As filed with the Securities and Exchange Registration No.
Commission on June 8, 1998 Registration No. 811-2512
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
- --------------------------------------------------------------------------------
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) 273-4686
J. Neil McMurdie, Counsel
Aetna Life Insurance and Annuity Company
151 Farmington Avenue, RE4A, Hartford, Connecticut 06156
(Name and Address of Agent for Service)
- --------------------------------------------------------------------------------
Approximate date of Proposed Public Offering: As soon as practicable after the
effectiveness of this Registration Statement.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<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...................... AUV History
5 General Description of Registrant, Depositor, and
Portfolio Companies.................................. The Company; Variable Annuity
Account B; The Funds
6 Deductions and Expenses.............................. Charges and Deductions
7 General Description of Variable Annuity Contracts.... Purchase; Miscellaneous
8 Annuity Period....................................... Annuity Period
9 Death Benefit........................................ Death Benefit During Accumulation
Period; Death Benefit Payable During
Annuity Period
10 Purchases and Contract Value......................... Purchase; Contract Valuation
11 Redemptions.......................................... Right to Cancel; Withdrawals
12 Taxes................................................ Tax Status
13 Legal Proceedings.................................... Miscellaneous - Legal Matters and
Proceedings
14 Table of Contents of the Statement of
Additional Information............................... Contents of the Statement of Additional
Information
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FORM N-4 PART B (STATEMENT OF LOCATION - STATEMENT OF
ITEM NO. ADDITIONAL INFORMATION) ADDITIONAL INFORMATION
<S> <C> <C>
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
</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 "Aetna
________________" group and individual deferred variable annuity contracts
("Contracts") issued by Aetna Life Insurance and Annuity Company (the
"Company"). The Contracts are offered only in those states where the Contract
has been approved for sale in that state. The Contracts are offered as (1)
nonqualified deferred annuity contracts, including Contracts offered to a
custodian for an Individual Retirement Account under Section 408(a) of the
Internal Revenue Code of 1986, as amended (the "Code") (we reserve the right to
limit ownership of nonqualified Contracts to natural persons); (2) Individual
Retirement Annuities ("IRA"), including Roth IRAs, other than "SIMPLE IRAs" as
defined in Section 408(p) of the Code (may be subject to approval by state
regulatory agencies); or (3) Qualified Contracts used in conjunction with
certain employer sponsored retirement plans (may be subject to approval by the
Company and state regulatory agencies). In most states, group Contracts are
offered, generally 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 become participants under the
Contract. Individual Contracts are offered only in those states where the group
Contracts are not authorized for sale. (See "Purchase.")
Purchase Payments may be allocated to one or more of the Subaccounts of Variable
Annuity Account B, a separate account of the Company. The Subaccounts invest
directly in shares of the following Funds:
<TABLE>
<S> <C>
(bullet) Aetna Balanced VP, Inc. (bullet) Janus Aspen Aggressive Growth Portfolio
(bullet) Aetna Income Shares d/b/a Aetna Bond VP (bullet) Janus Aspen Balanced Portfolio
(bullet) Aetna Growth VP (bullet) Janus Aspen Growth Portfolio
(bullet) Aetna Variable Fund d/b/a Aetna Growth and Income VP (bullet) Janus Aspen Worldwide Growth Portfolio
(bullet) Aetna Index Plus Large Cap VP (bullet) MFS Total Return Series
(bullet) Aetna International VP
(bullet) Aetna Variable Encore Fund d/b/a Aetna Money Market VP (bullet) Oppenheimer Aggressive Growth Fund
(bullet) Aetna Real Estate Securities VP (bullet) Oppenheimer Growth & Income Fund
(bullet) Oppenheimer Strategic Bond Fund
(bullet) Aetna Small Company VP (bullet) Portfolio Partners MFS Emerging Equities Portfolio
(bullet) AIM V.I. Capital Appreciation Fund
(bullet) AIM V.I. Growth Fund
(bullet) AIM V.I. Growth & Income Fund (bullet) Portfolio Partners MFS Research Growth Portfolio
(bullet) AIM V.I. Value Fund (bullet) Portfolio Partners Scudder International Growth Portfolio
(bullet) Fidelity VIP Equity-Income Portfolio (bullet) Portfolio Partners MFS Value Equity Portfolio
(bullet) Fidelity VIP High Income Portfolio
(bullet) Fidelity VIP II Contrafund Portfolio
</TABLE>
In most states, the Contracts also provide that Purchase Payments may be
allocated to the Guaranteed Account, a credited interest option. In certain
states where the Guaranteed Account is not available, Purchase Payments may be
allocated to the Fixed Account.
Except as specifically mentioned, this Prospectus describes only investments
through the Separate Account. The Guaranteed Account is described in Appendix A
to this Prospectus, as well as in the Guaranteed Account's prospectus. The Fixed
Account is described in Appendix B to this Prospectus. The availability of the
Funds, the Guaranteed Account and the Fixed Account is subject to applicable
regulatory authorization; not all options may be available in all jurisdictions
or under all Contracts. (See "Investment Options.")
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 ____ of this Prospectus. An
SAI for this Prospectus and for any Fund prospectus may be obtained by
indicating the request on your Application or by calling the number listed under
the "Inquiries" section of the Prospectus Summary.
<PAGE>
THIS PROSPECTUS SHOULD BE READ IN CONJUNCTION WITH THE CURRENT PROSPECTUSES OF
THE FUNDS AND THE GUARANTEED ACCOUNT. ALL PROSPECTUSES SHOULD BE RETAINED FOR
FUTURE REFERENCE.
THE CONTRACTS ARE NOT DEPOSITS WITH, OBLIGATIONS OF OR GUARANTEED BY ANY BANK,
NOR ARE THEY INSURED BY THE FDIC; THEY ARE SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THIS PROSPECTUS, THE STATEMENT OF ADDITIONAL INFORMATION AND OTHER INFORMATION
ABOUT THE SEPARATE ACCOUNT 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
_____________, 1998.
2
<PAGE>
TABLE OF CONTENTS
================================================================================
DEFINITIONS ....................................................................
PROSPECTUS SUMMARY .............................................................
FEE TABLE ......................................................................
THE COMPANY ....................................................................
VARIABLE ANNUITY ACCOUNT B .....................................................
INVESTMENT OPTIONS .............................................................
The Funds ..................................................................
Guaranteed Account Option ..................................................
Fixed Account Option .......................................................
PURCHASE .......................................................................
Contract Availability ......................................................
Purchasing Interests in the Contract .......................................
Purchase Payments ..........................................................
Contract Rights ............................................................
Designations of Beneficiary and Annuitant ..................................
Right to Cancel ............................................................
CHARGES AND DEDUCTIONS .........................................................
Daily Deductions from the Separate Account .................................
Mortality and Expense Risk Charge ......................................
Administrative Charge ..................................................
Maintenance Fee ............................................................
Reduction or Elimination of Administrative Charge and Maintenance Fee ......
Deferred Sales Charge ......................................................
Reduction or Elimination of the Deferred Sales Charge ......................
Fund Expenses ..............................................................
Premium and Other Taxes ....................................................
CONTRACT VALUATION .............................................................
Account Value ..............................................................
Accumulation Units .........................................................
Net Investment Factor ......................................................
SUBACCOUNT TRANSFERS ...........................................................
Telephone Transfers ........................................................
Dollar Cost Averaging Program ..............................................
Account Rebalancing Program ................................................
WITHDRAWALS ....................................................................
SYSTEMATIC DISTRIBUTION OPTIONS ................................................
3
<PAGE>
DEATH BENEFIT DURING ACCUMULATION PERIOD .......................................
Death Benefit Amount .......................................................
Death of a Spousal Beneficiary who Continues the Account................
Death of a Certificate Holder who is not the Annuitant .................
Death Benefit Payment Options ..............................................
Nonqualified Contracts .................................................
Qualified Contracts ....................................................
TRANSFERS BETWEEN OPTION PACKAGES ..............................................
ANNUITY PERIOD .................................................................
Annuity Period Elections ...................................................
Partial Annuitization ......................................................
Annuity Payout Options .....................................................
Annuity Payments ...........................................................
Charges Deducted During the Annuity Period .................................
Death Benefit Payable During the Annuity Period ............................
TAX STATUS .....................................................................
Introduction ...............................................................
Taxation of the Company ....................................................
Tax Status of the Contract .................................................
Taxation of Annuity Contracts ..............................................
Contracts Used with Certain Retirement Plans ...............................
Individual Retirement Annuities and Simplified Employee Pension Plans ......
Withholding ................................................................
MISCELLANEOUS ..................................................................
Distribution ...............................................................
Delay or Suspension of Payments ............................................
Performance Reporting ......................................................
Voting Rights ..............................................................
Modification of the Contract ...............................................
Transfers of Ownership; Assignment .........................................
Involuntary Terminations ...................................................
Legal Matters and Proceedings ..............................................
Year 2000 ..................................................................
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION ............................
APPENDIX A--ALIAC GUARANTEED ACCOUNT ...........................................
APPENDIX B--FIXED ACCOUNT ......................................................
APPENDIX C--DESCRIPTION OF UNDERLYING FUNDS....................................
4
<PAGE>
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.
5
<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.
Account Effective Date: The date on which an Account is established on a
Certificate Holder's behalf.
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 Account Effective Date
or an anniversary of such Account 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, if applicable, for amounts allocated to the Guaranteed
Account.
Annuitant: The person on whose death, during the Accumulation Period, a death
benefit becomes payable, and whose life or life expectancy Annuity Payments are
based.
Annuity Payment: 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 Payout Option: The option selected by the Certificate Holder which
governs how Annuity Payments will be made.
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 an interest in a group contract or an individual contract.
Beneficiary: The person(s) or entity who is entitled to receive any death
benefit proceeds. Beneficiary refers to the Beneficiary named under the
Contract.
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.
Claim Date: The date when proof of death and the Beneficiary's entitlement to
the death benefit are received in good order at the Company's Home Office.
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-dealer(s), 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 Company to offer
and sell the Contracts. The Company may also serve as a Distributor.
Fixed Account: The fixed interest option described in Appendix B to this
Prospectus. The Fixed Account is only available in those states in which the
Guaranteed Account is not available. Amounts allocated to the Fixed Account are
included in the Account Value.
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.
Guaranteed Account: The ALIAC Guaranteed Account credited interest option which
is described in Appendix A and under which we guarantee stipulated fixed rates
of interest, if held for the guaranteed term. The Guaranteed Account is
available in most states. Amounts allocated to the Guaranteed Account are
included in the Account Value.
Home Office: The Company's principal executive offices located at 151 Farmington
Avenue, Hartford, Connecticut 06156.
Individual Retirement Annuity: An individual or group variable deferred annuity
intended to qualify under
6
<PAGE>
Code Section 408(b) or 408A.
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).
Option Package: The version of the Contract selected which defines, among other
things, the amount of the mortality and expense risk charge, the calculation of
the death benefit, and the availability of certain withdrawals without
imposition of a deferred sales charge.
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 403(b), 408(b), or 408A.
Roth IRA: An IRA intended to qualify under Code Section 408A.
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.
Schedule Effective Date: The date an Option Package is effective, as indicated
on the schedule issued to the Certificate Holder. The initial Schedule Effective
Date is the same as the Account Effective Date. There will be a new Schedule
Effective Date upon any transfer to another Option Package.
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.
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.
Withdrawal Value: The amount payable upon the withdrawal of all or any portion
of an Account Value.
7
<PAGE>
PROSPECTUS SUMMARY
================================================================================
CONTRACTS OFFERED
The Contracts offered in connection with this Prospectus are group and
individual deferred variable annuity contracts issued by the Company. The
purpose of the Contract is to accumulate values and to provide benefits upon
retirement. The Contracts are currently available for (1) individual
nonqualified purchases, including purchases by a custodian for an Individual
Retirement Account; (2) IRAs including Roth IRAs, other than "SIMPLE IRAs" as
defined in the Code, as amended; and (3) purchases made in conjunction with
employer sponsored retirement plans. (See "Purchase - Contract Availability.")
In most states, group Contracts are offered, generally 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. Joint Certificate
Holders are allowed only on Nonqualified Contracts. References to "Certificate
Holders" in this Prospectus mean both of the Certificate Holders on joint
Accounts.
CONTRACT PURCHASE
You may purchase an interest in the Contract by completing an Application and
submitting it to the Company. Purchase Payments can be applied to the Contract
either through a lump-sum payment or through ongoing contributions. (See
"Purchase.")
OPTION PACKAGES
There are currently three Option Packages available under the Contract. You
select an Option Package in the Application.
Each Option Package differs in the amount of the mortality and expense risk
charge, the calculation of the death benefit, and the availability of certain
withdrawals without imposition of a deferred sales charge. There may also be
differences in the required minimum initial Purchase Payment or Account Value
necessary to select an Option Package. These differences are summarized as
follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Option Package I Option Package II Option Package III
- ------------------------------------------------------------------------------------------------------------------------------------
Mortality and
Expense Risk 0.80% 1.10% 1.25%
Charge(1):
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Death Benefit(2)
on Death of the The greater of: The greatest of: The greatest of:
Annuitant(3): (1) The sum of all Purchase (1) The sum of all Purchase (1) The sum of all Purchase
Payments made, adjusted for Payments made, adjusted for Payments made, adjusted for
amount(s) withdrawn or amount(s) withdrawn or amount(s) withdrawn or
applied to an Annuity Payout applied to an Annuity Payout applied to an Annuity Payout
Option as of the Claim Date; or Option as of the Claim Date; or Option as of the Claim Date; or
(2) The Account Value on the (2) The Account Value on the (2) The Account Value on the
Claim Date. Claim Date; or Claim Date; or
(3) The "Step-up Value" on the (3) The "Step-up Value" on the
Claim Date. Claim Date; or
(4) The "Roll-up Value" on the Claim
Date. The Roll-up Value may
not exceed 200% of the Account
- ------------------------------------------------------------------------------------------------------------------------------------
8
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------------------
Value on the Schedule
Effective Date, adjusted
for Purchase Payments made and
amount(s) withdrawn or applied
to an Annuity Payout Option
since that date.
- ------------------------------------------------------------------------------------------------------------------------------------
Minimum Initial Non-Qualified: Qualified: Non-Qualified: Qualified: Non-Qualified: Qualified:
Purchase Payment/ $15,000 $1,500 $5,000 $1,500 $5,000 $1,500
Account Value(4):
- ------------------------------------------------------------------------------------------------------------------------------------
Free 10% of Account Value each Account 10% of Account Value each Account 10% of Account Value each Account
Withdrawals(5): Year, non-cumulative. Year, non-cumulative. Year, cumulative to a maximum of
30%.
- ------------------------------------------------------------------------------------------------------------------------------------
Nursing Care-
Waiver of Deferred
Sales Charge(6): Not Available Available Available
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) See the "Fee Table" and "Charges and Deductions - Mortality and Expense Risk
Charge" for complete details.
(2) See "Death Benefit During the Accumulation Period - Death Benefit Amount"
for complete details.
(3) When a Certificate Holder is not the Annuitant, the amount of the death
benefit is not the same as shown above under each Option Package. See "Death
Benefit During the Accumulation Period - Death of a Certificate Holder who
is not the Annuitant" for complete details. A Certificate Holder who is not
the Annuitant should seriously consider whether Option Packages II or III
are suitable for their circumstances.
(4) See "Purchase - Purchase Payments" for complete details.
(5) See "Charges and Deductions - Free Withdrawals" for complete details.
(6) See "Charges and Deductions - Deferred Sales Charge" for complete details.
Subject to certain restrictions, you may transfer from one Option Package to
another on any anniversary of the Account Effective Date. You may make the
election to transfer during the sixty day period prior to and including any
anniversary of the Account Effective Date. The election must be made in writing
and received in good order at our Home Office during the sixty day election
period. Only one Option Package may be in effect at a time. See "Transfers
Between Option Packages" for complete details.
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 IRA, you will receive a refund of your Purchase Payments.
(See "Purchase--Right to Cancel.") If the Purchase Payment to a Roth IRA is a
rollover from a contract issued by the Company or an affiliate where the
deferred sales charge was eliminated or reduced to facilitate the rollover to
this Contract and you exercise your free look right under this provision, the
Purchase Payment will be restored to the contract from which it came.
9
<PAGE>
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. The Contract allows investment in the
Subaccounts, as well as in the Guaranteed Account (or Fixed Account, in certain
states) described below, subject to the limitations described in "Investment
Options." For a complete list of the Funds available under the Contracts, and a
description of the investment objectives of each of the Funds and their
investment advisers, see "Investment Options--The Funds" and Appendix C to this
Prospectus, as well as the prospectus for each of the Funds.
The Guaranteed Account is the credited interest option available under the
Contract which allows you to earn a fixed rate of interest, if held for the
guaranteed term. For a complete description of the Guaranteed Account option,
see Appendix A to this Prospectus and the prospectus for the Guaranteed Account.
The Fixed Account is an option available under the Contract in states where the
Guaranteed Account is unavailable and which allows you to earn a fixed rate of
interest. For a complete description of the Fixed Account option, see Appendix B
to this Prospectus.
CHARGES AND DEDUCTIONS
The charges associated with these Contracts may vary depending on the Option
Package selected. These charges include daily deductions from the Separate
Account (the mortality and expense risk charge and an administrative charge), as
well as any applicable maintenance fee, transfer fee and premium and other
taxes. The Funds also incur certain fees and expenses which are deducted
directly from the Funds. A deferred sales charge may apply upon a full or
partial withdrawal of the Account Value. (See the "Fee Table" and "Charges and
Deductions.")
SUBACCOUNT TRANSFERS
During the Accumulation Period, and subject to certain limitations, you can
transfer Account Values among the Subaccounts, and the Guaranteed Account (or
Fixed Account in certain states). During the Annuity Period and subject to state
approval, if you have elected variable Annuity Payments, you can make transfers
among the available Subaccounts. Currently, during the Accumulation Period,
twelve free transfers are allowed per Account Year. During the Annuity Period,
four free transfers are allowed each Account Year. The Company reserves the
right to charge up to $10 for each additional transfer in excess of the
available free transfers. Any transfer charge will be applied so that the amount
being transferred will be reduced. The Company currently does not impose this
charge. Transfers can be requested in writing or by telephone in accordance with
the Company's transfer procedures. (Transfers from the Guaranteed Account may be
restricted and subject to a market value adjustment. See Appendix A.)
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
Account term to any of the other Subaccounts on a monthly or quarterly basis. In
a Contract with a Fixed Account, the Fixed Account is only available for dollar
cost averaging from the Fixed Account to the other investment options over a
period not to exceed 12 months. The Account Rebalancing Program allows you to
request that each year, or at other more frequent intervals as we allow, we
automatically reallocate your Account Value to specified percentages among the
Subaccounts in which you invest. (See "Subaccount Transfers.")
10
<PAGE>
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. (See Appendix A.) The
taxable portion of the withdrawal may also be subject to income tax and a 10%
federal tax penalty. (See "Withdrawals.")
The Contract also offers certain Systematic Distribution Options during the
Accumulation Period subject to certain criteria. Some Systematic Distribution
Options are not available in all states and may not be suitable in every
situation. (See "Systematic Distribution Options.")
DEATH BENEFIT
Each Option Package contains a different method of calculating the death
benefit. Upon the death of the Annuitant, 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 Payout
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 Subaccounts 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 actually receive
a distribution from the Contract. A 10% federal tax penalty may be imposed on
certain withdrawals. Special rules apply to distributions from a Roth IRA. (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.)
11
<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. Some expenses may vary as explained under "Charges and Deductions." The
charges and expenses shown below do not include premium taxes that may be
applicable. For more information regarding expenses paid out of assets of a
particular Fund, see the Fund's prospectus.
CERTIFICATE HOLDER TRANSACTION EXPENSES
Deferred Sales Charge for withdrawals under each Contract (as a percentage of
each Purchase Payment withdrawn). If the Purchase Payment to a Roth IRA Contract
is a rollover from another contract issued by the Company or an affiliate where
the deferred sales charge has been waived, the deferred sales charge is based on
the number of completed years since the date of the initial payment to the
predecessor contract. The Company reserves the right to not accept any rollover
contribution to an existing Contract.
<TABLE>
<CAPTION>
CONTRACTS OTHER THAN
ROTH IRA CONTRACTS: ROTH IRA CONTRACTS:
------------------- -------------------
Years From Receipt of Purchase Deferred Sales Charge Completed Account Deferred Sales Charge
Payment Deduction Years Deduction
------- --------- ----- ---------
<S> <C> <C> <C>
Less than 2 7% Less than 1 5%
2 or more but less than 4 6% 1 or more but less than 2 4%
4 or more but less than 5 5% 2 or more but less than 3 3%
5 or more but less than 6 4% 3 or more but less than 4 2%
6 or more but less than 7 3% 4 or more but less than 5 1%
7 or more 0% 5 or more 0%
</TABLE>
<TABLE>
<S> <C>
Annual Maintenance Fee(1)....................................$30.00
Subaccount Transfer Charge(2)................................$0.00
</TABLE>
SEPARATE ACCOUNT ANNUAL EXPENSES (Daily deductions, equal to the percentage
shown on an annual basis, made from amounts allocated to the Subaccounts under
each Contract.)
During the Accumulation Period:
<TABLE>
<S> <C>
(bullet) Option Package I -
Mortality and Expense Risk Charge ....................... 0.80(3)
Administrative Charge ................................... 0.15%
----
Total Subaccount Annual Expenses ........................ 0.95%
(bullet) Option Package II -
Mortality and Expense Risk Charge ....................... 1.10%(3)
Administrative Charge ................................... 0.15%
----
Total Subaccount Annual Expenses ........................ 1.25%
(bullet) Option Package III -
Mortality and Expense Risk Charge ....................... 1.25%(3)
Administrative Charge ................................... 0.15%
----
Total Subaccount Annual Expenses ........................ 1.40%
</TABLE>
12
<PAGE>
During the Annuity Period:
<TABLE>
<S> <C>
(bullet) All Option Packages -
Mortality and Expense Risk Charge ........................ 1.25%
Administrative Charge .................................... 0.00%(4)
----
Total Subaccount Annual Expenses ......................... 1.25%
</TABLE>
(1) The maintenance fee, if applicable, will generally be deducted from each
Account annually and if the full Account Value is withdrawn. The maintenance
fee is waived when the Account Value is $50,000 or more on the date the
maintenance fee is due. The amount shown is the maximum maintenance fee that
can be deducted under the Contract.
(2) During the Accumulation Period we currently allow an unlimited number of
transfers between Subaccounts without charge. We reserve the right, however,
to impose a fee of $10 for each transfer in excess of 12 per year.
(3) Under certain Contracts the mortality and expense risk charge during the
Accumulation Period may be reduced. See "Charges and Deductions."
(4) 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.
13
<PAGE>
Annual Expenses of the Funds (Applies to all contracts)
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 are based on figures for the year ended December 31, 1997. 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 Advisory
Fees(1) (after Other Expenses
expense (after expense Total Fund Annual
reimbursement) reimbursement) Expenses
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aetna Balanced VP, Inc. (3) 0.50% 0.10% 0.60%
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP(3) 0.40% 0.10% 0.50%
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP(2)(3) 0.16% 0.64% 0.80%
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP(3) 0.50% 0.09% 0.59%
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP(2)(3) 0.32% 0.23% 0.55%
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna International VP(2)(3) 0.77% 0.38% 1.15%
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP(3) 0.25% 0.10% 0.35%
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Real Estate Securities VP(2)(3) 0.62% 0.33% 0.95%
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP(2)(3) 0.35% 0.60% 0.95%
- ---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund [add fee footnote] (4)
- ---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth Fund (4)
- ---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth & Income Fund (4)
- ---------------------------------------------------------------------------------------------------------------------------------
AIM V.I Value Fund (4)
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio(5) 0.50% 0.08% 0.58%
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio(5) 0.59% 0.12% 0.71%
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio(5) 0.60% 0.11% 0.71%
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio(6) 0.73% 0.03% 0.76%
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio(6) 0.76% 0.07% 0.83%
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio(6) 0.65% 0.05% 0.70%
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio(6) 0.66% 0.08% 0.74%
- ---------------------------------------------------------------------------------------------------------------------------------
MFS Total Return Series(7) 0.75% 0.25% 1.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth Fund 0.71% 0.02% 0.73%
- ---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Growth & Income Fund 0.75% 0.08% 0.83%
- ---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund 0.75% 0.08% 0.83%
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Emerging Equities Portfolio(8)(9) 0.68% 0.13% 0.81%
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Research Growth Portfolio(8)(9) 0.70% 0.15% 0.85%
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Value Equity Portfolio(8) 0.65% 0.25% 0.90%
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners Scudder International Growth 0.80% 0.20% 1.00%
Portfolio(8)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Certain of the Fund advisers reimburse the Company for administrative costs
incurred in connection with administering the Funds as variable funding
options under the Contract. These reimbursements are paid out of the
investment advisory fees and are not charged to investors.
14
<PAGE>
(2) Effective May 1, 1998, the Portfolios' adviser has agreed to waive a
portion of its fee or to reimburse certain expenses so that aggregate
expenses do not exceed the total expenses shown above. These fee
waiver/expense reimbursement arrangements will increase total return and
may be modified or terminated at any time.
Without these fee waiver/expense reimbursement arrangements Management Fees
and Total Expenses for the Portfolio would be higher. Management Fees and
Total Expenses would be as follows: 0.60% and 1.24% for Growth VP; 0.35%
and 0.58% for Index Plus Large Cap VP; 0.85% and 1.23% for International
VP; 0.75% and 1.08% for Real Estate Securities VP; and 0.75% and 1.35% for
Small Company VP, respectively.
(3) Prior to May 1, 1998, the investment adviser provided administrative
services to the Fund and assumed the Fund's ordinary recurring direct costs
under an Administrative Services Agreement. Effective May 1, 1998, the
investment adviser will continue to provide administrative services to the
Fund but will no longer assume all of the Fund's ordinary recurring direct
costs under the Administrative Services Agreement. The Administrative Fee
is 0.075% on the first $5 billion in assets and 0.050% on all assets over
$5 billion. The "Other Expenses" shown are not based on actual figures for
the year ended December 31, 1997, but reflect the fee payable under the new
Administrative Services Agreement and estimates of the Fund's ordinary
recurring direct costs.
International VP and Real Estate Securities VP commenced operations in
December 1997, therefore, estimates are based on expenses incurred for
similar funds. Actual expenses incurred may be more or less than the
amounts shown above.
(4) AIM V.I. FEE FOOTNOTE (to follow)
(5) A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, certain funds have entered into
arrangements with their custodian whereby credits realized, as a result of
uninvested cash balances were used to reduce custodian expenses. Including
these reductions, the total operating expenses would have been 0.57% for
Equity-Income Portfolio; 0.71% for High Income Portfolio; and 0.68% for
Contrafund Portfolio.
(6) Management fees for Aggressive Growth, Balanced, Growth and Worldwide
Growth Portfolios reflect a reduced fee schedule effective July 1, 1997.
The management fees shown above are based on the new rate applied to net
assets as of December 31, 1997. Other expenses are based on gross expenses
of the Shares before expense offset arrangements for the fiscal year ended
December 31, 1997. The information for each Portfolio is net of fee waivers
or reductions from Janus Capital. Fee reductions for the Aggressive Growth,
Balanced, Growth and Worldwide Growth Portfolios reduce the management fee
to the level of the corresponding Janus retail fund. Other waivers, if
applicable, are first applied against the management fee and then against
other expenses. Without such waivers or reductions, the Management Fee,
Other Expenses and Total Operating Expenses for the Shares would have been
0.74%, 0.04%, and 0.78% for Aggressive Growth Portfolio; 0.77%, 0.06%, and
0.83% for Balanced Portfolio; 0.74%, 0.04%, and 0.78% for Growth Portfolio;
and 0.72%, 0.09%, and 0.81% for Worldwide Growth Portfolio, respectively.
Janus Capital may modify or terminate the waivers or reductions at any time
upon at least 90 days' notice to the Trustees.
(7) The adviser has agreed to bear expenses for each Series, subject to
reimbursement by each Series, such that each Series' "Other Expenses" shall
not exceed 0.25% of the average daily net assets of the Series during the
current fiscal year. Otherwise, "Other Expenses" for the MFS Total Return
Series would be 0.27%, respectively, and "Total Fund Annual Expenses" would
be 1.02%, respectively, for these Series. Each Series has an expense offset
arrangement which reduces the Series' custodian fee based upon the amount
of cash maintained by the Series with its custodian and dividend disbursing
agent, and may enter into other such arrangements and directed brokerage
arrangements (which also have the effect of reducing the Series' expenses).
Any such fee reductions are not reflected under "Other Expenses."
(8) Each Portfolio's aggregate expenses are contractually limited to the
advisory and administrative fees disclosed above. The investment adviser
will not seek an increase in its advisory or administrative fee at any time
prior to May 1, 1999.
(9) The advisory fee is 0.70% of the first $500 million in assets and 0.65% on
the excess.
15
<PAGE>
HYPOTHETICAL EXAMPLE: OPTION PACKAGE I - FOR CONTRACTS OTHER THAN ROTH IRAS
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 withdraw the entire If you do not withdraw
Account Value at the end the Account Value, or if you
of the periods shown, annuitize at the end of the
you would pay the following periods shown, you would pay
expenses, including any applicable the following expenses (no
deferred sales charge: deferred sales charge is reflected):*
1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Balanced VP, Inc. $79 $103 $121 $187 $16 $50 $85 $187
Aetna Bond VP $78 $100 $115 $176 $15 $46 $80 $176
Aetna Growth VP $81 $109 $131 $208 $18 $56 $96 $208
Aetna Growth and Income VP $79 $103 $120 $186 $16 $49 $85 $186
Aetna Index Plus Large Cap VP $78 $101 $118 $181 $15 $48 $83 $181
Aetna International VP $84 $120 $149 $245 $22 $66 $114 $245
Aetna Money Market VP $76 $95 $107 $159 $13 $42 $72 $159
Aetna Real Estate Securities VP $82 $114 $139 $224 $19 $60 $104 $224
Aetna Small Company VP $82 $114 $139 $224 $19 $60 $104 $224
AIM V.I. Capital Appreciation Fund
AIM V.I. Growth Fund
AIM V.I. Growth & Income Fund
AIM V.I. Value Fund
Fidelity VIP Equity-Income Portfolio $79 $102 $120 $184 $16 $49 $84 $184
Fidelity VIP High Income Portfolio $80 $106 $127 $199 $17 $53 $91 $199
Fidelity VIP II Contrafund Portfolio $80 $106 $127 $199 $17 $53 $91 $199
Janus Aspen Aggressive Growth Portfolio $80 $108 $129 $204 $18 $54 $94 $204
Janus Aspen Balanced Portfolio $81 $110 $133 $211 $18 $57 $97 $211
Janus Aspen Growth Portfolio $80 $106 $126 $198 $17 $53 $91 $198
Janus Aspen Worldwide Growth Portfolio $80 $107 $128 $202 $17 $54 $93 $202
MFS Total Return Series $83 $94 $115 $128 $20 $41 $62 $84
Oppenheimer Aggressive Growth Fund $80 $107 $128 $201 $17 $54 $92 $201
Oppenheimer Growth & Income Fund $81 $110 $133 $211 $18 $57 $97 $211
Oppenheimer Strategic Bond Fund $81 $110 $133 $211 $18 $57 $97 $211
Portfolio Partners MFS Emerging Equities $81 $109 $132 $209 $18 $56 $96 $209
Portfolio
Portfolio Partners MFS Research Growth $81 $111 $134 $214 $18 $57 $98 $214
Portfolio
Portfolio Partners MFS Value Equity $82 $112 $136 $219 $19 $59 $101 $219
Portfolio
Portfolio Partners Scudder International $83 $115 $142 $229 $20 $62 $106 $229
Growth Portfolio
</TABLE>
16
<PAGE>
- ---------------
* This Example would not apply if a non-lifetime variable Annuity Payout Option
is selected, and a lump sum payment is requested within three years after
Annuity Payments start, since the lump sum payment will be treated as a
withdrawal during the Accumulation Period and will be subject to any deferred
sales charge that would then apply. (Refer to Example A.)
17
<PAGE>
HYPOTHETICAL EXAMPLE: OPTION PACKAGE I - CONTRACTS ISSUED AS ROTH IRAS
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 C EXAMPLE D
--------- ---------
If you withdraw the entire If you do not withdraw
Account Value at the end the Account Value, or if you
of the periods shown, annuitize at the end of the
you would pay the following periods shown, you would pay
expenses, including any applicable the following expenses (no
deferred sales charge: deferred sales charge is reflected):*
1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Balanced VP, Inc. $57 $72 $85 $187 $16 $50 $85 $187
Aetna Bond VP $56 $69 $80 $176 $15 $46 $80 $176
Aetna Growth VP $59 $78 $96 $208 $18 $56 $96 $208
Aetna Growth and Income VP $57 $71 $85 $186 $16 $49 $85 $186
Aetna Index Plus Large Cap VP $57 $70 $83 $181 $15 $48 $83 $181
Aetna International VP $63 $88 $114 $245 $22 $66 $114 $245
Aetna Money Market VP $55 $64 $72 $159 $13 $42 $72 $159
Aetna Real Estate Securities VP $61 $82 $104 $224 $19 $60 $104 $224
Aetna Small Company VP $61 $82 $104 $224 $19 $60 $104 $224
AIM V.I. Capital Appreciation Fund
AIM V.I. Growth Fund
AIM V.I. Growth & Income Fund
AIM V.I. Value Fund
Fidelity VIP Equity-Income Portfolio $57 $71 $84 $184 $16 $49 $84 $184
Fidelity VIP High Income Portfolio $58 $75 $91 $199 $17 $53 $91 $199
Fidelity VIP II Contrafund Portfolio $58 $75 $91 $199 $17 $53 $91 $199
Janus Aspen Aggressive Growth Portfolio $59 $76 $94 $204 $18 $54 $94 $204
Janus Aspen Balanced Portfolio $60 $79 $97 $211 $18 $57 $97 $211
Janus Aspen Growth Portfolio $58 $75 $91 $198 $17 $53 $91 $198
Janus Aspen Worldwide Growth Portfolio $59 $76 $93 $202 $17 $54 $93 $202
MFS Total Return Series $61 $84 $106 $229 $20 $62 $106 $229
Oppenheimer Aggressive Growth Fund $59 $76 $92 $201 $17 $54 $92 $201
Oppenheimer Growth & Income Fund $60 $79 $97 $211 $18 $57 $97 $211
Oppenheimer Strategic Bond Fund $60 $79 $97 $211 $18 $57 $97 $211
Portfolio Partners MFS Emerging Equities $59 $78 $96 $209 $18 $56 $96 $209
Portfolio
Portfolio Partners MFS Research Growth $60 $79 $98 $214 $18 $57 $98 $214
Portfolio
Portfolio Partners MFS Value Equity $60 $81 $101 $219 $19 $59 $101 $219
Portfolio
Portfolio Partners Scudder International $61 $84 $106 $229 $20 $62 $106 $229
Growth Portfolio
</TABLE>
18
<PAGE>
- -------------
* This Example would not apply if a non-lifetime variable Annuity Payout
Option is selected, and a lump sum payment is requested within three years
after Annuity Payments start, since the lump sum payment will be treated as
a withdrawal during the Accumulation Period and will be subject to any
deferred sales charge that would then apply. (Refer to Example C.)
19
<PAGE>
HYPOTHETICAL EXAMPLE: OPTION PACKAGE II - FOR CONTRACTS OTHER THAN ROTH IRAS
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 withdraw the entire If you do not withdraw
Account Value at the end the Account Value, or if you
of the periods shown, annuitize at the end of the
you would pay the following periods shown, you would pay
expenses, including any applicable the following expenses (no
deferred sales charge: deferred sales charge is reflected):*
1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Balanced VP, Inc. $82 $112 $136 $219 $19 $59 $101 $219
Aetna Bond VP $81 $109 $131 $208 $18 $56 $96 $208
Aetna Growth VP $84 $118 $147 $240 $21 $65 $111 $240
Aetna Growth and Income VP $82 $112 $136 $218 $19 $58 $101 $218
Aetna Index Plus Large Cap VP $81 $111 $134 $214 $18 $57 $98 $214
Aetna International VP $87 $129 $164 $276 $25 $75 $129 $276
Aetna Money Market VP $79 $104 $123 $192 $16 $51 $88 $192
Aetna Real Estate Securities VP $85 $123 $154 $255 $22 $69 $119 $255
Aetna Small Company VP $85 $123 $154 $255 $22 $69 $119 $255
AIM V.I. Capital Appreciation Fund
AIM V.I. Growth Fund
AIM V.I. Growth & Income Fund
AIM V.I. Value Fund
Fidelity VIP Equity-Income Portfolio $82 $112 $135 $217 $19 $58 $100 $217
Fidelity VIP High Income Portfolio $83 $116 $142 $231 $20 $62 $107 $231
Fidelity VIP II Contrafund Portfolio $83 $116 $142 $231 $20 $62 $107 $231
Janus Aspen Aggressive Growth Portfolio $83 $117 $145 $236 $21 $64 $109 $236
Janus Aspen Balanced Portfolio $84 $119 $148 $243 $21 $66 $113 $243
Janus Aspen Growth Portfolio $83 $115 $142 $229 $20 $62 $106 $229
Janus Aspen Worldwide Growth Portfolio $83 $116 $144 $234 $20 $63 $108 $234
MFS Total Return Series $86 $124 $157 $260 $23 $71 $121 $260
Oppenheimer Aggressive Growth Fund $83 $116 $143 $233 $20 $63 $108 $233
Oppenheimer Growth & Income Fund $84 $119 $148 $243 $21 $66 $113 $243
Oppenheimer Strategic Bond Fund $84 $119 $148 $243 $21 $66 $113 $243
Portfolio Partners MFS Emerging Equities $84 $119 $147 $241 $21 $65 $112 $241
Portfolio
Portfolio Partners MFS Research Growth $84 $120 $149 $245 $21 $66 $114 $245
Portfolio
Portfolio Partners MFS Value Equity $85 $121 $152 $250 $22 $68 $116 $250
Portfolio
Portfolio Partners Scudder International $86 $124 $157 $260 $23 $71 $121 $260
Growth Portfolio
</TABLE>
20
<PAGE>
- --------------
This Example would not apply if a non-lifetime variable Annuity Payout Option is
selected, and a lump sum payment is requested within three years after Annuity
Payments start, since the lump sum payment will be treated as a withdrawal
during the Accumulation Period and will be subject to any deferred sales charge
that would then apply. (Refer to Example A.)
