-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TVYLFjZ3ZaDal6EjrnyQ9h3RSGt6WBlTj33tbyPdCeCWNAbPiTBLR408eX/Xa4WC SnTqZwSZnyFaELFcOIZ+kQ== 0000945094-01-500093.txt : 20010607 0000945094-01-500093.hdr.sgml : 20010607 ACCESSION NUMBER: 0000945094-01-500093 CONFORMED SUBMISSION TYPE: 424B3 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20010606 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GLENBROOK LIFE & ANNUITY CO CENTRAL INDEX KEY: 0000945094 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 351113325 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B3 SEC ACT: SEC FILE NUMBER: 333-00987 FILM NUMBER: 1655021 BUSINESS ADDRESS: STREET 1: 3100 SANDERS ROAD CITY: NORTHBROOK STATE: IL ZIP: 60062 BUSINESS PHONE: 8474022400 MAIL ADDRESS: STREET 1: 3100 SANDERS RD CITY: NORTHBROOK STATE: IL ZIP: 60062 424B3 1 providerpros.txt GLAC PROVIDER THE GLENBROOK PROVIDER VARIABLE ANNUITY GLENBROOK LIFE AND ANNUITY COMPANY 300 N. MILWAUKEE AVE. VERNON HILLS, IL 60061 TELEPHONE NUMBER: 1-800-755-5275 PROSPECTUS DATED MAY 1, 2001 - -------------------------------------------------------------------------------- Glenbrook Life and Annuity Company ("GLENBROOK") is offering the Glenbrook Provider Variable Annuity, an individual flexible premium deferred variable annuity contract ("CONTRACT"). This prospectus contains information about the Contract that you should know before investing. Please keep it for future reference. The Contract currently offers 41 "INVESTMENT ALTERNATIVES". The investment alternatives include 3 fixed account options ("FIXED ACCOUNT OPTIONS") and 38 variable sub-accounts ("VARIABLE SUB-ACCOUNTS") of the Glenbrook Life Multi-Manager Variable Account ("VARIABLE ACCOUNT"). Each Variable Sub-Account invests exclusively in shares of one of the portfolios ("PORTFOLIOS") of the following mutual funds ("FUNDS"):
AIM VARIABLE INSURANCE FUNDS DREYFUS VARIABLE INVESTMENT FUND (VIF) THE DREYFUS SOCIALLY RESPONSIBLE THE UNIVERSAL INSTITUTIONAL FUNDS, INC. GROWTH FUND, INC. FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS MFS-REGISTERED TRADEMARK- VARIABLE GOLDMAN SACHS VARIABLE INSURANCE TRUST (VIT) INSURANCE TRUST-SM- DREYFUS STOCK INDEX FUND NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Not all of the Funds and/or Portfolios, however, may be available with your Contract. You should check with your representative for further information on the availability of Funds and/or Portfolios. Your annuity application will list all available Portfolios. WE (Glenbrook) have filed a Statement of Additional Information, dated May 1, 2001, with the Securities and Exchange Commission ("SEC"). It contains more information about the Contract and is incorporated herein by reference, which means it is legally a part of this prospectus. Its table of contents appears on page C-1 of this prospectus. For a free copy, please write or call us at the address or telephone number above, or go to the SEC's Web site (http://www.sec.gov). You can find other information and documents about us, including documents that are legally part of this prospectus, at the SEC's Web site. - --------------------------------------------------------------------
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE SECURITIES DESCRIBED IN THIS PROSPECTUS, NOR HAS IT PASSED ON THE ACCURACY OR THE ADEQUACY OF THIS PROSPECTUS. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A FEDERAL CRIME. IMPORTANT THE CONTRACTS MAY BE DISTRIBUTED THROUGH BROKER-DEALERS THAT NOTICES HAVE RELATIONSHIPS WITH BANKS OR OTHER FINANCIAL INSTITUTIONS OR BY EMPLOYEES OF SUCH BANKS. HOWEVER, THE CONTRACTS ARE NOT DEPOSITS, OR OBLIGATIONS OF, OR GUARANTEED BY SUCH INSTITUTIONS OR ANY FEDERAL REGULATORY AGENCY. INVESTMENT IN THE CONTRACTS INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE CONTRACTS ARE NOT FDIC INSURED. GLG257-3
1 PROSPECTUS TABLE OF CONTENTS - ------------------------------------------------------------------- PAGE - ----------------------------------------------------- OVERVIEW - ----------------------------------------------------- Important Terms 3 - ----------------------------------------------------- The Contract At A Glance 4 - ----------------------------------------------------- How the Contract Works 6 - ----------------------------------------------------- Expense Table 7 - ----------------------------------------------------- Financial Information 12 - ----------------------------------------------------- CONTRACT FEATURES - ----------------------------------------------------- The Contract 13 - ----------------------------------------------------- Purchases 14 - ----------------------------------------------------- Contract Value 15 - ----------------------------------------------------- Investment Alternatives 16 - ----------------------------------------------------- The Variable Sub-Accounts 16 - ----------------------------------------------------- The Fixed Account Options 18 - ----------------------------------------------------- Transfers 20 - ----------------------------------------------------- Expenses 22 - ----------------------------------------------------- Access To Your Money 24 - ----------------------------------------------------- Income Payments 25 - ----------------------------------------------------- - ----------------------------------------------------- PAGE Death Benefits 27 - ----------------------------------------------------- OTHER INFORMATION - ----------------------------------------------------- More Information: 29 - ----------------------------------------------------- Glenbrook 29 - ----------------------------------------------------- The Variable Account 29 - ----------------------------------------------------- The Portfolios 30 - ----------------------------------------------------- The Contract 30 - ----------------------------------------------------- Qualified Plans 31 - ----------------------------------------------------- Legal Matters 31 - ----------------------------------------------------- Taxes 31 - ----------------------------------------------------- Annual Reports and Other Documents 34 - ----------------------------------------------------- Experts 35 - ----------------------------------------------------- Performance Information 35 - ----------------------------------------------------- APPENDIX A -- ACCUMULATION UNIT VALUES A-1 - ----------------------------------------------------- APPENDIX B -- MARKET VALUE ADJUSTMENT EXAMPLE B-1 - ----------------------------------------------------- STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS C-1 - ----------------------------------------------------- 2 PROSPECTUS IMPORTANT TERMS - ------------------------------------------------------------------- This prospectus uses a number of important terms that you may not be familiar with. The index below identifies the page that describes each term. The first use of each term in this prospectus appears in highlights. PAGE - ----------------------------------------------------- Accumulation Phase 6 - ----------------------------------------------------- Accumulation Unit 15 - ----------------------------------------------------- Accumulation Unit Value 15 - ----------------------------------------------------- Anniversary Values 28 - ----------------------------------------------------- Annuitant 13 - ----------------------------------------------------- Automatic Additions Plan 14 - ----------------------------------------------------- Automatic Portfolio Rebalancing Program 21 - ----------------------------------------------------- Beneficiary 13 - ----------------------------------------------------- Cancellation Period 15 - ----------------------------------------------------- Contract* 30 - ----------------------------------------------------- Contract Anniversary 5 - ---------------------------------------------------- Contract Owner ("You") 13 - ---------------------------------------------------- Contract Value 15 - ---------------------------------------------------- Contract Year 4 - ---------------------------------------------------- Death Benefit Anniversary 27 - ---------------------------------------------------- Dollar Cost Averaging Program 21 - ---------------------------------------------------- Due Proof of Death 27 - ---------------------------------------------------- Enhanced Death Benefit Rider 27 - ---------------------------------------------------- Enhanced Death and Income Benefit Combination Rider 28 - ----------------------------------------------------- - ---------------------------------------------------- Fixed Account Options 18 PAGE - ---------------------------------------------------- Free Withdrawal Amount 23 - ---------------------------------------------------- Funds 1 - ---------------------------------------------------- Glenbrook ("We" or "Us") 29 - ---------------------------------------------------- Guarantee Periods 18 - ---------------------------------------------------- Income Plan 25 - ---------------------------------------------------- Investment Alternatives 16 - ---------------------------------------------------- Issue Date 6 - ---------------------------------------------------- Market Value Adjustment 20 - ---------------------------------------------------- Payout Phase 6 - ---------------------------------------------------- Payout Start Date 25 - ---------------------------------------------------- Portfolios 30 - ---------------------------------------------------- Qualified Contracts 4 - ---------------------------------------------------- SEC 1 - ---------------------------------------------------- Settlement Value 27 - ---------------------------------------------------- Systematic Withdrawal Program 25 - ---------------------------------------------------- Valuation Date 14 - ---------------------------------------------------- Variable Account 29 - ---------------------------------------------------- Variable Sub-Account 16 - ----------------------------------------------------- *In certain states the Contract is available only as a group Contract. If you purchase a group Contract, we will issue you a certificate that represents your ownership and that summarizes the provisions of the group Contract. References to "Contract" in this prospectus include certificates, unless the context requires otherwise. 3 PROSPECTUS THE CONTRACT AT A GLANCE - ------------------------------------------------------------------- The following is a snapshot of the Contract. Please read the remainder of this prospectus for more information.
FLEXIBLE PAYMENTS You can purchase a Contract with as little as $3,000 ($2,000 for "QUALIFIED CONTRACTS," which are Contracts issued within QUALIFIED PLANS). You can add to your Contract as often and as much as you like, but each payment must be at least $50. - -------------------------------------------------------------------------------------------------------- RIGHT TO CANCEL You may cancel your Contract within 20 days of receipt or any longer period as your state may require ("CANCELLATION PERIOD"). Upon cancellation, we will return your purchase payments adjusted, to the extent federal or state law permits, to reflect the investment experience of any amounts allocated to the Variable Account. - -------------------------------------------------------------------------------------------------------- EXPENSES You will bear the following expenses: - Total Variable Account annual fees equal to 1.15% of average daily net assets (1.37% if you select the ENHANCED DEATH BENEFIT RIDER and 1.59% if you select the ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER) - Annual contract maintenance charge of $35 (with certain exceptions) - Withdrawal charges ranging from 0% to 6% of purchase payment withdrawn (with certain exceptions) - Transfer fee of $10 after 12th transfer in any CONTRACT YEAR (fee currently waived) - State premium tax (if your state imposes one) In addition, each Portfolio pays expenses that you will bear indirectly if you invest in a Variable Sub-Account. - -------------------------------------------------------------------------------------------------------- INVESTMENT ALTERNATIVES The Contract offers 41 investment alternatives including: - 3 Fixed Account Options (which credit interest at rates we guarantee) - 38 Variable Sub-Accounts investing in Portfolios offering professional money management by these investment advisers: - A I M Advisors, Inc. - The Dreyfus Corporation - Fidelity Management & Research Company - Goldman Sachs Asset Management - Goldman Sachs Asset Management International - MFS Investment Management-Registered Trademark- - Miller Anderson & Sherrerd, LLP - Morgan Stanley Asset Management - Neuberger Berman Management, Inc. To find out current rates being paid on the Fixed Account Options or how the Variable Sub-Accounts have performed, call us at 1-800-755-5275. 4 PROSPECTUS - ------------------------------------------------------------------------------------------------------- SPECIAL SERVICES For your convenience, we offer these special services: - AUTOMATIC PORTFOLIO REBALANCING PROGRAM - AUTOMATIC ADDITIONS PROGRAM - DOLLAR COST AVERAGING PROGRAM - SYSTEMATIC WITHDRAWAL PROGRAM - -------------------------------------------------------------------------------------------------------- INCOME PAYMENTS You can choose fixed income payments, variable income payments, or a combination of the two. You can receive your income payments in one of the following ways: - life income with guaranteed payments - a "joint and survivor" life income with guaranteed payments - guaranteed payments for a specified period (5 to 30 years) - -------------------------------------------------------------------------------------------------------- DEATH BENEFITS If you or the ANNUITANT (if the Contract is owned by a non-natural person) die before the PAYOUT START DATE, we will pay the death benefit described in the Contract. We offer an Enhanced Death Benefit Rider and an Enhanced Death and Income Benefit Combination Rider. - -------------------------------------------------------------------------------------------------------- TRANSFERS Before the Payout Start Date, you may transfer your Contract value ("CONTRACT VALUE") among the investment alternatives, with certain restrictions. Transfers to a GUARANTEE PERIOD of the Fixed Account must be at least $50. We do not currently impose a fee upon transfers. However, we reserve the right to charge $10 per transfer after the 12th transfer in each "Contract Year", which we measure from the date we issue your Contract or a Contract anniversary ("CONTRACT ANNIVERSARY"). - -------------------------------------------------------------------------------------------------------- WITHDRAWALS You may withdraw some or all of your Contract Value at anytime prior to the Payout Start Date. In general, you must withdraw at least $50 at a time. Full or partial withdrawals are available under limited circumstances on or after the Payout Start Date. A 10% federal tax penalty may apply if you withdraw before you are 59 1/2 years old. A withdrawal charge and MARKET VALUE ADJUSTMENT also may apply.
5 PROSPECTUS HOW THE CONTRACT WORKS - ------------------------------------------------------------------- The Contract basically works in two ways. First, the Contract can help you (we assume you are the CONTRACT OWNER) save for retirement because you can invest in up to 41 investment alternatives and pay no federal income taxes on any earnings until you withdraw them. You do this during what we call the "ACCUMULATION PHASE" of the Contract. The Accumulation Phase begins on the date we issue your Contract (we call that date the "ISSUE DATE") and continues until the Payout Start Date, which is the date we apply your money to provide income payments. During the Accumulation Phase, you may allocate your purchase payments to any combination of the Variable Sub-Accounts and/or Fixed Account Options. If you invest in any of the three Fixed Account Options, you will earn a fixed rate of interest that we declare periodically. If you invest in any of the Variable Sub-Accounts, your investment return will vary up or down depending on the performance of the corresponding Portfolios. Second, the Contract can help you plan for retirement because you can use it to receive retirement income for life and/or for a pre-set number of years, by selecting one of the income payment options (we call these "INCOME PLANS") described on page 25. You receive income payments during what we call the "PAYOUT PHASE" of the Contract, which begins on the Payout Start Date and continues until we make the last payment required by the Income Plan you select. During the Payout Phase, if you select a fixed income payment option, we guarantee the amount of your payments, which will remain fixed. If you select a variable income payment option, based on one or more of the Variable Sub-Accounts, the amount of your payments will vary up or down depending on the performance of the corresponding Portfolios. The amount of money you accumulate under your Contract during the Accumulation Phase and apply to an Income Plan will determine the amount of your income payments during the Payout Phase. The timeline below illustrates how you might use your Contract.
ISSUE ACCUMULATION PHASE PAYOUT PAYOUT DATE START PHASE DATE ----------------------------------------------------------------------------------------------------- You save for retirement You can You elect to You can receive Or you can buy receive income payments receive income a income for a set payments for life Contract payments or period receive a lump sum payment
As the Contract Owner, you exercise all of the rights and privileges provided by the Contract. If you die, any surviving Contract Owner or, if none, the BENEFICIARY will exercise the rights and privileges provided by the Contract. SEE "The Contract". In addition, if you die before the Payout Start Date, we will pay a death benefit to any surviving Contract Owner, or if there is none, to your Beneficiary. SEE "Death Benefits". Please call us at 1-800-755-5275 if you have any questions about how the Contract works. 6 PROSPECTUS EXPENSE TABLE - ------------------------------------------------------------------- The table below lists the expenses that you will bear directly or indirectly when you buy a Contract. The table and the examples that follow do not reflect premium taxes that may be imposed by the state where you reside. For more information about Variable Account expenses, see "Expenses," below. For more information about Portfolio expenses, please refer to the accompanying prospectuses for the Funds. CONTRACT OWNER TRANSACTION EXPENSES Withdrawal Charge (as a percentage of purchase payments)*
Number of Complete Years Since We Received the Purchase Payment Being Withdrawn: 0 1 2 3 4 5 6+ - -------------------------------------------------------------------------------------------------------------------------- Applicable Charge: 6% 6% 5% 5% 4% 3% 0% - -------------------------------------------------------------------------------------------------------------------------- Annual Contract Maintenance Charge $35.00** - -------------------------------------------------------------------------------------------------------------------------- Transfer Fee $10.00*** - --------------------------------------------------------------------------------------------------------------------------- *Each Contract Year, you may withdraw up to 15% of your aggregate purchase payments without incurring a withdrawal charge. **We will waive this charge in certain cases. See "Expenses." ***Applies solely to the thirteenth and subsequent transfers within a Contract Year, excluding transfers due to dollar cost averaging and automatic portfolio rebalancing. We are currently waiving the transfer fee.
VARIABLE ACCOUNT ANNUAL EXPENSES (AS A PERCENTAGE OF AVERAGE DAILY NET ASSET VALUE DEDUCTED FROM EACH VARIABLE SUB-ACCOUNT) Mortality and Expense Risk Charge 1.05%* - --------------------------------------------------------------------- Administrative Expense Charge 0.10% - ---------------------------------------------------------------------- Total Variable Account Annual Expenses 1.15% - ---------------------------------------------------------------------- *If you select the Enhanced Death Benefit Rider, the mortality and expense risk charge is 1.27%. If you select the Enhanced Death and Income Benefit Combination Rider, the mortality and expense risk charge is 1.49%. 7 PROSPECTUS PORTFOLIO ANNUAL EXPENSES (After Voluntary Reductions and Reimbursements) (as a percentage of Portfolio average daily net assets)(1)
Rule Management 12b-1 Other Total Portfolio Portfolio Fees Fees Expenses Annual Expenses - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Balanced Fund 0.75% N/A 0.35% 1.10% - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Capital Appreciation Fund 0.61% N/A 0.21% 0.82% - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Diversified Income Fund 0.60% N/A 0.30% 0.90% - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Global Utilities Fund 0.65% N/A 0.45% 1.10% - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Government Securities Fund 0.50% N/A 0.47% 0.97% - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Growth Fund 0.61% N/A 0.22% 0.83% - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Growth and Income Fund 0.60% N/A 0.24% 0.84% - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. High Yield (2) 0.63% N/A 0.56% 1.19% - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. International Equity Fund 0.73% N/A 0.29% 1.02% - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Value Fund 0.61% N/A 0.23% 0.84% - ----------------------------------------------------------------------------------------------------------------------------- The Dreyfus Socially Responsible Growth Fund, Inc.: Initial Shares 0.75% N/A 0.03% 0.78% - ----------------------------------------------------------------------------------------------------------------------------- Dreyfus Stock Index Fund: Initial Shares 0.25% N/A 0.01% 0.26% - ----------------------------------------------------------------------------------------------------------------------------- Dreyfus VIF -- Growth & Income Portfolio: Initial Shares 0.75% N/A 0.03% 0.78% - ----------------------------------------------------------------------------------------------------------------------------- Dreyfus VIF -- Money Market Portfolio 0.50% N/A 0.10% 0.60% - ----------------------------------------------------------------------------------------------------------------------------- Dreyfus VIF -- Small Company Stock Portfolio: Initial Shares 0.75% N/A 0.18% 0.93% - ----------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Contrafund Portfolio (3,4) 0.57% N/A 0.09% 0.66% - ----------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Equity-Income Portfolio (3,4) 0.48% N/A 0.08% 0.56% - ----------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Growth Portfolio (3,4) 0.57% N/A 0.08% 0.65% - ----------------------------------------------------------------------------------------------------------------------------- Fidelity VIP High Income Portfolio (3) 0.58% N/A 0.10% 0.68% - ----------------------------------------------------------------------------------------------------------------------------- Goldman Sachs VIT Capital Growth Fund (5) 0.75% N/A 0.25% 1.00% - ----------------------------------------------------------------------------------------------------------------------------- Goldman Sachs VIT CORE(SM) Small Cap Equity Fund (5) 0.75% N/A 0.25% 1.00% - ----------------------------------------------------------------------------------------------------------------------------- Goldman Sachs VIT CORE(SM) U.S. Equity Fund0.70% N/A 0.20% 0.90% - ----------------------------------------------------------------------------------------------------------------------------- Goldman Sachs VIT Global Income Fund (5) 0.90% N/A 0.25% 1.05% - ----------------------------------------------------------------------------------------------------------------------------- Goldman Sachs VIT Growth and Income Fund (5) 0.75% N/A 0.25% 1.00% - ----------------------------------------------------------------------------------------------------------------------------- Goldman Sachs VIT International Equity Fund (5) 1.00% N/A 0.35% 1.35% - ----------------------------------------------------------------------------------------------------------------------------- MFS Emerging Growth Series (6) 0.75% N/A 0.10% 0.85% - ----------------------------------------------------------------------------------------------------------------------------- MFS Investors Trust Series (6,7) 0.75% N/A 0.12% 0.87% - ----------------------------------------------------------------------------------------------------------------------------- MFS New Discovery Series (6,8) 0.90% N/A 0.16% 1.06% - ----------------------------------------------------------------------------------------------------------------------------- Morgan Stanley UIF Equity Growth Portfolio (9) 0.48% N/A 0.37% 0.85% - ----------------------------------------------------------------------------------------------------------------------------- Morgan Stanley UIF Fixed Income Portfolio (9) 0.21% N/A 0.49% 0.70% - ----------------------------------------------------------------------------------------------------------------------------- Morgan Stanley UIF Global Equity Portfolio (9) 0.52% N/A 0.63% 1.15% - ----------------------------------------------------------------------------------------------------------------------------- Morgan Stanley UIF International Magnum Portfolio (9) 0.50% N/A 0.68% 1.18% - ----------------------------------------------------------------------------------------------------------------------------- Morgan Stanley UIF Mid Cap Value Portfolio (9) 0.53% N/A 0.52% 1.05% - ----------------------------------------------------------------------------------------------------------------------------- Morgan Stanley UIF U.S. Real Estate Portfolio (9) 0.74% N/A 0.36% 1.10% - ----------------------------------------------------------------------------------------------------------------------------- Morgan Stanley UIF Value Portfolio (9) 0.31% N/A 0.54% 0.85% - ----------------------------------------------------------------------------------------------------------------------------- Neuberger Berman AMT Guardian Portfolio (10)0.85% N/A 0.15% 1.00% - ----------------------------------------------------------------------------------------------------------------------------- Neuberger Berman AMT Mid-Cap Growth Portfolio (10) 0.84% N/A 0.14% 0.98% - ----------------------------------------------------------------------------------------------------------------------------- Neuberger Berman AMT Partners Portfolio 0.82% N/A 0.10% 0.92% - ------------------------------------------------------------------------------------------------------------------------------ (1) Figures shown in the Table are for the year ended December 31, 2000 (except as otherwise noted). (2) Expenses have been restated to reflect current fees. (3) Initial Class (4) Actual annual class operating expenses were lower because a portion of the brokerage commissions that the fund paid was used to reduce the fund's expenses, and/or because through arrangements with the fund's 8 PROSPECTUS
custodian, credits realized as a result of uninvested cash balances were used to reduce a portion of the fund's custodian expenses. See the accompanying fund prospectus for details. (5) Goldman Sachs Asset Management, the investment advisor has voluntarily agreed to reduce or limit certain "Other Expenses" (excluding management fees, taxes, interest, brokerage fees, litigation, indemnification, and other extraordinary expenses) to the extent such expenses exceed the percentage stated in the calculated per annum (above table) as of each funds' respective average daily net assets. Without the limitations described above, "Other Expenses" and "Total Portfolio Annual Expenses" would be estimated as follows: Rule Management 12b-1 Other Total Portfolio Portfolio Fees Fees Expenses Annual Expenses - ------------------------------------------------------------------------------------------------------------------- Goldman Sachs VIT Capital Growth Fund 0.75% N/A 0.94% 1.69% - ------------------------------------------------------------------------------------------------------------------- Goldman Sachs VIT CORE(SM) Small Cap Equity Fund 0.75% N/A 0.75% 1.50% ------------------------------------------------------------------------------------------------------------------- Goldman Sachs VIT Global Income Fund 0.90% N/A 1.78% 2.68% - ------------------------------------------------------------------------------------------------------------------- Goldman Sachs VIT Growth and Income Fund 0.75% N/A 0.47% 1.22% - ------------------------------------------------------------------------------------------------------------------- Goldman Sachs VIT International Equity Fund 1.00% N/A 0.77% 1.77% - -------------------------------------------------------------------------------------------------------------------- The Portfolio's Advisors may discontinue all or part of these reductions and reimbursements at any time. (6) Each series has an expense offset arrangement that reduces the series'custodian fee based upon the amount of cash maintained by the series with its custodian and dividend disbursing agent. The series may enter into other similar arrangements and directed brokerage arrangements, which would also have the effect of reducing the series' expenses. "Other Expense" do not take into account these expense reductions, and are therefore higher than the actual expenses of the series. Had these fee reductions been taken into account, "Total Portfolio Annual Expenses" would be lower, and for service class shares would be estimated to be: 0.84% for Emerging Growth Series, 0.86% for Investors Trust Series, and 1.05% for New Discovery Series. (7) Effective May 1, 2001, the Series changed its name from MFS Growth with Income Series to MFS Investors Trust Series to reflect changes in its investment policies. (8) MFS has contractually agreed, subject to reimbursement, bear the series'expenses such that "Other Expenses" (after taking into account the expense offset arrangement described above) do not exceed 0.15% annually. These contractual fee arrangements will continue until at least May 1, 2002, unless changed with the consent of the board of trustees which oversees the series. (9) Absent voluntary reductions and reimbursements for certain Portfolios, "Management Fees," "Rule 12b-1 Fees," "Other Expenses," and "Total Portfolio Annual Expenses" as a percent of average net assets of the portfolios would have been as follows: Rule Management 12b-1 Other Total Portfolio Portfolio Fees Fees Expenses Annual Expenses - ------------------------------------------------------------------------------------------------------------------- Morgan Stanley UIF Equity Growth Portfolio 0.55% N/A 0.37% 0.92% - ------------------------------------------------------------------------------------------------------------------- Morgan Stanley UIF Fixed Income Portfolio 0.40% N/A 0.49% 0.89% - ------------------------------------------------------------------------------------------------------------------- Morgan Stanley UIF Global Equity Portfolio 0.80% N/A 0.63% 1.43% - ------------------------------------------------------------------------------------------------------------------- Morgan Stanley UIF International Magnum Portfolio 0.80% N/A 0.68% 1.48% - ------------------------------------------------------------------------------------------------------------------- Morgan Stanley UIF Mid Cap Value Portfolio 0.75% N/A 0.52% 1.27% - ------------------------------------------------------------------------------------------------------------------- Morgan Stanley UIF U.S. Real Estate Portfolio 0.80% N/A 0.36% 1.16% - ------------------------------------------------------------------------------------------------------------------- Morgan Stanley UIF Value Portfolio 0.55% N/A 0.54% 1.09% - -------------------------------------------------------------------------------------------------------------------- The Portfolio's Advisors may discontinue all or part of these reductions and reimbursements at any time. (10) The expense reimbursement agreements with respect to the AMT Guardian and AMT Mid-Cap Growth Portfolios provide for Neuberger Berman Management, Inc.("NBMI") to recoup through December 31, 2004 amounts reimbursed by NBMI under the agreements, provided such recoupment would not cause the Portfolios to exceed their respective expense limitations. 9 PROSPECTUS
EXAMPLE 1 The example below shows the dollar amount of expenses that you would bear directly or indirectly if you: - - invested $1,000 in a Variable Sub-Account, - - earned a 5% annual return on your investment, - - surrendered your Contract, or you began receiving income payments for a specified period of less than 120 months, at the end of each time period, and - - elected the Enhanced Death and Income Benefit Combination Rider. THE EXAMPLE DOES NOT INCLUDE ANY TAXES OR TAX PENALTIES YOU MAY BE REQUIRED TO PAY IF YOU SURRENDER YOUR CONTRACT.
Sub-Account 1 Year 3 Year 5 Year 10 Year - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Balanced $79 $129 $173 $312 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Capital Appreciation $76 $121 $159 $284 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Diversified Income $77 $123 $163 $292 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Global Utilities $79 $129 $173 $312 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Government Securities $78 $125 $167 $299 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Growth and Income $77 $121 $160 $286 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Growth $77 $121 $159 $285 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. High Yield $80 $132 $178 $320 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. International Equity $78 $127 $169 $304 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Value $77 $121 $160 $286 - ----------------------------------------------------------------------------------------------------------------------------- The Dreyfus Socially Responsible Growth: Initial Shares $76 $119 $157 $279 - ----------------------------------------------------------------------------------------------------------------------------- Dreyfus Stock Index: Initial Shares $71 $103 $130 $225 - ----------------------------------------------------------------------------------------------------------------------------- Dreyfus VIF -- Growth & Income: Initial Shares $76 $119 $157 $279 - ----------------------------------------------------------------------------------------------------------------------------- Dreyfus VIF -- Money Market $74 $114 $148 $261 - ----------------------------------------------------------------------------------------------------------------------------- Dreyfus VIF -- Small Company Stock: Initial Shares $78 $124 $164 $295 - ----------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Contrafund $75 $116 $151 $267 - ----------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Equity-Income $74 $113 $146 $257 - ----------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Growth $75 $115 $150 $266 - ----------------------------------------------------------------------------------------------------------------------------- Fidelity VIP High Income $75 $116 $152 $269 - ----------------------------------------------------------------------------------------------------------------------------- Goldman Sachs VIT Capital Growth $78 $126 $168 $302 - ----------------------------------------------------------------------------------------------------------------------------- Goldman Sachs VIT CORE(SM) Small Cap Equity $78 $126 $168 $302 - ----------------------------------------------------------------------------------------------------------------------------- Goldman Sachs VIT CORE(SM) U.S. Equity $77 $123 $163 $292 - ------------------------------------------------------------------------------------------------------------------------------ Goldman Sachs VIT Global Income $80 $131 $176 $317 - ----------------------------------------------------------------------------------------------------------------------------- Goldman Sachs VIT Growth and Income $78 $126 $168 $302 - ----------------------------------------------------------------------------------------------------------------------------- Goldman Sachs VIT International Equity $82 $137 $186 $336 - ----------------------------------------------------------------------------------------------------------------------------- MFS Emerging Growth $77 $122 $160 $287 - ----------------------------------------------------------------------------------------------------------------------------- MFS Investors Trust $77 $122 $161 $289 - ----------------------------------------------------------------------------------------------------------------------------- MFS New Discovery $79 $128 $171 $308 - ----------------------------------------------------------------------------------------------------------------------------- Morgan Stanley UIF Equity Growth $77 $122 $160 $287 - ----------------------------------------------------------------------------------------------------------------------------- Morgan Stanley UIF Fixed Income $75 $117 $153 $271 - ----------------------------------------------------------------------------------------------------------------------------- Morgan Stanley UIF Global Equity $80 $131 $176 $317 - ----------------------------------------------------------------------------------------------------------------------------- Morgan Stanley UIF International Magnum $80 $132 $177 $319 - ----------------------------------------------------------------------------------------------------------------------------- Morgan Stanley UIF Mid Cap Value $79 $128 $171 $307 - ----------------------------------------------------------------------------------------------------------------------------- Morgan Stanley UIF U.S. Real Estate $80 $132 $178 $321 - ----------------------------------------------------------------------------------------------------------------------------- Morgan Stanley UIF Value $77 $122 $160 $287 - ----------------------------------------------------------------------------------------------------------------------------- Neuberger Berman AMT Guardian $78 $126 $168 $302 - ----------------------------------------------------------------------------------------------------------------------------- Neuberger Berman AMT Mid-Cap Growth $78 $126 $167 $300 - ----------------------------------------------------------------------------------------------------------------------------- Neuberger Berman AMT Partners $77 $124 $164 $294 - ------------------------------------------------------------------------------------------------------------------------------
10 PROSPECTUS EXAMPLE 2 Same assumptions as Example 1 above, except that you decided not to surrender your Contract, or you began receiving income payments for a specified period of at least 120 months, at the end of each period.
Sub-Account 1 Year 3 Year 5 Year 10 Year - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Balanced $28 $ 87 $148 $312 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Capital Appreciation $25 $ 78 $133 $284 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Diversified Income $26 $ 81 $137 $292 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Global Utilities $28 $ 87 $148 $312 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Government Securities $27 $ 83 $141 $299 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Growth and Income $26 $ 79 $134 $286 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Growth $26 $ 78 $134 $285 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. High Yield $29 $ 89 $152 $320 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. International Equity $27 $ 84 $144 $304 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Value $26 $ 79 $134 $286 - ----------------------------------------------------------------------------------------------------------------------------- The Dreyfus Socially Responsible Growth: Initial Shares $25 $ 77 $131 $279 - ----------------------------------------------------------------------------------------------------------------------------- Dreyfus Stock Index: Initial Shares $20 $ 61 $104 $225 - ----------------------------------------------------------------------------------------------------------------------------- Dreyfus VIF -- Growth & Income: Initial Shares $25 $ 77 $131 $279 - ----------------------------------------------------------------------------------------------------------------------------- Dreyfus VIF -- Money Market $23 $ 71 $122 $261 - ----------------------------------------------------------------------------------------------------------------------------- Dreyfus VIF -- Small Company Stock: Initial Shares $27 $ 82 $139 $295 - ----------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Contrafund $24 $ 73 $125 $267 - ----------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Equity-Income $23 $ 70 $120 $257 - ----------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Growth $24 $ 73 $125 $266 - ----------------------------------------------------------------------------------------------------------------------------- Fidelity VIP High Income $24 $ 74 $126 $269 - ----------------------------------------------------------------------------------------------------------------------------- Goldman Sachs VIT Capital Growth $27 $ 84 $143 $302 - ----------------------------------------------------------------------------------------------------------------------------- Goldman Sachs VIT CORE(SM) Small Cap Equity $27 $ 84 $143 $302 - ----------------------------------------------------------------------------------------------------------------------------- Goldman Sachs VIT CORE(SM) U.S. Equity $26 $ 81 $137 $292 - ----------------------------------------------------------------------------------------------------------------------------- Goldman Sachs VIT Global Income $29 $ 88 $150 $317 - ----------------------------------------------------------------------------------------------------------------------------- Goldman Sachs VIT Growth and Income $27 $ 84 $143 $302 - ----------------------------------------------------------------------------------------------------------------------------- Goldman Sachs VIT International Equity $31 $ 94 $160 $336 - ----------------------------------------------------------------------------------------------------------------------------- MFS Emerging Growth $26 $ 79 $135 $287 - ----------------------------------------------------------------------------------------------------------------------------- MFS Investors Trust $26 $ 80 $136 $289 - ----------------------------------------------------------------------------------------------------------------------------- MFS New Discovery $28 $ 85 $146 $308 - ----------------------------------------------------------------------------------------------------------------------------- Morgan Stanley UIF Equity Growth $26 $ 79 $135 $287 - ----------------------------------------------------------------------------------------------------------------------------- Morgan Stanley UIF Fixed Income $24 $ 74 $127 $271 - ----------------------------------------------------------------------------------------------------------------------------- Morgan Stanley UIF Global Equity $29 $ 88 $150 $317 - ----------------------------------------------------------------------------------------------------------------------------- Morgan Stanley UIF International Magnum $29 $ 89 $152 $319 - ----------------------------------------------------------------------------------------------------------------------------- Morgan Stanley UIF Mid Cap Value $28 $ 85 $145 $307 - ----------------------------------------------------------------------------------------------------------------------------- Morgan Stanley UIF U.S. Real Estate $29 $ 90 $153 $321 - ----------------------------------------------------------------------------------------------------------------------------- Morgan Stanley UIF Value $26 $ 79 $135 $287 - ----------------------------------------------------------------------------------------------------------------------------- Neuberger Berman AMT Guardian $27 $ 84 $143 $302 - ----------------------------------------------------------------------------------------------------------------------------- Neuberger Berman AMT Mid-Cap Growth $27 $ 83 $142 $300 - ----------------------------------------------------------------------------------------------------------------------------- Neuberger Berman AMT Partners $26 $ 81 $138 $294 - ------------------------------------------------------------------------------------------------------------------------------ PLEASE REMEMBER THAT YOU ARE LOOKING AT EXAMPLES AND NOT A REPRESENTATION OF PAST OR FUTURE EARNINGS. YOUR ACTUAL EXPENSES MAY BE LOWER OR GREATER THAN THOSE SHOWN ABOVE. SIMILARLY, YOUR RATE OF RETURN MAY BE LOWER OR GREATER THAN 5%, WHICH IS NOT GUARANTEED. THE EXAMPLES ASSUME THAT ANY PORTFOLIO EXPENSE WAIVERS OR REIMBURSEMENT ARRANGEMENTS DESCRIBED IN THE FOOTNOTES TO THE PORTFOLIO ANNUAL EXPENSE TABLE ARE IN EFFECT FOR THE PERIODS PRESENTED. THE ABOVE EXAMPLES ASSUME THE ELECTION OF THE ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER WITH A MORTALITY AND EXPENSE RISK CHARGE OF 1.49%. IF THAT RIDER WERE NOT ELECTED, THE EXPENSE FIGURES SHOWN ABOVE WOULD BE SLIGHTLY LOWER. TO REFLECT THE CONTRACT MAINTENANCE CHARGE IN THE EXAMPLES, WE ESTIMATED AN EQUIVALENT PERCENTAGE CHARGE, BASED ON THE CURRENT AVERAGE CONTRACT SIZE OF $47,490.
11 PROSPECTUS FINANCIAL INFORMATION - ------------------------------------------------------------------- To measure the value of your investment in the Variable Sub-Accounts during the Accumulation Phase, we use a unit of measure we call the "ACCUMULATION UNIT." Each Variable Sub-Account has a separate value for its Accumulation Units we call "ACCUMULATION UNIT VALUE." Accumulation Unit Value is analogous to, but not the same as, the share price of a mutual fund. Attached as Appendix A to this prospectus are tables showing the Accumulation Unit Values of each Variable Sub-Account since the date the contracts were first offered. To obtain a fuller picture of each Variable Sub-Account's finances, please refer to the Variable Account's financial statement contained in the Statement of Additional Information. The financial statements of Glenbrook also appear in the Statement of Additional Information. 12 PROSPECTUS THE CONTRACT - ------------------------------------------------------------------- CONTRACT OWNER The Glenbrook Provider 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 dies, and - - any other rights that the Contract provides. If you die, any surviving Contract Owner, or, if none, the Beneficiary may exercise the rights and privileges provided to them by the Contract. The Contract cannot be jointly owned by both a non-natural person and a natural person. The maximum age of the oldest Contract Owner, or Annuitant if the Owner is a non-natural person, cannot exceed 90 as of the date we received the completed application. You may change the Contract Owner at any time. We will provide a change of ownership form to be signed by you and filed with us. After we accept the form, the change of ownership will be effective as of the date you signed the form. Until we receive your written notice to change the Contract Owner, we are entitled to rely on the most recent ownership information in our files. We will not be liable as to any payment or settlement made prior to receiving the written notice. Accordingly, if you wish to change the Contract Owner, you should deliver your written notice to us promptly. Each change is subject to any payment made by us or any other action we take before we accept the change. You can use the Contract with or without a qualified plan. A qualified plan is a personal retirement savings plan, such as an IRA or tax-sheltered annuity, that meets the requirements of the Internal Revenue Code. Qualified plans may limit or modify your rights and privileges under the Contract. We use the term "Qualified Contract" to refer to a Contract issued within a qualified plan. See "Qualified Plans" on page 31. ANNUITANT The Annuitant is the individual whose life determines the amount and duration of income payments (other than under Income Plans with guaranteed payments for a specified period). You initially designate an Annuitant in your application. You may change the Annuitant at any time prior to the Payout Start Date (only if the Contract Owner is a natural person). Once we accept a change, it takes effect as of the date you signed the request. Each change is subject to any payment we make or other action we take before we accept it. You may designate a joint Annuitant, who is a second person on whose life income payments depend. We permit joint Annuitants only on or after the Payout Start Date. If the Annuitant dies prior to the Payout Start Date, the new Annuitant will be: (i) the youngest Contract Owner; otherwise, (ii) the youngest Beneficiary. BENEFICIARY The Beneficiary is the person selected by the Contract Owner to receive the death benefits or become the new Contract Owner if the sole surviving Contract Owner dies before the Payout Start Date. If the sole surviving Contract Owner dies after the Payout Start Date, the primary Beneficiary, or if none surviving, the contingent Beneficiary, will receive any guaranteed income payments scheduled to continue. You may name one or more primary and contingent Beneficiaries when you apply for a Contract. The primary Beneficiary is the person who may elect to receive the death benefit or become the new Contract Owner if the sole surviving Contract Owner dies before the Payout Start Date. A contingent Beneficiary is the person selected by the Contract Owner who will become the Beneficiary if all named primary Beneficiaries die before the death of the sole surviving Contract Owner. You may change or add Beneficiaries at any time, unless you have designated an irrevocable Beneficiary. We will provide a change of Beneficiary form to be signed by you and filed with us. After we accept the form, the change of Beneficiary will be effective as of the date you signed the form. Until we receive your written notice to change a Beneficiary, we are entitled to rely on the most recent Beneficiary information in our files. We will not be liable as to any payment or settlement made prior to receiving the written notice. Accordingly, if you wish to change your Beneficiary, you should deliver your written notice to us promptly. Each change is subject to any payment made by us or any other action we take before we accept the change. 13 PROSPECTUS If you did not name a Beneficiary or, unless otherwise provided in the Beneficiary designation, if a named Beneficiary is no longer living and there are no other surviving Beneficiaries or Contingent Beneficiaries, the new Beneficiary will be: - - your spouse or, if he or she is no longer alive, - - your surviving children equally, or if you have no surviving children, - - your estate. If one or more Beneficiaries survive you (or survives the Annuitant, if the Contract Owner is not a natural person), we will divide the death benefit among the surviving Beneficiaries according to your most recent written instructions. If you have not given us written instructions, we will pay the death benefit in equal amounts to the surviving Beneficiaries. MODIFICATION OF THE CONTRACT Only a Glenbrook officer may approve a change in or waive any provision of the Contract. Any change or waiver must be in writing. None of our agents has the authority to change or waive the provisions of the Contract. We may not change the terms of the Contract without your consent, except to conform the Contract to applicable law or changes in the law. If a provision of the Contract is inconsistent with state law, we will follow state law. ASSIGNMENT We will not honor an assignment of an interest in a Contract as collateral or security for a loan. However, you may assign periodic income payments under the Contract prior to the Payout Start Date. No Beneficiary may assign benefits under the Contract until they are payable to the Beneficiary. We will not be bound by any assignment until the assignor signs it and files it with us. We are not responsible for the validity of any assignment. Federal law prohibits or restricts the assignment of benefits under many types of retirement plans and the terms of such plans may themselves contain restrictions on assignments. An assignment may also result in taxes or tax penalties. YOU SHOULD CONSULT WITH AN ATTORNEY BEFORE TRYING TO ASSIGN YOUR CONTRACT. PURCHASES - ------------------------------------------------------------------- MINIMUM PURCHASE PAYMENTS Your initial purchase payment must be at least $3,000 ($2,000 for a Qualified Contract). All subsequent purchase payments must be $50 or more. You may make purchase payments at any time prior to the Payout Start Date. We reserve the right to limit the maximum amount of purchase payments we will accept. AUTOMATIC ADDITIONS PROGRAM You may make subsequent purchase payments by automatically transferring money from your bank account. Consult your representative for more detailed information. ALLOCATION OF PURCHASE PAYMENTS At the time you apply for a Contract, you must decide how to allocate your purchase payments among the investment alternatives. The allocation you specify on your application will be effective immediately. All allocations must be in whole percents that total 100% or in whole dollars. You can change your allocations by notifying us in writing. We will allocate your purchase payments to the investment alternatives according to your most recent instructions on file with us. Unless you notify us in writing otherwise, we will allocate subsequent purchase payments according to the allocation for the previous purchase payment. We will effect any change in allocation instructions at the time we receive written notice of the change in good order. We will credit the initial purchase payment that accompanies your completed application to your Contract within 2 business days after we receive the payment at our home office. If your application is incomplete, we will ask you to complete your application within 5 business days. If you do so, we will credit your initial purchase payment to your Contract within that 5 business day period. If you do not, we will return your purchase payment at the end of the 5 business day period unless you expressly allow us to hold it until you complete the application. We will credit subsequent purchase payments to the Contract at the close of the business day on which we receive the purchase payment at our home office. We are open for business each day Monday through Friday that the New York Stock Exchange is open for business. We also refer to these days as "VALUATION DATES." Our business day closes when the New York Stock Exchange closes, usually 4 p.m. Eastern Time (3 p.m. Central Time). If we receive your purchase 14 PROSPECTUS payment after 3 p.m. Central Time on any Valuation Date, we will credit your purchase payment using the Accumulation Unit Values computed on the next Valuation Date. RIGHT TO CANCEL You may cancel the Contract by returning it to us within the Cancellation Period, which is the 20 day period after you receive the Contract, or a longer period should your state require it. You may return it by delivering it or mailing it to us. If you exercise this "RIGHT TO CANCEL," the Contract terminates and we will pay you the full amount of your purchase payments allocated to the Fixed Account. We also will return your purchase payments allocated to the Variable Account adjusted, to the extent federal or state law permits, to reflect investment gain or loss that occurred from the date of allocation through the date of cancellation. Some states may require us to return a greater amount to you. In states where we are required to refund purchase payments, we reserve the right during the Cancellation Period to invest any purchase payments you allocated to a Variable Sub-Account to the Money Market Variable Sub-Account available under the Contract. We will notify you if we do so. At the end of the Cancellation Period, you may then allocate your money to other Variable Sub-Accounts. CONTRACT VALUE - ------------------------------------------------------------------- Your Contract Value at any time during the Accumulation Phase is equal to the sum of the value of your Accumulation Units in the Variable Sub-Accounts you have selected, plus the value of your investment in the Fixed Account Options. ACCUMULATION UNITS To determine the number of Accumulation Units of each Variable Sub-Account to credit to your Contract, we divide (i) the amount of the purchase payment or transfer you have allocated to a Variable Sub-Account by (ii) the Accumulation Unit Value of that Variable Sub-Account next computed after we receive your payment or transfer. For example, if we receive a $10,000 purchase payment allocated to a Variable Sub-Account when the Accumulation Unit Value for the Sub-Account is $10, we would credit 1,000 Accumulation Units of that Variable Sub-Account to your Contract. Withdrawals and transfers from a Variable Sub-Account would, of course, reduce the number of Accumulation Units of that Sub-Account allocated to your Contract. ACCUMULATION UNIT VALUE As a general matter, the Accumulation Unit Value for each Variable Sub-Account will rise or fall to reflect: - - changes in the share price of the Portfolio in which the Variable Sub-Account invests, and - - the deduction of amounts reflecting the mortality and expense risk charge, administrative expense charge, and any provision for taxes that have accrued since we last calculated the Accumulation Unit Value. We determine contract maintenance charges, withdrawal charges, and transfer fees (currently waived) separately for each Contract. They do not affect Accumulation Unit Value. Instead, we obtain payment of those charges and fees by redeeming Accumulation Units. For details on how we calculate Accumulation Unit Value, please refer to the Statement of Additional Information. We determine a separate Accumulation Unit Value for each Variable Sub-Account on each Valuation Date. We also determine a separate set of Accumulation Unit Values reflecting the cost of the Enhanced Death Benefit Rider and the Enhanced Death and Income Benefit Combination Rider described on pages 27-28. YOU SHOULD REFER TO THE PROSPECTUSES FOR THE FUNDS THAT ACCOMPANY THIS PROSPECTUS FOR A DESCRIPTION OF HOW THE ASSETS OF EACH PORTFOLIO ARE VALUED, SINCE THAT DETERMINATION DIRECTLY BEARS ON THE ACCUMULATION UNIT VALUE OF THE CORRESPONDING VARIABLE SUB-ACCOUNT AND, THEREFORE, YOUR CONTRACT VALUE. 15 PROSPECTUS INVESTMENT ALTERNATIVES: THE VARIABLE SUB-ACCOUNTS - ------------------------------------------------------------------- You may allocate your purchase payments to up to 38 Variable Sub-Accounts. Each Variable Sub-Account invests in the shares of a corresponding Portfolio. Each Portfolio has its own investment objective(s) and policies. We briefly describe the Portfolios below. For more complete information about each Portfolio, including expenses and risks associated with the Portfolio, please refer to the accompanying prospectuses for the Funds. You should carefully review the Fund prospectuses before allocating amounts to the Variable Sub-Accounts.
PORTFOLIO: EACH PORTFOLIO SEEKS: INVESTMENT ADVISOR: AIM VARIABLE INSURANCE FUNDS* AIM V.I. Balanced Fund As high a total return as possible, consistent with preservation of capital AIM V.I. Capital Appreciation Fund Growth of capital AIM V.I. Diversified Income Fund A high level of current income AIM V.I. Global Utilities Fund A high level of current income and secondarily, growth of capital AIM V.I. Government Securities Fund A high level of current income A I M Advisors, Inc. consistent with a reasonable concern for safety of principal AIM V.I. Growth Fund Growth of capital AIM V.I. Growth and Income Fund Growth of capital with a secondary objective of current income AIM V.I. High Yield Fund A high level of current income AIM V.I. International Equity Fund Long-term growth of capital AIM V.I. Value Fund Long-term growth of capital and income as a secondary objective THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.; THE DREYFUS STOCK INDEX FUND; AND THE DREYFUS VARIABLE INVESTMENT FUND (VIF) (COLLECTIVELY, THE DREYFUS FUNDS) The Dreyfus Socially Responsible Capital growth and, secondarily, Growth Fund, Inc. current income Dreyfus Stock Index Fund To match the total return of the Standard & Poor's-C- 500 Composite Stock Price Index Dreyfus VIF Growth & Income Portfolio Long-term capital growth, current The Dreyfus income and growth of income, Corporation consistent with reasonable investment risk Dreyfus VIF Money Market Portfolio A high level of current income as is consistent with the preservation of capital and the maintenance of liquidity Dreyfus VIF Small Company Stock Investment returns (consisting of Portfolio capital appreciation and income) that are greater than the total return performance of stocks represented by the Russell 2500-TM- Stock Index ("Russell 2500") FIDELITY VARIABLE INSURANCE PRODUCTS FUND Fidelity VIP Equity-Income Portfolio Reasonable income Fidelity VIP Growth Portfolio Capital appreciation Fidelity VIP High Income Portfolio High level of current income while also considering growth of capital Fidelity VIP Long-term capital appreciation Fidelity Management Contrafund-Registered Trademark- & Research Company Portfolio 16 PROSPECTUS PORTFOLIO: EACH PORTFOLIO SEEKS: INVESTMENT ADVISOR: GOLDMAN SACHS VARIABLE INSURANCE TRUST (VIT) Goldman Sachs VIT Capital Growth Fund Long-term growth of capital Goldman Sachs VIT CORE-SM- Small Cap Equity Long-term growth of capital Fund Goldman Sachs VIT CORE-SM- U.S. Equity Fund Long-term growth of capital and dividend income Goldman Sachs VIT Global Income Fund A high total return, emphasizing current income and, to a lesser extent providing opportunities for capital appreciation Goldman Sachs VIT Growth and Income Fund Long-term growth of capital and growth of Goldman Sachs Asset income Management Goldman Sachs VIT International Equity Fund Long-term capital appreciation Goldman Sachs Asset Management International MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST-SM- MFS Emerging Growth Series Long-term growth of capital MFS Investors Trust Series** Long-term growth of capital with a secondary objective to seek reasonable current income MFS New Discovery Series Capital appreciation MFS Investment Management- Registered Trademark THE UNIVERSAL INSTITUTIONAL FUNDS, INC. Morgan Stanley UIF Equity Growth Long-term capital appreciation Morgan Stanley Asset Management Morgan Stanley UIF Fixed Income Above-average total return over a market cycle Miller Anderson & of three to five years Sherrerd, LLP Morgan Stanley UIF Global Equity Long-term capital appreciation Morgan Stanley Asset Management Morgan Stanley UIF International Magnum Long-term capital appreciation Morgan Stanley Asset Management Morgan Stanley UIF Mid Cap Value Above-average total return over a market cycle Miller Anderson & of three to five years Sherrerd, LLP Morgan Stanley UIF U.S. Real Estate Above-average current income and long-term Morgan Stanley Asset capital appreciation Management Morgan Stanley UIF Value Above-average total return over a market cycle Miller Anderson & of three to five years Sherrerd, LLP NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST Neuberger Berman AMT Guardian Long-term growth of capital; current income is a secondary goal Neuberger Berman AMT Mid-Cap Growth Growth of capital Neuberger Berman AMT Partners Growth of capital Neuberger Berman Management Inc.
