As filed with the Securities and Exchange Registration No. 33-79122
Commission on April 22, 1997 Registration No. 811-2512
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
- --------------------------------------------------------------------------------
POST-EFFECTIVE AMENDMENT NO. 7 TO
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
and Amendment to
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
- --------------------------------------------------------------------------------
Variable Annuity Account B of Aetna Life Insurance and Annuity Company
Aetna Life Insurance and Annuity Company
151 Farmington Avenue, RE4A, Hartford, Connecticut 06156
Depositor's Telephone Number, including Area Code: (860) 273-7834
Susan E. Bryant, Counsel
Aetna Life Insurance and Annuity Company
151 Farmington Avenue, RE4A, Hartford, Connecticut 06156
(Name and Address of Agent for Service)
- --------------------------------------------------------------------------------
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 1997 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.
Registrant filed a Rule 24f-2 Notice for the fiscal year ended December 31, 1996
on February 28, 1997.
<PAGE>
VARIABLE ANNUITY ACCOUNT B
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
FORM N-4
ITEM NO. PART A (PROSPECTUS) LOCATION
<S> <C> <C>
1 Cover Page........................................... Cover Page
2 Definitions.......................................... Definitions
3 Synopsis............................................. Prospectus Summary; Fee Table
4 Condensed Financial Information...................... Condensed Financial Information
5 General Description of Registrant, Depositor, and The Company; Variable Annuity Account
Portfolio Companies.................................. B; Investment Options - The Funds
6 Deductions........................................... Charges and Deductions; Miscellaneous
- Distribution
7 General Description of Variable Annuity Contracts.... Purchase - Contract Rights;
Miscellaneous
8 Annuity Period....................................... Annuity Period
9 Death Benefit........................................ Death Benefit During Accumulation
10 Purchases and Contract Value......................... Period Purchase
11 Redemptions.......................................... Withdrawals; Purchase - Right to Cancel
12 Taxes................................................ Tax Status
13 Legal Proceedings.................................... Miscellaneous - Legal Matters and
Proceedings
14 Table of Contents of the Statement of Additional Statement of Additional Information -
Information.......................................... Table of Contents
<PAGE>
FORM N-4 PART B (STATEMENT OF ADDITIONAL LOCATION
ITEM NO. (INFORMATION)
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 of the Separate
Account; Financial Statements of the
Company
</TABLE>
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>
PROSPECTUS
================================================================================
The Contracts offered in connection with this Prospectus are the "Growth
Plus" group and individual deferred variable annuity contracts ("Contracts")
issued by Aetna Life Insurance and Annuity Company (the "Company"). The
Contracts are available as (1) nonqualified deferred variable annuity
contracts; (2) Individual Retirement Annuities ("IRA") under Section 408(b)
of the Internal Revenue Code ("Code") (may be subject to approval by state
regulatory agencies); and (3) contracts issued in connection with certain
employer sponsored qualified retirement plans (may be subject to approval by
the Company and state regulatory agencies). Currently, the IRA is not
available as a "SIMPLE IRA" as defined in Section 408(p) of the Internal
Revenue Code. In most states, group Contracts are offered to certain
broker-dealers or banks which have agreed to act as Distributors of the
Contracts. Individuals who have established accounts with those
broker-dealers or banks are eligible to participate in the Contract.
Individual Contracts are offered only in those states where the group
Contracts are not authorized for sale. (See "Purchase.")
The securities offered in this Prospectus are distributed through Aetna
Life Insurance and Annuity Company as the Underwriter and by registered
broker-dealers or banks selected by it as Distributors. See "Purchase."
The Contracts provide that Purchase Payments may be allocated to the ALIAC
Guaranteed Account (the "Guaranteed Account"), a credited interest option, 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 investment series of the Federated Insurance Series ("Trust"), a
Massachusetts business trust that is not affiliated with the Company:
<TABLE>
<S> <C>
(bullet) Federated American Leaders Fund II (bullet) Federated High Income Bond Fund II
(bullet) Federated Equity Income Fund II (bullet) Federated International Equity Fund II
(bullet) Federated Fund for U.S. Government Securities II (bullet) Federated Prime Money Fund II
(bullet) Federated Growth Strategies Fund II (bullet) Federated Utility Fund II
</TABLE>
Except as specifically mentioned, this Prospectus describes only
investments through the Separate Account. The Guaranteed Account is described
in the Appendix to this Prospectus, as well as in the Guaranteed Account's
prospectus.
This Prospectus provides investors with the information about the Separate
Account that they should know before investing in the Contracts. 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 21
of this Prospectus. An SAI for this Prospectus and for any of the Fund
Prospectuses may be obtained by indicating the request on your Application 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 THE ALIAC GUARANTEED ACCOUNT. ALL PROSPECTUSES SHOULD BE
READ AND RETAINED FOR FUTURE REFERENCE.
THIS PROSPECTUS, THE STATEMENT OF ADDITIONAL INFORMATION AND OTHER
INFORMATION ABOUT SEPARATE ACCOUNT B REQUIRED TO BE FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION CAN BE FOUND IN THE SEC'S WEB SITE AT
http://www.sec.gov.
THESE SECURITIES 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, 1997
<PAGE>
TABLE OF CONTENTS
================================================================================
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................................................... 3
PURCHASE...................................................................... 3
Contract Availability....................................................... 3
Purchasing Interests in the Contract........................................ 3
General..................................................................... 4
Purchase Payments........................................................... 4
Contract Rights............................................................. 4
Designations of Beneficiary and Annuitant................................... 4
Right to Cancel............................................................. 5
CHARGES AND DEDUCTIONS........................................................ 5
Daily Deductions from the Separate Account.................................. 5
Mortality and Expense Risk Charge......................................... 5
Administrative Charge..................................................... 5
Maintenance Fee............................................................. 5
Deferred Sales Charge....................................................... 5
Fund Expenses............................................................... 6
Premium and Other Taxes..................................................... 6
CONTRACT VALUATION............................................................ 7
Account Value............................................................... 7
Accumulation Units.......................................................... 7
Net Investment Factor....................................................... 7
TRANSFERS..................................................................... 7
Dollar Cost Averaging Program............................................... 8
Account Rebalancing Program................................................. 8
WITHDRAWALS................................................................... 8
ADDITIONAL WITHDRAWAL OPTIONS................................................. 9
DEATH BENEFIT DURING ACCUMULATION PERIOD...................................... 9
Death Benefit Amount........................................................ 9
Death Benefit Payment Options...............................................10
Death of the Annuitant......................................................11
ANNUITY PERIOD................................................................11
Annuity Period Elections....................................................11
Partial Annuitization.......................................................11
Annuity Options.............................................................12
<PAGE>
Annuity Payments............................................................12
Charges Deducted During the Annuity Period..................................13
Death Benefit Payable During the Annuity Period.............................13
Death of the Certificate Holder During the Annuity Period...................13
TAX STATUS....................................................................13
Introduction................................................................13
Taxation of the Company.....................................................14
Tax Status of the Contract..................................................14
Taxation of Annuity Contracts...............................................15
Contracts Used with Certain Retirement Plans................................17
Withholding.................................................................19
MISCELLANEOUS.................................................................19
Distribution................................................................19
Delay or Suspension of Payments.............................................19
Performance Reporting.......................................................20
Voting Rights...............................................................20
Modification of the Contract................................................20
Transfers of Ownership; Assignment..........................................20
Involuntary Terminations....................................................21
Legal Matters and Proceedings...............................................21
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION...........................21
APPENDIX--ALIAC GUARANTEED ACCOUNT............................................22
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. THE COMPANY DOES NOT AUTHORIZE ANY
PERSON TO GIVE INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH
THE OFFERING CONTAINED IN THIS PROSPECTUS EXCEPT AS OTHERWISE CONTAINED
HEREIN.
<PAGE>
DEFINITIONS
================================================================================
The following terms are defined as they are used in this Prospectus:
Account: A record that identifies contract values accumulated on each
Certificate Holder's behalf during the Accumulation Period.
Account Value: The total dollar value of amounts held in an Account as of
each Valuation Date 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.
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.
Adjusted Account Value: The Account Value, plus or minus the aggregate market
value adjustment for amounts allocated to the Guaranteed Account.
Adviser: Federated Advisers, the investment adviser of the Funds.
Annuitant: The person on whose life or life expectancy the annuity payments
are based.
Annuity: A series of payments for life, a definite period or a combination of
the two.
Annuity Date: The date on which annuity payments begin.
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.
Application: The form or collection of information required by the Company to
purchase on interest in a group contract or an individual contract.
Beneficiary(ies): The person or persons who are entitled to receive any death
benefit proceeds. Under Nonqualified Contracts, Individual Retirement
Annuities, and Section 403(b) Contracts, Beneficiary refers to the
beneficiary named under the Contract. Under Qualified Contracts sold in
conjunction with 401(a) or 457 Plans, Beneficiary refers to the beneficiary
under the plan.
Certificate: The document issued to a Certificate Holder for an Account
established under a group contract.
Certificate Holder (You): A person or entity who purchases an individual
contract or acquires an interest under a group Contract.
Company (We, Us): Aetna Life Insurance and Annuity Company.
Contract: The group and individual deferred, variable annuity contracts
offered by this Prospectus.
Distributor(s): The registered broker-dealers, or banks that may be acting as
broker-dealers without separate registration under the Securities Exchange
Act of 1934, which have entered into selling agreements with the Underwriter
to distribute interests in the Contracts. The Underwriter may also serve as a
Distributor.
Fund(s): An open-end registered management investment company whose shares
are purchased by the Separate Account to fund the benefits provided by the
Contract.
Group Contract Holder: The entity to which a group Contract is issued.
Home Office: The Company's principal executive offices located at 151
Farmington Avenue, Hartford, Connecticut 06156.
- --------------------------------------------------------------------------------
DEFINITIONS - 1
<PAGE>
Individual Contract Holder: A person or entity who has purchased an
individual variable annuity Contract (also referred to as a "Certificate
Holder").
Individual Retirement Annuity: An individual or group variable deferred
annuity intended to qualify under Code Section 408(b).
Nonqualified Contract: A Contract established to supplement an individual's
retirement income, or to provide an alternative investment option under an
Individual Retirement Account qualified under Code Section 408(a).
1940 Act: The Investment Company Act of 1940, as amended.
Purchase Payment(s): The gross payment(s) made to the Company under an
Account.
Qualified Contracts: Contracts available for use with plans entitled to
special federal income tax treatment under Code Sections 401(a), 403(b),
408(b) or 457.
Registered Representative: The individual who is registered with a
broker-dealer acting as Distributor to offer and sell securities, or who is
an employee of a bank acting as Distributor that is exempt from broker-dealer
registration under the Securities Exchange Act of 1934. Registered
Representatives must also be licensed as insurance agents to sell variable
annuity contracts.
Separate Account: Variable Annuity Account B, a separate account established
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.
Surrender Value: The amount payable upon the withdrawal of all or any portion
of an Account Value.
Underwriter: The registered broker-dealer which contracts with other
registered broker-dealers or banks to offer and sell the Contracts. The
Company will serve as Underwriter.
Valuation Date: The date and time at which the Accumulation Unit Value and
Annuity Unit Value of a Subaccount is calculated. Currently, this calculation
occurs after 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.
- --------------------------------------------------------------------------------
DEFINITIONS - 2
<PAGE>
PROSPECTUS SUMMARY
================================================================================
Contracts Offered
The Contracts offered in connection with this Prospectus are group and
individual 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. The Contracts are
currently available for use as (1) individual nonqualified purchases (we
reserve the right to limit the ownership of nonqualified contracts to natural
persons); (2) Individual Retirement Annuities ("IRAs"), other than "SIMPLE
IRAs" as defined in Section 408(p) of the Internal Revenue Code (may be
subject to approval by state regulatory agencies); and (3) contracts issued
in conjunction with employer sponsored retirement plans under Sections
401(a), 403(b) or 457 of the Code (may be subject to approval by the Company
and by state regulatory agencies. See "Purchase.")
The Contracts are generally group variable annuity contracts under which
accounts are established for persons in the group. Individual Contracts are
offered in those states where the group Contracts are not authorized for
sale.
Contract Purchase
You may purchase an interest in the Contract by completing an Application
and submitting it to the Company. Contracts may be purchased by two
individuals as joint Certificate Holders. Joint Certificate Holders are
allowed only on Nonqualified Contracts. A joint Certificate Holder must be
the spouse of the other joint Certificate Holder (unless otherwise prohibited
by state law). References to "Certificate Holders" in this Prospectus mean
both of the Certificate Holders on joint Accounts. Purchase Payments can be
applied to the Contract through a lump-sum payment or through ongoing
contributions. (See "Purchase--Right to Cancel.")
Free Look Period
You may cancel the Contract or Certificate within 10 days after you
receive it (or longer if required by state law) by returning it to the
Company along with a written notice of cancellation. Unless state law
requires otherwise, the amount you will receive upon cancellation will
reflect the investment performance of the Subaccounts into which your
Purchase Payments were deposited. In some cases this may be more or less than
the amount of your Purchase Payments. Under a Contract issued as an
Individual Retirement Annuity, you will receive a refund of your Purchase
Payment. (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 the Subaccounts, as well as in the Guaranteed Account 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 adviser, see "Investment Options--The Funds" in this Prospectus,
as well as the prospectuses for each of the Funds.
The Guaranteed Account is the credited interest option available under the
Contract which allows you to earn fixed rates of interest, if held for the
guaranteed term. (See the Appendix to this Prospectus and the prospectus for
the Guaranteed Account.)
Charges and Deductions
Certain charges are associated with these Contracts. These charges include
daily deductions from the Separate Account (the mortality and expense risk
charges and an administrative charge), as well as any applicable maintenance
fee, transfer fees 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.")
- --------------------------------------------------------------------------------
SUMMARY - 1
<PAGE>
Transfers
Prior to the Annuity Date, and subject to certain limitations, you can
transfer Account Values among the Subaccounts and the Guaranteed Account.
During the Annuity Period, if you have elected variable payments you can make
transfers among the Subaccounts available during the Annuity Period.
Currently, during the Accumulation Period, transfers are without charge.
However, the Company reserves the right to charge up to $10 for each
additional transfer if more than 12 transfers are made in a calendar year.
Transfers can be requested in writing or by telephone in accordance with the
Company's transfer procedures. If approved by your state, during the Annuity
Period, you can currently make up to four transfers each calendar year. There
is no charge for these transfers. (Transfers from the Guaranteed Account may
be restricted and subject to a market value adjustment. See the Appendix.)
The Company also offers a Dollar Cost Averaging Program and an Account
Rebalancing Program. The Dollar Cost Averaging Program permits the automatic
transfer of amounts from any of the Subaccounts and an available Guaranteed Term
to any of the other Subaccounts on a monthly or quarterly basis. The Account
Rebalancing Program allows you to request that each year or at more frequent
intervals as allowed by the Company we automatically reallocate your Account
Value to specified percentages among the Subaccounts in which you invest. (See
"Transfers.")
Withdrawals
All or a part of the Account Value may be withdrawn prior to the Annuity
Date by properly completing a disbursement form and sending it to the
Company. Certain charges may be assessed upon withdrawal. Amounts withdrawn
from the Guaranteed Account may be subject to a market value adjustment
("MVA"). (See the Appendix.) The taxable portion of the withdrawal may also
be subject to income tax and a federal tax penalty. (See "Withdrawals.")
The Contract also offers certain Additional Withdrawal Options during the
Accumulation Period subject to certain criteria. Some Additional Withdrawal
Options are not available in all states and may not be suitable in every
situation. (See "Additional Withdrawal Options.")
Guaranteed Death Benefit
These Contracts contain a guaranteed death benefit feature. Upon the death
of the Certificate Holder, or the Annuitant if the Certificate Holder is a
non-natural person, the Account Value may be increased under certain
circumstances. (See "Death Benefit During Accumulation Period.")
After Annuity Payments have commenced, a death benefit may be payable to
the Beneficiary depending upon the terms of the Contract and the Annuity
Option selected. (See "Death Benefit Payable During the Annuity Period.")
The Annuity Period
On the Annuity Date, you may elect to begin receiving Annuity Payments.
Annuity Payments can be made on either a fixed, variable or combination fixed
and variable basis. If a variable payout is selected, the payments will
continue to 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
Earnings are not generally taxed until you or your Beneficiary(ies)
actually receive a distribution from the Contract. A 10% federal tax penalty
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:
(bullet) Write to:
Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Hartford, Connecticut 06156-5996
Attention: Customer Service
(bullet) Call Customer Service:
1-800-531-4547 (for automated transfers or changes in the allocation of
Account Values, call: 1-800-262-3862)
- --------------------------------------------------------------------------------
SUMMARY - 2
<PAGE>
FEE TABLE
================================================================================
This Fee Table describes the various charges and expenses associated with the
Contract. No sales charge is paid upon purchase of the Contract. All costs
that are borne directly or indirectly under the Subaccounts and Funds are
shown below. 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.
CONTRACT HOLDER TRANSACTION EXPENSES
Deferred Sales Charge for withdrawals under each contract (as a percentage of
each Purchase Payment withdrawn):
Years from Receipt of Deferred Sales
Purchase Payment Charge Deduction
-----------------------------------------------------
Less than 1 7%
1 or more but less than 2 6%
2 or more but less than 3 5%
3 or more but less than 4 4%
4 or more but less than 5 3%
5 or more but less than 6 2%
6 or more but less than 7 1%
7 or more 0%
Annual Maintenance Fee(1)........................................... $30.00
Transfer Charge(2).................................................. $ 0.00
SEPARATE ACCOUNT ANNUAL EXPENSES (Daily deductions, equal to the percentage
shown on an annual basis, made from amounts allocated to the variable options
under each Contract)
During the Accumulation Period:
Mortality and Expense Risk Charge.................................... 1.25%
Administrative Charge................................................ 0.15%
-----
Total Subaccount Annual Expenses..................................... 1.40%
=====
During the Annuity Period:
Mortality and Expense Risk Charge.................................... 1.25%
Administrative Charge................................................ 0.00%(3)
-----
Total Subaccount Annual Expenses 1.25%
=====
Reduced charges apply to Purchase Payments in excess of $1.5 million.
(1) The maintenance fee if applicable will generally be deducted from each
Account annually and if the full Account Vaue is withdrawn. The
maintenance fee is waived when the Account Value is $50,000 or more on
the date the maintenance fee is due.
(2) During the Accumulation Period, we currently allow an unlimited number of
transfers without charge. However, we reserve the right to impose a fee
of $10 for each transfer in excess of 12 per year.
(3) We currently do not impose an Administrative Charge during the Annuity
Period. However, we reserve the right to deduct a daily charge of not
more than 0.25% per year from the Subaccounts.
- --------------------------------------------------------------------------------
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, 1996. 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.
<TABLE>
<CAPTION>
Investment Other
Advisory Fees(1) Expenses Total
(after expense (after expense Fund Annual
reimbursement) reimbursement) Expenses
---------------- ---------------- -------------
<S> <C> <C> <C>
Federated American Leaders Fund II(2) 0.53% 0.32% 0.85%
Federated Equity Income Fund II(3) 0.00% 0.85% 0.85%
Federated Fund for U.S. Government Securities II(2) 0.00% 0.80% 0.80%
Federated Growth Strategies Fund II(2) 0.00% 0.85% 0.85%
Federated High Income Bond Fund II(2) 0.00% 0.80% 0.80%
Federated International Equity Fund II(2) 0.00% 1.25% 1.25%
Federated Prime Money Fund II(2) 0.00% 0.80% 0.80%
Federated Utility Fund II(2) 0.24% 0.61% 0.85%
</TABLE>
(1) The Fund's Adviser has agreed to reimburse the Company for certain costs
incurred in connection with administering the Funds by payment of an
amount based on assets in the Funds attributable to the Contracts. These
amounts are not charged to the Funds or Certificate Holders, but are paid
from other assets of the Adviser.
(2) The management fee for each of the Funds has been reduced to reflect a
voluntary waiver of the management fee. The Adviser can terminate this
voluntary waiver at any time in its sole discretion. The maximum
management fee for each of the Funds is as follows: 0.50%--Prime Money
Fund II; 0.60%--High Income Bond Fund II and the Fund for U.S. Government
Securities II; 0.75%-- American Leaders Fund II, Growth Strategies Fund
II and Utility Fund II; and 1.00%--International Equity Fund II.
The total operating expenses of each of the Funds, absent the voluntary
waiver of the management fee and the voluntary reimbursement of certain
other operating expenses, would have been: 1.07% for the American Leaders
Fund II; 1.81% for the Fund for U.S. Government Securities II; 4.72% for
the Growth Strategies Fund II; 1.39% for the High Income Bond Fund II;
4.30% for the International Equity Fund II; 1.37% for the Prime Money
Fund II; and 1.36% for the Utility Fund II.
(3) The estimated investment advisory fee has been reduced to reflect the
anticipated voluntary waiver of the investment advisory fee. The Fund's
adviser can terminate this voluntary waiver at any time at its sole
discretion. The maximum investment advisory fee is 0.75%. The Fund has no
present intention of paying or accruing a 12b-1 fee during the fiscal
year ending December 31, 1997. If the Fund were paying or accruing the
12b-1 fee, Institutional Shares would be able to pay up to 0.25% of its
average daily net assets for the 12b-1 fee. See "Fund Information" in the
Fund prospectus.
The total operating expenses are estimated to be 1.82% absent the
anticipated voluntary waiver of the management fee and the anticipated
voluntary reimbursement of certain other operating expenses. Total Fund
operating expenses are estimated based on average expenses expected to be
incurred during the period ending December 31, 1997. During the course of
this period, expenses may be more or less than the average amount shown.
- --------------------------------------------------------------------------------
FEE TABLE - 2
<PAGE>
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 $30.00 that
can be deducted under the Contract has been converted to a percentage of
assets equal to 0.019%.
<TABLE>
<CAPTION>
EXAMPLE A EXAMPLE B
------------------------------------------ ------------------------------------------
If you do not withdraw the Account Value,
If you withdraw the entire Account Value or if you annuitize at the end of the
at the end of the periods shown, you would periods shown, you would pay the following
pay the following expenses, including any expenses (no deferred sales charge is
applicable deferred sales charge: 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>
Federated American Leaders
Fund II $85 $104 $138 $260 $23 $71 $121 $260
Federated Equity Income
Fund II $85 $104 $138 $260 $23 $71 $121 $260
Federated Fund for U.S.
Government Securities II $84 $103 $135 $255 $23 $69 $119 $255
Federated Growth Strategies
Fund II $85 $104 $138 $260 $23 $71 $121 $260
Federated High Income Bond
Fund II $84 $103 $135 $255 $23 $69 $119 $255
Federated International
Equity Fund II $88 $116 $158 $300 $27 $83 $141 $300
Federated Prime Money
Fund II $84 $103 $135 $255 $23 $69 $119 $255
Federated Utility Fund II $85 $104 $138 $260 $23 $71 $121 $260
</TABLE>
- --------------------------------------------------------------------------------
FEE TABLE - 3
<PAGE>
CONDENSED FINANCIAL INFORMATION
(Selected data for accumulation units outstanding throughout each period)
================================================================================
The condensed financial information presented below for the three years ended
December 31, 1996 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 and the independent
auditors' report thereon, are included in the Statement of Additional
Information.
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ -------------
<S> <C> <C> <C>
FEDERATED AMERICAN LEADERS FUND II
Value at beginning of period $ 12.971 $ 9.838 $ 10.000
Value at end of period $ 15.548 $ 12.971 $ 9.838
Increase (decrease) in value of accumulation units(1) 19.87% 31.84% (1.62)%(2)
Number of accumulation units outstanding at end of period 3,931,613 2,057,364 188,708
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
Value at beginning of period $ 10.804 $ 10.073 $ 10.000
Value at end of period $ 11.099 $ 10.804 $ 10.073
Increase (decrease) in value of accumulation units(1) 2.74% 7.25% 0.73%(2)
Number of accumulation units outstanding at end of period 689,789 417,293 12,714
FEDERATED GROWTH STRATEGIES FUND II
Value at beginning of period $ 10.277 $ 10.000
Value at end of period $ 12.596 $ 10.277
Increase (decrease) in value of accumulation unit(1) 22.57% 2.77%(3)
Number of accumulation units outstanding at end of period 570,182 17,503
FEDERATED HIGH INCOME BOND FUND II
Value at beginning of period $ 11.640 $ 9.814 $ 10.000
Value at end of period $ 13.119 $ 11.640 $ 9.814
Increase (decrease) in value of accumulation units(1) 12.71% 18.61% (1.86)%(2)
Number of accumulation units outstanding at end of period 2,069,633 1,020,321 31,309
FEDERATED INTERNATIONAL EQUITY FUND II
Value at beginning of period $ 10.255 $ 10.000
Value at end of period $ 10.952 $ 10.255
Increase (decrease) in value of accumulation unit(1) 6.80% 2.55%(4)
Number of accumulation units outstanding at end of period 541,970 158,319
FEDERATED PRIME MONEY FUND II
Value at beginning of period $ 10.406 $ 10.033 $ 10.000
Value at end of period $ 10.748 $ 10.406 $ 10.033
Increase (decrease) in value of accumulation unit(1) 3.29% 3.71% 0.33%(5)
Number of accumulation units outstanding at end of period 720,521 554,934 51,949
FEDERATED UTILITY FUND II
Value at beginning of period $ 12.095 $ 9.881 $ 10.000
Value at end of period $ 13.303 $ 12.095 $ 9.881
Increase (decrease) in value of accumulation units(1) 9.99% 22.40% (1.19)%(2)
Number of accumulation units outstanding at end of period 1,260,915 727,601 41,191
</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 charge or
the fixed dollar annual maintenance fee, if any. Inclusion of these
charges would reduce the investment results shown.
(2) Reflects less than a full year of performance activity. Funds were
first received in this option during September 1994.
(3) 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 Contract.
(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 Contract.
(5) Reflects less than a full year of performance activity. Funds were
first received in this option during November 1994.
- --------------------------------------------------------------------------------
AUV - 1
<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 Inc.
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 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
Purchase Payments may be allocated to one or more of the Subaccounts of
the Federated Insurance Series (the "Trust") as designated on the
Application. In turn, the Subaccounts invest in the corresponding Funds at
net asset value.
The availability of Funds may be subject to regulatory authorization. In
addition, the Company may add or withdraw Funds, as permitted by applicable
law.
If the shares of any Fund should no longer be available for investment by
the Separate Account or if in the judgment of the Company, further investment
in such shares should become inappropriate in view of the purpose of the
Contract, we may cease to make such Fund shares available for investment
under the Contract prospectively. The Company may, alternatively, substitute
shares of another Fund for shares already acquired. The Company reserves the
right to substitute shares of another Fund for shares already acquired
without a proxy vote. Any elimination, substitution or addition of Funds will
be done in accordance with applicable state and federal securities laws.
(bullet) Federated Insurance Series--Federated American Leaders Fund II
(formerly IMS Equity Growth and Income Fund) seeks to achieve
long-term growth of capital and to provide income. The Fund pursues
its investment objective by investing, under normal circumstances,
at least 65% of its total assets in common stock of "blue-chip"
companies. "Blue-chip" companies generally are top- quality,
established growth companies which, in the opinion of the Fund's
adviser meet certain criteria.
(bullet) Federated Insurance Series--Federated Equity Income Fund II seeks to
provide above average income and capital appreciation. The Fund
attempts to achieve its objectives by investing at least 65% of its
assets in income- producing equity securities. Equity securities
include common stocks, preferred stocks, and securities (including
debt securities) that are convertible into common stocks. The
portion of the Fund's total assets
- --------------------------------------------------------------------------------
1
<PAGE>
invested in common stocks, preferred stocks, and convertible
securities will vary according to the Fund's assessment of market
and economic conditions and outlook.
(bullet) Federated Insurance Series--Federated Fund for U.S. Government
Securities II (formerly IMS U.S. Government Bond Fund) seeks to
provide current income. The Fund pursues its investment objective by
investing at least 65% of the value of its total assets in
securities issued or guaranteed as to payment of principal and
interest by the U.S. government, its agencies or instrumentalities.
(bullet) Federated Insurance Series--Federated Growth Strategies Fund II
(formerly IMS Growth Stock Fund) seeks capital appreciation. The
Fund pursues its objective by investing at least 65% of its assets
in equity securities of companies with prospects for above-average
growth in earnings and dividends or companies where significant
fundamental changes are taking place. Equity securities include
common stocks, preferred stocks, and securities (including debt
securities) that are convertible into common stocks.
(bullet) Federated Insurance Series--Federated High Income Bond Fund II
(formerly IMS Corporate Bond Fund) seeks high current income by
investing primarily in a diversified portfolio of professionally
managed fixed income securities. The fixed-income securities in
which the Fund intends to invest are lower-rated corporate debt
obligations (commonly known as "junk bonds" or "high yield, high
risk bonds" which involve significant degree of risk). (See the
Fund's prospectus for a discussion of the risk factors involved in
investing in lower-rated corporate debt obligations).
(bullet) Federated Insurance Series--Federated International Equity Fund II
(formerly IMS International Stock Fund) seeks total return on its
assets by investing at least 65% of its assets (and under normal
market conditions, substantially all of its assets) in equity
securities of issuers located in at least three different countries
outside of the United States. Investing in non-U.S. securities
carries substantial risks in addition to those associated with
domestic investments.
(bullet) Federated Insurance Series--Federated Prime Money Fund II (formerly
IMS Prime Money Fund) seeks to provide current income consistent
with stability of principal and liquidity. The Fund pursues its
investment objective by investing exclusively in a portfolio of
money market instruments maturing in 397 days or less. The average
maturity of the money market instruments in the Fund's portfolio,
computed on a dollar-weighted basis, will be 90 days or less. An
investment in this Fund is neither insured nor guaranteed by the
U.S. government.
(bullet) Federated Insurance Series--Federated Utility Fund II (formerly IMS
Utility Fund) seeks to achieve high current income and moderate
capital appreciation by investing primarily in a professionally
managed and diversified portfolio of equity and debt securities of
utility companies. Under normal market conditions, the Fund will
invest at least 65% of its total assets in securities of utility
companies.
The Trust is managed by Federated Advisers, a Delaware business trust
organized on April 11, 1989, with its principal place of business in
Pittsburgh, Pennsylvania. Federated Advisers is a registered investment
adviser under the Investment Advisers Act of 1940, as amended.
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 current prospectus for each Fund which is distributed with
and accompanies 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. Additional
prospectuses and statements of Additional Information for this Prospectus and
for each of the Funds can be obtained from the Company's Home Office at the
address and telephone number listed under the "Inquiries" section of the
Prospectus Summary.
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."
- --------------------------------------------------------------------------------
2
<PAGE>
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 the Trust, which might force the Trust to sell portfolio
securities at disadvantageous prices, causing its per share value to
decrease. The Board of Trustees of the Trust 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 Option
Purchase Payments may be allocated to the ALIAC Guaranteed Account (the
"Guaranteed Account"). Through the Guaranteed Account, we guarantee
stipulated rates of interest for stated periods of time. Amounts must remain
in the Guaranteed Account for specified periods of the guaranteed term to
receive the quoted interest rates, or a market value adjustment (which may be
positive or negative) will be applied. (See the Appendix.)
PURCHASE
================================================================================
Contract Availability
The Contracts are offered as (1) nonqualified deferred annuity contracts,
(we reserve the right to limit ownership of nonqualified Contracts to natural
persons); (2) Individual Retirement Annuities, other than "SIMPLE IRAs" as
defined in Section 408(p) of the Internal Revenue Code; or (3) qualified
contracts used in conjunction with certain employer sponsored retirement
plans pursuant to Section 401(a), 403(b) and 457 of the Code. Individual
Retirement Annuities are currently available as rollovers, and may permit
ongoing contributions, subject to state regulatory approval. Additionally,
availability of the Qualified Contracts described under item (3) is subject
to approval by the Company and state regulatory agencies.
The maximum issue age for a Certificate Holder is generally 90; however,
some states may require a lower maximum issue age.
Joint Certificate Holders. Contracts may be purchased by two individuals
as Joint Certificate Holders. A Joint Certificate Holder must be the spouse
of the other Joint Certificate Holder unless otherwise prohibited by state
law. Tax law prohibits the purchase of Qualified Contracts by Joint
Certificate Holders.
Purchasing Interests in the Contract
Group Contracts. Groups will generally consist of those eligible
individuals who have established an account with a broker-dealer or bank who
has agreed to act as a Distributor for the Contracts. The Distributor or its
designee will execute a master application and return it to the Company. The
master application will then be delivered to the Company for its approval.
Once the Application is approved, the Contract will be issued and the
Contract Holder will be entitled to exercise certain limited rights under the
Contract. (See "Contract Rights.") Under certain circumstances, the person
who would otherwise be the Contract Holder may designate a trustee or other
third party to act as Contract Holder in its place subject to applicable
insurance laws. In that event, the third party would exercise the Contract
rights for the group Contract.
Eligible individuals who want to purchase an interest in a Contract as
part of the group will fill out an Application and return it with their
initial Purchase Payment to their Registered Representative or to the
Underwriter for delivery to the Company. Once the Application is accepted, a
Certificate will be issued to the individual evidencing his or her interest
in the group Contract.
Individual Contracts. Certain states will not allow a group Contract to be
offered due to provisions in their insurance laws. In those states, an
eligible individual will submit an Application and will be issued a Contract
rather than a Certificate. Individuals who want to purchase a Contract must
fill out an Application and return it with their initial Purchase Payment to
their Registered Representative or to the Underwriter for delivery to the
Company. Once the Application is accepted, an individual Contract will be
issued to the purchaser.
Rejection. Any Application and initial Purchase Payment tendered by a
prospective Certificate Holder may be rejected for any reason by the Company.
The Company will also return any forms that are incomplete or that do not
include sufficient information to set up an Account, unless the forms are
completed within five business days from the date the Company receives them.
Purchase Payments may be held for longer periods only with the consent of the
Certificate Holder. All forms that are rejected will be
- --------------------------------------------------------------------------------
3
<PAGE>
returned with a refund of all Purchase payments submitted with them.
General
Certificate Holders. The Term "Certificate Holders," as used in this
Prospectus, includes individuals purchasing an interest in the Contract as
part of a group and individuals who acquire individual Contracts. Generally,
Nonqualified Certificate Holders must be natural persons.
Joint Certificate Holders. Contracts may be purchased by two individuals
as joint Certificate Holders, except for Contracts acquired by individuals
for purposes of establishing a Qualified Contract. A joint Certificate Holder
must be the spouse of the other joint Certificate Holder unless otherwise
prohibited by state law. (See "Tax Status" and "Contract Rights.")
Purchase Payments
You may make Purchase Payments under the Contract in one lump sum, through
periodic payments or as a transfer from a pre-existing plan.
The minimum initial Purchase Payment amount is $1,500. Additional Purchase
Payments must be at least $500, or if made by automatic check plan, $50 per
month. In some states, a Contract is issued as an Individual Retirement
Annuity can accept only a lump sum, rollover Purchase Payment. Additional
Purchase Payments made to an existing Contract are subject to the terms and
conditions published by us at the time of the subsequent payment. A Purchase
Payment of more than $1,000,000 will be allowed only with the Company's
consent. We also reserve the right to reject any Purchase Payment to a
prospective or existing Account without advance notice, unless prohibited by
state law.
For Qualified Contracts, the Code imposes a maximum limit on annual
Purchase Payments which may be excluded from a Certificate Holder's gross
income. (See "Tax Status.")
Allocation of Purchase Payments. Purchase Payments will initially be
allocated to the Subaccounts or the Guaranteed Account as specified on the
Application. 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.
Contract Rights
The Contract Holder has title to the Contract and has the right to accept
or reject any modifications to the Contract. For group Contracts, this is the
only right the Contract Holder has. All other rights, specifically those
relating to the Account under the Contract, are held by the Certificate
Holder. Certificate Holders' rights are subject to rights of any assignee
under an assignment filed with the Company and to the rights of any
irrevocably named beneficiary.
Joint Certificate Holders have equal rights under the Contract and with
respect to their Account. On the death of a Joint Certificate Holder prior to
the Annuity Date, the surviving Certificate Holder may retain all ownership
rights under the Contract or elect to have the proceeds distributed. (See
"Death Benefits.") All rights under the Contract must be exercised by both
Joint Certificate Holders with the exception of transfers among investment
options; which can be exercised by one Joint Certificate Holder, after the
Account has been established.
Designations of Beneficiary and Annuitant
You generally designate the beneficiary under the Contract on the
Application. However, for Qualified Contracts issued in conjunction with a
Code Section 401(a) qualified pension or profit sharing plan or a Code
Section 457 deferred compensation plan, the employer or trustee must be both
the Certificate Holder and the Beneficiary under the Contract, and the
participant on whose behalf the Account was established must be the
Annuitant. Under such plans, the participant is generally allowed to
designate a beneficiary under the plan, and the Certificate Holder may direct
that we pay any death proceeds to the plan beneficiary. "Beneficiary" as used
refers to the person who is ultimately entitled to receive such proceeds.
For Qualified Contracts issued in conjunction with a Code Section 403(b)
tax deferred annuity program subject to the Employee Retirement Income
Security Act (ERISA), the spouse of a married participant must be the
beneficiary of at least 50% of the Account Value. If the married participant
is age 35 or older, the participant may name an alternate beneficiary
provided he or she furnishes a waiver and spousal consent which meets the
requirements of ERISA Section 205. The participant on whose behalf the
Account was established must be the Annuitant.
For Qualified Contracts issued as an Individual Retirement Annuity, the
Certificate Holder must be the Annuitant. For Nonqualified Contracts, the
Certificate
- --------------------------------------------------------------------------------
4
<PAGE>
Holder and the Annuitant may, but need not, be the same person.
Right to Cancel
You may cancel the Contract or Certificate without penalty by returning it
to the Company or to the person from whom the Contract was purchased with a
written notice of your intent to cancel. In most states, you have ten days to
exercise this "free look" right; some states allow you longer. Unless state
law requires otherwise, the amount you will receive upon cancellation will
reflect the investment performance of the Subaccounts into which your
Purchase Payments were deposited. In some cases this may be more or less than
the amount of your Purchase Payments; therefore, you bear the entire
investment risk for amounts allocated among the Subaccounts during the free
look period. Under Contracts issued as Individual Retirement Annuities, you
will receive a refund of your Purchase Payment. Account Values will be
determined as of the Valuation Date on which we receive your request for
cancellation at our Home Office.
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 the 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 expenses relating to the Contracts and as a source of
profit to the Company. The Company expects to make a profit from the
mortality and expense risk charge.
Administrative Charge. During the Accumulation Period, the Company makes a
daily deduction from each of the Subaccounts for an administrative charge.
The charge is equal, on an annual basis, to 0.15% of the daily net assets of
the Subaccounts and 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.
During the Annuity Period, the Company reserves the right to make a
deduction for the administrative charge of an amount equal, on an annual
basis, up to 0.25% of the daily net assets of the Subaccounts. There is
currently no administrative charge during the 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 the Account Value. The maintenance fee is to reimburse
the Company for some of its administrative expenses relating to the
establishment and maintenance of the Accounts.
The maintenance fee deducted under the Contract is $30. The maintenance
fee will be deducted annually on the anniversary of the Contract effective
date. It is deducted on a pro rata basis from each investment option in which
you have an interest. If your entire Account Value is withdrawn, the full
maintenance fee, if applicable, will be deducted at the time of withdrawal.
The maintenance fee will not be deducted (either annually or upon withdrawal)
if your Account Value is $50,000 or more on the day the maintenance fee is
due.
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
Purchase Payments withdrawn from the Subaccounts and the Guaranteed Account
and is based on the number of years which have elapsed since the Purchase
Payment was made. The deferred sales charge for each Purchase Payment is
determined by multiplying the Purchase Payment withdrawn by the appropriate
percentage, in accordance with the schedule set forth in the table below.
The charge only applies to the Purchase Payment (not to any associated
changes in value). To satisfy a partial withdrawal, the deferred sales charge
is calculated as if the
- --------------------------------------------------------------------------------
5
<PAGE>
Purchase Payments are withdrawn in the same order they were applied to the
Account. Partial withdrawals from the Guaranteed Account will be treated as
described in the Appendix and the prospectus for the Guaranteed Account. The
total charge will be the sum of the charges applicable for all of the
Purchase Payments withdrawn. Reduced charges apply to Purchase Payments in
excess of $1.5 million.
Years since receipt of Deferred Sales
Purchase Payment Charge Deduction
------------------------------- ----------------------
Less than 1 7%
1 or more but less than 2 6%
2 or more but less than 3 5%
3 or more but less than 4 4%
4 or more but less than 5 3%
5 or more but less than 6 2%
6 or more but less than 7 1%
7 or more 0%
A deferred sales charge will not be deducted from any portion of a
Purchase Payment withdrawn if the withdrawal is:
(bullet) applied to provide Annuity benefits;
(bullet) paid to a Beneficiary due to the Certificate Holder's death
before Annuity Payments start, up to a maximum of the Purchase
Payment(s) in the Account on the Certificate Holder's date of
death (if the Certificate Holder is a non-natural person, death
benefits are paid at the death of the Annuitant);
(bullet) made due to the election of an Additional Withdrawal Option (see
"Additional Withdrawal Options");
(bullet) if approved by your state, under a Qualified Contract when the
amount withdrawn is equal to the minimum distribution required by
the Code for this Contract calculated using a method permitted
under the Code and agreed to by the Company;
(bullet) paid upon a full withdrawal where the Account Value is $2,500
or less and no amount has been withdrawn during the prior 12
months; or
(bullet) paid if we close out your Account when the value is less than $2,500
(or other amount required by state law).
After the first Account Year, you may withdraw all or a portion of your
Purchase Payments without a deferred sales charge, provided that (1) such
withdrawal occurs within three years of your admission to a licensed nursing
care facility (including non-licensed facilities in New Hampshire), and (2)
you have spent at least 45 consecutive days in such facility. This waiver of
deferred sales charge does not apply if you are in a nursing care facility at
the time the Account is established. It will also not apply if otherwise
prohibited by state law.
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 mortality and expense risk charges under
the Contract described above.
Free Withdrawals. At least 12 months after the date the first Purchase
Payment is applied to your Account and subject to the restrictions described
below, you may withdraw up to 15% of your current Account Value during each
calendar year without imposition of a deferred sales charge. The free
withdrawal applies only to the first partial or full withdrawal in each
calendar year. The free withdrawal amount will be based on the Account Value
calculated on the Valuation Date next following our receipt of your request
for withdrawal. If your withdrawal exceeds the free withdrawal allowance, we
will deduct a deferred sales charge on the excess amount. (See the Appendix
for a discussion of withdrawals from the Guaranteed Account.) This provision
may not be exercised if an Additional Withdrawal Option is in effect in the
same calendar year or if you have withdrawn a minimum distribution required
by the Code for which the deferred sales charge has been waived in the same
calendar year. (See "Additional Withdrawal Options.")
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 set forth in the Fee Table in
this Prospectus and described more fully in the accompanying Fund
prospectuses.
Premium and Other Taxes
Several states and municipalities currently impose a premium tax on
Annuities. These taxes currently range from 0% to 4%. Ordinarily, any
applicable state premium tax will be deducted from the Account Value when it
is applied to an Annuity option. However, we reserve the right to deduct
state premium tax at any time from the Purchase Payment(s) or from the
Account Value, but no earlier than when we have a tax liability under state
law.
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6
<PAGE>
Any municipal premium tax assessed at a rate in excess of 1% will be
deducted from the Purchase Payment(s) or from the amount applied to an
Annuity option based on our determination of when such tax is due. We will
absorb any municipal premium tax which is assessed at 1% or less. We reserve
the right, however, to reflect this added expense in our Annuity purchase
rates for residents of such municipalities.
CONTRACT VALUATION
================================================================================
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 the Guaranteed Account.
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.
Initial Purchase Payments will be credited to your Account at the AUV
computed on the next Valuation Date following our acceptance of the
Application as described under "Purchasing Interests in the Contract." Each
subsequent Purchase Payment (or amount transferred) received by the Company
by the close of business of the New York Stock Exchange 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
(c) taxes or provisions for taxes, if any, attributable to the operation
of the Subaccount;
(d) divided by the total value of the Subaccount's Accumulation and
Annuity Units on the preceding Valuation Date;
(e) minus a daily charge at the annual effective rate of 1.25% for
mortality and expense risks, and an administrative charge of 0.15%
during the Accumulation Period and up to 0.25% during the Annuity
Period (currently 0% during the Annuity Period).
The net investment rate may be either positive or negative.
TRANSFERS
================================================================================
At any time prior to the Annuity Date, you can transfer amounts held under
your Account among the investment options. Transfers from the Guaranteed
Account may be subject to a market value adjustment. (See the Appendix.) If
approved in your state, during the Annuity Period, if you have elected a
variable Annuity, you can make transfers only among the Subaccounts available
during the Annuity Period. (See "Annuity Options.") 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. Any transfer
will be based on the Accumulation Unit Value next determined after the
Company receives a valid transfer request at its Home Office.
During the Accumulation Period, twelve free transfers are allowed per
calendar year. Thereafter, the Company reserves the right to charge up to $10
for each additional
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transfer. The Company currently does not impose this charge.
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. Dollar cost
averaging is a system for investing a fixed amount of money at regular intervals
over a period of time. The Dollar Cost Averaging Program permits the transfer of
amounts from any of the variable funding options and an available Guaranteed
Term subject to the Company's terms and conditions to any of the Subaccounts. A
market value adjustment will not be applied to dollar cost averaging transfers
from an available Guaranteed Term. There is no additional charge for this
Program. (See the Appendix for a discussion of the restrictions and features
attributable to the Guaranteed Account.)
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.
Dollar Cost Averaging is not available to individuals who have elected an
Additional Withdrawal Option or the Account Rebalancing Program.
Account Rebalancing Program
The Account Rebalancing Program allows you to have portions of your
Account Value automatically reallocated annually to a specified percentage or
at other more frequent intervals as allowed by the Company under the program.
Only Account Values accumulating in the Subaccounts can be rebalanced. You
may participate in this program by completing the Account Rebalancing section
of the Application, or by sending a written request to the Company at its
Home Office. The Account Rebalancing does not ensure a profit nor guarantee
against loss in a declining market.
Account Rebalancing is not available to Certificate Holders who have
elected the Dollar Cost Averaging Program.
WITHDRAWALS
================================================================================
All or a portion of your Account Value may be withdrawn at any time during
the Accumulation Period. Withdrawal restrictions applicable to Section 403(b)
Contracts are described below. To request a withdrawal, you must properly
complete a disbursement form and send it to our Home Office. Payments for
withdrawal requests will be made in accordance with Securities and Exchange
Commission requirements, but normally not later than seven calendar days
following our receipt of a disbursement form. Withdrawals may be subject to a
deferred sales charge (See "Charges and Deductions") and to taxes and to tax
penalties (See "Tax Status.")
Withdrawals may be requested in one of the following forms:
(bullet) Full Withdrawal of an Account: The amount paid for a full
withdrawal will be the Adjusted Account Value minus any applicable
deferred sales charge and maintenance fee due.
(bullet) Partial Withdrawals (Percentage): The amount paid will be the
percentage of the Adjusted Account Value requested minus any
applicable deferred sales charge.
(bullet) Partial Withdrawals (Specified Dollar Amount): The amount paid
will be the dollar amount requested. However, the amount withdrawn
from your Account will equal the amount you request plus any
applicable deferred sales charge and plus or minus any applicable
market value adjustment.
For any partial withdrawal, the value of the Accumulation Units canceled
will be withdrawn proportionately from the Guaranteed Account or each
Subaccount in which your Account is invested, unless you request otherwise in
writing. All amounts paid will be based on your Account Value 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.
The tax treatment of withdrawals from each Nonqualified Contract may be
affected if you own other annuity contracts issued by us (or our affiliates)
that were purchased on or after October 21, 1988. (See "Tax Status.")
Withdrawal Restrictions from 403(b) Plans. Under Section 403(b) Contracts,
the withdrawal of salary reduction contributions and earnings on such
contributions is generally prohibited prior to the participant's death,
disability, attainment of age 59-1/2, separation from service or financial
hardship. (See "Tax Status.")
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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, your 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:
(bullet) SWO--Systematic Withdrawal Option. SWO is a series of partial
withdrawals from your 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.
(bullet) ECO--Estate Conservation Option. ECO 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. ECO is available only under Qualified Contracts. Under
ECO, the Company calculates the minimum distribution amount
required by law, 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, you will retain
all of the rights and flexibility permitted under the Contract during the
Accumulation Period. Your Account Value will continue to be subject to the
charges and deductions described in this Prospectus. Taking a withdrawal
under one of these Additional Withdrawal Options may have tax consequences.
Any person concerned about tax implications should consult a competent tax
advisor prior to electing an option.
Once you elect an Additional Withdrawal Option, you may revoke it any time
by submitting a written request to our Home Office. Once an option is
revoked, it may not be elected again for three years, nor may any other
Additional Withdrawal Options be elected unless permitted by the Code. The
Company reserves the right to discontinue the availability of one or all of
these Additional Withdrawal Options for new elections at any time, and/or to
change the terms of future elections.
DEATH BENEFIT DURING ACCUMULATION PERIOD
================================================================================
A death benefit will be payable to the Beneficiary(ies) if the Certificate
Holder dies before Annuity Payments have commenced. Upon the death of a Joint
Certificate Holder prior to the Annuity Date, the surviving Certificate
Holder, if any, will become the designated Beneficiary. Any other Beneficiary
designation on record with the Company at the time of death will be treated
as a contingent Beneficiary. If the Certificate Holder is a non-natural
person, the death benefit will be paid to the Beneficiary(ies) at the death
of the Annuitant.
A Beneficiary may elect the death benefit to be paid under one of the
options described below or if the designated Beneficiary is the spouse of the
Certificate Holder, he or she may continue as a Certificate Holder and
exercise all the deceased Certificate Holder's rights under the Contract.
Death Benefit Amount
Upon the death of the Certificate Holder (or the Annuitant when the
Certificate Holder is a non-natural person), the death benefit proceeds will
be the greatest of:
(1) The Account Value as of the Valuation Date next following our receipt at
our Home Office of proof of death and election of the payment type to be
made; or
(2) The Account Value on the most recent seventh year anniversary of the
Effective Date plus any Purchase Payments made after such Effective Date
anniversary less any withdrawals and any amounts annuitized; or
(3) The amount of the death benefit determined as of the Valuation Date
corresponding to the date of death as follows:
(i) Until the first Effective Date anniversary, the death benefit is equal
to the Purchase Payments made by the Certificate Holder during that
year, less any withdrawals and any amounts annuitized.
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For each year thereafter, the death benefit during the year is equal to
the death benefit at the beginning of the year (see (ii) below) plus all
Purchase Payments made during the year less any withdrawals and any amounts
annuitized that year.
(ii) On the anniversary of the Effective Date each year, the death benefit
is determined as follows:
(a) The death benefit on the previous Effective Date anniversary increased
by the death benefit factor of 4%; plus
(b) Purchase Payments made by the Certificate Holder during the year since
the last anniversary of the Effective Date increased by the death
benefit factor of 4% for the portion of the year since the Purchase
Payment was made; less
(c) Any withdrawals or amounts applied to an Annuity Option during the
year increased by the death benefit factor of 4% for the portion of
the year since the withdrawal or election of an Annuity Option.
Currently there is no limitation on the maximum death benefit payable;
however, we reserve the right, in the future, to impose a limitation on the
maximum allowable death benefit under sections (2) and (3) above. We
currently do not anticipate imposing such a limitation prior to May 1, 2000.
The death benefit calculation described in (2) and (3) applies until the
Certificate Holder attains age 85. Thereafter, the death benefit is only
adjusted for Purchase Payments, withdrawals and anuitizations. If the
Certificate Holder attains age 85 prior to the seventh anniversary of the
Effective Date, the death benefit will be the greater of (1) or (3) above. If
the Certificate Holder is a non-natural person the Death Benefit calculation
will be based on the age of the Annuitant.
The excess, if any, of the guaranteed death benefit value over the Account
Value is determined when we receive proof of death at our Home Office. Any
excess amount is allocated to the Federated Prime Money Fund II Subaccount.
The Account Value plus any excess amount deposited becomes the Account Value.
In the case of a spousal Beneficiary who continues the Account in his or
her own name, the death benefit shall be equal to the Adjusted Account Value
less any applicable deferred sales charge on any Purchase Payment made after
we receive proof of death.
For amounts held in the Guaranteed Account, see the Appendix for a
discussion of the calculation of death benefit proceeds.
Death Benefit Payment Options
Death benefit proceeds may be paid to the Beneficiary as described below.
Prior to any election, the Account Value will remain in the Account and the
Account Value will continue to be affected by the investment performance of
the investment option(s) selected. The Beneficiary has the right to allocate
or transfer any amount to any available investment option (subject to an MVA,
as applicable). The Code requires that distributions begin within a certain
time period, as described below. If no elections are made, no distributions
will be made. Failure to commence distribution within those time periods can
result in tax penalties.