21
<PAGE>
HYPOTHETICAL EXAMPLE: OPTION PACKAGE II - CONTRACTS ISSUED AS ROTH IRAS
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 C EXAMPLE D
--------- ---------
If you withdraw the entire If you do not withdraw
Account Value at the end the Account Value, or if you
of the periods shown, annuitize at the end of the
you would pay the following periods shown, you would pay
expenses, including any applicable the following expenses (no
deferred sales charge: deferred sales charge is reflected):*
1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Balanced VP, Inc. $60 $81 $101 $219 $19 $59 $101 $219
Aetna Bond VP $59 $78 $96 $208 $18 $56 $96 $208
Aetna Growth VP $62 $87 $111 $240 $21 $65 $111 $240
Aetna Growth and Income VP $60 $80 $101 $218 $19 $58 $101 $218
Aetna Index Plus Large Cap VP $60 $79 $98 $214 $18 $57 $98 $214
Aetna International VP $66 $97 $129 $276 $25 $75 $129 $276
Aetna Money Market VP $58 $73 $88 $192 $16 $51 $88 $192
Aetna Real Estate Securities VP $64 $91 $119 $255 $22 $69 $119 $255
Aetna Small Company VP $64 $91 $119 $255 $22 $69 $119 $255
AIM V.I. Capital Appreciation Fund
AIM V.I. Growth Fund
AIM V.I. Growth & Income Fund
AIM V.I. Value Fund
Fidelity VIP Equity-Income Portfolio $60 $80 $100 $217 $19 $58 $100 $217
Fidelity VIP High Income Portfolio $61 $84 $107 $231 $20 $62 $107 $231
Fidelity VIP II Contrafund Portfolio $61 $84 $107 $231 $20 $62 $107 $231
Janus Aspen Aggressive Growth Portfolio $62 $85 $109 $236 $21 $64 $109 $236
Janus Aspen Balanced Portfolio $62 $88 $113 $243 $21 $66 $113 $243
Janus Aspen Growth Portfolio $61 $84 $106 $229 $20 $62 $106 $229
Janus Aspen Worldwide Growth Portfolio $62 $85 $108 $234 $20 $63 $108 $234
MFS Total Return Series $64 $93 $121 $260 $23 $71 $121 $260
Oppenheimer Aggressive Growth Fund $61 $85 $108 $233 $20 $63 $108 $233
Oppenheimer Growth & Income Fund $62 $88 $113 $243 $21 $66 $113 $243
Oppenheimer Strategic Bond Fund $62 $88 $113 $243 $21 $66 $113 $243
Portfolio Partners MFS Emerging Equities $62 $87 $112 $241 $21 $65 $112 $241
Portfolio
Portfolio Partners MFS Research Growth $63 $88 $114 $245 $21 $66 $114 $245
Portfolio
Portfolio Partners MFS Value Equity $63 $90 $116 $250 $22 $68 $116 $250
Portfolio
Portfolio Partners Scudder International $64 $93 $121 $260 $23 $71 $121 $260
Growth Portfolio
</TABLE>
22
<PAGE>
- -------------
* This Example would not apply if a non-lifetime variable Annuity Payout
Option is selected, and a lump sum payment is requested within three years
after Annuity Payments start, since the lump sum payment will be treated as
a withdrawal during the Accumulation Period and will be subject to any
deferred sales charge that would then apply. (Refer to Example C.)
23
<PAGE>
HYPOTHETICAL EXAMPLE: OPTION PACKAGE III - FOR CONTRACTS OTHER THAN ROTH IRAS
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 withdraw the entire If you do not withdraw
Account Value at the end the Account Value, or if you
of the periods shown, annuitize at the end of the
you would pay the following periods shown, you would pay
expenses, including any applicable the following expenses (no
deferred sales charge: deferred sales charge is reflected):*
1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Balanced VP, Inc. $83 $117 $144 $235 $20 $63 $109 $235
Aetna Bond VP $82 $114 $139 $224 $19 $60 $104 $224
Aetna Growth VP $85 $123 $154 $255 $23 $69 $119 $255
Aetna Growth and Income VP $83 $116 $144 $234 $20 $63 $108 $234
Aetna Index Plus Large Cap VP $83 $115 $142 $229 $20 $62 $106 $229
Aetna International VP $89 $133 $172 $290 $26 $80 $136 $290
Aetna Money Market VP $81 $109 $131 $208 $18 $56 $96 $208
Aetna Real Estate Securities VP $87 $127 $162 $271 $24 $74 $126 $271
Aetna Small Company VP $87 $127 $162 $271 $24 $74 $126 $271
AIM V.I. Capital Appreciation Fund
AIM V.I. Growth Fund
AIM V.I. Growth & Income Fund
AIM V.I. Value Fund
Fidelity VIP Equity-Income Portfolio $83 $116 $143 $233 $20 $63 $108 $233
Fidelity VIP High Income Portfolio $84 $120 $150 $246 $22 $67 $114 $246
Fidelity VIP II Contrafund Portfolio $84 $120 $150 $246 $22 $67 $114 $246
Janus Aspen Aggressive Growth Portfolio $85 $122 $152 $251 $22 $68 $117 $251
Janus Aspen Balanced Portfolio $86 $124 $156 $258 $23 $70 $120 $258
Janus Aspen Growth Portfolio $84 $120 $149 $245 $22 $66 $114 $245
Janus Aspen Worldwide Growth Portfolio $85 $121 $151 $249 $22 $68 $116 $249
MFS Total Return Series $87 $103 $129 $146 $25 $50 $75 $102
Oppenheimer Aggressive Growth Fund $85 $121 $151 $248 $22 $67 $115 $248
Oppenheimer Growth & Income Fund $86 $124 $156 $258 $23 $70 $120 $258
Oppenheimer Strategic Bond Fund $86 $124 $156 $258 $23 $70 $120 $258
Portfolio Partners MFS Emerging Equities $85 $123 $155 $256 $23 $70 $119 $256
Portfolio
Portfolio Partners MFS Research Growth $86 $124 $157 $260 $23 $71 $121 $260
Portfolio
Portfolio Partners MFS Value Equity $86 $126 $159 $265 $24 $72 $124 $265
Portfolio
Portfolio Partners Scudder International $87 $129 $164 $276 $25 $75 $129 $276
Growth Portfolio
</TABLE>
24
<PAGE>
- -------------
* This Example would not apply if a non-lifetime variable Annuity Payout Option
is selected, and a lump sum payment is requested within three years after
Annuity Payments start, since the lump sum payment will be treated as a
withdrawal during the Accumulation Period and will be subject to any deferred
sales charge that would then apply. (Refer to Example A.)
25
<PAGE>
HYPOTHETICAL EXAMPLE: OPTION PACKAGE III - CONTRACTS ISSUED AS ROTH IRAS
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 C EXAMPLE D
--------- ---------
If you withdraw the entire If you do not withdraw
Account Value at the end the Account Value, or if you
of the periods shown, annuitize at the end of the
you would pay the following periods shown, you would pay
expenses, including any applicable the following expenses (no
deferred sales charge: deferred sales charge is reflected):*
1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Balanced VP, Inc. $62 $85 $109 $235 $20 $63 $109 $235
Aetna Bond VP $61 $82 $104 $224 $19 $60 $104 $224
Aetna Growth VP $64 $91 $119 $255 $23 $69 $119 $255
Aetna Growth and Income VP $62 $85 $108 $234 $20 $63 $108 $234
Aetna Index Plus Large Cap VP $61 $84 $106 $229 $20 $62 $106 $229
Aetna International VP $67 $101 $136 $290 $26 $80 $136 $290
Aetna Money Market VP $59 $78 $96 $208 $18 $56 $96 $208
Aetna Real Estate Securities VP $65 $96 $126 $271 $24 $74 $126 $271
Aetna Small Company VP $65 $96 $126 $271 $24 $74 $126 $271
AIM V.I. Capital Appreciation Fund
AIM V.I. Growth Fund
AIM V.I. Growth & Income Fund
AIM V.I. Value Fund
Fidelity VIP Equity-Income Portfolio $61 $85 $108 $233 $20 $63 $108 $233
Fidelity VIP High Income Portfolio $63 $88 $114 $246 $22 $67 $114 $246
Fidelity VIP II Contrafund Portfolio $63 $88 $114 $246 $22 $67 $114 $246
Janus Aspen Aggressive Growth Portfolio $63 $90 $117 $251 $22 $68 $117 $251
Janus Aspen Balanced Portfolio $64 $92 $120 $258 $23 $70 $120 $258
Janus Aspen Growth Portfolio $63 $88 $114 $245 $22 $66 $114 $245
Janus Aspen Worldwide Growth Portfolio $63 $89 $116 $249 $22 $68 $116 $249
MFS Total Return Series $66 $97 $129 $276 $25 $75 $129 $276
Oppenheimer Aggressive Growth Fund $63 $89 $115 $248 $22 $67 $115 $248
Oppenheimer Growth & Income Fund $64 $92 $120 $258 $23 $70 $120 $258
Oppenheimer Strategic Bond Fund $64 $92 $120 $258 $23 $70 $120 $258
Portfolio Partners MFS Emerging Equities $64 $91 $119 $256 $23 $70 $119 $256
Portfolio
Portfolio Partners MFS Research Growth $64 $93 $121 $260 $23 $71 $121 $260
Portfolio
Portfolio Partners MFS Value Equity $65 $94 $124 $265 $24 $72 $124 $265
Portfolio
Portfolio Partners Scudder International $66 $97 $129 $276 $25 $75 $129 $276
Growth Portfolio
</TABLE>
26
<PAGE>
- -------------
* This Example would not apply if a non-lifetime variable Annuity Payout Option
is selected, and a lump sum payment is requested within three years after
Annuity Payments start, since the lump sum payment will be treated as a
withdrawal during the Accumulation Period and will be subject to any deferred
sales charge that would then apply. (Refer to Example C.)
27
<PAGE>
THE 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 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 obligations of the Company.
INVESTMENT OPTIONS
================================================================================
THE FUNDS
Purchase Payments may be allocated to one or more of the Subaccounts as
designated on the Application. In turn, the Subaccounts invest in the
corresponding Funds at net asset value. The Company reserves the right to limit
the number of investment options selected during the Accumulation Period. At
this time there is no limit on the number of investment options selected during
the Accumulation Period, but the number of investment options that may be
selected at any one time by a Certificate Holder is limited to 18. Each
Subaccount and each Guaranteed Term of the same duration, or an investment in
the Fixed Account in certain Contracts where the Guaranteed Account is not
available, count as an investment option.
The availability of Funds may be subject to regulatory authorization. In
addition, the Company may add or withdraw Funds, as permitted by applicable law.
Not all Funds may be available in all jurisdictions or under all Contracts.
Subject to state regulatory approval, 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.
28
<PAGE>
The Funds are described in Appendix C of this prospectus. More detailed
information may be found in the current prospectus for each Fund offered. The
prospectus for the Fund should be read in conjunction with this prospectus. A
free Fund prospectus is available upon request from the local Company office or
by writing or calling the number listed in the "Inquiries" section of the
Prospectus Summary.
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. 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."
Because the Funds available under the Contract are sold to fund variable annuity
contracts and variable life insurance policies issued by us or by other
companies, certain conflicts of interest could arise. If a conflict of interest
were to occur, one of the separate accounts might withdraw its investment in a
Fund, which might force that Fund to sell portfolio securities at
disadvantageous prices, causing its per share value to decrease. Each Fund's
Board of Directors or Trustees has agreed to monitor events in order to identify
any material irreconcilable conflicts which might arise and to determine what
action, if any, should be taken to address such conflict.
GUARANTEED ACCOUNT OPTION
Purchase Payments may be allocated to 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 to
receive the quoted interest rates, or a market value adjustment (which may be
positive or negative) will be applied. (See Appendix A)
FIXED ACCOUNT OPTION
In certain states, Purchase Payments may be allocated to the Fixed Account.
Through the Fixed Account we guarantee to pay the minimum interest rate
specified in the Contract. (See Appendix B)
29
<PAGE>
PURCHASE
================================================================================
CONTRACT AVAILABILITY
The Contracts are offered only in those states where the Contract has been
approved for sale in that state. The Contracts are offered as (1) nonqualified
deferred annuity contracts, including Contracts offered to a custodian for an
Individual Retirement Account under Section 408(a) of the Code (we reserve the
right to limit ownership of nonqualified Contracts to natural persons); (2)
IRAs, including Roth IRAs, other than "SIMPLE IRAs" as defined in Section 408(p)
of the Code; or (3) Qualified Contracts used in conjunction with certain
employer sponsored retirement plans. IRAs 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. A Roth IRA
Contract is a special form of IRA which can accept nondeductible annual
contributions. Contributions to a Simplified Employee Pension Plan ("SEP") are
not permitted in a Roth IRA Contract. The Roth IRA Contract can also accept
transfers and rollovers, but only from an IRA/Individual Retirement Account,
subject to ordinary income tax, or from another Roth IRA. If the Purchase
Payment to a Roth IRA is a rollover from a contract issued by the Company or an
affiliate where the deferred sales charge was eliminated or reduced and the
Contract is canceled during the free look period, the Purchase Payment will be
restored to the predecessor contract.
Eligible persons seeking to invest and accumulate money for retirement can
purchase individual interests in group Contracts, or, where required by state
law, they may purchase individual Contracts. In most states, group Contracts are
offered, generally to certain broker-dealers or banks which have agreed to act
as Distributors of the Contracts, and individual accounts are established by the
Company for each Certificate Holder. In some states, an individual Contract will
be owned by the Certificate Holder. In both cases, a Certificate Holder's
interest in the Contract is known as his or her "Account."
The maximum issue age for the Annuitant is 90.
Joint Certificate Holders. Nonqualified Contracts may be purchased by
individuals as joint Certificate Holders. References to "Certificate Holders" in
this Prospectus mean both of the Certificate Holders on joint Accounts. 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 which has agreed to act
as a Distributor for the Contracts. A group Contract is issued to the Group
Contract Holder. Certificate Holders may purchase interests in a group Contract
by submitting an Application. Once the Application is accepted a Certificate
will be issued.
Individual Contracts. Certain states will not allow a group Contract 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.
Regardless of whether you have purchased an interest in a group Contract or an
individual Contract, the Company must accept or reject the Application within
two business days of receipt. If the Application is incomplete, the Company may
hold any forms and accompanying Purchase Payments for five days. Purchase
Payments may be held for longer periods only with the consent of the Certificate
Holder, pending acceptance of the Application. If the Application is rejected,
the Application and any Purchase Payments will be returned to the Certificate
Holder. However, if the Purchase Payment to a Roth IRA is a rollover from a
contract issued by the Company or an affiliate where the deferred sales charge
was eliminated or reduced and the Contract is canceled
30
<PAGE>
during the free look period, the Purchase Payment will be restored to the
predecessor contract.
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. A 403(b) Contract
can only accept rollover or transfer contributions.
The minimum initial Purchase Payment amount is $5,000 ($15,000 for Option
Package I) for Nonqualified Contracts and $1,500 for Qualified Contracts. In
some states, a Contract issued as an IRA can accept only a lump sum, rollover
Purchase Payment. Additional Purchase Payments made to an existing Contract must
be at least $1,000 or at least $50 per month by electronic funds transfer, and
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 not allowed by state law).
For Qualified Contracts the Code imposes a maximum limit on annual Purchase
Payments which may be excluded from a participant's gross income. (See "Tax
Status.")
Allocation of Purchase Payments. Purchase Payments will initially be allocated
to the Subaccounts or the Guaranteed Account or Fixed 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.
(See "Investment Options.")
CONTRACT RIGHTS
Under individual Contracts, Certificate Holders have all Contract rights. Under
group Contracts, the Group Contract Holder has title to the Contract and
generally only the right to accept or reject any modifications to the Contract.
You have all other rights to your Account under the Contract. However, under a
Nonqualified Contract, if you and the Annuitant are not the same, and the
Annuitant dies first, your rights are automatically transferred to the
Beneficiary. (See "Death Benefit.")
Joint Certificate Holders have equal rights under the Contract and with respect
to their Account. 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. See "Death Benefit" regarding the rights of the surviving
joint Certificate Holder upon the death of a joint Certificate Holder prior to
the Annuity Date.
DESIGNATIONS OF BENEFICIARY AND ANNUITANT
You generally designate the Beneficiary for your Account on the Application. You
may also elect to specify the form of payment to be made to the Beneficiary. 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 the participant 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 IRA, the Certificate Holder must be the
Annuitant. For Nonqualified Contracts, the Certificate Holder and the Annuitant,
may, but need not, be the same person. (See "Purchase--Contract Availability.")
31
<PAGE>
RIGHT TO CANCEL
You may cancel the Contract or Certificate without penalty by returning it to
the Company 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 IRAs, 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. If the
Purchase Payment to a Roth IRA is a rollover from a contract issued by the
Company or an affiliate where the deferred sales charge was eliminated or
reduced and the Contract is canceled during the free look period, the Purchase
Payment will be restored to the predecessor contract.
CHARGES AND DEDUCTIONS
================================================================================
DAILY DEDUCTIONS FROM THE SEPARATE ACCOUNT
Mortality and Expense Risk Charge. The Company makes a daily deduction from each
of the Subaccounts for the mortality and expense risk charge. The charge is
assessed against the daily net assets of the Subaccounts and varies for each
Option Package. The charge under each Option Package is equal, on an annual
basis, to the following percentages:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
Option Package I Option Package II Option Package III
-------------------------------------------------------------------------------
<S> <C> <C>
0.80% 1.10% 1.25%
-------------------------------------------------------------------------------
</TABLE>
The mortality and expense risk charge 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 Annuity 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, including the expenses
associated with the differing death benefit available under each Option Package,
will exceed the maximum costs that can be charged under the Contract.
In certain circumstances, the risk of adverse expense experience associated with
this Contract may be reduced. In such event, the mortality and expense risk
charge applicable to that Contract may likewise be reduced. Whether such a
reduction is available will be determined by the Company based upon
consideration of one of the following factors:
(1) the size and composition of the prospective group such as a group
made up of active employees of the Company or its affiliates;
(2) the type and frequency of administrative and sales services
provided; and
(3) the level of maintenance fee and deferred sales charges.
Any reduction of the mortality and expense risk charge will not be unfairly
discriminatory against any person. We will make any reduction in the mortality
and expense risk charge according to our own rules in effect at the time the
Contract is issued. We reserve the right to change these rules from time to
time.
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
32
<PAGE>
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, to a
maximum of 0.25% of the daily net assets of the Subaccounts. There is currently
no administrative charge during the Annuity Period. Once an Annuity Payout
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 a 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 maximum maintenance fee deducted under the Contract is $30. The maintenance
fee will be deducted annually on the anniversary of the Account 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.
REDUCTION OR ELIMINATION OF ADMINISTRATIVE CHARGE AND MAINTENANCE FEE
The administrative charge and maintenance fee may be reduced or eliminated when
sales of the Contracts are made to individuals or to a group of individuals in
such a manner that results in savings of administrative expenses. The
entitlement to such a reduction will be based on:
(1) the size and type of the group of individuals to whom the Contract
is offered; and
(2) the amount of expected Purchase Payments.
Any reduction or elimination of the administrative charge or maintenance fee
will not be unfairly discriminatory against any person. We will make any
reduction in the administrative charge or maintenance fee according to our own
rules in effect at the time the Contract is issued. We reserve the right to
change these rules from time to time.
DEFERRED SALES CHARGE
Withdrawals of all or a portion of the Account Value may be subject to a
deferred sales charge. The deferred sales charge is a percentage of Purchase
Payments withdrawn from the Subaccounts and the Guaranteed Account or Fixed
Account and, except for Roth IRAs, is based on the number of years which have
elapsed since the Purchase Payment was received. The deferred sales charge on
withdrawals from a Roth IRA is based on the number of completed Account Years
which have elapsed from the Account Effective Date. 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 tables below. If the Purchase Payment is a rollover from another
contract issued by the Company or an affiliate where the deferred sales charge
has been waived, the deferred sales charge is based on the number of completed
Account Years since the date of the initial
33
<PAGE>
payment to the predecessor contract. The Company reserves the right to not
accept any rollover contribution to an existing contract.
Withdrawals are taken first against Purchase Payments, then against any increase
in value. However, the deferred sales charge only applies to the Purchase
Payment (not to any associated changes in value). To satisfy a partial
withdrawal other than from a Roth IRA, the deferred sales charge is calculated
as if the Purchase Payments are withdrawn from the Subaccounts in the same order
they were applied to the Account. Partial withdrawals from the Guaranteed
Account or the Fixed Account will be treated as described in the Appendices
attached to this Prospectus 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.
<TABLE>
<CAPTION>
CONTRACTS OTHER
THAN ROTH IRA CONTRACTS: ROTH IRA CONTRACTS:
------------------------ -------------------
Years From Receipt of Purchase Deferred Sales Charge Completed Account Deferred Sales Charge
Payment Deduction Years Deduction
------- --------- ----- ---------
<S> <C> <C> <C>
Less than 2 7% Less than 1 5%
2 or more but less than 4 6% 1 or more but less than 2 4%
4 or more but less than 5 5% 2 or more but less than 3 3%
5 or more but less than 6 4% 3 or more but less than 4 2%
6 or more but less than 7 3% 4 or more but less than 5 1%
7 or more 0% 5 or more 0%
</TABLE>
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 Payments;
(bullet) paid to a Beneficiary due to the Annuitant's death before Annuity
Payments start, up to a maximum of the aggregate Purchase Payments
made, minus the total of all partial withdrawals, amounts applied to an
Annuity Payout Option and deductions made prior to the Annuitant's date
of death;
(bullet) made due to the election of a Systematic Distribution Option (see
"Systematic Distribution 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;
(bullet) paid if we close out your Account when the value is less than $2,500
(or other amount required by state law); or
(bullet) if the withdrawal is applied as a rollover to certain Roth IRAs issued
by the Company or an affiliate.
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.
Nursing Home Waiver. Under Option Packages II and III, you may withdraw all or a
portion of your Purchase Payments without a deferred sales charge, provided
that:
(1) More than one Account Year has elapsed since the Schedule Effective
Date;
34
<PAGE>
(2) The withdrawal is requested within three years of the Annuitant's
admission to a licensed Nursing Home Waiver (including non-licensed
facilities in New Hampshire); and
(3) the Annuitant has spent at least 45 consecutive days in such
facility.
This waiver of deferred sales charge does not apply if the Annuitant is in a
licensed Nursing Home Facility for at least one day during the two week period
immediately preceding or following the Schedule Effective Date. It will also not
apply if otherwise prohibited by state law.
Free Withdrawals. Subject to the restrictions described below, you may withdraw
up to the greater of 10% of your Account Value or the minimum distribution
amount required by law during each Account Year without imposition of a deferred
sales charge. Under Option Package III, any unused percentage of the 10% free
withdrawal amount shall carry forward into successive Account Years, up to a
maximum of 30% of your Account Value. 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 and will be adjusted for amounts requested for
withdrawal under a Systematic Distribution Option or taken as a minimum
distribution amount required by law, during the Account Year. If your withdrawal
exceeds the applicable free withdrawal allowance, we will deduct a deferred
sales charge on the excess amount. (See Appendix A for a discussion of
withdrawals from the Guaranteed Account.)
REDUCTION OR ELIMINATION OF THE DEFERRED SALES CHARGE
We may reduce or eliminate the deferred sales charge when sales of the Contracts
are made to individuals or a group of individuals in such a manner that results
in savings of sales expenses. The entitlement to such a reduction in the
deferred sales charge will be based on the following:
(1) the size and type of the group of individuals to whom the Contract is
offered;
(2) the amount of expected Purchase Payments; and
(3) whether there is a prior or existing relationship with the Company
such as being an employee of the Company or an affiliate, receiving
distributions or making internal transfers from other contracts
issued by the Company, or making transfers of amounts held under
qualified plans sponsored by the Company or an affiliate.
Any reduction or elimination of the deferred sales charge may be subject to
state approval and will not be unfairly discriminatory against any person.
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 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 Payout Option. However, we reserve the right to deduct state premium tax
from the Purchase Payments or from the Account Values at any time, but no
earlier than when we have a tax liability under state law.
35
<PAGE>
Any municipal premium tax assessed at a rate in excess of 1% will be deducted
from the Purchase Payments or from the amount applied to an Annuity Payout
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 Payment 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 or Fixed 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 AUV 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 next
computed 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 next computed
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 equal to the
mortality and expense risk charge under the Option Package then in
effect (0.80% under Option Package I, 1.10% under Option Package II,
and 1.25% under Option Package III) and an administrative charge of
0.15% (unless reduced or eliminated) 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.
36
<PAGE>
SUBACCOUNT TRANSFERS
================================================================================
At any time prior to the Annuity Date, you can transfer amounts held under your
Account among the investment options available subject to certain limitations.
(See "Investment Options.") Transfers from the Guaranteed Account may be subject
to certain restrictions and to a market value adjustment. (See Appendix A.)
Transfers may be made from the Fixed Account to any of the investment options
available subject to certain restrictions. Amounts may not be transferred into
the Fixed Account from any of the investment options. If approved by your state,
during the Annuity Period, if you have elected variable Annuity Payments, you
can make transfers only among the Subaccounts available during the Annuity
Period. (See "Annuity Payout Options.") A request for transfer can be made
either in writing or by telephone.(See "Telephone Transfers" below.) 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 AUV next determined after the Company receives
a valid transfer request at its Home Office.
During the Accumulation Period, twelve free transfers are allowed each Account
Year. During the Annuity Period, four free transfers are allowed each Account
Year. The Company reserves the right to charge up to $10 for each additional
transfer in excess of the available free transfers. This charge will be deducted
from the gross amount of the transfer. The Company currently does not impose
this charge.
TELEPHONE TRANSFERS
You automatically have the right to make transfers among Funds by telephone. We
have enacted procedures to prevent abuses of Account transactions by telephone,
including requiring the use of a personal identification number (PIN) to execute
transactions. You are responsible for safeguarding your PIN, and for keeping
Account information confidential. Although the Company's failure to follow
reasonable procedures may result in the Company's liability for any losses due
to unauthorized or fraudulent telephone transfers, the Company will not be
liable for following instructions communicated by telephone which it reasonably
believes to be genuine. Any losses incurred pursuant to actions taken by the
Company in reliance on telephone instructions reasonably believed to be genuine
shall be borne by you. To ensure authenticity, we record all calls on the 800
line.
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 investment options and an available Guaranteed
Term or Fixed Account 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 any such Guaranteed Term during participation in the
Dollar Cost Averaging Program. If dollar cost averaging from a Guaranteed Term
is discontinued, the Company will automatically transfer the balance remaining
in the Guaranteed Term from which dollar cost averaging is withdrawn to a
Guaranteed Term of the same duration unless the Certificate Holder initiates a
transfer to another investment option. In either case, a market value adjustment
will apply. If Dollar Cost Averaging is stopped with regard to amounts in the
Fixed Account, the remaining balance in the Fixed Account will be transferred to
the money market subaccount. There is no additional charge for the Dollar Cost
Averaging Program. (See Appendix A 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.
37
<PAGE>
The Dollar Cost Averaging Program is not available to individuals who have
elected 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 us 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 Program does not ensure a profit nor guarantee against loss in a
declining market.
The Account Rebalancing Program 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 Deduction") and to taxes and to tax
penalties (see "Tax Status"). Roth IRAs provide for a tax-free withdrawal of all
assets in the Contract, both contributions and earnings, provided the withdrawal
is not made within the 5-taxable year period beginning with the first tax year
for which a contribution was made, and the distribution is made after attainment
of age 59-1/2, or on account of death or disability, or for a qualified
first-time home purchase.
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,
Fixed Account and 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 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.")
Reinstatement Privilege Following Withdrawal. You may elect to reinstate all or
a portion of the proceeds received from the full withdrawal of your Account
within 30 days after the withdrawal. Reinvested amounts
38
<PAGE>
must be received by the Company within 60 days of the withdrawal. Accumulation
Units will be credited to your Account for the amount reinstated, as well as for
any maintenance fee charged and any portion of any deferred sales charge imposed
at the time of withdrawal. However, any aggregate negative market value
adjustment made to the Guaranteed Account will not be credited. Reinstated
amounts will be reallocated to applicable investment options in the same
proportion as they were allocated at the time of withdrawal.
The number of Accumulation Units credited will be based upon the AUV(s) next
computed following receipt at our Home Office of the reinstatement request along
with the amount to be reinstated. Any maintenance fee which falls due after the
withdrawal and before the reinstatement will be deducted from the amount
reinstated. The reinstatement privilege may be used only once and does not apply
to a Certificate Holder's Account that we close out as described in the Section
entitled, "Involuntary Terminations." If you are contemplating reinstatement,
you should seek competent advice regarding the tax consequences associated with
this type of transaction.
SYSTEMATIC DISTRIBUTION OPTIONS
================================================================================
The Company offers certain withdrawal options under the Contract that are not
considered Annuity Payout Options ("Systematic Distribution Options"). To
exercise these options, your Account Value must meet the minimum dollar amount
and age criteria applicable to that option.
The Systematic Distribution 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.") ECO is not available
under the Roth IRA Contract.
(bullet) LEO--Life Expectancy Option. LEO offers an annual payment over a number
of years equal to your life expectancy or the life expectancy of you
and a designated beneficiary.
Other Systematic Distribution Options may be added from time to time. Additional
information relating to any of the Systematic Distribution Options may be
obtained from your local representative or from the Company at its Home Office.
If you select one of the Systematic Distribution 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
Systematic Distribution 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 a Systematic Distribution Option, you may revoke it any time by
submitting a written request to our Home Office. Once an option is revoked, no
other Systematic Distribution Option may be elected unless permitted by the
Code. The Company reserves the right to discontinue the availability of one or
all of these Systematic Distribution Options for new elections at any time,
and/or to change the terms of future elections.
39
<PAGE>
DEATH BENEFIT DURING ACCUMULATION PERIOD
================================================================================
A death benefit will be payable to the Beneficiary if the Certificate Holder or
the Annuitant dies before Annuity Payments have commenced. If the Account is
owned jointly, the death benefit applies at the death of the first joint
Certificate Holder. 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 the primary or contingent
Beneficiary, as originally designated, unless or until the newly designated
Beneficiary changes the Beneficiary designation.
DEATH BENEFIT AMOUNT
The amount of the death benefit will depend on the Option Package in effect on
the date the Certificate Holder or Annuitant dies.
Option Package I
Upon the death of the Annuitant the death benefit will be the greater of:
(1) The sum of all Purchase Payments made, adjusted for amounts withdrawn
or applied to an Annuity Payout Option ("Return of Purchase Payment")
as of the Claim Date; or
(2) The Account Value on the Claim Date.
Option Package II
Upon the death of the Annuitant the death benefit will be the greatest of:
(1) The sum of all Purchase Payments made, adjusted for amounts withdrawn
or applied to an Annuity Payout Option ("Return of Purchase Payment")
as of the Claim Date; or
(2) The Account Value on the Claim Date; or
(3) The "Step-up Value" (as described below) on the Claim Date.
Option Package III
Upon the death of the Annuitant, the death benefit will be the greatest of:
(1) The sum of all Purchase Payments made, adjusted for amounts withdrawn
or applied to an Annuity Payout Option ("Return of Purchase Payment")
as of the Claim Date; or
(2) The Account Value on the Claim Date; or
(3) The "Step-up Value" (as described below) on the Claim Date; or
(4) The "Roll-up Value" (as described below) on the Claim Date.
40
<PAGE>
Step-up Value: On the Schedule Effective Date, the Step-up Value is equal to the
greater of : (1) the Account Value; or (2) the Step-up Value, if any, calculated
on the anniversary of the Account Effective Date prior to the Schedule Effective
Date, adjusted for Purchase Payments made and amounts withdrawn or applied to an
Annuity Payout Option during the prior Account Year. Thereafter, once each year
on the anniversary of the Schedule Effective Date until the anniversary
immediately preceding the Annuitant's 85th birthday or death, whichever is
earlier, the Step-up Value is equal to the greater of:
(a) The Step-up Value most recently calculated, adjusted for Purchase
Payments made and amounts withdrawn or applied to an Annuity Payout
Option during the prior Account Year; or
(b) The Account Value on that anniversary of the Schedule Effective Date.
On each anniversary of the Schedule Effective Date after the Annuitant's 85th
birthday, the Step-up Value shall be equal to the Step-up Value on the
anniversary immediately preceding the Annuitant's 85th birthday, adjusted for
Purchase Payments made and amounts withdrawn or applied to an Annuity Payout
Option since that anniversary. On the Claim Date, the Step-up Value shall equal
the Step-up Value on the anniversary of the Schedule Effective Date immediately
preceding the Annuitant's death, adjusted for Purchase Payments made and amounts
withdrawn or applied to an Annuity Payout Option since that anniversary.
Roll-up Value: On the Schedule Effective Date, the Roll-up Value is equal to the
Account Value. Thereafter, once each year on the anniversary of the Schedule
Effective Date until the anniversary immediately preceding the Annuitant's 76th
birthday or death, whichever is earlier, the Roll-up Value is equal to the
Roll-up Value most recently calculated multiplied by a factor of 1.05, adjusted
for Purchase Payments made and amounts withdrawn or applied to an Annuity Payout
Option during the prior Account Year. The Roll-up Value may not exceed 200% of
the Account Value on the Schedule Effective Date, adjusted for Purchase Payments
made and amounts withdrawn or applied to an Annuity Payout Option since that
date.
On each anniversary of the Schedule Effective Date after the Annuitant's 76th
birthday, the Roll-up Value shall be equal to the Roll-up Value on the
anniversary immediately preceding the Annuitant's 76th birthday, adjusted for
Purchase Payments made and amounts withdrawn or applied to an Annuity Payout
Option since that anniversary. On the Claim Date, the Roll-up Value shall equal
the Roll-up Value on the anniversary of the Schedule Effective Date immediately
preceding the Annuitant's death, adjusted for Purchase Payments made and amounts
withdrawn or applied to an Annuity Payout Option since that anniversary.
For purposes of determining the death benefit, the adjustment for Purchase
Payments made and amounts withdrawn or applied to an Annuity Payout Option will
increase or reduce the Return of Purchase Payment, Step-up Value and/or Roll-up
Value in the same proportion that the Account Value was increased or reduced on
the date of the Purchase Payment, withdrawal or application to an Annuity Payout
Option.
Notwithstanding which Option Package is selected, on the Claim Date, if the
amount of the death benefit is greater than the Account Value, the amount by
which the death benefit exceeds the Account Value will be deposited and
allocated to the money market Subaccount available under the Contract.
Death of a Spousal Beneficiary who Continues the Account. If the spousal
Beneficiary continues the Account at the death of the Certificate Holder who was
also the Annuitant, the spousal Beneficiary becomes the Annuitant. The Option
Package in effect at the death of the Certificate Holder will also apply to the
spousal Beneficiary, unless later changed by the spousal Beneficiary.
41
<PAGE>
The amount of the death benefit payable at the death of a spousal beneficiary
who continues the Account shall be determined under the Option Package then in
effect and as described above, except that:
(1) In calculating the Return of Purchase Payment amount, the Account
Value on the Claim Date for the prior Certificate Holder's death shall
be treated as the initial Purchase Payment; and
(2) In calculating the Step-up Value, the Step-up Value on the Claim Date
for the prior Certificate Holder's death shall be the initial Step-up
Value; and
(3) In calculating the Roll-up Value, the Roll-up Value on the Claim Date
for the prior Certificate Holder's death shall be the initial Roll-up
Value.
Death of a Certificate Holder who is not the Annuitant. Under Nonqualified
Contracts only, if the Certificate Holder is not the Annuitant and dies, the
death benefit described above under Option Packages I, II and III will not
apply. Rather, the amount paid on account of the death of the Certificate Holder
will be equal to the Adjusted Account Value on the date the payment request is
processed. A deferred sales charge may apply to any full or partial payment of
this death benefit.
Likewise, if the spousal Beneficiary continues the Account at the death of the
Certificate Holder who was not the Annuitant, the Annuitant will not change and
the death benefit described above under Option Packages I, II and III will not
apply on the death of the spousal Beneficiary. Rather, the amount of death
benefit proceeds payable upon the spousal Beneficiary's death will be equal to
the Adjusted Account Value on the date the payment request is processed. A
deferred sales charge may apply to any full or partial payment of this death
benefit.
Because the death benefit equals the Adjusted Account Value in this situation, a
Certificate Holder who is not also the Annuitant should seriously consider
whether Option Packages II or III are suitable for their circumstances.
DEATH BENEFIT PAYMENT OPTIONS
Death benefit proceeds may be paid to the Beneficiary as described below. The
Beneficiary may elect any available death benefit payment option as permitted,
unless the Certificate Holder has specified the form of payment to the
Beneficiary. If you die and no Beneficiary exists, the death benefit will be
paid in a lump sum to your estate.
Prior to the date any election by the Beneficiary for payment of the death
benefit is processed, 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. As a result, the amount received by the
Beneficiary may be greater or less than the amount of the death benefit on the
Claim Date. The Beneficiary has the right to allocate or transfer any amount to
any available investment option (subject to a market value adjustment, 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 distributions within those time periods can result in
tax penalties.
Nonqualified Contracts. Under a Nonqualified Contract, if you die and the
Beneficiary is your surviving spouse, or if you are a nonnatural person and the
Annuitant dies and the Beneficiary is the Annuitant's surviving spouse, he or
she automatically becomes the successor Certificate Holder. The successor
Certificate Holder may exercise all rights under the Account and (1) continue in
the Accumulation Period; (2) elect to apply some or all of the Adjusted Account
Value to any of the Annuity Payout Options; or (3) receive at any time a lump
sum
42
<PAGE>
payment equal to all or a portion of the Adjusted Account Value. If you die and
you are not the Annuitant, any applicable deferred sales charge will be applied
if a lump sum payment is elected. Under the Code, distributions are not required
until the successor Certificate Holder's death.
If you die and the Beneficiary is not your surviving spouse, he or she may elect
option (2) or (3) above. According to the Code, any portion of the Adjusted
Account Value not distributed in installments over the life or life expectancy
beginning within one year of your death, must be paid within five years of your
death. (See "Tax Status of the Contract.")