* A portfolio's investment objective may be changed by the Fund's Board of Trustees without shareholder approval. ** Effective May 1, 2001, the Series changed its name from MFS Growth with Income Series to MFS Investors Trust Series to reflect changes in its investment policies. VARIABLE INSURANCE TRUST PORTFOLIOS MAY NOT BE MANAGED BY THE SAME PORTFOLIO MANAGERS WHO MANAGE RETAIL MUTUAL FUNDS WITH SIMILAR NAMES. THESE PORTFOLIOS ARE LIKELY TO DIFFER FROM RETAIL FUNDS IN ASSETS, CASH FLOW, AND TAX MATTERS. ACCORDINGLY, THE HOLDINGS AND INVESTMENT RESULTS OF A PORTFOLIO CAN BE EXPECTED TO BE HIGHER OR LOWER THAN THE INVESTMENT RESULTS OF RETAIL MUTUAL FUNDS. 17 PROSPECTUS INVESTMENT ALTERNATIVES: THE FIXED ACCOUNT OPTIONS - ------------------------------------------------------------------- You may allocate all or a portion of your purchase payments to the Fixed Account. You may choose from among 3 Fixed Account Options including 2 dollar cost averaging options and the option to invest in one or more Guarantee Periods included in the Guaranteed Maturity Fixed Account. The Fixed Account Options may not be available in all states. Please consult with your representative for current information. The Fixed Account supports our insurance and annuity obligations. The Fixed Account consists of our general assets other than those in segregated asset accounts. We have sole discretion to invest the assets of the Fixed Account, subject to applicable law. Any money you allocate to a Fixed Account Option does not entitle you to share in the investment experience of the Fixed Account. DOLLAR COST AVERAGING FIXED ACCOUNT OPTIONS DOLLAR COST AVERAGING FIXED ACCOUNT OPTION. Purchase payments that you allocate to the Dollar Cost Averaging Fixed Account Option ("DCA Fixed Account Option") will earn interest for a one year period at the current rate in effect at the time of allocation. We will credit interest daily at a rate that will compound over the year to the annual interest rate we guaranteed at the time of allocation. After the one year period, we will declare a renewal rate which we guarantee for a full year. Subsequent renewal dates will be every twelve months for each payment or transfer. For each purchase payment, the first transfer from the DCA Fixed Account must occur within one month of the date of payment. If we do not receive an allocation from you within one month of the date of payment, the payment plus associated interest will be transferred to the Money Market Variable Sub-Account in equal monthly installments. Transferring Account Value to the Money Market Variable Sub-Account in this manner may not be consistent with the theory of dollar cost averaging described on page 21. You must transfer each purchase payment and all its earnings out of this Option by means of dollar cost averaging within 36 months of payment. At the end of 36 months, any nominal amounts remaining in the DCA fixed Account will be allocated to the Money Market Variable Sub-Account. No transfers are permitted into the Dollar Cost Averaging Fixed Account. SHORT TERM DOLLAR COST AVERAGING FIXED ACCOUNT OPTION. You may establish a Short Term Dollar Cost Averaging Program by allocating purchase payments to the Short Term Dollar Cost Averaging Fixed Account Option ("Short Term DCA Fixed Account Option"). We will credit interest to purchase payments you allocate to this Option for up to one year at the current rate in effect at the time of allocation. For each purchase payment, the first transfer from the Short Term DCA Fixed Account must occur within one month of the date of payment. If we do not receive an allocation from you within one month of the date of payment, the payment plus associated interest will be transferred to the Money Market Variable Sub-Account in equal monthly installments. Transferring Account Value to the Money Market Variable Sub-Account in this manner may not be consistent with the theory of dollar cost averaging descirbed on page 21. We will follow your instructions in transferring amounts monthly from the Short Term DCA Fixed Account Option. However, you may not choose less than 3 or more than 12 monthly installments. Further, you must transfer each purchase payment and all its earnings out of this Option by means of dollar cost averaging within 12 months. At the end of the transfer period, any nominal amounts remaining in the Short Term DCA Fixed Account will be allocated to the Money Market Variable Sub-Account. If you discontinue the Short Term Dollar Cost Averaging Program before the end of the transfer period, we will transfer the remaining balance in this Option to the Money Market Variable Sub-Account unless you request a different investment alternative. No transfers are permitted into the Short Term Dollar Cost Averaging Fixed Account. We bear the investment risk for all amounts allocated to the DCA Fixed Account Option and the Short Term DCA Fixed Account Option. That is because we guarantee the current and renewal interest rates we credit to the amounts you allocate to either of these Options, which will never be less than the minimum guaranteed rate in the Contract. Currently, we determine, in our sole discretion, the amount of interest credited in excess of the guaranteed rate. We may declare more than one interest rate for different monies based upon the date of allocation to the DCA Fixed Account Option and the Short Term DCA Fixed Account Option. For current interest rate information, please contact your representative or Glenbrook customer service at 1-800-755-5275. GUARANTEE PERIODS Each payment or transfer allocated to a Guarantee Period earns interest at a specified rate that we guarantee for a period of years. Guarantee Periods may range from 1 to 10 years. We are currently offering Guarantee Periods of 1, 3, 5, 7, and 10 years in length. In the future we may offer Guarantee Periods of different lengths or stop offering some Guarantee Periods. You select the Guarantee Period for each payment or transfer. If you do not select a Guarantee Period, we will assign the same period(s) you selected for your most recent purchase payment(s). Each payment or transfer allocated to a Guarantee Period must be at least $50. We reserve the right to limit the number of additional purchase payments that you may allocate to this Option. INTEREST RATES. We will tell you what interest rates and Guarantee Periods we are offering at a particular time. We will not change the interest rate that we credit to a particular allocation until the end of the relevant Guarantee Period. We may declare different interest rates for Guarantee Periods of the same length that begin at different times. 18 PROSPECTUS We have no specific formula for determining the rate of interest that we will declare initially or in the future. We will set those interest rates based on investment returns available at the time of the determination. In addition, we may consider various other factors in determining interest rates including regulatory and tax requirements, our sales commission and administrative expenses, general economic trends, and competitive factors. WE DETERMINE THE INTEREST RATES TO BE DECLARED IN OUR SOLE DISCRETION. WE CAN NEITHER PREDICT NOR GUARANTEE WHAT THOSE RATES WILL BE IN THE FUTURE. For current interest rate information, please contact your representative or Glenbrook at 1-800-755-5275. HOW WE CREDIT INTEREST. We will credit interest daily to each amount allocated to a Guarantee Period at a rate that compounds to the annual interest rate that we declared at the beginning of the applicable Guarantee Period. The following example illustrates how a purchase payment allocated to a Guaranteed Period would grow, given an assumed Guarantee Period and annual interest rate: Purchase Payment............................................ $10,000
Guarantee Period............................................ 5 years Annual Interest Rate........................................ 4.50% END OF CONTRACT YEAR YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 ---------- ---------- ---------- ---------- ---------- Beginning Contract 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 withdrawal, you may be required to pay a withdrawal charge. In addition, the amount withdrawn may be increased or decreased by a Market Value Adjustment that reflects changes in interest rates since the time you invested the amount withdrawn. The hypothetical interest rate is for illustrative purposes only and is not intended to predict future interest rates to be declared under the Contract. Actual interest rates declared for any given Guarantee Period may be more or less than shown above. RENEWALS. Prior to the end of each Guarantee Period, we will mail you a notice asking you what to do with your money, including the accrued interest. During the 30-day period after the end of the Guarantee Period, you may: 1. Take no action. We will automatically apply your money to a new Guarantee Period of the same length as the expiring Guarantee Period. The new Guarantee Period will begin on the day the previous Guarantee Period ends. The new interest rate will be our then current declared rate for a Guarantee Period of that length; or 2. Instruct us to apply your money to one or more new Guarantee Periods of your choice. The new Guarantee Period(s) will begin on the day the previous Guarantee Period ends. The new interest rate will be our then current declared rate for those Guarantee Periods; or 3. Instruct us to transfer all or a portion of your money to one or more Variable Sub-Accounts of the Variable Account. We will effect the transfer on the day we receive your instructions. We will not adjust the amount transferred to include a Market Value Adjustment; or 19 PROSPECTUS 4. Withdraw all or a portion of your money. You may be required to pay a withdrawal charge, but we will not adjust the amount withdrawn to include a Market Value Adjustment. You may also be required to pay premium taxes and income tax withholding, if applicable. We will pay interest from the day the Guarantee Period expired until the date of withdrawal. The interest will be the rate for the shortest Guarantee Period then being offered. Amounts not withdrawn will be applied to a new Guarantee Period of the same length as the previous Guarantee Period. The new Guarantee Period will begin on the day the previous Guarantee Period ends. MARKET VALUE ADJUSTMENT. All withdrawals and transfers from a Guarantee Period, other than those taken during the 30 day period after such Guarantee Period expires, are subject to a Market Value Adjustment. A Market Value Adjustment also may apply upon payment of a death benefit and when you apply amounts currently invested in a Guarantee Period to an Income Plan (unless paid or applied during the 30-day period after such Guarantee Period expires). We also will not apply a Market Value Adjustment to a withdrawal you make: - - within the Free Withdrawal Amount as described on page 23, - - that qualify for one of the waivers as described on page 23, - - to satisfy the IRS minimum distribution rules for the Contract, or - - a single withdrawal made by a surviving spouse made within one year after continuing the Contract. We apply the Market Value Adjustment to reflect changes in interest rates from the time you first allocate money to a Guarantee Period to the time you remove it from that Guarantee Period. We calculate the Market Value Adjustment by comparing the TREASURY RATE for a period equal to the Guarantee Period at its inception to the Treasury Rate for a period equal to the Guarantee Period when you remove your money. "Treasury Rate" means the U.S. Treasury Note Constant Maturity Yield as reported in Federal Reserve Bulletin Release H.15. The Market Value Adjustment may be positive or negative, depending on changes in interest rates. As such, you bear the investment risk associated with changes in interest rates. If interest rates increase significantly, the Market Value Adjustment and any withdrawal charge, premium taxes, and income tax withholding (if applicable) could reduce the amount you receive upon full withdrawal from a Guaranteed Period to an amount that is less than the purchase payment applied to that period plus interest earned under the Contract. Generally, if the original Treasury Rate at the time you allocate money to a Guarantee Period is higher than the applicable current Treasury Rate for a period equal to the Guarantee Period, then the Market Value Adjustment will result in a higher amount payable to you, transferred or applied to an Income Plan. Conversely, if the Treasury Rate at the time you allocate money to a Guarantee Period is lower than the applicable Treasury Rate for a period equal to the Guarantee Period, then the Market Value Adjustment will result in a lower amount payable to you, transferred or applied to an Income Plan. For example, assume that you purchase a Contract and you select an initial Guarantee Period of 5 years and the 5-year Treasury Rate for that duration is 4.50%. Assume that at the end of 3 years, you make a partial withdrawal. If, at that later time, the current 5-year Treasury Rate is 4.20%, then the Market Value Adjustment will be positive, which will result in an increase in the amount payable to you. Conversely, if the current 5-year Treasury Rate is 4.80%, then the Market Value Adjustment will be negative, which will result in a decrease in the amount payable to you. The formula for calculating Market Value Adjustments is set forth in Appendix B to this prospectus, which also contains additional examples of the application of the Market Value Adjustment. INVESTMENT ALTERNATIVES: TRANSFERS - ------------------------------------------------------------------- TRANSFERS DURING THE ACCUMULATION PHASE During the Accumulation Phase, you may transfer Contract Value among the investment alternatives. You may not transfer Contract Value to either the Short-Term Dollar Cost Averaging Fixed Account or the Dollar Cost Averaging Fixed Account Options. You may request transfers in writing on a form that we 20 PROSPECTUS provided or by telephone according to the procedure described below. The minimum amount that you may transfer into a Guarantee Period is $50. We currently do not assess, but reserve the right to assess, a $10 charge on each transfer in excess of 12 per Contract Year. All transfers to or from more than one Portfolio on any given day counts as one transfer. We will process transfer requests that we receive before 3:00 p.m. Central Time on any Valuation Date using the Accumulation Unit Values for that Date. We will process requests completed after 3:00 p.m. Central Time on any Valuation Date using the Accumulation Unit Values for the next Valuation Date. The Contract permits us to defer transfers from the Fixed Account for up to six months from the date we receive your request. If we decide to postpone transfers for 30 days or more, we will pay interest as required by applicable law. Any interest would be payable from the date we receive the transfer request to the date we make the transfer. If you transfer an amount from a Guarantee Period other than during the 30 day period after such Guarantee Period expires, we will increase or decrease the amount by a Market Value Adjustment. We reserve the right to waive any transfer restrictions. TRANSFERS DURING THE PAYOUT PHASE During the Payout Phase, you may make transfers among the Variable Sub-Accounts so as to change the relative weighting of the Variable Sub-Accounts on which your variable income payments will be based. In addition, you will have a limited ability to make transfers from the Variable Sub-Accounts to increase the proportion of your income payments consisting of fixed income payments. You may not, however, convert any portion of your right to receive fixed income payments into variable income payments. If you choose an Income Plan that depends on any person's life, you may not make any transfers for the first 6 months after the Payout Start Date. Thereafter, you may make transfers among the Variable Sub-Accounts or make transfers from the Variable Sub-Accounts to increase the proportion of your income payments consisting of fixed income payments. Your transfers must be at least 6 months apart. TELEPHONE TRANSFERS You may make transfers by telephone by calling 1-800-755-5275. The cut-off time for telephone transfer requests is 3:00 p.m. Central time. In the event that the New York Stock Exchange closes early, i.e., before 3:00 p.m. Central Time, or in the event that the Exchange closes early for a period of time but then reopens for trading on the same day, we will process telephone transfer requests as of the close of the Exchange on that particular day. We will not accept telephone requests received at any telephone number other than the number that appears in this paragraph or received after the close of trading on the Exchange. We may suspend, modify or terminate the telephone transfer privilege at any time without notice. We use procedures that we believe provide reasonable assurance that the telephone transfers are genuine. For example, we tape telephone conversations with persons purporting to authorize transfers and request identifying information. Accordingly, we disclaim any liability for losses resulting from allegedly unauthorized telephone transfers. However, if we do not take reasonable steps to help ensure that a telephone authorization is valid, we may be liable for such losses. DOLLAR COST AVERAGING PROGRAM Through our Dollar Cost Averaging Program, you may automatically transfer a fixed dollar amount every month during the Accumulation Phase from the Short Term Dollar Cost Averaging Fixed Account or the Dollar Cost Averaging Fixed Account, to any Variable Sub-Account. You may not use the Dollar Cost Averaging Program to transfer amounts to the Guarantee Periods. We will not charge a transfer fee for transfers made under this Program, nor will such transfers count against the 12 transfers you can make each Contract Year without paying a transfer fee. The theory of dollar cost averaging is that if purchases of equal dollar amounts are made at fluctuating prices, the aggregate average cost per unit will be less than the average of the unit prices on the same purchase dates. However, participation in this Program does not assure you of a greater profit from your purchases under the Program nor will it prevent or necessarily reduce losses in a declining market. Call or write us for instructions on how to enroll. AUTOMATIC PORTFOLIO REBALANCING PROGRAM Once you have allocated your money among the Variable Sub-Accounts, the performance of each Sub-Account may cause a shift in the percentage you allocated to each Sub-Account. If you select our Automatic Portfolio Rebalancing Program, we will automatically rebalance the Contract Value in each Variable Sub-Account and return it to the desired percentage allocations. We will not include money you allocate to the Fixed Account Options in the Automatic Portfolio Rebalancing Program. 21 PROSPECTUS We will rebalance your account each quarter according to your instructions. We will transfer amounts among the Variable Sub-Accounts to achieve the percentage allocations you specify. You can change your allocations at any time by contacting us in writing or by telephone. The new allocation will be effective with the first rebalancing that occurs after we receive your request. We are not responsible for rebalancing that occurs prior to receipt of your request. Example: Assume that you want your initial purchase payment split among 2 Variable Sub-Accounts. You want 40% to be in the Fidelity VIP High Income Variable Sub-Account and 60% to be in the AIM V.I. Growth Variable Sub-Account. Over the next 2 months the bond market does very well while the stock market performs poorly. At the end of the first quarter, the Fidelity VIP High Income Variable Sub-Account now represents 50% of your holdings because of its increase in value. If you choose to have your holdings rebalanced quarterly, on the first day of the next quarter, we would sell some of your units in the Fidelity VIP High Income Variable Sub-Account and use the money to buy more units in the AIM V.I. Growth Variable Sub-Account so that the percentage allocations would again be 40% and 60% respectively. The Automatic Portfolio Rebalancing Program is available only during the Accumulation Phase. The transfers made under the Program do not count towards the 12 transfers you can make without paying a transfer fee, and are not subject to a transfer fee. Portfolio rebalancing is consistent with maintaining your allocation of investments among market segments, although it is accomplished by reducing your Contract Value allocated to the better performing segments. EXPENSES - ------------------------------------------------------------------- As a Contract Owner, you will bear, directly or indirectly, the charges and expenses described below. CONTRACT MAINTENANCE CHARGE During the Accumulation Phase, on each Contract Anniversary, we will deduct a $35 contract maintenance charge from your Contract Value invested in each Variable Sub-Account in proportion to the amount invested. If you surrender your Contract, we will deduct the contract maintenance charge pro rated for the part of the Contract Year elapsed, unless your Contract qualifies for a waiver, described below. The charge is to compensate us for the cost of administering the Contracts and the Variable Account. Maintenance costs include expenses we incur collecting purchase payments; keeping records; processing death claims, cash withdrawals, and policy changes; proxy statements; calculating Accumulation Unit Values and income payments; and issuing reports to Contract Owners and regulatory agencies. We cannot increase the charge. However, we will waive this charge if, as of the Contract Anniversary or upon full surrender: - - total purchase payments equal $50,000 or more, or - - all money is allocated to the Fixed Account. In addition, we will waive the Contract Maintenance Charge if total purchase payments are $50,000 or more as of the Payout Start Date. MORTALITY AND EXPENSE RISK CHARGE We deduct a mortality and expense risk charge daily at an annual rate of 1.05% of the average daily net assets you have invested in the Variable Sub-Accounts (1.27% if you select the Enhanced Death Benefit Rider, and 1.49% if you select the Enhanced Death and Income Benefit Combination Rider). The mortality and expense risk charge is for all the insurance benefits available with your Contract (including our guarantee of annuity rates and the death benefits), for certain expenses of the Contract, and for assuming the risk (expense risk) that the current charges will be sufficient in the future to cover the cost of administering the Contract. If the charges under the Contract are not sufficient, then we will bear the loss. We charge an additional amount for the Enhanced Death Benefit Rider and the Enhanced Death and Income Benefit Combination Rider to compensate us for the additional risk that we accept by providing these options. We guarantee that we will not raise the mortality and expense risk charge. We assess the mortality and expense risk charge during both the Accumulation Phase and the Payout Phase. ADMINISTRATIVE EXPENSE CHARGE We deduct an administrative expense charge daily at an annual rate of 0.10% of the average daily net assets you have invested in the Variable Sub-Accounts. We intend 22 PROSPECTUS this charge to cover actual administrative expenses that exceed the revenues from the contract maintenance charge. There is no necessary relationship between the amount of administrative charge imposed on a given Contract and the amount of expenses that may be attributed to that Contract. We assess this charge each day during the Accumulation Phase and the Payout Phase. We guarantee that we will not raise this charge. TRANSFER FEE We do not currently impose a fee upon transfers among the investment alternatives. However, we reserve the right to charge $10 per transfer after the 12th transfer in each Contract Year. We will not charge a transfer fee on transfers that are part of a Dollar Cost Averaging or Automatic Portfolio Rebalancing Program. WITHDRAWAL CHARGE We may assess a withdrawal charge of up to 6% of the purchase payment(s) you withdraw. The charge declines to 0% over a 6 year period that begins on the day we receive your payment. A schedule showing how the charge declines is shown on page 7. During each Contract Year, you can withdraw up to 15% of the aggregate amount of your purchase payments without paying the charge. Unused portions of this "FREE WITHDRAWAL AMOUNT" are not carried forward to future Contract Years. We will deduct withdrawal charges, if applicable, from the amount paid. For purposes of calculating the withdrawal charge, we will treat withdrawals as coming from the oldest purchase payments first. However, for federal income tax purposes, please note that withdrawals are considered to have come first from earnings, which means you pay taxes on the earnings portion of your withdrawal. We do not apply a withdrawal charge in the following situations: - - on the Payout Start Date (a withdrawal charge may apply if you terminate income payments to be received for a specified period); - - withdrawals taken to satisfy IRS minimum distribution rules for the Contract; or - - withdrawals that qualify for one of the waivers as described below. We use the amounts obtained from the withdrawal charge to pay sales commissions and other promotional or distribution expenses associated with marketing the Contracts. To the extent that the withdrawal charge does not cover all sales commissions and other promotional or distribution expenses, we may use any of our corporate assets, including potential profit which may arise from the mortality and expense risk charge or any other charges or fee described above, to make up any difference. Withdrawals also may be subject to tax penalties or income tax and a Market Value Adjustment. You should consult your own tax counsel or other tax advisers regarding any withdrawals. CONFINEMENT WAIVER. We will waive the withdrawal charge and any Market Value Adjustment on all withdrawals taken prior to the Payout Start Date under your Contract if the following conditions are satisfied: 1. You or the Annuitant, if the Contract Owner is not a natural person, are confined to a long term care facility or a hospital for at least 90 consecutive days. You or the Annuitant must enter the long term care facility or hospital at least 30 days after the Issue Date; 2. You request the withdrawal and provide written proof of the stay no later than 90 days following the end of your or the Annuitant's stay at the long term care facility or hospital; and 3. A physician must have prescribed the stay and the stay must be medically necessary (as defined in the Contract). You may not claim this benefit if you, the Annuitant, or a member of your or the Annuitant's immediate family, is the physician prescribing your or the Annuitant's stay in a long term care facility. TERMINAL ILLNESS WAIVER. We will waive the withdrawal charge and any Market Value Adjustment on all withdrawals taken prior to the Payout Start Date under your Contract if: 1. you or the Annuitant (if the Contract Owner is not a natural person) are first diagnosed with a terminal illness at least 30 days after the Issue Date; and 2. you claim this benefit and deliver adequate proof of diagnosis to us. UNEMPLOYMENT WAIVER. We will waive the withdrawal charge and any Market Value Adjustment on one partial or a full withdrawal taken prior to the Payout Start Date under your Contract, if you meet the following requirements: 1. you or the Annuitant, if the Contract Owner is not a natural person, become unemployed at least one year after the Issue Date; 2. you or the Annuitant, if the Contract Owner is not a natural person, receive unemployment compensation as defined in the Contract for at least 30 days as a result of that unemployment; and 3. you or the Annuitant, if the Contract Owner is not a natural person, claim this benefit within 180 days of your or the Annuitant's initial receipt of unemployment compensation. 23 PROSPECTUS Please refer to your Contract for more detailed information about the terms and conditions of these waivers. The laws of your state may limit the availability of these waivers and may also change certain terms and/or benefits available under the waivers. You should consult your Contract for further details on these variations. Also, even if you do not need to pay our withdrawal charge or a Market Value Adjustment because of these waivers, you still may be required to pay taxes or tax penalties on the amount withdrawn. You should consult your tax adviser to determine the effect of a withdrawal on your taxes. PREMIUM TAXES Some states and other governmental entities (e.g., municipalities) charge premium taxes or similar taxes. We are responsible for paying these taxes and will deduct them from your Contract Value. Some of these taxes are due when the Contract is issued, others are due when income payments begin or upon surrender. Our current practice is not to charge anyone for these taxes until income payments begin or when a total withdrawal occurs, including payment upon death. At our discretion, we may discontinue this practice and deduct premium taxes from the purchase payments. Premium taxes generally range from 0% to 4%, depending on the state. At the Payout Start Date, if applicable, we deduct the charge for premium taxes from each investment alternative in the proportion that the Contract Owner's value in the investment alternative bears to the total Contract Value. DEDUCTION FOR SEPARATE ACCOUNT INCOME TAXES We are not currently maintaining a provision for taxes. In the future, however, we may establish a provision for taxes if we determine, in our sole discretion, that we will incur a tax as a result of the operation of the Variable Account. We will deduct for any taxes we incur as a result of the operation of the Variable Account, whether or not we previously made a provision for taxes and whether or not it was sufficient. Our status under the Internal Revenue Code is briefly described in the Statement of Additional Information. OTHER EXPENSES Each Portfolio deducts advisory fees and other expenses from its assets. You indirectly bear the charges and expenses of the Portfolios whose shares are held by the Variable Sub-Accounts. These fees and expenses are described in the accompanying prospectuses for the Funds. For a summary of current estimates of those charges and expenses, see pages 8-9. We may receive compensation from the investment advisers or administrators of the Portfolios in connection with the administrative services we provide to the Portfolios. ACCESS TO YOUR MONEY - ------------------------------------------------------------------- You can withdraw some or all of your Contract Value at any time prior to the Payout Start Date. The amount payable upon withdrawal is the Contract Value (or portion thereof) next computed after we receive the request for a withdrawal at our home office, adjusted by any Market Value Adjustment, less any withdrawal charges, contract maintenance charges, income tax withholding, penalty tax, and any premium taxes. We will pay withdrawals from the Variable Account within 7 days of receipt of the request, subject to postponement in certain circumstances. You can withdraw money from the Variable Account or the Fixed Account Options. To complete a partial withdrawal from the Variable Account, we will cancel Accumulation Units in an amount equal to the withdrawal and any applicable withdrawal charge and premium taxes. You must name the investment alternative from which you are taking the withdrawal. If none is named, then the withdrawal request is incomplete and cannot be honored. In general, you must withdraw at least $50 at a time. You also may withdraw a lesser amount if you are withdrawing your entire interest in a Variable SubAccount. If you request a total withdrawal, we may require you to return your Contract to us. POSTPONEMENT OF PAYMENTS We may postpone the payment of any amounts due from the Variable Account under the Contract if: 1. The New York Stock Exchange is closed for other than usual weekends or holidays, or trading on the Exchange is otherwise restricted; 24 PROSPECTUS 2.An emergency exists as defined by the SEC; or 3. The SEC permits delay for your protection. In addition, we may delay payments or transfers from the Fixed Account Options for up to 6 months (or shorter period if required by law). If we delay payment for 30 days or more, we will pay interest as required by law. SYSTEMATIC WITHDRAWAL PROGRAM You may choose to receive systematic withdrawal payments on a monthly, quarterly, semi-annual, or annual basis at any time prior to the Payout Start Date. The minimum amount of each systematic withdrawal is $50. At our discretion, systematic withdrawals may not be offered in conjunction with the Dollar Cost Averaging Program or Automatic Portfolio Rebalancing Program. Depending on fluctuations in the value of the Variable Sub-Accounts and the value of the Fixed Account Options, systematic withdrawals may reduce or even exhaust the Contract Value. Income taxes may apply to systematic withdrawals. Please consult your tax advisor before taking any withdrawal. We will make systematic withdrawal payments to you or your designated payee. At our discretion, we may modify or suspend the Systematic Withdrawal Program and charge a processing fee for the service. If we modify or suspend the Systematic Withdrawal Program, existing systematic withdrawal payments will not be affected. MINIMUM CONTRACT VALUE If your request for a partial withdrawal would reduce your Contract Value to less than $2,000, we may treat it as a request to withdraw your entire Contract Value. Your Contract will terminate if you withdraw all of your Contract Value. We will, however, ask you to confirm your withdrawal request before terminating your Contract. If we terminate your Contract, we will distribute to you its Contract Value, adjusted by any applicable Market Value Adjustment, less withdrawal and other charges and applicable taxes. INCOME PAYMENTS - ------------------------------------------------------------------- PAYOUT START DATE You select the Payout Start Date in your application. The Payout Start Date is the day that we apply your money to an Income Plan. The Payout Start Date must be: - - at least 30 days after the Issue Date; and - - no later than the day the Annuitant reaches age 90, or the 10th Contract Anniversary, if later. You may change the Payout Start Date at any time by notifying us in writing of the change at least 30 days before the scheduled Payout Start Date. Absent a change, we will use the Payout Start Date stated in your Contract. INCOME PLANS An Income Plan is a series of scheduled payments to you or someone you designate. You may choose and change your choice of Income Plan until 30 days before the Payout Start Date. If you do not select an Income Plan, we will make income payments in accordance with Income Plan 1 with guaranteed payments for 10 years. Three Income Plans are available under the Contract. Each is available to provide: - - fixed income payments; - - variable income payments; or - - a combination of the two. The three Income Plans are: INCOME PLAN 1 -- LIFE INCOME WITH GUARANTEED PAYMENTS. Under this plan, we make periodic income payments for at least as long as the Annuitant lives. If the Annuitant dies before we have made all of the guaranteed income payments, we will continue to pay the remainder of the guaranteed income payments as required by the Contract. INCOME PLAN 2 -- JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED PAYMENTS. Under this plan, we make periodic income payments for at least as long as either the Annuitant or the joint Annuitant is alive. If both the Annuitant and the joint Annuitant die before we have made all of the guaranteed income payments, we will continue to pay the remainder of the guaranteed income payments as required by the Contract. INCOME PLAN 3 -- GUARANTEED PAYMENTS FOR A SPECIFIED PERIOD (5 YEARS TO 30 YEARS). Under this plan, we make 25 PROSPECTUS periodic income payments for the period you have chosen. These payments do not depend on the Annuitant's life. You may elect to receive guaranteed payments for periods ranging from 5 to 30 years. Income payments for less than 120 months may be subject to a withdrawal charge. We will deduct the mortality and expense risk charge from the Variable Sub-Account assets that support variable income payments even though we may not bear any mortality risk. The length of any guaranteed payment period under your selected Income Plan generally will affect the dollar amounts of each income payment. As a general rule, longer guarantee periods result in lower income payments, all other things being equal. For example, if you choose an Income Plan with payments that depend on the life of the Annuitant but with no minimum specified period for guaranteed payments, the income payments generally will be greater than the income payments made under the same Income Plan with a minimum specified period for guaranteed payments. If you choose Income Plan 1 or 2, or, if available, another Income Plan with payments that continue for the life of the Annuitant or joint Annuitant, we may require proof of age and sex of the Annuitant or joint Annuitant before starting income payments, and proof that the Annuitant or joint Annuitant are alive before we make each payment. Please note that under such Income Plans, if you elect to take no minimum guaranteed payments, it is possible that the payee could receive only 1 income payment if the Annuitant and any joint Annuitant both die before the second income payment, or only 2 income payments if they die before the third income payment, and so on. Generally, you may not make withdrawals after the Payout Start Date. One exception to this rule applies if you are receiving variable income payments that do not depend on the life of the Annuitant (such as under Income Plan 3). In that case you may terminate all or part of the Variable Account portion of the income payments at any time and receive a lump sum equal to the commuted balance of the remaining variable payments associated with the amount withdrawn. The minimum amount you may withdraw under this feature is $1,000. A withdrawal charge may apply. We deduct applicable premium taxes from the Contract Value at the Payout Start Date. We may make other Income Plans available. If you elected the Enhanced Death and Income Benefit Combination Option, you may be able to apply an amount greater than your Contract Value to an Income Plan. You must apply at least the Contract Value in the Fixed Account on the Payout Start Date to fixed income payments. If you wish to apply any portion of your Fixed Account balance to provide variable income payments, you should plan ahead and transfer that amount to the Variable Sub-Accounts prior to the Payout Start Date. If you do not tell us how to allocate your Contract Value among fixed and variable income payments, we will apply your Contract Value in the Variable Account to variable income payments and your Contract Value in the Fixed Account to fixed income payments. We will apply your Contract Value, adjusted by any applicable Market Value Adjustment, less applicable taxes to your Income Plan on the Payout Start Date. If the amount available to apply under an Income Plan is less than $2,000, or not enough to provide an initial payment of at least $20, and state law permits, we may: - - pay you the Contract Value, adjusted by any applicable Market Value Adjustment and less any applicable taxes, in a lump sum instead of the periodic payments you have chosen; or - - reduce the frequency of your payments so that each payment will be at least $20. VARIABLE INCOME PAYMENTS The amount of your variable income payments depends upon the investment results of the Variable Sub-Accounts you select, the premium taxes you pay, the age and sex of the Annuitant, and the Income Plan you choose. We guarantee that the payments will not be affected by (a) actual mortality experience and (b) the amount of our administration expenses. We cannot predict the total amount of your variable income payments. Your variable income payments may be more or less than your total purchase payments because (a) variable income payments vary with the investment results of the underlying Portfolios; and (b) the Annuitant could live longer or shorter than we expect based on the tables we use. In calculating the amount of the periodic payments in the annuity tables in the Contract, we assumed an annual investment rate of 3%. If the actual net investment return of the Variable Sub-Accounts you choose is less than this assumed investment rate, then the dollar amount of your variable income payments will decrease. The dollar amount of your variable income payments will increase, however, if the actual net investment return exceeds the assumed investment rate. The dollar amount of the variable income payments stays level if the net investment return equals the assumed investment rate. Please refer to the Statement of Additional Information for more detailed information as to how we determine variable income payments. 26 PROSPECTUS FIXED INCOME PAYMENTS We guarantee income payment amounts derived from any Fixed Account Option for the duration of the Income Plan. We calculate the fixed income payments by: 1. adjusting the portion of the Contract Value in any Fixed Account Option on the Payout Start Date by any applicable Market Value Adjustment; 2. deducting any applicable premium tax; and 3. applying the resulting amount to the greater of (a) the appropriate value from the income payment table in your Contract or (b) such other value as we are offering at that time. We may defer making fixed income payments for a period of up to 6 months or any shorter time state law may require. If we defer payments for 30 days or more, we will pay interest as required by law from the date we receive the withdrawal request to the date we make payment. CERTAIN EMPLOYEE BENEFIT PLANS The Contracts offered by this prospectus contain income payment tables that provide for different payments to men and women of the same age, except in states that require unisex tables. We reserve the right to use income payment tables that do not distinguish on the basis of sex to the extent permitted by applicable law. In certain employment-related situations, employers are required by law to use the same income payment tables for men and women. Accordingly, if the Contract is to be used in connection with an employment-related retirement or benefit plan and we do not offer unisex annuity tables in your state, you should consult with legal counsel as to whether the purchase of a Contract is appropriate. DEATH BENEFITS - ------------------------------------------------------------------- We will pay a death benefit prior to the Payout Start Date on: 1. the death of any Contract Owner or, 2. the death of the Annuitant, if the Contract is owned by a non-natural person. We will pay the death benefit to the new Contract Owner 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 of the death of the Annuitant, we will pay the death benefit to the current Contract Owner. A claim for a distribution on death must include DUE PROOF OF DEATH. We will accept the following documentation as "Due Proof of Death:" - - a certified copy of a death certificate, - - a certified copy of a decree of a court of competent jurisdiction as to the finding of death, or - - any other proof acceptable to us. DEATH BENEFIT AMOUNT Prior to the Payout Start Date, the death benefit is equal to the greatest of: 1. the Contract Value as of the date we determine the value of the death benefit, or 2. the SETTLEMENT VALUE (that is, the amount payable on a full withdrawal of Contract Value) on the date we determine the value of the death benefit, or 3. the Contract Value on each DEATH BENEFIT ANNIVERSARY prior to the date we determine the death benefit, increased by purchase payments made since that Death Benefit Anniversary and reduced by an adjustment for any partial withdrawals since that Death Benefit Anniversary. A "Death Benefit Anniversary" is every seventh Contract Anniversary beginning with the Issue Date. For example, the Issue Date, 7th and 14th Contract Anniversaries are the first 3 Death Benefit Anniversaries. The withdrawal adjustment is equal to (a) divided by (b), with the result multiplied by (c), where: (a) = the withdrawal amount; (b) = the Contract Value immediately prior to the withdrawal; and (c) = the Contract value on the Death Benefit Anniversary adjusted by any prior purchase payments or withdrawals made since that Anniversary. We will determine the value of the death benefit as of the end of the Valuation Date on which we receive a complete request for payment of the death benefit. If we receive a request after 3 p.m. Central Time on a Valuation Date, we will process the request as of the end of the following Valuation Date. ENHANCED DEATH BENEFIT RIDER If the Contract Owner is a living individual, the enhanced death benefit applies only upon the death of 27 PROSPECTUS the Contract Owner. If the Contract Owner is not a living individual, the enhanced death benefit applies only upon the death of the Annuitant. For Contracts with the Enhanced Death Benefit Rider, the death benefit will be the greatest of (1) through (3) above, or (4) the enhanced death benefit. The enhanced death benefit is equal to the greater of the Enhanced Death Benefit A or Enhanced Death Benefit B. Enhanced Death Benefit B may not be available in all states. The enhanced death benefit will never be greater than the maximum death benefit allowed by any state nonforfeiture laws that govern the Contract. ENHANCED DEATH BENEFIT A. At issue, Enhanced Death Benefit A is equal to the initial purchase payment. After issue, Enhanced Death Benefit A is the greatest of the ANNIVERSARY VALUES as of the date we determine the death benefit. The "Anniversary Value" is equal to the Contract Value on a Contract Anniversary, increased by purchase payments made since that Anniversary and reduced by an adjustment for any partial withdrawals since that Anniversary. The adjustment is equal to (a) divided by (b), and the result multiplied by (c) where: (a) = the withdrawal amount, (b) = the Contract Value immediately prior to the withdrawal, and (c) = the Contract Value on that Contract Anniversary adjusted by any prior purchase payments and withdrawals since that Contract Anniversary. We will calculate Anniversary Values for each Contract Anniversary prior to the oldest Contract Owner's or the Annuitant's, if the Contract Owner is not a natural person, 80th birthday. ENHANCED DEATH BENEFIT B. The Enhanced Death Benefit B is equal to total purchase payments made reduced by a withdrawal adjustment, as defined below. Each purchase payment and each withdrawal adjustment will accumulate daily at a rate equivalent to 5% per year until the earlier of: - - the date we determine the death benefit, or - - the first day of the month following the oldest Contract Owner's or, if the Contract Owner is not a natural person, the Annuitant's, 85th birthday. The adjustment is equal to (a) divided by (b), and the result multiplied by (c) where: (a) = the withdrawal amount, (b) = the Contract Value immediately prior to the withdrawal, and (c) = the most recently calculated enhanced death benefit. ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER You may elect not to choose the Enhanced Death Benefit Rider and may instead choose the Enhanced Death and Income Benefit Combination Rider. The enhanced death benefit portion of the Enhanced Death and Income Benefit Combination Rider is as described above under "Enhanced Death Benefit Rider." The enhanced income benefit defines a minimum amount applied to the Payout Phase. This minimum amount is equal to the value the enhanced death benefit would be on the Payout Start Date. The enhanced income benefit will apply if the Contract Owner elects a Payout Start Date that: - - is on or after the tenth Contract Anniversary, and - - is prior to the Annuitant's 90th Birthday. On the Payout Start Date, you may apply the greater of the Contract Value or the enhanced income benefit to the Payout Phase of the Contract. No Market Value Adjustment will be applied to the enhanced income benefit amount. The enhanced income benefit will only apply if the Income Plan selected provides payments guaranteed for either a single or joint lives with a period certain of at least: - - 10 years, if the youngest Annuitant's age is 80 or less on the date the amount is applied; or - - 5 years, if the youngest Annuitant's age is greater than 80 on the date the amount is applied. If, however, you apply the Contract Value and not the enhanced income benefit to the Income Plan, then you may select any Income Plan we offer at that time. DEATH BENEFIT PAYMENTS A death benefit will be paid: 1. if the Contract Owner elects to receive the death benefit distributed in a single payment within 180 days of the date of death, and 2. if the death benefit is paid as of the day the value of the death benefit is determined. Otherwise, the Settlement Value will be paid. We reserve the right to waive the 180 day limit on a non-discriminatory basis. In any event, the entire value of the Contract must be distributed within 5 years after the date of death unless an Income Plan is elected or a surviving spouse continues the Contract in accordance with the provisions described below. 28 PROSPECTUS If the Contract Owner eligible to receive the distribution upon death is not a natural person, the Contract Owner may elect to receive the distribution upon death in one or more distributions. If the Contract Owner is a natural person, the Contract Owner may elect to receive the distribution upon death either in one or more distributions or by periodic payments through an Income Plan. Payments from the Income Plan must begin within one year of the date of death and must be payable throughout: - - the life of the Contract Owner; or - - a period not to exceed the life expectancy of the Contract Owner; or - - the life of the Contract Owner with payments guaranteed to a period not to exceed the life expectancy of the Contract Owner. If the surviving spouse of the deceased Contract Owner is the new Contract Owner, then the spouse may elect one of the options listed above or may continue the Contract in the Accumulation Phase as if the death had not occurred. If the Contract is continued in the Accumulation Phase, the surviving spouse may make a single withdrawal of any amount within 1 year of the date of death without incurring a withdrawal charge or Market Value Adjustment. MORE INFORMATION - ------------------------------------------------------------------- GLENBROOK Glenbrook is the issuer of the Contract. Glenbrook is a stock life insurance company organized under the laws of the State of Arizona in 1998. Previously, Glenbrook was organized under the laws of the State of Illinois in 1992. Glenbrook was originally organized under the laws of the State of Indiana in 1965. From 1965 to 1983 Glenbrook was known as "United Standard Life Assurance Company" and from 1983 to 1992 as "William Penn Life Assurance Company of America." Glenbrook is currently licensed to operate in the District of Columbia and all states except New York. We intend to offer the Contract in those jurisdictions in which we are licensed. Our home office is located at 3100 Sanders Road, Northbrook, Illinois 60062. Glenbrook is a wholly owned subsidiary of Allstate Life Insurance Company ("ALLSTATE LIFE"), a stock life insurance company incorporated under the laws of the State of Illinois. Allstate Life is a wholly owned subsidiary of Allstate Insurance Company, a stock property-liability insurance company incorporated under the laws of Illinois. All of the outstanding capital stock of Allstate Insurance Company is owned by The Allstate Corporation. Glenbrook and Allstate Life entered into a reinsurance agreement effective June 5, 1992. Under the reinsurance agreement, Allstate Life reinsures substantially all of Glenbrook's liabilities under its various insurance contracts. The reinsurance agreement provides us with financial backing from Allstate Life. However, it does not create a direct contractual relationship between Allstate Life and you. In other words, the obligations of Allstate Life under the reinsurance agreement are to Glenbrook; Glenbrook remains the sole obligor under the Contract to you. Independent rating agencies regularly evaluate life insurers' claims-paying ability, quality of investments, and overall stability. A.M. Best Company assigns an A+ (Superior) financial strength rating to Allstate Life, which results in an A+r rating to Glenbrook due to the reinsurance agreement with Allstate Life mentioned above. Standard & Poor's assigns an AA+ (Very Strong) financial strength rating and Moody's Investors Service assigns an Aa2 (Excellent) financial strength rating to Glenbrook, sharing the same ratings of its parent, Allstate Life. These ratings do not reflect the investment performance of the Variable Account. We may from time to time advertise these ratings in our sales literature. THE VARIABLE ACCOUNT Glenbrook established the Glenbrook Life Multi-Manager Variable Account on January 15, 1996. We have registered the Variable Account with the SEC as a unit investment trust. The SEC does not supervise the management of the Variable Account or Glenbrook. We own the assets of the Variable Account. The Variable Account is a segregated asset account under Arizona law. That means we account for the Variable Account's income, gains and losses separately from the results of our other operations. It also means that only the assets of the Variable Account that are in excess of the reserves and other Contract liabilities with respect to the Variable Account are subject to liabilities relating to our other operations. Our obligations arising under 29 PROSPECTUS the Contracts are general corporate obligations of Glenbrook. The Variable Account consists of multiple Variable Sub-Accounts. Each Variable Sub-Account invests in a corresponding Portfolio. We may add new Variable Sub-Accounts or eliminate one or more of them, if we believe marketing, tax, or investment conditions so warrant. We may also add other Variable Sub-Accounts that may be available under other variable annuity contracts. We do not guarantee the investment performance of the Variable Account, its Sub-Accounts or the Portfolios. We may use the Variable Account to fund our other annuity contracts. We will account separately for each type of annuity contract funded by the Variable Account. THE PORTFOLIOS DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. We automatically reinvest all dividends and capital gains distributions from the Portfolios in shares of the distributing Portfolio at their net asset value. VOTING PRIVILEGES. As a general matter, you do not have a direct right to vote the shares of the Portfolios held by the Variable Sub-Accounts to which you have allocated your Contract Value. Under current law, however, you are entitled to give us instructions on how to vote those shares on certain matters. Based on our present view of the law, we will vote the shares of the Portfolios that we hold directly or indirectly through the Variable Account in accordance with instructions that we receive from Contract Owners entitled to give such instructions. As a general rule, before the Payout Start Date, the Contract Owner or anyone with a voting interest is the person entitled to give voting instructions. The number of shares that a person has a right to instruct will be determined by dividing the Contract Value allocated to the applicable Variable Sub-Account by the net asset value per share of the corresponding Portfolio as of the record date of the meeting. After the Payout Start Date the person receiving income payments has the voting interest. The payee's number of votes will be determined by dividing the reserve for such Contract allocated to the applicable Variable Sub-Account by the net asset value per share of the corresponding Portfolio. The votes decrease as income payments are made and as the reserves for the Contract decrease. We will vote shares attributable to Contracts for which we have not received instructions, as well as shares attributable to us, in the same proportion as we vote shares for which we have received instructions, unless we determine that we may vote such shares in our own discretion. We will apply voting instructions to abstain on any item to be voted upon on a pro-rata basis to reduce the votes eligible to be cast. We reserve the right to vote Portfolio shares as we see fit without regard to voting instructions to the extent permitted by law. If we disregard voting instructions, we will include a summary of that action and our reasons for that action in the next semi-annual financial report we send to you. CHANGES IN PORTFOLIOS. If the shares of any of the Portfolios are no longer available for investment by the Variable Account or if, in our judgment, further investment in such shares is no longer desirable in view of the purposes of the Contract, we may eliminate that Portfolio and substitute shares of another eligible investment fund. Any substitution of securities will comply with the requirements of the Investment Company Act of 1940. We also may add new Variable Sub-Accounts that invest in additional mutual funds. We will notify you in advance of any change. CONFLICTS OF INTEREST. Certain of the Portfolios sell their shares to separate accounts underlying both variable life insurance and variable annuity contracts. It is conceivable that in the future it may be unfavorable for variable life insurance separate accounts and variable annuity separate accounts to invest in the same Portfolio. The boards of directors of these Portfolios monitor for possible conflicts among separate accounts buying shares of the Portfolios. Conflicts could develop for a variety of reasons. For example, differences in treatment under tax and other laws or the failure by a separate account to comply with such laws could cause a conflict. To eliminate a conflict, a Portfolio's board of directors may require a separate account to withdraw its participation in a Portfolio. A Portfolio's net asset value could decrease if it had to sell investment securities to pay redemption proceeds to a separate account withdrawing because of a conflict. THE CONTRACT DISTRIBUTION. ALFS, Inc. ("ALFS"), located at 3100 Sanders Road, Northbrook, IL 60062-7154, serves as principal underwriter of the Contracts. ALFS is a wholly owned subsidiary of Allstate Life. ALFS is a registered broker dealer under the Securities and Exchange Act of 1934, as amended ("EXCHANGE ACT"), and is a member of the National Association of Securities Dealers, Inc. We will pay commissions to broker-dealers who sell the contracts. Commissions paid may vary, but we estimate that the total commissions paid on all Contract sales will not exceed 8% of all purchase payments. These commissions are intended to cover distribution expenses. Sometimes, we also pay the broker-dealer a 30 PROSPECTUS persistency bonus in addition to the standard commissions. A persistency bonus is not expected to exceed 0.25%, on an annual basis, of the Contract Values considered in connection with the bonus. In some states, Contracts may be sold by representatives or employees of banks which may be acting as broker-dealers without separate registration under the Exchange Act, pursuant to legal and regulatory exceptions. Glenbrook does not pay ALFS a commission for distribution of the Contracts. The underwriting agreement with ALFS provides that we will reimburse ALFS for any liability to Contract Owners arising out of services rendered or Contracts issued. ADMINISTRATION. We have primary responsibility for all administration of the Contracts and the Variable Account. We provide the following administrative services, among others: - - issuance of the Contracts; - - maintenance of Contract Owner records; - - Contract Owner services; - - calculation of unit values; - - maintenance of the Variable Account; and - - preparation of Contract Owner reports. We will send you Contract statements and transaction confirmations at least annually. You should notify us promptly in writing of any address change. You should read your statements and confirmations carefully and verify their accuracy. You should contact us promptly if you have a question about a periodic statement. We will investigate all complaints and make any necessary adjustments retroactively, but you must notify us of a potential error within a reasonable time after the date of the questioned statement. If you wait too long, we reserve the right to make the adjustment as of the date that we receive notice of the potential error. We also will provide you with additional periodic and other reports, information and prospectuses as may be required by federal securities laws. QUALIFIED PLANS If you use the Contract within a qualified plan, the plan may impose different or additional conditions or limitations on withdrawals, waivers of withdrawal charges, death benefits, Payout Start Dates, income payments, and other Contract features. In addition, adverse tax consequences may result if qualified plan limits on distributions and other conditions are not met. Please consult your qualified plan administrator for more information. LEGAL MATTERS Foley & Lardner, Washington, D.C., has advised Glenbrook on certain federal securities law matters. All matters of state insurance law pertaining to the Contracts, including the validity of the Contracts and Glenbrook's right to issue such Contracts under state insurance law, have been passed upon by Michael J. Velotta, General Counsel of Glenbrook. TAXES - ------------------------------------------------------------------- THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. GLENBROOK MAKES NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR TRANSACTION INVOLVING A CONTRACT. Federal, state, local and other tax consequences of ownership or receipt of distributions under an annuity contract depend on your individual circumstances. If you are concerned about any tax consequences with regard to your individual circumstances, you should consult a competent tax adviser. TAXATION OF ANNUITIES IN GENERAL TAX DEFERRAL. Generally, you are not taxed on increases in the Contract Value until a distribution occurs. This rule applies only where: 1. the Contract Owner is a natural person, 2. the investments of the Variable Account are "adequately diversified" according to Treasury Department regulations, and 3. Glenbrook is considered the owner of the Variable Account assets for federal income tax purposes. NON-NATURAL OWNERS. As a general rule, annuity contracts owned by non-natural persons such as corporations, trusts, or other entities are not treated as annuity contracts for federal income tax purposes. The income on such contracts is taxed as ordinary income received or accrued by the owner during the taxable year. Please see the Statement of Additional Information for a discussion of several exceptions to the general rule for Contracts owned by non-natural persons. DIVERSIFICATION REQUIREMENTS. For a Contract to be treated as an annuity for federal income tax purposes, 31 PROSPECTUS the investments in the Variable Account must be "adequately diversified" consistent with standards under Treasury Department regulations. If the investments in the Variable Account are not adequately diversified, the Contract will not be treated as an annuity contract for federal income tax purposes. As a result, the income on the Contract will be taxed as ordinary income received or accrued by the Contract Owner during the taxable year. Although Glenbrook does not have control over the Portfolios or their investments, we expect the Portfolios to meet the diversification requirements. OWNERSHIP TREATMENT. The IRS has stated that you will be considered the owner of Variable Account assets if you possess incidents of ownership in those assets, such as the ability to exercise investment control over the assets. At the time the diversification regulations were issued, the Treasury Department announced that the regulations do not provide guidance concerning circumstances in which investor control of separate account investments may cause an investor to be treated as the owner of the separate account. The Treasury Department also stated that future guidance would be issued regarding the extent that owners could direct sub-account investments without being treated as owners of the underlying assets of the separate account. Your rights under the Contract are different than those described by the IRS in rulings in which it found that contract owners were not owners of separate account assets. For example, you have the choice to allocate premiums and Contract Values among more investment alternatives. Also, you may be able to transfer among investment alternatives more frequently than in such rulings. These differences could result in you being treated as the owner of the Variable Account. If this occurs, income and gain from the Variable Account assets would be includible in your gross income. Glenbrook does not know what standards will be set forth in any regulations or rulings which the Treasury Department may issue. It is possible that future standards announced by the Treasury Department could adversely affect the tax treatment of your Contract. We reserve the right to modify the Contract as necessary to attempt to prevent you from being considered the federal tax owner of the assets of the Variable Account. However, we make no guarantee that such modification to the Contract will be successful. TAXATION OF PARTIAL AND FULL WITHDRAWALS. If you make a partial withdrawal under a non-Qualified Contract, amounts received are taxable to the extent the Contract Value, without regard to surrender charges, exceeds the investment in the Contract. The investment in the Contract is the gross premium paid for the Contract minus any amounts previously received from the Contract if such amounts were properly excluded from your gross income. If you make a partial withdrawal under a Qualified Contract, the portion of the payment that bears the same ratio to the total payment that the investment in the Contract (i.e., nondeductible IRA contributions, after tax contributions to qualified plans) bears to the Contract Value, is excluded from your income. If you make a full withdrawal under a non-Qualified Contract or a Qualified Contract, the amount received will be taxable only to the extent it exceeds the investment in the Contract. "Nonqualified distributions" from Roth IRAs are treated as made from contributions first and are included in gross income only to the extent that distributions exceed contributions. "Qualified distributions" from Roth IRAs are not included in gross income. "Qualified distributions" are any distributions made more than 5 taxable years after the taxable year of the first contribution to any Roth IRA and which are: - - made on or after the date the individual attains age 59 1/2, - - made to a beneficiary after the Contract Owner's death, - - attributable to the Contract Owner being disabled, or - - for a first time home purchase (first time home purchases are subject to a lifetime limit of $10,000). If you transfer a non-Qualified Contract without full and adequate consideration to a person other than your spouse (or to a former spouse incident to a divorce), you will be taxed on the difference between the Contract Value and the investment in the Contract at the time of transfer. Except for certain Qualified Contracts, any amount you receive as a loan under a Contract, and any assignment or pledge (or agreement to assign or pledge) of the Contract Value is treated as a withdrawal of such amount or portion. TAXATION OF ANNUITY PAYMENTS. Generally, the rule for income taxation of annuity payments received from a non-Qualified Contract provides for the return of your investment in the Contract in equal tax-free amounts over the payment period. The balance of each payment received is taxable. For fixed annuity payments, the amount excluded from income is determined by multiplying the payment by the ratio of the investment in the Contract (adjusted for any refund feature or period certain) to the total expected value of annuity payments for the term of the Contract. If you elect variable annuity payments, the amount excluded from taxable income is determined by dividing the investment in the Contract by the total number of expected payments. The annuity payments will be fully taxable after the total amount of the investment in the Contract is 32 PROSPECTUS excluded using these ratios. If you die, and annuity payments cease before the total amount of the investment in the Contract is recovered, the unrecovered amount will be allowed as a deduction for your last taxable year. TAXATION OF ANNUITY DEATH BENEFITS. Death of a Contract Owner, or death of the Annuitant if the Contract is owned by a non-natural person, will cause a distribution of death benefits from a Contract. Generally, such amounts are included in income as follows: 1. if distributed in a lump sum, the amounts are taxed in the same manner as a full withdrawal, or 2. if distributed under an annuity option, the amounts are taxed in the same manner as an annuity payment. Please see the Statement of Additional Information for more detail on distribution at death requirements. PENALTY TAX ON PREMATURE DISTRIBUTIONS. A 10% penalty tax applies to the taxable amount of any premature distribution from a non-Qualified Contract. The penalty tax generally applies to any distribution made prior to the date you attain age 59 1/2. However, no penalty tax is incurred on distributions: 1. made on or after the date the Contract Owner attains age 59 1/2; 2. made as a result of the Contract Owner's death or disability; 3. made in substantially equal periodic payments over the Contract Owner's life or life expectancy, 4. made under an immediate annuity, or 5. attributable to investment in the Contract before August 14, 1982. You should consult a competent tax advisor to determine if any other exceptions to the penalty apply to your situation. Similar exceptions may apply to distributions from Qualified Contracts. AGGREGATION OF ANNUITY CONTRACTS. All non-qualified deferred annuity contracts issued by Glenbrook (or its affiliates) to the same Contract Owner during any calendar year will be aggregated and treated as one annuity contract for purposes of determining the taxable amount of a distribution. TAX QUALIFIED CONTRACTS Contracts may be used as investments with certain qualified plans such as: - - Individual Retirement Annuities or Accounts (IRAs) under Section 408 of the Code; - - Roth IRAs under Section 408A of the Code; - - Simplified Employee Pension Plans under Section 408(k) of the Code; - - Savings Incentive Match Plans for Employees (SIMPLE) Plans under Section 408(p) of the Code; - - Tax Sheltered Annuities under Section 403(b) of the Code; - - Corporate and Self Employed Pension and Profit Sharing Plans; and - - State and Local Government and Tax-Exempt Organization Deferred Compensation Plans. The income on qualified plan and IRA investments is tax deferred and variable annuities held by such plans do not receive any additional tax deferral. You should review the annuity features, including all benefits and expenses, prior to purchasing a variable annuity in a qualified plan or IRA. Glenbrook reserves the right to limit the availablity of the Contract for use with any of the Qualified Plans listed above. In the case of certain qualified plans, the terms of the plans may govern the right to benefits, regardless of the terms of the Contract. RESTRICTIONS UNDER SECTION 403(b) PLANS. Section 403(b) of the Tax Code provides tax-deferred retirement savings plans for employees of certain non-profit and educational organizations. Under Section 403(b), any Contract used for a 403(b) plan must provide that distributions attributable to salary reduction contributions made after December 31, 1998, and all earnings on salary reduction contributions, may be made only: 1. on or after the date the employee - attains age 59 1/2, - separates from service, - dies, - becomes disabled, or 2. on account of hardship (earnings on salary reduction contributions may not be distributed on the account of hardship). These limitations do not apply to withdrawals where Glenbrook is directed to transfer some or all of the Contract Value to another 403(b) plan. 33 PROSPECTUS INCOME TAX WITHHOLDING Glenbrook is required to withhold federal income tax at a rate of 20% on all "eligible rollover distributions" unless you elect to make a "direct rollover" of such amounts to an IRA or eligible retirement plan. Eligible rollover distributions generally include all distributions from Qualified Contracts, excluding IRAs, with the exception of: 1. required minimum distributions, or 2. a series of substantially equal periodic payments made over a period of at least 10 years, or over the life (joint lives) of the participant (and beneficiary). Glenbrook may be required to withhold federal and state income taxes on any distributions from non-Qualified Contracts or Qualified Contracts that are not eligible rollover distributions, unless you notify us of your election to not have taxes withheld. ANNUAL REPORTS AND OTHER DOCUMENTS - ------------------------------------------------------------------- Glenbrook's annual report on Form 10-K for the year ended December 31, 2000 is incorporated herein by reference, which means that it is legally a part of this prospectus. After the date of this prospectus and before we terminate the offering of the securities under this prospectus, all documents or reports we file with the SEC under the Exchange Act are also incorporated herein by reference, which means that they also legally become a part of this prospectus. Statements in this prospectus, or in documents that we file later with the SEC and that legally become a part of this prospectus, may change or supersede statements in other documents that are legally part of this prospectus. Accordingly, only the statement that is changed or replaced will legally be a part of this prospectus. We file our Exchange Act documents and reports, including our annual and quarterly reports on Form 10-K and Form 10-Q electronically on the SEC's "EDGAR" system using the identifying number CIK No. 0001007285. The SEC maintains a Web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of the site is http://www.sec.gov. You also can view these materials at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. For more information on the operations of SEC's Public Reference Room, call 1-800-SEC-0330. If you have received a copy of this prospectus, and would like a free copy of any document incorporated herein by reference (other than exhibits not specifically incorporated by reference into the text of such documents), please write or call us at 300 N. Milwaukee Ave. Vernon Hills, IL 60061 (telephone: 1-800-755-5275). 34 PROSPECTUS EXPERTS - ------------------------------------------------------------------- The financial statements of Glenbrook as of December 31, 2000 and 1999 and for each of the three years in the period ended December 31, 2000 and the related financial statement schedule incorporated herein by reference from the Annual Report on Form 10-K of Glenbrook and from the Statement of Additional Information, have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report incorporated herein by reference, and have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. The financial statements of the Variable Account as of December 31, 2000 and for each of the periods in the two years then ended incorporated herein by reference from the Statement of Additional Information, have been audted by Deloitte & Touche LLP, independent auditors, as stated in their report incorporated herein by reference, and have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. PERFORMANCE INFORMATION - ------------------------------------------------------------------- We may advertise the performance of the Variable Sub-Accounts, including yield and total return information. Total return represents the change, over a specified period of time, in the value of an investment in a Variable Sub-Account after reinvesting all income distributions. Yield refers to the income generated by an investment in a Variable Sub-Account over a specified period. All performance advertisements will include, as applicable, standardized yield and total return figures that reflect the deduction of insurance charges, the contract maintenance charge, and withdrawal charge. Performance advertisements also may include total return figures that reflect the deduction of insurance charges, but not the contract maintenance or withdrawal charges. The deduction of such charges would reduce the performance shown. In addition, performance advertisements may include aggregate average, year-by-year, or other types of total return figures. Performance information for periods prior to the inception date of the Variable Sub-Accounts will be based on the historical performance of the corresponding Portfolios for the periods beginning with the inception dates of the Portfolios and adjusted to reflect current Contract expenses. You should not interpret these figures to reflect actual historical performance of the Variable Account. We may include in advertising and sales materials tax deferred compounding charts and other hypothetical illustrations that compare currently taxable and tax deferred investment programs based on selected tax brackets. Our advertisements also may compare the performance of our 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. 35 PROSPECTUS APPENDIX A - ------------------------------------------------------------------- ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED BASIC POLICY
FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31 ----------------------------- 1998 1999 2000 -------- -------- -------- AIM V.I. BALANCED SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.73 $12.66 Accumulation Unit Value, End of Period.................... $10.73 $12.66 $11.99 Number of Units Outstanding, End of Period................ -- 7,487 52,646 AIM V.I. CAPITAL APPRECIATION SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.39 $16.29 Accumulation Unit Value, End of Period.................... $11.39 $16.29 $14.35 Number of Units Outstanding, End of Period................ -- 8,743 73,347 AIM V.I. DIVERSIFIED INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.22 $9.91 Accumulation Unit Value, End of Period.................... $10.22 $9.91 $9.87 Number of Units Outstanding, End of Period................ -- 721 721 AIM V.I. GLOBAL UTILITIES SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.73 $14.16 Accumulation Unit Value, End of Period.................... $10.73 $14.16 $13.68 Number of Units Outstanding, End of Period................ -- -- -- AIM V.I. GOVERNMENT SECURITIES SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.38 $9.85 Accumulation Unit Value, End of Period.................... $10.38 $9.85 $10.73 Number of Units Outstanding, End of Period................ -- -- 2,954 AIM V.I. GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.83 $15.82 Accumulation Unit Value, End of Period.................... $11.83 $15.82 $12.43 Number of Units Outstanding, End of Period................ -- 13,275 69,688 AIM V.I. GROWTH AND INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.36 $15.09 Accumulation Unit Value, End of Period.................... $11.36 $15.09 $12.74 Number of Units Outstanding, End of Period................ -- 12,180 53,747 AIM V.I. HIGH YIELD SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.31 $11.27 Accumulation Unit Value, End of Period.................... $10.31 $11.27 $9.03 Number of Units Outstanding, End of Period................ -- 7,387 9,651 AIM V.I. INTERNATIONAL EQUITY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.68 $16.38 Accumulation Unit Value, End of Period.................... $10.68 $16.38 $11.92 Number of Units Outstanding, End of Period................ -- 0 4,196 AIM V.I. VALUE SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.52 $14.80 Accumulation Unit Value, End of Period.................... $11.52 $14.80 $12.49 Number of Units Outstanding, End of Period................ -- 42,074 115,418 A-1 FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31 ----------------------------- 1998 1999 2000 -------- -------- -------- DREYFUS SOCIALLY RESPONSIBLE GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.79 $14.40 Accumulation Unit Value, End of Period.................... $10.79 $14.40 $12.66 Number of Units Outstanding, End of Period................ -- 3,130 5,459 DREYFUS STOCK INDEX SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.87 $12.97 Accumulation Unit Value, End of Period.................... $10.87 $12.97 $11.63 Number of Units Outstanding, End of Period................ -- 9,930 23,030 DREYFUS VIF GROWTH AND INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.65 $12.47 Accumulation Unit Value, End of Period.................... $10.65 $12.47 $11.86 Number of Units Outstanding, End of Period................ -- 2,680 3,326 DREYFUS VIF MONEY MARKET SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.05 $10.40 Accumulation Unit Value, End of Period.................... $10.05 $10.40 $10.91 Number of Units Outstanding, End of Period................ -- -- -- DREYFUS VIF SMALL COMPANY STOCK SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.65 $11.66 Accumulation Unit Value, End of Period.................... $10.65 $11.66 $12.51 Number of Units Outstanding, End of Period................ -- 236 429 FIDELITY VIP II CONTRAFUND-Registered Trademark- SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.66 $14.33 Accumulation Unit Value, End of Period.................... $11.66 $14.33 $13.23 Number of Units Outstanding, End of Period................ -- 18,963 101,434 FIDELITY VIP EQUITYINCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.48 $11.02 Accumulation Unit Value, End of Period.................... $10.48 $11.02 $11.81 Number of Units Outstanding, End of Period................ -- 30,264 100,008 FIDELITY VIP GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.20 $15.22 Accumulation Unit Value, End of Period.................... $11.20 $15.22 $13.40 Number of Units Outstanding, End of Period................ -- 25,821 168,574 FIDELITY VIP HIGH INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.43 $11.16 Accumulation Unit Value, End of Period.................... $10.43 $11.16 $8.55 Number of Units Outstanding, End of Period................ -- 3,837 45,099 GOLDMAN SACHS VIT CAPITAL GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.10 $13.99 Accumulation Unit Value, End of Period.................... $11.10 $13.99 $12.73 Number of Units Outstanding, End of Period................ -- -- 573 GOLDMAN SACHS CORE-SM- SMALL CAP EQUITY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.60 $12.36 Accumulation Unit Value, End of Period.................... $10.60 $12.36 $12.44 Number of Units Outstanding, End of Period................ -- 86 717 A-2 FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31 ----------------------------- 1998 1999 2000 -------- -------- -------- GOLDMAN SACHS VIT CORE-SM- U.S. EQUITY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.89 $13.46 Accumulation Unit Value, End of Period.................... $10.89 $13.46 $12.02 Number of Units Outstanding, End of Period................ -- 317 -- GOLDMAN SACHS GLOBAL INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $9.67 $9.92 Accumulation Unit Value, End of Period.................... $9.67 $9.92 $10.70 Number of Units Outstanding, End of Period................ -- -- 724 GOLDMAN SACHS VIT GROWTH AND INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $9.94 $10.46 Accumulation Unit Value, End of Period.................... $9.94 $10.46 $9.86 Number of Units Outstanding, End of Period................ -- 637 636 GOLDMAN SACHS VIT INTERNATIONAL EQUITY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.84 $14.25 Accumulation Unit Value, End of Period.................... $10.84 $14.25 $12.24 Number of Units Outstanding, End of Period................ -- -- 168 MFS EMERGING GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.95 $20.88 Accumulation Unit Value, End of Period.................... $11.95 $20.88 $16.60 Number of Units Outstanding, End of Period................ -- 1,059 58,025 MFS INVESTORS TRUST SERIES SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.81 $11.41 Accumulation Unit Value, End of Period.................... $10.81 $11.41 $11.26 Number of Units Outstanding, End of Period................ -- 6,295 15,337 MFS NEW DISCOVERY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.38 $19.52 Accumulation Unit Value, End of Period.................... $11.38 $19.52 $18.92 Number of Units Outstanding, End of Period................ -- 183 3,148 MORGAN STANLEY UIF EQUITY GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.94 $15.09 Accumulation Unit Value, End of Period.................... $10.94 $15.09 $13.17 Number of Units Outstanding, End of Period................ -- -- 162 MORGAN STANLEY UIF FIXED INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.15 $9.87 Accumulation Unit Value, End of Period.................... $10.15 $9.87 $10.85 Number of Units Outstanding, End of Period................ -- -- -- MORGAN STANLEY UIF GLOBAL EQUITY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.43 $10.73 Accumulation Unit Value, End of Period.................... $10.43 $10.73 $11.83 Number of Units Outstanding, End of Period................ -- -- 959 MORGAN STANLEY UIF INTERNATIONAL MAGNUM SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.39 $12.85 Accumulation Unit Value, End of Period.................... $10.39 $12.85 $11.13 Number of Units Outstanding, End of Period................ -- -- -- A-3 FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31 ----------------------------- 1998 1999 2000 -------- -------- -------- MORGAN STANLEY UIF MID CAP VALUE SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.96 $10.00 Accumulation Unit Value, End of Period.................... 10.96 13.07 $14.32 Number of Units Outstanding, End of Period................ -- -- 5,400 MORGAN STANLEY UIF U.S. REAL ESTATE SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.18 $10.00 Accumulation Unit Value, End of Period.................... $10.18 $9.91 $12.67 Number of Units Outstanding, End of Period................ -- -- -- MORGAN STANLEY UIF VALUE SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $9.95 $10.00 Accumulation Unit Value, End of Period.................... $9.95 $9.65 $11.93 Number of Units Outstanding, End of Period................ -- -- 233 NEUBERGER BERMAN AMT GUARDIAN SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.81 $10.00 Accumulation Unit Value, End of Period.................... $10.81 $12.28 $10.31 Number of Units Outstanding, End of Period................ -- -- 28,736 NEUBERGER BERMAN AMT MID-CAP GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $12.13 $18.45 Accumulation Unit Value, End of Period.................... $12.13 $18.45 $16.88 Number of Units Outstanding, End of Period................ -- 296 696 NEUBERGER BERMAN AMT PARTNERS SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.31 $10.00 Accumulation Unit Value, End of Period.................... $10.31 $10.94 $10.90 Number of Units Outstanding, End of Period................ -- -- -- * The Contracts were first offered on November 10, 1998. The Accumulation Unit
Values in this table reflects a mortality and expense risk charge of 1.05% and an administrative expense charge of 0.10%. All of the Variable Sub-Accounts commenced operations on or before November 10, 1998. A-4 ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED WITH ENHANCED DEATH BENEFIT RIDER
FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31 ----------------------------- 1998 1999 2000 -------- -------- -------- AIM V.I. BALANCED SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.73 $12.63 Accumulation Unit Value, End of Period.................... $10.73 $12.63 $11.94 Number of Units Outstanding, End of Period................ -- 16,023 98,137 AIM V.I. CAPITAL APPRECIATION SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.39 $16.25 Accumulation Unit Value, End of Period.................... $11.39 $16.25 $14.28 Number of Units Outstanding, End of Period................ 1,466 17,447 131,704 AIM V.I. DIVERSIFIED INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.22 $9.88 Accumulation Unit Value, End of Period.................... $10.22 $9.88 $9.82 Number of Units Outstanding, End of Period................ -- -- -- AIM V.I. GLOBAL UTILITIES SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.72 $14.13 Accumulation Unit Value, End of Period.................... $10.72 $14.13 $13.62 Number of Units Outstanding, End of Period................ -- 154 327 AIM V.I. GOVERNMENT SECURITIES SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.38 $9.83 Accumulation Unit Value, End of Period.................... $10.38 $9.83 $10.68 Number of Units Outstanding, End of Period................ -- -- -- AIM V.I. GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.82 $15.78 Accumulation Unit Value, End of Period.................... $11.82 $15.78 $12.38 Number of Units Outstanding, End of Period................ -- 14,400 102,325 AIM V.I. GROWTH AND INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.36 $15.05 Accumulation Unit Value, End of Period.................... $11.36 $15.05 $12.68 Number of Units Outstanding, End of Period................ -- 16,349 92,631 AIM V.I. HIGH YIELD SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.31 $11.25 Accumulation Unit Value, End of Period.................... $10.31 $11.25 $8.98 Number of Units Outstanding, End of Period................ -- 3,356 14,461 AIM V.I. INTERNATIONAL EQUITY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.68 $16.34 Accumulation Unit Value, End of Period.................... $10.68 $16.34 $11.16 Number of Units Outstanding, End of Period................ -- 606 4,960 AIM V.I. VALUE SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.52 $14.76 Accumulation Unit Value, End of Period.................... $11.52 $14.76 $12.43 Number of Units Outstanding, End of Period................ -- 35,445 212,348 A-5 FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31 ----------------------------- 1998 1999 2000 -------- -------- -------- DREYFUS SOCIALLY RESPONSIBLE GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.78 $14.36 Accumulation Unit Value, End of Period.................... $10.78 $14.36 $12.60 Number of Units Outstanding, End of Period................ -- 1,093 1,147 DREYFUS STOCK INDEX SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.87 $12.94 Accumulation Unit Value, End of Period.................... $10.87 $12.94 $11.58 Number of Units Outstanding, End of Period................ -- 5,556 16,753 DREYFUS VIF GROWTH & INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.64 $12.43 Accumulation Unit Value, End of Period.................... $10.64 $12.43 $11.80 Number of Units Outstanding, End of Period................ -- -- -- DREYFUS VIF MONEY MARKET SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.04 $10.38 Accumulation Unit Value, End of Period.................... $10.04 $10.38 $10.86 Number of Units Outstanding, End of Period................ -- -- 4,766 DREYFUS VIF SMALL COMPANY STOCK SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.66 $11.63 Accumulation Unit Value, End of Period.................... $10.66 $11.63 $12.45 Number of Units Outstanding, End of Period................ 737 -- 468 FIDELITY VIP CONTRAFUND-Registered Trademark- SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.66 $14.29 Accumulation Unit Value, End of Period.................... $11.66 $14.29 $13.16 Number of Units Outstanding, End of Period................ -- 30,660 158,502 FIDELITY VIP EQUITY INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.47 $10.99 Accumulation Unit Value, End of Period.................... $10.47 $10.99 $11.76 Number of Units Outstanding, End of Period................ -- 17,530 80,075 FIDELITY VIP GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.20 $15.19 Accumulation Unit Value, End of Period.................... $11.20 $15.19 $13.33 Number of Units Outstanding, End of Period................ 313 45,514 210,159 FIDELITY VIP HIGH INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.43 $11.13 Accumulation Unit Value, End of Period.................... $10.43 $11.13 $8.51 Number of Units Outstanding, End of Period................ -- 3,914 55,337 GOLDMAN SACHS VIT CAPITAL GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.09 $13.95 Accumulation Unit Value, End of Period.................... $11.09 $13.95 $12.67 Number of Units Outstanding, End of Period................ -- -- -- GOLDMAN SACHS CORE-SM- SMALL CAP EQUITY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.60 $12.33 Accumulation Unit Value, End of Period.................... $10.60 $12.33 $12.38 Number of Units Outstanding, End of Period................ -- -- -- A-6 FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31 ----------------------------- 1998 1999 2000 -------- -------- -------- GOLDMAN SACHS VIT CORE-SM- U.S. EQUITY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.89 $13.42 Accumulation Unit Value, End of Period.................... $10.89 $13.42 $11.97 Number of Units Outstanding, End of Period................ -- -- -- GOLDMAN SACHS GLOBAL INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $9.67 $9.90 Accumulation Unit Value, End of Period.................... $9.67 $9.90 $14.28 Number of Units Outstanding, End of Period................ -- -- -- GOLDMAN SACHS VIT GROWTH AND INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $9.94 $9.90 Accumulation Unit Value, End of Period.................... $9.94 $9.90 $9.81 Number of Units Outstanding, End of Period................ -- -- -- GOLDMAN SACHS VIT INTERNATIONAL EQUITY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.84 $14.22 Accumulation Unit Value, End of Period.................... $10.84 $14.22 $12.18 Number of Units Outstanding, End of Period................ -- -- 272 MFS EMERGING GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.9 $20.83 Accumulation Unit Value, End of Period.................... $11.95 $20.83 $16.52 Number of Units Outstanding, End of Period................ -- 3,068 78,095 MFS INVESTORS TRUST SERIES SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.81 $11.38 Accumulation Unit Value, End of Period.................... $10.81 $11.38 $11.21 Number of Units Outstanding, End of Period................ -- 3,323 23,854 MFS NEW DISCOVERY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.38 $19.47 Accumulation Unit Value, End of Period.................... $11.38 $19.47 $18.83 Number of Units Outstanding, End of Period................ -- 1,669 2,029 MORGAN STANLEY UIF EQUITY GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.94 $15.05 Accumulation Unit Value, End of Period.................... $10.94 $15.05 $13.11 Number of Units Outstanding, End of Period................ -- 1,953 1,953 MORGAN STANLEY UIF FIXED INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.15 $9.85 Accumulation Unit Value, End of Period.................... $10.15 $9.85 $10.80 Number of Units Outstanding, End of Period................ -- 1,566 4,181 MORGAN STANLEY UIF GLOBAL EQUITY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.43 $10.71 Accumulation Unit Value, End of Period.................... $10.43 $10.71 $11.78 Number of Units Outstanding, End of Period................ 245 -- -- MORGAN STANLEY UIF INTERNATIONAL MAGNUM SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.38 $12.83 Accumulation Unit Value, End of Period.................... $10.38 $12.83 $11.08 Number of Units Outstanding, End of Period................ -- 624 624 A-7 FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31 ----------------------------- 1998 1999 2000 -------- -------- -------- MORGAN STANLEY UIF MID CAP VALUE SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.96 $13.04 Accumulation Unit Value, End of Period.................... $10.96 $13.04 $14.25 Number of Units Outstanding, End of Period................ -- -- -- MORGAN STANLEY UIF U.S. REAL ESTATE SUB-ACCOUNT Accumulation Unit Value, Beginning of Period $10.00 $10.17 $9.89 Accumulation Unit Value, End of Period.................... $10.17 $9.89 $12.61 Number of Units Outstanding, End of Period................ -- -- -- MORGAN STANLEY UIF VALUE SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $9.95 $9.63 Accumulation Unit Value, End of Period.................... $9.95 $9.63 Number of Units Outstanding, End of Period................ -- 903 NEUBERGER BERMAN AMT GUARDIAN SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.80 $12.25 Accumulation Unit Value, End of Period.................... $10.80 $12.25 $12.22 Number of Units Outstanding, End of Period................ -- 1,333 -- NEUBERGER BERMAN AMT MID CAP GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $12.12 $18.40 Accumulation Unit Value, End of Period.................... $12.12 $18.40 $16.80 Number of Units Outstanding, End of Period................ -- -- 929 NEUBERGER BERMAN AMT PARTNERS SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.30 $10.91 Accumulation Unit Value, End of Period.................... $10.30 $10.91 $10.84 Number of Units Outstanding, End of Period................ -- -- -- * The Contracts were first offered on November 10, 1998. The Accumulation Unit Values in this table reflect a mortality and expense risk charge of 1.27% and an administrative expense charge of 0.10%. All of the Variable Sub-Accounts commenced operations on or before November 10, 1998. A-8 ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED WITH ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31 ----------------------------- 1998 1999 2000 -------- -------- -------- AIM V.I. BALANCED SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.73 $12.60 Accumulation Unit Value, End of Period.................... $10.73 $12.60 $11.88 Number of Units Outstanding, End of Period................ 405 43,121 101,781 AIM V.I. CAPITAL APPRECIATION SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.39 $16.21 Accumulation Unit Value, End of Period.................... $11.39 $16.21 $14.22 Number of Units Outstanding, End of Period................ 398 16,046 122,768 AIM V.I. DIVERSIFIED INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.21 $9.86 Accumulation Unit Value, End of Period.................... $10.21 $9.86 $9.78 Number of Units Outstanding, End of Period................ -- 1,484 1,484 AIM V.I. GLOBAL UTILITIES SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.72 $14.09 Accumulation Unit Value, End of Period.................... $10.72 $14.09 $13.59 Number of Units Outstanding, End of Period................ -- -- -- AIM V.I. GOVERNMENT SECURITIES SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.38 $9.80 Accumulation Unit Value, End of Period.................... $10.38 $9.80 $10.63 Number of Units Outstanding, End of Period................ -- -- -- AIM V.I. GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.82 $15.74 Accumulation Unit Value, End of Period.................... $11.82 $15.74 $12.32 Number of Units Outstanding, End of Period................ 386 21,246 108,292 AIM V.I. GROWTH AND INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.36 $15.01 Accumulation Unit Value, End of Period.................... $11.36 $15.01 $12.63 Number of Units Outstanding, End of Period................ -- 11,459 66,400 AIM V.I. HIGH YIELD SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.31 $11.22 Accumulation Unit Value, End of Period.................... $10.31 $11.22 $8.94 Number of Units Outstanding, End of Period................ -- 185 10,889 AIM V.I. INTERNATIONAL EQUITY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.68 $16.30 Accumulation Unit Value, End of Period.................... $10.68 $16.30 $11.81 Number of Units Outstanding, End of Period................ -- 2,943 3,483 AIM V.I. VALUE SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.51 $14.73 Accumulation Unit Value, End of Period.................... $11.51 $14.73 $12.37 Number of Units Outstanding, End of Period................ -- 34,288 159,570 A-9 FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31 ----------------------------- 1998 1999 2000 -------- -------- -------- DREYFUS SOCIALLY RESPONSIBLE GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.786 $14.33 Accumulation Unit Value, End of Period.................... $10.786 $14.33 $12.55 Number of Units Outstanding, End of Period................ -- 5,493 7,121 DREYFUS STOCK INDEX SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.87 $12.90 Accumulation Unit Value, End of Period.................... $10.87 $12.90 $11.52 Number of Units Outstanding, End of Period................ 401 19,955 21,326 DREYFUS VIF GROWTH AND INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.64 $12.40 Accumulation Unit Value, End of Period.................... $10.64 $12.40 $11.75 Number of Units Outstanding, End of Period................ -- 3,983 3,676 DREYFUS VIF MONEY MARKET SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.04 $10.36 Accumulation Unit Value, End of Period.................... $10.04 $10.36 $10.81 Number of Units Outstanding, End of Period................ -- 577 489 DREYFUS VIF SMALL COMPANY STOCK SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.65 $11.60 Accumulation Unit Value, End of Period.................... $10.65 $11.60 $12.39 Number of Units Outstanding, End of Period................ -- 2,542 2,538 FIDELITY VIP II CONTRAFUND-Registered Trademark- SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.65 $14.26 Accumulation Unit Value, End of Period.................... $11.65 $14.26 $13.10 Number of Units Outstanding, End of Period................ 387 32,161 131,791 FIDELITY VIP EQUITY INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.47 $10.96 Accumulation Unit Value, End of Period.................... $10.47 $10.96 $11.70 Number of Units Outstanding, End of Period................ -- 11,621 45,849 FIDELITY VIP GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.19 $15.15 Accumulation Unit Value, End of Period.................... $11.19 $15.15 $13.27 Number of Units Outstanding, End of Period................ -- 22,088 151,189 FIDELITY VIP HIGH INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.43 $11.10 Accumulation Unit Value, End of Period.................... $10.43 $11.10 $8.47 Number of Units Outstanding, End of Period................ -- 3,667 31,190 GOLDMAN SACHS VIT CAPITAL GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.09 $13.92 Accumulation Unit Value, End of Period.................... $11.09 $13.92 $12.61 Number of Units Outstanding, End of Period................ -- 2,449 4,173 GOLDMAN SACHS CORE-SM- SMALL CAP EQUITY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.59 $12.30 Accumulation Unit Value, End of Period.................... $10.59 $12.30 $12.32 Number of Units Outstanding, End of Period................ -- 17,918 18,069 A-10 FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31 ----------------------------- 1998 1999 2000 -------- -------- -------- GOLDMAN SACHS VIT CORE-SM- U.S. EQUITY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.89 $13.39 Accumulation Unit Value, End of Period.................... $10.89 $13.39 $11.91 Number of Units Outstanding, End of Period................ 401 20,515 23,250 GOLDMAN SACHS GLOBAL INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $9.66 $9.87 Accumulation Unit Value, End of Period.................... $9.66 $9.87 $10.60 Number of Units Outstanding, End of Period................ -- -- -- GOLDMAN SACHS VIT GROWTH AND INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $9.93 $10.41 Accumulation Unit Value, End of Period.................... $9.93 $10.41 $9.76 Number of Units Outstanding, End of Period................ 419 2,081 2,047 GOLDMAN SACHS VIT INTERNATIONAL EQUITY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.84 $14.18 Accumulation Unit Value, End of Period.................... $10.84 $14.18 $12.12 Number of Units Outstanding, End of Period................ -- -- 1,812 MFS EMERGING GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.94 $20.78 Accumulation Unit Value, End of Period.................... $11.94 $20.78 $16.44 Number of Units Outstanding, End of Period................ 377 19,189 64,075 MFS INVESTORS TRUST SERIES SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.81 $11.35 Accumulation Unit Value, End of Period.................... $10.81 $11.35 $11.16 Number of Units Outstanding, End of Period................ -- 4,808 11,160 MFS NEW DISCOVERY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.38 $19.42 Accumulation Unit Value, End of Period.................... $11.38 $19.42 $18.74 Number of Units Outstanding, End of Period................ -- 707 1,509 MORGAN STANLEY UIF EQUITY GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.94 $15.02 Accumulation Unit Value, End of Period.................... $10.94 $15.02 $13.04 Number of Units Outstanding, End of Period................ 406 7,464 11,011 MORGAN STANLEY UIF FIXED INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.15 $9.82 Accumulation Unit Value, End of Period.................... $10.15 $9.82 $10.75 Number of Units Outstanding, End of Period................ -- -- -- MORGAN STANLEY UIF GLOBAL EQUITY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.42 $10.69 Accumulation Unit Value, End of Period.................... $10.42 $10.69 $11.72 Number of Units Outstanding, End of Period................ -- 245 363 MORGAN STANLEY UIF INTERNATIONAL MAGNUM SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.38 $12.79 Accumulation Unit Value, End of Period.................... $10.38 $12.79 $11.03 Number of Units Outstanding, End of Period................ -- -- -- A-11 FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31 ----------------------------- 1998 1999 2000 -------- -------- -------- MORGAN STANLEY UIF MID CAP VALUE SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.96 $13.01 Accumulation Unit Value, End of Period.................... $10.96 $13.01 $14.18 Number of Units Outstanding, End of Period................ 408 1,788 4,089 MORGAN STANLEY UIF U.S. REAL ESTATE SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.17 $9.86 Accumulation Unit Value, End of Period.................... $10.17 $9.86 $12.55 Number of Units Outstanding, End of Period................ -- -- -- MORGAN STANLEY UIF VALUE SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $9.95 $9.61 Accumulation Unit Value, End of Period.................... $9.95 $9.61 $11.82 Number of Units Outstanding, End of Period................ -- 17,465 16,697 NEUBERGER BERMAN AMT GUARDIAN SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.80 $12.22 Accumulation Unit Value, End of Period.................... $10.80 $12.22 $12.17 Number of Units Outstanding, End of Period................ -- 1,924 1,415 NEUBERGER BERMAN AMT MID CAP GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $12.12 $18.36 Accumulation Unit Value, End of Period.................... $12.12 $18.36 $16.72 Number of Units Outstanding, End of Period................ -- 64 1,853 NEUBERGER BERMAN AMT PARTNERS SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.30 $10.89 Accumulation Unit Value, End of Period.................... $10.30 $10.89 $10.79 Number of Units Outstanding, End of Period................ -- 17,996 16,330
* The Contracts were first offered on November 10, 1998. The Accumulation Unit Values in this table reflect a mortality and expense risk charge of 1.49% and an administrative expense charge of 0.10%. All of the Variable Sub-Accounts commenced operations on or before November 10, 1998. A-12 APPENDIX B MARKET VALUE ADJUSTMENT - ------------------------------------------------------------------- The Market Value Adjustment is based on the following: I = the Treasury Rate for a maturity equal to the Guarantee Period for the week preceding the establishment of the Guarantee Period. N = the number of whole and partial years from the date we receive the withdrawal, transfer, or death benefit request, or from the Payout Start Date to the end of the Guarantee Period. J = the Treasury Rate for a maturity equal to the Guarantee Period for the week preceding the receipt of the withdrawal, transfer, death benefit, or income payment request. If a Note with a maturity of the original Guarantee Period is not available, we will use a weighted average. Treasury Rate means the U.S. Treasury Note Constant Maturity yield as reported in Federal Reserve Bulletin Release H.15. The Market Value Adjustment factor is determined from the following formula: .9 X (I - J) X N To determine the Market Value Adjustment, we will multiply the Market Value Adjustment factor by the amount transferred, withdrawn (in excess of the Free Withdrawal Amount), paid as a death benefit, or applied to an Income Plan from a Guarantee Period at any time other than during the 30 day period after such Guarantee Period expires. EXAMPLES OF MARKET VALUE ADJUSTMENT Purchase Payment: $10,000 allocated to a Guarantee Period Guarantee Period: 5 years Interest Rate: 4.50% Full Withdrawal: End of Contract Year 3 NOTE: These examples assume that premium taxes are not applicable. EXAMPLE 1: (ASSUMES DECLINING INTEREST RATES)
Step 1: Calculate Contract Value at End of Contract Year 3: = $10,000 X (1.045) TO THE POWER OF 3 = $11,411.66 Step 2: Calculate the Free Withdrawal Amount: = .15 X ($10,000.00) = $1,500.00 Step 3: Calculate the Withdrawal Charge: = .05 X ($10,000.00 - $1,500.00) = $425.00 Step 4: Calculate the Market Value Adjustment: I = 4.50% J = 4.20% 730 DAYS N = -------- = 2 365 DAYS MARKET VALUE ADJUSTMENT FACTOR: .9 X (I - J) - N = .9 X (.045 - .042) X 2 = .0054 MARKET VALUE ADJUSTMENT = MARKET VALUE ADJUSTMENT FACTOR X AMOUNT SUBJECT TO MARKET VALUE ADJUSTMENT: = .0054 X ($11,411.66 - $1,500) = $53.52 Step 5: Calculate the amount received by Contract Owner as a result of full withdrawal at the end of Contract Year 3: = $11,411.66 - $425.00 + $53.52 = $11,040.18 B-1 EXAMPLE 2: (ASSUMES RISING INTEREST RATES) Step 1: Calculate Contract Value at End of Contract Year 3: = $10,000.00 X (1.045) TO THE POWER OF 3 = $11,411.66 Step 2: Calculate the Free Withdrawal Amount: = .15 X ($10,000.00) = $1,500.00 Step 3: Calculate the Withdrawal Charge: = .05 X ($10,000.00 - $1,500.00) = $425.00 Step 4: Calculate the Market Value Adjustment: I = 4.50% J = 4.80% 730 DAYS N = -------- = 2 365 DAYS MARKET VALUE ADJUSTMENT FACTOR: .9 X (I - J) X N = .9 X (.045 - .048) X (2) = -.0054 MARKET VALUE ADJUSTMENT = MARKET VALUE ADJUSTMENT FACTOR X AMOUNT SUBJECT TO MARKET VALUE ADJUSTMENT: = -.0054 X ($11,411.66 - $1,500) = -$53.52 Step 5: Calculate the amount received by Contract Owner as a result of full withdrawal at the end of Contract Year 3: = $11,411.66 - $425.00 - $53.52 = $10,933.14
B-2 STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS - ------------------------------------------------------------------- DESCRIPTION - ----------------------------------------------------- ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS - ----------------------------------------------------- THE CONTRACT - ----------------------------------------------------- Purchases of Contracts - ----------------------------------------------------- Tax-free Exchanges (1035 Exchanges, Rollovers and Transfers) - ----------------------------------------------------- PERFORMANCE INFORMATION - ----------------------------------------------------- Standardized Total Returns - ----------------------------------------------------- Non-standardized Total Returns - ----------------------------------------------------- Adjusted Historical Total Returns - ----------------------------------------------------- CALCULATION OF ACCUMULATION UNIT VALUES - ----------------------------------------------------- CALCULATION OF VARIABLE INCOME PAYMENTS - ----------------------------------------------------- Calculation of Annuity Unit Values - ----------------------------------------------------- - ----------------------------------------------------- DESCRIPTION GENERAL MATTERS - ----------------------------------------------------- Incontestability - ----------------------------------------------------- Settlements - ----------------------------------------------------- Safekeeping of the Variable Account's Assets - ---------------------------------------------------- Premium Taxes - ---------------------------------------------------- Tax Reserves - ---------------------------------------------------- FEDERAL TAX MATTERS - ---------------------------------------------------- QUALIFIED PLANS - ---------------------------------------------------- EXPERTS - ---------------------------------------------------- FINANCIAL STATEMENTS - ----------------------------------------------------- ------------------------------ THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. WE DO NOT AUTHORIZE ANYONE TO PROVIDE ANY INFORMATION OR REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS PROSPECTUS OTHER THAN AS CONTAINED IN THIS PROSPECTUS. C-1 GLG257-3 THE GLENBROOK PROVIDER VARIABLE ANNUITY GLENBROOK LIFE AND ANNUITY COMPANY 300 N. MILWAUKEE AVE. VERNON HILLS, IL 60061 TELEPHONE NUMBER: 1-800-755-5275 PROSPECTUS DATED MAY 1, 2001 - -------------------------------------------------------------------------------- Glenbrook Life and Annuity Company ("GLENBROOK") is offering the Glenbrook Provider Variable Annuity, an individual flexible premium deferred variable annuity contract ("CONTRACT"). This prospectus contains information about the Contract that you should know before investing. Please keep it for future reference. The Contract currently offers 35 "INVESTMENT ALTERNATIVES". The investment alternatives include 3 fixed account options ("FIXED ACCOUNT OPTIONS") and 32 variable sub-accounts ("VARIABLE SUB-ACCOUNTS") of the Glenbrook Life Multi-Manager Variable Account ("VARIABLE ACCOUNT"). Each Variable Sub-Account invests exclusively in shares of one of the portfolios ("PORTFOLIOS") of the following mutual funds ("FUNDS"):
AIM VARIABLE INSURANCE FUNDS MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST-SM- FEDERATED INSURANCE SERIES OPPENHEIMER VARIABLE ACCOUNT FUNDS FIDELITY VARIABLE INSURANCE PRODUCTS FUND STI CLASSIC VARIABLE TRUST FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Not all of the Funds and/or Portfolios, however, may be available with your Contract. You should check with your representative for further information on the availability of Funds and/or Portfolios. Your annuity application will list all available Portfolios. WE (Glenbrook) have filed a Statement of Additional Information, dated May 1, 2001, with the Securities and Exchange Commission ("SEC"). It contains more information about the Contract and is incorporated herein by reference, which means it is legally a part of this prospectus. Its table of contents appears on page C-1 of this prospectus. For a free copy, please write or call us at the address or telephone number above, or go to the SEC's Web site (http://www.sec.gov). You can find other information and documents about us, including documents that are legally part of this prospectus, at the SEC's Web site. - --------------------------------------------------------------------------------
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE SECURITIES DESCRIBED IN THIS PROSPECTUS, NOR HAS IT PASSED ON THE ACCURACY OR THE ADEQUACY OF THIS PROSPECTUS. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A FEDERAL CRIME. IMPORTANT THE CONTRACTS MAY BE DISTRIBUTED THROUGH BROKER-DEALERS THAT NOTICES HAVE RELATIONSHIPS WITH BANKS OR OTHER FINANCIAL INSTITUTIONS OR BY EMPLOYEES OF SUCH BANKS. HOWEVER, THE CONTRACTS ARE NOT DEPOSITS, OR OBLIGATIONS OF, OR GUARANTEED BY SUCH INSTITUTIONS OR ANY FEDERAL REGULATORY AGENCY. INVESTMENT IN THE CONTRACTS INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE CONTRACTS ARE NOT FDIC INSURED. GLG677-1
1 PROSPECTUS TABLE OF CONTENTS - ------------------------------------------------------------------- PAGE - ----------------------------------------------------- OVERVIEW - ----------------------------------------------------- Important Terms 3 - ----------------------------------------------------- The Contract At A Glance 4 - ----------------------------------------------------- How the Contract Works 6 - ----------------------------------------------------- Expense Table 7 - ----------------------------------------------------- Financial Information 12 - ----------------------------------------------------- CONTRACT FEATURES - ----------------------------------------------------- The Contract 13 - ----------------------------------------------------- Purchases 14 - ----------------------------------------------------- Contract Value 15 - ----------------------------------------------------- Investment Alternatives 16 - ----------------------------------------------------- The Variable Sub-Accounts 16 - ----------------------------------------------------- The Fixed Account Options 18 - ----------------------------------------------------- Transfers 21 - ----------------------------------------------------- Expenses 22 - ----------------------------------------------------- Access To Your Money 24 - ----------------------------------------------------- Income Payments 25 - ----------------------------------------------------- - ----------------------------------------------------- PAGE Death Benefits 27 - ----------------------------------------------------- OTHER INFORMATION - ----------------------------------------------------- More Information: 29 - ----------------------------------------------------- Glenbrook 29 - ----------------------------------------------------- The Variable Account 30 - ----------------------------------------------------- The Portfolios 30 - ----------------------------------------------------- The Contract 31 - ----------------------------------------------------- Qualified Plans 31 - ----------------------------------------------------- Legal Matters 32 - ----------------------------------------------------- Taxes 32 - ----------------------------------------------------- Annual Reports and Other Documents 34 - ----------------------------------------------------- Experts 36 - ----------------------------------------------------- Performance Information 37 - ----------------------------------------------------- APPENDIX A -- ACCUMULATION UNIT VALUES A-1 - ----------------------------------------------------- APPENDIX B -- MARKET VALUE ADJUSTMENT EXAMPLE B-1 - ----------------------------------------------------- STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS C-1 - ----------------------------------------------------- 2 PROSPECTUS IMPORTANT TERMS - ------------------------------------------------------------------- This prospectus uses a number of important terms that you may not be familiar with. The index below identifies the page that describes each term. The first use of each term in this prospectus appears in highlights. PAGE - ----------------------------------------------------- Accumulation Phase 6 - ----------------------------------------------------- Accumulation Unit 12 - ----------------------------------------------------- Accumulation Unit Value 12 - ----------------------------------------------------- Anniversary Values 28 - ----------------------------------------------------- Annuitant 13 - ----------------------------------------------------- Automatic Additions Plan 14 - ----------------------------------------------------- Automatic Portfolio Rebalancing Program 21 - ----------------------------------------------------- Beneficiary 13 - ----------------------------------------------------- Cancellation Period 4 - ----------------------------------------------------- Contract* 1 - ----------------------------------------------------- Contract Anniversary 5 - ----------------------------------------------------- Contract Owner ("You") 13 - ----------------------------------------------------- Contract Value 5 - ---------------------------------------------------- Contract Year 4 - ---------------------------------------------------- Death Benefit Anniversary 27 - ---------------------------------------------------- Dollar Cost Averaging Program 21 - ---------------------------------------------------- Due Proof of Death 27 - ---------------------------------------------------- Enhanced Death Benefit Rider 27 - ---------------------------------------------------- Enhanced Death and Income Benefit Combination Rider 28 - ---------------------------------------------------- Enhanced Death and Income Benefit Combination Rider II 28 - ----------------------------------------------------- - ---------------------------------------------------- Fixed Account Options 1 PAGE - ---------------------------------------------------- Free Withdrawal Amount 23 - ---------------------------------------------------- Funds 1 - ---------------------------------------------------- Glenbrook ("We" or "Us") 1 - ---------------------------------------------------- Guarantee Periods 18 - ---------------------------------------------------- Income Plan 6 - ---------------------------------------------------- Investment Alternatives 1 - ---------------------------------------------------- Issue Date 6 - ---------------------------------------------------- Market Value Adjustment 20 - ---------------------------------------------------- Payout Phase 6 - ---------------------------------------------------- Payout Start Date 25 - ---------------------------------------------------- Portfolios 1 - ---------------------------------------------------- Qualified Contracts 4 - ---------------------------------------------------- SEC 1 - ---------------------------------------------------- Settlement Value 27 - ---------------------------------------------------- Systematic Withdrawal Program 25 - ---------------------------------------------------- Valuation Date 15 - ---------------------------------------------------- Variable Account 1 - ---------------------------------------------------- Variable Sub-Account 1 - ----------------------------------------------------- *In certain states the Contract is available only as a group Contract. If you purchase a group Contract, we will issue you a certificate that represents your ownership and that summarizes the provisions of the group Contract. References to "Contract" in this prospectus include certificates, unless the context requires otherwise. 3 PROSPECTUS THE CONTRACT AT A GLANCE - ------------------------------------------------------------------- The following is a snapshot of the Contract. Please read the remainder of this prospectus for more information.
