AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 30, 2002
FILE NO. 333-52806
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 4
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 of (I.R.S. Employer
Incorporation or Organization) Identification Number)
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:
RICHARD T. CHOI, ESQUIRE JOANNE M, DERRIG, ESQUIRE
FOLEY & LARDNER ALFS, INC.
3000 K STREET N.W. 3100 SANDERS ROAD
SUITE 500 NORTHBROOK, IL 60062
WASHINGTON, D.C. 20007-5109
Approximate date of commencement of proposed sale to the public: As soon as
practicable 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/
THE ALLSTATE/(R)// /PROVIDER VARIABLE ANNUITY SERIES
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", "WE", OR "US") is offering the
following group and individual flexible premium deferred variable annuity
contracts (each, a "Contract"):
... The Allstate/(R)/ Provider Advantage Variable Annuity
(Formerly referred to as "The Glenbrook Provider Advantage Variable
Annuity")
... The Allstate/(R)/ Provider Ultra Variable Annuity
(Formerly referred to as "The Glenbrook Provider Ultra Variable
Annuity")
... The Allstate/(R)/ Provider Extra Variable Annuity
(Formerly referred to as "The Glenbrook Provider Extra Variable
Annuity")
Glenbrook is a wholly owned subsidiary of the Allstate Life Insurance Company.
This prospectus contains information about each Contract that you should know
before investing. Please keep it for future reference. Not all Contracts may be
available in all states or through your sales representative. Please check with
your sales representative for details.
Each Contract currently offers 52 investment alternatives ("INVESTMENT
ALTERNATIVES"). The investment alternatives include 3 fixed account options
("FIXED ACCOUNT OPTIONS") and 49 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 underlying funds ("FUNDS"):
AIM VARIABLE INSURANCE FUNDS GOLDMAN SACHS VARIABLE INSURANCE TRUST (VIT)
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH LSA VARIABLE SERIES TRUST
FUND, INC.
DREYFUS STOCK INDEX FUND MFS(TM) VARIABLE INSURANCE TRUST/SM/
DREYFUS VARIABLE INVESTMENT FUND (VIF) OPPENHEIMER VARIABLE ACCOUNT FUNDS
FIDELITY VARIABLE INSURANCE PRODUCTS FUND PUTNAM VARIABLE TRUST
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
Each Fund has multiple 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.
For the ALLSTATE PROVIDER EXTRA CONTRACTS, each time you make a purchase
payment, we will add to your Contract value ("Contract Value") a credit
enhancement ("Credit Enhancement") equal to 4% of that purchase payment.
Expenses for this Contract may be higher than expenses for an annuity contract
without the Credit Enhancement. Over time, the amount of the Credit Enhancement
may be more than offset by the higher expenses. You and your agent should decide
if this Contract is right for you.
Glenbrook has 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 73 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.
1
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THE SECURITIES DESCRIBED IN THIS PROSPECTUS, NOR
HAS IT PASSED ON THE ACCURACY OR THE ADEQUACY OF THIS
PROSPECTUS. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A
FEDERAL CRIME.
IMPORTANT THE CONTRACTS MAY BE DISTRIBUTED THROUGH BROKER-DEALERS THAT
NOTICES HAVE RELATIONSHIPS WITH BANKS OR OTHER FINANCIAL INSTITUTIONS
OR BY EMPLOYEES OF SUCH BANKS. HOWEVER, THE CONTRACTS ARE NOT
DEPOSITS, OR OBLIGATIONS OF, OR GUARANTEED BY SUCH INSTITUTIONS
OR ANY FEDERAL REGULATORY AGENCY. INVESTMENT IN THE CONTRACTS
INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL.
THE CONTRACTS ARE NOT FDIC INSURED.
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2
TABLE OF CONTENTS
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PAGE
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OVERVIEW
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Important Terms
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Overview of Contracts
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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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PAGE
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OTHER INFORMATION
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More Information:
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Glenbrook
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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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Taxation of Annuities in General
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Tax Qualified Contracts
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Income Tax Withholding
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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
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APPENDIX B - MARKET VALUE ADJUSTMENT EXAMPLES
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APPENDIX C - CALCULATION OF ENHANCED EARNINGS DEATH BENEFIT AMOUNT
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3
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
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ACCUMULATION PHASE
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ACCUMULATION UNIT
- --------------------------------------------------------------------------------
ACCUMULATION UNIT VALUE
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ANNIVERSARY VALUES
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ANNUITANT
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AUTOMATIC ADDITIONS PLAN
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AUTOMATIC PORTFOLIO REBALANCING PROGRAM
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BENEFICIARY
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CANCELLATION PERIOD
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CONTINGENT BENEFICIARY
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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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CREDIT ENHANCEMENT
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DEATH BENEFIT ANNIVERSARY
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DEATH BENEFIT EARNINGS
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DOLLAR COST AVERAGING PROGRAM
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DUE PROOF OF DEATH
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ENHANCED EARNINGS DEATH BENEFIT RIDER
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ENHANCED DEATH BENEFIT RIDER
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EXCESS-OF-EARNINGS WITHDRAWAL
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FIXED ACCOUNT OPTIONS
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FREE WITHDRAWAL AMOUNT
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FUNDS
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PAGE
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GLENBROOK ("WE" OR "US")
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GUARANTEE PERIODS
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GUARANTEED INCOME BENEFIT
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GUARANTEED MATURITY FIXED ACCOUNT
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INCOME BASE
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INCOME BENEFIT RIDER
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INCOME PLAN
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IN-FORCE EARNINGS
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IN-FORCE PREMIUM
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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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PRIMARY BENEFICIARY
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QUALIFIED CONTRACTS
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RIDER APPLICATION DATE
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RIDER DATE
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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. References to "Contract" also include all three Contracts
listed on the cover page of this prospectus, unless otherwise noted. However,
we administer each Contract separately.
4
OVERVIEW OF CONTRACTS
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The Contracts offer many of the same basic features and benefits. They differ
primarily with respect to the charges imposed, as follows:
... The ALLSTATE PROVIDER ADVANTAGE CONTRACT has a mortality and expense risk
charge of 1.45%, and no withdrawal charge.
... The ALLSTATE PROVIDER ULTRA CONTRACT has a mortality and expense risk charge
of 1.25%, and a withdrawal charge of up to 7% with a 7 year withdrawal charge
period (and an annual Free Withdrawal Amount).
... The ALLSTATE PROVIDER EXTRA CONTRACT offers a 4% Credit Enhancement on
purchase payments, and has a mortality and expense risk charge of 1.40% and a
withdrawal charge of up to 8% with an 8 year withdrawal charge period (and an
annual Free Withdrawal Amount).
Other differences among the Contracts relate to the transfer fees, the minimum
age of the Contract owners and Annuitants on the application date, the effect of
changing Annuitants under the Income Benefit Rider, the spousal continuation
provision of the Enhanced Death Benefit and Enhanced Earnings Death Benefit
Riders, and the calculation of the Enhanced Earnings Death Benefit.
5
THE CONTRACT AT A GLANCE
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The following is a snapshot of the Contract. Please read the remainder of this
prospectus for more information.
FLEXIBLE PAYMENTS You can purchase a Contract with as little as $5,000
($2,000 for "QUALIFIED CONTRACTS", which are Contracts
issued 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.
For ALLSTATE PROVIDER EXTRA CONTRACTS each time you
make a purchase payment, we will add to your Contract
Value a Credit Enhancement equal to 4% of that purchase
payment
- -------------------------------------------------------------------------------
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, including the deduction of mortality and
expense risk charges and administrative expense
charges.
ALLSTATE PROVIDER EXTRA CONTRACTS
---------------------------------
If you exercise your Right to Cancel the Contract, the
amount we refund to you will not include any Credit
Enhancement. See "Right to Cancel" for details.
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6
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EXPENSES You will bear the following expenses:
ALLSTATE PROVIDER ADVANTAGE CONTRACTS
-------------------------------------
.Total Variable Account annual fees equal to 1.55% of
average daily net assets (1.80% if you select the
ENHANCED DEATH BENEFIT RIDER or the INCOME BENEFIT
RIDER; and 2.05% if you select both the Enhanced
Death Benefit and the Income Benefit Riders).
. no withdrawal charges
.transfer fee of $10 after the 12th transfer in any
Contract Year (fee currently waived).
ALLSTATE PROVIDER ULTRA CONTRACTS
---------------------------------
.Total Variable Account annual fees equal to 1.35% of
average daily net assets (1.60% if you select the
Enhanced Death Benefits Rider or the Income Benefit
Rider; and 1.85% if you select both the Enhanced
Death Benefit and the Income Benefit Riders).
.Withdrawal charges ranging from 0% to 7% of purchase
payments withdrawn (with certain exceptions).
-
.transfer fee of $10 after the 12th transfer in any
Contract Year (fee currently waived).
ALLSTATE PROVIDER EXTRA CONTRACTS
---------------------------------
.Total Variable Account annual fees equal to 1.50% of
average daily net assets (1.75% if you select the
Enhanced Death Benefit Rider or the Income Benefit
Rider; and 2.00% if you select both the Enhanced
Death Benefit and the Income Benefit Riders).
.Withdrawal charges ranging from 0% to 8% of purchase
payments withdrawn (with certain exceptions).
.
Transfer fee of up to 0.50% of the amount transferred
after the 12th transfer in any Contract Year (subject
to a minimum charge of $10.00 per transfer). This
fee is currently waived.
ALL CONTRACTS
-------------
. If you select the ENHANCED EARNINGS DEATH BENEFIT
RIDER, you would pay an additional annual fee of up
to 0.35% (depending on the oldest Contract owner's
age as of the date we receive the completed
application or a written request to add the Rider,
whichever is later ("RIDER APPLICATION DATE") of the
CONTRACT VALUE on each Contract anniversary
("CONTRACT ANNIVERSARY"). For more information about
Variable Account expenses, see "EXPENSES" below.
.Annual contract maintenance charge of $35 (with
certain exceptions)
. 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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7
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INVESTMENT The Contract offers 52 investment alternatives
ALTERNATIVES including:
.3 Fixed Account Options (which credit interest at
rates we guarantee)
.49 Variable Sub-Accounts investing in Portfolios
offering professional money management by these
investment advisers:
. A I M Advisors, Inc.
. The Dreyfus Corporation
. Fidelity Management & Research Company
. Franklin Advisors, Inc.
. Franklin Mutual Advisers, LLC
. Goldman Sachs Asset Management
. LSA Asset Management, LLC
. MFS Investment Management
. Miller Anderson & Sherred, LLP
. OppenheimerFunds, Inc.
. Putnam Investment Management, Inc.
. Templeton Asset Management LTD.
. Templeton Investment Counsel, LLC.
. Van Kampen Investments
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)
We also offer an Income Benefit Rider.
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DEATH BENEFIT 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 also offer an Enhanced Death Benefit Rider and
Enhanced Earnings Death Benefit Rider.
- -------------------------------------------------------------------------------
TRANSFERS Before the Payout Start Date, you may transfer your
Contract Value among the investment alternatives, with
certain restrictions. We do not currently impose a fee
upon transfers. However, we reserve the right to charge
$10 per transfer (up to 0.50% of the amount transferred
per transaction for ALLSTATE PROVIDER EXTRA CONTRACTS)
after the 12th transfer in each "CONTRACT YEAR", which
we measure from the date we issue your Contract or a
Contract Anniversary.
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8
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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
(ALLSTATE PROVIDER ULTRA CONTRACTS and ALLSTATE
PROVIDER EXTRA CONTRACTS only) and a MARKET VALUE
ADJUSTMENT also may apply.
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9
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 52 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 25. 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.
Issue Payout Start
Date Accumulation Phase Date Payout Phase
- ------------------------------------------------------------------------------------------------------------>
You buy You save for retirement You elect to receive You can recieve Or you can receive
a Contract income payments or income payments income payments
receive a lump sum for a set period for life
payment
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.
10
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)
ALLSTATE PROVIDER ADVANTAGE CONTRACTS
None
- ------------------------------------------------------------------------------------------------
ALLSTATE PROVIDER ULTRA CONTRACTS
- ------------------------------------------------------------------------------------------------
Number of complete
years since we
received the purchase
payment being 0 1 2 3 4 5 6 7+
withdrawn*
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Applicable charge 7% 6% 6% 5% 5% 4% 3% 0%
- ------------------------------------------------------------------------------------------------
* Each Contract Year, you may withdraw up to 15% of your aggregate purchase
payments without incurring a withdrawal charge.
ALLSTATE PROVIDER EXTRA
CONTRACTS
- -------------------------------------------------------------------------------
Number of complete years since
we received the purchase payment 0 1 2 3 4 5 6 7 8+
being withdrawn*
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Applicable charge 8% 8% 8% 7% 6% 5% 4% 3% 0%
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ANNUAL CONTRACT MAINTENANCE CHARGE $35.00**
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**We will waive this charge in certain cases. See "Expenses."
TRANSFER FEE
Allstate Provider Advantage and Allstate Provider Ultra $10.00**
Contracts
Allstate Provider Extra Contracts up to .50% of the amount
transferred, subject to a minimum
fee of $10.00 per transfer**
- ----------------------------------------------------------------------------------------------
***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 average daily net asset value deducted from each Variable
Sub-Account)
Allstate Provider Allstate Provider Allstate Provider
Advantage Contracts Ultra Contracts Extra Contracts
-------------------------------------------------------------------------------
WITHOUT THE ENHANCED DEATH BENEFIT OR INCOME BENEFIT RIDERS
- -------------------------------------------------------------------------------------------------------
Mortality and Expense 1.45% 1.25% 1.40%
Risk Charge
- -------------------------------------------------------------------------------------------------------
Administrative Expense 0.10% 0.10% 0.10%
Charge
- -------------------------------------------------------------------------------------------------------
Total Variable Account 1.55% 1.35% 1.50%
Annual Expenses
- -------------------------------------------------------------------------------------------------------
WITH THE ENHANCED DEATH BENEFIT RIDER
- -------------------------------------------------------------------------------------------------------
Mortality and Expense 1.70% 1.50% 1.65%
Risk Charge
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Administrative Expense 0.10% 0.10% 0.10%
Charge
- -------------------------------------------------------------------------------------------------------
Total Variable Account 1.80% 1.60% 1.75%
Annual Expenses
- -------------------------------------------------------------------------------------------------------
WITH THE INCOME BENEFIT RIDER
- -------------------------------------------------------------------------------------------------------
Mortality and Expense 1.70% 1.50% 1.65%
Risk Charge
- -------------------------------------------------------------------------------------------------------
Administrative Expense 0.10% 0.10% 0.10%
Charge
- -------------------------------------------------------------------------------------------------------
Total Variable Account 1.80% 1.60% 1.75%
Annual Expenses
- -------------------------------------------------------------------------------------------------------
11
- -------------------------------------------------------------------------------------------------------
WITH THE INCOME BENEFIT AND ENHANCED DEATH BENEFIT RIDERS
- -------------------------------------------------------------------------------------------------------
Mortality and Expense 1.95% 1.75% 1.90%
Risk Charge
- -------------------------------------------------------------------------------------------------------
Administrative Expense 0.10% 0.10% 0.10%
Charge
- -------------------------------------------------------------------------------------------------------
Total Variable Account 2.05% 1.85% 2.00%
Annual Expenses
- -------------------------------------------------------------------------------------------------------
If you elect the Enhanced Earnings Death Benefit Rider, we will deduct an annual
charge of up to 0.35% of your Contract Value on each Contract Anniversary during
the Accumulation Phase. The charge is based on the oldest Contract owner's age
as of the Rider Application Date, as follows:
Age Annual Charge
- -------------------------------------------------------------------------------
0-55 0.10%
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56-65 0.20%
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66-75 0.35%
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We will deduct this charge from your Contract Value in the Variable Account on a
pro rata basis. If the Contract Value in the Variable Account is not sufficient
to cover the charge, we will deduct the remaining charge from the fixed
Guaranteed Periods, beginning with the oldest fixed Guaranteed Period (see
"EXPENSES" on page 22 for additional information). Fixed Guarantee Periods may
not be available in all states.
PORTFOLIO ANNUAL EXPENSES (after voluntary reductions and reimbursements for
certain Portfolios) (as a percentage of Portfolio average daily net assets)(1)
Portfolio Management Rule 12b-1 Total
Fees Fees Other Expenses Portfolio
- ----------------------------------------------------------------------------------------------------------------------- Annual
Expenses
-------------
AIM V.I. Aggressive Growth Fund - Series I 0.80% N/A 0.41% 1.21%
- ------------------------------------------------------------------------------------------------------------------------------------
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. Dent Demographic Trends Fund - Series I (3) 0.85% N/A 0.59% 1.44%
- ------------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Diversified Income Fund - Series I 0.60% N/A 0.33% 0.93%
- ------------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth Fund - Series I 0.62% N/A 0.26% 0.88%
- ------------------------------------------------------------------------------------------------------------------------------------
AIM V.I. International Growth Fund - Series I (2) 0.73% N/A 0.32% 1.05%
- ------------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Premier Equity Fund - Series 1 (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 Asset Manager: Growth Portfolio - Service Class 2 (4) 0.58% N/A 0.17% 1.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Contrafund(TM) Portfolio - Service Class 2 (4) 0.58% 0.25% 0.11% 0.94%
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio -Service Class 2 (4) 0.48% 0.25% 0.11% 0.84%
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio - Service Class 2 (4) 0.58% 0.25% 0.10% 0.93%
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio - Service Class 2 0.58% 0.25% 0.15% 0.98%
- ------------------------------------------------------------------------------------------------------------------------------------
Franklin Small Cap Fund - Class 2 (5,6) 0.45% N/A 0.31% 1.01%
- ------------------------------------------------------------------------------------------------------------------------------------
Franklin Technology Securities Fund - Class 2 (5,7) 0.52% N/A 0.51% 1.28%
- ------------------------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund - Class 2 (5) 0.60% N/A 0.19% 1.04%
- ------------------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities Fund - Class 2 (5) 1.25% N/A 0.32% 1.82%
- ------------------------------------------------------------------------------------------------------------------------------------
Templeton Foreign Securities Fund - Class 2 (5,8,9) 0.68% N/A 0.22% 1.15%
- ------------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT CORE/SM /Small Cap Equity Fund (10) 0.75% N/A 0.47% 1.22%
- ------------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT CORE/SM/U.S. Equity Fund (10) 0.70% N/A 0.12% 0.82%
- ------------------------------------------------------------------------------------------------------------------------------------
LSA Diversified Mid-Cap Fund (11) 0.90% N/A 0.30% 1.20%
- ------------------------------------------------------------------------------------------------------------------------------------
LSA Focused Equity Fund (12) 0.95% N/A 0.30% 1.25%
- ------------------------------------------------------------------------------------------------------------------------------------
LSA Growth Equity Fund (12) 0.85% N/A 0.30% 1.15%
- ------------------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Series -- Service Class (13,14) 0.75% 0.25% 0.12% 1.12%
- ------------------------------------------------------------------------------------------------------------------------------------
12
- ------------------------------------------------------------------------------------------------------------------------------------
MFS Investors Trust Series -- Service Class (13,14) 0.75% 0.25% 0.15% 1.15%
- ------------------------------------------------------------------------------------------------------------------------------------
MFS New Discovery Series -- Service Class (13,14,15) 0.90% 0.25% 0.16% 1.31%
- ------------------------------------------------------------------------------------------------------------------------------------
MFS Research Series -- Service Class (13,14) 0.75% 0.25% 0.15% 1.15%
- ------------------------------------------------------------------------------------------------------------------------------------
MFS Utilities Series -- Service Class (13,14) 0.75% 0.25% 0.18% 1.18%
- ------------------------------------------------------------------------------------------------------------------------------------
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 (16) 0.74% N/A 0.05% 0.79%
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam VT Growth and Income Fund - Class IB (17) 0.46% 0.25% 0.05% 0.76%
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam VT Growth Opportunities Fund - Class IB (17) 0.70% 0.25% 0.15% 1.10%
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam VT Health Sciences Fund - Class IB (17) 0.70% 0.25% 0.09% 1.04%
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam VT International Growth Fund - Class IB (17) 0.76% N/A 0.18% 1.19%
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam VT New Value Fund - Class IB (17) 0.70% 0.25% 0.09% 1.04%
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam VT Research Fund - Class IB (17) 0.65% N/A 0.09% 0.99%
- ------------------------------------------------------------------------------------------------------------------------------------
Van Kampen UIF Core Plus Fixed Income Portfolio (18,19) 0.40% N/A 0.31% 0.71%
- ------------------------------------------------------------------------------------------------------------------------------------
Van Kampen UIF Global Value Equity Portfolio (18,19) 0.80% N/A 0.48% 1.28%
- ------------------------------------------------------------------------------------------------------------------------------------
Van Kampen UIF Mid Cap Value Portfolio (18,19) 0.75% N/A 0.35% 1.10%
- ------------------------------------------------------------------------------------------------------------------------------------
Van Kampen UIF U.S. Real Estate Portfolio (18,19) 0.80% N/A 0.35% 1.15%
- ------------------------------------------------------------------------------------------------------------------------------------
Van Kampen UIF Value Portfolio (18,19) 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) Before fee waivers and restated to reflect current fees. The Portfolio's
advisor has contractually agreed to waive advisory fees or reimburse expenses
to the extent necessary to limit "Total Portfolio Annual Expenses" (excluding
Rule 12b-1 Plan fees, if any, interest, taxes, dividend expense on short
sales, extraordinary items and increases in expenses due to expense offset
arrangements, if any) to 1.30%. After fee waivers and expense reimbursements,
"Management Fees", "Other Expenses" and "Total Portfolio Annual Expenses" were
0.71%, 0.59% and 1.30%, respectively.
(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 0.99% for Asset Manager:
Growth Portfolio, 0.90% for Contrafund Portfolio, 0.83% for Equity-Income
Portfolio and 0.90% for Growth Portfolio.
(5) The Portfolio's Class 2 distribution plan or "rule 12b-1 plan" is described
in the Portfolio's prospectus.
(6) 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%.
(7) The manager had agreed in advance to make an estimated reduction of 0.03% 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 1.31%.
(8) Effective May 1, 2002 the Templeton International Securities Fund - Class 2
changed its name to the Templeton Foreign Securities Fund - Class 2.
(9) 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
13
this reduction, "Total Portfolio Annual Expenses" would have been 1.16%.
(10) "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 CORESM Small Cap Equity
Fund and 0.90% for CORESM U.S. Equity Fund. With these limitations taken into
consideration, "Management Fees", "Rule 12b-1 Fees", "Other Expenses" and
"Total Portfolio Annual Expenses" were as follows:
Management Rule 12b-1 Total Portfolio
Portfolio Fees Fees Other Expenses Annual Expenses
- -------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT CORE/SM/ Small Cap Equity Fund 0.75% N/A 0.25% 1.00%
- -------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT CORE/SM/ U.S. Equity Fund 0.70% N/A 0.11% 0.81%
- -------------------------------------------------------------------------------------------------------------
(11) Figures shown are based on estimates for the current fiscal year. Under an
expense limitation agreement ("Agreement"), the manager has agreed to reduce
its fees or reimburse the Portfolio for expenses incurred above certain
limits. Currently, this limit is set so that the Portfolio will not incur
expenses (including interest, taxes, brokerage commissions and extraordinary
expenses) that exceed the amount of its management fee plus 0.30% of its
average daily net assets. Without these fee reductions or expense
reimbursements, "Other Expenses" and "Total Portfolio Annual Expenses" for
2002 are expected to be 6.29% and 7.19%. These reductions and reimbursements
will remain in effect until at least April 30, 2003. Under certain
circumstances, the Agreement provides that, commencing June 1, 2002 and
continuing for three years thereafter, the manager may recoup a certain amount
of its fee reductions and reimbursements. The total amount of reimbursement,
if any, paid in any year to the manager may not, however, cause "Total
Portfolio Annual Expenses" to exceed the percentages listed in the table.
(12) Under an expense limitation agreement ("Agreement"), the manager has agreed
to reduce its fees or reimburse the Portfolio for expenses incurred above
certain limits. Currently, this limit is set so that the Portfolio will not
incur expenses (including interest, taxes, brokerage commissions and
extraordinary expenses) that exceed the amount of its management fee plus
0.30% of its average daily net assets. Without these fee reductions or
expense reimbursements, "Other Expenses" and "Total Portfolio Annual Expenses"
for the period ending December 31, 2001 were 2.95% and 3.90% for LSA Focused
Equity Fund and 2.34% and 3.19% for LSA Growth Equity Fund, respectively.
These reductions and reimbursements will remain in effect until at least
April 30, 2003. Under certain circumstances, the Agreement provides that,
commencing May 1, 2002 and continuing for three years thereafter, the manager
may recoup a certain amount of its fee reductions and reimbursements. The
total amount of reimbursement, if any, paid in any year to the manager may
not, however, cause "Total Portfolio Annual Expenses" to exceed the
percentages listed in the table.
(13) Each Portfolio has adopted a distribution plan under Rule 12b-1 that
permits it to pay marketing and other fees to support the sale and
distribution of service class shares (these fees are referred to as
distribution fees).
(14) 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 1.11% for Emerging Growth Series, 1.14% for Investors
Trust Series, 1.30% for New Discovery Series, 1.14% for Research Series and
1.17% for Utilities Series.
(15) 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 14 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 1.34%. 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 Portfolio.
(16) 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.
14
(17) 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.
(18) "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 Global Value Equity 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", "Rule 12b-1 Fees", "Other
Expenses" and "Total Portfolio Annual Expenses" were as follows:
Management Rule 12b-1 Total Portfolio
Portfolio Fees Fees Other Expenses Annual Expenses
- ---------------------------------------------------------------------------------------------------------------------------
Van Kampen UIF Core Plus Fixed Income Portfolio 0.39% N/A 0.31% 0.70%
- ---------------------------------------------------------------------------------------------------------------------------
Van Kampen UIF Global Value 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 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%
- ---------------------------------------------------------------------------------------------------------------------------
(19) 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 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, 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.
(20) Effective May 1, 2002, the Franklin Global Health Care Portfolio merged
into the Franklin Small Cap Fund.
15
EXAMPLE 1 (ALLSTATE PROVIDER ADVANTAGE CONTRACTS)
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,
... elected the Enhanced Death Benefit and Income Benefit Riders, and
... elected the Enhanced Earnings Death Benefit Rider (assuming Contract owner is
age 66-75 on the Rider Application Date).
THE EXAMPLE DOES NOT INCLUDE ANY TAXES OR TAX PENALTIES YOU MAY BE REQUIRED TO
PAY IF YOU SURRENDER YOUR CONTRACT OR RECEIVE INCOME PAYMENTS.
Variable Sub-Account 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------------------------
AIM V.I. Aggressive Growth $38 $115 $195 $406
- --------------------------------------------------------------------------------------------------
AIM V.I. Balanced $37 $113 $191 $398
- --------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation $34 $104 $178 $373
- --------------------------------------------------------------------------------------------------
AIM V.I. Core Equity $34 $103 $176 $370
- --------------------------------------------------------------------------------------------------
AIM V.I. Dent Demographic Trends $40 $122 $206 $427
- --------------------------------------------------------------------------------------------------
AIM V.I. Diversified Income $35 $107 $181 $380
- --------------------------------------------------------------------------------------------------
AIM V.I. Growth $34 $105 $179 $376
- --------------------------------------------------------------------------------------------------
AIM V.I. International Growth $36 $110 $187 $391
- --------------------------------------------------------------------------------------------------
AIM V.I. Premier Equity $34 $104 $178 $373
- --------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth $33 $102 $174 $366
- --------------------------------------------------------------------------------------------------
Dreyfus Stock Index $28 $86 $148 $315
- --------------------------------------------------------------------------------------------------
Dreyfus VIF - Growth & Income $34 $103 $175 $368
- --------------------------------------------------------------------------------------------------
Dreyfus VIF - Money Market $31 $ 96 $164 $347
- --------------------------------------------------------------------------------------------------
Fidelity VIP Asset Manager: Growth $36 $109 $185 $387
- --------------------------------------------------------------------------------------------------
Fidelity VIP Contrafund $35 $107 $182 $381
- --------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income $34 $104 $177 $371
- --------------------------------------------------------------------------------------------------
Fidelity VIP Growth $35 $107 $181 $380
- --------------------------------------------------------------------------------------------------
Fidelity VIP High Income $35 $108 $184 $385
- --------------------------------------------------------------------------------------------------
Fidelity Small Cap $36 $109 $185 $387
- --------------------------------------------------------------------------------------------------
Fidelity Technology Securities $39 $117 $199 $412
- --------------------------------------------------------------------------------------------------
Mutual Shares Securities $36 $110 $187 $390
- --------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities $44 $133 $225 $460
- --------------------------------------------------------------------------------------------------
Templeton Foreign Securities $37 $113 $192 $400
- --------------------------------------------------------------------------------------------------
Goldman Sachs VIT CORE/SM /Small Cap Equity $38 $116 $196 $407
- --------------------------------------------------------------------------------------------------
Goldman Sachs VIT CORE/SM/U.S. Equity $34 $103 $176 $370
- --------------------------------------------------------------------------------------------------
LSA Diversified Mid-Cap $38 $115 $195 $405
- --------------------------------------------------------------------------------------------------
LSA Focused Equity $38 $116 $197 $410
- --------------------------------------------------------------------------------------------------
LSA Growth Equity $37 $113 $192 $400
- --------------------------------------------------------------------------------------------------
MFS Emerging Growth $37 $113 $191 $398
- --------------------------------------------------------------------------------------------------
MFS Investors Trust $37 $113 $192 $400
- --------------------------------------------------------------------------------------------------
MFS New Discovery $39 $118 $200 $415
- --------------------------------------------------------------------------------------------------
MFS Research $37 $113 $192 $400
- --------------------------------------------------------------------------------------------------
MFS Utilities $38 $114 $194 $404
- --------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth $32 $ 99 $169 $356
- --------------------------------------------------------------------------------------------------
Oppenheimer Capital Appreciation $32 $ 99 $169 $356
- --------------------------------------------------------------------------------------------------
Oppenheimer Global Securities $33 $100 $170 $358
- --------------------------------------------------------------------------------------------------
Oppenheimer Main Street Growth & Income Fund $33 $101 $171 $361
- --------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund/VA $34 $103 $174 $367
- --------------------------------------------------------------------------------------------------
Putnam VT Growth and Income $33 $102 $173 $364
- --------------------------------------------------------------------------------------------------
16
- --------------------------------------------------------------------------------------------------
Putnam VT Growth Opportunities $37 $112 $190 $396
- --------------------------------------------------------------------------------------------------
Putnam VT Health Sciences $36 $110 $187 $390
- --------------------------------------------------------------------------------------------------
Putnam VT International Growth $38 $115 $194 $404
- --------------------------------------------------------------------------------------------------
Putnam VT New Value $36 $110 $187 $390
- --------------------------------------------------------------------------------------------------
Putnam VT Research $36 $109 $184 $386
- --------------------------------------------------------------------------------------------------
Van Kampen UIF Core Plus Fixed Income $33 $100 $170 $359
- --------------------------------------------------------------------------------------------------
Van Kampen UIF Global Value Equity $39 $117 $199 $412
- --------------------------------------------------------------------------------------------------
Van Kampen UIF Mid Cap Value $37 $112 $190 $396
- --------------------------------------------------------------------------------------------------
Van Kampen UIF U.S. Real Estate $38 $114 $192 $401
- --------------------------------------------------------------------------------------------------
Van Kampen UIF Value $26 $ 79 $135 $290
- --------------------------------------------------------------------------------------------------
PLEASE REMEMBER THAT YOU ARE LOOKING AT EXAMPLES AND NOT A REPRESENTATION OF
PAST OR FUTURE EARNINGS. YOUR ACTUAL EXPENSES MAY BE LOWER OR GREATER THAN THOSE
SHOWN ABOVE. SIMILARLY, YOUR RATE OF RETURN MAY BE LOWER OR GREATER THAN 5%,
WHICH IS NOT GUARANTEED. THE EXAMPLES ARE BASED ON THE EXPENSES SHOWN IN THE
PORTFOLIO ANNUAL EXPENSES TABLE, WHICH REFLECTS CERTAIN WAIVER AND REIMBURSEMENT
ARRANGEMENTS AS EXPLAINED IN THE FOOTNOTES TO THE TABLE. THE EXAMPLES ASSUME
THOSE ARRANGEMENTS REMAIN IN EFFECT FOR THE PERIODS PRESENTED. THE ABOVE
EXAMPLES ASSUME THE ELECTION OF THE ENHANCED DEATH BENEFIT AND INCOME BENEFIT
RIDERS WITH A TOTAL MORTALITY AND EXPENSE RISK CHARGE OF 1.95% FOR ALLSTATE
PROVIDER ADVANTAGE CONTRACTS AND THE ENHANCED EARNINGS DEATH BENEFIT RIDER WITH
AN ANNUAL FEE OF 0.35%. IF THOSE RIDERS WERE NOT ELECTED, THE EXPENSE FIGURES
SHOWN ABOVE WOULD BE SLIGHTLY LOWER. TO REFLECT THE CONTRACT MAINTENANCE CHARGE
IN THE EXAMPLES, WE ESTIMATED AN EQUIVALENT PERCENTAGE CHARGE, BASED ON AN
ASSUMED AVERAGE CONTRACT SIZE OF $81,342.
17
EXAMPLE 2 (ALLSTATE PROVIDER EXTRA CONTRACTS)
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,
... elected the Enhanced Death Benefit and Income Benefit Riders, and
... elected the Enhanced Earnings Death Benefit Rider (assuming Contract owner is
age 66-75 on the Rider Application Date).
THE EXAMPLE DOES NOT INCLUDE ANY TAXES OR TAX PENALTIES YOU MAY BE REQUIRED TO
PAY IF YOU SURRENDER YOUR CONTRACT OR RECEIVE INCOME PAYMENTS.
Variable Sub-Account 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------------------------
AIM V.I. Aggressive Growth $107 $179 $245 $421
- --------------------------------------------------------------------------------------------------
AIM V.I. Balanced $106 $176 $240 $412
- --------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation $103 $168 $226 $386
- --------------------------------------------------------------------------------------------------
AIM V.I. Core Equity $103 $167 $225 $383
- --------------------------------------------------------------------------------------------------
AIM V.I. Dent Demographic Trends $110 $186 $256 $442
- --------------------------------------------------------------------------------------------------
AIM V.I. Diversified Income $104 $170 $230 $393
- --------------------------------------------------------------------------------------------------
AIM V.I. Growth $104 $169 $228 $389
- --------------------------------------------------------------------------------------------------
AIM V.I. International Growth $106 $174 $236 $405
- --------------------------------------------------------------------------------------------------
AIM V.I. Premier Equity $103 $168 $226 $386
- --------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth $103 $165 $223 $379
- --------------------------------------------------------------------------------------------------
Dreyfus Stock Index $ 97 $149 $195 $325
- --------------------------------------------------------------------------------------------------
Dreyfus VIF - Growth & Income $103 $166 $224 $381
- --------------------------------------------------------------------------------------------------
Dreyfus VIF - Money Market $100 $159 $212 $358
- --------------------------------------------------------------------------------------------------
Fidelity VIP Asset Manager: Growth $105 $172 $234 $400
- --------------------------------------------------------------------------------------------------
Fidelity VIP Contrafund $104 $170 $231 $394
- --------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income $103 $167 $226 $385
- --------------------------------------------------------------------------------------------------
Fidelity VIP Growth $104 $170 $230 $393
- --------------------------------------------------------------------------------------------------
Fidelity VIP High Income $105 $172 $233 $398
- --------------------------------------------------------------------------------------------------
Fidelity Small Cap $105 $173 $234 $401
- --------------------------------------------------------------------------------------------------
Fidelity Technology Securities $108 $181 $248 $427
- --------------------------------------------------------------------------------------------------
Mutual Shares Securities $105 $174 $236 $404
- --------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities $114 $198 $275 $477
- --------------------------------------------------------------------------------------------------
Templeton Foreign Securities $107 $177 $242 $415
- --------------------------------------------------------------------------------------------------
Goldman Sachs VIT CORE/SM /Small Cap Equity $107 $179 $245 $422
- --------------------------------------------------------------------------------------------------
Goldman Sachs VIT CORE/SM/U.S. Equity $103 $167 $225 $383
- --------------------------------------------------------------------------------------------------
LSA Diversified Mid-Cap $107 $179 $244 $420
- --------------------------------------------------------------------------------------------------
LSA Focused Equity $108 $180 $247 $424
- --------------------------------------------------------------------------------------------------
LSA Growth Equity $107 $177 $242 $415
- --------------------------------------------------------------------------------------------------
MFS Emerging Growth $106 $176 $240 $412
- --------------------------------------------------------------------------------------------------
MFS Investors Trust $107 $177 $242 $415
- --------------------------------------------------------------------------------------------------
MFS New Discovery $108 $182 $250 $430
- --------------------------------------------------------------------------------------------------
MFS Research $107 $177 $242 $415
- --------------------------------------------------------------------------------------------------
MFS Utilities $107 $178 $243 $418
- --------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth $102 $162 $217 $369
- --------------------------------------------------------------------------------------------------
Oppenheimer Capital Appreciation $102 $162 $217 $369
- --------------------------------------------------------------------------------------------------
Oppenheimer Global Securities $102 $163 $218 $371
- --------------------------------------------------------------------------------------------------
Oppenheimer Main Street Growth & Income Fund $102 $164 $220 $374
- --------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund/VA $103 $166 $223 $380
- --------------------------------------------------------------------------------------------------
Putnam VT Growth and Income $102 $165 $222 $377
- --------------------------------------------------------------------------------------------------
18
- --------------------------------------------------------------------------------------------------
Putnam VT Growth Opportunities $106 $175 $239 $410
- --------------------------------------------------------------------------------------------------
Putnam VT Health Sciences $105 $174 $236 $404
- --------------------------------------------------------------------------------------------------
Putnam VT International Growth $107 $178 $244 $419
- --------------------------------------------------------------------------------------------------
Putnam VT New Value $105 $174 $236 $404
- --------------------------------------------------------------------------------------------------
Putnam VT Research $105 $172 $233 $399
- --------------------------------------------------------------------------------------------------
Van Kampen UIF Core Plus Fixed Income $102 $163 $219 $372
- --------------------------------------------------------------------------------------------------
Van Kampen UIF Global Value Equity $108 $181 $248 $427
- --------------------------------------------------------------------------------------------------
Van Kampen UIF Mid Cap Value $106 $175 $239 $410
- --------------------------------------------------------------------------------------------------
Van Kampen UIF U.S. Real Estate $107 $177 $242 $415
- --------------------------------------------------------------------------------------------------
Van Kampen UIF Value $104 $170 $230 $393
- --------------------------------------------------------------------------------------------------
19
EXAMPLE 3 (ALLSTATE PROVIDER EXTRA CONTRACTS)
Same assumptions as Example 2 above, except that you decide not to surrender
your Contract, or you began receiving income payments for a specified period of
at least 120 months, at the end of the time period.
Variable Sub-Account 1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------------------
AIM V.I. Aggressive Growth $39 $119 $202 $421
- ---------------------------------------------------------------------------------------
AIM V.I. Balanced $38 $117 $198 $412
- ---------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation $35 $108 $184 $386
- ---------------------------------------------------------------------------------------
AIM V.I. Core Equity $35 $107 $182 $383
- ---------------------------------------------------------------------------------------
AIM V.I. Dent Demographic Trends $42 $127 $214 $442
- ---------------------------------------------------------------------------------------
AIM V.I. Diversified Income $36 $111 $188 $393
- ---------------------------------------------------------------------------------------
AIM V.I. Growth $36 $109 $185 $389
- ---------------------------------------------------------------------------------------
AIM V.I. International Growth $38 $114 $194 $405
- ---------------------------------------------------------------------------------------
AIM V.I. Premier Equity $35 $108 $184 $386
- ---------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth $35 $106 $180 $379
- ---------------------------------------------------------------------------------------
Dreyfus Stock Index $29 $ 89 $153 $325
- ---------------------------------------------------------------------------------------
Dreyfus VIF - Growth & Income $35 $107 $181 $381
- ---------------------------------------------------------------------------------------
Dreyfus VIF - Money Market $32 $100 $170 $358
- ---------------------------------------------------------------------------------------
Fidelity VIP Asset Manager: Growth $37 $113 $191 $400
- ---------------------------------------------------------------------------------------
Fidelity VIP Contrafund $36 $111 $188 $394
- ---------------------------------------------------------------------------------------
Fidelity VIP Equity-Income $35 $108 $183 $385
- ---------------------------------------------------------------------------------------
Fidelity VIP Growth $36 $111 $188 $393
- ---------------------------------------------------------------------------------------
Fidelity VIP High Income $37 $112 $190 $398
- ---------------------------------------------------------------------------------------
Fidelity Small Cap $37 $113 $192 $401
- ---------------------------------------------------------------------------------------
Fidelity Technology Securities $40 $122 $206 $427
- ---------------------------------------------------------------------------------------
Mutual Shares Securities $37 $114 $193 $404
- ---------------------------------------------------------------------------------------
Templeton Developing Markets Securities $46 $138 $233 $477
- ---------------------------------------------------------------------------------------
Templeton Foreign Securities $39 $118 $199 $415
- ---------------------------------------------------------------------------------------
Goldman Sachs VIT CORE/SM /Small Cap Equity $39 $120 $203 $422
- ---------------------------------------------------------------------------------------
Goldman Sachs VIT CORE/SM/U.S. Equity $35 $107 $182 $383
- ---------------------------------------------------------------------------------------
LSA Diversified Mid-Cap $39 $119 $202 $420
- ---------------------------------------------------------------------------------------
LSA Focused Equity $40 $121 $204 $424
- ---------------------------------------------------------------------------------------
LSA Growth Equity $39 $118 $199 $415
- ---------------------------------------------------------------------------------------
MFS Emerging Growth $38 $117 $198 $412
- ---------------------------------------------------------------------------------------
MFS Investors Trust $39 $118 $199 $415
- ---------------------------------------------------------------------------------------
MFS New Discovery $40 $123 $207 $430
- ---------------------------------------------------------------------------------------
MFS Research $39 $118 $199 $415
- ---------------------------------------------------------------------------------------
MFS Utilities $39 $119 $201 $418
- ---------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth $34 $103 $175 $369
- ---------------------------------------------------------------------------------------
Oppenheimer Capital Appreciation $34 $103 $175 $369
- ---------------------------------------------------------------------------------------
Oppenheimer Global Securities $34 $103 $176 $371
- ---------------------------------------------------------------------------------------
Oppenheimer Main Street Growth & Income Fund $34 $104 $177 $374
- ---------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund/VA $35 $106 $181 $380
- ---------------------------------------------------------------------------------------
Putnam VT Growth and Income $34 $105 $179 $377
- ---------------------------------------------------------------------------------------
Putnam VT Growth Opportunities $38 $116 $197 $410
- ---------------------------------------------------------------------------------------
Putnam VT Health Sciences $37 $114 $193 $404
- ---------------------------------------------------------------------------------------
Putnam VT International Growth $39 $119 $201 $419
- ---------------------------------------------------------------------------------------
Putnam VT New Value $37 $114 $193 $404
- ---------------------------------------------------------------------------------------
Putnam VT Research $37 $113 $191 $399
- ---------------------------------------------------------------------------------------
Van Kampen UIF Core Plus Fixed Income $34 $104 $176 $372
- ---------------------------------------------------------------------------------------
Van Kampen UIF Global Value Equity $40 $122 $206 $427
- ---------------------------------------------------------------------------------------
20
- ---------------------------------------------------------------------------------------
Van Kampen UIF Mid Cap Value $38 $116 $197 $410
- ---------------------------------------------------------------------------------------
Van Kampen UIF U.S. Real Estate $39 $118 $199 $415
- ---------------------------------------------------------------------------------------
Van Kampen UIF Value $36 $111 $188 $393
- ---------------------------------------------------------------------------------------
PLEASE REMEMBER THAT YOU ARE LOOKING AT EXAMPLES AND NOT A REPRESENTATION OF
PAST OR FUTURE EARNINGS. YOUR ACTUAL EXPENSES MAY BE LOWER OR GREATER THAN THOSE
SHOWN ABOVE. SIMILARLY, YOUR RATE OF RETURN MAY BE LOWER OR GREATER THAN 5%,
WHICH IS NOT GUARANTEED. THE EXAMPLES ARE BASED ON THE EXPENSES SHOWN IN THE
PORTFOLIO ANNUAL EXPENSES TABLE, WHICH REFLECTS CERTAIN WAIVER AND REIMBURSEMENT
ARRANGEMENTS AS EXPLAINED IN THE FOOTNOTES TO THE TABLE. THE EXAMPLES ASSUME
THOSE ARRANGEMENTS REMAIN IN EFFECT FOR THE PERIODS PRESENTED. THE EXAMPLES
ASSUME THAT ANY PORTFOLIO EXPENSE WAIVERS OR REIMBURSEMENT ARRANGEMENTS
DESCRIBED IN THE FOOTNOTES TO THE PORTFOLIO ANNUAL EXPENSE TABLE ARE IN EFFECT
FOR THE PERIODS PRESENTED. THE ABOVE EXAMPLES ASSUME THE ELECTION OF THE
ENHANCED DEATH BENEFIT AND INCOME BENEFIT RIDERS WITH A TOTAL MORTALITY AND
EXPENSE RISK CHARGE OF 1.90% FOR ALLSTATE PROVIDER EXTRA CONTRACTS AND THE
ENHANCED EARNINGS DEATH BENEFIT RIDER WITH AN ANNUAL FEE OF 0.35%. IF THOSE
RIDERS WERE NOT ELECTED, THE EXPENSE FIGURES SHOWN ABOVE WOULD BE SLIGHTLY
LOWER. TO REFLECT THE CONTRACT MAINTENANCE CHARGE IN THE EXAMPLES, WE ESTIMATED
AN EQUIVALENT PERCENTAGE CHARGE, BASED ON AN ASSUMED AVERAGE CONTRACT SIZE OF
$26,440.
21
EXAMPLE 4 (ALLSTATE PROVIDER ULTRA CONTRACTS)
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 n your investment,
... surrendered your Contract, or you began receiving income payments for a
specified period of less tan 120 months, at the end of each time period,
... elected the Enhanced Death Benefit and Income Benefit Riders, and
... elected the Enhanced Earnings Death Benefit Rider (assuming Contract owner is
age 66-75 on the Rider Application Date).
THE EXAMPLE DOES NOT INCLUDE ANY TAXES OR TAX PENALTIES YOU MAY BE REQUIRED TO
PAY IF YOU SURRENDER YOUR CONTRACT OR RECEIVE INCOME PAYMENTS.