Nonqualified Contracts. If the Certificate Holder (or Annuitant if the
Certificate Holder is a non-natural person) dies and the Beneficiary is the
surviving spouse, he or she will automatically become the successor
Certificate Holder. The successor Certificate Holder may exercise all rights
under the Contract and elect to (1) continue in the Accumulation Period, or
(2) apply some or all of the Adjusted Account Value to any of the Annuity
Options or (3) receive, at any time, a lump sum payment of the death benefit.
Under the Code, distributions are not required until the successor
Certificate Holder's death.
If the Certificate Holder (or Annuitant if the Certificate Holder is a
non-natural person) dies and the Beneficiary is not the surviving spouse, he
or she may elect Option (2) or (3) above. According to the Code, any portion
of the death benefit not distributed in installments over the life or life
expectancy beginning within one year of the date of death, must be
distributed within five years of the date of death. (See "Tax Status of the
Contract.") A market value adjustment will apply at the time the death
benefit is paid.
Qualified Contracts. Under a Qualified Contract where the Certificate
Holder is a trust or an employer, the death benefit is paid at the death of
the Annuitant. The Beneficiary has the following options: (1) apply some or
all of the Adjusted Account Value to any of the Annuity Options, subject to
the distribution rules in Code Section 401(a)(9), or (2) receive at any time
a lump sum payment equal to all or a portion of the Adjusted Account Value.
If the Account was established in conjunction with a Section 401(a) qualified
pension or profit sharing plan or a Section 457 deferred compensation plan,
payment will be made, as directed by the Certificate Holder, to either the
Certificate Holder or to the plan beneficiary.
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If ECO or SWO is in effect and the participant dies before the required
beginning date for minimum distributions, payments will cease. A Beneficiary
may receive distributions under ECO or SWO provided the election would
satisfy the Code minimum distribution rules and would be permitted under the
Plan.
If ECO or SWO is in effect and the participant dies after the required
beginning date for minimum distributions, payments will continue as permitted
under the Code minimum distribution rules, unless revoked.
Death benefit payments must satisfy the distribution rules in Code Section
401(a)(9). (See "Tax Status of the Contract.")
Death of the Annuitant
If the Certificate Holder is a non-natural person, a death benefit is paid
at the death of the Annuitant and a new Annuitant may not be named. In all
other circumstances, if the Annuitant who is not a Certificate Holder dies on
or before the Annuity Date, no Death Benefit is due and a new Annuitant may
be named. If no Annuitant is named, the Certificate Holder will be the
Annuitant. If the Annuitant dies after the Annuity Date, the death benefit,
if any, will be payable to the Beneficiary as specified in the Annuity Option
elected. We will require proof of the Annuitant's death. Death benefits will
be paid at least as rapidly as would have been paid under the method of
distribution in effect at the time of the Annuitant's death.
ANNUITY PERIOD
================================================================================
Annuity Period Elections
You must notify us in writing of the date you want Annuity Payments to
start (the "Annuity Date") and the Annuity Option elected. Payments may not
begin earlier than one year after purchase, or, unless we consent, later than
the later of (a) first day of the month following the Annuitant's 90th
birthday or (b) the tenth anniversary (fifth anniversary for Contracts or
Certificates issued in Pennsylvania) of the last Purchase Payment.
As of January 1, 1997, the Code generally requires that for Qualified
Contracts, other than for IRAs and for five- percent owners in other
Qualified Contracts, 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 or retires, whichever occurs later. For IRA
depositors and for five-percent owners, minimum distributions must begin by
April 1 of the calendar year following the calendar year in which the
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.") For Nonqualified Contracts, failure
to select an Annuity Option and an Annuity Date, or postponement of the
Annuity Date past the Annuitant's 90th birthday or tenth anniversary of the
last Purchase Payment, may have adverse tax consequences. You should consult
with a qualified tax adviser if you are considering such a course of action.
At least 30 days prior to the Annuity Date, you must notify us in writing
of the following:
(bullet) the date on which you would like annuity payments to begin;
(bullet) the Annuity Option under which you want payments to be
calculated and paid;
(bullet) whether the payments are to be made monthly, quarterly,
semi-annually or annually; and
(bullet) 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 or a
combination of the two).
Annuity Payments will not begin until you have selected an Annuity Option.
Until a date and option are elected, the Account will continue in the
Accumulation Period. Once annuity payments begin, the Annuity Option may not
be changed. (See "Annuity Options" below for more information about transfers
during the Annuity Period.)
Partial Annuitization
You may elect an Annuity Option with respect to a portion of the Account
Value, while leaving the remaining portion of the Account Value invested in
the Accumulation
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Period. The Code and the regulations do not specifically address the tax
treatment applicable to payments provided in this way. Whether such payments
are taxable as annuity payments or as withdrawals is currently unclear,
therefore you should consult with a qualified tax adviser if you are
considering a partial annuitization of your Account.
Annuity Options
The Certificate Holder may choose one of the following Annuity Options:
Lifetime Annuity Options:
(bullet) Option 1--Life Annuity--An annuity with payments ending on the
Annuitant's death.
(bullet) Option 2--Life Annuity with Guaranteed Payments--An annuity with
payments guaranteed for 5-30 years.
*(bullet) Option 3--Life Annuity with Cash Refund Feature--An annuity with a
cash refund feature. Payments are guaranteed for the amount applied
to the Annuity option. If the Annuitant dies before the amount
applied to the Annuity Option (less any applicable premium tax) has
been paid, any remaining balance will be paid in one sum to the
Beneficiary. This option is available only when all payments are as
a fixed Annuity.
(bullet) Option 4--Life Annuity Based Upn the Lives of Two Annuitants--An
annuity paid during the lives of the Annuitant and a second
Annuitant. The Certificate Holder selects an Annuity with 100%,
66-2/3% or 50% of the payment to continue after the first death, or
an Annuity with 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.
(bullet) Option 5--Life Annuity Based Upon the Lives of Two Annuitants with
Guaranteed Payments--An Annuity with Payments for a minimum of 5-30
years, with 100% of the payment to continue after the first death.
*(bullet) Option 6--Life Annuity Based Upon the Lives of Two Annuitants with
a Cash Refund Feature--An Annuity with 100% of the payment to
continue after the first death with a cash refund feature. Payments
are guaranteed for the amount applied to the Annuity Option. If
both Annuitants die prior to the total payment of the amount
applied to the Annuity Option (less any premium tax), any remaining
balance will be paid in one sum to the beneficiary. This option is
available only when all payments are as a Fixed Annuity.
* (If approved by your state)
(bullet) If Option 1 or 4 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 4, should die prior to the due date of the
second Annuity Payment. Once lifetime Annuity payments begin, the
Certificate Holder cannot elect to receive a lump-sum settlement.
Nonlifetime Annuity Option:
Under this option, payments may be made for 5-30 years, as selected by the
Certificate Holder. If this option is elected as a variable Annuity, the
Certificate Holder may request that the present value of all or any portion
of the remaining variable payments be paid in one sum. If elected on a fixed
basis, you cannot elect to receive a lump-sum settlement.
We may also offer additional Annuity Options under your Contract from time
to time. You can call the number listed in the "Inquiries" section of the
Prospectus Summary, to determine which options are available and the terms of
such options. Additional or enhanced options may not be available to those
who have already receiving Annuity payments.
Annuity Payments
Duration of Payments. For Qualified Contracts only, 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 how
you allocate your Account Value between fixed and variable payouts (some
options require all payments be made on a fixed basis). No election may be
made that would result in the first Annuity Payment of less than $50, or $250
per year for total yearly Annuity Payments (less if required by state law).
If the 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 (plus
up to 0.25% to offset any applicable administrative charge). Annuity Payments
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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. This charge, established when a variable
Annuity Option is elected, will not exceed 0.25% per year of amounts held on
a variable basis. Once established, the charge will be effective during the
entire Annuity Period. (See "Charges and Deductions.")
Death Benefit Payable During the Annuity Period
The death benefit, if any, due when the Annuitant dies after Annuity
Payments have begun, will depend on the terms of the Contract and the Annuity
Option selected. If Option 1 or Option 4 was elected, Annuity Payments will
cease on the death of the Annuitant under Option 1 or death of the surviving
Annuitant under Option 4.
If Lifetime Option 2 or Option 5 was elected and the death of the
Annuitant under Option 2, or the surviving Annuitant under Option 5, occurs
prior to the end of the guaranteed minimum payment period, we will continue
payments to the Beneficiary unless the Beneficiary elects a lump sum.
If the nonlifetime option was elected, and the Annuitant dies before all
payments are made, the value of any remaining payments will be paid to the
Beneficiary unless the Beneficiary elects a lump sum.
When the Annuitant dies after Annuity payments have begun and if there is
a death benefit payable under the Annuity option elected, the remaining value
must be distributed to the Beneficiary at least as rapidly as under the
original method of distribution.
Any lump-sum payment paid under the applicable lifetime or nonlifetime
Annuity options will be made within seven calendar days after acceptable
proof of death, 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 5, such value will be reduced by any payments
made after the date of death.
Death of the Certificate Holder During the Annuity Period
If the Certificate Holder is the Annuitant, and the Annuity Payments are
solely life contingent, the death of the Certificate Holder after the Annuity
Date terminates the Annuity payments. If the Certificate Holder is not the
Annuitant, or if Annuity Payments are for a stated period of time, the
Certificate Holder's death after the Annuity Date will not affect the Annuity
payment except as provided under "Death of the Annuitant." The remaining
payments under the Annuity Option elected will be made to the Beneficiary at
least as rapidly as under the method of distribution in effect at the time of
the Certificate Holder's death.
TAX STATUS
================================================================================
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). In addition, this discussion does not cover the
potential application of federal estate and gift tax laws, or state, local or
any other tax law. The Company makes no guarantee regarding the tax treatment
of any contract or transaction involving a Contract.
The Contract may be purchased on a non-tax qualified basis ("Nonqualified
Contract") or purchased and used in connection with certain retirement
arrangements entitled to special income tax treatment under Section 401(a),
403(b), 408(b) or 457 of the Code ("Qualified Contracts"). 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,
Certificate Holder 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.
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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 Account 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.
Accordingly, 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 interpretation 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
Diversification. Section 817(h) of the Code requires that with respect to
Nonqualified Contracts, the investments of the Funds be "adequately
diversified" in accordance with Treasury Regulations in order for the
Contracts to qualify as annuity contracts under 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 affects
how the Funds' assets may be invested.
In addition, in certain circumstances, owners of variable annuity
contracts 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. The IRS has stated
in published rulings that a variable contract owner will be considered the
owner of separate account assets if the owner possesses incidents of
investment control over the assets. The ownership rights under the contract
are similar to, but different in certain respects from those described by the
IRS in rulings in which it was determined that owners were not owners of
separate account assets. For example, a Certificate Holder has additional
flexibility in allocating premium payments and account values. In addition,
the number of funds provided under the Contract is greater than the number of
funds offered in contracts on which rulings have been issued. These
differences could result in a Certificate Holder being treated as the owner
of a pro rata portion of the assets of the Separate Account. The Company
reserves the right to modify the Contract as necessary to attempt to prevent
a Certificate Holder from being considered the owner of a pro rata share of
the assets of the Separate Account.
Required Distributions--Nonqualified Contracts: In order to be treated as
an annuity contract for federal income tax purposes, Section 72(s) of the
Code requires Nonqualified Contracts to provide that (a) if any Certificate
Holder dies on or after the Annuity Date but prior to the time the entire
interest in the Contract has been distributed, the remaining portion of such
interest will be distributed at least as rapidly as under the method of
distribution in effect at the time of the Certificate Holder's death, and (b)
if any Certificate Holder dies prior to the annuity date, the entire interest
in the Contract will be distributed within five years after the date of such
Certificate Holder's death. These requirements will be considered satisfied
as to any portion of a Certificate Holder's interest which is payable to or
for the benefit of a "designated beneficiary" and which is distributed over
the life of such "designated beneficiary" or over a period not extending
beyond the life expectancy of that beneficiary, provided that such
distributions begin within one year of the Certificate Holder's death. The
"designated beneficiary" refers to a natural person designated by the
Certificate Holder as a Beneficiary and to whom ownership of the contract
passes by reason of death. However, if the "designated beneficiary" is the
surviving spouse of the deceased Certificate Holder, the Certificate may be
continued with the surviving spouse as the new Certificate Holder.
The Nonqualifed Contracts contain provisions which are intended to comply
with the requirements of Section 72(s) of the Code, although no regulations
interpreting these requirements have yet been issued. The Company intends to
review such provisions and modify them if necessary to assure that they
comply with the requirements of Code Section 72(s) when clarified by
regulation or otherwise.
The discussion under "Taxation of Annuities" below is based on the
assumption that the Contract qualifies as an annuity contract for federal
income tax purposes.
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Required Distributions--Qualified Contracts. The Code has required
distribution rules for Section 401(a), 403(b) and 457 Plans and Individual
Retirement Annuities. Other than for IRAs and for five-percent owners in the
Qualified Contracts distributions must generally begin by April 1 of the
calendar year following the calendar year in which the participant attains
age 70-1/2 or retires, whichever occurs later. For IRA depositors and for
five-percent owners, minimum distributions must begin by April 1 of the
calendar year following the calendar year in which the participant attains
age 70-1/2 or retires, whichever occurs later. Under 403(b) plans, if the
Company maintains separate records, distribution of amounts held as of
December 31, 1986 must generally begin by the end of the calendar year in
which the participant attains age 75 (or retires, whichever occurs later).
However, special rules require that some or all of the balance be distributed
earlier if any distributions are taken in excess of the minimum required
amount.
To comply with these provisions, distributions must be in a form and
amount sufficient to satisfy the minimum distribution and minimum
distribution incidental death benefit rules specified in Section 401(a)(9) of
the Code.
In general, annuity payments must be distributed over the participant's
life or the joint lives of the participant and beneficiary, or over a period
not greater than the participant's life expectancy or the joint life
expectancies of the participant and beneficiary. Also, any distribution under
a Section 457 Plan payable over a period of more than one year must be made
in substantially nonincreasing amounts.
If the participant dies on or after the required beginning date for
minimum distributions, distributions to the beneficiary must be made at least
as rapidly as the method of distribution in effect at the time of the
participant's death. However, if the required minimum distribution is
calculated each year based on the participant's single life expectancy or the
joint life expectancies of the participant and beneficiary, the regulations
for Code Section 401(a)(9) provide specific rules for calculating the
required minimum distributions at the participant's death. For example, if
ECO was elected with the calculation based on the participant's single life
expectancy, and the life expectancy is recalculated each year, the
recalculated life expectancy becomes zero in the calendar year following the
participant's death and the entire remaining interest must be distributed to
the beneficiary by December 31 of the year following the participant's death.
However, a spousal beneficiary, other than under a Section 457 Plan, has
certain rollover rights which can only be exercised in the year of the
participant's death. The rules are complex and the participant should consult
a tax adviser before electing the method of calculation to satisfy the
minimum distribution requirements.
If the participant dies before the required beginning date for minimum
distributions, the entire interest must be distributed by December 31 of the
calendar year containing the fifth anniversary of the date of the
participant's death. Alternatively, payments may be made over the life of the
beneficiary or over a period not extending beyond the life expectancy of the
beneficiary, not to exceed 15 years for a non-spousal beneficiary under a
Section 457 Plan, provided the distribution begins to a non-spouse
beneficiary by December 31 of the calendar year following the calendar year
of the participant's death. If payments are made to a spousal beneficiary,
distribution must begin by the later of December 31 of the calendar year
following the calendar year of the death or December 31 of the calendar year
in which the participant would have attained age 70-1/2.
An exception applies for a spousal beneficiary under an Individual
Retirement Annuity. In lieu of taking a distribution under these rules, a
spousal beneficiary may elect to treat the Account as his or her own IRA and
defer taking a distribution until his or her age 70-1/2. The surviving spouse
is deemed to have made such an election if the surviving spouse makes a
rollover to or from the Account or fails to take a distribution within the
required time period.
If the participant or beneficiary fails to take the required minimum
distribution for any tax year, a 50% excise tax is imposed on the required
amount that was not distributed.
Taxation of Annuity Contracts
In General: Section 72 of the Code governs taxation of annuities in
general. The Company believes that a Certificate Holder under a Nonqualified
Contract who is a natural person generally is not taxed on increases in the
Account Value until distribution occurs by withdrawing all or part of such
Account Value (e.g., withdrawals or Annuity Payments under the Annuity Option
elected). The taxable portion of a distribution (in the form of a single sum
payment or an annuity) is taxable as ordinary income.
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Non-Natural Holders of a Nonqualified Contract: If the Certificate Holder
is not a natural person, a Nonqualified Contract is not treated as an annuity
for income tax purposes and the "income on the contract" for the taxable year
is currently taxable as ordinary income. "Income on the contract" is any
increase over the year in the Surrender Value, adjusted for Purchase Payments
made during the year, amounts previously distributed and amounts previously
included in income. There are some exceptions to the rule and a non-natural
person should consult with its tax advisor prior to purchasing this Contract.
A non-natural person exempt from federal income taxes should consult with its
tax advisor regarding treatment of "income on the contract" for purposes of
the unrelated business income tax. When the Certificate Holder is not a
natural person, the Annuitant is considered the Certificate Holder for the
purpose of meeting the required distribution-at-death rules. In addition,
when the Certificate Holder is not a natural person, a change in Annuitant is
treated as the death of the Certificate Holder.
The following discussion generally applies to Qualified Contracts or
Nonqualified Contracts owned by a natural person.
Withdrawals: In the case of a withdrawal under a Qualified Contract,
including withdrawals under SWO or ECO, the amount taxable is generally based
on the ratio of the "investment in the contract" to Account Value. The
"investment in the contract" generally equals the amount of any nondeductible
Purchase Payments paid by or on behalf of any individual less any amount
received previously which was excludable from gross income. For a Qualified
Contract, the "investment in the contract" can be zero. Special tax rules may
be available for certain distributions from a Qualified Contract.
With respect to Nonqualified Contracts, partial withdrawals, including
withdrawals under SWO, are generally treated as taxable income to the extent
that the Account Value immediately before the withdrawal exceeds the
"investment in the contract" at that time. The Account Value immediately
before a withdrawal may have to be increased by any positive market value
adjustment (MVA) that results from such a withdrawal. There is, however, no
definitive guidance on the proper tax treatment of MVAs in these
circumstances, and a Certificate Holder should contact a competent tax
adviser with respect to the potential tax consequences of any MVA that arises
as a result of a partial withdrawal.
Full withdrawals of a Nonqualified Contract are treated as taxable income
to the extent that the amount received exceeds the "investment in the
contract."
Annuity Payments: Although the tax consequences may vary depending on the
Annuity Payment elected under the Contract, in general, only the portion of
the Annuity Payment that represents the amount by which the Account Value
exceeds the "investment in the contract" will be taxed; after the "investment
in the contract" is recovered, the full amount of any additional annuity
payments is taxable. For variable Annuity Payments, the taxable portion is
generally determined by an equation that establishes a specific dollar amount
of each payment that is not taxed. The dollar amount is determined by
dividing the "investment in the contract" by the total number of expected
periodic payments. However, the entire distribution will be taxable once the
recipient has recovered the dollar amount of his or her "investment in the
contract." For fixed annuity payments, in general there is no tax on the
portion of each payment which represents the same ratio that the "investment
in the contract" bears to the total expected value of the Annuity Payments
for the term of the payments; however, the remainder of each Annuity Payment
is taxable. Once the "investment in the contract" has been fully recovered,
the full amount of any additional Annuity Payments is taxable. If Annuity
Payments cease as a result of an Annuitant's death before full recovery of
the "investment in the contract," consult a competent tax adviser regarding
deductibility of the unrecovered amount.
Penalty Tax: In the case of a distribution pursuant to a Nonqualified
Contract, or a Qualified Contract other than a Qualified Contract sold in
conjunction with a Code Section 457 Plan, there may be imposed a federal
income tax penalty equal to 10% of the amount treated as taxable income.
In general, there is no penalty tax on distributions from a Nonqualified
Contract: (1) made on or after the date on which the taxpayer attains age
59-1/2; (2) made as a result of the death of the Certificate Holder; (3)
attributable to the taxpayer's total and permanent disability; (4) received
in substantially equal periodic payments (at least annually) over the life or
life expectancy of the taxpayer or the joint lives or joint life expectancies
of the taxpayer and a "designated beneficiary"; or (5) allocable to
"investment in the contract" before August 14, 1982.
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If a distribution is made from a Qualified Contract sold in conjunction
with a Section 401(a) Plan or Section 403(b) Plan, the penalty tax will not
apply on distributions made when the participant (a) attains age 59-1/2, (b)
becomes permanently and totally disabled, (c) dies, (d) separates from
service with the plan sponsor at or after age 55, (e) rolls over the
distribution amount to another plan of the same type in accordance with the
terms of the Code, or (f) takes the distributions in substantially equal
periodic payments (at least annually) over his or her life or life expectancy
or the joint lives or joint life expectancies of the participant and plan
beneficiary, provided the participant has separated from service with the
plan sponsor. In addition, the penalty tax does not apply for the amount of a
distribution equal to unreimbursed medical expenses incurred by the
participant that qualify for deduction as specified in the Code. The Code may
impose other penalty taxes in other circumstances.
In general, the same exceptions described in the preceding paragraph will
apply to distributions made from an Individual Retirement Annuity. Beginning
January 1, 1997, the penalty tax is also waived on distributions made from an
IRA to pay for health insurance premiums for certain unemployed individuals.
Taxation of Death Benefit Proceeds: Amounts may be distributed from the
Contract because of the death of a Certificate Holder or the Annuitant.
Generally, such amounts are includible in the income of the recipient as
follows: (1) if distributed in a lump sum, they are taxed in the same manner
as a full surrender as described above, or (2) if distributed under an
Annuity Option, they are taxed in the same manner as Annuity Payments, as
described above.
Transfers, Assignments or Exchanges of the Contract: A transfer of
ownership of a Contract, the designation of an Annuitant, payee or other
beneficiary who is not also a Certificate Holder, the selection of certain
Annuity Dates, or the exchange of a Contract may result in certain tax
consequences. The assignment, pledge, or agreement to assign or pledge any
portion of the Account Value generally will be treated as a distribution. The
assignment or transfer of ownership of a Qualified Contract generally is not
allowed. Anyone contemplating any such designation, transfer, assignment,
selection, or exchange should contact a competent tax adviser with respect to
the potential tax effects of such a transaction.
Multiple Contracts: All deferred nonqualified annuity contracts that are
issued by the Company (or its affiliates) to the same owner during any
calendar year are treated as one annuity contract for purposes of determining
the amount includible in gross income under Section 72(e) of the Code. In
addition, the Treasury Department has specific authority to issue regulations
that prevent the avoidance of Section 72(e) through the serial purchase of
annuity contracts or otherwise. Congress has also indicated that the Treasury
Department may have authority to treat the combination purchase of an
immediate annuity contract and separate deferred annuity contracts as a
single annuity contract under its general authority to prescribe rules as may
be necessary to enforce the income tax laws.
Contracts Used with Certain Retirement Plans
Qualified Contracts in General
The Qualified Contract is designed for use as an Individual Retirement
Annuity or as a Contract used in connection with certain employer sponsored
retirement plans. The tax rules applicable to participants and beneficiaries
in Qualified Contracts are complex. Special favorable tax treatment may be
available for certain types of contributions and distributions. Adverse tax
consequences may result from contributions in excess of specified limits;
distributions prior to age 59-1/2 (subject to certain exceptions);
distributions that do not conform to specified commencement and minimum
distribution rules; aggregate distributions in excess of a specified annual
amount; and in other specified circumstances.
The Company makes no attempt to provide more than general information
about use of the Contracts with the various types of retirement plans.
Participants and beneficiaries under Qualified Contracts may be subject to
the terms and conditions of the retirement 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.
Section 457 Plans. Code 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
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17
<PAGE>
plans may permit participants to specify the form of investment for their
deferred compensation account.
Prior to the August 20, 1996 enactment of the Small Business Job
Protection Act of 1996 (the "the Small Business Act") compensation deferred
under the plans, all property and rights purchased with such amounts, and all
income attributable to such amounts, property or rights remained solely the
property and rights of the employer (without being restricted to the
provision of benefits) subject only to the claims of the employer's general
creditors. For that reason, depending on the terms of the particular plan,
the employer may have been entitled to draw on deferred amounts for purposes
unrelated to its Section 457 plan obligations.
Under the Small Business Act, plans maintained by State or local
governments, their political subdivisions, agencies, instrumentalities and
certain affiliates will be required to hold all assets and income of the Plan
in trust for the exclusive benefit of plan participants and their
beneficiaries. For purposes of meeting the new requirement, custodial
accounts and annuity contracts are treated as trusts. State and local
government plans that were in existence on August 20, 1996 are allowed a
transition period that ends January 1, 1999 to comply with the new
requirement.
In general, all amounts received under a Section 457 plan are taxable and
reportable to the IRS as taxable income. 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
owner, we will withhold federal taxes (and state taxes, if applicable).
The Code imposes a maximum limit on annual Purchase Payments which may be
excluded from the participant's gross income. Such limit is generally the
lesser of $7,500 (as adjusted to reflect changes in the cost of living) or
33-1/3% of the participant's includible compensation (25% of gross
compensation).
Section 401(a) Plans. Section 401(a) permits corporate employers to
establish various types of retirement plans for employees, and permits
self-employed individuals to establish various types of retirement plans for
themselves and for their employees. These retirement plans may permit the
purchase of the Contract to accumulate retirement savings under the plans.
Adverse tax consequences to the plan, to the participant or to both may
result if this Contract is assigned or transferred to an individual except to
a participant as a means to provide benefit payments.
The Code imposes a maximum limit on annual Purchase Payments that may be
excluded from a participant's gross income. Such limit must be calculated
under the Plan by the employer in accordance with Section 415 of the Code.
This limit is generally the lesser of 25% of the participant's compensation
or $30,000. In addition, Purchase Payments will be excluded from a
participant's gross income only if the Section 401(a) Plan meets certain
nondiscrimination requirements.
All distributions will be taxed as they are received unless the
distribution is rolled over to another plan of the same type or to an
individual retirement annuity/account ("IRA") in accordance with the Code, or
unless the participant has made after-tax contributions to the plan, which
are not taxed upon distribution. The Code has specific rules that apply,
depending on the type of distribution received, if after-tax contributions
were made.
In general, payments received by a beneficiary after the participant's
death are taxed in the same manner as if the participant had received those
payments, except that a limited death benefit exclusion may apply for
payments due to deaths that occurred on or before August 20, 1996. This
exclusion no longer applies to payments due to deaths occurring after August
20, 1996.
Section 403(b) Plans. Under Section 403(b), contributions made by public
school systems or nonprofit healthcare organizations and other Section
501(c)(3) tax exempt organizations to purchase annuity contracts for their
employees are generally excludable from the gross income of the employee.
In order to be excludable from taxable income, total annual contributions
made by the participant and his or her employer cannot exceed either of two
limits set by the Code. The first limit, under Section 415, is generally the
lesser of 25% of includible compensation or $30,000. The second limit, which
is the exclusion allowance under Section 403(b), is usually calculated
according to a formula that takes into account the participant's length of
employment and any pretax contributions to certain other retirement plans.
These two limits apply to the participant's contributions as well as to any
contributions made by the employer on behalf of the participant. There is an
additional limit that specifically limits salary reduction contributions to
generally no more than $9,500 annually (subject to indexing); a participant's
own limit may be
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<PAGE>
higher or lower, depending on certain conditions. In addition Purchase
Payments will be excluded from a participant's gross income only if the Plan
meets certain nondiscrimination requirements.
Section 403(b)(11) restricts the distribution under Section 403(b)
contracts of: (1) salary reduction contributions made after December 31,
1988; (2) earnings on those contributions; and (3) earnings during such
period on amounts held as of December 31, 1988. Distribution of those amounts
may only occur upon death of the participant, attainment of age 59-1/2,
separation from service, total and permanent disability, or financial
hardship. In addition, income attributable to salary reduction contributions
may not be distributed in the case of hardship.
Individual Retirement Annuities and Simplified Employee Pension Plans.
Section 408 of the Code permits eligible individuals to contribute to an
individual retirement program known as an Individual Retirement Annuity,
hereinafter referred to as an "IRA." Also, distributions from certain other
types of qualified plans may be "rolled over" on a tax-deferred basis into an
IRA. Employers may establish Simplified Employee Pension (SEP) Plans and
contribute to an IRA owned by the employee. Purchasers of a Qualified
Contract for use with IRAs will be provided with supplemental information
required by the Internal Revenue Service. Purchasers should seek competent
advice as to the suitability of the Contract for use with IRAs.
Withholding
Pension and annuity distributions generally are subject to withholding for
the recipient's federal income tax liability at rates that vary according to
the type of distribution and the recipient's tax status. Recipients may be
provided the opportunity to elect not to have tax withheld from
distributions; however, certain distributions from Section 401(a) Plans and
Section 403(b) tax-deferred annuities are subject to mandatory 20% federal
income tax withholding. We will report to the IRS the taxable portion of all
distributions.
MISCELLANEOUS
================================================================================
Distribution
The Company will serve as the principal underwriter for the securities
sold by this Prospectus. The Company is registered as a broker-dealer with
the Securities and Exchange Commission ("SEC") and is a member of the
National Association of Securities Dealers, Inc. ("NASD"). As principal
underwriter, the Company will contract with one or more registered
broker-dealers, or with banks that may be acting as broker-dealers without
separate registration under the Securities Exchange Act of 1934 pursuant to
legal and regulatory exceptions ("Distributors"), to offer and sell the
Contracts. All individuals offering and selling the Contracts must either be
registered representatives of a broker-dealer, or employees of a bank exempt
from registration under the Securities Exchange Act of 1934, and must also be
licensed as insurance agents to sell variable annuity contracts.
Federated Securities Corp. ("FSC"), an affiliate of the Adviser, may enter
into agreements with some of the Distributors to provide services to
customers in connection with the Funds acquired through the Contracts. These
services will include providing customers with information concerning the
Funds, their investment objectives, policies and limitations; portfolio
securities; performance, responding to customer inquiries and providing such
other services as the parties may agree. Fees for these services may be based
on the total number of assets in the Funds attributable to the Distributors'
customers.
Payment of Commissions. Commissions will be paid to Distributors who sell
the Contracts. Distributors will be paid commissions, up to an amount
currently equal to 6.5% of Purchase Payments for promotional or distribution
expenses associated with the marketing of the Contracts.
Other than the mortality and expense risk charge, the administrative
charge and the reimbursements by Federated Advisers for administrative
charges, all expenses incurred in the operations of the Separate Account are
borne by the Company.
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 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 it is not reasonably
practicable for the Company fairly to determine the value of the Subaccount's
assets; or (c) during such other periods as the
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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.
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, the administrative charge 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.
Voting Rights
Each Contract Holder may direct us in the voting of shares at
shareholders' meetings of the appropriate Funds(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 equals the
portion of the Account Values(s) attributable to the Certificate Holder's
interest in 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 for the portion of the Contract attributable to the
Certificate Holder's interest in 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.
Certificate Holders under a group Contract have a fully vested (100%)
interest in the benefits provided to them under their Account. Therefore,
Certificate Holders may instruct the group Contract Holder how to direct the
Company to cast the votes for the portion of the value or valuation reserve
attributable to their Account. Votes attributable to those Certificate
Holders who do not instruct the group Contract Holder will be cast by the
Company in the same proportion as votes for which instructions have been
received by the group Contract Holder. Votes attributable to individual or
group Contract Holders who do not direct us will be cast by us in the same
proportion as votes for which directions the Company has received.
You will receive a notice of each meeting of shareholders, together with
any proxy solicitation materials, and a statement of the number of votes
attributable to your Account.
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 and the Certificate Holder, make other changes to group Contracts that
would apply only to individuals who become Certificate Holders under that
Contract after the effective date of such changes. If the group Contract
Holder does not agree to a change, the Company reserves the right to refuse
to establish new Accounts under the Contract. Certain changes will require
the approval of appropriate state or federal regulatory authorities.
Transfers of Ownership; Assignment
Assignments or transfers of ownership of a Qualified Contract generally
are not allowed except as permitted under the Code, incident to a divorce.
The prohibition does not apply to a Qualified Contract sold in conjunction
with (1) a Section 457 deferred compensation plan, or (2) a Section 401(a)
plan where the Contract is owned by the trustee. We will accept assignments
or transfers of ownership of a Nonqualified Contract or a Qualified Contract
where assignments or transfers of ownership are not prohibited, with proper
notification. The date of any such transfer will be the date we receive the
notification at our Home Office. Refer to "Tax Status" for general tax
information. If you are contemplating a transfer of ownership or assignment
you should consult a tax adviser due to the potential for tax liability.
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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.
Involuntary Terminations
We reserve the right to terminate any Account with a value of $2,500 or
less immediately following a partial withdrawal (unless otherwise required by
state law). However, an Individual Retirement Annuity may only be closed out
when Purchase Payments have not been received for a 24-month period and the
paid-up annuity benefit at maturity would be less than $20 per month. If such
right is exercised, you will be given 90 days advance written notice. No
deferred sales charge will be deducted for involuntary terminations. The
Company does not intend to exercise this right in cases where the Account
Value is reduced to $2,500 or less solely due to investment performance.
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 Counsel to the Company.
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
================================================================================
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
ALIAC GUARANTEED ACCOUNT
================================================================================
The ALIAC Guaranteed Account (the "Guaranteed Account") is a credited
interest option available during the Accumulation Period under the Contracts.
The ALIAC Guaranteed Account is only offered in states where the offer and
sale has been authorized by the appropriate regulatory authorities. This
Appendix is a summary of the Guaranteed Account and is not intended to
replace the Guaranteed Account prospectus. You should read the accompanying
Guaranteed Account prospectus carefully before investing.
The Guaranteed Account is a credited interest option in which we guarantee
stipulated rates of interest for stated periods of time on amounts directed
to the Guaranteed Account. For guaranteed terms of one year or less, a
guaranteed rate is credited for the full term. For guaranteed terms of
greater than one year, the initial guaranteed rate is credited from the date
of deposit to the end of a specified period within the guaranteed term. 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 for one year. Guaranteed interest rates
will never be less than an annual effective rate of 3%.
During a deposit period, amounts may be applied to any of the available
guaranteed terms. A Guaranteed Term is the period of time specified by the
Company for which a specific Guaranteed Rate or Rates are offered on amounts
invested during a specific Deposit Period. Guaranteed Terms are made
available by the Company subject to the Company's terms and conditions. See
the prospectus for the Guaranteed Account for further details regarding
Guaranteed Term. The Company may offer more than one Guaranteed Term of the
same duration. Purchase Payments received after the initial payment will be
allocated in the same proportions as the last allocation, if no new
allocation instructions are received with the Purchase Payment. For amounts
allocated to the Guaranteed Account, if the same guaranteed term(s) are not
available, the next shortest term will be used. If no shorter guaranteed term
is available, the next longer guaranteed term will be used.
Except for transfers from an available Guaranteed Term subject to the
Company's terms and conditions in connection with the Dollar Cost Averaging
Program and withdrawals taken in connection with an Estate Conservation Option
or Systematic Withdrawal Option, and, if approved by your state, withdrawals for
minimum distributions required by the Code for which the deferred sales charge
is waived, withdrawals or transfers from a guaranteed term before the guaranteed
term matures 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 the Certificate Holder receiving an amount which is
less than the amount paid into the Guaranteed Account.
If a Certificate Holder requests a partial withdrawal of the Account Value
without designating from which investment option it should be taken, a
proportionate share will be withdrawn from the Guaranteed Account. The amount
will be withdrawn from all guaranteed term groups as defined in the
prospectus for the Guaranteed Account.
As a Guaranteed Term matures, assets accumulating under the Guaranteed
Account may be (a) transferred to a new Guaranteed Term, (b) transferred to
other available investment options, or (c) withdrawn. Amounts withdrawn may
be subject to a deferred sales charge. If no direction is received by the
Company at its Home Office by the maturity date of a guaranteed term, the
amount from the maturing guaranteed term will be transferred to the current
deposit period for a similar length guaranteed term. If the same guaranteed
term is no longer available, the next shortest guaranteed term available in
the current deposit period will be used. If no shorter guaranteed term is
available, the next longer guaranteed term will be used.
If you do not provide instructions concerning the maturity value of a
maturing guaranteed term, the maturity value transfer provision applies. This
provision allows you to transfer without an MVA to available guaranteed terms
of the current deposit period or to other available investment options, or
surrender without an MVA (if applicable, a deferred sales charge is assessed
on the surrendered amount). The provision is available only during the
calendar month immediately following
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a guaranteed term maturity date and only applies to the first transaction
regardless of the amount involved in the transaction.
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.
This does not apply to (1) amounts transferred on the Maturity Date or under
the maturity value transfer provision; (2) amounts transferred from the
Guaranteed Account before the Maturity Date due to the election of an Annuity
option, (3) amounts transferred from an available Guaranteed Term in
connection with the Dollar Cost Averaging Program; and (4) amounts
distributed under the Estate Conservation or Systematic Withdrawal
distribution. Transfers after the 90-day period are permitted from guaranteed
term(s) to other guaranteed term(s) available during a deposit period or to
other available investment options. Except for transactions described in
items (1), (3) and (4) above, amounts withdrawn or transferred from the
Guaranteed Account prior to the maturity date will be subject to a Market
Value Adjustment. However, only a positive aggregate MVA will be applied to
transfers made due to annuitizations under one of Lifetime Annuity Options
described in item (2) above.
The Certificate Holder may select a maximum of 18 different funding
options over the lifetime of the Contract. Under the Guaranteed Account, each
guaranteed term is counted as one funding option. If a guaranteed term
matures, and is renewed for the same term, it will not count as an additional
funding option.
Transfers of the Guaranteed Account values on or within one calendar month
of a term's maturity date are not counted as one of the 12 free transfers of
accumulated values in the Certificate Holder's Account.
By notifying us at least 30 days prior to the Annuity Date, you may elect
a variable annuity and have amounts that have been accumulating under the
Guaranteed Account transferred to one or more of the Subaccounts available
during the Annuity Period. The Guaranteed Account cannot be used as an
investment option during the Annuity Period. Transfers made due to the
election of a Lifetime Annuity Option will be subject to only a positive
aggregate MVA.
Death Benefit
Full and partial withdrawals and transfers made from the Guaranteed
Account (including transfers due to annuitization) within six months after
the date of the Certificate Holder's death (or Annuitant's death, if the
Certificate Holder is a non-natural person) will be the greater of:
(a) The aggregate MVA amount (i.e., the sum of all market value adjusted
amounts calculated due to a withdrawal of amounts). This total may be
greater or less than the Account Value of those amounts; or
(b) The applicable portion of the Account Value attributable to the
Guaranteed Account.
After the six-month period, the surrender or transfer amount will be
adjusted for the aggregate MVA amount, which may be greater or less than the
Account Value of those amounts. However, only a positive aggregate Market
Value Adjustment will be applied to transfers made due to annuitization under
one of the Lifetime Annuity Options.
Distribution
The Company is the principal underwriter of the Contract. The Company is
registered with the Securities and Exchange Commission under the Securities
Exchange Act of 1934 as a broker-dealer, and is a member of the National
Association of Securities Dealers, Inc.
- --------------------------------------------------------------------------------
23
<PAGE>
- --------------------------------------------------------------------------------
VARIABLE ANNUITY ACCOUNT B
OF
AETNA LIFE INSURANCE AND ANNUITY COMPANY
- --------------------------------------------------------------------------------
Statement of Additional Information dated May 1, 1997
Aetna Growth Plus
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, 1997.
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
1-800-531-4547
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
Page
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................................................ 3
Sales Material and Advertising.................................. 4
Independent Auditors............................................ 5
Financial Statements of the Separate Account.................... S-1
Financial Statements of the Company............................. F-1
<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, 1996, the Company had
$30.1 billion invested through its products, including $15.0 billion in its
separate accounts (of which the Company oversees the management of $10.5
billion) and $1.1 billion in its mutual funds offered outside of its separate
accounts. As of December 31, 1995, it ranked among the top 2% of all U.S. life
insurance companies based on assets. 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 Inc. 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 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 the investment adviser for the Federated Funds.
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. Purchase Payments made under the Contract may be
allocated to one or more of the Subaccounts. Each Subaccount invests in the
shares of only one of the Funds listed below. The Company may make additions to,
deletions from or substitutions of available investment options as permitted by
law and subject to the conditions of the Contract. The availability of the Funds
is subject to applicable regulatory authorization. Not all Funds are available
in all jurisdictions or under all Contracts. The Funds currently available under
the Contract are as follows:
<TABLE>
<S> <C>
Federated American Leaders Fund II Federated High Income Bond Fund II
Federated Equity Income Fund II Federated International Equity Fund II
Federated Fund for U.S. Government Securities II Federated Prime Money Fund II
Federated Growth Strategies Fund II Federated Utility Fund II
</TABLE>
1
<PAGE>
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 as defined in the prospectus. 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 entitled "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. 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 redeemable value is then divided by the initial
investment and this quotient is taken to the Nth root (N represents the number
of years in the period) and 1 is subtracted from the result which is then
expressed as a percentage, carried to at least the nearest hundredth of a
percent. The standardized figures use the actual returns of the Fund since
inception and then adjust them to reflect the deduction of all recurring charges
under the Contracts during each period (e.g., mortality and expense risk
charges, maintenance fees, administrative 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 total
return figures shown below may be different from the condensed financial
information shown in the prospectus because, for periods prior to 1994, the
Subaccount's investment performance was based on the performance of the
underlying Fund plus any cash held by the Subaccount.
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 shown if reflected in these
calculations). The non-standardized figures may also include monthly, quarterly,
year-to-date and three-year periods.
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.
2
<PAGE>
AVERAGE ANNUAL TOTAL RETURN QUOTATIONS - Standardized and Non-Standardized
The table shown below reflects the average annual standardized and
non-standardized total return quotation figures for the periods ended December
31, 1996 for the Subaccounts available under the Contract. 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
asterisk).
<TABLE>
<CAPTION>
---------------------------------- ------------------------------------------- ------------
FUND
($30 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>
Federated American Leaders Fund II 12.66% 15.37%* n/a 19.85% 16.38%* n/a n/a 02/10/94
--------------------------------------- ---------- ----------- ----------- ----------- ---------- --------- ----------- -----------
Federated Fund for U.S. Government
Securities II (3.45%) 2.71%* n/a 2.72% 4.13%* n/a n/a 03/28/94
--------------------------------------- ---------- ----------- ----------- ----------- ---------- --------- ----------- -----------
Federated Growth Strategies Fund II 15.20% 16.47%* n/a 22.55% 20.21%* n/a n/a 10/02/95
--------------------------------------- ---------- ----------- ----------- ----------- ---------- --------- ----------- -----------
Federated High Income Bond Fund II 5.92% 7.68%* n/a 12.69% 8.91%* n/a n/a 03/01/94
--------------------------------------- ---------- ----------- ----------- ----------- ---------- --------- ----------- -----------
Federated International Equity Fund II 0.37% 2.68%* n/a 6.78% 5.63%* n/a n/a 05/08/95
--------------------------------------- ---------- ----------- ----------- ----------- ---------- --------- ----------- -----------
Federated Prime Money Fund II (2.94%) 1.52%* n/a 3.26% 3.44%* n/a n/a 11/18/94
--------------------------------------- ---------- ----------- ----------- ----------- ---------- --------- ----------- -----------
Federated Utility Fund II 3.38% 7.88%* n/a 9.98% 9.08%* n/a n/a 02/10/94
--------------------------------------- ---------- ----------- ----------- ----------- ---------- --------- ----------- -----------
</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.
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
3
<PAGE>
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 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 on 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.
4
<PAGE>
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. We may illustrate in advertisements the performance of the
underlying funds, if accompanied by performance which also shows the performance
of such funds reduced by applicable charges under the Separate Account. We may
also show in advertisements the portfolio holdings of the underlying funds,
updated at various intervals. 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 Certificate Holders. 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.
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.
5
<PAGE>
FINANCIAL STATEMENTS
VARIABLE ANNUITY ACCOUNT B
Index
Statement of Assets and Liabilities....................................... S-2
Statements of Operations and Changes in Net Assets........................ S-6
Notes to Financial Statements............................................. S-7
Independent Auditors' Report.............................................. S-15
S-1
<PAGE>
Variable Annuity Account B
Statement of Assets and Liabilities - December 31, 1996:
<TABLE>
<S> <C>
ASSETS:
Investments, at net asset value: (Note 1)
Aetna Variable Fund; 22,674,496 shares (cost $674,480,933) .............................................. $ 734,460,247
Aetna Income Shares; 5,554,723 shares (cost $69,738,402) ................................................ 70,118,035
Aetna Variable Encore Fund; 8,093,492 shares (cost $107,322,605) ........................................ 106,781,998
Aetna Investment Advisers Fund, Inc; 8,423,410 shares (cost $112,230,262) ............................... 127,344,696
Aetna GET Fund, Series B; 1,148,634 shares (cost $11,845,728) ........................................... 16,333,339
Aetna GET Fund, Series C; 907,283 shares (cost $9,136,442) .............................................. 9,281,276
Aetna Ascent Variable Portfolio; 446,824 shares (cost $5,362,215) ....................................... 5,638,668
Aetna Crossroads Variable Portfolio; 442,088 shares (cost $5,144,208) ................................... 5,295,700
Aetna Legacy Variable Portfolio; 549,727 shares (cost $6,140,411) ....................................... 6,186,987
Aetna Variable Index Plus Portfolio; 182,043 shares (cost $1,989,418) ................................... 1,985,372
Alger American Funds:
Balanced Portfolio; 408,798 shares (cost $4,238,672) .................................................. 3,777,291
Growth Portfolio; 1,268,424 shares (cost $41,195,068) ................................................. 43,545,003
Income and Growth Portfolio; 768,597 shares (cost $7,300,499) ......................................... 6,471,587
Leveraged AllCap Portfolio; 589,862 shares (cost $11,198,918) ......................................... 11,419,728
MidCap Portfolio; 929,402 shares (cost $19,160,303) ................................................... 19,842,727
Small Capitalization Portfolio; 1,436,114 shares (cost $59,246,689) ................................... 58,751,429
Calvert Responsibly Invested Balanced Portfolio; 336,323 shares (cost $597,518) ......................... 596,637
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio; 3,446,529 shares (cost $66,707,023) .......................................... 72,480,497
Growth Portfolio; 1,860,260 shares (cost $54,670,184) ................................................. 57,928,484
High Income Portfolio; 1,174,877 shares (cost $13,895,035) ............................................ 14,709,464
Overseas Portfolio; 515,036 shares (cost $8,959,583) .................................................. 9,703,271
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio; 350,352 shares (cost $5,447,282) ............................................. 5,931,464
Contrafund Portfolio; 3,414,168 shares (cost $50,327,864) ............................................. 56,538,618
Index 500 Portfolio; 307,196 shares (cost $25,139,330) ................................................ 27,380,370
Investment Grade Bond Portfolio; 389,026 shares (cost $4,585,849) ..................................... 4,761,677
Insurance Management Series:
American Leaders Fund II; 4,005,705 shares (cost $52,316,587) ......................................... 61,127,055
Growth Strategies Fund II; 561,108 shares (cost $6,448,785) ........................................... 7,182,178
High Income Bond Fund II; 2,651,478 shares (cost $26,128,555) ......................................... 27,151,137
International Equity Fund II; 531,863 shares (cost $5,627,988) ........................................ 5,935,590
Prime Money Fund II; 7,744,318 shares (cost $7,744,318) ............................................... 7,744,318
US Government Securities Fund II; 758,792 shares (cost $7,582,811) .................................... 7,656,209
Utility Fund II; 1,420,364 shares (cost $15,043,602) .................................................. 16,774,494
Janus Aspen Series:
Aggressive Growth Portfolio; 1,729,280 shares (cost $31,007,236) ...................................... 31,542,060
Balanced Portfolio; 797,173 shares (cost $11,400,361) ................................................. 11,774,244
Flexible Income Portfolio; 457,937 shares (cost $5,073,822) ........................................... 5,147,217
Growth Portfolio; 1,346,496 shares (cost $19,790,729) ................................................. 20,884,154
Short-Term Bond Portfolio; 192,639 shares (cost $1,947,988) ........................................... 1,920,611
Worldwide Growth Portfolio; 3,419,377 shares (cost $61,321,568) ....................................... 66,472,691
Lexington Emerging Markets Fund; 249,599 shares (cost $2,582,550) ....................................... 2,515,960
Lexington Natural Resources Trust Fund; 332,525 shares (cost $4,213,645) ................................ 4,751,784
MFS Funds:
Emerging Growth Series; 679,608 shares (cost $9,083,804) .............................................. 8,998,008
Research Series; 516,109 shares (cost $6,571,748) ..................................................... 6,776,512
Total Return Series; 307,540 shares (cost $4,144,359) ................................................. 4,216,370
Value Series; 19,591 shares (cost $207,906) ........................................................... 208,841
Worldwide Government Series; 38,555 shares (cost $398,609) ............................................ 407,913
Neuberger & Berman Advisers Management Trust -
Growth Portfolio; 319,727 shares (cost $8,249,239) .................................................... 8,242,574
Scudder Variable Life Investment Fund -
International Portfolio; 909,444 shares (cost $10,539,678) ............................................ 12,050,127
</TABLE>
S-2
<PAGE>
Variable Annuity Account B
Statement of Assets and Liabilities - December 31, 1996 (continued):
<TABLE>
<S> <C>
TCI Portfolios, Inc:
Balanced Fund; 396,732 shares (cost $2,846,031) ....................................................... $ 2,991,356
Growth Fund; 4,332,926 shares (cost $45,957,552) ...................................................... 44,369,162
International Fund; 789,697 shares (cost $4,330,759) .................................................. 4,706,594
--------------
NET ASSETS (cost $1,726,620,671) ......................................................................... $1,848,811,724
==============
Net assets represented by:
Reserves for annuity contracts in accumulation and payment period: (Notes 1 and 5)
Aetna Variable Fund:
Annuity contracts in accumulation ...................................................................... $ 644,728,031
Annuity contracts in payment period .................................................................... 89,732,216
Aetna Income Shares:
Annuity contracts in accumulation ...................................................................... 66,534,546
Annuity contracts in payment period .................................................................... 3,583,489
Aetna Variable Encore Fund:
Annuity contracts in accumulation ...................................................................... 106,781,998
Aetna Investment Advisers Fund, Inc:
Annuity contracts in accumulation ...................................................................... 119,402,212
Annuity contracts in payment period .................................................................... 7,942,484
Aetna GET Fund, Series B:
Annuity contracts in accumulation ...................................................................... 16,333,339
Aetna GET Fund, Series C:
Annuity contracts in accumulation ...................................................................... 9,281,276
Aetna Ascent Variable Portfolio:
Annuity contracts in accumulation ...................................................................... 5,638,668
Aetna Crossroads Variable Portfolio:
Annuity contracts in accumulation ...................................................................... 5,295,700
Aetna Legacy Variable Portfolio:
Annuity contracts in accumulation ...................................................................... 6,186,987
Aetna Variable Index Plus Portfolio:
Annuity contracts in accumulation ...................................................................... 1,985,372
Alger American Funds:
Balanced Portfolio:
Annuity contracts in accumulation ...................................................................... 3,777,291
Growth Portfolio:
Annuity contracts in accumulation ...................................................................... 43,545,003
Income and Growth Portfolio:
Annuity contracts in accumulation ...................................................................... 6,471,587
Leveraged AllCap Portfolio:
Annuity contracts in accumulation ...................................................................... 11,419,728
MidCap Portfolio:
Annuity contracts in accumulation ...................................................................... 19,842,727
Small Capitalization Portfolio:
Annuity contracts in accumulation ...................................................................... 58,751,429
Calvert Responsibly Invested Balanced Portfolio:
Annuity contracts in accumulation ...................................................................... 596,637
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio:
Annuity contracts in accumulation ...................................................................... 72,480,497
Growth Portfolio:
Annuity contracts in accumulation ...................................................................... 57,928,484
High Income Portfolio:
Annuity contracts in accumulation ...................................................................... 14,709,464
Overseas Portfolio:
Annuity contracts in accumulation ...................................................................... 9,703,271
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio:
Annuity contracts in accumulation ...................................................................... 5,931,464
</TABLE>
S-3
<PAGE>
Variable Annuity Account B
Statement of Assets and Liabilities - December 31, 1996 (continued):
<TABLE>
<S> <C>
Contrafund Portfolio:
Annuity contracts in accumulation ....................................................................... $ 56,538,618
Index 500 Portfolio:
Annuity contracts in accumulation ....................................................................... 27,380,370
Investment Grade Bond Portfolio:
Annuity contracts in accumulation ....................................................................... 4,761,677
Insurance Management Series:
American Leaders Fund II:
Annuity contracts in accumulation ....................................................................... 61,127,055
Growth Strategies Fund II:
Annuity contracts in accumulation ....................................................................... 7,182,178
High Income Bond Fund II:
Annuity contracts in accumulation ....................................................................... 27,151,137
International Equity Fund II:
Annuity contracts in accumulation ....................................................................... 5,935,590
Prime Money Fund II:
Annuity contracts in accumulation ....................................................................... 7,744,318
US Government Securities Fund II:
Annuity contracts in accumulation ....................................................................... 7,656,209
Utility Fund II:
Annuity contracts in accumulation ....................................................................... 16,774,494
Janus Aspen Series:
Aggressive Growth Portfolio:
Annuity contracts in accumulation ....................................................................... 31,542,060
Balanced Portfolio:
Annuity contracts in accumulation ....................................................................... 11,774,244
Flexible Income Portfolio:
Annuity contracts in accumulation ....................................................................... 5,147,217
Growth Portfolio:
Annuity contracts in accumulation ....................................................................... 20,884,154
Short-Term Bond Portfolio:
Annuity contracts in accumulation ....................................................................... 1,920,611
Worldwide Growth Portfolio:
Annuity contracts in accumulation ....................................................................... 66,472,691
Lexington Emerging Markets Fund:
Annuity contracts in accumulation ....................................................................... 2,515,960
Lexington Natural Resources Trust Fund:
Annuity contracts in accumulation ....................................................................... 4,751,784
MFS Funds:
Emerging Growth Series:
Annuity contracts in accumulation ....................................................................... 8,998,008
Research Series:
Annuity contracts in accumulation ....................................................................... 6,776,512
Total Return Series:
Annuity contracts in accumulation ....................................................................... 4,216,370
Value Series:
Annuity contracts in accumulation ....................................................................... 208,841
Worldwide Government Series:
Annuity contracts in accumulation ....................................................................... 407,913
Neuberger & Berman Advisers Management Trust - Growth Portfolio:
Annuity contracts in accumulation ....................................................................... 8,242,574
Scudder Variable Life Investment Fund - International Portfolio:
Annuity contracts in accumulation ....................................................................... 12,050,127
TCI Portfolios, Inc:
Balanced Fund:
Annuity contracts in accumulation ....................................................................... 2,991,356
</TABLE>
S-4
<PAGE>
Variable Annuity Account B
Statement of Assets and Liabilities - December 31, 1996 (continued):
<TABLE>
<S> <C>
Growth Fund:
Annuity contracts in accumulation ......................................................................... $ 44,369,162
International Fund:
Annuity contracts in accumulation ......................................................................... 4,706,594
--------------
$1,848,811,724
==============
</TABLE>
See Notes to Financial Statements
S-5
<PAGE>
Variable Annuity Account B
Statements of Operations and Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Income: (Notes 1, 3 and 5)
Dividends ..................................................................... $ 120,367,178 $ 112,097,675
Expenses: (Notes 2 and 5)
Valuation Period Deductions ................................................... (17,483,870) (11,786,592)
--------------- ---------------
Net investment income ............................................................ 102,883,308 100,311,083
--------------- ---------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on sales of investments: (Notes 1, 4 and 5)
Proceeds from sales ............................................................ 365,025,974 495,934,611
Cost of investments sold ....................................................... 347,598,566 463,921,121
--------------- ---------------
Net realized gain ............................................................ 17,427,408 32,013,490
Net unrealized gain (loss) on investments: (Note 5)
Beginning of year .............................................................. 28,746,944 (44,356,052)
End of year .................................................................... 122,191,053 28,746,944
--------------- ---------------
Net change in unrealized gain ................................................ 93,444,109 73,102,996
--------------- ---------------
Net realized and unrealized gain on investments .................................. 110,871,517 105,116,486
--------------- ---------------
Net increase in net assets resulting from operations ............................. 213,754,825 205,427,569
--------------- ---------------
FROM UNIT TRANSACTIONS:
Variable annuity contract purchase payments ...................................... 538,586,667 178,474,387
Sales and administrative charges deducted by the Company ......................... (17,370) (34,250)
--------------- ---------------
Net variable annuity contract purchase payments .............................. 538,569,297 178,440,137
Transfers from the Company for mortality guarantee adjustments ................... 690,779 1,565,140
Transfers from the Company's fixed account options ............................... 50,549,121 4,144,061
Redemptions by contract holders .................................................. (73,738,526) (46,390,791)
Annuity Payments ................................................................. (12,108,943) (9,198,421)
Other ............................................................................ 159,467 1,143,373
--------------- ---------------
Net increase in net assets from unit transactions (Note 5) ................... 504,121,195 129,703,499
--------------- ---------------
Change in net assets ............................................................. 717,876,020 335,131,068
NET ASSETS:
Beginning of year ................................................................ 1,130,935,704 795,804,636
--------------- ---------------
End of year ...................................................................... $ 1,848,811,724 $ 1,130,935,704
=============== ===============
</TABLE>
See Notes to Financial Statements
S-6
<PAGE>
Variable Annuity Account B
Notes to Financial Statements - December 31, 1996
1. Summary of Significant Accounting Policies
Variable Annuity Account B ("Account") is a separate account established by
Aetna Life Insurance and Annuity Company registered under the Investment
Company Act of 1940 as a unit investment trust. The Account is sold
exclusively for use with variable annuity contracts that may be entitled to
tax-deferred treatment under specific sections of the Internal Revenue Code
of 1986, as amended.