FLEXIBLE PAYMENTS You can purchase a Contract with as little as $3,000 ($2,000 for "QUALIFIED CONTRACTS", which are Contracts issued within QUALIFIED PLANS). You can add to your Contract as often and as much as you like, but each payment must be at least $50. - -------------------------------------------------------------------------------------------------------- RIGHT TO CANCEL You may cancel your Contract within 20 days of receipt or any longer period as your state may require ("CANCELLATION PERIOD"). Upon cancellation, we will return your purchase payments adjusted, to the extent federal or state law permits, to reflect the investment experience of any amounts allocated to the Variable Account. - -------------------------------------------------------------------------------------------------------- EXPENSES You will bear the following expenses: - Total Variable Account annual fees equal to 1.15% of average daily net assets (1.37% if you select the ENHANCED DEATH BENEFIT RIDER; 1.59% if you selected the ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER (for Contracts issued before September 22, 2000); and 1.65% if you select the ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER II (for Contracts on or after September 22, 2000) - Annual contract maintenance charge of $35 (with certain exceptions) - Withdrawal charges ranging from 0% to 6% of purchase payment withdrawn (with certain exceptions) - Transfer fee of $10 after 12th transfer in any CONTRACT YEAR (fee currently waived) - State premium tax (if your state imposes one) In addition, each Portfolio pays expenses that you will bear indirectly if you invest in a Variable Sub-Account. - -------------------------------------------------------------------------------------------------------------------- INVESTMENT ALTERNATIVES The Contract offers 35 investment alternatives including: - 3 Fixed Account Options (which credit interest at rates we guarantee) - 32 Variable Sub-Accounts investing in Portfolios offering professional money management by these investment advisers: - A I M Advisors, Inc. - Federated Investment Management Company - Fidelity Management & Research Company - Franklin Advisers, Inc. - MFS Investment Management-Registered Trademark - OppenheimerFunds, Inc. - Templeton Global Advisors Limited - Trusco Capital Management, Inc. To find out current rates being paid on the Fixed Account Options or how the Variable Sub-Accounts have performed, call us at 1-800-755-5275. 4 PROSPECTUS - ------------------------------------------------------------------------------------------------------------------- SPECIAL SERVICES For your convenience, we offer these special services: - AUTOMATIC PORTFOLIO REBALANCING PROGRAM - AUTOMATIC ADDITIONS PROGRAM - DOLLAR COST AVERAGING PROGRAM - SYSTEMATIC WITHDRAWAL PROGRAM - ------------------------------------------------------------------------------------------------------------------- INCOME PAYMENTS You can choose fixed income payments, variable income payments, or a combination of the two. You can receive your income payments in one of the following ways: - life income with guaranteed payments - a "joint and survivor" life income with guaranteed payments - guaranteed payments for a specified period (5 to 30 years) - --------------------------------------------------------------------------------------------------------------------- DEATH BENEFITS If you or the ANNUITANT (if the Contract is owned by a non-natural person) die before the PAYOUT START DATE, we will pay the death benefit described in the Contract. We offer an Enhanced Death Benefit Rider and an Enhanced Death and Income Benefit Combination Rider II. - ---------------------------------------------------------------------------------------------------------------------- TRANSFERS Before the Payout Start Date, you may transfer your Contract value ("CONTRACT VALUE") among the investment alternatives, with certain restrictions. Transfers to a GUARANTEE PERIOD of the Fixed Account must be at least $50. We do not currently impose a fee upon transfers. However, we reserve the right to charge $10 per transfer after the 12th transfer in each "Contract Year", which we measure from the date we issue your Contract or a Contract anniversary ("CONTRACT ANNIVERSARY"). - ------------------------------------------------------------------------------------------------------------------------ WITHDRAWALS You may withdraw some or all of your Contract Value at anytime prior to the Payout Start Date. In general, you must withdraw at least $50 at a time. Full or partial withdrawals are available under limited circumstances on or after the Payout Start Date. A 10% federal tax penalty may apply if you withdraw before you are 59 1/2 years old. A withdrawal charge and MARKET VALUE ADJUSTMENT also may apply.
5 PROSPECTUS HOW THE CONTRACT WORKS - ------------------------------------------------------------------- The Contract basically works in two ways. First, the Contract can help you (we assume you are the CONTRACT OWNER) save for retirement because you can invest in up to 35 investment alternatives and pay no federal income taxes on any earnings until you withdraw them. You do this during what we call the "ACCUMULATION PHASE" of the Contract. The Accumulation Phase begins on the date we issue your Contract (we call that date the "ISSUE DATE") and continues until the Payout Start Date, which is the date we apply your money to provide income payments. During the Accumulation Phase, you may allocate your purchase payments to any combination of the Variable Sub-Accounts and/or Fixed Account Options. If you invest in any of the three Fixed Account Options, you will earn a fixed rate of interest that we declare periodically. If you invest in any of the Variable Sub-Accounts, your investment return will vary up or down depending on the performance of the corresponding Portfolios. Second, the Contract can help you plan for retirement because you can use it to receive retirement income for life and/or for a pre-set number of years, by selecting one of the income payment options (we call these "INCOME PLANS") described on page 25. You receive income payments during what we call the "PAYOUT PHASE" of the Contract, which begins on the Payout Start Date and continues until we make the last payment required by the Income Plan you select. During the Payout Phase, if you select a fixed income payment option, we guarantee the amount of your payments, which will remain fixed. If you select a variable income payment option, based on one or more of the Variable Sub-Accounts, the amount of your payments will vary up or down depending on the performance of the corresponding Portfolios. The amount of money you accumulate under your Contract during the Accumulation Phase and apply to an Income Plan will determine the amount of your income payments during the Payout Phase. The timeline below illustrates how you might use your Contract.
ISSUE ACCUMULATION PHASE PAYOUT PAYOUT DATE START PHASE DATE ----------------------------------------------------------------------------------------------------- You can You save for retirement You elect to You can receive Or you can buy receive income payments receive income a income for a set payments for life Contract payments or period receive a lump sum payment
As the Contract Owner, you exercise all of the rights and privileges provided by the Contract. If you die, any surviving Contract Owner or, if none, the BENEFICIARY will exercise the rights and privileges provided by the Contract. SEE "The Contract." In addition, if you die before the Payout Start Date, we will pay a death benefit to any surviving Contract Owner, or if there is none, to your Beneficiary. SEE "Death Benefits." Please call us at 1-800-755-5275 if you have any questions about how the Contract works. 6 PROSPECTUS EXPENSE TABLE - ------------------------------------------------------------------- The table below lists the expenses that you will bear directly or indirectly when you buy a Contract. The table and the examples that follow do not reflect premium taxes that may be imposed by the state where you reside. For more information about Variable Account expenses, see "Expenses," below. For more information about Portfolio expenses, please refer to the accompanying prospectuses for the Funds. CONTRACT OWNER TRANSACTION EXPENSES Withdrawal Charge (as a percentage of purchase payments)*
Number of Complete Years Since We Received the Purchase Payment Being Withdrawn: 0 1 2 3 4 5 6+ - -------------------------------------------------------------------------------------------------------------------------- Applicable Charge: 6% 6% 5% 5% 4% 3% 0% - -------------------------------------------------------------------------------------------------------------------------- Annual Contract Maintenance Charge $35.00** - -------------------------------------------------------------------------------------------------------------------------- Transfer Fee $10.00*** - ---------------------------------------------------------------------------------------------------------------------------
* Each Contract Year, you may withdraw up to 15% of your aggregate purchase payments without incurring a withdrawal charge. ** We will waive this charge in certain cases. See "Expenses". *** Applies solely to the thirteenth and subsequent transfers within a Contract Year, excluding transfers due to dollar cost averaging and automatic portfolio rebalancing. We are currently waiving the transfer fee. VARIABLE ACCOUNT ANNUAL EXPENSES (AS A PERCENTAGE OF AVERAGE DAILY NET ASSET VALUE DEDUCTED FROM EACH VARIABLE SUB-ACCOUNT) Without the Enhanced Death Benefit Option, Enhanced Death and Income Benefit Combination Rider, or Enhanced Death and Income Benefit Combination Rider II Mortality and Expense Risk Charge 1.05% - --------------------------------------------------------------------- Administrative Expense Charge 0.10% - --------------------------------------------------------------------- Total Variable Account Annual Expenses 1.15% - ---------------------------------------------------------------------- With the Enhanced Death Benefit Option Mortality and Expense Risk Charge 1.27% - --------------------------------------------------------------------- Administrative Expense Charge 0.10% - --------------------------------------------------------------------- Total Variable Account Annual Expenses 1.37% - --------------------------------------------------------------------- With the Enhanced Death and Income Benefit Combination Rider (for Contracts issued before September 22, 2000) Mortality and Expense Risk Charge 1.49% - --------------------------------------------------------------------- Administrative Expense Charge 0.10% - --------------------------------------------------------------------- Total Variable Account Annual Expenses 1.59% - ------------------------------------------------------------------------------ With the Enhanced Death and Income Benefit Combination Rider II (for Contracts issued on or after September 22, 2000) Mortality and Expense Risk Charge 1.55% - ---------------------------------------------------------------------- Administrative Expense Charge 0.10% - ---------------------------------------------------------------------- Total Variable Account Annual Expenses 1.65% - ---------------------------------------------------------------------- 7 PROSPECTUS PORTFOLIO ANNUAL EXPENSES (After Voluntary Reductions and Reimbursements) (as a percentage of Portfolio average daily net assets)(1)
Total Portfolio Management Rule 12b-1 Other Annual Portfolio Fees Fees Expenses Expenses - -------------------------------------------------------------------------------------------------------------------------------- IM V.I. Balanced Fund 0.75% -- 0.35% 1.10% - -------------------------------------------------------------------------------------------------------------------------------- AIM V.I. Capital Appreciation Fund 0.61% -- 0.21% 0.82% - -------------------------------------------------------------------------------------------------------------------------------- AIM V.I. Growth Fund 0.61% -- 0.22% 0.83% - -------------------------------------------------------------------------------------------------------------------------------- AIM V.I. Growth and Income Fund 0.60% -- 0.24% 0.84% - --------------------------------------------------------------------------------------------------------------------------------- AIM V.I. High Yield (2) 0.63% -- 0.56% 1.19% - --------------------------------------------------------------------------------------------------------------------------------- AIM V.I. Value Fund 0.61% -- 0.23% 0.84% - --------------------------------------------------------------------------------------------------------------------------------- Federated Prime Money Fund II (3) 0.48% -- 0.19% 0.67% - --------------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Contrafund Portfolio (4,5) 0.57% -- 0.09% 0.66% - --------------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Equity-Income Portfolio (4,5) 0.48% -- 0.08% 0.56% - --------------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Growth Portfolio (4,5) 0.57% -- 0.08% 0.65% - --------------------------------------------------------------------------------------------------------------------------------- Fidelity VIP High Income Portfolio (4) 0.58% -- 0.10% 0.68% - --------------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Index 500 Portfolio (4,6) 0.24% -- 0.09% 0.33% - --------------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Overseas Portfolio (4,5) 0.72% -- 0.17% 0.89% - --------------------------------------------------------------------------------------------------------------------------------- MFS Emerging Growth Series (7) 0.75% -- 0.10% 0.85% - --------------------------------------------------------------------------------------------------------------------------------- MFS Investors Trust Series (7,8) 0.75% -- 0.12% 0.87% - ---------------------------------------------------------------------------------------------------------------------------------- MFS Research Series (7) 0.75% -- 0.10% 0.85% - --------------------------------------------------------------------------------------------------------------------------------- Oppenheimer Aggressive Growth Fund/VA 0.62% -- 0.02% 0.64% - --------------------------------------------------------------------------------------------------------------------------------- Oppenheimer Capital Appreciation Fund/VA 0.64% -- 0.03% 0.67% - ---------------------------------------------------------------------------------------------------------------------------------- Oppenheimer Global Securities Fund/VA 0.64% -- 0.04% 0.68% - ----------------------------------------------------------------------------------------------------------------------------------- Oppenheimer Main Street Growth & Income Fund/VA 0.70% -- 0.03% 0.73% - ----------------------------------------------------------------------------------------------------------------------------------- Oppenheimer Multiple Strategies Fund/VA 0.72% -- 0.04% 0.76% - ----------------------------------------------------------------------------------------------------------------------------------- Oppenheimer Strategic Bond Fund/VA 0.74% -- 0.05% 0.79% - ----------------------------------------------------------------------------------------------------------------------------------- STI Capital Appreciation Fund (3) 0.92% -- 0.23% 1.15% - ----------------------------------------------------------------------------------------------------------------------------------- STI Growth and Income Fund (3) 0.00% -- 1.20% 1.20% - ----------------------------------------------------------------------------------------------------------------------------------- TI International Equity Fund (3) 0.77% -- 0.83% 1.60% - ----------------------------------------------------------------------------------------------------------------------------------- STI Investment Grade Bond Fund (3) 0.23% -- 0.52% 0.75% - ----------------------------------------------------------------------------------------------------------------------------------- STI Mid-Cap Equity Fund (3) 0.74% -- 0.41% 1.15% - ----------------------------------------------------------------------------------------------------------------------------------- STI Quality Growth Stock Fund (3) 0.00% -- 1.30% 1.30% - ----------------------------------------------------------------------------------------------------------------------------------- STI Small Cap Value Equity Fund (3) 0.39% -- 0.81% 1.20% - ----------------------------------------------------------------------------------------------------------------------------------- STI Value Income Stock Fund (3) 0.69% -- 0.26% 0.95% - ---------------------------------------------------------------------------------------------------------------------------------- Templeton Global Income Securities Fund -- Class 2 (9,10) 0.63% 0.25% 0.09% 0.97% - ----------------------------------------------------------------------------------------------------------------------------------- Templeton Growth Securities Fund -- Class 2 (9,10) 0.81% 0.25% 0.06% 1.12% - -----------------------------------------------------------------------------------------------------------------------------------
(1) Figures shown in the Table are for the year ended December 31, 2000 (except as otherwise noted). (2) Expenses have been restated to reflect current fees. 8 PROSPECTUS (3) Absent voluntary reductions and reimbursements for certain Portfolios, "Management Fees," "Rule 12b-1 Fees," "Other Expenses," and "Total Portfolio Annual Expenses" as a percent of average net assets of the portfolios would have been as follows:
Total Portfolio Management Rule 12b-1 Other Annual Portfolio Fees Fees Expenses Expenses - ---------------------------------------------------------------------------------------------------------------------- Federated Prime Money Fund II 0.50% N/A 0.44% 0.94% - ---------------------------------------------------------------------------------------------------------------------- STI Capital Appreciation Fund 1.15% N/A 0.23% 1.38% - ---------------------------------------------------------------------------------------------------------------------- STI Growth and Income Fund 0.90% N/A 7.14% 8.04% - ---------------------------------------------------------------------------------------------------------------------- STI International Equity Fund 1.25% N/A 0.83% 2.08% - ---------------------------------------------------------------------------------------------------------------------- STI Investment Grade Bond Fund 0.74% N/A 0.52% 1.26% - ---------------------------------------------------------------------------------------------------------------------- STI Mid-Cap Equity Fund 1.15% N/A 0.41% 1.56% - ---------------------------------------------------------------------------------------------------------------------- STI Quality Growth Stock Fund 1.00% N/A 10.54% 11.54% - ---------------------------------------------------------------------------------------------------------------------- STI Small Cap Value Equity Fund 1.15% N/A 0.81% 1.96% - ---------------------------------------------------------------------------------------------------------------------- STI Value Income Stock Fund 0.80% N/A 0.26% 1.06% - -----------------------------------------------------------------------------------------------------------------------
The Portfolio's Advisors may discontinue all or part of these reductions and reimbursements at any time. (4) Initial Class (5) Actual annual class operating expenses were lower because a portion of the brokerage commissions that the fund paid was used to reduce the fund's expenses, and/or because through arrangements with the fund's custodian, credits realized as a result of uninvested cash balances were used to reduce a portion of the fund's custodian expenses. See the accompanying fund prospectus for details. (6) The fund's manager has voluntarily agreed to reimburse the class's expenses if they exceed a certain level. Including this reimbursement, the annual class operating expenses were 0.28%. This arrangement may be discontinued by the fund's manager at any time. (7) Each series has an expense offset arrangement which reduces the series' custodian fee based upon the amount of cash maintained by the series with its custodian and dividend disbursing agent. Each series may enter into such arrangements and directed brokerage arrangements, which would also have the effect of reducing the series' expenses. "Other Expenses" do not take into account these expense reductions, and are therefore higher that the actual expenses of the series. Had these fee reductions been taken into account, "Total Portfolio Annual Expenses" would be lower for certain series and would equal: 0.84% for Emerging Growth Series, 0.86% for Investors Trust Series, and 0.84% for Research Series. (8) Effective May 1, 2001, the Series changed its name from MFS Growth with Income Series to MFS Investors Trust Series to reflect changes in its investment policies. (9) The Fund's Class 2 distribution plan or "rule 12b-1 plan" is described in the Fund's prospectus. (10) The Fund administration fee is paid indirectly through the management fee. 9 PROSPECTUS EXAMPLE 1 The example below shows the dollar amount of expenses that you would bear directly or indirectly if you: - - invested $1,000 in a Variable Sub-Account, - - earned a 5% annual return on your investment, - - surrendered your Contract, or you began receiving income payments for a specified period of less than 120 months, at the end of each time period, and - - elected the Enhanced Death and Income Benefit Combination Rider II. THE EXAMPLE DOES NOT INCLUDE ANY TAXES OR TAX PENALTIES YOU MAY BE REQUIRED TO PAY IF YOU SURRENDER YOUR CONTRACT.
1 Year 3 Year 5 Year 10 Year - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Balanced $79 $129 $173 $312 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Capital Appreciation $76 $121 $159 $284 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Growth and Income $77 $121 $160 $286 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Growth $77 $121 $159 $285 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. High Yield $80 $132 $178 $320 - ------------------------------------------------------------------------------------------------------------------------------ AIM V.I. Value $77 $121 $160 $286 - ----------------------------------------------------------------------------------------------------------------------------- Federated Prime Money II $75 $116 $151 $268 - ----------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Contrafund $75 $116 $151 $267 - ----------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Equity-Income $74 $113 $146 $257 - ----------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Growth $75 $115 $150 $266 - ----------------------------------------------------------------------------------------------------------------------------- Fidelity VIP High Income $75 $116 $152 $269 - ----------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Index 500 $71 $105 $134 $233 - ----------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Overseas $77 $123 $162 $291 - ----------------------------------------------------------------------------------------------------------------------------- MFS Emerging Growth $77 $122 $160 $287 - ----------------------------------------------------------------------------------------------------------------------------- MFS Investors Trust $77 $122 $161 $289 - ----------------------------------------------------------------------------------------------------------------------------- MFS Research $77 $122 $160 $287 - ----------------------------------------------------------------------------------------------------------------------------- Oppenheimer Aggressive Growth $75 $115 $150 $265 - ----------------------------------------------------------------------------------------------------------------------------- Oppenheimer Capital Appreciation $75 $116 $151 $268 - ----------------------------------------------------------------------------------------------------------------------------- Oppenheimer Global Securities $75 $116 $152 $269 - ----------------------------------------------------------------------------------------------------------------------------- ppenheimer Main Street Growth & Income $76 $118 $154 $274 - ----------------------------------------------------------------------------------------------------------------------------- Oppenheimer Multiple Strategies $76 $119 $156 $277 - ----------------------------------------------------------------------------------------------------------------------------- Oppenheimer Strategic Bond $76 $120 $157 $280 - ----------------------------------------------------------------------------------------------------------------------------- STI Capital Appreciation $80 $131 $176 $317 - ----------------------------------------------------------------------------------------------------------------------------- STI Growth and Income $80 $132 $178 $321 - ----------------------------------------------------------------------------------------------------------------------------- STI International Equity $84 $144 $198 $360 - ----------------------------------------------------------------------------------------------------------------------------- STI Investment Grade Bond $76 $118 $155 $276 - ----------------------------------------------------------------------------------------------------------------------------- STI Mid-Cap Equity $80 $131 $176 $317 - ----------------------------------------------------------------------------------------------------------------------------- STI Quality Growth Stock $81 $135 $183 $331 - ----------------------------------------------------------------------------------------------------------------------------- STI Small Cap Value Equity $80 $132 $178 $321 - ----------------------------------------------------------------------------------------------------------------------------- STI Value Income Stock $78 $125 $166 $297 - ----------------------------------------------------------------------------------------------------------------------------- Templeton Developing Markets Securities -- Class 2 $87 $151 $208 $379 - ----------------------------------------------------------------------------------------------------------------------------- Templeton International Securities -- Class 2 $80 $130 $174 $314 - ------------------------------------------------------------------------------------------------------------------------------
10 PROSPECTUS EXAMPLE 2 Same assumptions as Example 1 above, except that you decided not to surrender your Contract, or you began receiving income payments for a specified period of at least 120 months, at the end of each period.
1 Year 3 Year 5 Year 10 Year - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Balanced $28 $ 87 $148 $312 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Capital Appreciation $25 $ 78 $133 $284 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Growth and Income $26 $ 79 $134 $286 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Growth $26 $ 78 $134 $285 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. High Yield $29 $ 89 $152 $320 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Value $26 $ 79 $134 $286 - ----------------------------------------------------------------------------------------------------------------------------- Federated Prime Money II $24 $ 74 $126 $268 - ----------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Contrafund $24 $ 73 $125 $267 - ----------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Equity-Income $23 $ 70 $120 $257 - ----------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Growth $24 $ 73 $125 $266 - ----------------------------------------------------------------------------------------------------------------------------- Fidelity VIP High Income $24 $ 74 $126 $269 - ----------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Index 500 $20 $ 63 $108 $233 - ----------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Overseas $26 $ 80 $137 $291 - ----------------------------------------------------------------------------------------------------------------------------- MFS Emerging Growth $26 $ 79 $135 $287 - ----------------------------------------------------------------------------------------------------------------------------- MFS Investors Trust $26 $ 80 $136 $289 - ----------------------------------------------------------------------------------------------------------------------------- MFS Research $26 $ 79 $135 $287 - ----------------------------------------------------------------------------------------------------------------------------- Oppenheimer Aggressive Growth $24 $ 73 $124 $265 - ----------------------------------------------------------------------------------------------------------------------------- Oppenheimer Capital Appreciation $24 $ 74 $126 $268 - ----------------------------------------------------------------------------------------------------------------------------- Oppenheimer Global Securities $24 $ 74 $126 $269 - ----------------------------------------------------------------------------------------------------------------------------- Oppenheimer Main Street Growth & Income $25 $ 75 $129 $274 - ----------------------------------------------------------------------------------------------------------------------------- Oppenheimer Multiple Strategies $25 $ 76 $130 $277 - ----------------------------------------------------------------------------------------------------------------------------- Oppenheimer Strategic Bond $25 $ 77 $132 $280 - ----------------------------------------------------------------------------------------------------------------------------- STI Capital Appreciation $29 $ 88 $150 $317 - ----------------------------------------------------------------------------------------------------------------------------- STI Growth and Income $29 $ 90 $153 $321 - ----------------------------------------------------------------------------------------------------------------------------- STI International Equity $33 $102 $173 $360 - ----------------------------------------------------------------------------------------------------------------------------- STI Investment Grade Bond $25 $ 76 $130 $276 - ----------------------------------------------------------------------------------------------------------------------------- STI Mid-Cap Equity $29 $ 88 $150 $317 - ----------------------------------------------------------------------------------------------------------------------------- STI Quality Growth Stock $30 $ 93 $158 $331 - ----------------------------------------------------------------------------------------------------------------------------- STI Small Cap Value Equity $29 $ 90 $153 $321 - ------------------------------------------------------------------------------------------------------------------------------ STI Value Income Stock $27 $ 82 $140 $297 - ----------------------------------------------------------------------------------------------------------------------------- Templeton Developing Markets Securities -- Class 2 $36 $108 $183 $379 - ----------------------------------------------------------------------------------------------------------------------------- Templeton International Securities -- Class 2 $29 $ 87 $149 $314 - ------------------------------------------------------------------------------------------------------------------------------
PLEASE REMEMBER THAT YOU ARE LOOKING AT EXAMPLES AND NOT A REPRESENTATION OF PAST OR FUTURE EARNINGS. YOUR ACTUAL EXPENSES MAY BE LOWER OR GREATER THAN THOSE SHOWN ABOVE. SIMILARLY, YOUR RATE OF RETURN MAY BE LOWER OR GREATER THAN 5%, WHICH IS NOT GUARANTEED. THE EXAMPLES ASSUME THAT ANY PORTFOLIO EXPENSE WAIVERS OR REIMBURSEMENT ARRANGEMENTS DESCRIBED IN THE FOOTNOTES TO THE PORTFOLIO'S ANNUAL EXPENSE TABLE ARE IN EFFECT FOR THE PERIODS PRESENTED BELOW. THE ABOVE EXAMPLES ASSUME THE ELECTION OF THE ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER II WITH A MORTALITY AND EXPENSE RISK CHARGE OF 1.55%. IF THAT RIDER WERE NOT ELECTED, THE EXPENSE FIGURES SHOWN ABOVE WOULD BE SLIGHTLY LOWER. TO REFLECT THE CONTRACT MAINTENANCE CHARGE IN THE EXAMPLES, WE ESTIMATED AN EQUIVALENT PERCENTAGE CHARGE, BASED ON THE CURRENT AVERAGE CONTRACT SIZE OF $47,490. 11 PROSPECTUS FINANCIAL INFORMATION - ------------------------------------------------------------------- To measure the value of your investment in the Variable Sub-Accounts during the Accumulation Phase, we use a unit of measure we call the "ACCUMULATION UNIT." Each Variable Sub-Account has a separate value for its Accumulation Units we call "ACCUMULATION UNIT VALUE." Accumulation Unit Value is analogous to, but not the same as, the share price of a mutual fund. Attached as Appendix A to this prospectus are tables showing the Accumulation Unit Values of each Variable Sub-Account since the date the Contracts were first offered. To obtain a fuller picture of each Variable Sub-Account's finances, please refer to the Variable Account's financial statements contained in the Statement of Additional Information. The financial statements of Glenbrook and the Variable Account appear in the Statement of Additional Information. 12 PROSPECTUS THE CONTRACT - ------------------------------------------------------------------- CONTRACT OWNER The Glenbrook Provider 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 dies, and - - any other rights that the Contract provides. If you die, any surviving Contract Owner, or, if none, the Beneficiary may exercise the rights and privileges provided to them by the Contract. The Contract cannot be jointly owned by both a non-natural person and a natural person. The maximum age of the oldest Contract Owner and Annuitant cannot exceed 90 as of the date we receive the completed application. You may change the Contract Owner at any time. We will provide a change of ownership form to be signed by you and filed with us. After we accept the form, the change of ownership will be effective as of the date you signed the form. Until we receive your written notice to change the Contract Owner, we are entitled to rely on the most recent ownership information in our files. We will not be liable as to any payment or settlement made prior to receiving the written notice. Accordingly, if you wish to change the Contract Owner, you should deliver your written notice to us promptly. Each change is subject to any payment made by us or any other action we take before we accept the change. You can use the Contract with or without a qualified plan. A qualified plan is a personal retirement savings plan, such as an IRA or tax-sheltered annuity, that meets the requirements of the Internal Revenue Code. Qualified plans may limit or modify your rights and privileges under the Contract. We use the term "Qualified Contract" to refer to a Contract issued within a qualified plan. See "Qualified Plans" on page 31. ANNUITANT The Annuitant is the individual whose life determines the amount and duration of income payments (other than under Income Plans with guaranteed payments for a specified period). You initially designate an Annuitant in your application. You may change the Annuitant at any time prior to the Payout Start Date (only if the Contract Owner is a natural person). Once we accept a change, it takes effect as of the date you signed the request. Each change is subject to any payment we make or other action we take before we accept it. You may designate a joint Annuitant, who is a second person on whose life income payments depend. We permit joint Annuitants only on or after the Payout Start Date. If the Annuitant dies prior to the Payout Start Date, the new Annuitant will be: (i) the youngest Contract Owner; otherwise, (ii) the youngest Beneficiary. BENEFICIARY The Beneficiary is the person selected by the Contract Owner to receive the death benefits or become the new Contract Owner if the sole surviving Contract Owner dies before the Payout Start Date. If the sole surviving Contract Owner dies after the Payout Start Date, the primary Beneficiary, or if none surviving, the contingent Beneficiary, will receive any guaranteed income payments scheduled to continue. You may name one or more primary and contingent Beneficiaries when you apply for a Contract. The primary Beneficiary is the person who may elect to receive the death benefit or become the new Contract Owner if the sole surviving Contract Owner dies before the Payout Start Date. A contingent Beneficiary is the person selected by the Contract Owner who will become the Beneficiary if all named primary Beneficiaries die before the death of the sole surviving Contract Owner. You may change or add Beneficiaries at any time, unless you have designated an irrevocable Beneficiary. We will provide a change of Beneficiary form to be signed by you and filed with us. After we accept the form, the change of Beneficiary will be effective as of the date you signed the form. Until we receive your 13 PROSPECTUS written notice to change a Beneficiary, we are entitled to rely on the most recent Beneficiary information in our files. We will not be liable as to any payment or settlement made prior to receiving the written notice. Accordingly, if you wish to change your Beneficiary, you should deliver your written notice to us promptly. Each change is subject to any payment made by us or any other action we take before we accept the change. If you did not name a Beneficiary or, unless otherwise provided in the Beneficiary designation, if a named Beneficiary is no longer living and there are no other surviving Beneficiaries or Contingent Beneficiaries, the new Beneficiary will be: - your spouse or, if he or she is no longer alive, - your surviving children equally, or if you have no surviving children, - your estate. If one or more Beneficiaries survive you (or survives the Annuitant, if the Contract Owner is not a natural person), we will divide the death benefit among the surviving Beneficiaries according to your most recent written instructions. If you have not given us written instructions, we will pay the death benefit in equal amounts to the surviving Beneficiaries. MODIFICATION OF THE CONTRACT Only a Glenbrook officer may approve a change in or waive any provision of the Contract. Any change or waiver must be in writing. None of our agents has the authority to change or waive the provisions of the Contract. We may not change the terms of the Contract without your consent, except to conform the Contract to applicable law or changes in the law. If a provision of the Contract is inconsistent with state law, we will follow state law. ASSIGNMENT We will not honor an assignment of an interest in a Contract as collateral or security for a loan. However, you may assign periodic income payments under the Contract prior to the Payout Start Date. No Beneficiary may assign benefits under the Contract until they are payable to the Beneficiary. We will not be bound by any assignment until the assignor signs it and files it with us. We are not responsible for the validity of any assignment. Federal law prohibits or restricts the assignment of benefits under many types of retirement plans and the terms of such plans may themselves contain restrictions on assignments. An assignment may also result in taxes or tax penalties. YOU SHOULD CONSULT WITH AN ATTORNEY BEFORE TRYING TO ASSIGN YOUR CONTRACT. PURCHASES - ------------------------------------------------------------------- MINIMUM PURCHASE PAYMENTS Your initial purchase payment must be at least $3,000 ($2,000 for a Qualified Contract). All subsequent purchase payments must be $50 or more. You may make purchase payments at any time prior to the Payout Start Date. We reserve the right to limit the maximum amount of purchase payments we will accept. We reserve the right to reject any application in our sole discretion. AUTOMATIC ADDITIONS PROGRAM You may make subsequent purchase payments by automatically transferring money from your bank account. Consult your representative for more detailed information. ALLOCATION OF PURCHASE PAYMENTS At the time you apply for a Contract, you must decide how to allocate your purchase payments among the investment alternatives. The allocation you specify on your application will be effective immediately. All allocations must be in whole percents that total 100% or in whole dollars. You can change your allocations by notifying us in writing. We will allocate your purchase payments to the investment alternatives according to your most recent instructions on file with us. Unless you notify us in writing otherwise, we will allocate subsequent purchase payments according to the allocation for the previous purchase payment. We will effect any change in allocation instructions at the time we receive written notice of the change in good order. We will credit the initial purchase payment that accompanies your completed application to your Contract within 2 business days after we receive the payment at our home office. If your application is incomplete, we will ask you to complete your application within 5 business days. If you do so, we will credit your initial purchase payment to your Contract within that 5 business day period. If you do not, we will return your purchase payment at the end of the 5 business day period unless you expressly allow us to hold it until you complete the application. We will credit subsequent 14 PROSPECTUS purchase payments to the Contract at the close of the business day on which we receive the purchase payment at our home office. We are open for business each day Monday through Friday that the New York Stock Exchange is open for business. We also refer to these days as "VALUATION DATES." Our business day closes when the New York Stock Exchange closes, usually 4 p.m. Eastern Time (3 p.m. Central Time). If we receive your purchase payment after 3 p.m. Central Time on any Valuation Date, we will credit your purchase payment using the Accumulation Unit Values computed on the next Valuation Date. RIGHT TO CANCEL You may cancel the Contract by returning it to us within the Cancellation Period, which is the 20 day period after you receive the Contract, or a longer period should your state require it. You may return it by delivering it or mailing it to us. If you exercise this "RIGHT TO CANCEL," the Contract terminates and we will pay you the full amount of your purchase payments allocated to the Fixed Account. We also will return your purchase payments allocated to the Variable Account adjusted, to the extent federal or state law permits, to reflect investment gain or loss that occurred from the date of allocation through the date of cancellation. Some states may require us to return a greater amount to you. In states where we are required to refund purchase payments, we reserve the right during the Cancellation Period to invest any purchase payments you allocated to a Variable Sub-Account to the Money Market Variable Sub-Account available under the Contract. We will notify you if we do so. At the end of the Cancellation Period, you may then allocate your money to other Variable Sub-Accounts. CONTRACT VALUE - ------------------------------------------------------------------- Your Contract Value at any time during the Accumulation Phase is equal to the sum of the value of your Accumulation Units in the Variable Sub-Accounts you have selected, plus the value of your investment in the Fixed Account Options. ACCUMULATION UNITS To determine the number of Accumulation Units of each Variable Sub-Account to credit to your Contract, we divide (i) the amount of the purchase or transfer payment you have allocated to a Variable Sub-Account by (ii) the Accumulation Unit Value of that Variable Sub-Account next computed after we receive your payment or transfer. For example, if we receive a $10,000 purchase payment allocated to a Variable Sub-Account when the Accumulation Unit Value for the Sub-Account is $10, we would credit 1,000 Accumulation Units of that Variable Sub-Account to your Contract. Withdrawals and transfers from a Variable Sub-Account would, of course, reduce the number of Accumulation Units of that Sub-Account allocated to your Contract. ACCUMULATION UNIT VALUE As a general matter, the Accumulation Unit Value for each Variable Sub-Account will rise or fall to reflect: - - changes in the share price of the Portfolio in which the Variable Sub-Account invests, and - - the deduction of amounts reflecting the mortality and expense risk charge, administrative expense charge, and any provision for taxes that have accrued since we last calculated the Accumulation Unit Value. We determine contract maintenance charges, withdrawal charges, and transfer fees (currently waived) separately for each Contract. They do not affect Accumulation Unit Value. Instead, we obtain payment of those charges and fees by redeeming Accumulation Units. For details on how we calculate Accumulation Unit Value, please refer to the Statement of Additional Information. We determine a separate Accumulation Unit Value for each Variable Sub-Account on each Valuation Date. We also determine a separate set of Accumulation Unit Values reflecting the cost of the Enhanced Death Benefit Rider, the Enhanced Death and Income Benefit Combination Rider and the Enhanced Death and Income Benefit Combination Rider II described on pages 27-29. YOU SHOULD REFER TO THE PROSPECTUSES FOR THE FUNDS THAT ACCOMPANY THIS PROSPECTUS FOR A DESCRIPTION OF HOW THE ASSETS OF EACH PORTFOLIO ARE VALUED, SINCE THAT DETERMINATION DIRECTLY BEARS ON THE ACCUMULATION UNIT VALUE OF THE CORRESPONDING VARIABLE SUB-ACCOUNT AND, THEREFORE, YOUR CONTRACT VALUE. 15 PROSPECTUS INVESTMENT ALTERNATIVES: THE VARIABLE SUB-ACCOUNTS - ------------------------------------------------------------------- You may allocate your purchase payments to up to 32 Variable Sub-Accounts. Each Variable Sub-Account invests in the shares of a corresponding Portfolio. Each Portfolio has its own investment objective(s) and policies. We briefly describe the Portfolios below. For more complete information about each Portfolio, including expenses and risks associated with the Portfolio, please refer to the accompanying prospectuses for the Funds. You should carefully review the Fund prospectuses before allocating amounts to the Variable Sub-Accounts.
Portfolio: Each Portfolio Seeks: Investment Advisor: AIM VARIABLE INSURANCE FUNDS* - ------------------------------------------------------------------------------------ AIM V.I. Balanced Fund As high a total return as possible, Consistent with preservation of capital - ----------------------------------------------------------------------------------- AIM V.I. Capital Appreciation Fund Growth of capital - ------------------------------------------------------------------------------------ AIM V.I. Growth Fund Growth of capital - ---------------------------------------------------------------------------------- AIM V.I. Growth and Income Fund Growth of capital with a secondary objective of current income A I M Advisors, Inc. - ------------------------------------------------------------------------------------ AIM V.I. High Yield Fund A high level of current income - ------------------------------------------------------------------------------------ AIM V.I. Value Fund Long-term growth of capital; Income is Secondary objective - ----------------------------------------------------------------------------------- FEDERATED INSURANCE SERIES - ----------------------------------------------------------------------------------- Federated Prime Money Fund II Current income consistent with the stability of principal and Federated Investment liquidity Management Company - ----------------------------------------------------------------------------------- FIDELITY VARIABLE INSURANCE PRODUCTS FUND - ----------------------------------------------------------------------------------- Fidelity VIP Contrafund Long-term capital appreciation Portfolio - ----------------------------------------------------------------------------------- Fidelity VIP Equity-Income Reasonable income Portfolio - ----------------------------------------------------------------------------------- Fidelity VIP Growth Portfolio Capital appreciation - ---------------------------------------------------------------------------------- Fidelity VIP High Income High level of current income while also Portfolio considering growth of capital Fidelity Management & Research Company - --------------------------------------------------------------------------------- Fidelity VIP Index 500 Portfolio Investment results that correspond to the total return of common stocks publicly traded in the United States, as represented by the S&P 500 - ----------------------------------------------------------------------------------- Fidelity VIP Overseas Portfolio Long-term growth of capital - ---------------------------------------------------------------------------------- FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (VIP) -- CLASS 2 - ---------------------------------------------------------------------------------- Templeton Global Income Securities High current income Fund Capital appreciation is a secondary Consideration. Franklin Advisers, Inc. - --------------------------------------------------------------------------------- Templeton Growth Securities Fund Long-term capital growth Templeton Global Advisors Limited - ---------------------------------------------------------------------------------- MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST-SM- - ----------------------------------------------------------------------------------- MFS Emerging Growth Series Long-term growth of capital - ----------------------------------------------------------------------------------- **MFS Investors Trust Series Long-term growth of capital with a Secondary objective to seek reasonable current income - ---------------------------------------------------------------------------------- MFS Investment Management(R) MFS Research Series Long-term growth of capital and future income - ------------------------------------------------------------------------------------ 16 PROSPECTUS Portfolio: Each Portfolio Seeks: Investment Advisor: OPPENHEIMER VARIABLE ACCOUNT FUNDS - ------------------------------------------------------------------------------------ Oppenheimer Aggressive Growth Capital Appreciation Fund/VA - ------------------------------------------------------------------------------------ Oppenheimer Capital Appreciation Capital Appreciation Fund/VA - --------------------------------------------------------------------------------- Oppenheimer Global Securities Long-term capital appreciation Fund/VA - ---------------------------------------------------------------------------------- Oppenheimer Main Street High total return, which includes Growth & Income Fund/VA growth in the value of its shares as well as OppenheimerFunds, Inc. current income, from equity and debt securities - ---------------------------------------------------------------------------------- Oppenheimer Multiple Strategies A high total investment return which Fund/VA includes current income and capital appreciation in the value of its shares. - --------------------------------------------------------------------------------- Oppenheimer Strategic Bond Fund/VA High level of current income - ----------------------------------------------------------------------------------- STI CLASSIC VARIABLE TRUST - -------------------------------------------------------------------------------- STI Capital Appreciation Fund Captial Appreciation - ----------------------------------------------------------------------------------- STI Growth and Income Fund Long-term capital appreciation with the secondary goal of current income Trusco Capital Management, Inc. - -------------------------------------------------------------------------------- STI International Equity Fund Long-term capital appreciation - --------------------------------------------------------------------------------- STI Investment Grade Bond Fund High total return through current income and capital appreciation,while preserving the principal amount invested - -------------------------------------------------------------------------------- STI Mid-Cap Equity Fund Capital appreciation - ---------------------------------------------------------------------------------- STI Quality Growth Stock Fund Long-term capital appreciation with nominaldividend income - ---------------------------------------------------------------------------------- STI Small Cap Value Equity Fund Capital appreciation with the secondary goal of current income - ------------------------------------------------------------------------------------ STI Value Income Stock Fund Current income with the secondary goal of capital appreciation - ----------------------------------------------------------------------------------
** Effective May 1, 2001, the Series changed its name from MFS Growth with Income Series to MFS Investors Trust Series to reflect changes in its investment policies. * A portfolio's investment objective may be changed by the Fund's Board of Trustees without shareholder approval. VARIABLE INSURANCE TRUST PORTFOLIOS MAY NOT BE MANAGED BY THE SAME PORTFOLIO MANAGERS WHO MANAGE RETAIL MUTUAL FUNDS WITH SIMILAR NAMES. THESE PORTFOLIOS ARE LIKELY TO DIFFER FROM RETAIL FUNDS IN ASSETS, CASH FLOW, AND TAX MATTERS. ACCORDINGLY, THE HOLDINGS AND INVESTMENT RESULTS OF A PORTFOLIO CAN BE EXPECTED TO BE HIGHER OR LOWER THAN THE INVESTMENT RESULTS OF RETAIL MUTUAL FUNDS. 17 PROSPECTUS INVESTMENT ALTERNATIVES: THE FIXED ACCOUNT OPTIONS - ------------------------------------------------------------------- You may allocate all or a portion of your purchase payments to the Fixed Account. You may choose from among 3 Fixed Account Options including 2 dollar cost averaging options and the option to invest in one or more Guarantee Periods included in the Guaranteed Maturity Fixed Account. The Fixed Account Options may not be available in all states. Please consult with your representative for current information. The Fixed Account supports our insurance and annuity obligations. The Fixed Account consists of our general assets other than those in segregated asset accounts. We have sole discretion to invest the assets of the Fixed Account, subject to applicable law. Any money you allocate to a Fixed Account Option does not entitle you to share in the investment experience of the Fixed Account. DOLLAR COST AVERAGING FIXED ACCOUNT OPTIONS DOLLAR COST AVERAGING FIXED ACCOUNT OPTION. Purchase payments that you allocate to the DOLLAR COST AVERAGING FIXED ACCOUNT OPTION ("DCA FIXED ACCOUNT OPTION") will earn interest for a one year period at the current rate in effect at the time of allocation. We will credit interest daily at a rate that will compound over the year to the annual interest rate we guaranteed at the time of allocation. After the one year period, we will declare a renewal rate which we guarantee for a full year. Subsequent renewal dates will be every twelve months for each payment or transfer. For each purchase payments, the first transfer from the DCA Fixed Account must occur within one month of the date of payment. If we do not receive an allocation from you within one month of the date of payment, the payment plus associated interest will be transferred to the Money Market Variable Sub-Account in equal monthly installments using the longest transfer period being offered at the time the purchase payment is made. Transferring Account Value to the Money Market Variable Sub-Account in this manner may not be consistent with the theory of dollar cost averaging described on page 21. We will follow your instructions in transferring amounts monthly from the DCA Fixed Account Option. However, you may not choose less than 3 or more than 36 monthly installments. Further, you must transfer each purchase payment and all its earnings out of this Option by means of dollar cost averaging within 36 months of payment. At the end of 36 months, any nominal amounts remaining will be allocated to the Money Market Variable Sub-Account. No transfers are permitted into the DCA Fixed Account. SHORT TERM DOLLAR COST AVERAGING FIXED ACCOUNT OPTION. You may establish a Short Term Dollar Cost Averaging Program by allocating purchase payments to the SHORT TERM DOLLAR COST AVERAGING FIXED ACCOUNT OPTION ("SHORT TERM DCA FIXED ACCOUNT OPTION"). We will credit interest to purchase payments you allocate to this Option for up to one year at the current rate in effect at the time of allocation. For each purchase payment, the first transfer from the Short Term DCA Fixed Account must occur within one month of the date of payment. If we do not receive an allocation from you within one month of the date of payment, the payment plus associated interest will be transferred to the Money Market Variable Sub-Account in equal monthly installments using the longest transfer period being offered at the time the purchase payment is made. Transferring Account Value to the Money Market Variable Sub-Account in this manner may not be consistent with the theory of dollar cost averaging described on page 21. You must transfer each purchase payment and all its earnings out of this Option by means of dollar cost averaging within 12 months. At the end of the transfer period, any nominal amounts remaining in the Short Term DCA Fixed Account will be allocated to the Money Market Variable Sub-Account. If you discontinue the Short Term DCA Fixed Account Option before the end of the transfer period, we will transfer the remaining balance in this Option to the Money Market Variable Sub-Account unless you request a different investment alternative. No transfers are permitted into the Short Term DCA Fixed Account. We bear the investment risk for all amounts allocated to the DCA Fixed Account Option and the Short Term DCA Fixed Account Option. That is because we guarantee the current and renewal interest rates we credit to the amounts you allocate to either of these Options, which will never be less than the minimum guaranteed rate in the Contract. Currently, we determine, in our sole discretion, the amount of interest credited in excess of the guaranteed rate. We may declare more than one interest rate for different monies based upon the date of allocation to the DCA Fixed Account Option and the Short Term DCA Fixed Account Option. For current interest rate information, please contact your representative or Glenbrook customer service at 1-800-755-5275. GUARANTEE PERIODS Each payment or transfer allocated to a Guarantee Period earns interest at a specified rate that we guarantee for a period of years. Guarantee Periods may range from 1 to 10 years. We are currently offering Guarantee Periods of 1, 3, 5, 7, and 10 years in length. In the future we may offer Guarantee Periods of 18 PROSPECTUS different lengths or stop offering some Guarantee Periods. You select the Guarantee Period for each payment or transfer. If you do not select a Guarantee Period, we will assign the same period(s) you selected for your most recent purchase payment(s). Each payment or transfer allocated to a Guarantee Period must be at least $50. We reserve the right to limit the number of additional purchase payments that you may allocate to this Option. INTEREST RATES. We will tell you what interest rates and Guarantee Periods we are offering at a particular time. We will not change the interest rate that we credit to a particular allocation until the end of the relevant Guarantee Period. We may declare different interest rates for Guarantee Periods of the same length that begin at different times. We have no specific formula for determining the rate of interest that we will declare initially or in the future. We will set those interest rates based on investment returns available at the time of the determination. In addition, we may consider various other factors in determining interest rates including regulatory and tax requirements, our sales commission and administrative expenses, general economic trends, and competitive factors. WE DETERMINE THE INTEREST RATES TO BE DECLARED IN OUR SOLE DISCRETION. WE CAN NEITHER PREDICT NOR GUARANTEE WHAT THOSE RATES WILL BE IN THE FUTURE. For current interest rate information, please contact your representative or Glenbrook at 1-800-755-5275. HOW WE CREDIT INTEREST. We will credit interest daily to each amount allocated to a Guarantee Period at a rate that compounds to the annual interest rate that we declared at the beginning of the applicable Guarantee Period. The following example illustrates how a purchase payment allocated to a Guaranteed Period would grow, given an assumed Guarantee Period and annual interest rate: Purchase Payment............................................ $10,000 Guarantee Period............................................ 5 years Annual Interest Rate........................................ 4.50%
END OF CONTRACT YEAR YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 Beginning Contract 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 withdrawal, you may be required to pay a withdrawal charge. In addition, the amount withdrawn may be increased or decreased by a Market Value Adjustment that reflects changes in interest rates since the time you invested the amount withdrawn. The hypothetical interest rate is for illustrative purposes only and is not intended to predict future interest rates to be declared under the Contract. Actual interest rates declared for any given Guarantee Period may be more or less than shown above. 19 PROSPECTUS RENEWALS. Prior to the end of each Guarantee Period, we will mail you a notice asking you what to do with your money, including the accrued interest. During the 30-day period after the end of the Guarantee Period, you may: 1. Take no action. We will automatically apply your money to a new Guarantee Period of the same length as the expiring Guarantee Period. The new Guarantee Period will begin on the day the previous Guarantee Period ends. The new interest rate will be our current declared rate for a Guarantee Period of that length; or 2. Instruct us to apply your money to one or more new Guarantee Periods of your choice. The new Guarantee Period(s) will begin on the day the previous Guarantee Period ends. The new interest rate will be our then current declared rate for those Guarantee Periods; or 3. Instruct us to transfer all or a portion of your money to one or more Variable Sub-Accounts of the Variable Account. We will effect the transfer on the day we receive your instructions. We will not adjust the amount transferred to include a Market Value Adjustment; or 4. Withdraw all or a portion of your money. You may be required to pay a withdrawal charge, but we will not adjust the amount withdrawn to include a Market Value Adjustment. You may also be required to pay premium taxes and income tax withholding, if applicable. We will pay interest from the day the Guarantee Period expired until the date of withdrawal. The interest will be the rate for the shortest Guarantee Period then being offered. Amounts not withdrawn will be applied to a new Guarantee Period of the same length as the previous Guarantee Period. The new Guarantee Period will begin on the day the previous Guarantee Period ends. MARKET VALUE ADJUSTMENT. All withdrawals and transfers from a Guarantee Period, other than those taken during the 30 day period after such Guarantee Period expires, are subject to a Market Value Adjustment. A Market Value Adjustment also may apply upon payment of a death benefit and when you apply amounts currently invested in a Guarantee Period to an Income Plan (unless paid or applied during the 30-day period after such Guarantee Period expires). We also will not apply a Market Value Adjustment to a withdrawal you make: - - within the Free Withdrawal Amount as described on page 23, - - that qualify for one of the waivers as described on page 23, - - to satisfy the IRS minimum distribution rules for the Contract, or - - a single withdrawal made by a surviving spouse made within one year after continuing the Contract. We apply the Market Value Adjustment to reflect changes in interest rates from the time you first allocate money to a Guarantee Period to the time you remove it from that Guarantee Period. We calculate the Market Value Adjustment by comparing the TREASURY RATE for a period equal to the Guarantee Period at its inception to the Treasury Rate for a period equal to the Guarantee Period when you remove your money. Treasury Rate means the U.S. Treasury Note Constant Maturity Yield as reported in Federal Reserve Bulletin Release H.15. The Market Value Adjustment may be positive or negative, depending on changes in interest rates. As such, you bear the investment risk associated with changes in interest rates. If interest rates increase significantly, the Market Value Adjustment and any withdrawal charge, premium taxes, and income tax withholding (if applicable) could reduce the amount you receive upon full withdrawal from a Guaranteed Period to an amount that is less than the purchase payment applied to that period plus interest earned under the Contract. Generally, if the original Treasury Rate at the time you allocate money to a Guarantee Period is higher than the applicable current Treasury Rate for a period equal to the Guarantee Period, then the Market Value Adjustment will result in a higher amount payable to you, transferred or applied to an Income Plan. Conversely, if the Treasury Rate at the time you allocate money to a Guarantee Period is lower than the applicable Treasury Rate for a period equal to the Guarantee Period, then the Market Value Adjustment will result in a lower amount payable to you, transferred or applied to an Income Plan. For example, assume that you purchase a Contract and you select an initial Guarantee Period of 5 years and the 5-year Treasury Rate for that duration is 4.50%. Assume that at the end of 3 years, you make a partial withdrawal. If, at that later time, the current 5-year Treasury Rate is 4.20%, then the Market Value Adjustment will be positive, which will result in an increase in the amount payable to you. Conversely, if the current 5-year Treasury Rate is 4.80%, then the Market Value Adjustment will be negative, which will result in a decrease in the amount payable to you. The formula for calculating Market Value Adjustments is set forth in Appendix B to this prospectus, which also contains additional examples of the application of the Market Value Adjustment. 20 PROSPECTUS INVESTMENT ALTERNATIVES: TRANSFERS - ------------------------------------------------------------------- TRANSFERS DURING THE ACCUMULATION PHASE During the Accumulation Phase, you may transfer Contract Value among the investment alternatives. You may not transfer Contract Value to the Short-Term Dollar Cost Averaging Fixed Account Option or the Dollar Cost Averaging Fixed Account Option. You may request transfers in writing on a form that we provided or by telephone according to the procedure described below. The minimum amount that you may transfer into a Guarantee Period is $50. We currently do not assess, but reserve the right to assess, a $10 charge on each transfer in excess of 12 per Contract Year. All transfers to or from more than one Portfolio on any given day counts as one transfer. We will process transfer requests that we receive before 3:00 p.m. Central Time on any Valuation Date using the Accumulation Unit Values for that Date. We will process requests completed after 3:00 p.m. Central Time on any Valuation Date using the Accumulation Unit Values for the next Valuation Date. The Contract permits us to defer transfers from the Fixed Account for up to six months from the date we receive your request. If we decide to postpone transfers for 30 days or more, we will pay interest as required by applicable law. Any interest would be payable from the date we receive the transfer request to the date we make the transfer. If you transfer an amount from a Guarantee Period other than during the 30 day period after such Guarantee Period expires, we will increase or decrease the amount by a Market Value Adjustment. We reserve the right to waive any transfer restrictions. TRANSFERS DURING THE PAYOUT PHASE During the Payout Phase, you may make transfers among the Variable Sub-Accounts so as to change the relative weighting of the Variable Sub-Accounts on which your variable income payments will be based. In addition, you will have a limited ability to make transfers from the Variable Sub-Accounts to increase the proportion of your income payments consisting of fixed income payments. You may not, however, convert any portion of your right to receive fixed income payments into variable income payments. If you choose an Income Plan that depends on any person's life, you may not make any transfers for the first 6 months after the Payout Start Date. Thereafter, you may make transfers among the Variable Sub-Accounts or make transfers from the Variable Sub-Accounts to increase the proportion of your income payments consisting of fixed income payments. Your transfers must be at least 6 months apart. TELEPHONE TRANSFERS You may make transfers by telephone by calling 1-800-755-5275. The cut-off time for telephone transfer requests is 3:00 p.m. Central time. In the event that the New York Stock Exchange closes early, i.e., before 3:00 p.m. Central Time, or in the event that the Exchange closes early for a period of time but then reopens for trading on the same day, we will process telephone transfer requests as of the close of the Exchange on that particular day. We will not accept telephone requests received at any telephone number other than the number that appears in this paragraph or received after the close of trading on the Exchange. We may suspend, modify or terminate the telephone transfer privilege at any time without notice. We use procedures that we believe provide reasonable assurance that the telephone transfers are genuine. For example, we tape telephone conversations with persons purporting to authorize transfers and request identifying information. Accordingly, we disclaim any liability for losses resulting from allegedly unauthorized telephone transfers. However, if we do not take reasonable steps to help ensure that a telephone authorization is valid, we may be liable for such losses. DOLLAR COST AVERAGING PROGRAM Through our Dollar Cost Averaging Program, you may automatically transfer a fixed dollar amount every month during the Accumulation Phase from the Short Term Dollar Cost Averaging Fixed Account or the Dollar Cost Averaging Fixed Account, to any Variable Sub-Account. You may not use the Dollar Cost Averaging Program to transfer amounts to the Guarantee Periods. We will not charge a transfer fee for transfers made under this Program, nor will such transfer count against the 12 transfers you can make each Contract Year without paying a transfer fee. The theory of dollar cost averaging is that if purchases of equal dollar amounts are made at fluctuating prices, the aggregate average cost per unit will be less than the average of the unit prices on the same purchase dates. However, participation in this Program does not assure you of a greater profit from your purchases under the Program nor will it prevent or necessarily reduce losses in a declining market. Call or write us for instructions on how to enroll. 21 PROSPECTUS AUTOMATIC PORTFOLIO REBALANCING PROGRAM Once you have allocated your money among the Variable Sub-Accounts, the performance of each Sub-Account may cause a shift in the percentage you allocated to each Sub-Account. If you select our Automatic Portfolio Rebalancing Program, we will automatically rebalance the Contract Value in each Variable Sub-Account and return it to the desired percentage allocations. We will not include money you allocate to the Fixed Account Options in the Automatic Portfolio Rebalancing Program. We will rebalance your account each quarter according to your instructions. We will transfer amounts among the Variable Sub-Accounts to achieve the percentage allocations you specify. You can change your allocations at any time by contacting us in writing or by telephone. The new allocation will be effective with the first rebalancing that occurs after we receive your request. We are not responsible for rebalancing that occurs prior to receipt of your request. Example: Assume that you want your initial purchase payment split among 2 Variable Sub-Accounts. You want 40% to be in the Fidelity VIP High Income Variable Sub-Account and 60% to be in the AIM V.I. Growth Variable Sub-Account. Over the next 2 months the bond market does very well while the stock market performs poorly. At the end of the first quarter, the Fidelity VIP High Income Variable Sub-Account now represents 50% of your holdings because of its increase in value. If you choose to have your holdings rebalanced quarterly, on the first day of the next quarter, we would sell some of your units in the Fidelity VIP High Income Variable Sub-Account and use the money to buy more units in the AIM V.I. Growth Variable Sub-Account so that the percentage allocations would again be 40% and 60% respectively. The Automatic Portfolio Rebalancing Program is available only during the Accumulation Phase. The transfers made under the Program do not count towards the 12 transfers you can make without paying a transfer fee, and are not subject to a transfer fee. Portfolio rebalancing is consistent with maintaining your allocation of investments among market segments, although it is accomplished by reducing your Contract Value allocated to the better performing segments. EXPENSES - ------------------------------------------------------------------- As a Contract Owner, you will bear, directly or indirectly, the charges and expenses described below. CONTRACT MAINTENANCE CHARGE During the Accumulation Phase, on each Contract Anniversary, we will deduct a $35 contract maintenance charge from your Contract Value invested in each Variable Sub-Account in proportion to the amount invested. If you surrender your Contract, we will deduct the contract maintenance charge pro rated for the part of the Contract Year elapsed, unless your Contract qualifies for a waiver, described below. The charge is to compensate us for the cost of administering the Contracts and the Variable Account. Maintenance costs include expenses we incur collecting purchase payments; keeping records; processing death claims, cash withdrawals, and policy changes; proxy statements; calculating Accumulation Unit Values and income payments; and issuing reports to Contract Owners and regulatory agencies. We cannot increase the charge. However, we will waive this charge if, as of the Contract Anniversary or upon full surrender: - - total purchase payments equal $50,000 or more, or - - all money is allocated to the Fixed Account. In addition, we will waive the Contract Maintenance Charge if total purchase payments are $50,000 or more as of the Payout Start Date. MORTALITY AND EXPENSE RISK CHARGE We deduct a mortality and expense risk charge daily at an annual rate of 1.05% of the average daily net assets you have invested in the Variable Sub-Accounts (1.27% if you select the Enhanced Death Benefit Rider, 1.49% if you selected the Enhanced Death and Income Combination Benefit Rider, and 1.55% if you select the Enhanced Death and Income Benefit Combination Rider II). The mortality and expense risk charge is for all the insurance benefits available with your Contract (including our guarantee of annuity rates and the death benefits), for certain expenses of the Contract, and for assuming the risk (expense risk) that the current charges will be sufficient in the future to cover the cost of administering the Contract. If the charges under the Contract are not sufficient, then we will bear the loss. We charge an additional amount for the Enhanced Death Benefit Rider, the Enhanced Death and Income Benefit Combination Rider and the Enhanced Death and Income Benefit Combination Rider II, to compensate us for the additional risk that we accept by providing these options. 22 PROSPECTUS We guarantee that we will not raise the mortality and expense risk charge. We assess the mortality and expense risk charge during both the Accumulation Phase and the Payout Phase. ADMINISTRATIVE EXPENSE CHARGE We deduct an administrative expense charge daily at an annual rate of 0.10% of the average daily net assets you have invested in the Variable Sub-Accounts. We intend this charge to cover actual administrative expenses that exceed the revenues from the contract maintenance charge. There is no necessary relationship between the amount of administrative charge imposed on a given Contract and the amount of expenses that may be attributed to that Contract. We assess this charge each day during the Accumulation Phase and the Payout Phase. We guarantee that we will not raise this charge. TRANSFER FEE We do not currently impose a fee upon transfers among the investment alternatives. However, we reserve the right to charge $10 per transfer after the 12th transfer in each Contract Year. We will not charge a transfer fee on transfers that are part of a Dollar Cost Averaging or Automatic Portfolio Rebalancing Program. WITHDRAWAL CHARGE We may assess a withdrawal charge of up to 6% of the purchase payment(s) you withdraw. The charge declines to 0% over a 6 year period that begins on the day we receive your payment. A schedule showing how the charge declines is shown on page 7. During each Contract Year, you can withdraw up to 15% of the aggregate amount of your purchase payments without paying the charge. Unused portions of this "FREE WITHDRAWAL AMOUNT" are not carried forward to future Contract Years. We will deduct withdrawal charges, if applicable, from the amount paid. For purposes of calculating the withdrawal charge, we will treat withdrawals as coming from the oldest purchase payments first. However, for federal income tax purposes, please note that withdrawals are considered to have come first from earnings, which means you pay taxes on the earnings portion of your withdrawal. We do not apply a withdrawal charge in the following situations: - - on the Payout Start Date (a withdrawal charge may apply if you terminate income payments to be received for a specified period; - - withdrawals taken to satisfy IRS minimum distribution rules for the Contract; or - - withdrawals that qualify for one of the waivers as described below. We use the amounts obtained from the withdrawal charge to pay sales commissions and other promotional or distribution expenses associated with marketing the Contracts. To the extent that the withdrawal charge does not cover all sales commissions and other promotional or distribution expenses, we may use any of our corporate assets, including potential profit which may arise from the mortality and expense risk charge or any other charges or fee described above, to make up any difference. Withdrawals also may be subject to tax penalties or income tax and a Market Value Adjustment. You should consult your own tax counsel or other tax advisers regarding any withdrawals. CONFINEMENT WAIVER. We will waive the withdrawal charge and any Market Value Adjustment on all withdrawals taken prior to the Payout Start Date under your Contract if the following conditions are satisfied: 1. You or the Annuitant, if the Contract Owner is not a natural person, are confined to a long term care facility or a hospital for at least 90 consecutive days. You or the Annuitant must enter the long term care facility or hospital at least 30 days after the Issue Date; 2. You request the withdrawal and provide written proof of the stay no later than 90 days following the end of your or the Annuitant's stay at the long term care facility or hospital; and 3. A physician must have prescribed the stay and the stay must be medically necessary (as defined in the Contract). You may not claim this benefit if you, the Annuitant, or a member of your or the Annuitant's immediate family, is the physician prescribing your or the Annuitant's stay in a long term care facility. TERMINAL ILLNESS WAIVER. We will waive the withdrawal charge and any Market Value Adjustment on all withdrawals taken prior to the Payout Start Date under your Contract if: 1. you or the Annuitant (if the Contract Owner is not a natural person) are first diagnosed with a terminal illness at least 30 days after the Issue Date; and 2. you claim this benefit and deliver adequate proof of diagnosis to us. UNEMPLOYMENT WAIVER. We will waive the withdrawal charge and any Market Value Adjustment on one partial or a full withdrawal taken prior to the Payout Start Date under your Contract, if you meet the following requirements: 1. you or the Annuitant, if the Contract Owner is not a natural person, become unemployed at least one year after the Issue Date; 2. you or the Annuitant, if the Contract Owner is not a natural person, receive unemployment compensation as defined in the Contract for at least 30 days as a result of that unemployment; and 23 PROSPECTUS 3. you or the Annuitant, if the Contract Owner is not a natural person, claim this benefit within 180 days of your or the Annuitant's initial receipt of unemployment compensation. Please refer to your Contract for more detailed information about the terms and conditions of these waivers. The laws of your state may limit the availability of these waivers and may also change certain terms and/or benefits available under the waivers. You should consult your Contract for further details on these variations. Also, even if you do not need to pay our withdrawal charge or a Market Value Adjustment because of these waivers, you still may be required to pay taxes or tax penalties on the amount withdrawn. You should consult your tax adviser to determine the effect of a withdrawal on your taxes. PREMIUM TAXES Some states and other governmental entities (e.g., municipalities) charge premium taxes or similar taxes. We are responsible for paying these taxes and will deduct them from your Contract Value. Some of these taxes are due when the Contract is issued, others are due when income payments begin or upon surrender. Our current practice is not to charge anyone for these taxes until income payments begin or when a total withdrawal occurs, including payment upon death. At our discretion, we may discontinue this practice and deduct premium taxes from the purchase payments. Premium taxes generally range from 0% to 4%, depending on the state. At the Payout Start Date, if applicable, we deduct the charge for premium taxes from each investment alternative in the proportion that the Contract Owner's value in the investment alternative bears to the total Contract Value. DEDUCTION FOR SEPARATE ACCOUNT INCOME TAXES We are not currently maintaining a provision for taxes. In the future, however, we may establish a provision for taxes if we determine, in our sole discretion, that we will incur a tax as a result of the operation of the Variable Account. We will deduct for any taxes we incur as a result of the operation of the Variable Account, whether or not we previously made a provision for taxes and whether or not it was sufficient. Our status under the Internal Revenue Code is briefly described in the Statement of Additional Information. OTHER EXPENSES Each Portfolio deducts advisory fees and other expenses from its assets. You indirectly bear the charges and expenses of the Portfolios whose shares are held by the Variable Sub-Accounts. These fees and expenses are described in the accompanying prospectuses for the Funds. For a summary of current estimates of those charges and expenses, see page 8. We may receive compensation from the investment advisers or administrators of the Portfolios in connection with the administrative services we provide to the Portfolios. ACCESS TO YOUR MONEY - ------------------------------------------------------------------- You can withdraw some or all of your Contract Value at any time prior to the Payout Start Date. The amount payable upon withdrawal is the Contract Value (or portion thereof) next computed after we receive the request for a withdrawal at our home office, adjusted by any Market Value Adjustment, less any withdrawal charges, contract maintenance charges, income tax withholding, penalty tax, and any premium taxes. We will pay withdrawals from the Variable Account within 7 days of receipt of the request, subject to postponement in certain circumstances. You can withdraw money from the Variable Account or the Fixed Account Options. To complete a partial withdrawal from the Variable Account, we will cancel Accumulation Units in an amount equal to the withdrawal and any applicable withdrawal charge and premium taxes. You must name the investment alternative from which you are taking the withdrawal. If none is named, then the withdrawal request is incomplete and cannot be honored. In general, you must withdraw at least $50 at a time. You also may withdraw a lesser amount if you are withdrawing your entire interest in a Variable SubAccount. If you request a total withdrawal, we may require you to return your Contract to us. POSTPONEMENT OF PAYMENTS We may postpone the payment of any amounts due from the Variable Account under the Contract if: 1. The New York Stock Exchange is closed for other than usual weekends or holidays, or trading on the Exchange is otherwise restricted; 24 PROSPECTUS 2. An emergency exists as defined by the SEC; or 3. The SEC permits delay for your protection. In addition, we may delay payments or transfers from the Fixed Account Options for up to 6 months (or shorter period if required by law). If we delay payment for 30 days or more, we will pay interest as required by law. SYSTEMATIC WITHDRAWAL PROGRAM You may choose to receive systematic withdrawal payments on a monthly, quarterly, semi-annual, or annual basis at any time prior to the Payout Start Date. The minimum amount of each systematic withdrawal is $50. At our discretion, systematic withdrawals may not be offered in conjunction with the Dollar Cost Averaging Program or Automatic Portfolio Rebalancing Program. Depending on fluctuations in the value of the Variable Sub-Accounts and the value of the Fixed Account Options, systematic withdrawals may reduce or even exhaust the Contract Value. Income taxes may apply to systematic withdrawals. Please consult your tax advisor before taking any withdrawal. We will make systematic withdrawal payments to you or your designated payee. At our discretion, we may modify or suspend the Systematic Withdrawal Program and charge a processing fee for the service. If we modify or suspend the Systematic Withdrawal Program, existing systematic withdrawal payments will not be affected. MINIMUM CONTRACT VALUE If your request for a partial withdrawal would reduce your Contract Value to less than $2,000, we may treat it as a request to withdraw your entire Contract Value. Your Contract will terminate if you withdraw all of your Contract Value. We will, however, ask you to confirm your withdrawal request before terminating your Contract. If we terminate your Contract, we will distribute to you its Contract Value, adjusted by any applicable Market Value Adjustment, less withdrawal and other charges and applicable taxes. INCOME PAYMENTS - ------------------------------------------------------------------- PAYOUT START DATE You select the Payout Start Date in your application. The Payout Start Date is the day that we apply your money to an Income Plan. The Payout Start Date must be: - - at least 30 days after the Issue Date; and - - no later than the day the Annuitant reaches age 90, or the 10th Contract Anniversary, if later. You may change the Payout Start Date at any time by notifying us in writing of the change at least 30 days before the scheduled Payout Start Date. Absent a change, we will use the Payout Start Date stated in your Contract. INCOME PLANS An Income Plan is a series of scheduled payments to you or someone you designate. You may choose and change your choice of Income Plan until 30 days before the Payout Start Date. If you do not select an Income Plan, we will make income payments in accordance with Income Plan 1 with guaranteed payments for 10 years. Three Income Plans are available under the Contract. Each is available to provide: - - fixed income payments; - - variable income payments; or - - a combination of the two. The three Income Plans are: INCOME PLAN 1 -- LIFE INCOME WITH GUARANTEED PAYMENTS. Under this plan, we make periodic income payments for at least as long as the Annuitant lives. If the Annuitant dies before we have made all of the guaranteed income payments, we will continue to pay the remainder of the guaranteed income payments as required by the Contract. INCOME PLAN 2 -- JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED PAYMENTS. Under this plan, we make periodic income payments for at least as long as either the Annuitant or the joint Annuitant is alive. If both the Annuitant and the joint Annuitant die before we have made all of the guaranteed income payments, we will continue to pay the remainder of the guaranteed income payments as required by the Contract. INCOME PLAN 3 -- GUARANTEED PAYMENTS FOR A SPECIFIED PERIOD (5 YEARS TO 30 YEARS). Under this plan, we make 25 PROSPECTUS periodic income payments for the period you have chosen. These payments do not depend on the Annuitant's life. You may elect to receive guaranteed payments for periods ranging from 5 to 30 years. Income payments for less than 120 months may be subject to a withdrawal charge. We will deduct the mortality and expense risk charge from the Variable Sub-Account assets that support variable income payments even though we may not bear any mortality risk. The length of any guaranteed payment period under your selected Income Plan generally will affect the dollar amounts of each income payment. As a general rule, longer guarantee periods result in lower income payments, all other things being equal. For example, if you choose an Income Plan with payments that depend on the life of the Annuitant but with no minimum specified period for guaranteed payments, the income payments generally will be greater than the income payments made under the same Income Plan with a minimum specified period for guaranteed payments. If you choose Income Plan 1 or 2, or, if available, another Income Plan with payments that continue for the life of the Annuitant or joint Annuitant, we may require proof of age and sex of the Annuitant or joint Annuitant before starting income payments, and proof that the Annuitant or joint Annuitant are alive before we make each payment. Please note that under such Income Plans, if you elect to take no minimum guaranteed payments, it is possible that the payee could receive only 1 income payment if the Annuitant and any joint Annuitant both die before the second income payment, or only 2 income payments if they die before the third income payment, and so on. Generally, you may not make withdrawals after the Payout Start Date. One exception to this rule applies if you are receiving variable income payments that do not depend on the life of the Annuitant (such as under Income Plan 3). In that case you may terminate all or part of the Variable Account portion of the income payments at any time and receive a lump sum equal to the present value of the remaining variable payments associated with the amount withdrawn. The minimum amount you may withdraw under this feature is $1,000. A withdrawal charge may apply. We deduct applicable premium taxes from the Contract Value at the Payout Start Date. We may make other Income Plans available. If you elected the Enhanced Death and Income Benefit Combination Rider or the Enhanced Death and Income Benefit Combination Rider II, you may be able to apply an amount greater than your Contract Value to an Income Plan. You must apply at least the Contract Value in the Fixed Account on the Payout Start Date to fixed income payments. If you wish to apply any portion of your Fixed Account balance to provide variable income payments, you should plan ahead and transfer that amount to the Variable Sub-Accounts prior to the Payout Start Date. If you do not tell us how to allocate your Contract Value among fixed and variable income payments, we will apply your Contract Value in the Variable Account to variable income payments and your Contract Value in the Fixed Account to fixed income payments. We will apply your Contract Value, adjusted by any applicable Market Value Adjustment, less applicable taxes to your Income Plan on the Payout Start Date. If the amount available to apply under an Income Plan is less than $2,000, or not enough to provide an initial payment of at least $20, and state law permits, we may: - - pay you the Contract Value, adjusted by any applicable Market Value Adjustment and less any applicable taxes, in a lump sum instead of the periodic payments you have chosen; or - - reduce the frequency of your payments so that each payment will be at least $20. VARIABLE INCOME PAYMENTS The amount of your variable income payments depends upon the investment results of the Variable Sub-Accounts you select, the premium taxes you pay, the age and sex of the Annuitant, and the Income Plan you choose. We guarantee that the payments will not be affected by (a) actual mortality experience and (b) the amount of our administration expenses. We cannot predict the total amount of your variable income payments. Your variable income payments may be more or less than your total purchase payments because (a) variable income payments vary with the investment results of the underlying Portfolios; and (b) the Annuitant could live longer or shorter than we expect based on the tables we use. In calculating the amount of the periodic payments in the annuity tables in the Contract, we assumed an annual investment rate of 3%. If the actual net investment return of the Variable Sub-Accounts you choose is less than this assumed investment rate, then the dollar amount of your variable income payments will decrease. The dollar amount of your variable income payments will increase, however, if the actual net investment return exceeds the assumed investment rate. The dollar amount of the variable income payments stays level if the net investment return equals the assumed investment rate. Please refer to the Statement of Additional Information for more detailed information as to how we determine variable income payments. 