Variable Sub-Account 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------------------------
AIM V.I. Aggressive Growth $87 $152 $219 $388
- --------------------------------------------------------------------------------------------------
AIM V.I. Balanced $86 $149 $215 $379
- --------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation $83 $141 $202 $354
- --------------------------------------------------------------------------------------------------
AIM V.I. Core Equity $83 $140 $200 $351
- --------------------------------------------------------------------------------------------------
AIM V.I. Dent Demographic Trends $89 $159 $231 $409
- --------------------------------------------------------------------------------------------------
AIM V.I. Diversified Income $84 $143 $206 $361
- --------------------------------------------------------------------------------------------------
AIM V.I. Growth $83 $142 $203 $357
- --------------------------------------------------------------------------------------------------
AIM V.I. International Growth $85 $147 $212 $373
- --------------------------------------------------------------------------------------------------
AIM V.I. Premier Equity $83 $141 $202 $354
- --------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth $82 $139 $198 $347
- --------------------------------------------------------------------------------------------------
Dreyfus Stock Index $77 $123 $172 $295
- --------------------------------------------------------------------------------------------------
Dreyfus VIF - Growth & Income $83 $139 $199 $349
- --------------------------------------------------------------------------------------------------
Dreyfus VIF - Money Market $80 $133 $188 $327
- --------------------------------------------------------------------------------------------------
Fidelity VIP Asset Manager: Growth $85 $145 $209 $368
- --------------------------------------------------------------------------------------------------
Fidelity VIP Contrafund $84 $144 $206 $362
- --------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income $83 $141 $201 $353
- --------------------------------------------------------------------------------------------------
Fidelity VIP Growth $84 $143 $206 $361
- --------------------------------------------------------------------------------------------------
Fidelity VIP High Income $84 $145 $208 $366
- --------------------------------------------------------------------------------------------------
Fidelity Small Cap $85 $146 $210 $369
- --------------------------------------------------------------------------------------------------
Fidelity Technology Securities $88 $154 $223 $394
- --------------------------------------------------------------------------------------------------
Mutual Shares Securities $85 $147 $211 $372
- --------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities $93 $170 $249 $443
- --------------------------------------------------------------------------------------------------
Templeton Foreign Securities $86 $150 $216 $382
- --------------------------------------------------------------------------------------------------
Goldman Sachs VIT CORE/SM /Small Cap Equity $87 $152 $220 $389
- --------------------------------------------------------------------------------------------------
Goldman Sachs VIT CORE/SM/U.S. Equity $83 $140 $200 $351
- --------------------------------------------------------------------------------------------------
LSA Diversified Mid-Cap $87 $152 $219 $387
- --------------------------------------------------------------------------------------------------
LSA Focused Equity $87 $153 $221 $392
- --------------------------------------------------------------------------------------------------
LSA Growth Equity $86 $150 $216 $382
- --------------------------------------------------------------------------------------------------
MFS Emerging Growth $86 $149 $215 $379
- --------------------------------------------------------------------------------------------------
MFS Investors Trust $86 $150 $216 $382
- --------------------------------------------------------------------------------------------------
MFS New Discovery $88 $155 $224 $397
- --------------------------------------------------------------------------------------------------
MFS Research $86 $150 $216 $382
- --------------------------------------------------------------------------------------------------
MFS Utilities $87 $151 $218 $385
- --------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth $81 $136 $193 $337
- --------------------------------------------------------------------------------------------------
Oppenheimer Capital Appreciation $81 $136 $193 $337
- --------------------------------------------------------------------------------------------------
Oppenheimer Global Securities $82 $136 $194 $339
- --------------------------------------------------------------------------------------------------
Oppenheimer Main Street Growth & Income Fund $82 $137 $196 $342
- --------------------------------------------------------------------------------------------------
22
- --------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund/VA $83 $139 $199 $348
- --------------------------------------------------------------------------------------------------
Putnam VT Growth and Income $82 $138 $197 $345
- --------------------------------------------------------------------------------------------------
Putnam VT Growth Opportunities $86 $148 $214 $378
- --------------------------------------------------------------------------------------------------
Putnam VT Health Sciences $85 $147 $211 $372
- --------------------------------------------------------------------------------------------------
Putnam VT International Growth $87 $151 $218 $386
- --------------------------------------------------------------------------------------------------
Putnam VT New Value $85 $147 $211 $372
- --------------------------------------------------------------------------------------------------
Putnam VT Research $85 $145 $209 $367
- --------------------------------------------------------------------------------------------------
Van Kampen UIF Core Plus Fixed Income $82 $137 $194 $340
- --------------------------------------------------------------------------------------------------
Van Kampen UIF Global Value Equity $88 $154 $223 $394
- --------------------------------------------------------------------------------------------------
Van Kampen UIF Mid Cap Value $86 $148 $214 $378
- --------------------------------------------------------------------------------------------------
Van Kampen UIF U.S. Real Estate $86 $150 $216 $382
- --------------------------------------------------------------------------------------------------
Van Kampen UIF Value $84 $143 $206 $361
- --------------------------------------------------------------------------------------------------
23
EXAMPLE 5 (ALLSTATE PROVIDER ULTRA CONTRACTS)
Same assumptions as Example 2 above, except that you decide not to surrender
your Contract, or you began receiving income payments for a specified period of
at least 120 months, at the end of the time period.
Variable Sub-Account 1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------------------
AIM V.I. Aggressive Growth $36 $109 $185 $388
- ---------------------------------------------------------------------------------------
AIM V.I. Balanced $35 $107 $181 $379
- ---------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation $32 $ 98 $168 $354
- ---------------------------------------------------------------------------------------
AIM V.I. Core Equity $32 $ 97 $166 $351
- ---------------------------------------------------------------------------------------
AIM V.I. Dent Demographic Trends $38 $116 $197 $409
- ---------------------------------------------------------------------------------------
AIM V.I. Diversified Income $33 $101 $172 $361
- ---------------------------------------------------------------------------------------
AIM V.I. Growth $32 $ 99 $169 $357
- ---------------------------------------------------------------------------------------
AIM V.I. International Growth $34 $104 $178 $373
- ---------------------------------------------------------------------------------------
AIM V.I. Premier Equity $32 $ 98 $168 $354
- ---------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth $31 $ 96 $164 $347
- ---------------------------------------------------------------------------------------
Dreyfus Stock Index $26 $ 80 $138 $295
- ---------------------------------------------------------------------------------------
Dreyfus VIF - Growth & Income $32 $ 97 $165 $349
- ---------------------------------------------------------------------------------------
Dreyfus VIF - Money Market $29 $ 90 $154 $327
- ---------------------------------------------------------------------------------------
Fidelity VIP Asset Manager: Growth $34 $103 $175 $368
- ---------------------------------------------------------------------------------------
Fidelity VIP Contrafund $33 $101 $172 $362
- ---------------------------------------------------------------------------------------
Fidelity VIP Equity-Income $32 $ 98 $167 $353
- ---------------------------------------------------------------------------------------
Fidelity VIP Growth $33 $101 $172 $361
- ---------------------------------------------------------------------------------------
Fidelity VIP High Income $33 $102 $174 $366
- ---------------------------------------------------------------------------------------
Fidelity Small Cap $34 $103 $176 $369
- ---------------------------------------------------------------------------------------
Fidelity Technology Securities $37 $111 $189 $394
- ---------------------------------------------------------------------------------------
Mutual Shares Securities $34 $104 $177 $372
- ---------------------------------------------------------------------------------------
Templeton Developing Markets Securities $42 $128 $215 $443
- ---------------------------------------------------------------------------------------
Templeton Foreign Securities $35 $108 $182 $382
- ---------------------------------------------------------------------------------------
Goldman Sachs VIT CORE/SM /Small Cap Equity $36 $110 $186 $389
- ---------------------------------------------------------------------------------------
Goldman Sachs VIT CORE/SM/U.S. Equity $32 $ 97 $166 $351
- ---------------------------------------------------------------------------------------
LSA Diversified Mid-Cap $36 $109 $185 $387
- ---------------------------------------------------------------------------------------
LSA Focused Equity $36 $111 $187 $392
- ---------------------------------------------------------------------------------------
LSA Growth Equity $35 $108 $182 $382
- ---------------------------------------------------------------------------------------
MFS Emerging Growth $35 $107 $181 $379
- ---------------------------------------------------------------------------------------
MFS Investors Trust $35 $108 $182 $382
- ---------------------------------------------------------------------------------------
MFS New Discovery $37 $112 $190 $397
- ---------------------------------------------------------------------------------------
MFS Research $35 $108 $182 $382
- ---------------------------------------------------------------------------------------
MFS Utilities $36 $108 $184 $385
- ---------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth $30 $ 93 $159 $337
- ---------------------------------------------------------------------------------------
Oppenheimer Capital Appreciation $30 $ 93 $159 $337
- ---------------------------------------------------------------------------------------
Oppenheimer Global Securities $31 $ 94 $160 $339
- ---------------------------------------------------------------------------------------
Oppenheimer Main Street Growth & Income Fund $31 $ 95 $162 $342
- ---------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund/VA $32 $ 97 $165 $348
- ---------------------------------------------------------------------------------------
Putnam VT Growth and Income $31 $ 96 $163 $345
- ---------------------------------------------------------------------------------------
Putnam VT Growth Opportunities $35 $106 $180 $378
- ---------------------------------------------------------------------------------------
Putnam VT Health Sciences $34 $104 $177 $372
- ---------------------------------------------------------------------------------------
Putnam VT International Growth $36 $109 $184 $386
- ---------------------------------------------------------------------------------------
Putnam VT New Value $34 $104 $177 $372
- ---------------------------------------------------------------------------------------
Putnam VT Research $34 $103 $175 $367
- ---------------------------------------------------------------------------------------
Van Kampen UIF Core Plus Fixed Income $31 $ 94 $160 $340
- ---------------------------------------------------------------------------------------
Van Kampen UIF Global Value Equity $37 $111 $189 $394
- ---------------------------------------------------------------------------------------
24
- ---------------------------------------------------------------------------------------
Van Kampen UIF Mid Cap Value $35 $106 $180 $378
- ---------------------------------------------------------------------------------------
Van Kampen UIF U.S. Real Estate $35 $108 $182 $382
- ---------------------------------------------------------------------------------------
Van Kampen UIF Value $33 $101 $172 $361
- ---------------------------------------------------------------------------------------
PLEASE REMEMBER THAT YOU ARE LOOKING AT EXAMPLES AND NOT A REPRESENTATION OF
PAST OR FUTURE EARNINGS. YOUR ACTUAL EXPENSES MAY BE LOWER OR GREATER THAN THOSE
SHOWN ABOVE. SIMILARLY, YOUR RATE OF RETURN MAY BE LOWER OR GREATER THAN 5%,
WHICH IS NOT GUARANTEED. THE EXAMPLES ARE BASED ON THE EXPENSE SHOWN IN THE
PORTFOLIO ANNUAL EXPENSES TABLE, WHICH REFLECTS CERTAIN WAIVER AND REIMBURSEMENT
ARRANGEMENTS AS EXPLAINED IN THE FOOTNOTES TO THE TABLE. THE EXAMPLES ASSUME
THOSE ARRANGEMENTS REMAIN IN EFFECT FOR THE PERIODS PRESENTED. THE ABOVE
EXAMPLES ASSUME THE ELECTION OF THE ENHANCED DEATH BENEFIT AND INCOME BENEFIT
RIDERS WITH A TOTAL MORTALITY AND EXPENSE RISK CHARGE OF 1.75% FOR ALLSTATE
PROVIDER ULTRA CONTRACTS AND THE ENHANCED EARNINGS DEATH BENEFIT RIDER WITH AN
ANNUAL FEE OF 0.35%. IF THOSE RIDERS WERE NOT ELECTED, THE EXPENSE FIGURES SHOWN
ABOVE WOULD BE SLIGHTLY LOWER. TO REFLECT THE CONTRACT MAINTENANCE CHARGE IN THE
EXAMPLES, WE ESTIMATED AN EQUIVALENT PERCENTAGE CHARGE, BASED ON AN ASSUMED
AVERAGE CONTRACT SIZE OF $75,569.
25
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 which
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 we first offered the
Contracts.
To obtain a fuller picture of each Variable Sub-Account's finances, please refer
to the Variable Account's financial statements contained in the Statement of
Additional Information. The financial statements of Glenbrook also appear in the
Statement of Additional Information.
26
THE CONTRACT
- --------------------------------------------------------------------------------
CONTRACT OWNER
Each Contract is an agreement between you, the Contract Owner, and Glenbrook, a
life insurance company. As the Contract Owner, you may exercise all of the
rights and privileges provided to you by the Contract. That means it is up to
you to select or change (to the extent permitted):
... the investment alternatives during the Accumulation and Payout Phases,
... the amount and timing of your purchase payments and withdrawals,
... the programs you want to use to invest or withdraw money,
... the income payment plan you want to use to receive retirement income,
... the Annuitant (either yourself or someone else) on whose life the income
payments will be based,
... the Beneficiary or Beneficiaries who will receive the benefits that the
Contract provides when the last surviving Contract owner 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 this section and the Death
Benefits section.The maximum age of any Contract owner on the date we receive
the completed application for each Contract is as follows:
... 90 - Allstate Provider Advantage
... 90 - Allstate Provider Ultra
... 80 - Allstate Provider Extra
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.
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.
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 33.
ANNUITANT
The Annuitant is the individual whose life determines the amount and duration of
income payments (other than under Income Plans with guaranteed payments for a
specified period). You initially designate an Annuitant in your application. 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.
The maximum age of any Annuitant on the date we receive the completed
application for each Contract is as follows:
... 90 - Allstate Provider Advantage
... 90 - Allstate Provider Ultra
... 80 - Allstate Provider Extra
BENEFICIARY
You may name one or more primary and contingent Beneficiaries when you apply for
a Contract. The primary Beneficiary is the person who may elect to receive the
death benefit or become the new Contract Owner pursuant to the Contract 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 primary
Beneficiary will receive any guaranteed income payments scheduled to continue.
A contingent Beneficiary is the person selected by the Contract Owner who will
exercise the rights of the primary 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
27
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. Accordingly, if you wish
to change your Beneficiary, you should deliver your written notice to us
promptly. Each beneficiary 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 benefit among
the surviving Beneficiaries according to your most recent written instructions.
If you have not given us written instructions, we will pay the death benefit in
equal amounts to the surviving Beneficiaries.
If there is more than one Beneficiary in a class and one of the Beneficiaries
predeceases the Owner, the remaining Beneficiaries in that class will divide the
deceased Beneficiary share in proportion to the original share of the remaining
Beneficiaries.
If there is more than one Beneficiary taking shares of the death proceeds, each
Beneficiary will be treated as a separate and independent owner of his or her
respective share of the death proceeds. Each Beneficiary will exercise all
rights related to his or her share of the death proceeds, 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. If there is more than
one Beneficiary and one of the Beneficiaries is a corporation or other type of
non-natural person, all Beneficiaries will be considered to be non-natural
persons for the above purposes.
MODIFICATION OF THE CONTRACT
Only a Glenbrook officer may approve a change in or waive any provision of the
Contract. Any change or waiver must be in writing. None of our agents have the
authority to change or waive the provisions of the Contract. We may not change
the terms of the Contract without your consent, except to conform the Contract
to applicable law or changes in the law. If a provision of the Contract is
inconsistent with state law, we will follow state law.
ASSIGNMENT
No owner has a right to 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 AN
ATTORNEY BEFORE TRYING TO ASSIGN YOUR CONTRACT.
PURCHASES
- --------------------------------------------------------------------------------
MINIMUM PURCHASE PAYMENTS
Your initial purchase payment must be at least $5,000 ($2,000 for a Qualified
Contract). All subsequent purchase payments must be $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. The most
we will accept without our prior approval is $1,000,000. We reserve the right to
limit the availability of investment alternatives. We also reserve the right to
reject any application.
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 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.
28
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.
CREDIT ENHANCEMENT (ALLSTATE PROVIDER EXTRA CONTRACTS only)
Each time you make a purchase payment, we will add to your Contract Value a
Credit Enhancement equal to 4% of the purchase payment.
We will allocate any Credit Enhancements to the investment alternatives
according to the allocation instructions you have on file with us at the time we
receive your purchase payment. We will allocate each Credit Enhancement among
the investment alternatives in the same proportions as the corresponding
purchase payment (except that any portion of the Credit Enhancement
corresponding to the value in any Fixed Account Option will instead be allocated
to the money market Variable Sub-account). Thereafter you may instruct us to
allocate these funds to any investment alternative you choose.
Credit Enhancements are treated as "earnings" for purposes of determining
withdrawal charges and free withdrawal amounts on surrenders and partial
withdrawals. Similarly, we do not consider Credit Enhancements to be investments
in the Contract for income tax purposes.
We use a portion of the withdrawal charge and mortality and expense risk charge
to help recover the cost of providing the Credit Enhancement under the Contract.
See "Expenses." Under certain circumstances (such as a period of poor market
performance) the cost associated with the Credit Enhancement may exceed the sum
of the Credit Enhancement and any related earnings. You should consider this
possibility before purchasing the Contract.
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 including the deduction of mortality and expense risk charges and
administrative expense charges that occurred from the date of allocation through
the date of cancellation. Some states may require us to return a greater amount
to you. If this Contract is qualified under Section 408 of the Internal Revenue
Code, we will refund the greater of any purchase payments or the Contract Value.
For ALLSTATE PROVIDER EXTRA CONTRACTS, the amount we return to you upon exercise
of this Right to Cancel will not include any Credit Enhancement or the amount of
charges deducted prior to cancellation but will reflect, except in states where
we are required to return the amount of your purchase payments, any investment
gain or loss associated with your Variable Account purchase payments and with
the Credit Enhancement.
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, we will allocate the amount in the Money Market Variable
Sub-Account to the Variable Sub-Account as you originally designated.
CONTRACT VALUE
- --------------------------------------------------------------------------------
On the Issue Date, the Contract Value is equal to:
... your initial purchase payment for ALLSTATE PROVIDER ADVANTAGE CONTRACTS and
ALLSTATE PROVIDER ULTRA CONTRACTS
... your initial purchase payment plus the Credit Enhancement for ALLSTATE
PROVIDER EXTRA CONTRACTS.
Your Contract Value at any time during the Accumulation Phase is equal to the
sum of the value of
29
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. For ALLSTATE PROVIDER EXTRA CONTRACTS, we would
also credit an additional 40 Accumulation Units of that Variable Sub-Account to
your Contract to reflect the 4% Credit Enhancement on your purchase payment.
See "Credit Enhancement." Withdrawals and transfers from a Variable
Sub-Account would, of course, reduce the number of Accumulation Units of that
Sub-Account allocated to your Contract.
ACCUMULATION UNIT VALUE
As a general matter, the Accumulation Unit Value for each Variable Sub-Account
will rise or fall to reflect:
... changes in the share price of the Portfolio in which the Variable Sub-Account
invests, and
... the deduction of amounts reflecting the mortality and expense risk charge,
administrative expense charge, and any provision for taxes that have accrued
since we last calculated the Accumulation Unit Value.
We determine contract maintenance charges, withdrawal charges (ALLSTATE PROVIDER
ULTRA CONTRACTS and ALLSTATE PROVIDER EXTRA CONTRACTS only), Enhanced Earnings
Death Benefit charges (if applicable) 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 Income
Benefit Rider, and the Enhanced Death Benefit Rider with the Income Benefit
Rider.
YOU SHOULD REFER TO THE PROSPECTUSES FOR THE FUNDS THAT ACCOMPANY THIS
PROSPECTUS FOR A DESCRIPTION OF HOW THE ASSETS OF EACH PORTFOLIO ARE VALUED,
SINCE THAT DETERMINATION DIRECTLY BEARS ON THE ACCUMULATION UNIT VALUE OF THE
CORRESPONDING VARIABLE SUB-ACCOUNT AND, THEREFORE, YOUR CONTRACT VALUE.
30
INVESTMENT ALTERNATIVES: THE VARIABLE SUB-ACCOUNTS
- --------------------------------------------------------------------------------
You may allocate your purchase payments to up to 49 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 Funds. You should carefully review the Fund prospectuses before allocating
amounts to the Variable Sub-Accounts.
Portfolio Each Portfolio Seeks Advisor
- -------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS (1)
- -------------------------------------------------------------------------------
AIM V.I. Aggressive Long-term growth of capital
Growth Fund
- -----------------------------------------------------------------------------
AIM V.I. Balanced Fund achieve 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 secondary
Fund objective of current income
- -----------------------------------------------------------------------------
AIM V.I. Dent Long-term growth of capital A I M ADVISORS, INC.
Demographic Trends
Fund
- -----------------------------------------------------------------------------
AIM V.I. Diversified A high level of current income
Income Fund
- -----------------------------------------------------------------------------
AIM V.I. Growth Fund Growth of capital
- -----------------------------------------------------------------------------
AIM V.I. International Long-term growth of capital
Growth Fund
- -----------------------------------------------------------------------------
AIM V.I. Premier Fund Long-term growth of capital. Income is 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 Capital growth and, secondarily, current income
Responsible Growth
Fund
THE DREYFUS CORPORATION
- -----------------------------------------------------------------------------
Dreyfus Stock Index To match the total return of the Standard & Poor's
Fund 500 Composite Stock Price Index
- -----------------------------------------------------------------------------
Dreyfus VIF Growth & Long-term capital growth, current income and growth
Income Portfolio of income, consistent with reasonable investment
risk
- -----------------------------------------------------------------------------
Dreyfus VIF Money A high level of current income as is consistent
Market Portfolio with the preservation of capital and the
maintenance of liquidity
- -----------------------------------------------------------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Asset To maximize total return by allocating assets among
Manager Growth stocks, bonds, short-term instruments and other
Portfolio-Service investments
Class 2
FIDELITY MANAGEMENT & RESEARCH COMPANY
- -----------------------------------------------------------------------------
Fidelity VIP Long-term capital appreciation
Contrafund Portfolio -
Service Class 2
- -----------------------------------------------------------------------------
Fidelity VIP Reasonable income
Equity-Income
Portfolio - Service
Class 2
- -----------------------------------------------------------------------------
Fidelity VIP Growth Capital appreciation
Portfolio - Service
Class 2
- -----------------------------------------------------------------------------
Fidelity VIP High High level of current income while also considering
Income Portfolio - growth of capital
Service Class 2
- ------------------------------------------------------------------------------------------------------------------------------------
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (VIP)
- -----------------------------------------------------------------------------------------------------------------------------------
31
- ------------------------------------------------------------------------------------------------------------------------------------
Franklin Global Health Capital appreciation
Care Securities Fund -
Class 2
FRANKLIN MUTUAL ADVISERS, LLC
- -----------------------------------------------------------------------------
Franklin Small Cap Long-term capital growth
Fund - Class 2
- ------------------------------------------------------------------------------
Franklin Technology Capital appreciation
Securities Fund -
Class 2
- -----------------------------------------------------------------------------------------------------------------------------------
Mutual Shares Capital appreciation. Secondary goal is income FRANKLIN ADVISERS, INC.
Securities Fund -
Class 2
- ------------------------------------------------------------------------------------------------------------------------------------
Templeton Developing Long-term capital appreciation TEMPLETON ASSET MANAGEMENT LTD
Markets Securities
Fund - Class 2
- ------------------------------------------------------------------------------------------------------------------------------------
Templeton Long-term capital growth TEMPLETON INVESTMENT COUNSEL, LLC
International
Securities
Fund - Class 2
- ------------------------------------------------------------------------------------------------------------------------------------
GOLDMAN SACHS VARIABLE INSURANCE TRUST (VIT)
- ------------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT Long-term growth of capital
Internet Tollkeeper
Fund-/SM/-
- -----------------------------------------------------------------------------
Goldman Sachs VIT Long term growth of capital
CORE-/SM/-Small Cap
Equity Fund GOLDMAN SACHS ASSET MANAGEMENT
- -----------------------------------------------------------------------------
Goldman Sachs VIT Long-term growth of capital and dividend income
CORE-/SM/-U.S. Equity
Fund
- -----------------------------------------------------------------------------
Goldman Sachs VIT A high total return, emphasizing current income
Global Income Fund and, to a lesser extent providing opportunities
for capital appreciation
- ------------------------------------------------------------------------------------------------------------------------------------
LSA VARIABLE SERIES TRUST
- ------------------------------------------------------------------------------------------------------------------------------------
LSA Focused Equity Capital appreciation LSA Asset Management LLC (2)
Fund
- ------------------------------------------------------------------------------------------------------------------------------------
LSA Growth Equity Fund Long-term growth of capital LSA Asset Management LLC (3)
- ------------------------------------------------------------------------------------------------------------------------------------
MFS/(R)/VARIABLE INSURANCE TRUST-/SM/-
- ------------------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Long-term growth of capital
Series - Service
Class
MFS INVESTMENT MANAGEMENT(R)
- -----------------------------------------------------------------------------
MFS Investors Trust Long-term growth of capital with a secondary
Series - Service Class objective to seek reasonable current income
- -----------------------------------------------------------------------------
MFS New Discovery Capital appreciating
Series - Service Class
- -----------------------------------------------------------------------------
MFS Research Series - Long-term growth of capital and future
Service Class income
- -----------------------------------------------------------------------------
MFS Utility Series - Capital growth and current income
Service Class
- -----------------------------------------------------------------------------------------------------------------------------------
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Above-average total return over a market cycle of
Fixed Income Portfolio three to five years
- -----------------------------------------------------------------------------
Morgan Stanley UIF Long-term capital appreciation
Global Value Equity
Portfolio MORGAN STANLEY ASSET MANAGEMENT
- -----------------------------------------------------------------------------
Morgan Stanley UIF Mid Above-average total return over a market
Cap Portfolio cycle of three to five years
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Above-average total return over a market cycle MILLER ANDERSON & SHERRERD, LLP
Value Portfolio of three to five years
- ------------------------------------------------------------------------------------------------------------------------------------
OPPENHEIMER VARIABLE ACCOUNT FUNDS
- -----------------------------------------------------------------------------------------------------------------------------------
32
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Capital appreciation
Growth Fund/VA
- -----------------------------------------------------------------------------
Oppenheimer Capital Capital appreciation
Appreciation Fund/VA OPPENHEIMERFUNDS, INC.
- -----------------------------------------------------------------------------
Oppenheimer Global Long-term capital appreciation
Securities Fund/VA
- -----------------------------------------------------------------------------
Oppenheimer Main High total return, which includes growth in the
Street Growth & Income value of its shares as well as current income,
Fund/VA from equity and debt securities
- -----------------------------------------------------------------------------
Oppenheimer Strategic High level of current income
Bond Fund/VA
- ------------------------------------------------------------------------------------------------------------------------------------
PUTNAM VARIABLE TRUST
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam VT Growth and Seeks capital growth and current income. The fund
Income Fund - Class IB seeks its goal by investing mainly in common stocks
of U.S. companies with a focus on value stocks that
offer the potential for capital growth, current
income or both
- -----------------------------------------------------------------------------
Putnam VT Growth Seeks capital appreciation. The fund seeks its
Opportunities Fund - goal by investing in common stock of U.S. companies
Class IB with a focus on growth stocks
- -----------------------------------------------------------------------------
Putnam VT Health Seeks capital appreciation. The fund seeks its PUTNAM INVESTMENT MANAGEMENT, INC.
Sciences Fund - Class goal by investing at least 80% of its net assets in
IB common stocks of U.S. companies in the health
sciences industries with a focus on growth stocks
- -----------------------------------------------------------------------------
Putnam VT Seeks capital appreciation. The fund seeks its
International Growth goal by investing mainly in common stocks of
Fund - Class IB companies outside the United States
- -----------------------------------------------------------------------------
Putnam VT New Value Seeks long-term capital appreciation. The fund
Fund - Class IB seeks its goal by investing mainly in common stocks
of U.S. companies with a focus on value stocks
- -----------------------------------------------------------------------------
Putnam VT Research Seeks capital appreciation. The fund seeks its
Fund - Class IB goal by investing mainly in common stocks of U.S.
companies that we think have the greatest potential
for capital appreciation, with stock prices that
reflect a value lower than that which we place on
the company, or whose earnings we believe are
likely to grow over time
- ------------------------------------------------------------------------------------------------------------------------------------
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
- ------------------------------------------------------------------------------------------------------------------------------------
Van Kampen UIF Core Above-average total return over a market cycle of
Plus Fixed Income three to five years
Portfolio**
- -----------------------------------------------------------------------------
Van Kampen UIF Global Long-term capital appreciation
Value Equity VAN KAMPEN
Portfolio**
- -----------------------------------------------------------------------------
Van Kampen UIF Mid Cap Above-average total return over a market cycle of
Value Portfolio** three to five years
- -----------------------------------------------------------------------------
Van Kampen UIF U.S. Above-average current income and long-term capital
Real Estate appreciation
Portfolio**
- -----------------------------------------------------------------------------
Van Kampen UIF Value Above-average total return over a market cycle of
Portfolio** three to five years
- ------------------------------------------------------------------------------------------------------------------------------------
*A portfolio's investment objective may be changed by the Fund's Board of
Trustees without shareholder approval.
(1) 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.
(1) Sub-advised by Van Kampen.
(2) Sub-advised by Goldman Sachs Asset Management.
33
VARIABLE INSURANCE TRUST 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 RETAIL MUTUAL FUNDS IN ASSETS, CASH FLOW, AND TAX MATTERS.
ACCORDINGLY, THE HOLDINGS AND INVESTMENT RESULTS OF A PORTFOLIO CAN BE EXPECTED
TO BE HIGHER OR LOWER THAN THE INVESTMENT RESULTS OF RETAIL MUTUAL FUNDS.
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.
- ------------------------------------------------------------
34
INVESTMENT ALTERNATIVES: THE FIXED ACCOUNT OPTIONS
- --------------------------------------------------------------------------------
You may allocate all or a portion of your purchase payments (and Credit
Enhancements for Allstate Provider Extra Contracts) to the Fixed Account. You
may choose from among 3 Fixed Account Options, including 2 dollar cost averaging
options and the option to invest in one or more Guarantee Periods included in
the Guaranteed Maturity Fixed Account. We may offer additional Fixed Account
options in the future. We will credit a minimum annual interest rate of 3% to
money you allocate to any of the dollar cost averaging Fixed Account Options.
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
account 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
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 (and Credit Enhancements
for ALLSTATE PROVIDER EXTRA CONTRACTS) you allocate to this Option for up to six
months at the current rate in effect at the time of allocation. We will credit
interest daily at a rate that will compound at the annual interest rate we
guaranteed at the time of allocation.
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 6 equal monthly installments. Further, you must transfer each purchase
payment (and Credit Enhancement for ALLSTATE PROVIDER EXTRA CONTRACTS) and
associated interest out of this Option by means of dollar cost averaging within
6 months. If you discontinue the 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 DCA Fixed Account.
For each purchase payment (and Credit Enhancement for ALLSTATE PROVIDER EXTRA
CONTRACTS) allocated to this Option, your first monthly transfer will occur at
the end of the first month following such purchase payment. If we do not receive
an allocation from you within one month of the date of payment, we will transfer
each monthly installment to the money market Variable Sub-Account until we
receive a different allocation instruction. Transferring Contract 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 21.
EXTENDED SHORT TERM DOLLAR COST AVERAGING FIXED ACCOUNT OPTION. You may
establish an Extended Short Term Dollar Cost Averaging Program by allocating
purchase payments to the EXTENDED SHORT TERM DOLLAR COST AVERAGING FIXED ACCOUNT
OPTION ("EXTENDED SHORT TERM DCA FIXED ACCOUNT OPTION"). We will credit interest
to purchase payments (and Credit Enhancements for ALLSTATE PROVIDER EXTRA
CONTRACTS) you allocate to this Option for up to twelve months at the current
rate in effect at the time of allocation. We will credit interest daily at a
rate that will compound at the annual interest rate we guaranteed at the time of
allocation.
We will follow your instructions in transferring amounts monthly from the
Extended Short Term DCA Fixed Account Option. However, you may not choose less
than 7 or more than 12 equal monthly installments. Further, you must transfer
each purchase payment (and Credit Enhancement for ALLSTATE PROVIDER EXTRA
CONTRACTS) and associated interest out of this Option by means of dollar cost
averaging within 12 months. If you discontinue the 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 Extended
Short Term DCA Fixed Account.
For each purchase payment (and Credit Enhancement for ALLSTATE PROVIDER EXTRA
CONTRACTS) allocated to this Option, your first monthly transfer will occur at
the end of the first month following such purchase payment. If we do not receive
an allocation from you within one month of the date of payment, we will transfer
each monthly installment to the money market Variable Sub-Account until we
receive a different allocation instruction. 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 21.
At the end of the transfer period, any nominal amounts remaining in the Short
Term Dollar Cost Averaging Fixed Account or the Extended Short Term Dollar Cost
Averaging Fixed Account will be allocated to the money market Variable
Sub-Account.
INVESTMENT RISK
We bear the investment risk for all amounts allocated to the Short Term DCA
Fixed Account Option and the Extended Short Term DCA Fixed Account Option. That
35
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 Short Term DCA Fixed Account Option and the Extended
Short Term DCA Fixed Account Option. For current interest rate information,
please contact your representative or our customer support unit at
1-800-755-5275.
GUARANTEE PERIODS
The Guaranteed Maturity Fixed Account is divided into Guarantee Periods. Each
purchase payment (plus the appropriate portion of the Credit Enhancement for
ALLSTATE PROVIDER EXTRA CONTRACTS) 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 recent purchase payment.
Each purchase 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 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 (and Credit Enhancement for ALLSTATE
PROVIDER EXTRA CONTRACTS) allocated to a Guaranteed Period would grow, given an
assumed Guarantee Period and annual interest rate:
Purchase Payment (and Credit Enhancement for ALLSTATE PROVIDER EXTRA CONTRACTS) $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
36
TOTAL INTEREST CREDITED DURING GUARANTEE PERIOD = $2,461.82 ($12,461.82 -
$10,000.00)
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
(ALLSTATE PROVIDER ULTRA CONTRACTS and ALLSTATE PROVIDER EXTRA CONTRACTS only),
and 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; or
3) Instruct us to transfer all or a portion of your money to one or more
Variable Sub-Accounts of the Variable Account. We will effect the transfer on
the day we receive your instructions. We will not adjust the amount
transferred to include a Market Value Adjustment; or
4) Withdraw all or a portion of your money. A withdrawal charge may apply (for
ALLSTATE PROVIDER ULTRA CONTRACTS and PROVIDER EXTRA CONTRACTS only), 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.
If you choose option 3 or 4 above, we will pay interest from the date the
previous Guarantee Period expired until the date of the transfer or withdrawal
as applicable. The interest rate will be the then current rate we are crediting
for a Guarantee Period of the same length as the previous Guarantee Period.
Amounts not withdrawn or transferred will be applied to a new Guarantee Period
of the same length as the previous Guarantee Period. The new Guarantee Period
will begin on the day the previous Guarantee Period ends.
MARKET VALUE ADJUSTMENT. All withdrawals 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 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). A positive aggregate Market Value Adjustment will
apply to amounts currently invested in a Guarantee Period that are paid out as
death benefits (unless paid or applied during the 30 day period after such
Guarantee Period expires). We will not apply a Market Value Adjustment to a
withdrawal you make:
... within the Free Withdrawal Amount as described below,
... that qualify for one of the waivers as described on page 23-24,
... to satisfy the IRS minimum distribution rules for the Contract, or
... within one year after the date of the death of the Owner as the surviving
spouse continuing the Contract (limit one withdrawal only).
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, any withdrawal charge (ALLSTATE PROVIDER ULTRA CONTRACTS and
PROVIDER EXTRA CONTRACTS only), and any 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.
During each Contract Year, you can withdraw up to 15% of the aggregate amount of
your purchase payments without a Market Value Adjustment. Unused portions of
this Free Withdrawal Amount are not carried forward to future Contract Years.
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
37
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
- --------------------------------------------------------------------------------
TRANSEFERS 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 Extended Short Term 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 (up to
0.50% of the amount transferred for ALLSTATE PROVIDER EXTRA CONTRACTS) 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.
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. You may make up to 12 transfers per
Contract Year. You may not convert any portion of your fixed income payments
into variable income payments. After 6 months from the Payout Start Date, you
may make transfers from the Variable Sub-Accounts to increase the proportion of
your income payments consisting of fixed income payments.
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.
EXCESSIVE TRADING LIMITS
We reserve the right to limit transfers among the Variable Sub-Accounts in any
Contract Year, or to refuse any Variable Sub-Account transfer request, if:
... we believe, in our sole discretion, that excessive trading by such Contract
owner or owners, or a specific transfer request or group of transfer requests,
may have a detrimental effect on the Accumulation Unit Values of any Variable
Sub-Account or the share prices of the corresponding Portfolios or would be to
the disadvantage of other Contract owners; or
... we are informed by one or more of the corresponding Portfolio that they intend
to restrict the purchase or redemption of Portfolio shares because of
excessive
38
trading or because they believe that a specific transfer or groups of
transfers would have a detrimental effect on the prices of Portfolio shares.
We may apply the restrictions in any manner reasonably designed to prevent
transfers that we consider disadvantageous to other Contract owners.
SHORT-TERM TRADES
All transfers involving the purchase or redemption of mutual fund shares by the
Variable Account may be subject to restrictions or requirements imposed by the
underlying Portfolios. Such restrictions or requirements may include the
assessment of short-term trading fees in connection with transfers from a
Variable Sub-Account that occur within a certain number of days following the
date of allocation to the Variable Sub-Account, but will only apply to those
Sub-Accounts corresponding to underlying Portfolios that explicitly require the
assessment of such fees.
DOLLAR COST AVERAGING PROGRAM
Through our Dollar Cost Averaging Program, you may automatically transfer a
fixed dollar amount every month from any Variable Sub-Account, the Short Term
Dollar Cost Averaging Fixed Account, or the Extended Short Term Dollar Cost
Averaging Fixed Account, to any of the other Variable Sub-Accounts. You may not
use the Dollar Cost Averaging Program to transfer amounts to the Guarantee
Periods. This program is available only during the Accumulation Phase.
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 Sub-Account may cause a shift in the percentage you
allocated to each Sub-Account. If you select our AUTOMATIC PORTFOLIO REBALANCING
PROGRAM, we will automatically rebalance the Contract Value in each Variable
Sub-Account and return it to the desired percentage allocations. We will not
include money you allocate to the Fixed Account Options in the Automatic
Portfolio Rebalancing Program.
We will rebalance your account monthly, quarterly, semi-annually, or annually,
depending on 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. Core Equity Variable Sub-Account.
Over the next 2 months the bond market does very well relative to the stock
market. 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. Core Equity 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.
39
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. During the Payout Phase, we will deduct the charge
proportionately from each income payment.
The charge is to compensate us for the cost of administering the Contracts and
the Variable Account. Maintenance costs include expenses we incur 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:
... your Contract Value equals $50,000 or more, or
... all money is allocated to the Fixed Account.
After the Payout Start Date, we will waive the charge if the Contract Value is
$50,000 or more as of the Payout Start Date.
MORTALITY AND EXPENSE RISK CHARGE
We deduct a mortality and expense risk charge daily from the net assets you have
invested in the Variable Sub-Accounts. The annual rate of the charge is:
... 1.45% for ALLSTATE PROVIDER ADVANTAGE CONTRACTS
... 1.25% for ALLSTATE PROVIDER ULTRA CONTRACTS
... 1.40% for ALLSTATE PROVIDER EXTRA CONTRACTS
If you select the Income Benefit Rider or the Enhanced Death Benefit Rider, the
mortality and expense risk charge will include an additional 0.25% for the
Rider. If you select both the Income Benefit Rider and the Enhanced Death
Benefit Rider, the mortality and expense risk charge will include an additional
0.50% for these Riders.
The mortality and expense risk charge is for 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. The mortality and expense risk
charge also helps pay for the cost of the Credit Enhancement under the ALLSTATE
PROVIDER EXTRA CONTRACTS. 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 Income Benefit Rider to compensate us for the
additional risk that we accept by providing these Riders.
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. After the Payout Start Date, mortality and expense risk
charges for the Enhanced Death Benefit and the Income Benefit will cease.
ENHANCED EARNINGS DEATH BENEFIT RIDER FEE
If you elect the Enhanced Earnings Death Benefit Rider, we will deduct an annual
charge from your Contract Value on each Contract Anniversary during the
Accumulation Phase. The annual charge is calculated as a percentage of your
Contract Value on the Contract Anniversary and is based on the oldest Contract
owner's age on the Rider Application Date (described below) as follows:
Age Annual Charge
--- -------------
0-55 0.10%
56-65 0.20%
66-75 0.35%
We first deduct this annual fee from the Variable Sub-Accounts on a pro rata
basis. If the Contract Value in the Variable Sub-Accounts is not sufficient to
cover the charge, we will deduct the remaining charge from the Guarantee
Periods, beginning with the oldest Guarantee Period. On the first Contract
Anniversary after we issue the Rider, we will deduct the Rider charge pro rated
to reflect the number of complete months the Rider was in effect during such
Contract Year. Also, if you surrender your Contract, we will deduct the Rider
charge (multiplied by the Contract Value immediately prior to the surrender) pro
rated to reflect the number of complete months the Rider was in effect during
the current Contract Year.
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.
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WITHDRAWAL CHARGE (ALLSTATE PROVIDER ULTRA and ALLSTATE PROVIDER EXTRA CONTRACTS
only)
We may assess a withdrawal charge from the purchase payment(s) you withdraw.
The amount of the charge will depend on the number of Contract Years that have
elapsed since we received the purchase payment being withdrawn. The Contracts
differ in the following respects:
ALLSTATE PROVIDER ULTRA CONTRACTS
We may assess a withdrawal charge of up to 7% of the purchase payment(s) you
withdraw. The charge declines to 0% over a 7 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 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.
ALLSTATE PROVIDER EXTRA CONTRACTS
We may assess a withdrawal charge of up to 8% of the purchase payment(s) you
withdraw. The charge declines to 0% over an 8 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 your purchase
payments, excluding Credit Enhancements, 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. Credit Enhancements are not considered purchase payments when
determining the Free Withdrawal Amount.
BOTH ALLSTATE PROVIDER ULTRA AND ALLSTATE PROVIDER EXTRA CONTRACTS
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, and to help defray the cost of the Credit Enhancement for the
ALLSTATE PROVIDER EXTRA CONTRACTS. To the extent that the withdrawal charge does
not cover all sales commissions and other promotional or distributional
expenses, or the cost of the Credit Enhancement, we may use any of our corporate
assets, including potential profit which may arise from the mortality and
expense risk charge or any other charges or fee described above, to make up any
difference.
Withdrawals also may be subject to tax penalties or income tax and a Market
Value Adjustment. You should consult your own tax counsel or other tax advisers
regarding any withdrawals.
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 (up to
0.50% of the amount transferred for ALLSTATE PROVIDER EXTRA CONTRACTS) 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.
CONFINEMENT WAIVER. We will waive the withdrawal charge (ALLSTATE PROVIDER ULTRA
CONTRACTS and ALLSTATE PROVIDER EXTRA CONTRACTS only), and a negative Market
Value Adjustment, if applicable, will not occur 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 (ALLSTATE PROVIDER
ULTRA CONTRACTS and ALLSTATE PROVIDER EXTRA CONTRACTS only), and a negative
Market Value Adjustment, if applicable, will not occur 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
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diagnosis to us.
UNEMPLOYMENT WAIVER. We will waive the withdrawal charge (ALLSTATE PROVIDER
ULTRA CONTRACTS and ALLSTATE PROVIDER EXTRA CONTRACTS only), and a negative
Market Value Adjustment, if applicable, will not occur 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 a withdrawal charge (ALLSTATE PROVIDER ULTRA CONTRACTS and
ALLSTATE PROVIDER EXTRA CONTRACTS only), 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 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.
OTHER EXPENSES
Each Portfolio deducts advisory fees and other expenses from its assets. You
indirectly bear the charges and expenses of the Portfolios whose shares are held
by the Variable Sub-Accounts. These fees and expenses are described in the
accompanying prospectuses for the Funds. For a summary of current estimates of
those charges and expenses, see page 23. 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. Withdrawals also are available under limited circumstances
on or after the Payout Start Date. See "Income Plans" on page 29.
The amount payable upon withdrawal is the Contract Value (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 charge (ALLSTATE
PROVIDER ULTRA CONTRACTS and ALLSTATE PROVIDER EXTRA CONTRACTS only), contract
maintenance charges, Enhanced Earnings Death Benefit Rider fee (if applicable),
income tax withholding, 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 (ALLSTATE PROVIDER ULTRA CONTRACTS and ALLSTATE PROVIDER EXTRA
CONTRACTS only) and premium taxes.
You must name the investment alternative from which you are taking the
withdrawal. If none is specified, we will deduct your withdrawal pro-rata from
the Variable Sub-Accounts according to the value of your investments therein.
42
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 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 reduced by
withdrawals to less than $2,000, we would 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 any
withdrawal charges (ALLSTATE PROVIDER ULTRA CONTRACTS and ALLSTATE PROVIDER
EXTRA CONTRACTS only) and any other applicable charges and taxes.
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.
After the Payout Start Date, you may not make withdrawals (except as described
below) or change your choice of Income Plans.
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
43
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
(ALLSTATE PROVIDER ULTRA CONTRACTS and ALLSTATE PROVIDER EXTRA CONTRACTS only).
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 income payments at any time
and receive a lump sum equal to their present value as of the close of the
Valuation Date on which we receive your request. To determine the present value
of any remaining variable income payments being withdrawn, we use a discount
rate equal to the assumed annual investment rate that we use to compute such
variable income payments. To determine the present value of any fixed income
payments being currently applicable interest rates. The minimum amount you may
withdraw under this feature is $1,000. A withdrawal charge may apply (ALLSTATE
PROVIDER ULTRA CONTRACTS and ALLSTATE PROVIDER EXTRA CONTRACTS only). We 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 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:
... 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
44
assumed investment rate. The dollar amount of the variable income payments stays
level if the net investment return equals the assumed investment rate. Please
refer to the Statement of Additional Information for more detailed information
as to how we determine variable income payments.
We reserve the right to make other assumed investment rates available under each
Contract.
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.
INCOME BENEFIT RIDER
QUALIFICATIONS. For Contract Owners and Annuitants up to and including age 75,
the Income Benefit Rider is an optional benefit that you may elect. To qualify
for the income benefit payments under this Rider, you must meet the following
requirements as of the Payout Start Date:
... You must elect a Payout Start Date that is on or after the 10th anniversary of
the date this Rider was made a part of your Contract ("RIDER DATE");
... The Payout Start Date must be prior to the oldest Annuitant's 90th birthday;
... The Payout Start Date must occur during the 30 day period following a Contract
Anniversary;
... You must elect to receive fixed income payments, which will be calculated
using the guaranteed payout rates listed in your Contract; and
... The Income Plan you selected must provide for payments guaranteed for either a
single life or joint lives with a specified period of at least:
. 10 years, if the youngest Annuitant's age is 80 or less on the Payout Start
Date, or
. 5 years, if the youngest Annuitant's age is greater than 80 on the Payout
Start Date.
If, however, you apply the Contract Value and not the Income Benefit to an
Income Plan, then you may select fixed and/or variable income payments under any
Income Plan we offer at that time. If you expect to apply your Contract Value to
variable and/or fixed income payment options, or you expect to apply your
Contract Value to current annuity payment rates then in effect, electing the
Income Benefit Rider may not be appropriate.
ALLSTATE PROVIDER ADVANTAGE CONTRACTS ONLY:
Prior to the Payout Start Date, the Income Benefit Rider will terminate and
charges for this Rider will cease when the Contract terminates. The mortality
and expense risk charge for this Rider will cease on the Payout Start Date.
The Income Benefit Rider will no longer be in effect and the mortality and
expense charge for the Rider will end upon the change of the named Annuitant for
reasons other than death.
INCOME BASE
The Income Base is used solely for the purpose of calculating the guaranteed
income benefit under this Rider ("Guaranteed Income Benefit") and does not
provide a Contract Value or guarantee performance of any investment option. On
the Rider Date, the Income Base is equal to the Contract Value. After the Rider
Date, the Income Base plus any subsequent purchase payments (and Credit
Enhancements for Allstate Provider Extra Contracts) and less a withdrawal
adjustment (described below) for any subsequent withdrawals will accumulate
daily at a rate equivalent to 5% per year until the earlier of the Payout Start
Date, or the first day of the month after the oldest Contract owner's
(Annuitant, if the Contract owner is not a natural person) 85th birthday.
WITHDRAWAL ADJUSTMENT
The 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 most recently calculated Income Base.
The Guaranteed Income Benefit amount is determined by applying the Income Base
less any applicable taxes to the guaranteed rates for the Income Plan you elect.
The Income Plan you elect must satisfy the conditions described above.
On the Payout Start Date, the income payment will be the greater of the
Guaranteed Income Benefit or the income payment provided in the payout phase
section of your Contract.
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
45
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
- --------------------------------------------------------------------------------
We will pay a death benefit prior to the Payout Start Date on:
1. the death of any Contract owner or,
2. the death of the Annuitant, if the Contract is owned by a non-natural person.
We will pay the death benefit to the new Contract owner as determined
immediately after the death. The new Contract owner would be a surviving
Contract owner or, if none, the Beneficiary(ies). In the case of the death of
the Annuitant, we will pay the death benefit to the current Contract owner.
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 settlement 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.
A complete request for payment of the death benefit must include DUE PROOF OF
DEATH. We will accept the following documentation as "Due Proof of Death":
... a certified copy of a death certificate,
... a certified copy of a decree of a court of competent jurisdiction as to the
finding of death, or
... any other proof acceptable to us.
