AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 11, 2003
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FILE NO. 033-62193
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 8
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
GLENROOK LIFE AND ANNUITY COMPANY
(Exact Name of Registrant)
ARIZONA 35-1113325
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Identification Number)
Organization)
3100 SANDERS ROAD, NORTHBROOK, ILLINOIS 60062
847-402-2400
(Address and Phone Number of Principal Executive Office)
MICHAEL J. VELOTTA
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
GLENBROOK LIFE AND ANNUITY COMPANY
3100 SANDERS ROAD
NORTHBROOK, ILLINOIS 60062
847-402-2400
(Name, Complete Address and Telephone Number of Agent for Service)
COPIES TO:
JOSEPH P. RATH
ALLSTATE LIFE INSURANCE COMPANY
ALFS, INC.
3100 SANDERS ROAD
NORTHBROOK, IL 60062
Approximate date of proposed public offering: Continuous
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, 2003 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)(1) 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 PLUS/SM /VARIABLE ANNUITY
GLENBROOK LIFE AND ANNUITY COMPANY
300 N. MILWAUKEE AVE.
VERNON HILLS, IL 60061
TELEPHONE NUMBER: 1-800-776-6978 PROSPECTUS DATED MAY 1, 2003
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Glenbrook Life and Annuity Company ("GLENBROOK LIFE") is offering the AIM
Lifetime Plus/SM/ Variable Annuity, an individual and group flexible premium
deferred variable annuity contract ("CONTRACT"). This prospectus contains
information about the Contract that you should know before investing. Please
keep it for future reference.
The Contract currently offers 19 investment alternatives ("INVESTMENT
ALTERNATIVES"). The Investment Alternatives include a fixed account option
("FIXED ACCOUNT") 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 I 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.
WE (Glenbrook Life) have filed a Statement of Additional Information, dated May
1, 2003, 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 40 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 ADEQUACY OF THIS PROSPECTUS.
ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A FEDERAL CRIME.
THE CONTRACTS MAY BE DISTRIBUTED THROUGH BROKER-DEALERS THAT
IMPORTANT HAVE RELATIONSHIPS WITH BANKS OR OTHER FINANCIAL INSTITUTIONS
OR BY EMPLOYEES OF SUCH BANKS. HOWEVER, THE CONTRACTS ARE NOT
NOTICES 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.
WE ARE NO LONGER OFFERING THE CONTRACTS FOR SALE.
1 PROSPECTUS
TABLE OF CONTENTS
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PAGE
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OVERVIEW
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Important Terms 3
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The Contract At A Glance 4
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How the Contract Works 6
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Expense Table 7
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Financial Information 9
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CONTRACT FEATURES
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The Contract 9
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Purchases 10
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Contract Value 11
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Investment Alternatives
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The Variable Sub-Accounts 12
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The Fixed Account 13
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Transfers 15
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Expenses 17
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Other Expenses 18
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Access To Your Money 19
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PAGE
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Income Payments 20
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Death Benefits 21
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OTHER INFORMATION
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More Information 24
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Glenbrook Life 24
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The Variable Account 24
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The Funds 25
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The Contract 25
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Qualified Plans 26
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Legal Matters 26
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Taxes 27
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Annual Reports and Other Documents 33
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Performance Information 33
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APPENDIX A-ACCUMULATION UNIT VALUES 34
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APPENDIX B-MARKET VALUE ADJUSTMENT 37
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STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS 40
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2 PROSPECTUS
IMPORTANT TERMS
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This prospectus uses a number of important terms that you may not be familiar
with. The index below identifies the page that describes each term. The first
use of each term in this prospectus appears in highlights.
PAGE
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Accumulation Phase 6
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Accumulation Unit 9
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Accumulation Unit Value 9
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Annuitant 9
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Automatic Additions Program 10
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Automatic Fund Rebalancing Program 16
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Beneficiary 9
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Cancellation Period 4
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*Contract 9, 25
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Contract Anniversary 5
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Contract Owner ("You") 9
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Contract Value 5
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Contract Year 4
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Death Benefit Anniversary 22
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Dollar Cost Averaging Program 16
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Due Proof of Death 21
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Enhanced Death Benefit Options 22
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Fixed Account 13
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Free Withdrawal Amount 17
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PAGE
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Funds 1, 25
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Glenbrook Life ("We") 1, 24
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Guarantee Periods 13
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Income Plans 6, 20
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Investment Alternatives 12, 13
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Issue Date 6
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Market Value Adjustment 14
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Payout Phase 5
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Payout Start Date 20
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Qualified Contracts 4
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Right to Cancel 4
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SEC 1
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Settlement Value 22
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Systematic Withdrawal Program 19
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Treasury Rate 15
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Valuation Date 11
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Variable Account 24
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Variable Sub-Account 12
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*If you purchase a group Contract, we will issue you a certificate that
represents your ownership and that summarizes the provisions of the group
Contract. References to "Contract" in the prospectus include certificates,
unless the context requires otherwise. In certain states the Contract is
available only as a group contract.
3 PROSPECTUS
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 $500 ($100 for automatic
purchase payments to the variable investment options).
You must maintain a minimum account size of $1,000.
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RIGHT TO CANCEL You may cancel your Contract within 20 days of receipt
or any longer period as your state may require
("CANCELLATION PERIOD"). Upon cancellation, we will
return your purchase payments adjusted, to the extent
federal or state law permits, to reflect the investment
experience of any amounts allocated to the Variable
Account. The adjustment will reflect the deduction of
mortality and expense risk charges and administrative
expense charges.
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EXPENSES You will bear the following expenses:
.Total Variable Account annual fees equal to 1.45% of
average daily net assets
.Annual contract maintenance charge of $35 (with
certain exceptions)
.Withdrawal charges ranging from 0% to 6% of payments
withdrawn (with certain exceptions)
.Transfer fee of $10 after 12th transfer in any
CONTRACT YEAR (fee currently waived)
. State premium tax (if your state imposes one)
In addition, each Fund pays expenses that you will bear
indirectly if you invest in a Variable Sub-Account.
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INVESTMENT The Contract offers 19 investment alternatives
ALTERNATIVES including:
.
The Fixed Account (which credits interest at rates we
guarantee), and
.18 Variable Sub-Accounts investing in Funds offering
professional money management by A I M Advisors, Inc.
To find out current rates being paid on the Fixed
Account, or to find out how the Variable Sub-Accounts
have performed, please call us at 1-800-776-6978.
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SPECIAL SERVICES For your convenience, we offer these special services:
. AUTOMATIC FUND REBALANCING PROGRAM
. AUTOMATIC ADDITIONS PROGRAM
. DOLLAR COST AVERAGING PROGRAM
. SYSTEMATIC WITHDRAWAL PROGRAM
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INCOME PAYMENTS You can choose fixed income payments, variable income
payments, or a combination of the two. You can receive
your income payments in one of the following ways:
. life income with guaranteed payments
.a joint and survivor life income with guaranteed
payments
.guaranteed payments for a specified period (5 to 30
years)
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DEATH BENEFITS If you 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 2 Enhanced Death Benefit
Options.
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4 PROSPECTUS
TRANSFERS Before the Payout Start Date, you may transfer your
Contract value ("CONTRACT VALUE") among the investment
alternatives, with certain restrictions. Transfers to
the Fixed Account must be at least $500.
We do not currently impose a fee upon transfers.
However, we reserve the right to charge $10 per
transfer after the 12th transfer in each "Contract
Year," which we measure from the date we issue your
Contract or a Contract anniversary ("CONTRACT
ANNIVERSARY").
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WITHDRAWALS You may withdraw some or all of your Contract Value at
any time during the ACCUMULATION PHASE. Full or partial
withdrawals are available under limited circumstances
on or after the Payout Start Date.
In general, you must withdraw at least $50 at a time.
($1,000 for withdrawals made during the PAYOUT PHASE).*
Withdrawals in the Payout Phase are only available if
the Payout Option is a Variable Income payment using
Guaranteed Payments for a Specified Period. Withdrawals
taken prior to annuitization (referred to in this
prospectus as the Payout Phase) are generally
considered to come from the earnings in the Contract
first. If the Contract is tax-qualified, generally all
withdrawals are treated as distributions of earnings.
Withdrawals of earnings are taxed as ordinary income
and, if taken prior to age 59 1/2, may be subject to an
additional 10% federal tax penalty. A withdrawal charge
and MARKET VALUE ADJUSTMENT also may apply.
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5 PROSPECTUS
HOW THE CONTRACT WORKS
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The Contract basically works in two ways. First, the Contract can help you (we
assume you are the CONTRACT OWNER) save for retirement because you can invest in
up to 19 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 the Fixed Account. If
you invest in the Fixed Account, you will earn a fixed rate of interest that we
declare periodically. If you invest in any of the Variable Sub-Accounts, your
investment return will vary up or down depending on the performance of the
corresponding Funds.
Second, the Contract can help you plan for retirement because you can use it to
receive retirement income for life and/ or for a pre-set number of years, by
selecting one of the income payment options (we call these "INCOME PLANS")
described on page 20. You receive income payments during what we call the
"PAYOUT PHASE" of the Contract, which begins on the Payout Start Date and
continues until we make the last payment required by the Income Plan you select.
During the Payout Phase, if you select a fixed income payment option, we
guarantee the amount of your payments, which will remain fixed. If you select a
variable income payment option, based on one or more of the Variable
Sub-Accounts, the amount of your payments will vary up or down depending on the
performance of the corresponding Funds. The amount of money you accumulate under
your Contract during the Accumulation Phase and apply to an Income Plan will
determine the amount of your income payments during the Payout Phase.
The timeline below illustrates how you might use your Contract.
Issue Payout Start
Date Accumulation Phase Date Payout Phase
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You buy You save for retirement You elect to receive You can receive 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,
your Beneficiary. See "Death Benefits."
Please call us at 1-800-776-6978 if you have any questions about how the
Contract works.
6 PROSPECTUS
EXPENSE TABLE
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The table below lists the expenses that you will bear directly or indirectly
when you buy a Contract. The table and the examples that follow do not reflect
premium taxes that may be imposed by the state where you reside. For more
information about Variable Account expenses, see "Expenses," below. For more
information about Fund expenses, please refer to the accompanying prospectus for
the Funds.
CONTRACT OWNER TRANSACTION EXPENSES
Withdrawal Charge (as a percentage of purchase payments)*
Number of Complete Years Since We Received the Purchase 0 1 2 3 4 5 6 7+
Payment Being Withdrawn
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Applicable Charge 6% 6% 5% 5% 4% 4% 3% 0%
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Annual Contract Maintenance Charge $35.00**
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Transfer Fee $10.00***
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* Each Contract Year, you may withdraw up to 10% of your aggregate purchase
payments without incurring a withdrawal charge or a Market Value Adjustment.
** We will waive this charge in certain cases. See "Expenses."
*** Applies solely to the thirteenth and subsequent transfers within a
Contract Year excluding transfers due to Dollar Cost Averaging or Automatic
Fund Rebalancing. We are currently waiving the transfer fee.
VARIABLE ACCOUNT ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSET VALUE
DEDUCTED FROM EACH VARIABLE SUB-ACCOUNT)
Mortality and Expense Risk Charge 1.35%
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Administrative Expense Charge 0.10%
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Total Variable Account Annual Expense 1.45%
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FUND ANNUAL EXPENSES (After Voluntary Reductions and Reimbursements)
(as a percentage of Fund average daily net assets)1
The next table shows the minimum and maximum total operating expenses charged by
the Funds that you may pay periodically during the time that you own the
Contract. Advisers and/or other service providers of certain Funds may have
agreed to waive their fees and/or reimburse Fund expenses in order to keep the
Funds' expenses below specified limits. The range of expenses shown in this
table does not show the effect of any such fee waiver or expense reimbursement.
More detail concerning each Fund's fees and expenses appears in the prospectus
for each Fund.
ANNUAL FUND EXPENSES
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Minimum Maximum
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Total Annual Fund
Operating
Expenses/(1)/
(expenses that are
deducted from Fund
assets, which may
include management
fees, distribution
and/or services
(12b-1) fees, and 0.67% 1.71%
other expenses)
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(1) Expenses are shown as a percentage of Fund average daily net assets (before
any waiver or reimbursement) as of December 31, 2002.
7 PROSPECTUS
EXAMPLE 1
This Example is intended to help you compare the cost of investing in the
Contracts with the cost of investing in other variable annuity contracts. These
costs include Contract owner transaction expenses, Contract fees, Variable
Account annual expenses, and Fund fees and expenses.
.. invested $10,000 in the Contract for the time periods indicated,
.. earned a 5% annual return on your investment, and
.. surrendered your Contract, or you began receiving income payments for a
specified period of less than 120 months, at the end of each time period.
The first line of the example assumes that the maximum fees and expenses of any
of the Funds are charged. The second line of the example assumes that the
minimum fees and expenses of any of the Funds are charged. Your actual expenses
may be higher or lower than those shown below.