26 PROSPECTUS FIXED INCOME PAYMENTS We guarantee income payment amounts derived from any Fixed Account Option for the duration of the Income Plan. We calculate the fixed income payments by: 1. adjusting the portion of the Contract Value in any Fixed Account Option on the Payout Start Date by any applicable Market Value Adjustment; 2. deducting any applicable premium tax; and 3. applying the resulting amount to the greater of (a) the appropriate value from the income payment table in your Contract or (b) such other value as we are offering at that time. We may defer making fixed income payments for a period of up to 6 months or any shorter time state law may require. If we defer payments for 30 days or more, we will pay interest as required by law from the date we receive the withdrawal request to the date we make payment. CERTAIN EMPLOYEE BENEFIT PLANS The Contracts offered by this prospectus contain income payment tables that provide for different payments to men and women of the same age, except in states that require unisex tables. We reserve the right to use income payment tables that do not distinguish on the basis of sex to the extent permitted by applicable law. In certain employment-related situations, employers are required by law to use the same income payment tables for men and women. Accordingly, if the Contract is to be used in connection with an employment-related retirement or benefit plan and we do not offer unisex annuity tables in your state, you should consult with legal counsel as to whether the purchase of a Contract is appropriate. DEATH BENEFITS - ------------------------------------------------------------------- We will pay a death benefit prior to the Payout Start Date on: 1. the death of any Contract Owner or, 2. the death of the Annuitant, if the Contract is owned by a non-natural person. We will pay the death benefit to the new Contract Owner 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 of the death of the Annuitant, we will pay the death benefit to the current Contract Owner. A claim for a distribution on death must include DUE PROOF OF DEATH. We will accept the following documentation as "Due Proof of Death": - - a certified copy of a death certificate, - - a certified copy of a decree of a court of competent jurisdiction as to the finding of death, or - - any other proof acceptable to us. DEATH BENEFIT AMOUNT Prior to the Payout Start Date, the death benefit is equal to the greatest of: 1. the Contract Value as of the date we determine the value of the death benefit, or 2. the SETTLEMENT VALUE (that is, the amount payable on a full withdrawal of Contract Value) on the date we determine the value of the death benefit, or 3. the Contract Value on each DEATH BENEFIT ANNIVERSARY prior to the date we determine the death benefit, increased by purchase payments made since that Death Benefit Anniversary and reduced by an adjustment for any partial withdrawals since that Death Benefit Anniversary. A "Death Benefit Anniversary" is every seventh Contract Anniversary beginning with the Issue Date. For example, the Issue Date, 7th and 14th Contract Anniversaries are the first 3 Death Benefit Anniversaries. The withdrawal adjustment is equal to (a) divided by (b), with the result multiplied by (c), where: (a) = the withdrawal amount; (b) = the Contract Value immediately prior to the withdrawal; and (c) = the Contract value on the Death Benefit Anniversary adjusted by any prior purchase payments or withdrawals made since that Anniversary. We will determine the value of the death benefit as of the end of the Valuation Date on which we receive a complete request for payment of the death benefit. If we receive a request after 3 p.m. Central Time on a Valuation Date, we will process the request as of the end of the following Valuation Date. ENHANCED DEATH BENEFIT RIDER If the oldest contract Owner and Annuitant are less than or equal to age 80 as of the date we receive the 27 PROSPECTUS completed application, or a written request to add the Rider, the Enhanced Death Benefit Rider is an optional benefit that you may elect. If the Contract Owner is a living individual, the enhanced death benefit applies only upon the death of the Contract Owner. If the Contract Owner is not a living individual, the enhanced death benefit applies only upon the death of the Annuitant. For Contracts with the Enhanced Death Benefit Rider, the death benefit will be the greatest of (1) through (3) above, or (4) the enhanced death benefit. The enhanced death benefit is equal to the greater of the Enhanced Death Benefit A or Enhanced Death Benefit B. Enhanced Death Benefit B may not be available in all states. That enhanced death benefit will never be greater than the maximum death benefit allowed by any state nonforfeiture laws that govern the Contract. ENHANCED DEATH BENEFIT A. At issue, Enhanced Death Benefit A is equal to the initial purchase payment. After issue, Enhanced Death Benefit A is the greatest of the ANNIVERSARY VALUES as of the date we determine the death benefit. The "Anniversary Value" is equal to the Contract Value on a Contract Anniversary, increased by purchase payments made since that Anniversary and reduced by an adjustment for any partial withdrawals since that Anniversary. The adjustment is equal to (a) divided by (b), and the result multiplied by (c) where: (a) = the withdrawal amount, (b) = the Contract Value immediately prior to the withdrawal, and (c) = the most recently calculated Enhanced Death Benefit A. We will calculate Anniversary Values for each Contract Anniversary prior to the oldest Contract Owner's or the Annuitant's, if the Contract Owner is not a natural person, 85th birthday. After age 85, we will recalculate Enhanced Death Benefit A only for purchase payments and withdrawals. ENHANCED DEATH BENEFIT B. The Enhanced Death Benefit B is equal to total purchase payments made reduced by a withdrawal adjustment, as defined below. Each purchase payment and each withdrawal adjustment will accumulate daily at a rate equivalent to 5% per year until the earlier of: - - the date we determine the death benefit, or - - the first day of the month following the oldest Contract Owner's or, if the Contract Owner is not a natural person, the Annuitant's, 85th birthday. The adjustment is equal to (a) divided by (b), and the result multiplied by (c) where: (a) = the withdrawal amount, (b) = the Contract Value immediately prior to the withdrawal, and (c) = the most recently calculated Enhanced Death Benefit B. ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER (FOR CONTRACTS ISSUED BEFORE SEPTEMBER 22, 2000) The enhanced death benefit portion of the Enhanced Death and Income Benefit Combination Rider is as described above under "Enhanced Death Benefit Rider." The enhanced income benefit defines a minimum amount applied to the Payout Phase. This minimum amount is equal to the value the enhanced death benefit would be on the Payout Start Date. The enhanced income benefit will apply if the Contract owner elects a Payout Start Date that: - - is on or after the tenth Contract Anniversary, and - - is prior to the Annuitant's 90th Birthday. On the Payout Start Date, you may apply the greater of the Contract Value or the enhanced income benefit to the Payout Phase of the Contract. No Market Value Adjustment will be applied to the enhanced income benefit amount. The enhanced income benefit will only apply if the Income Plan selected provides payments guaranteed for either a single or joint lives with a period certain of at least: - - 10 years, if the youngest Annuitant's age is 80 or less on the date the amount is applied; or - - 5 years, if the youngest Annuitant's age is greater than 80 on the date the amount is applied. If, however, you apply the Contract Value and not the enhanced income benefit to the Income Plan, then you may select any Income Plan we offer at that time. ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER II (FOR CONTRACTS ISSUED ON OR AFTER SEPTEMBER 22, 2000). You may elect not to choose the Enhanced Death Benefit Rider and may instead choose the Enhanced Death and Income Benefit Combination Rider II. The Enhanced Death and Income Benefit Combination Rider II may not be available in all states. The enhanced death benefit portion of the Enhanced Death and Income Benefit Combination Rider II is as described above under "Enhanced Death Benefit Rider." 28 PROSPECTUS The enhanced income benefit defines a minimum amount applied to the Payout Phase. This minimum amount is equal to the value the enhanced death benefit would be on the Payout Start Date. This minimum amount is used solely for the purpose of calculating the guaranteed income benefit under this Rider ("guaranteed income benefit") and does not provide a Contract Value or guarantee performance of any investment option. The guaranteed income benefit amount is determined by applying the enhanced income benefit amount less any applicable taxes to the guaranteed rates for the Income Plan you elect. The Income Plan you elect must satisfy the conditions described below. The enhanced income benefit will apply if the Contract Owner elects a Payout Start Date that: - - is on or after the tenth Contract Anniversary, and - - occurs during the 30 day period following a Contract Anniversary. On the Payout Start Date, you may apply the greater of the Contract Value or the enhanced income benefit to the Payout Phase of the Contract. No Market Value Adjustment will be applied to the enhanced income benefit amount. The enhanced income benefit will only apply if the Income Plan selected provides payments guaranteed for either a single or joint lives with a period certain of at least: - - 10 years, if the youngest Annuitant's age is 80 or less on the date the amount is applied; or - - 5 years, if the youngest Annuitant's age is greater than 80 on the date the amount is applied. You must elect to receive fixed income payments, which will be calculated using the appropriate guaranteed income payment table provided in your Contract. If, however, you apply the Contract Value and not the enhanced income benefit to the Income Plan, then you may select any Income Plan we offer at that time. If you expect to apply your Contract Value to variable income payment options or to current annuity payment rates then in effect, electing the enhanced income benefit may not be appropriate. DEATH BENEFIT PAYMENTS A death benefit will be paid: 1. if the Contract Owner elects to receive the death benefit distributed in a single payment within 180 days of the date of death, and 2. if the death benefit is paid as of the day the value of the death benefit is determined. Otherwise, the Settlement Value will be paid. We reserve the right to waive the 180 day limit on a non-discriminatory basis. In any event, the entire value of the Contract must be distributed within 5 years after the date of death unless an Income Plan is elected or a surviving spouse continues the Contract in accordance with the provisions described below. If the Contract Owner eligible to receive the distribution upon death is not a natural person, the Contract Owner may elect to receive the distribution upon death in one or more distributions. If the Contract Owner is a natural person, the Contract Owner may elect to receive the distribution upon death either in one or more distributions or by periodic payments through an Income Plan. Payments from the Income Plan must begin within one year of the date of death and must be payable throughout: - - the life of the Contract Owner; or - - a period not to exceed the life expectancy of the Contract Owner; or - - the life of the Contract Owner with payments guaranteed to a period not to exceed the life expectancy of the Contract Owner. If the surviving spouse of the deceased Contract Owner is the sole new Contract Owner, then the spouse may elect one of the options listed above or may continue the Contract in the Accumulation Phase as if the death had not occurred. If the Contract is continued in the Accumulation Phase, the surviving spouse may make a single withdrawal of any amount within 1 year of the date of death without incurring a withdrawal charge or Market Value Adjustment. MORE INFORMATION - ------------------------------------------------------------------- GLENBROOK Glenbrook is the issuer of the Contract. Glenbrook is a stock life insurance company organized under the laws of the State of Arizona in 1998. Previously, Glenbrook was organized under the laws of the State of Illinois in 1992. Glenbrook was originally organized under the 29 PROSPECTUS laws of the State of Indiana in 1965. From 1965 to 1983 Glenbrook was known as "United Standard Life Assurance Company" and from 1983 to 1992 as "William Penn Life Assurance Company of America." Glenbrook is currently licensed to operate in the District of Columbia and all states except New York. We intend to offer the Contract in those jurisdictions in which we are licensed. Our home office is located at 3100 Sanders Road, Northbrook, Illinois 60062. Glenbrook is a wholly owned subsidiary of Allstate Life Insurance Company ("ALLSTATE LIFE"), a stock life insurance company incorporated under the laws of the State of Illinois. Allstate Life is a wholly owned subsidiary of Allstate Insurance Company, a stock property-liability insurance company incorporated under the laws of Illinois. All of the outstanding capital stock of Allstate Insurance Company is owned by The Allstate Corporation. Glenbrook and Allstate Life entered into a reinsurance agreement effective June 5, 1992. Under the reinsurance agreement, Allstate Life reinsures substantially all of Glenbrook's liabilities under its various insurance contracts. The reinsurance agreement provides us with financial backing from Allstate Life. However, it does not create a direct contractual relationship between Allstate Life and you. In other words, the obligations of Allstate Life under the reinsurance agreement are to Glenbrook; Glenbrook remains the sole obligor under the Contract to you. Independent rating agencies regularly evaluate life insurers' claims-paying ability, quality of investments, and overall stability. A.M. Best Company assigns an A+ (Superior) financial strength rating to Allstate Life, which results in an A+(r) rating to Glenbrook due to the reinsurance agreement with Allstate Life mentioned above. Standard & Poor's Insurance Rating Services assigns an AA+ (Very Strong) financial strength rating and Moody's Investors Service assigns an Aa2 (Excellent) financial strength rating to Glenbrook, sharing the same ratings of its parent, Allstate Life. These ratings do not reflect the investment performance of the Variable Account. We may from time to time advertise these ratings in our sales literature. THE VARIABLE ACCOUNT Glenbrook established the Glenbrook Life Multi-Manager Variable Account on January 15, 1996. We have registered the Variable Account with the SEC as a unit investment trust. The SEC does not supervise the management of the Variable Account or Glenbrook. We own the assets of the Variable Account. The Variable Account is a segregated asset account under Arizona law. That means we account for the Variable Account's income, gains and losses separately from the results of our other operations. It also means that only the assets of the Variable Account that are in excess of the reserves and other Contract liabilities with respect to the Variable Account are subject to liabilities relating to our other operations. Our obligations arising under the Contracts are general corporate obligations of Glenbrook. The Variable Account consists of multiple Variable Sub-Accounts. Each Variable Sub-Account invests in a corresponding Portfolio. We may add new Variable Sub-Accounts or eliminate one or more of them, if we believe marketing, tax, or investment conditions so warrant. We may also add other Variable Sub-Accounts that may be available under other variable annuity contracts. We do not guarantee the investment performance of the Variable Account, its Sub-Accounts or the Portfolios. We may use the Variable Account to fund our other annuity contracts. We will account separately for each type of annuity contract funded by the Variable Account. THE PORTFOLIOS DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. We automatically reinvest all dividends and capital gains distributions from the Portfolios in shares of the distributing Portfolio at their net asset value. VOTING PRIVILEGES. As a general matter, you do not have a direct right to vote the shares of the Portfolios held by the Variable Sub-Accounts to which you have allocated your Contract Value. Under current law, however, you are entitled to give us instructions on how to vote those shares on certain matters. Based on our present view of the law, we will vote the shares of the Portfolios that we hold directly or indirectly through the Variable Account in accordance with instructions that we receive from Contract Owners entitled to give such instructions. As a general rule, before the Payout Start Date, the Contract Owner or anyone with a voting interest is the person entitled to give voting instructions. The number of shares that a person has a right to instruct will be determined by dividing the Contract Value allocated to the applicable Variable Sub-Account by the net asset value per share of the corresponding Portfolio as of the record date of the meeting. After the Payout Start Date the person receiving income payments has the voting interest. The payee's number of votes will be determined by dividing the reserve for such Contract allocated to the applicable Variable Sub-Account by the net asset value per share of the corresponding Portfolio. The votes decrease as income payments are made and as the reserves for the Contract decrease. 30 PROSPECTUS We will vote shares attributable to Contracts for which we have not received instructions, as well as shares attributable to us, in the same proportion as we vote shares for which we have received instructions, unless we determine that we may vote such shares in our own discretion. We will apply voting instructions to abstain on any item to be voted upon on a pro-rata basis to reduce the votes eligible to be cast. We reserve the right to vote Portfolio shares as we see fit without regard to voting instructions to the extent permitted by law. If we disregard voting instructions, we will include a summary of that action and our reasons for that action in the next semi-annual financial report we send to you. CHANGES IN PORTFOLIOS. If the shares of any of the Portfolios are no longer available for investment by the Variable Account or if, in our judgment, further investment in such shares is no longer desirable in view of the purposes of the Contract, we may eliminate that Portfolio and substitute shares of another eligible investment fund. Any substitution of securities will comply with the requirements of the Investment Company Act of 1940. We also may add new Variable Sub-Accounts that invest in additional mutual funds. We will notify you in advance of any change. CONFLICTS OF INTEREST. Certain of the Portfolios sell their shares to separate accounts underlying both variable life insurance and variable annuity contracts. It is conceivable that in the future it may be unfavorable for variable life insurance separate accounts and variable annuity separate accounts to invest in the same Portfolio. The boards of directors of these Portfolios monitor for possible conflicts among separate accounts buying shares of the Portfolios. Conflicts could develop for a variety of reasons. For example, differences in treatment under tax and other laws or the failure by a separate account to comply with such laws could cause a conflict. To eliminate a conflict, a Portfolio's board of directors may require a separate account to withdraw its participation in a Portfolio. A Portfolio's net asset value could decrease if it had to sell investment securities to pay redemption proceeds to a separate account withdrawing because of a conflict. THE CONTRACT DISTRIBUTION. ALFS, Inc. ("ALFS"), located at 3100 Sanders Road, Northbrook, IL 60062-7154, serves as principal underwriter of the Contracts. ALFS is a wholly owned subsidiary of Allstate Life. ALFS is a registered broker dealer under the Securities and Exchange Act of 1934, as amended ("EXCHANGE ACT"), and is a member of the National Association of Securities Dealers, Inc. We will pay commissions to broker-dealers who sell the contracts. Commissions paid may vary, but we estimate that the total commissions paid on all Contract sales will not exceed 8% of all purchase payments. These commissions are intended to cover distribution expenses. Sometimes, we also pay the broker-dealer a persistency bonus in addition to the standard commissions. A persistency bonus is not expected to exceed 0.25%, on an annual basis, of the Contract Values considered in connection with the bonus. In some states, Contracts may be sold by representatives or employees of banks which may be acting as broker-dealers without separate registration under the Exchange Act, pursuant to legal and regulatory exceptions. Glenbrook does not pay ALFS a commission for distribution of the Contracts. The underwriting agreement with ALFS provides that we will reimburse ALFS for any liability to Contract Owners arising out of services rendered or Contracts issued. ADMINISTRATION. We have primary responsibility for all administration of the Contracts and the Variable Account. We provide the following administrative services, among others: - - issuance of the Contracts; - - maintenance of Contract Owner records; - - Contract Owner services; - - calculation of unit values; - - maintenance of the Variable Account; and - - preparation of Contract Owner reports. We will send you Contract statements and transaction confirmations at least annually. You should notify us promptly in writing of any address change. You should read your statements and confirmations carefully and verify their accuracy. You should contact us promptly if you have a question about a periodic statement. We will investigate all complaints and make any necessary adjustments retroactively, but you must notify us of a potential error within a reasonable time after the date of the questioned statement. If you wait too long, we reserve the right to make the adjustment as of the date that we receive notice of the potential error. We also will provide you with additional periodic and other reports, information and prospectuses as may be required by federal securities laws. QUALIFIED PLANS If you use the Contract with a qualified plan, the plan may impose different or additional conditions or limitations on withdrawals, waivers of withdrawal charges, death benefits, Payout Start Dates, income payments, and other Contract features. In addition, adverse tax 31 PROSPECTUS 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 Foley & Lardner, Washington, D.C., has advised Glenbrook on certain federal securities law matters. All matters of state insurance law pertaining to the Contracts, including the validity of the Contracts and Glenbrook's right to issue such Contracts under state insurance law, have been passed upon by Michael J. Velotta, General Counsel of Glenbrook. TAXES - ------------------------------------------------------------------- THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. GLENBROOK MAKES NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR TRANSACTION INVOLVING A CONTRACT. Federal, state, local and other tax consequences of ownership or receipt of distributions under an annuity contract depend on your individual circumstances. If you are concerned about any tax consequences with regard to your individual circumstances, you should consult a competent tax adviser. TAXATION OF ANNUITIES IN GENERAL TAX DEFERRAL. Generally, you are not taxed on increases in the Contract Value until a distribution occurs. This rule applies only where: 1. the Contract Owner is a natural person, 2. the investments of the Variable Account are "adequately diversified" according to Treasury Department regulations, and 3. Glenbrook is considered the owner of the Variable Account assets for federal income tax purposes. NON-NATURAL OWNERS. As a general rule, annuity contracts owned by non-natural persons such as corporations, trusts, or other entities are not treated as annuity contracts for federal income tax purposes. The income on such contracts is taxed as ordinary income received or accrued by the owner during the taxable year. Please see the Statement of Additional Information for a discussion of several exceptions to the general rule for Contracts owned by non-natural persons. DIVERSIFICATION REQUIREMENTS. For a Contract to be treated as an annuity for federal income tax purposes, the investments in the Variable Account must be "adequately diversified" consistent with standards under Treasury Department regulations. If the investments in the Variable Account are not adequately diversified, the Contract will not be treated as an annuity contract for federal income tax purposes. As a result, the income on the Contract will be taxed as ordinary income received or accrued by the Contract Owner during the taxable year. Although Glenbrook does not have control over the Portfolios or their investments, we expect the Portfolios to meet the diversification requirements. OWNERSHIP TREATMENT. The IRS has stated that you will be considered the owner of Variable Account assets if you possess incidents of ownership in those assets, such as the ability to exercise investment control over the assets. At the time the diversification regulations were issued, the Treasury Department announced that the regulations do not provide guidance concerning circumstances in which investor control of separate account investments may cause an investor to be treated as the owner of the separate account. The Treasury Department also stated that future guidance would be issued regarding the extent that owners could direct sub-account investments without being treated as owners of the underlying assets of the separate account. Your rights under the Contract are different than those described by the IRS in rulings in which it found that contract owners were not owners of separate account assets. For example, you have the choice to allocate premiums and Contract Values among more investment alternatives. Also, you may be able to transfer among investment alternatives more frequently than in such rulings. These differences could result in you being treated as the owner of the Variable Account. If this occurs, income and gain from the Variable Account assets would be includible in your gross income. Glenbrook does not know what standards will be set forth in any regulations or rulings which the Treasury Department may issue. It is possible that future standards announced by the Treasury Department could adversely affect the tax treatment of your Contract. We reserve the right to modify the Contract as necessary to attempt to prevent you from being considered the federal tax owner of the assets of the Variable Account. However, we make no guarantee that such modification to the Contract will be successful. 32 PROSPECTUS TAXATION OF PARTIAL AND FULL WITHDRAWALS. If you make a partial withdrawal under a non-Qualified Contract, amounts received are taxable to the extent the Contract Value, without regard to surrender charges, exceeds the investment in the Contract. The investment in the Contract is the gross premium paid for the Contract minus any amounts previously received from the Contract if such amounts were properly excluded from your gross income. If you make a partial withdrawal under a Qualified Contract, the portion of the payment that bears the same ratio to the total payment that the investment in the Contract (i.e., nondeductible IRA contributions, after tax contributions to qualified plans) bears to the Contract Value, is excluded from your income. If you make a full withdrawal under a non-Qualified Contract or a Qualified Contract, the amount received will be taxable only to the extent it exceeds the investment in the Contract. "Nonqualified distributions" from Roth IRAs are treated as made from contributions first and are included in gross income only to the extent that distributions exceed contributions. "Qualified distributions" from Roth IRAs are not included in gross income. "Qualified distributions" are any distributions made more than 5 taxable years after the taxable year of the first contribution to any Roth IRA and which are: - - made on or after the date the individual attains age 59 1/2, - - made to a beneficiary after the Contract Owner's death, - - attributable to the Contract Owner being disabled, or - - for a first time home purchase (first time home purchases are subject to a lifetime limit of $10,000). If you transfer a non-Qualified Contract without full and adequate consideration to a person other than your spouse (or to a former spouse incident to a divorce), you will be taxed on the difference between the Contract Value and the investment in the Contract at the time of transfer. Except for certain Qualified Contracts, any amount you receive as a loan under a Contract, and any assignment or pledge (or agreement to assign or pledge) of the Contract Value is treated as a withdrawal of such amount or portion. TAXATION OF ANNUITY PAYMENTS. Generally, the rule for income taxation of annuity payments received from a non-Qualified Contract provides for the return of your investment in the Contract in equal tax-free amounts over the payment period. The balance of each payment received is taxable. For fixed annuity payments, the amount excluded from income is determined by multiplying the payment by the ratio of the investment in the Contract (adjusted for any refund feature or period certain) to the total expected value of annuity payments for the term of the Contract. If you elect variable annuity payments, the amount excluded from taxable income is determined by dividing the investment in the Contract by the total number of expected payments. The annuity payments will be fully taxable after the total amount of the investment in the Contract is excluded using these ratios. If you die, and annuity payments cease before the total amount of the investment in the Contract is recovered, the unrecovered amount will be allowed as a deduction for your last taxable year. TAXATION OF ANNUITY DEATH BENEFITS. Death of a Contract Owner, or death of the Annuitant if the Contract is owned by a non-natural person, will cause a distribution of death benefits from a Contract. Generally, such amounts are included in income as follows: 1. if distributed in a lump sum, the amounts are taxed in the same manner as a full withdrawal, or 2. if distributed under an annuity option, the amounts are taxed in the same manner as an annuity payment. Please see the Statement of Additional Information for more detail on distribution at death requirements. PENALTY TAX ON PREMATURE DISTRIBUTIONS. A 10% penalty tax applies to the taxable amount of any premature distribution from a non-Qualified Contract. The penalty tax generally applies to any distribution made prior to the date you attain age 59 1/2. However, no penalty tax is incurred on distributions: 1. made on or after the date the Contract Owner attains age 59 1/2; 2. made as a result of the Contract Owner's death or disability; 3. made in substantially equal periodic payments over the Contract Owner's life or life expectancy, 4. made under an immediate annuity, or 5. attributable to investment in the Contract before August 14, 1982. You should consult a competent tax advisor to determine if any other exceptions to the penalty apply to your situation. Similar exceptions may apply to distributions from Qualified Contracts. AGGREGATION OF ANNUITY CONTRACTS. All non-qualified deferred annuity contracts issued by Glenbrook (or its affiliates) to the same Contract Owner during any calendar year will be aggregated and treated as one annuity contract for purposes of determining the taxable amount of a distribution. 33 PROSPECTUS TAX QUALIFIED CONTRACTS Contracts may be used as investments with certain qualified plans such as: - - Individual Retirement Annuities or Accounts (IRAs) under Section 408 of the Code; - - Roth IRAs under Section 408A of the Code; - - Simplified Employee Pension Plans under Section 408(k) of the Code; - - Savings Incentive Match Plans for Employees (SIMPLE) Plans under Section 408(p) of the Code; - - Tax Sheltered Annuities under Section 403(b) of the Code; - - Corporate and Self Employed Pension and Profit Sharing Plans; and - - State and Local Government and Tax-Exempt Organization Deferred Compensation Plans. The income on qualified plan and IRA investments is tax deferred and variable annuities held by such plans do not receive any additional tax deferral. You should review the annuity features, including all benefits and expenses, prior to purchasing a variable annuity in a qualified plan or IRA. Glenbrook reserves the right to limit the availablity of the Contract for use with any of the Qualified Plans listed above. In the case of certain qualified plans, the terms of the plans may govern the right to benefits, regardless of the terms of the Contract. RESTRICTIONS UNDER SECTION 403(b) PLANS. Section 403(b) of the Tax Code provides tax-deferred retirement savings plans for employees of certain non-profit and educional organizations. Under Section 403(b), any Contract used for a 403(b) plan must provide that distributions attributable to salary reduction contributions made after December 31, 1998, and all earnings on salary reduction contributions, may be made only: 1. on or after the date the employee - attains age 59 1/2, - separates from service, - dies, - becomes disabled, or 2. on account of hardship (earnings on salary reduction contributions may not be distributed on the account of hardship). These limitations do not apply to withdrawals where Glenbrook is directed to transfer some or all of the Contract Value to another 403(b) plan. INCOME TAX WITHHOLDING Glenbrook is required to withhold federal income tax at a rate of 20% on all "eligible rollover distributions" unless you elect to make a "direct rollover" of such amounts to an IRA or eligible retirement plan. Eligible rollover distributions generally include all distributions from Qualified Contracts, excluding IRAs, with the exception of: 1. required minimum distributions, or 2. a series of substantially equal periodic payments made over a period of at least 10 years, or over the life (joint lives) of the participant (and beneficiary). Glenbrook may be required to withhold federal and state income taxes on any distributions from non-Qualified Contracts or Qualified Contracts that are not eligible rollover distributions, unless you notify us of your election to not have taxes withheld. ANNUAL REPORTS AND OTHER DOCUMENTS - ------------------------------------------------------------------- Glenbrook's annual report on Form 10-K for the year ended December 31, 2000 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 34 PROSPECTUS "EDGAR" system using the identifying number CIK No. 0001007285. The SEC maintains a Web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of the site is http://www.sec.gov. You also can view these materials at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. For more information on the operations of SEC's Public Reference Room, call 1-800-SEC-0330. If you have received a copy of this prospectus, and would like a free copy of any document incorporated herein by reference (other than exhibits not specifically incorporated by reference into the text of such documents), please write or call us at 300 N. Milwaukee Ave. Vernon Hills, IL 60061 (telephone: 1-800-755-5275). 35 PROSPECTUS EXPERTS - ------------------------------------------------------------------- The financial statements of Glenbrook as of December 31, 2000 and 1999 and for each of the three years in the period ended December 31, 2000, and the related financial statement schedule incorporated herein by reference from the Annual Report on Form 10-K of Glenbrook and from the Statement of Additional Information, have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report incorporated have been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. The financial statements of the Variable Account as of December 31, 2000, and for each of the periods in the two years then ended incorporated herein by reference from the Statement of Additional Information have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report incorporated herein by reference, and have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. 36 PROSPECTUS PERFORMANCE INFORMATION - ------------------------------------------------------------------- We may advertise the performance of the Variable Sub-Accounts, including yield and total return information. Total return represents the change, over a specified period of time, in the value of an investment in a Variable Sub-Account after reinvesting all income distributions. Yield refers to the income generated by an investment in a Variable Sub-Account over a specified period. All performance advertisements will include, as applicable, standardized yield and total return figures that reflect the deduction of insurance charges, the contract maintenance charge, and withdrawal charge. Performance advertisements also may include total return figures that reflect the deduction of insurance charges, but not the contract maintenance or withdrawal charges. The deduction of such charges would reduce the performance shown. In addition, performance advertisements may include aggregate average, year-by-year, or other types of total return figures. Performance information for periods prior to the inception date of the Variable Sub-Accounts will be based on the historical performance of the corresponding Portfolios for the periods beginning with the inception dates of the Portfolios and adjusted to reflect current Contract expenses. You should not interpret these figures to reflect actual historical performance of the Variable Account. We may include in advertising and sales materials tax deferred compounding charts and other hypothetical illustrations that compare currently taxable and tax deferred investment programs based on selected tax brackets. Our advertisements also may compare the performance of our 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. 37 PROSPECTUS APPENDIX A - ------------------------------------------------------------------- ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED BASIC POLICY
FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31, -------------------------- 1998 1999 2000 -------- -------- ------------ AIM V.I. BALANCED SUB-ACCOUNT - ---------------------------------------------------------------------------------------- Accumulation Unit Value, Beginning of Period $10.00 $10.73 $12.66 - ---------------------------------------------------------------------------------------- Accumulation Unit Value, End of Period $10.73 $12.66 $11.99 - ---------------------------------------------------------------------------------------- Number of Units Outstanding, End of Period -- 7,487 52,646 - ---------------------------------------------------------------------------------------- AIM V.I. CAPITAL APPRECIATION SUB-ACCOUNT - ---------------------------------------------------------------------------------------- Accumulation Unit Value, Beginning of Period $10.00 $11.39 $16.29 - ---------------------------------------------------------------------------------------- Accumulation Unit Value, End of Period $11.39 $16.29 $14.35 - ---------------------------------------------------------------------------------------- Number of Units Outstanding, End of Period -- 8,743 73,347 - ---------------------------------------------------------------------------------------- AIM V.I. GROWTH SUB-ACCOUNT - ---------------------------------------------------------------------------------------- Accumulation Unit Value, Beginning of Period $10.00 $11.83 $15.82 - ---------------------------------------------------------------------------------------- Accumulation Unit Value, End of Period $11.83 $15.82 $12.43 - ---------------------------------------------------------------------------------------- Number of Units Outstanding, End of Period -- 13,275 69,688 - ---------------------------------------------------------------------------------------- AIM V.I. GROWTH AND INCOME SUB-ACCOUNT - ---------------------------------------------------------------------------------------- Accumulation Unit Value, Beginning of Period $10.00 $11.36 $15.09 - ---------------------------------------------------------------------------------------- Accumulation Unit Value, End of Period $11.36 $15.09 $12.74 - ---------------------------------------------------------------------------------------- Number of Units Outstanding, End of Period -- 12,180 53,747 - ---------------------------------------------------------------------------------------- AIM V.I. HIGH YIELD SUB-ACCOUNT - ---------------------------------------------------------------------------------------- Accumulation Unit Value, Beginning of Period $10.00 $10.31 $11.27 - ---------------------------------------------------------------------------------------- Accumulation Unit Value, End of Period $10.31 $11.27 $ 9.03 - ---------------------------------------------------------------------------------------- Number of Units Outstanding, End of Period -- 7,387 9,651 - ---------------------------------------------------------------------------------------- AIM V.I. VALUE SUB-ACCOUNT - ---------------------------------------------------------------------------------------- Accumulation Unit Value, Beginning of Period $10.00 $11.52 $14.80 - ---------------------------------------------------------------------------------------- Accumulation Unit Value, End of Period $11.52 $14.80 $12.49 - ---------------------------------------------------------------------------------------- Number of Units Outstanding, End of Period -- 42,074 115,418 - ---------------------------------------------------------------------------------------- FEDERATED PRIME MONEY FUND II SUB-ACCOUNT(1) - ---------------------------------------------------------------------------------------- Accumulation Unit Value, Beginning of Period -- $10.00 $10.06 - ---------------------------------------------------------------------------------------- Accumulation Unit Value, End of Period -- $10.06 $10.55 - ---------------------------------------------------------------------------------------- Number of Units Outstanding, End of Period -- 7,985 11,541 - ---------------------------------------------------------------------------------------- FIDELITY VIP II CONTRAFUND-Registered Trademark- SUB-ACCOUNT - ---------------------------------------------------------------------------------------- Accumulation Unit Value, Beginning of Period $10.00 $11.66 $14.33 - ---------------------------------------------------------------------------------------- Accumulation Unit Value, End of Period $11.66 $14.33 $13.23 - ---------------------------------------------------------------------------------------- Number of Units Outstanding, End of Period -- 18,963 101,434 - ---------------------------------------------------------------------------------------- FIDELITY VIP EQUITY-INCOME SUB-ACCOUNT - ---------------------------------------------------------------------------------------- Accumulation Unit Value, Beginning of Period $10.00 $10.48 $11.02 - ---------------------------------------------------------------------------------------- Accumulation Unit Value, End of Period $10.48 $11.02 $11.81 - ---------------------------------------------------------------------------------------- Number of Units Outstanding, End of Period -- 30,264 100,008 - ---------------------------------------------------------------------------------------- FIDELITY VIP GROWTH SUB-ACCOUNT - ---------------------------------------------------------------------------------------- Accumulation Unit Value, Beginning of Period $10.00 $11.20 $15.22 - ---------------------------------------------------------------------------------------- Accumulation Unit Value, End of Period $11.20 $15.22 $13.40 - ---------------------------------------------------------------------------------------- Number of Units Outstanding, End of Period -- 25,821 168,574 - ---------------------------------------------------------------------------------------- A-1 FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31, -------------------------- 1998 1999 2000 -------- -------- ------------ FIDELITY VIP HIGH INCOME SUB-ACCOUNT - ---------------------------------------------------------------------------------------- Accumulation Unit Value, Beginning of Period $10.00 $10.43 $11.16 - ---------------------------------------------------------------------------------------- Accumulation Unit Value, End of Period $10.43 $11.16 $ 8.55 - ---------------------------------------------------------------------------------------- Number of Units Outstanding, End of Period -- 3,837 45,083 - ---------------------------------------------------------------------------------------- FIDELITY VIP II INDEX 500 SUB-ACCOUNT (3) - ---------------------------------------------------------------------------------------- Accumulation Unit Value, Beginning of Period -- -- $10.00 - ---------------------------------------------------------------------------------------- Accumulation Unit Value, End of Period -- -- $ 9.14 - ---------------------------------------------------------------------------------------- Number of Units Outstanding, End of Period -- -- 106,077 - ---------------------------------------------------------------------------------------- FIDELITY VIP OVERSEAS SUB-ACCOUNT (3) - ---------------------------------------------------------------------------------------- Accumulation Unit Value, Beginning of Period -- -- $10.00 - ---------------------------------------------------------------------------------------- Accumulation Unit Value, End of Period -- -- $ 8.38 - ---------------------------------------------------------------------------------------- Number of Units Outstanding, End of Period -- -- 30,679 - ---------------------------------------------------------------------------------------- MFS EMERGING GROWTH SUB-ACCOUNT - ---------------------------------------------------------------------------------------- Accumulation Unit Value, Beginning of Period $10.00 $11.95 $20.88 - ---------------------------------------------------------------------------------------- Accumulation Unit Value, End of Period $11.95 $20.88 $16.60 - ---------------------------------------------------------------------------------------- Number of Units Outstanding, End of Period -- 1,059 58,101 - ---------------------------------------------------------------------------------------- MFS INVESTORS TRUST SERIES SUB-ACCOUNT - ---------------------------------------------------------------------------------------- Accumulation Unit Value, Beginning of Period $10.00 $10.81 $11.41 - ---------------------------------------------------------------------------------------- Accumulation Unit Value, End of Period $10.81 $11.41 $11.26 - ---------------------------------------------------------------------------------------- Number of Units Outstanding, End of Period -- 6,295 15,347 - ---------------------------------------------------------------------------------------- MFS RESEARCH SUB-ACCOUNT(3) - ---------------------------------------------------------------------------------------- Accumulation Unit Value, Beginning of Period -- $10.00 $11.53 - ---------------------------------------------------------------------------------------- Accumulation Unit Value, End of Period -- $11.53 $10.85 - ---------------------------------------------------------------------------------------- Number of Units Outstanding, End of Period -- -- 15,852 - ---------------------------------------------------------------------------------------- OPPENHEIMER AGGRESSIVE GROWTH SUB-ACCOUNT(3) - ---------------------------------------------------------------------------------------- Accumulation Unit Value, Beginning of Period -- $10.00 $13.73 - ---------------------------------------------------------------------------------------- Accumulation Unit Value, End of Period -- $13.73 $12.05 - ---------------------------------------------------------------------------------------- Number of Units Outstanding, End of Period -- -- 24,923 - ---------------------------------------------------------------------------------------- OPPENHEIMER CAPITAL APPRECIATION SUB-ACCOUNT(3) - ---------------------------------------------------------------------------------------- Accumulation Unit Value, Beginning of Period -- $10.00 $12.11 - ---------------------------------------------------------------------------------------- Accumulation Unit Value, End of Period -- $12.11 $11.95 - ---------------------------------------------------------------------------------------- Number of Units Outstanding, End of Period -- -- 53,406 - ---------------------------------------------------------------------------------------- OPPENHEIMER GLOBAL SECURITIES SUB-ACCOUNT(3) - ---------------------------------------------------------------------------------------- Accumulation Unit Value, Beginning of Period -- $10.00 $13.11 - ---------------------------------------------------------------------------------------- Accumulation Unit Value, End of Period -- $13.11 $13.62 - ---------------------------------------------------------------------------------------- Number of Units Outstanding, End of Period -- -- 60,419 - ---------------------------------------------------------------------------------------- OPPENHEIMER MAIN STREET GROWTH & INCOME SUB-ACCOUNT(3) - ---------------------------------------------------------------------------------------- Accumulation Unit Value, Beginning of Period -- $10.00 $10.78 - ---------------------------------------------------------------------------------------- Accumulation Unit Value, End of Period -- $10.78 $ 9.72 - ---------------------------------------------------------------------------------------- Number of Units Outstanding, End of Period -- -- 121,955 - ---------------------------------------------------------------------------------------- OPPENHEIMER MULTIPLE STRATEGIES SUB-ACCOUNT(4) - ---------------------------------------------------------------------------------------- Accumulation Unit Value, Beginning of Period -- -- $10.16 - ---------------------------------------------------------------------------------------- Accumulation Unit Value, End of Period -- -- $10.49 - ---------------------------------------------------------------------------------------- Number of Units Outstanding, End of Period -- -- 20,686 - ---------------------------------------------------------------------------------------- A-2 FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31, -------------------------- 1998 1999 2000 -------- -------- ------------ OPPENHEIMER STRATEGIC BOND SUB-ACCOUNT(3) - ---------------------------------------------------------------------------------------- Accumulation Unit Value, Beginning of Period -- $10.00 $10.16 - ---------------------------------------------------------------------------------------- Accumulation Unit Value, End of Period -- $10.16 $10.31 - ---------------------------------------------------------------------------------------- Number of Units Outstanding, End of Period -- -- 28,737 - ---------------------------------------------------------------------------------------- STI CAPITAL APPRECIATION SUB-ACCOUNT(1) - ---------------------------------------------------------------------------------------- Accumulation Unit Value, Beginning of Period -- $10.00 $10.60 - ---------------------------------------------------------------------------------------- Accumulation Unit Value, End of Period -- $10.60 $10.80 - ---------------------------------------------------------------------------------------- Number of Units Outstanding, End of Period -- 10,425 -- - ---------------------------------------------------------------------------------------- STI GROWTH & INCOME SUB-ACCOUNT (4) - ---------------------------------------------------------------------------------------- Accumulation Unit Value, Beginning of Period -- -- $10.00 - ---------------------------------------------------------------------------------------- Accumulation Unit Value, End of Period -- -- $10.79 - ---------------------------------------------------------------------------------------- Number of Units Outstanding, End of Period -- -- 16,189 - ---------------------------------------------------------------------------------------- STI INTERNATIONAL EQUITY SUB-ACCOUNT (3) - ---------------------------------------------------------------------------------------- Accumulation Unit Value, Beginning of Period -- -- $10.00 - ---------------------------------------------------------------------------------------- Accumulation Unit Value, End of Period -- -- $ 9.72 - ---------------------------------------------------------------------------------------- Number of Units Outstanding, End of Period -- -- 2,615 - ---------------------------------------------------------------------------------------- STI INVESTMENT GRADE BOND SUB-ACCOUNT (4) - ---------------------------------------------------------------------------------------- Accumulation Unit Value, Beginning of Period -- -- $10.00 - ---------------------------------------------------------------------------------------- Accumulation Unit Value, End of Period -- -- $10.61 - ---------------------------------------------------------------------------------------- Number of Units Outstanding, End of Period -- -- 11,649 - ---------------------------------------------------------------------------------------- STI MID-CAP EQUITY SUB-ACCOUNT (4) - ---------------------------------------------------------------------------------------- Accumulation Unit Value, Beginning of Period -- -- $10.00 - ---------------------------------------------------------------------------------------- Accumulation Unit Value, End of Period -- -- $ 9.21 - ---------------------------------------------------------------------------------------- Number of Units Outstanding, End of Period -- -- 5,778 - ---------------------------------------------------------------------------------------- STI QUALITY GROWTH STOCK SUB-ACCOUNT (4) - ---------------------------------------------------------------------------------------- Accumulation Unit Value, Beginning of Period -- -- $10.00 - ---------------------------------------------------------------------------------------- Accumulation Unit Value, End of Period -- -- $ 9.58 - ---------------------------------------------------------------------------------------- Number of Units Outstanding, End of Period -- -- 9,606 - ---------------------------------------------------------------------------------------- STI SMALL CAP VALUE EQUITY SUB-ACCOUNT (4) - ---------------------------------------------------------------------------------------- Accumulation Unit Value, Beginning of Period -- -- $10.00 - ---------------------------------------------------------------------------------------- Accumulation Unit Value, End of Period -- -- $11.85 - ---------------------------------------------------------------------------------------- Number of Units Outstanding, End of Period -- -- 3,572 - ---------------------------------------------------------------------------------------- STI VALUE INCOME STOCK SUB-ACCOUNT(1) - ---------------------------------------------------------------------------------------- Accumulation Unit Value, Beginning of Period -- $10.00 $ 9.46 - ---------------------------------------------------------------------------------------- Accumulation Unit Value, End of Period -- $ 9.46 $10.33 - ---------------------------------------------------------------------------------------- Number of Units Outstanding, End of Period -- 5,699 13,619 - ---------------------------------------------------------------------------------------- TEMPLETON GLOBAL INCOME SECURITIES SUB-ACCOUNT - ---------------------------------------------------------------------------------------- Accumulation Unit Value, Beginning of Period (4,5) -- -- $10.00 - ---------------------------------------------------------------------------------------- Accumulation Unit Value, End of Period -- -- $11.39 - ---------------------------------------------------------------------------------------- Number of Units Outstanding, End of Period -- - 438 - ---------------------------------------------------------------------------------------- TEMPLETON GROWTH SECURITIES SUB-ACCOUNT - ---------------------------------------------------------------------------------------- Accumulation Unit Value, Beginning of Period (4,5) -- -- $10.00 - ---------------------------------------------------------------------------------------- Accumulation Unit Value, End of Period -- -- $13.59 - ---------------------------------------------------------------------------------------- Number of Units Outstanding, End of Period -- -- 11,237 - ---------------------------------------------------------------------------------------- A-3 FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31, -------------------------- 1998 1999 2000 -------- -------- ------------ TEMPLETON STOCK (CLASS 2)SUB-ACCOUNT(2) - ---------------------------------------------------------------------------------------- Accumulation Unit Value, Beginning of Period -- -- $11.37 - ---------------------------------------------------------------------------------------- Accumulation Unit Value, End of Period (4,5) -- -- $11.42 - ---------------------------------------------------------------------------------------- Number of Units Outstanding, End of Period (4,5) -- -- 0 - ---------------------------------------------------------------------------------------- TEMPLETON BOND(CLASS 2)SUB-ACCOUNT(2) - ---------------------------------------------------------------------------------------- Accumulation Unit Value, Beginning of Period -- -- $10.00 - ---------------------------------------------------------------------------------------- Accumulation Unit Value, End of Period (4,5) -- -- $9.87 - ---------------------------------------------------------------------------------------- Number of Units Outstanding, End of Period (4,5) -- -- 0 - ---------------------------------------------------------------------------------------- * The Contracts were first offered on November 10, 1998. The Accumulation Unit Values in this table reflect a mortality and expense risk charge of 1.05% and an administrative expense charge of 0.10%. All of the Variable Sub-Accounts commenced operations on or before November 10, 1998 except as described in the footnotes below. (1) Variable Sub-Accounts commenced operations on November 1, 1999. (2) Variable Sub-Accounts commenced operations on December 17, 1999. (3) Variable Sub-Accounts commenced operations on January 24, 2000. (4) Variable Sub-Accounts commenced operations on May 1, 2000. (5) Effective May 1, 2000, the Portfolios in which the Templeton Stock (Class 2) and Templeton Bond (Class 2) Variable Sub-Accounts invested were merged into the Templeton Growth Securities (Class 2) and the Templeton Global Income securities (Class 2) Portfolios. Accordingly, for administrative convenience, as of May 1, 2000, the corresponding Variable Sub-Accounts merged with and into new Variable Sub-Accounts named Templeton Growth Securities (Class 2) and Templeton Global Income Securities (Class 2), respectively, with Accumulation Unit Values starting at $10.00. A-4 ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED WITH ENHANCED DEATH BENEFIT RIDER FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31 ----------------------------- 1998 1999 2000 -------- -------- -------- AIM V.I. BALANCED SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.73 $12.63 Accumulation Unit Value, End of Period.................... $10.73 $12.63 $11.94 Number of Units Outstanding, End of Period................ -- 16,023 97,759 AIM V.I. CAPITAL APPRECIATION SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.39 $16.25 Accumulation Unit Value, End of Period.................... $11.39 $16.25 $14.28 Number of Units Outstanding, End of Period................ 1,466 17,447 131,661 AIM V.I. GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.82 $15.78 Accumulation Unit Value, End of Period.................... $11.82 $15.78 $12.38 Number of Units Outstanding, End of Period................ -- 14,400 102,340 AIM V.I. GROWTH AND INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.36 $15.05 Accumulation Unit Value, End of Period.................... $11.36 $15.05 $12.68 Number of Units Outstanding, End of Period................ -- 16,349 92,618 AIM V.I. HIGH YIELD SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.31 $11.25 Accumulation Unit Value, End of Period.................... $10.31 $11.25 $8.98 Number of Units Outstanding, End of Period................ -- 3,356 14,455 AIM V.I. VALUE SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.52 $14.76 Accumulation Unit Value, End of Period.................... $11.52 $14.76 $12.43 Number of Units Outstanding, End of Period................ -- 35,445 212,306 FEDERATED PRIME MONEY FUND II SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period.............. -- $10.00 $10.06 Accumulation Unit Value, End of Period.................... -- $10.06 $10.52 Number of Units Outstanding, End of Period................ -- 2,093 29,533 FIDELITY VIP II CONTRAFUND-Registered Trademark- SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.66 $14.29 Accumulation Unit Value, End of Period.................... $11.66 $14.29 $13.16 Number of Units Outstanding, End of Period................ -- 30,660 158,530 FIDELITY VIP EQUITY INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.47 $10.99 Accumulation Unit Value, End of Period.................... $10.47 $10.99 $11.76 Number of Units Outstanding, End of Period................ -- 17,530 80,045 FIDELITY VIP GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.20 $15.19 Accumulation Unit Value, End of Period.................... $11.20 $15.19 $13.33 Number of Units Outstanding, End of Period................ 313 45,514 210,113 A-5 FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31 ------------------------- 1998 1999 2000 -------- -------- -------- FIDELITY VIP HIGH INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.43 $11.13 Accumulation Unit Value, End of Period.................... $10.43 $11.13 $8.51 Number of Units Outstanding, End of Period................ -- 3,914 55,317 FIDELITY VIP II INDEX 500 SUB-ACCOUNT(3) Accumulation Unit Value, Beginning of Period.............. -- -- $10.00 Accumulation Unit Value, End of Period.................... -- -- $9.12 Number of Units Outstanding, End of Period................ -- -- 106,497 FIDELITY VIP OVERSEAS SUB-ACCOUNT(3) Accumulation Unit Value, Beginning of Period.............. -- -- $15.78 Accumulation Unit Value, End of Period.................... -- -- $8.36 Number of Units Outstanding, End of Period................ -- -- 27,868 MFS EMERGING GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.95 $20.83 Accumulation Unit Value, End of Period.................... $11.95 $20.83 $16.52 Number of Units Outstanding, End of Period................ -- 3,068 78,198 MFS INVESTORS TRUST SERIES SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.81 $11.38 Accumulation Unit Value, End of Period.................... $10.81 $11.38 $11.21 Number of Units Outstanding, End of Period................ -- 3,323 23,850 MFS NEW DISCOVERY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. -- -- $10.00 Accumulation Unit Value, End of Period.................... -- -- $18.83 Number of Units Outstanding, End of Period................ -- -- 2,028 MFS RESEARCH SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period.............. -- $10.00 $11.52 Accumulation Unit Value, End of Period.................... -- $11.52 $10.82 Number of Units Outstanding, End of Period................ -- -- 27,229 OPPENHEIMER AGGRESSIVE GROWTH SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period.............. -- $10.00 $13.72 Accumulation Unit Value, End of Period.................... -- $13.72 $12.02 Number of Units Outstanding, End of Period................ -- -- 33,428 OPPENHEIMER CAPITAL APPRECIATION SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period.............. -- $10.00 $12.11 Accumulation Unit Value, End of Period.................... -- $12.11 $11.92 Number of Units Outstanding, End of Period................ -- -- 25,664 OPPENHEIMER GLOBAL SECURITIES SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period.............. -- $10.00 $13.10 Accumulation Unit Value, End of Period.................... -- $13.10 $13.59 Number of Units Outstanding, End of Period................ -- -- 32,775 OPPENHEIMER MAIN STREET GROWTH & INCOME SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period.............. -- $10.00 $10.77 Accumulation Unit Value, End of Period.................... -- $10.77 $9.70 Number of Units Outstanding, End of Period................ -- -- 139,189 A-6 FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31 ----------------------------- 1998 1999 2000 -------- -------- -------- OPPENHEIMER MULTIPLE STRATEGIES SUB-ACCOUNT(3) Accumulation Unit Value, Beginning of Period.............. -- -- $10.00 Accumulation Unit Value, End of Period.................... -- -- $10.47 Number of Units Outstanding, End of Period................ -- -- 21,773 OPPENHEIMER STRATEGIC BOND SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period.............. -- $10.00 $10.16 Accumulation Unit Value, End of Period.................... -- $10.16 $10.29 Number of Units Outstanding, End of Period................ -- -- 19,036 STI CAPITAL APPRECIATION SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period.............. -- -- $10.00 Accumulation Unit Value, End of Period.................... -- -- $10.77 Number of Units Outstanding, End of Period................ -- -- 42,494 STI GROWTH & INCOME SUB-ACCOUNT(3) Accumulation Unit Value, Beginning of Period.............. -- -- $10.00 Accumulation Unit Value, End of Period.................... -- -- $10.77 Number of Units Outstanding, End of Period................ -- -- 22,745 STI INTERNATIONAL EQUITY SUB-ACCOUNT(3) Accumulation Unit Value, Beginning of Period.............. -- -- $10.00 Accumulation Unit Value, End of Period.................... -- -- $9.70 Number of Units Outstanding, End of Period................ -- -- 3,638 STI INVESTMENT GRADE BOND SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. -- -- $10.00 Accumulation Unit Value, End of Period.................... -- -- $10.59 Number of Units Outstanding, End of Period................ -- -- 6,265 STI MID-CAP EQUITY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. -- -- $10.00 Accumulation Unit Value, End of Period.................... -- -- $9.19 Number of Units Outstanding, End of Period................ -- -- 8,560 STI QUALITY GROWTH STOCK SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. -- -- $10.00 Accumulation Unit Value, End of Period.................... -- -- $9.56 Number of Units Outstanding, End of Period................ -- -- 41,215 STI SMALL CAP VALUE EQUITY SUB-ACCOUNT (3) Accumulation Unit Value, Beginning of Period.............. -- -- $10.00 Accumulation Unit Value, End of Period.................... -- -- $11.83 Number of Units Outstanding, End of Period................ -- -- 8,390 STI VALUE INCOME STOCK SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period.............. -- $10.00 $9.46 Accumulation Unit Value, End of Period.................... -- $9.46 $10.31 Number of Units Outstanding, End of Period................ -- 4,408 42,920 TEMPLETON GLOBAL INCOME SECURITIES SUB-ACCOUNT(4) Accumulation Unit Value, Beginning of Period (4,5)........ -- -- $10.00 Accumulation Unit Value, End of Period.................... -- -- $11.37 Number of Units Outstanding, End of Period................ -- -- 954 A-7 FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31 ----------------------------- 1998 1999 2000 -------- -------- -------- TEMPLETON GROWTH SECURITIES SUB-ACCOUNT (4) Accumulation Unit Value, Beginning of Period (4,5)........ -- -- $10.00 Accumulation Unit Value, End of Period.................... -- -- $13.57 Number of Units Outstanding, End of Period................ -- -- 6,599 TEMPLETON STOCK (CLASS 2) SUB-ACCOUNT(2) Accumulation Unit Value, Beginning of Period.............. -- -- 11.36 Accumulation Unit Value, End of Period.................... -- -- 11.40 Number of Units Outstanding, End of Period................ -- -- 0 TEMPLETON BOND (CLASS 2) SUB-ACCOUNT(2) Accumulation Unit Value, Beginning of Period.............. -- -- 10.00 Accumulation Unit Value, End of Period.................... -- -- 9.86 Number of Units Outstanding, End of Period................ -- -- 0 * The Contracts were first offered on November 10, 1998. The Accumulation Unit Values in this table reflect a mortality and expense risk charge of 1.27% and an administrative expense charge of 0.10%. All of the Variable Sub-Accounts commenced operations on or before November 10, 1998 except as described in the footnotes below. (1) Variable Sub-Accounts commenced operations on November 1, 1999. (2) Variable Sub-Accounts commenced operations on December 17, 1999. (3) Variable Sub-Accounts commenced operations on January 24, 2000. (4) Variable Sub-Accounts commenced operations on May 1, 2000. (5) Effective May 1, 2000, the Portfolios in which the Templeton Stock (Class 2) and Templeton Bond (Class 2) Variable Sub-Accounts invested were merged into the Templeton Growth Securities (Class 2) and the Templeton Global Income securities (Class 2) Portfolios. Accordingly, for administrative convenience, as of May 1, 2000, the corresponding Variable Sub-Accounts merged with and into new Variable Sub-Accounts named Templeton Growth Securities (Class 2) and Templeton Global Income Securities(Class 2), respectively, with Accumulation Unit Values starting at $10.00. A-8 ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED WITH ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER (FOR CONTRACTS ISSUED BEFORE SEPTEMBER 22, 2000) FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31, ----------------------------- 1998 1999 2000 -------- -------- -------- AIM V.I. BALANCED SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.73 $12.60 Accumulation Unit Value, End of Period.................... $10.73 $12.60 $11.88 Number of Units Outstanding, End of Period................ 405 43,121 101,781 AIM V.I. CAPITAL APPRECIATION SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.39 $16.21 Accumulation Unit Value, End of Period.................... $11.39 $16.21 $14.22 Number of Units Outstanding, End of Period................ 398 16,046 122,768 AIM V.I. GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.82 $15.74 Accumulation Unit Value, End of Period.................... $11.82 $15.74 $12.32 Number of Units Outstanding, End of Period................ 386 21,246 108,292 AIM V.I. GROWTH AND INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.36 $15.01 Accumulation Unit Value, End of Period.................... $11.36 $15.01 $12.63 Number of Units Outstanding, End of Period................ -- 11,459 66,400 AIM V.I. HIGH YIELD SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.31 $11.22 Accumulation Unit Value, End of Period.................... $10.31 $11.22 $8.94 Number of Units Outstanding, End of Period................ -- 185 10,889 AIM V.I. VALUE SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.51 $14.73 Accumulation Unit Value, End of Period.................... $11.51 $14.73 $12.37 Number of Units Outstanding, End of Period................ -- 34,288 159,570 FEDERATED PRIME MONEY FUND II SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period.............. -- $10.00 $10.06 Accumulation Unit Value, End of Period.................... -- $10.06 $10.49 Number of Units Outstanding, End of Period................ -- 5,291 40,906 FIDELITY VIP II CONTRAFUND-Registered Trademark- SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.65 $14.26 Accumulation Unit Value, End of Period.................... $11.65 $14.26 $13.10 Number of Units Outstanding, End of Period................ 387 32,161 131,791 FIDELITY VIP EQUITY INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.47 $10.96 Accumulation Unit Value, End of Period.................... $10.47 $10.96 $11.70 Number of Units Outstanding, End of Period................ -- 11,621 45,849 FIDELITY VIP GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.19 $15.15 Accumulation Unit Value, End of Period.................... $11.19 $15.15 $13.27 Number of Units Outstanding, End of Period................ -- 22,088 151,189 FIDELITY VIP HIGH INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.43 $11.10 Accumulation Unit Value, End of Period.................... $10.43 $11.10 $8.47 Number of Units Outstanding, End of Period................ -- 3,667 31,190 A-9 FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31, ----------------------------- 1998 1999 2000 -------- -------- -------- FIDELITY VIP II INDEX 500 SUB-ACCOUNT(3) Accumulation Unit Value, Beginning of Period.............. -- -- $10.00 Accumulation Unit Value, End of Period.................... -- -- $9.11 Number of Units Outstanding, End of Period................ -- -- 91,596 FIDELITY VIP OVERSEAS SUB-ACCOUNT(3) Accumulation Unit Value, Beginning of Period.............. -- -- $10.00 Accumulation Unit Value, End of Period.................... -- -- $8.34 Number of Units Outstanding, End of Period................ -- -- 30,230 MFS EMERGING GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $11.94 $20.78 Accumulation Unit Value, End of Period.................... $11.94 $20.78 $16.44 Number of Units Outstanding, End of Period................ 377 19,189 63,991 MFS INVESTORS TRUST SERIES SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 $10.81 $11.35 Accumulation Unit Value, End of Period.................... $10.81 $11.35 $11.16 Number of Units Outstanding, End of Period................ -- 4,808 11,160 MFS NEW DISCOVERY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. -- -- $10.00 Accumulation Unit Value, End of Period.................... -- -- $18.74 Number of Units Outstanding, End of Period................ -- -- 1,509 MFS RESEARCH SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period.............. -- $10.00 $11.52 Accumulation Unit Value, End of Period.................... -- $11.52 $10.79 Number of Units Outstanding, End of Period................ -- -- 60,709 OPPENHEIMER AGGRESSIVE GROWTH SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period.............. -- $10.00 $13.72 Accumulation Unit Value, End of Period.................... -- $13.72 $11.99 Number of Units Outstanding, End of Period................ -- -- 38,398 OPPENHEIMER CAPITAL APPRECIATION SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period.............. -- $10.00 $12.10 Accumulation Unit Value, End of Period.................... -- $12.10 $11.89 Number of Units Outstanding, End of Period................ -- -- 35,976 OPPENHEIMER GLOBAL SECURITIES SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period.............. -- $10.00 $13.10 Accumulation Unit Value, End of Period.................... -- $13.10 $13.55 Number of Units Outstanding, End of Period................ -- -- 33,241 OPPENHEIMER MAIN STREET GROWTH & INCOME SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period.............. -- $10.00 $10.77 Accumulation Unit Value, End of Period.................... -- $10.77 $9.67 Number of Units Outstanding, End of Period................ -- -- 130,587 OPPENHEIMER MULTIPLE STRATEGIES SUB-ACCOUNT(3) Accumulation Unit Value, Beginning of Period.............. -- -- $10.00 Accumulation Unit Value, End of Period.................... -- -- $10.45 Number of Units Outstanding, End of Period................ -- -- 20,592 OPPENHEIMER STRATEGIC BOND SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period.............. -- $10.00 $10.15 Accumulation Unit Value, End of Period.................... -- $10.15 $10.26 Number of Units Outstanding, End of Period................ -- -- 19,624 A-10 FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31, ----------------------------- 1998 1999 2000 -------- -------- -------- STI CAPITAL APPRECIATION SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period.............. -- -- $10.00 Accumulation Unit Value, End of Period.................... -- -- $10.75 Number of Units Outstanding, End of Period................ -- -- 44,314 STI GROWTH & INCOME SUB-ACCOUNT(3) Accumulation Unit Value, Beginning of Period.............. -- -- $10.00 Accumulation Unit Value, End of Period.................... -- -- $10.75 Number of Units Outstanding, End of Period................ -- -- 47,617 STI INTERNATIONAL EQUITY SUB-ACCOUNT(3) Accumulation Unit Value, Beginning of Period.............. -- -- $10.00 Accumulation Unit Value, End of Period.................... -- -- $9.68 Number of Units Outstanding, End of Period................ -- -- 9,071 STI INVESTMENT GRADE BOND SUB-ACCOUNT(3) Accumulation Unit Value, Beginning of Period.............. -- -- $10.00 Accumulation Unit Value, End of Period.................... -- -- $10.57 Number of Units Outstanding, End of Period................ -- -- 15,973 STI MID-CAP EQUITY SUB-ACCOUNT(3) Accumulation Unit Value, Beginning of Period.............. -- -- $10.00 Accumulation Unit Value, End of Period.................... -- -- $9.17 Number of Units Outstanding, End of Period................ -- -- 14,742 STI QUALITY GROWTH STOCK SUB-ACCOUNT(3) Accumulation Unit Value, Beginning of Period.............. -- -- $10.00 Accumulation Unit Value, End of Period.................... -- -- $9.54 Number of Units Outstanding, End of Period................ -- -- 62,796 STI SMALL CAP VALUE EQUITY SUB-ACCOUNT(3) Accumulation Unit Value, Beginning of Period.............. -- -- $10.00 Accumulation Unit Value, End of Period.................... -- -- $11.81 Number of Units Outstanding, End of Period................ -- -- 6,098 STI VALUE INCOME STOCK SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period.............. -- $10.00 $9.46 Accumulation Unit Value, End of Period.................... -- $9.46 $10.28 Number of Units Outstanding, End of Period................ -- 11,848 11,462 TEMPLETON GLOBAL INCOME SECURITIES SUB-ACCOUNT(4) Accumulation Unit Value, Beginning of Period.............. -- -- $10.00 Accumulation Unit Value, End of Period.................... -- -- $11.36 Number of Units Outstanding, End of Period................ -- -- 11,685 TEMPLETON GROWTH SECURITIES SUB-ACCOUNT(4) Accumulation Unit Value, Beginning of Period.............. -- -- $10.00 Accumulation Unit Value, End of Period.................... -- -- $13.55 Number of Units Outstanding, End of Period................ -- -- 9,457 TEMPLETON STOCK (CLASS 2) SUB-ACCOUNT(2) Accumulation Unit Value, Beginning of Period.............. -- -- $11.36 Accumulation Unit Value, End of Period.................... -- -- $11.39 Number of Units Outstanding, End of Period................ -- -- 0 0 A-11 FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31, ----------------------------- 1998 1999 2000 -------- -------- -------- TEMPLETON BOND (CLASS 2) SUB-ACCOUNT(2) Accumulation Unit Value, Beginning of Period.............. -- -- 10.00 Accumulation Unit Value, End of Period.................... -- -- 9.86 Number of Units Outstanding, End of Period................ -- -- 0 * The Contracts were first offered on November 10, 1998. The Accumulation Unit Values in this table reflect a mortality and expense risk charge of 1.49% and an administrative expense charge of 0.10%. All of the Variable Sub-Accounts commenced operations on or before November 10, 1998 except as described in the footnotes below. (1) Variable Sub-Accounts commenced operations on November 1, 1999. (2) Variable Sub-Accounts commenced operations on December 17, 1999. (3)Variable Sub-Accounts commenced operations on January 24, 2000. (4) Variable Sub-Accounts commenced operations on May 1, 2000. (5) Effective May 1, 2000, the Portfolios in which the Templeton Stock (Class 2) and Templeton Bond (Class 2) Variable Sub-Accounts invested were merged into the Templeton Growth Securities (Class 2) and the Templeton Global Income securities (Class 2) Portfolios. Accordingly, for administrative convenience, as of May 1, 2000, the corresponding Variable Sub-Accounts merged with and into new Variable Sub-Accounts named Templeton Growth Securities (Class 2) and Templeton Global Income Securities (Class 2), respectively, with Accumulation Unit Values starting at $10.00. A-12 ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED WITH ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER II (FOR CONTRACTS ISSUED ON OR AFTER SEPTEMBER 22, 2000) FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31, 2000 ------------------------------------ 2000 ---------- AIM V.I. BALANCED SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 Accumulation Unit Value, End of Period.................... $9.21 Number of Units Outstanding, End of Period................ 4,515 AIM V.I. CAPITAL APPRECIATION SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 Accumulation Unit Value, End of Period.................... $7.80 Number of Units Outstanding, End of Period................ 34,530 AIM V.I. GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 Accumulation Unit Value, End of Period.................... $7.52 Number of Units Outstanding, End of Period................ 32,771 AIM V.I. GROWTH AND INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 Accumulation Unit Value, End of Period.................... $8.06 Number of Units Outstanding, End of Period................ 20,079 AIM V.I. HIGH YIELD SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 Accumulation Unit Value, End of Period.................... $8.37 Number of Units Outstanding, End of Period................ 81 AIM V.I. VALUE SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 Accumulation Unit Value, End of Period.................... $8.54 Number of Units Outstanding, End of Period................ 22,904 FEDERATED PRIME MONEY FUND II SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period.............. $10.00 Accumulation Unit Value, End of Period.................... $10.17 Number of Units Outstanding, End of Period................ 5,731 FIDELITY VIP II CONTRAFUND-Registered Trademark- SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 Accumulation Unit Value, End of Period.................... $9.23 Number of Units Outstanding, End of Period................ 14,991 FIDELITY VIP EQUITY INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 Accumulation Unit Value, End of Period.................... $10.42 Number of Units Outstanding, End of Period................ 17,198 FIDELITY VIP GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 Accumulation Unit Value, End of Period.................... $8.37 Number of Units Outstanding, End of Period................ 21,583 FIDELITY VIP HIGH INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 Accumulation Unit Value, End of Period.................... $8.30 Number of Units Outstanding, End of Period................ 102 A-13 FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31, 2000 --------------------------------------- 2000 ---------- FIDELITY VIP II INDEX 500 SUB-ACCOUNT(3) Accumulation Unit Value, Beginning of Period.............. $10.00 Accumulation Unit Value, End of Period.................... $8.83 Number of Units Outstanding, End of Period................ 8,780 FIDELITY VIP OVERSEAS SUB-ACCOUNT(3) Accumulation Unit Value, Beginning of Period.............. $10.00 Accumulation Unit Value, End of Period.................... $8.68 Number of Units Outstanding, End of Period................ 4,854 MFS EMERGING GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 Accumulation Unit Value, End of Period.................... $8.08 Number of Units Outstanding, End of Period................ 11,866 MFS INVESTORS TRUST SERIES SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 Accumulation Unit Value, End of Period.................... $9.64 Number of Units Outstanding, End of Period................ 576 MFS RESEARCH SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period.............. $10.00 Accumulation Unit Value, End of Period.................... $8.61 Number of Units Outstanding, End of Period................ 11,698 OPPENHEIMER AGGRESSIVE GROWTH SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period.............. $10.00 Accumulation Unit Value, End of Period.................... $6.94 Number of Units Outstanding, End of Period................ 8,000 OPPENHEIMER CAPITAL APPRECIATION SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period.............. $10.00 Accumulation Unit Value, End of Period.................... $8.92 Number of Units Outstanding, End of Period................ 18,937 OPPENHEIMER GLOBAL SECURITIES SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period.............. $10.00 Accumulation Unit Value, End of Period.................... $9.41 Number of Units Outstanding, End of Period................ 2,457 OPPENHEIMER MAIN STREET GROWTH & INCOME SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period.............. $10.00 Accumulation Unit Value, End of Period.................... $8.72 Number of Units Outstanding, End of Period................ 33,469 OPPENHEIMER MULTIPLE STRATEGIES SUB-ACCOUNT(3) Accumulation Unit Value, Beginning of Period.............. $10.00 Accumulation Unit Value, End of Period.................... $9.68 Number of Units Outstanding, End of Period................ 3,475 OPPENHEIMER STRATEGIC BOND SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period.............. $10.00 Accumulation Unit Value, End of Period.................... $9.88 Number of Units Outstanding, End of Period................ 976 STI CAPITAL APPRECIATION SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.00 Accumulation Unit Value, End of Period.................... $9.28 Number of Units Outstanding, End of Period................ 214 A-14 FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31, 2000 --------------------------------------- 2000 ---------- STI GROWTH & INCOME SUB-ACCOUNT(3) Accumulation Unit Value, Beginning of Period.............. $10.00 Accumulation Unit Value, End of Period.................... $9.78 Number of Units Outstanding, End of Period................ 4,178 STI INTERNATIONAL EQUITY SUB-ACCOUNT(3) Accumulation Unit Value, Beginning of Period.............. $10.00 Accumulation Unit Value, End of Period.................... $9.54 Number of Units Outstanding, End of Period................ 358 STI INVESTMENT GRADE BOND SUB-ACCOUNT(3) Accumulation Unit Value, Beginning of Period.............. $10.00 Accumulation Unit Value, End of Period.................... $10.39 Number of Units Outstanding, End of Period................ 2,172 STI MID-CAP EQUITY SUB-ACCOUNT(3) Accumulation Unit Value, Beginning of Period.............. $10.00 Accumulation Unit Value, End of Period.................... $8.68 Number of Units Outstanding, End of Period................ 5,995 STI QUALITY GROWTH STOCK SUB-ACCOUNT(3) Accumulation Unit Value, Beginning of Period.............. $10.00 Accumulation Unit Value, End of Period.................... $8.76 Number of Units Outstanding, End of Period................ 4,378 STI SMALL CAP VALUE EQUITY SUB-ACCOUNT(3) Accumulation Unit Value, Beginning of Period.............. $10.00 Accumulation Unit Value, End of Period.................... $10.59 Number of Units Outstanding, End of Period................ 570 STI VALUE INCOME STOCK SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period.............. $10.00 Accumulation Unit Value, End of Period.................... $10.92 Number of Units Outstanding, End of Period................ 123 TEMPLETON GLOBAL INCOME SECURITIES SUB-ACCOUNT(4) Accumulation Unit Value, Beginning of Period.............. $10.00 Accumulation Unit Value, End of Period.................... $11.36 Number of Units Outstanding, End of Period................ 11,685 TEMPLETON GROWTH SECURITIES SUB-ACCOUNT(4) Accumulation Unit Value, Beginning of Period.............. $10.00 Accumulation Unit Value, End of Period.................... $10.00 Number of Units Outstanding, End of Period................ 2,289 TEMPLETON STOCK (CLASS 2) SUB-ACCOUNT(2) Accumulation Unit Value, Beginning of Period.............. $10.00 Accumulation Unit Value, End of Period.................... $10.00 Number of Units Outstanding, End of Period................ -- TEMPLETON BOND(CLASS 2)SUB-ACCOUNT(2) Accumulation Unit Value, Beginning of Period.............. $10.00 Accumulation Unit Value, End of Period.................... $10.00 Number of Units Outstanding, End of Period................ --
* The Contracts were first offered on November 10, 1998. The Accumulation Unit Values in this table reflect a mortality and expense risk charge of 1.55% and an administrative expense charge of 0.10%. All of the Variable Sub-Accounts commenced operations on or before November 10, 1998 except as described in the footnotes below. (1) Variable Sub-Accounts commenced operations on November 1,1999. (2) Variable Sub-Accounts commenced operations on December 17, 1999. (3) Variable Sub-Accounts commenced operations on January 24,1999. (4) Variable Sub-Accounts commenced operations on May 1, 2000. (5) Effective May 1, 2000, the Portfolios in which the Templeton Stock (Class 2) and Templeton Bond (Class 2) Variable Sub-Accounts invested were merged into the Templeton Growth Securities (Class 2)and the Templeton Global Income securities (Class 2) Portfolios. Accordingly, for administrative convenience, as of May 1, 2000, the corresponding Variable Sub-accounts merged with and into new Variable Sub-Accounts named Templeton Growth Securities (Class 2) and Templeton Global Income Securities (Class 2), respectively, with Accumulation Unit Values starting at $10.00. A-15 APPENDIX B MARKET VALUE ADJUSTMENT - ------------------------------------------------------------------- The Market Value Adjustment is based on the following: I = the Treasury Rate for a maturity equal to the Guarantee Period for the week preceding the establishment of the Guarantee Period. N = the number of whole and partial years from the date we receive the withdrawal, transfer, or death benefit request, or from the Payout Start Date to the end of the Guarantee Period. J = the Treasury Rate for a maturity equal to the Guarantee Period for the week preceding the receipt of the withdrawal, transfer, death benefit, or income payment request. Treasury Rate means the U.S. Treasury Note Constant Maturity yield as reported in Federal Reserve Bulletin Release H.15. The Market Value Adjustment factor is determined from the following formula: .9 X (I - J) X N To determine the Market Value Adjustment, we will multiply the Market Value Adjustment factor by the amount transferred, withdrawn (in excess of the Free Withdrawal Amount), paid as a death benefit, or applied to an Income Plan from a Guarantee Period at any time other than during the 30 day period after such Guarantee Period expires. EXAMPLES OF MARKET VALUE ADJUSTMENT Purchase Payment: $10,000 allocated to a Guarantee Period Guarantee Period: 5 years Interest Rate: 4.50% Full Withdrawal: End of Contract Year 3 NOTE: These examples assume that premium taxes are not applicable.