DEATH BENEFIT AMOUNT. Prior to the Payout Start Date, if we receive a complete
request for settlement of the death benefit within 180 days of the date of
death, 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 highest amount computed by taking the Contract Value on each DEATH
BENEFIT ANNIVERSARY prior to the date we determine the death benefit, increased
by purchase payments (and Credit Enhancements for ALLSTATE PROVIDER EXTRA
CONTRACTS) 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.
In calculating the Settlement Value when a death benefit is paid, only a
positive aggregate Market Value Adjustment amount, if any, is applied to the
Contract Value attributable to amounts withdrawn from Guarantee Period(s).
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 (and Credit Enhancements for Allstate Provider Extra
Contracts) or withdrawals made since that Anniversary.
If we do not receive a complete request for settlement of the death benefit
within 180 days of the date of death, the death benefit is equal to the greater
of:
1) the Contract Value as of the date we determine the death benefit, or
2) the Settlement Value as of the date we determine the death benefit.
We reserve the right to extend the 180-day period on a non-discriminatory basis.
ENHANCED DEATH BENEFIT RIDER
For Contract owners and Annuitants up to and including age 80 as of the date we
receive the completed application or a written request to add this rider,
whichever is later ("Rider Application Date"), the Enhanced Death Benefit Rider
is an optional benefit that you may elect. If the Contract owner is a natural
individual, the Enhanced Death Benefit applies only upon the death of the
Contract owner. If the Contract owner is not a natural 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 A or 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.
If we do not receive a complete request for settlement of the death benefit
within 180 days of the date of death, the Enhanced Death Benefit will not apply
and the death benefit is equal to the greater of:
1) the Contract Value as of the date we determine the death benefit, or
2) the Settlement Value as of the date we determine the
46
death benefit.
If the Owner is a natural person, the Enhanced Death Benefit is payable and the
Rider will terminate and the mortality and expense charge for the Rider will
cease upon the death of the Owner, unless the Contract and Rider are continued
as permitted by a surviving spouse, as described below. If the Owner is a
non-natural person, the Enhanced Death Benefit is payable and the Rider will
terminate and charges for the Rider will cease upon the death of the Annuitant.
The Enhanced Death Benefit Rider and charges for the Rider will terminate:
... when the Contract owner is changed for reasons other than death;
... if the Contract owner is a non-natural person, when the Annuitant is changed
for reasons other than death; or
... on the Payout Start Date.
The Rider may not be available in all states. We may discontinue the offering of
the Rider at any time.
ENHANCED DEATH BENEFIT A. On the date we issue the Rider ("RIDER DATE"),
Enhanced Death Benefit A is equal to the Contract Value on that date. On each
Contract Anniversary, we will recalculate your Enhanced Death Benefit A to equal
the greater of your Contract Value on that date, or the most recently calculated
Enhanced Death Benefit A. We also will recalculate your Enhanced Death Benefit A
whenever you make an additional purchase payment or a partial withdrawal.
Additional purchase payments will increase the Enhance Death Benefit A
dollar-for-dollar by the amount of the purchase payment (plus Credit Enhancement
for ALLSTATE PROVIDER EXTRA CONTRACTS). Withdrawals will reduce the Enhanced
Death Benefit A by an amount equal to a withdrawal adjustment computed in the
manner described below.
We will calculate Anniversary Values for each Contract Anniversary up until the
earlier of:
... the date we determine the death benefit; or
... the first Contract Anniversary following the oldest Contract owner's or, if
the Contract owner is not a natural person, the Annuitant's 80th birthday, or
the first day of the 61st month following the Rider Date, whichever is later.
After age 80, or the first day of the 61st month following the Rider Date,
whichever is later, we will recalculate the Enhanced Death Benefit A only for
purchase payments and withdrawals.
The withdrawal 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) = the most recently calculated Enhanced Death Benefit A.
ENHANCED DEATH BENEFIT B. The Enhanced Death Benefit B on the Rider Date is
equal to the Contract Value on that date. After the Rider Date, the Enhanced
Death Benefit B, plus any subsequent purchase payments (and Credit Enhancements
under ALLSTATE PROVIDER EXTRA CONTRACTS) and less a withdrawal adjustment, as
described below, 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 80th birthday, or the
first day of the 61st month following the Rider Date, whichever is later.
The withdrawal 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.
After age 80, or the first day of the 61st month following the Rider Date,
whichever is later, we will recalculate the Enhanced Death Benefit B only for
purchase payments and withdrawals.
SPOUSAL CONTINUATION UNDER ALLSTATE PROVIDER ADVANTAGE CONTRACTS AND ALLSTATE
PROVIDER EXTRA CONTRACTS. If you elected the Enhanced Death Benefit Rider, and
your spouse continues the Contract as described above, the Enhanced Death
Benefit Rider and the mortality and expense risk charge for this Rider will
terminate if your spouse is over age 80 on the date the Contract is continued.
If the Enhanced Death Benefit Rider does continue, then the following conditions
will apply:
... The Contract Value on the date the Contract is continued will equal the death
benefit amount;
... Enhanced Death Benefit A will continue to be recalculated for purchase
payments, withdrawals, and on Contract Anniversaries after the date the
Contract is continued until the earlier of:
1. the first Contract Anniversary after the oldest new Owner's 80th birthday.
After age 80, the Enhanced Death Benefit A will be recalculated only for
purchase payments and withdrawals; or
2. the date we determine the death benefit;
unless the deceased Owner was age 80 or older on the date of death. In this
case, the Enhanced Death Benefit A will be recalculated only for purchase
payments and withdrawals after the date the Contract is continued.
... The amount of the Enhanced Death Benefit B as of the date the Contract is
continued and any
47
subsequent purchase payments (and Credit Enhancements under ALLSTATE PROVIDER
EXTRA CONTRACTS) and less any subsequent withdrawal adjustments will
accumulate daily at a rate equivalent to 5% per year after the date the
Contract is continued, until the earlier of:
1. the first day of the month following the oldest new Owner's 80th birthday.
After age 80, the Enhanced Death Benefit B will be recalculated only for
purchase payments and withdrawals; or
2. the date we determine the death benefit;
unless the deceased Owner was age 80 or older on the date of death. In this
case, the Enhanced Death Benefit B will be recalculated only for purchase
payments and withdrawals after the date the Contract is continued.
SPOUSAL CONTINUATION UNDER ALLSTATE PROVIDER ULTRA CONTRACTS. If you elected the
Enhanced Death Benefit Rider, and your spouse continues the Contract as
described above, on the date the Contract is continued, the Rider Date will be
reset to the date the Contract is continued.
ENHANCED EARNINGS DEATH BENEFIT RIDER
For Contract owners and Annuitants up to and including age 75 as of the Rider
Application Date, the Enhanced Earnings Death Benefit Rider is an optional
benefit that you may elect.
The Rider may not be available in all states. We may discontinue the offering of
the Rider at any time.
If the Contract owner is a natural person, the Enhanced Earnings Death Benefit
Rider applies only upon the death of the Contract owner. If the Contract owner
is not a natural individual, the Enhanced Earnings Death Benefit Rider applies
only upon the death of the Annuitant. If the Owner is a natural person, the
Enhanced Earnings Death Benefit is payable and the Rider will terminate and the
annual charge for the Rider will cease upon the death of the Owner, unless the
Contract and Rider are continued as permitted by a surviving spouse, as
described below. If the Owner is a non-natural person, the Enhanced Earnings
Death Benefit is payable and the Rider will terminate and the annual charge for
the Rider will cease upon the death of the Annuitant.
The Enhanced Earnings Death Benefit Rider and the annual charge for the rider
will terminate:
... when the Contract owner is changed for reasons other than death;
... if your spouse continues the Contract as described below, and the oldest new
Contract owner (your spouse in the case of ALLSTATE PROVIDER ULTRA CONTRACTS)
is over age 75 on the date the Contract is continued, (or if your spouse
elects to terminate the Rider).
... if the Contract owner is a non-natural person, when the Annuitant is changed
for reasons other than death or when the Annuitant dies; or
... on the Payout Start Date.
ALLSTATE PROVIDER ADVANTAGE CONTRACTS AND ALLSTATE PROVIDER EXTRA CONTRACTS:
Under the Enhanced Earnings Death Benefit Rider, if the oldest Contract owner
(or the Annuitant if the Contract owner is a non-natural person) is age 55 or
younger on the Rider Application Date, the death benefit is increased by:
... The lesser of 80% of In-Force Premium (excluding purchase payments made after
the Rider Date and in the twelve month period immediately preceding the death
of the Owner, or Annuitant if the Owner is a non-natural person), or 40% of
In-Force Earnings, calculated as of the date we receive due proof of death.
If the oldest Contract owner (or the Annuitant if the Contract owner is a
non-natural person) is between the ages of 56 and 65 on the Rider Application
Date, the death benefit is increased by:
... The lesser of 60% of In-Force Premium (excluding purchase payments made after
the Rider Date and in the twelve month period immediately preceding the death
of the Owner, or annuitant is the Owner is a non-natural person), or 30% of
In-Force Earnings.
If the oldest Contract owner (or the Annuitant if the Contract owner is a
non-natural person) is between the ages of 66 and 75 on the Rider Application
Date, the death benefit is increased by:
... The lesser of 40% of In-Force Premium (excluding purchase payments made after
the Rider Application Date and in the twelve month period immediately
preceding the death of the Owner, or Annuitant if the Owner is a non-natural
person), or 20% of In-Force Earnings, calculated as of the date we receive due
proof of death.
ALLSTATE PROVIDER ULTRA CONTRACTS:
Under the Enhanced Earnings Death Benefit Rider, if the oldest Contract owner
(or the Annuitant if the Contract owner is a non-natural person) is age 55 or
younger on the Rider Application Date, the death benefit is increased by:
... 40% of the lesser of 200% of In-Force Premium (excluding purchase payments
made in the 12-month period immediately preceding the date of death) or the
In-Force Earnings. ("In-Force Earnings" are referred to as "Death Benefit
Earnings" in the ALLSTATE PROVIDER ULTRA CONTRACTS, but we use the term
"In-Force Earnings" in this prospectus for convenience).
If the oldest Contract owner (or the Annuitant if the Contract owner is a
non-natural person) is between the
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ages of 56 and 65 on the Rider Application Date, the death benefit is increased
by:
... 30% of the lesser of 200% of the In-Force Premium (excluding purchase payments
made in the 12-month period immediately preceding the date of death) or the
In-Force Earnings.
If the oldest Contract owner (or the Annuitant if the Contract owner is a
non-natural person) is between the ages of 66 and 75 on the Rider Application
Date, the death benefit is increased by:
... 20% of the lesser of 200% of the In-Force Premium (excluding purchase payments
made in the 12-month period immediately preceding the date of death) or the
In-Force earnings.
ALL CONTRACTS:
For purpose of calculating the Enhanced Earnings Death Benefit, the following
definitions apply:
In-Force Premium equals the Contract Value on the Rider Date plus all purchase
payments made after the Rider Date less the sum of all Excess-of-Earnings
Withdrawals after the Rider Date. If the Rider Date is the same as the Issue
Date, then the Contract Value on the Rider Date is equal to your initial
purchase payment.
In-Force Earnings equal the Contract Value minus the In-Force Premium. The
In-Force Earnings amount will never be less than zero.
An Excess-of-Earnings Withdrawal is the amount of a withdrawal in excess of
the In-Force Earnings in the Contract immediately prior to the withdrawal.
We will calculate the Enhanced Earnings Death Benefit Rider as of the date we
receive a complete request for settlement of the death benefit. We will pay the
Enhanced Earnings Death Benefit with the death benefit as described under "Death
Benefit Payments" below.
SPOUSAL CONTINUATION. If you elected the Enhanced Earnings Death Benefit Rider,
and your spouse continues the Contract as described below, the Enhanced Earnings
Death Benefit Rider and the annual charge for this Option will terminate if the
oldest new Contract owner is over age 75 on the date the Contract is continued,
or if your spouse elects to terminate the Rider. If the Enhanced Earnings Death
Benefit Rider is not terminated, on the date the Contract is continued, the
Rider Date for this Rider will be reset to the date the Contract is continued
("new Rider Date"). The age of the oldest Contract owner (surviving spouse for
ALLSTATE PROVIDER ULTRA CONTRACTS) on the new Rider Date will be used to
determine the Enhanced Earnings Death Benefit after the new Rider Date. Also,
the age of the oldest Contract owner (surviving spouse for ALLSTATE PROVIDER
ULTRA CONTRACTS) will be used to determine the annual charge for the Rider after
the new Rider Date.
The value of the Enhanced Earnings Death Benefit largely depends on the amount
of earnings that accumulate under your Contract. If you expect to withdraw the
earnings from your Contract Value, electing the Enhanced Earnings Death Benefit
Rider may not be appropriate. For purposes of calculating the Enhanced Earnings
Death Benefit, earnings are considered to be withdrawn first before purchase
payments. Your financial advisor can help you decide if the Enhanced Earnings
Death Benefit Rider is right for you.
For examples of how the death benefit is calculated under the Enhanced Earnings
Death Benefit Rider, see Appendix C.
DEATH BENEFIT PAYMENTS
If the sole new Contract Owner is your spouse, the new Contract Owner may:
1) elect to receive the death benefit in a lump sum, or
2) elect to apply the death benefit to an Income Plan. Payments from the Income
Plan must begin within one year of the date of death and must be payable
throughout:
... the life of the new Contract Owner;
... for a guaranteed number of payments from 5 to 50 years, but not to exceed the
life expectancy of the new Contract Owner; or
... 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.
If your spouse does not elect one of the options above 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:
On the date the Contract is continued, the Contract Value will equal the amount
of the death benefit as determined as of the end of the Valuation Date on which
we received a complete request for settlement of the death benefit (the next
Valuation Date, if we receive the request after 3:00 p.m. Central Time).
Unless otherwise instructed by the continuing spouse, the excess, if any, of the
death benefit over the Contract Value will be allocated to the Sub-Accounts of
the Variable Account. This excess will be allocated in proportion to your
Contract Value in those Sub-Accounts as of the end of the Valuation Date on
which we receive the complete request for settlement of the death benefit (the
next Valuation Date, if we receive the request after 3:00 p.m. Central Time),
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
49
Variable Sub-Accounts;
(ii) transfer all or a portion of the excess into the Guarantee 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 Guarantee 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 your
Contract.
The surviving spouse may make a single withdrawal of any amount within one year
of the date of your death without incurring a Market Value Adjustment or
withdrawal charge. Only one spousal continuation is allowed under this Contract.
If the new Contract Owner is not your spouse but is a natural person, or if
there are multiple natural new Contract Owners, the new Contract Owner may:
1) elect to receive the death benefit in a lump sum, or
2) elect to apply the death benefit to an Income Plan.
Payments from the Income Plan must begin within one year of the date of death
and must be payable throughout:
... the life of the new Contract Owner;
... for a guaranteed number of payments from 5 to 50 years, but not to exceed the
life expectancy of the new Contract Owner; or
... 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.
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. The Contract Value will equal the amount of the death benefit as
determined as of the end of the Valuation Date on which we receive the complete
request for settlement of the death benefit (the next Valuation Date, if we
receive the request after 3:00 p.m. Central Time). Unless otherwise instructed
by the new Contract Owner, the excess, if any, of the death benefit over the
Contract Value will be allocated to the money market Variable Sub-Account. The
new Contract Owner may exercise all rights as set forth in the Transfers section
of the Contract during this 5 year period.
No additional purchase payments may be added to the Contract under this
election. Any withdrawal charges applicable under ALLSTATE PROVIDER ULTRA
CONTRACTS and ALLSTATE PROVIDER EXTRA CONTRACTS will be waived for any
withdrawals made during this 5 year period.
If the new Contract Owner dies prior to the receiving all 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
received as a lump sum within 5 years of the date of the original Contract
Owner's death.
If the new Contract Owner is a corporation, trust, or other non- natural person:
(a) The new Contract Owner may elect to receive the death benefit 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. The Contract Value will equal the amount of the death benefit
as determined as of the end of the Valuation Date on which we receive the
complete request for settlement of the death benefit (the next Valuation Date,
if we receive the request after 3:00 p.m. Central Time). Unless otherwise
instructed by the new Contract Owner, the excess, if any, of the death benefit
over the Contract Value will be allocated to the money market Variable
Sub-Account. The new Contract Owner may exercise all rights as set forth in
the Transfers provision of the Contract during this 5 year period.
No additional purchase payments may be added to the Contract under this
election. Any withdrawal charges applicable under ALLSTATE PROVIDER ULTRA
CONTRACTS and ALLSTATE PROVIDER EXTRA CONTRACTS will be aived during this 5 year
period.
We reserve the right to offer additional options upon the death of the Contract
Owner.
If any new Contract Owner is a non-natural person, all new Contract Owners will
be considered to be non-natural persons for the above purposes.
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 benefit is paid.
DEATH OF ANNUITANT
If the Annuitant who is not also the Contract owner dies prior to the Payout
Start Date and the Contract owner is a living person, then the Contract will
continue with a new Annuitant as described in the Annuitant provision above.
If the Annuitant who is not also the Contract owner dies prior to the Payout
Start Date and the Contract owner is a non-natural person, the following apply:
(a) The Contract owner may elect to receive the death benefit in a lump sum;
or
(b) If the Contract owner does not elect the above option, then the Contract
Owner must receive the Contract Value payable within 5 years of the
Annuitant's date of death. The Contract Value will equal the amount of the
death benefit as determined as of the end of the Valuation Date on which we
receive the complete request for settlement of the
50
death benefit (the next Valuation Date, if we receive the request after 3:00
p.m. Central Time). Unless otherwise instructed by the Contract owner, the
excess, if any, of the death benefit over the Contract Value will be allocated
to the Money Market Variable Sub-Account. The Contract owner may then exercise
all rights as set forth in the Transfers provision of the Contract during this
5 year period.
No additional purchase payments may be added to the Contract under this
election. Any withdrawal charges applicable under ALLSTATE PROVIDER ULTRA
CONTRACTS and ALLSTATE PROVIDER EXTRA CONTRACTS will be waived during this 5
year period.
We reserve the right to offer additional options upon the death of the
Annuitant.
Under any of these options, all ownership rights are available to the
non-natural Contract Owner from the date of the Annuitant's death to the date on
which the death benefit is paid.
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MORE INFORMATION
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GLENBROOK
Glenbrook is the issuer of the Contract. Glenbrook is a stock life insurance
company organized under the laws of the State of Arizona in 1998. Previously,
Glenbrook was organized under the laws of the State of Illinois in 1992.
Glenbrook was originally organized under the laws of the State of Indiana in
1965. From 1965 to 1983 Glenbrook was known as "United Standard Life Assurance
Company" and from 1983 to 1992 as "William Penn Life Assurance Company of
America."
Glenbrook is currently licensed to operate in the District of Columbia, 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 is a wholly owned subsidiary of Allstate Life Insurance Company
("ALLSTATE LIFE"), a stock life insurance company incorporated under the laws of
the State of Illinois. Allstate Life is a wholly owned subsidiary of Allstate
Insurance Company, a stock property-liability insurance company incorporated
under the laws of Illinois. All of the outstanding capital stock of Allstate
Insurance Company is owned by The Allstate Corporation.
Glenbrook and Allstate Life entered into a reinsurance agreement effective June
5, 1992. Under the reinsurance agreement, Allstate Life reinsures substantially
all of Glenbrook's liabilities under its various insurance contracts. The
reinsurance agreement provides us with financial backing from Allstate Life.
However, it does not create a direct contractual relationship between Allstate
Life and you. In other words, the obligations of Allstate Life under the
reinsurance agreement are to Glenbrook; Glenbrook remains the sole obligor under
the Contract to you.
Several independent rating agencies regularly evaluate life insurers'
claims-paying ability, quality of investments, and overall stability. A.M. Best
Company assigns A+ (Superior) to Allstate Life which automatically reinsures all
net business of Glenbrook. A.M. Best Company also assigns Glenbrook the rating
of A+(r) because Glenbrook automatically reinsures all net business with
Allstate Life. Standard & Poor's Insurance Rating Services assigns an AA+ (Very
Strong) financial strength rating and Moody's assigns an Aa2 (Excellent)
financial strength rating to Glenbrook. Glenbrook shares the same ratings of its
parent, Allstate Life. These ratings do not reflect the investment performance
of the Variable Account. We may from time to time advertise these ratings in our
sales literature.
THE VARIABLE ACCOUNT
Glenbrook established the Glenbrook Life 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.
We own the assets of the Variable Account. The Variable Account is a segregated
asset account under Arizona law. That means we account for the Variable
Account's income, gains and losses separately from the results of our other
operations. It also means that only the assets of the Variable Account that are
in excess of the reserves and other Contract liabilities with respect to the
Variable Account are subject to liabilities relating to our other operations.
Our obligations arising under the Contracts are general corporate obligations of
Glenbrook.
The Variable Account consists of multiple Variable Sub-Accounts, 40 of which are
offered under this Contract. 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
52
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 fund. Any substitution of securities will comply with the
requirements of the Investment Company Act of 1940. We also may add new Variable
Sub-Accounts that invest in additional mutual funds. We will notify you in
advance of any change.
CONFLICTS OF INTEREST. Certain of the Portfolios sell their shares to separate
accounts underlying both variable life insurance and variable annuity contracts.
It is conceivable that in the future it may be unfavorable for variable life
insurance separate accounts and variable annuity separate accounts to invest in
the same Portfolio. The boards of directors 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 8.5% 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 1.00%, 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 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, waiver of withdrawal
charges (if applicable), 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
Foley & Lardner, Washington, D.C., has advised Glenbrook on certain federal
securities law matters. All matters of state insurance law pertaining to the
Contracts, including the validity of the Contracts and Glenbrook's right to
issue such Contracts under state insurance law, have been passed upon by Michael
J. Velotta, General Counsel of Glenbrook.
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 as a "Regulated Investment Company" under
Subchapter M of the Code. Investment income and realized capital gains of the
Variable Account are automatically applied to increase reserves under the
Contract. Under existing federal income tax law, 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 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 owner during the taxable year.
Although GLENBROOK LIFE does not have control over the Funds or their
investments, we expect the Funds to meet the diversification requirements.
OWNERSHIP TREATMENT. The IRS has stated that a Contract Owner will be considered
the owner of Variable 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 Variable Account investments may
cause a Contract Owner to be treated as the owner of the Variable
54
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 Variable
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 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 nonqualified 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:
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 Owner's death;
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 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 Owner's death. If the Contract Owner's designated
Beneficiary is the surviving spouse of the Owner, the Contract may be continued
with the surviving spouse as the new Contract Owner.
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 59 1/2. However, no penalty tax is incurred on distributions:
1. made on or after the date the Contract Owner attains age 59 1/2,
2. made as a result of the Contract Owner's death or becoming totally disabled,
3. made in substantially equal periodic payments over
55
the Contract Owner's life or life expectancy, or over the joint lives or joint
life expectancies of the Contract Owner and the Contract 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, 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 59 1/2 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.
The Contract may be used with several types of qualified plans. 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
56
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 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 59 1/2,
... 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 70 1/2. 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 this annuity 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 may not invest in life insurance contracts. However, an IRA
(e.g., traditional IRA, Roth IRA, SEP IRA and SIMPLE 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
owners of any IRA to select certain death benefits that offer enhanced earnings.
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.
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 59 1/2. However, no penalty tax is incurred on
distributions:
1. made on or after the date the Contract Owner attains age 59 1/2,
2. made as a result of the Contract Owner's death or 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 Contract 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 59 1/2 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
57
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 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 59 1/2,
... 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.
58
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
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'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 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 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 year period 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 from the Statement of Additional Information,
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
59
maintenance charge and the withdrawal charge (for ALLSTATE PROVIDER ULTRA
CONTRACTS and ALLSTATE PROVIDER EXTRA CONTRACTS). Performance advertisements
also may include total return figures that reflect the deduction of insurance
charges, but not the contract maintenance charge or withdrawal charge. Any total
return figures that reflect the Credit Enhancement will also reflect applicable
withdrawal charges to the extent required. 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 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.
60
APPENDIX A
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT
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ALLSTATE PROVIDER ADVANTAGE CONTRACTS Accumulation Unit Values for the Allstate
Provider Advantage Contracts for the period September 17, 2001* (date Contracts
were first offered) through December 31, 2001 are set out below:
VARIABLE SUB-ACCOUNTS With the
With the Income Benefit
Enhanced With the and Enhanced
Death Benefit Income Benefit Death Benefit
Base Policy /1/ Rider/^/ Rider/3/ Riders/4/
AIM V.I. AGGRESSIVE GROWTH*
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.665 10.661 10.661 10.656
Number of Units Outstanding, End of Period 0 0 0 0
AIM V.I. BALANCED
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 11.292 11.284 11.284 11.276
Number of Units Outstanding, End of Period 0 0 0 0
AIM V.I. CAPITAL APPRECIATION
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 12.619 12.610 12.610 12.601
Number of Units Outstanding, End of Period 1,667 0 0 0
AIM V.I. CORE EQUITY
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 12.391 12.382 12.382 12.374
Number of Units Outstanding, End of Period 0 0 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
AIM V.I. DENT DEMOGRAPHIC TRENDS*
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 11.041 11.036 11.036 11.032
Number of Units Outstanding, End of Period 0 0 0 0
AIM V.I. DIVERSIFIED INCOME*
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 9.776 9.772 9.772 9.768
Number of Units Outstanding, End of Period 0 0 0 0
AIM V.I. GROWTH
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 11.629 11.621 11.621 11.613
Number of Units Outstanding, End of Period 0 0 0 0
AIM V.I. INTERNATIONAL GROWTH*
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.217 10.213 10.213 10.208
Number of Units Outstanding, End of Period 0 0 0 0
AIM V.I. PREMIER EQUITY
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 11.853 11.844 11.844 11.836
Number of Units Outstanding, End of Period 1,836 0 0 0
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH*
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.525 10.520 10.520 10.516
Number of Units Outstanding, End of Period 0 0 0 0
DREYFUS STOCK INDEX*
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.584 10.579 10.579 10.575
Number of Units Outstanding, End of Period 0 0 0 0
61
DREYFUS VIF GROWTH & INCOME*
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.719 10.714 10.714 10.710
Number of Units Outstanding, End of Period 0 0 0 0
DREYFUS VIF MONEY MARKET*
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.010 10.006 10.006 10.002
Number of Units Outstanding, End of Period 0 0 0 0
FIDELITY VIP ASSET MANAGER: GROWTH SERVICE CLASS 2*
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.615 10.610 10.610 10.606
Number of Units Outstanding, End of Period 0 0 0 0
- ------------------------------------------------------------------
FIDELITY VIP CONTRAFUND/TM/ SERVICE CLASS 2
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 11.425 11.417 11.417 11.409
Number of Units Outstanding, End of Period 0 0 0 575
- ----------------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP EQUITY-INCOME SERVICE CLASS 2
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 11.703 11.695 11.695 11.686
Number of Units Outstanding, End of Period 180 0 0 0
FIDELITY VIP GROWTH SERVICE CLASS 2
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 12.424 12.415 12.415 12.406
Number of Units Outstanding, End of Period 1,314 0 0 0
FIDELITY VIP HIGH INCOME SERVICE CLASS 2
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.165 10.157 10.157 10.150
Number of Units Outstanding, End of Period 0 0 0 0
FRANKLIN SMALL CAP*
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 11.184 11.179 11.179 11.174
Number of Units Outstanding, End of Period 0 0 0 0
FRANKLIN TECHNOLOGY SECURITIES*
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 11.583 11.578 11.578 11.573
Number of Units Outstanding, End of Period 0 0 0 0
MUTUAL SHARES SECURITIES*
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.602 10.597 10.597 10.593
Number of Units Outstanding, End of Period 0 0 0 0
TEMPLETON DEVELOPING MARKETS SECURITIES - CLASS 2*
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.965 10.960 10.960 10.956
Number of Units Outstanding, End of Period 0 0 0 0
TEMPLETON FOREIGN SECURITIES - CLASS 2*
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.512 10.507 10.507 10.503
Number of Units Outstanding, End of Period 0 0 0 0
GOLDMAN SACHS VIT CORE/SM /SMALL CAP EQUITY*
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 11.272 11.267 11.267 11.262
Number of Units Outstanding, End of Period 0 0 0 0
GOLDMAN SACHS VIT CORE/SM/ U.S. EQUITY *
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.570 10.566 10.566 10.562
Number of Units Outstanding, End of Period 0 0 0 0
62
LSA DIVERSIFIED MID-CAP**
Accumulation Unit Value, Beginning of Period -- -- -- --
Accumulation Unit Value, End of Period -- -- -- --
Number of Units Outstanding, End of Period -- -- -- --
LSA FOCUSED EQUITY*
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.504 10.500 10.500 10.496
Number of Units Outstanding, End of Period 0 0 0 0
LSA GROWTH EQUITY*
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.576 10.572 10.572 10.568
Number of Units Outstanding, End of Period 0 0 0 0
MFS EMERGING GROWTH SERVICE CLASS
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 12.752 12.743 12.743 12.734
Number of Units Outstanding, End of Period 0 102 824 0
MFS INVESTORS TRUST SERVICE CLASS
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 11.545 11.537 11.537 11.529
Number of Units Outstanding, End of Period 0 0 700 0
MFS NEW DISCOVERY SERVICE CLASS
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 13.155 13.146 13.146 13.137
Number of Units Outstanding, End of Period 355 0 0 0
MFS RESEARCH SERVICE CLASS
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 11.948 11.940 11.940 11.932
Number of Units Outstanding, End of Period 0 0 0 0
MFS UTILITIES SERVICE CLASS
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.020 10.013 10.013 10.006
Number of Units Outstanding, End of Period 35 0 0 0
OPPENHEIMER AGGRESSIVE GROWTH
Accumulation Unit Value, Beginning of Period 10.0 10.0 10.0 10.0
Accumulation Unit Value, End of Period 11.554 11.546 11.546 11.538
Number of Units Outstanding, End of Period 182 0 0 0
OPPENHEIMER CAPITAL APPRECIATION
Accumulation Unit Value, Beginning of Period 10.0 10.0 10.0 10.0
Accumulation Unit Value, End of Period 12.235 12.226 12.226 12.217
Number of Units Outstanding, End of Period 576 105 0 0
OPPENHEIMER GLOBAL SECURITIES
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 12.373 12.364 12.364 12.356
Number of Units Outstanding, End of Period 82 0 0 0
OPPENHEIMER MAIN STREET GROWTH AND INCOME
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 11.480 11.472 11.472 11.464
Number of Units Outstanding, End of Period 2.061 0 0 0
63
OPPENHEIMER STRATEGIC BOND
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.384 10.377 10.377 10.369
Number of Units Outstanding, End of Period 0 123 0 0
PUTNAM VT GROWTH AND INCOME CLASS IB
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 11.385 11.377 11.377 11.369
Number of Units Outstanding, End of Period 0 0 0 0
PUTNAM VT GROWTH OPPORTUNITIES CLASS IB
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 12.249 12.241 12.241 12.232
Number of Units Outstanding, End of Period 0 0 0 0
PUTNAM VT HEALTH SCIENCES CLASS IB
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 11.053 110.45 11.045 11.037
Number of Units Outstanding, End of Period 0 0 0 587
PUTNAM VT INTERNATIONAL GROWTH*
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.404 10.399 10.399 10.395
Number of Units Outstanding, End of Period 0 0 0 0
PUTNAM VT NEW VALUE CLASS IB
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 11.856 11.848 11.848 11.840
Number of Units Outstanding, End of Period 0 0 536 0
PUTNAM VT RESEARCH CLASS IB*
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 12.955 12.945 12.945 12.936
Number of Units Outstanding, End of Period 0 0 0 0
VAN KAMPEN UIF CORE PLUS FIXED INCOME*
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 9.905 9.901 9.901 9.897
Number of Units Outstanding, End of Period 0 0 0 0
VAN KAMPEN UIF GLOBAL VALUE EQUITY*
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.382 10.378 10.378 10.373
Number of Units Outstanding, End of Period 0 0 0 0
VAN KAMPEN UIF MID CAP VALUE*
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 11.078 11.073 11.073 11.068
Number of Units Outstanding, End of Period 0 0 0 0
VAN KAMPEN UIF U.S. REAL ESTATE**
Accumulation Unit Value, Beginning of Period -- -- -- --
Accumulation Unit Value, End of Period -- -- -- --
Number of Units Outstanding, End of Period -- -- -- --
VAN KAMPEN UIF VALUE *
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.795 10.791 10.791 10.786
Number of Units Outstanding, End of Period 0 0 0 0
*The Allstate Provider Advantage Contracts we first offered on September 17,
2001. All Variable Sub-Accounts commenced prior to September 17, 2001 indicated
by an asterisk; they were first offered under the Allstate Provider Advantage
Contracts on November 1, 2001.
**These funds were first offered under the Allstate Provider Advantage Contracts
on May 1, 2002.
(1) The Accumulation Unit Values in this column reflect a mortality and expense
risk charge of 1.45%.
64
(2) The Accumulation Unit Values in this column reflect a mortality and expense
risk charge of 1.70%.
(3) The Accumulation Unit Values in this column reflect a mortality and expense
risk charge of 1.70%.
(4) The Accumulation Unit Values in this column reflect a mortality and expense
risk charge of 1.95%.
65
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT
- --------------------------------------------------------------------------------
ALLSTATE PROVIDER EXTRA CONTRACTS
Accumulation Unit Values for the Allstate Provider Extra Contracts for the
period November 2, 2001* (date Contracts were first offered) through December
31, 2001 are set out below:
VARIABLE SUB-ACCOUNTS With the
With the Income Benefit
Enhanced With the and Enhanced
Death Benefit Income Benefit Death Benefit
Base Policy /1/ Rider/^/ Rider/3/ Riders/4/
AIM V.I. AGGRESSIVE GROWTH
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.614 10.609 10.609 10.605
Number of Units Outstanding, End of Period 0 0 0 0
AIM V.I. BALANCED
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.288 10.284 10.284 10.280
Number of Units Outstanding, End of Period 0 0 0 0
AIM V.I. CAPITAL APPRECIATION
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.802 10.798 10.798 10.793
Number of Units Outstanding, End of Period 0 0 0 0
AIM V.I. CORE EQUITY
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.589 10.584 10.584 10.580
Number of Units Outstanding, End of Period 0 0 0 0
- -----------------------------------------------------
AIM V.I. DENT DEMOGRAPHIC TRENDS
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.956 10.951 10.951 10.947
Number of Units Outstanding, End of Period 0 0 0 0
AIM V.I. DIVERSIFIED INCOME
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 9.846 9.842 9.842 9.838
Number of Units Outstanding, End of Period 0 0 0 0
AIM V.I. GROWTH
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.460 10.456 10.456 10.452
Number of Units Outstanding, End of Period 0 0 0 0
AIM V.I. INTERNATIONAL GROWTH
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.184 10.180 10.180 10.176
Number of Units Outstanding, End of Period 0 0 0 0
AIM V.I. PREMIER EQUITY
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.503 10.499 10.499 10.494
Number of Units Outstanding, End of Period 0 0 0 0
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.494 10.488 10.488 10.484
Number of Units Outstanding, End of Period 0 0 0 0
DREYFUS STOCK INDEX
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.555 10.550 10.550 10.546
Number of Units Outstanding, End of Period 0 0 0 0
66
DREYFUS VIF GROWTH & INCOME
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.657 10.652 10.652 10.648
Number of Units Outstanding, End of Period 0 0 0 0
DREYFUS VIF MONEY MARKET
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.010 10.006 10.006 10.002
Number of Units Outstanding, End of Period 0 0 0 0
FIDELITY VIP ASSET MANAGER: GROWTH SERVICE CLASS 2
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.625 10.621 10.621 10.617
Number of Units Outstanding, End of Period 0 0 0 0
- -----------------------------------------------------
FIDELITY VIP CONTRAFUND/TM/ SERVICE CLASS 2
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.424 10.420 10.420 10.415
Number of Units Outstanding, End of Period 0 0 0 0
- -----------------------------------------------------
FIDELITY VIP EQUITY-INCOME SERVICE CLASS 2
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.635 10.630 10.630 10.626
Number of Units Outstanding, End of Period 0 0 0 0
FIDELITY VIP GROWTH SERVICE CLASS 2
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.680 10.676 10.676 10.672
Number of Units Outstanding, End of Period 0 0 0 0
FIDELITY VIP HIGH INCOME SERVICE CLASS 2
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.250 10.245 10.245 10.241
Number of Units Outstanding, End of Period 0 0 0 0
FRANKLIN GLOBAL HEALTH CARE SECURITIES - CLASS 2
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.532 10.527 10.527 10.523
Number of Units Outstanding, End of Period 0 0 0 0
FRANKLIN SMALL CAP
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 11.185 11.180 11.180 11.176
Number of Units Outstanding, End of Period 0 0 0 0
FRANKLIN TECHNOLOGY SECURITIES
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 11.534 11.529 11.529 11.524
Number of Units Outstanding, End of Period 0 0 0 0
MUTUAL SHARES SECURITIES
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.595 10.591 10.591 10.586
Number of Units Outstanding, End of Period 0 0 0 0
TEMPLETON DEVELOPING MARKETS SECURITIES - CLASS 2
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.941 10.937 10.937 10.932
Number of Units Outstanding, End of Period 0 0 0 0
TEMPLETON FOREIGN SECURITIES - CLASS 2
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.503 10.499 10.499 10.495
Number of Units Outstanding, End of Period 0 0 0 0
67
GOLDMAN SACHS VIT CORE/SM /SMALL CAP EQUITY
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 11.320 11.316 11.316 11.311
Number of Units Outstanding, End of Period 0 0 0 0
GOLDMAN SACHS VIT CORE/SM/ U.S. EQUITY
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.541 10.537 10.537 10.533
Number of Units Outstanding, End of Period 0 0 0 0
GOLDMAN SACHS VIT GLOBAL INCOME EQUITY
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 9.773 9.769 9.769 9.765
Number of Units Outstanding, End of Period 0 0 0 0
GOLDMAN SACHS VIT INTERNET TOLLKEEPER/SM /EQUITY
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 11.361 11.357 11.357 11.352
Number of Units Outstanding, End of Period 0 0 0 0
LSA DIVERSIFIED MID CAP EQUITY
Accumulation Unit Value, Beginning of Period -- -- -- --
Accumulation Unit Value, End of Period -- -- -- --
Number of Units Outstanding, End of Period -- -- -- --
LSA FOCUSED EQUITY
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.467 10.463 10.463 10.459
Number of Units Outstanding, End of Period 0 0 0 0
LSA GROWTH EQUITY
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.541 10.537 10.537 10.532
Number of Units Outstanding, End of Period 0 0 0 0
MFS EMERGING GROWTH SERVICE CLASS
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.867 10.862 10.862 10.858
Number of Units Outstanding, End of Period 0 0 0 0
MFS INVESTORS TRUST SERVICE CLASS
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.377 10.372 10.372 10.368
Number of Units Outstanding, End of Period 0 0 0 0
MFS NEW DISCOVERY SERVICE CLASS
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 11.635 11.630 11.630 11.625
Number of Units Outstanding, End of Period 0 0 0 0
MFS RESEARCH SERVICE CLASS
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.615 10.611 10.611 10.606
Number of Units Outstanding, End of Period 0 0 0 0
MFS UTILITIES SERVICE CLASS
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.167 10.163 10.163 10.159
Number of Units Outstanding, End of Period 0 0 0 0
OPPENHEIMER AGGRESSIVE GROWTH
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.684 10.680 10.680 10.675
Number of Units Outstanding, End of Period 0 0 0 0
68
OPPENHEIMER CAPITAL APPRECIATION
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.670 10.665 10.665 10.661
Number of Units Outstanding, End of Period 0 0 0 0
OPPENHEIMER GLOBAL SECURITIES
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.793 10.789 10.789 10784
Number of Units Outstanding, End of Period 0 0 0 0
OPPENHEIMER MAIN STREET GROWTH AND INCOME
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.455 10.450 10.450 10.446
Number of Units Outstanding, End of Period 0 0 0 0
OPPENHEIMER STRATEGIC BOND
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.174 10.170 10.170 10.165
Number of Units Outstanding, End of Period 0 0 0 0
PUTNAM VT GROWTH AND INCOME CLASS IB
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.514 10.510 10.510 10.505
Number of Units Outstanding, End of Period 0 0 0 0
PUTNAM VT GROWTH OPPORTUNITIES CLASS IB
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.533 10.529 10.529 10.525
Number of Units Outstanding, End of Period 0 0 0 0
PUTNAM VT HEALTH SCIENCE
Accumulation Unit Value, Beginning of Period -- -- -- --
Accumulation Unit Value, End of Period -- -- -- --
Number of Units Outstanding, End of Period -- -- -- --
PUTNAM VT INTERNATIONAL GROWTH
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.379 10.374 10.374 10.370
Number of Units Outstanding, End of Period 0 0 0 0
PUTNAM VT NEW VALUE
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.875 10.871 10.871 10.866
Number of Units Outstanding, End of Period 0 0 0 0
PUTNAM VT RESEARCH CLASS IB
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.859 10.855 10.855 10.850
Number of Units Outstanding, End of Period 0 0 0 0
VAN KAMPEN UIF CORE PLUS FIXED INCOME
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 9.941 9.936 9.936 9.932
Number of Units Outstanding, End of Period 0 0 0 0
VAN KAMPEN UIF GLOBAL VALUE EQUITY
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.348 10.344 10.344 10.340
Number of Units Outstanding, End of Period 0 0 0 0
VAN KAMPEN UIF MID CAP VALUE
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 11.079 11.074 11.074 11.070
Number of Units Outstanding, End of Period 0 0 0 0
69
VAN KAMPEN UIF U.S. REAL ESTATE
Accumulation Unit Value, Beginning of Period -- -- -- --
Accumulation Unit Value, End of Period -- -- -- --
Number of Units Outstanding, End of Period -- -- -- --
VAN KAMPEN UIF VALUE
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.735 10.731 10.731 10.727
Number of Units Outstanding, End of Period 0 0 0 0
*The Allstate Provider Extra Contracts were first offered on November 2, 2001.
All Variable Sub-Accounts commenced prior to November 2, 2001. There is no AUV
information for the LSA Diversified Mid-Cap Equity, Van Kampen UIF Real Estate,
and Putnam Health Sciences Sub-Accounts as they were first offered under the
Contracts on May 1, 2002.
(1) The Accumulation Unit Values in this column reflect a mortality and expense
risk charge of 1.40%.
(2) The Accumulation Unit Values in this column reflect a mortality and expense
risk charge of 1.65%.
(3) The Accumulation Unit Values in this column reflect a mortality and expense
risk charge of 1.65%.
(4) The Accumulation Unit Values in this column reflect a mortality and expense
risk charge of 1.90%.
70
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT
- --------------------------------------------------------------------------------
ALLSTATE PROVIDER ULTRA CONTRACTS
Accumulation Unit Values for the Allstate Provider Ultra Contracts for the
period May 1, 2001*(date Contracts were first offered) through December 31, 2001
are set out below:
VARIABLE SUB-ACCOUNTS With the
With the Income Benefit
Enhanced With the and Enhanced
Death Benefit Income Benefit Death Benefit
Base Policy /1/ Rider/^/ Rider/3/ Riders/4/
AIM V.I. AGGRESSIVE GROWTH
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 8.618 8.603 8.603 8.589
Number of Units Outstanding, End of Period 162 2,604 530 122
AIM V.I. BALANCED
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 9.121 9.106 9.106 9.090
Number of Units Outstanding, End of Period 17,262 36,214 8,928 2,006
AIM V.I. CAPITAL APPRECIATION
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 8.61 8.65 8.65 8.642
Number of Units Outstanding, End of Period 7,675 34,586 7,427 16,080
AIM V.I. CORE EQUITY
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 8.497 8.482 8.482 8.468
Number of Units Outstanding, End of Period 0 0 0 0
- ---------------------------------------------------------------------------------------------------------------------
AIM V.I. DENT DEMOGRAPHIC TRENDS
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 8.470 8.456 8.456 8.441
Number of Units Outstanding, End of Period 202 0 0 843
AIM V.I. DIVERSIFIED INCOME
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.127 10.109 10.109 10.092
Number of Units Outstanding, End of Period 1,291 3,369 507 38
AIM V.I. GROWTH
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 8.395 8.381 8.381 8.367
Number of Units Outstanding, End of Period 14,481 6,203 4,883 13,911
AIM V.I. INTERNATIONAL GROWTH
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 8.508 8.493 8.493 8.479
Number of Units Outstanding, End of Period 0 0 0 0
AIM V.I. PREMIER EQUITY
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 8.853 8.832 8.838 8.823
Number of Units Outstanding, End of Period 11,756 35,582 15,056 22,170
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 8.323 8.309 8.309 8.295
Number of Units Outstanding, End of Period 209 0 0 0
DREYFUS STOCK INDEX
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 9.409 9.034 9.034 9.018
Number of Units Outstanding, End of Period 6,900 3,055 2,060 2,030
71
DREYFUS VIF GROWTH & INCOME
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 9.156 9.140 9.140 9.124
Number of Units Outstanding, End of Period 904 0 0 0
DREYFUS VIF MONEY MARKET
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.124 10.107 10.107 10.090
Number of Units Outstanding, End of Period 11,463 0 4,062 3,777
FIDELITY VIP ASSET MANAGER: GROWTH SERVICE CLASS 2
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 9.497 9.481 9.481 9.456
Number of Units Outstanding, End of Period 1,656 0 0 0
- -----------------------------------------------------
FIDELITY VIP CONTRAFUND/TM/ SERVICE CLASS 2
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 9.456 9.449 9.449 9.433
Number of Units Outstanding, End of Period 17.056 15,928 4,269 5,676
- ---------------------------------------------------------------------------------------------------------------------
FIDELITY VIP EQUITY-INCOME SERVICE CLASS 2
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 9.370 9.354 9.354 9.339
Number of Units Outstanding, End of Period 35,300 48,170 21,250 16,281
FIDELITY VIP GROWTH SERVICE CLASS 2
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 8.681 8.666 8.666 8.651
Number of Units Outstanding, End of Period 13,066 23,900 2,130 2,064
FIDELITY VIP HIGH INCOME SERVICE CLASS 2
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 9.016 9.001 9.001 8.986
Number of Units Outstanding, End of Period 2,936 6,849 3,040 5,100
FRANKLIN SMALL CAP
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 9.286 9.270 9.270 9.254
Number of Units Outstanding, End of Period 2,096 0 509 1,972
FRANKLIN TECHNOLOGY SECURITIES
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 7.942 7.929 7.929 7.915
Number of Units Outstanding, End of Period 261 0 348 0
MUTUAL SHARES SECURITIES
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 9.833 9.816 9.816 9.800
Number of Units Outstanding, End of Period 14,810 1,046 3,552 837
TEMPLETON DEVELOPING MARKETS SECURITIES - CLASS 2
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 9.434 9.418 9.418 9.402
Number of Units Outstanding, End of Period 0 0 0 0
TEMPLETON FOREIGN SECURITIES - CLASS 2
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 8.776 8.761 8.761 8.746
Number of Units Outstanding, End of Period 825 1,234 1,036 119
GOLDMAN SACHS VIT CORE/SM /SMALL CAP EQUITY
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.163 10.146 10.146 10.129
Number of Units Outstanding, End of Period 0 0 0 0
72
GOLDMAN SACHS VIT CORE/SM/ U.S. EQUITY
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 9.015 9.000 9.000 8.985
Number of Units Outstanding, End of Period 0 0 0 0
LSA DIVERSIFIED MID-CAP
Accumulation Unit Value, Beginning of Period -- -- -- --
Accumulation Unit Value, End of Period -- -- -- --
Number of Units Outstanding, End of Period -- -- -- --
LSA FOCUSED EQUITY
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 9.102 9.087 9.087 9.072
Number of Units Outstanding, End of Period 302 198 168 340
LSA GROWTH EQUITY
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 8.845 8.830 8.830 8.815
Number of Units Outstanding, End of Period 0 0 0 507
MFS EMERGING GROWTH SERVICE CLASS
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 8.158 8.144 8.144 8.130
Number of Units Outstanding, End of Period 8,841 28,157 6,533 13,429
MFS INVESTORS TRUST SERVICE CLASS
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 8.843 8.828 8.828 8.813
Number of Units Outstanding, End of Period 16,089 20,784 3,393 4,190
MFS NEW DISCOVERY SERVICE CLASS
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 9.619 9.602 9.602 9.586
Number of Units Outstanding, End of Period 5,451 7,674 2,355 683
MFS RESEARCH SERVICE CLASS
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 8.458 8.444 8.444 8.430
Number of Units Outstanding, End of Period 6,555 14,559 1,783 936
MFS UTILITIES SERVICE CLASS
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 7.546 7.533 7.5533 7.520
Number of Units Outstanding, End of Period 33,039 20,335 6,058 7,254
OPPENHEIMER AGGRESSIVE GROWTH
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 8.833 8.818 8.818 8.803
Number of Units Outstanding, End of Period 19,725 11,201 3,962 6,136
OPPENHEIMER CAPITAL APPRECIATION
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 8.693 8.678 8.678 8.663
Number of Units Outstanding, End of Period 67,547 68,758 9,979 13,792
OPPENHEIMER GLOBAL SECURITIES
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 9.314 9.298 9.298 9.282
Number of Units Outstanding, End of Period 12,351 26,672 3,338 2,830
OPPENHEIMER MAIN STREET GROWTH AND INCOME
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 9.171 9.155 9.155 9.140
Number of Units Outstanding, End of Period 44,958 44,954 14,089 12,659
73
OPPENHEIMER STRATEGIC BOND
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.250 10.232 10.232 10.215
Number of Units Outstanding, End of Period 22,387 37,733 8,015 6,083
PUTNAM VT GROWTH AND INCOME CLASS IB
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 9.217 9.202 9.202 9.186
Number of Units Outstanding, End of Period 25,624 32,365 0 642
PUTNAM VT GROWTH OPPORTUNITIES CLASS IB
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 8.065 8.051 8.051 8.037
Number of Units Outstanding, End of Period 3,456 2,002 2,093 0
PUTNAM VT HEALTH SCIENCES
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 9.662 9.645 9.645 9.629
Number of Units Outstanding, End of Period 10,884 8,615 9,717 11,843
PUTNAM VT INTERNATIONAL GROWTH
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 11.829 11.820 11.820 11.812
Number of Units Outstanding, End of Period 0 0 0 0
PUTNAM VT NEW VALUE
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 9.574 9.558 9.558 9.542
Number of Units Outstanding, End of Period 10,667 11,841 1,206 0
PUTNAM VT RESEARCH CLASS IB
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 12.056 12.048 12.048 12.040
Number of Units Outstanding, End of Period 0 0 257 0
VAN KAMPEN UIF CORE PLUS FIXED INCOME
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 10.455 10.437 10.437 10.420
Number of Units Outstanding, End of Period 13,728 98 3,648 1,283
VAN KAMPEN UIF GLOBAL VALUE EQUITY
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 9.289 9.274 9.274 9.258
Number of Units Outstanding, End of Period 383 0 0 54
VAN KAMPEN UIF MID CAP VALUE
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 9.585 9.568 9.568 9.552
Number of Units Outstanding, End of Period 2,965 83 1,343 3,078
VAN KAMPEN UIF U.S. REAL ESTATE
Accumulation Unit Value, Beginning of Period -- -- -- --
Accumulation Unit Value, End of Period -- -- -- --
Number of Units Outstanding, End of Period -- -- -- --
VAN KAMPEN UIF VALUE
Accumulation Unit Value, Beginning of Period 10.000 10.000 10.000 10.000
Accumulation Unit Value, End of Period 9.615 9.599 9.599 9.583
Number of Units Outstanding, End of Period 1 0 657 0
*The Allstate Provider Ultra Contracts were first offered on May 1, 2001. All
Variable Sub-Accounts commenced prior to May 1, 2001 except the Putnam VT
International Growth, and Putnam VT Research Class IB which were first offered
under the Contracts on September 21, 2001. There is no AUV information for the
LSA Diversified Mid-Cap and Van Kampen UIF Real Estate Variable Sub-Accounts
which were first offered under the Contracts on May 1, 2002.
