AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 30th, 2002
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FILE NO. 333-00987
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 7
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
GLENBROOK LIFE AND ANNUITY COMPANY
(Exact Name of Registrant)
ARIZONA 35-1113325
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Identification Number)
Organization)
3100 SANDERS ROAD
NORTHBROOK, ILLINOIS 60062
847-402-2400
(Address and Phone Number of Principal Executive Office)
MICHAEL J. VELOTTA
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
GLENBROOK LIFE AND ANNUITY COMPANY
3100 SANDERS ROAD
NORTHBROOK, ILLINOIS 60062
847-402-2400
(Name, Complete Address and Telephone Number of Agent for Service)
COPIES TO:
CHRISTOPHER S. PETITO, ESQUIRE JOANNE M. DERRIG, ESQUIRE
JORDEN BURT LLP ALFS, INC.
1025 THOMAS JEFFERSON ST. N.W. 3100 SANDERS ROAD
SUITE 400 EAST SUITE J5B
WASHINGTON, D.C. 20007-0805 NORTHBROOK, ILLINOIS 60062
Approximate date of commencement of proposed sale to the public: The annuity
contract covered by this registration statement is to be issued promptly and
from time to time after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: /X/
Original 72
THE ALLSTATE(R) PROVIDER VARIABLE ANNUITY
(formerly referred to as "The Glenbrook Provider Variable Annuity")
GLENBROOK LIFE AND ANNUITY COMPANY
300 N. MILWAUKEE AVE.
VERNON HILLS, IL 60061
TELEPHONE NUMBER: 1-800-755-5275 PROSPECTUS
DATED MAY 1, 2002
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GLENBROOK LIFE AND ANNUITY COMPANY ("GLENBROOK LIFE") is offering the
Allstate(R) Provider Variable Annuity, an individual and group flexible premium
deferred variable annuity contract ("CONTRACT"). This prospectus contains
information about the Contract that you should know before investing. Please
keep it for future reference.
The Contract currently offers 22 investment alternatives ("INVESTMENT
ALTERNATIVES"). The investment alternatives include 2 fixed account options
("FIXED ACCOUNT OPTIONS") and 20 variable sub-accounts ("VARIABLE SUB-ACCOUNTS")
of the GLENBROOK LIFE Multi-Manager Variable Account ("VARIABLE ACCOUNT"). Each
Variable Sub-Account invests exclusively in shares of the following mutual funds
("FUNDS"):
AIM VARIABLE INSURANCE FUNDS DREYFUS STOCK INDEX FUND
AMERICAN CENTURY VARIABLE PORTFOLIOS DREYFUS VARIABLE INVESTMENT FUND (VIF)
(VP), INC. FIDELITY VARIABLE INSURANCE PRODUCTS
THE DREYFUS SOCIALLY RESPONSIBLE FUND
GROWTH FUND, INC. MFS(R) VARIABLE INSURANCE TRUST /SM/
Each Fund has multiple investment portfolios ("PORTFOLIOS"). Not all of the
Funds and/or Portfolios, however, may be available with your Contract. You
should check with your sales representative for further information on the
availability of Funds and/or Portfolios. Your annuity application will list all
available Portfolios.
WE (GLENBROOK LIFE) have filed a Statement of Additional Information, dated May
1, 2002, with the Securities and Exchange Commission ("SEC"). It contains more
information about the Contract and is incorporated herein by reference, which
means it is legally a part of this prospectus. Its table of contents appears on
page 44 of this prospectus. For a free copy, please write or call us at the
address or telephone number above, or go to the SEC's Web site (http://
www.sec.gov). You can find other information and documents about us, including
documents that are legally part of this prospectus, at the SEC's Web site.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THE SECURITIES DESCRIBED IN THIS PROSPECTUS, NOR
HAS IT PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A
FEDERAL CRIME.
IMPORTANT THE CONTRACTS MAY BE DISTRIBUTED THROUGH BROKER-DEALERS
THAT HAVE RELATIONSHIPS WITH BANKS OR OTHER FINANCIAL
NOTICES INSTITUTIONS OR BY EMPLOYEES OF SUCH BANKS. HOWEVER, THE
CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY SUCH INSTITUTIONS OR ANY FEDERAL REGULATORY AGENCY.
INVESTMENT IN THE CONTRACTS INVOLVES INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE CONTRACTS ARE NOT FDIC INSURED.
1
TABLE OF CONTENTS
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PAGE
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OVERVIEW
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Important Terms
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The Contract at a Glance
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How the Contract Works
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Expense Table
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Financial Information
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CONTRACT FEATURES
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The Contract
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Purchases
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Contract Value
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Investment Alternatives
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The Variable Sub-Accounts
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The Fixed Account Options
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Transfers
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Expenses
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Access To Your Money
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Income Payments
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Death Benefits
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OTHER INFORMATION
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More Information:
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GLENBROOK LIFE
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The Variable Account
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The Portfolios
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The Contract
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Qualified Plans
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Legal Matters
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Taxes
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Annual Reports and Other Documents
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Experts
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Performance Information
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APPENDIX A-ACCUMULATION UNIT VALUES 37
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APPENDIX B- MARKET VALUE ADJUSTMENT EXAMPLE 41
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2
IMPORTANT TERMS
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This prospectus uses a number of important terms that you may not be familiar
with. The index below identifies the page that describes each term. The first
use of each term in this prospectus appears in highlights.
PAGE
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Accumulation Phase
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Accumulation Unit
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Accumulation Unit Value
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Annuitant
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Automatic Additions Program
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Automatic Portfolio Rebalancing Program
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Beneficiary
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Cancellation Period
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Contract*
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Contract Anniversary
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Contract Owner ("You")
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Contract Value
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Contract Year
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Death Benefit Anniversary
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Death Proceeds
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Dollar Cost Averaging Program
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Due Proof of Death
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Enhanced Death Benefit Rider
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Fixed Account Options
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PAGE
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Free Withdrawal Amount
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GLENBROOK LIFE ("We" or "Us")
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Guarantee Periods
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Income Plan
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Investment Alternatives
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Issue Date
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Market Value Adjustment
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Payout Phase
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Payout Start Date
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Portfolios
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Qualified Contracts
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SEC
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Settlement Value
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Systematic Withdrawal Program
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Valuation Date
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Variable Account
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Variable Sub-Account
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*
In certain states the Contract is available only as a group Contract. If you
purchase a group Contract, we will issue you a certificate that represents
your ownership and that summarizes the provisions of the group Contract.
References to "Contract" in this prospectus include certificates, unless the
context requires otherwise.
3
THE CONTRACT AT A GLANCE
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The following is a snapshot of the Contract. Please read the remainder of this
prospectus for more information.
FLEXIBLE PAYMENTS You can purchase a Contract with as little as
$3,000 ($2,000 for "QUALIFIED CONTRACTS," which are
Contracts issued with QUALIFIED PLANS). You can add to
your Contract as often and as much as you like, but each
payment must be at least $50.
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RIGHT TO CANCEL You may cancel your Contract within 20 days of
receipt or any longer period as your state may require
("CANCELLATION PERIOD"). Upon cancellation, we will
return your purchase payments adjusted, to the extent
federal or state law permits, to reflect the investment
experience of any amounts allocated to the Variable
Account.
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EXPENSES You will bear the following expenses:
.Total Variable Account annual fees equal to 1.35% of
average daily net assets (1.45% if you select the
ENHANCED DEATH BENEFIT RIDER)
.Annual contract maintenance charge of $35 (with
certain exceptions)
.Withdrawal charges ranging from 0% to 6% of purchase
payment withdrawn (with certain exceptions)
.Transfer fee of $10 after 12th transfer in any
CONTRACT YEAR (fee currently waived)
. State premium tax (if your state imposes one)
In addition, each Portfolio pays expenses that you will
bear indirectly if you invest in a Variable Sub-Account.
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INVESTMENT The Contract offers 22 investment alternatives
ALTERNATIVES including:
.2 Fixed Account Options (which credit interest at
rates we guarantee)
.20 Variable Sub-Accounts investing in Portfolios
offering professional money management by these
investment advisers:
. AIM Advisors, Inc.
. American Century Investment Management, Inc.
. The Dreyfus Corporation
. Fidelity Management & Research Company
. MFS Investment Management(R)
To find out current rates being paid on the Fixed
Account Options or how the Variable Sub-Accounts have
performed, call us at 1-800-755-5275.
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SPECIAL SERVICES For your convenience, we offer these special services:
. AUTOMATIC PORTFOLIO REBALANCING PROGRAM
. AUTOMATIC ADDITIONS PROGRAM
. DOLLAR COST AVERAGING PROGRAM
. SYSTEMATIC WITHDRAWAL PROGRAM
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INCOME PAYMENTS You can choose fixed income payments, variable
income payments, or a combination of the two. You can
receive your income payments in one of the following
ways:
. life income with guaranteed payments
.a "joint and survivor" life income with guaranteed
payments
.guaranteed payments for a specified period (5 to 30
years)
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DEATH BENEFITS If you or the ANNUITANT (if the Contract is
owned by a non-natural person) die before the PAYOUT
START DATE, we will pay the death benefit described in
the Contract. We offer an Enhanced Death Benefit Rider.
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TRANSFERS Before the Payout Start Date, you may transfer your
Contract value ("CONTRACT VALUE") among the investment
alternatives, with certain restrictions. Transfers to a
Guarantee Period of the Fixed Account must be at least
$50.
We do not currently impose a fee upon transfers.
However, we reserve the right to charge $10 per transfer
after the 12th transfer in each "Contract Year," which
we measure from the date we issue your Contract or a
Contract anniversary ("CONTRACT ANNIVERSARY").
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WITHDRAWALS You may withdraw some or all of your Contract Value at
any time prior to the Payout Start Date. In general,
you must withdraw at least $50 at a time. Full or
partial withdrawals are available under limited
circumstances on or after the Payout Start Date.
Withdrawals of earnings are taxed as ordinary income
and, if taken prior to age 59/1/2/, may be subject to
an additional 10% federal tax penalty. A withdrawal
charge and MARKET VALUE ADJUSTMENT also may apply.
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4
5
HOW THE CONTRACT WORKS
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The Contract basically works in two ways. First, the Contract can help you (we
assume you are the CONTRACT OWNER) save for retirement because you can invest in
up to 22 investment alternatives and generally pay no federal income taxes on
any earnings until you withdraw them. You do this during what we call the
"ACCUMULATION PHASE" of the Contract. The Accumulation Phase begins on the date
we issue your Contract (we call that date the "ISSUE DATE") and continues until
the Payout Start Date, which is the date we apply your money to provide income
payments. During the Accumulation Phase, you may allocate your purchase payments
to any combination of the Variable Sub-Accounts and/ or Fixed Account Options.
If you invest in any of the 2 Fixed Account Options, you will earn a fixed rate
of interest that we declare periodically. If you invest in any of the 20
Variable Sub-Accounts, your investment return will vary up or down depending on
the performance of the corresponding Portfolios.
Second, the Contract can help you plan for retirement because you can use it to
receive retirement income for life and/ or for a pre-set number of years, by
selecting one of the income payment options (we call these "INCOME PLANS")
described on page__ . You receive income payments during what we call the
"PAYOUT PHASE" of the Contract, which begins on the Payout Start Date and
continues until we make the last payment required by the Income Plan you select.
During the Payout Phase, if you select a fixed income payment option, we
guarantee the amount of your payments, which will remain fixed. If you select a
variable income payment option, based on one or more of the Variable
Sub-Accounts, the amount of your payments will vary up or down depending on the
performance of the corresponding Portfolios. The amount of money you accumulate
under your Contract during the Accumulation Phase and apply to an Income Plan
will determine the amount of your income payments during the Payout Phase.
The timeline below illustrates how you might use your Contract.
LOGO
As the Contract Owner, you exercise all of the rights and privileges provided by
the Contract. If you die, any surviving Contract Owner or, if none, the
BENEFICIARY will exercise the rights and privileges provided by the Contract.
See "The Contract." In addition, if you die before the Payout Start Date, we
will pay a death benefit to any surviving Contract Owner, or if there is none,
to your Beneficiary. See "Death Benefits."
Please call us at 1-800-755-5275 if you have any question about how the Contract
works.
6
EXPENSE TABLE
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The table below lists the expenses that you will bear directly or indirectly
when you buy a Contract. The table and the examples that follow do not reflect
premium taxes that may be imposed by the state where you reside. For more
information about Variable Account expenses, see "Expenses," below. For more
information about Portfolio expenses, please refer to the accompanying
prospectuses for the Funds.
CONTRACT OWNER TRANSACTION EXPENSES
Withdrawal Charge (as a percentage of purchase payments)*
Number of Complete Years Since We Received the Purchase 0 1 2 3 4 5 6+
Payment Being Withdrawn
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Applicable Charge 6% 6% 5% 5% 4% 3% 0%
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Annual Contract Maintenance Charge $35.00**
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Transfer Fee $10.00***
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*Each Contract Year, you may withdraw up to 15% of your aggregate purchase
payments without incurring a withdrawal charge.
** We will waive this charge in certain cases. See "Expenses."
*** Applies solely to the thirteenth and subsequent transfers within a
Contract Year, excluding transfers due to dollar cost averaging and automatic
portfolio rebalancing. We are currently waiving the transfer fee.
Policy
with
VARIABLE ACCOUNT ANNUAL EXPENSES Enhanced
(AS A PERCENTAGE OF DAILY NET ASSET VALUE Death
DEDUCTED FROM EACH VARIABLE SUB-ACCOUNT) Base Benefit
Policy Rider
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Mortality and Expense Risk Charge 1.25% 1.35%
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Administrative Expense Charge 0.10% 0.10%
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Total Variable Account Annual Expense 1.35% 1.45%
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7
PORTFOLIO ANNUAL EXPENSES (as a percentage of Portfolio average daily net
assets)(1)
Total
Management Rule12b-1 Other Portfolio
Portfolio Fees Fees Expenses Annual Expenses
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AIM V.I. Capital Appreciation Fund-Series I 0.61% N/A 0.24% .85%
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AIM V.I. Core Equity Fund-Series I (2) 0.61% N/A 0.21% 0.82%
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AIM V.I. Diversified Income Fund-Series I 0.60% N/A 0.33% 0.93%
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AIM V.I. Global Utilities Fund-Series I 0.65% N/A 0.42% 1.07%
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AIM V.I. Government Securities Fund-Series I 0.50% N/A 0.58% 1.08%
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AIM V.I. Growth Fund-Series I 0.62% N/A 0.26% 0.88%
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AIM V.I. International Growth Fund-Series I (2) 0.73% N/A 0.32% 1.05%
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AIM V.I. Premier Equity Fund-Series I (2) 0.60% N/A 0.25% 0.85%
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American Century VP Balanced (3) 0.90% N/A 0.00% 0.90%
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American Century VP International (3) 1.26% N/A 0.00% 1.26%
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The Dreyfus Socially Responsible Growth Fund, Inc.: Initial Shares 0.75% N/A 0.03% 0.78%
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Dreyfus Stock Index Fund: Initial Shares 0.25% N/A 0.01% 0.26%
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Dreyfus VIF - Growth & Income Portfolio: Initial Shares 0.75% N/A 0.05% 0.80%
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Dreyfus VIF - Money Market Portfolio 0.50% N/A 0.08% 0.58%
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Dreyfus VIF - Small Company Stock Portfolio: Initial Shares 0.75% N/A 0.28% 1.03%
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Fidelity VIP Contrafund Portfolio (4) 0.58% N/A 0.10% 0.68%
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Fidelity VIP Equity-Income Portfolio (4) 0.48% N/A 0.10% 0.58%
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Fidelity VIP Growth Portfolio - Initial Class (4) 0.58% N/A 0.10% 0.68%
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Fidelity VIP High Income Portfolio - Initial Class (4) 0.58% N/A 0.13% 0.71%
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MFS Emerging Growth Series - Initial Class (5) 0.75% N/A 0.12% 0.87%
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1. Figures shown in the Table are for the year ended December 31, 2001
(except as otherwise noted).
2. Effective May 1, 2002 the AIM V.I. Growth and Income Fund, AIM V.I.
International Equity Fund and AIM V.I. Value Fund changed their names to the
AIM V.I. Core Equity Fund, AIM V.I. International Growth Fund and AIM V.I.
Premier Equity Fund, respectively.
3. The Portfolio has a stepped fee schedule. As a result, the Portfolio's
management fee generally decreases as Portfolio assets increase.
4. Actual "Total Portfolio Annual Expenses" were lower because a portion of the
brokerage commissions that the Portfolios paid was used to reduce the
Portfolios' expenses. In addition, through arrangements with the Portfolios'
custodian, credits realized as a result of uninvested cash balances are used
to reduce a portion of the Portfolios' custodian expenses. These offsets may
be discontinued at any time. Had these offsets been taken into account,
"Total Portfolio Annual Expenses" would have been 0.64% for Contrafund
Portfolio, 0.57% for Equity-Income Portfolio, 0.65% for Growth Portfolio and
0.70% for High Income Portfolio.
5. The Portfolio has an expense offset arrangement which reduces the Portfolio's
custodian fee based upon the amount of cash maintained by the Portfolio with
its custodian and dividend disbursing agent. The Portfolio may enter into
other such arrangements and directed brokerage arrangements, which would also
have the effect of reducing the Portfolio's expenses.
"Other Expenses" do not take these expense reductions into account, and are
therefore higher than the actual expenses of the Portfolio. Had these fee
reductions been taken into account, "Total Portfolio Annual Expenses" would
have been lower and would equal 0.86%.
8
EXAMPLE 1
The example below shows the dollar amount of expenses that you would bear
directly or indirectly if you:
... invested $1,000 in a Variable Sub-Account,
... earned a 5% annual return on your investment,
... surrendered your Contract at the end of each time period, and
... elected the Enhanced Death Benefit Rider.
THE EXAMPLE DOES NOT INCLUDE ANY TAXES OR TAX PENALTIES YOU MAY BE REQUIRED TO
PAY IF YOU SURRENDER YOUR CONTRACT.
ASSUMES TERMINATION
Portfolio 1 Year 3 Years 5 Years 10 Years
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AIM V.I. Capital Appreciation Fund $75 $117 $154 $273
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AIM V.I. Core Equity Fund $75 $117 $152 $270
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AIM V.I. Diversified Income Fund $76 $120 $158 $281
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AIM V.I. Global Utilities Fund $78 $124 $165 $295
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AIM V.I. Government Securities Fund $78 $124 $165 $296
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AIM V.I. Growth Fund $76 $118 $155 $276
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AIM V.I. International Growth Fund $77 $124 $164 $293
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AIM V.I. Premier Equity Fund $75 $117 $154 $273
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American Century VP Balanced Fund $76 $119 $156 $278
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American Century VP International Fund $80 $130 $174 $314
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The Dreyfus Socially Responsible Growth $75 $115 $150 $266
Fund, Inc.: Initial Shares
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Dreyfus Stock Index Fund: Initial Shares $69 $ 99 $123 $210
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Dreyfus VIF - Growth & Income Portfolio: $75 $116 $151 $268
Initial Shares
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Dreyfus VIF - Money Market Portfolio $73 $109 $140 $245
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Dreyfus VIF - Small Company Stock $77 $123 $163 $291
Portfolio: Initial Shares
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Fidelity VIP Contrafund Portfolio $74 $112 $145 $255
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Fidelity VIP Equity-Income Portfolio $73 $109 $140 $245
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Fidelity VIP Growth Portfolio $74 $112 $145 $255
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Fidelity VIP High Income Portfolio $74 $113 $146 $258
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MFS Emerging Growth Series $76 $118 $155 $275
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9
EXAMPLE 2
Same assumptions as Example 1 above, except that you decided not to surrender
your Contract.
ASSUMES NO TERMINATION
Portfolio 1 Year 3 Years 5 Years 10 Years
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AIM V.I. Capital Appreciation Fund $24 $75 $128 $273
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AIM V.I. Core Equity Fund $24 $74 $126 $270
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AIM V.I. Diversified Income Fund $25 $77 $132 $281
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AIM V.I. Global Utilities Fund $27 $82 $139 $295
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AIM V.I. Government Securities Fund $27 $82 $140 $296
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AIM V.I. Growth Fund $25 $76 $130 $276
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AIM V.I. International Growth Fund $26 $81 $138 $293
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AIM V.I. Premier Equity Fund $24 $75 $128 $273
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American Century VP Balanced Fund $25 $76 $131 $278
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American Century VP International Fund $29 $88 $149 $314
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The Dreyfus Socially Responsible Growth $24 $73 $124 $266
Fund, Inc.: Initial Shares
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Dreyfus Stock Index Fund: Initial Shares $18 $57 $ 97 $210
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Dreyfus VIF - Growth & Income Portfolio: $24 $73 $125 $268
Initial Shares
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Dreyfus VIF - Money Market Portfolio $22 $67 $114 $245
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Dreyfus VIF - Small Company Stock $26 $80 $137 $291
Portfolio: Initial Shares
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Fidelity VIP Contrafund Portfolio $23 $70 $119 $255
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Fidelity VIP Equity-Income Portfolio $22 $67 $114 $245
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Fidelity VIP Growth Portfolio $23 $70 $119 $255
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Fidelity VIP High Income Portfolio $23 $71 $121 $258
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MFS Emerging Growth Series $25 $76 $129 $275
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PLEASE REMEMBER THAT YOU ARE LOOKING AT EXAMPLES AND NOT A REPRESENTATION OF
PAST OR FUTURE EARNINGS. YOUR ACTUAL EXPENSES MAY BE LESS OR GREATER THAN THOSE
SHOWN ABOVE. SIMILARLY, YOUR RATE OF RETURN MAY BE LESS OR GREATER THAN 5%,
WHICH IS NOT GUARANTEED. THE ABOVE EXAMPLES ASSUME THE ELECTION OF THE ENHANCED
DEATH BENEFIT RIDER WITH A MORTALITY AND EXPENSE RISK CHARGE OF 1.35%. IF THAT
RIDER WERE NOT ELECTED, THE EXPENSE FIGURES SHOWN ABOVE WOULD BE SLIGHTLY LOWER.
TO REFLECT THE CONTRACT MAINTENANCE CHARGE IN THE EXAMPLES, WE ESTIMATED AN
EQUIVALENT PERCENTAGE CHARGE, BASED ON THE CURRENT AVERAGE CONTRACT SIZE OF
$43,861.
10
FINANCIAL INFORMATION
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To measure the value of your investment in the Variable Sub-Accounts during the
Accumulation Phase, we use a unit of measure we call the "ACCUMULATION UNIT."
Each Variable Sub-Account has a separate value for its Accumulation Units we
call "ACCUMULATION UNIT VALUE." Accumulation Unit Value is analogous to, but not
the same as, the share price of a mutual fund. Attached as Appendix A to this
prospectus are tables showing the Accumulation Unit Values of each Variable
Sub-Account since the date the Contracts were first offered. To obtain a fuller
picture of each Variable Sub-Account's finances, please refer to the Variable
Account's financial statements contained in the Statement of Additional
Information. The financial statements of GLENBROOK LIFE also appear in the
Statement of Additional Information.
11
THE CONTRACT
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CONTRACT OWNER
The Allstate Provider Variable Annuity is a contract between you, the Contract
Owner, and Glenbrook Life, a life insurance company. As the Contract Owner, you
may exercise all of the rights and privileges provided to you by the Contract.
That means it is up to you to select or change (to the extent permitted):
... the investment alternatives during the Accumulation and Payout Phases,
... the amount and timing of your purchase payments and withdrawals,
... the programs you want to use to invest or withdraw money,
... the income payment plan you want to use to receive retirement income,
... the Annuitant (either yourself or someone else) on whose life the income
payments will be based,
... the Beneficiary or Beneficiaries who will receive the benefits that the
Contract provides when the last surviving Contract Owner dies, and
... any other rights that the Contract provides.
If you die, any surviving Contract Owner, or, if none, the Beneficiary may
exercise the rights and privileges provided to them by the Contract.
The Contract cannot be jointly owned by both a non-natural person and a natural
person. If the Contract Owner is a grantor trust, the Contract Owner will be
considered a non-living person for purposes of the Death of Owner and Death of
Annuitant provisions of your Contract. The maximum age of the oldest Contract
Owner or Annuitant cannot exceed 90 as of the date we receive the completed
application. You may change the Contract Owner at any time. We will provide a
change of ownership form to be signed by you and filed with us. After we accept
the form, the change of ownership will be effective as of the date you signed
the form. Until we receive your written notice to change the Contract Owner, we
are entitled to rely on the most recent ownership information in our files. We
will not be liable as to any payment or settlement made prior to receiving the
written notice. Accordingly, if you wish to change the Contract Owner, you
should deliver your written notice to us promptly. Each change is subject to any
payment made by us or any other action we take before we accept the change.
You can use the Contract with or without a qualified plan. A qualified plan is a
personal retirement savings plan, such as an IRA or tax-sheltered annuity, that
meets the requirements of the Internal Revenue Code. Qualified plans may limit
or modify your rights and privileges under the Contract. We use the term
"Qualified Contract" to refer to a Contract issued with a qualified plan. See
"Qualified Plans" on page____
Changing ownership of this Contract may cause adverse tax consequences and may
not be allowed under qualified plans. Please consult with a competent tax
advisor prior to making a request for a change of Contract Owner.
BENEFICIARY
The Beneficiary is the person who may elect to receive the Death Proceeds or
become the new Contract Owner, subject to the "Death of Owner" section below, if
the sole surviving Contract Owner dies before the Payout Start Date. If the sole
surviving Contract Owner dies after the Payout Start Date, the Beneficiary will
receive any guaranteed income payments scheduled to continue.
You may name one or more primary and contingent Beneficiaries when you apply for
a Contract. The primary Beneficiary is the person who is first entitled to
receive benefits under the Contract the upon death of the sole surviving
Contract Owner. A contingent Beneficiary is the person selected by the Contract
Owner who will become the Beneficiary if all named primary Beneficiaries die
before the death of the sole surviving Contract Owner.
You may change or add Beneficiaries at any time, unless you have designated an
irrevocable Beneficiary. We will provide a change of Beneficiary form to be
signed by you and filed with us. After we accept the form, the change of
Beneficiary will be effective as of the date you signed the form. Until we
receive your written notice to change a Beneficiary, we are entitled to rely on
the most recent Beneficiary information in our files. We will not be liable as
to any payment or settlement made prior to receiving the written notice.
Accordingly, if you wish to change your Beneficiary, you should deliver your
written notice to us promptly. Each change is subject to any payment made by us
or any other action we take before we accept the change.
If you did not name a Beneficiary or, unless otherwise provided in the
Beneficiary designation, if a named Beneficiary is no longer living and there
are no other surviving primary or contingent Beneficiaries, the new Beneficiary
will be:
... your spouse or, if he or she is no longer alive,
... your surviving children equally, or if you have no surviving children,
... your estate.
If one or more Beneficiaries survive you (or survives the Annuitant, if the
Contract Owner is not a natural person), we will divide the Death Proceeds among
the surviving Beneficiaries according to your most recent written instructions.
If you have not given us written instructions, we will pay the Death Proceeds in
equal amounts to the surviving Beneficiaries.
If more than one Beneficiary shares in the Death
12
Proceeds, each Beneficiary will be treated as a separate and independent owner
of his or her respective share. Each Beneficiary will exercise all rights
related to his or her share including the sole right to select a payout option,
subject to any restrictions previously placed upon the Beneficiary. Each
Beneficiary may designate a Beneficiary(ies) for his or her respective share,
but that designated Beneficiary(ies) will be restricted to the payout option
chosen by the original Beneficiary.
MODIFICATION OF THE CONTRACT
Only a Glenbrook Life officer may approve a change in or waive any provision of
the Contract. Any change or waiver must be in writing. None of our agents has
the authority to change or waive the provisions of the Contract. We may not
change the terms of the Contract without your consent, except to conform the
Contract to applicable law or changes in the law. If a provision of the Contract
is inconsistent with state law, we will follow state law.
ANNUITANT
The Annuitant is the individual whose life determines the amount and duration of
income payments (other than under Income Plans with guaranteed payments for a
specified period). You initially designate an Annuitant in your application. You
may change the Annuitant at any time prior to the Payout Start Date (only if the
Contract Owner is a natural person). Once we accept a change, it takes effect as
of the date you signed the request. Each change is subject to any payment we
make or other action we take before we accept it.
You may designate a joint Annuitant, who is a second person on whose life income
payments depend at the time you select an Income Plan. We permit joint
Annuitants only on or after the Payout Start Date. If the Annuitant dies prior
to the Payout Start Date, the new Annuitant will be:
(i) the youngest Contract Owner; otherwise,
(ii) the youngest Beneficiary.
ASSIGNMENT
You may not assign any interest in a Contract as collateral or security for a
loan. However, you may assign periodic income payments under the Contract prior
to the Payout Start Date. No Beneficiary may assign benefits under the Contract
until they are payable to the Beneficiary. We will not be bound by any
assignment until the assignor signs it and files it with us. We are not
responsible for the validity of any assignment. Federal law prohibits or
restricts the assignment of benefits under many types of retirement plans and
the terms of such plans may themselves contain restrictions on assignments. An
assignment may also result in taxes or tax penalties. YOU SHOULD CONSULT WITH AN
ATTORNEY BEFORE TRYING TO ASSIGN YOUR CONTRACT.
PURCHASES
- --------------------------------------------------------------------------------
MINIMUM PURCHASE PAYMENTS
Your initial purchase payment must be at least $3,000 ($2,000 for a Qualified
Contract). All subsequent purchase payments must be $50 or more. You may make
purchase payments at any time prior to the Payout Start Date. We reserve the
right to limit the maximum amount of purchase payments we will accept.
AUTOMATIC ADDITIONS PROGRAM
You may make subsequent purchase payments by automatically transferring money
from your bank account. Consult your sales representative for more detailed
information.
ALLOCATION OF PURCHASE PAYMENTS
At the time you apply for a Contract, you must decide how to allocate your
purchase payments among the investment alternatives. The allocation you specify
on your application will be effective immediately. All allocations must be in
whole percents that total 100% or in whole dollars. You can change your
allocations by notifying us in writing. We reserve the right to limit the
availability of the investment alternatives.
We will allocate your purchase payments to the investment alternatives according
to your most recent instructions on file with us. Unless you notify us in
writing otherwise, we will allocate subsequent purchase payments according to
the allocation for the previous purchase payment. We will effect any change in
allocation instructions at the time we receive written notice of the change in
good order.
We will credit the initial purchase payment that accompanies your completed
application to your Contract within 2 business days after we receive the payment
at our home office. If your application is incomplete, we will ask you to
complete your application within 5 business days. If you do so, we will credit
your initial purchase payment to your Contract within that 5 business day
period. If you do not, we will return your purchase payment at the end of the 5
business day period unless you expressly allow us to hold it until you complete
the application. We will credit subsequent purchase payments to the Contract at
the close of the business day on which we receive the purchase payment at our
headquarters. We are open for business each day Monday through Friday that the
New York Stock Exchange is open for business. We also refer to these days as
"VALUATION DATES." Our business day closes when the New York Stock Exchange
closes, usually 4 p.m. Eastern Time (3 p.m. Central Time). If we receive your
purchase payment after 3 p.m. Central Time on any Valuation Date, we will credit
your purchase payment using the
13
Accumulation Unit Values computed on the next Valuation Date.
RIGHT TO CANCEL
You may cancel the Contract by returning it to us within the Cancellation
Period, which is the 20 day period after you receive the Contract, or a longer
period should your state require it. You may return your Contract by delivering
it or mailing it to us. If you exercise this "RIGHT TO CANCEL," the Contract
terminates and we will pay you the full amount of your purchase payments
allocated to the Fixed Account. We also will return your purchase payments
allocated to the Variable Account adjusted, to the extent federal or state law
permits, to reflect investment gain or loss that occurred from the date of
allocation through the date of cancellation. Some states may require us to
return a greater amount.
In states where we are required to refund purchase payments, we reserve the
right during the Cancellation Period to invest any purchase payments you
allocated to a Variable Sub-Account to the money market Variable Sub-Account
available under the Contract. We will notify you if we do so. At the end of the
Cancellation Period, you may then allocate your money to other Variable
Sub-Accounts.
If your Contract is qualified under Section 408 of the Internal Revenue Code, we
will refund the greater of any purchase payments or the Contract Value.
CONTRACT VALUE
- --------------------------------------------------------------------------------
Your Contract Value at any time during the Accumulation Phase is equal to the
sum of the value of your Accumulation Units in the Variable Sub-Accounts you
have selected, plus the value of your investment in the Fixed Account Options.
ACCUMULATION UNITS
To determine the number of Accumulation Units of each Variable Sub-Account to
credit to your Contract, we divide (i) the amount of the purchase payment
Accumulation Units you have allocated to a Variable Sub-Account by (ii) the
Accumulation Unit Value of that Variable Sub-Account next computed after we
receive your payment or transfer. For example, if we receive a $10,000 purchase
payment allocated to a Variable Sub-Account when the Accumulation Unit Value for
the Sub-Account is $10, we would credit 1,000 Accumulation Units of that
Variable Sub-Account to your Contract. Withdrawals and transfers from a Variable
Sub-Account would, of course, reduce the number of Accumulation Units of that
Variable Sub-Account allocated to your Contract.
ACCUMULATION UNIT VALUE
As a general matter, the Accumulation Unit Value for each Variable Sub-Account
will rise or fall to reflect:
... changes in the share price of the Portfolio in which the Variable Sub-Account
invests, and
... the deduction of amounts reflecting the mortality and expense risk charge,
administrative expense charge, and any provision for taxes that have accrued
since we last calculated the Accumulation Unit Value.
We determine contract maintenance charges, withdrawal charges, and transfer fees
(currently waived) separately for each Contract. They do not affect Accumulation
Unit Value. Instead, we obtain payment of those charges and fees by redeeming
Accumulation Units. For details on how we calculate Accumulation Unit Value,
please refer to the Statement of Additional Information. We determine a separate
Accumulation Unit Value for each Variable Sub-Account on each Valuation Date. We
also determine a separate set of Accumulation Unit Values reflecting the cost of
the Enhanced Death Benefit Rider described on page __ .
YOU SHOULD REFER TO THE PROSPECTUSES FOR THE PORTFOLIOS THAT ACCOMPANY THIS
PROSPECTUS FOR A DESCRIPTION OF HOW THE ASSETS OF EACH PORTFOLIO ARE VALUED,
SINCE THAT DETERMINATION DIRECTLY BEARS ON THE ACCUMULATION UNIT VALUE OF THE
CORRESPONDING VARIABLE SUB-ACCOUNT AND, THEREFORE, YOUR CONTRACT VALUE.
14
INVESTMENT ALTERNATIVES: THE VARIABLE SUB-ACCOUNTS
- --------------------------------------------------------------------------------
You may allocate your purchase payments to up to 20 Variable Sub-Accounts. Each
Variable Sub-Account invests in the shares of a corresponding Portfolio. Each
Portfolio has its own investment objective(s) and policies. We briefly describe
the Portfolios below.
For more complete information about each Portfolio, including expenses and risks
associated with the Portfolio, please refer to the accompanying prospectuses for
the Portfolios. You should carefully review the Portfolios' prospectuses before
allocating amounts to the Variable Sub-Accounts.
PORTFOLIO: EACH PORTFOLIO SEEKS: INVESTMENT ADVISOR:
- -------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS*
- -------------------------------------------------------------------------------
AIM V.I. Capital Growth of capital
Appreciation Fund
- -------------------------------------------------------
AIM V.I. Core Equity Growth of capital with a
Fund secondary objective of
current income
- -------------------------------------------------------
AIM V.I. Diversified A high level of current
Income Fund income AIM ADVISORS,
- ------------------------------------------------------- INC.
AIM V.I. Global High total return
Utilities Fund
- -------------------------------------------------------
AIM V.I. Government A high level of current
Securities Fund income consistent with a
reasonable concern for safety
of principal
- -------------------------------------------------------
AIM V.I. Growth Fund Growth of capital
- -------------------------------------------------------------------------------
AIM V.I. International Long-term growth of capital
Growth Fund
- -------------------------------------------------------
AIM V.I. Premier Long-term growth of capital
Equity Fund and income as a secondary
objective
- -------------------------------------------------------
AMERICAN CENTURY VARIABLE PORTFOLIOS (VP), INC.
- -------------------------------------------------------------------------------
American Century VP Long-term capital growth and AMERICAN
Balanced Fund current income INVESTMENT
MANAGEMENT,
INC.
- -------------------------------------------------------------------------------
American Century VP Long-term capital growth
International Fund
- -------------------------------------------------------
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.; THE DREYFUS STOCK INDEX
FUND; AND THE DREYFUS VARIABLE INVESTMENT FUND (VIF) (COLLECTIVELY, THE
DREYFUS FUNDS)
- -------------------------------------------------------------------------------
The Dreyfus Socially Responsible
Growth Fund, Inc. Capital growth, and, secondarily, current income
- -------------------------------------------------------
Dreyfus Stock Index To match the total return of
Fund the Standard & Poor's(R) 500
Composite Stock Price Index
- -------------------------------------------------------
Dreyfus VIF Growth & Long-term capital growth,
Income Portfolio current income and growth of
income, consistent with THE DREYFUS
reasonable investment risk CORPORATION
- -------------------------------------------------------
Dreyfus VIF Money A high level of current
Market Portfolio income as is consistent with
the preservation of capital
and the maintenance of
liquidity
- -------------------------------------------------------
Dreyfus VIF Small Investment returns
Company Stock (consisting of capital
Portfolio appreciation and income) that
are greater than the total
return performance of stocks ------------------------
represented by the Russell
2500/SM/ Stock Index
("Russell 2500")
- -------------------------------------------------------
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
- -------------------------------------------------------------------------------
Fidelity VIP Long-term capital
Contrafund Portfolio appreciation
- ------------------------------------------------------- FIDELITY MANAGEMENT
Fidelity VIP Reasonable income &
Equity-Income RESEARCH COMPANY
Portfolio
- -------------------------------------------------------
Fidelity VIP Growth Capital appreciation
Portfolio
- -------------------------------------------------------------------------------
Fidelity VIP High High level of current income
Income Portfolio while also considering growth
of capital
- -------------------------------------------------------
MFS(R) VARIABLE INSURANCE TRUST/SM/
- -------------------------------------------------------------------------------
MFS Emerging Growth Long-term growth of capital
Series
- ------------------------------------------------------- MFS INVESTMENT
MFS Limited Maturity Provide as high a level of MANAGEMENT (R)
Series** current income as is believed
to be consistent with prudent
investment risk. Secondary
objective is to protect
shareholders' capital. ------------------------
- -------------------------------------------------------
15
*A Portfolio's investment objective may be changed by the Fund's Board of
Trustees without shareholder approval.
** Effective May 1, 2002 the Portfilios AIM V.I. Growth and Income Fund, AIM
V.I. International Equity Fund and AIM V.I. Value Fund changed their names to
the AIM V.I. Core Equity Fund, AIM V.I. International Growth Fund and AIM
V.I. Premier Equity Fund, respectively.
AMOUNTS YOU ALLOCATE TO VARIABLE SUB-ACCOUNTS MAY GROW IN VALUE, DECLINE IN
VALUE, OR GROW LESS THAN YOU EXPECT, DEPENDING ON THE INVESTMENT PERFORMANCE OF
THE PORTFOLIOS IN WHICH THOSE VARIABLE SUB-ACCOUNTS INVEST. YOU BEAR THE
INVESTMENT RISK THAT THE PORTFOLIOS MIGHT NOT MEET THEIR INVESTMENT OBJECTIVES.
SHARES OF THE PORTFOLIOS ARE NOT DEPOSITS, OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
VARIABLE INSURANCE PORTFOLIOS MAY NOT BE MANAGED BY THE SAME PORTFOLIO MANAGERS
WHO MANAGE RETAIL MUTUAL FUNDS WITH SIMILAR NAMES. THESE PORTFOLIOS ARE LIKELY
TO DIFFER FROM SIMILARLY NAMED RETAIL FUNDS IN ASSETS, CASH FLOW, AND TAX
MATTERS. ACCORDINGLY, THE HOLDINGS AND INVESTMENT RESULTS OF A VARIABLE
INSURANCE PORTFOLIO CAN BE EXPECTED TO BE GREATER OR LESS THAN THE INVESTMENT
RESULTS OF SIMILARLY NAMED RETAIL MUTUAL FUNDS.
INVESTMENT ALTERNATIVES: THE FIXED ACCOUNT OPTIONS
- --------------------------------------------------------------------------------
You may allocate all or a portion of your purchase payments to the Fixed
Account. You may choose from among 2 Fixed Account Options: a dollar cost
averaging option, and the option to invest in one or more Guarantee Periods
included in the Guaranteed Maturity Fixed Account. The Fixed Account Options may
not be available in all states. Please consult with your sales representative
for current information. The Fixed Account supports our insurance and annuity
obligations. The Fixed Account consists of our general assets other than those
in segregated asset accounts. We have sole discretion to invest the assets of
the Fixed Account, subject to applicable law. Any money you allocate to a Fixed
Account Option does not entitle you to share in the investment experience of the
Fixed Account.
DOLLAR COST AVERAGING FIXED ACCOUNT OPTION
Purchase payments that you allocate to the Dollar Cost Averaging Fixed Account
Option ("DCA Fixed Account Option") will earn interest for a one year period at
the current rate in effect at the time of allocation. We will credit interest
daily at a rate that will compound over the year to the annual interest rate we
guaranteed at the time of allocation. After the one year period, we will declare
a renewal rate which we guarantee for a full year. Subsequent renewal dates will
be every twelve months for each payment or transfer.
For each purchase payment, the first transfer from the Short Term DCA Fixed
Account must occur within one month of the date of payment. If we do not receive
an allocation from you within one month of the date of payment, the payment plus
associated interest will be transferred to the money market Sub-Account in equal
monthly installments using the longest transfer period being offered at the time
the purchase payment is made. Transferring Account Value to the money market
Variable Sub-Account in this manner may not be consistent with the theory of
dollar cost averaging described on page___ . You must transfer each purchase
payment and all its earnings out of this Option by means of dollar cost
averaging within 36 months of payment. At the end of 36 months, any nominal
amounts remaining in the DCA Fixed Account will be alloccated to the money
market Variable Sub-Account. No transfers are permitted into the DCA Fixed
Account.
We bear the investment risk for all amounts allocated to the DCA Fixed Account
Option. That is because we guarantee the current and renewal interest rates we
credit to the amounts you allocate to this Option, which will never be less than
the minimum guaranteed rate in the Contract. Currently, we determine, in our
sole discretion, the amount of interest credited in excess of the guaranteed
rate. We may declare more than one interest rate for different monies based upon
the date of allocation to the DCA Fixed Account Option. For current interest
rate information, please contact your sales representative or GLENBROOK LIFE
customer service at 1-800-755-5275.
16
GUARANTEE PERIODS
Each payment or transfer allocated to a Guarantee Period earns interest at a
specified rate that we guarantee for a period of years. Guarantee Periods may
range from 1 to 10 years. We are currently offering Guarantee Periods of 1, 3,
5, 7, and ten years in length. In the future, we may offer Guarantee Periods of
different lengths or stop offering some Guarantee Periods.
You select the Guarantee Period for each payment or transfer. If you do not
select a Guarantee Period, we will assign the same period(s) you selected for
your most recent purchase payment. Each payment or transfer allocated to a
Guarantee Period must be at least $50. We reserve the right to limit the number
of additional purchase payments that you may allocate to this Option.
INTEREST RATES. We will tell you what interest rates and Guarantee Periods we
are offering at a particular time. We will not change the interest rate that we
credit to a particular allocation until the end of the relevant Guarantee
Period. We may declare different interest rates for Guarantee Periods of the
same length that begin at different times.
We have no specific formula for determining the rate of interest that we will
declare initially or in the future. We will set those interest rates based on
investment returns available at the time of the determination. In addition, we
may consider various other factors in determining interest rates including
regulatory and tax requirements, our sales commission and administrative
expenses, general economic trends, and competitive factors.
WE DETERMINE THE INTEREST RATES TO BE DECLARED IN OUR SOLE DISCRETION. WE CAN
NEITHER PREDICT NOR GUARANTEE WHAT THOSE RATES WILL BE IN THE FUTURE. For
current interest rate information, please contact your sales representative or
GLENBROOK LIFE at 1-800-755-5275.
HOW WE CREDIT INTEREST. We will credit interest daily to each amount allocated
to a Guarantee Period at a rate that compounds to the annual interest rate that
we declared at the beginning of the applicable Guarantee Period.
17
THE FOLLOWING EXAMPLE ILLUSTRATES HOW A PURCHASE PAYMENT ALLOCATED TO A
GUARANTEED PERIOD WOULD GROW, GIVEN AN ASSUMED GUARANTEE PERIOD AND ANNUAL
INTEREST RATE:
Purchase Payment ................................................... $10,000
Guarantee Period.................................................... 5 years
Annual Interest Rate................................................ 4.50%
END OF CONTRACT YEAR
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
---------- ---------- ---------- ---------- ------------
Beginning Contract $10,000.00
Value................
X (1 + Annual
Interest Rate) 1.045
----------
$10,450.00
Contract Value at end $10,450.00
of Contract Year.....
X (1 + Annual
Interest Rate) 1.045
----------
$10,920.25
Contract Value at end $10,920.25
of Contract Year.....
X (1 + Annual
Interest Rate) 1.045
----------
$11,411.66
Contract Value at end $11,411.66
of Contract Year.....
X (1 + Annual
Interest Rate) 1.045
----------
$11,925.19
Contract Value at end $11,925.19
of Contract Year.....
X (1 + Annual
Interest Rate) 1.045
-----------
$12,461.82
TOTAL INTEREST CREDITED DURING GUARANTEE PERIOD = $2,461.82 ($12,461.82-$10,000)
This example assumes no withdrawals during the entire 5-year Guarantee Period.
If you were to make a withdrawal, you may be required to pay a withdrawal
charge. In addition, the amount withdrawn may be increased or decreased by a
Market Value Adjustment that reflects changes in interest rates since the time
you invested the amount withdrawn. The hypothetical interest rate is for
illustrative purposes only and is not intended to predict future interest rates
to be declared under the Contract. Actual interest rates declared for any given
Guarantee Period may be more or less than shown above.
RENEWALS. Prior to the end of each Guarantee Period, we will mail you a notice
asking you what to do with your money, including the accrued interest. During
the 30-day period after the end of the Guarantee Period, you may:
1) Take no action. We will automatically apply your money to a new Guarantee
Period of the same length as the expiring Guarantee Period. The new Guarantee
Period will begin on the day the previous Guarantee Period ends. The new
interest rate will be our then current declared rate for a Guarantee Period of
that length; or
2) Instruct us to apply your money to one or more new Guarantee Periods of your
choice. The new Guarantee Period(s) will begin on the day the previous
Guarantee Period ends. The new interest rate will be our then current declared
rate for those Guarantee Periods; or
3) Instruct us to transfer all or a portion of your money to one or more
Variable Sub-Accounts of the Variable Account. We will effect the transfer on
the day we receive your instructions. We will not adjust the amount
transferred to include a Market Value Adjustment; we will pay interest from
the day the Guarantee Period expired until the date of the transfer. The
interest will be the rate for the shortest Guarantee Period then being
offered; or
4) Withdraw all or a portion of your money. You may be required to pay a
withdrawal charge, but we will not adjust the amount withdrawn to include a
Market Value Adjustment. You may also be required to pay premium taxes and
withholding, if applicable. We will pay interest from the day the Guarantee
Period expired until the date of withdrawal. The interest will be the rate for
the shortest Guarantee Period then being offered. Amounts not withdrawn will
be applied to a new Guarantee Period of the same length as the previous
Guarantee Period. The new Guarantee Period will begin on the day the previous
Guarantee Period ends. Withdrawals of earnings are taxed as ordinary income
and, if taken prior to age 59/1/2/, may be subject to an additional 10%
federal tax penalty.
MARKET VALUE ADJUSTMENT. All withdrawals and transfers from a Guarantee Period,
other than those taken during the 30 day period after such Guarantee Period
expires, are subject to a Market Value Adjustment. A Market Value Adjustment
also may apply upon payment of a death benefit and when you apply amounts
currently invested in a Guarantee Period to an Income Plan (unless paid or
applied during the 30-day period after such
18
Guarantee Period expires). We also will not apply a Market Value Adjustment to a
withdrawal you make within the Free Withdrawal Amount as described on page __.
We apply the Market Value Adjustment to reflect changes in interest rates from
the time you first allocate money to a Guarantee Period to the time you remove
it from that Guarantee Period. We calculate the Market Value Adjustment by
comparing the Treasury Rate for a period equal to the Guarantee Period at its
inception to the Treasury Rate for a period equal to the Guarantee Period when
you remove your money. "TREASURY RATE" means the U.S. Treasury Note Constant
Maturity Yield as reported in Federal Reserve Bulletin Release H.15.
The Market Value Adjustment may be positive or negative, depending on changes in
interest rates. As such, you bear the investment risk associated with changes in
interest rates. If interest rates increase significantly, the Market Value
Adjustment and any withdrawal charge, premium taxes, and income tax withholding
(if applicable) could reduce the amount you receive upon full withdrawal from a
Guaranteed Period to an amount that is less than the purchase payment applied to
that period plus interest earned under the Contract.
Generally, if the original Treasury Rate at the time you allocate money to a
Guarantee Period is higher than the applicable current Treasury Rate for a
period equal to the Guarantee Period, then the Market Value Adjustment will
result in a higher amount payable to you, transferred or applied to an Income
Plan. Conversely, if the Treasury Rate at the time you allocate money to a
Guarantee Period is lower than the applicable Treasury Rate for a period equal
to the Guarantee Period, then the Market Value Adjustment will result in a lower
amount payable to you, transferred or applied to an Income Plan.
For example, assume that you purchase a Contract and you select an initial
Guarantee Period of 5 years and the 5-year Treasury Rate for that duration is
4.50%. Assume that at the end of 3 years, you make a partial withdrawal. If, at
that later time, the current 5-year Treasury Rate is 4.20%, then the Market
Value Adjustment will be positive, which will result in an increase in the
amount payable to you. Conversely, if the current 5-year Treasury Rate is 4.80%,
then the Market Value Adjustment will be negative, which will result in a
decrease in the amount payable to you.
The formula for calculating Market Value Adjustments is set forth in Appendix B
to this prospectus, which also contains additional examples of the application
of the Market Value Adjustment.
INVESTMENT ALTERNATIVES: TRANSFERS
- --------------------------------------------------------------------------------
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase, you may transfer Contract Value among the
investment alternatives. You may request transfers in writing on a form that we
provide or by telephone according to the procedure described below. The minimum
amount that you may transfer into a Guarantee Period is $50. We currently do not
assess, but reserve the right to assess, a $10 charge on each transfer in excess
of 12 per Contract Year. We treat transfers to or from more than one Portfolio
on the same day as one transfer.
We will process transfer requests that we receive before 3:00 p.m. Central Time
on any Valuation Date using the Accumulation Unit Values for that Date. We will
process requests completed after 3:00 p.m. Central Time on any Valuation Date
using the Accumulation Unit Values for the next Valuation Date. The Contract
permits us to defer transfers from the Fixed Account for up to six months from
the date we receive your request. If we decide to postpone transfers for 30 days
or more, we will pay interest as required by applicable law. Any interest would
be payable from the date we receive the transfer request to the date we make the
transfer.
If you transfer an amount from a Guarantee Period other than during the 30 day
period after such Guarantee Period expires, we will increase or decrease the
amount by a Market Value Adjustment.
We reserve the right to waive any transfer restrictions.
TRANSFERS DURING THE PAYOUT PHASE
During the Payout Phase, you may make transfers among the Variable Sub-Accounts
so as to change the relative weighting of the Variable Sub-Accounts on which
your variable income payments will be based. In addition, you will have a
limited ability to make transfers from the Variable Sub-Accounts to increase the
proportion of your income payments consisting of fixed income payments. You may
not, however, convert any portion of your right to receive fixed income payments
into variable income payments. If you choose an Income Plan that depends on any
person's life, you may not make any transfers for the first 6 months after the
Payout Start Date. Thereafter, you may make transfers among the Variable
Sub-Accounts or make transfers from the Variable Sub-Accounts to increase the
proportion of your income payments consisting of fixed income payments. Your
transfers must be at least 6 months apart.
TELEPHONE TRANSFERS
You may make transfers by telephone by calling 1-800-755-5275. The cut-off time
for telephone transfer requests is 3:00 p.m. Central Time. In the event that the
New York Stock Exchange closes early, i.e., before 3:00 p.m. Central Time, or in
the event that the Exchange closes early for a period of time but then reopens
for trading on the same day, we will process telephone transfer requests as of
the close of the Exchange on that
19
particular day. We will not accept telephone requests received at any telephone
number other than the number that appears in this paragraph or received after
the close of trading on the Exchange.
We may suspend, modify or terminate the telephone transfer privilege at any time
without notice.
We use procedures that we believe provide reasonable assurance that the
telephone transfers are genuine. For example, we tape telephone conversations
with persons purporting to authorize transfers and request identifying
information. Accordingly, we disclaim any liability for losses resulting from
allegedly unauthorized telephone transfers. However, if we do not take
reasonable steps to help ensure that a telephone authorization is valid, we may
be liable for such losses.
DOLLAR COST AVERAGING PROGRAM
Through our Dollar Cost Averaging Program, you may automatically transfer a
fixed dollar amount every month during the Accumulation Phase from the DCA Fixed
Account to any Variable Sub-Account. You may not use the Dollar Cost Averaging
Program to transfer amounts to the Guarantee Periods.
We will not charge a transfer fee for transfers made under this Program, nor
will such transfer count against the 12 transfers you can make each Contract
Year without paying a transfer fee.
The theory of dollar cost averaging is that if purchases of equal dollar amounts
are made at fluctuating prices, the aggregate average cost per unit will be less
than the average of the unit prices on the same purchase dates. However,
participation in this Program does not assure you of a greater profit from your
purchases under the Program nor will it prevent or necessarily reduce losses in
a declining market. Call or write us for instructions on how to enroll.
AUTOMATIC PORTFOLIO REBALANCING PROGRAM
Once you have allocated your money among the Variable Sub-Accounts, the
performance of each Variable Sub-Account may cause a shift in the percentage you
allocated to each Variable Sub-Account. If you select our Automatic Portfolio
Rebalancing Program, we will automatically rebalance the Contract Value in each
Variable Sub-Account and return it to the desired percentage allocations. We
will not include money you allocate to the Fixed Account Options in the
Automatic Portfolio Rebalancing Program.
We will rebalance your account each quarter according to your instructions. We
will transfer amounts among the Variable Sub-Accounts to achieve the percentage
allocations you specify. You can change your allocations at any time by
contacting us in writing or by telephone. The new allocation will be effective
with the first rebalancing that occurs after we receive your request. We are not
responsible for rebalancing that occurs prior to receipt of your request.
Example:
Assume that you want your initial purchase payment split among two Variable
Sub-Accounts. You want 40% to be in the AIM V.I. Value Variable Sub-Account
and 60% to be in the AIM V.I. Growth Variable Sub-Account. Over the next 2
months the bond market does very well while the stock market performs poorly.
At the end of the first quarter, the AIM V.I. Value Variable Sub-Account now
represents 50% of your holdings because of its increase in value. If you
choose to have your holdings rebalanced quarterly, on the first day of the
next quarter, we would sell some of your units in the AIM V.I. Value Variable
Sub-Account and use the money to buy more units in the AIM V.I. Growth
Variable Sub-Account so that the percentage allocations would again be 40% and
60% respectively.
The Automatic Portfolio Rebalancing Program is available only during the
Accumulation Phase. The transfers made under the Program do not count towards
the 12 transfers you can make without paying a transfer fee. Portfolio
rebalancing is consistent with maintaining your allocation of investments among
market segments, although it is accomplished by reducing your Contract Value
allocated to the better performing segments.
EXPENSES
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As a Contract Owner, you will bear, directly or indirectly, the charges and
expenses described below.
CONTRACT MAINTENANCE CHARGE
During the Accumulation Phase, on each Contract Anniversary, we will deduct a
$35 contract maintenance charge from your Contract Value invested in each
Variable Sub-Account in proportion to the amount invested. If you surrender your
Contract, we will deduct the contract maintenance charge pro rated for the part
of the Contract Year elapsed, unless your Contract qualifies for a waiver,
described below.
The charge is to compensate us for the cost of administering the Contracts and
the Variable Account. Maintenance costs include expenses we incur collecting
purchase payments; keeping records; processing death claims, cash withdrawals,
and policy changes; proxy statements; calculating Accumulation Unit Values and
income payments; and issuing reports to Contract Owners and regulatory agencies.
We cannot increase the charge. However, we will waive this charge if, as of the
Contract Anniversary or upon full surrender:
... total purchase payments equal $50,000 or more, or
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... all money is allocated to the Fixed Account.
In addition, we will waive the contract maintenance charge if total purchase
payments are $50,000 or more as of the Payout Start Date.
MORTALITY AND EXPENSE RISK CHARGE
We deduct a mortality and expense risk charge daily at an annual rate of 1.25%
of the average daily net assets you have invested in the Variable Sub-Accounts
(1.35% if you select the Enhanced Death Benefit Rider). The mortality and
expense risk charge is for all the insurance benefits available with your
Contract (including our guarantee of annuity rates and the death benefits), for
certain expenses of the Contract, and for assuming the risk (expense risk) that
the current charges will be sufficient in the future to cover the cost of
administering the Contract. If the charges under the Contract are not
sufficient, then we will bear the loss. We charge an additional amount for the
Enhanced Death Benefit Rider to compensate us for the additional risk that we
accept by providing these options. We guarantee that we will not raise the
mortality and expense risk charge. We assess the mortality and expense risk
charge during both the Accumulation Phase and the Payout Phase.
ADMINISTRATIVE EXPENSE CHARGE
We deduct an administrative expense charge daily at an annual rate of 0.10% of
the average daily net assets you have invested in the Variable Sub-Accounts. We
intend this charge to cover actual administrative expenses that exceed the
revenues from the contract maintenance charge. There is no necessary
relationship between the amount of administrative charge imposed on a given
Contract and the amount of expenses that may be attributed to that Contract. We
assess this charge each day during the Accumulation Phase and the Payout Phase.
We guarantee that we will not raise this charge.
TRANSFER FEE
We do not currently impose a fee upon transfers among the investment
alternatives. However, we reserve the right to charge $10 per transfer after the
12th transfer in each Contract Year. We will NOT charge a transfer fee on
transfers that are part of a Dollar Cost Averaging or Automatic Portfolio
Rebalancing Program.
WITHDRAWAL CHARGE
We may assess a withdrawal charge of up to 6% of the purchase payment(s) you
withdraw. The charge declines to 0% over a 6 year period that begins on the day
we receive your payment. A schedule showing how the charge declines is shown on
page___. During each Contract Year, you can withdraw up to 15% of the aggregate
amount of your purchase payments without paying the charge. Unused portions of
this "FREE WITHDRAWAL AMOUNT" are NOT carried forward to future Contract Years.
We will deduct withdrawal charges, if applicable, from the amount paid. For
purposes of calculating the withdrawal charge, we will treat withdrawals as
coming from the oldest purchase payments first. However, for federal income tax
purposes, please note that withdrawals are considered to have come first from
earnings, which means you pay taxes on the earnings portion of your withdrawal.
We do not apply a withdrawal charge in the following situations:
... on the Payout Start Date (a withdrawal charge may apply if you terminate
income payments to be received for a specified period);
... on the death of the Contract Owner (or the Annuitant, if the Contract Owner is
not a natural person) (unless the Settlement Value is used to determine the
Death Proceeds);
... withdrawals taken to satisfy IRS minimum distribution rules for the Contract;
or
... withdrawals that qualify for one of the waivers as described below.
We use the amounts obtained from the withdrawal charge to pay sales commissions
and other promotional or distribution expenses associated with marketing the
Contracts. To the extent that the withdrawal charge does not cover all sales
commissions and other promotional or distribution expenses, we may use any of
our corporate assets, including potential profit which may arise from the
mortality and expense risk charge or any other charges or fee described above,
to make up any difference. Withdrawals of earnings are taxed as ordinary income
and, if taken before age 59/1/2,/ may be subject to an additional 10% federal
tax penalty. Withdrawals may also be subject to a Market Value Adjustment. You
should consult your own tax counsel or other tax advisers regarding any
withdrawals.
CONFINEMENT WAIVER. We will waive the withdrawal charge and any Market Value
Adjustment on all withdrawals taken prior to the Payout Start Date under your
Contract if the following conditions are satisfied:
1. you or the Annuitant (if the Contract Owner is not a natural person) are
confined to a long term care facility or a hospital for at least 90 consecutive
days. You or the Annuitant must enter the long term care facility or hospital at
least 30 days after the Issue Date;
2. you request the withdrawal and provide written proof of the stay no later
than 90 days following the end of your or the Annuitant's stay at the long term
care facility or hospital; and
3. a physician must have prescribed the stay and the stay must be medically
necessary (as defined in the Contract).
You may not claim this benefit if you, the Annuitant, or a member of your or the
Annuitant's immediate family, is the physician prescribing your or the
Annuitant's stay in a long term care facility.
TERMINAL ILLNESS WAIVER. We will waive the withdrawal charge and any Market
Value Adjustment on all withdrawals taken prior to the Payout Start Date under
your Contract if:
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1. you or the Annuitant (if the Contract Owner is not a natural person) are
first diagnosed with a terminal illness at least 30 days after the Issue Date;
and
2. you claim this benefit and deliver adequate proof of diagnosis to us.
Please refer to your Contract for more detailed information about the terms and
conditions of these waivers. The laws of your state may limit the availability
of these waivers and may also change certain terms and/or benefits available
under the waivers. You should consult your Contract for further details on these
variations. Also, even if you do not need to pay our withdrawal charge or a
Market Value Adjustment because of these waivers, you still may be required to
pay taxes or tax penalties on the amount withdrawn. You should consult your tax
adviser to determine the effect of a withdrawal on your taxes.
PREMIUM TAXES
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. We are responsible for paying these taxes and
will deduct them from your Contract Value. Some of these taxes are due when the
Contract is issued, others are due when income payments begin or upon surrender.
Our current practice is not to charge anyone for these taxes until income
payments begin or when a total withdrawal occurs, including payment upon death.
At our discretion, we may discontinue this practice and deduct premium taxes
from the purchase payments. Premium taxes generally range from 0% to 4%,
depending on the state.
At the Payout Start Date, if applicable, we deduct the charge for premium taxes
from each investment alternative in the proportion that the Contract Owner's
value in the investment alternative bears to the total Contract Value.
DEDUCTION FOR SEPARATE ACCOUNT INCOME TAXES
We are not currently making a provision for such taxes. In the future, however,
we may make a provision for taxes if we determine, in our sole discretion, that
we will incur a tax as a result of the operation of the Variable Account. We
will deduct for any taxes we incur as a result of the operation of the Variable
Account, whether or not we previously made a provision for taxes and whether or
not it was sufficient. Our status under the Internal Revenue Code is briefly
described in the "Taxes" section beginning on page_____.
OTHER EXPENSES
Each Portfolio deducts advisory fees and other expenses from its assets. You
indirectly bear the charges and expenses of the Portfolios whose shares are held
by the Variable Sub-Accounts. These fees and expenses are described in the
accompanying prospectuses for the Portfolios. For a summary of current estimates
of those charges and expenses, see page___ . We may receive compensation from
the investment advisers or administrators of the Portfolios in connection with
the administrative services we provide to the Portfolios.
ACCESS TO YOUR MONEY
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You can withdraw some or all of your Contract Value at any time prior to the
Payout Start Date. The amount payable upon withdrawal is the Contract Value (or
portion thereof) next computed after we receive the request for a withdrawal at
our home office, adjusted by any Market Value Adjustment, less any withdrawal
charges, contract maintenance charges, income tax withholding, penalty tax, and
any premium taxes. We will pay withdrawals from the Variable Account within 7
days of receipt of the request, subject to postponement in certain
circumstances. You can withdraw money from the Variable Account or the Fixed
Account Options. To complete a partial withdrawal from the Variable Account, we
will cancel Accumulation Units in an amount equal to the withdrawal and any
applicable withdrawal charge and premium taxes. You must name the investment
alternative from which you are taking the withdrawal. If none is named, then the
withdrawal request is incomplete and cannot be honored. In general, you must
withdraw at least $50 at a time. You also may withdraw a lesser amount if you
are withdrawing your entire interest in a Variable Sub-Account. If you request a
total withdrawal, we may require you to return your Contract to us. Withdrawals
of earnings are taxed as ordinary income and, if taken prior to age 59 /1/2/,
maybe subject to an additional 10% Federal tax penalty.
POSTPONEMENT OF PAYMENTS
We may postpone the payment of any amounts due from the Variable Account under
the Contract if:
1. The New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on the Exchange is otherwise restricted;
2. An emergency exists as defined by the SEC; or
3. The SEC permits delay for your protection.
In addition, we may delay payments or transfers from the Fixed Account Options
for up to 6 months (or shorter period if required by law). If we delay payment
for 30 days or more, we will pay interest as required by law.
SYSTEMATIC WITHDRAWAL PROGRAM
You may choose to receive systematic withdrawal payments on a monthly,
quarterly, semi-annual, or annual basis at any time prior to the Payout Start
Date. The minimum amount of each systematic withdrawal is $50. At our
discretion, systematic withdrawals may not be
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offered in conjunction with the Dollar Cost Averaging Program or Automatic
Portfolio Rebalancing Program. Depending on fluctuations in the value of the
Variable Sub-Accounts and the value of the Fixed Account Options, systematic
withdrawals may reduce or even exhaust the Contract Value. Withdrawals of
earnings under a Systematic Withdrawal Program are taxed as ordinary income and,
if taken prior to age 59 /1/2/, may be subject to an additional 10% federal tax
penalty. Please consult your tax advisor before taking any withdrawal.
We will make systematic withdrawal payments to you or your designated payee. At
our discretion, we may modify or suspend the Systematic Withdrawal Program and
charge a processing fee for the service. If we modify or suspend the Systematic
Withdrawal Program, existing systematic withdrawal payments will not be
affected.
MINIMUM CONTRACT VALUE
If your request for a partial withdrawal would reduce your Contract Value to
less than $2,000, we may treat it as a request to withdraw your entire Contract
Value. Your Contract will terminate if you withdraw all of your Contract Value.
We will, however, ask you to confirm your withdrawal request before terminating
your Contract. Before terminating any Contract whose value has been previously
reduced by withdrawals to less than $2,000, we will inform you in writing of our
intention to terminate your Contract and give you at least 30 days in which to
make an additional purchase payment to restore your Contract's Value to the
contractual minimum of $2,000. If we terminate your Contract, we will distribute
to you its Contract Value, adjusted by any applicable Market Value Adjustment,
less withdrawal and other charges and applicable taxes.
INCOME PAYMENTS
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PAYOUT START DATE
You select the Payout Start Date in your application. The "PAYOUT START DATE" is
the day that we apply your money to an Income Plan. The Payout Start Date must
be:
... at least 30 days after the Issue Date; and
... no later than the day the Annuitant reaches age 90, or the 10th Contract
Anniversary, if later.
You may change the Payout Start Date at any time by notifying us in writing of
the change at least 30 days before the scheduled Payout Start Date. Absent a
change, we will use the Payout Start Date stated in your Contract.
INCOME PLANS
An Income Plan is a series of scheduled payments to you or someone you
designate. You may choose and change your choice of Income Plan until 30 days
before the Payout Start Date. If you do not select an Income Plan, we will make
income payments in accordance with Income Plan 1 with guaranteed payments for 10
years. After the Payout Start Date, you make not make withdrawals (except as
described below) or change your choice of Income Plan.
Three Income Plans are available under the Contract. Each is available to
provide:
... fixed income payments;
... variable income payments; or
... a combination of the two.
The three Income Plans are:
INCOME PLAN 1 - LIFE INCOME WITH GUARANTEED PAYMENTS. Under this plan, we make
periodic income payments for at least as long as the Annuitant lives. If the
Annuitant dies before we have made all of the guaranteed income payments, we
will continue to pay the remainder of the guaranteed income payments as required
by the Contract.
INCOME PLAN 2 - JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED PAYMENTS. Under
this plan, we make periodic income payments for at least as long as either the
Annuitant or the joint Annuitant is alive. If both the Annuitant and the joint
Annuitant die before we have made all of the guaranteed income payments, we will
continue to pay the remainder of the guaranteed income payments as required by
the Contract.
INCOME PLAN 3 - GUARANTEED PAYMENTS FOR A SPECIFIED PERIOD (5 YEARS TO 30
YEARS). Under this plan, we make periodic income payments for the period you
have chosen. These payments do not depend on the Annuitant's life. You may elect
to receive guaranteed payments for periods ranging from 5 to 30 years. We will
deduct the mortality and expense risk charge from the Variable Sub-Account
assets that support variable income payments even though we may not bear any
mortality risk.
The length of any guaranteed payment period under your selected Income Plan
generally will affect the dollar amounts of each income payment. As a general
rule, longer guarantee periods result in lower income payments, all other things
being equal. For example, if you choose an Income Plan with payments that depend
on the life of the Annuitant but with no minimum specified period for guaranteed
payments, the income payments generally will be greater than the income payments
made under the same Income Plan with a minimum specified period for guaranteed
payments. If you choose Income Plan 1 or 2, or, if available, another Income
Plan with payments that continue for the life of the Annuitant or joint
Annuitant, we may require proof of age and sex of the Annuitant or joint
Annuitant before starting income payments, and proof that the Annuitant or joint
Annuitant are alive before we make each
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payment.
Please note that under such Income Plans, if you elect to take no minimum
guaranteed payments, it is possible that the payee could receive only 1 income
payment if the Annuitant and any joint Annuitant both die before the second
income payment, or only 2 income payments if they die before the third income
payment, and so on.
Generally, you may not make withdrawals after the Payout Start Date. One
exception to this rule applies if you are receiving variable income payments
that do not depend on the life of the Annuitant (such as under Income Plan 3).
In that case you may terminate all or part of the Variable Account portion of
the income payments at any time and receive a lump sum equal to the present
value of the remaining variable payments associated with the amount withdrawn.
The minimum amount you may withdraw under this feature is $1,000. A withdrawal
charge may apply. We also deduct applicable premium taxes from the Contract
Value at the Payout Start Date. We may make other Income Plans available. You
must apply at least the Contract Value in the Fixed Account on the Payout Start
Date to fixed income payments. If you wish to apply any portion of your Fixed
Account balance to provide variable income payments, you should plan ahead and
transfer that amount to the Variable Sub-Accounts prior to the Payout Start
Date. If you do not tell us how to allocate your Contract Value among fixed and
variable income payments, we will apply your Contract Value in the Variable
Account to variable income payments and your Contract Value in the Fixed Account
to fixed income payments. We will apply your Contract Value, adjusted by any
Market Value Adjustment, less applicable taxes to your Income Plan on the Payout
Start Date. If the amount available to apply under an Income Plan is less than
$2,000, or not enough to provide an initial payment of at least $20, and state
law permits, we may:
... terminate the Contract and pay you the Contract Value, adjusted by any
applicable Market Value Adjustment and less any applicable taxes, in a lump
sum instead of the periodic payments you have chosen; or
... reduce the frequency of your payments so that each payment will be at least
$20.
VARIABLE INCOME PAYMENTS
The amount of your variable income payments depends upon the investment results
of the Variable Sub-Accounts you select, the premium taxes you pay, the age and
sex of the Annuitant, and the Income Plan you choose. We guarantee that the
payments will not be affected by (a) actual mortality experience and (b) the
amount of our administration expenses.
We cannot predict the total amount of your variable income payments. Your
variable income payments may be more or less than your total purchase payments
because (a) variable income payments vary with the investment results of the
underlying Portfolios; and (b) the Annuitant could live longer or shorter than
we expect based on the tables we use.
In calculating the amount of the periodic payments in the annuity tables in the
Contract, we assumed an annual investment rate of 3%. If the actual net
investment return of the Variable Sub-Accounts you choose is less than this
assumed investment rate, then the dollar amount of your variable income payments
will decrease. The dollar amount of your variable income payments will increase,
however, if the actual net investment return exceeds the assumed investment
rate. The dollar amount of the variable income payments stays level if the net
investment return equals the assumed investment rate.
Please refer to the Statement of Additional Information for more detailed
information as to how we determine variable income payments.
FIXED INCOME PAYMENTS
We guarantee income payment amounts derived from any Fixed Account Option for
the duration of the Income Plan. We calculate the fixed income payments by:
1. adjusting the portion of the Contract Value in any Fixed Account Option on
the Payout Start Date by any applicable Market Value Adjustment;
2. deducting any applicable premium tax; and
3. applying the resulting amount to the greater of (a) the appropriate value
from the income payment table in your Contract or (b) such other value as we are
offering at that time.
We may defer making fixed income payments for a period of up to 6 months or any
shorter time state law may require. If we defer payments for 30 days or more, we
will pay interest as required by law from the date we receive the withdrawal
request to the date we make payment.
CERTAIN EMPLOYEE BENEFIT PLANS
The Contracts offered by this prospectus contain income payment tables that
provide for different payments to men and women of the same age, except in
states that require unisex tables. We reserve the right to use income payment
tables that do not distinguish on the basis of sex to the extent permitted by
applicable law. In certain employment related situations, employers are required
by law to use the same income payment tables for men and women. Accordingly, if
the Contract is to be used in connection with an employment-related retirement
or benefit plan and we do not offer unisex annuity tables in your state, you
should consult with legal counsel as to whether the purchase of a Contract is
appropriate.
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DEATH BENEFITS
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DEATH OF OWNER
If you die before the Payout Start Date, any surviving joint Contract Owner or,
if none, the Beneficiary will be designated the new Contract Owner and will be
entitled to the options described below. If the new Contract Owner previously
was the Beneficiary, however, the new Contract Owner's options will be subject
to any restrictions previously placed upon the Beneficiary.
The claim for death benefits must be submitted to us within 180 days of the
relevant death in order to claim the standard or enhanced death benefit. If a
complete claim is not submitted within 180 days of the relevant death, the
claimant will receive the greater of Contract Value or the Settlement Value.
(See "Death Proceeds" below).
1. If your spouse is the sole surviving Contract Owner or, in the absence of any
surviving Contract Owner, is the sole Beneficiary:
(a) Your spouse may elect to receive the Death Proceeds in a lump sum; or
(b) Your spouse may elect to receive the Death Proceeds paid out under one of
the Income Plans (described in "Income Payments" above) subject to the following
conditions:
The Payout Start Date must be within one year of your date of death. Income
payments must be payable:
(i) over the life of your spouse; or
(ii) for a guaranteed number of payments from 5 to 50 years but not to exceed
the life expectancy of your spouse; or
(iii) over the life of your spouse with a guaranteed number of payments from
5 to 30 years but not to exceed the life expectancy of your spouse.
(c) If your spouse does not elect one of these options, the Contract will
continue in the Accumulation Phase as if the death had not occurred. If the
Contract is continued in the Accumulation Phase, the following conditions apply:
The Contract Value of the continued Contract will be the Death Proceeds. Unless
otherwise instructed by the continuing spouse, the excess, if any, of the Death
Proceeds over the Contract Value will be allocated to the Sub-Accounts of the
Variable Account. The excess will be allocated in proportion to your Contract
Value in those Sub-Accounts as of the end of the Valuation Period during which
we receive the complete request for settlement of the Death Proceeds, except
that any portion of this excess attributable to the Fixed Account Options will
be allocated to the money market Variable Sub-Account. Within 30 days of the
date the Contract is continued, your surviving spouse may choose one of the
following transfer alternatives without incurring a transfer fee:
(i) transfer all or a portion of the excess among the Variable Sub-accounts;
(ii) transfer all or a portion of the excess into the Guaranteed Maturity
Fixed Account and begin a new Guarantee Period; or
(iii) transfer all or a portion of the excess into a combination of Variable
Sub-accounts and the Guaranteed Maturity Fixed Account.
Any such transfer does not count as one of the free transfers allowed each
Contract Year and is subject to any minimum allocation amount specified in the
Contract.
The surviving spouse may make a single withdrawal of any amount within one year
of the date of your death without incurring a Withdrawal Charge or Market Value
Adjustment.
Prior to the Payout Start Date, the Death Benefit of the continued Contract will
be as defined in the Death Benefit provision.
Only one spousal continuation is allowed under the Contract.
2. If the new Contract Owner is not your spouse but is a living person:
(a) The new Contract Owner may elect to receive the Death Proceeds in a lump
sum; or
(b) The new Contract Owner may elect to receive the Death Proceeds paid out
under one of the Income Plans (described in "Income Payments" above) subject to
the following conditions:
The Payout Start Date must be within one year of your date of death. Income
Payments must be payable:
(i) over the life of the new Contract Owner; or
(ii) . for a guaranteed number of payments from 5 to 50 years but not to
exceed the life expectancy of the new Contract Owner; or
(iii) over the life of the new Contract Owner with a guaranteed number of
payments from 5 to 30 years but not to exceed the life expectancy of the new
Contract Owner.
(c) If the new Contract Owner does not elect one of the options above, then
the new Contract Owner must receive the Contract Value payable within 5 years of
your date of death. On the date we receive the complete request for settlement
of the Death Proceeds the Contract Value will be the Death Proceeds. Unless
otherwise instructed by the new Contract Owner, the excess, if any, of the Death
Proceeds over the Contract Value will be allocated to the money market Variable
Sub-Account. Henceforth, the new Contract Owner may make transfers (as described
in "Transfers During the Payout Phase" above) during this 5 year period.
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The new Contract Owner may make additional purchase payments to the Contract
under this election. Withdrawal Charges will be waived for any withdrawals made
during this 5 year period.
We reserve the right to offer additional options upon the death of the Contract
Owner.
If the new Contract Owner dies prior to the complete liquidation of the Contract
Value, then the new Contract Owner's named Beneficiary(ies) will receive the
greater of the Settlement Value or the remaining Contract Value. This amount
must be liquidated as a lump sum within 5 years of the date of the original
Contract Owner's death.
3. If the new Contract Owner is a corporation or other type of non-living
person:
(a) The new Contract Owner may elect to receive the Death Proceeds in a lump
sum; or
(b) If the new Contract Owner does not elect the option above, then the new
Contract Owner must receive the Contract Value payable within 5 years of your
date of death. On the date we receive the complete request for settlement of the
Death Proceeds, the Contract Value under this option will be the Death Proceeds.
Unless otherwise instructed by the new Contract Owner, the excess, if any, of
the Death Proceeds over the Contract Value will be allocated to the money market
Variable Sub-Account. Henceforth, the new Contract Owner may make transfers (as
described in "Transfers During the Payout Phase" above) during this 5 year
period.
The new Contract Owner may not make additional purchase payments to the Contract
under this election. Withdrawal Charges will be waived during this 5 year
period.
We reserve the right to make additional options available to the new Contract
Owner upon the death of the Contract Owner.
If any new Contract Owner is a non-living person, all new Contract Owners will
be considered to be non-living persons for purposes of these provisions
Under any of these options, all ownership rights, subject to any restrictions
previously placed upon the Beneficiary, are available to the new Contract Owner
from the date of your death to the date on which the Death Proceeds are paid.
DEATH OF ANNUITANT
If the Annuitant who is not also the Contract Owner dies prior to the Payout
Start Date, the following apply:
1. If the Contract Owner is a living person, then the Contract will continue
with a new Annuitant, who will be:
(a) the youngest Contract Owner; otherwise
(b) the youngest Beneficiary.
You may change the Annuitant before the Payout Start Date.
2. If the Contract Owner is a non-living person:
(a) The Contract Owner may elect to receive the Death Proceeds in a lump sum;
or
(b) If the Contract Owner does not elect the option above, then the Contract
Owner must receive the Contract Value payable within 5 years of the Annuitant's
date of death. On the date we receive the complete request for settlement of the
Death Proceeds, the Contract Value under this option will be the Death Proceeds.
Unless otherwise instructed by the Contract Owner, the excess, if any, of the
Death Proceeds over the Contract Value will be allocated to the money market
Variable Sub-Account. Henceforth, the Contract Owner may make transfers (as
described in "Transfers During the Payout Phase" above) during this 5 year
period.
The new Contract Owner may not make additional purchase payments to the Contract
under this election. Withdrawal Charges will be waived during this 5 year
period.
We reserve the right to make additional options available to the Contract Owner
upon the death of the Annuitant.
Under any of these options, all ownership rights are available to the non-living
Contract Owner from the date of the Annuitant's death to the date on which the
Death Proceeds are paid.
DUE PROOF OF DEATH
A claim for a distribution on death must include Due Proof of Death. We will
accept the following documentation as "Due Proof of Death":
... a certified copy of a death certificate,
... a certified copy of a decree of a court of competent jurisdiction as to the
finding of death, or
... any other proof acceptable to us.
DEATH BENEFIT PAYMENTS
DEATH PROCEEDS
If we receive a complete request for settlement of the Death Proceeds within 180
days of the date of your death, the Death Proceeds are equal to the applicable
death benefit described below. Otherwise, the Death Proceeds are equal to the
greater of the Contract Value or the Settlement Value.
We reserve the right to extend, on a non-discriminatory basis, the 180-day
period in which the Death Proceeds will equal the applicable death benefit as
described above.
This right applies only for the purposes of determining the amount payable as
Death Proceeds and in no way restricts when a claim may be filed.
DEATH BENEFIT AMOUNT
Prior to the Payout Start Date, the death benefit is equal to the greatest of:
1. the Contract Value as of the date we determine the
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value of the death benefit, or
2. the SETTLEMENT VALUE (that is, the amount payable on a full withdrawal of
Contract Value) on the date we determine the value of the death benefit, or
3. the Contract Value on each DEATH BENEFIT ANNIVERSARY prior to the date we
determine the death benefit, increased by purchase payments made since that
Death Benefit Anniversary and reduced by an adjustment for any partial
withdrawals since that Death Benefit Anniversary.
A "Death Benefit Anniversary" is every seventh Contract Anniversary beginning
with the Issue Date. For example, the Issue Date, 7th and 14th Contract
Anniversaries are the first 3 Death Benefit Anniversaries. The partial
withdrawal adjustment is equal to (a) divided by (b), with the result multiplied
by (c), where:
(a) = is the withdrawal amount;
(b) = is the Contract Value immediately prior to the withdrawal; and
(c) = is the Contract Value on the Death Benefit Anniversary adjusted by any
prior purchase payments or withdrawals made since that Anniversary.
We will determine the value of the death benefit as of the end of the Valuation
Date on which we receive a complete request for payment of the death benefit. If
we receive a request after 3 p.m. Central Time on a Valuation Date, we will
process the request as of the end of the following Valuation Date.
ENHANCED DEATH BENEFIT RIDER
For Contracts with the Enhanced Death Benefit Rider, the death benefit will be
the greatest of (1) through (3) above, or (4) the value of the Enhanced Death
Benefit Rider, which is 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 an adjustment for any partial withdrawals since that
Anniversary.
The adjustment is equal to (a) divided by (b), and the result multiplied by (c)
where:
(a) is the withdrawal amount,
(b) is the Contract Value immediately prior to the withdrawal, and
(c) is the Contract Value on that Contract Anniversary adjusted by any prior
purchase payments and withdrawals since that Contract Anniversary.
We will calculate Anniversary Values for each Contract Anniversary prior to the
oldest Contract Owner's or the Annuitant's, if the Contract Owner is not a
natural person, 80th birthday. The Enhanced Death Benefit Rider will never be
greater than the maximum death benefit allowed by any state non-forfeiture laws
that govern the Contract.
MORE INFORMATION
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GLENBROOK LIFE
GLENBROOK LIFE is the issuer of the Contract. GLENBROOK
LIFE is a stock life insurance company organized under the laws of the State of
Arizona in 1998. Previously, GLENBROOK LIFE was organized under the laws of the
State of Illinois in 1992. GLENBROOK LIFE was originally organized under the
laws of the State of Indiana in 1965. From 1965 to 1983 GLENBROOK LIFE was known
as "United Standard Life Assurance Company" and from 1983 to 1992 as "William
Penn Life Assurance Company of America."
GLENBROOK LIFE is currently licensed to operate in the District of Columbia and
all states except New York. We intend to offer the Contract in those
jurisdictions in which we are licensed. Our home office is located at 3100
Sanders Road, Northbrook, Illinois, 60062.
GLENBROOK LIFE is a wholly owned subsidiary of Allstate Life Insurance Company
("Allstate Life"), a stock life insurance company incorporated under the laws of
the State of Illinois. Allstate Life is a wholly owned subsidiary of Allstate
Insurance Company, a stock property-liability insurance company incorporated
under the laws of Illinois. All of the outstanding capital stock of Allstate
Insurance Company is owned by The Allstate Corporation.
GLENBROOK LIFE and Allstate Life entered into a reinsurance agreement effective
June 5, 1992. Under the reinsurance agreement, Allstate Life reinsures
substantially all of GLENBROOK LIFE's liabilities under its various insurance
contracts. The reinsurance agreement provides us with financial backing from
Allstate Life. However, it does not create a direct contractual relationship
between Allstate Life and you. In other words, the obligations of Allstate Life
under the reinsurance agreement are to GLENBROOK LIFE; GLENBROOK
LIFE remains the sole obligor under the Contract to you.
Independent rating agencies regularly evaluate life insurers' claims-paying
ability, quality of investments, and overall stability. A.M. Best Company
assigns an A+ (Superior) financial strength rating to Allstate Life, which
results in an A+r rating to GLENBROOK LIFE due to the reinsurance agreement with
Allstate Life mentioned above. Standard & Poor's Insurance Rating Services
assigns an AA+ (Very Strong) financial strength rating and Moody's Investors
Service assigns an Aa2 (Excellent) financial strength rating to GLENBROOK LIFE,
sharing the same ratings of its parent, Allstate Life. These ratings do not
reflect the investment performance of the Variable
27
Account. We may from time to time advertise these ratings in our sales
literature.
THE VARIABLE ACCOUNT
GLENBROOK LIFE established the GLENBROOK LIFE Life Multi-Manager Variable
Account on January 15, 1996. We have registered the Variable Account with the
SEC as a unit investment trust. The SEC does not supervise the management of the
Variable Account or GLENBROOK LIFE.
We own the assets of the Variable Account. The Variable Account is a segregated
asset account under Arizona law. That means we account for the Variable
Account's income, gains and losses separately from the results of our other
operations. It also means that only the assets of the Variable Account that are
in excess of the reserves and other Contract liabilities with respect to the
Variable Account are subject to liabilities relating to our other operations.
Our obligations arising under the Contracts are general corporate obligations of
GLENBROOK LIFE.
The Variable Account consists of multiple Variable Sub-Accounts, Each Variable
Sub-Account invests in a corresponding Portfolio. We may add new Variable
Sub-Accounts or eliminate one or more of them, if we believe marketing, tax, or
investment conditions so warrant. We may also add other Variable Sub-Accounts
that may be available under other variable annuity contracts. We do not
guarantee the investment performance of the Variable Account, its Sub-Accounts
or the Portfolios. We may use the Variable Account to fund our other annuity
contracts. We will account separately for each type of annuity contract funded
by the Variable Account.
THE PORTFOLIOS
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. We automatically reinvest all
dividends and capital gains distributions from the Portfolios in shares of the
distributing Portfolio at their net asset value.
VOTING PRIVILEGES. As a general matter, you do not have a direct right to vote
the shares of the Portfolios held by the Variable Sub-Accounts to which you have
allocated your Contract Value. Under current law, however, you are entitled to
give us instructions on how to vote those shares on certain matters. Based on
our present view of the law, we will vote the shares of the Portfolios that we
hold directly or indirectly through the Variable Account in accordance with
instructions that we receive from Contract Owners entitled to give such
instructions.
As a general rule, before the Payout Start Date, the Contract Owner or anyone
with a voting interest is the person entitled to give voting instructions. The
number of shares that a person has a right to instruct will be determined by
dividing the Contract Value allocated to the applicable Variable Sub-Account by
the net asset value per share of the corresponding Portfolio as of the record
date of the meeting. After the Payout Start Date the person receiving income
payments has the voting interest. The payee's number of votes will be determined
by dividing the reserve for such Contract allocated to the applicable Variable
Sub-Account by the net asset value per share of the corresponding Portfolio. The
votes decrease as income payments are made and as the reserves for the Contract
decrease.
We will vote shares attributable to Contracts for which we have not received
instructions, as well as shares attributable to us, in the same proportion as we
vote shares for which we have received instructions, unless we determine that we
may vote such shares in our own discretion. We will apply voting instructions to
abstain on any item to be voted upon on a pro-rata basis to reduce the votes
eligible to be cast.
We reserve the right to vote Portfolio shares as we see fit without regard to
voting instructions to the extent permitted by law. If we disregard voting
instructions, we will include a summary of that action and our reasons for that
action in the next semi-annual financial report we send to you.
CHANGES IN PORTFOLIOS. If the shares of any of the Portfolios are no longer
available for investment by the Variable Account or if, in our judgment, further
investment in such shares is no longer desirable in view of the purposes of the
Contract, we may eliminate that Portfolio and substitute shares of another
eligible investment Portfolio. Any substitution of securities will comply with
the requirements of the Investment Company Act of 1940. We also may add new
Variable Sub-Accounts that invest in additional mutual funds. We will notify you
in advance of any change.
CONFLICTS OF INTEREST. Certain of the Portfolios sell their shares to separate
accounts underlying both variable life insurance and variable annuity contracts.
It is conceivable that in the future it may be unfavorable for variable life
insurance separate accounts and variable annuity separate accounts to invest in
the same Portfolio. The boards of directors of these Portfolios monitor for
possible conflicts among separate accounts buying shares of the Portfolios.
Conflicts could develop for a variety of reasons. For example, differences in
treatment under tax and other laws or the failure by a separate account to
comply with such laws could cause a conflict. To eliminate a conflict, a
Portfolio's board of directors may require a separate account to withdraw its
participation in a Portfolio. A Portfolio's net asset value could decrease if it
had to sell investment securities to pay redemption proceeds to a separate
account withdrawing because of a conflict.
THE CONTRACT
DISTRIBUTION. ALFS, Inc., ("ALFS") located at 3100 Sanders Road, Northbrook, IL
60062-7154, serves as principal underwriter and distributor of the Contracts.
ALFS is a wholly owned subsidiary of Allstate Life Insurance Company. ALFS is a
registered broker dealer under the Securities and Exchange Act of 1934, as
amended ("EXCHANGE ACT"), and is a member of the National Association of
Securities Dealers, Inc.
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We will pay commissions to broker-dealers who sell the contracts. Commissions
paid may vary, but we estimate that the total commissions paid on all Contract
sales will not exceed 8% of all purchase payments. These commissions are
intended to cover distribution expenses. Sometimes, we also pay the
broker-dealer a persistency bonus in addition to the standard commissions. A
persistency bonus is not expected to exceed 0.25%, on an annual basis, of the
Contract Values considered in connection with the bonus. In some states,
Contracts may be sold by representatives or employees of banks which may be
acting as broker-dealers without separate registration under the Exchange Act
pursuant to legal and regulatory exceptions.
GLENBROOK LIFE does not pay ALFS a commission for distribution of the Contracts.
The underwriting agreement with ALFS provides that we will reimburse ALFS for
any liability to Contract Owners arising out of services rendered or Contracts
issued.
ADMINISTRATION. We have primary responsibility for all administration of the
Contracts and the Variable Account. We provide the following administrative
services, among others:
... issuance of the Contracts;
... maintenance of Contract Owner records;
... Contract Owner services;
... calculation of unit values;
... maintenance of the Variable Account; and
... preparation of Contract Owner reports.
We will send you Contract statements and transaction confirmations at least
annually. You should notify us promptly in writing of any address change. You
should read your statements and confirmations carefully and verify their
accuracy. You should contact us promptly if you have a question about a periodic
statement. We will investigate all complaints and make any necessary adjustments
retroactively, but you must notify us of a potential error within a reasonable
time after the date of the questioned statement. If you wait too long, we
reserve the right to make the adjustment as of the date that we receive notice
of the potential error.
We also will provide you with additional periodic and other reports, information
and prospectuses as may be required by federal securities laws.
QUALIFIED PLANS
If you use the Contract with a qualified plan, the plan may impose different or
additional conditions or limitations on withdrawals, waivers of withdrawal
charges, death benefits, Payout Start Dates, income payments, and other Contract
features. In addition, adverse tax consequences may result if qualified plan
limits on distributions and other conditions are not met. Please consult your
qualified plan administrator for more information.
LEGAL MATTERS
Jorden Burt LLP, Washington, D.C., has advised GLENBROOK LIFE on certain federal
securities law matters. All matters of state insurance law pertaining to the
Contracts, including the validity of the Contracts and GLENBROOK LIFE's right to
issue such Contracts under state insurance law, have been passed upon by Michael
J. Velotta, General Counsel of GLENBROOK LIFE.
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TAXES
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THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. GLENBROOK
LIFE MAKES NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR
TRANSACTION INVOLVING A CONTRACT.
Federal, state, local and other tax consequences of ownership or receipt of
distributions under an annuity contract depend on your individual circumstances.
If you are concerned about any tax consequences with regard to your individual
circumstances, you should consult a competent tax adviser.
TAXATION OF GLENBROOK LIFE AND
ANNUITY COMPANY
GLENBROOK LIFE 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 GLENBROOK LIFE, and its operations form a part of GLENBROOK LIFE,
it will not be taxed separately. Investment income and realized capital gains of
the Variable Account are automatically applied to increase reserves under the
Contract. Under existing federal income tax law, GLENBROOK LIFE believes that
the Variable Account investment income and capital gains will not be taxed to
the extent that such income and gains are applied to increase the reserves under
the Contract. Accordingly, GLENBROOK LIFE does not anticipate that it will incur
any federal income tax liability attributable to the Variable Account, and
therefore GLENBROOK LIFE does not intend to make provisions for any such taxes.
If GLENBROOK LIFE is taxed on investment income or capital gains of the Variable
Account, then GLENBROOK LIFE may impose a charge against the Variable Account in
order to make provision for such taxes.
TAXATION OF ANNUITIES IN GENERAL
TAX DEFERRAL. Generally, you are not taxed on increases in the Contract Value
until a distribution occurs. This rule applies only where:
1. the Contract Owner is a natural person,
2. the investments of the Variable Account are "adequately diversified"
according to Treasury Department regulations, and
3. GLENBROOK LIFE is considered the owner of the Variable Account assets for
federal income tax purposes.
NON-NATURAL OWNERS. As a general rule, annuity contracts owned by non-natural
persons such as corporations, trusts, or other entities are not treated as
annuity contracts for federal income tax purposes. The income on such contracts
does not enjoy tax deferral and is taxed as ordinary income received or accrued
by the owner during the taxable year.
EXCEPTIONS TO THE NON-NATURAL OWNER RULE. There are several exceptions to the
general rule that annuity contracts held by a non-natural owner are not treated
as annuity contracts for federal income tax purposes. Contracts will generally
be treated as held by a natural person if the nominal owner is a trust or other
entity which holds the contract as agent for a natural person. However, this
special exception will not apply in the case of an employer who is the nominal
owner of an annuity contract under a non-qualified deferred compensation
arrangement for its employees. Other exceptions to the non-natural owner rule
are: (1) contracts acquired by an estate of a decedent by reason of the death of
the decedent; (2) certain qualified contracts; (3) contracts purchased by
employers upon the termination of certain qualified plans; (4) certain contracts
used in connection with structured settlement agreements, and (5) immediate
annuity 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.
DIVERSIFICATION REQUIREMENTS. For a Contract to be treated as an annuity for
federal income tax purposes, the investments in the Variable Account must be
"ADEQUATELY DIVERSIFIED" consistent with standards under Treasury Department
regulations. If the investments in the Variable Account are not adequately
diversified, the Contract will not be treated as an annuity contract for federal
income tax purposes. As a result, the income on the Contract will be taxed as
ordinary income received or accrued by the Contract Owner during the taxable
year. Although GLENBROOK LIFE does not have control over the Portfolios or their
investments, we expect the Portfolios to meet the diversification requirements.
OWNERSHIP TREATMENT. The IRS has stated that a contract owner will be considered
the owner of separate account assets if he 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, the Treasury
Department announced that the regulations do not provide guidance concerning
circumstances in which investor control of the separate account investments may
cause a contract owner to be treated as the owner of the separate account. The
Treasury Department also stated that future guidance would be issued regarding
the extent that owners could direct sub-account investments without being
treated as owners of the underlying assets of the separate account.
Your rights under the Contract are different than those described by the IRS in
rulings in which it found that contract owners were not owners of separate
account assets. For example, you have the choice to allocate premiums and
Contract Values among a broader selection of investment alternatives. Also, you
may be able to transfer among investment alternatives more frequently than in
such rulings. These differences could result in you
30
being treated as the owner of the Variable Account. If this occurs, income and
gain from the Variable Account assets would be includible in your gross income.
GLENBROOK
LIFE does not know what standards will be set forth in any regulations or
rulings which the Treasury Department may issue. It is possible that future
standards announced by the Treasury Department could adversely affect the tax
treatment of your Contract. We reserve the right to modify the Contract as
necessary to attempt to prevent you from being considered the federal tax owner
of the assets of the Variable Account. However, we make no guarantee that such
modification to the Contract will be successful.
TAXATION OF PARTIAL AND FULL WITHDRAWALS. If you make a partial withdrawal under
a non-qualified Contract, amounts received are taxable to the extent the
Contract Value, without regard to surrender charges, exceeds the investment in
the Contract. The investment in the Contract is the gross premium paid for the
contract minus any amounts previously received from the Contract if such amounts
were properly excluded from your gross income. If you make a full withdrawal
under a non-Qualified Contract, the amount received will be taxable only to the
extent it exceeds the investment in the Contract.
TAXATION OF ANNUITY PAYMENTS. Generally, the rule for income taxation of annuity
payments received from a non-qualified Contract provides for the return of your
investment in the Contract in equal tax-free amounts over the payment period.
The balance of each payment received is taxable. For fixed annuity payments, the
amount excluded from income is determined by multiplying the payment by the
ratio of the investment in the Contract (adjusted for any refund feature or
period certain) to the total expected value of annuity payments for the term of
the Contract. If you elect variable annuity payments, the amount excluded from
taxable income is determined by dividing the investment in the Contract by the
total number of expected payments. The annuity payments will be fully taxable
after the total amount of the investment in the Contract is excluded using these
ratios. The Federal tax treatment of annuity payments is unclear in some
respects. As a result, if the IRS should provide further guidance, it is
possible that the amount we calculate and report to the IRS as taxable could be
different. If you die, and annuity payments cease before the total amount of the
investment in the Contract is recovered, the unrecovered amount will be allowed
as a deduction for your last taxable year.
WITHDRAWALS AFTER THE PAYOUT START DATE. Federal tax law is unclear regarding
the taxation of any additional withdrawal received after the Payout Start Date.
It is possible that a greater or lesser portion of such a payment could be
taxable than the amount we determine.
DISTRIBUTION AT DEATH RULES. In order to be considered an annuity contract for
federal income tax purposes, the Contract must provide:
1. if any Contract Owner dies on or after the Payout 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 Contract Owner's death;
2. if any Contract Owner dies prior to the Payout Start Date, the entire
interest in the Contract will be distributed within 5 years after the date of
the Contract Owner's death. These requirements are satisfied if any portion of
the Contract Owner's interest that is payable to (or for the benefit of) a
designated Beneficiary is distributed over the life of such Beneficiary (or over
a period not extending beyond the life expectancy of the Beneficiary) and the
distributions begin within 1 year of the Contract Owner's death. If the Contract
Owner's designated Beneficiary is the surviving spouse of the Contract Owner,
the Contract may be continued with the surviving spouse as the new Contract
Owner.
3. if the Contract Owner is a non-natural person, then the Annuitant will be
treated as the Contract 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 Contract Owner.
TAXATION OF ANNUITY DEATH BENEFITS. Death Benefit amounts are included in income
as follows:
1. if distributed in a lump sum, the amounts are taxed in the same manner as a
full withdrawal, or
2. if distributed under an Income Plan, the amounts are taxed in the same manner
as annuity payments.
PENALTY TAX ON PREMATURE DISTRIBUTIONS. A 10% penalty tax applies to the taxable
amount of any premature distribution from a non-Qualified Contract. The penalty
tax generally applies to any distribution made prior to the date you attain age
591/2. However, no penalty tax is incurred on distributions:
1. made on or after the date the Contract Owner attains age 591/2,
2. made as a result of the Contract Owner's death or becoming totally disabled,
3. made in substantially equal periodic payments over the Contract Owner's life
or life expectancy, or over the joint lives or joint life expectancies of the
Contract Owner and the Beneficiary,
4. made under an immediate annuity, or
5. attributable to investment in the Contract before August 14, 1982.
You should consult a competent tax advisor to determine how these exceptions may
apply to your situation.
SUBSTANTIALLY EQUAL PERIODIC PAYMENTS. With respect to non-Qualified Contracts
using substantially equal periodic payments or immediate annuity payments as an
exception to the penalty tax on premature distributions,
31
any additional withdrawal or other modification of the payment stream would
violate the requirement that payments must be substantially equal. Failure to
meet this requirement would mean that the income portion of each payment
received prior to the later of 5 years or the Contract Owner's attaining age
591/2 would be subject to a 10% penalty tax unless another exception to the
penalty tax applied. The tax for the year of the modification is increased by
the penalty tax that would have been imposed without the exception, plus
interest for the years in which the exception was used. You should consult a
competent tax advisor prior to taking a withdrawal.
TAX FREE EXCHANGES UNDER IRC SECTION 1035. A 1035 exchange is a tax-free
exchange of a non-qualified life insurance contract, endowment contract or
annuity contract for a new non-qualified annuity contract. The Contract Owner(s)
must be the same on the old and new contract. Basis from the old contract
carries over to the new contract so long as we receive that information from the
relinquishing company. If basis information is never received, we will assume
that all exchanged funds represent earnings and will allocate no cost basis to
them.
TAXATION OF OWNERSHIP CHANGES. If you transfer a non-Qualified Contract without
full and adequate consideration to a person other than your spouse (or to a
former spouse incident to a divorce), you will be taxed on the difference
between the Contract Value and the investment in the Contract at the time of
transfer. Except for certain Qualified Contracts, any amount you receive as a
loan under a Contract, and any assignment or pledge (or agreement to assign or
pledge) of the Contract Value is taxed as a withdrawal of such amount or portion
and may also incur the 10% penalty tax. Currently we do not allow assignments.
AGGREGATION OF ANNUITY CONTRACTS. The Code requires that all non-qualified
deferred annuity contracts issued by GLENBROOK LIFE (or its affiliates) to the
same Contract Owner during any calendar year be aggregated and treated as one
annuity contract for purposes of determining the taxable amount of a
distribution.
INCOME TAX WITHHOLDING
Generally, GLENBROOK LIFE is required to withhold federal income tax at a rate
of 10% from all non-annuitized distributions. The customer may elect out of
withholding by completing and signing a withholding election form. If no
election is made, we will automatically withhold the required 10% of the taxable
amount. In certain states, if there is federal withholding, then state
withholding is also mandatory.
GLENBROOK LIFE is required to withhold federal income tax using the wage
withholding rates for all annuitized distributions. The customer may elect out
of withholding by completing and signing a withholding election form. If no
election is made, we will automatically withhold using married with three
exemptions as the default. In certain states, if there is federal withholding,
then state withholding is also mandatory.
Election out of withholding is valid only if the customer provides a U.S.
residence address and taxpayer identification number.
TAX QUALIFIED CONTRACTS
The income on qualified plan and IRA investments is tax deferred, and the income
on variable annuities held by such plans does not receive any additional tax
deferral. You should review the annuity features, including all benefits and
expenses, prior to purchasing a variable annuity in a qualified plan or IRA.
Contracts may be used as investments with certain qualified plans such as:
... Individual Retirement Annuities or Accounts (IRAs) under Section 408 of the
Code;
... Roth IRAs under Section 408A of the Code;
... Simplified Employee Pension Plans under Section 408(k) of the Code;
... Savings Incentive Match Plans for Employees (SIMPLE) Plans under Section
408(p) of the Code;
... Tax Sheltered Annuities under Section 403(b) of the Code;
... Corporate and Self Employed Pension and Profit Sharing Plans under Sections
401 and 403; and
... State and Local Government and Tax-Exempt Organization Deferred Compensation
Plans under Section 457.
GLENBROOK LIFE reserves the right to limit the availability of the Contract for
use with any of the Qualified Plans listed above or to modify the Contract to
conform with tax requirements. 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 certain
transactions such as excess contributions, premature distributions, and,
distributions that do not conform to specified commencement and minimum
distribution rules.
In the case of certain qualified plans, the terms of the plans may govern the
right to benefits, regardless of the terms of the Contract.
TAXATION OF WITHDRAWALS FROM A QUALIFIED CONTRACT. If you make a partial
withdrawal under a Qualified Contract other than a Roth IRA, the portion of the
payment that bears the same ratio to the total payment that the investment in
the Contract (i.e., nondeductible IRA contributions, after tax contributions to
qualified plans) bears to the Contract Value, is excluded from your income. We
do not keep track of nondeductible contributions, and all tax reporting of
distributions from Qualified Contracts other than Roth IRAs will indicate that
the distribution is fully taxable.
"QUALIFIED DISTRIBUTIONS" from Roth IRAs are not included in gross income.
"Qualified distributions" are any distributions made more than five taxable
years after
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the taxable year of the first contribution to any Roth IRA and which are:
... made on or after the date the Contract Owner attains age 591/2,
... made to a beneficiary after the Contract Owner's death,
... attributable to the Contract Owner being disabled, or
... made for a first time home purchase (first time home purchases are subject to
a lifetime limit of $10,000).
"NONQUALIFIED DISTRIBUTIONS" from Roth IRAs are treated as made from
contributions first and are included in gross income only to the extent that
distributions exceed contributions. All tax reporting of distributions from Roth
IRAs will indicate that the taxable amount is not determined.
REQUIRED MINIMUM DISTRIBUTIONS. Generally, qualified plans require minimum
distributions upon reaching age 701/2. Failure to withdraw the required minimum
distribution will result in a 50% tax penalty on the shortfall not withdrawn
from the Contract. Not all income plans offered under the Contract satisfy the
requirements for minimum distributions. Because these distributions are required
under the Code and the method of calculation is complex, please see a competent
tax advisor.
THE DEATH BENEFIT AND QUALIFIED CONTRACTS. Pursuant to the Code and IRS
regulations, an IRA (e.g., traditional IRA, Roth IRA, SEP IRA and SIMPLE IRA)
may not invest in life insurance contracts. However, an IRA may provide a death
benefit that equals the greater of the purchase payments or the Contract Value.
The Contract offers a death benefit that in certain circumstances may exceed the
greater of the purchase payments or 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 satisfy the
requirements of an IRA. We believe that these regulations do not prohibit all
forms of optional death benefits.
It is also possible that the certain death benefits that offer enhanced earnings
could be characterized as an incidental death benefit. If the death benefit were
so characterized, this could result in current taxable income to a Contract
Owner. In addition, there are limitations on the amount of incidental death
benefits that may be provided under qualified plans, such as in connection with
a 403(b) plan.
GLENBROOK LIFE reserves the right to limit the availability of the Contract for
use with any of the qualified plans listed above.
PENALTY TAX ON PREMATURE DISTRIBUTIONS FROM QUALIFIED CONTRACTS. A 10% penalty
tax applies to the taxable amount of any premature distribution from a Qualified
Contract. The penalty tax generally applies to any distribution made prior to
the date you attain age 591/2. However, no penalty tax is incurred on
distributions:
1. made on or after the date the Contract Owner attains age 591/2,
2. made as a result of the Contract Owner's death or total disability,
3. made in substantially equal periodic payments over the Contract Owner's life
or life expectancy, or over the joint lives or joint life expectancies of the
Contract Owner and the Beneficiary,
4. made pursuant to an IRS levy,
5. made for certain medical expenses,
6. made to pay for health insurance premiums while unemployed (only applies for
IRAs),
7. made for qualified higher education expenses (only applies for IRAs), and
8. made for a first time home purchase (up to a $10,000 lifetime limit and only
applies for IRAs).
During the first 2 years of the individual's participation in a SIMPLE IRA,
distributions that are otherwise subject to the premature distribution penalty,
will be subject to a 25% penalty tax.
You should consult a competent tax advisor to determine how these exceptions may
apply to your situation.
SUBSTANTIALLY EQUAL PERIODIC PAYMENTS ON QUALIFIED CONTRACTS. With respect to
Qualified Contracts using substantially equal periodic payments as an exception
to the penalty tax on premature distributions, any additional withdrawal or
other modification of the payment stream would violate the requirement that
payments must be substantially equal. Failure to meet this requirement would
mean that the income portion of each payment received prior to the later of 5
years or the taxpayer's attaining age 591/2 would be subject to a 10% penalty
tax unless another exception to the penalty tax applied. The tax for the year of
the modification is increased by the penalty tax that would have been imposed
without the exception, plus interest for the years in which the exception was
used. You should consult a competent tax advisor prior to taking a withdrawal.
INCOME TAX WITHHOLDING ON QUALIFIED CONTRACTS. Generally, GLENBROOK LIFE is
required to withhold federal income tax at a rate of 10% from all non-annuitized
distributions that are not considered "ELIGIBLE ROLLOVER DISTRIBUTIONS." The
customer may elect out of withholding by completing and signing a withholding
election form. If no election is made, we will automatically withhold the
required 10% from the taxable amount. In certain states, if there is federal
withholding, then state withholding is also mandatory. GLENBROOK LIFE is
required to withhold federal income tax at a rate of 20% on all "ELIGIBLE
ROLLOVER DISTRIBUTIONS" unless you elect to make a "DIRECT ROLLOVER" of such
amounts to an IRA or eligible retirement plan. Eligible rollover distributions
generally include all distributions
33
from Qualified Contracts, excluding IRAs, with the exception of:
1. required minimum distributions, or
2. a series of substantially equal periodic payments made over a period of at
least 10 years, or,
3. a series of substantially equal periodic payments made over the life (joint
lives) of the participant (and beneficiary), or,
4. hardship distributions.
For all annuitized distributions that are not subject to the 20% withholding
requirement, GLENBROOK LIFE is required to withhold federal income tax using the
wage withholding rates from all annuitized distributions. The customer may elect
out of withholding by completing and signing a withholding election form. If no
election is made, we will automatically withhold using married with three
exemptions as the default. In certain states, if there is federal withholding,
then state withholding is also mandatory.
Election out of withholding is valid only if the customer provides a U.S.
residence address and taxpayer identification number.
INDIVIDUAL RETIREMENT ANNUITIES. Section 408 of the Code permits eligible
individuals to contribute to an individual retirement program known as an
Individual Retirement Annuity (IRA). Individual Retirement Annuities are subject
to limitations on the amount that can be contributed and on the time when
distributions may commence. Certain distributions from other types of qualified
plans may be "ROLLED OVER" on a tax-deferred basis into an Individual Retirement
Annuity.
ROTH INDIVIDUAL RETIREMENT ANNUITIES. Section 408A of the Code permits eligible
individuals to make nondeductible contributions to an individual retirement
program known as a Roth Individual Retirement Annuity. Roth Individual
Retirement Annuities are subject to limitations on the amount that can be
contributed and on the time when distributions may commence.
Subject to certain limitations, a traditional Individual Retirement Account or
Annuity may be converted or "ROLLED OVER" to a Roth Individual Retirement
Annuity. The income portion of a conversion or rollover distribution is taxable
currently, but is exempted from the 10% penalty tax on premature distributions.
SIMPLIFIED EMPLOYEE PENSION PLANS. Section 408(k) of the Code allows eligible
employers to establish simplified employee pension plans for their employees
using individual retirement annuities. Under these plans the employer may,
within specified limits, make deductible contributions on behalf of the
employees to the individual retirement annuities. Employers intending to use the
Contract in connection with such plans should seek competent tax advice.
SAVINGS INCENTIVE MATCH PLANS FOR EMPLOYEES (SIMPLE PLANS). Sections 408(p) and
401(k) of the Code allow eligible employers with 100 or fewer employees to
establish SIMPLE retirement plans for their employees. SIMPLE plans may be
structured as a SIMPLE retirement account using an IRA or as a Section 401(k)
qualified cash or deferred arrangement. In general, a SIMPLE plan consists of a
salary deferral program for eligible employees and matching or nonelective
contributions made by employers. Employers intending to use the Contract in
conjunction with SIMPLE plans should seek competent tax and legal advice.
TO DETERMINE IF YOU ARE ELIGIBLE TO CONTRIBUTE TO ANY OF THE ABOVE LISTED IRAS
(TRADITIONAL, ROTH, SEP, OR SIMPLE), PLEASE REFER TO IRS PUBLICATION 590 AND
YOUR COMPETENT TAX ADVISOR.
TAX SHELTERED ANNUITIES. Section 403(b) of the Tax Code provides tax-deferred
retirement savings plans for employees of certain non-profit and educational
organizations. Under Section 403(b), any contract used for a 403(b) plan must
provide that distributions attributable to salary reduction contributions made
after 12/31/88, and all earnings on salary reduction contributions, may be made
only on or after the date the employee:
... attains age 591/2,
... separates from service,
... dies,
... becomes disabled, or
... incurs a hardship (earnings on salary reduction contributions may not be
distributed on account of hardship).
These limitations do not apply to withdrawals where GLENBROOK LIFE is directed
to transfer some or all of the Contract Value to another 403(b) plan.
CORPORATE AND SELF-EMPLOYED PENSION AND PROFIT SHARING PLANS. Sections 401(a)
and 403(a) of the Code permit corporate employers to establish various types of
tax favored retirement plans for employees. Self-employed individuals may
establish tax favored retirement plans for themselves and their employees. Such
retirement plans (commonly referred to as "H.R.10" or "KEOGH") may permit the
purchase of annuity contracts.
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. In eligible governmental plans, all assets and income must be
held in a trust/ custodial account/annuity contract for the exclusive benefit of
the participants and their beneficiaries. To the extent the Contracts are used
in connection with a non-governmental eligible plan, employees are considered
34
general creditors of the employer and the employer as owner of the Contract has
the sole right to the proceeds of the Contract. Under eligible 457 plans,
contributions made for the benefit of the employees will not be includible in
the employees' gross income until distributed from the plan.
ANNUAL REPORTS AND OTHER DOCUMENTS
- --------------------------------------------------------------------------------
GLENBROOK LIFE's annual report on Form 10-K for the year ended December 31, 2001
is incorporated herein by reference, which means that it is legally a part of
this prospectus.
After the date of this prospectus and before we terminate the offering of the
securities under this prospectus, all documents or reports we file with the SEC
under the Exchange Act are also incorporated herein by reference, which means
that they also legally become a part of this prospectus.
Statements in this prospectus, or in documents that we file later with the SEC
and that legally become a part of this prospectus, may change or supersede
statements in other documents that are legally part of this prospectus.
Accordingly, only the statement that is changed or replaced will legally be a
part of this prospectus.
We file our Exchange Act documents and reports, including our annual and
quarterly reports on Form 10-K and Form 10-Q electronically on the SEC's "EDGAR"
system using the identifying number CIK No. 0001007285. The SEC maintains a Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC. The
address of the site is http:/ / www.sec.gov. You also can view these materials
at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. For more information on the operations of SEC's Public Reference Room,
call 1-800-SEC-0330.
If you have received a copy of this prospectus, and would like a free copy of
any document incorporated herein by reference (other than exhibits not
specifically incorporated by reference into the text of such documents), please
write or call us at 300 N. Milwaukee Ave. Vernon Hills, IL 60061 (telephone:
1-800-755-5275).
EXPERTS
- --------------------------------------------------------------------------------
The financial statements of Glenbrook Life as of December 31, 2001 and 2000 and
for each of the three years in the period ended December 31, 2001 and the
related financial statement schedule incorporated herein by reference from the
Annual Report on Form 10-K of Glenbrook Life and from the Statement of
Additional Information, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, incorporated herein by reference, and have
been so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The financial statements of the Variable Account as of December 31, 2001 and for
each of the periods in the two years then ended incorporated herein by reference
from the Statement of Additional Information, have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report, incorporated herein
by reference and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
We may advertise the performance of the Variable Sub-Accounts, including yield
and total return information. Total return represents the change, over a
specified period of time, in the value of an investment in a Variable
Sub-Account after reinvesting all income distributions. Yield refers to the
income generated by an investment in a Variable Sub-Account over a specified
period.
All performance advertisements will include, as applicable, standardized yield
and total return figures that reflect the deduction of insurance charges, the
contract maintenance charge, and withdrawal charge. Performance advertisements
also may include total return figures that reflect the deduction of insurance
charges, but not the contract maintenance or withdrawal charges. The deduction
of such charges would reduce the performance shown. In addition, performance
advertisements may include aggregate average, year-by-year, or other types of
total return figures. Performance information for periods prior to the inception
date of the Variable Sub-Accounts will be based on the historical performance of
the corresponding Portfolios for the periods beginning with the inception dates
of the Portfolios and adjusted to reflect current Contract expenses. You should
not interpret these figures to reflect actual historical performance of the
Variable Account. We may include in advertising and sales materials tax deferred
compounding charts and other hypothetical illustrations that compare currently
taxable and tax deferred
35
investment programs based on selected tax brackets. Our advertisements also may
compare the performance of our Variable Sub-Accounts with: (a) certain unmanaged
market indices, including but not limited to the Dow Jones Industrial Average,
the Standard & Poor's 500, and the Shearson Lehman Bond Index; and/or (b) other
management investment companies with investment objectives similar to the
underlying funds being compared. In addition, our advertisements may include the
performance ranking assigned by various publications, including the Wall Street
Journal, Forbes, Fortune, Money, Barron's, Business Week, USA Today, and
statistical services, including Lipper Analytical Services Mutual Fund Survey,
Lipper Annuity and Closed End Survey, the Variable Annuity Research Data Survey,
and SEI.
36
APPENDIX A
- --------------------------------------------------------------------------------
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST BEING OFFERED
BASIC POLIC
For the Years Beginning January 1 and
Ending December 31,
1998 1999 2000 2001
AIM V.I. CAPITAL
APPRECIATION SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.000 $30.700 $17.628 $15.496
Accumulation Unit Value,
End of Period $30.700 $17.628 $15.496 $11.728
Number of Units
Outstanding, End of
Period 6,547 7,877 8,541 7,986
AIM V.I. CORE EQUITY
SUB-ACCOUNT (1)
Accumulation Unit Value,
Beginning of Period $10.000 $12.897 $17.081 $14.400
Accumulation Unit Value,
End of Period $12.897 $17.081 $14.400 $10.962
Number of Units
Outstanding, End of
Period 52,358 21,097 24,225 12,309
AIM V.I. DIVERSIFIED
INCOME SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.000 $10.131 $ 9.802 $ 9.739
Accumulation Unit Value,
End of Period $10.131 $ 9.802 $ 9.739 9.953
Number of Units
Outstanding, End of
Period 9,663 13,500 9,544 2,903
AIM V.I. GLOBAL UTILITIES
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.000 $11.444 $15.079 $14.539
Accumulation Unit Value,
End of Period $11.444 $15.079 $14.539 10.337
Number of Units
Outstanding, End of
Period 0 0 1,656 1,657
AIM V.I. GOVERNMENT
SECURITIES SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.000 $10.868 $10.290 $11.181
Accumulation Unit Value,
End of Period $10.868 $10.290 $11.181 $11.738
Number of Units
Outstanding, End of
Period 692 719 15,350 478
AIM V.I. GROWTH
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.000 $13.490 $17.988 $14.120
Accumulation Unit Value,
End of Period $13.490 $17.988 $14.120 $ 9.209
Number of Units
Outstanding, End of
Period 15,902 14,265 13,585 14,671
AIM V.I. INTERNATIONAL
GROWTH SUB-ACCOUNT (1)
Accumulation Unit Value,
Beginning of Period $10.000 $11.445 $17.507 $12.713
Accumulation Unit Value,
End of Period $11.445 $17.507 $12.713 $ 9.590
Number of Units
Outstanding, End of
Period 1,491 1,207 1,206 1,206
AIM V.I. PREMIER EQUITY
SUB ACCOUNT (1)
Accumulation Unit Value,
Beginning of Period $10.000 $13.299 $17.043 $14.353
Accumulation Unit Value,
End of Period $13.299 $17.043 $14.353 $12.380
Number of Units
Outstanding, End of
Period 34,858 34,854 32,778 22,769
AMERICAN CENTURY VP
BALANCED SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.618 $12.116 $13.142 $12.611
Accumulation Unit Value,
End of Period $12.116 $13.142 $12.611 $11.988
Number of Units
Outstanding, End of
Period 9,621 10,484 10,810 9,085
AMERICAN CENTURY VP
INTERNATIONAL SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.025 $11.734 $18.972 $15.544
Accumulation Unit Value,
End of Period $11.734 $18.972 $15.554 $10.856
Number of Units
Outstanding, End of
Period 5,546 11,548 11,365
DREYFUS SOCIALLY
RESPONSIBLE GROWTH
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.813 $13.265 $17.649 $15.472
Accumulation Unit Value,
End of Period $13.265 $17.649 $ 15472 $11.859
Number of Units
Outstanding, End of
Period 4726 3,528 6,596 4,051
DREYFUS STOCK INDEX
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.000 $12.819 $15.237 $13.626
Accumulation Unit Value,
End of Period $12.819 $15.237 $13.626 $11.829
Number of Units
Outstanding, End of
Period 39,205 80,779 77,360 28,373
DREYFUS VIF GROWTH AND
INCOME SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.000 $11.656 $13.601 $12.900
Accumulation Unit Value,
End of Period $11.656 $13.601 $12.900 $12.025
Number of Units
Outstanding, End of
Period 15,709 18,597 16,850 2,648
DREYFUS VIF MONEY MARKET
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.000 $10.566 $10.909 $11.402
Accumulation Unit Value,
End of Period $10.566 $10.909 $11.402 $11.732
Number of Units
Outstanding, End of
Period 750 40,342 2,062 9,333
DREYFUS VIF SMALL COMPANY
STOCK SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.000 $10.343 $11.275 $12.061
Accumulation Unit Value,
End of Period $10.343 $11.275 $12.061 $11.757
Number of Units
Outstanding, End of
Period 710 5,754 2,477 613
FIDELITY VIP
CONTRAFUND(TM) SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.000 $14.184 $17.370 $15.987
Accumulation Unit Value,
End of Period $14.184 $17.370 $15.987 $13.889
Number of Units
Outstanding, End of
Period 9350 14,873 17,120 7,894
FIDELITY VIP EQUITY -
INCOME SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.000 $11.259 $11.799 $12.610
Accumulation Unit Value,
End of Period $11.259 $11.799 $12.610 $11.858
Number of Units
Outstanding, End of
Period 40,266 70,192 67,206 16,719
FIDELITY VIP GROWTH
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.000 $14.691 $19.899 $17.461
Accumulation Unit Value,
End of Period $14.691 $19.899 $17.461 $14.235
Number of Units
Outstanding, End of
Period 6361 11,241 14,641 5,421
FIDELITY VIP HIGH INCOME
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.000 $10.164 $10.834 $ 8.280
Accumulation Unit Value,
End of Period $10.164 $10.834 $ 8.280 $ 7.235
Number of Units
Outstanding, End of
Period 5,530 27,471 18,857 1,096
MFS EMERGING GROWTH
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.000 $14.544 $25.331 $20.073
Accumulation Unit Value,
End of Period $14.544 $25.331 $20.073 $13.217
Number of Units
Outstanding, End of
Period 4,972 10,929 14,285 6,297
MFS LIMITED MATURITY
SUB-ACCOUNT (2)
Accumulation Unit Value,
Beginning of Period $10.000 $10.273 $10.753 $11.237
Accumulation Unit Value,
End of Period $10.273 $10.753 $11.237
Number of Units
Outstanding, End of
Period 1,014 5,857 4,938
Y*
37
The AIM Variable Sub-Account as well as, the Fidelity Equity Income, and Dreyfus
Stock Index Variable Sub-Accounts commenced operations on January 26, 1998.
The other Variable Sub-Accounts commenced operation on June 17, 1997, but had
no material operations for the year ended December 31, 1997. The Accumulation
Unit Values in this table reflect a mortality and expense risk charge of
1.25% and an administrative expense charge of 0.10%.
(1) Effective May 1, 2002 the Portfolios AIM V.I. Growth and Income, AIM
V.I. International Equity Fund and AIM V.I. Value Fund changed their names to
the AIM V.I. Core Equity Fund, AIM V.I. International Growth Fund and AIM
V.I. Premier Equity Fund, respectively.
