VARIABLE ANNUITY ACCOUNT B OF AETNA LIFE INS & ANNUITY CO, 485BPOS, 1996-04-22

VARIABLE ANNUITY ACCOUNT B OF AETNA LIFE INS & ANNUITY CO
485BPOS, 1996-04-22

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As filed with the Securities and Exchange Registration No. 33-75996*
Commission on April 22, 1996 Registration No. 811-2512

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-4

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Post-Effective Amendment No. 6 To
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

and Amendment To

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

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Variable Annuity Account B of Aetna Life Insurance and Annuity Company
(EXACT NAME OF REGISTRANT)

Aetna Life Insurance and Annuity Company
(NAME OF DEPOSITOR)

151 Farmington Avenue, RE4C, Hartford, Connecticut 06156
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

Depositor's Telephone Number, including Area Code: (860) 273-7834

Susan E. Bryant, Counsel
Aetna Life Insurance and Annuity Company
151 Farmington Avenue, RE4C, Hartford, Connecticut 06156
(NAME AND ADDRESS OF AGENT FOR SERVICE)
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It is proposed that this filing will become effective (CHECK APPROPRIATE SPACE):

immediately upon filing pursuant to paragraph (b) of Rule 485
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X on May 1, 1996 pursuant to paragraph (b) of Rule 485
-----

Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant has
registered an indefinite number of securities under the Securities Act of 1933.
The Registrant filed a Rule 24f-2 Notice for the fiscal year ended December 31,
1995 on February 29, 1996.

*Pursuant to Rule 429(a) under the Securities Act of 1933, Registrant has
included a combined prospectus under this Registration Statement which includes
all the information which would currently be required in a prospectus relating
to the securities covered by Registration Statement No. 2-52448 and the
individual deferred compensation contracts covered by Registration Statement No.
33-76000.

<PAGE>

VARIABLE ANNUITY ACCOUNT B
CROSS REFERENCE SHEET

Form N-4
Item No. Part A (Prospectus) Location
- -------- ------------------- --------

1 Cover Page . . . . . . . . . . . . . . . Cover Page

2 Definitions. . . . . . . . . . . . . . . Definitions

3 Synopsis or Highlights . . . . . . . . . Prospectus Summary; Fee Table

4 Condensed Financial Information. . . . . Condensed Financial
Information

5 General Description of Registrant, The Company; Variable Annuity
Depositor, and Portfolio Companies . . . Account B; The Funds

6 Deductions and Expenses. . . . . . . . . Charges and Deductions;
Distribution

7 General Description of Variable Annuity
Contracts . . . . . . . . . . . . . . . Purchase; Miscellaneous

8 Annuity Period . . . . . . . . . . . . . Annuity Period

9 Death Benefit. . . . . . . . . . . . . . Death Benefit During
Accumulation Period; Death
Benefit Payable During the
Annuity Period

10 Purchases and Contract Value . . . . . . Purchase; Contract Valuation

11 Redemptions. . . . . . . . . . . . . . . Right to Cancel; Withdrawals

12 Taxes. . . . . . . . . . . . . . . . . . Tax Status

13 Legal Proceedings. . . . . . . . . . . . Miscellaneous - Legal Matters
and Proceedings

14 Table of Contents of the Statement of . Contents of the Statement of
Additional Information . . . . . . . . . Additional Information

<PAGE>

Form N-4
Item No. Part B (Statement of Additional Information) Location
- -------- -------------------------------------------- --------

15 Cover Page . . . . . . . . . . . . . . . Cover page

16 Table of Contents. . . . . . . . . . . . Table of Contents

17 General Information and History. . . . . General Information and
History

18 Services . . . . . . . . . . . . . . . . General Information and
History; Independent
Auditors

19 Purchase of Securities Being Offered . . Offering and Purchase of
Contracts

20 Underwriters . . . . . . . . . . . . . . Offering and Purchase of
Contracts

21 Calculation of Performance Data. . . . . Performance Data; Average
Annual Total Return
Quotations

22 Annuity Payments . . . . . . . . . . . . Annuity Payments

23 Financial Statements . . . . . . . . . . Financial Statements

Part C (Other Information)
--------------------------

Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C to this Registration Statement.
<PAGE>

VARIABLE ANNUITY ACCOUNT B

GROUP VARIABLE ANNUITY CONTRACTS FOR
EMPLOYER-SPONSORED DEFERRED COMPENSATION PLANS

MAY 1, 1996 SUPPLEMENT TO MAY 1, 1996 PROSPECTUS

PRODUCERS' DEFERRED COMPENSATION PLAN
PRODUCERS' INCENTIVE SAVINGS PLAN

This supplement relates to the Producers' Deferred Compensation Plan and the
Producers' Incentive Savings Plan (the "Plans") for career agents and certain
brokers of Aetna Life Insurance Company and Aetna Life Insurance and Annuity
Company. The Plans have met the criteria allowing for the reduction or
elimination of certain charges under the Contract. Therefore, no maintenance
fee or deferred sales charge will be deducted under the Contract. (See
"Maintenance Fee - Reduction or Elimination of Maintenance Fee" and "Deferred
Sales Charge - Reduction or Elimination of Deferred Sales Charge.")

Form No. x75996.1-7

<PAGE>

VARIABLE ANNUITY ACCOUNT B

GROUP VARIABLE ANNUITY CONTRACTS FOR
EMPLOYER-SPONSORED DEFERRED COMPENSATION PLANS

MAY 1, 1996 SUPPLEMENT TO MAY 1, 1996 PROSPECTUS

The following is a negotiated provision regarding the deferred sales charge
applicable to the participants of the American Chamber of Commerce Executives
Deferred Compensation Plan. (See "Deferred Sales Charge - Reduction or
Elimination of Deferred Sales Charge.")

In addition to the applicable reasons listed in this Prospectus, a
deferred sales charge is not deducted for any Account Value which is
withdrawn due to the Participant's separation from service.

Form No. x75996.2-7

<PAGE>
PROSPECTUS
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This Prospectus generally describes group deferred variable annuity contracts
("Contracts") issued by Aetna Life Insurance and Annuity Company (the
"Company"). The Contracts are available through participation in (1) employer-
sponsored deferred compensation plans sponsored by tax-exempt organizations for
deferrals not subject to Section 457 of the Internal Revenue Code of 1986, as
amended ("Code") or by taxable organizations for their employees and/or
independent contractors ("Non-Section 457 Plans"); or (2) employer-sponsored
deferred compensation plans sponsored by tax-exempt organizations for deferrals
that are subject to Code Section 457 for their employees and/or independent
contractors ("Section 457 Plans") (collectively referred to as "Plans"). Only
group contracts are currently offered for sale; however, "Contracts" shall also
refer to employer-owned individual Contracts issued in connection with Plans in
the past.

The Contracts provide that contributions may be allocated to one or more of the
Credited Interest Options or to one or more of the Subaccounts of Variable
Annuity Account B, a separate account of the Company. The Subaccounts invest
directly in shares of the following Funds:

- Aetna Variable Fund - Fidelity VIP Growth Portfolio
- Aetna Income Shares - Fidelity VIP Overseas Portfolio
- Aetna Variable Encore Fund - Janus Aspen Aggressive Growth
- Aetna Investment Advisers Fund, Portfolio
Inc. - Janus Aspen Balanced Portfolio
- Aetna Ascent Variable Portfolio - Janus Aspen Flexible Income
- Aetna Crossroads Variable Portfolio Portfolio
- Aetna Legacy Variable Portfolio - Janus Aspen Growth Portfolio
- Alger American Growth Portfolio - Janus Aspen Short-Term Bond
- Alger American Small Cap Portfolio Portfolio
- Calvert Responsibly Invested - Janus Aspen Worldwide Growth
Balanced Portfolio Portfolio
- Fidelity VIP II Contrafund - Lexington Natural Resources Trust
Portfolio - Neuberger & Berman Growth Portfolio
- Fidelity VIP Equity-Income - Scudder International Portfolio
Portfolio Class A Shares
- TCI Growth (a Twentieth Century
fund)

The Credited Interest Options currently available under the Contract are the
Guaranteed Accumulation Account, the Fixed Account and the Fixed Plus Account.
Except as specifically mentioned, this Prospectus describes only investments
through the Separate Account. A brief description of each of the Credited
Interest Options is contained in Appendices to this Prospectus. Additional
information concerning the Guaranteed Accumulation Account is contained in a
separate prospectus.

The availability of the Funds and the Credited Interest Options is subject to
applicable regulatory authorization. Not all Funds or Credited Interest Options
may be available in all jurisdictions, under all Contracts, or in all Plans.
Please check with your employer to determine option availability. (See
"Investment Options.")

This Prospectus provides investors with the information that they should know
about the Separate Account before investing in the Contract through the Separate
Account. Additional information about the Separate Account is contained in a
Statement of Additional Information ("SAI") which is available at no charge. The
SAI has been filed with the Securities and Exchange Commission and is
incorporated herein by reference. The Table of Contents for the SAI is printed
on page 17 of this Prospectus. An SAI may be obtained by indicating the request
on the enrollment form or on the prospectus receipt contained in this
Prospectus, or by calling the number listed under the "Inquiries" section of the
Prospectus Summary.

THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUSES OF
THE FUNDS AND GUARANTEED ACCUMULATION ACCOUNT. ALL PROSPECTUSES SHOULD BE READ
AND RETAINED FOR FUTURE REFERENCE.

THE SECURITIES OFFERED BY THIS PROSPECTUS HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.

THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION ARE DATED MAY 1,
1996
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<S> <C>
DEFINITIONS.......................................................................... DEFINITIONS - 1
PROSPECTUS SUMMARY................................................................... SUMMARY - 1
FEE TABLE............................................................................ FEE TABLE - 1
CONDENSED FINANCIAL INFORMATION...................................................... AUV HISTORY - 1
THE COMPANY.......................................................................... 1
VARIABLE ANNUITY ACCOUNT B........................................................... 1
INVESTMENT OPTIONS................................................................... 1
The Funds........................................................................ 1
Credited Interest Options........................................................ 4
PURCHASE............................................................................. 4
Contract Availability............................................................ 4
Contract Purchase................................................................ 4
Purchase Payments................................................................ 4
Right to Cancel.................................................................. 5
Transfer Credits................................................................. 5
CHARGES AND DEDUCTIONS............................................................... 5
Daily Deductions from the Separate Account....................................... 5
Maintenance Fee.................................................................. 6
Deferred Sales Charge............................................................ 6
Fund Expenses.................................................................... 7
Premium and Other Taxes.......................................................... 7
CONTRACT VALUATION................................................................... 8
Account Value.................................................................... 8
Accumulation Units............................................................... 8
Net Investment Factor............................................................ 8
TRANSFERS............................................................................ 8
Dollar Cost Averaging Program.................................................... 8
WITHDRAWALS.......................................................................... 9
ADDITIONAL WITHDRAWAL OPTIONS........................................................ 9
DEATH BENEFIT DURING ACCUMULATION PERIOD............................................. 10
ANNUITY PERIOD....................................................................... 10
Annuity Period Elections......................................................... 10
Annuity Options.................................................................. 11
Annuity Payments................................................................. 12
Charges Deducted During the Annuity Period....................................... 12
Death Benefit Payable During the Annuity Period.................................. 12
TAX STATUS........................................................................... 13
Introduction..................................................................... 13
Taxation of the Company.......................................................... 13
Tax Status of the Contract....................................................... 13
Contracts Used With Certain Retirement Plans..................................... 13
Section 457 Plans................................................................ 14
Plans of Non-Section 457 Tax-Exempt Organizations and Taxable Organizations...... 14
MISCELLANEOUS........................................................................ 15
Voting Rights.................................................................... 15
Modification of the Contract..................................................... 15
Distribution..................................................................... 16
Performance Reporting............................................................ 16
Transfer of Ownership; Assignment................................................ 16
Delay or Suspension of Payments.................................................. 16
Legal Matters and Proceedings.................................................... 17
</TABLE>

<PAGE>

<TABLE>
<S> <C>
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION.................................. 17
APPENDIX I--GUARANTEED ACCUMULATION ACCOUNT.......................................... 18
APPENDIX II--FIXED ACCOUNT........................................................... 19
APPENDIX III--FIXED PLUS ACCOUNT..................................................... 20
</TABLE>

NO PERSON IS AUTHORIZED BY THE COMPANY TO GIVE INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION
WITH THE OFFERS CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
<PAGE>
DEFINITIONS
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As used in this Prospectus, the following terms have the meanings shown:

ACCOUNT: A record established for each Participant, as directed by the Contract
Holder, to identify contract values during the Accumulation Period.

ACCOUNT YEAR: A period of twelve months measured from the date on which an
Account is established (the effective date) or from an anniversary of such
effective date.

ACCOUNT VALUE: The total dollar value of amounts held in an Account as of any
Valuation Date during the Accumulation Period.

ACCUMULATION PERIOD: The period during which Purchase Payment(s) credited to an
Account are invested to fund future annuity payments.

ACCUMULATION UNIT: A measure of the value of each Subaccount before Annuity
payments begin.

AGGREGATE PURCHASE PAYMENT(S): The sum of all Purchase Payment(s) made under a
Contract.

ANNUITANT: The person on whose life or life expectancy the annuity payments are
based.

ANNUITY: A series of payments for life, for a definite period or a combination
of the two.

ANNUITY PERIOD: The period during which annuity payments are made.

ANNUITY UNIT: A measure of the value of each Subaccount selected during the
Annuity Period.

CODE: The Internal Revenue Code of 1986, as amended.

COMPANY (WE, US): Aetna Life Insurance and Annuity Company.

CONTRACTS: The group and individual deferred, variable annuity contracts
described in this Prospectus.

CONTRACT BENEFICIARY: The Contract Holder is the Contract Beneficiary.

CONTRACT HOLDER: The entity to which the Contract is issued (generally the
employer). The Contract Holder has all right, title and interest in amounts held
under the Contract.

CREDITED INTEREST OPTIONS: The fixed interest options under the Contract. The
Credited Interest Options currently consist of the Guaranteed Accumulation
Account, the Fixed Account and the Fixed Plus Account, each of which is
described in an Appendix to this Prospectus. Amounts allocated to the Credited
Interest Options are included in the Account Value.

FUND(S): An open-end management investment company whose shares are purchased by
the Separate Account to fund the benefits provided by the Contracts.

HOME OFFICE: The Company's principal executive offices located at 151 Farmington
Avenue, Hartford, Connecticut 06156.

NON-SECTION 457 PLAN(S): Employer-sponsored deferred compensation plans
sponsored by tax-exempt organizations for deferrals not subject to Code Section
457 and by taxable organizations for their employees and/or independent
contractors.

PARTICIPANT (YOU): A person participating in a Plan maintained by an eligible
organization. Participants have no rights to the assets accumulated under the
Plan.

PLAN(S): Employer-sponsored deferred compensation plans sponsored by tax-exempt
organizations and/or taxable organizations for their employees or independent
contractors (or both).

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DEFINITIONS - 1
<PAGE>

PLAN ACCOUNT: The record established for a Contract Holder of the net Purchase
Payments accumulated under a Contract where Accounts are not maintained.

PLAN BENEFICIARY: The person entitled to receive benefits under the Plan in the
event of the Participant's death.

PURCHASE PAYMENT(S): The gross payment(s) made to the Company under a Contract.

PURCHASE PAYMENT PERIOD: For "Installment Purchase Payment Accounts" the period
of time for completion of the agreed upon annual number and amount of Purchase
Payments. For example, if it is determined that the Purchase Payment Period will
consist of 12 payments per year and only 11 payments are made, the Purchase
Payment Period is not completed until the twelfth Purchase Payment is made.

SECTION 457 PLAN(S): Employer-sponsored deferred compensation plans sponsored by
tax-exempt organizations for deferrals that are subject to Code Section 457 for
their employees and/or independent contractors.

SEPARATE ACCOUNT: Variable Annuity Account B, a separate account established by
the Company for the purpose of funding variable annuity contracts issued by the
Company.

SUBACCOUNT(S): The portion of the assets of the Separate Account that is
allocated to a particular Fund. Each Subaccount invests in the shares of only
one corresponding Fund.

VALUATION DATE: The date and time at which the value of a Subaccount is
calculated. Currently, this calculation occurs at the close of business of the
New York Stock Exchange on any normal business day, Monday through Friday, that
the New York Stock Exchange is open.

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DEFINITIONS - 2
<PAGE>
PROSPECTUS SUMMARY
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CONTRACTS OFFERED

The Contracts offered in this Prospectus are group deferred variable annuity
contracts issued by Aetna Life Insurance and Annuity Company (the "Company").
The purpose of the Contract is to accumulate values and to provide benefits upon
retirement to Participants under:

(1) Employer-sponsored deferred compensation plans sponsored by tax-exempt
organizations for deferrals not subject to Code Section 457 and by
taxable organizations for their employees and/or independent contractors
("Non-Section 457 Plans"), and

(2) Employer-sponsored deferred compensation plans sponsored by tax-exempt
organizations for deferrals that are subject to Code Section 457 for
their employees and/or independent contractors ("Section 457 Plans").

CONTRACT PURCHASE

The Contract may be purchased by eligible organizations on behalf of a group
made up of their employees and/or independent contractors. An Account is
established for eligible employees by completing the enrollment form (and any
other required forms) and submitting them to the Company. Purchase Payments can
be applied to the Contract either through a lump-sum transfer from a
pre-existing plan or through periodic salary reductions or employer
contributions. (See "Purchase.")

FREE LOOK PERIOD

Contract Holders have the right to cancel their Contract within 10 days
after receiving it (or as otherwise allowed by state law) by returning it to us
along with a written notice of cancellation. Unless state law requires
otherwise, the amount received upon cancellation under this provision may
reflect the investment performance of the Purchase Payments deposited in the
Separate Account while invested. In certain cases, this may be less than the
amount of the Purchase Payments. (See "Purchase--Right to Cancel.")

INVESTMENT OPTIONS

The Company has established Variable Annuity Account B, a registered unit
investment trust, for the purpose of funding the variable portion of the
Contracts. The Separate Account is divided into subaccounts which invest
directly in shares of the Funds described herein. The Contract allows investment
in any or all of the Subaccounts, as well as in the Credited Interest Options
described below. For a complete list of the Funds available under the Contracts,
and a description of the investment objectives of each of the Funds and their
investment advisers, see "Investment Options-- The Funds" in this Prospectus, as
well as the prospectuses for each of the Funds.

The Contract also provides for investment in Credited Interest Options,
which earn fixed rates of interest. The fixed options available under the
Contract are the Guaranteed Accumulation Account ("GAA"), the Fixed Account, and
the Fixed Plus Account. (See the Appendices to this Prospectus.)

CHARGES AND DEDUCTIONS

Certain charges are associated with these Contracts. These charges include
daily deductions from the Separate Account (the mortality and expense risk
charge and an administrative charge), any annual maintenance fee, and premium
and other taxes. The Funds also incur certain fees and expenses which are
deducted directly from the Funds. A deferred sales charge may apply upon a full
or partial withdrawal of the Account Value. (See the Fee Table and "Charges and
Deductions.")

TRANSFERS

Prior to the Annuity Date, and subject to certain limitations, Account
Values may be transferred among the Subaccounts and the Credited Interest
Options without charge. Transfers can be requested in writing or by telephone in
accordance with the Company's transfer procedures. (See Appendices I, II and III
for a full description of the restrictions applicable to transfers from the
Credited Interest Options.) (See "Transfers.")

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SUMMARY - 1
<PAGE>
WITHDRAWALS

The Contract Holder may withdraw all or a part of the Account Value prior to
the Annuity Date by properly completing a disbursement form and sending it to
the Company. Limitations apply to withdrawals from the Fixed Plus Account.
Certain charges may be assessed upon withdrawal. The withdrawals may also be
subject to income tax. (See "Withdrawals.")

The Contract also offers certain Additional Withdrawal Options during the
Accumulation Period to persons meeting certain criteria. Additional Withdrawal
Options are not available in all states and may not be suitable in every
situation. (See "Additional Withdrawal Options.")

DEATH BENEFIT

The Contract provides that a Death Benefit is payable to the Contract
Beneficiary upon the death of the Participant before the Annuity Date. The
Contract Holder may direct that we make such payment to the Plan Beneficiary.
The amount of the Death Benefit will be equal to the Account Value. Until the
election of a method of payment, the Account Value will remain invested under
the Contract. The Contract Holder on behalf of a Plan Beneficiary may elect to
receive the proceeds in a lump sum or under any of the payment options available
under the Contract. However, the Code requires that distributions begin within a
certain time period. (See "Death Benefit During Accumulation Period.")

After Annuity Payments have commenced, a death benefit may be payable to the
Contract Beneficiary depending upon the terms of the Contract and the Annuity
Option selected. (See "Annuity Period--Death Benefit Payable During the Annuity
Period.")

THE ANNUITY PERIOD

On the Annuity Date, the Contract Holder, on your behalf, may elect to begin
receiving Annuity Payments on either a fixed, variable or combination of fixed
and variable basis. If a variable payout is selected, the payments will vary
with the investment performance of the Subaccount(s) selected. The Company
reserves the right to limit the number of Subaccounts that may be available
during the Annuity Period. (See "Annuity Period.")

TAXES

Contributions and earnings are not generally taxed until paid or made
available under the employer's Plan. Withholding for income tax may be imposed
on certain withdrawals. (See "Tax Status.")

INQUIRIES

Questions, inquiries or requests for additional information can be directed
to your agent or local representative, or you may contact the Company as
follows:

<TABLE>
<S> <C>
- Write to: Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Hartford, Connecticut 06156-1277
Attention: Customer Service

- Call Customer Service: 1-800-525-4225 (for automated transfers or changes
in the allocation of Account Values, call:
1-800-262-3862)
</TABLE>

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SUMMARY - 2
<PAGE>
FEE TABLE
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This Fee Table describes the various charges and expenses associated with the
Contract during the Accumulation Period. For amounts deducted during the Annuity
Period, see "Charges Deducted During the Annuity Period." No sales charge is
paid when the Contract is purchased. Some expenses may vary as explained under
"Charges and Deductions." The charges and expenses shown below do not include
premium taxes that may be applicable. For more information regarding expenses
paid out of assets of a particular Fund, see the Fund's prospectus.

DIRECT CHARGES. These charges are deducted daily from the Account Value. They
include:

DEFERRED SALES CHARGE. The deferred sales charge is deducted as a
percentage of the amount withdrawn. The total amount deducted for the
deferred sales charge will not exceed 8.5% of the total Purchase Payments
applied to the Account. The amount of the deferred sales charge is
calculated as follows:
<TABLE>
<CAPTION>
<S> <C>
INSTALLMENT PURCHASE PAYMENT ACCOUNTS

<CAPTION>
PURCHASE PAYMENT
PERIODS COMPLETED DEDUCTION
- ---------------------------------------- ---------
<S> <C>
Less than 5 5%
5 or more but less than 7 4%
7 or more but less than 9 3%
9 or more but less than 10 2%
more than 10 0%
<CAPTION>

SINGLE PURCHASE PAYMENT ACCOUNTS
ACCOUNT YEARS
COMPLETED DEDUCTION
- ---------------------------------------- ---------
<S> <C>
Less than 5 5%
5 or more but less than 6 4%
6 or more but less than 7 3%
7 or more but less than 8 2%
8 or more but less than 9 1%
9 or more 0%
</TABLE>

<TABLE>
<S> <C>
ANNUAL CONTRACT MAINTENANCE FEE--Installment Purchase Payment Accounts.................... $ 20.00
--Single Purchase Payment Accounts.......................... $ 0.00

The maintenance fee will generally be deducted annually from each Account
during the Accumulation Period. The amount of maintenance fee may be
reduced or eliminated under group Contracts. (See "Charges and
Deductions.") The amount shown is the MAXIMUM maintenance fee
that can be deducted under the Contract.
</TABLE>

INDIRECT CHARGES. Each Subaccount pays these expenses out of its assets. The
charges are reflected in the Subaccount's daily Accumulation Unit Value and are
not charged directly to an Account. They include:

<TABLE>
<S> <C>
MORTALITY AND EXPENSE RISK CHARGE......................................................... 1.25%

ADMINISTRATIVE EXPENSE CHARGE. We currently do not impose an Administrative............... 0.00%
Expense Charge. However, we reserve the right to deduct a daily charge
from the Subaccounts, equivalent on an annual basis to not more than 0.25%.
---------

TOTAL SEPARATE ACCOUNT CHARGES............................................................ 1.25%
---------
---------
</TABLE>

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FEE TABLE - 1
<PAGE>
ANNUAL EXPENSES OF THE FUNDS

The following table illustrates the advisory fees and other expenses applicable
to the Funds. Except as noted, the following figures are a percentage of average
net assets and, except where otherwise indicated, are based on figures for the
year ended December 31, 1995. A Fund's "Other Expenses" include operating costs
of the Fund. These expenses are reflected in the Fund's net asset value and are
not deducted from the Account Value under the Contract.

<TABLE>
<CAPTION>
INVESTMENT
ADVISORY
FEES(1) OTHER EXPENSES TOTAL FUND
(AFTER EXPENSE (AFTER EXPENSE ANNUAL
REIMBURSEMENT) REIMBURSEMENT) EXPENSES
-------------- -------------- -----------
<S> <C> <C> <C>
Aetna Variable Fund(2) 0.25% 0.06% 0.31%
Aetna Income Shares(2) 0.25% 0.08% 0.33%
Aetna Variable Encore Fund(2) 0.25% 0.10% 0.35%
Aetna Investment Advisers Fund,
Inc.(2) 0.25% 0.08% 0.33%
Aetna Ascent Variable Portfolio(2) 0.50% 0.15% 0.65%
Aetna Crossroads Variable Portfolio(2) 0.50% 0.15% 0.65%
Aetna Legacy Variable Portfolio(2) 0.50% 0.15% 0.65%
Alger American Growth Portfolio 0.75% 0.10% 0.85%
Alger American Small Cap Portfolio 0.85% 0.07% 0.92%
Calvert Responsibly Invested Balanced
Portfolio(3) 0.70% 0.13% 0.83%
Fidelity VIP II Contrafund
Portfolio(4) 0.61% 0.11% 0.72%
Fidelity VIP Equity-Income Portfolio 0.51% 0.10% 0.61%
Fidelity VIP Growth Portfolio 0.61% 0.09% 0.70%
Fidelity VIP Overseas Portfolio 0.76% 0.15% 0.91%
Janus Aspen Aggressive Growth
Portfolio(5) 0.75% 0.11% 0.86%
Janus Aspen Balanced Portfolio(5) 0.82% 0.55% 1.37%
Janus Aspen Flexible Income Portfolio 0.65% 0.42% 1.07%
Janus Aspen Growth Portfolio(5) 0.65% 0.13% 0.78%
Janus Aspen Short-Term Bond
Portfolio(5) 0.00% 0.70% 0.70%
Janus Aspen Worldwide Growth
Portfolio(5) 0.68% 0.22% 0.90%
Lexington Natural Resources Trust 1.00% 0.47% 1.47%
Neuberger & Berman Growth Portfolio(6) 0.84% 0.10% 0.94%
Scudder International Portfolio Class
A Shares 0.88% 0.20% 1.08%
TCI Growth(7) 1.00% 0.00% 1.00%
</TABLE>

- --------------------------
(1) Certain of the unaffiliated Fund advisers reimburse the Company for
administrative costs incurred in connection with administering the Funds as
variable funding options under the Contract. These reimbursements are paid
out of the investment advisory fees and are not charged to investors.

(2)As of May 1, 1996, the Company will provide administrative services to the
Fund and will assume the Fund's ordinary recurring direct costs under an
Administrative Services Agreement. The "Other Expenses" shown are not based
on figures for the year ended December 31, 1995, but reflect the fee payable
under this Agreement.

(3)The Management and Advisory Fees are subject to a performance adjustment,
after July 1, 1996, which could cause the fee to be as high as 0.85% or as
low as 0.55%, depending on performance. "Other Expenses" reflect an indirect
fee of 0.02%. Net fund operating expenses after reduction for fees paid
indirectly would be 0.81%.

(4) A portion of the brokerage commission the Fund paid was used to reduce its
expenses. Without this reduction, total operating expenses would have been
0.73% for the Contrafund Portfolio.

(5) The information for each Portfolio is net of fee waivers or reductions from
Janus Capital. Fee reductions for the Aggressive Growth, Balanced, Growth,
and Worldwide Growth Portfolios reduce the management fee to the level of
the corresponding Janus retail fund. Other waivers, if applicable, are first
applied against management fee and then against other expenses. Without such
waivers or reductions, the Investment Advisory Fees, Other Expenses and
Total Fund Annual Expenses would have been: 0.82%, 0.11 % and 0.93%,
respectively, for Janus Aspen Aggressive Growth Portfolio; 1.00%, 0.55% and
1.55%, respectively, for Janus Aspen Balanced Portfolio; 0.85%, 0.13% and
0.98%, respectively, for Janus Aspen Growth Portfolio; 0.65%, 0.72% and
1.37%, respectively, for Janus Aspen Short-Term Bond Portfolio; and 0.87%,
0.22% and 1.09%, respectively, for Janus Aspen Worldwide Growth Portfolio.
Janus Capital may modify or terminate the waivers or reductions at any time
upon 90 days' notice to the Portfolio's Board of Trustees.

(6) Neuberger & Berman Advisers Management Trust (the "Trust") is divided into
portfolios ("Portfolios"), each of which invests all of its net investable
assets in a corresponding series ("Series") of Advisers Managers Trust.
Expenses in the table reflect expenses of the Portfolio and include the
Portfolio's pro rata portion of the operating expenses of the Portfolio's
corresponding Series. The Portfolio pays Neuberger & Berman Management Inc.
("NBMI") an administration fee based on the Portfolio's net asset value. The

- --------------------------------------------------------------------------------
FEE TABLE - 2
<PAGE>

corresponding Series of the Portfolio pays NBMI a management fee based on
the Series' average daily net assets. Accordingly, this table combines
management fees at the Series level and administration fees at the Portfolio
level in a unified fee rate. (See "Expenses" in the Trust's prospectus.)

(7) The Portfolio's investment adviser pays all expenses of the Portfolio except
brokerage commissions, taxes, interest, fees, expenses of the non-interested
person directors (including counsel fees) and extraordinary expenses. These
expenses have historically represented a very small percentage (less than
0.01%) of total net assets in a fiscal year.

HYPOTHETICAL ILLUSTRATION (EXAMPLE)

THIS EXAMPLE IS PURELY HYPOTHETICAL. IT SHOULD NOT BE CONSIDERED A
REPRESENTATION OF
PAST OR FUTURE EXPENSES OR EXPECTED RETURN. ACTUAL EXPENSES AND/OR RETURN MAY BE
MORE OR LESS THAN THOSE SHOWN BELOW.

The following Examples illustrate the expenses that would have been paid
assuming a $1,000 investment in the Contract and a 5% return on assets. For the
purposes of these Examples, the maximum maintenance fee of $20.00 that can be
deducted under the Contract has been converted to a percentage of assets equal
to 0.021%.