THE EXAMPLE DOES NOT INCLUDE ANY TAXES OR TAX PENALTIES YOU MAY BE REQUIRED TO
PAY IF YOU SURRENDER YOUR CONTRACT.
1Year 3Years 5Years 10Years
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Costs Based on Maximum Annual $899 $1,540 $2,201 $3,804
Fund Expenses
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Costs Based on Minimum Annual $792 $1,223 $1,677 $2,784
Fund Expenses
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EXAMPLE 2
This Example uses the same assumptions as Example 1 above, except that it
assumes you decided not to surrender your Contract, or you began receiving
income payments for a specified period of at least 120 months, at the end of
each time period.
1Year 3Years 5Years 10Years
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Costs Based on Maximum $359 $1,090 $1,841 $3,804
Annual Fund Expenses
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Costs Based on Minimum $252 $ 773 $1,317 $2,784
Annual Fund Expenses
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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 EXAMPLES DO NOT ASSUME THAT ANY FUND EXPENSE
WAIVERS OR REIMBURSEMENT ARRANGEMENTS ARE IN EFFECT FOR THE PERIODS PRESENTED.
THE ABOVE EXAMPLES ASSUME A MORTALITY AND EXPENSE RISK CHARGE OF 1.35%, AN
ADMINISTRATIVE EXPENSE CHARGE OF 0.10% AND AN ANNUAL CONTRACT CHARGE OF $35. THE
ABOVE EXAMPLES ASSUME TOTAL ANNUAL FUND EXPENSES LISTED IN THE EXPENSE TABLE
WILL CONTINUE THROUGHOUT THE PERIODS SHOWN.
8 PROSPECTUS
FINANCIAL INFORMATION
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To measure the value of your investment in the Variable Sub-Accounts during the
Accumulation Phase, we use a unit of measure we call the "ACCUMULATION UNIT."
Each Variable Sub-Account has a separate value for its Accumulation Units we
call "ACCUMULATION UNIT VALUE." Accumulation Unit Value is analogous to, but not
the same as, the share price of a mutual fund. Attached as Appendix A to this
prospectus are tables showing the Accumulation Unit Values of each Variable
Sub-Account since its inception. To obtain a fuller picture of each Variable
Sub-Account's finances, please refer to the Variable Account's financial
statements contained in the Statement of Additional Information. The financial
statements of Glenbrook Life also appear in the Statement of Additional
Information.
THE CONTRACT
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CONTRACT OWNER
The AIM Lifetime Plus/SM/ Variable Annuity is a contract between you, the
Contract Owner, and Glenbrook, a life insurance company. As the Contract Owner,
you may exercise all of the rights and privileges provided to you by the
Contract. That means it is up to you to select or change (to the extent
permitted):
.. the Investment Alternatives during the Accumulation and Payout Phases,
.. the amount and timing of your Purchase Payments and withdrawals,
.. the programs you want to use to invest or withdraw money,
.. the Income Payment plan you want to use to receive retirement income,
.. the Annuitant (either yourself or someone else) on whose life the income
payments will be based,
.. the Beneficiary or Beneficiaries who will receive the benefits that the
Contract provides when the last surviving Contract Owner or Annuitant dies and
.. any other rights that the Contract provides.
If you die, any surviving Contract Owner, or, if none, the Beneficiary, may
exercise the rights and privileges provided 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-natural person for purposes of this section and the Death
Benefit section. The maximum issue age of the oldest Contract Owner cannot
exceed age 90 as of the date we receive the completed application to purchase
the Contract.
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.
The Contract can also be purchased as part of 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 26.
ANNUITANT
The Annuitant is the individual whose age determines the latest Payout Start
Date and whose life determines the amount and duration of income payments (other
than under Income Plans with guaranteed payments for a specified period). You
initially designate an Annuitant in your application. If the Contract Owner is a
natural person, you may change the Annuitant prior to the Payout Start Date. In
our discretion, we may permit you to designate a joint Annuitant, who is a
second person on whose life income payments depend, on the Payout Start Date.
The maximum issue age of an Annuitant cannot exceed age 90 as of the date we
receive the completed application to purchase the Contract.
If the Annuitant dies prior to the Payout Start Date, the new Annuitant will be:
.. the youngest Contract Owner, otherwise
.. the youngest Beneficiary.
BENEFICIARY
The Beneficiary is the person who may elect to receive the Death Benefit or
become the new Contract Owner, subject to the Death of Owner provisions, if the
sole surviving Contract Owner dies before the Payout Start Date. (See section
titled "Death Benefits" for more details.) If the sole surviving Contract Owner
dies after the Payout Start Date, the Beneficiary will receive any guaranteed
Income Payments scheduled to continue.
You may name one or more Beneficiaries when you apply for a Contract. You may
also name one or more contingent Beneficiaries who will receive any Death
Benefit or guaranteed income benefit if there are no surviving primary
Beneficiaries upon the death of the sole surviving Contract Owner. You may
change or add Beneficiaries at any time by writing to us, unless you have
designated an irrevocable Beneficiary. We will provide a change of Beneficiary
form to be signed and filed with us. Any change will be effective at the time
you sign the
9 PROSPECTUS
written notice, whether or not the Annuitant is living when we receive the
notice. Until we receive your written notice to change a Beneficiary, we are
entitled to rely on the most recent Beneficiary information in our files. We
will not be liable as to any payment or settlement made prior to receiving the
written notice. Accordingly, if you wish to change your Beneficiary, you should
deliver your written notice to us promptly.
If you did not name a Beneficiary or if the named Beneficiary is no longer
living and there are no other surviving Beneficiaries, the new Beneficiary will
be:
.. your spouse or, if he or she is no longer alive,
.. your surviving children equally, or if you have no surviving children,
.. your estate.
If more than one Beneficiary survives you, we will divide the Death Benefit
among your Beneficiaries according to your most recent written instructions. If
you have not given us written instructions, we will pay the Death Benefit in
equal amounts to the surviving Beneficiaries.
You may restrict income payments to Beneficiaries by providing us a written
request. Once we accept the written request, the change or restriction will
take effect as of the date you signed the request. Any change is subject to any
payment we make or other action we take before we accept the change.
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 due. We will not be bound by any assignment
until the assignor signs it and files it with us. We are not responsible for the
validity of any assignment. Federal law prohibits or restricts the assignment of
benefits under many types of retirement plans and the terms of such plans may
themselves contain restrictions on assignments. An assignment may also result in
taxes or tax penalties. YOU SHOULD CONSULT WITH AN ATTORNEY BEFORE TRYING TO
ASSIGN YOUR CONTRACT.
PURCHASES
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MINIMUM PURCHASE PAYMENTS
Your initial Purchase Payment must be at least $10,000 ($10,000 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
change 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.
MINIMUM AND MAXIMUM ALLOWABLE AGE
You can purchase a Contract if you are between your state's age of majority and
90 as of the date we receive the completed application. If the owner is a
non-natural person, then the Annuitant must be between the ages of 0 and 90 as
of the date we receive the completed application.
AUTOMATIC ADDITIONS PROGRAM
You may make additional Purchase Payments of at least $100 ($500 for allocation
to the Fixed Account) by automatically transferring amounts from your bank
account. Consult your sales representative for more detailed information.
ALLOCATION OF PURCHASE PAYMENTS
At the time you apply for a Contract, you must decide how to allocate your
Purchase Payments among the Investment Alternatives. The allocation you specify
on your application will be effective immediately. All allocations must be in
whole percents that total 100% or in whole dollars. You can change your
allocations by notifying us in writing. We reserve the right to limit the
availability of the Investment Alternatives.
We will allocate your additional 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. 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
10 PROSPECTUS
the application. We will credit additional Purchase Payments to the Contract at
the close of the business day on which we receive the Purchase Payment at our
service center (mailing address: P.O. Box 94039, Palatine, Illinois, 60094-4039;
overnight address: 300 North Milwaukee Avenue, Vernon Hills, Illinois, 60061).
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 such longer
period as your state may require. You may return it by delivering it or mailing
it to us. If you exercise this "RIGHT TO CANCEL," the Contract terminates and we
will pay you the full amount of your Purchase Payments allocated to the Fixed
Account. We also will return your Purchase Payments allocated to the Variable
Account after an adjustment, to the extent federal or state law permits, to
reflect investment gain or loss and applicable 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 your Contract is qualified under Section
408 of the Internal Revenue Code, we will refund the greater of any Purchase
Payments or the Contract Value.
CONTRACT VALUE
- --------------------------------------------------------------------------------
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.
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.
ACCUMULATION UNIT VALUE
As a general matter, the Accumulation Unit Value for each Variable Sub-Account
will rise or fall to reflect:
.. changes in the share price of the Fund in which the Variable Sub-Account
invests, and
.. the deduction of amounts reflecting the mortality and expense risk charge,
administrative expense charge, and any provision for taxes that have accrued
since we last calculated the Accumulation Unit Value.
We determine contract maintenance charges, withdrawal charges, and transfer fees
(currently waived) separately for each Contract. They do not affect the
Accumulation Unit Value. Instead, we obtain payment of those charges and fees by
redeeming Accumulation Units. For details on how we compute Accumulation Unit
Value, please refer to the Statement of Additional Information. We determine a
separate Accumulation Unit Value for each Variable Sub-Account on each Valuation
Date.
YOU SHOULD REFER TO THE PROSPECTUS FOR THE FUNDS THAT ACCOMPANIES THIS
PROSPECTUS FOR A DESCRIPTION OF HOW THE ASSETS OF EACH FUND ARE VALUED, SINCE
THAT DETERMINATION DIRECTLY BEARS ON THE ACCUMULATION UNIT VALUE OF THE
CORRESPONDING VARIABLE SUB-ACCOUNT AND, THEREFORE, YOUR CONTRACT VALUE.
11 PROSPECTUS
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 prospectus for the
Fund. You should carefully review the prospectus for the Funds before allocating
amounts to the Variable Sub-Accounts. A I M Advisors, Inc. serves as the
investment advisor to each Fund.
SERIES I SHARES: 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
Fund
- -------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------
*A fund's investment objective(s) may be changed by the Fund's Board of
Trustees 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.
12 PROSPECTUS
INVESTMENT ALTERNATIVES: THE FIXED ACCOUNT
- --------------------------------------------------------------------------------
You may allocate all or a portion of your Purchase Payments to the Fixed
Account. The Fixed Account may not be available in all states. Please consult
with your sales representative for current information. The Fixed Account
supports our insurance and annuity obligations. The Fixed Account consists of
our general assets other than those in segregated asset accounts. We have sole
discretion to invest the assets of the Fixed Account, subject to applicable law.
Any money you allocate to the Fixed Account does not entitle you to share in the
investment experience of the Fixed Account.
GUARANTEE PERIODS
Each payment or transfer allocated to 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. 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), if available.
Each Purchase 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 any one Guarantee Period.
The Guarantee Periods may not be available in your state.
INTEREST RATES. We will tell you what interest rates and Guarantee Periods we
are offering at a particular time. We may declare different interest rates for
Guarantee Periods of the same length that begin at different times. We will not
change the interest rate that we credit to a particular allocation until the end
of the relevant Guarantee Period.
We have no specific formula for determining the rate of interest that we will
declare initially or in the future. We will set those interest rates based on
investment returns available at the time of the determination. In addition, we
may consider various other factors in determining interest rates including
regulatory and tax requirements, sales commissions and administrative expenses,
general economic trends, and competitive factors. WE DETERMINE THE INTEREST
RATES TO BE DECLARED IN OUR SOLE DISCRETION. WE CAN NEITHER PREDICT NOR
GUARANTEE WHAT THOSE RATES WILL BE IN THE FUTURE. For current interest rate
information, please contact your sales representative or Glenbrook
Life at 1-800-776-6978. The interest rate will never be less than the minimum
guaranteed rate stated in the Contract.
13 PROSPECTUS
HOW WE CREDIT INTEREST
We will credit interest daily to each amount allocated to a Guarantee Period at
a rate that compounds to the annual interest rate that we declared at the
beginning of the applicable Guarantee Period.
The following example illustrates how a Purchase Payment allocated to the Fixed
Account would grow, given an assumed Guarantee Period and annual interest rate:
Purchase Payment............................................................. $10,000
Guarantee Period............................................................. 5 years
Annual Interest Rate......................................................... 4.50%
END OF CONTRACT YEAR
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
Beginning Contract
Value................ $10,000.00
X (1 + Annual
Interest Rate) x 1.045
----------
$10,450.00
Contract Value at end
of Contract Year..... $10,450.00
X (1 + Annual
Interest Rate) x 1.045
----------
$10,920.25
Contract Value at end
of Contract Year..... $10,920.25
X (1 + Annual
Interest Rate) x 1.045
----------
$11,411.66
Contract Value at end
of Contract Year..... $11,411.66
X (1 + Annual
Interest Rate) x 1.045
----------
$11,925.19
Contract Value at end
of Contract Year..... $11,925.19
X (1 + Annual
Interest Rate) x 1.045
----------
$12,461.82
TOTAL INTEREST CREDITED DURING GUARANTEE PERIOD = $2,461.82 ($12,461.82-$10,000)
This example assumes no withdrawals during the entire 5 year Guarantee Period.