(2) Not available to new investors.
38
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST BEING OFFERED
BASIC POLICY PLUS ENHANCED DEATH BENEFIT RIDER
For the Years Beginning January 1 and
Ending December 31,
1998 1999 2000 2001
AIM V.I. CAPITAL APPRECIATION SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period $10.000 $12.344 $ 17.594 $15.450
Accumulation Unit Value, End of Period $12.344 $17.594 $ 15.450 $11.682
Number of Units Outstanding, End of Period 5,197 13,896 14,129 10,572
AIM V.I. CORE EQUITY SUB-ACCOUNT (1)
Accumulation Unit Value, Beginning of
Period $10.000 $12.897 $ 17.081 $14.400
Accumulation Unit Value, End of Period $12.897 $17.081 $ 14.400 $ 9.173
Number of Units Outstanding, End of Period 0 21,097 24,225 14,671
AIM V.I. DIVERSIFIED INCOME SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period $10.000 $10.121 $ 9.784 $ 9.711
Accumulation Unit Value, End of Period $10.121 $ 9.784 $ 9.711 $ 9.913
Number of Units Outstanding, End of Period 8,931 7,601 8,074 7,232
AIM V.I. GLOBAL UTILITIES SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period $10.000 $11.433 $ 15.050 $13.620
Accumulation Unit Value, End of Period $11.433 $15.050 $13.620.
Number of Units Outstanding, End of Period 0 1,584 327
AIM V.I. GOVERNMENT SECURITIES SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period $10.000 $10.858 $ 10.270 $11.149
Accumulation Unit Value, End of Period $10.858 $10.270 $ 11.149 $11.691
Number of Units Outstanding, End of Period 7,546 39,816 47,013 16,757
AIM V.I. GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period $10.000 $13.477 $ 17.964 $14.079
Accumulation Unit Value, End of Period $13.477 $17.964 $ 14.079 $ 9.173
Number of Units Outstanding, End of Period 15,252 14,638 17,565 14,671
AIM V.I. INTERNATIONAL GROWTH SUB-ACCOUNT
(1)
Accumulation Unit Value, Beginning of
Period $10.000 $11.434 $ 17.474 $12.676
Accumulation Unit Value, End of Period $11.434 $17.474 $ 12.676 $ 9.590
Number of Units Outstanding, End of Period 5,403 4,967 977 1,206
AIM V.I. PREMIER EQUITY SUB ACCOUNT (1)
Accumulation Unit Value, Beginning of
Period $10.000 $13.287 $ 17.011 $14.311
Accumulation Unit Value, End of Period $13.287 $17.011 $ 14.311 $12.332
Number of Units Outstanding, End of Period 5,2510 64,070 65,919 57,074
AMERICAN CENTURY VP BALANCED SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period $10.618 $12.116 $ 13.142 $12.611
Accumulation Unit Value, End of Period $12.116 $13.142 $ 12.611 11.988
Number of Units Outstanding, End of Period 7,716 10,484 10,810 9,085
AMERICAN CENTURY VP INTERNATIONAL
SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period $10.025 $11.734 $ 18.972 $15.544
Accumulation Unit Value, End of Period $11.734 $18.972 $ 15.554 10.856
Number of Units Outstanding, End of Period 5,196 5,546 11,548 11,365
DREYFUS SOCIALLY RESPONSIBLE GROWTH
SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period $10.813 $13.265 $ 17.649 $15.472
Accumulation Unit Value, End of Period $13.265 $17.643 $ 15.472 $11.805
Number of Units Outstanding, End of Period 4,373 3,528 6,596 6,031
DREYFUSSTOCK INDEX SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period $10.000 $12.819 $ 15.237 $13.626
Accumulation Unit Value, End of Period $12.819 $15.237 $ 13.626 $11.792
Number of Units Outstanding, End of Period 86,935 80,779 77,360 66,841
DREYFUS VIF GROWTH AND INCOME SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period $10.602 $11.656 $ 13.601 $12.900
Accumulation Unit Value, End of Period $11.656 $13.601 $ 12.900 $11.970
Number of Units Outstanding, End of Period 18,031 18,597 16,850 13,932
DREYFUS VIF MONEY MARKET SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period $10.198 $10.566 $ 10.909 $11.402
Accumulation Unit Value, End of Period $10.566 $10.909 $ 11.402 $11.679
Number of Units Outstanding, End of Period 13,027 40,342 2,062 3,684
DREYFUS VIF SMALL COMPANY STOCK SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period $10.161 $10.343 $ 11.275 $12.061
Accumulation Unit Value, End of Period $10.343 $11.275 $ 12.061 $11.704
Number of Units Outstanding, End of Period 5,753 5,754 2,477 2,227
FIDELITY VIP CONTRAFUND SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period $10.071 $14.184 $ 17.370 $15.987
Accumulation Unit Value, End of Period $14.184 $17.370 $ 15.987 $13.826
Number of Units Outstanding, End of Period 11,838 14,873 17,120 13,544
FIDELITY VIP EQUITY - INCOME SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period $10.000 $11.259 $ 11.799 $12.610
Accumulation Unit Value, End of Period $11.259 $11.799 $ 12.610 $11.811
Number of Units Outstanding, End of Period 76,050 70,192 67,206 57,665
FIDELITY VIP GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period $10.685 $14.691 $ 19.899 $17.461
Accumulation Unit Value, End of Period $14.691 $19.899 $ 17.461 $14.170
Number of Units Outstanding, End of Period 8,947 11,241 14,641 12,263
FIDELITY VIP HIGH INCOME SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period $10.779 $10.164 $ 10.834 $ 8.280
Accumulation Unit Value, End of Period $10.164 $10.834 $ 8.280 $ 7.202
Number of Units Outstanding, End of Period 28,509 27,471 18,857 14,048
MFS EMERGING GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period $10.999 $14.544 $ 25.331 $20.073
Accumulation Unit Value, End of Period $14.544 $25.331 $ 20.073 $13.157
Number of Units Outstanding, End of Period 6,085 10,929 14,285 10,328
MFS LIMITED MATURITY SUB-ACCOUNT (2)
Accumulation Unit Value, Beginning of
Period $10.269 $10.273 $ 10.753
Accumulation Unit Value, End of Period $10.273 $10.753 $ 11.237
Number of Units Outstanding, End of Period 3,996 5,857 4,938
*
39
* The AIM Variable Sub-Account as well as, the Fidelity Equity Income, and
Dreyfus Stock Index Variable Sub-Accounts commenced operations on January 26,
1998. The other Variable Sub-Accounts commenced operation on June 17, 1997,
but had no material operations for the year ended December 31, 1997. 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%.
(1) Effective May 1, 2002 the Portfolios AIM V.I. Growth and Income, AIM
V.I. International Equity Fund and AIM V.I. Value Fund changed their names to
the AIM V.I. Core Equity Fund, AIM V.I. International Growth Fund and AIM
V.I. Premier Equity Fund, respectively.
(2) Not available to new investors.
40
MARKET VALUE ADJUSTMENT EXAMPLE
- --------------------------------------------------------------------------------
The Market Value Adjustment is based on the following:
I = the Treasury Rate for a maturity equal to the Guarantee Period for the week
preceding the establishment of the Guarantee Period.
N = the number of whole and partial years from the date we receive the
withdrawal, transfer, or death benefit request, or from the Payout Start Date to
the end of the Guarantee Period.
J = the Treasury Rate for a maturity equal to the Guarantee Period for the week
preceding the receipt of the withdrawal, transfer, death benefit, or income
payment request.*
Treasury Rate means the U.S. Treasury Note Constant Maturity yield as reported
in Federal Reserve Bulletin Release H.15.
*If a U.S. Treasury Note ("Note") with a maturity of the Guarantee Period is not
available, we will determine an appropriate interest rate based on an
interpolation of the next shortest duration and next longest duration Notes.
The Market Value Adjustment factor is determined from the following formula:
.9 X [I-(J + .0025)] X N
To determine the Market Value Adjustment, we will multiply the Market Value
Adjustment factor by the amount transferred, withdrawn (in excess of the Free
Withdrawal Amount), paid as a death benefit, or applied to an Income Plan from a
Guarantee Period at any time other than during the 30 day period after such
Guarantee Period expires.
41
EXAMPLES OF MARKET VALUE ADJUSTMENT
- --------------------------------------------------------------------------------
Purchase Payment: $10,000 allocated to a Guarantee Period
Guarantee Period: 5 years
Interest Rate: 4.50%
Full Surrender: End of Contract Year 3
NOTE: These examples assume that premium taxes are not applicable.
EXAMPLE 1 (ASSUMES DECLINING INTEREST RATES)
Step 1. Calculate Contract Value at $10,000.00 X (1.045)/3 /= $11,411.66 End of
Contract Year 3: Step 2. Calculate the Free Withdrawal .15 X ($10,000.00) =
$1,500.00 Amount:
Step 3. Calculate the Withdrawal I = 4.5%
Charge: J = 4.2%
N = 730 days =2
--------
365 days
Step 4. Calculate the Market Value Market Value Adjustment Factor: .9 X
Adjustment: [I - (J + .0025)] X N = .9 X [.045 -
(.042 + .0025)] X 2 = .0009
Market Value Adjustment = Market Value
Adjustment Factor X Amount Subject to
Market Value Adjustment:
= .0009 X ($11,411.66 - $1,500.00) =
$8.92
Step 5. Calculate the amount received
by a Contract Owner as a result of full
withdrawal at the end of Contract Year $11,411.66 + $8.92 = $11,420.58
3:
42
EXAMPLE 2: (ASSUMES RISING INTEREST RATES)
Step 1. Calculate Contract Value at $10,000.00 X (1.045)/3 /= $11,411.66 End of
Contract Year 3: Step 2. Calculate the Free Withdrawal .15 X ($10,000.00) =
$1,500.00 Amount:
Step 3. Calculate the Withdrawal I = 4.5%
Charge: J = 4.8%
N = 730 days =2
--------
365 days
Step 4. Calculate the Market Value Market Value Adjustment Factor: .9 X
Adjustment: [I - (J + .0025)] X N = .9 X [.045 -
(.048 + .0025)] X 2 = - .0099
Market Value Adjustment = Market Value
Adjustment Factor X Amount Subject to
Market Value Adjustment:
= - .0099 X ($11,411.66 - $1,500.00)
= - $98.13
Step 5. Calculate the amount received
by a Contract Owner as a result of full
withdrawal at the end of Contract Year $11,411.66 - $98.13 = $11,313.53
3:
43
44
Brown 257
THE ALLSTATE\\(R)\\ PROVIDER VARIABLE ANNUITY
(formerly referred to as "The Glenbrook Provider Variable Annuity")
GLENBROOK LIFE AND ANNUITY COMPANY
300 N. MILWAUKEE AVE.
VERNON HILLS, IL 60061
TELEPHONE NUMBER: 1-800-755-5275 PROSPECTUS
DATED MAY 1, 2002
-------------------------------------------------------------------------------
GLENBROOK LIFE AND ANNUITY COMPANY ("GLENBROOK LIFE") is offering the
Allstate\\(R)\\\\ \\Provider Variable Annuity, an individual flexible premium
deferred variable annuity contract ("CONTRACT"). This prospectus contains
information about the Contract that you should know before investing. Please
keep it for future reference.
The Contract currently offers 41 "INVESTMENT ALTERNATIVES". The investment
alternatives include 3 fixed account options ("FIXED ACCOUNT OPTIONS") and 38
variable sub-accounts ("VARIABLE SUB-ACCOUNTS") of the GLENBROOK LIFE
Multi-Manager Variable Account ("VARIABLE ACCOUNT"). Each Variable Sub-Account
invests exclusively in shares of one of the portfolios ("PORTFOLIOS") of the
following mutual funds ("FUNDS"):
AIM VARIABLE INSURANCE FUNDS FIDELITY VARIABLE INSURANCE PRODUCTS
THE DREYFUS SOCIALLY RESPONSIBLE FUNDS
GROWTH GOLDMAN SACHS VARIABLE INSURANCE TRUST
FUND, INC. MFS(R) VARIABLE INSURANCE TRUST/SM/
DREYFUS STOCK INDEX FUND NEUBERGER BERMAN ADVISERS MANAGEMENT
DREYFUS VARIABLE INVESTMENT FUND TRUST
(VIF) THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
Not all of the Funds and/or Portfolios, however, may be available with your
Contract. You should check with your representative for further information on
the availability of Funds and/or Portfolios. Your annuity application will list
all available Portfolios.
WE (GLENBROOK LIFE) have filed a Statement of Additional Information, dated May
1, 2002, with the Securities and Exchange Commission ("SEC"). It contains more
information about the Contract and is incorporated herein by reference, which
means it is legally a part of this prospectus. Its table of contents appears on
page 54 of this prospectus. For a free copy, please write or call us at the
address or telephone number above, or go to the SEC's Web site (http://
www.sec.gov). You can find other information and documents about us, including
documents that are legally part of this prospectus, at the SEC's Web site.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THE SECURITIES DESCRIBED IN THIS PROSPECTUS, NOR
HAS IT PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A
FEDERAL CRIME.
IMPORTANT THE CONTRACTS MAY BE DISTRIBUTED THROUGH BROKER-DEALERS
THAT HAVE RELATIONSHIPS WITH BANKS OR OTHER FINANCIAL
NOTICES INSTITUTIONS OR BY EMPLOYEES OF SUCH BANKS. HOWEVER, THE
CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY SUCH INSTITUTIONS OR ANY FEDERAL REGULATORY AGENCY.
INVESTMENT IN THE CONTRACTS INVOLVES INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE CONTRACTS ARE NOT FDIC INSURED.
1
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
- --------------------------------------------------------------------------------
OVERVIEW
- --------------------------------------------------------------------------------
Important Terms
- --------------------------------------------------------------------------------
The Contract at a Glance
- --------------------------------------------------------------------------------
How the Contract Works
- --------------------------------------------------------------------------------
Expense Table
- --------------------------------------------------------------------------------
Financial Information
- --------------------------------------------------------------------------------
CONTRACT FEATURES
- --------------------------------------------------------------------------------
The Contract
- --------------------------------------------------------------------------------
Purchases
- --------------------------------------------------------------------------------
Contract Value
- --------------------------------------------------------------------------------
Investment Alternatives
- --------------------------------------------------------------------------------
The Variable Sub-Accounts
- --------------------------------------------------------------------------------
The Fixed Account Options
- --------------------------------------------------------------------------------
Transfers
- --------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------
Access To Your Money
- --------------------------------------------------------------------------------
Income Payments
- --------------------------------------------------------------------------------
Death Benefits
- --------------------------------------------------------------------------------
PAGE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
More Information:
- --------------------------------------------------------------------------------
GLENBROOK LIFE
- --------------------------------------------------------------------------------
The Variable Account
- --------------------------------------------------------------------------------
The Portfolios
- --------------------------------------------------------------------------------
The Contract
- --------------------------------------------------------------------------------
Qualified Plans
- --------------------------------------------------------------------------------
Legal Matters
- --------------------------------------------------------------------------------
Taxes
- --------------------------------------------------------------------------------
Annual Reports and Other Documents
- --------------------------------------------------------------------------------
Experts
- --------------------------------------------------------------------------------
Performance Information
- --------------------------------------------------------------------------------
APPENDIX A-ACCUMULATION UNIT VALUES 42
- --------------------------------------------------------------------------------
APPENDIX B-MARKET VALUE ADJUSTMENT EXAMPLE 52
- --------------------------------------------------------------------------------
2
IMPORTANT TERMS
- --------------------------------------------------------------------------------
This prospectus uses a number of important terms that you may not be familiar
with. The index below identifies the page that describes each term. The first
use of each term in this prospectus appears in highlights.
PAGE
- --------------------------------------------------------------------------------
Accumulation Phase
- --------------------------------------------------------------------------------
Accumulation Unit
- --------------------------------------------------------------------------------
Accumulation Unit Value
- --------------------------------------------------------------------------------
Anniversary Values
- --------------------------------------------------------------------------------
Annuitant
- --------------------------------------------------------------------------------
Automatic Additions Plan
- --------------------------------------------------------------------------------
Automatic Portfolio Rebalancing Program
- --------------------------------------------------------------------------------
Beneficiary
- --------------------------------------------------------------------------------
Cancellation Period
- --------------------------------------------------------------------------------
Contract*
- --------------------------------------------------------------------------------
Contract Anniversary
- --------------------------------------------------------------------------------
Contract Owner (You)
- --------------------------------------------------------------------------------
Contract Value
- --------------------------------------------------------------------------------
Contract Year
- --------------------------------------------------------------------------------
Death Benefit Anniversary
- --------------------------------------------------------------------------------
Death Proceeds
- --------------------------------------------------------------------------------
Dollar Cost Averaging Program
- --------------------------------------------------------------------------------
Due Proof of Death
- --------------------------------------------------------------------------------
Enhanced Death Benefit Rider
- --------------------------------------------------------------------------------
Enhanced Death and Income Benefit Combination Rider
- --------------------------------------------------------------------------------
PAGE
- --------------------------------------------------------------------------------
Fixed Account Options
- --------------------------------------------------------------------------------
Free Withdrawal Amount
- --------------------------------------------------------------------------------
Funds
- --------------------------------------------------------------------------------
GLENBROOK LIFE ("We" or "Us")
- --------------------------------------------------------------------------------
Guarantee Periods
- --------------------------------------------------------------------------------
Income Plan
- --------------------------------------------------------------------------------
Investment Alternatives
- --------------------------------------------------------------------------------
Issue Date
- --------------------------------------------------------------------------------
Market Value Adjustment
- --------------------------------------------------------------------------------
Payout Phase
- --------------------------------------------------------------------------------
Payout Start Date
- --------------------------------------------------------------------------------
Portfolios
- --------------------------------------------------------------------------------
Qualified Contracts
- --------------------------------------------------------------------------------
SEC
- --------------------------------------------------------------------------------
Settlement Value
- --------------------------------------------------------------------------------
Systematic Withdrawal Program
- --------------------------------------------------------------------------------
Valuation Date
- --------------------------------------------------------------------------------
Variable Account
- --------------------------------------------------------------------------------
Variable Sub-Account
- --------------------------------------------------------------------------------
*
In certain states the Contract is available only as a group Contract. If you
purchase a group Contract, we will issue you a certificate that represents
your ownership and that summarizes the provisions of the group Contract.
References to "Contract" in this prospectus include certificates, unless the
context requires otherwise.
3
THE CONTRACT AT A GLANCE
- --------------------------------------------------------------------------------
The following is a snapshot of the Contract. Please read the remainder of this
prospectus for more information.
FLEXIBLE PAYMENTS You can purchase a Contract with as little as
$3,000 ($2,000 for "QUALIFIED CONTRACTS", which are
Contracts issued within QUALIFIED PLANS). You can add to
your Contract as often and as much as you like, but each
payment must be at least $50.
- -------------------------------------------------------------------------------
RIGHT TO CANCEL You may cancel your Contract within 20 days of
receipt or any longer period as your state may require
("CANCELLATION PERIOD"). Upon cancellation, we will
return your purchase payments adjusted, to the extent
federal or state law permits, to reflect the investment
experience of any amounts allocated to the Variable
Account.
- -------------------------------------------------------------------------------
EXPENSES You will bear the following expenses:
.Total Variable Account annual fees equal to 1.15% of
average daily net assets (1.37% if you select the
ENHANCED DEATH BENEFIT RIDER and 1.59% if you select
the ENHANCED DEATH AND INCOME BENEFIT COMBINATION
RIDER)
.Annual contract maintenance charge of $35 (with
certain exceptions)
.Withdrawal charges ranging from 0% to 6% of purchase
payment withdrawn (with certain exceptions)
.Transfer fee of $10 after 12th transfer in any
CONTRACT YEAR (fee currently waived)
. State premium tax (if your state imposes one)
In addition, each Portfolio pays expenses that you will
bear indirectly if you invest in a Variable Sub-Account.
- -------------------------------------------------------------------------------
INVESTMENT The Contract offers 41 investment alternatives
ALTERNATIVES including:
.3 Fixed Account Options (which credit interest at
rates we guarantee)
.38 Variable Sub-Accounts investing in Portfolios
offering professional money management by these
investment advisers:
. AIM Advisors, Inc.
. The Dreyfus Corporation
. Fidelity Management & Research Company
. Goldman Sachs Asset Management
. Goldman Sachs Asset Management International
. MFS Investment Management(R)
. Miller Anderson & Sherrerd, LLP
. Morgan Stanley Asset Management
. Neuberger Berman Management, Inc.
To find out current rates being paid on the Fixed
Account options, or to find out how the Variable
Sub-Accounts have performed, please call us at
1-800-755-5275.
- -------------------------------------------------------------------------------
SPECIAL SERVICES For your convenience, we offer these special services:
. AUTOMATIC PORTFOLIO REBALANCING PROGRAM
. AUTOMATIC ADDITIONS PROGRAM
. DOLLAR COST AVERAGING PROGRAM
. SYSTEMATIC WITHDRAWAL PROGRAM
- -------------------------------------------------------------------------------
INCOME PAYMENTS You can choose fixed income payments, variable
income payments, or a combination of the two. You can
receive your income payments in one of the following
ways:
. life income with guaranteed payments
.a "joint and survivor" life income with guaranteed
payments
.guaranteed payments for a specified period (5 to 30
years)
- -------------------------------------------------------------------------------
DEATH BENEFITS If you or the ANNUITANT (if the Contract is
owned by a non-natural person) die before the PAYOUT
START DATE, we will pay the death benefit described in
the Contract. We offer an Enhanced Death Benefit Rider
and an Enhanced Death and Income Benefit Combination
Rider.
- -------------------------------------------------------------------------------
TRANSFERS Before the Payout Start Date, you may transfer your
Contract value ("CONTRACT VALUE") among the investment
alternatives, with certain restrictions. Transfers to a
Guarantee Period of the Fixed Account must be at least
$50.
We do not currently impose a fee upon transfers.
However, we reserve the right to charge $10 per transfer
after the 12th transfer in each "Contract Year," which
we measure from the date we issue your Contract or a
Contract Anniversary ("CONTRACT ANNIVERSARY").
- -------------------------------------------------------------------------------
WITHDRAWALS You may withdraw some or all of your Contract Value at
any time prior to the Payout Start Date. In general,
you must withdraw at least $50 at a time. Full or
partial withdrawals are available under limited
circumstances on or after the Payout Start Date.
Withdrawals of earnings are taxed as ordinary income
and, if taken prior to age 59 /1/2/, may be subject to
an additional 10% federal tax penalty. A withdrawal
charge and MARKET VALUE ADJUSTMENT also may apply.
- -------------------------------------------------------------------------------
4
5
HOW THE CONTRACT WORKS
- --------------------------------------------------------------------------------
The Contract basically works in two ways. First, the Contract can help you (we
assume you are the CONTRACT OWNER) save for retirement because you can invest in
up to 41 investment alternatives and generally pay no federal income taxes on
any earnings until you withdraw them. You do this during what we call the
"ACCUMULATION PHASE" of the Contract. The Accumulation Phase begins on the date
we issue your Contract (we call that date the "ISSUE DATE") and continues until
the Payout Start Date, which is the date we apply your money to provide income
payments. During the Accumulation Phase, you may allocate your purchase payments
to any combination of the Variable Sub-Accounts and/ or Fixed Account Options.
If you invest in any of the 3 Fixed Account Options, you will earn a fixed rate
of interest that we declare periodically. If you invest in any of the 38
Variable Sub-Accounts, your investment return will vary up or down depending on
the performance of the corresponding Portfolios.
Second, the Contract can help you plan for retirement because you can use it to
receive retirement income for life and/ or for a pre-set number of years, by
selecting one of the income payment options (we call these "INCOME PLANS")
described on page___ . You receive income payments during what we call the
"PAYOUT PHASE" of the Contract, which begins on the Payout Start Date and
continues until we make the last payment required by the Income Plan you select.
During the Payout Phase, if you select a fixed income payment option, we
guarantee the amount of your payments, which will remain fixed. If you select a
variable income payment option, based on one or more of the Variable
Sub-Accounts, the amount of your payments will vary up or down depending on the
performance of the corresponding Portfolios. The amount of money you accumulate
under your Contract during the Accumulation Phase and apply to an Income Plan
will determine the amount of your income payments during the Payout Phase.
The timeline below illustrates how you might use your Contract.
LOGO
As the Contract Owner, you exercise all of the rights and privileges provided by
the Contract. If you die, any surviving Contract Owner or, if none, the
BENEFICIARY will exercise the rights and privileges provided by the Contract.
See "The Contract." In addition, if you die before the Payout Start Date, we
will pay a death benefit to any surviving Contract Owner, or if there is none,
to your Beneficiary. See "Death Benefits."
Please call us at 1-800-755-5275 if you have any questions about how the
Contract works.
6
EXPENSE TABLE
- --------------------------------------------------------------------------------
The table below lists the expenses that you will bear directly or indirectly
when you buy a Contract. The table and the examples that follow do not reflect
premium taxes that may be imposed by the state where you reside. For more
information about Variable Account expenses, see "Expenses," below. For more
information about Portfolio expenses, please refer to the accompanying
prospectuses for the Funds.
CONTRACT OWNER TRANSACTION EXPENSES
Withdrawal Charge (as a percentage of purchase payments)*
Number of Complete Years Since We Received the Purchase 0 1 2 3 4 5 6+
Payment Being Withdrawn
- --------------------------------------------------------------------------------------------
Applicable Charge 6% 6% 5% 5% 4% 3% 0%
- --------------------------------------------------------------------------------------------
Annual Contract Maintenance Charge $35.00**
- --------------------------------------------------------------------------------------------
Transfer Fee $10.00***
- --------------------------------------------------------------------------------------------
*Each Contract Year, you may withdraw up to 15% of your aggregate purchase
payments without incurring a withdrawal charge.
** We will waive this charge in certain cases. See "Expenses."
*** Applies solely to the thirteenth and subsequent transfers within a
Contract Year, excluding transfers due to dollar cost averaging and automatic
portfolio rebalancing. We are currently waiving the transfer fee.
Policywith
Policywith Enhanc
Enhance Deathand
VARIABLE ACCOUNT ANNUAL EXPENSES Death Income
(AS A PERCENTAGE OF DAILY NET ASSET VALUE Base Benefit Benefit
DEDUCTED FROM EACH VARIABLE SUB-ACCOUNT) Policy Rider Combo
- -----------------------------------------------------------------------------------------------------
Mortality and Expense Risk Charge 1.05% 1.27% 1.49%
- -----------------------------------------------------------------------------------------------------
Administrative Expense Charge 0.10% 0.10% 0.10%
- -----------------------------------------------------------------------------------------------------
Total Variable Account Annual Expenses 1.15% 1.37% 1.59%
- -----------------------------------------------------------------------------------------------------
7
PORTFOLIO ANNUAL EXPENSES (as a percentage of Portfolio average daily net
assets)(1)
Total
Portfolio
Management Rule 12b-1 Other Annual
Portfolio Fees Fees Expenses Expenses
- ----------------------------------------------------------------------------------------------------------------------
AIM V.I. Balanced Fund - Series I 0.75% N/A 0.37% 1.12%
- ----------------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund - Series I 0.61% N/A 0.24% 0.85%
- ----------------------------------------------------------------------------------------------------------------------
AIM V.I. Core Equity Fund - Series I (2) 0.61% N/A 0.21% 0.82%
- ----------------------------------------------------------------------------------------------------------------------
AIM V.I. Diversified Income Fund - Series I 0.60% N/A 0.33% 0.93%
- ----------------------------------------------------------------------------------------------------------------------
AIM V.I. Global Utilities Fund - Series I 0.65% N/A 0.42% 1.07%
- ----------------------------------------------------------------------------------------------------------------------
AIM V.I. Government Securities Fund - Series I 0.50% N/A 0.58% 1.08%
- ----------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth Fund - Series I 0.62% N/A 0.26% 0.88%
- ----------------------------------------------------------------------------------------------------------------------
AIM V.I. High Yield Fund - Series I 0.63% N/A 0.66% 1.29%
- ----------------------------------------------------------------------------------------------------------------------
AIM V.I. International Growth Fund - Series I (2) 0.73% N/A 0.32% 1.05%
- ----------------------------------------------------------------------------------------------------------------------
AIM V.I. Premier Equity Fund - Series I (2) 0.60% N/A 0.25% 0.85%
- ----------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth Fund, Inc.: Initial Shares 0.75% N/A 0.03% 0.78%
- ----------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund: Initial Shares 0.25% N/A 0.01% 0.26%
- ----------------------------------------------------------------------------------------------------------------------
Dreyfus VIF - Growth & Income Portfolio: Initial Shares 0.75% N/A 0.05% 0.80%
- ----------------------------------------------------------------------------------------------------------------------
Dreyfus VIF - Money Market Portfolio 0.50% N/A 0.08% 0.58%
- ----------------------------------------------------------------------------------------------------------------------
Dreyfus VIF - Small Company Stock Portfolio: Initial Shares 0.75% N/A 0.28% 1.03%
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Contrafund Portfolio-Initial Class (3) 0.58% N/A 0.10% 0.68%
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio-Initial Class (3) 0.48% N/A 0.10% 0.58%
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio-Initial Class (3) 0.58% N/A 0.10% 0.68%
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio-Initial Class (3) 0.58% N/A 0.13% 0.71%
- ----------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT Capital Growth Fund (4) 0.75% N/A 0.94% 1.69%
- ----------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT CORE/SM/ Small Cap Equity Fund (4) 0.75% N/A 0.47% 1.22%
- ----------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT CORE/SM/ U.S. Equity Fund (4) 0.70% N/A 0.12% 0.82%
- ----------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT Growth and Income Fund (4) 0.75% N/A 0.42% 1.17%
- ----------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT International Equity Fund (4) 1.00% N/A 1.05% 2.05%
- ----------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Series-Initial Class (5) 0.75% N/A 0.12% 0.87%
- ----------------------------------------------------------------------------------------------------------------------
MFS Investors Trust Series-Initial Class (5) 0.75% N/A 0.15% 0.90%
- ----------------------------------------------------------------------------------------------------------------------
MFS New Discovery Series-Initial Class (5,6) 0.90% N/A 0.16% 1.06%
- ----------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Guardian Portfolio-Class I (7) 0.85% N/A 0.14% 0.99%
- ----------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Mid-Cap Growth Portfolio-Class I (7) 0.84% N/A 0.07% 0.91%
- ----------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Partners Portfolio-Class I (7) 0.82% N/A 0.05% 0.87%
- ----------------------------------------------------------------------------------------------------------------------
Van Kampen UIF Core Plus Fixed Income Portfolio (8,9) 0.40% N/A 0.31% 0.71%
- ----------------------------------------------------------------------------------------------------------------------
Van Kampen UIF Equity Growth Portfolio (8,9) 0.55% N/A 0.36% 0.91%
- ----------------------------------------------------------------------------------------------------------------------
Van Kampen UIF Global Value Equity Portfolio (8,9) 0.80% N/A 0.48% 1.28%
- ----------------------------------------------------------------------------------------------------------------------
Van Kampen UIF International Magnum Portfolio (8,9) 0.80% N/A 0.54% 1.34%
- ----------------------------------------------------------------------------------------------------------------------
Van Kampen UIF Mid Cap Value Portfolio (8,9) 0.75% N/A 0.35% 1.10%
- ----------------------------------------------------------------------------------------------------------------------
Van Kampen UIF U.S. Real Estate (8,9) 0.80% N/A 0.35% 1.15%
- ----------------------------------------------------------------------------------------------------------------------
Van Kampen UIF Value Portfolio (8,9) 0.55% N/A 0.38% 0.93%
- ----------------------------------------------------------------------------------------------------------------------
1. Figures shown in the Table are for the year ended December 31, 2001 (except
as otherwise noted).
2. Effective May 1, 2002 the AIM V.I. Growth and Income Fund, AIM V.I.
International Equity Fund and AIM V.I. Value Fund changed their names to the AIM
V.I. Core Equity Fund, AIM V.I. International Growth Fund and AIM V.I. Premier
Equity Fund, respectively.
3. Actual "Total Portfolio Annual Expenses" were lower because a portion of the
brokerage commissions that the Portfolios paid was used to reduce the
Portfolios' expenses. In addition, through arrangements with the Portfolios'
custodian, credits realized as a result of uninvested cash balances are used to
reduce a portion of the Portfolios' custodian expenses. These offsets may be
discontinued at any time. Had these offsets been taken into account, "Total
8
Portfolio Annual Expenses" would have been 0.64% for Contrafund Portfolio, 0.57%
for Equity-Income Portfolio, 0.65% for Growth Portfolio and 0.70% for High
Income Portfolio.
4. "Total Portfolio Annual Expenses" listed in the table above reflect gross
ratios prior to any voluntary waivers/ reimbursements of expenses. Goldman Sachs
Asset Management and Goldman Sachs Asset Management International, the
investment advisers, have voluntarily agreed to reduce or limit certain other
expenses (excluding management fees, taxes, interest, brokerage fees,
litigation, indemnification and other extraordinary expenses) to the extent
"Total Portfolio Annual Expenses" exceed 1.00% for Capital Growth Fund, 1.00%
for Core/SM/ Small Cap Equity Fund, 0.82% for Core/SM/ U.S. Equity Fund, and
1.35% for International Equity Fund. With these limitations taken into
consideration, "Management Fees", "Rule 12b-1 fees","Other Expenses" and "Total
Portfolio Annual Expenses" were as follows:
Total
Management Rule12b-1 Other Portfolio
Portfolio Fees Fees Expenses Annual Expenses
- ---------------------------------------------------------------------------------------------
Goldman Sachs VIT Capital Growth Fund 0.75% N/A 0.25% 1.00%
- ---------------------------------------------------------------------------------------------
Goldman Sachs VIT CORE/SM/ Small Cap 0.75% N/A 0.25% 1.00%
Equity Fund
- ---------------------------------------------------------------------------------------------
Goldman Sachs VIT CORE/SM/ U.S. Equity 0.70% N/A 0.12% 0.82%
Fund*
- ---------------------------------------------------------------------------------------------
Goldman Sachs VIT International Equity 1.00% N/A 0.35% 1.35%
Fund
- ---------------------------------------------------------------------------------------------
*The Portfolio had expenses offset by earnings credits from the custodian bank.
Had the expenses offset been taken into account, "Total Portfolio Annual
Expenses would have been 0.81%.
5. Each Portfolio has an expense offset arrangement which reduces the
Portfolios' custodian fee based upon the amount of cash maintained by the
Portfolio with its custodian and dividend disbursing agent. Each Portfolio may
enter into other such arrangements and directed brokerage arrangements, which
would also have the effect of reducing the Portfolios' expenses. "Other
Expenses" do not take these expense reductions into account, and are therefore
higher than the actual expenses of the Portfolios. Had these fee reductions been
taken into account, "Total Portfolio Annual Expenses" would have been lower and
would equal 0.86% for Emerging Growth Series, 0.89% for Investors Trust Series
and 1.05% for New Discovery Series.
6. MFS has contractually agreed, subject to reimbursement, to bear expenses for
the Portfolio such that "Other Expenses" (after taking into account the expense
offset arrangement described in note 5 above), do not exceed 0.15% of the
average daily net assets of the Portfolio during the current fiscal year.
Without these fee arrangements "Total Portfolio Annual Expenses" would have been
1.09%. These contractual fee arrangements will continue at least until May 1,
2003, unless changed with the consent of the board of trustees which oversees
the Portfolios.
7. Neuberger Berman Management Inc. ("NBMI") has undertaken through April 30,
2005 to reimburse certain operating expenses, including the compensation of NBMI
(except with respect to Guardian, Mid-Cap Growth and Partners Portfolios) and
excluding taxes, interest, extraordinary expenses, brokerage commissions and
transaction costs, that exceed, in the aggregate, 1.00% of the Guardian, Mid-Cap
Growth and Partners Portfolios' average daily net asset value. The expense
reimbursement arrangements for Guardian, Mid-Cap Growth and Partners Portfolios
are contractual for three years and any excess expenses can be repaid to NBMI
within three years of the year incurred, provided such recoupment would not
cause a Portfolio to exceed its respective limitation.
8. "Total Portfolio Annual Expenses" listed in the table above reflect gross
ratios prior to any voluntary waivers/ reimbursements of expenses by the
adviser. For the year ended December 31, 2001, the management fee was reduced to
reflect the voluntary waiver of a portion or all of the management fee and the
reimbursement by the Portfolios' adviser to the extent "Total Portfolio Annual
Expenses" exceed the following percentages: Van Kampen UIF Core Plus Fixed
Income Portfolio 0.70%; Van Kampen UIF Equity Growth Portfolio 0.85%; Van Kampen
UIF Global Value Equity Portfolio 1.15%; Van Kampen UIF International Magnum
Portfolio 1.15%; Van Kampen UIF Mid Cap Value Portfolio 1.05%; Van Kampen UIF
U.S. Real Estate Portfolio 1.10%; Van Kampen UIF Value Portfolio 0.85%. The
adviser may terminate this voluntary waiver at any time at its sole discretion.
After such reductions, the "Management Fees", "Other Expenses" and "Total
Portfolio Annual Expenses" were as follows:
Total
Management Rule12b-1 Other Portfolio
Portfolio Fees Fees Expenses Annual Expenses
- ---------------------------------------------------------------------------------------------
Van Kampen UIF Core Plus Fixed Income 0.39% N/A 0.31% 0.70%
Portfolio
- ---------------------------------------------------------------------------------------------
Van Kampen UIF Equity Growth Portfolio 0.49% N/A 0.36% 0.85%
- ---------------------------------------------------------------------------------------------
Van Kampen UIF Global Value Equity 0.67% N/A 0.48% 1.15%
Portfolio
- ---------------------------------------------------------------------------------------------
Van Kampen UIF International Magnum 0.62% N/A 0.54% 1.16%
Portfolio
- ---------------------------------------------------------------------------------------------
Van Kampen UIF Mid Cap Value Portfolio 0.70% N/A 0.35% 1.05%
- ---------------------------------------------------------------------------------------------
Van Kampen UIF U.S. Real Estate Portfolio 0.75% N/A 0.35% 1.10%
- ---------------------------------------------------------------------------------------------
Van Kampen UIF Value Portfolio 0.47% N/A 0.38% 0.85%
- ---------------------------------------------------------------------------------------------
9
Additionally, in determining the actual amount of voluntary management fee
waiver and/or expense reimbursement for a Portfolio, if any, the adviser
excludes from consideration certain investment related expenses, such as foreign
country tax expense and interest expense on borrowing. Included in "Other
Expenses" of the International Magnum Portfolio is 0.01% of such
investment-related expenses.
9. Effective May 1, 2002 the Portfolios have been re-branded and have changed
names from Morgan Stanley UIF Fixed Income Portfolio to Van Kampen UIF Core Plus
Fixed Income Portfolio, Morgan Stanley UIF Equity Growth Portfolio to Van Kampen
UIF Equity Growth Portfolio, Morgan Stanley UIF Global Value Equity Portfolio to
Van Kampen UIF Global Value Equity Portfolio, Morgan Stanley UIF International
Magnum Portfolio to Van Kampen UIF International Magnum Portfolio, Morgan
Stanley UIF Mid Cap Value Portfolio to Van Kampen UIF Mid Cap Value Portfolio,
Morgan Stanley UIF U.S. Real Estate Portfolio to Van Kampen UIF U.S. Real Estate
Portfolio, and Morgan Stanley UIF Value Portfolio to Van Kampen UIF Value
Portfolio.
10
EXAMPLE 1
The example below shows the dollar amount of expenses that you would bear
directly or indirectly if you:
... invested $1,000 in a Variable Sub-Account,
... earned a 5% annual return on your investment,
... surrendered your Contract, or you began receiving income payments for a
specified period of less than 120 months, at the end of each time period, and
... elected the Enhanced Death and Income Benefit Combination Rider.
THE EXAMPLE DOES NOT INCLUDE ANY TAXES OR TAX PENALTIES YOU MAY BE REQUIRED TO
PAY IF YOU SURRENDER YOUR CONTRACT
ASSUMES TERMINATION
Sub-Account 1 Year 3 Year 5 Year 10 Year
- -------------------------------------------------------------------------------
AIM V.I. Balanced $80 $132 $177 $320
- -------------------------------------------------------------------------------
AIM V.I. Capital Appreciation $77 $123 $164 $293
- -------------------------------------------------------------------------------
AIM V.I. Core Equity $77 $123 $162 $290
- -------------------------------------------------------------------------------
AIM V.I. Diversified Income $78 $126 $168 $301
- -------------------------------------------------------------------------------
AIM V.I. Global Utilities $80 $130 $175 $315
- -------------------------------------------------------------------------------
AIM V.I. Government Securities $80 $131 $175 $316
- -------------------------------------------------------------------------------
AIM V.I. Growth $78 $124 $165 $296
- -------------------------------------------------------------------------------
AIM V.I. High Yield $82 $137 $186 $337
- -------------------------------------------------------------------------------
AIM V.I. International Growth $79 $130 $174 $313
- -------------------------------------------------------------------------------
AIM V.I. Premier Equity $77 $123 $164 $293
- -------------------------------------------------------------------------------
Dreyfus Socially Responsible Growth $77 $121 $160 $286
- -------------------------------------------------------------------------------
Dreyfus Stock Index $71 $105 $133 $232
- -------------------------------------------------------------------------------
Dreyfus VIF - Growth & Income $77 $122 $161 $288
- -------------------------------------------------------------------------------
Dreyfus VIF - Money Market $75 $115 $150 $265
- -------------------------------------------------------------------------------
Dreyfus VIF - Small Company Stock $79 $129 $173 $311
- -------------------------------------------------------------------------------
Fidelity VIP Contrafund $76 $118 $155 $276
- -------------------------------------------------------------------------------
Fidelity VIP Equity-Income $75 $115 $150 $265
- -------------------------------------------------------------------------------
Fidelity VIP Growth $76 $118 $155 $276
- -------------------------------------------------------------------------------
Fidelity VIP High Income $76 $119 $156 $279
- -------------------------------------------------------------------------------
Goldman Sachs VIT Capital Growth $86 $149 $206 $374
- -------------------------------------------------------------------------------
Goldman Sachs VIT CORE/SM/ Small Cap Equity $81 $135 $182 $329
- -------------------------------------------------------------------------------
Goldman Sachs VIT CORE/SM/ U.S. Equity $77 $123 $162 $290
- -------------------------------------------------------------------------------
Goldman Sachs VIT Growth and Income $81 $133 $180 $325
- -------------------------------------------------------------------------------
Goldman Sachs VIT International Equity $90 $160 $223 $407
- -------------------------------------------------------------------------------
MFS Emerging Growth $78 $124 $165 $295
- -------------------------------------------------------------------------------
MFS Investors Trust $78 $125 $166 $298
- -------------------------------------------------------------------------------
MFS New Discovery $80 $130 $174 $314
- -------------------------------------------------------------------------------
Neuberger Berman AMT Guardian $79 $128 $171 $307
- -------------------------------------------------------------------------------
Neuberger Berman AMT Mid-Cap Growth $78 $125 $167 $299
- -------------------------------------------------------------------------------
Neuberger Berman AMT Partners $78 $124 $165 $295
- -------------------------------------------------------------------------------
Van Kampen UIF Core Plus Fixed Income $76 $119 $156 $279
- -------------------------------------------------------------------------------
Van Kampen UIF Equity Growth $78 $125 $167 $299
- -------------------------------------------------------------------------------
Van Kampen UIF Global Value Equity $82 $137 $185 $335
- -------------------------------------------------------------------------------
Van Kampen UIF International Magnum $82 $138 $188 $341
- -------------------------------------------------------------------------------
Van Kampen UIF Mid Cap Value $80 $131 $176 $318
- -------------------------------------------------------------------------------
Van Kampen UIF U.S. Real Estate $81 $136 $184 $332
- -------------------------------------------------------------------------------
Van Kampen UIF Value $78 $126 $168 $301
- -------------------------------------------------------------------------------
11
EXAMPLE 2
Same assumptions as Example 1 above, except that you decided not to surrender
your Contract, or you began receiving income payments for a specified period of
at least 120 months, at the end of each period.
ASSUMES NO TERMINATION
Sub-Account 1 Year 3 Year 5 Year 10 Year
- -------------------------------------------------------------------------------
AIM V.I. Balanced $29 $ 89 $152 $320
- -------------------------------------------------------------------------------
AIM V.I. Capital Appreciation $26 $ 81 $138 $293
- -------------------------------------------------------------------------------
AIM V.IM Core Equity $26 $ 80 $137 $290
- -------------------------------------------------------------------------------
AIM V.I. Diversified Income $27 $ 83 $142 $301
- -------------------------------------------------------------------------------
AIM V.I. Global Utilities $29 $ 88 $149 $315
- -------------------------------------------------------------------------------
AIM V.I. Government Securities $29 $ 88 $150 $316
- -------------------------------------------------------------------------------
AIM V.I. Growth $27 $ 82 $140 $296
- -------------------------------------------------------------------------------
AIM V.I. High Yield $31 $ 95 $160 $337
- -------------------------------------------------------------------------------
AIM V.I. International Growth $28 $ 87 $148 $313
- -------------------------------------------------------------------------------
AIM V.I. Premier Equity $26 $ 81 $138 $293
- -------------------------------------------------------------------------------
Dreyfus Socially Responsible Growth $26 $ 79 $135 $286
- -------------------------------------------------------------------------------
Dreyfus Stock Index $20 $ 63 $108 $232
- -------------------------------------------------------------------------------
Dreyfus VIF - Growth & Income $26 $ 79 $136 $288
- -------------------------------------------------------------------------------
Dreyfus VIF - Money Market $24 $ 73 $124 $265
- -------------------------------------------------------------------------------
Dreyfus VIF - Small Company Stock $28 $ 86 $147 $311
- -------------------------------------------------------------------------------
Fidelity VIP Contrafund $25 $ 76 $129 $276
- -------------------------------------------------------------------------------
Fidelity VIP Equity-Income $24 $ 73 $124 $265
- -------------------------------------------------------------------------------
Fidelity VIP Growth $25 $ 76 $129 $276
- -------------------------------------------------------------------------------
Fidelity VIP High Income $25 $ 77 $131 $279
- -------------------------------------------------------------------------------
Goldman Sachs VIT Capital Growth $35 $107 $180 $374
- -------------------------------------------------------------------------------
Goldman Sachs VIT CORE/SM/ Small Cap Equity $30 $ 92 $157 $329
- -------------------------------------------------------------------------------
Goldman Sachs VIT CORE/SM/ U.S. Equity $26 $ 80 $137 $290
- -------------------------------------------------------------------------------
Goldman Sachs VIT Growth and Income $30 $ 91 $154 $325
- -------------------------------------------------------------------------------
Goldman Sachs VIT International Equity $39 $117 $198 $407
- -------------------------------------------------------------------------------
MFS Emerging Growth $27 $ 82 $139 $295
- -------------------------------------------------------------------------------
MFS Investors Trust $27 $ 83 $141 $298
- -------------------------------------------------------------------------------
MFS New Discovery $29 $ 87 $149 $314
- -------------------------------------------------------------------------------
Neuberger Berman AMT Guardian $28 $ 85 $145 $307
- -------------------------------------------------------------------------------
Neuberger Berman AMT Mid-Cap Growth $27 $ 83 $141 $299
- -------------------------------------------------------------------------------
Neuberger Berman AMT Partners $27 $ 82 $139 $295
- -------------------------------------------------------------------------------
Van Kampen UIF Core Plus Fixed Income $25 $ 77 $131 $279
- -------------------------------------------------------------------------------
Van Kampen UIF Equity Growth $27 $ 83 $141 $299
- -------------------------------------------------------------------------------
Van Kampen UIF Global Value Equity $31 $ 94 $160 $335
- -------------------------------------------------------------------------------
Van Kampen UIF International Magnum $31 $ 96 $163 $341
- -------------------------------------------------------------------------------
Van Kampen UIF Mid Cap Value $29 $ 89 $151 $318
- -------------------------------------------------------------------------------
Van Kampen UIF U.S. Real Estate $30 $ 93 $158 $332
- -------------------------------------------------------------------------------
Van Kampen UIF Value $27 $ 83 $142 $301
- -------------------------------------------------------------------------------
PLEASE REMEMBER THAT YOU ARE LOOKING AT EXAMPLES AND NOT A REPRESENTATION OF
PAST OR FUTURE EARNINGS. YOUR ACTUAL EXPENSES MAY BE LESS OR GREATER THAN THOSE
SHOWN ABOVE. SIMILARLY, YOUR RATE OF RETURN MAY BE LESS OR GREATER THAN 5%,
WHICH IS NOT GUARANTEED. THE ABOVE EXAMPLES ASSUME THE ELECTION OF THE ENHANCED
DEATH AND INCOME BENEFIT COMBINATION RIDER WITH A MORTALITY AND EXPENSE RISK
CHARGE OF 1.49%. IF NO RIDER WERE ELECTED, OR THE ENHANCED DEATH BENEFIT RIDER
WERE ELECTED, THE EXPENSE FIGURES SHOWN ABOVE WOULD BE SLIGHTLY LOWER. TO
REFLECT THE CONTRACT MAINTENANCE CHARGE IN THE EXAMPLES, WE ESTIMATED AN
EQUIVALENT PERCENTAGE CHARGE, BASED ON THE CURRENT AVERAGE CONTRACT SIZE OF
$45,559
12
FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
To measure the value of your investment in the Variable Sub-Accounts during the
Accumulation Phase, we use a unit of measure we call the "ACCUMULATION UNIT"
Each Variable Sub-Account has a separate value for its Accumulation Units we
call "ACCUMULATION UNIT VALUE". Accumulation Unit Value is analogous to, but not
the same as, the share price of a mutual fund. Attached as Appendix A to this
prospectus are tables showing the Accumulation Unit Values of each Variable
Sub-Account since the date the contracts were first offered. To obtain a fuller
picture of each Variable Sub-Account's finances, please refer to the Variable
Account's financial statement contained in the Statement of Additional
Information. The financial statements of GLENBROOK LIFE also appear in the
Statement of Additional Information.
13
THE CONTRACT
- --------------------------------------------------------------------------------
CONTRACT OWNER
The Glenbrook Life Provider Variable Annuity is a contract between you, the
Contract Owner, and Glenbrook Life, a life insurance company. As the Contract
Owner, you may exercise all of the rights and privileges provided to you by the
Contract. That means it is up to you to select or change (to the extent
permitted):
... the investment alternatives during the Accumulation and Payout Phases,
... the amount and timing of your purchase payments and withdrawals,
... the programs you want to use to invest or withdraw money,
... the income payment plan you want to use to receive retirement income,
... the Annuitant (either yourself or someone else) on whose life the income
payments will be based,
... the Beneficiary or Beneficiaries who will receive the benefits that the
Contract provides when the last surviving contract Owner dies, and
... any other rights that the Contract provides.
If you die, any surviving Contract Owner, or, if none, the Beneficiary may
exercise the rights and privileges provided to them by the Contract.
The Contract cannot be jointly owned by both a non-natural person and a natural
person. If the Contract Owner is a grantor trust, the Contract Owner will be
considered a non-living person for the purposes of the Death of Owner and Death
of Annuitant provisions of your Contract. The maximum age of the oldest Contract
Owner or Annuitant cannot exceed 90 as of the date we received the completed
application. You may change the Contract Owner at any time. We will provide a
change of ownership form to be signed by you and filed with us. After we accept
the form, the change of ownership will be effective as of the date you signed
the form. Until we receive your written notice to change the Contract Owner, we
are entitled to rely on the most recent ownership information in our files. We
will not be liable as to any payment or settlement made prior to receiving the
written notice. Accordingly, if you wish to change the Contract Owner, you
should deliver your written notice to us promptly. Each change is subject to any
payment made by us or any other action we take before we accept the change.
You can use the Contract with or without a qualified plan. A qualified plan is a
personal retirement savings plan, such as an IRA or tax-sheltered annuity, that
meets the requirements of the Internal Revenue Code. Qualified plans may limit
or modify your rights and privileges under the Contract. We use the term
"Qualified Contract" to refer to a Contract issued within a qualified plan. See
"Qualified Plans" on page__.
Changing ownership of this Contract may cause adverse tax consequences and may
not be allowed under qualified plans. Please consult with a competent tax
advisor prior to making a request for a change of Contract Owner.
ANNUITANT
The Annuitant is the individual whose life determines the amount and duration of
income payments (other than under Income Plans with guaranteed payments for a
specified period). You initially designate an Annuitant in your application. You
may change the Annuitant at any time prior to the Payout Start Date (only if the
Contract Owner is a natural person). Once we accept a change, it takes effect as
of the date you signed the request. Each change is subject to any payment we
make or other action we take before we accept it.
You may designate a joint Annuitant, who is a second person on whose life income
payments depend. We permit joint Annuitants only on or after the Payout Start
Date. If the Annuitant dies prior to the Payout Start Date, the new Annuitant
will be:
(i) the youngest Contract Owner; otherwise,
(ii) the youngest Beneficiary.
BENEFICIARY
The Beneficiary is the person who may elect to receive the Death Proceeds or
become the new Contract Owner, subject to the "Death of Owner" section below, if
the sole surviving Contract Owner dies before the Payout Start Date. If the sole
surviving Contract Owner dies after the Payout Start Date, the Beneficiary, will
receive any guaranteed income payments scheduled to continue.
You may name one or more primary and contingent Beneficiaries when you apply for
a Contract. The primary Beneficiary is the person who is the first entitled to
receive benefits under the Contract upon death of the sole surviving Contract
Owner. A contingent Beneficiary is the person selected by the Contract Owner who
will become the Beneficiary if all named primary Beneficiaries die before the
death of the sole surviving Contract Owner.
You may change or add Beneficiaries at any time, unless you have designated an
irrevocable Beneficiary. We will provide a change of Beneficiary form to be
signed by you and filed with us. After we accept the form, the change of
Beneficiary will be effective as of the date you signed the form. Until we
receive your written notice to change a Beneficiary, we are entitled to rely on
the most recent Beneficiary information in our files. We will not be liable as
to any payment or settlement made prior to receiving the written notice.
Accordingly, if you wish to change your Beneficiary, you should deliver your
written notice to us promptly. Each change is subject to any payment made by us
or any other action we take before we accept
14
the change.
If you did not name a Beneficiary or, unless otherwise provided in the
Beneficiary designation, if a named Beneficiary is no longer living and there
are no other surviving primary or contingent Beneficiaries, the new Beneficiary
will be:
... your spouse or, if he or she is no longer alive,
... your surviving children equally, or if you have no surviving children,
... your estate.
If one or more Beneficiaries survive you (or survives the Annuitant, if the
Contract Owner is not a natural person), we will divide the Death Proceeds among
the surviving Beneficiaries according to your most recent written instructions.
If you have not given us written instructions, we will pay the Death Proceeds in
equal amounts to the surviving Beneficiaries.
If more than one Beneficiary shares in the Death Proceeds, each Beneficiary will
be treated as a separate and independent owner of his or her respective share.
Each Beneficiary will exercise all rights related to his or her share, including
the sole right to select a payout option, subject to any restrictions previously
placed upon the Beneficiary. Each Beneficiary may designate a Beneficiary(ies)
for his or her respective share, but that designated Beneficiary(ies) will be
restricted to the payout option chosen by the original Beneficiary.
MODIFICATION OF THE CONTRACT
Only a Glenbrook Life officer may approve a change in or waive any provision of
the Contract. Any change or waiver must be in writing. None of our agents has
the authority to change or waive the provisions of the Contract. We may not
change the terms of the Contract without your consent, except to conform the
Contract to applicable law or changes in the law. If a provision of the Contract
is inconsistent with state law, we will follow state law.
ASSIGNMENT
You may not assign any interest in a Contract as collateral or security for a
loan. However, you may assign periodic income payments under the Contract prior
to the Payout Start Date. No Beneficiary may assign benefits under the Contract
until they are payable to the Beneficiary. We will not be bound by any
assignment until the assignor signs it and files it with us. We are not
responsible for the validity of any assignment. Federal law prohibits or
restricts the assignment of benefits under many types of retirement plans and
the terms of such plans may themselves contain restrictions on assignments. An
assignment may also result in taxes or tax penalties. YOU SHOULD CONSULT WITH AN
ATTORNEY BEFORE TRYING TO ASSIGN YOUR CONTRACT.
PURCHASES
- --------------------------------------------------------------------------------
MINIMUM PURCHASE PAYMENTS
Your initial purchase payment must be at least $3,000 ($2,000 for a Qualified
Contract). All subsequent purchase payments must be $50 or more. You may make
purchase payments at any time prior to the Payout Start Date. We reserve the
right to limit the maximum amount of purchase payments we will accept.
AUTOMATIC ADDITIONS PROGRAM
You may make subsequent purchase payments by automatically transferring money
from your bank account. Consult your representative for more detailed
information.
ALLOCATION OF PURCHASE PAYMENTS
At the time you apply for a Contract, you must decide how to allocate your
purchase payments among the investment alternatives. The allocation you specify
on your application will be effective immediately. All allocations must be in
whole percents that total 100% or in whole dollars. You can change your
allocations by notifying us in writing. We reserve the right to limit the the
availability of the investment alternatives.
We will allocate your purchase payments to the investment alternatives according
to your most recent instructions on file with us. Unless you notify us in
writing otherwise, we will allocate subsequent purchase payments according to
the allocation for the previous purchase payment. We will effect any change in
allocation instructions at the time we receive written notice of the change in
good order.
We will credit the initial purchase payment that accompanies your completed
application to your Contract within 2 business days after we receive the payment
at our home office. If your application is incomplete, we will ask you to
complete your application within 5 business days. If you do so, we will credit
your initial purchase payment to your Contract within that 5 business day
period. If you do not, we will return your purchase payment at the end of the 5
business day period unless you expressly allow us to hold it until you complete
the application. We will credit subsequent purchase payments to the Contract at
the close of the business day on which we receive the purchase payment at our
home office. We are open for business each day Monday through Friday that the
New York Stock Exchange is open for business. We also refer to these days as
"VALUATION DATES." Our business day closes when the New York Stock Exchange
closes, usually 4 p.m. Eastern Time (3 p.m. Central Time). If we receive your
purchase payment after 3 p.m. Central Time on any Valuation
15
Date, we will credit your purchase payment using the Accumulation Unit Values
computed on the next Valuation Date.
RIGHT TO CANCEL
You may cancel the Contract by returning it to us within the Cancellation
Period, which is the 20 day period after you receive the Contract, or a longer
period should your state require it. You may return your Contract by delivering
it or mailing it to us. If you exercise this "RIGHT TO CANCEL," the Contract
terminates and we will pay you the full amount of your purchase payments
allocated to the Fixed Account. We also will return your purchase payments
allocated to the Variable Account adjusted, to the extent federal or state law
permits, to reflect investment gain or loss that occurred from the date of
allocation through the date of cancellation. Some states may require us to
return a greater amount to you.
In states where we are required to refund purchase payments, we reserve the
right during the Cancellation Period to invest any purchase payments you
allocated to a Variable Sub-Account to the money market Variable Sub-Account
available under the Contract. We will notify you if we do so. At the end of the
Cancellation Period, you may then allocate your money to other Variable
Sub-Accounts.
If your Contract is qualified under Section 408 of the Internal Revenue Code, we
will refund the greater of any purchase payments of the Contract Value.
CONTRACT VALUE
- --------------------------------------------------------------------------------
Your Contract Value at any time during the Accumulation Phase is equal to the
sum of the value of your Accumulation Units in the Variable Sub-Accounts you
have selected, plus the value of your investment in the Fixed Account Options.
ACCUMULATION UNITS
To determine the number of Accumulation Units of each Variable Sub-Account to
credit to your Contract, we divide (i) the amount of the purchase payment or
transfer you have allocated to a Variable Sub-Account by (ii) the Accumulation
Unit Value of that Variable Sub-Account next computed after we receive your
payment or transfer. For example, if we receive a $10,000 purchase payment
allocated to a Variable Sub-Account when the Accumulation Unit Value for the
Sub-Account is $10, we would credit 1,000 Accumulation Units of that Variable
Sub-Account to your Contract. Withdrawals and transfers from a Variable
Sub-Account would, of course, reduce the number of Accumulation Units of that
Variable Sub-Account allocated to your Contract.
ACCUMULATION UNIT VALUE
As a general matter, the Accumulation Unit Value for each Variable Sub-Account
will rise or fall to reflect:
... changes in the share price of the Portfolio in which the Variable Sub-Account
invests, and
... the deduction of amounts reflecting the mortality and expense risk charge,
administrative expense charge, and any provision for taxes that have accrued
since we last calculated the Accumulation Unit Value.
We determine contract maintenance charges, withdrawal charges, and transfer fees
(currently waived) separately for each Contract. They do not affect Accumulation
Unit Value. Instead, we obtain payment of those charges and fees by redeeming
Accumulation Units. For details on how we calculate Accumulation Unit Value,
please refer to the Statement of Additional Information. We determine a separate
Accumulation Unit Value for each Variable Sub-Account on each Valuation Date. We
also determine a separate set of Accumulation Unit Values reflecting the cost of
the Enhanced Death Benefit Rider and the Enhanced Death and Income Benefit
Combination Rider described on pages __.
YOU SHOULD REFER TO THE PROSPECTUSES FOR THE PORTFOLIOS THAT ACCOMPANY THIS
PROSPECTUS FOR A DESCRIPTION OF HOW THE ASSETS OF EACH PORTFOLIO ARE VALUED,
SINCE THAT DETERMINATION DIRECTLY BEARS ON THE ACCUMULATION UNIT VALUE OF THE
CORRESPONDING VARIABLE SUB-ACCOUNT AND, THEREFORE, YOUR CONTRACT VALUE.
16
INVESTMENT ALTERNATIVES: THE VARIABLE SUB-ACCOUNTS
- --------------------------------------------------------------------------------
You may allocate your purchase payments to up to 38 Variable Sub-Accounts. Each
Variable Sub-Account invests in the shares of a corresponding Portfolio. Each
Portfolio has its own investment objective(s) and policies. We briefly describe
the Portfolios below.
For more complete information about each Portfolio, including expenses and risks
associated with the Portfolio, please refer to the accompanying prospectuses for
the Portfolios. You should carefully review the Portfolio prospectuses before
allocating amounts to the Variable Sub-Accounts.
PORTFOLIO: EACH PORTFOLIO SEEKS: INVESTMENT ADVISOR:
- -------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS*
- -------------------------------------------------------------------------------
AIM V.I. Balanced Fund As high a total return as
possible, consistent with
preservation of capital
- -------------------------------------------------------
AIM V.I. Capital Growth of capital
Appreciation Fund
- -------------------------------------------------------
AIM V.I. Core Equity Growth of capital with a
Fund secondary objective of
current income
- ------------------------------------------------------- AIM ADVISORS,
AIM V.I. Diversified A high level of current INC.
Income Fund income
- -------------------------------------------------------
AIM V.I. Global High total return
Utilities Fund
- -------------------------------------------------------
AIM V.I. Government A high level of current
Securities Fund income consistent with a
reasonable concern for safety
of principal
- -------------------------------------------------------
AIM V.I. Growth Fund Growth of capital
- -------------------------------------------------------
AIM V.I. High Yield A high level of current ------------------------
Fund income
- -------------------------------------------------------
AIM V.I. International Long-term growth of capital
Growth Fund
- -------------------------------------------------------
AIM V.I. Premier Long-term growth of capital
Equity Fund and income as a secondary
objective
- -------------------------------------------------------
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.; THE DREYFUS STOCK INDEX
FUND; AND THE DREYFUS VARIABLE INVESTMENT FUND (VIF) (COLLECTIVELY, THE
DREYFUS FUNDS)
- -------------------------------------------------------------------------------
The Dreyfus Socially Responsible
Growth Fund, Inc. Capital growth, and, secondarily, current income
- -------------------------------------------------------
Dreyfus Stock Index To match the total return of
Fund the Standard & Poor's(R) 500
Composite Stock Price Index
- -------------------------------------------------------
Dreyfus VIF Growth & Long-term capital growth,
Income Portfolio current income and growth of
income, consistent with THE DREYFUS
reasonable investment risk CORPORATION
- -------------------------------------------------------
Dreyfus VIF Money A high level of current
Market Portfolio income as is consistent with
the preservation of capital
and the maintenance of
liquidity
- -------------------------------------------------------
Dreyfus VIF Small Investment returns
Company Stock (consisting of capital
Portfolio appreciation and income) that
are greater than the total
return performance of stocks ------------------------
represented by the Russell
2500/SM/ Stock Index
("Russell 2500")
- -------------------------------------------------------
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
- -------------------------------------------------------------------------------
Fidelity VIP II Long-term capital
Contrafund(TM) appreciation
Portfolio
- -------------------------------------------------------------------------------
Fidelity VIP Reasonable income
Equity-Income
Portfolio FIDELITY MANAGEMENT
- ------------------------------------------------------ -&
Fidelity VIP Growth Capital appreciation RESEARCH COMPANY
Portfolio
- -------------------------------------------------------
Fidelity VIP High High level of current income
Income Portfolio while also considering growth ------------------------
of capital
- -------------------------------------------------------
GOLDMAN SACHS VARIABLE INSURANCE TRUST (VIT)
- -------------------------------------------------------------------------------
Goldman Sachs VIT Long-term growth of capital
Capital Growth Fund
- -------------------------------------------------------
Goldman Sachs VIT Long-term growth of capital
CORE/SM/Small Cap
Equity Fund
- ------------------------------------------------------- GOLDMAN SACHS
Goldman Sachs VIT Long-term growth of capital ASSET
CORE/SM/ U.S. Equity and dividend income MANAGEMENT
Fund
- -------------------------------------------------------
Goldman Sachs VIT A high total return,
Global Income Fund emphasizing current income
and, to a lesser extent
providing opportunities for
capital appreciation
- -------------------------------------------------------
Goldman Sachs VIT Long-term growth of capital ------------------------
Growth and Income Fund and growth of income
- -------------------------------------------------------
Goldman Sachs VIT Long-term capital
International Equity appreciation
Fund
- -------------------------------------------------------
MFS(R) VARIABLE INSURANCE TRUST/SM/
- -------------------------------------------------------------------------------
MFS Emerging Growth Long-term growth of capital
Series
- ------------------------------------------------------- MFS INVESTMENT
MFS Investors Trust Long-term growth of capital MANAGEMENT(R)
Series with a secondary objective to
seek reasonable current
income
- -------------------------------------------------------
MFS New Discovery Capital appreciation ------------------------
Series
- -------------------------------------------------------
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
- -------------------------------------------------------------------------------
Morgan Stanley UIF Long-term capital MORGAN STANLEY
Equity Growth appreciation ASSET
MANAGEMENT
- -------------------------------------------------------------------------------
Morgan Stanley UIF Above-average total return MILLER
Fixed Income over a market cycle of three ANDERSON &
to five years SHERRERD, LLP
- -------------------------------------------------------------------------------
Morgan Stanley UIF Long-term capital MORGAN STANLEY
Global Equity appreciation ASSET
MANAGEMENT
- -------------------------------------------------------
Morgan Stanley UIF Long-term capital ------------------------
International Magnum appreciation
- -------------------------------------------------------
Morgan Stanley UIF Mid Above-average total return MILLER ANDERSON
Cap Value over a market cycle of three &
to five years SHERRERD, LLP
- -------------------------------------------------------------------------------
Morgan Stanley UIF Above-average current income MORGAN STANLEY
U.S. Real Estate and long-term capital ASSET
appreciation MANAGEMENT
- -------------------------------------------------------------------------------
Morgan Stanley UIF Above-average total return MILLER ANDERSON &
Value over a market cycle of three SHERRERD, LLP
to five years
- -------------------------------------------------------------------------------
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
- -------------------------------------------------------------------------------
Neuberger Berman AMT Long-term growth of capital;
Guardian current income is a secondary
goal NEUBERGER BERMAN
- ------------------------------------------------------- MANAGEMENT INC.
Neuberger Berman AMT Growth of capital
Mid-Cap Growth
- -------------------------------------------------------
Neuberger Berman AMT Growth of capital ------------------------
Partners
- -------------------------------------------------------
17
* A Portfolio's investment objective may be changed by the Portfolio's Board of
Trustees without shareholder approval.
Effective May 1, 2002, the Portfolio changed its name from AIM V.I. Growth and
Income Fund to AIM V.I. Core Equity Fund.
Effective May 1, 2002, the Portfolio changed its name from AIM V.I.
International Equity Fund to AIM V.I. International Growth Fund.
Effective May 1, 2002, the Portfolio changed its name from AIM V.I. Value Fund
to AIM V.I. Premier Equity Fund.
AMOUNTS YOU ALLOCATE TO VARIABLE SUB-ACCOUNTS MAY GROW IN VALUE, DECLINE IN
VALUE, OR GROW LESS THAN YOU EXPECT, DEPENDING ON THE INVESTMENT PERFORMANCE OF
THE PORTFOLIOS IN WHICH THOSE VARIABLE SUB-ACCOUNTS INVEST. YOU BEAR THE
INVESTMENT RISK THAT THE PORTFOLIOS MIGHT NOT MEET THEIR INVESTMENT OBJECTIVES.
SHARES OF THE PORTFOLIOS ARE NOT DEPOSITS, OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
18
VARIABLE INSURANCE PORTFOLIOS MAY NOT BE MANAGED BY THE SAME PORTFOLIO MANAGERS
WHO MANAGE RETAIL MUTUAL FUNDS WITH SIMILAR NAMES. THESE PORTFOLIOS ARE LIKELY
TO DIFFER FROM SIMILARLY NAMED RETAIL FUNDS IN ASSETS, CASH FLOW, AND TAX
MATTERS. ACCORDINGLY, THE HOLDINGS AND INVESTMENT RESULTS OF A VARIABLE
INSURANCE PORTFOLIO CAN BE EXPECTED TO BE GREATER OR LESS THAN THE INVESTMENT
RESULTS OF SIMILARLY NAMED RETAIL MUTUAL FUNDS.
INVESTMENT ALTERNATIVES: THE FIXED ACCOUNT OPTIONS
- --------------------------------------------------------------------------------
You may allocate all or a portion of your purchase payments to the Fixed
Account. You may choose from among 3 Fixed Account Options: 2 dollar cost
averaging options, and the option to invest in one or more Guarantee Periods
included in the Guaranteed Maturity Fixed Account. The Fixed Account Options may
not be available in all states. Please consult with your representative for
current information. The Fixed Account supports our insurance and annuity
obligations. The Fixed Account consists of our general assets other than those
in segregated asset accounts. We have sole discretion to invest the assets of
the Fixed Account, subject to applicable law. Any money you allocate to a Fixed
Account Option does not entitle you to share in the investment experience of the
Fixed Account.
DOLLAR COST AVERAGING FIXED ACCOUNT OPTIONS
DOLLAR COST AVERAGING FIXED ACCOUNT OPTION. Purchase payments that you allocate
to the Dollar Cost Averaging Fixed Account Option ("DCA Fixed Account Option")
will earn interest for a one year period at the current rate in effect at the
time of allocation. We will credit interest daily at a rate that will compound
over the year to the annual interest rate we guaranteed at the time of
allocation. After the one year period, we will declare a renewal rate which we
guarantee for a full year. Subsequent renewal dates will be every twelve months
for each payment or transfer.
For each purchase payment, the first transfer from the DCA Fixed Account must
occur within one month of the date of payment. If we do not receive an
allocation from you within one month of the date of payment, the payment plus
associated interest will be transferred to the money market Variable Sub-Account
in equal monthly installments. Transferring Account Value to the money market
Variable Sub-Account in this manner may not be consistent with the theory of
dollar cost averaging described on page __. You must transfer each purchase
payment and all its earnings out of this Option by means of dollar cost
averaging within 36 months of payment. At the end of 36 months, any nominal
amounts remaining in the DCA Fixed Account will be allocated to the money market
Variable Sub-Account. No transfers are permitted into the Dollar Cost Averaging
Fixed Account.
SHORT TERM DOLLAR COST AVERAGING FIXED ACCOUNT OPTION. You may establish a Short
Term Dollar Cost Averaging Program by allocating purchase payments to the Short
Term Dollar Cost Averaging Fixed Account Option ("Short Term DCA Fixed Account
Option"). We will credit interest to purchase payments you allocate to this
Option for up to one year at the current rate in effect at the time of
allocation.
For each purchase payment, the first transfer from the Short Term DCA Fixed
Account must occur within one month of the date of payment. If we do not receive
an allocation from you within one month of the date of payment, the payment plus
associated interest will be transferred to the money market Variable Sub-Account
in equal monthly installments. Transferring Account Value to the money market
Variable Sub-Account in this manner may not be consistent with the theory of
dollar cost averaging described on page __.
We will follow your instructions in transferring amounts monthly from the Short
Term DCA Fixed Account Option. However, you may not choose less than 3 or more
than 12 monthly installments. Further, you must transfer each purchase payment
and all its earnings out of this Option by means of dollar cost averaging within
12 months. At the end of the transfer period, any nominal amounts remaining in
the Short Term DCA Fixed Account will be allocated to the money market Variable
Sub-Account.
If you discontinue the Short term Dollar Cost Averaging Program before the end
of the transfer period, we will transfer the remaining balance in this Option to
the money market Variable Sub-Account unless you request a different investment
alternative. No transfers are permitted into the Short Term Dollar Cost
Averaging Fixed Account.
We bear the investment risk for all amounts allocated to the DCA Fixed Account
Option and the Short Term DCA Fixed Account Option. That is because we guarantee
the current and renewal interest rates we credit to the amounts you allocate to
either of these Options, which will never be less than the minimum guaranteed
rate in the Contract. Currently, we determine, in our sole discretion, the
amount of interest credited in excess of the guaranteed rate. We may declare
more than one interest rate for different monies based upon the date of
allocation to the DCA Fixed Account Option and the Short Term DCA Fixed Account
Option. For current interest rate information, please contact your
representative or GLENBROOK LIFE customer service at 1-800-755-5275.
GUARANTEE PERIODS
Each payment or transfer allocated to a Guarantee Period earns interest at a
specified rate that we guarantee for a period of years. Guarantee Periods may
range from 1 to 10 years. We are currently offering Guarantee Periods of 1, 3,
5, 7, and 10 years in length. In the future we may
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offer Guarantee Periods of different lengths or stop offering some Guarantee
Periods.
You select the Guarantee Period for each payment or transfer. If you do not
select a Guarantee Period, we will assign the same period(s) you selected for
your most recent purchase payment(s). Each payment or transfer allocated to a
Guarantee Period must be at least $50. We reserve the right to limit the number
of additional purchase payments that you may allocate to this Option.
INTEREST RATES. We will tell you what interest rates and Guarantee Periods we
are offering at a particular time. We will not change the interest rate that we
credit to a particular allocation until the end of the relevant Guarantee
Period. We may declare different interest rates for Guarantee Periods of the
same length that begin at different times.
We have no specific formula for determining the rate of interest that we will
declare initially or in the future. We will set those interest rates based on
investment returns available at the time of the determination. In addition, we
may consider various other factors in determining interest rates including
regulatory and tax requirements, our sales commission and administrative
expenses, general economic trends, and competitive factors.
WE DETERMINE THE INTEREST RATES TO BE DECLARED IN OUR SOLE DISCRETION. WE CAN
NEITHER PREDICT NOR GUARANTEE WHAT THOSE RATES WILL BE IN THE FUTURE. For
current interest rate information, please contact your representative or
GLENBROOK LIFE at 1-800-755-5275.
HOW WE CREDIT INTEREST. We will credit interest daily to each amount allocated
to a Guarantee Period at a rate that compounds to the annual interest rate that
we declared at the beginning of the applicable Guarantee Period.
THE FOLLOWING EXAMPLE ILLUSTRATES HOW A PURCHASE PAYMENT ALLOCATED TO A
GUARANTEED PERIOD WOULD GROW, GIVEN AN ASSUMED GUARANTEE PERIOD AND ANNUAL
INTEREST RATE:
Purchase Payment................................................. $10,000
Guarantee Period................................................. 5 years
Annual Interest Rate............................................. 4.50%
END OF CONTRACT YEAR
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
---------- ---------- ---------- ---------- ------------
Beginning Contract $10,000.00
Value................
X (1 + Annual
Interest Rate) x1.045
----------
$10,450.00
Contract Value at end $10,450.00
of Contract Year.....
X (1 + Annual
Interest) x1.045
----------
$10,920.25
Contract Value at end $10,920.25
of Contract Year.....
X (1 + Annual
Interest Rate) x1.045
----------
$11,411.66
Contract Value at end $11,411.66
of Contract Year.....
X (1 + Annual
Interest Rate) x1.045
----------
$11,925.19
Contract Value at end $11,925.19
of Contract Year.....
X (1 + Annual
Interest Rate) x1.045
-----------
$12,461.82
TOTAL INTEREST CREDITED DURING GUARANTEE PERIOD = $2,461.82 ($12,461.82-$10,000)
This example assumes no withdrawals during the entire 5-year Guarantee Period.
If you were to make a withdrawal, you may be required to pay a withdrawal
charge. In addition, the amount withdrawn may be increased or decreased by a
Market Value Adjustment that reflects changes in interest rates since the time
you invested the amount withdrawn. The hypothetical interest rate is for
illustrative purposes only and is not intended to predict future interest rates
to be declared under the Contract. Actual interest rates declared for any given
Guarantee Period may be more or less than shown above.
RENEWALS. Prior to the end of each Guarantee Period, we will mail you a notice
asking you what to do with your money, including the accrued interest. During
the 30-day period after the end of the Guarantee Period, you may:
1) Take no action. We will automatically apply your money to a new Guarantee
Period of the same length as the expiring Guarantee Period. The new Guarantee
Period will begin on the day the previous Guarantee Period ends. The new
interest rate will be our then current declared rate for a Guarantee Period of
that length; or
2) Instruct us to apply your money to one or more new
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Guarantee Periods of your choice. The new Guarantee Period(s) will begin on
the day the previous Guarantee Period ends. The new interest rate will be our
then current declared rate for those Guarantee Periods; or
3) Instruct us to transfer all or a portion of your money to one or more
Variable Sub-Accounts of the Variable Account. We will effect the transfer on
the day we receive your instructions. We will not adjust the amount
transferred to include a Market Value Adjustment; we will pay interest from
the day the Guarantee Period expired until the date of the transfer. The
interest will be the rate for the shortest Guarantee Period then being
offered; or
4) Withdraw all or a portion of your money. You may be required to pay a
withdrawal charge, but we will not adjust the amount withdrawn to include a
Market Value Adjustment. You may also be required to pay premium taxes and
income tax withholding, if applicable. We will pay interest from the day the
Guarantee Period expired until the date of withdrawal. The interest will be
the rate for the shortest Guarantee Period then being offered. Amounts not
withdrawn will be applied to a new Guarantee Period of the same length as the
previous Guarantee Period. The new Guarantee Period will begin on the day the
previous Guarantee Period ends. Withdrawals of earnings are taxed as ordinary
income and, if taken prior to age 59 /1/2,/ may be subject to an additional
10% federal tax penalty.
MARKET VALUE ADJUSTMENT. All withdrawals and transfers from a Guarantee Period,
other than those taken during the 30 day period after such Guarantee Period
expires, are subject to a Market Value Adjustment. A Market Value Adjustment
also may apply upon payment of a death benefit and when you apply amounts
currently invested in a Guarantee Period to an Income Plan (unless paid or
applied during the 30-day period after such Guarantee Period expires). We also
will not apply a Market Value Adjustment to a withdrawal you make:
... within the Free Withdrawal Amount as described on page___,
... that qualify for one of the waivers as described on page___,
... to satisfy the IRS minimum distribution rules for the Contract, or
... a single withdrawal made by a surviving spouse made within one year after
continuing the Contract.
We apply the Market Value Adjustment to reflect changes in interest rates from
the time you first allocate money to a Guarantee Period to the time you remove
it from that Guarantee Period. We calculate the Market Value Adjustment by
comparing the Treasury Rate for a period equal to the Guarantee Period at its
inception to the Treasury Rate for a period equal to the Guarantee Period when
you remove your money. "TREASURY RATE" means the U.S. Treasury Note Constant
Maturity Yield as reported in Federal Reserve Bulletin Release H.15.
The Market Value Adjustment may be positive or negative, depending on changes in
interest rates. As such, you bear the investment risk associated with changes in
interest rates. If interest rates increase significantly, the Market Value
Adjustment and any withdrawal charge, premium taxes, and income tax withholding
(if applicable) could reduce the amount you receive upon full withdrawal from a
Guaranteed Period to an amount that is less than the purchase payment applied to
that period plus interest earned under the Contract.
Generally, if the original Treasury Rate at the time you allocate money to a
Guarantee Period is higher than the applicable current Treasury Rate for a
period equal to the Guarantee Period, then the Market Value Adjustment will
result in a higher amount payable to you, transferred or applied to an Income
Plan. Conversely, if the Treasury Rate at the time you allocate money to a
Guarantee Period is lower than the applicable Treasury Rate for a period equal
to the Guarantee Period, then the Market Value Adjustment will result in a lower
amount payable to you, transferred or applied to an Income Plan.
For example, assume that you purchase a Contract and you select an initial
Guarantee Period of 5 years and the 5-year Treasury Rate for that duration is
4.50%. Assume that at the end of 3 years, you make a partial withdrawal. If, at
that later time, the current 5-year Treasury Rate is 4.20%, then the Market
Value Adjustment will be positive, which will result in an increase in the
amount payable to you. Conversely, if the current 5-year Treasury Rate is 4.80%,
then the Market Value Adjustment will be negative, which will result in a
decrease in the amount payable to you.
The formula for calculating Market Value Adjustments is set forth in Appendix B
to this prospectus, which also contains additional examples of the application
of the Market Value Adjustment.
INVESTMENT ALTERNATIVES: TRANSFERS
- --------------------------------------------------------------------------------
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase, you may transfer Contract Value among the
investment alternatives. You may not transfer Contract Value to either the
Short-Term Dollar Cost Averaging Fixed Account or the Dollar Cost Averaging
Fixed Account Options. You may request transfers in writing on a form that we
provided or by telephone according to the procedure described below. The minimum
amount that you may transfer into a Guarantee Period is $50. We currently do not
assess, but reserve the right to assess, a $10 charge on each transfer
21
in excess of 12 per Contract Year. All transfers to or from more than one
Portfolio on any given day counts as one transfer.
We will process transfer requests that we receive before 3:00 p.m. Central Time
on any Valuation Date using the Accumulation Unit Values for that Date. We will
process requests completed after 3:00 p.m. Central Time on any Valuation Date
using the Accumulation Unit Values for the next Valuation Date. The Contract
permits us to defer transfers from the Fixed Account for up to six months from
the date we receive your request. If we decide to postpone transfers for 30 days
or more, we will pay interest as required by applicable law. Any interest would
be payable from the date we receive the transfer request to the date we make the
transfer.
If you transfer an amount from a Guarantee Period other than during the 30 day
period after such Guarantee Period expires, we will increase or decrease the
amount by a Market Value Adjustment.
We reserve the right to waive any transfer restrictions.
TRANSFERS DURING THE PAYOUT PHASE
During the Payout Phase, you may make transfers among the Variable Sub-Accounts
so as to change the relative weighting of the Variable Sub-Accounts on which
your variable income payments will be based. In addition, you will have a
limited ability to make transfers from the Variable Sub-Accounts to increase the
proportion of your income payments consisting of fixed income payments. You may
not, however, convert any portion of your right to receive fixed income payments
into variable income payments. If you choose an Income Plan that depends on any
person's life, you may not make any transfers for the first 6 months after the
Payout Start Date. Thereafter, you may make transfers among the Variable
Sub-Accounts or make transfers from the Variable Sub-Accounts to increase the
proportion of your income payments consisting of fixed income payments. Your
transfers must be at least 6 months apart.
TELEPHONE TRANSFERS
You may make transfers by telephone by calling 1-800-755-5275. The cut-off time
for telephone transfer requests is 3:00 p.m. Central Time. In the event that the
New York Stock Exchange closes early, i.e., before 3:00 p.m. Central Time, or in
the event that the Exchange closes early for a period of time but then reopens
for trading on the same day, we will process telephone transfer requests as of
the close of the Exchange on that particular day. We will not accept telephone
requests received at any telephone number other than the number that appears in
this paragraph or received after the close of trading on the Exchange.
We may suspend, modify or terminate the telephone transfer privilege at any time
without notice.
We use procedures that we believe provide reasonable assurance that the
telephone transfers are genuine. For example, we tape telephone conversations
with persons purporting to authorize transfers and request identifying
information. Accordingly, we disclaim any liability for losses resulting from
allegedly unauthorized telephone transfers. However, if we do not take
reasonable steps to help ensure that a telephone authorization is valid, we may
be liable for such losses.
DOLLAR COST AVERAGING PROGRAM
Through our Dollar Cost Averaging Program, you may automatically transfer a
fixed dollar amount every month during the Accumulation Phase from the Short
Term DCA Fixed Account or the DCA Fixed Account, to any Variable Sub-Account.
You may not use the Dollar Cost Averaging Program to transfer amounts to the
Guarantee Periods.
We will not charge a transfer fee for transfers made under this Program, nor
will such transfers count against the 12 transfers you can make each Contract
Year without paying a transfer fee.
The theory of dollar cost averaging is that if purchases of equal dollar amounts
are made at fluctuating prices, the aggregate average cost per unit will be less
than the average of the unit prices on the same purchase dates. However,
participation in this Program does not assure you of a greater profit from your
purchases under the Program nor will it prevent or necessarily reduce losses in
a declining market. Call or write us for instructions on how to enroll.
AUTOMATIC PORTFOLIO REBALANCING PROGRAM
Once you have allocated your money among the Variable Sub-Accounts, the
performance of each Variable Sub-Account may cause a shift in the percentage you
allocated to each Variable Sub-Account. If you select our Automatic Portfolio
Rebalancing Program, we will automatically rebalance the Contract Value in each
Variable Sub-Account and return it to the desired percentage allocations. We
will not include money you allocate to the Fixed Account Options in the
Automatic Portfolio Rebalancing Program.
We will rebalance your account each quarter according to your instructions. We
will transfer amounts among the Variable Sub-Accounts to achieve the percentage
allocations you specify. You can change your allocations at any time by
contacting us in writing or by telephone. The new allocation will be effective
with the first rebalancing that occurs after we receive your request. We are not
responsible for rebalancing that occurs prior to receipt of your request.
Example:
Assume that you want your initial purchase payment split among 2 Variable
Sub-Accounts. You want 40% to be in the Fidelity VIP High Income Variable
Sub-Account and 60% to be in the AIM V.I. Growth Variable Sub-Account. Over
the next 2 months the bond market does very well while the stock market
22
performs poorly. At the end of the first quarter, the Fidelity VIP High Income
Variable Sub-Account now represents 50% of your holdings because of its
increase in value. If you choose to have your holdings rebalanced quarterly,
on the first day of the next quarter, we would sell some of your units in the
Fidelity VIP High Income Variable Sub-Account and use the money to buy more
units in the AIM V.I. Growth Variable Sub-Account so that the percentage
allocations would again be 40% and 60% respectively.
The Automatic Portfolio Rebalancing Program is available only during the
Accumulation Phase. The transfers made under the Program do not count towards
the 12 transfers you can make without paying a transfer fee, and are not subject
to a transfer fee. Portfolio rebalancing is consistent with maintaining your
allocation of investments among market segments, although it is accomplished by
reducing your Contract Value allocated to the better performing segments.
EXPENSES
- --------------------------------------------------------------------------------
As a Contract Owner, you will bear, directly or indirectly, the charges and
expenses described below.
CONTRACT MAINTENANCE CHARGE
During the Accumulation Phase, on each Contract Anniversary, we will deduct a
$35 contract maintenance charge from your Contract Value invested in each
Variable Sub-Account in proportion to the amount invested. If you surrender your
Contract, we will deduct the contract maintenance charge pro rated for the part
of the Contract Year elapsed, unless your Contract qualifies for a waiver,
described below.
The charge is to compensate us for the cost of administering the Contracts and
the Variable Account. Maintenance costs include expenses we incur collecting
purchase payments; keeping records; processing death claims, cash withdrawals,
and policy changes; proxy statements; calculating Accumulation Unit Values and
income payments; and issuing reports to Contract Owners and regulatory agencies.
We cannot increase the charge. However, we will waive this charge if, as of the
Contract Anniversary or upon full surrender:
... total purchase payments equal $50,000 or more, or
... all money is allocated to the Fixed Account.
In addition, we will waive the Contract Maintenance Charge if total purchase
payments are $50,000 or more as of the Payout Start Date.
MORTALITY AND EXPENSE RISK CHARGE
We deduct a mortality and expense risk charge daily at an annual rate of 1.05%
of the average daily net assets you have invested in the Variable Sub-Accounts
(1.27% if you select the Enhanced Death Benefit Rider, and 1.49% if you select
the Enhanced Death and Income Benefit Combination Rider). The mortality and
expense risk charge is for all the insurance benefits available with your
Contract (including our guarantee of annuity rates and the death benefits), for
certain expenses of the Contract, and for assuming the risk (expense risk) that
the current charges will be sufficient in the future to cover the cost of
administering the Contract. If the charges under the Contract are not
sufficient, then we will bear the loss. We charge an additional amount for the
Enhanced Death Benefit Rider and the Enhanced Death and Income Benefit
Combination Rider to compensate us for the additional risk that we accept by
providing these options. We guarantee that we will not raise the mortality and
expense risk charge. We assess the mortality and expense risk charge during both
the Accumulation Phase and the Payout Phase.
ADMINISTRATIVE EXPENSE CHARGE
We deduct an administrative expense charge daily at an annual rate of 0.10% of
the average daily net assets you have invested in the Variable Sub-Accounts. We
intend this charge to cover actual administrative expenses that exceed the
revenues from the contract maintenance charge. There is no necessary
relationship between the amount of administrative charge imposed on a given
Contract and the amount of expenses that may be attributed to that Contract. We
assess this charge each day during the Accumulation Phase and the Payout Phase.
We guarantee that we will not raise this charge.
23
TRANSFER FEE
We do not currently impose a fee upon transfers among the investment
alternatives. However, we reserve the right to charge $10 per transfer after the
12th transfer in each Contract Year. We will not charge a transfer fee on
transfers that are part of a Dollar Cost Averaging or Automatic Portfolio
Rebalancing Program.
WITHDRAWAL CHARGE
We may assess a withdrawal charge of up to 6% of the purchase payment(s) you
withdraw. The charge declines to 0% over a 6 year period that begins on the day
we receive your payment. A schedule showing how the charge declines is shown on
page__. During each Contract Year, you can withdraw up to 15% of the aggregate
amount of your purchase payments without paying the charge. Unused portions of
this "FREE WITHDRAWAL AMOUNT" are not carried forward to future Contract Years.
We will deduct withdrawal charges, if applicable, from the amount paid. For
purposes of calculating the withdrawal charge, we will treat withdrawals as
coming from the oldest purchase payments first. However, for federal income tax
purposes, please note that withdrawals are considered to have come first from
earnings, which means you pay taxes on the earnings portion of your withdrawal.
We do not apply a withdrawal charge in the following situations:
... on the Payout Start Date (a withdrawal charge may apply if you terminate
income payments to be received for a specified period);
... on the death of the Contract Owner, or the Annuitant if the Contract Owner is
not a natural person (unless the Settlement Value is used to determine the
death benefit);
... withdrawals taken to satisfy IRS minimum distribution rules for the Contract;
or
... withdrawals that qualify for one of the waivers as described below.
We use the amounts obtained from the withdrawal charge to pay sales commissions
and other promotional or distribution expenses associated with marketing the
Contracts. To the extent that the withdrawal charge does not cover all sales
commissions and other promotional or distribution expenses, we may use any of
our corporate assets, including potential profit which may arise from the
mortality and expense risk charge or any other charges or fee described above,
to make up any difference. Withdrawals of earnings are taxed as ordinary income
and, if taken prior to age 59 /1/2,/ may be subject to an additional 10% federal
tax penalty and a Market Value Adjustment. You should consult your own tax
counsel or other tax advisers regarding any withdrawals.
CONFINEMENT WAIVER. We will waive the withdrawal charge and any Market Value
Adjustment on all withdrawals taken prior to the Payout Start Date under your
Contract if the following conditions are satisfied:
1. You or the Annuitant, if the Contract Owner is not a natural person, are
confined to a long term care facility or a hospital for at least 90 consecutive
days. You or the Annuitant must enter the long term care facility or hospital at
least 30 days after the Issue Date;
2. You request the withdrawal and provide written proof of the stay no later
than 90 days following the end of your or the Annuitant's stay at the long term
care facility or hospital; and
3. A physician must have prescribed the stay and the stay must be medically
necessary (as defined in the Contract).
You may not claim this benefit if you, the Annuitant, or a member of your or the
Annuitant's immediate family, is the physician prescribing your or the
Annuitant's stay in a long term care facility.
TERMINAL ILLNESS WAIVER. We will waive the withdrawal charge and any Market
Value Adjustment on all withdrawals taken prior to the Payout Start Date under
your Contract if:
1. you or the Annuitant (if the Contract Owner is not a natural person) are
first diagnosed with a terminal illness at least 30 days after the Issue Date;
and
2. you claim this benefit and deliver adequate proof of diagnosis to us.
UNEMPLOYMENT WAIVER. We will waive the withdrawal charge and any Market Value
Adjustment on one partial or a full withdrawal taken prior to the Payout Start
Date under your Contract, if you meet the following requirements:
1. you or the Annuitant, if the Contract Owner is not a natural person, become
unemployed at least one year after the Issue Date;
2. you or the Annuitant, if the Contract Owner is not a natural person, receive
unemployment compensation as defined in the Contract for at least 30 days as a
result of that unemployment; and
3. you or the Annuitant, if the Contract Owner is not a natural person, claim
this benefit within 180 days of your or the Annuitant's initial receipt of
unemployment compensation.
Please refer to your Contract for more detailed information about the terms and
conditions of these waivers. The laws of your state may limit the availability
of these waivers and may also change certain terms and/or benefits available
under the waivers. You should consult your Contract for further details on these
variations. Also, even if you do not need to pay our withdrawal charge or a
Market Value Adjustment because of these waivers, you still may be required to
pay taxes or tax penalties on the amount withdrawn. You should consult your tax
adviser to determine the effect of a withdrawal on your taxes.
24
PREMIUM TAXES
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. We are responsible for paying these taxes and
will deduct them from your Contract Value. Some of these taxes are due when the
Contract is issued, others are due when income payments begin or upon surrender.
Our current practice is not to charge anyone for these taxes until income
payments begin or when a total withdrawal occurs, including payment upon death.
At our discretion, we may discontinue this practice and deduct premium taxes
from the purchase payments. Premium taxes generally range from 0% to 4%,
depending on the state.
At the Payout Start Date, if applicable, we deduct the charge for premium taxes
from each investment alternative in the proportion that the Contract Owner's
value in the investment alternative bears to the total Contract Value.
DEDUCTION FOR SEPARATE ACCOUNT INCOME TAXES
We are not currently maintaining a provision for such taxes. In the future,
however, we may establish a provision for taxes if we determine, in our sole
discretion, that we will incur a tax as a result of the operation of the
Variable Account. We will deduct for any taxes we incur as a result of the
operation of the Variable Account, whether or not we previously made a provision
for taxes and whether or not it was sufficient. Our status under the Internal
Revenue Code is briefly described in the "Taxes" section beginning on page____.
OTHER EXPENSES
Each Portfolio deducts advisory fees and other expenses from its assets. You
indirectly bear the charges and expenses of the Portfolios whose shares are held
by the Variable Sub-Accounts. These fees and expenses are described in the
accompanying prospectuses for the Portfolios. For a summary of current estimates
of those charges and expenses, see page____. We may receive compensation from
the investment advisers or administrators of the Portfolios in connection with
the administrative services we provide to the Portfolios.
ACCESS TO YOUR MONEY
- --------------------------------------------------------------------------------
You can withdraw some or all of your Contract Value at any time prior to the
Payout Start Date. The amount payable upon withdrawal is the Contract Value (or
portion thereof) next computed after we receive the request for a withdrawal at
our home office, adjusted by any Market Value Adjustment, less any withdrawal
charges, contract maintenance charges, income tax withholding, penalty tax, and
any premium taxes. We will pay withdrawals from the Variable Account within 7
days of receipt of the request, subject to postponement in certain
circumstances. You can withdraw money from the Variable Account or the Fixed
Account Options. To complete a partial withdrawal from the Variable Account, we
will cancel Accumulation Units in an amount equal to the withdrawal and any
applicable withdrawal charge and premium taxes. You must name the investment
alternative from which you are taking the withdrawal. If none is named, then the
withdrawal request is incomplete and cannot be honored. In general, you must
withdraw at least $50 at a time. You also may withdraw a lesser amount if you
are withdrawing your entire interest in a Variable Sub-Account. If you request a
total withdrawal, we may require you to return your Contract to us. Withdrawals
of earnings are taxed as ordinary income and, if taken prior to age 59 /1/2/,
may be subject to an additional 10% Federal tax penalty.
POSTPONEMENT OF PAYMENTS
We may postpone the payment of any amounts due from the Variable Account under
the Contract if:
1. The New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on the Exchange is otherwise restricted;
2. An emergency exists as defined by the SEC; or
3. The SEC permits delay for your protection.
In addition, we may delay payments or transfers from the Fixed Account Options
for up to 6 months (or shorter period if required by law). If we delay payment
for 30 days or more, we will pay interest as required by law.
SYSTEMATIC WITHDRAWAL PROGRAM
You may choose to receive systematic withdrawal payments on a monthly,
quarterly, semi-annual, or annual basis at any time prior to the Payout Start
Date. The minimum amount of each systematic withdrawal is $50. At our
discretion, systematic withdrawals may not be offered in conjunction with the
Dollar Cost Averaging Program or Automatic Portfolio Rebalancing Program.
Depending on fluctuations in the value of the Variable Sub-Accounts and the
value of the Fixed Account Options, systematic withdrawals may reduce or even
exhaust the Contract Value. Withdrawals of earnings under a Systematic
Withdrawal Program are taxed as ordinary income and, if taken prior to age 59
/1/2/, may be subject to an additional 10% federal tax penalty. Please consult
your tax advisor before taking any withdrawal.
We will make systematic withdrawal payments to you or your designated payee. At
our discretion, we may modify or suspend the Systematic Withdrawal Program and
charge a processing fee for the service. If we modify or suspend the Systematic
Withdrawal Program, existing systematic withdrawal payments will not be
affected.
MINIMUM CONTRACT VALUE
If your request for a partial withdrawal would reduce your
25
Contract Value to less than $2,000, we may treat it as a request to withdraw
your entire Contract Value. Your Contract will terminate if you withdraw all of
your Contract Value. We will, however, ask you to confirm your withdrawal
request before terminating your Contract. Before terminating any Contract whose
value has been previously reduced by withdrawals to less than $2,000, we will
inform you in writing of our intention to terminate your Contract and give you
at least 30 days in which to make an additional purchase payment to restore your
Contract's Value to the contractual minimum of $2,000. If we terminate your
Contract, we will distribute to you its Contract Value, adjusted by any
applicable Market Value Adjustment, less withdrawal and other charges and
applicable taxes.
INCOME PAYMENTS
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PAYOUT START DATE
You select the Payout Start Date in your application. The "PAYOUT START DATE" is
the day that we apply your money to an Income Plan. The Payout Start Date must
be:
... at least 30 days after the Issue Date; and
... no later than the day the Annuitant reaches age 90, or the 10th Contract
Anniversary, if later.
You may change the Payout Start Date at any time by notifying us in writing of
the change at least 30 days before the scheduled Payout Start Date. Absent a
change, we will use the Payout Start Date stated in your Contract.
INCOME PLANS
An Income Plan is a series of scheduled payments to you or someone you
designate. You may choose and change your choice of Income Plan until 30 days
before the Payout Start Date. If you do not select an Income Plan, we will make
income payments in accordance with Income Plan 1 with guaranteed payments for 10
years. Three Income Plans are available under the Contract. Each is available to
provide:
... fixed income payments;
... variable income payments; or
... a combination of the two.
The three Income Plans are:
INCOME PLAN 1 - LIFE INCOME WITH GUARANTEED PAYMENTS. Under this plan, we make
periodic income payments for at least as long as the Annuitant lives. If the
Annuitant dies before we have made all of the guaranteed income payments, we
will continue to pay the remainder of the guaranteed income payments as required
by the Contract.
INCOME PLAN 2 - JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED PAYMENTS. Under
this plan, we make periodic income payments for at least as long as either the
Annuitant or the joint Annuitant is alive. If both the Annuitant and the joint
Annuitant die before we have made all of the guaranteed income payments, we will
continue to pay the remainder of the guaranteed income payments as required by
the Contract.
INCOME PLAN 3 - GUARANTEED PAYMENTS FOR A SPECIFIED PERIOD (5 YEARS TO 30
YEARS). Under this plan, we make periodic income payments for the period you
have chosen. These payments do not depend on the Annuitant's life. You may elect
to receive guaranteed payments for periods ranging from 5 to 30 years. Income
payments for less than 120 months may be subject to a withdrawal charge. We will
deduct the mortality and expense risk charge from the Variable Sub-Account
assets that support variable income payments even though we may not bear any
mortality risk.
The length of any guaranteed payment period under your selected Income Plan
generally will affect the dollar amounts of each income payment. As a general
rule, longer guarantee periods result in lower income payments, all other things
being equal. For example, if you choose an Income Plan with payments that depend
on the life of the Annuitant but with no minimum specified period for guaranteed
payments, the income payments generally will be greater than the income payments
made under the same Income Plan with a minimum specified period for guaranteed
payments. If you choose Income Plan 1 or 2, or, if available, another Income
Plan with payments that continue for the life of the Annuitant or joint
Annuitant, we may require proof of age and sex of the Annuitant or joint
Annuitant before starting income payments, and proof that the Annuitant or joint
Annuitant are alive before we make each payment.
Please note that under such Income Plans, if you elect to take no minimum
guaranteed payments, it is possible that the payee could receive only 1 income
payment if the Annuitant and any joint Annuitant both die before the second
income payment, or only 2 income payments if they die before the third income
payment, and so on.
Generally, you may not make withdrawals after the Payout Start Date. One
exception to this rule applies if you are receiving variable income payments
that do not depend on the life of the Annuitant (such as under Income Plan 3).
In that case you may terminate all or part of the Variable Account portion of
the income payments at any time and receive a lump sum equal to the commuted
balance of the remaining variable payments associated with the amount withdrawn.
The minimum amount you may withdraw under this feature is $1,000. A withdrawal
charge may apply. We deduct applicable premium taxes from the Contract Value at
the Payout
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Start Date.
We may make other Income Plans available.
If you elected the Enhanced Death and Income Benefit Combination Option, you may
be able to apply an amount greater than your Contract Value to an Income Plan.
You must apply at least the Contract Value in the Fixed Account on the Payout
Start Date to fixed income payments. If you wish to apply any portion of your
Fixed Account balance to provide variable income payments, you should plan ahead
and transfer that amount to the Variable Sub-Accounts prior to the Payout Start
Date. If you do not tell us how to allocate your Contract Value among fixed and
variable income payments, we will apply your Contract Value in the Variable
Account to variable income payments and your Contract Value in the Fixed Account
to fixed income payments. We will apply your Contract Value, adjusted by any
applicable Market Value Adjustment, less applicable taxes to your Income Plan on
the Payout Start Date. If the amount available to apply under an Income Plan is
less than $2,000, or not enough to provide an initial payment of at least $20,
and state law permits, we may:
... terminate the Contract and pay you the Contract Value, adjusted by any
applicable Market Value Adjustment and less any applicable taxes, in a lump
sum instead of the periodic payments you have chosen; or
... reduce the frequency of your payments so that each payment will be at least
$20.
VARIABLE INCOME PAYMENTS
The amount of your variable income payments depends upon the investment results
of the Variable Sub-Accounts you select, the premium taxes you pay, the age and
sex of the Annuitant, and the Income Plan you choose. We guarantee that the
payments will not be affected by (a) actual mortality experience and (b) the
amount of our administration expenses.
We cannot predict the total amount of your variable income payments. Your
variable income payments may be more or less than your total purchase payments
because (a) variable income payments vary with the investment results of the
underlying Portfolios; and (b) the Annuitant could live longer or shorter than
we expect based on the tables we use.
In calculating the amount of the periodic payments in the annuity tables in the
Contract, we assumed an annual investment rate of 3%. If the actual net
investment return of the Variable Sub-Accounts you choose is less than this
assumed investment rate, then the dollar amount of your variable income payments
will decrease. The dollar amount of your variable income payments will increase,
however, if the actual net investment return exceeds the assumed investment
rate. The dollar amount of the variable income payments stays level if the net
investment return equals the assumed investment rate.
Please refer to the Statement of Additional Information for more detailed
information as to how we determine variable income payments.
FIXED INCOME PAYMENTS
We guarantee income payment amounts derived from any Fixed Account Option for
the duration of the Income Plan. We calculate the fixed income payments by:
1. adjusting the portion of the Contract Value in any Fixed Account Option on
the Payout Start Date by any applicable Market Value Adjustment;
2. deducting any applicable premium tax; and
3. applying the resulting amount to the greater of (a) the appropriate value
from the income payment table in your Contract or (b) such other value as we are
offering at that time.
We may defer making fixed income payments for a period of up to 6 months or any
shorter time state law may require. If we defer payments for 30 days or more, we
will pay interest as required by law from the date we receive the withdrawal
request to the date we make payment.
CERTAIN EMPLOYEE BENEFIT PLANS
The Contracts offered by this prospectus contain income payment tables that
provide for different payments to men and women of the same age, except in
states that require unisex tables. We reserve the right to use income payment
tables that do not distinguish on the basis of sex to the extent permitted by
applicable law. In certain employment-related situations, employers are required
by law to use the same income payment tables for men and women. Accordingly, if
the Contract is to be used in connection with an employment-related retirement
or benefit plan and we do not offer unisex annuity tables in your state, you
should consult with legal counsel as to whether the purchase of a Contract is
appropriate.
DEATH BENEFITS
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DEATH OF OWNER
If you die before the Payout Start Date, any surviving joint Contract Owner or,
if none, the Beneficiary will be designated the new Contract Owner and will be
entitled to the options described below. If the new Contract Owner previously
was the Beneficiary, however, the new Contract Owner's options will be subject
to any restrictions previously placed upon the Beneficiary.
The claim for death benefits must be submitted to us within 180 days of the
relevant death in order to claim the standard or enhanced death benefit. If a
complete claim is not submitted within 180 days of the relevant death, the
claimant will receive the greater of Contract Value or the
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Settlement Value. (See "Death Proceeds" below).
1. If your spouse is the sole surviving Contract Owner or, in the absence of any
surviving Contract Owner, is the sole Beneficiary:
(a) Your spouse may elect to receive the Death Proceeds in a lump sum; or
(b) Your spouse may elect to receive the Death Proceeds paid out under one of
the Income Plans (described in "Income Payments" above) subject to the following
conditions:
The Payout Start Date must be within one year of your date of death. Income
payments must be payable:
(i) over the life of your spouse; or
(ii) for a guaranteed number of payments from 5 to 50 years but not to exceed
the life expectancy of your spouse; or
(iii) over the life of your spouse with a guaranteed number of payments from
5 to 30 years but not to exceed the life expectancy of your spouse.
(c) If your spouse does not elect one of these options, the Contract will
continue in the Accumulation Phase as if the death had not occurred. If the
Contract is continued in the Accumulation Phase, the following conditions apply:
The Contract Value of the continued Contract will be the Death Proceeds. Unless
otherwise instructed by the continuing spouse, the excess, if any, of the Death
Proceeds over the Contract Value will be allocated to the Sub-accounts of the
Variable Account. The excess will be allocated in proportion to your Contract
Value in those Sub-accounts as of the end of the Valuation Period during which
we receive the complete request for settlement of the Death Proceeds, except
that any portion of this excess attributable to the Fixed Account Options will
be allocated to the money market Variable Sub-account. Within 30 days of the
date the Contract is continued, your surviving spouse may choose one of the
following transfer alternatives without incurring a transfer fee:
(i) transfer all or a portion of the excess among the Variable Sub-accounts;
(ii) transfer all or a portion of the excess into the Guaranteed Maturity
Fixed Account and begin a new Guarantee Period; or
(iii) transfer all or a portion of the excess into a combination of Variable
Sub-accounts and the Guaranteed Maturity Fixed Account.
Any such transfer does not count as one of the free transfers allowed each
Contract Year and is subject to any minimum allocation amount specified in the
Contract.
The surviving spouse may make a single withdrawal of any amount within one year
of the date of your death without incurring a Withdrawal Charge or Market Value
Adjustment.
Prior to the Payout Start Date, the Death Benefit of the continued Contract will
be as defined in the Death Benefit provision.
Only one spousal continuation is allowed under the Contract.
2. If the new Contract Owner is not your spouse but is a living person:
(a) The new Contract Owner may elect to receive the Death Proceeds in a lump
sum; or
(b) The new Contract Owner may elect to receive the Death Proceeds paid out
under one of the Income Plans (described in "Income Payments" above) subject to
the following conditions:
The Payout Start Date must be within one year of your date of death. Income
Payments must be payable:
(i) over the life of the new Contract Owner; or
(ii) . for a guaranteed number of payments from 5 to 50 years but not to
exceed the life expectancy of the new Contract Owner; or
(iii) over the life of the new Contract Owner with a guaranteed number of
payments from 5 to 30 years but not to exceed the life expectancy of the new
Contract Owner.
(c) If the new Contract Owner does not elect one of the options above, then
the new Contract Owner must receive the Contract Value payable within 5 years of
your date of death. On the date we receive the complete request for settlement
of the Death Proceeds, the Contract Value will be the Death Proceeds. Unless
otherwise instructed by the new Contract Owner, the excess, if any, of the Death
Proceeds over the Contract Value will be allocated to the money market Variable
Sub-Account. Henceforth, the new Contract Owner may make transfers (as described
in "Transfers During the Payout Phase" above) during this 5 year period.
The new Contract Owner may not make additional purchase payments to the Contract
under this election. Withdrawal Charges will be waived for any withdrawals made
during this 5 year period.
We reserve the right to offer additional options upon the death of the Contract
Owner.
If the new Contract Owner dies prior to the complete liquidation of the Contract
Value, then the new Contract Owner's named Beneficiary(ies) will receive the
greater of the Settlement Value or the remaining Contract Value. This amount
must be liquidated as a lump sum within 5 years of the date of the original
Contract Owner's death.
3. If the new Contract Owner is a corporation or other type of non-living
person:
(a) The new Contract Owner may elect to receive the Death Proceeds in a lump
sum; or
(b) If the new Contract Owner does not elect the option above, then the new
Contract Owner must receive
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the Contract Value payable within 5 years of your date of death. On the date we
receive the complete request for settlement of the Death Proceeds, the Contract
Value under this option will be the Death Proceeds. Unless otherwise instructed
by the new Contract Owner, the excess, if any, of the Death Proceeds over the
Contract Value will be allocated to the money market Variable Sub-Account.
Henceforth, the new Contract Owner may make transfers(as described in "Transfers
During the Payout Phase" above) during this 5 year period.
The new Contract Owner may not make additional purchase payments to the Contract
under this election. Withdrawal Charges will be waived during this 5 year
period.
We reserve the right to make additional options available to the new Contract
Owner upon the death of the Contract Owner.
If any new Contract Owner is a non-living person, all new Contract Owners will
be considered to be non-living persons for purposes of these provisions
Under any of these options, all ownership rights, subject to any restrictions
previously placed upon the Beneficiary, are available to the new Contract Owner
from the date of your death to the date on which the Death Proceeds are paid.
DEATH OF ANNUITANT
If the Annuitant who is not also the Contract Owner dies prior to the Payout
Start Date, the following apply:
1. If the Contract Owner is a living person, then the Contract will continue
with a new Annuitant, who will be:
(a) the youngest Contract Owner; otherwise
(b) the youngest Beneficiary.
You may change the Annuitant before the Payout Start Date.
2. If the Contract Owner is a non-living person:
(a) The Contract Owner may elect to receive the Death Proceeds in a lump sum;
or
(b) If the Contract Owner does not elect the option above, then the Contract
Owner must receive the Contract Value payable within 5 years of the Annuitant's
date of death. On the date we receive the complete request for settlement of the
Death Proceeds, the Contract Value under this option will be the Death Proceeds.
Unless otherwise instructed by the Contract Owner, the excess, if any, of the
Death Proceeds over the Contract Value will be allocated to the money market
Variable Sub-Account. Henceforth, the Contract Owner may make transfers (as
described in "Transfers During the Payout Phase" above) during this 5 year
period.
The new Contract Owner may not make additional purchase payments to the Contract
under this election. Withdrawal Charges will be waived during this 5 year
period.
We reserve the right to make additional options available to the Contract Owner
upon the death of the Annuitant.
Under any of these options, all ownership rights are available to the non-living
Contract Owner from the date of the Annuitant's death to the date on which the
Death Proceeds are paid.
DUE PROOF OF DEATH
A claim for a distribution on death must include Due Proof of Death. We will
accept the following documentation as "Due Proof of Death":
... a certified copy of a death certificate,
... a certified copy of a decree of a court of competent jurisdiction as to the
finding of death, or
... any other proof acceptable to us.
DEATH BENEFIT PAYMENTS
DEATH PROCEEDS. If we receive a complete request for settlement of the Death
Proceeds within 180 days of the date of your death, the Death Proceeds are equal
to the applicable death benefit described below. Otherwise, the Death Proceeds
are equal to the greater of the Contract value or the Settlement Value.
We reserve the right to extend, on a non-discriminatory basis, the 180-day
period in which the Death Proceeds will equal the applicable death benefit as
described above.
This right applies only for the purposes of determining the amount payable as
Death Proceeds and in no way restricts when a claim may be filed.
DEATH BENEFIT AMOUNT
Prior to the Payout Start Date, the death benefit is equal to the greatest of:
1. the Contract Value as of the date we determine the value of the death
benefit, or
2. the SETTLEMENT VALUE (that is, the amount payable on a full withdrawal of
Contract Value) on the date we determine the value of the death benefit, or
3. the Contract Value on each DEATH BENEFIT ANNIVERSARY prior to the date we
determine the death benefit, increased by purchase payments made since that
Death Benefit Anniversary and reduced by an adjustment for any partial
withdrawals since that Death Benefit Anniversary.
A "Death Benefit Anniversary" is every seventh Contract Anniversary beginning
with the Issue Date. For example, the Issue Date, 7th and 14th Contract
Anniversaries are the first 3 Death Benefit Anniversaries. The partial
withdrawal adjustment is equal to (a) divided by (b), with the result multiplied
by (c), where:
(a) = the withdrawal amount;
(b) = the Contract Value immediately prior to the withdrawal; and
(c) = the Contract Value on the Death Benefit
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Anniversary adjusted by any prior purchase payments or withdrawals made since
that Anniversary.
We will determine the value of the death benefit as of the end of the Valuation
Date on which we receive a complete request for payment of the death benefit. If
we receive a request after 3 p.m. Central Time on a Valuation Date, we will
process the request as of the end of the following Valuation Date.
OPTIONAL RIDERS
We offer two optional riders: an Enhanced Death Benefit Rider and an Enhanced
Death and Income Benefit Combination Rider. You may elect to add either or no
Riders to your Contract; you may not add both. If you elect an optional Rider,
we will charge you a higher mortality and expense risk charge. We may
discontinue offering either or both of these Riders at any time. The benefits
under these Riders are described below.
ENHANCED DEATH BENEFIT RIDER
If the Contract Owner is a living individual, the enhanced death benefit applies
only upon the death of the Contract Owner. If the Contract Owner is not a living
individual, the enhanced death benefit applies only upon the death of the
Annuitant. For Contracts with the Enhanced Death Benefit Rider, the death
benefit will be the greatest of (1) through (3) above, or (4) the enhanced death
benefit. The enhanced death benefit is equal to the greater of the Enhanced
Death Benefit A or Enhanced Death Benefit B. Enhanced Death Benefit B may not be
available in all states. The enhanced death benefit will never be greater than
the maximum death benefit allowed by any state nonforfeiture laws that govern
the Contract.
ENHANCED DEATH BENEFIT A. At issue, Enhanced Death Benefit A is equal to the
initial purchase payment. After issue, Enhanced Death Benefit A is 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 an
adjustment for any partial withdrawals since that Anniversary.
The adjustment is equal to (a) divided by (b), and the result multiplied by (c)
where:
(d) = the withdrawal amount,
(e) = the Contract Value immediately prior to the withdrawal, and
(f) = the Contract Value on that Contract Anniversary adjusted by any prior
purchase payments and withdrawals since that Contract Anniversary.
We will calculate Anniversary Values for each Contract Anniversary prior to the
oldest Contract Owner's or the Annuitant's, if the Contract Owner is not a
natural person, 85th birthday. After age 85, we will recalculate Enhanced Death
Benefit A only for purchase payments and withdrawals.
ENHANCED DEATH BENEFIT B. The Enhanced Death Benefit B is equal to total
purchase payments made reduced by a withdrawal adjustment, as defined below.
Each purchase payment and each withdrawal adjustment will accumulate daily at a
rate equivalent to 5% per year until the earlier of:
... the date we determine the death benefit, or
... the first day of the month following the oldest Contract Owner's or, if the
Contract Owner is not a natural person, the Annuitant's, 85th birthday.
The adjustment is equal to (a) divided by (b), and the result multiplied by (c)
where:
(a) = the withdrawal amount,
(b) = the Contract Value immediately prior to the withdrawal, and
(c) = the most recently calculated enhanced death benefit.
ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER. Instead of the Enhanced
Death Benefit Rider, you may instead choose the Enhanced Death and Income
Benefit Combination Rider.
The enhanced death benefit portion of the Enhanced Death and Income Benefit
Combination Rider is as described above under "Enhanced Death Benefit Rider."
The enhanced income benefit guarantees that the amount of income payments you
receive will not be less than those determined by applying the value of the
enhanced death benefit on the Payout Start Date to the minimum guaranteed rate
(rather than to any current rates we may be offering) for the Income Plan you
select.
The enhanced income benefit will apply if the Contract Owner elects a Payout
Start Date that:
... is on or after the tenth Contract Anniversary, and
... is prior to the Annuitant's 90th Birthday.
On the Payout Start Date, you may apply the greater of the Contract Value or the
enhanced income benefit to the Payout Phase of the Contract. No Market Value
Adjustment will be applied to the enhanced income benefit amount. The enhanced
income benefit will only apply if the Income Plan selected provides payments
guaranteed for either a single or joint lives with a period certain of at least:
... 10 years, if the youngest Annuitant's age is 80 or less on the date the amount
is applied; or
... 5 years, if the youngest Annuitant's age is greater than 80 on the date the
amount is applied.
If, however, you apply the Contract Value and not the enhanced income benefit to
the Income Plan, then you may select any Income Plan we offer at that time.
The enhanced income benefit only applies to the determination of income payments
under Income Plans in the circumstances described above. This is not a
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guarantee of Contract Value on invetment performance. This benefit does not
enhance the amounts you receive in partial withdrawals or surrenders. If you
surrender your Contract, you will not receive any benefit under this Rider.
MORE INFORMATION
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GLENBROOK LIFE
GLENBROOK LIFE is the issuer of the Contract. GLENBROOK
LIFE is a stock life insurance company organized under the laws of the State of
Arizona in 1998. Previously, GLENBROOK LIFE was organized under the laws of the
State of Illinois in 1992. GLENBROOK LIFE was originally organized under the
laws of the State of Indiana in 1965. From 1965 to 1983 GLENBROOK LIFE was known
as "United Standard Life Assurance Company" and from 1983 to 1992 as "William
Penn Life Assurance Company of America."
GLENBROOK LIFE is currently licensed to operate in the District of Columbia and
all states except New York. We intend to offer the Contract in those
jurisdictions in which we are licensed. Our home office is located at 3100
Sanders Road, Northbrook, Illinois 60062.
GLENBROOK LIFE is a wholly owned subsidiary of Allstate Life Insurance Company
("Allstate Life"), a stock life insurance company incorporated under the laws of
the State of Illinois. Allstate Life is a wholly owned subsidiary of Allstate
Insurance Company, a stock property-liability insurance company incorporated
under the laws of Illinois. All of the outstanding capital stock of Allstate
Insurance Company is owned by The Allstate Corporation.
GLENBROOK LIFE and Allstate Life entered into a reinsurance agreement effective
June 5, 1992. Under the reinsurance agreement, Allstate Life reinsures
substantially all of GLENBROOK LIFE's liabilities under its various insurance
contracts. The reinsurance agreement provides us with financial backing from
Allstate Life. However, it does not create a direct contractual relationship
between Allstate Life and you. In other words, the obligations of Allstate Life
under the reinsurance agreement are to GLENBROOK LIFE; GLENBROOK
LIFE remains the sole obligor under the Contract to you.
Independent rating agencies regularly evaluate life insurers' claims-paying
ability, quality of investments, and overall stability. A.M. Best Company
assigns an A+ (Superior) financial strength rating to Allstate Life, which
results in an A+r rating to GLENBROOK LIFE due to the reinsurance agreement with
Allstate Life mentioned above. Standard & Poor's assigns an AA+ (Very Strong)
financial strength rating and Moody's Investors Service assigns an Aa2
(Excellent) financial strength rating to GLENBROOK LIFE, sharing the same
ratings of its parent, Allstate Life. These ratings do not reflect the
investment performance of the Variable Account. We may from time to time
advertise these ratings in our sales literature.
THE VARIABLE ACCOUNT
GLENBROOK LIFE established the GLENBROOK LIFE Multi-Manager Variable Account on
January 15, 1996. We have registered the Variable Account with the SEC as a unit
investment trust. The SEC does not supervise the management of the Variable
Account or GLENBROOK LIFE.
We own the assets of the Variable Account. The Variable Account is a segregated
asset account under Arizona law. That means we account for the Variable
Account's income, gains and losses separately from the results of our other
operations. It also means that only the assets of the Variable Account that are
in excess of the reserves and other Contract liabilities with respect to the
Variable Account are subject to liabilities relating to our other operations.
Our obligations arising under the Contracts are general corporate obligations of
GLENBROOK LIFE.
The Variable Account consists of multiple Variable Sub-Accounts. Each Variable
Sub-Account invests in a corresponding Portfolio. We may add new Variable
Sub-Accounts or eliminate one or more of them, if we believe marketing, tax, or
investment conditions so warrant. We may also add other Variable Sub-Accounts
that may be available under other variable annuity contracts. We do not
guarantee the investment performance of the Variable Account, its Sub-Accounts
or the Portfolios. We may use the Variable Account to fund our other annuity
contracts. We will account separately for each type of annuity contract funded
by the Variable Account.
THE PORTFOLIOS
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. We automatically reinvest all
dividends and capital gains distributions from the Portfolios in shares of the
distributing Portfolio at their net asset value.
VOTING PRIVILEGES. As a general matter, you do not have a direct right to vote
the shares of the Portfolios held by the Variable Sub-Accounts to which you have
allocated your Contract Value. Under current law, however, you are entitled to
give us instructions on how to vote those shares on certain matters. Based on
our present view of the law, we will vote the shares of the Portfolios that we
hold directly or indirectly through the Variable Account in accordance with
instructions that we receive from Contract Owners entitled to give such
instructions.
As a general rule, before the Payout Start Date, the Contract Owner or anyone
with a voting interest is the person entitled to give voting instructions. The
number of shares that a person has a right to instruct will be
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determined by dividing the Contract Value allocated to the applicable Variable
Sub-Account by the net asset value per share of the corresponding Portfolio as
of the record date of the meeting. After the Payout Start Date the person
receiving income payments has the voting interest. The payee's number of votes
will be determined by dividing the reserve for such Contract allocated to the
applicable Variable Sub-Account by the net asset value per share of the
corresponding Portfolio. The votes decrease as income payments are made and as
the reserves for the Contract decrease.
We will vote shares attributable to Contracts for which we have not received
instructions, as well as shares attributable to us, in the same proportion as we
vote shares for which we have received instructions, unless we determine that we
may vote such shares in our own discretion. We will apply voting instructions to
abstain on any item to be voted upon on a pro-rata basis to reduce the votes
eligible to be cast.
We reserve the right to vote Portfolio shares as we see fit without regard to
voting instructions to the extent permitted by law. If we disregard voting
instructions, we will include a summary of that action and our reasons for that
action in the next semi-annual financial report we send to you.
CHANGES IN PORTFOLIOS. If the shares of any of the Portfolios are no longer
available for investment by the Variable Account or if, in our judgment, further
investment in such shares is no longer desirable in view of the purposes of the
Contract, we may eliminate that Portfolio and substitute shares of another
eligible investment Portfolio. Any substitution of securities will comply with
the requirements of the Investment Company Act of 1940. We also may add new
Variable Sub-Accounts that invest in additional mutual funds. We will notify you
in advance of any change.