<TABLE>
<CAPTION>
EXAMPLE A EXAMPLE B
------------------------------------- -------------------------------------
IF YOU WITHDRAW YOUR ENTIRE ACCOUNT IF YOU DO NOT WITHDRAW YOUR ACCOUNT
VALUE AT THE END OF THE PERIODS VALUE, OR IF YOU ANNUITIZE AT THE END
SHOWN, YOU WOULD PAY THE FOLLOWING OF THE PERIODS SHOWN, YOU WOULD PAY
EXPENSES, INCLUDING ANY APPLICABLE THE FOLLOWING EXPENSES (NO DEFERRED
DEFERRED SALES CHARGE: SALES CHARGE IS REFLECTED):*
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Variable Fund $68 $105 $145 $188 $16 $50 $ 86 $188
Aetna Income Shares $68 $106 $146 $190 $16 $51 $ 87 $190
Aetna Variable Encore Fund $68 $106 $147 $192 $16 $51 $ 88 $192
Aetna Investment Advisers Fund, Inc. $68 $106 $146 $190 $16 $51 $ 87 $190
Aetna Ascent Variable Portfolio $71 $115 $162 $224 $20 $60 $104 $224
Aetna Crossroads Variable Portfolio $71 $115 $162 $224 $20 $60 $104 $224
Aetna Legacy Variable Portfolio $71 $115 $162 $224 $20 $60 $104 $224
Alger American Growth Portfolio $73 $121 $172 $245 $22 $66 $114 $245
Alger American Small Cap Portfolio $74 $123 $175 $252 $22 $69 $118 $252
Calvert Responsibly Invested Balanced
Portfolio $73 $120 $171 $243 $21 $66 $113 $243
Fidelity VIP II Contrafund Portfolio $72 $117 $165 $232 $20 $62 $107 $232
Fidelity VIP Equity-Income Portfolio $71 $114 $160 $220 $19 $59 $102 $220
Fidelity VIP Growth Portfolio $72 $117 $164 $230 $20 $62 $106 $230
Fidelity VIP Overseas Portfolio $74 $123 $174 $251 $22 $68 $117 $251
Janus Aspen Aggressive Growth Portfolio $73 $121 $172 $246 $22 $67 $114 $246
Janus Aspen Balanced Portfolio $78 $136 $196 $297 $27 $82 $140 $297
Janus Aspen Flexible Income Portfolio $75 $127 $182 $268 $24 $73 $125 $268
Janus Aspen Growth Portfolio $72 $119 $168 $238 $21 $64 $110 $238
Janus Aspen Short-Term Bond Portfolio $72 $117 $164 $230 $20 $62 $106 $230
Janus Aspen Worldwide Growth Portfolio $73 $122 $174 $250 $22 $68 $117 $250
Lexington Natural Resources Trust $79 $139 $201 $307 $28 $85 $145 $307
Neuberger & Berman Growth Portfolio $74 $123 $176 $255 $22 $69 $119 $255
Scudder International Portfolio Class A
Shares $75 $127 $183 $269 $24 $73 $126 $269
TCI Growth $74 $125 $179 $261 $23 $71 $122 $261
</TABLE>

- --------------------------
*This Example would not apply if a nonlifetime variable annuity option is
selected, and a lump-sum settlement is requested within three years after
annuity payments start since the lump-sum payment will be treated as a
withdrawal during the Accumulation Period and will be subject to any deferred
sales charge that would then apply. (Refer to Example A.)

- --------------------------------------------------------------------------------
FEE TABLE - 3
<PAGE>

CONDENSED FINANCIAL INFORMATION
(SELECTED DATA FOR ACCUMULATION UNITS OUTSTANDING THROUGHOUT EACH PERIOD)

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

THE CONDENSED FINANCIAL INFORMATION PRESENTED BELOW FOR EACH OF THE YEARS IN THE
TEN-YEAR PERIOD ENDED DECEMBER 31, 1995 (AS APPLICABLE), IS DERIVED FROM THE
FINANCIAL STATEMENTS OF THE SEPARATE ACCOUNT, WHICH FINANCIAL STATEMENTS HAVE
BEEN AUDITED BY KPMG PEAT MARWICK LLP, INDEPENDENT AUDITORS. THE FINANCIAL
STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE INDEPENDENT
AUDITORS' REPORT THEREON, ARE INCLUDED IN THE STATEMENT OF ADDITIONAL
INFORMATION.

<TABLE>
<CAPTION>
1995 1994 1993 1992 1991 1990
------------ ------------ ---------- ---------- ----------- ---------

<S> <C> <C> <C> <C> <C> <C>
AETNA VARIABLE FUND
Value at beginning of period $10.698 $10.940 $10.378 $84.249 $67.496 $66.174
Value at end of period $13.972 $10.698 $10.940 $10.378(2) $84.249 $67.496
Increase (decrease) in value of accumulation
unit(1) 30.61% (2.21)% 5.41% (2) 24.82% 2.00%
Number of accumulation units outstanding at
end of period 30,554,957 11,117,383 879,670 3,107 908,777 810,126

AETNA INCOME SHARES
Value at beginning of period $10.457 $11.006 $10.160 $37.815 $32.066 $29.752
Value at end of period $12.212 $10.457 $11.006 $10.160(3) $37.815 $32.066
Increase (decrease) in value of accumulation
unit(1) 16.78% (4.99)% 8.33% (3) 17.93% 7.78%
Number of accumulation units outstanding at
end of period 4,853,662 1,988,960 166,913 4,196 427,893 358,454

AETNA VARIABLE ENCORE FUND
Value at beginning of period $10.509 $10.223 $10.031 $34.122 $32.431 $30.285
Value at end of period $11.007 $10.509 $10.223 $10.031(4) $34.122 $32.431
Increase (decrease) in value of accumulation
unit(1) 4.73% 2.79% 1.91% (4) 5.21% 7.09%
Number of accumulation units outstanding at
end of period 4,354,272 1,822,449 90,782 2,808 548,425 722,438

AETNA INVESTMENT ADVISERS
FUND, INC.
Value at beginning of period $10.971 $11.164 $10.286 $12.717 $10.882 $10.423
Value at end of period $13.803 $10.971 $11.164 $10.286(6) $12.717 $10.882
Increase (decrease) in value of accumulation
unit(1) 25.81% (1.73)% 8.54% (6) 16.86% 4.40%
Number of accumulation units outstanding at
end of period 6,430,772 3,541,703 318,711 6,537 1,324,822 984,798

AETNA ASCENT VARIABLE PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.652
Increase (decrease) in value of accumulation
unit(1) 6.52%
Number of accumulation units outstanding at
end of period 16,791

AETNA CROSSROADS VARIABLE PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.594
Increase (decrease) in value of accumulation
unit(1) 5.94%
Number of accumulation units outstanding at
end of period 16,953

AETNA LEGACY VARIABLE PORTFOLIO
Value at beginning of period $10.000(8)
Value at end of period $10.443
Increase (decrease) in value of accumulation
unit(1) 4.43%
Number of accumulation units outstanding at
end of period 2,222

<CAPTION>
1989 1988 1987 1986
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
AETNA VARIABLE FUND
Value at beginning of period $51.900 $45.839 $43.994 $37.445
Value at end of period $66.174 $51.900 $45.839 $43,994
Increase (decrease) in value of accumulation
unit(1) 27.50% 13.22% 4.19% 17.49%
Number of accumulation units outstanding at
end of period 831,547 887,039 1,020,744 1,273,920
AETNA INCOME SHARES
Value at beginning of period $26.291 $24.734 $23.888 $21.203
Value at end of period $29,752 $26.291 $24.734 $23.888
Increase (decrease) in value of accumulation
unit(1) 13.16% 6.29% 3.54% 12.66%
Number of accumulation units outstanding at
end of period 366,176 383,856 377,078 565,148
AETNA VARIABLE ENCORE FUND
Value at beginning of period $28.029 $26.401 $25.028 $23.660
Value at end of period $30.285 $28.029 $26.401 $25.028
Increase (decrease) in value of accumulation
unit(1) 8.05% 6.17% 5.49% 5.78%
Number of accumulation units outstanding at
end of period 653,619 720,726 898,557 881,853
AETNA INVESTMENT ADVISERS
FUND, INC.
Value at beginning of period $10.000(5)
Value at end of period $10.423
Increase (decrease) in value of accumulation
unit(1) 4.23%
Number of accumulation units outstanding at
end of period 639,219
AETNA ASCENT VARIABLE PORTFOLIO
Value at beginning of period
Value at end of period
Increase (decrease) in value of accumulation
unit(1)
Number of accumulation units outstanding at
end of period
AETNA CROSSROADS VARIABLE PORTFOLIO
Value at beginning of period
Value at end of period
Increase (decrease) in value of accumulation
unit(1)
Number of accumulation units outstanding at
end of period
AETNA LEGACY VARIABLE PORTFOLIO
Value at beginning of period
Value at end of period
Increase (decrease) in value of accumulation
unit(1)
Number of accumulation units outstanding at
end of period
</TABLE>

- --------------------------------------------------------------------------------
AUV HISTORY - 1
<PAGE>

CONDENSED FINANCIAL INFORMATION (CONTINUED)

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
1995 1994 1993 1992
------------ ------------ ----------- ----------
<S> <C> <C> <C> <C>
ALGER AMERICAN GROWTH PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.157
Increase (decrease) in value of accumulation
unit(1) 1.57%
Number of accumulation units outstanding at
end of period 275,494

ALGER AMERICAN SMALL CAP PORTFOLIO
Value at beginning of period $ 9.622 $10.307 $10.000(9)
Value at end of period $13.714 $ 9.622 $10.307
Increase (decrease) in value of accumulation
unit(1) 42.52% (6.64)% 3.07%
Number of accumulation units outstanding at
end of period 1,364,901 441,809 31,855

CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO*
Value at beginning of period $10.518 $11.010 $10.296 $10.000(10)
Value at end of period $13.480 $10.518 $11.010 $10.296
Increase (decrease) in value of accumulation
unit(1) 28.17% (4.47)% 6.93% 2.96%
Number of accumulation units outstanding at
end of period 25,730 752 1,383 82

FIDELITY VIP II CONTRAFUND PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.468
Increase (decrease) in value of accumulation
unit(1) 4.68%
Number of accumulation units outstanding at
end of period 379,862

FIDELITY VIP EQUITY-INCOME PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $11.054
Increase (decrease) in value of accumulation
unit(1) 10.54%
Number of accumulation units outstanding at
end of period 294,244

FIDELITY VIP GROWTH PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.066
Increase (decrease) in value of accumulation
unit(1) 0.66%
Number of accumulation units outstanding at
end of period 288,576

FIDELITY VIP OVERSEAS PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.052
Increase (decrease) in value of accumulation
unit(1) 0.52%
Number of accumulation units outstanding at
end of period 33,813

JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
Value at beginning of period $10.319 $10.000(11)
Value at end of period $12.992 $10.319
Increase (decrease) in value of accumulation
unit(1) 25.91% 3.19%
Number of accumulation units outstanding at
end period 723,839 131,702

JANUS ASPEN BALANCED PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.835
Increase (decrease) in value of accumulation
unit(1) 8.35%
Number of accumulation units outstanding at
end period 7,772

JANUS ASPEN FLEXIBLE INCOME PORTFOLIO
Value at beginning of period $ 9.886 $10.000(11)
Value at end of period $12.094 $ 9.886
Increase (decrease) in value of accumulation
unit(1) 22.33% (1.14)%
Number of accumulation units outstanding at
end of period 84,048 15,893

JANUS ASPEN GROWTH PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.870
Increase (decrease) in value of accumulation
unit(1) 8.70%
Number of accumulation units outstanding at
end period 26,022

JANUS ASPEN SHORT-TERM BOND PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.325
Increase (decrease) in value of accumulation
unit(1) 3.25%
Number of accumulation units outstanding at
end period 2,678
</TABLE>

- --------------------------------------------------------------------------------
AUV HISTORY - 2
<PAGE>

CONDENSED FINANCIAL INFORMATION (CONTINUED)

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
1995 1994 1993 1992
------------ ------------ ----------- ----------
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO
<S> <C> <C> <C> <C>
Value at beginning of period $10.000(7)
Value at end of period $10.893
Increase (decrease) in value of accumulation
unit(1) 8.93%
Number of accumulation units outstanding at
end period 227,582

LEXINGTON NATURAL RESOURCES TRUST
Value at beginning of period $ 9.079 $ 9.716 $10.000(12)
Value at end of period $10.479 $ 9.079 $ 9.716
Increase (decrease) in value of accumulation
unit(1) 15.42% (6.56)% (2.84)%
Number of accumulation units outstanding at
end of period 162,462 141,076 27,908

NEUBERGER & BERMAN GROWTH PORTFOLIO
Value at beginning of period $12.199 $12.990 $10.123 $10.000(10)
Value at end of period $15.871 $12.199 $12.990 $10.123
Increase (decrease) in value of accumulation
unit(1) 30.10% (6.09)% 28.32% 1.23%
Number of accumulation units outstanding at
end of period 526,542 228,370 71,556 2,275

SCUDDER INTERNATIONAL PORTFOLIO CLASS A SHARES
Value at beginning of period $13.372 $13.654 $10.051 $10.000(10)
Value at end of period $14.674 $13.372 $13.654 $10.051
Increase (decrease) in value of accumulation
unit(1) 9.74% (2.07)% 35.85% 0.51%
Number of accumulation units outstanding at
end of period 720,017 652,630 144,303 324

TCI GROWTH
Value at beginning of period $10.883 $11.159 $10.232 $10.000(13)
Value at end of period $14.091 $10.883 $11.159 $10.232
Increase (decrease) in value of accumulation
unit(1) 29.47% (2.48)% 9.06% 2.32%
Number of accumulation units outstanding at
end of period 2,735,782 1,123,366 261,107 4,284
</TABLE>

(1) The above figures are calculated by subtracting the beginning Accumulation
Unit value from the ending Accumulation Unit value during a calendar year,
and dividing the result by the beginning Accumulation Unit value. These
figures do not reflect the deferred sales charges or the fixed dollar
annual maintenance fee, if any. Inclusion of these charges would reduce the
investment results shown.

(2) The Accumulation Unit value was converted to $10.000 on November 2, 1992
upon the commencement of a new administrative system. Immediately prior to
that date, the Accumulation Unit value of the Fund was $85.546. On the date
of conversion, additional units were issued so that account values were not
changed as a result of the conversion. The percentage change in the
Accumulation Unit value from the beginning of the year to the date of
conversion was 1.54%; the percentage change in the Accumulation Unit value
from the date of conversion to the end of the year was 3.78%.

(3) The Accumulation Unit value was converted to $10.000 on November 2, 1992
upon the commencement of a new administrative system. Immediately prior to
that date, the Accumulation Unit value of the Fund was $39.496. On the date
of conversion, additional units were issued so that account values were not
changed as a result of the conversion. The percentage change in the
Accumulation Unit value from the beginning of the year to the date of
conversion was 4.45%; the percentage change in the Accumulation Unit value
from the date of conversion to the end of the year was 1.60%.

(4) The Accumulation Unit value was converted to $10.000 on November 2, 1992
upon the commencement of a new administrative system. Immediately prior to
that date, the Accumulation Unit value of the Fund was $34.828. On the date
of conversion, additional units were issued so that account values were not
changed as a result of the conversion. The percentage change in the
Accumulation Unit value from the beginning of the year to the date of
conversion was 2.07%; the percentage change in the Accumulation Unit value
from the date of conversion to the end of the year was 0.31%.

(5) The initial Accumulation Unit value was established at $10.000 on June 23,
1989, the date on which the Fund commenced operations.

(6) The Accumulation Unit value was converted to $10.000 on November 2, 1992
upon the commencement of a new administrative system. Immediately prior to
that date, the Accumulation Unit value of the Fund was $12.991. On the date
of conversion, additional units were issued so that account values were not
changed as a result of the conversion. The percentage change in the
Accumulation Unit value from the beginning of the year to the date of
conversion was 2.15%; the percentage change in the Accumulation Unit value
from the date of conversion to the end of the year was 2.86%.

(7) The initial Accumulation Unit value was established at $10.000 during
August 1995, when the Fund became available under the Contract.

(8) The initial Accumulation Unit value was established at $10.000 during
September 1995, when the Fund became available under the Contract.

(9) The initial Accumulation Unit value was established at $10.000 on September
17, 1993, the date on which the Portfolio became available under the
Contract.

(10) The initial Accumulation Unit value was established at $10.000 on November
2, 1992, the date on which the Fund/Portfolio became available under the
Contract.

(11) The initial Accumulation Unit value was established at $10.000 during
October 1994, when the funds were first received in this option.

(12) The initial Accumulation Unit value was established at $10.000 on May 26,
1993, the date on which the Fund became available under the Contract.

(13) The initial Accumulation Unit value was established at $10.000 on August
21, 1992, the date on which the Fund became available under the Contract.

* Formerly Calvert Socially Responsible Series

- --------------------------------------------------------------------------------
AUV HISTORY - 3
<PAGE>
THE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Aetna Life Insurance and Annuity Company (the "Company") is the issuer of
the Contract, and as such, it is responsible for providing the insurance and
annuity benefits under the Contract. The Company is a stock life insurance
company organized under the insurance laws of the State of Connecticut in 1976.
Through a merger, it succeeded to the business of Aetna Variable Annuity Life
Insurance Company (formerly Participating Annuity Life Insurance Company), an
Arkansas life insurance company organized in 1954. The Company is engaged in the
business of issuing life insurance policies and variable annuity contracts in
all states of the United States. The Company's principal executive offices are
located at 151 Farmington Avenue, Hartford, Connecticut 06156.

The Company is a wholly owned subsidiary of Aetna Retirement Holdings, Inc.,
which is in turn a wholly owned subsidiary of Aetna Retirement Services, Inc.,
and an indirect wholly owned subsidiary of Aetna Life and Casualty Company.

VARIABLE ANNUITY ACCOUNT B
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

The Company established Variable Annuity Account B (the "Separate Account")
in 1976 as a segregated asset account for the purpose of funding its variable
annuity contracts. The Separate Account is registered as a unit investment trust
under the Investment Company Act of 1940 (the "1940 Act"), and meets the
definition of "separate account" under federal securities laws. The Separate
Account is divided into "subaccounts" which do not invest directly in stocks,
bonds or other investments. Instead, each Subaccount buys and sells shares of a
corresponding Fund.

Although the Company holds title to the assets of the Separate Account, such
assets are not chargeable with liabilities arising out of any other business
conducted by the Company. Income, gains or losses of the Separate Account are
credited to or charged against the assets of the Separate Account without regard
to other income, gains, or losses of the Company. All obligations arising under
the Contracts are general corporate obligations of the Company.

INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

THE FUNDS

The Contract Holder (or you if allowed by the Contract Holder) may allocate
Purchase Payments to one or more of the Subaccounts as designated on the
enrollment form. In turn, the Subaccounts invest in the corresponding Funds at
net asset value.

The Contract Holder may decide to offer only a select number of Funds under
its Plan, or it may decide to substitute shares of one Fund for shares of
another Fund currently held by the Separate Account. In addition, the
availability of Funds may be subject to regulatory authorization. Funds may be
added or withdrawn by the Company as permitted by applicable law. Therefore, not
all Funds may be available in all jurisdictions, under all Contracts, or in all
Plans.

The investment results of the Funds described below are likely to differ
significantly and there is no assurance that any of the Funds will achieve their
respective investment objectives. Except where otherwise noted, all of the Funds
are diversified, as defined in the 1940 Act.

- -AETNA VARIABLE FUND seeks to maximize total return through investments in a
diversified portfolio of common stocks and securities convertible into common
stock.(1)

- -AETNA INCOME SHARES seeks to maximize total return, consistent with reasonable
risk, through investments in a diversified portfolio consisting primarily of
debt securities.(1)

- -AETNA VARIABLE ENCORE FUND seeks to provide high current return, consistent
with preservation of capital and liquidity, through investment in high quality
"money market" instruments. An investment in the Fund is neither insured nor
guaranteed by the U.S. Government.

- --------------------------------------------------------------------------------
1
<PAGE>
- -AETNA INVESTMENT ADVISERS FUND, INC. is a managed fund which seeks to maximize
investment return consistent with reasonable safety of principal by investing
in one or more of the following asset classes: stocks, bonds and cash
equivalents, based on the Company's judgment of which of those sectors or mix
thereof offers the best investment prospects.(1)

- -AETNA GENERATION PORTFOLIOS INC.--AETNA ASCENT VARIABLE PORTFOLIO seeks to
provide capital appreciation by allocating its investments among equities and
fixed income securities. The Portfolio is managed for investors who generally
have an investment horizon exceeding 15 years, and who have a high level of
risk tolerance.(1)

- -AETNA GENERATION PORTFOLIOS, INC.--AETNA CROSSROADS VARIABLE PORTFOLIO seeks to
provide total return (i.e., income and capital appreciation, both realized and
unrealized) by allocating its investments among equities and fixed income
securities. The Portfolio is managed for investors who generally have an
investment horizon exceeding 10 years and who have a moderate level of risk
tolerance.(1)

- -AETNA GENERATION PORTFOLIOS, INC.--AETNA LEGACY VARIABLE PORTFOLIO seeks to
provide total return consistent with preservation of capital by allocating its
investments among equities and fixed income securities. The Portfolio is
managed for investors who generally have an investment horizon exceeding five
years and who have a low level of risk tolerance.(1)

- -ALGER AMERICAN FUND--ALGER AMERICAN GROWTH PORTFOLIO seeks long-term capital
appreciation by investing in a diversified, actively managed portfolio of
equity securities. The Portfolio primarily invests in equity securities of
companies which have a market capitalization of $1 billion or greater.(2)

- -ALGER AMERICAN FUND--ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO seeks
long-term capital appreciation. Except during temporary defensive periods, the
Portfolio invests at least 65% of its total assets in equity securities of
companies that, at the time of purchase of such securities, have total market
capitalization within the range of companies included in the Russell 2000
Growth Index, updated quarterly. The Russell 2000 Growth Index is designed to
track the performance of small capitalization companies. At March 31, 1996, the
range of market capitalization of these companies was $20 million to $3.0
billion.(2)

- -CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO is a non-diversified portfolio
that seeks growth of capital through investment in enterprises that make a
significant contribution to society through their products and services and
through the way they do business.(3)

- -FIDELITY INVESTMENTS' VARIABLE INSURANCE PRODUCTS FUND II--CONTRAFUND PORTFOLIO
seeks maximum total return over the long term by investing mainly in equity
securities of companies that are undervalued or out-of-favor.(4)

- -FIDELITY INVESTMENTS' VARIABLE INSURANCE PRODUCTS FUND--EQUITY-INCOME PORTFOLIO
seeks reasonable income by investing primarily in income-producing equity
securities. In selecting investments, the Fund also considers the potential for
capital appreciation.(4)

- -FIDELITY INVESTMENTS' VARIABLE INSURANCE PRODUCTS FUND--GROWTH PORTFOLIO seeks
capital appreciation by investing mainly in common stocks, although its
investments are not restricted to any one type of security.(4)

- -FIDELITY INVESTMENTS' VARIABLE INSURANCE PRODUCTS FUND--OVERSEAS PORTFOLIO
seeks long-term growth by investing mainly in foreign securities (at least 65%
of the Fund's total assets in securities of issuers from at least three
countries outside of North America).(4)

- -JANUS ASPEN SERIES--AGGRESSIVE GROWTH PORTFOLIO is a non-diversified portfolio
that seeks long-term growth of capital in a manner consistent with the
preservation of capital. The Portfolio pursues its investment objective by
normally investing at least 50% of its equity assets in securities issued by
medium-sized companies. Medium-sized companies are those whose market
capitalizations fall within the range of companies in the S&P MidCap 400 Index,
which as of December 29, 1995 included companies with capitalizations between
approximately $118 million and $7.5 billion, but which is expected to change on
a regular basis.(5)

- -JANUS ASPEN SERIES--BALANCED PORTFOLIO seeks long-term capital growth,
consistent with preservation of capital and balanced by current income. The
Portfolio pursues its investment objective by investing 40%-60% of its assets
in securities selected primarily for their growth potential and 40%-60% of its
assets in securities selected primarily for their income potential.(5)

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2
<PAGE>
- -JANUS ASPEN SERIES--FLEXIBLE INCOME PORTFOLIO seeks long-term capital growth,
consistent with preservation of capital and balanced by current income. The
Portfolio pursues its investment objective by investing 40%-60% of its assets
in equity securities selected primarily for their growth potential and 40%-60%
of its assets in fixed-income securities. Flexible Income Series may have
substantial holdings of debt securities rated below investment grade ("high
yield, high risk securities" also commonly known as "junk bonds.") High yield,
high risk securities involve certain risks. See the Fund's prospectus for a
discussion of these risks.(5)

- -JANUS ASPEN SERIES--GROWTH PORTFOLIO seeks long-term growth of capital in a
manner consistent with the preservation of capital. The Portfolio pursues its
investment objective by investing in common stocks of companies of any size.(5)

- -JANUS ASPEN SERIES--SHORT-TERM BOND PORTFOLIO seeks as high a level of current
income as is consistent with preservation of capital by investing primarily in
short- and intermediate-term fixed income securities.(5)

- -JANUS ASPEN SERIES--WORLDWIDE GROWTH PORTFOLIO seeks long-term growth of
capital in a manner consistent with preservation of capital. The Portfolio
pursues its investment objective primarily through investments in common stocks
of foreign and domestic issuers.(5)

- -LEXINGTON NATURAL RESOURCES TRUST is a non-diversified portfolio that seeks
long-term growth of capital through investment primarily in common stocks of
companies which own or develop natural resources and other basic commodities or
supply goods and services to such companies.(6)

- -NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST-- GROWTH PORTFOLIO seek capital
appreciation without regard to income. The Portfolio generally invests in
securities believed to have the maximum potential for long-term capital
appreciation. The Portfolio expects to be almost fully invested in common
stocks, often of companies that may be temporarily out of favor in the
market.(7)

- -SCUDDER VARIABLE LIFE INVESTMENT FUND-- INTERNATIONAL PORTFOLIO CLASS A SHARES
seeks long-term growth of capital primarily through diversified holdings of
marketable foreign equity investments.(8)

- -TCI PORTFOLIOS, INC.--TCI GROWTH (A TWENTIETH CENTURY FUND) seeks capital
growth. The Fund seeks to achieve its objective by investing in common stocks
(including securities convertible into common stocks) and other securities that
meet certain fundamental and technical standards of selection and, in the
opinion of the Fund's investment manager, have better than average potential
for appreciation.(9)

Investment Advisers for each of the Funds:
(1) Aetna Life Insurance and Annuity Company
(2) Fred Alger Management, Inc.
(3) Calvert Asset Management Company, Inc.
(4) Fidelity Management & Research Company
(5) Janus Capital Corporation
(6) Lexington Management Corporation (adviser);
Market Systems Research Advisors, Inc. (subadviser)

(7)Neuberger & Berman Management Inc. (Investment Manager); Neuberger & Berman,
L.P. (Sub-Adviser)

(8) Scudder, Stevens & Clark, Inc.
(9) Investors Research Corporation

RISKS ASSOCIATED WITH INVESTMENT IN THE FUNDS. Some of the Funds may use
instruments known as derivatives as part of their investment strategies. The use
of certain derivatives may involve high risk of volatility to a Fund, and the
use of leverage in connection with such derivatives can also increase risk of
losses. Some of the Funds may also invest in foreign or international securities
which involve greater risks than U.S. investments.

More comprehensive information, including a discussion of potential risks,
is found in the respective Fund prospectuses which accompany this Prospectus.
You should read the Fund prospectuses and consider carefully, and on a
continuing basis, which Fund or combination of Funds is best suited to your
long-term investment objectives.

CONFLICTS OF INTEREST (MIXED AND SHARED FUNDING). Shares of the Funds are
sold to each of the Subaccounts for funding the variable annuity contracts
issued by the Company. Shares of the Funds may also be sold to other insurance
companies for the same purpose. This is referred to as "shared funding." Shares
of the Funds may also be used for funding variable life insurance contracts
issued by the Company or by third parties. This is referred to as "mixed
funding."

Because the Funds available under the Contract are sold to fund variable
annuity contracts and variable life insurance policies issued by us or by other
companies, certain conflicts of interest could arise. If a conflict of interest
were to occur, one of the separate accounts might withdraw its investment in a
Fund, which might force that Fund to sell portfolio securities at
disadvantageous prices, causing its per share value to decrease. Each Fund's
Board

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3
<PAGE>
of Directors or Trustees has agreed to monitor events in order to identify any
material irreconcilable conflicts which might arise and to determine what
action, if any, should be taken to address such conflict.

CREDITED INTEREST OPTIONS

Purchase Payments may be allocated to one or more of the Credited Interest
Options available under the Contract, as described below. The Contract Holder
may elect not to offer all Credited Interest Options under its Plan.

- - The Guaranteed Accumulation Account (GAA) is a credited interest option
through which we guarantee stipulated rates of interest for stated periods of
time. Amounts must remain in the GAA for the full guaranteed term to received
the quoted interest rates, or a market value adjustment (which may be positive
or negative) will be applied. (See Appendix I.)

- - The Fixed Account is a part of the Company's general account. The Fixed
Account guarantees a minimum interest rate, as specified in the Contract. The
Company may credit higher interest rates from time to time. Transfers from the
Fixed Account are limited. (See Appendix II.)

- - The Fixed Plus Account is also a part of the Company's general account and
guarantees a minimum interest rate, as specified in the Contract. The Company
may credit higher interest rates in its discretion. Withdrawals and transfers
from the Fixed Plus Account are limited. (See Appendix III.)

PURCHASE
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- --------------------------------------------------------------------------------

CONTRACT AVAILABILITY

The Contracts are designed for (1) employer-sponsored deferred compensation
plans sponsored by tax-exempt organizations for deferrals not subject to Section
457 of the Internal Revenue Code of 1986, as amended ("Code") or by taxable
organizations for their employees and/or independent contractors ("Non-Section
457 Plans"); or (2) employer-sponsored deferred compensation plans sponsored by
tax-exempt organizations for deferrals that are subject to Code Section 457 for
their employees and/or independent contractors ("Section 457 Plans"). The
Contract is generally owned by the employer, and an Account is established for
each Participant, as directed by the Contract Holder, to identify contract
values during the Accumulation Period. A Participant's record under the Contract
is known as his or her "Account."

Under Section 457 Plans and Non-Section 457 Plans, the employer has all
right, title and interest in the amounts held under the Contract or in the
Account. The Contract will be part of the employer's general assets, subject to
the claims of its general creditors. Benefits available to you are governed
exclusively by the provisions of the Plan and are backed only by the general
assets of the employer. Some of the options and elections available under the
Contract may not be available to you under the provisions of your Plan. Contact
your employer for information regarding your Plan.

CONTRACT PURCHASE

Eligible organizations may acquire a Contract by submitting an application
to the Company. Once we approve the forms, a Contract is issued to the employer
as the Contract Holder. You may participate in the Plan by submitting an
enrollment form to the Company.

The Company must accept or reject the application or enrollment form within
two business days of receipt. If the application or enrollment form is
incomplete, the Company may hold any forms and accompanying Purchase Payments
for five days. Purchase Payments may be held for longer periods, pending
acceptance of the forms only with the consent of the Participant, or under
limited circumstances, with the consent of the group Contract holder. If we
agree to hold Purchase Payments for longer than the five business days based on
the consent of the group Contract Holder, they will be deposited in the Aetna
Variable Encore Fund Subaccount until the forms are completed.

PURCHASE PAYMENTS

Generally, two types of Purchase Payments may be made under the Contract,
and depending upon which type of payment is made, different Accounts may be
established for each payment type. Continuing, periodic payments will be placed
in "Installment Purchase Payment Accounts." Installment Purchase Payments must
be at least $100 per month ($1,200 annually) per Participant. No payment may be
less than $25. Lump-sum transfers of amounts accumulated under a pre-existing
plan may be placed in
"Single Purchase Payment Accounts" in accordance with the Company's procedures
in effect at the time of purchase.

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4
<PAGE>
The Code imposes a maximum limit on annual Purchase Payments which may be
excluded from a Participant's gross income for Section 457 Plan Participants.
Such limit is generally the lesser of $7,500 or 33 1/3% of your includible
compensation (25% of gross compensation).

For Contracts sold to taxable organizations, this Contract may be aggregated
with other annuity contracts purchased by the Contract Holder from us (and our
affiliates) on or after October 21, 1988 for purposes of determining the taxable
portion of payments from this Contract. (See "Tax Status.")

ALLOCATION OF PURCHASE PAYMENTS. Purchase Payments will initially be
allocated to the Subaccounts or Credited Interest Options as specified by the
Contract Holder (or you, if authorized by the Contract Holder) on the enrollment
form. Changes in such allocation may be made in writing or by telephone
transfer. Allocations must be in whole percentages, and there may be limitations
on the number of investment options that can be selected during the Accumulation
Period. (See "Transfers.")