If you were to make a partial withdrawal, you may be required to pay a
Withdrawal Charge. In addition, the amount withdrawn may be increased or
decreased by a Market Value Adjustment that reflects changes in interest rates
since the time you invested the amount withdrawn. The hypothetical interest rate
is for illustrative purposes only and is not intended to predict current or
future interest rates to be declared under the Contract. Actual interest rates
declared for any given Guarantee Period may be more or less than shown above but
will never be less than the guaranteed minimum rate stated in the Contract, if
any.
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 the Guarantee Period, we will automatically renew the Guarantee Period
value to a new Guarantee Period of the same duration, if available, to be
established on the day the previous Guarantee Period expired. In certain states
your money will automatically renew into a new Guarantee Period of the shortest
duration available to be established on the day the previous Guarantee Period
expired, or to the Money Market Variable Sub-account if no Guarantee Periods are
available at the time of expiration of the previous Guarantee Period. Please
consult with your representative. During the 30-day period after the end of the
Guarantee Period, you may:
1) Take no action and your money will remain in the newly established Guarantee
Period, if available, or the Money Market Variable Sub-account (Please consult
with your representative; or
2) Instruct us to apply your money to one or more new Guarantee Periods of your
choice. The new Guarantee Period(s) will begin on the day the previous
Guarantee Period ends. The new interest rate will be our then current declared
rate for those Guarantee Periods; or
3) Instruct us to transfer all or a portion of your money to one or more
Variable Sub-Accounts of the Variable Account. We will effect the transfer on
the day we receive your instructions. We will not adjust the amount
transferred to include a Market Value Adjustment; or
4) Withdraw all or a portion of your money. You may be required to pay a
withdrawal charge, but we will not adjust the amount withdrawn to include a
Market Value Adjustment. The amount withdrawn will be deemed to have been
withdrawn on the day the previous Guarantee Period ends. Unless you specify
otherwise, amounts not withdrawn will be applied to a new Guarantee Period of
the same length as the previous Guarantee Period. The new Guarantee Period
will begin on the day the previous Guarantee Period ends.
MARKET VALUE ADJUSTMENT. All withdrawals in excess of the Free Withdrawal Amount
and transfers from a Guarantee Period, other than those taken during the 30
14 PROSPECTUS
day period after such Guarantee Period expires, are subject to a Market Value
Adjustment. A Market Value Adjustment also will apply when you apply amounts
currently invested in a Guarantee Period to an Income Plan (unless applied
during the 30 day period after such Guarantee Period expires). A Market Value
Adjustment may apply in the calculation of the Settlement Value described below
in the "Death Benefit Amount" section. We will not apply a Market Value
Adjustment to a transfer you make as part of a Dollar Cost Averaging Program. We
also will not apply a Market Value Adjustment to a withdrawal you make:
.. within the Free Withdrawal Amount as described on pages 17-18 (Withdrawal
Charge), as a part of the Dollar Cost Averaging Program, or
.. withdrawals taken to satisfy IRS required minimum distribution rules for the
Contract.
We apply the Market Value Adjustment to reflect changes in interest rates from
the time you first allocate money to a Guarantee Period to the time it is
removed from that Guarantee Period. We calculate the Market Value Adjustment by
comparing the Treasury Rate for a period equal to the Guarantee Period at its
inception to the Treasury Rate for a period equal to the time remaining in the
Guarantee Period when you remove your money. "TREASURY RATE" means the U.S.
Treasury Note Constant Maturity Yield as reported in Federal Reserve Bulletin
Release H.15.
The Market Value Adjustment may be positive or negative, depending on changes in
interest rates. As such, you bear the investment risk associated with changes in
interest rates. If interest rates increase significantly, the Market Value
Adjustment and any withdrawal charge, premium taxes, and income tax withholding
(if applicable) could reduce the amount you receive upon full withdrawal of your
Contract Value to an amount that is less than the purchase payment plus interest
at the minimum guaranteed interest rate under the Contract.
Generally, if the Treasury Rate at the time you allocate money to a Guarantee
Period is higher than the applicable current Treasury Rate, then the Market
Value Adjustment will result in a higher amount payable to you, transferred, or
applied to an Income Plan. Conversely, if the Treasury Rate at the time you
allocate money to a Guarantee Period is lower than the applicable current
Treasury Rate, then the Market Value Adjustment will result in a lower amount
payable to you, transferred, or applied to an Income Plan.
For example, assume that you purchase a Contract and you select an initial
Guarantee Period of 5 years and the 5 year Treasury Rate for that duration is
4.50%. Assume that at the end of 3 years, you make a partial withdrawal. If, at
that later time, the current 2 year Treasury Rate is 4.20%, then the Market
Value Adjustment will be positive, which will result in an increase in the
amount payable to you. Conversely, if the current 2 year Treasury Rate is 4.80%,
then the Market Value Adjustment will be negative, which will result in a
decrease in the amount payable to you.
The formula for calculating Market Value Adjustments is set forth in Appendix B
to this prospectus, which also contains additional examples of the application
of the Market Value Adjustment.
INVESTMENT ALTERNATIVES: TRANSFERS
- --------------------------------------------------------------------------------
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase, you may transfer Contract Value among the
investment alternatives. You may request transfers in writing on a form that we
provide or by telephone according to the procedure described below. The minimum
amount that you may transfer into a Guarantee Period is $500. We currently do
not assess, but reserve the right to assess, a $10 charge on each transfer in
excess of 12 per Contract Year. We treat transfers to or from more than one Fund
on the same day as one transfer.
We will process transfer requests that we receive before 3:00 p.m. Central Time
on any Valuation Date using the Accumulation Unit Values for that Date. We will
process requests completed after 3:00 p.m. on any Valuation Date using the
Accumulation Unit Values for the next Valuation Date. The Contract permits us to
defer transfers from the Fixed Account for up to 6 months from the date we
receive your request. If we decide to postpone transfers from any Guarantee
Period for 30 days or more, we will pay interest as required by applicable law.
Any interest would be payable from the date we receive the transfer request to
the date we make the transfer.
If you transfer an amount from a Guarantee Period other than during the 30 day
period after such Guarantee Period expires, we will increase or decrease the
amount by a Market Value Adjustment. If any transfer reduces the value in the
Fixed Account to less than $500, we will treat the request as a transfer of the
entire value.
We reserve the right to waive any transfer restrictions.
TRANSFERS DURING THE PAYOUT PHASE
During the Payout Phase, you may make transfers among the Variable Sub-Accounts
to change the relative weighting of the Variable Sub-Accounts on which your
Variable Income Payments will be based. In addition, you will have a limited
ability to make transfers from the Variable Sub-Accounts to increase the
proportion of your Income Payments consisting of Fixed Income Payments. You may
not, however, convert any of your Fixed Income Payments into Variable Income
Payments. You may not
15 PROSPECTUS
make any transfers for the first 6 months after the Payout Start Date.
Thereafter, you may make transfers among the Variable Sub-Accounts or make
transfers from the Variable Sub-Accounts to increase the proportion of your
Income Payments consisting of Fixed Income Payments. Your transfers must be at
least 6 months apart.
TELEPHONE TRANSFERS
You may make transfers by telephone by calling 1-800-776-6978. The cut off time
for telephone transfer requests is 3:00 p.m. Central Time. In the event that the
New York Stock Exchange closes early, i.e., before 3:00 p.m. Central Time, or in
the event that the Exchange closes early for a period of time but then reopens
for trading on the same day, we will process telephone transfer requests as of
the close of the Exchange on that particular day. We will not accept telephone
requests received at any telephone number other than the number that appears in
this paragraph or received after the close of trading on the Exchange.
We may suspend, modify or terminate the telephone transfer privilege, as well as
any other electronic or automated means we previously approved, 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.
TRADING LIMITATIONS
We reserve the right to limit transfers among the investment alternatives in any
Contract year, or to refuse any transfer request, if:
.. we believe, in our sole discretion, that certain trading practices, such as
excessive trading or market timing ("Prohibited Trading Practices"), by, or on
behalf of, one or more Contract 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 on the share prices of the
corresponding Portfolio or otherwise would be to the disadvantage of other
Contract Owners; or
.. we are informed by one or more of the Portfolios that they intend to restrict
the purchase, exchange, or redemption of Portfolio shares because of
Prohibited Trading Practices or because they believe that a specific transfer
or group 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.
DOLLAR COST AVERAGING PROGRAM
Under the Dollar Cost Averaging Program, you may automatically transfer a set
amount at regular intervals during the Accumulation Phase from any Variable
Sub-Account, or a 1 year Guarantee Period of the Fixed Account, to any other
Variable Sub-Account. The intervals between transfers, may be monthly,
quarterly, semi-annually, or annually. You may not use the Dollar Cost Averaging
Program to transfer amounts to the Fixed Account.
We will not charge a transfer fee for transfers made under this Program, nor
will such transfers count against the 12 transfers you can make each Contract
Year without paying a transfer fee.
The theory of dollar cost averaging is that if purchases of equal dollar amounts
are made at fluctuating prices, the aggregate average cost per unit will be less
than the average of the unit prices on the same purchase dates. However,
participation in this Program does not assure you of a greater profit from your
purchases under the Program nor will it prevent or necessarily reduce losses in
a declining market.
AUTOMATIC FUND REBALANCING PROGRAM
Once you have allocated your money among the Variable Sub-Accounts, the
performance of each Sub-Account may cause a shift in the percentage you
allocated to each Sub-Account. If you select our Automatic Fund Rebalancing
Program, we will automatically rebalance the Contract Value in each Variable
Sub-Account and return it to the desired percentage allocations. Money you
allocate to the Fixed Account will not be included in the rebalancing.
We will rebalance your account each quarter according to your instructions. We
will transfer amounts among the Variable Sub-Accounts to achieve the percentage
allocations you specify. You can change your allocations at any time by
contacting us in writing or by telephone.
The new allocation will be effective with the first rebalancing that occurs
after we receive your 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
16 PROSPECTUS
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.
CONTRACT MAINTENANCE CHARGE
During the Accumulation Phase, on each Contract Anniversary, we will deduct a
$35 contract maintenance charge from your Contract Value invested in each
Variable Sub-Account in proportion to the amount invested. During the Payout
Phase, we will deduct the charge proportionately from each income payment.
The charge is to compensate us for the cost of administering the Contracts and
the Variable Account. Maintenance costs include expenses we incur in processing
purchase payments; keeping records; processing death claims, cash withdrawals,
policy changes; proxy statements; calculating Accumulation Unit Values and
income payments; and issuing reports to Contract Owners and regulatory agencies.
We cannot increase the charge. We will waive this charge if:
.. total Purchase Payments equal $50,000 or more, or
.. all of your money is allocated to the Fixed Account as of the Contract
Anniversary.
If you surrender your Contract, we will deduct the full contract maintenance
charge unless your Contract qualifies for a waiver.
MORTALITY AND EXPENSE RISK CHARGE
We deduct a mortality and expense risk charge daily at an annual rate of 1.35%
of the average daily net assets you have invested in the Variable Sub-Accounts.
The mortality and expense risk charge is for all the insurance benefits
available with your Contract (including our guarantee of annuity rates and the
death benefits), for certain expenses of the Contract, and for assuming the risk
(expense risk) that the current charges will be sufficient in the future to
cover the cost of administering the Contract. If the charges under the Contract
are not sufficient, then Glenbrook Life will bear the loss.
We guarantee the mortality and expense risk charge and we cannot increase it. We
assess the mortality and expense risk charge during both the Accumulation Phase
and the Payout Phase.
ADMINISTRATIVE EXPENSE CHARGE
We deduct an administrative expense charge daily at an annual rate of 0.10% of
the average daily net assets you have invested in the Variable Sub-Accounts. We
intend this charge to cover actual administrative expenses that exceed the
revenues from the contract maintenance charge. No necessary relationship exists
between the amount of administrative charge imposed on a given Contract and the
amount of expenses that may be attributed to that Contract. We assess this
charge each day during the Accumulation Phase and the Payout Phase. We guarantee
that we will not raise this charge.
TRANSFER FEE
We do not currently impose a fee upon transfers among the Investment
Alternatives. However, we reserve the right to charge $10 per transfer after the
12th transfer in each Contract Year. We will not charge a transfer fee on
transfers that are part of a Dollar Cost Averaging or an Automatic Fund
Rebalancing Program.