CONFLICTS OF INTEREST. Certain of the Portfolios sell their shares to separate
accounts underlying both variable life insurance and variable annuity contracts.
It is conceivable that in the future it may be unfavorable for variable life
insurance separate accounts and variable annuity separate accounts to invest in
the same Portfolio. The boards of directors of these Portfolios monitor for
possible conflicts among separate accounts buying shares of the Portfolios.
Conflicts could develop for a variety of reasons. For example, differences in
treatment under tax and other laws or the failure by a separate account to
comply with such laws could cause a conflict. To eliminate a conflict, a
Portfolio's board of directors may require a separate account to withdraw its
participation in a Portfolio. A Portfolio's net asset value could decrease if it
had to sell investment securities to pay redemption proceeds to a separate
account withdrawing because of a conflict.
THE CONTRACT
DISTRIBUTION. ALFS, Inc. ("ALFS"), located at 3100 Sanders Road, Northbrook, IL
60062-7154, serves as principal underwriter of the Contracts. ALFS is a wholly
owned subsidiary of Allstate Life. ALFS is a registered broker dealer under the
Securities and Exchange Act of 1934, as amended ("EXCHANGE ACT"), and is a
member of the National Association of Securities Dealers, Inc.
We will pay commissions to broker-dealers who sell the contracts. Commissions
paid may vary, but we estimate that the total commissions paid on all Contract
sales will not exceed 8% of all purchase payments. These commissions are
intended to cover distribution expenses. Sometimes, we also pay the
broker-dealer a persistency bonus in addition to the standard commissions. A
persistency bonus is not expected to exceed 0.25%, on an annual basis, of the
Contract Values considered in connection with the bonus. In some states,
Contracts may be sold by representatives or employees of banks which may be
acting as broker-dealers without separate registration under the Exchange Act,
pursuant to legal and regulatory exceptions.
GLENBROOK LIFE does not pay ALFS a commission for distribution of the Contracts.
The underwriting agreement with ALFS provides that we will reimburse ALFS for
any liability to Contract Owners arising out of services rendered or Contracts
issued.
ADMINISTRATION. We have primary responsibility for all administration of the
Contracts and the Variable Account. We provide the following administrative
services, among others:
... issuance of the Contracts;
... maintenance of Contract Owner records;
... Contract Owner services;
... calculation of unit values;
... maintenance of the Variable Account; and
... preparation of Contract Owner reports.
We will send you Contract statements and transaction confirmations at least
annually. You should notify us promptly in writing of any address change. You
should read your statements and confirmations carefully and verify their
accuracy. You should contact us promptly if you have a question about a periodic
statement. We will investigate all complaints and make any necessary adjustments
retroactively, but you must notify us of a potential error within a reasonable
time after the date of the questioned statement. If you wait too long, we
reserve the right to make the adjustment as of the date that we receive notice
of the potential error.
We also will provide you with additional periodic and other reports, information
and prospectuses as may be required by federal securities laws.
QUALIFIED PLANS
If you use the Contract within a qualified plan, the plan
32
may impose different or additional conditions or limitations on withdrawals,
waivers of withdrawal charges, death benefits, Payout Start Dates, income
payments, and other Contract features. In addition, adverse tax consequences may
result if qualified plan limits on distributions and other conditions are not
met. Please consult your qualified plan administrator for more information.
LEGAL MATTERS
Jorden Burt, LLP, Washington, D.C., has advised GLENBROOK LIFE on certain
federal securities law matters. All matters of state insurance law pertaining to
the Contracts, including the validity of the Contracts and GLENBROOK LIFE's
right to issue such Contracts under state insurance law, have been passed upon
by Michael J. Velotta, General Counsel of GLENBROOK LIFE.
33
TAXES
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THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. GLENBROOK
LIFE MAKES NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR
TRANSACTION INVOLVING A CONTRACT.
Federal, state, local and other tax consequences of ownership or receipt of
distributions under an annuity contract depend on your individual circumstances.
If you are concerned about any tax consequences with regard to your individual
circumstances, you should consult a competent tax adviser.
TAXATION OF GLENBROOK LIFE AND
ANNUITY COMPANY
GLENBROOK LIFE 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 GLENBROOK LIFE, and its operations form a part of GLENBROOK LIFE,
it will not be taxed separately. Investment income and realized capital gains of
the Variable Account are automatically applied to increase reserves under the
Contract. Under existing federal income tax law, GLENBROOK LIFE believes that
the Variable Account investment income and capital gains will not be taxed to
the extent that such income and gains are applied to increase the reserves under
the Contract. Accordingly, GLENBROOK LIFE does not anticipate that it will incur
any federal income tax liability attributable to the Variable Account, and
therefore GLENBROOK LIFE does not intend to make provisions for any such taxes.
If GLENBROOK LIFE is taxed on investment income or capital gains of the Variable
Account, then GLENBROOK LIFE may impose a charge against the Variable Account in
order to make provision for such taxes.
TAXATION OF ANNUITIES IN GENERAL
TAX DEFERRAL. Generally, you are not taxed on increases in the Contract Value
until a distribution occurs. This rule applies only where:
1. the Contract Owner is a natural person,
2. the investments of the Variable Account are "adequately diversified"
according to Treasury Department regulations, and
3. GLENBROOK LIFE is considered the owner of the Variable Account assets for
federal income tax purposes.
NON-NATURAL OWNERS. As a general rule, annuity contracts owned by non-natural
persons such as corporations, trusts, or other entities are not treated as
annuity contracts for federal income tax purposes. The income on such contracts
does not enjoy tax deferral and is taxed as ordinary income received or accrued
by the owner during the taxable year.
EXCEPTIONS TO THE NON-NATURAL OWNER RULE. There are several exceptions to the
general rule that annuity contracts held by a non-natural owner are not treated
as annuity contracts for federal income tax purposes. Contracts will generally
be treated as held by a natural person if the nominal owner is a trust or other
entity which holds the contract as agent for a natural person. However, this
special exception will not apply in the case of an employer who is the nominal
owner of an annuity contract under a non-qualified deferred compensation
arrangement for its employees. Other exceptions to the non-natural owner rule
are: (1) contracts acquired by an estate of a decedent by reason of the death of
the decedent; (2) certain qualified contracts; (3) contracts purchased by
employers upon the termination of certain qualified plans; (4) certain contracts
used in connection with structured settlement agreements, and (5) immediate
annuity 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.
DIVERSIFICATION REQUIREMENTS. For a Contract to be treated as an annuity for
federal income tax purposes, the investments in the Variable Account must be
"ADEQUATELY DIVERSIFIED" consistent with standards under Treasury Department
regulations. If the investments in the Variable Account are not adequately
diversified, the Contract will not be treated as an annuity contract for federal
income tax purposes. As a result, the income on the Contract will be taxed as
ordinary income received or accrued by the Contract Owner during the taxable
year. Although GLENBROOK LIFE does not have control over the Portfolios or their
investments, we expect the Portfolios to meet the diversification requirements.
OWNERSHIP TREATMENT. The IRS has stated that a contract owner will be considered
the owner of separate account assets if he 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, the Treasury
Department announced that the regulations do not provide guidance concerning
circumstances in which investor control of the separate account investments may
cause a contract owner to be treated as the owner of the separate account. The
Treasury Department also stated that future guidance would be issued regarding
the extent that owners could direct sub-account investments without being
treated as owners of the underlying assets of the separate account.
Your rights under the Contract are different than those described by the IRS in
rulings in which it found that contract owners were not owners of separate
account assets. For example, you have the choice to allocate premiums and
Contract Values among a broader selection of investment alternatives. Also, you
may be able to transfer among investment alternatives more frequently than in
such rulings. These differences could result in you
34
being treated as the owner of the Variable Account. If this occurs, income and
gain from the Variable Account assets would be includible in your gross income.
GLENBROOK
LIFE does not know what standards will be set forth in any regulations or
rulings which the Treasury Department may issue. It is possible that future
standards announced by the Treasury Department could adversely affect the tax
treatment of your Contract. We reserve the right to modify the Contract as
necessary to attempt to prevent you from being considered the federal tax owner
of the assets of the Variable Account. However, we make no guarantee that such
modification to the Contract will be successful.
TAXATION OF PARTIAL AND FULL WITHDRAWALS. If you make a partial withdrawal under
a non-qualified Contract, amounts received are taxable to the extent the
Contract Value, without regard to surrender charges, exceeds the investment in
the Contract. The investment in the Contract is the gross premium paid for the
contract minus any amounts previously received from the Contract if such amounts
were properly excluded from your gross income. If you make a full withdrawal
under a non-Qualified Contract, the amount received will be taxable only to the
extent it exceeds the investment in the Contract.
TAXATION OF ANNUITY PAYMENTS. Generally, the rule for income taxation of annuity
payments received from a non-qualified Contract provides for the return of your
investment in the Contract in equal tax-free amounts over the payment period.
The balance of each payment received is taxable. For fixed annuity payments, the
amount excluded from income is determined by multiplying the payment by the
ratio of the investment in the Contract (adjusted for any refund feature or
period certain) to the total expected value of annuity payments for the term of
the Contract. If you elect variable annuity payments, the amount excluded from
taxable income is determined by dividing the investment in the Contract by the
total number of expected payments. The annuity payments will be fully taxable
after the total amount of the investment in the Contract is excluded using these
ratios. The Federal tax treatment of annuity payments is unclear in some
respects. As a result, if the IRS should provide further guidance, it is
possible that the amount we calculate and report to the IRS as taxable could be
different. If you die, and annuity payments cease before the total amount of the
investment in the Contract is recovered, the unrecovered amount will be allowed
as a deduction for your last taxable year.
WITHDRAWALS AFTER THE PAYOUT START DATE. Federal tax law is unclear regarding
the taxation of any additional withdrawal received after the Payout Start Date.
It is possible that a greater or lesser portion of such a payment could be
taxable than the amount we determine.
DISTRIBUTION AT DEATH RULES. In order to be considered an annuity contract for
federal income tax purposes, the Contract must provide:
1. if any Contract Owner dies on or after the Payout 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 Contract Owner's death;
2. if any Contract Owner dies prior to the Payout Start Date, the entire
interest in the Contract will be distributed within 5 years after the date of
the Contract Owner's death. These requirements are satisfied if any portion of
the Contract Owner's interest that is payable to (or for the benefit of) a
designated Beneficiary is distributed over the life of such Beneficiary (or over
a period not extending beyond the life expectancy of the Beneficiary) and the
distributions begin within 1 year of the Contract Owner's death. If the Contract
Owner's designated Beneficiary is the surviving spouse of the Contract Owner,
the Contract may be continued with the surviving spouse as the new Contract
Owner.
3. if the Contract Owner is a non-natural person, then the Annuitant will be
treated as the Contract 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 Contract Owner.
TAXATION OF ANNUITY DEATH BENEFITS. Death Benefit amounts are included in income
as follows:
1. if distributed in a lump sum, the amounts are taxed in the same manner as a
full withdrawal, or
2. if distributed under an Income Plan, the amounts are taxed in the same manner
as annuity payments.
PENALTY TAX ON PREMATURE DISTRIBUTIONS. A 10% penalty tax applies to the taxable
amount of any premature distribution from a non-Qualified Contract. The penalty
tax generally applies to any distribution made prior to the date you attain age
591/2. However, no penalty tax is incurred on distributions:
1. made on or after the date the Contract Owner attains age 591/2,
2. made as a result of the Contract Owner's death or becoming totally disabled,
3. made in substantially equal periodic payments over the Contract Owner's life
or life expectancy, or over the joint lives or joint life expectancies of the
Contract Owner and the Beneficiary,
4. made under an immediate annuity, or
5. attributable to investment in the Contract before August 14, 1982.
You should consult a competent tax advisor to determine how these exceptions may
apply to your situation.
SUBSTANTIALLY EQUAL PERIODIC PAYMENTS. With respect to non-Qualified Contracts
using substantially equal periodic payments or immediate annuity payments as an
exception to the penalty tax on premature distributions,
35
any additional withdrawal or other modification of the payment stream would
violate the requirement that payments must be substantially equal. Failure to
meet this requirement would mean that the income portion of each payment
received prior to the later of 5 years or the Contract Owner's attaining age
591/2 would be subject to a 10% penalty tax unless another exception to the
penalty tax applied. The tax for the year of the modification is increased by
the penalty tax that would have been imposed without the exception, plus
interest for the years in which the exception was used. You should consult a
competent tax advisor prior to taking a withdrawal.
TAX FREE EXCHANGES UNDER IRC SECTION 1035. A 1035 exchange is a tax-free
exchange of a non-qualified life insurance contract, endowment contract or
annuity contract for a new non-qualified annuity contract. The Contract Owner(s)
must be the same on the old and new contract. Basis from the old contract
carries over to the new contract so long as we receive that information from the
relinquishing company. If basis information is never received, we will assume
that all exchanged funds represent earnings and will allocate no cost basis to
them.
TAXATION OF OWNERSHIP CHANGES. If you transfer a non-Qualified Contract without
full and adequate consideration to a person other than your spouse (or to a
former spouse incident to a divorce), you will be taxed on the difference
between the Contract Value and the investment in the Contract at the time of
transfer. Except for certain Qualified Contracts, any amount you receive as a
loan under a Contract, and any assignment or pledge (or agreement to assign or
pledge) of the Contract Value is taxed as a withdrawal of such amount or portion
and may also incur the 10% penalty tax. Currently we do not allow assignments.
AGGREGATION OF ANNUITY CONTRACTS. The Code requires that all non-qualified
deferred annuity contracts issued by GLENBROOK LIFE (or its affiliates) to the
same Contract Owner during any calendar year be aggregated and treated as one
annuity contract for purposes of determining the taxable amount of a
distribution.
INCOME TAX WITHHOLDING
Generally, GLENBROOK LIFE is required to withhold federal income tax at a rate
of 10% from all non-annuitized distributions. The customer may elect out of
withholding by completing and signing a withholding election form. If no
election is made, we will automatically withhold the required 10% of the taxable
amount. In certain states, if there is federal withholding, then state
withholding is also mandatory.
GLENBROOK LIFE is required to withhold federal income tax using the wage
withholding rates for all annuitized distributions. The customer may elect out
of withholding by completing and signing a withholding election form. If no
election is made, we will automatically withhold using married with three
exemptions as the default. In certain states, if there is federal withholding,
then state withholding is also mandatory.
Election out of withholding is valid only if the customer provides a U.S.
residence address and taxpayer identification number.
TAX QUALIFIED CONTRACTS
The income on qualified plan and IRA investments is tax deferred, and the income
on variable annuities held by such plans does not receive any additional tax
deferral. You should review the annuity features, including all benefits and
expenses, prior to purchasing a variable annuity in a qualified plan or IRA.
Contracts may be used as investments with certain qualified plans such as:
... Individual Retirement Annuities or Accounts (IRAs) under Section 408 of the
Code;
... Roth IRAs under Section 408A of the Code;
... Simplified Employee Pension Plans under Section 408(k) of the Code;
... Savings Incentive Match Plans for Employees (SIMPLE) Plans under Section
408(p) of the Code;
... Tax Sheltered Annuities under Section 403(b) of the Code;
... Corporate and Self Employed Pension and Profit Sharing Plans under Sections
401 and 403; and
... State and Local Government and Tax-Exempt Organization Deferred Compensation
Plans under Section 457.
GLENBROOK LIFE reserves the right to limit the availability of the Contract for
use with any of the Qualified Plans listed above or to modify the Contract to
conform with tax requirements. 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 certain
transactions such as excess contributions, premature distributions, and,
distributions that do not conform to specified commencement and minimum
distribution rules.
In the case of certain qualified plans, the terms of the plans may govern the
right to benefits, regardless of the terms of the Contract.
TAXATION OF WITHDRAWALS FROM A QUALIFIED CONTRACT. If you make a partial
withdrawal under a Qualified Contract other than a Roth IRA, the portion of the
payment that bears the same ratio to the total payment that the investment in
the Contract (i.e., nondeductible IRA contributions, after tax contributions to
qualified plans) bears to the Contract Value, is excluded from your income. We
do not keep track of nondeductible contributions, and all tax reporting of
distributions from Qualified Contracts other than Roth IRAs will indicate that
the distribution is fully taxable.
"QUALIFIED DISTRIBUTIONS" from Roth IRAs are not included in gross income.
"Qualified distributions" are any distributions made more than five taxable
years after
36
the taxable year of the first contribution to any Roth IRA and which are:
... made on or after the date the Contract Owner attains age 591/2,
... made to a beneficiary after the Contract Owner's death,
... attributable to the Contract Owner being disabled, or
... made for a first time home purchase (first time home purchases are subject to
a lifetime limit of $10,000).
"NONQUALIFIED DISTRIBUTIONS" from Roth IRAs are treated as made from
contributions first and are included in gross income only to the extent that
distributions exceed contributions. All tax reporting of distributions from Roth
IRAs will indicate that the taxable amount is not determined.
REQUIRED MINIMUM DISTRIBUTIONS. Generally, qualified plans require minimum
distributions upon reaching age 701/2. Failure to withdraw the required minimum
distribution will result in a 50% tax penalty on the shortfall not withdrawn
from the Contract. Not all income plans offered under the Contract satisfy the
requirements for minimum distributions. Because these distributions are required
under the Code and the method of calculation is complex, please see a competent
tax advisor.
THE DEATH BENEFIT AND QUALIFIED CONTRACTS. Pursuant to the Code and IRS
regulations, an IRA (e.g., traditional IRA, Roth IRA, SEP IRA and SIMPLE IRA)
may not invest in life insurance contracts. However, an IRA may provide a death
benefit that equals the greater of the purchase payments or the Contract Value.
The Contract offers a death benefit that in certain circumstances may exceed the
greater of the purchase payments or 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 satisfy the
requirements of an IRA. We believe that these regulations do not prohibit all
forms of optional death benefits.
It is also possible that the certain death benefits that offer enhanced earnings
could be characterized as an incidental death benefit. If the death benefit were
so characterized, this could result in current taxable income to a Contract
Owner. In addition, there are limitations on the amount of incidental death
benefits that may be provided under qualified plans, such as in connection with
a 403(b) plan.
GLENBROOK LIFE reserves the right to limit the availability of the Contract for
use with any of the qualified plans listed above.
PENALTY TAX ON PREMATURE DISTRIBUTIONS FROM QUALIFIED CONTRACTS. A 10% penalty
tax applies to the taxable amount of any premature distribution from a Qualified
Contract. The penalty tax generally applies to any distribution made prior to
the date you attain age 591/2. However, no penalty tax is incurred on
distributions:
1. made on or after the date the Contract Owner attains age 591/2,
2. made as a result of the Contract Owner's death or total disability,
3. made in substantially equal periodic payments over the Contract Owner's life
or life expectancy, or over the joint lives or joint life expectancies of the
Contract Owner and the Beneficiary,
4. made pursuant to an IRS levy,
5. made for certain medical expenses,
6. made to pay for health insurance premiums while unemployed (only applies for
IRAs),
7. made for qualified higher education expenses (only applies for IRAs), and
8. made for a first time home purchase (up to a $10,000 lifetime limit and only
applies for IRAs).
During the first 2 years of the individual's participation in a SIMPLE IRA,
distributions that are otherwise subject to the premature distribution penalty,
will be subject to a 25% penalty tax.
You should consult a competent tax advisor to determine how these exceptions may
apply to your situation.
SUBSTANTIALLY EQUAL PERIODIC PAYMENTS ON QUALIFIED CONTRACTS. With respect to
Qualified Contracts using substantially equal periodic payments as an exception
to the penalty tax on premature distributions, any additional withdrawal or
other modification of the payment stream would violate the requirement that
payments must be substantially equal. Failure to meet this requirement would
mean that the income portion of each payment received prior to the later of 5
years or the taxpayer's attaining age 591/2 would be subject to a 10% penalty
tax unless another exception to the penalty tax applied. The tax for the year of
the modification is increased by the penalty tax that would have been imposed
without the exception, plus interest for the years in which the exception was
used. You should consult a competent tax advisor prior to taking a withdrawal.
INCOME TAX WITHHOLDING ON QUALIFIED CONTRACTS. Generally, GLENBROOK LIFE is
required to withhold federal income tax at a rate of 10% from all non-annuitized
distributions that are not considered "ELIGIBLE ROLLOVER DISTRIBUTIONS." The
customer may elect out of withholding by completing and signing a withholding
election form. If no election is made, we will automatically withhold the
required 10% from the taxable amount. In certain states, if there is federal
withholding, then state withholding is also mandatory. GLENBROOK LIFE is
required to withhold federal income tax at a rate of 20% on all "ELIGIBLE
ROLLOVER DISTRIBUTIONS" unless you elect to make a "DIRECT ROLLOVER" of such
amounts to an IRA or eligible retirement plan. Eligible rollover distributions
generally include all distributions
37
from Qualified Contracts, excluding IRAs, with the exception of:
1. required minimum distributions, or
2. a series of substantially equal periodic payments made over a period of at
least 10 years, or,
3. a series of substantially equal periodic payments made over the life (joint
lives) of the participant (and beneficiary), or,
4. hardship distributions.
For all annuitized distributions that are not subject to the 20% withholding
requirement, GLENBROOK LIFE is required to withhold federal income tax using the
wage withholding rates from all annuitized distributions. The customer may elect
out of withholding by completing and signing a withholding election form. If no
election is made, we will automatically withhold using married with three
exemptions as the default. In certain states, if there is federal withholding,
then state withholding is also mandatory.
Election out of withholding is valid only if the customer provides a U.S.
residence address and taxpayer identification number.
INDIVIDUAL RETIREMENT ANNUITIES. Section 408 of the Code permits eligible
individuals to contribute to an individual retirement program known as an
Individual Retirement Annuity (IRA). Individual Retirement Annuities are subject
to limitations on the amount that can be contributed and on the time when
distributions may commence. Certain distributions from other types of qualified
plans may be "ROLLED OVER" on a tax-deferred basis into an Individual Retirement
Annuity.
ROTH INDIVIDUAL RETIREMENT ANNUITIES. Section 408A of the Code permits eligible
individuals to make nondeductible contributions to an individual retirement
program known as a Roth Individual Retirement Annuity. Roth Individual
Retirement Annuities are subject to limitations on the amount that can be
contributed and on the time when distributions may commence.
Subject to certain limitations, a traditional Individual Retirement Account or
Annuity may be converted or "ROLLED OVER" to a Roth Individual Retirement
Annuity. The income portion of a conversion or rollover distribution is taxable
currently, but is exempted from the 10% penalty tax on premature distributions.
SIMPLIFIED EMPLOYEE PENSION PLANS. Section 408(k) of the Code allows eligible
employers to establish simplified employee pension plans for their employees
using individual retirement annuities. Under these plans the employer may,
within specified limits, make deductible contributions on behalf of the
employees to the individual retirement annuities. Employers intending to use the
Contract in connection with such plans should seek competent tax advice.
SAVINGS INCENTIVE MATCH PLANS FOR EMPLOYEES (SIMPLE PLANS). Sections 408(p) and
401(k) of the Code allow eligible employers with 100 or fewer employees to
establish SIMPLE retirement plans for their employees. SIMPLE plans may be
structured as a SIMPLE retirement account using an IRA or as a Section 401(k)
qualified cash or deferred arrangement. In general, a SIMPLE plan consists of a
salary deferral program for eligible employees and matching or nonelective
contributions made by employers. Employers intending to use the Contract in
conjunction with SIMPLE plans should seek competent tax and legal advice.
TO DETERMINE IF YOU ARE ELIGIBLE TO CONTRIBUTE TO ANY OF THE ABOVE LISTED IRAS
(TRADITIONAL, ROTH, SEP, OR SIMPLE), PLEASE REFER TO IRS PUBLICATION 590 AND
YOUR COMPETENT TAX ADVISOR.
TAX SHELTERED ANNUITIES. Section 403(b) of the Tax Code provides tax-deferred
retirement savings plans for employees of certain non-profit and educational
organizations. Under Section 403(b), any contract used for a 403(b) plan must
provide that distributions attributable to salary reduction contributions made
after 12/31/88, and all earnings on salary reduction contributions, may be made
only on or after the date the employee:
... attains age 591/2,
... separates from service,
... dies,
... becomes disabled, or
... incurs a hardship (earnings on salary reduction contributions may not be
distributed on account of hardship).
These limitations do not apply to withdrawals where GLENBROOK LIFE is directed
to transfer some or all of the Contract Value to another 403(b) plan.
CORPORATE AND SELF-EMPLOYED PENSION AND PROFIT SHARING PLANS. Sections 401(a)
and 403(a) of the Code permit corporate employers to establish various types of
tax favored retirement plans for employees. Self-employed individuals may
establish tax favored retirement plans for themselves and their employees. Such
retirement plans (commonly referred to as "H.R.10" or "KEOGH") may permit the
purchase of annuity contracts.
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. In eligible governmental plans, all assets and income must be
held in a trust/ custodial account/annuity contract for the exclusive benefit of
the participants and their beneficiaries. To the extent the Contracts are used
in connection with a non-governmental eligible plan, employees are considered
38
general creditors of the employer and the employer as owner of the Contract has
the sole right to the proceeds of the Contract. Under eligible 457 plans,
contributions made for the benefit of the employees will not be includible in
the employees' gross income until distributed from the plan.
ANNUAL REPORTS AND OTHER DOCUMENTS
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GLENBROOK LIFE's annual report on Form 10-K for the year ended December 31, 2001
is incorporated herein by reference, which means that it is legally a part of
this prospectus.
After the date of this prospectus and before we terminate the offering of the
securities under this prospectus, all documents or reports we file with the SEC
under the Exchange Act are also incorporated herein by reference, which means
that they also legally become a part of this prospectus.
Statements in this prospectus, or in documents that we file later with the SEC
and that legally become a part of this prospectus, may change or supersede
statements in other documents that are legally part of this prospectus.
Accordingly, only the statement that is changed or replaced will legally be a
part of this prospectus.
We file our Exchange Act documents and reports, including our annual and
quarterly reports on Form 10-K and Form 10-Q electronically on the SEC's "EDGAR"
system using the identifying number CIK No. 0001007285. The SEC maintains a Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC. The
address of the site is http:// www.sec.gov. You also can view these materials at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. For more information on the operations of SEC's Public Reference Room,
call 1-800-SEC-0330.
If you have received a copy of this prospectus, and would like a free copy of
any document incorporated herein by reference (other than exhibits not
specifically incorporated by reference into the text of such documents), please
write or call us at 300 N. Milwaukee Ave. Vernon Hills, IL 60061 (telephone:
1-800-755-5275).
EXPERTS
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The financial statements of Glenbrook Life as of December 31, 2001 and 2000 and
for each of the three years in the period ended December 31, 2001 and the
related financial statement schedule incorporated herein by reference from the
Annual Report on Form 10-K of Glenbrook Life and from the Statement of
Additional Information, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, incorporated herein by reference, and have
been so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The financial statements of the Variable Account as of December 31, 2001 and for
each of the periods in the two years then ended incorporated herein by reference
from the Statement of Additional Information, have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report, incorporated herein
by reference and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
PERFORMANCE INFORMATION
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We may advertise the performance of the Variable Sub-Accounts, including yield
and total return information. Total return represents the change, over a
specified period of time, in the value of an investment in a Variable
Sub-Account after reinvesting all income distributions. Yield refers to the
income generated by an investment in a Variable Sub-Account over a specified
period.
All performance advertisements will include, as applicable, standardized yield
and total return figures that reflect the deduction of insurance charges, the
contract maintenance charge, and withdrawal charge. Performance advertisements
also may include total return figures that reflect the deduction of insurance
charges, but not the contract maintenance or withdrawal charges. The deduction
of such charges would reduce the performance shown. In addition, performance
advertisements may include aggregate average, year-by-year, or other types of
total return figures. Performance information for periods prior to the inception
date of the Variable Sub-Accounts will be based on the historical performance of
the corresponding Portfolios for the periods beginning with the inception dates
of the Portfolios and adjusted to reflect current Contract expenses. You should
not interpret these figures to reflect actual historical performance of the
Variable Account. We may include in advertising and sales materials tax deferred
compounding charts and other hypothetical illustrations that compare currently
taxable and tax deferred
39
investment programs based on selected tax brackets. Our advertisements also may
compare the performance of our Variable Sub-Accounts with: (a) certain unmanaged
market indices, including but not limited to the Dow Jones Industrial Average,
the Standard & Poor's 500, and the Shearson Lehman Bond Index; and/or (b) other
management investment companies with investment objectives similar to the
underlying funds being compared. In addition, our advertisements may include the
performance ranking assigned by various publications, including the Wall Street
Journal, Forbes, Fortune, Money, Barron's, Business Week, USA Today, and
statistical services, including Lipper Analytical Services Mutual Fund Survey,
Lipper Annuity and Closed End Survey, the Variable Annuity Research Data Survey,
and SEI.
40
APPENDIX A
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERRED
- --------------------------------------------------------------------------------
For the Years Beginning January 1* and Ending
December 31,
Sub-Accounts 1998 1999 2000 2001
AIM V.I. BALANCED
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.73 $ 12.66 $ 11.99
Accumulation Unit Value,
End of Period $10.73 $ 12.66 $ 11.99 $ 10.50
Number of Units
Outstanding, End of Period -- 7,487 52,646 90,025
AIM V.I. CAPITAL
APPRECIATION SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.39 $ 16.29 $ 14.35
Accumulation Unit Value,
End of Period $10.73 $ 16.29 $ 14.35 $ 10.88
Number of Units
Outstanding, End of Period -- 8,743 73,347 76,217
AIM V.I. CORE EQUITY
SUB-ACCOUNT (1)
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.36 $ 15.09 $ 12.74
Accumulation Unit Value,
End of Period $11.36 $ 15.09 $ 12.74 $ 9.72
Number of Units
Outstanding, End of Period -- 12,180 53,747 73,192
AIM V.I. DIVERSIFIED INCOME
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.22 $ 9.91 $ 9.87
Accumulation Unit Value,
End of Period $10.22 $ 9.91 $ 9.87 $ 10.11
Number of Units
Outstanding, End of Period -- 721 721 721
AIM V.I. GLOBAL UTILITIES
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.73 $ 14.16 $ 13.68
Accumulation Unit Value,
End of Period $10.73 $ 14.16 $ 13.68 $ 11.04
Number of Units
Outstanding, End of Period -- -- -- --
AIM V.I. GOVERNMENT
SECURITIES SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.38 $ 9.85 $ 10.73
Accumulation Unit Value,
End of Period $10.38 $ 9.85 $ 10.73 $ 11.29
Number of Units
Outstanding, End of Period -- -- 2,954 17,908
AIM V.I. GROWTH SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.83 $ 15.82 $ 12.43
Accumulation Unit Value,
End of Period $11.83 $ 15.82 $ 12.43 $ 8.13
Number of Units
Outstanding, End of Period -- 13,275 69,688 57,165
AIM V.I. HIGH YIELD
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.31 $ 11.27 $ 9.03
Accumulation Unit Value,
End of Period $10.31 $ 11.27 $ 9.03 $ 8.48
Number of Units
Outstanding, End of Period -- 7,387 9,651 16,857
AIM V.I. INTERNATIONAL
GROWTH SUB-ACCOUNT (1)
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.68 $ 16.38 $ 11.92
Accumulation Unit Value,
End of Period $10.68 $ 16.38 $ 11.92 $ 9.00
Number of Units
Outstanding, End of Period -- -- 4,196 4,353
AIM V.I. PREMIER EQUITY
SUB-ACCOUNT (1)
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.52 $ 14.80 $ 12.49
Accumulation Unit Value,
End of Period $11.52 $ 14.80 $ 12.49 $ 10.79
Number of Units
Outstanding, End of Period -- 42,074 115,418 133,037
DREYFUS SOCIALLY RESPONSIBLE
GROWTH SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.79 $ 14.40 $ 12.66
Accumulation Unit Value,
End of Period $10.79 $ 14.40 $ 12.66 $ 9.69
Number of Units
Outstanding, End of Period -- 3,130 5,459 2,854
DREYFUS STOCK INDEX
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.87 $ 12.97 $ 11.63
Accumulation Unit Value,
End of Period $10.87 $ 12.97 $ 11.63 $ 10.10
Number of Units
Outstanding, End of Period -- 9,930 23,030 17,916
DREYFUS VIF GROWTH & INCOME
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.65 $ 12.47 $ 11.86
Accumulation Unit Value,
End of Period $10.65 $ 12.47 $ 11.86 $ 11.078
Number of Units
Outstanding, End of Period -- 2,680 3,326 13,021
DREYFUS VIF MONEY MARKET
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.05 $ 10.40 $ 10.91
Accumulation Unit Value,
End of Period $10.05 $ 10.40 $ 10.91 $ 11.211
Number of Units
Outstanding, End of Period -- -- -- 33,552
DREYFUS VIF SMALL COMPANY
STOCK SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.65 $ 11.66 $ 12.51
Accumulation Unit Value,
End of Period $10.65 $ 11.66 $ 12.51 $ 12.178
Number of Units
Outstanding, End of Period -- 236 429 428
FIDELITY VIP CONTRAFUND
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.66 $ 14.33 $ 13.23
Accumulation Unit Value,
End of Period $11.66 $ 14.33 $ 13.23 $ 11.473
Number of Units
Outstanding, End of Period -- 18,963 101,434 128,908
FIDELITY VIP EQUITY-INCOME
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.48 $ 11.02 $ 11.81
Accumulation Unit Value,
End of Period $10.48 $ 11.02 $ 11.81 $ 11.096
Number of Units
Outstanding, End of Period -- 30,264 100,008 169,933
FIDELITY VIP GROWTH
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.20 $ 15.22 $ 13.40
Accumulation Unit Value,
End of Period $11.20 $ 15.22 $ 13.40 $ 10.906
Number of Units
Outstanding, End of Period -- 25,821 168,574 193,055
FIDELITY VIP HIGH INCOME
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.43 $ 11.16 $ 8.55
Accumulation Unit Value,
End of Period $10.43 $ 11.16 $ 8.55 $ 7.462
Number of Units
Outstanding, End of Period -- 3,837 45,009 69,939
GOLDMAN SACHS VIT CAPITAL
GROWTH SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.10 $ 13.99 $ 8.55
Accumulation Unit Value,
End of Period $11.10 $ 11.16 $ 8.55 $ 10.763
Number of Units
Outstanding, End of Period -- -- 573 573
GOLDMAN SACHS CORE/SM/ SMALL
CAP EQUITY SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.60 $ 12.36 $ 12.44
Accumulation Unit Value,
End of Period $10.60 $ 12.36 $ 12.44 $ 12.851
Number of Units
Outstanding, End of Period -- 86 717 716
GOLDMAN SACHS VIT CORE/SM/
U.S. EQUITY SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.89 $ 13.46 $ 12.02
Accumulation Unit Value,
End of Period $10.89 $ 13.46 $ 12.02 $ 10.466
Number of Units
Outstanding, End of Period -- 317 -- 159
GOLDMAN SACHS VIT GLOBAL
INCOME SUB-ACCOUNT (3)
Accumulation Unit Value,
Beginning of Period $10.00 $ 9.67 $ 9.92 $ 10.70
Accumulation Unit Value,
End of Period $ 9.67 $ 9.92 $ 10.70 $ 11.089
Number of Units
Outstanding, End of Period -- -- 724 895
GOLDMAN SACHS VIT GROWTH AND
INCOME SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 9.94 $ 10.46 $ 9.86
Accumulation Unit Value,
End of Period $ 9.94 $ 10.46 $ 9.86 $ 8.712
Number of Units
Outstanding, End of Period -- 637 636 1386
GOLDMAN SACHS VIT
INTERNATIONAL EQUITY
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.84 $ 14.25 $ 12.24
Accumulation Unit Value,
End of Period $10.84 $ 14.25 $ 12.24 $ 9.402
Number of Units
Outstanding, End of Period -- -- 168 167
MFS EMERGING GROWTH
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.95 $ 20.88 $ 16.60
Accumulation Unit Value,
End of Period $11.95 $ 20.88 $ 16.60 $ 10.91
Number of Units
Outstanding, End of Period -- 1,059 58,025 104,779
MFS INVESTORS TRUST
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.81 $ 11.41 $ 11.26
Accumulation Unit Value,
End of Period $10.81 $ 11.41 $ 11.26 $ 9.36
Number of Units
Outstanding, End of Period -- 6,295 15,337 45,121
MFS NEW DISCOVERY
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.38 $ 19.52 $ 18.92
Accumulation Unit Value,
End of Period $11.38 $ 19.52 $ 18.92 $ 17.76
Number of Units
Outstanding, End of Period -- 183 3,148 6,802
NEUBERGER BERMAN AMT
GUARDIAN SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.81 $ 12.28 $ 10.31
Accumulation Unit Value,
End of Period $10.81 $ 12.28 $ 10.31
Number of Units
Outstanding, End of Period -- -- 28,736
NEUBERGER BERMAN AMT MID-MIP
GROWTH SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 12.13 $ 18.45 $ 16.88
Accumulation Unit Value,
End of Period $12.13 $ 18.45 $ 16.88
Number of Units
Outstanding, End of Period -- 296 696
NEUBERGER BERMAN AMT
PARTNERS SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.31 $ 10.00 $ 10.90
Accumulation Unit Value,
End of Period $10.31 $ 10.94 $ 10.90
Number of Units
Outstanding, End of Period -- -- --
VAN KAMPEN UIF CORE PLUS
FIXED INCOME SUB-ACCOUNT (2)
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.15 $ 9.87 $ 10.85
Accumulation Unit Value,
End of Period $10.15 $ 9.87 $ 10.85
Number of Units
Outstanding, End of Period -- -- --
VAN KAMPEN UIF EQUITY GROWTH
SUB-ACCOUNT (2)
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.94 $ 15.09 $ 13.17
Accumulation Unit Value,
End of Period $10.94 $ 15.09 $ 13.17
Number of Units
Outstanding, End of Period -- -- 162
VAN KAMPEN UIF GLOBAL VALUE
EQUITY SUB-ACCOUNT (2)
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.43 $ 10.73 $ 11.83
Accumulation Unit Value,
End of Period $10.43 $ 10.73 $ 11.83
Number of Units
Outstanding, End of Period -- -- 959
VAN KAMPEN UIF INTERNATIONAL
MAGNUM SUB-ACCOUNT (2)
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.39 $ 12.85 $ 11.13
Accumulation Unit Value,
End of Period $10.39 $ 12.85 $ 11.13
Number of Units
Outstanding, End of Period -- -- --
VAN KAMPEN UIF MID CAP VALUE
SUB-ACCOUNT (2)
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.96 $ 10.00 $ 14.32
Accumulation Unit Value,
End of Period $10.96 $ 13.07 $ 14.32
Number of Units
Outstanding, End of Period -- -- 5,400
VAN KAMPEN UIF U.S. REAL
ESTATE SUB-ACCOUNT (2)
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.18 $ 10.00 $ 12.67
Accumulation Unit Value,
End of Period $10.18 $ 9.91 $ 12.67
Number of Units
Outstanding, End of Period -- -- --
VAN KAMPEN UIF VALUE
SUB-ACCOUNT (2)
Accumulation Unit Value,
Beginning of Period $10.00 $ 9.95 $ 10.00 $ 11.93
Accumulation Unit Value,
End of Period $ 9.95 $ 9.65 $ 11.93
Number of Units
Outstanding, End of Period -- -- 233
BASIC POLICY
41
42
*The Contracts were first offered on November 10, 1998. The Accumulation Unit
Values in this table reflect a mortality and expense risk charge of 1.05% and
an administrative expense charge of 0.10%. All of the Variable Sub-Accounts
commenced operations on or before November 10, 1998.
1. Effective May 1, 2002 AIM V.I. Growth and IncomeFund, AIM V.I. International
Equity Fund and AIM V.I. Value Fund changed their names to
43
the AIM V.I. Core Equity Fund, AIM V.I. International Growth Fund and AIM
V.I. Premier Equity Fund, respectively.
2. Effective May 1, 2002 the Portfolios have been re-branded and have changed
names from Morgan Stanley UIF Fixed Income Portfolio to Van Kampen UIF Core
Plus Fixed Income Portfolio, Morgan Stanley UIF Equity Growth Portfolio to
Van Kampen UIF Equity Growth Portfolio, Morgan Stanley UIF Global Value
Equity Porfolio to Van Kampen UIF Global Value Equity Portfolio, Morgan
Stanley UIF International Magnum Portfolio to Van Kampen UIF International
Magnum Portfolio, Morgan Stanley UIF Mid Cap Value Portfolio to Van Kampen
UIF Mid Cap Value Portfolio, Morgan Stanley UIF U.S. Real Estate Portfolio to
Van Kampen UIF U.S. Real Estate Portfolio and Morgan Stanley UIF Value
Portfolio to Van Kampen UIF Value Portfolio.
3. The Goldman Sachs VIT Global Income Sub-Account will not be available to new
investors beginning on May 1, 2001.
44
APPENDIX A
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED
- --------------------------------------------------------------------------------
For the Years Beginning January 1* and Ending
December 31,
SUB-ACCOUNTS 1998 1999 2000 2001
AIM V.I. BALANCED
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.73 $ 12.63 $ 11.94
Accumulation Unit Value,
End of Period $10.73 $ 12.63 $ 11.94 $ 10.43
Number of Units
Outstanding, End of Period -- 16,023 98,137 129,553
AIM V.I. CAPITAL
APPRECIATION SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.39 $ 16.25 $ 14.28
Accumulation Unit Value,
End of Period $11.39 $ 16.25 $ 14.28 $ 10.81
Number of Units
Outstanding, End of Period -- 17,447 131,704 139,313
AIM V.I. CORE EQUITY
SUB-ACCOUNT (1)
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.36 $ 15.05 $ 12.68
Accumulation Unit Value,
End of Period $11.36 $ 15.05 $ 12.68 $ 9.65
Number of Units
Outstanding, End of Period -- 16,349 92,631 96,750
AIM V.I. DIVERSIFIED INCOME
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.22 $ 9.88 $ 9.82
Accumulation Unit Value,
End of Period $10.22 $ 9.88 $ 9.82 $ 10.13
Number of Units
Outstanding, End of Period -- -- -- --
AIM V.I. GLOBAL UTILITIES
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.72 $ 14.13 $ 13.62
Accumulation Unit Value,
End of Period $10.72 $ 14.13 $ 13.62 $ 9.68
Number of Units
Outstanding, End of Period -- 154 327 326
AIM V.I. GOVERNMENT
SECURITIES SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.38 $ 9.83 $ 10.68
Accumulation Unit Value,
End of Period $10.38 $ 9.83 $ 10.68 $ 11.21
Number of Units
Outstanding, End of Period -- -- -- 6,075
AIM V.I. GROWTH SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.82 $ 15.78 $ 12.38
Accumulation Unit Value,
End of Period $11.82 $ 15.78 $ 12.38 $ 8.07
Number of Units
Outstanding, End of Period -- 14,400 102,325 90,578
AIM V.I. HIGH YIELD
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.31 $ 11.25 $ 8.98
Accumulation Unit Value,
End of Period $10.31 $ 11.25 $ 8.98 $ 8.42
Number of Units
Outstanding, End of Period -- 3,356 14,461 20,655
AIM V.I. INTERNATIONAL
GROWTH SUB-ACCOUNT (1)
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.68 $ 16.34 $ 11.16
Accumulation Unit Value,
End of Period $10.68 $ 16.34 $ 11.16 $ 8.95
Number of Units
Outstanding, End of Period -- 606 4,960 5,642
AIM V.I. PREMIER EQUITY
SUB-ACCOUNT (1)
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.52 $ 14.76 $ 12.43
Accumulation Unit Value,
End of Period $11.52 $ 14.76 $ 12.43 $ 10.72
Number of Units
Outstanding, End of Period -- 35,445 212,348 204,770
DREYFUS SOCIALLY RESPONSIBLE
GROWTH SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.78 $ 14.36 $ 12.60
Accumulation Unit Value,
End of Period $10.78 $ 14.36 $ 12.60 $ 9.63
Number of Units
Outstanding, End of Period -- 1,093 1,147 4,204
DREYFUS STOCK INDEX
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.87 $ 12.94 $ 11.58
Accumulation Unit Value,
End of Period $10.87 $ 12.94 $ 11.58 $ 10.03
Number of Units
Outstanding, End of Period -- 5,556 16,753 33,168
DREYFUS VIF GROWTH & INCOME
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.64 $ 12.43 $ 11.80
Accumulation Unit Value,
End of Period $10.64 $ 12.43 $ 11.80 $ 10.96
Number of Units
Outstanding, End of Period -- -- -- 4,754
DREYFUS VIF MONEY MARKET
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.04 $ 10.38 $ 10.86
Accumulation Unit Value,
End of Period $10.04 $ 10.38 $ 10.86 $ 11.13
Number of Units
Outstanding, End of Period -- -- 4,766 53,563
DREYFUS VIF SMALL COMPANY
STOCK SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.66 $ 11.63 $ 12.45
Accumulation Unit Value,
End of Period $10.66 $ 11.63 $ 12.45 $ 12.09
Number of Units
Outstanding, End of Period -- -- 468 168
FIDELITY VIP CONTRAFUND
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.66 $ 14.29 $ 13.16
Accumulation Unit Value,
End of Period $11.66 $ 14.29 $ 13.16 $ 11.39
Number of Units
Outstanding, End of Period -- 30,660 158,502 154,780
FIDELITY VIP EQUITY-INCOME
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.47 $ 10.99 $ 11.76
Accumulation Unit Value,
End of Period $10.47 $ 10.99 $ 11.76 $ 11.02
Number of Units
Outstanding, End of Period -- 17,530 80,075 140,070
FIDELITY VIP GROWTH
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.20 $ 15.19 $ 13.33
Accumulation Unit Value,
End of Period $11.20 $ 15.19 $ 13.33 $ 10.83
Number of Units
Outstanding, End of Period -- 45,514 210,159 224,251
FIDELITY VIP HIGH INCOME
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.43 $ 11.13 $ 8.51
Accumulation Unit Value,
End of Period $10.43 $ 11.13 $ 8.51 $ 7.41
Number of Units
Outstanding, End of Period -- 3,914 55,337 76,456
GOLDMAN SACHS VIT CAPITAL
GROWTH SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.09 $ 13.95 $ 12.67
Accumulation Unit Value,
End of Period $11.09 $ 13.95 $ 12.67 $ 9.23
Number of Units
Outstanding, End of Period -- -- -- --
GOLDMAN SACHS CORE/SM/ SMALL
CAP EQUITY SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.60 $ 12.33 $ 12.38
Accumulation Unit Value,
End of Period $10.60 $ 12.33 $ 12.38 $ 12.35
Number of Units
Outstanding, End of Period -- -- -- --
GOLDMAN SACHS VIT CORE/SM/
U.S. EQUITY SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.89 $ 13.42 $ 11.97
Accumulation Unit Value,
End of Period $10.89 $ 13.42 $ 11.97 $ 10.39
Number of Units
Outstanding, End of Period -- -- -- 514
GOLDMAN SACHS VIT GLOBAL
INCOME SUB-ACCOUNT (3)
Accumulation Unit Value,
Beginning of Period $10.00 $ 9.67 $ 9.90 $ 14.28
Accumulation Unit Value,
End of Period $ 9.67 $ 9.90 $ 14.28 $ 11.01
Number of Units
Outstanding, End of Period -- -- -- 9,473
GOLDMAN SACHS VIT GROWTH AND
INCOME SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 9.94 $ 9.90 $ 9.90
Accumulation Unit Value,
End of Period $ 9.94 $ 9.90 $ 9.81 $ 8.91
Number of Units
Outstanding, End of Period -- -- -- --
GOLDMAN SACHS VIT
INTERNATIONAL EQUITY
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.84 $ 14.22 $ 12.18
Accumulation Unit Value,
End of Period $10.84 $ 14.22 $ 12.18 $ 9.34
Number of Units
Outstanding, End of Period -- -- 272 204
MFS EMERGING GROWTH
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.90 $ 20.83 $ 16.42
Accumulation Unit Value,
End of Period $11.90 $ 20.83 $ 16.42 $ 10.84
Number of Units
Outstanding, End of Period -- 3,068 78,095 112,839
MFS INVESTORS TRUST
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.81 $ 11.38 $ 11.21
Accumulation Unit Value,
End of Period $10.81 $ 11.38 $ 11.21 $ 9.29
Number of Units
Outstanding, End of Period -- 3,323 23,854 35,987
MFS NEW DISCOVERY
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.38 $ 19.47 $ 18.83
Accumulation Unit Value,
End of Period $11.38 $ 19.47 $ 18.83
Number of Units
Outstanding, End of Period -- 1,669 2,029
NEUBERGER BERMAN AMT
GUARDIAN SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.80 $ 12.25 $ 12.22
Accumulation Unit Value,
End of Period $10.80 $ 12.25 $ 12.22 $ 11.88
Number of Units
Outstanding, End of Period -- 1,333 -- --
NEUBERGER BERMAN AMT MID-CAP
GROWTH SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 12.12 $ 18.40 $ 16.80
Accumulation Unit Value,
End of Period $12.12 $ 18.40 $ 16.80 $ 12.49
Number of Units
Outstanding, End of Period -- -- 929 804
NEUBERGER BERMAN AMT
PARTNERS SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.30 $ 10.91 $ 10.84
Accumulation Unit Value,
End of Period $10.30 $ 10.91 $ 10.84 $ 10.43
Number of Units
Outstanding, End of Period -- -- -- --
VAN KAMPEN UIF CORE PLUS
FIXED INCOME SUB-ACCOUNT (2)
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.15 $ 9.85 $ 10.80
Accumulation Unit Value,
End of Period $10.15 $ 9.85 $ 10.80 $ 11.64
Number of Units
Outstanding, End of Period -- 1,566 4,181 5,179
VAN KAMPEN UIF EQUITY GROWTH
SUB-ACCOUNT (2)
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.94 $ 15.05 $ 13.11
Accumulation Unit Value,
End of Period $10.94 $ 15.05 $ 13.11 $ 10.97
Number of Units
Outstanding, End of Period -- 1,953 1,953 1,954
VAN KAMPEN UIF GLOBAL VALUE
EQUITY SUB-ACCOUNT (2)
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.43 $ 10.71 $ 11.78
Accumulation Unit Value,
End of Period $10.43 $ 10.71 $ 11.78 $ 10.80
Number of Units
Outstanding, End of Period -- -- -- 168
VAN KAMPEN UIF INTERNATIONAL
MAGNUM SUB-ACCOUNT (2)
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.38 $ 12.83 $ 12.83
Accumulation Unit Value,
End of Period $10.38 $ 12.83 $ 11.08 $ 8.82
Number of Units
Outstanding, End of Period -- 624 624 625
VAN KAMPEN UIF MID CAP VALUE
SUB-ACCOUNT (2)
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.96 $ 13.04 $ 13.04
Accumulation Unit Value,
End of Period $10.96 $ 13.04 $ 14.25 $ 13.61
Number of Units
Outstanding, End of Period -- -- -- 5,158
VAN KAMPEN UIF U.S. REAL
ESTATE SUB-ACCOUNT (2)
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.17 $ 9.89 $ 12.61
Accumulation Unit Value,
End of Period $10.17 $ 9.89 $ 12.61 $ 14.09
Number of Units
Outstanding, End of Period -- -- -- --
VAN KAMPEN UIF VALUE
SUB-ACCOUNT (2)
Accumulation Unit Value,
Beginning of Period $10.00 $ 9.95 $ 9.63
Accumulation Unit Value,
End of Period $ 9.95 $ 9.63 $ 11.98
Number of Units
Outstanding, End of Period -- 903 1,431
WITH ENHANCED DEATH BENEFIT RIDER
45
46
*The Contracts were first offered on November 10, 1998. The Accumulation Unit
Values in this table reflect a mortality and expense risk charge of 1.27% and
an administrative expense charge of 0.10%. All of the Variable Sub-Accounts
commenced operations on or before November 10, 1998.
47
1. Effective May 1, 2002 AIM V.I. Growth and IncomeFund, AIM V.I. International
Equity Fund and AIM V.I. Value Fund changed their names to the AIM V.I. Core
Equity Fund, AIM V.I. International Growth Fund and AIM V.I. Premier Equity
Fund, respectively.
2. Effective May 1, 2002 the Portfolios have been re-branded and have changed
names from Morgan Stanley UIF Fixed Income Portfolio to Van Kampen UIF Core
Plus Fixed Income Portfolio, Morgan Stanley UIF Equity Growth Portfolio to
Van Kampen UIF Equity Growth Portfolio, Morgan Stanley UIF Global Value
Equity Porfolio to Van Kampen UIF Global Value Equity Portfolio, Morgan
Stanley UIF International Magnum Portfolio to Van Kampen UIF International
Magnum Portfolio, Morgan Stanley UIF Mid Cap Value Portfolio to Van Kampen
UIF Mid Cap Value Portfolio, Morgan Stanley UIF U.S. Real Estate Portfolio to
Van Kampen UIF U.S. Real Estate Portfolio and Morgan Stanley UIF Value
Portfolio to Van Kampen UIF Value Portfolio.
3. The Goldman Sachs VIT Global Income Sub-Account will not be available to new
investors beginning on May 1, 2001.
48
APPENDIX A
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED
- --------------------------------------------------------------------------------
For the Years Beginning January 1* and Ending
December 31,
SUB-ACCOUNTS 1998 1999 2000 2001
AIM V.I. BALANCED
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.73 $ 12.60 $ 11.88
Accumulation Unit Value,
End of Period $10.73 $ 12.60 $ 11.88 $ 10.36
Number of Units
Outstanding, End of Period -- 43121 101,781 94,585
AIM V.I. CAPITAL
APPRECIATION SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.39 $ 16.21 $ 14.22
Accumulation Unit Value,
End of Period $11.39 $ 16.21 $ 14.22 $ 10.73
Number of Units
Outstanding, End of Period -- 16,046 122,768 129,783
AIM V.I. CORE EQUITY
SUB-ACCOUNT (1)
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.36 $ 15.01 $ 12.63
Accumulation Unit Value,
End of Period $11.36 $ 15.01 $ 12.63 $ 9.59
Number of Units
Outstanding, End of Period -- 11,459 66,400 69,341
AIM V.I. DIVERSIFIED INCOME
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.21 $ 9.86 $ 9.78
Accumulation Unit Value,
End of Period $10.21 $ 9.86 $ 9.78 $ 9.97
Number of Units
Outstanding, End of Period -- 1,484 1,484 1,484
AIM V.I. GLOBAL UTILITIES
SUB-ACCOUT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.72 $ 14.09 $ 14.09
Accumulation Unit Value,
End of Period $10.72 $ 14.09 $ 13.59 $ 10.90
Number of Units
Outstanding, End of Period -- -- -- --
AIM V.I. GOVERNMENT
SECURITIES SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.38 $ 9.80 $ 10.63
Accumulation Unit Value,
End of Period $10.38 $ 9.80 $ 10.63 $ 10.99
Number of Units
Outstanding, End of Period -- -- -- --
AIM V.I. GROWTH SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.82 $ 15.74 $ 12.32
Accumulation Unit Value,
End of Period $11.82 $ 15.74 $ 12.32 $ 8.02
Number of Units
Outstanding, End of Period -- 21,246 108,292 112,689
AIM V.I. HIGH YIELD
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.31 $ 11.22 $ 8.94
Accumulation Unit Value,
End of Period $10.31 $ 11.22 $ 8.94 $ 8.36
Number of Units
Outstanding, End of Period -- 185 10,889 11,220
AIM V.I. INTERNATIONAL
GROWTH SUB-ACCOUNT (1)
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.68 $ 16.30 $ 11.81
Accumulation Unit Value,
End of Period $10.68 $ 16.30 $ 11.81 $ 8.89
Number of Units
Outstanding, End of Period -- 2,943 3,483 3,178
AIM V.I. PREMIER EQUITY
SUB-ACCOUNT (1)
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.51 $ 14.73 $ 12.37
Accumulation Unit Value,
End of Period $11.51 $ 14.73 $ 12.37 $ 10.65
Number of Units
Outstanding, End of Period -- 34,288 159,570 160,343
DREYFUS SOCIALLY RESPONSIBLE
GROWTH SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.77 $ 14.33 $ 12.55
Accumulation Unit Value,
End of Period $10.77 $ 14.33 $ 12.55 $ 9.56
Number of Units
Outstanding, End of Period -- 5,493 7,121 6,350
DREYFUS STOCK INDEX
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.87 $ 12.90 $ 11.52
Accumulation Unit Value,
End of Period $10.87 $ 12.90 $ 11.52 $ 9.96
Number of Units
Outstanding, End of Period -- 19,955 21,326 19,024
DREYFUS VIF GROWTH & INCOME
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.64 $ 12.40 $ 11.75
Accumulation Unit Value,
End of Period $10.64 $ 12.40 $ 11.75 $ 10.89
Number of Units
Outstanding, End of Period -- 3,983 3,676 3,568
DREYFUS VIF MONEY MARKET
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.04 $ 10.36 $ 10.81
Accumulation Unit Value,
End of Period $10.04 $ 10.36 $ 10.81 $ 11.06
Number of Units
Outstanding, End of Period -- 577 489 16,157
DREYFUS VIF SMALL COMPANY
STOCK SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.65 $ 11.60 $ 12.39
Accumulation Unit Value,
End of Period $10.65 $ 11.60 $ 12.39 $ 12.01
Number of Units
Outstanding, End of Period -- 2,542 2,538 2,047
FIDELITY VIP CONTRAFUND
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.65 $ 14.26 $ 13.10
Accumulation Unit Value,
End of Period $11.65 $ 14.26 $ 13.10 $ 11.32
Number of Units
Outstanding, End of Period -- 32,161 13,1791 134,375
FIDELITY VIP EQUITY-INCOME
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.47 $ 10.96 $ 11.70
Accumulation Unit Value,
End of Period $10.47 $ 10.96 $ 11.70 $ 10.94
Number of Units
Outstanding, End of Period -- 11,621 45,849 55,016
FIDELITY VIP GROWTH
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.19 $ 15.15 $ 13.27
Accumulation Unit Value,
End of Period $11.19 $ 15.15 $ 13.27 $ 10.76
Number of Units
Outstanding, End of Period -- 22,088 151,189 149,935
FIDELITY VIP HIGH INCOME
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.43 $ 11.10 $ 8.47
Accumulation Unit Value,
End of Period $10.43 $ 11.10 $ 8.47 $ 7.36
Number of Units
Outstanding, End of Period -- 3,667 31,190 24,128
GOLDMAN SACHS VIT CAPITAL
GROWTH SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.09 $ 13.92 $ 12.61
Accumulation Unit Value,
End of Period $11.09 $ 13.92 $ 12.61 $ 10.62
Number of Units
Outstanding, End of Period -- 2,449 4,173 2,958
GOLDMAN SACHS CORE/SM/ SMALL
CAP EQUITY SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.59 $ 12.30 $ 12.32
Accumulation Unit Value,
End of Period $10.59 $ 12.30 $ 12.32 $ 12.67
Number of Units
Outstanding, End of Period -- 17,918 18,069 17,077
GOLDMAN SACHS VIT CORE/SM/
U.S. EQUITY SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.89 $ 13.39 $ 11.91
Accumulation Unit Value,
End of Period $10.89 $ 13.39 $ 11.91 $ 10.32
Number of Units
Outstanding, End of Period -- 20,515 23,250 20,215
GOLDMAN SACHS VIT GLOBAL
INCOME SUB-ACCOUNT (3)
Accumulation Unit Value,
Beginning of Period $10.00 $ 9.66 $ 9.87 $ 10.60
Accumulation Unit Value,
End of Period $ 9.66 $ 9.87 $ 10.60 10.94
Number of Units
Outstanding, End of Period -- -- -- --
GOLDMAN SACHS VIT GROWTH AND
INCOME SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 9.93 $ 10.41 $ 9.76
Accumulation Unit Value,
End of Period $ 9.93 $ 10.41 $ 9.76 $ 8.71
Number of Units
Outstanding, End of Period -- 2,081 2,047 1,386
GOLDMAN SACHS VIT
INTERNATIONAL EQUITY
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.84 $ 14.18 $ 12.12
Accumulation Unit Value,
End of Period $10.84 $ 14.18 $ 12.12 $ 9.27
Number of Units
Outstanding, End of Period -- -- 1,812 1,812
MFS EMERGING GROWTH
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.94 $ 20.78 $ 16.44
Accumulation Unit Value,
End of Period $11.94 $ 20.78 $ 16.44 $ 10.76
Number of Units
Outstanding, End of Period -- 19,189 64,075 65,183
MFS INVESTORS TRUST SERIES
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.81 $ 11.35 $ 11.16
Accumulation Unit Value,
End of Period $10.81 $ 11.35 $ 11.16 $ 9.23
Number of Units
Outstanding, End of Period -- 4,808 11,160 9,277
MFS NEW DISCOVERY
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.38 $ 19.42 $ 18.74
Accumulation Unit Value,
End of Period $11.38 $ 19.42 $ 18.74 $ 17.51
Number of Units
Outstanding, End of Period -- 707 1,509 913
NEUBERGER BERMAN AMT
GUARDIAN SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.80 $ 12.22 $ 12.17
Accumulation Unit Value,
End of Period $10.80 $ 12.22 $ 12.17 $ 11.79
Number of Units
Outstanding, End of Period -- 1,924 1,415 1,315
NEUBERGER BERMAN AMT MID CAP
GROWTH SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 12.12 $ 18.36 $ 16.72
Accumulation Unit Value,
End of Period $12.12 $ 18.36 $ 16.72 $ 12.40
Number of Units
Outstanding, End of Period -- 64 1,853 1,852
NEUBERGER BERMAN AMT
PARTNERS SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.30 $ 10.89 $ 10.79
Accumulation Unit Value,
End of Period $10.30 $ 10.89 $ 10.79 $ 10.32
Number of Units
Outstanding, End of Period -- 17,996 16,330 16,031
VAN KAMPEN UIF CORE PLUS
FIXED INCOME SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.15 $ 9.82 $ 10.75
Accumulation Unit Value,
End of Period $10.15 $ 9.82 $ 10.75 $ 11.40
Number of Units
Outstanding, End of Period -- -- -- --
VAN KAMPEN UIF EQUITY GROWTH
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.94 $ 15.02 $ 13.04
Accumulation Unit Value,
End of Period $10.94 $ 15.02 $ 13.04 $ 10.90
Number of Units
Outstanding, End of Period -- 7,464 11,011 9,643
VAN KAMPEN UIF GLOBAL EQUITY
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.42 $ 10.69 $ 11.72
Accumulation Unit Value,
End of Period $10.42 $ 10.69 $ 11.72 $ 10.72
Number of Units
Outstanding, End of Period -- 245 363 244
VAN KAMPEN UIF INTERNATIONAL
MAGNUM SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.38 $ 12.79 $ 11.03
Accumulation Unit Value,
End of Period $10.38 $ 12.79 $ 11.03 $ 9.43
Number of Units
Outstanding, End of Period -- -- -- --
VAN KAMPENUIF MID-CAP VALUE
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.96 $ 13.01 $ 14.18
Accumulation Unit Value,
End of Period $10.96 $ 13.01 $ 14.18 $ 13.52
Number of Units
Outstanding, End of Period -- 1,788 4,089 2,772
VAN KAMPEN UIF U.S. REAL
ESTATE SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.17 $ 9.86 $ 12.55
Accumulation Unit Value,
End of Period $10.17 $ 9.86 $ 12.55 14.00
Number of Units
Outstanding, End of Period -- -- -- --
VAN KAMPEN UIF VALUE
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 9.95 $ 9.61 $ 11.82
Accumulation Unit Value,
End of Period $ 9.95 $ 9.61 $ 11.82 $ 11.89
Number of Units
Outstanding, End of Period -- 17,465 16,697 15,426
WITH ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER
49
50
*The Contracts were first offered on November 10, 1998. The Accumulation Unit
Values in this table reflect a mortality and expense risk charge of 1.27% and
an administrative expense charge of 0.10%. All of the Variable Sub-Accounts
commenced operations on or before November 10, 1998.
51
1. Effective May 1, 2002 AIM V.I. Growth and IncomeFund, AIM V.I. International
Equity Fund and AIM V.I. Value Fund changed their names to the AIM V.I. Core
Equity Fund, AIM V.I. International Growth Fund and AIM V.I. Premier Equity
Fund, respectively.
2. Effective May 1, 2002 the Portfolios have been re-branded and have changed
names from Morgan Stanley UIF Fixed Income Portfolio to Van Kampen UIF Core
Plus Fixed Income Portfolio, Morgan Stanley UIF Equity Growth Portfolio to
Van Kampen UIF Equity Growth Portfolio, Morgan Stanley UIF Global Value
Equity Porfolio to Van Kampen UIF Global Value Equity Portfolio, Morgan
Stanley UIF International Magnum Portfolio to Van Kampen UIF International
Magnum Portfolio, Morgan Stanley UIF Mid Cap Value Portfolio to Van Kampen
UIF Mid Cap Value Portfolio, Morgan Stanley UIF U.S. Real Estate Portfolio to
Van Kampen UIF U.S. Real Estate Portfolio and Morgan Stanley UIF Value
Portfolio to Van Kampen UIF Value Portfolio.
3. The Goldman Sachs VIT Global Income Sub-Account will not be available to new
investors beginning on May 1, 2001.
52
APPENDIX B
- --------------------------------------------------------------------------------
MARKET VALUE ADJUSTMENT
- --------------------------------------------------------------------------------
The Market Value Adjustment is based on the following:
I = the Treasury Rate for a maturity equal to the Guarantee Period for the week
preceding the establishment of the Guarantee Period.
N = the number of whole and partial years from the date we receive the
withdrawal, transfer, or death benefit request, or from the Payout Start Date to
the end of the Guarantee Period.
J = the Treasury Rate for a maturity equal to the Guarantee Period for the week
preceding the receipt of the withdrawal, transfer, death benefit, or income
payment request.*
Treasury Rate means the U.S. Treasury Note Constant Maturity yield as reported
in Federal Reserve Bulletin Release H.15.
*If a U.S. Treasury Note ("Note") with a maturity of the Guarantee Period is not
available, we will determine an appropriate interest rate based on an
interpolation of the next shortest duration and next longest duration Notes.
The Market Value Adjustment factor is determined from the following formula:
.9 X [I-(J + .0025)] X N
To determine the Market Value Adjustment, we will multiply the Market Value
Adjustment factor by the amount transferred, withdrawn (in excess of the Free
Withdrawal Amount), paid as a death benefit, or applied to an Income Plan from a
Guarantee Period at any time other than during the 30 day period after such
Guarantee Period expires.
53
EXAMPLES OF MARKET VALUE ADJUSTMENT
- --------------------------------------------------------------------------------
Purchase Payment: $10,000 allocated to a Guarantee Period
Guarantee Period: 5 years
Interest Rate: 4.50%
Full Surrender: End of Contract Year 3
NOTE: These examples assume that premium taxes are not applicable.
Step 1. Calculate Contract Value at $10,000.00 X (1.045)/3 /= $11,411.66 End of
Contract Year 3: Step 2. Calculate the Free Withdrawal .15 X ($10,000.00) =
$1,500.00 Amount:
I = 4.5%
J = 4.2%
Step 3. Calculate the Withdrawal N = 730 days =2
Charge: --------
365 days
Market Value Adjustment Factor: .9 X
[I - (J + .0025)] X N = .9 X [.045 -
Step 4. Calculate the Market Value (.042 + .0025)] X 2 = .0009
Adjustment:
Market Value Adjustment = Market Value
Adjustment Factor X Amount Subject to
Market Value Adjustment:
= .0009 X ($11,411.66 - $1,500.00) =
$8.92
Step 5. Calculate the amount received
by a Contract Owner as a result of full
withdrawal at the end of Contract Year $11,411.66 + $8.92 = $11,420.58
3:
EXAMPLE 1 (ASSUMES DECLINING INTEREST RATES)
54
EXAMPLE 2: (ASSUMES RISING INTEREST RATES)
Step 1. Calculate Contract Value at $10,000.00 X (1.045)/3 /= $11,411.66 End of
Contract Year 3: Step 2. Calculate the Free Withdrawal .15 X ($10,000.00) =
$1,500.00 Amount:
I = 4.5%
J = 4.8%
Step 3. Calculate the Withdrawal N = 730 days =2
Charge: --------
365 days
Market Value Adjustment Factor: .9 X
[I - (J + .0025)] X N = .9 X [.045 -
Step 4. Calculate the Market Value (.048 + .0025)] X 2 = -.0099
Adjustment:
Market Value Adjustment = Market Value
Adjustment Factor X Amount Subject to
Market Value Adjustment:
= -.0099 X ($11,411.66 - $1,500.00)
= -$98.13
Step 5. Calculate the amount received
by a Contract Owner as a result of full
withdrawal at the end of Contract Year $11,411.66 - $98.13 = $11,313.53
3:
55
56
Green 677
THE ALLSTATE\\(R)\\ PROVIDER VARIABLE ANNUITY
(formerly referred to as "The Glenbrook Provider Variable Annuity")
GLENBROOK LIFE AND ANNUITY COMPANY
300 N. MILWAUKEE AVE.
VERNON HILLS, IL 60061
TELEPHONE NUMBER: 1-800-755-5275 PROSPECTUS
DATED MAY 1, 2002
-------------------------------------------------------------------------------
GLENBROOK LIFE AND ANNUITY COMPANY ("GLENBROOK LIFE") is offering the
Allstate\\(R)\\ Provider Variable Annuity, an individual flexible premium
deferred variable annuity contract ("CONTRACT"). This prospectus contains
information about the Contract that you should know before investing. Please
keep it for future reference.
The Contract currently offers 43 "INVESTMENT ALTERNATIVEs". The investment
alternatives include 3 fixed account options ("FIXED ACCOUNT OPTIONS") and 40
variable sub-accounts ("VARIABLE SUB-ACCOUNTS") of the GLENBROOK LIFE
Multi-Manager Variable Account ("VARIABLE ACCOUNT"). Each Variable Sub-Account
invests exclusively in shares of one of the portfolios ("PORTFOLIOS") of the
following mutual funds ("FUNDS"):
AIM VARIABLE INSURANCE FUNDS MFS(R) VARIABLE INSURANCE TRUST/SM/
FEDERATED INSURANCE SERIES OPPENHEIMER VARIABLE ACCOUNT FUNDS
FIDELITY VARIABLE INSURANCE PRODUCTS PUTNAM VARIABLE ACCOUNT FUNDS
FUND STI CLASSIC VARIABLE TRUST
FRANKLIN TEMPLETON VARIABLE INSURANCE
PRODUCTS TRUST
Not all of the Funds and/or Portfolios, however, may be available with your
Contract. You should check with your representative for further information on
the availability of Funds and/or Portfolios. Your annuity application will list
all available Portfolios.
WE (GLENBROOK LIFE) have filed a Statement of Additional Information, dated May
1, 2002, with the Securities and Exchange Commission ("SEC"). It contains more
information about the Contract and is incorporated herein by reference, which
means it is legally a part of this prospectus. Its table of contents appears on
page 59 of this prospectus. For a free copy, please write or call us at the
address or telephone number above, or go to the SEC's Web site (http://
www.sec.gov). You can find other information and documents about us, including
documents that are legally part of this prospectus, at the SEC's Web site.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THE SECURITIES DESCRIBED IN THIS PROSPECTUS, NOR
HAS IT PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A
FEDERAL CRIME.
IMPORTANT THE CONTRACTS MAY BE DISTRIBUTED THROUGH BROKER-DEALERS
THAT HAVE RELATIONSHIPS WITH BANKS OR OTHER FINANCIAL
NOTICES INSTITUTIONS OR BY EMPLOYEES OF SUCH BANKS. HOWEVER, THE
CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY SUCH INSTITUTIONS OR ANY FEDERAL REGULATORY AGENCY.
INVESTMENT IN THE CONTRACTS INVOLVES INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE CONTRACTS ARE NOT FDIC INSURED.
1
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
- --------------------------------------------------------------------------------
OVERVIEW
- --------------------------------------------------------------------------------
Important Terms
- --------------------------------------------------------------------------------
The Contract at a Glance
- --------------------------------------------------------------------------------
How the Contract Works
- --------------------------------------------------------------------------------
Expense Table
- --------------------------------------------------------------------------------
Financial Information
- --------------------------------------------------------------------------------
CONTRACT FEATURES
- --------------------------------------------------------------------------------
The Contract
- --------------------------------------------------------------------------------
Purchases
- --------------------------------------------------------------------------------
Contract Value
- --------------------------------------------------------------------------------
Investment Alternatives
- --------------------------------------------------------------------------------
The Variable Sub-Accounts
- --------------------------------------------------------------------------------
The Fixed Account Options
- --------------------------------------------------------------------------------
Transfers
- --------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------
Access To Your Money
- --------------------------------------------------------------------------------
Income Payments
- --------------------------------------------------------------------------------
DEATH BENEFITS
- --------------------------------------------------------------------------------
PAGE
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
More Information:
- --------------------------------------------------------------------------------
GLENBROOK LIFE
- --------------------------------------------------------------------------------
The Variable Account
- --------------------------------------------------------------------------------
The Portfolios
- --------------------------------------------------------------------------------
The Contract
- --------------------------------------------------------------------------------
Qualified Plans
- --------------------------------------------------------------------------------
Legal Matters
- --------------------------------------------------------------------------------
Taxes
- --------------------------------------------------------------------------------
Annual Reports and Other Documents
- --------------------------------------------------------------------------------
Experts
- --------------------------------------------------------------------------------
Performance Information
- --------------------------------------------------------------------------------
APPENDIX A-ACCUMULATION UNIT VALUES 44
- --------------------------------------------------------------------------------
APPENDIX B-MARKET VALUE ADJUSTMENT EXAMPLE 57
- --------------------------------------------------------------------------------
2
IMPORTANT TERMS
- --------------------------------------------------------------------------------
This prospectus uses a number of important terms that you may not be familiar
with. The index below identifies the page that describes each term. The first
use of each term in this prospectus appears in highlights.
PAGE
- --------------------------------------------------------------------------------
Accumulation Phase
- --------------------------------------------------------------------------------
Accumulation Unit
- --------------------------------------------------------------------------------
Accumulation Unit Value
- --------------------------------------------------------------------------------
Anniversary Values
- --------------------------------------------------------------------------------
Annuitant
- --------------------------------------------------------------------------------
Automatic Additions Plan
- --------------------------------------------------------------------------------
Automatic Portfolio Rebalancing Program
- --------------------------------------------------------------------------------
Beneficiary
- --------------------------------------------------------------------------------
Cancellation Period
- --------------------------------------------------------------------------------
Contract*
- --------------------------------------------------------------------------------
Contract Anniversary
- --------------------------------------------------------------------------------
Contract Owner (You)
- --------------------------------------------------------------------------------
Contract Value
- --------------------------------------------------------------------------------
Contract Year
- --------------------------------------------------------------------------------
Death Benefit Anniversary
- --------------------------------------------------------------------------------
Death Proceeds
- --------------------------------------------------------------------------------
Dollar Cost Averaging Program
- --------------------------------------------------------------------------------
Due Proof of Death
- --------------------------------------------------------------------------------
Enhanced Death Benefit Rider
- --------------------------------------------------------------------------------
Enhanced Death and Income Benefit Combination Rider
- --------------------------------------------------------------------------------
Enhanced Death and Income Benefit Combination Rider II
- --------------------------------------------------------------------------------
PAGE
- --------------------------------------------------------------------------------
Fixed Account Options
- --------------------------------------------------------------------------------
Free Withdrawal Amount
- --------------------------------------------------------------------------------
Funds
- --------------------------------------------------------------------------------
GLENBROOK LIFE ("We" or "Us")
- --------------------------------------------------------------------------------
Guarantee Periods
- --------------------------------------------------------------------------------
Income Plan
- --------------------------------------------------------------------------------
Investment Alternatives
- --------------------------------------------------------------------------------
Issue Date
- --------------------------------------------------------------------------------
Market Value Adjustment
- --------------------------------------------------------------------------------
Payout Phase
- --------------------------------------------------------------------------------
Payout Start Date
- --------------------------------------------------------------------------------
Portfolios
- --------------------------------------------------------------------------------
Qualified Contracts
- --------------------------------------------------------------------------------
SEC
- --------------------------------------------------------------------------------
Settlement Value
- --------------------------------------------------------------------------------
Systematic Withdrawal Program
- --------------------------------------------------------------------------------
Valuation Date
- --------------------------------------------------------------------------------
Variable Account
- --------------------------------------------------------------------------------
Variable Sub-Account
- --------------------------------------------------------------------------------
*
In certain states the Contract is available only as a group Contract. If you
purchase a group Contract, we will issue you a certificate that represents
your ownership and that summarizes the provisions of the group Contract.
References to "Contract" in this prospectus include certificates, unless the
context requires otherwise.
3
THE CONTRACT AT A GLANCE
- --------------------------------------------------------------------------------
The following is a snapshot of the Contract. Please read the remainder of this
prospectus for more information.
FLEXIBLE PAYMENTS You can purchase a Contract with as little as
$3,000 ($2,000 for "QUALIFIED CONTRACTS", which are
Contracts issued within QUALIFIED PLANS). You can add to
your Contract as often and as much as you like, but each
payment must be at least $50.
- -------------------------------------------------------------------------------
RIGHT TO CANCEL You may cancel your Contract within 20 days of
receipt or any longer period as your state may require
("CANCELLATION PERIOD"). Upon cancellation, we will
return your purchase payments adjusted, to the extent
federal or state law permits, to reflect the investment
experience of any amounts allocated to the Variable
Account.
- -------------------------------------------------------------------------------
EXPENSES You will bear the following expenses:
.Total Variable Account annual fees equal to 1.15% of
average daily net assets (1.37% if you select the
ENHANCED DEATH BENEFIT RIDER; 1.59% if you selected
the ENHANCED DEATH AND INCOME BENEFIT COMBINATION
RIDER (for Contracts issued before September 22,
2000); and 1.65% if you select the ENHANCED DEATH AND
INCOME BENEFIT COMBINATION RIDER II (for Contracts
issued on or after September 22, 2000)
.Annual contract maintenance charge of $35 (with
certain exceptions)
.Withdrawal charges ranging from 0% to 6% of purchase
payment withdrawn (with certain exceptions)
.Transfer fee of $10 after 12th transfer in any
CONTRACT YEAR (fee currently waived)
. State premium tax (if your state imposes one)
In addition, each Portfolio pays expenses that you will
bear indirectly if you invest in a Variable Sub-Account.
- -------------------------------------------------------------------------------
INVESTMENT The Contract offers 43 investment alternatives
ALTERNATIVES including:
.3 Fixed Account Options (which credit interest at
rates we guarantee)
.40 Variable Sub-Accounts investing in Portfolios
offering professional money management by these
investment advisers:
. AIM Advisors, Inc.
. Federated Investment Management Company
. Fidelity Management & Research Company
. Franklin Advisers, Inc.
. MFS Investment Management(R)
. Oppenheimer Funds, Inc.
. Putnam Investment Management Group(R)
. Templeton Global Advisors Limited
. Trusco Capital Management, Inc.
To find out current rates being paid on the Fixed
Account options, or to find out how the Variable
Sub-Accounts have performed, please call us at
1-800-755-5275.
- -------------------------------------------------------------------------------
SPECIAL SERVICES For your convenience, we offer these special services:
. AUTOMATIC PORTFOLIO REBALANCING PROGRAM
. AUTOMATIC ADDITIONS PROGRAM
. DOLLAR COST AVERAGING PROGRAM
. SYSTEMATIC WITHDRAWAL PROGRAM
INCOME PAYMENTS You can choose fixed income payments, variable
income payments, or a combination of the two. You can
receive your income payments in one of the following
ways:
. life income with guaranteed payments
.a "joint and survivor" life income with guaranteed
payments
.guaranteed payments for a specified period (5 to 30
years)
- -------------------------------------------------------------------------------
DEATH BENEFITS If you or the ANNUITANT (if the Contract is owned by a
non-natural person) die before the PAYOUT START DATE,
we will pay the death benefit described in the
Contract. We offer an Enhanced Death Benefit Rider and
an Enhanced Death and Income Benefit Combination Rider
II.
- -------------------------------------------------------------------------------
TRANSFERS Before the Payout Start Date, you may transfer your
Contract value ("CONTRACT VALUE") among the investment
alternatives, with certain restrictions. Transfers to a
Guarantee Period of the Fixed Account must be at least
$50.
We do not currently impose a fee upon transfers.
However, we reserve the right to charge $10 per transfer
after the 12th transfer in each "Contract Year," which
we measure from the date we issue your Contract or a
Contract anniversary ("CONTRACT ANNIVERSARY").
- -------------------------------------------------------------------------------
WITHDRAWALS You may withdraw some or all of your Contract Value at
any time prior to the Payout Start Date. In general,
you must withdraw at least $50 at a time. Full or
partial withdrawals are available under limited
circumstances on or after the Payout Start Date.
Withdrawals of earnings are taxed as ordinary income
and, if taken prior to age 59/1/2/, may be subject to
an additional 10% federal tax penalty. A withdrawal
charge and MARKET VALUE ADJUSTMENT also may apply.
- -------------------------------------------------------------------------------
4
5
HOW THE CONTRACT WORKS
- --------------------------------------------------------------------------------
The Contract basically works in two ways. First, the Contract can help you (we
assume you are the CONTRACT OWNER) save for retirement because you can invest in
up to 43 investment alternatives and generally pay no federal income taxes on
any earnings until you withdraw them. You do this during what we call the
"ACCUMULATION PHASE" of the Contract. The Accumulation Phase begins on the date
we issue your Contract (we call that date the "ISSUE DATE") and continues until
the Payout Start Date, which is the date we apply your money to provide income
payments. During the Accumulation Phase, you may allocate your purchase payments
to any combination of the Variable Sub-Accounts and/ or Fixed Account Options.
If you invest in any of the 3 Fixed Account Options, you will earn a fixed rate
of interest that we declare periodically. If you invest in any of the 40
Variable Sub-Accounts, your investment return will vary up or down depending on
the performance of the corresponding Portfolios.
Second, the Contract can help you plan for retirement because you can use it to
receive retirement income for life and/ or for a pre-set number of years, by
selecting one of the income payment options (we call these "INCOME PLANS")
described on page___ . You receive income payments during what we call the
"PAYOUT PHASE" of the Contract, which begins on the Payout Start Date and
continues until we make the last payment required by the Income Plan you select.
During the Payout Phase, if you select a fixed income payment option, we
guarantee the amount of your payments, which will remain fixed. If you select a
variable income payment option, based on one or more of the Variable
Sub-Accounts, the amount of your payments will vary up or down depending on the
performance of the corresponding Portfolios. The amount of money you accumulate
under your Contract during the Accumulation Phase and apply to an Income Plan
will determine the amount of your income payments during the Payout Phase.
The timeline below illustrates how you might use your Contract.
LOGO
As the Contract Owner, you exercise all of the rights and privileges provided by
the Contract. If you die, any surviving Contract Owner or, if none, the
BENEFICIARY will exercise the rights and privileges provided by the Contract.
See "The Contract." In addition, if you die before the Payout Start Date, we
will pay a death benefit to any surviving Contract Owner, or if there is none,
to your Beneficiary. See "Death Benefits."
Please call us at 1-800-755-5275 if you have any questions about how the
Contract works.
6
EXPENSE TABLE
- --------------------------------------------------------------------------------
The table below lists the expenses that you will bear directly or indirectly
when you buy a Contract. The table and the examples that follow do not reflect
premium taxes that may be imposed by the state where you reside. For more
information about Variable Account expenses, see "Expenses," below. For more
information about Portfolio expenses, please refer to the accompanying
prospectuses for the Funds.
CONTRACT OWNER TRANSACTION EXPENSES
Withdrawal Charge (as a percentage of purchase payments)*
Number of Complete Years Since We Received the Purchase 0 1 2 3 4 5 6+
Payment Being Withdrawn
- --------------------------------------------------------------------------------------------
Applicable Charge 6% 6% 5% 5% 4% 3% 0%
- --------------------------------------------------------------------------------------------
Annual Contract Maintenance Charge $35.00**
- --------------------------------------------------------------------------------------------
Transfer Fee $10.00***
- --------------------------------------------------------------------------------------------
*Each Contract Year, you may withdraw up to 15% of your aggregate purchase
payments without incurring a withdrawal charge.
** We will waive this charge in certain cases. See "Expenses."
*** Applies solely to the thirteenth and subsequent transfers within a
Contract Year, excluding transfers due to dollar cost averaging and automatic
portfolio rebalancing. We are currently waiving the transfer fee.
VARIABLE ACCOUNT ANNUAL EXPENSES
(AS A PERCENTAGE OF DAILY NET ASSET VALUE
DEDUCTED FROM EACH VARIABLE SUB-ACCOUNT)
WITHOUT THE ENHANCED DEATH BENEFIT RIDER, ENHANCED DEATH AND INCOME BENEFIT
COMBINATION RIDER, OR ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER II
Mortality and Expense Risk Charge 1.05%
- -----------------------------------------------------------------------------------
Administrative Expense Charge 0.10%
- -----------------------------------------------------------------------------------
Total Variable Account Annual Expense 1.15%
- -----------------------------------------------------------------------------------
WITH THE ENHANCED DEATH BENEFIT RIDER
Mortality and Expense Risk Charge 1.27%
- -------------------------------------------------------------------------------
Administrative Expense Charge 0.10%
- -------------------------------------------------------------------------------
Total Variable Account Annual Expense 1.37%
- -------------------------------------------------------------------------------
WITH THE ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER (FOR CONTRACTS
ISSUED BEFORE SEPTEMBER 22, 2000)
Mortality and Expense Risk Charge 1.49%
- -------------------------------------------------------------------------------
Administrative Expense Charge 0.10%
- -------------------------------------------------------------------------------
Total Variable Account Annual Expense 1.59%
- -------------------------------------------------------------------------------
WITH THE ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER II (FOR CONTRACTS
ISSUED ON OR AFTER SEPTEMBER 22, 2000.
Mortality and Expense Risk Charge 1.55%
- -------------------------------------------------------------------------------
Administrative Expense Charge 0.10%
- -------------------------------------------------------------------------------
Total Variable Account Annual Expense 1.65%
- -------------------------------------------------------------------------------
7
PORTFOLIO ANNUAL EXPENSES (AS A PERCENTAGE OF PORTFOLIO AVERAGE DAILY NET
ASSETS)
Total
Portfolio
Management Rule 12b-1 Other Annual
Portfolio Fees Fees Expenses Expenses
- ----------------------------------------------------------------------------------------------------------------------
AIM V.I. Balanced Fund - Series 1 0.75% N/A 0.37% 1.12%
- ----------------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund - Series 1 0.61% N/A 0.24% 0.85%
- ----------------------------------------------------------------------------------------------------------------------
AIM V.I. Core Equity Fund - Series 1 (2) 0.61% N/A 0.21% 0.82%
- ----------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth Fund - Series 1 0.62% N/A 0.26% 0.88%
- ----------------------------------------------------------------------------------------------------------------------
AIM V.I. High Yield Fund Series 1 0.63% N/A 0.66% 1.29%
- ----------------------------------------------------------------------------------------------------------------------
AIM V.I. Premier Equity Fund - Series 1 (2) 0.60% N/A 0.25% 0.85%
- ----------------------------------------------------------------------------------------------------------------------
Federated Prime Money Fund II (3,4) 0.75% N/A 0.16% 0.91%
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Contrafund Portfolio Initial Class (5) 0.58% N/A 0.10% 0.68%
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio Initial Class (5) 0.48% N/A 0.10% 0.58%
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio Initial Class (5) 0.58% N/A 0.10% 0.68%
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio Initial Class (5) 0.58% N/A 0.13% 0.71%
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Index 500 Portfolio Initial Class (6) 0.24% N/A 0.11% 0.35%
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio Initial Class (5) 0.73% N/A 0.19% 0.92%
- ----------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Series Initial Class (7) 0.75% N/A 0.12% 0.87%
- ----------------------------------------------------------------------------------------------------------------------
MFS Investors Trust Series - Initial Class (7) 0.75% N/A 0.15% 0.90%
- ----------------------------------------------------------------------------------------------------------------------
MFS New Discovery Series - Initial Class (7,8) 0.90% N/A 0.16% 1.06%
- ----------------------------------------------------------------------------------------------------------------------
MFS Research Series - Initial Class (7) 0.75% N/A 0.15% 0.90%
- ----------------------------------------------------------------------------------------------------------------------
MFS Utilities Series - Initial Class (7) 0.75% N/A 0.18% 0.93%
- ----------------------------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth Fund/VA 0.64% N/A 0.04% 0.68%
- ----------------------------------------------------------------------------------------------------------------------
Oppenheimer Capital Appreciation Fund/VA 0.64% N/A 0.04% 0.68%
- ----------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund/VA 0.64% N/A 0.06% 0.70%
- ----------------------------------------------------------------------------------------------------------------------
Oppenheimer Main Street Growth & Income Fund/VA 0.68% N/A 0.05% 0.73%
- ----------------------------------------------------------------------------------------------------------------------
Oppenheimer Multiple Strategies Fund/VA 0.72% N/A 0.04% 0.76%
- ----------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund/VA (9) 0.74% N/A 0.05% 0.79%
- ----------------------------------------------------------------------------------------------------------------------
Putnam VT Diversified Income Fund - Class IB (10) 0.68% .025% 0.11% 1.04%
- ----------------------------------------------------------------------------------------------------------------------
Putnam VT Growth and Income Fund - Class IB (10) 0.46% .025% 0.05% 0.76%
- ----------------------------------------------------------------------------------------------------------------------
Putnam VT Growth Opportunities Fund - Class IB (10) 0.70% .025% 0.15% 1.10%
- ----------------------------------------------------------------------------------------------------------------------
Putnam VT Health Sciences Fund - Class IB (10) 0.70% .025% 0.09% 1.04%
- ----------------------------------------------------------------------------------------------------------------------
Putnam VT New Value Fund - Class IB (10) 0.70% .025% 0.09% 1.04%
- ----------------------------------------------------------------------------------------------------------------------
Putnam VT Voyager Fund II - Class IB (10) 0.70% .025% 0.92% 1.87%
- ----------------------------------------------------------------------------------------------------------------------
STI Capital Appreciation Fund (11) 1.15% N/A 0.29% 1.44%
- ----------------------------------------------------------------------------------------------------------------------
STI Growth and Income Fund (12) 0.00% N/A 1.20% 1.20%
- ----------------------------------------------------------------------------------------------------------------------
STI International Equity Fund (11) 1.25% N/A 1.07% 2.32%
- ----------------------------------------------------------------------------------------------------------------------
STI Investment Grade Bond Fund (11) 0.74% N/A 0.58% 1.32%
- ----------------------------------------------------------------------------------------------------------------------
STI Mid-Cap Equity Fund (11) 1.15% N/A 0.51% 1.66%
- ----------------------------------------------------------------------------------------------------------------------
STI Quality Growth Stock Fund (12) 0.00% N/A 1.30% 1.30%
- ----------------------------------------------------------------------------------------------------------------------
STI Small Cap Value Equity Fund (11) 1.15% N/A 0.76% 1.91%
- ----------------------------------------------------------------------------------------------------------------------
STI Value Income Stock Fund (11) 0.80% N/A 0.32% 1.12%
- ----------------------------------------------------------------------------------------------------------------------
Templeton Global Income Securities Fund - Class 2 (13) 0.63% 0.25% 0.08% 0.96%
- ----------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund- Class 2 (13) 0.80% 0.25% 0.05% 1.10%
- ----------------------------------------------------------------------------------------------------------------------
(1)
1. Figures shown in the Table are for the year ended December 31, 2001 (except
as otherwise noted).
2. Effective May 1, 2002 the AIM V.I. Growth and Income Fund and AIM V.I. Value
Fund changed their names to the AIM V.I. Core Equity Fund and AIM V.I. Premier
Equity Fund, respectively.
3. "Management Fees" include a shareholder services fee of 0.25%.
8
4. Although not contractually obligated to do so, the shareholder services
provider waived certain amounts. The Portfolio did not pay or accrue the
shareholder services fee during the fiscal year ended December 31, 2001.
Additionally, the Portfolio has no present intention of paying or accruing the
shareholder services fee during the year ending December 31, 2002. "Total
Portfolio Annual Expenses" listed in the table above reflect gross ratios prior
to any voluntary waivers/reimbursements of expenses. Had this fee reduction been
taken into account, "Total Portfolio Annual Expenses" would have been lower and
would equal 0.66%.
5. Actual "Total Portfolio Annual Expenses" were lower because a portion of the
brokerage commissions that the Portfolios paid was used to reduce the
Portfolios' expenses. In addition, through arrangements with the Portfolios'
custodian, credits realized as a result of uninvested cash balances are used to
reduce a portion of the Portfolios' custodian expenses. These offsets may be
discontinued at any time. Had these offsets been taken into account, "Total
Portfolio Annual Expenses" would have been 0.64% for Contrafund Portfolio, 0.57%
for Equity-Income Portfolio, 0.65% for Growth Portfolio, 0.70% for High Income
Portfolio and 0.87% for Overseas Portfolio.
6. The Portfolio's manager has voluntarily agreed to reimburse expenses to the
extent that "Total Portfolio Annual Expenses" (excluding interest, taxes,
certain securities lending costs, brokerage commissions and extraordinary
expenses) exceed 0.28%. This arrangement can be discontinued by the Portfolios'
manager at any time. Including this reimbursement, the "Management Fees", "Other
Expenses" and "Total Portfolio Annual Expenses" in 2001 were 0.24%, 0.04% and
0.28%, respectively.
7. Each Portfolio has an expense offset arrangement which reduces the
Portfolios' custodian fee based upon the amount of cash maintained by the
Portfolio with its custodian and dividend disbursing agent. Each Portfolio may
enter into other such arrangements and directed brokerage arrangements, which
would also have the effect of reducing the Portfolios' expenses. "Other
Expenses" do not take these expense reductions into account, and are therefore
higher than the actual expenses of the Portfolios. Had these fee reductions been
taken into account, "Total Portfolio Annual Expenses" would have been lower and
would equal 0.86% for Emerging Growth Series, 0.89% for Investors Trust Series,
1.05% for New Discovery Series, 0.89 for Research Series and 0.92% for Utilities
Series.
8. MFS has contractually agreed, subject to reimbursement, to bear expenses for
the Portfolio such that "Other Expenses" (after taking into account the expense
offset arrangement described in note 7 above), do not exceed 0.15% of the
average daily net assets of the Portfolios during the current fiscal year.
Without these fee arrangements "Total Portfolio Annual Expenses" would have been
1.09%. These contractual fee arrangements will continue at least until May 1,
2003, unless changed with the consent of the board of trustees which oversee the
Portfolios.
9. Oppenheimer Funds, Inc. (OFI) will reduce the management fee by 0.10% as long
as the fund's trailing 12-month performance at the end of the quarter is in the
fifth Lipper peer-group quintile; and by 0.05% as long as it is in the fourth
quintile. If the fund emerges from a "penalty box" position for a quarter but
then slips back in the next quarter, OFI will reinstate the waiver. The waiver
is voluntary and may be terminated by the Manager at any time.
10. Restated to reflect an increase in Rule 12b-1 Fees effective April 30, 2001.
Actual Rule 12b-1 Fees during the most recent fiscal year were 0.22%. See the
Funds' prospectus for more information about Rule 12b-1 fees payable under the
Funds' distribution plan.
11. "Total Portfolio Annual Expenses" listed in the table above reflect gross
ratios prior to any voluntary waivers/ reimbursements of expenses. The
Investment Adviser, has voluntarily agreed to reduce or limit certain other
expenses to the extent "Total Portfolio Annual Expenses" exceed 1.15% for
Capital Appreciation Fund, 1.60% for International Equity Fund, 0.75% for
Investment Grade Bond Fund, 1.15% for Mid-Cap Equity Fund, 1.20% for Small Cap
Value Equity Fund and 0.95% for Value Income Stock Fund. This arrangement can be
discontinued by the Adviser at any time. With these limitations taken into
consideration, "Management Fees", "Rule 12b-1 Fees", "Other Expenses" and "Total
Portfolio Annual Expenses" were as follows:
Total
Portfolio
Management Rule 12b-1 Other Annual
Portfolio Fees Fees Expenses Expenses
- ----------------------------------------------------------------------------------------
STI Capital Appreciation Fund 0.86% N/A 0.29% 1.15%
- ----------------------------------------------------------------------------------------
STI International Equity Fund 0.53% N/A 1.07% 1.60%
- ----------------------------------------------------------------------------------------
STI Investment Grade Bond Fund 0.17% N/A 0.58% 0.75%
- ----------------------------------------------------------------------------------------
STI Mid-Cap Equity Fund 0.64% N/A 0.51% 1.15%
- ----------------------------------------------------------------------------------------
STI Small Cap Value Equity Fund 0.44% N/A 0.76% 1.20%
- ----------------------------------------------------------------------------------------
STI Value Income Stock Fund 0.63% N/A 0.32% 0.95%
- ----------------------------------------------------------------------------------------
9
12. The investment Adviser, has agreed to waive its fee and/or reimburse
expenses to the extent necessary to limit "Total Portfolio Annual Expenses" to
1.20% for Growth and Income Fund and 1.30% for Quality Growth Stock Fund. If at
any point before May 1, 2005, it becomes unnecessary for the Adviser to make
reimbursements, the Adviser may retain the difference between "Total Portfolio
Annual Expenses" of either Portfolio and its expense cap to recapture any of its
prior reimbursements. Without these reimbursements, "Management Fees", "Other
Expenses" and "Total Portfolio Annual Expenses" would have been 0.90%, 2.32% and
3.22% for Growth and Income Fund and 1.00%, 4.47% and 5.47% for Quality Growth
Stock Fund, respectively.
13. The Portfolio administration fee is paid indirectly through the management
fee. The Portfolio's Class 2 distribution plan or "rule 12b-1 plan" is described
in the Portfolio's prospectus.
10
EXAMPLE 1
The example below shows the dollar amount of expenses that you would bear
directly or indirectly if you:
... invested $1,000 in a Variable Sub-Account,
... earned a 5% annual return on your investment,
... surrendered your Contract, or you began receiving income payments for a
specified period of less than 120 months, at the end of each time period, and
... elected the Enhanced Death and Income Benefit Combination Rider II.
THE EXAMPLE DOES NOT INCLUDE ANY TAXES OR TAX PENALTIES YOU MAY BE REQUIRED TO
PAY IF YOU SURRENDER YOUR CONTRACT.
ASSUMES TERMINATION
Portfolio 1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------------
AIM V.I. Balanced $80 $132 $177 $320
- -------------------------------------------------------------------------------
AIM V.I. Capital Appreciation $77 $123 $164 $293
- -------------------------------------------------------------------------------
AIM V.I.Core Equity $77 $123 $162 $290
- -------------------------------------------------------------------------------
AIM V.I. Growth $78 $124 $165 $296
- -------------------------------------------------------------------------------
AIM V.I. High Yield $82 $137 $186 $337
- -------------------------------------------------------------------------------
AIM V.I. Premier Equity $77 $123 $164 $293
- -------------------------------------------------------------------------------
Federated Prime Money Fund II $78 $125 $167 $299
- -------------------------------------------------------------------------------
Fidelity VIP Contrafund $76 $118 $155 $276
- -------------------------------------------------------------------------------
Fidelity VIP Equity-Income $75 $115 $150 $265
- -------------------------------------------------------------------------------
Fidelity VIP Growth $76 $118 $155 $276
- -------------------------------------------------------------------------------
Fidelity VIP High Income $76 $119 $156 $279
- -------------------------------------------------------------------------------
Fidelity VIP Index 500 $72 $108 $138 $241
- -------------------------------------------------------------------------------
Fidelity VIP Overseas $78 $126 $167 $300
- -------------------------------------------------------------------------------
MFS Emerging Growth $78 $124 $165 $295
- -------------------------------------------------------------------------------
MFS Investors Trust $78 $125 $166 $298
- -------------------------------------------------------------------------------
MFS New Discovery $80 $130 $174 $314
- -------------------------------------------------------------------------------
MFS Research $78 $125 $166 $298
- -------------------------------------------------------------------------------
MFS Utilities $78 $126 $168 $301
- -------------------------------------------------------------------------------
Oppenheimer Aggressive Growth $76 $118 $155 $276
- -------------------------------------------------------------------------------
Oppenheimer Capital Appreciation $76 $118 $155 $276
- -------------------------------------------------------------------------------
Oppenheimer Global Securities $76 $119 $156 $278
- -------------------------------------------------------------------------------
Oppenheimer Main Street Growth & Income $76 $120 $157 $281
- -------------------------------------------------------------------------------
Oppenheimer Multiple Strategies $76 $121 $159 $284
- -------------------------------------------------------------------------------
Oppenheimer Strategic Bond $77 $122 $161 $287
- -------------------------------------------------------------------------------
Putnam VT Diversified Income $79 $129 $173 $312
- -------------------------------------------------------------------------------
Putnam VT Growth and Income $76 $121 $159 $284
- -------------------------------------------------------------------------------
Putnam VT Growth Opportunities $80 $131 $176 $318
- -------------------------------------------------------------------------------
Putnam VT Health Sciences $79 $129 $173 $312
- -------------------------------------------------------------------------------
Putnam VT New Value $79 $129 $173 $312
- -------------------------------------------------------------------------------
Putnam VT Voyager II $88 $154 $215 $391
- -------------------------------------------------------------------------------
STI Capital Appreciation $83 $141 $193 $351
- -------------------------------------------------------------------------------
STI Growth and Income $81 $134 $181 $328
- -------------------------------------------------------------------------------
STI International Equity $92 $168 $236 $431
- -------------------------------------------------------------------------------
STI Investment Grade Bond $82 $138 $187 $339
- -------------------------------------------------------------------------------
STI Mid-Cap Equity $86 $148 $204 $371
- -------------------------------------------------------------------------------
STI Quality Growth Stock $82 $137 $186 $337
- -------------------------------------------------------------------------------
STI Small Cap Value Equity $88 $156 $216 $394
- -------------------------------------------------------------------------------
STI Value Income Stock $80 $132 $177 $320
- -------------------------------------------------------------------------------
Templeton Global Income Securities $79 $127 $169 $304
- -------------------------------------------------------------------------------
Templeton Growth Securities $80 $131 $176 $318
- -------------------------------------------------------------------------------
11
12
EXAMPLE 2
Same assumptions as Example 1 above, except that you decided not to surrender
your Contract, or you began receiving income payments for a specified period of
at least 120 months, at the end of each period.
ASSUMES NO TERMINATION
Portfolio 1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------------
AIM V.I. Balanced $29 $ 89 $152 $320
- -------------------------------------------------------------------------------
AIM V.I. Capital Appreciation $26 $ 81 $138 $293
- -------------------------------------------------------------------------------
AIM V.I. Core Equity $26 $ 80 $137 $290
- -------------------------------------------------------------------------------
AIM V.I. Growth $27 $ 82 $140 $296
- -------------------------------------------------------------------------------
AIM V.I. High Yield $31 $ 95 $160 $337
- -------------------------------------------------------------------------------
AIM V.I. Premier Equity $26 $ 81 $138 $293
- -------------------------------------------------------------------------------
Federated Prime Money Fund II $27 $ 83 $141 $299
- -------------------------------------------------------------------------------
Fidelity VIP Contrafund $25 $ 76 $129 $276
- -------------------------------------------------------------------------------
Fidelity VIP Equity-Income $24 $ 73 $124 $265
- -------------------------------------------------------------------------------
Fidelity VIP Growth $25 $ 76 $129 $276
- -------------------------------------------------------------------------------
Fidelity VIP High Income $25 $ 77 $131 $279
- -------------------------------------------------------------------------------
Fidelity VIP Index 500 $21 $ 66 $112 $241
- -------------------------------------------------------------------------------
Fidelity VIP Overseas $27 $ 83 $142 $300
- -------------------------------------------------------------------------------
MFS Emerging Growth $27 $ 82 $139 $295
- -------------------------------------------------------------------------------
MFS Investors Trust $27 $ 83 $141 $298
- -------------------------------------------------------------------------------
MFS New Discovery $29 $ 87 $149 $314
- -------------------------------------------------------------------------------
MFS Research $27 $ 83 $141 $298
- -------------------------------------------------------------------------------
MFS Utilities $27 $ 83 $142 $301
- -------------------------------------------------------------------------------
Oppenheimer Aggressive Growth $25 $ 76 $129 $276
- -------------------------------------------------------------------------------
Oppenheimer Capital Appreciation $25 $ 76 $129 $276
- -------------------------------------------------------------------------------
Oppenheimer Global Securities $25 $ 76 $130 $278
- -------------------------------------------------------------------------------
Oppenheimer Main Street Growth & Income $25 $ 77 $132 $281
- -------------------------------------------------------------------------------
Oppenheimer Multiple Strategies $25 $ 78 $134 $284
- -------------------------------------------------------------------------------
Oppenheimer Strategic Bond $26 $ 79 $135 $287
- -------------------------------------------------------------------------------
Putnam VT Diversified Income $28 $ 87 $148 $312
- -------------------------------------------------------------------------------
Putnam VT Growth and Income $25 $ 78 $134 $284
- -------------------------------------------------------------------------------
Putnam VT Growth Opportunities $29 $ 89 $151 $318
- -------------------------------------------------------------------------------
Putnam VT Health Sciences $28 $ 87 $148 $312
- -------------------------------------------------------------------------------
Putnam VT New Value $28 $ 87 $148 $312
- -------------------------------------------------------------------------------
Putnam VT Voyager II $37 $112 $189 $391
- -------------------------------------------------------------------------------
STI Capital Appreciation $32 $ 99 $168 $351
- -------------------------------------------------------------------------------
STI Growth and Income $30 $ 92 $156 $328
- -------------------------------------------------------------------------------
STI International Equity $41 $125 $211 $431
- -------------------------------------------------------------------------------
STI Investment Grade Bond $31 $ 95 $162 $339
- -------------------------------------------------------------------------------
STI Mid-Cap Equity $35 $106 $179 $371
- -------------------------------------------------------------------------------
STI Quality Growth Stock $31 $ 95 $161 $337
- -------------------------------------------------------------------------------
STI Small Cap Value Equity $37 $113 $191 $394
- -------------------------------------------------------------------------------
STI Value Income Stock $29 $ 89 $152 $320
- -------------------------------------------------------------------------------
Templeton Global Income Securities $28 $ 84 $144 $304
- -------------------------------------------------------------------------------
Templeton Growth Securities $29 $ 89 $151 $318
- -------------------------------------------------------------------------------
PLEASE REMEMBER THAT YOU ARE LOOKING AT EXAMPLES AND NOT A REPRESENTATION OF
PAST OR FUTURE EARNINGS. YOUR ACTUAL EXPENSES MAY BE LESSER OR GREATER THAN
THOSE SHOWN ABOVE. SIMILARLY, YOUR RATE OF RETURN MAY BE LESSER OR GREATER THAN
5%, WHICH IS NOT GUARANTEED. THE ABOVE EXAMPLES ASSUME THE ELECTION OF THE
ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER II WITH A MORTALITY AND
EXPENSE RISK CHARGE OF 1.55%. IF NO RIDER WERE ELECTED, OR THE ENHANCED DEATH
BENEFIT RIDER WERE ELECTED, THE EXPENSE FIGURES SHOWN ABOVE WOULD BE SLIGHTLY
13
LOWER. TO REFLECT THE CONTRACT MAINTENANCE CHARGE IN THE EXAMPLES, WE ESTIMATED
AN EQUIVALENT PERCENTAGE CHARGE, BASED ON THE CURRENT AVERAGE CONTRACT SIZE OF
$38,997.
14
FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
To measure the value of your investment in the Variable Sub-Accounts during the
Accumulation Phase, we use a unit of measure we call the "ACCUMULATION UNIT."
Each Variable Sub-Account has a separate value for its Accumulation Units we
call "ACCUMULATION UNIT VALUE". Accumulation Unit Value is analogous to, but not
the same as, the share price of a mutual fund. Attached as Appendix A to this
prospectus are tables showing the Accumulation Unit Values of each Variable
Sub-Account since the date the Contracts were first offered. To obtain a fuller
picture of each Variable Sub-Account's finances, please refer to the Variable
Account's financial statements contained in the Statement of Additional
Information. The financial statements of GLENBROOK LIFE and the Variable Account
appear in the Statement of Additional Information.
15
THE CONTRACT
- --------------------------------------------------------------------------------
CONTRACT OWNER
The Glenbrook Life Provider Variable Annuity is a contract between you, the
Contract Owner, and Glenbrook Life, a life insurance company. As the Contract
Owner, you may exercise all of the rights and privileges provided to you by the
Contract. That means it is up to you to select or change (to the extent
permitted):
... the investment alternatives during the Accumulation and Payout Phases,
... the amount and timing of your purchase payments and withdrawals,
... the programs you want to use to invest or withdraw money,
... the income payment plan you want to use to receive retirement income,
... the Annuitant (either yourself or someone else) on whose life the income
payments will be based,
... the Beneficiary or Beneficiaries who will receive the benefits that the
Contract provides when the last surviving Contract Owner dies, and
... any other rights that the Contract provides.
If you die, any surviving Contract Owner, or, if none, the Beneficiary may
exercise the rights and privileges provided to them by the Contract.
The Contract cannot be jointly owned by both a non-natural person and a natural
person. If the Contract Owner is a grantor trust, the Contract Owner will be
considered a non-living person for purposes of the Death of Owner and Death of
Annuitant provisions of your Contract. The maximum age of the oldest Contract
Owner and Annuitant cannot exceed 90 as of the date we receive the completed
application. You may change the Contract Owner at any time. We will provide a
change of ownership form to be signed by you and filed with us. After we accept
the form, the change of ownership will be effective as of the date you signed
the form. Until we receive your written notice to change the Contract Owner, we
are entitled to rely on the most recent ownership information in our files. We
will not be liable as to any payment or settlement made prior to receiving the
written notice. Accordingly, if you wish to change the Contract Owner, you
should deliver your written notice to us promptly. Each change is subject to any
payment made by us or any other action we take before we accept the change.
You can use the Contract with or without a qualified plan. A qualified plan is a
personal retirement savings plan, such as an IRA or tax-sheltered annuity, that
meets the requirements of the Internal Revenue Code. Qualified plans may limit
or modify your rights and privileges under the Contract. We use the term
"Qualified Contract" to refer to a Contract issued within a qualified plan. See
"Qualified Plans" on page___.
Changing ownership of this Contract may cause adverse tax consequences and may
not be allowed under qualified plans. Please consult with a competent tax
advisor prior to making a request for a change of Contract Owner.
ANNUITANT
The Annuitant is the individual whose life determines the amount and duration of
income payments (other than under Income Plans with guaranteed payments for a
specified period). You initially designate an Annuitant in your application. You
may change the Annuitant at any time prior to the Payout Start Date (only if the
Contract Owner is a natural person). Once we accept a change, it takes effect as
of the date you signed the request. Each change is subject to any payment we
make or other action we take before we accept it.
You may designate a joint Annuitant, who is a second person on whose life income
payments depend. We permit joint Annuitants only on or after the Payout Start
Date. If the Annuitant dies prior to the Payout Start Date, the new Annuitant
will be:
(i) the youngest Contract Owner; otherwise,
(ii) the youngest Beneficiary.
BENEFICIARY
The Beneficiary is the person who may elect to receive the Death Proceeds or
become the new Contract Owner, subject to the "Death of Owner" section below, if
the sole surviving Contract Owner dies before the Payout Start Date. If the sole
surviving Contract Owner dies after the Payout Start Date, the Beneficiary will
receive any guaranteed income payments scheduled to continue.
You may name one or more primary and contingent Beneficiaries when you apply for
a Contract. The primary Beneficiary is the person who is first entitled to
receive benefits under the Contract upon death of the sole surviving Contract
Owner. A contingent Beneficiary is the person selected by the Contract Owner who
will become the Beneficiary if all named primary Beneficiaries die before the
death of the sole surviving Contract Owner.
You may change or add Beneficiaries at any time, unless you have designated an
irrevocable Beneficiary. We will provide a change of Beneficiary form to be
signed by you and filed with us. After we accept the form, the change of
Beneficiary will be effective as of the date you signed the form. Until we
receive your written notice to change a Beneficiary, we are entitled to rely on
the most recent Beneficiary information in our files. We will not be liable as
to any payment or settlement made prior to receiving the written notice.
Accordingly, if you wish to change your Beneficiary, you should deliver your
written notice to us promptly. Each change is subject to any payment made by us
or any other action we take before we accept
16
the change.
If you did not name a Beneficiary or, unless otherwise provided in the
Beneficiary designation, if a named Beneficiary is no longer living and there
are no other surviving primary or contingent Beneficiaries, the new Beneficiary
will be:
... your spouse or, if he or she is no longer alive,
... your surviving children equally, or if you have no surviving children,
... your estate.
If one or more Beneficiaries survive you (or survives the Annuitant, if the
Contract Owner is not a natural person), we will divide the Death Proceeds among
the surviving Beneficiaries according to your most recent written instructions.
If you have not given us written instructions, we will pay the Death Proceeds in
equal amounts to the surviving Beneficiaries.
If more than one Beneficiary shares in the Death Proceeds, each Beneficiary will
be treated as a separate and independent owner of his or her respective share.
Each Beneficiary will exercise all rights related to his or her share,
including the sole right to select a payout option, subject to any restrictions
previously placed upon the Beneficiary. Each Beneficiary may designate a
Beneficiary(ies) for his or her respective share, but that designated
Beneficiary(ies) will be restricted to the payout option chosen by the original
Beneficiary.
MODIFICATION OF THE CONTRACT
Only a Glenbrook Life officer may approve a change in or waive any provision of
the Contract. Any change or waiver must be in writing. None of our agents has
the authority to change or waive the provisions of the Contract. We may not
change the terms of the Contract without your consent, except to conform the
Contract to applicable law or changes in the law. If a provision of the Contract
is inconsistent with state law, we will follow state law.
ASSIGNMENTYou may not assign any interest in a Contract as collateral or
security for a loan. However, you may assign periodic income payments under the
Contract prior to the Payout Start Date. No Beneficiary may assign benefits
under the Contract until they are payable to the Beneficiary. We will not be
bound by any assignment until the assignor signs it and files it with us. We are
not responsible for the validity of any assignment. Federal law prohibits or
restricts the assignment of benefits under many types of retirement plans and
the terms of such plans may themselves contain restrictions on assignments. An
assignment may also result in taxes or tax penalties. YOU SHOULD CONSULT WITH AN
ATTORNEY BEFORE TRYING TO ASSIGN YOUR CONTRACT.
PURCHASES
- --------------------------------------------------------------------------------
MINIMUM PURCHASE PAYMENTS
Your initial purchase payment must be at least $3,000 ($2,000 for a Qualified
Contract). All subsequent purchase payments must be $50 or more. You may make
purchase payments at any time prior to the Payout Start Date. We reserve the
right to limit the maximum amount of purchase payments we will accept. We
reserve the right to reject any application in our sole discretion.
AUTOMATIC ADDITIONS PROGRAM
You may make subsequent purchase payments by automatically transferring money
from your bank account. Consult your representative for more detailed
information.
ALLOCATION OF PURCHASE PAYMENTS
At the time you apply for a Contract, you must decide how to allocate your
purchase payments among the investment alternatives. The allocation you specify
on your application will be effective immediately. All allocations must be in
whole percents that total 100% or in whole dollars. You can change your
allocations by notifying us in writing. We reserve the right to limit the
availability of the investment alternatives.
We will allocate your purchase payments to the investment alternatives according
to your most recent instructions on file with us. Unless you notify us in
writing otherwise, we will allocate subsequent purchase payments according to
the allocation for the previous purchase payment. We will effect any change in
allocation instructions at the time we receive written notice of the change in
good order.
We will credit the initial purchase payment that accompanies your completed
application to your Contract within 2 business days after we receive the payment
at our home office. If your application is incomplete, we will ask you to
complete your application within 5 business days. If you do so, we will credit
your initial purchase payment to your Contract within that 5 business day
period. If you do not, we will return your purchase payment at the end of the 5
business day period unless you expressly allow us to hold it until you complete
the application. We will credit subsequent purchase payments to the Contract at
the close of the business day on which we receive the purchase payment at our
home office. We are open for business each day Monday through Friday that the
New York Stock Exchange is open for business. We also refer to these days as
"VALUATION DATES." Our business day closes when the New York Stock Exchange
closes, usually 4 p.m. Eastern Time (3 p.m. Central Time). If we receive your
purchase payment after 3 p.m. Central Time on any Valuation Date, we will credit
your purchase payment using the Accumulation Unit Values computed on the next
Valuation Date.
17
RIGHT TO CANCEL
You may cancel the Contract by returning it to us within the Cancellation
Period, which is the 20 day period after you receive the Contract, or a longer
period should your state require it. You may return it by delivering it or
mailing it to us. If you exercise this "RIGHT TO CANCEL," the Contract
terminates and we will pay you the full amount of your purchase payments
allocated to the Fixed Account. We also will return your purchase payments
allocated to the Variable Account adjusted, to the extent federal or state law
permits, to reflect investment gain or loss that occurred from the date of
allocation through the date of cancellation. Some states may require us to
return a greater amount to you.
In states where we are required to refund purchase payments, we reserve the
right during the Cancellation Period to invest any purchase payments you
allocated to a Variable Sub-Account to the money market Variable Sub-Account
available under the Contract. We will notify you if we do so. At the end of the
Cancellation Period, you may then allocate your money to other Variable
Sub-Accounts.
If your Contract is qualified under Section 408 of the Internal Revenue Code, we
will refund the greater of any purchase payments or the Contract Value.
CONTRACT VALUE
- --------------------------------------------------------------------------------
Your Contract Value at any time during the Accumulation Phase is equal to the
sum of the value of your Accumulation Units in the Variable Sub-Accounts you
have selected, plus the value of your investment in the Fixed Account Options.
ACCUMULATION UNITS
To determine the number of Accumulation Units of each Variable Sub-Account to
credit to your Contract, we divide (i) the amount of the purchase or transfer
payment you have allocated to a Variable Sub-Account by (ii) the Accumulation
Unit Value of that Variable Sub-Account next computed after we receive your
payment or transfer. For example, if we receive a $10,000 purchase payment
allocated to a Variable Sub-Account when the Accumulation Unit Value for
theVariable Sub-Account is $10, we would credit 1,000 Accumulation Units of that
Variable Sub-Account to your Contract. Withdrawals and transfers from a Variable
Sub-Account would, of course, reduce the number of Accumulation Units of that
Variable Sub-Account allocated to your Contract.
ACCUMULATION UNIT VALUE
As a general matter, the Accumulation Unit Value for each Variable Sub-Account
will rise or fall to reflect:
... changes in the share price of the Portfolio in which the Variable Sub-Account
invests, and
... the deduction of amounts reflecting the mortality and expense risk charge,
administrative expense charge, and any provision for taxes that have accrued
since we last calculated the Accumulation Unit Value.
We determine contract maintenance charges, withdrawal charges, and transfer fees
(currently waived) separately for each Contract. They do not affect Accumulation
Unit Value. Instead, we obtain payment of those charges and fees by redeeming
Accumulation Units. For details on how we calculate Accumulation Unit Value,
please refer to the Statement of Additional Information. We determine a separate
Accumulation Unit Value for each Variable Sub-Account on each Valuation Date. We
also determine a separate set of Accumulation Unit Values reflecting the cost of
the Enhanced Death Benefit Rider, the Enhanced Death and Income Benefit
Combination Rider and the Enhanced Death and Income Benefit Combination Rider II
described on pages___ .
YOU SHOULD REFER TO THE PROSPECTUSES FOR THE PORTFOLIOS THAT ACCOMPANY THIS
PROSPECTUS FOR A DESCRIPTION OF HOW THE ASSETS OF EACH PORTFOLIO ARE VALUED,
SINCE THAT DETERMINATION DIRECTLY BEARS ON THE ACCUMULATION UNIT VALUE OF THE
CORRESPONDING VARIABLE SUB-ACCOUNT AND, THEREFORE, YOUR CONTRACT VALUE.
18
INVESTMENT ALTERNATIVES: THE VARIABLE SUB-ACCOUNTS
- --------------------------------------------------------------------------------
You may allocate your purchase payments to up to 40 Variable Sub-Accounts. Each
Variable Sub-Account invests in the shares of a corresponding Portfolio. Each
Portfolio has its own investment objective(s) and policies. We briefly describe
the Portfolios below.
For more complete information about each Portfolio, including expenses and risks
associated with the Portfolio, please refer to the accompanying prospectuses for
the Portfolios. You should carefully review the Portfolio prospectuses before
allocating amounts to the Variable Sub-Accounts.
PORTFOLIO: EACH PORTFOLIO SEEKS: INVESTMENT ADVISOR:
- -------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS*
- -------------------------------------------------------------------------------
AIM V.I. Balanced Fund As high a total return as
possible, consistent with
preservation of capital
- -------------------------------------------------------
AIM V.I. Capital Growth of capital
Appreciation Fund AIM ADVISORS,
- ------------------------------------------------------- INC.
AIM V.I. Core Equity Growth of capital with a
Fund secondary objective of
current income
- -------------------------------------------------------
AIM V.I. Growth Fund Growth of capital
- -------------------------------------------------------
AIM V.I. High Yield A high level of current ------------------------
Fund income
- -------------------------------------------------------
AIM V.I. Premier Long-term growth of capital;
Equity Fund Income is Secondary objective
- -------------------------------------------------------
FEDERATED INSURANCE SERIES
- ------------------------------------------------------------------------------
Federated VIP Prime Current income consistent FEDERATED
Money Fund II with the stability of INVESTMENT
principal and Federated MANAGEMENT COMPANY
Investment liquidity
Management Company
- -------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
- -------------------------------------------------------------------------------
Fidelity VIP Long-term capital
Contrafund(TM) appreciation
Portfolio
- -------------------------------------------------------
Fidelity VIP Reasonable income
Equity-Income
Portfolio
- ------------------------------------------------------- FIDELITY MANAGEMENT
Fidelity VIP Growth Capital appreciation &
Portfolio RESEARCH COMPANY
- -------------------------------------------------------
Fidelity VIP High High level of current income
Income Portfolio while also considering growth
of capital
- -------------------------------------------------------
Fidelity VIP Index 500 Investment results that
Portfolio correspond to the total
return of common stocks
publicly traded in the United
States, as represented by the ------------------------
S&P 500
- -------------------------------------------------------
Fidelity VIP Overseas Long-term growth of capital
Portfolio
- -------------------------------------------------------
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
(VIP) -- CLASS 2
- -------------------------------------------------------------------------------
Templeton Global High current income. Capital FRANKLIN
Income Securities Fund appreciation is a secondary ADVISORS, INC.
Consideration.
- -------------------------------------------------------------------------------
Templeton Growth Long-term capital growth TEMPLETON
Securities Fund GLOBAL
ADVISORS
LIMITED
- -------------------------------------------------------------------------------
MFS-REGISTERED TRADEMARK--VARIABLE INSURANCE
TRUST/SM/
- -------------------------------------------------------------------------------
MFS Emerging Growth Long-term growth of capital MFS INVESTMENT
Series MANAGEMENT
- -------------------------------------------------------------------------------
MFS Investors Trust Long-term growth of capital
Series with a Secondary objective to
seek reasonable current
income
- -------------------------------------------------------------------------------
MFS New Discovery Capital Appreciation
- -------------------------------------------------------------------------------
MFS Research Series Long-term growth of capital
and future income
- -------------------------------------------------------------------------------
MFS Utilities Capital growth and current
income
- -------------------------------------------------------------------------------
OPPENHEIMER VARIABLE ACCOUNT FUNDS
- -------------------------------------------------------------------------------
Oppenheimer Aggressive Capital appreciation OPPENHEIMER FUNDS,
Growth Fund/VA INC.
- -------------------------------------------------------------------------------
Oppenheimer Capital Capital appreciation
Appreciation Fund/VA
- -------------------------------------------------------------------------------
Oppenheimer Global Long-term capital
Securities Fund/VA appreciation
- -------------------------------------------------------------------------------
Oppenheimer Main High total return, which
Street Growth & Income includes growth in the value
Fund/VA of its shares as well as
current income, from equity
and debt securities
- -------------------------------------------------------------------------------
Oppenheimer Multiple A high total investment
Strategies Fund/VA return which includes current
income and capital
appreciation in the value of
its shares.