RIGHT TO CANCEL

The Contract Holder may cancel participation under the Contract without
penalty by returning it to the Company with a written notice of cancellation. In
most states, Contract Holders have ten days to exercise this right; some states
allow a longer free-look period. When we receive the request for cancellation,
we will return the Account Value, unless the laws of the state in which the
Contract was issued require that we return the initial Purchase Payment (if
greater than the Account Value). In states that do not require a return of
Purchase Payments, the purchaser bears the entire investment risk for amounts
allocated among the Subaccounts during the free look period. Account Values will
be determined as of the Valuation Date on which we receive the request for
cancellation at our Home Office.

TRANSFER CREDITS

The Company may provide a transfer credit on "transferred assets," subject
to certain conditions and state approvals. Transferred assets are the value of
contributions made on your behalf under this Plan or a prior plan before such
amounts are applied to this Contract. The transfer credit equals a percentage of
the transferred assets remaining in the Contract after a specified period of
time. Once a transfer credit is applied to your Contract, all provisions of the
Contract apply. This benefit is provided on a nondiscriminatory basis. If a
transfer credit is due under the Contract, you will be provided with additional
information specific to the Contract.

CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

DAILY DEDUCTIONS FROM THE SEPARATE ACCOUNT

MORTALITY AND EXPENSE RISK CHARGE. The Company makes a daily deduction from
each of the Subaccounts for the mortality and expense risk charge. The charge is
equal, on an annual basis, to 1.25% of the daily net assets of the Subaccounts
and compensates the Company for the assumption of mortality and expense risks
under the Contract. The mortality risks are those assumed for our promise to
make lifetime payments according to annuity rates specified in the Contract. The
expense risk is the risk that the actual expenses for costs incurred under the
Contract will exceed the maximum costs that can be charged under the Contract.

If the amount deducted for mortality and expense risks is not sufficient to
cover the mortality costs and expense shortfalls, the loss is borne by the
Company. If the deduction is more than sufficient, the excess may be used to
recover distribution expense relating to the Contracts and as a source of profit
for the Company. The Company expects to make a profit from the mortality and
expense risk charge.

ADMINISTRATIVE EXPENSE CHARGE. The Company reserves the right to make a
deduction from each of the Subaccounts for an administrative expense charge. The
administrative expense charge compensates the Company for administrative
expenses that exceed revenues from the maintenance fee described below. The
charge is set at a level which does not exceed the average expected cost of the
administrative services to be provided while the Contract is in force. The
Company does not expect to make a profit from this charge.

Under the Contract, the amount of the administrative expense charge may be
of an amount equal, on an annual basis, to a maximum of 0.25% of the daily net
assets of the Subaccounts. There is currently no administrative expense charge
during the Accumulation

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5
<PAGE>
Period or Annuity Period. Once an Annuity Option is elected, the charge will be
established and will be effective during the entire Annuity Period.

MAINTENANCE FEE

During the Accumulation Period, the Company will deduct an annual
maintenance fee from each Installment Purchase Payment Account on its
anniversary date. The maintenance fee is to reimburse the Company for some of
its administrative expenses relating to the establishment and maintenance of the
Accounts.

The maximum maintenance fee that can be deducted under the Contract is $20.
However, under group contracts, the maintenance fee may be reduced or eliminated
depending upon certain criteria described below. The maintenance fee will be
deducted on a pro rata basis from each Subaccount and Credited Interest Option
in which the Account is invested. If the Account Value is withdrawn, the full
maintenance fee will be deducted at the time of withdrawal.

REDUCTION OR ELIMINATION OF THE MAINTENANCE FEE. The annual maintenance fee
may be reduced or eliminated under various conditions as agreed to by us and the
Contract Holder in writing. Any reduction or elimination of the annual
maintenance fee will reflect differences in administrative costs and services
after taking into consideration factors such as the following:

- - the size, characteristics, and nature of the group to which a Contract is
issued;

- - the level of our anticipated expenses in administering the Contract, such as
billing for Purchase Payments, producing periodic reports, providing for the
direct payment of Contract charges rather than having them deducted from
Contract Values, and any other factors pertaining to the level and expense of
administrative services which will be provided under the Contract.

Any reduction or elimination of maintenance fees will not be unfairly
discriminatory against any person. We will make any reduction in annual
maintenance fees according to our own rules in effect at the time an application
for a Contract is approved. We reserve the right to change these rules from time
to time.

DEFERRED SALES CHARGE

Withdrawals of all or a portion of the Account Value may be subject to a
deferred sales charge. The deferred sales charge is a percentage of the amount
withdrawn from the Subaccounts, the Fixed Account or the Guaranteed Accumulation
Account. No deferred sales charge is deducted from amounts withdrawn from the
Fixed Plus Account. For Installment Purchase Payment Accounts, the deferred
sales charge is based on the number of completed Purchase Payment Periods. For
Single Purchase Payment Accounts, it is based on the number of Contract Years
that have elapsed since the Contract effective date. The amount of the deferred
sales charge is determined in accordance with the schedule set forth in the
following tables:

<TABLE>
<CAPTION>
INSTALLMENT PURCHASE PAYMENT ACCOUNTS
DEFERRED
SALES
PURCHASE PAYMENT CHARGE
PERIODS COMPLETED DEDUCTION
---------------------------------------- ---------
<C> <C>
Less than 5 5%
5 or more but less than 7 4%
7 or more but less than 9 3%
9 or more but less than 10 2%
more than 10 0%

SINGLE PURCHASE PAYMENT ACCOUNTS
DEFERRED
SALES
ACCOUNT YEARS CHARGE
COMPLETED DEDUCTION
---------------------------------------- ---------
<C> <C>
Less than 5 5%
5 or more but less than 6 4%
6 or more but less than 7 3%
7 or more but less than 8 2%
8 or more but less than 9 1%
9 or more 0%
</TABLE>

If you transfer the total account value under another deferred compensation
annuity contract issued by the Company to an Account under this Contract, the
effective date of the new Account will be the same effective date as your former
contract for purposes of calculating the applicable deferred sales charge under
this Contract.

A deferred sales charge will not be deducted from any portion of the Account
Value which is:

- - applied to provide Annuity benefits;

- - withdrawn on or after the tenth anniversary of the effective date of the
Account or Plan Account;

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6
<PAGE>
- - paid due to the death of the Participant;

- - withdrawn due to the election of an Additional Withdrawal Option (see
"Additional Withdrawal Options");

- - paid where the Account Value is $3,500 or less and no amount has been
withdrawn or used to purchase Annuity benefits during the prior 12 months. If
more than one Account is being fully withdrawn on behalf of a Participant, all
Account Values will be added together to determine eligibility for the $3,500
exemption. This provision is not available under Plan Accounts (where Accounts
are not maintained by the Company) or applicable to the withdrawal of all
Accounts under one Contract established with the Company;

- - withdrawn from an Installment Purchase Payment Account by a Participant who is
at least age 59 1/2 and who has completed nine Purchase Payment Periods; or

- - for Section 457 Plans only, withdrawn due to a hardship resulting from an
unforeseeable emergency, as specified in the Code.

The deduction for the deferred sales charge will not exceed 8.5% of the
total Purchase Payments actually made to the Account. The Company does not
anticipate that the deferred sales charge will cover all sales and
administrative expenses which it incurs in connection with the Contract; the
difference will be covered by the general assets of the Company which are
attributable, in part, to the mortality and expense risk charge described above.

REDUCTION OR ELIMINATION OF THE DEFERRED SALES CHARGE. For a particular
Plan, we may reduce, waive or eliminate the deferred sales charge. Any
reduction, waiver or elimination of such charges will reflect differences or
expected differences in the amounts of unrecovered distribution costs or
services of the types that the charge is intended to defray. When considering
whether to reduce or eliminate such charges or to grant such a waiver, we will
take into account factors which may include the following:

- - the number of participants under the Plan;

- - the expected level of assets or cash flow under the Plan;

- - the level of agent involvement in sales activities;

- - the level of our sales-related expenses;

- - the specific distribution provisions under the Plan;

- - the Plan's purchase of one or more other variable annuity contracts from us
and the features of those contracts;

- - the level of employer involvement in determining eligibility for distributions
under the Contract; and

- - our assessment of financial risk to the Company relating to surrenders.

Any reduction, waiver or elimination of deferred sales charges will not be
unfairly discriminatory against any person.

We may also negotiate provisions regarding the deferred sales charge with
respect to Contracts issued to certain employer groups or associations which
have negotiated on behalf of its employees. All variations in, or elimination
of, provisions regarding the deferred sales charge resulting from such
negotiations will be offered uniformly to all employees within the group. For
specific information on fees applicable to your Account please call the number
listed under the "Inquiries" section.

We will make any reduction in deferred sales charge according to our own
rules in effect at the time an Application for a Contract is approved. We
reserve the right to change these rules from time to time.

FUND EXPENSES

Each Fund incurs certain expenses which are paid out of its net assets.
These expenses include, among other things, the investment advisory or
"management" fee. The expenses of the Funds are illustrated in the Fee Table in
this Prospectus and described more fully in the accompanying Fund prospectuses.

PREMIUM AND OTHER TAXES

Several states and municipalities impose a premium tax on Annuities. These
taxes currently range from 0% to 4%. The Company reserves the right to deduct
premium tax against Purchase Payments or Account Values at any time, but no
earlier than when we have a tax liability under state law. The Company's current
practice is to deduct for premium taxes at the time of complete
withdrawal or annuitization. In addition to the premium tax, the Company
reserves the right to assess a charge for
any state or federal taxes due against the Contract or the Separate Account
assets.

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7
<PAGE>
CONTRACT VALUATION
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- --------------------------------------------------------------------------------

ACCOUNT VALUE

Until the Annuity Date, the Account Value is the total dollar value of
amounts held in the Account as of any Valuation Date. The Account Value at any
given time is based on the value of the units held in each Subaccount, plus the
value of amounts held in any of the Credited Interest Options.

ACCUMULATION UNITS

The value of your interests in a Subaccount is expressed as the number of
"Accumulation Units" that you hold multiplied by an "Accumulation Unit Value"
(or "AUV") for each unit. The AUV on any Valuation Date is determined by
multiplying the value on the immediately preceding Valuation Date by the net
investment factor of that Subaccount for the period between the immediately
preceding Valuation Date and the current Valuation Date. (See "Net Investment
Factor" below.) The Accumulation Unit Value will be affected by the investment
performance, expenses and charges of the applicable Fund and is reduced each day
by a percentage that accounts for the daily assessment of mortality and expense
risk charges and the administrative charge (if any).

Initial Purchase Payments will be credited to your Account as described
under "Contract Purchase." Each subsequent Purchase Payment (or amount
transferred) will be credited to your Account at the AUV computed on the next
Valuation Date following our receipt of your payment or transfer request. The
value of an Accumulation Unit may increase or decrease.

NET INVESTMENT FACTOR

The net investment factor is used to measure the investment performance of a
Subaccount from one Valuation Date to the next. The net investment factor for a
Subaccount for any valuation period is equal to the sum of 1.0000 plus the net
investment rate. The net investment rate equals:

(a) the net assets of the Fund held by the Subaccount on the current Valuation
Date, minus

(b) the net assets of the Fund held by the Subaccount on the preceding
Valuation Date, plus or minus

(d) divided by the total value of the Subaccount's Accumulation and Annuity
Units the preceding Valuation Date;

(e) minus a daily charge at the annual effective rate of 1.25% for mortality
and expense risks and up to 0.25% as an administrative expense charge
(currently 0%).

The net investment rate may be either positive or negative.

TRANSFERS
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- --------------------------------------------------------------------------------

At any time prior to the Annuity Date, the Contract Holder, or you (if
permitted by the Contract Holder), can transfer amounts held under the Contract
from one Subaccount to another. Transfers between the Credited Interest Options
and the Subaccounts are subject to certain restrictions. (See Appendices I, II
and III.) A request for transfer can be made either in writing or by telephone.
The telephone transfer privilege is available automatically; no special election
is necessary. All transfers must be in accordance with the terms of the Contract
and your Plan, as applicable.

The Company currently allows unlimited transfers of accumulated amounts to
available investment options without charge. The transfer amount may not be less
than $500. In addition, the total number of investment options that may be
selected during the Accumulation Period may be limited, as set forth on your
enrollment materials. Any transfer will be based on the Accumulation Unit Value
next determined after the Company receives a valid transfer request at its Home
Office. Transfers are currently not available during the Annuity Period;
however, they may be available beginning later in 1996. (See "Annuity
Period--Annuity Options.")

DOLLAR COST AVERAGING PROGRAM

You may establish automated transfers of Account Values on a monthly or
quarterly basis through the Company's Dollar Cost Averaging Program, if
available under your Plan. Dollar Cost Averaging is a system for

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8
<PAGE>
investing a fixed amount of money at regular intervals over a period of time.
Dollar Cost Averaging does not ensure a profit nor guarantee against loss in a
declining market. You should consider your financial ability to continue
purchases through periods of low price levels. For additional information,
please refer to the Inquiries Section of the Prospectus Summary which describes
how you can obtain further information.

WITHDRAWALS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Subject to the limitations on withdrawals from the Fixed Plus Account, the
Contract Holder may withdraw all or a portion of the Account Value at any time
during the Accumulation Period. To request a withdrawal, the Contract Holder, on
your behalf, must property complete a disbursement form and send it to our Home
Office. Payments for withdrawal requests will be made in accordance with SEC
requirements, but normally not later than seven calendar days following our
receipt of a disbursement form.

Withdrawals may be requested in one of the following forms:

- -FULL WITHDRAWAL OF THE CONTRACT OR AN ACCOUNT: The amount paid for a full
withdrawal will be the Account Value(s) allocated to the Subaccounts, the
Guaranteed Accumulation Account (plus or minus a market value adjustment) (see
Appendix I), and the Fixed Account, minus any applicable deferred sales charge
and maintenance fee due, plus the amount available for withdrawal from the
Fixed Plus Account (see Appendix III).

- -PARTIAL WITHDRAWALS (Percentage): The amount paid will be the percentage of the
Account Value(s) requested minus any applicable deferred sales charge; however,
the amount available for withdrawal from the Fixed Plus Account is limited (see
Appendix III).

- -PARTIAL WITHDRAWAL (Specified Dollar Amount): The amount paid will be the
dollar amount requested. However, the amount withdrawn from the Account will
equal the amount requested plus any applicable deferred sales charge. The
amount available for withdrawal from the Fixed Plus Account is limited (see
Appendix III).

For any partial withdrawal, amounts will be withdrawn proportionately from
each Subaccount or Credited Interest Option in which the Account is invested
unless otherwise requested in writing. All amounts paid will be based on Account
Values as of the next Valuation Date after we receive a request for withdrawal
at our Home Office, or on such later date as the disbursement form may specify.

ADDITIONAL WITHDRAWAL OPTIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

The Company offers certain withdrawal options under the Contract that are
not considered annuity options ("Additional Withdrawal Options"). To exercise
these options, the Account Value must meet the minimum dollar amounts and age
criteria applicable to that option.

The Additional Withdrawal Options currently available under the Contract
include the following:

- -SWO--SYSTEMATIC WITHDRAWAL OPTION. SWO is a series of partial withdrawals from
the Account based on a payment method you select. It is designed for those who
want a periodic income while retaining investment flexibility for amounts
accumulated under a Contract.

- -ECO--ESTATE CONSERVATION OPTION. ECO is available to Section 457 Plan
Participants only. It offers the same investment flexibility as SWO but is
designed for those who want to receive only the minimum distribution that the
Code requires each year. Under ECO, the Company calculates the minimum
distribution amount required by law at age 70 1/2 (or retirement, if later, for
church plans), and pays you that amount once a year. (See "Tax Status.")

Other Additional Withdrawal Options may be added from time to time.
Additional information relating to any of the Additional Withdrawal Options may
be obtained from your local representative or from the Company at its Home
Office.

If you select one of the Additional Withdrawal Options, the Account will
retain all of the rights and flexibility permitted under the Contract during the
Accumulation Period. The Account Value will continue to be subject to the
charges and deductions described in this Prospectus.

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9
<PAGE>
Once elected, an Additional Withdrawal Option may be revoked by the Contract
Holder at any time by submitting a written request to our Home Office. Any
revocation will apply only to the amount not yet paid. Once an option is
revoked, it may not be elected again, nor may any other Additional Withdrawal
Options be elected. The Company reserves the right to discontinue the
availability of one or all of these Additional Withdrawal Options at any time,
and/or to change the terms of future elections. To determine whether the
Additional Withdrawal Options are available under your Plan, and to assess the
terms and conditions that may apply, you should check with your employer. Any
pay-out election that you make under a deferred compensation plan must be
irrevocable.

DEATH BENEFIT DURING ACCUMULATION PERIOD
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

The Contract provides that a death benefit is payable to the Contract
Beneficiary(ies) upon the death of the Participant before the Annuity Date. The
Contract Holder may direct that we make such payment to the Plan Beneficiary.
The amount of the death benefit will be equal to the Account Value. Death
benefit proceeds may be paid to the beneficiary:

- - in a lump sum;

- - in accordance with any of the Annuity Options available under the Contract; or

- - under any Additional Withdrawal Options available under the Contract (if the
Plan Beneficiary is your spouse).

The Contract Holder on behalf of a Plan Beneficiary may instead elect to
leave the Account Value invested in the Contract. However, the Code limits how
long the death benefit proceeds may be left in this option (see below).

When paying the Contract Beneficiary, we will determine the Account Value on
the Valuation Date following the date on which we receive proof of death
acceptable to the Company. Interest, if any, will be paid from the date of death
at a rate no less than required by law. We will mail payment to the Contract
Beneficiary within seven days after we receive proof of death.

The Code requires that distribution of death proceeds begin within a certain
period of time. For NON-SECTION 457 PLANS, if required by the Code, the entire
value must be distributed within five years after the date of death unless an
Annuity option is elected within one year.

For SECTION 457 PLANS, generally, either payments must begin by December 31
of the year following the year of your death, or the entire value of your
benefits must be distributed by December 31 of the fifth year following the year
of your death. If your Plan Beneficiary is your spouse, he or she is not
required to begin distributions until the year you would have attained age
70 1/2. In no event may payments extend beyond the life expectancy of the Plan
Beneficiary or any period certain greater than the Plan Beneficiary's life
expectancy.

If no elections are made, no distributions will be made. Failure to commence
distributions within the above time periods can result in tax penalties.
Regardless of the method of payment, death benefit proceeds will generally be
taxed to the beneficiary in the same manner as if you had received those
payments. (See "Tax Status.")

ANNUITY PERIOD
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ANNUITY PERIOD ELECTIONS

For Section 457 Plans, the Code generally requires that minimum annual
distributions of the Account Value must begin by April 1st of the calendar year
following the calendar year in which a Participant attains age 70 1/2. In
addition, distributions must be in a form and amount sufficient to satisfy the
Code requirements. These requirements may be satisfied by the election of
certain Annuity Options or Additional Withdrawal Options. (See "Tax Status.")

At least 30 days prior to the Annuity Date, the Contract Holder must notify
us in writing of the following:

- - the date on which you would like to start receiving annuity payments;

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10
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- - the Annuity Option under which you want your payments to be calculated and
paid;

- - whether the payments are to be made monthly, quarterly, semi-annually or
annually; and

- - the investment option(s) used to provide annuity payments (i.e., a fixed
annuity using the general account or any of the Subaccounts available at the
time of annuitization). As of the date of this Prospectus, Aetna Variable
Fund, Aetna Income Shares and Aetna Investment Advisers Fund, Inc. are the
only Subaccounts available; however, additional Subaccounts may be available
under some Annuity Options in the future (see "Annuity Options" below).

Annuity payments will not begin until an Annuity Option has been selected. Until
a date and option are elected, the Account or Plan Account will continue in the
Accumulation Period. Once annuity payments begin, the Annuity Option may not be
changed, nor may transfers be made among the investment options(s) selected.
(See "Annuity Options" below for more information about transfers during the
Annuity Period.)

ANNUITY OPTIONS

The Contract Holder may choose one of the following Annuity Options:

LIFETIME ANNUITY OPTIONS:

- -OPTION 1--Life Annuity--An annuity with payments ending on the Annuitant's
death.

- -OPTION 2--Life Annuity with Guaranteed Payments-- An annuity with payments
guaranteed for 5, 10, 15 or 20 years, or such other periods as the Company may
offer at the time of annuitization.

- -OPTION 3--Life Income based Upon the Lives of Two Payees--An annuity will be
paid during the lives of the Annuitant and a second Annuitant, with 100%,
66 2/3% or 50% of the payment to continue after the first death, or 100% of the
payment to continue at the death of the second Annuitant and 50% of the payment
to continue at the death of the Annuitant.

- -OPTION 4--Life Income based Upon the Lives of Two Payees--An annuity with
payments for a minimum of 120 months, with 100% of the payment to continue
after the first death.

If Option 1 or 3 is elected, it is possible that only one Annuity Payment
will be made if the Annuitant under Option 1, or the surviving Annuitant under
Option 3, should die prior to the due date of the second Annuity Payment. Once
lifetime Annuity payments begin, the Annuitant cannot elect to receive a
lump-sum settlement.

NONLIFETIME ANNUITY OPTIONS:

- -OPTION 1--Payments for a Specified Period--payments will continue for a
specified period of time, as provided for under your Contract.

Under the nonlifetime option, the type of annuity (fixed or variable) and
the number of years that may be selected are determined by the investment
options used prior to annuitization. For amounts held in the Fixed Plus Account,
the annuity must be paid on a fixed basis and payments may be made for 5-30
years. For amounts held in the Subaccounts, the Guaranteed Accumulation Account
or the Fixed Account, an annuity may be selected on a fixed or variable basis
and payments may be made for 3-30 years. If this option is elected on a variable
basis, the Contract Holder may request at any time during the payment period
that the present value of all or any portion of the remaining variable payments
be paid in one sum. However, any lump-sum elected before three years of payments
have been completed will be treated as a withdrawal during the Accumulation
Period and any applicable deferred sales charge will be assessed. (See "Charges
and Deductions--Deferred Sales Charge.") The nonlifetime options is not
available on a variable basis under a Contract which provides for immediate
Annuity benefits.

We may also offer additional Annuity Options under the Contract from time to
time. The Company expects to offer additional Annuity Options and enhanced
versions of the Annuity Options listed above at some time during 1996. These
additional Annuity Options and enhanced versions of the existing options will
have additional Subaccounts available and will allow transfers between
Subaccounts during the Annuity Period. (Additional Subaccounts and transfer
capability are expected during the second half of 1996.) Such additional or
enhanced options will be made available by an endorsement to the Contract, which
will include the guaranteed annuity payout rates and other terms applicable to
such options. (Depending on which guaranteed payout rates apply to the existing
options, the guaranteed payout rates for the new and enhanced options will be
the same or lower.) Please refer to the Contract, or call the number listed in
the "Inquiries" section of the Prospectus Summary, to determine which options
are available and the terms of

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11
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such options. It is not expected that these additional or enhanced options will
be made available to those who have already commenced receiving Annuity
Payments.

ANNUITY PAYMENTS

DATE PAYOUTS START. When payments start, the age of the Annuitant plus the
number of years for which payments are guaranteed must not exceed 95. Annuity
payments may not extend beyond (a) the life of the Annuitant, (b) the joint
lives of the Annuitant and beneficiary, (c) a period certain greater than the
Annuitant's life expectancy, or (d) a period certain greater than the joint life
expectancies of the Annuitant and beneficiary.

AMOUNT OF EACH ANNUITY PAYMENT. The amount of each payment depends on the
size of the Account Value, how you allocate it between fixed and variable
payouts, and the annuity option chosen. No election may be made that would
result in the first Annuity payment of less than $20, or total yearly Annuity
payments of less than $100. If the Account or Plan Account Value on the Annuity
Date is insufficient to elect an option for the minimum amount specified, a
lump-sum payment must be elected.

If Annuity Payments are to be made on a variable basis, the first and
subsequent payments will vary depending on the assumed net investment rate
selected (3 1/2% or 5% per annum). Selection of a 5% rate causes a higher first
payment, but Annuity Payments will increase thereafter only to the extent that
the net investment rate exceeds 5% on an annualized basis. Annuity Payments
would decline if the rate were below 5%. Use of the 3 1/2% assumed rate causes a
lower first payment, but subsequent payments would increase more rapidly or
decline more slowly as changes occur in the net investment rate. (See the
Statement of Additional Information for further discussion on the impact of
selecting an assumed net investment rate.)

CHARGES DEDUCTED DURING THE ANNUITY PERIOD

We make a daily deduction for mortality and expense risks from any amounts
held on a variable basis. Therefore, electing the nonlifetime option on a
variable basis will result in a deduction being made even though we assume no
mortality risk. We may also deduct a daily administrative charge from amounts
held under the variable options. (See "Charges and Deductions.")

DEATH BENEFIT PAYABLE DURING THE
ANNUITY PERIOD

If an Annuitant dies after Annuity Payments have begun, any death benefit
payable will depend on the terms of the Contract and the Annuity Option
selected. If Option 1 or Option 3 was elected, Annuity Payments will cease on
the death of the Annuitant under Option 1 or the death of the surviving
Annuitant under Option 3.

If Lifetime Option 2 or Option 4 was elected and the death of the Annuitant
under Option 2, or the surviving Annuitant under Option 4, occurs prior to the
end of the guaranteed minimum payment period, we will pay to the beneficiary in
a lump sum, unless otherwise requested, the present value of the guaranteed
annuity payments remaining.

If the nonlifetime option was elected, and the Annuitant dies before all
payments are made, the value of any remaining payments may be paid in a lump-sum
to the Plan Beneficiary (unless otherwise requested), and no deferred sales
charge will be imposed.

For Non-Section 457 Plans, if required by the Code, and there is a death
benefit payable under the Annuity Option elected, the remaining values must be
distributed at least as rapidly as under the original method of distribution.

For Section 457 Plans, if there is a death benefit payable under the Annuity
Option elected, Annuity Payments must be distributed to your beneficiary at
least as rapidly as under the original method of distribution and in
substantially nonincreasing amounts.

Any lump-sum payment paid under the applicable lifetime or nonlifetime
Annuity options will be made within seven calendar days after proof of death
acceptable to us, and a request for payment are received at our Home Office.

The value of any death benefit proceeds will be determined as of the next
Valuation Date after we receive acceptable proof of death and a request for
payment. Under Options 2 and 4, such value will be reduced by any payments made
after the date of death.

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TAX STATUS
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INTRODUCTION

The following provides a general discussion and is not intended as tax
advice. This discussion reflects the Company's understanding of current federal
income tax law. Such laws may change in the future, and it is possible that any
change could be retroactive (i.e., effective prior to the date of the change).
The Company makes no guarantee regarding the tax treatment of any Contract or
transaction involving a Contract. The ultimate effect of federal income taxes on
the amounts held under a Contract, on Annuity Payments, and on the economic
benefit to the Contract Holder, Participant or Beneficiary may depend upon the
tax status of the individual concerned. Any person concerned about these tax
implications should consult a competent tax adviser before initiating any
transaction.

TAXATION OF THE COMPANY

The Company is taxed as a life insurance company under the Code. Since the
Separate Account is not an entity separate from the Company, it will not be
taxed separately as a "regulated investment company" under the Code. Investment
income and realized capital gains are automatically applied to increase reserves
under the Contracts. Under existing federal income tax law, the Company believes
that the Separate Accounts investment income and realized net capital gains will
not be taxed to the extent that such income and gains are applied to increase
the reserves under the Contracts.

The Company does not anticipate that it will incur any federal income tax
liability attributable to the Separate Account and, therefore, the Company does
not intend to make provisions for any such taxes. However, if changes in the
federal tax laws or interpretations thereof result in the Company being taxed on
income or gains attributable to the Separate Account, then the Company may
impose a charge against the Separate Account (with respect to some or all
Contracts) in order to set aside provisions to pay such taxes.

TAX STATUS OF THE CONTRACT

With respect to contracts sold to taxable organizations, Section 817(h) of
the Code requires that the investments of the Funds be "adequately diversified"
in accordance with Treasury Regulations in order for the Contracts to qualify as
annuity contracts with federal tax law. The Separate Account, through the Funds,
intends to comply with the diversification requirements prescribed by the
Treasury in Reg. Sec. 1.817-5, which affect how the Fund's assets may be
invested.

In certain circumstances, owners of variable annuity contracts that are
taxable organizations may be considered the owners, for federal income tax
purposes, of the assets of the separate accounts used to support their
contracts. In these circumstances, income and gains from the separate account
assets would be includible in the variable contract owner's gross income. One of
the circumstances that has raised this issue is the number of funding options
available under the Contract. The Company reserves the right to modify the
Contract as necessary to attempt to prevent a Contract Holder from being
considered the owner of a pro rata share of the assets of the Separate Account.

CONTRACTS USED WITH CERTAIN RETIREMENT PLANS

IN GENERAL: The Contract may be purchased and used in connection with:

(1) Employer-sponsored deferred compensation plans sponsored by tax-exempt
organizations for deferrals not subject to Code Section 457 and by taxable
organizations for their employees and/or independent contractors; and

(2) Employer-sponsored deferred compensation plans sponsored by tax-exempt
organizations for deferrals that are subject to Code Section 457 for their
employees and/or independent contractors.

The Company makes no attempt to provide more than general information about
use of the Contracts with the various types of retirement plans. Participants as
well as beneficiaries are cautioned that the rights of any person to any
benefits under the Contracts may be subject to the terms and conditions of the
plans themselves, in addition to the terms and conditions of the Contract issued
in connection with such plans. Some retirement plans are subject to distribution
and other requirements that are not incorporated in the provisions of the
Contracts. Purchasers are responsible for determining that contributions,
distributions and other transactions with respect to the Contracts satisfy
applicable laws and should consult their legal counsel and tax adviser regarding
the suitability of the Contract.

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13
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SECTION 457 PLANS

Section 457 provides for certain deferred compensation plans. These plans
may be offered with respect to service for state governments, local governments,
political subdivisions, agencies, instrumentalities and certain affiliates of
such entities, and tax exempt organizations. These plans are subject to various
restrictions on contributions and distributions. The plans may permit
participants to specify the form of investment for their deferred compensation
account. In general, all investments are owned by the sponsoring employer and
are subject to the claims of the general creditors of the employer. Depending on
the terms of the particular plan, the employer may be entitled to draw on
deferred amounts for purposes unrelated to its Section 457 plan obligations. In
general, all amounts received under a Section 457 plan are taxable and
reportable to the IRS as taxable income. This includes payments for death
benefits, periodic and nonperiodic distribution. Also, all amounts except death
benefit proceeds are subject to federal income tax withholding as wages. If we
make payments directly to a Participant on behalf of the employer as Contract
Holder, we will withhold federal taxes (state taxes, if applicable).

The Code imposes a maximum limit on annual Purchase Payments which may be
excluded from your gross income. For Section 457 Plan Participants, such limit
is generally the lesser of $7,500 or 33 1/3% of your includible compensation
(25% of gross compensation).

MINIMUM DISTRIBUTION REQUIREMENTS: The Code has required distribution rules
for Section 457 Plans. Distributions must generally begin by April 1 of the
calendar year following the calendar year in which you attain age 70 1/2. For
governmental or church plans, distributions must begin by April 1 of the
calendar year following the calendar year in which you attain age 70 1/2 or
retire, whichever occurs later.

In general, annuity payments must be distributed over your life or the joint
lives of you and your Plan Beneficiary, or over a period not greater than your
life expectancy or the joint life expectancies of you and your Plan Beneficiary.
Also, any distribution payable over a period of more than one year must be made
in substantially non-increasing amounts.