If you are a natural person but not the Annuitant and the Annuitant dies, the
Beneficiary may elect to apply the Adjusted Account Value to an Annuity Payout
Option within 60 days or to receive a lump sum payment equal to the Adjusted
Account Value, subject to state regulatory approval. If the Beneficiary does not
elect an Annuity Payout Option within 60 days of the date of death, the gain, if
any, will be includible in the Beneficiary's income in the year the Annuitant
dies.
If SWO is in effect, payments will cease at the Certificate Holder's or
Annuitant's death. A Beneficiary, however, may elect to continue SWO.
Qualified Contracts. Under a Qualified Contract, the death benefit is paid at
the death of the participant, who is the Annuitant under the Contract. The
Beneficiary has the following options: (1) apply some or all of the Adjusted
Account Value to any of the Annuity Payout 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 ECO, SWO or LEO is in effect and the participant dies before the required
beginning date for minimum distributions, payments will cease. A Beneficiary, or
the Certificate Holder on behalf of a plan Beneficiary, may elect ECO, SWO or
LEO provided the election would satisfy the Code minimum distribution rules.
If ECO, SWO or LEO 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 the option is revoked. Death
benefit payments must satisfy the distribution rules in Code Section 401(a)(9).
(See "Tax Status of the Contract.")
TRANSFERS BETWEEN OPTION PACKAGES
================================================================================
Provided your Account Value meets the minimum requirements described below, you
may transfer from one Option Package to another on any anniversary of the
Account Effective Date by providing us with written notice of your intent to
transfer. For such notice to be effective, it must be received by us during the
sixty day period prior to and including the anniversary on which the transfer is
to be made.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
Transfers to Option Package I Transfers to Option Packages II or III
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Minimum Non-Qualified: Qualified: Non-Qualified: Qualified:
Account Value: $15,000 $1,500 $5,000 $1,500
------------------------------------------------------------------------------------------------
</TABLE>
The mortality and expense risk charge relating to the Option Package transferred
to will be effective as of the new Schedule Effective Date. With respect to the
guaranteed death benefit and withdrawals free of the deferred sales charge, the
following rules will apply:
43
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Transfers to Option Package I Transfers to Option Package II Transfers to Option Package III
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
o Death Benefit(1): o Death Benefit(1): o Death Benefit(1):
o Return of Purchase Payment amount o Return of Purchase Payment amount o Return of Purchase Payment amount
will continue to be calculated as of will continue to be calculated as will continue to be calculated as
the Account Effective Date. of the Account Effective Date. of the Account Effective Date.
o The Step up Value under Option o If transferring from Option o If transferring from Option
Packages II and III will terminate on Package I, the Step-up Value will Package I, the Step-up Value will
the new Schedule Effective Date. be calculated beginning on the new be calculated beginning on the new
Schedule Effective Date. Schedule Effective Date.
o If transferring from Option o If transferring from Option
Package III, the Step-up Value Package II, the Step-up Value
will continue to be calculated will continue to be calculated
from the date calculated under from the date calculated under
Option Package III. Option Package II.
o The Roll-up Value under Option o The Roll-up Value under Option o The Roll-up Value will be
Package III will terminate on the new Package III will terminate on the new calculated beginning on the new
Schedule Effective Date. Schedule Effective Date. Schedule Effective Date.
o Nursing Home Waiver(2): o Nursing Home Waiver(2): o Nursing Home Waiver(2):
o The availability of waiver of the o If transferring from Option o If transferring from Option
deferred sales charge under the Package I, the waiting period under Package I, the waiting period under
Nursing Home Waiver will the Nursing Home Waiver will the Nursing Home Waiver will
terminate on the new Schedule begin to be measured from the new begin to be measured from the new
Effective Date. Schedule Effective Date. Schedule Effective Date.
o If transferring from Option o If transferring from Option
Package III, the waiting period Package II, the waiting period
under the Nursing Home under the Nursing Home
Waiver will have been Waiver will have been
satisfied on the new satisfied on the new Schedule
Schedule Effective Date. Effective Date.
o Free Withdrawal Amount(3): o Free Withdrawal Amount(3): o Free Withdrawal Amount(3):
o If transferring From Option o If transferring From Option o The cumulative to 30% available
Package III, any available free Package III, any available free free withdrawal amount will begin
withdrawal amount in excess withdrawal amount in excess to be calculated as of the new
of 10% will be lost as of the of 10% will be lost as of the Schedule Effective Date.
new Schedule Effective Date. new Schedule Effective Date.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) See "Death Benefit During the Accumulation Period - Death Benefit Amount".
(2) See "Charges And Deductions - Nursing Home Waiver".
(3) See "Charges And Deductions - Free Withdrawals".
Only one Option Package may be in effect at any time.
44
<PAGE>
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 Payout Option elected. Payments may not
begin during the first Account Year, or, unless we consent, later than the later
of (a) the first day of the month following the Annuitant's 85th birthday, or
(b) the tenth anniversary of the last Purchase Payment.
Annuity Payments will not begin until you have selected an Annuity Date and an
Annuity Payout Option. Until a date and option are elected, the Account will
continue in the Accumulation Period.
As of January 1, 1997, the Code generally requires that for Qualified Contracts,
other than IRAs and for five-percent owners in other Qualified Contracts,
minimum annual distributions of the Account Value begin by April 1st of the
Account Year following the Account 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 Account Year
following the Account 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 Payout Options or Systematic Distribution Options. (See "Tax
Status.") For Nonqualified Contracts, failure to select an Annuity Payout Option
and an Annuity Date, or postponement of the Annuity Date past the Annuitant's
85th birthday or tenth anniversary of your 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.
For Roth IRAs, the minimum distribution rules do not apply prior to your death.
You are not required to begin taking minimum annual distributions by April 1 of
the Account Year following the Account Year in which you attain age 70-1/2.
The general rule that Annuity Payments may not extend beyond your life/life
expectancy or beyond the joint lives/joint life expectancies of you and your
beneficiaries does not apply to a Roth IRA. The minimum distribution rules which
apply to the beneficiary at your death and which are described in this
Prospectus continue to apply. The rules differ depending on whether you die
after distributions have begun.
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 Payout 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., fixed
Annuity Payments using the general account or variable Annuity
Payments using any of the Subaccounts available on the Annuity Date, or
a combination of the two).
Once Annuity Payments begin, the Annuity Payout Option may not be changed.
PARTIAL ANNUITIZATION
You may elect an Annuity Payout Option with respect to a portion of your Account
Value, while leaving the remaining portion of your Account Value invested in the
Accumulation Period. The Code and the regulations do not specifically address
the tax treatment applicable to payments provided in this way. Whether such
payments
45
<PAGE>
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 PAYOUT OPTIONS
The Certificate Holder may choose one of the following Annuity Payout Options:
Nonlifetime Annuity Payout Option:
Nonlifetime Annuity - An option with Annuity Payments made for generally 5-30
years, as selected by the Certificate Holder. If this option is elected as
variable Annuity Payments, the Certificate Holder may request that the present
value of all or any portion of the remaining variable payments be paid in one
sum. However, any lump-sum elected before three years of payments have been
completed will be treated as a withdrawal during the Accumulation Period and any
applicable deferred sales charge will be assessed. (See "Charges and
Deductions--Deferred Sales Charge.") If the nonlifetime option is elected on a
fixed basis, you cannot elect to receive a lump-sum payment.
Lifetime Annuity Payout Options:
Option 1--Life Annuity--An option with Annuity Payments ending on the
Annuitant's death.
Option 2--Life Annuity with Guaranteed Payments--An option with Annuity
Payments guaranteed for 5-30 years.
Option 3--Life Annuity with Cash Refund Feature--An option with a cash
refund feature. Payments are guaranteed for the amount applied to the
Annuity Payout Option. If the Annuitant dies before the amount applied to
the Annuity Payout 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 for fixed Annuity Payments.
Option 4--Life Annuity Based Upon the Lives of Two Annuitants--An option
with Annuity Payments made during the lives of the primary Annuitant and a
secondary Annuitant. The Certificate Holder selects Annuity Payments with
100%, 66% or 50% of the payment to continue after the first death, or
Annuity Payments with 100% of the payment to continue at the death of the
secondary Annuitant and 50% of the payment to continue at the death of the
primary Annuitant.
Option 5--Life Annuity Based Upon the Lives of Two Annuitants with
Guaranteed Payments--An option with Annuity Payments made for a minimum of
5-30 years, with 100% of the payment to continue after the first death.
Option 6--Life Annuity Based Upon the Lives of Two Annuitants with a Cash
Refund Feature--An option 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 Payout Option. If both Annuitants die prior
to the total payment of the amount applied to the Annuity Payout Option
(less any premium tax), any remaining balance will be paid in one sum to
the Beneficiary. This option is available only for fixed Annuity Payments
and may not be available in all states.
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 payment.
We may also offer additional Annuity Payout 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
46
<PAGE>
the terms of such options. Additional or enhanced options may not be available
to those already receiving Annuity Payments.
ANNUITY PAYMENTS
Date Payments Start. When payments start, the age of the Annuitant plus the
number of years for which payments are guaranteed must not exceed 95. 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 that 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 total yearly
Annuity Payments of less than $250 (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. We reserve the
right to increase the minimum first Annuity Payment amount and the minimum
annual Annuity Payment amount based on increases reflected in the Consumer Price
Index-Urban (CPI-U), since July 1, 1993.
If Annuity Payments are to be made on a variable basis, the first and subsequent
payments will vary depending on the assumed interest rate ("AIR") selected
(3-1/2 % or 5% per annum). Selection of a 5% AIR causes a higher first payment,
but Annuity Payments will increase thereafter only to the extent that the rate
exceeds 5% on an annualized basis. Annuity Payments would decline if the rate
were below 5%. Use of the 3-1/2% AIR causes a lower first payment, but
subsequent payments would increase more rapidly or decline more slowly as
changes occur in the AIR. (See the Statement of Additional Information for
further discussion on the impact of selecting an AIR.)
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 investment options. This charge, established when a variable
Annuity Payout 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 Payout
Option selected. If Option 1 or Option 4 was elected, Annuity Payments will
cease on the death of the Annuitant under Option 1 or the 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, provided the Certificate
Holder has not prohibited such an election in the Beneficiary designation.
If the nonlifetime option was elected, and the Annuitant dies before all
payments are made, remaining payments will be paid to the Beneficiary unless the
Beneficiary elects a lump sum, provided the Certificate Holder has not
prohibited such an election in the Beneficiary designation.
47
<PAGE>
When the Annuitant dies after Annuity Payments have begun and if there is a
death benefit payable under the Annuity Payout 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
Payout 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.
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 Sections 403(b),
408(b) or 408A 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 Group 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.
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.
48
<PAGE>
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
significantly 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 Account may be continued with the surviving spouse as the new
Certificate Holder. If the Certificate Holder is a non-natural person, the
surviving spouse who is the "designated beneficiary" of the deceased Annuitant
may continue the Account.
If the Certificate Holder is a natural person but not the Annuitant and the
Annuitant dies, if the Beneficiary does not elect an Annuity Payout Option
within 60 days of the date of death, the gain, if any, will be includible in the
Beneficiary's income in the year the Annuitant dies.
The Nonqualified 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.
Required Distributions--Qualified Contracts: The Code has required distribution
rules for Section 403(b) Plans and IRAs. Other than for IRAs and for
five-percent owners in other Qualified Contracts, distributions must generally
begin by April 1 of the Account Year following the Account Year in which the
participant attains age 70-1/2 or retires, whichever occurs later. For
traditional IRA participants and for five-percent owners, minimum distributions
must begin by April 1 of the Account Year following the Account Year in which
the participant attains age 70-1/2. There is no required distribution date for
participants in a Roth IRA. Under 403(b) plans, if the Company maintains
separate records, distribution of amounts held as of December 31, 1986 must
49
<PAGE>
generally begin by the end of the Account 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 from a traditional IRA 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.
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
Account 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 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
Account 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,
provided the distribution begins to a non-spouse beneficiary by December 31 of
the Account Year following the Account Year of the participant's death. If
payments are made to a spousal beneficiary, distributions must begin by the
later of December 31 of the Account Year following the Account Year of the death
or December 31 of the Account Year in which the participant would have attained
age 70-1/2.
An exception applies for a spousal beneficiary under an IRA. 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.
The minimum distribution rules also apply to beneficiaries under a Roth IRA and
are based on whether the participant dies before or after distribution begins.
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 Payout Option elected). The
taxable portion of a distribution (in the form of a single sum payment or an
Annuity Payment) is taxable as ordinary income.
50
<PAGE>
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 Withdrawal 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 adviser prior to purchasing this Contract. A non-natural
person exempt from federal income taxes should consult with its tax adviser
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, ECO or LEO, 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 or LEO, 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 advisor 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."
Any "qualified" distribution from a Roth IRA is not includible in gross income.
A "qualified" distribution is any distribution made after the participant
attains age 59-1/2, or on account of the participant's death or disability, or
for a qualified first-time home purchase. A distribution will not be treated as
"qualified" if it is made within the 5-taxable year period beginning with the
first taxable year for which a contribution was made. If a distribution is not
"qualified", the accumulated earnings are includible in income. The 10%
premature distribution penalty will apply to the taxable portion of the
distribution unless one of the exceptions under the Code applies. (See "Penalty
Tax" below.) A partial distribution will first be treated as a return of cost
basis (i.e. aggregate amount of contributions.)
For Roth IRAs The minimum distribution rules do not apply prior to the
participant's death. (See "Annuity Period" above.)
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
51
<PAGE>
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 expected number of
payments as defined in Code Section 72 (d); 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 advisor regarding
deductibility of the unrecovered amount.
Penalty Tax: In the case of a distribution pursuant to a Nonqualified Contract,
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.
If a distribution is made from a Qualified Contract sold in conjunction with
Section 403(b) Plan, the penalty tax will not apply on distribution 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 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, except for (d), the same exceptions described in the preceding
paragraph will apply to distributions made from an IRA, including a distribution
from a Roth IRA that is not a "qualified distribution" or a rollover to a Roth
IRA that is not a "qualified rollover" contribution. 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. Beginning January
1, 1998, the penalty tax is waived if the amounts withdrawn are used for a
qualified first-time home purchase or for higher education expenses.
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 Payout Option, they
are taxed in the same manner as Annuity Payments, as described above.
Special rules may apply on Nonqualified Contracts. See "Required Distributions -
Nonqualified Contracts."
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
52
<PAGE>
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 Account 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.
CONTRACTS USED WITH CERTAIN RETIREMENT PLANS
Qualified Contracts in General: The Qualified Contract is designed for use as a
Code Section 408(b) IRA 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; 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 403(b) Plans. 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(b) of the Code permits eligible individuals to contribute to an
individual retirement program known as a traditional IRA, 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.
Section 408A of the Code permits eligible individuals to contribute to a Roth
IRA on an after-tax (non-deductible) basis.
Distributions from other types of qualified plans are not permitted to be
transferred or rolled over to a Roth IRA. A Roth IRA can accept
transfers/rollovers only from an IRA, subject to ordinary income tax, or from
another Roth IRA.
53
<PAGE>
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 403(b) tax-deferred annuities are subject to
mandatory 20% federal income tax withholding. If the recipient is a non-resident
alien, any withholding will be governed by Code Section 1441 based on the
individual's citizenship, the country of domicile and treaty status. 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. The Company and one or more of
its affiliates may also sell the Contracts directly. 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.
From time to time, the Company may offer customers of certain broker-dealers
special guaranteed rates in connection with the Guaranteed Account offered
through the Contracts, and may negotiate different commissions for these
broker-dealers.
The Company may also contract with independent third party broker-dealers who
will act as wholesalers by assisting the Company in finding broker-dealers or
banks interested in acting as Distributors for the Company. These wholesalers
may also provide training, marketing and other sales related functions for the
Company and the Distributors and may provide certain administrative services to
the Company in connection with the Contracts. The Company may pay such
wholesalers compensation based on Purchase Payments for the Contracts purchased
through Distributors selected by the wholesaler.
The Company may also designate third parties to provide services in connection
with the Contracts such as reviewing applications for completeness and
compliance with insurance requirements and providing the Distributors with
approved marketing material, prospectuses or other supplies. These parties will
also receive payments based on Purchase Payments for their services, to the
extent such payments are allowed by applicable securities laws. All costs and
expenses related to these services will be paid by the Company.
Payment of Commissions. We pay Distributors and their Registered Representatives
who sell the Contracts commissions and service fees. Distributors will be paid
commissions up to an amount currently equal to 6.0% of Purchase Payments or as a
combination of a certain percentage amount of purchase payments at time of sale
and a trail commission as a percentage of assets. Under the latter arrangement,
commission payments may exceed 6.0% of purchase payments over the life of the
Contract. In limited circumstances, we also pay certain of these professionals
compensation, overrides or reimbursement for expenses associated with the
distribution of the Contract. At times the Company may offer certain
distributors an enhanced commission for a limited period of time. In addition,
some sales personnel may receive various types of non-cash compensation such as
special sales incentives, including trips and educational and/or business
seminars. Supervisory and other management
54
<PAGE>
personnel of the Company may receive compensation that will vary based on the
relative profitability to the Company of the funding options you select. Funding
options that invest in Funds advised by the Company or its affiliates are
generally more profitable to the Company.
We pay these commissions, fees and related distribution expenses out of any
deferred sales charges assessed or out of our general assets, including
investment income and any profit from investment advisory fees and mortality and
expense risk charges. No additional deductions or charges are imposed for
commissions and related expenses.
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 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 contributions were first received in
the Fund under the Separate Account, if less than the full period). Standardized
returns will reflect the reduction of all recurring charges during each period
(e.g., mortality and expense risk charges, annual maintenance fees,
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, and may include
performance from the Fund's inception date..
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 individual Certificate Holder or Group 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 individual Certificate Holder or Group Contract
Holder may give direction will be determined as of the record date. The number
of votes each individual Certificate Holder or Group Contract Holder is entitled
to direct with respect to a particular Fund during the Accumulation Period
equals the portion of the Account Value(s) of the Contract attributable to that
Fund, divided by the net asset value of one share of that Fund. During the
Annuity Period, the number of votes is equal to the valuation reserve for the
portion of the Contract attributable to that Fund, divided by the net asset
value of one share of that Fund. In determining the number of votes, fractional
votes will be recognized. Where the value of the Contract or valuation reserve
relates to more than one Fund, the calculation of votes will be performed
separately for each Fund.
55
<PAGE>
If you are a Certificate Holder under a group Contract, you have a fully vested
(100%) interest in the benefits provided to you under your Account. Therefore,
you may instruct the Group Contract Holder how to direct the Company to cast the
votes for the portion or the value of valuation reserve attributable to your
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 Certificate Holders or Group Contract Holders
who do not direct us will be cast by us in the same proportion as votes for
which directions we have 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 Group Contract
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. 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.
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 Certificate Holder 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 IRA 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.
56
<PAGE>
YEAR 2000
As a healthcare and financial services enterprise, Aetna Inc. (referred to
collectively with its affiliates and subsidiaries as Aetna), is dependent on
computer systems and applications to conduct its business. Aetna has developed
and is currently executing a comprehensive risk-based plan designed to make its
computer systems, applications and facilities Year 2000 ready. The plan covers
four stages including (i) inventory, (ii) assessment, (iii) remediation and (iv)
testing and certification. At year end 1997, Aetna , including the Company, had
substantially completed the inventory and assessment stages. The remediation
process is currently underway and targeted for completion by December 31, 1998.
Testing and certification of these systems and applications are targeted for
completion by mid-1999. The costs of these efforts will not affect the Separate
Account.
The Company, its affiliates and the mutual funds that serve as investment
options for the Separate Account also have relationships with investment
advisers, broker dealers, transfer agents, custodians or other securities
industry participants or other service providers that are not affiliated with
Aetna. Aetna, including the Company, is initiating communication with its
critical external relationships to determine the extent to which Aetna may be
vulnerable to such parties' failure to resolve their own Year 2000 issues. Where
practicable Aetna and the Company will assess and attempt to mitigate their
risks with respect to the failure of these parties' to be Year 2000 ready. There
can be no assurance that failure of third parties to complete adequate
preparations in a timely manner, and any resulting systems interruptions or
other consequences, would not have an adverse effect, directly or indirectly, on
the Separate Account, including, without limitation, its operation or the
valuation of its assets and units.
57
<PAGE>
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
Sales Material and Advertising
Independent Auditors
Financial Statements of the Separate Account
Financial Statements of the Company
58
<PAGE>
APPENDIX A
ALIAC GUARANTEED ACCOUNT
================================================================================
The ALIAC Guaranteed Account (the "Guaranteed Account") is a credited interest
option available during the Accumulation Period under the Contracts. 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 rates 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 and credit
one with a higher rate contingent upon use only with the Dollar Cost Averaging
Program. If amounts are applied to a Guaranteed Term which is credited with a
higher rate using dollar cost averaging and the dollar cost averaging is
discontinued, the amounts will be transferred to another Guaranteed Term of the
same duration and a market value adjustment ("MVA") will apply. The Company also
reserves the right to limit the number of Guaranteed Terms or the availability
of certain Guaranteed Terms. 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. 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,
withdrawals taken in connection with an Estate Conservation or Systematic
Withdrawal distribution 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 an 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.
For partial withdrawals during the Accumulation Period, amounts to be withdrawn
from the Guaranteed Account will be withdrawn on a pro rata basis from each
group of deposits having the same length of time until the Maturity Date
("Guaranteed Term Group"). Within a Guaranteed Term Group, the amount will be
withdrawn first from the oldest Deposit Period, then from the next oldest, and
so on until the amount requested is satisfied.
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
59
<PAGE>
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 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 Payout
Option; (3) amounts distributed under the Estate Conservation or Systematic
Withdrawal Options; and (4) amounts transferred from an available Guaranteed
Term in connection with the Dollar Cost Averaging Program. However, if the
Certificate Holder discontinues the Dollar Cost Averaging Program and the
amounts in it are transferred in accordance with the Company's terms and
conditions governing Guaranteed Terms, an MVA will apply. 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 an MVA. However, only a positive aggregate MVA will be
applied to transfers made due to annuitization under one of the lifetime Annuity
Payout Options described in item (2) above.
The Company reserves the right to limit the number of investment options
selected during the Accumulation Period. At this time there is no limit on the
number of options selected during the Accumulation Period, but the number of
investment options that may be selected at any one time by a Certificate Holder
presently is limited to 18. 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 investment 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 Account.
By notifying us at least 30 days prior to the Annuity Date, you may elect a
variable Annuity Payout Option 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 Payout Option will be subject to only a positive aggregate
MVA.
60
<PAGE>
DEATH BENEFIT
Full and partial withdrawals and transfers made from the Guaranteed Account
within six months after the date of the Annuitant's death will be the greater
of:
(1) the aggregate MVA amount (i.e., the sum of all market value adjusted
amounts calculated due to a withdrawal of amounts) which may be greater or
less than the Account Value of those amounts; or
(2) 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.
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.
From time to time, the Company may offer customers of certain broker-dealers
special guaranteed rates in connection with the Guaranteed Account offered
through the Contracts, and may negotiate different commissions for these
broker-dealers.
61
<PAGE>
APPENDIX B
FIXED ACCOUNT
================================================================================
The Fixed Account is an investment option available during the Accumulation
Period under the Contracts. The following summarizes material information
concerning the Fixed Account that is offered as an option under the Contract.
Additional information may be found in your Contract. Amounts allocated to the
Fixed Account are held in the Company's general account that supports insurance
and annuity obligations. Interests in the Fixed Account have not been registered
with the SEC in reliance on exemptions under the Securities Act of 1933, as
amended. Disclosure in this prospectus regarding the Fixed Account, however, may
be subject to certain generally applicable provisions of the federal securities
laws relating to the accuracy and completeness of the statements.
Disclosure in this Appendix regarding the Fixed Account has not been reviewed by
the SEC.
Fixed Account
Amounts allocated to this option will earn the minimum guaranteed interest rate
specified in the Contract. The Company may credit a higher interest rate from
time to time. The Company's determination of interest rates reflects the
investment income earned on invested assets and the amortization of any capital
gains and/or losses realized on the sale of invested assets. Under this option,
the Company assumes the risk of investment gain or loss by guaranteeing Net
Purchase Payment values and promising a minimum interest rate and Annuity
Payment.
Amounts applied to the Fixed Account will earn the interest rate in effect when
actually applied to the Fixed Account. The Fixed Account is only available in
certain states. If a withdrawal is made from the Fixed Account, a deferred sales
charge may apply. Amounts allocated to the Fixed Account will count as an option
for purposes of the 18 investment option limit. (See "Investment Options.")
Dollar Cost Averaging
Amounts invested in the Fixed Account must be transferred into the other
investment options available under the Contract over a period not to exceed 12
months under the Dollar Cost Averaging Program. In the event a Certificate
Holder discontinues dollar cost averaging, the remaining balance amounts in the
Fixed Account will be transferred into the money market Subaccount unless
directed otherwise.
Mortality and Expense Risk Charges
The Fixed Account will reflect a compound interest rate credited by the Company.
The interest rate quoted is an annual effective yield. The Company makes no
deductions from the credited interest rate for mortality and expense risks;
these risks are considered in determining the credited rate.
Transfers Among Investment Options
Transfers from the Fixed Account to any other available investment option under
the Contract are allowed in each Account Year during the Accumulation Period.
The amount which may be transferred may vary at the Company's discretion;
however, it will never be less than 10% of the amount held under the Fixed
Account. By giving notice to the Company at its Home Office at least 30 days
before Annuity Payments begin, the Certificate Holder may elect to have amounts
which have been accumulated under the Fixed Account transferred to one or more
of the investment options available during the Annuity Period to provide
variable Annuity Payments.
Under certain emergency conditions, we may defer payment of a Fixed Account
withdrawal value (a) for a period of up to six months, or (b) as allow provided
by federal law.
62
<PAGE>
APPENDIX C
DESCRIPTION OF UNDERLYING FUNDS
================================================================================
The investment results of the Funds described below are likely to differ
significantly and there is no assurance that any of the Funds will achieve their
respective investment objectives. Except where otherwise noted, all of the Funds
are diversified, as defined in the 1940 Act.
Aetna Balanced VP, Inc.
Investment Objective
Seeks to maximize investment return, consistent with reasonable safety of
principal by investing in a diversified portfolio of one or more of the
following asset classes: stocks, bonds, and cash equivalents, based on the
investment adviser's judgment of which of those sectors or mix thereof offers
the best investment prospects.
Policies
Assets are allocated among common and preferred stocks, bonds, U.S. Government
securities and derivatives, and money market instruments. The Fund may also
invest in when-issued or delayed-delivery securities. The Fund generally will
maintain at least 25 percent of its total assets in fixed income securities.
Risks
There can be no assurance that the investment adviser will always allocate
assets to the best performing sectors. The Fund's performance would suffer if a
major proportion of its assets were allocated to stocks in a declining market
or, similarly, if a major portion of its assets were allocated to bonds in a
time of adverse interest rate movement. High -yield bonds involve additional
investment risk. Foreign securities may involve certain additional risks. Such
risks include: currency fluctuations and related currency conversion costs; less
liquidity; price or income volatility; less government supervision and
regulation of foreign stock exchanges, brokers and listed companies; adverse
foreign political and economic developments; different accounting procedures and
auditing standards; and less publicly available information about foreign
issuers.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Income Shares d/b/a Aetna Bond VP
Investment Objective
Seeks to maximize total return, consistent with reasonable risk, through
investments in a diversified portfolio consisting primarily of debt securities.
Policies
The Fund will invest at least 65 percent of its total assets in debt securities.
It is anticipated that the portfolio's effective average maturity will normally
be between three and ten years. The Fund will normally invest at least 70
percent of its assets in one or more of the following: a) debt securities or
obligations that are rated at the time of purchase within the four highest
categories assigned by Moody's Investors Service, Inc., Standard & Poor's
Corporation, or other rating agencies, or, if not rated, that are considered by
the investment adviser to be of comparable quality; b) securities of, or
guaranteed by, the U.S. Government, its agencies or instrumentalities; c)
marketable securities or obligations of, or guaranteed by, foreign governments;
d) commercial paper and other short-term investments having a maturity of less
than one year that are considered by the investment adviser to be investment
grade; and, e) cash or cash equivalents. May invest up to 30 percent of its
total assets in high-yield bonds. May invest up to 25 percent of its total
assets in foreign debt and/or equity securities.
Risks
The value of debt securities may be affected by changes in general interest
rates. High-yield bonds tend to offer higher yields than investment-grade bonds,
but additional risks are associated with them. Foreign securities may
63
<PAGE>
involve certain additional risks. Such risks include: currency fluctuations and
related currency conversion costs; less liquidity; price or income volatility;
less government supervision and regulation of foreign stock exchanges, brokers
and listed companies; adverse foreign political and economic developments;
different accounting procedures and auditing standards; and less publicly
available information about foreign issuers.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Variable Fund d/b/a Aetna Growth and Income VP
Investment Objective
Seeks to maximize total return through investments in a diversified portfolio of
common stocks and securities convertible into common stock. It is anticipated
that capital appreciation and investment income will both be major factors in
achieving total return.
Policies
The Fund will invest principally in common stocks and securities convertible
into common stock that the investment adviser believes have significant
potential for capital appreciation and/or investment income. May invest up to 25
percent of its total assets in foreign equity securities. The Fund may invest in
nonconvertible preferred stocks, debt securities, rights and warrants; the Fund
may maintain a reserve of cash and high-grade, short-term debt securities and
the Fund may purchase securities on a when-issued or delayed-delivery basis.
Risks
Share prices will fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. Foreign
securities may involve certain additional risks. Such risks include: currency
fluctuations and related currency conversion costs; less liquidity; price or
income volatility; less government supervision and regulation of foreign stock
exchanges, brokers and listed companies; adverse foreign political and economic
developments; different accounting procedures and auditing standards; and less
publicly available information about foreign issuers.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Variable Encore Fund d/b/a Aetna Money Market VP
Investment Objective
Seeks to provide high current return, consistent with preservation of capital
and liquidity, through investment in high-quality money market instruments.
Policies
The Fund will Invest primarily in: a) money market instruments that have a
maturity at the time of purchase, of 397 days or less (762 days or less for U.S.
government securities), and b) debt securities with a longer maturity, if the
Fund has the absolute right to sell such securities back to the issuer for at
least the face amount of the debt obligation within 397 days after the date of
purchase. At least 95 percent of total Fund assets are invested in high-quality
securities (those receiving the highest credit rating by any two rating agencies
or one if only one agency has rated the security). May invest up to 25 percent
of its total assets in foreign securities.
Risks
Yield will fluctuate with interest rates. The Fund is neither insured nor
guaranteed by the U.S. government. Foreign securities may involve certain
additional risks. Such risks include: currency fluctuations and related currency
conversion costs; less liquidity; price or income volatility; less government
supervision and regulation of foreign stock exchanges, brokers and listed
companies; adverse foreign political and economic developments; different
accounting procedures and auditing standards; and less publicly available
information about foreign issuers.
64
<PAGE>
An investment in the Fund is neither insured nor guaranteed by the U.S.
Government.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Variable Portfolios, Inc. - Aetna Growth VP
Investment Objective
Seeks growth of capital through investment in a diversified portfolio of common
stocks and securities convertible into common stocks believed to offer growth
potential.
Policies
Normally invests at least 65 percent of its total assets in common stocks that
have significant potential for capital growth. May also invest in convertible
and nonconvertible preferred stocks. May buy and sell put and call options, and
stock index futures and options. May enter into repurchase agreements and invest
up to 25 percent of its total assets in foreign securities. Will not invest more
than 15 percent of the total value of its assets in high-yield bonds.
Risks
Equity securities are subject to a decline in the stock market or in the value
of the company and preferred stocks have price risk and some interest rate and
credit risk. Foreign investing involves certain additional risks not present in
U.S. securities. Such risks may include: currency fluctuations and related
currency conversion costs: less liquidity; price or income volatility; less
government supervision and regulation of foreign stock exchanges, brokers and
listed companies; adverse foreign political and economic developments; different
accounting procedures and auditing standards; and less publicly available
information about foreign issuers. High-yield bonds may provide a higher return,
but have added risk. Derivatives may experience greater price swings and may be
less liquid than other securities.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Variable Portfolios, Inc. - Aetna Index Plus Large Cap VP
Investment Objective
Seeks to outperform the total return performance of publicly traded common
stocks represented in the Standard & Poor's 500 Composite Stock Price Index (S&P
500).
Policies
The Portfolio attempts to be fully invested in common stocks and normally
invests at least 90 percent of its assets in certain common stocks represented
in the S&P 500. Portfolio managers will attempt to outperform the S&P 500 by
creating a portfolio that has similar market risk characteristics to the S&P
500, but will use a disciplined quantitative analysis to identify those stocks
having the greatest likelihood of either outperforming or underperforming the
market.
Risks
Because the Portfolio invests in common stocks, it is subject to the possibility
that common stock prices will decline over short or even extended periods. The
U.S. stock market tends to be cyclical, with periods when stock prices generally
rise and periods when prices generally decline. There is no assurance that the
Portfolio's objectives will be met.
Investment Adviser: Aeltus Investment Management, Inc.
65
<PAGE>
Aetna Variable Portfolios, Inc. - Aetna International VP
Investment objective
Seeks long-term capital growth primarily though investment in a diversified
portfolio of common stocks principally traded in countries outside of the United
States. The Portfolio will not target any given level of current income.
Policies
Invests at least 65 percent of its total assets among securities principally
traded in three or more countries outside of North America. The Portfolio will
invest primarily in equity securities, including securities convertible into
stocks. The Portfolio will invest in a broad spectrum of companies and
industries. Further, from time to time, the Portfolio may hold up to 10 percent
of its total assets in long-term debt securities with an S&P or Moody's rating
of AA/Aa or above, or, if unrated, are considered by the investment adviser to
be of comparable quality. Additionally, the Portfolio may invest in options,
futures, enter into repurchase agreements and engage in currency hedging.
Risks
Equity securities are subject to a decline in the stock market or in the value
of the company. Investments in foreign securities involve certain additional
risks. Such risks may include: currency fluctuations and related currency
conversion costs; less liquidity; price or income volatility; less government
supervision and regulation of foreign stock exchanges, brokers and listed
companies; adverse foreign economic and political developments; different
accounting procedures and auditing standards; and less publicly available
information about foreign issuers. Derivatives may experience greater price
swings and may be less liquid than other securities.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Variable Portfolios, Inc. - Aetna Real Estate Securities VP
Investment Objective
Seeks maximum total return primarily through investment in a diversified
portfolio of equity securities issued by real estate companies, the majority of
which are real estate investment trusts (REITs).
Policies
Normally invests at least 65 percent of total assets in income-producing equity
securities of publicly-traded companies "principally engaged" in the real estate
industry, including those companies that, at the time of purchase, derive a
significant proportion (at least 50 percent) of their revenues or profits from
real estate operations or related services. The Portfolio may invest in
convertible securities and preferred stock. Additionally, the Portfolio may
invest in options and futures, enter into repurchase agreements, and invest up
to 25 percent of its total assets in foreign securities. The Portfolio will not
invest more than 15 percent of the total value of its assets in high-yield
bonds.
Risks
There are a number of risk factors to be considered when investing in Real
Estate Securities VP. Derivatives may experience greater price swings than other
securities and may be less liquid than other securities. Risks involved in
futures contracts include, but are not limited to: transactions to close out
futures contracts may not be able to be effected at favorable prices; possible
reduction in a fund's total return and yield; possible reduction the value of
the futures instrument, and potential losses in excess of the amount invested in
the futures contracts themselves. Writing call options involves the risk of not
being able to effect closing transactions at favorable prices or to participate
in the appreciation of the underlying securities. Purchasing put options
involves the risk of losing the entire purchase price of the option. High-yield
bonds have additional risks associated with them, including but not limited to:
lack of liquidity; an unpredictable secondary market and a higher risk of
default.
66
<PAGE>
Special consideration to an investment in real estate include those risks
associated with the direct ownership of real estate: declines in the value of
real estate, risks related to general and local economic conditions,
over-building and increased competition, increases in property taxes and
operating expenses, changes in zoning laws and other risks particular to this
market. The value of securities of companies which service the real estate
industry may also be affected by such risks.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Variable Portfolios, Inc. - Aetna Small Company VP
Investment Objective
Seeks growth of capital primarily through investment in a diversified portfolio
of common stocks and securities convertible into common stocks of companies with
smaller market capitalizations.
Policies
Normally invests at least 65 percent of its total assets in the common stock of
companies with equity market capitalizations at the time of purchase of $1
billion or less. May also invest in convertible and nonconvertible preferred
stock. The securities of small capitalization companies may be in an early
developmental stage or older companies entering a new stage of growth due to
management changes, new technology, products, or markets. Such companies may
also be undervalued due to poor economic conditions, market decline, or actual
or unanticipated unfavorable developments affecting the companies. May invest in
lower-risk derivatives for hedging and other investment purposes.
Risks
Equity securities are subject to a decline in the stock market or in the value
of the company. Although securities of small capitalization companies tend to
offer greater potential for growth than securities of larger, more established
issuers, there are additional risks associated with them. These include: limited
marketability, more abrupt or erratic market movements than securities of larger
capitalization companies, and less publicly available information about the
issuer. These companies may also be dependent on relatively few products or
services, have limited financial resources and lack of management depth, and may
have less of a track record or historical pattern of performance. Derivatives
may experience greater price swings and may be less liquid than other
securities.
Investment Adviser: Aeltus Investment Management, Inc.
AIM V.I. Capital Appreciation Fund ("Capital Appreciation Fund")
Investment Objective
Policies
Risks
Investment Adviser: A.I.M. Advisors, Inc.
AIM Growth Fund ("Growth Fund")
Investment Objective
Policies
Risks
67
<PAGE>
Investment Adviser: A.I.M. Advisors, Inc.
AIM Growth & Income Fund ("Growth & Income Fund")
Investment Objective
Policies
Risks
Investment Adviser: A.I.M. Advisors, Inc.
AIM Value Fund ("Value Fund")
Investment Objective
Policies
Risks
Investment Adviser: A.I.M. Advisors, Inc.
Fidelity Investments Variable Insurance Products Fund - Equity-Income Portfolio
Investment Objective
Seeks reasonable income by investing primarily in income-producing equity
securities. Also considers the potential for capital appreciation.
Policies
Seeks to achieve a yield that will beat that of the Standard & Poor's (S&P) 500
Index. The Portfolio normally invests at least 65 percent of its total assets in
income-producing equity securities. The Portfolio has the flexibility, however,
to invest the balance in all types of domestic and foreign securities, including
bonds. Portfolio managers do not expect to invest in debt securities of
companies that do not have proven earnings or credit.