- -------------------------------------------------------------------------------
Oppenheimer Strategic High level of current income
Bond Fund/VA
- -------------------------------------------------------------------------------
PUTNAM VARIABLE
ACCOUNT FUNDS-CLASS IB
- -------------------------------------------------------------------------------
Putnam VT Diversified High Current income PUTNAM
Income Fund consistent with capital INVESTMENT
Management, Inc. preservation
- -------------------------------------------------------------------------------
Putnam VT Growth and Capital growth and current
Income Fund income
- -------------------------------------------------------------------------------
Putnam VT Growth Capital Appreciation
Opportunities
- -------------------------------------------------------------------------------
Putnam VT Health Capital Appreciation
Sciences Fund
- -------------------------------------------------------------------------------
Putnam VT New Value Long-term capital
Fund appreciation
- -------------------------------------------------------------------------------
Putnam VT Voyager Long-term growth of capital
Fund II
- -------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST
- -------------------------------------------------------------------------------
STI Capital Capital Appreciation
Appreciation Fund
- -------------------------------------------------------
STI Growth and Income Long-term capital
Fund appreciation with the
secondary goal of current
income
- -------------------------------------------------------
STI International Long-term capital
Equity Fund appreciation
- ------------------------------------------------------- TRUSCO MANAGEMENT,
STI Investment Grade High total return through INC.
Bond Fund current income and capital
appreciation, while
preserving the principal
amount invested
- -------------------------------------------------------
STI Mid-Cap Equity Capital appreciation
Fund
- -------------------------------------------------------
STI Quality Growth Long-term capital
Stock Fund appreciation with nominal
dividend income
- -------------------------------------------------------
STI Small Cap Value Capital appreciation with the ------------------------
Equity Fund secondary goal of current
income
- -------------------------------------------------------
STI Value Income Stock Current income with the
Fund secondary goal of capital
appreciation
- -------------------------------------------------------
19
*A portfolio's investment objective may be changed by the Fund's Board of
Trustees without shareholder approval.
Effective May 1, 2002, the Portfolio changed its name from AIM V.I. Growth and
Income Fund to AIM V.I. Core Equity Fund.
Effective May 1, 2002, the Portfolio changed its name from AIM V.I. Value Fund
to AIM V.I. Premier Equity Fund.
AMOUNTS YOU ALLOCATE TO VARIABLE SUB-ACCOUNTS MAY GROW IN VALUE, DECLINE IN
VALUE, OR GROW LESS THAN YOU EXPECT, DEPENDING ON THE INVESTMENT PERFORMANCE OF
THE PORTFOLIOS IN WHICH THOSE VARIABLE SUB-ACCOUNTS INVEST. YOU BEAR THE
INVESTMENT RISK THAT THE PORTFOLIOS MIGHT NOT MEET THEIR INVESTMENT OBJECTIVES.
SHARES OF THE PORTFOLIOS ARE NOT DEPOSITS, OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
VARIABLE INSURANCE PORTFOLIOS MAY NOT BE MANAGED BY THE SAME PORTFOLIO MANAGERS
WHO MANAGE RETAIL MUTUAL FUNDS WITH SIMILAR NAMES. THESE PORTFOLIOS ARE LIKELY
TO DIFFER FROM SIMILARLY NAMED RETAIL FUNDS IN ASSETS, CASH FLOW, AND TAX
MATTERS. ACCORDINGLY, THE HOLDINGS AND INVESTMENT RESULTS OF A VARIABLE
INSURANCE PORTFOLIO CAN BE EXPECTED TO BE GREATER OR LESS THAN THE INVESTMENT
RESULTS OF SIMILARLY NAMED RETAIL MUTUAL FUNDS.
20
INVESTMENT ALTERNATIVES: THE FIXED ACCOUNT OPTIONS
- --------------------------------------------------------------------------------
You may allocate all or a portion of your purchase payments to the Fixed
Account. You may choose from among 3 Fixed Account Options: 2 dollar cost
averaging options, and the option to invest in one or more Guarantee Periods
included in the Guaranteed Maturity Fixed Account. The Fixed Account Options may
not be available in all states. Please consult with your representative for
current information. The Fixed Account supports our insurance and annuity
obligations. The Fixed Account consists of our general assets other than those
in segregated asset accounts. We have sole discretion to invest the assets of
the Fixed Account, subject to applicable law. Any money you allocate to a Fixed
Account Option does not entitle you to share in the investment experience of the
Fixed Account.
DOLLAR COST AVERAGING FIXED ACCOUNT OPTIONS
DOLLAR COST AVERAGING FIXED ACCOUNT OPTION. Purchase payments that you allocate
to the Dollar Cost Averaging Fixed Account Option ("DCA Fixed Account Option")
will earn interest for a one year period at the current rate in effect at the
time of allocation. We will credit interest daily at a rate that will compound
over the year to the annual interest rate we guaranteed at the time of
allocation. After the one year period, we will declare a renewal rate which we
guarantee for a full year. Subsequent renewal dates will be every twelve months
for each payment or transfer.
For each purchase payment, the first transfer from the DCA Fixed Account must
occur within one month of the date of payment. If we do not receive an
allocation from you within one month of the date of payment, the payment plus
associated interest will be transferred to the money marketVariable Sub-Account
in equal monthly installments using the longest transfer period being offered at
the time the purchase payment is made. Transferring Account Value to the money
marketVariable Sub-Account in this manner may not be consistent with the theory
of dollar cost averaging described on page __.
We will follow your instructions in transferring amounts monthly from the DCA
Fixed Account. However, you may not choose less than 3 or more than 36 monthly
installments. Further, you must transfer each purchase payment and all its
earnings out of this Option by means of dollar cost averaging within 36 months
of payment. At the end of 36 months, any nominal amounts remaining will be
allocated to the money marketVariable Sub-Account. No transfers are permitted
into the DCA Fixed Account.
SHORT TERM DOLLAR COST AVERAGING FIXED ACCOUNT OPTION. You may establish a Short
Term Dollar Cost Averaging Program by allocating purchase payments to the Short
Term Dollar Cost Averaging Fixed Account Option ("Short Term DCA Fixed Account
Option"). We will credit interest to purchase payments you allocate to this
Option for up to one year at the current rate in effect at the time of
allocation.
For each purchase payment, the first transfer from the Short Term DCA Fixed
Account must occur within one month of the date of payment. If we do not receive
an allocation from you within one month of the date of payment, the payment plus
associated interest will be transferred to the money marketVariable Sub-Account
in equal monthly installments using the longest transfer period being offered at
the time the purchase payment is made. Transferring Account Value to the money
marketVariable Sub-Account in this manner may not be consistent with the theory
of dollar cost averaging described on page __.
You must transfer each purchase payment and all its earnings out of this Option
by means of dollar cost averaging within 12 months. At the end of the transfer
period, any nominal amounts remaining in the Short Term DCA Fixed Account will
be allocated to the money market Variable Sub-Account.
If you discontinue the Short Term DCA Fixed Account Option before the end of the
transfer period, we will transfer the remaining balance in Short Term DCA Fixed
Account to the money market Variable Sub-Account unless you request a different
investment alternative. No transfers are permitted into the Short Term DCA Fixed
Account.
We bear the investment risk for all amounts allocated to the DCA Fixed Account
Option and the Short Term DCA Fixed Account Option. That is because we guarantee
the current and renewal interest rates we credit to the amounts you allocate to
either of these Options, which will never be less than the minimum guaranteed
rate in the Contract. Currently, we determine, in our sole discretion, the
amount of interest credited in excess of the guaranteed rate. We may declare
more than one interest rate for different monies based upon the date of
allocation to the DCA Fixed Account Option and the Short Term DCA Fixed Account
Option. For current interest rate information, please contact your
representative or GLENBROOK LIFE customer service at 1-800-755-5275.
GUARANTEE PERIODS
Each payment or transfer allocated to a Guarantee Period earns interest at a
specified rate that we guarantee for a period of years. Guarantee Periods may
range from 1 to 10 years. We are currently offering Guarantee Periods of 1, 3,
5, 7, and 10 years in length. In the future we may offer Guarantee Periods of
different lengths or stop offering some Guarantee Periods.
21
You select the Guarantee Period for each payment or transfer. If you do not
select a Guarantee Period, we will assign the same period(s) you selected for
your most recent purchase payment(s). Each payment or transfer allocated to a
Guarantee Period must be at least $50. We reserve the right to limit the number
of additional purchase payments that you may allocate to this Option.
INTEREST RATES. We will tell you what interest rates and Guarantee Periods we
are offering at a particular time. We will not change the interest rate that we
credit to a particular allocation until the end of the relevant Guarantee
Period. We may declare different interest rates for Guarantee Periods of the
same length that begin at different times.
We have no specific formula for determining the rate of interest that we will
declare initially or in the future. We will set those interest rates based on
investment returns available at the time of the determination. In addition, we
may consider various other factors in determining interest rates including
regulatory and tax requirements, our sales commission and administrative
expenses, general economic trends, and competitive factors.
WE DETERMINE THE INTEREST RATES TO BE DECLARED IN OUR SOLE DISCRETION. WE CAN
NEITHER PREDICT NOR GUARANTEE WHAT THOSE RATES WILL BE IN THE FUTURE. For
current interest rate information, please contact your representative or
GLENBROOK LIFE at 1-800-755-5275.
HOW WE CREDIT INTEREST. We will credit interest daily to each amount allocated
to a Guarantee Period at a rate that compounds to the annual interest rate that
we declared at the beginning of the applicable Guarantee Period.
THE FOLLOWING EXAMPLE ILLUSTRATES HOW A PURCHASE PAYMENT ALLOCATED TO A
GUARANTEED PERIOD WOULD GROW, GIVEN AN ASSUMED GUARANTEE PERIOD AND ANNUAL
INTEREST RATE:
Purchase Payment.................................................... $10,000
Guarantee Period.................................................... 5 years
Annual Interest Rate................................................ 4.50%
END OF CONTRACT YEAR
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
---------- ---------- ---------- ---------- ------------
Beginning Contract $10,000.00
Value................
X (1 + Annual
Interest Rate) 1.045
----------
$10,450.00
Contract Value at end $10,450.00
of Contract Year.....
X (1 + Annual
Interest) 1.045
----------
$10,920.25
Contract Value at end $10,920.25
of Contract Year.....
X (1 + Annual
Interest Rate) 1.045
----------
$11,411.66
Contract Value at end $11,411.66
of Contract Year.....
X (1 + Annual
Interest Rate) 1.045
----------
$11,925.19
Contract Value at end $11,925.19
of Contract Year.....
X (1 + Annual
Interest Rate) 1.045
-----------
$12,461.82
TOTAL INTEREST CREDITED DURING GUARANTEE PERIOD = $2,461.82 ($12,461.82-$10,000)
This example assumes no withdrawals during the entire 5-year Guarantee Period.
If you were to make a withdrawal, you may be required to pay a withdrawal
charge. In addition, the amount withdrawn may be increased or decreased by a
Market Value Adjustment that reflects changes in interest rates since the time
you invested the amount withdrawn. The hypothetical interest rate is for
illustrative purposes only and is not intended to predict future interest rates
to be declared under the Contract. Actual interest rates declared for any given
Guarantee Period may be more or less than shown above.
RENEWALS. Prior to the end of each Guarantee Period, we will mail you a notice
asking you what to do with your money, including the accrued interest. During
the 30-day period after the end of the Guarantee Period, you may:
1) Take no action. We will automatically apply your money to a new Guarantee
Period of the same length as the expiring Guarantee Period. The new Guarantee
Period will begin on the day the previous Guarantee Period ends. The new
interest rate will be our current declared rate for a Guarantee Period of that
length; or
2) Instruct us to apply your money to one or more new Guarantee Periods of your
choice. The new Guarantee Period(s) will begin on the day the previous
Guarantee Period ends. The new interest rate will be our then current declared
rate for those
22
Guarantee Periods; or
3) Instruct us to transfer all or a portion of your money to one or more
Variable Sub-Accounts of the Variable Account. We will effect the transfer on
the day we receive your instructions. We will not adjust the amount
transferred to include a Market Value Adjustment; we will pay interest from
the day the Guarantee Period expired until the date of the transfer. The
interest will be the rate for the shortest Guarantee Period then being
offered; or
4) Withdraw all or a portion of your money. You may be required to pay a
withdrawal charge, but we will not adjust the amount withdrawn to include a
Market Value Adjustment. You may also be required to pay premium taxes and
income tax withholding, if applicable. We will pay interest from the day the
Guarantee Period expired until the date of withdrawal. The interest will be
the rate for the shortest Guarantee Period then being offered. Amounts not
withdrawn will be applied to a new Guarantee Period of the same length as the
previous Guarantee Period. The new Guarantee Period will begin on the day the
previous Guarantee Period ends. Withdrawals of earnings are treated as
ordinary income and, if taken prior to age 59 /1/2,/ may be subject to an
additional 10% federal tax penalty.
MARKET VALUE ADJUSTMENT. All withdrawals and transfers from a Guarantee Period,
other than those taken during the 30 day period after such Guarantee Period
expires, are subject to a Market Value Adjustment. A Market Value Adjustment
also may apply upon payment of a death benefit and when you apply amounts
currently invested in a Guarantee Period to an Income Plan (unless paid or
applied during the 30-day period after such Guarantee Period expires). We also
will not apply a Market Value Adjustment to a withdrawal you make:
... within the Free Withdrawal Amount as described on page___ ,
... that qualify for one of the waivers as described on page___ ,
... to satisfy the IRS minimum distribution rules for the Contract, or
... a single withdrawal made by a surviving spouse made within one year after
continuing the Contract.
We apply the Market Value Adjustment to reflect changes in interest rates from
the time you first allocate money to a Guarantee Period to the time you remove
it from that Guarantee Period. We calculate the Market Value Adjustment by
comparing the Treasury Rate for a period equal to the Guarantee Period at its
inception to the Treasury Rate for a period equal to the Guarantee Period when
you remove your money. "TREASURY RATE" means the U.S. Treasury Note Constant
Maturity Yield as reported in Federal Reserve Bulletin Release H.15.
The Market Value Adjustment may be positive or negative, depending on changes in
interest rates. As such, you bear the investment risk associated with changes in
interest rates. If interest rates increase significantly, the Market Value
Adjustment and any withdrawal charge, premium taxes, and income tax withholding
(if applicable) could reduce the amount you receive upon full withdrawal from a
Guaranteed Period to an amount that is less than the purchase payment applied to
that period plus interest earned under the Contract.
Generally, if the original Treasury Rate at the time you allocate money to a
Guarantee Period is higher than the applicable current Treasury Rate for a
period equal to the Guarantee Period, then the Market Value Adjustment will
result in a higher amount payable to you, transferred or applied to an Income
Plan. Conversely, if the Treasury Rate at the time you allocate money to a
Guarantee Period is lower than the applicable Treasury Rate for a period equal
to the Guarantee Period, then the Market Value Adjustment will result in a lower
amount payable to you, transferred or applied to an Income Plan.
For example, assume that you purchase a Contract and you select an initial
Guarantee Period of 5 years and the 5-year Treasury Rate for that duration is
4.50%. Assume that at the end of 3 years, you make a partial withdrawal. If, at
that later time, the current 5-year Treasury Rate is 4.20%, then the Market
Value Adjustment will be positive, which will result in an increase in the
amount payable to you. Conversely, if the current 5-year Treasury Rate is 4.80%,
then the Market Value Adjustment will be negative, which will result in a
decrease in the amount payable to you.
The formula for calculating Market Value Adjustments is set forth in Appendix B
to this prospectus, which also contains additional examples of the application
of the Market Value Adjustment.
INVESTMENT ALTERNATIVES: TRANSFERS
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TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase, you may transfer Contract Value among the
investment alternatives. You may not transfer Contract Value to the Short-Term
Dollar Cost Averaging Fixed Account Option or the Dollar Cost Averaging Fixed
Account Option. You may request transfers in writing on a form that we provided
or by telephone according to the procedure described below. The minimum amount
that you may transfer into a Guarantee Period is $50. We currently do not
assess, but reserve the right to assess, a $10 charge on each transfer in excess
of 12 per Contract Year. All transfers to or from more than one Portfolio on any
given day counts as one
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transfer.
We will process transfer requests that we receive before 3:00 p.m. Central Time
on any Valuation Date using the Accumulation Unit Values for that Date. We will
process requests completed after 3:00 p.m. Central Time on any Valuation Date
using the Accumulation Unit Values for the next Valuation Date. The Contract
permits us to defer transfers from the Fixed Account for up to six months from
the date we receive your request. If we decide to postpone transfers for 30 days
or more, we will pay interest as required by applicable law. Any interest would
be payable from the date we receive the transfer request to the date we make the
transfer.
If you transfer an amount from a Guarantee Period other than during the 30 day
period after such Guarantee Period expires, we will increase or decrease the
amount by a Market Value Adjustment.
We reserve the right to waive any transfer restrictions.
TRANSFERS DURING THE PAYOUT PHASE
During the Payout Phase, you may make transfers among the Variable Sub-Accounts
so as to change the relative weighting of the Variable Sub-Accounts on which
your variable income payments will be based. In addition, you will have a
limited ability to make transfers from the Variable Sub-Accounts to increase the
proportion of your income payments consisting of fixed income payments. You may
not, however, convert any portion of your right to receive fixed income payments
into variable income payments. If you choose an Income Plan that depends on any
person's life, you may not make any transfers for the first 6 months after the
Payout Start Date. Thereafter, you may make transfers among the Variable
Sub-Accounts or make transfers from the Variable Sub-Accounts to increase the
proportion of your income payments consisting of fixed income payments. Your
transfers must be at least 6 months apart.
TELEPHONE TRANSFERS
You may make transfers by telephone by calling 1-800-755-5275. The cut-off time
for telephone transfer requests is 3:00 p.m. Central Time. In the event that the
New York Stock Exchange closes early, i.e., before 3:00 p.m. Central Time, or in
the event that the Exchange closes early for a period of time but then reopens
for trading on the same day, we will process telephone transfer requests as of
the close of the Exchange on that particular day. We will not accept telephone
requests received at any telephone number other than the number that appears in
this paragraph or received after the close of trading on the Exchange.
We may suspend, modify or terminate the telephone transfer privilege at any time
without notice.
We use procedures that we believe provide reasonable assurance that the
telephone transfers are genuine. For example, we tape telephone conversations
with persons purporting to authorize transfers and request identifying
information. Accordingly, we disclaim any liability for losses resulting from
allegedly unauthorized telephone transfers. However, if we do not take
reasonable steps to help ensure that a telephone authorization is valid, we may
be liable for such losses.
DOLLAR COST AVERAGING PROGRAM
Through our Dollar Cost Averaging Program, you may automatically transfer a
fixed dollar amount every month during the Accumulation Phase from the Short
Term DCA Fixed Account or the DCA Fixed Account, to any Variable Sub-Account.
You may not use the Dollar Cost Averaging Program to transfer amounts to the
Guarantee Periods.
We will not charge a transfer fee for transfers made under this Program, nor
will such transfer count against the 12 transfers you can make each Contract
Year without paying a transfer fee.
The theory of dollar cost averaging is that if purchases of equal dollar amounts
are made at fluctuating prices, the aggregate average cost per unit will be less
than the average of the unit prices on the same purchase dates. However,
participation in this Program does not assure you of a greater profit from your
purchases under the Program nor will it prevent or necessarily reduce losses in
a declining market. Call or write us for instructions on how to enroll.
AUTOMATIC PORTFOLIO REBALANCING PROGRAM
Once you have allocated your money among the Variable Sub-Accounts, the
performance of each Variable Sub-Account may cause a shift in the percentage you
allocated to each Variable Sub-Account. If you select our Automatic Portfolio
Rebalancing Program, we will automatically rebalance the Contract Value in each
Variable Sub-Account and return it to the desired percentage allocations. We
will not include money you allocate to the Fixed Account Options in the
Automatic Portfolio Rebalancing Program.
We will rebalance your account each quarter according to your instructions. We
will transfer amounts among the Variable Sub-Accounts to achieve the percentage
allocations you specify. You can change your allocations at any time by
contacting us in writing or by telephone. The new allocation will be effective
with the first rebalancing that occurs after we receive your request. We are not
responsible for rebalancing that occurs prior to receipt of your request.
Example:
Assume that you want your initial purchase payment split among 2 Variable
Sub-Accounts. You want 40% to be in the Fidelity VIP High Income Variable
Sub-Account and 60% to be in the AIM V.I. Growth Variable Sub-Account. Over
the next 2 months the bond market does very well while the stock market
performs poorly. At the end of the first quarter, the
24
Fidelity VIP High Income Variable Sub-Account now represents 50% of your
holdings because of its increase in value. If you choose to have your holdings
rebalanced quarterly, on the first day of the next quarter, we would sell some
of your units in the Fidelity VIP High Income Variable Sub-Account and use the
money to buy more units in the AIM V.I. Growth Variable Sub-Account so that
the percentage allocations would again be 40% and 60% respectively.
The Automatic Portfolio Rebalancing Program is available only during the
Accumulation Phase. The transfers made under the Program do not count towards
the 12 transfers you can make without paying a transfer fee, and are not subject
to a transfer fee. Portfolio rebalancing is consistent with maintaining your
allocation of investments among market segments, although it is accomplished by
reducing your Contract Value allocated to the better performing segments.
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EXPENSES
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As a Contract Owner, you will bear, directly or indirectly, the charges and
expenses described below.
CONTRACT MAINTENANCE CHARGE
During the Accumulation Phase, on each Contract Anniversary, we will deduct a
$35 contract maintenance charge from your Contract Value invested in each
Variable Sub-Account in proportion to the amount invested. If you surrender your
Contract, we will deduct the contract maintenance charge pro rated for the part
of the Contract Year elapsed, unless your Contract qualifies for a waiver,
described below.
The charge is to compensate us for the cost of administering the Contracts and
the Variable Account. Maintenance costs include expenses we incur collecting
purchase payments; keeping records; processing death claims, cash withdrawals,
and policy changes; proxy statements; calculating Accumulation Unit Values and
income payments; and issuing reports to Contract Owners and regulatory agencies.
We cannot increase the charge. However, we will waive this charge if, as of the
Contract Anniversary or upon full surrender:
... total purchase payments equal $50,000 or more, or
... all money is allocated to the Fixed Account.
In addition, we will waive the Contract Maintenance Charge if total purchase
payments are $50,000 or more as of the Payout Start Date.
MORTALITY AND EXPENSE RISK CHARGE
We deduct a mortality and expense risk charge daily at an annual rate of 1.05%
of the average daily net assets you have invested in the Variable Sub-Accounts
(1.27% if you select the Enhanced Death Benefit Rider, 1.49% if you selected the
Enhanced Death and Income Combination Benefit Rider, and 1.55% if you select the
Enhanced Death and Income Benefit Combination Rider II). The mortality and
expense risk charge is for all the insurance benefits available with your
Contract (including our guarantee of annuity rates and the death benefits), for
certain expenses of the Contract, and for assuming the risk (expense risk) that
the current charges will be sufficient in the future to cover the cost of
administering the Contract. If the charges under the Contract are not
sufficient, then we will bear the loss. We charge an additional amount for the
Enhanced Death Benefit Rider, the Enhanced Death and Income Benefit Combination
Rider and the Enhanced Death and Income Benefit Combination Rider II, to
compensate us for the additional risk that we accept by providing these options.
We guarantee that we will not raise the mortality and expense risk charge. We
assess the mortality and expense risk charge during both the Accumulation Phase
and the Payout Phase.
ADMINISTRATIVE EXPENSE CHARGE
We deduct an administrative expense charge daily at an annual rate of 0.10% of
the average daily net assets you have invested in the Variable Sub-Accounts. We
intend this charge to cover actual administrative expenses that exceed the
revenues from the contract maintenance charge. There is no necessary
relationship between the amount of administrative charge imposed on a given
Contract and the amount of expenses that may be attributed to that Contract. We
assess this charge each day during the Accumulation Phase and the Payout Phase.
We guarantee that we will not raise this charge.
TRANSFER FEE
We do not currently impose a fee upon transfers among the investment
alternatives. However, we reserve the right to charge $10 per transfer after the
12th transfer in each Contract Year. We will not charge a transfer fee on
transfers that are part of a Dollar Cost Averaging or Automatic Portfolio
Rebalancing Program.
WITHDRAWAL CHARGE
We may assess a withdrawal charge of up to 6% of the purchase payment(s) you
withdraw. The charge declines to 0% over a 6 year period that begins on the day
we receive your payment. A schedule showing how the charge declines is shown on
page ___. During each Contract Year, you can withdraw up to 15% of the aggregate
amount of your purchase payments without paying the charge. Unused portions of
this "FREE WITHDRAWAL AMOUNT" are not carried forward to future Contract Years.
We will deduct withdrawal charges, if applicable, from the amount paid. For
purposes of calculating the withdrawal charge, we will treat withdrawals as
coming from the oldest purchase payments first. However, for federal income tax
purposes, please note that withdrawals are considered to have come first from
earnings, which means you pay taxes on the earnings portion of your withdrawal.
We do not apply a withdrawal charge in the following situations:
... on the Payout Start Date (a withdrawal charge may apply if you terminate
income payments to be received for a specified period;
... withdrawals taken to satisfy IRS minimum distribution rules for the Contract;
or
... withdrawals that qualify for one of the waivers as described below.
We use the amounts obtained from the withdrawal charge to pay sales commissions
and other promotional or distribution expenses associated with marketing the
Contracts. To the extent that the withdrawal charge does not cover all sales
commissions and other promotional or distribution expenses, we may use any of
our corporate assets, including potential profit which may arise from the
mortality and expense risk charge or any other charges or
26
fee described above, to make up any difference. Withdrawals of earnings are
taxed as ordinary income and, if taken prior to age 59 /1/2/\\, \\may be subject
to an additional 10% federal tax penalty and a Market Value Adjustment. You
should consult your own tax counsel or other tax advisers regarding any
withdrawals.
CONFINEMENT WAIVER. We will waive the withdrawal charge and any Market Value
Adjustment on all withdrawals taken prior to the Payout Start Date under your
Contract if the following conditions are satisfied:
1. You or the Annuitant, if the Contract Owner is not a natural person, are
confined to a long term care facility or a hospital for at least 90 consecutive
days. You or the Annuitant must enter the long term care facility or hospital at
least 30 days after the Issue Date;
2. You request the withdrawal and provide written proof of the stay no later
than 90 days following the end of your or the Annuitant's stay at the long term
care facility or hospital; and
3. A physician must have prescribed the stay and the stay must be medically
necessary (as defined in the Contract).
You may not claim this benefit if you, the Annuitant, or a member of your or the
Annuitant's immediate family, is the physician prescribing your or the
Annuitant's stay in a long term care facility.
TERMINAL ILLNESS WAIVER. We will waive the withdrawal charge and any Market
Value Adjustment on all withdrawals taken prior to the Payout Start Date under
your Contract if:
1. you or the Annuitant (if the Contract Owner is not a natural person) are
first diagnosed with a terminal illness at least 30 days after the Issue Date;
and
2. you claim this benefit and deliver adequate proof of diagnosis to us.
UNEMPLOYMENT WAIVER. We will waive the withdrawal charge and any Market Value
Adjustment on one partial or a full withdrawal taken prior to the Payout Start
Date under your Contract, if you meet the following requirements:
1. you or the Annuitant, if the Contract Owner is not a natural person, become
unemployed at least one year after the Issue Date;
2. you or the Annuitant, if the Contract Owner is not a natural person, receive
unemployment compensation as defined in the Contract for at least 30 days as a
result of that unemployment; and
3. you or the Annuitant, if the Contract Owner is not a natural person, claim
this benefit within 180 days of your or the Annuitant's initial receipt of
unemployment compensation.
Please refer to your Contract for more detailed information about the terms and
conditions of these waivers. The laws of your state may limit the availability
of these waivers and may also change certain terms and/or benefits available
under the waivers. You should consult your Contract for further details on these
variations. Also, even if you do not need to pay our withdrawal charge or a
Market Value Adjustment because of these waivers, you still may be required to
pay taxes or tax penalties on the amount withdrawn. You should consult your tax
adviser to determine the effect of a withdrawal on your taxes.
PREMIUM TAXES
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. We are responsible for paying these taxes and
will deduct them from your Contract Value. Some of these taxes are due when the
Contract is issued, others are due when income payments begin or upon surrender.
Our current practice is not to charge anyone for these taxes until income
payments begin or when a total withdrawal occurs, including payment upon death.
At our discretion, we may discontinue this practice and deduct premium taxes
from the purchase payments. Premium taxes generally range from 0% to 4%,
depending on the state.
At the Payout Start Date, if applicable, we deduct the charge for premium taxes
from each investment alternative in the proportion that the Contract Owner's
value in the investment alternative bears to the total Contract Value.
DEDUCTION FOR SEPARATE ACCOUNT INCOME TAXES
We are not currently maintaining a provision for such taxes. In the future,
however, we may establish a provision for taxes if we determine, in our sole
discretion, that we will incur a tax as a result of the operation of the
Variable Account. We will deduct for any taxes we incur as a result of the
operation of the Variable Account, whether or not we previously made a provision
for taxes and whether or not it was sufficient. Our status under the Internal
Revenue Code is briefly described in the "Taxes" Section beginning on page
- -----.
OTHER EXPENSES
Each Portfolio deducts advisory fees and other expenses from its assets. You
indirectly bear the charges and expenses of the Portfolios whose shares are held
by the Variable Sub-Accounts. These fees and expenses are described in the
accompanying prospectuses for the Portfolios. For a summary of current estimates
of those charges and expenses, see page 8. We may receive compensation from the
investment advisers or administrators of the Portfolios in connection with the
administrative services we provide to the Portfolios.
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ACCESS TO YOUR MONEY
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You can withdraw some or all of your Contract Value at any time prior to the
Payout Start Date. The amount payable upon withdrawal is the Contract Value (or
portion thereof) next computed after we receive the request for a withdrawal at
our home office, adjusted by any Market Value Adjustment, less any withdrawal
charges, contract maintenance charges, income tax withholding, penalty tax, and
any premium taxes. We will pay withdrawals from the Variable Account within 7
days of receipt of the request, subject to postponement in certain
circumstances. You can withdraw money from the Variable Account or the Fixed
Account Options. To complete a partial withdrawal from the Variable Account, we
will cancel Accumulation Units in an amount equal to the withdrawal and any
applicable withdrawal charge and premium taxes. You must name the investment
alternative from which you are taking the withdrawal. If none is named, then the
withdrawal request is incomplete and cannot be honored. In general, you must
withdraw at least $50 at a time. You also may withdraw a lesser amount if you
are withdrawing your entire interest in a Variable Sub-Account. If you request a
total withdrawal, we may require you to return your Contract to us.
Withdrawals of earnings are taxed as ordinary income and, if taken prior to age
59 /1/2,/ may be subject to an additional 10% federal tax penalty and a Market
Value Adjustment.
POSTPONEMENT OF PAYMENTS
We may postpone the payment of any amounts due from the Variable Account under
the Contract if:
1. The New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on the Exchange is otherwise restricted;
2. An emergency exists as defined by the SEC; or
3. The SEC permits delay for your protection.
In addition, we may delay payments or transfers from the Fixed Account Options
for up to 6 months (or shorter period if required by law). If we delay payment
for 30 days or more, we will pay interest as required by law.
SYSTEMATIC WITHDRAWAL PROGRAM
You may choose to receive systematic withdrawal payments on a monthly,
quarterly, semi-annual, or annual basis at any time prior to the Payout Start
Date. The minimum amount of each systematic withdrawal is $50. At our
discretion, systematic withdrawals may not be offered in conjunction with the
Dollar Cost Averaging Program or Automatic Portfolio Rebalancing Program.
Depending on fluctuations in the value of the Variable Sub-Accounts and the
value of the Fixed Account Options, systematic withdrawals may reduce or even
exhaust the Contract Value. Withdrawals of earnings under a Systematic
Withdrawal Program are taxed as ordinary income and, if taken prior to age 59
/1/2/, may be subject to an additional 10% federal tax penalty. Please consult
your tax advisor before taking any withdrawal. We will make systematic
withdrawal payments to you or your designated payee. At our discretion, we may
modify or suspend the Systematic Withdrawal Program and charge a processing fee
for the service. If we modify or suspend the Systematic Withdrawal Program,
existing systematic withdrawal payments will not be affected.
MINIMUM CONTRACT VALUE
If your request for a partial withdrawal would reduce your Contract Value to
less than $2,000, we may treat it as a request to withdraw your entire Contract
Value. Your Contract will terminate if you withdraw all of your Contract Value.
We will, however, ask you to confirm your withdrawal request before terminating
your Contract. Before terminating any Contract whose value has been previously
reduced by withdrawals to less than $2,000, we will inform you in writing of our
intention to terminate your Contract and give you at least 30 days in which to
make an additional purchase payment to restore your Contract's Value to the
contractual minimum of $2,000. If we terminate your Contract, we will distribute
to you its Contract Value, adjusted by any applicable Market Value Adjustment,
less withdrawal and other charges and applicable taxes.
INCOME PAYMENTS
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PAYOUT START DATE
You select the Payout Start Date in your application. The "PAYOUT START DATE" is
the day that we apply your money to an Income Plan. The Payout Start Date must
be:
... at least 30 days after the Issue Date; and
... no later than the day the Annuitant reaches age 90, or the 10th Contract
Anniversary, if later.
You may change the Payout Start Date at any time by notifying us in writing of
the change at least 30 days before the scheduled Payout Start Date. Absent a
change, we will use the Payout Start Date stated in your Contract.
INCOME PLANS
An Income Plan is a series of scheduled payments to you or someone you
designate. You may choose and change your choice of Income Plan until 30 days
before the Payout Start Date. If you do not select an Income Plan, we will make
income payments in accordance with Income Plan 1 with guaranteed payments for 10
years.
28
After the Payout Start Date, you may not make withdrawals (except as described
below) or change your choice of Income Plan.
Three Income Plans are available under the Contract. Each is available to
provide:
... fixed income payments;
... variable income payments; or
... a combination of the two.
The three Income Plans are:
INCOME PLAN 1 - LIFE INCOME WITH GUARANTEED PAYMENTS. Under this plan, we make
periodic income payments for at least as long as the Annuitant lives. If the
Annuitant dies before we have made all of the guaranteed income payments, we
will continue to pay the remainder of the guaranteed income payments as required
by the Contract.
INCOME PLAN 2 - JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED PAYMENTS. Under
this plan, we make periodic income payments for at least as long as either the
Annuitant or the joint Annuitant is alive. If both the Annuitant and the joint
Annuitant die before we have made all of the guaranteed income payments, we will
continue to pay the remainder of the guaranteed income payments as required by
the Contract.
INCOME PLAN 3 - GUARANTEED PAYMENTS FOR A SPECIFIED PERIOD (5 YEARS TO 30
YEARS). Under this plan, we make periodic income payments for the period you
have chosen. These payments do not depend on the Annuitant's life. You may elect
to receive guaranteed payments for periods ranging from 5 to 30 years. Income
payments for less than 120 months may be subject to a withdrawal charge. We will
deduct the mortality and expense risk charge from the Variable Sub-Account
assets that support variable income payments even though we may not bear any
mortality risk.
The length of any guaranteed payment period under your selected Income Plan
generally will affect the dollar amounts of each income payment. As a general
rule, longer guarantee periods result in lower income payments, all other things
being equal. For example, if you choose an Income Plan with payments that depend
on the life of the Annuitant but with no minimum specified period for guaranteed
payments, the income payments generally will be greater than the income payments
made under the same Income Plan with a minimum specified period for guaranteed
payments. If you choose Income Plan 1 or 2, or, if available, another Income
Plan with payments that continue for the life of the Annuitant or joint
Annuitant, we may require proof of age and sex of the Annuitant or joint
Annuitant before starting income payments, and proof that the Annuitant or joint
Annuitant are alive before we make each payment.
Please note that under such Income Plans, if you elect to take no minimum
guaranteed payments, it is possible that the payee could receive only 1 income
payment if the Annuitant and any joint Annuitant both die before the second
income payment, or only 2 income payments if they die before the third income
payment, and so on.
Generally, you may not make withdrawals after the Payout Start Date. One
exception to this rule applies if you are receiving variable income payments
that do not depend on the life of the Annuitant (such as under Income Plan 3).
In that case you may terminate all or part of the Variable Account portion of
the income payments at any time and receive a lump sum equal to the present
value of the remaining variable payments associated with the amount withdrawn.
The minimum amount you may withdraw under this feature is $1,000. A withdrawal
charge may apply. We deduct applicable premium taxes from the Contract Value at
the Payout Start Date.
We may make other Income Plans available.
If you elected the Enhanced Death and Income Benefit Combination Rider or the
Enhanced Death and Income Benefit Combination Rider II, you may be able to apply
an amount greater than your Contract Value to an Income Plan. You must apply at
least the Contract Value in the Fixed Account on the Payout Start Date to fixed
income payments. If you wish to apply any portion of your Fixed Account balance
to provide variable income payments, you should plan ahead and transfer that
amount to the Variable Sub-Accounts prior to the Payout Start Date. If you do
not tell us how to allocate your Contract Value among fixed and variable income
payments, we will apply your Contract Value in the Variable Account to variable
income payments and your Contract Value in the Fixed Account to fixed income
payments. We will apply your Contract Value, adjusted by any applicable Market
Value Adjustment, less applicable taxes to your Income Plan on the Payout Start
Date. If the amount available to apply under an Income Plan is less than $2,000,
or not enough to provide an initial payment of at least $20, and state law
permits, we may:
... terminate the Contract and pay you the Contract Value, adjusted by any
applicable Market Value Adjustment and less any applicable taxes, in a lump
sum instead of the periodic payments you have chosen; or
... reduce the frequency of your payments so that each payment will be at least
$20.
VARIABLE INCOME PAYMENTS
The amount of your variable income payments depends upon the investment results
of the Variable Sub-Accounts you select, the premium taxes you pay, the age and
sex of the Annuitant, and the Income Plan you choose. We guarantee that the
payments will not be affected by (a) actual mortality experience and (b) the
amount of our administration expenses.
We cannot predict the total amount of your variable income payments. Your
variable income payments may be
29
more or less than your total purchase payments because (a) variable income
payments vary with the investment results of the underlying Portfolios; and (b)
the Annuitant could live longer or shorter than we expect based on the tables we
use.
In calculating the amount of the periodic payments in the annuity tables in the
Contract, we assumed an annual investment rate of 3%. If the actual net
investment return of the Variable Sub-Accounts you choose is less than this
assumed investment rate, then the dollar amount of your variable income payments
will decrease. The dollar amount of your variable income payments will increase,
however, if the actual net investment return exceeds the assumed investment
rate. The dollar amount of the variable income payments stays level if the net
investment return equals the assumed investment rate.
Please refer to the Statement of Additional Information for more detailed
information as to how we determine variable income payments.
FIXED INCOME PAYMENTS
We guarantee income payment amounts derived from any Fixed Account Option for
the duration of the Income Plan. We calculate the fixed income payments by:
1. adjusting the portion of the Contract Value in any Fixed Account Option on
the Payout Start Date by any applicable Market Value Adjustment;
2. deducting any applicable premium tax; and
3. applying the resulting amount to the greater of (a) the appropriate value
from the income payment table in your Contract or (b) such other value as we are
offering at that time.
We may defer making fixed income payments for a period of up to 6 months or any
shorter time state law may require. If we defer payments for 30 days or more, we
will pay interest as required by law from the date we receive the withdrawal
request to the date we make payment.
CERTAIN EMPLOYEE BENEFIT PLANS
The Contracts offered by this prospectus contain income payment tables that
provide for different payments to men and women of the same age, except in
states that require unisex tables. We reserve the right to use income payment
tables that do not distinguish on the basis of sex to the extent permitted by
applicable law. In certain employment-related situations, employers are required
by law to use the same income payment tables for men and women. Accordingly, if
the Contract is to be used in connection with an employment-related retirement
or benefit plan and we do not offer unisex annuity tables in your state, you
should consult with legal counsel as to whether the purchase of a Contract is
appropriate.
DEATH BENEFITS
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DEATH OF OWNER
If you die before the Payout Start Date, any surviving joint Contract Owner or,
if none, the Beneficiary will be designated the new Contract Owner and will be
entitled to the options described below. If the new Contract Owner previously
was the Beneficiary, however, the new Contract Owner's options will be subject
to any restrictions previously placed upon the Beneficiary.
The claim for death benefits must be submitted to us within 180 days of the
relevant death in order to claim the standard or enhanced death benefit. If a
complete claim is not submitted within 180 days of the relevant death, the
claimant will receive the greater of Contract Value or the Settlement Value.
(See "Death Proceeds" below).
1. If your spouse is the sole surviving Contract Owner or, in the absence of any
surviving Contract Owner, is the sole Beneficiary:
(a) Your spouse may elect to receive the Death Proceeds in a lump sum; or
(b) Your spouse may elect to receive the Death Proceeds paid out under one of
the Income Plans (described in "Income Payments" above) subject to the following
conditions:
The Payout Start Date must be within one year of your date of death. Income
payments must be payable:
(i) over the life of your spouse; or
(ii) for a guaranteed number of payments from 5 to 50 years but not to exceed
the life expectancy of your spouse; or
(iii) over the life of your spouse with a guaranteed number of payments from
5 to 30 years but not to exceed the life expectancy of your spouse.
(c) If your spouse does not elect one of these options, the Contract will
continue in the Accumulation Phase as if the death had not occurred. If the
Contract is continued in the Accumulation Phase, the following conditions apply:
The Contract Value of the continued Contract will be the Death Proceeds. Unless
otherwise instructed by the continuing spouse, the excess, if any, of the Death
Proceeds over the Contract Value will be allocated to the Sub-accounts of the
Variable Account. The excess will be allocated in proportion to your Contract
Value in those Sub-accounts as of the end of the Valuation Period during which
we receive the complete request for settlement of the Death Proceeds, except
that any portion of this excess attributable to the Fixed Account Options will
be allocated to the money market Variable Sub-account. Within 30 days of the
date the Contract is continued, your surviving spouse may choose one of the
following transfer alternatives without incurring a transfer fee:
(i) transfer all or a portion of the excess among the
30
Variable Sub-accounts;
(ii) transfer all or a portion of the excess into the Guaranteed Maturity
Fixed Account and begin a new Guarantee Period; or
(iii) transfer all or a portion of the excess into a combination of Variable
Sub-accounts and the Guaranteed Maturity Fixed Account.
Any such transfer does not count as one of the free transfers allowed each
Contract Year and is subject to any minimum allocation amount specified in the
Contract.
The surviving spouse may make a single withdrawal of any amount within one year
of the date of your death without incurring a Withdrawal Charge or Market Value
Adjustment.
Prior to the Payout Start Date, the Death Benefit of the continued Contract will
be as defined in the Death Benefit provision.
Only one spousal continuation is allowed under the Contract.
2. If the new Contract Owner is not your spouse but is a living person:
(a) The new Contract Owner may elect to receive the Death Proceeds in a lump
sum; or
(b) The new Contract Owner may elect to receive the Death Proceeds paid out
under one of the Income Plans (described in "Income Payments" above) subject to
the following conditions:
The Payout Start Date must be within one year of your date of death. Income
Payments must be payable:
(i) over the life of the new Contract Owner; or
(ii) . for a guaranteed number of payments from 5 to 50 years but not to
exceed the life expectancy of the new Contract Owner; or
(iii) over the life of the new Contract Owner with a guaranteed number of
payments from 5 to 30 years but not to exceed the life expectancy of the new
Contract Owner.
(c) If the new Contract Owner does not elect one of the options above, then
the new Contract Owner must receive the Contract Value payable within 5 years of
your date of death. On the date we receive the complete request for settlement
of the Death Proceeds the Contract Value will be the Death Proceeds. Unless
otherwise instructed by the new Contract Owner, the excess, if any, of the Death
Proceeds over the Contract Value will be allocated to the money market Variable
Sub-Account. Henceforth, the new Contract Owner may make transfers (as described
in "Transfers During the Payout Phase" above) during this 5 year period.
The new Contract Owner may make additional purchase payments to the Contract
under this election. Withdrawal Charges will be waived for any withdrawals made
during this 5 year period.
We reserve the right to offer additional options upon the death of the Contract
Owner.
If the new Contract Owner dies prior to the complete liquidation of the Contract
Value, then the new Contract Owner's named Beneficiary(ies) will receive the
greater of the Settlement Value or the remaining Contract Value. This amount
must be liquidated as a lump sum within 5 years of the date of the original
Contract Owner's death.
3. If the new Contract Owner is a corporation or other type of non-living
person:
(a) The new Contract Owner may elect to receive the Death Proceeds in a lump
sum; or
(b) If the new Contract Owner does not elect the option above, then the new
Contract Owner must receive the Contract Value payable within 5 years of your
date of death. On the date we receive the complete request for settlement of the
Death Proceeds the Contract Value under this option will be the Death Proceeds.
Unless otherwise instructed by the new Contract Owner, the excess, if any, of
the Death Proceeds over the Contract Value will be allocated to the money market
Variable Sub-Account. Henceforth, the new Contract Owner may make transfers(as
described in "Transfers During the Payout Phase" above) during this 5 year
period.
The new Contract Owner may not make additional purchase payments to the Contract
under this election. Withdrawal Charges will be waived during this 5 year
period.
We reserve the right to make additional options available to the new Contract
Owner upon the death of the Contract Owner.
If any new Contract Owner is a non-living person, all new Contract Owners will
be considered to be non-living persons for purposes of these provisions
Under any of these options, all ownership rights, subject to any restrictions
previously placed upon the Beneficiary, are available to the new Contract Owner
from the date of your death to the date on which the Death Proceeds are paid.
DEATH OF ANNUITANT
If the Annuitant who is not also the Contract Owner dies prior to the Payout
Start Date, the following apply:
1. If the Contract Owner is a living person, then the Contract will continue
with a new Annuitant, who will be:
(a) the youngest Contract Owner; otherwise
(b) the youngest Beneficiary.
You may change the Annuitant before the Payout Start Date.
2. If the Contract Owner is a non-living person:
(a) The Contract Owner may elect to receive the Death Proceeds in a lump sum;
or
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(b) If the Contract Owner does not elect the option above, then the Contract
Owner must receive the Contract Value payable within 5 years of the Annuitant's
date of death. On date we receive the complete request for settlement of the
Death Proceeds the Contract Value under this option will be the Death Proceds.
Unless otherwise instructed by the Contract Owner, the excess, if any, of the
Death Proceeds over the Contract Value will be allocated to the money market
Variable Sub-Account. Henceforth, the Contract Owner may make transfers (as
described in "Transfers During the Payout Phase" above) during this 5 year
period.
The new Contract Owner may not make additional purchase payments to the Contract
under this election. Withdrawal Charges will be waived during this 5 year
period.
We reserve the right to make additional options available to the Contract Owner
upon the death of the Annuitant.
Under any of these options, all ownership rights are available to the non-living
Contract Owner from the date of the Annuitant's death to the date on which the
Death Proceeds are paid.
DUE PROOF OF DEATH
A claim for a distribution on death must include Due Proof of Death. We will
accept the following documentation as "Due Proof of Death":
... a certified copy of a death certificate,
... a certified copy of a decree of a court of competent jurisdiction as to the
finding of death, or
... any other proof acceptable to us.
DEATH BENEFIT PAYMENTS
DEATH PROCEEDS. If we receive a complete request for settlement of the Death
Proceeds within 180 days of the date of your death, the Death Proceeds are equal
to the applicable death benefit described below. Otherwise, the Death Proceeds
are equal to the greater of the Contract value or the Settlement Value.
We reserve the right to extend, on a non-discriminatory basis, the 180-day
period in which the Death Proceeds will equal the applicable death benefit as
described above.
This right applies only for the purposes of determining the amount payable as
Death Proceeds and in no way restricts when a claim may be filed.
DEATH BENEFIT AMOUNT
Prior to the Payout Start Date, the death benefit is equal to the greatest of:
1. the Contract Value as of the date we determine the value of the death
benefit, or
2. the SETTLEMENT VALUE (that is, the amount payable on a full withdrawal of
Contract Value) on the date we determine the value of the death benefit, or
3. the Contract Value on each DEATH BENEFIT ANNIVERSARY prior to the date we
determine the death benefit, increased by purchase payments made since that
Death Benefit Anniversary and reduced by an adjustment for any partial
withdrawals since that Death Benefit Anniversary.
A "Death Benefit Anniversary" is every seventh Contract Anniversary beginning
with the Issue Date. For example, the Issue Date, 7th and 14th Contract
Anniversaries are the first 3 Death Benefit Anniversaries.
The withdrawal adjustment is equal to (a) divided by (b), with the result
multiplied by (c), where:
(a) = is the withdrawal amount;
(b) = is the Contract Value immediately prior to the withdrawal; and
(c) = is the Contract Value on the Death Benefit Anniversary adjusted by any
prior purchase payments or withdrawals made since that Anniversary.
We will determine the value of the death benefit as of the end of the Valuation
Date on which we receive a complete request for payment of the death benefit. If
we receive a request after 3 p.m. Central Time on a Valuation Date, we will
process the request as of the following Valuation Date.
OPTIONAL RIDERS
We offer two optional riders: an Enhanced Death Benefit Rider and an Enhanced
Death and Income Benefit Combination Rider II. You may elect to add either or no
rider to your Contract; you may not add both. If you elect an optional rider, we
will charge you a higher mortality and expense risk charge. We may discontinue
offering either or both of these Riders at any time. The benefits under these
Riders are described below.
Before September 22, 2000, we offered the Enhanced Death and Benefit Combination
Rider. We no longer offer it with this Contract. However, it also is described
below for the convenience of Contract Owners who purchased it when it was
available.
ENHANCED DEATH BENEFIT RIDER
You may elect the enhanced Death Benefit Rider if the oldest Contract Owner and
Annuitant are no older than age 80 as of the date we receive the completed
application, or a written request to add the Rider.
If the Contract Owner is a living individual, the enhanced death benefit applies
only upon the death of the Contract Owner. If the Contract Owner is not a living
individual, the enhanced death benefit applies only upon the death of the
Annuitant. For Contracts with the Enhanced Death Benefit Rider, the death
benefit will be the greatest of (1) through (3) above, or (4) the enhanced death
benefit. The enhanced death benefit is equal to the greater of the Enhanced
Death Benefit A or Enhanced Death Benefit B. Enhanced Death Benefit B may not be
available in all states.
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The enhanced death benefit will never be greater than the maximum death benefit
allowed by any state nonforfeiture laws that govern the Contract.
ENHANCED DEATH BENEFIT A.
At issue, Enhanced Death Benefit A is equal to the initial purchase payment.
After issue, Enhanced Death Benefit A is 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 an adjustment for any partial
withdrawals since that Anniversary. The adjustment is equal to (a) divided by
(b), and the result multiplied by (c) where:
(a) = the withdrawal amount,
(b) = the Contract Value immediately prior to the withdrawal, and
(c) = the most recently calculated Enhanced Death Benefit A.
We will calculate Anniversary Values for each Contract Anniversary prior to the
oldest Contract Owner's or the Annuitant's, if the Contract Owner is not a
natural person, 85th birthday. After age 85, we will recalculate Enhanced Death
Benefit A only for purchase payments and withdrawals.
ENHANCED DEATH BENEFIT B.
The Enhanced Death Benefit B is equal to total purchase payments made reduced by
a withdrawal adjustment, as defined below. Each purchase payment and each
withdrawal adjustment will accumulate daily at a rate equivalent to 5% per year
until the earlier of:
... the date we determine the death benefit, or
... the first day of the month following the oldest Contract Owner's or, if the
Contract Owner is not a natural person, the Annuitant's 85th birthday.
The adjustment is equal to (a) divided by (b), and the result multiplied by (c)
where:
(a) = the withdrawal amount,
(b) = the Contract Value immediately prior to the withdrawal, and
(c) = the most recently calculated Enhanced Death Benefit B.
ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER. (for Contracts issued
before September 22, 2000)
The enhanced death benefit portion of the Enhanced Death and Income Benefit
Combination Rider is as described above under "Enhanced Death Benefit Rider."
The enhanced income benefit guarantees that the amount of income payments you
receive will not be less than those determined by applying the value of the
enhanced death benefit on the Payout Start Date to the minimum guaranteed rate
(rather than to any current rates we may be offering) for the Income Plan you
select.
The enhanced income benefit will apply if the Contract owner elects a Payout
Start Date that:
... is on or after the tenth Contract Anniversary, and
... is prior to the Annuitant's 90th Birthday.
On the Payout Start Date, you may apply the greater of the Contract Value or the
enhanced income benefit to the Payout Phase of the Contract. No Market Value
Adjustment will be applied to the enhanced income benefit amount. The enhanced
income benefit will only apply if the Income Plan selected provides payments
guaranteed for either a single or joint lives with a period certain of at least:
... 10 years, if the youngest Annuitant's age is 80 or less on the date the amount
is applied; or
... 5 years, if the youngest Annuitant's age is greater than 80 on the date the
amount is applied.
If, however, you apply the Contract Value and not the enhanced income benefit to
the Income Plan, then you may select any Income Plan we offer at that time.
ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER II. (for Contracts issued on
or after September 22, 2000). Instead of the Enhanced Death Benefit Rider, you
may choose the Enhanced Death and Income Benefit Combination Rider II. The
Enhanced Death and Income Benefit Combination Rider II may not be available in
all states.
The enhanced death benefit portion of the Enhanced Death and Income Benefit
Combination Rider II is as described above under "Enhanced Death Benefit Rider."
The enhanced income benefit guarantees that the amount of income payments you
receive will not be less than those determined by applying the value of the
enhanced death benefit on the Payout Start Date to the minimum guaranteed rate
(rather than to any current rates we may be offering) for the Income Plan you
select.
The guaranteed income benefit amount is determined by applying the enhanced
income benefit amount less any applicable taxes to the guaranteed rates for the
Income Plan you elect. The Income Plan you elect must satisfy the conditions
described below.
The enhanced income benefit will apply if the Contract Owner elects a Payout
Start Date that:
... is on or after the tenth Contract Anniversary, and
... occurs during the 30 day period following a Contract Anniversary.
On the Payout Start Date, you may apply the greater of the Contract Value or the
enhanced income benefit to the Payout Phase of the Contract. No Market Value
Adjustment will be applied to the enhanced income benefit amount. The enhanced
income benefit will only apply if the Income Plan selected provides payments
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guaranteed for either a single or joint lives with a period certain of at least:
... 10 years, if the youngest Annuitant's age is 80 or less on the date the amount
is applied; or
... 5 years, if the youngest Annuitant's age is greater than 80 on the date the
amount is applied.
You must elect to receive fixed income payments, which will be calculated using
the appropriate guaranteed income payment table provided in your Contract.
If, however, you apply the Contract Value and not the enhanced income benefit to
the Income Plan, then you may select any Income Plan we offer at that time. If
you expect to apply your Contract Value to variable income payment options or to
current annuity payment rates then in effect, electing the enhanced income
benefit may not be appropriate.
The enhanced income benefit only applies to the determination of income payments
under Income Plans in the circumstances described above. This is not a guarantee
of Contract Value or investment performance. This benefit does not enhance the
amounts you receive in partial withdrawal or surrenders. If you surrender you
Contract, you will not receive any benefit under this Rider.
MORE INFORMATION
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GLENBROOK LIFE
GLENBROOK LIFE is the issuer of the Contract. GLENBROOK
LIFE is a stock life insurance company organized under the laws of the State of
Arizona in 1998. Previously, GLENBROOK LIFE was organized under the laws of the
State of Illinois in 1992. GLENBROOK LIFE was originally organized under the
laws of the State of Indiana in 1965. From 1965 to 1983 GLENBROOK LIFE was known
as "United Standard Life Assurance Company" and from 1983 to 1992 as "William
Penn Life Assurance Company of America."
GLENBROOK LIFE is currently licensed to operate in the District of Columbia and
all states except New York. We intend to offer the Contract in those
jurisdictions in which we are licensed. Our home office is located at 3100
Sanders Road, Northbrook, Illinois 60062.
GLENBROOK LIFE is a wholly owned subsidiary of Allstate Life Insurance Company
("Allstate Life"), a stock life insurance company incorporated under the laws of
the State of Illinois. Allstate Life is a wholly owned subsidiary of Allstate
Insurance Company, a stock property-liability insurance company incorporated
under the laws of Illinois. With the exception of directors' qualifying shares,
all of the outstanding capital stock of Allstate Insurance Company is owned by
The Allstate Corporation.
GLENBROOK LIFE and Allstate Life entered into a reinsurance agreement effective
June 5, 1992. Under the reinsurance agreement, Allstate Life reinsures
substantially all of GLENBROOK LIFE's liabilities under its various insurance
contracts. The reinsurance agreement provides us with financial backing from
Allstate Life. However, it does not create a direct contractual relationship
between Allstate Life and you. In other words, the obligations of Allstate Life
under the reinsurance agreement are to GLENBROOK LIFE; GLENBROOK
LIFE remains the sole obligor under the Contract to you.
Independent rating agencies regularly evaluate life insurers' claims-paying
ability, quality of investments, and overall stability. A.M. Best Company
assigns an A+ (Superior) financial strength rating to Allstate Life, which
results in an A+r rating to GLENBROOK LIFE due to the reinsurance agreement with
Allstate Life mentioned above. Standard & Poor's Insurance Rating Services
assigns an AA+ (Very Strong) financial strength rating and Moody's Investors
Service assigns an Aa2 (Excellent) financial strength rating to GLENBROOK LIFE,
sharing the same ratings of its parent, Allstate Life. These ratings do not
reflect the investment performance of the Variable Account. We may from time to
time advertise these ratings in our sales literature.
THE VARIABLE ACCOUNT
GLENBROOK LIFE established the GLENBROOK LIFE Multi-Manager Variable Account on
January 15, 1996. We have registered the Variable Account with the SEC as a unit
investment trust. The SEC does not supervise the management of the Variable
Account or GLENBROOK LIFE.
We own the assets of the Variable Account. The Variable Account is a segregated
asset account under Arizona law. That means we account for the Variable
Account's income, gains and losses separately from the results of our other
operations. It also means that only the assets of the Variable Account that are
in excess of the reserves and other Contract liabilities with respect to the
Variable Account are subject to liabilities relating to our other operations.
Our obligations arising under the Contracts are general corporate obligations of
GLENBROOK LIFE.
The Variable Account consists of multiple Variable Sub-Accounts. Each Variable
Sub-Account invests in a corresponding Portfolio. We may add new Variable
Sub-Accounts or eliminate one or more of them, if we believe marketing, tax, or
investment conditions so warrant. We may also add other Variable Sub-Accounts
that may be available under other variable annuity contracts. We do not
guarantee the investment performance of the Variable Account, its Sub-Accounts
or the Portfolios. We may use
34
the Variable Account to fund our other annuity contracts. We will account
separately for each type of annuity contract funded by the Variable Account.
THE PORTFOLIOS
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. We automatically reinvest all
dividends and capital gains distributions from the Portfolios in shares of the
distributing Portfolio at their net asset value.
VOTING PRIVILEGES. As a general matter, you do not have a direct right to vote
the shares of the Portfolios held by the Variable Sub-Accounts to which you have
allocated your Contract Value. Under current law, however, you are entitled to
give us instructions on how to vote those shares on certain matters. Based on
our present view of the law, we will vote the shares of the Portfolios that we
hold directly or indirectly through the Variable Account in accordance with
instructions that we receive from Contract Owners entitled to give such
instructions.
As a general rule, before the Payout Start Date, the Contract Owner or anyone
with a voting interest is the person entitled to give voting instructions. The
number of shares that a person has a right to instruct will be determined by
dividing the Contract Value allocated to the applicable Variable Sub-Account by
the net asset value per share of the corresponding Portfolio as of the record
date of the meeting. After the Payout Start Date the person receiving income
payments has the voting interest. The payee's number of votes will be determined
by dividing the reserve for such Contract allocated to the applicable Variable
Sub-Account by the net asset value per share of the corresponding Portfolio. The
votes decrease as income payments are made and as the reserves for the Contract
decrease.
We will vote shares attributable to Contracts for which we have not received
instructions, as well as shares attributable to us, in the same proportion as we
vote shares for which we have received instructions, unless we determine that we
may vote such shares in our own discretion. We will apply voting instructions to
abstain on any item to be voted upon on a pro-rata basis to reduce the votes
eligible to be cast.
We reserve the right to vote Portfolio shares as we see fit without regard to
voting instructions to the extent permitted by law. If we disregard voting
instructions, we will include a summary of that action and our reasons for that
action in the next semi-annual financial report we send to you.
CHANGES IN PORTFOLIOS. If the shares of any of the Portfolios are no longer
available for investment by the Variable Account or if, in our judgment, further
investment in such shares is no longer desirable in view of the purposes of the
Contract, we may eliminate that Portfolio and substitute shares of another
eligible investment Portfolio. Any substitution of securities will comply with
the requirements of the Investment Company Act of 1940. We also may add new
Variable Sub-Accounts that invest in additional mutual funds. We will notify you
in advance of any change.
CONFLICTS OF INTEREST. Certain of the Portfolios sell their shares to separate
accounts underlying both variable life insurance and variable annuity contracts.
It is conceivable that in the future it may be unfavorable for variable life
insurance separate accounts and variable annuity separate accounts to invest in
the same Portfolio. The boards of directors of these Portfolios monitor for
possible conflicts among separate accounts buying shares of the Portfolios.
Conflicts could develop for a variety of reasons. For example, differences in
treatment under tax and other laws or the failure by a separate account to
comply with such laws could cause a conflict. To eliminate a conflict, a
Portfolio's board of directors may require a separate account to withdraw its
participation in a Portfolio. A Portfolio's net asset value could decrease if it
had to sell investment securities to pay redemption proceeds to a separate
account withdrawing because of a conflict.
THE CONTRACT
DISTRIBUTION. ALFS, Inc. ("ALFS"), located at 3100 Sanders Road, Northbrook, IL
60062-7154, serves as principal underwriter of the Contracts. ALFS is a wholly
owned subsidiary of Allstate Life. ALFS is a registered broker dealer under the
Securities and Exchange Act of 1934, as amended ("EXCHANGE ACT"), and is a
member of the National Association of Securities Dealers, Inc.
We will pay commissions to broker-dealers who sell the contracts. Commissions
paid may vary, but we estimate that the total commissions paid on all Contract
sales will not exceed 8% of all purchase payments. These commissions are
intended to cover distribution expenses. Sometimes, we also pay the
broker-dealer a persistency bonus in addition to the standard commissions. A
persistency bonus is not expected to exceed 0.25%, on an annual basis, of the
Contract Values considered in connection with the bonus. In some states,
Contracts may be sold by representatives or employees of banks which may be
acting as broker-dealers without separate registration under the Exchange Act,
pursuant to legal and regulatory exceptions.
GLENBROOK LIFE does not pay ALFS a commission for distribution of the Contracts.
The underwriting agreement with ALFS provides that we will reimburse ALFS for
any liability to Contract Owners arising out of services rendered or Contracts
issued.
ADMINISTRATION. We have primary responsibility for all administration of the
Contracts and the Variable Account. We provide the following administrative
services, among others:
... issuance of the Contracts;
... maintenance of Contract Owner records;
... Contract Owner services;
... calculation of unit values;
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... maintenance of the Variable Account; and
... preparation of Contract Owner reports.
We will send you Contract statements and transaction confirmations at least
annually. You should notify us promptly in writing of any address change. You
should read your statements and confirmations carefully and verify their
accuracy. You should contact us promptly if you have a question about a periodic
statement. We will investigate all complaints and make any necessary adjustments
retroactively, but you must notify us of a potential error within a reasonable
time after the date of the questioned statement. If you wait too long, we
reserve the right to make the adjustment as of the date that we receive notice
of the potential error.
We also will provide you with additional periodic and other reports, information
and prospectuses as may be required by federal securities laws.
QUALIFIED PLANS
If you use the Contract with a qualified plan, the plan may impose different or
additional conditions or limitations on withdrawals, waivers of withdrawal
charges, death benefits, Payout Start Dates, income payments, and other Contract
features. In addition, adverse tax consequences may result if qualified plan
limits on distributions and other conditions are not met. Please consult your
qualified plan administrator for more information.
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LEGAL MATTERS
Jorden Burt, Washington, D.C., has advised GLENBROOK
LIFE on certain federal securities law matters. All matters of state insurance
law pertaining to the Contracts, including the validity of the Contracts and
GLENBROOK LIFE's right to issue such Contracts under state insurance law, have
been passed upon by Michael J. Velotta, General Counsel of GLENBROOK LIFE.
37
TAXES
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THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. GLENBROOK
LIFE MAKES NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR
TRANSACTION INVOLVING A CONTRACT.
Federal, state, local and other tax consequences of ownership or receipt of
distributions under an annuity contract depend on your individual circumstances.
If you are concerned about any tax consequences with regard to your individual
circumstances, you should consult a competent tax adviser.
TAXATION OF GLENBROOK LIFE AND
ANNUITY COMPANY
GLENBROOK LIFE 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 GLENBROOK LIFE, and its operations form a part of GLENBROOK LIFE,
it will not be taxed separately. Investment income and realized capital gains of
the Variable Account are automatically applied to increase reserves under the
Contract. Under existing federal income tax law, GLENBROOK LIFE believes that
the Variable Account investment income and capital gains will not be taxed to
the extent that such income and gains are applied to increase the reserves under
the Contract. Accordingly, GLENBROOK LIFE does not anticipate that it will incur
any federal income tax liability attributable to the Variable Account, and
therefore GLENBROOK LIFE does not intend to make provisions for any such taxes.
If GLENBROOK LIFE is taxed on investment income or capital gains of the Variable
Account, then GLENBROOK LIFE may impose a charge against the Variable Account in
order to make provision for such taxes.
TAXATION OF ANNUITIES IN GENERAL
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TAX DEFERRAL. Generally, you are not taxed on increases in the Contract Value
until a distribution occurs. This rule applies only where:
1. the Contract Owner is a natural person,
2. the investments of the Variable Account are "adequately diversified"
according to Treasury Department regulations, and
3. GLENBROOK LIFE is considered the owner of the Variable Account assets for
federal income tax purposes.
NON-NATURAL OWNERS. As a general rule, annuity contracts owned by non-natural
persons such as corporations, trusts, or other entities are not treated as
annuity contracts for federal income tax purposes. The income on such contracts
does not enjoy tax deferral and is taxed as ordinary income received or accrued
by the owner during the taxable year.
EXCEPTIONS TO THE NON-NATURAL OWNER RULE. There are several exceptions to the
general rule that annuity contracts held by a non-natural owner are not treated
as annuity contracts for federal income tax purposes. contracts will generally
be treated as held by a natural person if the nominal owner is a trust or other
entity which holds the contract as agent for a natural person. However, this
special exception will not apply in the case of an employer who is the nominal
owner of an annuity contract under a non-qualified deferred compensation
arrangement for its employees. Other exceptions to the non-natural owner rule
are: (1) contracts acquired by an estate of a decedent by reason of the death of
the decedent; (2) certain qualified contracts; (3) contracts purchased by
employers upon the termination of certain qualified plans; (4) certain contracts
used in connection with structured settlement agreements, and (5) immediate
annuity 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.
DIVERSIFICATION REQUIREMENTS. For a Contract to be treated as an annuity for
federal income tax purposes, the investments in the Variable Account must be
"ADEQUATELY DIVERSIFIED" consistent with standards under Treasury Department
regulations. If the investments in the Variable Account are not adequately
diversified, the Contract will not be treated as an annuity contract for federal
income tax purposes. As a result, the income on the Contract will be taxed as
ordinary income received or accrued by the Contract Owner during the taxable
year. Although GLENBROOK LIFE does not have control over the Portfolios or their
investments, we expect the Portfolios to meet the diversification requirements.
OWNERSHIP TREATMENT. The IRS has stated that a contract owner will be considered
the owner of separate account assets if he 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, the Treasury
Department announced that the regulations do not provide guidance concerning
circumstances in which investor control of the separate account investments may
cause a contract owner to be treated as the owner of the separate account. The
Treasury Department also stated that future guidance would be issued regarding
the extent that owners could direct sub-account investments without being
treated as owners of the underlying assets of the separate account.
Your rights under the Contract are different than those
38
described by the IRS in rulings in which it found that contract owners were not
owners of separate account assets. For example, you have the choice to allocate
premiums and Contract Values among a broader selection of investment
alternatives. Also, you may be able to transfer among investment alternatives
more frequently than in such rulings. These differences could result in you
being treated as the owner of the Variable Account. If this occurs, income and
gain from the Variable Account assets would be includible in your gross income.
GLENBROOK
LIFE does not know what standards will be set forth in any regulations or
rulings which the Treasury Department may issue. It is possible that future
standards announced by the Treasury Department could adversely affect the tax
treatment of your Contract. We reserve the right to modify the Contract as
necessary to attempt to prevent you from being considered the federal tax owner
of the assets of the Variable Account. However, we make no guarantee that such
modification to the Contract will be successful.
TAXATION OF PARTIAL AND FULL WITHDRAWALS. If you make a partial withdrawal under
a non-qualified Contract, amounts received are taxable to the extent the
Contract Value, without regard to surrender charges, exceeds the investment in
the Contract. The investment in the Contract is the gross premium paid for the
contract minus any amounts previously received from the Contract if such amounts
were properly excluded from your gross income. If you make a full withdrawal
under a non-Qualified Contract, the amount received will be taxable only to the
extent it exceeds the investment in the Contract.
TAXATION OF ANNUITY PAYMENTS. Generally, the rule for income taxation of annuity
payments received from a non-qualified Contract provides for the return of your
investment in the Contract in equal tax-free amounts over the payment period.
The balance of each payment received is taxable. For fixed annuity payments, the
amount excluded from income is determined by multiplying the payment by the
ratio of the investment in the Contract (adjusted for any refund feature or
period certain) to the total expected value of annuity payments for the term of
the Contract. If you elect variable annuity payments, the amount excluded from
taxable income is determined by dividing the investment in the Contract by the
total number of expected payments. The annuity payments will be fully taxable
after the total amount of the investment in the Contract is excluded using these
ratios. The Federal tax treatment of annuity payments is unclear in some
respects. As a result, if the IRS should provide further guidance, it is
possible that the amount we calculate and report to the IRS as taxable could be
different. If you die, and annuity payments cease before the total amount of the
investment in the Contract is recovered, the unrecovered amount will be allowed
as a deduction for your last taxable year.
WITHDRAWALS AFTER THE PAYOUT START DATE. Federal tax law is unclear regarding
the taxation of any additional withdrawal received after the Payout Start Date.
It is possible that a greater or lesser portion of such a payment could be
taxable than the amount we determine.
DISTRIBUTION AT DEATH RULES. In order to be considered an annuity contract for
federal income tax purposes, the Contract must provide:
1. if any Contract Owner dies on or after the Payout 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 Contract Owner's death;
2. if any Contract Owner dies prior to the Payout Start Date, the entire
interest in the Contract will be distributed within 5 years after the date of
the Contract Owner's death. These requirements are satisfied if any portion of
the Contract Owner's interest that is payable to (or for the benefit of) a
designated Beneficiary is distributed over the life of such Beneficiary (or over
a period not extending beyond the life expectancy of the Beneficiary) and the
distributions begin within 1 year of the Contract Owner's death. If the Contract
Owner's designated Beneficiary is the surviving spouse of the Contract Owner,
the Contract may be continued with the surviving spouse as the new Contract
Owner.
3. if the Contract Owner is a non-natural person, then the Annuitant will be
treated as the Contract 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 Contract Owner.
TAXATION OF ANNUITY DEATH BENEFITS. Death Benefit amounts are included in income
as follows:
1. if distributed in a lump sum, the amounts are taxed in the same manner as a
full withdrawal, or
2. if distributed under an Income Plan, the amounts are taxed in the same manner
as annuity payments.
PENALTY TAX ON PREMATURE DISTRIBUTIONS. A 10% penalty tax applies to the taxable
amount of any premature distribution from a non-Qualified Contract. The penalty
tax generally applies to any distribution made prior to the date you attain age
591/2. However, no penalty tax is incurred on distributions:
1. made on or after the date the Contract Owner attains age 591/2,
2. made as a result of the Contract Owner's death or becoming totally disabled,
3. made in substantially equal periodic payments over the Contract Owner's life
or life expectancy, or over the joint lives or joint life expectancies of the
Contract Owner and the Beneficiary,
4. made under an immediate annuity, or
5. attributable to investment in the Contract before August 14, 1982.
39
You should consult a competent tax advisor to determine how these exceptions may
apply to your situation.
SUBSTANTIALLY EQUAL PERIODIC PAYMENTS. With respect to non-Qualified Contracts
using substantially equal periodic payments or immediate annuity payments as an
exception to the penalty tax on premature distributions, any additional
withdrawal or other modification of the payment stream would violate the
requirement that payments must be substantially equal. Failure to meet this
requirement would mean that the income portion of each payment received prior to
the later of 5 years or the Contract Owner's attaining age 591/2 would be
subject to a 10% penalty tax unless another exception to the penalty tax
applied. The tax for the year of the modification is increased by the penalty
tax that would have been imposed without the exception, plus interest for the
years in which the exception was used. You should consult a competent tax
advisor prior to taking a withdrawal.
TAX FREE EXCHANGES UNDER IRC SECTION 1035. A 1035 exchange is a tax-free
exchange of a non-qualified life insurance contract, endowment contract or
annuity contract for a new non-qualified annuity contract. The Contract Owner(s)
must be the same on the old and new contract. Basis from the old contract
carries over to the new contract so long as we receive that information from the
relinquishing company. If basis information is never received, we will assume
that all exchanged funds represent earnings and will allocate no cost basis to
them.
TAXATION OF OWNERSHIP CHANGES. If you transfer a non-Qualified Contract without
full and adequate consideration to a person other than your spouse (or to a
former spouse incident to a divorce), you will be taxed on the difference
between the Contract Value and the investment in the Contract at the time of
transfer. Except for certain Qualified Contracts, any amount you receive as a
loan under a Contract, and any assignment or pledge (or agreement to assign or
pledge) of the Contract Value is taxed as a withdrawal of such amount or portion
and may also incur the 10% penalty tax. Currently we do not allow assignments.
AGGREGATION OF ANNUITY CONTRACTS. The Code requires that all non-qualified
deferred annuity contracts issued by GLENBROOK LIFE (or its affiliates) to the
same Contract Owner during any calendar year be aggregated and treated as one
annuity contract for purposes of determining the taxable amount of a
distribution.
INCOME TAX WITHHOLDING
Generally, GLENBROOK LIFE is required to withhold federal income tax at a rate
of 10% from all non-annuitized distributions. The customer may elect out of
withholding by completing and signing a withholding election form. If no
election is made, we will automatically withhold the required 10% of the taxable
amount. In certain states, if there is federal withholding, then state
withholding is also mandatory.
GLENBROOK LIFE is required to withhold federal income tax using the wage
withholding rates for all annuitized distributions. The customer may elect out
of withholding by completing and signing a withholding election form. If no
election is made, we will automatically withhold using married with three
exemptions as the default. In certain states, if there is federal withholding,
then state withholding is also mandatory.
Election out of withholding is valid only if the customer provides a U.S.
residence address and taxpayer identification number.
TAX QUALIFIED CONTRACTS
The income on qualified plan and IRA investments is tax deferred, and the income
on variable annuities held by such plans does not receive any additional tax
deferral. You should review the annuity features, including all benefits and
expenses, prior to purchasing a variable annuity in a qualified plan or IRA.
Contracts may be used as investments with certain qualified plans such as:
... Individual Retirement Annuities or Accounts (IRAs) under Section 408 of the
Code;
... Roth IRAs under Section 408A of the Code;
... Simplified Employee Pension Plans under Section 408(k) of the Code;
... Savings Incentive Match Plans for Employees (SIMPLE) Plans under Section
408(p) of the Code;
... Tax Sheltered Annuities under Section 403(b) of the Code;
... Corporate and Self Employed Pension and Profit Sharing Plans under Sections
401 and 403; and
... State and Local Government and Tax-Exempt Organization Deferred Compensation
Plans under Section 457.
GLENBROOK LIFE reserves the right to limit the availability of the Contract for
use with any of the Qualified Plans listed above or to modify the Contract to
conform with tax requirements. 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 certain
transactions such as excess contributions, premature distributions, and,
distributions that do not conform to specified commencement and minimum
distribution rules.
In the case of certain qualified plans, the terms of the plans may govern the
right to benefits, regardless of the terms of the Contract.
TAXATION OF WITHDRAWALS FROM A QUALIFIED CONTRACT. If you make a partial
withdrawal under a Qualified Contract other than a Roth IRA, the portion of the
payment that bears the same ratio to the total payment that the investment in
the Contract (i.e., nondeductible IRA contributions, after tax contributions to
qualified plans) bears to the Contract Value, is excluded from your income. We
do not keep track of nondeductible contributions, and all tax reporting of
40
distributions from Qualified Contracts other than Roth IRAs will indicate that
the distribution is fully taxable.
"QUALIFIED DISTRIBUTIONS" from Roth IRAs are not included in gross income.
"Qualified distributions" are any distributions made more than five taxable
years after the taxable year of the first contribution to any Roth IRA and which
are:
... made on or after the date the Contract Owner attains age 591/2,
... made to a beneficiary after the Contract Owner's death,
... attributable to the Contract Owner being disabled, or
... made for a first time home purchase (first time home purchases are subject to
a lifetime limit of $10,000).
"NONQUALIFIED DISTRIBUTIONS" from Roth IRAs are treated as made from
contributions first and are included in gross income only to the extent that
distributions exceed contributions. All tax reporting of distributions from Roth
IRAs will indicate that the taxable amount is not determined.
REQUIRED MINIMUM DISTRIBUTIONS. Generally, qualified plans require minimum
distributions upon reaching age 701/2. Failure to withdraw the required minimum
distribution will result in a 50% tax penalty on the shortfall not withdrawn
from the Contract. Not all income plans offered under the Contract satisfy the
requirements for minimum distributions. Because these distributions are required
under the Code and the method of calculation is complex, please see a competent
tax advisor.
THE DEATH BENEFIT AND QUALIFIED CONTRACTS. Pursuant to the Code and IRS
regulations, an IRA (e.g., traditional IRA, Roth IRA, SEP IRA and SIMPLE IRA)
may not invest in life insurance contracts. However, an IRA may provide a death
benefit that equals the greater of the purchase payments or the Contract Value.
The Contract offers a death benefit that in certain circumstances may exceed the
greater of the purchase payments or 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 satisfy the
requirements of an IRA. We believe that these regulations do not prohibit all
forms of optional death benefits, however, at this time we are not allowing the
Enhanced Earnings Death Benefit Plus Option to be sold with an IRA.
It is also possible that the certain death benefits that offer enhanced earnings
could be characterized as an incidental death benefit. If the death benefit were
so characterized, this could result in current taxable income to a Contract
Owner. In addition, there are limitations on the amount of incidental death
benefits that may be provided under qualified plans, such as in connection with
a 403(b) plan.
GLENBROOK LIFE reserves the right to limit the availability of the Contract for
use with any of the qualified plans listed above.
PENALTY TAX ON PREMATURE DISTRIBUTIONS FROM QUALIFIED CONTRACTS. A 10% penalty
tax applies to the taxable amount of any premature distribution from a Qualified
Contract. The penalty tax generally applies to any distribution made prior to
the date you attain age 591/2. However, no penalty tax is incurred on
distributions:
1. made on or after the date the Contract Owner attains age 591/2,
2. made as a result of the Contract Owner's death or total disability,
3. made in substantially equal periodic payments over the Contract Owner's life
or life expectancy, or over the joint lives or joint life expectancies of the
Contract Owner and the Beneficiary,
4. made pursuant to an IRS levy,
5. made for certain medical expenses,
6. made to pay for health insurance premiums while unemployed (only applies for
IRAs),
7. made for qualified higher education expenses (only applies for IRAs), and
8. made for a first time home purchase (up to a $10,000 lifetime limit and only
applies for IRAs).
During the first 2 years of the individual's participation in a SIMPLE IRA,
distributions that are otherwise subject to the premature distribution penalty,
will be subject to a 25% penalty tax.
You should consult a competent tax advisor to determine how these exceptions may
apply to your situation.
SUBSTANTIALLY EQUAL PERIODIC PAYMENTS ON QUALIFIED CONTRACTS. With respect to
Qualified Contracts using substantially equal periodic payments as an exception
to the penalty tax on premature distributions, any additional withdrawal or
other modification of the payment stream would violate the requirement that
payments must be substantially equal. Failure to meet this requirement would
mean that the income portion of each payment received prior to the later of 5
years or the taxpayer's attaining age 591/2 would be subject to a 10% penalty
tax unless another exception to the penalty tax applied. The tax for the year of
the modification is increased by the penalty tax that would have been imposed
without the exception, plus interest for the years in which the exception was
used. You should consult a competent tax advisor prior to taking a withdrawal.
INCOME TAX WITHHOLDING ON QUALIFIED CONTRACTS. Generally, GLENBROOK LIFE is
required to withhold federal income tax at a rate of 10% from all non-annuitized
distributions that are not considered "ELIGIBLE ROLLOVER DISTRIBUTIONS." The
customer may elect out of withholding by completing and signing a withholding
election form. If no election is made, we will automatically withhold the
required 10% from the
41
taxable amount. In certain states, if there is federal withholding, then state
withholding is also mandatory. GLENBROOK LIFE is required to withhold federal
income tax at a rate of 20% on all "ELIGIBLE ROLLOVER DISTRIBUTIONS" unless you
elect to make a "DIRECT ROLLOVER" of such amounts to an IRA or eligible
retirement plan. Eligible rollover distributions generally include all
distributions from Qualified Contracts, excluding IRAs, with the exception of:
1. required minimum distributions, or
2. a series of substantially equal periodic payments made over a period of at
least 10 years, or,
3. a series of substantially equal periodic payments made over the life (joint
lives) of the participant (and beneficiary), or,
4. hardship distributions.
For all annuitized distributions that are not subject to the 20% withholding
requirement, GLENBROOK LIFE is required to withhold federal income tax using the
wage withholding rates from all annuitized distributions. The customer may elect
out of withholding by completing and signing a withholding election form. If no
election is made, we will automatically withhold using married with three
exemptions as the default. In certain states, if there is federal withholding,
then state withholding is also mandatory.
Election out of withholding is valid only if the customer provides a U.S.
residence address and taxpayer identification number.
INDIVIDUAL RETIREMENT ANNUITIES. Section 408 of the Code permits eligible
individuals to contribute to an individual retirement program known as an
Individual Retirement Annuity (IRA). Individual Retirement Annuities are subject
to limitations on the amount that can be contributed and on the time when
distributions may commence. Certain distributions from other types of qualified
plans may be "ROLLED OVER" on a tax-deferred basis into an Individual Retirement
Annuity.
ROTH INDIVIDUAL RETIREMENT ANNUITIES. Section 408A of the Code permits eligible
individuals to make nondeductible contributions to an individual retirement
program known as a Roth Individual Retirement Annuity. Roth Individual
Retirement Annuities are subject to limitations on the amount that can be
contributed and on the time when distributions may commence.
Subject to certain limitations, a traditional Individual Retirement Account or
Annuity may be converted or "ROLLED OVER" to a Roth Individual Retirement
Annuity. The income portion of a conversion or rollover distribution is taxable
currently, but is exempted from the 10% penalty tax on premature distributions.
SIMPLIFIED EMPLOYEE PENSION PLANS. Section 408(k) of the Code allows eligible
employers to establish simplified employee pension plans for their employees
using individual retirement annuities. Under these plans the employer may,
within specified limits, make deductible contributions on behalf of the
employees to the individual retirement annuities. Employers intending to use the
Contract in connection with such plans should seek competent tax advice.
SAVINGS INCENTIVE MATCH PLANS FOR EMPLOYEES (SIMPLE PLANS). Sections 408(p) and
401(k) of the Code allow eligible employers with 100 or fewer employees to
establish SIMPLE retirement plans for their employees. SIMPLE plans may be
structured as a SIMPLE retirement account using an IRA or as a Section 401(k)
qualified cash or deferred arrangement. In general, a SIMPLE plan consists of a
salary deferral program for eligible employees and matching or nonelective
contributions made by employers. Employers intending to use the Contract in
conjunction with SIMPLE plans should seek competent tax and legal advice.
TO DETERMINE IF YOU ARE ELIGIBLE TO CONTRIBUTE TO ANY OF THE ABOVE LISTED IRAS
(TRADITIONAL, ROTH, SEP, OR SIMPLE), PLEASE REFER TO IRS PUBLICATION 590 AND
YOUR COMPETENT TAX ADVISOR.
TAX SHELTERED ANNUITIES. Section 403(b) of the Tax Code provides tax-deferred
retirement savings plans for employees of certain non-profit and educational
organizations. Under Section 403(b), any contract used for a 403(b) plan must
provide that distributions attributable to salary reduction contributions made
after 12/31/88, and all earnings on salary reduction contributions, may be made
only on or after the date the employee:
... attains age 591/2,
... separates from service,
... dies,
... becomes disabled, or
... incurs a hardship (earnings on salary reduction contributions may not be
distributed on account of hardship).
These limitations do not apply to withdrawals where GLENBROOK LIFE is directed
to transfer some or all of the Contract Value to another 403(b) plan.
CORPORATE AND SELF-EMPLOYED PENSION AND PROFIT SHARING PLANS. Sections 401(a)
and 403(a) of the Code permit corporate employers to establish various types of
tax favored retirement plans for employees. Self-employed individuals may
establish tax favored retirement plans for themselves and their employees. Such
retirement plans (commonly referred to as "H.R.10" or "KEOGH") may permit the
purchase of annuity contracts.
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
42
deferred compensation plan. In eligible governmental plans, all assets and
income must be held in a trust/ custodial account/annuity contract for the
exclusive benefit of the participants and their beneficiaries. To the extent the
Contracts are used in connection with a non-governmental eligible plan,
employees are considered general creditors of the employer and the employer as
owner of the Contract has the sole right to the proceeds of the Contract. Under
eligible 457 plans, contributions made for the benefit of the employees will not
be includible in the employees' gross income until distributed from the plan.
ANNUAL REPORTS AND OTHER DOCUMENTS
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GLENBROOK LIFE's annual report on Form 10-K for the year ended December 31, 2001
is incorporated herein by reference, which means that it is legally a part of
this prospectus.
After the date of this prospectus and before we terminate the offering of the
securities under this prospectus, all documents or reports we file with the SEC
under the Exchange Act are also incorporated herein by reference, which means
that they also legally become a part of this prospectus.
Statements in this prospectus, or in documents that we file later with the SEC
and that legally become a part of this prospectus, may change or supersede
statements in other documents that are legally part of this prospectus.
Accordingly, only the statement that is changed or replaced will legally be a
part of this prospectus.
We file our Exchange Act documents and reports, including our annual and
quarterly reports on Form 10-K and Form 10-Q electronically on the SEC's "EDGAR"
system using the identifying number CIK No. 0001007285. The SEC maintains a Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC. The
address of the site is http:// www.sec.gov. You also can view these materials at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. For more information on the operations of SEC's Public Reference Room,
call 1-800-SEC-0330.
If you have received a copy of this prospectus, and would like a free copy of
any document incorporated herein by reference (other than exhibits not
specifically incorporated by reference into the text of such documents), please
write or call us at 300 N. Milwaukee Ave., Vernon Hills, IL 60061 (telephone:
1-800-755-5275).
EXPERTS
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The financial statements of Glenbrook Life as of December 31, 2001 and 2000 and
for each of the three years in the period ended December 31, 2001 and the
related financial statement schedule incorporated herein by reference from the
Annual Report on Form 10-K of Glenbrook Life and from the Statement of
Additional Information, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, incorporated herein by reference, and have
been so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The financial statements of the Variable Account as of December 31, 2001 and for
each of the periods in the two years then ended incorporated herein by reference
from the Statement of Additional Information, have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report, incorporated herein
by reference and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
We may advertise the performance of the Variable Sub-Accounts, including yield
and total return information. Total return represents the change, over a
specified period of time, in the value of an investment in a Variable
Sub-Account after reinvesting all income distributions. Yield refers to the
income generated by an investment in a Variable Sub-Account over a specified
period.
All performance advertisements will include, as applicable, standardized yield
and total return figures that reflect the deduction of insurance charges, the
contract maintenance charge, and withdrawal charge. Performance advertisements
also may include total return figures that reflect the deduction of insurance
charges, but not the contract maintenance or withdrawal charges. The deduction
of such charges would reduce the performance shown. In addition, performance
advertisements may include aggregate average, year-by-year, or other types of
total return figures. Performance information for periods prior to the inception
date of the Variable Sub-Accounts will be based on the historical performance of
the corresponding Portfolios for the periods beginning with the inception dates
of the
43
Portfolios and adjusted to reflect current Contract expenses. You should not
interpret these figures to reflect actual historical performance of the Variable
Account. We may include in advertising and sales materials tax deferred
compounding charts and other hypothetical illustrations that compare currently
taxable and tax deferred investment programs based on selected tax brackets. Our
advertisements also may compare the performance of our Variable Sub-Accounts
with: (a) certain unmanaged market indices, including but not limited to the Dow
Jones Industrial Average, the Standard & Poor's 500, and the Shearson Lehman
Bond Index; and/or (b) other management investment companies with investment
objectives similar to the underlying funds being compared. In addition, our
advertisements may include the performance ranking assigned by various
publications, including the Wall Street Journal, Forbes, Fortune, Money,
Barron's, Business Week, USA Today, and statistical services, including Lipper
Analytical Services Mutual Fund Survey, Lipper Annuity and Closed End Survey,
the Variable Annuity Research Data Survey, and SEI.
44
APPENDIX A
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED
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For the Years Beginning January 1* and
Ending December 31,
SUB-ACCOUNTS 1998 1999 2000 2001
AIM V.I. BALANCED
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.73 $ 12.66 $ 11.99
Accumulation Unit Value,
End of Period $10.73 $ 12.66 $ 11.99 $ 10.501
Number of Units
Outstanding, End of Period -- 7,487 52,646 90,025
AIM V.I. CAPITAL
APPRECIATION SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.39 $ 16.29 $ 14.35
Accumulation Unit Value,
End of Period $11.39 $ 16.29 $ 14.35 $ 10.883
Number of Units
Outstanding, End of Period -- 8,743 73,347 76,217
AIM V.I. CORE EQUITY
SUB-ACCOUNT (6)
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.36 $ 15.09 $ 12.74
Accumulation Unit Value,
End of Period $15.09 $ 15.09 $ 12.74 $ 9.721
Number of Units
Outstanding, End of Period -- 12,180 53,747 73,192
AIM V.I. GROWTH SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.83 $ 15.82 $ 12.43
Accumulation Unit Value,
End of Period $11.83 $ 15.82 $ 12.43 $ 8.127
Number of Units
Outstanding, End of Period -- 13,275 69,688 57,165
AIM V.I. HIGH YIELD
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.31 $ 11.27 $ 9.03
Accumulation Unit Value,
End of Period $10.31 $ 11.27 $ 9.03 $ 8.477
Number of Units
Outstanding, End of Period -- 7,387 9,651 16,857
AIM V.I. PREMIER EQUITY
SUB-ACCOUNT (6)
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.52 $ 14.80 $ 12.49
Accumulation Unit Value,
End of Period $11.52 $ 14.80 $ 12.49 $ 10.794
Number of Units
Outstanding, End of Period -- 42,074 115,418 13,3037
FEDERATED PRIME MONEY FUND
II SUB-ACCOUNT (1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 10.06 $ 10.55
Accumulation Unit Value,
End of Period -- $ 10.06 $ 10.55 $ 10.819
Number of Units
Outstanding, End of Period -- 7,985 11,541 46,149
FIDELITY VIP CONTRAFUND
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.66 $ 14.33 $ 13.23
Accumulation Unit Value,
End of Period $11.66 $ 14.33 $ 13.23 $ 11.473
Number of Units
Outstanding, End of Period -- 18,963 101,434 128,908
FIDELITY VIP EQUITY-INCOME
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.48 $ 11.02 $ 11.81
Accumulation Unit Value,
End of Period $10.48 $ 11.02 $ 11.81 $ 11.096
Number of Units
Outstanding, End of Period -- 30,264 100,008 169,933
FIDELITY VIP GROWTH
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.20 $ 15.22 $ 13.40
Accumulation Unit Value,
End of Period $11.20 $ 15.22 $ 13.40 $ 10.906
Number of Units
Outstanding, End of Period -- 25,821 168,574 193,055
FIDELITY VIP HIGH INCOME
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.43 $ 11.16 8.55
Accumulation Unit Value,
End of Period $10.43 $ 11.16 $ 8.55 $ 7.462
Number of Units
Outstanding, End of Period -- 3,837 45,083 69,939
FIDELITY VIP INDEX 500
SUB-ACCOUNT(2)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 9.14
Accumulation Unit Value,
End of Period -- -- 9.14 $ 7.944
Number of Units
Outstanding, End of Period -- -- 106,077 178,134
FIDELITY VIP OVERSEAS
SUB-ACCOUNT(2)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 8.38
Accumulation Unit Value,
End of Period -- -- $ 8.38 $ 6.529
Number of Units
Outstanding, End of Period -- -- 30,679 32,911
MFS EMERGING GROWTH
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.95 $ 20.88 $ 16.60
Accumulation Unit Value,
End of Period $11.95 $ 20.88 $ 16.60 $ 10.913
Number of Units
Outstanding, End of Period -- 1,059 58,101 104,779
MFS INVESTORS TRUST SERIES
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.81 $ 11.41 $ 11.26
Accumulation Unit Value,
End of Period $10.81 $ 11.41 $ 11.26 $ 9.358
Number of Units
Outstanding, End of Period -- 6,295 1,547 45,121
MFS NEW DISCOVERY
SUB-ACCOUNT (4)
Accumulation Unit Value,
Beginning of Period $ 10.00
Accumulation Unit Value,
End of Period $ 17.758
Number of Units
Outstanding, End of Period 6,802
MFS RESEARCH SUB-ACCOUNT (1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 11.53 $ 10.85
Accumulation Unit Value,
End of Period -- $ 11.53 $ 10.85 $ 8.445
Number of Units
Outstanding, End of Period -- -- 15,852 60,264
MFS UTILITIES SUB-ACCOUNT
(4)
Accumulation Unit Value,
Beginning of Period $ 10.00
Accumulation Unit Value,
End of Period
Number of Units
Outstanding, End of Period
OPPENHEIMER AGGRESSIVE
GROWTH SUB-ACCOUNT(1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 13.73 $ 12.05
Accumulation Unit Value,
End of Period -- $ 13.73 $ 12.05 $ 8.187
Number of Units
Outstanding, End of Period -- -- 24,923 55,945
OPPENHEIMER CAPITAL
APPRECIATION SUB-ACCOUNT(1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 12.11 $ 11.95
Accumulation Unit Value,
End of Period -- 12.00 11.95 10.329
Number of Units
Outstanding, End of Period -- -- 53,406 146,217
OPPENHEIMER GLOBAL
SECURITIES SUB-ACCOUNT(1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 13.11 $ 13.62
Accumulation Unit Value,
End of Period -- 13.11 13.62 11.846
Number of Units
Outstanding, End of Period -- -- 60,419 91,989
OPPENHEIMER MAIN STREET
GROWTH & INCOME
SUB-ACCOUNT(1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 10.78 $ 9.72
Accumulation Unit Value,
End of Period -- $ 10.78 $ 9.72 $ 8.636
Number of Units
Outstanding, End of Period -- -- 121,955 283,935
OPPENHEIMER MULTIPLE
STRATEGIES SUB-ACCOUNT(2)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.16 $ 10.49
Accumulation Unit Value,
End of Period -- -- $ 10.49 $ 10.603
Number of Units
Outstanding, End of Period -- -- 20,686 116,284
OPPENHEIMER STRATEGIC BOND
SUB-ACCOUNT(1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 10.16 $ 10.31
Accumulation Unit Value,
End of Period -- $ 10.16 $ 10.31 $ 10.690
Number of Units
Outstanding, End of Period -- -- 28,737 56,563
PUTNAM VT DIVERSIFIED INCOME
SUB-ACCOUNT (4)
Accumulation Unit Value,
Beginning of Period
Accumulation Unit Value,
End of Period
Number of Units
Outstanding, End of Period
PUTNAM VT GROWTH AND INCOME
SUB-ACCOUNT (4)
Accumulation Unit Value,
Beginning of Period
Accumulation Unit Value,
End of Period
Number of Units
Outstanding, End of Period
PUTNAM VT GROWTH
OPPORTUNITIES SUB-ACCOUNT
(4)
Accumulation Unit Value,
Beginning of Period
Accumulation Unit Value,
End of Period
Number of Units
Outstanding, End of Period
PUTNAM VT HEALTH SCIENCES
SUB-ACCOUNT (4)
Accumulation Unit Value,
Beginning of Period
Accumulation Unit Value,
End of Period
Number of Units
Outstanding, End of Period
PUTNAM VT NEW VALUE
SUB-ACCOUNT (4)
Accumulation Unit Value,
Beginning of Period
Accumulation Unit Value,
End of Period
Number of Units
Outstanding, End of Period
PUTNAM VT VOYAGER II
SUB-ACCOUNT (4)
Accumulation Unit Value,
Beginning of Period
Accumulation Unit Value,
End of Period
Number of Units
Outstanding, End of Period
STI CAPITAL APPRECIATION
SUB-ACCOUNT (1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 10.60 $ 10.80
Accumulation Unit Value,
End of Period -- $ 10.60 $ 10.80 $ 10.107
Number of Units
Outstanding, End of Period -- 10,425 -- 54,725
STI GROWTH AND INCOME
SUB-ACCOUNT (3)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 10.79
Accumulation Unit Value,
End of Period -- -- $ 10.79 $ 10.075
Number of Units
Outstanding, End of Period -- -- 16,189 88,166
SIT INTERNATIONAL EQUITY
SUB-ACCOUNT (2)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 9.72
Accumulation Unit Value,
End of Period -- -- $ 9.72 $ 7.937
Number of Units
Outstanding, End of Period -- -- 2,615 7,445
STI INVESTMENT GRADE BOND
SUB-ACCOUNT (2)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 10.61
Accumulation Unit Value,
End of Period -- -- $ 10.61 $ 11.452
Number of Units
Outstanding, End of Period -- -- 11649 30994
STI MID-CAP EQUITY
SUB-ACCOUNT (2)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 9.21
Accumulation Unit Value,
End of Period -- $ 9.21 $ 9.350
Number of Units
Outstanding, End of Period -- 5778 16934
STI QUALITY GROWTH STOCK
SUB-ACCOUNT (2)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 9.58
Accumulation Unit Value,
End of Period -- -- $ 9.58 $ 7.703
Number of Units
Outstanding, End of Period -- -- 9,606 11,789
STI SMALL CAP VALUE EQUITY
SUB-ACCOUNT (2)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 11.85
Accumulation Unit Value,
End of Period -- -- $ 11.85 $ 14.234
Number of Units
Outstanding, End of Period -- -- 3,572
STI VALUE INCOME STOCK
SUB-ACCOUNT (1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 9.46 $ 10.33
Accumulation Unit Value,
End of Period -- $ 9.46 $ 10.33 $ 10.097
Number of Units
Outstanding, End of Period 5,699 13,619 32,108
TEMPLETON GLOBAL INCOME
SECURITIES SUB-ACCOUNT (3,5)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.74 $ 11.39
Accumulation Unit Value,
End of Period -- -- $ 11.39 $ 11.513
Number of Units
Outstanding, End of Period -- -- 438 2,410
TEMPLETON GROWTH SECURITIES
SUB-ACCOUNT (3,5)
Accumulation Unit Value,
Beginning of Period -- -- $ 12.89 $ 13.59
Accumulation Unit Value,
End of Period -- -- $ 13.59 $ 13.262
Number of Units
Outstanding, End of Period -- -- 11,237 10,586
TEMPLETON STOCK (CLASS 2)
SUB-ACCOUNT(1)
Accumulation Unit Value,
Beginning of Period -- -- $ 11.37 $ 11.42
Accumulation Unit Value,
End of Period -- -- 11.42 --
Number of Units
Outstanding, End of Period -- -- 0 --
TEMPLETON BOND (CLASS 2)
SUB-ACCOUNT(2)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 9.87
Accumulation Unit Value,
End of Period -- -- $ 9.87 --
Number of Units
Outstanding, End of Period -- -- 0 --
BASIC POLICY
45
46
47
* The Contracts were first offered on November 10, 1998. The Accumulation Unit
Values in this table reflect a mortality and expense risk charge of 1.05% and
an administrative expense charge of 0.10%. All of the Variable Sub-Accounts
commenced operations on or before November 10, 1998, except as described in
the footnotes below.
(1) Variable Sub-Accounts that commenced operations on November 1, 1999.
(2) Variable Sub-Accounts that commenced operations on January 24, 2000.
(3) Variable Sub-Accounts that commenced operations on May 1, 2000.
(4) Variable Sub-Accounts that commenced operations on August 30, 2001.
(5) Effective May 1, 2000, the Portfolios in which the Templeton Stock (Class 2)
and Templeton Bond (Class 2) Variable Sub-Accounts invested were merged into
the Templeton Growth Securities (Class 2) and the Templeton Global Income
Securities Portfolios. Accordingly, for administrative convenience, as of May
1, 2000, the corresponding Variable Sub-Accounts merged with and into a new
Variable Sub-Accounts named Templeton Growth Securities (Class 2) and
Templeton Global Income Securities (Class 2), respectively, with accumulating
Unit Values starting at $10.00. For ease of comparison, in this table we are
continuing to show AUVs for the predecessor Variable Sub-Accounts. (6)
Effective May 1, 2002, the AIM V.I. Growth and Income fund and AIM V.I. Value
Fund changed their names to the AIM V.I. Core Equity Fund and AIM V.I.
Premier Equity Fund, respectively.
48
APPENDIX A
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED
- --------------------------------------------------------------------------------
For the Years Beginning January 1* and
Ending December 31,
SUB-ACCOUNTS 1998 1999 2000 2001
AIM V.I. BALANCED
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.73 $ 12.63 $ 11.94
Accumulation Unit Value,
End of Period $10.73 $ 12.63 $ 11.94 $ 10.428
Number of Units
Outstanding, End of Period 16,023 97,759 129,553
AIM V.I. CAPITAL
APPRECIATION SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.39 $ 16.25 $ 14.28
Accumulation Unit Value,
End of Period $11.39 $ 16.25 $ 14.28 $ 10.808
Number of Units
Outstanding, End of Period -- 17,447 131,661 139,313
AIM V.I. CORE EQUITY
SUB-ACCOUNT (6)
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.36 $ 15.05 $ 12.68
Accumulation Unit Value,
End of Period $11.36 $ 15.05 $ 12.68 $ 9.654
Number of Units
Outstanding, End of Period -- 16,349 92,618 96,750
AIM V.I. GROWTH SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.82 $ 15.78 $ 12.38
Accumulation Unit Value,
End of Period 11.82 15.78 12.38 8.071
Number of Units
Outstanding, End of Period -- 14,400 102,340 90,578
AIM V.I. HIGH YIELD
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.31 $ 11.25 $ 8.98
Accumulation Unit Value,
End of Period $10.31 $ 11.25 $ 8.98 $ 8.419
Number of Units
Outstanding, End of Period -- 3,356 14,455 20,655
AIM V.I. PREMIER EQUITY
SUB-ACCOUNT (6)
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.52 $ 14.76 $ 12.43
Accumulation Unit Value,
End of Period $11.52 $ 14.76 $ 12.43 $ 10.720
Number of Units
Outstanding, End of Period -- 35445 212306 204770
FEDERATED PRIME MONEY MARKET
FUND II SUB-ACCOUNT (1)
Accumulation Unit Value,
Beginning of Period --- $ 10.00 $ 10.06 $ 10.52
Accumulation Unit Value,
End of Period -- $ 10.06 $ 10.52 $ 10.767
Number of Units
Outstanding, End of Period -- 2,093 29,533 138,387
FIDELITY VIP CONTRAFUND
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.66 $ 14.29 $ 13.16
Accumulation Unit Value,
End of Period $11.66 $ 14.29 $ 13.16 11.394
Number of Units
Outstanding, End of Period -- 30,660 158,530 154,780
FIDELITY VIP EQUITY-INCOME
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.47 $ 10.99 $ 11.76
Accumulation Unit Value,
End of Period $10.47 $ 10.99 $ 11.76 11.020
Number of Units
Outstanding, End of Period -- 17,530 80,045 140,070
FIDELITY VIP GROWTH
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.20 $ 15.19 $ 13.33
Accumulation Unit Value,
End of Period $11.20 $ 15.19 $ 13.33 10.831
Number of Units
Outstanding, End of Period 313 45,514 210,113 224,251
FIDELITY VIP HIGH INCOME
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.43 $ 11.13 $ 8.51
Accumulation Unit Value,
End of Period -- $ 11.13 $ 8.51 7.410
Number of Units
Outstanding, End of Period -- 3,914 55,317 76,456
FIDELITY VIP INDEX 500
SUB-ACCOUNT(2)
Accumulation Unit Value,
Beginning of Period -- -- 10.00 9.12
Accumulation Unit Value,
End of Period -- -- 9.12 7.910
Number of Units
Outstanding, End of Period -- -- 10,6497 189,268
FIDELITY VIP OVERSEAS
SUB-ACCOUNT(2)
Accumulation Unit Value,
Beginning of Period -- -- $ 15.78 $ 8.36
Accumulation Unit Value,
End of Period -- -- $ 8.36 6.500
Number of Units
Outstanding, End of Period -- -- 27,868 40,817
MFS EMERGING GROWTH
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.95 $ 20.83 $ 16.52
Accumulation Unit Value,
End of Period $11.95 $ 20.83 $ 16.52 $ 10.838
Number of Units
Outstanding, End of Period -- 3,068 78,198 112,839
MFS INVESTORS TRUST SERIES
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.81 $ 11.38 $ 11.21
Accumulation Unit Value,
End of Period $10.81 $ 11.38 $ 11.21 $ 9.293
Number of Units
Outstanding, End of Period -- 3,323 23,850 35,987
MFS NEW DISCOVERY
SUB-ACCOUNT (4)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 18.83
Accumulation Unit Value,
End of Period -- -- $ 18.83 $ 17.636
Number of Units
Outstanding, End of Period -- -- 2,028 11,438
MFS RESEARCH SUB-ACCOUNT (1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 11.52 $ 10.82
Accumulation Unit Value,
End of Period -- $ 11.52 $ 10.82 $ 8.405
Number of Units
Outstanding, End of Period -- -- 27,229 48,292
MFS UTILITIES SUB-ACCOUNT
(4)
Accumulation Unit Value,
Beginning of Period $ 10.00
Accumulation Unit Value,
End of Period $ 9.116
Number of Units
Outstanding, End of Period 804
OPPENHEIMER AGGRESSIVE
GROWTH SUB-ACCOUNT(1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 13.72 $ 12.02
Accumulation Unit Value,
End of Period -- $ 13.72 $ 12.02 $ 8.148
Number of Units
Outstanding, End of Period -- -- 33,428 67,549
OPPENHEIMER CAPITAL
APPRECIATION SUB-ACCOUNT(1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 12.11 $ 11.92
Accumulation Unit Value,
End of Period -- $ 12.11 $ 11.92 $ 10.28
Number of Units
Outstanding, End of Period -- -- 25,664 80,173
OPPENHEIMER GLOBAL
SECURITIES SUB-ACCOUNT(1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 13.10 $ 13.59
Accumulation Unit Value,
End of Period -- $ 13.10 $ 13.59 $ 11.790
Number of Units
Outstanding, End of Period -- -- 32,775 78,891
OPPENHEIMER MAIN STREET
GROWTH AND INCOME
SUB-ACCOUNT(1)
- -------------------------------------------------------------------------------
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 10.77 $ 9.70
Accumulation Unit Value,
End of Period -- $ 10.77 $ 9.70 $ 8.594
Number of Units
Outstanding, End of Period -- -- 139,189 263,407
OPPENHEIMER MULTIPLE
STRATEGIES SUB-ACCOUNT (2)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 10.47
Accumulation Unit Value,
End of Period -- -- $ 10.47 $ 10.558
Number of Units
Outstanding, End of Period -- -- 21,773 80,527
OPPENHEIMER STRATEGIC BOND
SUB-ACCOUNT(1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 10.16 $ 10.29
Accumulation Unit Value,
End of Period -- $ 10.16 $ 10.29 $ 10.639
Number of Units
Outstanding, End of Period -- -- 19,036 64,322
PUTNAM VT DIVERSIFIED INCOME
SUB-ACCOUNT (4)
Accumulation Unit Value,
Beginning of Period
Accumulation Unit Value,
End of Period
Number of Units
Outstanding, End of Period
PUTNAM VT GROWTH & INCOME
SUB-ACCOUNT (4)
Accumulation Unit Value,
Beginning of Period
Accumulation Unit Value,
End of Period
Number of Units
Outstanding, End of Period
PUTNAM VT GROWTH
OPPORTUNITIES SUB-ACCOUNT
(4)
Accumulation Unit Value,
Beginning of Period
Accumulation Unit Value,
End of Period
Number of Units
Outstanding, End of Period
PUTNAM VT HEALTH SCIENCES
SUB-ACCOUNT (4)
Accumulation Unit Value,
Beginning of Period
Accumulation Unit Value,
End of Period
Number of Units
Outstanding, End of Period
PUTNAM VT NEW VALUE
SUB-ACCOUNT (4)
Accumulation Unit Value,
Beginning of Period
Accumulation Unit Value,
End of Period
Number of Units
Outstanding, End of Period
PUTNAM VT VOYAGER II
SUB-ACCOUNT (4)
Accumulation Unit Value,
Beginning of Period
Accumulation Unit Value,
End of Period
Number of Units
Outstanding, End of Period
STI CAPITAL APPRECIATION
SUB-ACCOUNT (1)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 10.77
Accumulation Unit Value,
End of Period -- -- $ 10.77 $ 10.059
Number of Units
Outstanding, End of Period -- -- 42,494 52,273
STI GROWTH AND INCOME
SUB-ACCOUNT (3)
Accumulation Unit Value,
Beginning of Period -- -- 10.00 10.77
Accumulation Unit Value,
End of Period -- -- 10.77 10.032
Number of Units
Outstanding, End of Period -- -- 22,751 45,818
STI INTERNATIONAL EQUITY
SUB-ACCOUNT (2)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 10.77
Accumulation Unit Value,
End of Period -- -- $ 10.77 $ 7.903
Number of Units
Outstanding, End of Period -- -- 3,637 4,982
STI INVESTMENT GRADE BOND
SUB-ACCOUNT (2)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 10.59
Accumulation Unit Value,
End of Period -- -- $ 10.59 $ 11.403
Number of Units
Outstanding, End of Period -- -- 6,263 38,428
STI MID-CAP EQUITY
SUB-ACCOUNT (2)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 9.19
Accumulation Unit Value,
End of Period -- -- $ 9.19 $ 9.310
Number of Units
Outstanding, End of Period -- -- 8,565 27,595
STI QUALITY GROWTH STOCK
SUB-ACCOUNT (2)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 9.56
Accumulation Unit Value,
End of Period -- -- $ 9.56 $ 7.670
Number of Units
Outstanding, End of Period -- -- 41,199 48,072
STI SMALL CAP VALUE EQUITY
SUB-ACCOUNT (2)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 11.83
Accumulation Unit Value,
End of Period -- -- $ 11.83 $ 14.174
Number of Units
Outstanding, End of Period -- -- 8,399 30,993
STI VALUE INCOME STOCK
SUB-ACCOUNT (1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 9.46 $ 10.31
Accumulation Unit Value,
End of Period -- $ 9.46 $ 10.31 $ 10.059
Number of Units
Outstanding, End of Period -- 4,408 42,942 61,537
TEMPLETON GLOBAL INCOME
SECURITIES SUB-ACCOUNT (3,5)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 11.37
Accumulation Unit Value,
End of Period -- -- $ 11.37 $ 11.470
Number of Units
Outstanding, End of Period -- -- 954 3,023
TEMPLETON GROWTH SECURITIES
SUB-ACCOUNT (3,5)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 13.57
Accumulation Unit Value,
End of Period -- -- $ 13.57 $ 13.213
Number of Units
Outstanding, End of Period -- -- 6,597 10,369
TEMPLETON STOCK (CLASS 2)
SUB-ACCOUNT(1)
Accumulation Unit Value,
Beginning of Period -- -- $ 11.36 $ 11.40
Accumulation Unit Value,
End of Period -- -- $ 11.40 --
Number of Units
Outstanding, End of Period -- -- 0 --
TEMPLETON BOND (CLASS 2)
SUB-ACCOUNT(2)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 9.86
Accumulation Unit Value,
End of Period -- -- $ 9.86 --
Number of Units
Outstanding, End of Period -- -- 0 --
WITH ENHANCED DEATH BENEFIT RIDER
49
50
51
* The Contracts were first offered on November 10, 1998. The Accumulation Unit
Values in this table reflect a mortality and expense risk charge of 1.27% and
an administrative expense charge of 0.10%. All of the Variable Sub-Accounts
commenced operations on or before November 10, 1998, except as described in
the footnotes below.
(1) Variable Sub-Accounts that commenced operations on November 1, 1999.
(2) Variable Sub-Accounts commenced operations on January 24, 2000.
(3) Variable Sub-Accounts commenced operations on May 1, 2000.
(4) Variable Sub-Accounts commenced operations on August 30, 2000.
(5) Effective May 1, 2000, the Portfolio in which the Templeton Stock (Class 2)
and Templeton Bond (Class 2) Variable Sub-Accounts invested were merged into
the Templeton Growth Securities (Class 2) and the Global Income Securities
Portfolio. Accordingly, for administrative convenience, as of May 1, 2000,
the corresponding Variable Sub-Account merged with and into a new Variable
Sub-Accounts named the
52
Templeton Growth Securities (Class 2). For ease of comparison, in this table
we are continuing to show AUV's for the predecessor Variable Sub-Accounts.
For Templeton Growth Securities (Class 2) and Templeton Global Income
Securities (Class2). (6) Effective May 1, 2002, the AIM V.I. Growth and
Income fund and AIM V.I. Value Fund changed their names to the AIM V.I. Core
Equity fund and AIM V.I. Premier Equity Fund, respectively.
53
APPENDIX A
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED
- --------------------------------------------------------------------------------
WITH ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER FOR CONTRACTS ISSUED
BEFORE 9/22/00
For the Years Beginning January 1* and
Ending December 31,
-------------------------------------------------
SUB-ACCOUNTS 1998 1999 2000 2001
- -------------------------------------------------------------------------------
AIM V.I. BALANCED
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.73 $ 12.60 $ 11.88
Accumulation Unit Value,
End of Period $10.73 $ 12.60 $ 11.88 $ 10.356
Number of Units
Outstanding, End of Period 405 43,121 101,781 94,585
AIM V.I. CAPITAL
APPRECIATION SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.39 $ 16.21 $ 14.22
Accumulation Unit Value,
End of Period $11.39 $ 16.21 $ 14.22 $ 10.734
Number of Units
Outstanding, End of Period 398 16,046 122,768 129,783
AIM V.I. CORE EQUITY
SUB-ACCOUNT (6)
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.36 $ 15.01 $ 15.01
Accumulation Unit Value,
End of Period $11.36 $ 15.01 $ 12.63 $ 9.588
Number of Units
Outstanding, End of Period 386 1,159 66,400 69,341
AIM V.I. GROWTH SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.82 $ 15.74 $ 12.32
Accumulation Unit Value,
End of Period $11.82 $ 15.74 $ 12.32 $ 8.015
Number of Units
Outstanding, End of Period 386 21,246 108,292 112,689
AIM V.I. HIGH YIELD
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.31 $ 11.22 $ 8.94
Accumulation Unit Value,
End of Period 10.31 $ 11.22 $ 8.94 $ 8.361
Number of Units
Outstanding, End of Period 185 10,889 1,120
AIM V.I. PREMIER EQUITY
SUB-ACCOUNT (6)
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.51 $ 14.73 $ 12.37
Accumulation Unit Value,
End of Period $11.51 $ 14.73 $ 12.37 $ 10646
Number of Units
Outstanding, End of Period 34,288 159,570 160,343
FEDERATED PRIME MONEY FUND
II SUB-ACCOUNT (1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 10.06 $ 10.49
Accumulation Unit Value,
End of Period -- $ 10.06 $ 10.49 $ 10.716
Number of Units
Outstanding, End of Period -- 5,291 40,906 127,260
FIDELITY VIP CONTRAFUND
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.65 $ 14.26 $ 13.10
Accumulation Unit Value,
End of Period $11.65 $ 14.26 $ 13.10 11.315
Number of Units
Outstanding, End of Period 387 32,161 131,791 134,375
FIDELITY VIP EQUITY-INCOME
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.47 $ 10.96 $ 11.70
Accumulation Unit Value,
End of Period $10.47 $ 10.96 $ 11.70 10.944
Number of Units
Outstanding, End of Period -- 1,1621 45,849 55,016
FIDELITY VIP GROWTH
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.19 $ 15.15 $ 13.27
Accumulation Unit Value,
End of Period $11.19 $ 15.15 $ 13.27 10.756
Number of Units
Outstanding, End of Period -- 22,088 151,189 149,935
FIDELITY VIP HIGH INCOME
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.43 $ 11.10 $ 8.47
Accumulation Unit Value,
End of Period $10.43 $ 11.10 $ 8.47 7.359
Number of Units
Outstanding, End of Period -- 3,667 3,1190 24,128
FIDELITY VIP INDEX 500
SUB-ACCOUNT (2)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 9.11
Accumulation Unit Value,
End of Period -- -- $ 9.11 7.876
Number of Units
Outstanding, End of Period -- -- 91,596 113,232
FIDELITY VIP OVERSEAS
SUB-ACCOUNT(2)
Accumulation Unit Value,
Beginning of Period -- -- 10.00 8.34
Accumulation Unit Value,
End of Period -- -- 8.34 6.473
Number of Units
Outstanding, End of Period -- -- 30,230 29,449
MFS EMERGING GROWTH
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.94 $ 20.78 $ 16.44
Accumulation Unit Value,
End of Period $11.94 $ 20.78 $ 16.44 $ 10.763
Number of Units
Outstanding, End of Period -- 19,189 63,991 65,183
MFS INVESTORS TRUST
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.81 $ 11.35 $ 11.16
Accumulation Unit Value,
End of Period $10.81 $ 11.35 $ 11.16 $ 9.229
Number of Units
Outstanding, End of Period -- 4,808 11,160 9,277
MFS NEW DISCOVERY
SUB-ACCOUNT (4)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 18.74
Accumulation Unit Value,
End of Period -- -- 18.74 17.515
Number of Units
Outstanding, End of Period -- -- 1,509 913
MFS RESEARCH SUB-ACCOUNT (1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 11.52 $ 10.79
Accumulation Unit Value,
End of Period -- $ 11.52 $ 10.79 $ 8.365
Number of Units
Outstanding, End of Period -- -- 60,709 73,568
MFS UTILITIES SUB-ACCOUNT
(4)
Accumulation Unit Value,
Beginning of Period $ 10.00
Accumulation Unit Value,
End of Period
Number of Units
Outstanding, End of Period
OPPENHEIMER AGGRESSIVE
GROWTH SUB-ACCOUNT(1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 13.72 $ 11.99
Accumulation Unit Value,
End of Period -- $ 13.72 $ 11.99 $ 8.109
Number of Units
Outstanding, End of Period -- -- 38,398 42,643
OPPENHEIMER CAPITAL
APPRECIATION SUB-ACCOUNT (1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 12.10 $ 11.89
Accumulation Unit Value,
End of Period -- $ 12.10 $ 11.89 $ 10.232
Number of Units
Outstanding, End of Period -- -- 38,398 43,914
OPPENHEIMER GLOBAL
SECURITIES SUB-ACCOUNT (1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 13.10 $ 13.55
Accumulation Unit Value,
End of Period -- $ 13.10 $ 13.55 $ 11.734
Number of Units
Outstanding, End of Period -- -- 33,241 33,299
OPPENHEIMER MAIN STREET
GROWTH & INCOME
SUB-ACCOUNT(1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 10.77 $ 9.67
Accumulation Unit Value,
End of Period -- $ 10.77 $ 9.67 $ 8.55
Number of Units
Outstanding, End of Period -- -- 130,587 144,668
OPPENHEIMER MULTIPLE
STRATEGIES SUB-ACCOUNT (2)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 10.45
Accumulation Unit Value,
End of Period -- -- $ 10.45 $ 10.513
Number of Units
Outstanding, End of Period -- -- 20,592 28,807
OPPENHEIMER STRATEGIC BOND
SUB-ACCOUNT(1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 10.15 $ 10.26
Accumulation Unit Value,
End of Period -- $ 10.15 $ 10.26 $ 10.589
Number of Units
Outstanding, End of Period -- -- 19,624 26,549
PUTNAM VT DIVERSIFIED INCOME
SUB-ACCOUNT (4)
Accumulation Unit Value,
Beginning of Period
Accumulation Unit Value,
End of Period
Number of Units
Outstanding, End of Period
PUTNAM VT GROWTH AND INCOME
SUB-ACCOUNT (4)
Accumulation Unit Value,
Beginning of Period
Accumulation Unit Value,
End of Period
Number of Units
Outstanding, End of Period
PUTNAM VT GROWTH
OPPORTUNITIES SUB-ACCOUNT
(4)
Accumulation Unit Value,
Beginning of Period
Accumulation Unit Value,
End of Period
Number of Units
Outstanding, End of Period
PUTNAM VT HEALTH SCIENCES
SUB-ACCOUNT (4)
Accumulation Unit Value,
Beginning of Period
Accumulation Unit Value,
End of Period
Number of Units
Outstanding, End of Period
PUTNAM VT NEW VALUE
SUB-ACCOUNT (4)
Accumulation Unit Value,
Beginning of Period
Accumulation Unit Value,
End of Period
Number of Units
Outstanding, End of Period
PUTNAM VT VOYAGER II
SUB-ACCOUNT (4)
Accumulation Unit Value,
Beginning of Period
Accumulation Unit Value,
End of Period
Number of Units
Outstanding, End of Period
STI CAPITAL APPRICIATION
SUB-ACCOUNT (1)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 10.75
Accumulation Unit Value,
End of Period -- -- $ 10.75 $ 10.012
Number of Units
Outstanding, End of Period -- -- 44,314 41,591
STI GROWTH AND INCOME
SUB-ACCOUNT (3)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 10.75
Accumulation Unit Value,
End of Period -- -- $ 10.75 $ 9.989
Number of Units
Outstanding, End of Period -- -- 47,617 54,798
STI INTERNATIONAL EQUITY
SUB-ACCOUNT (2)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 9.68
Accumulation Unit Value,
End of Period -- -- $ 9.68 $ 7.869
Number of Units
Outstanding, End of Period -- -- 9,071 10,251
STI INVESTMENT GRADE BOND
SUB-ACCOUNT (2)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 10.57
Accumulation Unit Value,
End of Period -- -- $ 10.57 $ 11.354
Number of Units
Outstanding, End of Period -- -- 15,973 27,766
STI MID-CAP EQUITY
SUB-ACCOUNT (2)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 9.17
Accumulation Unit Value,
End of Period -- -- $ 9.17 $ 9.271
Number of Units
Outstanding, End of Period -- -- 14,742 15,970
STI QUALITY GROWTH STOCK
SUB-ACCOUNT (2)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 9.54
Accumulation Unit Value,
End of Period -- -- $ 9.54 $ 7.637
Number of Units
Outstanding, End of Period -- -- 62,796 75,646
STI SMALL CAP VALUE EQUITY
SUB-ACCOUNT (2)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 11.81
Accumulation Unit Value,
End of Period -- -- $ 11.81 --
Number of Units
Outstanding, End of Period -- -- 6098 --
STI VALUE INCOME STOCK
SUB-ACCOUNT (1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 9.46 $ 10.28
Accumulation Unit Value,
End of Period -- $ 9.46 $ 10.28 $ 10.001
Number of Units
Outstanding, End of Period -- 11,848 11,462 15,344
TEMPLETON GLOBAL INCOME
SECURITIES SUB-ACCOUNT (3,5)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 11.36
Accumulation Unit Value,
End of Period -- -- $ 11.36 $ 11.428
Number of Units
Outstanding, End of Period -- -- 11,685 13,624
TEMPLETON GROWTH SECURITIES
SUB-ACCOUNT (3,5)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 13.55
Accumulation Unit Value,
End of Period -- -- $ 13.55 $ 13.165
Number of Units
Outstanding, End of Period -- -- 9457 10,221
TEMPLETON STOCK (CLASS 2)
SUB-ACCOUNT (1)
Accumulation Unit Value,
Beginning of Period -- -- $ 11.36 $ 11.39
Accumulation Unit Value,
End of Period -- -- $ 11.39
Number of Units
Outstanding, End of Period -- -- 0
TEMPLETON BOND (CLASS 2)
SUB-ACCOUNT (2)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 9.86
Accumulation Unit Value,
End of Period -- -- $ 9.86 --
Number of Units
Outstanding, End of Period -- -- 0 --
54
55
56
* The Contracts were first offered on November 10, 1998. The Accumulation Unit
Values in this table reflect a mortality and expense risk charge of 1.49% and
an administrative expense charge of 0.10%. All of the Variable Sub-Accounts
commenced operations on or before November 10, 1998, except as described in
the footnotes below.