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.
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, 1996:
<TABLE>
<S> <C>
Aetna Variable Fund Insurance Management Series:
Aetna Income Shares [bullet] American Leaders Fund II
Aetna Variable Encore Fund [bullet] Growth Strategies Fund II
Aetna Investment Advisers Fund, Inc. [bullet] High Income Bond Fund II
Aetna GET Fund, Series B [bullet] International Equity Fund II
Aetna GET Fund, Series C [bullet] Prime Money Fund II
Aetna Ascent Variable Portfolio [bullet] U.S. Government Securities Fund II
Aetna Crossroads Variable Portfolio [bullet] Utility Fund II
Aetna Legacy Variable Portfolio Janus Aspen Series:
Aetna Variable Index Plus Portfolio [bullet] Aggressive Growth Portfolio
Alger American Funds: [bullet] Balanced Portfolio
[bullet] Balanced Portfolio [bullet] Flexible Income Portfolio
[bullet] Growth Portfolio [bullet] Growth Portfolio
[bullet] Income and Growth Portfolio [bullet] Short-Term Bond Portfolio
[bullet] Leveraged AllCap Portfolio [bullet] Worldwide Growth Portfolio
[bullet] MidCap Portfolio Lexington Fund Emerging Markets Fund
[bullet] Small Capitalization Portfolio Lexington Natural Resources Trust Fund
Calvert Responsibly Invested Balanced Portfolio MFS Funds:
Fidelity Investments Variable Insurance Products Fund: [bullet] Emerging Growth Series
[bullet] Equity-Income Portfolio [bullet] Research Series
[bullet] Growth Portfolio [bullet] Total Return Series
[bullet] High Income Portfolio [bullet] Value Series
[bullet] Overseas Portfolio [bullet] World Government Series
Fidelity Investments Variable Insurance Products Fund II: Neuberger & Berman Advisers Management Trust -
[bullet] Asset Manager Portfolio [bullet] Growth Portfolio
[bullet] Contrafund Portfolio Scudder Variable Life Investment Fund -
[bullet] Index 500 Portfolio [bullet] International Portfolio
[bullet] Investment Grade Bond Portfolio [bullet] TCI Portfolios, Inc.:
[bullet] Balanced Fund
[bullet] Growth Fund
[bullet] International Fund
</TABLE>
S-7
<PAGE>
Notes to Financial Statements - December 31, 1996 (continued):
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.
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 (distributions in excess of net investment income) and accumulated
net realized gain (loss) on investments is included in net unrealized gain
(loss) in the Statements of Operations and Changes in Net Assets.
4. Purchases and Sales of Investments
The cost of purchases and proceeds from sales of investments other than
short-term investments for the years ended December 31, 1996 and December
31, 1995 aggregated $972,030,476 and $365,025,974; $725,949,193 and
$495,934,611, respectively.
S-8
<PAGE>
Variable Annuity Account B
Notes to Financial Statements - December 31, 1996 (continued):
<TABLE>
<CAPTION>
5. Supplemental Information to Statements of Operations and Changes in Net Assets - Year Ended December 31, 1996
- --------------------------------------------------------------------------------------------------------------------------------
Valuation Proceeds Cost of Net
Period from Investments Realized
Dividends Deductions Sales Sold Gain (Loss)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Variable Fund: $77,000,986 ($7,148,689) $96,146,932 $97,318,697 ($1,171,765)
Annuity contracts in accumulation
Annuity contracts in payment period
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Income Shares: 4,527,825 (813,024) 19,585,006 18,826,116 758,890
Annuity contracts in accumulation
Annuity contracts in payment period
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Encore Fund: 5,358,925 (1,043,955) 78,888,315 76,637,102 2,251,213
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc.: 11,247,847 (1,372,478) 16,403,009 13,386,571 3,016,438
Annuity contracts in accumulation
Annuity contracts in payment period
- --------------------------------------------------------------------------------------------------------------------------------
Aetna GET Fund, Series B: 1,055,590 (226,340) 915,330 681,610 233,720
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------------------------
Aetna GET Fund, Series C: 46,499 (14,753) 361,353 354,510 6,843
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio: 235,037 (27,609) 317,740 277,917 39,823
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio: 257,055 (29,943) 362,140 312,870 49,270
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio: 363,749 (38,623) 406,948 384,407 22,541
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Index Plus Portfolio: 10,290 (2,403) 139,030 133,438 5,592
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------------------------
Alger American Funds:
Balanced Portfolio: 775,351 (33,904) 244,368 332,405 (88,037)
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------------------------
Growth Portfolio: 758,872 (394,360) 6,990,444 6,528,212 462,232
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------------------------
Income and Growth Portfolio: 2,009,995 (55,929) 390,051 732,537 (342,486)
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------------------------
Leveraged AllCap Portfolio: 61,186 (116,503) 4,991,495 4,605,949 385,546
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------------------------
MidCap Portfolio: 190,158 (166,087) 3,198,308 3,039,709 158,599
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------------------------
Small Capitalization Portfolio: 184,900 (588,663) 31,506,275 29,929,826 1,576,449
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------------------------
Calvert Responsibly Invested 44,676 (3,984) 141,022 137,780 3,242
Balanced Portfolio:
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable
Insurance Products Fund:
Equity-Income Portfolio: 940,850 (608,164) 4,030,269 3,343,817 686,452
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------------------------
Growth Portfolio: 1,412,110 (540,670) 2,600,136 2,280,711 319,425
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------------------------
High Income Portfolio: 178,909 (112,363) 1,318,057 1,318,142 (85)
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-9
<PAGE>
Variable Annuity Account B
Notes to Financial Statements - December 31, 1996 (continued):
<TABLE>
<CAPTION>
5. Supplemental Information to Statements of Operations and Changes in Net Assets-Year Ended December 31, 1996 (Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Net
Net Unrealized Increase
Gain (Loss) Net (Decrease) Net Assets
----------- Change in In Net Assets ----------
Beginning End Unrealized from Unit Beginning End
of Year of Year Gain (Loss) Transactions of Year of Year
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aetna Variable Fund: ($8,051,873) $59,979,314 $68,031,187 $4,966,306
Annuity contracts in accumulation $530,231,821 $644,728,031
Annuity contracts in payment period 62,550,401 89,732,216
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Income Shares: 3,224,044 379,633 (2,844,411) ($9,600,618)
Annuity contracts in accumulation 74,693,652 66,534,546
Annuity contracts in payment period 3,395,721 3,583,489
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Encore Fund: 2,487,618 (540,607) (3,028,225) $22,111,260
Annuity contracts in accumulation 81,132,780 106,781,998
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc.: 12,419,220 15,114,435 2,695,215 $602,270
Annuity contracts in accumulation 104,415,595 119,402,212
Annuity contracts in payment period 6,739,809 7,942,484
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna GET Fund, Series B: 2,566,580 4,487,610 1,921,030 ($650,835)
Annuity contracts in accumulation 14,000,174 16,333,339
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna GET Fund, Series C: 0 144,834 144,834 $9,097,853
Annuity contracts in accumulation 0 9,281,276
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio: 5,570 276,453 270,883 $4,773,151
Annuity contracts in accumulation 347,383 5,638,668
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio: 8,209 151,493 143,284 $4,409,627
Annuity contracts in accumulation 466,407 5,295,700
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio: 1,609 46,576 44,967 $5,470,774
Annuity contracts in accumulation 323,579 6,186,987
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Index Plus Portfolio: 0 (4,046) (4,046) $1,975,940
Annuity contracts in accumulation (1) 1,985,372
- ------------------------------------------------------------------------------------------------------------------------------------
Alger American Funds:
Balanced Portfolio: 1,644 (461,380) (463,024) $2,897,855
Annuity contracts in accumulation 689,050 3,777,291
- ------------------------------------------------------------------------------------------------------------------------------------
Growth Portfolio: (63,817) 2,349,936 2,413,753 $29,514,421
Annuity contracts in accumulation 10,790,085 43,545,003
- ------------------------------------------------------------------------------------------------------------------------------------
Income and Growth Portfolio: (6,769) (828,912) (822,143) $4,660,630
Annuity contracts in accumulation 1,021,520 6,471,587
- ------------------------------------------------------------------------------------------------------------------------------------
Leveraged AllCap Portfolio: 32,561 220,810 188,249 $8,946,454
Annuity contracts in accumulation 1,954,796 11,419,728
- ------------------------------------------------------------------------------------------------------------------------------------
MidCap Portfolio: 7,193 682,424 675,231 $15,727,261
Annuity contracts in accumulation 3,257,565 19,842,727
- ------------------------------------------------------------------------------------------------------------------------------------
Small Capitalization Portfolio: 46,283 (495,260) (541,543) $32,655,969
Annuity contracts in accumulation 25,464,317 58,751,429
- ------------------------------------------------------------------------------------------------------------------------------------
Calvert Responsibly Invested (13,512) (881) 12,631 $193,226
Balanced Portfolio:
Annuity contracts in accumulation 346,846 596,637
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable
Insurance Products Fund:
Equity-Income Portfolio: 966,600 5,773,475 4,806,875 $51,230,275
Annuity contracts in accumulation 15,424,209 72,480,497
- ------------------------------------------------------------------------------------------------------------------------------------
Growth Portfolio: (34,190) 3,258,300 3,292,490 $38,219,867
Annuity contracts in accumulation 15,225,262 57,928,484
- ------------------------------------------------------------------------------------------------------------------------------------
High Income Portfolio: 15,029 814,429 799,400 $12,636,277
Annuity contracts in accumulation 1,207,326 14,709,464
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-10
<PAGE>
Variable Annuity Account B
Notes to Financial Statements - December 31, 1996 (continued):
<TABLE>
<CAPTION>
5. Supplemental Information to Statements of Operations and Changes in Net Assets - Year Ended December 31, 1996
- -----------------------------------------------------------------------------------------------------------------------
Valuation Proceeds Cost of Net
Period from Investments Realized
Dividends Deductions Sales Sold Gain (Loss)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Overseas Portfolio: $75,181 ($91,010) $880,668 $813,434 $67,234
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable
Insurance Products Fund II:
Asset Manager Portfolio: 119,231 (54,259) 540,553 465,407 75,146
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------
Contrafund Portfolio: 146,164 (428,708) 5,044,449 4,308,117 736,332
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------
Index 500 Portfolio: 143,406 (203,362) 6,086,685 5,356,843 729,842
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------
Investment Grade Bond Portfolio: 45,797 (42,799) 882,619 925,636 (43,017)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------
Insurance Management Series:
American Leaders Fund II: 857,970 (631,122) 6,368,961 4,596,688 1,772,273
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------
Growth Strategies Fund II: 405 (44,481) 119,084 103,727 15,357
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------
High Income Bond Fund II: 1,647,290 (260,987) 5,863,283 5,644,702 218,581
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------
International Equity Fund II: 10,567 (51,003) 250,169 236,027 14,142
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------
Prime Money Fund II: 289,134 (87,958) 12,400,851 12,398,826 2,025
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------
U.S. Government Securities Fund II: 367,608 (86,361) 5,011,311 5,085,345 (74,034)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------
Utility Fund II: 547,259 (186,219) 1,034,753 867,262 167,491
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series:
Aggressive Growth Portfolio: 243,931 (266,292) 6,134,481 4,875,603 1,258,878
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------
Balanced Portfolio: 181,099 (68,277) 2,812,822 2,536,688 276,134
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------
Flexible Income Portfolio: 304,512 (43,754) 1,127,628 1,090,808 36,820
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------
Growth Portfolio: 324,844 (141,840) 1,249,735 1,041,911 207,824
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------
Short-Term Bond Portfolio: 79,326 (23,159) 2,910,009 2,872,811 37,198
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------
Worldwide Growth Portfolio: 642,050 (384,732) 4,899,145 3,899,490 999,655
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund: 0 (27,131) 1,463,410 1,431,864 31,546
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust Fund: 15,653 (38,378) 2,192,808 1,809,743 383,065
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-11
<PAGE>
Variable Annuity Account B
Notes to Financial Statements - December 31, 1996 (continued):
<TABLE>
<CAPTION>
5. Supplemental Information to Statements of Operations and Changes in Net Assets-Year Ended December 31, 1996 (Continued)
- ------------------------------------------------------------------------------------------------------------------
Net Unrealized
Gain (Loss) Net
----------- Change in
Beginning End Unrealized
of Year of Year Gain (Loss)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Overseas Portfolio: $51,434 $743,689 $692,255
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable
Insurance Products Fund II:
Asset Manager Portfolio: 98,360 484,182 385,822
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------
Contrafund Portfolio: 122,841 6,210,754 6,087,913
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------
Index 500 Portfolio: 70,864 2,241,040 2,170,176
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------
Investment Grade Bond Portfolio: 11,466 175,829 164,363
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------
Insurance Management Series:
American Leaders Fund II: 2,916,888 8,810,467 5,893,579
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------
Growth Strategies Fund II: 3,614 733,393 729,779
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------
High Income Bond Fund II: 229,008 1,022,582 793,574
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------
International Equity Fund II: 43,172 307,602 264,430
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------
Prime Money Fund II: (1,182) 0 1,182
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------
U.S. Government Securities Fund II: 75,600 73,398 (2,202)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------
Utility Fund II: 799,746 1,730,892 931,146
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------
Janus Aspen Series:
Aggressive Growth Portfolio: 1,164,909 534,823 (630,086)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------
Balanced Portfolio: 26,040 373,883 347,843
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------
Flexible Income Portfolio: 29,809 73,395 43,586
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------
Growth Portfolio: 84,852 1,093,423 1,008,571
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------
Short-Term Bond Portfolio: 1,330 (27,376) (28,706)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------
Worldwide Growth Portfolio: 253,639 5,151,123 4,897,484
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund: (4,024) (66,591) (62,567)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust Fund: 188,717 538,139 349,422
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Variable Annuity Account B
Notes to Financial Statements - December 31, 1996 (continued):
<TABLE>
<CAPTION>
5. Supplemental Information to Statements of Operations and Changes in Net Assets-Year Ended December 31, 1996 (Continued)
- ----------------------------------------------------------------------------------------------------------------
Net
Increase
(Decrease) Net Assets
In Net Assets ------------------------------------
from Unit Beginning End
Transactions of Year of Year
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Overseas Portfolio: $6,948,020
Annuity contracts in accumulation $2,011,591 $9,703,271
- ----------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable
Insurance Products Fund II:
Asset Manager Portfolio: $4,043,035
Annuity contracts in accumulation 1,362,489 5,931,464
- ----------------------------------------------------------------------------------------------------------------
Contrafund Portfolio: $38,043,675
Annuity contracts in accumulation 11,953,242 56,538,618
- ----------------------------------------------------------------------------------------------------------------
Index 500 Portfolio: $22,367,490
Annuity contracts in accumulation 2,172,818 27,380,370
- ----------------------------------------------------------------------------------------------------------------
Investment Grade Bond Portfolio: $3,931,632
Annuity contracts in accumulation 705,701 4,761,677
- ----------------------------------------------------------------------------------------------------------------
Insurance Management Series:
American Leaders Fund II: $26,548,788
Annuity contracts in accumulation 26,685,567 61,127,055
- ----------------------------------------------------------------------------------------------------------------
Growth Strategies Fund II: $6,301,239
Annuity contracts in accumulation 179,879 7,182,178
- ----------------------------------------------------------------------------------------------------------------
High Income Bond Fund II: $12,876,189
Annuity contracts in accumulation 11,876,490 27,151,137
- ----------------------------------------------------------------------------------------------------------------
International Equity Fund II: $4,073,916
Annuity contracts in accumulation 1,623,538 5,935,590
- ----------------------------------------------------------------------------------------------------------------
Prime Money Fund II: $1,765,443
Annuity contracts in accumulation 5,774,492 7,744,318
- ----------------------------------------------------------------------------------------------------------------
U.S. Government Securities Fund II: $2,942,870
Annuity contracts in accumulation 4,508,328 7,656,209
- ----------------------------------------------------------------------------------------------------------------
Utility Fund II: $6,514,735
Annuity contracts in accumulation 8,800,082 16,774,494
- ----------------------------------------------------------------------------------------------------------------
Janus Aspen Series:
Aggressive Growth Portfolio: $19,085,222
Annuity contracts in accumulation 11,850,407 31,542,060
- ----------------------------------------------------------------------------------------------------------------
Balanced Portfolio: $10,311,561
Annuity contracts in accumulation 725,884 11,774,244
- ----------------------------------------------------------------------------------------------------------------
Flexible Income Portfolio: $3,237,811
Annuity contracts in accumulation 1,568,242 5,147,217
- ----------------------------------------------------------------------------------------------------------------
Growth Portfolio: $16,916,813
Annuity contracts in accumulation 2,567,942 20,884,154
- ----------------------------------------------------------------------------------------------------------------
Short-Term Bond Portfolio: $1,106,654
Annuity contracts in accumulation 749,298 1,920,611
- ----------------------------------------------------------------------------------------------------------------
Worldwide Growth Portfolio: $54,723,321
Annuity contracts in accumulation 5,594,913 66,472,691
- ----------------------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund: $2,232,953
Annuity contracts in accumulation 341,159 2,515,960
- ----------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust Fund: $2,162,813
Annuity contracts in accumulation 1,879,209 4,751,784
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
S-12
<PAGE>
Variable Annuity Account B
Notes to Financial Statements - December 31, 1996 (continued):
<TABLE>
<CAPTION>
5. Supplemental Information to Statements of Operations and Changes in Net Assets - Year Ended December 31, 1996
- ----------------------------------------------------------------------------------------------------------------------------------
Valuation Proceeds Cost of
Period from Investments
Dividends Deductions Sales Sold
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MFS Funds:
Emerging Growth Series: $73,635 ($33,243) $190,630 $186,959
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------------------------------------
Research Series: 94,710 (22,219) 253,406 258,774
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return Series: 87,973 (13,218) 140,628 132,113
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------------------------------------
Value Series: 4,089 (372) 496 486
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------------------------------------
World Government Series: 0 (1,705) 19,663 19,513
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers
Management Trust-
Growth Portfolio: 770,877 (98,063) 3,864,131 3,857,033
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------------------------------------
Scudder Variable Life
Investment Fund-
International Portfolio: 276,128 (136,107) 4,557,311 4,016,790
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.:
Balanced Fund: 67,198 (24,832) 247,893 231,495
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------------------------------------
Growth Fund: 6,228,055 (611,968) 19,145,021 17,607,144
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------------------------------------
International Fund: 62,276 (41,867) 397,143 365,001
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------------------------------------
Total Variable Annuity Account B $120,367,178 ($17,483,870) $365,025,974 $347,598,566
==================================================================================================================================
</TABLE>
Variable Annuity Account B
Notes to Financial Statements - December 31, 1996 (continued):
<TABLE>
<CAPTION>
5. Supplemental Information to Statements of Operations and Changes in Net Assets-Year Ended December 31, 1996 (Continued)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Unrealized
Gain (Loss) Net
Net ----------- Change in
Realized Beginning End Unrealized
Gain (Loss) of Year of Year Gain (Loss)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MFS Funds:
Emerging Growth Series: $3,671 $0 ($85,796) ($85,796)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------------------------------------
Research Series: (5,368) 0 204,764 204,764
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return Series: 8,515 0 72,010 72,010
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------------------------------------
Value Series: 10 0 935 935
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------------------------------------
World Government Series: 150 0 9,304 9,304
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers
Management Trust-
Growth Portfolio: 7,098 77,158 (6,666) (83,824)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------------------------------------
Scudder Variable Life
Investment Fund-
International Portfolio: 540,521 652,411 1,510,449 858,038
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.:
Balanced Fund: 16,398 16,540 145,325 128,785
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------------------------------------
Growth Fund: 1,537,877 8,206,103 (1,588,390) (9,794,493)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------------------------------------
International Fund: 32,142 15,650 375,835 360,185
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------------------------------------
Total Variable Annuity Account B $17,427,408 $28,746,944 $122,191,053 $93,444,109
==================================================================================================================================
</TABLE>
S-13
<PAGE>
Variable Annuity Account B
Notes to Financial Statements - December 31, 1996 (continued):
<TABLE>
<CAPTION>
5. Supplemental Information to Statements of Operations and Changes in Net Assets-Year Ended December 31, 1996 (Continued)
- ------------------------------------------------------------------------------------------------------------------
Net
Increase
(Decrease) Net Assets
In Net Assets ------------------------------------
from Unit Beginning End
Transactions of Year of Year
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MFS Funds:
Emerging Growth Series: $9,039,741
Annuity contracts in accumulation $0 $8,998,008
- ------------------------------------------------------------------------------------------------------------------
Research Series: $6,504,625
Annuity contracts in accumulation 0 6,776,512
- ------------------------------------------------------------------------------------------------------------------
Total Return Series: $4,061,090
Annuity contracts in accumulation 0 4,216,370
- ------------------------------------------------------------------------------------------------------------------
Value Series: $204,179
Annuity contracts in accumulation 0 208,841
- ------------------------------------------------------------------------------------------------------------------
World Government Series: $400,164
Annuity contracts in accumulation 0 407,913
- ------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers
Management Trust-
Growth Portfolio: ($710,088)
Annuity contracts in accumulation 8,356,574 8,242,574
- ------------------------------------------------------------------------------------------------------------------
Scudder Variable Life
Investment Fund-
International Portfolio: ($54,117)
Annuity contracts in accumulation 10,565,664 12,050,127
- ------------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.:
Balanced Fund: $2,313,929
Annuity contracts in accumulation 489,878 2,991,356
- ------------------------------------------------------------------------------------------------------------------
Growth Fund: ($7,301,710)
Annuity contracts in accumulation 54,311,401 44,369,162
- ------------------------------------------------------------------------------------------------------------------
International Fund: $3,691,239
Annuity contracts in accumulation 602,619 4,706,594
- ------------------------------------------------------------------------------------------------------------------
Total Variable Annuity Account B $504,121,195 $1,130,935,704 $1,848,811,724
==================================================================================================================
</TABLE>
S-14
<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, 1996, and the related statements of operations and 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, 1996. 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, 1996, 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 Aetna Life Insurance and Annuity Company Variable Annuity Account B
as of December 31, 1996, the results of its operations and the 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, 1996 in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Hartford, Connecticut
February 14, 1997
S-15
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBIDIARIES
Index to Consolidated Financial Statements
Page
Independent Auditors' Report F-2
Consolidated Financial Statements:
Consolidated Statements of Income for the Years Ended
December 31, 1996, 1995 and 1994 F-3
Consolidated Balance Sheets as of December 31, 1996
and 1995 F-4
Consolidated Statements of Changes in Shareholder's Equity
for the Years Ended December 31, 1996, 1995 and 1994 F-5
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1996, 1995 and 1994 F-6
Notes to Consolidated Financial Statements F-7
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, 1996 and 1995,
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, 1996. 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, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1996, in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
February 4, 1997
F-2
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Statements of Income
(millions)
Years Ended December 31,
--------------------------------
1996 1995 1994
---- ---- ----
Revenue:
Premiums $133.6 $212.7 $191.6
Charges assessed against policyholders 396.5 318.9 279.0
Net investment income 1,045.6 1,004.3 917.2
Net realized capital gains 19.7 41.3 1.5
Other income 45.4 42.0 10.3
------- ------- -------
Total revenue 1,640.8 1,619.2 1,399.6
------- ------- -------
Benefits and expenses:
Current and future benefits 968.6 997.2 921.5
Operating expenses 342.2 310.8 225.7
Amortization of deferred policy
acquisition costs 69.8 48.0 31.5
Severance and facilities charges 61.3 -- --
------- ------- -------
Total benefits and expenses 1,441.9 1,356.0 1,178.7
------- ------- -------
Income before income taxes 198.9 263.2 220.9
Income taxes 57.8 87.3 75.6
------- ------- -------
Net income $141.1 $175.9 $145.3
======= ======= =======
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Balance Sheets
(millions, except share data)
December 31,
-------------------------
1996 1995
---- ----
Assets
- ------
Investments:
Debt securities, available for sale:
(amortized cost: $12,539.1 and $11,923.7) $12,905.5 $12,720.8
Equity securities, available for sale:
Non-redeemable preferred stock
(cost: $107.6 and $51.3) 119.0 57.6
Investment in affiliated mutual funds
(cost: $77.3 and $173.4) 81.1 191.8
Common stock (cost: $0.0 and $6.9) 0.3 8.2
Short-term investments 34.8 15.1
Mortgage loans 13.0 21.2
Policy loans 399.3 338.6
--------- ---------
Total investments 13,553.0 13,353.3
Cash and cash equivalents 459.1 568.8
Accrued investment income 159.0 175.5
Premiums due and other receivables 26.6 37.3
Deferred policy acquisition costs 1,515.3 1,341.3
Reinsurance loan to affiliate 628.3 655.5
Other assets 33.7 26.2
Separate Account assets 15,318.3 10,987.0
--------- ---------
Total assets $31,693.3 $27,144.9
========= =========
Liabilities and Shareholder's Equity
- -------------------------------------
Liabilities:
Future policy benefits $3,617.0 $3,594.6
Unpaid claims and claim expenses 28.9 27.2
Policyholders' funds left with the Company 10,663.7 10,500.1
--------- ---------
Total insurance reserve liabilities 14,309.6 14,121.9
Other liabilities 354.7 257.2
Income taxes:
Current 20.7 26.2
Deferred 80.5 169.6
Separate Account liabilities 15,318.3 10,987.0
--------- ---------
Total liabilities 30,083.8 25,561.9
--------- ---------
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 418.0 407.6
Net unrealized capital gains 60.5 132.5
Retained earnings 1,128.2 1,040.1
--------- ---------
Total shareholder's equity 1,609.5 1,583.0
--------- ---------
Total liabilities and shareholder's equity $31,693.3 $27,144.9
========= =========
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Statements of Changes in Shareholder's Equity
(millions)
Years Ended December 31,
-----------------------------------
1996 1995 1994
---- ---- ----
Shareholder's equity, beginning of year $1,583.0 $1,088.5 $1,246.7
Capital contributions 10.4 -- --
Net change in unrealized capital gains (losses) (72.0) 321.5 (303.5)
Net income 141.1 175.9 145.3
Other changes (49.5) -- --
Common stock dividends declared (3.5) (2.9) --
-------- -------- --------
Shareholder's equity, end of year $1,609.5 $1,583.0 $1,088.5
======== ======== ========
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Statements of Cash Flows
(millions)
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $141.1 $175.9 $145.3
Adjustments to reconcile net income to net
cash (used for) provided by operating activities:
Decrease (increase) in accrued investment income 16.5 (33.3) (17.5)
Decrease in premiums due and other receivables 1.6 25.4 1.3
Increase in policy loans (60.7) (89.9) (46.0)
Increase in deferred policy acquisition costs (174.0) (177.0) (105.9)
Decrease in reinsurance loan to affiliate 27.2 34.8 27.8
Net increase in universal life account balances 243.2 393.4 164.7
(Decrease) increase in other insurance
reserve liabilities (211.5) 79.0 75.1
Net increase in other liabilities and other assets 3.1 13.0 52.5
Decrease in income taxes (26.7) (4.5) (10.3)
Net accretion of discount on investments (68.0) (66.4) (77.9)
Net realized capital gains (19.7) (41.3) (1.5)
Other, net 1.1 -- (1.0)
-------- -------- --------
Net cash (used for) provided by operating activities (126.8) 309.1 206.6
-------- -------- --------
Cash Flows from Investing Activities:
Proceeds from sales of:
Debt securities available for sale 5,182.2 4,207.2 3,593.8
Equity securities 190.5 180.8 93.1
Mortgage loans 8.7 10.7 --
Limited partnership -- 26.6 --
Investment maturities and collections of:
Debt securities available for sale 885.2 583.9 1,289.2
Short-term investments 35.0 106.1 30.4
Cost of investment purchases in:
Debt securities available for sale (6,534.3) (6,034.0) (5,621.4)
Equity securities (118.1) (170.9) (162.5)
Short-term investments (54.7) (24.7) (106.1)
Mortgage loans -- (21.3) --
Limited partnership -- -- (25.0)
Other, net (17.6) -- --
-------- -------- --------
Net cash used for investing activities (423.1) (1,135.6) (908.5)
-------- -------- --------
Cash Flows from Financing Activities:
Deposits and interest credited for investment contracts 1,579.5 1,884.5 1,737.8
Withdrawals of investment contracts (1,146.2) (1,109.6) (948.7)
Additional capital contributions 10.4 -- --
Dividends paid to shareholder (3.5) (2.9) --
-------- -------- --------
Net cash provided by financing activities 440.2 772.0 789.1
-------- -------- --------
Net (decrease) increase in cash and cash equivalents (109.7) (54.5) 87.2
Cash and cash equivalents, beginning of year 568.8 623.3 536.1
-------- -------- --------
Cash and cash equivalents, end of year $459.1 $568.8 $623.3
======== ======== ========
Supplemental cash flow information:
Income taxes paid, net $85.5 $92.8 $85.9
======== ======== ========
See Notes to Consolidated Financial Statements.
</TABLE>
F-6
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements
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 individual life insurance.
Financial services products include annuity contracts that offer a variety
of funding and payout options for individual and employer-sponsored
retirement plans qualified under Internal Revenue Code Sections 401, 403,
408 and 457, and non-qualified annuity contracts. These contracts may be
deferred or immediate ("payout annuities"). Financial services also include
investment advisory services, financial planning and pension plan
administrative services.
Individual life insurance products include universal life, variable
universal life, traditional whole life and term insurance.
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 Holdings, Inc.
("HOLDCO"). HOLDCO is a wholly owned subsidiary of Aetna Retirement
Services, Inc., whose ultimate parent is Aetna Inc. ("Aetna").
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles. Certain reclassifications have
been made to 1995 and 1994 financial information to conform to the 1996
presentation.
Future Application of Accounting Standards
Financial Accounting Standard ("FAS") No. 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities, was
issued in June 1996. This statement provides accounting and reporting
standards for transfers of financial assets and extinguishments of
liabilities. Transactions covered by this statement would include
securitizations, sales of partial interests in assets, repurchase
agreements and securities lending. This statement requires that after a
transfer of financial assets, an entity would recognize any assets it
controls and liabilities it has incurred. An entity would not recognize
assets when control has been surrendered or liabilities have been
satisfied. Portions of this statement are effective for each of 1997 and
1998 financial statements and early adoption is not permitted. The Company
does not expect adoption of this statement to have a material effect on its
financial position or results of operations.
F-7
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
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 Equivalents
Cash and cash equivalents include cash on hand, money market instruments
and other debt issues with a maturity of 90 days or less when purchased.
Investments
All of the Company's debt and equity securities are classified as available
for sale and carried at fair value. These securities are written down (as
realized capital losses) for other than temporary declines in value.
Unrealized capital gains and losses related to available for sale other
than amounts allocable to experience rated contractholders, are reflected
in shareholder's equity, net of related taxes.
Fair values for debt and equity 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 and equity securities are recorded on the trade
date.
The investment in affiliated mutual funds primarily 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 are carried at unpaid principal balances,
net of impairment reserves. Sales of mortgage loans are recorded on the
closing date.
Short-term investments, consisting primarily of money market instruments
and other debt issues purchased with a maturity of 91 days to one year, are
considered available for sale and are carried at fair value, which
approximates amortized cost.
F-8
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
1. Summary of Significant Accounting Policies (Continued)
Futures contracts are carried at fair value and require daily cash
settlement. Changes in the fair value of futures contracts that qualify as
hedges are deferred and recognized as an adjustment to the hedged asset or
liability. Deferred gains or losses on such futures contracts are amortized
over the life of the acquired asset or liability as a yield adjustment or
through net realized capital gains or losses upon disposal of an asset.
Changes in the fair value of futures contracts that do not qualify as
hedges are recorded in net realized capital gains or losses. Hedge
designation requires specific asset or liability identification, a
probability at inception of high correlation with the position underlying
the hedge, and that high correlation be maintained throughout the hedge
period. If a hedging instrument ceases to be highly correlated with the
position underlying the hedge, hedge accounting ceases at that date and
excess gains and losses on the hedging instrument are reflected in net
realized capital gains or losses.
Swap agreements which are designated as interest rate risk management
instruments at inception are accounted for using the accrual method.
Accordingly, the difference between amounts paid and received on such
agreements is reported in net investment income. There is no recognition in
the Consolidated Balance Sheets for changes in the fair value of the
agreement.
Deferred Policy Acquisition Costs
Certain costs of acquiring insurance business are deferred. These costs,
all of which vary with and are primarily related to the production of new
and renewal 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 (up to 20 years). For universal life and certain
annuity contracts, such costs are amortized in proportion to estimated
gross profits and adjusted to reflect actual gross profits over the life of
the contracts (up to 20 years).
Deferred policy acquisition costs are written off to the extent that it is
determined that future policy premiums and investment income or gross
profits are not adequate to cover related losses and expenses.
Insurance Reserve Liabilities
Future Policy Benefits include reserves for universal life, immediate
annuities with life contingent payouts and traditional life insurance
contracts. Reserves for universal life contracts are equal to cumulative
deposits less charges and withdrawals plus credited interest thereon.
Reserves for immediate annuities with life contingent payouts and
traditional life insurance contracts are computed on the basis of assumed
investment yield, mortality, and expenses, including a margin for adverse
deviations. Such assumptions generally vary by plan, year of issue and
policy duration. Reserve interest rates range from 2.25% to 12.00%.
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.
F-9
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
1. Summary of Significant Accounting Policies (Continued)
Policyholders' Funds Left With the Company include reserves for deferred
annuity investment contracts and immediate annuities without life
contingent payouts. Reserves on such contracts are equal to cumulative
deposits less charges and withdrawals plus credited interest thereon (rates
range from 4.00% to 7.00%), net of adjustments for investment experience
that the Company is entitled to reflect in future credited interest.
Reserves on contracts subject to experience rating reflect the rights of
contractholders, plan participants and 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
For universal life and certain annuity contracts, charges assessed against
policyholders' funds for the cost of insurance, surrender charges,
actuarial margin and other fees are recorded as revenue in charges assessed
against policyholders. Other amounts received for these contracts are
reflected as deposits and are not recorded as revenue. Life insurance
premiums, other than premiums for universal life and certain annuity
contracts, are recorded as premium revenue when due. Related policy
benefits are recorded in relation to the associated premiums or gross
profit so that profits are recognized over the expected lives of the
contracts. When annuity payments begin under contracts with life contingent
payouts that were initially investment contracts, the accumulated balance
in the account is treated as a single premium for the purchase of an
annuity, reflected as an offsetting amount in both premiums and current and
future benefits in the Consolidated Statements of Income.
Separate Accounts
Assets held under variable universal 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, the Aetna Series Fund Inc., or the
Aetna Generation Funds (collectively, "Funds"), 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. Since the Company bears
the investment risk where the contract is held to maturity, the assets of
the Separate Account supporting the guaranteed interest option are carried
at an amortized cost of $515.6 million for 1996 (fair value $523.0 million)
and $322.2 million for 1995 (fair value $343.9 million). Reserves relating
to the guaranteed interest option are maintained at fund value and reflect
interest credited at rates ranging from 4.10% to 8.00% in 1996 and 4.50% to
8.38% in 1995.
F-10
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
1. Summary of Significant Accounting Policies (Continued)
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 and losses of the Separate Accounts
are not reflected in the Consolidated Statements of Income (with the
exception of realized capital gains and 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.
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 expenses/benefits result from changes during the year
in cumulative temporary differences between the tax basis and book basis of
assets and liabilities.
F-11
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
2. Investments
Debt securities available for sale as of December 31, 1996 were as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
(millions)
<S> <C> <C> <C> <C>
U.S. government and government
agencies and authorities $ 1,072.4 $ 20.5 $ 4.5 $ 1,088.4
States, municipalities and political
subdivisions 6.0 1.2 -- 7.2
U.S. corporate securities:
Financial 2,143.4 43.1 9.7 2,176.8
Food & fiber 198.2 4.6 1.3 201.5
Healthcare & consumer products 735.9 20.2 6.3 749.8
Media & broadcast 274.9 7.0 2.8 279.1
Natural resources 187.7 4.5 0.4 191.8
Transportation & capital goods 521.9 22.0 1.8 542.1
Utilities 448.8 14.8 2.8 460.8
Other 141.5 3.0 -- 144.5
--------- --------- --------- ---------
Total U.S. corporate securities 4,652.3 119.2 25.1 4,746.4
Foreign Securities:
Government 758.6 36.0 5.7 788.9
Utilities 187.8 16.1 -- 203.9
Other 945.5 30.9 6.3 970.1
--------- --------- --------- ---------
Total foreign securities 1,891.9 83.0 12.0 1,962.9
Residential mortgage-backed securities:
Pass-throughs 792.2 78.3 3.1 867.4
Collateralized mortgage obligations 2,227.8 94.9 13.7 2,309.0
--------- --------- --------- ---------
Total residential mortgage-
backed securities 3,020.0 173.2 16.8 3,176.4
Commercial/Multifamily mortgage-
backed securities 1,008.7 24.8 5.6 1,027.9
Other asset-backed securities 887.8 10.7 2.2 896.3
--------- --------- --------- ---------
Total Debt Securities $12,539.1 $ 432.6 $ 66.2 $12,905.5
========= ========= ========= =========
</TABLE>
F-12
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
2. Investments (Continued)
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. government and government
agencies and authorities $ 539.5 $ 47.5 $ -- $ 587.0
States, municipalities and political
subdivisions 41.4 12.4 -- 53.8
U.S. Corporate securities:
Financial 2,764.4 110.3 2.1 2,872.6
Food & fiber 310.8 20.8 0.6 331.0
Healthcare & consumer products 766.0 59.2 0.2 825.0
Media & broadcast 191.7 10.0 -- 201.7
Natural resources 186.9 12.6 0.2 199.3
Transportation & capital goods 602.4 46.7 0.2 648.9
Utilities 454.4 27.8 1.0 481.2
Other 119.9 10.2 -- 130.1
--------- --------- --------- ---------
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
Utilities 236.3 32.9 269.2
Other 749.9 60.5 3.5 806.9
--------- --------- --------- ---------
Total foreign securities 1,302.6 119.5 5.5 1,416.6
Residential mortgage-backed securities:
Pass-throughs 556.7 99.2 1.8 654.1
Collateralized mortgage obligations 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
Other asset-backed securities 961.2 35.5 0.5 996.2
--------- --------- --------- ---------
Total Debt Securities $11,923.7 $ 811.6 $ 14.5 $12,720.8
========= ========= ========= =========
</TABLE>
F-13
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
2. Investments (Continued)
At December 31, 1996 and 1995, net unrealized appreciation of $366.4
million and $797.1 million, respectively, on available for sale debt
securities included $288.5 million and $619.1 million, respectively,
related to experience rated contracts, which were not reflected in
shareholder's equity but in Future Policy Benefits and Policyholders' Funds
Left With the Company.
The amortized cost and fair value of debt securities for the year ended
December 31, 1996 are shown below by contractual maturity. Actual
maturities may differ from contractual maturities because securities may be
restructured, called, or prepaid.
Amortized Fair
Cost Value
--------- -----
(millions)
Due to mature:
One year or less $ 424.4 $ 425.7
After one year through five years 2,162.4 2,194.2
After five years through ten years 2,467.4 2,509.6
After ten years 2,568.4 2,675.4
Mortgage-backed securities 4,028.7 4,204.3
Other asset-backed securities 887.8 896.3
--------- ---------
Total $12,539.1 $12,905.5
========= =========
The Company engages in securities lending whereby certain securities from
its portfolio are loaned to other institutions for short periods of time.
Collateral, primarily cash, 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, 1996 and 1995, the Company had loaned
securities (which are reflected as invested assets) with a market value of
approximately $444.7 million and $264.5 million, respectively.
At December 31, 1996 and 1995, debt securities carried at $7.6 million and
$7.4 million, respectively, were on deposit as required by regulatory
authorities.
The carrying value of non-income producing investments was $0.9 million and
$0.1 million at December 31, 1996 and 1995, respectively.
The Company did not have any 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, 1996.
F-14
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
2. Investments (Continued)
Included in the Company's total debt securities were residential
collateralized mortgage obligations ("CMOs") supporting the following:
<TABLE>
<CAPTION>
1996 1995
---- ----
Fair Amortized Fair Amortized
Value Cost Value Cost
----- ---- ----- ----
(millions)
<S> <C> <C> <C> <C>
Total residential CMOs (1) $2,309.0 $2,227.8 $2,549.4 $2,383.9
======== ======== ======== ========
Percentage of total:
Supporting experience rated products 84.2% 85.3%
Supporting remaining products 15.8% 14.7%
-------- --------
100.0% 100.0%
======== ========
</TABLE>
(1) At December 31, 1996 and 1995, approximately 71% and 81%,
respectively, of the Company's residential CMO holdings were backed by
government agencies such as GNMA, FNMA, FHLMC.
There are various categories of CMOs which are subject to different degrees
of risk from changes in interest rates and, for nonagency-backed CMOs,
defaults. The principal risks inherent in holding CMOs are prepayment and
extension risks related to dramatic decreases and increases in interest
rates resulting in the repayment of principal from the underlying mortgages
either earlier or later than originally anticipated.
At December 31, 1996 and 1995, approximately 68% and 79%, respectively, of
the Company's CMO holdings were in planned amortization class ("PAC") and
sequential structure tranches, which are subject to less prepayment and
extension risk than other types of CMO instruments. At December 31, 1996
and 1995, approximately 3% of the Company's CMO holdings were in the
interest-only ("IOs") and principal-only ("POs") tranches, which are
subject to more prepayment and extension risks than other types of CMO
instruments. Remaining CMO holdings are in other tranches that have
prepayment and extension risks which fall between the degree of risk
associated with PACs and sequentials, and IOs and POs.
F-15
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
2. Investments (Continued)
Investments in available for sale equity securities were as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ---------- ---------- -----
(millions)
1996
Equity Securities $ 184.9 $ 16.3 $ 0.8 $ 200.4
======= ======= ======= =======
1995
Equity Securities $ 231.6 $ 27.2 $ 1.2 $ 257.6
======= ======= ======= =======
3. Financial Instruments
Estimated Fair Value
The carrying values and estimated fair values of certain of the Company's
financial instruments at December 31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
------------------ -----------------
Carrying Fair Carrying Fair
Value Value Value Value
----- ----- ----- -----
(millions)
<S> <C> <C> <C> <C>
Assets:
Mortgage loans $ 13.0 $ 13.2 $ 21.2 $ 21.9
Liabilities:
Investment contract liabilities:
With a fixed maturity $ 1,014.1 $ 1,028.8 $ 989.1 $ 1,001.2
Without a fixed maturity 9,649.6 9,427.6 9,511.0 9,298.4
</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 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, price and liquidity
risks, the fair values of all assets and liabilities should be taken into
consideration, not only those presented above.
F-16
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
3. Financial Instruments (Continued)
The following valuation methods and assumptions were used by the Company in
estimating the fair value of the above financial instruments:
Mortgage loans: Fair values are 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.
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 and Other Financial Instruments (including Derivative
Financial Instruments)
The Company uses off-balance-sheet and other financial instruments
primarily to manage portfolio risks, including interest rate,
prepayment/call, credit, price, and liquidity risks. In 1996, Treasury
futures contracts were used to manage interest rate risk in the Company's
bond portfolio and stock index futures contracts were used to manage price
risk in the Company's equity portfolio. In 1996 and 1995, interest rate
swaps and forward commitments to enter into interest rate swaps,
respectively, were also used to manage interest rate risk in the Company's
bond portfolio.
Futures Contracts:
Futures contracts represent commitments to either purchase or sell
underlying assets at a specified future date. Futures contracts trade on
organized exchanges and, therefore, have minimal credit risk. Cash
settlements are made daily based on changes in the prices of the underlying
assets. There were no futures contracts open as of December 31, 1996 and
1995.
F-17
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
3. Financial Instruments (Continued)
Interest Rate Swaps:
Under interest rate swaps, the Company agrees with other parties to
exchange interest amounts calculated by reference to an agreed notional
principal amount. Generally, no cash is exchanged at the outset of the
contract and no principal payments are made. A single net payment is
usually made by one counterparty at each due date or upon termination of
the contract. The Company would be exposed to credit-related losses in the
event of nonperformance by counterparties to financial instruments,
however, the Company controls its exposure to credit risk through credit
approvals, credit limits and regular monitoring procedures. The credit
exposure of interest rate swaps is represented by the fair value (market
value) of contracts with a positive fair value (market value) at the
reporting date. There were no interest rate swap agreements open as of
December 31, 1996. At December 31, 1995, the Company had an open forward
swap agreement with a notional amount of $100.0 million and a fair value of
$0.1 million.
During 1995, the Company received $0.4 million for writing call options on
underlying securities. The Company did not write any call options in 1996.
As of December 31, 1996 and 1995, there were no option contracts
outstanding.
The Company also had investments in certain debt instruments with
derivative characteristics, including those whose market value is at least
partially determined by, among other things, levels of or changes in
domestic and/or foreign interest rates (short or long term), exchange
rates, prepayment rates, equity markets or credit ratings/spreads. The
amortized cost and fair value of these securities, included in the debt
securities portfolio, as of December 31, 1996 was as follows:
Amortized Fair
Cost Value
---- -----
(millions)
Residential collateralized mortgage obligations $ 2,227.8 $ 2,309.0
Principal-only strips (included above) 44.5 53.3
Interest-only strips (included above) 10.3 22.8
Other structured securities with derivative
characteristics (1) 126.3 129.2
(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.
F-18
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
4. Net Investment Income
Sources of net investment income were as follows:
1996 1995 1994
---- ---- ----
(millions)
Debt securities $ 945.3 $ 891.5 $ 823.9
Preferred stock 5.9 4.2 3.9
Investment in affiliated mutual funds 14.3 14.9 5.2
Mortgage loans 2.2 1.4 1.4
Policy loans 18.4 13.7 11.5
Reinsurance loan to affiliate 44.1 46.5 51.5
Cash equivalents 29.4 38.9 29.5
Other 2.1 8.4 6.7
-------- -------- --------
Gross investment income 1,061.7 1,019.5 933.6
Less investment expenses (16.1) (15.2) (16.4)
-------- -------- --------
Net investment income $1,045.6 $1,004.3 $ 917.2
======== ======== ========
Net investment income includes amounts allocable to experience rated
contractholders of $787.6 million, $744.2 million and $677.1 million for
the years ended December 31, 1996, 1995 and 1994, respectively. Interest
credited to contractholders is included in Current and Future Benefits.
5. Dividend Restrictions and Shareholder's Equity
The Company paid $3.5 million in cash dividends to HOLDCO in 1996. In 1995,
the Company dividended $2.9 million in the form of two of its subsidiaries,
Systematized Benefits Administrators, Inc. and Aetna Investment Services,
Inc., to Aetna Retirement Services, Inc. (the Company's former parent).
The amount of dividends that may be paid to the shareholder in 1997 without
prior approval by the Insurance Commissioner of the State of Connecticut is
$71.1 million.
The Insurance Department of the State of Connecticut (the "Department")
recognizes as net income and shareholder's capital and surplus 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
$57.8 million, $70.0 million and $64.9 million for the years ended December
31, 1996, 1995 and 1994, respectively. Statutory capital and surplus was
$713.6 million and $670.7 million as of December 31, 1996 and 1995,
respectively.
As of December 31, 1996 the Company does not utilize any statutory
accounting practices which are not prescribed by state regulatory
authorities that, individually or in the aggregate, materially affect
statutory capital and surplus.
F-19
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
6. Capital Gains and Losses on Investment Operations
Realized capital gains or losses are the difference between the carrying
value and sale proceeds of specific investments sold.