EXAMPLE 1: (ASSUMES DECLINING INTEREST RATES) Step 1: Calculate Contract Value at End of Contract = $10,000 X (1.045)TO THE POWER OF 3 = $11,411.66 Year 3: Step 2: Calculate the Free Withdrawal Amount: = .15 X $10,000 = $1,500.00 Step 3: Calculate the Withdrawal Charge: = .05 X ($10,000 - $1,500) = $425.00 Step 4: Calculate the Market Value Adjustment: I = 4.50% J = 4.20% 730 days N = ------- = 2 365 days Market Value Adjustment Factor: .9 X (I - J) X N = .9 X (.045 - .042) X 2 = .0054 Market Value Adjustment = Market Value Adjustment Factor X Amount Subject to Market Value Adjustment: = .0054 X ($11,411.66 - $1,500) = $53.52 Step 5: Calculate the amount received by Contract Owner as a result of full withdrawal at the end of Contract Year 3: = $11,411.66 - $425.00 + $53.52 = $11,040.18 B-1 EXAMPLE 2: (ASSUMES RISING INTEREST RATES) Step 1: Calculate Contract Value at End of Contract Year 3: = $10,000.00 X (1.045)TO THE POWER OF 3 = $11,411.66 Step 2: Calculate the Free Withdrawal Amount: = .15 X ($10,000.00) = $1,500.00 Step 3: Calculate the Withdrawal Charge: = .05 X ($10,000.00 - $1,500.00) = $425.00 Step 4: Calculate the Market Value Adjustment: I = 4.50% J = 4.80% 730 days = 2 N = ------- 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 ($11,411.66 - $1,500) = -$53.52 Step 5: Calculate the amount received by Contract Owner as a result of full withdrawal at the end of Contract Year 3: = $11,411.66 - $425.00 - 53.52 = $10,933.14
B-2 STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS - ------------------------------------------------------------------- DESCRIPTION - ----------------------------------------------------- ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS - ----------------------------------------------------- THE CONTRACT - ----------------------------------------------------- Purchases of Contracts - -------------------------------------------------- Tax-free Exchanges (1035 Exchanges, Rollovers and Transfers) - ------------------------------------------------ PERFORMANCE INFORMATION - ----------------------------------------------------- Standardized Total Returns - ---------------------------------------------------- Non-standardized Total Returns - ----------------------------------------------------- Adjusted Historical Total Returns - ----------------------------------------------------- CALCULATION OF ACCUMULATION UNIT VALUES - ----------------------------------------------------- CALCULATION OF VARIABLE INCOME PAYMENTS - ----------------------------------------------------- - ----------------------------------------------------- DESCRIPTION Calculation of Annuity Unit Values - ----------------------------------------------------- GENERAL MATTERS - ---------------------------------------------------- Incontestability - ----------------------------------------------------- Settlements - ----------------------------------------------------- Safekeeping of the Variable Account's Assets - ----------------------------------------------------- Premium Taxes ---------------------------------------------------- Tax Reserves - ----------------------------------------------------- FEDERAL TAX MATTERS ---------------------------------------------------- QUALIFIED PLANS ---------------------------------------------------- EXPERTS - ----------------------------------------------------- FINANCIAL STATEMENTS - ----------------------------------------------------- THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. WE DO NOT AUTHORIZE ANYONE TO PROVIDE ANY INFORMATION OR REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS PROSPECTUS OTHER THAN AS CONTAINED IN THIS PROSPECTUS. C-1 GLG677-1 THE GLENBROOK PROVIDER VARIABLE ANNUITY GLENBROOK LIFE AND ANNUITY COMPANY 300 N. MILWAUKEE AVE. VERNON HILLS, IL 60061 TELEPHONE NUMBER: 1-800-755-5275 PROSPECTUS DATED MAY 1,2001 - -------------------------------------------------------------------------------- Glenbrook Life and Annuity Company ("GLENBROOK") is offering the Glenbrook Provider Variable Annuity, an individual and group flexible premium deferred variable annuity contract ("CONTRACT"). This prospectus contains information about the Contract that you should know before investing. Please keep it for future reference. The Contract currently offers 22 investment alternatives ("INVESTMENT ALTERNATIVES"). The investment alternatives include 2 fixed account options ("FIXED ACCOUNT OPTIONS") and 20 variable sub-accounts ("VARIABLE SUB-ACCOUNTS") of the Glenbrook Life Multi-Manager Variable Account ("VARIABLE ACCOUNT"). Each Variable Sub-Account invests exclusively in shares of the following mutual funds ("FUNDS"):
AIM VARIABLE INSURANCE FUNDS DREYFUS STOCK INDEX FUND AMERICAN CENTURY VARIABLE PORTFOLIOS DREYFUS VARIABLE INVESTMENT FUND (VIF) (VP), INC. FIDELITY VARIABLE INSURANCE PRODUCTS FUND THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST
Each Fund has multiple investment portfolios ("PORTFOLIOS"). Not all of the Funds and/or Portfolios, however, may be available with your Contract. You should check with your sales representative for further information on the availability of Funds and/or Portfolios. Your annuity application will list all available Portfolios. WE (Glenbrook) have filed a Statement of Additional Information, dated May 1, 2001, with the Securities and Exchange Commission ("SEC"). It contains more information about the Contract and is incorporated herein by reference, which means it is legally a part of this prospectus. Its table of contents appears on page C-1 of this prospectus. For a free copy, please write or call us at the address or telephone number above, or go to the SEC's Web site (http://www.sec.gov). You can find other information and documents about us, including documents that are legally part of this prospectus, at the SEC's Web site. - --------------------------------------------------------------------------------
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE SECURITIES DESCRIBED IN THIS PROSPECTUS, NOR HAS IT PASSED ON THE ACCURACY OR THE ADEQUACY OF THIS PROSPECTUS. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A FEDERAL CRIME. IMPORTANT THE CONTRACTS MAY BE DISTRIBUTED THROUGH BROKER-DEALERS THAT NOTICES HAVE RELATIONSHIPS WITH BANKS OR OTHER FINANCIAL INSTITUTIONS OR BY EMPLOYEES OF SUCH BANKS. HOWEVER, THE CONTRACTS ARE NOT DEPOSITS, OR OBLIGATIONS OF, OR GUARANTEED BY SUCH INSTITUTIONS OR ANY FEDERAL REGULATORY AGENCY. INVESTMENT IN THE CONTRACTS INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE CONTRACTS ARE NOT FDIC INSURED.
1 PROSPECTUS TABLE OF CONTENTS - ------------------------------------------------------------------- PAGE - ----------------------------------------------------- OVERVIEW - ----------------------------------------------------- Important Terms 3 - ----------------------------------------------------- The Contract At A Glance 4 - ----------------------------------------------------- How the Contract Works 6 - ----------------------------------------------------- Expense Table 7 - ----------------------------------------------------- Financial Information 11 - ----------------------------------------------------- CONTRACT FEATURES - ----------------------------------------------------- The Contract 12 - ----------------------------------------------------- Purchases 13 - ----------------------------------------------------- Contract Value 14 - ----------------------------------------------------- Investment Alternatives - ----------------------------------------------------- The Variable Sub-Accounts 15 - ----------------------------------------------------- The Fixed Account Options 16 - ----------------------------------------------------- Transfers 18 - ----------------------------------------------------- Expenses 20 - ----------------------------------------------------- Access To Your Money 22 - ----------------------------------------------------- Income Payments 23 - ----------------------------------------------------- - ----------------------------------------------------- PAGE Death Benefits 25 - ----------------------------------------------------- OTHER INFORMATION - ----------------------------------------------------- More Information: 26 - ----------------------------------------------------- Glenbrook 26 - ----------------------------------------------------- The Variable Account 26 - ----------------------------------------------------- The Portfolios 27 - ----------------------------------------------------- The Contract 27 - ----------------------------------------------------- Qualified Plans 28 - ----------------------------------------------------- Legal Matters 28 - ----------------------------------------------------- Taxes 28 - ----------------------------------------------------- Annual Reports and Other Documents 31 - ----------------------------------------------------- Experts 31 - ----------------------------------------------------- Performance Information 32 - ----------------------------------------------------- APPENDIX A -- ACCUMULATION UNIT VALUES A-1 - ----------------------------------------------------- APPENDIX B -- MARKET VALUE ADJUSTMENT EXAMPLE B-1 - ----------------------------------------------------- STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS C-1 - ----------------------------------------------------- 2 PROSPECTUS IMPORTANT TERMS - ------------------------------------------------------------------- This prospectus uses a number of important terms that you may not be familiar with. The index below identifies the page that describes each term. The first use of each term in this prospectus appears in highlights. PAGE - ----------------------------------------------------- Accumulation Phase 14 - ----------------------------------------------------- Accumulation Unit 14 - ----------------------------------------------------- Accumulation Unit Value 14 - ----------------------------------------------------- Annuitant 12 - ----------------------------------------------------- Automatic Additions Program 13 - ----------------------------------------------------- Automatic Portfolio Rebalancing Program 19 - ----------------------------------------------------- Beneficiary 12 - ----------------------------------------------------- Cancellation Period 14 - ----------------------------------------------------- Contract* 12 - ----------------------------------------------------- Contract Anniversary 5 - ----------------------------------------------------- Contract Owner ("You") 12 - ----------------------------------------------------- Contract Value 14 - ----------------------------------------------------- Contract Year 4 - ----------------------------------------------------- Death Benefit Anniversary 25 - ----------------------------------------------------- Dollar Cost Averaging Program 19 - ----------------------------------------------------- Due Proof of Death 25 - ----------------------------------------------------- Enhanced Death Benefit Rider 25 - ----------------------------------------------------- Fixed Account Options 16 - ----------------------------------------------------- - ----------------------------------------------------- Free Withdrawal Amount 21 PAGE - ----------------------------------------------------- Glenbrook ("We" or "Us") 26 - ----------------------------------------------------- Guarantee Periods 16 - ----------------------------------------------------- Income Plan 23 - ----------------------------------------------------- Investment Alternatives 15 - ----------------------------------------------------- Issue Date 6 - ----------------------------------------------------- Market Value Adjustment 18 - ----------------------------------------------------- Payout Phase 6 - ----------------------------------------------------- Payout Start Date 23 - ----------------------------------------------------- Portfolios 27 - ----------------------------------------------------- Qualified Contracts 30 - ----------------------------------------------------- SEC 1 - ----------------------------------------------------- Settlement Value 25 - ----------------------------------------------------- Systematic Withdrawal Program 22 - ----------------------------------------------------- Valuation Date 13 - ----------------------------------------------------- Variable Account 26 - ----------------------------------------------------- Variable Sub-Account 15 - ----------------------------------------------------- *In certain states the Contract is available only as a group Contract. If you purchase a group Contract, we will issue you a certificate that represents your ownership and that summarizes the provisions of the group Contract. References to "Contract" in this prospectus include certificates, unless the context requires otherwise. 3 PROSPECTUS THE CONTRACT AT A GLANCE - -------------------------------------------------------------------
The following is a snapshot of the Contract. Please read the remainder of this prospectus for more information. FLEXIBLE PAYMENTS You can purchase a Contract with as little as $3,000 ($2,000 for "QUALIFIED CONTRACTS," which are Contracts issued with QUALIFIED PLANS). You can add to your Contract as often and as much as you like, but each payment must be at least $50. - -------------------------------------------------------------------------------------------------------- RIGHT TO CANCEL You may cancel your Contract within 20 days of receipt or any longer period as your state may require ("CANCELLATION PERIOD"). Upon cancellation, we will return your purchase payments adjusted, to the extent federal or state law permits, to reflect the investment experience of any amounts allocated to the Variable Account. - -------------------------------------------------------------------------------------------------------- EXPENSES You will bear the following expenses: - Total Variable Account annual fees equal to 1.35% of average daily net assets (1.45% if you select the ENHANCED DEATH BENEFIT RIDER) - Annual contract maintenance charge of $35 (with certain exceptions) - Withdrawal charges ranging from 0% to 6% of purchase payment withdrawn (with certain exceptions) - Transfer fee of $10 after 12th transfer in any CONTRACT YEAR (fee currently waived) - State premium tax (if your state imposes one) In addition, each Portfolio pays expenses that you will bear indirectly if you invest in a Variable Sub-Account. - -------------------------------------------------------------------------------------------------------- INVESTMENT ALTERNATIVES The Contract offers 22 investment alternatives including: - 2 Fixed Account Options (which credit interest at rates we guarantee) - 20 Variable Sub-Accounts investing in Portfolios offering professional money management by these investment advisers: - A I M Advisors, Inc. - American Century Investment Management, Inc. - The Dreyfus Corporation - Fidelity Management & Research Company - MFS Investment Management-Registered Trademark- To find out current rates being paid on the Fixed Account Options or how the Variable Sub-Accounts have performed, call us at 1-800-755-5275. - -------------------------------------------------------------------------------------------------------- SPECIAL SERVICES For your convenience, we offer these special services: - AUTOMATIC PORTFOLIO REBALANCING PROGRAM - AUTOMATIC ADDITIONS PROGRAM - DOLLAR COST AVERAGING PROGRAM - SYSTEMATIC WITHDRAWAL PROGRAM 4 PROSPECTUS - -------------------------------------------------------------------------------------------------------- INCOME PAYMENTS You can choose fixed income payments, variable income payments, or a combination of the two. You can receive your income payments in one of the following ways: - life income with guaranteed payments - a "joint and survivor" life income with guaranteed payments - guaranteed payments for a specified period (5 to 30 years) - -------------------------------------------------------------------------------------------------------- DEATH BENEFITS If you or the ANNUITANT (if the Contract is owned by a non-natural person) die before the PAYOUT START DATE, we will pay the death benefit described in the Contract. We offer an Enhanced Death Benefit Rider. - -------------------------------------------------------------------------------------------------------- TRANSFERS Before the Payout Start Date, you may transfer your Contract value ("CONTRACT VALUE") among the investment alternatives, with certain restrictions. Transfers to a Guarantee Period of the Fixed Account must be at least $50. We do not currently impose a fee upon transfers. However, we reserve the right to charge $10 per transfer after the 12th transfer in each "Contract Year", which we measure from the date we issue your contract or a Contract anniversary ("CONTRACT ANNIVERSARY"). - -------------------------------------------------------------------------------------------------------- WITHDRAWALS You may withdraw some or all of your Contract Value at anytime prior to the Payout Start Date. In general, you must withdraw at least $50 at a time. Full or partial withdrawals are available under limited circumstances on or after the Payout Start Date. A 10% federal tax penalty may apply if you withdraw before you are 59 1/2 years old. A withdrawal charge and MARKET VALUE ADJUSTMENT also may apply.
5 PROSPECTUS HOW THE CONTRACT WORKS - ------------------------------------------------------------------- The Contract basically works in two ways. First, the Contract can help you (we assume you are the CONTRACT OWNER) save for retirement because you can invest in up to 22 investment alternatives and pay no federal income taxes on any earnings until you withdraw them. You do this during what we call the "ACCUMULATION PHASE" of the Contract. The Accumulation Phase begins on the date we issue your Contract (we call that date the "ISSUE DATE") and continues until the Payout Start Date, which is the date we apply your money to provide income payments. During the Accumulation Phase, you may allocate your purchase payments to any combination of the Variable Sub-Accounts and/or Fixed Account Options. If you invest in any of the 2 Fixed Account Options, you will earn a fixed rate of interest that we declare periodically. If you invest in any of the Variable Sub-Accounts, your investment return will vary up or down depending on the performance of the corresponding Portfolios. Second, the Contract can help you plan for retirement because you can use it to receive retirement income for life and/or for a pre-set number of years, by selecting one of the income payment options (we call these "INCOME PLANS") described on page 23. You receive income payments during what we call the "PAYOUT PHASE" of the Contract, which begins on the Payout Start Date and continues until we make the last payment required by the Income Plan you select. During the Payout Phase, if you select a fixed income payment option, we guarantee the amount of your payments, which will remain fixed. If you select a variable income payment option, based on one or more of the Variable Sub-Accounts, the amount of your payments will vary up or down depending on the performance of the corresponding Portfolios. The amount of money you accumulate under your Contract during the Accumulation Phase and apply to an Income Plan will determine the amount of your income payments during the Payout Phase. The timeline below illustrates how you might use your Contract.
ISSUE ACCUMULATION PHASE PAYOUT PAYOUT DATE START PHASE DATE ----------------------------------------------------------------------------------------------------- You buy You save for retirement You elect to You can receive Or you can a receive income payments receive income Contract income for a set payments for life payments or period receive a lump sum payment
As the Contract Owner, you exercise all of the rights and privileges provided by the contract. If you die, any surviving Contract Owner or, if none, the BENEFICIARY will exercise the rights and privileges provided by the Contract. SEE "THE CONTRACT." IN ADDITION, IF YOU DIE BEFORE THE PAYOUT START DATE, WE WILL PAY A DEATH BENEFIT TO ANY SURVIVING CONTRACT OWNER, OR IF THERE IS NONE, TO YOUR BENEFICIARY. SEE "Death Benefits." Please call us at 1-800-755-5275 if you have any question about how the Contract works. 6 PROSPECTUS EXPENSE TABLE - ------------------------------------------------------------------- The table below lists the expenses that you will bear directly or indirectly when you buy a Contract. The table and the examples that follow do not reflect premium taxes that may be imposed by the state where you reside. For more information about Variable Account expenses, see "Expenses," below. For more information about Portfolio expenses, please refer to the accompanying prospectuses for the Funds. CONTRACT OWNER TRANSACTION EXPENSES Withdrawal Charge (as a percentage of purchase payments)*
Number of Complete Years Since We Received the Purchase Payment Being Withdrawn: 0 1 2 3 4 5 6+ - ---------------------------------------------------------------------------------------------------------------------------- Applicable Charge: 6% 6% 5% 5% 4% 3% 0% - ---------------------------------------------------------------------------------------------------------------------------- Annual Contract Maintenance Charge $35.00** - ---------------------------------------------------------------------------------------------------------------------------- Transfer Fee $10.00*** - ----------------------------------------------------------------------------------------------------------------------------- * Each Contract Year, you may withdraw up to 15% of your aggregate purchase payments without incurring a withdrawal charge. ** We will waive this charge in certain cases. See "Expenses." *** Applies solely to the thirteenth and subsequent transfers within a Contract Year, excluding transfers due to dollar cost averaging and automatic portfolio rebalancing. We are currently waiving the transfer fee. VARIABLE ACCOUNT ANNUAL EXPENSES (AS A PERCENTAGE OF AVERAGE DAILY NET ASSET VALUE DEDUCTED FROM EACH VARIABLE SUB-ACCOUNT) Mortality and Expense Risk Charge 1.25%* - ---------------------------------------------------------------------------------------------------------------------------- Administrative Expense Charge 0.10% - ---------------------------------------------------------------------------------------------------------------------------- Total Variable Account Annual Expenses 1.35% - ----------------------------------------------------------------------------------------------------------------------------
*If you select the Enhanced Death Benefit Rider, the mortality and expense risk charge is 1.35%. 7 PROSPECTUS PORTFOLIO ANNUAL EXPENSES (After Voluntary Reductions and Reimbursements) (as a percentage of Portfolio average daily net assets)(1)
Rule Total Portfolio Management 12b-1 Other Annual Portfolio Fees Fees Expenses Expenses - --------------------------------------------------------------------------------------------------------------------------------- AIM V.I. Capital Appreciation Fund 0.61% N/A 0.21% 0.82% - -------------------------------------------------------------------------------------------------------------------------------- AIM V.I. Diversified Income Fund 0.60% N/A 0.30% 0.90% - -------------------------------------------------------------------------------------------------------------------------------- AIM V.I. Global Utilities Fund 0.65% N/A 0.45% 1.10% - -------------------------------------------------------------------------------------------------------------------------------- AIM V.I. Government Securities Fund 0.50% N/A 0.47% 0.97% - -------------------------------------------------------------------------------------------------------------------------------- AIM V.I. Growth Fund 0.61% N/A 0.22% 0.83% - -------------------------------------------------------------------------------------------------------------------------------- AIM V.I. Growth and Income Fund 0.60% N/A 0.24% 0.84% - -------------------------------------------------------------------------------------------------------------------------------- AIM V.I. International Equity Fund 0.73% N/A 0.29% 1.02% - -------------------------------------------------------------------------------------------------------------------------------- AIM V.I. Value Fund 0.61% N/A 0.23% 0.84% - -------------------------------------------------------------------------------------------------------------------------------- American Century VP Balanced Fund 0.90% N/A N/A 0.90% - --------------------------------------------------------------------------------------------------------------------------------- American Century VP International Fund (2) 1.23% N/A N/A 1.23% - -------------------------------------------------------------------------------------------------------------------------------- The Dreyfus Socially Responsible Growth Fund, Inc.: Initial Shares 0.75% N/A 0.03% 0.78% - -------------------------------------------------------------------------------------------------------------------------------- Dreyfus Stock Index Fund: Initial Shares 0.25% N/A 0.01% 0.26% - -------------------------------------------------------------------------------------------------------------------------------- Dreyfus VIF -- Growth & Income Portfolio: Initial Shares 0.75% N/A 0.03% 0.78% - -------------------------------------------------------------------------------------------------------------------------------- Dreyfus VIF -- Money Market Portfolio 0.50% N/A 0.10% 0.60% - -------------------------------------------------------------------------------------------------------------------------------- Dreyfus VIF -- Small Company Stock Portfolio: Initial Shares 0.75% N/A 0.18% 0.93% - -------------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Contrafund Portfolio (3,4) 0.57% N/A 0.09% 0.66% - -------------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Equity-Income Portfolio (3,4) 0.48% N/A 0.08% 0.56% - -------------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Growth Portfolio (3,4) 0.57% N/A 0.08% 0.65% - -------------------------------------------------------------------------------------------------------------------------------- Fidelity VIP High Income Portfolio (3) 0.58% N/A 0.10% 0.68% - -------------------------------------------------------------------------------------------------------------------------------- MFS Emerging Growth Series (5) 0.75% N/A 0.10% 0.85% - -------------------------------------------------------------------------------------------------------------------------------- MFS Limited Maturity Series (5,6,7) 0.55% N/A 0.47% 1.02% - --------------------------------------------------------------------------------------------------------------------------------- (1) Figures shown in the Table are for the year ended December 31, 2000 (except as otherwise noted). (2) The Fund has a stepped fee schedule. As a result, the Fund's management fee rate generally decreases as fund assets increase. The annualized fee schedule for the Fund is as follows: 1.50% on the first $250 million, 1.20% on the next $250 million, and 1.10% over $500 million. (3) Initial Class (4) Actual annual class operating expenses were lower because a portion of the brokerage commissions that the fund paid was used to reduce the fund's expenses, and/or because through arrangements with the fund's custodian, credits realized as a result of uninvested cash balances were used to reduce a portion of the fund's custodian expenses. See the accompanying fund prospectus for details. (5) Each series has an expense offset arrangement that reduces the series' custodian fee based upon the amount of cash maintained by the series with its custodian and dividend disbursing agent. The series may enter into other similar arrangements and directed brokerage arrangements, which would also have the effect of reducing the series' expenses. "Other Expenses" do not take into account these expense reductions, and are therefore higher than the actual expenses of the series. Had these fee reductions been taken into account, "Total Portfolio Annual Expenses" would be lower, and for service class shares would be estimated to be: 0.84%% for Emerging Growth Series, and 1.00% for Limited Maturity Series. (6) MFS has contractually agreed, subject to reimbursement, to bear the series' expenses such that "Other Expenses" (after taking into account the expense offset arrangement described above) do not exceed 0.45% annually. These contractual fee arrangements will continue until at least May 1, 2002, unless changed with the consent of the board of trustees which oversees the series. (7) Not available to new investors. 8 PROSPECTUS EXAMPLE 1 The example below shows the dollar amount of expenses that you would bear directly or indirectly if you: - invested $1,000 in a Variable Sub-Account, - earned a 5% annual return on your investment, - surrendered your Contract at the end of each time period, and - elected the Enhanced Death Benefit Rider. THE EXAMPLE DOES NOT INCLUDE ANY TAXES OR TAX PENALTIES YOU MAY BE REQUIRED TO PAY IF YOU SURRENDER YOUR CONTRACT. 1 Year 3 Years 5 Years 10 Years - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Capital Appreciation $75 $116 $152 $269 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Diversified Income $76 $119 $156 $277 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Global Utilities $78 $125 $166 $298 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Government Securities $77 $121 $159 $285 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Growth and Income $75 $117 $153 $271 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Growth $75 $117 $152 $270 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. International Equity $77 $122 $162 $290 - ---------------------------------------------------------------------------------------------------------------------------- AIM V.I. Value $75 $117 $153 $271 - ----------------------------------------------------------------------------------------------------------------------------- American Century VP Balanced $76 $119 $156 $277 - ----------------------------------------------------------------------------------------------------------------------------- American Century VP International $79 $129 $173 $311 - ----------------------------------------------------------------------------------------------------------------------------- The Drefyus Socially Responsible Growth: Initial Shares $75 $115 $150 $265 - ----------------------------------------------------------------------------------------------------------------------------- Dreyfus Stock Index: Initial Shares $69 $ 99 $123 $210 - ----------------------------------------------------------------------------------------------------------------------------- Dreyfus VIF -- Growth & Income: Initial Shares $75 $115 $150 $265 - ----------------------------------------------------------------------------------------------------------------------------- Dreyfus VIF -- Money Market $73 $110 $140 $246 - ----------------------------------------------------------------------------------------------------------------------------- Dreyfus VIF -- Small Company Stock: Initial Shares $76 $120 $157 $280 - ----------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Contrafund $73 $111 $143 $253 - ----------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Equity-Income $72 $108 $138 $242 - ----------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Growth $73 $111 $143 $252 - ----------------------------------------------------------------------------------------------------------------------------- Fidelity VIP High Income $74 $112 $144 $255 - ----------------------------------------------------------------------------------------------------------------------------- MFS Emerging Growth $75 $117 $153 $272 - ----------------------------------------------------------------------------------------------------------------------------- MFS Limited Maturity* $77 $122 $162 $290 - ------------------------------------------------------------------------------------------------------------------------------
*Not available to new investors 9 PROSPECTUS EXAMPLE 2 Same assumptions as Example 1 above, except that you decided not to surrender your Contract.
1 Year 3 Years 5 Years 10 Years - ---------------------------------------------------------------------------------------------------------------------------- AIM V.I. Capital Appreciation $24 $ 74 $126 $269 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Diversified Income $25 $ 76 $130 $277 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Global Utilities $27 $ 82 $141 $298 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Government Securities $26 $ 78 $134 $285 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Growth and Income $24 $ 74 $127 $271 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Growth $24 $ 74 $127 $270 - ---------------------------------------------------------------------------------------------------------------------------- AIM V.I. International Equity $26 $ 80 $136 $290 - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. Value $24 $ 74 $127 $271 - ----------------------------------------------------------------------------------------------------------------------------- American Century VP Balanced $25 $ 76 $130 $277 - ----------------------------------------------------------------------------------------------------------------------------- American Century VP International $28 $ 86 $147 $311 - ----------------------------------------------------------------------------------------------------------------------------- The Drefyus Socially Responsible Growth: Initial Shares $24 $ 73 $124 $265 - ----------------------------------------------------------------------------------------------------------------------------- Dreyfus Stock Index: Initial Shares $18 $ 56 $ 97 $210 - ----------------------------------------------------------------------------------------------------------------------------- Dreyfus VIF -- Growth & Income: Initial Shares $24 $ 73 $124 $265 - ----------------------------------------------------------------------------------------------------------------------------- Dreyfus VIF -- Money Market $22 $ 67 $115 $246 - ----------------------------------------------------------------------------------------------------------------------------- Dreyfus VIF -- Small Company Stock: Initial Shares $25 $ 77 $132 $280 - ----------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Contrafund $22 $ 69 $118 $253 - ---------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Equity-Income $21 $ 66 $113 $242 - ---------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Growth $22 $ 69 $117 $252 - ---------------------------------------------------------------------------------------------------------------------------- Fidelity VIP High Income $23 $ 70 $119 $255 - ---------------------------------------------------------------------------------------------------------------------------- MFS Emerging Growth $24 $ 75 $128 $272 - --------------------------------------------------------------------------------------------------------------------------- MFS Limited Maturity* $26 $ 80 $136 $290 - ------------------------------------------------------------------------------------------------------------------------------
*Not available to new investors PLEASE REMEMBER THAT YOU ARE LOOKING AT EXAMPLES AND NOT A REPRESENTATION OF PAST OR FUTURE EARNINGS. YOUR ACTUAL EXPENSES MAY BE LOWER OR GREATER THAN THOSE SHOWN ABOVE. SIMILARLY, YOUR RATE OF RETURN MAY BE LOWER OR GREATER THAN 5%, WHICH IS NOT GUARANTEED. THE EXAMPLES ASSUME THAT ANY PORTFOLIO EXPENSE WAIVERS OR REIMBURSEMENT ARRANGEMENTS DESCRIBED IN THE FOOTNOTES TO THE PORTFOLIOS ANNUAL EXPENSE TABLE ARE IN EFFECT FOR THE PERIODS PRESENTED ABOVE. THE ABOVE EXAMPLES ASSUME THE ELECTION OF THE ENHANCED DEATH BENEFIT RIDER WITH A MORTALITY AND EXPENSE RISK CHARGE OF 1.35%. IF THAT RIDER WERE NOT ELECTED, THE EXPENSE FIGURES SHOWN ABOVE WOULD BE SLIGHTLY LOWER. TO REFLECT THE CONTRACT MAINTENANCE CHARGE IN THE EXAMPLES, WE ESTIMATED AN EQUIVALENT PERCENTAGE CHARGE, BASED ON THE CURRENT AVERAGE CONTRACT SIZE OF $47,490. 10 PROSPECTUS FINANCIAL INFORMATION - ------------------------------------------------------------------- To measure the value of your investment in the Variable Sub-Accounts during the Accumulation Phase, we use a unit of measure we call the "ACCUMULATION UNIT." Each Variable Sub-Account has a separate value for its Accumulation Units we call "ACCUMULATION UNIT VALUE." Accumulation Unit Value is analogous to, but not the same as, the share price of a mutual fund. Attached as Appendix A to this prospectus are tables showing the Accumulation Unit Values of each Variable Sub-Account since the date the Contracts were first offered. To obtain a fuller picture of each Variable Sub-Account's finances, please refer to the Variable Account's financial statements contained in the Statement of Additional Information. The financial statements of Glenbrook also appear in the Statement of Additional Information. 11 PROSPECTUS THE CONTRACT - ------------------------------------------------------------------- CONTRACT OWNER The Glenbrook Provider 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 dies, and - - any other rights that the Contract provides. If you die, any surviving Contract Owner, or, if none, the Beneficiary may exercise the rights and privileges provided to them by the Contract. The Contract cannot be jointly owned by both a non-natural person and a natural person. The maximum age of the oldest Contract Owner, or Annuitant if the Owner is a non-natural person, cannot exceed 90 as of the date we receive the completed application. You may change the Contract Owner at any time. We will provide a change of ownership form to be signed by you and filed with us. After we accept the form, the change of ownership will be effective as of the date you signed the form. Until we receive your written notice to change the Contract Owner, we are entitled to rely on the most recent ownership information in our files. We will not be liable as to any payment or settlement made prior to receiving the written notice. Accordingly, if you wish to change the Contract Owner, you should deliver your written notice to us promptly. Each change is subject to any payment made by us or any other action we take before we accept the change. You can use the Contract with or without a qualified plan. A qualified plan is a personal retirement savings plan, such as an IRA or tax-sheltered annuity, that meets the requirements of the Internal Revenue Code. Qualified plans may limit or modify your rights and privileges under the Contract. We use the term "Qualified Contract" to refer to a Contract issued with a qualified plan. See "Qualified Plans" on page 28. ANNUITANT The Annuitant is the individual whose life determines the amount and duration of income payments (other than under Income Plans with guaranteed payments for a specified period). You initially designate an Annuitant in your application. You may change the Annuitant at any time prior to the Payout Start Date (only if the Contract Owner is a natural person). Once we accept a change, it takes effect as of the date you signed the request. Each change is subject to any payment we make or other action we take before we accept it. You may designate a joint Annuitant, who is a second person on whose life income payments depend at the time you select an Income Plan. We permit joint Annuitants only on or after the Payout Start Date. If the Annuitant dies prior to the Payout Start Date, the new Annuitant will be: (i) the youngest Contract Owner; otherwise, (ii) the youngest Beneficiary. BENEFICIARY The Beneficiary is the person selected by the Contract Owner to receive the death benefits or become the new Contract Owner if the sole surviving Contract Owner dies before the Payout Start Date. If the sole surviving Contract Owner dies after the Payout Start Date, the primary Beneficiary, or if none surviving, the contingent Beneficiary, will receive any guaranteed income payments scheduled to continue. You may name one or more primary and contingent Beneficiaries when you apply for a Contract. The primary Beneficiary is the person who may elect to receive the death benefit or become the new Contract Owner if the sole surviving Contract Owner dies before the Payout Start Date. A contingent Beneficiary is the person selected by the Contract Owner who will become the Beneficiary if all named primary Beneficiaries die before the death of the sole surviving Contract Owner. You may change or add Beneficiaries at any time, unless you have designated an irrevocable Beneficiary. We will provide a change of Beneficiary form to be signed by you and filed with us. After we accept the form, the change of Beneficiary will be effective as of the date you signed the form. Until we receive your written notice to change a Beneficiary, we are entitled to rely on the most recent Beneficiary information in our files. We will not be liable as to any payment or settlement made prior to receiving the written notice. Accordingly, if you wish to change your Beneficiary, you should deliver your written notice to us promptly. Each change is subject to any payment made by us or any other action we take before we accept the change. 12 PROSPECTUS If you did not name a Beneficiary or, unless otherwise provided in the Beneficiary designation, if a named Beneficiary is no longer living and there are no other surviving Beneficiaries or Contingent Beneficiaries, the new Beneficiary will be: - - your spouse or, if he or she is no longer alive, - - your surviving children equally, or if you have no surviving children, - - your estate. If one or more Beneficiaries survive you (or survives the Annuitant, if the Contract Owner is not a natural person), we will divide the death benefit among the surviving Beneficiaries according to your most recent written instructions. If you have not given us written instructions, we will pay the death benefit in equal amounts to the surviving Beneficiaries. MODIFICATION OF THE CONTRACT Only a Glenbrook officer may approve a change in or waive any provision of the Contract. Any change or waiver must be in writing. None of our agents has the authority to change or waive the provisions of the Contract. We may not change the terms of the Contract without your consent, except to conform the Contract to applicable law or changes in the law. If a provision of the Contract is inconsistent with state law, we will follow state law. ASSIGNMENT We will not honor an assignment of an interest in a Contract as collateral or security for a loan. However, you may assign periodic income payments under the Contract prior to the Payout Start Date. No Beneficiary may assign benefits under the Contract until they are payable to the Beneficiary. We will not be bound by any assignment until the assignor signs it and files it with us. We are not responsible for the validity of any assignment. Federal law prohibits or restricts the assignment of benefits under many types of retirement plans and the terms of such plans may themselves contain restrictions on assignments. An assignment may also result in taxes or tax penalties. YOU SHOULD CONSULT WITH AN ATTORNEY BEFORE TRYING TO ASSIGN YOUR CONTRACT. PURCHASES - ------------------------------------------------------------------- MINIMUM PURCHASE PAYMENTS Your initial purchase payment must be at least $3,000 ($2,000 for a Qualified Contract). All subsequent purchase payments must be $50 or more. You may make purchase payments at any time prior to the Payout Start Date. We reserve the right to limit the maximum amount of purchase payments we will accept. AUTOMATIC ADDITIONS PROGRAM You may make subsequent purchase payments by automatically transferring money from your bank account. Consult your sales representative for more detailed information. ALLOCATION OF PURCHASE PAYMENTS At the time you apply for a Contract, you must decide how to allocate your purchase payments among the investment alternatives. The allocation you specify on your application will be effective immediately. All allocations must be in whole percents that total 100% or in whole dollars. You can change your allocations by notifying us in writing. We will allocate your purchase payments to the investment alternatives according to your most recent instructions on file with us. Unless you notify us in writing otherwise, we will allocate subsequent purchase payments according to the allocation for the previous purchase payment. We will effect any change in allocation instructions at the time we receive written notice of the change in good order. We will credit the initial purchase payment that accompanies your completed application to your Contract within 2 business days after we receive the payment at our home office. If your application is incomplete, we will ask you to complete your application within 5 business days. If you do so, we will credit your initial purchase payment to your Contract within that 5 business day period. If you do not, we will return your purchase payment at the end of the 5 business day period unless you expressly allow us to hold it until you complete the application. We will credit subsequent purchase payments to the Contract at the close of the business day on which we receive the purchase payment at our headquarters. We are open for business each day Monday through Friday that the New York Stock Exchange is open for business. We also refer to these days as "VALUATION DATES." Our business day closes when the New York Stock Exchange closes, usually 4 p.m. Eastern Time (3 p.m. Central Time). If we receive your purchase 13 PROSPECTUS payment after 3 p.m. Central Time on any Valuation Date, we will credit your purchase payment using the Accumulation Unit Values computed on the next Valuation Date. RIGHT TO CANCEL You may cancel the Contract by returning it to us within the Cancellation Period, which is the 20 day period after you receive the Contract, or a longer period should your state require it. You may return your Contract by delivering it or mailing it to us. If you exercise this "RIGHT TO CANCEL," the Contract terminates and we will pay you the full amount of your purchase payments allocated to the Fixed Account. We also will return your purchase payments allocated to the Variable Account adjusted, to the extent federal or state law permits, to reflect investment gain or loss that occurred from the date of allocation through the date of cancellation. Some states may require us to return a greater amount. In states where we are required to refund purchase payments, we reserve the right during the Cancellation Period to invest any purchase payments you allocated to a Variable Sub-Account to the Money Market Variable Sub-Account available under the Contract. We will notify you if we do so. At the end of the Cancellation Period, you may then allocate your money to other Variable Sub-Accounts. CONTRACT VALUE - ------------------------------------------------------------------- Your Contract Value at any time during the Accumulation Phase is equal to the sum of the value of your Accumulation Units in the Variable Sub-Accounts you have selected, plus the value of your Fixed Account Options. ACCUMULATION UNITS To determine the number of Accumulation Units of each Variable Sub-Account to credit to your Contract, we divide (i) the amount of the purchase payment Accumulation Units you have allocated to a Variable Sub-Account by (ii) the Accumulation Unit Value of that Variable Sub-Account next computed after we receive your payment or transfer. For example, if we receive a $10,000 purchase payment allocated to a Variable Sub-Account when the Accumulation Unit Value for the Sub-Account is $10, we would credit 1,000 Accumulation Units of that Variable Sub-Account to your Contract. Withdrawals and transfers from a Variable Sub-Account would, of course, reduce the number of Accumulation Units of that Sub-Account allocated to your Contract. ACCUMULATION UNIT VALUE As a general matter, the Accumulation Unit Value for each Variable Sub-Account will rise or fall to reflect: - - changes in the share price of the Portfolio in which the Variable Sub-Account invests, and - - the deduction of amounts reflecting the mortality and expense risk charge, administrative expense charge, and any provision for taxes that have accrued since we last calculated the Accumulation Unit Value. We determine contract maintenance charges, withdrawal charges, and transfer fees (currently waived) separately for each Contract. They do not affect Accumulation Unit Value. Instead, we obtain payment of those charges and fees by redeeming Accumulation Units. For details on how we calculate Accumulation Unit Value, please refer to the Statement of Additional Information. We determine a separate Accumulation Unit Value for each Variable Sub-Account on each Valuation Date. We also determine a separate set of Accumulation Unit Values reflecting the cost of the Enhanced Death Benefit Rider and the Enhanced Death and Income Benefit Combination Rider described on page below. YOU SHOULD REFER TO THE PROSPECTUSES FOR THE FUNDS THAT ACCOMPANY THIS PROSPECTUS FOR A DESCRIPTION OF HOW THE ASSETS OF EACH PORTFOLIO ARE VALUED, SINCE THAT DETERMINATION DIRECTLY BEARS ON THE ACCUMULATION UNIT VALUE OF THE CORRESPONDING VARIABLE SUB-ACCOUNT AND, THEREFORE, YOUR CONTRACT VALUE. 14 PROSPECTUS INVESTMENT ALTERNATIVES: THE VARIABLE SUB-ACCOUNTS - ------------------------------------------------------------------- You may allocate your purchase payments to up to 20 Variable Sub-Accounts. Each Variable Sub-Account invests in the shares of a corresponding Portfolio. Each Portfolio has its own investment objective(s) and policies. We briefly describe the Portfolios below. For more complete information about each Portfolio, including expenses and risks associated with the Portfolio, please refer to the accompanying prospectuses for the Funds. You should carefully review the Fund prospectuses before allocating amounts to the Variable Sub-Accounts.
PORTFOLIO: EACH PORTFOLIO SEEKS: INVESTMENT ADVISOR: AIM VARIABLE INSURANCE FUNDS* AIM V.I. Capital Appreciation Fund Growth of capital A I M Advisors, Inc. AIM V.I. Diversified Income Fund A high level of current income AIM V.I. Global Utilities Fund A high level of current income and secondarily, growth of capital AIM V.I. Government Securities Fund A high level of current income consistent with a reasonable concern for safety of principal AIM V.I. Growth Fund Growth of capital AIM V.I. Growth and Income Fund Growth of capital with a secondary objective of current income AIM V.I. International Equity Fund Long-term growth of capital AIM V.I. Value Fund Long-term growth of capital and income as a secondary objective AMERICAN CENTURY VARIABLE PORTFOLIOS (VP), INC. American Century VP Balanced Long-term capital growth and current American Century income Investment Management, American Century VP International Long-term capital growth Inc. THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.; THE DREYFUS STOCK INDEX FUND; AND THE DREYFUS VARIABLE INVESTMENT FUND (VIF) (COLLECTIVELY, THE DREYFUS FUNDS) The Dreyfus Socially Responsible Capital growth and, secondarily, Growth Fund, Inc. current income Dreyfus Stock Index Fund To match the total return of the Standard & Poor's-C- 500 Composite Stock Price Index Dreyfus VIF Growth & Income Portfolio Long-term capital growth, current income and growth of income, consistent with reasonable investment The DreyfusCorporation risk Dreyfus VIF Money Market Portfolio A high level of current income as is consistent with the preservation of capital and the maintenance of liquidity Dreyfus VIF Small Company Stock Investment returns (consisting of Portfolio capital appreciation and income) that are greater than the total return performance of stocks represented by the Russell 2500-TM-Stock Index ("Russell 2500") FIDELITY VARIABLE INSURANCE PRODUCTS FUND Fidelity VIP Long-term capital appreciation Fidelity Management Contrafund-Registered Trademark- & Portfolio Research Company Fidelity VIP Equity-Income Portfolio Reasonable income Fidelity VIP Growth Portfolio Capital appreciation Fidelity VIP High Income Portfolio High level of current income while also considering growth of capital MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST-SM- MFS Emerging Growth Series Long-term growth of capital MFS Investment Management-Registered Trademark MFS Limited Maturity Series** Provide as high a level of current income as is believed to be consistent with prudent investment risk. Secondary objective is to protect shareholders' capital.