Risks
Share prices will fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. The value of
bonds fluctuates based on changes in interest rates and in the credit quality of
the issuer. Foreign securities, foreign currencies and securities issued by U.S.
entities with substantial foreign operations may involve additional risks. These
include political or economic risks, fluctuations in foreign currencies
withholding or other taxes, operational risks, increased regulatory burdens, and
less stringent investor protection and disclosure standards of foreign markets.
Investment Adviser: Fidelity Management & Research Company
Fidelity Investments Variable Insurance Products Fund - High Income Portfolio
Investment Objective
Seeks to obtain a high level of current income by investing primarily in
high-yielding, lower-rated, fixed income securities, while also considering
growth of capital.
Policies
Invests primarily in all types of income-producing debt securities, preferred
stocks, and convertible securities. The Portfolio normally invests at least 65
percent of its assets in these securities. If consistent with its
68
<PAGE>
investment objectives, the Portfolio may also invest in common stocks, other
equity securities, and debt securities that are not currently paying interest
but that are expected to do so in the future. The Portfolio manager focuses on
assembling a portfolio of income-producing securities that it believes will
provide the best tradeoff between risk and return within the range of securities
that are eligible investments for the Portfolio. The Portfolio may invest up to
50 percent of its total assets in foreign securities.
Risks
Yield and share price change daily and are based on changes in interest rates,
market conditions, other economic and political news, and on the quality and
maturity of the Portfolio's investments. Lower quality debt securities (also
known as "junk bonds") are considered to have speculative characteristics and
involve greater risk of default or price changes. Foreign securities, foreign
currencies and securities issued by U.S. entities with substantial foreign
operations may involve additional risks. These include political or economic
risks, fluctuations in foreign currencies, withholding or other taxes,
operational risks, increased regulatory burdens, and less stringent investor
protection and disclosure standards of foreign markets.
Investment Adviser: Fidelity Management & Research Company
Fidelity Investments Variable Insurance Products Fund II - Contrafund Portfolio
Investment Objective
Seeks maximum total return over the long term by investing mainly in securities
of companies whose value the investment adviser believes is not fully recognized
by the public.
Policies
Usually invests in common stock and securities convertible into common stock,
but may invest in any type of security that may produce capital appreciation.
Seeks companies that are: 1) unpopular, but that may improve due to developments
such as a change in management, a new product line, or an improved balance
sheet; or 2) recently popular, but temporarily out of favor due to short-term or
one-time factors; or, undervalued compared to other companies in the same
industry. May not invest more than 25 percent of its total assets in any one
industry.
Risks
Stock values may fluctuate in response to the activities of an individual
company or general market and economic conditions. The Portfolio's strategy can
lead to investments in small- and medium-sized companies, which carry more risk
than larger ones. Generally, such companies rely on limited product lines and
markets, financial resources or other factors. This may make them more
susceptible to downturns. Foreign securities, foreign currencies, and securities
issued by U.S. entities with substantial foreign operations may involve
additional risks. These include political or economic risks, fluctuations in
foreign currencies, withholding or other taxes, operational risks, increased
regulatory burdens, and less stringent investor protection and disclosure
standards of foreign markets. Seeks to manage risk by diversifying its holdings
among many companies and industries.
Investment Adviser: Fidelity Management & Research Company
Janus Aspen Series - Aggressive Growth Portfolio
Investment Objective
Seeks long-term growth of capital.
Policies
A nondiversified portfolio that invests primarily in common stocks of foreign
and domestic companies selected for their growth potential. Normally invests at
least 50 percent of its equity assets in securities issued by medium-sized
companies - those whose market capitalizations fall within the range of
companies in the Standard
69
<PAGE>
and Poor's (S&P) Mid Cap 400 Index. May invest, to a lesser degree, in other
types of securities including preferred stocks, warrants, convertible
securities, and debt securities. May invest up to 35 percent of its net assets
in high-yield/high-risk debt securities ("junk bonds"). May at times hold
substantial positions in cash equivalents or interest-bearing securities.
Risks
Stock values may fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. Historically,
common stocks have provided greater long-term returns and have entailed greater
short-term risks than other investment choices. Smaller or newer issuers are
more likely to realize more substantial growth as well as suffer more
significant losses than larger or more established issuers. Investments in such
companies can be both more volatile and more speculative. Investments in foreign
securities, including those of foreign governments, involve greater risks than
investing in comparable domestic securities. These risks include currency,
political, economic, regulatory, and market risk factors. High-yield/high-risk
securities are generally more dependent on the ability of the issuer to meet
interest and principal payments (i.e., credit risk). Issuers of high-yield
securities may not be as strong financially as those issuing bonds with higher
credit ratings. They are more vulnerable to real or perceived economic changes,
political changes or other adverse developments.
Investment Adviser: Janus Capital Corporation
Janus Aspen Series - Balanced Portfolio
Investment Objective
Seeks long-term capital growth, consistent with preservation of capital and
balanced by current income.
Policies
Normally invests 40-60 percent of its assets in securities selected primarily
for their growth potential and 40-60 percent of its assets in securities
selected primarily for their income potential. Invests in common stocks of
domestic and foreign companies. May invest to a lesser degree in other types of
securities including preferred stocks, warrants, convertible securities, and
debt securities when the portfolio manager perceives an opportunity for capital
growth. Assets may shift between the growth and income components of the
Portfolio based on the portfolio manager's analysis of relevant market financial
and economic conditions. The portfolio manager generally takes a "bottom up"
approach to building the Portfolio, seeking to identify individual companies
with earnings growth potential that may not be recognized by the market at
large.
Risks
Share prices will fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. Investments in
foreign securities, including those of foreign governments, involve greater
risks than investing in comparable domestic securities. These risks include
currency, political, economic, regulatory and market risk factors. Risk is
reduced through diversification. Investment Adviser: Janus Capital Corporation
Janus Aspen Series - Growth Portfolio
Investment Objective
Seeks long-term growth of capital in a manner consistent with the preservation
of capital.
Policies
Invests in common stocks of companies of any size, although it generally invests
in larger, more established issuers. Invests primarily in stocks of domestic and
foreign companies selected for their growth potential. May at times hold
substantial positions in cash equivalents or interest bearing securities. May
invest to a lesser degree in other types of securities including preferred
stocks, warrants, convertible securities, and debt securities when
70
<PAGE>
its portfolio manager perceives an opportunity for capital growth. Using a
"bottom up" approach to building the Portfolio, the portfolio manager seeks to
identify individual companies with earnings growth potential that may not be
recognized by the market at large. Securities are generally selected without
regard to any defined industry sector. Securities are selected solely for their
capital growth potential; investment income is not a consideration.
Risks
Share prices will fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. Historically,
common stocks have provided greater long-term returns and have entailed greater
short-term risks than other investment choices. Smaller or newer issuers are
more likely to realize more substantial growth as well as suffer more
significant losses than larger or more established issuers. Investments in such
companies can be both more volatile and more speculative. Investments in foreign
securities, including those of foreign governments, involve greater risks than
investing in comparable domestic securities. These risks include currency,
political, economic, regulatory and market risk factors. Risk is reduced through
diversification.
Investment Adviser: Janus Capital Corporation
Janus Aspen Series - Worldwide Growth Portfolio
Investment Objective
Seeks long-term growth of capital in a manner consistent with the preservation
of capital.
Policies
A diversified portfolio that invests primarily in common stocks of foreign and
domestic issuers. Invests worldwide in companies and organizations of any size,
regardless of country of organization or place of principal business activity.
Normally invests in issuers from at least five different countries, including
the United States. May at times invest in fewer than five countries or even in a
single country. May hold substantial positions in cash equivalents or
interest-bearing securities. May invest to a lesser degree in other types of
securities, including preferred stocks, warrants, convertible securities, and
debt securities, when the portfolio manager perceives an opportunity for growth.
May invest up to 35 percent of net assets in high-yield/high-risk securities
(also called "junk bonds"). May invest without limit in foreign equity and debt
securities.
Risks
Stock values may fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. Historically,
common stocks have provided greater long-term returns and have entailed greater
short-term risks than other investment choices. Investment in foreign
securities, including those of foreign governments, involve greater risks than
investing in comparable domestic securities. These include currency, political,
economic, regulatory and market risk factors. High-yield/high-risk securities
are generally more dependent on the ability of the issuer to meet interest and
principal payments (i.e., credit risk). Issuers of high-yield securities may not
be as strong financially as those issuing bonds with higher credit ratings. They
are more vulnerable to real or perceived economic changes, political changes or
other adverse developments.
Investment Adviser: Janus Capital Corporation
MFS Total Return Series
Investment Objective
Seeks to provide above average income (compared to a portfolio invested entirely
in equity securities) consistent with the prudent employment of capital. Its
secondary objective is to provide a reasonable opportunity for growth of capital
and income.
71
<PAGE>
Policies
Under normal market conditions, at least 25 percent of the Series' assets will
be invested in fixed income securities, and at least 40 percent (but no more
than 75 percent) of the Series' assets will be invested in equity securities.
The Series invests in a broad list of securities, including short-term
obligations. The list may be diversified not only by companies and industries,
but also by type of security. May vary the percentage of assets invested in any
one type of security depending on the Adviser's interpretation of economic and
money market conditions, fiscal and monetary policy, and underlying security
values. The Series debt investment may consist of both investment grade
securities and securities that are lower rated or unrated categories (commonly
known as "junk bonds"). May hold up to 20 percent of its assets in foreign
securities (including emerging market securities and Brady Bonds) which are not
traded on a U.S. exchange.
Risks
Investing in the securities of foreign issuers generally involves risks not
ordinarily associated with investing in securities of domestic issuers. These
include changes in currency rates, exchange control regulations, governmental
administration or economic or monetary policy (in the U.S. or abroad), or
circumstances in dealing between nations. Other considerations include limited
information about foreign issuers, higher brokerage costs, different accounting
standards, and thinner trading markets.
Investment Adviser: Massachusetts Financial Services Company ("MFS")
Oppenheimer Aggressive Growth Fund
Investment Objective
Seeks to achieve capital appreciation by investing in "growth-type" companies.
Policies
"Growth-type" companies are believed to have relatively favorable long-term
prospects for increasing demand for their goods or services, or to be developing
new products, services, or markets and normally retain a relatively larger
portion of their earnings for research, development, and investment in capital
assets. The Fund will invest no more than 25 percent of its total assets in
foreign securities or in government securities of any foreign country or in
obligations of foreign banks.
Risks
Stock prices will fluctuate. Additional risk is present in growth-type
investments since the price of the security may decline if the anticipated
development fails to occur. Investing in small, unseasoned companies (those that
have been in operation for less than three years, counting the operations of any
predecessors) may have limited liquidity, and the prices of these securities may
be volatile. Foreign securities markets may be less liquid and more volatile
than markets in the U.S. Risks of foreign securities may include foreign
withholding taxation, changes in currency, less publicly available information,
and differences between domestic and foreign legal, auditing, brokerage and
economic standards.
Investment Adviser: OppenheimerFunds, Inc.
Oppenheimer Growth & Income Fund
Investment Objective
Seeks a high total return (which includes growth in the value of its shares as
well as current income) from equity and debt securities.
Policies
Invests primarily in equity and debt securities and focuses on all market
capitalization including small to medium capitalization companies. Equity
investments include common stocks, preferred stocks, convertible securities,
72
<PAGE>
and warrants. Debt securities include bonds, participation interests,
asset-backed securities, private label mortgage backed securities and
collateralized mortgage obligations (CMOs), zero coupon securities, and U.S.
Government obligations. The proportion of equity and fixed income investments
will vary based upon the manager's evaluation of economic and market trends and
perceived relative total anticipated return from such types of investments.
There is no minimum or maximum percentage of assets that may, at any given time,
be invested in either type of investment. The Fund may invest in foreign
securities without limit.
Risks
Changes in overall market movements or interest rates, or factors affecting a
particular industry or issuer can affect the value of the Fund's investments and
their price per share. Equity investments are generally subject to a number of
risks, including the risk that values will fluctuate as a result of changing
expectations for the economy and individual issuers; stocks with small- to
medium-size capitalization may fluctuate more than large capitalization stocks.
Foreign investments are subject to the risk of adverse currency fluctuation and
additional risks and expenses in comparison to U.S. investments.
Investment Adviser: OppenheimerFunds, Inc.
Oppenheimer Strategic Bond Fund
Investment Objective
Seeks a high level of current income principally derived from interest on debt
securities and seeks to enhance such income by writing covered call options on
debt securities.
Policies
Invests principally in lower-rated, high-yield domestic debt securities
(commonly shown as "junk bonds"), U.S. Government securities, and foreign
government and corporate debt securities. Under normal circumstances, the Fund's
assets will be invested in each of these three sectors. However, Strategic Bond
Fund may occasionally invest up to 100 percent of its total assets in any one
sector, if, in the manager's judgment, the Fund has the opportunity to seek a
high level of current income without undue risk to principal. Accordingly, the
Fund's investments should be considered speculative. Distributable income will
fluctuate as the Fund's assets are shifted among the three sectors.
Risks
The higher yields and income sought by Strategic Bond Fund are generally
associated with securities in the lower-rating categories of the established
rating services. Such securities are considered speculative and involve greater
risk than lower-yielding, higher-rated fixed income securities, while providing
higher yields than such securities. Lower-rated securities may be less liquid,
and significant losses could be experienced if a substantial number of other
holders of such securities decide to sell at the same time. Issuers of
lower-rated or unrated securities are generally not as financially secure or
creditworthy as issuers of higher-rated securities.
Investment Adviser: OppenheimerFunds, Inc.
Portfolio Partners MFS Emerging Equities Portfolio
Investment Objective
Seeks to provide long-term growth of capital. Dividend and interest income from
portfolio securities, if any, is incidental to the Portfolio's investment
objective.
Policies
Normally invests at least 80 percent of its assets in common stocks of companies
the subadviser believes are in an early phase of their life cycle, but that have
the potential to become major enterprises. Such companies would be expected to
show earnings growth over time well above the growth rate of the overall economy
and inflation
73
<PAGE>
and have the products, technologies, management and market and other
opportunities usually necessary to become more widely recognized as growth
companies. Emerging growth companies can be of any size. The Portfolio may
invest in larger or more established companies whose rates of earnings growth
are expected to accelerate because of special factors or basic changes in the
economic environment. Up to 25 percent of the Portfolio's net assets may be
invested in foreign issuers.
Risks
Share prices will fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. Investing in
emerging growth companies involves greater risk than is customarily associated
with investments in more established companies. Such companies may have limited
product lines, markets or financial resources and they may be dependent on one
person's management. In addition, there may be less research available on many
promising small- and medium-sized emerging growth companies, making it more
difficult to find and analyze these companies. The securities of these companies
may have limited marketability and may be subject to more abrupt or erratic
market movements than securities of larger, more established growth companies or
the market averages in general. Foreign investing involves risks that are
different in some respects from investments in the securities of U.S. issuers.
Risks include less availability of information about issuers or foreign markets,
economic and political volatility, and price, interest rate and currency risk.
Investment Adviser: Aetna Life Insurance and Annuity Company; Subadviser:
Massachusetts Financial Services Company
Portfolio Partners MFS Research Growth Portfolio
Investment Objective
Seeks long-term growth of capital and future income.
Policies
Invests at least 65 percent of its total assets in common stocks, or securities
convertible into common stocks, of companies believed to possess better than
average prospects for long-term growth. A smaller proportion of the assets may
be invested in bonds, short-term obligations, preferred stocks or common stocks
whose principal characteristic is income production rather than growth. In the
case of both growth stocks and income issues, emphasis is placed on the
selection of progressive, well-managed companies. The Portfolio may invest up to
20 percent of its net assets in foreign securities, including emerging market
securities.
Risks
Share prices will fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. Investing in
securities of foreign issuers generally involves risks not ordinarily associated
with investing in securities of domestic issuers. These include less
availability of information about issuers or foreign markets, economic and
political volatility, and price, interest rate and currency risk.
Investment Adviser: Aetna Life Insurance and Annuity Company; Subadviser:
Massachusetts Financial Services Company
Portfolio Partners MFS Value Equity Portfolio
Investment Objectives
Seeks capital appreciation. Dividend income, if any, is a consideration
incidental to the Portfolio's objective of capital appreciation.
Policies
While the Portfolio's policy is to invest at least 65 percent of its total
assets in common stocks, it may seek
74
<PAGE>
appreciation other types of securities (such as fixed-income, convertible bonds,
convertible preferred stocks and warrants) when relative values make such
purchases appear attractive, either as individual issues or as types of
securities in certain economic environments. The Portfolio may invest in
high-yield fixed-income (below investment grade), but will invest no more than
25 percent of its net assets in these securities. The Portfolio may also invest
up to 50 percent (but generally expects to invest not more than 25 percent) of
its net assets in foreign securities.
Risks
Share prices will fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. Historically,
common stocks have provided greater long-term returns and have entailed greater
short-term risks than other investment choices. Lower-rated bonds have
speculated characteristics. Changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than in the case of higher-grade securities. Investing in
securities of foreign issuers generally involves risks not ordinarily associated
with investing in securities of domestic issuers. These include less
availability of information about issuers or foreign markets, economic and
political volatility, and price, interest rate and currency risk.
Investment Adviser: Aetna Life Insurance and Annuity Company; Subadviser:
Massachusetts Financial Services Company
Portfolio Partners Scudder International Growth Portfolio
Investment Objective
Seeks long-term growth of capital primarily through a diversified portfolio of
marketable foreign equity investments.
Policies
Invests in companies, wherever organized, that do business primarily outside the
United States. The Portfolio intends to diversify investments among several
countries and to have represented in its holdings business activities in not
less than three different countries. Does not intend to concentrate investments
in any particular industry. Invests primarily in equity securities of
established companies, listed on foreign exchanges, that the subadviser believes
have favorable characteristics. Although the Portfolio will consist primarily of
equity securities, it may also invest in fixed-income securities of foreign
governments and companies.
Risks
Share prices will fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. Historically,
common stocks have provided greater long-term returns and have entailed greater
short-term risks than other investment choices. Investing in foreign securities
may involve a greater degree of risk than investing in domestic securities.
Additional risk factors include the possibility of exchange rate fluctuations,
less publicly available information, more volatile markets, less securities
regulation and less favorable tax provisions.
Investment Adviser: Aetna Life Insurance and Annuity Company; Subadviser:
Scudder Kemper Investments, Inc.
75
<PAGE>
- --------------------------------------------------------------------------------
VARIABLE ANNUITY ACCOUNT B
OF
AETNA LIFE INSURANCE AND ANNUITY COMPANY
- --------------------------------------------------------------------------------
Statement of Additional Information dated September , 1998
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 September , 1998.
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
<TABLE>
<CAPTION>
Page
<S> <C>
General Information and History.......................................... 2
Variable Annuity Account B............................................... 2
Offering and Purchase of Contracts....................................... 4
Performance Data......................................................... 4
General............................................................ 4
Average Annual Total Return Quotations............................. 5
Annuity Payments......................................................... 12
Sales Material and Advertising........................................... 13
Independent Auditors..................................................... 13
Financial Statements of the Separate Account............................. S-1
Financial Statements of the Company...................................... F-1
</TABLE>
-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, 1997, the Company
had $40.7 billion invested through its products, including $22.3 billion in its
separate accounts (of which the Company, or an affiliate oversees the management
of $17.6 billion) and $1.3 billion in its mutual funds offered outside of its
separate accounts. The Company is ranked among the top 2% of all U.S. life
insurance companies based on assets as of December 31, 1996. 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 some advisers of the Funds used as funding options under the Contract.
These fees generally range up to 0.25%.
The assets of the Separate Account are held by the Company. The Separate Account
has no custodian. However, the Funds in whose shares the assets of the Separate
Account are invested each have custodians, as discussed in their respective
prospectuses.
VARIABLE ANNUITY ACCOUNT B
Variable Annuity Account B (the "Separate Account") is a separate account
established by the Company for the purpose of funding variable annuity contracts
issued by the Company. The Separate Account is registered with the Securities
and Exchange Commission as a unit investment trust under the Investment Company
Act of 1940, as amended. 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.
-2-
<PAGE>
The Funds currently available under the "________________" Contract are as
follows:
<TABLE>
<S> <C>
(bullet) Aetna Balanced VP, Inc. (bullet) Janus Aspen Aggressive Growth Portfolio
(bullet) Aetna Income Shares d/b/a Aetna Bond VP (bullet) Janus Aspen Balanced Portfolio
(bullet) Aetna Growth VP (bullet) Janus Aspen Growth Portfolio
(bullet) Aetna Variable Fund d/b/a Aetna Growth and Income VP (bullet) Janus Aspen Worldwide Growth Portfolio
(bullet) Aetna Index Plus Large Cap VP (bullet) MFS Total Return Series
(bullet) Aetna International VP (bullet) Oppenheimer Aggressive Growth Fund
(bullet) Aetna Variable Encore Fund d/b/a Aetna Money Market VP (bullet) Oppenheimer Growth & Income Fund
(bullet) Aetna Real Estate Securities VP (bullet) Oppenheimer Strategic Bond Fund
(bullet) Aetna Small Company VP (bullet) Portfolio Partners MFS Emerging Equities Portfolio
(bullet) AIM V.I. Capital Appreciation Fund
(bullet) AIM V.I. Growth Fund
(bullet) AIM V.I. Growth & Income Fund (bullet) Portfolio Partners MFS Research Growth Portfolio
(bullet) AIM V.I. Value Fund (bullet) Portfolio Partners MFS Value Equity Portfolio
(bullet) Fidelity VIP Equity-Income Portfolio (bullet) Portfolio Partners Scudder International Growth
(bullet) Fidelity VIP High Income Portfolio Portfolio
(bullet) Fidelity VIP II Contrafund Portfolio
</TABLE>
Complete descriptions of each of the Funds, including their investment
objectives, policies, risks and fees and expenses, are contained in the
prospectuses and statements of additional information for each of the Funds.
OFFERING AND PURCHASE OF CONTRACTS
The Company is both the depositor and the principal underwriter for the
securities sold by the Prospectus. The Company offers the Contracts through life
insurance agents licensed to sell variable annuities who are Registered
Representatives 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 titled "Purchase" and "Contract
Valuation."
PERFORMANCE DATA
GENERAL
From time to time, the Company may advertise different types of historical
performance for the Subaccounts of the Separate Account available under the
Contracts. 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 the
date contributions were first received in the Fund under the Separate Account
and then adjust them to reflect the deduction of the maximum recurring charges
under the Contracts during each period (i.e., Option Package III:1.25% mortality
and expense risk charge, $30.00 maintenance fee, 0.15% administrative charge,
and deferred sales charge of 7% of Purchase Payments grading down to 0% after 7
years). 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
-3-
<PAGE>
total return figures shown below will be lower than the standardized figures for
Option Packages I and II because of the lower mortality and expense risk charge
under those Option Packages (0.80% and 1.10% respectively). The Company may also
advertise standardized returns and non-standardized returns using the fees and
charges applicable to Option Package I and II.
The total return figures shown below may be different from the actual historical
total return under your Contract because for periods prior to 1994, the
Subaccount's investment performance reflected the investment 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, and may include returns calculated from the
Fund's inception date and/or the date contributions were first received in the
Fund under the Separate Account.
Investment results of the Subaccounts will fluctuate over time, and any
presentation of the Subaccounts' total return quotations for any prior period
should not be considered as a representation of how the Subaccounts will perform
in any future period. Additionally, the Account Value upon redemption may be
more or less than your original cost.
AVERAGE ANNUAL TOTAL RETURN QUOTATIONS - Standardized and Non-Standardized
The tables below reflect the average annual standardized and non-standardized
total return quotation figures for the periods ended December 31, 1997 for the
variable investment options under the Contracts issued by the Company. These
returns reflect the maximum charges under the Contract (i.e. Option Package III)
as described under "General" above; the Company may also advertise returns based
on lower charges that may apply to particular Contracts under Option Packages I
and II.
For the Subaccounts funded by the Portfolio Partners portfolios, two sets of
performance returns are shown for each Subaccount: one showing performance based
solely on the performance of the Portfolio Partners portfolio from November 28,
1997, the date the Portfolio commenced operations; and one quotation based on
(a) performance through November 26, 1997 of the fund it replaced under many
Company contracts and; (b) after November 26, 1997, based on the performance of
the Portfolio Partners portfolio.
For those Subaccounts where results are not available for the full calendar
period indicated, performance for such partial periods is shown in the column
labeled "Since Inception." For standardized performance, the "Since Inception"
column shows the average annual return since the date contributions were first
received in the Fund under the Separate Account. For non-standardized
performance, the "Since Inception" column shows average annual total return
since the Fund's inception date.
-4-
<PAGE>
TABLE A
<TABLE>
<CAPTION>
--------------------------------------------------------------
Date
Contributions
STANDARDIZED First Received
Under the
Separate Account
- ------------------------------------------------------------------------------------------------------------------------------------
SUBACCOUNT 1 Year 5 Year 10 Year Inception*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Balanced VP, Inc. 14.60% 12.42% 11.05% 06/30/89
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP(1) 0.51% 4.85% 7.68%
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 10.54% 05/30/97
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP(1) 21.95% 15.69% 14.99%
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 25.92% 26.87% 10/31/96
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna International VP
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP(1)(2) (2.29%) 2.71% 4.45%
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Real Estate Securities VP
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 12.09% 05/30/97
- ------------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund
- ------------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth Fund
- ------------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth & Income Fund
- ------------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Value Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 20.18% 22.66% 12/30/94
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio 9.81% 12.49% 06/30/95
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 16.24% 19.87% 06/30/95
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 4.85% 11.50% 10/31/94
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 14.22% 17.96% 01/31/95
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 14.86% 18.30% 07/29/94
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 14.27% 25.63% 04/28/95
- ------------------------------------------------------------------------------------------------------------------------------------
MFS Total Return Series 13.42% 14.43% 05/31/96
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth Fund 2.03% 05/30/97
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Growth & Income Fund 10.25% 05/30/97
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund (2.07%) 05/30/97
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Emerging Equities Portfolio (8.19%) 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/Portfolio Partners MFS Emerging Equities(3) 1.43% 9.49% 09/30/93
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Research Growth Portfolio (8.83%) 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/Portfolio Partners MFS
Research Growth(3) (10.67%) 3.73% 5.37% 08/31/92
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Value Equity Portfolio (5.69%) 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/Portfolio Partners MFS Value Equity(3) 18.43% 10.97% 11.16% 11/30/92
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners Scudder International Growth Portfolio (5.87%) 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio Class A/Portfolio Partners Scudder
International Growth(3) 1.20% 11.67% 9.75% 08/31/92
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to the discussion preceding the tables for an explanation of the
charges included and methodology used in the standardized and non-standardized
figures. These figures represent historical performance and should not be
considered a projection of future performance.
* Reflects performance from the date contributions were first received in the
Fund under the Separate Account.
(1) These Funds have been available through the Separate Account for more than
ten years.
(2) The current yield for the Subaccount for the 7-day period ended December 31,
1997 (on an annualized basis) was 4.061%. The current yield reflects the
deduction of all charges under the Contract that are deducted from the total
return quotations shown above except the maximum 7% deferred sales charge.
(3) The Fund first listed was replaced with the applicable Portfolio Partners
Portfolio after the close of business on November 26, 1997. The performance
shown is based on the performance of the replaced Fund until November 26, 1997,
and the performance of the applicable Portfolio Partners Portfolio after that
date. The replaced Fund may not have been available under all Contracts. The
"Date Contributions First Received Under Separate Account" refers to the
applicable date for the replaced Fund.
-5-
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------
Fund
NON-STANDARDIZED Inception
Date
- ------------------------------------------------------------------------------------------------------------------------------------
SUBACCOUNT 1 Year 3 Years 5 Years 10 Years Inception**
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aetna Balanced VP, Inc. 20.75% 19.81% 12.82% 10.93% 04/03/89
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP(1) 6.77% 8.32% 5.42% 7.68%
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 31.13% 31.13% 12/13/96
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP(1) 28.05% 27.01% 16.04% 14.99%
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 32.00% 32.76% 09/16/96
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna International VP
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP(1)(2) 3.98% 4.13% 3.34% 4.45%
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Real Estate Securities VP
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 32.59% 33.01% 12/27/96
- ------------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund
- ------------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth Fund
- ------------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth & Income Fund
- ------------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Value Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio(1) 26.30% 23.75% 18.47% 15.08%
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio(1) 16.00% 15.78% 12.30% 11.22%
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 22.39% 26.39% 01/03/95
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 11.07% 14.10% 17.54% 09/13/93
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 20.37% 19.26% 14.66% 09/13/93
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 21.01% 21.95% 16.01% 09/13/93
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 20.43% 24.37% 21.19% 09/13/93
- ------------------------------------------------------------------------------------------------------------------------------------
MFS Total Return Series 19.58% 19.24% 01/03/95
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth Fund 10.09% 19.46% 14.28% 14.45%
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Growth & Income Fund 30.61% 35.28% 07/05/95
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund 7.17% 10.41% 6.11% 05/03/93
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Emerging Equities Portfolio (1.27%) 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/Portfolio Partners MFS Emerging Equities(3) 7.68% 16.31% 10.62% 17.31% 09/21/88
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Research Growth Portfolio (1.96%) 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/Portfolio Partners MFS
Research Growth(3) (4.34%) 5.26% 4.32% 7.19%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Value Equity Portfolio 1.41% 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/Portfolio Partners MFS Value Equity(3) 24.56% 20.28% 11.41% 13.03%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners Scudder International Growth Portfolio 1.22% 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio Class A/Portfolio Partners Scudder
International Growth(3) 7.44% 10.02% 12.09% 10.21%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to the discussion preceding the tables for an explanation of the
charges included and methodology used in the standardized and non-standardized
figures. These figures represent historical performance and should not be
considered a projection of future performance.
** Reflects performance from the Fund's inception date.
(1) These Funds have been in operation for more than ten years.
(2) The current yield for the Subaccount for the 7-day period ended December 31,
1997 (on an annualized basis) was 4.061%. The current yield reflects the
deduction of all charges under the Contract that are deducted from the total
return quotations shown above. As in the table above, the maximum 7% deferred
sales charge is not reflected.
(3) The Fund first listed was replaced with the applicable Portfolio Partners
Portfolio after the close of business on November 26, 1997. The performance
shown is based on the performance of the replaced Fund until November 26, 1997,
and the performance of the applicable Portfolio Partners Portfolio after that
date. The replaced Fund may not have been available under all Contracts. The
"Fund Inception Date" refers to the applicable date for the replaced Fund. If no
date is shown, the replaced Fund has been in operation for more than ten years.
-6-
<PAGE>
ANNUITY PAYMENTS
When Annuity payments are to begin, the value of the Account is determined using
Accumulation Unit values as of the tenth Valuation Date before the first Annuity
payment is due. Such value (less any applicable premium tax) is applied to
provide an Annuity in accordance with the Annuity and investment options
elected.
The Annuity option tables found in the Contract show, for each form of Annuity,
the amount of the first Annuity payment for each $1,000 of value applied.
Thereafter, variable Annuity payments fluctuate as the Annuity Unit value(s)
fluctuates with the investment experience of the selected investment option(s).
The first payment and subsequent payments also vary depending on the assumed net
investment rate ("AIR") selected (3.5% or 5% per annum). Selection of a 5% AIR
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% AIR causes a lower first payment, but subsequent payments
would increase more rapidly or decline more slowly as changes occur in the AIR.
When the Annuity Period begins, the Annuitant is credited with a fixed number of
Annuity Units (which does not change thereafter) in each of the designated
investment options. This number is calculated by dividing (a) by (b), where (a)
is the amount of the first Annuity payment based on a particular investment
option, and (b) is the then current Annuity Unit value for that investment
option. As noted, Annuity Unit values fluctuate from one Valuation Date to the
next; such fluctuations reflect changes in the net investment factor for the
appropriate Subaccount(s) (with a ten Valuation Date lag which gives the Company
time to process Annuity payments) and a mathematical adjustment which offsets
the AIR 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 AIR 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.
-7-
<PAGE>
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 AIR of 5% is elected, the appropriate factor to neutralize such assumed
rate would be .9998663.
SALES MATERIAL AND ADVERTISING
The Company may include hypothetical illustrations in its sales literature that
explain the mathematical principles of dollar cost averaging, compounded
interest, tax deferred accumulation, and the mechanics of variable annuity
contracts. The Company may also discuss the difference between variable annuity
contracts and other types of savings or investment products, including, but not
limited to, personal savings accounts and certificates of deposit.
We may distribute sales literature that compares the percentage change in
Accumulation Unit values for any of the Subaccounts to established market
indices such as the Standard & Poor's 500 Stock Index and the Dow Jones
Industrial Average or to the percentage change in values of other management
investment companies that have investment objectives similar to the Subaccount
being compared.
We may publish in advertisements and reports, the ratings and other information
assigned to us by one or more independent rating organizations such as A.M. Best
Company, Duff & Phelps, Standard & Poor's Corporation and Moody's Investors
Service, 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 categorize the underlying funds in terms of the
asset classes they represent and use such categories in marketing materials for
the Contracts. 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 review of filings made with the SEC.
-8-
<PAGE>
Form No. SAI.34370-98 ALIAC Ed. May 1998
<PAGE>
VARIABLE ANNUITY ACCOUNT B
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
(1) Part A:
Condensed Financial Information, not available
(2) Included in Part B:
Financial Statements of Variable Annuity Account B:
- Statement of Assets and Liabilities as of December 31, 1997
- Statements of Operations and Changes in Net Assets for the
years ended December 31, 1997 and 1996
- 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, 1997, 1996 and 1995
- Consolidated Balance Sheets as of December 31, 1997 and 1996
- Consolidated Statements of Changes in Shareholder's Equity for
the years ended December 31, 1997, 1996 and 1995
- Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995
- 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) Broker-Dealer Agreement
(3.2) Alternative Form of Wholesaling Agreement and Related Selling
Agreement(2)
(4.1) Variable Annuity Contract (GM-VA-98)
(4.2) Variable Annuity Contract Certificate (GMC-VA-98)
(5) Variable Annuity Contract Application*
(6.1) Certificate of Incorporation of Aetna Life Insurance and Annuity
Company(3)
(6.2) Amendment of Certificate of Incorporation of Aetna Life Insurance
and Annuity Company(4)
(6.3) By-Laws as amended September 17, 1997 of Aetna Life Insurance and
Annuity Company(5)
(7) Not applicable
(8.1) Form of Fund Participation Agreement between Aetna Life Insurance
and Annuity Company and AIM
*To be filed by amendment.
<PAGE>
(8.2) Form of Service Agreement between Aetna Life Insurance and Annuity
Company and AIM
(8.3) Fund Participation Agreement by and among Aetna Life Insurance and
Annuity Company and Aetna Variable Fund, Aetna Variable Encore
Fund, Aetna Income Shares, Aetna Balanced VP, Inc., Aetna GET Fund
on behalf of each of its series, Aetna Generation Portfolios, Inc.,
on behalf of each of its series, and Aetna Variable Portfolios,
Inc. on behalf of each of its series and Aeltus Investment
Management, Inc., dated as of May 1, 1998
(8.4) Service Agreement between Aeltus Investment Management, Inc.
and Aetna Life Insurance and Annuity Company in connection
with the sale of shares of Aetna Variable Fund, Aetna Variable
Encore Fund, Aetna Income Shares, Aetna Balanced VP, Inc.,
Aetna GET Fund on behalf of each of its series, Aetna
Generation Portfolios, Inc. on behalf of each of its series
and Aetna Variable Portfolios, Inc., on behalf of each of its
series dated as of May 1, 1998
(8.5) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company, Variable Insurance Products Fund and Fidelity
Distributors Corporation dated February 1, 1994 and amended on
December 15, 1994, February 1, 1995, May 1, 1995, January 1,
1996 and March 1, 1996(4)
(8.6) Fifth Amendment, dated as of May 1, 1997, to the Fund
Participation Agreement between Aetna Life Insurance and
Annuity Company, Variable Insurance Products Fund and Fidelity
Distributors Corporation dated February 1, 1994 and amended on
December 15, 1994, February 1, 1995, May 1, 1995, January 1,
1996 and March 1, 1996(6)
(8.7) Sixth Amendment dated November 6, 1997 to the Fund
Participation Agreement between Aetna Life Insurance and
Annuity Company, Variable Insurance Products Fund and Fidelity
Distributors Corporation dated February 1, 1994 and amended on
December 15, 1994, February 1, 1995, May 1, 1995, January 1,
1996, March 1, 1996 and May 1, 1997(7)
(8.8) Seventh Amendment dated as of May 1, 1998 to the Fund
Participation Agreement between Aetna Life Insurance and
Annuity Company, Variable Insurance Products Fund and Fidelity
Distributors Corporation dated February 1, 1994 and amended on
December 15, 1994, February 1, 1995, May 1, 1995, January 1,
1996, March 1, 1996 May 1, 1997 and November 6, 1997
(8.9) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company, Variable Insurance Products Fund II and
Fidelity Distributors Corporation dated February 1, 1994 and
amended on December 15, 1994, February 1, 1995, May 1, 1995,
January 1, 1996 and March 1, 1996(4)
(8.10) Fifth Amendment, dated as of May 1, 1997, to the Fund
Participation Agreement between Aetna Life Insurance and
Annuity Company, Variable Insurance Products Fund II and
Fidelity Distributors Corporation dated February 1, 1994 and
amended on December 15, 1994, February 1, 1995, May 1, 1995,
January 1, 1996 and March 1, 1996(6)
<PAGE>
(8.11) Sixth Amendment dated as of January 20, 1998 to the Fund
Participation Agreement between Aetna Life Insurance and Annuity
Company, Variable Insurance Products Fund II and Fidelity
Distributors Corporation dated February 1, 1994 and amended on
December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996,
March 1, 1996 and May 1, 1997(8)
(8.12) Seventh Amendment dated as of May 1, 1998 to the Fund
Participation Agreement between Aetna Life Insurance and Annuity
Company, Variable Insurance Products Fund II and Fidelity
Distributors Corporation dated February 1, 1994 and amended on
December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996,
March 1, 1996 May 1, 1997 and January 20, 1998
(8.13) Service Agreement between Aetna Life Insurance and Annuity Company
and Fidelity Investments Institutional Operations Company dated
as of November 1, 1995(9)
(8.14) Amendment dated January 1, 1997 to Service Agreement between Aetna
Life Insurance and Annuity Company and Fidelity Investments
Institutional Operations Company dated as of November 1, 1995(6)
(8.15) Fund Participation Agreement among Janus Aspen Series and Aetna
Life Insurance and Annuity Company and Janus Capital Corporation
dated December 8, 1997(10)
(8.16) Service Agreement between Janus Capital Corporation and Aetna Life
Insurance and Annuity Company dated December 8, 1997(10)
(8.17) Fund Participation Agreement among MFS Variable Insurance Trust,
Aetna Life Insurance and Annuity Company and Massachusetts
Financial Services Company dated April 30, 1996
(8.18) First Amendment dated September 3, 1996 to Fund Participation
Agreement among MFS Variable Insurance Trust, Aetna Life Insurance
and Annuity Company and Massachusetts Financial Services Company
(8.19) Second Amendment dated March 14, 1997 to Fund Participation
Agreement among MFS Variable Insurance Trust, Aetna Life Insurance
and Annuity Company and Massachusetts Financial Services Company
(8.20) Third Amendment dated November 28, 1997 to Fund Participation
Agreement among MFS Variable Insurance Trust, Aetna Life Insurance
and Annuity Company and Massachusetts Financial Services Company
(8.21) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Oppenheimer Variable Annuity Account Funds and
Oppenheimer Funds, Inc. dated March 11, 1997(11)
(8.22) Service Agreement between Oppenheimer Funds, Inc. and Aetna Life
Insurance and Annuity Company dated March 11, 1997(11)
(9) Opinion and Consent of Counsel*
(10) Consent of Independent Auditors*
(11) Not applicable
(12) Not applicable
<PAGE>
(13) Schedule for Computation of Performance Data*
(14) Not applicable
(15.1) Powers of Attorney(12)
(15.2) Authorization for Signatures(2)
* To be filed by amendment.