74
(1) The Accumulation Unit Values in this column reflect a mortality and expense
risk charge of 1.25%.
(2) The Accumulation Unit Values in this column reflect a mortality and expense
risk charge of 1.50%.
(3) The Accumulation Unit Values in this column reflect a mortality and expense
risk charge of 1.50%.
(4) The Accumulation Unit Values in this column reflect a mortality and expense
risk charge of 1.75%.
75
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.
76
EXAMPLES OF MARKET VALUE ADJUSTMENT
- --------------------------------------------------------------------------------
Purchase Payment: $10,000 (plus Credit Enhancement of $400 for ALLSTATE PROVIDER
EXTRA CONTRACTS) 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 FOR ALLSTATE PROVIDER ADVANTAGE CONTRACTS (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 Market Value I = 4.5%
Adjustment: J = 4.2%
N = 730 days =2
--------
365 days
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 4. 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
77
EXAMPLE 2: FOR ALLSTATE PROVIDER ADVANTAGE CONTRACTS (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 Market Value I = 4.5%
Adjustment: J = 4.8%
N = 730 days =2
--------
365 days
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 4. 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
EXAMPLE 3: FOR ALLSTATE PROVIDER ULTRA CONTRACTS (ASSUMES DECLINING 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: = .06 X ($10,000 - $1,500) =
$510.00
Step 4. Calculate the Market Value I = 4.50%
Adjustment: J = 4.20%
N = 730 days =2
--------
365 days
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 $11,411.66 - $510.00 + $8.92 =
withdrawal at the end of Contract Year $10,910.58
3:
78
EXAMPLE 4: FOR ALLSTATE PROVIDER ULTRA CONTRACTS (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 Charge = .06 X ($10,000 - $1,500) = $510.00
Step 4. Calculate the Market Value I = 4.50%
Adjustment: J = 4.80%
N = 730 days =2
--------
365 days
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 $11,411.66 - $510.00 - $98.13 =
withdrawal at the end of Contract Year $10,803.53
3:
EXAMPLE 5: FOR ALLSTATE PROVIDER EXTRA CONTRACTS (ASSUMES DECLINING INTEREST
RATES)
Step 1. Calculate Contract Value at $10,400.00 X (1.045)/3 /= $11,868.13
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
Charge: = .08 X ($10,000 - $1,500) = $680
Step 4. Calculate the Market Value I = 4.5%
Adjustment: J = 4.2%
N = 730 days =2
--------
365 days
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 ($11,868.13 - $1,500.00) =
$9.33
Step 5. Calculate the amount received
by a Contract owner as a result of full $11,868.13 - $680.00 + $9.33=
withdrawal at the end of Contract Year $11,197.46
3:
79
EXAMPLE 6: ALLSTATE PROVIDER EXTRA CONTRACTS (ASSUMES RISING INTEREST RATES)
Step 1. Calculate Contract Value at $10,400.00 X (1.045)/3 /= $11,868.13
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
Charge: = .08 X ($10,000 - $1,500) = $680
Step 4. Calculate the Market Value I = 4.5%
Adjustment: J = 4.8%
N = 730 days =2
--------
365 days
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 ($11,868.13 - $1,500.00)
= ( $102.64)
Step 5. Calculate the amount received
by a Contract owner as a result of full
withdrawal at the end of Contract Year $11,868.13 - $680.00 - $102.64 =
3: $11,085.49
80
APPENDIX C CALCULATION OF ENHANCED EARNINGS DEATH BENEFIT AMOUNT
- --------------------------------------------------------------------------------
ALLSTATE PROVIDER ADVANTAGE AND PROVIDER EXTRA CONTRACTS
EXAMPLE1. In this example, assume that the oldest Owner is age 55 at the time
the Contract is issued and elects the Enhanced Earnings Death Benefit Rider when
the Contract is issued. The Owner makes an initial purchase payment of $100,000.
After four years, the Owner dies. On the date Glenbrook receives Due Proof of
Death, the Contract Value is $125,000. Prior to his death, the Owner did not
make any additional purchase payments or take any withdrawals.
Excess-of-Earnings Withdrawals = $0
Purchase payments in the 12 months prior to Death = $0
In-Force Premium = $100,000 ($100,000 + $0 - $0)
In-Force Earnings = $25,000 ($125,000 - $100,000)
Enhanced Earnings Death Benefit = 40% X $25,000 = $10,000.
Since 40% In-Force Earnings are less than 80% of the In-Force Premium (excluding
purchase payments in the 12 months prior to death), the In-Force Earnings are
used to compute the Enhanced Earnings Death Benefit amount.
EXAMPLE 2. In the second example, assume the same facts as above, except that
the Owner has taken a withdrawal of $10,000 during the second year of the
Contract. At the time the withdrawal is taken, the Contract Value is $105,000.
Here, $5,000 of the withdrawal is in excess of the In-Force Earnings at the time
of the withdrawal. The Contract Value on the date Glenbrook receives due proof
of death will be assumed to be $114,000.
Excess of Earnings Withdrawals = $5,000 ($10,000 - $5,000)
Purchase payments in the 12 months prior to Death = $0
In-Force Premium = $95,000 ($100,000 + $0 - $5,000)
In-Force Earnings = $19,000 ($114,000 - $95,000)
Enhanced Earnings Death Benefit = 40% X $19,000 = $7,600.
Since 40% In-Force Earnings are less than 80% of the In-Force Premium (excluding
purchase payments in the 12 months prior to death), the In-Force Earnings are
used to compute the Enhanced Earnings Death Benefit amount.
EXAMPLE 3. This third example is intended to illustrate the effect of adding the
Enhanced Earnings Death Benefit Rider after the Contract has been issued and the
effect of later purchase payments. In this example, assume that the oldest Owner
is age 65 on the Rider Date. At the time the Contract is issued, the Owner makes
a purchase payment of $100,000. After two years pass, the Owner elects to add
the Enhanced Earnings Death Benefit Rider. On the date this Rider is added, the
Contract Value is $110,000. Two years later, the Owner withdraws $50,000.
Immediately prior to the withdrawal, the Contract Value is $130,000. Another two
years later, the Owner makes an additional purchase payment of $40,000.
Immediately after the additional purchase payment, the Contract Value is
$130,000. Two years later, the owner dies with a Contract Value of $140,000 on
the date Glenbrook receives Due Proof of Death.
Excess of Earnings Withdrawals = $30,000 ($50,000 - $20,000)
Purchase payments in the 12 months prior to Death = $0
In-Force Premium = $120,000 ($110,000 + $40,000 - $30,000)
In-Force Earnings = $20,000 ($140,000 - $120,000)
Enhanced Earnings Death Benefit = 30% of $20,000 = $6,000.
In this example, In-Force Premium is equal to the Contract Value on the date the
Rider was issued plus the additional purchase payment and minus the
Excess-of-Earnings Withdrawal.
Since 30% In-Force Earnings are less than 60% of the In-Force Premium (excluding
purchase payments in the 12 months prior to death), the In-Force Earnings are
used to compute the Enhanced Earnings Death Benefit amount.
81
ALLSTATE PROVIDER ULTRA CONTRACTS
EXAMPLE1. In this example, assume that the oldest Owner is age 55 at the time
the Contract is issued and elects the Enhanced Earnings Death Benefit Rider when
the Contract is issued. The Owner makes an initial purchase payment of $100,000.
After four years, the Owner dies. On the date Glenbrook receives Due Proof of
Death, the Contract Value is $125,000. Prior to his death, the Owner did not
make any additional purchase payments or take any withdrawals.
Excess-of-Earnings Withdrawals = $0
Purchase payments in the 12 months prior to Death = $0
In-Force Premium = $100,000 ($100,000 + $0 - $0)
Death Benefit Earnings = $25,000 ($125,000 - $100,000)
Enhanced Earnings Death Benefit = 40% X $25,000 = $10,000.
Since Death Benefit Earnings are less than 200% of the In-Force Premium
(excluding purchase payments in the 12 months prior to death), the Death Benefit
Earnings are used to compute the Enhanced Earnings Death Benefit amount.
EXAMPLE 2. In the second example, assume the same facts as above, except that
the Owner has taken a withdrawal of $10,000 during the second year of the
Contract. At the time the withdrawal is taken, the Contract Value is $105,000.
Here, $5,000 of the withdrawal is in excess of the Death Benefit Earnings at the
time of the withdrawal. The Contract Value on the date Glenbrook receives due
proof of death will be assumed to be $114,000.
Excess of Earnings Withdrawals = $5,000 ($10,000 - $5,000)
Purchase payments in the 12 months prior to Death = $0
In-Force Premium = $95,000 ($100,000 + $0 -$5,000)
Death Benefit Earnings = $19,000 ($114,000 - $95,000)
Enhanced Earnings Death Benefit = 40% X $19,000 = $7,600.
Since Death Benefit Earnings are less than 200% of the In-Force Premium
(excluding purchase payments in the 12 months prior to death), the Death Benefit
Earnings are used to compute the Enhanced Earnings Death Benefit amount.
EXAMPLE 3. This third example is intended to illustrate the effect of adding the
Enhanced Earnings Death Benefit Rider after the Contract has been issued and the
effect of later purchase payments. In this example, assume that the oldest Owner
is age 65 on the Rider Date. At the time the Contract is issued, the Owner makes
a purchase payment of $100,000. After two years pass, the Owner elects to add
the Enhanced Earnings Death Benefit Rider. On the date this Rider is added, the
Contract Value is $110,000. Two years later, the Owner withdraws $50,000.
Immediately prior to the withdrawal, the Contract Value is $130,000. Another two
years later, the Owner makes an additional purchase payment of $40,000.
Immediately after the additional purchase payment, the Contract Value is
$130,000. Two years later, the owner dies with a Contract Value of $140,000 on
the date Glenbrook receives Due Proof of Death.
Excess of Earnings Withdrawals = $30,000 ($50,000 - $20,000)
Purchase payments in the 12 months prior to Death = $0
In-Force Premium = $120,000 ($110,000 + $40,000 - $30,000)
Death Benefit Earnings = $20,000 ($140,000 - $120,000)
Enhanced Earnings Death Benefit = 30% of $20,000 = $6,000.
In this example, In-Force Premium is equal to the Contract Value on the date the
Rider was issued plus the additional purchase payment and minus the
Excess-of-Earnings Withdrawal.
Since Death Benefit Earnings are less than 200% of the In-Force Premium
(excluding purchase payments in the 12 months prior to death), the Death Benefit
Earnings are used to compute the Enhanced Earnings Death Benefit amount.
82
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DESCRIPTION
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DESCRIPTION
- --------------------------------------------------------------------------------
GENERAL MATTERS
- --------------------------------------------------------------------------------
Incontestability
- --------------------------------------------------------------------------------
Settlements
- --------------------------------------------------------------------------------
Safekeeping of the Variable Account's
- --------------------------------------------------------------------------------
Assets
- --------------------------------------------------------------------------------
Premium Taxes
- --------------------------------------------------------------------------------
Tax Reserves
- --------------------------------------------------------------------------------
FEDERAL TAX MATTERS
- --------------------------------------------------------------------------------
QUALIFIED PLANS
- --------------------------------------------------------------------------------
EXPERTS
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. WE DO NOT AUTHORIZE ANYONE TO PROVIDE
ANY INFORMATION OR REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS
PROSPECTUS OTHER THAN AS CONTAINED IN THIS PROSPECTUS.
83
THE ALLSTATE/(R)// /PROVIDER VARIABLE ANNUITY SERIES
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", "WE", OR "US") is offering the
following group and individual flexible premium deferred variable annuity
contracts (each, a "Contract"):
... The Allstate/(R)/ Provider Advantage Variable Annuity
(Formerly referred to as "The Glenbrook Provider Advantage Variable
Annuity")
... The Allstate/(R)/ Provider Ultra Variable Annuity
(Formerly referred to as "The Glenbrook Provider Ultra Variable
Annuity")
Glenbrook is a wholly owned subsidiary of the Allstate Life Insurance Company.
This prospectus contains information about each Contract that you should know
before investing. Please keep it for future reference. Not all Contracts may be
available in all states or through your sales representative. Please check with
your sales representative for details.
Each Contract currently offers 43 investment alternatives ("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 the portfolios
("PORTFOLIOS") of the following underlying funds ("FUNDS"):
AIM VARIABLE INSURANCE FUNDS MFS(TM)VARIABLEINSURANCETRUST/SM/
FEDERATED INSURANCE SERIES OPPENHEIMERVARIABLEACCOUNTFUNDS
FIDELITY VARIABLE INSURANCE PRODUCTS FUND PUTNAMVARIABLETRUST
FRANKLIN/(R)/ TEMPLETON/(R)/ VARIABLE STICLASSICVARIABLETRUST
INSURANCE
PRODUCTS TRUST
Each Fund has multiple 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.
Glenbrook has 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 73 of this prospectus. For a free copy, please write or call us at the
address or telephone number above, or go to the SEC's Web site
(http://www.sec.gov). You can find other information and documents about us,
including documents that are legally part of this prospectus, at the SEC's Web
site.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THE SECURITIES DESCRIBED IN
THIS PROSPECTUS, NOR HAS IT PASSED ON THE ACCURACY OR
THE ADEQUACY OF THIS PROSPECTUS. ANYONE WHO TELLS YOU
OTHERWISE IS COMMITTING A FEDERAL CRIME.
IMPORTANT THE CONTRACTS MAY BE DISTRIBUTED THROUGH
BROKER-DEALERS THAT HAVE RELATIONSHIPS WITH BANKS OR
NOTICES OTHER FINANCIAL INSTITUTIONS OR BY EMPLOYEES OF SUCH
BANKS. HOWEVER, THE CONTRACTS ARE NOT DEPOSITS, OR
OBLIGATIONS OF, OR GUARANTEED BY SUCH INSTITUTIONS OR
ANY FEDERAL REGULATORY AGENCY. INVESTMENT IN THE
CONTRACTS INVOLVES INVESTMENT RISKS, INCLUDING
POSSIBLE LOSS OF PRINCIPAL.
THE CONTRACTS ARE NOT FDIC INSURED.
1
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
- --------------------------------------------------------------------------------
OVERVIEW
- --------------------------------------------------------------------------------
Important Terms
- --------------------------------------------------------------------------------
Overview of Contracts
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
The Variable Account
- --------------------------------------------------------------------------------
The Portfolios
- --------------------------------------------------------------------------------
The Contract
- --------------------------------------------------------------------------------
Qualified Plans
- --------------------------------------------------------------------------------
Legal Matters
- --------------------------------------------------------------------------------
Taxes
- --------------------------------------------------------------------------------
Taxation of Annuities in General
- --------------------------------------------------------------------------------
Tax Qualified Contracts
- --------------------------------------------------------------------------------
Income Tax Withholding
- --------------------------------------------------------------------------------
Annual Reports and Other Documents
- --------------------------------------------------------------------------------
Experts
- --------------------------------------------------------------------------------
Performance Information
- --------------------------------------------------------------------------------
APPENDIX A - ACCUMULATION UNIT VALUES
- --------------------------------------------------------------------------------
APPENDIX B - MARKET VALUE ADJUSTMENT EXAMPLES
- --------------------------------------------------------------------------------
APPENDIX C - CALCULATION OF ENHANCED EARNINGS DEATH BENEFIT AMOUNT
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
CONTINGENT BENEFICIARY
- --------------------------------------------------------------------------------
CONTRACT*
- --------------------------------------------------------------------------------
CONTRACT ANNIVERSARY
- --------------------------------------------------------------------------------
CONTRACT OWNER ("YOU")
- --------------------------------------------------------------------------------
CONTRACT VALUE
- --------------------------------------------------------------------------------
CONTRACT YEAR
- --------------------------------------------------------------------------------
DEATH BENEFIT ANNIVERSARY
- --------------------------------------------------------------------------------
DEATH BENEFIT EARNINGS
- --------------------------------------------------------------------------------
DOLLAR COST AVERAGING PROGRAM
- --------------------------------------------------------------------------------
DUE PROOF OF DEATH
- --------------------------------------------------------------------------------
ENHANCED EARNINGS DEATH BENEFIT RIDER
- --------------------------------------------------------------------------------
ENHANCED DEATH BENEFIT RIDER
- --------------------------------------------------------------------------------
EXCESS-OF-EARNINGS WITHDRAWAL
- --------------------------------------------------------------------------------
FIXED ACCOUNT OPTIONS
- --------------------------------------------------------------------------------
FREE WITHDRAWAL AMOUNT
- --------------------------------------------------------------------------------
FUNDS
- --------------------------------------------------------------------------------
GLENBROOK ("WE" OR "US")
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PAGE
- --------------------------------------------------------------------------------
GUARANTEE PERIODS
- --------------------------------------------------------------------------------
GUARANTEED INCOME BENEFIT
- --------------------------------------------------------------------------------
GUARANTEED MATURITY FIXED ACCOUNT
- --------------------------------------------------------------------------------
INCOME BASE
- --------------------------------------------------------------------------------
INCOME BENEFIT RIDER
- --------------------------------------------------------------------------------
INCOME PLAN
- --------------------------------------------------------------------------------
IN-FORCE EARNINGS
- --------------------------------------------------------------------------------
IN-FORCE PREMIUM
- --------------------------------------------------------------------------------
INVESTMENT ALTERNATIVES
- --------------------------------------------------------------------------------
ISSUE DATE
- --------------------------------------------------------------------------------
MARKET VALUE ADJUSTMENT
- --------------------------------------------------------------------------------
PAYOUT PHASE
- --------------------------------------------------------------------------------
PAYOUT START DATE
- --------------------------------------------------------------------------------
PORTFOLIOS
- --------------------------------------------------------------------------------
PRIMARY BENEFICIARY
- --------------------------------------------------------------------------------
QUALIFIED CONTRACTS
- --------------------------------------------------------------------------------
RIDER APPLICATION DATE
- --------------------------------------------------------------------------------
RIDER DATE
- --------------------------------------------------------------------------------
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. References to "Contract" also include both Contracts listed
on the cover page of this prospectus, unless otherwise noted. However, we
administer each Contract separately.
3
OVERVIEW OF CONTRACTS
- --------------------------------------------------------------------------------
The Contracts offer many of the same basic features and benefits. They differ
primarily with respect to the charges imposed, as follows:
... The ALLSTATE PROVIDER ADVANTAGE CONTRACT has a mortality and expense risk
charge of 1.45%, and no withdrawal charge.
... The ALLSTATE PROVIDER ULTRA CONTRACT has a mortality and expense risk charge
of 1.25%, and a withdrawal charge of up to 7% with a 7 year withdrawal charge
period (and an annual Free Withdrawal Amount).
Other differences among the Contracts relate to the effect of changing
Annuitants under the Income Benefit Rider, the spousal continuation provision of
the Enhanced Death Benefit and Enhanced Earnings Death Benefit Riders, and the
calculation of the Enhanced Earnings Death Benefit.
4
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 $5,000
($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, including the deduction of mortality and
expense risk charges and administrative expense
charges.
- -------------------------------------------------------------------------------
EXPENSES You will bear the following expenses:
ALLSTATE PROVIDER ADVANTAGE CONTRACTS
-------------------------------------
.Total Variable Account annual fees equal to 1.55% of
average daily net assets (1.80% if you select the
ENHANCED DEATH BENEFIT RIDER or the INCOME BENEFIT
RIDER; and 2.05% if you select both the Enhanced
Death Benefit and the Income Benefit Riders).
ALLSTATE PROVIDER ULTRA CONTRACTS
---------------------------------
.Total Variable Account annual fees equal to 1.35% of
average daily net assets (1.60% if you select the
Enhanced Death Benefits Rider or the Income Benefit
Rider; and 1.85% if you select both the Enhanced
Death Benefit and the Income Benefit Riders).
.Withdrawal charges ranging from 0% to 7% of purchase
payments withdrawn (with certain exceptions).
-
BOTH CONTRACTS
--------------
. If you select the ENHANCED EARNINGS DEATH BENEFIT
RIDER, you would pay an additional annual fee of up
to 0.35% (depending on the oldest Contract owner's
age as of the date we receive the completed
application or a written request to add the Rider,
whichever is later ("RIDER APPLICATION DATE") of the
CONTRACT VALUE on each Contract anniversary
("CONTRACT ANNIVERSARY"). For more information about
Variable Account expenses, see "EXPENSES" below.
.Annual contract maintenance charge of $35 (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.
- -------------------------------------------------------------------------------
5
- -------------------------------------------------------------------------------
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:
. A I M Advisors, Inc.
. Federated Investment Management Company
. Fidelity Management & Research Company
. Franklin Advisors, Inc.
. MFS Investment Management (TM)
. OppenheimerFunds, Inc.
. Putnam Investment Management, LLC.
. Templeton Global Advisors Limited
. Trusco Capital Management, Inc.
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.
- -------------------------------------------------------------------------------
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)
We also offer an Income Benefit Rider.
- -------------------------------------------------------------------------------
DEATH BENEFIT 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 also offer an Enhanced Death Benefit Rider and
Enhanced Earnings Death Benefit Rider.
- -------------------------------------------------------------------------------
TRANSFERS Before the Payout Start Date, you may transfer your
Contract Value among the investment alternatives, with
certain restrictions. 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.
- -------------------------------------------------------------------------------
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
(ALLSTATE PROVIDER ULTRA CONTRACTS only) and a MARKET
VALUE ADJUSTMENT also may apply.
- -------------------------------------------------------------------------------
6
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 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 25. 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.
Issue Payout Start
Date Accumulation Phase Date Payout Phase
- ------------------------------------------------------------------------------------------------------------>
You buy You save for retirement You elect to receive You can recieve Or you can receive
a Contract income payments or income payments income payments
receive a lump sum for a set period for life
payment
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.
7
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)
ALLSTATE PROVIDER ADVANTAGE CONTRACTS No Withdrawal Charges
- ------------------------------------------------------------------------
ALLSTATE PROVIDER ULTRA CONTRACTS
- -------------------------------------------------------------------------------
Number of complete years since we
received the purchase payment being 0 1 2 3 4 5 6 7+
withdrawn*
- -------------------------------------------------------------------------------
Applicable charge 7% 6% 6% 5% 5% 4% 3% 0%
- -------------------------------------------------------------------------------
BOTH CONTRACTS
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 AVERAGE DAILY NET ASSET VALUE DEDUCTED FROM EACH VARIABLE
SUB-ACCOUNT)
Allstate Provider Allstate Provider
Advantage Contracts Ultra Contracts
--------------------------------------------------------------------------
WITHOUT THE ENHANCED DEATH BENEFIT OR INCOME BENEFIT RIDERS
- --------------------------------------------------------------------------------------------------
Mortality and Expense 1.45% 1.25%
Risk Charge
- --------------------------------------------------------------------------------------------------
Administrative Expense 0.10% 0.10%
Charge
- --------------------------------------------------------------------------------------------------
Total Variable Account 1.55% 1.35%
Annual Expenses
- --------------------------------------------------------------------------------------------------
WITH THE ENHANCED DEATH BENEFIT RIDER
- --------------------------------------------------------------------------------------------------
Mortality and Expense 1.70% 1.50%
Risk Charge
- --------------------------------------------------------------------------------------------------
Administrative Expense 0.10% 0.10%
Charge
- --------------------------------------------------------------------------------------------------
Total Variable Account 1.80% 1.60%
Annual Expenses
- --------------------------------------------------------------------------------------------------
WITH THE INCOME BENEFIT RIDER
- --------------------------------------------------------------------------------------------------
Mortality and Expense 1.70% 1.50%
Risk Charge
- --------------------------------------------------------------------------------------------------
Administrative Expense 0.10% 0.10%
Charge
- --------------------------------------------------------------------------------------------------
Total Variable Account 1.80% 1.60%
Annual Expenses
- --------------------------------------------------------------------------------------------------
WITH THE INCOME BENEFIT AND ENHANCED DEATH BENEFIT RIDERS
- --------------------------------------------------------------------------------------------------
Mortality and Expense 1.95% 1.75%
Risk Charge
- --------------------------------------------------------------------------------------------------
Administrative Expense 0.10% 0.10%
Charge
- --------------------------------------------------------------------------------------------------
Total Variable Account 2.05% 1.85%
Annual Expenses
- --------------------------------------------------------------------------------------------------
8
If you elect the Enhanced Earnings Death Benefit Rider, we will deduct an annual
charge of up to 0.35% of your Contract Value on each Contract Anniversary during
the Accumulation Phase. The charge is based on the oldest Contract owner's age
as of the Rider Application Date, as follows:
Age Annual Charge
- -------------------------------------------------------------------------------
0-55 0.10%
- -------------------------------------------------------------------------------
56-65 0.20%
- -------------------------------------------------------------------------------
66-75 0.35%
- -------------------------------------------------------------------------------
We will deduct this charge from your Contract Value in the Variable Account on a
pro rata basis. If the Contract Value in the Variable Account is not sufficient
to cover the charge, we will deduct the remaining charge from the fixed
Guaranteed Periods, beginning with the oldest fixed Guaranteed Period (see
"EXPENSES" on page 22 for additional information). Fixed Guarantee Periods may
not be available in all states.
PORTFOLIO ANNUAL EXPENSES (after voluntary reductions and reimbursements) (as a
percentage of Portfolio average daily net assets)(1)
Management Total Portfolio
Portfolio Fees Rule 12b-1 Fees Other Expenses Annual 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. 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. Premier Equity Fund - Series I (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(TM) Portfolio - Service Class 0.58% 0.25% 0.11% 0.94%
2(5)
- ------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio -Service Class 2 0.48% 0.25% 0.11% 0.84%
(5)
- ------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio - Service Class 2 (5) 0.58% 0.25% 0.10% 0.93%
- ------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio - Service Class 2 0.58% 0.25% 0.15% 0.98%
- ------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Index 500 Portfolio - Service Class 2 (6) 0.24% 0.25% 0.12% 0.61%
- ------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio - Service Class 2 (5) 0.73% 0.25% 0.20% 1.18%
- ------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Series -- Service Class (7,8) 0.75% 0.25% 0.12% 1.12%
- ------------------------------------------------------------------------------------------------------------------------
MFS Investors Trust Series -- Service Class (7,8) 0.75% 0.25% 0.15% 1.15%
- ------------------------------------------------------------------------------------------------------------------------
MFS New Discovery Series -- Service Class (7,8,9) 0.90% 0.25% 0.16% 1.31%
- ------------------------------------------------------------------------------------------------------------------------
MFS Research Series -- Service Class (7,8) 0.75% 0.25% 0.15% 1.15%
- ------------------------------------------------------------------------------------------------------------------------
MFS Utilities Series -- Service Class (7,8) 0.75% 0.25% 0.18% 1.18%
- ------------------------------------------------------------------------------------------------------------------------
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 (10) 0.74% N/A 0.05% 0.79%
- ------------------------------------------------------------------------------------------------------------------------
Putnam VT Diversified Income Fund - Class IB (11) 0.68% 0.25% 0.11% 1.04%
- ------------------------------------------------------------------------------------------------------------------------
Putnam VT Growth and Income Fund - Class IB (11) 0.46% 0.25% 0.05% 0.76%
- ------------------------------------------------------------------------------------------------------------------------
Putnam VT Growth Opportunities Fund - Class IB (11) 0.70% 0.25% 0.15% 1.10%
- ------------------------------------------------------------------------------------------------------------------------
Putnam VT Health Sciences Fund - Class IB (11) 0.70% 0.25% 0.09% 1.04%
- ------------------------------------------------------------------------------------------------------------------------
Putnam VT New Value Fund - Class IB (11) 0.70% 0.25% 0.09% 1.04%
- ------------------------------------------------------------------------------------------------------------------------
Putnam VT Voyager Fund II - Class IB (11) 0.70% 0.25% 0.92% 1.87%
- ------------------------------------------------------------------------------------------------------------------------
STI Capital Appreciation Fund (12) 1.15% N/A 0.29% 1.44%
- ------------------------------------------------------------------------------------------------------------------------
STI Growth and Income Fund (13) 0.00% N/A 1.20% 1.20%
- ------------------------------------------------------------------------------------------------------------------------
STI International Equity Fund (12) 1.25% N/A 1.07% 2.32%
- ------------------------------------------------------------------------------------------------------------------------
STI Investment Grade Bond Fund (12) 0.74% N/A 0.58% 1.32%
- ------------------------------------------------------------------------------------------------------------------------
STI Mid-Cap Equity Fund (12) 1.15% N/A 0.51% 1.66%
- ------------------------------------------------------------------------------------------------------------------------
9
- ------------------------------------------------------------------------------------------------------------------------
STI Quality Growth Stock Fund (13) 0.00% N/A 1.30% 1.30%
- ------------------------------------------------------------------------------------------------------------------------
STI Small Cap Value Equity Fund (12) 1.15% N/A 0.76% 1.91%
- ------------------------------------------------------------------------------------------------------------------------
STI Value Income Stock Fund (12) 0.80% N/A 0.32% 1.12%
- ------------------------------------------------------------------------------------------------------------------------
Templeton Global Income Securities Fund -- Class 2 0.63% 0.25% 0.08% 0.96%
(14)
- ------------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund -- Class 2 (14) 0.80% 0.25% 0.05% 1.10%
- ------------------------------------------------------------------------------------------------------------------------
(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%.
(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 0.90% for Contrafund
Portfolio, 0.83% for Equity-Income Portfolio, 0.90% for Growth Portfolio and
1.12% 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 0.53%. This arrangement can be discontinued by the
Portfolios' manager at any time. Including this reimbursement, the
"Management Fees", "Rule 12b-1 Fees", "Other Expenses" and "Total Portfolio
Annual Expenses" in 2001 were 0.24%, 0.25%, 0.04% and 0.53%, respectively.
(7) Each Portfolio has adopted a distribution plan under Rule 12b-1 that permits
it to pay marketing and other fees to support the sale and distribution of
service class shares (these fees are referred to as distribution fees).
(8) 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 1.11% for Emerging Growth Series, 1.14%
for Investors Trust Series, 1.30% for New Discovery Series, 1.14% for Research
Series and 1.17% for Utilities Series.
(9) 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 8 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 1.34%. 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.
(10) 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.
(11) 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.
(12) "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
10
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:
Management Total Portfolio
Portfolio Fees Rule 12b-1 Fees Other Expenses Annual Expenses
- ---------------------------------------------------------------------------------------------
STI Capital Appreciation 0.86% N/A 0.29% 1.15%
Fund
- ---------------------------------------------------------------------------------------------
STI International Equity 0.53% N/A 1.07% 1.60%
Fund
- ---------------------------------------------------------------------------------------------
STI Investment Grade Bond 0.17% N/A 0.58% 0.75%
Fund
- ---------------------------------------------------------------------------------------------
STI Mid-Cap Equity Fund 0.64% N/A 0.51% 1.15%
- ---------------------------------------------------------------------------------------------
STI Small Cap Value Equity 0.44% N/A 0.76% 1.20%
Fund
- ---------------------------------------------------------------------------------------------
STI Value Income Stock Fund 0.63% N/A 0.32% 0.95%
- ---------------------------------------------------------------------------------------------
(13) 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.
(14) 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.
EXAMPLE 1 (ALLSTATE PROVIDER ADVANTAGE CONTRACTS)
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,
... elected the Enhanced Death Benefit and Income Benefit Riders, and
... elected the Enhanced Earnings Death Benefit Rider (assuming Contract owner is
age 66-75 on the Rider Application Date).
THE EXAMPLE DOES NOT INCLUDE ANY TAXES OR TAX PENALTIES YOU MAY BE REQUIRED TO
PAY IF YOU SURRENDER YOUR CONTRACT OR RECEIVE INCOME PAYMENTS.
Variable Sub-Account 1 Year 3 Years 5 Years 10 Years
- -----------------------------------------------------------------------------------------------------------------
AIM V.I. Balanced $37 $113 $191 $398
- -----------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation $34 $104 $177 $372
- -----------------------------------------------------------------------------------------------------------------
AIM V.I. Core Equity $34 $103 $176 $370
- -----------------------------------------------------------------------------------------------------------------
AIM V.I. Growth $34 $105 $179 $375
- -----------------------------------------------------------------------------------------------------------------
AIM V.I. High Yield $39 $118 $199 $413
- -----------------------------------------------------------------------------------------------------------------
AIM V.I. Premier Equity $34 $104 $177 $372
- -----------------------------------------------------------------------------------------------------------------
Federated Prime Money Fund II $37 $113 $191 $398
- -----------------------------------------------------------------------------------------------------------------
Fidelity VIP Contrafund(TM) - Service Class 2 $35 $107 $182 $381
- -----------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income -Service Class 2 $34 $104 $177 $371
- -----------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth - Service Class 2 $35 $107 $181 $380
- -----------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income - Service Class 2 $35 $108 $184 $385
- -----------------------------------------------------------------------------------------------------------------
Fidelity VIP Index 500 - Service Class 2 $32 $ 97 $165 $349
- -----------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas - Service Class 2 $38 $114 $194 $403
- -----------------------------------------------------------------------------------------------------------------
MFS Emerging Growth - Service Class $37 $113 $191 $398
- -----------------------------------------------------------------------------------------------------------------
MFS Investors Trust - Service Class $37 $113 $192 $400
- -----------------------------------------------------------------------------------------------------------------
MFS New Discovery - Service Class $39 $118 $200 $415
- -----------------------------------------------------------------------------------------------------------------
MFS Research - Service Class $37 $113 $192 $400
- -----------------------------------------------------------------------------------------------------------------
11
- -----------------------------------------------------------------------------------------------------------------
MFS Utilities - Service Class $38 $114 $194 $403
- -----------------------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth /VA $32 $ 99 $169 $356
- -----------------------------------------------------------------------------------------------------------------
Oppenheimer Capital Appreciation /VA $32 $ 99 $169 $356
- -----------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities /VA $33 $100 $170 $358
- -----------------------------------------------------------------------------------------------------------------
Oppenheimer Main Street Growth & Income /VA $33 $101 $171 $361
- -----------------------------------------------------------------------------------------------------------------
Oppenheimer Multiple Strategies /VA $33 $102 $173 $364
- -----------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond /VA $34 $103 $174 $367
- -----------------------------------------------------------------------------------------------------------------
Putnam VT Diversified Income - Class IB $36 $110 $187 $390
- -----------------------------------------------------------------------------------------------------------------
Putnam VT Growth and Income - Class IB $33 $102 $173 $364
- -----------------------------------------------------------------------------------------------------------------
Putnam VT Growth Opportunities - Class IB $37 $112 $190 $396
- -----------------------------------------------------------------------------------------------------------------
Putnam VT Health Sciences - Class IB $36 $110 $187 $390
- -----------------------------------------------------------------------------------------------------------------
Putnam VT New Value - Class IB $36 $110 $187 $390
- -----------------------------------------------------------------------------------------------------------------
Putnam VT Voyager II - Class IB $45 $135 $227 $464
- -----------------------------------------------------------------------------------------------------------------
STI Capital Appreciation $40 $122 $206 $427
- -----------------------------------------------------------------------------------------------------------------
STI Growth and Income $38 $115 $195 $405
- -----------------------------------------------------------------------------------------------------------------
STI International Equity $49 $148 $248 $502
- -----------------------------------------------------------------------------------------------------------------
STI Investment Grade Bond $39 $119 $200 $416
- -----------------------------------------------------------------------------------------------------------------
STI Mid-Cap Equity $42 $129 $217 $446
- -----------------------------------------------------------------------------------------------------------------
STI Quality Growth Stock $39 $118 $199 $414
- -----------------------------------------------------------------------------------------------------------------
STI Small Cap Value Equity $45 $136 $229 $468
- -----------------------------------------------------------------------------------------------------------------
STI Value Income Stock $37 $113 $191 $398
- -----------------------------------------------------------------------------------------------------------------
Templeton Global Income Securities - Class 2 $35 $108 $183 $383
- -----------------------------------------------------------------------------------------------------------------
Templeton Growth Securities - Class 2 $37 $112 $190 $396
- -----------------------------------------------------------------------------------------------------------------
PLEASE REMEMBER THAT YOU ARE LOOKING AT EXAMPLES AND NOT A REPRESENTATION OF
PAST OR FUTURE EARNINGS. YOUR ACTUAL EXPENSES MAY BE LOWER OR GREATER THAN THOSE
SHOWN ABOVE. SIMILARLY, YOUR RATE OF RETURN MAY BE LOWER OR GREATER THAN 5%,
WHICH IS NOT GUARANTEED. THE EXAMPLES ASSUME THAT ANY PORTFOLIO EXPENSE WAIVERS
OR REIMBURSEMENT ARRANGEMENTS DESCRIBED IN THE FOOTNOTES TO THE PORTFOLIO ANNUAL
EXPENSE TABLE ARE IN EFFECT FOR THE PERIODS PRESENTED. THE ABOVE EXAMPLES ASSUME
THE ELECTION OF THE ENHANCED DEATH BENEFIT AND INCOME BENEFIT RIDERS WITH A
TOTAL MORTALITY AND EXPENSE RISK CHARGE OF 1.95% FOR ALLSTATE PROVIDER ADVANTAGE
CONTRACTS AND THE ENHANCED EARNINGS DEATH BENEFIT RIDER WITH AN ANNUAL FEE OF
0.35%. IF THOSE RIDERS WERE NOT ELECTED, THE EXPENSE FIGURES SHOWN ABOVE WOULD
BE SLIGHTLY LOWER. TO REFLECT THE CONTRACT MAINTENANCE CHARGE IN THE EXAMPLES,
WE ESTIMATED AN EQUIVALENT PERCENTAGE CHARGE, BASED ON AN ASSUMED AVERAGE
CONTRACT SIZE OF $81,342.
EXAMPLE 2 (ALLSTATE PROVIDER ULTRA CONTRACTS)
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 n 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,
... elected the Enhanced Death Benefit and Income Benefit Riders, and
... elected the Enhanced Earnings Death Benefit Rider (assuming Contract owner is
age 66-75 on the Rider Application Date).
THE EXAMPLE DOES NOT INCLUDE ANY TAXES OR TAX PENALTIES YOU MAY BE REQUIRED TO
PAY IF YOU SURRENDER YOUR CONTRACT OR RECEIVE INCOME PAYMENTS.
Variable Sub-Account 1 Year 3 Years 5 Years 10 Years
- -----------------------------------------------------------------------------------------------------------------
AIM V.I. Balanced $86 $149 $215 $379
- -----------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation $83 $141 $202 $354
- -----------------------------------------------------------------------------------------------------------------
12
- -----------------------------------------------------------------------------------------------------------------
AIM V.I. Core Equity $83 $140 $200 $351
- -----------------------------------------------------------------------------------------------------------------
AIM V.I. Growth $83 $142 $203 $357
- -----------------------------------------------------------------------------------------------------------------
AIM V.I. High Yield $88 $154 $223 $395
- -----------------------------------------------------------------------------------------------------------------
AIM V.I. Premier Equity $83 $141 $202 $354
- -----------------------------------------------------------------------------------------------------------------
Federated Prime Money Fund II $86 $149 $215 $379
- -----------------------------------------------------------------------------------------------------------------
Fidelity VIP Contrafund(TM) - Service Class 2 $84 $144 $206 $362
- -----------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income -Service Class 2 $83 $141 $201 $353
- -----------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth - Service Class 2 $84 $143 $206 $361
- -----------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income - Service Class 2 $84 $145 $208 $366
- -----------------------------------------------------------------------------------------------------------------
Fidelity VIP Index 500 - Service Class 2 $81 $134 $189 $330
- -----------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas - Service Class 2 $87 $151 $218 $385
- -----------------------------------------------------------------------------------------------------------------
MFS Emerging Growth - Service Class $86 $149 $215 $379
- -----------------------------------------------------------------------------------------------------------------
MFS Investors Trust - Service Class $86 $150 $216 $382
- -----------------------------------------------------------------------------------------------------------------
MFS New Discovery - Service Class $88 $155 $224 $397
- -----------------------------------------------------------------------------------------------------------------
MFS Research - Service Class $86 $150 $216 $382
- -----------------------------------------------------------------------------------------------------------------
MFS Utilities - Service Class $87 $151 $218 $385
- -----------------------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth /VA $81 $136 $193 $337
- -----------------------------------------------------------------------------------------------------------------
Oppenheimer Capital Appreciation /VA $81 $136 $193 $337
- -----------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities /VA $82 $136 $194 $339
- -----------------------------------------------------------------------------------------------------------------
Oppenheimer Main Street Growth & Income /VA $82 $137 $196 $342
- -----------------------------------------------------------------------------------------------------------------
Oppenheimer Multiple Strategies /VA $82 $138 $197 $345
- -----------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond VA $83 $139 $199 $348
- -----------------------------------------------------------------------------------------------------------------
Putnam VT Diversified Income - Class IB $85 $147 $211 $372
- -----------------------------------------------------------------------------------------------------------------
Putnam VT Growth and Income - Class IB $82 $138 $197 $345
- -----------------------------------------------------------------------------------------------------------------
Putnam VT Growth Opportunities - Class IB $86 $148 $214 $378
- -----------------------------------------------------------------------------------------------------------------
Putnam VT Health Sciences - Class IB $85 $147 $211 $372
- -----------------------------------------------------------------------------------------------------------------
Putnam VT New Value - Class IB $85 $147 $211 $372
- -----------------------------------------------------------------------------------------------------------------
Putnam VT Voyager II - Class IB $94 $172 $252 $447
- -----------------------------------------------------------------------------------------------------------------
STI Capital Appreciation $89 $159 $231 $409
- -----------------------------------------------------------------------------------------------------------------
STI Growth and Income $87 $152 $219 $387
- -----------------------------------------------------------------------------------------------------------------
STI International Equity $98 $185 $273 $486
- -----------------------------------------------------------------------------------------------------------------
STI Investment Grade Bond $88 $155 $225 $398
- -----------------------------------------------------------------------------------------------------------------
STI Mid-Cap Equity $91 $165 $241 $429
- -----------------------------------------------------------------------------------------------------------------
STI Quality Growth Stock $88 $155 $224 $396
- -----------------------------------------------------------------------------------------------------------------
STI Small Cap Value Equity $94 $173 $254 $451
- -----------------------------------------------------------------------------------------------------------------
STI Value Income Stock $86 $149 $215 $379
- -----------------------------------------------------------------------------------------------------------------
Templeton Global Income Securities - Class 2 $84 $144 $207 $364
- -----------------------------------------------------------------------------------------------------------------
Templeton Growth Securities - Class 2 $86 $148 $214 $378
- -----------------------------------------------------------------------------------------------------------------
EXAMPLE 3 (ALLSTATE PROVIDER ULTRA CONTRACTS)
Same assumptions as Example 2 above, except that you decide not to surrender
your Contract, or you began receiving income payments for a specified period of
at least 120 months, at the end of the time period.