If you die after the required minimum distribution has commenced,
distributions to your Plan Beneficiary must be made at least as rapidly as under
the method of distribution in effect at the time of your death. However, if the
minimum required distribution is calculated each year based on your single life
expectancy or the joint life expectancies of you and your Plan Beneficiary, the
regulations for Code Section 401(a)(9) provide specific rules for calculating
the minimum required distributions at your death. For example, if you have
elected ECO with the calculation based on your single life expectancy, and the
life expectancy is recalculated each year, your recalculated life expectancy
becomes zero in the calendar year following your death and the entire remaining
interest must be distributed to your beneficiary by December 31 of the year
following your death. The rules are complex and you should consult your tax
adviser before electing the method of calculation to satisfy the minimum
distribution requirements.

If you die before the required minimum distribution has commenced, your
entire interest must be distributed by December 31 of the calendar year
containing the fifth anniversary of the date of your death. Alternatively,
payments may be made over the life of the Plan Beneficiary or over a period not
extending beyond the life expectancy of the Plan Beneficiary (not to exceed 15
years for a non-spousal beneficiary) provided the distribution begins by
December 31 of the calendar year following the calendar year of your death, or
December 31 of the calendar year in which you would have attained age 70 1/2.

If you fail to receive the minimum required distribution for any tax year, a
50% excise tax is imposed on the required amount that was not distributed.

PLANS OF NON-SECTION 457 TAX-EXEMPT ORGANIZATIONS AND TAXABLE ORGANIZATIONS

Effective January 1, 1987, rules applicable to deferred compensation plans
of state and local governments (Section 457 of the Code) were extended to
deferred compensation plans sponsored by tax-exempt employers. While no
limitation is imposed on deferrals under deferred compensation plans of taxable
employers, each Participant in a plan subject to Section 457 has a maximum
allowable annual deferral of $7,500 or 33 1/3% of the Participant's includible
compensation (25% of gross compensation). However, the Code does allow the
following "grandfathering" provisions for those who were Participants in
tax-exempt employer deferred compensation plans, as of August 16, 1986.

(1) Section 457 shall not apply to amounts deferred from taxable years beginning
before January 1, 1987.

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14
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(2) Section 457 shall not apply to amounts deferred from taxable years beginning
after December 31, 1986 provided (a) a deferral agreement was in writing on
August 16, 1986, and (b) as of August 16, 1986, the agreement provided for a
deferral of a fixed amount or of an amount determined pursuant to a fixed
formula, and (c) the agreement has not been modified as to amount or formula
after August 16, 1986.

Only individuals may participate under a Section 457 Plan subject to the
Section 457 rules. Therefore, corporations may not participate in tax-exempt
employer deferred compensation plans unless they qualify under the
"grandfathering" provisions.

Any reference in this prospectus to Section 457 Plans relates only to
contributions subject to Section 457 of the Code and these references do not
apply to "grandfathered" contributions.

In general, all amounts received under these Plans are taxable and, except
for death benefit payments, are subject to federal income tax withholding as
wages. This includes payments for periodic and nonperiodic distributions. Under
Plans sponsored by taxable organizations, such payments made to a Participant
are generally deductible by the Contract Holder as compensation paid to the
Participant. If we make payments directly to a Participant or beneficiary on
behalf of the employer as Contract Holder, we will report to the IRS the taxable
income and we will withhold federal taxes (and state taxes, if applicable) for
payments to Participants.

The owner of a Contract who is not a natural person must generally include
in income any increase in the excess of the Account Value over the "investment
in the contract" during the taxable year. There are some exceptions to this rule
and prospective owners that are not natural persons may wish to discuss this
with a competent tax advisor.

For contracts sold to taxable organizations, Section 72(e)(11) of the Code
provides that annuity contracts issued by the same insurer (and its affiliates)
to the same Contract Holder during a calendar year shall be treated as a single
annuity contract. This means that any amount received under this contract, or
any other contract subject to this provision, prior to the contract's Annuity
starting date will be taxable (and possibly subject to the 10% penalty tax) to
the extent of the combined income in all such contracts. For purposes of this
section, immediate annuity contracts, and contracts used to fund qualified
pension and profit-sharing plans under Section 401(a) of the Code, Annuity plans
under Sections 403(a) or 403(b) of the Code, and individual retirement annuities
and accounts under Section 408 of the Code are not aggregated.

MISCELLANEOUS
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VOTING RIGHTS

Each Contract Holder may direct us in the voting of shares at meetings of
shareholders of the appropriate Fund(s). The number of votes to which each
Contract Holder may give direction will be determined as of the record date.

The number of votes each Contract Holder is entitled to direct with respect
to a particular Fund during the Accumulation Period is equal to the portion of
the current value of the Contract attributable to that Fund, divided by the net
asset value of one share of that Fund. During the Annuity Period, the number of
votes is equal to the valuation reserve applicable to the portion of the
Contract attributable to that Fund, divided by the net asset value of one share
of that Fund. In determining the number of votes, fractional votes will be
recognized. Where the value of the Contract or valuation reserve relates to more
than one Fund, the calculation of votes will be performed separately for each
Fund.

Each Contract Holder will receive a notice of each meeting of shareholders
of that Fund, together with any proxy solicitation materials, and a statement of
the number of votes attributable to the Contract. Votes attributable to Contract
Holders who do not direct us will be cast by us in the same proportion as the
votes for which we have received directions.

MODIFICATION OF THE CONTRACT

The Company may change the Contract as required by federal or state law. In
addition, the Company may, upon 30 days written notice to the Contract Holder,
make other changes to group Contracts that would apply only to individuals who
become Participants under that Contract

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15
<PAGE>
after the effective date of such changes. If the Contract Holder does not agree
to a change, no new Participants will be covered under the Contract. Certain
changes will require the approval of appropriate state or federal regulatory
authorities.

DISTRIBUTION

The Company will serve as Principal Underwriter for the securities sold by
this Prospectus. The Company is registered as a broker-dealer with the
Securities and Exchange Commission and is a member of the National Association
of Securities Dealers, Inc. (NASD). As Underwriter, the Company will contract
with one or more registered broker-dealers ("Distributors"), including at least
one affiliate of the Company, to offer and sell the Contracts. All persons
offering and selling the Contracts must be registered representatives of the
Distributors and must also be licensed as insurance agents to sell variable
annuity contracts. These registered representatives may also provide services to
Participants in connection with establishing their Accounts under the Contract.

Persons offering and selling the Contracts may receive commissions in
connection with the sale of the Contracts. The maximum percentage amount that
the Company will ever pay as commission with respect to any given Purchase
Payment is with respect to those made during the first year of Purchase Payments
under an Account. That percentage amount will range from 1% to 6% of those
Purchase Payments. The Company may also pay renewal commissions on Purchase
Payments made after the first year and, under group contracts, asset-based
service fees. The average of all payments made by the Company is estimated to
equal approximately 3% of the total Purchase Payments made over the life of an
average Contract. The Company may also reimburse the Distributor for certain
actual expenses. The name of the Distributor and the registered representative
responsible for your Account are set forth on your enrollment form. Commissions
and sales related expenses are paid by the Company and are not deducted from
Purchase Payments. (See "Charges and Deductions--Deferred Sales Charge.")

Occasionally, we may pay commissions and fees to Distributors which are
affiliated or associated with the Contract Holder or the Participants. We may
also enter into agreements with some entities associated with the Contract
Holder or Participants in which we would agree to pay the entity for certain
services in connection with administering the Contracts. In both these
circumstances there may be an understanding that the Distributor or entity would
endorse the Company as a provider of the Contract. You will be notified if you
are purchasing a Contract that is subject to these arrangements.

PERFORMANCE REPORTING

From time to time, the Company may advertise different types of historical
performance for the Subaccounts of the Separate Account. The Company may
advertise the "standardized average annual total returns" of the Subaccounts,
calculated in a manner prescribed by the SEC, as well as the "non-standardized
returns." "Standardized average annual total returns" are computed according to
a formula in which a hypothetical investment of $1,000 is applied to the
Subaccount and then related to the ending redeemable values over the most recent
one, five and ten-year periods (or since inception, if less than ten years).
Standardized returns will reflect the reduction of all recurring charges during
each period (e.g., mortality and expense risk charges, annual maintenance fees,
administrative expense charge (if any) and any applicable deferred sales
charge). "Non-standardized returns" will be calculated in a similar manner,
except that non-standardized figures will not reflect the deduction of any
applicable deferred sales charge (which would decrease the level of performance
shown if reflected in these calculations). The non-standardized figures may also
include monthly, quarterly, year to date and three-year periods.

The Company may also advertise certain ratings, rankings or other
information related to the Company, the Subaccounts or the Funds. Further
details regarding performance reporting and advertising are described in the
Statement of Additional Information.

TRANSFER OF OWNERSHIP; ASSIGNMENT

No assignment of a Contract will be binding on us unless made in writing and
sent to us at our Home Office. The Company will use reasonable procedures to
confirm that the assignment is authentic, including verification of signature.
If the Company fails to follow its procedures, it would be liable for any losses
to you directly resulting from the failure. Otherwise, we are not responsible
for the validity of any assignment. The rights of the Owner and the interest of
the Annuitant and any Beneficiary will be subject to the rights of any assignee
of record.

DELAY OR SUSPENSION OF PAYMENTS

The Company reserves the right to suspend or postpone the date of payment
for any benefit or values (a) on any Valuation Date on which the New York Stock

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Exchange ("Exchange") is closed (other than customary weekend and holiday
closings) or when trading on the Exchange is restricted; (b) when an emergency
exists, as determined by the SEC, so that disposal of securities held in the
Subaccounts is not reasonably practicable or is not reasonably practicable for
the value of the Subaccount's assets; or (c) during such other periods as the
SEC may by order permit for the protection of investors. The conditions under
which restricted trading or an emergency exists shall be determined by the rules
and regulations of the SEC.

LEGAL MATTERS AND PROCEEDINGS

The Company knows of no material legal proceedings pending to which the
Separate Account or the Company is a party or which would materially affect the
Separate Account. The validity of the securities offered by this Prospectus has
been passed upon by Susan E. Bryant, Esq., Counsel to the Company.

CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
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The Statement of Additional Information contains more specific information on
the Separate Account and the Contract, as well as the financial statements of
the Separate Account and the Company. A list of the contents of the SAI is set
forth below:

General Information and History
Variable Annuity Account B
Offering and Purchase of Contracts
Performance Data
General
Average Annual Total Return Quotations

Annuity Payments

Sales Material and Advertising
Independent Auditors
Financial Statements of the Separate Account
Financial Statements of the Company

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APPENDIX I
GUARANTEED ACCUMULATION ACCOUNT
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THE GUARANTEED ACCUMULATION ACCOUNT ("GAA") IS A CREDITED INTEREST OPTION
AVAILABLE DURING THE ACCUMULATION PERIOD UNDER THE CONTRACTS OFFERED BY THIS
PROSPECTUS. AMOUNTS ALLOCATED TO THE LONG-TERM CLASSIFICATIONS OF GAA ARE HELD
IN A NONINSULATED, NONUNITIZED SEPARATE ACCOUNT. AMOUNTS ALLOCATED TO THE
SHORT-TERM CLASSIFICATIONS OF GAA ARE HELD IN THE COMPANY'S GENERAL ACCOUNT.
THIS APPENDIX IS A SUMMARY OF GAA AND IS NOT INTENDED TO REPLACE THE GAA
PROSPECTUS. YOU SHOULD READ THE ACCOMPANYING GAA PROSPECTUS CAREFULLY BEFORE
INVESTING.

GAA is a credited interest option in which we guarantee stipulated rates of
interest for stated periods of time on amounts directed to GAA. The interest
rate stipulated is an annual effective yield; that is, it reflects a full year's
interest. Interest is credited daily at a rate that will provide the guaranteed
annual effective yield over the period of one year. This option guarantees the
minimum interest rate specified in the Contract.

During a specified period of time (the "deposit period"), amounts may be
applied to any or all available Guaranteed Terms within the Short-Term and
Long-Term Classifications. Short-Term GAA has Guaranteed Terms from one to three
years, and Long-Term GAA has Guaranteed Terms from three to ten years.

Purchase Payments must remain in GAA for the full Guaranteed Term to receive
the quoted interest rates. Withdrawals or transfers from a Guaranteed Term
before the end of that Guaranteed Term may be subject to a market value
adjustment ("MVA"). An MVA reflects the change in the value of the investment
due to changes in interest rates since the date of deposit. When interest rates
increase after the date of deposit, the value of the investment decreases, and
the MVA is negative. Conversely, when interest rates decrease after the date of
deposit, the value of the investment increases, and the MVA is positive. It is
possible that a negative MVA could result in you receiving an amount that is
less than the amount paid into GAA.

As a Guaranteed Term matures, assets accumulating under GAA may be (a)
transferred to a new Guaranteed Term, (b) transferred to the other available
investment options, or (c) withdrawn. Amounts withdrawn may be subject to a
deferred sales charge and/or federal tax liabilities.

By notifying us at our Home Office at least 30 days prior to the Annuity
Date, you may elect a variable annuity and have amounts that have been
accumulating under GAA transferred to one or more of the Subaccounts available
during the Annuity Period. GAA cannot be used as an investment option during the
Annuity Period.

MORTALITY AND EXPENSE RISK CHARGES

We make no deductions from the credited interest rate for mortality and
expense risks; these risks are considered in determining the credited rate.

TRANSFERS

Amounts applied to a Guaranteed Term during a deposit period may not be
transferred to any other funding option or to another Guaranteed Term during
that deposit period or for 90 days after the close of that deposit period.
Transfers are permitted from Guaranteed Terms of one classification to available
Guaranteed Terms of another classification. We will apply an MVA to GAA
transfers made before the end of a Guaranteed Term. Transfers of GAA values due
to a maturity are not subject to an MVA.

- --------------------------------------------------------------------------------
18
<PAGE>
APPENDIX II
FIXED ACCOUNT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

THE FOLLOWING SUMMARIZES MATERIAL INFORMATION CONCERNING THE FIXED ACCOUNT.
AMOUNTS ALLOCATED TO THE FIXED ACCOUNT ARE HELD IN THE COMPANY'S GENERAL ACCOUNT
THAT SUPPORTS GENERAL INSURANCE AND ANNUITY OBLIGATIONS. INTERESTS IN THE FIXED
ACCOUNT HAVE NOT BEEN REGISTERED WITH THE SEC IN RELIANCE ON EXEMPTIONS UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. DISCLOSURE IN THE PROSPECTUS REGARDING
THE FIXED ACCOUNT, MAY, HOWEVER, BE SUBJECT TO CERTAIN GENERALLY APPLICABLE
PROVISIONS OF THE FEDERAL SECURITIES LAWS RELATING TO THE ACCURACY AND
COMPLETENESS OF SUCH STATEMENTS. DISCLOSURE IN THIS APPENDIX REGARDING THE FIXED
ACCOUNT HAS NOT BEEN REVIEWED BY THE SEC.

The Fixed Account guarantees the minimum interest rate specified in the
Contract. The Company may credit a higher interest rate from time to time. The
current rate is subject to change at any time, but will never fall below the
guaranteed minimum. The Company's determination of interest rates reflects the
investment income earned on invested assets and the amortization of any capital
gains and/or losses realized on the sale of invested assets. Under the Fixed
Account, the Company assumes the risk of investment gain or loss by guaranteeing
Account Values and promising a minimum interest rate and Annuity Payment.

Under certain emergency conditions, we may defer payment of a Fixed Account
withdrawal value (a) for a period of up to six months, or (b) as provided by
federal law.

In addition, if allowed by state law, the Company may pay any Fixed Account
withdrawal value in equal payments, with interest, over a period not to exceed
60 months, when:

(a) the Fixed Account withdrawal value for the Contract or for the total of the
Accounts under the Contract exceeds $250,000 on the day prior to the
withdrawal; and

(b) the sum of the current Fixed Account withdrawal and the total of all Fixed
Account withdrawals from the Contract or any Account under the Contract
within the past 12 calendar months exceeds 20% of the amount in the Fixed
Account on the day prior to the current withdrawal.

Interest, as used above, will not be more than two percentage points below
any rate determined prospectively by the Board of Directors for this class of
Contract. In no event will the interest rate be less than the minimum stated in
the Contract.

Amounts applied to the Fixed Account will earn the interest rate in effect
when actually applied to the Fixed Account.

The Fixed Account will reflect a compound interest rate credited by us. The
interest rate quoted is an annual effective yield. We make no deductions from
the credited interest rate for mortality and expense risks; these risks are
considered in determining the credited rate.

If a withdrawal is made from the Fixed Account, a deferred sales charge may
apply. (See "Charges and Deductions-- Deferred Sales Charge.")

TRANSFERS AMONG INVESTMENT OPTIONS

Transfers from the Fixed Account to any other available investment option(s)
are allowed in each calendar year during the Accumulation Period. The amount
which may be transferred may vary at our discretion; however, it will never be
less than 10% of the amount held under the Fixed Account. Transfers to the Fixed
Plus Account (if available under the Contract) will be permitted without regard
to this limitation.

By notifying us at our Home Office at least 30 days before Annuity payments
begin, you may elect to have amounts which have been accumulating under the
Fixed Account transferred to one or more of the Subaccounts available during the
Annuity Period to provide variable Annuity Payments.

- --------------------------------------------------------------------------------
19
<PAGE>
APPENDIX III
FIXED PLUS ACCOUNT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

THE FOLLOWING SUMMARIZES MATERIAL INFORMATION CONCERNING THE FIXED PLUS ACCOUNT.
AMOUNTS ALLOCATED TO THE FIXED PLUS ACCOUNT ARE HELD IN THE COMPANY'S GENERAL
ACCOUNT THAT SUPPORTS INSURANCE AND ANNUITY OBLIGATIONS. INTERESTS IN THE FIXED
PLUS ACCOUNT HAVE NOT BEEN REGISTERED WITH THE SEC IN RELIANCE ON EXEMPTIONS
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. DISCLOSURE IN THIS PROSPECTUS
REGARDING THE FIXED PLUS ACCOUNT MAY, HOWEVER, BE SUBJECT TO CERTAIN GENERALLY
APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES LAWS RELATING TO THE ACCURACY
AND COMPLETENESS OF THE STATEMENTS. DISCLOSURE IN THIS APPENDIX REGARDING THE
FIXED PLUS ACCOUNT HAS NOT BEEN REVIEWED BY THE SEC.

FIXED PLUS ACCOUNT

The Fixed Plus Account guarantees that amounts allocated to this option will
earn the minimum Fixed Plus interest rate specified in the Contract. We may
credit a higher interest rate from time to time. Our determination of interest
rates reflects the investment income earned on invested assets and the
amortization of any capital gains and/or losses realized on the sale of invested
assets. Under this option, we assume the risk of investment gain or loss by
guaranteeing Net Purchase Payment values and promising a minimum interest rate
and Annuity payment.

The Fixed Plus Account will reflect a compound interest rate credited by us.
The interest rate quoted is an annual effective yield. Amounts applied to the
Fixed Plus Account will earn the Fixed Plus interest rate in effect when
actually applied to the Fixed Plus Account. We make no deductions from the
credited interest rate for mortality and expense risks; these risks are
considered in determining the credited rate.

Beginning on the tenth Account Year, we will credit amounts held in the
Fixed Plus Account with an interest rate that is at least 0.25% higher than the
then-declared interest rate for the Fixed Plus Accounts for Accounts that have
not reached their tenth anniversary.

We reserve the right to limit Net Purchase Payment(s) and/or transfers to
the Fixed Plus Account.

FIXED PLUS ACCOUNT WITHDRAWALS

The amount eligible for partial withdrawal is 20% of the amount held in the
Fixed Plus Account on the day we receive a written request in our Home Office,
reduced by any Fixed Plus Account withdrawals, transfers or annuitizations made
in the prior 12 months. In calculating the 20% limit, we reserve the right to
include payments made due to the election of any Additional Withdrawal Option.

The 20% limit is waived if the partial withdrawal is due to annuitization or
death. The waiver upon death will only be exercised once and must occur within
six months after the Participant's date of death. For this waiver to apply, any
such partial withdrawal must also be made pro rata from all funding options used
under the Account.

If a full withdrawal is requested, we will pay any amounts held in the Fixed
Plus Account, with interest, in five annual payments that will be equal to:

1. One-fifth of the Fixed Plus Account value on the day the request is
received, reduced by any Fixed Plus Account withdrawals, transfers or
annuitizations made in the prior 12 months;

2. One-fourth of the remaining Fixed Plus Account value twelve months later;

3. One-third of the remaining Fixed Plus Account value twelve months later;

4. One-half of the remaining Fixed Plus Account value twelve months later; and

5. The balance of the Fixed Plus Account value twelve months later.

Once we receive a request for a full withdrawal from an Account, no further
withdrawals or transfers will be permitted from the Fixed Plus Account.

- --------------------------------------------------------------------------------
20
<PAGE>
A full withdrawal from the Fixed Plus Account may be cancelled at any time
before the end of the five-payment period.

We will waive the Fixed Plus Account full withdrawal provision, if the
withdrawal is made:

(a) due to your death, before Annuity payments begin, within 6 months of the
date of death;

(b) due to the election of an Annuity option;

(c) when the Fixed Plus Account value is $3,500 or less (and no withdrawals,
transfers or annuitizations have been made from the Account within the prior
12 months).

TRANSFERS AMONG INVESTMENT OPTIONS

The amount eligible for transfer from the Fixed Plus Account is 20% of the
amount held in the Fixed Plus Account on the day we receive a written request in
our Home Office, reduced by any Fixed Plus Account withdrawals, transfers or
annuitizations made in the prior 12 months. In calculating the 20% limit, we
reserve the right to include payments made due to the election of an Additional
Withdrawal Option. We will waive the 20% transfer limit when the value in the
Fixed Plus Account is $1,000 or less.

By notifying us at our Home Office at least 30 days before Annuity payments
begin, the Contract Holder may elect to have amounts which have been
accumulating under the Fixed Plus Account transferred to one or more of the
Subaccounts available during the Annuity Period, to provide lifetime variable
Annuity payments.

SWO

The Systematic Withdrawal Option may not be elected if you have requested a
Fixed Plus Account transfer or withdrawal within the prior 12-month period.

- --------------------------------------------------------------------------------
21
<PAGE>
FOR MASTER APPLICATIONS ONLY

I HEREBY ACKNOWLEDGE RECEIPT OF AN ACCOUNT B GROUP DEFERRED VARIABLE ANNUITY
PROSPECTUS DATED MAY 1, 1996 FOR EMPLOYER-SPONSORED DEFERRED COMPENSATION PLANS,
AS WELL AS ALL CURRENT PROSPECTUSES PERTAINING TO THE VARIABLE INVESTMENT
OPTIONS AVAILABLE UNDER THE CONTRACTS.

- ---- PLEASE SEND AN ACCOUNT B STATEMENT OF ADDITIONAL INFORMATION (FORM NO.
75996(S)-2) DATED MAY 1, 1996.

- --------------------------------------------------------------------------------

CONTRACT HOLDER'S SIGNATURE

- --------------------------------------------------------------------------------

DATE

75996-2 (5/96)
<PAGE>

VARIABLE ANNUITY ACCOUNT B
OF
AETNA LIFE INSURANCE AND ANNUITY COMPANY

STATEMENT OF ADDITIONAL INFORMATION DATED MAY 1, 1996

AetnaPlus Contracts
Group and Individual Variable Annuity Contracts Available under Section 457

This Statement of Additional Information is not a prospectus and should be read
in conjunction with the current prospectus for Variable Annuity Account B (the
"Separate Account") dated May 1, 1996.

A free prospectus is available upon request from the local Aetna Life Insurance
and Annuity Company office or by writing to or calling:

Aetna Life Insurance and Annuity Company
Customer Service
151 Farmington Avenue
Hartford, Connecticut 06156
1-800-525-4225

Read the prospectus before you invest. Terms used in this Statement of
Additional Information shall have the same meaning as in the Prospectus.

TABLE OF CONTENTS
<TABLE>
<CAPTION>

Page
<S> <C>
General Information and History. . . . . . . . . . . . . . . . . . . . . . 1
Variable Annuity Account B . . . . . . . . . . . . . . . . . . . . . . . . 1
Offering and Purchase of Contracts . . . . . . . . . . . . . . . . . . . . 2
Performance Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Average Annual Total Return Quotations . . . . . . . . . . . . . . . . 3
Annuity Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Sales Material and Advertising . . . . . . . . . . . . . . . . . . . . . . 8
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Financial Statements of the Separate Account . . . . . . . . . . . . . . . S-1
Financial Statements of Aetna Life Insurance and Annuity Company . . . . . F-1
</TABLE>

<PAGE>
GENERAL INFORMATION AND HISTORY

Aetna Life Insurance and Annuity Company (the "Company") is a stock life
insurance company which was organized under the insurance laws of the State of
Connecticut in 1976. Through a merger, it succeeded to the business of Aetna
Variable Annuity Life Insurance Company (formerly Participating Annuity Life
Insurance Company organized in 1954). As of December 31, 1995, the Company had
assets of $27.1 billion (subject to $25.5 billion of customer and other
liabilities, $1.6 billion of shareholder equity) which includes $11 billion in
assets held in the Company's separate accounts. the Company had $22 billion in
assets under management, including $8 billion in its mutual funds. as of
December 31, 1994, it ranked among the top 2% of all U.S. life insurance
companies by size. the Company is a wholly owned subsidiary of Aetna Retirement
Holdings, Inc., which is in turn a wholly owned subsidiary of Aetna Retirement
Services, Inc., and an indirect wholly owned subsidiary of Aetna Life and
Casualty Company. The Company is engaged in the business of issuing life
insurance policies and annuity contracts in all states of the United States.
The Company's Home Office is located at 151 Farmington Avenue, Hartford,
Connecticut 06156.

In addition to serving as the principal underwriter and the depositor for the
Separate Account, the Company is also a registered investment adviser under the
Investment Advisers Act of 1940, and a registered broker-dealer under the
Securities Exchange Act of 1934. The Company provides investment advice to
several of the registered management investment companies offered as variable
investment options under the Contracts funded by the Separate Account (see
"Variable Annuity Account B" below).

Other than the mortality and expense risk charges and administrative expense
charge described in the prospectus, all expenses incurred in the operations of
the Separate Account are borne by the Company. See "Charges and Deductions" in
the prospectus. The Company receives reimbursement for certain administrative
costs from some unaffiliated sponsors of the Funds used as funding options under
the Contract. These fees generally range up to 0.25%.

The assets of the Separate Account are held by the Company. The Separate
Account has no custodian. However, the Funds in whose shares the assets of the
Separate Account are invested each have custodians, as discussed in their
respective prospectuses.

VARIABLE ANNUITY ACCOUNT B

Variable Annuity Account B (the "Separate Account") is a separate account
established by the Company for the purpose of funding variable annuity contracts
issued by the Company. The Separate Account is registered with the Securities
and Exchange Commission as a unit investment trust under the Investment Company
Act of 1940, as amended. The assets of each of the Subaccounts of the Separate
Account will be invested exclusively in shares of the mutual funds described in
the Prospectus. Purchase Payments made under the Contract may be allocated to
one or more of the Subaccounts. The Company may make additions to or deletions
from available investment options as permitted by law. The availability of the
Funds is subject to applicable regulatory authorization. Not all Funds are
available in all jurisdictions, under all Contracts, or under all Plans. The
Funds currently available under the Contract are as follows:

1
<PAGE>

<S> <C>
Aetna Variable Fund Fidelity VIP Growth Portfolio
Aetna Income Shares Fidelity VIP Overseas Portfolio
Aetna Variable Encore Fund Janus Aspen Aggressive Growth Portfolio
Aetna Investment Advisers Fund, Inc. Janus Aspen Balanced Portfolio
Aetna Ascent Variable Portfolio Janus Aspen Flexible Income Portfolio
Aetna Crossroads Variable Portfolio Janus Aspen Growth Portfolio
Aetna Legacy Variable Portfolio Janus Aspen Short-Term Bond Portfolio
Alger American Growth Portfolio Janus Aspen Worldwide Growth Portfolio
Alger American Small Cap Portfolio Lexington Natural Resources Trust
Calvert Responsibly Invested Balanced Portfolio Neuberger & Berman Growth Portfolio
Fidelity VIP II Contrafund Portfolio Scudder International Portfolio Class A Shares
Fidelity VIP Equity-Income Portfolio TCI Growth
</TABLE>

Complete descriptions of each of the Funds, including their investment
objectives, policies, risks and fees and expenses, are contained in the
prospectuses and statements of additional information for each of the Funds.

OFFERING AND PURCHASE OF CONTRACTS

The Company is both the depositor and the principal underwriter for the
securities sold by the prospectus. The Company offers the Contracts through
life insurance agents licensed to sell variable annuities who are registered
representatives of the Company or of other registered broker-dealers who have
sales agreements with the Company. The offering of the Contracts is continuous.
A description of the manner in which Contracts are purchased may be found in the
prospectus under the sections titled "Purchase" and "Contract Valuation."

PERFORMANCE DATA

GENERAL

From time to time, the Company may advertise different types of historical
performance for the Subaccounts of the Separate Account available under the
Contracts issued by the Company in connection with Plans described in the
Prospectus. The Company may advertise the "standardized average annual total
returns," calculated in a manner prescribed by the Securities and Exchange
Commission (the "standardized return"), as well as "non-standardized returns,"
both of which are described below.

The standardized and non-standardized total return figures are computed
according to a formula in which a hypothetical initial Purchase Payment of
$1,000 is applied to the various Subaccounts under the Contract, and then
related to the ending redeemable values over one, five and ten year periods (or
fractional periods thereof). The standardized figures reflect the deduction of
all recurring charges during each period (e.g., mortality and expense risk
charges, maintenance fees, administrative expense charges, and deferred sales
charges). These charges will be deducted on a pro rata basis in the case of
fractional periods. The maintenance fee is converted to a percentage of assets
based on the average account size under the Contracts described in the
Prospectus.

The non-standardized figures will be calculated in a similar manner, except that
they will not reflect the deduction of any applicable deferred sales charge
(which would decrease the level of performance

2
<PAGE>

shown if reflected in these calculations). The non-standardized figures may
also include monthly, quarterly, year-to-date and three year periods.

If a Fund was in existence prior to the date it became available under the
Contract, standardized and non-standardized total returns may include periods
prior to such date. These figures are calculated by adjusting the actual
returns of the Fund to reflect the charges that would have been assessed under
the Contract had that Fund been available under the Contract during that period.

Investment results of the Subaccounts will fluctuate over time, and any
presentation of the Subaccounts' total return quotations for any prior period
should not be considered as a representation of how the Subaccounts will perform
in any future period. Additionally, the Account Value upon redemption may be
more or less than your original cost.

AVERAGE ANNUAL TOTAL RETURN QUOTATIONS - STANDARDIZED AND NON-STANDARDIZED

Each set of tables shown below represents the variations in contract payment
type and in the maintenance fees assessed under different plans. Table A
reflects the average annual standardized and non-standardized total return
quotation figures for the periods ended December 31, 1995 for the Subaccounts
under Single Payment Accounts issued by the Company. Tables B and C reflect the
average annual standardized and non-standardized total return quotation figures
for the periods ended December 31, 1995 for the Subaccounts under Installment
Payment Accounts with a $20 annual maintenance fee and a $15 annual maintenance
fee, respectively. For those Subaccounts where results are not available for
the full calendar period indicated, the percentage shown is an average annual
return since inception (denoted with an *).