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 (Accession No. 0000950146-96-000563).
2. Incorporated by reference to Post-Effective Amendment No. 5 to Registration
Statement on Form N-4 (File No. 33-75986), as filed electronically on April
12, 1996 (Accession No. 0000912057-96-006383).
3. 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 (Accession No. 0000950146-96-000534).
4. 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 (Accession No. 0000950146-97-000159).
5. Incorporated by reference to Post-Effective Amendment No. 12 to
Registration Statement on Form N-4 (File No. 33-91846), as filed
electronically on October 30, 1997 (Accession No. 0000950146-97-001589).
6. Incorporated by reference to Post-Effective Amendment No. 30 to
Registration Statement on Form N-4 (File No. 33-34370), as filed
electronically on September 29, 1997 (Accession No. 0000950146-97-001485).
7. Incorporated by reference to Post-Effective Amendment No. 16 to
Registration Statement on Form N-4 (File No. 33-75964), as filed
electronically on February 9, 1998 (Accession No. 0000950146-98-000179).
8. Incorporated by Reference to Post-Effective Amendment No. 7 to Registration
Statement on Form S-6 (File No. 33-75248), as filed electronically on
February 24, 1998 (Accession No. 0000950146-98-000267).
9. Incorporated by reference to Post-Effective Amendment No. 3 to Registration
Statement on Form N-4 (File No. 33-88720), as filed electronically on June
28, 1996 (Accession No. 0000928389-96-000136).
10. Incorporated by reference to Post-Effective Amendment No. 10 to
Registration Statement on Form N-4 (File No. 33-75992), as filed
electronically on December 31, 1997 (Accession No. 0000950146-97-001982).
11. Incorporated by reference to Post-Effective Amendment No. 27 to
Registration Statement on Form N-4 (File No. 33-34370), as filed
electronically on April 16, 1997 (Accession No. 0000950146-97-000617).
12. Included on the signature page of this filing.
<PAGE>
Item 25. Directors and Officers of the Depositor
Name and Principal
Business Address* Positions and Offices with Depositor
Thomas J. McInerney Director and President
Catherine H. Smith Director, Chief Financial Officer and
Senior Vice President
Shaun P. Mathews Director and Senior 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
Corporate 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
Attached is a listing of all persons directly or indirectly controlled by
or under common control with the Registrant. The listing indicates (1) the state
or other sovereign power under the laws of which the entity is organized, (2)
the percentage of voting securities owned or other basis of control by the
person, if any, immediately controlling it (percentages are rounded to the
nearest whole percentage and are based on ownership of voting rights), and (3)
its principal business.
March 31, 1998 COMPANY ORGANIZATION LIST
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
COMPANY STATE IMMEDIATE OWNER OWNERSHIP PRINCIPAL BUSINESS
PERCENTAGE+
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aetna Inc. CT (1) Publicly Held Holding Company
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Services, Inc. CT (1) (*) Aetna Inc. 100% Holding Company
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna U.S. Healthcare Inc. PA (1) (*) Aetna Inc. 100% Holding Company
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Risk Indemnity Bermuda (1) (*) Aetna Inc. 100% Insurance
Company Limited
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Life Insurance Company CT (1) (*) Aetna Services, Inc. 100% Life and Health Insurance
and Related Services
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Retirement Services, Inc. CT (1) (*) Aetna Services, Inc. 100% Holding Company
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna International, Inc. CT (1) (*) Aetna Services, Inc. 100% Holding Company for
International Subsidiaries
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Health and Life Insurance CT (1) (*) Aetna Services, Inc. 100% Life and Health Insurance
Company
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Corporation (*) Fully Consolidated
(2) Partnership (**) One Line Consolidation
(3) Joint Venture (***) Not Consolidated
(4) Trust
(5) Limited Liability Company
+ Percentages are rounded to the nearest whole percent and are based on
ownership of voting rights.
1
<PAGE>
COMPANY ORGANIZATION LIST
March 31, 1998
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
COMPANY STATE IMMEDIATE OWNER OWNERSHIP PRINCIPAL BUSINESS
PERCENTAGE+
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AUSHC Holdings, Inc. CT (1) (*) Aetna Services, Inc. 100% Holding Company
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Foundation, Inc. CT (1) (***) Aetna Services, Inc. 100% Supports Charitable
Scientific, Literary and
Educational Activities
- ------------------------------------------------------------------------------------------------------------------------------------
Imperial Fire & Marine U.K. (1) (***) Aetna Services, Inc. 10% Reinsurance
Re-Insurance Company Limited
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Business Resources, Inc. CT (1) (*) Aetna Services, Inc. 100% Provides Business Services to
External Clients
- ------------------------------------------------------------------------------------------------------------------------------------
AE Fifteen, Incorporated CT (1) (*) Aetna Services, Inc. 100% Shell Corp. for Interest in
Cogeneration
- ------------------------------------------------------------------------------------------------------------------------------------
Luettgens Limited CT (1) (*) Aetna Services, Inc. 100% Retail Specialty Store
- ------------------------------------------------------------------------------------------------------------------------------------
AE Housing Corp. CT (1) (*) Aetna Services, Inc. 100% Real Estate
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Capital L.L.C. DE (5) (*) Aetna Services, Inc. 95% Finance - Limited Liability
Company
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Realty Investments I, Inc. CT (1) (*) Aetna Services, Inc. 100% Real Estate Investment
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Properties I Limited CT (2) (***) Aetna Realty 84% Real Estate Investment
Partnership Investments I, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
PHPSNE Parent Corporation DE (1) (*) AUSHC Holdings, Inc. 55% Holding Company
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Health Plans of Southern CT (1)(*) PHPSNE Parent 100% Health Care
New England, Inc. Corporation
- ------------------------------------------------------------------------------------------------------------------------------------
CMBS Holdings, Inc. TX (1) (*) Aetna Life Insurance 100% Real Estate Investment and
Company Management
- ------------------------------------------------------------------------------------------------------------------------------------
CMBS Holdings, Inc. - II CT (1) (*) Aetna Life Insurance 100% Real Estate
Company
- ------------------------------------------------------------------------------------------------------------------------------------
CMBS Holdings, L.L.C. CT (5) (*) Aetna Life Insurance 99% Real Estate
Company
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
COMPANY ORGANIZATION LIST
March 31, 1998
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
COMPANY STATE IMMEDIATE OWNER OWNERSHIP PRINCIPAL BUSINESS
PERCENTAGE+
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aetna Real Estate CT (1) (*) Aetna Life Insurance 100% Acquire, Develop and Lease
Properties, Inc. Company Real Estate
- ------------------------------------------------------------------------------------------------------------------------------------
CDI Equity, Inc. DE (1) (*) Aetna Life Insurance 100% General Business Corporation
Company
- ------------------------------------------------------------------------------------------------------------------------------------
CDI Equity L.L.C. DE (5) (*) Aetna Life Insurance 99% General Business Corporation
Company
- ------------------------------------------------------------------------------------------------------------------------------------
AE Fourteen, Inc. CT (1) (*) Aetna Life Insurance 100% Cogeneration
Company
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Life Assignment CT (1) (*) Aetna Life Insurance 100% Assignment Company for
Company Company Structured Settlements
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna/Area Corporation CT (1) (*) Aetna Life Insurance 100% Real Estate Investment and
Company Management
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Institutional Investors I CT (2) (**) Aetna Life Insurancey 13% Real Estate Investment
Limited Partnership Company
- ------------------------------------------------------------------------------------------------------------------------------------
Shadow Ridge At Oak Park CA (2) (**) Aetna Life Insurance 80% Real Estate
Condominium Associates Company
- ------------------------------------------------------------------------------------------------------------------------------------
BPC Equity, Inc. DE (1) (*) Aetna Life Insurance 100% General Business Corporation
Company
- ------------------------------------------------------------------------------------------------------------------------------------
BPC Equity, L.L.C. DE (5) (*) Aetna Life Insurance 99% General Business Corporation
Company
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Affordable Housing, Inc. CT (1) (*) Aetna Life Insurance 100% Real Estate Investment
Company
- ------------------------------------------------------------------------------------------------------------------------------------
AHP Holdings, Inc. CT (1) (*) Aetna Life Insurance 100% Holding Company
Company
- ------------------------------------------------------------------------------------------------------------------------------------
Bay Area Mall, L.L.C. DE (5) (*) Aetna Life Insurance 99% Real Estate
Company
- ------------------------------------------------------------------------------------------------------------------------------------
Bay Area Mall, Inc. DE (1) (*) Aetna Life Insurance 100% Real Estate
Company
- ------------------------------------------------------------------------------------------------------------------------------------
455 Market Street CA (2) (**) Aetna Life Insurance 90% Real Estate
Company
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
COMPANY ORGANIZATION LIST
March 31, 1998
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
COMPANY STATE IMMEDIATE OWNER OWNERSHIP PRINCIPAL BUSINESS
PERCENTAGE+
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Koll Center Newport A CA (2) (**) Aetna Life Insurance 50% Real Estate Investment
Company
- ------------------------------------------------------------------------------------------------------------------------------------
Koll Center Newport Number 8 CA (2) (**) Aetna Life Insurance 50% Real Estate Investment
Company
- ------------------------------------------------------------------------------------------------------------------------------------
Koll Center Newport Number 9 CA (2) (**) Aetna Life Insurance 50% Real Estate Investment
Company
- ------------------------------------------------------------------------------------------------------------------------------------
Koll Center Newport Number 10 CA (2) (**) Aetna Life Insurance 50% Real Estate Investment
Company
- ------------------------------------------------------------------------------------------------------------------------------------
Koll Center Newport Number 11 CA (2) (**) Aetna Life Insurance 50% Real Estate Investment
Company
- ------------------------------------------------------------------------------------------------------------------------------------
Koll Center Newport Number 14 CA (3) (**) Aetna Life Insurance 60% Real Estate Investment
Company
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Hamilton Partnership IL (2) (**) Aetna Life Insurance 62% Real Estate Investment
Company
- ------------------------------------------------------------------------------------------------------------------------------------
Waterloo Associates NC (2) (**) Aetna Life Insurance 99% Real Estate Investment
Limited Partnership Company
- ------------------------------------------------------------------------------------------------------------------------------------
Hayward Industrial Park CT (2) (**) Aetna Life Insurance 99% Real Estate Investment
Associates Company
- ------------------------------------------------------------------------------------------------------------------------------------
Gables At Farmington Associates CT (2) (**) Aetna Life Insurance 60% Real Estate Investment
Company
- ------------------------------------------------------------------------------------------------------------------------------------
Country Club Heights at MA (2) (**) Aetna Life Insurance 60% Real Estate Investment
Woburn Associates Company
- ------------------------------------------------------------------------------------------------------------------------------------
Britcher Aetna-Laguna Hills CA (2) (**) Aetna Life Insurance 68% Real Estate Investment
Company
- ------------------------------------------------------------------------------------------------------------------------------------
Harbor Business Park CA (2) (**) Aetna Life Insurance 99% Real Estate Investment
Company
- ------------------------------------------------------------------------------------------------------------------------------------
Ensenada De Las Colinas I TX (2) (**) Aetna Life Insurance 99% Real Estate Investment
Associates Company
- -----------------------------------------------------------------------------------------------------------------------------------
Trevose Hospitality, Inc. CT (1) (**) Aetna Life Insurance 100% Real Estate Investment
Company
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
COMPANY ORGANIZATION LIST
March 31, 1998
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
COMPANY STATE IMMEDIATE OWNER OWNERSHIP PRINCIPAL BUSINESS
PERCENTAGE+
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Oaks at Valley Ranch I TX (2) (**) Aetna Life Insurance 99% Real Estate Investment
Company
- ------------------------------------------------------------------------------------------------------------------------------------
Oaks at Valley Ranch II TX (2) (**) Aetna Life Insurance 99% Real Estate Investment
Company
- ------------------------------------------------------------------------------------------------------------------------------------
KBC-RED Hill Limited CA (2) (**) Aetna Life Insurance 80% Real Estate Investment
Partnership Company
- ------------------------------------------------------------------------------------------------------------------------------------
KBC-Eastside Limited AZ (2) (**) Aetna Life Insurance 80% Real Estate Investment
Partnership Compan
- ------------------------------------------------------------------------------------------------------------------------------------
C.R.I. Hotel Associates, IA (2) (**) Aetna Life Insurance 75% Real Estate Investment
L.P. Company
- ------------------------------------------------------------------------------------------------------------------------------------
Trumbull One, Inc. CT (1) (*) Aetna Life Insurance 100% Real Estate Investment
Company
- ------------------------------------------------------------------------------------------------------------------------------------
Trumbull Two, Inc. CT (1) (*) Aetna Life Insurance 100% Real Estate Investment
Company
- ------------------------------------------------------------------------------------------------------------------------------------
Trumbull Three, Inc. CT (1) (*) Aetna Life Insurance 100% Real Estate Investment
Company
- ------------------------------------------------------------------------------------------------------------------------------------
Trumbull Four, Inc. CT (1) (*) Aetna Life Insurance 100% Real Estate Investment
Company
- ------------------------------------------------------------------------------------------------------------------------------------
Century City North L.L.C. DE (5) (**) Aetna Life Insurance 84% Real Estate Investment
Company
- ------------------------------------------------------------------------------------------------------------------------------------
Southfield Partners MD (2) (**) Aetna Life Insurance 99% Real Estate Investment
Company
- ------------------------------------------------------------------------------------------------------------------------------------
Lincoln Rancho CA (2) (**) Aetna Life Insurance 60% Real Estate Investment
Cucamonga Associates Company
- ------------------------------------------------------------------------------------------------------------------------------------
Becknell Properties IL (2) (**) Aetna Life Insurance 75% Real Estate Investment
Company
- ------------------------------------------------------------------------------------------------------------------------------------
Village Green of Madison MI (2) (**) Aetna Life Insurance 99% Real Estate Investment
Heights Company
- ------------------------------------------------------------------------------------------------------------------------------------
Centrum Associates CA (2) (**) Aetna Life Insurance 65% Real Estate Investment
Company
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
COMPANY ORGANIZATION LIST
March 31, 1998
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
COMPANY STATE IMMEDIATE OWNER OWNERSHIP PRINCIPAL BUSINESS
PERCENTAGE+
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tri-City Mall Associates AZ (2) (**) Aetna Life Insurance 50% Real Estate Investment
Company
- ------------------------------------------------------------------------------------------------------------------------------------
Southwest Financial Associates AZ (2) (**) Aetna Life Insurance 60% Real Estate Investment
Company
- ------------------------------------------------------------------------------------------------------------------------------------
B&H Ventures IV Limited CT (2) (**) Aetna Life Insurance 75% Real Estate Investment
Partnership Company
- ------------------------------------------------------------------------------------------------------------------------------------
Champions Richland TX (2) (*) Aetna Life Insurance 99% Real Estate Investment
Northcourte Partnership Company
- ------------------------------------------------------------------------------------------------------------------------------------
Chris-Town Village AZ (2) (**) Aetna Life Insurance 50% Real Estate Investment
Associates Company
- ------------------------------------------------------------------------------------------------------------------------------------
Arshaw Partners I TX (2) (*) Aetna Life Insurance 50% Real Estate Investment
Company
- ------------------------------------------------------------------------------------------------------------------------------------
Assembly Square Mall LLC DE (5) (**) Aetna Life Insurance 99% Real Estate Investment
Company
- ------------------------------------------------------------------------------------------------------------------------------------
Spectrum Fashion Center AZ (2) (**) Aetna Life Insurance 50% Real Estate Investment
Company
- ------------------------------------------------------------------------------------------------------------------------------------
Chambridgeside Galleria MA (2) (**) Aetna Life Insurance 50% Real Estate Investment
Company
- ------------------------------------------------------------------------------------------------------------------------------------
ADBI Partnership FL (2) (**) Aetna Life Insurance 30% Real Estate Investment
Company
- ------------------------------------------------------------------------------------------------------------------------------------
Marriott Inner Harbor MD (2) (*) Aetna Life Insurance 99% Real Estate Investment
Hotel Company
- ------------------------------------------------------------------------------------------------------------------------------------
1501 Fourth Ave. WA (2) (**) Aetna Life Insurance 91% Real Estate Investment
Limited Partnership Company
- ------------------------------------------------------------------------------------------------------------------------------------
Thace Associates MI (2) (**) Aetna Life Insurance 25% Real Estate Investment
Company
- ------------------------------------------------------------------------------------------------------------------------------------
Eastmeadow Distribution GA (2) (**) Aetna Life Insurance 99% Real Estate Investment
Center Limited Partnership Company
- ------------------------------------------------------------------------------------------------------------------------------------
Eastmeadow Distribution GA (2) (**) Aetna Life Insurance 99% Real Estate Investment
Center Phase II Limited Company
Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
COMPANY ORGANIZATION LIST
March 31, 1998
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMPANY STATE IMMEDIATE OWNER OWNERSHIP PRINCIPAL BUSINESS
PERCENTAGE+
- ------------------------------------------------------------------------------------------------------------------------------------
Azalea Mall, L.L.C. DE (5) (**) Aetna Life Insurance 99% Real Estate Holding Company
Company
- ------------------------------------------------------------------------------------------------------------------------------------
Southeast Second Avenue, Inc. DE (1) (*) Aetna Life Insurance 100% Real Estate Investment
Company
- ------------------------------------------------------------------------------------------------------------------------------------
Menlo One, L.L.C. DE (5) (**) Aetna Life Insurance 99% Real Estate Holding Company
Company
- ------------------------------------------------------------------------------------------------------------------------------------
Central Trust Center OH (2) (**) Aetna Life Insurance 15% Real Estate Investment
Associates Company
- ------------------------------------------------------------------------------------------------------------------------------------
Capitol District Energy CT (2) (**) AE Fourteen, Inc. 50% Cogeneration of Electrical
Center Cogeneration Associates Power
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Insurance Company of CT (1) (*) AHP Holdings, Inc. 100% Insurance
Connecticut
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Retirement Holdings, Inc. CT (1) (*) Aetna Retirement 100% Holding Company
Services, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Life Insurance and CT (1) (*) Aetna Retirement 100% Life Insurance, Pensions
Annuity Company Holdings, Inc. And Annuities
- ------------------------------------------------------------------------------------------------------------------------------------
Systematized Benefits CT (1) (*) Aetna Retirement 100% Third Party Administrator
Administrators, Inc. Holdings, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Financial Services, Inc. CT (1) (*) Aetna Retirement 100% Broker-Dealer and Investment
Holdings, Inc Advisor
- ------------------------------------------------------------------------------------------------------------------------------------
Aeltus Investment CT (1) (*) Aetna Retirement 100% Investment Advisor
Management, Inc. Holdings, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Investment Services, Inc. CT (1) (*) Aetna Retirement 100% Distribute Securities Products
Holdings, Inc. - ALIAC and Outside Funds
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Insurance Agency CT (1) (*) Aetna Retirement 100% Holding Company
Holdings Company, Inc. Holdings, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
FNI International, Inc. CA (1) (*) Aetna Retirement 100% Holding Company
Holdings, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Insurance Company CT (1) (*) Aetna Life Insurance 100% Write/Reinsure Life and
of America and Annuity Company Annuity Business
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
COMPANY ORGANIZATION LIST
March 31, 1998
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
COMPANY STATE IMMEDIATE OWNER OWNERSHIP PRINCIPAL BUSINESS
PERCENTAGE+
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aetna New Series Fund, Inc. MD (1) (**) Aetna Life Insurance 100% Regulated Investment Company
and Annuity Company (Mutual Fund)
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Income Shares MA (4) (**) Aetna Life Insurance 99% Regulated Investment Company
and Annuity Company (Mutual Fund)
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Encore Fund MA (4) (**) Aetna Life Insurance 100% Regulated Investment Company
and Annuity Company (Mutual Fund)
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna GET Fund MA (4) (**) Aetna Life Insurance 100% Regulated Investment Company
and Annuity Company (Mutual Fund)
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Portfolios, Inc. MD (1) (**) Aetna Life Insurance 96% Regulated Investment Company
and Annuity Company (Mutual Fund)
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Fund MA (4) (**) Aetna Life Insurance 98% Regulated Investment Company
and Annuity Company (Mutual Fund)
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Generation Portfolios, Inc. MD (1) (**) Aetna Life Insurance 100% Regulated Investment Company
and Annuity Company (Mutual Fund)
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, MD (1) (**) Aetna Life Insurance 100% Regulated Investment Company
Inc. and Annuity Company (Mutual Fund)
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Series Fund, Inc. MD (1) (**) Aetna Life Insurance 24% Regulated Investment Company
and Annuity Company (Mutual Fund)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners, Inc. MD (1) (**) Aetna Life Insurance 100% Regulated Investment Company
and Annuity Company (Mutual Fund)
- ------------------------------------------------------------------------------------------------------------------------------------
Financial Network Investment CA (1) (*) FNI International, Inc. 100% Broker/Dealer
Corporation
- ------------------------------------------------------------------------------------------------------------------------------------
FN Insurance Agency of MA (1) (*) FNI International, Inc. 100% Broker/Dealer
Massachusetts, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
FN Insurance Services, Inc. CA (1) (*) FNI International, Inc. 100% Insurance Agency
- ------------------------------------------------------------------------------------------------------------------------------------
FN Insurance Services of Alabama, AL (1) (*) FNI International, Inc. 100% sale of life and health and
Inc. variable products
- ------------------------------------------------------------------------------------------------------------------------------------
FN Insurance Services of Nevada, NV (1) (*) FNI International, Inc. 100% To engage as an agent,
Inc. managing general agent broker
in all classes of insurance
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
COMPANY ORGANIZATION LIST
March 31, 1998
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
COMPANY STATE IMMEDIATE OWNER OWNERSHIP PRINCIPAL BUSINESS
PERCENTAGE+
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial Network Investment HA (1)(*) Financial Network 100% Insurance Agency and Insurance
Corporation of Hawaii Investment Corporation Broker
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Investment Management Bermuda (1) (*) Aeltus Investment 100% Holding Company
(Bermuda) Holdings Limited Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Aeltus Capital, Inc. CT (1) (*) Aeltus Investment 100% Broker-Dealer Related
Management, Inc. Functions
- ------------------------------------------------------------------------------------------------------------------------------------
Aeltus Trust Company CT (1) (*) Aeltus Investment 100% Fiduciary Powers Granted to
Management, Inc. State Bank and Trust Companies
- ------------------------------------------------------------------------------------------------------------------------------------
China Dynamic Investment Hong Kong (1) (**) Aetna Investment 50% Establish and Manage
Management (Hong Kong) Limited Management (Bermuda) Collective Investment Scheme
Holdings Limited
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Insurance Agency, Inc. CT (1) (*) Aetna Insurance Agency 100% Insurance agency for the
Holdings Company, Inc. marketing of registered and
nonregistered insurance
products
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Insurance Agency of MA (1) (*) Aetna Insurance Agency 100% Insurance agency for the
Massachusetts, Inc. Holdings Company, Inc. marketing of registered and
nonregistered insurance
products
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Insurance Agency of AL (1)(*) Aetna Insurance Agency 100% Insurance agency for the
Alabama, Inc. Holdings Company, Inc. marketing of registered and
nonregistered insurance
products
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Insurance Agency of Ohio, OH (1) (*) Aetna Insurance Agency 90% Insurance agency for the
Inc. Holdings Company, Inc. marketing of registered and
nonregistered insurance
products
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna International Holdings Hong Kong (1) (*) Aetna International, 100% Holding Company for Insurance
(Hong Kong) I Limited Inc. and Financial Services
- ------------------------------------------------------------------------------------------------------------------------------------
East Asia Aetna Insurance Company Bermuda (1) (**) Aetna International, 50% Life Disability and Employee
(Bermuda) Ltd. Inc. Benefits Ins. in H.K.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
COMPANY ORGANIZATION LIST
March 31, 1998
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
COMPANY STATE IMMEDIATE OWNER OWNERSHIP PRINCIPAL BUSINESS
PERCENTAGE+
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aetna International Fund CT (1) (*) Aetna International, 100% Investment Management Services
Management Inc. Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Holdings (Cayman) Ltd. Cayman (1) (**) Aetna International, 100% Insurance Company
Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
ALICA Holdings, Inc. CT (1) (*) Aetna International, 80% Dedicated Holding Company
Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Life Insurance Company of CT (1) (*) Aetna International, 100% Life Insurance
America Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna International Holdings Hong Kong (1) (*) Aetna International, 100% Holding Company
(Hong Kong) II Limited Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Internacional y Compania, Mexico (1) (**) Aetna International, 71% Holding Company
S. en N.C. de C.V. Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Internacional De Mexico Mexico (1) (**) Aetna International, 100% Mexican Holding Company
S.A. De C.V. Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna S.A. Chile (1) (*) Aetna International, 100% Holding Company
Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
Arcella Limited Hong Kong (1) (*) Aetna International, 100% Investment & Holding Co. for
Inc. Aetna's Asia Pacific Operations
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Life & Casualty Bermuda Bermuda (1) (*) Aetna International, 100% Insurance, Guaranteed and
Limited Inc. Indemnity Business
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna International Global Luxembourg (1) (*) Aetna International, 100% Investment Services
Investment Services S.A.
- -----------------------------------------------------------------------------------------------------------------------------------
Inversiones Mercantil Aetna, C.A. Venezuela (1) (*) Aetna International, 50% Insurance Company
Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Heart Investment Holdings Taiwan (1) (*) Aetna International, 80% Holding Company
Limited Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Life and Casualty Netherlands Aetna International, 100% Finance Investment Company
International Finance N.V. Antilles (1) (*) Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
Sul America Aetna Seguros de Brazil Aetna International, 49% Insurance
Previdencia S.A. Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
COMPANY ORGANIZATION LIST
March 31, 1998
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
COMPANY STATE IMMEDIATE OWNER OWNERSHIP PRINCIPAL BUSINESS
PERCENTAGE+
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aetna Investment Management Australia (1) (*) Aetna International,. 100% Stockbroking
(Australia) Limited Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Capital Holdings, Inc. CT (1) (*) Aetna International,. 100% Holding Company
Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Securities Investment Taiwan (1) (*) Aetna International,. 80% Securities Investment Advisor
Management (Taiwan) Ltd. Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Capital Management U.K. (1) (*) Aetna International,. 100% Promoter of Offshore Mutual
International Ltd. Inc. Funds or other Open-Ended
Investment Vehicles
- ------------------------------------------------------------------------------------------------------------------------------------
AE Five Incorporated CT (1) (*) Aetna International,. 100% Holding Company
Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Vida S.A. Argentina (1) (*) Aetna International,.. 60% Health and Life Insurance
Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Investment Management Hong Kong (1) (*) Aetna International,. 100% Investment Management. &
(F.E.) Nominees Limited Inc. Advisory Services for
Individual Clients and
Investment Funds
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Canada Holdings Limited Canada (1) (*) Aetna International,. 100% Investment Holding Company
Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Investment Management Taiwan (1) (*) Aetna International,. 80% Provide Non-Security Business
(Taiwan) Limited Inc. and Investment Advice
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna International (N.Z.) New Zealand (1) (*) Aetna International,. 100% Holding Company
Limited Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Investment Management Hong Kong (1) (*) Aetna International,. 100% Investment Holding Company
(F.E.) Holdings Limited Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Phillippine Ventures, Inc. Philippines (1) (*) Aetna International,. 100% Holding Company
Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Life Insurance Inc. Philippines (1) (*) Aetna Philippine 100% Life Insurance
Ventures, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Healthcare, Inc. Philippines (1) (*) Aetna Life Insurance 100% Insurance
Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
COMPANY ORGANIZATION LIST
March 31, 1998
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
COMPANY STATE IMMEDIATE OWNER OWNERSHIP PRINCIPAL BUSINESS
PERCENTAGE+
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Blue Cross (Asia Pacific) Hong Kong (1) (**) Aetna International 35% Underwriter Casualty and
Insurance Ltd. Holdings(Hong Kong) General Insurance in Hong Kong
I Limited and Macau
- ------------------------------------------------------------------------------------------------------------------------------------
East Asia Aetna Services Company Hong Kong (1) (**) East Asia Aetna 100% Management services to
Limited Insurance Company associate companies
(Bermuda) Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
The Aetna International Umbrella Luxembourg (1) (***) Aetna Life Insurance 02% An Undertaking for the
Fund Company of America Collective Investment in
Transferable Securities
- ------------------------------------------------------------------------------------------------------------------------------------
PT Aetna Life Insurance Indonesia Indonesia (1) (**) Aetna Life Insurance 80% Limited Liability Life
Company of America Insurance Company
- ------------------------------------------------------------------------------------------------------------------------------------
Daya Aetna (Malaysia) SDN. BHD. Malaysia (1) (*) Aetna International 82% Holding Company
Holdings (Hong Kong)
II Limited
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Universal Insurance Berhad Malaysia (1) (*) Daya Aetna (Malaysia) 100% Individual Life, Home Service,
SDN. BHD. Group and General Insurance
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Heart Co., Ltd. Taiwan (1) (a) Aetna Heart Investment 100% Trading Company - Marketing
Holdings Limited of Gifts and Souvenirs
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna South Life Agency Co., Ltd. Taiwan (1) (a) Aetna Heart Investment 100% Administrative Support
Holdings Limited
- ------------------------------------------------------------------------------------------------------------------------------------
Huei Hong Securities Co., Ltd. Taiwan (1) (a) Aetna Heart Investment 20% Securities Trading
Holdings Limited
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Heart Publishing Company Taiwan (1) (a) Aetna Heart Investment 100% Trading Company
Ltd. Holdings Limited
- ------------------------------------------------------------------------------------------------------------------------------------
Seguros Mercantil, C.A. Venezuela (1) (*) Inveriones Mercantil 100% Insurance Company
Aetna, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Seguros Monterrey Aetna, S.A. Mexico (1) (**) AE Five Incorporated 14% Insurance and Reinsurance
- ------------------------------------------------------------------------------------------------------------------------------------
Fianzas Monterrey Aetna, S.A. Mexico (1) (**) AE Five Incorporated 14% Issuance of Bonds
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
COMPANY ORGANIZATION LIST
March 31, 1998
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
COMPANY STATE IMMEDIATE OWNER OWNERSHIP PRINCIPAL BUSINESS
PERCENTAGE+
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aetna (Netherlands) Netherlands (1) (*) Aetna Life and Casualty 100% Finance Company
Holdings B.V. International Finance
N.V.
- ------------------------------------------------------------------------------------------------------------------------------------
Travelguard Limited Hong Kong (1) (*) Blue Cross (Asia Pacific) 100% Insurance Agent
Insurance Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
Toursafe Limited Hong Kong (1) (*) Blue Cross (Asia Pacific) 100% Insurance Agent
Insurance Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
Travelsafe Limited Hong Kong (1) (*) Blue Cross (Asia Pacific) 100% Insurance Agent for its
Insurance Ltd. Ultimate Holding Company
- ------------------------------------------------------------------------------------------------------------------------------------
Multiasistencia, S.A. de C.V. Mexico (1) (**) Seguros Bancomer, S.A. 50% Administrative Services in
de C.V. Connection with Insurance
Claims
- ------------------------------------------------------------------------------------------------------------------------------------
Meximed, S.A. de C.V. Mexico (1) (**) Seguros Bancomer, S.A. 50% Services for Insureds for
de C.V. Hospitals Admissions and
Claims Processing
- ------------------------------------------------------------------------------------------------------------------------------------
Seguros Bancomer, S.A. de C.V. Mexico (1) (**) Aetna Internacional 49% Insurance and Reinsurance
Compania S en N.C Company
de C.V.
- ------------------------------------------------------------------------------------------------------------------------------------
Pensiones Bancomer S.A. de C.V. Mexico (1) (**) Aetna Internacional 49% Insurance Company
Compania S en N.C.
de C.V.
- ------------------------------------------------------------------------------------------------------------------------------------
Administradora de Fondos Para el Mexico (1) (**) Aetna Internacional 49% Retirement Funds Management
Retiro Bancomer, S.A. de C.V. Compania Sen N.C. Company
de C.V.
- ------------------------------------------------------------------------------------------------------------------------------------
Grupo Vamsa, S.A. de C.V. Mexico (1) (**) Aetna Internacional 49% Legal Administration and
Compania Sen N.C. Financial Services
de C.V.
- ------------------------------------------------------------------------------------------------------------------------------------
Asesores en Promocion Segunomina Mexico (1) (**) Seguros Bancomer, 33% Marketing of Seguros Products/
S.A. de C.V. S.A. de C.V. Payroll Discounts
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
COMPANY ORGANIZATION LIST
March 31, 1998
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
COMPANY STATE IMMEDIATE OWNER OWNERSHIP PRINCIPAL BUSINESS
PERCENTAGE+
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inverval De Mexico S.A. de C.V. Mexico (1(*) Aetna Internacional 100% Holding Company
Compania S en N.C.
de C.V.
- ----------------------------------- ------------------------------------------------------ ------------------ ----------------------
AE Five Compania S. de R.L. de Mexico (1)(*) Aetna Ninernacional 100% Limited Limitability Company
C.V. Compania S en N.C. formed under Mex. Law for the
de C.V. purpose of issuing CPOs in
Mexico.
- ----------------------------------- ------------------------------------------------------------------------------------------------
Aetna Chile Seguros Generales S.A. Chile (1) (*) Aetna S.A. 98% Casualty Insurance Company
- ----------------------------------- ------------------------------------------------------------------------------------------------
Aetna Administradora de Fondos de Chile (1) (*) Aetna S.A. 100% Real Estate Investment Trust
Inversion S.A. Management Co.
- ----------------------------------- ------------------------------------------------------------------------------------------------
Aetna Chile Seguros de Vida S.A. Chile (1) (*) Aetna S.A. 100% Life Insurance Company
- ----------------------------------- ------------------------------------------------------------------------------------------------
Aetna Pensiones S.A. Chile (1) (*) Aetna S.A. 100% Holding Company
- ----------------------------------- ------------------------------------------------------------------------------------------------
Aetna Credito Hipotecario S.A. Chile (1) (*) Aetna S.A. 100% Mortgage Company
- ----------------------------------- ------------------------------------------------------------------------------------------------
Aetna International Peru S.A. Peru (1) (*) Aetna S.A. 86% Holding Company
- ----------------------------------- ------------------------------------------------------------------- ----------------------------
Aetna Salud S.A. Chile (1) (*) Aetna S.A. 90% Health Indemnity - Chile
- ----------------------------------- ------------------------------------------------------------------- ----------------------------
Administradora de Fondos de Chile (1) (*) Aetna Pensiones S.A. 71% Pension Funds Management
Pensiones Santa Maria S.A. Company
- ----------------------------------- ------------------------------------------------------ ------------------ ----------------------
Santa Maria Internacional S.A. Chile (1) (*) Administradora de 100% Pension Administration
Fondos de Pensiones
Santa Maria S.A.
- ----------------------------------- ------------------------------------------------------ ------------------ ----------------------
Aetna Pensiones Peru S.A. Peru (1) (**) Santa Maria 66% Investment
Internacional S.A.
- ----------------------------------- ------------------------------------------------------ ------------------ ----------------------
Administradora de Fondos de Peru (1) (**) Aetna Pensiones Peru S.A. 30% Pension Funds Management
Pensiones Integra S.A. Company
- ----------------------------------- ------------------------------------------------------ ------------------ ----------------------
Wiese Aetna Compania de Seguros Peru (1) (*) Aetna International 34% Insurance and Reinsurance
S.A. Peru S.A.
- ----------------------------------- ------------------------------------------------------ ------------------ ----------------------
</TABLE>
14
<PAGE>
COMPANY ORGANIZATION LIST
March 31, 1998
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
COMPANY STATE IMMEDIATE OWNER OWNERSHIP PRINCIPAL BUSINESS
PERCENTAGE+
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Immobilaria Padre Marinano S.A. Chile (1) (*) Aetna Credito 99% Real Estate Development
Hipotecario S.A.
- ------------------------------------------------------------------------------------------------------------------------------------
Sul America Previdencia Privada Brazil (1) (*) Sul America Aetna 100% Pension
Seguros de Previdencia
S.A.
- ------------------------------------------------------------------------------------------------------------------------------------
Sul America Servicos Medicos S.A. Brazil (1) (*) Sul America Aetna 100% Health Administrator
Seguros de Previdencia
S.A.
- ------------------------------------------------------------------------------------------------------------------------------------
Clube Dos Executivos, S.A. Brazil (1) (*) Sul American Aetna 100% Life insurance sponsor
Seguros de Previdencia
S.A.
- ------------------------------------------------------------------------------------------------------------------------------------
Brasilprev Previdencia Privada Brazil (1) (**) Sul America Aetna 20% Pension
S.A. Seguros de Previdencia
S.A.