(1) Variable Sub-Accounts that commenced operations on November 1, 1999.
(2) Variable Sub-Accounts commenced operations on January 24, 2000.
(3) Variable Sub-Accounts commenced operations on May 1, 2000.
(4) Variable Sub-Accounts commenced operations on August 30, 2000.
(5) Effective May 1, 2000, the Portfolio in which the Templeton Stock (Class 2)
and Templeton Bond (Class 2) Variable Sub-Accounts invested were merged into
the Templeton Growth Securities (Class 2) and the Global Income Securities
Portfolio. Accordingly, for administrative convenience, as of May 1, 2000,
the corresponding Variable Sub-Account merged with and into a new Variable
Sub-Accounts named the Templeton Growth Securities (Class 2). For ease of
comparison, in this table we are continuing to show AUV's for the predecessor
Variable Sub-Accounts. For Templeton Growth Securities (Class 2) and
Templeton Global Income Securities (Class2) the Accumulation Unit Values are
$12.89 and $10.74, respectively.
(6) Effective May 1, 2002, the AIM V.I. Growth and Income fund and AIM V.I.
Value Fund changed their names to the AIM V.I. Core Equity fund and AIM V.I.
Premier Equity Fund, respectively.
57
APPENDIX A
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED
- --------------------------------------------------------------------------------
WITH ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER II FOR CONRACTS ISSUED
ON OR AFTER 9/22/00
For the Years Beginning
January 1* and Ending
December 31,
SUB-ACCOUNTS 2000 2001
AIM V.I. BALANCED SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 9.21
Accumulation Unit Value, End of Period $ 9.21 $ 8.024
Number of Units Outstanding, End of Period 4,515 61,468
AIM V.I. CAPITAL APPRECIATION SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 7.80
Accumulation Unit Value, End of Period $ 7.80 $ 5.888
Number of Units Outstanding, End of Period 34,530 99,227
AIM V.I. CORE EQUITY SUB-ACCOUNT (6)
Accumulation Unit Value, Beginning of Period $ 10.00 $ 8.06
Accumulation Unit Value, End of Period $ 8.06 $ 6.117
Number of Units Outstanding, End of Period 20,079 104,459
AIM V.I. GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 7.52
Accumulation Unit Value, End of Period $ 7.52 $ 4.90
Number of Units Outstanding, End of Period 32,771 133,470
AIM V.I. HIGH YIELD SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 8.37
Accumulation Unit Value, End of Period $ 8.37 $ 7.825
Number of Units Outstanding, End of Period 81 8,589
AIM V.I. PREMIER EQUITY SUB-ACCOUNT (6)
Accumulation Unit Value, Beginning of Period $ 10.00 $ 8.54
Accumulation Unit Value, End of Period $ 8.54 $ 7.345
Number of Units Outstanding, End of Period 22,904 96,014
FEDERATED PRIME MONEY FUND II SUB-ACCOUNT (1)
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.17
Accumulation Unit Value, End of Period $ 10.17 $ 10.375
Number of Units Outstanding, End of Period 5,731 72,350
FIDELITY VIP CONTRAFUND SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 9.23
Accumulation Unit Value, End of Period $ 9.23 $ 7.970
Number of Units Outstanding, End of Period 14,991 80,328
FIDELITY VIP EQUITY-INCOME SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.42
Accumulation Unit Value, End of Period $ 10.42 $ 9.740
Number of Units Outstanding, End of Period 17,198 42,652
FIDELITY VIP GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 8.37
Accumulation Unit Value, End of Period $ 8.37 $ 6.783
Number of Units Outstanding, End of Period 21,583 76,935
FIDELITY VIP HIGH INCOME SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 8.30
Accumulation Unit Value, End of Period $ 8.30 $ 7.209
Number of Units Outstanding, End of Period 102 4,442
FIDELITY VIP INDEX 500 SUB-ACCOUNT(2)
Accumulation Unit Value, Beginning of Period $ 10.00 $ 8.83
Accumulation Unit Value, End of Period $ 8.83 $ 7.634
Number of Units Outstanding, End of Period 8,780 52,114
FIDELITY VIP OVERSEAS SUB-ACCOUNT(2)
Accumulation Unit Value, Beginning of Period $ 10.00 $ 8.68
Accumulation Unit Value, End of Period $ 8.68 $ 6.732
Number of Units Outstanding, End of Period 4,854 11,548
MFS EMERGING GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 8.08
Accumulation Unit Value, End of Period $ 8.08 $ 5.287
Number of Units Outstanding, End of Period 11,866 61,761
MFS INVESTORS TRUST SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 9.64
Accumulation Unit Value, End of Period $ 9.64 $ 7.965
Number of Units Outstanding, End of Period 11,698 70,874
MFS NEW DISCOVERY SUB-ACCOUNT (4)
Accumulation Unit Value, Beginning of Period $ 10.00
Accumulation Unit Value, End of Period 8.923
Number of Units Outstanding, End of Period 4,370
MFS RESEARCH SUB-ACCOUNT (1)
Accumulation Unit Value, Beginning of Period
Accumulation Unit Value, End of Period
Number of Units Outstanding, End of Period
MFS UTILITIES SUB-ACCOUNT (4)
Accumulation Unit Value, Beginning of Period $ 10.00
Accumulation Unit Value, End of Period
Number of Units Outstanding, End of Period
OPPENHEIMER AGGRESSIVE GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period 10.00 8.61
Accumulation Unit Value, End of Period 8.61 6.666
Number of Units Outstanding, End of Period 11,698 70,874
OPPENHEIMER CAPITAL APPRECIATION SUB-ACCOUNT (1)
Accumulation Unit Value, Beginning of Period $ 10.00 $ 8.92
Accumulation Unit Value, End of Period $ 8.92 $ 7.667
Number of Units Outstanding, End of Period 18,937 81,840
OPPENHEIMER GLOBAL SECURITIES SUB-ACCOUNT (1)
Accumulation Unit Value, Beginning of Period $ 10.00 $ 9.41
Accumulation Unit Value, End of Period $ 9.41 $ 8.142
Number of Units Outstanding, End of Period 2457 16,539
OPPENHEIMER MAIN STREET GROWTH & INCOME
SUB-ACCOUNT (1)
Accumulation Unit Value, Beginning of Period $ 10.00 $ 8.72
Accumulation Unit Value, End of Period $ 8.72 $ 7.702
Number of Units Outstanding, End of Period 33,469 146,919
OPPENHEIMER MULTIPLE STRATEGIES SUB-ACCOUNT (2)
Accumulation Unit Value, Beginning of Period $ 10.00 $ 9.68
Accumulation Unit Value, End of Period $ 9.68 $ 9.727
Number of Units Outstanding, End of Period 3,475 24,335
OPPENHEIMER STRATEGIC BOND SUB-ACCOUNT (1)
Accumulation Unit Value, Beginning of Period $ 10.00 $ 9.88
Accumulation Unit Value, End of Period $ 9.88 $ 10.184
Number of Units Outstanding, End of Period 4,378 33,868
PUTNAM VT DIVERSIFIED INCOME SUB-ACCOUNT (4)
Accumulation Unit Value, Beginning of Period
Accumulation Unit Value, End of Period
Number of Units Outstanding, End of Period
PUTNAM VT GROWTH AND INCOME SUB-ACCOUNT (4)
Accumulation Unit Value, Beginning of Period
Accumulation Unit Value, End of Period
Number of Units Outstanding, End of Period
PUTNAM VT GROWTH OPPORTUNITIES SUB-ACCOUNT (4)
Accumulation Unit Value, Beginning of Period
Accumulation Unit Value, End of Period
Number of Units Outstanding, End of Period
PUTNAM VT HEALTH SCIENCES SUB-ACCOUNT (4)
Accumulation Unit Value, Beginning of Period
Accumulation Unit Value, End of Period
Number of Units Outstanding, End of Period
PUTNAM VT NEW VALUE SUB-ACCOUNT (4)
Accumulation Unit Value, Beginning of Period
Accumulation Unit Value, End of Period
Number of Units Outstanding, End of Period
PUTNAM VT VOYAGER II SUB-ACCOUNT (4)
Accumulation Unit Value, Beginning of Period
Accumulation Unit Value, End of Period
Number of Units Outstanding, End of Period
STI CAPITAL APPRICIATION SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 9.28
Accumulation Unit Value, End of Period $ 9.28 $ 8.640
Number of Units Outstanding, End of Period 214 12,066
STI GROWTH AND INCOME SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 9.78
Accumulation Unit Value, End of Period $ 9.78 $ 9.088
Number of Units Outstanding, End of Period 4,178 35,434
SIT INTERNATIONAL EQUITY SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 9.54
Accumulation Unit Value, End of Period $ 9.54 $ 7.749
Number of Units Outstanding, End of Period 358 5,355
STI INVESTMENT GRADE BOND SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.39
Accumulation Unit Value, End of Period $ 10.39 $ 11.154
Number of Units Outstanding, End of Period 2,172 31,355
STI MID-CAP EQUITY SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 8.68
Accumulation Unit Value, End of Period $ 8.68 $ 8.766
Number of Units Outstanding, End of Period 5,995 1205
STI QUALITY GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 8.76
Accumulation Unit Value, End of Period $ 8.76 $ 7.007
Number of Units Outstanding, End of Period 4,378 33,868
STI SMALL CAP VALUE EQUITY SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.59
Accumulation Unit Value, End of Period $ 10.59 --
Number of Units Outstanding, End of Period 570 --
STI VALUE INCOME SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.92
Accumulation Unit Value, End of Period $ 10.92 $ 10.620
Number of Units Outstanding, End of Period 123 7,368
TEMPLETON GLOBAL INCOME SECURITIES SUB-ACCOUNT
(3,5)
Accumulation Unit Value, Beginning of Period $ 10.00 $ 11.36
Accumulation Unit Value, End of Period $ 11.36 $ 10.516
Number of Units Outstanding, End of Period 11,685 533
TEMPLETON GROWTH SECURITIES SUB-ACCOUNT (3,5)
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.00
Accumulation Unit Value, End of Period $ 10.00 $ 9.703
Number of Units Outstanding, End of Period 2,289 2,050
58
59
60
* The Contracts were first offered on November 10, 1998. The Accumulation Unit
Values in this table reflect a mortality and expense risk charge of 1.65% and
an administrative expense charge of 0.10%. All of the Variable Sub-Accounts
commenced operations on or before November 10, 1998, except as described in
the footnotes below.
(1) Variable Sub-Accounts that commenced operations on November 1, 1999.
(2) Variable Sub-Accounts commenced operations on January 24, 2000.
(3) Variable Sub-Accounts commenced operations on May 1, 2000.
(4) Variable Sub-Accounts commenced operations on August 30, 2000.
(5) Effective May 1, 2000, the Portfolio in which the Templeton Stock (Class 2)
and Templeton Bond (Class 2) Variable Sub-Accounts invested were merged into
the Templeton Growth Securities (Class 2) and the Global Income Securities
Portfolio. Accordingly, for administrative convenience, as of May 1, 2000,
the corresponding Variable Sub-Account merged with and into a new Variable
Sub-Accounts named the Templeton Growth Securities (Class 2). For ease of
comparison, in this table we are continuing to show AUV's for the predecessor
Variable Sub-Accounts. For Templeton Growth Securities (Class 2) and
Templeton Global Income Securities (Class2) the Accumulation Unit Values are
$12.89 and $10.74, respectively.
(6) Effective May 1, 2002, the AIM V.I. Growth and Income fund and AIM V.I.
Value Fund changed their names to the AIM V.I. Core Equity fund and AIM V.I.
Premier Equity Fund, respectively.
61
APPENDIX B
- --------------------------------------------------------------------------------
MARKET VALUE ADJUSTMENT
- --------------------------------------------------------------------------------
The Market Value Adjustment is based on the following:
I = the Treasury Rate for a maturity equal to the Guarantee Period for the week
preceding the establishment of the Guarantee Period.
N = the number of whole and partial years from the date we receive the
withdrawal, transfer, or death benefit request, or from the Payout Start Date to
the end of the Guarantee Period.
J = the Treasury Rate for a maturity equal to the Guarantee Period for the week
preceding the receipt of the withdrawal, transfer, death benefit, or income
payment request.*
Treasury Rate means the U.S. Treasury Note Constant Maturity yield as reported
in Federal Reserve Bulletin Release H.15.
*If a U.S. Treasury Note ("Note") with a maturity of the Guarantee Period is not
available, we will determine an appropriate interest rate based on an
interpolation of the next shortest duration and next longest duration Notes.
The Market Value Adjustment factor is determined from the following formula:
.9 X [I-(J +.0025)] X N
To determine the Market Value Adjustment, we will multiply the Market Value
Adjustment factor by the amount transferred, withdrawn (in excess of the Free
Withdrawal Amount), paid as a death benefit, or applied to an Income Plan from a
Guarantee Period at any time other than during the 30 day period after such
Guarantee Period expires.
62
EXAMPLES OF MARKET VALUE ADJUSTMENT
- --------------------------------------------------------------------------------
Purchase Payment: $10,000 allocated to a Guarantee Period
Guarantee Period: 5 years
Interest Rate: 4.50%
Full Surrender: End of Contract Year 3
NOTE: These examples assume that premium taxes are not applicable.
Step 1. Calculate Contract Value at End $10,000.00 X (1.045)/3 /= $11,411.66 of
Contract Year 3: Step 2. Calculate the Free Withdrawal .15 X ($10,000.00) =
$1,500.00 Amount:
Step 3. Calculate the Withdrawal Charge: I = 4.5%
J = 4.2%
N = 730 days =2
--------
Step 4. Calculate the Market Value 365 days
Adjustment: Market Value Adjustment Factor:.9 X
[I - (J +.0025)] X N =.9 X [.045 -
(.042 +.0025)] X 2 =.0009
Market Value Adjustment = Market
Value Adjustment Factor X Amount
Subject to Market Value Adjustment:
=.0009 X ($11,411.66 - $1,500.00) =
$8.92
Step 5. Calculate the amount received by
a Contract Owner as a result of full
withdrawal at the end of Contract Year $11,411.66 + $8.92 = $11,420.58
3:
EXAMPLE 1 (ASSUMES DECLINING INTEREST RATES)
63
EXAMPLE 2: (ASSUMES RISING INTEREST RATES)
Step 1. Calculate Contract Value at End $10,000.00 X (1.045)/3 /= $11,411.66 of
Contract Year 3: Step 2. Calculate the Free Withdrawal .15 X ($10,000.00) =
$1,500.00 Amount:
Step 3. Calculate the Withdrawal Charge: I = 4.5%
J = 4.8%
N = 730 days =2
--------
Step 4. Calculate the Market Value 365 days
Adjustment: Market Value Adjustment Factor:.9 X
[I - (J +.0025)] X N =.9 X [.045 -
(.048 +.0025)] X 2 = -.0099
Market Value Adjustment = Market
Value Adjustment Factor X Amount
Subject to Market Value Adjustment:
= -.0099 X ($11,411.66 - $1,500.00)
= - $98.13
Step 5. Calculate the amount received by
a Contract Owner as a result of full
withdrawal at the end of Contract Year $11,411.66 - $98.13 = $11,313.53
3:
64
65
Blue 678
THE ALLSTATE\\(R)\\ PROVIDER VARIABLE ANNUITY
(formerly referred to as "The Glenbrook Provider Variable Annuity")
GLENBROOK LIFE AND ANNUITY COMPANY
- ----------------------------------
300 N. MILWAUKEE AVE.
VERNON HILLS, IL 60061
TELEPHONE NUMBER: 1-800-755-5275 PROSPECTUS
DATED MAY 1, 2002
-------------------------------------------------------------------------------
GLENBROOK LIFE AND ANNUITY COMPANY ("GLENBROOK LIFE") is offering the
- ---------------------------------------------------
Allstate\\(R)\\ Provider Variable Annuity, an individual flexible premium
deferred variable annuity contract ("CONTRACT"). This prospectus contains
information about the Contract that you should know before investing. Please
keep it for future reference.
The Contract currently offers 41 "INVESTMENT ALTERNATIVES". The investment
alternatives include 3 fixed account options ("FIXED ACCOUNT OPTIONS") and 38
variable sub-accounts ("VARIABLE SUB-ACCOUNTS") of the GLENBROOK LIFE
--------------
Multi-Manager Variable Account ("VARIABLE ACCOUNT"). Each Variable Sub-Account
invests exclusively in shares of the portfolios ("PORTFOLIOS") of the following
mutual funds ("FUNDS")
AIM VARIABLE INSURANCE FUNDS (VIT) FRANKLIN TEMPLETON VARIABLE INSURANCE
THE DREYFUS SOCIALLY RESPONSIBLE PRODUCTS TRUST - CLASS 2
GROWTH FUND, INC./SM/ GOLDMAN SACHS VARIABLE INSURANCE TRUST DREYFUS STOCK
INDEX FUND MFS(R) VARIABLE INSURANCE TRUST/SM/ DREYFUS VARIABLE INVESTMENT FUND
(VIF) OPPENHEIMER VARIABLE ACCOUNT FUNDS FIDELITY VARIABLE INSURANCE PRODUCTS
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
FUND
:
Each Fund has multiple investment Portfolios. Not all of the Funds and/or
Portfolios, however, may be available with your Contract. You should check with
your representative for further information on the availability of Funds and/or
Portfolios. Your annuity application will list all available Portfolios.
WE (GLENBROOK LIFE) have filed a Statement of Additional Information, dated May
1, 2002, with the Securities and Exchange Commission ("SEC"). It contains more
information about the Contract and is incorporated herein by reference, which
means it is legally a part of this prospectus. Its table of contents appears on
page 65 of this prospectus. For a free copy, please write or call us at the
address or telephone number above, or go to the SEC's Web site (http://
www.sec.gov). You can find other information and documents about us, including
documents that are legally part of this prospectus, at the SEC's Web site.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THE SECURITIES DESCRIBED IN THIS PROSPECTUS, NOR
HAS IT PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A
FEDERAL CRIME.
IMPORTANT THE CONTRACTS MAY BE DISTRIBUTED THROUGH BROKER-DEALERS
THAT HAVE RELATIONSHIPS WITH BANKS OR OTHER FINANCIAL
NOTICES INSTITUTIONS OR BY EMPLOYEES OF SUCH BANKS. HOWEVER, THE
CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY SUCH INSTITUTIONS OR ANY FEDERAL REGULATORY AGENCY.
INVESTMENT IN THE CONTRACTS INVOLVES INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE CONTRACTS ARE NOT FDIC INSURED.
1
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
- --------------------------------------------------------------------------------
OVERVIEW
- --------------------------------------------------------------------------------
Important Terms
- --------------------------------------------------------------------------------
The Contract at a Glance
- --------------------------------------------------------------------------------
How the Contract Works
- --------------------------------------------------------------------------------
Expense Table
- --------------------------------------------------------------------------------
Financial Information
- --------------------------------------------------------------------------------
CONTRACT FEATURES
- --------------------------------------------------------------------------------
The Contract
- --------------------------------------------------------------------------------
Purchases
- --------------------------------------------------------------------------------
Contract Value
- --------------------------------------------------------------------------------
Investment Alternatives
- --------------------------------------------------------------------------------
The Variable Sub-Accounts
- --------------------------------------------------------------------------------
The Fixed Account Option
- --------------------------------------------------------------------------------
Transfers
- --------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------
Access To Your Money
- --------------------------------------------------------------------------------
Income Payments
- --------------------------------------------------------------------------------
DEATH BENEFITS
- --------------------------------------------------------------------------------
PAGE
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
More Information:
- --------------------------------------------------------------------------------
GLENBROOK LIFE
--------------
- --------------------------------------------------------------------------------
The Variable Account
- --------------------------------------------------------------------------------
The Portfolios
- --------------------------------------------------------------------------------
The Contract
- --------------------------------------------------------------------------------
Qualified Plans
- --------------------------------------------------------------------------------
Legal Matters
- --------------------------------------------------------------------------------
Taxes
- --------------------------------------------------------------------------------
Annual Reports and Other Documents
- --------------------------------------------------------------------------------
Experts
- --------------------------------------------------------------------------------
Performance Information
- --------------------------------------------------------------------------------
APPENDIX A-ACCUMULATION UNIT VALUES 44
- --------------------------------------------------------------------------------
APPENDIX B-MARKET VALUE ADJUSTMENT EXAMPLE 63
- --------------------------------------------------------------------------------
2
IMPORTANT TERMS
- --------------------------------------------------------------------------------
This prospectus uses a number of important terms that you may not be familiar
with. The index below identifies the page that describes each term. The first
use of each term in this prospectus appears in highlights.
PAGE
- --------------------------------------------------------------------------------
Accumulation Phase
- --------------------------------------------------------------------------------
Accumulation Unit
- --------------------------------------------------------------------------------
Accumulation Unit Value
- --------------------------------------------------------------------------------
Anniversary Values
- --------------------------------------------------------------------------------
Annuitant
- --------------------------------------------------------------------------------
Automatic Additions Plan
- --------------------------------------------------------------------------------
Automatic Portfolio Rebalancing Program
- --------------------------------------------------------------------------------
Beneficiary
- --------------------------------------------------------------------------------
Cancellation Period
- --------------------------------------------------------------------------------
Contract*
- --------------------------------------------------------------------------------
Contract Anniversary
- --------------------------------------------------------------------------------
Contract Owner ("You")
- --------------------------------------------------------------------------------
Contract Value
- --------------------------------------------------------------------------------
Contract Year
- --------------------------------------------------------------------------------
Death Benefit Anniversary
- --------------------------------------------------------------------------------
Death Proceeds
- --------------------------------------------------------------------------------
Dollar Cost Averaging Program
- --------------------------------------------------------------------------------
Due Proof of Death
- --------------------------------------------------------------------------------
Enhanced Death Benefit Rider
- --------------------------------------------------------------------------------
Enhanced Death and Income Benefit Combination Rider
- --------------------------------------------------------------------------------
Enhanced Death and Income Benefit Combination Rider II
- --------------------------------------------------------------------------------
PAGE
- --------------------------------------------------------------------------------
Fixed Account Options
- --------------------------------------------------------------------------------
Free Withdrawal Amount
- --------------------------------------------------------------------------------
Funds
- --------------------------------------------------------------------------------
GLENBROOK LIFE ("We" or "Us")
- --------------
- --------------------------------------------------------------------------------
Guarantee Periods
- --------------------------------------------------------------------------------
Income Plan
- --------------------------------------------------------------------------------
Investment Alternatives
- --------------------------------------------------------------------------------
Issue Date
- --------------------------------------------------------------------------------
Market Value Adjustment
- --------------------------------------------------------------------------------
Payout Phase
- --------------------------------------------------------------------------------
Payout Start Date
- --------------------------------------------------------------------------------
Portfolios
- --------------------------------------------------------------------------------
Qualified Contracts
- --------------------------------------------------------------------------------
SEC
- --------------------------------------------------------------------------------
Settlement Value
- --------------------------------------------------------------------------------
Systematic Withdrawal Program
- --------------------------------------------------------------------------------
Valuation Date
- --------------------------------------------------------------------------------
Variable Account
- --------------------------------------------------------------------------------
Variable Sub-Account
- --------------------------------------------------------------------------------
*
In certain states the Contract is available only as a group Contract. If you
purchase a group Contract, we will issue you a certificate that represents
your ownership and that summarizes the provisions of the group Contract.
References to "Contract" in this prospectus include certificates, unless the
context requires otherwise.
3
THE CONTRACT AT A GLANCE
- --------------------------------------------------------------------------------
The following is a snapshot of the Contract. Please read the remainder of this
prospectus for more information.
FLEXIBLE PAYMENTS You can purchase a Contract with as
little as $3,000 ($2,000 for "QUALIFIED
CONTRACTS", which are Contracts issued within
QUALIFIED PLANS). You can add to your Contract
as often and as much as you like, but each
payment must be at least $50.
- ---------------------------------------------------------------------------------------
RIGHT TO CANCEL You may cancel your Contract within 20 days of receipt
or any longer period as your state may require
("CANCELLATION PERIOD"). Upon cancellation, we will
return your purchase payments adjusted, to the extent
federal or state law permits, to reflect the investment
experience of any amounts allocated to the Variable
Account.
- ---------------------------------------------------------------------------------------
EXPENSES You will bear the following expenses:
.Total Variable Account annual fees equal to
1.15% of average daily net assets (1.37% if
you select the ENHANCED DEATH BENEFIT RIDER;
1.59% if you selected the ENHANCED DEATH AND
INCOME BENEFIT COMBINATION RIDER (for
Contracts issued before September 22, 2000);
and 1.65% if you select the ENHANCED DEATH AND
INCOME BENEFIT COMBINATION RIDER II (for
Contracts issued on or after September 22,
2000).
.Annual contract maintenance charge of $35 (with
certain exceptions)
.Withdrawal charges ranging from 0% to 6% of
purchase payment withdrawn (with certain
exceptions)
.Transfer fee of $10 after 12th transfer in any
CONTRACT YEAR (fee currently waived)
. State premium tax (if your state imposes one).
In addition, each Portfolio pays expenses that
you will bear indirectly if you invest in a
Variable Sub-Account.
- ---------------------------------------------------------------------------------------
INVESTMENT ALTERNATIVES The Contract offers 42 investment
alternatives including:
.3 Fixed Account Options (which credit interest at
rates we guarantee)
.39 Variable Sub-Accounts investing in
Portfolios offering professional money
management by these investment advisers:
. AIM Advisors, Inc.
. The Dreyfus Corporation
. Fidelity Management & Research Company
. Franklin Advisers, Inc.
. Franklin Mutual Advisers, LLC
. Goldman Sachs Asset Management
. Goldman Sachs Asset Management International
. MFS Investment Management(R)
. Miller Anderson & Sherrerd, LLP
. Morgan Stanley Asset Management
. OppenheimerFunds, Inc.
. Templeton Asset Management LTD
. Templeton Global Advisors Limited
. Templeton Investment Counsel, Inc.
To find out current rates being paid on the
Fixed Account, or to find out how the Variable
Sub-Accounts have performed, please call us at
1-800-755-5275.
- ---------------------------------------------------------------------------------------
SPECIAL SERVICES For your convenience, we offer these special services:
. AUTOMATIC PORTFOLIO REBALANCING PROGRAM
. AUTOMATIC ADDITIONS PROGRAM
. DOLLAR COST AVERAGING PROGRAM
. SYSTEMATIC WITHDRAWAL PROGRAM
- ---------------------------------------------------------------------------------------
INCOME PAYMENTS You can choose fixed income payments,
variable income payments, or a combination of
the two. You can receive your income payments in
one of the following ways:
. life income with guaranteed payments
.a "joint and survivor" life income with guaranteed
payments
.guaranteed payments for a specified period (5 to 30
years)
- ---------------------------------------------------------------------------------------
DEATH BENEFITS If you or the ANNUITANT (if the Contract is owned by a
non-natural person) die before the PAYOUT START DATE,
we will pay the death benefit described in the
Contract. We offer an Enhanced Death Benefit Rider and
an Enhanced Death and Income Benefit Combination Rider
II.
- ---------------------------------------------------------------------------------------
TRANSFERS Before the Payout Start Date, you may transfer
your Contract value ("CONTRACT VALUE") among the
investment alternatives, with certain
restrictions. Transfers to a GUARANTEE PERIOD of
the Fixed Account must be at least $50.
We do not currently impose a fee upon transfers.
However, we reserve the right to charge $10 per
transfer after the 12th transfer in each
"Contract Year," which we measure from the date
we issue your Contract or a Contract Anniversary
("CONTRACT ANNIVERSARY").
- ---------------------------------------------------------------------------------------
WITHDRAWALS You may withdraw some or all of your Contract
Value at any time prior to the Payout Start
Date.
In general, you must withdraw at least $50 at a
time. Full or partial withdrawals are available
under limited circumstances on or after the
Payout Start Date. Withdrawals of earnings are
taxed as ordinary income and, if taken prior to
age 59/1/2/, may be subject to an additional 10%
federal tax penalty. A withdrawal charge and
MARKET VALUE ADJUSTMENT also may apply.
- ---------------------------------------------------------------------------------------
4
5
HOW THE CONTRACT WORKS
- --------------------------------------------------------------------------------
The Contract basically works in two ways.
First, the Contract can help you (we assume you are the CONTRACT OWNER) save for
retirement because you can invest in up to 42 investment alternatives and
generally pay no federal income taxes on any earnings until you withdraw them.
You do this during what we call the "ACCUMULATION PHASE" of the Contract. The
Accumulation Phase begins on the date we issue your Contract (we call that date
the "ISSUE DATE") and continues until the Payout Start Date, which is the date
we apply your money to provide income payments. During the Accumulation Phase,
you may allocate your purchase payments to any combination of the Variable
Sub-Accounts and/or Fixed Account Options. If you invest in any of the three
Fixed Account Options, you will earn a fixed rate of interest that we declare
periodically. If you invest in any of the Variable Sub-Accounts, your investment
return will vary up or down depending on the performance of the corresponding
Portfolios.
Second, the Contract can help you plan for retirement because you can use it to
receive retirement income for life and/ or for a pre-set number of years, by
selecting one of the income payment options (we call these "INCOME PLANS")
described on page___. You receive income payments during what we call the
"PAYOUT PHASE" of the Contract, which begins on the Payout Start Date and
continues until we make the last payment required by the Income Plan you select.
During the Payout Phase, if you select a fixed income payment option, we
guarantee the amount of your payments, which will remain fixed. If you select a
variable income payment option, based on one or more of the Variable
Sub-Accounts, the amount of your payments will vary up or down depending on the
performance of the corresponding Portfolios. The amount of money you accumulate
under your Contract during the Accumulation Phase and apply to an Income Plan
will determine the amount of your income payments during the Payout Phase.
The timeline below illustrates how you might use your Contract.
LOGO
As the Contract Owner, you exercise all of the rights and privileges provided by
the Contract. If you die, any surviving Contract Owner or, if none, the
BENEFICIARY will exercise the rights and privileges provided by the Contract.
See "The Contract." In addition, if you die before the Payout Start Date, we
will pay a death benefit to any surviving Contract Owner, or if there is none,
to your Beneficiary. See "Death Benefits."
Please call us at 1-800-755-5275 if you have any questions about how the
Contract works.
6
EXPENSE TABLE
- --------------------------------------------------------------------------------
The table below lists the expenses that you will bear directly or indirectly
when you buy a Contract. The table and the examples that follow do not reflect
premium taxes that may be imposed by the state where you reside. For more
information about Variable Account expenses, see "Expenses," below. For more
information about Portfolio expenses, please refer to the accompanying
prospectuses for the Funds.
CONTRACT OWNER TRANSACTION EXPENSES
Withdrawal Charge (as a percentage of purchase payments)*
Number of Complete Years Since We Received the Purchase 0 1 2 3 4 5 6+
Payment Being Withdrawn
- --------------------------------------------------------------------------------------------
Applicable Charge 6% 6% 5% 5% 4% 3% 0%
- --------------------------------------------------------------------------------------------
Annual Contract Maintenance Charge $35.00**
- --------------------------------------------------------------------------------------------
Transfer Fee $10.00***
- --------------------------------------------------------------------------------------------
*Each Contract Year, you may withdraw up to 15% of your aggregate purchase
payments without incurring a withdrawal charge.
** We will waive this charge in certain cases. See "Expenses."
*** Applies solely to the thirteenth and subsequent transfers within a
Contract Year, excluding transfers due to dollar cost averaging and automatic
portfolio rebalancing. We are currently waiving the transfer fee.
VARIABLE ACCOUNT ANNUAL EXPENSES
(AS A PERCENTAGE OF DAILY NET ASSET VALUE
DEDUCTED FROM EACH VARIABLE SUB-ACCOUNT)
Without the Enhanced Death Benefit Rider, Enhanced Death and Income Benefit
Combination Rider, or Enhanced Death and Income Benefit Combination Rider II
Mortality and Expense Risk Charge 1.05%
- -----------------------------------------------------------------------------------
Administrative Expense Charge 0.10%
- -----------------------------------------------------------------------------------
Total Variable Account Annual Expense 1.15%
- -----------------------------------------------------------------------------------
With the Enhanced Death Benefit Rider
Mortality and Expense Risk Charge 1.27%
- -------------------------------------------------------------------------------
Administrative Expense Charge 0.10%
- -------------------------------------------------------------------------------
Total Variable Account Annual Expense 1.37%
- -------------------------------------------------------------------------------
With the Enhanced Death and Income Benefit Combination Rider (for Contracts
issued before September 22, 2000)
Mortality and Expense Risk Charge 1.49%
- -------------------------------------------------------------------------------
Administrative Expense Charge 0.10%
- -------------------------------------------------------------------------------
Total Variable Account Annual Expense 1.59%
- -------------------------------------------------------------------------------
With the Enhanced Death and Income Benefit Combination Rider II (for
Contracts issued on or after September 22, 2000)
Mortality and Expense Risk Charge 1.55%
- -------------------------------------------------------------------------------
Administrative Expense Charge 0.10%
- -------------------------------------------------------------------------------
Total Variable Account Annual Expenses 1.65%
- -------------------------------------------------------------------------------
7
PORTFOLIO ANNUAL EXPENSES (as a percentage of Portfolio average daily net
assets)/1/
Total
Management Rule12b-1 Other Portfolio
Portfolio Fees Fees Expenses Annual Expenses
- ---------------------------------------------------------------------------------------------------------------------------
AIM V.I. Balanced Fund - Series I 0.75% N/A 0.37% 1.12%
- ---------------------------------------------------------------------------------------------------------------------------
AIM V.I. Core Equity Fund - Series I (2) 0.61% N/A 0.21% .82%
- ---------------------------------------------------------------------------------------------------------------------------
AIM V.I. Diversified Income Fund - Series I 0.60% N/A 0.33% 0.93%
- ---------------------------------------------------------------------------------------------------------------------------
AIM V.I. Government Securities Fund - Series I 0.50% N/A 0.58% 1.08%
- ---------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth Fund - Series I 0.62% N/A 0.26% 0.88%
- ---------------------------------------------------------------------------------------------------------------------------
AIM V.I. International Growth Fund - Sereis I (2) 0.73% N/A 0.32% 1.05%
- ---------------------------------------------------------------------------------------------------------------------------
AIM V.I. Premier Equity Fund - Series I (2) 0.60% N/A 0.25% 0.85%
- ---------------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth Fund, Inc.: Initial Shares 0.75% N/A 0.03% 0.78%
- ---------------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund: Initial Shares 0.25% N/A 0.01% 0.26%
- ---------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF - Growth & Income Portfolio: Initial Shares 0.75% N/A 0.05% 0.80%
- ---------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF - Money Market Portfolio 0.50% N/A 0.08% 0.58%
- ---------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Contrafund Portfolio - Initial Class (3) 0.58% N/A 0.10% 0.68%
- ---------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio - Initial Class (3) 0.48% N/A 0.10% 0.58%
- ---------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio - Initial Class (3) 0.58% N/A 0.10% 0.68%
- ---------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio - Initial Class (3) 0.58% N/A 0.13% 0.71%
- ---------------------------------------------------------------------------------------------------------------------------
Franklin Small Cap Fund-Class 2 (4,5) 0.45% 0.25% 0.31% 1.01%
- ---------------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund - Class 2 (4) 0.60% 0.25% 0.19% 1.04%
- ---------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities Fund - Class 2 (4) 1.25% 0.25% 0.32% 1.82%
- ---------------------------------------------------------------------------------------------------------------------------
Templeton Foreign Securities Fund - Class 2 (4,6,7) 0.68% 0.25% 0.22% 1.15%
- ---------------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund - Class 2 (4,8) 0.80% 0.25% 0.05% 1.10%
- ---------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT Capital Growth Fund (9) 0.75% N/A 0.94% 1.69%
- ---------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT CORE/SM/ Small Cap Equity Fund (9) 0.75% N/A 0.47% 1.22%
- ---------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT CORE/SM/ U.S. Equity Fund (9) 0.70% N/A 0.12% 0.82%
- ---------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT International Equity Fund (9) 1.00% N/A 1.05% 2.05%
- ---------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Series - Initial Class (10) 0.75% N/A 0.12% 0.87%
- ---------------------------------------------------------------------------------------------------------------------------
MFS Investors Trust Series - Initial Class (10) 0.75% N/A 0.15% 0.90%
- ---------------------------------------------------------------------------------------------------------------------------
MFS New Discovery Series (10,11) 0.90% N/A 0.16% 1.06%
- ---------------------------------------------------------------------------------------------------------------------------
MFS Research Series - Initial Class (10) 0.75% N/A 0.15% 0.90%
- ---------------------------------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth Fund/VA 0.64% N/A 0.04% 0.68%
- ---------------------------------------------------------------------------------------------------------------------------
Oppenheimer Capital Appreciation Fund/VA 0.64% N/A 0.04% 0.68%
- ---------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund/VA 0.64% N/A 0.06% 0.70%
- ---------------------------------------------------------------------------------------------------------------------------
Oppenheimer Main Street Growth & Income Fund/VA 0.68% N/A 0.05% 0.73%
- ---------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund/VA(12) 0.74% N/A 0.05% 0.79%
- ---------------------------------------------------------------------------------------------------------------------------
Van Kampen UIF Core Plus Fixed Income Portfolio (13,14) 0.40% N/A 0.31% 0.71%
- ---------------------------------------------------------------------------------------------------------------------------
Van Kampen UIF Equity Growth Portfolio (13,14) 0.55% N/A 0.36% 0.91%
- ---------------------------------------------------------------------------------------------------------------------------
Van Kampen UIF Global Value Equity Portfolio (13,14) 0.80% N/A 0.48% 1.28%
- ---------------------------------------------------------------------------------------------------------------------------
Van Kampen UIF Mid Cap Value Portfolio (13,14) 0.75% N/A 0.35% 1.10%
- ---------------------------------------------------------------------------------------------------------------------------
Van Kampen UIF Value Portfolio (13,14) 0.55% N/A 0.38% 0.93%
- ---------------------------------------------------------------------------------------------------------------------------
(1) Figures shown in the Table are for the year ended December 31, 2001(except
as otherwise noted).
(2) Effective May 1, 2002 Portfolios AIM V.I. Growth and Income Fund, AIM V.I.
International Equity Fund and AIM V.I. Value Fund changed their names to the
AIM V.I. Core Equity Fund, AIM V.I. International Growth Fund and AIM V.I.
Premier Equity Fund, respectively.
(3) Actual "Total Portfolio Annual Expenses" were lower because a portion of the
brokerage commissions that the Portfolios paid was used to reduce the
Portfolios' expenses. In addition, through arrangements with the Portfolios'
custodian, credits realized as a result of uninvested cash balances are used
to reduce a portion of the Portfolios'
8
custodian expenses. These offsets may be discontinued at any time. Had these
offsets been taken into account, "Total Portfolio Annual Expenses" would have
been 0.64% for Contrafund Portfolio, 0.57% for Equity-Income Portfolio, 0.65%
for Growth Portfolio and 0.70% for High Income Portfolio.
(4) The Portfolio's Class 2 distribution plan or "rule 12b-1 plan" is described
in the Portfolio's prospectus.
(5) The manager had agreed in advance to make an estimated reduction of 0.08% to
its management fee to reflect reduced services resulting from the Portfolio's
investment in a Franklin Templeton money fund. This reduction is required by
the Portfolio's Board of Trustees and an order of the Securities and Exchange
Commission. Without this reduction, "Total Portfolio Annual Expenses" would
have been 1.09%.
(6) Effective May 1, 2002 the Templeton International Securities Fund - Class 2
changed its name to the Templeton Foreign Securities Fund - Class 2.
(7) The manager had agreed in advance to make an estimated reduction of 0.01% to
its management fee to reflect reduced services resulting from the Portfolio's
investment in a Franklin Templeton money fund. This reduction is required by
the Portfolio's Board of Trustees and an order of the Securities and Exchange
Commission. Without this reduction, "Total Portfolio Annual Expenses" would
have been 1.16%.
(8) The Portfolio administration fee is paid indirectly through the management
fee.
(9) "Total Portfolio Annual Expenses" listed in the table above reflect gross
ratios prior to any voluntary waivers/ reimbursements of expenses. Goldman
Sachs Asset Management and Goldman Sachs Asset Management International, the
investment advisers, have voluntarily agreed to reduce or limit certain other
expenses (excluding management fees, taxes, interest, brokerage fees,
litigation, indemnification and other extraordinary expenses) to the extent
"Total Portfolio Annual Expenses" exceed 1.00% for Capital Growth Fund, 1.00%
for Core/sm/ Small Cap Equity Fund, 0.81% for Core/sm/ U.S. Equity Fund and
1.35% for International Equity Fund. With these limitations taken into
consideration, "Management Fees", "Rule 12b-1 Fees", "Other Expenses" and
"Total Portfolio Annual Expenses" were as follows:
Total
Management Rule12b-1 Other Portfolio
Portfolio Fees Fees Expenses Annual Expenses
- ----------------------------------------------------------------------------------------------------
Goldman Sachs VIT Capital Growth Fund 0.75% N/A 0.25% 1.00%
- ----------------------------------------------------------------------------------------------------
Goldman Sachs VIT CORE/SM/ Small Cap Equity 0.75% N/A 0.25% 1.00%
Fund
- ----------------------------------------------------------------------------------------------------
Goldman Sachs VIT CORE/SM /U.S. Equity Fund* 0.70% N/A 0.12% 0.82%
- ----------------------------------------------------------------------------------------------------
Goldman Sachs VIT International Equity Fund 1.00% N/A 0.35% 1.35%
- ----------------------------------------------------------------------------------------------------
* The Portfolio had expenses offset by earnings credits for the custodian bank.
Had the expenses offset been taken into account, "Total Portfolio Annual
Expenses" would have been 0.81%.
(10) Each Portfolio has an expense offset arrangement which reduces the
Portfolios' custodian fee based upon the amount of cash maintained by the
Portfolio with its custodian and dividend disbursing agent. Each Portfolio may
enter into other such arrangements and directed brokerage arrangements, which
would also have the effect of reducing the Portfolios' expenses. "Other
Expenses" do not take these expense reductions into account, and are therefore
higher than the actual expenses of the Portfolios. Had these fee reductions
been taken into account, "Total Portfolio Annual Expenses" would have been
lower and would equal 0.86% for Emerging Growth Series, 0.89% for Investors
Trust Series, 1.05% for New Discovery Series and 0.89 for Research Series.
(11) MFS has contractually agreed, subject to reimbursement, to bear expenses
for the Portfolio such that "Other Expenses" (after taking into account the
expense offset arrangement described in note 10 above), do not exceed 0.15% of
the average daily net assets of the Portfolios during the current fiscal year.
Without these fee arrangements "Total Portfolio Annual Expenses" would have
been 1.09%. These contractual fee arrangements will continue at least until
May 1, 2003, unless changed with the consent of the board of trustees which
oversee the Portfolios.
(12) Oppenheimer Funds, Inc. (OFI) will reduce the management fee by 0.10% as
long as the fund's trailing 12-month performance at the end of the quarter is
in the fifth Lipper peer-group quintile; and by 0.05% as long as it is in the
fourth quintile. If the fund emerges from a "penalty box" position for a
quarter but then slips back in the next quarter, OFI will reinstate the
waiver. The waiver is voluntary and may be terminated by the Manager at any
time.
(13) "Total Portfolio Annual Expenses" listed in the table above reflect gross
ratios prior to any voluntary waivers/ reimbursements of expenses by the
adviser. For the year ended December 31, 2001, the management fee was reduced
to reflect the voluntary waiver of a portion or all of the management fee and
the reimbursement by the Portfolios' adviser to the extent "Total Portfolio
Annual Expenses" exceed the following percentages: Van Kampen
9
UIF Core Plus Fixed Income Portfolio 0.70%; Van Kampen UIF Equity Growth
Portfolio 0.85%; Van Kampen UIF Global Value Equity Portfolio 1.15%; Van
Kampen UIF Mid Cap Value Portfolio 1.05%; Van Kampen UIF Value Portfolio
0.85%. The adviser may terminate this voluntary waiver at any time at its sole
discretion. After such reductions, the "Management Fees", "Rule 12b-1 Fees",
"Other Expenses" and "Total Portfolio Annual Expenses" were as follows:
Total
Management Rule 12b-1 Other Portfolio
Portfolio Fees Fees Expenses Annual Expenses
- ---------------------------------------------------------------------------------------------------------------------------------
Van Kampen UIF Core Plus Fixed Income Portfolio 0.39% N/A 0.31% 0.70%
- ---------------------------------------------------------------------------------------------------------------------------------
Van Kampen UIF Equity Growth Portfolio 0.49% N/A 0.36% 0.85%
- ---------------------------------------------------------------------------------------------------------------------------------
Van Kampen UIF Global Equity Portfolio 0.67% N/A 0.48% 1.15%
- ---------------------------------------------------------------------------------------------------------------------------------
Van Kampen UIF Mid Cap Value Portfolio 0.70% N/A 0.35% 1.05%
- ---------------------------------------------------------------------------------------------------------------------------------
Van Kampen UIF Value Portfolio 0.47% N/A 0.38% 0.85%
- ---------------------------------------------------------------------------------------------------------------------------------
Effective May 1, 2002 the Portfolios have been re-branded and have changed
names from Morgan Stanley UIF Fixed Income Portfolio to Van Kampen UIF Core
Plus Fixed Income Portfolio, Morgan Stanley UIF Equity Growth Portfolio to Van
Kampen UIF Equity Growth Portfolio, Morgan Stanley UIF Global Value Equity
Portfolio to Van Kampen UIF Global Value Equity Portfolio, Morgan Stanley UIF
Mid Cap Value Portfolio to Van Kampen UIF Mid Cap Value Portfolio and Morgan
Stanley UIF Value Portfolio to Van Kampen UIF Value Portfolio.
10
EXAMPLE 1
The example below shows the dollar amount of expenses that you would bear
directly or indirectly if you:
... invested $1,000 in a Variable Sub-Account,
... earned a 5% annual return on your investment,
... surrendered your Contract, or you began receiving income payments for a
specified period of less than 120 months, at the end of each time period, and
... elected the Enhanced Death and Income Benefit Combination Rider II.
THE EXAMPLE DOES NOT INCLUDE ANY TAXES OR TAX PENALTIES YOU MAY BE REQUIRED TO
PAY IF YOU SURRENDER YOUR CONTRACT.
ASSUMES TERMINATION.
Portfolio 1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------------
AIM V.I. Balanced $76 $111 $148 $279
- -------------------------------------------------------------------------------
AIM V.I. Core Equity $73 $101 $133 $248
- -------------------------------------------------------------------------------
AIM V.I. Diversified Income $74 $105 $138 $259
- -------------------------------------------------------------------------------
AIM V.I. Government Securities $76 $109 $146 $275
- -------------------------------------------------------------------------------
AIm V.I. Growth $73 $103 $136 $254
- -------------------------------------------------------------------------------
AIM V.I. International Growth $75 $109 $144 $272
- -------------------------------------------------------------------------------
AIM V.I. Premier Equity $73 $102 $134 $251
- -------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth $72 $100 $130 $244
Fund, Inc.: Initial Shares
- -------------------------------------------------------------------------------
Dreyfus Stock Index: Initial Shares $67 $ 84 $103 $187
- -------------------------------------------------------------------------------
Dreyfus VIF - Growth & Income: Initial $73 $101 $131 $246
Shares
- -------------------------------------------------------------------------------
Dreyfus VIF - Money Market $70 $ 94 $120 $222
- -------------------------------------------------------------------------------
Fidelity VIP Contrafund $71 $ 97 $125 $233
- -------------------------------------------------------------------------------
Fidelity VIP Equity-Income $70 $ 94 $120 $222
- -------------------------------------------------------------------------------
Fidelity VIP Growth $71 $ 97 $125 $233
- -------------------------------------------------------------------------------
Fidelity VIP High Income $72 $ 98 $127 $236
- -------------------------------------------------------------------------------
Franklin Small Cap - Class 2 $75 $107 $142 $268
- -------------------------------------------------------------------------------
Mutual Shares Securities - Class 2 $75 $108 $144 $271
- -------------------------------------------------------------------------------
Templeton Developing Markets Securities - $75 $108 $144 $271
Class 2
- -------------------------------------------------------------------------------
Templeton Foreign Securities - Class 2 $76 $112 $150 $282
- -------------------------------------------------------------------------------
Templeton Growth Securities - Class 2 $76 $110 $147 $277
- -------------------------------------------------------------------------------
Goldman Sachs VIT Capital Growth $82 $128 $177 $335
- -------------------------------------------------------------------------------
Goldman Sachs VIT CORE/SM/ Small Cap $77 $114 $153 $289
Equity
- -------------------------------------------------------------------------------
Goldman Sachs VIT CORE/SM/ U.S. Equity $73 $101 $133 $248
- -------------------------------------------------------------------------------
Goldman Sachs VIT International Equity $85 $139 $195 $369
- -------------------------------------------------------------------------------
MFS Emerging Growth $73 $103 $135 $253
- -------------------------------------------------------------------------------
MFS Investors Trust $74 $104 $137 $256
- -------------------------------------------------------------------------------
MFS New Discovery $75 $109 $145 $273
- -------------------------------------------------------------------------------
MFS Research $74 $104 $137 $256
- -------------------------------------------------------------------------------
Oppenheimer Aggressive Growth $71 $ 97 $125 $233
- -------------------------------------------------------------------------------
Oppenheimer Capital Appreciation $71 $ 97 $125 $233
- -------------------------------------------------------------------------------
Oppenheimer Global Securities $64 $ 76 $ 89 $158
- -------------------------------------------------------------------------------
Oppenheimer Main Street Growth & Income $72 $ 99 $128 $238
- -------------------------------------------------------------------------------
Oppenheimer Strategic Bond $73 $101 $131 $245
- -------------------------------------------------------------------------------
Van Kampen UIF Core Plus Fixed Income $72 $ 98 $127 $236
- -------------------------------------------------------------------------------
Van Kampen UIF Equity Growth $74 $104 $137 $257
- -------------------------------------------------------------------------------
Van Kampen UIF Global Value Equity $74 $105 $138 $259
- -------------------------------------------------------------------------------
Van Kampen UIF Mid Cap Value $76 $110 $147 $277
- -------------------------------------------------------------------------------
Van Kampen UIF Value $78 $116 $156 $295
- -------------------------------------------------------------------------------
11
EXAMPLE 2
Same assumptions as Example 1 above, except that you decided not to surrender
your Contract, or you began receiving income payments for a specified period of
at least 120 months, at the end of each period.
ASSUMES NO TERMINATION.
Portfolio 1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------------
AIM V.I. Balanced $25 $ 77 $131 $279
- -------------------------------------------------------------------------------
AIM V.I. Core Equity $22 $ 67 $116 $248
- -------------------------------------------------------------------------------
AIM V.I. Diversified Income $23 $ 71 $121 $259
- -------------------------------------------------------------------------------
AIM V.I. Government Securities $25 $ 75 $129 $275
- -------------------------------------------------------------------------------
AIM V.I. Growth $22 $ 69 $119 $254
- -------------------------------------------------------------------------------
AIM V.I. International Growth $24 $ 75 $127 $272
- -------------------------------------------------------------------------------
AIM V.I. Premier Equity $22 $ 68 $117 $251
- -------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth $21 $ 66 $113 $244
Fund, Inc.: Initial Shares
- -------------------------------------------------------------------------------
Dreyfus Stock Index: Initial Shares $16 $ 50 $ 86 $187
- -------------------------------------------------------------------------------
Dreyfus VIF - Growth & Income: Initial $22 $ 67 $114 $246
Shares
- -------------------------------------------------------------------------------
Dreyfus VIF - Money Market $19 $ 60 $103 $222
- -------------------------------------------------------------------------------
Fidelity VIP Contrafund $20 $ 63 $108 $233
- -------------------------------------------------------------------------------
Fidelity VIP Equity-Income $19 $ 60 $103 $222
- -------------------------------------------------------------------------------
Fidelity VIP Growth $20 $ 63 $108 $233
- -------------------------------------------------------------------------------
Fidelity VIP High Income $21 $ 64 $110 $236
- -------------------------------------------------------------------------------
Franklin Small Cap - Class 2 $24 $ 73 $125 $268
- -------------------------------------------------------------------------------
Mutual Shares Securities Fund - Class 2 $24 $ 74 $127 $271
- -------------------------------------------------------------------------------
Templeton Developing Markets Securities - $24 $ 74 $127 $271
Class 2
- -------------------------------------------------------------------------------
Templeton Foreign Securites - Class 2 $25 $ 78 $133 $282
- -------------------------------------------------------------------------------
Templeton Growth Securities - Class 2 $25 $ 76 $130 $277
- -------------------------------------------------------------------------------
Goldman Sachs VIT Capital Growth $31 $ 94 $160 $335
- -------------------------------------------------------------------------------
Goldman Sachs VIT CORE/SM/ Small Cap $26 $ 80 $136 $289
Equity
- -------------------------------------------------------------------------------
Goldman Sachs VIT CORE/SM/ U.S. Equity $22 $ 67 $116 $248
- -------------------------------------------------------------------------------
Goldman Sachs VIT International Equity $34 $105 $178 $369
- -------------------------------------------------------------------------------
MFS Emerging Growth $22 $ 69 $118 $253
- -------------------------------------------------------------------------------
MFS Investors Trust $23 $ 70 $120 $256
- -------------------------------------------------------------------------------
MFS New Discovery $24 $ 75 $128 $273
- -------------------------------------------------------------------------------
MFS Research $23 $ 70 $120 $256
- -------------------------------------------------------------------------------
Oppenheimer Aggressive Growth $20 $ 63 $108 $233
- -------------------------------------------------------------------------------
Oppenheimer Capital Appreciation $20 $ 63 $108 $233
- -------------------------------------------------------------------------------
Oppenheimer Global Securities $13 $ 42 $ 72 $158
- -------------------------------------------------------------------------------
Oppenheimer Main Street Growth & Income $21 $ 65 $111 $238
- -------------------------------------------------------------------------------
Oppenheimer Strategic Bond $22 $ 67 $114 $245
- -------------------------------------------------------------------------------
Van Kampen UIF Core Plus Fixed Income $21 $ 64 $110 $236
- -------------------------------------------------------------------------------
Van Kampen UIF Equity Growth $23 $ 70 $120 $257
- -------------------------------------------------------------------------------
Van Kampen UIF Global Value Equity $23 $ 71 $121 $259
- -------------------------------------------------------------------------------
Van Kampen UIF Mid Cap Value $25 $ 76 $130 $277
- -------------------------------------------------------------------------------
Van Kampen UIF Value $27 $ 82 $139 $295
- -------------------------------------------------------------------------------
PLEASE REMEMBER THAT YOU ARE LOOKING AT EXAMPLES AND NOT A REPRESENTATION OF
PAST OR FUTURE EARNINGS. YOUR ACTUAL EXPENSES MAY BE LESSER OR GREATER THAN
THOSE SHOWN ABOVE. SIMILARLY, YOUR RATE OF RETURN MAY BE LESSER OR GREATER THAN
5%, WHICH IS NOT GUARANTEED. THE ABOVE EXAMPLES ASSUME THE ELECTION OF THE
ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER II WITH A MORTALITY AND
EXPENSE RISK CHARGE OF 1.55%. IF NO RIDER WERE ELECTED, OR THE ENHANCED DEATH
BENEFIT RIDER WERE ELECTED, THE EXPENSE FIGURES SHOWN ABOVE WOULD BE SLIGHTLY
LOWER. TO REFLECT THE CONTRACT MAINTENANCE CHARGE IN THE EXAMPLES, WE ESTIMATED
AN EQUIVALENT PERCENTAGE CHARGE, BASED ON THE CURRENT AVERAGE CONTRACT SIZE OF
$45,000
12
FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
To measure the value of your investment in the Variable Sub-Accounts during the
Accumulation Phase, we use a unit of measure we call the "ACCUMULATION UNIT".
Each Variable Sub-Account has a separate value for its Accumulation Units we
call "ACCUMULATION UNIT VALUE." Accumulation Unit Value is analogous to, but not
the same as, the share price of a mutual fund. Attached as Appendix A to this
prospectus are tables showing the Accumulation Unit Values of each Variable
Sub-Account since the date the Contracts were first offered. To obtain a fuller
picture of each Variable Sub-Account's finances, please refer to the Variable
Account's financial statements contained in the Statement of Additional
Information. The financial statements of GLENBROOK LIFE also appear in the
Statement of Additional Information.
13
THE CONTRACT
- --------------------------------------------------------------------------------
CONTRACT OWNER
The Glenbrook Life Provider Variable Annuity is a contract between you, the
Contract Owner, and Glenbrook Life, a life insurance company. As the Contract
Owner, you may exercise all of the rights and privileges provided to you by the
Contract. That means it is up to you to select or change (to the extent
permitted):
... the investment alternatives during the Accumulation and Payout Phases,
... the amount and timing of your purchase payments and withdrawals,
... the programs you want to use to invest or withdraw money,
... the income payment plan you want to use to receive retirement income,
... the Annuitant (either yourself or someone else) on whose life the income
payments will be based,
... the Beneficiary or Beneficiaries who will receive the benefits that the
Contract provides when the last surviving Contract Owner dies, and
... any other rights that the Contract provides.
If you die, any surviving Contract Owner, or, if none, the Beneficiary may
exercise the rights and privileges provided to them by the Contract.
The Contract cannot be jointly owned by both a non-natural person and a natural
person. If the Contract Owner is a grantor trust, the Contract Owner will be
considered a non-living person for the purposes of the Death of Owner and Death
of Annuitant provisions of your contract.
The maximum age of the oldest Contract Owner and Annuitant cannot exceed 90 as
of the date we receive the completed application. You may change the Contract
Owner at any time. We will provide a change of ownership form to be signed by
you and filed with us. After we accept the form, the change of ownership will be
effective as of the date you signed the form. Until we receive your written
notice to change the Contract Owner, we are entitled to rely on the most recent
ownership information in our files. We will not be liable as to any payment or
settlement made prior to receiving the written notice. Accordingly, if you wish
to change the Contract Owner, you should deliver your written notice to us
promptly. Each change is subject to any payment made by us or any other action
we take before we accept the change.
You can use the Contract with or without a qualified plan. A qualified plan is a
personal retirement savings plan, such as an IRA or tax-sheltered annuity, that
meets the requirements of the Internal Revenue Code. Qualified plans may limit
or modify your rights and privileges under the Contract. We use the term
"Qualified Contract" to refer to a Contract issued within a qualified plan. See
"Qualified Plans" on page__.
Changing of ownership of this contract may cause adverse tax consequences and
may not be allowed under qualified plans. Please consult with a competent tax
advisor prior to making a request for a change of Contract Owner.
ANNUITANT
The Annuitant is the individual whose life determines the amount and duration of
income payments (other than under Income Plans with guaranteed payments for a
specified period). You initially designate an Annuitant in your application. You
may change the Annuitant at any time prior to the Payout Start Date (only if the
Contract Owner is a natural person). Once we accept a change, it takes effect as
of the date you signed the request. Each change is subject to any payment we
make or other action we take before we accept it.
You may designate a joint Annuitant, who is a second person on whose life income
payments depend at the time you select an Income Plan. We permit joint
Annuitants only on or after the Payout Start Date. If the Annuitant dies prior
to the Payout Start Date, the new Annuitant will be:
(i) the youngest Contract Owner; otherwise,
(ii) the youngest Beneficiary.
BENEFICIARY
The Beneficiary is the person who may elect to receive the Death Proceeds or
become the new Contract Owner, subject to the "Death of Owner" section below, if
the sole surviving Contract Owner dies before the Payout Start Date. If the sole
surviving Contract Owner dies after the Payout Start Date, the Beneficiary will
receive any guaranteed income payments scheduled to continue.
You may name one or more primary and contingent Beneficiaries when you apply for
a Contract. The primary Beneficiary is the person who is first entitled to
receive benefits under the Contract upon death of the sole surviving Contract
Owner. A contingent Beneficiary is the person selected by the Contract Owner who
will become the Beneficiary if all named primary Beneficiaries die before the
death of the sole surviving Contract Owner.
You may change or add Beneficiaries at any time, unless you have designated an
irrevocable Beneficiary. We will provide a change of Beneficiary form to be
signed by you and filed with us. After we accept the form, the change of
Beneficiary will be effective as of the date you signed the form. Until we
receive your written notice to change a Beneficiary, we are entitled to rely on
the most recent Beneficiary information in our files. We will not be liable as
to any payment or settlement made prior to receiving the written notice.
Accordingly, if you wish to change
14
your Beneficiary, you should deliver your written notice to us promptly. Each
change is subject to any payment made by us or any other action we take before
we accept the change.
If you did not name a Beneficiary or, unless otherwise provided in the
Beneficiary designation, if a named Beneficiary is no longer living and there
are no other surviving primary or contingent Beneficiaries, the new Beneficiary
will be:
... your spouse or, if he or she is no longer alive,
... your surviving children equally, or if you have no surviving children,
... your estate.
If one or more Beneficiaries survive you (or survives the Annuitant, if the
Contract Owner is not a natural person), we will divide the Death Proceeds among
the surviving Beneficiaries according to your most recent written instructions.
If you have not given us written instructions, we will pay the Death Proceeds in
equal amounts to the surviving Beneficiaries.
If more than one Beneficiary shares in the Death Proceeds, each Beneficiary will
be treated as a separate and independent owner of his or her respective share.
Each Beneficiary will exercise all rights related to his or her share,
including the sole right to select a payout option, subject to any restrictions
previously placed upon the Beneficiary. Each Beneficiary may designate a
Beneficiary(ies) for his or her respective share, but that designated
Beneficiary(ies) will be restricted to the payout option chosen by the original
Beneficiary.
MODIFICATION OF THE CONTRACT
Only a Glenbrook Life officer may approve a change in or waive any provision of
the Contract. Any change or waiver must be in writing. None of our agents has
the authority to change or waive the provisions of the Contract. We may not
change the terms of the Contract without your consent, except to conform the
Contract to applicable law or changes in the law. If a provision of the Contract
is inconsistent with state law, we will follow state law.
ASSIGNMENT
You may not assign any interest in a Contract as collateral or security for a
loan. However, you may assign periodic income payments under the Contract prior
to the Payout Start Date. No Beneficiary may assign benefits under the Contract
until they are payable to the Beneficiary. We will not be bound by any
assignment until the assignor signs it and files it with us. We are not
responsible for the validity of any assignment. Federal law prohibits or
restricts the assignment of benefits under many types of retirement plans and
the terms of such plans may themselves contain restrictions on assignments. An
assignment may also result in taxes or tax penalties. YOU SHOULD CONSULT WITH AN
ATTORNEY BEFORE TRYING TO ASSIGN YOUR CONTRACT.
PURCHASES
- --------------------------------------------------------------------------------
MINIMUM PURCHASE PAYMENTS
Your initial purchase payment must be at least $3,000 ($2,000 for a Qualified
Contract). All subsequent purchase payments must be $50 or more. You may make
purchase payments at any time prior to the Payout Start Date. We reserve the
right to limit the maximum amount of purchase payments we will accept. We
reserve the right to reject any application in our sole discretion.
AUTOMATIC ADDITIONS PROGRAM
You may make subsequent purchase payments by automatically transferring money
from your bank account. Consult your representative for more detailed
information.
ALLOCATION OF PURCHASE PAYMENTS
At the time you apply for a Contract, you must decide how to allocate your
purchase payments among the investment alternatives. The allocation you specify
on your application will be effective immediately. All allocations must be in
whole percents that total 100% or in whole dollars. You can change your
allocations by notifying us in writing. We reserve the right to limit the
availability of the investment alternatives.
We will allocate your purchase payments to the investment alternatives according
to your most recent instructions on file with us. Unless you notify us in
writing otherwise, we will allocate subsequent purchase payments according to
the allocation for the previous purchase payment. We will effect any change in
allocation instructions at the time we receive written notice of the change in
good order.
We will credit the initial purchase payment that accompanies your completed
application to your Contract within 2 business days after we receive the payment
at our home office. If your application is incomplete, we will ask you to
complete your application within 5 business days. If you do so, we will credit
your initial purchase payment to your Contract within that 5 business day
period. If you do not, we will return your purchase payment at the end of the 5
business day period unless you expressly allow us to hold it until you complete
the application. We will credit subsequent purchase payments to the Contract at
the close of the business day on which we receive the purchase payment at our
home office. We are open for business each day Monday through Friday that the
New York Stock Exchange is open for business. We also refer to these days as
"VALUATION DATES." Our business day closes when the
15
New York Stock Exchange closes, usually 4 p.m. Eastern Time (3 p.m. Central
Time). If we receive your purchase payment after 3 p.m. Central Time on any
Valuation Date, we will credit your purchase payment using the Accumulation Unit
Values computed on the next Valuation Date.
RIGHT TO CANCEL
You may cancel the Contract by returning it to us within the Cancellation
Period, which is the 20 day period after you receive the Contract, or a longer
period should your state require it. You may return your Contract by delivering
it or mailing it to us. If you exercise this "RIGHT TO CANCEL," the Contract
terminates and we will pay you the full amount of your purchase payments
allocated to the Fixed Account. We also will return your purchase payments
allocated to the Variable Account adjusted, to the extent federal or state law
permits, to reflect investment gain or loss that occurred from the date of
allocation through the date of cancellation. Some states may require us to
return a greater amount to you.
In states where we are required to refund purchase payments, we reserve the
right during the Cancellation Period to invest any purchase payments you
allocated to a Variable Sub-Account to the money market Variable Sub-Account
available under the Contract. We will notify you if we do so. At the end of the
Cancellation Period, you may then allocate your money to other Variable
Sub-Accounts.
If your Contract is qualified under Section 408 of the Internal Revenue Code, we
will refund the greater of any purchase payments or the Contract Value.
CONTRACT VALUE
- --------------------------------------------------------------------------------
Your Contract Value at any time during the Accumulation Phase is equal to the
sum of the value of your Accumulation Units in the Variable Sub-Accounts you
have selected, plus the value of your investment in the Fixed Account Options.
ACCUMULATION UNITS
To determine the number of Accumulation Units of each Variable Sub-Account to
credit to your Contract, we divide (i) the amount of the purchase payment or
transfer you have allocated to a Variable Sub-Account by (ii) the Accumulation
Unit Value of that Variable Sub-Account next computed after we receive your
payment or transfer. For example, if we receive a $10,000 purchase payment
allocated to a Variable Sub-Account when the Accumulation Unit Value for the
Variable Sub-Account is $10, we would credit 1,000 Accumulation Units of that
Variable Sub-Account to your Contract. Withdrawals and transfers from a Variable
Sub-Account would, of course, reduce the number of Accumulation Units of that
Variable Sub-Account allocated to your Contract.
ACCUMULATION UNIT VALUE
As a general matter, the Accumulation Unit Value for each Variable Sub-Account
will rise or fall to reflect:
... changes in the share price of the Portfolio in which the Variable Sub-Account
invests, and
... the deduction of amounts reflecting the mortality and expense risk charge,
administrative expense charge, and any provision for taxes that have accrued
since we last calculated the Accumulation Unit Value.
We determine contract maintenance charges, withdrawal charges, and transfer fees
(currently waived) separately for each Contract. They do not affect Accumulation
Unit Value. Instead, we obtain payment of those charges and fees by redeeming
Accumulation Units. For details on how we calculate Accumulation Unit Value,
please refer to the Statement of Additional Information. We determine a separate
Accumulation Unit Value for each Variable Sub-Account on each Valuation Date. We
also determine a separate set of Accumulation Unit Values reflecting the cost of
the Enhanced Death Benefit Rider, the Enhanced Death and Income Benefit
Combination Rider, and the Enhanced Death and Income Benefit Rider II described
on pages __.
YOU SHOULD REFER TO THE PROSPECTUSES FOR THE PORTFOLIOS THAT ACCOMPANY THIS
PROSPECTUS FOR A DESCRIPTION OF HOW THE ASSETS OF EACH PORTFOLIO ARE VALUED,
SINCE THAT DETERMINATION DIRECTLY BEARS ON THE ACCUMULATION UNIT VALUE OF THE
CORRESPONDING VARIABLE SUB-ACCOUNT AND, THEREFORE, YOUR CONTRACT VALUE.
16
INVESTMENT ALTERNATIVES: THE VARIABLE SUB-ACCOUNTS
- --------------------------------------------------------------------------------
You may allocate your purchase payments to up to 39 Variable Sub-Accounts. Each
Variable Sub-Account invests in the shares of a corresponding Portfolio. Each
Portfolio has its own investment objective(s) and policies. We briefly describe
the Portfolios below.
For more complete information about each Portfolio, including expenses and risks
associated with the Portfolio, please refer to the accompanying prospectuses for
the Portfolios. You should carefully review the Portfolio prospectuses before
allocating amounts to the Variable Sub-Accounts.
PORTFOLIO: EACH PORTFOLIO SEEKS: INVESTMENT ADVISOR:
- -------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS*
- -------------------------------------------------------------------------------
AIM V.I. Balanced Fund As high a total return as
possible, consistent with
preservation of capital
- -------------------------------------------------------
AIM V.I. Core Equity Growth of capital with a
Fund** secondary objective of
current income
- ------------------------------------------------------- AIM ADVISORS,
AIM V.I. Diversified A high level of current INC.
Income Fund income
- -------------------------------------------------------
AIM V.I. Government A high level of current
Securities Fund income consistent with a
reasonable concern for safety
of principal
- -------------------------------------------------------
AIM V.I. Growth Fund Growth of capital
- -------------------------------------------------------
AIM V.I. International Long-term growth of capital ------------------------
Growth Fund**
- -------------------------------------------------------
AIM V.I. Premier Long-term growth of capital
Equity Fund** and income as a secondary
objective
- -------------------------------------------------------
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC./SM/; THE DREYFUS STOCK
INDEX FUND; AND THE DREYFUS VARIABLE INVESTMENT FUND (VIF) (COLLECTIVELY, THE
DREYFUS FUNDS)
- -------------------------------------------------------------------------------
The Dreyfus Socially Responsible
Growth Fund, Inc. Capital growth, and, secondarily, current income
- -------------------------------------------------------
Dreyfus Stock Index To match the total return of
Fund the Standard & Poor's(R) 500
Composite Stock Price Index THE DREYFUS
- ------------------------------------------------------- CORPORATION
Dreyfus VIF Growth & Long-term capital growth,
Income Portfolio current income and growth of
income, consistent with
reasonable investment risk
- -------------------------------------------------------
Dreyfus VIF Money A high level of current
Market Portfolio income as is consistent with
the preservation of capital ------------------------
and the maintenance of
liquidity
- -------------------------------------------------------
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
- -------------------------------------------------------------------------------
Fidelity VIP Long-term capital
Contrafund appreciation
- -------------------------------------------------------
Fidelity VIP Reasonable income FIDELITY MANAGEMENT &
Equity-Income RESEARCH COMPANY
Portfolio
- -------------------------------------------------------
Fidelity VIP Growth Capital appreciation
Portfolio
- -------------------------------------------------------
Fidelity VIP High High level of current income ------------------------
Income Portfolio while also considering growth
of capital
- -------------------------------------------------------
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (VIP) -- CLASS 2
- -------------------------------------------------------------------------------
Franklin Small Cap Long-term capital growth FRANKLIN ADVISERS,
Fund INC.
- -------------------------------------------------------------------------------
Mutual Shares Capital appreciation. FRANKLIN MUTUAL
Securities Fund Secondary goal is income ADVISERS, LLC.
- -------------------------------------------------------------------------------
Templeton Developing Long-term capital TEMPLETON ASSET
Markets Securities appreciation MANAGEMENT LTD
Fund
- -------------------------------------------------------------------------------
Templeton Growth Long-term capital growth TEMPLETON GLOBAL
Securities Fund ADVISORS LIMITED
- -------------------------------------------------------------------------------
Templeton Long-term capital growth TEMPLETON INVESTMENT
International Securities Fund COUNSEL, LLC
- -------------------------------------------------------------------------------
GOLDMAN SACHS VARIABLE INSURANCE TRUST (VIT)
- -------------------------------------------------------------------------------
Goldman Sachs VIT Long-term growth of capital
Capital Growth Fund
- ------------------------------------------------------- GOLDMAN SACHS ASSET
Goldman Sachs VIT Long-term growth of capital MANAGEMENT
CORE/SM/ Small Cap
Equity Fund
- -------------------------------------------------------
Goldman Sachs VIT Long-term growth of capital
CORE/SM/ U.S. Equity and dividend income ------------------------
Fund
- -------------------------------------------------------
Goldman Sachs VIT Long-term capital GOLDMAN SACHS ASSET
International Equity appreciation MANAGEMENT
Fund INTERNATIONAL
- -------------------------------------------------------------------------------
MFS(R) VARIABLE INSURANCE TRUST/SM/
- -------------------------------------------------------------------------------
MFS Emerging Growth Long-term growth of capital
Series
- -------------------------------------------------------
MFS Investors Trust Long-term growth of capital MFS INVESTMENT
Series with a secondary objective to MANAGEMENT(R)
seek reasonable current
income
- -------------------------------------------------------
MFS New Discovery Capital appreciation
Series
- -------------------------------------------------------------------------------
MFS Research Series Long-term growth of capital
and future income
- -------------------------------------------------------
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
- -------------------------------------------------------------------------------
Van Kampen UIF Equity Long-term capital
Growth Portfolio appreciation
- -------------------------------------------------------
Van Kampen UIF Fixed Above-average total return MORGAN STANLEY ASSET
Income Portfolio over a market cycle of three MANAGEMENT
to five years
- -------------------------------------------------------
Van Kampen UIF Global Long-term capital
Equity Portfolio appreciation
- -------------------------------------------------------
Van Kampen UIF Mid Cap Above-average total return ------------------------
Value Portfolio over a market cycle of three
to five years
- -------------------------------------------------------
Van Kampen UIF Value Above-average total return MILLER ANDERSON &
Portfolio over a market cycle of three SHERRERD, LLP
to five years
- -------------------------------------------------------------------------------
OPPENHEIMER VARIABLE ACCOUNT FUNDS
- -------------------------------------------------------------------------------
Oppenheimer Aggressive Capital appreciation
Growth Fund/VA
- -------------------------------------------------------
Oppenheimer Capital Capital appreciation
Appreciation Fund/VA
- ------------------------------------------------------- OPPENHEIMER FUNDS,
Oppenheimer Global Long-term capital INC.
Securities Fund/VA appreciation
- -------------------------------------------------------
Oppenheimer Main High total return, which
Street Growth & Income includes growth in the value
Fund/VA of its shares as well as
current income, from equity
and debt securities ------------------------
- -------------------------------------------------------
Oppenheimer Strategic High level of current income
Bond Fund/VA
- -------------------------------------------------------
*
17
*A portfolio's investment objective may be changed by the Fund's Board of
Trustees without shareholders approval
**Effective May 1, 2002 AIM V.I. Growth and Income Fund, AIM V.I. International
Equity Fund and AIM V.I. Value Fund changed their names to the AIM V.I. Core
Equity Fund, AIM V.I. International Growth Fund and AIM V.I. Premier Equity
Fund, respectively.
AMOUNTS YOU ALLOCATE TO VARIABLE SUB-ACCOUNTS MAY GROW IN VALUE, DECLINE IN
VALUE, OR GROW LESS THAN YOU EXPECT, DEPENDING ON THE INVESTMENT PERFORMANCE OF
THE PORTFOLIOS IN WHICH THOSE VARIABLE SUB-ACCOUNTS INVEST. YOU BEAR THE
INVESTMENT RISK THAT THE PORTFOLIOS MIGHT NOT MEET THEIR INVESTMENT OBJECTIVES.
SHARES OF THE PORTFOLIOS ARE NOT DEPOSITS, OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
VARIABLE INSURANCE PORTFOLIOS MAY NOT BE MANAGED BY THE SAME PORTFOLIO MANAGERS
WHO MANAGE RETAIL MUTUAL FUNDS WITH SIMILAR NAMES. THESE PORTFOLIOS ARE LIKELY
TO DIFFER FROM SIMILARLY NAMED RETAIL FUNDS IN ASSETS, CASH FLOW AND TAX
MATTERS. ACCORDINGLY, THE HOLDINGS AND INVESTMENT RESULTS OF A VARIABLE
INSURANCE PORTFOLIO CAN BE
18
EXPECTED TO BE GREATER OR LESS THAN THE INVESTMENT RESULTS OF SIMILARLY NAMED
RETAIL MUTUAL FUNDS.
19
INVESTMENT ALTERNATIVES: THE FIXED ACCOUNT OPTIONS
- --------------------------------------------------------------------------------
You may allocate all or a portion of your purchase payments to the Fixed
Account. You may choose from among 3 Fixed Account Options: 2 dollar cost
averaging options, and the option to invest in one or more Guarantee Periods
included in the Guaranteed Maturity Fixed Account. The Fixed Account Options may
not be available in all states. Please consult with your representative for
current information. The Fixed Account supports our insurance and annuity
obligations. The Fixed Account consists of our general assets other than those
in segregated asset accounts. We have sole discretion to invest the assets of
the Fixed Account, subject to applicable law. Any money you allocate to a Fixed
Account Option does not entitle you to share in the investment experience of the
Fixed Account.
DOLLAR COST AVERAGING FIXED ACCOUNT OPTIONS
DOLLAR COST AVERAGING FIXED ACCOUNT OPTION. Purchase payments that you allocate
to the Dollar Cost Averaging Fixed Account Option ("DCA Fixed Account Option")
will earn interest for a one year period at the current rate in effect at the
time of allocation. We will credit interest daily at a rate that will compound
over the year to the annual interest rate we guaranteed at the time of
allocation. After the one year period, we will declare a renewal rate which we
guarantee for a full year. Subsequent renewal dates will be every twelve months
for each payment or transfer.
For each purchase payment, the first transfer from the DCA Fixed Account must
occur within one month of the date of payment. If we do not receive an
allocation from you within one month of the date of payment, the payment plus
associated interest will be transferred to the money market Sub-Account in equal
monthly installments using the longest transfer period being offered at the time
the purchase payment is made. Transferring Account Value to the money market
Variable Sub-Account in this manner may not be consistent with the theory of
dollar cost averaging described on page __.
We will follow your instructions in transferring amounts monthly from the DCA
Fixed Account. However, you may not choose less than 3 or more than 36 monthly
installments. Further, you must transfer each purchase payment and all its
earnings out of this Option by means of dollar cost averaging within 36 months
of payment. At the end of 36 months, any nominal amounts remaining in this
option will be allocated to the money market Variable Sub-Account. No transfers
are permitted into the DCA Fixed Account.
SHORT TERM DOLLAR COST AVERAGING FIXED ACCOUNT OPTION. You may establish a Short
Term Dollar Cost Averaging Program by allocating purchase payments to the Short
Term Dollar Cost Averaging Fixed Account Option ("Short Term DCA Fixed Account
Option"). We will credit interest to purchase payments you allocate to this
Option for up to one year at the current rate in effect at the time of
allocation.
For each purchase payment, the first transfer from the Short Term DCA Fixed
Account must occur within one month of the date of payment. If we do not receive
an allocation from you within one month of the date of payment, the payment plus
associated interest will be transferred to the money market Sub-Account in equal
monthly installments using the longest transfer period being offered at the time
the purchase payment is made. Transferring Account Value to the money market
Variable Sub-Account in this manner may not be consistent with the theory of
dollar cost averaging described on page __.
You must transfer each purchase payment and all its earnings out of this Option
by means of dollar cost averaging within 12 months. At the end of the transfer
period, any nominal amounts remaining in the Short Term DCA Fixed Account will
be allocated to the money market Variable Sub-Account. If you discontinue the
Short Term DCA Fixed Account Option before the end of the transfer period, we
will transfer the remaining balance in the Short Term DCA Fixed Account to the
money market Variable Sub-Account unless you request a different investment
alternative. No transfers are permitted into the Short Term Dollar Cost
Averaging Fixed Account.
We bear the investment risk for all amounts allocated to the DCA Fixed Account
Option and the Short Term DCA Fixed Account Option. That is because we guarantee
the current and renewal interest rates we credit to the amounts you allocate to
either of these Options, which will never be less than the minimum guaranteed
rate in the Contract. Currently, we determine, in our sole discretion, the
amount of interest credited in excess of the guaranteed rate. We may declare
more than one interest rate for different monies based upon the date of
allocation to the DCA Fixed Account Option and the Short Term DCA Fixed Account
Option. For current interest rate information, please contact your
representative or GLENBROOK LIFE customer service at 1-800-755-5275.
GUARANTEE PERIODS
Each payment or transfer allocated to a Guarantee Period earns interest at a
specified rate that we guarantee for a period of years. Guarantee Periods may
range from 1 to 10 years. We are currently offering Guarantee Periods of 1, 3,
5, 7, and 10 years in length. In the future we may offer Guarantee Periods of
different lengths or stop offering some Guarantee Periods.
You select the Guarantee Period for each payment or transfer. If you do not
select a Guarantee Period, we will assign the same period(s) you selected for
your most
20
recent purchase payment(s). Each payment or transfer allocated to a Guarantee
Period must be at least $50. We reserve the right to limit the number of
additional purchase payments that you may allocate to this Option.
INTEREST RATES. We will tell you what interest rates and Guarantee Periods we
are offering at a particular time. We will not change the interest rate that we
credit to a particular allocation until the end of the relevant Guarantee
Period. We may declare different interest rates for Guarantee Periods of the
same length that begin at different times.
We have no specific formula for determining the rate of interest that we will
declare initially or in the future. We will set those interest rates based on
investment returns available at the time of the determination. In addition, we
may consider various other factors in determining interest rates including
regulatory and tax requirements, our sales commission and administrative
expenses, general economic trends, and competitive factors.
WE DETERMINE THE INTEREST RATES TO BE DECLARED IN OUR SOLE DISCRETION. WE CAN
NEITHER PREDICT NOR GUARANTEE WHAT THOSE RATES WILL BE IN THE FUTURE. For
current interest rate information, please contact your representative or
GLENBROOK LIFE at 1-800-755-5275.
HOW WE CREDIT INTEREST. We will credit interest daily to each amount allocated
to a Guarantee Period at a rate that compounds to the annual interest rate that
we declared at the beginning of the applicable Guarantee Period.
THE FOLLOWING EXAMPLE ILLUSTRATES HOW A PURCHASE PAYMENT ALLOCATED TO A
GUARANTEED PERIOD WOULD GROW, GIVEN AN ASSUMED GUARANTEE PERIOD AND ANNUAL
INTEREST RATE:
Purchase Payment.................................................... $10,000
Guarantee Period.................................................... 5 years
Annual Interest Rate................................................ 4.50%
END OF CONTRACT YEAR
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
---------- ---------- ---------- ---------- ------------
Beginning Contract $10,000.00
Value................
X (1 + Annual
Interest Rate) 1.045
----------
$10,450.00
Contract Value at end $10,450.00
of Contract Year.....
X (1 + Annual
Interest Rate) 1.045
----------
$10,920.25
Contract Value at end $10,920.25
of Contract Year.....
X (1 + Annual
Interest Rate) 1.045
----------
$11,411.66
Contract Value at end $11,411.66
of Contract Year.....
X (1 + Annual
Interest Rate) 1.045
----------
$11,925.19
Contract Value at end $11,925.19
of Contract Year.....
X (1 + Annual
Interest Rate) 1.045
-----------
$12,461.82
TOTAL INTEREST CREDITED DURING GUARANTEE PERIOD = $2,461.82 ($12,461.82-$10,000)
This example assumes no withdrawals during the entire 5-year Guarantee Period.
If you were to make a withdrawal, you may be required to pay a withdrawal
charge. In addition, the amount withdrawn may be increased or decreased by a
Market Value Adjustment that reflects changes in interest rates since the time
you invested the amount withdrawn. The hypothetical interest rate is for
illustrative purposes only and is not intended to predict future interest rates
to be declared under the Contract. Actual interest rates declared for any given
Guarantee Period may be more or less than shown above.
RENEWALS. Prior to the end of each Guarantee Period, we will mail you a notice
asking you what to do with your money, including the accrued interest. During
the 30-day period after the end of the Guarantee Period, you may:
1) Take no action. We will automatically apply your money to a new Guarantee
Period of the same length as the expiring Guarantee Period. The new Guarantee
Period will begin on the day the previous Guarantee Period ends. The new
interest rate will be our current declared rate for a Guarantee Period of that
length; or
2) Instruct us to apply your money to one or more new Guarantee Periods of your
choice. The new Guarantee Period(s) will begin on the day the previous
Guarantee Period ends. The new interest rate will be our then current declared
rate for those Guarantee Periods;
21
3) Instruct us to transfer all or a portion of your money to one or more
Variable Sub-Accounts of the Variable Account. We will effect the transfer on
the day we receive your instructions. We will not adjust the amount
transferred to include a Market Value Adjustment; we will pay interest from
the day the Guarantee Period expired until the date of the transfer. The
interest will be the rate for the shortest Guarantee Period then being
offered; or
4) Withdraw all or a portion of your money. You may be required to pay a
withdrawal charge, but we will not adjust the amount withdrawn to include a
Market Value Adjustment. You may also be required to pay premium taxes and
income tax withholding, if applicable. We will pay interest from the day the
Guarantee Period expired until the date of withdrawal. The interest will be
the rate for the shortest Guarantee Period then being offered. Amounts not
withdrawn will be applied to a new Guarantee Period of the same length as the
previous Guarantee Period. The new Guarantee Period will begin on the day the
previous Guarantee Period ends. Withdrawals of as earnings are taxed as
ordinary income and, if taken prior to age 59 /1/2,/ may be subject to an
additional 10% federal tax penalty.
MARKET VALUE ADJUSTMENT. All withdrawals and transfers from a Guarantee Period,
other than those taken during the 30 day period after such Guarantee Period
expires, are subject to a Market Value Adjustment. A Market Value Adjustment
also may apply upon payment of a death benefit and when you apply amounts
currently invested in a Guarantee Period to an Income Plan (unless paid or
applied during the 30-day period after such Guarantee Period expires). We also
will not apply a Market Value Adjustment to a withdrawal you make:
... within the Free Withdrawal Amount as described on page___
... that qualify for one of the waivers as described on page___
... to satisfy the IRS minimum distribution rules for the Contract, or
... a single withdrawal made by a surviving spouse made within one year after
continuing the Contract.
We apply the Market Value Adjustment to reflect changes in interest rates from
the time you first allocate money to a Guarantee Period to the time you remove
it from that Guarantee Period. We calculate the Market Value Adjustment by
comparing the Treasury Rate for a period equal to the Guarantee Period at its
inception to the Treasury Rate for a period equal to the Guarantee Period when
you remove your money. "TREASURY RATE" means the U.S. Treasury Note Constant
Maturity Yield as reported in Federal Reserve Bulletin Release H.15.
The Market Value Adjustment may be positive or negative, depending on changes in
interest rates. As such, you bear the investment risk associated with changes in
interest rates. If interest rates increase significantly, the Market Value
Adjustment and any withdrawal charge, premium taxes, and income tax withholding
(if applicable) could reduce the amount you receive upon full withdrawal from a
Guaranteed Period to an amount that is less than the purchase payment applied to
that period plus interest earned under the Contract.
Generally, if the original Treasury Rate at the time you allocate money to a
Guarantee Period is higher than the applicable current Treasury Rate for a
period equal to the Guarantee Period, then the Market Value Adjustment will
result in a higher amount payable to you, transferred or applied to an Income
Plan. Conversely, if the Treasury Rate at the time you allocate money to a
Guarantee Period is lower than the applicable Treasury Rate for a period equal
to the Guarantee Period, then the Market Value Adjustment will result in a lower
amount payable to you, transferred or applied to an Income Plan.
For example, assume that you purchase a Contract and you select an initial
Guarantee Period of 5 years and the 5-year Treasury Rate for that duration is
4.50%. Assume that at the end of 3 years, you make a partial withdrawal. If, at
that later time, the current 5-year Treasury Rate is 4.20%, then the Market
Value Adjustment will be positive, which will result in an increase in the
amount payable to you. Conversely, if the current 5-year Treasury Rate is 4.80%,
then the Market Value Adjustment will be negative, which will result in a
decrease in the amount payable to you.
The formula for calculating Market Value Adjustments is set forth in Appendix B
to this prospectus, which also contains additional examples of the application
of the Market Value Adjustment.
INVESTMENT ALTERNATIVES: TRANSFERS
- --------------------------------------------------------------------------------
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase, you may transfer Contract Value among the
investment alternatives. You may not transfer Contract Value to either the
Short-Term Dollar Cost Averaging Fixed Account or the Dollar Cost Averaging
Fixed Account Options. You may request transfers in writing on a form that we
provided or by telephone according to the procedure described below. The minimum
amount that you may transfer into a Guarantee Period is $50. We currently do not
assess, but reserve the right to assess, a $10 charge on each transfer in excess
of 12 per Contract Year. All transfers to or from more than one Portfolio on any
given day counts as one transfer.
22
We will process transfer requests that we receive before 3:00 p.m. Central Time
on any Valuation Date using the Accumulation Unit Values for that Date. We will
process requests completed after 3:00 p.m. Central Time on any Valuation Date
using the Accumulation Unit Values for the next Valuation Date. The Contract
permits us to defer transfers from the Fixed Account for up to six months from
the date we receive your request. If we decide to postpone transfers for 30 days
or more, we will pay interest as required by applicable law. Any interest would
be payable from the date we receive the transfer request to the date we make the
transfer.
If you transfer an amount from a Guarantee Period other than during the 30 day
period after such Guarantee Period expires, we will increase or decrease the
amount by a Market Value Adjustment.
We reserve the right to waive any transfer restrictions.
TRANSFERS DURING THE PAYOUT PHASE
During the Payout Phase, you may make transfers among the Variable Sub-Accounts
so as to change the relative weighting of the Variable Sub-Accounts on which
your variable income payments will be based. In addition, you will have a
limited ability to make transfers from the Variable Sub-Accounts to increase the
proportion of your income payments consisting of fixed income payments. You may
not, however, convert any portion of your right to receive fixed income payments
into variable income payments. If you choose an Income Plan that depends on any
person's life, you may not make any transfers for the first 6 months after the
Payout Start Date. Thereafter, you may make transfers among the Variable
Sub-Accounts or make transfers from the Variable Sub-Accounts to increase the
proportion of your income payments consisting of fixed income payments. Your
transfers must be at least 6 months apart.
TELEPHONE TRANSFERS
You may make transfers by telephone by calling 1-800-755-5275. The cut-off time
for telephone transfer requests is 3:00 p.m. Central Time. In the event that the
New York Stock Exchange closes early, i.e., before 3:00 p.m. Central Time, or in
the event that the Exchange closes early for a period of time but then reopens
for trading on the same day, we will process telephone transfer requests as of
the close of the Exchange on that particular day. We will not accept telephone
requests received at any telephone number other than the number that appears in
this paragraph or received after the close of trading on the Exchange.
We may suspend, modify or terminate the telephone transfer privilege at any time
without notice.
We use procedures that we believe provide reasonable assurance that the
telephone transfers are genuine. For example, we tape telephone conversations
with persons purporting to authorize transfers and request identifying
information. Accordingly, we disclaim any liability for losses resulting from
allegedly unauthorized telephone transfers. However, if we do not take
reasonable steps to help ensure that a telephone authorization is valid, we may
be liable for such losses.
DOLLAR COST AVERAGING PROGRAM
Through our Dollar Cost Averaging Program, you may automatically transfer a
fixed dollar amount every month during the Accumulation Phase from the Short
Term DCA Fixed Account or the DCA Fixed Account, to any Variable Sub-Account.
You may not use the Dollar Cost Averaging Program to transfer amounts to the
Guarantee Periods.
We will not charge a transfer fee for transfers made under this Program, nor
will such transfer count against the 12 transfers you can make each Contract
Year without paying a transfer fee.
The theory of dollar cost averaging is that if purchases of equal dollar
amounts are made at fluctuating prices, the aggregate average cost per unit will
be less than the average of the unit prices on the same purchase dates. However,
participation in this Program does not assure you of a greater profit from your
purchases under the Program nor will it prevent or necessarily reduce losses in
a declining market. Call or write us for instructions on how to enroll.
AUTOMATIC PORTFOLIO REBALANCING PROGRAM
Once you have allocated your money among the Variable Sub-Accounts, the
performance of each Variable Sub-Account may cause a shift in the percentage you
allocated to each Variable Sub-Account. If you select our Automatic Portfolio
Rebalancing Program, we will automatically rebalance the Contract Value in each
Variable Sub-Account and return it to the desired percentage allocations. We
will not include money you allocate to the Fixed Account Options in the
Automatic Portfolio Rebalancing Program.
We will rebalance your account each quarter according to your instructions. We
will transfer amounts among the Variable Sub-Accounts to achieve the percentage
allocations you specify. You can change your allocations at any time by
contacting us in writing or by telephone. The new allocation will be effective
with the first rebalancing that occurs after we receive your request. We are not
responsible for rebalancing that occurs prior to receipt of your request.
Example:
Assume that you want your initial purchase payment split among 2 Variable
Sub-Accounts. You want 40% to be in the Fidelity VIP High Income Variable
Sub-Account and 60% to be in the AIM V.I. Growth Variable Sub-Account. Over
the next 2 months the bond market does very well while the stock market
performs poorly. At the end of the first quarter, the Fidelity VIP High Income
Variable Sub-Account
23
now represents 50% of your holdings because of its increase in value. If you
choose to have your holdings rebalanced quarterly, on the first day of the
next quarter, we would sell some of your units in the Fidelity VIP High Income
Variable Sub-Account and use the money to buy more units in the AIM V.I.
Growth Variable Sub-Account so that the percentage allocations would again be
40% and 60% respectively.
The Automatic Portfolio Rebalancing Program is available only during the
Accumulation Phase. The transfers made under the Program do not count towards
the 12 transfers you can make without paying a transfer fee, and are not subject
to a transfer fee. Portfolio rebalancing is consistent with maintaining your
allocation of investments among market segments, although it is accomplished by
reducing your Contract Value allocated to the better performing segments.
EXPENSES
- --------------------------------------------------------------------------------
As a Contract Owner, you will bear, directly or indirectly, the charges and
expenses described below.
CONTRACT MAINTENANCE CHARGE
During the Accumulation Phase, on each Contract Anniversary, we will deduct a
$35 contract maintenance charge from your Contract Value invested in each
Variable Sub-Account in proportion to the amount invested. If you surrender your
Contract, we will deduct the contract maintenance charge pro rated for the part
of the Contract Year elapsed, unless your Contract qualifies for a waiver,
described below.
The charge is to compensate us for the cost of administering the Contracts and
the Variable Account. Maintenance costs include expenses we incur collecting
purchase payments; keeping records; processing death claims, cash withdrawals,
and policy changes; proxy statements; calculating Accumulation Unit Values and
income payments; and issuing reports to Contract Owners and regulatory agencies.
We cannot increase the charge. However, we will waive this charge if, as of the
Contract Anniversary or upon full surrender:
... total purchase payments equal $50,000 or more, or
... all money is allocated to the Fixed Account.
In addition, we will waive the Contract Maintenance Charge if total purchase
payments are $50,000 or more as of the Payout Start Date.
MORTALITY AND EXPENSE RISK CHARGE
We deduct a mortality and expense risk charge daily at an annual rate of 1.05%
of the average daily net assets you have invested in the Variable Sub-Accounts
(1.27% if you select the Enhanced Death Benefit Rider, 1.49% if you selected the
Enhanced Death and Income Combination Rider, and 1.55% if you select the
Enhanced Death and Income Benefit Combination Rider II). The mortality and
expense risk charge is for all the insurance benefits available with your
Contract (including our guarantee of annuity rates and the death benefits), for
certain expenses of the Contract, and for assuming the risk (expense risk) that
the current charges will be sufficient in the future to cover the cost of
administering the Contract. If the charges under the Contract are not
sufficient, then we will bear the loss. We charge an additional amount for the
Enhanced Death Benefit Rider, the Enhanced Death and Income Benefit Combination
Rider and the Enhanced Death and Income Benefit Combination Rider II to
compensate us for the additional risk that we accept by providing these options.
We guarantee that we will not raise the mortality and expense risk charge. We
assess the mortality and expense risk charge during both the Accumulation Phase
and the Payout Phase.
ADMINISTRATIVE EXPENSE CHARGE
We deduct an administrative expense charge daily at an annual rate of 0.10% of
the average daily net assets you have invested in the Variable Sub-Accounts. We
intend this charge to cover actual administrative expenses that exceed the
revenues from the contract maintenance charge. There is no necessary
relationship between the amount of administrative charge imposed on a given
Contract and the amount of expenses that may be attributed to that Contract. We
assess this charge each day during the Accumulation Phase and the Payout Phase.
We guarantee that we will not raise this charge.
TRANSFER FEE
We do not currently impose a fee upon transfers among the investment
alternatives. However, we reserve the right to charge $10 per transfer after the
12th transfer in each Contract Year. We will not charge a transfer fee on
---
transfers that are part of a Dollar Cost Averaging or Automatic Portfolio
Rebalancing Program.
WITHDRAWAL CHARGE
We may assess a withdrawal charge of up to 6% of the purchase payment(s) you
withdraw. The charge declines to 0% over a 6 year period that begins on the day
we receive your payment. A schedule showing how the charge declines is shown on
page ___. During each Contract Year, you can withdraw up to 15% of the aggregate
amount of your purchase payments without paying the charge. Unused portions of
this "FREE WITHDRAWAL AMOUNT" are not carried forward to future Contract Years.
---
We will deduct withdrawal charges, if applicable, from the amount paid. For
purposes of calculating the withdrawal charge, we will treat withdrawals as
coming from the oldest purchase payments first. However, for federal income tax
purposes, please note that withdrawals are considered to have come first from
earnings, which means you pay taxes on the earnings portion of your withdrawal.
We do not apply a
24
withdrawal charge in the following situations:
... on the Payout Start Date (a withdrawal charge may apply if you terminate
income payments to be received for a specified period;
... withdrawals taken to satisfy IRS minimum distribution rules for the Contract;
or
... withdrawals that qualify for one of the waivers as described below.
We use the amounts obtained from the withdrawal charge to pay sales commissions
and other promotional or distribution expenses associated with marketing the
Contracts. To the extent that the withdrawal charge does not cover all sales
commissions and other promotional or distribution expenses, we may use any of
our corporate assets, including potential profit which may arise from the
mortality and expense risk charge or any other charges or fee described above,
to make up any difference. Withdrawals of earnings are taxed as ordinary income
and, if taken prior to age 59 /1/2,/ may be subject to an additional 10% federal
tax penalty and a Market Value Adjustment. You should consult your own tax
counsel or other tax advisers regarding any withdrawals.
CONFINEMENT WAIVER. We will waive the withdrawal charge and any Market Value
Adjustment on all withdrawals taken prior to the Payout Start Date under your
Contract if the following conditions are satisfied:
1. You or the Annuitant, if the Contract Owner is not a natural person, are
confined to a long term care facility or a hospital for at least 90 consecutive
days. You or the Annuitant must enter the long term care facility or hospital at
least 30 days after the Issue Date;
2. You request the withdrawal and provide written proof of the stay no later
than 90 days following the end of your or the Annuitant's stay at the long term
care facility or hospital; and
3. A physician must have prescribed the stay and the stay must be medically
necessary (as defined in the Contract).
You may not claim this benefit if you, the Annuitant, or a member of your or the
Annuitant's immediate family, is the physician prescribing your or the
Annuitant's stay in a long term care facility.
TERMINAL ILLNESS WAIVER. We will waive the withdrawal charge and any Market
Value Adjustment on all withdrawals taken prior to the Payout Start Date under
your Contract if:
1. you or the Annuitant (if the Contract Owner is not a natural person) are
first diagnosed with a terminal illness at least 30 days after the Issue Date;
and
2. you claim this benefit and deliver adequate proof of diagnosis to us.
UNEMPLOYMENT WAIVER. We will waive the withdrawal charge and any Market Value
Adjustment on one partial or a full withdrawal taken prior to the Payout Start
Date under your Contract, if you meet the following requirements:
1. you or the Annuitant, if the Contract Owner is not a natural person, become
unemployed at least one year after the Issue Date;
2. you or the Annuitant, if the Contract Owner is not a natural person, receive
unemployment compensation as defined in the Contract for at least 30 days as a
result of that unemployment; and
3. you or the Annuitant, if the Contract Owner is not a natural person, claim
this benefit within 180 days of your or the Annuitant's initial receipt of
unemployment compensation.
Please refer to your Contract for more detailed information about the terms and
conditions of these waivers. The laws of your state may limit the availability
of these waivers and may also change certain terms and/or benefits available
under the waivers. You should consult your Contract for further details on these
variations. Also, even if you do not need to pay our withdrawal charge or a
Market Value Adjustment because of these waivers, you still may be required to
pay taxes or tax penalties on the amount withdrawn. You should consult your tax
adviser to determine the effect of a withdrawal on your taxes.
PREMIUM TAXES
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. We are responsible for paying these taxes and
will deduct them from your Contract Value. Some of these taxes are due when the
Contract is issued, others are due when income payments begin or upon surrender.
Our current practice is not to charge anyone for these taxes until income
payments begin or when a total withdrawal occurs, including payment upon death.
At our discretion, we may discontinue this practice and deduct premium taxes
from the purchase payments. Premium taxes generally range from 0% to 4%,
depending on the state.
At the Payout Start Date, if applicable, we deduct the charge for premium taxes
from each investment alternative in the proportion that the Contract Owner's
value in the investment alternative bears to the total Contract Value.
DEDUCTION FOR SEPARATE ACCOUNT INCOME TAXES
We are not currently maintaining a provision for such taxes. In the future,
however, we may establish a provision for taxes if we determine, in our sole
discretion, that we will incur a tax as a result of the operation of the
Variable Account. We will deduct for any taxes we incur as a result of the
operation of the Variable Account, whether or not we previously made a provision
for taxes and whether or not it was sufficient. Our status under the Internal
Revenue Code is briefly described in the "Taxes" Section beginning on page___.
25
OTHER EXPENSES
Each Portfolio deducts advisory fees and other expenses from its assets. You
indirectly bear the charges and expenses of the Portfolios whose shares are held
by the Variable Sub-Accounts. These fees and expenses are described in the
accompanying prospectuses for the Portfolios. For a summary of current estimates
of those charges and expenses, see page . We may receive compensation from the
investment advisers or administrators of the Portfolios in connection with the
administrative services we provide to the Portfolios.
ACCESS TO YOUR MONEY
- --------------------------------------------------------------------------------
You can withdraw some or all of your Contract Value at any time prior to the
Payout Start Date. The amount payable upon withdrawal is the Contract Value (or
portion thereof) next computed after we receive the request for a withdrawal at
our home office, adjusted by any Market Value Adjustment, less any withdrawal
charges, contract maintenance charges, income tax withholding, penalty tax, and
any premium taxes. We will pay withdrawals from the Variable Account within 7
days of receipt of the request, subject to postponement in certain
circumstances. You can withdraw money from the Variable Account or the Fixed
Account Options. To complete a partial withdrawal from the Variable Account, we
will cancel Accumulation Units in an amount equal to the withdrawal and any
applicable withdrawal charge and premium taxes. You must name the investment
alternative from which you are taking the withdrawal. If none is named, then the
withdrawal request is incomplete and cannot be honored. In general, you must
withdraw at least $50 at a time. You also may withdraw a lesser amount if you
are withdrawing your entire interest in a Variable Sub-Account. If you request a
total withdrawal, we may require you to return your Contract to us. Withdrawals
of earnings are taxed as ordinary income and, if taken prior to age 591/2, may
be subject to an additional 10% federal tax penalty.
POSTPONEMENT OF PAYMENTS
We may postpone the payment of any amounts due from the Variable Account under
the Contract if:
1. The New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on the Exchange is otherwise restricted;
2. An emergency exists as defined by the SEC; or
3. The SEC permits delay for your protection.
In addition, we may delay payments or transfers from the Fixed Account Options
for up to 6 months (or shorter period if required by law). If we delay payment
for 30 days or more, we will pay interest as required by law.
SYSTEMATIC WITHDRAWAL PROGRAM
You may choose to receive systematic withdrawal payments on a monthly,
quarterly, semi-annual, or annual basis at any time prior to the Payout Start
Date. The minimum amount of each systematic withdrawal is $50. At our
discretion, systematic withdrawals may not be offered in conjunction with the
Dollar Cost Averaging Program or Automatic Portfolio Rebalancing Program.
Depending on fluctuations in the value of the Variable Sub-Accounts and the
value of the Fixed Account Options, systematic withdrawals may reduce or even
exhaust the Contract Value. Withdrawals of earnings are taxed as ordinary income
and, if taken prior to age 59/1/2/, may be subject to an additional 10% federal
tax penalty. Please consult your tax advisor before taking any withdrawal.
We will make systematic withdrawal payments to you or your designated payee. At
our discretion, we may modify or suspend the Systematic Withdrawal Program and
charge a processing fee for the service. If we modify or suspend the Systematic
Withdrawal Program, existing systematic withdrawal payments will not be
affected.
MINIMUM CONTRACT VALUE
If your request for a partial withdrawal would reduce your Contract Value to
less than $1,000, we may treat it as a request to withdraw your entire Contract
Value. Your Contract will terminate if you withdraw all of your Contract Value.
We will, however, ask you to confirm your withdrawal request before terminating
your Contract. Before terminating any Contract whose value has been previously
reduced by withdrawals to less than $2,000, we will inform you in writing of our
intention to terminate your Contract and give you at least 30 days in which to
make an additional purchase payment to restore your Contract's value to the
contractual minimum of $2,000. If we terminate your Contract, we will distribute
to you its Contract Value, adjusted by any applicable Market Value Adjustment,
less withdrawal and other charges and applicable taxes.
26
INCOME PAYMENTS
- --------------------------------------------------------------------------------
PAYOUT START DATE
You select the Payout Start Date in your application. The "PAYOUT START DATE" is
the day that we apply your money to an Income Plan. The Payout Start Date must
be:
... at least 30 days after the Issue Date; and
... no later than the day the Annuitant reaches age 90, or the 10th Contract
Anniversary, if later.
You may change the Payout Start Date at any time by notifying us in writing of
the change at least 30 days before the scheduled Payout Start Date. Absent a
change, we will use the Payout Start Date stated in your Contract.
INCOME PLANS
An Income Plan is a series of scheduled payments to you or someone you
designate. You may choose and change your choice of Income Plan until 30 days
before the Payout Start Date. If you do not select an Income Plan, we will make
income payments in accordance with Income Plan 1 with guaranteed payments for 10
years. Three Income Plans are available under the Contract. Each is available to
provide:
... fixed income payments;
... variable income payments; or
... a combination of the two.
The three Income Plans are:
INCOME PLAN 1 - LIFE INCOME WITH GUARANTEED PAYMENTS. Under this plan, we make
periodic income payments for at least as long as the Annuitant lives. If the
Annuitant dies before we have made all of the guaranteed income payments, we
will continue to pay the remainder of the guaranteed income payments as required
by the Contract.
INCOME PLAN 2 - JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED PAYMENTS. Under
this plan, we make periodic income payments for at least as long as either the
Annuitant or the joint Annuitant is alive. If both the Annuitant and the joint
Annuitant die before we have made all of the guaranteed income payments, we will
continue to pay the remainder of the guaranteed income payments as required by
the Contract.
INCOME PLAN 3 - GUARANTEED PAYMENTS FOR A SPECIFIED PERIOD (5 YEARS TO 30
YEARS). Under this plan, we make periodic income payments for the period you
have chosen. These payments do not depend on the Annuitant's life. You may elect
to receive guaranteed payments for periods ranging from 5 to 30 years. Income
payments for less than 120 months may be subject to a withdrawal charge. We will
deduct the mortality and expense risk charge from the Variable Sub-Account
assets that support variable income payments even though we may not bear any
mortality risk.
The length of any guaranteed payment period under your selected Income Plan
generally will affect the dollar amounts of each income payment. As a general
rule, longer guarantee periods result in lower income payments, all other things
being equal. For example, if you choose an Income Plan with payments that depend
on the life of the Annuitant but with no minimum specified period for guaranteed
payments, the income payments generally will be greater than the income payments
made under the same Income Plan with a minimum specified period for guaranteed
payments. If you choose Income Plan 1 or 2, or, if available, another Income
Plan with payments that continue for the life of the Annuitant or joint
Annuitant, we may require proof of age and sex of the Annuitant or joint
Annuitant before starting income payments, and proof that the Annuitant or joint
Annuitant are alive before we make each payment.
Please note that under such Income Plans, if you elect to take no minimum
guaranteed payments, it is possible that the payee could receive only 1 income
payment if the Annuitant and any joint Annuitant both die before the second
income payment, or only 2 income payments if they die before the third income
payment, and so on.
Generally, you may not make withdrawals after the Payout Start Date. One
exception to this rule applies if you are receiving variable income payments
that do not depend on the life of the Annuitant (such as under Income Plan 3).
In that case you may terminate all or part of the Variable Account portion of
the income payments at any time and receive a lump sum equal to the present
value of the remaining variable payments associated with the amount withdrawn.
The minimum amount you may withdraw under this feature is $1,000. A withdrawal
charge may apply. We deduct applicable premium taxes from the Contract Value at
the Payout Start Date.
We may make other Income Plans available.
If you elected the Enhanced Death and Income Benefit Combination Rider or the
Enhanced Death and Income Benefit Combination Rider II, you may be able to apply
an amount greater than your Contract Value to an Income Plan. You must apply at
least the Contract Value in the Fixed Account on the Payout Start Date to fixed
income payments. If you wish to apply any portion of your Fixed Account balance
to provide variable income payments, you should plan ahead and transfer that
amount to the Variable Sub-Accounts prior to the Payout Start Date. If you do
not tell us how to allocate your Contract Value among fixed and variable income
payments, we will apply your Contract Value in the Variable Account to variable
income payments and your Contract Value in the Fixed Account to fixed income
payments. We will apply your Contract Value, adjusted by any applicable Market
Value Adjustment, less applicable taxes to your Income Plan on the Payout Start
Date. If
27
the amount available to apply under an Income Plan is less than $2,000, or not
enough to provide an initial payment of at least $20, and state law permits, we
may:
... terminate the Contract and pay you the Contract Value, adjusted by any
applicable Market Value Adjustment and less any applicable taxes, in a lump
sum instead of the periodic payments you have chosen; or
... reduce the frequency of your payments so that each payment will be at least
$20.
VARIABLE INCOME PAYMENTS
The amount of your variable income payments depends upon the investment results
of the Variable Sub-Accounts you select, the premium taxes you pay, the age and
sex of the Annuitant, and the Income Plan you choose. We guarantee that the
payments will not be affected by (a) actual mortality experience and (b) the
amount of our administration expenses.
We cannot predict the total amount of your variable income payments. Your
variable income payments may be more or less than your total purchase payments
because (a) variable income payments vary with the investment results of the
underlying Portfolios; and (b) the Annuitant could live longer or shorter than
we expect based on the tables we use.
In calculating the amount of the periodic payments in the annuity tables in the
Contract, we assumed an annual investment rate of 3%. If the actual net
investment return of the Variable Sub-Accounts you choose is less than this
assumed investment rate, then the dollar amount of your variable income payments
will decrease. The dollar amount of your variable income payments will increase,
however, if the actual net investment return exceeds the assumed investment
rate. The dollar amount of the variable income payments stays level if the net
investment return equals the assumed investment rate.
Please refer to the Statement of Additional Information for more detailed
information as to how we determine variable income payments.
FIXED INCOME PAYMENTS
We guarantee income payment amounts derived from any Fixed Account Option for
the duration of the Income Plan. We calculate the fixed income payments by:
4. adjusting the portion of the Contract Value in any Fixed Account Option on
the Payout Start Date by any applicable Market Value Adjustment;
5. deducting any applicable premium tax; and
6. applying the resulting amount to the greater of (a) the appropriate value
from the income payment table in your Contract or (b) such other value as we are
offering at that time.
We may defer making fixed income payments for a period of up to 6 months or any
shorter time state law may require. If we defer payments for 30 days or more, we
will pay interest as required by law from the date we receive the withdrawal
request to the date we make payment.
CERTAIN EMPLOYEE BENEFIT PLANS
The Contracts offered by this prospectus contain income payment tables that
provide for different payments to men and women of the same age, except in
states that require unisex tables. We reserve the right to use income payment
tables that do not distinguish on the basis of sex to the extent permitted by
applicable law. In certain employment-related situations, employers are required
by law to use the same income payment tables for men and women. Accordingly, if
the Contract is to be used in connection with an employment-related retirement
or benefit plan and we do not offer unisex annuity tables in your state, you
should consult with legal counsel as to whether the purchase of a Contract is
appropriate.
DEATH BENEFITS
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DEATH OF OWNER
If you die before the Payout Start Date, any surviving joint Contract Owner or,
if none, the Beneficiary will be designated the new Contract Owner and will be
entitled to the options described below. If the new Contract Owner previously
was the Beneficiary, however, the new Contract Owner's options will be subject
to any restrictions previously placed upon the Beneficiary.
The claim for death benefits must be submitted to us within 180 days of the
relevant death in order to claim the standard or enhanced death benefit. If a
complete claim is not submitted within 180 days of the relevant death, the
claimant will receive the greater of Contract Value or the Settlement Value.
(See "Death Proceeds" below).
1. If your spouse is the sole surviving Contract Owner or, in the absence of any
surviving Contract Owner, is the sole Beneficiary:
(a) Your spouse may elect to receive the Death Proceeds in a lump sum; or
(b) Your spouse may elect to receive the Death Proceeds paid out under one of
the Income Plans (described in "Income Payments" above) subject to the following
conditions:
The Payout Start Date must be within one year of your date of death. Income
payments must be payable:
(i) over the life of your spouse; or
(ii) for a guaranteed number of payments from 5 to 50 years but not to exceed
the life expectancy of your spouse; or
(iii) over the life of your spouse with a guaranteed
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number of payments from 5 to 30 years but not to exceed the life expectancy of
your spouse.
(c) If your spouse does not elect one of these options, the Contract will
continue in the Accumulation Phase as if the death had not occurred. If the
Contract is continued in the Accumulation Phase, the following conditions apply:
The Contract Value of the continued Contract will be the Death Proceeds. Unless
otherwise instructed by the continuing spouse, the excess, if any, of the Death
Proceeds over the Contract Value will be allocated to the Sub-accounts of the
Variable Account. The excess will be allocated in proportion to your Contract
Value in those Sub-accounts as of the end of the Valuation Period during which
we receive the complete request for settlement of the Death Proceeds, except
that any portion of this excess attributable to the Fixed Account Options will
be allocated to the money market Variable Sub-account. Within 30 days of the
date the Contract is continued, your surviving spouse may choose one of the
following transfer alternatives without incurring a transfer fee:
(i) transfer all or a portion of the excess among the Variable Sub-accounts;
(ii) transfer all or a portion of the excess into the Guaranteed Maturity
Fixed Account and begin a new Guarantee Period; or
(iii) transfer all or a portion of the excess into a combination of Variable
Sub-accounts and the Guaranteed Maturity Fixed Account.
Any such transfer does not count as one of the free transfers allowed each
Contract Year and is subject to any minimum allocation amount specified in the
Contract.
The surviving spouse may make a single withdrawal of any amount within one year
of the date of your death without incurring a Withdrawal Charge or Market Value
Adjustment.
Prior to the Payout Start Date, the Death Benefit of the continued Contract will
be as defined in the Death Benefit provision.
Only one spousal continuation is allowed under the Contract.
2. If the new Contract Owner is not your spouse but is a living person:
(a) The new Contract Owner may elect to receive the Death Proceeds in a lump
sum; or
(b) The new Contract Owner may elect to receive the Death Proceeds paid out
under one of the Income Plans (described in "Income Payments" above) subject to
the following conditions:
The Payout Start Date must be within one year of your date of death. Income
Payments must be payable:
(i) over the life of the new Contract Owner; or
(ii) . for a guaranteed number of payments from 5 to 50 years but not to
exceed the life expectancy of the new Contract Owner; or
(iii) over the life of the new Contract Owner with a guaranteed number of
payments from 5 to 30 years but not to exceed the life expectancy of the new
Contract Owner.
(c) If the new Contract Owner does not elect one of the options above, then
the new Contract Owner must receive the Contract Value payable within 5 years of
your date of death. On the date we receive the complete request for settlement
of the Death Proceeds the Contract Value will be the Death Proceeds. Unless
otherwise instructed by the new Contract Owner, the excess, if any, of the Death
Proceeds over the Contract Value will be allocated to the money market Variable
Sub-Account. Henceforth, the new Contract Owner may make transfers (as described
in "Transfers During the Payout Phase" above) during this 5 year period.
The new Contract Owner may make additional purchase payments to the Contract
under this election. Withdrawal Charges will be waived for any withdrawals made
during this 5 year period.
We reserve the right to offer additional options upon the death of the Contract
Owner.
If the new Contract Owner dies prior to the complete liquidation of the Contract
Value, then the new Contract Owner's named Beneficiary(ies) will receive the
greater of the Settlement Value or the remaining Contract Value. This amount
must be liquidated as a lump sum within 5 years of the date of the original
Contract Owner's death.
3. If the new Contract Owner is a corporation or other type of non-living
person:
(a) The new Contract Owner may elect to receive the Death Proceeds in a lump
sum; or
(b) If the new Contract Owner does not elect the option above, then the new
Contract Owner must receive the Contract Value payable within 5 years of your
date of death. On the date we receive the complete request for settlement of the
Death Proceeds the Contract Value under this option will be the Death Proceeds.
Unless otherwise instructed by the new Contract Owner, the excess, if any, of
the Death Proceeds over the Contract Value will be allocated to the money market
Variable Sub-Account. Henceforth, the new Contract Owner may make transfers(as
described in "Transfers During the Payout Phase" above) during this 5 year
period.
The new Contract Owner may not make additional purchase payments to the Contract
under this election. Withdrawal Charges will be waived during this 5 year
period.
We reserve the right to make additional options available to the new Contract
Owner upon the death of the Contract Owner.
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If any new Contract Owner is a non-living person, all new Contract Owners will
be considered to be non-living persons for purposes of these provisions
Under any of these options, all ownership rights, subject to any restrictions
previously placed upon the Beneficiary, are available to the new Contract Owner
from the date of your death to the date on which the Death Proceeds are paid.
DEATH OF ANNUITANT
If the Annuitant who is not also the Contract Owner dies prior to the Payout
Start Date, the following apply:
1. If the Contract Owner is a living person, then the Contract will continue
with a new Annuitant, who will be:
(a) the youngest Contract Owner; otherwise
(b) the youngest Beneficiary.
You may change the Annuitant before the Payout Start Date.
2. If the Contract Owner is a non-living person:
(a) The Contract Owner may elect to receive the Death Proceeds in a lump sum;
or
(b) If the Contract Owner does not elect the option above, then the Contract
Owner must receive the Contract Value payable within 5 years of the Annuitant's
date of death. On date we receive the complete request for settlement of the
Death Proceeds the Contract Value under this option will be the Death Proceds.
Unless otherwise instructed by the Contract Owner, the excess, if any, of the
Death Proceeds over the Contract Value will be allocated to the money market
Variable Sub-Account. Henceforth, the Contract Owner may make transfers (as
described in "Transfers During the Payout Phase" above) during this 5 year
period.
The new Contract Owner may not make additional purchase payments to the Contract
under this election. Withdrawal Charges will be waived during this 5 year
period.
We reserve the right to make additional options available to the Contract Owner
upon the death of the Annuitant.
Under any of these options, all ownership rights are available to the non-living
Contract Owner from the date of the Annuitant's death to the date on which the
Death Proceeds are paid.
DUE PROOF OF DEATH
A claim for a distribution on death must include Due Proof of Death. We will
accept the following documentation as "Due Proof of Death":
... a certified copy of a death certificate,
... a certified copy of a decree of a court of competent jurisdiction as to the
finding of death, or
... any other proof acceptable to us.
DEATH BENEFIT PAYMENTS
DEATH PROCEEDS
If we receive a complete request for settlement of the Death Proceeds within 180
days of the date of your death, the Death Proceeds are equal to the applicable
death benefit described below. Otherwise, the Death Proceeds are equal to the
greater of the Contract value or the Settlement Value.
We reserve the right to extend, on a non-discriminatory basis, the 180-day
period in which the Death Proceeds will equal the applicable death benefit as
described above.
This right applies only for the purposes of determining the amount payable as
Death Proceeds and in no way restricts when a claim may be filed.
DEATH BENEFIT AMOUNT
Prior to the Payout Start Date, the death benefit is equal to the greatest of:
1. the Contract Value as of the date we determine the value of the death
benefit, or
2. the SETTLEMENT VALUE (that is, the amount payable on a full withdrawal of
Contract Value) on the date we determine the value of the death benefit, or
3. the Contract Value on each DEATH BENEFIT ANNIVERSARY prior to the date we
determine the death benefit, increased by purchase payments made since that
Death Benefit Anniversary and reduced by an adjustment for any partial
withdrawals since that Death Benefit Anniversary.
A "Death Benefit Anniversary" is every seventh Contract Anniversary beginning
with the Issue Date. For example, the Issue Date, 7th and 14th Contract
Anniversaries are the first 3 Death Benefit Anniversaries.
The withdrawal adjustment is equal to (a) divided by (b), with the result
multiplied by (c), where:
(a) = is the withdrawal amount;
(b) = is the Contract Value immediately prior to the withdrawal; and
(c) = is the Contract Value on the Death Benefit Anniversary adjusted by any
prior purchase payments (or withdrawals) made since that Anniversary.
We will determine the value of the death benefits as of the end of the Valuation
Date on which we receive a complete request for payment of the death benefit. If
we receive a request after 3 p.m. Central Time on a Valuation Date, we will
process the request as of the end of the following Valuation Date.
OPTIONAL RIDERS
We offer two optional riders: an Enhanced Death Benefit Rider and an Enhanced
Death and Income Benefit Combination Rider II. You may elect to add either or no
rider to your Contract; you may not add both. If you elect
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an optional rider, we will charge you a higher mortality and expense risk
charge. We may discontinue offering either or both of these Riders at any time.
The benefits under these Riders are described below.
Before September 22, 2000, we offered the Enhanced Death and Benefit Combination
Rider. We no longer offer it with this Contract. However, it also is described
below for the convenience of Contract Owners who purchased it when it was
available.
ENHANCED DEATH BENEFIT RIDER
You may elect the Enhanced Death Benefit Rider if the oldest Contract Owner and
Annuitant are no older than age 80 as of the date we receive the completed
application or written request to add the Rider.
If the Contract Owner is a living individual, the enhanced death benefit applies
only upon the death of the Contract Owner. If the Contract Owner is not a living
individual, the enhanced death benefit applies only upon the death of the
Annuitant. For Contracts with the Enhanced Death Benefit Rider, the death
benefit will be the greatest of (1) through (3) above, or (4) the enhanced death
benefit. The enhanced death benefit is equal to the greater of the Enhanced
Death Benefit A or Enhanced Death Benefit B. Enhanced Death Benefit B may not be
available in all states. The enhanced death benefit will never be greater than
the maximum death benefit allowed by any state nonforfeiture laws that govern
the Contract.
ENHANCED DEATH BENEFIT A. At issue, Enhanced Death Benefit A is equal to the
initial purchase payment. After issue, Enhanced Death Benefit A is 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 an
adjustment for any partial withdrawals since that Anniversary.
The adjustment is equal to (a) divided by (b), and the result multiplied by (c)
where:
(a) = is the withdrawal amount,
(b) = is the Contract Value immediately prior to the withdrawal, and
(c) = is the most recently calculated Enhanced Death Benefit A.
We will calculate Anniversary Values for each Contract Anniversary prior to the
oldest Contract Owner's or the Annuitant's, if the Contract Owner is not a
natural person, 85th birthday. After age 85, we will recalculate Enhanced Death
Benefit A for purchase payments and withdrawals.
ENHANCED DEATH BENEFIT B. The Enhanced Death Benefit B is equal to total
purchase payments made reduced by a withdrawal adjustment, as defined below.