TABLE A

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SINGLE PAYMENT ACCOUNT FUND
($0 MAINTENANCE FEE) STANDARDIZED NON-STANDARDIZED INCEPTION
DATE
- ------------------------------------------------------------------------------------------------------------------------------------
SUBACCOUNT 1 Year 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Variable Fund 24.08% 11.20% 12.31% 30.61% 10.42% 12.11% 12.31% 04/30/75
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Income Shares 10.94% 7.62% 8.57% 16.78% 6.32% 8.51% 8.57% 06/01/78

- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Encore Fund (0.50%) 2.56% 4.94% 4.74% 3.14% 3.40% 4.94% 09/01/75
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc. 19.37% 9.61% 8.86%* 25.65% 10.30% 10.50% 9.37%* 06/23/89
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio 4.32%* N/A N/A 9.81%* N/A N/A N/A 07/03/95
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio 3.25%* N/A N/A 8.68%* N/A N/A N/A 07/03/95
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio 2.27%* N/A N/A 7.66%* N/A N/A N/A 07/03/95
- ------------------------------------------------------------------------------------------------------------------------------------
Alger American Growth Portfolio 27.95% 19.24% 17.44%* 34.68% 17.73% 20.22% 17.96%* 01/08/89
- ------------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap Portfolio 35.39% 17.79% 20.51%* 2.52% 14.07% 18.75% 20.85%* 09/21/88
- ------------------------------------------------------------------------------------------------------------------------------------
Calvert Responsibly Invested Balanced
Portfolio 21.76% 9.20% 8.85%* 28.17% 9.40% 10.09% 8.85%* 09/04/86
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 31.01%* N/A N/A 37.91%* N/A N/A N/A 01/03/95
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 26.75% 18.84% 11.99%* 33.43% 18.12% 19.82% 11.99%* 10/22/86
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 27.01% 18.31% 13.55%* 33.69% 15.88% 19.28% 13.55%* 11/07/86
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 2.91% 5.91% 5.90%* 8.32% 13.86% 6.78% 6.02%* 02/13/87
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 19.61% 23.24%* N/A 25.91% 26.02%* N/A N/A 9/13/93
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 17.08% 10.02%* N/A 23.24% 12.50%* N/A N/A 09/13/93
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 16.21% 5.92%* N/A 22.33% 8.31%* N/A N/A 09/13/93
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 22.14% 11.27%* N/A 28.56% 13.78%* N/A N/A 09/13/93
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Short-Term Bond Portfolio 2.77% 1.02%* N/A 8.18% 3.30%* N/A N/A 09/13/93
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 19.40% 16.51%* N/A 25.69% 19.13%* N/A N/A 09/13/93
- ------------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 9.65% 3.61%* N/A 15.42% 5.51% 4.88%* N/A 10/14/91
- -----------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Growth Portfolio 23.59% 15.67% 12.90% 30.10% 16.17% 16.62% 12.90% 12/31/85
- ------------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio Class A
Shares 4.25% 8.11% 7.88%* 9.74% 13.44% 8.99% 8.01%* 05/01/87
- ------------------------------------------------------------------------------------------------------------------------------------
TCI Growth 23.00% 12.57% 11.32%* 29.47% 11.26% 13.50% 11.46%* 11/20/87
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Please refer to the discussion preceding the Tables for an explanation of the
charges included in the Standardized and Non-Standardized figures. These
figures represent historical performance and should not be considered a
projection of future performance.

4
<PAGE>

TABLE B

<TABLE>
<CAPTION>
---------------------------- --------------------------------------- ---------
INSTALLMENT PAYMENT ACCOUNT FUND
($20 ANNUAL MAINTENANCE FEE) STANDARDIZED NON-STANDARDIZED INCEPTION
DATE
---------------------------- --------------------------------------- ---------
SUBACCOUNT 1 Year 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Variable Fund 24.06% 10.94% 12.29% 30.59% 10.40% 12.09% 12.29% 04/30/75
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Income Shares 10.92% 7.38% 8.54% 16.76% 6.30% 8.49% 8.54% 06/01/78
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Encore Fund (0.52%) 2.33% 4.92% 4.71% 3.12% 3.38% 4.92% 09/01/75
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc. 19.35% 9.36% 8.49%* 25.63% 10.28% 10.48% 9.34%* 06/23/89
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio 4.30%* N/A N/A 9.79%* N/A N/A N/A 07/03/95
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio 3.23%* N/A N/A 8.66%* N/A N/A N/A 07/03/95
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio 2.25%* N/A N/A 7.64%* N/A N/A N/A 07/03/95
- ------------------------------------------------------------------------------------------------------------------------------------
Alger American Growth Portfolio 27.93% 18.97% 17.07%* 34.66% 17.71% 20.20% 17.94%* 01/08/89
- ------------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap Portfolio 35.37% 17.52% 19.98%* 42.50% 14.05% 18.73% 20.83%* 09/21/88
- ------------------------------------------------------------------------------------------------------------------------------------
Calvert Responsibly Invested Balanced
Portfolio 21.74% 8.95% 8.23%* 28.15% 9.38% 10.07% 8.83%* 09/04/86
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 30.99%* N/A N/A 37.89%* N/A N/A N/A 01/03/95
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 26.73% 18.57% 11.35%* 33.40% 18.10% 19.80% 11.97%* 10/22/86
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 26.99% 18.04% 12.90%* 33.67% 15.86% 19.26% 13.53%* 11/07/86
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 2.89% 5.67% 5.39%* 8.30% 13.84% 6.76% 6.00%* 02/13/87
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 19.59% 23.21%* N/A 25.89% 26.00%* N/A N/A 9/13/93
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 17.06% 10.00%* N/A 23.22% 12.48%* N/A N/A 09/13/93
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 16.19% 5.90%* N/A 22.31% 8.29%* N/A N/A 09/13/93
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 22.11% 11.24%* N/A 28.54% 13.75%* N/A N/A 09/13/93
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Short-Term Bond Portfolio 2.75% 1.00%* N/A 8.16% 3.28%* N/A N/A 09/13/93
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 19.38% 16.48%* N/A 25.67% 19.11%* N/A N/A 09/13/93
- ------------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 9.63% 3.59%* N/A 15.40% 5.49% 4.86%* N/A 10/14/91
- ------------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Growth Portfolio 23.57% 15.41% 12.87% 30.08% 16.15% 16.60% 12.87% 12/31/85
- ------------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio Class A
Shares 4.23% 7.86% 7.35%* 9.72% 13.42% 8.97% 7.99%* 05/01/87
- ------------------------------------------------------------------------------------------------------------------------------------
TCI Growth 22.98% 12.32% 10.74%* 29.45% 11.24% 13.48% 11.44%* 11/20/87
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

5
<PAGE>

TABLE C

<TABLE>
<CAPTION>
---------------------------- --------------------------------------- ---------
INSTALLMENT PAYMENT ACCOUNT FUND
($15 ANNUAL MAINTENANCE FEE) STANDARDIZED NON-STANDARDIZED INCEPTION
DATE
---------------------------- --------------------------------------- ---------
SUBACCOUNT 1 Year 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Variable Fund 24.06% 10.95% 12.29% 30.59% 10.40% 12.09% 12.29% 04/30/75
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Income Shares 10.92% 7.38% 8.55% 16.76% 6.31% 8.49% 8.55% 06/01/78
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Encore Fund (0.52%) 2.33% 4.93% 4.72% 3.13% 3.39% 4.93% 09/01/75
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc. 19.35% 9.36% 8.49%* 25.64% 10.28% 10.49% 9.35%* 06/23/89
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio 4.30%* N/A N/A 9.79%* N/A N/A N/A 07/03/95
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio 3.23%* N/A N/A 8.67%* N/A N/A N/A 07/03/95
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio 2.26%* N/A N/A 7.64%* N/A N/A N/A 07/03/95
- ------------------------------------------------------------------------------------------------------------------------------------
Alger American Growth Portfolio 27.93% 18.98% 17.08%* 34.67% 17.72% 20.20% 17.94%* 01/08/89
- ------------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap Portfolio 35.38% 17.53% 19.98%* 42.50% 14.05% 18.74% 20.83%* 09/21/88
- ------------------------------------------------------------------------------------------------------------------------------------
Calvert Responsibly Invested Balanced
Portfolio 21.74% 8.95% 8.23%* 28.15% 9.38% 10.08% 8.83%* 09/04/86
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 31.00%* N/A N/A 37.89%* N/A N/A N/A 01/03/95
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 26.74% 18.58% 11.35%* 33.41% 18.10% 19.80% 11.97%* 10/22/86
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 26.99% 18.05% 12.90%* 33.68% 15.87% 19.26% 13.54%* 11/07/86
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 2.89% 5.67% 5.39%* 8.31% 13.84% 6.76% 6.00%* 02/13/87
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 19.59% 23.22%* N/A 25.89% 26.00%* N/A N/A 9/13/93
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 17.07% 10.00%* N/A 23.23% 12.48%* N/A N/A 09/13/93
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 16.19% 5.90%* N/A 22.31% 8.29%* N/A N/A 09/13/93
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 22.12% 11.25%* N/A 28.55% 13.76%* N/A N/A 09/13/93
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Short-Term Bond Portfolio 2.75% 1.00%* N/A 8.16% 3.28%* N/A N/A 09/13/93
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 19.39% 16.49%* N/A 25.67% 19.12%* N/A N/A 09/13/93
- ------------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 9.63% 3.59%* N/A 15.40% 5.49% 4.86%* N/A 10/14/91

- ------------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Growth Portfolio 23.58% 15.41% 12.88% 30.08% 16.15% 16.60% 12.88% 12/31/85
- ------------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio Class A
Shares 4.24% 7.86% 7.35%* 9.72% 13.43% 8.98% 7.99%* 05/01/87
- ------------------------------------------------------------------------------------------------------------------------------------
TCI Growth 22.98% 12.32% 10.74%* 29.46% 11.24% 13.48% 11.45%* 11/20/87
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

6
<PAGE>

ANNUITY PAYMENTS

When Annuity payments are to begin, the value of the Account is determined using
Accumulation Unit values as of the tenth Valuation Date before the first Annuity
payment is due. Such value (less any applicable premium tax) is applied to
provide an Annuity in accordance with the Annuity and investment options
elected.

The Annuity option tables found in the Contract show, for each form of Annuity,
the amount of the first Annuity payment for each $1,000 of value applied.
Thereafter, variable Annuity payments fluctuate as the Annuity Unit value(s)
fluctuates with the investment experience of the selected investment option(s).
The first payment and subsequent payments also vary depending on the assumed net
investment rate selected (3.5% or 5% per annum). Selection of a 5% rate causes a
higher first payment, but Annuity payments will increase thereafter only to the
extent that the net investment rate increases by more than 5% on an annual
basis. Annuity payments would decline if the rate failed to increase by 5%. Use
of the 3.5% assumed rate causes a lower first payment, but subsequent payments
would increase more rapidly or decline more slowly as changes occur in the net
investment rate.

When the Annuity Period begins, the Annuitant is credited with a fixed number of
Annuity Units (which does not change thereafter) in each of the designated
investment options. This number is calculated by dividing (a) by (b), where (a)
is the amount of the first Annuity payment based on a particular investment
option, and (b) is the then current Annuity Unit value for that investment
option. As noted, Annuity Unit values fluctuate from one Valuation Date to the
next; such fluctuations reflect changes in the net investment factor for the
appropriate Subaccount(s) (with a ten Valuation Date lag which gives the Company
time to process Annuity payments) and a mathematical adjustment which offsets
the assumed net investment rate of 3.5% or 5% per annum.

The operation of all these factors can be illustrated by the following
hypothetical example. These procedures will be performed separately for the
investment options selected during the Annuity Period.

EXAMPLE:
Assume that, at the date Annuity payments are to begin, there are 3,000
Accumulation Units credited under a particular Account and that the value of an
Accumulation Unit for the tenth Valuation Date prior to retirement was
$13.650000. This produces a total value of $40,950.

Assume also that no premium tax is payable and that the Annuity table in the
Contract provides, for the option elected, a first monthly variable Annuity
payment of $6.68 per $1000 of value applied; the Annuitant's first monthly
payment would thus be 40.950 multiplied by $6.68, or $273.55.

Assume then that the value of an Annuity Unit for the Valuation Date on which
the first payment was due was $13.400000. When this value is divided into the
first monthly payment, the number of Annuity Units is determined to be 20.414.
The value of this number of Annuity Units will be paid in each subsequent month.

If the net investment factor with respect to the appropriate Subaccount is
1.0015000 as of the tenth Valuation Date preceding the due date of the second
monthly payment, multiplying this factor by .9999058* (to neutralize the assumed
net investment rate of 3.5% per annum built into the number of

7
<PAGE>

Annuity Units determined above) produces a result of 1.0014057. This is then
multiplied by the Annuity Unit value for the prior Valuation Date (assume such
value to be $13.504376) to produce an Annuity Unit value of $13.523359 for the
Valuation Date in which the second payment is due.

The second monthly payment is then determined by multiplying the number of
Annuity Units by the current Annuity Unit value, or 20.414 times $13.523359,
which produces a payment of $276.07.

*If an assumed net investment rate of 5% is elected, the appropriate factor to
neutralize such assumed rate would be .9998663.

SALES MATERIAL AND ADVERTISING

The Company may include hypothetical illustrations in its sales literature that
explain the mathematical principles of dollar cost averaging, compounded
interest, tax deferred accumulation, and the mechanics of variable annuity
contracts. The Company may also discuss the difference between variable annuity
contracts and other types of savings or investment products, including, but not
limited to, personal savings accounts and certificates of deposit.

We may distribute sales literature that compares the percentage change in
Accumulation Unit values for any of the Subaccounts to established market
indices such as the Standard & Poor's 500 Stock Index and the Dow Jones
Industrial Average or to the percentage change in values of other management
investment companies that have investment objectives similar to the Subaccount
being compared.

We may publish in advertisements and reports, the ratings and other information
assigned to us by one or more independent rating organizations such as A.M. Best
Company, Duff & Phelps, Standard & Poor's Corporation and Moody's Investors
Services, Inc. The purpose of the ratings is to reflect our financial strength
and/or claims-paying ability. We may also quote ranking services such as
Morningstar's Variable Annuity/Life Performance Report and Lipper's Variable
Insurance Products Performance Analysis Service (VIPPAS), which rank variable
annuity or life Subaccounts or their underlying funds by performance and/or
investment objective. From time to time, we will quote articles from newspapers
and magazines or other publications or reports, including, but not limited to
The Wall Street Journal, Money magazine, USA Today and The VARDS Report.

The Company may provide in advertising, sales literature, periodic publications
or other materials information on various topics of interest to current and
prospective Contract Holders or Participants. These topics may include the
relationship between sectors of the economy and the economy as a whole and its
effect on various securities markets, investment strategies and techniques (such
as value investing, market timing, dollar cost averaging, asset allocation,
constant ratio transfer and account rebalancing), the advantages and
disadvantages of investing in tax-deferred and taxable investments, customer
profiles and hypothetical purchase and investment scenarios, financial
management and tax and retirement planning, and investment alternatives to
certificates of deposit and other financial instruments, including comparison
between the Contracts and the characteristics of and market for such financial
instruments.

8
<PAGE>

INDEPENDENT AUDITORS

KPMG Peat Marwick LLP, CityPlace II, Hartford, Connecticut 06103-4103, are the
independent auditors for the Separate Account and for the Company. The services
provided to the Separate Account include primarily the examination of the
Separate Account's financial statements and the review of filings made with the
SEC.

9
<PAGE>

FINANCIAL STATEMENTS

VARIABLE ANNUITY ACCOUNT B

INDEX

Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . S-2
Statement of Assets and Liabilities. . . . . . . . . . . . . . . . . . S-3
Statement of Operations. . . . . . . . . . . . . . . . . . . . . . . . S-8
Statements of Changes in Net Assets. . . . . . . . . . . . . . . . . . S-10
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . S-11
Condensed Financial Information. . . . . . . . . . . . . . . . . . . . S-13

S-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors of Aetna Life Insurance and Annuity Company and
Contract Owners of Variable Annuity Account B:

We have audited the accompanying statement of assets and liabilities of Aetna
Life Insurance and Annuity Company Variable Annuity Account B (the "Account") as
of December 31, 1995, and the related statement of operations for the year then
ended, statements of changes in net assets for each of the years in the two-year
period then ended and condensed financial information for the year ended
December 31, 1995. These financial statements and condensed financial
information are the responsibility of the Account's management. Our
responsibility is to express an opinion on these financial statements and
condensed financial information based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and condensed
financial information are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1995, by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and condensed financial information
referred to above present fairly, in all material respects, the financial
position of the Aetna Life Insurance and Annuity Company Variable Annuity
Account B as of December 31, 1995, the results of its operations for the year
then ended, changes in its net assets for each of the years in the two-year
period then ended and condensed financial information for the year ended
December 31, 1995 in conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Hartford, Connecticut
February 16, 1996

S-2

<PAGE>

VARIABLE ANNUITY ACCOUNT B

STATEMENT OF ASSETS AND LIABILITIES - December 31, 1995

<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at net asset value: (Note 1)
Aetna Variable Fund; 20,401,661 shares at $29.06 per share (cost $600,834,096)..............................$ 592,782,223
Aetna Income Shares; 6,006,058 shares at $13.00 per share (cost $74,865,329) ............................... 78,089,373
Aetna Variable Encore Fund; 6,101,341 shares at $13.30 per share (cost $78,645,161) ........................ 81,132,779
Aetna Investment Advisers Fund, Inc.; 7,664,725 shares at $14.50 per share (cost $98,736,185)............... 111,155,405
Aetna GET Fund, Series B; 1,128,914 shares at $12.40 per share (cost $11,433,593) .......................... 14,000,173
Aetna Ascent Variable Portfolio; 32,179 shares at $10.80 per share (cost $341,813) ......................... 347,383
Aetna Crossroads Variable Portfolio; 43,426 shares at $10.74 per share (cost $458,196) ..................... 466,405
Aetna Legacy Variable Portfolio; 30,419 shares at $10.64 per share (cost $321,970) ......................... 323,579
Alger American Funds:
Alger American Balanced Portfolio; 50,517 shares at $13.64 per share (cost $687,406)...................... 689,050
Alger American Growth Portfolio; 346,280 shares at $31.16 per share(cost $10,853,903) .................... 10,790,086
Alger American Income and Growth Portfolio; 57,421 shares at $17.79 per share (cost $1,028,289)........... 1,021,520
Alger American Leveraged AllCap Portfolio; 112,151 shares at $17.43 per share (cost $1,922,235)........... 1,954,796
Alger American MidCap Growth Portfolio; 167,570 shares at $19.44 per share (cost $3,250,372).............. 3,257,565
Alger American Small Capitalization Portfolio; 646,138 shares at $39.41 per share (cost $25,418,034)...... 25,464,317
Calvert Responsibly Invested Balanced Portfolio; 203,667 shares at $1.70 per share (cost $360,358).......... 346,846
Fidelity Investments Variable Insurance Products Funds:
Equity-Income Portfolio; 800,426 shares at $19.27 per share (cost $14,457,609)............................ 15,424,209
Growth Portfolio; 521,413 shares at $29.20 per share (cost $15,259,452)................................... 15,225,262
High Income Portfolio; 100,193 shares at $12.05 per share (cost $1,192,297)............................... 1,207,326
Overseas Portfolio; 117,982 shares at $17.05 per share (cost $1,960,157).................................. 2,011,591
Fidelity Investments Variable Insurance Products Funds II:
Asset Manager Portfolio; 86,288 shares at $15.79 per share (cost $1,264,129).............................. 1,362,489
Contrafund Portfolio; 867,434 shares at $13.78 per share (cost $11,830,403)............................... 11,953,244
Index 500 Portfolio; 28,699 shares at $75.71 per share (cost $2,101,954).................................. 2,172,818
Investment Grade Bond Portfolio; 56,547 shares at $12.48 per share (cost $694,235)........................ 705,701
Insurance Management Series:
Corporate Bond Fund; 1,213,125 shares at $9.79 per share (cost $11,647,482)............................... 11,876,490
Equity Growth and Income Fund; 2,084,810 shares at $12.80 per share (cost $23,768,678).................... 26,685,566
Growth Stock Fund; 17,464 shares at $10.30 per share (cost $176,265)...................................... 179,879
International Stock Fund; 156,864 shares at $10.35 per share (cost $1,580,366)............................ 1,623,538
Prime Money Fund; 5,774,492 shares at $1.00 per share (cost $5,775,674)................................... 5,774,492
U.S. Government Bond Fund; 438,127 shares at $10.29 per share (cost $4,432,728)........................... 4,508,328
Utility Fund; 797,832 shares at $11.03 per share (cost $8,000,336)........................................ 8,800,082
Janus Aspen Series:
Aggressive Growth Portfolio; 693,818 shares at $17.08 per share (cost $10,685,497)........................ 11,850,406
Balanced Portfolio; 55,709 shares at $13.03 per share (cost $699,844)..................................... 725,884
Flexible Income Portfolio; 141,156 shares at $11.11 per share (cost $1,538,432)........................... 1,568,241
Growth Portfolio; 190,925 shares at $13.45 per share (cost $2,483,088).................................... 2,567,940
Short-Term Bond Portfolio; 74,706 shares at $10.03 per share (cost $747,969).............................. 749,299
Worldwide Growth Portfolio; 365,442 shares at $15.31 per share (cost $5,341,275).......................... 5,594,914
Lexington Emerging Markets Fund; 36,371 shares at $9.38 per share (cost $345,183)........................... 341,159
Lexington Natural Resources Trust; 166,302 shares at $11.30 per share (cost $1,690,491)..................... 1,879,208

S-3

<PAGE>

<CAPTION>
<S> <C>
Neuberger & Berman Advisers Management Trust - Growth Portfolio; 323,147 shares at $25.86
per share (cost $8,279,416) .............................................................................. 8,356,574
Scudder Variable Life Investment Fund - International Portfolio; 893,880 shares
at $11.82 per share (cost $9,913,254)..................................................................... 10,565,665
TCI Portfolios, Inc.:
TCI Balanced; 69,585 shares at $7.04 per share (cost $473,338) ........................................... 489,878
TCI Growth; 4,503,433 shares at $12.06 per share (cost $46,105,299) ...................................... 54,311,402
TCI International; 113,062 shares at $5.33 per share (cost $586,969) ..................................... 602,619
--------------
NET ASSETS ...................................................................................................$1,130,935,704
--------------
--------------
</TABLE>

STATEMENT OF ASSETS AND LIABILITIES - December 31, 1995 (continued)

Net assets represented by:

<TABLE>
<CAPTION>
ACCUMULATION
UNIT
UNITS VALUE
----- -----
<S> <C> <C> <C>
Reserves for annuity contracts in accumulation and payment period:
AETNA VARIABLE FUND:
Non-Qualified 1964 ................................................... 5,159.1 $149.975........ $773,737
Non-Qualified I ...................................................... 157,693.1 169.682........ 26,757,709
Non-Qualified II ..................................................... 91,497.4 119.527........ 10,936,439
Non-Qualified III .................................................... 129,657.4 114.464........ 14,841,063
Non-Qualified V ......................................................30,554,956.8 13.972........ 426,924,429
Non-Qualified VI ..................................................... 538,384.8 13.060........ 7,031,177
Non-Qualified VII .................................................... 3,068,782.3 14.001........ 42,967,268
Reserves for annuity contracts in payment period (Note 1) .............................................. 62,550,401
AETNA INCOME SHARES:
Non-Qualified I ...................................................... 7,341.1 46.171........ 338,944
Non-Qualified II ..................................................... 46,936.3 48.232........ 2,263,808
Non-Qualified III .................................................... 11,092.5 46.616........ 517,093
Non-Qualified V ...................................................... 4,853,662.2 12.212........ 59,271,792
Non-Qualified VI ..................................................... 36,561.4 11.140........ 407,298
Non-Qualified VII .................................................... 988,198.5 12.037........ 11,894,717
Reserves for annuity contracts in payment period (Note 1) .............................................. 3,395,721
AETNA VARIABLE ENCORE FUND:
Non-Qualified I ...................................................... 19,658.0 37.683........ 740,766
Non-Qualified II ..................................................... 53,953.2 38.335........ 2,068,303
Non-Qualified III .................................................... 21,094.2 36.081........ 761,100
Non-Qualified V ...................................................... 4,354,271.6 11.007........ 47,927,808
Non-Qualified VI ..................................................... 8,053.2 10.728........ 86,394
Non-Qualified VII .................................................... 2,694,033.8 10.968........ 29,548,408
AETNA INVESTMENT ADVISERS FUND, INC.:
Non-Qualified I ...................................................... 38,200.7 18.002........ 687,677
Non-Qualified II ..................................................... 101,130.6 17.932........ 1,813,429
Non-Qualified III .................................................... 26,617.3 17.889........ 476,148
Non-Qualified V ...................................................... 6,430,772.1 13.803........ 88,762,468

S-4

<PAGE>

<CAPTION>
<S> <C> <C> <C>
Non-Qualified VI ..................................................... 14,277.8 11.589........ 165,459
Non-Qualified VII .................................................... 919,744.2 13.602........ 12,510,415
Reserves for annuity contracts in payment period (Note 1) .............................................. 6,739,809
AETNA GET FUND, SERIES B:
Non-Qualified V ...................................................... 1,089,582.2 12.849........ 14,000,173
AETNA ASCENT VARIABLE PORTFOLIO:
Non-Qualified V ...................................................... 16,790.9 10.652........ 178,853
Non-Qualified VII .................................................... 15,831.9 10.645........ 168,530
AETNA CROSSROADS VARIABLE PORTFOLIO:
Non-Qualified V ...................................................... 16,953.1 10.594........ 179,603
Non-Qualified VII .................................................... 27,089.2 10.587........ 286,802
AETNA LEGACY VARIABLE PORTFOLIO:
Non-Qualified V ...................................................... 2,222.3 10.443........ 23,208
Non-Qualified VII .................................................... 28,777.7 10.438........ 300,371
ALGER AMERICAN FUNDS:
ALGER AMERICAN BALANCED PORTFOLIO:
Non-Qualified VII .................................................... 54,737.3 12.588........ 689,050
ALGER AMERICAN GROWTH PORTFOLIO:
Non-Qualified V ...................................................... 275,493.6 10.157........ 2,798,288
Non-Qualified VII .................................................... 615,696.6 12.980........ 7,991,798
ALGER AMERICAN INCOME AND GROWTH PORTFOLIO:
Non-Qualified VII .................................................... 95,828.9 10.660........ 1,021,520
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO:
Non-Qualified VII .................................................... 159,378.8 12.265........ 1,954,796
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO:
Non-Qualified VII .................................................... 233,109.8 13.974........ 3,257,565
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO:
Non-Qualified V ...................................................... 1,364,900.9 13.714........ 18,718,117
Non-Qualified VII .................................................... 507,425.1 13.295........ 6,746,200
CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO:
Non-Qualified V ...................................................... 25,730.0 13.480........ 346,846
FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUNDS:
EQUITY - INCOME PORTFOLIO:
Non-Qualified V ...................................................... 294,244.1 11.054........ 3,252,637
Non-Qualified VII..................................................... 913,516.8 13.324........ 12,171,572
GROWTH PORTFOLIO:
Non-Qualified V ...................................................... 288,576.0 10.066........ 2,904,786
Non-Qualified VII..................................................... 885,545.2 13.913........ 12,320,476
HIGH INCOME PORTFOLIO:
Non-Qualified VII..................................................... 112,818.5 10.701........ 1,207,326
OVERSEAS PORTFOLIO:
Non-Qualified V ...................................................... 33,813.3 10.052........ 339,882
Non-Qualified VII..................................................... 150,017.4 11.143........ 1,671,709
FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUNDS II
ASSET MANAGER PORTFOLIO:
Non-Qualified VII..................................................... 116,810.0 11.664........ 1,362,489
CONTRAFUND PORTFOLIO:
Non-Qualified V ...................................................... 379,862.0 10.468........ 3,976,320
Non-Qualified VII..................................................... 684,272.2 11.658........ 7,976,924
INDEX 500 PORTFOLIO:
Non-Qualified VII..................................................... 191,671.3 11.336........ 2,172,818

S-5

<PAGE>

<CAPTION>
<S> <C> <C> <C>
INVESTMENT GRADE BOND PORTFOLIO:
Non-Qualified VII..................................................... 66,574.4 10.600........ 705,701
INSURANCE MANAGEMENT SERIES:
CORPORATE BOND FUND:
Non-Qualified VII..................................................... 1,020,320.8 11.640........ 11,876,490
EQUITY GROWTH AND INCOME FUND:
Non-Qualified VII..................................................... 2,057,363.9 12.971........ 26,685,566
GROWTH STOCK FUND:
Non-Qualified VII..................................................... 17,503.1 10.277........ 179,879
INTERNATIONAL STOCK FUND:
Non-Qualified VII..................................................... 158,318.6 10.255........ 1,623,538
PRIME MONEY FUND:
Non-Qualified VII..................................................... 554,933.5 10.406........ 5,774,492
U.S. GOVERNMENT BOND FUND:
Non-Qualified VII..................................................... 417,293.2 10.804........ 4,508,328
UTILITY FUND:
Non-Qualified VII..................................................... 727,600.6 12.095........ 8,800,082
JANUS ASPEN SERIES:
AGGRESSIVE GROWTH PORTFOLIO:
Non-Qualified V....................................................... 723,838.5 12.992........ 9,404,275
Non-Qualified VII..................................................... 187,583.5 13.040........ 2,446,131
BALANCED PORTFOLIO:
Non-Qualified V....................................................... 7,771.5 10.835........ 84,204
Non-Qualified VII..................................................... 53,016.1 12.104........ 641,680
FLEXIBLE INCOME PORTFOLIO:
Non-Qualified V....................................................... 84,047.6 12.094........ 1,016,439
Non-Qualified VII..................................................... 45,713.6 12.071........ 551,802
GROWTH PORTFOLIO:
Non-Qualified V....................................................... 26,022.4 10.870........ 282,874
Non-Qualified VII..................................................... 176,110.7 12.975........ 2,285,066
SHORT-TERM BOND PORTFOLIO:
Non-Qualified V....................................................... 2,677.9 10.325........ 27,650
Non-Qualified VII..................................................... 67,034.3 10.765........ 721,649
WORLDWIDE GROWTH PORTFOLIO:
Non-Qualified V....................................................... 227,582.2 10.893........ 2,479,004
Non-Qualified VII..................................................... 252,485.1 12.341........ 3,115,910
LEXINGTON EMERGING MARKETS FUND:
Non-Qualified VII..................................................... 36,773.1 9.277........ 341,159
LEXINGTON NATURAL RESOURCES TRUST:
Non-Qualified V ...................................................... 162,462.2 10.479........ 1,702,501
Non-Qualified VII .................................................... 16,932.5 10.436........ 176,707
NEUBERGER & BERMAN ADVISERS
MANAGEMENT TRUST - GROWTH PORTFOLIO:
Non-Qualified V ...................................................... 526,542.1 15.871........ 8,356,574
SCUDDER VARIABLE LIFE INVESTMENT FUND:
INTERNATIONAL PORTFOLIO:
Non-Qualified V ...................................................... 720,017.3 14.674........ 10,565,665
TCI PORTFOLIOS, INC.:
TCI BALANCED:
Non-Qualified VII..................................................... 40,406.8 12.124........ 489,878

S-6

<PAGE>

TCI GROWTH:
Non-Qualified II ..................................................... 82,191.6 13.224........ 1,086,884
Non-Qualified III .................................................... 24,926.7 13.107........ 326,719
Non-Qualified V ...................................................... 2,735,782.0 14.091........ 38,549,513
Non-Qualified VI ..................................................... 10,258.8 11.884........ 121,912
Non-Qualified VII .................................................... 1,014,612.2 14.021........ 14,226,374
TCI INTERNATIONAL:
Non-Qualified VII...................................................... 57,691.1 10.446........ 602,619
--------------
$1,130,935,704
--------------
--------------
</TABLE>

See Notes to Financial Statements.