- ------------------------------------------------------------------------------------------------------------------------------------
Brasilsaude Companhia de Segoros Brazil (1) (*) Sul America Aetna 51% Insurance
Seguros de Previdencia
S.A.
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Health Management Canada, Ontario (1)(*) Aetna Canada Holdings 100% Managed Healthcare
Inc. Limited
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Life Insurance Company of Canada (1) (*) Aetna Canada Holdings 100% Life, Accident and Sickness
Canada Limited Insurance
- ------------------------------------------------------------------------------------------------------------------------------------
Equinox Financial Group Inc. Canada (1) (*) Aetna Canada Holdings 92% Distributor of Life Insurance,
Limited Financial and Related
Products
- ------------------------------------------------------------------------------------------------------------------------------------
2733854 Canada Ltd. Canada (1) (*) Aetna Canada Holdings 70% Marketing of Life Ins. and
Limited Related Products
- ------------------------------------------------------------------------------------------------------------------------------------
AlphaQuest Capital Management Ontario (1) (***) Aetna Canada Holdings 15% Investment Counselor Portfolio
Limited Limited Manager
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Acceptance Corporation Ontario (1) (*) Aetna Canada Holdings 100% Provision of Financial
Limited Limited Assistance to Agents to
Assist in Growth of Business
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
COMPANY ORGANIZATION LIST
March 31, 1998
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
COMPANY STATE IMMEDIATE OWNER OWNERSHIP PRINCIPAL BUSINESS
PERCENTAGE+
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First Canadian Health Management Canada (1) (**) Aetna Health Management 49% Managed Health Services
Corporation, Inc. Canada, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Benefits Management, Inc. Canada (1) (*) Aetna Life Insurance 100% Claims Administration
Company of Canada and Actuarial Services
- ------------------------------------------------------------------------------------------------------------------------------------
Landex Properties Ltd. British Aetna Life Insurance 100% Real Estate Acquisitions
Columbia (1) (*) Company of Canada
- ------------------------------------------------------------------------------------------------------------------------------------
Mount-Batten Properties Limited Ontario (1) (*) Aetna Life Insurance 100% Acquisition, Development
Company of Canada and Management of Real Estate
- ------------------------------------------------------------------------------------------------------------------------------------
Financial Life Assurance Company Canada (1) (*) Aetna Life Insurance 100% Insurance company
of Canada Company of Canada
- ------------------------------------------------------------------------------------------------------------------------------------
3158047 Canada Limited Canada (1) (*) Aetna Life Insurance 100% Acquisition, Development
Company of Canada and Management of Real Estate
- ------------------------------------------------------------------------------------------------------------------------------------
3273806 Canada Limited Canada (1) (*) Aetna Life Insurance 100% Real Estate Holding Company
Company of Canada
- ------------------------------------------------------------------------------------------------------------------------------------
PVS Preferred Vision Services Inc. Canada (1) (**) Aetna Benefits 20% Provider of Ophthalmic,
Management, Inc. Service for Four Major
Shareholders
- ------------------------------------------------------------------------------------------------------------------------------------
Churchill Office Park Limited Canada (1) (**) Mount-Batten Properties 45% Real Estate Development
Limited of Ottawa Site
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Health (N.Z.) Limited New Zealand (1) (**) Aetna International (N.Z) 50% Health Insurance Underwriting
Limited
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Life Insurance (N.Z.) New Zealand (1) (*) Aetna Health (N.Z.) 100% Group Benefits/Pension
Limited Limited Management
- ------------------------------------------------------------------------------------------------------------------------------------
Human Affairs Limited (N.Z.) New Zealand (1) (*) Aetna Health (N.Z.) 100% Indemnity Health Insurance
Limited
- ------------------------------------------------------------------------------------------------------------------------------------
First Health (New Zealand Limited) New Zealand (1) (*) Aetna Health (N.Z.) 100% Super Annuitization/Long
Limited Term Care
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
COMPANY ORGANIZATION LIST
March 31, 1998
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
COMPANY STATE IMMEDIATE OWNER OWNERSHIP PRINCIPAL BUSINESS
PERCENTAGE+
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prime Health Limited New Zealand (1) (*) First Health 50% Buying and Managing Risk for
(New Zealand) Limited Publicly Funded Health
Services and Providing
Management Services and
Infrastructure To its Network
of Doctors
- ------------------------------------------------------------------------------------------------------------------------------------
Managed Care New Zealand Limited New Zealand (1) (*) Human Affairs (NZ) 100% Long Term Care provider
Limited
- ------------------------------------------------------------------------------------------------------------------------------------
PLJ Holdings Limited Hong Kong (1) (*) Aetna Investment 100% Investment Management &
Management (F.E.) Securities Trading
Holdings Limited
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna International Fund Managers Hong Kong (1) (*) Aetna Investment 100% Investment & Unit Trust
Limited Management (F.E.) Management
Holdings Limited
- ----------------------------------- ------------------------------------------------------------------------------------------------
Aetna Investment Management Hong Kong (1) (*) Aetna Investment 100% Nominee Services Holding
(F.E.) Limited Management (F.E.) Assets of AIM F.E.'s Customers
Holdings Limited in Street Name
- ----------------------------------- ------------------------------------------------------------------------------------------------
Kwang HUA Securities Investment & Taiwan (1) (***) Aetna Investment 20% Securities Investment & Trust
Trust Co. Ltd. Management (F.E.)
Holdings Limited
- ----------------------------------- ------------------------------------------------------------------------------------------------
Kwang HUA Securities Investment Taiwan (1) (***) PLJ Holdings Limited 20% Investment Consulting Company
Consultant Co. Ltd.
- ----------------------------------- ------------------------------------------------------------------------------------------------
U.S. Healthcare Financial DE (1) (*) Aetna U.S. Healthcare 100% Holding Company
Services, Inc. Inc. (PA)
- ----------------------------------- ------------------------------------------------------------------------------------------------
Primary Holdings, Inc. DE (1) (*) Aetna U.S. Healthcare 100% Holding Company
Inc. (PA)
- ----------------------------------- ------------------------------------------------------------------------------------------------
Aetna Health Management, Inc. DE (1) (*) Aetna U.S. Healthcare 100% HMO Management Company
Inc. (PA)
- ----------------------------------- ------------------------------------------------------------------------------------------------
U.S. Healthcare Dental Plan, Inc. PA (1) (*) Aetna U.S. Healthcare 100% Dental
Inc. (PA)
- ----------------------------------- ------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
COMPANY ORGANIZATION LIST
March 31, 1998
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
COMPANY STATE IMMEDIATE OWNER OWNERSHIP PRINCIPAL BUSINESS
PERCENTAGE+
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Healthcare Dental Plan, Inc. NJ (1) (*) Aetna U.S. Healthcare 100% Dental
Inc. (PA)
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Healthcare Dental Plan, Inc. DE (1) (*) Aetna U.S. Healthcare 100% Dental
Inc. (PA)
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Health Insurance Company NY (1) (*) Aetna U.S. Healthcare 100% Accident and Health Insurance
Inc. (PA) Company
- ------------------------------------------------------------------------------------------------------------------------------------
Corporate Health Insurance PA (1) (*) Aetna U.S. Healthcare 100% Accident and Health Insurance
Company Inc. (PA) Company
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Managed Care, Inc. MD (1) (*) Aetna U.S. Healthcare 100% Utilization Review
Inc. (PA)
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna U.S. Healthcare, Inc. NJ (1) (*) Aetna U.S. Healthcare 100% HMO
Inc. (PA)
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna U.S. Healthcare, Inc. NY (1) (*) Aetna U.S. Healthcare 100% HMO
Inc. (PA)
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna U.S. Healthcare, Inc. CT (1) (*) Aetna U.S. Healthcare 100% HMO
Inc. (PA)
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna U.S. Healthcare, Inc. MA (1) (*) Aetna U.S. Healthcare 100% HMO
Inc. (PA)
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna U.S. Healthcare, Inc. DE (1) (*) Aetna U.S. Healthcare 100% HMO
Inc. (PA)
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna U.S. Healthcare of New NH (1) (*) Aetna U.S. Healthcare 100% HMO
Hampshire, Inc. Inc. (PA)
- ------------------------------------------------------------------------------------------------------------------------------------
Advent Investments, Inc. DE (1) (*) U.S. Healthcare Financial 100% DE Holding Company
Services, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Independent Investments, Inc. DE (1) (*) U.S. Healthcare Financial 100% DE Holding Company
Services, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
United States Physicians Care PA (1) (*) U.S. Healthcare Financial 100% Financial Services to
Systems, Inc. Services, Inc. Physicians
- ------------------------------------------------------------------------------------------------------------------------------------
United States Home Health Care PA (1) (*) U.S. Healthcare Financial 100% Inactive - other Medical
Systems, Inc. Services, Inc. Services
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
COMPANY ORGANIZATION LIST
March 31, 1998
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
COMPANY STATE IMMEDIATE OWNER OWNERSHIP PRINCIPAL BUSINESS
PERCENTAGE+
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Health Aviation Corp. PA (1) (*) U.S. Healthcare Financial 100% Ownership and Operation of
Services, Inc. Airplanes
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Healthcare Properties, Inc. PA (1) (*) U.S. Healthcare Financial 100% Holding Company for Real
Services, Inc. Estate
- ------------------------------------------------------------------------------------------------------------------------------------
Inteli-Health, Inc. DE (1) (*) U.S. Healthcare Financial 85% Software Development
Services, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
USHC Management Services DE (1) (*) U.S. Healthcare Financial 100% Management and Financial
Corporation Services, Inc. Services to Network Providers
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Healthcare Advantage, Inc. DE (1) (*) Advent Investments, Inc. 100% Holding Company
- ------------------------------------------------------------------------------------------------------------------------------------
Wissahickon Payment DE (1) (*) Advent Investments, Inc. 100% Third Party Administrator
Administrators, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Advent Financial Services, Inc. DE (1) (*) U.S. Healthcare 100% Holding Company
Advantage, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Corporate Health Administrators, PA (1) (*) Advent Financial 100% Third Party Administrator for
Inc. Services, Inc. Self-Insured Plans
- ------------------------------------------------------------------------------------------------------------------------------------
Managed Care Coordinators, Inc. DE (1) (*) Advent Financial 100% Evaluation and Administration
Services, Inc. of Multiple Health Plans
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Phoenix Corporation PA (1) (*) Advent Financial 100% Shell
Services, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Quality Algorithms, Inc. PA (1) (*) Advent Financial 100% Services to Analyze the
Services, Inc. Quality and Effectiveness of
Medical Care
- ------------------------------------------------------------------------------------------------------------------------------------
Workers Comp Advantage, Inc. PA (1) (*) Advent Financial 100% Case Management and other
Services, Inc. Medical Management Services
for Employers on Costs Related
to Workers' Compensation
Claims
- ------------------------------------------------------------------------------------------------------------------------------------
Primary Investments, Inc. DE (1) (*) Primary Holdings, Inc. 100% Holding Company
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
COMPANY ORGANIZATION LIST
March 31, 1998
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
COMPANY STATE IMMEDIATE OWNER OWNERSHIP PRINCIPAL BUSINESS
PERCENTAGE+
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
United States Health Care Systems PA (1) (*) Primary Investments, Inc. 100% HMO
of Pennsylvania, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna U.S. Healthcare Inc. VA (1) (*) Primary Investments, Inc. 26% HMO
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Healthcare, Inc. OH (1) (*) Primary Investments, Inc. 100% HMO
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna U.S. Healthcare of the NC (1) (*) Primary Investments, Inc. 100% HMO
Carolinas, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna U.S. Healthcare of Georgia, GA (1) (*) Primary Investments, Inc. 63% HMO
Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Advent HMO Corporation ND (1) (*) Primary Investments, Inc. 100% Inactive
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna U.S. Healthcare of Alabama, AL (1) (*) Primary Investments, Inc. 100% HMO
Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Health Insurance Company CT (1) (*) Primary Investments, Inc. 100% Accident and Health
Insurance Company
- ------------------------------------------------------------------------------------------------------------------------------------
AUSHC Inc. AL (1)(*) Primary Investments, Inc. 100% HMO
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna U.S. Healthcare, Inc. MI (1) (*) Primary Investments, Inc. 100% HMO
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna U.S. Healthcare, Inc. OK (1) (*) Primary Investments, Inc. 100% HMO
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Healthcare, Inc. MO (1) (*) Primary Investments, Inc. 100% HMO
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna U.S. Healthcare Holdings, DE (1) (*) Primary Investments, Inc. 100% Holding Company
Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna U.S. Healthcare Inc. WA (1) (*) Primary Investments, Inc. 100% HMO
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna U.S. Healthcare of CO (1) (*) Aetna U.S. Healthcare 100% HMO
Colorado, Inc. Holdings, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
COMPANY ORGANIZATION LIST
March 31, 1998
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
COMPANY STATE IMMEDIATE OWNER OWNERSHIP PRINCIPAL BUSINESS
PERCENTAGE+
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aetna U.S. Healthcare, Inc. OH (1) (*) Aetna Health 100% HMO
Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna U.S. Healthcare Dental Plan CA (1) (*) Aetna Health 100% Provide Pre-Paid
of California Inc. Management, Inc. Dental Services
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna U.S. Healthcare, Inc. FL (1) (*) Aetna Health 100% HMO
Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Informed Health, Inc. DE (1) (*) Aetna Health 100% Sponsors Health
Management, Inc. Information Service
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna U.S. Healthcare, Inc. TN (1) (*) Aetna Health 100% HMO
Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna U.S. Healthcare of Georgia, GA (1) (*) Aetna Health 37% HMO
Inc. Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Dental Care of New Jersey, NJ (1) (*) Aetna Health 100% Dental Care
Inc. Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
AUSHC Holdings, Inc. DE (1) (*) Aetna Health 100% Holding Company
Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna U.S. Healthcare, Inc. VA (1) (*) Aetna Health 74% HMO
Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Health Plans of the NC (1) (*) Aetna Health 100% HMO
Carolinas, Inc. Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna U.S. Healthcare, Inc. AZ (1) (*) Aetna Health 100% HMO
Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Dental Care of Texas, Inc. TX (1)(*) Aetna Health 100% HMO offering single health
Management, Inc. service plan - dental
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna U.S. Healthcare of IL (1) (*) Aetna Health 100% HMO
Illinois, Inc. Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Dental Care of Kentucky, KY (1) (*) Aetna Health 100% Dental Plan Organization
Inc. Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
COMPANY ORGANIZATION LIST
March 31, 1998
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
COMPANY STATE IMMEDIATE OWNER OWNERSHIP PRINCIPAL BUSINESS
PERCENTAGE+
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aetna Health Plans of Central and PA (1) (*) Aetna Health 100% HMO
Eastern Pennsylvania, Inc. Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna U.S. Healthcare, Inc. TX (1) (*) Aetna Health 100% HMO
Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna U.S. Healthcare, Inc. LA (1) (*) Aetna Health 100% HMO
Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
MED Southwest, Inc. TX (1) (*) Aetna Health 55% Holding Company
Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Freedom Choice, Inc. PA (1)(*) Aetna Health Plans 100% Third Party Administrator
of Central and Eastern
Pennsylvania, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Government Health Plans, CA (1) (*) Aetna Health 100% Sponsors Champus Business
Inc. Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna U.S. Healthcare of CA (1) (*) Aetna Health 100% HMO
California, Inc. Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Health Plans of New York, NY (1) (*) AUSHC Holdings, Inc. 100% HMO
Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Health Plans of New Jersey, NJ (1) (*) AUSHC Holdings, Inc. 100% HMO
Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Southwest Physicians Life TX (1) (*) MED Southwest, Inc. 100% Life and Health Insurer
Insurance Company
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna U.S. Healthcare of North TX (1) (*) MED Southwest, Inc. 100% HMO
Texas Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
Item 27. Number of Contract Owners
As of April 30, 1998, there were 66,203 individual holders of interests in
variable annuity contracts funded through Variable Annuity Account B.
Item 28. Indemnification
Section 21 of Public Act No. 97-246 of the Connecticut General Assembly (the
"Act") provides that a corporation may provide indemnification of or advance
expenses to a director, officer, employee or agent only as permitted by Sections
33-770 to 33-778, inclusive, of the Connecticut General Statutes, as amended by
Sections 12 to 20, inclusive, of this Act. Reference is hereby made to Section
33-771(e) of the Connecticut General Statutes ("CGS") regarding indemnification
of directors and Section 33-776(d) of CGS regarding indemnification of officers,
<PAGE>
employees and agents of Connecticut corporations. These statutes provide in
general that Connecticut corporations incorporated prior to January 1, 1997
shall, except to the extent that their certificate of incorporation expressly
provides otherwise, indemnify their directors, officers, employees and agents
against "liability" (defined as the obligation to pay a judgment, settlement,
penalty, fine, including an excise tax assessed with respect to an employee
benefit plan, or reasonable expenses incurred with respect to a proceeding) when
(1) a determination is made pursuant to Section 33-775 that the party seeking
indemnification has met the standard of conduct set forth in Section 33-771 or
(2) a court has determined that indemnification is appropriate pursuant to
Section 33-774. Under Section 33-775, the determination of and the authorization
for indemnification are made (a) by the disinterested directors, as defined in
Section 33-770(3); (b) by special counsel; (c) by the shareholders; or (d) in
the case of indemnification of an officer, agent or employee of the corporation,
by the general counsel of the corporation or such other officer(s) as the board
of directors may specify. Also, Section 33-772 provides that a corporation shall
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 he was a director, officer, employee or agent of
the corporation. In the case of a proceeding by or in the right of the
corporation or with respect to conduct for which the director, officer, agent or
employee was adjudged liable on the basis that he received a financial benefit
to which he was not entitled, indemnification is limited to reasonable expenses
incurred in connection with the proceeding against the corporation to which the
individual was named a party.
The statute does specifically authorize a corporation to procure indemnification
insurance on behalf of an individual who 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, only, for Aetna Variable Encore
Fund, Aetna Variable Fund, Aetna Generation Portfolios, Inc., Aetna
Income Shares, Aetna Balanced VP, Inc. (formerly Aetna Investment
Advisers Fund, Inc.), Aetna GET Fund, and Aetna Variable Portfolios,
Inc. and as the principal underwriter and investment adviser for
Portfolio Partners, 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 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.
<PAGE>
(c) Compensation as of December 31, 1997:
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
<S> <C> <C> <C> <C>
Name of Net Underwriting Compensation on
Principal Discounts and Redemption or Brokerage
Underwriter Commissions Annuitization Commissions Compensation*
- ----------- ---------------- ---------------- ----------- -------------
Aetna Life $347,583 $29,637,063
Insurance 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;
(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
<PAGE>
(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 complies 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) P. 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, has duly caused this Registration Statement to be signed on
its behalf in the City of Hartford, State of Connecticut, on the 8th day of
June, 1998.
VARIABLE ANNUITY ACCOUNT B OF AETNA
LIFE INSURANCE AND ANNUITY COMPANY
(Registrant)
By: AETNA LIFE INSURANCE AND ANNUITY
COMPANY
(Depositor)
By: /s/ Thomas J. McInerney
---------------------------
Thomas J. McInerney
President
As required by the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated. Each person whose signature appears below hereby constitutes Kirk P.
Wickman, Julie E. Rockmore and Mary Katherine Johnson and each of them
individually, such person's true and lawful attorneys, and agents with full
power of substitution and resubstitution, for him or her and in his or her name,
place and stead, in any and all capacities, to sign for such person and in such
person's name and capacity indicated below, any and all amendments to this
Registration Statement, hereby ratifying and confirming such person's signatures
as it may be signed by said attorneys to any and all amendments (pre-effective
and post-effective amendments).
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Thomas J. McInerney Director and President )
- -------------------------------- (principal executive officer) )
Thomas J. McInerney )
)
/s/ Catherine H. Smith Director and Chief Financial Officer )
- -------------------------------- )
Catherine H. Smith ) June 8, 1998
)
/s/ Shaun P. Mathews Director )
- -------------------------------- )
Shaun P. Mathews )
)
/s/ Deborah Koltenuk Vice President and Treasurer, Corporate Controller )
- -------------------------------- )
Deborah Koltenuk )
)
</TABLE>
<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 Broker-Dealer Agreement
------------
99-B.3.2 Alternative Form of Wholesaling Agreement and Related Selling Agreement *
99-B.4.1 Variable Annuity Contract (GM-VA-98)
------------
99-B.4.2 Variable Annuity Contract Certificate (GMC-VA-98)
------------
99-B.5 Variable Annuity Contract Application** *
99-B.6.1 Certificate of Incorporation of Aetna Life Insurance and Annuity Company *
99-B.6.2 Amendment of Certificate of Incorporation of Aetna Life Insurance and Annuity *
Company
9-B.6.3 By-Laws as amended September 17, 1997 of Aetna Life Insurance and Annuity Company *
99-B.8.1 Form of Fund Participation Agreement between Aetna Life Insurance and Annuity
Company and AIM
------------
99-B.8.2 Form of Service Agreement between Aetna Life Insurance and Annuity Company and
AIM
------------
99-B.8.3 Fund Participation Agreement by and among Aetna Life Insurance and Annuity
Company and Aetna Variable Fund, Aetna Variable Encore Fund, Aetna Income Shares,
Aetna Balanced VP, Inc., Aetna GET Fund on behalf of each of its series, Aetna
Generation Portfolios, Inc., on behalf of each of its series, and Aetna Variable
Portfolios, Inc. on behalf of each of its series and Aeltus Investment
Management, Inc., dated as of May 1, 1998
------------
</TABLE>
*Incorporated by reference
**To be filed by amendment
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Exhibit Page
<S> <C> <C>
99-B.8.4 Service Agreement between Aeltus Investment Management,
Inc. and Aetna Life Insurance and Annuity Company in
connection with the sale of shares of Aetna Variable
Fund, Aetna Variable Encore Fund, Aetna Income Shares,
Aetna Balanced VP, Inc., Aetna GET Fund on behalf of each
of its series, Aetna Generation Portfolios, Inc. on
behalf of each of its series and Aetna Variable
Portfolios, Inc., on behalf of each of its series dated
as of May 1, 1998
------------
99-B.8.5 Fund Participation Agreement between Aetna Life Insurance
and Annuity Company, Variable Insurance Products Fund *
and Fidelity Distributors Corporation dated February 1,
1994 and amended on December 15, 1994, February 1, 1995,
May 1, 1995, January 1, 1996 and March 1, 1996
99-B.8.6 Fifth Amendment, dated as of May 1, 1997, to the Fund Participation Agreement *
between Aetna Life Insurance and Annuity Company, Variable Insurance Products
Fund and Fidelity Distributors Corporation dated February 1, 1994 and amended on
December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996 and March 1,
1996
99-B.8.7 Sixth Amendment dated November 6, 1997 to the Fund Participation Agreement *
between Aetna Life Insurance and Annuity Company, Variable Insurance Products
Fund and Fidelity Distributors Corporation dated February 1, 1994 and amended on
December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996, March 1, 1996
and May 1, 1997
99-B.8.8 Seventh Amendment dated as of May 1, 1998 to the Fund Participation Agreement
between Aetna Life Insurance and Annuity Company, Variable Insurance Products
Fund and Fidelity Distributors Corporation dated February 1, 1994 and amended on
December 15, 1994, February 1, 1995, May 1, 1995, January
1, 1996, March 1, 1996 May 1, 1997 and November 6, 1997
------------
</TABLE>
*Incorporated by reference
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Exhibit Page
<S> <C> <C>
99-B.8.9 Fund Participation Agreement between Aetna Life Insurance
and Annuity Company, Variable Insurance Products Fund *
II and Fidelity Distributors Corporation dated February
1, 1994 and amended on December 15, 1994, February 1,
1995, May 1, 1995, January 1, 1996, and March 1, 1996
99-B.8.10 Fifth Amendment, dated as of May 1, 1997, to the Fund Participation Agreement *
between Aetna Life Insurance and Annuity Company, Variable Insurance Products
Fund II and Fidelity Distributors Corporation dated February 1, 1994 and amended
on December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996, and March
1, 1996
99.B-8.11 Sixth Amendment dated as of January 20, 1998 to the Fund Participation Agreement *
between Aetna Life Insurance and Annuity Company, Variable Insurance Products
Fund II and Fidelity Distributors Corporation dated February 1, 1994 and amended
on December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996, March 1,
1996 and May 1, 1997
99-B.8.12 Seventh Amendment dated as of May 1, 1998 to the Fund Participation Agreement
between Aetna Life Insurance and Annuity Company, Variable Insurance Products
Fund II and Fidelity Distributors Corporation dated February 1, 1994 and amended
on December 15, 1994, February 1, 1995, May 1, 1995,
January 1, 1996, March 1, 1996 May 1, 1997 and January
20, 1998
------------
99-B.8.13 Service Agreement between Aetna Life Insurance and Annuity Company and Fidelity *
Investments Institutional Operations Company dated as of November 1, 1995
99-B.8.14 Amendment dated January 1, 1997 to Service Agreement between Aetna Life Insurance *
and Annuity Company and Fidelity Investments Institutional Operations Company
dated as of November 1, 1995
*Incorporated by reference
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Exhibit Page
<S> <C> <C>
99-B.8.15 Fund Participation Agreement among Janus Aspen Series and Aetna Life Insurance *
and Annuity Company and Janus Capital Corporation dated December 8, 1997
99-B.8.16 Service Agreement between Janus Capital Corporation and Aetna Life Insurance and *
Annuity Company dated December 8, 1997
99-B.8.17 Fund Participation Agreement among MFS Variable Insurance Trust, Aetna Life
Insurance and Annuity Company and Massachusetts Financial Services Company dated
April 30, 1996
------------
99-B.8.18 First Amendment dated September 3, 1996 to Fund Participation Agreement among MFS
Variable Insurance Trust, Aetna Life Insurance and Annuity Company and
Massachusetts Financial Services Company
------------
99-B.8.19 Second Amendment dated March 14, 1997 to Fund Participation Agreement among MFS
Variable Insurance Trust, Aetna Life Insurance and Annuity Company and
Massachusetts Financial Services Company
------------
99-B.8.20 Third Amendment dated November 28, 1997 to Fund Participation Agreement among MFS
Variable Insurance Trust Aetna Life Insurance and Annuity Company and
Massachusetts Financial Services Company
------------
99-B.8.21 Fund Participation Agreement between Aetna Life Insurance and Annuity Company and *
Oppenheimer Variable Annuity Account Funds and Oppenheimer Funds, Inc. dated
March 11, 1997
99-B.8.22 Service Agreement between Oppenheimer Funds, Inc. and Aetna Life Insurance and *
Annuity Company dated March 11, 1997
99-B.9 Opinion and Consent of Counsel **
99-B.10 Consent of Independent Auditors **
</TABLE>
*Incorporated by reference
**To be filed by amendment
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Exhibit Page
<S> <C> <C>
99-B.13 Schedule for Computation of Performance Data** *
99-B.15.1 Powers of Attorney*** *
99-B.15.2 Authorization for Signatures *
*Incorporated by reference
**To be filed by amendment
***Included on the signature page of this filing
</TABLE>
11
ALIAC BROKER-DEALER AGREEMENT
THIS AGREEMENT ("Agreement") is effective as of this _____________ day of
___________________, 1996, by and between Aetna Life Insurance and Annuity
Company ("Company"), Hartford, Connecticut 06156, incorporated under the laws of
the State of Connecticut, and ___________________________ ("Broker-Dealer"),
incorporated under the laws of the State of _________.
In consideration of the mutual promises contained herein, the parties hereto
agree as follows:
1. Agreements of the Company
A. The Company hereby authorizes the Broker-Dealer during the term of
this Agreement to solicit, offer and sell the contracts
("Contracts") described in the Schedules attached hereto and
issued and distributed by the Company to suitable customers,
provided that the Contracts are qualified for sale under all
applicable federal and state securities and insurance laws of the
jurisdiction in which the solicitations, offers or sales will be
made.
B. During the term of this Agreement, the Company will notify
Broker-Dealer of the issuance by the SEC or any state or
jurisdiction of any stop order with respect to the registration
statement or any amendments thereto or the initiation of any
proceedings for that purpose or for any other purpose relating to
the registration and/or offering of the Contracts and of any other
action or circumstance that may prevent the lawful sale of any
Contract in any state or jurisdiction.
C. During the term of this Agreement, the Company shall advise the
Broker-Dealer of any amendment to any registration statement
and/or any amendment, sticker or supplement to any Prospectus.
2. Agreements of Broker-Dealer
A. Registration and Licenses. The Broker-Dealer represents that it
is a registered Broker-Dealer with the Securities and Exchange
Commission ("SEC") and a member in good standing of the National
Association of Securities Dealers, Inc. ("NASD"). The
Broker-Dealer represents that it is or will become registered,
licensed and appointed to sell the Contracts, as required under
the securities and insurance laws of those states and
jurisdictions where its agents or registered representatives will
solicit, offer
1
<PAGE>
and sell the Contracts. The Broker-Dealer represents that each
registered representative who solicits, offers and sells the
Contracts will be a duly registered representative of
Broker-Dealer. The Broker-Dealer represents that each registered
representative will hold all registrations and licenses required
by the NASD and any state or jurisdiction to sell the Contracts.
B. Sales Practices and Supervision. The Broker-Dealer agrees to use
its best efforts to lawfully solicit, offer and sell the Contracts
and further agrees to the following:
(i) The Broker-Dealer shall only use advertising material and
sales literature, including prospectuses, which have been
first approved by the Company and, if required, filed with
the NASD and any state or jurisdiction. The Broker-Dealer
agrees to discard immediately any out dated sales and
advertising material and prospectuses or any materials the
Company notifies the Broker-Dealer to discontinue using.
(ii) The Broker-Dealer shall establish and implement compliance
and supervisory procedures for the supervision of the sales
practices and conduct of its agents and representatives. The
Broker-Dealer shall submit to the Company, as reasonably
requested, periodic reports concerning the compliance by the
Broker-Dealer and its registered representatives with its
procedures and applicable laws and regulations, as they may
pertain to the Company's contracts. The Broker-Dealer agrees
to permit the Company to periodically audit its records with
respect to compliance upon reasonable notice.
(iii) The Broker-Dealer agrees that its registered representatives
will not make recommendations to a customer to invest in a
Contract in the absence of reasonable grounds to believe
that the Contract is suitable for the customer.
Determination of suitability shall be the sole
responsibility of the Broker-Dealer.
(iv) The Broker-Dealer agrees that neither it nor or any of
its affiliates will engage in any program or provide data to
any other person which will allow for the replacement of any
of the Company's business (or that of the Company's
affiliates).
(v) The Broker-Dealer and its employees, agents, or registered
representatives shall not, directly or indirectly, rebate or
offer to rebate all or part of its compensation on a
Contract issued or to be issued by the Company, nor offer
anything of value to a customer not specified in the
Contract, as an inducement to the customer to buy or retain
a Contract issued by the Company.
2
<PAGE>
C. Handling of Customer Payments. All payments for Contracts
collected by the Broker-Dealer shall be remitted promptly together
with such applications, forms and other required documentation to
the Company. Payments from customers shall be in accordance with
the procedures established by the Company from time to time. No
payment is deemed received by the Company until actually received
by the Company. The Broker-Dealer acknowledges that the Company
retains the unconditional right to reject, in whole or part, any
application for a Contract.
Upon the Company's acceptance of a Contract application
submitted by the Broker-Dealer, the Company shall mail the
appropriate documentation representing the Contract to the
Broker-Dealer, which shall make prompt delivery to the customer.
Notwithstanding this obligation of the Broker-Dealer, the Company
reserves the right to transmit such documentation directly to the
customer.
D. Independent Contractor. The Broker-Dealer agrees it is and shall
act as an independent contractor. Nothing in this Agreement shall
make the Broker-Dealer, or its employees, agents or registered
representatives, an employee of the Company. Neither the
Broker-Dealer, nor its employees, agents, or registered
representatives shall hold themselves out to be employees, agents
or registered representatives of the Company in any dealings with
the public.
E. Authority. The Broker-Dealer warrants and represents that it has
the authority to act on behalf of any and all subsidiaries, and is
hereby exercising such authority on behalf of such subsidiaries
with respect to the obligations set forth in this Agreement as
well as the transfer of customer payments and forms, and the
acceptance of any compensation paid under this Agreement.
F. Training. The Broker-Dealer shall be responsible for training its
registered representatives with regard to the Contracts as well as
the Company procedures before they are permitted to sell any
Contract. The Company will, at the request of the Broker-Dealer,
provide training to Broker-Dealer personnel. The Broker-Dealer
shall be responsible to pay all costs of training for its
registered representatives.
G. Use of Sales and Training Materials. The Broker-Dealer agrees that
any material that it develops, approves or uses for sales,
advertising, training, explanatory or other purposes in connection
with the Contracts, and that references the Aetna, the Company or
Company name or the Company's Contract will not be used without
the prior written consent of the Company.
H. Compliance with Laws and Regulations. The solicitation, offer and
sale of the Contracts by the Broker-Dealer and its registered
representatives shall be undertaken only in accordance with
applicable laws and regulations. No
3
<PAGE>
registered representative of the Broker-Dealer shall solicit,
offer or sell the Contracts until duly registered, licensed, or
appointed, as required by the NASD and any state or jurisdiction.
The Broker-Dealer understands and acknowledges that neither the
Broker-Dealer nor its registered representatives are authorized by
the Company to give any information or make any representation in
connection with the solicitation, offer or sale of the Contracts
other than as contained in the prospectus or sales or advertising
material authorized in writing by the Company.
I. Maintaining Records. The Broker-Dealer shall have the
responsibility for maintaining the records of those registered
representatives of the Broker-Dealer registered, licensed and
appointed and otherwise qualified to sell the Contracts. The
Broker-Dealer shall maintain such records as required by
applicable laws and regulations. The books, accounts and records
maintained by the Broker-Dealer under the terms of this Agreement
that relate to the sale of the Contracts, the Company, and/or the
Broker-Dealer shall be maintained so as to clearly and accurately
disclose the nature and details of the transactions covered by the
Agreement.
J. Proprietary Information. Any and all account records developed by
the Company or provided to the Company by the Broker-Dealer,
including customers files, sales aides, computer software,
customer names, addresses, telephone numbers and related
paperwork, literature, authorizations, manuals and supplies of
every kind and nature relating to the Contracts and the servicing
of the Contracts are and shall remain the property of the Company.
Any and all materials developed and provided by the Company shall
be returned to the Company (including all copies made by the
Broker-Dealer) upon termination of this Agreement. Any materials
developed by the Broker-Dealer in support of the marketing, sales,
advertising or training related to the Company or its Contracts
shall be destroyed upon the termination of the Agreement. The
Broker-Dealer shall keep confidential any information that is
covered by this Agreement, and shall only disclose such
information if authorized in writing by the Company or expressly
required by the laws or regulations of any jurisdiction or the
NASD or court order.
K. Marketing Changes. With respect to the Contracts covered by this
Agreement, as amended from time to time, the Broker-Dealer shall
notify the Company of any material change or intention to
materially change its marketing operations. Such notice shall be
given in the manner specified in Section 13 of this Agreement. All
Broker-Dealer marketing plans and methods for offering Contracts
are subject to periodic review by the Company, but not less
frequently than annually.
4
<PAGE>
3. Compensation
A. Payment Schedule. The Company agrees to pay compensation to
Broker-Dealer for the sale of each Contract lawfully sold by a
registered representative of the Broker-Dealer. If required by the
law of any state or jurisdiction, such compensation will be paid
to a Designee and/or a Nominee, as provided in Addendum A and/or
Addendum B (attached hereto and made part of this Agreement). The
amount of compensation shall be in accordance with the Schedules
attached hereto. Notwithstanding the foregoing, no compensation
shall be payable for any transaction not in compliance with all
applicable insurance and securities laws, rules and regulations at
the time of the solicitation, offer and sale of a Contract and
thereafter. Notwithstanding any provision in the attached
Schedules concerning chargebacks, if any Contract is tendered for
redemption or not taken in accordance with applicable regulatory
requirements, no compensation shall be paid.
Payment of compensation as described in the attached Schedules is
due when an application for a Contract is tendered to the Company.
The Broker-Dealer or, if applicable, the Designee and/or Nominee
may retain any compensation due it from amounts otherwise lawfully
due the Company. The Broker-Dealer, on its own behalf and on
behalf of any Designee and/or the Nominee, agrees to refund
immediately any compensation so retained with regard to a
particular Contract if the Company does not accept an application
for such Contract or the Contract is otherwise redeemed or not
taken as hereinbefore described. The Company reserves the right to
disallow or discontinue the practice of allowing the retain of
commissions. The Broker-Dealer shall be solely responsible for the
payment of any compensation of any kind to its registered
representatives.
B. Deductions by the Company. The Company reserves the right to
deduct any amount it determines is owed by the Broker-Dealer to
the Company or its affiliates, from any compensation due the
Broker-Dealer from the Company. This right shall apply, but is not
limited to the following: (i) advances to the Broker-Dealer; (ii)
compensation paid to the Broker-Dealer for payments by a customer
received by the Company and later returned or credited to such
customer for any reason; and (iii) any overpayment of compensation
to the Broker-Dealer. Any balance due the Company after such
deduction shall be a debt of the Broker-Dealer and will accrue
interest at eight percent (8%) per annum. The Company shall have
all rights of a creditor to collect amounts owed it by the
Broker-Dealer.
C. Payment Upon Termination. Upon the termination of this Agreement,
the Company will pay commissions to the Broker-Dealer in
accordance with the Company's established procedures on business
placed with the Company prior to the termination date of this
Agreement unless payment or receipt of renewal
5
<PAGE>
commissions would violate any laws, rules or regulations of any
jurisdiction or the NASD.
4. Complaints and Investigations
A. Cooperation. The Company and Broker-Dealer agree to cooperate
fully in any investigation or proceeding, the subject of which is
the Broker-Dealer, to the extent that such investigation or
proceeding concerns any matters related to this Agreement. Without
limiting the foregoing:
(i) The Company shall promptly notify the Broker-Dealer of
receipt of any customer complaint or notice of any inquiry,
investigation or proceeding concerning any matter related to
this Agreement.
(ii) The Broker-Dealer shall promptly notify the Company of
receipt of any customer complaint or notice of any inquiry,
investigation or proceeding concerning any matter relating
to this Agreement. The Broker-Dealer shall promptly notify
the Company of any NASD, federal or state inquiry,
investigation or proceeding, or litigation that has been
initiated against the Broker-Dealer.
B. Settlement by the Company. The Company reserves the right to
settle any claim or complaint made by a customer concerning any
conduct, act or omission by the Broker-Dealer or its registered
representatives. Provided there is agreement between the Company
and the Broker-Dealer regarding such settlement, the Broker-Dealer
shall reimburse the Company for the amount of any such settlement.