Variable Sub-Account 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------
AIM V.I. Balanced $35 $107 $181 $379
- ------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation $32 $ 98 $168 $354
- ------------------------------------------------------------------------------------------------------
AIM V.I. Core Equity $32 $ 97 $166 $351
- ------------------------------------------------------------------------------------------------------
AIM V.I. Growth $32 $ 99 $169 $357
- ------------------------------------------------------------------------------------------------------
AIM V.I. High Yield $37 $112 $189 $395
- ------------------------------------------------------------------------------------------------------
AIM V.I. Premier Equity $32 $ 98 $168 $354
- ------------------------------------------------------------------------------------------------------
13
- ------------------------------------------------------------------------------------------------------
Federated Prime Money Fund II $35 $107 $181 $379
- ------------------------------------------------------------------------------------------------------
Fidelity VIP Contrafund(TM) - Service Class 2 $33 $101 $172 $362
- ------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income -Service Class 2 $32 $ 98 $167 $353
- ------------------------------------------------------------------------------------------------------
Fidelity VIP Growth - Service Class 2 $33 $101 $172 $361
- ------------------------------------------------------------------------------------------------------
Fidelity VIP High Income - Service Class 2 $33 $102 $174 $366
- ------------------------------------------------------------------------------------------------------
Fidelity VIP Index 500 - Service Class 2 $30 $ 91 $155 $330
- ------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas - Service Class 2 $36 $108 $184 $385
- ------------------------------------------------------------------------------------------------------
MFS Emerging Growth - Service Class $35 $107 $181 $379
- ------------------------------------------------------------------------------------------------------
MFS Investors Trust - Service Class $35 $108 $182 $382
- ------------------------------------------------------------------------------------------------------
MFS New Discovery - Service Class $37 $112 $190 $397
- ------------------------------------------------------------------------------------------------------
MFS Research - Service Class $35 $108 $182 $382
- ------------------------------------------------------------------------------------------------------
MFS Utilities - Service Class $36 $108 $184 $385
- ------------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth /VA $30 $ 93 $159 $337
- ------------------------------------------------------------------------------------------------------
Oppenheimer Capital Appreciation /VA $30 $ 93 $159 $337
- ------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities /VA $31 $ 94 $160 $339
- ------------------------------------------------------------------------------------------------------
Oppenheimer Main Street Growth & Income /VA $31 $ 95 $162 $342
- ------------------------------------------------------------------------------------------------------
Oppenheimer Multiple Strategies /VA $31 $ 96 $163 $345
- ------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond /VA $32 $ 97 $165 $348
- ------------------------------------------------------------------------------------------------------
Putnam VT Diversified Income - Class IB $34 $104 $177 $372
- ------------------------------------------------------------------------------------------------------
Putnam VT Growth and Income - Class IB $31 $ 96 $163 $345
- ------------------------------------------------------------------------------------------------------
Putnam VT Growth Opportunities - Class IB $35 $106 $180 $378
- ------------------------------------------------------------------------------------------------------
Putnam VT Health Sciences - Class IB $34 $104 $177 $372
- ------------------------------------------------------------------------------------------------------
Putnam VT New Value - Class IB $34 $104 $177 $372
- ------------------------------------------------------------------------------------------------------
Putnam VT Voyager II - Class IB $43 $129 $218 $447
- ------------------------------------------------------------------------------------------------------
STI Capital Appreciation $38 $116 $197 $409
- ------------------------------------------------------------------------------------------------------
STI Growth and Income $36 $109 $185 $387
- ------------------------------------------------------------------------------------------------------
STI International Equity $47 $142 $239 $486
- ------------------------------------------------------------------------------------------------------
STI Investment Grade Bond $37 $113 $191 $398
- ------------------------------------------------------------------------------------------------------
STI Mid-Cap Equity $40 $123 $207 $429
- ------------------------------------------------------------------------------------------------------
STI Quality Growth Stock $37 $112 $190 $396
- ------------------------------------------------------------------------------------------------------
STI Small Cap Value Equity $43 $130 $220 $451
- ------------------------------------------------------------------------------------------------------
STI Value Income Stock $35 $107 $181 $379
- ------------------------------------------------------------------------------------------------------
Templeton Global Income Securities - Class 2 $33 $102 $173 $364
- ------------------------------------------------------------------------------------------------------
Templeton Growth Securities - Class 2 $35 $106 $180 $378
- ------------------------------------------------------------------------------------------------------
PLEASE REMEMBER THAT YOU ARE LOOKING AT EXAMPLES AND NOT A REPRESENTATION OF
PAST OR FUTURE EARNINGS. YOUR ACTUAL EXPENSES MAY BE LOWER OR GREATER THAN THOSE
SHOWN ABOVE. SIMILARLY, YOUR RATE OF RETURN MAY BE LOWER OR GREATER THAN 5%,
WHICH IS NOT GUARANTEED. THE EXAMPLES ASSUME THAT ANY PORTFOLIO EXPENSE WAIVERS
OR REIMBURSEMENT ARRANGEMENTS DESCRIBED IN THE FOOTNOTES TO THE PORTFOLIO ANNUAL
EXPENSE TABLE ARE IN EFFECT FOR THE PERIODS PRESENTED. THE ABOVE EXAMPLES ASSUME
THE ELECTION OF THE ENHANCED DEATH BENEFIT AND INCOME BENEFIT RIDERS WITH A
TOTAL MORTALITY AND EXPENSE RISK CHARGE OF 1.75% FOR ALLSTATE PROVIDER ULTRA
CONTRACTS AND THE ENHANCED EARNINGS DEATH BENEFIT RIDER WITH AN ANNUAL FEE OF
0.35%. IF THOSE RIDERS WERE NOT ELECTED, THE EXPENSE FIGURES SHOWN ABOVE WOULD
BE SLIGHTLY LOWER. TO REFLECT THE CONTRACT MAINTENANCE CHARGE IN THE EXAMPLES,
WE ESTIMATED AN EQUIVALENT PERCENTAGE CHARGE, BASED ON AN ASSUMED AVERAGE
CONTRACT SIZE OF $75,569.
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 which
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 we first offered the
Contracts.
To obtain a fuller picture of each Variable Sub-Account's finances, please refer
to the Variable Account's financial statements contained in the Statement of
Additional Information. The financial statements of Glenbrook also appear in the
Statement of Additional Information.
15
THE CONTRACT
- --------------------------------------------------------------------------------
CONTRACT OWNER
Each Contract is an agreement between you, the Contract Owner, and Glenbrook, a
life insurance company. As the Contract Owner, you may exercise all of the
rights and privileges provided to you by the Contract. That means it is up to
you to select or change (to the extent permitted):
... the investment alternatives during the Accumulation and Payout Phases,
... the amount and timing of your purchase payments and withdrawals,
... the programs you want to use to invest or withdraw money,
... the income payment plan you want to use to receive retirement income,
... the Annuitant (either yourself or someone else) on whose life the income
payments will be based,
... the Beneficiary or Beneficiaries who will receive the benefits that the
Contract provides when the last surviving Contract owner 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 this section and the Death
Benefits section.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.
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.
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 33.
ANNUITANT
The Annuitant is the individual whose life determines the amount and duration of
income payments (other than under Income Plans with guaranteed payments for a
specified period). You initially designate an Annuitant in your application. 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
You may name one or more primary and contingent Beneficiaries when you apply for
a Contract. The primary Beneficiary is the person who may elect to receive the
death benefit or become the new Contract Owner pursuant to the Contract 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 primary
Beneficiary will receive any guaranteed income payments scheduled to continue.
A contingent Beneficiary is the person selected by the Contract Owner who will
exercise the rights of the primary 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. Accordingly, if you wish
to change your Beneficiary, you should deliver your written notice to us
promptly. Each beneficiary 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
16
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 benefit among
the surviving Beneficiaries according to your most recent written instructions.
If you have not given us written instructions, we will pay the death benefit in
equal amounts to the surviving Beneficiaries.
If there is more than one Beneficiary in a class and one of the Beneficiaries
predeceases the Owner, the remaining Beneficiaries in that class will divide the
deceased Beneficiary share in proportion to the original share of the remaining
Beneficiaries.
If there is more than one Beneficiary taking shares of the death proceeds, each
Beneficiary will be treated as a separate and independent owner of his or her
respective share of the death proceeds. Each Beneficiary will exercise all
rights related to his or her share of the death proceeds, 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. If there is more than
one Beneficiary and one of the Beneficiaries is a corporation or other type of
non-natural person, all Beneficiaries will be considered to be non-natural
persons for the above purposes.
MODIFICATION OF THE CONTRACT
Only a Glenbrook officer may approve a change in or waive any provision of the
Contract. Any change or waiver must be in writing. None of our agents have the
authority to change or waive the provisions of the Contract. We may not change
the terms of the Contract without your consent, except to conform the Contract
to applicable law or changes in the law. If a provision of the Contract is
inconsistent with state law, we will follow state law.
ASSIGNMENT
No owner has a right to 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 AN
ATTORNEY BEFORE TRYING TO ASSIGN YOUR CONTRACT.
17
PURCHASES
- --------------------------------------------------------------------------------
MINIMUM PURCHASE PAYMENTS
Your initial purchase payment must be at least $5,000 ($2,000 for a Qualified
Contract). All subsequent purchase payments must be $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. The most
we will accept without our prior approval is $1,000,000. We reserve the right to
limit the availability of investment alternatives. We also reserve the right to
reject any application.
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 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.
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 including the deduction of mortality and expense risk charges and
administrative expense charges that occurred from the date of allocation through
the date of cancellation. Some states may require us to return a greater amount
to you. If this Contract is qualified under Section 408 of the Internal Revenue
Code, we will refund the greater of any purchase payments or the Contract Value.
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, we will allocate the amount in the Money Market Variable
Sub-Account to the Variable Sub-Account as you originally designated.
18
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
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 (ALLSTATE PROVIDER
ULTRA CONTRACTS only), Enhanced Earnings Death Benefit charges (if applicable)
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 Income
Benefit Rider, and the Enhanced Death Benefit Rider with the Income Benefit
Rider.
YOU SHOULD REFER TO THE PROSPECTUSES FOR THE FUNDS THAT ACCOMPANY THIS
PROSPECTUS FOR A DESCRIPTION OF HOW THE ASSETS OF EACH PORTFOLIO ARE VALUED,
SINCE THAT DETERMINATION DIRECTLY BEARS ON THE ACCUMULATION UNIT VALUE OF THE
CORRESPONDING VARIABLE SUB-ACCOUNT AND, THEREFORE, YOUR CONTRACT VALUE.
19
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 Funds. You should carefully review the Fund prospectuses before allocating
amounts to the Variable Sub-Accounts.
Portfolio Each Portfolio Seeks 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. Growth Fund Growth of capital A I M ADVISORS, INC.
- -------------------------------------------------------
AIM V.I. Core Equity Growth of capital with a
Fund secondary objective of
current income
- -------------------------------------------------------
AIM V.I. High Yield A high level of income
Fund
- -------------------------------------------------------
AIM V.I. Premier Long-term growth of capital
Equity Fund and income as a secondary
objective
- -------------------------------------------------------------------------------
FEDERATED INSURANCE SERIES
- -------------------------------------------------------------------------------
Federated Prime Money Current income consistent FEDERATED INVESTMENT
Fund II with the stability of MANAGEMENT COMPANY
principal and liquidity
- -------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
- -------------------------------------------------------------------------------
Fidelity VIP Long-term capital
Contrafund(TM)- appreciation
Service Class 2
- -------------------------------------------------------
Fidelity VIP Reasonable income
Equity-Income
Portfolio - Service
Class 2
- -------------------------------------------------------
Fidelity VIP Growth Capital appreciation FIDELITY MANAGEMENT &
Portfolio - Service RESEARCH COMPANY
Class 2
- -------------------------------------------------------
Fidelity VIP High High level of current income
Income Fidelity while also considering growth
Portfolio - Service of capital
Class 2
- -------------------------------------------------------
Fidelity VIP Index 500 Investment results that
Portfolio - Service correspond to the total
Class 2 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 - Service
Class 2
- -------------------------------------------------------------------------------
FRANKLIN TEMPLETON VARIABLE PRODUCTS TRUST
- -------------------------------------------------------------------------------
Templeton Global High current income. Capital FRANKLIN ADVISERS, INC.
Income Franklin appreciation is a Secondary
Securities Fund - consideration.
Class 2
- -------------------------------------------------------------------------------
Templeton Growth Long-term capital growth. TEMPLETON GLOBAL
Securities Fund - ADVISORS LIMITED
Class 2
- -------------------------------------------------------------------------------
MFS/(R)/ -VARIABLE INSURANCE TRUST/SM/
- -------------------------------------------------------------------------------
MFS Emerging Growth Long-term growth of capital
Series - Service
Class
- -------------------------------------------------------
MFS Investors Trust Long-term growth of capital MFS INVESTMENT
Series Service Class with a secondary objective to MANAGEMENT/(R)/
seek reasonable current
income.
- -------------------------------------------------------
MFS New Discovery Capital appreciation
Series - Service Class
- -------------------------------------------------------
MFS Research Series - Long-term growth of capital
Service Class and future income
- -------------------------------------------------------
MFS Utilities Series - Capital growth and current
Service Class income
- --------------------------------------------------------------------------------
20
PORTFOLIO EACH PORTFOLIO SEEKS: INVESTMENT ADVISOR
- -------------------------------------------------------------------------------
OPPENHEIMER VARIABLE ACCOUNT FUNDS
- -------------------------------------------------------------------------------
Oppenheimer Aggressive Capital appreciation
Growth Fund/VA
- -------------------------------------------------------
Oppenheimer Capital Capital appreciation
Appreciation Fund/VA
- -------------------------------------------------------
Oppenheimer Global Long-term capital
Securities Fund/VA appreciation OPPENHEIMERFUNDS, INC.
- -------------------------------------------------------
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 TRUST
- -------------------------------------------------------------------------------
Putnam VT Diversified High current income
Income Fund - Class consistent with capital
IB preservation
- -------------------------------------------------------
Putnam VT Growth and Capital growth and current
Income Fund - Class IB income PUTNAM INVESTMENT
- -------------------------------------------------------MANAGEMENT, LLC
Putnam VT Growth Capital appreciation
Opportunities Fund -
Class IB
- -------------------------------------------------------
Putnam VT Health Capital appreciation
Sciences Fund - Class
IB
- -------------------------------------------------------
Putnam VT New Value Long-term capital
Fund - Class IB appreciation
- -------------------------------------------------------
Putnam VT Voyager Fund Long-term growth of capital
II - Class IB appreciation
- --------------------------------------------------------------------------------
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
- -------------------------------------------------------TRUSCO CAPITAL
STI International Long-term capital MANAGEMENT, INC.
Equity Fund appreciation
- -------------------------------------------------------
STI Investment Grade High total return through
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
- -------------------------------------------------------------------------------
*A portfolio's investment objective may be changed by the Fund's Board of
Trustees without shareholder approval.
VARIABLE INSURANCE TRUST 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 RETAIL MUTUAL FUNDS IN ASSETS, CASH FLOW, AND TAX MATTERS.
ACCORDINGLY, THE HOLDINGS AND INVESTMENT RESULTS OF A PORTFOLIO CAN BE EXPECTED
TO BE HIGHER OR LOWER THAN THE INVESTMENT RESULTS OF RETAIL MUTUAL FUNDS.
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.
- ------------------------------------------------------------
21
INVESTMENT ALTERNATIVES: THE FIXED ACCOUNT OPTIONS
- --------------------------------------------------------------------------------
You may allocate all or a portion of your purchase payments to the Fixed
Account. You may choose from among 3 Fixed Account Options, including 2 dollar
cost averaging options and the option to invest in one or more Guarantee Periods
included in the Guaranteed Maturity Fixed Account. We may offer additional Fixed
Account options in the future. We will credit a minimum annual interest rate of
3% to money you allocate to any of the dollar cost averaging Fixed Account
Options. 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 account 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
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 six months at the current rate in effect at the time of
allocation. We will credit interest daily at a rate that will compound at the
annual interest rate we guaranteed at the time of allocation.
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 6 equal monthly installments. Further, you must transfer each purchase
payment and associated interest out of this Option by means of dollar cost
averaging within 6 months. If you discontinue the 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
DCA Fixed Account.
For each purchase payment allocated to this Option, your first monthly transfer
will occur at the end of the first month following such purchase payment. If we
do not receive an allocation from you within one month of the date of payment,
we will transfer each monthly installment to the money market Variable
Sub-Account until we receive a different allocation instruction. Transferring
Contract 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 21.
EXTENDED SHORT TERM DOLLAR COST AVERAGING FIXED ACCOUNT OPTION. You may
establish an Extended Short Term Dollar Cost Averaging Program by allocating
purchase payments to the EXTENDED SHORT TERM DOLLAR COST AVERAGING FIXED ACCOUNT
OPTION ("EXTENDED SHORT TERM DCA FIXED ACCOUNT OPTION"). We will credit interest
to purchase payments you allocate to this Option for up to twelve months at the
current rate in effect at the time of allocation. We will credit interest daily
at a rate that will compound at the annual interest rate we guaranteed at the
time of allocation.
We will follow your instructions in transferring amounts monthly from the
Extended Short Term DCA Fixed Account Option. However, you may not choose less
than 7 or more than 12 equal monthly installments. Further, you must transfer
each purchase payment and associated interest out of this Option by means of
dollar cost averaging within 12 months. If you discontinue the 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 Extended Short Term DCA Fixed Account.
For each purchase payment allocated to this Option, your first monthly transfer
will occur at the end of the first month following such purchase payment. If we
do not receive an allocation from you within one month of the date of payment,
we will transfer each monthly installment to the money market Variable
Sub-Account until we receive a different allocation instruction. 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 21.
At the end of the transfer period, any nominal amounts remaining in the Short
Term Dollar Cost Averaging Fixed Account or the Extended Short Term Dollar Cost
Averaging Fixed Account will be allocated to the money market Variable
Sub-Account.
INVESTMENT RISK
We bear the investment risk for all amounts allocated to the Short Term DCA
Fixed Account Option and the Extended 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.
22
We may declare more than one interest rate for different monies based upon the
date of allocation to the Short Term DCA Fixed Account Option and the Extended
Short Term DCA Fixed Account Option. For current interest rate information,
please contact your representative or our customer support unit at
1-800-755-5275.
GUARANTEE PERIODS
The Guaranteed Maturity Fixed Account is divided into 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 recent purchase payment.
Each purchase 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 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 -
$10,000.00)
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
(under ALLSTATE PROVIDER ULTRA CONTRACTS only), and the amount withdrawn may be
increased or decreased by a Market Value Adjustment that reflects changes in
interest rates since the time you
23
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; or
3) Instruct us to transfer all or a portion of your money to one or more
Variable Sub-Accounts of the Variable Account. We will effect the transfer on
the day we receive your instructions. We will not adjust the amount
transferred to include a Market Value Adjustment; or
4) Withdraw all or a portion of your money. A withdrawal charge may apply (for
ALLSTATE PROVIDER ULTRA CONTRACTS only), 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.
If you choose option 3 or 4 above, we will pay interest from the date the
previous Guarantee Period expired until the date of the transfer or withdrawal
as applicable. The interest rate will be the then current rate we are crediting
for a Guarantee Period of the same length as the previous Guarantee Period.
Amounts not withdrawn or transferred will be applied to a new Guarantee Period
of the same length as the previous Guarantee Period. The new Guarantee Period
will begin on the day the previous Guarantee Period ends.
MARKET VALUE ADJUSTMENT. All withdrawals 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 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). A positive aggregate Market Value Adjustment will
apply to amounts currently invested in a Guarantee Period that are paid out as
death benefits (unless paid or applied during the 30 day period after such
Guarantee Period expires). We will not apply a Market Value Adjustment to a
withdrawal you make:
... within the Free Withdrawal Amount as described below,
... that qualify for one of the waivers as described on page 23-24,
... to satisfy the IRS minimum distribution rules for the Contract, or
... within one year after the date of the death of the Owner as the surviving
spouse continuing the Contract (limit one withdrawal only)
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, any withdrawal charge (ALLSTATE PROVIDER ULTRA CONTRACTS only), and
any 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.
During each Contract Year, you can withdraw up to 15% of the aggregate amount of
your purchase payments without a Market Value Adjustment. Unused portions of
this Free Withdrawal Amount are not carried forward to future Contract Years.
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
24
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.
25
INVESTMENT ALTERNATIVES: TRANSFERS
- --------------------------------------------------------------------------------
TRANSEFERS 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 Extended Short Term 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.
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. You may make up to 12 transfers per
Contract Year. You may not convert any portion of your fixed income payments
into variable income payments. After 6 months from the Payout Start Date, you
may make transfers from the Variable Sub-Accounts to increase the proportion of
your income payments consisting of fixed income payments.
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.
EXCESSIVE TRADING LIMITS
We reserve the right to limit transfers among the Variable Sub-Accounts in any
Contract Year, or to refuse any Variable Sub-Account transfer request, if:
... we believe, in our sole discretion, that excessive trading by such Contract
owner or owners, or a specific transfer request or group of transfer requests,
may have a detrimental effect on the Accumulation Unit Values of any Variable
Sub-Account or the share prices of the corresponding Portfolios or would be to
the disadvantage of other Contract owners; or
... we are informed by one or more of the corresponding Portfolio that they intend
to restrict the purchase or redemption of Portfolio shares because of
excessive trading or because they believe that a specific transfer or groups
of transfers would have a detrimental effect on the prices of Portfolio
shares.
We may apply the restrictions in any manner reasonably designed to prevent
transfers that we consider disadvantageous to other Contract owners.
SHORT-TERM TRADES
All transfers involving the purchase or redemption of mutual fund shares by the
Variable Account may be subject to restrictions or requirements imposed by the
underlying Portfolios. Such restrictions or requirements may include the assess
ment of short-term trading fees in connection with transfers from a Variable
Sub-Account that occur within a certain number of days following th e date of
allocation to the Variable Sub-Account, but will only apply to those
Sub-Accounts corresponding to underlying Portfolios that explicitly require the
assessment of such fees.
DOLLAR COST AVERAGING PROGRAM
Through our Dollar Cost Averaging Program, you may automatically transfer a
fixed dollar amount every month from any Variable Sub-Account, the Short Term
Dollar
26
Cost Averaging Fixed Account, or the Extended Short Term Dollar Cost Averaging
Fixed Account, to any of the other Variable Sub-Accounts. You may not use the
Dollar Cost Averaging Program to transfer amounts to the Guarantee Periods. This
program is available only during the Accumulation Phase.
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 Sub-Account may cause a shift in the percentage you
allocated to each Sub-Account. If you select our AUTOMATIC PORTFOLIO REBALANCING
PROGRAM, we will automatically rebalance the Contract Value in each Variable
Sub-Account and return it to the desired percentage allocations. We will not
include money you allocate to the Fixed Account Options in the Automatic
Portfolio Rebalancing Program.
We will rebalance your account monthly, quarterly, semi-annually, or annually,
depending on 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. Core Equity Variable Sub-Account.
Over the next 2 months the bond market does very well relative to the stock
market. 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. Core Equity 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.
27
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. During the Payout Phase, we will deduct the charge
proportionately from each income payment.
The charge is to compensate us for the cost of administering the Contracts and
the Variable Account. Maintenance costs include expenses we incur 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:
... your Contract Value equals $50,000 or more, or
... all money is allocated to the Fixed Account.
After the Payout Start Date, we will waive the charge if the Contract Value is
$50,000 or more as of the Payout Start Date.
MORTALITY AND EXPENSE RISK CHARGE
We deduct a mortality and expense risk charge daily from the net assets you have
invested in the Variable Sub-Accounts. The annual rate of the charge is:
... 1.45% for ALLSTATE PROVIDER ADVANTAGE CONTRACTS
... 1.25% for ALLSTATE PROVIDER ULTRA CONTRACTS
If you select the Income Benefit Rider or the Enhanced Death Benefit Rider, the
mortality and expense risk charge will include an additional 0.25% for the
Rider. If you select both the Income Benefit Rider and the Enhanced Death
Benefit Rider, the mortality and expense risk charge will include an additional
0.50% for these Riders.
The mortality and expense risk charge is for 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 Income Benefit Rider to compensate
us for the additional risk that we accept by providing these Riders.
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. After the Payout Start Date, mortality and expense risk
charges for the Enhanced Death Benefit and the Income Benefit will cease.
ENHANCED EARNINGS DEATH BENEFIT RIDER FEE
If you elect the Enhanced Earnings Death Benefit Rider, we will deduct an annual
charge from your Contract Value on each Contract Anniversary during the
Accumulation Phase. The annual charge is calculated as a percentage of your
Contract Value on the Contract Anniversary and is based on the oldest Contract
owner's age on the Rider Application Date (described below) as follows:
Age Annual Charge
--- ------ ------
0-55 0.10%
56-65 0.20%
66-75 0.35%
We first deduct this annual fee from the Variable Sub-Accounts on a pro rata
basis. If the Contract Value in the Variable Sub-Accounts is not sufficient to
cover the charge, we will deduct the remaining charge from the Guarantee
Periods, beginning with the oldest Guarantee Period. On the first Contract
Anniversary after we issue the Rider, we will deduct the Rider charge pro rated
to reflect the number of complete months the Rider was in effect during such
Contract Year. Also, if you surrender your Contract, we will deduct the Rider
charge (multiplied by the Contract Value immediately prior to the surrender) pro
rated to reflect the number of complete months the Rider was in effect during
the current Contract Year.
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.
WITHDRAWAL CHARGE (ALLSTATE PROVIDER ULTRA
CONTRACTS ONLY)
We may assess a withdrawal charge of up to 7% of the purchase payment(s) you
withdraw. The charge declines
28
to 0% over a 7 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 changes, 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 distributional expenses, we may use any of
our corporate assets, including potential profit which may arise from the
mortality and expense risk charge or any other charges or fee described above,
to make up any difference.
Withdrawals also may be subject to tax penalties or income tax and a Market
Value Adjustment. You should consult your own tax counsel or other tax advisers
regarding any withdrawals.
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.
CONFINEMENT WAIVER. We will waive the withdrawal charge (ALLSTATE PROVIDER ULTRA
CONTRACTS only), and a negative Market Value Adjustment, if applicable, will
not occur 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 (ALLSTATE PROVIDER
ULTRA CONTRACTS only), and a negative Market Value Adjustment, if applicable,
will not occur 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 (ALLSTATE PROVIDER
ULTRA CONTRACTS only), and a negative Market Value Adjustment, if applicable,
will not occur 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 a withdrawal charge (ALLSTATE PROVIDER ULTRA CONTRACTS ONLY),
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.
29
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 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.
OTHER EXPENSES
Each Portfolio deducts advisory fees and other expenses from its assets. You
indirectly bear the charges and expenses of the Portfolios whose shares are held
by the Variable Sub-Accounts. These fees and expenses are described in the
accompanying prospectuses for the Funds. For a summary of current estimates of
those charges and expenses, see page 23. We may receive compensation from the
investment advisers or administrators of the Portfolios in connection with the
administrative services we provide to the Portfolios.
30
ACCESS TO YOUR MONEY
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You can withdraw some or all of your Contract Value at any time prior to the
Payout Start Date. Withdrawals also are available under limited circumstances
on or after the Payout Start Date. See "Income Plans" on page 29.
The amount payable upon withdrawal is the Contract Value (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 charge (ALLSTATE
PROVIDER ULTRA CONTRACTS only), contract maintenance charges, Enhanced Earnings
Death Benefit Rider fee (if applicable), income tax withholding, 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 (ALLSTATE PROVIDER ULTRA CONTRACTS only) and premium taxes.
You must name the investment alternative from which you are taking the
withdrawal. If none is specified, we will deduct your withdrawal pro-rata from
the Variable Sub-Accounts according to the value of your investments therein.
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 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 reduced by
withdrawals to less than $2,000, we would 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 any
withdrawal charges (ALLSTATE PROVIDER ULTRA CONTRACTS only) and any other
applicable charges and taxes.
31
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
(ALLSTATE PROVIDER ULTRA CONTRACTS only). 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 income payments at any time
and receive a lump sum equal to their present value as of the close of the
Valuation Date on which we receive your request. To determine the present value
of any remaining variable income payments being withdrawn, we use a discount
rate equal to the assumed annual investment rate that we use to compute such
variable income payments. To determine the present value of any fixed income
payments being currently applicable interest rates. The minimum amount you may
withdraw under this feature is $1,000. A withdrawal charge may apply (ALLSTATE
PROVIDER ULTRA CONTRACTS only). We 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
32
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:
... 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.
We reserve the right to make other assumed investment rates avaialable under
each Contract.
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.
INCOME BENEFIT RIDER
QUALIFICATIONS. For Contract Owners and Annuitants up to and including age 75,
the Income Benefit Rider is an optional benefit that you may elect. To qualify
for the income benefit payments under this Rider, you must meet the following
requirements as of the Payout Start Date:
... You must elect a Payout Start Date that is on or after the 10th anniversary of
the date this Rider was made a part of your Contract ("RIDER DATE");
... The Payout Start Date must be prior to the oldest Annuitant's 90th birthday;
... The Payout Start Date must occur during the 30 day period following a Contract
Anniversary;
... You must elect to receive fixed income payments, which will be calculated
using the guaranteed payout rates listed in your Contract; and
... The Income Plan you selected must provide for payments guaranteed for either a
single life or joint lives with a specified period of at least:
. 10 years, if the youngest Annuitant's age is 80 or less on the Payout Start
Date, or
. 5 years, if the youngest Annuitant's age is greater than 80 on the Payout
Start Date.
If, however, you apply the Contract Value and not the Income Benefit to an
Income Plan, then you may select fixed and/or variable income payments under any
Income Plan we offer at that time. If you expect to apply your Contract Value to
variable and/or fixed income payment options, or you expect to apply your
Contract Value to current annuity payment rates then in effect, electing the
Income Benefit Rider may not be appropriate.
Prior to the Payout Start Date, the Income Benefit Rider will terminate and
charges for this Rider will cease when the Contract terminates. The mortality
and expense risk charge for this Rider will cease on the Payout Start Date.
ALLSTATE PROVIDER ULTRA CONTRACTS ONLY:
The Income Benefit Rider will no longer be in effect and the mortality and
expense charge for the Rider will end upon the change of the named Annuitant for
reasons other than death.
INCOME BASE
The Income Base is used solely for the purpose of calculating the guaranteed
income benefit under this Rider ("Guaranteed Income Benefit") and does not
provide a Contract Value or guarantee performance of
33
any investment option. On the Rider Date, the Income Base is equal to the
Contract Value. After the Rider Date, the Income Base plus any subsequent
purchase payments and less a withdrawal adjustment (described below) for any
subsequent withdrawals will accumulate daily at a rate equivalent to 5% per year
until the earlier of the Payout Start Date, or the first day of the month after
the oldest Contract owner's (Annuitant, if the Contract owner is not a natural
person) 85th birthday.
WITHDRAWAL ADJUSTMENT
The 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 most recently calculated Income Base.
The Guaranteed Income Benefit amount is determined by applying the Income Base
less any applicable taxes to the guaranteed rates for the Income Plan you elect.
The Income Plan you elect must satisfy the conditions described above.
On the Payout Start Date, the income payment will be the greater of the
Guaranteed Income Benefit or the income payment provided in the payout phase
section of your Contract.
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.
34
DEATH BENEFITS
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We will pay a death benefit prior to the Payout Start Date on:
1. the death of any Contract owner or,
2. the death of the Annuitant, if the Contract is owned by a non-natural person.
We will pay the death benefit to the new Contract owner as determined
immediately after the death. The new Contract owner would be a surviving
Contract owner or, if none, the Beneficiary(ies). In the case of the death of
the Annuitant, we will pay the death benefit to the current Contract owner.
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 settlement 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.
A complete request for settlement of the death benefit must include DUE PROOF OF
DEATH. We will accept the following documentation as "Due Proof of Death":
... a certified copy of a death certificate,
... a certified copy of a decree of a court of competent jurisdiction as to the
finding of death, or
... any other proof acceptable to us.
DEATH BENEFIT AMOUNT. Prior to the Payout Start Date, if we receive a complete
request for settlement of the death benefit within 180 days of the date of
death, 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 highest amount computed by taking 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.
In calculating the Settlement Value when a death benefit is paid, only a
positive aggregate Market Value Adjustment amount, if any, is applied to the
Contract Value attributable to amounts withdrawn from Guarantee Period(s).
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.
If we do not receive a complete request for settlement of the death benefit
within 180 days of the date of death, the death benefit is equal to the greater
of:
1) the Contract Value as of the date we determine the death benefit, or
2) the Settlement Value as of the date we determine the death benefit.
We reserve the right to extend the 180-day period on a non-discriminatory basis.
ENHANCED DEATH BENEFIT RIDER
For Contract owners and Annuitants up to and including age 80 as of the date we
receive the completed application or a written request to add this rider,
whichever is later ("Rider Application Date"), the Enhanced Death Benefit Rider
is an optional benefit that you may elect. If the Contract owner is a natural
individual, the Enhanced Death Benefit applies only upon the death of the
Contract owner. If the Contract owner is not a natural 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 A or 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.
If we do not receive a complete request for settlement of the death benefit
within 180 days of the date of death, the Enhanced Death Benefit will not apply
and the death benefit is equal to the greater of:
1) the Contract Value as of the date we determine the death benefit, or
2) the Settlement Value as of the date we determine the death benefit.
If the Owner is a natural person, the Enhanced Death Benefit is payable and the
Rider will terminate and the mortality and expense charge for the Rider will
cease upon the death of the Owner, unless the Contract and Rider are continued
as permitted by a surviving spouse, as described below. If the Owner is a
non-natural person, the Enhanced Death Benefit is payable and the Rider will
terminate and charges for the Rider will cease upon the death of the Annuitant.
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The Enhanced Death Benefit Rider and charges for the Rider will terminate:
... when the Contract owner is changed for reasons other than death;
... if the Contract owner is a non-natural person, when the Annuitant is changed
for reasons other than death; or
... on the Payout Start Date.
The Rider may not be available in all states. We may discontinue the offering of
the Rider at any time.
ENHANCED DEATH BENEFIT A. On the date we issue the Rider ("RIDER DATE"),
Enhanced Death Benefit A is equal to the Contract Value on that date. After the
Rider Date, 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 a withdrawal adjustment, as described
below, for any partial withdrawals since that Anniversary.
We will calculate Anniversary Values for each Contract Anniversary up until the
earlier of:
... the date we determine the death benefit; or
... the first Contract Anniversary following the oldest Contract owner's or, if
the Contract owner is not a natural person, the Annuitant's 80th birthday, or
the first day of the 61st month following the Rider Date, whichever is later.
After age 80, or the first day of the 61st month following the Rider Date,
whichever is later, we will recalculate the Enhanced Death Benefit A only for
purchase payments and withdrawals.
The withdrawal 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) = the most recently calculated Enhanced Death Benefit A.
ENHANCED DEATH BENEFIT B. The Enhanced Death Benefit B on the Rider Date is
equal to the Contract Value on that date. After the Rider Date, the Enhanced
Death Benefit B, plus any subsequent purchase payments and less a withdrawal
adjustment, as described below, 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 80th birthday, or the
first day of the 61st month following the Rider Date, whichever is later.
The withdrawal 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.
After age 80, or the first day of the 61st month following the Rider Date,
whichever is later, we will recalculate the Enhanced Death Benefit B only for
purchase payments and withdrawals.
SPOUSAL CONTINUATION UNDER ALLSTATE PROVIDER ADVANTAGE CONTRACTS. If you elected
the Enhanced Death Benefit Rider, and your spouse continues the Contract as
described above, the Enhanced Death Benefit Rider and the mortality and expense
risk charge for this Rider will terminate if your spouse is over age 80 on the
date the Contract is continued. If the Enhanced Death Benefit Rider does
continue, then the following conditions will apply:
... The Contract Value on the date the Contract is continued will equal the death
benefit amount;
... Enhanced Death Benefit A will continue to be recalculated for purchase
payments, withdrawals, and on Contract Anniversaries after the date the
Contract is continued until the earlier of:
1. the first Contract Anniversary after the oldest new Owner's 80th birthday.
After age 80, the Enhanced Death Benefit A will be recalculated only for
purchase payments and withdrawals; or
2. the date we determine the death benefit;
unless the deceased Owner was age 80 or older on the date of death. In this
case, the Enhanced Death Benefit A will be recalculated only for purchase
payments and withdrawals after the date the Contract is continued.
... The amount of the Enhanced Death Benefit B as of the date the Contract is
continued and any subsequent purchase payments and less any subsequent
withdrawal adjustments will accumulate daily at a rate equivalent to 5% per
year after the date the Contract is continued, until the earlier of:
1. the first day of the month following the oldest new Owner's 80th birthday.
After age 80, the Enhanced Death Benefit B will be recalculated only for
purchase payments and withdrawals; or
2. the date we determine the death benefit;
unless the deceased Owner was age 80 or older on the date of death. In this
case, the Enhanced Death Benefit B will be recalculated only for purchase
payments and withdrawals after the date the Contract is continued.
SPOUSAL CONTINUATION UNDER ALLSTATE PROVIDER ULTRA CONTRACTS. If you elected the
Enhanced Death Benefit Rider, and your spouse continues the Contract as
36
described above, on the date the Contract is continued, the Rider Date will be
reset to the date the Contract is continued. For purposes of calculating future
death benefits, your spouse's age on this new Rider Date will be used to
determine applicable death benefit amounts.
ENHANCED EARNINGS DEATH BENEFIT RIDER
For Contract owners and Annuitants up to and including age 75 as of the Rider
Application Date, the Enhanced Earnings Death Benefit Rider is an optional
benefit that you may elect.
The Rider may not be available in all states. We may discontinue the offering of
the Rider at any time.
If the Contract owner is a natural person, the Enhanced Earnings Death Benefit
Rider applies only upon the death of the Contract owner. If the Contract owner
is not a natural individual, the Enhanced Earnings Death Benefit Rider applies
only upon the death of the Annuitant. If the Owner is a natural person, the
Enhanced Earnings Death Benefit is payable and the Rider will terminate and the
annual charge for the Rider will cease upon the death of the Owner, unless the
Contract and Rider are continued as permitted by a surviving spouse, as
described below. If the Owner is a non-natural person, the Enhanced Earnings
Death Benefit is payable and the Rider will terminate and the annual charge for
the Rider will cease upon the death of the Annuitant.
The Enhanced Earnings Death Benefit Rider and the annual charge for the rider
will terminate:
... when the Contract owner is changed for reasons other than death;
... if your spouse continues the Contract as described below and your spouse is
over age 75 on the date the Contract is continued, (or if your spouse elects
to terminate the Rider);
... if the Contract owner is a non-natural person, when the Annuitant is changed
for reasons other than death or when the Annuitant dies; or
... on the Payout Start Date.
ALLSTATE PROVIDER ADVANTAGE CONTRACTS:
Under the Enhanced Earnings Death Benefit Rider, if the oldest Contract owner
(or the Annuitant if the Contract owner is a non-natural person) is age 55 or
younger on the Rider Application Date, the death benefit is increased by:
... The lesser of 80% of In-Force Premium (excluding purchase payments made after
the Rider Date and in the twelve month period immediately preceding the death
of the Owner, or Annuitant if the Owner is a non-natural person), or 40% of
In-Force Earnings, calculated as of the date we receive due proof of death.
If the oldest Contract owner (or the Annuitant if the Contract owner is a
non-natural person) is between the ages of 56 and 65 on the Rider Application
Date, the death benefit is increased by:
... The lesser of 60% of In-Force Premium (Excluding purchase payments made after
the Rider Date and in the twelve month period immediately preceding the death
of the Owner, or annuitant is the Owner is a non-natural person), or 30 % of
In-Force Earnings.
If the oldest Contract owner (or the Annuitant if the Contract owner is a
non-natural person) is between the ages of 66 and 75 on the Rider Application
Date, the death benefit is increased by:
... The lesser of 40% of In-Force Premium (excluding purchase payments made after
the Rider Application Date and in the twelve month period immediately
preceding the death of the Owner, or Annuitant if the Owner is a non-natural
person), or 20% of In-Force Earnings, calculated as of the date we receive due
proof of death.
ALLSTATE PROVIDER ULTRA CONTRACTS:
Under the Enhanced Earnings Death Benefit Rider, if the oldest Contract owner
(or the Annuitant if the Contract owner is a non-natural person) is age 55 or
younger on the Rider Application Date, the death benefit is increased by:
... 40% of the lesser of 200% of In-Force Premium (excluding purchase payments
made in the 12-month period immediately preceding the date of death) or the
In-Force Earnings. ("In-Force Earnings" are referred to as "Death Benefit
Earnings" in the ALLSTATE PROVIDER ULTRA CONTRACTS, but we use the term
"In-Force Earnings" in this prospectus for convenience).
If the oldest Contract owner (or the Annuitant if the Contract owner is a
non-natural person) is between the ages of 56 and 65 on the Rider Application
Date, the death benefit is increased by:
... 30% of the lesser of 200% of the In-Force Premium (excluding purchase payments
made in the 12-month period immediately preceding the date of death) or the
In-Force Earnings.
If the oldest Contract owner (or the Annuitant if the Contract owner is a
non-natural person) is between the ages of 66 and 75 on the Rider Application
Date, the death benefit is increased by:
... 20% of the lesser of 200% of the In-Force Premium (excluding purchase payments
made in the 12-month period immediately preceding the date of death) or the
In-Force earnings.
BOTH CONTRACTS:
For purpose of calculating the Enhanced Earnings Death Benefit, the following
definitions apply:
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In-Force Premium equals the Contract Value on the Rider Date plus all purchase
payments made after the Rider Date less the sum of all Excess-of-Earnings
Withdrawals after the Rider Date. If the Rider Date is the same as the Issue
Date, then the Contract Value on the Rider Date is equal to your initial
purchase payment.
In-Force Earnings equal the Contract Value minus the In-Force Premium. The
In-Force Earnings amount will never be less than zero.
An Excess-of-Earnings Withdrawal is the amount of a withdrawal in excess of
the In-Force Earnings in the Contract immediately prior to the withdrawal.
We will calculate the Enhanced Earnings Death Benefit Rider as of the date we
receive a complete request for settlement of the death benefit. We will pay the
Enhanced Earnings Death Benefit with the death benefit as described under "Death
Benefit Payments" below.
SPOUSAL CONTINUATION. If you elected the Enhanced Earnings Death Benefit Rider,
and your spouse continues the Contract as described below, the Enhanced Earnings
Death Benefit Rider and the annual charge for this Option will terminate if the
oldest new Contract owner is over age 75 on the date the Contract is continued,
or if your spouse elects to terminate the Rider. If the Enhanced Earnings Death
Benefit Rider is not terminated, on the date the Contract is continued, the
Rider Date for this Rider will be reset to the date the Contract is continued
("new Rider Date"). The age of the surviving spouse (oldest Contract owner for
ALLSTATE PROVIDER ADVANTAGE CONTRACTS) on the new Rider Date will be used to
determine the Enhanced Earnings Death Benefit after the new Rider Date. Also,
the age of the surviving spouse (oldest Contract owner for ALLSTATE PROVIDER
ADVANTAGE CONTRACTS) on the new Rider Date will be used to determine the annual
charge for the Rider after the new Rider Date.
The value of the Enhanced Earnings Death Benefit largely depends on the amount
of earnings that accumulate under your Contract. If you expect to withdraw the
earnings from your Contract Value, electing the Enhanced Earnings Death Benefit
Rider may not be appropriate. For purposes of calculating the Enhanced Earnings
Death Benefit, earnings are considered to be withdrawn first before purchase
payments. Your financial advisor can help you decide if the Enhanced Earnings
Death Benefit Rider is right for you.
For examples of how the death benefit is calculated under the Enhanced Earnings
Death Benefit Rider, see Appendix C.
DEATH BENEFIT PAYMENTS
If the sole new Contract Owner is your spouse, the new Contract Owner may:
1) elect to receive the death benefit in a lump sum, or
2) elect to apply the death benefit to an Income Plan. Payments from the Income
Plan must begin within one year of the date of death and must be payable
throughout:
... the life of the new Contract Owner;
... for a guaranteed number of payments from 5 to 50 years, but not to exceed the
life expectancy of the new Contract Owner; or
... 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.
If your spouse does not elect one of the options above 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:
On the date the Contract is continued, the Contract Value will equal the amount
of the death benefit as determined as of the end of the Valuation Date on which
we received a complete request for settlement of the death benefit (the next
Valuation Date, if we receive the request after 3:00 p.m. Central Time). Unless
otherwise instructed by the continuing spouse, the excess, if any, of the death
benefit over the Contract Value will be allocated to the Sub-Accounts of the
Variable Account. This excess will be allocated in proportion to your Contract
Value in those Sub-Accounts as of the end of the Valuation Date on which we
receive the complete request for settlement of the death benefit (the next
Valuation Date, if we receive the request after 3:00 p.m. Central Time), 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 Guarantee 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 Guarantee 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 your
Contract.
The surviving spouse may make a single withdrawal of any amount within one year
of the date of your death without incurring a Market Value Adjustment or
withdrawal charge. Only one spousal continuation is allowed under this Contract.
Prior to the Payout Start Date, the death benefit of the continued Contract
will be as described under Death
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Benefit Amount above.
If the new Contract Owner is not your spouse but is a natural person, or if
there are multiple natural persons new Contract Owners the new Contract Owner
may:
1) elect to receive the death benefit in a lump sum, or
2) elect to apply the death benefit to an Income Plan.
Payments from the Income Plan must begin within one year of the date of death
and must be payable throughout:
... the life of the new Contract Owner;
... for a guaranteed number of payments from 5 to 50 years, but not to exceed the
life expectancy of the new Contract Owner; or
... 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.
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. The Contract Value will equal the amount of the death benefit as
determined as of the end of the Valuation Date on which we receive the complete
request for settlement of the death benefit (the next Valuation Date, if we
receive the request after 3:00 p.m. Central Time). Unless otherwise instructed
by the new Contract Owner, the excess, if any, of the death benefit over the
Contract Value will be allocated to the money market Variable Sub-Account. The
new Contract Owner may exercise all rights as set forth in the Transfers section
of the Contract during this 5 year period.
No additional purchase payments may be added to the Contract under this
election. Any withdrawal charges applicable under ALLSTATE PROVIDER ULTRA
CONTRACTS will be waived for any withdrawals made during this 5 year period.
If the new Contract Owner dies prior to the receiving all 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
received as a lump sum within 5 years of the date of the original Contract
Owner's death.
If the new Contract Owner is a corporation, trust, or other non- natural person:
(a)
The new Contract Owner may elect to receive the death benefit 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. The Contract Value will equal the amount of the death benefit as
determined as of the end of the Valuation Date on which we receive the complete
request for settlement of the death benefit (the next Valuation Date, if we
receive the request after 3:00 p.m. Central Time). Unless otherwise instructed
by the new Contract Owner, the excess, if any, of the death benefit over the
Contract Value will be allocated to the money market Variable Sub-Account. The
new Contract Owner may exercise all rights as set forth in the Transfers
provision of the Contract during this 5 year period.
No additional purchase payments may be added to the Contract under this
election. Any withdrawal charges applicable under ALLSTATE PROVIDER ULTRA
CONTRACTS will be waived during this 5 year period.
We reserve the right to offer additional options upon the death of the Contract
Owner.
If any new Contract Owner is a non-natural person, all new Contract Owners will
be considered to be non-natural persons for the above purposes.
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 benefit is paid.
DEATH OF ANNUITANT
If the Annuitant who is not also the Contract owner dies prior to the Payout
Start Date and the Contract owner is a living person, then the Contract will
continue with a new Annuitant as described in the Annuitant provision above.
If the Annuitant who is not also the Contract owner dies prior to the Payout
Start Date and the Contract owner is a non-natural person, the following apply:
(a) The Contract owner may elect to receive the death benefit in a lump sum; or
(b)
If the Contract owner does not elect the above option, then the Contract Owner
must receive the Contract Value payable within 5 years of the Annuitant's date
of death. The Contract Value will equal the amount of the death benefit as
determined as of the end of the Valuation Date on which we receive the complete
request for settlement of the death benefit (the next Valuation Date, if we
receive the request after 3:00 p.m. Central Time). Unless otherwise instructed
by the Contract owner, the excess, if any, of the death benefit over the
Contract Value will be allocated to the Money Market Variable Sub-Account. The
Contract owner may then exercise all rights as set forth in the Transfers
provision of the Contract during this 5 year period.
No additional purchase payments may be added to the Contract under this
election. Any withdrawal charges applicable under ALLSTATE PROVIDER ULTRA
CONTRACTS will be waived during this 5 year period.
We reserve the right to offer additional options upon the death of the
Annuitant.
39
Under any of these options, all ownership rights are available to the
non-natural Contract Owner from the date of the Annuitant's death to the date on
which the death benefit is paid.
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MORE INFORMATION
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GLENBROOK
Glenbrook is the issuer of the Contract. Glenbrook is a stock life insurance
company organized under the laws of the State of Arizona in 1998. Previously,
Glenbrook was organized under the laws of the State of Illinois in 1992.
Glenbrook was originally organized under the laws of the State of Indiana in
1965. From 1965 to 1983 Glenbrook was known as "United Standard Life Assurance
Company" and from 1983 to 1992 as "William Penn Life Assurance Company of
America."