* A Portfolio's investment objective may be changed by the Fund's Board of Trustees without shareholder approval. ** Not available to new investors. 15 PROSPECTUS AMOUNTS YOU ALLOCATE TO VARIABLE SUB-ACCOUNTS MAY GROW IN VALUE, DECLINE IN VALUE, OR GROW LESS THAN YOU EXPECT, DEPENDING ON THE INVESTMENT PERFORMANCE OF THE PORTFOLIOS IN WHICH THOSE VARIABLE SUB-ACCOUNTS INVEST. YOU BEAR THE INVESTMENT RISK THAT THE PORTFOLIOS MIGHT NOT MEET THEIR INVESTMENT OBJECTIVES. SHARES OF THE PORTFOLIOS ARE NOT DEPOSITS, OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY ANY BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. VARIABLE INSURANCE TRUST PORTFOLIOS MAY NOT BE MANAGED BY THE SAME PORTFOLIO MANAGERS WHO MANAGE RETAIL MUTUAL FUNDS WITH SIMILAR NAMES. THESE PORTFOLIOS ARE LIKELY TO DIFFER FROM RETAIL FUNDS IN ASSETS, CASH FLOW, AND TAX MATTERS. ACCORDINGLY, THE HOLDINGS AND INVESTMENT RESULTS OF A PORTFOLIO CAN BE EXPECTED TO BE HIGHER OR LOWER THAN THE INVESTMENT RESULTS OF RETAIL MUTUAL FUNDS. INVESTMENT ALTERNATIVES: THE FIXED ACCOUNT OPTIONS - ------------------------------------------------------------------- You may allocate all or a portion of your purchase payments to the Fixed Account. You may choose from among 2 Fixed Account Options including a dollar cost averaging option and the option to invest in one or more Guarantee Periods included in the Guaranteed Maturity Fixed Account. The Fixed Account Options may not be available in all states. Please consult with your sales representative for current information. The Fixed Account supports our insurance and annuity obligations. The Fixed Account consists of our general assets other than those in segregated asset accounts. We have sole discretion to invest the assets of the Fixed Account, subject to applicable law. Any money you allocate to a Fixed Account Option does not entitle you to share in the investment experience of the Fixed Account. DOLLAR COST AVERAGING FIXED ACCOUNT OPTIONS DOLLAR COST AVERAGING FIXED ACCOUNT OPTION. Purchase payments that you allocate to the Dollar Cost Averaging Fixed Account Option ("DCA Fixed Account Option") will earn interest for a one year period at the current rate in effect at the time of allocation. We will credit interest daily at a rate that will compound over the year to the annual interest rate we guaranteed at the time of allocation. After the one year period, we will declare a renewal rate which we guarantee for a full year. Subsequent renewal dates will be every twelve months for each payment or transfer. For each purchase payment, the first transfer from the Fixed Account must occur within one month of the date of payment. If we do not receive an allocation from you within one month of the date of payment, the payment plus associated interest will be transferred to the Money Market Variable Sub-Account in equal monthly installments using the longest transfer period being offered at the time the purchase payment is made. Transferring Account Value to the Money Market Variable Sub-Account in this manner may not be consistent with the theory of dollar cost averaging described on page 19. You must transfer each purchase payment and all its earnings out of this Option by means of dollar cost averaging within 36 months of payment. At the end of 36 months, any nominal amounts remaining in the DCA Fixed Account will be allocated to the Money Market Variable Sub-Account. No transfers are permitted into the DCA Fixed Account. We bear the investment risk for all amounts allocated to the DCA Fixed Account Option. That is because we guarantee the current and renewal interest rates we credit to the amounts you allocate to this Option, which will never be less than the minimum guaranteed rate in the Contract. Currently, we determine, in our sole discretion, the amount of interest credited in excess of the guaranteed rate. We may declare more than one interest rate for different monies based upon the date of allocation to the DCA Fixed Account Option. For current interest rate information, please contact your sales representative or Glenbrook customer service at 1-800-755-5275. GUARANTEE PERIODS Each payment or transfer allocated to a Guarantee Period earns interest at a specified rate that we guarantee for a period of years. Guarantee Periods may range from 1 to 10 years. We are currently offering Guarantee Periods of 1, 3, 5, 7, and ten years in length. In the future, we may offer Guarantee Periods of different lengths or stop offering some Guarantee Periods. You select the Guarantee Period for each payment or transfer. If you do not select a Guarantee Period, we will assign the same period(s) you selected for your most recent purchase payment. 16 PROSPECTUS Each payment or transfer allocated to a Guarantee Period must be at least $50. We reserve the right to limit the number of additional purchase payments that you may allocate to this Option. INTEREST RATES. We will tell you what interest rates and Guarantee Periods we are offering at a particular time. We will not change the interest rate that we credit to a particular allocation until the end of the relevant Guarantee Period. We may declare different interest rates for Guarantee Periods of the same length that begin at different times. We have no specific formula for determining the rate of interest that we will declare initially or in the future. We will set those interest rates based on investment returns available at the time of the determination. In addition, we may consider various other factors in determining interest rates including regulatory and tax requirements, our sales commission and administrative expenses, general economic trends, and competitive factors. WE DETERMINE THE INTEREST RATES TO BE DECLARED IN OUR SOLE DISCRETION. WE CAN NEITHER PREDICT NOR GUARANTEE WHAT THOSE RATES WILL BE IN THE FUTURE. For current interest rate information, please contact your sales representative or Glenbrook at 1-800-755-5275. HOW WE CREDIT INTEREST. We will credit interest daily to each amount allocated to a Guarantee Period at a rate that compounds to the annual interest rate that we declared at the beginning of the applicable Guarantee Period. The following example illustrates how a purchase payment allocated to a Guaranteed Period would grow, given an assumed Guarantee Period and annual interest rate: Purchase Payment............................................ $10,000 Guarantee Period............................................ 5 years Annual Interest Rate........................................ 4.50%
END OF CONTRACT YEAR YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 ---------- ---------- ---------- ---------- ----------- Beginning Contract Value......................$10,000.00 X (1 + Annual Interest Rate) 1.045 ---------- $10,450.00 Contract Value at end of Contract Year........ $10,450.00 X (1 + Annual Interest Rate) 1.045 ---------- $10,920.25 Contract Value at end of Contract Year........ $10,920.25 X (1 + Annual Interest Rate) 1.045 ---------- $11,411.66 Contract Value at end of Contract Year........ $11,411.66 X (1 + Annual Interest Rate) 1.045 ---------- $11,925.19 Contract Value at end of Contract Year........ $11,925.19 X (1 + Annual Interest Rate) 1.045 --------- $12,461.82
TOTAL INTEREST CREDITED DURING GUARANTEE PERIOD = $2,461.82 ($12,461.82-$10,000) This example assumes no withdrawals during the entire 5-year Guarantee Period. If you were to make a withdrawal, you may be required to pay a withdrawal charge. In addition, the amount withdrawn may be increased or decreased by a Market Value Adjustment that reflects changes in interest rates since the time you invested the amount withdrawn. The hypothetical interest rate is for illustrative purposes only and is not intended to predict future interest rates to be declared under the Contract. Actual interest rates declared for any given Guarantee Period may be more or less than shown above. RENEWALS. Prior to the end of each Guarantee Period, we will mail you a notice asking you what to do with your money, including the accrued interest. During the 30-day period after the end of the Guarantee Period, you may: 1) take no action. We will automatically apply your money to a new Guarantee Period of the same length as the expiring Guarantee Period. The new Guarantee Period will begin on the day the previous Guarantee Period ends. The new interest rate will be our then current declared rate for a Guarantee Period of that length; or 2) instruct us to apply your money to one or more new Guarantee Periods of your choice. The new Guarantee Period(s) will begin on the day the previous Guarantee Period ends. 17 PROSPECTUS The new interest rate will be our then current declared rate for those Guarantee Periods; or 3) instruct us to transfer all or a portion of your money to one or more Variable Sub-Accounts of the Variable Account. We will effect the transfer on the day we receive your instructions. We will not adjust the amount transferred to include a Market Value Adjustment; or 4) withdraw all or a portion of your money. You may be required to pay a withdrawal charge, but we will not adjust the amount withdrawn to include a Market Value Adjustment. You may also be required to pay premium taxes and withholding, if applicable. We will pay interest from the day the Guarantee Period expired until the date of withdrawal. The interest will be the rate for the shortest Guarantee Period then being offered. Amounts not withdrawn will be applied to a new Guarantee Period of the same length as the previous Guarantee Period. The new Guarantee Period will begin on the day the previous Guarantee Period ends. MARKET VALUE ADJUSTMENT. All withdrawals and transfers from a Guarantee Period, other than those taken during the 30 day period after such Guarantee Period expires, are subject to a Market Value Adjustment. A Market Value Adjustment also may apply upon payment of a death benefit and when you apply amounts currently invested in a Guarantee Period to an Income Plan (unless paid or applied during the 30-day period after such Guarantee Period expires). We also will not apply a Market Value Adjustment to a withdrawal you make within the Free Withdrawal Amount as described on page 21. We apply the Market Value Adjustment to reflect changes in interest rates from the time you first allocate money to a Guarantee Period to the time you remove it from that Guarantee Period. We calculate the Market Value Adjustment by comparing the Treasury Rate for a period equal to the Guarantee Period at its inception to the Treasury Rate for a period equal to the Guarantee Period when you remove your money. "Treasury Rate" means the U.S. Treasury Note Constant Maturity Yield as reported in Federal Reserve Bulletin Release H.15. The Market Value Adjustment may be positive or negative, depending on changes in interest rates. As such, you bear the investment risk associated with changes in interest rates. If interest rates increase significantly, the Market Value Adjustment and any withdrawal charge, premium taxes, and income tax withholding (if applicable) could reduce the amount you receive upon full withdrawal from a Guaranteed Period to an amount that is less than the purchase payment applied to that period plus interest earned under the Contract. Generally, if the original Treasury Rate at the time you allocate money to a Guarantee Period is higher than the applicable current Treasury Rate for a period equal to the Guarantee Period, then the Market Value Adjustment will result in a higher amount payable to you, transferred or applied to an Income Plan. Conversely, if the Treasury Rate at the time you allocate money to a Guarantee Period is lower than the applicable Treasury Rate for a period equal to the Guarantee Period, then the Market Value Adjustment will result in a lower amount payable to you, transferred or applied to an Income Plan. For example, assume that you purchase a Contract and you select an initial Guarantee Period of 5 years and the 5-year Treasury Rate for that duration is 4.50%. Assume that at the end of 3 years, you make a partial withdrawal. If, at that later time, the current 5-year Treasury Rate is 4.20%, then the Market Value Adjustment will be positive, which will result in an increase in the amount payable to you. Conversely, if the current 5-year Treasury Rate is 4.80%, then the Market Value Adjustment will be negative, which will result in a decrease in the amount payable to you. The formula for calculating Market Value Adjustments is set forth in Appendix B to this prospectus, which also contains additional examples of the application of the Market Value Adjustment. INVESTMENT ALTERNATIVES: TRANSFERS - ------------------------------------------------------------------- TRANSFERS DURING THE ACCUMULATION PHASE During the Accumulation Phase, you may transfer Contract Value among the investment alternatives. You may request transfers in writing on a form that we provide or by telephone according to the procedure described below. The minimum amount that you may transfer into a Guarantee Period is $50. We currently 18 PROSPECTUS do not assess, but reserve the right to assess, a $10 charge on each transfer in excess of 12 per Contract Year. We treat transfers to or from more than one Portfolio on the same day as one transfer. We will process transfer requests that we receive before 3:00 p.m. Central Time on any Valuation Date using the Accumulation Unit Values for that Date. We will process requests completed after 3:00 p.m. Central Time on any Valuation Date using the Accumulation Unit Values for the next Valuation Date. The Contract permits us to defer transfers from the Fixed Account for up to six months from the date we receive your request. If we decide to postpone transfers for 30 days or more, we will pay interest as required by applicable law. Any interest would be payable from the date we receive the transfer request to the date we make the transfer. If you transfer an amount from a Guarantee Period other than during the 30 day period after such Guarantee Period expires, we will increase or decrease the amount by a Market Value Adjustment. We reserve the right to waive any transfer restrictions. TRANSFERS DURING THE PAYOUT PHASE During the Payout Phase, you may make transfers among the Variable Sub-Accounts so as to change the relative weighting of the Variable Sub-Accounts on which your variable income payments will be based. In addition, you will have a limited ability to make transfers from the Variable Sub-Accounts to increase the proportion of your income payments consisting of fixed income payments. You may not, however, convert any portion of your right to receive fixed income payments into variable income payments. If you choose an Income Plan that depends on any person's life, you may not make any transfers for the first 6 months after the Payout Start Date. Thereafter, you may make transfers among the Variable Sub-Accounts or make transfers from the Variable Sub-Accounts to increase the proportion of your income payments consisting of fixed income payments. Your transfers must be at least 6 months apart. TELEPHONE TRANSFERS You may make transfers by telephone by calling 1-800-755-5275. The cut-off time for telephone transfer requests is 3:00 p.m. Central time. In the event that the New York Stock Exchange closes early, i.e., before 3:00 p.m. Central Time, or in the event that the Exchange closes early for a period of time but then reopens for trading on the same day, we will process telephone transfer requests as of the close of the Exchange on that particular day. We will not accept telephone requests received at any telephone number other than the number that appears in this paragraph or received after the close of trading on the Exchange. We may suspend, modify or terminate the telephone transfer privilege at any time without notice. We use procedures that we believe provide reasonable assurance that the telephone transfers are genuine. For example, we tape telephone conversations with persons purporting to authorize transfers and request identifying information. Accordingly, we disclaim any liability for losses resulting from allegedly unauthorized telephone transfers. However, if we do not take reasonable steps to help ensure that a telephone authorization is valid, we may be liable for such losses. DOLLAR COST AVERAGING PROGRAM Through our Dollar Cost Averaging Program, you may automatically transfer a fixed dollar amount every month during the Accumulation Phase from the Dollar Cost Averaging Fixed Account, to any Variable Sub-Account. You may not use the Dollar Cost Averaging Program to transfer amounts to the Guarantee Periods. We will not charge a transfer fee for transfers made under this Program, nor will such transfer count against the 12 transfers you can make each Contract Year without paying a transfer fee. The theory of dollar cost averaging is that if purchases of equal dollar amounts are made at fluctuating prices, the aggregate average cost per unit will be less than the average of the unit prices on the same purchase dates. However, participation in this Program does not assure you of a greater profit from your purchases under the Program nor will it prevent or necessarily reduce losses in a declining market. Call or write us for instructions on how to enroll. AUTOMATIC PORTFOLIO REBALANCING PROGRAM Once you have allocated your money among the Variable Sub-Accounts, the performance of each Sub-Account may cause a shift in the percentage you allocated to each Sub-Account. If you select our Automatic Portfolio Rebalancing Program, we will automatically rebalance the Contract Value in each Variable Sub-Account and return it to the desired percentage allocations. We will not include money you allocate to the Fixed Account Options in the Automatic Portfolio Rebalancing Program. We will rebalance your account 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 19 PROSPECTUS rebalancing that occurs after we receive your request. We are not responsible for rebalancing that occurs prior to receipt of your request. Example: Assume that you want your initial purchase payment split among two Variable Sub-Accounts. You want 40% to be in the AIM V.I. Value Variable Sub-Account and 60% to be in the AIM V.I. Growth Variable Sub-Account. Over the next 2 months the bond market does very well while the stock market performs poorly. At the end of the first quarter, the AIM V.I. Value Variable SubAccount now represents 50% of your holdings because of its increase in value. If you choose to have your holdings rebalanced quarterly, on the first day of the next quarter, we would sell some of your units in the AIM V.I. Value Variable Sub-Account and use the money to buy more units in the AIM V.I. Growth Variable Sub-Account so that the percentage allocations would again be 40% and 60% respectively. The Automatic Portfolio Rebalancing Program is available only during the Accumulation Phase. The transfers made under the Program do not count towards the 12 transfers you can make without paying a transfer fee. Portfolio rebalancing is consistent with maintaining your allocation of investments among market segments, although it is accomplished by reducing your Contract Value allocated to the better performing segments. EXPENSES - ------------------------------------------------------------------- As a Contract Owner, you will bear, directly or indirectly, the charges and expenses described below. CONTRACT MAINTENANCE CHARGE During the Accumulation Phase, on each Contract Anniversary, we will deduct a $35 contract maintenance charge from your Contract Value invested in each Variable Sub-Account in proportion to the amount invested. If you surrender your Contract, we will deduct the contract maintenance charge pro rated for the part of the Contract Year elapsed, unless your Contract qualifies for a waiver, described below. The charge is to compensate us for the cost of administering the Contracts and the Variable Account. Maintenance costs include expenses we incur collecting purchase payments; keeping records; processing death claims, cash withdrawals, and policy changes; proxy statements; calculating Accumulation Unit Values and income payments; and issuing reports to Contract Owners and regulatory agencies. We cannot increase the charge. However, we will waive this charge if, as of the Contract Anniversary or upon full surrender: - - total purchase payments equal $50,000 or more, or - - all money is allocated to the Fixed Account. In addition, we will waive the contract maintenance charge if total purchase payments are $50,000 or more as of the Payout Start Date. MORTALITY AND EXPENSE RISK CHARGE We deduct a mortality and expense risk charge daily at an annual rate of 1.25% of the average daily net assets you have invested in the Variable Sub-Accounts (1.35% if you select the Enhanced Death Benefit Rider). The mortality and expense risk charge is for all the insurance benefits available with your Contract (including our guarantee of annuity rates and the death benefits), for certain expenses of the Contract, and for assuming the risk (expense risk) that the current charges will be sufficient in the future to cover the cost of administering the Contract. If the charges under the Contract are not sufficient, then we will bear the loss. We charge an additional amount for the Enhanced Death Benefit Rider to compensate us for the additional risk that we accept by providing these options. We guarantee that we will not raise the mortality and expense risk charge. We assess the mortality and expense risk charge during both the Accumulation Phase and the Payout Phase. ADMINISTRATIVE EXPENSE CHARGE We deduct an administrative expense charge daily at an annual rate of 0.10% of the average daily net assets you have invested in the Variable Sub-Accounts. We intend this charge to cover actual administrative expenses that exceed the revenues from the contract maintenance charge. There is no necessary relationship between the amount of administrative charge imposed on a given Contract and the amount of expenses that may be attributed to that Contract. We assess this charge each day during the Accumulation Phase and the Payout Phase. We guarantee that we will not raise this charge. 20 PROSPECTUS TRANSFER FEE We do not currently impose a fee upon transfers among the investment alternatives. However, we reserve the right to charge $10 per transfer after the 12th transfer in each Contract Year. We will not charge a transfer fee on transfers that are part of a Dollar Cost Averaging or Automatic Portfolio Rebalancing Program. WITHDRAWAL CHARGE We may assess a withdrawal charge of up to 6% of the purchase payment(s) you withdraw. The charge declines to 0% over a 6 year period that begins on the day we receive your payment. A schedule showing how the charge declines is shown on page 7. During each Contract Year, you can withdraw up to 15% of the aggregate amount of your purchase payments without paying the charge. Unused portions of this "FREE WITHDRAWAL AMOUNT" are not carried forward to future Contract Years. We will deduct withdrawal charges, if applicable, from the amount paid. For purposes of calculating the withdrawal charge, we will treat withdrawals as coming from the oldest purchase payments first. However, for federal income tax purposes, please note that withdrawals are considered to have come first from earnings, which means you pay taxes on the earnings portion of your withdrawal. We do not apply a withdrawal charge in the following situations: - - on the Payout Start Date (a withdrawal charge may apply if you terminate income payments to be received for a specified period); - - on the death of the Contract Owner (Annuitant if Contract Owner is not a natural person); - - withdrawals taken to satisfy IRS minimum distribution rules for the Contract; or - - withdrawals that qualify for one of the waivers as described below. We use the amounts obtained from the withdrawal charge to pay sales commissions and other promotional or distribution expenses associated with marketing the Contracts. To the extent that the withdrawal charge does not cover all sales commissions and other promotional or distribution expenses, we may use any of our corporate assets, including potential profit which may arise from the mortality and expense risk charge or any other charges or fee described above, to make up any difference. Withdrawals also may be subject to tax penalties, income tax and a Market Value Adjustment. You should consult your own tax counsel or other tax advisers regarding any withdrawals. CONFINEMENT WAIVER. We will waive the withdrawal charge and any Market Value Adjustment on all withdrawals taken prior to the Payout Start Date under your Contract if the following conditions are satisfied: 1. you or the Annuitant (if the Contract Owner is not a natural person) are confined to a long term care facility or a hospital for at least 90 consecutive days. You or the Annuitant must enter the long term care facility or hospital at least 30 days after the Issue Date; 2. you request the withdrawal and provide written proof of the stay no later than 90 days following the end of your or the Annuitant's stay at the long term care facility or hospital; and 3. a physician must have prescribed the stay and the stay must be medically necessary (as defined in the Contract). You may not claim this benefit if you, the Annuitant, or a member of your or the Annuitant's immediate family, is the physician prescribing your or the Annuitant's stay in a long term care facility. TERMINAL ILLNESS WAIVER. We will waive the withdrawal charge and any Market Value Adjustment on all withdrawals taken prior to the Payout Start Date under your Contract if: 1. you or the Annuitant (if the Contract Owner is not a natural person) are first diagnosed with a terminal illness at least 30 days after the Issue Date; and 2. you claim this benefit and deliver adequate proof of diagnosis to us. Please refer to your Contract for more detailed information about the terms and conditions of these waivers. The laws of your state may limit the availability of these waivers and may also change certain terms and/or benefits available under the waivers. You should consult your Contract for further details on these variations. Also, even if you do not need to pay our withdrawal charge or a Market Value Adjustment because of these waivers, you still may be required to pay taxes or tax penalties on the amount withdrawn. You should consult your tax adviser to determine the effect of a withdrawal on your taxes. PREMIUM TAXES Some states and other governmental entities (e.g., municipalities) charge premium taxes or similar taxes. We are responsible for paying these taxes and will deduct them from your Contract Value. Some of these taxes are due when the Contract is issued, others are due when income payments begin or upon surrender. Our current practice is not to charge anyone for these taxes until income payments begin or when a total 21 PROSPECTUS withdrawal occurs, including payment upon death. At our discretion, we may discontinue this practice and deduct premium taxes from the purchase payments. Premium taxes generally range from 0% to 4%, depending on the state. At the Payout Start Date, if applicable, we deduct the charge for premium taxes from each investment alternative in the proportion that the Contract Owner's value in the investment alternative bears to the total Contract Value. DEDUCTION FOR SEPARATE ACCOUNT INCOME TAXES We are not currently making a provision for taxes. In the future, however, we may make a provision for taxes if we determine, in our sole discretion, that we will incur a tax as a result of the operation of the Variable Account. We will deduct for any taxes we incur as a result of the operation of the Variable Account, whether or not we previously made a provision for taxes and whether or not it was sufficient. Our status under the Internal Revenue Code is briefly described in the Statement of Additional Information. OTHER EXPENSES Each Portfolio deducts advisory fees and other expenses from its assets. You indirectly bear the charges and expenses of the Portfolios whose shares are held by the Variable Sub-Accounts. These fees and expenses are described in the accompanying prospectuses for the Funds. For a summary of current estimates of those charges and expenses, see page 8. We may receive compensation from the investment advisers or administrators of the Portfolios in connection with the administrative services we provide to the Portfolios. ACCESS TO YOUR MONEY - ------------------------------------------------------------------- You can withdraw some or all of your Contract Value at any time prior to the Payout Start Date. The amount payable upon withdrawal is the Contract Value or a portion therefore, next computed after we receive the request for a withdrawal at our headquarters, adjusted by any Market Value Adjustment, less any withdrawal charges, contract maintenance charges, income tax withholding, penalty tax, and any premium taxes. We will pay withdrawals from the Variable Account within 7 days of receipt of the request, subject to postponement in certain circumstances. You can withdraw money from the Variable Account or the Fixed Account Options. To complete a partial withdrawal from the Variable Account, we will cancel Accumulation Units in an amount equal to the withdrawal and any applicable withdrawal charge and premium taxes. You must name the investment alternative from which you are taking the withdrawal. If none is named, then the withdrawal request is incomplete and cannot be honored. In general, you must withdraw at least $50 at a time. You also may withdraw a lesser amount if you are withdrawing your entire interest in a Variable SubAccount. If you request a total withdrawal, we may require you to return your Contract to us. POSTPONEMENT OF PAYMENTS We may postpone the payment of any amounts due from the Variable Account under the Contract if: 1. The New York Stock Exchange is closed for other than usual weekends or holidays, or trading on the Exchange is otherwise restricted; 2. An emergency exists as defined by the SEC; or 3. The SEC permits delay for your protection. In addition, we may delay payments or transfers from the Fixed Account Options for up to 6 months (or shorter period if required by law). If we delay payment for 30 days or more, we will pay interest as required by law. SYSTEMATIC WITHDRAWAL PROGRAM You may choose to receive systematic withdrawal payments on a monthly, quarterly, semi-annual, or annual basis at any time prior to the Payout Start Date. The minimum amount of each systematic withdrawal is $50. At our discretion, systematic withdrawals may not be offered in conjunction with the Dollar Cost Averaging Program or Automatic Portfolio Rebalancing Program. Depending on fluctuations in the value of the Variable Sub-Accounts and the value of the Fixed Account Options, systematic withdrawals may reduce or even exhaust the Contract Value. Income taxes may apply to systematic withdrawals. Please consult your tax advisor before taking any withdrawal. 22 PROSPECTUS We will make systematic withdrawal payments to you or your designated payee. At our discretion, we may modify or suspend the Systematic Withdrawal Program and charge a processing fee for the service. If we modify or suspend the Systematic Withdrawal Program, existing systematic withdrawal payments will not be affected. MINIMUM CONTRACT VALUE If your request for a partial withdrawal will reduce your Contract Value to less than $2,000, we may treat it as a request to withdraw your entire Contract Value. Your Contract will terminate if you withdraw all of your Contract Value. We will, however, ask you to confirm your withdrawal request before terminating your Contract. 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. INCOME PAYMENTS - ------------------------------------------------------------------- PAYOUT START DATE You select the Payout Start Date in your application. The Payout Start Date is the day that we apply your money to an Income Plan. The Payout Start Date must be: - - at least 30 days after the Issue Date; and - - no later than the day the Annuitant reaches age 90, or the 10th Contract Anniversary, if later. You may change the Payout Start Date at any time by notifying us in writing of the change at least 30 days before the scheduled Payout Start Date. Absent a change, we will use the Payout Start Date stated in your Contract. INCOME PLANS An Income Plan is a series of scheduled payments to you or someone you designate. You may choose and change your choice of Income Plan until 30 days before the Payout Start Date. If you do not select an Income Plan, we will make income payments in accordance with Income Plan 1 with guaranteed payments for 10 years. Three Income Plans are available under the Contract. Each is available to provide: - - fixed income payments; - - variable income payments; or - - a combination of the two. The three Income Plans are: INCOME PLAN 1 -- LIFE INCOME WITH GUARANTEED PAYMENTS. Under this plan, we make periodic income payments for at least as long as the Annuitant lives. If the Annuitant dies before we have made all of the guaranteed income payments, we will continue to pay the remainder of the guaranteed income payments as required by the Contract. INCOME PLAN 2 -- JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED PAYMENTS. Under this plan, we make periodic income payments for at least as long as either the Annuitant or the joint Annuitant is alive. If both the Annuitant and the joint Annuitant die before we have made all of the guaranteed income payments, we will continue to pay the remainder of the guaranteed income payments as required by the Contract. INCOME PLAN 3 -- GUARANTEED PAYMENTS FOR A SPECIFIED PERIOD (5 YEARS TO 30 YEARS). Under this plan, we make periodic income payments for the period you have chosen. These payments do not depend on the Annuitant's life. You may elect to receive guaranteed payments for periods ranging from 5 to 30 years. 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 23 PROSPECTUS that the Annuitant or joint Annuitant are alive before we make each payment. Please note that under such Income Plans, if you elect to take no minimum guaranteed payments, it is possible that the payee could receive only 1 income payment if the Annuitant and any joint Annuitant both die before the second income payment, or only 2 income payments if they die before the third income payment, and so on. Generally, you may not make withdrawals after the Payout Start Date. One exception to this rule applies if you are receiving variable income payments that do not depend on the life of the Annuitant (such as under Income Plan 3). In that case you may terminate all or part of the Variable Account portion of the income payments at any time and receive a lump sum equal to the present value of the remaining variable payments associated with the amount withdrawn. The minimum amount you may withdraw under this feature is $1,000. A withdrawal charge may apply. We also deduct applicable premium taxes from the Contract Value at the Payout Start Date. We may make other Income Plans available. You must apply at least the Contract Value in the Fixed Account on the Payout Start Date to fixed income payments. If you wish to apply any portion of your Fixed Account balance to provide variable income payments, you should plan ahead and transfer that amount to the Variable Sub-Accounts prior to the Payout Start Date. If you do not tell us how to allocate your Contract Value among fixed and variable income payments, we will apply your Contract Value in the Variable Account to variable income payments and your Contract Value in the Fixed Account to fixed income payments. We will apply your Contract Value, adjusted by any Market Value Adjustment, less applicable taxes to your Income Plan on the Payout Start Date. If the amount available to apply under an Income Plan is less than $2,000, or not enough to provide an initial payment of at least $20, and state law permits, we may: - - pay you the Contract Value, adjusted by any applicable Market Value Adjustment and less any applicable taxes, in a lump sum instead of the periodic payments you have chosen; or - - reduce the frequency of your payments so that each payment will be at least $20. VARIABLE INCOME PAYMENTS The amount of your variable income payments depends upon the investment results of the Variable Sub-Accounts you select, the premium taxes you pay, the age and sex of the Annuitant, and the Income Plan you choose. We guarantee that the payments will not be affected by (a) actual mortality experience and (b) the amount of our administration expenses. We cannot predict the total amount of your variable income payments. Your variable income payments may be more or less than your total purchase payments because (a) variable income payments vary with the investment results of the underlying Portfolios; and (b) the Annuitant could live longer or shorter than we expect based on the tables we use. In calculating the amount of the periodic payments in the annuity tables in the Contract, we assumed an annual investment rate of 3%. If the actual net investment return of the Variable Sub-Accounts you choose is less than this assumed investment rate, then the dollar amount of your variable income payments will decrease. The dollar amount of your variable income payments will increase, however, if the actual net investment return exceeds the assumed investment rate. The dollar amount of the variable income payments stays level if the net investment return equals the assumed investment rate. Please refer to the Statement of Additional Information for more detailed information as to how we determine variable income payments. FIXED INCOME PAYMENTS We guarantee income payment amounts derived from any Fixed Account Option for the duration of the Income Plan. We calculate the fixed income payments by: 1. adjusting the portion of the Contract Value in any Fixed Account Option on the Payout Start Date by any applicable Market Value Adjustment; 2. deducting any applicable premium tax; and 3. applying the resulting amount to the greater of (a) the appropriate value from the income payment table in your Contract or (b) such other value as we are offering at that time. We may defer making fixed income payments for a period of up to 6 months or any shorter time state law may require. If we defer payments for 30 days or more, we will pay interest as required by law from the date we receive the withdrawal request to the date we make payment. CERTAIN EMPLOYEE BENEFIT PLANS The Contracts offered by this prospectus contain income payment tables that provide for different payments to men and women of the same age, except in states that require unisex tables. We reserve the right to use income payment tables that do not distinguish on the basis of sex to the extent permitted by 24 PROSPECTUS applicable law. In certain employment related situations, employers are required by law to use the same income payment tables for men and women. Accordingly, if the Contract is to be used in connection with an employment-related retirement or benefit plan and we do not offer unisex annuity tables in your state, you should consult with legal counsel as to whether the purchase of a Contract is appropriate. DEATH BENEFITS - ------------------------------------------------------------------- We will pay a death benefit prior to the Payout Start Date on: 1. the death of any Contract Owner or, 2. the death of the Annuitant, if the Contract is owned by a non-natural person. We will pay the death benefit to the new Contract Owner who is determined immediately after the death. The new Contract Owner would be a surviving Contract Owner or, if none, the Beneficiaries. In the case of the death of the Annuitant, we will pay the death benefit to the current Contract Owner. A claim for a distribution on death must include DUE PROOF OF DEATH. We will accept the following documentation as "Due Proof of Death": - - a certified copy of a death certificate, - - a certified copy of a decree of a court of competent jurisdiction as to the finding of death, or - - any other proof acceptable to us. DEATH BENEFIT AMOUNT. Prior to the Payout Start Date, the death benefit is equal to the greatest of: 1. the Contract Value as of the date we determine the value of the death benefit, or 2. the SETTLEMENT VALUE (that is, the amount payable on a full withdrawal of Contract Value) on the date we determine the value of the death benefit, or 3. the Contract Value on each DEATH BENEFIT ANNIVERSARY prior to the date we determine the death benefit, increased by purchase payments made since that Death Benefit Anniversary and reduced by an adjustment for any partial withdrawals since that Death Benefit Anniversary. A "Death Benefit Anniversary" is every seventh Contract Anniversary beginning with the Issue Date. For example, the Issue Date, 7th and 14th Contract Anniversaries are the first 3 Death Benefit Anniversaries. The withdrawal adjustment is equal to (a) divided by (b), with the result multiplied by (c), where: (a) is the withdrawal amount; (b) is the Contract Value immediately prior to the withdrawal; and (c) is the Contract Value on the Death Benefit Anniversary adjusted by any prior purchase payments or withdrawals made since that Anniversary. We will determine the value of the death benefit as of the end of the Valuation Date on which we receive a complete request for payment of the death benefit. If we receive a request after 3 p.m. Central Time on a Valuation Date, we will process the request as of the end of the following Valuation Date. ENHANCED DEATH BENEFIT RIDER. For Contracts with the Enhanced Death Benefit Rider, the death benefit will be the greatest of (1) through (3) above, or (4) the value of the Enhanced Death Benefit Rider, which is the greatest of the ANNIVERSARY VALUES as of the date we determine the death benefit. An "Anniversary Value" is equal to the Contract Value on a Contract Anniversary, increased by purchase payments made since that Anniversary and reduced by an adjustment for any partial withdrawals since that Anniversary. The adjustment is equal to (a) divided by (b), and the result multiplied by (c) where: (a) is the withdrawal amount, (b) is the Contract Value immediately prior to the withdrawal, and (c) is the Contract Value on that Contract Anniversary adjusted by any prior purchase payments and withdrawals since that Contract Anniversary. We will calculate Anniversary Values for each Contract Anniversary prior to the oldest Contract Owner's or the Annuitant's, if the Contract Owner is not a natural person, 80th birthday. The Enhanced Death Benefit Rider will never be greater than the maximum death benefit allowed by any state non-forfeiture laws that govern the Contract. DEATH BENEFIT PAYMENTS. A death benefit will be paid: 1. if the Contract Owner elects to receive the death benefit distributed in a single payment within 180 days of the date of death, and 25 PROSPECTUS 2. if the death benefit is paid as of the day the value of the death benefit is determined. Otherwise, the Settlement Value will be paid. We reserve the right to waive the 180 day limit on a non-discriminatory basis. In any event, the entire value of the Contract must be distributed within 5 years after the date of death unless an Income Plan is elected or a surviving spouse continues the Contract in accordance with the provisions described below. If the Contract Owner eligible to receive the distribution upon death is not a natural person, the Contract Owner may elect to receive the distribution upon death in one or more distributions. If the Contract Owner is a natural person, the Contract Owner may elect to receive the distribution upon death either in one or more distributions or by periodic payments through an Income Plan. Payments from the Income Plan must begin within one year of the date of death and must be payable throughout: - - the life of the Contract Owner; or - - a period not to exceed the life expectancy of the Contract Owner; or - - the life of the Contract Owner with payments guaranteed to a period not to exceed the life expectancy of the Contract Owner. If the surviving spouse of the deceased Contract Owner is the new Contract Owner, then the spouse may elect one of the options listed above or may continue the Contract in the Accumulation Phase as if the death had not occurred. If the Contract is continued in the Accumulation Phase, the surviving spouse may make a single withdrawal of any amount within one year of the date of death without incurring a withdrawal charge. However, any applicable Market Value Adjustment, determined as of the date of the withdrawal, will apply. MORE INFORMATION - ------------------------------------------------------------------- GLENBROOK Glenbrook is the issuer of the Contract. Glenbrook is a stock life insurance company organized under the laws of the State of Arizona in 1998. Previously, Glenbrook was organized under the laws of the State of Illinois in 1992. Glenbrook was originally organized under the laws of the State of Indiana in 1965. From 1965 to 1983 Glenbrook was known as "United Standard Life Assurance Company" and from 1983 to 1992 as "William Penn Life Assurance Company of America." Glenbrook is currently licensed to operate in the District of Columbia and all states except New York. We intend to offer the Contract in those jurisdictions in which we are licensed. Our home office is located at 3100 Sanders Road, Northbrook, Illinois, 60062. Glenbrook is a wholly owned subsidiary of Allstate Life Insurance Company ("ALLSTATE LIFE"), a stock life insurance company incorporated under the laws of the State of Illinois. Allstate Life is a wholly owned subsidiary of Allstate Insurance Company, a stock property-liability insurance company incorporated under the laws of Illinois. All of the outstanding capital stock of Allstate Insurance Company is owned by The Allstate Corporation. Glenbrook and Allstate Life entered into a reinsurance agreement effective June 5, 1992. Under the reinsurance agreement, Allstate Life reinsures substantially all of Glenbrook's liabilities under its various insurance contracts. The reinsurance agreement provides us with financial backing from Allstate Life. However, it does not create a direct contractual relationship between Allstate Life and you. In other words, the obligations of Allstate Life under the reinsurance agreement are to Glenbrook; Glenbrook remains the sole obligor under the Contract to you. Independent rating agencies regularly evaluate life insurers' claims-paying ability, quality of investments, and overall stability. A.M. Best Company assigns an A+ (Superior) financial strength rating to Allstate Life, which results in an A+r rating to Glenbrook due to the reinsurance agreement with Allstate Life mentioned above. Standard & Poor's Insurance Rating Services assigns an AA+ (Very Strong) financial strength rating and Moody's Investors Service assigns an Aa2 (Excellent) financial strength rating to Glenbrook, sharing the same ratings of its parent, Allstate Life. These ratings do not reflect the investment performance of the Variable Account. We may from time to time advertise these ratings in our sales literature. THE VARIABLE ACCOUNT Glenbrook established the Glenbrook Life Multi-Manager Variable Account on January 15, 1996. We have registered the Variable Account with the SEC as a unit 26 PROSPECTUS investment trust. The SEC does not supervise the management of the Variable Account or Glenbrook. We own the assets of the Variable Account. The Variable Account is a segregated asset account under Arizona law. That means we account for the Variable Account's income, gains and losses separately from the results of our other operations. It also means that only the assets of the Variable Account that are in excess of the reserves and other Contract liabilities with respect to the Variable Account are subject to liabilities relating to our other operations. Our obligations arising under the Contracts are general corporate obligations of Glenbrook. The Variable Account consists of multiple Variable Sub-Accounts, Each Variable Sub-Account invests in a corresponding Portfolio. We may add new Variable Sub-Accounts or eliminate one or more of them, if we believe marketing, tax, or investment conditions so warrant. We may also add other Variable Sub-Accounts that may be available under other variable annuity contracts. We do not guarantee the investment performance of the Variable Account, its Sub-Accounts or the Portfolios. We may use the Variable Account to fund our other annuity contracts. We will account separately for each type of annuity contract funded by the Variable Account. THE PORTFOLIOS DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. We automatically reinvest all dividends and capital gains distributions from the Portfolios in shares of the distributing Portfolio at their net asset value. VOTING PRIVILEGES. As a general matter, you do not have a direct right to vote the shares of the Portfolios held by the Variable Sub-Accounts to which you have allocated your Contract Value. Under current law, however, you are entitled to give us instructions on how to vote those shares on certain matters. Based on our present view of the law, we will vote the shares of the Portfolios that we hold directly or indirectly through the Variable Account in accordance with instructions that we receive from Contract Owners entitled to give such instructions. As a general rule, before the Payout Start Date, the Contract Owner or anyone with a voting interest is the person entitled to give voting instructions. The number of shares that a person has a right to instruct will be determined by dividing the Contract Value allocated to the applicable Variable Sub-Account by the net asset value per share of the corresponding Portfolio as of the record date of the meeting. After the Payout Start Date the person receiving income payments has the voting interest. The payee's number of votes will be determined by dividing the reserve for such Contract allocated to the applicable Variable Sub-Account by the net asset value per share of the corresponding Portfolio. The votes decrease as income payments are made and as the reserves for the Contract decrease. We will vote shares attributable to Contracts for which we have not received instructions, as well as shares attributable to us, in the same proportion as we vote shares for which we have received instructions, unless we determine that we may vote such shares in our own discretion. We will apply voting instructions to abstain on any item to be voted upon on a pro-rata basis to reduce the votes eligible to be cast. We reserve the right to vote Portfolio shares as we see fit without regard to voting instructions to the extent permitted by law. If we disregard voting instructions, we will include a summary of that action and our reasons for that action in the next semi-annual financial report we send to you. CHANGES IN PORTFOLIOS. If the shares of any of the Portfolios are no longer available for investment by the Variable Account or if, in our judgment, further investment in such shares is no longer desirable in view of the purposes of the Contract, we may eliminate that Portfolio and substitute shares of another eligible investment fund. Any substitution of securities will comply with the requirements of the Investment Company 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 Portfolios sell their shares to separate accounts underlying both variable life insurance and variable annuity contracts. It is conceivable that in the future it may be unfavorable for variable life insurance separate accounts and variable annuity separate accounts to invest in the same Portfolio. The boards of directors of these Portfolios monitor for possible conflicts among separate accounts buying shares of the Portfolios. Conflicts could develop for a variety of reasons. For example, differences in treatment under tax and other laws or the failure by a separate account to comply with such laws could cause a conflict. To eliminate a conflict, a Portfolio's board of directors may require a separate account to withdraw its participation in a Portfolio. A Portfolio's net asset value could decrease if it had to sell investment securities to pay redemption proceeds to a separate account withdrawing because of a conflict. THE CONTRACT DISTRIBUTION. ALFS, Inc.,located at 3100 Sanders Road, Northbrook, IL 60062-7154, serves as principal underwriter and distributor of the Contracts. ALFS is a 27 PROSPECTUS wholly owned subsidiary of Allstate Life Insurance Company. ALFS is a registered broker dealer under the Securities and Exchange Act of 1934, as amended ("EXCHANGE ACT"), and is a member of the National Association of Securities Dealers, Inc. We will pay commissions to broker-dealers who sell the contracts. Commissions paid may vary, but we estimate that the total commissions paid on all Contract sales will not exceed 8% of all purchase payments. These commissions are intended to cover distribution expenses. Sometimes, we also pay the broker-dealer a persistency bonus in addition to the standard commissions. A persistency bonus is not expected to exceed 0.25%, on an annual basis, of the Contract Values considered in connection with the bonus. In some states, Contracts may be sold by representatives or employees of banks which may be acting as broker-dealers without separate registration under the Securities Exchange Act of 1934, pursuant to legal and regulatory exceptions. Glenbrook does not pay ALFS a commission for distribution of the Contracts. The underwriting agreement with ALFS provides that we will reimburse ALFS for any liability to Contract Owners arising out of services rendered or Contracts issued. ADMINISTRATION. We have primary responsibility for all administration of the Contracts and the Variable Account. We provide the following administrative services, among others: - - issuance of the Contracts; - - maintenance of Contract Owner records; - - Contract Owner services; - - calculation of unit values; - - maintenance of the Variable Account; and - - preparation of Contract Owner reports. We will send you Contract statements and transaction confirmations at least annually. You should notify us promptly in writing of any address change. You should read your statements and confirmations carefully and verify their accuracy. You should contact us promptly if you have a question about a periodic statement. We will investigate all complaints and make any necessary adjustments retroactively, but you must notify us of a potential error within a reasonable time after the date of the questioned statement. If you wait too long, we reserve the right to make the adjustment as of the date that we receive notice of the potential error. We also will provide you with additional periodic and other reports, information and prospectuses as may be required by federal securities laws. QUALIFIED PLANS If you use the Contract with a qualified plan, the plan may impose different or additional conditions or limitations on withdrawals, waivers of withdrawal charges, death benefits, Payout Start Dates, income payments, and other Contract features. In addition, adverse tax consequences may result if qualified plan limits on distributions and other conditions are not met. Please consult your qualified plan administrator for more information. LEGAL MATTERS Foley & Lardner, Washington, D.C., has advised Glenbrook on certain federal securities law matters. All matters of state insurance law pertaining to the Contracts, including the validity of the Contracts and Glenbrook's right to issue such Contracts under state insurance law, have been passed upon by Michael J. Velotta, General Counsel of Glenbrook. TAXES - ------------------------------------------------------------------- THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. GLENBROOK MAKES NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR TRANSACTION INVOLVING A CONTRACT. Federal, state, local and other tax consequences of ownership or receipt of distributions under an annuity contract depend on your individual circumstances. If you are concerned about any tax consequences with regard to your individual circumstances, you should consult a competent tax adviser. TAXATION OF ANNUITIES IN GENERAL TAX DEFERRAL. Generally, you are not taxed on increases in the Contract Value until a distribution occurs. This rule applies only where: 1. the Contract Owner is a natural person, 2. the investments of the Variable Account are "adequately diversified" according to Treasury Department regulations, and 3. Glenbrook is considered the owner of the Variable Account assets for federal income tax purposes. 28 PROSPECTUS NON-NATURAL OWNERS. As a general rule, annuity contracts owned by non-natural persons such as corporations, trusts, or other entities are not treated as annuity contracts for federal income tax purposes. The income on such contracts is taxed as ordinary income received or accrued by the owner during the taxable year. Please see the Statement of Additional Information for a discussion of several exceptions to the general rule for Contracts owned by non-natural persons. DIVERSIFICATION REQUIREMENTS. For a Contract to be treated as an annuity for federal income tax purposes, the investments in the Variable Account must be "adequately diversified" consistent with standards under Treasury Department regulations. If the investments in the Variable Account are not adequately diversified, the Contract will not be treated as an annuity contract for federal income tax purposes. As a result, the income on the Contract will be taxed as ordinary income received or accrued by the Contract Owner during the taxable year. Although Glenbrook does not have control over the Portfolios or their investments, we expect the Portfolios to meet the diversification requirements. OWNERSHIP TREATMENT. The IRS has stated that you will be considered the owner of Variable Account assets if you possess incidents of ownership in those assets, such as the ability to exercise investment control over the assets. At the time the diversification regulations were issued, the Treasury Department announced that the regulations do not provide guidance concerning circumstances in which investor control of separate account investments may cause an investor to be treated as the owner of the separate account. The Treasury Department also stated that future guidance would be issued regarding the extent that owners could direct sub-account investments without being treated as owners of the underlying assets of the separate account. Your rights under the Contract are different than those described by the IRS in rulings in which it found that contract owners were not owners of separate account assets. For example, you have the choice to allocate premiums and Contract Values among more investment alternatives. Also, you may be able to transfer among investment alternatives more frequently than in such rulings. These differences could result in you being treated as the owner of the Variable Account. If this occurs, income and gain from the Variable Account assets would be includible in your gross income. Glenbrook does not know what standards will be set forth in any regulations or rulings which the Treasury Department may issue. It is possible that future standards announced by the Treasury Department could adversely affect the tax treatment of your Contract. We reserve the right to modify the Contract as necessary to attempt to prevent you from being considered the federal tax owner of the assets of the Variable Account. However, we make no guarantee that such modification to the Contract will be successful. TAXATION OF PARTIAL AND FULL WITHDRAWALS. If you make a partial withdrawal under a non-Qualified Contract, amounts received are taxable to the extent the Contract Value, without regard to surrender charges, exceeds the investment in the Contract. The investment in the Contract is the gross premium paid for the Contract minus any amounts previously received from the Contract if such amounts were properly excluded from your gross income. If you make a partial withdrawal under a Qualified Contract, the portion of the payment that bears the same ratio to the total payment that the investment in the Contract (i.e., nondeductible IRA contributions, after tax contributions to qualified plans) bears to the Contract Value, is excluded from your income. If you make a full withdrawal under a non-Qualified Contract or a Qualified Contract, the amount received will be taxable only to the extent it exceeds the investment in the Contract. "Non-qualified distributions" from Roth IRAs are treated as made from contributions first and are included in gross income only to the extent that distributions exceed contributions. "Qualified distributions" from Roth IRAs are not included in gross income. "Qualified distributions" are any distributions made more than 5 taxable years after the taxable year of the first contribution to any Roth IRA and which are: - - made on or after the date the individual attains age 59 1/2, - - made to a beneficiary after the Contract Owner's death, - - attributable to the Contract Owner being disabled, or - - for a first time home purchase (first time home purchases are subject to a lifetime limit of $10,000). If you transfer a non-Qualified Contract without full and adequate consideration to a person other than your spouse (or to a former spouse incident to a divorce), you will be taxed on the difference between the Contract Value and the investment in the Contract at the time of transfer. Except for certain Qualified Contracts, any amount you receive as a loan under a Contract, and any assignment or pledge (or agreement to assign or pledge) of the Contract Value is treated as a withdrawal of such amount or portion. TAXATION OF ANNUITY PAYMENTS. Generally, the rule for income taxation of annuity payments received from a non-Qualified Contract provides for the return of your investment in the Contract in equal tax-free amounts over the payment period. The balance of each payment 29 PROSPECTUS received is taxable. For fixed annuity payments, the amount excluded from income is determined by multiplying the payment by the ratio of the investment in the Contract (adjusted for any refund feature or period certain) to the total expected value of annuity payments for the term of the Contract. If you elect variable annuity payments, the amount excluded from taxable income is determined by dividing the investment in the Contract by the total number of expected payments. The annuity payments will be fully taxable after the total amount of the investment in the Contract is excluded using these ratios. If you die, and annuity payments cease before the total amount of the investment in the Contract is recovered, the unrecovered amount will be allowed as a deduction for your last taxable year. TAXATION OF ANNUITY DEATH BENEFITS. Death of a Contract Owner, or death of the Annuitant if the Contract is owned by a non-natural person, will cause a distribution of death benefits from a Contract. Generally, such amounts are included in income as follows: 1. if distributed in a lump sum, the amounts are taxed in the same manner as a full withdrawal; or 2. if distributed under an annuity option, the amounts are taxed in the same manner as an annuity payment. Please see the Statement of Additional Information for more detail on distribution at death requirements. PENALTY TAX ON PREMATURE DISTRIBUTIONS. A 10% penalty tax applies to the taxable amount of any premature distribution from a non-Qualified Contract. The penalty tax generally applies to any distribution made prior to the date you attain age 59 1/2. However, no penalty tax is incurred on distributions: 1. made on or after the date the Contract Owner attains age 59 1/2; 2. made as a result of the Contract Owner's death or disability; 3. made in substantially equal periodic payments over the Contract Owner's life or life expectancy; 4. made under an immediate annuity; or 5. attributable to investment in the Contract before August 14, 1982. You should consult a competent tax advisor to determine if any other exceptions to the penalty apply to your situation. Similar exceptions may apply to distributions from Qualified Contracts. AGGREGATION OF ANNUITY CONTRACTS. All non-qualified deferred annuity contracts issued by Glenbrook (or its affiliates) to the same Contract Owner during any calendar year will be aggregated and treated as one annuity contract for purposes of determining the taxable amount of a distribution. TAX QUALIFIED CONTRACTS Contracts may be used as investments with certain qualified plans such as: - - Individual Retirement Annuities or Accounts (IRAs) under Section 408 of the Code; - - Roth IRAs under Section 408A of the Code; - - Simplified Employee Pension Plans under Section 408(k) of the Code; - - Savings Incentive Match Plans for Employees (SIMPLE) Plans under Section 408(p) of the Code; - - Tax Sheltered Annuities under Section 403(b) of the Code; - - Corporate and Self Employed Pension and Profit Sharing Plans; and - - State and Local Government and Tax-Exempt Organization Deferred Compensation Plans. The income on qualified plan and IRA investments is tax deferred and variable annuities held by such plans do not receive any additional tax deferral. You should review the annuity features, including all benefits and expenses, prior to purchasing a variable annuity in a qualified plan or IRA. Glenbrook reserves the right to limit the availability of the Contract for use with any of the Qualified Plans listed below. In the case of certain qualified plans, the terms of the plans may govern the right to benefits, regardless of the terms of the Contract. RESTRICTIONS UNDER SECTION 403(b) PLANS. Section 403(b) of the Tax Code provides tax-deferred retirement savings plans for employees of certain non-profit and educational organizations. Under Section 403(b), any Contract used for a 403(b) plan must provide that distributions attributable to salary reduction contributions made after 12/31/88, and all earnings on salary reduction contributions, may be made only: 1. on or after the date the employee - attains age 59 1/2, - separates from service, - dies, - becomes disabled, or 2. on account of hardship (earnings on salary reduction contributions may not be distributed on the account of hardship). These limitations do not apply to withdrawals where Glenbrook is directed to transfer some or all of the Contract Value to another 403(b) plan. 30 PROSPECTUS INCOME TAX WITHHOLDING Glenbrook is required to withhold federal income tax at a rate of 20% on all "eligible rollover distributions" unless you elect to make a "direct rollover" of such amounts to an IRA or eligible retirement plan. Eligible rollover distributions generally include all distributions from Qualified Contracts, excluding IRAs, with the exception of: 1. required minimum distributions, or 2. a series of substantially equal periodic payments made over a period of at least 10 years, or, over the life (joint lives) of the participant (and beneficiary). Glenbrook may be required to withhold federal and state income taxes on any distributions from non-Qualified Contracts or Qualified Contracts that are not eligible rollover distributions, unless you notify us of your election to not have taxes withheld. ANNUAL REPORTS AND OTHER DOCUMENTS - ------------------------------------------------------------------- Glenbrook's annual report on Form 10-K for the year ended December 31, 2000 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 of 1934 are also incorporated herein by reference, which means that they also legally become a part of this prospectus. Statements in this prospectus, or in documents that we file later with the SEC and that legally become a part of this prospectus, may change or supersede statements in other documents that are legally part of this prospectus. Accordingly, only the statement that is changed or replaced will legally be a part of this prospectus. We file our Exchange Act documents and reports, including our annual and quarterly reports on Form 10-K and Form 10-Q electronically on the SEC's "EDGAR" system using the identifying number CIK No. 0001007285. The SEC maintains a Web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of the site is http://www.sec.gov. You also can view these materials at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. For more information on the operations of SEC's Public Reference Room, call 1-800-SEC-0330. If you have received a copy of this prospectus, and would like a free copy of any document incorporated herein by reference (other than exhibits not specifically incorporated by reference into the text of such documents), please write or call us at 300 N. Milwaukee Ave. Vernon Hills, IL 60061 (telephone: 1-800-755-5275). EXPERTS - ------------------------------------------------------------------- The financial statements of Glenbrook as of December 31, 2000 and 1999 and for each of the three years in the period ended December 31, 2000, and the related financial statement schedule incorporated herein by reference from the Annual Report on Form 10-K of Glenbrook and from the Statement of Additional Information, have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report incorporated herein by reference, and have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. The financial statements of the Variable Account as of December 31, 2000 and for each of the periods in the two years then ended incorporated herein by reference from the Statement of Additional Information, have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report incorporated herein by reference, and have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. 31 PROSPECTUS PERFORMANCE INFORMATION - ------------------------------------------------------------------- We may advertise the performance of the Variable Sub-Accounts, including yield and total return information. Total return represents the change, over a specified period of time, in the value of an investment in a Variable Sub-Account after reinvesting all income distributions. Yield refers to the income generated by an investment in a Variable Sub-Account over a specified period. All performance advertisements will include, as applicable, standardized yield and total return figures that reflect the deduction of insurance charges, the contract maintenance charge, and withdrawal charge. Performance advertisements also may include total return figures that reflect the deduction of insurance charges, but not the contract maintenance or withdrawal charges. The deduction of such charges would reduce the performance shown. In addition, performance advertisements may include aggregate average, year-by-year, or other types of total return figures. Performance information for periods prior to the inception date of the Variable Sub-Accounts will be based on the historical performance of the corresponding Portfolios for the periods beginning with the inception dates of the Portfolios and adjusted to reflect current Contract expenses. You should not interpret these figures to reflect actual historical performance of the Variable Account. We may include in advertising and sales materials tax deferred compounding charts and other hypothetical illustrations that compare currently taxable and tax deferred investment programs based on selected tax brackets. Our advertisements also may compare the performance of our 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. 32 PROSPECTUS APPENDIX A - ------------------------------------------------------------------- ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED BASIC POLICY
FOR THE YEARS BEGINNING JANUARY 1* AND ENDING DECEMBER 31 ------------------------------------ 1998 1999 2000 --------- ----------- ----------- AIM V.I. CAPITAL APPRECIATION SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.000 $30.700 $17.628 Accumulation Unit Value, End of Period.................... $30.700 $17.628 $15.496 Number of Units Outstanding, End of Period................ 6,547 7,877 8,541 AIM V.I. DIVERSIFIED INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period $10.000 $10.131 $9.802 Accumulation Unit Value, End of Period.................... $10.131 $9.802 $9.739 Number of Units Outstanding, End of Period................ 9,663 13,500 9,544 AIM V.I. GLOBAL UTILITIES SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.000 $11.444 $15.079 Accumulation Unit Value, End of Period.................... $11.444 $15.079 $14.539 Number of Units Outstanding, End of Period................ 0 0 1,656 AIM V.I. GOVERNMENT SECURITIES SUB-ACCOUNT Accumulation Unit Value, Beginning of Period $10.000 $10.868 $10.290 Accumulation Unit Value, End of Period.................... $10.868 $10.290 $11.181 Number of Units Outstanding, End of Period................ 692 719 15,350 AIM V.I. GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.000 $13.490 $17.998 Accumulation Unit Value, End of Period.................... $13.490 $17.998 $14.120 Number of Units Outstanding, End of Period................ 15,902 14,265 13,585 AIM V.I. GROWTH AND INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.000 $12.897 $17.081 Accumulation Unit Value, End of Period.................... $12.897 $17.081 $14.400 Number of Units Outstanding, End of Period................ 52,358 21,097 24,225 AIM V.I. INTERNATIONAL EQUITY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.000 $11.445 $17.507 Accumulation Unit Value, End of Period.................... $11.445 $17.507 $12.713 Number of Units Outstanding, End of Period................ 1,491 1,207 1,206 AIM V.I. VALUE SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.000 $13.299 $17.043 Accumulation Unit Value, End of Period.................... $13.299 $17.043 $14.353 Number of Units Outstanding, End of Period................ 34,858 34,854 32,778 AMERICAN CENTURY VP BALANCED SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.618 $12.134 $13.175 Accumulation Unit Value, End of Period.................... $12.134 $13.175 $12.655 Number of Units Outstanding, End of Period................ 9,621 9,793 13,187 AMERICAN CENTURY VP INTERNATIONAL SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.025 $11.752 $19.020 Accumulation Unit Value, End of Period.................... $11.752 $19.020 $15.609 Number of Units Outstanding, End of Period................ 344 371 370
A-1 ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED BASIC POLICY
FOR THE YEARS BEGINNING JANUARY 1* AND ENDING DECEMBER 31 ------------------------------------ 1998 1999 2000 --------- ----------- ----------- DREYFUS SOCIALLY RESPONSIBLE GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.813 $13.286 $17.688 Accumulation Unit Value, End of Period.................... $13.286 $17.688 $15.527 Number of Units Outstanding, End of Period................ 4,726 6,933 4,213 DREYFUS STOCK INDEX SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.000 $12.830 $15.267 Accumulation Unit Value, End of Period.................... $12.830 $15.267 $13.666 Number of Units Outstanding, End of Period 39,205 37,405 32,323 DREYFUS VIF GROWTH AND INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.602 $11.674 $13.636 Accumulation Unit Value, End of Period.................... $11.674 $13.636 $12.946 Number of Units Outstanding, End of Period................ 15,709 13,729 6,661 DREYFUS VIF MONEY MARKET SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.198 $10.582 $10.936 Accumulation Unit Value, End of Period.................... $10.582 $10.936 $11.442 Number of Units Outstanding, End of Period................ 750 6,351 779 DREYFUS VIF SMALL COMPANY STOCK SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $11.161 $10.359 $11.303 Accumulation Unit Value, End of Period.................... $10.359 $11.303 $12.104 Number of Units Outstanding, End of Period................ 710 708 708 FIDELITY VIP II CONTRAFUND SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $11.071 $14.205 $17.414 Accumulation Unit Value, End of Period.................... $14.205 $17.414 $16.044 Number of Units Outstanding, End of Period................ 9,350 10,442 9,095 FIDELITY VIP EQUITY-INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.000 $11.270 $11.822 Accumulation Unit Value, End of Period.................... $11.270 $11.822 $12.647 Number of Units Outstanding, End of Period................ 40,266 40,268 27,073 FIDELITY VIP GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.685 $14.713 $19.950 Accumulation Unit Value, End of Period.................... $14.713 $19.950 $17.523 Number of Units Outstanding, End of Period................ 6,361 7,516 8,143 FIDELITY VIP HIGH INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.779 $10.180 $10.862 Accumulation Unit Value, End of Period.................... $10.180 $10.862 $8.309 Number of Units Outstanding, End of Period................ 5,530 6,101 3,264 MFS EMERGING GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.999 $14.566 $25.395 Accumulation Unit Value, End of Period.................... $14.566 $25.395 $20.144 Number of Units Outstanding, End of Period 4,972 6,246 6,845 MFS LIMITED MATURITY SUB-ACCOUNT** Accumulation Unit Value, Beginning of Period.............. $10.269 $10.298 $10.780 Accumulation Unit Value, End of Period.................... $10.298 $10.780 $11.277 Number of Units Outstanding, End of Period................ 1,014 995 995
* The AIM Variable Sub-Accounts as well as, the Fidelity Equity Income, and Dreyfus Stock Index Variable Sub-Accounts commenced operations on January 26, 1998. The other Variable Sub-Accounts commenced operations on June 17, 1997, but had no material operations for the year ended December 31, 1997. The Accumulation Unit Values in this table reflect a mortality and expense risk charge of 1.25% and an administrative expense charge of 0.10%. ** Not available to new investors. A-2 ACCUMULATION UNIT VALUES AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED BASIC POLICY PLUS ENHANCED DEATH BENEFIT RIDER
FOR THE YEARS BEGINNING JANUARY 1* AND ENDING DECEMBER 31 ----------------------------- 1998 1999 2000 -------- -------- -------- AIM V.I. CAPITAL APPRECIATION SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.000 $12.344 $17.594 Accumulation Unit Value, End of Period.................... $12.344 $17.594 $15.450 Number of Units Outstanding, End of Period................ 5,197 13,896 14,129 AIM V.I. DIVERSIFIED INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.000 $10.121 $9.784 Accumulation Unit Value, End of Period.................... $10.121 $9.784 $9.711 Number of Units Outstanding, End of Period................ 8,931 7,601 8,074 AIM V.I. GLOBAL UTILITIES SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.000 $11.433 $15.050 Accumulation Unit Value, End of Period.................... $11.433 $15.050 $13.620 Number of Units Outstanding, End of Period................ 0 1,584 327 AIM V.I. GOVERNMENT SECURITIES SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.000 $10.858 $10.270 Accumulation Unit Value, End of Period.................... $10.858 $10.270 $11.149 Number of Units Outstanding, End of Period................ 7,546 39,816 47,013 AIM V.I. GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.000 $13.477 $17.964 Accumulation Unit Value, End of Period.................... $13.477 $17.964 $14.079 Number of Units Outstanding, End of Period................ 15,252 14,638 17,565 AIM V.I. GROWTH AND INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.000 $12.885 $17.048 Accumulation Unit Value, End of Period.................... $12.885 $17.048 $14.358 Number of Units Outstanding, End of Period 53,358 48,463 49,495 AIM V.I. INTERNATIONAL EQUITY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.000 $11.434 $17.474 Accumulation Unit Value, End of Period.................... $11.434 $17.474 $12.676 Number of Units Outstanding, End of Period................ 5,403 4,967 977 AIM V.I. VALUE SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.000 $13.287 $17.011 Accumulation Unit Value, End of Period.................... $13.287 $17.011 $14.311 Number of Units Outstanding, End of Period................ 52,510 64,070 65,919 AMERICAN CENTURY VP BALANCED SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.618 $12.116 $13.142 Accumulation Unit Value, End of Period.................... $12.116 $13.142 $12.611 Number of Units Outstanding, End of Period................ 7,716 10,484 10,810 AMERICAN CENTURY VP INTERNATIONAL SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.025 $11.734 $18.972 Accumulation Unit Value, End of Period.................... $11.734 $18.972 $15.554 Number of Units Outstanding, End of Period................ 5,196 5,546 11,548
A-3 ACCUMULATION UNIT VALUES AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED BASIC POLICY PLUS ENHANCED DEATH BENEFIT RIDER
FOR THE YEARS BEGINNING JANUARY 1* AND ENDING DECEMBER 31 ----------------------------- 1998 1999 2000 -------- -------- -------- DREYFUS SOCIALLY RESPONSIBLE GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.813 $13.265 $17.649 Accumulation Unit Value, End of Period.................... $13.265 $17.643 $15.472 Number of Units Outstanding, End of Period................ 4,373 3,528 6,596 DREYFUS STOCK INDEX SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.000 $12.819 $15.237 Accumulation Unit Value, End of Period.................... $12.819 $15.237 $13.626 Number of Units Outstanding, End of Period................ 86,935 80,779 77,360 DREYFUS VIF GROWTH AND INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.602 $11.656 $13.601 Accumulation Unit Value, End of Period.................... $11.656 $13.601 $12.900 Number of Units Outstanding, End of Period................ 18,031 18,597 16,850 DREYFUS VIF MONEY MARKET SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.198 $10.566 $10.909 Accumulation Unit Value, End of Period.................... $10.566 $10.909 $11.402 Number of Units Outstanding, End of Period................ 13,027 40,342 2,062 DREYFUS VIF SMALL COMPANY STOCK SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $11.161 $10.343 $11.275 Accumulation Unit Value, End of Period.................... $10.343 $11.275 $12.061 Number of Units Outstanding, End of Period................ 5,753 5,754 2,477 FIDELITY VIP II CONTRAFUND SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $11.071 $14.184 $17.370 Accumulation Unit Value, End of Period.................... $14.184 17.370 $15.987 Number of Units Outstanding, End of Period................ 11,838 14,873 17,120 FIDELITY VIP EQUITY INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.000 $11.259 $11.799 Accumulation Unit Value, End of Period.................... $11.259 $11.799 $12.610 Number of Units Outstanding, End of Period................ 76,050 70,192 67,206 FIDELITY VIP GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.685 $14.691 $19.899 Accumulation Unit Value, End of Period.................... $14.691 $19.899 $17.461 Number of Units Outstanding, End of Period................ 8,947 1,241 14,641 FIDELITY VIP HIGH INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.779 $10.164 $10.834 Accumulation Unit Value, End of Period.................... $10.164 $10.834 8.280 Number of Units Outstanding, End of Period................ 28,509 27,471 18,857 MFS EMERGING GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period.............. $10.999 $14.544 $25.331 Accumulation Unit Value, End of Period.................... $14.544 $25.331 $20.073 Number of Units Outstanding, End of Period................ 6,085 10,929 14,285 MFS LIMITED MATURITY SUB-ACCOUNT** Accumulation Unit Value, Beginning of Period.............. $10.269 $10.273 $10.753 Accumulation Unit Value, End of Period.................... $10.273 $10.753 $11.237 Number of Units Outstanding, End of Period................ 3,996 5,857 4,938 * The Enhanced Death Benefit Rider has been available since the contracts were first offered. The inception dates of the Variable Sub-Accounts are listed in the footnote to the Accumulation Unit Value Table for the Basic Policy above. The Accumulation Unit Values in this table reflect a mortality and expense risk charge of 1.35% and an administrative expense charge of 0.10%. ** Not available to new investors.
A-4 APPENDIX B MARKET VALUE ADJUSTMENT EXAMPLE - ------------------------------------------------------------------- The Market Value Adjustment is based on the following: I = the Treasury Rate for a maturity equal to the Guarantee Period for the week preceding the establishment of the Guarantee Period. J = the Treasury Rate for a maturity equal to the Guarantee Period for the week preceding the receipt of the withdrawal, transfer, death benefit, or income payment request. If a Note with a maturity of the original Guarantee Period is not available, a weighted average will be used. 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. Treasury Rate means the U.S. Treasury Note Constant Maturity yield as reported in Federal Reserve Bulletin Release H.15. The Market Value Adjustment factor is determined from the following formula: .9 X (I - J) X N To determine the Market Value Adjustment, we will multiply the Market Value Adjustment factor by the amount transferred, withdrawn (in excess of the Free Withdrawal Amount), paid as a death benefit, or applied to an Income Plan, out of a Guarantee Period at any time other than during the 30 day period after such Guarantee Period expires. EXAMPLES OF MARKET VALUE ADJUSTMENT Purchase Payment: $10,000 allocated to a Guarantee Period Guarantee Period: 5 years Interest Rate: 4.50% Full Withdrawal: End of Contract Year 3 NOTE: These examples assume that premium taxes are not applicable. EXAMPLE 1: (ASSUMES DECLINING INTEREST RATES)
Step 1: Calculate Contract Value at End of Contract $10,000.00 X (1.045)3 = $11,411.66 Year 3: Step 2: Calculate the Free Withdrawal Amount: .15 X ($10,000.00) = $1,500.00 Step 3: Calculate the Withdrawal Charge: .05 X ($10,000.00 - $1,500.00) = $425.00 Step 4: Calculate the Market Value Adjustment: I = 4.5% J = 4.2% 730 days N = ------- = 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 ($11,411.66 - $1,500) = $53.52 Step 5: Calculate the amount received by Contract Owner as a result of full withdrawal at the end of Contract Year 3: $11,411.66 - $425.00 + $53.52 = $11,040.18 B-1 EXAMPLE 2: (ASSUMES RISING INTEREST RATES) Step 1: Calculate Contract Value at End of Contract Year 3: $10,000.00 X (1.045)3 = $11,411.66 Step 2: Calculate the Free Withdrawal Amount: .15 X ($10,000.00) = $1,500.00 Step 3: Calculate the Withdrawal Charge: .05 X ($10,000.00 - $1,500.00) = $425.00 Step 4: Calculate the Market Value Adjustment: I = 4.5% J = 4.8% 730 days N = ------- = 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 ($11,411.66 - $1,500) = -$53.52 Step 5: Calculate the amount received by Contract Owner as a result of full withdrawal at the end of Contract Year 3: $11,411.66 - $425.00 - $53.52 = $10,933.14
B-2 STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS - ------------------------------------------------------------------- DESCRIPTION - ----------------------------------------------------- ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS - ---------------------------------------------------- THE CONTRACT - ---------------------------------------------------- Purchases of Contracts - ---------------------------------------------------- Tax-free Exchanges (1035 Exchanges, Rollovers and Transfers) - ---------------------------------------------------- PERFORMANCE INFORMATION - ---------------------------------------------------- Standardized Total Returns - ---------------------------------------------------- Non-standardized Total Returns - ---------------------------------------------------- Adjusted Historical Total Returns - ---------------------------------------------------- CALCULATION OF ACCUMULATION UNIT VALUES - ---------------------------------------------------- CALCULATION OF VARIABLE INCOME PAYMENTS - ---------------------------------------------------- CALCULATION OF ANNUITY UNIT VALUES - ----------------------------------------------------- DESCRIPTION - ----------------------------------------------------- GENERAL MATTERS - ---------------------------------------------------- Incontestability - ---------------------------------------------------- Settlements - ---------------------------------------------------- Safekeeping of the Variable Account's Assets - ---------------------------------------------------- Premium Taxes - ---------------------------------------------------- Tax Reserves - ---------------------------------------------------- FEDERAL TAX MATTERS - ---------------------------------------------------- QUALIFIED PLANS - ---------------------------------------------------- EXPERTS - ---------------------------------------------------- FINANCIAL STATEMENTS - ----------------------------------------------------- ------------------------------ THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. WE DO NOT AUTHORIZE ANYONE TO PROVIDE ANY INFORMATION OR REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS PROSPECTUS OTHER THAN AS CONTAINED IN THIS PROSPECTUS. C-1 The Glenbrook Provider Variable Annuity Prospectus dated May 1, 2001 Glenbrook Life And Annuity Company 300 N. Milwaukee Ave. Vernon Hills, IL 60061 Telephone Number: 1-800-755-5275 Glenbrook Life and Annuity Company ("Glenbrook") is offering the Glenbrook Provider Variable Annuity, an individual flexible premium deferred variable annuity contract ("Contract"). This prospectus contains information about the Contract that you should know before investing. Please keep it for future reference. The Contract currently offers 42 "investment alternatives". The investment alternatives include 3 fixed account options ("Fixed Account Options") and 39 variable sub-accounts ("Variable Sub-Accounts") of the Glenbrook Life Multi-Manager Variable Account ("Variable Account"). Each Variable Sub-Account invests exclusively in shares of the portfolios ("Portfolios") of the following mutual funds ("Funds"):
Franklin Templeton Variable Insurance Products Trust AIM Variable Insurance Funds Goldman Sachs Variable Insurance Trust (VIT) The Dreyfus Socially Responsible Growth Fund, Inc. MFS(R) Variable Insurance TrustSM Dreyfus Stock Index Fund Oppenheimer Variable Account Funds Dreyfus Variable Investment Fund (VIF) The Universal Institutional Funds, Inc. Fidelity Variable Insurance Products Fund
Each Fund has multiple investment Portfolios. Not all of the Funds and/or Portfolios, however, may be available with your Contract. You should check with your representative for further information on the availability of Funds and/or Portfolios. Your annuity application will list all available Portfolios. We (Glenbrook) have filed a Statement of Additional Information, dated May 1, 2001, with the Securities and Exchange Commission ("SEC"). It contains more information about the Contract and is incorporated herein by reference, which means it is legally a part of this prospectus. Its table of contents appears on page C-1 of this prospectus. For a free copy, please write or call us at the address or telephone number above, or go to the SEC's Web site (http://www.sec.gov). You can find other information and documents about us, including documents that are legally part of this prospectus, at the SEC's Web site. The Securities and Exchange Commission has not approved or disapproved the securities described in this prospectus, nor has it passed on the accuracy or the adequacy of this prospectus. Anyone who tells you otherwise is committing a federal crime. IMPORTANT The Contracts may be distributed through broker-dealers that NOTICES have relationships with banks or other financial institutions or by employees of such banks. However, the Contracts are not deposits, or obligations of, or guaranteed by such institutions or any federal regulatory agency. Investment in the Contracts involves investment risks, including possible loss of principal. The Contracts are not FDIC insured. Table of Contents Page Overview Important Terms 3 The Contract At A Glance 4 How the Contract Works 6 Expense Table 7 Financial Information 12 Contract Features The Contract 13 Purchases 14 Contract Value 15 Investment Alternatives 16 The Variable Sub-Accounts 16 The Fixed Account Options 18 Transfers 21 Expenses 22 Access To Your Money 25 Income Payments 25 Death Benefits 27 Other Information More Information: 30 Glenbrook 30 The Variable Account 30 The Portfolios 31 The Contract 31 Qualified Plans 32 Legal Matters 32 Taxes 33 Annual Reports and Other Documents 35 Experts 36 Performance Information 37 Appendix A - Accumulation Unit Values A-1 Appendix B - Market Value Adjustment Example B-1 Statement of Additional Information Table of Contents C-1 GLG678-1 Important Terms This prospectus uses a number of important terms that you may not be familiar with. The index below identifies the page that describes each term. The first use of each term in this prospectus appears in highlights. Page Accumulation Phase 15 Accumulation Unit 15 Accumulation Unit Value 15 Anniversary Values 28 Annuitant 13 Automatic Additions Plan 14 Automatic Portfolio Rebalancing Program 21 Beneficiary 13 Cancellation Period 15 Contract* 31 Contract Anniversary 5 Contract Owner ("You") 13 Contract Value 15 Contract Year 4 Death Benefit Anniversary 28 Dollar Cost Averaging Program 21 Due Proof of Death 27 Enhanced Death Benefit Rider 28 Enhanced Death and Income Benefit Combination Rider 28 Enhanced Death and Income Benefit Combination Rider II 29 Fixed Account Options 18 Free Withdrawal Amount 23 Funds 1 Glenbrook ("We" or "Us") 30 Guarantee Periods 18 Income Plan 26 Investment Alternatives 16 Issue Date 6 Market Value Adjustment 20 Payout Phase 6 Payout Start Date 25 Portfolios 31 Qualified Contracts 34 SEC 1 Settlement Value 28 Systematic Withdrawal Program 25 Valuation Date 14 Variable Account 30 Variable Sub-Account 16 * In certain states the Contract is available only as a group Contract. If you purchase a group Contract, we will issue you a certificate that represents your ownership and that summarizes the provisions of the group Contract. References to Contract in this prospectus include certificates, unless the context requires otherwise. 1 PROSPECTUS The Contract at a Glance The following is a snapshot of the Contract. Please read the remainder of this prospectus for more information. Flexible Payments You can purchase a Contract with as little as $3,000 ($2,000 for "Qualified Contracts," which are Contracts issued within qualified plans). You can add to your Contract as often and as much as you like, but each payment must be at least $50. Right to Cancel You may cancel your Contract within 20 days of receipt or any longer period as your state may require ("Cancellation Period"). Upon cancellation, we will return your purchase payments adjusted, to the extent federal or state law permits, to reflect the investment experience of any amounts allocated to the Variable Account. Expenses You will bear the following expenses: o Total Variable Account annual fees equal to 1.15% of average daily net assets (1.37% if you select the Enhanced Death Benefit Rider; 1.59% if you selected the Enhanced Death and Income Benefit Combination Rider (for Contracts issued before September 22,2000); and 1.65% if you select the Enhanced Death and Income Benefit Combination Rider II (for Contracts issued on or after September 22, 2000). o Annual contract maintenance charge of $35 (with certain exceptions) o Withdrawal charges ranging from 0% to 6% of purchase payment withdrawn (with certain exceptions) o Transfer fee of $10 after 12th transfer in any Contract Year (fee currently waived) o State premium tax (if your state imposes one) In addition, each Portfolio pays expenses that you will bear indirectly if you invest in a Variable Sub-Account.