S-7

<PAGE>

VARIABLE ANNUITY ACCOUNT B

STATEMENT OF OPERATIONS - Year Ended December 31, 1995

<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Dividends: (Notes 1 and 3)
Aetna Variable Fund.................................................................... $97,535,899
Aetna Income Shares.................................................................... 4,800,986
Aetna Variable Encore Fund............................................................. 61,853
Aetna Investment Advisers Fund, Inc.................................................... 7,359,482
Aetna GET Fund, Series B .............................................................. 359,007
Aetna Ascent Variable Portfolio........................................................ 7,378
Aetna Crossroads Variable Portfolio.................................................... 8,108
Aetna Legacy Variable Portfolio........................................................ 5,625
Alger American Fund - Alger American Balanced Portfolio................................ 267
Alger American Fund - Alger American Growth Portfolio.................................. 1,379
Alger American Fund - Alger American MidCap Portfolio.................................. 2
Calvert Responsibly Invested Balanced Portfolio..................... .................. 30,986
Fidelity Investments Variable Insurance Products Fund - Equity-Income Portfolio........ 126,924
Fidelity Investments Variable Insurance Products Fund - Growth Portfolio............... 1,403
Fidelity Investments Variable Insurance Products Fund - Overseas Portfolio............. 106
Fidelity Investments Variable Insurance Products Fund II - Asset Manager Portfolio..... 3,070
Fidelity Investments Variable Insurance Products Fund II - Contrafund Portfolio........ 146,072
Insurance Management Series - Corporate Bond Fund...................................... 425,532
Insurance Management Series - Equity Growth and Income Fund............................ 249,502
Insurance Management Series - Prime Money Fund......................................... 225,699
Insurance Management Series - U.S. Government Bond Fund................................ 98,938
Insurance Management Series - Utility Fund............................................. 186,623
Janus Aspen Series - Aggressive Growth Portfolio....................................... 113,664
Janus Aspen Series - Balanced Portfolio................................................ 5,931
Janus Aspen Series - Flexible Income Portfolio......................................... 51,680
Janus Aspen Series - Growth Portfolio.................................................. 41,839
Janus Aspen Series - Short-Term Bond Portfolio......................................... 15,670
Janus Aspen Series - Worldwide Growth Portfolio........................................ 17,957
Lexington Emerging Markets Fund........................................................ 3,323
Lexington National Resources Trust..................................................... 7,842
Neuberger & Berman Advisers Management Trust - Growth Portfolio........................ 111,452
Scudder Variable Life Investment Fund - International Portfolio........................ 40,450
TCI Portfolios, Inc. - TCI Balanced.................................................... 5,359
TCI Portfolios, Inc. - TCI Growth...................................................... 47,667
Total investment income ............................................................ 112,097,675
Valuation period deductions (Note 2)................................................... (11,786,592)
Net investment income ................................................................. 100,311,083

S-8

<PAGE>

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on sales of investments: (Notes 1 and 4)
Proceeds from sales .................................................................$495,934,611
Cost of investments sold ............................................................ 463,921,121
Net realized gain ................................................................. 32,013,490
Net unrealized gain (loss) on investments:
Beginning of year ................................................................... (44,356,052)
End of year ......................................................................... 28,746,944
Net unrealized gain ............................................................... 73,102,996
Net realized and unrealized gain on investments ....................................... 105,116,486
------------
Net increase in net assets resulting from operations .................................. $205,427,569
------------
------------
</TABLE>

See Notes to Financial Statements.

S-9

<PAGE>

VARIABLE ANNUITY ACCOUNT B

STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994
---- ----
<S> <C> <C>
FROM OPERATIONS:
Net investment income ................................................ $100,311,083 $74,514,904
Net realized and unrealized gain (loss) on investments ............... 105,116,486 (89,424,840)
-------------- ------------
Net increase (decrease) in net assets resulting from operations .... 205,427,569 (14,909,936)
-------------- ------------
FROM UNIT TRANSACTIONS:
Variable annuity contract purchase payments .......................... 178,474,387 170,170,873
Sales and administrative charges deducted by the Company ............. (34,250) (8,045)
-------------- ------------
Net variable annuity contract purchase payments .................... 178,440,137 170,162,828
Transfers from the Company for mortality guarantee adjustments........ 1,565,140 537,027
Transfers from (to) the Company's fixed account options .............. 4,144,061 (6,000,310)
Redemptions by contract holders ...................................... (46,390,791) (32,737,461)
Annuity payments ..................................................... (9,198,421) (7,564,589)
Other ................................................................ 1,143,373 (127,555)
-------------- ------------
Net increase in net assets from unit transactions .................. 129,703,499 124,269,940
-------------- ------------
Change in net assets ................................................. 335,131,068 109,360,004
NET ASSETS:
Beginning of year .................................................... 795,804,636 686,444,632
-------------- ------------
End of year .......................................................... $1,130,935,704 $795,804,636
-------------- ------------
-------------- ------------
</TABLE>

See Notes to Financial Statements.

S-10

<PAGE>

VARIABLE ANNUITY ACCOUNT B

NOTES TO FINANCIAL STATEMENTS - December 31, 1995

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Variable Annuity Account B ("Account") is registered under the Investment
Company Act of 1940 as a unit investment trust. The Account is sold
exclusively for use with annuity contracts that may be entitled to tax-
deferred treatment under specific sections of the Internal Revenue Code of
1986, as amended.

The accompanying financial statements of the Account have been prepared in
accordance with generally accepted accounting principles.

a. VALUATION OF INVESTMENTS
Investments in the following Funds are stated at the closing net asset
value per share as determined by each Fund on December 31, 1995:

<TABLE>
<CAPTION>
<S> <C>
Aetna Variable Fund Insurance Management Series:
Aetna Income Shares - Corporate Bond Fund
Aetna Variable Encore Fund - Equity Growth and Income Fund
Aetna Investment Advisers Fund, Inc. - Growth Stock Fund
Aetna GET Fund, Series B - International Stock Fund
Aetna Ascent Variable Portfolio - Prime Money Fund
Aetna Crossroads Variable Portfolio - U.S. Government Bond Fund
Aetna Legacy Variable Portfolio - Utility Fund
Alger American Funds: Janus Aspen Series:
- Alger American Balanced Portfolio - Aggressive Growth Portfolio
- Alger American Growth Portfolio - Balanced Portfolio
- Alger American Income and Growth Portfolio - Flexible Income Portfolio
- Alger American Leveraged AllCap Portfolio - Growth Portfolio
- Alger American MidCap Growth Portfolio - Short-Term Bond Portfolio
- Alger American Small Capitalization Portfolio - Worldwide Growth Portfolio
Calvert Responsibly Invested Balanced Portfolio Lexington Emerging Markets Fund:
Fidelity Investments Variable Insurance Products Fund: Lexington Natural Resources Trust
- Equity-Income Portfolio Neuberger & Berman Advisers Management Trust:
- Growth Portfolio - Growth Portfolio
- High Income Portfolio Scudder Variable Life Investment Fund:
- Overseas Portfolio - International Portfolio
Fidelity Investments Variable Insurance Products Fund II: TCI Portfolios, Inc.:
- Asset Manager Portfolio - TCI Balanced
- Contrafund Portfolio - TCI Growth
- Index 500 Portfolio - TCI International
- Investment Grade Bond Portfolio
</TABLE>

b. OTHER
Investment transactions are accounted for on a trade date basis and
dividend income is recorded on the ex-dividend date. The cost of
investments sold is determined by specific identification.

S-11

<PAGE>

VARIABLE ANNUITY ACCOUNT B

NOTES TO FINANCIAL STATEMENTS - December 31, 1995 (continued)

c. FEDERAL INCOME TAXES
The operations of the Account form a part of, and are taxed with, the total
operations of Aetna Life Insurance and Annuity Company ("Company") which is
taxed as a life insurance company under the Internal Revenue Code of 1986,
as amended.

d. ANNUITY RESERVES
Annuity reserves held in the Separate Accounts are computed for currently
payable contracts according to the Progressive Annuity, a49, 1971
Individual Annuity Mortality, 1971 Group Annuity Mortality, 83a, and 1983
Group Annuity Mortality tables using various assumed interest rates not to
exceed seven percent. Mortality experience is monitored by the Company.
Charges to annuity reserves for mortality experience are reimbursed to the
Company if the reserves required are less than originally estimated. If
additional reserves are required, the Company reimburses the Account.

2. VALUATION PERIOD DEDUCTIONS

Deductions by the Account for mortality and expense risk charges are made
in accordance with the terms of the contracts and are paid to the Company.

3. DIVIDEND INCOME

On an annual basis, the Funds distribute substantially all of their
taxable income and realized capital gains to their shareholders.
Distributions to the Account are automatically reinvested in shares of the
Funds. The Account's proportionate share of each Fund's undistributed net
investment income and accumulated net realized gain on investments is
included in net unrealized gain in the Statement of Operations.

4. PURCHASES AND SALES OF INVESTMENTS

The cost of purchases and proceeds from sales of investments other than
short-term investments for the year ended Decmeber 31, 1995 aggregated
$725,949,193 and $495,934,611, respectively.

5. ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect amounts reported therein. Although actual results
could differ from these estimates, any such differences are expected to be
immaterial to the net assets of the Account.

S-12

<PAGE>

VARIABLE ANNUITY ACCOUNT B
CONDENSED FINANCIAL INFORMATION

CHANGE IN VALUE OF ACCUMULATION UNIT - JANUARY 1, 1995 TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------

Increase
Value at Value at in Value of
Beginning End of Accumulation
of Year Year Unit
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AETNA VARIABLE FUND:
Non-Qualified 1964 ....................................... $114.828 $149.975 30.61%
Non-Qualified I .......................................... 129.838 169.682 30.69%
Non-Qualified II ......................................... 91.515 119.527 30.61%
Non-Qualified III ........................................ 87.638 114.464 30.61%
Non-Qualified V .......................................... 10.698 13.972 30.61%
Non-Qualified VI ......................................... 9.993 13.060 30.69%
Non-Qualified VII ........................................ 10.737 14.001 30.40%
- -------------------------------------------------------------------------------------------------------
AETNA INCOME SHARES:
Non-Qualified I .......................................... $39.514 $46.171 16.85%
Non-Qualified II ......................................... 41.302 48.232 16.78%
Non-Qualified III ........................................ 39.919 46.616 16.78%
Non-Qualified V .......................................... 10.457 12.212 16.78%
Non-Qualified VI ......................................... 9.534 11.140 16.85%
Non-Qualified VII ........................................ 10.324 12.037 16.59%
- -------------------------------------------------------------------------------------------------------
AETNA VARIABLE ENCORE FUND:
Non-Qualified I .......................................... $35.958 $37.683 4.80%
Non-Qualified II ......................................... 36.602 38.335 4.73%
Non-Qualified III ........................................ 34.450 36.081 4.73%
Non-Qualified V .......................................... 10.509 11.007 4.73%
Non-Qualified VI ......................................... 10.237 10.728 4.80%
Non-Qualified VII ........................................ 10.489 10.968 4.57%
- -------------------------------------------------------------------------------------------------------
AETNA INVESTMENT ADVISERS FUND, INC.:
Non-Qualified I .......................................... $14.299 $18.002 25.90%
Non-Qualified II ......................................... 14.252 17.932 25.82%
Non-Qualified III ........................................ 14.218 17.889 25.82%
Non-Qualified V .......................................... 10.971 13.803 25.81%
Non-Qualified VI ......................................... 10.000 11.589 15.89% (4)
Non-Qualified VII ........................................ 10.828 13.602 25.62%
- -------------------------------------------------------------------------------------------------------
AETNA GET FUND, SERIES B:
Non-Qualified V .......................................... $10.159 $12.849 26.48%
- -------------------------------------------------------------------------------------------------------
AETNA ASCENT VARIABLE PORTFOLIO:
Non-Qualified V .......................................... $10.000 $10.652 6.52% (7)
Non-Qualified VII ........................................ 10.000 10.645 6.45% (7)
- -------------------------------------------------------------------------------------------------------
AETNA CROSSROADS VARIABLE PORTFOLIO:
Non-Qualified V .......................................... $10.000 $10.594 5.94% (7)
Non-Qualified VII ........................................ 10.000 10.587 5.87% (7)
- -------------------------------------------------------------------------------------------------------
AETNA LEGACY VARIABLE PORTFOLIO:
Non-Qualified V .......................................... $10.000 $10.443 4.43% (8)
Non-Qualified VII ........................................ 10.000 10.438 4.38% (8)
- -------------------------------------------------------------------------------------------------------

</TABLE>

S-13

<PAGE>

VARIABLE ANNUITY ACCOUNT B

CONDENSED FINANCIAL INFORMATION

CHANGE IN VALUE OF ACCUMULATION UNIT - JANUARY 1, 1995 TO DECEMBER 31, 1995
(continued)

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------

Increase
Value at Value at in Value of
Beginning End of Accumulation
of Year Year Unit
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ALGER AMERICAN FUNDS:
ALGER AMERICAN BALANCED PORTFOLIO:
Non-Qualified VII ........................................ $10.000 $12.588 25.88% (1)
- -------------------------------------------------------------------------------------------------------
ALGER AMERICAN GROWTH PORTFOLIO:
Non-Qualified V .......................................... $10.000 $10.157 1.57% (7)
Non-Qualified VII ........................................ 10.000 12.980 29.80% (2)
- -------------------------------------------------------------------------------------------------------
ALGER AMERICAN INCOME AND GROWTH PORTFOLIO:
Non-Qualified VII ........................................ $10.000 $10.660 6.60% (5)
- -------------------------------------------------------------------------------------------------------
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO:
Non-Qualified VII ........................................ $10.000 $12.265 22.65% (5)
- -------------------------------------------------------------------------------------------------------
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO:
Non-Qualified VII ........................................ $10.000 $13.974 39.74% (1)
- -------------------------------------------------------------------------------------------------------
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO:
Non-Qualified V .......................................... $9.622 $13.714 42.52%
Non-Qualified VII ........................................ 10.000 13.295 32.95% (3)
- -------------------------------------------------------------------------------------------------------
CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO:
Non-Qualified V .......................................... $10.518 $13.480 28.17%
- -------------------------------------------------------------------------------------------------------
FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUNDS:
EQUITY - INCOME PORTFOLIO:
Non-Qualified V .......................................... $10.000 $11.054 10.54% (7)
Non-Qualified VII ........................................ 10.002 13.324 33.21%
- -------------------------------------------------------------------------------------------------------
GROWTH PORTFOLIO:
Non-Qualified V .......................................... $10.000 $10.066 0.66% (7)
Non-Qualified VII ........................................ 10.423 13.913 33.48%
- -------------------------------------------------------------------------------------------------------
HIGH INCOME PORTFOLIO:
Non-Qualified VII ........................................ $10.000 $10.701 7.01% (5)
- -------------------------------------------------------------------------------------------------------
OVERSEAS PORTFOLIO:
Non-Qualified V .......................................... $10.000 $10.052 0.52% (7)
Non-Qualified VII ........................................ 10.000 11.143 11.43% (1)
- -------------------------------------------------------------------------------------------------------
FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUNDS II:
ASSET MANAGER PORTFOLIO:
Non-Qualified VII ........................................ $10.000 $11.664 16.64% (1)
- -------------------------------------------------------------------------------------------------------
CONTRAFUND PORTFOLIO:
Non-Qualified V .......................................... $10.000 $10.468 4.68% (7)
Non-Qualified VII ........................................ 10.000 11.658 16.58% (5)
- -------------------------------------------------------------------------------------------------------
INDEX 500 PORTFOLIO:
Non-Qualified VII ........................................ $10.000 $11.336 13.36% (5)
- -------------------------------------------------------------------------------------------------------
INVESTMENT GRADE BOND PORTFOLIO:
Non-Qualified VII ........................................ $10.000 $10.600 6.00% (6)
- -------------------------------------------------------------------------------------------------------
INSURANCE MANAGEMENT SERIES:
CORPORATE BOND FUND:
Non-Qualified VII ........................................ $9.814 $11.640 18.61%
- -------------------------------------------------------------------------------------------------------
</TABLE>

S-14

<PAGE>

VARIABLE ANNUITY ACCOUNT B

CONDENSED FINANCIAL INFORMATION

CHANGE IN VALUE OF ACCUMULATION UNIT - JANUARY 1, 1995 TO DECEMBER 31, 1995
(continued)

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Increase
(Decrease)
Value at Value at in Value of
Beginning End of Accumulation
of Year Year Unit
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
EQUITY GROWTH AND INCOME FUND:
Non-Qualified VII ....................................... $9.838 $12.971 31.84%
- -------------------------------------------------------------------------------------------------------
GROWTH STOCK FUND:
Non-Qualified VII ........................................ $10.000 $10.277 2.77% (9)
- -------------------------------------------------------------------------------------------------------
INTERNATIONAL STOCK FUND:
Non-Qualified VII ........................................ $10.000 $10.255 2.55% (4)
- -------------------------------------------------------------------------------------------------------
PRIME MONEY FUND:
Non-Qualified VII ........................................ $10.033 $10.406 3.71%
- -------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT BOND FUND:
Non-Qualified VII ........................................ $10.073 $10.804 7.25%
- -------------------------------------------------------------------------------------------------------
UTILITY FUND:
Non-Qualified VII ........................................ $9.881 $12.095 22.40%
- -------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES:
AGGRESSIVE GROWTH PORTFOLIO:
Non-Qualified V .......................................... $10.319 $12.992 25.91%
Non-Qualified VII ........................................ 10.374 13.040 25.71%
- -------------------------------------------------------------------------------------------------------
BALANCED PORTFOLIO:
Non-Qualified V .......................................... $10.000 $10.835 8.35% (7)
Non-Qualified VII ........................................ 10.000 12.104 21.04% (1)
- -------------------------------------------------------------------------------------------------------
FLEXIBLE INCOME PORTFOLIO:
Non-Qualified V .......................................... $9.886 $12.094 22.33%
Non-Qualified VII ........................................ 9.884 12.071 22.13%
- -------------------------------------------------------------------------------------------------------
GROWTH PORTFOLIO:
Non-Qualified V .......................................... $10.000 $10.870 8.70% (7)
Non-Qualified VII ........................................ 10.109 12.975 28.35%
- -------------------------------------------------------------------------------------------------------
SHORT TERM BOND PORTFOLIO:
Non-Qualified V .......................................... $10.000 $10.325 3.25% (7)
Non-Qualified VII ........................................ 10.000 10.765 7.65% (1)
- -------------------------------------------------------------------------------------------------------
WORLDWIDE GROWTH PORTFOLIO:
Non-Qualified V .......................................... $10.000 $10.893 8.93% (7)
Non-Qualified VII ........................................ 10.000 12.341 23.41% (3)
- -------------------------------------------------------------------------------------------------------
LEXINGTON EMERGING MARKETS FUND:
Non-Qualified VII ........................................ $9.795 $9.277 (5.28%)
- -------------------------------------------------------------------------------------------------------
LEXINGTON NATURAL RESOURCES TRUST:
Non-Qualified V .......................................... $9.079 $10.479 15.42%
Non-Qualified VII ........................................ 9.056 10.436 15.24%
- -------------------------------------------------------------------------------------------------------
NEUBERGER & BERMAN ADVISERS
MANAGEMENT TRUST - GROWTH PORTFOLIO:
Non-Qualified V .......................................... $12.199 $15.871 30.10%
- -------------------------------------------------------------------------------------------------------
SCUDDER VARIABLE LIFE INVESTMENT FUND - INTERNATIONAL
PORTFOLIO:
Non-Qualified V .......................................... $13.372 $14.674 9.74%
- -------------------------------------------------------------------------------------------------------
</TABLE>

S-15

<PAGE>

VARIABLE ANNUITY ACCOUNT B

CONDENSED FINANCIAL INFORMATION

CHANGE IN VALUE OF ACCUMULATION UNIT - JANUARY 1, 1995 TO DECEMBER 31, 1995
(continued)

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------

NON-QUALIFIED 1964 Individual contract issued from December 1, 1964 to
March 14, 1967.

NON-QUALIFIED I Individual contract issued in connection with deferred
compensation plans from March 15, 1967 through April
30, 1975; other individual contracts issued from March
15, 1967 through October 31, 1975; and group contracts
issued from March 15, 1967 to December 31, 1975.

NON-QUALIFIED II Individual contracts issued in connection with deferred
compensation plans since May 1, 1975; other individual
contracts issued since November 1, 1975; and group
contracts issued since January 1, 1976.

NON-QUALIFIED III Group contracts issued in connection with deferred
compensation plans for tax-exempt organizations
(non-governmental only) since May 3, 1982.

NON-QUALIFIED V Group Aetna Plus contracts issued in connection
with Deferred Compensation Plans issued since
August 28, 1992.

NON-QUALIFIED VI Certain existing contracts that were converted to ACES,
the new administrative system (previously valued under
Non-Qualified I).

NON-QUALIFIED VII Certain individual and group contracts issued as
non-qualified deferred annuity contracts or Individual
Retirement Annuity contracts issued since May 4, 1994.

1 - Reflects less than a full year of performance activity. The initial
Accumulation Unit Value was established at $10.000 during January 1995 when
the fund became available under the contract.

2 - Reflects less than a full year of performance activity. The initial
Accumulation Unit Value was established at $10.000 during February 1995 when
the fund became available under the contract.

3 - Reflects less than a full year of performance activity. The initial
Accumulation Unit Value was established at $10.000 during April 1995 when
the fund became available under the contract.

S-16

<PAGE>

VARIABLE ANNUITY ACCOUNT B

CONDENSED FINANCIAL INFORMATION

CHANGE IN VALUE OF ACCUMULATION UNIT - JANUARY 1, 1995 TO DECEMBER 31, 1995
(continued)

- --------------------------------------------------------------------------------

4 - Reflects less than a full year of performance activity. The initial
Accumulation Unit Value was established at $10.000 during May 1995 when the
fund became available under the contract.

5 - Reflects less than a full year of performance activity. The initial
Accumulation Unit Value was established at $10.000 during June 1995 when the
fund became available under the contract.

6 - Reflects less than a full year of performance activity. The initial
Accumulation Unit Value was established at $10.000 during July 1995 when the
fund became available under the contract.

7 - Reflects less than a full year of performance activity. The initial
Accumulation Unit Value was established at $10.000 during August 1995 when
the fund became available under the contract.

8 - Reflects less than a full year of performance activity. The initial
Accumulation Unit Value was established at $10.000 during September 1995
when the fund became available under the contract.

9 - Reflects less than a full year of performance activity. The initial
Accumulation Unit Value was established at $10.000 during November 1995 when
the fund became available under the contract.

S-17

<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
Index

<TABLE>
<CAPTION>
PAGE
---
<S> <C>
Independent Auditors' Report..................................... F-2
Consolidated Financial Statements:
Consolidated Statements of Income for the Years Ended
December 31, 1995, 1994 and 1993.............................. F-3
Consolidated Balance Sheets as of December 31, 1995 and 1994... F-4
Consolidated Statements of Changes in Shareholder's Equity for
the Years Ended
December 31, 1995, 1994 and 1993.............................. F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993.............................. F-6
Notes to Consolidated Financial Statements....................... F-7
</TABLE>

F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT

The Shareholder and Board of Directors
Aetna Life Insurance and Annuity Company:

We have audited the accompanying consolidated balance sheets of Aetna Life
Insurance and Annuity Company and Subsidiaries as of December 31, 1995 and 1994,
and the related consolidated statements of income, changes in shareholder's
equity and cash flows for each of the years in the three-year period ended
December 31, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Aetna Life Insurance
and Annuity Company and Subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995, in conformity with generally accepted
accounting principles.

As discussed in Note 1 to the consolidated financial statements, in 1993 the
Company changed its methods of accounting for certain investments in debt and
equity securities.

KPMG Peat Marwick LLP

Hartford, Connecticut
February 6, 1996

F-2
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Consolidated Statements of Income
(millions)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Revenue:
Premiums............................................. $ 130.8 $ 124.2 $ 82.1
Charges assessed against policyholders............... 318.9 279.0 251.5
Net investment income................................ 1,004.3 917.2 911.9
Net realized capital gains........................... 41.3 1.5 9.5
Other income......................................... 42.0 10.3 9.5
-------- -------- --------
Total revenue...................................... 1,537.3 1,332.2 1,264.5
-------- -------- --------
Benefits and expenses:
Current and future benefits.......................... 915.3 854.1 818.4
Operating expenses................................... 318.7 235.2 207.2
Amortization of deferred policy acquisition costs.... 43.3 26.4 19.8
-------- -------- --------
Total benefits and expenses........................ 1,277.3 1,115.7 1,045.4
-------- -------- --------
Income before federal income taxes..................... 260.0 216.5 219.1
Federal income taxes................................. 84.1 71.2 76.2
-------- -------- --------
Net income............................................. $ 175.9 $ 145.3 $ 142.9
-------- -------- --------
-------- -------- --------
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-3
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Consolidated Balance Sheets
(millions)

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
ASSETS
- -------------------------------------------------------
Investments:
Debt securities, available for sale:
(amortized cost: $11,923.7 and $10,577.8)........... $12,720.8 $10,191.4
Equity securities, available for sale:
Non-redeemable preferred stock (cost: $51.3 and
$43.3)............................................ 57.6 47.2
Investment in affiliated mutual funds (cost: $173.4
and $187.1)....................................... 191.8 181.9
Common stock (cost: $6.9 at December 31, 1995)..... 8.2 --
Short-term investments............................... 15.1 98.0
Mortgage loans....................................... 21.2 9.9
Policy loans......................................... 338.6 248.7
Limited partnership.................................. -- 24.4
--------- ---------
Total investments................................ 13,353.3 10,801.5

Cash and cash equivalents.............................. 568.8 623.3
Accrued investment income.............................. 175.5 142.2
Premiums due and other receivables..................... 37.3 75.8
Deferred policy acquisition costs...................... 1,341.3 1,164.3
Reinsurance loan to affiliate.......................... 655.5 690.3
Other assets........................................... 26.2 15.9
Separate Accounts assets............................... 10,987.0 7,420.8
--------- ---------
Total assets..................................... $27,144.9 $20,934.1
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDER'S EQUITY
- -------------------------------------------------------
Liabilities:
Future policy benefits............................... $ 3,594.6 $ 2,912.7
Unpaid claims and claim expenses..................... 27.2 23.8
Policyholders' funds left with the Company........... 10,500.1 8,949.3
--------- ---------
Total insurance reserve liabilities.............. 14,121.9 11,885.8
Other liabilities.................................... 259.2 302.1
Federal income taxes:
Current............................................ 24.2 3.4
Deferred........................................... 169.6 233.5
Separate Accounts liabilities........................ 10,987.0 7,420.8
--------- ---------
Total liabilities................................ 25,561.9 19,845.6
--------- ---------
--------- ---------
Shareholder's equity:
Common stock, par value $50 (100,000 shares
authorized;
55,000 shares issued and outstanding)............... 2.8 2.8
Paid-in capital...................................... 407.6 407.6
Net unrealized capital gains (losses)................ 132.5 (189.0)
Retained earnings.................................... 1,040.1 867.1
--------- ---------
Total shareholder's equity....................... 1,583.0 1,088.5
--------- ---------
Total liabilities and shareholder's equity..... $27,144.9 $20,934.1
--------- ---------
--------- ---------
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-4
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Consolidated Statements of Changes in Shareholder's Equity
(millions)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Shareholder's equity, beginning of year................ $ 1,088.5 $ 1,246.7 $ 990.1
Net change in unrealized capital gains (losses)........ 321.5 (303.5) 113.7
Net income............................................. 175.9 145.3 142.9
Common stock dividends declared........................ (2.9) -- --
--------- --------- ---------
Shareholder's equity, end of year...................... $ 1,583.0 $ 1,088.5 $ 1,246.7
--------- --------- ---------
--------- --------- ---------
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-5
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Consolidated Statements of Cash Flows
(millions)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income........................................... $ 175.9 $ 145.3 $ 142.9
Adjustments to reconcile net income to net cash
provided by operating activities:
Increase in accrued investment income.............. (33.3) (17.5) (11.1)
Decrease (increase) in premiums due and other
receivables....................................... 25.4 1.3 (5.6)
Increase in policy loans........................... (89.9) (46.0) (36.4)
Increase in deferred policy acquisition costs...... (177.0) (105.9) (60.5)
Decrease in reinsurance loan to affiliate.......... 34.8 27.8 31.8
Net increase in universal life account balances.... 393.4 164.7 126.4
Increase in other insurance reserve liabilities.... 79.0 75.1 86.1
Net increase in other liabilities and other
assets............................................ 15.0 53.9 7.0
Decrease in federal income taxes................... (6.5) (11.7) (3.7)
Net accretion of discount on bonds................. (66.4) (77.9) (88.1)
Net realized capital gains......................... (41.3) (1.5) (9.5)
Other, net......................................... -- (1.0) 0.2
---------- ---------- ----------
Net cash provided by operating activities........ 309.1 206.6 179.5
---------- ---------- ----------
Cash Flows from Investing Activities:
Proceeds from sales of:
Debt securities available for sale................. 4,207.2 3,593.8 473.9
Equity securities.................................. 180.8 93.1 89.6
Mortgage loans..................................... 10.7 -- --
Limited partnership................................ 26.6 -- --
Investment maturities and collections of:
Debt securities available for sale................. 583.9 1,289.2 2,133.3
Short-term investments............................. 106.1 30.4 19.7
Cost of investment purchases in:
Debt securities.................................... (6,034.0) (5,621.4) (3,669.2)
Equity securities.................................. (170.9) (162.5) (157.5)
Short-term investments............................. (24.7) (106.1) (41.3)
Mortgage loans..................................... (21.3) -- --
Limited partnership................................ -- (25.0) --
---------- ---------- ----------
Net cash used for investing activities........... (1,135.6) (908.5) (1,151.5)
---------- ---------- ----------
Cash Flows from Financing Activities:
Deposits and interest credited for investment
contracts........................................... 1,884.5 1,737.8 2,117.8
Withdrawals of investment contracts.................. (1,109.6) (948.7) (1,000.3)
Dividends paid to shareholder........................ (2.9) -- --
---------- ---------- ----------
Net cash provided by financing activities........ 772.0 789.1 1,117.5
---------- ---------- ----------

Net (decrease) increase in cash and cash equivalents... (54.5) 87.2 145.5
Cash and cash equivalents, beginning of year........... 623.3 536.1 390.6
---------- ---------- ----------
Cash and cash equivalents, end of year................. $ 568.8 $ 623.3 $ 536.1
---------- ---------- ----------
---------- ---------- ----------
Supplemental cash flow information:
Income taxes paid, net............................... $ 90.2 $ 82.6 $ 79.9
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-6
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1995, 1994, and 1993

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Aetna Life Insurance and Annuity Company and its wholly owned subsidiaries
(collectively, the "Company") is a provider of financial services and life
insurance products in the United States. The Company has two business segments,
financial services and life insurance.

The financial services products include individual and group annuity contracts
which offer a variety of funding and distribution options for personal and
employer-sponsored retirement plans that qualify under Internal Revenue Code
Sections 401, 403, 408 and 457, and individual and group non-qualified annuity
contracts. These contracts may be immediate or deferred and are offered
primarily to individuals, pension plans, small businesses and employer-sponsored
groups in the health care, government, education (collectively "not-for-profit"
organizations) and corporate markets. Financial services also include pension
plan administrative services.

The life insurance products include universal life, variable universal life,
interest sensitive whole life and term insurance. These products are offered
primarily to individuals, small businesses, employer sponsored groups and
executives of Fortune 2000 companies.

BASIS OF PRESENTATION

The consolidated financial statements include Aetna Life Insurance and Annuity
Company and its wholly owned subsidiaries, Aetna Insurance Company of America
and Aetna Private Capital, Inc. Aetna Life Insurance and Annuity Company is a
wholly owned subsidiary of Aetna Retirement Services, Inc. ("ARSI"). ARSI is a
wholly owned subsidiary of Aetna Life and Casualty Company ("Aetna"). Two
subsidiaries, Systematized Benefits Administrators, Inc. ("SBA"), and Aetna
Investment Services, Inc. ("AISI"), which were previously reported in the
consolidated financial statements were distributed in the form of dividends to
ARSI in December of 1995. The impact to the Company's financial statements of
distributing these dividends was immaterial.