Glenbrook is currently licensed to operate in the District of Columbia, 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 is a wholly owned subsidiary of Allstate Life Insurance Company
("ALLSTATE LIFE"), a stock life insurance company incorporated under the laws of
the State of Illinois. Allstate Life is a wholly owned subsidiary of Allstate
Insurance Company, a stock property-liability insurance company incorporated
under the laws of Illinois. All of the outstanding capital stock of Allstate
Insurance Company is owned by The Allstate Corporation.
Glenbrook and Allstate Life entered into a reinsurance agreement effective June
5, 1992. Under the reinsurance agreement, Allstate Life reinsures substantially
all of Glenbrook's liabilities under its various insurance contracts. The
reinsurance agreement provides us with financial backing from Allstate Life.
However, it does not create a direct contractual relationship between Allstate
Life and you. In other words, the obligations of Allstate Life under the
reinsurance agreement are to Glenbrook; Glenbrook remains the sole obligor under
the Contract to you.
Several independent rating agencies regularly evaluate life insurers'
claims-paying ability, quality of investments, and overall stability. A.M. Best
Company assigns A+ (Superior) to Allstate Life which automatically reinsures all
net business of Glenbrook. A.M. Best Company also assigns Glenbrook the rating
of A+(r) because Glenbrook automatically reinsures all net business with
Allstate Life. Standard & Poor's Insurance Rating Services assigns an AA+ (Very
Strong) financial strength rating and Moody's assigns an Aa2 (Excellent)
financial strength rating to Glenbrook. Glenbrook shares the same ratings of its
parent, Allstate Life. These ratings do not reflect the investment performance
of the Variable Account. We may from time to time advertise these ratings in our
sales literature.
THE VARIABLE ACCOUNT
Glenbrook established the Glenbrook Life 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.
We own the assets of the Variable Account. The Variable Account is a segregated
asset account under Arizona law. That means we account for the Variable
Account's income, gains and losses separately from the results of our other
operations. It also means that only the assets of the Variable Account that are
in excess of the reserves and other Contract liabilities with respect to the
Variable Account are subject to liabilities relating to our other operations.
Our obligations arising under the Contracts are general corporate obligations of
Glenbrook.
The Variable Account consists of multiple Variable Sub-Accounts, 40 of which are
offered under this Contract. 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
41
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 fund. Any substitution of securities will comply with the
requirements of the Investment Company Act of 1940. We also may add new Variable
Sub-Accounts that invest in additional mutual funds. We will notify you in
advance of any change.
CONFLICTS OF INTEREST. Certain of the Portfolios sell their shares to separate
accounts underlying both variable life insurance and variable annuity contracts.
It is conceivable that in the future it may be unfavorable for variable life
insurance separate accounts and variable annuity separate accounts to invest in
the same Portfolio. The boards of directors 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 8.5% 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 1.00%, 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 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, waiver of withdrawal
charges (if applicable), 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.
42
LEGAL MATTERS
Foley & Lardner, Washington, D.C., has advised Glenbrook on certain federal
securities law matters. All matters of state insurance law pertaining to the
Contracts, including the validity of the Contracts and Glenbrook's right to
issue such Contracts under state insurance law, have been passed upon by Michael
J. Velotta, General Counsel of Glenbrook.
43
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 as a "Regulated Investment Company" under
Subchapter M of the Code. Investment income and realized capital gains of the
Variable Account are automatically applied to increase reserves under the
Contract. Under existing federal income tax law, 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 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 owner during the taxable year.
Although GLENBROOK LIFE does not have control over the Funds or their
investments, we expect the Funds to meet the diversification requirements.
OWNERSHIP TREATMENT. The IRS has stated that a Contract Owner will be considered
the owner of Variable 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 Variable Account investments may
cause a Contract Owner to be treated as the owner of the Variable 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 Variable 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
44
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 nonqualified 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:
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 Owner's death;
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 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 Owner's death. If the Contract Owner's designated
Beneficiary is the surviving spouse of the Owner, the Contract may be continued
with the surviving spouse as the new Contract Owner.
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 59 1/2. However, no penalty tax is incurred on distributions:
1. made on or after the date the Contract Owner attains age 59 1/2,
2. made as a result of the Contract Owner's death or 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 Contract 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
45
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 59 1/2 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.
The Contract may be used with several types of qualified plans. 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
46
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 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 59 1/2,
... 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 70 1/2. 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 this annuity 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 may not invest in life insurance contracts. However, an IRA
(e.g., traditional IRA, Roth IRA, SEP IRA and SIMPLE 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
owners of any IRA to select certain death benefits that offer enhanced earnings.
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.
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 59 1/2. However, no penalty tax is incurred on
distributions:
1. made on or after the date the Contract Owner attains age 59 1/2,
2. made as a result of the Contract Owner's death or 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 Contract 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 59 1/2 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
47
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 59 1/2,
... 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
48
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.
49
ANNUAL REPORTS AND OTHER DOCUMENTS
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Glenbrook'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 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 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 year period 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 from the Statement of Additional Information,
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 the withdrawal charge (for ALLSTATE PROVIDER
ULTRA CONTRACTS). Performance advertisements also may include total return
figures that reflect the deduction of insurance charges, but not the contract
maintenance charge or withdrawal charge. 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 Variable Sub-Accounts
with: (a) certain unmanaged market indices, including but not
50
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.
51
APPENDIX A
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT
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ALLSTATE PROVIDER ADVANTAGE CONTRACTS
Accumulation Unit Values for the Allstate Provider Advantage Contracts for the
period September 17, 2001* (date Contracts were first offered) through December
31, 2001 are set out below:
With the
With the Income Benefit
Enhanced With the and Enhanced
Death Benefit Income Benefit Death Benefit
VARIABLE SUB-ACCOUNTS Base Policy /1/ Rider/^/ Rider/3/ Riders/4/
AIM V.I. BALANCED
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $11.292 $11.284 $11.284 $11.276
Number of Units Outstanding, End of Period 0 0 0 0
AIM V.I. CAPITAL APPRECIATION
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $12.619 $12.610 $12.610 $12.601
Number of Units Outstanding, End of Period 1,667 0 0 0
AIM V.I. CORE EQUITY
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $12.391 $12.382 $12.382 $12.374
Number of Units Outstanding, End of Period 0 0 0 0
AIM V.I. GROWTH
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $11.629 $11.621 $11.621 $11.613
Number of Units Outstanding, End of Period 0 0 0 0
AIM V.I. HIGH YIELD
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $10.573 $10.566 $10.566 $10.558
Number of Units Outstanding, End of Period 0 0 0 0
AIM V.I. PREMIER EQUITY
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $11.853 $11.844 $11.844 $11.836
Number of Units Outstanding, End of Period 1,836 0 0 0
FEDERATED PRIME MONEY FUND II
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $10.016 $10.009 $10.009 $10.002
Number of Units Outstanding, End of Period 846 2,178 0 14,453
FIDELITY VIP CONTRAFUND/TM/ SERVICE CLASS 2
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $11.452 $11.417 $11.417 $11.409
Number of Units Outstanding, End of Period 0 0 0 575
- ----------------------------------------------------------------------------------------------------------------
FIDELITY VIP EQUITY-INCOME SERVICE CLASS 2
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $11.703 $11.695 $11.695 $11.686
Number of Units Outstanding, End of Period 180 0 0 0
FIDELITY VIP GROWTH SERVICE CLASS 2
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $12.424 $12.415 $12.415 $12.406
Number of Units Outstanding, End of Period 1,314 0 0 0
FIDELITY VIP HIGH INCOME SERVICE CLASS 2
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $10.165 $10.157 $10.157 $10.150
Number of Units Outstanding, End of Period 0 0 0 0
52
FIDELITY VIP INDEX 500 PORTFOLIO SERVICE CLASS 2
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $11.870 $11.862 $ 1.862 $11.854
Number of Units Outstanding, End of Period 58 0 1,375 0
FIDELITY VIP OVERSEAS PORTFOLIO SERVICE CLASS 2
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $11.653 $11.645 $11.645 $11.637
Number of Units Outstanding, End of Period 676 0 0 0
MFS EMERGING GROWTH SERVICE CLASS
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $12.752 $12.743 $12.743 $12.734
Number of Units Outstanding, End of Period 0 102 824 0
MFS INVESTORS TRUST SERVICE CLASS
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $11.545 $11.537 $11.537 $11.529
Number of Units Outstanding, End of Period 0 0 700 0
MFS NEW DISCOVERY SERVICE CLASS
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $13.155 $13.146 $13.146 $13.137
Number of Units Outstanding, End of Period 355 0 0 0
MFS RESEARCH SERVICE CLASS
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $11.948 $11.940 $11.940 $11.932
Number of Units Outstanding, End of Period 0 0 0 0
MFS UTILITIES SERVICE CLASS
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $10.020 $10.013 $10.013 $10.006
Number of Units Outstanding, End of Period 35 0 0 0
OPPENHEIMER AGGRESSIVE GROWTH
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $11.554 $11.546 $11.546 $11.538
Number of Units Outstanding, End of Period 182 0 0 0
OPPENHEIMER CAPITAL APPRECIATION
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $12.235 $12.226 $12.226 $12.217
Number of Units Outstanding, End of Period 576 105 0 0
OPPENHEIMER GLOBAL SECURITIES
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $12.373 $12.364 $12.364 $12.356
Number of Units Outstanding, End of Period 82 0 0 0
OPPENHEIMER MAIN STREET GROWTH AND INCOME
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $11.480 $11.472 $11.472 $11.464
Number of Units Outstanding, End of Period 2.061 0 0 0
OPPENHEIMER MULTIPLE STRATEGIES
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $11.184 $11.176 $11.176 $11.169
Number of Units Outstanding, End of Period 0 115 0 0
OPPENHEIMER STRATEGIC BOND
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $10.384 $10.377 $10.377 $10.369
Number of Units Outstanding, End of Period 0 123 0 0
PUTNAM VT DIVERSIFIED INCOME CLASS IB
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $10.190 $10.183 $10.183 $10.175
Number of Units Outstanding, End of Period 68 0 0 0
53
PUTNAM VT GROWTH AND INCOME CLASS IB
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $11.385 $11.377 $11.377 $11.369
Number of Units Outstanding, End of Period 0 0 0 0
PUTNAM VT GROWTH OPPORTUNITIES CLASS IB
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $12.249 $12.241 $12.241 $12.232
Number of Units Outstanding, End of Period 0 0 0 0
PUTNAM VT HEALTH SCIENCES Class IB
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $11.053 $11.045 $11.045 $11.037
Number of Units Outstanding, End of Period 0 0 0 587
PUTNAM VT NEW VALUE CLASS IB
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $11.856 $11.848 $11.848 $11.840
Number of Units Outstanding, End of Period 0 0 536 0
PUTNAM VT VOYAGER II CLASS IB
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $12.955 $12.945 $12.945 $12.936
Number of Units Outstanding, End of Period 0 0 0 0
STI CAPITAL APPRECIATION
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $12.146 $12.137 $12.137 $12.129
Number of Units Outstanding, End of Period 0 0 0 0
STI GROWTH AND INCOME
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $11.675 $11.667 $11.667 $11.659
Number of Units Outstanding, End of Period 0 0 0 0
STI INTERNATIONAL EQUITY
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $11.261 $11.253 $11.253 $11.245
Number of Units Outstanding, End of Period 0 0 0 0
STI INVESTMENT GRADE BOND
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 9.949 $ 9.942 $ 9.942 $ 9.935
Number of Units Outstanding, End of Period 70 0 0 0
STI MID-CAP EQUITY
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $12.960 $12.951 $12.951 $12.942
Number of Units Outstanding, End of Period 308 0 0 514
STI QUALITY GROWTH STOCK
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $11.837 $11.829 $11.829 $11.820
Number of Units Outstanding, End of Period 0 0 0 0
STI SMALL CAP VALUE EQUITY
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $12.108 $12.100 $12.100 $12.091
Number of Units Outstanding, End of Period 1,066 0 0 543
STI VALUE INCOME STOCK
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $11.633 $11.624 $11.624 $11.616
Number of Units Outstanding, End of Period 181 0 0 0
54
TEMPLETON GLOBAL INCOME SECURITIES - CLASS 2
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 9.957 $ 9.950 $ 9.950 $ 9.943
Number of Units Outstanding, End of Period 0 0 0 0
TEMPLETON GROWTH SECURITIES - CLASS 2
Accumulation Unit Value, Beginning of Period $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $11.839 $11.830 $11.830 $11.822
Number of Units Outstanding, End of Period 0 0 0 0
*The Contracts were first offered on September 17, 2001.
(1) The Accumulation Unit Values in this column reflect a mortality and expense
risk charge of 1.45%.
(2) The Accumulation Unit Values in this column reflect a mortality and expense
risk charge of 1.70%.
(3) The Accumulation Unit Values in this column reflect a mortality and expense
risk charge of 1.70%.
(4) The Accumulation Unit Values in this column reflect a mortality and expense
risk charge of 1.95%.
55
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT
ALLSTATE PROVIDER ULTRA CONTRACTS
Accumulation Unit Values for the Allstate Provider Ultra Contracts for the
period May 1, 2001* (date Contracts were first offered) through December 31,
2001 are set out below:
With the
With the Income Benefit
Enhanced With the and Enhanced
Death Benefit Income Benefit Death Benefit
VARIABLE SUB-ACCOUNTS Base Policy /1/ Rider/2/ Rider/3/ Riders/4/
AIM V.I. BALANCED
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 9.121 $ 9.106 $ 9.106 $ 9.090
Number of Units Outstanding, End of Period 17,262 36,214 8,928 2,006
AIM V.I. CAPITAL APPRECIATION
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 8.61 $ 8.65 $ 8.65 $ 8.642
Number of Units Outstanding, End of Period 7,675 34,586 7,427 16,080
AIM V.I. CORE EQUITY
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 10.000 $ 10.000 $10.000 $10.000
Number of Units Outstanding, End of Period 6,837 12,044 8,515 16,782
AIM V.I. GROWTH
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 8.395 $ 8.381 $ 8.381 $ 8.367
Number of Units Outstanding, End of Period 14,481 6,203 4,883 13,911
AIM V.I. HIGH YIELD
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 9.444 $ 9.428 $ 9.428 $ 9.412
Number of Units Outstanding, End of Period 6,926 1,624 834 479
AIM V.I. PREMIER EQUITY
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 8.853 $ 8.832 $ 8.838 $ 8.823
Number of Units Outstanding, End of Period 11,756 35,582 15,056 22,170
FEDERATED PRIME MONEY FUND II
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 10.109 $ 10.092 $10.092 $10.075
Number of Units Outstanding, End of Period 25,597 35,632 1,869 28,939
FIDELITY VIP CONTRAFUND/TM/ SERVICE CLASS 2
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 9.456 $ 9.449 $ 9.449 $ 9.433
Number of Units Outstanding, End of Period 17.056 15,928 4,269 5,676
- ----------------------------------------------------------------------------------------------------------------
FIDELITY VIP EQUITY-INCOME SERVICE CLASS 2
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 9.370 $ 9.354 $ 9.354 $ 9.339
Number of Units Outstanding, End of Period 35,300 48,170 21,250 16,281
FIDELITY VIP GROWTH SERVICE CLASS 2
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 8.681 $ 8.666 $ 8.666 $ 8.651
Number of Units Outstanding, End of Period 13,066 23,900 2,130 2,064
FIDELITY VIP HIGH INCOME SERVICE CLASS 2
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 9.016 $ 9.001 $ 9.001 $ 8.986
Number of Units Outstanding, End of Period 2,936 6,849 3,040 5,100
56
FIDELITY VIP INDEX 500 PORTFOLIO SERVICE CLASS 2
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 9.041 $ 9.026 $ 9.026 $ 9.010
Number of Units Outstanding, End of Period 26,457 59,776 14,249 9,098
FIDELITY VIP OVERSEAS PORTFOLIO SERVICE CLASS 2
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 8.045 $ 8.032 $ 8.032 $ 8.018
Number of Units Outstanding, End of Period 1,796 1,596 481 0
MFS EMERGING GROWTH SERVICE CLASS
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 8.158 $ 8.144 $ 8.144 $ 8.130
Number of Units Outstanding, End of Period 8,841 28,157 6,533 13,429
MFS INVESTORS TRUST SERVICE CLASS
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 8.843 $ 8.828 $ 8.828 $ 8.813
Number of Units Outstanding, End of Period 16,089 20,784 3,393 4,190
MFS NEW DISCOVERY SERVICE CLASS
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 9.619 $ 9.602 $ 9.602 $ 9.586
Number of Units Outstanding, End of Period 5,451 7,674 2,355 683
MFS RESEARCH SERVICE CLASS
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 8.458 $ 8.444 $ 8.444 $ 8.430
Number of Units Outstanding, End of Period 6,555 14,559 1,783 936
MFS UTILITIES SERVICE CLASS
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 7.546 $ 7.533 $7.5533 $ 7.520
Number of Units Outstanding, End of Period 33,039 20,335 6,058 7,254
OPPENHEIMER AGGRESSIVE GROWTH
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 8.833 $ 8.818 $ 8.818 $ 8.803
Number of Units Outstanding, End of Period 19,725 11,201 3,962 6,136
OPPENHEIMER CAPITAL APPRECIATION
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 8.693 $ 8.678 $ 8.678 $ 8.663
Number of Units Outstanding, End of Period 67,547 68,758 9,979 13,792
OPPENHEIMER GLOBAL SECURITIES
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 9.314 $ 9.298 $ 9.298 $ 9.282
Number of Units Outstanding, End of Period 12,351 26,672 3,338 2,830
OPPENHEIMER MAIN STREET GROWTH AND INCOME
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 9.171 $ 9.155 $ 9.155 $ 9.140
Number of Units Outstanding, End of Period 44,958 44,954 14,089 12,659
OPPENHEIMER MULTIPLE STRATEGIES
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 9.610 $ 9.594 $ 9.594 $ 9.577
Number of Units Outstanding, End of Period 24.,078 31,126 8,513 2,422
OPPENHEIMER STRATEGIC BOND
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 10.250 $ 10.232 $10.232 $10.215
Number of Units Outstanding, End of Period 22,387 37,733 8,015 6,083
PUTNAM VT DIVERSIFIED INCOME CLASS IB
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 10.106 $ 10.089 $10.089 $10.072
Number of Units Outstanding, End of Period 11,853 32,527 3,387 0
57
PUTNAM VT GROWTH AND INCOME CLASS IB
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 9.217 $ 9.202 $ 9.202 $ 9.186
Number of Units Outstanding, End of Period 25,624 32,365 0 642
PUTNAM VT GROWTH OPPORTUNITIES CLASS IB
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 8.065 $ 8.051 $ 8.051 $ 8.037
Number of Units Outstanding, End of Period 3,456 2,002 2,093 0
PUTNAM VT HEALTH SCIENCES CLASS IB
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 9.662 $ 9.645 $ 9.645 $ 9.629
Number of Units Outstanding, End of Period 10,884 8,615 9,717 11,843
PUTNAM VT NEW VALUE CLASS IB
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 9.574 $ 9.558 $ 9.558 $ 9.542
Number of Units Outstanding, End of Period 10,667 11,841 1,206 0
PUTNAM VT VOYAGER II CLASS IB
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 8.060 $ 8.047 $ 8.047 $ 8.033
Number of Units Outstanding, End of Period 12,089 10,399 13,977 7,867
STI CAPITAL APPRECIATION
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 9.492 $ 9.476 $ 9.476 $ 9.460
Number of Units Outstanding, End of Period 3,007 7,451 3,775 293
STI GROWTH AND INCOME
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 9.453 $ 9.437 $ 9.437 $ 9.421
Number of Units Outstanding, End of Period 3,400 9,138 3,266 1,830
STI INTERNATIONAL EQUITY
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 8.635 $ 8.621 $ 8.621 $ 8.606
Number of Units Outstanding, End of Period 962 0 263 0
STI INVESTMENT GRADE BOND
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 10.337 $ 10.320 $10.320 $10.302
Number of Units Outstanding, End of Period 30,005 31,250 11,821 2,966
STI MID-CAP EQUITY
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 10.303 $ 10.286 $10.286 $10.268
Number of Units Outstanding, End of Period 5,019 5,718 1,642 592
STI QUALITY GROWTH STOCK
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 10.000 $ 10.000 $10.000 $10.000
Number of Units Outstanding, End of Period 2,881 4,616 1,980 0
STI SMALL CAP VALUE EQUITY
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 10.938 $ 10.920 $10.920 $10.901
Number of Units Outstanding, End of Period 12,295 7,610 2,641 4,362
STI VALUE INCOME STOCK
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 9.541 $ 9.525 $ 9.525 $ 9.509
Number of Units Outstanding, End of Period 4,062 2,020 3,196 3,040
TEMPLETON GLOBAL INCOME SECURITIES - CLASS 2
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 10.431 $ 10.414 $10.414 $10.396
Number of Units Outstanding, End of Period 1,263 655 972 0
58
TEMPLETON GROWTH SECURITIES - CLASS 2
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.000 $10.000 $10.000
Accumulation Unit Value, End of Period $ 9.716 $9.9.699 $ 9.699 $ 9.683
Number of Units Outstanding, End of Period 3,102 3,332 347 102
*The Contracts were first offered on May 1, 2001.
(1) The Accumulation Unit Values in this column reflect a mortality and expense
risk charge of 1.25%.
(2) The Accumulation Unit Values in this column reflect a mortality and expense
risk charge of 1.50%.
(3) The Accumulation Unit Values in this column reflect a mortality and expense
risk charge of 1.50%.
(4) The Accumulation Unit Values in this column reflect a mortality and expense
risk charge of 1.75%.
59
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.
60
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 FOR ALLSTATE PROVIDER ADVANTAGE CONTRACTS (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 Market Value I = 4.5%
Adjustment: J = 4.2%
N = 730 days =2
--------
365 days
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 4. 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:
61
EXAMPLE 2: FOR ALLSTATE PROVIDER ADVANTAGE CONTRACTS (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 Market Value I = 4.5%
Adjustment: J = 4.8%
N = 730 days =2
--------
365 days
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 4. 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:
EXAMPLE 3: FOR ALLSTATE PROVIDER ULTRA CONTRACTS (ASSUMES DECLINING 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: = .06 X ($10,000 - $1,500) =
$510.00
Step 4. Calculate the Market Value I = 4.50%
Adjustment: J = 4.20%
N = 730 days =2
--------
365 days
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 $11,411.66 - $510.00 + $8.92 =
withdrawal at the end of Contract Year $10,910.58
3:
62
EXAMPLE 4: FOR ALLSTATE PROVIDER ULTRA CONTRACTS (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 Charge = .06 X ($10,000 - $1,500) = $510.00
Step 4. Calculate the Market Value I = 4.50%
Adjustment: J = 4.80%
N = 730 days =2
--------
365 days
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 $11,411.66 - $510.00 - $98.13 =
withdrawal at the end of Contract Year $10,803.53
3:
63
APPENDIX C CALCULATION OF ENHANCED EARNINGS DEATH BENEFIT AMOUNT
- --------------------------------------------------------------------------------
THE ENHANCED EARNINGS DEATH BENEFIT RIDER IS NOT AVAILABLE FOR PURCHASE OF ANY
IRA A THIS TIME.
ALLSTATE PROVIDER ADVANTAGE CONTRACTS
EXAMPLE1. In this example, assume that the oldest Owner is age 55 at the time
the Contract is issued and elects the Enhanced Earnings Death Benefit Rider when
the Contract is issued. The Owner makes an initial purchase payment of $100,000.
After four years, the Owner dies. On the date Glenbrook receives Due Proof of
Death, the Contract Value is $125,000. Prior to his death, the Owner did not
make any additional purchase payments or take any withdrawals.
Excess-of-Earnings Withdrawals = $0
Purchase payments in the 12 months prior to Death = $0
In-Force Premium = $100,000 ($100,000 + $0 - $0)
In-Force Earnings = $25,000 ($125,000 - $100,000)
Enhanced Earnings Death Benefit = 40% X $25,000 = $10,000.
Since 40% In-Force Earnings are less than 80% of the In-Force Premium (excluding
purchase payments in the 12 months prior to death), the In-Force Earnings are
used to compute the Enhanced Earnings Death Benefit amount.
EXAMPLE 2. In the second example, assume the same facts as above, except that
the Owner has taken a withdrawal of $10,000 during the second year of the
Contract. At the time the withdrawal is taken, the Contract Value is $105,000.
Here, $5,000 of the withdrawal is in excess of the In-Force Earnings at the time
of the withdrawal. The Contract Value on the date Glenbrook receives due proof
of death will be assumed to be $114,000.
Excess of Earnings Withdrawals = $5,000 ($10,000 - $5,000)
Purchase payments in the 12 months prior to Death = $0
In-Force Premium = $95,000 ($100,000 + $0 - $5,000)
In-Force Earnings = $19,000 ($114,000 - $95,000)
Enhanced Earnings Death Benefit = 40% X $19,000 = $7,600.
Since 40% In-Force Earnings are less than 80% of the In-Force Premium (excluding
purchase payments in the 12 months prior to death), the In-Force Earnings are
used to compute the Enhanced Earnings Death Benefit amount.
EXAMPLE 3. This third example is intended to illustrate the effect of adding the
Enhanced Earnings Death Benefit Rider after the Contract has been issued and the
effect of later purchase payments. In this example, assume that the oldest Owner
is age 65 on the Rider Date. At the time the Contract is issued, the Owner makes
a purchase payment of $100,000. After two years pass, the Owner elects to add
the Enhanced Earnings Death Benefit Rider. On the date this Rider is added, the
Contract Value is $110,000. Two years later, the Owner withdraws $50,000.
Immediately prior to the withdrawal, the Contract Value is $130,000. Another two
years later, the Owner makes an additional purchase payment of $40,000.
Immediately after the additional purchase payment, the Contract Value is
$130,000. Two years later, the owner dies with a Contract Value of $140,000 on
the date Glenbrook receives Due Proof of Death.
Excess of Earnings Withdrawals = $30,000 ($50,000 - $20,000)
Purchase payments in the 12 months prior to Death = $0
In-Force Premium = $120,000 ($110,000 + $40,000 - $30,000)
In-Force Earnings = $20,000 ($140,000 - $120,000)
Enhanced Earnings Death Benefit = 30% of $20,000 = $6,000.
In this example, In-Force Premium is equal to the Contract Value on the date the
Rider was issued plus the additional purchase payment and minus the
Excess-of-Earnings Withdrawal.
Since 30% In-Force Earnings are less than 60% of the In-Force Premium (excluding
purchase payments in the 12 months prior to death), the In-Force Earnings are
used to compute the Enhanced Earnings Death Benefit amount.
64
ALLSTATE PROVIDER ULTRA CONTRACTS
EXAMPLE1. In this example, assume that the oldest Owner is age 55 at the time
the Contract is issued and elects the Enhanced Earnings Death Benefit Rider when
the Contract is issued. The Owner makes an initial purchase payment of $100,000.
After four years, the Owner dies. On the date Glenbrook receives Due Proof of
Death, the Contract Value is $125,000. Prior to his death, the Owner did not
make any additional purchase payments or take any withdrawals.
Excess-of-Earnings Withdrawals = $0
Purchase payments in the 12 months prior to Death = $0
In-Force Premium = $100,000 ($100,000 + $0 - $0)
Death Benefit Earnings = $25,000 ($125,000 - $100,000)
Enhanced Earnings Death Benefit = 40% X $25,000 = $10,000.
Since Death Benefit Earnings are less than 200% of the In-Force Premium
(excluding purchase payments in the 12 months prior to death), the Death Benefit
Earnings are used to compute the Enhanced Earnings Death Benefit amount.
EXAMPLE 2. In the second example, assume the same facts as above, except that
the Owner has taken a withdrawal of $10,000 during the second year of the
Contract. At the time the withdrawal is taken, the Contract Value is $105,000.
Here, $5,000 of the withdrawal is in excess of the Death Benefit Earnings at the
time of the withdrawal. The Contract Value on the date Glenbrook receives due
proof of death will be assumed to be $114,000.
Excess of Earnings Withdrawals = $5,000 ($10,000 - $5,000)
Purchase payments in the 12 months prior to Death = $0
In-Force Premium = $95,000 ($100,000 + $0 -$5,000)
Death Benefit Earnings = $19,000 ($114,000 - $95,000)
Enhanced Earnings Death Benefit = 40% X $19,000 = $7,600.
Since Death Benefit Earnings are less than 200% of the In-Force Premium
(excluding purchase payments in the 12 months prior to death), the Death Benefit
Earnings are used to compute the Enhanced Earnings Death Benefit amount.
EXAMPLE 3. This third example is intended to illustrate the effect of adding the
Enhanced Earnings Death Benefit Rider after the Contract has been issued and the
effect of later purchase payments. In this example, assume that the oldest Owner
is age 65 on the Rider Date. At the time the Contract is issued, the Owner makes
a purchase payment of $100,000. After two years pass, the Owner elects to add
the Enhanced Earnings Death Benefit Rider. On the date this Rider is added, the
Contract Value is $110,000. Two years later, the Owner withdraws $50,000.
Immediately prior to the withdrawal, the Contract Value is $130,000. Another two
years later, the Owner makes an additional purchase payment of $40,000.
Immediately after the additional purchase payment, the Contract Value is
$130,000. Two years later, the owner dies with a Contract Value of $140,000 on
the date Glenbrook receives Due Proof of Death.
Excess of Earnings Withdrawals = $30,000 ($50,000 - $20,000)
Purchase payments in the 12 months prior to Death = $0
In-Force Premium = $120,000 ($110,000 + $40,000 - $30,000)
Death Benefit Earnings = $20,000 ($140,000 - $120,000)
Enhanced Earnings Death Benefit = 30% of $20,000 = $6,000.
In this example, In-Force Premium is equal to the Contract Value on the date the
Rider was issued plus the additional purchase payment and minus the
Excess-of-Earnings Withdrawal.
Since Death Benefit Earnings are less than 200% of the In-Force Premium
(excluding purchase payments in the 12 months prior to death), the Death Benefit
Earnings are used to compute the Enhanced Earnings Death Benefit amount.
65
As filed with the Securities and Exchange Commission on April 30, 2002.
File No. 333-69660
811-07351
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NOS. 1 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
AMENDMENT NO. 23 /X/
GLENBROOK LIFE AND ANNUITY COMPANY SEPARATE ACOUNT A
(Exact Name of Registrant)
GLENBROOK LIFE AND ANNUITY COMPANY
(Name of Depositor)
3100 SANDERS ROAD
NORTHBROOK, ILLINOIS 60062
847-402-2400
(Address and Telephone number of Depositor's Principal Offices)
MICHAEL J. VELOTTA
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
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 of all communications to:
Joseph P. Rath, Esquire Joanne Derrig, Esquire
Brickler & Eckler LLP ALFS, Inc.
100 South Third Street 3100 Sanders Road, Suite J5B
Columbus, OH 43215 Northbrook, IL 60062
Date of proposed public offering: As soon as practicable after the effective
date of the Registration Statement.
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE
(CHECK APPROPRIATE BOX)
/ / immediately upon filing pursuant to paragraph (b) of Rule 485
/X/ on May 1, 2002 pursuant to paragraph (b) of Rule 485
/ / 60 days after filing pursuant to paragraph (a)(1) of Rule 485
/ / on (date) pursuant to paragraph (a)(i) of Rule 485
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
/ / This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: Units of interest in the Glenbrook Life
and Annuity Company Separate Account A under deferred variable annuity
contracts.
AIM LIFETIME AMERICA VARIABLE ANNUITY SERIES
AIM LIFETIME AMERICA CLASSIC/SM/
AIM LIFETIME AMERICA REGAL/SM/
AIM LIFETIME AMERICA FREEDOM/SM/
GLENBROOK LIFE AND ANNUITY COMPANY
P.O. BOX 94039, PALATINE, IL 60094-4039
TELEPHONE NUMBER: 1-800-776-6978 Prospectus dated May 1, 2002
-------------------------------------------------------------------------------
Glenbrook Life and Annuity Company ("GLENBROOK LIFE", "WE", OR "US") is offering
the Following group and individual flexible premium deferred variable annuity
contracts ("CONTRACT" or "OPTION"). Contract or Option as used in this
prospectus refers to one of the following 3 variable annuity options:
AIM LIFETIME AMERICA CLASSIC AIM LIFETIME AMERICA REGAL AIM
LIFETIME AMERICA FREEDOM
All three of these options are available to you.
This prospectus contains information about each Contract that you should know
before investing. Please keep it for future reference.
Each Contract currently offers several investment alternatives ("INVESTMENT
ALTERNATIVES"). The investment alternatives include up to 3 fixed account
options ("FIXED ACCOUNT OPTIONS"), and 18 variable sub-accounts ("VARIABLE
SUB-ACCOUNTS") of the Glenbrook Life and Annuity Company Separate Account A
("VARIABLE ACCOUNT"). Each Variable Sub-Account invests exclusively in shares of
one of the following funds ("FUNDS") of AIM Variable Insurance Funds (Series II
Shares):
AIM V.I. AGGRESSIVE GROWTH FUND AIM V.I. GLOBAL UTILITIES FUND
AIM V.I. BALANCED FUND AIM V.I. GOVERNMENT SECURITIES FUND
AIM V.I. BASIC VALUE FUND AIM V.I. GROWTH FUND
AIM V.I. BLUE CHIP FUND AIM V.I. HIGH YIELD FUND
AIM V.I. CAPITAL APPRECIATION FUND AIM V.I. INTERNATIONAL GROWTH FUND**
AIM V.I. CAPITAL DEVELOPMENT FUND AIM V.I. MID CAP CORE EQUITY FUND ***
AIM V.I. CORE EQUITY FUND* AIM V.I. MONEY MARKET FUND
AIM V.I. DENT DEMOGRAPHIC TRENDS FUND AIM V.I. NEW TECHNOLOGY FUND
AIM V.I. DIVERSIFIED INCOME FUND AIM V.I. PREMIER EQUITY FUND****
*Effective May 1, 2002, the Fund changed its name from AIM V.I. Growth and
Income Fund to AIM V.I. Core Equity Fund. We have made a corresponding
change in the name of the Variable Sub-Account that invests in that Fund.
**Effective May 1, 2002, the Fund changed its name from AIM V.I. International
Equity Fund to AIM V.I. International Growth Fund. We have made a
corresponding change in the name of the Variable Sub-Account that invests in
that Fund
***Effective May 1, 2002, the Fund changed its name from AIM V.I. Mid Cap Equity
Fund to AIM V.I. Mid Cap Core Equity Fund. We have made a corresponding
change in the name of the Variable Sub-Account that invests in that Fund.
****Effective May 1, 2002, the Fund changed its name from AIM V.I. Value Fund to
AIM V.I. Premier Equity Fund. We have made a corresponding change in the
name of the Variable Sub-Account that invests in that Fund.
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 representative for further information on the
availability of Funds and/or Portfolios. Your annuity application will list all
available Portfolios.
Glenbrook has 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 47 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.
1
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THE SECURITIES DESCRIBED IN THIS PROSPECTUS, NOR
HAS IT PASSED ON THE ACCURACY OR THE ADEQUACY OF THIS
PROSPECTUS. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A
FEDERAL CRIME.
THE CONTRACTS MAY BE DISTRIBUTED THROUGH BROKER-DEALERS THAT
HAVE RELATIONSHIPS WITH BANKS OR OTHER FINANCIAL
INSTITUTIONS OR BY EMPLOYEES OF SUCH BANKS. HOWEVER, THE
IMPORTANT NOTICES CONTRACTS ARE NOT DEPOSITS, OR OBLIGATIONS OF, OR GUARANTEED
BY SUCH INSTITUTIONS OR ANY FEDERAL REGULATORY AGENCY. THE
CONTRACTS MAY BE DISTRIBUTED THROUGH BROKER-DEALERS THAT
HAVE RELATIONSHIPS WITH BANKS OR OTHER FINANCIAL
INSTITUTIONS OR BY EMPLOYEES OF SUCH BANKS. HOWEVER, THE
INVESTMENT IN 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.
2
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
- --------------------------------------------------------------------------------
OVERVIEW 5
- --------------------------------------------------------------------------------
IMPORTANT TERMS 4
- --------------------------------------------------------------------------------
The Contract At A Glance 6
- --------------------------------------------------------------------------------
How the Contract Works 8
- --------------------------------------------------------------------------------
Expense Table 9
- --------------------------------------------------------------------------------
Financial Information 15
- --------------------------------------------------------------------------------
CONTRACT FEATURES
- --------------------------------------------------------------------------------
The Contract 16
- --------------------------------------------------------------------------------
Purchases 18
- --------------------------------------------------------------------------------
Contract Value 19
- --------------------------------------------------------------------------------
Investment Alternatives 1
- --------------------------------------------------------------------------------
The Variable Sub-Accounts 20
- --------------------------------------------------------------------------------
The Fixed Account Options 21
- --------------------------------------------------------------------------------
Transfers 24
- --------------------------------------------------------------------------------
Expenses 25
- --------------------------------------------------------------------------------
Access To Your Money 28
- --------------------------------------------------------------------------------
Income Payments 29
- --------------------------------------------------------------------------------
Death Benefits 32
- --------------------------------------------------------------------------------
PAGE
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
More Information:
- --------------------------------------------------------------------------------
Glenbrook 1, 36
- --------------------------------------------------------------------------------
The Variable Account 36
- --------------------------------------------------------------------------------
The Contract 38
- --------------------------------------------------------------------------------
Qualified Plans 6, 38
- --------------------------------------------------------------------------------
Legal Matters 38
- --------------------------------------------------------------------------------
Taxes 38
- --------------------------------------------------------------------------------
Annual Reports and Other Documents 41
- --------------------------------------------------------------------------------
Experts 41
- --------------------------------------------------------------------------------
Performance Information 41
- --------------------------------------------------------------------------------
APPENDIX A - MARKET VALUE ADJUSTMENT EXAMPLE 43
- --------------------------------------------------------------------------------
APPENDIX B - CALCULATION OF ENHANCED EARNINGS DEATH BENEFIT AMOUNT 45
- --------------------------------------------------------------------------------
APPENDIX C - AIM LIFETIME AMERICA/SM/ VA SERIES CONTRACT COMPARISON CHART 46
- --------------------------------------------------------------------------------
3
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 8
- --------------------------------------------------------------------------------
Accumulation Unit 15, 19
- --------------------------------------------------------------------------------
Accumulation Unit Value 15, 19
- --------------------------------------------------------------------------------
Anniversary Value 33
- --------------------------------------------------------------------------------
Annuitant 16
- --------------------------------------------------------------------------------
Automatic Additions Program 18
- --------------------------------------------------------------------------------
Automatic Portfolio Rebalancing Program 25
- --------------------------------------------------------------------------------
Beneficiary 16
- --------------------------------------------------------------------------------
Cancellation Period 6, 18
- --------------------------------------------------------------------------------
Contingent Beneficiary 16
- --------------------------------------------------------------------------------
*Contract 6, 16
- --------------------------------------------------------------------------------
Contract Anniversary 31
- --------------------------------------------------------------------------------
Contract Owner ("You") 8, 16
- --------------------------------------------------------------------------------
Contract Value 7
- --------------------------------------------------------------------------------
Contract Year 7
- --------------------------------------------------------------------------------
Death Benefit Anniversary 32
- --------------------------------------------------------------------------------
Dollar Cost Averaging Program 24
- --------------------------------------------------------------------------------
Due Proof of Death 32
- --------------------------------------------------------------------------------
Enhanced Earnings Death Benefit Rider 6, 23
- --------------------------------------------------------------------------------
Enhanced Death Benefit Rider 6, 33
- --------------------------------------------------------------------------------
Excess-of-Earnings Withdrawal 43
- --------------------------------------------------------------------------------
Fixed Account Options 21
- --------------------------------------------------------------------------------
Free Withdrawal Amount 9
- --------------------------------------------------------------------------------
PAGE
- --------------------------------------------------------------------------------
Funds 36
- --------------------------------------------------------------------------------
Glenbrook ("We" or "Us") 1, 36
- --------------------------------------------------------------------------------
Guarantee Periods 21
- --------------------------------------------------------------------------------
Guaranteed Income Benefit 31
- --------------------------------------------------------------------------------
Guaranteed Maturity Fixed Account 21
- --------------------------------------------------------------------------------
Income Base 31
- --------------------------------------------------------------------------------
Income Benefit Rider 31
- --------------------------------------------------------------------------------
Income Plan 29
- --------------------------------------------------------------------------------
In-Force Premium 45
- --------------------------------------------------------------------------------
Investment Alternatives 7, 23
- --------------------------------------------------------------------------------
Issue Date 8
- --------------------------------------------------------------------------------
Market Value Adjustment 7, 23
- --------------------------------------------------------------------------------
Payout Phase 8
- --------------------------------------------------------------------------------
Payout Start Date 8, 29
- --------------------------------------------------------------------------------
Primary Beneficiary 16
- --------------------------------------------------------------------------------
Qualified Contracts 6, 16
- --------------------------------------------------------------------------------
Rider Date 16
- --------------------------------------------------------------------------------
SEC 1
- --------------------------------------------------------------------------------
Settlement Value 32
- --------------------------------------------------------------------------------
Systematic Withdrawal Program 28
- --------------------------------------------------------------------------------
Valuation Date 18
- --------------------------------------------------------------------------------
Variable Account 36
- --------------------------------------------------------------------------------
Variable Sub-Account 20
- --------------------------------------------------------------------------------
*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. References to "CONTRACT" also include all three Contract
options listed on the cover page of this prospectus, unless otherwise noted.
However, we administer each Contract separately.
4
OVERVIEW OF THE CONTRACT OPTIONS
- --------------------------------------------------------------------------------
There are 3 options that offer many of the same basic features and benefits.
They differ with respect to the charges imposed, as follows:
The AIM LIFETIME AMERICA CLASSIC/SM/ has a mortality and expense risk charge of
1.20%, an administrative charge of 0.10% and a withdrawal charge of up to 7%
with a 7-year withdrawal charge period.
The AIM LIFETIME AMERICA REGAL/SM/ has a mortality and expense risk charge of
1.35%, an administrative charge of 0.10% and a withdrawal charge of up to 7%
with a 3-year withdrawal charge period.
The AIM LIFETIME AMERICA FREEDOM/SM/ has a mortality and expense risk charge of
1.40%, an administrative charge of 0.10% with no withdrawal charge.
Other differences among the Options relate to available Fixed Account Options
and available withdrawal charge waivers. For side-by-side comparison of these
differences, please turn to Appendix C of this prospectus.
5
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 $10,000
($10,000 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 $500 ($100 for automatic
Purchase Payments to the Variable Investment Options).
You must maintain a minimum account size of $1,000.
- ---------------------------------------------------------------------------------------
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. The adjustment will reflect the deduction of
mortality and expense rik charges and administrative
expense charges.
- ---------------------------------------------------------------------------------------
EXPENSES Each Fund pays expenses that you will bear indirectly
if you invest in a Variable Sub-account. In addition,
you will bear the following expenses:
AIM LIFETIME AMERICA CLASSIC/S//M/ Option
Annual mortality and expense risk charge equal to 1.20%
of average daily net assets.
Annual administrative charge equal to 0.10% of average
daily net assets.
Withdrawal charges ranging from 0% to 7% of purchase
payments withdrawn (with certain exceptions).
AIM LIFETIME AMERICA REGAL/SM/ Option
Annual Mortality and Expense Risk Charge equal to 1.35%
of average daily net assets.
Annual Administrative Charge equal to 0.10% of average
daily net assets.
Withdrawal Charges ranging from 0% to 7% of Purchase
Payments withdrawn (with certain exceptions).
AIM LIFETIME AMERICA FREEDOM/SM/ Option
Annual Mortality And Expense Risk Charge equal to 1.40%
of average daily net assets.
Annual Administrative Charge equal to 0.10% of average
daily net assets.
- ---------------------------------------------------------------------------------------
ALL OPTIONS If you select the ENHANCED DEATH BENEFIT RIDER Option
you would pay an additional mortality and expense risk
charge of 0.25%.
If you select the ENHANCED EARNINGS DEATH BENEFIT RIDER
Option you would pay an additional Mortality and
Expense Risk Charge of 0.15%, 0.25% or 0.35% (depending
on the age of the oldest Owner on the date we receive
the completed application or
request to add the option, whichever is later).
If you select the INCOME BENEFIT RIDER Option you would
pay an additional Mortality and Expense Risk Charge of
0.30%.
Transfer fee equal to $25 after the 12th Transfer in
any Contract Year.
State premium tax (if your state imposes one).
- ---------------------------------------------------------------------------------------
6
INVESTMENT ALTERNATIVES Each Contract offers several Investment Alternatives
including:
.up to 3 Fixed Account Options (which credit
interest at rates we guarantee)
.18 Variable Sub-Accounts investing in Portfolios
offering professional money management by A I M
Advisors, Inc.
To find out current rates being paid on the Fixed
Account Options or how the Variable Sub-Accounts have
performed, please call us at 1-800-776-6978.
- ---------------------------------------------------------------------------------------
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 of 5 to
30 years(absolute maximum of 50 years at certain
ages).
We offer an Income Benefit Rider that allows you to
lock in a dollar amount that you can apply towards
Fixed Income.
- ---------------------------------------------------------------------------------------
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 also offer an ENHANCED DEATH BENEFIT RIDER
and an ENHANCED EARNINGS DEATH BENEFIT RIDER.
- ---------------------------------------------------------------------------------------
TRANSFERS Before the Payout Start Date, you may transfer your
Contract value ("CONTRACT VALUE") among the Investment
Alternatives, with certain restrictions. A charge may
apply after the 12th Transfer in each Contract Year
("CONTRACT YEAR"), which we measure from the date we
issue your Contract or a Contract Anniversary.
- ---------------------------------------------------------------------------------------
WITHDRAWALS You may withdraw some or all of your Contract Value at
anytime 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 591/2, may be subject to an additional 10%
federal tax penalty. A withdrawal charge and a MARKET
VALUE ADJUSTMENT also may apply.
- ---------------------------------------------------------------------------------------
7
HOW THE CONTRACT WORKS
- --------------------------------------------------------------------------------
Each 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 your Contract's investment alternatives and
pay no federal income taxes on any earnings until you withdraw them. You do this
during what we call the "ACCUMULATION PHASE" of the Contract. The Accumulation
Phase begins on the date we issue your Contract (we call that date the "ISSUE
DATE") and continues until the Payout Start Date, which is the date we apply
your money to provide income payments. During the Accumulation Phase, you may
allocate your purchase payments to any combination of the Variable Sub-Accounts
and/or Fixed Account Options. If you invest in a Fixed Account Option, 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 29. You receive income payments during what we call the
"PAYOUT PHASE" of the Contract, which begins on the Payout Start Date and
continues until we make the last payment required by the Income Plan you select.
During the Payout Phase, if you select a fixed income payment option, we
guarantee the amount of your payments, which will remain fixed. If you select a
variable income payment option, based on one or more of the Variable
Sub-Accounts, the amount of your payments will vary up or down depending on the
performance of the corresponding Portfolios. The amount of money you accumulate
under your Contract during the Accumulation Phase and apply to an Income Plan
will determine the amount of your income payments during the Payout Phase.
The timeline below illustrates how you might use your Contract.
Issue Payout Start
Date Accumulation Phase Date Payout Phase
- ------------------------------------------------------------------------------------------------------------>
You buy You save for retirement You elect to receive You can recieve Or you can receive
a Contract income payments or income payments income payments
receive a lump sum for a set period for life
payment
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."
You buy You save for You elect to receive You can receive Or you can a Contract
retirement income payments or income payments receive income receive a lump for
a set period payments for sum payment life
Please call us at 1-800-776-6978 if you have any questions about how the
Contract works.
8
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 Payment Being 0 1 2 3 4 5 6 7+
Withdrawn
- -------------------------------------------------------------------------------
Applicable Charge AIM LIFETIME 7% 7% 7% 6% 5% 4% 3% 0%
AMERICA CLASSIC/SM// /
- -------------------------------------------------------------------------------
Applicable Charge AIM LIFETIME 7% 6% 6% 0% 0% 0% 0% 0%
AMERICA REGAL/SM/
- -------------------------------------------------------------------------------
Applicable Charge AIM LIFETIME
AMERICA FREEDOM/SM // /No Withdrawal 0% 0% 0% 0% 0% 0% 0% 0%
Charge
- -------------------------------------------------------------------------------
Transfer Fee all Contracts $25.00**
- -------------------------------------------------------------------------------
*Each Contract Year, you may withdraw up to the Free Withdrawal Amount offered
under your Contract without incurring a Withdrawal Charge. However, the
amount withdrawn may be subject to a Market Value Adjustment.