Investment Alternatives The Contract offers 42 investment alternatives including: o 3 Fixed Account Options (which credit interest at rates we guarantee o 39 Variable Sub-Accounts investing in Portfolios offering professional money management by these investment advisers: o A I M Advisors, Inc. o The Dreyfus Corporation o Fidelity Management & Research Company o Franklin Advisers, Inc. o Franklin Mutual Advisers, LLC o Goldman Sachs Asset Management o Goldman Sachs Asset Management International o MFS Investment Management(R) o Miller Anderson & Sherrerd, LLP o Morgan Stanley Asset Management o OppenheimerFunds, Inc. o Templeton Asset Management Ltd o Templeton Global Advisors Limited o Templeton Investment Counsel, LLC To find out current rates being paid on the Fixed Account Options or how the Variable Sub-Accounts have performed, call us at 1-800-755-5275. 4 PROSPECTUS Special Services For your convenience, we offer these special services: o Automatic Portfolio Rebalancing Program o Automatic Additions Program o Dollar Cost Averaging Program o Systematic Withdrawal Program Income Payments You can choose fixed income payments, variable income payments, or a combination of the two. You can receive your income payments in one of the following ways: o life income with guaranteed payments o a "joint and survivor" life income with guaranteed payments o guaranteed payments for a specified period (5 to 30 years) Death Benefits If you or the Annuitant (if the Contract is owned by a non-natural person) die before the Payout Start Date, we will pay the death benefit described in the Contract. We offer an Enhanced Death Benefit Rider and an Enhanced Death and Income Benefit Combination Rider II. Transfers Before the Payout Start Date, you may transfer your Contract value ("Contract Value") among the investment alternatives, with certain restrictions. Transfers to a Guarantee Period of the Fixed Account must be at least $50. We do not currently impose a fee upon transfers. However, we reserve the right to charge $10 per transfer after the 12th transfer in each Contract Year, which we measure from the date we issue your Contract or a Contract anniversary ("Contract Anniversary"). Withdrawals You may withdraw some or all of your Contract Value at anytime prior to the Payout Start Date. In general, you must withdraw at least $50 at a time. Full or partial withdrawals are available under limited circumstances on or after the Payout Start Date. A 10% federal tax penalty may apply if you withdraw before you are 59 1/2 years old. A withdrawal charge and Market Value Adjustment also may apply.
5 PROSPECTUS How the Contract Works The Contract basically works in two ways. First, the Contract can help you (we assume you are the Contract owner) save for retirement because you can invest in up to 42 investment alternatives and pay no federal income taxes on any earnings until you withdraw them. You do this during what we call the "Accumulation Phase" of the Contract. The Accumulation Phase begins on the date we issue your Contract (we call that date the "Issue Date") and continues until the Payout Start Date, which is the date we apply your money to provide income payments. During the Accumulation Phase, you may allocate your purchase payments to any combination of the Variable Sub-Accounts and/or Fixed Account Options. If you invest in any of the three Fixed Account Options, you will earn a fixed rate of interest that we declare periodically. If you invest in any of the Variable Sub-Accounts, your investment return will vary up or down depending on the performance of the corresponding Portfolios. Second, the Contract can help you plan for retirement because you can use it to receive retirement income for life and/or for a pre-set number of years, by selecting one of the income payment options (we call these "Income Plans") described on page 26. You receive income payments during what we call the "Payout Phase" of the Contract, which begins on the Payout Start Date and continues until we make the last payment required by the Income Plan you select. During the Payout Phase, if you select a fixed income payment option, we guarantee the amount of your payments, which will remain fixed. If you select a variable income payment option, based on one or more of the Variable Sub-Accounts, the amount of your payments will vary up or down depending on the performance of the corresponding Portfolios. The amount of money you accumulate under your Contract during the Accumulation Phase and apply to an Income Plan will determine the amount of your income payments during the Payout Phase. The timeline below illustrates how you might use your Contract.
ISSUE ACCUMULATION PHASE PAYOUT START PAYOUT PHASE DATE DATE - ------------------------------------------------------------------------------------------------------ You buy You save for retirement You elect to You can receive Or you can a Contract receive income income payments receive income payments or for a set period payments for life receive a lump sum payment
As the Contract Owner, you exercise all of the rights and privileges provided by the Contract. If you die, any surviving Contract Owner or, if none, the Beneficiary will exercise the rights and privileges provided by the Contract. See "The Contract." In addition, if you die before the Payout Start Date, we will pay a death benefit to any surviving Contract owner or, if there is none, to your Beneficiary. See "Death Benefits." Please call us at 1-800-755-5275 if you have any questions about how the Contract works. 6 PROSPECTUS Expense Table The table below lists the expenses that you will bear directly or indirectly when you buy a Contract. The table and the examples that follow do not reflect premium taxes that may be imposed by the state where you reside. For more information about Variable Account expenses, see "Expenses," below. For more information about Portfolio expenses, please refer to the accompanying prospectuses for the Funds. Contract Owner Transaction Expenses Withdrawal Charge (as a percentage of purchase payments)* Number of Complete Years Since We Received the Payment Being Withdrawn: 0 1 2 3 4 5 6+ Applicable Charge: 6% 6% 5% 5% 4% 3% 0% Annual Contract Maintenance Charge $35.00** Transfer Fee $10.00*** * Each Contract Year, you may withdraw up to 15% of your aggregate purchase payments without incurring a withdrawal charge. ** We will waive this charge in certain cases. See "Expenses." *** Applies solely to the thirteenth and subsequent transfers within a Contract Year, excluding transfers due to dollar cost averaging and automatic portfolio rebalancing. We are currently waiving the transfer fee. Variable Account Annual Expenses (as a percentage of average daily net asset value deducted from each Variable Sub-Account) Without the Enhanced Death Benefit Option, Enhanced Death and Income Benefit Combination Rider, or Enhanced Death and Income Benefit Combination Rider II Mortality and Expense Risk Charge 1.05% Administrative Expense Charge 0.10% Total Variable Account Annual Expenses 1.15% With the Enhanced Death Benefit Option Mortality and Expense Risk Charge 1.27% Administrative Expense Charge 0.10% Total Variable Account Annual Expenses 1.37% With the Enhanced Death and Income Benefit Combination Rider (for Contracts issued before September 22, 2000) Mortality and Expense Risk Charge 1.49% Administrative Expense Charge 0.10% Total Variable Account Annual Expenses 1.59% With the Enhanced Death and Income Benefit Combination Rider II (for Contracts issued on or after September 22, 2000) Mortality and Expense Risk Charge 1.55% Administrative Expense Charge 0.10% Total Variable Account Annual Expenses 1.65% 7 PROSPECTUS Portfolio Annual Expenses (After Voluntary Reductions and Reimbursements) (as a percentage of Portfolio average daily net assets)(1)
Portfolio Management Rule 12b-1 Other Total Portfolio Fees Fees Expenses Annual Expenses AIM V.I. Balanced Fund 0.75% N/A 0.35% 1.10% AIM V.I. Diversified Income Fund 0.60% N/A 0.30% 0.90% AIM V.I. Government Securities Fund 0.50% N/A 0.47% 0.97% AIM V.I. Growth Fund 0.61% N/A 0.22% 0.83% AIM V.I. Growth and Income Fund 0.60% N/A 0.24% 0.84% AIM V.I. International Equity Fund 0.73% N/A 0.29% 1.02% AIM V.I. Value Fund 0.61% N/A 0.23% 0.84% The Dreyfus Socially Responsible Growth Fund, Inc.: 0.75% N/A 0.03% 0.78% Initial Shares Dreyfus Stock Index Fund: Initial Shares 0.25% N/A 0.01% 0.26% Dreyfus VIF - Growth & Income Portfolio: Initial Shares 0.75% N/A 0.03% 0.78% Dreyfus VIF - Money Market Portfolio 0.50% N/A 0.10% 0.60% Fidelity VIP Contrafund Portfolio (2,3) 0.57% N/A 0.09% 0.66% Fidelity VIP Equity-Income Portfolio (2,3) 0.48% N/A 0.08% 0.56% Fidelity VIP Growth Portfolio (2,3) 0.57% N/A 0.08% 0.65% Fidelity VIP High Income Portfolio (2) 0.58% N/A 0.10% 0.68% Franklin Small Cap Fund - Class 2 (4,5,6) 0.49% 0.25% 0.28% 1.02% Mutual Shares Securities Fund - Class 2 (4) 0.60% 0.25% 0.20% 1.05% Templeton Developing Markets Securities Fund - 1.25% 0.25% 0.31% 1.81% Class 2 (4) Templeton Growth Securities Fund - Class 2 (4,7) 0.81% 0.25% 0.06% 1.12% Templeton International Securities Fund - Class 2 (4) 0.67% 0.25% 0.20% 1.12% Goldman Sachs VIT Capital Growth Fund (8) 0.75% N/A 0.25% 1.00% Goldman Sachs VIT CORE(sm) Small Cap Equity Fund (8) 0.75% N/A 0.25% 1.00% Goldman Sachs VIT CORE(sm) U.S. Equity Fund 0.70% N/A 0.20% 0.90% Goldman Sachs VIT Global Income Fund (8) 0.90% N/A 0.25% 1.05% Goldman Sachs VIT International Equity Fund (8) 1.00% N/A 0.35% 1.35% MFS Emerging Growth Series (9) 0.75% N/A 0.10% 0.85% MFS Investors Trust Series (9,10) 0.75% N/A 0.12% 0.87% MFS New Discovery Series (9,11) 0.90% N/A 0.16% 1.06% MFS Research Series (9) 0.75% N/A 0.10% 0.85% Morgan Stanley UIF Equity Growth Portfolio (12) 0.48% N/A 0.37% 0.85% Morgan Stanley UIF Fixed Income Portfolio (12) 0.21% N/A 0.49% 0.70% Morgan Stanley UIF Global Equity Portfolio (12) 0.52% N/A 0.63% 1.15% Morgan Stanley UIF Mid Cap Value Portfolio (12) 0.53% N/A 0.52% 1.05% Morgan Stanley UIF Value Portfolio (12) 0.31% N/A 0.54% 0.85% Oppenheimer Aggressive Growth Fund/VA 0.62% N/A 0.02% 0.64% Oppenheimer Capital Appreciation Fund/VA 0.64% N/A 0.03% 0.67% Oppenheimer Global Securities Fund/VA 0.64% N/A 0.04% 0.68% Oppenheimer Main Street Growth & Income Fund/VA 0.70% N/A 0.03% 0.73% Oppenheimer Strategic Bond Fund/VA 0.74% N/A 0.05% 0.79% (1) Figures shown in the Table are for the year ended December 31, 2000 (except as otherwise noted). (2) Initial Class. (3) Actual annual class operating expenses were lower because a portion of the brokerage commissions that the fund paid was used to reduce the fund's expenses, and/or because through arrangements with the fund's custodian, credits realized as a result of uninvested cash balances were used to reduce a portion of the fund's custodian expenses. See the accompanying fund prospectus for details. 8 PROSPECTUS (4) The Fund's Class 2 distribution plan or "Rule 12b-1 plan" is described in the Fund's prospectus. (5) "Total Portfolio Annual Expenses" differ from the ratio of expenses to average net assets shown in the Financial Highlights table included in the Fund's Annual Report to Shareholders for the fiscal year ended December 31, 2000 because they have been restated due to a new management agreement effective May 1, 2000. (6) The manager has agreed in advance to make an estimated reduction of 0.04% of its fee to reflect reduced services resulting from the Fund's investment on a Franklin Templeton money fund. This reduction is required by the Fund's Board of Trustees and an order of the Securities and Exchange Commission. Without this reduction, the "Total Portfolio Annual Expenses" are estimated to be 1.06%. (7) The Fund administration fee is paid indirectly through the management fee. (8) Goldman Sachs Asset Management, the investment advisor has voluntarily agreed to reduce or limit certain "Other Expenses" (excluding management fees, taxes, interest, brokerage fees, litigation, indemnification, and other extraordinary expenses) to the extent such expenses exceed the percentage stated in the calculated per annum (above table) as of each funds' respective average daily net assets. Without the limitations described above, "Other Expenses" and "Total Portfolio Annual Expenses" would be estimated as follows: Portfolio Management Rule 12b-1 Other Total Portfolio Fees Fees Expenses Annual Expenses Goldman Sachs VIT Capital Growth Fund 0.75% N/A 0.94% 1.69% Goldman Sachs VIT CORE(sm) Small Cap Equity Fund 0.75% N/A 0.75% 1.50% Goldman Sachs VIT Global Income Fund 0.90% N/A 1.78% 2.68% Goldman Sachs VIT International Equity Fund 1.00% N/A 0.77% 1.77% The Portfolio's Advisors may discontinue all or part of these reductions and reimbursements at any time. (9) Each series has an expense offset arrangement that reduces the series' custodian fee based upon the amount of cash maintained by the series with its custodian and dividend disbursing agent. The series may enter into other similar arrangements and directed brokerage arrangements, which would also have the effect of reducing the series' expenses. "Other Expenses" do not take into account these expense reductions, and are therefore higher than the actual expenses of the series. Had these fee reductions been taken into account, "Total Portfolio Annual Expenses" would be lower, and for service class shares would be estimated to be: 0.84% for Emerging Growth Series, 0.86% for Investors Trust Series, 1.05% for New Discovery Series, and 0.84% for Research Series. (10) Effective May 1, 2001, the Series changed its name from MFS Growth with Income Series to MFS Investors Trust Series to reflect changes in its investment policies. (11) MFS has contractually agreed, subject to reimbursement, bear the series' expenses such that "Other Expenses" (after taking into account the expense offset arrangement described above) do not exceed 0.15% annually. These contractual fee arrangements will continue until at least May 1, 2002, unless changed with the consent of the board of trustees which oversees the series. (12) Absent voluntary reductions and reimbursements for certain Portfolios, "Management Fees," "Rule 12b-1 Fees," "Other Expenses," and "Total Portfolio Annual Expenses" as a percent of average net assets of the portfolios would have been as follows: Morgan Stanley UIF Equity Growth Portfolio 0.55% N/A 0.37% 0.92% Morgan Stanley UIF Fixed Income Portfolio 0.40% N/A 0.49% 0.89% Morgan Stanley UIF Global Equity Portfolio 0.80% N/A 0.63% 1.43% Morgan Stanley UIF Mid Cap Value Portfolio 0.75% N/A 0.52% 1.27% Morgan Stanley UIF Value Portfolio 0.55% N/A 0.54% 1.09%
The Portfolio's Advisors may discontinue all or part of these reductions and reimbursements at any time. 9 PROSPECTUS Example 1 The example below shows the dollar amount of expenses that you would bear directly or indirectly if you: o invested $1,000 in a Variable Sub-Account, o earned a 5% annual return on your investment, o surrendered your Contract, or you began receiving income payments for a specified period of less than 120 months, at the end of each time period, and o elected the Enhanced Death and Income Benefit Combination Rider II. The example does not include any taxes or tax penalties you may be required to pay if you surrender your contract.
1 Year 3 Years 5 Years 10 Years AIM V.I. Balanced $79 $129 $173 $312 AIM V.I. Diversified Income $77 $123 $163 $292 AIM V.I. Government Securities $78 $125 $167 $299 AIM V.I. Growth and Income $77 $121 $160 $286 AIM V.I. Growth $77 $121 $159 $285 AIM V.I. International Equity $78 $127 $169 $304 AIM V.I. Value $77 $121 $160 $286 The Dreyfus Socially Responsible Growth Fund, Inc.: Initial Shares $76 $119 $157 $279 Dreyfus Stock Index: Initial Shares $71 $103 $130 $225 Dreyfus VIF - Growth & Income: Initial Shares $76 $119 $157 $279 Dreyfus VIF - Money Market $74 $114 $148 $261 Fidelity VIP Contrafund $75 $116 $151 $267 Fidelity VIP Equity-Income $74 $113 $146 $257 Fidelity VIP Growth $75 $115 $150 $266 Fidelity VIP High Income $75 $116 $152 $269 Franklin Small Cap - Class 2 $78 $127 $169 $304 Mutual Shares Securities - Class 2 $79 $128 $171 $307 Templeton Developing Markets Securities - Class 2 $87 $151 $208 $379 Templeton Global Income Securities - Class 2 $78 $125 $167 $299 Templeton Growth Securities - Class 2 $80 $130 $174 $314 Goldman Sachs VIT Capital Growth $78 $126 $168 $302 Goldman Sachs VIT CORE(sm) Small Cap Equity $78 $126 $168 $302 Goldman Sachs VIT CORE(sm) U.S. Equity $77 $123 $163 $292 Goldman Sachs VIT Global Income $80 $131 $176 $317 Goldman Sachs VIT International Equity $82 $137 $186 $336 MFS Emerging Growth $77 $122 $160 $287 MFS Investors Trust $77 $122 $161 $289 MFS New Discovery $79 $128 $171 $308 MFS Research $77 $122 $160 $287 Morgan Stanley UIF Equity Growth $77 $122 $160 $287 Morgan Stanley UIF Fixed Income $75 $117 $153 $271 Morgan Stanley UIF Global Equity $80 $131 $176 $317 Morgan Stanley UIF Mid Cap Value $79 $128 $171 $307 Morgan Stanley UIF Value $77 $122 $160 $287 Oppenheimer Aggressive Growth $75 $115 $150 $265 Oppenheimer Capital Appreciation $75 $116 $151 $268 Oppenheimer Global Securities $75 $116 $152 $269 Oppenheimer Main Street Growth & Income $76 $118 $154 $274 Oppenheimer Strategic Bond $76 $120 $157 $280 10 PROSPECTUS Example 2 Same assumptions as Example 1 above, except that you decided not to surrender your Contract, or you began receiving income payments for a specified period of at least 120 months, at the end of each period. 1 Year 3 Years 5 Years 10 Years AIM V.I. Balanced $28 $87 $148 $312 AIM V.I. Diversified Income $26 $81 $137 $292 AIM V.I. Government Securities $27 $83 $141 $299 AIM V.I. Growth and Income $26 $79 $134 $286 AIM V.I. Growth $26 $78 $134 $285 AIM V.I. International Equity $27 $84 $144 $304 AIM V.I. Value $26 $79 $134 $286 The Dreyfus Socially Responsible Growth Fund, Inc.: Initial Shares $25 $77 $131 $279 Dreyfus Stock Index: Initial Shares $20 $61 $104 $225 Dreyfus VIF - Growth & Income: Initial Shares $25 $77 $131 $279 Dreyfus VIF - Money Market $23 $71 $122 $261 Fidelity VIP Contrafund $24 $73 $125 $267 Fidelity VIP Equity-Income $23 $70 $120 $257 Fidelity VIP Growth $24 $73 $125 $266 Fidelity VIP High Income $24 $74 $126 $269 Franklin Small Cap - Class 2 $27 $84 $144 $304 Mutual Shares Securities - Class 2 $28 $85 $145 $307 Templeton Developing Markets Securities - Class 2 $36 $108 $183 $379 Templeton Global Income Securities - Class 2 $27 $83 $141 $299 Templeton Growth Securities - Class 2 $29 $87 $149 $314 Goldman Sachs VIT Capital Growth $27 $84 $143 $302 Goldman Sachs VIT CORE(sm) Small Cap Equity $27 $84 $143 $302 Goldman Sachs VIT CORE(sm) U.S. Equity $26 $81 $137 $292 Goldman Sachs VIT Global Income $29 $88 $150 $317 Goldman Sachs VIT International Equity $31 $94 $160 $336 MFS Emerging Growth $26 $79 $135 $287 MFS Investors Trust $26 $80 $136 $289 MFS New Discovery $28 $85 $146 $308 MFS Research $26 $79 $135 $287 Morgan Stanley UIF Equity Growth $26 $79 $135 $287 Morgan Stanley UIF Fixed Income $24 $74 $127 $271 Morgan Stanley UIF Global Equity $29 $88 $150 $317 Morgan Stanley UIF Mid Cap Value $28 $85 $145 $307 Morgan Stanley UIF Value $26 $79 $135 $287 Oppenheimer Aggressive Growth $24 $73 $124 $265 Oppenheimer Capital Appreciation $24 $74 $126 $268 Oppenheimer Global Securities $24 $74 $126 $269 Oppenheimer Main Street Growth & Income $25 $75 $129 $274 Oppenheimer Strategic Bond $25 $77 $132 $280
Please remember that you are looking at examples and not a representation of past or future earnings. Your actual expenses may be lower or greater than those shown above. Similarly, your rate of return may be lower or greater than 5%, which is not guaranteed. The examples assume that any portfolio expense waivers or reimbursement arrangements described in the footnotes to the portfolio annual expense table are in effect for the periods presented. The above examples assume the election of the Enhanced Death and Income Benefit Combination Rider II with a mortality and expense risk charge of 1.55%. If that rider were not elected, the expense figures shown above would be slightly lower. To reflect the contract maintenance charge in the examples, we estimated an equivalent percentage charge, based on the current average contract size of $47,490. 11 PROSPECTUS Financial Information To measure the value of your investment in the Variable Sub-Accounts during the Accumulation Phase, we use a unit of measure we call the "Accumulation Unit." Each Variable Sub-Account has a separate value for its Accumulation Units we call "Accumulation Unit Value." Accumulation Unit Value is analogous to, but not the same as, the share price of a mutual fund. Attached as Appendix A to this prospectus are tables showing the Accumulation Unit Values of each Variable Sub-Account since the date the Contracts were first offered. To obtain a fuller picture of each Variable Sub-Account's finances, please refer to the Variable Account's financial statements contained in the Statement of Additional Information. The financial statements of Glenbrook also appear in the Statement of Additional Information. 12 PROSPECTUS The Contract CONTRACT OWNER The Glenbrook Provider 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): o the investment alternatives during the Accumulation and Payout Phases, o the amount and timing of your purchase payments and withdrawals, o the programs you want to use to invest or withdraw money, o the income payment plan you want to use to receive retirement income, o the Annuitant (either yourself or someone else) on whose life the income payments will be based, o the Beneficiary or Beneficiaries who will receive the benefits that the Contract provides when the last surviving Contract Owner dies, and o any other rights that the Contract provides. If you die, any surviving Contract Owner, or, if none, the Beneficiary may exercise the rights and privileges provided to them by the Contract. The Contract cannot be jointly owned by both a non-natural person and a natural person. The maximum age of the oldest Contract Owner and Annuitant cannot exceed 90 as of the date we receive the completed application. You may change the Contract Owner at any time. We will provide a change of ownership form to be signed by you and filed with us. After we accept the form, the change of ownership will be effective as of the date you signed the form. Until we receive your written notice to change the Contract Owner, we are entitled to rely on the most recent ownership information in our files. We will not be liable as to any payment or settlement made prior to receiving the written notice. Accordingly, if you wish to change the Contract Owner, you should deliver your written notice to us promptly. Each change is subject to any payment made by us or any other action we take before we accept the change. You can use the Contract with or without a qualified plan. A qualified plan is a personal retirement savings plan, such as an IRA or tax-sheltered annuity, that meets the requirements of the Internal Revenue Code. Qualified plans may limit or modify your rights and privileges under the Contract. We use the term "Qualified Contract" to refer to a Contract issued within a qualified plan. See "Qualified Plans" on page 32. ANNUITANT The Annuitant is the individual whose life determines the amount and duration of income payments (other than under Income Plans with guaranteed payments for a specified period). You initially designate an Annuitant in your application. You may change the Annuitant at any time prior to the Payout Start Date (only if the Contract Owner is a natural person). Once we accept a change, it takes effect as of the date you signed the request. Each change is subject to any payment we make or other action we take before we accept it. You may designate a joint Annuitant, who is a second person on whose life income payments depend. We permit joint Annuitants only on or after the Payout Start Date. If the Annuitant dies prior to the Payout Start Date, the new Annuitant will be: (i) the youngest Contract Owner; otherwise, (ii) the youngest Beneficiary. BENEFICIARY The Beneficiary is the person selected by the Contract Owner to receive the death benefits or become the new Contract Owner if the sole surviving Contract Owner dies before the Payout Start Date. If the sole surviving Contract Owner dies after the Payout Start Date, the primary Beneficiary, or if none surviving, the contingent Beneficiary, will receive any guaranteed income payments scheduled to continue. You may name one or more primary and contingent Beneficiaries when you apply for a Contract. The primary Beneficiary is the person who may elect to receive the death benefit or become the new Contract Owner if the sole surviving Contract Owner dies before the Payout Start Date. A contingent Beneficiary is the person selected by the Contract Owner who will become the Beneficiary if all named primary Beneficiaries die before the death of the sole surviving Contract Owner. You may change or add Beneficiaries at any time, unless you have designated an irrevocable Beneficiary. We will provide a change of Beneficiary form to be signed by you and filed with us. After we accept the form, the change of Beneficiary will be effective as of the date you signed the form. Until we receive your written notice to change a Beneficiary, we are entitled to rely on the most recent Beneficiary information in our files. We will not be liable as to any payment or settlement made prior to receiving the written notice. Accordingly, if you wish to change your Beneficiary, you should deliver your written notice to us promptly. Each change is subject to any payment made by us or any other action we take before we accept the change. 13 PROSPECTUS If you did not name a Beneficiary or, unless otherwise provided in the Beneficiary designation, if a named Beneficiary is no longer living and there are no other surviving Beneficiaries or Contingent Beneficiaries, the new Beneficiary will be: o your spouse or, if he or she is no longer alive, o your surviving children equally, or if you have no surviving children, o your estate. If one or more Beneficiaries survive you (or survives the Annuitant, if the Contract Owner is not a natural person), we will divide the death benefit among the surviving Beneficiaries according to your most recent written instructions. If you have not given us written instructions, we will pay the death benefit in equal amounts to the surviving Beneficiaries. MODIFICATION OF THE CONTRACT Only a Glenbrook officer may approve a change in or waive any provision of the Contract. Any change or waiver must be in writing. None of our agents has the authority to change or waive the provisions of the Contract. We may not change the terms of the Contract without your consent, except to conform the Contract to applicable law or changes in the law. If a provision of the Contract is inconsistent with state law, we will follow state law. ASSIGNMENT We will not honor an assignment of an interest in a Contract as collateral or security for a loan. However, you may assign periodic income payments under the Contract prior to the Payout Start Date. No Beneficiary may assign benefits under the Contract until they are payable to the Beneficiary. We will not be bound by any assignment until the assignor signs it and files it with us. We are not responsible for the validity of any assignment. Federal law prohibits or restricts the assignment of benefits under many types of retirement plans and the terms of such plans may themselves contain restrictions on assignments. An assignment may also result in taxes or tax penalties. You should consult with an attorney before trying to assign your Contract. Purchases MINIMUM PURCHASE PAYMENTS Your initial purchase payment must be at least $3,000 ($2,000 for a Qualified Contract). All subsequent purchase payments must be $50 or more. You may make purchase payments at any time prior to the Payout Start Date. We reserve the right to limit the maximum amount of purchase payments we will accept. We reserve the right to reject any application in our sole discretion. AUTOMATIC ADDITIONS PROGRAM You may make subsequent purchase payments by automatically transferring money from your bank account. Consult your representative for more detailed information. ALLOCATION OF PURCHASE PAYMENTS At the time you apply for a Contract, you must decide how to allocate your purchase payments among the investment alternatives. The allocation you specify on your application will be effective immediately. All allocations must be in whole percents that total 100% or in whole dollars. You can change your allocations by notifying us in writing. We will allocate your purchase payments to the investment alternatives according to your most recent instructions on file with us. Unless you notify us in writing otherwise, we will allocate subsequent purchase payments according to the allocation for the previous purchase payment. We will effect any change in allocation instructions at the time we receive written notice of the change in good order. We will credit the initial purchase payment that accompanies your completed application to your Contract within 2 business days after we receive the payment at our home office. If your application is incomplete, we will ask you to complete your application within 5 business days. If you do so, we will credit your initial purchase payment to your Contract within that 5 business day period. If you do not, we will return your purchase payment at the end of the 5 business day period unless you expressly allow us to hold it until you complete the application. We will credit subsequent purchase payments to the Contract at the close of the business day on which we receive the purchase payment at our home office. We are open for business each day Monday through Friday that the New York Stock Exchange is open for business. We also refer to these days as "Valuation 14 PROSPECTUS Dates." Our business day closes when the New York Stock Exchange closes, usually 4:00 p.m. Eastern Time (3:00 p.m. Central Time). If we receive your purchase payment after 3 p.m. Central Time on any Valuation Date, we will credit your purchase payment using the Accumulation Unit Values computed on the next Valuation Date. RIGHT TO CANCEL You may cancel the Contract by returning it to us within the Cancellation Period, which is the 20 day period after you receive the Contract, or a longer period should your state require it. You may return it by delivering it or mailing it to us. If you exercise this "Right to Cancel," the Contract terminates and we will pay you the full amount of your purchase payments allocated to the Fixed Account. We also will return your purchase payments allocated to the Variable Account adjusted, to the extent federal or state law permits, to reflect investment gain or loss that occurred from the date of allocation through the date of cancellation. Some states may require us to return a greater amount to you. In states where we are required to refund purchase payments, we reserve the right during the Cancellation Period to invest any purchase payments you allocated to a Variable Sub-Account to the Money Market Variable Sub-Account available under the Contract. We will notify you if we do so. At the end of the Cancellation Period, you may then allocate your money to other Variable Sub-Accounts. Contract Value Your Contract Value at any time during the Accumulation Phase is equal to the sum of the value of your Accumulation Units in the Variable Sub-Accounts you have selected, plus the value of your investment in the Fixed Account Options. ACCUMULATION UNITS To determine the number of Accumulation Units of each Variable Sub-Account to credit to your Contract, we divide (i) the amount of the purchase payment or transfer you have allocated to a Variable Sub-Account by (ii) the Accumulation Unit Value of that Variable Sub-Account next computed after we receive your payment or transfer. For example, if we receive a $10,000 purchase payment allocated to a Variable Sub-Account when the Accumulation Unit Value for the Sub-Account is $10, we would credit 1,000 Accumulation Units of that Variable Sub-Account to your Contract. Withdrawals and transfers from a Variable Sub-Account would, of course, reduce the number of Accumulation Units of that Sub-Account allocated to your Contract. ACCUMULATION UNIT VALUE As a general matter, the Accumulation Unit Value for each Variable Sub-Account will rise or fall to reflect: o changes in the share price of the Portfolio in which the Variable Sub-Account invests, and o the deduction of amounts reflecting the mortality and expense risk charge, administrative expense charge, and any provision for taxes that have accrued since we last calculated the Accumulation Unit Value. We determine contract maintenance charges, withdrawal charges, and transfer fees (currently waived) separately for each Contract. They do not affect Accumulation Unit Value. Instead, we obtain payment of those charges and fees by redeeming Accumulation Units. For details on how we calculate Accumulation Unit Value, please refer to the Statement of Additional Information. We determine a separate Accumulation Unit Value for each Variable Sub-Account on each Valuation Date. We also determine a separate set of Accumulation Unit Values reflecting the cost of the Enhanced Death Benefit Rider, the Enhanced Death and Income Benefit Combination Rider, and the Enhanced Death and Income Benefit Rider II described on pages 28-29. You should refer to the prospectuses for the Funds that accompany this prospectus for a description of how the assets of each Portfolio are valued, since that determination directly bears on the Accumulation Unit Value of the corresponding Variable Sub-Account and, therefore, your Contract Value. 15 PROSPECTUS Investment Alternatives: The Variable Sub-Accounts You may allocate your purchase payments to up to 39 Variable Sub-Accounts. Each Variable Sub-Account invests in the shares of a corresponding Portfolio. Each Portfolio has its own investment objective(s) and policies. We briefly describe the Portfolios below. For more complete information about each Portfolio, including expenses and risks associated with the Portfolio, please refer to the accompanying prospectuses for the Funds. You should carefully review the Fund prospectuses before allocating amounts to the Variable Sub-Accounts.
Portfolio: Each Portfolio Seeks: Investment Advisor: AIM Variable Insurance Funds* AIM V.I. Balanced Fund As high a total return as possible, consistent with preservation of capital AIM V.I. Diversified Income Fund A high level of current income AIM V.I. Government Securities Fund A high level of current income consistent with a reasonable concern for safety of principal AIM V.I. Growth Fund Growth of capital A I M Advisors, Inc. AIM V.I. Growth and Income Fund Growth of capital with a secondary objective of current income AIM V.I. International Equity Fund Long-term growth of capital AIM V.I. Value Fund Long-term growth of capital and income as a secondary objective The Dreyfus Socially Responsible Growth Fund, Inc.; The Dreyfus Stock Index Fund; and The Dreyfus Variable Investment Fund (VIF) (collectively, the Dreyfus Funds) The Dreyfus Socially Responsible Growth Fund, Capital growth and, secondarily, current income Inc. Dreyfus Stock Index Fund To match the total return of the Standard & Poor's(C) 500 Composite Stock Price Index Dreyfus VIF Growth & Income Portfolio Long-term capital growth, income current and growth of income, consistent with reasonable The Dreyfus Corporation investment risk Dreyfus VIF Money Market Portfolio A high level of current income as is consistent with the preservation of capital and the maintenance of liquidity Fidelity Variable Insurance Products Fund Fidelity VIP Contrafund Portfolio Long-term capital appreciation Fidelity VIP Equity-Income Portfolio Reasonable income Fidelity VIP Growth Portfolio Capital appreciation Fidelity Management & Research Company Fidelity VIP High Income Portfolio High level of current income while also considering growth of capital Franklin Templeton Variable Insurance Products Trust (VIP) - Class 2 Franklin Small Cap Fund Long-term capital growth Franklin Advisers, Inc. Mutual Shares Securities Fund Capital appreciation. Secondary goal is income Franklin Mutual Advisers, LLC. Templeton Developing Markets Securities Fund Long-term capital appreciation Templeton Asset Management LTD Templeton Growth Securities Fund Long-term capital growth Templeton Global Advisors Limited Templeton International Securities Fund Long-term capital growth Templeton Investment Counsel, LLC. 16 PROSPECTUS Portfolio: Each Portfolio Seeks: Investment Advisor: Goldman Sachs Variable Insurance Trust (VIT) Goldman Sachs VIT Capital Growth Fund Long-term growth of capital Goldman Sachs Asset Management Goldman Sachs VIT CORE(sm) Small Cap Equity Fund Long-term growth of capital Goldman Sachs VIT CORE(sm) U.S. Equity Fund Long-term growth of capital and dividend income Goldman Sachs VIT Global Income Fund A high total return, emphasizing current income and, to a lesser extent providing opportunities for capital appreciation Goldman Sachs VIT International Equity Fund Long-term capital appreciation Goldman Sachs Asset Management International MFS(R)Variable Insurance TRUST(sm) MFS Emerging Growth Series Long-term growth of capital MFS Investors Trust Series** Long-term growth of capital with a secondary MFS Investment objective to seek reasonable current income Management(R) MFS New Discovery Series Capital appreciation MFS Research Series Long-term growth of capital and future income The Universal Institutional Funds, Inc. Morgan Stanley UIF Equity Growth Long-term capital appreciation Morgan Stanley UIF Fixed Income Above-average total return over a market cycle Morgan Stanley Asset of three to five years Management Morgan Stanley UIF Global Equity Long-term capital appreciation Morgan Stanley UIF Mid Cap Value Above-average total return over a market cycle of three to five years Morgan Stanley UIF Value Above-average total return over a market cycle Miller Anderson & of three to five years Sherrerd, LLP Oppenheimer Variable Account Funds Oppenheimer Aggressive Growth Fund/VA Capital appreciation Oppenheimer Capital Appreciation Fund/VA Capital appreciation Oppenheimer Global Securities Fund/VA Long-term capital appreciation OppenheimerFunds, Inc. Oppenheimer Main Street Growth & Income Fund/VA High total return, which includes growth in the value of its shares as well as current income, from equity and debt securities Oppenheimer Strategic Bond Fund/VA High level of current income
* A portfolio's investment objective may be changed by the Fund's Board of Trustees without shareholders approval. ** Effective May 1, 2001, the Series changed its name from MFS Growth with Income Series to MFS Investors Trust Series to reflect changes in its investment policies. Variable insurance trust portfolios may not be managed by the same portfolio managers who manage retail mutual funds with similar names. These portfolios are likely to differ from retail funds in assets, cash flow, and tax matters. Accordingly, the holdings and investment results of a portfolio can be expected to be higher or lower than the investment results of retail mutual funds. 17 PROSPECTUS Investment Alternatives: The Fixed Account Options You may allocate all or a portion of your purchase payments to the Fixed Account. You may choose from among 3 Fixed Account Options including 2 dollar cost averaging options and the option to invest in one or more Guarantee Periods included in the Guaranteed Maturity Fixed Account. The Fixed Account Options may not be available in all states. Please consult with your representative for current information. The Fixed Account supports our insurance and annuity obligations. The Fixed Account consists of our general assets other than those in segregated asset accounts. We have sole discretion to invest the assets of the Fixed Account, subject to applicable law. Any money you allocate to a Fixed Account Option does not entitle you to share in the investment experience of the Fixed Account. DOLLAR COST AVERAGING FIXED ACCOUNT OPTIONS Dollar Cost Averaging Fixed Account Option. Purchase payments that you allocate to the Dollar Cost Averaging Fixed Account Option ("DCA Fixed Account Option") will earn interest for a one year period at the current rate in effect at the time of allocation. We will credit interest daily at a rate that will compound over the year to the annual interest rate we guaranteed at the time of allocation. After the one year period, we will declare a renewal rate which we guarantee for a full year. Subsequent renewal dates will be every twelve months for each payment or transfer. For each purchase payment, the first transfer from the DCA Fixed Account must occur within one month of the date of payment. If we do not receive an allocation from you within one month of the date of payment, the payment plus associated interest will be transferred to the Money Market Sub-Account in equal monthly installments using the longest transfer period being offered at the time the purchase payment is made. Transferring Account Value to the Money Market Variable Sub-Account in this manner may not be consistent with the theory of dollar cost averaging described on page 21. We will follow your instructions in transferring amounts monthly from the DCA Fixed Account Option. However, you may not choose less than 3 or more than 36 monthly installments. Further, you must transfer each purchase payment and all its earnings out of this Option by means of dollar cost averaging within 36 months of payment. At the end of 36 months, any nominal amounts remaining will be allocated to the Money Market Variable Sub-Account. No transfers are permitted into the Dollar Cost Averaging Fixed Account. Short Term Dollar Cost Averaging Fixed Account Option. You may establish a Short Term Dollar Cost Averaging Program by allocating purchase payments to the Short Term Dollar Cost Averaging Fixed Account Option ("Short Term DCA Fixed Account Option"). We will credit interest to purchase payments you allocate to this Option for up to one year at the current rate in effect at the time of allocation. For each purchase payment, the first transfer from the Short Term DCA Fixed Account must occur within one month of the date of payment. If we do not receive an allocation from you within one month of the date of payment, the payment plus associated interest will be transferred to the Money Market Sub-Account in equal monthly installments using the longest transfer period being offered at the time the purchase payment is made. Transferring Account Value to the Money Market Variable Sub-Account in this manner may not be consistent with the theory of dollar cost averaging described on page 21. You must transfer each purchase payment and all its earnings out of this Option by means of dollar cost averaging within 12 months. At the end of the transfer period, any nominal amounts remaining in the Short Term DCA Fixed Account will be allocated to the Money Market Variable Sub-Account. If you discontinue the Short Term DCA Fixed Account Option before the end of the transfer period, we will transfer the remaining balance in this Option to the Money Market Variable Sub- Account unless you request a different investment alternative. No transfers are permitted into the Short Term DCA Fixed Account. We bear the investment risk for all amounts allocated to the DCA Fixed Account Option and the Short Term DCA Fixed Account Option. That is because we guarantee the current and renewal interest rates we credit to the amounts you allocate to either of these Options, which will never be less than the minimum guaranteed rate in the Contract. Currently, we determine, in our sole discretion, the amount of interest credited in excess of the guaranteed rate. We may declare more than one interest rate for different monies based upon the date of allocation to the DCA Fixed Account Option and the Short Term DCA Fixed Account Option. For current interest rate information, please contact your representative or Glenbrook customer service at 1-800-755-5275. GUARANTEE PERIODS Each payment or transfer allocated to a Guarantee Period earns interest at a specified rate that we guarantee for a period of years. Guarantee Periods may range from 1 to 10 years. We are currently offering Guarantee Periods of 1, 3, 5, 7, and 10 years in length. In the future we may offer Guarantee Periods of different lengths or stop offering some Guarantee Periods. 18 PROSPECTUS You select the Guarantee Period for each payment or transfer. If you do not select a Guarantee Period, we will assign the same period(s) you selected for your most recent purchase payment(s). Each payment or transfer allocated to a Guarantee Period must be at least $50. We reserve the right to limit the number of additional purchase payments that you may allocate to this Option. Interest Rates. We will tell you what interest rates and Guarantee Periods we are offering at a particular time. We will not change the interest rate that we credit to a particular allocation until the end of the relevant Guarantee Period. We may declare different interest rates for Guarantee Periods of the same length that begin at different times. We have no specific formula for determining the rate of interest that we will declare initially or in the future. We will set those interest rates based on investment returns available at the time of the determination. In addition, we may consider various other factors in determining interest rates including regulatory and tax requirements, our sales commission and administrative expenses, general economic trends, and competitive factors. We determine the interest rates to be declared in our sole discretion. We can neither predict nor guarantee what those rates will be in the future. For current interest rate information, please contact your representative or Glenbrook at 1-800-755-5275. How We Credit Interest. We will credit interest daily to each amount allocated to a Guarantee Period at a rate that compounds to the annual interest rate that we declared at the beginning of the applicable Guarantee Period. The following example illustrates how a purchase payment allocated to a Guaranteed Period would grow, given an assumed Guarantee Period and annual interest rate: Purchase Payment............................................ $10,000 Guarantee Period............................................ 5 years Annual Interest Rate........................................ 4.50%
End of Contract Year Year 1 Year 2 Year 3 Year 4 Year 5 ------ ------ ------ ------ ------ Beginning Contract 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 withdrawal, you may be required to pay a withdrawal charge. In addition, the amount withdrawn may be increased or decreased by a Market Value Adjustment that reflects changes in interest rates since the time you invested the amount withdrawn. The hypothetical interest rate is for illustrative purposes only and is not intended to predict future interest rates to be declared under the Contract. Actual interest rates declared for any given Guarantee Period may be more or less than shown above. Renewals. Prior to the end of each Guarantee Period, we will mail you a notice asking you what to do with your money, including the accrued interest. During 19 PROSPECTUS the 30-day period after the end of the Guarantee Period, you may: 1) Take no action. We will automatically apply your money to a new Guarantee Period of the same length as the expiring Guarantee Period. The new Guarantee Period will begin on the day the previous Guarantee Period ends. The new interest rate will be our current declared rate for a Guarantee Period of that length; or 2) Instruct us to apply your money to one or more new Guarantee Periods of your choice. The new Guarantee Period(s) will begin on the day the previous Guarantee Period ends. The new interest rate will be our then current declared rate for those Guarantee Periods; or 3) Instruct us to transfer all or a portion of your money to one or more Variable Sub-Accounts of the Variable Account. We will effect the transfer on the day we receive your instructions. We will not adjust the amount transferred to include a Market Value Adjustment; or 4) Withdraw all or a portion of your money. You may be required to pay a withdrawal charge, but we will not adjust the amount withdrawn to include a Market Value Adjustment. You may also be required to pay premium taxes and income tax withholding, if applicable. We will pay interest from the day the Guarantee Period expired until the date of withdrawal. The interest will be the rate for the shortest Guarantee Period then being offered. Amounts not withdrawn will be applied to a new Guarantee Period of the same length as the previous Guarantee Period. The new Guarantee Period will begin on the day the previous Guarantee Period ends. Market Value Adjustment. All withdrawals and transfers from a Guarantee Period, other than those taken during the 30 day period after such Guarantee Period expires, are subject to a Market Value Adjustment. A Market Value Adjustment also may apply upon payment of a death benefit and when you apply amounts currently invested in a Guarantee Period to an Income Plan (unless paid or applied during the 30-day period after such Guarantee Period expires). We also will not apply a Market Value Adjustment to a withdrawal you make: o within the Free Withdrawal Amount as described on page 23, o that qualify for one of the waivers as described on page 23, o to satisfy the IRS minimum distribution rules for the Contract, or o a single withdrawal made by a surviving spouse made within one year after continuing the Contract. We apply the Market Value Adjustment to reflect changes in interest rates from the time you first allocate money to a Guarantee Period to the time you remove it from that Guarantee Period. We calculate the Market Value Adjustment by comparing the Treasury Rate for a period equal to the Guarantee Period at its inception to the Treasury Rate for a period equal to the Guarantee Period when you remove your money. "Treasury Rate" means the U.S. Treasury Note Constant Maturity Yield as reported in Federal Reserve Bulletin Release H.15. The Market Value Adjustment may be positive or negative, depending on changes in interest rates. As such, you bear the investment risk associated with changes in interest rates. If interest rates increase significantly, the Market Value Adjustment and any withdrawal charge, premium taxes, and income tax withholding (if applicable) could reduce the amount you receive upon full withdrawal from a Guaranteed Period to an amount that is less than the purchase payment applied to that period plus interest earned under the Contract. Generally, if the original Treasury Rate at the time you allocate money to a Guarantee Period is higher than the applicable current Treasury Rate for a period equal to the Guarantee Period, then the Market Value Adjustment will result in a higher amount payable to you, transferred or applied to an Income Plan. Conversely, if the Treasury Rate at the time you allocate money to a Guarantee Period is lower than the applicable Treasury Rate for a period equal to the Guarantee Period, then the Market Value Adjustment will result in a lower amount payable to you, transferred or applied to an Income Plan. For example, assume that you purchase a Contract and you select an initial Guarantee Period of 5 years and the 5-year Treasury Rate for that duration is 4.50%. Assume that at the end of 3 years, you make a partial withdrawal. If, at that later time, the current 5-year Treasury Rate is 4.20%, then the Market Value Adjustment will be positive, which will result in an increase in the amount payable to you. Conversely, if the current 5-year Treasury Rate is 4.80%, then the Market Value Adjustment will be negative, which will result in a decrease in the amount payable to you. The formula for calculating Market Value Adjustments is set forth in Appendix B to this prospectus, which also contains additional examples of the application of the Market Value Adjustment. 20 PROSPECTUS Investment Alternatives: Transfers TRANSFERS DURING THE ACCUMULATION PHASE During the Accumulation Phase, you may transfer Contract Value among the investment alternatives. You may not transfer Contract Value to either the Short-Term Dollar Cost Averaging Fixed Account or the Dollar Cost Averaging Fixed Account Options. You may request transfers in writing on a form that we provided or by telephone according to the procedure described below. The minimum amount that you may transfer into a Guarantee Period is $50. We currently do not assess, but reserve the right to assess, a $10 charge on each transfer in excess of 12 per Contract Year. All transfers to or from more than one Portfolio on any given day counts as one transfer. We will process transfer requests that we receive before 3:00 p.m. Central Time on any Valuation Date using the Accumulation Unit Values for that Date. We will process requests completed after 3:00 p.m. Central Time on any Valuation Date using the Accumulation Unit Values for the next Valuation Date. The Contract permits us to defer transfers from the Fixed Account for up to six months from the date we receive your request. If we decide to postpone transfers for 30 days or more, we will pay interest as required by applicable law. Any interest would be payable from the date we receive the transfer request to the date we make the transfer. If you transfer an amount from a Guarantee Period other than during the 30 day period after such Guarantee Period expires, we will increase or decrease the amount by a Market Value Adjustment. We reserve the right to waive any transfer restrictions. TRANSFERS DURING THE PAYOUT PHASE During the Payout Phase, you may make transfers among the Variable Sub-Accounts so as to change the relative weighting of the Variable Sub-Accounts on which your variable income payments will be based. In addition, you will have a limited ability to make transfers from the Variable Sub-Accounts to increase the proportion of your income payments consisting of fixed income payments. You may not, however, convert any portion of your right to receive fixed income payments into variable income payments. If you choose an Income Plan that depends on any person's life, you may not make any transfers for the first 6 months after the Payout Start Date. Thereafter, you may make transfers among the Variable Sub-Accounts or make transfers from the Variable Sub-Accounts to increase the proportion of your income payments consisting of fixed income payments. Your transfers must be at least 6 months apart. TELEPHONE TRANSFERS You may make transfers by telephone by calling 1-800-755-5275. The cut-off time for telephone transfer requests is 3:00 p.m. Central time. In the event that the New York Stock Exchange closes early, i.e., before 3:00 p.m. Central Time, or in the event that the Exchange closes early for a period of time but then reopens for trading on the same day, we will process telephone transfer requests as of the close of the Exchange on that particular day. We will not accept telephone requests received at any telephone number other than the number that appears in this paragraph or received after the close of trading on the Exchange. We may suspend, modify or terminate the telephone transfer privilege at any time without notice. We use procedures that we believe provide reasonable assurance that the telephone transfers are genuine. For example, we tape telephone conversations with persons purporting to authorize transfers and request identifying information. Accordingly, we disclaim any liability for losses resulting from allegedly unauthorized telephone transfers. However, if we do not take reasonable steps to help ensure that a telephone authorization is valid, we may be liable for such losses. DOLLAR COST AVERAGING PROGRAM Through our Dollar Cost Averaging Program, you may automatically transfer a fixed dollar amount every month during the Accumulation Phase from the Short Term Dollar Cost Averaging Fixed Account or the Dollar Cost Averaging Fixed Account, to any Variable Sub-Account. You may not use the Dollar Cost Averaging Program to transfer amounts to the Guarantee Periods. We will not charge a transfer fee for transfers made under this Program, nor will such transfer count against the 12 transfers you can make each Contract Year without paying a transfer fee. The theory of dollar cost averaging is that if purchases of equal dollar amounts are made at fluctuating prices, the aggregate average cost per unit will be less than the average of the unit prices on the same purchase dates. However, participation in this Program does not assure you of a greater profit from your purchases under the Program nor will it prevent or necessarily reduce losses in a declining market. Call or write us for instructions on how to enroll. AUTOMATIC PORTFOLIO REBALANCING PROGRAM Once you have allocated your money among the Variable Sub-Accounts, the performance of each Sub-Account may cause a shift in the percentage you 21 PROSPECTUS allocated to each Sub-Account. If you select our Automatic Portfolio Rebalancing Program, we will automatically rebalance the Contract Value in each Variable Sub-Account and return it to the desired percentage allocations. We will not include money you allocate to the Fixed Account Options in the Automatic Portfolio Rebalancing Program. We will rebalance your account each quarter according to your instructions. We will transfer amounts among the Variable Sub-Accounts to achieve the percentage allocations you specify. You can change your allocations at any time by contacting us in writing or by telephone. The new allocation will be effective with the first rebalancing that occurs after we receive your request. We are not responsible for rebalancing that occurs prior to receipt of your request. Example: Assume that you want your initial purchase payment split among 2 Variable Sub-Accounts. You want 40% to be in the Fidelity VIP High Income Variable Sub-Account and 60% to be in the AIM V.I. Growth Variable Sub-Account. Over the next 2 months the bond market does very well while the stock market performs poorly. At the end of the first quarter, the Fidelity VIP High Income Variable Sub-Account now represents 50% of your holdings because of its increase in value. If you choose to have your holdings rebalanced quarterly, on the first day of the next quarter, we would sell some of your units in the Fidelity VIP High Income Variable Sub-Account and use the money to buy more units in the AIM V.I. Growth Variable Sub-Account so that the percentage allocations would again be 40% and 60% respectively. The Automatic Portfolio Rebalancing Program is available only during the Accumulation Phase. The transfers made under the Program do not count towards the 12 transfers you can make without paying a transfer fee, and are not subject to a transfer fee. Portfolio rebalancing is consistent with maintaining your allocation of investments among market segments, although it is accomplished by reducing your Contract Value allocated to the better performing segments. Expenses As a Contract Owner, you will bear, directly or indirectly, the charges and expenses described below. CONTRACT MAINTENANCE CHARGE During the Accumulation Phase, on each Contract Anniversary, we will deduct a $35 contract maintenance charge from your Contract Value invested in each Variable Sub-Account in proportion to the amount invested. If you surrender your Contract, we will deduct the contract maintenance charge pro rated for the part of the Contract Year elapsed, unless your Contract qualifies for a waiver, described below. The charge is to compensate us for the cost of administering the Contracts and the Variable Account. Maintenance costs include expenses we incur collecting purchase payments; keeping records; processing death claims, cash withdrawals, and policy changes; proxy statements; calculating Accumulation Unit Values and income payments; and issuing reports to Contract Owners and regulatory agencies. We cannot increase the charge. However, we will waive this charge if, as of the Contract Anniversary or upon full surrender: o total purchase payments equal $50,000 or more, or o all money is allocated to the Fixed Account. In addition, we will waive the Contract Maintenance Charge if total purchase payments are $50,000 or more as of the Payout Start Date. MORTALITY AND EXPENSE RISK CHARGE We deduct a mortality and expense risk charge daily at an annual rate of 1.05% of the average daily net assets you have invested in the Variable Sub-Accounts (1.27% if you select the Enhanced Death Benefit Rider, 1.49% if you selected the Enhanced Death and Income Combination Rider, and 1.55% if you select the Enhanced Death and Income Benefit Combination Rider II). The mortality and expense risk charge is for all the insurance benefits available with your Contract (including our guarantee of annuity rates and the death benefits), for certain expenses of the Contract, and for assuming the risk (expense risk) that the current charges will be sufficient in the future to cover the cost of administering the Contract. If the charges under the Contract are not sufficient, then we will bear the loss. We charge an additional amount for the Enhanced Death Benefit Rider, the Enhanced Death and Income Benefit Combination Rider and the Enhanced Death and Income Benefit Combination Rider II to compensate us for the additional risk that we accept by providing these options. 22 PROSPECTUS We guarantee that we will not raise the mortality and expense risk charge. We assess the mortality and expense risk charge during both the Accumulation Phase and the Payout Phase. ADMINISTRATIVE EXPENSE CHARGE We deduct an administrative expense charge daily at an annual rate of 0.10% of the average daily net assets you have invested in the Variable Sub-Accounts. We intend this charge to cover actual administrative expenses that exceed the revenues from the contract maintenance charge. There is no necessary relationship between the amount of administrative charge imposed on a given Contract and the amount of expenses that may be attributed to that Contract. We assess this charge each day during the Accumulation Phase and the Payout Phase. We guarantee that we will not raise this charge. TRANSFER FEE We do not currently impose a fee upon transfers among the investment alternatives. However, we reserve the right to charge $10 per transfer after the 12th transfer in each Contract Year. We will not charge a transfer fee on transfers that are part of a Dollar Cost Averaging or Automatic Portfolio Rebalancing Program. WITHDRAWAL CHARGE We may assess a withdrawal charge of up to 6% of the purchase payment(s) you withdraw. The charge declines to 0% over a 6 year period that begins on the day we receive your payment. A schedule showing how the charge declines is shown on page 7. During each Contract Year, you can withdraw up to 15% of the aggregate amount of your purchase payments without paying the charge. Unused portions of this "Free Withdrawal Amount" are not carried forward to future Contract Years. We will deduct withdrawal charges, if applicable, from the amount paid. For purposes of calculating the withdrawal charge, we will treat withdrawals as coming from the oldest purchase payments first. However, for federal income tax purposes, please note that withdrawals are considered to have come first from earnings, which means you pay taxes on the earnings portion of your withdrawal. We do not apply a withdrawal charge in the following situations: o on the Payout Start Date (a withdrawal charge may apply if you terminate income payments to be received for a specified period; o withdrawals taken to satisfy IRS minimum distribution rules for the Contract; or o withdrawals that qualify for one of the waivers as described below. We use the amounts obtained from the withdrawal charge to pay sales commissions and other promotional or distribution expenses associated with marketing the Contracts. To the extent that the withdrawal charge does not cover all sales commissions and other promotional or distribution expenses, we may use any of our corporate assets, including potential profit which may arise from the mortality and expense risk charge or any other charges or fee described above, to make up any difference. Withdrawals also may be subject to tax penalties or income tax and a Market Value Adjustment. You should consult your own tax counsel or other tax advisers regarding any withdrawals. Confinement Waiver. We will waive the withdrawal charge and any Market Value Adjustment on all withdrawals taken prior to the Payout Start Date under your Contract if the following conditions are satisfied: 1. You or the Annuitant, if the Contract Owner is not a natural person, are confined to a long term care facility or a hospital for at least 90 consecutive days. You or the Annuitant must enter the long term care facility or hospital at least 30 days after the Issue Date; 2. You request the withdrawal and provide written proof of the stay no later than 90 days following the end of your or the Annuitant's stay at the long term care facility or hospital; and 3. A physician must have prescribed the stay and the stay must be medically necessary (as defined in the Contract). You may not claim this benefit if you, the Annuitant, or a member of your or the Annuitant's immediate family, is the physician prescribing your or the Annuitant's stay in a long term care facility. Terminal Illness Waiver. We will waive the withdrawal charge and any Market Value Adjustment on all withdrawals taken prior to the Payout Start Date under your Contract if: 1. you or the Annuitant (if the Contract Owner is not a natural person) are first diagnosed with a terminal illness at least 30 days after the Issue Date; and 2. you claim this benefit and deliver adequate proof of diagnosis to us. Unemployment Waiver.We will waive the withdrawal charge and any Market Value Adjustment on one partial or a full withdrawal taken prior to the Payout 23 PROSPECTUS Start Date under your Contract, if you meet the following requirements: 1. you or the Annuitant, if the Contract Owner is not a natural person, become unemployed at least one year after the Issue Date; 2. you or the Annuitant, if the Contract Owner is not a natural person, receive unemployment compensation as defined in the Contract for at least 30 days as a result of that unemployment; and 3. you or the Annuitant, if the Contract Owner is not a natural person, claim this benefit within 180 days of your or the Annuitant's initial receipt of unemployment compensation. Please refer to your Contract for more detailed information about the terms and conditions of these waivers. The laws of your state may limit the availability of these waivers and may also change certain terms and/or benefits available under the waivers. You should consult your Contract for further details on these variations. Also, even if you do not need to pay our withdrawal charge or a Market Value Adjustment because of these waivers, you still may be required to pay taxes or tax penalties on the amount withdrawn. You should consult your tax adviser to determine the effect of a withdrawal on your taxes. PREMIUM TAXES Some states and other governmental entities (e.g., municipalities) charge premium taxes or similar taxes. We are responsible for paying these taxes and will deduct them from your Contract Value. Some of these taxes are due when the Contract is issued, others are due when income payments begin or upon surrender. Our current practice is not to charge anyone for these taxes until income payments begin or when a total withdrawal occurs, including payment upon death. At our discretion, we may discontinue this practice and deduct premium taxes from the purchase payments. Premium taxes generally range from 0% to 4%, depending on the state. At the Payout Start Date, if applicable, we deduct the charge for premium taxes from each investment alternative in the proportion that the Contract Owner's value in the investment alternative bears to the total Contract Value. DEDUCTION FOR SEPARATE ACCOUNT INCOME TAXES We are not currently maintaining a provision for taxes. In the future, however, we may establish a provision for taxes if we determine, in our sole discretion, that we will incur a tax as a result of the operation of the Variable Account. We will deduct for any taxes we incur as a result of the operation of the Variable Account, whether or not we previously made a provision for taxes and whether or not it was sufficient. Our status under the Internal Revenue Code is briefly described in the Statement of Additional Information. OTHER EXPENSES Each Portfolio deducts advisory fees and other expenses from its assets. You indirectly bear the charges and expenses of the Portfolios whose shares are held by the Variable Sub-Accounts. These fees and expenses are described in the accompanying prospectuses for the Funds. For a summary of current estimates of those charges and expenses, see page 7. We may receive compensation from the investment advisers or administrators of the Portfolios in connection with the administrative services we provide to the Portfolios. 24 PROSPECTUS Access to Your Money You can withdraw some or all of your Contract Value at any time prior to the Payout Start Date. The amount payable upon withdrawal is the Contract Value (or portion thereof) next computed after we receive the request for a withdrawal at our home office, adjusted by any Market Value Adjustment, less any withdrawal charges, contract maintenance charges, income tax withholding, penalty tax, and any premium taxes. We will pay withdrawals from the Variable Account within 7 days of receipt of the request, subject to postponement in certain circumstances. You can withdraw money from the Variable Account or the Fixed Account Options. To complete a partial withdrawal from the Variable Account, we will cancel Accumulation Units in an amount equal to the withdrawal and any applicable withdrawal charge and premium taxes. You must name the investment alternative from which you are taking the withdrawal. If none is named, then the withdrawal request is incomplete and cannot be honored. In general, you must withdraw at least $50 at a time. You also may withdraw a lesser amount if you are withdrawing your entire interest in a Variable Sub-Account. If you request a total withdrawal, we may require you to return your Contract to us. POSTPONEMENT OF PAYMENTS We may postpone the payment of any amounts due from the Variable Account under the Contract if: 1. The New York Stock Exchange is closed for other than usual weekends or holidays, or trading on the Exchange is otherwise restricted; 2. An emergency exists as defined by the SEC; or 3. The SEC permits delay for your protection. In addition, we may delay payments or transfers from the Fixed Account Options for up to 6 months (or shorter period if required by law). If we delay payment for 30 days or more, we will pay interest as required by law. SYSTEMATIC WITHDRAWAL PROGRAM You may choose to receive systematic withdrawal payments on a monthly, quarterly, semi-annual, or annual basis at any time prior to the Payout Start Date. The minimum amount of each systematic withdrawal is $50. At our discretion, systematic withdrawals may not be offered in conjunction with the Dollar Cost Averaging Program or Automatic Portfolio Rebalancing Program. Depending on fluctuations in the value of the Variable Sub-Accounts and the value of the Fixed Account Options, systematic withdrawals may reduce or even exhaust the Contract Value. Income taxes may apply to systematic withdrawals. Please consult your tax advisor before taking any withdrawal. We will make systematic withdrawal payments to you or your designated payee. At our discretion, we may modify or suspend the Systematic Withdrawal Program and charge a processing fee for the service. If we modify or suspend the Systematic Withdrawal Program, existing systematic withdrawal payments will not be affected. MINIMUM CONTRACT VALUE If your request for a partial withdrawal would reduce your Contract Value to less than $2,000, we may treat it as a request to withdraw your entire Contract Value. Your Contract will terminate if you withdraw all of your Contract Value. We will, however, ask you to confirm your withdrawal request before terminating your Contract. If we terminate your Contract, we will distribute to you its Contract Value, adjusted by any applicable Market Value Adjustment, less withdrawal and other charges and applicable taxes. Income Payments PAYOUT START DATE You select the Payout Start Date in your application. The Payout Start Date is the day that we apply your money to an Income Plan. The Payout Start Date must be: o at least 30 days after the Issue Date; and o no later than the day the Annuitant reaches age 90, or the 10th Contract Anniversary, if later. You may change the Payout Start Date at any time by notifying us in writing of the change at least 30 days before the scheduled Payout Start Date. Absent a 25 PROSPECTUS change, we will use the Payout Start Date stated in your Contract. INCOME PLANS An Income Plan is a series of scheduled payments to you or someone you designate. You may choose and change your choice of Income Plan until 30 days before the Payout Start Date. If you do not select an Income Plan, we will make income payments in accordance with Income Plan 1 with guaranteed payments for 10 years. Three Income Plans are available under the Contract. Each is available to provide: o fixed income payments; o variable income payments; or o a combination of the two. The three Income Plans are: Income Plan 1 - Life Income with Guaranteed Payments.Under this plan, we make periodic income payments for at least as long as the Annuitant lives. If the Annuitant dies before we have made all of the guaranteed income payments, we will continue to pay the remainder of the guaranteed income payments as required by the Contract. Income Plan 2 - Joint and Survivor Life Income with Guaranteed Payments.Under this plan, we make periodic income payments for at least as long as either the Annuitant or the joint Annuitant is alive. If both the Annuitant and the joint Annuitant die before we have made all of the guaranteed income payments, we will continue to pay the remainder of the guaranteed income payments as required by the Contract. Income Plan 3 - Guaranteed Payments for a Specified Period (5 Years to 30 Years).Under this plan, we make periodic income payments for the period you have chosen. These payments do not depend on the Annuitant's life. You may elect to receive guaranteed payments for periods ranging from 5 to 30 years. Income payments for less than 120 months may be subject to a withdrawal charge. We will deduct the mortality and expense risk charge from the Variable Sub-Account assets that support variable income payments even though we may not bear any mortality risk. The length of any guaranteed payment period under your selected Income Plan generally will affect the dollar amounts of each income payment. As a general rule, longer guarantee periods result in lower income payments, all other things being equal. For example, if you choose an Income Plan with payments that depend on the life of the Annuitant but with no minimum specified period for guaranteed payments, the income payments generally will be greater than the income payments made under the same Income Plan with a minimum specified period for guaranteed payments. If you choose Income Plan 1 or 2, or, if available, another Income Plan with payments that continue for the life of the Annuitant or joint Annuitant, we may require proof of age and sex of the Annuitant or joint Annuitant before starting income payments, and proof that the Annuitant or joint Annuitant are alive before we make each payment. Please note that under such Income Plans, if you elect to take no minimum guaranteed payments, it is possible that the payee could receive only 1 income payment if the Annuitant and any joint Annuitant both die before the second income payment, or only 2 income payments if they die before the third income payment, and so on. Generally, you may not make withdrawals after the Payout Start Date. One exception to this rule applies if you are receiving variable income payments that do not depend on the life of the Annuitant (such as under Income Plan 3). In that case you may terminate all or part of the Variable Account portion of the income payments at any time and receive a lump sum equal to the present value of the remaining variable payments associated with the amount withdrawn. The minimum amount you may withdraw under this feature is $1,000. A withdrawal charge may apply. We deduct applicable premium taxes from the Contract Value at the Payout Start Date. We may make other Income Plans available. If you elected the Enhanced Death and Income Benefit Combination Rider or the Enhanced Death and Income Benefit Combination Rider II , you may be able to apply an amount greater than your Contract Value to an Income Plan. You must apply at least the Contract Value in the Fixed Account on the Payout Start Date to fixed income payments. If you wish to apply any portion of your Fixed Account balance to provide variable income payments, you should plan ahead and transfer that amount to the Variable Sub-Accounts prior to the Payout Start Date. If you do not tell us how to allocate your Contract Value among fixed and variable income payments, we will apply your Contract Value in the Variable Account to variable income payments and your Contract Value in the Fixed Account to fixed income payments. We will apply your Contract Value, adjusted by any applicable Market Value Adjustment, less applicable taxes to your Income Plan on the Payout Start Date. If the amount available to apply under an Income Plan is 26 PROSPECTUS less than $2,000, or not enough to provide an initial payment of at least $20, and state law permits, we may: o pay you the Contract Value, adjusted by any applicable Market Value Adjustment and less any applicable taxes, in a lump sum instead of the periodic payments you have chosen; or o reduce the frequency of your payments so that each payment will be at least $20. VARIABLE INCOME PAYMENTS The amount of your variable income payments depends upon the investment results of the Variable Sub-Accounts you select, the premium taxes you pay, the age and sex of the Annuitant, and the Income Plan you choose. We guarantee that the payments will not be affected by (a) actual mortality experience and (b) the amount of our administration expenses. We cannot predict the total amount of your variable income payments. Your variable income payments may be more or less than your total purchase payments because (a) variable income payments vary with the investment results of the underlying Portfolios; and (b) the Annuitant could live longer or shorter than we expect based on the tables we use. In calculating the amount of the periodic payments in the annuity tables in the Contract, we assumed an annual investment rate of 3%. If the actual net investment return of the Variable Sub-Accounts you choose is less than this assumed investment rate, then the dollar amount of your variable income payments will decrease. The dollar amount of your variable income payments will increase, however, if the actual net investment return exceeds the assumed investment rate. The dollar amount of the variable income payments stays level if the net investment return equals the assumed investment rate. Please refer to the Statement of Additional Information for more detailed information as to how we determine variable income payments. FIXED INCOME PAYMENTS We guarantee income payment amounts derived from any Fixed Account Option for the duration of the Income Plan. We calculate the fixed income payments by: 1. adjusting the portion of the Contract Value in any Fixed Account Option on the Payout Start Date by any applicable Market Value Adjustment; 2. deducting any applicable premium tax; and 3. applying the resulting amount to the greater of (a) the appropriate value from the income payment table in your Contract or (b) such other value as we are offering at that time. We may defer making fixed income payments for a period of up to 6 months or any shorter time state law may require. If we defer payments for 30 days or more, we will pay interest as required by law from the date we receive the withdrawal request to the date we make payment. CERTAIN EMPLOYEE BENEFIT PLANS The Contracts offered by this prospectus contain income payment tables that provide for different payments to men and women of the same age, except in states that require unisex tables. We reserve the right to use income payment tables that do not distinguish on the basis of sex to the extent permitted by applicable law. In certain employment-related situations, employers are required by law to use the same income payment tables for men and women. Accordingly, if the Contract is to be used in connection with an employment-related retirement or benefit plan and we do not offer unisex annuity tables in your state, you should consult with legal counsel as to whether the purchase of a Contract is appropriate. Death Benefits We will pay a death benefit prior to the Payout Start Date on: 1. the death of any Contract Owner or, 2. the death of the Annuitant, if the Contract is owned by a non-natural person. We will pay the death benefit to the new Contract Owner as determined immediately after the death. The new Contract Owner would be a surviving Contract Owner or, if none, the Beneficiary(ies). In the case of the death of the Annuitant, we will pay the death benefit to the current Contract Owner. A claim for a distribution on death must include Due Proof of Death. We will accept the following documentation as "Due Proof of Death": o a certified copy of a death certificate, 27 PROSPECTUS o a certified copy of a decree of a court of competent jurisdiction as to the finding of death, or o any other proof acceptable to us. DEATH BENEFIT AMOUNT Prior to the Payout Start Date, the death benefit is equal to the greatest of: 1. the Contract Value as of the date we determine the value of the death benefit, or 2. the Settlement Value (that is, the amount payable on a full withdrawal of Contract Value) on the date we determine the value of the death benefit, or 3. the Contract Value on each Death Benefit Anniversary prior to the date we determine the death benefit, increased by purchase payments made since that Death Benefit Anniversary and reduced by an adjustment for any partial withdrawals since that Death Benefit Anniversary. A "Death Benefit Anniversary" is every seventh Contract Anniversary beginning with the Issue Date. For example, the Issue Date, 7th and 14th Contract Anniversaries are the first 3 Death Benefit Anniversaries. The withdrawal adjustment is equal to (a) divided by (b), with the result multiplied by (c), where: (a) = the withdrawal amount, (b) = the Contract Value immediately prior to the withdrawal, and (c) = the Contract Value on the Death Benefit Anniversary adjusted by any prior purchase payments or withdrawals made since that Anniversary. We will determine the value of the death benefits as of the end of the Valuation Date on which we receive a complete request for payment of the death benefit. If we receive a request after 3 p.m. Central Time on a Valuation Date, we will process the request as of the end of the following Valuation Date. ENHANCED DEATH BENEFIT RIDER If the oldest Contract Owner and Annuitant are less than or equal to age 80 as of the date we receive the completed application, the Enhanced Death Benefit Rider is an optional benefit that you may elect. If the Contract Owner is a living individual, the enhanced death benefit applies only upon the death of the Contract Owner. If the Contract Owner is not a living individual, the enhanced death benefit applies only upon the death of the Annuitant. For Contracts with the Enhanced Death Benefit Rider, the death benefit will be the greatest of (1) through (3) above, or (4) the enhanced death benefit. The enhanced death benefit is equal to the greater of the Enhanced Death Benefit A or Enhanced Death Benefit B. Enhanced Death Benefit B may not be available in all states. The enhanced death benefit will never be greater than the maximum death benefit allowed by any state nonforfeiture laws that govern the Contract. Enhanced Death Benefit A. At issue, Enhanced Death Benefit A is equal to the initial purchase payment. After issue, Enhanced Death Benefit A is the greatest of the Anniversary Values as of the date we determine the death benefit. The "Anniversary Value" is equal to the Contract Value on a Contract Anniversary, increased by purchase payments made since that Anniversary and reduced by an adjustment for any partial withdrawals since that Anniversary. The adjustment is equal to (a) divided by (b), and the result multiplied by (c) where: (a) = the withdrawal amount, (b) = the Contract Value immediately prior to the withdrawal, and (c) = the most recently calculated Enhanced Death Benefit A. We will calculate Anniversary Values for each Contract Anniversary prior to the oldest Contract Owner's or the Annuitant's, if the Contract Owner is not a natural person, 85th birthday. After age 85, we will re-calculate Enhanced Death Benefit A for purchase payments and withdrawals. Enhanced Death Benefit B.The Enhanced Death Benefit B is equal to total purchase payments made reduced by a withdrawal adjustment, as defined below. Each purchase payment and each withdrawal adjustment will accumulate daily at a rate equivalent to 5% per year until the earlier of: o the date we determine the death benefit, or o the first day of the month following the oldest Contract Owner's or, if the Contract Owner is not a natural person, the Annuitant's, 85th birthday. The adjustment is equal to (a) divided by (b), and the result multiplied by (c) where: (a) = the withdrawal amount, (b) = the Contract Value immediately prior to the withdrawal, and (c) = the most recently calculated Enhanced Death Benefit B. Enhanced Death and Income Benefit Combination Rider (for Contracts issued before September 22, 2000).You may elect not to choose the Enhanced Death Benefit Rider and may instead choose the 28 PROSPECTUS Enhanced Death and Income Benefit Combination Rider. The enhanced death benefit portion of the Enhanced Death and Income Benefit Combination Rider is as described above under Enhanced Death Benefit Rider. The enhanced income benefit defines a minimum amount applied to the Payout Phase. This minimum amount is equal to the value the enhanced death benefit would be on the Payout Start Date. The enhanced income benefit will apply if the Contract owner elects a Payout Start Date that: o is on or after the tenth Contract Anniversary, and o is prior to the Annuitant's 90th birthday. On the Payout Start Date, you may apply the greater of the Contract Value or the enhanced income benefit to the Payout Phase of the Contract. No Market Value Adjustment will be applied to the enhanced income benefit amount. The enhanced income benefit will only apply if the Income Plan selected provides payments guaranteed for either a single or joint lives with a period certain of at least: o 10 years, if the youngest Annuitant's age is 80 or less on the date the amount is applied; or o 5 years, if the youngest Annuitant's age is greater than 80 on the date the amount is applied. If, however, you apply the Contract Value and not the enhanced income benefit to the Income Plan, then you may select any Income Plan we offer at that time. Enhanced Death and Income Benefit Combination Rider II (for Contracts issued on or after September 22, 2000).You may elect not to choose the Enhanced Death Benefit Rider and may instead choose the Enhanced Death and Income Benefit Combination Rider II. The Enhanced Death and Income Benefit Combination Rider II may not be available in all states. The enhanced death benefit portion of the Enhanced Death and Income Benefit Combination Rider II is as described above under "Enhanced Death Benefit Rider." The enhanced income benefit defines a minimum amount applied to the Payout Phase. This minimum amount is equal to the value the enhanced death benefit would be on the Payout Start Date. The minimum amount is used solely for the purpose of calculating the guaranteed income benefit under this Rider ("guaranteed income benefit") and does not provide a Contract Value or guarantee performance of any investment option. The guaranteed income benefit amount is determined by applying the enhanced income benefit amount less any applicable taxes to the guaranteed rates for the Income Plan you elect. The Income Plan you elect must satisfy the conditions described below. The enhanced income benefit will apply if the Contract Owner elects a Payout Start Date that: o is on or after the tenth Contract Anniversary, and o occurs during the 30 day period following a Contract Anniversary. On the Payout Start Date, you may apply the greater of the Contract Value or the enhanced income benefit to the Payout Phase of the Contract. No Market Value Adjustment will be applied to the enhanced income benefit amount. The enhanced income benefit will only apply if the Income Plan selected provides payments guaranteed for either a single or joint lives with a period certain of at least: o 10 years, if the youngest Annuitant's age is 80 or less on the date the amount is applied; or o 5 years, if the youngest Annuitant's age is greater than 80 on the date the amount is applied. You must elect to receive fixed income payments, which will be calculated using the appropriate Guaranteed Income Payment table provided in your Contract. If, however, you apply the Contract Value and not the enhanced income benefit to the Income Plan, then you may select any Income Plan we offer at that time. If you expect to apply your Contract Value to variable income payment options or to current annuity payment rates then in effect, electing the enhanced income benefit may not be appropriate. Death Benefit Payments. A death benefit will be paid: 1. if the Contract Owner elects to receive the death benefit distributed in a single payment within 180 days of the date of death, and 2. if the death benefit is paid as of the day the value of the death benefit is determined. Otherwise, the Settlement Value will be paid. We reserve the right to waive the 180 day limit on a non-discriminatory basis. In any event, the entire value of the Contract must be distributed within 5 years after the date of death unless an Income Plan is elected or a surviving spouse continues the Contract in accordance with the provisions described below. If the Contract Owner eligible to receive the distribution upon death is not a natural person, the Contract Owner may elect to receive the distribution upon death in one or more distributions. 