The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles. Intercompany transactions have been
eliminated. Certain reclassifications have been made to 1994 and 1993 financial
information to conform to the 1995 presentation.

ACCOUNTING CHANGES

Accounting for Certain Investments in Debt and Equity Securities

On December 31, 1993, the Company adopted Financial Accounting Standard ("FAS")
No. 115, Accounting for Certain Investments in Debt and Equity Securities, which
requires the classification of debt securities into three categories: "held to
maturity", which are carried at amortized cost; "available for sale", which are
carried at fair value with changes in fair value recognized as a component of
shareholder's equity; and "trading", which are carried at fair value with
immediate recognition in income of changes in fair value.

Initial adoption of this standard resulted in a net increase of $106.8 million,
net of taxes of $57.5 million, to net unrealized gains in shareholder's equity.
These amounts exclude gains and losses allocable to experience-rated (including
universal life) contractholders. Adoption of FAS No. 115 did not have a material
effect on deferred policy acquisition costs.

F-7
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from reported results using those estimates.

CASH AND CASH EQUIVALENT

Cash and cash equivalents include cash on hand, money market instruments and
other debt issues with a maturity of ninety days or less when purchased.

INVESTMENTS

Debt Securities

At December 31, 1995 and 1994, all of the Company's debt securities are
classified as available for sale and carried at fair value. These securities are
written down (as realized losses) for other than temporary decline in value.
Unrealized gains and losses related to these securities, after deducting amounts
allocable to experience-rated contractholders and related taxes, are reflected
in shareholder's equity.

Fair values for debt securities are based on quoted market prices or dealer
quotations. Where quoted market prices or dealer quotations are not available,
fair values are measured utilizing quoted market prices for similar securities
or by using discounted cash flow methods. Cost for mortgage-backed securities is
adjusted for unamortized premiums and discounts, which are amortized using the
interest method over the estimated remaining term of the securities, adjusted
for anticipated prepayments.

Purchases and sales of debt securities are recorded on the trade date.

Equity Securities

Equity securities are classified as available for sale and carried at fair value
based on quoted market prices or dealer quotations. Equity securities are
written down (as realized losses) for other than temporary declines in value.
Unrealized gains and losses related to such securities are reflected in
shareholder's equity. Purchases and sales are recorded on the trade date.

The investment in affiliated mutual funds represents an investment in the Aetna
Series Fund, Inc., a retail mutual fund which has been seeded by the Company,
and is carried at fair value.

Mortgage Loans and Policy Loans

Mortgage loans and policy loans are carried at unpaid principal balances net of
valuation reserves, which approximates fair value, and are generally secured.
Purchases and sales of mortgage loans are recorded on the closing date.

F-8
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Limited Partnership

The Company's limited partnership investment was carried at the amount invested
plus the Company's share of undistributed operating results and unrealized gains
(losses), which approximates fair value. The Company disposed of the limited
partnership during 1995.

Short-Term Investments

Short-term investments, consisting primarily of money market instruments and
other debt issues purchased with an original maturity of over ninety days and
less than one year, are considered available for sale and are carried at fair
value, which approximates amortized cost.

DEFERRED POLICY ACQUISITION COSTS

Certain costs of acquiring insurance business have been deferred. These costs,
all of which vary with and are primarily related to the production of new
business, consist principally of commissions, certain expenses of underwriting
and issuing contracts and certain agency expenses. For fixed ordinary life
contracts, such costs are amortized over expected premium-paying periods. For
universal life and certain annuity contracts, such costs are amortized in
proportion to estimated gross profits and adjusted to reflect actual gross
profits. These costs are amortized over twenty years for annuity pension
contracts, and over the contract period for universal life contracts.

Deferred policy acquisition costs are written off to the extent that it is
determined that future policy premiums and investment income or gross profits
would not be adequate to cover related losses and expenses.

INSURANCE RESERVE LIABILITIES

The Company's liabilities include reserves related to fixed ordinary life, fixed
universal life and fixed annuity contracts. Reserves for future policy benefits
for fixed ordinary life contracts are computed on the basis of assumed
investment yield, assumed mortality, withdrawals and expenses, including a
margin for adverse deviation, which generally vary by plan, year of issue and
policy duration. Reserve interest rates range from 2.25% to 10.00%. Assumed
investment yield is based on the Company's experience. Mortality and withdrawal
rate assumptions are based on relevant Aetna experience and are periodically
reviewed against both industry standards and experience.

Reserves for fixed universal life (included in Future Policy Benefits) and fixed
deferred annuity contracts (included in Policyholders' Funds Left With the
Company) are equal to the fund value. The fund value is equal to cumulative
deposits less charges plus credited interest thereon, without reduction for
possible future penalties assessed on premature withdrawal. For guaranteed
interest options, the interest credited ranged from 4.00% to 6.38% in 1995 and
4.00% to 5.85% in 1994. For all other fixed options, the interest credited
ranged from 5.00% to 7.00% in 1995 and 5.00% to 7.50% in 1994.

Reserves for fixed annuity contracts in the annuity period and for future
amounts due under settlement options are computed actuarially using the 1971
Individual Annuity Mortality Table, the 1983 Individual Annuity Mortality Table,
the

F-9
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
1983 Group Annuity Mortality Table and, in some cases, mortality improvement
according to scales G and H, at assumed interest rates ranging from 3.5% to
9.5%. Reserves relating to contracts with life contingencies are included in
Future Policy Benefits. For other contracts, the reserves are reflected in
Policyholders' Funds Left With the Company.

Unpaid claims for all lines of insurance include benefits for reported losses
and estimates of benefits for losses incurred but not reported.

PREMIUMS, CHARGES ASSESSED AGAINST POLICYHOLDERS, BENEFITS AND EXPENSES

Premiums are recorded as revenue when due for fixed ordinary life contracts.
Charges assessed against policyholders' funds for cost of insurance, surrender
charges, actuarial margin and other fees are recorded as revenue for universal
life and certain annuity contracts. Policy benefits and expenses are recorded in
relation to the associated premiums or gross profit so as to result in
recognition of profits over the expected lives of the contracts.

SEPARATE ACCOUNTS

Assets held under variable universal life, variable life and variable annuity
contracts are segregated in Separate Accounts and are invested, as designated by
the contractholder or participant under a contract, in shares of Aetna Variable
Fund, Aetna Income Shares, Aetna Variable Encore Fund, Aetna Investment Advisers
Fund, Inc., Aetna GET Fund, or The Aetna Series Fund Inc., which are managed by
the Company or other selected mutual funds not managed by the Company. Separate
Accounts assets and liabilities are carried at fair value except for those
relating to a guaranteed interest option which is offered through a Separate
Account. The assets of the Separate Account supporting the guaranteed interest
option are carried at an amortized cost of $322.2 million for 1995 (fair value
$343.9 million) and $149.7 million for 1994 (fair value $146.3 million), since
the Company bears the investment risk where the contract is held to maturity.
Reserves relating to the guaranteed interest option are maintained at fund value
and reflect interest credited at rates ranging from 4.5% to 8.38% in both 1995
and 1994. Separate Accounts assets and liabilities are shown as separate
captions in the Consolidated Balance Sheets. Deposits, investment income and net
realized and unrealized capital gains (losses) of the Separate Accounts are not
reflected in the Consolidated Statements of Income (with the exception of
realized capital gains (losses) on the sale of assets supporting the guaranteed
interest option). The Consolidated Statements of Cash Flows do not reflect
investment activity of the Separate Accounts.

FEDERAL INCOME TAXES

The Company is included in the consolidated federal income tax return of Aetna.
The Company is taxed at regular corporate rates after adjusting income reported
for financial statement purposes for certain items. Deferred income tax benefits
result from changes during the year in cumulative temporary differences between
the tax basis and book basis of assets and liabilities.

F-10
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993

2. INVESTMENTS
Investments in debt securities available for sale as of December 31, 1995 were
as follows:

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
(MILLIONS)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government agencies and corporations... $ 539.5 $ 47.5 $ -- $ 587.0
Obligations of states and political
subdivisions................................ 41.4 12.4 -- 53.8
U.S. Corporate securities:
Financial.................................. 2,764.4 110.3 2.1 2,872.6
Utilities.................................. 454.4 27.8 1.0 481.2
Other...................................... 2,177.7 159.5 1.2 2,336.0
--------- ---------- ----- ---------
Total U.S. Corporate securities............ 5,396.5 297.6 4.3 5,689.8
Foreign securities:
Government................................. 316.4 26.1 2.0 340.5
Financial.................................. 534.2 45.4 3.5 576.1
Utilities.................................. 236.3 32.9 -- 269.2
Other...................................... 215.7 15.1 -- 230.8
--------- ---------- ----- ---------
Total Foreign securities................... 1,302.6 119.5 5.5 1,416.6
Residential mortgage-backed securities:
Residential pass-throughs.................. 556.7 99.2 1.8 654.1
Residential CMOs........................... 2,383.9 167.6 2.2 2,549.3
--------- ---------- ----- ---------
Total Residential mortgage-backed
securities................................ 2,940.6 266.8 4.0 3,203.4
Commercial/Multifamily mortgage-backed
securities.................................. 741.9 32.3 0.2 774.0
--------- ---------- ----- ---------
Total Mortgage-backed securities........... 3,682.5 299.1 4.2 3,977.4
Other asset-backed securities................ 961.2 35.5 0.5 996.2
--------- ---------- ----- ---------
Total debt securities available for sale..... $11,923.7 $811.6 $14.5 $12,720.8
--------- ---------- ----- ---------
--------- ---------- ----- ---------
</TABLE>

F-11
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993

2. INVESTMENTS (CONTINUED)
Investments in debt securities available for sale as of December 31, 1994 were
as follows:

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
(MILLIONS)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government agencies and corporations... $ 1,396.1 $ 2.0 $ 84.2 $ 1,313.9
Obligations of states and political
subdivisions................................ 37.9 1.2 -- 39.1
U.S. Corporate securities:
Financial.................................. 2,216.9 3.8 109.4 2,111.3
Utilities.................................. 100.1 -- 7.9 92.2
Other...................................... 1,344.3 6.0 67.9 1,282.4
--------- ---------- ---------- ---------
Total U.S. Corporate securities............ 3,661.3 9.8 185.2 3,485.9
Foreign securities:
Government................................. 434.4 1.2 33.9 401.7
Financial.................................. 368.2 1.1 23.0 346.3
Utilities.................................. 204.4 2.5 9.5 197.4
Other...................................... 46.3 0.8 1.5 45.6
--------- ---------- ---------- ---------
Total Foreign securities................... 1,053.3 5.6 67.9 991.0
Residential mortgage-backed securities:
Residential pass-throughs.................. 627.1 81.5 5.0 703.6
Residential CMOs........................... 2,671.0 32.9 139.4 2,564.5
--------- ---------- ---------- ---------
Total Residential mortgage-backed
securities.................................. 3,298.1 114.4 144.4 3,268.1
Commercial/Multifamily mortgage-backed
securities.................................. 435.0 0.2 21.3 413.9
--------- ---------- ---------- ---------
Total Mortgage-backed securities............. 3,733.1 114.6 165.7 3,682.0
Other asset-backed securities................ 696.1 0.2 16.8 679.5
--------- ---------- ---------- ---------
Total debt securities available for sale..... $10,577.8 $133.4 $519.8 $10,191.4
--------- ---------- ---------- ---------
--------- ---------- ---------- ---------
</TABLE>

At December 31, 1995 and 1994, net unrealized appreciation (depreciation) of
$797.1 million and $(386.4) million, respectively, on available for sale debt
securities included $619.1 million and $(308.6) million, respectively, related
to experience-rated contractholders, which were not included in shareholder's
equity.

F-12
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993

2. INVESTMENTS (CONTINUED)
The amortized cost and fair value of debt securities for the year ended December
31, 1995 are shown below by contractual maturity. Actual maturities may differ
from contractual maturities because securities may be restructured, called, or
prepaid.

<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
--------- ---------
(MILLIONS)
<S> <C> <C>
Due to mature:
One year or less..................................... $ 348.8 $ 351.1
After one year through five years.................... 2,100.2 2,159.5
After five years through ten years................... 2,516.0 2,663.4
After ten years...................................... 2,315.0 2,573.2
Mortgage-backed securities........................... 3,682.5 3,977.4
Other asset-backed securities........................ 961.2 996.2
--------- ---------
Total................................................ $11,923.7 $12,720.8
--------- ---------
--------- ---------
</TABLE>

The Company engages in securities lending whereby certain securities from its
portfolio are loaned to other institutions for short periods of time. Cash
collateral, which is in excess of the market value of the loaned securities, is
deposited by the borrower with a lending agent, and retained and invested by the
lending agent to generate additional income for the Company. The market value of
the loaned securities is monitored on a daily basis with additional collateral
obtained or refunded as the market value fluctuates. At December 31, 1995, the
Company had loaned securities (which are reflected as invested assets on the
Consolidated Balance Sheets) with a market value of approximately $264.5
million.

At December 31, 1995 and 1994, debt securities carried at $7.4 million and $7.0
million, respectively, were on deposit as required by regulatory authorities.

The valuation reserve for mortgage loans was $3.1 million at December 31, 1994.
There was no valuation reserve for mortgage loans at December 31, 1995. The
carrying value of non-income producing investments was $0.1 million and $0.2
million at December 31, 1995 and 1994, respectively.

F-13
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993

2. INVESTMENTS (CONTINUED)
Investments in a single issuer, other than obligations of the U.S. government,
with a carrying value in excess of 10% of the Company's shareholder's equity at
December 31, 1995 are as follows:

<TABLE>
<CAPTION>
AMORTIZED
DEBT SECURITIES COST FAIR VALUE
---------- ----------
(MILLIONS)
<S> <C> <C>
General Electric Corporation........................... $ 314.9 $ 329.3
General Motors Corporation............................. 273.9 284.5
Associates Corporation of North America................ 230.2 239.1
Society National Bank.................................. 203.5 222.3
Ciesco, L.P............................................ 194.9 194.9
Countrywide Funding.................................... 171.2 172.7
Baxter International................................... 168.9 168.9
Time Warner............................................ 158.6 166.1
Ford Motor Company..................................... 156.7 162.6
</TABLE>

The portfolio of debt securities at December 31, 1995 and 1994 included $662.5
million and $318.3 million, respectively, (5% and 3%, respectively, of the debt
securities) of investments that are considered "below investment grade". "Below
investment grade" securities are defined to be securities that carry a rating
below BBB-/Baa3, by Standard & Poors/ Moody's Investor Services, respectively.
The increase in below investment grade securities is the result of a change in
investment strategy, which has reduced the Company's holdings in residential
mortgage-back securities and increased the Company's holdings in corporate
securities. Residential mortgage-back securities are subject to higher
prepayment risk and lower credit risk, while corporate securities earning a
comparable yield are subject to higher credit risk and lower prepayment risk. We
expect the percentage of below investment grade securities will increase in
1996, but we expect that the overall average quality of the portfolio of debt
securities will remain at AA-. Of these below investment grade assets, $14.5
million and $31.8 million, at December 31, 1995 and 1994, respectively, were
investments that were purchased at investment grade, but whose ratings have
since been downgraded.

Included in residential mortgage-back securities are collateralized mortgage
obligations ("CMOs") with carrying values of $2.5 billion and $2.6 billion at
December 31, 1995 and 1994, respectively. The principal risks inherent in
holding CMOs are prepayment and extension risks related to dramatic decreases
and increases in interest rates whereby the CMOs would be subject to repayments
of principal earlier or later than originally anticipated. At December 31, 1995
and 1994, approximately 79% and 85%, respectively, of the Company's CMO holdings
consisted of sequential and planned amortization class debt securities which are
subject to less prepayment and extension risk than other CMO instruments. At
December 31, 1995 and 1994, approximately 81% and 82%, respectively, of the
Company's CMO holdings were collateralized by residential mortgage loans, on
which the timely payment of principal and interest was backed by specified
government agencies (e.g., GNMA, FNMA, FHLMC).

If due to declining interest rates, principal was to be repaid earlier than
originally anticipated, the Company could be affected by a decrease in
investment income due to the reinvestment of these funds at a lower interest
rate. Such prepayments may result in a duration mismatch between assets and
liabilities which could be corrected as cash from prepayments could be
reinvested at an appropriate duration to adjust the mismatch.

F-14
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993

2. INVESTMENTS (CONTINUED)
Conversely, if due to increasing interest rates, principal was to be repaid
slower than originally anticipated, the Company could be affected by a decrease
in cash flow which reduces the ability to reinvest expected principal repayments
at higher interest rates. Such slower payments may result in a duration mismatch
between assets and liabilities which could be corrected as available cash flow
could be reinvested at an appropriate duration to adjust the mismatch.

At December 31, 1995 and 1994, approximately 3% and 4%, respectively, of the
Company's CMO holdings consisted of interest-only strips ("IOs") or
principal-only strips ("POs"). IOs receive payments of interest and POs receive
payments of principal on the underlying pool of mortgages. The risk inherent in
holding POs is extension risk related to dramatic increases in interest rates
whereby the future payments due on POs could be repaid much slower than
originally anticipated. The extension risks inherent in holding POs was
mitigated somewhat by offsetting positions in IOs. During dramatic increases in
interest rates, IOs would generate more future payments than originally
anticipated.

The risk inherent in holding IOs is prepayment risk related to dramatic
decreases in interest rates whereby future IO cash flows could be much less than
originally anticipated and in some cases could be less than the original cost of
the IO. The risks inherent in IOs are mitigated somewhat by holding offsetting
positions in POs. During dramatic decreases in interest rates POs would generate
future cash flows much quicker than originally anticipated.

Investments in available for sale equity securities were as follows:

<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
------ ---------- ---------- ----------
(MILLIONS)
<S> <C> <C> <C> <C>
1995
Equity Securities................ $231.6 $ 27.2 $ 1.2 $ 257.6
------ ----- --- ----------
1994
Equity Securities................ $230.5 $ 6.5 $ 7.9 $ 229.1
------ ----- --- ----------
</TABLE>

3. CAPITAL GAINS AND LOSSES ON INVESTMENT OPERATIONS
Realized capital gains or losses are the difference between proceeds received
from investments sold or prepaid, and amortized cost. Net realized capital gains
as reflected in the Consolidated Statements of Income are after deductions for
net realized capital gains (losses) allocated to experience-rated contracts of
$61.1 million, $(29.1) million and $(54.8) million for the years ended December
31, 1995, 1994, and 1993, respectively. Net realized capital gains (losses)
allocated to experience-rated contracts are deferred and subsequently reflected
in credited rates on an amortized basis. Net unamortized gains (losses),
reflected as a component of Policyholders' Funds Left With the Company, were
$7.3 million and $(50.7) million at the end of December 31, 1995 and 1994,
respectively.

Changes to the mortgage loan valuation reserve and writedowns on debt securities
are included in net realized capital gains (losses) and amounted to $3.1
million, $1.1 million and $(98.5) million, of which $2.2 million, $0.8 million
and $(91.5) million were allocable to experience-rated contractholders, for the
years ended December 31, 1995, 1994 and 1993, respectively. The 1993 losses were
primarily related to writedowns of interest-only mortgage-backed securities to
their fair value.

F-15
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993

3. CAPITAL GAINS AND LOSSES ON INVESTMENT OPERATIONS (CONTINUED)
Net realized capital gains (losses) on investments, net of amounts allocated to
experience-rated contracts, were as follows:

<TABLE>
<CAPTION>
1995 1994 1993
----- ----- ------
(MILLIONS)
<S> <C> <C> <C>
Debt securities........................................ $32.8 $ 1.0 $ 9.6
Equity securities...................................... 8.3 0.2 0.1
Mortgage loans......................................... 0.2 0.3 (0.2)
----- ----- ------
Pretax realized capital gains.......................... $41.3 $ 1.5 $ 9.5
----- ----- ------
After-tax realized capital gains....................... $25.8 $ 1.0 $ 6.2
----- ----- ------
</TABLE>

Gross gains of $44.6 million, $26.6 million and $33.3 million and gross losses
of $11.8 million, $25.6 million and $23.7 million were realized from the sales
of investments in debt securities in 1995, 1994 and 1993, respectively.

Changes in unrealized capital gains (losses), excluding changes in unrealized
capital gains (losses) related to experience-rated contracts, for the years
ended December 31, were as follows:

<TABLE>
<CAPTION>
1995 1994 1993
------ -------- ------
(MILLIONS)
<S> <C> <C> <C>
Debt securities........................................ $255.9 $ (242.1) $164.3
Equity securities...................................... 27.3 (13.3) 10.6
Limited partnership.................................... 1.8 (1.8) --
------ -------- ------
285.0 (257.2) 174.9
Deferred federal income taxes (See Note 6)............. (36.5) 46.3 61.2
------ -------- ------
Net change in unrealized capital gains (losses)........ $321.5 $ (303.5) $113.7
------ -------- ------
------ -------- ------
</TABLE>

Net unrealized capital gains (losses) allocable to experience-rated contracts of
$515.0 million and $104.1 million at December 31, 1995 and $(260.9) million and
$(47.7) million at December 31, 1994 are reflected on the Consolidated Balance
Sheet in Policyholders' Funds Left With the Company and Future Policy Benefits,
respectively, and are not included in shareholder's equity.

F-16
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993

3. CAPITAL GAINS AND LOSSES ON INVESTMENT OPERATIONS (CONTINUED)
Shareholder's equity included the following unrealized capital gains (losses),
which are net of amounts allocable to experience-rated contractholders, at
December 31:

<TABLE>
<CAPTION>
1995 1994 1993
------ ------- -------
(MILLIONS)
<S> <C> <C> <C>
Debt securities
Gross unrealized capital gains....................... $179.3 $ 27.4 $ 164.3
Gross unrealized capital losses...................... (1.3) (105.2) --
------ ------- -------
178.0 (77.8) 164.3
Equity securities
Gross unrealized capital gains....................... 27.2 6.5 12.0
Gross unrealized capital losses...................... (1.2) (7.9) (0.1)
------ ------- -------
26.0 (1.4) 11.9
Limited Partnership
Gross unrealized capital gains....................... -- -- --
Gross unrealized capital losses...................... -- (1.8) --
------ ------- -------
Deferred federal income taxes (See Note 6)............. 71.5 108.0 61.7
------ ------- -------
Net unrealized capital gains (losses).................. $132.5 $(189.0) $ 114.5
------ ------- -------
------ ------- -------
</TABLE>

4. NET INVESTMENT INCOME
Sources of net investment income were as follows:

<TABLE>
<CAPTION>
1995 1994 1993
-------- ------ ------
(MILLIONS)
<S> <C> <C> <C>
Debt securities........................................ $ 891.5 $823.9 $828.0
Preferred stock........................................ 4.2 3.9 2.3
Investment in affiliated mutual funds.................. 14.9 5.2 2.9
Mortgage loans......................................... 1.4 1.4 1.5
Policy loans........................................... 13.7 11.5 10.8
Reinsurance loan to affiliate.......................... 46.5 51.5 53.3
Cash equivalents....................................... 38.9 29.5 16.8
Other.................................................. 8.4 6.7 7.7
-------- ------ ------
Gross investment income................................ 1,019.5 933.6 923.3
Less investment expenses............................... (15.2) (16.4) (11.4)
-------- ------ ------
Net investment income.................................. $1,004.3 $917.2 $911.9
-------- ------ ------
-------- ------ ------
</TABLE>

Net investment income includes amounts allocable to experience-rated
contractholders of $744.2 million, $677.1 million and $661.3 million for the
years ended December 31, 1995, 1994 and 1993, respectively. Interest credited to
contractholders is included in Current and Future Benefits.

F-17
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993

5. DIVIDEND RESTRICTIONS AND SHAREHOLDER'S EQUITY
The Company distributed $2.9 million in the form of dividends of two of its
subsidiaries, SBA and AISI, to Aetna Retirement Services, Inc. in 1995.

The amount of dividends that may be paid to the shareholder in 1996 without
prior approval by the Insurance Commissioner of the State of Connecticut is
$70.0 million.

The Insurance Department of the State of Connecticut (the "Department")
recognizes as net income and shareholder's equity those amounts determined in
conformity with statutory accounting practices prescribed or permitted by the
Department, which differ in certain respects from generally accepted accounting
principles. Statutory net income was $70.0 million, $64.9 million and $77.6
million for the years ended December 31, 1995, 1994 and 1993, respectively.
Statutory shareholder's equity was $670.7 million and $615.0 million as of
December 31, 1995 and 1994, respectively.

At December 31, 1995 and December 31, 1994, the Company does not utilize any
statutory accounting practices which are not prescribed by insurance regulators
that, individually or in the aggregate, materially affect statutory
shareholder's equity.

6. FEDERAL INCOME TAXES
The Company is included in the consolidated federal income tax return of Aetna.
Aetna allocates to each member an amount approximating the tax it would have
incurred were it not a member of the consolidated group, and credits the member
for the use of its tax saving attributes in the consolidated return.

In August 1993, the Omnibus Budget Reconciliation Act of 1993 (OBRA) was enacted
which resulted in an increase in the federal corporate tax rate from 34% to 35%
retroactive to January 1, 1993. The enactment of OBRA resulted in an increase in
the deferred tax liability of $3.4 million at date of enactment, which is
included in the 1993 deferred tax expense.

Components of income tax expense (benefits) were as follows:

<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -------
(MILLIONS)
<S> <C> <C> <C>
Current taxes (benefits):
Income from operations............................... $82.9 $78.7 $ 87.1
Net realized capital gains........................... 28.5 (33.2) 18.1
----- ----- -------
111.4 45.5 105.2
----- ----- -------
Deferred taxes (benefits):
Income from operations............................... (14.4) (8.0) (14.2)
Net realized capital gains........................... (12.9) 33.7 (14.8)
----- ----- -------
(27.3) 25.7 (29.0)
----- ----- -------
Total................................................ $84.1 $71.2 $ 76.2
----- ----- -------
----- ----- -------
</TABLE>

F-18
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993

6. FEDERAL INCOME TAXES (CONTINUED)
Income tax expense was different from the amount computed by applying the
federal income tax rate to income before federal income taxes for the following
reasons:

<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
(MILLIONS)
<S> <C> <C> <C>
Income before federal income taxes..................... $260.0 $216.5 $219.1
Tax rate............................................... 35% 35% 35%
------ ------ ------
Application of the tax rate............................ 91.0 75.8 76.7
------ ------ ------
Tax effect of:
Excludable dividends................................. (9.3) (8.6) (8.7)
Tax reserve adjustments.............................. 3.9 2.9 4.7
Reinsurance transaction.............................. (0.5) 1.9 (0.2)
Tax rate change on deferred liabilities.............. -- -- 3.7
Other, net........................................... (1.0) (0.8) --
------ ------ ------
Income tax expense................................... $ 84.1 $ 71.2 $ 76.2
------ ------ ------
------ ------ ------
</TABLE>

The tax effects of temporary differences that give rise to deferred tax assets
and deferred tax liabilities at December 31 are presented below:

<TABLE>
<CAPTION>
1995 1994
------ ------
(MILLIONS)
<S> <C> <C>
Deferred tax assets:
Insurance reserves................................... $290.4 $211.5
Net unrealized capital losses........................ -- 136.3
Unrealized gains allocable to experience-rated
contracts........................................... 216.7 --
Investment losses not currently deductible........... 7.3 15.5
Postretirement benefits other than pensions.......... 7.7 8.4
Other................................................ 32.0 28.3
------ ------
Total gross assets..................................... 554.1 400.0
Less valuation allowance............................... -- 136.3
------ ------
Deferred tax assets, net of valuation.................. 554.1 263.7
Deferred tax liabilities:
Deferred policy acquisition costs.................... 433.0 385.2
Unrealized losses allocable to experience-rated
contracts........................................... -- 108.0
Market discount...................................... 4.4 3.6
Net unrealized capital gains......................... 288.2 --
Other................................................ (1.9) 0.4
------ ------
Total gross liabilities................................ 723.7 497.2
------ ------
Net deferred tax liability............................. $169.6 $233.5
------ ------
------ ------
</TABLE>

F-19
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993

6. FEDERAL INCOME TAXES (CONTINUED)
Net unrealized capital gains and losses are presented in shareholder's equity
net of deferred taxes. At December 31, 1994, $81.0 million of net unrealized
capital losses were reflected in shareholder's equity without deferred tax
benefits. As of December 31, 1995, no valuation allowance was required for
unrealized capital gains and losses. The reversal of the valuation allowance had
no impact on net income in 1995.

The "Policyholders' Surplus Account," which arose under prior tax law, is
generally that portion of a life insurance company's statutory income that has
not been subject to taxation. As of December 31, 1983, no further additions
could be made to the Policyholders' Surplus Account for tax return purposes
under the Deficit Reduction Act of 1984. The balance in such account was
approximately $17.2 million at December 31, 1995. This amount would be taxed
only under certain conditions. No income taxes have been provided on this amount
since management believes the conditions under which such taxes would become
payable are remote.

The Internal Revenue Service ("Service") has completed examinations of the
consolidated federal income tax returns of Aetna through 1986. Discussions are
being held with the Service with respect to proposed adjustments. However,
management believes there are adequate defenses against, or sufficient reserves
to provide for, such challenges. The Service has commenced its examinations for
the years 1987 through 1990.

7. BENEFIT PLANS
Employee Pension Plans--The Company, in conjunction with Aetna, has
non-contributory defined benefit pension plans covering substantially all
employees. The plans provide pension benefits based on years of service and
average annual compensation (measured over sixty consecutive months of highest
earnings in a 120 month period). Contributions are determined using the
Projected Unit Credit Method and, for qualified plans subject to ERISA
requirements, are limited to the amounts that are currently deductible for tax
reporting purposes. The accumulated benefit obligation and plan assets are
recorded by Aetna. The accumulated plan assets exceed accumulated plan benefits.
There has been no funding to the plan for the years 1993 through 1995, and
therefore, no expense has been recorded by the Company.

Agent Pension Plans--The Company, in conjunction with Aetna, has a non-qualified
pension plan covering certain agents. The plan provides pension benefits based
on annual commission earnings. The accumulated plan assets exceed accumulated
plan benefits. There has been no funding to the plan for the years 1993 through
1995, and therefore, no expense has been recorded by the Company.

Employee Postretirement Benefits--In addition to providing pension benefits,
Aetna also provides certain postretirement health care and life insurance
benefits, subject to certain caps, for retired employees. Medical and dental
benefits are offered to all full-time employees retiring at age 50 with at least
15 years of service or at age 65 with at least 10 years of service. Retirees are
required to contribute to the plans based on their years of service with Aetna.

The cost to the Company associated with the Aetna postretirement plans for 1995,
1994 and 1993 were $1.4 million, $1.0 million and $0.8 million, respectively.

Agent Postretirement Benefits--The Company, in conjunction with Aetna, also
provides certain postemployment health care and life insurance benefits for
certain agents.

F-20
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993

7. BENEFIT PLANS (CONTINUED)

The cost to the Company associated to the agents' postretirement plans for 1995,
1994 and 1993 were $0.8 million, $0.7 million and $0.6 million, respectively.

Incentive Savings Plan--Substantially all employees are eligible to participate
in a savings plan under which designated contributions, which may be invested in
common stock of Aetna or certain other investments, are matched, up to 5% of
compensation, by Aetna. Pretax charges to operations for the incentive savings
plan were $4.9 million, $3.3 million and $3.1 million in 1995, 1994 and 1993,
respectively.

Stock Plans--Aetna has a stock incentive plan that provides for stock options
and deferred contingent common stock or cash awards to certain key employees.
Aetna also has a stock option plan under which executive and middle management
employees of Aetna may be granted options to purchase common stock of Aetna at
the market price on the date of grant or, in connection with certain business
combinations, may be granted options to purchase common stock on different
terms. The cost to the Company associated with the Aetna stock plans for 1995,
1994 and 1993, was $6.3 million, $1.7 million and $0.4 million, respectively.