Each purchase payment and each withdrawal adjustment will accumulate daily at a
rate equivalent to 5% per year until the earlier of:
... the date we determine the death benefit, or
... the first day of the month following the oldest Contract Owner's or, if the
Contract Owner is not a natural person, the Annuitant's, 85th birthday.
The adjustment is equal to (a) divided by (b), and the result multiplied by (c)
where:
(a) = the withdrawal amount,
(b) = is the Contract Value immediately prior to the withdrawal, and
(c) = is the most recently calculated Enhanced Death Benefit B.
ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER. (FOR CONTRACTS ISSUED
BEFORE SEPTEMBER 22, 2000) The enhanced death benefit portion of the Enhanced
Death and Income Benefit Combination Rider is as described above under "Enhanced
Death Benefit Rider."
The enhanced income benefit guarantees that the amount of income payments you
receive will not be less than those determined by applying the value of the
enhanced death benefit on the Payout Start Date to the minimum guaranteed rate
(rather than to any current rates we may be offering) for the Income Plan you
select.
The enhanced income benefit will apply if the Contract owner elects a Payout
Start Date that:
... is on or after the tenth Contract Anniversary, and
... is prior to the Annuitant's 90th Birthday.
On the Payout Start Date, you may apply the greater of the Contract Value or the
enhanced income benefit to the Payout Phase of the Contract. No Market Value
Adjustment will be applied to the enhanced income benefit amount. The enhanced
income benefit will only apply if the Income Plan selected provides payments
guaranteed for either a single or joint lives with a period certain of at least:
... 10 years, if the youngest Annuitant's age is 80 or less on the date the amount
is applied; or
... 5 years, if the youngest Annuitant's age is greater than 80 on the date the
amount is applied.
If, however, you apply the Contract Value and not the enhanced income benefit to
the Income Plan, then you may select any Income Plan we offer at that time.
ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER II (FOR CONTRACTS ISSUED ON
OR AFTER SEPTEMBER 22, 2000). Instead of the Enhanced Death Benefit Rider, you
may choose the Enhanced Death and Income Benefit Combination Rider II. The
Enhanced Death and Income Benefit Combination Rider II may not be available in
all states.
The enhanced death benefit portion of the Enhanced
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Death and Income Benefit Combination RiderII is as described above under
"Enhanced Death Benefit Rider."
The enhanced income benefit guarantees that the amount of income payments you
receive will not be less than those determined by applying the value of the
enhanced death benefit on the Payout Start Date to the minimum guaranteed rate
(rather than to any current rates we may be offering) for the Income Plan you
select.
The guaranteed income benefit amount is determined by applying the enhanced
income benefit amount less any applicable taxes to the guaranteed rates for the
Income Plan you elect. The Income Plan you elect must satisfy the conditions
described below.
The enhanced income benefit will apply if the Contract Owner elects a Payout
Start Date that:
... is on or after the tenth Contract Anniversary, and
... occurs during the 30 day period following a Contract Anniversary.
On the Payout Start Date, you may apply the greater of the Contract Value or the
enhanced income benefit to the Payout Phase of the Contract. No Market Value
Adjustment will be applied to the enhanced income benefit amount. The enhanced
income benefit will only apply if the Income Plan selected provides payments
guaranteed for either a single or joint lives with a period certain of at least:
... 10 years, if the youngest Annuitant's age is 80 or less on the date the amount
is applied; or
... 5 years, if the youngest Annuitant's age is greater than 80 on the date the
amount is applied.
You must elect to receive fixed income payments, which will be calculated using
the appropriate Guaranteed Income Payment table provided in your Contract.
If, however, you apply the Contract Value and not the enhanced income benefit to
the Income Plan, then you may select any Income Plan we offer at that time. If
you expect to apply your Contract Value to variable income payment options or to
current annuity payment rates then in effect, electing the enhanced income
benefit may not be appropriate.
The enhanced income benefit only applies to the determination of income payments
under Income Plans in the circumstances described above. This is not a guarantee
of Contract Value or investment performance. This benefit does not enhance the
amounts you receive in partial withdrawal or surrenders. If you surrender your
Contract, you will not receive any benefit under this Rider.
MORE INFORMATION
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GLENBROOK LIFE
GLENBROOK LIFE is the issuer of the Contract. GLENBROOK
LIFE is a stock life insurance company organized under the laws of the State of
Arizona in 1998. Previously, GLENBROOK LIFE was organized under the laws of the
State of Illinois in 1992.
GLENBROOK LIFE was originally organized under the laws of the State of Indiana
in 1965. From 1965 to 1983 GLENBROOK LIFE was known as "United Standard Life
Assurance Company" and from 1983 to 1992 as "William Penn Life Assurance Company
of America."
GLENBROOK LIFE is currently licensed to operate in the District of Columbia and
all states except New York. We intend to offer the Contract in those
jurisdictions in which we are licensed. Our home office is located at 3100
Sanders Road, Northbrook, Illinois, 60062.
GLENBROOK LIFE is a wholly owned subsidiary of Allstate Life Insurance Company
("Allstate Life"), a stock life insurance company incorporated under the laws of
the State of Illinois. Allstate Life is a wholly owned subsidiary of Allstate
Insurance Company, a stock property-liability insurance company incorporated
under the laws of Illinois. All of the outstanding capital stock of Allstate
Insurance Company is owned by The Allstate Corporation.
GLENBROOK LIFE and Allstate Life entered into a reinsurance agreement effective
June 5, 1992. Under the reinsurance agreement, Allstate Life reinsures
substantially all of GLENBROOK LIFE's liabilities under its various insurance
contracts. The reinsurance agreement provides us with financial backing from
Allstate Life. However, it does not create a direct contractual relationship
between Allstate Life and you. In other words, the obligations of Allstate Life
under the reinsurance agreement are to GLENBROOK LIFE; GLENBROOK
LIFE remains the sole obligor under the Contract to you.
Independent rating agencies regularly evaluate life insurers' claims-paying
ability, quality of investments, and overall stability. A.M. Best Company
assigns an A+ (Superior) financial strength rating to Allstate Life, which
results in an A+r rating to GLENBROOK LIFE due to the reinsurance agreement with
Allstate Life mentioned above. Standard & Poor's Insurance Rating Services
assigns an AA+ (Very Strong) financial strength rating and Moody's Investors
Service assigns an Aa2 (Excellent) financial strength rating to GLENBROOK LIFE,
sharing the same ratings of its parent, Allstate Life. These ratings do not
reflect the investment performance of the Variable Account. We may from time to
time advertise these ratings in our sales literature.
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THE VARIABLE ACCOUNT
GLENBROOK LIFE established the GLENBROOK LIFE Multi-Manager Variable Account on
January 15, 1996. We have registered the Variable Account with the SEC as a unit
investment trust. The SEC does not supervise the management of the Variable
Account or GLENBROOK LIFE.
We own the assets of the Variable Account. The Variable Account is a segregated
asset account under Arizona law. That means we account for the Variable
Account's income, gains and losses separately from the results of our other
operations. It also means that only the assets of the Variable Account that are
in excess of the reserves and other Contract liabilities with respect to the
Variable Account are subject to liabilities relating to our other operations.
Our obligations arising under the Contracts are general corporate obligations of
GLENBROOK LIFE.
The Variable Account consists of multiple Variable Sub-Accounts. Each Variable
Sub-Account invests in a corresponding Portfolio. We may add new Variable
Sub-Accounts or eliminate one or more of them, if we believe marketing, tax, or
investment conditions so warrant. We may also add other Variable Sub-Accounts
that may be available under other variable annuity contracts. We do not
guarantee the investment performance of the Variable Account, its Sub-Accounts
or the Portfolios. We may use the Variable Account to fund our other annuity
contracts. We will account separately for each type of annuity contract funded
by the Variable Account.
THE PORTFOLIOS
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. We automatically reinvest all
dividends and capital gains distributions from the Portfolios in shares of the
distributing Portfolio at their net asset value.
VOTING PRIVILEGES. As a general matter, you do not have a direct right to vote
the shares of the Portfolios held by the Variable Sub-Accounts to which you have
allocated your Contract Value. Under current law, however, you are entitled to
give us instructions on how to vote those shares on certain matters. Based on
our present view of the law, we will vote the shares of the Portfolios that we
hold directly or indirectly through the Variable Account in accordance with
instructions that we receive from Contract Owners entitled to give such
instructions.
As a general rule, before the Payout Start Date, the Contract Owner or anyone
with a voting interest is the person entitled to give voting instructions. The
number of shares that a person has a right to instruct will be determined by
dividing the Contract Value allocated to the applicable Variable Sub-Account by
the net asset value per share of the corresponding Portfolio as of the record
date of the meeting. After the Payout Start Date the person receiving income
payments has the voting interest. The payee's number of votes will be determined
by dividing the reserve for such Contract allocated to the applicable Variable
Sub-Account by the net asset value per share of the corresponding Portfolio. The
votes decrease as income payments are made and as the reserves for the Contract
decrease.
We will vote shares attributable to Contracts for which we have not received
instructions, as well as shares attributable to us, in the same proportion as we
vote shares for which we have received instructions, unless we determine that we
may vote such shares in our own discretion. We will apply voting instructions to
abstain on any item to be voted upon on a pro-rata basis to reduce the votes
eligible to be cast.
We reserve the right to vote Portfolio shares as we see fit without regard to
voting instructions to the extent permitted by law. If we disregard voting
instructions, we will include a summary of that action and our reasons for that
action in the next semi-annual financial report we send to you.
CHANGES IN PORTFOLIOS. If the shares of any of the Portfolios are no longer
available for investment by the Variable Account or if, in our judgment, further
investment in such shares is no longer desirable in view of the purposes of the
Contract, we may eliminate that Portfolio and substitute shares of another
eligible investment Portfolio. Any substitution of securities will comply with
the requirements of the Investment Company Act of 1940. We also may add new
Variable Sub-Accounts that invest in additional mutual funds. We will notify you
in advance of any change.
CONFLICTS OF INTEREST. Certain of the Portfolios sell their shares to separate
accounts underlying both variable life insurance and variable annuity contracts.
It is conceivable that in the future it may be unfavorable for variable life
insurance separate accounts and variable annuity separate accounts to invest in
the same Portfolio. The boards of directors of these Portfolios monitor for
possible conflicts among separate accounts buying shares of the Portfolios.
Conflicts could develop for a variety of reasons. For example, differences in
treatment under tax and other laws or the failure by a separate account to
comply with such laws could cause a conflict. To eliminate a conflict, a
Portfolio's board of directors may require a separate account to withdraw its
participation in a Portfolio. A Portfolio's net asset value could decrease if it
had to sell investment securities to pay redemption proceeds to a separate
account withdrawing because of a conflict.
THE CONTRACT
DISTRIBUTION. ALFS, Inc. ("ALFS"), located at 3100 Sanders Road, Northbrook, IL
60062-7154, serves as principal underwriter of the Contracts. ALFS is a wholly
owned subsidiary of Allstate Life. ALFS is a registered broker dealer under the
Securities and Exchange Act of 1934, as amended ("EXCHANGE ACT"), and is a
member of the National Association of Securities Dealers, Inc.
We will pay commissions to broker-dealers who sell the contracts. Commissions
paid may vary, but we estimate
33
that the total commissions paid on all Contract sales will not exceed 8% of all
purchase payments. These commissions are intended to cover distribution
expenses. Sometimes, we also pay the broker-dealer a persistency bonus in
addition to the standard commissions. A persistency bonus is not expected to
exceed 0.25%, on an annual basis, of the Contract Values considered in
connection with the bonus. In some states, Contracts may be sold by
representatives or employees of banks which may be acting as broker-dealers
without separate registration under the Exchange Act, pursuant to legal and
regulatory exceptions.
GLENBROOK LIFE does not pay ALFS a commission for distribution of the Contracts.
The underwriting agreement with ALFS provides that we will reimburse ALFS for
any liability to Contract Owners arising out of services rendered or Contracts
issued.
ADMINISTRATION. We have primary responsibility for all administration of the
Contracts and the Variable Account. We provide the following administrative
services, among others:
... issuance of the Contracts;
... maintenance of Contract Owner records;
... Contract Owner services;
... calculation of unit values;
... maintenance of the Variable Account; and
... preparation of Contract Owner reports.
We will send you Contract statements and transaction confirmations at least
annually. You should notify us promptly in writing of any address change. You
should read your statements and confirmations carefully and verify their
accuracy. You should contact us promptly if you have a question about a periodic
statement. We will investigate all complaints and make any necessary adjustments
retroactively, but you must notify us of a potential error within a reasonable
time after the date of the questioned statement. If you wait too long, we
reserve the right to make the adjustment as of the date that we receive notice
of the potential error.
We also will provide you with additional periodic and other reports, information
and prospectuses as may be required by federal securities laws.
QUALIFIED PLANS
If you use the Contract within a qualified plan, the plan may impose different
or additional conditions or limitations on withdrawals, waivers of withdrawal
charges, death benefits, Payout Start Dates, income payments, and other Contract
features. In addition, adverse tax consequences may result if qualified plan
limits on distributions and other conditions are not met. Please consult your
qualified plan administrator for more information.
LEGAL MATTERS
Jorden Burt LLP, Washington, D.C., has advised GLENBROOK LIFE on certain federal
securities law matters. All matters of state insurance law pertaining to the
Contracts, including the validity of the Contracts and GLENBROOK LIFE's right to
issue such Contracts under state insurance law, have been passed upon by Michael
J. Velotta, General Counsel of GLENBROOK LIFE.
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TAXES
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THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. GLENBROOK
LIFE MAKES NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR
TRANSACTION INVOLVING A CONTRACT.
Federal, state, local and other tax consequences of ownership or receipt of
distributions under an annuity contract depend on your individual circumstances.
If you are concerned about any tax consequences with regard to your individual
circumstances, you should consult a competent tax adviser.
TAXATION OF GLENBROOK LIFE AND
ANNUITY COMPANY
GLENBROOK LIFE 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 GLENBROOK LIFE, and its operations form a part of GLENBROOK LIFE,
it will not be taxed separately. Investment income and realized capital gains of
the Variable Account are automatically applied to increase reserves under the
Contract. Under existing federal income tax law, GLENBROOK LIFE believes that
the Variable Account investment income and capital gains will not be taxed to
the extent that such income and gains are applied to increase the reserves under
the Contract. Accordingly, GLENBROOK LIFE does not anticipate that it will incur
any federal income tax liability attributable to the Variable Account, and
therefore GLENBROOK LIFE does not intend to make provisions for any such taxes.
If GLENBROOK LIFE is taxed on investment income or capital gains of the Variable
Account, then GLENBROOK LIFE may impose a charge against the Variable Account in
order to make provision for such taxes.
TAXATION OF ANNUITIES IN GENERAL
TAX DEFERRAL. Generally, you are not taxed on increases in the Contract Value
until a distribution occurs. This rule applies only where:
1. the Contract Owner is a natural person,
2. the investments of the Variable Account are "adequately diversified"
according to Treasury Department regulations, and
3. GLENBROOK LIFE is considered the owner of the Variable Account assets for
federal income tax purposes.
NON-NATURAL OWNERS. As a general rule, annuity contracts owned by non-natural
persons such as corporations, trusts, or other entities are not treated as
annuity contracts for federal income tax purposes. The income on such contracts
does not enjoy tax deferral and is taxed as ordinary income received or accrued
by the owner during the taxable year.
EXCEPTIONS TO THE NON-NATURAL OWNER RULE. There are several exceptions to the
general rule that annuity contracts held by a non-natural owner are not treated
as annuity contracts for federal income tax purposes. contracts will generally
be treated as held by a natural person if the nominal owner is a trust or other
entity which holds the contract as agent for a natural person. However, this
special exception will not apply in the case of an employer who is the nominal
owner of an annuity contract under a non-qualified deferred compensation
arrangement for its employees. Other exceptions to the non-natural owner rule
are: (1) contracts acquired by an estate of a decedent by reason of the death of
the decedent; (2) certain qualified contracts; (3) contracts purchased by
employers upon the termination of certain qualified plans; (4) certain contracts
used in connection with structured settlement agreements, and (5) immediate
annuity 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.
DIVERSIFICATION REQUIREMENTS. For a Contract to be treated as an annuity for
federal income tax purposes, the investments in the Variable Account must be
"ADEQUATELY DIVERSIFIED" consistent with standards under Treasury Department
regulations. If the investments in the Variable Account are not adequately
diversified, the Contract will not be treated as an annuity contract for federal
income tax purposes. As a result, the income on the Contract will be taxed as
ordinary income received or accrued by the Contract Owner during the taxable
year. Although GLENBROOK LIFE does not have control over the Portfolios or their
investments, we expect the Portfolios to meet the diversification requirements.
OWNERSHIP TREATMENT. The IRS has stated that a contract owner will be considered
the owner of separate account assets if he 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, the Treasury
Department announced that the regulations do not provide guidance concerning
circumstances in which investor control of the separate account investments may
cause a contract owner to be treated as the owner of the separate account. The
Treasury Department also stated that future guidance would be issued regarding
the extent that owners could direct sub-account investments without being
treated as owners of the underlying assets of the separate account.
Your rights under the Contract are different than those described by the IRS in
rulings in which it found that contract owners were not owners of separate
account assets. For example, you have the choice to allocate premiums and
Contract Values among a broader selection of investment alternatives. Also, you
may be able to transfer among investment alternatives more frequently than in
such rulings. These differences could result in you
35
being treated as the owner of the Variable Account. If this occurs, income and
gain from the Variable Account assets would be includible in your gross income.
GLENBROOK
LIFE does not know what standards will be set forth in any regulations or
rulings which the Treasury Department may issue. It is possible that future
standards announced by the Treasury Department could adversely affect the tax
treatment of your Contract. We reserve the right to modify the Contract as
necessary to attempt to prevent you from being considered the federal tax owner
of the assets of the Variable Account. However, we make no guarantee that such
modification to the Contract will be successful.
TAXATION OF PARTIAL AND FULL WITHDRAWALS. If you make a partial withdrawal under
a non-qualified Contract, amounts received are taxable to the extent the
Contract Value, without regard to surrender charges, exceeds the investment in
the Contract. The investment in the Contract is the gross premium paid for the
contract minus any amounts previously received from the Contract if such amounts
were properly excluded from your gross income. If you make a full withdrawal
under a non-Qualified Contract, the amount received will be taxable only to the
extent it exceeds the investment in the Contract.
TAXATION OF ANNUITY PAYMENTS. Generally, the rule for income taxation of annuity
payments received from a non-qualified Contract provides for the return of your
investment in the Contract in equal tax-free amounts over the payment period.
The balance of each payment received is taxable. For fixed annuity payments, the
amount excluded from income is determined by multiplying the payment by the
ratio of the investment in the Contract (adjusted for any refund feature or
period certain) to the total expected value of annuity payments for the term of
the Contract. If you elect variable annuity payments, the amount excluded from
taxable income is determined by dividing the investment in the Contract by the
total number of expected payments. The annuity payments will be fully taxable
after the total amount of the investment in the Contract is excluded using these
ratios. The Federal tax treatment of annuity payments is unclear in some
respects. As a result, if the IRS should provide further guidance, it is
possible that the amount we calculate and report to the IRS as taxable could be
different. If you die, and annuity payments cease before the total amount of the
investment in the Contract is recovered, the unrecovered amount will be allowed
as a deduction for your last taxable year.
WITHDRAWALS AFTER THE PAYOUT START DATE. Federal tax law is unclear regarding
the taxation of any additional withdrawal received after the Payout Start Date.
It is possible that a greater or lesser portion of such a payment could be
taxable than the amount we determine.
DISTRIBUTION AT DEATH RULES. In order to be considered an annuity contract for
federal income tax purposes, the Contract must provide:
1. if any Contract Owner dies on or after the Payout 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 Contract Owner's death;
2. if any Contract Owner dies prior to the Payout Start Date, the entire
interest in the Contract will be distributed within 5 years after the date of
the Contract Owner's death. These requirements are satisfied if any portion of
the Contract Owner's interest that is payable to (or for the benefit of) a
designated Beneficiary is distributed over the life of such Beneficiary (or over
a period not extending beyond the life expectancy of the Beneficiary) and the
distributions begin within 1 year of the Contract Owner's death. If the Contract
Owner's designated Beneficiary is the surviving spouse of the Contract Owner,
the Contract may be continued with the surviving spouse as the new Contract
Owner.
3. if the Contract Owner is a non-natural person, then the Annuitant will be
treated as the Contract 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 Contract Owner.
TAXATION OF ANNUITY DEATH BENEFITS. Death Benefit amounts are included in income
as follows:
1. if distributed in a lump sum, the amounts are taxed in the same manner as a
full withdrawal, or
2. if distributed under an Income Plan, the amounts are taxed in the same manner
as annuity payments.
PENALTY TAX ON PREMATURE DISTRIBUTIONS. A 10% penalty tax applies to the taxable
amount of any premature distribution from a non-Qualified Contract. The penalty
tax generally applies to any distribution made prior to the date you attain age
591/2. However, no penalty tax is incurred on distributions:
1. made on or after the date the Contract Owner attains age 591/2,
2. made as a result of the Contract Owner's death or becoming totally disabled,
3. made in substantially equal periodic payments over the Contract Owner's life
or life expectancy, or over the joint lives or joint life expectancies of the
Contract Owner and the Beneficiary,
4. made under an immediate annuity, or
5. attributable to investment in the Contract before August 14, 1982.
You should consult a competent tax advisor to determine how these exceptions may
apply to your situation.
SUBSTANTIALLY EQUAL PERIODIC PAYMENTS. With respect to non-Qualified Contracts
using substantially equal periodic payments or immediate annuity payments as an
exception to the penalty tax on premature distributions,
36
any additional withdrawal or other modification of the payment stream would
violate the requirement that payments must be substantially equal. Failure to
meet this requirement would mean that the income portion of each payment
received prior to the later of 5 years or the Contract Owner's attaining age
591/2 would be subject to a 10% penalty tax unless another exception to the
penalty tax applied. The tax for the year of the modification is increased by
the penalty tax that would have been imposed without the exception, plus
interest for the years in which the exception was used. You should consult a
competent tax advisor prior to taking a withdrawal.
TAX FREE EXCHANGES UNDER IRC SECTION 1035. A 1035 exchange is a tax-free
exchange of a non-qualified life insurance contract, endowment contract or
annuity contract for a new non-qualified annuity contract. The Contract Owner(s)
must be the same on the old and new contract. Basis from the old contract
carries over to the new contract so long as we receive that information from the
relinquishing company. If basis information is never received, we will assume
that all exchanged funds represent earnings and will allocate no cost basis to
them.
TAXATION OF OWNERSHIP CHANGES. If you transfer a non-Qualified Contract without
full and adequate consideration to a person other than your spouse (or to a
former spouse incident to a divorce), you will be taxed on the difference
between the Contract Value and the investment in the Contract at the time of
transfer. Except for certain Qualified Contracts, any amount you receive as a
loan under a Contract, and any assignment or pledge (or agreement to assign or
pledge) of the Contract Value is taxed as a withdrawal of such amount or portion
and may also incur the 10% penalty tax. Currently we do not allow assignments.
AGGREGATION OF ANNUITY CONTRACTS. The Code requires that all non-qualified
deferred annuity contracts issued by GLENBROOK LIFE (or its affiliates) to the
same Contract Owner during any calendar year be aggregated and treated as one
annuity contract for purposes of determining the taxable amount of a
distribution.
INCOME TAX WITHHOLDING
Generally, GLENBROOK LIFE is required to withhold federal income tax at a rate
of 10% from all non-annuitized distributions. The customer may elect out of
withholding by completing and signing a withholding election form. If no
election is made, we will automatically withhold the required 10% of the taxable
amount. In certain states, if there is federal withholding, then state
withholding is also mandatory.
GLENBROOK LIFE is required to withhold federal income tax using the wage
withholding rates for all annuitized distributions. The customer may elect out
of withholding by completing and signing a withholding election form. If no
election is made, we will automatically withhold using married with three
exemptions as the default. In certain states, if there is federal withholding,
then state withholding is also mandatory.
Election out of withholding is valid only if the customer provides a U.S.
residence address and taxpayer identification number.
TAX QUALIFIED CONTRACTS
The income on qualified plan and IRA investments is tax deferred, and the income
on variable annuities held by such plans does not receive any additional tax
deferral. You should review the annuity features, including all benefits and
expenses, prior to purchasing a variable annuity in a qualified plan or IRA.
Contracts may be used as investments with certain qualified plans such as:
... Individual Retirement Annuities or Accounts (IRAs) under Section 408 of the
Code;
... Roth IRAs under Section 408A of the Code;
... Simplified Employee Pension Plans under Section 408(k) of the Code;
... Savings Incentive Match Plans for Employees (SIMPLE) Plans under Section
408(p) of the Code;
... Tax Sheltered Annuities under Section 403(b) of the Code;
... Corporate and Self Employed Pension and Profit Sharing Plans under Sections
401 and 403; and
... State and Local Government and Tax-Exempt Organization Deferred Compensation
Plans under Section 457.
GLENBROOK LIFE reserves the right to limit the availability of the Contract for
use with any of the Qualified Plans listed above or to modify the Contract to
conform with tax requirements. 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 certain
transactions such as excess contributions, premature distributions, and,
distributions that do not conform to specified commencement and minimum
distribution rules.
In the case of certain qualified plans, the terms of the plans may govern the
right to benefits, regardless of the terms of the Contract.
TAXATION OF WITHDRAWALS FROM A QUALIFIED CONTRACT. If you make a partial
withdrawal under a Qualified Contract other than a Roth IRA, the portion of the
payment that bears the same ratio to the total payment that the investment in
the Contract (i.e., nondeductible IRA contributions, after tax contributions to
qualified plans) bears to the Contract Value, is excluded from your income. We
do not keep track of nondeductible contributions, and all tax reporting of
distributions from Qualified Contracts other than Roth IRAs will indicate that
the distribution is fully taxable.
"QUALIFIED DISTRIBUTIONS" from Roth IRAs are not included in gross income.
"Qualified distributions" are any distributions made more than five taxable
years after
37
the taxable year of the first contribution to any Roth IRA and which are:
... made on or after the date the Contract Owner attains age 591/2,
... made to a beneficiary after the Contract Owner's death,
... attributable to the Contract Owner being disabled, or
... made for a first time home purchase (first time home purchases are subject to
a lifetime limit of $10,000).
"NONQUALIFIED DISTRIBUTIONS" from Roth IRAs are treated as made from
contributions first and are included in gross income only to the extent that
distributions exceed contributions. All tax reporting of distributions from Roth
IRAs will indicate that the taxable amount is not determined.
REQUIRED MINIMUM DISTRIBUTIONS. Generally, qualified plans require minimum
distributions upon reaching age 701/2. Failure to withdraw the required minimum
distribution will result in a 50% tax penalty on the shortfall not withdrawn
from the Contract. Not all income plans offered under the Contract satisfy the
requirements for minimum distributions. Because these distributions are required
under the Code and the method of calculation is complex, please see a competent
tax advisor.
THE DEATH BENEFIT AND QUALIFIED CONTRACTS. Pursuant to the Code and IRS
regulations, an IRA (e.g., traditional IRA, Roth IRA, SEP IRA and SIMPLE IRA)
may not invest in life insurance contracts. However, an IRA may provide a death
benefit that equals the greater of the purchase payments or the Contract Value.
The Contract offers a death benefit that in certain circumstances may exceed the
greater of the purchase payments or 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 satisfy the
requirements of an IRA. We believe that these regulations do not prohibit all
forms of optional death benefits.
It is also possible that the certain death benefits that offer enhanced earnings
could be characterized as an incidental death benefit. If the death benefit were
so characterized, this could result in current taxable income to a Contract
Owner. In addition, there are limitations on the amount of incidental death
benefits that may be provided under qualified plans, such as in connection with
a 403(b) plan.
GLENBROOK LIFE reserves the right to limit the availability of the Contract for
use with any of the qualified plans listed above.
PENALTY TAX ON PREMATURE DISTRIBUTIONS FROM QUALIFIED CONTRACTS. A 10% penalty
tax applies to the taxable amount of any premature distribution from a Qualified
Contract. The penalty tax generally applies to any distribution made prior to
the date you attain age 591/2. However, no penalty tax is incurred on
distributions:
1. made on or after the date the Contract Owner attains age 591/2,
2. made as a result of the Contract Owner's death or total disability,
3. made in substantially equal periodic payments over the Contract Owner's life
or life expectancy, or over the joint lives or joint life expectancies of the
Contract Owner and the Beneficiary,
4. made pursuant to an IRS levy,
5. made for certain medical expenses,
6. made to pay for health insurance premiums while unemployed (only applies for
IRAs),
7. made for qualified higher education expenses (only applies for IRAs), and
8. made for a first time home purchase (up to a $10,000 lifetime limit and only
applies for IRAs).
During the first 2 years of the individual's participation in a SIMPLE IRA,
distributions that are otherwise subject to the premature distribution penalty,
will be subject to a 25% penalty tax.
You should consult a competent tax advisor to determine how these exceptions may
apply to your situation.
SUBSTANTIALLY EQUAL PERIODIC PAYMENTS ON QUALIFIED CONTRACTS. With respect to
Qualified Contracts using substantially equal periodic payments as an exception
to the penalty tax on premature distributions, any additional withdrawal or
other modification of the payment stream would violate the requirement that
payments must be substantially equal. Failure to meet this requirement would
mean that the income portion of each payment received prior to the later of 5
years or the taxpayer's attaining age 591/2 would be subject to a 10% penalty
tax unless another exception to the penalty tax applied. The tax for the year of
the modification is increased by the penalty tax that would have been imposed
without the exception, plus interest for the years in which the exception was
used. You should consult a competent tax advisor prior to taking a withdrawal.
INCOME TAX WITHHOLDING ON QUALIFIED CONTRACTS. Generally, GLENBROOK LIFE is
required to withhold federal income tax at a rate of 10% from all non-annuitized
distributions that are not considered "ELIGIBLE ROLLOVER DISTRIBUTIONS." The
customer may elect out of withholding by completing and signing a withholding
election form. If no election is made, we will automatically withhold the
required 10% from the taxable amount. In certain states, if there is federal
withholding, then state withholding is also mandatory. GLENBROOK LIFE is
required to withhold federal income tax at a rate of 20% on all "ELIGIBLE
ROLLOVER DISTRIBUTIONS" unless you elect to make a "DIRECT ROLLOVER" of such
amounts to an IRA or eligible retirement plan. Eligible rollover distributions
generally include all distributions
38
from Qualified Contracts, excluding IRAs, with the exception of:
1. required minimum distributions, or
2. a series of substantially equal periodic payments made over a period of at
least 10 years, or,
3. a series of substantially equal periodic payments made over the life (joint
lives) of the participant (and beneficiary), or,
4. hardship distributions.
For all annuitized distributions that are not subject to the 20% withholding
requirement, GLENBROOK LIFE is required to withhold federal income tax using the
wage withholding rates from all annuitized distributions. The customer may elect
out of withholding by completing and signing a withholding election form. If no
election is made, we will automatically withhold using married with three
exemptions as the default. In certain states, if there is federal withholding,
then state withholding is also mandatory.
Election out of withholding is valid only if the customer provides a U.S.
residence address and taxpayer identification number.
INDIVIDUAL RETIREMENT ANNUITIES. Section 408 of the Code permits eligible
individuals to contribute to an individual retirement program known as an
Individual Retirement Annuity (IRA). Individual Retirement Annuities are subject
to limitations on the amount that can be contributed and on the time when
distributions may commence. Certain distributions from other types of qualified
plans may be "ROLLED OVER" on a tax-deferred basis into an Individual Retirement
Annuity.
ROTH INDIVIDUAL RETIREMENT ANNUITIES. Section 408A of the Code permits eligible
individuals to make nondeductible contributions to an individual retirement
program known as a Roth Individual Retirement Annuity. Roth Individual
Retirement Annuities are subject to limitations on the amount that can be
contributed and on the time when distributions may commence.
Subject to certain limitations, a traditional Individual Retirement Account or
Annuity may be converted or "ROLLED OVER" to a Roth Individual Retirement
Annuity. The income portion of a conversion or rollover distribution is taxable
currently, but is exempted from the 10% penalty tax on premature distributions.
SIMPLIFIED EMPLOYEE PENSION PLANS. Section 408(k) of the Code allows eligible
employers to establish simplified employee pension plans for their employees
using individual retirement annuities. Under these plans the employer may,
within specified limits, make deductible contributions on behalf of the
employees to the individual retirement annuities. Employers intending to use the
Contract in connection with such plans should seek competent tax advice.
SAVINGS INCENTIVE MATCH PLANS FOR EMPLOYEES (SIMPLE PLANS). Sections 408(p) and
401(k) of the Code allow eligible employers with 100 or fewer employees to
establish SIMPLE retirement plans for their employees. SIMPLE plans may be
structured as a SIMPLE retirement account using an IRA or as a Section 401(k)
qualified cash or deferred arrangement. In general, a SIMPLE plan consists of a
salary deferral program for eligible employees and matching or nonelective
contributions made by employers. Employers intending to use the Contract in
conjunction with SIMPLE plans should seek competent tax and legal advice.
TO DETERMINE IF YOU ARE ELIGIBLE TO CONTRIBUTE TO ANY OF THE ABOVE LISTED IRAS
(TRADITIONAL, ROTH, SEP, OR SIMPLE), PLEASE REFER TO IRS PUBLICATION 590 AND
YOUR COMPETENT TAX ADVISOR.
TAX SHELTERED ANNUITIES. Section 403(b) of the Tax Code provides tax-deferred
retirement savings plans for employees of certain non-profit and educational
organizations. Under Section 403(b), any contract used for a 403(b) plan must
provide that distributions attributable to salary reduction contributions made
after 12/31/88, and all earnings on salary reduction contributions, may be made
only on or after the date the employee:
... attains age 591/2,
... separates from service,
... dies,
... becomes disabled, or
... incurs a hardship (earnings on salary reduction contributions may not be
distributed on account of hardship).
These limitations do not apply to withdrawals where GLENBROOK LIFE is directed
to transfer some or all of the Contract Value to another 403(b) plan.
CORPORATE AND SELF-EMPLOYED PENSION AND PROFIT SHARING PLANS. Sections 401(a)
and 403(a) of the Code permit corporate employers to establish various types of
tax favored retirement plans for employees. Self-employed individuals may
establish tax favored retirement plans for themselves and their employees. Such
retirement plans (commonly referred to as "H.R.10" or "KEOGH") may permit the
purchase of annuity contracts.
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. In eligible governmental plans, all assets and income must be
held in a trust/ custodial account/annuity contract for the exclusive benefit of
the participants and their beneficiaries. To the extent the Contracts are used
in connection with a non-governmental eligible plan, employees are considered
39
general creditors of the employer and the employer as owner of the Contract has
the sole right to the proceeds of the Contract. Under eligible 457 plans,
contributions made for the benefit of the employees will not be includible in
the employees' gross income until distributed from the plan.
ANNUAL REPORTS AND OTHER DOCUMENTS
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GLENBROOK LIFE's annual report on Form 10-K for the year ended December 31, 2001
is incorporated herein by reference, which means that it is legally a part of
this prospectus.
After the date of this prospectus and before we terminate the offering of the
securities under this prospectus, all documents or reports we file with the SEC
under the Exchange Act are also incorporated herein by reference, which means
that they also legally become a part of this prospectus.
Statements in this prospectus, or in documents that we file later with the SEC
and that legally become a part of this prospectus, may change or supersede
statements in other documents that are legally part of this prospectus.
Accordingly, only the statement that is changed or replaced will legally be a
part of this prospectus.
We file our Exchange Act documents and reports, including our annual and
quarterly reports on Form 10-K and Form 10-Q electronically on the SEC's "EDGAR"
system using the identifying number CIK No. 0001007285. The SEC maintains a Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC. The
address of the site is http:// www.sec.gov. You also can view these materials at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. For more information on the operations of SEC's Public Reference Room,
call 1-800-SEC-0330.
If you have received a copy of this prospectus, and would like a free copy of
any document incorporated herein by reference (other than exhibits not
specifically incorporated by reference into the text of such documents), please
write or call us at 300 Milwaukee Ave, Vernon Hills, 60061 (telephone:
1-800-755-5275).
EXPERTS
- --------------------------------------------------------------------------------
The financial statements of Glenbrook Life as of December 31, 2001 and 2000 and
for each of the three years in the period ended December 31, 2001 and the
related financial statement schedule incorporated herein by reference from the
Annual Report on Form 10-K of Glenbrook Life and from the Statement of
Additional Information, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, incorporated herein by reference, and have
been so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The financial statements of the Variable Account as of December 31, 2001 and for
each of the periods in the two years then ended incorporated herein by reference
from the Statement of Additional Information, have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report, incorporated herein
by reference and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
We may advertise the performance of the Variable Sub-Accounts, including yield
and total return information. Total return represents the change, over a
specified period of time, in the value of an investment in a Variable
Sub-Account after reinvesting all income distributions. Yield refers to the
income generated by an investment in a Variable Sub-Account over a specified
period.
All performance advertisements will include, as applicable, standardized yield
and total return figures that reflect the deduction of insurance charges, the
contract maintenance charge, and withdrawal charge. Performance advertisements
also may include total return figures that reflect the deduction of insurance
charges, but not the contract maintenance or withdrawal charges. The deduction
of such charges would reduce the performance shown. In addition, performance
advertisements may include aggregate average, year-by-year, or other types of
total return figures. Performance information for periods prior to the inception
date of the Variable Sub-Accounts will be based on the historical performance of
the corresponding Portfolios for the periods beginning with the inception dates
of the Portfolios and adjusted to reflect current Contract expenses. You should
not interpret these figures to reflect actual historical performance of the
Variable Account. We may include in advertising and sales materials tax deferred
compounding charts and other hypothetical illustrations that compare currently
taxable and tax deferred investment programs based on selected tax brackets. Our
advertisements also may compare the performance of our
40
Variable Sub-Accounts with: (a) certain unmanaged market indices, including but
not limited to the Dow Jones Industrial Average, the Standard & Poor's 500, and
the Shearson Lehman Bond Index; and/or (b) other management investment companies
with investment objectives similar to the underlying funds being compared. In
addition, our advertisements may include the performance ranking assigned by
various publications, including the Wall Street Journal, Forbes, Fortune, Money,
Barron's, Business Week, USA Today, and statistical services, including Lipper
Analytical Services Mutual Fund Survey, Lipper Annuity and Closed End Survey,
the Variable Annuity Research Data Survey, and SEI.
41
APPENDIX A
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERRED
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For the Years Beginning January 1*
and Ending December 31,
----------------------------------------------
SUB-ACCOUNTS 1998 1999 2000 2001
- -------------------------------------------------------------------------------
AIM V.I. BALANCED SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.73 $ 12.66 $ 11.99
Accumulation Unit Value, End
of Period $10.73 $ 12.66 $ 11.99 $ 10.50
Number of Units Outstanding,
End of Period -- 7,487 52,646 90,025
AIM V.I. CORE EQUITY
SUB-ACCOUNT (4)
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.36 $ 15.09 $ 12.74
Accumulation Unit Value, End
of Period $11.36 $ 15.09 $ 12.74 $ 9.72
Number of Units Outstanding,
End of Period -- 12,180 53,747 73,192
AIM V.I. DIVERSIFIED INCOME
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.22 $ 9.91 $ 9.87
Accumulation Unit Value, End
of Period $10.22 $ 9.91 $ 9.87 $ 10.10
Number of Units Outstanding,
End of Period -- 721 721 721
AIM V.I. GOVERNMENT SECURITIES
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.38 $ 9.85 $ 10.73
Accumulation Unit Value, End
of Period $10.38 $ 9.85 $ 10.73 $ 11.28
Number of Units Outstanding,
End of Period -- -- 2,954 12,908
AIM V.I. GROWTH SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.83 $ 15.82 $ 12.43
Accumulation Unit Value, End
of Period $11.83 $ 15.82 $ 12.43 $ 8.12
Number of Units Outstanding,
End of Period -- 13,275 69,688 57,165
AIM V.I. INTERNATIONAL GROWTH
SUB-ACCOUNT (4)
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.68 $ 16.38 $ 11.92
Accumulation Unit Value, End
of Period $10.68 $ 16.38 $ 11.92 $ 9.00
Number of Units Outstanding,
End of Period -- -- 4,196 43,53
AIM V.I. PREMIER EQUITY
SUB-ACCOUNT (4)
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.52 $ 14.80 $ 12.49
Accumulation Unit Value, End
of Period $11.52 $ 14.80 $ 12.49 $ 10.79
Number of Units Outstanding,
End of Period -- 42,074 115,418 133,037
DREYFUS SOCIALLY RESPONSIBLE
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.79 $ 14.40 $ 12.66
Accumulation Unit Value, End
of Period $10.79 $ 14.40 $ 12.66 $ 9.692
Number of Units Outstanding,
End of Period -- 3,130 5,459 2,854
DREYFUS STOCK INDEX SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.87 $ 12.97 $ 11.63
Accumulation Unit Value, End
of Period $10.87 $ 12.97 $ 11.63 $ 10.098
Number of Units Outstanding,
End of Period -- 9,930 23,030 17,916
DREYFUS VIF GROWTH AND INCOME
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.65 $ 12.47 $ 11.86
Accumulation Unit Value, End
of Period $10.65 $ 12.47 $ 11.86 $ 11.078
Number of Units Outstanding,
End of Period -- 2,680 3,326 13021
DREYFUS VIF MONEY MARKET
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.05 $ 10.40 $ 10.91
Accumulation Unit Value, End
of Period $10.05 $ 10.40 $ 10.91 $ 11.211
Number of Units Outstanding,
End of Period -- -- -- 33552
FIDELITY VIP II CONTRAFUND
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.66 $ 14.33 $ 13.23
Accumulation Unit Value, End
of Period $11.66 $ 14.33 $ 13.23 $ 11.473
Number of Units Outstanding,
End of Period -- 18,963 101,434 128908
FIDELITY VIP EQUITY INCOME
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.48 $ 11.02 $ 11.81
Accumulation Unit Value, End
of Period $10.48 $ 11.02 $ 11.81 $ 11.096
Number of Units Outstanding,
End of Period -- 30,264 100,008 169933
FIDELITY VIP GROWTH SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.20 $ 15.22 $ 13.40
Accumulation Unit Value, End
of Period $11.20 $ 15.22 $ 13.40 $ 10.906
Number of Units Outstanding,
End of Period -- 25,821 168,574 193055
FIDELITY VIP HIGH INCOME
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.43 $ 11.16 $ 8.55
Accumulation Unit Value, End
of Period $10.43 $ 11.16 $ 8.55 $ 7.461
Number of Units Outstanding,
End of Period -- 3,837 45,009 69939
FRANKLIN SMALL CAP INVESTMENTS
(CLASS 2) SUB-ACCOUNT(1)(3)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 12.70 $ 20.98
Accumulation Unit Value, End
of Period -- $ 12.70 $ 12.17 --
Number of Units Outstanding,
End of Period -- -- 579 --
FRANKLIN SMALL CAP (CLASS 2)
SUB-ACCOUNT(2)(3)
Accumulation Unit Value,
Beginning of Period -- -- $ 24.78 $ 12.17
Accumulation Unit Value, End
of Period -- -- $ 20.98 $ 17.574
Number of Units Outstanding,
End of Period -- -- -- 1,478
GOLDMAN SACHS VIT CAPITAL
GROWTH SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.10 $ 13.99 $ 12.73
Accumulation Unit Value, End
of Period $11.10 $ 13.99 $ 12.73 $ 10.763
Number of Units Outstanding,
End of Period -- -- 573 573
GOLDMAN SACHS VIT CORE/(R)/
SMALL CAP EQUITY SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.60 $ 12.36 $ 12.36
Accumulation Unit Value, End
of Period $10.60 $ 12.36 $ 12.44 $ 12.851
Number of Units Outstanding,
End of Period -- 86 717 716
GOLDMAN SACHS VIT CORE/(R)/ US
EQUITY SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.90 $ 13.46 $ 12.02
Accumulation Unit Value, End
of Period $10.90 $ 13.46 $ 12.02 $ 10.466
Number of Units Outstanding,
End of Period -- -- 317 159
GOLDMAN SACHS VIT GLOBAL INCOME
SUB-ACCOUNT (7)
Accumulation Unit Value,
Beginning of Period $10.00 $ 9.67 $ 9.92 $ 10.70
Accumulation Unit Value, End
of Period $ 9.67 $ 9.92 $ 10.70 $ 11.090
Number of Units Outstanding,
End of Period -- -- 724 895
GOLDMAN SACHS VIT INTERNATONAL
EQUITY SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.84 $ 14.25 $ 12.24
Accumulation Unit Value, End
of Period $10.84 $ 14.25 $ 12.24 $ 9.402
Number of Units Outstanding,
End of Period -- -- 168 167
MFS EMERGING GROWTH SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.95 $ 20.88 $ 16.60
Accumulation Unit Value, End
of Period $11.95 $ 20.88 $ 16.60 $ 10.91
Number of Units Outstanding,
End of Period -- 1,059 58,025 104,779
MFS INVESTORS TRUST SERIES
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.81 $ 11.41 $ 11.26
Accumulation Unit Value, End
of Period $10.81 $ 11.41 $ 11.26 $ 9.35
Number of Units Outstanding,
End of Period -- 6,295 15,337
MFS NEW DISCOVERY SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.38 $ 19.52 $ 19.92
Accumulation Unit Value, End
of Period $11.38 $ 19.52 $ 18.92 $ 17.76
Number of Units Outstanding,
End of Period -- 183 3,146 6,802
MFS RESEARCH SUB-ACCOUNT (1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 11.53 $ 10.85
Accumulation Unit Value, End
of Period -- $ 11.53 $ 10.85 $ 8.45
Number of Units Outstanding,
End of Period -- -- 15,842 60,264
MUTUAL SHARE SECURITIES (CLASS
2) SUB-ACCOUNT(2)(3)
Accumulation Unit Value,
Beginning of Period -- -- $ 12.72 $ 20.98
Accumulation Unit Value, End
of Period -- -- $ 14.11 --
Number of Units Outstanding,
End of Period -- -- 579 --
MUTUAL SHARES INVESTMENTS
(CLASS 2) SUB-ACCOUNT(1)(3)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 10.31 $ 14.11
Accumulation Unit Value, End
of Period -- $ 10.31 $ 10.19 $ 14.931
Number of Units Outstanding,
End of Period -- -- 4,984 6,817
OPPENHEIMER AGGRESSIVE GROWTH
SUB-ACCOUNT(1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 13.73 $ 12.05
Accumulation Unit Value, End
of Period -- $ 13.73 $ 12.05 $ 8.19
Number of Units Outstanding,
End of Period -- -- 24,920 55,945
OPPENHEIMER CAPITAL
APPRECIATION SUB-ACCOUNT(1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 12.11 $ 11.95
Accumulation Unit Value, End
of Period -- $ 12.11 $ 11.95 $ 10.329
Number of Units Outstanding,
End of Period -- -- 53,426 146,217
OPPENHEIMER GLOBAL SECURITIES
SUB-ACCOUNT(1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 13.11 $ 13.62
Accumulation Unit Value, End
of Period -- $ 13.11 $ 13.62 $ 11.846
Number of Units Outstanding,
End of Period -- -- 60,421 91,989
OPPENHEIMER MAIN STREET GROWTH
AND INCOME SUB-ACCOUNT(1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 10.78 $ 9.72
Accumulation Unit Value, End
of Period -- $ 10.78 $ 9.729 $ 8.64
Number of Units Outstanding,
End of Period -- -- 121,355 283,935
OPPENHEIMER STRATEGIC BOND
SUB-ACCOUNT(1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 10.16 $ 10.31
Accumulation Unit Value, End
of Period -- $ 10.16 $ 10.31 $ 10.69
Number of Units Outstanding,
End of Period -- -- 28,736 56,563
TEMPLETON DEVELOPING MARKETS
SECURITIES (CLASS 2)
SUB-ACCOUNT(1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 12.16 $ 8.17
Accumulation Unit Value, End
of Period -- $ 12.16 $ 8.17 --
Number of Units Outstanding,
End of Period -- -- -- --
TEMPLETON FOREIGN SECURITIES
SUB-ACCOUNT (1) (5)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 11.26 $ 11.39
Accumulation Unit Value, End
of Period -- $ 11.26 $ 10.87 $ 9.027
Number of Units Outstanding,
End of Period -- -- 438 2,780
TEMPLETON GROWTH SECURITIES
SUB-ACCOUNT (2)(3)
Accumulation Unit Value,
Beginning of Period -- $ 12.89 $ 13.59
Accumulation Unit Value, End
of Period -- $ 13.59 $ 13.262
Number of Units Outstanding,
End of Period -- 11,237 10,586
TEMPLETON STOCK (CLASS 2)
SUB-ACCOUNT(1)(3)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 11.37 $ 11.42
Accumulation Unit Value, End
of Period -- $ 11.37 $ 11.42 --
Number of Units Outstanding,
End of Period -- -- -- --
VAN KAMPEN UIF EQUITY GROWTH
SUB-ACCOUNT (6)
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.94 $ 15.09 $ 13.17
Accumulation Unit Value, End
of Period $10.94 $ 15.09 $ 13.17 --
Number of Units Outstanding,
End of Period -- -- 162
VAN KAMPEN UIF CORE PLUS FIXED
INCOME SUB-ACCOUNT (6)
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.15 $ 9.87 $ 10.49
Accumulation Unit Value, End
of Period $10.15 $ 9.87 $ 10.49 --
Number of Units Outstanding,
End of Period -- -- -- --
VAN KAMPEN UIF GLOBAL VALUE
EQUITY SUB-ACCOUNT (6)
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.43 $ 10.73 $ 11.83
Accumulation Unit Value, End
of Period $10.43 $ 10.73 $ 11.83 --
Number of Units Outstanding,
End of Period -- -- 959 --
VAN KAMPEN UIF MID CAP VALUE
SUB-ACCOUNT (6)
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.96 $ 13.07 $ 14.32
Accumulation Unit Value, End
of Period $10.96 $ 13.07 $ 14.32 --
Number of Units Outstanding,
End of Period -- -- 5,400 --
VAN KAMPEN UIF VALUE
SUB-ACCOUNT (6)
Accumulation Unit Value,
Beginning of Period $10.00 $ 9.95 $ 9.65 $ 11.93
Accumulation Unit Value, End
of Period $ 9.95 $ 9.65 $ 11.93 --
Number of Units Outstanding,
End of Period -- -- 233 --
BASIC POLICY
42
43
44
* The Contracts were first offered on November 10, 1998. The Accumulation Unit
Values in this table reflect a mortality and expense risk charge of 1.05% and
an administrative expense charge of 0.10%. All of the Variable Sub-Accounts
commenced operations on or before November 10, 1998, except as described in
the footnotes below.
(1) Variable Sub-Accounts that commenced operations on Novemeber 1, 1999.
45
(2) Variable Sub-Accounts that commenced operations on May 1, 2000.
(3) Effective May 1, 2000, the Portfolios in which the Franklin Small Cap
Investments (Class 2), Mutual Shares Investments (Class 2), and Templeton
Stock (Class 2) Variable Sub-Accounts invested were merged into the Franklin
Small Cap (Class 2), Mutual Shares Securities (Class 2), and the Templeton
Growth Securities (Class 2) Portfolios. Accordingly, for administrative
convenience, as of May 1, 2000, the corresponding Variable Sub-Accounts
merged with and into new Variable Sub-Accounts named Franklin Small Cap
(Class 2), Mutual Shares Securities (Class 2), and the Templeton Growth
Securities (Class 2), respectively, with Accumulation Unit Values starting at
$10.00 For each of the comparison, in this table we are continuing to show
AUV's for the predecessor Variable Sub-Accounts.
(4) Effective May 1, 2002 AIM V.I. Growth and Income Fund, AIM V.I.
International Equity Fund and AIM V.I. Value Fund changed their names to the
AIM V.I. Core Equity Fund, AIM V.I. International Growth Fund and AIM V.I.
Premier Equity Fund, respectively.
(5) Effective May 1, 2002 the Templeton International Securities Fund - Class 2
changed its name to the Templeton Foreign Securities Fund - Class 2.
(6) Effective May 1, 2002 the Portfolios have been re-branded and have changed
names from Morgan Stanley UIF Fixed Income Portfolio to Van Kampen UIF Core
Plus Fixed Income Portfolio, Morgan Stanley UIF Equity Growth Portfolio to
Van Kampen UIF Equity Growth Portfolio, Morgan Stanley UIF Global Value
Equity Porfolio to Van Kampen UIF Global Value Equity Portfolio, Morgan
Stnaley International Magnum Portfolio to Van Kampen UIF International Magnum
Portfolio, Morgan Stanley UIF Mid Cap Value Portfolio to Van Kampen UIF Mid
Cap Value Portfolio, Morgan Stanley UIF U.S. Real Estate Portfolio to Van
Kampen UIF U.S. Real Estate Portfolio and Morgan Stanley UIF Value Portfolio
Van Kampen UIF Value Portfolio.
(7) Goldman Sachs VIT Global Income Portfolio will not be available to new
investors beginning May 1, 2002.
46
APPENDIX A
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED*
- --------------------------------------------------------------------------------
WITH ENHANCED DEATH BENEFIT RIDER
For the Years Beginning January 1*
and Ending December 31,
----------------------------------------------
SUB-ACCOUNTS 1998 1999 2000 2001
- -------------------------------------------------------------------------------
AIM V.I. BALANCED SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.73 $ 12.66 $ 11.99
Accumulation Unit Value, End
of Period $10.73 $ 12.66 $ 11.99 $ 10.50
Number of Units Outstanding,
End of Period -- 7,487 52,646 90,025
AIM V.I. CORE EQUITY
SUB-ACCOUNT (4)
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.36 $ 15.09 $ 12.74
Accumulation Unit Value, End
of Period $11.36 $ 15.09 $ 12.74 $ 9.72
Number of Units Outstanding,
End of Period -- 12,180 53,747 73,192
AIM V.I. DIVERSIFIED INCOME
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.22 $ 9.91 $ 9.87
Accumulation Unit Value, End
of Period $10.22 $ 9.91 $ 9.87 $ 10.10
Number of Units Outstanding,
End of Period -- 721 721 721
AIM V.I. GOVERNMENT SECURITIES
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.38 $ 9.85 $ 10.73
Accumulation Unit Value, End
of Period $10.38 $ 9.85 $ 10.73 $ 11.28
Number of Units Outstanding,
End of Period -- -- 2,954 12,908
AIM V.I. GROWTH SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.83 $ 15.82 $ 12.43
Accumulation Unit Value, End
of Period $11.83 $ 15.82 $ 12.43 $ 8.12
Number of Units Outstanding,
End of Period -- 13,275 69,688 57,165
AIM V.I. INTERNATIONAL GROWTH
SUB-ACCOUNT (4)
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.68 $ 16.38 $ 11.92
Accumulation Unit Value, End
of Period $10.68 $ 16.38 $ 11.92 $ 9.00
Number of Units Outstanding,
End of Period -- -- 4,196 43,53
AIM V.I. PREMIER EQUITY
SUB-ACCOUNT (4)
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.52 $ 14.80 $ 12.49
Accumulation Unit Value, End
of Period $11.52 $ 14.80 $ 12.49 $ 10.79
Number of Units Outstanding,
End of Period -- 42,074 115,418 133,037
DREYFUS SOCIALLY RESPONSIBLE
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.78 $ 14.36 $ 12.60
Accumulation Unit Value, End
of Period $10.78 $ 14.36 $ 12.60 $ 9.63
Number of Units Outstanding,
End of Period -- 1,093 1,147 4,204
DREYFUS STOCK INDEX SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.87 $ 12.94 $ 11.58
Accumulation Unit Value, End
of Period $10.87 $ 12.94 $ 11.58 $ 10.03
Number of Units Outstanding,
End of Period -- 5,556 16,753 33,168
DREYFUS VIF GROWTH AND INCOME
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.64 $ 12.43 $ 11.80
Accumulation Unit Value, End
of Period $10.64 $ 12.43 $ 11.80 $ 10.962
Number of Units Outstanding,
End of Period -- -- -- 4,754
DREYFUS VIF MONEY MARKET
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.04 $ 10.38 $ 10.86
Accumulation Unit Value, End
of Period $10.04 $ 10.38 $ 10.86 $ 11.134
Number of Units Outstanding,
End of Period -- -- 4,766 53,563
FIDELITY VIP II CONTRAFUND
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.66 $ 14.29 $ 13.16
Accumulation Unit Value, End
of Period $11.66 $ 14.29 $ 13.16 $ 11.394
Number of Units Outstanding,
End of Period -- 30,660 158,502 154,780
FIDELITY VIP EQUITY INCOME
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.47 $ 10.99 $ 11.76
Accumulation Unit Value, End
of Period $10.47 $ 10.99 $ 11.76 $ 11.020
Number of Units Outstanding,
End of Period -- 17,530 80,075 140,070
FIDELITY VIP GROWTH SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.20 $ 15.19 $ 13.33
Accumulation Unit Value, End
of Period $11.20 $ 15.19 $ 13.33 10.831
Number of Units Outstanding,
End of Period -- 45,514 210,159 224,251
FIDELITY VIP HIGH INCOME
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.43 $ 11.13 $ 8.51
Accumulation Unit Value, End
of Period $10.43 $ 11.13 $ 8.51 $ 7.411
Number of Units Outstanding,
End of Period -- 3,914 55,337 76,456
FRANKLIN SMALL CAP INVESTMENTS
(CLASS 2) SUB-ACCOUNT(1)(3)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 12.67 $ 20.95
Accumulation Unit Value, End
of Period -- $ 12.67 $ 20.95
Number of Units Outstanding,
End of Period -- -- 158
FRANKLIN SMALL CAP (CLASS 2)
SUB-ACCOUNT(2)(3)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 12.16
Accumulation Unit Value, End
of Period -- -- $ 12.16
Number of Units Outstanding,
End of Period -- -- --
GOLDMAN SACHS VIT CAPITAL
GROWTH SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.09 $ 13.95 $ 12.67
Accumulation Unit Value, End
of Period $11.09 $ 13.95 $ 12.67 $ 10.689
Number of Units Outstanding,
End of Period -- -- -- 12,933
GOLDMAN SACHS VIT
CORE/(R)/SMALL CAP EQUITY
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.60 $ 12.36 $ 12.38
Accumulation Unit Value, End
of Period $10.60 $ 12.36 $ 12.38
Number of Units Outstanding,
End of Period -- -- --
GOLDMAN SACHS VIT CORE/(R)/ US
EQUITY SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.89 $ 13.46 $ 11.97
Accumulation Unit Value, End
of Period $10.89 $ 13.46 $ 11.97 $ 10.394
Number of Units Outstanding,
End of Period -- -- -- 514
GOLDMAN SACHS VIT GLOBAL INCOME
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 9.67 $ 9.90 $ 14.28
Accumulation Unit Value, End
of Period $ 9.67 $ 9.90 $ 14.28 $ 11.013
Number of Units Outstanding,
End of Period -- -- -- 9,473
GOLDMAN SACHS VIT INTERNATONAL
EQUITY SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.84 $ 14.22 $ 12.18
Accumulation Unit Value, End
of Period $10.84 $ 14.22 $ 12.18 $ 9.338
Number of Units Outstanding,
End of Period -- -- 272 204
MFS EMERGING GROWTH SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.95 $ 20.83 $ 16.52
Accumulation Unit Value, End
of Period $11.95 $ 20.83 $ 16.52 $ 10.84
Number of Units Outstanding,
End of Period -- 3,068 78,095 112,839
MFS INVESTORS TRUST SERIES
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.81 $ 11.38 $ 11.21
Accumulation Unit Value, End
of Period $10.81 $ 11.38 $ 11.21 $ 9.29
Number of Units Outstanding,
End of Period -- 3,323 23,834 35,987
MFS NEW DISCOVERY SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.38 $ 19.47 $ 18.83
Accumulation Unit Value, End
of Period $11.38 $ 19.47 $ 18.83 $ 17.64
Number of Units Outstanding,
End of Period -- 1,669 2,029 11,438
MFS RESEARCH SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 11.52 $ 10.82
Accumulation Unit Value, End
of Period -- $ 11.52 $ 10.82 $ 8.40
Number of Units Outstanding,
End of Period -- -- 27,212 48,292
MUTUAL SHARE SECURITIES (CLASS
2) SUB-ACCOUNT(2)(3)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 14.09
Accumulation Unit Value, End
of Period -- -- $ 14.09 14.876
Number of Units Outstanding,
End of Period -- -- 4,988 1,904
MUTUAL SHARES INVESTMENTS CLASS
(2) SUB-ACCOUNT(1)(3)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 10.31 $ 10.31
Accumulation Unit Value, End
of Period -- -- $ 10.31 $ 14.88
Number of Units Outstanding,
End of Period -- -- -- 1,904
OPPENHEIMER AGGRESSIVE GROWTH
SUB-ACCOUNT(1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 13.72 $ 12.02
Accumulation Unit Value, End
of Period -- $ 13.72 $ 12.02 $ 8.15
Number of Units Outstanding,
End of Period -- -- 33,424 67,549
OPPENHEIMER CAPITAL
APPRECIATION SUB-ACCOUNT(1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 12.11 $ 11.92
Accumulation Unit Value, End
of Period -- $ 12.11 $ 11.92 $ 10.28
Number of Units Outstanding,
End of Period -- -- 25,674 80,173
OPPENHEIMER GLOBAL SECURITIES
SUB-ACCOUNT(1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 13.10 $ 13.59
Accumulation Unit Value, End
of Period -- $ 13.10 $ 13.59 $ 11.79
Number of Units Outstanding,
End of Period -- -- 32,776 78,891
OPPENHEIMER MAIN STREET GROWTH
AND INCOME SUB-ACCOUNT(1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 10.77 $ 9.70
Accumulation Unit Value, End
of Period -- $ 10.77 $ 9.70 $ 8.60
Number of Units Outstanding,
End of Period -- -- 139,125 263,407
OPPENHEIMER STRATEGIC BOND
SUB-ACCOUNT(1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 10.16 $ 10.29
Accumulation Unit Value, End
of Period -- $ 10.16 $ 10.29 $ 10.64
Number of Units Outstanding,
End of Period -- -- 19,035 64,322
TEMPLETON DEVELOPING MARKETS
SECURITIES (CLASS 2)
SUB-ACCOUNT(1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 12.16 $ 8.15
Accumulation Unit Value, End
of Period -- $ 12.16 $ 8.15
Number of Units Outstanding,
End of Period -- -- --
TEMPLETON FOREIGN EQUITY
SECURITIES SUB-ACCOUNT (5)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 11.25 $ 10.84
Accumulation Unit Value, End
of Period -- $ 11.25 $ 10.84 $ 8.984
Number of Units Outstanding,
End of Period -- -- 1,773 2,056
TEMPLETON GROWTH SECURITIES
SUB-ACCOUNT (2)(3)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 11.36 $ 13.57
Accumulation Unit Value, End
of Period -- $ 11.36 $ 13.57 $ 13.21
Number of Units Outstanding,
End of Period -- -- 6,599 10,369
TEMPLETON STOCK (CLASS 2)
SUB-ACCOUNT(1)(3)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 11.40
Accumulation Unit Value, End
of Period -- -- $ 11.40
Number of Units Outstanding,
End of Period -- -- 0
VAN KAMPEN UIF EQUITY GROWTH
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.94 $ 15.05 $ 13.11
Accumulation Unit Value, End
of Period $10.94 $ 15.05 $ 13.11
Number of Units Outstanding,
End of Period -- 1,953 1,953
VAN KAMPEN UIF CORE PLUS FIXED
INCOME SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.15 $ 9.85 $ 10.80
Accumulation Unit Value, End
of Period $10.15 $ 9.85 $ 10.80
Number of Units Outstanding,
End of Period -- 1,566 4,181
VAN KAMPEN UIF GLOBAL VALUE
EQUITY SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.43 $ 10.71 $ 11.78
Accumulation Unit Value, End
of Period $10.43 $ 10.71 $ 11.78
Number of Units Outstanding,
End of Period -- -- 245
VAN KAMPEN UIF MID CAP VALUE
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.96 $ 13.04 $ 14.25
Accumulation Unit Value, End
of Period $10.96 $ 13.04 $ 14.25
Number of Units Outstanding, -- -- --
End of Period
- -------------------------------------------------------------------------------
VAN KAMPEN UIF VALUE
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 9.95 $ 9.63 $ 11.87
Accumulation Unit Value, End
of Period $ 9.95 $ 9.63 $ 11.87
Number of Units Outstanding,
End of Period -- 903 903
47
48
49
* The Contracts were first offered on November 10, 1998. The Accumulation Unit
Values in this table reflect a mortality and expense risk charge of 1.27% and
an administrative expense charge of 0.10%. All of the Variable Sub-Accounts
commenced operations on or before November 10, 1998 except as described in the
footnotes below.
(1) Variable Sub-Accounts that commenced operations on Novemeber 1, 1999.
(2) Variable Sub-Accounts that commenced operations on May 1, 2000.
(3) Effective May 1, 2000, the Portfolios in which the Franklin Small Cap
Investments (Class 2), Mutual Shares Investments (Class 2), and Templeton
Stock (Class 2) Variable Sub-Accounts invested were merged into the Franklin
Small Cap (Class 2), Mutual Shares Securities (Class 2), and the Templeton
Growth Securities (Class 2) Portfolios. Accordingly, for administrative
convenience, as of May 1, 2000, the corresponding Variable Sub-Accounts
merged with and into new Variable Sub-Accounts named Franklin Small Cap
(Class 2), Mutual Shares Securities (Class 2), and the Templeton Growth
Securities (Class 2), respectively, with Accumulation Unit Values starting at
$10.00. For each of the comparison, in this table we are continuing to show
AUV's for the predecessor Variable Sub-Accounts.
(4) Effective May 1, 2002 AIM V.I. Growth and Income Fund, AIM V.I.
International Equity Fund and AIM V.I. Value Fund changed their names to the
AIM V.I. Core Equity Fund, AIM V.I. International Growth Fund and AIM V.I.
Premier Equity Fund, respectively.
(5) Effective May 1, 2002 the Templeton International Securities Fund - Class 2
changed its name to the Templeton Foreign Securities Fund - Class 2.
(6) Effective May 1, 2002 the Portfolios have been re-branded and have changed
names from Morgan Stanley UIF Fixed Income Portfolio to Van
50
Kampen UIF Core Plus Fixed Income Portfolio, Morgan Stanley UIF Equity Growth
Portfolio to Van Kampen UIF Equity Growth Portfolio, Morgan Stanley UIF
Global Value Equity Porfolio to Van Kampen UIF Global Value Equity Portfolio,
Morgan Stnaley International Magnum Portfolio to Van Kampen UIF International
Magnum Portfolio, Morgan Stanley UIF Mid Cap Value Portfolio to Van Kampen
UIF Mid Cap Value Portfolio, Morgan Stanley UIF U.S. Real Estate Portfolio to
Van Kampen UIF U.S. Real Estate Portfolio and Morgan Stanley UIF Value
Portfolio Van Kampen UIF Value Portfolio.
(7) Goldman Sachs VIT Global Income Portfolio will not be available to new
investors beginning May 1, 2002.
51
APPENDIX A
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED
- --------------------------------------------------------------------------------
WITH ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER
(FOR CONTRACTS ISSUED BEFORE 9/22/00)
For the Years Beginning January 1*
and Ending December 31,
----------------------------------------------
SUB-ACCOUNTS 1998 1999 2000 2001
- -------------------------------------------------------------------------------
AIM V.I. BALANCED SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.73 $ 12.66 $ 11.99
Accumulation Unit Value, End
of Period $10.73 $ 12.66 $ 11.99 $ 10.50
Number of Units Outstanding,
End of Period -- 7,487 52,646 90,025
AIM V.I.CORE EQUITY SUB-ACCOUNT
(4)
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.36 $ 15.09 $ 12.74
Accumulation Unit Value, End
of Period $11.36 $ 15.09 $ 12.74 $ 9.72
Number of Units Outstanding,
End of Period -- 12,180 53,747 73,192
AIM V.I. DIVERSIFIED INCOME
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.22 $ 9.91 $ 9.87
Accumulation Unit Value, End
of Period $10.22 $ 9.91 $ 9.87 $ 10.10
Number of Units Outstanding,
End of Period -- 721 721 721
AIM V.I. GOVERNMENT SECURITIES
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.38 $ 9.85 $ 10.73
Accumulation Unit Value, End
of Period $10.38 $ 9.85 $ 10.73 $ 11.28
Number of Units Outstanding,
End of Period -- -- 2,954 12,908
AIM V.I. GROWTH SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.83 $ 15.82 $ 12.43
Accumulation Unit Value, End
of Period $11.83 $ 15.82 $ 12.43 $ 8.12
Number of Units Outstanding,
End of Period -- 13,275 69,688 57,165
AIM V.I. INTERNATIONAL GROWTH
SUB-ACCOUNT (4)
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.68 $ 16.38 $ 11.92
Accumulation Unit Value, End
of Period $10.68 $ 16.38 $ 11.92 $ 9.00
Number of Units Outstanding,
End of Period -- -- 4,196 43,53
AIM V.I. PREMIER EQUITY
SUB-ACCOUNT (4)
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.52 $ 14.80 $ 12.49
Accumulation Unit Value, End
of Period $11.52 $ 14.80 $ 12.49 $ 10.79
Number of Units Outstanding,
End of Period -- 42,074 115,418 133,037
DREYFUS SOCIALLY RESPONSIBLE
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.78 $ 14.33 $ 12.55
Accumulation Unit Value, End
of Period $10.78 $ 14.33 $ 12.55 $ 9.56
Number of Units Outstanding,
End of Period -- 5,493 7,121 6,350
DREYFUS STOCK INDEX SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.87 $ 12.90 $ 11.52
Accumulation Unit Value, End
of Period $10.87 $ 12.90 $ 11.52 $ 9.96
Number of Units Outstanding,
End of Period 401 19,955 21,326 19,024
DREYFUS VIF GROWTH AND INCOME
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.64 $ 12.40 $ 11.75
Accumulation Unit Value, End
of Period $10.64 $ 12.40 $ 11.75 $ 10.886
Number of Units Outstanding,
End of Period -- 3,983 3,676 3,568
DREYFUS VIF MONEY MARKET
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.04 $ 10.36 $ 10.81
Accumulation Unit Value, End
of Period $10.04 $ 10.36 $ 10.81 $ 11.057
Number of Units Outstanding,
End of Period -- 577 489 16,157
FIDELITY VIP II CONTRAFUND
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.65 $ 14.26 $ 13.10
Accumulation Unit Value, End
of Period $11.65 $ 14.26 $ 13.10 $ 11.315
Number of Units Outstanding,
End of Period 387 32,161 13,1791 134,375
FIDELITY VIP EQUITY INCOME
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.47 $ 10.96 $ 11.70
Accumulation Unit Value, End
of Period $10.47 $ 10.96 $ 11.70 $ 10.944
Number of Units Outstanding,
End of Period -- 11,621 45,849 55,016
FIDELITY VIP GROWTH SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.19 $ 15.15 $ 13.27
Accumulation Unit Value, End
of Period $11.19 $ 15.15 $ 13.27 $ 10.756
Number of Units Outstanding,
End of Period -- 22,088 151,189 149,935
FIDELITY VIP HIGH INCOME
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.43 $ 11.10 $ 8.47
Accumulation Unit Value, End
of Period $10.43 $ 11.10 $ 8.47 $ 7.359
Number of Units Outstanding,
End of Period -- 3,667 31,190 24,128
FRANKLIN SMALL CAP INVESTMENTS
(CLASS 2) SUB-ACCOUNT(1)(3)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 12.66 $ 12.15
Accumulation Unit Value, End
of Period -- $ 12.66 $ 12.15
Number of Units Outstanding,
End of Period -- -- --
FRANKLIN SMALL CAP (CLASS 2)
SUB-ACCOUNT(2)(3)
Accumulation Unit Value,
Beginning of Period -- -- $ 12.66 $ 12.15
Accumulation Unit Value, End
of Period -- -- $ 12.15 $ 16.83
Number of Units Outstanding,
End of Period -- -- -- --
GOLDMAN SACHS VIT CAPITAL
GROWTH SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.09 $ 13.92 $ 12.61
Accumulation Unit Value, End
of Period $11.09 $ 13.92 $ 12.61 $ 10.615
Number of Units Outstanding,
End of Period -- 2,449 41,73 2,958
GOLDMAN SACHS VIT CORE/(R)/
SMALL CAP EQUITY SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.59 $ 12.30 $ 12.32
Accumulation Unit Value, End
of Period $10.59 $ 12.30 $ 12.32 $ 12.674
Number of Units Outstanding,
End of Period -- 17,918 18,069 17,077
GOLDMAN SACHS VIT CORE/(R)/ US
EQUITY SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.89 $ 13.39 $ 11.91
Accumulation Unit Value, End
of Period $10.89 $ 13.39 $ 11.91 $ 10.322
Number of Units Outstanding,
End of Period 401 20,515 23,250 20,215
GOLDMAN SACHS VIT GLOBAL INCOME
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 9.66 $ 9.87 $ 10.60
Accumulation Unit Value, End
of Period $ 9.66 $ 9.87 $ 10.60
Number of Units Outstanding,
End of Period -- -- --
GOLDMAN SACHS VIT INTERNATONAL
EQUITY SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.84 $ 14.18 $ 12.12
Accumulation Unit Value, End
of Period $10.84 $ 14.18 $ 12.12 $ 9.273
Number of Units Outstanding,
End of Period -- -- 1,812 1,812
MFS EMERGING GROWTH SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.94 $ 20.78 $ 16.44
Accumulation Unit Value, End
of Period $11.94 $ 20.78 $ 16.44 $ 10.76
Number of Units Outstanding,
End of Period 377 19,189 63,991 65,183
MFS INVESTORS TRUST SERIES
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.81 $ 11.35 $ 11.16
Accumulation Unit Value, End
of Period $10.81 $ 11.35 $ 11.16 $ 9.23
Number of Units Outstanding,
End of Period -- 4,808 11,160 9,277
MFS NEW DISCOVERY SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 11.38 $ 19.42 $ 18.74
Accumulation Unit Value, End
of Period $11.38 $ 19.42 $ 18.74 $ 17.51
Number of Units Outstanding,
End of Period -- 707 1,509
MFS RESEARCH SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 11.52 $ 10.79
Accumulation Unit Value, End
of Period -- $ 11.52 $ 10.79 $ 8.365
Number of Units Outstanding,
End of Period -- -- 60,709
MUTUAL SHARE SECURITIES (CLASS
2) SUB-ACCOUNT(2)(3)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 14.07
Accumulation Unit Value, End
of Period -- -- $ 14.07 $ 15.42
Number of Units Outstanding,
End of Period -- -- 4,992 --
MUTUAL SHARES INVESTMENTS CLASS
(2) SUB-ACCOUNT(1)(3)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 10.30 $ 10.30
Accumulation Unit Value, End
of Period -- -- $ 10.30
Number of Units Outstanding,
End of Period -- -- --
OPPENHEIMER AGGRESSIVE GROWTH
SUB-ACCOUNT(1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 13.72 $ 11.99
Accumulation Unit Value, End
of Period -- $ 13.72 $ 11.99 $ 8.11
Number of Units Outstanding,
End of Period -- -- 38,398 42,643
OPPENHEIMER CAPITAL
APPRECIATION SUB-ACCOUNT(1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 12.10 $ 11.89
Accumulation Unit Value, End
of Period -- $ 12.10 $ 11.89 $ 10.23
Number of Units Outstanding,
End of Period -- -- 35,976 43,914
OPPENHEIMER GLOBAL SECURITIES
SUB-ACCOUNT(1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 13.10 $ 13.55
Accumulation Unit Value, End
of Period -- $ 13.10 $ 13.55 $ 11.73
Number of Units Outstanding,
End of Period -- -- 33,241 33,299
OPPENHEIMER MAIN STREET GROWTH
AND INCOME SUB-ACCOUNT(1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 10.77 $ 9.67
Accumulation Unit Value, End
of Period -- $ 10.77 $ 9.67 $ 8.55
Number of Units Outstanding,
End of Period -- -- 130,587 144,668
OPPENHEIMER STRATEGIC BOND
SUB-ACCOUNT(1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 10.15 $ 10.26
Accumulation Unit Value, End
of Period -- $ 10.15 $ 10.26 $ 10.59
Number of Units Outstanding,
End of Period -- -- 19,624 26,549
TEMPLETON DEVELOPING MARKETS
SECURITIES (CLASS 2)
SUB-ACCOUNT(1)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 12.15 $ 8.13
Accumulation Unit Value, End
of Period -- $ 12.15 $ 8.13 $ 7.48
Number of Units Outstanding,
End of Period -- -- -- --
TEMPLETON FOREIGN SECURITIES
SUB-ACCOUNT (5)
Accumulation Unit Value,
Beginning of Period -- $ 10.00 $ 11.25 $ 10.82
Accumulation Unit Value, End
of Period -- $ 11.25 $ 10.82 $ 9.64
Number of Units Outstanding,
End of Period -- -- -- --
TEMPLETON GROWTH SECURITIES
SUB-ACCOUNT (2)(3)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 13.55
Accumulation Unit Value, End
of Period -- -- $ 13.55 $ 13.17
Number of Units Outstanding,
End of Period -- -- 9,457 10221
TEMPLETON STOCK (CLASS 2)
SUB-ACCOUNT(1)(3)
Accumulation Unit Value,
Beginning of Period -- -- $ 10.00 $ 11.39
Accumulation Unit Value, End
of Period -- -- $ 11.39
Number of Units Outstanding,
End of Period -- -- 0
VAN KAMPEN UIF CORE PLUS FIXED
INCOME SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.15 $ 9.82 $ 10.75
Accumulation Unit Value, End
of Period $10.15 $ 9.82 $ 10.75
Number of Units Outstanding,
End of Period -- -- --
VAN KAMPEN UIF EQUITY GROWTH
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.94 $ 15.02 $ 13.04
Accumulation Unit Value, End
of Period $10.94 $ 15.02 $ 13.04
Number of Units Outstanding,
End of Period 406 7,464 11,011
VAN KAMPEN UIF GLOBAL VALUE
EQUITY SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.42 $ 10.69 $ 11.72
Accumulation Unit Value, End
of Period $10.42 $ 10.69 $ 11.72
Number of Units Outstanding,
End of Period -- 245 363
MORGAN STANLEY UIF MID CAP
VALUE SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 10.96 $ 13.01 $ 14.18
Accumulation Unit Value, End
of Period $10.96 $ 13.01 $ 14.18
Number of Units Outstanding,
End of Period -- 1,788 4,089
VAN KAMPEN UIF VALUE
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $10.00 $ 9.95 $ 9.61 $ 11.82
Accumulation Unit Value, End
of Period $ 9.95 $ 9.61 $ 11.82
Number of Units Outstanding,
End of Period -- 17,465 16,697
52
53
54
* The Contracts were first offered on November 10, 1998. The Accumulation Unit
Values in this table reflect a Mortality and expense risk charge of 1.49% and an
administrative expense charge of 0.10%. All of the Variable Sub-Accounts
commenced operations on or before November 10, 1998 except as described in the
footnotes below.
(1) Variable Sub-Accounts that commenced operations on Novemeber 1, 1999.
(2) Variable Sub-Accounts that commenced operations on May 1, 2000.
(3) Effective May 1, 2000, the Portfolios in which the Franklin Small Cap
Investments (Class 2), Mutual Shares Investments (Class 2), and Templeton
Stock (Class 2) Variable Sub-Accounts invested were merged into the Franklin
Small Cap (Class 2), Mutual Shares Securities (Class 2), and the Templeton
Growth Securities (Class 2) Portfolios. Accordingly, for administrative
convenience, as of May 1, 2000, the corresponding Variable Sub-Accounts
merged with and into new Variable Sub-Accounts named Franklin Small Cap
(Class 2), Mutual Shares Securities (Class 2), and the Templeton Growth
Securities (Class 2), respectively, with Accumulation Unit Values starting at
$10.00. For each of the comparison, in this table we are continuing to show
AUV's for the predecessor Variable Sub-Accounts.
(4) Effective May 1, 2002 AIM V.I. Growth and Income Fund, AIM V.I.
International Equity Fund and AIM V.I. Value Fund changed their names to the
AIM V.I. Core Equity Fund, AIM V.I. International Growth Fund and AIM V.I.
Premier Equity Fund, respectively.
(5) Effective May 1, 2002 the Templeton International Securities Fund - Class 2
changed its name to the Templeton Foreign Securities Fund - Class 2.
(6) Effective May 1, 2002 the Portfolios have been re-branded and have changed
names from Morgan Stanley UIF Fixed Income Portfolio to Van
55
Kampen UIF Core Plus Fixed Income Portfolio, Morgan Stanley UIF Equity Growth
Portfolio to Van Kampen UIF Equity Growth Portfolio, Morgan Stanley UIF
Global Value Equity Porfolio to Van Kampen UIF Global Value Equity Portfolio,
Morgan Stnaley International Magnum Portfolio to Van Kampen UIF International
Magnum Portfolio, Morgan Stanley UIF Mid Cap Value Portfolio to Van Kampen
UIF Mid Cap Value Portfolio, Morgan Stanley UIF U.S. Real Estate Portfolio to
Van Kampen UIF U.S. Real Estate Portfolio and Morgan Stanley UIF Value
Portfolio Van Kampen UIF Value Portfolio.
(7) Goldman Sachs VIT Global Income Portfolio will not be available to new
investors beginning May 1, 2002.
56
APPENDIX A
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED*
- --------------------------------------------------------------------------------
WITH ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER II
(FOR CONTRACTS ISSUED ON OR AFTER 9/22/00)
For the Years Beginning January 1*
and Ending December 31,
-------------------------------------------
SUB-ACCOUNTS 1998 1999 2000 2001
- -------------------------------------------------------------------------------
AIM V.I. BALANCED SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $ 10.00 $ 9.21
Accumulation Unit Value, End of
Period $ 9.21 $ 8.024
Number of Units Outstanding, End
of Period 4,545 61,468
AIM V.I.CORE EQUITY SUB-ACCOUNT
(4)
Accumulation Unit Value,
Beginning of Period $ 10.00 $ 8.06
Accumulation Unit Value, End of
Period 8.06 $ 6.117
Number of Units Outstanding, End
of Period 20,079 104,459
AIM V.I. DIVERSIFIED INCOME
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $ 10.00 $ 7.80
Accumulation Unit Value, End of
Period $ 7.80 $ 10.297
Number of Units Outstanding, End
of Period 34,530 --
AIM V.I. GOVERNMENT SECURITIES
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $ 10.00 $ 10.43
Accumulation Unit Value, End of
Period $ 10.43 $ 10.785
Number of Units Outstanding, End
of Period -- --
AIM V.I. GROWTH SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $ 10.00 $ 7.52
Accumulation Unit Value, End of
Period $ 7.52 $ 4.890
Number of Units Outstanding, End
of Period 32,771 133,470
AIM V.I. INTERNATIONAL GROWTH
SUB-ACCOUNT (4)
Accumulation Unit Value,
Beginning of Period $ 10.00 $ 8.32
Accumulation Unit Value, End of
Period $ 8.32 $ 6.255
Number of Units Outstanding, End
of Period -- 1,446
AIM V.I. PREMIER EQUITY
SUB-ACCOUNT (4)
Accumulation Unit Value,
Beginning of Period $ 10.00 $ 8.54
Accumulation Unit Value, End of
Period $ 8.54 $ 7.345
Number of Units Outstanding, End
of Period 22,904 96,014
DREYFUS SOCIALLY RESPONSIBLE
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $ 10.00 $ 8.42
Accumulation Unit Value, End of
Period $ 8.42 $ 6.410
Number of Units Outstanding, End
of Period -- 2,161
DREYFUS STOCK INDEX SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $ 10.00 $ 8.83
Accumulation Unit Value, End of
Period $ 8.83 $ 7.626
Number of Units Outstanding, End
of Period 403 5,634
DREYFUS VIF GROWTH AND INCOME
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $ 10.00 $ 9.38
Accumulation Unit Value, End of
Period $ 9.38 $ 8.683
Number of Units Outstanding, End
of Period -- 6,523
DREYFUS VIF MONEY MARKET
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $ 10.00 $ 10.17
Accumulation Unit Value, End of
Period $ 10.17 $ 10.400
Number of Units Outstanding, End
of Period 8,743 10,868
FIDELITY VIP CONTRAFUND
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $ 10.00 $ 9.23
Accumulation Unit Value, End of
Period $ 9.23 $ 7.970
Number of Units Outstanding, End
of Period 14,991 80,328
FIDELITY VIP EQUITY INCOME
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $ 10.00 $ 10.42
Accumulation Unit Value, End of
Period $ 10.42 $ 9.741
Number of Units Outstanding, End
of Period 17,198 42,652
FIDELITY VIP GROWTH SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $ 10.00 $ 8.37
Accumulation Unit Value, End of
Period $ 8.37 $ 6.782
Number of Units Outstanding, End
of Period 21,583 76,935
FIDELITY VIP HIGH INCOME
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $ 10.00 $ 8.30
Accumulation Unit Value, End of
Period 8.30 $ 7.209
Number of Units Outstanding, End
of Period 102 4,442
FRANKLIN SMALL CAP INVESTMENTS
(CLASS 2) SUB-ACCOUNT(1)(3)
Accumulation Unit Value,
Beginning of Period
Accumulation Unit Value, End of
Period
Number of Units Outstanding, End
of Period
FRANKLIN SMALL CAP (CLASS 2)
SUB-ACCOUNT(2)(3)
Accumulation Unit Value,
Beginning of Period $ 10.00 $ 10.10
Accumulation Unit Value, End of
Period $ 10.00 $ 6.790
Number of Units Outstanding, End
of Period 836
GOLDMAN SACHS VIT CAPITAL GROWTH
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $ 10.00 $ 8.76
Accumulation Unit Value, End of
Period $ 8.76 $ 7.737
Number of Units Outstanding, End
of Period 1,593 4,137
GOLDMAN SACHS VIT CORE/(R)/ SMALL
CAP EQUITY SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $ 10.00 $ 9.61
Accumulation Unit Value, End of
Period $ 9.61 $ 9.88
Number of Units Outstanding, End
of Period -- 4,499
GOLDMAN SACHS VIT CORE US EQUITY
SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $ 10.00 $ 8.81
Accumulation Unit Value, End of
Period $ 8.81 $ 7.627
Number of Units Outstanding, End
of Period 1,916 4,493
GOLDMAN SACHS VIT GLOBAL INCOME
SUB-ACCOUNT (7)
Accumulation Unit Value,
Beginning of Period $ 10.00 $ 10.36
Accumulation Unit Value, End of
Period $ 10.36 --
Number of Units Outstanding, End
of Period -- --
GOLDMAN SACHS VIT INTERNATONAL
EQUITY SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $ 10.00 $ 9.09
Accumulation Unit Value, End of
Period $ 9.09 --
Number of Units Outstanding, End
of Period -- --
MFS EMERGING GROWTH SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $ 10.00 $ 8.08
Accumulation Unit Value, End of
Period $ 8.08 $ 5.286
Number of Units Outstanding, End
of Period 11,866 61,761
MFS INVESTORS TRUST SERIES
Accumulation Unit Value,
Beginning of Period $ 10.00 $ 9.64
Accumulation Unit Value, End of
Period $ 9.64 $ 7.965
Number of Units Outstanding, End
of Period 576 15527
MFS NEW DISCOVERY SUB-ACCOUNT
Accumulation Unit Value,
Beginning of Period $ 10.00 $ 9.55
Accumulation Unit Value, End of
Period $ 9.55 $ 8.923
Number of Units Outstanding, End
of Period -- 4,370
MFS RESEARCH SUB-ACCOUNT (1)
Accumulation Unit Value,
Beginning of Period $ 10.00 $ 8.61
Accumulation Unit Value, End of
Period $ 8.61 $ 6.666
Number of Units Outstanding, End
of Period 11,698 70,874
MUTUAL SHARE SECURITIES (CLASS 2)
SUB-ACCOUNT(2)(3)
Accumulation Unit Value,
Beginning of Period $ 10.00 $ 10.45
Accumulation Unit Value, End of
Period $ 10.45 $ 11.00
Number of Units Outstanding, End
of Period -- 2,884
MUTUAL SHARE INVESTMENTS (CLASS 2)
SUB-ACCOUNT(1)(3)
Accumulation Unit Value,
Beginning of Period
Accumulation Unit Value, End of
Period
Number of Units Outstanding, End
of Period
OPPENHEIMER AGGRESSIVE GROWTH
SUB-ACCOUNT(1)
Accumulation Unit Value,
Beginning of Period $ 10.00 $ 6.94
Accumulation Unit Value, End of
Period $ 6.94 $ 4.694
Number of Units Outstanding, End
of Period 8,000 54,096
OPPENHEIMER CAPITAL APPRECIATION
SUB-ACCOUNT(1)
Accumulation Unit Value,
Beginning of Period $ 10.00 $ 8.92
Accumulation Unit Value, End of
Period $ 8.92 $ 7.667
Number of Units Outstanding, End
of Period 18937 81840
OPPENHEIMER GLOBAL SECURITIES
SUB-ACCOUNT(1)
Accumulation Unit Value,
Beginning of Period $ 10.00 $ 9.41
Accumulation Unit Value, End of
Period $ 9.41 $ 8.142
Number of Units Outstanding, End
of Period 2,457 16,839
OPPENHEIMER MAIN STREET GROWTH AND
INCOME SUB-ACCOUNT(1)
Accumulation Unit Value,
Beginning of Period $ 10.00 $ 8.72
Accumulation Unit Value, End of
Period $ 8.72 $ 7.702
Number of Units Outstanding, End
of Period 33,469 16,839
OPPENHEIMER STRATEGIC BOND
SUB-ACCOUNT(1)
Accumulation Unit Value,
Beginning of Period $ 10.00 $ 9.88
Accumulation Unit Value, End of
Period $ 9.88 $ 10.184
Number of Units Outstanding, End
of Period 976 34,123
TEMPLETON DEVELOPING MARKETS
SECURITIES (CLASS 2)
SUB-ACCOUNT(1)
Accumulation Unit Value,
Beginning of Period $ 10.00 $ 8.17
Accumulation Unit Value, End of
Period $ 8.17 $ 7.507
Number of Units Outstanding, End
of Period -- --
TEMPLETON FOREIGN SECURITIES
SUB-ACCOUNT(1) (5)
Accumulation Unit Value,
Beginning of Period 10.00 9.60
Accumulation Unit Value, End of
Period $ 9.60 $ 8.548
Number of Units Outstanding, End
of Period -- --
TEMPLETON GROWTH SECURITIES
SUB-ACCOUNT (2)(3)
Accumulation Unit Value,
Beginning of Period $ 10.00 $ 10.00
Accumulation Unit Value, End of
Period $ 10.00 $ 9.703
Number of Units Outstanding, End
of Period 2,289 2,050
TEMPLETON STOCK SECURITIES (Class
2) SUB-ACCOUNT (1)(3)
Accumulation Unit Value,
Beginning of Period
Accumulation Unit Value, End of
Period
Number of Units Outstanding, End
of Period
VAN KAMPEN UIF EQUITY GROWTH
SUB-ACCOUNT (6)
Accumulation Unit Value,
Beginning of Period $ 10.00 $ 8.06
Accumulation Unit Value, End of
Period $ 8.06 --
Number of Units Outstanding, End
of Period 2,971 --
VAN KAMPEN UIF CORE PLUS FIXED
INCOME SUB-ACCOUNT (6)
Accumulation Unit Value,
Beginning of Period $ 10.00 $ 10.49
Accumulation Unit Value, End of
Period $ 10.49 --
Number of Units Outstanding, End
of Period -- --
VAN KAMPEN UIF GLOBAL EQUITY
SUB-ACCOUNT (6)
Accumulation Unit Value,
Beginning of Period $ 10.00 $ 10.50
Accumulation Unit Value, End of
Period $ 10.50 --
Number of Units Outstanding, End
of Period -- --
VAN KAMPEN UIF MID CAP VALUE
SUB-ACCOUNT (6)
Accumulation Unit Value,
Beginning of Period $ 10.00 $ 9.92
Accumulation Unit Value, End of
Period $ 9.92 --
Number of Units Outstanding, End
of Period 1,841 --
VAN KAMPEN UIF VALUE SUB-ACCOUNT
(6)
Accumulation Unit Value,
Beginning of Period $ 10.00 $ 11.65
Accumulation Unit Value, End of
Period $ 11.65 --
Number of Units Outstanding, End
of Period -- --
57
58
59
* The Contracts were first offered on November 10, 1998. The Accumulation Unit
Values in this table reflect a mortality and expense risk charge of 1.55% and
an administrative charge of 0.10%. All of the Varialbe Sub-Accounts commenced
operations on or before November 10, 1998, except as footnotes below.
(1) Variable Sub-Accounts that commenced operations on Novemeber 1, 1999.
(2) Variable Sub-Accounts that commenced operations on May 1, 2000.
(3) Effective May 1, 2000, the Portfolios in which the Franklin Small Cap
Investments (Class 2), Mutual Shares Investments (Class 2), and Templeton
Stock (Class 2) Variable Sub-Accounts invested were merged into the Franklin
Small Cap (Class 2), Mutual Shares Securities (Class 2), and the Templeton
Growth Securities (Class 2) Portfolios. Accordingly, for administrative
convenience, as of May 1, 2000, the corresponding Variable Sub-Accounts
merged with and into new Variable Sub-Accounts named Franklin Small Cap
(Class 2), Mutual Shares Securities (Class 2), and the Templeton Growth
Securities (Class 2), respectively, with Accumulation Unit Values starting at
$10.00. For each of the comparison, in this table we are continuing to show
AUV's for the predecessor Variable Sub-Accounts.
(4) Effective May 1, 2002 AIM V.I. Growth and Income Fund, AIM V.I.
International Equity Fund and AIM V.I. Value Fund changed their names to the
AIM V.I. Core Equity Fund, AIM V.I. International Growth Fund and AIM V.I.
Premier Equity Fund, respectively.
(5) Effective May 1, 2002 the Templeton International Securities Fund - Class 2
changed its name to the Templeton Foreign Securities Fund - Class 2.
(6) Effective May 1, 2002 the Portfolios have been re-branded and have changed
names from Morgan Stanley UIF Fixed Income Portfolio to Van Kampen UIF Core
Plus Fixed Income Portfolio, Morgan Stanley UIF Equity Growth Portfolio to
Van Kampen UIF Equity Growth Portfolio, Morgan Stanley UIF Global Value
Equity Porfolio to Van Kampen UIF Global Value Equity Portfolio, Morgan
Stnaley International Magnum Portfolio to Van Kampen UIF International Magnum
Portfolio, Morgan Stanley UIF Mid Cap Value Portfolio to Van Kampen UIF Mid
Cap Value Portfolio, Morgan Stanley UIF U.S. Real Estate Portfolio to Van
Kampen UIF U.S. Real Estate Portfolio and Morgan Stanley UIF Value Portfolio
Van Kampen UIF Value Portfolio.
(7) Goldman Sachs VIT Global Income Portfolio will not be available to new
investors beginning May 1, 2002.
60
APPENDIX B
- --------------------------------------------------------------------------------
MARKET VALUE ADJUSTMENT
- --------------------------------------------------------------------------------
The Market Value Adjustment is based on the following:
I = the Treasury Rate for a maturity equal to the Guarantee Period for the week
preceding the establishment of the Guarantee Period.
N = the number of whole and partial years from the date we receive the
withdrawal, transfer, or death benefit request, or from the Payout Start Date to
the end of the Guarantee Period.
J = the Treasury Rate for a maturity equal to the Guarantee Period for the week
preceding the receipt of the withdrawal, transfer, death benefit, or income
payment request.*
Treasury Rate means the U.S. Treasury Note Constant Maturity yield as reported
in Federal Reserve Bulletin Release H.15.
*If a U.S. Treasury Note ("Note") with a maturity of the Guarantee Period is not
available, we will determine an appropriate interest rate based on an
interpolation of the next shortest duration and next longest duration Notes.
The Market Value Adjustment factor is determined from the following formula:
.9 X [I-(J + .0025)] X N
To determine the Market Value Adjustment, we will multiply the Market Value
Adjustment factor by the amount transferred, withdrawn (in excess of the Free
Withdrawal Amount), paid as a death benefit, or applied to an Income Plan from a
Guarantee Period at any time other than during the 30 day period after such
Guarantee Period expires.
61
EXAMPLES OF MARKET VALUE ADJUSTMENT
- --------------------------------------------------------------------------------
Purchase Payment: $10,000 allocated to a Guarantee Period
Guarantee Period: 5 years
Interest Rate: 4.50%
Full Surrender: End of Contract Year 3
NOTE: These examples assume that premium taxes are not applicable.
Step 1. Calculate Contract Value at $10,000.00 X (1.045)/3 /= $11,411.66 End of
Contract Year 3: Step 2. Calculate the Free Withdrawal .15 X ($10,000.00) =
$1,500.00 Amount:
Step 3: Calculate the Withdrawal I = 4.5%
Charge: J = 4.2%
N = 730 days =2
--------
365 days
Step 4: Calculate the Market Value Market Value Adjustment Factor: .9 X
Adjustment: [I - (J + .0025)] X N = .9 X [.045 -
(.042 + .0025)] X 2 = .0009
Market Value Adjustment = Market Value
Adjustment Factor X Amount Subject to
Market Value Adjustment:
= .0009 X ($11,411.66 - $1,500.00) =
$8.92
Step 5. Calculate the amount received
by a Contract Owner as a result of full
withdrawal at the end of Contract Year
3: $11,411.66 + $8.92 = $11,420.58
EXAMPLE 1 (ASSUME DECLINING INTEREST RATES)
62
EXAMPLE 2: (ASSUMES RISING INTEREST RATES)
Step 1. Calculate Contract Value at $10,000.00 X (1.045)/3 /= $11,411.66 End of
Contract Year 3: Step 2. Calculate the Free Withdrawal .15 X ($10,000.00) =
$1,500.00 Amount:
Step 3: Calculate the Withdrawal I = 4.5%
Charge: J = 4.8%
N = 730 days =2
--------
365 days
Step 4. Calculate the Market Value Market Value Adjustment Factor: .9 X
Adjustment: [I - (J + .0025)] X N = .9 X [.045 -
(.048 + .0025)] X 2 = - .0099
Market Value Adjustment = Market Value
Adjustment Factor X Amount Subject to
Market Value Adjustment:
= - .0099 X ($11,411.66 - $1,500.00)
= - $98.13
Step 5. Calculate the amount received
by a Contract Owner as a result of full
withdrawal at the end of Contract Year
3: $11,411.66 - $98.13 = $11,313.53
63
glac provider sai2
THE ALLSTATER PROVIDER VARIABLE ANNUITY
(formerly referred to as "The Glenbrook Life Provider Variable Annuity")
Glenbrook Life and Annuity Company Statement of Additional Information
Multi-Manager Variable Account Dated May 1, 2002
Post Office Box 94092
Palatine, IL 60094-4039
1 (800) 755-5275
This Statement of Additional Information supplements the information in the
prospectus for each of the two forms of AllstateR Provider Variable Annuity
Contracts that we offer. This Statement of Additional Information is not a
prospectus. You should read it with the prospectus, dated May 1, 2002, for each
form of Contract. You may obtain a prospectus by calling or writing us at the
address or telephone number listed above.
Except as otherwise noted, this Statement of Additional Information uses the
same defined terms as the prospectus for each of the two forms of AllstateR
Provider Variable Annuity Contracts that we offer. For convenience, we sometimes
refer to the second form of Contract that offers the Enhanced Death and Income
Benefit Combination Rider as the AllstateR Enhanced Provider Variable Annuity
contract ("Enhanced Provider Contract").
Certain Variable Sub-Accounts offered with the Enhanced Provider Contract are
not available under the Provider Contract. Also, the Enhanced Provider Contracts
are offered through multiple sales channels that may offer different
combinations of the Variable Sub-Accounts and optional riders. If you own an
Enhanced Provider Contract, please refer to your prospectus for the Variable
Sub-Accounts and optional riders available under your Contract.
TABLE OF CONTENTS
Description Page
Additions, Deletions or Substitutions of Investments
The Contract
Purchases of Contracts
Tax-free Exchanges (1035 Exchanges, Rollovers and Transfers)
Performance Information
Standardized Total Returns
Non-standardized Total Returns
Adjusted historical Total Returns
Calculation of Accumulation Unit Values
Calculation of Variable Income Payments
Calculation of Annuity Unit Values
General Matters
Incontestability
Settlements
Safekeeping of the Variable Account's Assets
Experts
Financial Statements
ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS
We may add, delete, or substitute the Portfolio shares held by any Variable
Sub-Account to the extent the law permits. We may substitute shares of any
Portfolio with those of another Portfolio of the same or different mutual
Portfolio if the shares of the Portfolio are no longer available for investment,
or if we believe investment in any Portfolio would become inappropriate in view
of the purposes of the Variable Account.
We will not substitute shares attributable to a Contract Owner's interest in a
Variable Sub-Account until we have notified the Contract Owner of the change,
and until the Securities and Exchange Commission has approved the change, to the
extent such notification and approval are required by law. Nothing contained in
this Statement of Additional Information shall prevent the Variable Account from
purchasing other securities for other series or classes of contracts, or from
effecting a conversion between series or classes of contracts on the basis of
requests made by Contract Owners.
We also may establish additional Variable Sub-Accounts or series of Variable
Sub-Accounts. Each additional Variable Sub-Account would purchase shares in a
new Portfolio of the same or different mutual fund. We may establish new
Variable Sub-Accounts when we believe marketing needs or investment conditions
warrant. We determine the basis on which we will offer any new Variable
Sub-Accounts in conjunction with the Contract to existing Contract Owners. We
may eliminate one or more Variable Sub-Accounts if, in our sole discretion,
marketing, tax or investment conditions so warrant.
We may, by appropriate endorsement, change the Contract as we believe necessary
or appropriate to reflect any substitution or change in the Portfolios. If we
believe the best interests of persons having voting rights under the Contracts
would be served, we may operate the Variable Account as a management company
under the Investment Company Act of 1940 or we may withdraw its registration
under such Act if such registration is no longer required.
THE CONTRACT
The Contract is primarily designed to aid individuals in long-term financial
planning. You can use it for retirement planning regardless of whether the
retirement plan qualifies for special federal income tax treatment.
PURCHASE OF CONTRACTS
We offer the Contracts to the public through banks as well as brokers licensed
under the federal securities laws and state insurance laws. ALFS, Inc.
("ALFS") is the principal underwriter of the Contracts. ALFS is an affiliate of
Glenbrook Life. The offering of the Contracts is continuous. We do not
anticipate discontinuing the offering of the Contracts, but we reserve the right
to do so at any time.
TAX-FREE EXCHANGES (1035 EXCHANGES, ROLLOVERS AND TRANSFERS)
We accept purchase payments that are the proceeds of a Contract in a transaction
qualifying for a tax-free exchange under Section 1035 of the Internal Revenue
Code ("Code"). Except as required by federal law in calculating the basis of the
Contract, we do not differentiate between Section 1035 purchase payments and
non-Section 1035 purchase payments.
We also accept "rollovers" and transfers from Contracts qualifying as
tax-sheltered annuities ("TSAs"), individual retirement annuities or accounts
("IRAs"), or any other Qualified Contract that is eligible to "rollover" into an
IRA. We differentiate among non-Qualified Contracts, TSAs, IRAs and other
Qualified Contracts to the extent necessary to comply with federal tax laws. For
example, we restrict the assignment, transfer, or pledge of TSAs and IRAs so the
Contracts will continue to qualify for special tax treatment. A Contract Owner
contemplating any such exchange, rollover or transfer of a Contract should
contact a competent tax adviser with respect to the potential effects of such a
transaction.
PERFORMANCE INFORMATION
From time to time we may advertise the "standardized," "non-standardized," and
"adjusted historical" total returns of the Variable Sub-Accounts, as described
below. Please remember that past performance is not an estimate or guarantee of
future performance and does not necessarily represent the actual experience of
amounts invested by a particular Contract Owner. No performance information is
shown for the Provider Contract which we are no longer marketing. Also, please
note that the performance figures shown do not reflect any applicable taxes.
STANDARDIZED TOTAL RETURNS
A Variable Sub-Account's standardized total return represents the average annual
total return of that Sub-Account over a particular period. We compute
standardized total return by finding the annual percentage rate that, when
compounded annually, will accumulate a hypothetical $1,000 purchase payment to
the redeemable value at the end of the one, five or ten year period, or for a
period from the date of commencement of the Variable Sub-Account's operations,
if shorter than any of the foregoing. We use the following formula prescribed by
the SEC for computing standardized total return:
1000(1 + T)n = ERV
where:
T = average annual total return
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of 1, 5, or 10 year periods or
shorter period
n = number of years in the period
1000 = hypothetical $1,000 investment
When factoring in the withdrawal charge assessed upon redemption, we exclude the
Free Withdrawal Amount, which is the amount you can withdraw from the Contract
without paying a withdrawal charge. We also use the withdrawal charge that would
apply upon redemption at the end of each period. Thus, for example, when
factoring in the withdrawal charge for a one year standardized total return
calculation, we would use the withdrawal charge that applies to a withdrawal of
a purchase payment made one year prior.
When factoring in the contract maintenance charge, we pro rate the charge by
dividing (i) the contract maintenance charge by (ii) the average contract size
of $38,997. We then multiply the resulting percentage by a hypothetical $1,000
investment.
The standardized total returns for the Variable Sub-Accounts available under
each form of Contract for the periods ended December 31, 2001 are set out below.
No standardized total returns are shown for the Dreyfus VIF Money Market
Variable Sub-Account.
The Enhanced Provider Contracts were first offered to the public on November 10,
1998. Accordingly, performance figures for certain Variable Sub-Accounts prior
to that date reflect the historical performance of the Variable Sub-Accounts,
adjusted to reflect the current level of charges that apply to the Variable
Sub-Accounts under the Enhanced Provider Contracts, as well as the withdrawal
and contract maintenance charges described above.
The standardized performance figures for the Franklin Small Cap (Class 2),
Mutual Shares Securities (Class 2), Templeton Global Income Securities (Class
2), and Templeton Growth Securities (Class 2) Variable Sub-Accounts
(collectively, "new Variable Sub-Accounts") reflect the performance of
predecessor Variable Sub-Accounts for the period from December 17, 1999 the date
of inception of the predecessor Variable Sub-Account, to May 1, 2000 ( the date
the predecessor Sub-Accounts, for administrative convenience, merged into the
new Variable Sub-Accounts).
Effective May 1, 2002, AIM V.I. Growth and Income Fund changed its name to AIM
V.I. Core Equity Fund.
Effective May 1, 2002, AIM V.I. International Equity Fund changed its name to
AIM V.I. International Growth Fund.
Effective May 1, 2002, AIM V.I. Value Fund changed its name to AIM V.I. Premier
Equity Fund.
Enhanced Provider Contracts
(Without the Enhanced Death Benefit Rider, the Enhanced Death and Income Benefit
Combination Rider or the Enhanced Death or Income Benefit Combination Rider II)
Average Annual Returns
5 Years 10 Years or
Variable Sub- Account 1 Year Since Inception*
AIM V.I. Balanced Fund -17.62% N/A 0.16%
AIM V.I. Capital Appreciation -29.34% N/A 3.32%
AIM V.I. Core Equity -28.90% N/A 1.48%
AIM V.I. Diversified Income -2.78% N/A -1.10%
AIM V.I. Global Utilities -33.93% N/A -0.08%
AIM V.I. Government Securities 0.01% N/A 3.32%
AIM V.I. Growth -39.82% N/A -3.10%
AIM V.I. High Yield -11.26% N/A -6.77%
AIM V.I. International Growth -29.59% N/A -2.06%
AIM V.I. Premier Equity -18.75% N/A 4.80%
Drefyus Socially Responsible Growth -28.64% N/A 2.45%
Dreyfus Stock Index -18.37% N/A 3.51%
Dreyfus VIF - Growth & Income -12.11% N/A 3.53%
Dreyfus VIF - Money Market -2.40% N/A 2.97%
Dreyfus VIF - Small Company Stock -7.84% N/A 3.10%
Federated Prime Money Fund II -2.58% N/A 1.63%
Fidelity VIP Contrafund -18.43% N/A 7.07%
Fidelity VIP Equity-Income -11.23% N/A 3.61%
Fidelity VIP Growth -23.77% N/A 7.48%
Fidelity VIP High Income -17.92% N/A -7.75%
Fidelity VIP Index 500 -18.29% N/A -12.94%
Fidelity VIP Overseas -27.25% N/A -23.03%
Franklin Small Cap - Class 2 -21.40% N/A 1.20%
Goldman Sachs VIT Capital Growth -20.62% N/A 0.97%
Goldman Sachs VIT CORE Small Cap Equity -1.85% N/A 6.94%
Goldman Sachs VIT CORE U.S. Equity -18.13% N/A -0.11%
Goldman Sachs VIT Global Income -1.58% N/A 0.37%
Goldman Sachs VIT Growth and Income -15.56% N/A -5.46%
Goldman Sachs VIT International Equity -28.33% N/A -3.48%
MFS Emerging Growth -39.43% N/A 5.19%
MFS Investors Trust -22.10% N/A -3.62%
MFS New Discovery -11.30% N/A 19.04%
MFS Research -27.33% N/A -9.78%
MFS Utilities N/A N/A N/A
Mutual Shares Securities - Class 2 0.64% N/A 6.50%
Neuberger Berman AMT Guardian -7.82% N/A 4.55%
Neuberger Berman AMT Mid Cap Growth -30.69% N/A 6.31%
Neuberger Berman AMT Partners -9.12% N/A 0.03%
Oppenheimer Aggressive Growth -37.24% N/A -11.13%
Oppenheimer Capital Appreciation -18.76% N/A -0.54%
Oppenheimer Global Securities -18.23% N/A 6.23%
Oppenheimer Main Street Growth & Income -16.37% N/A -8.80%
Oppenheimer Multiple Strategies -4.13% N/A 0.87%
Oppenheimer Strategic Bond -1.54% N/A 1.11%
Putnam Diversified Income N/A N/A N/A
Putnam Growth and Income N/A N/A N/A
Putnam Growth Opportunities N/A N/A N/A
Putnam Health Sciences N/A N/A N/A
Putnam New Value N/A N/A N/A
Putnam Voyager ll N/A N/A N/A
STI Capital Appreciation -11.61% N/A -1.58%
STI Growth and Income -11.83% N/A -2.31%
STI International Equity -23.53% N/A -13.93%
STI Investment Grade Bond 2.79% N/A 4.35%
STI Mid-Cap Equity -3.64% N/A -5.53%
STI Quality Growth Stock -24.80% N/A -15.75%
STI Small Cap Value Equity 14.90% N/A 18.18%
STI Value Income Stock -7.45% N/A -1.64%
Templeton Developing Markets - Class 2 -14.31% N/A -15.27%
Templeton Foreign Securities - Class 2 -22.14% N/A -6.81%
Templeton Global Income Securities - Class 2 -4.11% N/A 0.33%
Templeton Growth Securities - Class 2 -7.62% N/A 5.72%
Van Kampen UIF U.S. Real Estate 3.07% N/A 8.53%
Van Kampen UIF Value -6.85% N/A 3.99%
*The Variable Sub-Accounts (or their predecessors) commenced operations on the
following dates:
Sub Account
Inception Date
AIM V.I. Balanced Fund 11/09/98
AIM V.I. Capital Appreciation 01/26/98
AIM V.I. Core Equity 01/26/98
AIM V.I. Diversified Income 01/26/98
AIM V.I. Global Utilities 01/26/98
AIM V.I. Government Securities 01/26/98
AIM V.I. Growth 01/26/98
AIM V.I. High Yield 11/09/98
AIM V.I. International Growth 01/26/98
AIM V.I. Premier Equity 01/26/98
Drefyus Socially Responsible Growth 06/17/97
Dreyfus Stock Index 01/26/98
Dreyfus VIF - Growth & Income 06/17/97
Dreyfus VIF - Money Market 06/17/97
Dreyfus VIF - Small Company Stock 06/17/97
Federated Prime Money Fund II 11/01/99
Fidelity VIP Contrafund 06/17/97
Fidelity VIP Equity-Income 01/26/98
Fidelity VIP Growth 06/17/97
Fidelity VIP High Income 06/17/97
Franklin Small Cap - Class 2 11/01/99
Goldman Sachs VIT Capital Growth 11/09/98
Goldman Sachs VIT CORE Small Cap Equity 11/09/98
Goldman Sachs VIT CORE U.S. Equity 11/09/98
Goldman Sachs VIT Global Income 11/09/98
Goldman Sachs VIT Growth and Income 11/09/98
Goldman Sachs VIT International Equity 11/09/98
MFS Emerging Growth 06/17/97
MFS Investors Trust 11/09/98
MFS New Discovery 11/09/98
MFS Research 11/01/99
MFS Utilities 05/01/01
Mutual Shares Securities - Class 2 11/01/99
Neuberger Berman AMT Guardian 11/09/98
Neuberger Berman AMT Mid Cap Growth 11/09/98
Neuberger Berman AMT Partners 11/09/98
Oppenheimer Aggressive Growth 11/01/99
Oppenheimer Capital Appreciation 11/01/99
Oppenheimer Global Securities 11/01/99
Oppenheimer Main Street Growth & Income 11/01/99
Oppenheimer Multiple Strategies 01/24/00
Oppenheimer Strategic Bond 11/01/99
Putnam Diversified Income 05/01/01
Putnam Growth and Income 05/01/01
Putnam Growth Opportunities 05/01/01
Putnam Health Sciences 05/01/01
Putnam New Value 05/01/01
Putnam Voyager ll 05/01/01
STI Capital Appreciation 11/01/99
STI Growth and Income 01/24/00
STI International Equity 01/24/00
STI Investment Grade Bond 01/24/00
STI Mid-Cap Equity 01/24/00
STI Quality Growth Stock 01/24/00
STI Small Cap Value Equity 01/24/00
STI Value Income Stock 11/01/99
Templeton Developing Markets - Class 2 11/01/99
Templeton Foreign Securities - Class 2 11/01/99
Templeton Global Income Securities - Class 2 01/21/00
Templeton Growth Securities - Class 2 11/01/99
Van Kampen UIF Core Plus Fixed Income 11/09/98
Van Kampen UIF Equity Growth 11/09/98
Van Kampen UIF Global Value Equity 11/09/98
Van Kampen UIF International Magnum 11/09/98
Van Kampen UIF Mid Cap Value 11/09/98
Van Kampen UIF U.S. Real Estate 11/09/98
Van Kampen UIF Value 11/09/98
(With the Enhanced Death Benefit Rider)
Average Annual Returns
5 Years 10 Years or
Variable Sub-Account 1 Year Since Inception*
AIM V.I. Balanced Fund -17.81% N/A -0.07%
AIM V.I. Capital Appreciation -29.51% N/A 3.09%
AIM V.I. Core Equity -29.07% N/A 1.25%
AIM V.I. Diversified Income -3.00% N/A -1.33%
AIM V.I. Global Utilities -34.09% N/A -0.31%
AIM V.I. Government Securities -0.22% N/A 3.09%
AIM V.I. Growth -39.97% N/A -3.33%
AIM V.I. High Yield -11.47% N/A -6.99%
AIM V.I. International Growth -29.76% N/A -2.28%
AIM V.I. Premier Equity -18.94% N/A 4.57%
Drefyus Socially Responsible Growth -28.81% N/A 2.22%
Dreyfus Stock Index -18.56% N/A 3.27%
Dreyfus VIF - Growth & Income -12.31% N/A 3.30%
Dreyfus VIF - Money Market -2.63% N/A 2.74%
Dreyfus VIF - Small Company Stock -8.06% N/A 2.86%
Federated Prime Money Fund II -2.80% N/A 1.40%
Fidelity VIP Contrafund -18.62% N/A 6.83%
Fidelity VIP Equity-Income -11.43% N/A 3.37%
Fidelity VIP Growth -23.95% N/A 7.24%
Fidelity VIP High Income -18.12% N/A -7.97%
Fidelity VIP Index 500 -18.48% N/A -13.14%
Fidelity VIP Overseas -27.42% N/A -23.21%
Franklin Small Cap - Class 2 -21.59% N/A 0.97%
Goldman Sachs VIT Capital Growth -20.81% N/A 0.74%
Goldman Sachs VIT CORE Small Cap Equity -2.08% N/A 6.70%
Goldman Sachs VIT CORE U.S. Equity -18.32% N/A -0.34%
Goldman Sachs VIT Global Income -1.81% N/A 0.14%
Goldman Sachs VIT Growth and Income -15.75% N/A -5.68%
Goldman Sachs VIT International Equity -28.50% N/A -3.70%
MFS Emerging Growth -39.58% N/A 4.96%
MFS Investors Trust -22.28% N/A -3.84%
MFS New Discovery -11.50% N/A 18.77%
MFS Research -27.51% N/A -9.99%
MFS Utilities N/A N/A N/A
Mutual Shares Securities - Class 2 0.40% N/A 6.25%
Neuberger Berman AMT Guardian -8.03% N/A 4.31%
Neuberger Berman AMT Mid Cap Growth -30.85% N/A 6.07%
Neuberger Berman AMT Partners -9.33% N/A -0.20%
Oppenheimer Aggressive Growth -37.39% N/A -11.33%
Oppenheimer Capital Appreciation -18.95% N/A -0.77%
Oppenheimer Global Securities -18.42% N/A 5.99%
Oppenheimer Main Street Growth & Income -16.57% N/A -9.01%
Oppenheimer Multiple Strategies -4.36% N/A 0.64%
Oppenheimer Strategic Bond -1.76% N/A 0.87%
Putnam Diversified Income N/A N/A N/A
Putnam Growth and Income N/A N/A N/A
Putnam Growth Opportunities N/A N/A N/A
Putnam Health Sciences N/A N/A N/A
Putnam New Value N/A N/A N/A
Putnam Voyager ll N/A N/A N/A
STI Capital Appreciation -11.82% N/A -1.81%
STI Growth and Income -12.04% N/A -2.54%
STI International Equity -23.71% N/A -14.13%
STI Investment Grade Bond 2.55% N/A 4.11%
STI Mid-Cap Equity -3.86% N/A -5.75%
STI Quality Growth Stock -24.97% N/A -15.94%
STI Small Cap Value Equity 14.64% N/A 17.91%
STI Value Income Stock -7.66% N/A -1.86%
Templeton Developing Markets - Class 2 -14.52% N/A -15.47%
Templeton Foreign Securities - Class 2 -22.32% N/A -7.03%
Templeton Global Income Securities - Class 2 -4.34% N/A 0.09%
Templeton Growth Securities - Class 2 -7.83% N/A 5.48%
Van Kampen UIF Core Plus Fixed Income 0.98% N/A 3.71%
Van Kampen UIF Equity Growth -21.45% N/A 1.63%
Van Kampen UIF Global Value Equity -13.49% N/A 1.08%
Van Kampen UIF International Magnum -25.57% N/A -5.62%
Van Kampen UIF Mid Cap Value -9.65% N/A 9.09%
Van Kampen UIF U.S. Real Estate 2.83% N/A 8.28%
Van Kampen UIF Value -7.07% N/A 3.75%
*The inception dates of the Variable Sub-Accounts appear in the first table
above.
(With the Enhanced Death and Income Benefit Combination Rider for Contracts
issued before September 22, 2000)
Average Annual Returns
10 Years or
Variable Sub-Account 1 Year 5 Years Since Inception*
AIM V.I. Balanced Fund -18.01% N/A -0.30%
AIM V.I. Capital Appreciation -29.68% N/A 2.85%
AIM V.I. Core Equity -29.24% N/A 1.02%
AIM V.I. Diversified Income -3.23% N/A -1.55%
AIM V.I. Global Utilities -34.25% N/A -0.53%
AIM V.I. Government Securities -0.45% N/A 2.85%
AIM V.I. Growth -40.11% N/A -3.55%
AIM V.I. High Yield -11.68% N/A -7.20%
AIM V.I. International Growth -29.92% N/A -2.51%
AIM V.I. Premier Equity -19.13% N/A 4.33%
Drefyus Socially Responsible Growth -28.98% N/A 1.99%
Dreyfus Stock Index -18.75% N/A 3.04%
Dreyfus VIF - Growth & Income -12.52% N/A 3.07%
Dreyfus VIF - Money Market -2.85% N/A 2.50%
Dreyfus VIF - Small Company Stock -8.27% N/A 2.63%
Federated Prime Money Fund II -3.03% N/A 1.17%
Fidelity VIP Contrafund -18.81% N/A 6.59%
Fidelity VIP Equity-Income -11.64% N/A 3.14%
Fidelity VIP Growth -24.13% N/A 7.00%
Fidelity VIP High Income -18.31% N/A -8.18%
Fidelity VIP Index 500 -18.67% N/A -13.35%
Fidelity VIP Overseas -27.60% N/A -23.40%
Franklin Small Cap - Class 2 -21.77% N/A 0.74%
Goldman Sachs VIT Capital Growth -21.00% N/A 0.51%
Goldman Sachs VIT CORE Small Cap Equity -2.31% N/A 6.46%
Goldman Sachs VIT CORE U.S. Equity -18.52% N/A -0.57%
Goldman Sachs VIT Global Income -2.03% N/A -0.09%
Goldman Sachs VIT Growth and Income -15.95% N/A -5.90%
Goldman Sachs VIT International Equity -28.67% N/A -3.92%
MFS Emerging Growth -39.72% N/A 4.72%
MFS Investors Trust -22.46% N/A -4.06%
MFS New Discovery -11.71% N/A 18.50%
MFS Research -27.68% N/A -10.20%
MFS Utilities N/A N/A N/A
Mutual Shares Securities - Class 2 0.17% N/A 6.01%
Neuberger Berman AMT Guardian -8.25% N/A 4.07%
Neuberger Berman AMT Mid Cap Growth -31.02% N/A 5.83%
Neuberger Berman AMT Partners -9.55% N/A -0.43%
Oppenheimer Aggressive Growth -37.54% N/A -11.54%
Oppenheimer Capital Appreciation -19.14% N/A -0.99%
Oppenheimer Global Securities -18.61% N/A 5.75%
Oppenheimer Main Street Growth & Income -16.76% N/A -9.22%
Oppenheimer Multiple Strategies -4.58% N/A 0.41%
Oppenheimer Strategic Bond -1.99% N/A 0.64%
Putnam Diversified Income N/A N/A N/A
Putnam Growth and Income N/A N/A N/A
Putnam Growth Opportunities N/A N/A N/A
Putnam Health Sciences N/A N/A N/A
Putnam New Value N/A N/A N/A
Putnam Voyager ll N/A N/A N/A
STI Capital Appreciation -12.02% N/A -2.03%
STI Growth and Income -12.24% N/A -2.77%
STI International Equity -23.89% N/A -14.34%
STI Investment Grade Bond 2.32% N/A 3.87%
STI Mid-Cap Equity -4.09% N/A -5.96%
STI Quality Growth Stock -25.15% N/A -16.14%
STI Small Cap Value Equity 14.37% N/A 17.64%
STI Value Income Stock -7.88% N/A -2.09%
Templeton Developing Markets - Class 2 -14.72% N/A -15.67%
Templeton Foreign Securities - Class 2 -22.51% N/A -7.24%
Templeton Global Income Securities - Class 2 -4.56% N/A -0.14%
Templeton Growth Securities - Class 2 -8.04% N/A 5.24%
Van Kampen UIF Core Plus Fixed Income 0.74% N/A 3.47%
Van Kampen UIF Equity Growth -21.64% N/A 1.40%
Van Kampen UIF Global Value Equity -13.69% N/A 0.85%
Van Kampen UIF International Magnum -25.75% N/A -5.83%
Van Kampen UIF Mid Cap Value -9.86% N/A 8.84%
Van Kampen UIF U.S. Real Estate 2.60% N/A 8.04%
Van Kampen UIF Value -7.29% N/A 3.52%
*The inception dates of the Variable Sub-Accounts appear in the table above.