Net realized capital gains on investments were as follows:
1996 1995 1994
---- ---- ----
(millions)
Debt securities $ 11.1 $ 32.8 $ 1.0
Equity securities 8.6 8.3 0.2
Mortgage loans -- 0.2 0.3
-------- -------- -------
Pretax realized capital gains $ 19.7 $ 41.3 $ 1.5
======== ======= =======
After tax realized capital gains $ 13.0 $ 25.8 $ 1.0
======== ======= =======
Net realized capital gains of $53.1 million and $61.1 million for 1996 and
1995, respectively, and net realized capital losses of $29.1 million for
1994, allocable to experience rated contracts, were deducted from net
realized capital gains (losses) and an offsetting amount was reflected in
policyholder funds' left with the Company. Net unamortized gains were $53.3
million and $7.3 million at December 31, 1996 and 1995, respectively.
Changes to the mortgage loan valuation reserve and writedowns on debt
securities for other than temporary declines in value are included in net
realized capital gains (losses) and amounted to $(3.3) million, $3.1
million and $1.1 million, of which $(3.2) million, $2.2 million and $0.8
million were allocable to experience rated contractholders, for the years
ended December 31, 1996, 1995 and 1994, respectively. There was no
valuation reserve for mortgage loans at December 31, 1996 or at December
31, 1995.
Proceeds from the sale of available for sale debt securities and the
related gross gains and losses were as follows:
1996 1995 1994
---- ---- ----
(millions)
Proceeds on Sales $5,182.2 $4,207.2 $3,593.8
Gross gains 24.3 44.6 26.6
Gross losses 13.2 11.8 25.6
F-20
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
6. Capital Gains and Losses on Investment Operations (Continued)
Changes in shareholder's equity related to changes in unrealized capital
gains (losses), (excluding those related to experience rated
contractholders), were as follows:
1996 1995 1994
---- ---- ----
(millions)
Debt securities $ (100.1) $ 255.9 $ (242.1)
Equity securities (10.5) 27.3 (13.3)
Limited partnership -- 1.8 (1.8)
-------- -------- --------
(110.6) 285.0 (257.2)
Deferred income taxes (See Note 8) (38.6) (36.5) 46.3
-------- -------- --------
Net change in unrealized
capital gains (losses) $ (72.0) $ 321.5 $ (303.5)
======== ======== ========
Net unrealized capital gains allocable to experience rated contracts of
$245.2 million and $43.3 million at December 31, 1996 and $515.0 million
and $104.1 million at December 31, 1995 are reflected on the Consolidated
Balance Sheets in Policyholders' Funds Left With the Company and Future
Policy Benefits, respectively, and are not included in shareholder's
equity.
Shareholder's equity included the following unrealized capital gains
(losses), which are net of amounts allocable to experience rated
contractholders, at December 31:
1996 1995 1994
---- ---- ----
(millions)
Debt securities
Gross unrealized capital gains $101.7 $179.3 $ 27.4
Gross unrealized capital losses (23.8) (1.3) (105.2)
------ ------ --------
77.9 178.0 (77.8)
Equity securities
Gross unrealized capital gains 16.3 27.2 6.5
Gross unrealized capital losses (0.8) (1.2) (7.9)
------ ------ --------
15.5 26.0 (1.4)
Limited Partnership -- -- --
Gross unrealized capital gains -- -- --
Gross unrealized capital losses -- -- (1.8)
------ ------ --------
-- -- (1.8)
Deferred income taxes (See Note 8) 32.9 71.5 108.0
------ ------ --------
Net unrealized capital gains (losses) $ 60.5 $132.5 $(189.0)
====== ====== ========
F-21
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
7. Severance and Facilities Charges
Severance and facilities charges during 1996, as described below, included
the following (pretax):
<TABLE>
<CAPTION>
Vacated
Asset Leased Corporate
(Millions) Severance Write-Off Property Other Allocation Total
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Financial Services $ 29.1 $ 1.0 $ 1.3 $ 1.7 $ -- $ 33.1
Individual Life Insurance 12.5 0.4 0.5 0.8 -- 14.2
Corporate Allocation -- -- -- -- 14.0 14.0
---------------------------------------------------------------
Total Company $ 41.6 $ 1.4 $ 1.8 $ 2.5 $ 14.0 $ 61.3
- --------------------------------------------------------------------------------------------
</TABLE>
In the third quarter of 1996, the Company recorded a $30.7 million after
tax ($47.3 million pretax) charge principally related to actions taken or
expected to be taken to improve its cost structure relative to its
competitors. The severance portion of the charge is based on a plan to
eliminate 702 positions (primarily customer service, sales and information
technology support staff). The facilities portion of the charge is based on
a plan to consolidate sales/service field offices.
In addition to the above charge, Aetna recorded a facilities and severance
charge in the second quarter of 1996, primarily as a result of actions
taken or expected to be taken to reduce the level of corporate expenses and
other costs previously absorbed by Aetna's property-casualty operations.
The cost allocated to the Company associated with this charge was $9.1
million after tax ($14.0 million pretax).
The activity during 1996 within the severance and facilities reserve
(pretax, in millions) and the number of positions eliminated related to
such actions were as follows:
Reserve Positions
---------------------------------------------------------------------------
Beginning of year $ -- --
Severance and facilities charges 47.3 702
Corporate Allocation 14.0 --
Actions taken (1) (13.4) (178)
-------------------------------
End of year $ 47.9 524
---------------------------------------------------------------------------
(1) Includes $8.0 million of severance-related actions and $4.1 million of
corporate allocation-related actions.
The Company's severance actions are expected to be substantially completed
by March 31, 1998. The corporate allocation actions and the vacating of the
leased office space are expected to be substantially completed in 1997.
F-22
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
8. Income Taxes
The Company is included in the consolidated federal income tax return and
combined Connecticut and New York state income tax returns 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 used in the consolidated
returns.
Income taxes for the years ended December 31, consist of:
1996 1995 1994
---- ---- ----
(millions)
Current taxes (benefits):
Income Taxes:
Federal $ 50.9 $ 82.9 $ 78.7
State 3.7 3.2 4.4
Net realized capital gains (losses) 25.3 28.5 (33.2)
------ ------ ------
79.9 114.6 49.9
------ ------ ------
Deferred taxes (benefits):
Income Taxes:
Federal (3.5) (14.4) (8.0)
Net realized capital gains (losses) (18.6) (12.9) 33.7
------ ------ ------
(22.1) (27.3) 25.7
------ ------ ------
Total $ 57.8 $ 87.3 $ 75.6
====== ====== ======
Income taxes were different from the amount computed by applying the
federal income tax rate to income before income taxes for the following
reasons:
1996 1995 1994
---- ---- ----
(millions)
Income before income taxes $198.9 $263.2 $220.9
Tax rate 35% 35% 35%
------ ------ ------
Application of the tax rate 69.6 92.1 77.3
------ ------ ------
Tax effect of:
State income tax, net of federal benefit 2.4 2.1 2.9
Excludable dividends (8.7) (9.3) (8.6)
Other, net (5.5) 2.4 4.0
------ ------ ------
Income taxes $ 57.8 $ 87.3 $ 75.6
====== ====== ======
F-23
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
8. Income Taxes (Continued)
The tax effects of temporary differences that give rise to deferred tax
assets and deferred tax liabilities at December 31 are presented below:
1996 1995
---- ----
(millions)
Deferred tax assets:
Insurance reserves $ 344.6 $ 290.4
Unrealized gains allocable to
experience rated contracts 100.8 216.7
Investment losses 7.5 7.3
Postretirement benefits other
than pensions 27.0 7.7
Deferred compensation 25.0 18.9
Pension 7.6 5.7
Other 29.3 9.2
------- -------
Total gross assets 541.8 555.9
Deferred tax liabilities:
Deferred policy acquisition costs 482.1 433.0
Market discount 6.8 4.4
Net unrealized capital gains 133.7 288.2
Other (0.3) (0.1)
------- -------
Total gross liabilities 622.3 725.5
------- -------
Net deferred tax liability $ 80.5 $ 169.6
======= =======
Net unrealized capital gains and losses are presented in shareholder's
equity net of deferred taxes. Valuation allowances are provided when it is
not considered more likely than not that deferred tax assets will be
realized. As of December 31, 1996 and 1995, no valuation allowances were
required for unrealized capital gains and losses.
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, 1996. 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.
F-24
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
8. Income Taxes (Continued)
The Internal Revenue Service ("Service") has completed examinations of the
consolidated federal income tax returns of Aetna through 1990. Discussions
are being held with the Service with respect to proposed adjustments.
Management believes there are adequate defenses against, or sufficient
reserves to provide for, any such adjustments. The Service has commenced
its examinations for the years 1991 through 1994.
9. Benefit Plans
Employee Pension Plans - The Company, in conjunction with Aetna, has
noncontributory defined benefit pension plans covering substantially all
employees. The plans provide pension benefits based on years of service and
average annual compensation (measured over 60 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 tax-deductible. As of
December 31, 1996, Aetna's accrued pension cost has been allocated to its
subsidiaries, including the Company, under an allocation based on eligible
salaries. Data on a separate company basis regarding the proportionate
share of the projected benefit obligation and plan assets is not available.
The accumulated benefit obligation and plan assets are recorded by Aetna.
As of the measurement date (i.e., September 30), the accumulated plan
assets exceeded accumulated plan benefits. Allocated pretax charges to
operations for the pension plan (based on the Company's total salary cost
as a percentage of Aetna's total salary cost) were $4.3 million, $6.1
million and $5.5 million for the years ended December 31, 1996, 1995 and
1994, respectively.
Employee Postretirement Benefits - In addition to providing pension
benefits, Aetna currently provides health care and life insurance benefits,
subject to certain caps, for retired employees. A comprehensive medical and
dental plan is offered to all full-time employees retiring at age 50 with
15 years of service or at age 65 with 10 years of service. Retirees are
generally required to contribute to the plans based on their years of
service with Aetna. The costs to the Company associated with the Aetna
postretirement plans for 1996, 1995 and 1994 were $1.8 million, $1.4
million and $1.0 million, respectively.
As of December 31, 1996, Aetna transferred to the Company approximately
$77.7 million of accrued liabilities, primarily related to the pension and
postretirement benefit plans described above, that had been previously
recorded by Aetna. The after tax amount of this transfer (approximately
$50.5 million) is reported as a reduction in retained earnings.
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. As of the measurement
date (i.e., September 30), the accumulated plan assets exceeded accumulated
plan benefits.
F-25
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
9. Benefit Plans (Continued)
Agent Postretirement Benefits - The Company, in conjunction with Aetna,
also provides certain postretirement health care and life insurance
benefits for certain agents. The costs to the Company associated with the
agents' postretirement plans for 1996, 1995 and 1994 were $0.7 million,
$0.8 million and $0.7 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 $5.4 million, $4.9 million and $3.3
million in 1996, 1995 and 1994, respectively.
Stock Plans - Aetna has a stock incentive plan that provides for stock
options, deferred contingent common stock or equivalent cash awards or
restricted stock to certain key employees. Executive and middle management
employees may be granted options to purchase common stock of Aetna at or
above the market price on the date of grant. Options generally become 100%
vested three years after the grant is made, with one-third of the options
vesting each year. Aetna does not recognize compensation expense for stock
options granted at or above the market price on the date of grant under its
stock incentive plans. In addition, executives may be granted incentive
units which are rights to receive common stock or an equivalent value in
cash. The incentive units may vest within a range from 0% to 175% at the
end of a four year period based on the attainment of performance goals. The
costs to the Company associated with the Aetna stock plans for 1996, 1995
and 1994, were $8.1 million, $6.3 million and $1.7 million, respectively.
As of December 31, 1996, Aetna transferred to the Company approximately
$1.1 million of deferred tax benefits related to stock options. This amount
is reported as an increase in retained earnings.
10. 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 .10% to
1.90% 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 .85% of their average daily net assets. The Company
also receives fees (expressed as a percentage of the average daily net
assets) from the variable life and annuity mutual funds and The Aetna
Series Fund for providing administration services, and from The Aetna
Series Fund for providing 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
$185.4 million, $128.1 million and $104.6 million in 1996, 1995 and 1994,
respectively. The Company may waive advisory fees at its discretion.
F-26
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
10. Related Party Transactions (Continued)
The Company acts as an investment adviser for its affiliated mutual funds.
Since August 1996, Aeltus Investment Management, Inc. ("Aeltus"), a wholly
owned subsidiary of HOLDCO and an affiliate of the Company, has been acting
as Subadvisor of all affiliated mutual funds and of most of the General
Account assets. Fees paid by the Company to Aeltus, included in both
Charges Assessed Against Policyholders and Net Investment Income, on an
annual basis, range from .06% to .55% of the average daily net assets under
management. For the year ended December 31, 1996, the Company paid $16.0
million in such fees.
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. An additional $6.1 million commission, paid by
the Company to Aetna Life in 1996, was capitalized as deferred policy
acquisition costs. The Company maintained insurance reserves of $628.3
million and $655.5 million as of December 31, 1996 and 1995, 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 $625.3 million and $663.5 million as of December 31, 1996 and 1995,
respectively, and is based upon the fair value of the underlying assets.
Premiums of $25.3 million, $28.0 million and $32.8 million and current and
future benefits of $39.5 million, $43.0 million and $43.8 million were
assumed in 1996, 1995 and 1994, respectively.
Investment income of $44.1 million, $46.5 million and $51.5 million was
generated from the reinsurance loan to affiliate in 1996, 1995 and 1994,
respectively. Net income of approximately $8.1 million, $18.4 million and
$25.1 million resulted from this agreement in 1996, 1995 and 1994,
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 $28.9 million and
$28.0 million were maintained for this contract as of December 31, 1996 and
1995, 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 $5.2
million, $3.2 million and $1.3 million for 1996, 1995 and 1994,
respectively.
F-27
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
10. Related Party Transactions (Continued)
The Company received a capital contribution of $10.4 million in cash from
HOLDCO in 1996. The Company received no capital contributions in 1995 or
1994.
The Company paid $3.5 million in cash dividends to HOLDCO in 1996. In 1995,
the Company dividended $2.9 million in the form of two of its subsidiaries,
Systematized Benefits Administrators, Inc. and Aetna Investment Services,
Inc., to Aetna Retirement Services, Inc. (the Company's former parent).
Premiums due and other receivables include $2.8 million and $5.7 million
due from affiliates in 1996 and 1995, respectively. Other liabilities
include $10.7 million and $12.4 million due to affiliates for 1996 and
1995, 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.
11. 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-28
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
11. Reinsurance (Continued)
The following table includes premium amounts ceded/assumed to/from
affiliated companies as discussed in Note 10 above.
Ceded to Assumed
Direct Other from Other Net
Amount Companies Companies Amount
------ --------- --------- ------
(millions)
1996
Premiums:
Life Insurance $ 34.6 $ 11.2 $ 25.3 $ 48.7
Accident and Health Insurance 6.3 6.3 -- --
Annuities 84.3 -- 0.6 84.9
======= ======= ======= =======
Total earned premiums $ 125.2 $ 17.5 $ 25.9 $ 133.6
======= ======= ======= =======
1995
Premiums:
Life Insurance $ 28.8 $ 8.6 $ 28.0 $ 48.2
Accident and Health Insurance 7.5 7.5 -- --
Annuities 164.0 -- 0.5 164.5
======= ======= ======= =======
Total earned premiums $ 200.3 $ 16.1 $ 28.5 $ 212.7
======= ======= ======= =======
1994
Premiums:
Life Insurance $ 27.3 $ 6.0 $ 32.8 $ 54.1
Accident and Health Insurance 9.3 9.3 -- --
Annuities 137.3 -- 0.2 137.5
======= ======= ======= =======
Total earned premiums $ 173.9 $ 15.3 $ 33.0 $ 191.6
======= ======= ======= =======
12. 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 the value
of the securities underlying the commitments. At December 31, 1996, the
Company had commitments to purchase investments of $17.9 million. The fair
value of the investments at December 31, 1996 approximated $18.3 million.
F-29
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
12. Commitments and Contingent Liabilities (Continued)
Litigation
The Company is involved in numerous lawsuits arising, for the most part, in
the ordinary course of its business operations. While the ultimate outcome
of litigation against the Company cannot be determined at this time, after
consideration of the defenses available to the Company and any related
reserves established, it is not expected to result in liability for amounts
material to the financial condition of the Company, although it may
adversely affect results of operations in future periods.
F-30
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
13. Segment Information (1)
The Company's operations are reported through two major business segments:
Financial Services and Individual Life Insurance.
Summarized financial information for the Company's principal operations was
as follows:
(Millions) 1996 1995 1994
- --------------------------------------------------------------------------------
Revenue:
Financial Services $ 1,195.1 $ 1,211.3 $ 1,013.5
Individual Life Insurance 445.7 407.9 386.1
---------------------------------
Total revenue $ 1,640.8 $ 1,619.2 $ 1,399.6
- --------------------------------------------------------------------------------
Income before income taxes: (2)
Financial Services $ 129.9 $ 160.1 $ 122.5
Individual Life Insurance 83.0 103.1 98.4
---------------------------------
Total income before income taxes $ 212.9 $ 263.2 $ 220.9
- --------------------------------------------------------------------------------
Net income: (2)
Financial Services $ 94.3 $ 113.8 $ 85.5
Individual Life Insurance 55.9 62.1 59.8
---------------------------------
Net income $ 150.2 $ 175.9 $ 145.3
- --------------------------------------------------------------------------------
Assets under management: (3)
Financial Services $27,268.1 $22,534.4 $18,122.9
Individual Life Insurance 2,830.5 2,590.9 2,220.5
- --------------------------------------------------------------------------------
Total assets under management $30,098.6 $25,125.3 $20,343.4
- --------------------------------------------------------------------------------
(1) The 1996 results include severance and facilities charges of $30.7 million,
after tax. Of this charge $21.5 million related to the Financial Services
segment and $9.2 million related to the Individual Life Insurance segment.
(2) Excludes any effect of the corporate facilities and severance charge
recorded in 1996 which is not directly allocable to the Financial Services
and Individual Life Insurance segments. (Refer to Note 7).
(3) Excludes net unrealized capital gains (losses) of $366.4 million, $797.1
million and $(386.4) million at December 31, 1996, 1995 and 1994,
respectively.
F-31
<PAGE>
Form No. SAI.79122-97 ALIAC ED. May 1997
<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:
- Statement of Assets and Liabilities as of December 31,
1996
- Statements of Operations and Changes in Net Assets for the
years ended December 31, 1996 and 1995
- Notes to Financial Statements
- Independent Auditors' Report
Financial Statements of the Depositor:
- Independent Auditors' Report
- Consolidated Statements of Income for the years ended
December 31, 1996, 1995 and 1994
- Consolidated Balance Sheets as of December 31, 1996 and
1995
- Consolidated Statements of Changes in Shareholder's Equity
for the years ended December 31, 1996, 1995 and 1994
- Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994
- 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 Federated Broker-Dealer Agreement (9/2/94)(2)
(3.2) Alternate Form of Broker-Dealer Agreement (1994)(2)
(4.1) Form of Aetna Growth Plus Group Variable, Fixed or Combination
Annuity Contract (Nonparticipating) (G-CDA-GPI(4/94))(3)
(4.2) Form of Aetna Growth Plus Individual Variable, Fixed or
Combination Annuity Contract (Nonparticipating)
(I-CDA-GPI(4/94))(3)
(4.3) Form of Certificate of Group Annuity Coverage
(GP1CERT(4/94))(3)
(4.4) Form of Variable Fixed or Combination Annuity Contract
(Nonparticipating) (I-GP1(5/96))
(4.5) Form of Group Variable, Fixed or Combination Annuity Contract
(Nonparticipating (G-GP1(5/96))
(4.6) Form of Certificate of Group Annuity Coverage (GP1CERT(5/96))
(4.7) Form of Endorsement (GP1END(5/97)) to Contract G-GP1(5/96)
(4.8) Form of Endorsement (I-GP1END(5/97)) to Contract (I-GP1(5/96))
<PAGE>
(5.1) Form of Application for Aetna Growth Plus Group Variable,
Fixed or Combination Annuity Contract (Nonparticipating)
(GP1APP(4/94))(3)
(5.2) Form of Application for Aetna Growth Plus Individual Variable,
Fixed or Combination Annuity Contract (Nonparticipating)
(I-GP1APP(4/94))(3)
(6.1) Certificate of Incorporation and By-Laws of Aetna Life
Insurance and Annuity Company(4)
(6.2) Amendment of Certificate of Incorporation of Aetna Life
Insurance and Annuity Company(5)
(7) Form of Reinsurance Agreement(6)
(8) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company, Insurance Management Series and Federated
Advisors dated July 1, 1994(7)
(9) Opinion of Counsel(8)
(10.1) Consent of Independent Auditors
(10.2) Consent of Counsel
(11) Not applicable
(12) Not applicable
(13) Schedule for Computation of Performance Data(9)
(14) Not applicable
(15.1) Powers of Attorney(10)
(15.2) Authorization for Signatures(11)
(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. 3 to Registration
Statement on Form N-4 (File No. 33-79122), as filed electronically on
August 16, 1995.
3. Incorporated by reference to Registration Statement on Form N-4 (File No.
33-79122), as filed on May 18, 1994.
4. 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.
5. Incorporated by reference to Post-Effective Amendment No. 12 to
Registration Statement on Form N-4 (File No. 33-75964), as filed
electronically on February 11, 1997.
6. Incorporated by reference to Post-Effective Amendment No. 3 to Registration
Statement on Form N-4 (File No. 33-80750), as filed electronically on
August 15, 1995.
7. Incorporated by reference to Post-Effective Amendment No. 26 to
Registration Statement on Form N-4 (File No. 33-34370), as filed
electronically on April 16, 1997.
8. Incorporated by Registrant's 24f-2 Notice for the fiscal year ended
December 31, 1996, as filed electronically with the Securities and Exchange
Commission on February 28, 1997.
9. Incorporated by reference to Post-Effective Amendment No. 2 to Registration
Statement on Form N-4 (File No. 33-79122), as filed on April 25, 1995.
<PAGE>
10. Incorporated by reference to Post-Effective Amendment No. 2 to Registration
Statement on Form S-2 (File No. 33-60477), as filed electronically on April
4, 1997.
11. 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.
<PAGE>
Item 25. Directors and Officers of the Depositor
Name and Principal
Business Address* Positions and Offices with Depositor
- ----------------- ------------------------------------
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
J. Scott Fox 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
Deborah Koltenuk Vice President and Treasurer, Corporate Controller
Frederick D. Kelsven Vice President and Chief Compliance Officer
Kirk P. Wickman Vice President, General Counsel and Secretary
* 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.
2 to the Registration Statement on Form N-4 (File No. 33-61897), as filed
electronically on April 11, 1997.
Item 27. Number of Contract Owners
<PAGE>
As of February 28, 1997, there were 49,006 individuals holding interests in
variable annuity contracts funded through Variable Annuity Account B.
Item 28. Indemnification
Reference is hereby made to Section 33-771(f) of the Connecticut General
Statutes ("C.G.S.") regarding indemnification of directors and Section 33-776(4)
regarding indemnification of officers, employees and agents of Connecticut
corporations. These statutes provide in general that Connecticut corporations
incorporated prior to January 1, 1997 shall indemnify their officers, directors,
employees and agents against "liability" (defined as the obligation to pay a
judgment, settlement, penalty, fine, excise tax in the case of an employee
benefit plan or reasonable expenses incurred with respect to a proceeding). In
the case of a proceeding by or in the right of the corporation, indemnification
is limited to reasonable expenses incurred in connection with the proceeding
against the corporation to which the individual was named a party. The
corporation's obligation to provide such indemnification does not apply unless
(1) the individual has met the standard of conduct set forth in Section 33-771;
and (2) a determination is made (by majority vote of a quorum of the board of
directors who were not parties to the proceeding, or if a quorum cannot be
obtained, by a committee of the board selected as described in Section
33-775(b)(2); by special legal counsel selected by the board of directors or
members thereof as described in Section 33-775(b)(3); by shareholders) that the
individual met the standard set forth in Section 33-771; 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. Also, unless limited by
its Certificate of Incorporation, a corporation must indemnify an individual who
was wholly successful on the merits or otherwise against reasonable expenses
incurred by him in connection with a proceeding to which he was a party because
of his relationship as director, officer, employee or agent of the corporation.
The statute does specifically authorize a corporation to procure indemnification
insurance on behalf of an individual who is or was a director, officer, employer
or agent of the corporation. Consistent with the statute, Aetna Inc. 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.
Item 29. Principal Underwriter
(a) In addition to serving as the principal underwriter and depositor for
the Registrant, Aetna Life Insurance and Annuity Company (Aetna) also
acts as the principal underwriter and investment adviser for Aetna
Variable Encore Fund, Aetna Variable Fund, Aetna Series Fund, Inc.,
Aetna Generation Portfolios, Inc., Aetna Income Shares, Aetna
Investment Advisers Fund, Inc., Aetna GET Fund, and Aetna Variable
Portfolios, Inc. (all management investment companies registered under
the Investment Company Act of 1940 (1940 Act)). Additionally, Aetna
acts as the principal underwriter and depositor for Variable Life
Account B of Aetna, Variable Annuity Account C of Aetna and Variable
Annuity Account G of Aetna (separate accounts of Aetna registered as
unit investment trusts under the 1940 Act). Aetna is also the principal
underwriter for Variable Annuity
<PAGE>
Account I of Aetna Insurance Company of America (AICA) (a separate
account of AICA registered as a unit investment trust under the 1940
Act).
(b) See Item 25 regarding the Depositor.
(c) Compensation as of December 31, 1996:
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Name of Net Underwriting Compensation on
Principal Discounts and Redemption or Brokerage
Underwriter Commissions Annuitization Commissions Compensation*
- ----------- ----------- ------------- ----------- -------------
<S> <C> <C>
Aetna Life Insurance $288,029 $17,661,810
and Annuity Company
</TABLE>
* 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 accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the rules under it relating to the securities
described in and issued under this Registration Statement 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
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;
<PAGE>
(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) The Company hereby represents that it is relying upon and will comply
with the provisions of Paragraphs (1) through (4) of the SEC Staff's
No-Action Letter dated November 22, 1988 with respect to language
concerning withdrawal restrictions applicable to plans established
pursuant to Section 403(b) of the Internal Revenue Code. See American
Counsel of Life Insurance; SEC No-Action Letter, [1989 Transfer Binder]
Fed. SEC. L. Rep. (CCH) [paragraph] 78,904 at 78,523 (November 22,
1988).
(e) 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.
(f) Aetna Life Insurance and Annuity Company represents that the fees and
charges deducted under the contracts covered by this registration
statement, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed
by the insurance company.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 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. 7 to its
Registration Statement on Form N-4 (File No. 33-79122) and has duly caused this
Post-Effective Amendment No. 7 to its Registration Statement on Form N-4 (File
No. 33-79122) 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, 1997.
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, this Post-Effective Amendment
No. 7 to the Registration Statement on Form N-4 (File No. 33-79122) 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 Officer )
Timothy A. Holt )
)
Christopher J. Burns* Director ) April
- ----------------------- ) 22, 1997
Christopher J. Burns )
)
Laura R. Estes* Director )
- ----------------------- )
Laura R. Estes )
)
J. Scott Fox* Director )
- ----------------------- )
J. Scott Fox )
<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 )
)
Deborah Koltenuk* Vice President and Treasurer, )
- ----------------------- Corporate Controller )
Deborah Koltenuk )
By: /s/Julie E. Rockmore
-------------------
Julie E. Rockmore
*Attorney-in-Fact
<PAGE>
VARIABLE ANNUITY ACCOUNT B
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit Page
- ----------- ------- ----
<S> <C> <C>
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 Federated Broker-Dealer Agreement (9/2/94) *
99-B.3.2 Alternate Form of Broker-Dealer Agreement (1994) *
99-B.4.1 Form of Aetna Growth Plus Group Variable, Fixed or Combination Annuity Contract *
(Nonparticipating) (G-CDA-GPI(4/94))
99-B.4.2 Form of Aetna Growth Plus Individual Variable, Fixed or Combination Annuity *
Contract (Nonparticipating) (I-CDA-GPI(4/94))
99-B.4.3 Form of Certificate of Group Annuity Coverage (GP1CERT(4/94)) *
99-B.4.4 Form of Variable Fixed or Combination Annuity Contract
(Nonparticipating) (I-GP1(5/96)) --------------
99-B.4.5 Form of Group Variable, Fixed or Combination Annuity Contract (Nonparticipating
(G-GP1(5/96)) --------------
99-B.4.6 Form of Certificate of Group Annuity Coverage (GP1CERT(5/96)) --------------
99-B.4.7 Form of Endorsement (GP1END(5/97)) to Contract G-GP1(5/96) --------------
99-B.4.8 Form of Endorsement (I-GP1END(5/97)) to Contract I-GP1(5/96) --------------
99-B.5.1 Form of Application for Aetna Growth Plus Group Variable, Fixed or Combination *
Annuity Contract (Nonparticipating) (GP1APP(4/94))
99-B.5.2 Form of Application for Aetna Growth Plus Individual Variable, Fixed or Combination *
Annuity Contract (Nonparticipating)
(I-GP1APP(4/94))
99-B.6.1 Certificate of Incorporation and By-Laws of Depositor *
99-B.6.2 Amendment of Certificate of Incorporation of Depositor *
*Incorporated by reference
<PAGE>
Exhibit No. Exhibit Page
- ----------- ------- ----
99-B.7 Form of Reinsurance Agreement *
99-B.8 Fund Participation Agreement between Aetna Life Insurance and Annuity Company, *
Insurance Management Series and Federated Advisors dated July 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 Schedule for Computation of Performance Data *
99-B.15.1 Powers of Attorney *
99-B.15.2 Authorization for Signatures *
27 Financial Data Schedule --------------
</TABLE>
*Incorporated by reference
----------------------------------------------------
Aetna Life Insurance and Annuity Company
Home Office: 151 Farmington Avenue
P.O. Box 30670
Hartford, Connecticut 06150-0670
(800) 531-4547
You may call the toll-free number shown above for
answers to questions or to resolve a complaint.
Individual Variable, Fixed or Combination Annuity Contract (Nonparticipating)
Aetna Life Insurance and Annuity Company (We or Us), a stock company, agrees to
pay benefits according to the terms and conditions set forth in this Contract.
Specifications
- --------------------------------------------------------------------------------
Plan
- --------------------------------------------------------------------------------
Type of Plan
- --------------------------------------------------------------------------------
Contract Holder
- --------------------------------------------------------------------------------
Contract Number
- --------------------------------------------------------------------------------
Effective Date
This Contract is delivered in and is subject to the laws and regulations of that
state.
The variable features of the Contract are described in sections 6 and 12.
Right to Cancel
- --------------------------------------------------------------------------------
The Contract Holder may cancel this Contract within 10 days by returning it to
Us at the address shown above or to the person from whom it was purchased.
Within seven (7) days of the cancellation request, We will return the amount of
Purchase Payment(s) made plus any increase, or minus any decrease, on the Amount
allocated to the Separate Account.
Signed at the Home Office on the Effective Date.
/s/ Dan Kearney /s/ Susan E. Schechter
President Secretary
ALL PAYMENTS AND VALUES PROVIDED BY THE CONTRACT, WHEN BASED ON INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT. THIS CONTRACT CONTAINS A MARKET VALUE ADJUSTMENT FORMULA.
APPLICATION OF A MARKET VALUE ADJUSTMENT MAY RESULT IN EITHER AN INCREASE OR
DECREASE IN THE CURRENT VALUE. THE MARKET VALUE ADJUSTMENT FORMULA DOES NOT
APPLY TO A GUARANTEED TERM AT THE TIME OF ITS MATURITY.
<PAGE>
Table of Contents
Page
Right to Cancel.........................................................1
Contract Schedule.......................................................4
Separate Account.....................................................4
ALIAC Guaranteed Account (AG Guaranteed Account).....................4
Separate Account and AG Account......................................4
Fixed Annuity........................................................5
Section 1. Definitions.................................................6
Section 2. General Provisions..........................................7
The Contract.........................................................7
Nonparticipating Contract............................................8
Misstatements and Adjustments........................................8
Reports..............................................................8
Premium Taxes........................................................8
Protection of Proceeds...............................................8
Evidence of Survival.................................................8
Proof of Age.........................................................8
Change of Contract...................................................8
Section 3. Ownership...................................................8
Contract Holder Rights...............................................8
Transfer of Ownership................................................9
Section 4. Beneficiary Provisions......................................9
Beneficiary..........................................................9
Change of Beneficiary................................................9
Death of Beneficiary.................................................9
Section 5. Purchase Payments...........................................9
Purchase Payments....................................................9
Allocation of Purchase Payments......................................9
Section 6. Separate Account...........................................10
General.............................................................10
Investment Allocations to the Separate Account......................10
Valuation of Assets.................................................10
Accumulation Unit...................................................10
Net Return Factor for Each Valuation Period.........................10
Administrative Charge...............................................11
Mortality Risk Charge...............................................11
Expense Risk Charge.................................................11
Mortality and Expense Guarantee.....................................11
Section 7. AG Account.................................................11
AG Account Guaranteed Interest Rate.................................11
Deposit Period......................................................11
Guaranteed Term.....................................................11
Guaranteed Term(s) Groups...........................................12
2
<PAGE>
Maturity Date.......................................................12
Allocation of Net Purchase Payments to the AG Account...............12
AG Account Guaranteed Term Maturity Date and Maturity Value.........12
Withdrawals and Transfers from the AG Account.......................12
Reinvestment........................................................13
AG Account Market Value Adjustment (Factor).........................13
Section 8. Contract Value; Transfers and Withdrawals During the
Accumulation Period........................................14
Contract Value......................................................14
Transfers During the Accumulation Period............................14
Withdrawals During the Accumulation Period..........................14
Deferred Sales Charge...............................................15
Waiver of Deferred Sales Charge.....................................15
Payment of Adjusted Contract Value..................................15
Systematic Withdrawal Option (SWO)..................................15
Section 9. Maintenance Charge.........................................16
Maintenance Charge..................................................16
Section 10. Proceeds Payable on Death.................................16
Death of the Contract Holder Prior to the Annuity Date..............16
Death Benefit Amount Prior to the Annuity Date......................16
Death Benefit Payment Methods.......................................18
Death of Contract Holder On or After the Annuity Date...............18
Death of the Annuitant..............................................19
Section 11. Delay of Payments.........................................19
Delay of Payments...................................................19
Section 12. Annuity Provisions........................................19
Designation of Annuitant............................................19
Terms of Annuity Options............................................20
Annuity Unit........................................................21
Annuity Unit Value..................................................21
Annuity Net Return Factor...........................................21
Annuity Options.....................................................22
3
<PAGE>
Contract Schedule
<TABLE>
Separate Account
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Separate Account: Variable Account B
Charges to the Separate Account: A daily charge is deducted from the assets of the Separate Account. The deduction
is the daily equivalent of the annual effective percentage shown below:
(a) During the Accumulation Period:
Administrative Charge 0.15%
Mortality Risk Charge 0.35%
Expense Risk Charge 0.90%
TOTAL Separate Account Charges During
Accumulation Period 1.40%
(b) During the Annuity Period
Administrative Charge Not To Exceed 0.25%
Mortality Risk Charge 0.35%
Expense Risk Charge 0.90%
TOTAL Maximum Separate Account Charges
During Annuity Period 1.50%
ALIAC Guaranteed Account (AG Guaranteed Account)
- -----------------------------------------------------------------------------------------------------------------------------------
Minimum Guaranteed Interest Rate 3.0%
(effective annual rate of return):
Separate Account and AG Account
- -----------------------------------------------------------------------------------------------------------------------------------
Minimum Initial Purchase Payment: $1,500
Minimum Subsequent Purchase Payment: $500 or $50 per month if paid by an automatic check plan
Maximum Subsequent Purchase Payment: $1,000,000 without home office approval
Transfers: We allow an unlimited number of transfers during the Accumulation Period. Twelve
(12) transfers in any calendar year are free. Thereafter, We reserve the right to
charge a transfer charge up to $10 for each subsequent transfer.
Maintenance Charge: The annual maintenance charge is $30. If the Contract Value is $50,000 or more on
the date the maintenance charge is to be deducted, the maintenance charge is $0.
4
<PAGE>
Deferred Sales Charge: For each withdrawal from the Contract Value, a deferred sales charge for each Net
Purchase Payment will be determined as follows:
Years from Receipt of Deferred
Net Purchase Payment Sales Charge
0-1 7%
1-2 6%
2-3 5%
3-4 4%
4-5 3%
5-6 2%
6-7 1%
7+ 0%
Waiver of Deferred Sales Charge: Section 8.05 provides for the following:
(c) At least 12 months after
the date of the first
Purchase Payment in an
amount equal to or less
than 15% of the Contract
Value.
(d) For a full withdrawal
where the Contract Value
does not exceed $2,500
and no withdrawals have
been taken from the
Contract Value within the
prior 12 months.
Systematic Withdrawal Option: (a) Specified Payment - Maximum Percentage: 10%
(b) Specified Period - Minimum Period: 10 years
(c) Specified Percentage - Maximum Percentage: 10%
Death Benefit Factor: 4%
Death Benefit Maximum Amount: There is no maximum death benefit amount.
Death Benefit Maximum Age: 85 years
Fund for Allocation of Excess Guaranteed Federated Prime Money Fund II
Death Benefit Value:
Latest Annuity Date: The Contract Holder's 90th birthday.
Fixed Annuity
- -----------------------------------------------------------------------------------------------------------------------------------
Minimum Guaranteed Interest Rate 3.0%
(effective annual rate of return):
</TABLE>
5
<PAGE>
Section 1. Definitions
- --------------------------------------------------------------------------------
1.01 Accumulation Period - The period during which one or more
Net Purchase Payments applied to the Contract accumulate to
provide future Annuity payments.
1.02 Accumulation Unit - A measure of the net investment results
for each variable investment option during the Accumulation
Period. The Accumulation Units for the applicable Funds are
used to calculate the portion of the Contract Value
attributable to a Separate Account during the Accumulation
Period.
1.03 Adjusted Contract Value - The Contract Value, plus or minus
any aggregate AG Account Market Value Adjustment.
1.04 ALIAC Guaranteed Account (AG Account) - An investment option
where We guarantee specified rate(s) of interest for
specified periods of time. The AG Account is a separate
account established by Us in accordance with the provisions
of the Connecticut General Statutes Section 38a-433.
Contract Holders do not participate in the investment gain
or loss from the assets held in the AG Account. Assets in
the AG Account may be charged with liabilities arising out
of any other business We may conduct.
1.05 Annuitant - The natural person on whose life an Annuity
payment is based.
1.06 Annuity - A series of payments We make for life, a definite
period or a combination of the two.
1.07 Annuity Date - The date on which Annuity payments commence.
1.08 Annuity Options - Annuity payment methods available during
the Annuity Period.
1.09 Annuity Period - The period of time during which Annuity
payments are made.
1.10 Annuity Unit - A measure of the net investment results for
each variable investment option during the Annuity Period.
Annuity Units are used to calculate the amount of each
variable Annuity payment.
1.11 Beneficiary - The person(s) entitled to receive any death
benefit under the Contract. Upon the death of a joint
Contract Holder, the surviving joint Contract Holder, if
any, is treated as the Beneficiary. Any other Beneficiary
designation on record with Us at the time of death is
treated as a contingent Beneficiary.
1.12 Contract Holder - The person who purchases a Contract. We
reserve the right to limit ownership to natural persons. If
more than one Contract Holder owns the Contract, each
Contract Holder shall be a joint Contract Holder. Any joint
Contract Holder must be the spouse of the other joint
Contract Holder. Joint Contract Holders have joint ownership
rights and both must authorize any exercising of those
ownership rights unless otherwise allowed by Us. If the
Contract is owned by a nonnatural person, the death benefit
will be paid at the death of the Annuitant and a new
Annuitant may not be named.
6
<PAGE>
1.13 Contract Value - The dollar value as of any Valuation Period
of all amounts accumulated in the Contract.
1.14 Contract - This agreement between the Contract Holder and
Us.
1.15 Dollar Cost Averaging - A program that permits the Contract
Holder to systematically transfer amounts from any of the
Funds and the one-year guaranteed term of the AG Account to
any of the Funds. Dollar Cost Averaging is not available if
the Systematic Withdrawal Option is in effect.
1.16 Effective Date - The date the Contract is issued to the
Contract Holder.
1.17 Fund - One of the variable investment options which may be
selected by a Contract Holder.
1.18 General Account - The General Account is made up of all of
our general assets other than those allocated to the
Separate Accounts.
1.19 Home Office - Our headquarters, located at 151 Farmington
Avenue, Hartford, CT 06156.
1.20 Market Value Adjustment - An adjustment that may apply to a
withdrawal made from the AG Account before the end of a
guaranteed term as stated in Section 7.10.
1.21 Net Purchase Payment - The Purchase Payment less premium
taxes, if applicable.
1.22 Purchase Payment - The gross payment accepted by Us and
allocated to the Contract. We reserve the right to refuse to
accept any Purchase Payment at any time for any reason.
1.23 Separate Account - A separate account that buys and holds
shares of the Fund(s). Income, gains or losses, realized or
unrealized, are credited or charged to the Separate Account
without regard to Our other income, gains or losses. We own
the assets held in the Separate Account and are not a
trustee as to such amounts. The Separate Account generally
is not guaranteed and is held at market value. The name of
the Separate Account is shown on the Contract Schedule. The
assets of the Separate Account, to the extent of reserves
and other Contract liabilities of the Separate Account, will
not be charged with Our other liabilities.
1.24 Valuation Period - The period of time for which a Fund
determines its net asset value, usually from 4:15 p.m.
Eastern time each day the New York Stock Exchange is open
until 4:15 p.m. the next such business day, or such other
day that one or more of the Funds determines its net asset
value. The assets of the Separate Account are not chargeable
with the liabilities arising out of any other business We
may conduct.
1.25 Variable Annuity Contract - An Annuity Contract providing
for the accumulation of value and/or for Annuity payments
which vary in amount based on investment results.
Section 2. General Provisions
- --------------------------------------------------------------------------------
2.01 The Contract - The entire Contract consists of this Contract
and any endorsements attached or subsequently issued.
7
<PAGE>
2.02 Nonparticipating Contract - Neither the Contract Holder, nor
any Beneficiary have a right to share in our earnings.
2.03 Misstatements and Adjustments - If We learn that the age of
any Annuitant or second Annuitant is misstated, the correct
age will be used to adjust payments. We reserve the right to
request reimbursement or adjust future payments for any
amount overpaid. We will pay the amount of any underpayment.
2.04 Reports - We furnish each Contract Holder with a report
showing the Contract Value at least once each calendar year.
We also furnish an annual report of the Separate Account.
2.05 Premium Taxes - Any premium taxes paid to any governmental
entity are charged against Purchase Payments or the Contract
Value. We may, at our sole discretion, pay premium taxes
when due and deduct that amount from the Contract Value at a
later date. Payment at an earlier date does not waive any
right We may have to deduct amounts at a later date.
2.06 Protection of Proceeds - To the extent permitted by law, all
payments under this Contract to a Contract Holder or
Beneficiary shall be free from legal process and the claim
of any creditor.
2.07 Evidence of Survival - The Company may require satisfactory
evidence of the continued survival of any
person(s) on whose life Annuity payments are based.
2.08 Proof of Age - The Company may require evidence of age of
any Annuitant under Annuity Options 2 and 3 and of the
designated second Annuitant under Annuity Option 3.
2.09 Change of Contract - We reserve the right to change the
Contract, but only if a change is necessary to:
(a) Make the Contract or the Separate Account comply
with state or federal laws or regulations; or
(b) Assure the continued qualified status of the
Contract under the Code or other federal laws or
regulations governing annuity contracts; or
(c) Reflect a change in the operation of the Separate
Account or the Funds; or
(d) Provide additional funds; or
(e) Withdraw Funds
We will notify the Contract Holder in writing 30 days before
any change becomes effective. When appropriate, we will
endorse the Contract for the change.
Section 3. Ownership
- --------------------------------------------------------------------------------
3.01 Contract Holder Rights - The Contract Holder has all
interest and right to amounts held in his or her Contract.
The Contract Holder and any joint Contract Holder are named
on the Specifications page. The Contract Holder and any
joint Contract Holder may exercise all the rights under the
Contract, subject to the rights of:
(a) Any assignee under an assignment filed at our home
office; and
(b) Any irrevocably named Beneficiary.
8
<PAGE>
Upon the death of a Contract Holder prior to the Annuity
Date, a spousal Beneficiary may elect to continue the
Contract in his or her own name and retain all ownership
rights and privileges or take distribution of the death
benefit as defined in Section 10.
3.02 Transfer of Ownership - A Contract Holder may transfer all
of his or her rights under the Contract. We reserve the
right not to accept an assignment or transfer to a
nonnatural person. A written request, dated and signed by
the Contract Holder and any joint Contract Holder, must be
filed at our home office. After the transfer is recorded, it
will take effect as of the date the request was signed. Any
such transfer terminates the interest of any existing
Contract Holder. It does not change the Beneficiary, nor
transfer the Beneficiary's interest. A transfer will not
affect any payments We may make or actions We may take
before such transfer has been recorded at our home office.
Section 4. Beneficiary Provisions
- --------------------------------------------------------------------------------
4.01 Beneficiary - The Contract Holder may name a Beneficiary and
a contingent Beneficiary. At the death of the Contract
Holder prior to the Annuity Date, the Beneficiary(ies) named
in our records will receive a death benefit as stated in
Section 10. Upon the death of either joint Contract Holder
prior to the Annuity Date, the surviving joint Contract
Holder, if any, will be treated as the designated
Beneficiary and any other Beneficiary designation on record
with Us at the time of death is treated as a contingent
Beneficiary. If the Contract Holder is a nonnatural person,
the death benefit will be paid at the death of the
Annuitant.
4.02 Change of Beneficiary - The Contract Holder may change the
Beneficiary. A written request, dated and signed by the
Contract Holder, must be filed at our home office. If there
are joint Contract Holders, both must sign the request.
After the change is recorded, it will take effect as of the
date the request was signed. If the request reaches our home
office and is recorded after the Contract Holder dies, but
before any payment is made, the change is valid.
4.03 Death of Beneficiary - If all of the Beneficiaries and
contingent Beneficiaries die prior to the Contract Holder's
death, We pay the death benefit in one sum to the Contract
Holder's estate. If the Contract Holder is a nonnatural
person, and all of the Beneficiaries and contingent
Beneficiaries die prior to the Annuitant's death, We will
pay the death benefit in one sum to the Contract Holder.
Section 5. Purchase Payments
- --------------------------------------------------------------------------------
5.01 Purchase Payments - Subject to the maximum and minimum shown
on the Contract Schedule, the Contract Holder may determine
the amount and frequency of Purchase Payments. We reserve
the right not to accept any Purchase Payment. We will
declare from time to time the acceptability of additional
Purchase Payments.
5.02 Allocation of Purchase Payments - The Contract Holder may
elect to have each Net Purchase Payment accumulate:
(a) On a variable basis invested in shares of one or
more Funds in which the Separate Account invests;
(b) For guaranteed terms offered in the current deposit
period(s) under the AG Account; or
(c) In a combination of any of the available investment
options.
9
<PAGE>
Net Purchase Payments must be allocated in whole
percentages. For subsequent Purchase Payments, if no
allocation instructions are received with the Purchase
Payment, the allocation will be as indicated in the most
recent directive from the Contract Holder. If the same
guaranteed term(s) are not available, the next shortest will
be used. If no shorter guaranteed term is available, the
next longer guaranteed term will be used.
Section 6. Separate Account
- --------------------------------------------------------------------------------
6.01 General - The assets of the Separate Account, equal to the
reserves and other Contract liabilities that depend on the
investment performance of the Separate Account are not
chargeable with liabilities arising out of any other
business We may conduct. Income, gains or losses of the
Separate Account, realized or unrealized, are credited to or
charged against the assets of the Separate Account without
regard to Our other income, gains or losses.
6.02 Investment Allocations to the Separate Account - The assets
of the Separate Account are segregated by Fund, If the
shares of any Fund are no longer available for investment by
the Separate Account or if in our judgment, further
investment in such shares should become inappropriate in
view of the purpose of the Contract, We may cease to make
such Fund shares available for investment under the Contract
prospectively, or We may substitute shares of another Fund
for shares already acquired. We may also, from time to time,
add additional Funds. Any elimination, substitution or
addition of Funds will be done in accordance with applicable
state and federal securities laws. We reserve the right to
substitute shares of another Fund for shares already
acquired without a proxy vote.
6.03 Valuation of Assets - The shares of the Funds will be valued
at their net asset value at the end of each Valuation
Period.
6.04 Accumulation Unit - A Net Purchase Payment that is allocated
to one or more Funds is credited to the Contract as
Accumulation Units. The number of Accumulation Units
credited is determined by dividing the applicable portion of
the Net Purchase Payment by the Accumulation Unit value for
the appropriate Fund. The Accumulation Unit value used is
that which is computed for the next Valuation Period after
which the Purchase Payment is received at our home office.
Accumulation Units attributable to the initial Purchase
Payments will be credited within two business days of
acceptance.
Accumulation Unit values may increase or decrease from
Valuation Period to Valuation Period.
6.05 Net Return Factor for Each Valuation Period - The value of
an Accumulation Unit for any Valuation Period is calculated
by multiplying the Accumulation Unit value for the
immediately preceding Valuation Period by the net return
factor of the appropriate Fund for the current period.
The net return factor for each Fund is equal to 1.0000000
plus the net return rate.
The net return rate equals:
(a) The value of the shares of the Fund held by the
Separate Account at the end of a Valuation Period;
minus
(b) The value of the shares of the Fund held by the
Separate Account at the start of the Valuation
Period; plus or minus
10
<PAGE>
(c) Taxes (or reserves for taxes) on the Separate
Account (if any); divided by
(d) The total value of the Funds(s) Accumulation Units
and Fund(s) Annuity Units of the Separate Account at
the start of the Valuation Period; minus
(e) A daily actuarial charge as shown on the Contract
Schedule for Annuity mortality and expense risks and
profit and a daily administrative charge.
The net return rate may be more or less than zero (0)
percent.
The value of a share of the Fund is equal to the net assets
of the Fund divided by the number of shares outstanding.
6.06 Administrative Charge - We deduct an administrative charge
equal, on an annual basis, to the amount shown on the
Contract Schedule.
6.07 Mortality Risk Charge - We deduct a mortality risk charge
equal, on an annual basis, to the amount shown on the
Contract Schedule.
6.08 Expense Risk Charge - We deduct an expense risk charge
equal, on an annual basis, to the amount shown on the
Contract Schedule.
6.09 Mortality and Expense Guarantee - We guarantee that the
dollar amount of each Annuity payment after the first will
not be affected by variations in mortality or expense
experience.
Section 7. AG Account
- --------------------------------------------------------------------------------
7.01 AG Account Guaranteed Interest Rate - All amounts allocated
to the AG Account earn a rate of interest that is guaranteed
for a specified period of time. The rate will be credited
daily and will never be less than the minimum guaranteed
interest rate shown on the Contract Schedule. We determine
the rate and it is not based on investment experience.
For guaranteed terms of one year or less, one guaranteed
interest rate is credited for the full guaranteed term. For
longer guaranteed terms, an initial guaranteed interest rate
is credited from the date of deposit to the end of a
specified period within the guaranteed term. There may be
different guaranteed interest rate(s) declared for
subsequent specified time intervals throughout the
guaranteed term.
7.02 Deposit Period - A calendar week, a calendar month, a
calendar quarter, or any other period of time We specify
during which Net Purchase Payment(s), transfers and
reinvestments are accepted into the AG Account for one or
more guaranteed terms. We reserve the right to extend the
deposit period.
7.03 Guaranteed Term - The period of time for which AG Account
guaranteed interest rates are guaranteed on Net Purchase
Payments. Transfers and reinvestments are made into a
current deposit period for the AG Account. Such period
begins on the day following the close of the deposit period
and ends on the designated Maturity Date. Guaranteed terms,
if any, are offered at our discretion for various lengths of
time ranging up to and including ten years.
During a deposit period, We may make available any number of
guaranteed terms. The Contract Holder may allocate Net
Purchase Payments and transfers into any or all of the
available guaranteed terms.
11
<PAGE>
7.04 Guaranteed Term(s) Groups - All AG Account guaranteed
term(s) with the same length of time from the close of the
deposit period until the designated Maturity Date.
7.05 Maturity Date - The last day of a guaranteed term.
7.06 Allocation of Net Purchase Payments to the AG Account - When
the Contract Holder wishes to allocate all or any portion of
a Net Purchase Payment to the Guaranteed Account, he or she
must tell Us the percentage to apply to one or more of the
AG Account guaranteed term(s) available during the current
deposit period. If no allocation instructions are received,
a Net Purchase Payment is allocated as indicated in the most
recent directive from the Contract Holder. If the same
guaranteed term is not available for any amount allocated to
the AG Account, We will allocate the amount to the next
shortest guaranteed term available. If no shorter guaranteed
term is available, We will allocate it to the next longest
guaranteed term.
7.07 AG Account Guaranteed Term Maturity Date and Maturity Value
- On the maturity date, the value of the total of all
amounts allocated to that guaranteed term is called the
maturity value.
When the Contract Holder has assets in the AG Account, at
least eighteen (18) days before a maturity date, We notify
him or her of the:
(a) Projected maturity value; and
(b) Guaranteed terms and the applicable guaranteed
interest rates available during the current deposit
period.