8. RELATED PARTY TRANSACTIONS
The Company is compensated by the Separate Accounts for bearing mortality and
expense risks pertaining to variable life and annuity contracts. Under the
insurance contracts, the Separate Accounts pay the Company a daily fee which, on
an annual basis, ranges, depending on the product, from .25% to 1.80% of their
average daily net assets. The Company also receives fees from the variable life
and annuity mutual funds and The Aetna Series Fund for serving as investment
adviser. Under the advisory agreements, the Funds pay the Company a daily fee
which, on an annual basis, ranges, depending on the fund, from .25% to 1.00% of
their average daily net assets. The advisory agreements also call for the
variable funds to pay their own administrative expenses and for The Aetna Series
Fund to pay certain administrative expenses. The Company also receives fees
(expressed as a percentage of the average daily net assets) from The Aetna
Series Fund for providing administration, shareholder services and promoting
sales. The amount of compensation and fees received from the Separate Accounts
and Funds, included in Charges Assessed Against Policyholders, amounted to
$128.1 million, $104.6 million and $93.6 million in 1995, 1994 and 1993,
respectively. The Company may waive advisory fees at its discretion.

The Company may, from time to time, make reimbursements to a Fund for some or
all of its operating expenses. Reimbursement arrangements may be terminated at
any time without notice.

Since 1981, all domestic individual non-participating life insurance of Aetna
and its subsidiaries has been issued by the Company. Effective December 31,
1988, the Company entered into a reinsurance agreement with Aetna Life Insurance
Company ("Aetna Life") in which substantially all of the non-participating
individual life and annuity business written by Aetna Life prior to 1981 was
assumed by the Company. A $108.0 million commission, paid by the Company to
Aetna Life in 1988, was capitalized as deferred policy acquisition costs. The
Company maintained insurance reserves of $655.5 million and $690.3 million as of
December 31, 1995 and 1994, respectively, relating to the business assumed. In
consideration for the assumption of this business, a loan was established
relating to the assets held by Aetna Life which support the insurance reserves.
The loan is being reduced in accordance with the decrease in the reserves. The
fair value of this loan was $663.5 million and $630.3 million as of December 31,
1995 and 1994, respectively, and is based upon the fair value of the underlying
assets. Premiums of $28.0 million, $32.8 million and $33.3 million and current
and future benefits of $43.0 million, $43.8 million and $55.4 million were
assumed in 1995, 1994 and 1993, respectively.

F-21
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993

8. RELATED PARTY TRANSACTIONS (CONTINUED)
Investment income of $46.5 million, $51.5 million and $53.3 million was
generated from the reinsurance loan to affiliate in 1995, 1994 and 1993,
respectively. Net income of approximately $18.4 million, $25.1 million and $13.6
million resulted from this agreement in 1995, 1994 and 1993, respectively.

On December 16, 1988, the Company assumed $25.0 million of premium revenue from
Aetna Life for the purchase and administration of a life contingent single
premium variable payout annuity contract. In addition, the Company also is
responsible for administering fixed annuity payments that are made to annuitants
receiving variable payments. Reserves of $28.0 million and $24.2 million were
maintained for this contract as of December 31, 1995 and 1994, respectively.

Effective February 1, 1992, the Company increased its retention limit per
individual life to $2.0 million and entered into a reinsurance agreement with
Aetna Life to reinsure amounts in excess of this limit, up to a maximum of $8.0
million on any new individual life business, on a yearly renewable term basis.
Premium amounts related to this agreement were $3.2 million, $1.3 million and
$0.6 million for 1995, 1994 and 1993, respectively.

The Company received no capital contributions in 1995, 1994 or 1993.

The Company distributed $2.9 million in the form of dividends of two of its
subsidiaries, SBA and AISI, to Aetna Retirement Services, Inc. in 1995.

Premiums due and other receivables include $5.7 million and $27.6 million due
from affiliates in 1995 and 1994, respectively. Other liabilities include $12.4
million and $27.9 million due to affiliates for 1995 and 1994, respectively.

Substantially all of the administrative and support functions of the Company are
provided by Aetna and its affiliates. The financial statements reflect allocated
charges for these services based upon measures appropriate for the type and
nature of service provided.

9. REINSURANCE
The Company utilizes indemnity reinsurance agreements to reduce its exposure to
large losses in all aspects of its insurance business. Such reinsurance permits
recovery of a portion of losses from reinsurers, although it does not discharge
the primary liability of the Company as direct insurer of the risks reinsured.
The Company evaluates the financial strength of potential reinsurers and
continually monitors the financial condition of reinsurers. Only those
reinsurance recoverables deemed probable of recovery are reflected as assets on
the Company's Consolidated Balance Sheets.

F-22
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993

9. REINSURANCE (CONTINUED)
The following table includes premium amounts ceded/assumed to/from affiliated
companies as discussed in Note 8 above.
<TABLE>
<CAPTION>
CEDED TO ASSUMED
DIRECT OTHER FROM OTHER
AMOUNT COMPANIES COMPANIES
--------- ------------- -------------
(MILLIONS)
<S> <C> <C> <C>
1995
Premiums:
Life Insurance.................................................................. $ 28.8 $ 8.6 $ 28.0
Accident and Health Insurance................................................... 7.5 7.5 --
Annuities....................................................................... 82.1 -- 0.5
--------- ----- -----
Total earned premiums........................................................... $ 118.4 $ 16.1 $ 28.5
--------- ----- -----
--------- ----- -----

1994
Premiums:
Life Insurance.................................................................. $ 27.3 $ 6.0 $ 32.8
Accident and Health Insurance................................................... 9.3 9.3 --
Annuities....................................................................... 69.9 -- 0.2
--------- ----- -----
Total earned premiums........................................................... $ 106.5 $ 15.3 $ 33.0
--------- ----- -----
--------- ----- -----
1993
Premiums:
Life Insurance.................................................................. $ 22.4 $ 5.6 $ 33.3
Accident and Health Insurance................................................... 12.9 12.9 --
Annuities....................................................................... 31.3 -- 0.7
--------- ----- -----
Total earned premiums........................................................... $ 66.6 $ 18.5 $ 34.0
--------- ----- -----
--------- ----- -----

NET
AMOUNT
---------

<S> <C>
1995
Premiums:
Life Insurance.................................................................. $ 48.2
Accident and Health Insurance................................................... --
Annuities....................................................................... 82.6
---------
Total earned premiums........................................................... $ 130.8
---------
---------
1994
Premiums:
Life Insurance.................................................................. $ 54.1
Accident and Health Insurance................................................... --
Annuities....................................................................... 70.1
---------
Total earned premiums........................................................... $ 124.2
---------
---------
1993
Premiums:
Life Insurance.................................................................. $ 50.1
Accident and Health Insurance................................................... --
Annuities....................................................................... 32.0
---------
Total earned premiums........................................................... $ 82.1
---------
---------
</TABLE>

F-23
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993

10. FINANCIAL INSTRUMENTS

ESTIMATED FAIR VALUE

The carrying values and estimated fair values of the Company's financial
instruments at December 31, 1995 and 1994 were as follows:

<TABLE>
<CAPTION>
1995 1994
-------------------- --------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
--------- --------- --------- ---------
(MILLIONS)
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents................................. $ 568.8 $ 568.8 $ 623.3 $ 623.3
Short-term investments.................................... 15.1 15.1 98.0 98.0
Debt securities........................................... 12,720.8 12,720.8 10,191.4 10,191.4
Equity securities......................................... 257.6 257.6 229.1 229.1
Limited partnership....................................... -- -- 24.4 24.4
Mortgage loans............................................ 21.2 21.9 9.9 9.9

Liabilities:
Investment contract liabilities:
With a fixed maturity................................... 989.1 1,001.2 826.7 833.5
Without a fixed maturity................................ 9,511.0 9,298.4 8,122.6 7,918.2
</TABLE>

Fair value estimates are made at a specific point in time, based on available
market information and judgments about the financial instrument, such as
estimates of timing and amount of expected future cash flows. Such estimates do
not reflect any premium or discount that could result from offering for sale at
one time the Company's entire holdings of a particular financial instrument, nor
do they consider the tax impact of the realization of unrealized gains or
losses. In many cases, the fair value estimates cannot be substantiated by
comparison to independent markets, nor can the disclosed value be realized in
immediate settlement of the instrument. In evaluating the Company's management
of interest rate and liquidity risk, the fair values of all assets and
liabilities should be taken into consideration, not only those above.

The following valuation methods and assumptions were used by the Company in
estimating the fair value of the above financial instruments:

SHORT-TERM INSTRUMENTS: Fair values are based on quoted market prices or dealer
quotations. Where quoted market prices are not available, the carrying amounts
reported in the Consolidated Balance Sheets approximates fair value. Short-term
instruments have a maturity date of one year or less and include cash and cash
equivalents, and short-term investments.

DEBT AND EQUITY SECURITIES: Fair values are based on quoted market prices or
dealer quotations. Where quoted market prices or dealer quotations are not
available, fair value is estimated by using quoted market prices for similar
securities or discounted cash flow methods.

F-24
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993

10. FINANCIAL INSTRUMENTS (CONTINUED)
MORTGAGE LOANS: Fair value is estimated by discounting expected mortgage loan
cash flows at market rates which reflect the rates at which similar loans would
be made to similar borrowers. The rates reflect management's assessment of the
credit quality and the remaining duration of the loans. The fair value estimate
of mortgage loans of lower quality, including problem and restructured loans, is
based on the estimated fair value of the underlying collateral.

INVESTMENT CONTRACT LIABILITIES (INCLUDED IN POLICYHOLDERS' FUNDS LEFT WITH THE
COMPANY):

WITH A FIXED MATURITY: Fair value is estimated by discounting cash flows at
interest rates currently being offered by, or available to, the Company for
similar contracts.

WITHOUT A FIXED MATURITY: Fair value is estimated as the amount payable to the
contractholder upon demand. However, the Company has the right under such
contracts to delay payment of withdrawals which may ultimately result in paying
an amount different than that determined to be payable on demand.

OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS (INCLUDING DERIVATIVE FINANCIAL
INSTRUMENTS)

During 1995, the Company received $0.4 million for writing call options on
underlying securities. As of December 31, 1995 there were no option contracts
outstanding.

At December 31, 1995, the Company had a forward swap agreement with a notional
amount of $100.0 million and a fair value of $0.1 million.

The Company did not have transactions in derivative instruments in 1994.

The Company also holds investments in certain debt and equity securities with
derivative characteristics (i.e., including the fact that their market value is
at least partially determined by, among other things, levels of or changes in
interest rates, prepayment rates, equity markets or credit ratings/spreads). The
amortized cost and fair value of these securities, included in the $13.4 billion
investment portfolio, as of December 31, 1995 was as follows:

<TABLE>
<CAPTION>
AMORTIZED FAIR
(MILLIONS) COST VALUE
----------- -----------
<S> <C> <C>
Collateralized mortgage obligations..................................................................... $ 2,383.9 $ 2,549.3
Principal-only strips (included above).................................................................. 38.7 50.0
Interest-only strips (included above)................................................................... 10.7 20.7
Structured Notes (1).................................................................................... 95.0 100.3
</TABLE>

(1) Represents non-leveraged instruments whose fair values and credit risk are
based on underlying securities, including fixed income securities and
interest rate swap agreements.

11. COMMITMENTS AND CONTINGENT LIABILITIES

COMMITMENTS

Through the normal course of investment operations, the Company commits to
either purchase or sell securities or money market instruments at a specified
future date and at a specified price or yield. The inability of counterparties
to honor these commitments may result in either higher or lower replacement
cost. Also, there is likely to be a change in

F-25
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993

11. COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
the value of the securities underlying the commitments. At December 31, 1995,
the Company had commitments to purchase investments of $31.4 million. The fair
value of the investments at December 31, 1995 approximated $31.5 million. There
were no outstanding forward commitments at December 31, 1994.

LITIGATION

There were no material legal proceedings pending against the Company as of
December 31, 1995 or December 31, 1994 which were beyond the ordinary course of
business. The Company is involved in lawsuits arising, for the most part, in the
ordinary course of its business operations as an insurer.

12. SEGMENT INFORMATION
The Company's operations are reported through two major business segments: Life
Insurance and Financial Services.

Summarized financial information for the Company's principal operations was as
follows:

<TABLE>
<CAPTION>
(MILLIONS) 1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Revenue:
Financial services..................................................................... $ 1,129.4 $ 946.1 $ 892.8
Life insurance......................................................................... 407.9 386.1 371.7
----------- ----------- -----------
Total revenue.......................................................................... $ 1,537.3 $ 1,332.2 $ 1,264.5
----------- ----------- -----------
Income before federal income taxes:
Financial services..................................................................... $ 158.0 $ 119.7 $ 121.1
Life insurance......................................................................... 102.0 96.8 98.0
----------- ----------- -----------
Total income before federal income taxes............................................... $ 260.0 $ 216.5 $ 219.1
----------- ----------- -----------
Net income:
Financial services..................................................................... $ 113.8 $ 85.5 $ 86.8
Life insurance......................................................................... 62.1 59.8 56.1
----------- ----------- -----------
Net income............................................................................... $ 175.9 $ 145.3 $ 142.9
----------- ----------- -----------
Assets under management, at fair value:
Financial services..................................................................... $ 23,224.3 $ 17,785.2 $ 16,600.5
Life insurance......................................................................... 2,698.1 2,171.7 2,175.5
----------- ----------- -----------
Total assets under management.......................................................... $ 25,922.4 $ 19,956.9 $ 18,776.0
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

F-26
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

VARIABLE ANNUITY ACCOUNT B

VARIABLE ANNUITY CONTRACTS

ISSUED BY

AETNA LIFE INSURANCE AND ANNUITY COMPANY

FORM NO. 75996(S)-2 ALIAC ED. MAY 1996

<PAGE>

VARIABLE ANNUITY ACCOUNT B
PART C - OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
(1) Included in Part A:
Condensed Financial Information
(2) Included in Part B:
Financial Statements of Variable Annuity Account B:
- Independent Auditors' Report
- Statement of Assets and Liabilities as of
December 31, 1995
- Statement of Operations for the year ended
December 31, 1995
- Statements of Changes in Net Assets for the years ended
December 31, 1995 and 1994
- Notes to Financial Statements
Financial Statements of the Depositor:
- Independent Auditors' Report
- Consolidated Statements of Income for the years ended
December 31, 1995, 1994 and 1993
- Consolidated Balance Sheets as of December 31, 1995
and 1994
- Consolidated Statements of Changes in Shareholder's
Equity for the years ended December 31, 1995, 1994
and 1993
- Consolidated Statements of Cash Flows for the years
ended December 31, 1995, 1994 and 1993
- Notes to Consolidated Financial Statements

(b) Exhibits
(1) Resolution of the Board of Directors of Aetna Life
Insurance and Annuity Company establishing Variable
Annuity Account B(1)
(2) Not applicable
(3.1) Form of Broker-Dealer Agreement(2)
(3.2) Alternative Form of Wholesaling Agreement and related
Selling Agreement(2)
(4.1) Form of Variable Annuity Contract (G-CDA-HF)(3)
(4.2) Form of Variable Annuity Contract (IA-CDA-IA)(4)
(5.1) Form of Variable Annuity Contract Application
(300-GTD-IA)(5)
(5.2) Form of Variable Annuity Contract Application
(710.00.141)(6)
(6) Certification of Incorporation and By-Laws of
Depositor(7)
(7) Not applicable
(8.1) Fund Participation Agreement (Amended and Restated)
between Aetna Life Insurance and Annuity Company, Alger
American Fund and Fred Alger Management, Inc. dated
March 31, 1996(2)

<PAGE>

(8.2) Fund Participation Agreement between Aetna Life
Insurance and Annuity Company and Calvert Asset
Management Company (Calvert Responsibly Invested
Balanced Portfolio formerly Calvert Socially
Responsible Series) dated March 13, 1989 and amended
December 27, 1993(2)
(8.3) Fund Participation Agreement between Aetna Life
Insurance and Annuity Company and Fidelity Distributors
Corporation (Variable Insurance Products Fund) dated
February 1, 1994 and amended March 1, 1996(2)
(8.4) Fund Participation Agreement between Aetna Life
Insurance and Annuity Company and Fidelity Distribution
Corporation (Variable Insurance Products Fund II) dated
February 1, 1994 and amended March 1, 1996(2)
(8.5) Fund Participation Agreement between Aetna Life
Insurance and Annuity Company and Janus Aspen Series
dated April 19, 1994 and amended March 1, 1996(2)
(8.6) Fund Participation Agreement between Aetna Life
Insurance and Annuity Company and Lexington Management
Corporation regarding Natural Resources Trust dated
December 1, 1988 and amended February 11, 1991(2)
(8.7) Fund Participation Agreement between Aetna Life
Insurance and Annuity Company and Advisers Management
Trust (now Neuberger & Berman Advisers Management
Trust) dated April 14, 1989 and as assigned and
modified on May 1, 1995(2)
(8.8) Fund Participation Agreement between Aetna Life
Insurance and Annuity Company and Scudder Variable Life
Investment Fund dated April 27, 1992 and amended
February 19, 1993 and August 13, 1993(2)
(8.9) Fund Participation Agreement between Aetna Life
Insurance and Annuity Company, Investors Research
Corporation and TCI Portfolios, Inc. dated July 29,
1992 and amended December 22, 1992 and June 1, 1994(2)
(9) Opinion of Counsel(8)
(10.1) Consent of Independent Auditors
(10.2) Consent of Counsel
(11) Not applicable
(12) Not applicable
(13) Computation of Performance Data(9)
(14) Not applicable
(15.1) Powers of Attorney(10)
(15.2) Authorization for Signatures(2)
(27) Financial Data Schedule

1. Incorporated by reference to Post-Effective Amendment No. 6 to Registration
Statement on Form N-4 (File No. 33-75986), as filed electronically on
April 22, 1996.
2. Incorporated by reference to Post-Effective Amendment No. 5 to Registration
Statement on Form N-4 (File No. 33-75986), as filed electronically on April
12, 1996.
3. Incorporated by reference to Post-Effective Amendment No. 3 to Registration
Statement on Form N-4 (File No. 33-75964), as filed on February 24, 1995.
4. Incorporated by reference to Post-Effective Amendment No. 3 to Registration
Statement on Form-N-4 (File No. 33-75958), as filed on April 28, 1995.

<PAGE>

5. Incorporated by reference to Post-Effective Amendment No. 60 to
Registration Statement on Form N-4 (File No 2-52449), as filed on February
24, 1995.
6 Incorporated by reference to Post-Effective Amendment No. 1 to Registration
Statement on Form N-4 (File No. 33-76000), as filed on April 28, 1995.
7. Incorporated by reference to Post-Effective Amendment No. 1 to Registration
Statement on Form S-1 (File No. 33-60477), as filed electronically on April
15, 1996.
8. Incorporated by reference to Registrant's 24f-2 Notice for fiscal year
ended December 31, 1995, as filed electronically on February 29, 1996.
9. Incorporated by reference to Post-Effective Amendment No. 4 to Registration
Statement on Form N-4 (File No. 33-75996), as filed on April 28, 1995.
10. Incorporated by reference to Post-Effective Amendment No. 1 to Registration
Statement on Form N-4 (File No. 33-75974), as filed electronically on April
9, 1996.

<PAGE>

ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR

Name and Principal
Business Address* Positions and Offices with Depositor
- ------------------ ------------------------------------

<S> <C>
Daniel P. Kearney Director and President

Timothy A. Holt Director, Senior Vice President and Chief
Financial Officer

Christopher J. Burns Director and Senior Vice President

Laura R. Estes Director and Senior Vice President

Gail P. Johnson Director and Vice President

John Y. Kim Director and Senior Vice President

Shaun P. Mathews Director and Vice President

Glen Salow Director and Vice President

Creed R. Terry Director and Vice President

Eugene M. Trovato Vice President and Treasurer, Corporate
Controller

Zoe Baird Senior Vice President and General Counsel

Diane Horn Vice President and Chief Compliance Officer

Susan E. Schechter Corporate Secretary and Counsel
</TABLE>

* The principal business address of all directors and officers listed is
151 Farmington Avenue, Hartford, Connecticut 06156.

ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT

Incorporated herein by reference to Item 26 of Post-Effective Amendment
No. 5 to Registration Statement on Form N-4 (File No. 33-75986) filed
electronically on April 12, 1996, as supplemented by Post-Effective Amendment
No. 6 to Registration Statement on Form N-4 (File No. 33-75986) filed
electronically on April 22, 1996.

<PAGE>

ITEM 27. NUMBER OF CONTRACT OWNERS

As of February 29, 1996, there were 34,893 individuals holding interests in
variable annuity contracts funded through Variable Annuity Account B.

ITEM 28. INDEMNIFICATION

Reference is hereby made to Section 33-320a of the Connecticut General
Statutes ("C.G.S.") regarding indemnification of directors and officers of
Connecticut corporations. The statute provides in general that Connecticut
corporations shall indemnify their officers, directors, employees, agents, and
certain other defined individuals against judgments, fines, penalties, amounts
paid in settlement and reasonable expenses actually incurred in connection with
proceedings against the corporation. The corporation's obligation to provide
such indemnification does not apply unless (1) the individual is successful on
the merits in the defense of any such proceeding; or (2) a determination is made
(by a majority of the board of directors not a party to the proceeding by
written consent; by independent legal counsel selected by a majority of the
directors not involved in the proceeding; or by a majority of the shareholders
not involved in the proceeding) that the individual acted in good faith and in
the best interests of the corporation; or (3) the court, upon application by the
individual, determines in view of all the circumstances that such person is
reasonably entitled to be indemnified.

C.G.S. Section 33-320a provides an exclusive remedy: a Connecticut
corporation cannot indemnify a director or officer to an extent either greater
or less than that authorized by the statute, e.g., pursuant to its certificate
of incorporation, bylaws, or any separate contractual arrangement. However, the
statute does specifically authorize a corporation to procure indemnification
insurance to provide greater indemnification rights. The premiums for such
insurance may be shared with the insured individuals on an agreed basis.

Consistent with the statute, Aetna Life and Casualty Company has procured
insurance from Lloyd's of London and several major United States excess insurers
for its directors and officers and the directors and officers of its
subsidiaries, including the Depositor, which supplements the indemnification
rights provided by C.G.S. Section 33-320a to the extent such coverage does not
violate public policy.

ITEM 29. PRINCIPAL UNDERWRITER

(a) In addition to serving as the principal underwriter for the
Registrant, Aetna Life Insurance and Annuity Company (ALIAC) also
acts as the principal underwriter for Variable Life Account B and
Variable Annuity Accounts C and G (separate accounts of ALIAC
registered as unit investment trusts), and Variable Annuity
Account I (a separate account of Aetna Insurance Company of
America registered as a unit investment trust). Additionally,
ALIAC is the investment adviser for Aetna Variable Fund, Aetna
Income Shares, Aetna Variable Encore Fund, Aetna Investment
Advisers Fund, Inc., Aetna GET Fund, Aetna Series Fund, Inc. and
Aetna Generation Portfolios, Inc. ALIAC is also the depositor of
Variable Life Account B, and Variable Annuity Accounts C and G.

<PAGE>

(b) See Item 25 regarding the Depositor.

(1) (2) (3) (4) (5)

Name of Net Underwriting Compensation
Principal Discounts and on Redemption Brokerage
Underwriter Commissions or Annuitization Commissions Compensation*

Aetna Life $294,931 $11,944,532
Insurance and
Annuity Company

* Compensation shown in column 5 includes deductions for mortality and
expense risk guarantees and contract charges assessed to cover costs incurred in
the sales and administration of the contracts issued under Variable Annuity
Account B.

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS

All records concerning contract owners of Variable Annuity Account B are
located at the home office of the Depositor as follows:

Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Hartford, Connecticut 06156

ITEM 31. MANAGEMENT SERVICES

Not applicable

<PAGE>

ITEM 32. UNDERTAKINGS

Registrant hereby undertakes:

(a) to file a post-effective amendment to this registration statement
on Form N-4 as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never more than
sixteen months old for as long as payments under the variable annuity
contracts may be accepted;

(b) to include as part of any application to purchase a contract offered
by a prospectus which is part of this registration statement on
Form N-4, a space that an applicant can check to request a Statement
of Additional Information; and

(c) to deliver any Statement of Additional Information and any financial
statements required to be made available under this Form N-4 promptly
upon written or oral request.

(d) Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.

<PAGE>

SIGNATURES

As required by the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, the Registrant, Variable Annuity Account B of Aetna Life
Insurance and Annuity Company, certifies that it meets the requirements of
Securities Act Rule 485(b) for effectiveness of this Post-Effective Amendment
No. 6 to its Registration Statement on Form N-4 (File No. 33-75996) and has
caused this Post-Effective Amendment No 6 to its Registration Statement on Form
N-4 (File No. 33-75996) to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Hartford, State of Connecticut, on the 22nd day
of April, 1996.

VARIABLE ANNUITY ACCOUNT B OF AETNA LIFE
INSURANCE AND ANNUITY COMPANY
(REGISTRANT)

By: AETNA LIFE INSURANCE AND ANNUITY COMPANY
(DEPOSITOR)

By: Daniel P. Kearney*
--------------------
Daniel P. Kearney
President

As required by the Securities Act of 1933, as amended, this Post-Effective
Amendment No. 6 to the Registration Statement on Form N-4 (File No. 33-75996)
has been signed by the following persons in the capacities and on the dates
indicated.

SIGNATURE TITLE DATE

Daniel P. Kearney* Director and President )
- --------------------- (principal executive officer) )
Daniel P. Kearney )
)
Timothy A. Holt* Director, Senior Vice President )
- --------------------- and Chief Financial ) April
Timothy A. Holt Officer ) 22, 1996
)
Christopher J. Burns* Director )
- --------------------- )
Christopher J. Burns )
)
Laura R. Estes* Director )
- --------------------- )
Laura R. Estes )

<PAGE>

)
Gail P. Johnson* Director )
- --------------------- )
Gail P. Johnson )
)
John Y. Kim* Director )
- --------------------- )
John Y. Kim )
)
Shaun P. Mathews* Director )
- --------------------- )
Shaun P. Mathews )
)
Glen Salow* Director )
- --------------------- )
Glen Salow )
)
Creed R. Terry* Director )
- --------------------- )
Creed R. Terry )
)
Eugene M. Trovato* Vice President and Treasurer, )
- --------------------- Corporate Controller )
Eugene M. Trovato )

By: /s/ Julie E. Rockmore
-------------------------------------------------
Julie E. Rockmore

*Attorney-in-Fact

<PAGE>

VARIABLE ANNUITY ACCOUNT B
EXHIBIT INDEX

Exhibit No. Exhibit Page
- ----------- ------- ----

99-B.1 Resolution of the Board of Directors of Aetna *
Life Insurance and Annuity Company establishing
Variable Annuity Account B

99-B.3.1 Form of Broker-Dealer Agreement *

99-B.3.2 Alternative Form of Wholesaling Agreement and *
related Selling Agreement

99-B.4.1 Form of Variable Annuity Contract (G-CDA-HF) *

99-B.4.2 Form of Variable Annuity Contract (IA-CDA-IA) *

99-B.5 Form of Variable Annuity Contract Application (300-GTD-IA) *

99-B.5.2 Form of Variable Annuity Contract Application (710.00.141) *

99-B.6 Certification of Incorporation and By-Laws of Depositor *

99-B.8.1 Fund Participation Agreement (Amended and Restated) *
between Aetna Life Insurance and Annuity Company, Alger
American Fund and Fred Alger Management, Inc.
dated March 31, 1995

99-B.8.2 Fund Participation Agreement between Aetna *
Life Insurance and Annuity Company and Calvert
Asset Management Company (Calvert Responsibly
Invested Balanced Portfolio formerly Calvert Socially
Responsible Series) dated March 13, 1989 and amended
December 27, 1993

99-B.8.3 Fund Participation Agreement between Aetna Life *
Insurance and Annuity Company and Fidelity Distributors
Corporation (Variable Insurance Products Fund)
dated February 1, 1994 and amended March 1, 1996

99-B.8.4 Fund Participation Agreement between Aetna Life *
Insurance and Annuity Company and Fidelity
Distribution Corporation (Variable Insurance
Products Fund II) dated February 1, 1994 and amended
March 1, 1996

*Incorporated by reference

<PAGE>

Exhibit No. Exhibit Page
- ----------- ------- ----

99-B.8.5 Fund Participation Agreement between *
Aetna Life Insurance and Annuity Company and
Janus Aspen Series dated April 19, 1994 and
amended March 1, 1996

99-B.8.6 Fund Participation Agreement between Aetna Life *
Insurance and Annuity Company and Lexington Management
Corporation regarding Natural Resources Trust
dated December 1, 1988 and amended February 11, 1991

99-B.8.7 Fund Participation Agreement between Aetna Life *
Insurance and Annuity Company and Advisers Management
Trust (now Neuberger & Berman Advisers Management
Trust) dated April 14, 1989 and as assigned and modified
on May 1, 1995

99-B.8.8 Fund Participation Agreement between Aetna *
Life Insurance and Annuity Company and Scudder
Variable Life Investment Fund dated April 27,
1992 and amended February 19, 1993 and August 13, 1993

99-B.8.9 Fund Participation Agreement between Aetna Life *
Insurance and Annuity Company, Investors Research
Corporation and TCI Portfolios, Inc. dated July 29,
1992 and amended December 22, 1992 and June 1, 1994

99-B.9 Opinion of Counsel *

99-B.10.1 Consent of Independent Auditors _________

99-B.10.2 Consent of Counsel _________

99-B.13 Computation of Performance Data *

99-B.15.1 Powers of Attorney *

99-B.15.2 Authorization for Signatures *

27 Financial Data Schedule _________

*Incorporated by reference

<PAGE>

CONSENT OF INDEPENDENT AUDITORS

The Board of Directors of Aetna Life Insurance and Annuity Company
and Contract Owners of Aetna Variable Annuity Account B:

We consent to the use of our reports dated February 6, 1996 and February 16,
1996 included herein and to the references to our Firm under the captions
"Condensed Financial Information" in the Prospectus and "Independent Auditors"
in the Statement of Additional Information.

Our report dated February 6, 1996 refers to a change in 1993 in the Company's
method of accounting for certain investments in debt and equity securities.

/s/ KPMG Peat Marwick LLP

Hartford, Connecticut
April 22, 1996

<PAGE>

151 Farmington Avenue Susan E. Bryant
Hartford, CT 06156 Counsel
Law and Regulatory Affairs, RE4C
(860) 273-7834
Fax: (860) 273-8340

April 22, 1996

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Attention: Filing Desk

Re: Variable Annuity Account B of Aetna Life Insurance and Annuity Company
Post-Effective Amendment No. 6 to the Registration Statement on Form N-4
File Nos. 33-75996 and 811-2512
-------------------------------

Gentlemen:

As Counsel of Aetna Life Insurance and Annuity Company (the "Company"), I hereby
consent to the use of my opinion dated February 28, 1996 (incorporated herein by
reference to the 24f-2 Notice for the fiscal year ended December 31, 1995 filed
on behalf of Variable Annuity Account B of Aetna Life Insurance and Annuity
Company on February 29, 1996) as an exhibit to this Post-Effective Amendment No.
6 to the Registration Statement on Form N-4 (File No. 33-75996) and to my being
named under the caption "Legal Matters" therein.

Very truly yours,

/s/ Susan E. Bryant

Susan E. Bryant
Counsel
Aetna Life Insurance and Annuity Company

<PAGE>
<ARTICLE> 6

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 1,102,188,760
<INVESTMENTS-AT-VALUE> 1,130,935,704
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,130,935,704
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 1,130,935,704
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,130,935,704
<DIVIDEND-INCOME> 112,097,675
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (11,786,592)
<NET-INVESTMENT-INCOME> 100,311,083
<REALIZED-GAINS-CURRENT> 32,013,490
<APPREC-INCREASE-CURRENT> 73,102,996
<NET-CHANGE-FROM-OPS> 205,427,569
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 335,131,068
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>