(With the Enhanced Death and Income Benefit Combination Rider II for Contracts
issued on or after September 22, 2000)
Average Annual Returns
10 Years or
Variable Sub-Account 1 Year 5 Years Since Inception*
AIM V.I. Balanced Fund -18.06% N/A -0.36%
AIM V.I. Capital Appreciation -29.72% N/A 2.79%
AIM V.I. Core Equity -29.28% N/A 0.96%
AIM V.I. Diversified Income -3.29% N/A -1.62%
AIM V.I. Global Utilities -34.29% N/A -0.60%
AIM V.I. Government Securities -0.51% N/A 2.79%
AIM V.I. Growth -40.15% N/A -3.61%
AIM V.I. High Yield -11.74% N/A -7.26%
AIM V.I. International Growth -29.97% N/A -2.57%
AIM V.I. Premier Equity -19.18% N/A 4.26%
Drefyus Socially Responsible Growth -29.03% N/A 1.92%
Dreyfus Stock Index -18.80% N/A 2.97%
Dreyfus VIF - Growth & Income -12.57% N/A 3.00%
Dreyfus VIF - Money Market -2.91% N/A 2.44%
Dreyfus VIF - Small Company Stock -8.33% N/A 2.56%
Federated Prime Money Fund II -3.09% N/A 1.11%
Fidelity VIP Contrafund -18.87% N/A 6.53%
Fidelity VIP Equity-Income -11.70% N/A 3.07%
Fidelity VIP Growth -24.18% N/A 6.93%
Fidelity VIP High Income -18.36% N/A -8.24%
Fidelity VIP Index 500 -18.72% N/A -13.40%
Fidelity VIP Overseas -27.64% N/A -23.45%
Franklin Small Cap - Class 2 -21.82% N/A 0.68%
Goldman Sachs VIT Capital Growth -21.05% N/A 0.45%
Goldman Sachs VIT CORE Small Cap Equity -2.37% N/A 6.39%
Goldman Sachs VIT CORE U.S. Equity -18.57% N/A -0.63%
Goldman Sachs VIT Global Income -2.10% N/A -0.15%
Goldman Sachs VIT Growth and Income -16.01% N/A -5.96%
Goldman Sachs VIT International Equity -28.72% N/A -3.98%
MFS Emerging Growth -39.76% N/A 4.66%
MFS Investors Trust -22.51% N/A -4.12%
MFS New Discovery -11.77% N/A 18.43%
MFS Research -27.72% N/A -10.26%
MFS Utilities N/A N/A N/A
Mutual Shares Securities - Class 2 0.11% N/A 5.95%
Neuberger Berman AMT Guardian -8.31% N/A 4.01%
Neuberger Berman AMT Mid Cap Growth -31.06% N/A 5.76%
Neuberger Berman AMT Partners -9.60% N/A -0.49%
Oppenheimer Aggressive Growth -37.58% N/A -11.60%
Oppenheimer Capital Appreciation -19.19% N/A -1.06%
Oppenheimer Global Securities -18.66% N/A 5.68%
Oppenheimer Main Street Growth & Income -16.82% N/A -9.28%
Oppenheimer Multiple Strategies -4.64% N/A 0.35%
Oppenheimer Strategic Bond -2.06% N/A 0.58%
Putnam Diversified Income N/A N/A N/A
Putnam Growth and Income N/A N/A N/A
Putnam Growth Opportunities N/A N/A N/A
Putnam Health Sciences N/A N/A N/A
Putnam New Value N/A N/A N/A
Putnam Voyager ll N/A N/A N/A
STI Capital Appreciation -12.08% N/A -2.10%
STI Growth and Income -12.30% N/A -2.83%
STI International Equity -23.94% N/A -14.39%
STI Investment Grade Bond 2.25% N/A 3.81%
STI Mid-Cap Equity -4.15% N/A -6.02%
STI Quality Growth Stock -25.20% N/A -16.20%
STI Small Cap Value Equity 14.30% N/A 17.57%
STI Value Income Stock -7.94% N/A -2.15%
Templeton Developing Markets - Class 2 -14.77% N/A -15.72%
Templeton Foreign Securities - Class 2 -22.56% N/A -7.30%
Templeton Global Income Securities - Class 2 -4.62% N/A -0.20%
Templeton Growth Securities - Class 2 -8.10% N/A 5.17%
Van Kampen UIF Core Plus Fixed Income 0.68% N/A 3.40%
Van Kampen UIF Equity Growth -21.69% N/A 1.33%
Van Kampen UIF Global Value Equity -13.75% N/A 0.79%
Van Kampen UIF International Magnum -25.80% N/A -5.89%
Van Kampen UIF Mid Cap Value -9.92% N/A 8.77%
Van Kampen UIF U.S. Real Estate 2.53% N/A 7.97%
Van Kampen UIF Value -7.35% N/A 3.45%
*The inception dates of the Variable Sub-Accounts appear in the table above.
NON-STANDARDIZED TOTAL RETURNS
From time to time, we also may quote average annual total returns that do not
reflect the withdrawal charge. We calculate these "non-standardized total
returns" in exactly the same way as the standardized total returns described
above, except that we replace the ending redeemable value of the hypothetical
account for the period with an ending redeemable value for the period that does
not take into account any charges on amounts surrendered.
In addition, we 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 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 non-standardized total returns for the Variable Sub-Accounts for the periods
ended December 31, 2000 are set out below. No non-standardized total returns are
shown for the Dreyfus VIF Money Market Variable Sub-Account.
The non-standardized performance figures for the Franklin Small Cap (Class 2),
Mutual Shares Securities (Class 2), Templeton Global Income Securities (Class
2), and Templeton Growth Securities (Class 2) Variable Sub-Accounts (i.e., the
new Variable Sub-Accounts) reflect the performance of predecessor Variable
Sub-Accounts for the period from December 17, 1999, the
date of inception of the predecessor Variable Accounts to May 1, 2000 (the date
the predecessor Sub-Accounts, for administrative convenience, merged into the
new Variable Sub-Accounts).
Effective May 1, 2002, AIM V.I. Growth and Income Fund changed its name to AIM
V.I. Core Equity Fund.
Effective May 1, 2002, AIM V.I. International Equity Fund changed its name to
AIM V.I. International Growth Fund.
Effective May 1, 2002, AIM V.I. Value Fund changed its name to AIM V.I. Premier
Equity Fund.
Enhanced Provider Contracts
(Without the Enhanced Death Benefit Rider, the Enhanced Death and Income Benefit
Combination Rider, or the Enhanced Death and Income Benefit Combination Rider
II)
Average Annual Returns
5 Years 10 Years or
Variable Sub-Account 1 Year Since Inception*
AIM V.I. Balanced Fund -12.44% N/A 1.58%
AIM V.I. Capital Appreciation -24.16% N/A 4.35%
AIM V.I. Core Equity -23.72% N/A 2.56%
AIM V.I. Diversified Income 2.40% N/A 0.08%
AIM V.I. Global Utilities -28.76% N/A 1.05%
AIM V.I. Government Securities 5.19% N/A 4.37%
AIM V.I. Growth -34.65% N/A -1.88%
AIM V.I. High Yield -6.09% N/A -5.13%
AIM V.I. International Growth -24.41% N/A -0.86%
AIM V.I. Premier Equity -13.57% N/A 5.79%
Drefyus Socially Responsible Growth -23.47% N/A 3.20%
Dreyfus Stock Index -13.19% N/A 4.53%
Dreyfus VIF - Growth & Income -6.93% N/A 4.26%
Dreyfus VIF - Money Market 2.78% N/A 3.72%
Dreyfus VIF - Small Company Stock -2.66% N/A 3.84%
Federated Prime Money Fund II 2.60% N/A 3.64%
Fidelity VIP Contrafund -13.25% N/A 7.72%
Fidelity VIP Equity-Income -6.05% N/A 4.64%
Fidelity VIP Growth -18.60% N/A 8.30%
Fidelity VIP High Income -12.75% N/A -6.69%
Fidelity VIP Index 500 -13.11% N/A -9.91%
Fidelity VIP Overseas -22.07% N/A -19.64%
Franklin Small Cap - Class 2 -16.22% N/A 3.20%
Goldman Sachs VIT Capital Growth -15.45% N/A 2.36%
Goldman Sachs VIT CORE Small Cap Equity 3.33% N/A 8.19%
Goldman Sachs VIT CORE U.S. Equity -12.95% N/A 1.31%
Goldman Sachs VIT Global Income 3.60% N/A 1.79%
Goldman Sachs VIT Growth and Income -10.38% N/A -3.87%
Goldman Sachs VIT International Equity -23.15% N/A -1.96%
MFS Emerging Growth -34.25% N/A 5.87%
MFS Investors Trust -16.92% N/A -2.09%
MFS New Discovery -6.12% N/A 20.03%
MFS Research -22.16% N/A -7.50%
MFS Utilities N/A N/A N/A
Mutual Shares Securities - Class 2 5.81% N/A 8.40%
Neuberger Berman AMT Guardian -2.64% N/A 5.85%
Neuberger Berman AMT Mid Cap Growth -25.51% N/A 7.56%
Neuberger Berman AMT Partners -3.95% N/A 1.46%
Oppenheimer Aggressive Growth -32.06% N/A -8.82%
Oppenheimer Capital Appreciation -13.58% N/A 1.51%
Oppenheimer Global Securities -13.05% N/A 8.13%
Oppenheimer Main Street Growth & Income -11.19% N/A -6.54%
Oppenheimer Multiple Strategies 1.04% N/A 3.53%
Oppenheimer Strategic Bond 3.64% N/A 3.13%
Putnam Diversified Income N/A N/A N/A
Putnam Growth and Income N/A N/A N/A
Putnam Growth Opportunities N/A N/A N/A
Putnam Health Sciences N/A N/A N/A
Putnam New Value N/A N/A N/A
Putnam Voyager ll N/A N/A N/A
STI Capital Appreciation -6.34% N/A 0.49%
STI Growth and Income -6.65% N/A 0.42%
STI International Equity -18.35% N/A -10.87%
STI Investment Grade Bond 7.97% N/A 6.93%
STI Mid-Cap Equity 1.54% N/A -2.70%
STI Quality Growth Stock -19.62% N/A -12.62%
STI Small Cap Value Equity 20.08% N/A 20.48%
STI Value Income Stock -2.27% N/A 0.45%
Templeton Developing Markets - Class 2 -9.14% N/A -12.83%
Templeton Foreign Securities - Class 2 -16.96% N/A -4.61%
Templeton Global Income Securities - Class 2 1.06% N/A 2.98%
Templeton Growth Securities - Class 2 -2.44% N/A 7.64%
Van Kampen UIF Core Plus Fixed Income 6.39% N/A 5.27%
Van Kampen UIF Equity Growth -16.09% N/A 3.22%
Van Kampen UIF Global Value Equity -8.11% N/A 2.70%
Van Kampen UIF International Magnum -20.22% N/A -3.81%
Van Kampen UIF Mid Cap Value -4.26% N/A 10.53%
Van Kampen UIF U.S. Real Estate 8.25% N/A 9.75%
Van Kampen UIF Value -1.68% N/A 5.31%
*The inception dates of the Variable Sub-Accounts appear in the table under
"Standardized Total Returns."
(With the Enhanced Death Benefit Rider)
Average Annual Returns
10 Years or
Variable Sub-Account 1 Year 5 Years Since Inception*
AIM V.I. Balanced Fund -12.64% N/A 1.35%
AIM V.I. Capital Appreciation -24.33% N/A 4.12%
AIM V.I. Core Equity -23.89% N/A 2.34%
AIM V.I. Diversified Income 2.17% N/A -0.14%
AIM V.I. Global Utilities -28.91% N/A 0.83%
AIM V.I. Government Securities 4.96% N/A 4.14%
AIM V.I. Growth -34.79% N/A -2.10%
AIM V.I. High Yield -6.30% N/A -5.34%
AIM V.I. International Growth -24.58% N/A -1.08%
AIM V.I. Premier Equity -13.76% N/A 5.56%
Drefyus Socially Responsible Growth -23.64% N/A 2.97%
Dreyfus Stock Index -13.38% N/A 4.30%
Dreyfus VIF - Growth & Income -7.13% N/A 4.03%
Dreyfus VIF - Money Market 2.55% N/A 3.49%
Dreyfus VIF - Small Company Stock -2.88% N/A 3.61%
Federated Prime Money Fund II 2.37% N/A 3.42%
Fidelity VIP Contrafund -13.45% N/A 7.48%
Fidelity VIP Equity-Income -6.26% N/A 4.41%
Fidelity VIP Growth -18.78% N/A 8.06%
Fidelity VIP High Income -12.94% N/A -6.90%
Fidelity VIP Index 500 -13.30% N/A -10.10%
Fidelity VIP Overseas -22.25% N/A -19.82%
Franklin Small Cap - Class 2 -16.41% N/A 2.97%
Goldman Sachs VIT Capital Growth -15.63% N/A 2.14%
Goldman Sachs VIT CORE Small Cap Equity 3.10% N/A 7.95%
Goldman Sachs VIT CORE U.S. Equity -13.15% N/A 1.09%
Goldman Sachs VIT Global Income 3.37% N/A 1.57%
Goldman Sachs VIT Growth and Income -10.58% N/A -4.08%
Goldman Sachs VIT International Equity -23.33% N/A -2.18%
MFS Emerging Growth -34.40% N/A 5.64%
MFS Investors Trust -17.10% N/A -2.30%
MFS New Discovery -6.33% N/A 19.77%
MFS Research -22.33% N/A -7.71%
MFS Utilities N/A N/A N/A
Mutual Shares Securities - Class 2 5.58% N/A 8.17%
Neuberger Berman AMT Guardian -2.86% N/A 5.62%
Neuberger Berman AMT Mid Cap Growth -25.68% N/A 7.32%
Neuberger Berman AMT Partners -4.16% N/A 1.23%
Oppenheimer Aggressive Growth -32.21% N/A -9.02%
Oppenheimer Capital Appreciation -13.77% N/A 1.28%
Oppenheimer Global Securities -13.24% N/A 7.89%
Oppenheimer Main Street Growth & Income -11.39% N/A -6.75%
Oppenheimer Multiple Strategies 0.82% N/A 3.31%
Oppenheimer Strategic Bond 3.41% N/A 2.90%
Putnam Diversified Income N/A N/A N/A
Putnam Growth and Income N/A N/A N/A
Putnam Growth Opportunities N/A N/A N/A
Putnam Health Sciences N/A N/A N/A
Putnam New Value N/A N/A N/A
Putnam Voyager ll N/A N/A N/A
STI Capital Appreciation -6.64% N/A 0.27%
STI Growth and Income -6.86% N/A 0.20%
STI International Equity -18.53% N/A -11.07%
STI Investment Grade Bond 7.73% N/A 6.70%
STI Mid-Cap Equity 1.31% N/A -2.92%
STI Quality Growth Stock -19.80% N/A -12.82%
STI Small Cap Value Equity 19.82% N/A 20.22%
STI Value Income Stock -2.49% N/A 0.23%
Templeton Developing Markets - Class 2 -9.34% N/A -13.02%
Templeton Foreign Securities - Class 2 -17.15% N/A -4.82%
Templeton Global Income Securities - Class 2 0.84% N/A 2.76%
Templeton Growth Securities - Class 2 -2.65% N/A 7.40%
Van Kampen UIF Core Plus Fixed Income 6.15% N/A 5.04%
Van Kampen UIF Equity Growth -16.27% N/A 3.00%
Van Kampen UIF Global Value Equity -8.31% N/A 2.48%
Van Kampen UIF International Magnum -20.40% N/A -4.02%
Van Kampen UIF Mid Cap Value -4.47% N/A 10.28%
Van Kampen UIF U.S. Real Estate 8.01% N/A 9.51%
Van Kampen UIF Value -1.89% N/A 5.08%
*The inception dates of the Variable Sub-Accounts appear in the first table
under "Standardized Total Returns."
(With the Enhanced Death and Income Benefit Combination Rider (for Contracts
issued before September 22, 2000))
Average Annual Returns
10 Years or
Variable Sub-Account 1 Year 5 Years Since Inception*
AIM V.I. Balanced Fund -12.83% N/A 1.13%
AIM V.I. Capital Appreciation -24.50% N/A 3.89%
AIM V.I. Core Equity -24.06% N/A 2.11%
AIM V.I. Diversified Income 1.95% N/A -0.36%
AIM V.I. Global Utilities -29.07% N/A 0.61%
AIM V.I. Government Securities 4.73% N/A 3.91%
AIM V.I. Growth -34.93% N/A -2.31%
AIM V.I. High Yield -6.50% N/A -5.55%
AIM V.I. International Growth -24.75% N/A -1.30%
AIM V.I. Premier Equity -13.95% N/A 5.33%
Drefyus Socially Responsible Growth -23.80% N/A 2.74%
Dreyfus Stock Index -13.57% N/A 4.07%
Dreyfus VIF - Growth & Income -7.34% N/A 3.80%
Dreyfus VIF - Money Market 2.32% N/A 3.26%
Dreyfus VIF - Small Company Stock -3.09% N/A 3.38%
Federated Prime Money Fund II 2.15% N/A 3.19%
Fidelity VIP Contrafund -13.64% N/A 7.25%
Fidelity VIP Equity-Income -6.46% N/A 4.18%
Fidelity VIP Growth -18.96% N/A 7.83%
Fidelity VIP High Income -13.13% N/A -7.10%
Fidelity VIP Index 500 -13.50% N/A -10.30%
Fidelity VIP Overseas -22.42% N/A -20.00%
Franklin Small Cap - Class 2 -16.59% N/A 2.75%
Goldman Sachs VIT Capital Growth -15.82% N/A 1.91%
Goldman Sachs VIT CORE Small Cap Equity 2.87% N/A 7.71%
Goldman Sachs VIT CORE U.S. Equity -13.34% N/A 0.87%
Goldman Sachs VIT Global Income 3.14% N/A 1.34%
Goldman Sachs VIT Growth and Income -10.78% N/A -4.29%
Goldman Sachs VIT International Equity -23.49% N/A -2.39%
MFS Emerging Growth -34.54% N/A 5.41%
MFS Investors Trust -17.29% N/A -2.52%
MFS New Discovery -6.54% N/A 19.51%
MFS Research -22.50% N/A -7.91%
MFS Utilities N/A N/A N/A
Mutual Shares Securities - Class 2 5.35% N/A 7.93%
Neuberger Berman AMT Guardian -3.07% N/A 5.38%
Neuberger Berman AMT Mid Cap Growth -25.84% N/A 7.09%
Neuberger Berman AMT Partners -4.37% N/A 1.01%
Oppenheimer Aggressive Growth -32.36% N/A -9.22%
Oppenheimer Capital Appreciation -13.96% N/A 1.06%
Oppenheimer Global Securities -13.43% N/A 7.66%
Oppenheimer Main Street Growth & Income -11.59% N/A -6.95%
Oppenheimer Multiple Strategies 0.60% N/A 3.08%
Oppenheimer Strategic Bond 3.18% N/A 2.67%
Putnam Diversified Income N/A N/A N/A
Putnam Growth and Income N/A N/A N/A
Putnam Growth Opportunities N/A N/A N/A
Putnam Health Sciences N/A N/A N/A
Putnam New Value N/A N/A N/A
Putnam Voyager ll N/A N/A N/A
STI Capital Appreciation -6.85% N/A 0.05%
STI Growth and Income -7.07% N/A -0.02%
STI International Equity -18.71% N/A -11.26%
STI Investment Grade Bond 7.49% N/A 6.46%
STI Mid-Cap Equity 1.09% N/A -3.13%
STI Quality Growth Stock -19.97% N/A -13.01%
STI Small Cap Value Equity 19.55% N/A 19.96%
STI Value Income Stock -2.70% N/A 0.01%
Templeton Developing Markets - Class 2 -9.54% N/A -13.21%
Templeton Foreign Securities - Class 2 -17.33% N/A -5.03%
Templeton Global Income Securities - Class 2 0.62% N/A 2.53%
Templeton Growth Securities - Class 2 -2.87% N/A 7.16%
Van Kampen UIF Core Plus Fixed Income 5.92% N/A 4.81%
Van Kampen UIF Equity Growth -16.46% N/A 2.77%
Van Kampen UIF Global Value Equity -8.52% N/A 2.25%
Van Kampen UIF International Magnum -20.57% N/A -4.23%
Van Kampen UIF Mid Cap Value -4.69% N/A 10.04%
Van Kampen UIF U.S. Real Estate 7.77% N/A 9.27%
Van Kampen UIF Value -2.11% N/A 4.85%
*The inception dates of the Variable Sub-Accounts appear in the first table
under "Standardized Total Returns."
(With the Enhanced Death and Income Benefit Combination Rider II (for Contracts
issued on or after September 22, 2000))
Average Annual Returns
10 Years or
Variable Sub-Account 1 Year 5 Years Since Inception*
AIM V.I. Balanced Fund -12.88% N/A 1.07%
AIM V.I. Capital Appreciation -24.54% N/A 3.83%
AIM V.I. Core Equity -24.10% N/A 2.05%
AIM V.I. Diversified Income 1.89% N/A -0.42%
AIM V.I. Global Utilities -29.11% N/A 0.55%
AIM V.I. Government Securities 4.66% N/A 3.85%
AIM V.I. Growth -34.97% N/A -2.37%
AIM V.I. High Yield -6.56% N/A -5.60%
AIM V.I. International Growth -24.79% N/A -1.36%
AIM V.I. Premier Equity -14.00% N/A 5.27%
Drefyus Socially Responsible Growth -23.85% N/A 2.68%
Dreyfus Stock Index -13.63% N/A 4.01%
Dreyfus VIF - Growth & Income -7.40% N/A 3.74%
Dreyfus VIF - Money Market 2.26% N/A 3.20%
Dreyfus VIF - Small Company Stock -3.15% N/A 3.32%
Federated Prime Money Fund II 2.09% N/A 3.13%
Fidelity VIP Contrafund -13.69% N/A 7.18%
Fidelity VIP Equity-Income -6.52% N/A 4.12%
Fidelity VIP Growth -19.01% N/A 7.76%
Fidelity VIP High Income -13.18% N/A -7.16%
Fidelity VIP Index 500 -13.55% N/A -10.35%
Fidelity VIP Overseas -22.47% N/A -20.04%
Franklin Small Cap - Class 2 -16.65% N/A 2.69%
Goldman Sachs VIT Capital Growth -15.87% N/A 1.85%
Goldman Sachs VIT CORE Small Cap Equity 2.81% N/A 7.65%
Goldman Sachs VIT CORE U.S. Equity -13.39% N/A 0.81%
Goldman Sachs VIT Global Income 3.08% N/A 1.28%
Goldman Sachs VIT Growth and Income -10.83% N/A -4.34%
Goldman Sachs VIT International Equity -23.54% N/A -2.45%
MFS Emerging Growth -34.58% N/A 5.34%
MFS Investors Trust -17.34% N/A -2.58%
MFS New Discovery -6.59% N/A 19.43%
MFS Research -22.55% N/A -7.96%
MFS Utilities N/A N/A N/A
Mutual Shares Securities - Class 2 5.28% N/A 7.87%
Neuberger Berman AMT Guardian -3.13% N/A 5.32%
Neuberger Berman AMT Mid Cap Growth -25.89% N/A 7.02%
Neuberger Berman AMT Partners -4.43% N/A 0.95%
Oppenheimer Aggressive Growth -32.40% N/A -9.27%
Oppenheimer Capital Appreciation -14.02% N/A 1.00%
Oppenheimer Global Securities -13.49% N/A 7.59%
Oppenheimer Main Street Growth & Income -11.64% N/A -7.01%
Oppenheimer Multiple Strategies 0.54% N/A 3.02%
Oppenheimer Strategic Bond 3.12% N/A 2.61%
Putnam Diversified Income N/A N/A N/A
Putnam Growth and Income N/A N/A N/A
Putnam Growth Opportunities N/A N/A N/A
Putnam Health Sciences N/A N/A N/A
Putnam New Value N/A N/A N/A
Putnam Voyager ll N/A N/A N/A
STI Capital Appreciation -6.90% N/A -0.01%
STI Growth and Income -7.12% N/A -0.08%
STI International Equity -18.76% N/A -11.31%
STI Investment Grade Bond 7.43% N/A 6.40%
STI Mid-Cap Equity 1.03% N/A -3.19%
STI Quality Growth Stock -20.02% N/A -13.06%
STI Small Cap Value Equity 19.48% N/A 19.88%
STI Value Income Stock -2.76% N/A -0.05%
Templeton Developing Markets - Class 2 -9.59% N/A -13.26%
Templeton Foreign Securities - Class 2 -17.38% N/A -5.09%
Templeton Global Income Securities - Class 2 0.56% N/A 2.47%
Templeton Growth Securities - Class 2 -2.93% N/A 7.10%
Van Kampen UIF Core Plus Fixed Income 5.86% N/A 4.74%
Van Kampen UIF Equity Growth -16.51% N/A 2.71%
Van Kampen UIF Global Value Equity -8.57% N/A 2.19%
Van Kampen UIF International Magnum -20.62% N/A -4.29%
Van Kampen UIF Mid Cap Value -4.74% N/A 9.97%
Van Kampen UIF U.S. Real Estate 7.71% N/A 9.20%
Van Kampen UIF Value -2.17% N/A 4.79%
*The inception dates of the Variable Sub-Accounts appear in the first table
under "Standardized Total Returns." Performance for periods prior to the date
we first offered the Enhanced Death and Income Benefit Combination Rider II
are based on the historical performance of the Sub-Accounts adjusted to reflect
the cost of this Rider.
ADJUSTED HISTORICAL TOTAL RETURNS
We may advertise the total return for periods prior to the date that the
Variable Sub-Accounts commenced operations. We will calculate such "adjusted
historical total returns" using the historical performance of the underlying
Portfolios and adjusting such performance to reflect the current level of
charges that apply to the Variable Sub-Accounts under the Contract and the
contract maintenance charge, but not the withdrawal charge.
The adjusted historical performance figures for the Franklin Small Cap (Class
2), Mutual Shares Securities (Class 2), Templeton Global Income Securities
(Class 2), and Templeton Growth Securities (Class 2) Variable Sub-Accounts are
based on the historical performance of the Franklin Small Cap (Class 2), Mutual
Shares Securities (Class 2), Templeton Global Income Securities (Class 2), and
Templeton Growth Securities (Class 2) Portfolios, respectively. These figures do
not reflect the performance of predecessor Variable Sub-Accounts prior to May 1,
2000.
Effective May 1, 2002, AIM V.I. Growth and Income Fund changed its name to AIM
V.I. Core Equity Fund.
Effective May 1, 2002, AIM V.I. International Equity Fund changed its name to
AIM V.I. International Growth Fund.
Effective May 1, 2002, AIM V.I. Value Fund changed its name to AIM V.I. Premier
Equity Fund.
The adjusted historical total returns for the Variable Sub-Accounts for the
periods ended December 31, 2001 are set out below.
Enhanced Provider Contracts
The inception dates of the Portfolios are as follows:
AIM V.I. Balanced Fund 05/01/98
AIM V.I. Capital Appreciation 05/05/93
AIM V.I. Core Equity 05/02/94
AIM V.I. Diversified Income 05/05/93
AIM V.I. Global Utilities 05/02/94
AIM V.I. Government Securities 05/05/93
AIM V.I. Growth 05/05/93
AIM V.I. High Yield 05/01/98
AIM V.I. International Growth 05/05/93
AIM V.I. Premier Equity 05/05/93
Drefyus Socially Responsible Growth 09/30/93
Dreyfus Stock Index 09/29/89
Dreyfus VIF - Growth & Income 04/30/94
Dreyfus VIF - Money Market 08/31/90
Dreyfus VIF - Small Company Stock 05/01/96
Federated Prime Money Fund II 11/21/94
Fidelity VIP Contrafund 01/03/95
Fidelity VIP Equity-Income 10/23/86
Fidelity VIP Growth 10/09/86
Fidelity VIP High Income 09/19/85
Fidelity VIP Index 500 08/28/92
Fidelity VIP Overseas 01/29/87
Franklin Small Cap - Class 2 10/31/95
Goldman Sachs VIT Capital Growth 04/30/98
Goldman Sachs VIT CORE Small Cap Equity 02/13/98
Goldman Sachs VIT CORE U.S. Equity 02/13/98
Goldman Sachs VIT Global Income 01/12/98
Goldman Sachs VIT Growth and Income 01/12/98
Goldman Sachs VIT International Equity 01/12/98
MFS Emerging Growth 07/24/95
MFS Investors Trust 10/09/95
MFS New Discovery 04/29/98
MFS Research 07/26/95
MFS Utilities 01/03/95
Mutual Shares Securities - Class 2 11/08/96
Neuberger Berman AMT Guardian 11/03/97
Neuberger Berman AMT Mid Cap Growth 11/03/97
Neuberger Berman AMT Partners 03/22/94
Oppenheimer Aggressive Growth 08/15/86
Oppenheimer Capital Appreciation 04/03/85
Oppenheimer Global Securities 11/12/90
Oppenheimer Main Street Growth & Income 07/05/95
Oppenheimer Multiple Strategies 02/09/87
Oppenheimer Strategic Bond 05/03/93
Putnam Diversified Income 09/15/93
Putnam Growth and Income 02/01/88
Putnam Growth Opportunities 01/31/00
Putnam Health Sciences 04/30/98
Putnam New Value 01/02/97
Putnam Voyager ll 09/29/00
STI Capital Appreciation 10/02/95
STI Growth and Income 12/31/99
STI International Equity 11/07/96
STI Investment Grade Bond 10/02/95
STI Mid-Cap Equity 10/02/95
STI Quality Growth Stock 12/31/99
STI Small Cap Value Equity 10/21/97
STI Value Income Stock 10/02/95
Templeton Developing Markets - Class 2 03/04/96
Templeton Foreign Securities - Class 2 05/01/92
Templeton Global Income Securities - Class 2 01/24/89
Templeton Growth Securities - Class 2 03/15/94
Van Kampen UIF Core Plus Fixed Income 01/02/97
Van Kampen UIF Equity Growth 01/02/97
Van Kampen UIF Global Value Equity 01/02/97
Van Kampen UIF International Magnum 01/02/97
Van Kampen UIF Mid Cap Value 01/02/97
Van Kampen UIF U.S. Real Estate 03/04/97
Van Kampen UIF Value 01/02/97
Enhanced Provider Contracts
(Without the Enhanced Death Benefit Rider, the Enhanced Death and Income Benefit
Combination Rider or Enhanced Death and Income Benefit Rider II)
Average Annual Returns
10 Years or
Variable Sub-Account 1 Year 5 Years Since Inception
AIM V.I. Balanced Fund -17.62% N/A 1.37%
AIM V.I. Capital Appreciation -29.34% 4.31% 10.41%
AIM V.I. Core Equity -28.90% 5.59% 10.03%
AIM V.I. Diversified Income -2.78% 1.28% 3.77%
AIM V.I. Global Utilities -33.93% 4.22% 6.96%
AIM V.I. Government Securities 0.01% 4.44% 4.21%
AIM V.I. Growth -39.82% 2.17% 7.51%
AIM V.I. High Yield -11.26% N/A -8.97%
AIM V.I. International Growth -29.59% -0.23% 5.57%
AIM V.I. Premier Equity -18.75% 8.01% 12.06%
Drefyus Socially Responsible Growth -28.64% 5.73% 10.64%
Dreyfus Stock Index -18.37% 8.65% 11.13%
Dreyfus VIF - Growth & Income -12.11% 5.38% 12.44%
Dreyfus VIF - Money Market -2.40% 3.17% 3.44%
Dreyfus VIF - Small Company Stock -7.84% 4.53% 5.41%
Federated Prime Money Fund II -2.58% N/A 7.08%
Fidelity VIP Contrafund -18.43% 8.76% 14.39%
Fidelity VIP Equity-Income -11.23% 7.71% 12.42%
Fidelity VIP Growth -23.77% 9.98% 12.04%
Fidelity VIP High Income -17.92% -5.39% 4.03%
Fidelity VIP Index 500 -18.29% 8.69% 12.05%
Fidelity VIP Overseas -27.25% 1.01% 4.62%
Franklin Small Cap - Class 2 -21.40% 8.73% 11.93%
Goldman Sachs VIT Capital Growth -20.62% N/A 1.14%
Goldman Sachs VIT CORE Small Cap Equity -1.85% N/A 0.86%
Goldman Sachs VIT CORE U.S. Equity -18.13% N/A 0.87%
Goldman Sachs VIT Global Income -1.58% N/A 1.71%
Goldman Sachs VIT Growth and Income -15.56% N/A -3.37%
Goldman Sachs VIT International Equity -28.33% N/A -0.63%
MFS Emerging Growth -39.43% 6.95% 10.69%
MFS Investors Trust -22.10% 5.60% 9.40%
MFS New Discovery -11.30% N/A 12.37%
MFS Research -27.33% 4.95% 8.86%
MFS Utilities -30.25% 7.47% 12.38%
Mutual Shares Securities - Class 2 0.64% 8.37% 8.80%
Neuberger Berman AMT Guardian -7.82% N/A 9.76%
Neuberger Berman AMT Mid Cap Growth -30.69% N/A 12.49%
Neuberger Berman AMT Partners -9.12% 5.83% 11.06%
Oppenheimer Aggressive Growth -37.24% 5.37% 10.45%
Oppenheimer Capital Appreciation -18.76% 12.51% 13.84%
Oppenheimer Global Securities -18.23% 13.72% 12.56%
Oppenheimer Main Street Growth & Income -16.37% 5.02% 12.31%
Oppenheimer Multiple Strategies -4.13% 7.05% 8.89%
Oppenheimer Strategic Bond -1.54% 2.64% 4.33%
Putnam Diversified Income -2.85% 0.36% 2.89%
Putnam Growth and Income -12.65% 6.24% 10.47%
Putnam Growth Opportunities -38.05% N/A -32.91%
Putnam Health Sciences -25.85% N/A 2.05%
Putnam New Value -3.05% N/A 7.76%
Putnam Voyager ll -36.76 N/A -47.26%
STI Capital Appreciation -11.61% 11.64% 14.20%
STI Growth and Income -11.83% N/A -1.77%
STI International Equity -23.53% 0.63% 0.90%
STI Investment Grade Bond 2.79% 4.59% 4.71%
STI Mid-Cap Equity -3.64% 6.59% 8.37%
STI Quality Growth Stock -24.80% N/A -14.74%
STI Small Cap Value Equity 14.90% N/A 1.50%
STI Value Income Stock -7.45% 6.37% 9.26%
Templeton Developing Markets - Class 2 -14.31% -13.82% -13.11%
Templeton Foreign Securities - Class 2 -22.14% 2.90% 8.20%
Templeton Global Income Securities - Class 2 -4.11% 0.03% 2.86%
Templeton Growth Securities - Class 2 -7.62% 6.60% 8.56%
Van Kampen UIF Core Plus Fixed Income 1.21% N/A 5.41%
Van Kampen UIF Equity Growth -21.26% N/A 8.85%
Van Kampen UIF Global Value Equity -13.29% N/A 6.16%
Van Kampen UIF International Magnum -25.40% N/A -1.31%
Van Kampen UIF Mid Cap Value -9.44% N/A 14.25%
Van Kampen UIF U.S. Real Estate 3.07% N/A 5.86%
Van Kampen UIF Value -6.85% N/A 5.88%
*The inception dates of the portfolios appear in the first table under "Adjusted
Historical Total Returns."
(1)The Portfolios' Class IB shares ("12b-1 class") corresponding to the
Putnam Diversified Income and Growth and the Income Variable Sub-Accounts were
first offered on April 6, 1998, those corresponding to the Health Sciences and
the New Value Variable Sub-Accounts were first offered on April 30, 1998, those
corresponding to the Growth Opportunities Variable Sub-Account were first
offered on January 31, 2000, and those corresponding to the Putnam Voyager II
Variable Sub-Account were first offered on September 1, 2000, respectively. For
periods prior to these dates, the performance shown is based on the historical
performance of the Portfolios' Class IA shares ("non-12b-1 class"), adjusted to
reflect the current expense of the Portfolios' 12b-1 class. The inception dates
for the Portfolios are as shown above.
(With the Enhanced Death Benefit Rider)*
Average Annual Returns
10 Years or
Variable Sub-Account 1 Year 5 Years Since Inception**
AIM V.I. Balanced Fund -17.81% N/A 1.14%
AIM V.I. Capital Appreciation -29.51% 4.07% 10.17%
AIM V.I. Core Equity -29.07% 5.35% 9.79%
AIM V.I. Diversified Income -3.00% 1.05% 3.54%
AIM V.I. Global Utilities -34.09% 3.98% 6.73%
AIM V.I. Government Securities -0.22% 4.21% 3.98%
AIM V.I. Growth -39.97% 1.94% 7.28%
AIM V.I. High Yield -11.47% N/A -9.19%
AIM V.I. International Growth -29.76% -0.45% 5.34%
AIM V.I. Premier Equity -18.94% 7.76% 11.81%
Drefyus Socially Responsible Growth -28.81% 5.49% 10.40%
Dreyfus Stock Index -18.56% 8.41% 10.89%
Dreyfus VIF - Growth & Income -12.31% 5.14% 12.20%
Dreyfus VIF - Money Market -2.63% 2.94% 3.21%
Dreyfus VIF - Small Company Stock -8.06% 4.30% 5.17%
Federated Prime Money Fund II -2.80% 2.87% 6.84%
Fidelity VIP Contrafund -18.62% 8.52% 14.14%
Fidelity VIP Equity-Income -11.43% 7.47% 12.17%
Fidelity VIP Growth -23.95% 9.74% 11.79%
Fidelity VIP High Income -18.12% -5.60% 3.80%
Fidelity VIP Index 500 -18.48% 8.45% 11.80%
Fidelity VIP Overseas -27.42% 0.78% 4.39%
Franklin Small Cap - Class 2 -21.59% 8.48% 11.69%
Goldman Sachs VIT Capital Growth -20.81% N/A 0.91%
Goldman Sachs VIT CORE Small Cap Equity -2.08% N/A 0.63%
Goldman Sachs VIT CORE U.S. Equity -18.32% N/A 0.64%
Goldman Sachs VIT Global Income -1.81% N/A 1.48%
Goldman Sachs VIT Growth and Income -15.75% N/A -3.60%
Goldman Sachs VIT International Equity -28.50% N/A -0.86%
MFS Emerging Growth -39.58% 6.71% 10.45%
MFS Investors Trust -22.28% 5.36% 9.16%
MFS New Discovery -11.50% N/A 12.12%
MFS Research -27.51% 4.71% 8.62%
MFS Utilities -30.42% 7.23% 12.14%
Mutual Shares Securities - Class 2 0.40% 8.13% 8.55%
Neuberger Berman AMT Guardian -8.03% N/A 9.52%
Neuberger Berman AMT Mid Cap Growth -30.85% N/A 12.24%
Neuberger Berman AMT Partners -9.33% 5.59% 10.81%
Oppenheimer Aggressive Growth -37.39% 5.13% 10.21%
Oppenheimer Capital Appreciation -18.95% 12.26% 13.59%
Oppenheimer Global Securities -18.42% 13.47% 12.31%
Oppenheimer Main Street Growth & Income -16.57% 4.78% 12.06%
Oppenheimer Multiple Strategies -4.36% 6.81% 8.65%
Oppenheimer Strategic Bond -1.76% 2.41% 4.10%
Putnam Diversified Income -3.08% 0.13% 2.66%
Putnam Growth and Income -12.85% 6.01% 10.23%
Putnam Growth Opportunities -38.20% N/A -33.07%
Putnam Health Sciences -26.03% N/A 1.82%
Putnam New Value -3.27% N/A 7.52%
Putnam Voyager ll -36.91% N/A -47.39%
STI Capital Appreciation -11.82% 11.39% 13.95%
STI Growth and Income -12.04% N/A -2.00%
STI International Equity -23.71% 0.40% 0.67%
STI Investment Grade Bond 2.55% 4.36% 4.48%
STI Mid-Cap Equity -3.86% 6.35% 8.13%
STI Quality Growth Stock -24.97% N/A -14.93%
STI Small Cap Value Equity 14.64% N/A 1.27%
STI Value Income Stock -7.66% 6.13% 9.02%
Templeton Developing Markets - Class 2 -14.52% -14.02% -13.31%
Templeton Foreign Securities - Class 2 -22.32% 2.67% 7.96%
Templeton Global Income Securities - Class 2 -4.34% -0.20% 2.63%
Templeton Growth Securities - Class 2 -7.83% 6.36% 8.33%
Van Kampen UIF Core Plus Fixed Income 0.98% N/A 5.17%
Van Kampen UIF Equity Growth -21.45% N/A 8.61%
Van Kampen UIF Global Value Equity -13.49% N/A 5.92%
Van Kampen UIF International Magnum -25.57% N/A -1.54%
Van Kampen UIF Mid Cap Value -9.65% N/A 14.00%
Van Kampen UIF U.S. Real Estate 2.83% N/A 5.62%
Van Kampen UIF Value -7.07% N/A 5.64%
*Performance figures have been adjusted to reflect the current charge for the
Enhanced Death Benefit Rider as if that feature had been available throughout
the periods shown.
**The inception dates of the portfolio appear in the first table under "Adjusted
Historical Total Returns."
(1) The Portfolios' Class IB shares ("12b-1 class") corresponding to the Putnam
Diversified Income and Growth and the Income Variable Sub-Accounts were first
offered on April 6, 1998, those corresponding to the Health Sciences and the New
Value Variable Sub-Accounts were first offered on April 30, 1998, those
corresponding to the Growth Opportunities Variable Sub-Account were first
offered on January 31, 2000, and those corresponding to the Putnam Voyager II
Variable Sub-Account were first offered on September 1, 2000, respectively. For
periods prior to these dates, the performance shown is based on the historical
performance of the Portfolios' Class IA shares ("non-12b-1 class"), adjusted to
reflect the current expense of the Portfolios' 12b-1 class. The inception dates
for the Portfolios are as shown above.
(With the Enhanced Death and Income Benefit Combination Rider for Contracts
issued before September 22, 2000)*
Average Annual Returns
10 Years or
Variable Sub-Account 1 Year 5 Years Since Inception**
AIM V.I. Balanced Fund -18.01% N/A 0.91%
AIM V.I. Capital Appreciation -29.68% 3.84% 9.93%
AIM V.I. Core Equity -29.24% 5.11% 9.54%
AIM V.I. Diversified Income -3.23% 0.82% 3.31%
AIM V.I. Global Utilities -34.25% 3.75% 6.49%
AIM V.I. Government Securities -0.45% 3.97% 3.75%
AIM V.I. Growth -40.11% 1.71% 7.04%
AIM V.I. High Yield -11.68% N/A -9.40%
AIM V.I. International Growth -29.92% -0.68% 5.10%
AIM V.I. Premier Equity -19.13% 7.52% 11.56%
Drefyus Socially Responsible Growth -28.98% 5.25% 10.16%
Dreyfus Stock Index -18.75% 8.16% 10.65%
Dreyfus VIF - Growth & Income -12.52% 4.90% 11.95%
Dreyfus VIF - Money Market -2.85% 2.71% 2.98%
Dreyfus VIF - Small Company Stock -8.27% 4.06% 4.94%
Federated Prime Money Fund II -3.03% 2.64% 6.61%
Fidelity VIP Contrafund -18.81% 8.28% 13.89%
Fidelity VIP Equity-Income -11.64% 7.23% 11.93%
Fidelity VIP Growth -24.13% 9.49% 11.55%
Fidelity VIP High Income -18.31% -5.82% 3.57%
Fidelity VIP Index 500 -18.67% 8.20% 11.56%
Fidelity VIP Overseas -27.60% 0.55% 4.16%
Franklin Small Cap - Class 2 -21.77% 8.24% 11.44%
Goldman Sachs VIT Capital Growth -21.00% N/A 0.68%
Goldman Sachs VIT CORE Small Cap Equity -2.31% N/A 0.40%
Goldman Sachs VIT CORE U.S. Equity -18.52% N/A 0.41%
Goldman Sachs VIT Global Income -2.03% N/A 1.25%
Goldman Sachs VIT Growth and Income -15.95% N/A -3.82%
Goldman Sachs VIT International Equity -28.67% N/A -1.09%
MFS Emerging Growth -39.72% 6.48% 10.21%
MFS Investors Trust -22.46% 5.13% 8.92%
MFS New Discovery -11.71% N/A 11.87%
MFS Research -27.68% 4.48% 8.39%
MFS Utilities -30.59% 6.99% 11.89%
Mutual Shares Securities - Class 2 0.17% 7.88% 8.31%
Neuberger Berman AMT Guardian -8.25% N/A 9.27%
Neuberger Berman AMT Mid Cap Growth -31.02% N/A 11.99%
Neuberger Berman AMT Partners -9.55% 5.35% 10.57%
Oppenheimer Aggressive Growth -37.54% 4.89% 9.96%
Oppenheimer Capital Appreciation -19.14% 12.01% 13.34%
Oppenheimer Global Securities -18.61% 13.22% 12.06%
Oppenheimer Main Street Growth & Income -16.76% 4.54% 11.81%
Oppenheimer Multiple Strategies -4.58% 6.57% 8.41%
Oppenheimer Strategic Bond -1.99% 2.18% 3.87%
Putnam Diversified Income -3.31% -0.10% 2.44%
Putnam Growth and Income -13.05% 5.77% 9.99%
Putnam Growth Opportunities -38.35% N/A -33.23%
Putnam Health Sciences -26.20% N/A 1.59%
Putnam New Value -3.50% N/A 7.28%
Putnam Voyager ll -37.06% N/A -47.52%
STI Capital Appreciation -12.02% 11.14% 13.70%
STI Growth and Income -12.24% N/A -2.22%
STI International Equity -23.89% 0.18% 0.45%
STI Investment Grade Bond 2.32% 4.12% 4.25%
STI Mid-Cap Equity -4.09% 6.11% 7.89%
STI Quality Growth Stock -25.15% N/A -15.13%
STI Small Cap Value Equity 14.37% N/A 1.04%
STI Value Income Stock -7.88% 5.89% 8.78%
Templeton Developing Markets - Class 2 -14.72% -14.22% -13.52%
Templeton Foreign Securities - Class 2 -22.51% 2.44% 7.73%
Templeton Global Income Securities - Class 2 -4.56% -0.43% 2.41%
Templeton Growth Securities - Class 2 -8.04% 6.12% 8.09%
Van Kampen UIF Core Plus Fixed Income 0.74% N/A 4.94%
Van Kampen UIF Equity Growth -21.64% N/A 8.36%
Van Kampen UIF Global Value Equity -13.69% N/A 5.68%
Van Kampen UIF International Magnum -25.75% N/A -1.76%
Van Kampen UIF Mid Cap Value -9.86% N/A 13.74%
Van Kampen UIF U.S. Real Estate 2.60% N/A 5.38%
Van Kampen UIF Value -7.29% N/A 5.40%
*Performance figures have been adjusted to reflect the current charge for the
Enhanced Death and Income Benefit Combination Rider as if that feature had been
available throughout the periods shown.
**The inception dates of the portfolios appear in the first table under
"Adjusted Historical Total Returns."
(1) The Portfolios' Class IB shares ("12b-1 class") corresponding to the Putnam
Diversified Income and Growth and the Income Variable Sub-Accounts were first
offered on April 6, 1998, those corresponding to the Health Sciences and the New
Value Variable Sub-Accounts were first offered on April 30, 1998, those
corresponding to the Growth Opportunities Variable Sub-Account were first
offered on January 31, 2000, and those corresponding to the Putnam Voyager II
Variable Sub-Account were first offered on September 1, 2000, respectively. For
periods prior to these dates, the performance shown is based on the historical
performance of the Portfolios' Class IA shares ("non-12b-1 class"), adjusted to
reflect the current expense of the Portfolios' 12b-1 class. The inception dates
for the Portfolios are as shown above.
(With the Enhanced Death and Income Benefit Combination Rider II for Contracts
issued on or after September 22, 2000)*
Average Annual Returns
10 Years or
Variable Sub-Account 1 Year 5 Years Since Inception**
AIM V.I. Balanced Fund -18.06% N/A 0.85%
AIM V.I. Capital Appreciation -29.72% 3.77% 9.86%
AIM V.I. Core Equity -29.28% 5.05% 9.48%
AIM V.I. Diversified Income -3.29% 0.76% 3.25%
AIM V.I. Global Utilities -34.29% 3.68% 6.43%
AIM V.I. Government Securities -0.51% 3.91% 3.69%
AIM V.I. Growth -40.15% 1.65% 6.98%
AIM V.I. High Yield -11.74% N/A -9.46%
AIM V.I. International Growth -29.97% -0.74% 5.04%
AIM V.I. Premier Equity -19.18% 7.46% 11.50%
Drefyus Socially Responsible Growth -29.03% 5.19% 10.09%
Dreyfus Stock Index -18.80% 8.10% 10.58%
Dreyfus VIF - Growth & Income -12.57% 4.84% 11.88%
Dreyfus VIF - Money Market -2.91% 2.65% 2.92%
Dreyfus VIF - Small Company Stock -8.33% 4.00% 4.87%
Federated Prime Money Fund II -3.09% 2.58% 6.54%
Fidelity VIP Contrafund -18.87% 8.21% 13.82%
Fidelity VIP Equity-Income -11.70% 7.17% 11.86%
Fidelity VIP Growth -24.18% 9.42% 11.48%
Fidelity VIP High Income -18.36% -5.88% 3.51%
Fidelity VIP Index 500 -18.72% 8.14% 11.49%
Fidelity VIP Overseas -27.64% 0.49% 4.10%
Franklin Small Cap - Class 2 -21.82% 8.17% 11.37%
Goldman Sachs VIT Capital Growth -21.05% N/A 0.62%
Goldman Sachs VIT CORE Small Cap Equity -2.37% N/A 0.34%
Goldman Sachs VIT CORE U.S. Equity -18.57% N/A 0.34%
Goldman Sachs VIT Global Income -2.10% N/A 1.18%
Goldman Sachs VIT Growth and Income -16.01% N/A -3.88%
Goldman Sachs VIT International Equity -28.72% N/A -1.15%
MFS Emerging Growth -39.76% 6.41% 10.14%
MFS Investors Trust -22.51% 5.06% 8.85%
MFS New Discovery -11.77% N/A 11.80%
MFS Research -27.72% 4.41% 8.32%
MFS Utilities -30.63% 6.93% 11.82%
Mutual Shares Securities - Class 2 0.11% 7.82% 8.25%
Neuberger Berman AMT Guardian -8.31% N/A 9.20%
Neuberger Berman AMT Mid Cap Growth -31.06% N/A 11.92%
Neuberger Berman AMT Partners -9.60% 5.29% 10.50%
Oppenheimer Aggressive Growth -37.58% 4.83% 9.90%
Oppenheimer Capital Appreciation -19.19% 11.94% 13.28%
Oppenheimer Global Securities -18.66% 13.15% 11.99%
Oppenheimer Main Street Growth & Income -16.82% 4.48% 11.75%
Oppenheimer Multiple Strategies -4.64% 6.51% 8.34%
Oppenheimer Strategic Bond -2.06% 2.11% 3.81%
Putnam Diversified Income -3.37% -0.16% 2.38%
Putnam Growth and Income -13.11% 5.70% 9.92%
Putnam Growth Opportunities -38.39% N/A -33.28%
Putnam Health Sciences -26.25% N/A 1.52%
Putnam New Value -3.56% N/A 7.21%
Putnam Voyager ll -37.10% N/A -47.55%
STI Capital Appreciation -12.08% 11.07% 13.63%
STI Growth and Income -12.30% N/A -2.28%
STI International Equity -23.94% 0.12% 0.39%
STI Investment Grade Bond 2.25% 4.06% 4.18%
STI Mid-Cap Equity -4.15% 6.05% 7.83%
STI Quality Growth Stock -25.20% N/A -15.19%
STI Small Cap Value Equity 14.30% N/A 0.98%
STI Value Income Stock -7.94% 5.83% 8.71%
Templeton Developing Markets - Class 2 -14.77% -14.27% -13.57%
Templeton Foreign Securities - Class 2 -22.56% 2.37% 7.66%
Templeton Global Income Securities - Class 2 -4.62% -0.49% 2.35%
Templeton Growth Securities - Class 2 -8.10% 6.06% 8.02%
Van Kampen UIF Core Plus Fixed Income 0.68% N/A 4.87%
Van Kampen UIF Equity Growth -21.69% N/A 8.30%
Van Kampen UIF Global Value Equity -13.75% N/A 5.61%
Van Kampen UIF International Magnum -25.80% N/A -1.82%
Van Kampen UIF Mid Cap Value -9.92% N/A 13.67%
Van Kampen UIF U.S. Real Estate 2.53% N/A 5.32%
Van Kampen UIF Value -7.35% N/A 5.34%
*Performance figures have been adjusted to reflect the current charge for the
Enhanced Death and Income Benefit Combination Rider II as if that feature had
been available throughout the periods shown.
**The inception dates of the portfolios appear in the first table under
"Adjusted Historical Total Returns."
(1) The Portfolios' Class IB shares ("12b-1 class") corresponding to the Putnam
Diversified Income and Growth and the Income Variable Sub-Accounts were first
offered on April 6, 1998, those corresponding to the Health Sciences and the New
Value Variable Sub-Accounts were first offered on April 30, 1998, those
corresponding to the Growth Opportunities Variable Sub-Account were first
offered on January 31, 2000, and those corresponding to the Putnam Voyager II
Variable Sub-Account were first offered on September 1, 2000, respectively. For
periods prior to these dates, the performance shown is based on the historical
performance of the Portfolios' Class IA shares ("non-12b-1 class"), adjusted to
reflect the current expense of the Portfolios' 12b-1 class. The inception dates
for the Portfolios are as shown above.
CALCULATION OF ACCUMULATION UNIT VALUES
The value of Accumulation Units will change each Valuation Period according to
the investment performance of the Portfolio shares purchased by each Variable
Sub-Account and the deduction of certain expenses and charges. A "Valuation
Period" is the period from the end of one Valuation Date and continues to the
end of the next Valuation Date. A Valuation Date ends at the close of regular
trading on the New York Stock Exchange (currently 3:00 p.m. Central Time).
The Accumulation Unit Value of a Variable Sub-Account for any Valuation Period
equals the Accumulation Unit Value as of the immediately preceding Valuation
Period, multiplied by the Net Investment Factor (described below) for that
Sub-Account for the current Valuation Period.
NET INVESTMENT FACTOR
The Net Investment Factor for a Valuation Period is a number representing the
change, since the last Valuation Period, in the value of Sub-Account assets per
Accumulation Unit due to investment income, realized or unrealized capital gain
or loss, deductions for taxes, if any, and deductions for the mortality and
expense risk charge and administrative expense charge. We determine the Net
Investment Factor for each Variable Sub-Account for any Valuation Period by
dividing (A) by (B) and subtracting (C) from the result, where:
(A) is the sum of:
(1) the net asset value per share of the Portfolio underlying the
Variable Sub-Account determined at the end of the current Valuation
Period; plus,
(2) the per share amount of any dividend or capital gain distributions
made by the Portfolio underlying the Variable Sub-Account during the
current Valuation Period;
(B) is the net asset value per share of the Portfolio underlying the
Variable Sub-Account determined as of the end of the immediately
preceding Valuation Period; and
(C) is the annualized mortality and expense risk and administrative
expense charges divided by 365 and then multiplied by the number of
calendar days in the current Valuation Period.
CALCULATION OF VARIABLE INCOME PAYMENTS
We calculate the amount of the first variable income payment under an Income
Plan by applying the Contract Value allocated to each Variable Sub-Account less
any applicable premium tax charge deducted at the time, to the income payment
tables in the Contract. We divide the amount of the first variable annuity
income payment by the Variable Sub-Account's then current Annuity Unit value to
determine the number of annuity units ("Annuity Units") upon which later income
payments will be based. To determine income payments after the first, we simply
multiply the number of Annuity Units determined in this manner for each Variable
Sub-Account by the then current Annuity Unit value ("Annuity Unit Value") for
that Variable Sub-Account.
CALCULATION OF ANNUITY UNIT VALUES
Annuity Units in each Variable Sub-Account are valued separately and Annuity
Unit Values will depend upon the investment experience of the particular
Portfolio in which the Variable Sub-Account invests. We calculate the Annuity
Unit Value for each Variable Sub-Account at the end of any Valuation Period by:
o multiplying the Annuity Unit Value at the end of the immediately preceding
Valuation Period by the Variable Sub-Account's Net Investment Factor
(described in the preceding section) for the Period; and then
o dividing the product by the sum of 1.0 plus the assumed investment rate for
the Valuation Period. The assumed investment rate is an effective annual
rate of 3%.
The assumed investment rate adjusts for the interest rate assumed in the income
payment tables used to determine the dollar amount of the first variable income
payment, and is at an effective annual rate which is disclosed in the Contract.
We determine the amount of the first variable income payment paid under an
Income Plan using the income payment tables set out in the Contracts. The
Contracts include tables that differentiate on the basis of sex, except in
states that require the use of unisex tables.
GENERAL MATTERS
INCONTESTABILITY
We will not contest the Contract after we issue it.
SETTLEMENTS
The Contract must be returned to us prior to any settlement. We must receive due
proof of the Contract Owner(s) death (or Annuitant's death if there is a
non-natural ContractOwner) before we will settle a death claim.
SAFEKEEPING OF THE VARIABLE ACCOUNT'S ASSETS
We hold title to the assets of the Variable Account. We keep the assets
physically segregated and separate and apart from our general corporate assets.
We maintain records of all purchases and redemptions of the Portfolio shares
held by each of the Variable Sub-Accounts.
The Portfolios do not issue stock certificates. Therefore, we hold the Variable
Account's assets in open account in lieu of stock certificates. See the
Portfolios' prospectuses for a more complete description of the custodian of the
Portfolios.
PREMIUM TAXES
Applicable premium tax rates depend on the Contract Owner's state of residency
and the insurance laws and our status in those states where premium taxes are
incurred. Premium tax rates may be changed by legislation, administrative
interpretations, or judicial acts.
TAX RESERVES
We do not establish capital gains tax reserves for any Variable Sub-Account nor
do we deduct charges for tax reserves because we believe that capital gains
attributable to the Variable Account will not be taxable. However, we reserve
the right to deduct charges to establish tax reserves for potential taxes on
realized or unrealized capital gains.
EXPERTS
The financial statements of Glenbrook Life as of December 31, 2001 and 2000 and
for each of the three years in the period ended December 31, 2001 and the
related financial statement schedule that appear in this Statement of Additional
Information have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report appearing herein, and are included in reliance upon the
report of such firm given upon thei authoirty as experts in acounting and
auditing.
The financial statements of the Variable Account as of December 31, 2001 and for
each of the periods in the two years then ended that appear in this Statement of
Additional Information have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing herein, and are included in
reliance upon their report of such firm given upon their authority as experts in
accounting and auditing. The principal business address of Deloitte & Touche LLP
is, Two Prudential Plaza, 180 N. Stetson Avenue, Chicago, Illinois 60601.
FINANCIAL STATEMENTS
The financial statements of the Variable Account as of December 31, 2001 and for
each of the periods in the two years then ended, the Financial Statements of
Glenbrook Life as of December 31, 2001 and 2000 and for each of the three years
in the period ended December 31, 2001 and the related financial statement
schedule accompanying Independent Auditors' Reports appear on the pages that
follow. The financial statements of Glenbrook Life included herein should be
considered only as bearing upon the ability of Glenbrook Life to meet its
obligations under the Contracts.
<Page>
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 (the "Company", an affiliate of The Allstate
Corporation) as of December 31, 2001 and 2000, and the related Statements of
Operations and Comprehensive Income, Shareholder's Equity and Cash Flows for
each of the three years in the period ended December 31, 2001. 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2001 and
2000, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 2001 in conformity with accounting
principles generally accepted in the United States of America. Also, in our
opinion, Schedule IV--Reinsurance, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 20, 2002
F-1
<Page>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
------------------------------
2001 2000 1999
-------- -------- --------
(IN THOUSANDS)
REVENUES
Net investment income..................................... $10,715 $10,808 $ 6,579
Realized capital gains and losses......................... 435 419 312
------- ------- -------
INCOME FROM OPERATIONS BEFORE INCOME TAX EXPENSE............ 11,150 11,227 6,891
Income Tax Expense.......................................... 3,896 3,925 2,382
------- ------- -------
NET INCOME.................................................. 7,254 7,302 4,509
------- ------- -------
OTHER COMPREHENSIVE INCOME (LOSS), AFTER-TAX
Change in unrealized net capital gains and losses......... 1,633 3,603 (5,286)
------- ------- -------
COMPREHENSIVE INCOME (LOSS)................................. $ 8,887 $10,905 $ (777)
======= ======= =======
</Table>
See notes to financial statements.
F-2
<Page>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF FINANCIAL POSITION
<Table>
<Caption>
DECEMBER 31,
-------------------------
2001 2000
----------- -----------
(IN THOUSANDS, EXCEPT PAR
VALUE DATA)
ASSETS
Investments
Fixed income securities, at fair value (amortized cost
$154,154 and $139,819)................................... $ 160,974 $ 144,127
Short-term................................................ 6,592 3,085
---------- ----------
Total investments......................................... 167,566 147,212
Cash........................................................ -- 13,500
Reinsurance recoverable from Allstate Life Insurance
Company, net.............................................. 5,378,036 4,702,940
Other assets................................................ 3,404 3,391
Separate Accounts........................................... 1,547,953 1,740,328
---------- ----------
TOTAL ASSETS.......................................... $7,096,959 $6,607,371
========== ==========
LIABILITIES
Contractholder funds........................................ $5,370,475 $4,696,846
Reserve for life-contingent contract benefits............... 7,561 6,094
Current income taxes payable................................ 3,844 3,729
Deferred income taxes....................................... 2,610 1,842
Payable to affiliates, net.................................. 2,198 5,101
Separate Accounts........................................... 1,547,953 1,740,328
---------- ----------
TOTAL LIABILITIES..................................... 6,934,641 6,453,940
---------- ----------
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 8)
SHAREHOLDER'S EQUITY
Common stock, $500 par value, 10,000 shares authorized,
5,000 shares issued and outstanding....................... 2,500 2,500
Additional capital paid-in.................................. 119,241 119,241
Retained income............................................. 36,144 28,890
Accumulated other comprehensive income:
Unrealized net capital gains and losses................... 4,433 2,800
---------- ----------
Total accumulated other comprehensive income.......... 4,433 2,800
---------- ----------
TOTAL SHAREHOLDER'S EQUITY............................ 162,318 153,431
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY............ $7,096,959 $6,607,371
========== ==========
</Table>
See notes to financial statements.
F-3
<Page>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF SHAREHOLDER'S EQUITY
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
------------------------------
2001 2000 1999
-------- -------- --------
(IN THOUSANDS)
COMMON STOCK
Balance, beginning of year.................................. $ 2,500 $ 2,500 $ 2,100
Issuance of stock........................................... -- -- 400
-------- -------- --------
Balance, end of year........................................ 2,500 2,500 2,500
-------- -------- --------
ADDITIONAL CAPITAL PAID-IN
Balance, beginning of year.................................. 119,241 119,241 69,641
Capital contribution........................................ -- -- 49,600
-------- -------- --------
Balance, end of year........................................ 119,241 119,241 119,241
-------- -------- --------
RETAINED INCOME
Balance, beginning of year.................................. 28,890 21,588 17,079
Net income.................................................. 7,254 7,302 4,509
-------- -------- --------
Balance, end of year........................................ 36,144 28,890 21,588
-------- -------- --------
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Balance, beginning of year.................................. 2,800 (803) 4,483
Change in unrealized net capital gains and losses........... 1,633 3,603 (5,286)
-------- -------- --------
Balance, end of year........................................ 4,433 2,800 (803)
-------- -------- --------
TOTAL SHAREHOLDER'S EQUITY.............................. $162,318 $153,431 $142,526
======== ======== ========
</Table>
See notes to financial statements.
F-4
<Page>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF CASH FLOWS
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
------------------------------
2001 2000 1999
-------- -------- --------
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................. $ 7,254 $ 7,302 $ 4,509
Adjustments to reconcile net income to net cash provided by
operating activities
Amortization and other non-cash items................... (77) (468) (65)
Realized capital gains and losses....................... (435) (419) (312)
Changes in:
Income taxes payable.................................. 4 1,563 235
Payable to affiliates, net............................ (2,903) 979 539
Other operating assets and liabilities................ (1,491) (725) (275)
-------- -------- --------
Net cash provided by operating activities............... 2,352 8,232 4,631
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Fixed income securities
Proceeds from sales....................................... 14,535 20,682 9,049
Investment collections.................................... 9,553 3,163 4,945
Investments purchases..................................... (36,433) (68,967) (20,328)
Change in short-term investments, net....................... (3,507) 50,381 (48,288)
-------- -------- --------
Net cash (used in) provided by investing activities..... (15,852) 5,259 (54,622)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock...................... -- -- 400
Capital contribution........................................ -- -- 49,600
-------- -------- --------
Net cash provided by financing activities............... -- -- 50,000
-------- -------- --------
NET (DECREASE) INCREASE IN CASH............................. (13,500) 13,491 9
CASH AT BEGINNING OF YEAR................................... 13,500 9 --
-------- -------- --------
CASH AT END OF YEAR......................................... $ -- $ 13,500 $ 9
======== ======== ========
</Table>
See notes to financial statements.
F-5
<Page>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
1. GENERAL
BASIS OF PRESENTATION
The accompanying financial statements include the accounts of Glenbrook Life and
Annuity Company ("Glenbrook Life" or the "Company"), a wholly owned subsidiary
of Allstate Life Insurance Company ("ALIC"), which is wholly owned by Allstate
Insurance Company ("AIC"), a wholly owned subsidiary of The Allstate Corporation
(the "Corporation"). These financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America
("GAAP").
To conform with the 2001 presentation, certain amounts in the prior years'
financial statements and notes have been reclassified.
NATURE OF OPERATIONS
Glenbrook Life, a single segment entity, markets a diversified group of products
to meet consumers' lifetime needs in the areas of protection and retirement
solutions through financial services firms. These products include
interest-sensitive life including single premium life and variable life; fixed
annuities including market value adjusted annuities and equity-indexed
annuities; immediate annuities; and variable annuities. ALFS, Inc. ("ALFS") is
the principal underwriter for certain Glenbrook Life products, such as variable
life, variable annuities and market value adjusted annuities. ALFS is a wholly
owned subsidiary of ALIC and is a registered broker-dealer under the Securities
Exchange Act of 1934.
In 2001, substantially all of the Company's statutory premiums and deposits were
from annuities. Statutory premiums and deposits is a measure used by management
to analyze sales trends. Statutory premiums and deposits includes premiums and
annuity considerations determined in conformity with statutory accounting
practices prescribed or permitted by the insurance regulatory authorities of the
state of Arizona, and all other funds received from customers on deposit-type
products which are treated as liabilities. The statutory accounting practices
differ in certain, material aspects from GAAP.
Annuity contracts and life insurance policies issued by the Company are subject
to discretionary surrender or withdrawal by customers, subject to applicable
surrender charges. These policies and contracts are reinsured with ALIC (see
Note 3), which invests premiums and deposits to provide cash flows that will be
used to fund future benefits and expenses.
The Company monitors economic and regulatory developments that have the
potential to impact its business. Federal legislation has allowed banks and
other financial organizations to have greater participation in the securities
and insurance businesses. This legislation presents an increased level of
competition for sales of the Company's products. Furthermore, under current U.S.
tax law and regulations, deferred and immediate annuities and life insurance,
including interest-sensitive products, receive favorable tax treatment. Any
legislative or regulatory changes that adversely alter this treatment are likely
to negatively affect demand for these products. In addition, recent changes in
the federal estate tax laws will affect the demand for the types of life
insurance used in estate planning
Additionally, traditional demutualizations of mutual insurance companies and
enacted and pending state legislation to permit mutual insurance companies to
convert to a hybrid structure known as a mutual holding company could have a
number of significant effects on the Company by: 1) increasing industry
competition through consolidation caused by mergers and acquisitions related to
the new corporate form of business; and 2) increasing competition in the capital
markets.
Although the Company currently benefits from agreements with financial services
entities who market and distribute its products, change in control or other
factors of these non-affiliated entities with which the Company has alliances
could negatively impact the Company's sales.
The Company is authorized to sell life and investment products in all states
except New York, as well as in the District of Columbia. The top geographic
locations for statutory premiums and deposits for the Company were California,
Texas, Pennsylvania, Florida, Illinois, New Jersey, and Michigan for the year
ended December 31, 2001. No other jurisdiction accounted for more than 5% of
statutory premiums and deposits. All premiums and deposits are ceded to ALIC
under reinsurance agreements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS
Fixed income securities include bonds and mortgage-backed securities. All fixed
income securities are carried at fair value and may be sold prior to their
contractual maturity ("available for sale"). The fair value of exchange traded
fixed income securities are based upon quoted market prices or dealer quotes.
The fair value of non-exchange traded fixed income securities is based on either
independent third party pricing sources or widely accepted pricing valuation
models which utilize internally developed ratings and independent third party
data as inputs. The difference between amortized cost and fair value, net of
deferred income taxes, is reflected as a component of Accumulated other
comprehensive income. Short-term investments are carried at cost or amortized
cost, which approximates fair value.
F-6
<Page>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
Investment income consists primarily of interest. Interest 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. They include gains and losses on portfolio trading and write-downs in
value due to other than temporary declines in fair value.
The Company monitors its fixed income portfolios for ratings changes or other
events that may result in declines in value that are other than temporary.
Factors considered in evaluating whether a decline in fair value is other than
temporary are: 1) the Company's ability and intent to retain the investment for
a period of time sufficient to allow for an anticipated recovery in value; 2)
the duration for and extent to which the fair value has been less than cost; and
3) the financial condition and near-term prospects of the issuer.
REINSURANCE RECOVERABLE
The Company has reinsurance agreements whereby all contract charges, credited
interest, policy benefits and certain expenses are ceded to ALIC (see Note 3).
Such amounts are reflected net of such reinsurance in the statements of
operations and comprehensive income. Reinsurance recoverable and the related
reserve for life-contingent contract benefits and contractholder funds are
reported separately in the statements of financial position. Reinsurance does
not extinguish the Company's primary liability under the policies written.
Investment income earned on the assets which support contractholder funds and
the reserve for life-contingent contract benefits is not included in the
Company's financial statements as those assets are owned and managed under terms
of reinsurance agreements.
RECOGNITION OF INSURANCE REVENUE AND RELATED BENEFITS AND INTEREST CREDITED
Immediate annuities with life contingencies provide insurance protection over a
period that extends beyond the period in which premiums are collected. Gross
premiums in excess of the net premium on immediate annuities with life
contingencies are deferred and recognized over the contract period. Contract
benefits are recognized in relation to such revenues so as to result in the
recognition of profits over the life of the policy.
Interest-sensitive life contracts, such as single premium life, are insurance
contracts whose terms are not fixed and guaranteed. The terms that may be
changed include premiums paid by the contractholder, interest credited to the
contractholder account balance and one or more amounts assessed against the
contractholder. Premiums from these contracts are reported as deposits to
contractholder funds. Contract charges consists of fees assessed against the
contractholder account balance for cost of insurance (mortality risk), contract
administration and surrender charges. These revenues are recognized when levied
against the account balance. Contract benefits include life-contingent benefit
payments in excess of the reserves held.
Contracts that do not subject the Company to significant risk arising from
mortality or morbidity are referred to as investment contracts. Fixed annuities,
market value adjusted annuities, equity-indexed annuities and immediate
annuities without life contingencies are considered investment contracts.
Deposits received for such contracts are reported as deposits to contractholder
funds. Contract charges for investment contracts consist of fees assessed
against the contractholder account balance for contract administration and
surrender charges. These revenues are recognized when levied against the
contractholder account balance.
Interest credited to contractholders' funds represents contractual interest
accrued or paid for interest-sensitive life contracts and investment contracts.
Crediting rates for fixed annuities and interest-sensitive life contracts are
adjusted periodically by the Company to reflect current market conditions.
Crediting rates for indexed annuities are based on an interest rate index, such
as LIBOR or an equity index, such as S&P 500.
Separate Accounts products include variable annuity and variable life. The
assets supporting these products are legally segregated and available only to
settle Separate Accounts contract obligations. Deposits received are reported as
Separate Accounts liabilities. Contract charges for these contracts consist of
fees assessed against the Separate Accounts fund balances for contract
maintenance, administration, mortality, expense and surrenders. Contract
benefits incurred for Separate Accounts include, for example, guaranteed minimum
death benefits paid on variable annuity contracts.
All contract charges, contract benefits and interest credited are reinsured.
INCOME TAXES
The income tax provision is calculated under the liability method and presented
net of reinsurance. Deferred tax assets and liabilities are recorded based on
the difference between the financial statement and tax bases of assets and
liabilities at the enacted tax rates. The principal assets and liabilities
giving rise to such differences are unrealized capital gains
F-7
<Page>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
and losses on fixed income securities carried at fair value and differences in
the tax bases of investments.
SEPARATE ACCOUNTS
The Company issues variable annuities and variable life contracts, the assets
and liabilities of which are legally segregated and reflected as Separate
Accounts. The assets of the Separate Accounts are carried at fair value.
Separate Accounts liabilities represent the contractholders' claims to the
related assets and are carried at the fair value of the assets. Investment
income and realized capital gains and losses of the Separate Accounts accrue
directly to the contractholders and therefore, are not included in the Company's
statements of operations. Revenues to the Company from the Separate Accounts
consist of contract maintenance and administration fees and mortality, surrender
and expense charges and are ceded to ALIC.
Absent any contract provision wherein the Company guarantees either a minimum
return or account value upon death or annuitization, contractholders bear the
investment risk that the Separate Accounts' funds may not meet their stated
objectives.
RESERVE FOR LIFE-CONTINGENT CONTRACT BENEFITS
The reserve for life-contingent contract benefits, which relates to immediate
annuities with life contingencies, is computed on the basis of assumptions as to
future investment yields, mortality, terminations and expenses. These
assumptions include provisions for adverse deviation and generally vary by such
characteristics as type of coverage, year of issue and policy duration. Detailed
reserve assumptions and reserve interest rates are outlined in Note 6.
CONTRACTHOLDER FUNDS
Contractholder funds arise from the issuance of interest-sensitive life policies
and investment contracts. Deposits received are recorded as interest-bearing
liabilities. Contractholder funds are equal to deposits received and interest
credited to the benefit of the contractholder less surrenders and withdrawals,
mortality charges, and administrative expenses. Detailed information on
crediting rates and surrender and withdrawal protection on contractholder funds
are outlined in Note 6.
USE OF ESTIMATES
The preparation of financial statements in conformity with GAAP 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.
PENDING ACCOUNTING STANDARDS
In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standard ("SFAS") No. 142, "Goodwill and other
Intangible Assets", which eliminates the requirement to amortize goodwill, and
requires that goodwill and separately identified intangible assets with
indefinite lives be evaluated for impairment on an annual basis (or more
frequently if impairment indicators arise) on a fair value as opposed to an
undiscounted basis. SFAS No. 142 is effective January 1, 2002. A transitional
goodwill impairment test is required to be completed within the first six months
of adoption with any resulting impairment charge recognized as the cumulative
effect of a change in accounting principle in the statement of operations. The
adoption of SFAS No. 142 is not expected to have a material impact on either the
financial position or results of operations of the Company.
In December 2001, the Accounting Standards Executive Committee ("AcSEC") issued
Statement of Position ("SOP") 01-6, "Accounting by Certain Entities (Including
Entities With Trade Receivables) That Lend to or Finance the Activities of
Others", which is effective for interim and annual financial statements issued
for the fiscal year beginning after December 15, 2001. The SOP conforms
accounting and financial reporting practices for certain lending and financing
activities, eliminating various specialized accounting practices that developed
from the issuance of AICPA finance company, bank, and credit union audit guides.
The SOP also explicitly incorporates lending and financing activities of
insurance companies within its scope. The Company's adoption of SOP 01-6 is not
expected to have a material effect on the results of operations or financial
position.
3. RELATED PARTY TRANSACTIONS
REINSURANCE
The Company has reinsurance agreements whereby all contract charges, interest
credited to contractholders' funds, contract benefits and certain expenses are
ceded to ALIC and reflected net of such reinsurance in the statements of
operations and comprehensive income. Reinsurance recoverable and the related
reserve for life-contingent contract benefits and contractholder funds are
reported separately in the statements of financial position. The Company
continues to have primary liability as the direct insurer for risks reinsured.
Investment income earned on the assets which support contractholder funds and
the reserve for life-contingent contract benefits is not included in the
Company's financial statements as those assets are owned and managed under terms
of reinsurance agreements.
F-8
<Page>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
The following table summarizes amounts that were ceded to ALIC under reinsurance
agreements:
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
2001 2000 1999
(IN THOUSANDS) -------- -------- --------
Contract charges $ 31,771 $ 37,965 $ 27,175
Interest credited to contractholders'
funds, contract benefits and certain
expenses 384,825 331,220 253,945
</Table>
BUSINESS OPERATIONS
The Company utilizes services performed by AIC and ALIC and business facilities
owned or leased, and operated by AIC in conducting its business activities. The
Company reimburses AIC and ALIC for the operating expenses incurred on behalf of
the Company. The Company is charged for the cost of these operating expenses
based on the level of services provided. Operating expenses, including
compensation and retirement and other benefit programs, allocated to the Company
were $48.6 million, $48.6 million and $26.6 million in 2001, 2000 and 1999,
respectively. Of these costs, the Company retains investment related expenses.
All other costs are ceded to ALIC under reinsurance agreements.
INCOME TAXES
The Company is a party to a federal income tax allocation agreement with the
Corporation (Note 9).
DEBT
The Company has entered into an intercompany loan agreement with the
Corporation. The amount of funds available to the Company at a given point in
time is dependent upon the debt position of the Corporation. No amounts were
outstanding for the Company under the intercompany loan agreement at December
31, 2001 and 2000, respectively.
4. INVESTMENTS
FAIR VALUES
The amortized cost, gross unrealized gains and losses, and fair value for fixed
income securities are as follows:
<Table>
<Caption>
GROSS
UNREALIZED
AMORTIZED --------------- FAIR
AT DECEMBER 31, 2001 COST GAINS LOSSES VALUE
-------------------- --------- ------ ------- --------
(IN THOUSANDS)
U.S. government and agencies $ 44,832 $2,508 $ (24) $ 47,316
Municipal 1,400 -- (3) 1,397
Corporate 75,425 3,532 (650) 78,307
Foreign government 415 20 -- 435
Mortgage-backed securities 32,082 1,447 (10) 33,519
-------- ------ ------- --------
Total fixed income securities $154,154 $7,507 $ (687) $160,974
======== ====== ======= ========
<Caption>
AT DECEMBER 31, 2000
--------------------
U.S. government and agencies $ 13,210 $2,376 $ -- $ 15,586
Municipal 1,400 -- (38) 1,362
Corporate 82,269 2,092 (1,167) 83,194
Foreign government 256 24 -- 280
Mortgage-backed securities 42,684 1,081 (60) 43,705
-------- ------ ------- --------
Total fixed income securities $139,819 $5,573 $(1,265) $144,127
======== ====== ======= ========
</Table>
SCHEDULED MATURITIES
The scheduled maturities for fixed income securities are as follows at
December 31, 2001:
<Table>
<Caption>
AMORTIZED FAIR
COST VALUE
(IN THOUSANDS) --------- --------
Due in one year or less $ 6,728 $ 6,865
Due after one year through five years 50,006 52,447
Due after five years through ten years 47,974 48,868
Due after ten years 17,364 19,275
-------- --------
122,072 127,455
Mortgage-backed securities 32,082 33,519
-------- --------
Total $154,154 $160,974
======== ========
</Table>
Actual maturities may differ from those scheduled as a result of prepayments by
the issuers.
NET INVESTMENT INCOME
<Table>
<Caption>
YEAR ENDED DECEMBER 31, 2001 2000 1999
----------------------- ------- ------- ------
(IN THOUSANDS)
Fixed income securities $10,566 $10,317 $6,458
Short-term investments 409 587 230
------- ------- ------
Investment income, before expense 10,975 10,904 6,688
Investment expense 260 96 109
------- ------- ------
Net investment income $10,715 $10,808 $6,579
======= ======= ======
</Table>
F-9
<Page>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
REALIZED CAPITAL GAINS AND LOSSES, AFTER TAX
<Table>
<Caption>
YEAR ENDED DECEMBER 31, 2001 2000 1999
----------------------- ----- ----- -----
(IN THOUSANDS)
Fixed income securities $ 435 $ 419 $ 312
Income taxes (152) (147) (109)
----- ----- -----
Realized capital gains and losses, after tax $ 283 $ 272 $ 203
===== ===== =====
</Table>
Excluding calls and prepayments, gross gains of $636 thousand, $807 thousand and
$370 thousand were realized on sales of fixed income securities during 2001,
2000 and 1999, respectively, and gross losses of $201 thousand, $388 thousand,
and $58 thousand were realized on sales of fixed income securities during 2001,
2000 and 1999, respectively.
UNREALIZED NET CAPITAL GAINS AND LOSSES
Unrealized net capital gains and losses on fixed income securities included in
shareholder's equity at December 31, 2001 are as follows:
<Table>
<Caption>
GROSS
UNREALIZED
AMORTIZED FAIR -------------- UNREALIZED
COST VALUE GAINS LOSSES NET GAINS
(IN THOUSANDS) --------- -------- ------ ------ ----------
Fixed income securities $154,154 $160,974 $7,507 $(687) $ 6,820
======== ======== ====== =====
Deferred income taxes (2,387)
-------
Unrealized net capital gains
and losses $ 4,433
=======
</Table>
CHANGE IN UNREALIZED NET CAPITAL GAINS AND LOSSES
<Table>
<Caption>
YEAR ENDED DECEMBER 31, 2001 2000 1999
----------------------- ------ ------- -------
(IN THOUSANDS)
Fixed income securities $2,512 $ 5,544 $(8,134)
Deferred income taxes (879) (1,941) 2,848
------ ------- -------
Increase (decrease) in unrealized net capital gains
and losses $1,633 $ 3,603 $(5,286)
====== ======= =======
</Table>
SECURITIES ON DEPOSIT
At December 31, 2001, fixed income securities with a carrying value of $9.3
million were on deposit with regulatory authorities as required by law.
5. FINANCIAL INSTRUMENTS
In the normal course of business, the Company invests in various financial
assets and incurs various financial liabilities. The fair value estimates of
financial instruments presented below are not necessarily indicative of the
amounts the Company might pay or receive in actual market transactions.
Potential taxes and other transaction costs have not been considered in
estimating fair value. The disclosures that follow do not reflect the fair value
of the Company as a whole since a number of the Company's significant assets
(including reinsurance recoverable and deferred income taxes) and liabilities
(including interest-sensitive life insurance reserves and deferred income taxes)
are not considered financial instruments and are not carried at fair value.
Other assets and liabilities considered financial instruments, such as accrued
investment income and cash, are generally of a short-term nature. Their carrying
values are deemed to approximate fair value.
FINANCIAL ASSETS
The carrying value and fair value of financial assets at December 31, are as
follows:
<Table>
<Caption>
2001 2000
---------------------- ----------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
(IN THOUSANDS) ---------- ---------- ---------- ----------
Fixed income securities
$ 160,974 $ 160,974 $ 144,127 $ 144,127
Short-term investments 6,592 6,592 3,085 3,085
Separate Accounts 1,547,953 1,547,953 1,740,328 1,740,328
</Table>
Fair values for exchange traded fixed income securities are based upon quoted
market prices or dealer quotes. The fair value of non-exchange traded fixed
income securities is based on either independent third party pricing sources or
widely accepted pricing valuation models which utilize internally developed
ratings and independent third party data as inputs. Short-term investments are
highly liquid investments with maturities of less than one year whose carrying
value are deemed to approximate fair value. Separate Accounts assets are carried
in the statements of financial position at fair value based on quoted market
prices.
FINANCIAL LIABILITIES
The carrying value and fair value of financial liabilities at December 31, are
as follows:
<Table>
<Caption>
2001 2000
---------------------- ----------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
(IN THOUSANDS) ---------- ---------- ---------- ----------
Contractholder funds on
investment contracts $5,332,632 $5,086,856 $4,694,695 $4,467,866
Separate Accounts 1,547,953 1,547,953 1,740,328 1,740,328
</Table>
Contractholder funds include interest-sensitive life insurance contracts and
investment contracts. Interest-sensitive life insurance contracts and certain
other contractholder liabilities are not considered to be financial instruments
subject to fair value disclosure requirements. The fair value of investment
contracts is based on the terms of the underlying contracts. Fixed annuities and
immediate annuities without
F-10
<Page>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
life contingencies are valued at the account balance less surrender charges.
Market value adjusted annuities' fair value is estimated to be the market
adjusted surrender value. Equity-indexed deferred annuity contracts' fair value
approximates carrying value since the embedded equity options are carried at
market value in the consolidated financial statements. Separate Accounts
liabilities are carried at the fair value of the underlying assets.
6. RESERVE FOR LIFE-CONTINGENT CONTRACT BENEFITS AND CONTRACTHOLDER FUNDS
Reserves for life-contingent contract benefits consist of immediate annuities
with life contingencies. The assumptions for mortality generally utilized in
calculating reserves include the 1983 group annuity mortality table. Interest
rate assumptions vary from 3.0% to 7.7%. Other estimation methods used include
the present value of contractually fixed future benefits.
Premium deficiency reserves are established, if necessary, for the immediate
annuity business, to the extent the unrealized gains on fixed income securities
would result in a premium deficiency had those gains actually been realized. The
Company did not have a premium deficiency reserve at December 31, 2001 and 2000.
At December 31, Contractholder funds consists of the following:
<Table>
<Caption>
2001 2000
(IN THOUSANDS) ---------- ----------
Interest-sensitive life $ 67,555 $ 27,997
Fixed annuities:
Immediate annuities 24,123 20,577
Deferred annuities 5,278,797 4,648,272
---------- ----------
Total Contractholder funds $5,370,475 $4,696,846
========== ==========
</Table>
Contractholder funds are equal to deposits received and interest credited for
the benefit of the contractholder less surrenders and withdrawals, mortality
charges and administrative expenses. Interest rates credited range from 4.3% to
7.1% for interest-sensitive life contracts; 3.2% to 7.3% for immediate annuities
and 0% to 9.0% for deferred annuities. Withdrawal and surrender charge
protection includes: i) for interest-sensitive life, either a percentage of
account balance or dollar amount grading off generally over 20 years; and,
ii) for deferred annuities not subject to a market value adjustment, either a
declining or a level percentage charge generally over nine years or less. Less
than 1% of deferred annuities are subject to a market value adjustment.
7. THIRD PARTY ADMINISTRATION AGREEMENT
On July 18, 2001, the Company entered into an administrative services agreement
with American Maturity Life Insurance Company ("American Maturity"), which was
effective as of January 2, 2001, to administer certain blocks of annuities that
American Maturity reinsures to ALIC. Pursuant to the terms of the agreement, the
Company is to provide insurance contract administration and financial services
for all contracts covered under the reinsurance agreement. The administrative
services agreement can be terminated by either the Company or American Maturity
upon mutual consent or as otherwise provided for in the terms of the agreement.
All administrative fees earned and administrative expenses incurred are ceded to
ALIC in accordance with reinsurance agreements.
8. COMMITMENTS AND CONTINGENT LIABILITIES
REGULATION AND LEGAL PROCEEDINGS
The Company's business is subject to the effects of a changing social, economic
and regulatory environment. State and federal regulatory initiatives have varied
and have included employee benefit regulations, removal of barriers preventing
banks from engaging in the securities and insurance businesses, 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 the overall expansion of regulation. The ultimate
changes and eventual effects, if any, of these initiatives are uncertain.
From time to time the Company is involved in pending and threatened litigation
in the normal course of business in which claims for monetary damages are
asserted. In the opinion of management, the ultimate liability, if any, in one
or more of these actions in excess of amounts currently reserved is not expected
to have a material effect on the results of operations, liquidity or financial
position of the Company.
GUARANTY FUNDS
Under state insurance guaranty fund laws, insurers doing business in a state can
be assessed, up to prescribed limits, for certain obligations of insolvent
insurance companies to policyholders and claimants. Amounts assessed to each
company are typically related to its proportion of business written in a
particular state. The Company's expenses related to these funds have been
immaterial and are ceded to ALIC under reinsurance agreements.
F-11
<Page>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
9. INCOME TAXES
For 1996, the Company filed a separate federal income tax return. Beginning in
1997, the Company joined the Corporation and its other eligible domestic
subsidiaries (the "Allstate Group") in the filing of a consolidated federal
income tax return and is party to a federal income tax allocation agreement (the
"Allstate Tax Sharing Agreement"). Under the Allstate Tax Sharing Agreement, the
Company pays to or receives from the Corporation the amount, if any, by which
the Allstate Group's federal income tax liability is affected by virtue of
inclusion of the Company in the consolidated federal income tax return. The
Company has also entered into a supplemental tax sharing agreement with respect
to reinsurance ceded to ALIC to allocate the tax benefits and detriments related
to such reinsurance. Effectively, these agreements result in the Company's
annual income tax provision being computed as if the Company filed a separate
return, adjusted for the reinsurance ceded to ALIC.
The components of the deferred income tax liabilities at December 31, are as
follows:
<Table>
<Caption>
2001 2000
(IN THOUSANDS) ------ ------
DEFERRED LIABILITIES
Unrealized net capital gains $2,387 $1,508
Difference in tax bases of investments 223 334
------ ------
Total deferred liabilities $2,610 $1,842
====== ======
</Table>
The components of income tax expense for the year ended December 31, are as
follows:
<Table>
<Caption>
2001 2000 1999
(IN THOUSANDS) ------ ------ ------
Current $4,008 $3,730 $2,326
Deferred (112) 195 56
------ ------ ------
Total income tax expense $3,896 $3,925 $2,382
====== ====== ======
</Table>
The Company paid income taxes of $3.9 million, $2.4 million and $2.1 million in
2001, 2000 and 1999, respectively.
A reconciliation of the statutory federal income tax rate to the effective
income tax rate on income from operations for the year ended December 31, is as
follows:
<Table>
<Caption>
2001 2000 1999
----- ----- -----
Statutory federal income tax rate 35.0% 35.0% 35.0%
Other (0.1) -- (0.4)
---- ---- ----
Effective income tax rate 34.9% 35.0% 34.6%
==== ==== ====
</Table>
10. STATUTORY FINANCIAL INFORMATION
The following table reconciles Net income for the year ended December 31, and
Shareholder's equity at December 31, as reported herein in conformity with GAAP
with total statutory net income and capital and surplus of the Company,
determined in accordance with statutory accounting practices prescribed or
permitted by insurance regulatory authorities:
<Table>
<Caption>
SHAREHOLDER'S
NET INCOME EQUITY
---------------------- ------------------
2001 2000 1999 2001 2000
(IN THOUSANDS) ------ ------ ------ -------- --------
Balance per GAAP $7,254 $7,302 $4,509 $162,318 $153,431
Unrealized gain/loss on fixed
income securities -- -- -- (6,820) (4,308)
Deferred income taxes (65) (554) (164) 269 22
Employee benefits (31) (1) 1 216 180
Reserves and non-admitted assets (150) (197) (165) (7,699) (290)
Other (24) 47 (2) 5,757 (1,954)
------ ------ ------ -------- --------
Balance per statutory accounting
practices $6,984 $6,597 $4,179 $154,041 $147,081
====== ====== ====== ======== ========
</Table>
The Company prepares its statutory financial statements in accordance with
accounting practices prescribed or permitted by the State of Arizona. Prescribed
statutory accounting practices include a variety of publications of the National
Association of Insurance Commissioners ("NAIC"), as well as state laws,
regulations and general administrative rules. Permitted statutory accounting
practices encompass all accounting practices not so prescribed.
Effective January 1, 2001, the State of Arizona required insurance companies
domiciled in its state to prepare statutory-basis financial statements in
accordance with the NAIC Accounting Practices and Procedures Manual--Version
effective January 1, 2001 ("codification") subject to any deviations prescribed
or permitted by the State of Arizona insurance commissioner.
Accounting changes adopted to conform to the provisions of codification are
reported as changes in accounting principles. The cumulative effect of changes
in accounting principles is reported as an adjustment to unassigned funds
(surplus) in the period of the change in accounting principle. The cumulative
effect is the difference between the amount of capital and surplus at the
beginning of the year and the amount of capital and surplus that would have been
reported at that date if the new accounting principles had been applied
retroactively for all prior periods. The Company reported a decrease to surplus
of $463 thousand effective January 1, 2001 as a result of recognizing a net
deferred tax liability.
The NAIC is currently in the process of clarifying and interpreting requirements
as the insurance industry implements codification. As the NAIC announces changes
and as they are approved by the Arizona Department of Insurance, the impact of
the changes will be recorded.
F-12
<Page>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
DIVIDENDS
The ability of the Company to pay dividends is dependent on business conditions,
income, cash requirements of the Company and other relevant factors. The payment
of shareholder dividends by the Company without the prior approval of the state
insurance regulator is limited by Arizona law to formula amounts based on
statutory surplus and net gain from operations, 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 2002 without prior approval of
the Arizona Department of Insurance is $7.0 million.
RISK-BASED CAPITAL
The NAIC has a standard for assessing the solvency of insurance companies, which
is referred to as risk-based capital ("RBC"). The requirement consists of a
formula for determining each insurer's RBC and a model law specifying regulatory
actions if an insurer's RBC falls below specified levels. At December 31, 2001,
RBC for the Company was significantly above levels that would require regulatory
action.
11. OTHER COMPREHENSIVE INCOME
The components of other comprehensive income on a pretax and after-tax basis for
the year ended December 31, are as follows:
<Table>
<Caption>
2001 2000 1999
-------------------------- -------------------------- --------------------------
PRETAX TAX AFTER-TAX PRETAX TAX AFTER-TAX PRETAX TAX AFTER-TAX
(IN THOUSANDS) ------ ------- --------- ------ ------- --------- ------- ------ ---------
UNREALIZED CAPITAL GAINS AND
LOSSES:
- -----------------------------------
Unrealized holding gains (losses)
arising during the period $2,948 $(1,032) $1,916 $5,752 $(2,014) $3,738 $(7,822) $2,739 $(5,083)
Less: reclassification adjustments 436 (153) 283 208 (73) 135 312 (109) 203
------ ------- ------ ------ ------- ------ ------- ------ -------
Unrealized net capital gains
(losses) 2,512 (879) 1,633 5,544 (1,941) 3,603 (8,134) 2,848 (5,286)
------ ------- ------ ------ ------- ------ ------- ------ -------
Other comprehensive income (loss) $2,512 $ (879) $1,633 $5,544 $(1,941) $3,603 $(8,134) $2,848 $(5,286)
====== ======= ====== ====== ======= ====== ======= ====== =======
</Table>
F-13
<Page>
GLENBROOK LIFE AND ANNUITY COMPANY
SCHEDULE IV--REINSURANCE
(IN THOUSANDS)
<Table>
<Caption>
GROSS NET
AMOUNT CEDED AMOUNT
-------- -------- --------
YEAR ENDED DECEMBER 31, 2001
Life insurance in force..................................... $187,400 $187,400 $ --
======== ======== ========
Premiums and contract charges:
Life and annuities........................................ $ 31,711 $ 31,711 $ --
======== ======== ========
</Table>
<Table>
<Caption>
GROSS NET
AMOUNT CEDED AMOUNT
-------- -------- --------
YEAR ENDED DECEMBER 31, 2000
Life insurance in force..................................... $ 88,042 $ 88,042 $ --
======== ======== ========
Premiums and contract charges:
Life and annuities........................................ $ 37,965 $ 37,965 $ --
======== ======== ========
</Table>
<Table>
<Caption>
GROSS NET
AMOUNT CEDED AMOUNT
-------- -------- --------
YEAR ENDED DECEMBER 31, 1999
Life insurance in force..................................... $ 23,586 $ 23,586 $ --
======== ======== ========
Premiums and contract charges:
Life and annuities........................................ $ 27,175 $ 27,175 $ --
======== ======== ========
</Table>
F-14
<Page>
<Page>
---------------------------------------
GLENBROOK LIFE MULTI-MANAGER VARIABLE
ACCOUNT
FINANCIAL STATEMENTS AS OF DECEMBER 31,
2001 AND FOR THE PERIODS ENDED DECEMBER
31, 2001 AND DECEMBER 31, 2000, AND
INDEPENDENT AUDITORS' REPORT
<Page>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholder of
Glenbrook Life and Annuity Company:
We have audited the accompanying statements of net assets of each of the
individual sub-accounts disclosed in Note 1 which comprise the Glenbrook Life
Multi-Manager Variable Account (the "Account") as of December 31, 2001, the
related statements of operations for the periods then ended and the statements
of changes in net assets for each of the periods in the two year period then
ended for each of the individual sub-accounts which comprise the Account. These
financial statements are the responsibility of management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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, 2001 by correspondence with the Account's custodians. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of each of the individual sub-accounts which
comprise the Glenbrook Life Multi-Manager Variable Account as of December 31,
2001, the results of operations for the periods then ended for each of the
individual sub-accounts and the changes in their net assets for each of the
periods in the two year period then ended in conformity with accounting
principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
Chicago, Illinois
March 8, 2002
<Page>
GLENBROOK LIFE MULTI-MANAGER VARIABLE ACCOUNT
<Table>
<Caption>
STATEMENTS OF NET ASSETS
DECEMBER 31, 2001
- -------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds Sub-Accounts
---------------------------------------------------------------------------------------
AIM V.I. AIM V.I. AIM V.I.
Aggressive AIM V.I. Capital AIM V.I. Dent Diversified
Growth (a) Balanced Appreciation Demographics (a) Income
--------------- --------------- --------------- --------------- ---------------
ASSETS
Investments at fair value $ 29,411 $ 4,355,810 $ 5,112,390 $ 8,822 $ 175,313
--------------- --------------- --------------- --------------- ---------------
Total assets $ 29,411 $ 4,355,810 $ 5,112,390 $ 8,822 $ 175,313
=============== =============== =============== =============== ===============
NET ASSETS
Accumulation units $ 29,411 $ 4,355,810 $ 5,112,390 $ 8,822 $ 175,313
--------------- --------------- --------------- --------------- ---------------
Total net assets $ 29,411 $ 4,355,810 $ 5,112,390 $ 8,822 $ 175,313
=============== =============== =============== =============== ===============
FUND SHARE INFORMATION
Number of shares 2,721 401,457 235,377 1,578 19,202
=============== =============== =============== =============== ===============
Cost $ 27,025 $ 4,874,862 $ 7,399,647 $ 8,884 $ 198,611
=============== =============== =============== =============== ===============
</Table>
(a) For the Period Beginning May 1, 2001 and Ended December 31, 2001
See notes to financial statements.
2
<Page>
<Table>
<Caption>
AIM Variable Insurance Funds Sub-Accounts
---------------------------------------------------------------------------------------
AIM V.I. AIM V.I.
Global Government AIM V.I. Growth AIM V.I. High
Utilities Securities AIM V.I. Growth and Income Yield
--------------- --------------- --------------- --------------- ---------------
ASSETS
Investments at fair value $ 20,284 $ 415,310 $ 3,306,971 $ 3,890,737 $ 570,896
--------------- --------------- --------------- --------------- ---------------
Total assets $ 20,284 $ 415,310 $ 3,306,971 $ 3,890,737 $ 570,896
=============== =============== =============== =============== ===============
NET ASSETS
Accumulation units $ 20,284 $ 415,310 $ 3,306,971 $ 3,890,737 $ 570,896
--------------- --------------- --------------- --------------- ---------------
Total net assets $ 20,284 $ 415,310 $ 3,306,971 $ 3,890,737 $ 570,896
=============== =============== =============== =============== ===============
FUND SHARE INFORMATION
Number of shares 1,497 36,020 202,014 192,611 107,513
=============== =============== =============== =============== ===============
Cost $ 32,394 $ 410,475 $ 5,276,302 $ 5,065,538 $ 730,770
=============== =============== =============== =============== ===============
</Table>
See notes to financial statements.
3
<Page>
<Table>
<Caption>
Dreyfus Variable
AIM Variable Insurance Funds American Century Variable Investment Fund
Sub-Accounts Portfolios, Inc. Sub-Accounts Sub-Account
--------------------------------- --------------------------------- ---------------
AIM V.I. American American VIF
International Century Century Growth And
Equity AIM V.I. Value VP Balanced VP International Income
--------------- --------------- --------------- --------------- ---------------
ASSETS
Investments at fair value $ 148,749 $ 7,771,657 $ 142,061 $ 127,514 $ 498,211
--------------- --------------- --------------- --------------- ---------------
Total assets $ 148,749 $ 7,771,657 $ 142,061 $ 127,514 $ 498,211
=============== =============== =============== =============== ===============
NET ASSETS
Accumulation units $ 148,749 $ 7,771,657 $ 142,061 $ 127,514 $ 498,211
--------------- --------------- --------------- --------------- ---------------
Total net assets $ 148,749 $ 7,771,657 $ 142,061 $ 127,514 $ 498,211
=============== =============== =============== =============== ===============
FUND SHARE INFORMATION
Number of shares 9,977 332,833 21,557 19,350 23,012
=============== =============== =============== =============== ===============
Cost $ 221,625 $ 9,618,491 $ 165,843 $ 216,980 $ 510,173
=============== =============== =============== =============== ===============
</Table>
See notes to financial statements.
4
<Page>
<Table>
<Caption>
Dreyfus Socially
Responsible Dreyfus Stock Federated
Dreyfus Variable Investment Growth Fund, Inc. Index Fund Insurance Series
Fund Sub-Accounts Sub-Account Sub-Account Sub-Account
------------------------------- ----------------- ------------- --------------
VIF VIF Dreyfus Socially
Money Small Company Responsible Dreyfus Stock Federated Prime
Market Stock Growth Fund Index Fund Money Fund II
-------------- -------------- -------------- -------------- --------------
ASSETS
Investments at fair value $ 1,611,911 $ 65,102 $ 263,644 $ 1,997,069 $ 5,207,491
-------------- -------------- -------------- -------------- --------------
Total assets $ 1,611,911 $ 65,102 $ 263,644 $ 1,997,069 $ 5,207,491
============== ============== ============== ============== ==============
NET ASSETS
Accumulation units $ 1,611,911 $ 65,102 $ 263,644 $ 1,997,069 $ 5,207,491
-------------- -------------- -------------- -------------- --------------
Total net assets $ 1,611,911 $ 65,102 $ 263,644 $ 1,997,069 $ 5,207,491
============== ============== ============== ============== ==============
FUND SHARE INFORMATION
Number of shares 1,611,911 3,659 9,885 68,020 5,207,491
============== ============== ============== ============== ==============
Cost $ 1,611,911 $ 55,012 $ 339,198 $ 2,157,833 $ 5,207,491
============== ============== ============== ============== ==============
</Table>
See notes to financial statements.
5
<Page>
<Table>
<Caption>
Fidelity Variable Insurance Products Fund Sub-Accounts
-----------------------------------------------------------------------------
VIP Equity- VIP High
VIP Contrafund Income VIP Growth Income VIP Index 500
-------------- ------------- ------------- ------------- -------------
ASSETS
Investments at fair value $ 5,700,127 $ 5,326,118 $ 6,919,904 $ 1,407,173 $ 4,201,956
------------- ------------- ------------- ------------- -------------
Total assets $ 5,700,127 $ 5,326,118 $ 6,919,904 $ 1,407,173 $ 4,201,956
============= ============= ============= ============= =============
NET ASSETS
Accumulation units $ 5,700,127 $ 5,326,118 $ 6,919,904 $ 1,407,173 $ 4,201,956
-------------- ------------- ------------- ------------- -------------
Total net assets $ 5,700,127 $ 5,326,118 $ 6,919,904 $ 1,407,173 $ 4,201,956
============= ============= ============= ============= =============
FUND SHARE INFORMATION
Number of shares 283,166 234,115 205,888 219,528 32,305
============= ============= ============= ============= =============
Cost $ 6,813,188 $ 5,525,171 $ 9,526,969 $ 1,937,579 $ 4,788,384
============= ============= ============= ============= =============
</Table>
See notes to financial statements.
6
<Page>
<Table>
<Caption>
Fidelity Variable
Insurance
Products Fund Fidelity Variable Insurance Products Fund
Sub-Accounts (Service Class 2) Sub-Accounts
------------- --------------------------------------------------------------
VIP Asset
Manager VIP Contrafund VIP Equity- VIP Growth
Growth (Service (Service Income (Service (Service
VIP Overseas Class 2)(a) Class 2)(a) Class 2)(a) Class 2)(a)
------------- ------------- ------------- ------------- -------------
ASSETS
Investments at fair value $ 748,561 $ 15,724 $ 412,368 $ 1,134,296 $ 373,182
------------- ------------- ------------- ------------- -------------
Total assets $ 748,561 $ 15,724 $ 412,368 $ 1,134,296 $ 373,182
============= ============= ============= ============= =============
NET ASSETS
Accumulation units $ 748,561 $ 15,724 $ 412,368 $ 1,134,296 $ 373,182
------------- ------------- ------------- ------------- -------------
Total net assets $ 748,561 $ 15,724 $ 412,368 $ 1,134,296 $ 373,182
============= ============= ============= ============= =============
FUND SHARE INFORMATION
Number of shares 53,931 1,265 20,618 50,212 11,193
============= ============= ============= ============= =============
Cost $ 1,098,100 $ 15,258 $ 407,283 $ 1,122,948 $ 378,208
============= ============= ============= ============= =============
</Table>
(a) For the Period Beginning May 1, 2001 and Ended December 31, 2001
See notes to financial statements.
7
<Page>
<Table>
<Caption>
Franklin Templeton
Fidelity Variable Insurance Products Variable Insurance
Fund (Service Class 2) Sub-Accounts Products Trust Sub-Accounts
--------------------------------------------- ------------------------------
VIP High VIP Index 500 VIP Overseas Franklin Global
Income (Service (Service (Service Health Care Franklin
Class 2)(a) Class 2)(a) Class 2)(a) Securities(a) Small Cap
------------- ------------- ------------- ------------- -------------
ASSETS
Investments at fair value $ 161,305 $ 1,006,319 $ 39,008 $ 7,603 $ 102,734
------------- ------------- ------------- ------------- -------------
Total assets $ 161,305 $ 1,006,319 $ 39,008 $ 7,603 $ 102,734
============= ============= ============= ============= =============
NET ASSETS
Accumulation units $ 161,305 $ 1,006,319 $ 39,008 $ 7,603 $ 102,734
------------- ------------- ------------- ------------- -------------
Total net assets $ 161,305 $ 1,006,319 $ 39,008 $ 7,603 $ 102,734
============= ============= ============= ============= =============
FUND SHARE INFORMATION
Number of shares 25,362 7,776 2,825 590 5,755
============= ============= ============= ============= =============
Cost $ 166,103 $ 1,029,736 $ 40,618 $ 7,351 $ 99,466
============= ============= ============= ============= =============
</Table>
(a) For the Period Beginning May 1, 2001 and Ended December 31, 2001
See notes to financial statements.
8
<Page>
<Table>
<Caption>
Franklin Templeton Variable Insurance Products Trust Sub-accounts
-----------------------------------------------------------------------------
Franklin Templeton Templeton Templeton
Technology Mutual Shares Global Income Growth International
Securities(a) Securities Securities Securities Securities
------------- ------------- ------------- ------------- -------------
ASSETS
Investments at fair value $ 4,830 $ 360,797 $ 253,834 $ 497,795 $ 71,733
------------- ------------- ------------- ------------- -------------
Total assets $ 4,830 $ 360,797 $ 253,834 $ 497,795 $ 71,733
============= ============= ============= ============= =============
NET ASSETS
Accumulation units $ 4,830 $ 360,797 $ 253,834 $ 497,795 $ 71,733
------------- ------------- ------------- ------------- -------------
Total net assets $ 4,830 $ 360,797 $ 253,834 $ 497,795 $ 71,733
============= ============= ============= ============= =============
FUND SHARE INFORMATION
Number of shares 906 25,716 22,404 45,213 6,110
============= ============= ============= ============= =============
Cost $ 3,995 $ 369,427 $ 244,740 $ 567,212 $ 91,891
============= ============= ============= ============= =============
</Table>
(a) For the Period Beginning May 1, 2001 and Ended December 31, 2001
See notes to financial statements.
9
<Page>
<Table>
<Caption>
Goldman Sachs Variable Insurance Trust Sub-accounts
-----------------------------------------------------------------------------
VIT Core VIT Core
VIT Capital Large Cap Small Cap VIT Core VIT Global
Growth Growth Equity U.S. Equity Income
------------- ------------- ------------- ------------- -------------
ASSETS
Investments at fair value $ 206,316 $ 3,669 $ 301,461 $ 257,683 $ 152,757
------------- ------------- ------------- ------------- -------------
Total assets $ 206,316 $ 3,669 $ 301,461 $ 257,683 $ 152,757
============= ============= ============= ============= =============
NET ASSETS
Accumulation units $ 206,316 $ 3,669 $ 301,461 $ 257,683 $ 152,757
------------- ------------- ------------- ------------- -------------
Total net assets $ 206,316 $ 3,669 $ 301,461 $ 257,683 $ 152,757
============= ============= ============= ============= =============
FUND SHARE INFORMATION
Number of shares 20,050 421 27,810 23,554 15,524
============= ============= ============= ============= =============
Cost $ 229,364 $ 6,575 $ 263,693 $ 297,631 $ 155,879
============= ============= ============= ============= =============
</Table>
See notes to financial statements.
10
<Page>
<Table>
<Caption>
Goldman Sachs Variable Insurance LSA Variable Series
Trust Sub-Accounts Trust Sub-Accounts
------------------------------------------ ---------------------------
VIT
VIT Growth International VIT Mid Cap LSA Focused LSA Growth
and Income Equity Value Equity (a) Equity (a)
------------ ------------ ------------ ------------ ------------
ASSETS
Investments at fair value $ 12,076 $ 20,286 $ 6,359 $ 9,160 $ 4,468
------------ ------------ ------------ ------------ ------------
Total assets $ 12,076 $ 20,286 $ 6,359 $ 9,160 $ 4,468
============ ============ ============ ============ ============
NET ASSETS
Accumulation units $ 12,076 $ 20,286 $ 6,359 $ 9,160 $ 4,468
------------ ------------ ------------ ------------ ------------
Total net assets $ 12,076 $ 20,286 $ 6,359 $ 9,160 $ 4,468
============ ============ ============ ============ ============
FUND SHARE INFORMATION
Number of shares 1,294 2,257 564 1,063 489
============ ============ ============ ============ ============
Cost $ 14,450 $ 31,182 $ 6,030 $ 8,885 $ 4,228
============ ============ ============ ============ ============
</Table>
(a) For the Period Beginning May 1, 2001 and Ended December 31, 2001
See notes to financial statements.
11
<Page>
<Table>
<Caption>
MFS Variable Insurance Trust Sub-Accounts
-------------------------------------------------------------------------------
MFS Emerging MFS Investors MFS New
Growth Trust (b) Discovery MFS Research MFS Utilities(a)
------------- ------------- ------------- ------------- ----------------
ASSETS
Investments at fair value $ 3,613,630 $ 965,940 $ 378,744 $ 2,002,610 $ 7,327
------------- ------------- ------------- ------------- -------------
Total assets $ 3,613,630 $ 965,940 $ 378,744 $ 2,002,610 $ 7,327
============= ============= ============= ============= =============
NET ASSETS
Accumulation units $ 3,613,630 $ 965,940 $ 378,744 $ 2,002,610 $ 7,327
------------- ------------- ------------- ------------- --------------
Total net assets $ 3,613,630 $ 965,940 $ 378,744 $ 2,002,610 $ 7,327
============= ============= ============= ============= =============
FUND SHARE INFORMATION
Number of shares 200,981 56,389 24,803 139,847 459
============= ============= ============= ============= =============
Cost $ 5,612,298 $ 1,066,878 $ 373,892 $ 2,662,210 $ 7,060
============= ============= ============= ============= =============
</Table>
(a) For the Period Beginning May 1, 2001 and Ended December 31, 2001
(b) Previosly known as MFS Growth with Income
See notes to financial statements.
12
<Page>
<Table>
<Caption>
MFS Variable Insurance Trust (Service Class) Sub-Accounts
- ---------------------------------------------------------------------------------------------------------
MFS
MFS Emerging MFS Investors New Discovery MFS Research MFS Utilities
Growth (Service Trust (Service (Service (Service (Service
Class) (a) Class) (a) Class) (a) Class) (a) Class) (a)
-------------- ------------- ------------- ------------- -------------
ASSETS
Investments at fair value $ 475,618 $ 400,711 $ 159,944 $ 201,323 $ 503,028
-------------- ------------- ------------- ------------- -------------
Total assets $ 475,618 $ 400,711 $ 159,944 $ 201,323 $ 503,028
============= ============= ============= ============= =============
NET ASSETS
Accumulation units $ 475,618 $ 400,711 $ 159,944 $ 201,323 $ 503,028
-------------- ------------- ------------- ------------- -------------
Total net assets $ 475,618 $ 400,711 $ 159,944 $ 201,323 $ 503,028
============= ============= ============= ============= =============
FUND SHARE INFORMATION
Number of shares 26,526 23,461 10,509 14,098 31,637
============= ============= ============= ============= =============
Cost $ 483,477 $ 404,694 $ 145,590 $ 203,574 $ 550,135
============= ============= ============= ============= =============
</Table>
(a) For the Period Beginning May 1, 2001 and Ended December 31, 2001
See notes to financial statements.
13
<Page>
<Table>
<Caption>
Neuberger & Berman Advisers Oppenheimer Variable
Management Trust Sub-Accounts Account Funds Sub-Accounts
--------------------------------------------- -----------------------------
AMT Oppenheimer Oppenheimer
AMT Mid-Cap AMT Aggressive Capital
Guardian Growth Partners Growth Appreciation
------------- ------------- ------------- ------------- -------------
ASSETS
Investments at fair value $ 15,511 $ 41,758 $ 165,466 $ 1,972,125 $ 4,809,623
------------- ------------- ------------- ------------- -------------
Total assets $ 15,511 $ 41,758 $ 165,466 $ 1,972,125 $ 4,809,623
============= ============= ============= ============= =============
NET ASSETS
Accumulation units $ 15,511 $ 41,758 $ 165,466 $ 1,972,125 $ 4,809,623
------------- ------------- ------------- ------------- -------------
Total net assets $ 15,511 $ 41,758 $ 165,466 $ 1,972,125 $ 4,809,623
============= ============= ============= ============= =============
FUND SHARE INFORMATION
Number of shares 1,059 2,465 10,958 48,431 131,482
============= ============= ============= ============= =============
Cost $ 16,410 $ 60,136 $ 200,572 $ 2,944,786 $ 5,379,001
============= ============= ============= ============= =============
</Table>
See notes to financial statements.
14
<Page>
<Table>
<Caption>
Oppenheimer Variable Account Funds Sub-Accounts
- -----------------------------------------------------------------------------------------
Oppenheimer
Oppenheimer Main Street Oppenheimer Oppenheimer
Global Growth & Multiple Strategic
Securities Income Strategies Bond
------------- ------------- ------------- ------------
ASSETS
Investments at fair value $ 2,969,009 $ 8,177,413 $ 3,258,848 $ 2,678,563
------------- ------------- ------------- -------------
Total assets $ 2,969,009 $ 8,177,413 $ 3,258,848 $ 2,678,563
============= ============= ============= =============
NET ASSETS
Accumulation units $ 2,969,009 $ 8,177,413 $ 3,258,848 $ 2,678,563
------------- ------------- ------------- -------------
Total net assets $ 2,969,009 $ 8,177,413 $ 3,258,848 $ 2,678,563
============= ============= ============= =============
FUND SHARE INFORMATION
Number of shares 129,992 430,617 211,613 579,776
============= ============= ============= =============
Cost $ 3,448,600 $ 9,030,424 $ 3,319,591 $ 2,664,557
============= ============= ============= =============
</Table>
See notes to financial statements.
15
<Page>
<Table>
<Caption>
Putnam Variable Trust Sub-Accounts
--------------------------------------------------------------------------------
VT Diversified VT Growth VT Growth VT Health VT
Income (a) and Income (a) Opportunities (a) Sciences (a) New Value (a)
------------- ------------- ----------------- ------------- -------------
ASSETS
Investments at fair value $ 482,814 $ 544,878 $ 60,844 $ 411,967 $ 241,845
------------- ------------- ------------- ------------- -------------
Total assets $ 482,814 $ 544,878 $ 60,844 $ 411,967 $ 241,845
============= ============= ============= ============= =============
NET ASSETS
Accumulation units $ 482,814 $ 544,878 $ 60,844 $ 411,967 $ 241,845
------------- ------------- ------------- ------------- -------------
Total net assets $ 482,814 $ 544,878 $ 60,844 $ 411,967 $ 241,845
============= ============= ============= ============= =============
FUND SHARE INFORMATION
Number of shares 55,179 23,246 11,502 35,211 18,021
============= ============= ============= ============= =============
Cost $ 480,732 $ 557,539 $ 64,206 $ 417,812 $ 238,342
============= ============= ============= ============= =============
</Table>
(a) For the Period Beginning May 1, 2001 and Ended December 31, 2001
See notes to financial statements.
16
<Page>
<Table>
<Caption>
Putnam Variable
Trust Sub-Accounts STI Classic Variable Trust Sub-Accounts
---------------------------- -------------------------------------------
STI
VT VT STI Capital STI Growth International
Research(a) Voyager II(a) Appreciation & Income Equity
------------ ------------- ------------ ------------ -------------
ASSETS
Investments at fair value $ 3,092 $ 357,590 $ 1,787,584 $ 2,383,756 $ 231,191
------------ ------------ ------------ ------------ ------------
Total assets $ 3,092 $ 357,590 $ 1,787,584 $ 2,383,756 $ 231,191
============ ============ ============ ============ ============
NET ASSETS
Accumulation units $ 3,092 $ 357,590 $ 1,787,584 $ 2,383,756 $ 231,191
------------ ------------ ------------ ------------ ------------
Total net assets $ 3,092 $ 357,590 $ 1,787,584 $ 2,383,756 $ 231,191
============ ============ ============ ============ ============
FUND SHARE INFORMATION
Number of shares 283 71,950 102,265 233,473 27,040
============ ============ ============ ============ ============
Cost $ 3,030 $ 367,581 $ 1,966,061 $ 2,446,698 $ 277,290
============ ============ ============ ============ ============
</Table>
(a) For the Period Beginning May 1, 2001 and Ended December 31, 2001
See notes to financial statements.
17
<Page>
<Table>
<Caption>
STI Classic Variable Trust Sub-Accounts
-----------------------------------------------------------------------------
STI STI STI Value
Investment Mid-Cap STI Quality STI Small Income
Grade Bond Equity Growth Stock Cap Equity Stock
------------- ------------- ------------- ------------- -------------
ASSETS
Investments at fair value $ 2,244,014 $ 812,676 $ 1,358,437 $ 1,522,194 $ 1,293,706
------------- ------------- ------------- ------------- -------------
Total assets $ 2,244,014 $ 812,676 $ 1,358,437 $ 1,522,194 $ 1,293,706
============= ============= ============= ============= =============
NET ASSETS
Accumulation units $ 2,244,014 $ 812,676 $ 1,358,437 $ 1,522,194 $ 1,293,706
------------- ------------- ------------- ------------- -------------
Total net assets $ 2,244,014 $ 812,676 $ 1,358,437 $ 1,522,194 $ 1,293,706
============= ============= ============= ============= =============
FUND SHARE INFORMATION
Number of shares 223,285 73,280 172,610 139,140 101,867
============= ============= ============= ============= =============
Cost $ 2,236,094 $ 910,657 $ 1,660,576 $ 1,378,279 $ 1,302,013
============= ============= ============= ============= =============
</Table>
See notes to financial statements.
18
<Page>
<Table>
<Caption>
The Universal Institutional Funds, Inc. Sub-Accounts
----------------------------------------------------------
Equity Fixed Global Value International
Growth Income Equity (c) Magnum
------------ ------------ ------------ -------------
ASSETS
Investments at fair value $ 164,795 $ 277,359 $ 22,439 $ 5,508
------------ ------------ ------------ ------------
Total assets $ 164,795 $ 277,359 $ 22,439 $ 5,508
============ ============ ============ ============
NET ASSETS
Accumulation units $ 164,795 $ 277,359 $ 22,439 $ 5,508
------------ ------------ ------------ ------------
Total net assets $ 164,795 $ 277,359 $ 22,439 $ 5,508
============ ============ ============ ============
FUND SHARE INFORMATION
Number of shares 11,597 25,562 1,850 582
============ ============ ============ ============
Cost $ 205,527 $ 285,703 $ 23,273 $ 7,640
============ ============ ============ ============
</Table>
(c) Previously known as Global Equity
See notes to financial statements.
19
<Page>
<Table>
<Caption>
The Universal Institutional
Funds, Inc. Sub-Accounts
----------------------------
Mid Cap
Value Value
------------ -------------
ASSETS
Investments at fair value $ 386,027 $ 243,051
------------ ------------
Total assets $ 386,027 $ 243,051
============ ============
NET ASSETS
Accumulation units $ 386,027 $ 243,051
------------ ------------
Total net assets $ 386,027 $ 243,051
============ ============
FUND SHARE INFORMATION
Number of shares 26,513 19,033
============ ============
Cost $ 390,831 $ 230,435
============ ============
</Table>
See notes to financial statements.
20
<Page>
GLENBROOK LIFE MULTI-MANAGER VARIABLE ACCOUNT
<Table>
<Caption>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2001
- ---------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds Sub-Accounts
-------------------------------------------------------------------------------
AIM V.I. AIM V.I.
Aggressive AIM V.I. AIM V.I. Capital AIM V.I. Dent Diversified
Growth (a) Balanced Appreciation Demographics(a) Income
------------ ------------ ------------ -------------- --------------
NET INVESTMENT INCOME (LOSS)
Dividends $ - $ 72,856 $ - $ - $ 11,575
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (103) (47,623) (66,892) (48) (2,361)
Administrative expense (7) (3,624) (5,006) (3) (178)
------------ ------------ ------------ ------------ ------------
Net investment income (loss) (110) 21,609 (71,898) (51) 9,036
------------ ------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) on fund shares:
Proceeds from sales 106 685,229 816,986 474 78,672
Cost of investments sold 102 761,009 1,121,666 528 87,679
------------ ------------ ------------ ------------ ------------
Realized gains (losses) on fund shares 4 (75,780) (304,680) (54) (9,007)
Realized gain distributions - - 409,689 - -
------------ ------------ ------------ ------------ ------------
Net realized gains (losses) 4 (75,780) 105,009 (54) (9,007)
Change in unrealized gains (losses) 2,386 (418,926) (1,454,912) (62) 4,339
------------ ------------ ------------ ------------ ------------
Net realized and unrealized gains
(losses) on investments 2,390 (494,706) (1,349,903) (116) (4,668)
------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ 2,280 $ (473,097) $ (1,421,801) $ (167) $ 4,368
============ ============ ============ ============ ============
</Table>
(a) For the Period Beginning May 1, 2001 and Ended December 31, 2001
See notes to financial statements.
21
<Page>
<Table>
<Caption>
AIM Variable Insurance Funds Sub-Accounts
--------------------------------------------------------------------------------
AIM V.I.
AIM V.I. Global Government AIM V.I. Growth AIM V.I. High
Utilities Securities AIM V.I. Growth and Income Yield
-------------- -------------- --------------- --------------- --------------
NET INVESTMENT INCOME (LOSS)
Dividends $ 291 $ 11,795 $ 7,949 $ 1,927 $ 67,939
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (307) (6,344) (46,392) (50,861) (5,956)
Administrative expense (24) (493) (3,430) (3,839) (463)
------------- ------------- ------------- ------------- -------------
Net investment income (loss) (40) 4,958 (41,873) (52,773) 61,520
------------- ------------- ------------- ------------- -------------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) on fund shares:
Proceeds from sales 338 610,792 896,410 798,566 132,160
Cost of investments sold 428 584,323 1,450,082 1,021,353 165,089
------------- ------------- ------------- ------------- -------------
Realized gains (losses) on fund shares (90) 26,469 (553,672) (222,787) (32,929)
Realized gain distributions 1,901 - - - -
------------- ------------- ------------- ------------- -------------
Net realized gains (losses) 1,811 26,469 (553,672) (222,787) (32,929)
Change in unrealized gains (losses) (10,014) (5,793) (962,171) (766,520) (61,435)
------------- ------------- ------------- ------------- -------------
Net realized and unrealized gains
(losses) on investments (8,203) 20,676 (1,515,843) (989,307) (94,364)
------------- ------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ (8,243) $ 25,634 $ (1,557,716) $ (1,042,080) $ (32,844)
============= ============= ============= ============= =============
</Table>
See notes to financial statements.