When no allocation instructions are received and the assets
in a guaranteed term have been reinvested by Us in another
guaranteed term on the maturity date, the Contract Holder
may transfer or withdraw, during the month following the
maturity date, the reinvested amount with interest earned
(as of the date the request is received at our home office)
without incurring a Market Value Adjustment. This
transaction is allowed only once for each maturity date,
regardless of whether the transfer or withdrawal is partial
or full.
7.08 Withdrawals and Transfers from the AG Account - When the
Contract Holder requests a withdrawal or transfer from the
AG Account, if instructions are not provided by the Contract
Holder, amounts are withdrawn on a pro rata basis from the
guaranteed term(s) groups in which the Contract is currently
invested. Within a guaranteed term group, the amount to be
withdrawn will be withdrawn first from the oldest deposit
period. Withdrawals or transfers from an AG Account
guaranteed term before the maturity date are subject to a
Market Value Adjustment, except for:
(a) A one month period following the maturity date
described in 7.07;
(b) Transfers under the Dollar Cost Averaging program;
and
(c) Withdrawals under the Systematic Withdrawal Option
described in Section 8.07.
Only a positive Market Value Adjustment will apply to
amounts transferred from the AG Account when the Contract
Holder elects Annuity Option 2 or 3.
12
<PAGE>
7.09 Reinvestment - We will mail a notice to the Contract Holder
before a guaranteed term's maturity date. This notice will
contain the guaranteed terms available during the current
deposit periods with their guaranteed interest rate(s) and
projected maturity value. If no specific direction is given
by the Contract Holder prior to the maturity date, each
maturity value will be reinvested in the current deposit
period for a guaranteed term of the same duration. If a
guaranteed term of the same duration is unavailable, each
matured term value will automatically be reinvested in the
current deposit period for the next shortest guaranteed term
available. If no shorter guaranteed term is available, the
next longer guaranteed term will be used. We will mail a
confirmation statement to the Contract Holder after the
maturity date. This notice will state the guaranteed term
and guaranteed interest rate(s) which will apply to the
reinvested matured term value.
7.10 AG Account Market Value Adjustment (Factor) - The Market
Value Adjustment factor (MVA factor) reflects any change in
interest rates from the time assets are allocated to the AG
Account to the time they are transferred or withdrawn.
Except as noted in Sections 7.09, 10.02 and 12.01, an MVA
factor is applied to any amount withdrawn or transferred
from the AG Account before the end of a guaranteed term.
The amount withdrawn from the AG Account is multiplied by
the MVA factor which is calculated as follows:
x
---
365
(1 + i)
------------
x
---
365
(i + j)
Where:
i is the Deposit Period Yield
j is the Current Yield
x is the number of days remaining,
(computed from Wednesday of the week of
withdrawal) in the guaranteed Term.
Determination of MVA factor parameters:
A yield is computed at the close of the last business day of
each week of the deposit period. The yield will equal the
average of the yields on U.S. Treasury Notes which matured
during the last three months of the applicable guaranteed
term.
The deposit period yield is the average of those yields for
the deposit period. If withdrawal is made prior to the close
of the deposit period, it is the average of those yields on
each week preceding withdrawal.
The current yield is the average of the yields on the last
business day of the week preceding withdrawal on the same
U.S. Treasury Notes included in the deposit period yield.
If no U.S. Treasury Notes matured during the last three
months of the guaranteed term, We reserve the right to use
the average of the yields on U.S. Treasury Notes that mature
during a following quarter.
13
<PAGE>
Section 8. Contract Value; Transfers and Withdrawals During the Accumulation
Period
- --------------------------------------------------------------------------------
8.01 Contract Value - The value of the Contract is determined by
adding the value of the total of Accumulation Units
attributed to the selected Fund(s) to the value of any
amounts attributed to the AG Account.
8.02 Transfers During the Accumulation Period - Before the
Annuity Date, the Contract Holder may transfer from any Fund
or guaranteed term of the AG Account to:
(a) Any other Fund; or
(b) Any guaranteed term of the AG Account available in
the current deposit period.
Transfer requests can be submitted as a percentage or as a
dollar amount. We may establish a minimum transfer amount.
Within a guaranteed term group, the amount transferred is
withdrawn first from the oldest deposit period, then from
the next oldest, and so on until the amount requested is
satisfied.
The Contract Holder may make an unlimited number of
transfers during the Accumulation Period. The number of free
transfers allowed is shown on the Contract Schedule.
Transfers in excess of that number may be subject to the
transfer charge shown on the Contract Schedule. Transfers
under the Dollar Cost Averaging program do not count toward
the annual limit. Transfers of a matured term value from the
AG Account on or within one calendar month after a
guaranteed term's maturity date do not count against the
annual transfer limit.
Amounts applied to guaranteed terms of the AG Account may
not be transferred to the Funds or to another guaranteed
term during the deposit period or for 90 days after the
close of the deposit period except for (1) matured term
value(s) during the calendar month following the guaranteed
term's maturity date; (2) amounts applied to an annuity
option; (3) transfers from the one-year guaranteed term
under the Dollar Cost Averaging program; and (4) amounts
distributed under the Systematic Withdrawal Option.
Except as noted in Section 7.09, 10.02 and 12.01, transfers
from guaranteed terms of the AG Account before the Maturity
Date are subject to a Market Value Adjustment.
8.03 Withdrawals During the Accumulation Period - The Contract
Holder may withdraw all or a portion of the Contract Value
during the Accumulation Period by properly completing a
withdrawal request form. Withdrawal requests can be
submitted as a percentage or as a specific dollar amount.
Net Purchase Payment amounts are withdrawn first, and then
the excess value, if any. For any partial withdrawal, if
instructions are not provided by the Contract Holder,
amounts are withdrawn on a pro rata basis from the Fund(s),
and/or the guaranteed term(s) groups in which the Contract
is currently invested. Within a guaranteed term group, the
amount to be withdrawn will be withdrawn first from the
oldest deposit period, then from the next oldest, and so on
until the amount requested is satisfied.
After deduction of the maintenance charge, if applicable,
the withdrawn amount shall be reduced by the applicable
deferred sales charge and any applicable premium taxes.
14
<PAGE>
8.04 Deferred Sales Charge - The deferred sales charge only
applies to the portion of the amount withdrawn attributable
to Net Purchase Payment(s) and varies according to the
elapsed time since receipt of the Purchase Payment. The
deferred sales charge is shown on the Contract Schedule.
8.05 Waiver of Deferred Sales Charge - No deferred sales charge
is deducted when the Contract Value is paid:
(a) To a Beneficiary as a death benefit, except for
Purchase Payments made by a surviving joint Contract
Holder as described in Section 10.02(b);
(b) As a premium for an Annuity Option;
(c) At least the number of months, as shown on the
Contract Schedule, after the date of the first
Purchase Payment and in an amount equal to or less
than the percentage of the Contract Value as shown
on the Contract Schedule. This applies to the first
withdrawal request, partial or full, in a calendar
year. The Contract Value is calculated as of the
date the withdrawal request is received in good
order at our home office. This Waiver is not
available to the Contract Holder while a SWO is in
effect;
(d) For a full withdrawal where the Contract Value does
not exceed the amount shown on the Contract Schedule
and no withdrawals have been taken from the Contract
within the prior 12 months;
(e) For a distribution made by Us under Section 8.06; or
(f) For a distribution which is part of a SWO under
Section 8.07.
We reserve the right to allow the proceeds of a total
withdrawal to be reinstated under the terms and conditions
as established by Us from time to time.
8.06 Payment of Adjusted Contract Value - Upon 90 day's written
notice to the Contract Holder, We will terminate any
Contract if the Contract Value becomes less than $1,500
immediately following any partial withdrawal. We do not
intend to exercise this right in cases where the Contract
Value is reduced to $1,500 or less solely due to investment
performance. When We make a distribution pursuant to this
provision, the deferred sales charge will not be deducted.
8.07 Systematic Withdrawal Option (SWO) - We will allow the
Contract Holder to establish a schedule of withdrawals to be
made automatically from the Contract Value. All distributed
amounts will be withdrawn on a pro rata basis from the
Fund(s) and/or the guaranteed term(s) groups of the AG
Account in which the Contract is invested.
The Contract Holder must elect one of the following SWO
methods:
(a) Specified Payment: Payments of a designated dollar
amount. The annual amount may not be greater than
the percentage of the Contract Value at time of the
election as shown on the Contract Schedule. This
annual dollar amount will remain constant. At our
discretion, We may require a minimum payment amount;
or
(b) Specified Period: Payments which are made over a
period of time which must be at least the minimum
period as shown on the Contract Schedule. The annual
amount paid each year is calculated by dividing the
Contract Value as of December 31 of the prior year
by the number of payment years remaining; or
15
<PAGE>
(c) Specified Percentage: Payment of a designated
percentage which cannot be greater than the
percentage of the Contract Value at the time of
election as shown on the Contract Schedule. The
percentage may be changed by written request. We
reserve the right to limit the number of times the
percentage may be changed. The annual amount is
calculated by multiplying the Contract Value as of
December 31 of the year prior to the payment by the
designated percentage.
SWO payments will cease at the Contract Holder's death (or
if the Contract Holder is a nonnatural person, at the death
of the Annuitant). A beneficiary may elect to continue SWO
as provided in Section 10.01.
In our discretion, We may require a minimum initial Contract
Value for election of this option. SWO may be elected by
submitting a completed and signed election form to Us. Once
elected, this option may be revoked by submitting a written
request to Us. SWO may be elected only once by the Contract
Holder or by a spousal Beneficiary.
The Contract Holder should consult his or her tax adviser
prior to requesting this distribution option. We are not
responsible for any adverse tax consequences due to the
Contract Holder receiving SWO payments. A ten (10) percent
penalty tax may apply to distributions to a Contract Holder
who has not reached age 59-1/2. Upon death of the Contract
Holder, any payments will be made under the terms of Section
10.
Dollar Cost Averaging is not available to Contract Holders
who have elected SWO.
Section 9. Maintenance Charge
- --------------------------------------------------------------------------------
9.01 Maintenance Charge - We will deduct an annual maintenance
charge as shown in the Contract Schedule from the Contract
during the Accumulation Period. We will deduct the
maintenance charge on the anniversary of the Effective Date
of the Contract. This maintenance charge is also deducted
upon withdrawal of the entire Adjusted Contract Value. The
maintenance charge is deducted proportionately from each
investment option used.
Section 10. Proceeds Payable on Death
- --------------------------------------------------------------------------------
10.01 Death of the Contract Holder Prior to the Annuity Date - In
the event of the death of the Contract Holder or a joint
Contract Holder prior to the Annuity Date, a death benefit
is payable to the Beneficiary(ies) designated by the
Contract Holder. Upon the death of a joint Contract Holder,
the surviving joint Contract Holder, if any, will be treated
as the designated Beneficiary. Any other Beneficiary
designation on record with Us at the time of death will be
treated as a contingent Beneficiary. If the Contract Holder
is a nonnatural person, the death benefit will be payable to
the Beneficiary(ies) at the death of the Annuitant.
A Beneficiary may request We pay the death benefit under one
of the methods described in Section 10.03. If the
Beneficiary is the spouse of the Contract Holder, or the
spouse of the Annuitant if the Contract Holder is a
nonnatural person, he or she may elect to continue the
Contract in his or her own name and exercise all the
Contract Holder rights under the Contract.
10.02 Death Benefit Amount Prior to the Annuity Date -
16
<PAGE>
(a) Except as set forth below, the amount of the
guaranteed death benefit value is equal to the
greater of:
(i) The Contract Value at the end of the Valuation
Period during which We receive at our home
office due proof of death and election of the
type of payment to be made; or
(ii) The death benefit determined as of the
Valuation Period corresponding to the date of
death.
Until the first Effective Date anniversary,
the death benefit is equal to the Purchase
Payments made by the Contract Holder prior to
the Effective Date anniversary less any
withdrawals and any amounts applied to an
Annuity Option.
For each Contract year thereafter, the death
benefit during the Contract year equals the
death benefit at the beginning of the Contract
year plus Purchase Payments made during the
year less any withdrawals and any amounts
applied to an Annuity Option.
On each Effective Date anniversary, the death
benefit is determined as follows:
(A) The death benefit on the previous
Effective Date anniversary increased by
the death benefit factor shown on the
Contract Schedule; plus
(B) Purchase Payments made by the Contract
Holder during the Contract year
increased by the death benefit factor
shown on the Contract Schedule for the
portion of the year since the Purchase
Payment was made; less
(C) Any withdrawals or amounts applied to
an Annuity Option during the Contract
year increased by the death benefit
factor shown on the Contract Schedule
for the portion of the Contract year
since the withdrawal or election of
Annuity option; or
(iii) The Contract Value on the most recent seventh
year anniversary of the Effective Date plus
any Purchase Payments made after such
Effective Date anniversary less any
withdrawals and any amounts applied to an
Annuity Option.
Notwithstanding the foregoing, the death benefit under (ii)
or (iii) will not exceed the death benefit maximum amount
shown on the Contract Schedule.
The death benefit calculation described in (ii) and (iii)
above, applies until the Contract Holder reaches the death
benefit maximum age shown on the Contract Schedule. If the
Contract Holder is a nonnatural person, death provisions
will be based on the age of the Annuitant. Thereafter, the
death benefit is only adjusted for Purchase Payments,
withdrawals and amounts applied to Annuity Options. If the
Contract Holder reaches the death benefit maximum age shown
on the Contract Schedule prior to the seventh anniversary of
the Effective Date, the death benefit will be the greater of
(i) or (ii) above.
The excess, if any, of the guaranteed death benefit value
over the Contract Value is determined when we receive at our
home office due proof of death and allocated to the Fund
shown on the Contract Schedule. The Contract Value plus any
excess amount deposited becomes the Contract Value.
17
<PAGE>
(b) In the case of a spousal Beneficiary who continued
the Contract in his or her own name, the death
benefit shall be equal to the Adjusted Contract
Value less any applicable deferred sales charge on
any Purchase Payment made after We have received at
our home office due proof of death of the joint
Contract Holder (or Annuitant, if applicable).
When the Beneficiary withdraws or transfers all or any
portion of the death benefit in the AG Account within six
months after the date of death, the amount withdrawn or
transferred from the AG Account will be the greater of:
(1) The aggregate Market Value Adjustment amount (the
amount resulting from the application of relevant
Market Value Adjustment factors); or
(2) The applicable portion of the Contract Value in the
AG Account.
After the six-month period, when the Beneficiary withdraws
or transfers all or any portion of the death benefit in the
AG Account, the amount will be equal to the aggregate Market
Value Adjustment amount. Only a positive market value
adjustment will apply, however, to amounts transferred from
the AG Account when the Beneficiary elects Annuity Option 2
or 3.
At the death of a spousal Beneficiary who continued the
Contract in his or her own name, when the Beneficiary
withdraws or transfers all or any portion of the death
benefit in the AG Account, the amount will be equal to the
Aggregate Market Value Adjustment amount.
10.03 Death Benefit Payment Methods - A non-spousal Beneficiary
must elect the death benefit to be paid under one of the
following methods in the event of the death of the Contract
Holder prior to the Annuity Date:
Method 1 - Lump sum payment of the death benefit; or
Method 2 - The payment of the entire death benefit within
five years of the date of the Contract Holder's death; or
Method 3 - Payment of the death benefit over the lifetime of
the designated Beneficiary or over a period not extending
beyond the life expectancy of the designated Beneficiary
with distribution beginning within one year of the date of
death of the Contract Holder.
Any portion of the death benefit not applied under Method 3
within one year of the date of Contract Holder's death, or
the death of the Annuitant if the Contract Holder is a
nonnatural person, must be distributed within five years of
the date of death.
A spousal Beneficiary may elect to continue the Contract in
his or her name, elect a lump sum payment of the death
benefit, or apply the Adjusted Contract Value to an Annuity
Option.
10.04 Death of Contract Holder On or After the Annuity Date - If
the Contract Holder who is not the Annuitant, dies on or
after the Annuity Date, the remaining payments under the
Annuity Option elected will be made to the Beneficiary at
least as rapidly as under the method of distribution in
effect at the Contract Holder's death.
18
<PAGE>
10.05 Death of the Annuitant - If the Annuitant, who is not a
Contract Holder, dies on or before the Annuity Date, a new
Annuitant may be named. If no Annuitant is named, the
Contract Holder will be the Annuitant. If the Contract
Holder is a nonnatural person, the death benefit will be
paid at the death of the Annuitant and no new Annuitant may
be named. If the Annuitant dies after the Annuity Date, the
death benefit, if any, will be payable to the Beneficiary as
specified in the Annuity Option elected. We will require
proof of the Annuitant's death. Death benefits will be paid
at least as rapidly as under the method of distribution in
effect at the Annuitant's death.
Section 11. Delay of Payments
- --------------------------------------------------------------------------------
11.01 Delay of Payments - We will make any payments under this
Contract within seven days after a request is received in
good order. We reserve the right to suspend or postpone any
type of payment from the Separate Account for any period
when:
(a) The New York Stock Exchange is closed for other than
customary weekend and holiday closings;
(b) Trading on the Exchange is restricted;
(c) An emergency exists as a result of which it is not
reasonably practicable to dispose of securities held
in the Separate Account or determine their value; or
(d) The Securities and Exchange Commission so permits
delay for the protection of security holders.
The applicable rules of the Securities and Exchange
Commission will govern as to whether the conditions in (b)
or (c) exist.
We also reserve the right to delay any type of payment from
the AG Account for up to six months.
Section 12. Annuity Provisions
- --------------------------------------------------------------------------------
12.01 Designation of Annuitant - The Contract Holder and the
Annuitant need not be the same person. The Contract Holder
names the Annuitant and during the Accumulation Period, may
change the designated Annuitant. We change the Annuitant
when We receive a written request in good order at our home
office. We will not change the Annuitant when Annuity
payments have commenced.
The Contract Holder elects an Annuity Option by telling Us
to use all or any portion of the Contract Value (minus any
applicable premium taxes if not previously deducted) to
purchase Annuity payments under an Annuity Option. If the
Contract Holder elects Annuity Option 1, the amount applied
to purchase Annuity payments will be equal to the Adjusted
Contract Value. If the Contract Holder elects Annuity Option
2 or 3, the amount applied to purchase Annuity payments will
be the greater of:
(1) The Adjusted Contract Value; or
(2) The Contract Value.
When an Annuity option is chosen the Contract Holder must
designate a:
19
<PAGE>
(a) Fixed Annuity using the General Account;
(b) Variable Annuity using any of the Funds available
during the Annuity Period; or
(c) Combination of (a) and (b).
If a fixed Annuity is chosen, We will calculate the amount
using an interest assumption no less than the percentage
specified on the Contract Schedule. We may calculate the
amount using a higher interest rate.
If a variable Annuity is chosen, an Assumed Annual Net
Return Rate of 5% may be chosen. If not chosen, We will use
an Assumed Annual Net Return Rate of 3.5%
Payments are made on a monthly basis to the Contract Holder
unless the Contract Holder requests a different mode of
payment.
Once elected, an Annuity Option may not be revoked, except
for Option 1 when elected on a variable basis.
12.02 Terms of Annuity Options - The minimum first payment amount
must be at least $50 per month and at least $250 per year.
If the Contract Holder elects a fixed Annuity and We
determine that the Contract Holder would receive larger
payments by applying the Contract Value, reduced by the
deferred sales charge, to a single premium immediate Annuity
currently offered by Us, We will make the larger payments.
We determine the first payment of a variable Annuity, or the
payment amount of a fixed Annuity, using the Annuitant's
(and second Annuitant's if applicable) adjusted age which We
calculate as follows:
(a) If Annuity payments begin any time between July 1,
1992 and December 31, 1999, the adjusted age is the
Annuitant's age as of the birthday closest in time
to the Annuity Date reduced by one (1) year.
(b) If the Annuity begins any time between January 1,
2000 and December 31, 2009, the adjusted age is the
Annuitant's age as of the birthday closest in time
to the Annuity Date reduced by two (2) years.
(c) For each succeeding decade, the adjusted age is the
Annuitant's age as determined in (b), reduced by one
additional year.
The Annuity rates for Options 2 and 3 are based on mortality
from 1983 Table A.
Assumed Annual Net Return Rate is the interest rate used to
determine the amount of the first Annuity payment under a
variable Annuity. The Separate Account must earn this rate
plus enough to cover the mortality and expense risks charges
(which may include profit) and administrative charges if
future variable Annuity payments are to remain level.
The Contract Holder must give written notice to Us at least
30 days before the Annuity payments begin, electing or
changing:
20
<PAGE>
(a) The date on which Annuity payments are to begin;
(b) The Annuity Option;
(c) Whether the payments are to be made monthly,
quarterly, semiannually or annually;
(d) The investment options used to provide Annuity
payments.
The first Annuity payment may not be earlier than one (1)
calendar year after the initial Purchase Payment, nor later
than the later of the:
(a) First day of the month following the Annuitant's
birthday shown on the Contract Schedule; or
(b) Tenth anniversary of the last Purchase Payment. In
lieu of the election of an Annuity, the Contract
Holder may request a lump sum payment.
12.03 Annuity Unit - The number of Annuity Units per Fund is based
on the amount of the first variable Annuity payment which is
equal to:
(a) The portion of the Contract Value (minus any premium
taxes) applied to pay a variable Annuity; divided
by,
(b) 1000; multiplied by,
(c) The payment rate for the Annuity Option chosen.
Such amount, or portion, of the variable Annuity payment
will be divided by the Annuity Unit value for the
appropriate Fund on the tenth Valuation Period before the
due date of the first payment to determine the number of
each Fund's Annuity Units. The number of each Fund's Annuity
Unit remains fixed. Each future payment is equal to the sum
of the products of each Fund's Annuity Unit value multiplied
by the appropriate number of units. The Fund's Annuity Unit
value on the tenth Valuation Period prior to the due date of
the payment is used.
12.04 Annuity Unit Value - For any Valuation Period, a Fund's
Annuity Unit value is equal to:
(a) The value for the previous Valuation Period;
multiplied by,
(b) The Annuity Net Return Factor for the Valuation
Period; multiplied by,
(c) A daily factor to reflect the Assumed Annual Net
Return Rate (the factor for 3.5% per year is
.9999058; for 5% per year it is .9998663).
The dollar value of a Fund(s) Annuity Unit values and
payments may go up or down due to investment gain or loss.
12.05 Annuity Net Return Factor - The Annuity net return factor is
used to compute all Separate Account Annuity payments for
any Fund.
The Annuity net return factor(s) for each Fund is equal to
1.0000000 plus the net return rate. The net return rate is
equal to:
21
<PAGE>
(a) The value of the shares of the Fund held by the
Separate Account at the end of a Valuation Period;
minus,
(b) The value of the shares of the Fund held by the
Separate Account at the start of the Valuation
Period; plus or minus,
(c) Taxes (or reserves for taxes) on the Separate
Account (if any); divided by
(d) The total value of the Fund(s) Accumulation Units
and Fund(s) Annuity Units of the Separate Account at
the start of the Valuation Period; minus,
(e) A daily actuarial charge as shown of the Contract
Schedule for Annuity mortality and expense risks and
profit and a daily administrative charge which will
not exceed the administrative charge as shown on the
Contract Schedule.
The net return rate may be more or less than zero (0)
percent,
The value of a share of the Fund is equal to the net assets
of the Fund divided by the number of shares outstanding.
12.06 Annuity Options
Option 1 - Payments for a Stated Period of Time - An Annuity
will be paid for the number of years chosen. The number of
years must be at least 5 and not more than 30.
If payments for this Annuity Option are made under a
variable Annuity, the present value of any remaining
payments may be withdrawn at any time.
Option 2 - Life Income - An Annuity will be paid for the
life of the Annuitant. If also chosen, We will guarantee
payments for 60, 120, 180, or 240 months.
Option 3 - Life Income Based upon the Lives of Two
Annuitants - An Annuity will be paid during the lives of the
Annuitant and a second Annuitant. Payments will continue
until both Annuitants have died. When this Annuity Option is
chosen, a choice must be made of:
(a) 100% of the payment to continue after the first
death;
(b) 66-2/3% of the payment to continue after the first
death;
(c) 50% of the payment to continue after the first
death;
(d) Payments for a minimum of 120 months with 100% of
the payment to continue after the first death; or
(e) 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.
We may make other options available as allowed by law.
22
<PAGE>
OPTION 1
Payments for a Stated Period of Time
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
<TABLE>
<CAPTION>
- --------------------- -------------------- -------------------- -------------------- --------------------- --------------------
Years Guaranteed Rate Monthly Payment Quarterly Payment Semi-Annual Payment Annual Payment
- --------------------- -------------------- -------------------- -------------------- --------------------- --------------------
<S> <C> <C> <C> <C> <C>
5 3.00% 17.91 53.59 106.78 211.99
6 3.00% 15.14 45.30 90.27 179.22
7 3.00% 13.16 39.39 78.49 155.83
8 3.00% 11.68 34.96 69.66 138.31
9 3.00% 10.53 31.52 62.81 124.69
10 3.00% 9.61 28.77 57.33 113.82
11 3.00% 8.86 26.52 52.85 104.93
12 3.00% 8.24 24.65 49.13 97.54
13 3.00% 7.71 23.08 45.98 91.29
14 3.00% 7.26 21.73 43.29 85.95
15 3.00% 6.87 20.56 40.96 81.33
16 3.00% 6.53 19.54 38.93 77.29
17 3.00% 6.23 18.64 37.14 73.74
18 3.00% 5.96 17.84 35.56 70.59
19 3.00% 5.73 17.13 34.14 67.78
20 3.00% 5.51 16.50 32.87 65.26
21 3.00% 5.32 15.92 31.72 62.98
22 3.00% 5.15 15.40 30.68 60.92
23 3.00% 4.99 14.92 29.74 59.04
24 3.00% 4.84 14.49 28.88 57.33
25 3.00% 4.71 14.09 28.08 55.76
26 3.00% 4.59 13.73 27.36 54.31
27 3.00% 4.47 13.39 26.68 52.97
28 3.00% 4.37 13.08 26.06 51.74
29 3.00% 4.27 12.79 25.49 50.60
30 3.00% 4.18 12.52 24.95 49.53
- --------------------- -------------------- -------------------- -------------------- --------------------- --------------------
</TABLE>
23
<PAGE>
OPTION 2
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
Payments Guaranteed for a Stated Period of Months
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted None 60 120 180 240
Age of --------------------------------------------------------------------------------------------------------------------
Annuitant Male Female Male Female Male Female Male Female Male Female
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $4.27 $3.90 $4.26 $3.90 $4.22 $3.89 $4.17 $3.86 $4.08 $3.82
51 4.34 3.97 4.33 3.96 4.30 3.95 4.23 3.92 4.14 3.88
52 4.43 4.03 4.41 4.03 4.37 4.01 4.30 3.98 4.20 3.93
53 4.51 4.10 4.50 4.10 4.45 4.08 4.37 4.04 4.26 3.99
54 4.60 4.18 4.59 4.17 4.54 4.15 4.45 4.11 4.32 4.04
55 4.70 4.25 4.68 4.25 4.62 4.22 4.53 4.18 4.39 4.11
56 4.80 4.34 4.78 4.33 4.72 4.30 4.61 4.25 4.45 4.17
57 4.91 4.42 4.89 4.41 4.82 4.38 4.69 4.32 4.51 4.23
58 5.03 4.52 5.00 4.51 4.92 4.47 4.78 4.40 4.58 4.30
59 5.15 4.61 5.12 4.60 5.03 4.56 4.87 4.48 4.65 4.37
60 5.28 4.72 5.25 4.70 5.14 4.66 4.96 4.57 4.71 4.44
61 5.43 4.83 5.39 4.81 5.27 4.76 5.06 4.66 4.78 4.51
62 5.58 4.95 5.53 4.93 5.39 4.87 5.16 4.75 4.84 4.58
63 5.74 5.08 5.69 5.05 5.53 4.99 5.26 4.85 4.90 4.65
64 5.91 5.21 5.85 5.18 5.66 5.10 5.36 4.95 4.96 4.72
65 6.10 5.36 6.03 5.32 5.81 5.22 5.46 5.05 5.02 4.79
66 6.30 5.51 6.21 5.47 5.96 5.36 5.56 5.16 5.08 4.86
67 6.51 5.67 6.41 5.63 6.12 5.50 5.66 5.26 5.13 4.93
68 6.73 5.85 6.62 5.80 6.28 5.65 5.77 5.37 5.18 5.00
69 6.97 6.04 6.84 5.98 6.44 5.80 5.86 5.49 5.23 5.06
70 7.23 6.25 7.07 6.18 6.61 5.97 5.96 5.60 5.27 5.12
71 7.51 6.47 7.32 6.39 6.79 6.14 6.05 5.71 5.31 5.18
72 7.80 6.71 7.58 6.62 6.96 6.32 6.14 5.83 5.34 5.23
73 8.12 6.98 7.85 6.86 7.14 6.50 6.23 5.94 5.37 5.28
74 8.46 7.26 8.14 7.12 7.32 6.69 6.31 6.04 5.40 5.32
75 8.82 7.57 8.45 7.40 7.50 6.89 6.38 6.14 5.42 5.35
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
24
<PAGE>
OPTION 3
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
(Annuitant is Male and Second Annuitant is Female)
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- ------------------- -------------------
Second Option 3a Option 3b Option 3c Option 3d Option 3e
Annuitant Annuitant
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $3.69 $4.05 $4.27 $3.69 $4.13
55 55 3.88 4.25 4.47 3.87 4.25
55 60 3.06 4.47 4.71 4.06 4.36
60 55 3.99 4.44 4.71 3.98 4.55
60 60 4.24 4.71 4.99 4.23 4.70
60 65 4.49 5.01 5.32 4.48 4.85
65 60 4.38 4.97 5.32 4.38 5.10
65 65 4.72 5.33 5.70 4.71 5.32
65 70 5.07 5.75 6.17 5.05 5.54
70 65 4.93 5.68 6.15 4.91 5.86
70 70 5.40 6.21 6.70 5.36 6.18
70 75 5.89 6.82 7.40 5.81 6.49
75 70 5.69 6.68 7.32 5.62 6.92
75 75 6.37 7.45 8.15 6.23 7.40
75 80 7.07 8.34 9.16 6.78 7.85
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983
Table a. The rates assume the Annuitant is Male and
the Second Annuitant is Female. Rates for ages not
shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
25
<PAGE>
OPTION 3
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
(Annuitant is Female and Second Annuitant is Male)
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- ------------------- -------------------
Second Option 3a Option 3b Option 3c Option 3d Option 3e
Annuitant Annuitant
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $3.75 $4.07 $4.26 $3.75 $3.98
55 55 3.88 4.25 4.47 3.87 4.06
55 60 3.99 4.44 4.71 3.98 4.12
60 55 4.06 4.47 4.71 4.06 4.37
60 60 4.24 4.71 4.99 4.23 4.47
60 65 4.38 4.97 5.32 4.38 4.54
65 60 4.49 5.01 5.32 4.48 4.89
65 65 4.72 5.33 5.70 4.71 5.02
65 70 4.93 5.68 6.15 4.91 5.14
70 65 5.07 5.75 6.17 5.05 5.60
70 70 5.40 6.21 6.70 5.36 5.79
70 75 5.69 6.68 7.32 5.62 5.96
75 70 5.89 6.83 7.40 5.81 6.63
75 75 6.37 7.45 8.15 6.23 6.92
75 80 6.78 8.11 8.99 6.54 7.15
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983
Table a. The rates assume the Annuitant is Female
and the Second Annuitant is Male. Rates for ages
not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
26
<PAGE>
OPTION 1
Payments for a Stated Period of Time
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Years Guaranteed Rate Monthly Payment Quarterly Payment Semi-Annual Payment Annual Payment
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
5 3.50% 18.12 54.19 107.92 213.99
6 3.50% 15.35 45.92 91.44 181.32
7 3.50% 13.38 40.01 79.69 158.01
8 3.50% 11.90 35.59 70.88 140.56
9 3.50% 10.75 32.16 64.05 127.00
10 3.50% 9.83 29.42 58.59 116.18
11 3.50% 9.09 27.18 54.13 107.34
12 3.50% 8.46 25.32 50.42 99.98
13 3.50% 7.94 23.75 47.29 93.78
14 3.50% 7.49 22.40 44.62 88.47
15 3.50% 7.10 21.24 42.31 83.89
16 3.50% 6.76 20.23 40.29 79.89
17 3.50% 6.47 19.34 38.51 76.37
18 3.50% 6.20 18.55 36.94 73.25
19 3.50% 5.97 17.85 35.54 70.47
20 3.50% 5.75 17.22 34.28 67.98
21 3.50% 5.56 16.65 33.15 65.74
22 3.50% 5.39 16.13 32.13 63.70
23 3.50% 5.24 15.66 31.19 61.85
24 3.50% 5.09 15.24 30.34 60.17
25 3.50% 4.96 14.85 29.56 58.62
26 3.50% 4.84 14.49 28.85 57.20
27 3.50% 4.73 14.15 28.19 55.90
28 3.50% 4.63 13.85 27.58 54.69
29 3.50% 4.53 13.57 27.02 53.57
30 3.50% 4.45 13.30 26.49 52.53
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
OPTION 1
Payments for a Stated Period of Time
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Years Guaranteed Rate Monthly Payment Quarterly Payment Semi-Annual Payment Annual Payment
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
5 5.00% 18.74 56.00 111.33 219.98
6 5.00% 15.99 47.77 94.96 187.64
7 5.00% 14.02 41.90 83.30 164.59
8 5.00% 12.56 37.52 74.58 147.35
9 5.00% 11.42 34.11 67.81 133.99
10 5.00% 10.51 31.40 62.42 123.34
11 5.00% 9.77 29.19 58.03 114.66
12 5.00% 9.16 27.36 54.38 107.45
13 5.00% 8.64 25.81 51.31 101.39
14 5.00% 8.20 24.50 48.69 96.21
15 5.00% 7.82 23.36 46.44 91.75
16 5.00% 7.49 22.37 44.47 87.88
17 5.00% 7.20 21.51 42.75 84.48
18 5.00% 6.94 20.74 41.23 81.47
19 5.00% 6.71 20.06 39.88 78.80
20 5.00% 6.51 19.46 38.68 76.42
21 5.00% 6.33 18.91 37.59 74.28
22 5.00% 6.17 18.42 36.62 72.35
23 5.00% 6.02 17.98 35.73 70.61
24 5.00% 5.88 17.57 34.93 69.02
25 5.00% 5.76 17.20 34.20 67.57
26 5.00% 5.65 16.87 33.53 66.25
27 5.00% 5.54 16.56 32.92 65.04
28 5.00% 5.45 16.28 32.35 63.93
29 5.00% 5.36 16.01 31.83 62.90
30 5.00% 5.28 15.77 31.35 61.95
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
OPTION 2
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
Payments Guaranteed for a Stated Period of Months
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted None 60 120 180 240
Age of -------------------------------------------------------------------------------------------------------------------
Annuitant Male Female Male Female Male Female Male Female Male Female
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $4.56 $4.20 $4.55 $4.19 $4.51 $4.18 $4.45 $4.15 $4.36 $4.11
51 4.64 4.26 4.62 4.25 4.58 4.24 4.51 4.21 4.42 4.16
52 4.72 4.32 4.70 4.32 4.66 4.30 4.58 4.26 4.48 4.21
53 4.80 4.39 4.79 4.38 4.74 4.36 4.65 4.32 4.53 4.27
54 4.89 4.46 4.87 4.46 4.82 4.43 4.73 4.39 4.59 4.32
55 4.99 4.54 4.97 4.53 4.91 4.50 4.80 4.46 4.65 4.38
56 5.09 4.62 5.07 4.61 5.00 4.58 4.88 4.53 4.72 4.44
57 5.20 4.71 5.17 4.70 5.10 4.66 4.96 4.60 4.78 4.50
58 5.32 4.80 5.29 4.79 5.20 4.75 5.05 4.68 4.84 4.57
59 5.44 4.90 5.41 4.88 5.31 4.84 5.14 4.76 4.91 4.63
60 5.57 5.00 5.53 4.99 5.42 4.93 5.23 4.84 4.97 4.70
61 5.71 5.11 5.67 5.09 5.54 5.03 5.32 4.93 5.03 4.77
62 5.86 5.23 5.81 5.21 5.66 5.14 5.42 5.02 5.09 4.84
63 6.02 5.36 5.97 5.33 5.79 5.25 5.51 5.11 5.16 4.91
64 6.20 5.49 6.13 5.46 5.93 5.37 5.61 5.21 5.21 4.98
65 6.38 5.64 6.31 5.60 6.07 5.49 5.71 5.31 5.27 5.05
66 6.58 5.79 6.49 5.75 6.22 5.63 5.81 5.41 5.32 5.12
67 6.79 5.95 6.69 5.91 6.38 5.76 5.91 5.52 5.38 5.18
68 7.02 6.13 6.89 6.08 6.53 5.91 6.01 5.63 5.42 5.25
69 7.26 6.32 7.11 6.26 6.70 6.06 6.11 5.74 5.47 5.31
70 7.52 6.53 7.35 6.45 6.86 6.23 6.20 5.85 5.51 5.37
71 7.80 6.75 7.59 6.66 7.03 6.39 6.29 5.96 5.54 5.42
72 8.09 6.99 7.85 6.89 7.21 6.57 6.38 6.07 5.57 5.47
73 8.41 7.26 8.12 7.13 7.38 6.75 6.46 6.17 5.60 5.51
74 8.75 7.54 8.41 7.39 7.55 6.94 6.53 6.28 5.63 5.55
75 9.12 7.85 8.71 7.66 7.73 7.13 6.61 6.38 5.65 5.59
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
29
<PAGE>
OPTION 2
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
Payments Guaranteed for a Stated Period of Months
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted None 60 120 180 240
Age of -------------------------------------------------------------------------------------------------------------------
Annuitant Male Female Male Female Male Female Male Female Male Female
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $5.48 $5.12 $5.46 $5.11 $5.41 $5.09 $5.34 $5.06 $5.24 $5.01
51 5.55 5.17 5.53 5.17 5.48 5.14 5.40 5.11 5.29 5.05
52 5.63 5.23 5.61 5.23 5.55 5.20 5.46 5.16 5.34 5.10
53 5.71 5.30 5.69 5.29 5.62 5.26 5.53 5.22 5.40 5.15
54 5.80 5.37 5.77 5.36 5.70 5.33 5.60 5.27 5.45 5.20
55 5.89 5.44 5.86 5.43 5.79 5.39 5.67 5.34 5.51 5.25
56 5.99 5.52 5.96 5.51 5.87 5.47 5.74 5.40 5.56 5.31
57 6.10 5.60 6.06 5.59 5.97 5.54 5.82 5.47 5.62 5.37
58 6.21 5.69 6.17 5.67 6.06 5.62 5.90 5.54 5.68 5.42
59 6.33 5.79 6.29 5.77 6.17 5.71 5.98 5.61 5.74 5.48
60 6.46 5.89 6.41 5.87 6.28 5.80 6.06 5.69 5.79 5.55
61 6.60 6.00 6.55 6.97 6.39 5.90 6.15 5.77 5.85 5.61
62 6.75 6.11 6.69 6.08 6.51 6.00 6.24 5.86 5.91 5.67
63 6.91 6.23 6.84 6.20 6.64 6.10 6.33 5.95 5.96 5.73
64 7.09 6.37 7.00 6.33 6.77 6.22 6.42 6.04 6.02 5.80
65 7.27 6.51 7.18 6.46 6.91 6.34 6.52 6.13 6.07 5.86
66 7.47 6.66 7.36 6.61 7.05 6.46 6.61 6.23 6.12 5.92
67 7.68 6.82 7.55 6.76 7.20 6.60 6.70 6.33 6.16 5.99
68 7.91 7.00 7.76 6.93 7.35 6.74 6.80 6.43 6.21 6.04
69 8.15 7.19 7.98 7.11 7.51 6.89 6.89 6.54 6.25 6.10
70 8.41 7.39 8.21 7.30 7.67 7.04 6.97 6.64 6.28 6.15
71 8.69 7.62 8.45 7.51 7.83 7.21 7.06 6.74 6.32 6.20
72 8.99 7.86 8.70 7.73 8.00 7.38 7.14 6.85 6.35 6.25
73 9.31 8.12 8.97 7.97 8.16 7.55 7.21 6.95 6.37 6.29
74 9.65 8.41 9.26 8.23 8.33 7.73 7.29 7.04 6.39 6.33
75 10.02 8.72 9.55 8.50 8.50 7.92 7.35 7.14 6.41 6.36
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
30
<PAGE>
OPTION 3
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
(Annuitant is Male and Second Annuitant is Female)
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- --------------------------------------
Second
Annuitant Annuitant Option 3a Option 3b Option 3c Option 3d Option 3e
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $3.97 $4.35 $4.56 $3.97 $4.42
55 55 4.16 4.54 4.76 4.15 4.54
55 60 4.34 4.76 5.00 4.34 4.64
60 55 4.27 4.73 5.00 4.26 4.83
60 60 4.51 4.99 5.27 4.50 4.98
60 65 4.76 5.29 5.60 4.75 5.13
65 60 4.66 5.25 5.61 4.65 5.39
65 65 4.99 5.61 5.99 4.98 5.60
65 70 5.34 6.03 6.46 5.31 5.81
70 65 5.19 5.97 6.44 5.17 6.14
70 70 5.67 6.49 6.99 5.62 6.47
70 75 6.16 7.10 7.68 6.07 6.77
75 70 5.95 6.96 7.61 5.87 7.20
75 75 6.64 7.73 8.43 6.48 7.68
75 80 7.33 8.62 9.45 7.02 8.13
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983
Table a. The rates assume the Annuitant is Male and
the Second Annuitant is Female. Rates for ages not
shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
31
<PAGE>
OPTION 3
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
(Annuitant is Female and Second Annuitant is Male)
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- --------------------------------------
Second
Annuitant Annuitant Option 3a Option 3b Option 3c Option 3d Option 3e
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $4.03 $4.36 $4.55 $4.03 $4.41
55 55 4.16 4.54 4.76 4.15 4.54
55 60 4.27 4.73 5.00 4.26 4.83
60 55 4.34 4.76 5.00 4.34 4.64
60 60 4.51 4.99 5.27 4.50 4.98
60 65 4.66 5.25 5.61 4.65 5.39
65 60 4.76 5.29 5.60 4.75 5.13
65 65 4.99 5.61 5.99 4.98 5.60
65 70 5.19 5.97 6.44 5.17 6.14
70 65 5.34 6.03 6.46 5.31 5.81
70 70 5.67 6.49 6.99 5.62 6.47
70 75 5.95 6.96 7.61 5.87 7.20
75 70 6.16 7.10 7.68 6.07 6.77
75 75 6.64 7.73 8.43 6.48 7.68
75 80 7.04 8.39 9.29 6.79 8.70
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983
Table a. The rates assume the Annuitant is Female
and the Second Annuitant is Male. Rates for ages
not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
32
<PAGE>
OPTION 3
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
(Annuitant is Male and Second Annuitant is Female)
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- --------------------------------------
Second
Annuitant Annuitant Option 3a Option 3b Option 3c Option 3d Option 3e
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $4.88 $5.26 $5.48 $4.88 $5.34
55 55 5.04 5.44 5.66 5.04 5.43
55 60 5.21 5.65 5.89 5.21 5.53
60 55 5.15 5.63 5.91 5.14 5.73
60 60 5.37 5.87 6.16 5.37 5.86
60 65 5.61 6.16 6.49 5.60 6.01
65 60 5.52 6.14 6.51 5.51 6.28
65 65 5.83 6.49 6.87 5.82 6.47
65 70 6.17 6.90 7.33 6.13 6.67
70 65 6.04 6.84 7.34 6.00 7.03
70 70 6.49 7.35 7.87 6.44 7.33
70 75 6.97 7.96 8.56 6.87 7.62
75 70 6.77 7.84 8.51 6.68 8.08
75 75 7.45 8.60 9.33 7.27 8.55
75 80 8.14 9.49 10.35 7.80 8.98
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983
Table a. The rates assume the Annuitant is Male and
the Second Annuitant is Female. Rates for ages not
shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
33
<PAGE>
OPTION 3
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
(Annuitant is Female and Second Annuitant is Male)
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- --------------------------------------
Second
Annuitant Annuitant Option 3a Option 3b Option 3c Option 3d Option 3e
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $4.93 $5.27 $5.46 $4.93 $5.19
55 55 5.04 5.44 5.66 5.04 5.43
55 60 5.15 5.63 5.91 5.14 5.73
60 55 5.21 5.65 5.89 5.21 5.53
60 60 5.37 5.87 6.16 5.37 5.86
60 65 5.52 6.14 6.51 5.51 6.28
65 60 5.61 6.16 6.49 5.60 6.01
65 65 5.83 6.49 6.87 5.82 6.47
65 70 6.04 6.84 7.34 6.00 7.03
70 65 6.17 6.90 7.33 6.13 6.67
70 70 6.49 7.35 7.87 6.44 7.33
70 75 6.77 7.84 8.51 6.68 8.08
75 70 6.97 7.96 8.56 6.87 7.62
75 75 7.45 8.60 9.33 7.27 8.55
75 80 7.86 9.28 10.20 7.57 9.59
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983
Table a. The rates assume the Annuitant is Female
and the Second Annuitant is Male. Rates for ages
not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
34
<PAGE>
[Aetna logo]
Aetna Life Insurance and Annuity Company
Home Office: 151 Farmington Avenue
P.O. Box 30670
Hartford, Connecticut 06150-0670
(800) 531-4547
Individual Variable, Fixed, or Combination Annuity Contract
Nonparticipating
ALL PAYMENTS AND VALUES PROVIDED BY THE CONTRACT, WHEN BASED ON INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT. THIS CONTRACT CONTAINS A MARKET VALUE ADJUSTMENT FORMULA.
APPLICATION OF A MARKET VALUE ADJUSTMENT MAY RESULT IN EITHER AN INCREASE OR
DECREASE IN THE CURRENT VALUE. THE MARKET VALUE ADJUSTMENT FORMULA DOES NOT
APPLY TO A GUARANTEED TERM AT THE TIME OF ITS MATURITY.
35
-----------------------------------------------
Aetna Life Insurance and Annuity Company
Home Office: 151 Farmington Avenue
P.O. Box 30670
Hartford, Connecticut 06150-0670
(800) 531-4547
You may call the toll-free number shown above
for answers to questions or to resolve a complaint
Group Variable, Fixed or Combination Annuity Contract (Nonparticipating)
Aetna Life Insurance and Annuity Company (We or Us), a stock company, agrees to
pay benefits according to the terms and conditions set forth in this Contract.
Specifications
- --------------------------------------------------------------------------------
Plan
SPECIMEN
- --------------------------------------------------------------------------------
Type of Plan
SPECIMEN
- --------------------------------------------------------------------------------
Contract Holder
SPECIMEN
- --------------------------------------------------------------------------------
Contract Number
SPECIMEN
- --------------------------------------------------------------------------------
Effective Date
SPECIMEN
This Contract is delivered in SPECIMEN and is subject to the laws and
regulations of that state.
The variable features of the Group Contract are described in sections 6 and 12.
Right to Cancel
- --------------------------------------------------------------------------------
The Group Contract Holder may cancel this Contract within ten (10) days of
receiving it by returning it to Us at the address above or to the person from
whom it was purchased. Within seven (7) days of the cancellation request, We
will return the Certificate Holder's Purchase Payment(s) made plus any increase,
or minus any decrease, on the amount allocated to the Separate Account.
Signed at the home office on the Effective Date.
/s/ Dan Kearney /s/ Susan E. Schechter
President Secretary
<PAGE>
ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT, WHEN BASED ON INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT. THIS CONTRACT CONTAINS A MARKET VALUE ADJUSTMENT FORMULA.
APPLICATION OF A MARKET VALUE ADJUSTMENT MAY RESULT IN EITHER AN INCREASE OR
DECREASE IN THE CURRENT VALUE. THE MARKET VALUE ADJUSTMENT FORMULA DOES NOT
APPLY TO A GUARANTEED TERM AT THE TIME OF ITS MATURITY.
2
<PAGE>
Table of Contents
Page
Right to Cancel............................................................1
Contract Schedule..........................................................5
Separate Account......................................................5
ALIAC Guaranteed Account (AG Account).................................5
Separate Account and AG Account.......................................5
Fixed Annuity.........................................................6
Section 1. Definitions....................................................7
Section 2. General Provisions.............................................9
The Contract..........................................................9
Certificates..........................................................9
Nonparticipating Contract.............................................9
Misstatements and Adjustments.........................................9
Reports...............................................................9
Premium Taxes.........................................................9
Protection of Proceeds................................................9
Evidence of Survival..................................................9
Proof of Age..........................................................9
Change of Contract....................................................9
Section 3. Ownership.....................................................10
Group Contract Holder................................................10
Certificate Holder Rights............................................10
Transfer of Ownership................................................10
Section 4. Beneficiary Provisions........................................11
Beneficiary..........................................................11
Change of Beneficiary................................................11
Death of Beneficiary.................................................11
Section 5. Purchase Payments.............................................11
Purchase Payments....................................................11
Allocation of Purchase Payments......................................11
Section 6. Separate Account..............................................12
General..............................................................12
Investment Allocations to the Separate Account.......................12
Valuation of Assets..................................................12
Accumulation Unit....................................................12
Net Return Factor for Each Valuation Period..........................12
Administrative Charge................................................13
Mortality Risk Charge................................................13
Expense Risk Charge..................................................13
Mortality and Expense Guarantee......................................13
3
<PAGE>
Section 7. AG Account....................................................13
AG Account Guaranteed Interest Rate..................................13
Deposit Period.......................................................13
Guaranteed Term......................................................13
Guaranteed Term(s) Groups............................................13
Maturity Date........................................................13
Allocation of Net Purchase Payments to the AG Guaranteed Account.....14
AG Account Guaranteed Term Maturity Date and Maturity Value..........14
Withdrawals from the AG Account......................................14
Reinvestment.........................................................15
AG Account Market Value Adjustment (Factor)..........................15
Section 8. Certificate Holder's Account Value; Transfers and Withdrawals
During the Accumulation Period.......................................16
Certificate Holder's Account Value...................................16
Transfers During the Accumulation Period.............................16
Withdrawals During the Accumulation Period...........................16
Deferred Sales Charge................................................17
Waiver of Deferred Sales Charge......................................17
Payment of Adjusted Certificate Holder Account Value.................17
Systematic Withdrawal Option (SWO)...................................17
Section 9. Maintenance Charge............................................18
Maintenance Charge...................................................18
Section 10. Proceeds Payable on Death....................................18
Death of the Certificate Holder Prior to the Annuity Date............19
Death Benefit Amount Prior to the Annuity Date.......................19
Death Benefit Payment Methods........................................20
Death of Certificate Holder On or After the Annuity Date.............21
Death of the Annuitant...............................................21
Section 11. Delay of Payments............................................21
Delay of Payments....................................................21
Section 12. Annuity Provisions...........................................22
Designation of Annuitant.............................................22
Terms of Annuity Options.............................................22
Annuity Unit.........................................................23
Annuity Unit Value...................................................23
Annuity Net Return Factor............................................24
Annuity Options......................................................24
4
<PAGE>
Contract Schedule
<TABLE>
Separate Account
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Separate Account: Variable Account B
Charges to the Separate Account: A daily charge is deducted from the assets of the Separate Account. The deduction is
the daily equivalent of the annual effective percentage shown below:
(a) During the Accumulation Period:
Administrative Charge 0.15%
Mortality Risk Charge 0.35%
Expense Risk Charge 0.90%
TOTAL Separate Account Charges During
Accumulation Period 1.40%
(b) During the Annuity Period
Administrative Charge Not To Exceed 0.25%
Mortality Risk Charge 0.35%
Expense Risk Charge 0.90%
TOTAL Maximum Separate Account Charges
During Annuity Period 1.50%
ALIAC Guaranteed Account (AG Guaranteed Account)
- -----------------------------------------------------------------------------------------------------------------------------------
Minimum Guaranteed Interest Rate 3.0%
(effective annual rate of return):
Separate Account and AG Account
- -----------------------------------------------------------------------------------------------------------------------------------
Minimum Initial Purchase Payment: $1,500
Minimum Subsequent Purchase Payment: $500 or $50 per month if paid by an automatic check plan
Maximum Subsequent Purchase Payment: $1,000,000 without home office approval
Transfers: We allow an unlimited number of transfers during the Accumulation Period. Twelve (12)
transfers in any calendar year are free. Thereafter, We reserve the right to charge a
transfer charge up to $10 for each subsequent transfer.
Maintenance Charge: The annual maintenance charge is $30. If the Certificate Holder's Account is $50,000
or more on the date the maintenance charge is to be deducted, the maintenance charge
is $0.