**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 AVERAGE DAILY NET ASSET
VALUE DEDUCTED FROM EACH VARIABLE SUB-ACCOUNT)
AIM Lifetime Basic With Income With Enhanced With Enhanced With Enhanced Death
AMERICA CLASSIC/SM/ Contract Benefit Rider Death Benefit Earnings Death Benefit, Enhanced
Rider Benefit Rider* Earnings Death
Benefit and Income
Benefit Riders**
- ------------------------------------------------------------------------------------------------------------------------------
Mortality and Expense Risk Charge 1.20 % 1.50 % 1.45 % 1.35 % * 1.90 %**
- ------------------------------------------------------------------------------------------------------------------------------
Administrative Expense Charge 0.10 % 0.10 % 0.10 % 0.10 % 0.10 %
- ------------------------------------------------------------------------------------------------------------------------------
Total Variable Account Annual Expense 1.30 % 1.55 % 1.55 % 1.45 % 2.00 %
- ------------------------------------------------------------------------------------------------------------------------------
AIM Lifetime Basic With Income With Enhanced With Enhanced With Enhanced Death
AMERICA REGAL/SM/ Contract Benefit Rider Death Benefit Earnings Death Benefit, Enhanced
Rider Benefit Rider* Earnings Death
Benefit and Income
Benefit Riders**
- -----------------------------------------------------------------------------------------------------------------------
Mortality and Expense Risk Charge 1.35 % 1.65 % 1.60 % 1.50 % * 2.05 %**
- -----------------------------------------------------------------------------------------------------------------------
Administrative Expense Charge 0.10 % 0.10 % 0.10 % 0.10 % 0.10 %
- -----------------------------------------------------------------------------------------------------------------------
Total Variable Account Annual Expense 1.45 % 1.75 % 1.70 % 1.60 % 2.15 %
- -----------------------------------------------------------------------------------------------------------------------
AIM Lifetime Basic With Income With Enhanced With Enhanced With Enhanced Death
AMERICA FREEDOM/SM/ Contract Benefit Rider Death Benefit Earnings Death Benefit, Enhanced
Rider Benefit Rider* Earnings Death
Benefit and Income
Benefit Riders**
- -----------------------------------------------------------------------------------------------------------------------
Mortality and Expense Risk Charge 1.40 % 1.70 % 1.65 % 1.55 % * 2.10 %**
- -----------------------------------------------------------------------------------------------------------------------
Administrative Expense Charge 0.10 % 0.10 % 0.10 % 0.10 % 0.10 %
- -----------------------------------------------------------------------------------------------------------------------
Total Variable Account Annual Expense 1.50 % 1.80 % 1.75 % 1.65 % 2.20 %
- -----------------------------------------------------------------------------------------------------------------------
* The mortality and expense risk charge shown for the Enhanced Earnings Death
Benefit Rider reflects a charge of 0.15% for the Option, assuming the age of
the oldest Contract Owner or Annuitant is age 55 or younger on the Rider
Application Date. If the age of the oldest Contract Owner or Annuitant is
between 56 and 65 on the Rider Application Date, the charge for the Option is
0.25% and the mortality and expense risk charge shown for
9
Contracts with this Option would be higher by 0.10%. If the age of the oldest
Contract Owner or Annuitant is 66 or older on the Rider Application Date, the
charge for the Option is 0.35% and the mortality and expense risk charge
shown for Contracts with this Option would be higher by 0.20%.
** Please note that you can select any combination of the 3 different riders.
You could choose one or all 3 riders as shown in the chart or you could
choose a combination of 2 riders. Taking into account the age-adjusted charge
for the Enhanced Earnings Death Benefit described in the preceding footnote,
it is easy for you to determine the aggregate level of asset charge for your
base contract and the combination of optional features you select. Simply
take the base level charge for the Contract option you select, either 1.30%
(Classic), 1.45% (Regal), or 1.50% (Freedom), and add the charge for the
benefit riders or riders you select. The charge for the Enhanced Death
Benefit Rider is 0.25% and, for the Income Benefit Rider, is 0.30%.
10
FUND ANNUAL EXPENSES(1)
(as a percentage of Fund average daily net assets(*)
OTHER EXPENSES
(AFTER VOLUNTARY
MANAGEMENT 12B-1 REDUCTIONS AND TOTAL ANNUAL
FUND FEES FEES REIMBURSEMENTS) FUND EXPENSES
- -------------------------------------------------------------------------------
AIM V.I. Aggressive 0.80% 0.25% 0.46% 1.51%**
Growth Fund (2)
- -------------------------------------------------------------------------------
AIM V.I. Balanced Fund 0.75% 0.25% 0.35% 1.35%
(2)
- -------------------------------------------------------------------------------
AIM V.I. Basic Value 0.73% 0.25% 0.57% 1.55%**
Fund.
- -------------------------------------------------------------------------------
AIM V.I. Blue Chip Fund 0.75% 0.25% 1.38% 2.38%**
(2)
- -------------------------------------------------------------------------------
AIM V.I. Capital 0.61% 0.25% 0.21% 1.07%
Appreciation Fund
- -------------------------------------------------------------------------------
AIM V.I. Capital 0.75% 0.25% 0.63% 1.63%
Development Fund (2)
- -------------------------------------------------------------------------------
AIM V.I. Dent 0.85% 0.25% 0.48% 1.58%**
Demographic Trends Fund
(2)
- -------------------------------------------------------------------------------
AIM V.I. Diversified 0.60% 0.25% 0.30% 1.15%
Income Fund
- -------------------------------------------------------------------------------
AIM V.I. Global 0.65% 0.25% 0.45% 1.35%
Utilities
- -------------------------------------------------------------------------------
AIM V.I. Government 0.50% 0.25% 0.47% 1.22%
Securities Fund
- -------------------------------------------------------------------------------
AIM V.I. Growth Fund 0.61% 0.25% 0.22% 1.08%
- -------------------------------------------------------------------------------
AIM V.I. Growth and 0.61% 0.25% 0.24% 1.09%
Income Fund
- -------------------------------------------------------------------------------
AIM V.I. High Yield Fund 0.63% 0.25% 0.56% 1.44%
(2)
- -------------------------------------------------------------------------------
AIM V.I. International 0.73% 0.25% 0.29% 1.27%
Equity Fund
- -------------------------------------------------------------------------------
AIM V.I. Mid Cap Equity 0.73% 0.25% 0.57% 1.55%**
Fund
- -------------------------------------------------------------------------------
AIM V.I. Money Market 0.40% 0.25% 0.31% 0.96%
Fund
- -------------------------------------------------------------------------------
AIM V.I. New Technology 1.00% 0.25% 0.31% 1.56%**
Fund
- -------------------------------------------------------------------------------
AIM V.I. Value Fund 0.61% 0.25% 0.23% 1.09%
- -------------------------------------------------------------------------------
* Based on estimated assets.
** The investment advisor has agreed to waive fees and/or reimburse expense
(excluding interest, taxes, dividend expense on short sales, extraordinary
items and increase in expenses due to expense offset arrangements, if any) to
limit total Series II shares operating expenses to 1.45% of average daily net
assets until Decemeber 31, 2001.
Figures shown in the Table are for the year ended December 31, 2001 (except as
otherwise noted).
Expenses have been restated to reflect current fees.
11
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,
... elected the Enhanced Death Benefit and Income Benefit Riders, and
... elected the Enhanced Earnings Death Benefit Rider (assuming Contract owner is
age 66-75 on the Rider Date).
THE EXAMPLE DOES NOT INCLUDE ANY TAXES OR TAX PENALTIES YOU MAY BE REQUIRED TO
PAY IF YOU SURRENDER YOUR CONTRACT.
AIM LIFETIME AMERICA CLASSIC/SM/
Assumes Termination
1 3 5 10
Sub-Account Year Year Year Year
- -------------------------------------------------------------------------------
AIM V.I. Aggressive Growth Fund $95 $167 $225 $381
- -------------------------------------------------------------------------------
AIM V.I. Balanced Fund $94 $164 $220 $372
- -------------------------------------------------------------------------------
AIM V.I. Basic Value Fund. $95 $167 $225 $381
- -------------------------------------------------------------------------------
AIM V.I. Blue Chip Fund $95 $167 $225 $381
- -------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund $91 $156 $206 $345
- -------------------------------------------------------------------------------
AIM V.I. Capital Development Fund $95 $167 $225 $381
- -------------------------------------------------------------------------------
AIM V.I. Dent Demographic Trends Fund $95 $167 $225 $381
- -------------------------------------------------------------------------------
AIM V.I. Diversified Income Fund $92 $158 $210 $353
- -------------------------------------------------------------------------------
AIM V.I. Global Utilities Fund $94 $164 $220 $372
- -------------------------------------------------------------------------------
AIM V.I. Government Securities Fund $93 $160 $214 $359
- -------------------------------------------------------------------------------
AIM V.I. Growth Fund $91 $156 $207 $346
- -------------------------------------------------------------------------------
AIM V.I. Growth and Income Fund $91 $157 $207 $347
- -------------------------------------------------------------------------------
AIM V.I. High Yield Fund $95 $167 $225 $380
- -------------------------------------------------------------------------------
AIM V.I. International Equity Fund. $93 $162 $216 $364
- -------------------------------------------------------------------------------
AIM V.I. Mid Cap Equity Fund $95 $167 $225 $381
- -------------------------------------------------------------------------------
AIM V.I. Money Market Fund $90 $153 $201 $334
- -------------------------------------------------------------------------------
AIM V.I. New Technology Fund $95 $167 $225 $381
- -------------------------------------------------------------------------------
AIM V.I. Value Fund $91 $157 $207 $347
- -------------------------------------------------------------------------------
AIM LIFETIME AMERICA REGAL/SM/
Assumes Termination
1 3 5 10 Year
Sub-Account Year Year Year
- -------------------------------------------------------------------------------
AIM V.I. Aggressive Growth Fund $96 $163 $190 $395
- -------------------------------------------------------------------------------
AIM V.I. Balanced Fund $95 $160 $185 $385
- -------------------------------------------------------------------------------
AIM V.I. Basic Value Fund. $96 $163 $190 $395
- -------------------------------------------------------------------------------
AIM V.I. Blue Chip Fund $96 $163 $190 $395
- -------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund $93 $152 $171 $359
- -------------------------------------------------------------------------------
AIM V.I. Capital Development Fund $96 $163 $190 $395
- -------------------------------------------------------------------------------
AIM V.I. Dent Demographic Trends Fund $96 $163 $190 $395
- -------------------------------------------------------------------------------
AIM V.I. Diversified Income Fund $93 $154 $175 $367
- -------------------------------------------------------------------------------
AIM V.I. Global Utilities Fund $95 $160 $185 $385
- -------------------------------------------------------------------------------
AIM V.I. Government Securities Fund $94 $156 $179 $373
- -------------------------------------------------------------------------------
AIM V.I. Growth Fund $93 $152 $172 $360
- -------------------------------------------------------------------------------
AIM V.I. Growth and Income Fund $93 $153 $172 $361
- -------------------------------------------------------------------------------
AIM V.I. High Yield Fund $96 $163 $190 $394
- -------------------------------------------------------------------------------
AIM V.I. International Equity Fund. $95 $158 $181 $378
- -------------------------------------------------------------------------------
AIM V.I. Mid Cap Equity Fund $96 $163 $190 $395
- -------------------------------------------------------------------------------
AIM V.I. Money Market Fund $91 $149 $166 $349
- -------------------------------------------------------------------------------
AIM V.I. New Technology Fund $96 $163 $190 $395
- -------------------------------------------------------------------------------
AIM V.I. Value Fund $93 $154 $172 $361
- -------------------------------------------------------------------------------
12
AIM LIFETIME AMERICA FREEDOM/SM/
Assumes Termination
1 3 5 10
Sub-Account Year Year Year Year
- -------------------------------------------------------------------------------
AIM V.I. Aggressive Growth Fund $37 $114 $193 $399
- -------------------------------------------------------------------------------
AIM V.I. Balanced Fund $36 $111 $188 $390
- -------------------------------------------------------------------------------
AIM V.I. Basic Value Fund. $37 $114 $193 $399
- -------------------------------------------------------------------------------
AIM V.I. Blue Chip Fund $37 $114 $193 $399
- -------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund $34 $102 $174 $364
- -------------------------------------------------------------------------------
AIM V.I. Capital Development Fund $37 $114 $193 $399
- -------------------------------------------------------------------------------
AIM V.I. Dent Demographic Trends Fund $37 $114 $193 $399
- -------------------------------------------------------------------------------
AIM V.I. Diversified Income Fund $34 $105 $178 $390
- -------------------------------------------------------------------------------
AIM V.I. Global Utilities Fund $36 $111 $188 $390
- -------------------------------------------------------------------------------
AIM V.I. Government Securities Fund $35 $107 $181 $378
- -------------------------------------------------------------------------------
AIM V.I. Growth Fund $34 $103 $174 $365
- -------------------------------------------------------------------------------
AIM V.I. Growth and Income Fund $34 $103 $175 $366
- -------------------------------------------------------------------------------
AIM V.I. High Yield Fund $37 $114 $192 $398
- -------------------------------------------------------------------------------
AIM V.I. International Equity Fund. $36 $109 $184 $383
- -------------------------------------------------------------------------------
AIM V.I. Mid Cap Equity Fund $37 $114 $193 $399
- -------------------------------------------------------------------------------
AIM V.I. Money Market Fund $32 $ 99 $168 $354
- -------------------------------------------------------------------------------
AIM V.I. New Technology Fund $37 $114 $193 $399
- -------------------------------------------------------------------------------
AIM V.I. Value Fund $34 $103 $175 $366
- -------------------------------------------------------------------------------
13
EXAMPLE 2
Same assumptions as Example 1 above, except that you decided not to surrender
your Contract, or you began receiving income payments (for at least 120 months
if under an Income Plan for a specified period), at the end of each period.
AIM LIFETIME AMERICA CLASSIC/SM/
Assumes No Termination
1 3 5 10
Sub-Account Year Year Year Year
- -------------------------------------------------------------------------------
AIM V.I. Aggressive Growth Fund $35 $108 $183 $381
- -------------------------------------------------------------------------------
AIM V.I. Balanced Fund $34 $105 $178 $372
- -------------------------------------------------------------------------------
AIM V.I. Basic Value Fund. $35 $108 $183 $381
- -------------------------------------------------------------------------------
AIM V.I. Blue Chip Fund $35 $108 $183 $381
- -------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund $31 $ 96 $164 $345
- -------------------------------------------------------------------------------
AIM V.I. Capital Development Fund $35 $108 $183 $381
- -------------------------------------------------------------------------------
AIM V.I. Dent Demographic Trends Fund $35 $108 $183 $381
- -------------------------------------------------------------------------------
AIM V.I. Diversified Income Fund $32 $ 99 $168 $353
- -------------------------------------------------------------------------------
AIM V.I. Global Utilities Fund $34 $105 $178 $372
- -------------------------------------------------------------------------------
AIM V.I. Government Securities Fund $33 $101 $171 $359
- -------------------------------------------------------------------------------
AIM V.I. Growth Fund $32 $ 97 $164 $346
- -------------------------------------------------------------------------------
AIM V.I. Growth and Income Fund $32 $ 97 $165 $347
- -------------------------------------------------------------------------------
AIM V.I. High Yield Fund $35 $108 $182 $380
- -------------------------------------------------------------------------------
AIM V.I. International Equity Fund. $34 $102 $174 $364
- -------------------------------------------------------------------------------
AIM V.I. Mid Cap Equity Fund $35 $108 $183 $381
- -------------------------------------------------------------------------------
AIM V.I. Money Market Fund $30 $ 93 $158 $334
- -------------------------------------------------------------------------------
AIM V.I. New Technology Fund $35 $108 $183 $381
- -------------------------------------------------------------------------------
AIM V.I. Value Fund $32 $ 97 $165 $347
- -------------------------------------------------------------------------------
AIM LIFETIME AMERICA REGAL/SM/
Assumes No Termination
1 3 5 10
Sub-Account Year Year Year Year
- -------------------------------------------------------------------------------
AIM V.I. Aggressive Growth Fund $37 $112 $190 $395
- -------------------------------------------------------------------------------
AIM V.I. Balanced Fund $36 $109 $185 $385
- -------------------------------------------------------------------------------
AIM V.I. Basic Value Fund. $37 $112 $190 $395
- -------------------------------------------------------------------------------
AIM V.I. Blue Chip Fund $37 $112 $190 $395
- -------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund $33 $101 $171 $359
- -------------------------------------------------------------------------------
AIM V.I. Capital Development Fund $37 $112 $190 $395
- -------------------------------------------------------------------------------
AIM V.I. Dent Demographic Trends Fund $37 $112 $190 $395
- -------------------------------------------------------------------------------
AIM V.I. Diversified Income Fund $34 $103 $175 $367
- -------------------------------------------------------------------------------
AIM V.I. Global Utilities Fund $36 $109 $185 $385
- -------------------------------------------------------------------------------
AIM V.I. Government Securities Fund $35 $105 $179 $373
- -------------------------------------------------------------------------------
AIM V.I. Growth Fund $33 $101 $172 $360
- -------------------------------------------------------------------------------
AIM V.I. Growth and Income Fund $33 $102 $172 $361
- -------------------------------------------------------------------------------
AIM V.I. High Yield Fund $37 $112 $190 $394
- -------------------------------------------------------------------------------
AIM V.I. International Equity Fund. $35 $107 $181 $378
- -------------------------------------------------------------------------------
AIM V.I. Mid Cap Equity Fund $37 $112 $190 $395
- -------------------------------------------------------------------------------
AIM V.I. Money Market Fund $32 $ 98 $166 $349
- -------------------------------------------------------------------------------
AIM V.I. New Technology Fund $37 $112 $190 $395
- -------------------------------------------------------------------------------
AIM V.I. Value Fund $33 $102 $172 $361
- -------------------------------------------------------------------------------
14
AIM LIFETIME AMERICA FREEDOM/SM/
Assumes No Termination
1 3 5 10
Sub-Account Year Year Year Year
- -------------------------------------------------------------------------------
AIM V.I. Aggressive Growth Fund $37 $114 $193 $399
- -------------------------------------------------------------------------------
AIM V.I. Balanced Fund $36 $111 $188 $390
- -------------------------------------------------------------------------------
AIM V.I. Basic Value Fund. $37 $114 $193 $399
- -------------------------------------------------------------------------------
AIM V.I. Blue Chip Fund $37 $114 $193 $399
- -------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund $34 $102 $174 $364
- -------------------------------------------------------------------------------
AIM V.I. Capital Development Fund $37 $114 $193 $399
- -------------------------------------------------------------------------------
AIM V.I. Dent Demographic Trends Fund $37 $114 $193 $399
- -------------------------------------------------------------------------------
AIM V.I. Diversified Income Fund $34 $105 $178 $372
- -------------------------------------------------------------------------------
AIM V.I. Global Utilities Fund $36 $111 $188 $390
- -------------------------------------------------------------------------------
AIM V.I. Government Securities Fund $35 $107 $181 $378
- -------------------------------------------------------------------------------
AIM V.I. Growth Fund $34 $103 $174 $365
- -------------------------------------------------------------------------------
AIM V.I. Growth and Income Fund $34 $103 $175 $366
- -------------------------------------------------------------------------------
AIM V.I. High Yield Fund $37 $114 $192 $398
- -------------------------------------------------------------------------------
AIM V.I. International Equity Fund. $36 $109 $184 $383
- -------------------------------------------------------------------------------
AIM V.I. Mid Cap Equity Fund $37 $114 $193 $399
- -------------------------------------------------------------------------------
AIM V.I. Money Market Fund $32 $ 99 $168 $354
- -------------------------------------------------------------------------------
AIM V.I. New Technology Fund $37 $114 $193 $399
- -------------------------------------------------------------------------------
AIM V.I. Value Fund $34 $103 $175 $366
- -------------------------------------------------------------------------------
PLEASE REMEMBER THAT YOU ARE LOOKING AT EXAMPLES AND NOT A REPRESENTATION OF
PAST OR FUTURE EXPENSES. YOUR ACTUAL EXPENSES MAY BE LOWER OR GREATER THAN THOSE
SHOWN ABOVE. SIMILARLY, YOUR RATE OF RETURN MAY BE LOWER OR GREATER THAN 5%,
WHICH IS NOT GUARANTEED. THE ABOVE EXAMPLES ASSUME THE ELECTION OF THE ENHANCED
DEATH AND INCOME BENEFIT RIDERS WITH A MORTALITY AND EXPENSE RISK CHARGE OF
1.85% FOR THE AIM LIFETIME AMERICA CLASSIC SM, 2.00% FOR THE AIM LIFETIME
AMERICA REGALSM, AND 2.05% FOR THE AIM LIFETIME AMERICA FREEDOMSM. THE ENHANCED
EARNINGS DEATH BENEFIT RIDER HAS AN ANNUAL FEE OF 0.15%. IF ANY OR ALL OF THOSE
FEATURES WERE NOT ELECTED, THE EXAMPLE FIGURES SHOWN ABOVE WOULD BE SLIGHTLY
LOWER.
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 which
we call "ACCUMULATION UNIT VALUE." Accumulation Unit Value is analogous to, but
not the same as, the share price of a mutual fund.
There are no Accumulation Unit Values to report because the Contracts were first
offered as of the date of this prospectus.
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.
15
THE CONTRACT
- --------------------------------------------------------------------------------
CONTRACT OWNER
Each Contract is an agreement between you, the Contract owner, and Glenbrook, a
life insurance company. As the Contract owner, you may exercise all of the
rights and privileges provided to you by the Contract. That means it is up to
you to select or change (to the extent permitted):
... the investment alternatives during the Accumulation and Payout Phases,
... the amount and timing of your purchase payments and withdrawals,
... the programs you want to use to invest or withdraw money,
... the income payment plan you want to use to receive retirement income,
... the Annuitant (either yourself or someone else) on whose life the income
payments will be based,
... the Beneficiary or Beneficiaries who will receive the benefits that the
Contract provides when the last surviving Contract owner dies, and
... any other rights that the Contract provides, including restricting income
payments to beneficiaries.
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. The maximum age of the oldest Contract Owner and Annuitant cannot exceed
90 as of the date we receive the completed application.
If you select the Enhanced Earnings Death Benefit and Income Benefit Riders, the
maximum age of any Contract Owner on the date we receive the completed
application or request to add the Option, whichever is later ("RIDER DATE") is
currently 75. If you select the Enhanced Death Benefit Rider, the maximum age of
any Contract Owner on the date we receive the completed application or request
to add the Option, whichever is later ("RIDER DATE") is currently 80.
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 38. If the Contracts are issued within a qualified
plan, no additional tax advantages attach to the annuity.
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. The
maximum age of the Annuitant cannot exceed age 90 as of the date we receive the
completed application for each Contract. 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 selected by the Contract owner to receive the
death benefits or become the new Contract owner if the sole surviving Contract
owner dies before the Payout Start Date. If the sole surviving Contract owner
dies after the Payout Start Date, the primary Beneficiary, or if none surviving,
the contingent 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 may elect to receive the
death benefit or become the new Contract owner if the sole surviving Contract
owner dies before the Payout Start Date. 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 in a form satisfactory to us,
unless you have designated an irrevocable Beneficiary. You may restrict income
payments to Beneficiaries by written notice in a form
16
satisfactory to us. We will provide a change of Beneficiary form to be signed by
you and filed with us. Once we accept the request, the change or restriction,
will take effect as of the date you signed the request. Until we receive your
written notice to change a Beneficiary or restrict income payments to 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 Beneficiaries 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 benefit among
the surviving Beneficiaries according to your most recent written instructions.
If you have not given us written instructions, we will pay the death benefit in
equal amounts to the surviving Beneficiaries.
MODIFICATION OF THE CONTRACT
Only a Glenbrook 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 have
the authority to change or waive the provisions of the Contract. We may not
change the terms of the Contract without your consent, except to conform the
Contract to applicable law or changes in the law. If a provision of the Contract
is inconsistent with state law, we will follow state law.
ASSIGNMENT
We will not honor an assignment of an interest in a Contract as collateral or
security for a loan. However, you may assign periodic income payments under the
Contract prior to the Payout Start Date. No Beneficiary may assign benefits
under the Contract until they are 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 AN
ATTORNEY BEFORE TRYING TO ASSIGN YOUR CONTRACT.
17
PURCHASES
- --------------------------------------------------------------------------------
MINIMUM PURCHASE PAYMENTS
Your initial Purchase Payment must be at least $5,000 ($2,000 for a Qualified
Contract). All subsequent Purchase Payments must be $500 or more. The maximum
Purchase Payment is $2,000,000 without prior approval. We reserve the right to
reduce the minimum Purchase Payment and to change the maximum Purchase Payment.
You may make Purchase Payments of at least $500 at any time prior to the Payout
Start Date. We also reserve the right to reject any application..
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 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 service center in Vernon Hills mailing address: 300 N. Milwaukee Avenue,
Vernon Hills, Illinois, 60061. 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 in good
order at our service center as described above.
We use the term "BUSINESS DAY" to refer to each day Monday through Friday that
the New York Stock Exchange is open for business. We also refer to these days as
"VALUATION DATES." Our business day closes when the New York Stock Exchange
closes, usually 4 p.m. Eastern Time (3 p.m. Central Time). If we receive your
purchase payment after 3 p.m. Central Time on any Valuation Date, we will credit
your purchase payment using the Accumulation Unit Values computed on the next
Valuation Date.
RIGHT TO CANCEL
You may cancel 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. If this Contract is qualified under Section 408
of the Internal Revenue Code, we will refund the greater of any purchase
payments or the Contract Value.
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, we will allocate the amount in the Money Market Variable
Sub-Account to the Variable Sub-Account as you originally designated.
18
CONTRACT VALUE
- --------------------------------------------------------------------------------
On the Issue Date, your Contract Value is equal to your initial purchase
payment. Thereafter, your Contract Value at any time during the Accumulation
Phase is equal to the sum of the value of your Accumulation Units in the
Variable Sub-Accounts you have selected, plus the value of your 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
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 withdrawal charges, and transfer fees 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
Earnings Death Benefit Rider, and the Income Benefit Rider.
YOU SHOULD REFER TO THE PROSPECTUSES FOR THE FUNDS THAT ACCOMPANY THIS
PROSPECTUS FOR A DESCRIPTION OF HOW THE ASSETS OF EACH PORTFOLIO ARE VALUED,
SINCE THAT DETERMINATION DIRECTLY BEARS ON THE ACCUMULATION UNIT VALUE OF THE
CORRESPONDING VARIABLE SUB-ACCOUNT AND, THEREFORE, YOUR CONTRACT VALUE.
19
INVESTMENT ALTERNATIVES: THE VARIABLE SUB-ACCOUNTS
- --------------------------------------------------------------------------------
You may allocate your purchase payments to up to 18 Variable Sub-Accounts. Each
Variable Sub-Account invests in the shares of a corresponding Fund. Each Fund
has its own investment objective(s) and policies. We briefly describe the Funds
below.
For more complete information about each Fund, including expenses and risks
associated with the Fund, please refer to the accompanying prospectuses for the
Fund. You should carefully review the Fund prospectuses before allocating
amounts to the Variable Sub-Accounts. A I M Advisors, Inc. serves as the
investment advisor to each Fund.
Fund: Each Fund Seeks*:
FUND: EACH FUND SEEKS*:
- -------------------------------------------------------------------------------
AIM V.I. Aggressive Long-term growth of capital
Growth Fund**
- -------------------------------------------------------------------------------
AIM V.I. Balanced Fund As high a total return as possible, consistent with
preservation of capital
- -------------------------------------------------------------------------------
AIM V.I. Basic Value Long-term growth of capital
Fund
- -------------------------------------------------------------------------------
AIM V.I. Blue Chip Long-term growth of capital with a secondary objective
Fund of current income
- -------------------------------------------------------------------------------
AIM V.I. Capital Growth of capital
Appreciation Fund
- -------------------------------------------------------------------------------
AIM V.I. Capital Long-term growth of capital
Development Fund
- -------------------------------------------------------------------------------
AIM V.I. Core Equity Growth of capital with a secondary objective of current
Fund income
- -------------------------------------------------------------------------------
AIM V.I. Dent Long-term growth of capital
Demographic Trends
Fund
- -------------------------------------------------------------------------------
AIM V.I. Diversified High level of current income
Income Fund
- -------------------------------------------------------------------------------
AIM V.I. Global High total return
Utilities Fund
- -------------------------------------------------------------------------------
AIM V.I. Government High level of current income consistent with reasonable
Securities Fund concern for safety of principal
- -------------------------------------------------------------------------------
AIM V.I. Growth Fund Growth of capital
- -------------------------------------------------------------------------------
AIM V.I. High Yield High level of current income
Fund
- -------------------------------------------------------------------------------
AIM V.I. International Long-term growth of capital
Growth Fund
- -------------------------------------------------------------------------------
AIM V.I. Mid Cap Core Long-term growth of capital
Equity Fund
- -------------------------------------------------------------------------------
AIM V.I. Money Market As high a level of current income as is consistent with
Fund the preservation of capital and liquidity
- -------------------------------------------------------------------------------
AIM V.I. New Long-term growth of capital
Technology Fund
- -------------------------------------------------------------------------------
AIM V.I. Premier Long-term growth of capital with income as a secondary
Equity Fund objective
- -------------------------------------------------------------------------------
*The investment objective(s) of each Fund may be changed by the Board of
Directors without shareholder approval.
**Due to the sometime limited availability of common stocks of small-cap
companies that meet the investment criteria for AIM V.I. Aggressive Growth
Fund, the Fund may periodically suspend or limit the offering of its shares.
The Fund will be closed to new participants when Fund assets reach $200
million. During closed periods, the Fund will accept additional investments
from existing participants.
Amounts you allocate to variable Sub-Accounts may grow in value, decline in
value, or grow less than you expect, depending on the investment performance of
the Funds in which those Variable Sub-Accounts invest. You bear the investment
risk that the Funds might not meet their investment objectives. Shares of the
Funds are not deposits, or obligations of, or guaranteed or endorsed by any bank
and are not insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other agency.
20
INVESTMENT ALTERNATIVES: THE FIXED ACCOUNT OPTIONS
- --------------------------------------------------------------------------------
You may allocate all or a portion of your purchase payments to the Fixed
Account. The Fixed Account Options available under each of the three contract
options are:
... GUARANTEED MATURITY FIXED ACCOUNT OPTION
... 6 MONTH DOLLAR COST AVERAGING OPTION
... 12 MONTH DOLLAR COST AVERAGING OPTION
We may offer additional Fixed Account options in the future. We will credit a
minimum annual interest rate of 3% to money you allocate to any of the Fixed
Account Options. 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 account 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
The Dollar Cost Averaging Fixed Account Options are three of the investment
alternatives that you can use to establish a Dollar Cost Averaging Program, as
described on page 24. These options allow you to allocate purchase payments to
the Fixed Account for 6 months (the "6 MONTH DOLLAR COST AVERAGING OPTION"), or
for 12 months (the "12 MONTH DOLLAR COST AVERAGING OPTION") depending on the
form of contract you are in. Your purchase payments will earn interest for the
period you select at the current rates in effect at the time of allocation.
Rates may differ from those available for the Guarantee Periods described below.
You must transfer all of your money out of the 6 or 12 Month Dollar Cost
Averaging Options to other investment alternatives that you have selected in
equal monthly installments beginning the next business day after allocation. The
number of monthly installments must be no more than 6 for the 6 Month Dollar
Cost Averaging Option and no more than 12 for the 12 Month Dollar Cost Averaging
Option.
If we do not receive allocation instructions from you within one month of the
date of the payment, the payment plus associated interest will be transfered to
the Money Market Variable Sub-Account in equal monthly installments using the
longest transfer period being offered at the time the Purchase Payment is made.
At the end of the applicable transfer period, any nominal amounts remaining in
the Dollar Cost Averaging Option will be allocated to the Money Market Variable
Sub-Account.
Transfers out of the 6 or 12 Month Dollar Cost Averaging Options do not count
towards the 12 transfers you can make without paying a transfer fee.
You may not transfer funds from other investment alternatives to either the 6 or
12 Month Dollar Cost Averaging Options.
The 6 or 12 Month Dollar Cost Averaging Options may not be available in your
state. Please check with your representative for availability.
INVESTMENT RISK
We bear the investment risk for all amounts allocated to the 6 Month DCA Fixed
Account Option and the 12 Month DCA Fixed Account Option. That is because we
guarantee the current and renewal interest rates we credit to the amounts you
allocate to 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 6 Month DCA Fixed Account Option and the 12 Month DCA
Fixed Account Option. For current interest rate information, please contact your
representative or our customer support unit at 1-800-776-6978.
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 recent purchase payment(s).
Each payment or transfer allocated to a Guarantee Period must be at least $500.
We reserve the right to limit the number of additional purchase payments that
you may allocate to this Option.
The Guarantee Periods may not be available in your state. Please check with your
representative for availability.
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.
21
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 at 1-800-776-6978.
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 X1.045
X (1 + Annual Interest $10,450.00
Rate)
Contract Value at end $10,450.00
of Contract Year X1.045
X (1 + Annual Interest $10,920.25
Rate)
Contract Value at end $10,920.25
of Contract Year X1.045
X (1 + Annual Interest $11,411.66
Rate)
Contract Value at end $11,411.66
of Contract Year X1.045
X (1 + Annual Interest $11,925.19
Rate)
Contract Value at end $11,925.19
of Contract Year X1.045
X (1 + Annual Interest $12,461.82
Rate)
Total Interest Credited During Guarantee Period = $2,461.82 ($12,461.82 -
$10,000.00). 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 see p23. 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. At the end of a
Guarantee Period, we will automatically renew the Guarantee Period value to a
Guarantee Period of the same duration to be established on the day the previous
Guarantee Period expired. In certain states your money will automatically renew
into a newly established one-year Guarantee Period. Please consult with your
representative. During the 30-day period after the end of the Guarantee Period,
you may:
... Take no action. We will automatically apply your money to a new Guarantee
Period of the same length as the expiring Guarantee Period. In certain states
your money will automatically renew into a newly established one-year
Guarantee Period. Please consult with your representative. The new Guarantee
Period will begin on the day the previous Guarantee Period ends. The new
interest rate will be the rate in effect on the 1st day of the New Period
selected; or
22
... Instruct us to apply your money to one or more new Guarantee Periods of your
choice to be established on the day we receive the instruction. The new
interest rate will be our then current declared rate for those Guarantee
Periods; or
... 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 at the next
unit value we calculate after we receive your instructions. We will not adjust
the amount transferred to include a Market Value Adjustment; or
... 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. In this case, the amount withdrawn will
be deemed to have been withdrawn on the day we received notification.
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, may be 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:
... that qualifies for one of the waivers as described on page 26-27,
... 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 A
to this prospectus, which also contains additional examples of the application
of the Market Value Adjustment.
The Market Value Adjustment may not be applicable in your state. Please check
with your representative.
23
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 the Six Month
Fixed Account or the Twelve Month 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 $500. A transfer fee of $25 applies to each
transfer after the 12th in any Contract Year. Multiple transfers on a single
trading day are considered a single 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 credit you contract
with interest as required by applicable law. Any interest would be credited 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 may increase or decrease the
amount transferred by a Market Value Adjustment.
In certain states, a Market Value Adjustment may not apply. In these states, the
total number of transfers and withdrawals from each Guarantee Period of the
Guaranteed Maturity Fixed Account during a Contract Year cannot exceed 25% of
the purchase payment or the amount transferred into that Guarantee Period. For
each Guarantee Period, any portion of the total allowable transfer and
withdrawal amount that is not transferred or withdrawn in that Contract Year
will not increase the allowable transfer and withdrawal amount in any subsequent
Contract Year. This limitation will be waived for amounts transferred during the
30-day period after the Guarantee Period expires. This limitation does not apply
to any Dollar Cost Averaging Fixed Accounts. Please consult your representative.
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. You may make up to 12 transfers per
Contract Year. You may not convert any portion of your fixed income payments
into variable income payments. You may make transfers from the Variable
Sub-Accounts to increase the proportion of your income payments consisting of
fixed income payments.
TELEPHONE TRANSFERS
You may make transfers by telephone by calling 1-800-776-6978. The cut-off time
for telephone transfer requests is 3:00 p.m. Central time. In the event that the
New York Stock Exchange closes early, i.e., before 3:00 p.m. Central Time, or in
the event that the Exchange closes early for a period of time but then reopens
for trading on the same day, we will process telephone transfer requests as of
the close of the Exchange on that particular day. We will not accept telephone
requests received at any telephone number other than the number that appears in
this paragraph or received after the close of trading on the Exchange.
We may suspend, modify or terminate the telephone transfer privilege at any time
without notice.
We use procedures that we believe provide reasonable assurance that the
telephone transfers are genuine. For example, we tape telephone conversations
with persons purporting to authorize transfers and request identifying
information. Accordingly, we disclaim any liability for losses resulting from
allegedly unauthorized telephone transfers. However, if we do not take
reasonable steps to help ensure that a telephone authorization is valid, we may
be liable for such losses.
EXCESSIVE TRADING LIMITS
We reserve the right to limit transfers among the Variable Sub-Accounts in any
Contract Year, or to refuse any Variable Sub-Account transfer request, if:
... we believe, in our sole discretion, that excessive trading by such Contract
owner or owners, or a specific transfer request or group of transfer requests,
may have a detrimental effect on the Accumulation Unit Values of any Variable
Sub-Account or the share prices of the corresponding Funds or would be to the
disadvantage of other Contract owners; or
... we are informed by one or more of the corresponding Funds that they intend to
restrict the purchase or redemption of Fund shares because of excessive
trading or because they believe that a specific transfer or groups of
transfers would have a detrimental effect on the prices of Fund shares.
We may apply the restrictions in any manner reasonably designed to prevent
transfers that we consider disadvantageous to other Contract owners.
DOLLAR COST AVERAGING PROGRAM
Through our Dollar Cost Averaging Program, you may automatically transfer a
fixed dollar amount every month from any Variable Sub-Account, the Six Month
Dollar Cost Averaging Fixed Account or the Twelve Month Dollar Cost Averaging
Fixed Account, to any of the other
24
Variable Sub-Accounts. You may not use the Dollar Cost Averaging Program to
transfer amounts to the Guarantee Periods. This program is available only during
the Accumulation Phase.
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 Sub-Account may cause a shift in the percentage of your
contract value allocated to each Sub-Account. If you select our Automatic
Portfolio Rebalancing Program, we will automatically rebalance the Contract
Value in each Variable Sub-Account and return it to the desired percentage
allocations. We will not include money you allocate to the Fixed Account Options
in the Automatic Portfolio Rebalancing Program.
We will rebalance your account monthly, quarterly, semi-annually, or annually,
depending on your instructions. At the end of the period you select, we will
transfer amounts among the Variable Sub-Accounts to achieve the percentage
allocations you specify. You can change your allocations at any time by
contacting us in writing or by telephone. The new allocation will be effective
with the first rebalancing that occurs after we receive your request. We are not
responsible for rebalancing that occurs prior to receipt of your request.
EXAMPLE:
Assume that you want your initial purchase payment split among 2 Variable
Sub-Accounts. You want 40% to be in the AIM V.I. Diversified Income Variable
Sub-Account and 60% to be in the AIM V.I. Growth Variable Sub-Account. Over the
next 2 months the bond market does very well while the stock market performs
poorly. At the end of the first quarter, the AIM V.I. Diversified Income
Variable Sub-Account now represents 50% of your holdings because of its increase
in value. If you choose to have your holdings rebalanced quarterly, on the first
day of the next quarter we would sell some of your units in the AIM V.I.
Diversified Income Variable Sub-Account and use the money to buy more units in
the AIM V.I. Growth Variable Sub-Account so that the percentage allocations
would again be 40% and 60% respectively.
The Automatic Fund Rebalancing Program is available only during the Accumulation
Phase. The transfers made under the Program do not count towards the 12
transfers you can make without paying a transfer fee, and are not subject to a
transfer fee.
Fund rebalancing is consistent with maintaining your allocation of investments
among market segments, although it is accomplished by reducing your Contract
Value allocated to the better performing segments.
EXPENSES
- --------------------------------------------------------------------------------
As a Contract owner, you will bear, directly or indirectly, the charges and
expenses described below.
MORTALITY AND EXPENSE RISK CHARGE
We deduct a mortality and expense risk charge daily from the net assets you have
invested in the Variable Sub-Accounts. The annual rate of the charge is:
... 1.20% FOR AIM LIFETIME AMERICA CLASSIC /SM/
... 1.35% FOR AIM LIFETIME AMERICA REGAL /SM/
... 1.40% FOR AIM LIFETIME AMERICA FREEDOM /SM/
The mortality and expense risk charge is for 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. If you select the Enhanced Death
Benefit Rider Option, the mortality and expense risk charge will include an
additional 0.25% for the Option. If you select the Enhanced Earnings Death
Benefit Option, the mortality and expense risk charge will include an additional
0.15% for the Option if, on the Rider Date, either the Contract Owner or
Annuitant is age 55 or younger, an additional 0.25% for the Option if, on the
Rider Date, either the oldest Contract Owner or Annuitant is between age 56 and
65, and an additional 0.35% for the Option if, on the Rider Date, either the
oldest Contract
Owner or the Annuitant is age 66 or older. If you select the Income Benefit
Rider Option, the mortality and expense risk charge will include an additional
0.30% for the Option.
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. After the Payout Start Date, mortality and expense risk
charges for the Enhanced Death Benefit and the Income Benefit will cease.
25
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. 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 impose a $25 fee upon transfers in excess of 12 during any 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 from the purchase payment(s) you withdraw. The
amount of the charge will depend on the number of years that have elapsed since
we received the purchase payment being withdrawn. A schedule showing the charge
applicable for each Contract appears on page 9. The Contracts differ in the
following respects:
AIM LIFETIME AMERICA CLASSIC /S//M/ and AIM LIFETIME AMERICA REGAL /SM/. Under
the AIM Lifetime America Classic and AIM Lifetime America Regal Option, you can
withdraw up to the Free Withdrawal Amount each Contract Year without paying a
withdrawal charge; however, the amount withdrawn may be subject to a Market
Value Adjustment. The Free Withdrawal Amount is equal to the greater of 15% of
purchase payments, or 15% of the Contract Value as of the beginning of the
Contract Year. Unused portions of the "Free Withdrawal Amount " are not carried
forward to future Contract Years.
AIM LIFETIME AMERICA FREEDOM /SM /
Under the AIM Lifetime America FreedomSM Option, there is no withdrawal charge
on any withdrawals. However, any amount withdrawn from a guarantee period fixed
option may be subject to a Market Value Adjustment.
ALL OPTIONS
We will deduct withdrawal charges, if applicable, from the amount paid. For
purposes of the withdrawal charge, we will treat withdrawals as coming from the
oldest payments first. However, for federal income tax purposes, earnings are
considered to come out first, which means you pay taxes on the earnings portion
of your withdrawal.
We do not apply a withdrawal charge in the following situations:
... the death of the Contract Owner or Annuitant (unless the Death Benefit equals
the settlement value);
... 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 recover the cost of
sales commissions and other promotional or distribution expenses associated with
marketing the Contracts. To the extent that the withdrawal charge does not cover
all sales commissions and other promotional or distribution expenses, we may use
any of our corporate assets, including potential profit which may arise from the
mortality and expense risk charge or any other charges or fee described above,
to make up any difference.
Withdrawals also may be subject to tax penalties or income tax and a Market
Value Adjustment. You should consult your own tax counsel or other tax advisers
regarding any withdrawals.
CONFINEMENT WAIVER
We will waive the withdrawal charge and any Market Value Adjustment on all
withdrawals taken under your Contract if the following conditions are satisfied:
... 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;
... 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
... 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 under your Contract if:
... 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
... you claim this benefit, request a withdrawal and deliver adequate proof of
diagnosis to us.
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UNEMPLOYMENT WAIVER
We will waive the withdrawal charge and any Market Value Adjustment on one
partial or a full withdrawal taken under your Contract, if you meet the
following requirements:
... you or the Annuitant, if the Contract owner is not a natural person, become
unemployed at least one year after the Issue Date;
... 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
... you or the Annuitant, if the Contract owner is not a natural person, claim
... this benefit and request a withdrawal 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 pay a 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 for these taxes against your Contract
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 taxes. In the future, however,
we may establish a provision for taxes if we determine, in our sole discretion,
that we will incur a tax as a result of the operation of the Variable Account.
We will deduct for any taxes we incur as a result of the operation of the
Variable Account, whether or not we previously made a provision for taxes and
whether or not it was sufficient. Our status under the Internal Revenue Code is
briefly described in the Statement of Additional Information.
OTHER EXPENSES
Each Fund deducts advisory fees and other expenses from its assets. You
indirectly bear the charges and expenses of the Fund whose shares are held by
the Variable Sub-Accounts. These fees and expenses are described in the
accompanying prospectuses for the Funds. For a summary of current estimates of
those charges and expenses, see pages 11-15. We may receive compensation from
the investment advisers or administrators of the Funds in connection with the
administrative services we provide to the Funds.
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ACCESS TO YOUR MONEY
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You can withdraw some or all of your Contract Value at any time prior to the
Payout Start Date. Withdrawals also are available under limited circumstances on
or after the Payout Start Date. See "INCOME PLANS" on page 29.
The amount payable upon withdrawal is the Contract Value (or portion thereof)
next computed after we receive the request for a withdrawal at our service
center, adjusted by any Market Value Adjustment less any withdrawal 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 have the opportunity to name the investment alternative(s) from which you
are taking the withdrawal. If none is specified, we will deduct your withdrawal
pro-rata from the investment alternatives according to the value of your
investments therein.
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.
In certain states, where a Market Value Adjustment does not apply, the total
amount of transfers and partial withdrawals from each Guarantee Period of the
Guaranteed Maturity Fixed Account during a Contract Year cannot exceed 25% of
the purchase payment or the amount transferred into that Guarantee Period. For
each Guarantee Period, any portion of the total allowable transfer and
withdrawal amount that is not transferred or withdrawn in that Contract year
will not increase the allowable transfer and withdrawal amount in any subsequent
Contract Year. This limitation will be waived for amounts transferred during the
30-day period after the Guarantee Period expires. This limitation does not apply
to any Dollar Cost Averaging Fixed Accounts. Please consult with your
representative. These limitations do not apply to a full withdrawal of your
Contract Value.
If you request a total withdrawal, we may require you to return your Contract to
us.
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 credit your Contract with 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. Income taxes may apply to systematic withdrawals.
Please consult your tax advisor before taking any withdrawal.
We will make systematic withdrawal payments to you or your designated payee. 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 reduced by
withdrawals to less that $1,000, we would 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 contractual
minimum of $1,000. 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.
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INCOME PAYMENTS
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PAYOUT START DATE
You select the Payout Start Date in your application. The Payout Start Date is
the day that we apply your 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 the longer of the life of
the Annuitant or a specified guarantee period. 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. If the
Annuitant is age 90 or older at the time payments begin, a minimum of 5 years of
guaranteed payments applies.
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. If the Annuitant is age 90 or older at the time
payments begin, a minimum of 5 years of guaranteed payments applies.
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. If you select a
Payout Start Date prior to the third anniversary of the Contract issue date,
then the number of years guaranteed may be from 10 to30 years or age 100 (but =
50 absolute max.). If you select a Payout Start Date on or after the third
anniversary of the Contract issue date, then the number of years guaranteed may
from 5 to30 years or age 100 (but = 50 absolute max.). 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 income payments that do not
depend on the life of the Annuitant under Income Plan 3. In that case you may
terminate all or part 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
$50. 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. You may obtain information about them
by writing or calling us. You may apply all or part of your Contract Value to an
Income Plan. If you elected the Income Benefit Rider, you may be able to apply
an amount greater than your Contract Value. On the Payout Start Date, you may
choose the portion of the Contract Value to be applied to variable income
payments and the portion to be applied
29
to fixed income payments. If you do not tell us how to allocate your Contract
Value among fixed and variable income payments, we will apply your Contract
Value in the Variable Account to variable income payments and your Contract
Value in the Fixed Account Options to fixed income payments.