WITHDRAWAL CHARGE
We may assess a Withdrawal Charge of up to 6% of the Purchase Payment(s) you
withdraw. The charge declines to 0% after 7 complete years from the date we
received the Purchase Payment being withdrawn. A schedule showing how the charge
declines appears on page 7. During each Contract Year, you can withdraw up to
10% of Purchase Payments without paying the charge. Unused portions of this 10%
"FREE WITHDRAWAL AMOUNT" are not carried forward to future Contract Years. We
will deduct Withdrawal Charges, if applicable, from the amount paid. For
purposes of the Withdrawal Charge, we will treat withdrawals as coming from the
oldest Purchase Payments first. However, for federal income tax purposes,
earnings are considered to come out first, which means you pay taxes on the
earnings portion of your withdrawal.
Beginning on January 1, 2004, if you make a withdrawal before the Payout Start
Date, we will apply the withdrawal charge percentage in effect on the date of
the withdrawal, or the withdrawal charge percentage in effect on the following
day, whichever is lower.We do not apply a Withdrawal Charge in the following
situations:
.. on the Payout Start Date (a Withdrawal Charge may apply if you elect to
receive Income Payments for a specified period of less than 120 months);
17 PROSPECTUS
.. the death of the Contract owner or Annuitant (unless the settlement value is
used);
.. withdrawals taken to satisfy IRS minimum distribution rules; or
.. withdrawals that qualify for the waiver as described below.
We use the amounts obtained from the Withdrawal Charge to pay sales commissions
and other promotional or distribution expenses associated with marketing the
Contracts. To the extent that the Withdrawal Charge does not cover all sales
commissions and other promotional or distribution expenses, we may use any of
our corporate assets, including potential profit which may arise from the
mortality and expense risk charge or any other charges or fee described above,
to make up any difference. Withdrawals may be subject to tax penalties or income
tax and a Market Value Adjustment. You should consult your own tax counsel or
other tax advisers regarding any withdrawals.
CONFINEMENT WAIVER
We will waive the Withdrawal Charge on all withdrawals taken prior to the Payout
Start Date under your Contract if the following conditions are satisfied:
1. you, or the Annuitant if the Contract is owned by a non-natural person, are
first confined to a long term care facility or a hospital (as defined in the
Contract) for at least 90 consecutive days. You or the Annuitant must enter the
long term care facility or hospital at least 30 days after the Issue Date;
2. we must receive the request for the withdrawal and due proof (as defined in
the Contract) of the stay no later than 90 days following the end of your or the
Annuitant's stay at the long term care facility or hospital; and
3. a physician must have prescribed the stay and the stay must be medically
necessary (as defined in the Contract).
You may not claim this benefit if you, or the Annuitant, or a member of your or
the Annuitant's immediate family (as defined in the Contract), is the physician
prescribing your or the Annuitant's stay in a long term care facility. Please
refer to your Contract for more detailed information about the terms and
conditions of these waivers.
The laws of your state may limit the availability of this waiver and may also
change certain terms and/or benefits available under the waiver. You should
consult your Contract for further details on these variations. Also, even if you
do not need to pay our Withdrawal Charge because of the waiver, you still may be
required to pay taxes or tax penalties on the amount withdrawn. You should
consult your tax adviser to determine the effect of a withdrawal on your taxes.
PREMIUM TAXES
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. We are responsible for paying these taxes and
will deduct them from your Contract Value. Some of these taxes are due when the
Contract is issued, others are due when income payments begin or upon surrender.
Our current practice is not to charge anyone for these taxes until Income
Payments begin or when a total withdrawal occurs including payment upon death.
We may discontinue this practice sometime in the future and deduct premium taxes
from the Purchase Payments. Premium taxes generally range from 0% to 4%,
depending on the state.
At the Payout Start Date, if applicable, we deduct the charge for premium taxes
from each investment alternative in the proportion that the Contract 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
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Each Fund deducts advisory fees and other expenses from its assets. You
indirectly bear the charges and expenses of the Funds whose shares are held by
the Variable Sub-Accounts. These fees and expenses are described in the
accompanying prospectus for the AIM Variable Insurance Funds. For a summary of
current estimates of those charges and expenses, see pages 7-8. We may receive
compensation from A I M Advisors, Inc., for administrative services we provide
to the Funds.
18 PROSPECTUS
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 20.
The amount payable upon withdrawal is the Contract Value next computed after we
receive the request for a withdrawal at our service center, adjusted by any
Market Value Adjustment, less any Withdrawal Charges, contract maintenance
charges, income tax withholding, penalty tax, and any premium taxes. We will pay
withdrawals from the Variable Account within 7 days of receipt of the request,
subject to postponement in certain circumstances.
You can withdraw money from the Variable Account or the Fixed Account. To
complete a partial withdrawal from the Variable Account, we will cancel
Accumulation Units in an amount equal to the withdrawal and any applicable
withdrawal charge and premium taxes.
You 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.
If you request a total withdrawal, we may require you to return your Contract to
us. We also will deduct a contract maintenance charge of $35, unless we have
waived the contract maintenance charge on your Contract.
Withdrawals taken prior to annuitization (referred to in this prospectus as the
Payout Phase) are generally considered to come from the earnings in the Contract
first. If the Contract is tax-qualified, generally all withdrawals are treated
as distributions of earnings. 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.
POSTPONEMENT OF PAYMENTS
We may postpone the payment of any amounts due from the Variable Account under
the Contract if:
1. The New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on the Exchange is otherwise restricted;
2. An emergency exists as defined by the SEC; or
3. The SEC permits delay for your protection.
In addition, we may delay payments or transfers from the Fixed Account for up to
6 months or a shorter period if required by law. If we delay payment or transfer
for 30 days or more, we will pay interest as required by law. Any interest would
be payable from the date we receive the withdrawal request to the date we make
the payment or transfer.
SYSTEMATIC WITHDRAWAL PROGRAM
You may choose to receive systematic withdrawal payments on a monthly,
quarterly, semi-annual, or annual basis at any time prior to the Payout Start
Date. The minimum amount of each systematic withdrawal is $50. At our
discretion, systematic withdrawals may not be offered in conjunction with the
Dollar Cost Averaging or Automatic Fund Rebalancing Programs.
Depending on fluctuations in the "accumulation unit value" of the Variable
Sub-Accounts and the value of the Fixed Account, systematic withdrawals may
reduce or even exhaust the Contract Value. Systematic withdrawal payments are
subject to any applicable withdrawal charges and market value adjustments.
Please consult your tax advisor before taking any withdrawal.
We will make systematic withdrawal payments to you or your designated payee. We
may modify or suspend the Systematic Withdrawal Program and charge a processing
fee for the service. If we modify or suspend the Systematic Withdrawal Program,
existing systematic withdrawal payments will not be affected.
MINIMUM CONTRACT VALUE
If your request for a partial withdrawal would reduce the amount in any
Guarantee Period to less than $500, we may treat the request as a withdrawal of
the entire amount invested in such Guarantee Period. In addition, if your
request for a partial withdrawal would reduce your Contract Value to less than
$1,000, we may treat it as a request to withdraw your entire Contract Value.
Your Contract will terminate if you withdraw all of your Contract Value. We
will, however, ask you to confirm your withdrawal request before terminating
your Contract. Before terminating any Contract whose value has been reduced by
withdrawals to less than $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 the 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 taxes.
19 PROSPECTUS
INCOME PAYMENTS
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PAYOUT START DATE
You select the Payout Start Date in your application. The Payout Start Date is
the day that we apply your Contract Value, adjusted by any Market Value
Adjustment and less any applicable taxes, to an Income Plan. The Payout Start
Date must be no later than the Annuitant's 90th birthday, or the 10th Contract
Anniversary, if later.
You may change the Payout Start Date at any time by notifying us in writing of
the change at least 30 days before the scheduled Payout Start Date. Absent a
change, we will use the Payout Start Date stated in your Contract.
INCOME PLANS
An "Income Plan" is a series of payments on a scheduled basis to you or to
another person designated by you. You may choose and change your choice of
Income Plan until 30 days before the Payout Start Date. If you do not select an
Income Plan, we will make income payments in accordance with Income Plan 1 with
guaranteed payments for 10 years. After the Payout Start Date, you may not make
withdrawals (except as described on below) or change your choice of Income Plan.
Three Income Plans are available under the Contract. Each is available to
provide:
.. fixed income payments;
.. variable income payments; or
.. a combination of the two.
A portion of each payment will be considered taxable and the remaining portion
will be a non-taxable return of your investment in the Contract, which is also
called the "basis". Once the basis in the Contract is depleted, all remaining
payments will be fully taxable. If the Contract is tax-qualified, generally,
all payments will be fully taxable. Taxable payments taken prior to age 59 1/2,
may be subject to an additional 10% federal tax penalty.
The three Income Plans are:
INCOME PLAN 1 - LIFE INCOME WITH GUARANTEED PAYMENTS. Under this plan, we make
periodic income payments for at least as long as the Annuitant lives. If the
Annuitant dies before we have made all of the guaranteed income payments, we
will continue to pay the remainder of the guaranteed income payments as required
by the Contract.
INCOME PLAN 2 - JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED PAYMENTS. Under
this plan, we make periodic income payments for at least as long as either the
Annuitant or the joint Annuitant is alive. If both the Annuitant and the joint
Annuitant die before we have made all of the Guaranteed income payments, we will
continue to pay the remainder of the guaranteed income payments as required by
the Contract.
INCOME PLAN 3 - GUARANTEED PAYMENTS FOR A SPECIFIED PERIOD (5 YEARS TO 30
YEARS). Under this plan, we make periodic income payments for the period you
have chosen. These payments do not depend on the Annuitant's life. Income
payments for less than 120 months may be subject to a withdrawal charge. We will
deduct the mortality and expense risk charge from the Variable Sub-Account
assets 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 is alive before
we make each payment.
Please note that under such Income Plans, if you elect to take no minimum
guaranteed payments, it is possible that the payee could receive only 1 income
payment if the Annuitant and any joint Annuitant both die before the second
income payment, or only 2 income payments if they die before the third income
payment, and so on.
Generally, you may not make withdrawals after the Payout Start Date. One
exception to this rule applies if you are receiving variable income payments
that do not depend on the life of the Annuitant (such as under Income Plan 3).
In that case you may terminate all or a portion of the Variable Account portion
of the income payments at any time and receive a lump sum equal to the present
value of the remaining variable payments associated with the amount withdrawn.
To determine the present value of any remaining variable income payments being
withdrawn, we use a discount rate equal to the assumed annual investment rate
that we use to compute such variable income payments. The minimum amount you may
withdraw under this feature is $1,000. A withdrawal charge may apply. We 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.
20 PROSPECTUS
You must apply at least the Contract Value in the Fixed Account on the Payout
Start Date to fixed income payments. If you wish to apply any portion of your
Fixed Account option balance to provide variable income payments, you should
plan ahead and transfer that amount to the Variable Sub-Accounts prior to the
Payout Start Date. If you do not tell us how to allocate your Contract Value
among fixed and variable income payments, we will apply your Contract Value in
the Variable Account to variable income payments and your Contract Value in the
Fixed Account to fixed income payments. We will apply your Contract Value,
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 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 the Fixed Account for the
duration of the Income Plan. We calculate the Fixed Income Payments by:
1) adjusting the portion of the Contract Value in the Fixed Account on the
Payout Start Date by any applicable Market Value Adjustment;
2) deducting any applicable premium tax; and
3) applying the resulting amount to the greater of (a) the appropriate value
from the income payment table in your Contract or (b) such other value as we are
offering at that time.
We may defer making Fixed Income Payments for a period of up to 6 months or such
shorter time as state law may require. If we defer payments for 30 days or more,
we will pay interest as required by law from the date we receive the withdrawal
request to the date we make payment.
CERTAIN EMPLOYEE BENEFIT PLANS
The Contracts offered by this prospectus contain Income Payment Tables that
provide for different payments to men and women of the same age, except in
states that require unisex tables. We reserve the right to use Income Payment
Tables that do not distinguish on the basis of sex to the extent permitted by
law. In certain employment-related situations, employers are required by law to
use the same income payment tables for men and women. Accordingly, if the
Contract is to be used in connection with an employment-related retirement or
benefit plan and we do not offer unisex annuity tables in your state, you should
consult with legal counsel as to whether the purchase of a Contract is
appropriate.
DEATH BENEFITS
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We will pay a death benefit if, prior to the Payout Start Date:
1. any Contract owner dies or,
2. the Annuitant dies, if the Contract is owned by a company or other
non-natural Owner.
We will pay the death benefit to the new Contract Owner who is determined
immediately after the death. The new Contract Owner would be a surviving
Contract Owner or, if none, the Beneficiary(ies). In the case a Contract owned
by a non-natural owner, upon the death of an 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 a
finding of death; or
.. any other proof acceptable to us.
21 PROSPECTUS
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 the payment of the death
benefit. If we receive a request after 3:00 p.m. Central Time on a Valuation
Date, we will process the request as of the end of the following Valuation Date.