5
<PAGE>
Deferred Sales Charge: For each withdrawal from a Certificate Holder's Account, a deferred sales charge for
each Net Purchase Payment will be determined as follows:
Years from Receipt of Deferred
Net Purchase Payment Sales Charge
0-1 7%
1-2 6%
2-3 5%
3-4 4%
4-5 3%
5-6 2%
6-7 1%
7+ 0%
Waiver of Deferred Sales Charge: Section 8.05 provides for the following:
(c) At least 12 months after the date of the first Purchase Payment in an amount equal
to or less than 15% of the Certificate Holder's Account Value.
(d) For a full withdrawal where the Certificate Holder's Account Value does not exceed
$2,500 and no withdrawals have been taken from the Certificate Holder's Account
within the prior 12 months.
Systematic Withdrawal Option: (a) Specified Payment - Maximum Percentage: 10%
(b) Specified Period - Minimum Period: 10 years
(c) Specified Percentage - Maximum Percentage: 10%
Death Benefit Factor: 4%
Death Benefit Maximum Amount: There is no maximum death benefit amount.
Death Benefit Maximum Age: 85 years
Fund for Allocation of Excess Federated Prime Money Fund II
Guaranteed Death Benefit Value:
Latest Annuity Date: The Certificate Holder's 90th birthday.
Fixed Annuity
- -----------------------------------------------------------------------------------------------------------------------------------
Minimum Guaranteed Interest Rate 3.0%
(effective annual rate of return):
</TABLE>
6
<PAGE>
Section 1. Definitions
- --------------------------------------------------------------------------------
1.01 Accumulation Period - The period during which one or more Net
Purchase Payments applied to a Certificate Holder's Account
accumulate to provide future Annuity payments.
1.02 Accumulation Unit - A measure of the net investment results for
each variable investment option during the Accumulation Period.
The Accumulation Units for the applicable Funds are used to
calculate the portion of a Certificate Holder's Account Value
attributable to a Separate Account during the Accumulation
Period.
1.03 Adjusted Certificate Holder Account Value - The Certificate
Holder's Account Value, plus or minus any aggregate AG Account
Market Value Adjustment.
1.04 ALIAC Guaranteed Account (AG Account) - An investment option
where We guarantee specified rate(s) of interest for specified
periods of time. The AG Account is a separate account
established by Us in accordance with the provisions of the
Connecticut General Statutes Section 38a-433. Certificate
Holders do not participate in the investment gain or loss from
the assets held in the AG Account. Assets in the AG Account may
be charged with liabilities arising out of any other business We
may conduct.
1.05 Annuitant - The natural person on whose life an Annuity payment
is based.
1.06 Annuity - A series of payments We make for life, a definite
period or a combination of the two.
1.07 Annuity Date - The date on which Annuity payments commence.
1.08 Annuity Options - Annuity payment methods available during the
Annuity Period.
1.09 Annuity Period - The period of time during which Annuity
payments are made.
1.10 Annuity Unit - A measure of the net investment results for each
variable investment option during the Annuity Period. Annuity
Units are used to calculate the amount of each variable Annuity
payment.
1.11 Beneficiary - The person(s) entitled to receive any death
benefit under the Certificate Holder's Account. Upon the death
of a joint Certificate Holder, the surviving joint Certificate
Holder, if any, is treated as the Beneficiary. Any other
Beneficiary designation on record with Us at the time of death
is treated as a contingent Beneficiary.
1.12 Certificate - The document issued to a Certificate Holder to
evidence a Certificate Holder's Account established under the
group Contract.
1.13 Certificate Holder - A person who has established a Certificate
Holder's Account under a group Contract. We reserve the right to
limit ownership to natural persons. If more than one Certificate
Holder owns an Account, each Certificate Holder shall be a joint
Certificate Holder. Any joint Certificate Holder must be the
spouse of the other joint Certificate Holder. Joint Certificate
Holders have joint ownership rights and both must authorize any
exercising of those ownership rights unless otherwise allowed by
Us. If the Certificate Holder's Account is owned by a nonnatural
person, the death benefit will be paid at the death of the
Annuitant and a new Annuitant may not be named.
7
<PAGE>
1.14 Certificate Holder's Account - A record We establish for each
Certificate Holder to maintain values under a group Contract.
1.15 Certificate Holder's Account Value - The dollar value as of any
Valuation Period of all amounts accumulated in a Certificate
Holder's Account.
1.16 Contract - This agreement between the Group Contract Holder and
Us.
1.17 Dollar Cost Averaging - A program that permits the Certificate
Holder to systematically transfer amounts from any of the Funds
and the one-year guaranteed term of the AG Account to any of the
Funds. Dollar Cost Averaging is not available if the Systematic
Withdrawal Option is in effect.
1.18 Effective Date - The date a Certificate is issued to a
Certificate Holder.
1.19 Fund - One of the variable investment options which may be
selected by a Certificate Holder.
1.20 General Account - The General Account is made up of all of our
general assets other than those allocated to the separate
accounts.
1.21 Group Contract Holder - The entity to which a group Contract is
issued.
1.22 Home Office - Our headquarters, located at 151 Farmington
Avenue, Hartford, CT 06156.
1.23 Market Value Adjustment - An adjustment that may apply to a
withdrawal made from the AG Account before the end of a
guaranteed term as stated in Section 7.10.
1.24 Net Purchase Payment - The Purchase Payment less premium taxes,
if applicable.
1.25 Purchase Payment - The gross payment accepted by Us and
allocated to the Certificate Holder's Account. We reserve the
right to refuse to accept any Purchase Payment at any time for
any reason.
1.26 Separate Account - A separate account that buys and holds shares
of the Fund(s). Income, gains or losses, realized or unrealized,
are credited or charged to the Separate Account without regard
to Our other income, gains or losses. We own the assets held in
the Separate Account and are not a trustee as to such amounts.
The Separate Account generally is not guaranteed and is held at
market value. The name of the Separate Account is shown on the
Contract Schedule. The assets of the Separate Account, to the
extent of reserves and other Contract liabilities of the
Separate Account, will not be charged with Our other
liabilities.
1.27 Valuation Period - The period of time for which a Fund
determines its net asset value, usually from 4:15 p.m. Eastern
time each day the New York Stock Exchange is open until 4:15
p.m. the next such business day, or such other day that one or
more of the Funds determines its net asset value. The assets of
the Separate Account are not chargeable with the liabilities
arising out of any other business We may conduct.
1.28 Variable Annuity Contract - An Annuity Contract providing for
the accumulation of value and/or for Annuity payments which vary
in amount based on investment results.
8
<PAGE>
Section 2. General Provisions
- --------------------------------------------------------------------------------
2.01 The Contract - The entire Contract consists of this Contract and
any endorsements attached or subsequently issued.
2.02 Certificates - A Certificate is issued to each Certificate
Holder whose Purchase Payment(s) is accepted by Us. The
Certificate evidences a Certificate Holder's Account established
under the Contract. Certificates are not part of the Contract.
2.03 Nonparticipating Contract - Neither the Group Contract Holder,
Certificate Holder nor any Beneficiary have a right to share in
our earnings.
2.04 Misstatements and Adjustments - If We learn that the age of any
Annuitant or second Annuitant is misstated, the correct age will
be used to adjust payments. We reserve the right to request
reimbursement or adjust future payments for any amount overpaid.
We will pay the amount of any underpayment.
2.05 Reports - We furnish each Certificate Holder with a report
showing the Certificate Holder's Account Value at least once
each calendar year. We also furnish an annual report of the
Separate Account.
2.06 Premium Taxes - Any premium taxes paid to any governmental
entity are charged against Purchase Payments or a Certificate
Holder's Account. We may, at our sole discretion, pay premium
taxes when due and deduct that amount from the Certificate
Holder's Account at a later date. Payment at an earlier date
does not waive any right We may have to deduct amounts at a
later date.
2.07 Protection of Proceeds - To the extent permitted by law, all
payments under this Contract to a Certificate Holder or
Beneficiary shall be free from legal process and the claim of
any creditor.
2.08 Evidence of Survival - The Company may require satisfactory
evidence of the continued survival of any person(s) on whose
life Annuity payments are based.
2.09 Proof of Age - The Company may require evidence of age of any
Annuitant under Annuity Options 2 and 3 and of the designated
second Annuitant under Annuity Option 3.
2.10 Change of Contract - Only our authorized officers may change the
terms of this Contract. We will notify the Group Contract Holder
in writing at least 30 days before the effective date of any
change. Any change will not affect the amount or terms of any
Annuity which begins before the change.
We may make any change that affects the AG Account Market Value
Adjustment with at least thirty (30) days' advance written
notice to the Group Contract Holder and the Certificate Holder.
Any such change shall become effective for any new guaranteed
term and will apply to all present and future Certificate
Holders' Accounts.
9
<PAGE>
We reserve the right to change the terms of the Systematic
Withdrawal Option for future elections and discontinue the
availability of this option.
Any change to any of the following provisions under this
Contract will not apply to Certificate Holder's Accounts in
existence before the effective date of the change:
(a) Net Purchase Payment (1.24)
(b) AG Account Guaranteed Interest Rate (7.01)
(c) Net Return Factor (6.05)
(d) Certificate Holder's Account Value (1.15)
(e) Deferred Sales Charge (8.04)
(f) Annuity Unit Value (12.04)
(g) Annuity Options (12.06)
(h) Fixed Annuity Interest Rates (12.01)
(i) Transfers (8.02).
Any change that affects the Annuity Option and the tables for
the Annuity Options may be made:
(a) No earlier than twelve (12) months after the Effective
Date; and
(b) No earlier than twelve (12) months after the effective
date of any prior change.
Any Certificate Holder's Account established on or after the
effective date of any change will be subject to the change. If
the Group Contract Holder does not agree to any change under
this provision, We reserve the right to not allow any new
Certificate Holder's Accounts to be established under this
Contract. This Contract may also be changed as deemed necessary
by Us to comply with federal or state law.
Section 3. Ownership
- --------------------------------------------------------------------------------
3.01 Group Contract Holder - The Group Contract Holder has title to
the Contract. The Contract and any amounts accumulated
thereunder are not subject to the claims of the Group Contract
Holder nor any of its creditors.
3.02 Certificate Holder Rights - The Certificate Holder has all
interest and right to amounts held in his or her Certificate
Holder's Account. The Certificate Holder and any joint
Certificate Holder are named on the Specifications page. The
Certificate Holder and any joint Certificate Holder may exercise
all the rights under the Certificate Holder's Account, subject
to the rights of:
(a) Any assignee under an assignment filed at our home
office; and
(b) Any irrevocably named Beneficiary.
Upon the death of a Certificate Holder prior to the Annuity
Date, a spousal Beneficiary may elect to continue the
Certificate Holder's Account in his or her own name and retain
all ownership rights and privileges or take distribution of the
death benefit as defined in Section 10.
3.03 Transfer of Ownership - The Group Contract Holder may transfer
ownership of this Contract. A written request, dated and signed,
must be filed at our home office.
Any transfer of ownership terminates the interest of any
existing Group Contract Holder. It does not change the rights of
any Certificate Holder.
10
<PAGE>
A Certificate Holder may transfer all of his or her rights under
the Contract. We reserve the right not to accept an assignment
or transfer to a nonnatural person. A written request, dated and
signed by the Certificate Holder and any joint Certificate
Holder, must be filed at our home office. After the transfer is
recorded, it will take effect as of the date the request was
signed. Any such transfer terminates the interest of any
existing Certificate Holder. It does not change the Beneficiary,
nor transfer the Beneficiary's interest. A transfer will not
affect any payments We may make or actions We may take before
such transfer has been recorded at our home office.
Section 4. Beneficiary Provisions
- --------------------------------------------------------------------------------
4.01 Beneficiary - The Certificate Holder may name a Beneficiary and
a contingent Beneficiary. At the death of the Certificate Holder
prior to the Annuity Date, the Beneficiary(ies) named in our
records will receive a death benefit as stated in Section 10.
Upon the death of either joint Certificate Holder prior to the
Annuity Date, the surviving joint Certificate Holder, if any,
will be treated as the designated Beneficiary and any other
Beneficiary designation on record with Us at the time of death
is treated as a contingent Beneficiary. If the Certificate
Holder is a nonnatural person, the death benefit will be paid at
the death of the Annuitant.
4.02 Change of Beneficiary - The Certificate Holder may change the
Beneficiary. A written request, dated and signed by the
Certificate Holder, must be filed at our home office. If there
are joint Certificate Holders, both must sign the request. After
the change is recorded, it will take effect as of the date the
request was signed. If the request reaches our home office and
is recorded after the Certificate Holder dies, but before any
payment is made, the change is valid.
4.03 Death of Beneficiary - If all of the Beneficiaries and
contingent Beneficiaries die prior to the Certificate Holder's
death, We pay the death benefit in one sum to the Certificate
Holder's estate. If the Certificate Holder is a nonnatural
person, and all of the Beneficiaries and contingent
Beneficiaries die prior to the Annuitant's death, We will pay
the death benefit in one sum to the Certificate Holder.
Section 5. Purchase Payments
- --------------------------------------------------------------------------------
5.01 Purchase Payments - Subject to the maximum and minimum shown on
the Contract Schedule, the Certificate Holder may determine the
amount and frequency of Purchase Payments. We reserve the right
not to accept any Purchase Payment. We will declare from time to
time the acceptability of additional Purchase Payments.
5.02 Allocation of Purchase Payments - The Certificate Holder may
elect to have each Net Purchase Payment accumulate:
(a) On a variable basis invested in shares of one or more
Funds in which the Separate Account invests;
(b) For guaranteed terms offered in the current deposit
period(s) under the AG Account; or
(c) In a combination of any of the available investment
options.
Net Purchase Payments must be allocated in whole percentages.
For subsequent Purchase Payments, if no allocation instructions
are received with the Purchase Payment, the allocation will be
as indicated in the most recent directive from the Certificate
Holder. If the same guaranteed term(s) are not available, the
next shortest will be used. If no shorter guaranteed term is
available, the next longer guaranteed term will be used.
11
<PAGE>
Section 6. Separate Account
- --------------------------------------------------------------------------------
6.01 General - The assets of the Separate Account, equal to the
reserves and other Contract liabilities that depend on the
investment performance of the Separate Account are not
chargeable with liabilities arising out of any other business We
may conduct. Income, gains or losses of the Separate Account,
realized or unrealized, are credited to or charged against the
assets of the Separate Account without regard to Our other
income, gains or losses.
6.02 Investment Allocations to the Separate Account - The assets of
the Separate Account are segregated by Fund. If the shares of
any Fund are no longer available for investment by the Separate
Account or if in our judgment, further investment in such shares
should become inappropriate in view of the purpose of the
Contract, We may cease to make such Fund shares available for
investment under the Contract prospectively, or We may
substitute shares of another Fund for shares already acquired.
We may also, from time to time, add additional Funds. Any
elimination, substitution or addition of Funds will be done in
accordance with applicable state and federal securities laws. We
reserve the right to substitute shares of another Fund for
shares already acquired without a proxy vote.
6.03 Valuation of Assets - The shares of the Funds will be valued at
their net asset value at the end of each Valuation Period.
6.04 Accumulation Unit - A Net Purchase Payment that is allocated to
one or more Funds is credited to the Certificate Holder's
Account as Accumulation Units. The number of Accumulation Units
credited is determined by dividing the applicable portion of the
Net Purchase Payment by the Accumulation Unit value for the
appropriate Fund. The Accumulation Unit value used is that which
is computed for the next Valuation Period after which the
Purchase Payment is received at our home office. Accumulation
Units attributable to the initial Purchase Payments will be
credited within two business days of acceptance.
Accumulation Unit values may increase or decrease from Valuation
Period to Valuation Period.
6.05 Net Return Factor for Each Valuation Period - The value of an
Accumulation Unit for any Valuation Period is calculated by
multiplying the Accumulation Unit value for the immediately
preceding Valuation Period by the net return factor of the
appropriate Fund for the current period.
The net return factor for each Fund is equal to 1.0000000 plus
the net return rate.
The net return rate equals:
(a) The value of the shares of the Fund held by the
Separate Account at the end of a Valuation Period;
minus
(b) The value of the shares of the Fund held by the
Separate Account at the start of the Valuation Period;
plus or minus
(c) Taxes (or reserves for taxes) on the Separate Account
(if any); divided by
(d) The total value of the Funds(s) Accumulation Units and
Fund(s) Annuity Units of the Separate Account at the
start of the Valuation Period; minus
(e) A daily actuarial charge as shown on the Contract
Schedule for Annuity mortality and expense risks and
profit and a daily administrative charge.
12
<PAGE>
The net return rate may be more or less than zero (0) percent.
The value of a share of the Fund is equal to the net assets of
the Fund divided by the number of shares outstanding.
6.06 Administrative Charge - We deduct an administrative charge
equal, on an annual basis, to the amount shown on the Contract
Schedule.
6.07 Mortality Risk Charge - We deduct a mortality risk charge equal,
on an annual basis, to the amount shown on the Contract
Schedule.
6.08 Expense Risk Charge - We deduct an expense risk charge equal, on
an annual basis, to the amount shown on the Contract Schedule.
6.09 Mortality and Expense Guarantee - We guarantee that the dollar
amount of each Annuity payment after the first will not be
affected by variations in mortality or expense experience.
Section 7. AG Account
- --------------------------------------------------------------------------------
7.01 AG Account Guaranteed Interest Rate - All amounts allocated to
the AG Account earn a rate of interest that is guaranteed for a
specified period of time. The rate will be credited daily and
will never be less than the minimum guaranteed interest rate
shown on the Contract Schedule. We determine the rate and it is
not based on investment experience.
For guaranteed terms of one year or less, one guaranteed
interest rate is credited for the full guaranteed term. For
longer guaranteed terms, an initial guaranteed interest rate is
credited from the date of deposit to the end of a specified
period within the guaranteed term. There may be different
guaranteed interest rate(s) declared for subsequent specified
time intervals throughout the guaranteed term.
7.02 Deposit Period - A calendar week, a calendar month, a calendar
quarter, or any other period of time We specify during which Net
Purchase Payment(s), transfers and reinvestments are accepted
into the AG Account for one or more guaranteed terms. We reserve
the right to extend the deposit period.
7.03 Guaranteed Term - The period of time for which AG Account
guaranteed interest rates are guaranteed on Net Purchase
Payments. Transfers and reinvestments are made into a current
deposit period for the AG Account. Such period begins on the day
following the close of the deposit period and ends on the
designated Maturity Date. Guaranteed terms, if any, are offered
at our discretion for various lengths of time ranging up to and
including ten years.
During a deposit period, We may make available any number of
guaranteed terms. The Certificate Holder may allocate Net
Purchase Payments and transfers into any or all of the available
guaranteed terms.
7.04 Guaranteed Term(s) Groups - All AG Account guaranteed term(s)
with the same length of time from the close of the deposit
period until the designated Maturity Date.
7.05 Maturity Date - The last day of a guaranteed term.
13
<PAGE>
7.06 Allocation of Net Purchase Payments to the AG Account - When the
Certificate Holder wishes to allocate all or any portion of a
Net Purchase Payment to the Guaranteed Account, he or she must
tell Us the percentage to apply to one or more of the AG Account
guaranteed term(s) available during the current deposit period.
If no allocation instructions are received, a Net Purchase
Payment is allocated as indicated in the most recent directive
from the Certificate Holder. If the same guaranteed term is not
available for any amount allocated to the AG Account, We will
allocate the amount to the next shortest guaranteed term
available. If no shorter guaranteed term is available, We will
allocate it to the next longest guaranteed term.
7.07 AG Account Guaranteed Term Maturity Date and Maturity Value - On
the maturity date, the value of the total of all amounts
allocated to that guaranteed term is called the maturity value.
When Certificate Holders have assets in the AG Account, at least
eighteen (18) days before a maturity date, We notify them of
the:
(a) Projected maturity value; and
(b) Guaranteed terms and the applicable guaranteed interest
rates available during the current deposit period.
When no allocation instructions are received and the assets in a
guaranteed term have been reinvested by Us in another guaranteed
term on the maturity date, the Certificate Holder may transfer
or withdraw, during the month following the maturity date, the
reinvested amount with interest earned (as of the date the
request is received at our home office) without incurring a
Market Value Adjustment. This transaction is allowed only once
for each maturity date, regardless of whether the transfer or
withdrawal is partial or full.
7.08 Withdrawals and Transfers from the AG Account - When the
Certificate Holder requests a withdrawal or transfer from the AG
Account, if instructions are not provided by the Certificate
Holder, amounts are withdrawn on a pro rata basis from the
guaranteed term(s) groups in which the Certificate Holder's
Account is currently invested. Within a guaranteed term group,
the amount to be withdrawn will be withdrawn first from the
oldest deposit period. Withdrawals or transfers from an AG
Account guaranteed term before the maturity date are subject to
a Market Value Adjustment, except for:
(a) A one month period following the maturity date
described in 7.07;
(b) Transfers under the Dollar Cost Averaging program; and
(c) Withdrawals under the Systematic Withdrawal Option
described in Section 8.07.
Only a positive Market Value Adjustment will apply to amounts
transferred from the AG Account when the Certificate Holder
elects Annuity Option 2 or 3.
14
<PAGE>
7.09 Reinvestment - We will mail a notice to the Certificate Holder
before a guaranteed term's maturity date. This notice will
contain the guaranteed terms available during the current
deposit periods with their guaranteed interest rate(s) and
projected maturity value. If no specific direction is given by
the Certificate Holder prior to the maturity date, each maturity
value will be reinvested in the current deposit period for a
guaranteed term of the same duration. If a guaranteed term of
the same duration is unavailable, each matured term value will
automatically be reinvested in the current deposit period for
the next shortest guaranteed term available. If no shorter
guaranteed term is available, the next longer guaranteed term
will be used. We will mail a confirmation statement to the
Certificate Holder after the maturity date. This notice will
state the guaranteed term and guaranteed interest rate(s) which
will apply to the reinvested matured term value.
7.10 AG Account Market Value Adjustment (Factor) - The Market Value
Adjustment factor (MVA factor) reflects any change in interest
rates from the time assets are allocated to the AG Account to
the time they are transferred or withdrawn. Except as noted in
Section 7.09, 10.02 and 12.01, an MVA factor is applied to any
amount withdrawn or transferred from the AG Account before the
end of a guaranteed term.
The amount withdrawn from the AG Account is multiplied by the
MVA factor which is calculated as follows:
x
---
365
(1 + i)
------------
x
---
365
(i + j)
Where:
i is the Deposit Period Yield
j is the Current Yield
x is the number of days remaining, (computed from
Wednesday of the week of withdrawal) in the
guaranteed Term.
Determination of MVA factor parameters:
A yield is computed at the close of the last business day of
each week of the deposit period. The yield will equal the
average of the yields on U.S. Treasury Notes which matured
during the last three months of the applicable guaranteed term.
The deposit period yield is the average of those yields for the
deposit period. If withdrawal is made prior to the close of the
deposit period, it is the average of those yields on each week
preceding withdrawal.
The current yield is the average of the yields on the last
business day of the week preceding withdrawal on the same U.S.
Treasury Notes included in the deposit period yield.
15
<PAGE>
If no U.S. Treasury Notes matured during the last three months
of the guaranteed term, We reserve the right to use the average
of the yields on U.S. Treasury Notes that mature during a
following quarter.
Section 8. Certificate Holder's Account Value; Transfers and Withdrawals During
the Accumulation Period
- --------------------------------------------------------------------------------
8.01 Certificate Holder's Account Value - The value of a Certificate
Holder's Account is determined by adding the value of the total
of Accumulation Units attributed to the selected Fund(s) to the
value of any amounts attributed to the AG Account.
8.02 Transfers During the Accumulation Period - Before the Annuity
Date, the Certificate Holder may transfer from any Fund or
guaranteed term of the AG Account to:
(a) Any other Fund; or
(b) Any guaranteed term of the AG Account available in the
current deposit period.
Transfer requests can be submitted as a percentage or as a
dollar amount. We may establish a minimum transfer amount.
Within a guaranteed term group, the amount transferred is
withdrawn first from the oldest deposit period, then from the
next oldest, and so on until the amount requested is satisfied.
The Certificate Holder may make an unlimited number of transfers
during the Accumulation Period. The number of free transfers
allowed is shown on the Contract Schedule. Transfers in excess
of that number may be subject to the transfer charge shown on
the Contract Schedule. Transfers under the Dollar Cost Averaging
program do not count toward the annual limit. Transfers of a
matured term value from the AG Account on or within one calendar
month after a guaranteed term's maturity date do not count
against the annual transfer limit.
Amounts applied to guaranteed terms of the AG Account may not be
transferred to the Funds or to another guaranteed term during
the deposit period or for 90 days after the close of the deposit
period except for (1) matured term value(s) during the calendar
month following the guaranteed term's maturity date; (2) amounts
applied to an annuity option; (3) transfers from the one-year
guaranteed term under the Dollar Cost Averaging program; and (4)
amounts distributed under the Systematic Withdrawal Option.
Except as noted in Section 7.09, 10.02 and 12.01, transfers from
guaranteed terms of the AG Account before the Maturity Date are
subject to a Market Value Adjustment.
8.03 Withdrawals During the Accumulation Period - The Certificate
Holder may withdraw all or a portion of the Certificate Holder's
Account Value during the Accumulation Period by properly
completing a withdrawal request form. Withdrawal requests can be
submitted as a percentage or as a specific dollar amount. Net
Purchase Payment amounts are withdrawn first, and then the
excess value, if any. For any partial withdrawal, if
instructions are not provided by the Certificate Holder, amounts
are withdrawn on a pro rata basis from the Fund(s), and/or the
guaranteed term(s) groups in which the Certificate Holder's
Account is currently invested. Within a guaranteed term group,
the amount to be withdrawn will be withdrawn first from the
oldest deposit period, then from the next oldest, and so on
until the amount requested is satisfied.
16
<PAGE>
After deduction of the maintenance charge, if applicable, the
withdrawn amount shall be reduced by the applicable deferred
sales charge and any applicable premium taxes.
8.04 Deferred Sales Charge - The deferred sales charge only applies
to the portion of the amount withdrawn attributable to Net
Purchase Payment(s) and varies according to the elapsed time
since receipt of the Purchase Payment. The deferred sales charge
is shown on the Contract Schedule.
8.05 Waiver of Deferred Sales Charge - No deferred sales charge is
deducted when a Certificate Holder's Account Value is paid:
(a) To a Beneficiary as a death benefit, except for Purchase
Payments made by a surviving joint Certificate Holder as
described in Section 10.02(b);
(b) As a premium for an Annuity Option;
(c) At least the number of months, as shown on the Contract
Schedule, after the date of the first Purchase Payment
and in an amount equal to or less than the percentage of
the Certificate Holder's Account Value as shown on the
Contract Schedule. This applies to the first withdrawal
request, partial or full, in a calendar year. The
Certificate Holder's Account Value is calculated as of
the date the withdrawal request is received in good order
at our home office. This waiver is not available to the
Certificate Holder while a SWO is in effect;
(d) For a full withdrawal where the Certificate Holder's
Account Value does not exceed the amount shown on the
Contract Schedule and no withdrawals have been taken from
the Certificate Holder's Account within the prior 12
months;
(e) For a distribution made by Us under Section 8.06; or
(f) For a distribution which is part of a SWO under Section
8.07.
We reserve the right to allow the proceeds of a total withdrawal
to be reinstated under the terms and conditions as established
by Us from time to time.
8.06 Payment of Adjusted Certificate Holder Account Value - Upon 90
day's written notice to the Certificate Holder, We will
terminate any Certificate Holder's Account if the Certificate
Holder's Account Value becomes less than $1,500 immediately
following any partial withdrawal. We do not intend to exercise
this right in cases where the Certificate Holder's Account Value
is reduced to $1,500 or less solely due to investment
performance. When We make a distribution pursuant to this
provision, the deferred sales charge will not be deducted.
8.07 Systematic Withdrawal Option (SWO) - We will allow the
Certificate Holder to establish a schedule of withdrawals to be
made automatically from the Certificate Holder's Account Value.
All distributed amounts will be withdrawn on a pro rata basis
from the Fund(s) and/or the guaranteed term(s) groups of the AG
Account in which the Certificate Holder's Account is invested.
The Certificate Holder must elect one of the following SWO
methods:
17
<PAGE>
(a) Specified Payment: Payments of a designated dollar
amount. The annual amount may not be greater than the
percentage of the Certificate Holder's Account Value at
time of the election as shown on the Contract Schedule.
This annual dollar amount will remain constant. At our
discretion, We may require a minimum payment amount; or
(b) Specified Period: Payments which are made over a period
of time which must be at least the minimum period as
shown on the Contract Schedule. The annual amount paid
each year is calculated by dividing the Certificate
Holder's Account Value as of December 31 of the prior
year by the number of payment years remaining; or
(c) Specified Percentage: Payment of a designated percentage
which cannot be greater than the percentage of the
Certificate Holder's Account Value at the time of
election as shown on the Contract Schedule. The
percentage may be changed by written request. We reserve
the right to limit the number of times the percentage may
be changed. The annual amount is calculated by
multiplying the Certificate Holder's Account Value as of
December 31 of the year prior to the payment by the
designated percentage.
SWO payments will cease at the Certificate Holder's death (or if
the Certificate Holder is a nonnatural person, at the death of
the Annuitant). A beneficiary may elect to continue SWO as
provided in Section 10.01.
In our discretion, We may require a minimum initial Certificate
Holder's Account Value for election of this option. SWO may be
elected by submitting a completed and signed election form to
Us. Once elected, this option may be revoked by submitting a
written request to Us. SWO may be elected only once by the
Certificate Holder or by a spousal Beneficiary.
Certificate Holders should consult their tax adviser prior to
requesting this distribution option. We are not responsible for
any adverse tax consequences due to a Certificate Holder's
receiving SWO payments. A ten (10) percent penalty tax may apply
to distributions to a Certificate Holder who has not reached age
59-1/2. Upon death of the Certificate Holder, any payments will
be made under the terms of Section 10.
Dollar Cost Averaging is not available to Certificate Holders
who have elected SWO.
Section 9. Maintenance Charge
- --------------------------------------------------------------------------------
9.01 Maintenance Charge - We will deduct an annual maintenance charge
as shown in the Contract Schedule from the Certificate Holder's
Account during the Accumulation Period. We will deduct the
maintenance charge on the anniversary of the Effective Date of
the Certificate for the Certificate Holder's Account. This
maintenance charge is also deducted upon withdrawal of the
entire Adjusted Certificate Holder's Account. The maintenance
charge is deducted proportionately from each investment option
used.
Section 10. Proceeds Payable on Death
- --------------------------------------------------------------------------------
18
<PAGE>
10.01 Death of the Certificate Holder Prior to the Annuity Date - In
the event of the death of the Certificate Holder or a joint
Certificate Holder prior to the Annuity Date, a death benefit is
payable to the Beneficiary(ies) designated by the Certificate
Holder. Upon the death of a joint Certificate Holder, the
surviving joint Certificate Holder, if any, will be treated as
the designated Beneficiary. Any other Beneficiary designation on
record with Us at the time of death will be treated as a
contingent Beneficiary. If the Certificate Holder is a
nonnatural person, the death benefit will be payable to the
Beneficiary(ies) at the death of the Annuitant.
A Beneficiary may request We pay the death benefit under one of
the methods described in Section 10.03. If the Beneficiary is
the spouse of the Certificate Holder, or the spouse of the
Annuitant if the Certificate Holder is a nonnatural person, he
or she may elect to continue the Certificate Holder's Account in
his or her own name and exercise all the Certificate Holder's
rights under the Contract.
10.02 Death Benefit Amount Prior to the Annuity Date -
(a) Except as set forth below, the amount of the guaranteed
death benefit value is equal to the greater of:
(i) The Certificate Holder's Account Value at the end
of the Valuation Period during which We receive at
our home office due proof of death and election of
the type of payment to be made; or
(ii) The death benefit determined as of the Valuation
Period corresponding to the date of death.
Until the first Effective Date anniversary, the
death benefit is equal to the Purchase Payments
made by the Certificate Holder prior to the
Effective Date anniversary less any withdrawals
and any amounts applied to an Annuity Option.
For each Certificate year thereafter, the death
benefit during the Certificate year equals the
death benefit at the beginning of the Certificate
year plus Purchase Payments made during the year
less any withdrawals and any amounts applied to an
Annuity Option.
On each Effective Date anniversary, the death
benefit is determined as follows:
(A) The death benefit on the previous Effective
Date anniversary increased by the death
benefit factor shown on the Contract
Schedule; plus
(B) Purchase Payments made by the Certificate
Holder during the Certificate year increased
by the death benefit factor shown on the
Contract Schedule for the portion of the
year since the Purchase Payment was made;
less
(C) Any withdrawals or amounts applied to an
Annuity Option during the Certificate year
increased by the death benefit factor shown
on the Contract Schedule for the portion of
the Certificate year since the withdrawal or
election of Annuity option; or
19
<PAGE>
(iii) The Certificate Holder's Account Value on the most
recent seventh year anniversary of the Effective
Date plus any Purchase Payments made after such
Effective Date anniversary less any withdrawals
and any amounts applied to an Annuity Option.
Notwithstanding the foregoing, the death benefit under
(ii) or (iii) will not exceed the death benefit maximum
amount shown on the Contract Schedule.
The death benefit calculation described in (ii) and (iii)
above, applies until the Certificate Holder reaches the
death benefit maximum age shown on the Contract Schedule.
If the Certificate Holder is a nonnatural person, death
provisions will be based on the age of the Annuitant.
Thereafter, the death benefit is only adjusted for
Purchase Payments, withdrawals and amounts applied to
Annuity Options. If the Certificate Holder reaches the
death benefit maximum age shown on the Contract Schedule
prior to the seventh anniversary of the Effective Date,
the death benefit will be the greater of (i) or (ii)
above.
The excess, if any, of the guaranteed death benefit value
over the Certificate Holder's Account Value is determined
when we receive at our home office due proof of death and
allocated to the Fund shown on the Contract Schedule. The
Certificate Holder's Account Value plus any excess amount
deposited becomes the Certificate Holder's Account Value.
(b) In the case of a spousal Beneficiary who continued the
Certificate Holder's Account in his or her own name, the
death benefit shall be equal to the Adjusted Current
Value less any applicable deferred sales charge on any
Purchase Payment made after We have received at our home
office due proof of death of the joint Certificate Holder
(or Annuitant, if applicable).
When the Beneficiary withdraws or transfers all or any portion
of the death benefit in the AG Account within six months after
the date of death, the amount withdrawn or transferred from the
AG Account will be the greater of:
(1) The aggregate Market Value Adjustment amount (the amount
resulting from the application of relevant Market Value
Adjustment factors); or
(2) The applicable portion of Certificate Holder's Account
Value in the AG Account.
After the six-month period, when the Beneficiary withdraws or
transfers all or any portion of the death benefit in the AG
Account, the amount will be equal to the aggregate Market Value
Adjustment amount. Only a positive market value adjustment will
apply, however, to amounts transferred from the AG Account when
the Beneficiary elects Annuity Option 2 or 3.
At the death of a spousal Beneficiary who continued the
Certificate Holder's Account in his or her own name, when the
Beneficiary withdraws or transfers all or any portion of the
death benefit in the AG Account, the amount will be equal to the
Aggregate Market Value Adjustment amount.
10.03 Death Benefit Payment Methods - A non-spousal Beneficiary must
elect the death benefit to be paid under one of the following
methods in the event of the death of the Certificate Holder
prior to the Annuity Date:
20
<PAGE>
Method 1 - Lump sum payment of the death benefit; or
Method 2 - The payment of the entire death benefit within five
years of the date of the Certificate Holder's death; or
Method 3 - Payment of the death benefit over the lifetime of the
designated Beneficiary or over a period not extending beyond the
life expectancy of the designated Beneficiary with distribution
beginning within one year of the date of death of the
Certificate Holder.
Any portion of the death benefit not applied under Method 3
within one year of the date of Certificate Holder's death, or
the death of the Annuitant if the Certificate Holder is a
nonnatural person, must be distributed within five years of the
date of death.
A spousal Beneficiary may elect to continue the Certificate
Holder's Account in his or her name, elect a lump sum payment of
the death benefit, or apply the Adjusted Certificate Holder's
Account Value to an Annuity Option.
10.04 Death of Certificate Holder On or After the Annuity Date - If
the Certificate Holder who is not the Annuitant, dies on or
after the Annuity Date, the remaining payments under the Annuity
Option elected will be made to the Beneficiary at least as
rapidly as under the method of distribution in effect at the
Certificate Holder's death.
10.05 Death of the Annuitant - If the Annuitant, who is not a
Certificate Holder, dies on or before the Annuity Date, a new
Annuitant may be named. If no Annuitant is named, the
Certificate Holder will be the Annuitant. If the Certificate
Holder is a nonnatural person, the death benefit will be paid at
the death of the Annuitant and no new Annuitant may be named. If
the Annuitant dies after the Annuity Date, the death benefit, if
any, will be payable to the Beneficiary as specified in the
Annuity Option elected. We will require proof of the Annuitant's
death. Death benefits will be paid at least as rapidly as under
the method of distribution in effect at the Annuitant's death.
Section 11. Delay of Payments
- --------------------------------------------------------------------------------
11.01 Delay of Payments - We will make any payments under this
Contract within seven days after a request is received in good
order. We reserve the right to suspend or postpone any type of
payment from the Separate Account for any period when:
(a) The New York Stock Exchange is closed for other than
customary weekend and holiday closings;
(b) Trading on the Exchange is restricted;
(c) An emergency exists as a result of which it is not
reasonably practicable to dispose of securities held in
the Separate Account or determine their value; or
(d) The Securities and Exchange Commission so permits delay
for the protection of security holders.
The applicable rules of the Securities and Exchange Commission
will govern as to whether the conditions in (b) or (c) exist.
We also reserve the right to delay any type of payment from the
AG Account for up to six months.
21
<PAGE>
Section 12. Annuity Provisions
- --------------------------------------------------------------------------------
12.01 Designation of Annuitant - The Certificate Holder and the
Annuitant need not be the same person. The Certificate Holder
names the Annuitant and during the Accumulation Period, may
change the designated Annuitant. We change the Annuitant when We
receive a written request in good order at our home office. We
will not change the Annuitant when Annuity payments have
commenced.
The Certificate Holder elects an Annuity Option by telling Us to
use all or any portion of the Certificate Holder's Account Value
(minus any applicable premium taxes if not previously deducted)
to purchase Annuity payments under an Annuity Option. If the
Certificate Holder elects Annuity Option 1, the amount applied
to purchase Annuity payments will be equal to the Adjusted
Certificate Holder's Account Value. If the Certificate Holder
elects Annuity Option 2 or 3, the amount applied to purchase
Annuity payments will be the greater of:
(1) The Adjusted Certificate Holder's Account Value; or
(2) The Certificate Holder's Account Value.
When an Annuity Option is chosen the Certificate Holder must
designate a:
(a) Fixed Annuity using the General Account;
(b) Variable Annuity using any of the Funds available during
the Annuity Period; or
(c) Combination of (a) and (b).
If a fixed Annuity is chosen, We will calculate the amount using
an interest assumption no less than the percentage specified on
the Contract Schedule. We may calculate the amount using a
higher interest rate.
If a variable Annuity is chosen, an Assumed Annual Net Return
Rate of 5% may be chosen. If not chosen, We will use an Assumed
Annual Net Return Rate of 3.5%.
Payments are made on a monthly basis to the Certificate Holder
unless the Certificate Holder requests a different mode of
payment.
Once elected, an Annuity Option may not be revoked, except for
Option 1 when elected on a variable basis.
12.02 Terms of Annuity Options - The minimum first payment amount must
be at least $50 per month and at least $250 per year.
If the Certificate Holder elects a fixed Annuity and We
determine that the Certificate Holder would receive larger
payments by applying the Certificate Holder's Account Value,
reduced by the deferred sales charge, to a single premium
immediate Annuity currently offered by Us, We will make the
larger payments.
We determine the first payment of a variable Annuity, or the
payment amount of a fixed Annuity, using the Annuitant's (and
second Annuitant's if applicable) adjusted age which We
calculate as follows:
22
<PAGE>
(a) If Annuity payments begin any time between July 1, 1992
and December 31, 1999, the adjusted age is the
Annuitant's age as of the birthday closest in time to the
Annuity Date reduced by one (1) year.
(b) If the Annuity begins any time between January 1, 2000
and December 31, 2009, the adjusted age is the
Annuitant's age as of the birthday closest in time to the
Annuity Date reduced by two (2) years.
(c) For each succeeding decade, the adjusted age is the
Annuitant's age as determined in (b), reduced by one
additional year.
The Annuity rates for Options 2 and 3 are based on mortality
from 1983 Table A.
Assumed Annual Net Return Rate is the interest rate used to
determine the amount of the first Annuity payment under a
variable Annuity. The Separate Account must earn this rate plus
enough to cover the mortality and expense risks charges (which
may include profit) and administrative charges if future
variable Annuity payments are to remain level.
The Certificate Holder must give written notice to Us at least
30 days before the Annuity payments begin, electing or changing:
(a) The date on which Annuity payments are to begin;
(b) The Annuity Option;
(c) Whether the payments are to be made monthly, quarterly,
semiannually or annually;
(d) The investment options used to provide Annuity payments.
The first Annuity payment may not be earlier than one (1)
calendar year after the initial Purchase Payment, nor later than
the later of the:
(a) First day of the month following the Annuitant's birthday
shown on the Contract Schedule; or
(b) Tenth anniversary of the last Purchase Payment. In lieu
of the election of an Annuity, the Certificate Holder may
request a lump sum payment.
12.03 Annuity Unit - The number of Annuity Units per Fund is based on
the amount of the first variable Annuity payment which is equal
to:
(a) The portion of the Certificate Holder's Account Value
(minus any premium taxes) applied to pay a variable
Annuity; divided by,
(b) 1000; multiplied by,
(c) The payment rate for the Annuity Option chosen.
Such amount, or portion, of the variable Annuity payment will be
divided by the Annuity Unit value for the appropriate Fund on
the tenth Valuation Period before the due date of the first
payment to determine the number of each Fund's Annuity Units.
The number of each Fund's Annuity Unit remains fixed. Each
future payment is equal to the sum of the products of each
Fund's Annuity Unit value multiplied by the appropriate number
of units. The Fund's Annuity Unit value on the tenth Valuation
Period prior to the due date of the payment is used.
12.04 Annuity Unit Value - For any Valuation Period, a Fund's Annuity
Unit value is equal to:
23
<PAGE>
(a) The value for the previous Valuation Period; multiplied
by,
(b) The Annuity Net Return Factor for the Valuation Period;
multiplied by,
(c) A daily factor to reflect the Assumed Annual Net Return
Rate (the factor for 3.5% per year is .9999058; for 5%
per year it is .9998663).
The dollar value of a Fund(s) Annuity Unit values and payments
may go up or down due to investment gain or loss.
12.05 Annuity Net Return Factor - The Annuity net return factor is
used to compute all Separate Account Annuity payments for any
Fund.
The Annuity net return factor(s) for each Fund is equal to
1.0000000 plus the net return rate. The net return rate is equal
to:
(a) The value of the shares of the Fund held by the Separate
Account at the end of a Valuation Period; minus,
(b) The value of the shares of the Fund held by the Separate
Account at the start of the Valuation Period; plus or
minus,
(c) Taxes (or reserves for taxes) on the Separate Account (if
any); divided by
(d) The total value of the Fund(s) Accumulation Units and
Fund(s) Annuity Units of the Separate Account at the
start of the Valuation Period; minus,
(e) A daily actuarial charge as shown of the Contract
Schedule for Annuity mortality and expense risks and
profit and a daily administrative charge which will not
exceed the administrative charge as shown on the Contract
Schedule.
The net return rate may be more or less than zero (0) percent.
The value of a share of the Fund is equal to the net assets of
the Fund divided by the number of shares outstanding.
12.06 Annuity Options
Option 1 - Payments for a Stated Period of Time - An Annuity
will be paid for the number of years chosen. The number of years
must be at least 5 and not more than 30.
If payments for this Annuity Option are made under a variable
Annuity, the present value of any remaining payments may be
withdrawn at any time.
Option 2 - Life Income - An Annuity will be paid for the life of
the Annuitant. If also chosen, We will guarantee payments for
60, 120, 180, or 240 months.
Option 3 - Life Income Based upon the Lives of Two Annuitants -
An Annuity will be paid during the lives of the Annuitant and a
second Annuitant. Payments will continue until both Annuitants
have died. When this Annuity Option is chosen, a choice must be
made of:
24
<PAGE>
(a) 100% of the payment to continue after the first death;
(b) 66-2/3% of the payment to continue after the first death;
(c) 50% of the payment to continue after the first death;
(d) Payments for a minimum of 120 months with 100% of the
payment to continue after the first death; or
(e) 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.
We may make other options available as allowed by law.
25
<PAGE>
OPTION 1
Payments for a Stated Period of Time
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Guaranteed Monthly Quazrterly Semi-Annual Annual
Years Rate Payment Payment Payment Payment
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
5 3.00% 17.91 53.59 106.78 211.99
6 3.00% 15.14 45.30 90.27 179.22
7 3.00% 13.16 39.39 78.49 155.83
8 3.00% 11.68 34.96 69.66 138.31
9 3.00% 10.53 31.52 62.81 124.69
10 3.00% 9.61 28.77 57.33 113.82
11 3.00% 8.86 26.52 52.85 104.93
12 3.00% 8.24 24.65 49.13 97.54
13 3.00% 7.71 23.08 45.98 91.29
14 3.00% 7.26 21.73 43.29 85.95
15 3.00% 6.87 20.56 40.96 81.33
16 3.00% 6.53 19.54 38.93 77.29
17 3.00% 6.23 18.64 37.14 73.74
18 3.00% 5.96 17.84 35.56 70.59
19 3.00% 5.73 17.13 34.14 67.78
20 3.00% 5.51 16.50 32.87 65.26
21 3.00% 5.32 15.92 31.72 62.98
22 3.00% 5.15 15.40 30.68 60.92
23 3.00% 4.99 14.92 29.74 59.04
24 3.00% 4.84 14.49 28.88 57.33
25 3.00% 4.71 14.09 28.08 55.76
26 3.00% 4.59 13.73 27.36 54.31
27 3.00% 4.47 13.39 26.68 52.97
28 3.00% 4.37 13.08 26.06 51.74
29 3.00% 4.27 12.79 25.49 50.60
30 3.00% 4.18 12.52 24.95 49.53
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE>
OPTION 2
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
Payments Guaranteed for a Stated Period of Months
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted None 60 120 180 240
Age of -------------------------------------------------------------------------------------------------------------------
Annuitant Male Female Male Female Male Female Male Female Male Female
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $4.27 $3.90 $4.26 $3.90 $4.22 $3.89 $4.17 $3.86 $4.08 $3.82
51 4.34 3.97 4.33 3.96 4.30 3.95 4.23 3.92 4.14 3.88
52 4.43 4.03 4.41 4.03 4.37 4.01 4.30 3.98 4.20 3.93
53 4.51 4.10 4.50 4.10 4.45 4.08 4.37 4.04 4.26 3.99
54 4.60 4.18 4.59 4.17 4.54 4.15 4.45 4.11 4.32 4.04
55 4.70 4.25 4.68 4.25 4.62 4.22 4.53 4.18 4.39 4.11
56 4.80 4.34 4.78 4.33 4.72 4.30 4.61 4.25 4.45 4.17
57 4.91 4.42 4.89 4.41 4.82 4.38 4.69 4.32 4.51 4.23
58 5.03 4.52 5.00 4.51 4.92 4.47 4.78 4.40 4.58 4.30
59 5.15 4.61 5.12 4.60 5.03 4.56 4.87 4.48 4.65 4.37
60 5.28 4.72 5.25 4.70 5.14 4.66 4.96 4.57 4.71 4.44
61 5.43 4.83 5.39 4.81 5.27 4.76 5.06 4.66 4.78 4.51
62 5.58 4.95 5.53 4.93 5.39 4.87 5.16 4.75 4.84 4.58
63 5.74 5.08 5.69 5.05 5.53 4.99 5.26 4.85 4.90 4.65
64 5.91 5.21 5.85 5.18 5.66 5.10 5.36 4.95 4.96 4.72
65 6.10 5.36 6.03 5.32 5.81 5.22 5.46 5.05 5.02 4.79
66 6.30 5.51 6.21 5.47 5.96 5.36 5.56 5.16 5.08 4.86
67 6.51 5.67 6.41 5.63 6.12 5.50 5.66 5.26 5.13 4.93
68 6.73 5.85 6.62 5.80 6.28 5.65 5.77 5.37 5.18 5.00
69 6.97 6.04 6.84 5.98 6.44 5.80 5.86 5.49 5.23 5.06
70 7.23 6.25 7.07 6.18 6.61 5.97 5.96 5.60 5.27 5.12
71 7.51 6.47 7.32 6.39 6.79 6.14 6.05 5.71 5.31 5.18
72 7.80 6.71 7.58 6.62 6.96 6.32 6.14 5.83 5.34 5.23
73 8.12 6.98 7.85 6.86 7.14 6.50 6.23 5.94 5.37 5.28
74 8.46 7.26 8.14 7.12 7.32 6.69 6.31 6.04 5.40 5.32
75 8.82 7.57 8.45 7.40 7.50 6.89 6.38 6.14 5.42 5.35
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
27
<PAGE>
OPTION 3
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
(Annuitant is Male and Second Annuitant is Female)
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- ---------------------------------------
Second
Annuitant Annuitant Option 3a Option 3b Option 3c Option 3d Option 3e
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $ 3.69 $ 4.05 $ 4.27 $ 3.69 $4.13
55 55 3.88 4.25 4.47 3.87 4.25
55 60 3.06 4.47 4.71 4.06 4.36
60 55 3.99 4.44 4.71 3.98 4.55
60 60 4.24 4.71 4.99 4.23 4.70
60 65 4.49 5.01 5.32 4.48 4.85
65 60 4.38 4.97 5.32 4.38 5.10
65 65 4.72 5.33 5.70 4.71 5.32
65 70 5.07 5.75 6.17 5.05 5.54
70 65 4.93 5.68 6.15 4.91 5.86
70 70 5.40 6.21 6.70 5.36 6.18
70 75 5.89 6.82 7.40 5.81 6.49
75 70 5.69 6.68 7.32 5.62 6.92
75 75 6.37 7.45 8.15 6.23 7.40
75 80 7.07 8.34 9.16 6.78 7.85
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a. The rates
assume the Annuitant is Male and the Second Annuitant is
Female. Rates for ages not shown will be provided on
request and will be computed on a basis consistent with
the rates in the above tables.
28
<PAGE>
OPTION 3
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
(Annuitant is Female and Second Annuitant is Male)
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- ---------------------------------------
Second
Annuitant Annuitant Option 3a Option 3b Option 3c Option 3d Option 3e
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $ 3.75 $ 4.07 $ 4.26 $ 3.75 $ 3.98
55 55 3.88 4.25 4.47 3.87 4.06
55 60 3.99 4.44 4.71 3.98 4.12
60 55 4.06 4.47 4.71 4.06 4.37
60 60 4.24 4.71 4.99 4.23 4.47
60 65 4.38 4.97 5.32 4.38 4.54
65 60 4.49 5.01 5.32 4.48 4.89
65 65 4.72 5.33 5.70 4.71 5.02
65 70 4.93 5.68 6.15 4.91 5.14
70 65 5.07 5.75 6.17 5.05 5.60
70 70 5.40 6.21 6.70 5.36 5.79
70 75 5.69 6.68 7.32 5.62 5.96
75 70 5.89 6.83 7.40 5.81 6.63
75 75 6.37 7.45 8.15 6.23 6.92
75 80 6.78 8.11 8.99 6.54 7.15
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a.
The rates assume the Annuitant is Female and the Second Annuitant is Male.
Rates for ages not shown will be provided on
request and will be computed on a basis
consistent with the rates in the above tables.