Any settlement payments agreed to by the Broker-Dealer shall be
reimbursed by the Broker-Dealer and will be a debt of the
Broker-Dealer as described in Section 3.B.
5. Indemnification
A. By the Company. The Company agrees to hold harmless and indemnify
the Broker-Dealer and its affiliates against any and all claims,
liabilities and expenses which any such party may incur from
liabilities (including reasonable attorney fees and related
expenses) arising from any acts or omissions of the Company and
its employees and other associated persons.
B. By the Broker-Dealer. The Broker-Dealer agrees to hold harmless
and indemnify Company and its affiliates against any and all
claims, liabilities and expenses which any such party may incur
from liabilities (including reasonable attorney fees and related
expense) arising from the acts or omissions of the Broker-Dealer,
its employees, registered representatives and other associated
persons (including any Designee or Nominee identified in any
Addendum to this Agreement).
6
<PAGE>
7
<PAGE>
C. Notice of Action. After receipt by an indemnified party of notice
of the commencement of any action with respect to which a claim
will be made against an indemnifying party, such indemnified party
shall notify the indemnifying party promptly in writing of the
commencement of the action. The failure to so notify the
indemnifying party shall not relieve the indemnifying party from
any liability which it may otherwise have to any indemnified party
except and to the extent the indemnifying party is prejudiced
thereby. In any such action where the indemnified party has given
the notice described in this Section 5, the indemnifying party
shall be entitled to participate in and, to the extent that it
shall wish, jointly with any other indemnifying party similarly
notified, to assume defense of the action. After notice to such
indemnified party that the indemnifying party has elected to
assume defense of the action, the indemnifying party shall not be
liable to such indemnified party for any legal or other expenses
subsequently incurred by such indemnified party in connection with
the defense other than reasonable costs of investigation.
6. Assignability
This Agreement shall not be assigned by either party without the written
consent of the other party.
7. Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the State of Connecticut.
8. Revocation of Prior Agreements
This Agreement and any subsequent written amendments constitute the
entire agreement between the Company and the Broker-Dealer. This
Agreement terminates and supersedes all previous contracts, agreements or
arrangements made between the parties in connection with the Contracts
described in this Agreement.
9. Severability
The provisions of this Agreement are severable, and if any provision of
this Agreement or any amendment to it is found to be invalid, such
provision shall not affect any other provision of the Agreement that can
be given effect without the invalid provision.
10. Amendments
A. The Company reserves the right to amend this Agreement or any
Schedule attached hereto at any time. An amendment to the
Agreement shall be
8
<PAGE>
effective thirty (30) days from the date notice is given the
Broker-Dealer. Amendments to Schedules shall be effective without
approval of the Broker-Dealer from the date notice is given to the
Broker-Dealer that a new or amended Schedule has been issued by
the Company.
B. No amendment made by the Broker-Dealer shall be effective unless
it is agreed to in writing by the Company.
11. Waiver
Failure of either party to require performance of any provision of this
Agreement shall not constitute a waiver of that party's right to enforce
such provision at a later time. Waiver of any breach of any provision
shall not constitute a waiver of any succeeding breach.
12. Termination
A. This Agreement shall terminate:
(i) If the Broker-Dealer is dissolved, liquidated, or otherwise
ceases business operations;
(ii) If the Broker-Dealer fails, in the Company's sole judgment,
to comply with any of its obligations under this Agreement;
(iii) If the Company fails, in the Broker-Dealer's sole judgment,
to comply with any of its obligations under this Agreement;
(iv) If any state or jurisdiction revokes, suspends or otherwise
terminates the insurance license or appointment to represent
the Company of the Broker-Dealer or, where applicable, the
Broker-Dealer's Designee and/or Nominee (provided that no
substitute Designee and/or Nominee satisfactory to the
Company is named by the Broker-Dealer);
(v) If the Broker-Dealer's SEC, state or NASD registration or
membership is suspended, terminated or otherwise restricted
so as to render the Broker-Dealer, in the Company's opinion,
unable to perform its obligations pursuant to this
Agreement; or
(vi) If the Broker-Dealer refuses to accept an amendment made in
accordance with Section 10.
B. The termination date of this Agreement for any of the
circumstances set forth in Section 12.A shall be the date of
occurrence.
9
<PAGE>
C. Notwithstanding the provisions of Section 12.A., the Company and
the Broker-Dealer shall have the right to terminate this Agreement
for any reason. Termination in accordance with this Section 12.C.
shall be effective sixty (60) days from the date notice is given
by the terminating party.
D. Upon termination of this Agreement, all authorizations, rights and
obligations shall cease except the provisions set forth in
Sections 3.B, 3.C, 4, and 5.
13. Arbitration
Any claim or controversy arising out of or relating to this Agreement
shall be subject to arbitration according to the commercial arbitration
rules of the American Arbitration Association then in effect. There shall
be three arbitrators. Each party shall select one arbitrator and the two
arbitrators selected shall mutually agree upon a third arbitrator. Cost
of the arbitration may be awarded in the discretion of the arbitrator(s).
The award of the arbitrator or arbitrators shall be final and binding,
and judgment on the award may be entered by any court having
jurisdiction.
14. Notice
Any notice required by the terms of this Agreement or any attachment
hereto, shall be valid if in writing and hand delivered, or sent by
United States mail postage prepaid, overnight delivery service or
facsimile transmission to the other party at the address provided below
such party's signature hereto.
15. Force Majeure
No party to this Agreement shall be responsible to the other for delays
or errors in its performance or other breach under this Agreement
occurring solely by reason of circumstances beyond its control, including
acts of civil or military authority, national emergencies, fire, major
mechanical breakdown, labor disputes, flood or catastrophe, acts of God,
insurrection, war, riots, delays of supplier, or failure of
transportation, communication or power supply.
16. Headings
The headings in this Agreement are for reference purposes only and shall
not be deemed part of this Agreement or affect its meaning or
interpretation.
17. Counterparts
This Agreement may be executed in any number of counterparts, all of
which, taken together, shall constitute one agreement, and any party
hereto may execute this Agreement by signing any such counterpart.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
AETNA LIFE INSURANCE AND ANNUITY COMPANY
By:_____________________________ Date:__________________
Name:___________________________
Title:__________________________
Address: 151 Farmington Avenue
Hartford, CT 06156
(860) 275-3333 (Facsimile)
_________________________________________ [BROKER-DEALER]
By:______________________________ Date:__________________
Name:____________________________
Title:___________________________
Address:
11
----------------------------------------------------
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 to
request information about this Contract.
Aetna Life Insurance and Annuity Company, a stock company, herein called Aetna,
agrees to pay the benefits stated in this Contract.
Specifications
- --------------------------------------------------------------------------------
Plan
SPECIMEN
- --------------------------------------------------------------------------------
Type of Plan
SPECIMEN
- --------------------------------------------------------------------------------
Contract Holder
SPECIMEN
- --------------------------------------------------------------------------------
Contract No.
SPECIMEN
- --------------------------------------------------------------------------------
Contract Effective Date
SPECIMEN
- --------------------------------------------------------------------------------
This Contract is delivered in and is subject to the laws of that jurisdiction.
The variable features of the Group Contract are described in parts III, IV and
V.
Right to Cancel
- --------------------------------------------------------------------------------
The Contract Holder may cancel this Contract within 10 days by returning it to
the agent from whom it was purchased, or to Aetna at the address shown above.
Within seven days of receiving the Contract at its home office, Aetna will
return the amount of Certificate Holder Purchase Payment(s) received, plus any
increase, or minus any decrease, on the amount, if any, allocated to the
Separate Account Subaccount(s).
This page and the pages that follow constitute the entire Contract.
Signed at the home office on the Contract Effective Date.
President Secretary
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. AMOUNTS ALLOCATED TO THE GUARANTEED ACCOUNT, IF WITHDRAWN
BEFORE THE GUARANTEED TERM MATURITY DATE, MAY BE SUBJECT TO A MARKET VALUE
ADJUSTMENT. THE MARKET VALUE ADJUSTMENT MAY RESULT IN AN INCREASE OR A DECREASE
IN THE ACCOUNT VALUE.
GM-VA-98
<PAGE>
Specifications
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Guaranteed There is a minimum guaranteed rate for Purchase Payment(s) held in the Guaranteed Account. (See Schedule -
Rate Accumulation Period.)
- -----------------------------------------------------------------------------------------------------------------------------------
Deductions from the There will be deductions for mortality and expense risk as well as administrative charges. (See Schedule -
Separate Account Accumulation Period and Schedule - Annuity Period.)
- -----------------------------------------------------------------------------------------------------------------------------------
Deduction from Purchase Purchase Payment(s) may be subject to a deduction for premium taxes. (See Section III - Purchase Payment.)
Payment(s)
- -----------------------------------------------------------------------------------------------------------------------------------
Deferred Sales Charge There may be a charge deducted upon withdrawal. (See Schedule - Accumulation Period.)
</TABLE>
This Contract is a legal contract and constitutes the entire legal relationship
between Aetna and the Contract Holder.
READ THIS CONTRACT CAREFULLY. This Contract sets forth, in detail, all of the
rights and obligations of both you and Aetna. THEREFORE, IT IS IMPORTANT THAT
YOU READ THIS CONTRACT CAREFULLY.
<PAGE>
Schedule - Accumulation Period
Option Package
- --------------------------------------------------------------------------------
Option Package Selected - A different Schedule - Accumulation Period may apply
to each Account depending upon the Option Package selected. (See Section IV -
OPTION PACKAGES.)
Option Package I was selected.
Schedule Effective Date
June 1, 1998
Separate Account
- --------------------------------------------------------------------------------
Separate Account
Variable Annuity Account B
Charges to Separate Account
A daily charge is deducted from any portion of the Account Value
allocated to the Separate Account. The deduction is the daily
equivalent of the annual effective percentage shown in the
following chart:
<TABLE>
<S> <C>
Administrative Charge 0.15%
Mortality and Expense Risk Charge 0.80%
-----
Total Separate Account Charges 0.95%
</TABLE>
Guaranteed Account
- --------------------------------------------------------------------------------
Minimum Guaranteed Rate
3.0% (effective annual rate of return)
Separate Account and Guaranteed Account
- --------------------------------------------------------------------------------
Transfers
An unlimited number of Transfers are allowed during the
Accumulation Period. Aetna allows 12 free Transfers in any Account
Year. Thereafter, Aetna reserves the right to charge $10 for each
subsequent Transfer.
Maintenance Fee
The annual Maintenance Fee is $30. If the Account Value is $50,000
or more on the date the Maintenance Fee is to be deducted, the
Maintenance Fee is $0.
GM-VA-98 Page 3
<PAGE>
Schedule - Accumulation Period (continued)
Separate Account and Guaranteed Account
- --------------------------------------------------------------------------------
Deferred Sales Charge
For each withdrawal, the Deferred Sales Charge will be determined
as follows:
<TABLE>
<CAPTION>
Deferred Sales Charge
Length of Time from Receipt of (as percentage of
Purchase Payment (Years) Purchase Payment)
-----------------------------------------------------------------------
<S> <C>
Less than 2 years 7%
More than 2 but less than 4 years 6%
More than 4 but less than 5 years 5%
More than 5 but less than 6 years 4%
More than 6 but less than 7 years 3%
7 years or more 0%
</TABLE>
See Section I - DEFINITIONS for explanations.
GM-VA-98 Page 4
<PAGE>
Schedule - Annuity Period
Separate Account - Variable Annuity Payment
- --------------------------------------------------------------------------------
Charges to Separate Account
A daily charge is deducted at an annual effective rate of l.25%
for mortality and expense risks. The administrative charge is
established upon election of an Annuity Payout Option. This charge
will not exceed 0.25%.
Assumed Interest Rate (AIR)
If a variable Annuity Payment is chosen, an AIR of 5.0% may be
elected. If 5.0% is not elected, Aetna will use an AIR of 3.5%.
The AIR factor for 3.5% per year is 0.9999058.
The AIR factor for 5.0% per year is 0.9998663.
If the portion of a variable Annuity Payment for any Subaccount is
not to decrease, the annuity return factor under the Separate
Account for that Subaccount must be:
(a) 4.75% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity Payments commence if an AIR of 3.5% is chosen; or
(b) 6.25% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity Payments commence, if an AIR of 5% is chosen.
Transfers
When a variable Annuity Payment has been elected, four free
Transfers are allowed each Account Year among the Subaccounts
available during the Annuity Period. Thereafter, Aetna reserves
the right to charge $10 for each subsequent Transfer.
General Account - Fixed Annuity Payment
- --------------------------------------------------------------------------------
Minimum Guaranteed Interest Rate
3.0% (effective annual rate of return)
See Section I - DEFINITIONS for explanations.
GM-VA-98 Page 5
<PAGE>
Schedule - Accumulation Period
Option Package
- --------------------------------------------------------------------------------
Option Package Selected - A different Schedule - Accumulation Period may apply
to each Account depending upon the Option Package selected. (See Section IV -
OPTION PACKAGES.)
Option Package I was selected.
Schedule Effective Date
June 1, 1998
Separate Account
- --------------------------------------------------------------------------------
Separate Account
Variable Annuity Account B
Charges to Separate Account
A daily charge is deducted from any portion of the Account Value
allocated to the Separate Account. The deduction is the daily
equivalent of the annual effective percentage shown in the
following chart:
Administrative Charge 0.15%
Mortality and Expense Risk Charge 0.80%
-----
Total Separate Account Charges 0.95%
Guaranteed Account
- --------------------------------------------------------------------------------
Minimum Guaranteed Rate
3.0% (effective annual rate of return)
Separate Account and Guaranteed Account
- --------------------------------------------------------------------------------
Transfers
An unlimited number of Transfers are allowed during the
Accumulation Period. Aetna allows 12 free Transfers in any Account
Year. Thereafter, Aetna reserves the right to charge $10 for each
subsequent Transfer.
Maintenance Fee
The annual Maintenance Fee is $30. If the Account Value is $50,000
or more on the date the Maintenance Fee is to be deducted, the
Maintenance Fee is $0.
GM-VA-98 Page 3
<PAGE>
Schedule - Accumulation Period (continued)
Separate Account and Guaranteed Account
- --------------------------------------------------------------------------------
Deferred Sales Charge
For each withdrawal, the Deferred Sales Charge will be determined
as follows:
<TABLE>
<CAPTION>
Deferred Sales Charge
Length of Time from Receipt of (as percentage of
Purchase Payment (Years) Purchase Payment)
------------------------------------------------------------------
<S> <C>
Less than 1 year 3%
More than 1 but less than 2 years 2%
More than 2 but less than 3 years 1%
More than 3 years 0%
</TABLE>
See Section I - DEFINITIONS for explanations.
GM-VA-98 Page 4
<PAGE>
Schedule - Annuity Period
Separate Account - Variable Annuity Payment
- --------------------------------------------------------------------------------
Charges to Separate Account
A daily charge is deducted at an annual effective rate of l.25%
for mortality and expense risks. The administrative charge is
established upon election of an Annuity Payout Option. This charge
will not exceed 0.25%.
Assumed Interest Rate (AIR)
If a variable Annuity Payment is chosen, an AIR of 5.0% may be
elected. If 5.0% is not elected, Aetna will use an AIR of 3.5%.
The AIR factor for 3.5% per year is 0.9999058.
The AIR factor for 5.0% per year is 0.9998663.
If the portion of a variable Annuity Payment for any Subaccount is
not to decrease, the annuity return factor under the Separate
Account for that Subaccount must be:
(a) 4.75% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity Payments commence if an AIR of 3.5% is chosen; or
(b) 6.25% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity Payments commence, if an AIR of 5% is chosen.
Transfers
When a variable Annuity Payment has been elected, four free
Transfers are allowed each Account Year among the Subaccounts
available during the Annuity Period. Thereafter, Aetna reserves
the right to charge $10 for each subsequent Transfer.
General Account - Fixed Annuity Payment
- --------------------------------------------------------------------------------
Minimum Guaranteed Interest Rate
3.0% (effective annual rate of return)
See Section I - DEFINITIONS for explanations.
GM-VA-98 Page 5
<PAGE>
Schedule- Accumulation Period
Option Package
- --------------------------------------------------------------------------------
Option Package Selected - A different Schedule - Accumulation Period may apply
to each Account depending upon the Option Package selected. (See Section IV -
OPTION PACKAGES.)
Option Package I was selected.
Schedule Effective Date
June 1, 1998
Separate Account
- --------------------------------------------------------------------------------
Separate Account
Variable Annuity Account B
Charges to Separate Account
A daily charge is deducted from any portion of the Account Value
allocated to the Separate Account. The deduction is the daily
equivalent of the annual effective percentage shown in the
following chart:
Administrative Charge 0.15%
Mortality and Expense Risk Charge 0.80%
-----
Total Separate Account Charges 0.95%
Guaranteed Account
- --------------------------------------------------------------------------------
Minimum Guaranteed Rate
3.0% (effective annual rate of return)
Separate Account and Guaranteed Account
- --------------------------------------------------------------------------------
Transfers
An unlimited number of Transfers are allowed during the
Accumulation Period. Aetna allows 12 free Transfers in any Account
Year. Thereafter, Aetna reserves the right to charge $10 for each
subsequent Transfer.
Maintenance Fee
The annual Maintenance Fee is $30. If the Account Value is $50,000
or more on the date the Maintenance Fee is to be deducted, the
Maintenance Fee is $0.
GM-VA-98 Page 3
<PAGE>
Schedule - Accumulation Period (continued)
Separate Account and Guaranteed Account
- --------------------------------------------------------------------------------
Deferred Sales Charge
For each withdrawal, the Deferred Sales Charge will be determined
as follows:
<TABLE>
<CAPTION>
Deferred Sales Charge
Length of Time from Account Effective Date (as percentage of
Purchase Payment)
------------------------------------------------------------------
<S> <C>
Less than 1 year 5%
1 year but less than 2 years 4%
2 years but less than 3 years 3%
3 years but less than 4 years 2%
4 years but less than 5 years 1%
5 years or more 0%
</TABLE>
See Section I - DEFINITIONS for explanations.
GM-VA-98 Page 4
<PAGE>
Schedule - Annuity Period
Separate Account - Variable Annuity Payment
- --------------------------------------------------------------------------------
Charges to Separate Account
A daily charge is deducted at an annual effective rate of l.25%
for mortality and expense risks. The administrative charge is
established upon election of an Annuity Payout Option. This charge
will not exceed 0.25%.
Assumed Interest Rate (AIR)
If a variable Annuity Payment is chosen, an AIR of 5.0% may be
elected. If 5.0% is not elected, Aetna will use an AIR of 3.5%.
The AIR factor for 3.5% per year is 0.9999058.
The AIR factor for 5.0% per year is 0.9998663.
If the portion of a variable Annuity Payment for any Subaccount is
not to decrease, the annuity return factor under the Separate
Account for that Subaccount must be:
(a) 4.75% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity Payments commence if an AIR of 3.5% is chosen; or
(b) 6.25% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity Payments commence, if an AIR of 5% is chosen.
Transfers
When a variable Annuity Payment has been elected, four free
Transfers are allowed each Account Year among the Subaccounts
available during the Annuity Period. Thereafter, Aetna reserves
the right to charge $10 for each subsequent Transfer.
General Account - Fixed Annuity Payment
- --------------------------------------------------------------------------------
Minimum Guaranteed Interest Rate
3.0% (effective annual rate of return)
See Section I - DEFINITIONS for explanations.
GM-VA-98 Page 5
<PAGE>
Schedule - Accumulation Period
Option Package
- --------------------------------------------------------------------------------
Option Package Selected - A different Schedule - Accumulation Period may apply
to each Account depending upon the Option Package selected. (See Section IV -
OPTION PACKAGES.)
Option Package II was selected.
Schedule Effective Date
June 1, 1998
Separate Account
- --------------------------------------------------------------------------------
Separate Account
Variable Annuity Account B
Charges to Separate Account
A daily charge is deducted from any portion of the Account Value
allocated to the Separate Account. The deduction is the daily
equivalent of the annual effective percentage shown in the
following chart:
<TABLE>
<S> <C>
Administrative Charge 0.15%
Mortality and Expense Risk Charge 1.10%
-----
Total Separate Account Charges 1.25%
</TABLE>
Guaranteed Account
- --------------------------------------------------------------------------------
Minimum Guaranteed Rate
3.0% (effective annual rate of return)
Separate Account and Guaranteed Account
- --------------------------------------------------------------------------------
Transfers
An unlimited number of Transfers are allowed during the
Accumulation Period. Aetna allows 12 free Transfers in any Account
Year. Thereafter, Aetna reserves the right to charge $10 for each
subsequent Transfer.
Maintenance Fee
The annual Maintenance Fee is $30. If the Account Value is $50,000
or more on the date the Maintenance Fee is to be deducted, the
Maintenance Fee is $0.
GM-VA-98 Page 3
<PAGE>
Schedule - Accumulation Period (continued)
Separate Account and Guaranteed Account
- --------------------------------------------------------------------------------
Deferred Sales Charge
For each withdrawal, the Deferred Sales Charge will be determined
as follows:
<TABLE>
<CAPTION>
Deferred Sales Charge
Length of Time from Receipt of (as percentage of
Purchase Payment (Years) Purchase Payment)
------------------------------------------------------------------
<S> <C>
Less than 2 years 7%
More than 2 but less than 4 years 6%
More than 4 but less than 5 years 5%
More than 5 but less than 6 years 4%
More than 6 but less than 7 years 3%
7 years or more 0%
</TABLE>
See Section I - DEFINITIONS for explanations.
GM-VA-98 Page 4
<PAGE>
Schedule - Annuity Period
Separate Account - Variable Annuity Payment
- --------------------------------------------------------------------------------
Charges to Separate Account
A daily charge is deducted at an annual effective rate of l.25%
for mortality and expense risks. The administrative charge is
established upon election of an Annuity Payout Option. This charge
will not exceed 0.25%.
Assumed Interest Rate (AIR)
If a variable Annuity Payment is chosen, an AIR of 5.0% may be
elected. If 5.0% is not elected, Aetna will use an AIR of 3.5%.
The AIR factor for 3.5% per year is 0.9999058.
The AIR factor for 5.0% per year is 0.9998663.
If the portion of a variable Annuity Payment for any Subaccount is
not to decrease, the annuity return factor under the Separate
Account for that Subaccount must be:
(a) 4.75% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity Payments commence if an AIR of 3.5% is chosen; or
(b) 6.25% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity Payments commence, if an AIR of 5% is chosen.
Transfers
When a variable Annuity Payment has been elected, four free
Transfers are allowed each Account Year among the Subaccounts
available during the Annuity Period. Thereafter, Aetna reserves
the right to charge $10 for each subsequent Transfer.
General Account - Fixed Annuity Payment
- --------------------------------------------------------------------------------
Minimum Guaranteed Interest Rate
3.0% (effective annual rate of return)
See Section I - DEFINITIONS for explanations.
GM-VA-98 Page 5
<PAGE>
Schedule - Accumulation Period
Option Package
- --------------------------------------------------------------------------------
Option Package Selected - A different Schedule - Accumulation Period may apply
to each Account depending upon the Option Package selected. (See Section IV -
OPTION PACKAGES.)
Option Package II was selected.
Schedule Effective Date
June 1, 1998
Separate Account
- --------------------------------------------------------------------------------
Separate Account
Variable Annuity Account B
Charges to Separate Account
A daily charge is deducted from any portion of the Account Value
allocated to the Separate Account. The deduction is the daily
equivalent of the annual effective percentage shown in the
following chart:
<TABLE>
<S> <C>
Administrative Charge 0.15%
Mortality and Expense Risk Charge 1.10%
-----
Total Separate Account Charges 1.25%
</TABLE>
Guaranteed Account
- --------------------------------------------------------------------------------
Minimum Guaranteed Rate
3.0% (effective annual rate of return)
Separate Account and Guaranteed Account
- --------------------------------------------------------------------------------
Transfers
An unlimited number of Transfers are allowed during the
Accumulation Period. Aetna allows 12 free Transfers in any Account
Year. Thereafter, Aetna reserves the right to charge $10 for each
subsequent Transfer.
Maintenance Fee
The annual Maintenance Fee is $30. If the Account Value is $50,000
or more on the date the Maintenance Fee is to be deducted, the
Maintenance Fee is $0.
GM-VA-98 Page 3
<PAGE>
Schedule - Accumulation Period (continued)
Separate Account and Guaranteed Account
- --------------------------------------------------------------------------------
Deferred Sales Charge
For each withdrawal, the Deferred Sales Charge will be determined
as follows:
<TABLE>
<CAPTION>
Deferred Sales Charge
Length of Time from Receipt of (as percentage of
Purchase Payment (Years) Purchase Payment)
------------------------------------------------------------------
<S> <C>
Less than 1 year 3%
More than 1 but less than 2 years 2%
More than 2 but less than 3 years 1%
More than 3 years 0%
</TABLE>
See Section I - DEFINITIONS for explanations.
GM-VA-98 Page 4
<PAGE>
Schedule - Annuity Period
Separate Account - Variable Annuity Payment
- --------------------------------------------------------------------------------
Charges to Separate Account
A daily charge is deducted at an annual effective rate of l.25%
for mortality and expense risks. The administrative charge is
established upon election of an Annuity Payout Option. This charge
will not exceed 0.25%.
Assumed Interest Rate (AIR)
If a variable Annuity Payment is chosen, an AIR of 5.0% may be
elected. If 5.0% is not elected, Aetna will use an AIR of 3.5%.
The AIR factor for 3.5% per year is 0.9999058.
The AIR factor for 5.0% per year is 0.9998663.
If the portion of a variable Annuity Payment for any Subaccount is
not to decrease, the annuity return factor under the Separate
Account for that Subaccount must be:
(a) 4.75% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity Payments commence if an AIR of 3.5% is chosen; or
(b) 6.25% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity Payments commence, if an AIR of 5% is chosen.
Transfers
When a variable Annuity Payment has been elected, four free
Transfers are allowed each Account Year among the Subaccounts
available during the Annuity Period. Thereafter, Aetna reserves
the right to charge $10 for each subsequent Transfer.
General Account - Fixed Annuity Payment
- --------------------------------------------------------------------------------
Minimum Guaranteed Interest Rate
3.0% (effective annual rate of return)
See Section I - DEFINITIONS for explanations.
GM-VA-98 Page 5
<PAGE>
Schedule- Accumulation Period
Option Package
- --------------------------------------------------------------------------------
Option Package Selected - A different Schedule - Accumulation Period may apply
to each Account depending upon the Option Package selected. (See Section IV -
OPTION PACKAGES.)
Option Package II was selected.
Schedule Effective Date
June 1, 1998
Separate Account
- --------------------------------------------------------------------------------
Separate Account
Variable Annuity Account B
Charges to Separate Account
A daily charge is deducted from any portion of the Account Value
allocated to the Separate Account. The deduction is the daily
equivalent of the annual effective percentage shown in the
following chart:
<TABLE>
<S> <C>
Administrative Charge 0.15%
Mortality and Expense Risk Charge 1.10%
-----
Total Separate Account Charges 1.25%
</TABLE>
Guaranteed Account
- --------------------------------------------------------------------------------
Minimum Guaranteed Rate
3.0% (effective annual rate of return)
Separate Account and Guaranteed Account
- --------------------------------------------------------------------------------
Transfers
An unlimited number of Transfers are allowed during the
Accumulation Period. Aetna allows 12 free Transfers in any Account
Year. Thereafter, Aetna reserves the right to charge $10 for each
subsequent Transfer.
Maintenance Fee
The annual Maintenance Fee is $30. If the Account Value is $50,000
or more on the date the Maintenance Fee is to be deducted, the
Maintenance Fee is $0.
GM-VA-98 Page 3
<PAGE>
Schedule - Accumulation Period (continued)
Separate Account and Guaranteed Account
- --------------------------------------------------------------------------------
Deferred Sales Charge
For each withdrawal, the Deferred Sales Charge will be determined
as follows:
<TABLE>
<CAPTION>
Deferred Sales Charge
Length of Time from Account Effective Date (as percentage of
Purchase Payment)
------------------------------------------------------------------
<S> <C>
Less than 1 year 5%
1 year but less than 2 years 4%
2 years but less than 3 years 3%
3 years but less than 4 years 2%
4 years but less than 5 years 1%
5 years or more 0%
</TABLE>
See Section I - DEFINITIONS for explanations.
GM-VA-98 Page 4
<PAGE>
Schedule - Annuity Period
Separate Account - Variable Annuity Payment
- --------------------------------------------------------------------------------
Charges to Separate Account
A daily charge is deducted at an annual effective rate of l.25%
for mortality and expense risks. The administrative charge is
established upon election of an Annuity Payout Option. This charge
will not exceed 0.25%.
Assumed Interest Rate (AIR)
If a variable Annuity Payment is chosen, an AIR of 5.0% may be
elected. If 5.0% is not elected, Aetna will use an AIR of 3.5%.
The AIR factor for 3.5% per year is 0.9999058.
The AIR factor for 5.0% per year is 0.9998663.
If the portion of a variable Annuity Payment for any Subaccount is
not to decrease, the annuity return factor under the Separate
Account for that Subaccount must be:
(a) 4.75% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity Payments commence if an AIR of 3.5% is chosen; or
(b) 6.25% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity Payments commence, if an AIR of 5% is chosen.
Transfers
When a variable Annuity Payment has been elected, four free
Transfers are allowed each Account Year among the Subaccounts
available during the Annuity Period. Thereafter, Aetna reserves
the right to charge $10 for each subsequent Transfer.
General Account - Fixed Annuity Payment
- --------------------------------------------------------------------------------
Minimum Guaranteed Interest Rate
3.0% (effective annual rate of return)
See Section I - DEFINITIONS for explanations.
GM-VA-98 Page 5
<PAGE>
Schedule - Accumulation Period
Option Package
- --------------------------------------------------------------------------------
Option Package Selected - A different Schedule - Accumulation Period may apply
to each Account depending upon the Option Package selected. (See Section IV -
OPTION PACKAGES.)
Option Package III was selected.
Schedule Effective Date
June 1, 1998
Separate Account
- --------------------------------------------------------------------------------
Separate Account
Variable Annuity Account B
Charges to Separate Account
A daily charge is deducted from any portion of the Account Value
allocated to the Separate Account. The deduction is the daily
equivalent of the annual effective percentage shown in the
following chart:
<TABLE>
<S> <C>
Administrative Charge 0.15%
Mortality and Expense Risk Charge 1.25%
-----
Total Separate Account Charges 1.40%
</TABLE>
Guaranteed Account
- --------------------------------------------------------------------------------
Minimum Guaranteed Rate
3.0% (effective annual rate of return)
Separate Account and Guaranteed Account
- --------------------------------------------------------------------------------
Transfers
An unlimited number of Transfers are allowed during the
Accumulation Period. Aetna allows 12 free Transfers in any Account
Year. Thereafter, Aetna reserves the right to charge $10 for each
subsequent Transfer.
Maintenance Fee
The annual Maintenance Fee is $30. If the Account Value is $50,000
or more on the date the Maintenance Fee is to be deducted, the
Maintenance Fee is $0.
GM-VA-98 Page 3
<PAGE>
Schedule - Accumulation Period (continued)
Separate Account and Guaranteed Account
- --------------------------------------------------------------------------------
Deferred Sales Charge
For each withdrawal, the Deferred Sales Charge will be determined
as follows:
<TABLE>
<CAPTION>
Deferred Sales Charge
Length of Time from Receipt of (as percentage of
Purchase Payment (Years) Purchase Payment)
------------------------------------------------------------------
<S> <C>
Less than 2 years 7%
More than 2 but less than 4 years 6%
More than 4 but less than 5 years 5%
More than 5 but less than 6 years 4%
More than 6 but less than 7 years 3%
7 years or more 0%
</TABLE>
See Section I - DEFINITIONS for explanations.
GM-VA-98 Page 4
<PAGE>
Schedule - Annuity Period
Separate Account - Variable Annuity Payment
- --------------------------------------------------------------------------------
Charges to Separate Account
A daily charge is deducted at an annual effective rate of l.25%
for mortality and expense risks. The administrative charge is
established upon election of an Annuity Payout Option. This charge
will not exceed 0.25%.
Assumed Interest Rate (AIR)
If a variable Annuity Payment is chosen, an AIR of 5.0% may be
elected. If 5.0% is not elected, Aetna will use an AIR of 3.5%.
The AIR factor for 3.5% per year is 0.9999058.
The AIR factor for 5.0% per year is 0.9998663.
If the portion of a variable Annuity Payment for any Subaccount is
not to decrease, the annuity return factor under the Separate
Account for that Subaccount must be:
(a) 4.75% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity Payments commence if an AIR of 3.5% is chosen; or
(b) 6.25% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity Payments commence, if an AIR of 5% is chosen.
Transfers
When a variable Annuity Payment has been elected, four free
Transfers are allowed each Account Year among the Subaccounts
available during the Annuity Period. Thereafter, Aetna reserves
the right to charge $10 for each subsequent Transfer.
General Account - Fixed Annuity Payment
- --------------------------------------------------------------------------------
Minimum Guaranteed Interest Rate
3.0% (effective annual rate of return)
See Section I - DEFINITIONS for explanations.
GM-VA-98 Page 5
<PAGE>
Schedule - Accumulation Period
Option Package
- --------------------------------------------------------------------------------
Option Package Selected - A different Schedule - Accumulation Period may apply
to each Account depending upon the Option Package selected. (See Section IV -
OPTION PACKAGES.)
Option Package III was selected.
Schedule Effective Date
June 1, 1998
Separate Account
- --------------------------------------------------------------------------------
Separate Account
Variable Annuity Account B
Charges to Separate Account
A daily charge is deducted from any portion of the Account Value
allocated to the Separate Account. The deduction is the daily
equivalent of the annual effective percentage shown in the
following chart:
<TABLE>
<S> <C>
Administrative Charge 0.15%
Mortality and Expense Risk Charge 1.25%
-----
Total Separate Account Charges 1.40%
</TABLE>
Guaranteed Account
- --------------------------------------------------------------------------------
Minimum Guaranteed Rate
3.0% (effective annual rate of return)
Separate Account and Guaranteed Account
- --------------------------------------------------------------------------------
Transfers
An unlimited number of Transfers are allowed during the
Accumulation Period. Aetna allows 12 free Transfers in any Account
Year. Thereafter, Aetna reserves the right to charge $10 for each
subsequent Transfer.
Maintenance Fee
The annual Maintenance Fee is $30. If the Account Value is $50,000
or more on the date the Maintenance Fee is to be deducted, the
Maintenance Fee is $0.
GM-VA-98 Page 3
<PAGE>
Schedule - Accumulation Period (continued)
Separate Account and Guaranteed Account
- --------------------------------------------------------------------------------
Deferred Sales Charge
For each withdrawal, the Deferred Sales Charge will be determined
as follows:
<TABLE>
<CAPTION>
Deferred Sales Charge
Length of Time from Receipt of (as percentage of
Purchase Payment (Years) Purchase Payment)
------------------------------------------------------------------
<S> <C>
Less than 1 year 3%
More than 1 but less than 2 years 2%
More than 2 but less than 3 years 1%
More than 3 years 0%
</TABLE>
See Section I - DEFINITIONS for explanations.
GM-VA-98 Page 4
<PAGE>
Schedule - Annuity Period
Separate Account - Variable Annuity Payment
- --------------------------------------------------------------------------------
Charges to Separate Account
A daily charge is deducted at an annual effective rate of l.25%
for mortality and expense risks. The administrative charge is
established upon election of an Annuity Payout Option. This charge
will not exceed 0.25%.
Assumed Interest Rate (AIR)
If a variable Annuity Payment is chosen, an AIR of 5.0% may be
elected. If 5.0% is not elected, Aetna will use an
AIR of 3.5%.
The AIR factor for 3.5% per year is 0.9999058.
The AIR factor for 5.0% per year is 0.9998663.
If the portion of a variable Annuity Payment for any Subaccount is
not to decrease, the annuity return factor under the Separate
Account for that Subaccount must be:
(a) 4.75% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity Payments commence if an AIR of 3.5% is chosen; or
(b) 6.25% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity Payments commence, if an AIR of 5% is chosen.
Transfers
When a variable Annuity Payment has been elected, four free
Transfers are allowed each Account Year among the Subaccounts
available during the Annuity Period. Thereafter, Aetna reserves
the right to charge $10 for each subsequent Transfer.
General Account - Fixed Annuity Payment
- --------------------------------------------------------------------------------
Minimum Guaranteed Interest Rate
3.0% (effective annual rate of return)
See Section I - DEFINITIONS for explanations.
GM-VA-98 Page 5
<PAGE>
Schedule- Accumulation Period
Option Package
- --------------------------------------------------------------------------------
Option Package Selected - A different Schedule - Accumulation Period may apply
to each Account depending upon the Option Package selected. (See Section IV -
OPTION PACKAGES.)
Option Package III was selected.
Schedule Effective Date
June 1, 1998
Separate Account
- --------------------------------------------------------------------------------
Separate Account
Variable Annuity Account B
Charges to Separate Account
A daily charge is deducted from any portion of the Account Value
allocated to the Separate Account. The deduction is the daily
equivalent of the annual effective percentage shown in the
following chart:
<TABLE>
<S> <C>
Administrative Charge 0.15%
Mortality and Expense Risk Charge 1.25%
-----
Total Separate Account Charges 1.40%
</TABLE>
Guaranteed Account
- --------------------------------------------------------------------------------
Minimum Guaranteed Rate
3.0% (effective annual rate of return)
Separate Account and Guaranteed Account
- --------------------------------------------------------------------------------
Transfers
An unlimited number of Transfers are allowed during the
Accumulation Period. Aetna allows 12 free Transfers in any Account
Year. Thereafter, Aetna reserves the right to charge $10 for each
subsequent Transfer.
Maintenance Fee
The annual Maintenance Fee is $30. If the Account Value is $50,000
or more on the date the Maintenance Fee is to be deducted, the
Maintenance Fee is $0.
GM-VA-98 Page 3
<PAGE>
Schedule - Accumulation Period (continued)
Separate Account and Guaranteed Account
- --------------------------------------------------------------------------------
Deferred Sales Charge
For each withdrawal, the Deferred Sales Charge will be determined
as follows:
<TABLE>
<CAPTION>
Deferred Sales Charge
Length of Time from Account Effective Date (as percentage of
Purchase Payment)
------------------------------------------------------------------
<S> <C>
Less than 1 year 5%
1 year but less than 2 years 4%
2 years but less than 3 years 3%
3 years but less than 4 years 2%
4 years but less than 5 years 1%
5 years or more 0%
</TABLE>
See Section I - DEFINITIONS for explanations.