Where there are multiple beneficiaries, we will only value the death benefit at
the time the first beneficiary submits the necessary documentation in good
order. Any death benefit amounts attributable to any beneficiary which remain in
the investment divisions are subject to investment risk.
DEATH BENEFIT AMOUNT
Prior to the Payout Start Date, if we receive a complete request for payment 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 Death Benefit, or
2. the SETTLEMENT VALUE (that is, the amount that would have been payable on a
full withdrawal of the Contract Value) on the date that we determine the Death
Benefit, or
3. the Contract Valueon the DEATH BENEFIT ANNIVERSARY immediately preceding the
date that we determine the Death Benefit, adjusted by any Purchase Payments,
withdrawals, and charges made since that Death Benefit Anniversary.
In calculating the Settlement Value, the amount in each individual Guarantee
Period may be subject to a Market Value Adjustment. A Market Value Adjustment
will apply to amounts in a Guarantee Period, unless we calculate the Settlement
Value during the 30-day period after the expiration of the Guarantee Period.
Also, the Settlement Value will reflect deduction of any applicable withdrawal
charges, contract maintenance charges, and premium taxes.
A "Death Benefit Anniversary" is every seventh Contract Anniversary beginning
with the Issue Date. For example, the Issue Date, 7th and 14th Contract
Anniversaries are the first three Death Benefit Anniversaries.
We will adjust the Death Benefit by any applicable Market Value Adjustment as of
the date we determine the Death Benefit (a Market Value Adjustment, if any, made
upon payment of a Death Benefit would be positive). The Death Benefit will never
be less than the sum of all purchase payments less any amounts previously paid
to the Contract owner (including income tax withholding).
If we do not receive a complete request for payment of the Death Benefit within
180 days of the date of death, the Death Benefit is equal to the greater of:
.. the Contract Value as of the date we determine the Death Benefit, or
.. the Settlement Value.
We reserve the right to extend, on a non-discriminatory basis, the 180 day
period in which the death proceeds will equal the Death Benefit as described
above. This right applies only to the amount payable as death proceeds and in no
way restricts when a claim maybe filed.
ENHANCED DEATH BENEFIT OPTIONS
You can select an enhanced Death Benefit option when you purchase the Contract.
ENHANCED DEATH BENEFIT A. If you select Enhanced Death Benefit A, the Death
Benefit will be the greater of the values stated in the Death Benefit Amount
provision above, or the value of Enhanced Death Benefit A. The Enhanced Death
Benefit A is:
The greatest of the ANNIVERSARY VALUES as of the date we determine the Death
Benefit. An "Anniversary Value" is equal to the Contract Value on a Contract
Anniversary, increased by purchase payments made since that Anniversary and
reduced by the amount of any partial withdrawals since that anniversary.
Anniversary Values will be calculated for each Contract Anniversary prior to the
earlier of:
(i) the date we determine the Death Benefit, or
(ii) the 75th birthday of the oldest Contract owner, or, the Annuitant if the
Contract owner is not a natural person, or 5 years after the Issue Date, if
later.
ENHANCED DEATH BENEFIT B. If you select Enhanced Death Benefit B, the Death
Benefit will be the greater of the values stated in the Death Benefit Amount
provision above, or the value of Enhanced Death Benefit B. The Enhanced Death
Benefit B is:
Total purchase payments minus the sum of all partial withdrawals. Each Purchase
Payment and each partial withdrawal will accumulate daily at a rate equivalent
to 5% per year until the earlier of:
(i) the date we determine the Death Benefit, or
(ii) the first day of the month following the 75th birthday of the oldest
Contract Owner, or, the Annuitant if the Contract Owner is not a natural person,
or 5 years after the Issue Date, if later.
If the enhanced Death Benefit option is purchased and neither option is selected
by the Owner, the Contract will automatically include Enhanced Death Benefit A.
We will determine the value of the Death Benefit at the end of the Valuation
Date on which we receive a complete request for payment of the Death Benefit
which includes due proof of death. Neither Enhanced Death Benefit A nor Enhanced
Death Benefit B will ever be greater than the maximum Death Benefit allowed by
any non-forfeiture laws which govern the Contract.
DEATH BENEFIT PAYMENTS
If the new Owner is your spouse, the new Owner may:
1. elect to receive the Death Benefit in a lump sum, or
22 PROSPECTUS
2. elect to apply the Death Benefit to an Income Plan. Payments from the Income
Plan must begin within 1 year of the date of death and must be payable
throughout:
.. The life of the new Owner; or
.. for a guaranteed number of payments from 5 to 50 years, but not to exceed the
life expectancy of the new Owner; or
.. over the life of the new Owner with a guaranteed number of payments from 5 to
30 years but not to exceed the life expectancy of the new Owner.
If your spouse does not elect one of the above 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 restrictions
apply:
.. 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 the completed request for settlement of the Death Benefit (the next
Valuation Date, if we receive the completed request for settlement of the
Death Benefit after 3 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 Period during which we receive the
completed request for settlement of the Death Benefit, except that any portion
of this excess attributable to the Fixed Account Options will be allocated to
the Money Market 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:
. transfer all or a portion of the excess among the Variable Sub-Accounts;
. transfer all or a portion of the excess into the Guaranteed Maturity Fixed
Account and begin a new Guarantee Period; or
. transfer all or a portion of the excess into a combination of Variable
Sub-Accounts and the Guaranteed Maturity Fixed Account.
Any such transfer does not count as one of the free transfers allowed each
Contract Year and is subject to any minimum allocation amount specified in your
Contract.
The surviving spouse may make a single withdrawal of any amount within one year
of the date of death without incurring a Withdrawal Charge.
Only one spousal continuation is allowed under this Contract.
If the new Owner is not your spouse but is a natural person, the new 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 1 year of the date of death and must be payable
throughout:
. the life of the new Owner; or
. for a guaranteed number of payments from 5 to 50 years, but not to exceed
the life expectancy of the new Owner; or
. over the life of the new Owner with a guaranteed number of payments from 5
to 30 years but not to exceed the life expectancy of the new Owner.
If the new Owner does not elect one of the above options above, then the new
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 Valuation Date on which we received the completed request
for settlement of the Death Benefit (the next Valuation Date, if we receive the
completed request for settlement of the Death Benefit after 3 p.m. Central
Time). Unless otherwise instructed by the new 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 Owner may exercise all rights as set forth in the
TRANSFERS section during this 5 year period.
No additional Purchase Payments may be added to the Contract under this
election. Withdrawal Charges will be waived for any withdrawals made during this
5 year period.
If the new Owner dies prior to the receiving all of the Contract Value, then the
new 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 Owner's death.
We reserve the right to offer additional options upon Death of Owner.
If the new Owner is a corporation, trust, or other non-natural person:
(a) The new Owner may elect, within 180 days of the date of death, to receive
the Death Benefit in a lump sum; or
(b) If the new Owner does not elect the option above, then the new Owner must
receive the Contract Value payable within 5 years of your date of death. On the
date we receive the complete request for settlement of the Death Benefit, the
Contract Value under this option will be the Death Benefit. Unless otherwise
instructed by the new 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 Owner may exercise all rights set forth in the Transfers provision during
this 5 year period.
We reserve the right to offer additional options upon Death of Owner.
23 PROSPECTUS
If any new Owner is a non-natural person, all new 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 Owner from the
date of your death to the date on which the death proceeds are paid.
DEATH OF ANNUITANT
If the Annuitant who is not also the Contract Owner dies prior to the Payout
Start Date and the Contract Owner is a natural person, then the Contract will
continue with a new Annuitant as designated by the Contract Owner.
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 new Owner does not elect the option above, then the Owner must
receive the Contract Value payable within 5 years of the Annuitant's date of
death. On the date we receive the complete request for settlement of the Death
Benefit, the Contract Value under this option will be the Death Benefit. 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 set forth in the
Transfers provision during this 5 year period. No additional Purchase Payments
may be added to the Contract under this election. Withdrawal Charges will be
waived during this 5 year period.
We reserve the right to offer additional options upon Death of Annuitant.
MORE INFORMATION
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GLENBROOK LIFE
Glenbrook Life is the issuer of the Contract. Glenbrook Life is a stock life
insurance company originally organized under the laws of the State of Indiana in
1965. From 1965 to 1983 the Company was known as "United Standard Life Assurance
Company" and from 1983 to 1992 the Company was known as "William Penn Life
Assurance Company of America." In 1992, the Company was renamed Glenbrook Life
and redomesticated to Illinois. In 1998, the Company was redomesticated to
Arizona.
Glenbrook Life is licensed to operate in the District of Columbia and all states
except New York. Our home office is located at 3100 Sanders Road, Northbrook,
Illinois 60062.
Glenbrook Life is a wholly owned subsidiary of Allstate Life Insurance Company
(Allstate Life), a stock life insurance company incorporated under the laws of
the State of Illinois. Allstate Life is a wholly owned subsidiary of Allstate
Insurance Company, a stock property-liability insurance company incorporated
under the laws of the State of Illinois. All of the outstanding capital stock of
Allstate Insurance Company is owned by The Allstate Corporation, a Delaware
company which has several different classes of securities, including common
stock, registered with the Securities and Exchange Commission.
Glenbrook Life and Allstate Life entered into reinsurance agreements under which
Glenbrook Life reinsures all of its business with Allstate Life. Under the
agreements, contract charges, credited interest, policy benefits and certain
expenses under all general account contracts are reinsured with Allstate Life.
Allstate Life is bound to stand behind Glenbrook Life's contractual obligations
to its policyholders. However, the obligations of Allstate Life under the
reinsurance agreements are to Glenbrook Life. Glenbrook Life continues to have
primary responsibility as the direct insurer for risks reinsured. In addition,
assets of Glenbrook Life that relate to insurance in-force, excluding Separate
Accounts assets, are transferred to Allstate Life. Therefore, the funds
necessary to support the operations of Glenbrook Life are provided by Allstate
Life and Glenbrook Life is not required to obtain additional capital to support
in-force or future business.
Several independent rating agencies regularly evaluate life insurer's claims
paying ability, quality of investments and overall stability. A.M. Best Company
assigns A+ (Superior) to Allstate Life which automatically reinsures all net
business of Glenbrook Life. A.M. Best Company also assigns Glenbrook Life the
rating of A+(r) because Glenbrook Life automatically reinsures all business with
Allstate Life. Standard & Poor's Insurance Rating Services assigns AA+ (very
strong) to Glenbrook Life's claims-paying ability and Moody's Investors Service
assigns an Aa2 (excellent) financial strength rating to Glenbrook Life.
Glenbrook Life shares the same ratings of its parent, Allstate Life. In
February 2002, Standard & Poor's affirmed its December 31, 2001 ratings.
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
24 PROSPECTUS
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 do not guarantee the investment performance of the Variable Account,
its Sub-Accounts or the Funds. We may use the Variable Account to fund our other
annuity contracts. We will account separately for each type of annuity contract
funded by the Variable Account.
THE FUNDS
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. We automatically reinvest all
dividends and capital gains distributions from the Funds in shares of the
distributing Fund at their net asset value.
VOTING PRIVILEGES. As a general matter, you do not have a direct right to vote
the shares of the Funds held by the Variable Sub-Accounts to which you have
allocated your Contract Value. Under current law, however, you are entitled to
give us instructions on how to vote those shares on certain matters. Based on
our present view of the law, we will vote the shares of the Funds that we hold
directly or indirectly through the Variable Account in accordance with
instructions that we receive from Contract Owners entitled to give such
instructions.
As a general rule, before the Payout Start Date, the Contract Owner or anyone
with a voting interest is the person entitled to give voting instructions. The
number of shares that a person has a right to instruct will be determined by
dividing the Contract Value allocated to the applicable Variable Sub-Account by
the net asset value per share of the corresponding Fund as of the record date of
the meeting. After the Payout Start Date, the person receiving Income Payments
has the voting interest. The payee's number of votes will be determined by
dividing the reserve for such Contract allocated to the applicable Variable
Sub-account by the net asset value per share of the corresponding Fund. The
votes decrease as income payments are made and as the reserves for the Contract
decrease.
We will vote shares attributable to Contracts for which we have not received
instructions, as well as shares attributable to us, in the same proportion as we
vote shares for which we have received instructions, unless we determine that we
may vote such shares in our own discretion. We will apply voting instructions to
abstain on any item to be voted on a pro-rata basis to reduce the votes eligible
to be cast.
We reserve the right to vote Fund shares as we see fit without regard to voting
instructions to the extent permitted by law. If we disregard voting
instructions, we will include a summary of that action and our reasons for that
action in the next semi-annual financial report we send to you.
CHANGES IN FUNDS. If the shares of any of the Funds are no longer available for
investment by the Variable Account or if, in our judgment, further investment in
such shares is no longer desirable in view of the purposes of the Contract, we
may eliminate that Fund and substitute shares of another eligible investment
fund. Any substitution of securities will comply with the requirements of the
1940 Act. We also may add new Variable Sub-Accounts that invest in additional
mutual funds. We will notify you in advance of any change.