29
<PAGE>
OPTION 1
Payments for a Stated Period of Time
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Years Guaranteed Rate Monthly Payment Quarterly Payment Semi-Annual Payment Annual Payment
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
5 3.50% 18.12 54.19 107.92 213.99
6 3.50% 15.35 45.92 91.44 181.32
7 3.50% 13.38 40.01 79.69 158.01
8 3.50% 11.90 35.59 70.88 140.56
9 3.50% 10.75 32.16 64.05 127.00
10 3.50% 9.83 29.42 58.59 116.18
11 3.50% 9.09 27.18 54.13 107.34
12 3.50% 8.46 25.32 50.42 99.98
13 3.50% 7.94 23.75 47.29 93.78
14 3.50% 7.49 22.40 44.62 88.47
15 3.50% 7.10 21.24 42.31 83.89
16 3.50% 6.76 20.23 40.29 79.89
17 3.50% 6.47 19.34 38.51 76.37
18 3.50% 6.20 18.55 36.94 73.25
19 3.50% 5.97 17.85 35.54 70.47
20 3.50% 5.75 17.22 34.28 67.98
21 3.50% 5.56 16.65 33.15 65.74
22 3.50% 5.39 16.13 32.13 63.70
23 3.50% 5.24 15.66 31.19 61.85
24 3.50% 5.09 15.24 30.34 60.17
25 3.50% 4.96 14.85 29.56 58.62
26 3.50% 4.84 14.49 28.85 57.20
27 3.50% 4.73 14.15 28.19 55.90
28 3.50% 4.63 13.85 27.58 54.69
29 3.50% 4.53 13.57 27.02 53.57
30 3.50% 4.45 13.30 26.49 52.53
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
OPTION 1
Payments for a Stated Period of Time
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Years Guaranteed Rate Monthly Payment Quarterly Payment Semi-Annual Payment Annual Payment
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
5 5.00% 18.74 56.00 111.33 219.98
6 5.00% 15.99 47.77 94.96 187.64
7 5.00% 14.02 41.90 83.30 164.59
8 5.00% 12.56 37.52 74.58 147.35
9 5.00% 11.42 34.11 67.81 133.99
10 5.00% 10.51 31.40 62.42 123.34
11 5.00% 9.77 29.19 58.03 114.66
12 5.00% 9.16 27.36 54.38 107.45
13 5.00% 8.64 25.81 51.31 101.39
14 5.00% 8.20 24.50 48.69 96.21
15 5.00% 7.82 23.36 46.44 91.75
16 5.00% 7.49 22.37 44.47 87.88
17 5.00% 7.20 21.51 42.75 84.48
18 5.00% 6.94 20.74 41.23 81.47
19 5.00% 6.71 20.06 39.88 78.80
20 5.00% 6.51 19.46 38.68 76.42
21 5.00% 6.33 18.91 37.59 74.28
22 5.00% 6.17 18.42 36.62 72.35
23 5.00% 6.02 17.98 35.73 70.61
24 5.00% 5.88 17.57 34.93 69.02
25 5.00% 5.76 17.20 34.20 67.57
26 5.00% 5.65 16.87 33.53 66.25
27 5.00% 5.54 16.56 32.92 65.04
28 5.00% 5.45 16.28 32.35 63.93
29 5.00% 5.36 16.01 31.83 62.90
30 5.00% 5.28 15.77 31.35 61.95
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
OPTION 2
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
Payments Guaranteed for a Stated Period of Months
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted None 60 120 180 240
Age of -------------------------------------------------------------------------------------------------------------------
Annuitant Male Female Male Female Male Female Male Female Male Female
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $ 4.56 $ 4.20 $ 4.55 $ 4.19 $ 4.51 $ 4.18 $ 4.45 $ 4.15 $ 4.36 $ 4.11
51 4.64 4.26 4.62 4.25 4.58 4.24 4.51 4.21 4.42 4.16
52 4.72 4.32 4.70 4.32 4.66 4.30 4.58 4.26 4.48 4.21
53 4.80 4.39 4.79 4.38 4.74 4.36 4.65 4.32 4.53 4.27
54 4.89 4.46 4.87 4.46 4.82 4.43 4.73 4.39 4.59 4.32
55 4.99 4.54 4.97 4.53 4.91 4.50 4.80 4.46 4.65 4.38
56 5.09 4.62 5.07 4.61 5.00 4.58 4.88 4.53 4.72 4.44
57 5.20 4.71 5.17 4.70 5.10 4.66 4.96 4.60 4.78 4.50
58 5.32 4.80 5.29 4.79 5.20 4.75 5.05 4.68 4.84 4.57
59 5.44 4.90 5.41 4.88 5.31 4.84 5.14 4.76 4.91 4.63
60 5.57 5.00 5.53 4.99 5.42 4.93 5.23 4.84 4.97 4.70
61 5.71 5.11 5.67 5.09 5.54 5.03 5.32 4.93 5.03 4.77
62 5.86 5.23 5.81 5.21 5.66 5.14 5.42 5.02 5.09 4.84
63 6.02 5.36 5.97 5.33 5.79 5.25 5.51 5.11 5.16 4.91
64 6.20 5.49 6.13 5.46 5.93 5.37 5.61 5.21 5.21 4.98
65 6.38 5.64 6.31 5.60 6.07 5.49 5.71 5.31 5.27 5.05
66 6.58 5.79 6.49 5.75 6.22 5.63 5.81 5.41 5.32 5.12
67 6.79 5.95 6.69 5.91 6.38 5.76 5.91 5.52 5.38 5.18
68 7.02 6.13 6.89 6.08 6.53 5.91 6.01 5.63 5.42 5.25
69 7.26 6.32 7.11 6.26 6.70 6.06 6.11 5.74 5.47 5.31
70 7.52 6.53 7.35 6.45 6.86 6.23 6.20 5.85 5.51 5.37
71 7.80 6.75 7.59 6.66 7.03 6.39 6.29 5.96 5.54 5.42
72 8.09 6.99 7.85 6.89 7.21 6.57 6.38 6.07 5.57 5.47
73 8.41 7.26 8.12 7.13 7.38 6.75 6.46 6.17 5.60 5.51
74 8.75 7.54 8.41 7.39 7.55 6.94 6.53 6.28 5.63 5.55
75 9.12 7.85 8.71 7.66 7.73 7.13 6.61 6.38 5.65 5.59
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
32
<PAGE>
OPTION 2
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
Payments Guaranteed for a Stated Period of Months
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted None 60 120 180 240
Age of -------------------------------------------------------------------------------------------------------------------
Annuitant Male Female Male Female Male Female Male Female Male Female
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $ 5.48 $ 5.12 $ 5.46 $ 5.11 $ 5.41 $ 5.09 $ 5.34 $ 5.06 $ 5.24 $ 5.01
51 5.55 5.17 5.53 5.17 5.48 5.14 5.40 5.11 5.29 5.05
52 5.63 5.23 5.61 5.23 5.55 5.20 5.46 5.16 5.34 5.10
53 5.71 5.30 5.69 5.29 5.62 5.26 5.53 5.22 5.40 5.15
54 5.80 5.37 5.77 5.36 5.70 5.33 5.60 5.27 5.45 5.20
55 5.89 5.44 5.86 5.43 5.79 5.39 5.67 5.34 5.51 5.25
56 5.99 5.52 5.96 5.51 5.87 5.47 5.74 5.40 5.56 5.31
57 6.10 5.60 6.06 5.59 5.97 5.54 5.82 5.47 5.62 5.37
58 6.21 5.69 6.17 5.67 6.06 5.62 5.90 5.54 5.68 5.42
59 6.33 5.79 6.29 5.77 6.17 5.71 5.98 5.61 5.74 5.48
60 6.46 5.89 6.41 5.87 6.28 5.80 6.06 5.69 5.79 5.55
61 6.60 6.00 6.55 6.97 6.39 5.90 6.15 5.77 5.85 5.61
62 6.75 6.11 6.69 6.08 6.51 6.00 6.24 5.86 5.91 5.67
63 6.91 6.23 6.84 6.20 6.64 6.10 6.33 5.95 5.96 5.73
64 7.09 6.37 7.00 6.33 6.77 6.22 6.42 6.04 6.02 5.80
65 7.27 6.51 7.18 6.46 6.91 6.34 6.52 6.13 6.07 5.86
66 7.47 6.66 7.36 6.61 7.05 6.46 6.61 6.23 6.12 5.92
67 7.68 6.82 7.55 6.76 7.20 6.60 6.70 6.33 6.16 5.99
68 7.91 7.00 7.76 6.93 7.35 6.74 6.80 6.43 6.21 6.04
69 8.15 7.19 7.98 7.11 7.51 6.89 6.89 6.54 6.25 6.10
70 8.41 7.39 8.21 7.30 7.67 7.04 6.97 6.64 6.28 6.15
71 8.69 7.62 8.45 7.51 7.83 7.21 7.06 6.74 6.32 6.20
72 8.99 7.86 8.70 7.73 8.00 7.38 7.14 6.85 6.35 6.25
73 9.31 8.12 8.97 7.97 8.16 7.55 7.21 6.95 6.37 6.29
74 9.65 8.41 9.26 8.23 8.33 7.73 7.29 7.04 6.39 6.33
75 10.02 8.72 9.55 8.50 8.50 7.92 7.35 7.14 6.41 6.36
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
33
<PAGE>
OPTION 3
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
(Annuitant is Male and Second Annuitant is Female)
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- ------------------- -------------------
Annuitant Second Annuitant Option 3a Option 3b Option 3c Option 3d Option 3e
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $ 3.97 $ 4.35 $ 4.56 $ 3.97 $ 4.42
55 55 4.16 4.54 4.76 4.15 4.54
55 60 4.34 4.76 5.00 4.34 4.64
60 65 4.27 4.73 5.00 4.26 4.83
60 60 4.51 4.99 5.27 4.50 4.98
60 65 4.76 5.29 5.60 4.75 5.13
65 60 4.66 5.25 5.61 4.65 5.39
65 65 4.99 5.61 5.99 4.98 5.60
65 70 5.34 6.03 6.46 5.31 5.81
70 65 5.19 5.97 6.44 5.17 6.14
70 70 5.67 6.49 6.99 5.62 6.47
70 75 6.16 7.10 7.68 6.07 6.77
75 70 5.95 6.96 7.61 5.87 7.20
75 75 6.64 7.73 8.43 6.48 7.68
75 80 7.33 8.62 9.45 7.02 8.13
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a.
The rates assume the Annuitant is Male and the Second Annuitant is Female.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
34
<PAGE>
OPTION 3
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
(Annuitant is Female and Second Annuitant is Male)
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- ------------------- -------------------
Annuitant Second Annuitant Option 3a Option 3b Option 3c Option 3d Option 3e
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $ 4.03 $ 4.36 $ 4.55 $ 4.03 $ 4.41
55 55 4.16 4.54 4.76 4.15 4.54
55 60 4.27 4.73 5.00 4.26 4.83
60 55 4.34 4.76 5.00 4.34 4.64
60 60 4.51 4.99 5.27 4.50 4.98
60 65 4.66 5.25 5.61 4.65 5.39
65 60 4.76 5.29 5.60 4.75 5.13
65 65 4.99 5.61 5.99 4.98 5.60
65 70 5.19 5.97 6.44 5.17 6.14
70 65 5.34 6.03 6.46 5.31 5.81
70 70 5.67 6.49 6.99 5.62 6.47
70 75 5.95 6.96 7.61 5.87 7.20
75 70 6.16 7.10 7.68 6.07 6.77
75 75 6.64 7.73 8.43 6.48 7.68
75 80 7.04 8.39 9.29 6.79 8.70
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a.
The rates assume the Annuitant is Female and the Second Annuitant is Male.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
35
<PAGE>
OPTION 3
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
(Annuitant is Male and Second Annuitant is Female)
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- ------------------- -------------------
Annuitant Second Annuitant Option 3a Option 3b Option 3c Option 3d Option 3e
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $ 4.88 $ 5.26 $ 5.48 $ 4.88 $ 5.34
55 55 5.04 5.44 5.66 5.04 5.43
55 60 5.21 5.65 5.89 5.21 5.53
60 55 5.15 5.63 5.91 5.14 5.73
60 60 5.37 5.87 6.16 5.37 5.86
60 65 5.61 6.16 6.49 5.60 6.01
65 60 5.52 6.14 6.51 5.51 6.28
65 65 5.83 6.49 6.87 5.82 6.47
65 70 6.17 6.90 7.33 6.13 6.67
70 65 6.04 6.84 7.34 6.00 7.03
70 70 6.49 7.35 7.87 6.44 7.33
70 75 6.97 7.96 8.56 6.87 7.62
75 70 6.77 7.84 8.51 6.68 8.08
75 75 7.45 8.60 9.33 7.27 8.55
75 80 8.14 9.49 10.35 7.80 8.98
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a.
The rates assume the Annuitant is Male and the Second Annuitant is Female.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
36
<PAGE>
OPTION 3
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
(Annuitant is Female and Second Annuitant is Male)
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- ------------------- -------------------
Annuitant Second Annuitant Option 3a Option 3b Option 3c Option 3d Option 3e
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $ 4.93 $ 5.27 $ 5.46 $4.93 $5.19
55 55 5.04 5.44 5.66 5.04 5.43
55 60 5.15 5.63 5.91 5.14 5.73
60 55 5.21 5.65 5.89 5.21 5.53
60 60 5.37 5.87 6.16 5.37 5.86
60 65 5.52 6.14 6.51 5.51 6.28
65 60 5.61 6.16 6.49 5.60 6.01
65 65 5.83 6.49 6.87 5.82 6.47
65 70 6.04 6.84 7.34 6.00 7.03
70 65 6.17 6.90 7.33 6.13 6.67
70 70 6.49 7.35 7.87 6.44 7.33
70 75 6.77 7.84 8.51 6.68 8.08
75 70 6.97 7.96 8.56 6.87 7.62
75 75 7.45 8.60 9.33 7.27 8.55
75 80 7.86 9.28 10.20 7.57 9.59
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a.
The rates assume the Annuitant is Female and the Second Annuitant is Male.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
37
Aetna Life Insurance and Annuity Company
Home Office: 151 Farmington Avenue
P.O. Box 30670
Hartford, Connecticut 06150-0670
(800) 531-4547
You may call the toll-free number shown above for
answers to questions or to resolve a complaint.
Aetna Life Insurance and Annuity Company (We or Us), a stock company, agrees to
pay benefits according to the terms and conditions set forth in this Contract.
- --------------------------------------------------------------------------------
Certificate of Group Annuity Coverage
Aetna certifies that an account is established for you under the Group Annuity
Contract and Certificate numbers shown below.
This certificate describes Group Annuity Contract provisions. It replaces any
and all prior certificates or endorsements issued to you under the stated
Contract and Certificate numbers. This Certificate is for information only and
is not a part of the Contract.
The variable features of the Group Contract are described in sections 6 and 12.
- --------------------------------------------------------------------------------
Right to Cancel
The Certificate Holder may cancel the Certificate within ten (10) days of
receiving it by returning it to Us at the address above or the person from whom
it was purchased. Within seven (7) days of the cancellation request, We will
return the Certificate Holder's Purchase Payment(s) made plus any increase, or
minus any decrease on the amount allocated to the Separate Account.
Signed at the home office on the Effective Date.
/s/ Dan Kearney /s/ Susan E. Schechter
President Secretary
- ------------------------------------------------------------------------------
Contract Holder Group Annuity Contract Number
SPECIMEN SPECIMEN
SPECIMEN
- ------------------------------------------------------------------------------
Certificate Holder Certificate Number
SPECIMEN SPECIMEN
SPECIMEN
- ------------------------------------------------------------------------------
Annuitant Name Type of Plan
SPECIMEN SPECIMEN
SPECIMEN
<PAGE>
ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT, WHEN BASED ON INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT. THIS CERTIFICATE CONTAINS A MARKET VALUE ADJUSTMENT
FORMULA. APPLICATION OF A MARKET VALUE ADJUSTMENT MAY RESULT IN EITHER AN
INCREASE OR DECREASE IN THE CURRENT VALUE. THE MARKET VALUE ADJUSTMENT FORMULA
DOES NOT APPLY TO A GUARANTEED TERM AT THE TIME OF ITS MATURITY.
2
<PAGE>
Table of Contents
Page
Right to Cancel..............................................................1
Contract Schedule............................................................5
Separate Account...................................................5
ALIAC Guaranteed Account (AG Account)..............................5
Separate Account and AG Account....................................5
Fixed Annuity......................................................7
Section 1. Definitions.......................................................8
Section 2. General Provisions..............................................10
The Contract......................................................10
Certificates......................................................10
Nonparticipating Contract.........................................10
Misstatements and Adjustments.....................................10
Reports...........................................................10
Premium Taxes.....................................................10
Protection of Proceeds............................................10
Evidence of Survival..............................................11
Proof of Age......................................................11
Change of Contract................................................11
Section 3. Ownership.......................................................12
Group Contract Holder.............................................12
Certificate Holder Rights.........................................12
Transfer of Ownership.............................................12
Section 4. Beneficiary Provisions..........................................12
Beneficiary.......................................................12
Change of Beneficiary.............................................13
Death of Beneficiary..............................................13
Section 5. Purchase Payments................................................13
Purchase Payments.................................................13
Allocation of Purchase Payments...................................13
Section 6. Separate Account................................................13
General...........................................................13
Investment Allocations to the Separate Account....................14
Valuation of Assets...............................................14
Accumulation Unit.................................................14
Net Return Factor for Each Valuation Period.......................14
Administrative Charge.............................................15
Mortality Risk Charge.............................................15
Expense Risk Charge...............................................15
Mortality and Expense Guarantee...................................15
3
<PAGE>
Page
Section 7. AG Account.......................................................15
AG Account Guaranteed Interest Rate...............................15
Deposit Period....................................................15
Guaranteed Term...................................................15
Guaranteed Term(s) Groups.........................................15
Maturity Date.....................................................15
Allocation of Net Purchase Payments to the AG Guaranteed Account..16
AG Account Guaranteed Term Maturity Date and Maturity Value.......16
Withdrawals from the AG Account...................................16
Reinvestment......................................................17
AG Account Market Value Adjustment (Factor).......................17
Section 8. Certificate Holder's Account Value; Transfers and Withdrawals
During the Accumulation Period.........................................18
Certificate Holder's Account Value................................18
Transfers During the Accumulation Period..........................18
Withdrawals During the Accumulation Period........................18
Deferred Sales Charge.............................................19
Waiver of Deferred Sales Charge...................................19
Payment of Adjusted Certificate Holder Account Value..............19
Systematic Withdrawal Option (SWO)................................19
Section 9. Maintenance Charge..............................................21
Maintenance Charge................................................21
Section 10. Proceeds Payable on Death......................................21
Death of the Certificate Holder Prior to the Annuity Date.........21
Death Benefit Amount Prior to the Annuity Date....................21
Death Benefit Payment Methods.....................................23
Death of Certificate Holder On or After the Annuity Date..........23
Death of the Annuitant............................................23
Section 11. Delay of Payments..............................................24
Delay of Payments.................................................24
Section 12. Annuity Provisions.............................................24
Designation of Annuitant..........................................24
Terms of Annuity Options..........................................25
Annuity Unit......................................................26
Annuity Unit Value................................................26
Annuity Net Return Factor.........................................26
Annuity Options...................................................27
4
<PAGE>
Contract Schedule
<TABLE>
Separate Account
- --------------------------------------- -------------------------------------------------------------------------------------------
<S> <C>
Separate Account Variable Account B
Charges to the A daily charge is deducted from the assets of the Separate Account. The deduction is the
Separate Account: daily equivalent of the annual effective percentage shown below:
(a) During the Accumulation Period:
Administrative Charge 0.15%
Mortality Risk Charge 0.35%
Expense Risk Charge 0.90%
TOTAL Separate Account Charges During
Accumulation Period 1.40%
(b) During the Annuity Period
Administrative Charge Not To Exceed 0.25%
Mortality Risk Charge 0.35%
Expense Risk Charge 0.90%
TOTAL Maximum Separate Account Charges
During Annuity Period 1.50%
ALIAC Guaranteed Account (AG Guaranteed Account)
- -----------------------------------------------------------------------------------------------------------------------------------
Minimum Guaranteed Interest Rate
(effective annual rate of return): 3.0%
Separate Account and AG Account
- -----------------------------------------------------------------------------------------------------------------------------------
Minimum Initial $1,500
Purchase Payment:
Minimum Subsequent Purchase Payment: $500 or $50 per month if paid by an automatic check plan
Maximum Subsequent Purchase Payment: $1,000,000 without home office approval
Transfers: We allow an unlimited number of transfers during the Accumulation Period. Twelve (12)
transfers in any calendar year are free. Thereafter, We reserve the right to charge a
transfer charge up to $10 for each subsequent transfer.
5
<PAGE>
Maintenance Charge: The annual maintenance charge is $30. If the Certificate Holder's Account is $50,000 or
more on the date the maintenance charge is to be deducted, the maintenance charge is $0.
Deferred Sales Charge: For each withdrawal from a Certificate Holder's Account, a deferred sale charge for each
Net Purchase Payment will be determined as follows:
Years from Receipt of Deferred
Net Purchase Payment Sales Charge
0-1 7%
1-2 6%
2-3 5%
3-4 4%
4-5 3%
5-6 2%
6-7 1%
7+ 0%
Waiver of Deferred Section 8.05 provides for the following:
Sales Charge:
(c) At least 12 months after the date of the first Purchase Payment in an amount equal to
or less than 15% of the Certificate Holder's Account Value.
(d) For a full withdrawal where the Certificate Holder's Account Value does not exceed
$2,500 and no withdrawals have been taken from the Certificate Holder's Account
within the prior 12 months.
Systematic (a) Specified Payment - Maximum Percentage: 10%
Withdrawal Option:
(b) Specified Period - Minimum Period: 10 years
(c) Specified Percentage - Maximum Percentage: 10%
Death Benefit Factor: 4%
Death Benefit There is no maximum death benefit amount.
Maximum Amount:
Death Benefit 85 years
Maximum Age:
Fund for Allocation of Federated Prime Money Fund II
Excess Guaranteed
Death Benefit Value:
Latest Annuity Date: The Certificate Holder's 90th birthday.
6
<PAGE>
Fixed Annuity
- --------------------------------------- -------------------------------------------------------------------------------------------
Minimum Guaranteed 3.0%
Interest Rate
(effective annual rate
of return):
</TABLE>
7
<PAGE>
Section 1. Definitions
- --------------------------------------------------------------------------------
1.01 Accumulation Period - The period during which one or more Net
Purchase Payments applied to a Certificate Holder's Account
accumulate to provide future Annuity payments.
1.02 Accumulation Unit - A measure of the net investment results for
each variable investment option during the Accumulation Period.
The Accumulation Units for the applicable Funds are used to
calculate the portion of a Certificate Holder's Account Value
attributable to a Separate Account during the Accumulation
Period.
1.03 Adjusted Certificate Holder Account Value - The Certificate
Holder's Account Value, plus or minus any aggregate AG Account
Market Value Adjustment.
1.04 ALIAC Guaranteed Account (AG Account) - An investment option
where We guarantee specified rate(s) of interest for specified
periods of time. The AG Account is a separate account
established by Us in accordance with the provisions of the
Connecticut General Statutes Section 38a-433. Certificate
Holders do not participate in the investment gain or loss from
the assets held in the AG Account. Assets in the AG Account may
be charged with liabilities arising out of any other business
We may conduct.
1.05 Annuitant - The natural person on whose life an Annuity payment
is based.
1.06 Annuity - A series of payments We make for life, a definite
period or a combination of the two.
1.07 Annuity Date - The date on which Annuity payments commence.
1.08 Annuity Options - Annuity payment methods available during the
Annuity Period.
1.09 Annuity Period - The period of time during which Annuity
payments are made.
1.10 Annuity Unit - A measure of the net investment results for each
variable investment option during the Annuity Period. Annuity
Units are used to calculate the amount of each variable Annuity
payment.
1.11 Beneficiary - The person(s) entitled to receive any death
benefit under the Certificate Holder's Account. Upon the death
of a joint Certificate Holder, the surviving joint Certificate
Holder, if any, is treated as the Beneficiary. Any other
Beneficiary designation on record with Us at the time of death
is treated as a contingent Beneficiary.
1.12 Certificate - The document issued to a Certificate Holder to
evidence a Certificate Holder's Account established under the
group Contract.
8
<PAGE>
1.13 Certificate Holder - A person who has established a Certificate
Holder's Account under a group Contract. We reserve the right
to limit ownership to natural persons. If more than one
Certificate Holder owns an Account, each Certificate Holder
shall be a joint Certificate Holder. Any joint Certificate
Holder must be the spouse of the other joint Certificate
Holder. Joint Certificate Holders have joint ownership rights
and both must authorize any exercising of those ownership
rights unless otherwise allowed by Us. If the Certificate
Holder's Account is owned by a nonnatural person, the death
benefit will be paid at the death of the Annuitant and a new
Annuitant may not be named.
1.14 Certificate Holder's Account - A record We establish for each
Certificate Holder to maintain values under a group Contract.
1.15 Certificate Holder's Account Value - The dollar value as of any
Valuation Period of all amounts accumulated in a Certificate
Holder's Account.
1.16 Contract - This agreement between the Group Contract Holder and
Us.
1.17 Dollar Cost Averaging - A program that permits the Certificate
Holder to systematically transfer amounts from any of the Funds
and the one-year guaranteed term of the AG Account to any of
the Funds. Dollar Cost Averaging is not available if the
Systematic Withdrawal Option is in effect.
1.18 Effective Date - The date a Certificate is issued to a
Certificate Holder.
1.19 Fund - One of the variable investment options which may be
selected by a Certificate Holder.
1.20 General Account - The General Account is made up of all of our
general assets other than those allocated to the separate
accounts.
1.21 Group Contract Holder - The entity to which a group Contract is
issued.
1.22 Home Office - Our headquarters, located at 151 Farmington
Avenue, Hartford, CT 06156.
1.23 Market Value Adjustment - An adjustment that may apply to a
withdrawal made from the AG Account before the end of a
guaranteed term as stated in Section 7.10.
1.24 Net Purchase Payment - The Purchase Payment less premium taxes,
if applicable.
1.25 Purchase Payment - The gross payment accepted by Us and
allocated to the Certificate Holder's Account. We reserve the
right to refuse to accept any Purchase Payment at any time for
any reason.
9
<PAGE>
1.26 Separate Account - A separate account that buys and holds
shares of the Fund(s). Income, gains or losses, realized or
unrealized, are credited or charged to the Separate Account
without regard to Our other income, gains or losses. We own the
assets held in the Separate Account and are not a trustee as to
such amounts. The Separate Account generally is not guaranteed
and is held at market value. The name of the Separate Account
is shown on the Contract Schedule. The assets of the Separate
Account, to the extent of reserves and other Contract
liabilities of the Separate Account, will not be charged with
Our other liabilities.
1.27 Valuation Period - The period of time for which a Fund
determines its net asset value, usually from 4:15 p.m. Eastern
time each day the New York Stock Exchange is open until 4:15
p.m. the next such business day, or such other day that one or
more of the Funds determines its net asset value. The assets of
the Separate Account are not chargeable with the liabilities
arising out of any other business We may conduct.
1.28 Variable Annuity Contract - An Annuity Contract providing for
the accumulation of value and/or for Annuity payments which
vary in amount based on investment results.
Section 2. General Provisions
- --------------------------------------------------------------------------------
2.01 The Contract - The entire Contract consists of this Contract
and any endorsements attached or subsequently issued.
2.02 Certificates - A Certificate is issued to each Certificate
Holder whose Purchase Payment(s) is accepted by Us. The
Certificate evidences a Certificate Holder's Account
established under the Contract. Certificates are not part of
the Contract.
2.03 Nonparticipating Contract - Neither the Group Contract Holder,
Certificate Holder nor any Beneficiary have a right to share in
our earnings.
2.04 Misstatements and Adjustments - If We learn that the age of any
Annuitant or second Annuitant is misstated, the correct age
will be used to adjust payments. We reserve the right to
request reimbursement or adjust future payments for any amount
overpaid. We will pay the amount of any underpayment.
2.05 Reports - We furnish each Certificate Holder with a report
showing the Certificate Holder's Account Value at least once
each calendar year. We also furnish an annual report of the
Separate Account.
2.06 Premium Taxes - Any premium taxes paid to any governmental
entity are charged against Purchase Payments or a Certificate
Holder's Account. We may, at our sole discretion, pay premium
taxes when due and deduct that amount from the Certificate
Holder's Account at a later date. Payment at an earlier date
does not waive any right We may have to deduct amounts at a
later date.
2.07 Protection of Proceeds - To the extent permitted by law, all
payments under this Contract to a Certificate Holder or
Beneficiary shall be free from legal process and the claim of
any creditor.
10
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2.08 Evidence of Survival - The Company may require satisfactory
evidence of the continued survival of any person(s) on whose
life Annuity payments are based.
2.09 Proof of Age - The Company may require evidence of age of any
Annuitant under Annuity Options 2 and 3 and of the designated
second Annuitant under Annuity Option 3.
2.10 Change of Contract - Only our authorized officers may change
the terms of this Contract. We will notify the Group Contract
Holder in writing at least 30 days before the effective date of
any change. Any change will not affect the amount or terms of
any Annuity which begins before the change.
We may make any change that affects the AG Account Market Value
Adjustment with at least thirty (30) days' advance written
notice to the Group Contract Holder and the Certificate Holder.
Any such change shall become effective for any new guaranteed
term and will apply to all present and future Certificate
Holders' Accounts.
We reserve the right to change the terms of the Systematic
Withdrawal Option for future elections and discontinue the
availability of this option.
Any change to any of the following provisions under this
Contract will not apply to Certificate Holder's Accounts in
existence before the effective date of the change:
(a) Net Purchase Payment (1.24)
(b) AG Account Guaranteed Interest Rate (7.01)
(c) Net Return Factor (6.05)
(d) Certificate Holder's Account Value (1.15)
(e) Deferred Sales Charge (8.04)
(f) Annuity Unit Value (12.04)
(g) Annuity Options (12.06)
(h) Fixed Annuity Interest Rates (12.01)
(i) Transfers (8.02).
Any change that affects the Annuity Option and the tables for
the Annuity Options may be made:
(a) No earlier than twelve (12) months after the Effective
Date; and
(b) No earlier than twelve (12) months after the effective
date of any prior change.
Any Certificate Holder's Account established on or after the
effective date of any change will be subject to the change. If
the Group Contract Holder does not agree to any change under
this provision, We reserve the right to not allow any new
Certificate Holder's Accounts to be established under this
Contract. This Contract may also be changed as deemed necessary
by Us to comply with federal or state law.
11
<PAGE>
Section 3. Ownership
- --------------------------------------------------------------------------------
3.01 Group Contract Holder - The Group Contract Holder has title to
the Contract. The Contract and any amounts accumulated
thereunder are not subject to the claims of the Group Contract
Holder nor any of its creditors.
3.02 Certificate Holder Rights - The Certificate Holder has all
interest and right to amounts held in his or her Certificate
Holder's Account. The Certificate Holder and any joint
Certificate Holder are named on the Specifications page. The
Certificate Holder and any joint Certificate Holder may
exercise all the rights under the Certificate Holder's Account,
subject to the rights of:
(a) Any assignee under an assignment filed at our home
office; and
(b) Any irrevocably named Beneficiary.
Upon the death of a Certificate Holder prior to the Annuity
Date, a spousal Beneficiary may elect to continue the
Certificate Holder's Account in his or her own name and retain
all ownership rights and privileges or take distribution of the
death benefit as defined in Section 10.
3.03 Transfer of Ownership - The Group Contract Holder may transfer
ownership of this Contract. A written request, dated and
signed, must be filed at our home office.
Any transfer of ownership terminates the interest of any
existing Group Contract Holder. It does not change the rights
of any Certificate Holder.
A Certificate Holder may transfer all of his or her rights
under the Contract. We reserve the right not to accept an
assignment or transfer to a nonnatural person. A written
request, dated and signed by the Certificate Holder and any
joint Certificate Holder, must be filed at our home office.
After the transfer is recorded, it will take effect as of the
date the request was signed. Any such transfer terminates the
interest of any existing Certificate Holder. It does not change
the Beneficiary, nor transfer the Beneficiary's interest. A
transfer will not affect any payments We may make or actions We
may take before such transfer has been recorded at our home
office.
Section 4. Beneficiary Provisions
- --------------------------------------------------------------------------------
4.01 Beneficiary - The Certificate Holder may name a Beneficiary and
a contingent Beneficiary. At the death of the Certificate
Holder prior to the Annuity Date, the Beneficiary(ies) named in
our records will receive a death benefit as stated in Section
10. Upon the death of either joint Certificate Holder prior to
the Annuity Date, the surviving joint Certificate Holder, if
any, will be treated as the designated Beneficiary and any
other Beneficiary designation on record with Us at the time of
death is treated as a contingent Beneficiary. If the
Certificate Holder is a nonnatural person, the death benefit
will be paid at the death of the Annuitant.
12
<PAGE>
4.02 Change of Beneficiary - The Certificate Holder may change the
Beneficiary. A written request, dated and signed by the
Certificate Holder, must be filed at our home office. If there
are joint Certificate Holders, both must sign the request.
After the change is recorded, it will take effect as of the
date the request was signed. If the request reaches our home
office and is recorded after the Certificate Holder dies, but
before any payment is made, the change is valid.
4.03 Death of Beneficiary - If all of the Beneficiaries and
contingent Beneficiaries die prior to the Certificate Holder's
death, We pay the death benefit in one sum to the Certificate
Holder's estate. If the Certificate Holder is a nonnatural
person, and all of the Beneficiaries and contingent
Beneficiaries die prior to the Annuitant's death, We will pay
the death benefit in one sum to the Certificate Holder.
Section 5. Purchase Payments
- --------------------------------------------------------------------------------
5.01 Purchase Payments - Subject to the maximum and minimum shown on
the Contract Schedule, the Certificate Holder may determine the
amount and frequency of Purchase Payments. We reserve the right
not to accept any Purchase Payment. We will declare from time
to time the acceptability of additional Purchase Payments.
5.02 Allocation of Purchase Payments - The Certificate Holder may
elect to have each Net Purchase Payment accumulate:
(a) On a variable basis invested in shares of one or more
Funds in which the Separate Account invests;
(b) For guaranteed terms offered in the current deposit
period(s) under the AG Account; or
(c) In a combination of any of the available investment
options.
Net Purchase Payments must be allocated in whole percentages.
For subsequent Purchase Payments, if no allocation instructions
are received with the Purchase Payment, the allocation will be
as indicated in the most recent directive from the Certificate
Holder. If the same guaranteed term(s) are not available, the
next shortest will be used. If no shorter guaranteed term is
available, the next longer guaranteed term will be used.
Section 6. Separate Account
- --------------------------------------------------------------------------------
6.01 General - The assets of the Separate Account, equal to the
reserves and other Contract liabilities that depend on the
investment performance of the Separate Account are not
chargeable with liabilities arising out of any other business
We may conduct. Income, gains or losses of the Separate
Account, realized or unrealized, are credited to or charged
against the assets of the Separate Account without regard to
Our other income, gains or losses.
13
<PAGE>
6.02 Investment Allocations to the Separate Account - The assets of
the Separate Account are segregated by Fund. If the shares of
any Fund are no longer available for investment by the Separate
Account or if in our judgment, further investment in such
shares should become inappropriate in view of the purpose of
the Contract, We may cease to make such Fund shares available
for investment under the Contract prospectively, or We may
substitute shares of another Fund for shares already acquired.
We may also, from time to time, add additional Funds. Any
elimination, substitution or addition of Funds will be done in
accordance with applicable state and federal securities laws.
We reserve the right to substitute shares of another Fund for
shares already acquired without a proxy vote.
6.03 Valuation of Assets - The shares of the Funds will be valued at
their net asset value at the end of each Valuation Period.
6.04 Accumulation Unit - A Net Purchase Payment that is allocated to
one or more Funds is credited to the Certificate Holder's
Account as Accumulation Units. The number of Accumulation Units
credited is determined by dividing the applicable portion of
the Net Purchase Payment by the Accumulation Unit value for the
appropriate Fund. The Accumulation Unit value used is that
which is computed for the next Valuation Period after which the
Purchase Payment is received at our home office. Accumulation
Units attributable to the initial Purchase Payments will be
credited within two business days of acceptance.
Accumulation Unit values may increase or decrease from
Valuation Period to Valuation Period.
6.05 Net Return Factor for Each Valuation Period - The value of an
Accumulation Unit for any Valuation Period is calculated by
multiplying the Accumulation Unit value for the immediately
preceding Valuation Period by the net return factor of the
appropriate Fund for the current period.
The net return factor for each Fund is equal to 1.0000000 plus
the net return rate.
The net return rate equals:
(a) The value of the shares of the Fund held by the Separate
Account at the end of a Valuation Period; minus
(b) The value of the shares of the Fund held by the Separate
Account at the start of the Valuation Period; plus or
minus
(c) Taxes (or reserves for taxes) on the Separate Account
(if any); divided by
(d) The total value of the Funds(s) Accumulation Units and
Fund(s) Annuity Units of the Separate Account at the
start of the Valuation Period; minus
(e) A daily actuarial charge as shown on the Contract
Schedule for Annuity mortality and expense risks and
profit and a daily administrative charge.
The net return rate may be more or less than zero (0) percent.
The value of a share of the Fund is equal to the net assets of
the Fund divided by the number of shares outstanding.
14
<PAGE>
6.06 Administrative Charge - We deduct an administrative charge
equal, on an annual basis, to the amount shown on the Contract
Schedule.
6.07 Mortality Risk Charge - We deduct a mortality risk charge
equal, on an annual basis, to the amount shown on the Contract
Schedule.
6.08 Expense Risk Charge - We deduct an expense risk charge equal,
on an annual basis, to the amount shown on the Contract
Schedule.
6.09 Mortality and Expense Guarantee - We guarantee that the dollar
amount of each Annuity payment after the first will not be
affected by variations in mortality or expense experience.
Section 7. AG Account
- --------------------------------------------------------------------------------
7.01 AG Account Guaranteed Interest Rate - All amounts allocated to
the AG Account earn a rate of interest that is guaranteed for a
specified period of time. The rate will be credited daily and
will never be less than the minimum guaranteed interest rate
shown on the Contract Schedule. We determine the rate and it is
not based on investment experience.
For guaranteed terms of one year or less, one guaranteed
interest rate is credited for the full guaranteed term. For
longer guaranteed terms, an initial guaranteed interest rate is
credited from the date of deposit to the end of a specified
period within the guaranteed term. There may be different
guaranteed interest rate(s) declared for subsequent specified
time intervals throughout the guaranteed term.
7.02 Deposit Period - A calendar week, a calendar month, a calendar
quarter, or any other period of time We specify during which
Net Purchase Payment(s), transfers and reinvestments are
accepted into the AG Account for one or more guaranteed terms.
We reserve the right to extend the deposit period.
7.03 Guaranteed Term - The period of time for which AG Account
guaranteed interest rates are guaranteed on Net Purchase
Payments. Transfers and reinvestments are made into a current
deposit period for the AG Account. Such period begins on the
day following the close of the deposit period and ends on the
designated Maturity Date. Guaranteed terms, if any, are offered
at our discretion for various lengths of time ranging up to and
including ten years.
During a deposit period, We may make available any number of
guaranteed terms. The Certificate Holder may allocate Net
Purchase Payments and transfers into any or all of the
available guaranteed terms.
7.04 Guaranteed Term(s) Groups - All AG Account guaranteed term(s)
with the same length of time from the close of the deposit
period until the designated Maturity Date.
7.05 Maturity Date - The last day of a guaranteed term.
15
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7.06 Allocation of Net Purchase Payments to the AG Account - When
the Certificate Holder wishes to allocate all or any portion of
a Net Purchase Payment to the Guaranteed Account, he or she
must tell Us the percentage to apply to one or more of the AG
Account guaranteed term(s) available during the current deposit
period. If no allocation instructions are received, a Net
Purchase Payment is allocated as indicated in the most recent
directive from the Certificate Holder. If the same guaranteed
term is not available for any amount allocated to the AG
Account, We will allocate the amount to the next shortest
guaranteed term available. If no shorter guaranteed term is
available, We will allocate it to the next longest guaranteed
term.
7.07 AG Account Guaranteed Term Maturity Date and Maturity Value -
On the maturity date, the value of the total of all amounts
allocated to that guaranteed term is called the maturity value.
When Certificate Holders have assets in the AG Account, at
least eighteen (18) days before a maturity date, We notify them
of the:
(a) Projected maturity value; and
(b) Guaranteed terms and the applicable guaranteed interest
rates available during the current deposit period.
When no allocation instructions are received and the assets in
a guaranteed term have been reinvested by Us in another
guaranteed term on the maturity date, the Certificate Holder
may transfer or withdraw, during the month following the
maturity date, the reinvested amount with interest earned (as
of the date the request is received at our home office) without
incurring a Market Value Adjustment. This transaction is
allowed only once for each maturity date, regardless of whether
the transfer or withdrawal is partial or full.
7.08 Withdrawals and Transfers from the AG Account - When the
Certificate Holder requests a withdrawal or transfer from the
AG Account, if instructions are not provided by the Certificate
Holder, amounts are withdrawn on a pro rata basis from the
guaranteed term(s) groups in which the Certificate Holder's
Account is currently invested. Within a guaranteed term group,
the amount to be withdrawn will be withdrawn first from the
oldest deposit period. Withdrawals or transfers from an AG
Account guaranteed term before the maturity date are subject to
a Market Value Adjustment, except for:
(a) A one month period following the maturity date described
in 7.07;
(b) Transfers under the Dollar Cost Averaging program; and
(c) Withdrawals under the Systematic Withdrawal Option
described in Section 8.07.
Only a positive Market Value Adjustment will apply to amounts
transferred from the AG Account when the Certificate Holder
elects Annuity Option 2 or 3.
16
<PAGE>
7.09 Reinvestment - We will mail a notice to the Certificate Holder
before a guaranteed term's maturity date. This notice will
contain the guaranteed terms available during the current
deposit periods with their guaranteed interest rate(s) and
projected maturity value. If no specific direction is given by
the Certificate Holder prior to the maturity date, each
maturity value will be reinvested in the current deposit period
for a guaranteed term of the same duration. If a guaranteed
term of the same duration is unavailable, each matured term
value will automatically be reinvested in the current deposit
period for the next shortest guaranteed term available. If no
shorter guaranteed term is available, the next longer
guaranteed term will be used. We will mail a confirmation
statement to the Certificate Holder after the maturity date.
This notice will state the guaranteed term and guaranteed
interest rate(s) which will apply to the reinvested matured
term value.
7.10 AG Account Market Value Adjustment (Factor) - The Market Value
Adjustment factor (MVA factor) reflects any change in interest
rates from the time assets are allocated to the AG Account to
the time they are transferred or withdrawn. Except as noted in
Section 7.09, 10.02 and 12.01, an MVA factor is applied to any
amount withdrawn or transferred from the AG Account before the
end of a guaranteed term.
The amount withdrawn from the AG Account is multiplied by the
MVA factor which is calculated as follows:
x
---
365
(1 + i)
------------
x
---
365
(i + j)
Where:
i is the Deposit Period Yield
j is the Current Yield
x is the number of days remaining, (computed from
Wednesday of the week of withdrawal) in the
guaranteed Term.
Determination of MVA factor parameters:
A yield is computed at the close of the last business day of
each week of the deposit period. The yield will equal the
average of the yields on U.S. Treasury Notes which matured
during the last three months of the applicable guaranteed term.
The deposit period yield is the average of those yields for the
deposit period. If withdrawal is made prior to the close of the
deposit period, it is the average of those yields on each week
preceding withdrawal.
The current yield is the average of the yields on the last
business day of the week preceding withdrawal on the same U.S.
Treasury Notes included in the deposit period yield.
17
<PAGE>
If no U.S. Treasury Notes matured during the last three months
of the guaranteed term, We reserve the right to use the average
of the yields on U.S. Treasury Notes that mature during a
following quarter.
Section 8. Certificate Holder's Account Value; Transfers and Withdrawals
During the Accumulation Period
- --------------------------------------------------------------------------------
8.01 Certificate Holder's Account Value - The value of a Certificate
Holder's Account is determined by adding the value of the total
of Accumulation Units attributed to the selected Fund(s) to the
value of any amounts attributed to the AG Account.
8.02 Transfers, During the Accumulation Period - Before the Annuity
Date, the Certificate Holder may transfer from any Fund or
guaranteed term of the AG Account to:
(a) Any other Fund; or
(b) Any guaranteed term of the AG Account available in the
current deposit period.
Transfer requests can be submitted as a percentage or as a
dollar amount. We may establish a minimum transfer amount.
Within a guaranteed term group, the amount transferred is
withdrawn first from the oldest deposit period, then from the
next oldest, and so on until the amount requested is satisfied.
The Certificate Holder may make an unlimited number of
transfers during the Accumulation Period. The number of free
transfers allowed is shown on the Contract Schedule. Transfers
in excess of that number may be subject to the transfer charge
shown on the Contract Schedule. Transfers under the Dollar Cost
Averaging program do not count toward the annual limit.
Transfers of a matured term value from the AG Account on or
within one calendar month after a guaranteed term's maturity
date do not count against the annual transfer limit.
Amounts applied to guaranteed terms of the AG Account may not
be transferred to the Funds or to another guaranteed term
during the deposit period or for 90 days after the close of the
deposit period except for (1) matured term value(s) during the
calendar month following the guaranteed term's maturity date;
(2) amounts applied to an annuity option; (3) transfers from
the one-year guaranteed term under the Dollar Cost Averaging
program; and (4) amounts distributed under the Systematic
Withdrawal Option.
Except as noted in Section 7.09, 10.02 and 12.01, transfers
from guaranteed terms of the AG Account before the Maturity
Date are subject to a Market Value Adjustment.
8.03 Withdrawals During the Accumulation Period - The Certificate
Holder may withdraw all or a portion of the Certificate
Holder's Account Value during the Accumulation Period by
properly completing a withdrawal request form. Withdrawal
requests can be submitted as a percentage or as a specific
dollar amount. Net Purchase Payment amounts are withdrawn
first, and then the excess value, if any. For any partial
withdrawal, if instructions are not provided by the Certificate
Holder, amounts are withdrawn on a pro rata basis from the
Fund(s), and/or the guaranteed term(s) groups in which the
Certificate Holder's Account is currently invested. Within a
guaranteed term group, the amount to be withdrawn will be
withdrawn first from the oldest deposit period, then from the
next oldest, and so on until the amount requested is satisfied.
18
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After deduction of the maintenance charge, if applicable, the
withdrawn amount shall be reduced by the applicable deferred
sales charge and any applicable premium taxes.
8.04 Deferred Sales Charge - The deferred sales charge only applies
to the portion of the amount withdrawn attributable to Net
Purchase Payment(s) and varies according to the elapsed time
since receipt of the Purchase Payment. The deferred sales
charge is shown on the Contract Schedule.
8.05 Waiver of Deferred Sales Charge - No deferred sales charge is
deducted when a Certificate Holder's Account Value is paid:
(a) To a Beneficiary as a death benefit, except for Purchase
Payments made by a surviving joint Certificate Holder as
described in Section 10.02(b);
(b) As a premium for an Annuity Option;
(c) At least the number of months, as shown on the Contract
Schedule, after the date of the first Purchase Payment
and in an amount equal to or less than the percentage of
the Certificate Holder's Account Value as shown on the
Contract Schedule. This applies to the first withdrawal
request, partial or full, in a calendar year. The
Certificate Holder's Account Value is calculated as of
the date the withdrawal request is received in good
order at our home office. This waiver is not available
to the Certificate Holder while a SWO is in effect;
(d) For a full withdrawal where the Certificate Holder's
Account Value does not exceed the amount shown on the
Contract Schedule and no withdrawals have been taken
from the Certificate Holder's Account within the prior
12 months;
(e) For a distribution made by Us under Section 8.06; or
(f) For a distribution which is part of a SWO under Section
8.07.
We reserve the right to allow the proceeds of a total
withdrawal to be reinstated under the terms and conditions as
established by Us from time to time.
8.06 Payment of Adjusted Certificate Holder Account Value - Upon 90
day's written notice to the Certificate Holder, We will
terminate any Certificate Holder's Account if the Certificate
Holder's Account Value becomes less than $1,500 immediately
following any partial withdrawal. We do not intend to exercise
this right in cases where the Certificate Holder's Account
Value is reduced to $1,500 or less solely due to investment
performance. When We make a distribution pursuant to this
provision, the deferred sales charge will not be deducted.
8.07 Systematic Withdrawal Option (SWO) - We will allow the
Certificate Holder to establish a schedule of withdrawals to be
made automatically from the Certificate Holder's Account Value.
All distributed amounts will be withdrawn on a pro rata basis
from the Fund(s) and/or the guaranteed term(s) groups of the AG
Account in which the Certificate Holder's Account is invested.
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The Certificate Holder must elect one of the following SWO
methods:
(a) Specified Payment: Payments of a designated dollar
amount. The annual amount may not be greater than the
percentage of the Certificate Holder's Account Value at
time of the election as shown on the Contract Schedule.
This annual dollar amount will remain constant. At our
discretion, We may require a minimum payment amount; or
(b) Specified Period: Payments which are made over a period
of time which must be at least the minimum period as
shown on the Contract Schedule. The annual amount paid
each year is calculated by dividing the Certificate
Holder's Account Value as of December 31 of the prior
year by the number of payment years remaining; or
(c) Specified Percentage: Payment of a designated percentage
which cannot be greater than the percentage of the
Certificate Holder's Account Value at the time of
election as shown on the Contract Schedule. The
percentage may be changed by written request. We reserve
the right to limit the number of times the percentage
may be changed. The annual amount is calculated by
multiplying the Certificate Holder's Account Value as of
December 31 of the year prior to the payment by the
designated percentage.
SWO payments will cease at the Certificate Holder's death (or
if the Certificate Holder is a nonnatural person, at the death
of the Annuitant). A beneficiary may elect to continue SWO as
provided in Section 10.01.
In our discretion, We may require a minimum initial Certificate
Holder's Account Value for election of this option. SWO may be
elected by submitting a completed and signed election form to
Us. Once elected, this option may be revoked by submitting a
written request to Us. SWO may be elected only once by the
Certificate Holder or by a spousal Beneficiary.
Certificate Holders should consult their tax adviser prior to
requesting this distribution option. We are not responsible for
any adverse tax consequences due to a Certificate Holder's
receiving SWO payments. A ten (10) percent penalty tax may
apply to distributions to a Certificate Holder who has not
reached age 59-1/2. Upon death of the Certificate Holder, any
payments will be made under the terms of Section 10.
Dollar Cost Averaging is not available to Certificate Holders
who have elected SWO.
20
<PAGE>
Section 9. Maintenance Charge
- --------------------------------------------------------------------------------
9.01 Maintenance Charge - We will deduct an annual maintenance
charge as shown in the Contract Schedule from the Certificate
Holder's Account during the Accumulation Period. We will deduct
the maintenance charge on the anniversary of the Effective Date
of the Certificate for the Certificate Holder's Account. This
maintenance charge is also deducted upon withdrawal of the
entire Adjusted Certificate Holder's Account. The maintenance
charge is deducted proportionately from each investment option
used.
Section 10. Proceeds Payable on Death
- --------------------------------------------------------------------------------
10.01 Death of the Certificate Holder Prior to the Annuity Date - In
the event of the death of the Certificate Holder or a joint
Certificate Holder prior to the Annuity Date, a death benefit
is payable to the Beneficiary(ies) designated by the
Certificate Holder. Upon the death of a joint Certificate
Holder, the surviving joint Certificate Holder, if any, will be
treated as the designated Beneficiary. Any other Beneficiary
designation on record with Us at the time of death will be
treated as a contingent Beneficiary. If the Certificate Holder
is a nonnatural person, the death benefit will be payable to
the Beneficiary(ies) at the death of the Annuitant.
A Beneficiary may request We pay the death benefit under one of
the methods described in Section 10.03. If the Beneficiary is
the spouse of the Certificate Holder, or the spouse of the
Annuitant if the Certificate Holder is a nonnatural person, he
or she may elect to continue the Certificate Holder's Account
in his or her own name and exercise all the Certificate
Holder's rights under the Contract.
10.02 Death Benefit Amount Prior to the Annuity Date -
(a) Except as set forth below, the amount of the guaranteed
death benefit value is equal to the greater of:
(i) The Certificate Holder's Account Value at the end
of the Valuation Period during which We receive
at our home office due proof of death and
election of the type of payment to be made; or
(ii) The death benefit determined as of the Valuation
Period corresponding to the date of death.
Until the first Effective Date anniversary, the
death benefit is equal to the Purchase Payments
made by the Certificate Holder prior to the
Effective Date anniversary less any withdrawals
and any amounts applied to an Annuity Option.
For each Certificate year thereafter, the death
benefit during the Certificate year equals the
death benefit at the beginning of the Certificate
year plus Purchase Payments made during the year
less any withdrawals and any amounts applied to
an Annuity Option.
21
<PAGE>
On each Effective Date anniversary, the death
benefit is determined as follows:
(A) The death benefit on the previous Effective
Date anniversary increased by the death
benefit factor shown on the Contract
Schedule; plus
(B) Purchase Payments made by the Certificate
Holder during the Certificate year
increased by the death benefit factor shown
on the Contract Schedule for the portion of
the year since the Purchase Payment was
made; less
(C) Any withdrawals or amounts applied to an
Annuity Option during the Certificate year
increased by the death benefit factor shown
on the Contract Schedule for the portion of
the Certificate year since the withdrawal
or election of Annuity option; or
(iii) The Certificate Holder's Account Value on the
most recent seventh year anniversary of the
Effective Date plus any Purchase Payments made
after such Effective Date anniversary less any
withdrawals and any amounts applied to an Annuity
Option.
Notwithstanding the foregoing, the death benefit under
(ii) or (iii) will not exceed the death benefit maximum
amount shown on the Contract Schedule.