We will apply your Contract Value, adjusted by any applicable Market Value
Adjustment, less applicable taxes to your Income Plan on the Payout Start Date.
If the Contract Value is less than $2,000 or not enough to provide an initial
payment of at least $20, and state law permits, we may:
... pay you the Contract Value, adjusted by any Market Value Adjustment and less
any applicable taxes, in a lump sum instead of the periodic payments you have
chosen, or
... reduce the frequency of your payments so that each payment will be at least
$20.
VARIABLE INCOME PAYMENTS
The amount of your variable income payments depends upon the investment results
of the Variable Sub-Accounts you select, the premium taxes you pay, the age and
sex of the Annuitant, and the Income Plan you choose. We guarantee that the
payments will not be affected by (a) actual mortality experience and (b) the
amount of our administration expenses.
We cannot predict the total amount of your variable income payments. Your
variable income payments may be more or less than your total purchase payments
because (a) variable income payments vary with the investment results of the
underlying Funds; and (b) the Annuitant could live longer or shorter than we
expect based on the tables we use.
In calculating the amount of the periodic payments in the annuity tables in the
Contract, we assumed an annual investment rate of 3%. If the actual net
investment return of the Variable Sub-Accounts you choose is less than this
assumed investment rate, then the dollar amount of your variable income payments
will decrease. The dollar amount of your variable income payments will increase,
however, if the actual net investment return exceeds the assumed investment
rate. The dollar amount of the variable income payments stays level if the net
investment return equals the assumed investment rate. Please refer to the
Statement of Additional Information for more detailed information as to how we
determine variable income payments.
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:
... adjusting the portion of the Contract Value in any Fixed Account Option on the
Payout Start Date by any applicable Market Value Adjustment;
... deducting any applicable premium tax; and
... 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 credit interest to your Contract as required by law from the date we
receive the withdrawal request to the date we make payment.
PAYOUT WITHDRAWAL
You may terminate all or a portion of the income payments being made under
Income Plan 3 at any time and withdraw their value, subject to a Payout
Withdrawal Charge, by writing to us. For Variable Amount Income Payments, this
value is equal to the present value of the Variable Amount Income Payments being
terminated, calculated using a discount rate equal to the Assumed Investment
Rate that was used in determining the initial variable payment. For Fixed Amount
Income Payments, this value is equal to the present value of the Fixed Amount
Income Payments being terminated, calculated using a discount rate equal to the
Applicable Current Interest Rate. The Applicable Current Interest Rate is the
rate we are using on the date we receive your payout withdrawal request to
determine income payments for a new payout commencement with a payment period
equal to the remaining payment period of the income payments being terminated.
A Payout Withdrawal must be a least $50. If any Payout Withdrawal reduces the
value of the remaining income payments to an amount not sufficient to provide an
initial payment of at least $20, we reserve the right to terminate the Contract
and pay you the Value of the remaining income payments in a lump sum. If you
withdraw the entire value of the remaining income payments, the Contract will
terminate.
You must specify the Investment Alternatives(s) from which you wish to make
Payout Withdrawal. If you withdraw a portion of the value of your remaining
income payments, the payment period will remain unchanged and your remaining
payment amounts will be reduced proportionately.
PAYOUT WITHDRAWAL CHARGE
To determine the Payout Withdrawal Charge, we assume that purchase payments are
withdrawn first, beginning with the oldest payment. When an amount equal to all
purchase payments have been withdrawn, additional withdrawals will not be
assessed a Payout Withdrawal Charge.
30
Payout Withdrawals will be subject to a Payout Withdrawal Charge for each
Contract as follows:
For AIM LIFETIME AMERICA CLASSIC /SM/ Option
Payment Year: 1 2 3 4 5 6 7 8
Percentage: 7% 7% 7% 6% 5% 4% 3% 0%
For AIM LIFETIME AMERICA REGAL/SM/ Option
Payment Year: 1 2 3 4
Percentage: 7% 6% 6% 0%
For AIM LIFETIME AMERICA FREEDOM /SM/ Option has No Withdrawal charge
For each purchase payment withdrawal, the "Payment Year" in the table is
measured from the date we received the purchase payment. The Payout Withdrawal
Charge is determined by multiplying the percentage corresponding to the Payment
Year times the amount of each purchase payment withdrawal.
Regularly scheduled Income Payments are never subject to a Payout Withdrawal
Charge.
The Payout Withdrawal Charge may not apply in your state.
INCOME BENEFIT RIDER
You may have the option to add to your Contract an Income Benefit Rider.
Currently, the option is available for Contract Owners and Annuitants who are
age 75 or younger on the Rider Application Date. You may exercise this benefit
up to your latest Payout Start Date. The Rider may not be available in all
states.
QUALIFICATIONS
To qualify for this benefit, you must meet the following conditions as of the
Payout Start Date:
... You must elect a Payout Start Date that is on or after the 10th anniversary of
the Rider Date;
... The Payout Start Date must be prior to the oldest Annuitant's 90th birthday;
... The payout Start Date must occur during the 30 day period following a Contract
Anniversary;
... You must elect to receive fixed income payments, which will be calculated
using the guaranteed income payment tables listed in your Contract; and
... The Income Plan you selected must provide for payments guaranteed for either a
single life or joint lives with a specified period of at least:
... 10 years, if the youngest Annuitant's age is 80 or less on the Payout Start
Date, or
... 5 years, if the youngest Annuitant's age is greater than 80 on the Payout
Start Date.
The annualized mortality and expense risk charge for this Rider is 0.30%. We
deduct the charge only from the Variable Sub-Account(s).
The Income Base is used solely for the purpose of calculating the guaranteed
income benefit under this Rider ("GUARANTEED INCOME BENEFIT") and does not
provide a Contract Value or guaranteed performance of any investment option.
The Income Base is the greater of Income Base A and Income Base B. We determine
each Income Base as follows:
INCOME BASE A
On the Rider Date, Income Base A is equal to the Contract Value. After the Rider
Date, we recalculate Income Base A as follows on the Contract Anniversary and
when a purchase payment or withdrawal is made:
For purchase payments, Income Base A is equal to the most recently calculated
Income Base plus the purchase payment.
For withdrawals, Income Base A is equal to the most recently calculated Income
Base reduced by a withdrawal adjustment.
On each Contract Anniversary, Income Base A is equal to the greater of the
Contract Value on that date or the most recently calculated Income Base A.
In the absence of any withdrawals or purchase payments, Income Base A will be
the greatest of the Contract Value on the Rider Date and all the Contract
Anniversary Contract Values between the Rider Date and the Payout Start Date. We
will recalculate Income Base A for purchase payments, for withdrawals and on
Contract Anniversaries until the first Contract Anniversary on or after the 85th
birthday of the oldest Owner or, if no Owner is a living individual, the oldest
Annuitant. After that date, we will recalculate Income Base A for purchase
payments and withdrawals.
INCOME BASE B
On the Rider Date, Income Base B is equal to the Contract Value. After the Rider
Date, Income Base B, plus any subsequent purchase payments and less a withdrawal
adjustment for any subsequent withdrawals, will accumulate daily at a rate equal
to 5% per year until
31
the first day of the month following the oldest Contract Owner's or, if the
Contract Owner is not a living individual, the Annuitant's 85th birthday. This
accumulation rate may differ depending on your state. After this date, Income
Base B will be recalculated only for purchase payments and withdrawals.
For purposes of computing Income Base A or B, the withdrawal adjustment is equal
to (1) divided by (2), with the result multiplied by (3), where:
1) = withdrawal amount,
2) = the Contract Value immediately prior to the withdrawal, and
3) = the most recently calculated Income Base.
See Appendix B for an example of how the withdrawal adjustment applies.
The guaranteed income benefit will only apply if you elect to receive fixed
income payments. If, however, you apply the Contract Value and not the
guaranteed 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 Income Benefit may not be appropriate.
We determine the guaranteed income benefit amount by applying the Income Base,
less any applicable taxes, to the guaranteed rates for the Income Plan that you
select. On the Payout Start Date, the income payment will be the greater of (i)
the income payment provided by the guaranteed income benefit or (ii) the income
payment provided in the fixed amount income payment provision of the Contract.
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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We will pay a death benefit prior to the Payout Start Date on:
... the death of any Contract owner or,
... the death of the Annuitant, if the Contract is owned by a non-natural person.
We will pay the death benefit to the new Contract owner as determined
immediately after the death. The new Contract owner would be a surviving
Contract owner or, if none, the Beneficiary(ies). In the case of the death of
the Annuitant, we will pay the death benefit to the current Contract owner.
A claim for a distribution on death must include DUE PROOF OF DEATH. We will
accept the following documentation as "DUE PROOF OF DEATH":
... a certified copy of a death certificate,
... a certified copy of a decree of a court of competent jurisdiction as to the
finding of death, or
... any other proof acceptable to us.
DEATH BENEFIT AMOUNT
Prior to the Payout Start Date, the death benefit is equal to the greatest of:
1) the Contract Value as of the date we determine the death benefit, or
2) the SETTLEMENT VALUE (that is, the amount payable on a full withdrawal of
Contract Value, see page 32) on the date we determine the death benefit, or
3) the sum of all purchase payments reduced by a withdrawal adjustment, as
defined below, or
4) the greatest of the Contract Values on the current or any previous DEATH
BENEFIT ANNIVERSARY prior to the date we determine the Death Benefit,
increased by any purchase payments made since that Death Benefit Anniversary
and reduced by an adjustment for any withdrawals, as defined below.
Death Benefit Anniversaries occur every 7th Contract Anniversary until the
oldest Owner's 80th birthday, or the Annuitant's 80th birthday if the Owner is
not a living person. For example, the 7th, 14th, and 21st Contract Anniversaries
are the first three Death Benefit Anniversaries. The Contract anniversary
immediately following the oldest Owner's 80th birthday, or the Annuitant's 80th
birthday if the Owner is not a living person, will also be a Death Benefit
Anniversary and is the final Death Benefit Anniversary.
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.
(c) is the Contract value on the applicable Death Benefit Anniversary adjusted
by any prior purchase payments or withdrawals made since that Death Benefit
Anniversary, or the sum of all purchase payments adjusted for any prior
withdrawals, as applicable.
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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 settlement 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 Contract owners and Annuitants up to and including age 80, the Enhanced
Death Benefit Rider is an optional benefit that you may elect. 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 A or 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. The Enhanced
Death Benefit Rider and the mortality and expense charge for the Rider will
terminate upon the change of Contract owner (or the Annuitant if the Contract is
owned by a non-natural person) for reasons other than death.
The annualized mortality and expense risk charge for this Rider is 0.25%. We
deduct the charge only from the Variable Sub-Account(s).
ENHANCED DEATH BENEFIT A.
On the date we issue the Rider ("Rider Date"), Enhanced Death Benefit A is equal
to the Contract Value on that date. After the Rider Date, Enhanced Death Benefit
A is the greatest of all Contract 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 a withdrawal adjustment, as described below, for any partial
withdrawals since that Anniversary.
We will calculate Anniversary Values for each Contract Anniversary up until the
earlier of:
... the date we determine the death benefit; or
... the first Contract Anniversary on or after the oldest Contract owner's or, if
the Contract owner is not a natural person, the Annuitant's 80th birthday, or
the first day of the 61st month following the Rider Date, whichever is later.
Following the first Contract Anniversary on or after the oldest Owner's or, if
the Contract Owner is not a natural person, the Annuitant's 80th birthday, or
the first day of the 61st month following the Rider Date, we will recalculate
the Enhanced Death Benefit A only for purchase payments and withdrawals.
ENHANCED DEATH BENEFIT B
The Enhanced Death Benefit B on the Rider Date is equal to the Contract Value on
that date. After the Rider Date, the Enhanced Death Benefit B, plus any
subsequent purchase payments and less a withdrawal adjustment, as described
below, will accumulate daily at a rate equivalent to 5% (accumulation rate may
differ depending on your state, please consult with your representative) 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 80th birthday,
or the first day of the 61st month following the Rider Date, whichever is
later.
After the first day of the month following the oldest Owner's 80th birthday or,
if the Owner is not a living individual, the Annuitant's 80th birthday, or the
first day of the 61st month following the Rider Date, whichever is later, we
will recalculate the Enhanced Death Benefit B only for purchase payments and
withdrawals.
For purposes of computing Enhanced Death Benefit A or B: The withdrawal
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 A or B as
applicable.
The Enhanced Death Benefit Rider will terminate and charges for this rider will
cease:
... When the Owner (if the current Owner is a living person) is changed for any
reason other than death unless the new Owner is a trust and the Annuitant is
the current Owner; or
... When the Owner (if the current Owner is a non-living person) is changed for
any reason unless the new Owner is a non-living person or is the current
annuitant.
... When the Annuitant (if the current Owner is a non-living person) is changed
for any reason other than death; or
... on the date we determine the value of the Death Benefit unless the Contract is
continued by surviving spouse as defined in section III above: or
... on the Payout Start Date.
ENHANCED EARNINGS DEATH BENEFIT RIDER
For Contract owners and Annuitants up to and including age 75, the Enhanced
Earnings Death Benefit Rider is an optional benefit that you may elect.
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If the Contract owner is a living individual, the Enhanced Earnings Death
Benefit Rider applies only upon the death of the Contract owner. If the Contract
owner is not a living individual, the Enhanced Earnings Death Benefit Rider
applies only upon the death of the annuitant. The Enhanced Earnings Death
Benefit Rider and the annual charge for the Rider will terminate upon the change
of Contract owner (or the Annuitant if the Contract is owned by a non-natural
person) for reasons other than death. The Rider may not be available in all
states. We may discontinue the offering of the Rider at any time.
Under the Enhanced Earnings Death Benefit Rider, if the oldest Contract owner
(or the Annuitant if the Contract owner is a non-natural person) is age 55 or
younger on the date we receive the completed application or the date we receive
the request to add this rider, whichever is later, the Enhanced Earnings Death
Benefit will be:
... The lesser of 100% of In-Force Premium (excluding purchase payments made after
the Rider Date and in the twelve month period immediately preceding the death
of the Owner, or Annuitant if the Owner is a non-living person) or 50% of
In-Force Earnings, calculated as of the date we receive the completed request
for settlement of the death benefit. The annualized mortality and expense risk
charge for this Rider is 0.15%.
If the oldest Contract owner (or the Annuitant if the Contract owner is a
non-natural person) is between the ages of 56 and 65 on the date we receive the
completed application or the date we receive the request to add this rider,
whichever is later, the Enhanced Earnings Death Benefit will be:
... The lesser of 80% of the In-Force Premium (excluding purchase payments made
after the Rider Date and in the twelve month period immediately preceding the
death of the Owner, or Annuitant if the Owner is a non-living person) or 40%
of In-Force Earnings, calculated as of the date we receive the completed
request for settlement of the death benefit. The annualized mortality and
expense risk charge for this Rider is 0.25%.
If the oldest Contract owner (or the Annuitant if the Contract owner is a
non-natural person) is between the ages of 66 and 75 on the date we receive the
completed application or the date we receive the request to add this rider,
whichever is later, the Enhanced Earnings Death Benefit will be:
... The lesser of 50% of the In-Force Premium (excluding purchase payments made
after the Rider Date and in the twelve month period immediately preceding the
death of the Owner, or Annuitant if the Owner is a non-living person) or 25 %
of In-Force Earnings, calculated as of the date we receive the completed
request for settlement of the death benefit. The annualized mortality and
expense risk charge for this Rider is 0.35%. For purpose of calculating the
Enhanced Earnings Death Benefit, the following definitions apply:
. In-Force Premium equals the Contract Value on the Rider Date plus all
purchase payments made after the Rider Date less the sum of all
Excess-of-Earnings Withdrawals after the Rider Date. If the Rider Date is
the same as the Issue Date, then the Contract Value on the Rider Date is
equal to your initial purchase payment.
In-Force Earnings equal the Contract Value minus the In-Force Premium. The
In-Force Earnings amount will never be less than zero.
An Excess-of-Earnings Withdrawal is the amount of a withdrawal in excess of the
In-Force Earnings in the Contract immediately prior to the withdrawal.
We will calculate the Enhanced Earnings Death Benefit Rider as of the date we
receive Due Proof of Death. We will pay the Enhanced Earnings Death Benefit with
the death benefit as described under "Death Benefit Payments" below.
The value of the Enhanced Earnings Death Benefit largely depends on the amount
of earnings that accumulate under your Contract. If you expect to withdraw the
earnings from your Contract Value, electing the Enhanced Earnings Death Benefit
Rider may not be appropriate. For purposes of calculating the Enhanced Earnings
Death Benefit, earnings are considered to be withdrawn first before purchase
payments. Your financial advisor can help you decide if the Enhanced Earnings
Death Benefit Rider is right for you.
For examples of how the death benefit is calculated under the Enhanced Earnings
Death Benefit Rider, see Appendix B.
The Enhanced Earnings Death Benefit Rider will terminate and charges for this
rider will cease:
... when the Owner (if the current Owner is a living person) is changed for any
reason other than death unless the new Owner is a trust and the Annuitant is
the current Owner; or
... when the Owner (if the current Owner is a non-living person) is changed for
any reason unless the new Owner is a non-living person or is the current
Annuitant, or
... when the Annuitant (if the current Owner is a non-living person) is changed
for any reason other than death; or
... on the Payout Start Date.
34
DEATH BENEFIT PAYMENTS
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DEATH OF CONTRACT OWNER
Subject to any restrictions previously placed upon any Beneficiary, the new
Contract owner may, within 180 days of the date of your death, elect to:
1) receive the death benefit in a lump sum, or
2) apply the death benefit to one of the Income Plans described above. The
Payout Start Date must be within 1 year of the date of death. Income payments
must be:
. over the life of the new Contract owner; or
. for a guaranteed number of payments from 5 to 50 years, but not to exceed
the life expectancy of the (new) Contract owner;
. 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.
Otherwise, the new Contract owner will receive the Settlement Value. The
Settlement Value is the Contract Value, less any applicable withdrawal charge
and premium tax. We will calculate the Settlement Value as of the end of the
Valuation Date coinciding with the requested distribution date for payment or on
the mandatory distribution date of 5 years after the date of your death,
whichever is earlier. If we receive a request after 3 p.m. Central Time on
Valuation Date, we will process the request as of the end of the following
Valuation Date.
In any event, the entire value of the Contract must be distributed within 5
years after the date of the death unless an Income Plan is elected or a
surviving spouse continues the Contract in accordance with the provisions
described below.
If the sole new Contract owner is your spouse, then he or she may elect one of
the options listed above or may continue the Contract in the Accumulation Phase
as if the death had not occurred. On the date the Contract is continued, the
Contract Value will equal the amount of the death benefit as determined as of
the Valuation Date on which we received complete request for settlement of the
death benefit (the next Valuation Date, if we receive complete request for
settlement of the death benefit after 3 p.m. Central Time). The Contract may
only be continued once. If the Contract is continued in the Accumulation Phase,
the surviving spouse may make a single withdrawal of any amount within one year
of the date of death without incurring a withdrawal charge or Market Value
Adjustment. If you elected the Enhanced Death Benefit Rider and/or the Enhanced
Earnings Death Benefit Rider, on the date the Contract is continued the
applicable rider will continue in force, and the Rider Date will be reset to the
date the
Contract is continued. For purposes of calculating future death benefits, your
spouse's age on this new Rider Date will be used to determine applicable death
benefit amounts. The percentage used to determine the annual charge for the
Enhanced Earnings Death Benefit will change to reflect the age of the surviving
spouse as of the new Rider Date.
If the new Contract owner is a corporation, trust, or other non-natural person,
then the new Contract owner may elect, within 180 days of your death, to receive
the death benefit in lump sum or may elect to receive the Settlement Value in a
lump sum within 5 years of death.
DEATH OF ANNUITANT
If any Annuitant who is not also the Contract owner dies prior to the Payout
Start Date, the Contract owner must elect one of the applicable options
described below.
If the Contract owner is a natural person, then the Contract will continue with
a new Annuitant as described on page 16.
If the Contract owner is a non-natural person, the non-natural Contract owner
may elect, within 180 days of the Annuitant's date of death, to receive the
death benefit in a lump sum or may elect to receive the Settlement Value payable
in a lump sum within 5 years of the Annuitant's date of death. If the
non-natural Contract owner does not make one of the above described elections,
the Settlement Value must be withdrawn by the non-natural Contract owner on or
before the mandatory distribution date 5 years after the Annuitant's death.
35
MORE INFORMATION
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GLENBROOK
Glenbrook Life is the issuer of the Contract. Glenbrook is a stock life
insurance company organized under the laws of the State of Arizona in 1998.
Previously, Glenbrook 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, all
states except New York, and Puerto Rico. We intend to offer the Contract in
those jurisdictions in which we are licensed. Our headquarters is located at
3100 Sanders Road, Northbrook, Illinois, 60062.
Glenbrook 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'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 Service
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 and Annuity Company Separate
Account A on September 6, 1995. We have registered the Variable Account with the
SEC as a unit investment trust. The SEC does not supervise the management of the
Variable Account or Glenbrook 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 18 Variable Sub-Accounts, each of which invests
in a corresponding Fund. We may add new Variable Sub-Accounts or eliminate one
or more of them, if we believe marketing, tax, or investment conditions so
warrant. We may also add other variable sub-accounts that may be available under
other variable annuity contracts. We do not guarantee the investment performance
of the Variable Account, its Sub-Accounts or the Funds. We may use the Variable
Account to fund our other annuity contracts. We will account separately for each
type of annuity contract funded by the Variable Account.
THE FUNDS
Dividends and Capital Gain Distributions. We automatically reinvest all
dividends and capital gains distributions from the Funds in shares of the
distributing Funds at their net asset value.
Voting Privileges. As a general matter, you do not have a direct right to vote
the shares of the Funds held by the Variable Sub-Accounts to which you have
allocated your Contract Value. Under current law, however, you are entitled to
give us instructions on how to vote those shares on certain matters. Based on
our present view of the law, we will vote the shares of the Funds that we hold
directly or indirectly through the Variable Account in accordance with
instructions that we receive from Contract owners entitled to give such
instructions.
As a general rule, before the Payout Start Date, the Contract owner or anyone
with a voting interest is the person entitled to give voting instructions. The
number of shares that a person has a right to instruct will be determined by
dividing the Contract Value allocated to the applicable Variable Sub-Account by
the net asset value per share of the corresponding Fund as of the record date of
the meeting. After the Payout Start Date, the person receiving income payments
has the voting interest. The payee's number of votes will be determined by
dividing the reserve for such Contract allocated to the applicable Sub-Account
by the net asset value per share of the corresponding eligible Fund. The votes
decrease as
36
income payments are made and as the reserves for the Contract decrease.
We will vote shares attributable to Contracts for which we have not received
instructions, as well as shares attributable to us, in the same proportion as we
vote shares for which we have received instructions, unless we determine that we
may vote such shares in our own discretion. We will apply voting instructions to
abstain on any item to be voted upon on a pro-rata basis to reduce the votes
eligible to be cast.
We reserve the right to vote Fund shares as we see fit without regard to voting
instructions to the extent permitted by law. If we disregard voting
instructions, we will include a summary of that action and our reasons for that
action in the next semi-annual financial report we send to you.
Changes in Funds. If the shares of any of the Funds are no longer available for
investment by the Variable Account or if, in our judgment, further investment in
such shares is no longer desirable in view of the purposes of the Contract, we
may eliminate that Fund and substitute shares of another eligible investment
fund. Any substitution of securities will comply with the requirements of the
1940 Act. We also may add new Variable Sub-Accounts that invest in additional
underlying mutual funds. We will notify you in advance of any change.
Conflicts of Interest. The Funds sell their shares to separate accounts
underlying both variable life insurance and variable annuity contracts. It is
conceivable that in the future it may be unfavorable for variable life insurance
separate accounts and variable annuity separate accounts to invest in the same
Fund. The board of directors of the Funds monitors for possible conflicts among
separate accounts buying shares of the Funds. Conflicts could develop for a
variety of reasons. For example, differences in treatment under tax and other
laws or the failure by a separate account to comply with such laws could cause a
conflict. To eliminate a conflict, the Funds' board of directors may require a
separate account to withdraw its participation in a Fund. A Fund's net asset
value could decrease if it had to sell investment securities to pay redemption
proceeds to a separate account withdrawing because of a conflict.
37
THE CONTRACT
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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 8.50% 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 1.20%, 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 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
Bricker & Eckler, LLP, Columbus, Ohio, 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's right to
issue such Contracts under state insurance law, have been passed upon by Michael
J. Velotta, General Counsel of Glenbrook Life.
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 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:
... the Contract owner is a natural person,
... the investments of the Variable Account are "adequately diversified" according
to Treasury Department regulations, and
... Glenbrook is considered the owner of the Variable Account assets for federal
income tax purposes.
NON-NATURAL OWNERS
As a general rule, annuity contracts owned by non-natural
38
persons such as corporations, trusts, or other entities are not treated as
annuity contracts for federal income tax purposes. The income on such contracts
is taxed as ordinary income received or accrued by the owner during the taxable
year. Please see the Statement of Additional Information for a discussion of
several exceptions to the general rule for Contracts owned by non-natural
persons.
DIVERSIFICATION REQUIREMENTS
For a Contract to be treated as an annuity for federal income tax purposes, the
investments in the Variable Account must be "adequately diversified" consistent
with standards under Treasury Department regulations. If the investments in the
Variable Account are not adequately diversified, the Contract will not be
treated as an annuity contract for federal income tax purposes. As a result, the
income on the Contract will be taxed as ordinary income received or accrued by
the Contract owner during the taxable year. Although Glenbrook does not have
control over the Funds or their investments, we expect the Funds to meet the
diversification requirements.
OWNERSHIP TREATMENT
The IRS has stated that you will be considered the owner of Variable Account
assets if you possess incidents of ownership in those assets, such as the
ability to exercise investment control over the assets. At the time the
diversification regulations were issued, the Treasury Department announced that
the regulations do not provide guidance concerning circumstances in which
investor control of separate account investments may cause an investor to be
treated as the owner of the separate account. The Treasury Department also
stated that future guidance would be issued regarding the extent that owners
could direct sub-account investments without being treated as owners of the
underlying assets of the separate account.
Your rights under the Contract are different than those described by the IRS in
rulings in which it found that contract owners were not owners of separate
account assets. For example, you have the choice to allocate premiums and
Contract Values among more investment alternatives. Also, you may be able to
transfer among investment alternatives more frequently than in such rulings.
These differences could result in you being treated as the owner of the Variable
Account. If this occurs, income and gain from the Variable Account assets would
be includible in your gross income. Glenbrook does not know what standards will
be set forth in any regulations or rulings which the Treasury Department may
issue. It is possible that future standards announced by the Treasury Department
could adversely affect the tax treatment of your Contract. We reserve the right
to modify the Contract as necessary to attempt to prevent you from being
considered the federal tax owner of the assets of the Variable Account. However,
we make no guarantee that such modification to the Contract will be successful.
TAXATION OF PARTIAL AND FULL WITHDRAWALS
If you make a partial withdrawal under a non-Qualified Contract, amounts
received are taxable to the extent the Contract Value, without regard to
surrender charges, exceeds the investment in the Contract. The investment in the
Contract is the gross premium paid for the Contract minus any amounts previously
received from the Contract if such amounts were properly excluded from your
gross income. If you make a partial withdrawal under a Qualified Contract, the
portion of the payment that bears the same ratio to the total payment that the
investment in the Contract (i.e., nondeductible IRA contributions, after tax
contributions to qualified plans) bears to the Contract Value, is excluded from
your income. If you make a full withdrawal under a non-Qualified Contract, the
amount received will be taxable only to the extent it exceeds the investment in
the Contract.
"NONQUALIFIED DISTRIBUTIONS" from Roth IRAs are treated as made from
contributions first and are included in gross income only to the extent that
distributions exceed contributions. "QUALIFIED DISTRIBUTIONS" from Roth IRAs are
not included in gross income. "QUALIFIED DISTRIBUTIONS" are any distributions
made more than 5 taxable years after the taxable year of the first contribution
to any Roth IRA and which are:
... made on or after the date the individual attains age 591/2,
... made to a beneficiary after the Contract owner's death,
... attributable to the Contract owner being disabled, or
... for a first time home purchase (first time home purchases are subject to a
lifetime limit of $10,000).
If you transfer a non-Qualified Contract without full and adequate consideration
to a person other than your spouse (or to a former spouse incident to a
divorce), you will be taxed on the difference between the investment in the
Contract and the Contract Value at the time of transfer. Except for certain
Qualified Contracts, any amount you receive as a loan under a Contract, and any
assignment or pledge (or agreement to assign or pledge) of the Contract Value is
treated as a withdrawal of such amount or portion.
TAXATION OF ANNUITY PAYMENTS
Generally, the rule for income taxation of annuity payments received from a
non-Qualified Contract provides for the return of your investment in the
Contract in equal tax-free amounts over the payment period. The balance of each
payment received is taxable. For fixed annuity payments, the amount excluded
from income is determined by multiplying the payment by the ratio of the
investment in the Contract (adjusted for any refund feature or period certain)
to the total expected value of annuity payments for the term of the Contract. If
you elect variable annuity payments, the amount excluded from taxable income is
determined by dividing the
39
investment in the Contract by the total number of expected payments. The annuity
payments will be fully taxable after the total amount of the investment in the
Contract is excluded using these ratios. If you die, and annuity payments cease
before the total amount of the investment in the Contract is recovered, the
unrecovered amount will be allowed as a deduction for your last taxable year.
TAXATION OF ANNUITY DEATH BENEFITS
Death of a Contract owner, or death of the Annuitant if the Contract is owned by
a non-natural person, will cause a distribution of death benefits from a
Contract. Generally, such amounts are included in income as follows:
... if distributed in a lump sum, the amounts are taxed in the same manner as a
full withdrawal, or
... if distributed under an annuity option, the amounts are taxed in the same
manner as an annuity payment. Please see the Statement of Additional
Information for more detail on distribution at death requirements.
PENALTY TAX ON PREMATURE DISTRIBUTIONS
A 10% penalty tax applies to the taxable amount of any premature distribution
from a non-Qualified Contract. The penalty tax generally applies to any
distribution made prior to the date you attain age 591/2. However, no penalty
tax is incurred on distributions:
... made on or after the date the Contract owner attains age 591/2;
... made as a result of the Contract owner's death or disability;
... made in substantially equal periodic payments over the Contract owner's life
or life expectancy,
... made under an immediate annuity, or
... attributable to investment in the Contract before August 14, 1982.
You should consult a competent tax advisor to determine if any other exceptions
to the penalty apply to your situation. Similar exceptions may apply to
distributions from Qualified Contracts.
AGGREGATION OF ANNUITY CONTRACTS
All non-qualified deferred annuity contracts issued by Glenbrook Life (or its
affiliates) to the same Contract owner during any calendar year will be
aggregated and treated as one annuity contract for purposes of determining the
taxable amount of a distribution.
TAX QUALIFIED CONTRACTS
Contracts may be used as investments with certain qualified plans such as:
... Individual Retirement Annuities or Accounts (IRAs) under Section 408 of the
Code;
... Roth IRAs under Section 408A of the Code;
... Simplified Employee Pension Plans under Section 408(k) of the Code;
... Savings Incentive Match Plans for Employees (SIMPLE) Plans under Section
408(p) of the Code;
... Tax Sheltered Annuities under Section 403(b) of the Code;
... Corporate and Self Employed Pension and Profit Sharing Plans; and
... State and Local Government and Tax-Exempt Organization Deferred Compensation
Plans.
The income on qualified plan and IRA investments is tax deferred and variable
annuities held by such plans do not receive any additional tax deferral. You
should review the annuity features, including all benefits and expenses, prior
to purchasing a variable annuity in a qualified plan or IRA. Glenbrook Life
reserves the right to limit the availability of the Contract for use with any of
the Qualified Plans listed above.
In the case of certain qualified plans, the terms of the plans may govern the
right to benefits, regardless of the terms of the Contract.
The Death Benefit and Qualified Contracts. Pursuant to IRS regulations, IRAs may
not invest in life insurance contracts. However, an IRA (e.g., traditional IRA,
Roth IRA, SEP IRA and SIMPLE 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 Death Benefit could be characterized as an
incidental Death Benefit. If the Death Benefit were so characterized, this could
result in currently taxable income to 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. Even if the
Death Benefit under the Contract were characterized as an incidental Death
Benefit, it is unlikely to violate those limits unless the Contract owner also
purchases a life insurance contract in connection with such plan.
RESTRICTIONS UNDER SECTION 403(B) PLANS
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 December 31, 1998, and
all
40
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
... on account of hardship (earnings on salary reduction contributions may not be
distributed on the account of hardship).
These limitations do not apply to withdrawals where Glenbrook Life is directed
to transfer some or all of the Contract Value to another 403(b) plan.
INCOME TAX WITHHOLDING
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:
... required minimum distributions, or
... a series of substantially equal periodic payments made over a period of at
least 10 years, or over the life (joint lives) of the participant (and
beneficiary).
Glenbrook Life may be required to withhold federal and state income taxes on any
distributions from non-Qualified Contracts or Qualified Contracts that are not
eligible rollover distributions, unless you notify us of your election to not
have taxes withheld.
ANNUAL REPORTS AND OTHER DOCUMENTS
- --------------------------------------------------------------------------------
Glenbrook's annual report on Form 10-K for the year ended December 31, 2001 is
incorporated herein by reference, which means that they are legally a part of
this prospectus.
After the date of this prospectus and before we terminate the offering of the
securities under this prospectus, all documents or reports we file with the SEC
under the Exchange Act are also incorporated herein by reference, which means
that they also legally become a part of this prospectus.
Statements in this prospectus, or in documents that we file later with the SEC
and that legally become a part of this prospectus, may change or supersede
statements in other documents that are legally part of this prospectus.
Accordingly, only the statement that is changed or replaced will legally be a
part of this prospectus.
We file our Exchange Act documents and reports, including our annual and
quarterly reports on Form 10-K and Form 10-Q electronically on the SEC's "EDGAR"
system using the identifying number CIK No. 0000947878. The SEC maintains a Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC. The
address of the site is http://www.sec.gov. You also can view these materials at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. For more information on the operations of SEC's Public Reference Room,
call 1-800-SEC-0330.
If you have received a copy of this prospectus, and would like a free copy of
any document incorporated herein by reference (other than exhibits not
specifically incorporated by reference into the text of such documents), please
write or call us at 300 N. Milwaukee Ave., Vernon Hills, IL 60061.
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 ny
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.
INVESTMENT PERFORMANCE
- --------------------------------------------------------------------------------
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.
41
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
Funds for the periods beginning with the inception dates of the Funds and
adjusted to reflect current Contract expenses. You should not interpret these
figures to reflect actual historical performance of the Variable Account
We may include in advertising and sales materials tax deferred compounding
charts and other hypothetical illustrations that compare currently taxable and
tax deferred investment programs based on selected tax brackets. Our
advertisements also may compare the performance of our Variable Sub-Accounts
with: (a) certain unmanaged market indices, including but not limited to the Dow
Jones Industrial Average, the Standard & Poor's 500, and the Shearson Lehman
Bond Index; and/or (b) other management investment companies with investment
objectives similar to the underlying funds being compared. In addition, our
advertisements may include the performance ranking assigned by various
publications, including the Wall Street Journal, Forbes, Fortune, Money,
Barron's, Business Week, USA Today, and statistical services, including Lipper
Analytical Services Mutual Fund Survey, Lipper Annuity and Closed End Survey,
the Variable Annuity Research Data Survey, and SEI.
42
APPENDIX A
- --------------------------------------------------------------------------------
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. If a Note with a maturity of the
original Guarantee Period is not available, we will use a weighted
average.
Treasury Rate means the U.S. Treasury Note Constant Maturity yield as reported
in Federal Reserve Bulletin Release H.15.
The Market Value Adjustment factor is determined from the following formula:
.9 X [I-(J + .0025)] X N
To determine the Market Value Adjustment, we will multiply the Market Value
Adjustment factor by the amount transferred, withdrawn, paid as a death benefit,
or applied to an Income Plan from a Guarantee Period at any time other than
during the 30 day period after such Guarantee Period expires.
EXAMPLES OF MARKET VALUE ADJUSTMENT
Purchase Payment: $10,000 allocated to a Guarantee Period
Guarantee Period: 5 years
Interest Rate: 4.50%
Full Withdrawal: End of Contract Year 3
Contract: AIM Lifetime America Classic /SM/
NOTE: These examples assume that premium taxes are not
applicable.
NOTE: These examples assume that premium taxes are not applicable.
EXAMPLE 1: (ASSUMES DECLINING INTEREST RATES)
Step 1: Calculate Contract Value at End of Contract Year 3: = $10,000.00 X (1.045) TO THE
POWER OF 3 = $11,411.66
Step 2: Calculate the Free Withdrawal Amount: = .15 X $10,920.25* = $1,638.04
Step 3: Calculate the Withdrawal Charge: = .07 X ($10,000 - $1,638.04) =
$585.34
Step 4: Calculate the Market Value Adjustment: I = 4.50%
J = 4.20%
730 DAYS
N = -------- = 2
365 DAYS
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 = $10.27
Step 5: Calculate the amount received by Contract owner as a = $11,411.66 - $585.34 + $10.27 =
result of full withdrawal at the end of Contract Year 3: $10,836.59
*Contract Value at End of Contract Year 2
43
EXAMPLE 2: (ASSUMES RISING INTEREST RATES)
STEP 1: CALCULATE CONTRACT VALUE AT END OF CONTRACT YEAR 3: = $10,000.00 X (1.045) TO THE POWER OF 3 = $11,411.66
STEP 2: CALCULATE THE FREE WITHDRAWAL AMOUNT: = .15 X $10,920.25* = $1,638.04
STEP 3: CALCULATE THE WITHDRAWAL CHARGE: = 0.7 X ($10,000 - $1,638.04) = $585.34
STEP 4: CALCULATE THE MARKET VALUE ADJUSTMENT: I = 4.50%
J = 4.80%
730 DAYS
N = ----------- = 2
365 DAYS
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 = -($112.98)
STEP 5: CALCULATE THE AMOUNT RECEIVED BY CONTRACT OWNER AS
A RESULT OF FULL WITHDRAWAL AT THE END OF CONTRACT YEAR 3: = $11,411.66 - $585.34 - $112.98 = $10,713.35
*Contract Value at End of Contract Year 2
44
APPENDIX B
- --------------------------------------------------------------------------------
CALCULATION OF ENHANCED EARNINGS DEATH BENEFIT AMOUNT
EXAMPLE 1
In this example, assume that the oldest Owner is age 55 at the time the Contract
is issued and elects the Enhanced Earnings Death Benefit Rider when the Contract
is issued. The Owner makes an initial purchase payment of $100,000. After four
years, the Owner dies. On the date Glenbrook receives Due Proof of Death, the
Contract Value is $125,000. Prior to his death, the Owner did not make any
additional purchase payments or take any withdrawals.
Excess-of-Earnings Withdrawals = $0 Purchase payments in the 12 months prior to
Death = $0 In-Force Premium = $100,000 ($100,000 + $0 - $0) In-Force Earnings =
$25,000 ($125,000 - $100,000) Enhanced Earnings Death Benefit = 50% x $25,000 =
$12,500.
Since In-Force Earnings are less than 100% of the In-Force Premium (excluding
purchase payments in the 12 months prior to death), the In-Force Earnings are
used to compute the Enhanced Earnings Death Benefit amount.
EXAMPLE 2
In the second example, assume the same facts as above, except that the Owner has
taken a withdrawal of $10,000 during the second year of the Contract.
Immediately prior to the withdrawal, the Contract Value is $105,000. Here,
$5,000 of the withdrawal is in excess of the In-Force Earnings at the time of
the withdrawal. The Contract Value on the date Glenbrook receives due proof of
death will be assumed to be $114,000.
Excess of Earnings Withdrawals = $5,000 ($10,000 - $5,000) Purchase payments in
the 12 months prior to Death = $0 In-Force Premium = $95,000 ($100,000 + $0 -
$5,000) In-Force Earnings = $19,000 ($114,000 - $95,000) Enhanced Earnings Death
Benefit = 50% x $19,000 = $9,500.
Since In-Force Earnings are less than 80% of the In-Force Premium (excluding
purchase payments in the 12 months prior to death), the In-Force Earnings are
used to compute the Enhanced Earnings Death Benefit amount.
EXAMPLE 3
This third example is intended to illustrate the effect of adding the Enhanced
Earnings Death Benefit Rider after the Contract has been issued and the effect
of later purchase payments. In this example, assume that the oldest Owner is age
65 on the Rider Date. At the time the Contract is issued, the Owner makes a
purchase payment of $100,000. After two years pass, the Owner elects to add the
Enhanced Earnings Death Benefit Rider. On the date this Rider is added, the
Contract Value is $110,000. Two years later, the Owner withdraws $50,000.
Immediately prior to the withdrawal, the Contract Value is $130,000. Another two
years later, the Owner makes an additional purchase payment of $40,000.
Immediately after the additional purchase payment, the Contract Value is
$130,000. Two years later, the owner dies with a Contract Value of $140,000 on
the date Glenbrook receives Due Proof of Death.
Excess of Earnings Withdrawals = $30,000 ($50,000 - $20,000) Purchase payments
in the 12 months prior to Death = $0 In-Force Premium = $120,000 ($110,000 +
$40,000 - $30,000) In-Force Earnings = $20,000 ($140,000 - $120,000) Enhanced
Earnings Death Benefit = 40% of $20,000 = $8,000.
In this example, In-Force Premium is equal to the Contract Value on the date the
Rider was issued plus the additional purchase payment and minus the
Excess-of-Earnings Withdrawal.
Since In-Force Earnings are less than 100% of the In-Force Premium (excluding
purchase payments in the 12 months prior to death), the In-Force Earnings are
used to compute the Enhanced Earnings Death Benefit amount.
45
APPENDIX C
- --------------------------------------------------------------------------------
AIM LIFETIME AMERICA VARIABLE ANNUITY SERIES CONTRACT COMPARISON CHART
Feature AIM Lifetime America AIM Lifetime America AIM Lifetime
Classic /SM/ Regal /SM/ America Freedom
- -------------------------------------------------------------------------------------------------------------------/SM/
-----------------
MAXIMUM AGE OF CONTRACT 90 90 90
OWNER AND ANNUITANT ON THE
ISSUE DATE
- ------------------------------------------------------------------------------------------------------------------------------------
MINIMUM INITIAL PURCHASE PAYMENT $10,000 $10,000 $10,000
- ------------------------------------------------------------------------------------------------------------------------------------
FIXED ACCOUNT OPTIONS . 6 month DCA . 6 month DCA . 6 month DCA
. 12 Month DCA . 12 Month DCA . 12 Month DCA
.Guaranteed Fixed .Guaranteed Fixed .Guaranteed
Maturity Account Maturity Account Fixed Maturity
Account
- ------------------------------------------------------------------------------------------------------------------------------------
ADMINISTRATIVE EXPENSE CHARGE 0.10% 0.10% 0.10%
- ------------------------------------------------------------------------------------------------------------------------------------
MORTALITY AND EXPENSE RISK CHARGE (WITHOUT OPTIONAL BENEFIT) 1.20% 1.35% 1.40%
- ------------------------------------------------------------------------------------------------------------------------------------
FREE WITHDRAWAL AMOUNT GREATER OF 15% OF GREATER OF 15% OF NO WITHDRAWAL
PURCHASE PAYMENTS, OR PURCHASE PAYMENTS, CHARGES ON THIS
15% OF THE CONTRACT OR 15% OF THE OPTION
VALUE CONTRACT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
WITHDRAWAL CHARGE (MEASURED FROM NUMBER OF COMPLETE YEARS SINCE WE YEAR: 1 2 3 4 5 6 7 8 YEAR: 1 2 3 4 NONE
RECEIVED THE PURCHASE PAYMENTS)(AS A PERCENTAGE OF PURCHASE PAYMENTS %: 7 7 7 6 5 4 3 0 %: 7 6 6 0
WITHDRAWN IN EXCESS OF THE FREE WITHDRAWAL AMOUNT)
- ------------------------------------------------------------------------------------------------------------------------------------
WITHDRAWAL CHARGE WAIVERS YES YES N/A
- ------------------------------------------------------------------------------------------------------------------------------------
46
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Description
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
Premium Taxes
- --------------------------------------------------------------------------------
Tax Reserves
- --------------------------------------------------------------------------------
Federal Tax Matters
- --------------------------------------------------------------------------------
Qualified Plans
- --------------------------------------------------------------------------------
Experts
- --------------------------------------------------------------------------------
Financial Statements
- --------------------------------------------------------------------------------
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. WE DO NOT AUTHORIZE ANYONE TO PROVIDE
ANY INFORMATION OR REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS
PROSPECTUS OTHER THAN AS CONTAINED IN THIS PROSPECTUS.
47
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.
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) Form of Contract, Endorsements and Application for the Glenbrook Provider
Ultra Contract (Incorporated herein by reference to the initial filing of
to the Form N-4 Registration Statement of the Glenbrook Life Multi-Manager
Valuable Account of Glenbrook Life and Annuity Company (File No. 333-55306)
dated February 9, 2001)
(4)(b) Form of Contract, Endorsements and Application for the Glenbrook Provider
Advantage Contract (Incorporated herein by reference to the initial filing
of the Form N-4 Registration Statement of the Glenbrook Life Multi-Manager
Variable Account of Glenbrook Life and Annuity Company (File No. 333-62922)
dated June 13, 2001)
(4)(c) Form of Contract, Endorsements and Application for the Glenbrook Provider
Extra Contract (Incorporated herein by reference to the initial filing of
the Form N-4 Registration Statement of the Glenbrook Life Multi-Manager
Variable Account of Glenbrook Life and Annuity Company (File No. 333-65826)
dated July 25, 2001)
(4)(d) Form of Contract, Endorsements and Application for the AIM Lifetime
Variable Annuities Contracts (AIM Lifetime America ClassicSM, AIM Lifetime
America RegalSM, and AIM Lifetime America FreedomSM) (Incorporated herein
by reference to Pre-Effective Amendment No. 1 to the Form N-4 Registration
Statement of the Glenbrook Life and Annuity Company Separate Account A
(File No. 333-69660) dated November 29, 2001)
(5)(a) Opinion of General Counsel re: Legality (Previously filed in the initial
filing of this Registration Statement (File No. 333-52806 dated December
27, 2000).
(8) None
(11) None
(12) None
(15) None
(23)(a) Independent Auditors' Consent
(23)(b) Consent of Foley & Lardner
(24)(a) Powers of Attorney for Thomas J. Wilson, II, Michael J. Velotta,
Margaret G. Dyer, Marla G. Friedman, John C. Lounds, J. Kevin McCarthy,
Casey J. Sylla, Samuel H. Pilch (Incorporated herein by reference to
Registrant's Registration Statement (File No. 333-41236) dated July 12,
2000)
(24)(b) Power of Attorney for Steven E. Shebik (Previously filed in
Post-Effective Amendment No. 3 to this Registration Statement (File No.
333-52806) dated October 19, 2001).
(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 registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the
Township of Northfield, State of Illinois on the 30th day of April, 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 registration
statement has been signed by the following persons in the capacities indicated
and on the 30th day of April, 2002.
*/THOMAS J. WILSON, II President, Director and Chief Executive
- ---------------------- Officer (Principal Executive Officer)
Thomas J. Wilson, II
/s/MICHAEL J. VELOTTA Vice President, Secretary,
- ----------------------- General Counsel and Director
Michael J. Velotta
*/SAMUEL J. 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 Director and Vice President
- --------------------
Marla G. Friedman
*/By Michael J. Velotta, pursuant to Powers of Attorney previously filed.
EXHIBIT LIST
The following exhibits are filed herewith:
Exhibit No. Description
(23)(a) Independent Auditors' Consent
(23)(b) Consent of Foley & Lardner