CONFLICTS OF INTEREST. Certain of the Funds sell their shares to separate
accounts underlying both variable life insurance and variable annuity contracts.
It is conceivable that in the future it may be unfavorable for variable life
insurance separate accounts and variable annuity separate accounts to invest in
the same Fund. The boards of directors of these Funds monitor for possible
conflicts among separate accounts buying shares of the Funds. Conflicts could
develop for a variety of reasons. For example, differences in treatment under
tax and other laws or the failure by a separate account to comply with such laws
could cause a conflict. To eliminate a conflict, a Fund's board of directors may
require a separate account to withdraw its participation in a Fund. A Fund's net
asset value could decrease if it had to sell investment securities to pay
redemption proceeds to a separate account withdrawing because of a conflict.
THE CONTRACT
DISTRIBUTION. ALFS, Inc.("ALFS"), located at 3100 Sanders Road, Northbrook,
Illinois 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 NASD.
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 any purchase payments (on a present value basis).
Sometimes, we also pay the broker-dealer a persistency bonus in addition to the
standard commissions. We do not expect that a persistency bonus will exceed
1.20%, on an annual basis, of the Contract Values considered in connection with
the bonus.
In some states, Contracts may be sold by representatives or employees of banks
which may be acting as broker-dealers without separate registration under the
Exchange Act, pursuant to legal and regulatory exceptions.
Glenbrook Life does not pay ALFS a commission for distribution of the Contracts.
The underwriting
25 PROSPECTUS
agreement with ALFS provides that we will reimburse ALFS for any liability to
Contract owners arising out of services rendered or Contracts issued.
ADMINISTRATION. We have primary responsibility for all administration of the
Contracts and the Variable Account. We provide the following administrative
services, among others:
.. issuance of the Contracts;
.. maintenance of Contract owner records;
.. Contract owner services;
.. calculation of unit values;
.. maintenance of the Variable Account; and
.. preparation of Contract owner reports.
We will send you Contract statements and transaction confirmations at least
annually. You should notify us promptly in writing of any address change. You
should read your statements and confirmations carefully and verify their
accuracy. You should contact us promptly if you have a question about a periodic
statement. We will investigate all complaints and make any necessary adjustments
retroactively, but you must notify us of a potential error within a reasonable
time after the date of the questioned statement. If you wait too long, we
reserve the right to make the adjustment as of the date that we receive notice
of the potential error.
We also will provide you with additional periodic and other reports, information
and prospectuses as may be required by federal securities laws.
QUALIFIED PLANS
If you use the Contract with a qualified plan, the plan may impose different or
additional conditions or limitations on withdrawals, waivers of Withdrawal
Charges, death benefits, Payout Start Dates, Income Payments, and other Contract
features. In addition, adverse tax consequences may result if qualified plan
limits on distributions and other conditions are not met. Please consult your
qualified plan administrator for more information.
LEGAL MATTERS
All matters of state law pertaining to the Contracts, including the validity of
the Contracts and Glenbrook
Life's right to issue such Contracts under state insurance law, have been passed
upon by Michael J. Velotta, General Counsel of Glenbrook Life.
26 PROSPECTUS
TAXES
- --------------------------------------------------------------------------------
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 (the "Code"). Since the Variable Account is not an
entity separate from Glenbrook Life, and its operations form a part of Glenbrook
Life, it will not be taxed separately. Investment income and realized capital
gains of the Variable Account are automatically applied to increase reserves
under the Contract. Under existing federal income tax law, Glenbrook Life
believes that the Variable Account investment income and capital gains will not
be taxed to the extent that such income and gains are applied to increase the
reserves under the Contract. Accordingly, Glenbrook Life does not anticipate
that it will incur any federal income tax liability attributable to the Variable
Account, and therefore Glenbrook Life does not intend to make provisions for any
such taxes. If Glenbrook Life is taxed on investment income or capital gains of
the Variable Account, then Glenbrook Life may impose a charge against the
Variable Account in order to make provision for such taxes.
TAXATION OF VARIABLE 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 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.
GRANTOR TRUST OWNED ANNUITY. Contracts owned by a grantor trust are considered
owned by a non-natural owner. Grantor trust owned contracts receive tax
deferral as described in the Exceptions To The Non-Natural Owner Rule section.
In accordance with the Code, upon the death of the annuitant, the death benefit
must be paid. According to your Contract, the Death Benefit is paid to the
surviving Contract Owner. Since the trust will be the surviving Contract Owner
in all cases, the Death Benefit will be payable to the trust notwithstanding any
beneficiary designation on the annuity contract. A trust, including a grantor
trust, has two options for receiving any death benefits: 1) a lump sum payment;
or 2) payment deferred up to five years from date of death.
DIVERSIFICATION REQUIREMENTS. For a Contract to be treated as an annuity for
federal income tax purposes, the investments in the Variable Account must be
"adequately diversified" consistent with standards under Treasury Department
regulations. If the investments in the Variable Account are not adequately
diversified, the Contract will not be treated as an annuity contract for federal
income tax purposes. As a result, the income on the Contract will be taxed as
ordinary income received or accrued by the Contract owner during the taxable
year. Although Glenbrook Life does not have control over the Portfolios or their
investments, we expect the Portfolios to meet the diversification requirements.
OWNERSHIP TREATMENT. The IRS has stated that a contract owner will be
considered the owner of separate account assets if he possesses incidents of
ownership in those assets, such as the ability to exercise investment control
over the assets. At the time the diversification regulations were issued, the
Treasury Department
27 PROSPECTUS
announced that the regulations do not provide guidance concerning circumstances
in which investor control of the separate account investments may cause a
Contract owner to be treated as the owner of the separate account. The Treasury
Department also stated that future guidance would be issued regarding the extent
that owners could direct sub-account investments without being treated as owners
of the underlying assets of the separate account.
Your rights under the Contract are different than those described by the IRS in
rulings in which it found that Contract owners were not owners of separate
account assets. For example, you have the choice to allocate premiums and
Contract Values among a broader selection of investment alternatives. Also, you
may be able to transfer among investment alternatives more frequently than in
such rulings. These differences could result in you being treated as the owner
of the Variable Account. If this occurs, income and gain from the Variable
Account assets would be includible in your gross income. Glenbrook
Life does not know what standards will be set forth in any regulations or
rulings which the Treasury Department may issue. It is possible that future
standards announced by the Treasury Department could adversely affect the tax
treatment of your Contract. We reserve the right to modify the Contract as
necessary to attempt to prevent you from being considered the federal tax owner
of the assets of the Variable Account. However, we make no guarantee that such
modification to the Contract will be successful.
TAXATION OF PARTIAL AND FULL WITHDRAWALS. If you make a partial withdrawal
under a Non-Qualified Contract, amounts received are taxable to the extent the
Contract Value, without regard to surrender charges, exceeds the investment in
the Contract. The investment in the Contract is the gross premium paid for the
contract minus any amounts previously received from the Contract if such amounts
were properly excluded from your gross income. If you make a full withdrawal
under a Non-Qualified Contract, the amount received will be taxable only to the
extent it exceeds the investment in the Contract.
TAXATION OF ANNUITY PAYMENTS. Generally, the rule for income taxation of
annuity payments received from a Non-Qualified Contract provides for the return
of your investment in the Contract in equal tax-free amounts over the payment
period. The balance of each payment received is taxable. For fixed annuity
payments, the amount excluded from income is determined by multiplying the
payment by the ratio of the investment in the Contract (adjusted for any refund
feature or period certain) to the total expected value of annuity payments for
the term of the Contract. If you elect variable annuity payments, the amount
excluded from taxable income is determined by dividing the investment in the
Contract by the total number of expected payments. The annuity payments will be
fully taxable after the total amount of the investment in the Contract is
excluded using these ratios. The Federal tax treatment of annuity payments is
unclear in some respects. As a result, if the IRS should provide further
guidance, it is possible that the amount we calculate and report to the IRS as
taxable could be different. If you die, and annuity payments cease before the
total amount of the investment in the Contract is recovered, the unrecovered
amount will be allowed as a deduction for your last taxable year.
WITHDRAWALS AFTER THE PAYOUT START DATE. Federal tax law is unclear regarding
the taxation of any additional withdrawal received after the Payout Start Date.
It is possible that a greater or lesser portion of such a payment could be
taxable than the amount we determine.
DISTRIBUTION AT DEATH RULES. In order to be considered an annuity contract for
federal income tax purposes, the Contract must provide:
.. if any Contract Owner dies on or after the Payout Start Date but before the
entire interest in the Contract has been distributed, the remaining portion of
such interest must be distributed at least as rapidly as under the method of
distribution being used as of the date of the Contract Owner's death;
.. if any Contract Owner dies prior to the Payout Start Date, the entire interest
in the Contract will be distributed within 5 years after the date of the
Contract Owner's death. These requirements are satisfied if any portion of the
Contract Owner's interest that is payable to (or for the benefit of) a
designated Beneficiary is distributed over the life of such Beneficiary (or
over a period not extending beyond the life expectancy of the Beneficiary) and
the distributions begin within 1 year of the Contract Owner's death. If the
Contract Owner's designated Beneficiary is the surviving spouse of the
Contract Owner, the Contract may be continued with the surviving spouse as the
new Contract Owner.
.. 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:
.. if distributed in a lump sum, the amounts are taxed in the same manner as a
full withdrawal, or
.. 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:
28 PROSPECTUS
.. made on or after the date the Contract Owner attains age 59 1/2,
.. made as a result of the Contract Owner's death or becoming totally disabled,
.. made in substantially equal periodic payments over the Contract Owner's life
or life expectancy, or over the joint lives or joint life expectancies of the
Contract Owner and the Beneficiary,
.. 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 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 INTERNAL REVENUE CODE 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.
Generally, Section 1441 of the Code provides that a withholding agent must
withhold 30% of the taxable amounts paid to a non-resident alien. A non-resident
alien is someone other than a U.S. citizen or resident alien. Withholding may
be reduced or eliminated by an income tax treaty between the U.S. and the
non-resident alien's country of residence if the payee provides a U.S. taxpayer
identification number on Form W-8BEN. A U.S. taxpayer identification number is a
social security number or an individual taxpayer identification number ("ITIN").
ITINs are issued by the IRS to non-resident alien individuals who are not
eligible to obtain a social security 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;
29 PROSPECTUS
.. Corporate and Self Employed Pension and Profit Sharing Plans under Sections
401 and 403; and
.. State and Local Government and Tax-Exempt Organization Deferred Compensation
Plans under Section 457.
Glenbrook Life reserves the right to limit the availability of the Contract for
use with any of the Qualified Plans listed above or to modify the Contract to
conform with tax requirements.
The tax rules applicable to participants in such qualified plans vary according
to the type of plan and the terms and conditions of the plan itself. Adverse tax
consequences may result from certain transactions such as excess contributions,
premature distributions, and, distributions that do not conform to specified
commencement and minimum distribution rules. Glenbrook Life can issue an
individual retirement annuity on a rollover or transfer of proceeds from a
decedent's IRA or Qualified Plan under which the decedent's surviving spouse is
the beneficiary. Glenbrook Life does not offer an individual retirement annuity
that can accept a transfer of funds for any other, non-spousal, beneficiary of a
decedent's IRA or Qualified Plan.
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 AN INDIVIDUALLY OWNED 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 the Contract satisfy the
requirements for minimum distributions. Because these distributions are required
under the Code and the method of calculation is complex, please see a competent
tax advisor.
THE DEATH BENEFIT AND QUALIFIED CONTRACTS. Pursuant to the Code and IRS
regulations, an IRA (e.g., traditional IRA, Roth IRA, SEP IRA and SIMPLE IRA)
may not invest in life insurance contracts. However, an IRA may provide a death
benefit that equals the greater of the purchase payments or the Contract Value.
The Contract offers a death benefit that in certain circumstances may exceed the
greater of the purchase payments or the Contract Value. We believe that the
Death Benefits offered by your Contract do not constitute life insurance under
these regulations.
It is also possible that the certain death benefits that offer enhanced earnings
could be characterized as an incidental death benefit. If the death benefit were
so characterized, this could result in current taxable income to a Contract
owner. In addition, there are limitations on the amount of incidental death
benefits that may be provided under qualified plans, such as in connection with
a 403(b) plan.
Glenbrook Life reserves the right to limit the availability of the Contract for
use with any of the qualified plans listed above.