The death benefit calculation described in (ii) and
(iii) above, applies until the Certificate Holder
reaches the death benefit maximum age shown on the
Contract Schedule. If the Certificate Holder is a
nonnatural person, death provisions will be based on the
age of the Annuitant. Thereafter, the death benefit is
only adjusted for Purchase Payments, withdrawals and
amounts applied to Annuity Options. If the Certificate
Holder reaches the death benefit maximum age shown on
the Contract Schedule prior to the seventh anniversary
of the Effective Date, the death benefit will be the
greater of (i) or (ii) above.
The excess, if any, of the guaranteed death benefit
value over the Certificate Holder's Account Value is
determined when we receive at our home office due proof
of death and allocated to the Fund shown on the Contract
Schedule. The Certificate Holder's Account Value plus
any excess amount deposited becomes the Certificate
Holder's Account Value.
(b) In the case of a spousal Beneficiary who continued the
Certificate Holder's Account in his or her own name, the
death benefit shall be equal to the Adjusted Current
Value less any applicable deferred sales charge on any
Purchase Payment made after We have received at our home
office due proof of death of the joint Certificate
Holder (or Annuitant, if applicable).
When the Beneficiary withdraws or transfers all or any portion
of the death benefit in the AG Account within six months after
the date of death, the amount withdrawn or transferred from the
AG Account will be the greater of:
(1) The aggregate Market Value Adjustment amount (the amount
resulting from the application of relevant Market Value
Adjustment factors); or
(2) The applicable portion of Certificate Holder's Account
Value in the AG Account.
22
<PAGE>
After the six-month period, when the Beneficiary withdraws or
transfers all or any portion of the death benefit in the AG
Account, the amount will be equal to the aggregate Market Value
Adjustment amount. Only a positive market value adjustment will
apply, however, to amounts transferred from the AG Account when
the Beneficiary elects Annuity Option 2 or 3.
At the death of a spousal Beneficiary who continued the
Certificate Holder's Account in his or her own name, when the
Beneficiary withdraws or transfers all or any portion of the
death benefit in the AG Account, the amount will be equal to
the Aggregate Market Value Adjustment amount.
10.03 Death Benefit Payment Methods - A non-spousal Beneficiary must
elect the death benefit to be paid under one of the following
methods in the event of the death of the Certificate Holder
prior to the Annuity Date:
Method 1 - Lump sum payment of the death benefit; or
Method 2 - The payment of the entire death benefit within five
years of the date of the Certificate Holder's death; or
Method 3 - Payment of the death benefit over the lifetime of
the designated Beneficiary or over a period not extending
beyond the life expectancy of the designated Beneficiary with
distribution beginning within one year of the date of death of
the Certificate Holder.
Any portion of the death benefit not applied under Method 3
within one year of the date of Certificate Holder's death, or
the death of the Annuitant if the Certificate Holder is a
nonnatural person, must be distributed within five years of the
date of death.
A spousal Beneficiary may elect to continue the Certificate
Holder's Account in his or her name, elect a lump sum payment
of the death benefit, or apply the Adjusted Certificate
Holder's Account Value to an Annuity Option.
10.04 Death of Certificate Holder On or After the Annuity Date - If
the Certificate Holder who is not the Annuitant, dies on or
after the Annuity Date, the remaining payments under the
Annuity Option elected will be made to the Beneficiary at least
as rapidly as under the method of distribution in effect at the
Certificate Holder's death.
10.05 Death of the Annuitant - If the Annuitant, who is not a
Certificate Holder, dies on or before the Annuity Date, a new
Annuitant may be named. If no Annuitant is named, the
Certificate Holder will be the Annuitant. If the Certificate
Holder is a nonnatural person, the death benefit will be paid
at the death of the Annuitant and no new Annuitant may be
named. If the Annuitant dies after the Annuity Date, the death
benefit, if any, will be payable to the Beneficiary as
specified in the Annuity Option elected. We will require proof
of the Annuitant's death. Death benefits will be paid at least
as rapidly as under the method of distribution in effect at the
Annuitant's death.
23
<PAGE>
Section 11. Delay of Payments
- --------------------------------------------------------------------------------
11.01 Delay of Payments - We will make any payments under this
Contract within seven days after a request is received in good
order. We reserve the right to suspend or postpone any type of
payment from the Separate Account for any period when:
(a) The New York Stock Exchange is closed for other than
customary weekend and holiday closings;
(b) Trading on the Exchange is restricted;
(c) An emergency exists as a result of which it is not
reasonably practicable to dispose of securities held in
the Separate Account or determine their value; or
(d) The Securities and Exchange Commission so permits delay
for the protection of security holders.
The applicable rules of the Securities and Exchange Commission
will govern as to whether the conditions in (b) or (c) exist.
We also reserve the right to delay any type of payment from the
AG Account for up to six months.
Section 12. Annuity Provisions
- --------------------------------------------------------------------------------
12.01 Designation of Annuitant - The Certificate Holder and the
Annuitant need not be the same person. The Certificate Holder
names the Annuitant and during the Accumulation Period, may
change the designated Annuitant. We change the Annuitant when
We receive a written request in good order at our home office.
We will not change the Annuitant when Annuity payments have
commenced.
The Certificate Holder elects an Annuity Option by telling Us
to use all or any portion of the Certificate Holder's Account
Value (minus any applicable premium taxes if not previously
deducted) to purchase Annuity payments under an Annuity Option.
If the Certificate Holder elects Annuity Option 1, the amount
applied to purchase Annuity payments will be equal to the
Adjusted Certificate Holder's Account Value. If the Certificate
Holder elects Annuity Option 2 or 3, the amount applied to
purchase Annuity payments will be the greater of:
(1) The Adjusted Certificate Holder's Account Value; or
(2) The Certificate Holder's Account Value.
When an Annuity Option is chosen the Certificate Holder must
designate a:
(a) Fixed Annuity using the General Account;
(b) Variable Annuity using any of the Funds available during
the Annuity Period; or
(c) Combination of (a) and (b).
If a fixed Annuity is chosen, We will calculate the amount
using an interest assumption no less than the percentage
specified on the Contract Schedule. We may calculate the amount
using a higher interest rate.
24
<PAGE>
If a variable Annuity is chosen, an Assumed Annual Net Return
Rate of 5% may be chosen. If not chosen, We will use an Assumed
Annual Net Return Rate of 3.5%
Payments are made on a monthly basis to the Certificate Holder
unless the Certificate Holder requests a different mode of
payment.
Once elected, an Annuity Option may not be revoked, except for
Option 1 when elected on a variable basis.
12.02 Terms of Annuity Options - The minimum first payment amount
must be at least $50 per month and at least $250 per year.
If the Certificate Holder elects a fixed Annuity and We
determine that the Certificate Holder would receive larger
payments by applying the Certificate Holder's Account Value,
reduced by the deferred sales charge, to a single premium
immediate Annuity currently offered by Us, We will make the
larger payments.
We determine the first payment of a variable Annuity, or the
payment amount of a fixed Annuity, using the Annuitant's (and
second Annuitant's if applicable) adjusted age which We
calculate as follows:
(a) If Annuity payments begin any time between July 1, 1992
and December 31, 1999, the adjusted age is the
Annuitant's age as of the birthday closest in time to
the Annuity Date reduced by one (1) year.
(b) If the Annuity begins any time between January 1, 2000
and December 31, 2009, the adjusted age is the
Annuitant's age as of the birthday closest in time to
the Annuity Date reduced by two (2) years.
(c) For each succeeding decade, the adjusted age is the
Annuitant's age as determined in (b), reduced by one
additional year.
The Annuity rates for Options 2 and 3 are based on mortality
from 1983 Table A.
Assumed Annual Net Return Rate is the interest rate used to
determine the amount of the first Annuity payment under a
variable Annuity. The Separate Account must earn this rate plus
enough to cover the mortality and expense risks charges (which
may include profit) and administrative charges if future
variable Annuity payments are to remain level.
25
<PAGE>
The Certificate Holder must give written notice to Us at least
30 days before the Annuity payments begin, electing or
changing:
(a) The date on which Annuity payments are to begin;
(b) The Annuity Option;
(c) Whether the payments are to be made monthly, quarterly,
semiannually or annually;
(d) The investment options used to provide Annuity payments.
The first Annuity payment may not be earlier than one (1)
calendar year after the initial Purchase Payment, nor later
than the later of the:
(a) First day of the month following the Annuitant's
birthday shown on the Contract Schedule; or
(b) Tenth anniversary of the last Purchase Payment. In lieu
of the election of an Annuity, the Certificate Holder
may request a lump sum payment.
12.03 Annuity Unit - The number of Annuity Units per Fund is based on
the amount of the first variable Annuity payment which is equal
to:
(a) The portion of the Certificate Holder's Account Value
(minus any premium taxes) applied to pay a variable
Annuity; divided by,
(b) 1000; multiplied by,
(c) The payment rate for the Annuity Option chosen.
Such amount, or portion, of the variable Annuity payment will
be divided by the Annuity Unit value for the appropriate Fund
on the tenth Valuation Period before the due date of the first
payment to determine the number of each Fund's Annuity Units.
The number of each Fund's Annuity Unit remains fixed. Each
future payment is equal to the sum of the products of each
Fund's Annuity Unit value multiplied by the appropriate number
of units. The Fund's Annuity Unit value on the tenth Valuation
Period prior to the due date of the payment is used.
12.04 Annuity Unit Value - For any Valuation Period, a Fund's Annuity
Unit value is equal to:
(a) The value for the previous Valuation Period; multiplied
by,
(b) The Annuity Net Return Factor for the Valuation Period;
multiplied by,
(c) A daily factor to reflect the Assumed Annual Net Return
Rate (the factor for 3.5% per year is .9999058; for 5%
per year it is .9998663).
The dollar value of a Fund(s) Annuity Unit values and payments
may go up or down due to investment gain or loss.
12.05 Annuity Net Return Factor - The Annuity net return factor is
used to compute all Separate Account Annuity payments for any
Fund.
26
<PAGE>
The Annuity net return factor(s) for each Fund is equal to
1.0000000 plus the net return rate. The net return rate is
equal to:
(a) The value of the shares of the Fund held by the Separate
Account at the end of a Valuation Period; minus,
(b) The value of the shares of the Fund held by the Separate
Account at the start of the Valuation Period; plus or
minus,
(c) Taxes (or reserves for taxes) on the Separate Account
(if any); divided by
(d) The total value of the Fund(s) Accumulation Units and
Fund(s) Annuity Units of the Separate Account at the
start of the Valuation Period; minus,
(e) A daily actuarial charge as shown of the Contract
Schedule for Annuity mortality and expense risks and
profit and a daily administrative charge which will not
exceed the administrative charge as shown on the
Contract Schedule.
The net return rate may be more or less than zero (0) percent.
The value of a share of the Fund is equal to the net assets of
the Fund divided by the number of shares outstanding.
12.06 Annuity Options
Option 1 - Payments for a Stated Period of Time - An Annuity
will be paid for the number of years chosen. The number of
years must be at least 5 and not more than 30.
If payments for this Annuity Option are made under a variable
Annuity, the present value of any remaining payments may be
withdrawn at any time. Option 2 - Life Income - An Annuity will
be paid for the life of the Annuitant. If also chosen, We will
guarantee payments for 60, 120, 180, or 240 months.
Option 3 - Life Income Based upon the Lives of Two Annuitants -
An Annuity will be paid during the lives of the Annuitant and a
second Annuitant. Payments will continue until both Annuitants
have died. When this Annuity Option is chosen, a choice must be
made of:
(a) 100% of the payment to continue after the first death;
(b) 66-2/3% of the payment to continue after the first
death;
(c) 50% of the payment to continue after the first death;
(d) Payments for a minimum of 120 months with 100% of the
payment to continue after the first death; or
(e) 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.
We may make other options available as allowed by law.
27
<PAGE>
OPTION 1
Payments for a Stated Period of Time
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Guaranteed Monthly Quarterly Semi-Annual Annual
Years Rate Payment Payment Payment Payment
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
5 3.00% 17.91 53.59 106.78 211.99
6 3.00% 15.14 45.30 90.27 179.22
7 3.00% 13.16 39.39 78.49 155.83
8 3.00% 11.68 34.96 69.66 138.31
9 3.00% 10.53 31.52 62.81 124.69
10 3.00% 9.61 28.77 57.33 113.82
11 3.00% 8.86 26.52 52.85 104.93
12 3.00% 8.24 24.65 49.13 97.54
13 3.00% 7.71 23.08 45.98 91.29
14 3.00% 7.26 21.73 43.29 85.95
15 3.00% 6.87 20.56 40.96 81.33
16 3.00% 6.53 19.54 38.93 77.29
17 3.00% 6.23 18.64 37.14 73.74
18 3.00% 5.96 17.84 35.56 70.59
19 3.00% 5.73 17.13 34.14 67.78
20 3.00% 5.51 16.50 32.87 65.26
21 3.00% 5.32 15.92 31.72 62.98
22 3.00% 5.15 15.40 30.68 60.92
23 3.00% 4.99 14.92 29.74 59.04
24 3.00% 4.84 14.49 28.88 57.33
25 3.00% 4.71 14.09 28.08 55.76
26 3.00% 4.59 13.73 27.36 54.31
27 3.00% 4.47 13.39 26.68 52.97
28 3.00% 4.37 13.08 26.06 51.74
29 3.00% 4.27 12.79 25.49 50.60
30 3.00% 4.18 12.52 24.95 49.53
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
OPTION 2
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
Payments Guaranteed for a Stated Period of Months
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted None 60 120 180 240
Age of -------------------------------------------------------------------------------------------------------------------
Annuitant Male Female Male Female Male Female Male Female Male Female
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $ 4.27 $3.90 $4.26 $ 3.90 $ 4.22 $ 3.89 $ 4.17 $ 3.86 $ 4.08 $ 3.82
51 4.34 3.97 4.33 3.96 4.30 3.95 4.23 3.92 4.14 3.88
52 4.43 4.03 4.41 4.03 4.37 4.01 4.30 3.98 4.20 3.93
53 4.51 4.10 4.50 4.10 4.45 4.08 4.37 4.04 4.26 3.99
54 4.60 4.18 4.59 4.17 4.54 4.15 4.45 4.11 4.32 4.04
55 4.70 4.25 4.68 4.25 4.62 4.22 4.53 4.18 4.39 4.11
56 4.80 4.34 4.78 4.33 4.72 4.30 4.61 4.25 4.45 4.17
57 4.91 4.42 4.89 4.41 4.82 4.38 4.69 4.32 4.51 4.23
58 5.03 4.52 5.00 4.51 4.92 4.47 4.78 4.40 4.58 4.30
59 5.15 4.61 5.12 4.60 5.03 4.56 4.87 4.48 4.65 4.37
60 5.28 4.72 5.25 4.70 5.14 4.66 4.96 4.57 4.71 4.44
61 5.43 4.83 5.39 4.81 5.27 4.76 5.06 4.66 4.78 4.51
62 5.58 4.95 5.53 4.93 5.39 4.87 5.16 4.75 4.84 4.58
63 5.74 5.08 5.69 5.05 5.53 4.99 5.26 4.85 4.90 4.65
64 5.91 5.21 5.85 5.18 5.66 5.10 5.36 4.95 4.96 4.72
65 6.10 5.36 6.03 5.32 5.81 5.22 5.46 5.05 5.02 4.79
66 6.30 5.51 6.21 5.47 5.96 5.36 5.56 5.16 5.08 4.86
67 6.51 5.67 6.41 5.63 6.12 5.50 5.66 5.26 5.13 4.93
68 6.73 5.85 6.62 5.80 6.28 5.65 5.77 5.37 5.18 5.00
69 6.97 6.04 6.84 5.98 6.44 5.80 5.86 5.49 5.23 5.06
70 7.23 6.25 7.07 6.18 6.61 5.97 5.96 5.60 5.27 5.12
71 7.51 6.47 7.32 6.39 6.79 6.14 6.05 5.71 5.31 5.18
72 7.80 6.71 7.58 6.62 6.96 6.32 6.14 5.83 5.34 5.23
73 8.12 6.98 7.85 6.86 7.14 6.50 6.23 5.94 5.37 5.28
74 8.46 7.26 8.14 7.12 7.32 6.69 6.31 6.04 5.40 5.32
75 8.82 7.57 8.45 7.40 7.50 6.89 6.38 6.14 5.42 5.35
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
29
<PAGE>
OPTION 3
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
(Annuitant is Male and Second Annuitant is Female)
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- -------------------------------------
Second
Annuitant Annuitant Option 3a Option 3b Option 3c Option 3d Option 3e
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $ 3.69 $ 4.05 $ 4.27 $ 3.69 $ 4.13
55 55 3.88 4.25 4.47 3.87 4.25
55 60 3.06 4.47 4.71 4.06 4.36
60 55 3.99 4.44 4.71 3.98 4.55
60 60 4.24 4.71 4.99 4.23 4.70
60 65 4.49 5.01 5.32 4.48 4.85
65 60 4.38 4.97 5.32 4.38 5.10
65 65 4.72 5.33 5.70 4.71 5.32
65 70 5.07 5.75 6.17 5.05 5.54
70 65 4.93 5.68 6.15 4.91 5.86
70 70 5.40 6.21 6.70 5.36 6.18
70 75 5.89 6.82 7.40 5.81 6.49
75 70 5.69 6.68 7.32 5.62 6.92
75 75 6.37 7.45 8.15 6.23 7.40
75 80 7.07 8.34 9.16 6.78 7.85
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983
Table a. The rates assume the Annuitant is Male and the
Second Annuitant is Female.
Rates for ages not shown will be provided on request
and will be computed on a basis consistent
with the rates in the above tables.
30
<PAGE>
OPTION 3
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
(Annuitant is Female and Second Annuitant is Male)
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- -------------------------------------
Second
Annuitant Annuitant Option 3a Option 3b Option 3c Option 3d Option 3e
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $ 3.75 $ 4.07 $ 4.26 $ 3.75 $ 3.98
55 55 3.88 4.25 4.47 3.87 4.06
55 60 3.99 4.44 4.71 3.98 4.12
60 55 4.06 4.47 4.71 4.06 4.37
60 60 4.24 4.71 4.99 4.23 4.47
60 65 4.38 4.97 5.32 4.38 4.54
65 60 4.49 5.01 5.32 4.48 4.89
65 65 4.72 5.33 5.70 4.71 5.02
65 70 4.93 5.68 6.15 4.91 5.14
70 65 5.07 5.75 6.17 5.05 5.60
70 70 5.40 6.21 6.70 5.36 5.79
70 75 5.69 6.68 7.32 5.62 5.96
75 70 5.89 6.83 7.40 5.81 6.63
75 75 6.37 7.45 8.15 6.23 6.92
75 80 6.78 8.11 8.99 6.54 7.15
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983
Table a. The rates assume the Annuitant is Female and
the Second Annuitant is Male.
Rates for ages not shown will be provided on request
and will be computed on a basis consistent
with the rates in the above tables.
31
<PAGE>
OPTION 1
Payments for a Stated Period of Time
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Guaranteed Monthly Quarterly Semi-Annual Annual
Years Rate Payment Payment Payment Payment
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
5 3.50% 18.12 54.19 107.92 213.99
6 3.50% 15.35 45.92 91.44 181.32
7 3.50% 13.38 40.01 79.69 158.01
8 3.50% 11.90 35.59 70.88 140.56
9 3.50% 10.75 32.16 64.05 127.00
10 3.50% 9.83 29.42 58.59 116.18
11 3.50% 9.09 27.18 54.13 107.34
12 3.50% 8.46 25.32 50.42 99.98
13 3.50% 7.94 23.75 47.29 93.78
14 3.50% 7.49 22.40 44.62 88.47
15 3.50% 7.10 21.24 42.31 83.89
16 3.50% 6.76 20.23 40.29 79.89
17 3.50% 6.47 19.34 38.51 76.37
18 3.50% 6.20 18.55 36.94 73.25
19 3.50% 5.97 17.85 35.54 70.47
20 3.50% 5.75 17.22 34.28 67.98
21 3.50% 5.56 16.65 33.15 65.74
22 3.50% 5.39 16.13 32.13 63.70
23 3.50% 5.24 15.66 31.19 61.85
24 3.50% 5.09 15.24 30.34 60.17
25 3.50% 4.96 14.85 29.56 58.62
26 3.50% 4.84 14.49 28.85 57.20
27 3.50% 4.73 14.15 28.19 55.90
28 3.50% 4.63 13.85 27.58 54.69
29 3.50% 4.53 13.57 27.02 53.57
30 3.50% 4.45 13.30 26.49 52.53
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
OPTION 1
Payments for a Stated Period of Time
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Guaranteed Monthly Quarterly Semi-Annual Annual
Years Rate Payment Payment Payment Payment
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
5 5.00% 18.74 56.00 111.33 219.98
6 5.00% 15.99 47.77 94.96 187.64
7 5.00% 14.02 41.90 83.30 164.59
8 5.00% 12.56 37.52 74.58 147.35
9 5.00% 11.42 34.11 67.81 133.99
10 5.00% 10.51 31.40 62.42 123.34
11 5.00% 9.77 29.19 58.03 114.66
12 5.00% 9.16 27.36 54.38 107.45
13 5.00% 8.64 25.81 51.31 101.39
14 5.00% 8.20 24.50 48.69 96.21
15 5.00% 7.82 23.36 46.44 91.75
16 5.00% 7.49 22.37 44.47 87.88
17 5.00% 7.20 21.51 42.75 84.48
18 5.00% 6.94 20.74 41.23 81.47
19 5.00% 6.71 20.06 39.88 78.80
20 5.00% 6.51 19.46 38.68 76.42
21 5.00% 6.33 18.91 37.59 74.28
22 5.00% 6.17 18.42 36.62 72.35
23 5.00% 6.02 17.98 35.73 70.61
24 5.00% 5.88 17.57 34.93 69.02
25 5.00% 5.76 17.20 34.20 67.57
26 5.00% 5.65 16.87 33.53 66.25
27 5.00% 5.54 16.56 32.92 65.04
28 5.00% 5.45 16.28 32.35 63.93
29 5.00% 5.36 16.01 31.83 62.90
30 5.00% 5.28 15.77 31.35 61.95
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE>
OPTION 2
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
Payments Guaranteed for a Stated Period of Months
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted None 60 120 180 240
Age of -------------------------------------------------------------------------------------------------------------------
Annuitant Male Female Male Female Male Female Male Female Male Female
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $ 4.56 $ 4.20 $ 4.55 $ 4.19 $ 4.51 $ 4.18 $ 4.45 $ 4.15 $ 4.36 $ 4.11
51 4.64 4.26 4.62 4.25 4.58 4.24 4.51 4.21 4.42 4.16
52 4.72 4.32 4.70 4.32 4.66 4.30 4.58 4.26 4.48 4.21
53 4.80 4.39 4.79 4.38 4.74 4.36 4.65 4.32 4.53 4.27
54 4.89 4.46 4.87 4.46 4.82 4.43 4.73 4.39 4.59 4.32
55 4.99 4.54 4.97 4.53 4.91 4.50 4.80 4.46 4.65 4.38
56 5.09 4.62 5.07 4.61 5.00 4.58 4.88 4.53 4.72 4.44
57 5.20 4.71 5.17 4.70 5.10 4.66 4.96 4.60 4.78 4.50
58 5.32 4.80 5.29 4.79 5.20 4.75 5.05 4.68 4.84 4.57
59 5.44 4.90 5.41 4.88 5.31 4.84 5.14 4.76 4.91 4.63
60 5.57 5.00 5.53 4.99 5.42 4.93 5.23 4.84 4.97 4.70
61 5.71 5.11 5.67 5.09 5.54 5.03 5.32 4.93 5.03 4.77
62 5.86 5.23 5.81 5.21 5.66 5.14 5.42 5.02 5.09 4.84
63 6.02 5.36 5.97 5.33 5.79 5.25 5.51 5.11 5.16 4.91
64 6.20 5.49 6.13 5.46 5.93 5.37 5.61 5.21 5.21 4.98
65 6.38 5.64 6.31 5.60 6.07 5.49 5.71 5.31 5.27 5.05
66 6.58 5.79 6.49 5.75 6.22 5.63 5.81 5.41 5.32 5.12
67 6.79 5.95 6.69 5.91 6.38 5.76 5.91 5.52 5.38 5.18
68 7.02 6.13 6.89 6.08 6.53 5.91 6.01 5.63 5.42 5.25
69 7.26 6.32 7.11 6.26 6.70 6.06 6.11 5.74 5.47 5.31
70 7.52 6.53 7.35 6.45 6.86 6.23 6.20 5.85 5.51 5.37
71 7.80 6.75 7.59 6.66 7.03 6.39 6.29 5.96 5.54 5.42
72 8.09 6.99 7.85 6.89 7.21 6.57 6.38 6.07 5.57 5.47
73 8.41 7.26 8.12 7.13 7.38 6.75 6.46 6.17 5.60 5.51
74 8.75 7.54 8.41 7.39 7.55 6.94 6.53 6.28 5.63 5.55
75 9.12 7.85 8.71 7.66 7.73 7.13 6.61 6.38 5.65 5.59
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
34
<PAGE>
OPTION 2
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
Payments Guaranteed for a Stated Period of Months
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted None 60 120 180 240
Age of -------------------------------------------------------------------------------------------------------------------
Annuitant Male Female Male Female Male Female Male Female Male Female
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $5.48 $5.12 $5.46 $5.11 $5.41 $5.09 $5.34 $5.06 $5.24 $5.01
51 5.55 5.17 5.53 5.17 5.48 5.14 5.40 5.11 5.29 5.05
52 5.63 5.23 5.61 5.23 5.55 5.20 5.46 5.16 5.34 5.10
53 5.71 5.30 5.69 5.29 5.62 5.26 5.53 5.22 5.40 5.15
54 5.80 5.37 5.77 5.36 5.70 5.33 5.60 5.27 5.45 5.20
55 5.89 5.44 5.86 5.43 5.79 5.39 5.67 5.34 5.51 5.25
56 5.99 5.52 5.96 5.51 5.87 5.47 5.74 5.40 5.56 5.31
57 6.10 5.60 6.06 5.59 5.97 5.54 5.82 5.47 5.62 5.37
58 6.21 5.69 6.17 5.67 6.06 5.62 5.90 5.54 5.68 5.42
59 6.33 5.79 6.29 5.77 6.17 5.71 5.98 5.61 5.74 5.48
60 6.46 5.89 6.41 5.87 6.28 5.80 6.06 5.69 5.79 5.55
61 6.60 6.00 6.55 6.97 6.39 5.90 6.15 5.77 5.85 5.61
62 6.75 6.11 6.69 6.08 6.51 6.00 6.24 5.86 5.91 5.67
63 6.91 6.23 6.84 6.20 6.64 6.10 6.33 5.95 5.96 5.73
64 7.09 6.37 7.00 6.33 6.77 6.22 6.42 6.04 6.02 5.80
65 7.27 6.51 7.18 6.46 6.91 6.34 6.52 6.13 6.07 5.86
66 7.47 6.66 7.36 6.61 7.05 6.46 6.61 6.23 6.12 5.92
67 7.68 6.82 7.55 6.76 7.20 6.60 6.70 6.33 6.16 5.99
68 7.91 7.00 7.76 6.93 7.35 6.74 6.80 6.43 6.21 6.04
69 8.15 7.19 7.98 7.11 7.51 6.89 6.89 6.54 6.25 6.10
70 8.41 7.39 8.21 7.30 7.67 7.04 6.97 6.64 6.28 6.15
71 8.69 7.62 8.45 7.51 7.83 7.21 7.06 6.74 6.32 6.20
72 8.99 7.86 8.70 7.73 8.00 7.38 7.14 6.85 6.35 6.25
73 9.31 8.12 8.97 7.97 8.16 7.55 7.21 6.95 6.37 6.29
74 9.65 8.41 9.26 8.23 8.33 7.73 7.29 7.04 6.39 6.33
75 10.02 8.72 9.55 8.50 8.50 7.92 7.35 7.14 6.41 6.36
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a.
Rates for ages not shown will be provided on request and will be computed
35
<PAGE>
on a basis consistent with the rates in the above tables.
36
<PAGE>
OPTION 3
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
(Annuitant is Male and Second Annuitant is Female)
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- -------------------------------------
Second
Annuitant Annuitant Option 3a Option 3b Option 3c Option 3d Option 3e
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $ 3.97 $ 4.35 $ 4.56 $ 3.97 $ 4.42
55 55 4.16 4.54 4.76 4.15 4.54
55 60 4.34 4.76 5.00 4.34 4.64
60 55 4.27 4.73 5.00 4.26 4.83
60 60 4.51 4.99 5.27 4.50 4.98
60 65 4.76 5.29 5.60 4.75 5.13
65 60 4.66 5.25 5.61 4.65 5.39
65 65 4.99 5.61 5.99 4.98 5.60
65 70 5.34 6.03 6.46 5.31 5.81
70 65 5.19 5.97 6.44 5.17 6.14
70 70 5.67 6.49 6.99 5.62 6.47
70 75 6.16 7.10 7.68 6.07 6.77
75 70 5.95 6.96 7.61 5.87 7.20
75 75 6.64 7.73 8.43 6.48 7.68
75 80 7.33 8.62 9.45 7.02 8.13
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983
Table a. The rates assume the Annuitant is Male and the
Second Annuitant is Female.
Rates for ages not shown will be provided on request
and will be computed on a basis consistent
with the rates in the above tables.
37
<PAGE>
OPTION 3
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
(Annuitant is Female and Second Annuitant is Male)
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- -------------------------------------
Second
Annuitant Annuitant Option 3a Option 3b Option 3c Option 3d Option 3e
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $ 4.03 $ 4.36 $ 4.55 $ 4.03 $ 4.41
55 55 4.16 4.54 4.76 4.15 4.54
55 60 4.27 4.73 5.00 4.26 4.83
60 55 4.34 4.76 5.00 4.34 4.64
60 60 4.51 4.99 5.27 4.50 4.98
60 65 4.66 5.25 5.61 4.65 5.39
65 60 4.76 5.29 5.60 4.75 5.13
65 65 4.99 5.61 5.99 4.98 5.60
65 70 5.19 5.97 6.44 5.17 6.14
70 65 5.34 6.03 6.46 5.31 5.81
70 70 5.67 6.49 6.99 5.62 6.47
70 75 5.95 6.96 7.61 5.87 7.20
75 70 6.16 7.10 7.68 6.07 6.77
75 75 6.64 7.73 8.43 6.48 7.68
75 80 7.04 8.39 9.29 6.79 8.70
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983
Table a. The rates assume the Annuitant is Female and
the Second Annuitant is Male.
Rates for ages not shown will be provided on request
and will be computed on a basis consistent
with the rates in the above tables.
38
<PAGE>
OPTION 3
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
(Annuitant is Male and Second Annuitant is Female)
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- -------------------------------------
Second
Annuitant Annuitant Option 3a Option 3b Option 3c Option 3d Option 3e
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $ 4.88 $ 5.26 $ 5.48 $ 4.88 $ 5.34
55 55 5.04 5.44 5.66 5.04 5.43
55 60 5.21 5.65 5.89 5.21 5.53
60 55 5.15 5.63 5.91 5.14 5.73
60 60 5.37 5.87 6.16 5.37 5.86
60 65 5.61 6.16 6.49 5.60 6.01
65 60 5.52 6.14 6.51 5.51 6.28
65 65 5.83 6.49 6.87 5.82 6.47
65 70 6.17 6.90 7.33 6.13 6.67
70 65 6.04 6.84 7.34 6.00 7.03
70 70 6.49 7.35 7.87 6.44 7.33
70 75 6.97 7.96 8.56 6.87 7.62
75 70 6.77 7.84 8.51 6.68 8.08
75 75 7.45 8.60 9.33 7.27 8.55
75 80 8.14 9.49 10.35 7.80 8.98
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983
Table a. The rates assume the Annuitant is Male and the
Second Annuitant is Female.
Rates for ages not shown will be provided on request
and will be computed on a basis consistent
with the rates in the above tables.
39
<PAGE>
OPTION 3
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
(Annuitant is Female and the Second Annuitant is Male)
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- -------------------------------------
Second
Annuitant Annuitant Option 3a Option 3b Option 3c Option 3d Option 3e
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $ 4.93 $ 5.27 $ 5.46 $ 4.93 $ 5.19
55 55 5.04 5.44 5.66 5.04 5.43
55 60 5.15 5.63 5.91 5.14 5.73
60 55 5.21 5.65 5.89 5.21 5.53
60 60 5.37 5.87 6.16 5.37 5.86
60 65 5.52 6.14 6.51 5.51 6.28
65 60 5.61 6.16 6.49 5.60 6.01
65 65 5.83 6.49 6.87 5.82 6.47
65 70 6.04 6.84 7.34 6.00 7.03
70 65 6.17 6.90 7.33 6.13 6.67
70 70 6.49 7.35 7.87 6.44 7.33
70 75 6.77 7.84 8.51 6.68 8.08
75 70 6.97 7.96 8.56 6.87 7.62
75 75 7.45 8.60 9.33 7.27 8.55
75 80 7.86 9.28 10.20 7.57 9.59
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983,
Table a. The rates assume the Annuitant is Female and
the Second Annuitant is Male.
Rates for ages not shown will be provided on request
and will be computed on a basis consistent
with the rates in the above tables.
40
<PAGE>
Aetna Life Insurance and Annuity Company
Home Office: 151 Farmington Avenue
P.O. Box 30670
Hartford, Connecticut 06150-0670
(800) 531-4547
Group Variable, Fixed, or Combination Annuity Contract
Nonparticipating
ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT, WHEN BASED ON INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT. THIS CONTRACT CONTAINS A MARKET VALUE ADJUSTMENT FORMULA.
APPLICATION OF A MARKET VALUE ADJUSTMENT MAY RESULT IN EITHER AN INCREASE OR
DECREASE IN THE CURRENT VALUE. THE MARKET VALUE ADJUSTMENT FORMULA DOES NOT
APPLY TO A GUARANTEED TERM AT THE TIME OF ITS MATURITY.
41
Aetna Life Insurance and Annuity Company
Endorsement
The Contract and Certificate are endorsed as follows.
1. On the Contract Schedule, under Separate Account and AG Account, delete
Transfers and replace it with the following.
Transfers:
We allow an unlimited number of transfers during the Accumulation Period.
Each calendar year, [12] transfers are free of charge. We reserve the
right to impose a transfer charge of up to [$10] for each subsequent
transfer.
When a variable Annuity has been elected, [four] free transfers per
calendar year are allowed among the Funds available during the Annuity
Period. We reserve the right to allow additional transfers.
2. On the Contract Schedule, delete Systematic Withdrawal Option.
3. Delete Section 1.17, Dollar Cost Averaging, and replace it with the
following.
1.17 Dollar Cost Averaging
A program that permits the Certificate Holder to systematically transfer
amounts from any of the Funds or an available AG Account guaranteed term
to any of the Funds. We reserve the right to establish terms and
conditions governing Dollar Cost Averaging. Dollar Cost Averaging is not
available if an SDO is in effect.
4. Delete the third paragraph under Section 2.10, Change of Contract.
5. Delete the second sentence in Section 3.02, Certificate Holder Rights,
and replace it with the following:
The Certificate Holder and any joint Certificate Holder are named on the
Specifications page of the Certificate.
6. Delete Section 5.02, Allocation of Purchase Payments, and replace it with
the following.
5.02 Allocation of Purchase Payments
Each Net Purchase Payment will be allocated, as directed by the
Certificate Holder, and subject to terms and conditions We specify, among
any available:
(a) Funds in which the Separate Account invests;
(b) AG Account guaranteed terms.
1
<PAGE>
For each Net Purchase Payment, the Certificate Holder shall tell Us the
percentage of each Net Purchase Payment to allocate to any AG Account
guaranteed term made available subject to terms and conditions We
specify, and/or each Fund. Unless different instructions are received for
any subsequent Net Purchase Payment, the allocation will be the same as
for the most recent directive from the Certificate Holder. If the same
guaranteed term(s) are not available, the next shortest will be used. If
no shorter guaranteed term is available, the next longer term will be
used.
7. Delete Section 7.02, Deposit Period, and replace it with the following.
7.02 Deposit Period
A day, a calendar week, a calendar month, a calendar quarter, or any
other period of time We specify during which Net Purchase Payment(s),
transfers and/or reinvestments may be allocated to one or more AG Account
guaranteed terms. We reserve the right to shorten or to extend the
deposit period. During a deposit period, We may offer any number of
guaranteed terms and more than one guaranteed term of the same duration
may be offered.
8. Delete Section 7.03, Guaranteed Term, and replace it with the following.
7.03 Guaranteed Term
The period of time We specify for which a specific guaranteed rate(s) are
offered on amounts invested during a specific deposit period. Guaranteed
terms are made available subject to Our terms and conditions, including,
but not limited to, Our right to restrict allocations to new Net Purchase
Payments (such as by prohibiting transfers into a particular guaranteed
term from any other guaranteed term or from any of the Funds, or by
prohibiting reinvestment of a Maturity Value to a particular guaranteed
term. More than one guaranteed term of the same duration may be offered
during a deposit period.
9. Delete Section 7.04, Guaranteed Term(s) Groups, and replace it with the
following.
7.04 Guaranteed Term(s) Groups
All AG Account guaranteed term(s) of the same duration (from the close of
the deposit period until the designated Maturity Date).
10. Delete the first sentence in Section 7.06, Allocation of Net Purchase
Payments to the AG Account, and replace it with the following.
When the Certificate Holder wishes to allocate all or any portion of a
Net Purchase Payment to the AG Account, he or she must tell Us the
percentage to apply to one or more of the guaranteed terms made
available, subject to terms and conditions We specify, during the current
deposit period.
11. Delete subsection (c) under Section 7.08, Withdrawals and Transfers from
the AG Account, and replace it with the following.
(c) Withdrawals under an SDO.
2
<PAGE>
12. Add the following as subsection (d) under Section 7.08, Withdrawals and
Transfers from the AG Account.
(d) Under a qualified Contract when the amount withdrawn is equal to the
required minimum distribution for the Certificate Holder's Account using
a method permitted under the Code and agreed to by Us.
13. Delete the second sentence in Section 7.10, AG Account Market Value
Adjustment (Factor), and replace it with the following.
Except as noted in Sections 7.07, 7.08, 7.09, 10.02 and 12.01, an MVA
factor is applied to any amount withdrawn from the AG Account before the
end of a guaranteed term.
14. Delete subsection (b) under Section 8.02, Transfers During the
Accumulation Period, delete (4) and replace it with the following.
(b) Any AG Account guaranteed term made available, subject to terms and
conditions We specify.
15. In the fourth paragraph in Section 8.02, Transfers During the
Accumulation Period, delete (3) and (4) and replace them with the
following.
(3) transfers under the Dollar Cost Averaging program;
(4) amounts distributed under an SDO.
16. Delete the last sentence in subsections (c) and (f) under Section 8.05,
Waiver of Deferred Sales Charge, and replace it with the following.
(c) This waiver is not available if an SDO has been in effect at any
time during the calendar year;
(f) For a distribution which is part of an SDO.
17. Delete Section 8.07, Systematic Withdrawal Option (SWO), and replace it
with the following.
8.07 Systematic Distribution Options (SDOs)
Without further endorsement of the Contract or Certificate, We may, from
time to time, make one or more systematic distribution options (SDOs)
available during the Accumulation Period. When an SDO is elected, We will
make automatic payments from the Certificate Holder's Account. No
deferred sales charge or MVA will apply to the automatic payments made
under an SDO.
Any SDO will be subject to the following criteria:
(a) Any SDO will be available to similarly situated contracts
uniformly, and on the basis of objective criteria consistently
applied;
(b) The availability of any SDO may be limited by terms and conditions
applicable to the election of such SDO; and
3
<PAGE>
(c) We may discontinue the availability of an SDO at any time. Except
to the extent required to comply with applicable law, the
availability of an SDO will apply only to future elections. Such a
change will not affect SDOs in effect at the time an option is
discontinued.
18. Insert the following at the end of Section 12.01, Designation of
Annuitant.
During the Annuity Period when a variable Annuity has been elected, at
the request of the Certificate Holder, all or any portion of the amount
allocated to a Fund may be transfered to any other Fund available during
the Annuity Period. The number of transfers allowed without charge each
calendar year is shown on the Contract Schedule. We reserve the right to
allow additional transfers.
Transfer requests must be expressed as a percentage of the allocation
among the Funds of the amount upon which the variable Annuity will be
based. We reserve the right to establish a minimum transfer amount.
Transfers will be effective as of the Valuation Period in which We
receive a transfer request in good order at Our Home Office.
19. Delete the second paragraph of Section 12.02 Terms of Annuity Options,
and replace it with the following.
If a fixed Annuity is chosen, We will use the applicable current
settlement rate if it will provide higher fixed Annuity payments.
20. Delete Section 12.06, Annuity Options, and replace it with the following.
12.06 Annuity Options
Option 1. Payments for a Specified Period: Payments are made for the
number of years specified by the Certificate Holder. The number of years
must be at least five and not more than 30.
Option 2. Life income based on the life of the Annuitant: Payments are
made until the death of the Annuitant. When this option is elected, the
Certificate Holder must also choose one of the following:
(a) payments cease at the death of the Annuitant;
(b) payments are guaranteed for a specified period from five to 30
years;
(c) cash refund: if the Annuitant dies, the Beneficiary will receive a
lump sum payment equal to the amount applied to the Annuity option
(less any premium tax, if applicable) less the total amount of
Annuity payments made prior to such death. This cash refund
feature is only available if the total amount applied to the
Annuity option is allocated to a fixed Annuity.
Option 3. Life income based on the lives of two Annuitants: Payments are
made for the lives of two Annuitants, one of whom is designated the
second Annuitant, and cease only when both Annuitants have died. When
this option is elected, the Certificate Holder must also choose one of
the following:
(a) 100% of the payment to continue after the first death;
(b) 66-2/3% of the payment to continue after the first death;
(c) 50% of the payment to continue after the first death;
4
<PAGE>
(d) 100% of the payment to continue after the first death and payments
are guaranteed for a period of five to 30 years;
(e) 100% of the payment to continue at the death of the designated
second Annuitant and 50% of the payment to continue at the death
of the Annuitant; or
(f) 100% of the payment continues after the first death with a cash
refund feature. If the Annuitant and designated second Annuitant
die, the Beneficiary will receive a lump sum payment equal to the
amount applied to the Annuity option (less any premium tax) less
the total amount of Annuity payments paid prior to such death.
This cash refund feature is only available if the total amount
applied to the Annuity option is allocated to a fixed Annuity.
If a fixed Annuity is chosen under Option 1, Option 2 (a) or (b), or
Option 3 (a) or (d), the Certificate Holder may elect an annual increase
of one, two or three percent compounded annually.
As allowed under applicable state law, We reserve the right to offer
additional Annuity options.
21. Delete the tables showing rates for Annuity Options 1, 2 and 3 and
replace them with the tables provided in Addendum A attached.
Endorsed and made a part of the Contract and the Certificate as of the Effective
Date or when the endorsement is approved, whichever is later.
/s/ Dan Kearney
President
Aetna Life Insurance and Annuity Company
5
Aetna Life Insurance and Annuity Company
Endorsement
The Contract is endorsed as follows.
1. On the Contract Schedule, under Separate Account and AG Account, delete
Transfers and replace it with the following.
Transfers:
We allow an unlimited number of transfers during the Accumulation Period.
Each calendar year, [12] transfers are free of charge. We reserve the
right to impose a transfer charge of up to [$10] for each subsequent
transfer.
When a variable Annuity has been elected, [four] free transfers per
calendar year are allowed among the Funds available during the Annuity
Period. We reserve the right to allow additional transfers.
2. On the Contract Schedule, delete Systematic Withdrawal Option.
3. Delete Section 1.17, Dollar Cost Averaging, and replace it with the
following.
1.17 Dollar Cost Averaging
A program that permits the Contract Holder to systematically transfer
amounts from any of the Funds or an available AG Account guaranteed term
to any of the Funds. We reserve the right to establish terms and
conditions governing Dollar Cost Averaging. Dollar Cost Averaging is not
available if an SDO is in effect.
4. Delete the third paragraph under Section 2.10, Change of Contract.
5. Delete Section 5.02, Allocation of Purchase Payments, and replace it
with the following.
5.02 Allocation of Purchase Payments
Each Net Purchase Payment will be allocated, as directed by the Contract
Holder, and subject to terms and conditions We specify, among any
available:
(a) Funds in which the Separate Account invests;
(b) AG Account guaranteed terms.
For each Net Purchase Payment, the Contract Holder shall tell Us the
percentage of each Net Purchase Payment to allocate to any AG Account
guaranteed term made available subject to terms and conditions We
specify, and/or each Fund. Unless different instructions are received for
any subsequent Net Purchase Payment, the allocation will be the same as
for the most recent directive from the Contract Holder. If the same
guaranteed term(s) are not available, the next shortest will be used. If
no shorter guaranteed term is available, the next longer term will be
used.
1
<PAGE>
6. Delete Section 7.02, Deposit Period, and replace it with the following.
7.02 Deposit Period
A day, a calendar week, a calendar month, a calendar quarter, or any
other period of time We specify during which Net Purchase Payment(s),
transfers and/or reinvestments may be allocated to one or more AG Account
guaranteed terms. We reserve the right to shorten or to extend the
deposit period. During a deposit period, We may offer any number of
guaranteed terms and more than one guaranteed term of the same duration
may be offered.
7. Delete Section 7.03, Guaranteed Term, and replace it with the following.
7.03 Guaranteed Term
The period of time We specify for which a specific guaranteed rate(s)
are offered on amounts invested during a specific deposit period.
Guaranteed terms are made available subject to Our terms and
conditions, including, but not limited to, Our right to restrict
allocations to new Net Purchase Payments (such as by prohibiting
transfers into a particular guaranteed term from any other guaranteed
term or from any of the Funds, or by prohibiting reinvestment of a
Maturity Value to a particular guaranteed term). More than one
guaranteed term of the same duration may be offered during a deposit
period.
8. Delete Section 7.04, Guaranteed Term(s) Groups, and replace it with the
following.
7.04 Guaranteed Term(s) Groups
All AG Account guaranteed term(s) of the same duration (from the close of
the deposit period until the designated Maturity Date).
9. Delete the first sentence in Section 7.06, Allocation of Net Purchase
Payments to the AG Account, and replace it with the following.
When the Contract Holder wishes to allocate all or any portion of a Net
Purchase Payment to the AG Account, he or she must tell Us the percentage
to apply to one or more of the guaranteed terms made available, subject
to terms and conditions We specify, during the current deposit period.
10. Delete subsection (c) under Section 7.08, Withdrawals and Transfers from
the AG Account, and replace it with the following.
(c) Withdrawals under an SDO.
11. Add the following as subsection (d) under Section 7.08, Withdrawals and
Transfers from the AG Account.
(d) Under a qualified Contract when the amount withdrawn is equal to the
required minimum distribution for the Contract using a method permitted
under the Code and agreed to by Us.
2
<PAGE>
12. Delete the second sentence in Section 7.10, AG Account Market Value
Adjustment (Factor), and replace it with the following.
Except as noted in Sections 7.07, 7.08, 7.09, 10.02 and 12.01, an MVA
factor is applied to any amount withdrawn from the AG Account before the
end of a guaranteed term.
13. Delete subsection (b) under Section 8.02, Transfers During the
Accumulation Period, delete (4) and replace it with the following.
(b) Any AG Account guaranteed term made available, subject to terms and
conditions We specify.
14. In the fourth paragraph in Section 8.02, Transfers During the
Accumulation Period, delete (3) and (4) and replace them with the
following.
(3) transfers under the Dollar Cost Averaging program;
(4) amounts distributed under an SDO.
15. Delete the last sentence in subsections (c) and (f) under Section 8.05,
Waiver of Deferred Sales Charge, and replace it with the following.
(c) This waiver is not available if an SDO has been in effect at any
time during the calendar year;
(f) For a distribution which is part of an SDO.
16. Delete Section 8.07, Systematic Withdrawal Option (SWO), and replace it
with the following.
8.07 Systematic Distribution Options (SDOs)
Without further endorsement of the Contract, We may, from time to time,
make one or more systematic distribution options (SDOs) available during
the Accumulation Period. When an SDO is elected, We will make automatic
payments from the Contract. No deferred sales charge or MVA will apply to
the automatic payments made under an SDO.
Any SDO will be subject to the following criteria:
(a) Any SDO will be available to similarly situated contracts
uniformly, and on the basis of objective criteria consistently
applied;
(b) The availability of any SDO may be limited by terms and
conditions applicable to the election of such SDO; and
(c) We may discontinue the availability of an SDO at any time. Except
to the extent required to comply with applicable law, the
availability of an SDO will apply only to future elections. Such a
change will not affect SDOs in effect at the time an option is
discontinued.
3
<PAGE>
17. Insert the following at the end of Section 12.01, Designation of
Annuitant.
During the Annuity Period when a variable Annuity has been elected, at
the request of the Contract Holder, all or any portion of the amount
allocated to a Fund may be transfered to any other Fund available during
the Annuity Period. The number of transfers allowed without charge each
calendar year is shown on the Contract Schedule. We reserve the right to
allow additional transfers.
Transfer requests must be expressed as a percentage of the allocation
among the Funds of the amount upon which the variable Annuity will be
based. We reserve the right to establish a minimum transfer amount.
Transfers will be effective as of the Valuation Period in which We
receive a transfer request in good order at Our Home Office.
18. Delete the second paragraph of Section 12.02 Terms of Annuity Options,
and replace it with the following.
If a fixed Annuity is chosen, We will use the applicable current
settlement rate if it will provide higher fixed Annuity payments.
19. Delete Section 12.06, Annuity Options, and replace it with the following.
12.06 Annuity Options
Option 1. Payments for a Specified Period: Payments are made for the
number of years specified by the Contract Holder. The number of years
must be at least five and not more than 30.
Option 2. Life income based on the life of the Annuitant: Payments are
made until the death of the Annuitant. When this option is elected, the
Contract Holder must also choose one of the following:
(a) payments cease at the death of the Annuitant;
(b) payments are guaranteed for a specified period from five to 30
years;
(c) cash refund: if the Annuitant dies, the Beneficiary will receive a
lump sum payment equal to the amount applied to the Annuity option
(less any premium tax, if applicable) less the total amount of
Annuity payments made prior to such death. This cash refund
feature is only available if the total amount applied to the
Annuity option is allocated to a fixed Annuity.
Option 3. Life income based on the lives of two Annuitants: Payments are
made for the lives of two Annuitants, one of whom is designated the
second Annuitant, and cease only when both Annuitants have died. When
this option is elected, the Contract Holder must also choose one of the
following:
(a) 100% of the payment to continue after the first death;
(b) 66 2/3% of the payment to continue after the first death;
(c) 50% of the payment to continue after the first death;
(d) 100% of the payment to continue after the first death and payments
are guaranteed for a period of five to 30 years;
(e) 100% of the payment to continue at the death of the designated
second Annuitant and 50% of the payment to continue at the death
of the Annuitant; or
4
<PAGE>
(f) 100% of the payment continues after the first death with a cash
refund feature. If the Annuitant and designated second
Annuitant die, the Beneficiary will receive a lump sum payment
equal to the amount applied to the Annuity option (less any
premium tax) less the total amount of Annuity payments paid prior
to such death. This cash refund feature is only available if the
total amount applied to the Annuity option is allocated to a
fixed Annuity.
If a fixed Annuity is chosen under Option 1, Option 2 (a) or (b), or
Option 3 (a) or (d), the Contract Holder may elect an annual increase of
one, two or three percent compounded annually.
As allowed under applicable state law, We reserve the right to offer
additional Annuity options.
20. Delete the tables showing rates for Annuity Options 1, 2 and 3 and
replace them with the tables provided in Addendum A attached.
Endorsed and made a part of the Contract as of the Effective Date or when the
endorsement is approved, whichever is later.
/s/ Dan Kearney
President
Aetna Life Insurance and Annuity Company
5
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 4, 1997 and February 14,
1997 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.
/s/KPMG Peat Marwick LLP
------------------------
KPMG Peat Marwick LLP
Hartford, Connecticut
April 22, 1997
[Aetna Letterhead] 151 Farmington Avenue
[Aetna Logo] Hartford, CT 06156
April 22, 1997 Susan E. Bryant
Counsel
Law Division, RE4A
Investments & Financial Services
(860) 273-7834
Fax: (860) 273-0356
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: Variable Annuity Account B of Aetna Life Insurance and Annuity Company
Post-Effective Amendment No. 7 to Registration Statement on Form N-4
File Nos. 33-79122 and 811-2512
Dear Sir or Madam:
As Counsel of Aetna Life Insurance and Annuity Company (the "Company"), I hereby
consent to the use of my opinion dated February 28, 1997 (incorporated herein by
reference to the 24f-2 Notice for the fiscal year ended December 31, 1996 filed
on behalf of Variable Annuity Account B of Aetna Life Insurance and Annuity
Company on February 28, 1997) as an exhibit to this Post-Effective Amendment No.
7 to Registration Statement on Form N-4 (File No. 33-79122).
Sincerely,
/s/Susan E. Bryant
Susan E. Bryant
Counsel
Aetna Life Insurance and Annuity Company
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