22
<Page>
<Table>
<Caption>
Dreyfus Variable
AIM Variable Insurance Funds American Century Variable Investment Fund
Sub-Accounts Portfolios, Inc. Sub-Accounts Sub-Accounts
------------------------------- ------------------------------ --------------
AIM V.I. American American VIF
International Century Century Growth and
Equity AIM V.I. Value VP Balanced VP International Income
-------------- -------------- -------------- ----------------- --------------
NET INVESTMENT INCOME (LOSS)
Dividends $ 505 $ 10,315 $ 8,062 $ 133 $ 2,037
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (2,157) (98,933) (2,649) (1,967) (5,429)
Administrative expense (170) (7,525) (202) (146) (415)
-------------- -------------- -------------- -------------- -------------
Net investment income (loss) (1,822) (96,143) 5,211 (1,980) (3,807)
-------------- -------------- -------------- -------------- -------------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) on fund shares:
Proceeds from sales 28,020 1,573,540 157,698 4,947 97,519
Cost of investments sold 39,257 1,929,727 178,398 6,436 104,925
-------------- -------------- -------------- -------------- -------------
Realized gains (losses) on fund shares (11,237) (356,187) (20,700) (1,489) (7,406)
Realized gain distributions 3,949 156,396 9,571 14,743 6,002
-------------- -------------- -------------- -------------- -------------
Net realized gains (losses) (7,288) (199,791) (11,129) 13,254 (1,404)
Change in unrealized gains (losses) (39,409) (838,201) (679) (66,469) (31,181)
-------------- -------------- -------------- -------------- -------------
Net realized and unrealized gains
(losses) on investments (46,697) (1,037,992) (11,808) (53,215) (32,585)
-------------- -------------- -------------- -------------- -------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ (48,519) $ (1,134,135) $ (6,597) $ (55,195) $ (36,392)
============== ============== ============== ============== =============
</Table>
See notes to financial statements.
23
<Page>
<Table>
<Caption>
Dreyfus Socially
Responsible Dreyfus Stock Federated
Dreyfus Variable Investment Growth Fund, Inc. Index Fund Insurance Series
Fund Sub-Accounts Sub-Account Sub-Account Sub-Account
------------------------------- ----------------- -------------- --------------
VIF VIF Dreyfus Socially
Money Small Company Responsible Dreyfus Stock Federated Prime
Market Stock Growth Fund Index Fund Money Fund II
-------------- -------------- ---------------- -------------- --------------
NET INVESTMENT INCOME (LOSS)
Dividends $ 26,896 $ 49 $ 188 $ 32,036 $ 101,786
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (10,444) (921) (3,979) (25,896) (44,895)
Administrative expense (826) (67) (304) (1,976) (3,299)
-------------- -------------- -------------- -------------- --------------
Net investment income (loss) 15,626 (939) (4,095) 4,164 53,592
-------------- -------------- -------------- -------------- --------------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) on fund shares:
Proceeds from sales 1,059,587 14,334 62,598 441,931 3,494,450
Cost of investments sold 1,059,587 12,884 79,397 473,243 3,494,450
-------------- -------------- -------------- -------------- --------------
Realized gains (losses) on fund shares - 1,450 (16,799) (31,312) -
Realized gain distributions - - - - -
-------------- -------------- -------------- -------------- --------------
Net realized gains (losses) - 1,450 (16,799) (31,312) -
Change in unrealized gains (losses) - (3,166) (65,640) (274,851) -
-------------- -------------- -------------- -------------- --------------
Net realized and unrealized gains
(losses) on investments - (1,716) (82,439) (306,163) -
-------------- -------------- -------------- -------------- --------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ 15,626 $ (2,655) $ (86,534) $ (301,999) $ 53,592
============== ============== ============== ============== ==============
</Table>
See notes to financial statements.
24
<Page>
<Table>
<Caption>
Fidelity Variable Insurance Products Fund Sub-Accounts
---------------------------------------------------------------------------------
VIP Equity- VIP High
VIP Contrafund Income VIP Growth Income VIP Index 500
-------------- ------------ ------------ ------------ --------------
NET INVESTMENT INCOME (LOSS)
Dividends $ 42,646 $ 67,651 $ 5,446 $ 165,128 $ 31,414
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (74,277) (58,207) (93,371) (18,523) (46,033)
Administrative expense (5,706) (4,640) (7,296) (1,490) (3,629)
-------------- ------------ ------------ ------------ --------------
Net investment income (loss) (37,337) 4,804 (95,221) 145,115 (18,248)
-------------- ------------ ------------ ------------ --------------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) on fund shares:
Proceeds from sales 1,093,122 843,083 1,370,472 395,078 465,658
Cost of investments sold 1,350,459 894,264 1,890,195 550,822 538,389
-------------- ------------ ------------ ------------ --------------
Realized gains (losses) on fund shares (257,337) (51,181) (519,723) (155,744) (72,731)
Realized gain distributions 150,516 190,068 511,942 - -
-------------- ------------ ------------ ------------ --------------
Net realized gains (losses) (106,821) 138,887 (7,781) (155,744) (72,731)
Change in unrealized gains (losses) (708,982) (448,316) (1,507,574) (207,945) (396,350)
-------------- ------------ ------------ ------------ --------------
Net realized and unrealized gains
(losses) on investments (815,803) (309,429) (1,515,355) (363,689) (469,081)
-------------- ------------ ------------ ------------ --------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ (853,140) $ (304,625) $ (1,610,576) $ (218,574) $ (487,329)
============== ============ ============ ============ ==============
</Table>
See notes to financial statements.
25
<Page>
<Table>
<Caption>
Fidelity Variable
Insurance
Products Fund Fidelity Variable Insurance Products Fund
Sub-Accounts (Service Class 2) Sub-Accounts
----------------- --------------------------------------------------------------
VIP Asset
Manager VIP Contrafund VIP Equity- VIP Growth
Growth (Service (Service Income (Service (Service
VIP Overseas Class 2) (a) Class 2) (a) Class 2) (a) Class 2) (a)
----------------- ------------- ------------- ------------- -------------
NET INVESTMENT INCOME (LOSS)
Dividends $ 39,592 $ - $ - $ - $ -
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (10,346) (51) (1,571) (4,966) (1,678)
Administrative expense (799) (4) (112) (341) (116)
----------------- ------------- ------------- ------------- -------------
Net investment income (loss) 28,447 (55) (1,683) (5,307) (1,794)
----------------- ------------- ------------- ------------- -------------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) on fund shares:
Proceeds from sales 110,079 4,161 11,119 429,433 10,304
Cost of investments sold 152,614 4,729 12,502 436,355 11,510
----------------- ------------- ------------- ------------- -------------
Realized gains (losses) on fund shares (42,535) (568) (1,383) (6,922) (1,206)
Realized gain distributions 62,582 - - - -
----------------- ------------- ------------- ------------- -------------
Net realized gains (losses) 20,047 (568) (1,383) (6,922) (1,206)
Change in unrealized gains (losses) (254,067) 466 5,085 11,348 (5,026)
----------------- ------------- ------------- ------------- -------------
Net realized and unrealized gains
(losses) on investments (234,020) (102) 3,702 4,426 (6,232)
----------------- ------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ (205,573) $ (157) $ 2,019 $ (881) $ (8,026)
================= ============= ============= ============= =============
</Table>
(a) For the Period Beginning May 1, 2001 and Ended December 31, 2001
See notes to financial statements.
26
<Page>
<Table>
<Caption>
Franklin Templeton
Fidelity Variable Insurance Products Variable Insurance
Fund (Service Class 2) Sub-Accounts Products Trust Sub-Accounts
-------------------------------------------- -------------------------------
VIP High VIP Index 500 VIP Overseas Franklin Global
Income (Service (Service (Service Health Care Franklin
Class 2) (a) Class 2) (a) Class 2) (a) Securities (a) Small Cap
------------- ------------- ------------- ------------- -------------
NET INVESTMENT INCOME (LOSS)
Dividends $ - $ - $ - $ - $ 72
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (723) (5,345) (182) (14) (452)
Administrative expense (46) (360) (13) (1) (36)
------------- ------------- ------------- ------------- -------------
Net investment income (loss) (769) (5,705) (195) (15) (416)
------------- ------------- ------------- ------------- -------------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) on fund shares:
Proceeds from sales 1,867 5,923 183 236 28,562
Cost of investments sold 1,906 6,434 199 253 31,731
------------- ------------- ------------- ------------- -------------
Realized gains (losses) on fund shares (39) (511) (16) (17) (3,169)
Realized gain distributions - - - - -
------------- ------------- ------------- ------------- -------------
Net realized gains (losses) (39) (511) (16) (17) (3,169)
Change in unrealized gains (losses) (4,798) (23,417) (1,610) 252 4,965
------------- ------------- ------------- ------------- -------------
Net realized and unrealized gains
(losses) on investments (4,837) (23,928) (1,626) 235 1,796
------------- ------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ (5,606) $ (29,633) $ (1,821) $ 220 $ 1,380
============= ============= ============= ============= =============
</Table>
(a) For the Period Beginning May 1, 2001 and Ended December 31, 2001
See notes to financial statements.
27
<Page>
<Table>
<Caption>
Franklin Templeton Variable Insurance Products Trust Sub-Accounts
-----------------------------------------------------------------------------
Franklin Templeton Templeton Templeton
Technology Mutual Shares Global Income Growth International
Securities (a) Securities Securities Securities Securities
------------- ------------- ------------- ------------- -------------
NET INVESTMENT INCOME (LOSS)
Dividends $ - $ 2,124 $ 6,644 $ 9,661 $ 1,220
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (13) (1,405) (2,927) (6,173) (573)
Administrative expense (1) (116) (207) (478) (49)
------------- ------------- ------------- ------------- -------------
Net investment income (loss) (14) 603 3,510 3,010 598
------------- ------------- ------------- ------------- -------------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) on fund shares:
Proceeds from sales 274 12,495 34,175 160,501 2,541
Cost of investments sold 247 13,065 33,153 179,919 3,219
------------- ------------- ------------- ------------- -------------
Realized gains (losses) on fund shares 27 (570) 1,022 (19,418) (678)
Realized gain distributions - 7,141 - 86,691 9,595
------------- ------------- ------------- ------------- -------------
Net realized gains (losses) 27 6,571 1,022 67,273 8,917
Change in unrealized gains (losses) 835 (8,630) 171 (86,546) (16,987)
------------- ------------- ------------- ------------- -------------
Net realized and unrealized gains
(losses) on investments 862 (2,059) 1,193 (19,273) (8,070)
------------- ------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ 848 $ (1,456) $ 4,703 $ (16,263) $ (7,472)
============= ============= ============= ============= =============
</Table>
(a) For the Period Beginning May 1, 2001 and Ended December 31, 2001
See notes to financial statements.
28
<Page>
<Table>
<Caption>
Goldman Sachs Variable Insurance Trust Sub-Accounts
---------------------------------------------------------------------------------
VIT CORE VIT CORE
VIT Capital Large Cap Small Cap VIT CORE VIT Global
Growth Growth Equity U.S. Equity Income
------------- ------------- ------------- ------------- -------------
NET INVESTMENT INCOME (LOSS)
Dividends $ 1,019 $ 1 $ 854 $ 1,170 $ 5,630
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (2,099) (135) (3,730) (4,111) (1,054)
Administrative expense (154) (9) (251) (276) (83)
------------- ------------- ------------- ------------- -------------
Net investment income (loss) (1,234) (143) (3,127) (3,217) 4,493
------------- ------------- ------------- ------------- -------------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) on fund shares:
Proceeds from sales 13,146 5,771 21,552 46,033 2,214
Cost of investments sold 18,499 10,918 20,175 53,780 2,201
------------- ------------- ------------- ------------- -------------
Realized gains (losses) on fund shares (5,353) (5,147) 1,377 (7,747) 13
Realized gain distributions - 2 - - -
------------- ------------- ------------- ------------- -------------
Net realized gains (losses) (5,353) (5,145) 1,377 (7,747) 13
Change in unrealized gains (losses) (18,212) 2,262 9,430 (31,340) (2,678)
------------- ------------- ------------- ------------- -------------
Net realized and unrealized gains
(losses) on investments (23,565) (2,883) 10,807 (39,087) (2,665)
------------- ------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ (24,799) $ (3,026) $ 7,680 $ (42,304) $ 1,828
============= ============= ============= ============= =============
</Table>
See notes to financial statements.
29
<Page>
<Table>
<Caption>
LSA Variable Series
Goldman Sachs Variable Insurance Trust Sub-Accounts Trust Sub-Accounts
--------------------------------------------------- -----------------------------
VIT
VIT Growth International VIT Mid Cap LSA Focused LSA Growth
and Income Equity Value Equity (a) Equity (a)
------------- ------------- ------------- ------------- -------------
NET INVESTMENT INCOME (LOSS)
Dividends $ 57 $ 348 $ 87 $ - $ -
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (312) (325) (66) (15) (22)
Administrative expense (23) (23) (5) (1) (1)
------------- ------------- ------------- ------------- -------------
Net investment income (loss) (278) - 16 (16) (23)
------------- ------------- ------------- ------------- -------------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) on fund shares:
Proceeds from sales 11,434 1,062 50 13 22
Cost of investments sold 14,028 1,392 890 13 22
------------- ------------- ------------- ------------- -------------
Realized gains (losses) on fund shares (2,594) (330) (840) - -
Realized gain distributions - 18 260 - -
------------- ------------- ------------- ------------- -------------
Net realized gains (losses) (2,594) (312) (580) - -
Change in unrealized gains (losses) (215) (6,016) 1,132 275 240
------------- ------------- ------------- ------------- -------------
Net realized and unrealized gains
(losses) on investments (2,809) (6,328) 552 275 240
------------- ------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ (3,087) $ (6,328) $ 568 $ 259 $ 217
============= ============= ============= ============= =============
</Table>
(a) For the Period Beginning May 1, 2001 and Ended December 31, 2001
See notes to financial statements.
30
<Page>
<Table>
<Caption>
MFS Variable Insurance Trust Sub-Accounts
--------------------------------------------------------------
MFS Emerging MFS Investors MFS Limited MFS New
Growth Trust (b) Maturity (d) Discovery
------------- ------------- ------------- -------------
NET INVESTMENT INCOME (LOSS)
Dividends $ - $ 1,079 $ - $ 6,412
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (45,845) (9,019) (273) (3,159)
Administrative expense (3,591) (720) (21) (252)
------------- ------------- ------------- -------------
Net investment income (loss) (49,436) (8,660) (294) 3,001
------------- ------------- ------------- -------------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) on fund shares:
Proceeds from sales 506,186 118,267 67,246 27,806
Cost of investments sold 802,414 133,933 65,670 31,887
------------- ------------- ------------- -------------
Realized gains (losses) on fund shares (296,228) (15,666) 1,576 (4,081)
Realized gain distributions 233,594 17,761 - 254
------------- ------------- ------------- -------------
Net realized gains (losses) (62,634) 2,095 1,576 (3,827)
Change in unrealized gains (losses) (1,437,517) (106,272) (1,054) (5,141)
------------- ------------- ------------- -------------
Net realized and unrealized gains
(losses) on investments (1,500,151) (104,177) 522 (8,968)
------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ (1,549,587) $ (112,837) $ 228 $ (5,967)
============= ============= ============= =============
</Table>
(b) Previously known as MFS Growth with Income
(d) For the Period Beginning January 1, 2001 and Ended June 27,2001
See notes to financial statements.
31
<Page>
<Table>
<Caption>
MFS Variable Insurance MFS Variable Insurance Trust
Trust Sub-Accounts (Service Class) Sub-Accounts
-------------------------------- ---------------------------------------------
MFS
MFS Emerging MFS Investors New Discovery
Growth (Service Trust (Service (Service
MFS Research MFS Utilities (a) Class) (a) Class) (a) Class) (a)
------------ ---------------- ------------- ------------ ------------
NET INVESTMENT INCOME (LOSS)
Dividends $ 20,890 $ - $ - $ - $ -
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (24,915) (26) (2,812) (1,714) (485)
Administrative expense (1,845) (2) (184) (118) (34)
------------ ------------ ------------ ------------ ------------
Net investment income (loss) (5,870) (28) (2,996) (1,832) (519)
------------ ------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) on fund shares:
Proceeds from sales 288,858 27 108,832 6,885 11,906
Cost of investments sold 412,512 27 123,834 7,234 12,328
------------ ------------ ------------ ------------ ------------
Realized gains (losses) on fund shares (123,654) - (15,002) (349) (422)
Realized gain distributions 208,939 - - - -
------------ ------------ ------------ ------------ ------------
Net realized gains (losses) 85,285 - (15,002) (349) (422)
Change in unrealized gains (losses) (547,684) 267 (7,859) (3,983) 14,354
------------ ------------ ------------ ------------ ------------
Net realized and unrealized gains
(losses) on investments (462,399) 267 (22,861) (4,332) 13,932
------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ (468,269) $ 239 $ (25,857) $ (6,164) $ 13,413
============ ============ ============ ============ ============
</Table>
(a) For the Period Beginning May 1, 2001 and Ended December 31, 2001
See notes to financial statements.
32
<Page>
<Table>
<Caption>
MFS Variable Insurance Trust Neuberger & Berman Advisers
(Service Class) Sub-Accounts Management Trust Sub-Accounts
---------------------------- --------------------------------------------
MFS Research MFS Utilities AMT
(Service (Service AMT Mid-Cap AMT
Class) (a) Class) (a) Guardian Growth Partners
------------ ------------- ------------ ------------ ------------
NET INVESTMENT INCOME (LOSS)
Dividends $ - $ - $ 75 $ 7 $ 650
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (842) (2,429) (245) (613) (2,481)
Administrative expense (57) (172) (16) (45) (167)
------------ ------------ ------------ ------------ ------------
Net investment income (loss) (899) (2,601) (186) (651) (1,998)
------------ ------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) on fund shares:
Proceeds from sales 1,178 182,451 1,466 2,232 6,885
Cost of investments sold 1,302 180,369 1,522 3,399 8,372
------------ ------------ ------------ ------------ ------------
Realized gains (losses) on fund shares (124) 2,082 (56) (1,167) (1,487)
Realized gain distributions - - 1,066 - 6,171
------------ ------------ ------------ ------------ ------------
Net realized gains (losses) (124) 2,082 1,010 (1,167) 4,684
Change in unrealized gains (losses) (2,251) (47,107) (1,332) (13,227) (10,370)
------------ ------------ ------------ ------------ ------------
Net realized and unrealized gains
(losses) on investments (2,375) (45,025) (322) (14,394) (5,686)
------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ (3,274) $ (47,626) $ (508) $ (15,045) $ (7,684)
============ ============ ============ ============ ============
</Table>
(a) For the Period Beginning May 1, 2001 and Ended December 31, 2001
See notes to financial statements.
33
<Page>
<Table>
<Caption>
Oppenheimer Variable Account Funds Sub-Accounts
------------------------------------------------------------
Oppenheimer
Oppenheimer Oppenheimer Oppenheimer Main Street
Aggressive Capital Global Growth &
Growth Appreciation Securities Income
------------ ------------ ------------ ------------
NET INVESTMENT INCOME (LOSS)
Dividends $ 11,853 $ 12,522 $ 12,369 $ 26,272
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (20,617) (38,292) (28,365) (79,689)
Administrative expense (1,566) (2,988) (2,300) (6,172)
------------ ------------ ------------ ------------
Net investment income (loss) (10,330) (28,758) (18,296) (59,589)
------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) on fund shares:
Proceeds from sales 240,608 372,484 370,500 570,407
Cost of investments sold 363,933 440,495 439,351 663,771
------------ ------------ ------------ ------------
Realized gains (losses) on fund shares (123,325) (68,011) (68,851) (93,364)
Realized gain distributions 184,944 187,915 229,325 -
------------ ------------ ------------ ------------
Net realized gains (losses) 61,619 119,904 160,474 (93,364)
Change in unrealized gains (losses) (575,302) (461,091) (399,265) (509,814)
------------ ------------ ------------ ------------
Net realized and unrealized gains
(losses) on investments (513,683) (341,187) (238,791) (603,178)
------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ (524,013) $ (369,945) $ (257,087) $ (662,767)
============ ============ ============ ============
</Table>
See notes to financial statements.
34
<Page>
<Table>
<Caption>
Oppenheimer Variable
Account Funds Sub-Accounts Putnam Variable Trust Sub-Accounts
----------------------------- -------------------------------------------------
Oppenheimer Oppenheimer
Multiple Strategic VT Diversified VT Growth VT Growth
Strategies Bond Income (a) and Income (a) Opportunities (a)
------------ ------------ ------------- ------------- -----------------
NET INVESTMENT INCOME (LOSS)
Dividends $ 43,438 $ 29,461 $ - $ - $ -
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (24,129) (20,762) (1,983) (2,882) (783)
Administrative expense (1,948) (1,592) (137) (203) (54)
------------ ------------ ------------ ------------ ------------
Net investment income (loss) 17,361 7,107 (2,120) (3,085) (837)
------------ ------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) on fund shares:
Proceeds from sales 637,584 534,808 8,356 15,241 90,235
Cost of investments sold 653,886 539,562 8,279 17,188 111,048
------------ ------------ ------------ ------------ ------------
Realized gains (losses) on fund shares (16,302) (4,754) 77 (1,947) (20,813)
Realized gain distributions 58,019 37,450 - - -
------------ ------------ ------------ ------------ ------------
Net realized gains (losses) 41,717 32,696 77 (1,947) (20,813)
Change in unrealized gains (losses) (65,170) 20,234 2,082 (12,661) (3,362)
------------ ------------ ------------ ------------ ------------
Net realized and unrealized gains
(losses) on investments (23,453) 52,930 2,159 (14,608) (24,175)
------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ (6,092) $ 60,037 $ 39 $ (17,693) $ (25,012)
============ ============ ============ ============ ============
</Table>
(a) For the Period Beginning May 1, 2001 and Ended December 31, 2001
See notes to financial statements.
35
<Page>
<Table>
<Caption>
Putnam Variable Trust Sub-Accounts
--------------------------------------------------------------
VT Health VT VT VT
Sciences (a) New Value (a) Research (a) Voyager II (a)
------------ ------------- ------------ --------------
NET INVESTMENT INCOME (LOSS)
Dividends $ - $ - $ - $ -
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (1,720) (1,131) (2) (1,969)
Administrative expense (112) (81) - (132)
------------ ------------ ------------ ------------
Net investment income (loss) (1,832) (1,212) (2) (2,101)
------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) on fund shares:
Proceeds from sales 19,103 6,864 2 80,113
Cost of investments sold 18,720 6,808 2 97,995
------------ ------------ ------------ ------------
Realized gains (losses) on fund shares 383 56 - (17,882)
Realized gain distributions - - - -
------------ ------------ ------------ ------------
Net realized gains (losses) 383 56 - (17,882)
Change in unrealized gains (losses) (5,845) 3,503 62 (9,991)
------------ ------------ ------------ ------------
Net realized and unrealized gains
(losses) on investments (5,462) 3,559 62 (27,873)
------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ (7,294) $ 2,347 $ 60 $ (29,974)
============ ============ ============ ============
</Table>
(a) For the Period Beginning May 1, 2001 and Ended December 31, 2001
See notes to financial statements.
36
<Page>
<Table>
<Caption>
STI Classic Variable Trust Sub-Accounts
----------------------------------------------------------------------------
STI STI STI
STI Capital STI Growth International Investment Mid-Cap
Appreciation & Income Equity Grade Bond Equity
------------ ------------ ------------- ------------ ------------
NET INVESTMENT INCOME (LOSS)
Dividends $ 29,981 $ 7,820 $ 182 $ 54,855 $ 57,995
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (19,161) (21,463) (2,783) (15,296) (6,515)
Administrative expense (1,488) (1,640) (203) (1,136) (486)
------------ ------------ ------------ ------------ ------------
Net investment income (loss) 9,332 (15,283) (2,804) 38,423 50,994
------------ ------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) on fund shares:
Proceeds from sales 516,912 158,685 51,685 129,147 96,037
Cost of investments sold 556,173 165,160 63,969 126,785 111,570
------------ ------------ ------------ ------------ ------------
Realized gains (losses) on fund shares (39,261) (6,475) (12,284) 2,362 (15,533)
Realized gain distributions 79,308 - - - 41,263
------------ ------------ ------------ ------------ ------------
Net realized gains (losses) 40,047 (6,475) (12,284) 2,362 25,730
Change in unrealized gains (losses) (151,967) (77,002) (26,579) (54) (51,139)
------------ ------------ ------------ ------------ ------------
Net realized and unrealized gains
(losses) on investments (111,920) (83,477) (38,863) 2,308 (25,409)
------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ (102,588) $ (98,760) $ (41,667) $ 40,731 $ 25,585
============ ============ ============ ============ ============
</Table>
See notes to financial statements.
37
<Page>
<Table>
<Caption>
The Universal Institutional
STI Classic Variable Trust Sub-Accounts Funds, Inc. Sub-Accounts
-------------------------------------------- -----------------------------
STI Value
STI Quality STI Small Income Equity Fixed
Growth Stock Cap Equity Stock Growth Income
------------ ------------ ------------ ------------ ------------
NET INVESTMENT INCOME (LOSS)
Dividends $ 207 $ 9,842 $ 15,789 $ - $ 10,046
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (17,507) (10,031) (12,247) (2,577) (1,194)
Administrative expense (1,255) (771) (961) (176) (90)
------------ ------------ ------------ ------------ ------------
Net investment income (loss) (18,555) (960) 2,581 (2,753) 8,762
------------ ------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) on fund shares:
Proceeds from sales 140,487 72,644 60,088 16,179 19,630
Cost of investments sold 171,478 67,103 61,419 22,486 19,275
------------ ------------ ------------ ------------ ------------
Realized gains (losses) on fund shares (30,991) 5,541 (1,331) (6,307) 355
Realized gain distributions - - - 226 3,875
------------ ------------ ------------ ------------ ------------
Net realized gains (losses) (30,991) 5,541 (1,331) (6,081) 4,230
Change in unrealized gains (losses) (223,110) 121,749 (22,710) (25,385) (8,162)
------------ ------------ ------------ ------------ ------------
Net realized and unrealized gains
(losses) on investments (254,101) 127,290 (24,041) (31,466) (3,932)
------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ (272,656) $ 126,330 $ (21,460) $ (34,219) $ 4,830
============ ============ ============ ============ ============
</Table>
See notes to financial statements.
38
<Page>
<Table>
<Caption>
The Universal Institutional Funds, Inc. Sub-Accounts
-------------------------------------------------------------
Global Value International Mid Cap
Equity (c) Magnum Value Value
------------ ------------ ------------ -------------
NET INVESTMENT INCOME (LOSS)
Dividends $ 231 $ 29 $ - $ 2,431
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (213) (76) (2,951) (3,369)
Administrative expense (18) (6) (227) (230)
------------- ------------- ------------- -------------
Net investment income (loss) - (53) (3,178) (1,168)
------------- ------------- ------------- -------------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) on fund shares:
Proceeds from sales 1,564 80 23,543 32,483
Cost of investments sold 1,604 104 28,594 30,817
------------- ------------- ------------- -------------
Realized gains (losses) on fund shares (40) (24) (5,051) 1,666
Realized gain distributions - - 235 10,032
------------- ------------- ------------- -------------
Net realized gains (losses) (40) (24) (4,816) 11,698
Change in unrealized gains (losses) (1,404) (1,333) 4,891 (11,097)
------------- ------------- ------------- -------------
Net realized and unrealized gains
(losses) on investments (1,444) (1,357) 75 601
------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ (1,444) $ (1,410) $ (3,103) $ (567)
============= ============= ============= =============
</Table>
(c) Previously known as Global Equity
See notes to financial statements.
39
<Page>
GLENBROOK LIFE MULTI-MANAGER VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended December 31,
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds Sub-Accounts
----------------------------------------------------------------------------
AIM V.I.
Aggressive
Growth AIM V.I. Balanced AIM V.I. Capital Appreciation
----------- ---------------------------- -----------------------------
2001 (a) 2001 2000 2001 2000
----------- ----------- ----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) $ (110) $ 21,609 $ (25,018) $ (71,898) $ (56,705)
Net realized gains (losses) 4 (75,780) 712 105,009 155,354
Change in unrealized gains (losses) 2,386 (418,926) (148,307) (1,454,912) (1,054,521)
----------- ----------- ----------- ----------- -----------
Increase (decrease) in net assets
from operations 2,280 (473,097) (172,613) (1,421,801) (955,872)
----------- ----------- ----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL TRANSACTIONS
Deposits 25,648 642,297 1,334,462 938,674 3,544,829
Benefit payments - (38,786) (9,010) (34,209) (9,635)
Payments on termination - (319,495) (165,066) (299,786) (251,806)
Contract maintenance charge - (572) (820) (1,672) (1,951)
Transfers among the sub-accounts
and with the Fixed Account - net 1,483 1,491,615 1,226,429 631,882 1,904,220
----------- ----------- ----------- ----------- -----------
Increase (decrease) in net assets
from capital transactions 27,131 1,775,059 2,385,995 1,234,889 5,185,657
----------- ----------- ----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS 29,411 1,301,962 2,213,382 (186,912) 4,229,785
NET ASSETS AT BEGINNING OF PERIOD - 3,053,848 840,466 5,299,302 1,069,517
----------- ----------- ----------- ----------- -----------
NET ASSETS AT END OF PERIOD $ 29,411 $ 4,355,810 $ 3,053,848 $ 5,112,390 $ 5,299,302
=========== =========== =========== =========== ===========
UNITS OUTSTANDING
Units outstanding at beginning of period - 257,109 66,631 385,019 64,009
Units issued 3,419 274,652 220,459 243,270 349,542
Units redeemed - (91,722) (29,981) (98,356) (28,532)
----------- ----------- ----------- ----------- -----------
Units outstanding at end of period 3,419 440,039 257,109 529,933 385,019
=========== =========== =========== =========== ===========
</Table>
(a) For the Period Beginning May 1, 2001 and Ended December 31, 2001
See notes to financial statements.
40
<Page>
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds Sub-Accounts
----------------------------------------------------------------------------
AIM V.I. Dent
Demographics AIM V.I. Diversified Income AIM V.I. Global Utilities
------------- ---------------------------- ---------------------------
2001 (a) 2001 2000 2001 2000
------------- ----------- ----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) $ (51) $ 9,036 $ 9,502 $ (40) $ (329)
Net realized gains (losses) (54) (9,007) (10,086) 1,811 4,405
Change in unrealized gains (losses) (62) 4,339 (1,774) (10,014) (7,177)
------------- ----------- ----------- ----------- -----------
Increase (decrease) in net assets
from operations (167) 4,368 (2,358) (8,243) (3,101)
------------- ----------- ----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL TRANSACTIONS
Deposits 4,305 43,398 2,500 25,000 -
Benefit payments - - (23,383) - -
Payments on termination (421) (66,415) (16,620) - -
Contract maintenance charge - (15) (53) (4) (11)
Transfers among the sub-accounts
and with the Fixed Account - net 5,105 1,013 4,389 (25,005) 5,639
------------- ----------- ----------- ----------- -----------
Increase (decrease) in net assets
from capital transactions 8,989 (22,019) (33,167) (9) 5,628
------------- ----------- ----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS 8,822 (17,651) (35,525) (8,252) 2,527
NET ASSETS AT BEGINNING OF PERIOD - 192,964 228,489 28,536 26,009
------------- ----------- ----------- ----------- -----------
NET ASSETS AT END OF PERIOD $ 8,822 $ 175,313 $ 192,964 $ 20,284 $ 28,536
============= =========== =========== =========== ===========
UNITS OUTSTANDING
Units outstanding at beginning of period - 19,823 23,306 1,983 1,738
Units issued 1,099 5,323 5,139 - 1,831
Units redeemed (55) (7,600) (8,622) - (1,586)
------------- ----------- ----------- ----------- -----------
Units outstanding at end of period 1,044 17,546 19,823 1,983 1,983
============= =========== =========== =========== ===========
</Table>
(a) For the Period Beginning May 1, 2001 and Ended December 31, 2001
See notes to financial statements.
41
<Page>
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds Sub-Accounts
---------------------------------------------------------------------------------------
AIM V.I. Government Securities AIM V.I. Growth AIM V.I. Growth and Income
------------------------------ -------------------------- ---------------------------
2001 2000 2001 2000 2001 2000
------------ ------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) $ 4,958 $ 24,950 $ (41,873) $ (45,357) $ (52,773) $ (41,216)
Net realized gains (losses) 26,469 (50) (553,672) 178,041 (222,787) 189,688
Change in unrealized gains (losses) (5,793) 25,861 (962,171) (1,242,051) (766,520) (841,592)
------------ ------------ ------------ ------------ ------------ ------------
Increase (decrease) in net assets
from operations 25,634 50,761 (1,557,716) (1,109,367) (1,042,080) (693,120)
------------ ------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL TRANSACTIONS
Deposits 6,570 31,009 634,235 2,759,267 729,977 1,937,761
Benefit payments - - (53,067) (43,978) (70,811) -
Payments on termination (462,745) (5,195) (303,307) (218,155) (464,257) (309,191)
Contract maintenance charge 147 (109) (919) (1,421) (665) (1,425)
Transfers among the sub-accounts
and with the Fixed Account - net 118,240 234,665 435,204 1,474,850 818,935 1,197,196
------------ ------------ ------------ ------------ ------------ ------------
Increase (decrease) in net assets
from capital transactions (337,788) 260,370 712,146 3,970,563 1,013,179 2,824,341
------------ ------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS (312,154) 311,131 (845,570) 2,861,196 (28,901) 2,131,221
NET ASSETS AT BEGINNING OF PERIOD 727,464 416,333 4,152,541 1,291,345 3,919,638 1,788,417
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS AT END OF PERIOD $ 415,310 $ 727,464 $ 3,306,971 $ 4,152,541 $ 3,890,737 $ 3,919,638
============ ============ ============ ============ ============ ============
UNITS OUTSTANDING
Units outstanding at beginning of period 65,317 40,535 344,226 77,823 306,577 109,548
Units issued 24,099 25,296 236,748 292,392 215,105 237,349
Units redeemed (53,198) (514) (123,140) (25,989) (81,907) (40,320)
------------ ------------ ------------ ------------ ------------ ------------
Units outstanding at end of period 36,218 65,317 457,834 344,226 439,775 306,577
============ ============ ============ ============ ============ ============
</Table>
See notes to financial statements.
42
<Page>
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds Sub-Accounts
--------------------------------------------------------------------------------------
AIM V.I. High Yield AIM V.I. International Equity AIM V.I. Value
--------------------------- ----------------------------- --------------------------
2001 2000 2001 2000 2001 2000
------------ ----------- ----------- ----------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) $ 61,520 $ 34,589 $ (1,822) $ (1,991) $ (96,143) $ (77,646)
Net realized gains (losses) (32,929) (6,335) (7,288) 24,371 (199,791) 380,850
Change in unrealized gains (losses) (61,435) (95,058) (39,409) (73,496) (838,201) (1,550,830)
------------ ----------- ----------- ----------- ------------ ------------
Increase (decrease) in net assets
from operations (32,844) (66,804) (48,519) (51,116) (1,134,135) (1,247,626)
------------ ----------- ----------- ----------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL TRANSACTIONS
Deposits 142,139 198,896 26,823 111,576 1,098,895 3,734,854
Benefit payments - (83,895) (2,925) - (45,729) (228,712)
Payments on termination (53,716) (60,134) (7,864) (1,942) (642,624) (339,557)
Contract maintenance charge (68) (55) (88) (55) (1,348) (2,589)
Transfers among the sub-accounts
and with the Fixed Account - net 200,293 203,996 3,631 (46,561) 831,848 2,413,476
------------ ----------- ----------- ----------- ------------ ------------
Increase (decrease) in net assets
from capital transactions 288,648 258,808 19,577 63,018 1,241,042 5,577,472
------------ ----------- ----------- ----------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS 255,804 192,004 (28,942) 11,902 106,907 4,329,846
NET ASSETS AT BEGINNING OF PERIOD 315,092 123,088 177,691 165,789 7,664,750 3,334,904
------------ ----------- ----------- ----------- ------------ ------------
NET ASSETS AT END OF PERIOD $ 570,896 $ 315,092 $ 148,749 $ 177,691 $ 7,771,657 $ 7,664,750
=========== ========== ========== ========== =========== ===========
UNITS OUTSTANDING
Units outstanding at beginning of period 35,082 10,928 14,822 9,723 608,937 210,731
Units issued 50,097 39,069 4,847 9,836 336,307 489,687
Units redeemed (17,995) (14,915) (2,776) (4,737) (187,837) (91,481)
------------ ----------- ----------- ----------- ------------ ------------
Units outstanding at end of period 67,184 35,082 16,893 14,822 757,407 608,937
=========== ========== ========== ========== =========== ===========
</Table>
See notes to financial statements.
43
<Page>
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment
American Century Variable Portfolios, Inc. Sub-Accounts Fund Sub-Accounts
-------------------------------------------------------- ---------------------------
American Century American Century
VP Balanced VP International VIF Growth and Income
--------------------------- --------------------------- ---------------------------
2001 2000 2001 2000 2001 2000
----------- ----------- ----------- ----------- ----------- ------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) $ 5,211 $ 3,519 $ (1,980) $ (2,377) $ (3,807) $ 1,496
Net realized gains (losses) (11,129) 4,355 13,254 33,655 (1,404) 20,230
Change in unrealized gains (losses) (679) (19,382) (66,469) (65,914) (31,181) (46,985)
----------- ----------- ----------- ----------- ----------- ------------
Increase (decrease) in net assets
from operations (6,597) (11,508) (55,195) (34,636) (36,392) (25,259)
----------- ----------- ----------- ----------- ----------- ------------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL TRANSACTIONS
Deposits - 3,246 112 - 171,762 7,745
Benefit payments (5,256) - - - - (73,777)
Payments on termination (149,593) (3,125) (2,824) (3,124) (82,535) (15,053)
Contract maintenance charge (8) (76) 34 (39) (107) (167)
Transfers among the sub-accounts
and with the Fixed Account - net 300 47,856 (3) 110,911 59,251 (30,235)
----------- ----------- ----------- ----------- ----------- ------------
Increase (decrease) in net assets
from capital transactions (154,557) 47,901 (2,681) 107,748 148,371 (111,487)
----------- ----------- ----------- ----------- ----------- ------------
INCREASE (DECREASE) IN NET ASSETS (161,154) 36,393 (57,876) 73,112 111,979 (136,746)
NET ASSETS AT BEGINNING OF PERIOD 303,215 266,822 185,390 112,278 386,232 522,978
----------- ----------- ----------- ----------- ----------- ------------
NET ASSETS AT END OF PERIOD $ 142,061 $ 303,215 $ 127,514 $ 185,390 $ 498,211 $ 386,232
=========== =========== =========== =========== =========== ============
UNITS OUTSTANDING
Units outstanding at beginning of period 23,997 20,277 11,918 5,917 30,513 38,988
Units issued 25 9,852 9 9,516 23,066 1,311
Units redeemed (12,185) (6,132) (183) (3,515) (8,228) (9,786)
----------- ----------- ----------- ----------- ----------- ------------
Units outstanding at end of period 11,837 23,997 11,744 11,918 45,351 30,513
=========== =========== =========== =========== =========== ============
</Table>
See notes to financial statements.
44
<Page>
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------------
Dreyfus Socially Responsible
Dreyfus Variable Investment Fund Sub-Accounts Growth Fund, Inc. Sub-Account
-------------------------------------------------------- -----------------------------
Dreyfus Socially
VIF Money Market VIF Small Company Stock Responsible Growth Fund
--------------------------- --------------------------- -----------------------------
2001 2000 2001 2000 2001 2000
------------ ----------- ----------- ----------- ----------- ------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) $ 15,626 $ 4,912 $ (939) $ (1,045) $ (4,095) $ (2,926)
Net realized gains (losses) - - 1,450 4,074 (16,799) 17,735
Change in unrealized gains (losses) - - (3,166) 2,034 (65,640) (61,690)
------------ ----------- ----------- ----------- ----------- ------------
Increase (decrease) in net assets
from operations 15,626 4,912 (2,655) 5,063 (86,534) (46,881)
------------ ----------- ----------- ----------- ----------- ------------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL TRANSACTIONS
Deposits 312,303 139,385 - 7,292 34,697 68,199
Benefit payments - (31,362) - - - (45,111)
Payments on termination (361,758) (49,262) (13,315) - (42,579) (4,648)
Contract maintenance charge (54) 4 (42) (47) (75) (137)
Transfers among the sub-accounts
and with the Fixed Account - net 1,467,386 (400,791) 21 (36,347) 17,694 44,690
------------ ----------- ----------- ----------- ----------- ------------
Increase (decrease) in net assets
from capital transactions 1,417,877 (342,026) (13,336) (29,102) 9,737 62,993
------------ ----------- ----------- ----------- ----------- ------------
INCREASE (DECREASE) IN NET ASSETS 1,433,503 (337,114) (15,991) (24,039) (76,797) 16,112
NET ASSETS AT BEGINNING OF PERIOD 178,408 515,522 81,093 105,132 340,441 324,329
------------ ----------- ----------- ----------- ----------- ------------
NET ASSETS AT END OF PERIOD $ 1,611,911 $ 178,408 $ 65,102 $ 81,093 $ 263,644 $ 340,441
============ =========== =========== =========== =========== ============
UNITS OUTSTANDING
Units outstanding at beginning of period 16,839 47,270 6,620 9,240 24,539 20,178
Units issued 242,765 79,767 - 661 7,011 12,381
Units redeemed (113,146) (110,198) (1,137) (3,281) (5,692) (8,020)
------------ ----------- ----------- ----------- ----------- ------------
Units outstanding at end of period 146,458 16,839 5,483 6,620 25,858 24,539
============ =========== =========== =========== =========== ============
</Table>
See notes to financial statements.
45
<Page>
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund Federated Insurance Series Fidelity Variable Insurance
Sub-Account Sub-Account Products Sub-Accounts
--------------------------- --------------------------- -----------------------------
Federated
Dreyfus Stock Index Fund Prime Money Fund II VIP Contrafund
--------------------------- --------------------------- -----------------------------
2001 2000 2001 2000 2001 2000
------------ ----------- ----------- ----------- ----------- ------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) $ 4,164 $ (11,116) $ 53,592 $ 19,065 $ (37,337) $ (47,645)
Net realized gains (losses) (31,312) 80,440 - - (106,821) 282,879
Change in unrealized gains (losses) (274,851) (336,211) - - (708,982) (600,561)
------------ ----------- ----------- ----------- ----------- ------------
Increase (decrease) in net assets
from operations (301,999) (266,887) 53,592 19,065 (853,140) (365,327)
------------ ----------- ----------- ----------- ----------- ------------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL TRANSACTIONS
Deposits 363,468 249,617 2,053,283 440,162 681,737 2,301,180
Benefit payments (6,112) (88,628) (37,615) (80,569) (54,808) (4,120)
Payments on termination (237,560) (106,821) (883,799) (236,876) (438,362) (277,431)
Contract maintenance charge (593) (1,057) (511) (243) (1,589) (1,691)
Transfers among the sub-accounts
and with the Fixed Account - net (27,088) 160,569 3,108,600 617,768 653,470 2,451,718
------------ ----------- ----------- ----------- ----------- ------------
Increase (decrease) in net assets
from capital transactions 92,115 213,680 4,239,958 740,242 840,448 4,469,656
------------ ----------- ----------- ----------- ----------- ------------
INCREASE (DECREASE) IN NET ASSETS (209,884) (53,207) 4,293,550 759,307 (12,692) 4,104,329
NET ASSETS AT BEGINNING OF PERIOD 2,206,953 2,260,160 913,941 154,634 5,712,819 1,608,490
------------ ----------- ----------- ----------- ----------- ------------
NET ASSETS AT END OF PERIOD $ 1,997,069 $ 2,206,953 $ 5,207,491 $ 913,941 $ 5,700,127 $ 5,712,819
============ =========== =========== =========== =========== ============
UNITS OUTSTANDING
Units outstanding at beginning of period 171,195 153,625 87,136 15,369 432,933 107,100
Units issued 48,419 40,404 871,559 179,822 222,746 368,432
Units redeemed (34,612) (22,834) (465,036) (108,055) (135,851) (42,599)
------------ ----------- ----------- ----------- ----------- ------------
Units outstanding at end of period 185,002 171,195 493,659 87,136 519,828 432,933
============ =========== =========== =========== =========== ============
</Table>
See notes to financial statements.
46
<Page>
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity Variable Insurance Products Fund Sub-Accounts
--------------------------- --------------------------- -----------------------------
VIP Equity-Income VIP Growth VIP High Income
--------------------------- --------------------------- -----------------------------
2001 2000 2001 2000 2001 2000
------------ ----------- ----------- ----------- ----------- ------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) $ 4,804 $ (1,932) $ (95,221) $ (73,697) $ 145,115 $ 26,181
Net realized gains (losses) 138,887 120,977 (7,781) 320,062 (155,744) (26,793)
Change in unrealized gains (losses) (448,316) 184,553 (1,507,574) (1,331,876) (207,945) (316,517)
------------ ----------- ----------- ----------- ----------- ------------
Increase (decrease) in net assets
from operations (304,625) 303,598 (1,610,576) (1,085,511) (218,574) (317,129)
------------ ----------- ----------- ----------- ----------- ------------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL TRANSACTIONS
Deposits 806,296 1,246,543 654,121 4,874,441 472,412 738,055
Benefit payments (56,282) (103,409) (113,190) (2,168) (15,525) -
Payments on termination (445,137) (243,496) (473,587) (264,916) (163,009) (99,665)
Contract maintenance charge (608) (1,348) (1,659) (2,507) (118) (363)
Transfers among the sub-accounts
and with the Fixed Account - net 1,298,499 868,226 818,080 2,334,924 26,916 493,163
------------ ----------- ----------- ----------- ----------- ------------
Increase (decrease) in net assets
from capital transactions 1,602,768 1,766,516 883,765 6,939,774 320,676 1,131,190
------------ ----------- ----------- ----------- ----------- ------------
INCREASE (DECREASE) IN NET ASSETS 1,298,143 2,070,114 (726,811) 5,854,263 102,102 814,061
NET ASSETS AT BEGINNING OF PERIOD 4,027,975 1,957,861 7,646,715 1,792,452 1,305,071 491,010
------------ ----------- ----------- ----------- ----------- ------------
NET ASSETS AT END OF PERIOD $ 5,326,118 $ 4,027,975 $ 6,919,904 $ 7,646,715 $ 1,407,173 $ 1,305,071
============ =========== =========== =========== =========== ============
UNITS OUTSTANDING
Units outstanding at beginning of period 337,409 169,875 574,289 112,180 153,849 44,990
Units issued 244,905 226,316 277,518 547,113 98,415 136,051
Units redeemed (100,260) (58,782) (189,948) (85,004) (62,154) (27,192)
------------ ----------- ----------- ----------- ----------- ------------
Units outstanding at end of period 482,054 337,409 661,859 574,289 190,110 153,849
============ =========== =========== =========== =========== ============
</Table>
See notes to financial statements.
47
<Page>
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity Variable
Insurance Products
Fidelity Variable Insurance Products Fund Sub-Accounts (Service Class 2) Sub-Accounts
------------------------------------------------------ -------------------------------
VIP Asset VIP
Manager Growth Contrafund
(Service (Service
VIP Index 500 VIP Overseas Class 2) Class 2)
-------------------------- -------------------------- -------------- ---------------
2001 2000 (e) 2001 2000 (e) 2001 (a) 2001 (a)
------------ ----------- ----------- ----------- -------------- ---------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) $ (18,248) $ (15,555) $ 28,447 $ (5,526) $ (55) $ (1,683)
Net realized gains (losses) (72,731) (378) 20,047 (7,772) (568) (1,383)
Change in unrealized gains (losses) (396,350) (190,078) (254,067) (95,472) 466 5,085
------------ ----------- ----------- ----------- -------------- ---------------
Increase (decrease) in net assets
from operations (487,329) (206,011) (205,573) (108,770) (157) 2,019
------------ ----------- ----------- ----------- -------------- ---------------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL TRANSACTIONS
Deposits 500,527 1,955,534 58,152 507,613 19,572 228,791
Benefit payments (88,192) - - (975) - -
Payments on termination (139,021) (114,457) (32,261) (30,501) - (252)
Contract maintenance charge (596) (789) (266) (217) - -
Transfers among the sub-accounts
and with the Fixed Account - net 1,562,801 1,219,489 143,936 417,423 (3,691) 181,810
------------ ----------- ----------- ----------- -------------- ---------------
Increase (decrease) in net assets
from capital transactions 1,835,519 3,059,777 169,561 893,343 15,881 410,349
------------ ----------- ----------- ----------- -------------- ---------------
INCREASE (DECREASE) IN NET ASSETS 1,348,190 2,853,766 (36,012) 784,573 15,724 412,368
NET ASSETS AT BEGINNING OF PERIOD 2,853,766 - 784,573 - - -
------------ ----------- ----------- ----------- -------------- ---------------
NET ASSETS AT END OF PERIOD $ 4,201,956 $ 2,853,766 $ 748,561 $ 784,573 $ 15,724 $ 412,368
============ =========== =========== =========== ============== ===============
UNITS OUTSTANDING
Units outstanding at beginning of period 313,030 - 93,653 - - -
Units issued 294,832 334,267 44,157 104,052 2,139 44,810
Units redeemed (75,114) (21,237) (23,086) (10,399) (483) (1,306)
------------ ----------- ----------- ----------- -------------- ---------------
Units outstanding at end of period 532,748 313,030 114,724 93,653 1,656 43,504
============ =========== =========== =========== ============== ===============
</Table>
(a) For the Period Beginning May 1, 2001 and Ended December 31, 2001
(e) For the Period Beginning January 24, 2000 and Ended December 31, 2000
See notes to financial statements.
48
<Page>
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity Variable Insurance Products Fund (Service Class 2) Sub-Accounts
-----------------------------------------------------------------------------------------
VIP Equity- VIP High
Income VIP Growth Income VIP Index 500 VIP Overseas
(Service Class 2) (Service Class 2) (Service Class 2) (Service Class 2) (Service Class 2)
----------------- ----------------- ----------------- ----------------- -----------------
2001 (a) 2001 (a) 2001 (a) 2001 (a) 2001 (a)
----------------- ----------------- ----------------- ----------------- -----------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) $ (5,307) $ (1,794) $ (769) $ (5,705) $ (195)
Net realized gains (losses) (6,922) (1,206) (39) (511) (16)
Change in unrealized gains (losses) 11,348 (5,026) (4,798) (23,417) (1,610)
------------- ------------- ------------- ------------- -------------
Increase (decrease) in net assets
from operations (881) (8,026) (5,606) (29,633) (1,821)
------------- ------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL TRANSACTIONS
Deposits 837,230 259,180 59,714 610,905 22,390
Benefit payments - - - - -
Payments on termination (931) (3,858) (1,200) (4,559) -
Contract maintenance charge - - - - -
Transfers among the sub-accounts
and with the Fixed Account - net 298,878 125,886 108,397 429,606 18,439
------------- ------------- ------------- ------------- -------------
Increase (decrease) in net assets
from capital transactions 1,135,177 381,208 166,911 1,035,952 40,829
------------- ------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS 1,134,296 373,182 161,305 1,006,319 39,008
NET ASSETS AT BEGINNING OF PERIOD - - - - -
------------- ------------- ------------- ------------- -------------
NET ASSETS AT END OF PERIOD $ 1,134,296 $ 373,182 $ 161,305 $ 1,006,319 $ 39,008
============= ============= ============= ============= =============
UNITS OUTSTANDING
Units outstanding at beginning of period - - - - -
Units issued 145,949 43,232 18,059 112,385 4,549
Units redeemed (24,768) (757) (135) (1,371) -
------------- ------------- ------------- ------------- -------------
Units outstanding at end of period 121,181 42,475 17,924 111,014 4,549
============= ============= ============= ============= =============
</Table>
(a) For the Period Beginning May 1, 2001 and Ended December 31, 2001
See notes to financial statements.
49
<Page>
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------------
Franklin Templeton Variable Insurance Products Trust Sub-Accounts
-------------------------------------------------------------------------------------
Franklin
Global Franklin
Health Care Technology
Securities Franklin Small Cap Securities Mutual Shares Securities
------------- ------------------------ ----------- -------------------------------
2001 (a) 2001 2000 (f) 2001 (a) 2001 2000 (f)
------------- ----------- ----------- ----------- -------------- ---------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) $ (15) $ (416) $ (94) $ (14) $ 603 $ -
Net realized gains (losses) (17) (3,169) 68 27 6,571 -
Change in unrealized gains (losses) 252 4,965 (1,697) 835 (8,630) -
------------ --------- ---------- ---------- ------------- ------------
Increase (decrease) in net assets
from operations 220 1,380 (1,723) 848 (1,456) -
------------ --------- ---------- ---------- ------------- ------------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL TRANSACTIONS
Deposits 5,824 39,173 13,435 4,244 180,502 -
Benefit payments - (2,819) - - - -
Payments on termination (223) (4,514) (840) (262) (3,389) -
Contract maintenance charge - - (4) - (9) -
Transfers among the sub-accounts
and with the Fixed Account - net 1,782 54,061 4,585 - 185,149 -
------------ --------- ---------- ---------- ------------- ------------
Increase (decrease) in net assets
from capital transactions 7,383 85,901 17,176 3,982 362,253 -
------------ --------- ---------- ---------- ------------- ------------
INCREASE (DECREASE) IN NET ASSETS 7,603 87,281 15,453 4,830 360,797 -
NET ASSETS AT BEGINNING OF PERIOD - 15,453 - - - -
------------ --------- ---------- ---------- ------------- ------------
NET ASSETS AT END OF PERIOD $ 7,603 $ 102,734 $ 15,453 $ 4,830 $ 360,797 $ -
============ ========= ========== ========== ============= ============
UNITS OUTSTANDING
Units outstanding at beginning of period - 737 - - - -
Units issued 800 9,418 801 645 32,914 -
Units redeemed (25) (1,627) (64) (36) (1,063) -
------------ --------- ---------- ---------- ------------- ------------
Units outstanding at end of period 775 8,528 737 609 31,851 -
============ ========= ========== ========== ============= ============
</Table>
(a) For the Period Beginning May 1, 2001 and Ended December 31, 2001
(f) For the Period Beginning May 1, 2000 and Ended December 31, 2000
See notes to financial statements.
50
<Page>
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------------
Franklin Templeton Variable Insurance Products Trust Sub-Accounts
-------------------------------------------------------------------------------------
Templeton Global Templeton Templeton
Income Securities Growth Securities International Securities
-------------------------- ------------------------ -------------------------------
2001 2000 (f) 2001 2000 (f) 2001 2000
------------- ----------- ----------- ----------- -------------- ---------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) $ 3,510 $ (729) $ 3,010 $ (2,243) $ 598 $ 11
Net realized gains (losses) 1,022 (88) 67,273 349 8,917 2,789
Change in unrealized gains (losses) 171 8,923 (86,546) 17,129 (16,987) (3,171)
------------ ---------- ---------- ---------- ------------- --------------
Increase (decrease) in net assets
from operations 4,703 8,106 (16,263) 15,235 (7,472) (371)
------------ ---------- ---------- ---------- ------------- --------------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL TRANSACTIONS
Deposits 37,135 6,502 55,053 217,223 35,294 39,743
Benefit payments - - (25,904) - - -
Payments on termination (15,200) (3,940) (16,519) (9,250) (1,440) (1,200)
Contract maintenance charge (71) (41) (139) (109) 6 (11)
Transfers among the sub-accounts
and with the Fixed Account - net 78,709 137,931 108,156 170,312 7,199 (15)
------------ ---------- ---------- ---------- ------------- --------------
Increase (decrease) in net assets
from capital transactions 100,573 140,452 120,647 378,176 41,059 38,517
------------ ---------- ---------- ---------- ------------- --------------
INCREASE (DECREASE) IN NET ASSETS 105,276 148,558 104,384 393,411 33,587 38,146
NET ASSETS AT BEGINNING OF PERIOD 148,558 - 393,411 - 38,146 -
------------ ---------- ---------- ---------- ------------- --------------
NET ASSETS AT END OF PERIOD $ 253,834 $ 148,558 $ 497,795 $ 393,411 $ 71,733 $ 38,146
============ ========== ========== ========== ============= ==============
UNITS OUTSTANDING
Units outstanding at beginning of period 13,077 - 29,582 - 3,513 -
Units issued 13,610 13,931 26,606 30,852 4,685 3,625
Units redeemed (4,208) (854) (16,169) (1,270) (148) (112)
------------ ---------- ---------- ---------- ------------- --------------
Units outstanding at end of period 22,479 13,077 40,019 29,582 8,050 3,513
============ ========== ========== ========== ============= ==============
</Table>
(f) For the Period Beginning May 1, 2000 and Ended December 31, 2000
See notes to financial statements.
51
<Page>
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Variable Insurance Trust Sub-Accounts
--------------------------------------------------------------------------------------
VIT Capital Growth VIT CORE Large Cap Growth VIT CORE Small Cap Equity
-------------------------- ------------------------- -------------------------------
2001 2000 2001 2000 2001 2000
------------- ----------- ----------- ----------- -------------- ---------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) $ (1,234) $ 420 $ (143) $ (20) $ (3,127) $ 1,669
Net realized gains (losses) (5,353) 3,324 (5,145) 1,066 1,377 5,554
Change in unrealized gains (losses) (18,212) (9,209) 2,262 (5,168) 9,430 (8,052)
------------ ---------- ---------- ---------- ------------- --------------
Increase (decrease) in net assets
from operations (24,799) (5,465) (3,026) (4,122) 7,680 (829)
------------ ---------- ---------- ---------- ------------- --------------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL TRANSACTIONS
Deposits 124,226 27,776 - 16,170 69,537 22,403
Benefit payments - - - - - -
Payments on termination (40) 211 - - (17,435) (12,497)
Contract maintenance charge (22) (29) (6) (3) (38) (96)
Transfers among the sub-accounts
and with the Fixed Account - net 33,087 17,269 (5,620) 276 10,179 1,072
------------ ---------- ---------- ---------- ------------- --------------
Increase (decrease) in net assets
from capital transactions 157,251 45,227 (5,626) 16,443 62,243 10,882
------------ ---------- ---------- ---------- ------------- --------------
INCREASE (DECREASE) IN NET ASSETS 132,452 39,762 (8,652) 12,321 69,923 10,053
NET ASSETS AT BEGINNING OF PERIOD 73,864 34,102 12,321 - 231,538 221,485
------------ ---------- ---------- ---------- ------------- --------------
NET ASSETS AT END OF PERIOD $ 206,316 $ 73,864 $ 3,669 $ 12,321 $ 301,461 $ 231,538
============ ========== ========== ========== ============= ==============
UNITS OUTSTANDING
Units outstanding at beginning of period 6,339 2,450 1,071 - 18,786 18,004
Units issued 16,817 3,896 - 1,071 8,184 1,814
Units redeemed (2,555) (7) (662) - (1,587) (1,032)
------------ ---------- ---------- ---------- ------------- --------------
Units outstanding at end of period 20,601 6,339 409 1,071 25,383 18,786
============ ========== ========== ========== ============= ==============
</Table>
See notes to financial statements.
52
<Page>
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Variable Insurance Trust Sub-Accounts
--------------------------------------------------------------------------------------
VIT CORE U.S. Equity VIT Global Income VIT Growth and Income
-------------------------- ------------------------- -------------------------------
2001 2000 2001 2000 2001 2000
------------- ----------- ----------- ----------- -------------- ---------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) $ (3,217) $ (1,934) $ 4,493 $ 679 $ (278) $ (310)
Net realized gains (losses) (7,747) 2,771 13 - (2,594) (32)
Change in unrealized gains (losses) (31,340) (36,381) (2,678) (444) (215) (1,366)
------------ ---------- ---------- ---------- ------------- --------------
Increase (decrease) in net assets
from operations (42,304) (35,544) 1,828 235 (3,087) (1,708)
------------ ---------- ---------- ---------- ------------- --------------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL TRANSACTIONS
Deposits 35,269 79,686 168,071 7,500 - -
Benefit payments - - - - - -
Payments on termination (9,680) (14,027) (1,085) - (5,398) (332)
Contract maintenance charge (87) (124) (8) (2) (16) (22)
Transfers among the sub-accounts
and with the Fixed Account - net (19,330) (15,112) (23,797) 15 (5,684) -
------------ ---------- ---------- ---------- ------------- --------------
Increase (decrease) in net assets
from capital transactions 6,172 50,423 143,181 7,513 (11,098) (354)
------------ ---------- ---------- ---------- ------------- --------------
INCREASE (DECREASE) IN NET ASSETS (36,132) 14,879 145,009 7,748 (14,185) (2,062)
NET ASSETS AT BEGINNING OF PERIOD 293,815 278,936 7,748 - 26,261 28,323
------------ ---------- ---------- ---------- ------------- --------------
NET ASSETS AT END OF PERIOD $ 257,683 $ 293,815 $ 152,757 $ 7,748 $ 12,076 $ 26,261
============ ========== ========== ========== ============= ==============
UNITS OUTSTANDING
Units outstanding at beginning of period 25,166 20,832 724 - 2,683 2,718
Units issued 4,223 6,535 13,532 724 - -
Units redeemed (3,149) (2,201) (108) - (1,297) (35)
------------ ---------- ---------- ---------- ------------- --------------
Units outstanding at end of period 26,240 25,166 14,148 724 1,386 2,683
============ ========== ========== ========== ============= ==============
</Table>
See notes to financial statements.
53
<Page>
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------------
LSA Variable Series
Goldman Sachs Variable Insurance Trust Sub-Accounts Trust Sub-Accounts
----------------------------------------------------- -------------------------------
LSA Focused LSA Growth
VIT International Equity VIT Mid Cap Value Equity Equity
-------------------------- ------------------------- -------------------------------
2001 2000 2001 2000 2001 (a) 2001 (a)
------------- ----------- ----------- ----------- -------------- ---------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) $ - $ 406 $ 16 $ 46 $ (16) $ (23)
Net realized gains (losses) (312) 810 (580) 3 - -
Change in unrealized gains (losses) (6,016) (4,881) 1,132 23 275 240
------------ ---------- ---------- ---------- ------------- --------------
Increase (decrease) in net assets
from operations (6,328) (3,665) 568 72 259 217
------------ ---------- ---------- ---------- ------------- --------------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL TRANSACTIONS
Deposits - 30,841 4,200 1,500 4,094 3,759
Benefit payments - - - - - -
Payments on termination (711) - - - - -
Contract maintenance charge (2) (8) (5) - - -
Transfers among the sub-accounts
and with the Fixed Account - net - 159 24 - 4,807 492
------------ ---------- ---------- ---------- ------------- --------------
Increase (decrease) in net assets
from capital transactions (713) 30,992 4,219 1,500 8,901 4,251
------------ ---------- ---------- ---------- ------------- --------------
INCREASE (DECREASE) IN NET ASSETS (7,041) 27,327 4,787 1,572 9,160 4,468
NET ASSETS AT BEGINNING OF PERIOD 27,327 - 1,572 - - -
------------ ---------- ---------- ---------- ------------- --------------
NET ASSETS AT END OF PERIOD $ 20,286 $ 27,327 $ 6,359 $ 1,572 $ 9,160 $ 4,468
============ ========== ========== ========== ============= ==============
UNITS OUTSTANDING
Units outstanding at beginning of period 2,252 - 124 - - -
Units issued - 2,252 329 125 1,009 507
Units redeemed (68) - (1) (1) (1) -
------------ ---------- ---------- ---------- ------------- --------------
Units outstanding at end of period 2,184 2,252 452 124 1,008 507
============ ========== ========== ========== ============= ==============
</Table>
(a) For the Period Beginning May 1, 2001 and Ended December 31, 2001
See notes to financial statements.
54
<Page>
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------------
MFS Variable Insurance Trust Sub-Accounts
--------------------------------------------------------------------------------------
MFS Emerging Growth MFS Investors Trust (b) MFS Limited Maturity
-------------------------- ------------------------- -------------------------------
2001 2000 2001 2000 2001 (d) 2000
------------- ----------- ----------- ----------- -------------- ---------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) $ (49,436) $ 28,568 $ (8,660) $ (3,844) $ (294) $ (998)
Net realized gains (losses) (62,634) 101,220 2,095 3,030 1,576 (170)
Change in unrealized gains (losses) (1,437,517) (936,485) (106,272) (1,720) (1,054) 4,209
------------ ----------- ---------- ---------- ------------- --------------
Increase (decrease) in net assets
from operations (1,549,587) (806,697) (112,837) (2,534) 228 3,041
------------ ----------- ---------- ---------- ------------- --------------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL TRANSACTIONS
Deposits 690,576 2,568,483 292,620 283,417 - -
Benefit payments (44,013) - (5,983) - - -
Payments on termination (247,893) (107,829) (53,509) (16,034) (1,958) -
Contract maintenance charge (982) (1,225) (115) (172) (16) (30)
Transfers among the sub-accounts
and with the Fixed Account - net 939,393 1,253,173 275,756 141,111 (64,959) (10,020)
------------ ----------- ---------- ---------- ------------- --------------
Increase (decrease) in net assets
from capital transactions 1,337,081 3,712,602 508,769 408,322 (66,933) (10,050)
------------ ----------- ---------- ---------- ------------- --------------
INCREASE (DECREASE) IN NET ASSETS (212,506) 2,905,905 395,932 405,788 (66,705) (7,009)
NET ASSETS AT BEGINNING OF PERIOD 3,826,136 920,231 570,008 164,220 66,705 73,714
------------ ----------- ---------- ---------- ------------- --------------
NET ASSETS AT END OF PERIOD $ 3,613,630 $ 3,826,136 $ 965,940 $ 570,008 $ - $ 66,705
============ =========== ========== ========== ============= ==============
UNITS OUTSTANDING
Units outstanding at beginning of period 233,107 40,491 50,907 14,426 5,933 6,852
Units issued 207,851 210,070 68,460 38,834 - -
Units redeemed (79,771) (17,454) (13,455) (2,353) (5,933) (919)
------------ ---------- ---------- ---------- ------------- --------------
Units outstanding at end of period 361,187 233,107 105,912 50,907 - 5,933
============ =========== ========== ========== ============= ==============
</Table>
(b) Previously known as MFS Growth with Income
(d) For the Period Beginning January 1, 2001 and Ended June 27,2001
See notes to financial statements.
55
<Page>
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------
MFS Variable Insurance Trust Sub-Accounts
--------------------------------------------------------------------
MFS New Discovery MFS Research MFS Utilities
-------------------------- ------------------------- -------------
2001 2000 2001 2000 2001 (a)
------------- ----------- ----------- ----------- -------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) $ 3,001 $ 98 $ (5,870) $ (5,221) $ (28)
Net realized gains (losses) (3,827) 1,270 85,285 8,412 -
Change in unrealized gains (losses) (5,141) (4,163) (547,684) (111,916) 267
------------ ---------- ----------- ----------- ------------
Increase (decrease) in net assets
from operations (5,967) (2,795) (468,269) (108,725) 239
------------ ---------- ----------- ----------- ------------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL TRANSACTIONS
Deposits 201,559 65,643 334,437 435,221 25,000
Benefit payments - - (26,135) (2,120) -
Payments on termination (7,793) 12 (122,144) (20,328) -
Contract maintenance charge (31) (47) (308) (338) -
Transfers among the sub-accounts
and with the Fixed Account - net 64,951 13,413 1,062,782 918,537 (17,912)
------------ ---------- ----------- ----------- ------------
Increase (decrease) in net assets
from capital transactions 258,686 79,021 1,248,632 1,330,972 7,088
------------ ---------- ----------- ----------- ------------
INCREASE (DECREASE) IN NET ASSETS 252,719 76,226 780,363 1,222,247 7,327
NET ASSETS AT BEGINNING OF PERIOD 126,025 49,799 1,222,247 - -
------------ ---------- ----------- ----------- ------------
NET ASSETS AT END OF PERIOD $ 378,744 $ 126,025 $ 2,002,610 $ 1,222,247 $ 7,327
============ ========== =========== =========== ============
UNITS OUTSTANDING
Units outstanding at beginning of period 6,686 2,559 115,461 - -
Units issued 19,766 4,388 190,899 120,969 804
Units redeemed (2,813) (261) (53,361) (5,508) -
------------ ---------- ----------- ----------- ------------
Units outstanding at end of period 23,639 6,686 252,999 115,461 804
============ ========== =========== =========== ============
</Table>
(a) For the Period Beginning May 1, 2001 and Ended December 31, 2001
See notes to financial statements.
56
<Page>
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------------------------------------------
MFS Variable Insurance Trust (Service Class) Sub-Accounts
-----------------------------------------------------------------------------------
MFS Emerging MFS Investors MFS New
Growth Trust Discovery MFS Research MFS Utilities
(Service Class) (Service Class) (Service Class) (Service Class) (Service Class)
--------------- --------------- --------------- --------------- ---------------
2001 (a) 2001 (a) 2001 (a) 2001 (a) 2001 (a)
--------------- --------------- --------------- --------------- ---------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) $ (2,996) $ (1,832) $ (519) $ (899) $ (2,601)
Net realized gains (losses) (15,002) (349) (422) (124) 2,082
Change in unrealized gains (losses) (7,859) (3,983) 14,354 (2,251) (47,107)
----------- ----------- ----------- ---------- -----------
Increase (decrease) in net assets
from operations (25,857) (6,164) 13,413 (3,274) (47,626)
----------- ----------- ----------- ---------- -----------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL TRANSACTIONS
Deposits 384,421 178,105 71,636 88,151 -
Benefit payments - - - - -
Payments on termination (14,072) (5,051) (3,114) (1,200) (14,504)
Contract maintenance charge - - - - -
Transfers among the sub-accounts
and with the Fixed Account - net 131,126 233,821 78,009 117,646 565,158
----------- ----------- ----------- ---------- -----------
Increase (decrease) in net assets
from capital transactions 501,475 406,875 146,531 204,597 550,654
----------- ----------- ----------- ---------- -----------
INCREASE (DECREASE) IN NET ASSETS 475,618 400,711 159,944 201,323 503,028
NET ASSETS AT BEGINNING OF PERIOD - - - - -
----------- ----------- ----------- ---------- -----------
NET ASSETS AT END OF PERIOD $ 475,618 $ 400,711 $ 159,944 $ 201,323 $ 503,028
=========== =========== =========== ========== ===========
UNITS OUTSTANDING
Units outstanding at beginning of period - - - - -
Units issued 71,108 46,264 17,944 24,130 70,599
Units redeemed (13,221) (1,108) (1,427) (297) (3,879)
----------- ----------- ----------- ---------- -----------
Units outstanding at end of period 57,887 45,156 16,517 23,833 66,720
=========== =========== =========== ========== ===========
</Table>
(a) For the Period Beginning May 1, 2001 and Ended December 31, 2001
See notes to financial statements.
57
<Page>
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers Management Trust Sub-Accounts
--------------------------------------------------------------------------------------
AMT Guardian AMT Mid-Cap Growth AMT Partners
-------------------------- ------------------------- -------------------------------
2001 2000 2001 2000 2001 2000
------------- ----------- ----------- ----------- -------------- ---------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) $ (186) $ (206) $ (651) $ (912) $ (1,998) $ (1,566)
Net realized gains (losses) 1,010 (723) (1,167) 120 4,684 25,500
Change in unrealized gains (losses) (1,332) (127) (13,227) (7,569) (10,370) (26,243)
------------ ---------- ---------- ---------- ------------- -------------
Increase (decrease) in net assets
from operations (508) (1,056) (15,045) (8,361) (7,684) (2,309)
------------ ---------- ---------- ---------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL TRANSACTIONS
Deposits - - - 42,724 1,109 14,208
Benefit payments - - - - - -
Payments on termination (1,200) (1,199) (1,542) - (4,213) (12,821)
Contract maintenance charge (3) - (22) (38) - (32)
Transfers among the sub-accounts
and with the Fixed Account - net - (20,373) (1) 17,393 2 (18,756)
------------ ---------- ---------- ---------- ------------- -------------
Increase (decrease) in net assets
from capital transactions (1,203) (21,572) (1,565) 60,079 (3,102) (17,401)
------------ ---------- ---------- ---------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS (1,711) (22,628) (16,610) 51,718 (10,786) (19,710)
NET ASSETS AT BEGINNING OF PERIOD 17,222 39,850 58,368 6,650 176,252 195,962
------------ ---------- ---------- ---------- ------------- -------------
NET ASSETS AT END OF PERIOD $ 15,511 $ 17,222 $ 41,758 $ 58,368 $ 165,466 $ 176,252
============ ========== ========== ========== ============= =============
UNITS OUTSTANDING
Units outstanding at beginning of period 1,415 3,257 3,478 360 16,330 17,996
Units issued - - - 3,120 107 1,309
Units redeemed (100) (1,842) (126) (2) (406) (2,975)
------------ ---------- ---------- ---------- ------------- -------------
Units outstanding at end of period 1,315 1,415 3,352 3,478 16,031 16,330
============ ========== ========== ========== ============= =============
</Table>
See notes to financial statements.
58
<Page>
<Table>
<Caption>
Oppenheimer Variable Account Funds Sub-Accounts
---------------------------------------------------------------------------------
Oppenheimer Oppenheimer Oppenheimer
Aggressive Growth Capital Appreciation Global Securities
------------------------- ------------------------- -------------------------
2001 2000 2001 2000 2001 2000
----------- ----------- ----------- ----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) $ (10,330) $ (11,151) $ (28,758) $ (7,612) $ (18,296) $ (9,198)
Net realized gains (losses) 61,619 1,019 119,904 5,255 160,474 36,600
Change in unrealized gains (losses) (575,302) (397,359) (461,091) (108,288) (399,265) (80,326)
----------- ----------- ----------- ----------- ----------- -----------
Increase (decrease) in net assets
from operations (524,013) (407,491) (369,945) (110,645) (257,087) (52,924)
----------- ----------- ----------- ----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL TRANSACTIONS
Deposits 609,302 1,028,487 2,256,542 1,152,070 855,764 1,143,940
Benefit payments -- -- (25,561) (2,113) (22,053) --
Payments on termination (54,235) (61,134) (188,020) (29,739) (131,889) (35,099)
Contract maintenance charge (469) (337) (352) (426) (40) (487)
Transfers among the sub-accounts
and with the Fixed Account - net 723,676 658,339 1,595,575 532,237 782,054 686,830
----------- ----------- ----------- ----------- ----------- -----------
Increase (decrease) in net assets
from capital transactions 1,278,274 1,625,355 3,638,184 1,652,029 1,483,836 1,795,184
----------- ----------- ----------- ----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS 754,261 1,217,864 3,268,239 1,541,384 1,226,749 1,742,260
NET ASSETS AT BEGINNING OF PERIOD 1,217,864 -- 1,541,384 -- 1,742,260 --
----------- ----------- ----------- ----------- ----------- -----------
NET ASSETS AT END OF PERIOD $1,972,125 $1,217,864 $4,809,623 $1,541,384 $2,969,009 $1,742,260
=========== =========== =========== =========== =========== ===========
UNITS OUTSTANDING
Units outstanding at beginning of period 104,742 -- 134,013 -- 128,895 --
Units issued 202,791 115,239 429,334 144,758 185,893 135,418
Units redeemed (46,095) (10,497) (50,446) (10,745) (48,498) (6,523)
----------- ----------- ----------- ----------- ----------- -----------
Units outstanding at end of period 261,438 104,742 512,901 134,013 266,290 128,895
=========== =========== =========== =========== =========== ===========
</Table>
See notes to financial statements.
59
<Page>
<Table>
<Caption>
Oppenheimer Variable Account Funds Sub-Accounts
-----------------------------------------------------------------------------------------
Oppenheimer
Main Street Growth & Income Oppenheimer Multiple Strategies Oppenheimer Strategic Bond
--------------------------- ------------------------------- ---------------------------
2001 2000 2001 2000 (e) 2001 2000
------------- ------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) $ (59,589) $ (22,800) $ 17,361 $ (2,927) $ 7,107 $ 9,646
Net realized gains (losses) (93,364) 23,706 41,717 (708) 32,696 (310)
Change in unrealized gains (losses) (509,814) (343,196) (65,170) 4,427 20,234 (6,228)
------------ ------------ ------------ ------------ ------------ ------------
Increase (decrease) in net assets
from operations (662,767) (342,290) (6,092) 792 60,037 3,108
------------ ------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL TRANSACTIONS
Deposits 1,917,855 2,978,604 657,587 390,433 744,604 374,137
Benefit payments 94,426 -- (44,434) -- (37,867) --
Payments on termination (272,597) (117,719) (78,963) (7,944) (116,268) (12,394)
Contract maintenance charge (966) (1,152) (240) (197) (84) (194)
Transfers among the sub-accounts
and with the Fixed Account - net 3,011,536 1,572,483 2,037,975 309,931 1,324,899 338,585
------------ ------------ ------------ ------------ ------------ ------------
Increase (decrease) in net assets
from capital transactions 4,750,254 4,432,216 2,571,925 692,223 1,915,284 700,134
------------ ------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS 4,087,487 4,089,926 2,565,833 693,015 1,975,321 703,242
NET ASSETS AT BEGINNING OF PERIOD 4,089,926 -- 693,015 -- 703,242 --
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS AT END OF PERIOD $ 8,177,413 $ 4,089,926 $ 3,258,848 $ 693,015 $ 2,678,563 $ 703,242
============ ============ ============ ============ ============ ============
UNITS OUTSTANDING
Units outstanding at beginning of period 425,079 -- 66,442 -- 68,371 ---
Units issued 650,516 450,752 321,710 74,141 227,502 72,987
Units redeemed (117,918) (25,673) (71,946) (7,699) (39,976) (4,616)
------------ ------------ ------------ ------------ ------------ ------------
Units outstanding at end of period 957,677 425,079 316,206 66,442 255,897 68,371
============ ============ ============ ============ ============ =============
</Table>
(e) For the Period Beginning January 24, 2000 and Ended December 31, 2000
See notes to financial statements.
60
<Page>
<Table>
<Caption>
Putnam Variable Trust Sub-Accounts
---------------------------------------------------------------------
VT Diversified VT Growth VT Growth VT Health
Income and Income Opportunities Sciences VT New Value
-------------- ----------- ------------- ------------ ------------
2001 (a) 2001 (a) 2001 (a) 2001 (a) 2001 (a)
-------------- ----------- ------------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) $ (2,120) $ (3,085) $ (837) $ (1,832) $ (1,212)
Net realized gains (losses) 77 (1,947) (20,813) 383 56
Change in unrealized gains (losses) 2,082 (12,661) (3,362) (5,845) 3,503
-------------- ----------- ------------- ------------ ------------
Increase (decrease) in net assets
from operations 39 (17,693) (25,012) (7,294) 2,347
-------------- ----------- ------------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL TRANSACTIONS
Deposits 368,910 382,186 152,334 205,983 107,118
Benefit payments -- -- -- -- --
Payments on termination (3,323) (4,633) -- (3,159) --
Contract maintenance charge -- -- -- -- --
Transfers among the sub-accounts
and with the Fixed Account - net 117,188 185,018 (66,478) 216,437 132,380
-------------- ----------- ------------- ------------ ------------
Increase (decrease) in net assets
from capital transactions 482,775 562,571 85,856 419,261 239,498
-------------- ----------- ------------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS 482,814 544,878 60,844 411,967 241,845
NET ASSETS AT BEGINNING OF PERIOD -- -- -- -- --
-------------- ----------- ------------- ------------ ------------
NET ASSETS AT END OF PERIOD $ 482,814 $ 544,878 $ 60,844 $ 411,967 $ 241,845
=============== =========== ============= ============ ============
UNITS OUTSTANDING
Units outstanding at beginning of period -- -- -- -- --
Units issued 49,670 60,912 19,568 42,816 25,738
Units redeemed (1,834) (1,779) (12,017) (283) (632)
-------------- ----------- ------------- ------------ ------------
Units outstanding at end of period 47,836 59,133 7,551 42,533 25,106
============== =========== ============= ============ ============
</Table>
(a) For the Period Beginning May 1, 2001 and Ended December 31, 2001
See notes to financial statements.
61
<Page>
<Table>
<Caption>
Putnam Variable
Trust Sub-Accounts STI Classic Variable Trust Sub-Accounts
-------------------------- ----------------------------------------------------------
VT Research VT Voyager II STI Capital Appreciation STI Growth & Income
----------- ------------- --------------------------- ----------------------------
2001 (a) 2001 (a) 2001 2000 2001 2000 (e)
------------ ------------- ------------- ----------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) $ (2) $ (2,101) $ 9,332 $ 25,576 $ (15,283) $ (3,513)
Net realized gains (losses) -- (17,882) 40,047 2,382 (6,475) 1,263
Change in unrealized gains (losses) 62 (9,991) (151,967) (36,059) (77,002) 14,060
------------ ------------- ------------- ----------- ------------ ------------
Increase (decrease) in net assets
from operations 60 (29,974) (102,588) (8,101) (98,760) 11,810
------------ ------------- ------------- ----------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL TRANSACTIONS
Deposits 3,032 306,491 224,387 435,873 566,617 502,110
Benefit payments -- -- (29,946) (79,940) (9,220) --
Payments on termination -- (3,128) (78,980) (67,160) (107,810) (16,391)
Contract maintenance charge -- -- (442) (516) (263) (269)
Transfers among the sub-accounts
and with the Fixed Account - net -- 84,201 620,969 395,609 1,060,822 475,110
------------ ------------- ------------- ----------- ------------ ------------
Increase (decrease) in net assets
from capital transactions 3,032 387,564 735,988 683,866 1,510,146 960,560
------------ ------------- ------------- ----------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS 3,092 357,590 633,400 675,765 1,411,386 972,370
NET ASSETS AT BEGINNING OF PERIOD -- -- 1,154,184 478,419 972,370 --
------------ ------------- ------------- ----------- ------------ ------------
NET ASSETS AT END OF PERIOD $ 3,092 $ 357,590 $1,787,584 $1,154,184 $2,383,756 $ 972,370
============ ============= ============= =========== ============ ============
UNITS OUTSTANDING
Units outstanding at beginning of period -- -- 107,209 45,151 90,725 --
Units issued 257 54,764 117,581 92,430 175,924 94,970
Units redeemed -- (10,353) (44,609) (30,372) (24,797) (4,245)
------------ ------------- ------------- ----------- ------------ ------------
Units outstanding at end of period 257 44,411 180,181 107,209 241,852 90,725
============ ============= ============= =========== ============ ============
</Table>
(a) For the Period Beginning May 1, 2001 and Ended December 31, 2001
(e) For the Period Beginning January 24, 2000 and Ended December 31, 2000
See notes to financial statements.
62
<Page>
<Table>
<Caption>
STI Classic Variable Trust Sub-Accounts
---------------------------------------------------------------------------------
STI International Equity STI Investment Grade Bond STI Mid-Cap Equity
-------------------------- -------------------------- -------------------------
2001 2000 (e) 2001 2000 (e) 2001 2000 (e)
------------ ----------- ----------- ------------ ------------ -----------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) $ (2,804) $ 13,107 $ 38,423 $ 8,052 $ 50,994 $ 6,370
Net realized gains (losses) (12,284) 5,823 2,362 (23) 25,730 8,404
Change in unrealized gains (losses) (26,579) (19,520) (54) 7,974 (51,139) (46,842)
------------ ----------- ----------- ------------ ------------ -----------
Increase (decrease) in net assets
from operations (41,667) (590) 40,731 16,003 25,585 (32,068)
------------ ----------- ----------- ------------ ------------ -----------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL TRANSACTIONS
Deposits 27,035 66,936 458,565 169,189 140,182 181,646
Benefit payments -- -- (16,761) -- -- --
Payments on termination (18,998) (3,580) (94,712) (2,199) (52,929) (1,438)
Contract maintenance charge (11) (42) (134) (105) (299) (88)
Transfers among the sub-accounts
and with the Fixed Account - net 112,878 89,230 1,475,001 198,436 381,076 171,009
------------ ----------- ----------- ------------ ------------ -----------
Increase (decrease) in net assets
from capital transactions 120,904 152,544 1,821,959 365,321 468,030 351,129
------------ ----------- ----------- ------------ ------------ -----------
INCREASE (DECREASE) IN NET ASSETS 79,237 151,954 1,862,690 381,324 493,615 319,061
NET ASSETS AT BEGINNING OF PERIOD 151,954 -- 381,324 -- 319,061 --
------------ ----------- ----------- ------------ ------------ -----------
NET ASSETS AT END OF PERIOD $ 231,191 $ 151,954 $2,244,014 $ 381,324 $ 812,676 $ 319,061
============ =========== =========== ============ ============ ===========
UNITS OUTSTANDING
Units outstanding at beginning of period 15,683 -- 36,063 -- 35,072 --
Units issued 21,139 17,324 186,638 37,233 80,244 36,672
Units redeemed (7,564) (1,641) (18,046) (1,170) (29,019) (1,600)
------------ ----------- ----------- ------------ ------------ -----------
Units outstanding at end of period 29,258 15,683 204,655 36,063 86,297 35,072
============ =========== =========== ============ ============ ===========
</Table>
(e) For the Period Beginning January 24, 2000 and Ended December 31, 2000
See notes to financial statements.
63
<Page>
<Table>
<Caption>
STI Classic Variable Trust Sub-Accounts
--------------------------------------------------------------------------------
STI Quality Growth Stock STI Small Cap Equity STI Value Income Stock
-------------------------- ------------------------ -----------------------
2001 2000 (e) 2001 2000 (e) 2001 2000
------------- ----------- ----------- ----------- ------------ -----------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) $ (18,555) $ (6,778) $ (960) $ 697 $ 2,581 $ 40,214
Net realized gains (losses) (30,991) 250 5,541 732 (1,331) 1,268
Change in unrealized gains (losses) (223,110) (79,029) 121,749 22,166 (22,710) 25,771
------------- ----------- ----------- ----------- ------------ -----------
Increase (decrease) in net assets
from operations (272,656) (85,557) 126,330 23,595 (21,460) 67,253
------------- ----------- ----------- ----------- ------------ -----------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL TRANSACTIONS
Deposits 68,130 410,475 423,599 93,606 211,072 175,411
Benefit payments (4,651) (2,059) (24,360) -- (8,632) --
Payments on termination (71,607) (24,134) (34,775) (4,913) (15,544) (18,907)
Contract maintenance charge (404) (311) (205) (61) (255) (384)
Transfers among the sub-accounts
and with the Fixed Account - net 515,703 825,508 812,033 107,345 426,434 271,069
------------- ----------- ----------- ----------- ------------ -----------
Increase (decrease) in net assets
from capital transactions 507,171 1,209,479 1,176,292 195,977 613,075 427,189
------------- ----------- ----------- ----------- ------------ -----------
INCREASE (DECREASE) IN NET ASSETS 234,515 1,123,922 1,302,622 219,572 591,615 494,442
NET ASSETS AT BEGINNING OF PERIOD 1,123,922 -- 219,572 -- 702,091 207,649
------------- ----------- ----------- ----------- ------------ -----------
NET ASSETS AT END OF PERIOD $1,358,437 $1,123,922 $1,522,194 $ 219,572 $1,293,706 $ 702,091
============= =========== =========== =========== ============ ===========
UNITS OUTSTANDING
Units outstanding at beginning of period 117,999 -- 18,626 -- 68,117 21,954
Units issued 86,602 124,667 112,033 20,344 69,097 65,347
Units redeemed (25,749) (6,668) (15,397) (1,718) (8,359) (19,184)
------------- ----------- ----------- ----------- ------------ -----------
Units outstanding at end of period 178,852 117,999 115,262 18,626 128,855 68,117
============= =========== =========== =========== ============ ===========
</Table>
(e) For the Period Beginning January 24, 2000 and Ended December 31, 2000
See notes to financial statements.
64
<Page>
<Table>
<Caption>
The Universal Institutional Funds, Inc. Sub-Accounts
---------------------------------------------------------------------------------
Equity Growth Fixed Income Global Value Equity (c)
------------------------- ------------------------ -------------------------
2001 2000 2001 2000 2001 2000
----------- ----------- ----------- ----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) $ (2,753) $ (2,945) $ 8,762 $ 2,641 $ -- $ 162
Net realized gains (losses) (6,081) 13,581 4,230 (84) (40) 950
Change in unrealized gains (losses) (25,385) (39,936) (8,162) 403 (1,404) 537
----------- ----------- ----------- ----------- ----------- -----------
Increase (decrease) in net assets
from operations (34,219) (29,300) 4,830 2,960 (1,444) 1,649
----------- ----------- ----------- ----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL TRANSACTIONS
Deposits 17,135 75,909 50,211 27,083 6,647 11,347
Benefit payments -- -- -- -- -- --
Payments on termination (1,676) (1,056) (7,979) -- -- --
Contract maintenance charge (40) (84) 4 (8) (11) (8)
Transfers among the sub-accounts
and with the Fixed Account - net (11,710) 8,342 185,148 (318) 1,642 --
----------- ----------- ----------- ----------- ----------- -----------
Increase (decrease) in net assets
from capital transactions 3,709 83,111 227,384 26,757 8,278 11,339
----------- ----------- ----------- ----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS (30,510) 53,811 232,214 29,717 6,834 12,988
NET ASSETS AT BEGINNING OF PERIOD 195,305 141,494 45,145 15,428 15,605 2,617
----------- ----------- ----------- ----------- ----------- -----------
NET ASSETS AT END OF PERIOD $ 164,795 $ 195,305 $ 277,359 $ 45,145 $ 22,439 $ 15,605
=========== =========== =========== =========== =========== ===========
UNITS OUTSTANDING
Units outstanding at beginning of period 16,097 9,417 4,181 1,566 1,322 245
Units issued 2,463 6,763 22,572 2,616 837 1,080
Units redeemed (1,378) (83) (949) (1) -- (3)
----------- ----------- ----------- ----------- ----------- -----------
Units outstanding at end of period 17,182 16,097 25,804 4,181 2,159 1,322
=========== =========== =========== =========== =========== ===========
</Table>
(c) Previously known as Global Equity
See notes to financial statements.
65
<Page>
<Table>
<Caption>
The Universal Institutional Funds, Inc. Sub-Accounts
---------------------------------------------------------------------------------
International Magnum Mid Cap Value Value
------------------------- ------------------------ -------------------------
2001 2000 2001 2000 2001 2000
----------- ----------- ----------- ---------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) $ (53) $ (52) $ (3,178) $ (1,008) $ (1,168) $ (408)
Net realized gains (losses) (24) 288 (4,816) 19,068 11,698 2,237
Change in unrealized gains (losses) (1,333) (1,266) 4,891 (10,249) (11,097) 39,152
----------- ----------- ----------- ---------- ----------- -----------
Increase (decrease) in net assets
from operations (1,410) (1,030) (3,103) 7,811 (567) 40,981
----------- ----------- ----------- ---------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL TRANSACTIONS
Deposits -- -- 207,579 112,763 137,505 18,792
Benefit payments -- -- -- -- -- --
Payments on termination -- (60) (5,120) 244 (12,999) (14,021)
Contract maintenance charge 2 -- (86) (68) (45) (55)
Transfers among the sub-accounts
and with the Fixed Account - net (2) -- 33,178 9,565 (91,641) (11,389)
----------- ----------- ----------- ---------- ----------- -----------
Increase (decrease) in net assets
from capital transactions -- (60) 235,551 122,504 32,820 (6,673)
----------- ----------- ----------- ---------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS (1,410) (1,090) 232,448 130,315 32,253 34,308
NET ASSETS AT BEGINNING OF PERIOD 6,918 8,008 153,579 23,264 210,798 176,490
----------- ----------- ----------- ---------- ----------- -----------
NET ASSETS AT END OF PERIOD $ 5,508 $ 6,918 $ 386,027 $ 153,579 $ 243,051 $ 210,798
=========== =========== =========== ========== =========== ===========
UNITS OUTSTANDING
Units outstanding at beginning of period 624 624 11,330 1,788 17,833 18,368
Units issued 1 408 23,538 9,548 5,218 1,944
Units redeemed -- (408) (2,034) (6) (2,474) (2,479)
----------- ----------- ----------- ---------- ----------- -----------
Units outstanding at end of period 625 624 32,834 11,330 20,577 17,833
=========== =========== =========== ========== =========== ===========
</Table>
See notes to financial statements.
66
<Page>
GLENBROOK LIFE MULTI-MANAGER VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Glenbrook Life Multi-Manager Variable Account (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"). The assets of the
Account are legally segregated from those of Glenbrook Life. Glenbrook Life
is wholly owned by Allstate Life Insurance Company, a wholly owned
subsidiary of Allstate Insurance Company, which is wholly owned by The
Allstate Corporation.
Glenbrook Life issues five variable annuity contracts, Enhanced Glenbrook
Provider, Glenbrook Provider, Provider Ultra, Provider Advantage, and
Provider Extra (collectively the "Contracts"), the deposits of which are
invested at the direction of the contractholders in the sub-accounts that
comprise the Account. Absent any Contract provisions wherein Glenbrook Life
contractually guarantees either a minimum return or account value upon
death or annuitization, variable annuity contractholders bear the
investment risk that the sub-accounts may not meet their stated investment
objectives. The sub-accounts invest in the following underlying mutual fund
portfolios (collectively the "Funds"):
<Table>
<Caption>
AIM VARIABLE INSURANCE FUNDS FIDELITY VARIABLE INSURANCE PRODUCTS FUND
AIM V.I. Aggressive Growth VIP Contrafund
AIM V.I. Balanced VIP Equity-Income
AIM V.I. Capital Appreciation VIP Growth
AIM V.I. Dent Demographics VIP High Income
AIM V.I. Diversified Income VIP Index 500
AIM V.I. Global Utilities VIP Overseas
AIM V.I. Government Securities FIDELITY VARIABLE INSURANCE PRODUCTS FUND (SERVICE
AIM V.I. Growth CLASS 2)
AIM V.I. Growth and Income VIP Asset Manager Growth (Service Class 2)
AIM V.I. High Yield VIP Contrafund (Service Class 2)
AIM V.I. International Equity VIP Equity-Income (Service Class 2)
AIM V.I. Value VIP Growth (Service Class 2)
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. VIP High Income (Service Class 2)
American Century VP Balanced VIP Index 500 (Service Class 2)
American Century VP International VIP Overseas (Service Class 2)
DREYFUS VARIABLE INVESTMENT FUND FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS
VIF Growth and Income TRUST
VIF Money Market Franklin Global Health Care Securities
VIF Small Company Stock Franklin Small Cap
DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. Franklin Technology Securities
DREYFUS STOCK INDEX FUND Mutual Shares Securities
FEDERATED INSURANCE SERIES Templeton Developing Markets Securities*
Federated Prime Money Fund II Templeton Global Income Securities
Templeton Growth Securities
Templeton International Securities
</Table>
67
<Page>
<Table>
<Caption>
GOLDMAN SACHS VARIABLE INSURANCE TRUST OPPENHEIMER VARIABLE ACCOUNT FUNDS
VIT Capital Growth Oppenheimer Aggressive Growth
VIT CORE Large Cap Growth Oppenheimer Capital Appreciation
VIT CORE Small Cap Equity Oppenheimer Global Securities
VIT CORE U.S. Equity Oppenheimer Main Street Growth & Income
VIT Global Income Oppenheimer Multiple Strategies
VIT Growth and Income Oppenheimer Strategic Bond
VIT International Equity PUTNAM VARIABLE TRUST
VIT Internet Tollkeeper* VT Diversified Income
VIT Mid Cap Value VT Growth and Income
LSA VARIABLE SERIES TRUST VT Growth Opportunities
LSA Focused Equity VT Health Sciences
LSA Growth Equity VT International Growth*
MFS VARIABLE INSURANCE TRUST VT New Value
MFS Emerging Growth VT Research
MFS Investors Trust (Previously known as VT Voyager II
MFS Growth with Income) STI CLASSIC VARIABLE TRUST
MFS Limited Maturity STI Capital Appreciation
MFS New Discovery STI Growth & Income
MFS Research STI International Equity
MFS Utilities STI Investment Grade Bond
MFS VARIABLE INSURANCE TRUST (SERVICE CLASS) STI Mid-Cap Equity
MFS Emerging Growth (Service Class) STI Quality Growth Stock
MFS Investors Trust (Service Class) STI Small Cap Equity
MFS New Discovery (Service Class) STI Value Income Stock
MFS Research (Service Class) THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
MFS Utilities (Service Class) Equity Growth
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST Fixed Income
AMT Guardian Global Value Equity (Previously known as
AMT Mid-Cap Growth Global Equity)
AMT Partners International Magnum
Mid Cap Value
U.S. Real Estate*
Value
</Table>
* These Funds were available, but had no Fund activity as of December 31, 2001.
Glenbrook Life provides insurance and administrative services to the
contractholders for a fee. Glenbrook Life also maintains a fixed account
("Fixed Account"), to which contractholders may direct their deposits and
receive a fixed rate of return. Glenbrook Life has sole discretion to
invest the assets of the Fixed Account, subject to applicable law.
The LSA Variable Series Trust ("Trust") is managed by LSA Asset
Management, LLC (the "Manager"), a wholly owned subsidiary of Allstate
Life Insurance Company, pursuant to an investment management agreement
with the Trust. The Manager is entitled to receive a management fee from
each sub-account investing in the Trust. Fees are payable monthly at an
annual rate as a percentage of average daily net assets at 0.85% for LSA
Growth Equity and 0.95% for LSA Focused Equity.
68
<Page>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS - Investments consist of shares of the Funds and are stated at
fair value based on quoted market prices.
INVESTMENT INCOME - Investment income consists of dividends declared by the
Funds and is recognized on the ex-dividend date.
REALIZED GAINS AND LOSSES - Realized gains and losses on fund shares
represent the difference between the proceeds from sales of shares of the
Funds by the Account and the cost of such shares, which is determined on a
weighted average basis. Transactions are recorded on a trade date basis.
Income from realized gain distributions are recorded on the Fund's
ex-distribution date.
FEDERAL INCOME TAXES - The Account intends to qualify as a segregated asset
account as defined in the Internal Revenue Code ("Code"). As such, the
operations of the Account are included in the tax return of Glenbrook Life.
Glenbrook Life is taxed as a life insurance company under the Code. No
federal income taxes are allocable to the Account as the Account did not
generate taxable income.
USE OF ESTIMATES - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of
America 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.
OTHER - To conform with the 2001 presentation, certain amounts in the
prior year's financial statements and notes have been reclassified. In
addition, disclosures have been revised to adopt appropriate provisions of
the AICPA Audit and Accounting Guide, AUDITS OF INVESTMENT COMPANIES.
3. EXPENSES
MORTALITY AND EXPENSE RISK CHARGE - Glenbrook Life assumes mortality and
expense risks related to the operations of the Account and deducts charges
daily at a rate ranging from 1.05% to 1.95% per annum of the daily net
assets of the Account, based on the Contract and rider options selected.
The mortality and expense risk charge covers insurance benefits available
with the Contracts and certain expenses of the Contracts. It also covers
the risk that the current charges will not be sufficient in the future to
cover the cost of administering the Contract. Glenbrook Life guarantees
that the amount of this charge will not increase over the life of the
Contract. At the contractholder's discretion, additional options,
primarily death benefits, may be purchased for an additional charge.
Glenbrook Life guarantees that the amount of this charge will not increase
over the lives of the Contracts.
ADMINISTRATIVE EXPENSE CHARGE - Glenbrook Life deducts administrative
expense charges daily at a rate equal to .10% per annum of the average
daily net assets of the Account. Glenbrook Life guarantees that the amount
of this charge will not increase over the lives of the Contracts.
69
<Page>
CONTRACT MAINTENANCE CHARGE - Glenbrook Life deducts an annual maintenance
charge of $35 on each Contract anniversary and guarantees that this charge
will not increase over the lives of the Contracts. This charge will be
waived if certain conditions are met.
70
<Page>
The cost of purchases of investments for the year ended December 31, 2001
were as follows:
<Table>
<Caption>
Purchases
------------
Investments in the AIM Variable Insurance Funds Sub-Accounts:
AIM V. I. Aggressive Growth $ 27,127
AIM V. I. Balanced 2,481,053
AIM V. I. Capital Appreciation 2,388,200
AIM V. I. Dent Demographics 9,412
AIM V. I. Diversified Income 65,636
AIM V. I. Global Utilities 2,182
AIM V. I. Government Securities 277,761
AIM V. I. Growth 1,565,534
AIM V. I. Growth and Income 1,757,888
AIM V. I. High Yield 482,240
AIM V. I. International Equity 49,675
AIM V. I. Value 2,872,715
Investments in the American Century Variable Portfolios, Inc
Sub-Accounts:
American Century VP Balanced 17,839
American Century VP International 14,978
Investments in the Dreyfus Socially Responsible Growth Fund, Inc.
Sub-Account:
Dreyfus Socially Responsible Growth Fund 68,147
Investments in the Dreyfus Stock Index Fund Sub-Account:
Dreyfus Stock Index Fund 537,600
Investments in the Dreyfus Variable Investment Fund Sub-Accounts:
VIF Growth & Income 247,978
VIF Money Market 2,493,041
VIF Small Company Stock 37
Investments in the Federated Insurance Series Sub-Account:
Federated Prime Money Fund II 7,787,747
Investments in the Fidelity Variable Insurance Products Fund
Sub-Accounts:
VIP Contrafund 2,045,170
VIP Equity-Income 2,639,610
VIP Growth 2,668,844
VIP High Income 860,507
VIP Index 500 2,282,140
VIP Overseas 370,451
</Table>
71
<Page>
The cost of purchases of investments for the year ended December 31, 2001
were as follows:
<Table>
<Caption>
Purchases
------------
Investments in the Fidelity Variable Insurance Products Fund
(Service Class 2) Sub-Accounts:
VIP Asset Manager Growth (Service Class 2) $ 19,987
VIP Contrafund (Service Class 2) 419,784
VIP Equity-Income (Service Class 2) 1,559,302
VIP Growth (Service Class 2) 389,718
VIP High Income (Service Class 2) 168,009
VIP Index 500 (Service Class 2) 1,036,170
VIP Overseas (Service Class 2) 40,817
Investments in the Franklin Templeton Variable Insurance Products
Trust Sub-Accounts:
Franklin Global health Care Securities 7,603
Franklin Small Cap 114,044
Franklin Technology Securities 4,242
Mutual Shares Securities 382,492
Templeton Global Income Securities 138,217
Templeton Growth Securities 370,740
Templeton International Securities 53,782
Investments in the Goldman Sachs Variable Insurance Trust
Sub-Accounts:
VIT Capital Growth 169,143
VIT CORE Large Cap Growth --
VIT CORE Small Cap Equity 80,605
VIT CORE U.S. Equity 48,907
VIT Global Income 149,886
VIT Growth and Income 51
VIT International Equity 359
VIT Mid Cap Value 4,545
Investments in the LSA Variable Series Trust Sub-Accounts:
LSA Focused Equity 8,898
LSA Growth Equity 4,250
Investments in the MFS Variable Insurance Trust Sub-Accounts:
MFS Emerging Growth 2,026,366
MFS Investors Trust 635,978
MFS New Discovery 289,712
MFS Research 1,740,221
MFS Utilities 7,087
</Table>
72
<Page>
The cost of purchases of investments for the year ended December 31, 2001
were as follows:
<Table>
<Caption>
Purchases
-----------
Investments in the MFS Variable Insurance Trust (Service Class)
Sub-Accounts:
MFS Emerging Growth (Service Class) $ 607,312
MFS Investors Trust (Service Class) 411,929
MFS New Discovery (Service Class) 157,918
MFS Research (Service Class) 204,876
MFS Utilities (Service Class) 730,504
Investments in the Neuberger & Berman Advisers Management Trust
Sub-Accounts:
AMT Guardian 1,138
AMT Mid-Cap Growth --
AMT Partners 7,908
Investments in the Oppenheimer Variable Account Funds Sub-Accounts:
Oppenheimer Aggressive Growth 1,693,159
Oppenheimer Capital Appreciation 4,169,398
Oppenheimer Global Securities 2,064,883
Oppenheimer Main Street Growth & Income 5,259,941
Oppenheimer Multiple Strategies 3,284,697
Oppenheimer Strategic Bond 2,494,455
Investments in the Putnam Variable Trust Sub-Accounts:
VT Diversified Income 489,010
VT Growth and Income 574,727
VT Growth Opportunities 175,254
VT Health Sciences 436,533
VT New Value 245,150
VT Research 3,032
VT Voyager II 465,575
</Table>
73
<Page>
The cost of purchases of investments for the year ended December 31, 2001
were as follows:
<Table>
<Caption>
Purchases
------------
Investments in the STI Classic Variable Trust Sub-Accounts:
STI Capital Appreciation $ 1,341,221
STI Growth & Income 1,653,280
STI International Equity 169,743
STI Investment Grade Bond 1,989,423
STI Mid-Cap Equity 656,235
STI Quality Growth Stock 628,792
STI Small Cap Equity 1,247,914
STI Value Income Stock 675,551
Investments in The Universal Institutional Funds, Inc. Sub-Accounts:
Equity Growth 17,307
Fixed Income 259,638
Global Value Equity 9,837
International Magnum 26
Mid Cap Value 256,109
Value 74,108
------------
$ 76,341,010
============
</Table>
74
<Page>
5. FINANCIAL HIGHLIGHTS
The range of lowest and highest accumulation unit values, the investment
income ratio, the range of lowest and highest expense ratio assessed by
Glenbrook Life, and the corresponding range of total return is presented
for each rider option of the sub-account which had outstanding units during
the period.
As explained in Note 3, the expense ratio represents mortality and expense
risk and administrative expense charges which are assessed as a percentage
of daily net assets. The amount deducted is based upon the product and the
number and magnitude of rider options selected by each contractholder. This
results in several unit values for each sub-account based upon those
choices.
ITEMS IN THE FOLLOWING TABLE ARE NOTATED AS FOLLOWS:
* INVESTMENT INCOME RATIO - This represents dividends, excluding
realized gain distributions, received by the sub-account, net of
management fees assessed by the fund manager, divided by the
average net assets. This ratio excludes those expenses that result
in direct reductions in the unit values. The recognition of
investment income by the sub-account is affected by the timing of
the declaration of dividends in which the sub-accounts invest.
** EXPENSE RATIO - This represents the annualized contract expenses of
the sub-account for the period and includes only those expenses
that are charged through a reduction in the unit values. Excluded
are expenses of the underlying fund portfolios and charges made
directly to contractholder accounts through the redemption of
units.
***TOTAL RETURN - This represents the total return for the period and
reflects a deduction only for expenses assessed through the daily
unit value calculation. The total return does not include any
expenses assessed through the redemption of units; inclusion of
these expenses in the calculation would result in a reduction in
the total return presented. Returns were annualized for new
products launched during 2001 to represent the return as if the
contractholder was invested in the sub-account for the entire year.
Sub-accounts with a date notation indicate the effective date of
that investment option in the Account. The investment income ratio
and total return are calculated for the period or from the
effective date through the end of the reporting period.
<Table>
<Caption>
At December 31, 2001 For the year ended December 31, 2001
-------------------- -------------------------------------------------------
Accumulation Investment Expense Total
Unit Value Income Ratio* Ratio** Return***
------------------- ------------- ----------------- -------------------
Investments in the AIM Variable Insurance Funds
Sub-Accounts:
AIM V. I. Aggressive Growth (a) $ 8.59 - $ 8.62 0.00% 1.35% - 1.85% -14.11% - -13.82%
AIM V. I. Balanced 8.02 - 10.50 1.97 1.15 - 1.85 -13.00 - -12.44
AIM V. I. Capital Appreciation 5.89 - 12.62 0.00 1.15 - 1.85 -24.67 - -24.16
AIM V. I. Dent Demographics (a) 8.44 - 8.47 0.00 1.35 - 1.85 -15.59 - -15.30
AIM V. I. Diversified Income 9.91 - 10.13 6.29 1.15 - 1.85 1.78 - 2.40
AIM V. I. Global Utilities 9.68 - 10.34 1.19 1.35 - 1.45 -28.97 - -28.90
AIM V. I. Government Securities 11.21 - 11.74 2.06 1.15 - 1.45 4.87 - 5.19
AIM V. I. Growth 4.89 - 9.21 0.21 1.15 - 1.85 -35.10 - -34.65
AIM V. I. Growth and Income 6.12 - 10.96 0.05 1.15 - 1.85 -24.23 - -23.72
AIM V. I. High Yield 7.82 - 9.44 15.34 1.15 - 1.85 -6.68 - -6.09
AIM V. I. International Equity 6.25 - 9.59 0.31 1.15 - 1.65 -24.78 - -24.41
AIM V. I. Value 7.35 - 12.38 0.13 1.15 - 1.85 -14.12 - -13.57
</Table>
(a) For the Period Beginning May 1, 2001 and Ended December 31, 2001
75
<Page>
<Table>
<Caption>
At December 31, 2001 For the year ended December 31, 2001
-------------------- --------------------------------------------------
Accumulation Investment Expense Total
Unit Value Income Ratio* Ratio** Return***
-------------------- ------------- -------------- ------------------
Investments in the American Century Variable Portfolios,
Inc. Sub-Accounts:
American Century VP Balanced $ 11.99 - $ 12.04 3.62% 1.35% - 1.45% -4.94% - -4.84%
American Century VP International 10.86 - 10.91 0.09 1.35 - 1.45 -30.20 - -30.13
Investments in the Dreyfus Variable Investment Fund
Sub-Accounts:
VIF Growth & Income 8.68 - 12.02 0.46 1.15 - 1.65 -7.38 - -6.93
VIF Money Market 10.09 - 11.73 3.00 1.15 - 1.85 2.11 - 2.49
VIF Small Company Stock 11.70 - 12.18 0.07 1.15 - 1.59 -3.10 - -2.67
Investments in the Dreyfus Socially Responsible
Growth Fund, Inc. Sub-Account:
Dreyfus Socially Responsible Growth Fund 6.41 - 11.86 0.06 1.15 - 1.65 -23.84 - -23.47
Investments in the Dreyfus Stock Index Fund
Sub-Account:
Dreyfus Stock Index Fund 7.63 - 11.84 1.52 1.15 - 1.85 -13.75 - -13.19
Investments in the Federated Insurance Series
Sub-Account:
Federated Prime Money Fund II 10.00 - 10.82 3.33 1.15 - 2.05 1.81 - 2.57
Investments in the Fidelity Variable Insurance Products
Fund Sub-Accounts:
VIP Contrafund 7.97 - 13.89 0.75 1.15 - 1.65 -13.69 - -13.25
VIP Equity-Income 9.74 - 11.86 1.45 1.15 - 1.65 -6.52 - -6.05
VIP Growth 6.78 - 14.24 0.07 1.15 - 1.65 -19.01 - -18.60
VIP High Income 7.20 - 7.46 12.18 1.15 - 1.65 -13.18 - -12.75
VIP Index 500 7.63 - 7.94 0.89 1.15 - 1.65 -13.55 - -13.11
VIP Overseas 6.47 - 6.73 5.16 1.15 - 1.65 -22.47 - -22.07
Investments in the Fidelity Variable Insurance Products
Fund (Service Class 2) Sub-Accounts:
VIP Asset Manager Growth (Service Class 2) (a) 9.48 - 9.50 0.00 1.35 - 1.60 -5.19 - -5.03
VIP Contrafund (Service Class 2) (a) 9.43 - 11.41 0.00 1.35 - 2.05 -5.78 - -5.35
VIP Equity-Income (Service Class 2) (a) 9.34 - 11.70 0.00 1.35 - 1.85 -6.61 - -6.30
VIP Growth (Service Class 2) (a) 8.65 - 12.42 0.00 1.35 - 1.85 -13.49 - -13.19
VIP High Income (Service Class 2) (a) 8.99 - 9.02 0.00 1.35 - 1.85 -10.14 - -9.84
VIP Index 500 (Service Class 2) (a) 9.01 - 11.87 0.00 1.35 - 1.85 -9.90 - -9.59
VIP Overseas (Service Class 2) (a) 8.03 - 11.65 0.00 1.35 - 1.60 -19.68 - -19.55
</Table>
(a) For the Period Beginning May 1, 2001 and Ended December 31, 2001
76
<Page>
<Table>
<Caption>
At December 31, 2001 For the year ended December 31, 2001
-------------------- --------------------------------------------------
Accumulation Investment Expense Total
Unit Value Income Ratio* Ratio** Return***
-------------------- ------------- -------------- ------------------
Investments in the Franklin Templeton Variable Insurance
Products Trust Sub-Accounts:
Franklin Global health Care Securities (a) $ 9.78 - $ 9.82 0.00% 1.35% - 1.85% -2.16% - -1.82%
Franklin Small Cap 6.79 - 17.57 0.12 1.15 - 1.85 -16.76 - -16.22
Franklin Technology Securities (a) 7.93 - 7.94 0.00 1.35 - 1.60 -20.71 - -20.58
Mutual Shares Securities 9.80 - 14.93 1.18 1.15 - 1.85 -2.00 - -1.52
Templeton Global Income Securities 10.41 - 11.51 3.30 1.15 - 1.65 0.63 - 1.06
Templeton Growth Securities 9.68 - 13.26 2.17 1.15 - 1.85 -3.17 - -3.05
Templeton International Securities 8.75 - 9.03 2.22 1.15 - 1.85 -17.50 - -16.96
Investments in the Goldman Sachs Variable Insurance
Trust Sub-Accounts:
VIT Capital Growth 7.37 - 10.76 0.73 1.15 - 1.65 -15.87 - -15.45
VIT CORE Large Cap Growth 8.97 - 8.97 0.01 1.59 - 1.59 -22.02 - -22.02
VIT CORE Small Cap Equity 9.88 - 12.85 0.32 1.15 - 1.85 2.71 - 3.33
VIT CORE U.S. Equity 7.63 - 10.47 0.42 1.15 - 1.85 -13.51 - -13.06
VIT Global Income 10.17 - 11.09 7.02 1.15 - 1.85 2.99 - 3.60
VIT Growth and Income 8.71 - 8.83 0.30 1.15 - 1.59 -10.78 - -10.38
VIT International Equity 9.27 - 9.40 1.46 1.15 - 1.59 -23.49 - -23.15
VIT Mid Cap Value 14.06 - 14.06 2.19 1.37 - 1.37 10.52 - 10.52
Investments in the LSA Variable Series Trust
Sub-Accounts:
LSA Focused Equity (a) 9.07 - 9.10 0.00 1.35 - 1.85 -9.28 - -8.98
LSA Growth Equity (a) 8.82 - 8.82 0.00 1.85 - 1.85 -11.85 - -11.85
Investments in the MFS Variable Insurance Trust
Sub-Accounts:
MFS Emerging Growth 5.29 - 13.22 0.00 1.15 - 1.65 -34.58 - -34.25
MFS Investors Trust (b) 7.97 - 9.36 0.14 1.15 - 1.65 -17.34 - -16.92
MFS New Discovery 8.92 - 17.76 2.54 1.15 - 1.65 -6.57 - -6.12
MFS Research 6.67 - 8.44 1.30 1.15 - 1.65 -22.55 - -22.16
MFS Utilities (a) 9.12 - 9.12 0.00 1.47 - 1.47 -8.84 - -8.84
Investments in the MFS Variable Insurance Trust (Service
Class) Sub-Accounts:
MFS Emerging Growth (Service Class) (a) 8.13 - 12.74 0.00 1.35 - 1.85 -18.70 - -18.42
MFS Investors Trust (Service Class) (a) 8.81 - 11.54 0.00 1.35 - 1.85 -11.87 - -11.57
MFS New Discovery (Service Class) (a) 9.59 - 13.16 0.00 1.35 - 1.85 -4.14 - -3.81
MFS Research (Service Class) (a) 8.43 - 8.46 0.00 1.35 - 1.85 -15.70 - -15.42
MFS Utilities (Service Class) (a) 7.52 - 10.02 0.00 1.35 - 1.85 -24.80 - -24.54
</Table>
(a) For the Period Beginning May 1, 2001 and Ended December 31, 2001
(b) Previously known as MFS Growth with Income
77
<Page>
<Table>
<Caption>
At December 31, 2001 For the year ended December 31, 2001
-------------------- --------------------------------------------------
Accumulation Investment Expense Total
Unit Value Income Ratio* Ratio** Return***
-------------------- ------------- -------------- ------------------
Investments in the Neuberger & Berman Advisers
Management Trust Sub-Accounts:
AMT Guardian $ 11.79 - $ 11.88 0.46% 1.37% - 1.59% -3.07% - -2.93%
AMT Mid-Cap Growth 12.40 - 12.58 0.01 1.15 - 1.59 -25.84 - -25.51
AMT Partners 10.32 - 10.32 0.38 1.59 - 1.59 -4.37 - -4.37
Investments in the Oppenheimer Variable Account
Funds Sub-Accounts:
Oppenheimer Aggressive Growth 4.69 - 11.55 0.74 1.15 - 1.85 -32.52 - -32.06
Oppenheimer Capital Appreciation 7.67 - 12.23 0.39 1.15 - 1.85 -14.14 - -13.58
Oppenheimer Global Securities 8.14 - 12.37 0.53 1.15 - 1.85 -13.61 - -13.05
Oppenheimer Main Street Growth & Income 7.70 - 11.48 0.43 1.15 - 1.85 -11.76 - -11.19
Oppenheimer Multiple Strategies 9.58 - 11.18 2.20 1.15 - 1.85 0.41 - 1.04
Oppenheimer Strategic Bond 10.18 - 10.69 1.74 1.15 - 1.85 3.00 - 3.64
Investments in the Putnam Variable Trust
Sub-Accounts:
VT Diversified Income (a) 10.09 - 10.19 0.00 1.35 - 1.60 0.89 - 1.06
VT Growth and Income (a) 9.19 - 9.91 0.00 1.25 - 1.85 -8.14 - -7.75
VT Growth Opportunities (a) 8.05 - 8.06 0.00 1.35 - 1.60 -19.49 - -19.35
VT Health Sciences (a) 9.63 - 11.04 0.00 1.25 - 2.05 -3.82 - -2.01
VT New Value (a) 9.56 - 11.85 0.00 1.25 - 1.80 -4.55 - 1.24
VT Research (a) 12.05 - 12.05 0.00 1.60 - 1.60 20.48 - 20.48
VT Voyager II (a) 8.03 - 10.13 0.00 1.35 - 1.85 -19.67 - -19.40
Investments in the STI Classic Variable Trust
Sub-Accounts:
STI Capital Appreciation 8.64 - 10.11 2.04 1.15 - 1.85 -7.02 - -6.43
STI Growth & Income 9.09 - 10.07 0.47 1.15 - 1.85 -7.24 - -6.65
STI International Equity 7.75 - 8.64 0.10 1.15 - 1.65 -18.76 - -18.35
STI Investment Grade Bond 9.95 - 11.45 4.18 1.15 - 1.85 7.27 - 7.93
STI Mid-Cap Equity 8.77 - 12.96 10.25 1.15 - 2.05 0.79 - 1.54
STI Quality Growth Stock 7.01 - 8.85 0.02 1.15 - 1.65 -20.02 - -19.62
STI Small Cap Equity 10.90 - 14.23 1.13 1.15 - 2.05 19.24 - 20.08
STI Value Income Stock 9.51 - 11.63 1.58 1.15 - 1.85 -2.88 - -2.27
Investments in The Universal Institutional Funds, Inc.
Sub-Accounts:
Equity Growth 6.73 - 11.05 0.00 1.15 - 1.65 -16.51 - -16.09
Fixed Income 10.42 - 11.64 6.23 1.35 - 1.85 7.47 - 7.84
Global Value Equity (c) 9.26 - 10.87 1.21 1.15 - 1.85 -8.68 - -8.11
International Magnum 8.82 - 8.82 0.47 1.37 - 1.37 -20.40 - -20.40
Mid Cap Value 9.45 - 13.71 0.00 1.15 - 1.85 -4.86 - -4.26
Value 9.60 - 12.06 1.07 1.15 - 1.65 0.61 - 1.10
</Table>
(a) For the Period Beginning May 1, 2001 and Ended December 31, 2001
(c) Previously known as Global Equity
78
64
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The By-laws of Glenbrook Life and Annuity Company ("Registrant") provide
that Registrant will indemnify its officers and directors for certain damages
and expenses that may be incurred in the performance of their duty to
Registrant. No indemnification is provided, however, when such person is
adjudged to be liable for negligence or misconduct in the performance of his or
her duty, unless indemnification is deemed appropriate by the court upon
application.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
Exhibit No. Description
(1) Form of Underwriting Agreement (Incorporated herein by reference to
Pre-Effective Amendment No. 2 to the Form N-4 Registration Statement of the
Glenbrook Life Multi-Manager Variable Account of Glenbrook Life and Annuity
Company (File No. 333-00999) dated August 23, 1996).
(2) None
(4)(a) Contract and Application (Incorporated herein by reference to
Pre-Effective Amendment No. 2 to the Form N-4 Registration Statement of the
Glenbrook Life Multi-Manager Valuable Account of Glenbrook Life and Annuity
Company (File No. 333-00999) dated August 23, 1996).
(4)(b) Contract Endorsement (Incorporated herein by reference to
Post-Effective Amendment No. 4 to the Form N-4 Registration Statement of the
Glenbrook Life Multi-Manager Variable Account of Glenbrook Life and Annuity
Company (File No. 333-00999) dated September 30, 1998).
(5)(a) Opinion of General Counsel re: Legality (Previously filed in
Pre-Effective Amendment No. 2 to this Registration Statement (File No.
333-00987) dated August 23, 1996).
(5)(b) Opinion and Consent of General Counsel re: Legality (Previously
filed in Post-Effective Amendment No. 4 to this Registration Statement (File No.
033-00987) dated April 29, 1999).
(8) None.
(11) None.
(12) None.
(15) None.
(23)(a) Independent Auditors' Consent.
(23)(b) Consent of Jorden Burt LLP.
(24)(a) Powers of Attorney for Thomas J. Wilson, II, Michael J. Velotta and
Samuel H. Pilch (Previously filed in Post-Effective Amendment No. 5 to this
Registration Statement(File No. 333-00987) filed on May 4, 2000).
(24)(b) Powers of Attorney for Margaret G. Dyer, John C. Lounds, J. Kevin
McCarthy and Marla G. Friedman (Previously filed in Post-Effective Amendment No.
6 to this Registration Statement (File No. 333-00987) filed on April 26, 2001).
(24) (c) Power of Attorney for Steven E. Shebik filed herewith.
(25) None.
(26) None.
(27) Not applicable.
(99) Form of Resolution of Board of Directors (Incorporated herein by
reference to Post-Effective Amendment No. 1 to Registrant's Registration
Statement (File No. 033-92842) dated April 9, 1996).
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to the registration statement:
(i) to include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof ) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
and
(iii)to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by Registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant, Glenbrook Life and Annuity Company, 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 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 by 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
Securities Act and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Registrant certifies
that it has reasonable grounds to believe that it meets all of the requirements
for filing on Form S-3 and has duly caused this amended registration statement
to be signed on its behalf by the undersigned, thereunto duly authorized in the
Township of Northfield, State of Illinois on the day of April 30th, 2002.
GLENBROOK LIFE AND ANNUITY COMPANY
(REGISTRANT)
By: /s/MICHAEL J. VELOTTA
----------------------
Michael J. Velotta
Vice President, Secretary and
General Counsel
Pursuant to the requirements of the Securities Act of 1933, this amended
registration statement has been signed by the following persons in the
capacities indicated and on the day of April 30th, 2002.
*/THOMAS J. WILSON, II President, Chief Executive Officer
- ----------------------- and Director, (Principal Executive Officer)
Thomas J. Wilson, II
/s/MICHAEL J. VELOTTA Vice President, Secretary,
- ------------------------ General Counsel and Director
Michael J. Velotta
*/SAMUEL H. PILCH Vice President and Controller
- --------------------------- (Principal Accounting Officer)
Samuel H. Pilch
*/MARGARET G. DYER Director
- ---------------------------
Margaret G. Dyer
*/JOHN C. LOUNDS Director
- ---------------------------
John C. Lounds
*/J. KEVIN MCCARTHY Director
- -----------------------------
J. Kevin McCarthy
*/STEVEN E. SHEBIK Director and Vice President (Principal
- --------------------------- Financial Officer)
Steven E. Shebik
*/MARLA G. FRIEDMAN Vice President and Director
- ---------------------------
Marla G. Friedman
/*/By Michael J. Velotta, pursuant to Powers of Attorney previously filed or
filed herewith.
EXHIBIT LIST
The following exhibits are filed herewith:
Exhibit No. Description
(23) (a) Independent Auditors' Consent
(b) Consent of Jorden Burt LLP
(24) (c) Power of Attorney for Steven E. Shebik