PENALTY TAX ON PREMATURE DISTRIBUTIONS FROM QUALIFIED CONTRACTS. A 10% penalty
tax applies to the taxable amount of any premature distribution from a Qualified
Contract. The penalty tax generally applies to any distribution made prior to
the date you attain age 59 1/2. However, no penalty tax is incurred on
distributions:
.. made on or after the date the Contract Owner attains age 59 1/2,
.. made as a result of the Contract Owner's death or total disability,
.. made in substantially equal periodic payments over the Contract Owner's life
or life expectancy, or over the joint lives or joint life expectancies of the
Contract Owner and the Beneficiary,
.. made pursuant to an IRS levy,
.. made for certain medical expenses,
.. made to pay for health insurance premiums while unemployed (only applies for
IRAs),
.. made for qualified higher education expenses (only applies for IRAs), and
30 PROSPECTUS
.. 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
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:
.. required minimum distributions, or,
.. a series of substantially equal periodic payments made over a period of at
least 10 years, or,
.. a series of substantially equal periodic payments made over the life (joint
lives) of the participant (and beneficiary), or,
.. 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. 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.
Generally, Section 1441 of the Code provides that a withholding agent must
withhold 30% of the taxable amounts paid to a non-resident alien. A non-resident
alien is someone other than a U.S. citizen or resident alien. Withholding may
be reduced or eliminated by an income tax treaty between the U.S. and the
non-resident alien's country of residence if the payee provides a U.S. taxpayer
identification number on Form W-8BEN. A U.S. taxpayer identification number is a
social security number or an individual taxpayer identification number ("ITIN").
ITINs are issued by the IRS to non-resident alien individuals who are not
eligible to obtain a social security 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.
ANNUITIES HELD BY INDIVIDUAL RETIREMENT ACCOUNTS (COMMONLY KNOWN AS CUSTODIAL
IRAS)
Internal Revenue Code Section 408 permits a custodian or trustee of an
Individual Retirement Account to purchase an annuity as an investment of the
Individual Retirement Account. If an annuity is purchased inside of an
Individual Retirement Account, then the Annuitant must be the same as the
beneficial owner of the Individual Retirement Account.
Generally, the death benefit of an annuity held in an Individual Retirement
Account must be paid upon the death of the Annuitant. However, in most states,
the Contract permits the custodian or trustee of the Individual Retirement
Account to continue the Contract
31 PROSPECTUS
in the accumulation phase, with the Annuitant's surviving spouse as the new
Annuitant, if the following conditions are met:
1) The custodian or trustee of the Individual Retirement Account is the owner of
the annuity and has the right to the death proceeds otherwise payable under
the annuity contract;
2) The deceased Annuitant was the beneficial owner of the Individual Retirement
Account;
3) We receive a complete request for settlement for the death of the Annuitant;
and
4) The custodian or trustee of the Individual Retirement Account provides us
with a signed certification of the following:
(a) The Annuitant's surviving spouse is the sole beneficiary of the Individual
Retirement Account;
(b) The Annuitant's surviving spouse has elected to continue the Individual
Retirement Account as his or her own Individual Retirement Account; and
(c) The custodian or trustee of the Individual Retirement Account has
continued the Individual Retirement Account pursuant to the surviving spouse's
election.
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 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.
Generally, we do not accept Employee Retirement Income Security Act of 1974
(ERISA) funds in 403(b) contracts.
CORPORATE AND SELF-EMPLOYED PENSION AND PROFIT SHARING PLANS. Sections 401(a)
and 403(a) of the Code permit corporate employers to establish various types of
tax favored retirement plans for employees. Self-employed individuals may
establish tax favored retirement plans for themselves and their employees. Such
retirement plans (commonly referred to as "H.R.10" or "Keogh") may permit the
purchase of annuity contracts.
STATE AND LOCAL GOVERNMENT AND TAX-EXEMPT ORGANIZATION DEFERRED COMPENSATION
PLANS. Section 457 of the Code permits employees of state and local governments
and tax-exempt organizations to defer a portion of their compensation without
paying current taxes. The employees must be participants in an eligible deferred
compensation plan. In eligible governmental plans, all assets and income must be
held in a trust/ custodial account/annuity contract for the exclusive benefit of
the participants and their beneficiaries. To the extent the Contracts are used
in connection with a non-governmental eligible plan, employees are considered
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.
32 PROSPECTUS
ANNUAL REPORTS AND OTHER DOCUMENTS
- --------------------------------------------------------------------------------
Glenbrook Life's annual report on Form 10-K for the year ended December 31, 2002
is incorporated herein by reference, which means that it is legally a part of
this prospectus.
After the date of this prospectus and before we terminate the offering of the
securities under this prospectus, all documents or reports we file with the SEC
under the Exchange Act are also incorporated herein by reference, which means
that they also legally become a part of this prospectus.
Statements in this prospectus, or in documents that we file later with the SEC
and that legally become a part of this prospectus, may change or supersede
statements in other documents that are legally part of this prospectus.
Accordingly, only the statement that is changed or replaced will legally be a
part of this prospectus.
We file our Exchange Act documents and reports, including our annual and
quarterly reports on Form 10-K and Form 10-Q electronically on the SEC's "EDGAR"
system using the identifying number CIK No. 0000947878. The SEC maintains a
Website 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.
30549. 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:
1-800-776-6978).
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
We may advertise the performance of the Variable Sub-Accounts, including yield
and total return information. Yield refers to the income generated by an
investment in a Variable Sub-Account over a specified period. Total return
represents the change, over a specified period of time, in the value of an
investment in a Variable Sub-Account after reinvesting all income distributions.
All performance advertisements will include, as applicable, standardized yield
and total return figures that reflect the deduction of insurance charges, the
contract maintenance charge, and Withdrawal Charge. Performance advertisements
also may include total return figures that reflect the deduction of insurance
charges, but not the contract maintenance or Withdrawal Charges. The deduction
of such charges would reduce the performance shown. In addition, performance
advertisements may include aggregate, average, year-by-year, or other types of
total return figures.
Performance information for periods prior to the inception date of the Variable
Sub-Accounts will be based on the historical performance of the corresponding
Funds for the periods beginning with the inception dates of the Funds and
adjusted to reflect current Contract expenses. You should not interpret these
figures to reflect actual historical performance of the Variable Account.
We may include in advertising and sales materials tax deferred compounding
charts and other hypothetical illustrations that compare currently taxable and
tax deferred investment programs based on selected tax brackets. Our
advertisements also may compare the performance of our Variable Sub-Accounts
with: (a) certain unmanaged market indices, including but not limited to the Dow
Jones Industrial Average, the Standard & Poor's 500, and the Shearson Lehman
Bond Index; and/or (b) other management investment companies with investment
objectives similar to the underlying funds being compared. In addition, our
advertisements may include the performance ranking assigned by various
publications, including the Wall Street Journal, Forbes, Fortune, Money,
Barron's, Business Week, USA Today, and statistical services, including Lipper
Analytical Services Mutual Fund Survey, Lipper Annuity and Closed End Survey,
the Variable Annuity Research Data Survey, and SEI.
33 PROSPECTUS
APPENDIX A
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED*
- --------------------------------------------------------------------------------
For the period beginning January 1 and ending December 31, 1995 1996 1997 1998 1999
AIM V.I. AGGRESSIVE GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- $ 10.000 $ 9.810
Accumulation Unit Value, End of Period -- -- -- $ 9.810 $ 13.988
Number of Units Outstanding, End of Period -- -- -- 163,537 247,763
AIM V.I. BALANCED SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- $ 10.000 $ 11.193
Accumulation Unit Value, End of Period -- -- -- $ 11.193 $ 13.162
Number of Units Outstanding, End of Period -- -- -- 244,603 297,688
AIM V.I. BASIC VALUE SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- -- --
Accumulation Unit Value, End of Period -- -- -- -- --
Number of Units Outstanding, End of Period -- -- -- -- --
AIM V.I. BLUE CHIP SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- -- --
Accumulation Unit Value, End of Period -- -- -- -- --
Number of Units Outstanding, End of Period -- -- -- -- --
AIM V.I. CAPITAL APPRECIATION SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 9.827 $ 11.387 $ 12.739 $ 14.979
Accumulation Unit Value, End of Period $ 9.827 $ 11.387 $ 12.739 $ 14.979 $ 21.350
Number of Units Outstanding, End of Period 996 4,471,775 7,850,032 8,770,421 7,460,389
AIM V.I. CAPITAL DEVELOPMENT SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- $ 10.000 $ 9.160
Accumulation Unit Value, End of Period -- -- -- $ 9.160 $ 11.655
Number of Units Outstanding, End of Period -- -- -- 126,384 104,456
AIM V.I. CORE EQUITY SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 9.897 $ 11.699 $ 14.496 $ 18.243
Accumulation Unit Value, End of Period $ 9.897 $ 11.699 $ 14.496 $ 18.243 $ 24.138
Number of Units Outstanding, End of Period 103 2,425,462 5,374,119 6,935,245 6,476,240
AIM V.I. DENT DEMOGRAPHIC TRENDS SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- -- --
Accumulation Unit Value, End of Period -- -- -- -- --
Number of Units Outstanding, End of Period -- -- -- -- --
AIM V.I. DIVERSIFIED INCOME SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 10.068 $ 10.934 $ 11.788 $ 12.035
Accumulation Unit Value, End of Period $10.068 $ 10.934 $ 11.788 $ 12.035 $ 11.633
Number of Units Outstanding, End of Period 0 747,505 1,950,608 2,301,209 1,949,974
AIM V.I. GLOBAL UTILITIES SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 10.209 $ 11.276 $ 13.518 $ 15.534
Accumulation Unit Value, End of Period $10.209 $ 11.276 $ 13.518 $ 15.534 $ 20.432
Number of Units Outstanding, End of Period 0 163,534 426,581 630,811 604,243
AIM V.I. GOVERNMENT SECURITIES SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 10.082 $ 10.164 $ 10.835 $ 11.484
Accumulation Unit Value, End of Period $10.082 $ 10.164 $ 10.835 $ 11.484 $ 11.189
Number of Units Outstanding, End of Period 0 263,768 550,452 912,586 791,933
34 PROSPECTUS
AIM V.I. GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 9.852 $ 11.466 $ 14.388 $ 18.954
Accumulation Unit Value, End of Period $ 9.852 $ 11.466 $ 14.388 $ 18.954 $ 25.263
Number of Units Outstanding, End of Period 104 2,070,239 4,031,175 5,170,994 4,664,892
AIM V.I. HIGH YIELD SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- $ 10.000 $ 9.141
Accumulation Unit Value, End of Period -- -- -- $ 9.141 $ 9.957
Number of Units Outstanding, End of Period -- -- -- 170,679 207,626
AIM V.I. INTERNATIONAL GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 10.103 $ 11.953 $ 12.598 $ 14.340
Accumulation Unit Value, End of Period $10.103 $ 11.953 $ 12.598 $ 14.340 $ 21.914
Number of Units Outstanding, End of Period 936 1,969,297 3,667,815 3,847,934 3,482,659
AIM V.I. MID CAP CORE EQUITY SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- -- --
Accumulation Unit Value, End of Period -- -- -- -- --
Number of Units Outstanding, End of Period -- -- -- -- --
AIM V.I. MONEY MARKET SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 10.023 $ 10.369 $ 10.745 $ 11.125
Accumulation Unit Value, End of Period $10.023 $ 10.369 $ 10.745 $ 11.125 $ 11.479
Number of Units Outstanding, End of Period 0 894,947 1,291,169 1,389,344 1,636,925
AIM V.I. NEW TECHNOLOGY SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- -- --
Accumulation Unit Value, End of Period -- -- -- -- --
Number of Units Outstanding, End of Period -- -- -- -- --
AIM V.I. PREMIER EQUITY SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 9.783 $ 11.090 $ 13.520 $ 17.644
Accumulation Unit Value, End of Period $ 9.783 $ 11.090 $ 13.520 $ 17.644 $ 22.589
Number of Units Outstanding, End of Period 966 3,528,353 7,294,719 9,222,186 8,450,007
For the period beginning January 1 and ending December 31, 2000 2001 2002
AIM V.I. AGGRESSIVE GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 13.988 $ 14.146 $ 10.308
Accumulation Unit Value, End of Period $ 14.146 $ 10.308 7.856
Number of Units Outstanding, End of Period 374,674 317,871 319,993
AIM V.I. BALANCED SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 13.162 $ 12,429 $ 10.849
Accumulation Unit Value, End of Period $ 12,429 $ 10.849 8.865
Number of Units Outstanding, End of Period 324,385 466,375 375,715
AIM V.I. BASIC VALUE SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- $ 10.000 $ 11.200
Accumulation Unit Value, End of Period -- $ 11.200 8.594
Number of Units Outstanding, End of Period -- 106,295 523,111
AIM V.I. BLUE CHIP SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.000 $ 8.824 $ 6.736
Accumulation Unit Value, End of Period $ 8.824 $ 6.736 4.902
Number of Units Outstanding, End of Period 43,201 137,431 150,596
AIM V.I. CAPITAL APPRECIATION SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 21.350 $ 18.749 $ 14.176
Accumulation Unit Value, End of Period $ 18.749 $ 14.176 10.569
Number of Units Outstanding, End of Period 6,513,666 5,542,201 4,387,246
AIM V.I. CAPITAL DEVELOPMENT SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 11.655 $ 12.551 $ 11.369
Accumulation Unit Value, End of Period $ 12.551 $ 11.369 8.812
Number of Units Outstanding, End of Period 100,594 148,205 218,127
35 PROSPECTUS
AIM V.I. CORE EQUITY SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 24.138 $ 20.330 $ 12.901
Accumulation Unit Value, End of Period $ 20.330 $ 12.901 12.863
Number of Units Outstanding, End of Period 5,660,367 3,481,797 3,775,932
AIM V.I. DENT DEMOGRAPHIC TRENDS SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.000 $ 7.890 $ 5.294
Accumulation Unit Value, End of Period $ 7.890 $ 5.294 3.537
Number of Units Outstanding, End of Period 254,388 297,997 202,469
AIM V.I. DIVERSIFIED INCOME SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 11.633 $ 10.226 $ 11.788
Accumulation Unit Value, End of Period $ 11.547 $ 11.788 11.886
Number of Units Outstanding, End of Period 1,535,325 1,296,754 1,072,702
AIM V.I. GLOBAL UTILITIES SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 20.432 $ 19.680 $ 13.978
Accumulation Unit Value, End of Period $ 19.680 $ 13.978 10.259
Number of Units Outstanding, End of Period 545,485 477,804 352,260
AIM V.I. GOVERNMENT SECURITIES SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 11.189 $ 12.146 $ 12.738
Accumulation Unit Value, End of Period $ 12.146 $ 12.738 13.759
Number of Units Outstanding, End of Period 655,826 777,763 1,181,464
AIM V.I. GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 25.263 $ 19.799 $ 12.901
Accumulation Unit Value, End of Period $ 19.799 $ 12.901 8.777
Number of Units Outstanding, End of Period 4,123,264 3,481,797 2,700,234
AIM V.I. HIGH YIELD SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 9.957 $ 7.949 $ 7.443
Accumulation Unit Value, End of Period $ 7.949 $ 7.443 $ 6.908
Number of Units Outstanding, End of Period 147,733 150,485 267,488
AIM V.I. INTERNATIONAL GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 21.914 $ 15.899 $ 11.980
Accumulation Unit Value, End of Period $ 15.899 $ 11.980 9.957
Number of Units Outstanding, End of Period 3,123,925 2,619,796 2,092,548
AIM V.I. MID CAP CORE EQUITY SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- $ 10.000 $ 11.357
Accumulation Unit Value, End of Period -- $ 11.357 9.950
Number of Units Outstanding, End of Period -- 61,146 295,398
AIM V.I. MONEY MARKET SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 11.479 $ 11.977 $ 12.231
Accumulation Unit Value, End of Period $ 11.977 $ 12.231 12.198
Number of Units Outstanding, End of Period 1,174,166 1,544,144 1,327,970
AIM V.I. NEW TECHNOLOGY SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.000 $ 20.180 $ 10.447
Accumulation Unit Value, End of Period $ 20.180 $ 10.447 5.649
Number of Units Outstanding, End of Period 100,871 104,248 86,017
AIM V.I. PREMIER EQUITY SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 22.589 $ 19.004 $ 16.376
Accumulation Unit Value, End of Period $ 19.004 $ 16.376 11.256
Number of Units Outstanding, End of Period 7,205,760 6,078,870 4,579,632
- -------------------------------------------------------------------------------------------------
* All Variable Sub-Accounts commenced operations on December 4, 1995, with the
exception of the AIM V.I. Aggressive Growth, Balanced, Capital Development, and
High Yield Sub-Accounts, which commenced operations on May 1, 1998, and the AIM
V.I. Blue Chip Fund, Dent Demographic Trends, and New Technology Variable Sub
Accounts, which commenced operations on January 3, 2000, and the Basic Value and
Mid Cap Core Equity Sub-Accounts, which commenced operations on October 1, 2001.