29 PROSPECTUS If the Contract Owner is a natural person, the Contract Owner may elect to receive the distribution upon death either in one or more distributions or by periodic payments through an Income Plan. Payments from the Income Plan must begin within one year of the date of death and must be payable throughout: o the life of the Contract Owner; or o a period not to exceed the life expectancy of the Contract Owner; or o the life of the Contract Owner with payments guaranteed to a period not to exceed the life expectancy of the Contract Owner. If the surviving spouse of the deceased Contract Owner is the new Contract Owner, then the spouse may elect one of the options listed above or may continue the Contract in the Accumulation Phase as if the death had not occurred. If the Contract is continued in the Accumulation Phase, the surviving spouse may make a single withdrawal of any amount within 1 year of the date of death without incurring a withdrawal charge or Market Value Adjustment. More Information GLENBROOK Glenbrook is the issuer of the Contract. Glenbrook is a stock life insurance company organized under the laws of the State of Arizona in 1998. Previously, Glenbrook was organized under the laws of the State of Illinois in 1992. Glenbrook was originally organized under the laws of the State of Indiana in 1965. From 1965 to 1983 Glenbrook was known as "United Standard Life Assurance Company" and from 1983 to 1992 as "William Penn Life Assurance Company of America." Glenbrook is currently licensed to operate in the District of Columbia and all states except New York. We intend to offer the Contract in those jurisdictions in which we are licensed. Our home office is located at 3100 Sanders Road, Northbrook, Illinois, 60062. Glenbrook is a wholly owned subsidiary of Allstate Life Insurance Company ("Allstate Life"), a stock life insurance company incorporated under the laws of the State of Illinois. Allstate Life is a wholly owned subsidiary of Allstate Insurance Company, a stock property-liability insurance company incorporated under the laws of Illinois. All of the outstanding capital stock of Allstate Insurance Company is owned by The Allstate Corporation. Glenbrook and Allstate Life entered into a reinsurance agreement effective June 5, 1992. Under the reinsurance agreement, Allstate Life reinsures substantially all of Glenbrook's liabilities under its various insurance contracts. The reinsurance agreement provides us with financial backing from Allstate Life. However, it does not create a direct contractual relationship between Allstate Life and you. In other words, the obligations of Allstate Life under the reinsurance agreement are to Glenbrook; Glenbrook remains the sole obligor under the Contract to you. Independent rating agencies regularly evaluate life insurers' claims-paying ability, quality of investments, and overall stability. A.M. Best Company assigns an A+ (Superior) financial strength rating to Allstate Life, which results in an A+r rating to Glenbrook due to the reinsurance agreement with Allstate Life mentioned above. Standard & Poor's Insurance Rating Services assigns an AA+ (Very Strong) financial strength rating and Moody's Investors Service assigns an Aa2 (Excellent) financial strength rating to Glenbrook, sharing the same ratings of its parent, Allstate Life. These ratings do not reflect the investment performance of the Variable Account. We may from time to time advertise these ratings in our sales literature. THE VARIABLE ACCOUNT Glenbrook established the Glenbrook Life Multi-Manager Variable Account on January 15, 1996. We have registered the Variable Account with the SEC as a unit investment trust. The SEC does not supervise the management of the Variable Account or Glenbrook. We own the assets of the Variable Account. The Variable Account is a segregated asset account under Arizona law. That means we account for the Variable Account's income, gains and losses separately from the results of our other operations. It also means that only the assets of the Variable Account that are in excess of the reserves and other Contract liabilities with respect to the Variable Account are subject to liabilities relating to our other operations. Our obligations arising under the Contracts are general corporate obligations of Glenbrook. The Variable Account consists of multiple Variable Sub-Accounts. Each Variable Sub-Account invests in a corresponding Portfolio. We may add new Variable 30 PROSPECTUS Sub-Accounts or eliminate one or more of them, if we believe marketing, tax, or investment conditions so warrant. We may also add other Variable Sub-Accounts that may be available under other variable annuity contracts. We do not guarantee the investment performance of the Variable Account, its Sub-Accounts or the Portfolios. We may use the Variable Account to fund our other annuity contracts. We will account separately for each type of annuity contract funded by the Variable Account. THE PORTFOLIOS Dividends and Capital Gain Distributions.We automatically reinvest all dividends and capital gains distributions from the Portfolios in shares of the distributing Portfolio at their net asset value. Voting Privileges.As a general matter, you do not have a direct right to vote the shares of the Portfolios held by the Variable Sub-Accounts to which you have allocated your Contract Value. Under current law, however, you are entitled to give us instructions on how to vote those shares on certain matters. Based on our present view of the law, we will vote the shares of the Portfolios that we hold directly or indirectly through the Variable Account in accordance with instructions that we receive from Contract Owners entitled to give such instructions. As a general rule, before the Payout Start Date, the Contract Owner or anyone with a voting interest is the person entitled to give voting instructions. The number of shares that a person has a right to instruct will be determined by dividing the Contract Value allocated to the applicable Variable Sub-Account by the net asset value per share of the corresponding Portfolio as of the record date of the meeting. After the Payout Start Date the person receiving income payments has the voting interest. The payee's number of votes will be determined by dividing the reserve for such Contract allocated to the applicable Variable Sub-Account by the net asset value per share of the corresponding Portfolio. The votes decrease as income payments are made and as the reserves for the Contract decrease. We will vote shares attributable to Contracts for which we have not received instructions, as well as shares attributable to us, in the same proportion as we vote shares for which we have received instructions, unless we determine that we may vote such shares in our own discretion. We will apply voting instructions to abstain on any item to be voted upon on a pro-rata basis to reduce the votes eligible to be cast. We reserve the right to vote Portfolio shares as we see fit without regard to voting instructions to the extent permitted by law. If we disregard voting instructions, we will include a summary of that action and our reasons for that action in the next semi-annual financial report we send to you. Changes in Portfolios.If the shares of any of the Portfolios are no longer available for investment by the Variable Account or if, in our judgment, further investment in such shares is no longer desirable in view of the purposes of the Contract, we may eliminate that Portfolio and substitute shares of another eligible investment fund. Any substitution of securities will comply with the requirements of the Investment Company Act of 1940. We also may add new Variable Sub-Accounts that invest in additional mutual funds. We will notify you in advance of any change. Conflicts of Interest.Certain of the Portfolios sell their shares to separate accounts underlying both variable life insurance and variable annuity contracts. It is conceivable that in the future it may be unfavorable for variable life insurance separate accounts and variable annuity separate accounts to invest in the same Portfolio. The boards of directors of these Portfolios monitor for possible conflicts among separate accounts buying shares of the Portfolios. Conflicts could develop for a variety of reasons. For example, differences in treatment under tax and other laws or the failure by a separate account to comply with such laws could cause a conflict. To eliminate a conflict, a Portfolio's board of directors may require a separate account to withdraw its participation in a Portfolio. A Portfolio's net asset value could decrease if it had to sell investment securities to pay redemption proceeds to a separate account withdrawing because of a conflict. THE CONTRACT Distribution.ALFS, Inc. ("ALFS"), located at 3100 Sanders Road, Northbrook, IL 60062-7154, serves as principal underwriter of the Contracts. ALFS is a wholly owned subsidiary of Allstate Life. ALFS is a registered broker dealer under the Securities and Exchange Act of 1934, as amended ("Exchange Act"), and is a member of the National Association of Securities Dealers, Inc. We will pay commissions to broker-dealers who sell the contracts. Commissions paid may vary, but we estimate that the total commissions paid on all Contract sales will not exceed 8% of all purchase payments. These commissions are intended to cover distribution expenses. Sometimes, we also pay the broker-dealer a persistency bonus in addition to the standard commissions. A persistency bonus is not expected to exceed 0.25%, on an annual basis, of the Contract Values considered in connection with the bonus. In some states, Contracts may be sold by representatives or employees of banks which may be acting as broker- 31 PROSPECTUS dealers without separate registration under the Exchange Act, pursuant to legal and regulatory exceptions. Glenbrook does not pay ALFS a commission for distribution of the Contracts. The underwriting agreement with ALFS provides that we will reimburse ALFS for any liability to Contract Owners arising out of services rendered or Contracts issued. Administration.We have primary responsibility for all administration of the Contracts and the Variable Account. We provide the following administrative services, among others: o issuance of the Contracts; o maintenance of Contract Owner records; o Contract Owner services; o calculation of unit values; o maintenance of the Variable Account; and o preparation of Contract Owner reports. We will send you Contract statements and transaction confirmations at least annually. You should notify us promptly in writing of any address change. You should read your statements and confirmations carefully and verify their accuracy. You should contact us promptly if you have a question about a periodic statement. We will investigate all complaints and make any necessary adjustments retroactively, but you must notify us of a potential error within a reasonable time after the date of the questioned statement. If you wait too long, we reserve the right to make the adjustment as of the date that we receive notice of the potential error. We also will provide you with additional periodic and other reports, information and prospectuses as may be required by federal securities laws. QUALIFIED PLANS If you use the Contract within a qualified plan, the plan may impose different or additional conditions or limitations on withdrawals, waivers of withdrawal charges, death benefits, Payout Start Dates, income payments, and other Contract features. In addition, adverse tax consequences may result if qualified plan limits on distributions and other conditions are not met. Please consult your qualified plan administrator for more information. LEGAL MATTERS Foley & Lardner, Washington, D.C., has advised Glenbrook on certain federal securities law matters. All matters of state insurance law pertaining to the Contracts, including the validity of the Contracts and Glenbrook's right to issue such Contracts under state insurance law, have been passed upon by Michael J. Velotta, General Counsel of Glenbrook. 32 PROSPECTUS Taxes The following discussion is general and is not intended as tax advice. Glenbrook makes no guarantee regarding the tax treatment of any Contract or transaction involving a Contract. Federal, state, local and other tax consequences of ownership or receipt of distributions under an annuity contract depend on your individual circumstances. If you are concerned about any tax consequences with regard to your individual circumstances, you should consult a competent tax adviser. TAXATION OF ANNUITIES IN GENERAL Tax Deferral.Generally, you are not taxed on increases in the Contract Value until a distribution occurs. This rule applies only where: 1. the Contract Owner is a natural person, 2. the investments of the Variable Account are "adequately diversified" according to Treasury Department regulations, and 3. Glenbrook is considered the owner of the Variable Account assets for federal income tax purposes. Non-natural Owners.As a general rule, annuity contracts owned by non-natural persons such as corporations, trusts, or other entities are not treated as annuity contracts for federal income tax purposes. The income on such contracts is taxed as ordinary income received or accrued by the owner during the taxable year. Please see the Statement of Additional Information for a discussion of several exceptions to the general rule for Contracts owned by non-natural persons. Diversification Requirements.For a Contract to be treated as an annuity for federal income tax purposes, the investments in the Variable Account must be "adequately diversified" consistent with standards under Treasury Department regulations. If the investments in the Variable Account are not adequately diversified, the Contract will not be treated as an annuity contract for federal income tax purposes. As a result, the income on the Contract will be taxed as ordinary income received or accrued by the Contract Owner during the taxable year. Although Glenbrook does not have control over the Portfolios or their investments, we expect the Portfolios to meet the diversification requirements. Ownership Treatment.The IRS has stated that you will be considered the owner of Variable Account assets if you possess incidents of ownership in those assets, such as the ability to exercise investment control over the assets. At the time the diversification regulations were issued, the Treasury Department announced that the regulations do not provide guidance concerning circumstances in which investor control of separate account investments may cause an investor to be treated as the owner of the separate account. The Treasury Department also stated that future guidance would be issued regarding the extent that owners could direct sub-account investments without being treated as owners of the underlying assets of the separate account. Your rights under the Contract are different than those described by the IRS in rulings in which it found that contract owners were not owners of separate account assets. For example, you have the choice to allocate premiums and Contract Values among more investment alternatives. Also, you may be able to transfer among investment alternatives more frequently than in such rulings. These differences could result in you being treated as the owner of the Variable Account. If this occurs, income and gain from the Variable Account assets would be includible in your gross income. Glenbrook does not know what standards will be set forth in any regulations or rulings which the Treasury Department may issue. It is possible that future standards announced by the Treasury Department could adversely affect the tax treatment of your Contract. We reserve the right to modify the Contract as necessary to attempt to prevent you from being considered the federal tax owner of the assets of the Variable Account. However, we make no guarantee that such modification to the Contract will be successful. Taxation of Partial and Full Withdrawals.If you make a partial withdrawal under a non-Qualified Contract, amounts received are taxable to the extent the Contract Value, without regard to surrender charges, exceeds the investment in the Contract. The investment in the Contract is the gross premium paid for the Contract minus any amounts previously received from the Contract if such amounts were properly excluded from your gross income. If you make a partial withdrawal under a Qualified Contract, the portion of the payment that bears the same ratio to the total payment that the investment in the Contract (i.e., nondeductible IRA contributions, after tax contributions to qualified plans) bears to the Contract Value, is excluded from your income. If you make a full withdrawal under a non-Qualified Contract or a Qualified Contract, the amount received will be taxable only to the extent it exceeds the investment in the Contract. "Nonqualified distributions" from Roth IRAs are treated as made from contributions first and are included in gross income only to the extent that distributions exceed contributions. "Qualified distributions" from Roth IRAs are not included in gross income. "Qualified distributions" are any distributions made more than 5 taxable years after the taxable year 34 PROSPECTUS of the first contribution to any Roth IRA and which are: o made on or after the date the individual attains age 591/2, o made to a beneficiary after the Contract Owner's death, o attributable to the Contract Owner being disabled, or o for a first time home purchase (first time home purchases are subject to a lifetime limit of $10,000). If you transfer a non-Qualified Contract without full and adequate consideration to a person other than your spouse (or to a former spouse incident to a divorce), you will be taxed on the difference between the Contract Value and the investment in the Contract at the time of transfer. Except for certain Qualified Contracts, any amount you receive as a loan under a Contract, and any assignment or pledge (or agreement to assign or pledge) of the Contract Value is treated as a withdrawal of such amount or portion. Taxation of Annuity Payments.Generally, the rule for income taxation of annuity payments received from a non-Qualified Contract provides for the return of your investment in the Contract in equal tax-free amounts over the payment period. The balance of each payment received is taxable. For fixed annuity payments, the amount excluded from income is determined by multiplying the payment by the ratio of the investment in the Contract (adjusted for any refund feature or period certain) to the total expected value of annuity payments for the term of the Contract. If you elect variable annuity payments, the amount excluded from taxable income is determined by dividing the investment in the Contract by the total number of expected payments. The annuity payments will be fully taxable after the total amount of the investment in the Contract is excluded using these ratios. If you die, and annuity payments cease before the total amount of the investment in the Contract is recovered, the unrecovered amount will be allowed as a deduction for your last taxable year. Taxation of Annuity Death Benefits.Death of a Contract Owner, or death of the Annuitant if the Contract is owned by a non-natural person, will cause a distribution of death benefits from a Contract. Generally, such amounts are included in income as follows: 1. if distributed in a lump sum, the amounts are taxed in the same manner as a full withdrawal, or 2. if distributed under an annuity option, the amounts are taxed in the same manner as an annuity payment. Please see the Statement of Additional Information for more detail on distribution at death requirements. Penalty Tax on Premature Distributions. A 10% penalty tax applies to the taxable amount of any premature distribution from a non-Qualified Contract. The penalty tax generally applies to any distribution made prior to the date you attain age 59 1/2. However, no penalty tax is incurred on distributions: 1. made on or after the date the Contract Owner attains age 59 1/2; 2. made as a result of the Owner's death or disability; 3. made in substantially equal periodic payments over the Contract Owner's life or life expectancy; 4. made under an immediate annuity; or 5. attributable to investment in the Contract before August 14, 1982. You should consult a competent tax advisor to determine if any other exceptions to the penalty apply to your situation. Similar exceptions may apply to distributions from Qualified Contracts. Aggregation of Annuity Contracts.All non-qualified deferred annuity contracts issued by Glenbrook (or its affiliates) to the same Contract Owner during any calendar year will be aggregated and treated as one annuity contract for purposes of determining the taxable amount of a distribution. TAX QUALIFIED CONTRACTS Contracts may be used as investments with certain qualified plans such as: o Individual Retirement Annuities or Accounts (IRAs) under Section 408 of the Code; o Roth IRAs under Section 408A of the Code; o Simplified Employee Pension Plans under Section 408(k) of the Code; o Savings Incentive Match Plans for Employees (SIMPLE) Plans under Section 408(p) of the Code; o Tax Sheltered Annuities under Section 403(b) of the Code; o Corporate and Self Employed Pension and Profit Sharing Plans; and o State and Local Government and Tax-Exempt Organization Deferred Compensation Plans. The income on qualified plan and IRA investments is tax deferred and variable annuities held by such plans do not receive any additional tax deferral. You should review the annuity features, including all benefits and expenses, prior to purchasing a variable annuity in a qualified plan or IRA. Glenbrook reserves the right to limit the availablity of the Contract for use with any of the Qualified Plans listed below. 34 PROSPECTUS In the case of certain qualified plans, the terms of the plans may govern the right to benefits, regardless of the terms of the Contract. Restrictions Under Section 403 Plans. Section 403(b) of the Tax Code provides tax-deferred retirement savings plans for employees of certain non-profit and educational organizations. Under Section 403(b), any Contract used for a 403(b) plan must provide that distributions attributable to salary reduction contributions made after December 31, 1998, and all earnings on salary reduction contributions, may be made only: 1. on or after the date of employee o attains age 59 1/2, o separates from service, o dies, o becomes disabled, or 2. on account of hardship (earnings on salary reduction contributions may not be distributed on the account of hardship). These limitations do not apply to withdrawals where Glenbrook is directed to transfer some or all of the Contract Value to another 403(b) plan. INCOME TAX WITHHOLDING Glenbrook is required to withhold federal income tax at a rate of 20% on all "eligible rollover distributions" unless you elect to make a "direct rollover" of such amounts to an IRA or eligible retirement plan. Eligible rollover distributions generally include all distributions from Qualified Contracts, excluding IRAs, with the exception of: 1. required minimum distributions, or 2. a series of substantially equal periodic payments made over a period of at least 10 years, or over the life (joint lives) of the participant (and beneficiary). Glenbrook may be required to withhold federal and state income taxes on any distributions from non-Qualified Contracts or Qualified Contracts that are not eligible rollover distributions, unless you notify us of your election to not have taxes withheld. Annual Reports and Other Documents Glenbrook's annual report on Form 10-K for the year ended December 31, 2000 is incorporated herein by reference, which means that it is legally a part of this prospectus. After the date of this prospectus and before we terminate the offering of the securities under this prospectus, all documents or reports we file with the SEC under the Exchange Act are also incorporated herein by reference, which means that they also legally become a part of this prospectus. Statements in this prospectus, or in documents that we file later with the SEC and that legally become a part of this prospectus, may change or supersede statements in other documents that are legally part of this prospectus. Accordingly, only the statement that is changed or replaced will legally be a part of this prospectus. We file our Exchange Act documents and reports, including our annual and quarterly reports on Form 10-K and Form 10-Q electronically on the SEC's "EDGAR" system using the identifying number CIK No. 0001007285. The SEC maintains a Web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of the site is http://www.sec.gov. You also can view these materials at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. For more information on the operations of SEC's Public Reference Room, call 1-800-SEC-0330. If you have received a copy of this prospectus, and would like a free copy of any document incorporated herein by reference (other than exhibits not specifically incorporated by reference into the text of such documents), please write or call us at 300 Milwaukee Ave, Vernon Hills, 60061 (telephone: 1-800-755-5275). 35 PROSPECTUS Experts The financial statements of Glenbrook as of December 31, 2000 and 1999 and for each of the three years in the period ended December 31, 2000 and the related financial statement schedule incorporated herein by reference from the Annual Report on Form 10-K of Glenbrook and from the Statement of Additional Information, have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report incorporated herein by reference, and have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. The financial statements of the Variable Account as of December 31, 2000 and for each of the periods in the two years then ended incorporated herein by reference from the Statement of Additional Information, have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report incorporated herein by reference, and have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. 36 PROSPECTUS Performance Information We may advertise the performance of the Variable Sub-Accounts, including yield and total return information. Total return represents the change, over a specified period of time, in the value of an investment in a Variable Sub-Account after reinvesting all income distributions. Yield refers to the income generated by an investment in a Variable Sub-Account over a specified period. All performance advertisements will include, as applicable, standardized yield and total return figures that reflect the deduction of insurance charges, the contract maintenance charge, and withdrawal charge. Performance advertisements also may include total return figures that reflect the deduction of insurance charges, but not the contract maintenance or withdrawal charges. The deduction of such charges would reduce the performance shown. In addition, performance advertisements may include aggregate average, year-by-year, or other types of total return figures. Performance information for periods prior to the inception date of the Variable Sub-Accounts will be based on the historical performance of the corresponding Portfolios for the periods beginning with the inception dates of the Portfolios and adjusted to reflect current Contract expenses. You should not interpret these figures to reflect actual historical performance of the Variable Account. We may include in advertising and sales materials tax deferred compounding charts and other hypothetical illustrations that compare currently taxable and tax deferred investment programs based on selected tax brackets. Our advertisements also may compare the performance of our 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. 37 PROSPECTUS Appendix A ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED BASIC POLICY
For the Years Beginning January 1* and Ended December 31, 1998 1999 2000 ---- ---- ---- AIM V.I. BALANCED SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.73 $12.66 Accumulation Unit Value, End of Period...................................................... $10.73 $12.66 $11.99 Number of Units Outstanding, End of Period.................................................. - 7,487 52,646 AIM V.I. DIVERSIFIED INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.22 $9.91 Accumulation Unit Value, End of Period...................................................... $10.22 $9.91 $9.87 Number of Units Outstanding, End of Period.................................................. - 721 721 AIM V.I. GOVERNMENT SECURITIES SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.38 $9.85 Accumulation Unit Value, End of Period...................................................... $10.38 $9.85 $10.73 Number of Units Outstanding, End of Period.................................................. - - 2,954 AIM V.I. GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $11.83 $15.82 Accumulation Unit Value, End of Period...................................................... $11.83 $15.82 $12.43 Number of Units Outstanding, End of Period.................................................. - 13,275 69,688 AIM V.I. GROWTH AND INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $11.36 $15.09 Accumulation Unit Value, End of Period...................................................... $11.36 $15.09 $12.74 Number of Units Outstanding, End of Period.................................................. - 12,180 53,747 AIM V.I. INTERNATIONAL EQUITY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.68 $16.38 Accumulation Unit Value, End of Period...................................................... $10.68 $16.38 $11.92 Number of Units Outstanding, End of Period.................................................. - - 4,196 AIM V.I. VALUE SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $11.52 $14.80 Accumulation Unit Value, End of Period...................................................... $11.52 $14.80 $12.49 Number of Units Outstanding, End of Period.................................................. - 42,074 115,418 DREYFUS SOCIALLY RESPONSIBLE GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.79 $14.40 Accumulation Unit Value, End of Period...................................................... $10.79 $14.40 $12.66 Number of Units Outstanding, End of Period.................................................. - 3,130 5,459 DREYFUS STOCK INDEX SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.87 $12.97 Accumulation Unit Value, End of Period...................................................... $10.87 $12.97 $11.63 Number of Units Outstanding, End of Period.................................................. - 9,930 23,030 DREYFUS VIF GROWTH AND INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.65 $12.47 Accumulation Unit Value, End of Period...................................................... $10.65 $12.47 $11.86 Number of Units Outstanding, End of Period.................................................. - 2,680 3,326 A-1 For the Years Beginning January 1* and Ended December 31, 1998 1999 2000 ---- ---- ---- DREYFUS VIF MONEY MARKET SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.05 $10.40 Accumulation Unit Value, End of Period...................................................... $10.05 $10.40 $10.91 Number of Units Outstanding, End of Period.................................................. - - - FIDELITY VIP II CONTRAFUND(R)SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $11.66 $14.33 Accumulation Unit Value, End of Period...................................................... $11.66 $14.33 $13.23 Number of Units Outstanding, End of Period.................................................. - 18,963 101,434 FIDELITY VIP EQUITY INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.48 $11.02 Accumulation Unit Value, End of Period...................................................... $10.48 $11.02 $11.81 Number of Units Outstanding, End of Period.................................................. - 30,264 100,008 FIDELITY VIP GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $11.20 $15.22 Accumulation Unit Value, End of Period...................................................... $11.20 $15.22 $13.40 Number of Units Outstanding, End of Period.................................................. - 25,821 168,574 FIDELITY VIP HIGH INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.43 $11.16 Accumulation Unit Value, End of Period...................................................... $10.43 $11.16 $8.55 Number of Units Outstanding, End of Period.................................................. - 3,837 45,099 FRANKLIN SMALL CAP INVESTMENTS (CLASS 2) SUB-ACCOUNT(2) Accumulation Unit Value, Beginning of Period................................................ - $10.00 $12.70 Accumulation Unit Value, End of Period (3,4)................................................ - $12.70 $20.98 Number of Units Outstanding, End of Period (3,4)............................................ - - 579 FRANKLIN SMALL CAP (CLASS 2) SUB-ACCOUNT(3) Accumulation Unit Value, Beginning of Period (3,4).......................................... - - $10.00 Accumulation Unit Value, End of Period...................................................... - - $12.17 Number of Units Outstanding, End of Period.................................................. - - 0 MUTUAL SHARES SECURITIES (CLASS 2) SUB-ACCOUNT(3) Accumulation Unit Value, Beginning of Period (3,4).......................................... - - $10.00 Accumulation Unit Value, End of Period...................................................... - - $20.98 Number of Units Outstanding, End of Period.................................................. - - 579 MUTUAL SHARES INVESTMENTS (CLASS 2) SUB-ACCOUNT(2) Accumulation Unit Value, Beginning of Period................................................ - $10.00 $10.31 Accumulation Unit Value, End of Period (3,4)................................................ - $10.31 $14.11 Number of Units Outstanding, End of Period (3,4)............................................ - - 4,984 TEMPLETON DEVELOPING MARKETS SECURITIES (CLASS 2) SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period................................................ - $10.00 $12.16 Accumulation Unit Value, End of Period...................................................... - $12.16 $8.17 Number of Units Outstanding, End of Period.................................................. - - - TEMPLETON INTERNATIONAL SECURITIES SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period................................................ - - $10.00 Accumulation Unit Value, End of Period...................................................... - - $11.39 Number of Units Outstanding, End of Period.................................................. - - 438 A-2 For the Years Beginning January 1* and Ended December 31, 1998 1999 2000 ---- ---- ---- TEMPLETON GROWTH SECURITIES SUB-ACCOUNT(3) Accumulation Unit Value, Beginning of Period (3,4).......................................... - - $10.00 Accumulation Unit Value, End of Period...................................................... - - $13.59 Number of Units Outstanding, End of Period.................................................. - - 11,237 TEMPLETON STOCK (CLASS 2) SUB-ACCOUNT(2) Accumulation Unit Value, Beginning of Period................................................ - $10.00 $11.37 Accumulation Unit Value, End of Period (3,4)................................................ - $11.37 $11.42 Number of Units Outstanding, End of Period (3,4)............................................ - - 0 GOLDMAN SACHS VIT CAPITAL GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $11.10 $13.99 Accumulation Unit Value, End of Period...................................................... $11.10 $13.99 $12.73 Number of Units Outstanding, End of Period.................................................. - - 573 GOLDMAN SACHS VIT CORE(sm) SMALL CAP EQUITY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.60 $12.36 Accumulation Unit Value, End of Period...................................................... $10.60 $12.36 $12.44 Number of Units Outstanding, End of Period.................................................. - 86 717 GOLDMAN SACHS VIT CORE(sm) U.S. EQUITY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.90 $13.46 Accumulation Unit Value, End of Period...................................................... $10.90 $13.46 $12.02 Number of Units Outstanding, End of Period.................................................. - - 317 GOLDMAN SACHS VIT GLOBAL INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $9.67 $9.92 Accumulation Unit Value, End of Period...................................................... $9.67 $9.92 $10.70 Number of Units Outstanding, End of Period.................................................. - - 724 GOLDMAN SACHS VIT INTERNATIONAL EQUITY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.84 $14.25 Accumulation Unit Value, End of Period...................................................... $10.84 $14.25 $12.24 Number of Units Outstanding, End of Period.................................................. - - 168 MFS EMERGING GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $11.95 $20.88 Accumulation Unit Value, End of Period...................................................... $11.95 $20.88 $16.60 Number of Units Outstanding, End of Period.................................................. - 1,059 58,025 MFS INVESTORS TRUST SERIES Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.81 $11.41 Accumulation Unit Value, End of Period...................................................... $10.81 $11.41 $11.26 Number of Units Outstanding, End of Period.................................................. - 6,295 15,337 MFS NEW DISCOVERY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $11.38 $19.52 Accumulation Unit Value, End of Period...................................................... $11.38 $19.52 $18.92 Number of Units Outstanding, End of Period.................................................. - 183 3,146 MFS RESEARCH SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period................................................ - $10.00 $11.53 Accumulation Unit Value, End of Period...................................................... - $11.53 $10.85 Number of Units Outstanding, End of Period.................................................. - - 15,842 A-3 For the Years Beginning January 1* and Ended December 31, 1998 1999 2000 ---- ---- ---- MORGAN STANLEY UIF EQUITY GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.94 $15.09 Accumulation Unit Value, End of Period...................................................... $10.94 $15.09 $13.17 Number of Units Outstanding, End of Period.................................................. - - 162 MORGAN STANLEY UIF FIXED INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.15 $9.87 Accumulation Unit Value, End of Period...................................................... $10.15 $9.87 $10.49 Number of Units Outstanding, End of Period.................................................. - - - MORGAN STANLEY UIF GLOBAL EQUITY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.43 $10.73 Accumulation Unit Value, End of Period...................................................... $10.43 $10.73 $11.83 Number of Units Outstanding, End of Period.................................................. - - 959 MORGAN STANLEY UIF MID CAP VALUE SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.96 $13.07 Accumulation Unit Value, End of Period...................................................... $10.96 $13.07 $14.32 Number of Units Outstanding, End of Period.................................................. - - 5,400 MORGAN STANLEY UIF VALUE SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $9.95 $9.65 Accumulation Unit Value, End of Period...................................................... $9.95 $9.65 $11.93 Number of Units Outstanding, End of Period.................................................. - - 233 OPPENHEIMER AGGRESSIVE GROWTH SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period................................................ - $10.00 $13.73 Accumulation Unit Value, End of Period...................................................... - $13.73 $12.05 Number of Units Outstanding, End of Period.................................................. - - 24,920 OPPENHEIMER CAPITAL APPRECIATION SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period................................................ - $10.00 $12.11 Accumulation Unit Value, End of Period...................................................... - $12.11 $11.95 Number of Units Outstanding, End of Period.................................................. - - 53,426 OPPENHEIMER GLOBAL SECURITIES SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period................................................ - $10.00 $13.11 Accumulation Unit Value, End of Period...................................................... - $13.11 $13.62 Number of Units Outstanding, End of Period.................................................. - - 60,421 OPPENHEIMER MAIN STREET GROWTH & INCOME SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period................................................ - $10.00 $10.78 Accumulation Unit Value, End of Period...................................................... - $10.78 $9.72 Number of Units Outstanding, End of Period.................................................. - - 121,955 OPPENHEIMER STRATEGIC BOND SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period................................................ - $10.00 $10.16 Accumulation Unit Value, End of Period...................................................... - $10.16 $10.31 Number of Units Outstanding, End of Period.................................................. - - 28,736 * The Contracts were first offered on November 10, 1998. The Accumulation Unit Values in this table reflect a mortality and expense risk charge of 1.05% and an administrative expense charge of 0.10%. All of the Variable Sub-Accounts commenced operations on or before November 10, 1998, except as described in the footnotes below. (1) Variable Sub-Accounts that commenced operations on November 1, 1999 A-4 (2) Variable Sub-Accounts that commenced operations on December 17, 1999. (3) Variable Sub-Accounts that commenced operations on May 1, 2000 (4) Effective May 1, 2000, the Portfolios in which the Franklin Small Cap Investments (Class 2), Mutual Shares Investments (Class 2), and Templeton Stock (Class 2) Variable Sub-Accounts invested were merged into the Franklin Small Cap (Class 2), Mutual Shares Securities (Class 2), and the Templeton Growth Securities (Class 2) Portfolios. Accordingly, for administrative convenience, as of May 1, 2000, the corresponding Variable Sub-Accounts merged with and into new Variable Sub-Accounts named Franklin Small Cap (Class 2), Mutual Shares Securities (Class 2), and the Templeton Growth Securities (Class 2), respectively, with Accumulation Unit values starting at $10.00. A-5 ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED WITH ENHANCED DEATH BENEFIT RIDER For the Years Beginning January 1* and Ended December 31, 1998 1999 2000 ---- ---- ---- AIM V.I. BALANCED SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.73 $12.63 Accumulation Unit Value, End of Period...................................................... $10.73 $12.63 $11.94 Number of Units Outstanding, End of Period.................................................. - 16,023 98,137 AIM V.I. DIVERSIFIED INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.22 $9.88 Accumulation Unit Value, End of Period...................................................... $10.22 $9.88 $9.82 Number of Units Outstanding, End of Period.................................................. - - - AIM V.I. GOVERNMENT SECURITIES SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.38 $9.83 Accumulation Unit Value, End of Period...................................................... $10.38 $9.83 $10.68 Number of Units Outstanding, End of Period.................................................. - - - AIM V.I. GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $11.82 $15.78 Accumulation Unit Value, End of Period...................................................... $11.82 $15.78 $12.38 Number of Units Outstanding, End of Period.................................................. - 14,400 102,325 AIM V.I. GROWTH AND INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $11.36 $15.05 Accumulation Unit Value, End of Period...................................................... $11.36 $15.05 $12.68 Number of Units Outstanding, End of Period.................................................. - 16,349 92,631 AIM V.I. INTERNATIONAL EQUITY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.68 $16.34 Accumulation Unit Value, End of Period...................................................... $10.68 $16.34 $11.86 Number of Units Outstanding, End of Period.................................................. - 606 4,960 AIM V.I. VALUE SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $11.52 $14.76 Accumulation Unit Value, End of Period...................................................... $11.52 $14.76 $12.43 Number of Units Outstanding, End of Period.................................................. - 35,445 212,348 DREYFUS SOCIALLY RESPONSIBLE GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.78 $14.36 Accumulation Unit Value, End of Period...................................................... $10.78 $14.36 $12.60 Number of Units Outstanding, End of Period.................................................. - 1,093 1,147 DREYFUS STOCK INDEX SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.87 $12.94 Accumulation Unit Value, End of Period...................................................... $10.87 $12.94 $11.58 Number of Units Outstanding, End of Period.................................................. - 5,556 16,753 DREYFUS VIF GROWTH AND INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.64 $12.43 Accumulation Unit Value, End of Period...................................................... $10.64 $12.43 $11.80 Number of Units Outstanding, End of Period.................................................. - - - A-6 For the Years Beginning January 1* and Ended December 31, 1998 1999 2000 ---- ---- ---- DREYFUS VIF MONEY MARKET SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.04 $10.38 Accumulation Unit Value, End of Period...................................................... $10.04 $10.38 $10.86 Number of Units Outstanding, End of Period.................................................. - - 4,766 FIDELITY VIP II CONTRAFUND(R)SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $11.66 $14.29 Accumulation Unit Value, End of Period...................................................... $11.66 $14.29 $13.16 Number of Units Outstanding, End of Period.................................................. - 30,660 158,502 FIDELITY VIP EQUITY-INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.47 $10.99 Accumulation Unit Value, End of Period...................................................... $10.47 $10.99 $11.76 Number of Units Outstanding, End of Period.................................................. - 17,530 80,075 FIDELITY VIP GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $11.20 $15.19 Accumulation Unit Value, End of Period...................................................... $11.20 $15.19 $13.33 Number of Units Outstanding, End of Period.................................................. 313 45,514 210,159 FIDELITY VIP HIGH INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.43 $11.13 Accumulation Unit Value, End of Period...................................................... $10.43 $11.13 $8.51 Number of Units Outstanding, End of Period.................................................. - 3,914 55,337 FRANKLIN SMALL CAP INVESTMENTS (CLASS 2) SUB-ACCOUNT(2) Accumulation Unit Value, Beginning of Period................................................ - $10.00 $12.67 Accumulation Unit Value, End of Period (3,4)................................................ - $12.67 $20.95 Number of Units Outstanding, End of Period (3,4)............................................ - - 158 FRANKLIN SMALL CAP (CLASS 2) SUB-ACCOUNT(3) Accumulation Unit Value, Beginning of Period (3,4).......................................... - - $10.00 Accumulation Unit Value, End of Period...................................................... - - $12.16 Number of Units Outstanding, End of Period.................................................. - - 0 MUTUAL SHARES SECURITIES (CLASS 2) SUB-ACCOUNT(3) Accumulation Unit Value, Beginning of Period (3,4).......................................... - - $10.00 Accumulation Unit Value, End of Period...................................................... - - $10.18 Number of Units Outstanding, End of Period.................................................. - - 4,988 MUTUAL SHARES INVESTMENTS (CLASS 2) SUB-ACCOUNT(2) Accumulation Unit Value, Beginning of Period (3,4).......................................... - $10.00 $10.31 Accumulation Unit Value, End of Period (3,4)................................................ - - $10.31 Number of Units Outstanding, End of Period - - 0 TEMPLETON DEVELOPING MARKETS EQUITY (CLASS 2) SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period................................................ - $10.00 $12.16 Accumulation Unit Value, End of Period...................................................... - $12.16 $8.15 Number of Units Outstanding, End of Period.................................................. - - - TEMPLETON GROWTH SECURITIES SUB-ACCOUNT(3) Accumulation Unit Value, Beginning of Period (3,4).......................................... - $10.00 $11.36 Accumulation Unit Value, End of Period...................................................... - $11.36 $13.57 Number of Units Outstanding, End of Period.................................................. - - 6,599 TEMPLETON STOCK (CLASS 2) SUB-ACCOUNT(2) Accumulation Unit Value, Beginning of Period................................................ - - $10.00 Accumulation Unit Value, End of Period (3,4)................................................ - - $11.40 Number of Units Outstanding, End of Period (3,4)............................................ - - 0 A-7 For the Years Beginning January 1* and Ended December 31, 1998 1999 2000 ---- ---- ---- TEMPLETON INTERNATIONAL EQUITY (CLASS 2) SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period................................................ - $10.00 $11.25 Accumulation Unit Value, End of Period...................................................... - $11.25 $10.84 Number of Units Outstanding, End of Period.................................................. - - 1,773 GOLDMAN SACHS VIT CAPITAL GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $11.09 $13.95 Accumulation Unit Value, End of Period...................................................... $11.09 $13.95 $12.67 Number of Units Outstanding, End of Period.................................................. - - - GOLDMAN SACHS VIT CORE(sm) SMALL CAP EQUITY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.60 $12.36 Accumulation Unit Value, End of Period...................................................... $10.60 $12.36 $12.38 Number of Units Outstanding, End of Period.................................................. - - - GOLDMAN SACHS VIT CORE(sm) U.S. EQUITY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.89 $13.46 Accumulation Unit Value, End of Period...................................................... $10.89 $13.46 $11.97 Number of Units Outstanding, End of Period.................................................. - - - GOLDMAN SACHS VIT GLOBAL INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $9.67 $9.90 Accumulation Unit Value, End of Period...................................................... $9.67 $9.90 $14.28 Number of Units Outstanding, End of Period.................................................. - - - GOLDMAN SACHS VIT INTERNATIONAL EQUITY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.84 $14.22 Accumulation Unit Value, End of Period...................................................... $10.84 $14.22 $12.18 Number of Units Outstanding, End of Period.................................................. - - 272 MFS EMERGING GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $11.95 $20.83 Accumulation Unit Value, End of Period...................................................... $11.95 $20.83 $16.52 Number of Units Outstanding, End of Period.................................................. - 3,068 78,095 MFS INVESTORS TRUST SERIES SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.81 $11.38 Accumulation Unit Value, End of Period...................................................... $10.81 $11.38 $11.21 Number of Units Outstanding, End of Period.................................................. - 3,323 23,834 MFS NEW DISCOVERY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $11.38 $19.47 Accumulation Unit Value, End of Period...................................................... $11.38 $19.47 $18.83 Number of Units Outstanding, End of Period.................................................. - 1,669 2,029 MFS RESEARCH SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period................................................ - $10.00 $11.52 Accumulation Unit Value, End of Period...................................................... - $11.52 $10.82 Number of Units Outstanding, End of Period.................................................. - - 27,212 MORGAN STANLEY UIF EQUITY GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.94 $15.05 Accumulation Unit Value, End of Period...................................................... $10.94 $15.05 $13.11 Number of Units Outstanding, End of Period.................................................. - 1,953 1,953 MORGAN STANLEY UIF FIXED INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.15 $9.85 Accumulation Unit Value, End of Period...................................................... $10.15 $9.85 $10.80 Number of Units Outstanding, End of Period.................................................. - 1,566 4,181 A-8 For the Years Beginning January 1* and Ended December 31, 1998 1999 2000 ---- ---- ---- MORGAN STANLEY UIF GLOBAL EQUITY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.43 $10.71 Accumulation Unit Value, End of Period...................................................... $10.43 $10.71 $11.78 Number of Units Outstanding, End of Period.................................................. - - 245 MORGAN STANLEY UIF MID CAP VALUE SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.96 $13.04 Accumulation Unit Value, End of Period...................................................... $10.96 $13.04 $14.25 Number of Units Outstanding, End of Period.................................................. - - - MORGAN STANLEY UIF VALUE SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $9.95 $9.63 Accumulation Unit Value, End of Period...................................................... $9.95 $9.63 $11.87 Number of Units Outstanding, End of Period.................................................. - 903 903 OPPENHEIMER AGGRESSIVE GROWTH SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period................................................ - $10.00 $13.72 Accumulation Unit Value, End of Period...................................................... - $13.72 $12.02 Number of Units Outstanding, End of Period.................................................. - - 33,424 OPPENHEIMER CAPITAL APPRECIATION SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period................................................ - $10.00 $12.11 Accumulation Unit Value, End of Period...................................................... - $12.11 $11.92 Number of Units Outstanding, End of Period.................................................. - - 25,674 OPPENHEIMER GLOBAL SECURITIES SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period................................................ - $10.00 $13.10 Accumulation Unit Value, End of Period...................................................... - $13.10 $13.59 Number of Units Outstanding, End of Period.................................................. - - 32,776 OPPENHEIMER MAIN STREET GROWTH & INCOME SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period................................................ - $10.00 $10.77 Accumulation Unit Value, End of Period...................................................... - $10.77 $9.70 Number of Units Outstanding, End of Period.................................................. - - 139,125 OPPENHEIMER STRATEGIC BOND SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period................................................ - $10.00 $10.16 Accumulation Unit Value, End of Period...................................................... - $10.16 $10.29 Number of Units Outstanding, End of Period.................................................. - - 19,035 * The Contracts were first offered on November 10, 1998. The Accumulation Unit Values in this table reflect a mortality and expense risk charge of 1.27% and an administrative expense charge of 0.10%. All of the Variable Sub-Accounts commenced operations on or before November 10, 1998 except as described in the footnotes below. (1) Variable Sub-Accounts that commenced operations on November 1, 1999. (2) Variable Sub-Accounts commenced operations on December 17, 1999. (3) Variable Sub-Accounts that commenced operations on May 1, 2000 (4) Effective May 1, 2000, the Portfolios in which the Franklin Small Cap Investments (Class 2), Mutual Shares Investments (Class 2), and Templeton Stock (Class 2) Variable Sub-Accounts invested were merged into the Franklin Small Cap (Class 2), Mutual Shares Securities (Class 2), and the Templeton Growth Securities (Class 2) Portfolios. Accordingly, for administrative convenience, as of May 1, 2000, the corresponding Variable Sub-Accounts merged with and into new Variable Sub-Accounts named Franklin Small Cap (Class 2), Mutual Shares Securities (Class 2), and the Templeton Growth Securities (Class 2), respectively, with Accumulation Unit values starting at $10.00. A-9 ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED WITH ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER (for Contracts issued before September 22, 2000) For the Years Beginning January 1* and Ended December 31, 1998 1999 2000 ---- ---- ---- AIM V.I. BALANCED SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.73 $12.60 Accumulation Unit Value, End of Period...................................................... $10.73 $12.60 $11.88 Number of Units Outstanding, End of Period.................................................. 405 43,121 101,781 AIM V.I. DIVERSIFIED INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.21 $9.86 Accumulation Unit Value, End of Period...................................................... $10.21 $9.86 $9.78 Number of Units Outstanding, End of Period.................................................. - 1,484 1,484 AIM V.I. GOVERNMENT SECURITIES SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.38 $9.80 Accumulation Unit Value, End of Period...................................................... $10.38 $9.80 $10.63 Number of Units Outstanding, End of Period.................................................. - - - AIM V.I. GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $11.82 $15.74 Accumulation Unit Value, End of Period...................................................... $11.82 $15.74 $12.32 Number of Units Outstanding, End of Period.................................................. 386 21,246 108,292 AIM V.I. GROWTH AND INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $11.36 $15.01 Accumulation Unit Value, End of Period...................................................... $11.36 $15.01 $12.63 Number of Units Outstanding, End of Period.................................................. - 11,459 66,400 AIM V.I. INTERNATIONAL EQUITY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.68 $16.30 Accumulation Unit Value, End of Period...................................................... $10.68 $16.30 $11.81 Number of Units Outstanding, End of Period.................................................. - 2,943 3,483 AIM V.I. VALUE SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $11.51 $14.73 Accumulation Unit Value, End of Period...................................................... $11.51 $14.73 $12.37 Number of Units Outstanding, End of Period.................................................. - 34,288 159,570 DREYFUS SOCIALLY RESPONSIBLE GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.78 $14.33 Accumulation Unit Value, End of Period...................................................... $10.78 $14.33 $12.55 Number of Units Outstanding, End of Period.................................................. - 5,493 7,121 DREYFUS STOCK INDEX SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.87 $12.90 Accumulation Unit Value, End of Period...................................................... $10.87 $12.90 $11.52 Number of Units Outstanding, End of Period.................................................. 401 19,955 21,326 DREYFUS VIF GROWTH AND INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.64 $12.40 Accumulation Unit Value, End of Period...................................................... $10.64 $12.40 $11.75 Number of Units Outstanding, End of Period.................................................. - 3,983 3,676 A-10 For the Years Beginning January 1* and Ended December 31, 1998 1999 2000 ---- ---- ---- DREYFUS VIF MONEY MARKET SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.04 $10.36 Accumulation Unit Value, End of Period...................................................... $10.04 $10.36 $10.81 Number of Units Outstanding, End of Period.................................................. - 577 489 FIDELITY VIP II CONTRAFUND(R)SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $11.65 $14.26 Accumulation Unit Value, End of Period...................................................... $11.65 $14.26 $13.10 Number of Units Outstanding, End of Period.................................................. 387 32,161 131,791 FIDELITY VIP EQUITY-INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.47 $10.96 Accumulation Unit Value, End of Period...................................................... $10.47 $10.96 $11.70 Number of Units Outstanding, End of Period.................................................. - 11,621 45,849 FIDELITY VIP GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $11.19 $15.15 Accumulation Unit Value, End of Period...................................................... $11.19 $15.15 $13.27 Number of Units Outstanding, End of Period.................................................. - 22,088 151,189 FIDELITY VIP HIGH INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.43 $11.10 Accumulation Unit Value, End of Period...................................................... $10.43 $11.10 $8.47 Number of Units Outstanding, End of Period - 3,667 31,190 FRANKLIN SMALL CAP INVESTMENTS (CLASS 2) SUB-ACCOUNT(2) Accumulation Unit Value, Beginning of Period................................................ - $10.00 $12.66 Accumulation Unit Value, End of Period (3,4)................................................ - $12.66 $12.15 Number of Units Outstanding, End of Period (3,4)............................................ - - - FRANKLIN SMALL CAP (CLASS 2) SUB-ACCOUNT(3) Accumulation Unit Value, Beginning of Period (3,4).......................................... - - $12.66 Accumulation Unit Value, End of Period...................................................... - - $12.15 Number of Units Outstanding, End of Period.................................................. - - - MUTUAL SHARES SECURITIES (CLASS 2) SUB-ACCOUNT (3) Accumulation Unit Value, Beginning of Period (3,4).......................................... - - $10.00 Accumulation Unit Value, End of Period...................................................... - - $14.07 Number of Units Outstanding, End of Period.................................................. - - 4,992 MUTUAL SHARES INVESTMENTS (CLASS 2) SUB-ACCOUNT(2) Accumulation Unit Value, Beginning of Period (3,4).......................................... - $10.00 $10.30 Accumulation Unit Value, End of Period (3,4)................................................ - - $10.30 Number of Units Outstanding, End of Period.................................................. - - - TEMPLETON DEVELOPING MARKETS SECURITIES (CLASS 2) SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period................................................ - $10.00 $12.15 Accumulation Unit Value, End of Period...................................................... - $12.15 $8.13 Number of Units Outstanding, End of Period.................................................. - - - TEMPLETON INTERNATIONAL SECURITIES (CLASS 2) SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period................................................ - $10.00 $11.25 Accumulation Unit Value, End of Period...................................................... - $11.25 $10.82 Number of Units Outstanding, End of Period.................................................. - - - A-11 For the Years Beginning January 1* and Ended December 31, 1998 1999 2000 ---- ---- ---- TEMPLETON GROWTH SECURITIES SUB-ACCOUNT (3) Accumulation Unit Value, Beginning of Period (3,4).......................................... - - $10.00 Accumulation Unit Value, End of Period...................................................... - - $13.55 Number of Units Outstanding, End of Period.................................................. - - 9,457 TEMPLETON STOCK (CLASS 2) SUB-ACCOUNT(2) Accumulation Unit Value, Beginning of Period................................................ - - $10.00 Accumulation Unit Value, End of Period (3,4)................................................ - - $11.39 Number of Units Outstanding, End of Period (3,4)............................................ - - 0 GOLDMAN SACHS VIT CAPITAL GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $11.09 $13.92 Accumulation Unit Value, End of Period...................................................... $11.09 $13.92 $12.61 Number of Units Outstanding, End of Period.................................................. - 2,449 4,173 GOLDMAN SACHS VIT CORE(sm) SMALL CAP EQUITY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.59 $12.30 Accumulation Unit Value, End of Period...................................................... $10.59 $12.30 $12.32 Number of Units Outstanding, End of Period.................................................. - 17,918 18,069 GOLDMAN SACHS VIT CORE(sm) U.S. EQUITY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.89 $13.39 Accumulation Unit Value, End of Period...................................................... $10.89 $13.39 $11.91 Number of Units Outstanding, End of Period.................................................. 401 20,515 23,250 GOLDMAN SACHS VIT GLOBAL INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $9.66 $9.87 Accumulation Unit Value, End of Period...................................................... $9.66 $9.87 $10.60 Number of Units Outstanding, End of Period.................................................. - - - GOLDMAN SACHS VIT INTERNATIONAL EQUITY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.84 $14.18 Accumulation Unit Value, End of Period...................................................... $10.84 $14.18 $12.12 Number of Units Outstanding, End of Period.................................................. - - 1,812 MFS EMERGING GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $11.94 $20.78 Accumulation Unit Value, End of Period...................................................... $11.94 $20.78 $16.44 Number of Units Outstanding, End of Period.................................................. 377 19,189 63,991 MFS INVESTORS TRUST SERIES SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.81 $11.35 Accumulation Unit Value, End of Period...................................................... $10.81 $11.35 $11.16 Number of Units Outstanding, End of Period.................................................. - 4,808 11,160 MFS NEW DISCOVERY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $11.38 $19.42 Accumulation Unit Value, End of Period...................................................... $11.38 $19.42 $18.74 Number of Units Outstanding, End of Period.................................................. - 707 1,509 MFS RESEARCH SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period................................................ - $10.00 $11.52 Accumulation Unit Value, End of Period...................................................... - $11.52 $10.79 Number of Units Outstanding, End of Period.................................................. - - 60,709 MORGAN STANLEY UIF EQUITY GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.94 $15.02 Accumulation Unit Value, End of Period...................................................... $10.94 $15.02 $13.04 Number of Units Outstanding, End of Period.................................................. 406 7,464 11,011 A-12 For the Years Beginning January 1* and Ended December 31, 1998 1999 2000 ---- ---- ---- MORGAN STANLEY UIF FIXED INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.15 $9.82 Accumulation Unit Value, End of Period...................................................... $10.15 $9.82 $10.75 Number of Units Outstanding, End of Period.................................................. - - - MORGAN STANLEY UIF GLOBAL EQUITY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.42 $10.69 Accumulation Unit Value, End of Period...................................................... $10.42 $10.69 $11.72 Number of Units Outstanding, End of Period.................................................. - 245 363 MORGAN STANLEY UIF MID CAP VALUE SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $10.96 $13.01 Accumulation Unit Value, End of Period...................................................... $10.96 $13.01 $14.18 Number of Units Outstanding, End of Period.................................................. 408 1,788 4,089 MORGAN STANLEY UIF VALUE SUB-ACCOUNT Accumulation Unit Value, Beginning of Period................................................ $10.00 $9.95 $9.61 Accumulation Unit Value, End of Period...................................................... $9.95 $9.61 $11.82 Number of Units Outstanding, End of Period.................................................. - 17,465 16,697 OPPENHEIMER AGGRESSIVE GROWTH SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period................................................ - $10.00 $13.72 Accumulation Unit Value, End of Period...................................................... - $13.72 $11.99 Number of Units Outstanding, End of Period.................................................. - - 38,398 OPPENHEIMER CAPITAL APPRECIATION SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period................................................ - $10.00 $12.10 Accumulation Unit Value, End of Period...................................................... - $12.10 $11.89 Number of Units Outstanding, End of Period.................................................. - - 35,976 OPPENHEIMER GLOBAL SECURITIES SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period................................................ - $10.00 $13.10 Accumulation Unit Value, End of Period...................................................... - $13.10 $13.55 Number of Units Outstanding, End of Period.................................................. - - 33,241 OPPENHEIMER MAIN STREET GROWTH & INCOME SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period................................................ - $10.00 $10.77 Accumulation Unit Value, End of Period...................................................... - $10.77 $9.67 Number of Units Outstanding, End of Period.................................................. - - 130,587 OPPENHEIMER STRATEGIC BOND SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period................................................ - $10.00 $10.15 Accumulation Unit Value, End of Period...................................................... - $10.15 $10.26 Number of Units Outstanding, End of Period.................................................. - - 19,624 * The Contracts were first offered on November 10, 1998. The Accumulation Unit Values in this table reflect a mortality and expense risk charge of 1.49% and an administrative expense charge of 0.10%. All of the Variable Sub-Accounts commenced operations on or before November 10, 1998 except as described in the footnotes below. (1) Variable Sub-Accounts that commenced operations on November 1, 1999. (2) Variable Sub-Accounts that commenced operations on December 17, 1999. (3) Variable Sub-Accounts that commenced operations on May 1, 2000 (4) Effective May 1, 2000, the Portfolios in which the Franklin Small Cap Investments (Class 2), Mutual Shares Investments (Class 2), and Templeton Stock Class (Class 2) Variable Sub-Accounts invested were merged into the Franklin Small Cap (Class 2), Mutual Shares Securities (Class 2), and the Templeton Growth Securities (Class 2) Portfolios. Accordingly, for administrative convenience, as of May 1, 2000, the corresponding Variable Sub-Accounts merged with and into new Variable Sub-Accounts named Franklin Small Cap (Class 2), Mutual Shares Securities (Class 2), and the Templeton Growth Securities (Class 2), respectively, with Accumulation Unit values starting at $10.00. A-13 ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED WITH ENHANCED DEATHAND INCOME BENEFIT COMBINATION RIDER II (for Contracts issued on or after September 22, 2000) For the Period Beginning September 22 and Ended December 31, 2000 AIM V.I. BALANCED SUB-ACCOUNT Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $9.21 Number of Units Outstanding, End of Period............................................................. 4,545 AIM V.I. DIVERSIFIED INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $7.80 Number of Units Outstanding, End of Period............................................................. 34,530 AIM V.I. GOVERNMENT SECURITIES SUB-ACCOUNT Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $10.43 Number of Units Outstanding, End of Period............................................................. - AIM V.I. GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $7.52 Number of Units Outstanding, End of Period............................................................. 32,771 AIM V.I. GROWTH AND INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $8.06 Number of Units Outstanding, End of Period............................................................. 20,079 AIM V.I. INTERNATIONAL EQUITY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $8.32 Number of Units Outstanding, End of Period............................................................. - AIM V.I. VALUE SUB-ACCOUNT Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $8.54 Number of Units Outstanding, End of Period............................................................. 22,904 THE DREYFUS SOCIALLY RESPONSIBLE GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $8.42 Number of Units Outstanding, End of Period............................................................. - DREYFUS GROWTH AND INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $9.38 Number of Units Outstanding, End of Period............................................................. - DREYFUS STOCK INDEX SUB-ACCOUNT Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $8.83 Number of Units Outstanding, End of Period............................................................. 403 A-14 For the Period Beginning September 22 and Ended December 31, 2000 DREYFUS VIF MONEY MARKET SUB-ACCOUNT Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $10.17 Number of Units Outstanding, End of Period............................................................. 8,743 FIDELITY VIP CONTRAFUND(R)SUB-ACCOUNT Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $9.23 Number of Units Outstanding, End of Period............................................................. 14,991 FIDELITY VIP EQUITY-INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $10.42 Number of Units Outstanding, End of Period............................................................. 17,198 FIDELITY VIP GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $8.37 Number of Units Outstanding, End of Period............................................................. 21,583 FIDELITY VIP HIGH INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $8.30 Number of Units Outstanding, End of Period............................................................. 102 FRANKLIN SMALL CAP (CLASS 2) SUB-ACCOUNT(2) Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $10.00 Number of Units Outstanding, End of Period............................................................. - MUTUAL SHARES SECURITIES (CLASS 2) SUB-ACCOUNT(2) Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $10.45 Number of Units Outstanding, End of Period............................................................. - TEMPLETON DEVELOPING MARKETS SECURITIES (CLASS 2) SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $8.17 Number of Units Outstanding, End of Period............................................................. - TEMPLETON GROWTH SECURITIES SUB-ACCOUNT(2) Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $10.00 Number of Units Outstanding, End of Period............................................................. 2,289 TEMPLETON INTERNATIONAL SECURITIES (CLASS 2) SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $9.60 Number of Units Outstanding, End of Period............................................................. - GOLDMAN SACHS VIT CAPITAL GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $8.76 Number of Units Outstanding, End of Period............................................................. 1,593 A-15 For the Period Beginning September 22 and Ended December 31, 2000 GOLDMAN SACHS VIT SMALL CAP EQUITY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $9.61 Number of Units Outstanding, End of Period............................................................. - GOLDMAN SACHS VIT CORE(sm) U.S. EQUITY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $8.81 Number of Units Outstanding, End of Period............................................................. 1,916 GOLDMAN SACHS VIT GLOBAL INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $10.36 Number of Units Outstanding, End of Period............................................................. - GOLDMAN SACHS VIT INTERNATIONAL EQUITY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $9.09 Number of Units Outstanding, End of Period............................................................. - MFS EMERGING GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $8.08 Number of Units Outstanding, End of Period............................................................. 11,866 MFS INVESTORS TRUST SERIES SUB-ACCOUNT Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $9.64 Number of Units Outstanding, End of Period............................................................. 576 MFS NEW DISCOVERY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $9.55 Number of Units Outstanding, End of Period............................................................. - MFS RESEARCH SUB-ACCOUNT(1) Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $8.61 Number of Units Outstanding, End of Period............................................................. 11,698 MORGAN STANLEY UIF EQUITY GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $8.06 Number of Units Outstanding, End of Period............................................................. 2,971 MORGAN STANLEY UIF FIXED INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $10.49 Number of Units Outstanding, End of Period............................................................. - MORGAN STANLEY UIF GLOBAL EQUITY SUB-ACCOUNT Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $10.50 Number of Units Outstanding, End of Period............................................................. - A-16 For the Period Beginning September 22 and Ended December 31, 2000 MORGAN STANLEY UIF MID CAP VALUE SUB-ACCOUNT Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $9.92 Number of Units Outstanding, End of Period............................................................. 1,841 MORGAN STANLEY UIF VALUE SUB-ACCOUNT Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $11.65 Number of Units Outstanding, End of Period............................................................. - OPPENHEIMER AGGRESSIVE GROWTH SUB-ACCOUNT Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $6.94 Number of Units Outstanding, End of Period............................................................. 8,000 OPPENHEIMER CAPITAL APPRECIATION SUB-ACCOUNT Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $8.92 Number of Units Outstanding, End of Period............................................................. 18,937 OPPENHEIMER GLOBAL SECURITIES SUB-ACCOUNT Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $9.41 Number of Units Outstanding, End of Period............................................................. 2,457 OPPENHEIMER MAIN STREET GROWTH & INCOME SUB-ACCOUNT Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $8.72 Number of Units Outstanding, End of Period............................................................. 33,469 OPPENHEIMER STRATEGIC BOND SUB-ACCOUNT Accumulation Unit Value, Beginning of Period........................................................... $10.00 Accumulation Unit Value, End of Period................................................................. $9.88 Number of Units Outstanding, End of Period............................................................. 976 * Contracts with the Enhanced Death and Income Benefit Combination Rider II were first made available for all of the above Variable Sub-Accounts on September 22, 2000. The Accumulation Unit Value for each of these Variable Sub-Accounts was initially set at $10.00. The Accumulation Unit Values in this table reflect a mortality and expense risk charge of 1.55% and an administrative expense charge of .10%. The additional .50% mortality and expense risk charge is applicable to Contract owners who selected the Enhanced Death and Income Benefit Combination Rider II. All of the Variable Sub-Accounts commenced operations on or before November 10, 1998 except as described in the footnotes below. (1) Variable Sub-Accounts that commenced operations on November 1, 1999. (2) Variable Sub-Accounts that commenced operations on May 1, 2000.
A-17 Appendix B Market Value Adjustment The Market Value Adjustment is based on the following: I = the Treasury Rate for a maturity equal to the Guarantee Period for the week preceding the establishment of the Guarantee Period. N = the number of whole and partial years from the date we receive the withdrawal, transfer, or death benefit request, or from the Payout Start Date to the end of the Guarantee Period. J = the Treasury Rate for a maturity equal to the Guarantee Period for the week preceding the receipt of the withdrawal, transfer, death benefit, or income payment request. Treasury Rate means the U.S. Treasury Note Constant Maturity yield as reported in Federal Reserve Bulletin Release H.15. The Market Value Adjustment factor is determined from the following formula: .9 X (I - J) X N To determine the Market Value Adjustment, we will multiply the Market Value Adjustment factor by the amount transferred, withdrawn (in excess of the Free Withdrawal Amount), paid as a death benefit, or applied to an Income Plan from a Guarantee Period at any time other than during the 30 day period after such Guarantee Period expires. Examples of Market Value Adjustment Purchase Payment: $10,000 allocated to a Guarantee Period Guarantee Period: 5 years Interest Rate: 4.50% Full Withdrawal: End of Contract Year 3 NOTE: These examples assume that premium taxes are not applicable. Example 1: (Assumes declining interest rates)
Step 1: Calculate Contract Value at End of $10,000.00 X (1.0450)3 = $11,411.66 Contract Year 3: Step 2. Calculate the Free Withdrawal Amount: .15 X ($10,000.00) = $1,500.00 Step 3: Calculate the Withdrawal Charge: .05 X ($10,000 - $1,500) = $425.00 Step 4. Calculate the Market Value Adjustment: I = 4.50% 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 ($11,411.66 - $1,500) = $53.52 Step 5. Calculate the amount received by Customers $11,411.66 - $425.00 + $53.52 = $11,040.18 as a result of full withdrawal at the end of Contract Year 3: B-1 Example 2: (Assumes rising interest rates) Step 1. Calculate Contract Value at End of Contract Year 3: $10,000.00 X (1.045)3 = $11,411.66 Step 2. Calculate the Free Withdrawal Amount: .15 X ($10,000.00) = $1,500.00 Step 3. Calculate the Withdrawal Charge: .05 X ($10,000.00 - $1,500.00) = $425.00 Step 4. Calculate the Market Value Adjustment: I = 4.50% 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 ($11,411.66 - $1,500) = -$53.52 Step 5: Calculate the amount received by Contract $11,411.66 - $425.00 - $53.52 = $10,933.14 Owner as a result of full withdrawal at the end of Contract Year 3:
B-2 Statement of Additional Information Table of Contents Description Additions, Deletions or Substitutions of Investments The Contract Purchases of Contracts Tax-free Exchanges (1035 Exchanges, Rollovers and Transfers) Performance Information Standardized Total Returns Non-standardized Total Returns Adjusted Historical Total Returns Calculation of Accumulation Unit Values Calculation of Variable Income Payments Calculation of Annuity Unit Values General Matters Incontestability Settlements Safekeeping of the Variable Account's Assets Premium Taxes Tax Reserves Federal Tax Matters Qualified Plans Experts Financial Statements ----------- This prospectus does not constitute an offering in any jurisdiction in which such offering may not lawfully be made. We do not authorize anyone to provide any information or representations regarding the offering described in this prospectus other than as contained in this prospectus. (This page has been left blank intentionally.) GLG678-1 -----END PRIVACY-ENHANCED MESSAGE-----