The Accumulation Unit Values in this table reflect a mortality and expense risk
charge of 1.35% and an administrative charge of 0.10%.
36 PROSPECTUS
APPENDIX B MARKET VALUE ADJUSTMENT
- --------------------------------------------------------------------------------
The Market Value Adjustment is based on the following:
I = the Treasury Rate for a maturity equal to the applicable Guarantee Period
for the week preceding the establishment of the Guarantee Period.
N = the number of whole and partial years from the date we receive the
withdrawal, transfer, or death benefit request, or from the Payout Start Date,
to the end of the Guarantee Period; and
J = the Treasury Rate for a maturity equal to the Guarantee Period for the
week preceding the receipt of the withdrawal, transfer, death benefit, or income
payment request. If a note for a maturity of length N is not available, a
weighted average will be used.
"Treasury Rate" means the U.S. Treasury Note Constant Maturity Yield as reported
in Federal Reserve Bulletin Release H.15.
The Market Value Adjustment factor is determined from the following formula:
.9 x (I - J) x N
To determine the Market Value Adjustment, we will multiply the Market Value
Adjustment factor by the amount transferred (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.
37 PROSPECTUS
EXAMPLES OF MARKET VALUE ADJUSTMENT
- --------------------------------------------------------------------------------
Purchase Payment: $10,000 (Credit Enhancement of $400 allocated to Money Market
Variable Sub-Account)
(Option 1: 4% up front): 10,000 allocated to a Guarantee Period
Guarantee Period: 5 years
Treasury Rate (at the time the Guarantee Period was established): 4.50%
Assumed Net Annual Earnings Rate in Money Market Variable Sub-Account: 4.50%
Full Surrender: End of Contract Year 3
NOTE: These examples assume that premium taxes are not applicable.
Step 1. Calculate Contract $10,000.00 X (1.04)/ / X (1.045)/3 /= $11,868.13
Value at End of Contract
Year 3:
Step 2. Calculate the Free 15% X $10,000.00 X (1.04) X (1.045)/2 /= $1,703.56
Withdrawal Amount:
Step 3. Calculate the = .07 X ($10,000.00 - $1,703.56) = $580.75
Withdrawal Charge:
Step 4. Calculate the I = 4.50%
Market Value Adjustment: J = 4.20%
N = 730 days = 2
--------
365 days
Market Value Adjustment Factor: .9 x (I - J) X N =
.9 x (.045 - .042) x (2) = .0054
Market Value Adjustment = Market Value Adjustment
Factor x Amount Subject to Market Value
Adjustment:
= .0054 X ($11,868.13 - $1,703.56) = $54.89
Step 5. Calculate the
amount received by a
Contract owner as a result
of full withdrawal at the
end of Contract Year 3: $11,868.13 - $580.75 + $54.89 = $11,342.27
EXAMPLE 1 (ASSUME DECLINING INTEREST RATES)
38 PROSPECTUS
EXAMPLE 2: (ASSUMES RISING INTEREST RATES)
Step 1. Calculate $10,000.00 X (1.04)/ / X (1.045)/3 /= $11,868.13
Contract Value at End of
Contract Year 3:
Step 2. Calculate the Free 15% X $10,000.00 X (1.04) X (1.045)/2 /= $1,703.56
Withdrawal Amount:
Step 3. Calculate the = .07 X ($10,000.00 - $1,703.56) = $580.75
Withdrawal Charge:
Step 4. Calculate the I = 4.50%
Market Value Adjustment: J = 4.80%
N = 730 days = 2
--------
365 days
Market Value Adjustment Factor: .9 x (I - J) x N =
.9 X (.045 - .048) x (2) = - .0054
Market Value Adjustment = Market Value Adjustment
Factor x Amount Subject to Market Value Adjustment:
= -.0054 X ($11,868.13 - $1,703.56) = $(54.89)
Step 5. Calculate the
amount received by a
Contract owner as a
result of full withdrawal
at the end of Contract
Year 3: $11,868.13 - $580.75 - $54.89 = $11,232.49
39 PROSPECTUS
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Additions, Deletions or Substitutions of Investments
- --------------------------------------------------------------------------------
The Contract
- --------------------------------------------------------------------------------
Purchase of Contract
- --------------------------------------------------------------------------------
Tax-free Exchanges (1035 Exchanges, Rollovers and Transfers)
- --------------------------------------------------------------------------------
Performance Information
- --------------------------------------------------------------------------------
Standardized Total Returns
- --------------------------------------------------------------------------------
Non-Standardized Total Returns
- --------------------------------------------------------------------------------
Adjusted Historical Returns
- --------------------------------------------------------------------------------
Calculation of Accumulation Unit Values
- --------------------------------------------------------------------------------
Net Investment Factors
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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.
40 PROSPECTUS
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 the court upon deems indemnification appropriate application.
ITEM 16. EXHIBITS.
Exhibit No. Description
(1) Form of Underwriting Agreement (Incorporated herein by reference to
Post-Effective Amendment No. 1 to Registrant's Form S-1 Registration Statement
(File No.
033-62193) dated March 22, 1996.)
(2) None
(4)(a) Form of Glenbrook Life and Annuity Company Flexible Premium Deferred
Variable Annuity Contract and Application (Incorporated herein by reference to
the initial filing of the Form N-4 Registration Statement (File No. 033-62203)
dated August 28, 1995.) (4)(b) Death Benefit Amendatory Endorsement
(Incorporated herein by reference to Post-Effective Amendment No. 9 (File No.
033-62203) dated April 26, 2002.)
(5) Opinion of General Counsel re: Legality (Previously filed in Post-Effective
Amendment No. 7 to this Registration Statement (File No. 033-62193) dated April
25, 2002.)
(8) None
(11) None
(12) None
(15) None
(23)(a) Independent Auditors' Consent filed herewith.
(24)(a) Powers of Attorney for Thomas J. Wilson II, Michael J. Velotta, & Samuel
H. Pilch (Previously filed in Post-Effective Amendment No. 5 to Form S-3
Registration Statement filed on April 21, 2000,File No. 033-62193).
(b)Powers of Attorney for Margaret G. Dyer, John C. Lounds, J. Kevin
McCarthy, Marla G. Friedman (Previously filed in Post-Effective Amendment No. 6
to this Registration Statement filed on April 6, 2001 (File No. 033-62193).
(c) Power of Attorney for Steven E. Shebik (Previously filed in
Post-Effective Amendment No. 7 to this Registration Statement (File No.
033-62193) dated April 25, 2002.)
(d) Power of Attorney for Casey J. Sylla filed herewith.
(25) None
(26) None
(27) Not applicable
(99) Form of Resolution of Board of Directors (Incorporated herein by reference
to Post-Effective Amendment No. 1 to Registrant's Form S-1 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.
Item 18. EXPERTS.
The financial statements and the related financial statement schedule
incorporated in this prospectus by reference from Glenbrook Life and Annuity
Company's Annual Report on Form 10-K for the year ended December 31, 2002 and
from the Statement of Additional Information (which is part of Registration
Statement No. 033-62203) have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is incorporated herein by reference,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
The financial statements of Glenbrook Life and Annuity Company Separate Account
A as of December 31, 2002 and for each of the periods in the two year period
then ended incorporated herein by reference from the Statement of Additional
Information (which is part of Registration Statement No. 033-62203), 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.
SIGNATURES
As required by the Securities Act of 1933, Registrant certifies that it has
reasonable grounds to believe that it meets all of the requirements for filing
on Form S-3, and has duly caused this amended Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the
Township of Northfield, State of Illinois, on the 1st day of April, 2003.
GLENBROOK LIFE AND ANNUITY COMPANY
(REGISTRANT)
AIM VARIABLE ANNUITY I
By:/s/ MICHAEL J. VELOTTA
------------------------
Michael J. Velotta
Vice President, Secretary and
General Counsel
Pursuant to the requirements of the Securities Act of 1933, this amended
Registration Statement has been signed by the following persons in their
capacities and on the 1st day of April, 2003.
* CASEY J. SYLLA Director, President and Chief Executive
- ---------------------- Officer (Principal Executive Officer)
Casey J. Sylla
/s/MICHAEL J. VELOTTA Vice President, Secretary,
--------------------- General Counsel, and Director
Michael J. Velotta
*/STEVEN E. SHEBIK Director and Vice President and Chief
------------------- Financial Officer (Principal Financial
Steven E. Shebik Officer)
*/SAMUEL H. PILCH Group Vice President and Controller
----------------- (Principal Accounting Officer)
Samuel H. Pilch
*/MARLA G. FRIEDMAN Vice President and Director
--------------------
Marla G. Friedman
*/MARGARET G. DYER Director
------------------
Margaret G. Dyer
*/JOHN C. LOUNDS Director
-----------------
John C. Lounds
*/J. KEVIN MCCARTHY Director
--------------------
J. Kevin McCarthy
*/ By Michael J. Velotta, pursuant to Power of Attorney previously filed or
filed herewith
EXHIBIT INDEX
Exhibit Description
(23)(a) Independent Auditors' Consent.
(24)(d) Power of Attorney for Casey J. Sylla