GM-VA-98 Page 4
<PAGE>
Schedule - Annuity Period
Separate Account - Variable Annuity Payment
- --------------------------------------------------------------------------------
Charges to Separate Account
A daily charge is deducted at an annual effective rate of l.25%
for mortality and expense risks. The administrative charge is
established upon election of an Annuity Payout Option. This charge
will not exceed 0.25%.
Assumed Interest Rate (AIR)
If a variable Annuity Payment is chosen, an AIR of 5.0% may be
elected. If 5.0% is not elected, Aetna will use an AIR of 3.5%.
The AIR factor for 3.5% per year is 0.9999058.
The AIR factor for 5.0% per year is 0.9998663.
If the portion of a variable Annuity Payment for any Subaccount is
not to decrease, the annuity return factor under the Separate
Account for that Subaccount must be:
(a) 4.75% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity Payments commence if an AIR of 3.5% is chosen; or
(b) 6.25% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity Payments commence, if an AIR of 5% is chosen.
Transfers
When a variable Annuity Payment has been elected, four free
Transfers are allowed each Account Year among the Subaccounts
available during the Annuity Period. Thereafter, Aetna reserves
the right to charge $10 for each subsequent Transfer.
General Account - Fixed Annuity Payment
- --------------------------------------------------------------------------------
Minimum Guaranteed Interest Rate
3.0% (effective annual rate of return)
See Section I - DEFINITIONS for explanations.
GM-VA-98 Page 5
<PAGE>
Table of Contents
<TABLE>
<S> <C> <C>
I. DEFINITIONS PAGE
1.01 Account...................................... 8
1.02 Account Effective Date....................... 8
1.03 Account Value................................ 8
1.04 Account Year................................. 8
1.05 Accumulation Period.......................... 8
1.06 Adjusted Account Value....................... 8
1.07 Annuitant.................................... 8
1.08 Annuity Payment.............................. 8
1.09 Annuity Payout Options....................... 8
1.10 Annuity Period............................... 8
1.11 Beneficiary.................................. 9
1.12 Certificate Holder........................... 9
1.13 Claim Date................................... 9
1.14 Code......................................... 9
1.15 Contract .................................... 9
1.16 Contract Holder ............................. 9
1.17 Deferred Sales Charge........................ 9
1.18 Deposit Period............................... 9
1.19 Dollar Cost Averaging ....................... 9
1.20 Fund(s) .....................................10
1.21 General .....................................10
1.22 Guaranteed Account...........................10
1.23 Guaranteed Rates - Guaranteed Account .......10
1.24 Guaranteed Term .............................10
1.25 Guaranteed Term(s) Groups....................10
1.26 Maintenance Fee..............................10
1.27 Market Value Adjustment (MVA) ...............11
1.28 Matured Term Value...........................11
1.29 Maturity Value Transfer......................11
1.30 Maturity Date................................11
1.31 Option Package...............................11
1.32 Purchase Payment(s) .........................11
1.33 Reinvestment.................................11
1.34 Schedule Effective Date......................11
1.35 Separate Account ............................11
1.36 Subaccount(s)................................12
1.37 Systematic Distribution Option...............12
1.38 Transfers....................................12
1.39 Withdrawal Value ............................12
1.40 Valuation Date ..............................12
II. GENERAL PROVISIONS
2.01 Change of Contract ..........................12
2.02 Change of Fund(s) ...........................13
2.03 Nonparticipating Contract ...................13
2.04 Payments and Elections ......................13
2.05 State Laws ..................................13
2.06 Control of Contract .........................13
2.07 Designation of Beneficiary ..................14
2.08 Misstatements and Adjustments ...............14
2.09 Incontestability ............................14
2.10 Grace Period ................................14
2.11 Individual Certificates......................14
</TABLE>
GM-VA-98 Page 6
<PAGE>
<TABLE>
<S> <C> <C>
III. PURCHASE PAYMENT, ACCOUNT VALUE, AND WITHDRAWAL PROVISIONS
3.01 Purchase Payment ...........................................14
3.02 Certificate Holder's Account................................14
3.03 Accumulation Units -- Separate Account .....................15
3.04 Net Investment Factor(s) -- Separate Account ...............15
3.05 Accumulation Unit Value -- Separate Account ................15
3.06 Market Value Adjustment (MVA)...............................15
3.07 Transfer of Account Value from the Subaccount(s) or
Guaranteed Account During the Accumulation Period...........16
3.08 Notice to the Certificate Holder ...........................17
3.09 Loans ......................................................17
3.10 Systematic Distribution Options.............................17
3.11 Death Benefit Amount........................................17
3.12 Death Benefit Options Available to Beneficiary .............18
3.13 Liquidation of Withdrawal Value ............................19
3.14 Deferred Sales Charge ......................................19
3.15 Payment of Withdrawal Value ................................19
3.16 Payment of Adjusted Account ................................19
3.17 Reinstatement...............................................19
IV. OPTION PACKAGES
4.01 Election of Option Packages.................................20
4.02 Description of Option Package I.............................20
4.03 Description of Option Package II............................21
4.04 Description of Option Package ..............................23
V. ANNUITY PAYOUT PROVISIONS
5.01 Annuity Payout Options......................................25
5.02 Annuity Payment Choices.....................................26
5.03 Terms of Annuity Payout Options.............................27
5.04 Death of Annuitant/Beneficiary .............................27
5.05 Annuity Units -- Separate Account...........................28
5.06 Annuity Unit Value -- Separate Account......................28
5.07 Annuity Net Return Factor(s) - Separate Account.............28
</TABLE>
GM-VA-98 Page 7
<PAGE>
I. DEFINITIONS
- --------- ----------------------------------------------------------------------
1.01 Account:
A record that identifies contract values accumulated on each
Certificate Holder's behalf.
1.02 Account Effective Date:
The date on which an Account is established on a Certificate
Holder's behalf.
1.03 Account Value:
As of the most recent Valuation Date, the Account Value is equal
to the total of the Purchase Payment(s) made to the Account;
(a) Plus or minus the investment experience for the amount, if
any, allocated to one or more of the Subaccounts;
(b) Plus interest added to the amount, if any, allocated to the
Guaranteed Account;
(c) Plus any additional amount deposited to the Account (see
Section IV - OPTION PACKAGES);
(d) Less the amount of any Maintenance Fee deducted;
(e) Less any additional fee(s) deducted;
(f) Less any amount(s) withdrawn; and
(g) Less any amount(s) applied to an Annuity Payout Option.
1.04 Account Year:
A period of twelve months measured from the Account Effective Date
or an anniversary of such Account Effective Date.
1.05 Accumulation Period:
The period during which the Purchase Payment(s) are applied to an
Account to provide future Annuity Payment(s).
1.06 Adjusted Account Value:
The Account Value plus or minus the aggregate Market Value
Adjustment (MVA), if applicable, for the amount(s) allocated to
the Guaranteed Account (see Section III - Market Value
Adjustment).
1.07 Annuitant:
The person on whose death, during the Accumulation Period, a death
benefit becomes payable and on whose life or life expectancy the
Annuity Payments are based under the Contract.
1.08 Annuity Payment:
A series of payments for life, a definite period or a combination
of the two. The Annuity Payments may be variable or fixed in
amount or a combination of both.
1.09 Annuity Payout Options:
The Certificate Holder may choose to receive Annuity Payments
under one of the following options:
(a) For the life of one or two persons;
(b) For a stated period; or
(c) For some combination of (a) and (b).
1.10 Annuity Period:
The period during which Annuity Payments are made.
GM-VA-98 Page 8
<PAGE>
1.11 Beneficiary:
The individual(s) or entity entitled to receive any death benefit
due under the Contract. Any designated Beneficiary has the right
to name another Beneficiary. If the Account is owned by joint
Certificate Holders, the survivor will be deemed the designated
Beneficiary and any other Beneficiary on record will then be
treated as the primary or contingent Beneficiary, as originally
designated, unless and until changed by the new designated
Beneficiary.
1.12 Certificate Holder:
A person who purchases an interest in this Contract as evidenced
by a certificate. Aetna reserves the right to limit ownership to
natural persons. If more than one Certificate Holder owns an
Account, each Certificate Holder will be a joint Certificate
Holder. Joint Certificate Holders have joint ownership rights and
both must authorize exercising any ownership rights unless Aetna
allows otherwise.
1.13 Claim Date:
The date when proof of death and the Beneficiary's entitlement to
the death benefit are received in good order at Aetna's home
office. This is also the date that the excess of the death benefit
over the Account Value, if any, is allocated to the money market
fund available through the Separate Account.
1.14 Code:
The Internal Revenue Code of 1986, as it may be amended from time
to time.
1.15 Contract:
This agreement between Aetna and the Contract Holder.
1.16 Contract Holder:
The entity to which the Contract is issued.
1.17 Deferred Sales Charge:
The charge that is applied to a Purchase Payment(s) upon
withdrawal. This charge may be waived under certain circumstances
or after a certain length of time (see Section III - Deferred
Sales Charge).
1.18 Deposit Period:
A day, a calendar week, a calendar month, a calendar quarter, or
any other period of time specified by Aetna during which a
Purchase Payment(s), Transfer(s) and/or Reinvestment(s) may be
allocated to one or more Guaranteed Account Guaranteed Terms.
Aetna reserves the right to shorten or to extend the Deposit
Period.
During a Deposit Period, Aetna may offer any number of Guaranteed
Terms and more than one Guaranteed Term of the same duration may
be offered.
1.19 Dollar Cost Averaging:
A program that permits the Certificate Holder to systematically
transfer amounts from one of the available Subaccounts, or an
available Guaranteed Account Guaranteed Term, to one or more of
the Subaccounts. If the Certificate Holder elects a Guaranteed
Account Guaranteed Term available for Dollar Cost Averaging, no
MVA applies to amounts transferred under Dollar Cost Averaging. If
Dollar Cost Averaging from a Guaranteed Account Guaranteed Term is
discontinued before the end of the Dollar Cost Averaging period
elected, Aetna will automatically transfer the balance to a
Guaranteed Term of the same duration and an MVA will apply. The
Certificate Holder may initiate a transfer to another investment
option and an MVA will apply. If a Guaranteed Term of the same
duration is not available, Aetna will transfer the amount to the
Guaranteed Term with the next shortest duration. If no shorter
Guaranteed Term is available, the next longer Guaranteed Term will
be used. Aetna reserves the right to establish and change terms
and conditions governing Dollar Cost Averaging.
GM-VA-98 Page 9
<PAGE>
1.20 Fund(s):
The open-end registered management investment companies whose
shares are purchased by the Separate Account to fund the benefits
provided by the Contract.
The Funds, and the number of Funds, available during the
Accumulation Period may be different from those available during
the Annuity Period. Aetna reserves the right to limit the number
of Funds available at any one time and to limit the number of
investment options the Certificate Holder may select during the
Accumulation Period and/or during the Annuity Period.
1.21 General Account:
The account holding the assets of Aetna, other than those assets
held in Aetna's separate accounts.
1.22 Guaranteed Account:
A separate account, established by Aetna Life Insurance and
Annuity Company (herein Aetna) under Section 38a-433 of the
Connecticut General Statutes, that holds assets for Guaranteed
Terms. There are no discrete units for this account. The
Certificate Holder does not participate in any gain or loss
resulting from the performance of the investments held in the
account. Income, gains or losses realized or unrealized, are gains
or losses of Aetna. Aetna liabilities, except for liabilities
under this Contract and reserves required by federal and state
law, may not be charged against the nonunitized separate account.
1.23 Guaranteed Rates -- Guaranteed Account:
Aetna will declare the interest rate(s) applicable to a specific
Guaranteed Term at the start of the Deposit Period for that
Guaranteed Term. The rate(s) are guaranteed by Aetna for the
period beginning with the first day of the Deposit Period and
ending on the Maturity Date. Guaranteed Rates are credited
beginning with the date of allocation. The Guaranteed Rates are
annual effective yields. That is, interest is credited daily at a
rate that will produce the Guaranteed Rate over the period of a
year. No Guaranteed Rate will ever be less than the minimum
Guaranteed Rate shown on the Schedule - Accumulation Period.
For Guaranteed Terms of one year or less, one Guaranteed Rate is
credited for the full Guaranteed Term. For longer Guaranteed
Terms, an initial Guaranteed Rate is credited from the date of
deposit to the end of a specified period within the Guaranteed
Term. There may be different Guaranteed Rate(s) declared for
subsequent specified time intervals throughout the Guaranteed
Term.
Aetna may offer more than one Guaranteed Term of the same duration
and credit one with a higher rate contingent upon use only with
Dollar Cost Averaging.
1.24 Guaranteed Term:
The period of time specified by Aetna for which a specific
Guaranteed Rate(s) is offered on amounts invested during a
specific Deposit Period. Guaranteed Terms are made available
subject to Aetna's terms and conditions, including, but not
limited to, Aetna's right to restrict allocations to new Purchase
Payments (such as by prohibiting Transfers into a particular
Guaranteed Term from any other Guaranteed Term or from any of the
Subaccounts, or by prohibiting Reinvestment of a Matured Term
Value to a particular Guaranteed Term). More than one Guaranteed
Term of the same duration may be offered within the Contract.
1.25 Guaranteed Term(s) Groups:
All Guaranteed Account Guaranteed Term(s) of the same duration
(from the close of the Deposit Period until the designated
Maturity Date).
1.26 Maintenance Fee:
The Maintenance Fee (see Schedule - Accumulation Period) will be
deducted during the Accumulation Period from the Account Value on
each anniversary of the Account Effective Date and upon withdrawal
of the entire Account.
GM-VA-98 Page 10
<PAGE>
1.27 Market Value Adjustment ( MVA) :
An adjustment that may apply to an amount withdrawn or transferred
from a Guaranteed Account Guaranteed Term prior to the end of that
Guaranteed Term. The adjustment reflects the change in the value
of the investment due to changes in interest rates since the date
of deposit and is computed using the formula given. The adjustment
is expressed as a percentage of each dollar being withdrawn (see
Section III- Market Value Adjustment).
1.28 Matured Term Value:
The amount due on a Guaranteed Account Guaranteed Term's Maturity
Date.
1.29 Maturity Value Transfer:
During the calendar month following a Guaranteed Account Maturity
Date, the Certificate Holder may notify Aetna's home office in
writing to Transfer or withdraw all or part of the Matured Term
Value, plus accrued interest at the new Guaranteed Rate, from the
Guaranteed Account without an MVA. This provision only applies to
the first such written request received from the Certificate
Holder during this period for any Matured Term Value.
1.30 Maturity Date:
The last day of a Guaranteed Account Guaranteed Term.
1.31 Option Package:
The version of the Contract selected which defines, among other
things, the amount of the mortality and expense risk charge, the
calculation of the death benefit, and the availability of certain
withdrawals without imposition of a Deferred Sales Charge.
1.32 Purchase Payment(s):
The Purchase Payment(s) less premium taxes, if applicable,
accepted by Aetna at its home office. Aetna reserves the right to
refuse to accept any Purchase Payment at any time for any reason.
No advance notice will be given to the Contract Holder or
Certificate Holder.
1.33 Reinvestment:
Aetna will mail a notice to the Certificate Holder at least 18
calendar days before a Guaranteed Term's Maturity Date. This
notice will contain the Terms available during current Deposit
Periods with their Guaranteed Rate(s), and projected Matured Term
Value. If no specific direction is given by the Certificate Holder
prior to the Maturity Date, each Matured Term 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. Aetna
will mail a confirmation statement to the Certificate Holder the
next business day after the Maturity Date. This notice will state
the Guaranteed Term and Guaranteed Rate(s) which will apply to the
reinvested Matured Term Value.
1.34 Schedule Effective Date:
The date that an Option Package becomes effective. This date is
indicated on the Schedule - Accumulation Period. At initial
purchase, this date is the same as the Account Effective Date.
1.35 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 other income,
gains or losses of Aetna. Aetna owns the assets held in the
Separate Account and is not a trustee as to such amounts. The
Separate Account generally is not guaranteed and is held at market
value. The assets of the Separate Account, to the extent of
reserves and other contract liabilities of the Separate Account,
shall not be charged with other Aetna liabilities.
GM-VA-98 Page 11
<PAGE>
1.36 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.
1.37 Systematic Distribution Option:
An option elected by the Certificate Holder during the
Accumulation Period which establishes a schedule of withdrawals to
be made automatically from the Certificate Holder's Account.
1.38 Transfers:
The movement of invested amounts among the available Subaccount(s)
and/or any Guaranteed Account Guaranteed Term made available,
subject to terms and conditions established by Aetna, during the
Accumulation Period or the Annuity Period.
1.39 Withdrawal Value:
The amount payable by Aetna upon the withdrawal of any portion of
an Account.
1.40 Valuation Date:
The date and time for which a Subaccount calculates its net asset
value, usually from 4:00 p.m. Eastern time each day the New York
Stock Exchange is open, to 4:00 p.m. the next such business day.
II. GENERAL PROVISIONS
- --------------------------------------------------------------------------------
2.01 Change of Contract:
Only an authorized officer of Aetna may change the terms of this
Contract. Aetna will notify the 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 Payout Option
which begins before the change.
Aetna may make any change that affects the Market Value Adjustment
(see Section III- Market Value Adjustment) with at least 30 days
advance written notice to the 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 Accounts.
Any change that affects any of the following under this Contract
will not apply to Accounts in existence before the effective date
of the change:
The following will not be changed:
(a) Account Value
(b) Guaranteed Rates - Guaranteed Account
(c) Purchase Payment
(d) Withdrawal Value
(e) Transfers
(f) Net Investment Factor(s) -- Separate Account (see Section
III)
(g) Minimum Guaranteed Interest Rates (see Section V)
(h) Annuity Unit Value -- Separate Account (see Section V)
(i) Annuity Payout Options (see Section V).
Any change that affects the Annuity Payout Options and the tables
for the Annuity Payout Options may be made:
(a) No earlier than 12 months after the Account Effective
Date; and
(b) No earlier than 12 months after the effective date of any
prior change.
GM-VA-98 Page 12
<PAGE>
2.01 Change of Contract (Cont'd):
Any Account established on or after the effective date of any
change will be subject to the change. If the Contract Holder does
not agree to any change under this provision, no new Accounts may
be established under the Contract. The Contract may also be
changed as deemed necessary by Aetna to comply with federal or
state law.
2.02 Change of Fund(s):
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, Aetna may cease to make such Fund shares available
for investment under the Contract prospectively, or Aetna may
substitute shares of another Fund for shares already acquired.
Aetna 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.
Aetna reserves the right to substitute shares of another Fund for
shares already acquired without a proxy vote.
2.03 Nonparticipating Contract:
The Contract Holder, Certificate Holders or Beneficiaries will not
have a right to share in the earnings of Aetna.
2.04 Payments and Elections:
While the Certificate Holder is living, Aetna will pay the
Certificate Holder any Annuity Payments as and when due. After the
Certificate Holder's death, or at the death of the first
Certificate Holder if the Account is owned jointly, any Annuity
Payments required to be made will be paid in accordance with
Section V - Death of Annuitant/Beneficiary. Aetna will determine
other payments and/or elections as of the end of the Valuation
Date in which the request is received at its home office. Such
payments will be made within 7 calendar days of receipt at its
home office of a written claim for payment which is in good order,
except as provided in Section III - Payment of Withdrawal Value.
2.05 State Laws:
The Contract and Certificate comply with the laws of the state in
which they are delivered. Any withdrawal, death benefit amount, or
Annuity Payments are equal to or greater than the minimum required
by such laws. Annuity tables for legal reserve valuation shall be
as required by state law. Such tables may be different from
annuity tables used to determine Annuity Payments.
2.06 Control of Contract:
This is a Contract between the Contract Holder and Aetna. The
Contract Holder has title to the Contract. Contract Holder rights
are limited to accepting or rejecting Contract modifications. The
Certificate Holder has all other rights to amounts held in his or
her Account.
Each Certificate Holder shall own all amounts held in his or her
Account. Each Certificate Holder may make any choices allowed by
this Contract for his or her Account. Choices made under this
Contract must be in writing. If the Account is owned jointly, both
joint Certificate Holders must authorize any Certificate Holder
change in writing. Until receipt of such choices at Aetna's home
office, Aetna may rely on any previous choices made.
The Contract is not subject to the claims of any creditors of the
Contract Holder or the Certificate Holder, except to the extent
permitted by law.
The Certificate Holder may assign or transfer his or her rights
under the Contract. Aetna reserves the right not to accept
assignment or transfer to a nonnatural person. Any assignment or
transfer made under the Contract must be submitted to Aetna's home
office in writing and will not be effective until accepted by
Aetna.
GM-VA-98 Page 13
<PAGE>
2.07 Designation of Beneficiary:
Each Certificate Holder shall name his or her Beneficiary and when
designating the Beneficiary may elect to specify in writing the
form of payment to the Beneficiary. Aetna will honor the specified
form of payment to the extent permitted under section 72(s) of the
Code. If the Account is owned jointly, both joint Certificate
Holders must agree in writing to the Beneficiary designated. The
Beneficiary may be changed at any time. Changes to a Beneficiary
must be submitted to Aetna's home office in writing and will not
be effective until accepted by Aetna. If the Account is owned
jointly, at the death of one joint Certificate Holder, the
survivor will be deemed the designated Beneficiary; any other
Beneficiary on record will then be treated as a primary or a
contingent Beneficiary, as originally designated unless and until
changed by the new designated Beneficiary. If a designated
Beneficiary defers taking payment of a death benefit, the
designated Beneficiary has the right to name another Beneficiary.
2.08 Misstatements and Adjustments:
If Aetna finds the age of any Annuitant to be misstated, the
correct facts will be used to adjust payments.
2.09 Incontestability:
Aetna may cancel the Contract if, upon discovery of erroneous
information, the Contract would not have been issued.
2.10 Grace Period:
The Contract will remain in effect even if Purchase Payments are
not continued except as provided in the Payment of Adjusted
Account Value provision (see Section III - Payment of Adjusted
Account Value).
2.11 Individual Certificates:
Aetna shall issue a certificate to each Certificate Holder. The
certificate will summarize certain provisions of the Contract.
Certificates are for information only and are not a part of the
Contract.
III. PURCHASE PAYMENT, ACCOUNT VALUE, AND WITHDRAWAL PROVISIONS
- --------------------------------------------------------------------------------
3.01 Purchase Payment:
This amount is the actual Purchase Payment. Aetna reserves the
right to pay premium taxes when due and deduct the amount from the
Account Value when we pay the tax or at a later date.
Each Purchase Payment will be allocated, as directed by the
Certificate Holder, among:
(a) Guaranteed Account Guaranteed Terms made available, subject
to terms and conditions established by Aetna; and/or
(b) The Subaccount(s) offered through the Separate Account.
For each Purchase Payment, the Certificate Holder shall tell Aetna
the percentage of each Purchase Payment to allocate to any
available Guaranteed Account Guaranteed Term and/or each
Subaccount. Unless different allocation instructions are received
for any additional Purchase Payment, the allocation will be the
same as for the initial Purchase Payment. If the same Guaranteed
Term is no longer available, the Purchase Payment will be
allocated to the next shortest Guaranteed Term available in the
current Deposit Period. If no shorter Guaranteed Term is
available, the next longer Guaranteed Term will be used.
3.02 Certificate Holder's Account:
Aetna will maintain an Account for each Certificate Holder.
Aetna will declare from time to time the acceptability and the
minimum amount for initial and additional Purchase Payments.
GM-VA-98 Page 14
<PAGE>
3.03 Accumulation Units - Separate Account:
The portion of the Purchase Payment(s) applied to each Subaccount
under the Separate Account will determine the number of
accumulation units for that Subaccount. This number is equal to
the portion of the Purchase Payment(s) applied to each Subaccount
divided by the accumulation unit value (see Section III -
Accumulation Unit Value Separate Account) for the Valuation Date
in which the Purchase Payment is received in good order at Aetna's
home office.
3.04 Net Investment Factor(s) -- Separate Account:
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 Date
is equal to the sum of 1.0000 plus the net investment rate. The
net investment rate equals:
(a) the net assets of the Subaccount on the current Valuation
Date, minus
(b) the net assets of 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 for
mortality and expense risks as stated in the Schedule -
Accumulation Period and Schedule - Annuity Period, and an
administrative charge of 0.15% (unless reduced or
eliminated) 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.
3.05 Accumulation Unit Value - Separate Account:
An accumulation unit value is computed by multiplying the net
investment factor for the current Valuation Date by the
accumulation unit value for the previous Valuation Date. The
dollar value of accumulation units, Separate Account assets, and
variable Annuity Payments may go up or down due to investment gain
or loss.
3.06 Market Value Adjustment (MVA):
An MVA will apply to any withdrawal from the Guaranteed Account
before the end of a Guaranteed Term when the withdrawal is:
(a) A Transfer (including a Transfer from a Guaranteed Account
Guaranteed Term if Dollar Cost Averaging is discontinued);
except for Transfers under Dollar Cost Averaging, or as
specified in Section I - Maturity Term Value Transfer;
(b) A full or partial withdrawal (including a free withdrawal,
see Section III - Deferred Sales Charge), except for a
payment made:
(1) under a Systematic Distribution Option, or
(2) under a qualified Contract, when the amount withdrawn
is equal to the required minimum distribution for the
Account calculated using a method permitted under the
Code and agreed to by Aetna; or
(c) Due to an election of Annuity Payout Option 1. Only a
positive MVA will apply upon election of Annuity Payout
Option 2 or 3 (see Section V - Annuity Payout Options).
Full and partial withdrawals and Transfers made within six months
after the date of the Annuitant's death will be the greater of:
(a) The aggregate MVA amount which is the sum of all market
value adjusted amounts resulting from a withdrawal(s). This
total may be greater or less than the Account Value of those
amounts; or
(b) The applicable portion of the Account Value in the
Guaranteed Account.
After the six-month period, the withdrawal or Transfer will be the
aggregate MVA amount, which may be greater or less than the
Account Value of those amounts.
GM-VA-98 Page 15
<PAGE>
3.06 Market Value Adjustment (MVA) (Cont'd):
Market value adjusted amounts will be equal to the amount
withdrawn multiplied by the following ratio:
x
---
365
(1 + i)
----------
1
---
365
(1 + j)
Where:
i is the Deposit Period yield
j is the current yield
x is the number of days remaining in the Guaranteed
Term, computed from Wednesday of the week of
withdrawal.
The Deposit Period yield will be determined as follows:
(a) At the close of the last business day of each week of the
Deposit Period, a yield will be computed as the average of
the yields on that day of U.S. Treasury Notes which mature
in the last three months of the Guaranteed Term.
(b) The Deposit Period yield is the average of those yields for
the Deposit Period. If withdrawal is made before 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.
In the event that no U.S. Treasury Notes which mature in the last
three months of the Guaranteed Term exist, Aetna reserves the
right to use the U.S. Treasury Notes that mature in the following
quarter.
3.07 Transfer of Account Value from the Subaccount(s) or Guaranteed Account
During the Accumulation Period:
Before an Annuity Payout Option is elected, all or any portion of
the Adjusted Account Value of the Certificate Holder's Account may
be transferred from any Subaccount or Guaranteed Term of the
Guaranteed Account:
a) To any other Subaccount; or
b) To any Guaranteed Term of the Guaranteed Account made
available in the current Deposit Period, subject to terms
and conditions specified by Aetna.
Transfer requests can be submitted as a percentage or as a dollar
amount. Aetna may establish a minimum transfer amount. Within a
Guaranteed Term Group, the amount to be withdrawn or transferred
will be 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 by Aetna is shown on the Schedule - Accumulation Period.
Additional Transfers may be subject to a Transfer fee as shown on
the Schedule - Accumulation Period.
GM-VA-98 Page 16
<PAGE>
3.07 Transfer of Account Value from the Subaccount(s) or Guaranteed Account
During the Accumulation Period (Cont'd):
Amounts transferred from the Guaranteed Account under the Dollar
Cost Averaging program, or amounts transferred as a Matured Term
Value on or within one calendar month of a Maturity Date do not
count against the annual Transfer limit.
Amounts allocated to Guaranteed Account Guaranteed Terms may not
be transferred to the Subaccounts or to another Guaranteed Term
during a Deposit Period or for 90 days after the close of a
Deposit Period except for:
(a) Matured Term Value(s) during the calendar month following
the Maturity Date;
(b) Amounts applied to an Annuity Payout Option;
(c) Amounts transferred under the Dollar Cost Averaging program;
(d) Amounts distributed under a Systematic Distribution Option;
and
(e) Amounts transferred by Aetna if Dollar Cost Averaging is
discontinued.
3.08 Notice to the Certificate Holder:
The Certificate Holder will receive quarterly statements from
Aetna of:
(a) The value of any amounts held in:
(1) The Guaranteed Account; and
(2) The Subaccount(s) under the Separate Account;
(b) The number of any accumulation units; and
(c) The accumulation unit value.
Such number or values will be as of a specific date no more than
60 days before the date of the notice.
3.09 Loans:
Loans are not available under this Contract.
3.10 Systematic Distribution Options:
Aetna may, from time to time, make one or more Systematic
Distribution Options available during the Accumulation Period.
When a Systematic Distribution Option is elected, Aetna will make
automatic payments from the Certificate Holder's Account. No
Deferred Sales Charge or MVA will apply to the automatic payments
made under a Systematic Distribution Option.
Any Systematic Distribution Option will be subject to the
following criteria:
(a) Any Systematic Distribution Option will be made available on
the basis of objective criteria consistently applied;
(b) The availability of any Systematic Distribution Option may
be limited by terms and conditions applicable to the
election of such Systematic Distribution Option; and
(c) Aetna may discontinue the availability of a Systematic
Distribution Option at any time. Except to the extent
required to comply with applicable law, discontinuance of a
Systematic Distribution Option will apply only to future
elections and will not affect Systematic Distribution
Options in effect at the time an option is discontinued.
3.11 Death Benefit Amount:
The amount of the death benefit is described in Section IV -
OPTION PACKAGES.
GM-VA-98 Page 17
<PAGE>
3.12 Death Benefit Options Available to Beneficiary:
Prior to any election, or until amounts must be otherwise
distributed under this section, the Account Value will be retained
in the Account. The Beneficiary has the right to allocate or
reallocate any amount to any of the available investment options
(subject to an MVA, if applicable). If the Certificate Holder has
specified the form of payment to the Beneficiary, the death
benefit will be paid as elected by the Certificate Holder in the
Beneficiary designation, to the extent permitted by section 72(s)
of the Code. If the Certificate Holder has not specified a form of
payment, the Beneficiary may elect one of the following options.
(a) When the Certificate Holder is the Annuitant or when the
Certificate Holder is a nonnatural person, and the
Annuitant dies:
(1) If the Beneficiary is the surviving spouse, the
spousal Beneficiary will be the successor
Certificate Holder and may exercise all
Certificate Holder rights under the Contract and
continue in the Accumulation Period, or may elect
(i) or (ii) below. Under the Code, distributions
from the Account are not required until the
spousal Beneficiary's death. The spousal
Beneficiary may elect to:
(i) Apply some or all of the Adjusted Account
Value to an Annuity Payout Option (see
Section V); or
(ii) Receive, at any time, a lump sum payment
equal to the Adjusted Account Value.
(2) If the Beneficiary is other than the surviving
spouse, then options (i) or (ii) above apply. Any
portion of the Adjusted Account Value not applied
to an Annuity Payout Option within one year of the
death must be distributed within five years of the
date of death.
(3) If no Beneficiary exists, a lump sum payment equal
to the Adjusted Account Value must be made to the
Annuitant's estate within five years of the date
of death.
(4) If the Beneficiary is an entity, a lump sum
payment equal to the Adjusted Account Value must
be made within five years of the date of death,
unless otherwise permitted by IRS regulation or
ruling.
(b) When the Certificate Holder is not the Annuitant and the
Certificate Holder dies:
(1) If the Beneficiary is the Certificate Holder's
surviving spouse, the spousal Beneficiary will be
the successor Certificate Holder and may exercise
all Certificate Holder rights under the Contract
and continue in the Accumulation Period, or may
elect (i) or (ii) below. Under the Code,
distributions from the Account are not required
until the spousal Beneficiary's death. The spousal
Beneficiary may elect to:
(i) Apply some or all of the Adjusted Account
Value to an Annuity Payout Option (see
Section V); or
(ii) Receive, at any time, a lump sum payment
equal to the Withdrawal Value.
(2) If the Beneficiary is other than the Certificate
Holder's surviving spouse, then options (i) or
(ii) under (1) above apply. Any portion of the
death benefit not applied to an Annuity Payout
Option within one year of the Certificate Holder's
death must be distributed within five years of the
date of death.
(3) If no Beneficiary exists, a lump sum payment equal
to the Withdrawal Value must be made to the
Certificate Holder's estate within five years of
the date of death.
(4) If the Beneficiary is an entity, a lump sum
payment equal to the Withdrawal Value must be made
within five years of the date of death, unless
otherwise permitted by IRS regulation or ruling.
(c) When the Certificate Holder is a natural person and not
the Annuitant and the Annuitant dies, the Beneficiary (or
the Certificate Holder if no Beneficiary exists) may
elect to:
(1) Apply all or some of the Adjusted Account Value to
an Annuity Payout Option within 60 days of the
date of death; or
(2) Receive a lump sum payment equal to the Adjusted
Account Value.
GM-VA-98 Page 18
<PAGE>
3.13 Liquidation of Withdrawal Value:
All or any portion of the Account Value may be withdrawn at any
time. Withdrawal requests may be submitted as a percentage of the
Account Value or as a specific dollar amount. Purchase Payment
amounts are withdrawn first, and then the excess value, if any.
Partial withdrawal amounts are withdrawn on a pro rata basis from
the Subaccount(s) and/or the Guaranteed Term(s) Groups of the
Guaranteed Account in which the Account Value is invested. Within
a Guaranteed Term Group, the amount to be withdrawn or transferred
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 Fee, if applicable, the
withdrawn amount shall be reduced by a Deferred Sales Charge, if
applicable. An MVA may apply to amounts withdrawn from the
Guaranteed Account.
3.14 Deferred Sales Charge:
The Deferred Sales Charge only applies to the Purchase Payment(s)
portion withdrawn and varies according to the elapsed time since
deposit (see Schedule - Accumulation Period). Purchase Payment
amounts are withdrawn in the same order they were applied.
No Deferred Sales Charge is deducted from any portion of the
Purchase Payment which is paid:
(a) To a Beneficiary due to the Annuitant's death before
Annuity Payments start, up to a maximum of the aggregate
Purchase Payment(s) minus the total of all partial
surrenders, amounts applied to an Annuity Payout Option
and deductions made prior to the Annuitant's date of
death;
(b) For an Annuity Payout Option (see Section V);
(c) As a distribution under a Systematic Distribution Option;
(d) For a full withdrawal of the Account where the Account
Value is $2,500 or less and no withdrawals have been
taken from the Account within the prior 12 months;
(e) By Aetna under Section III - Payment of Adjusted Account
Value;
(f) Under a qualified Contract when the amount withdrawn is
equal to the minimum distribution required by the Code
for the Account, calculated using a method permitted
under the Code and agreed to by Aetna;
(g) As a free withdrawal as described in Section IV - OPTION
PACKAGES; or
(h) Under the Nursing Home Waiver, if available, and as
described in Section IV - OPTION PACKAGES.
3.15 Payment of Withdrawal Value:
Under certain emergency conditions, Aetna may defer payment:
(a) For a period of up to six months (unless not allowed by
state law); or
(b) As provided by federal law.
3.16 Payment of Adjusted Account Value:
Upon 90 days written notice to the Certificate Holder, Aetna will
terminate any Account if the Account Value becomes less than
$2,500 immediately following any partial withdrawal. Aetna does
not intend to exercise this right in cases where an Account is
reduced to $2,500 or less solely due to investment performance. A
Deferred Sales Charge will not be deducted from the Adjusted
Account Value.
3.17 Reinstatement:
The Certificate Holder may reinstate the proceeds of a full
withdrawal, subject to terms and conditions established by Aetna.
GM-VA-98 Page 19
<PAGE>
IV. OPTION PACKAGES
- --------------------------------------------------------------------------------
The Contract offers three Option Packages regarding calculation of the death
benefit and the ability to withdraw money free of Deferred Sales Charge. The
Option Package selected is reflected in the Schedule-Accumulation Period
attached to the Certificate. At initial purchase, the Schedule Effective Date is
the same as the Account Effective Date. If, at a later date, the (Contract)
Holder wishes to replace the current Option Package with another available
Option Package, the (Contract) Holder may do so upon any anniversary of the
Account Effective Date.
A different Schedule-Accumulation Period may apply to each Certificate Holder
depending upon the Option Package selected.
Below is a description of the ability to elect other Option Packages and the
contractual provisions of each Option Package.
4.01 Election of Option Packages:
Any (Contract) Holder, who meets the applicable minimum Account
Value required by Aetna, may elect to replace the Option Package
in effect with one of the other available Option Packages. The
eligible (Contract) Holder may make the election during the sixty
day period prior to and including any anniversary of the Account
Effective Date. Such election must be made in writing and received
in good order at Aetna's home office during the election period.
The effective date of the newly elected Option Package is the
anniversary of the Account Effective Date at the end of the 60 day
election period. Aetna will issue another Schedule reflecting the
new Option Package chosen. The new Schedule will reflect the
revisions to the (Contract) Holder's benefits during the
Accumulation Period, namely:
(bullet) The new Schedule Effective Date,
(bullet) The revised Charges to Separate Account,
(bullet) The calculation of the death benefit, and
(bullet) The revised ability to withdraw money free of Deferred
Sales Charge.
All other Contract features remain in effect from the Account
Effective Date.
4.02 Description of Option Package I:
Deferred Sales Charge:
In addition to the events described in Section III - Deferred
Sales Charge, the total amount that may be withdrawn each Account
Year without a Deferred Sales Charge cannot exceed 10% of the
Account Value less:
(1) Any amount(s) withdrawn and/or requested for withdrawal
under a Systematic Distribution Option, or
(2) Any amount(s) taken as a minimum required distribution as
described in Section III - Deferred Sales Charge.
Death Benefit Calculation During the Accumulation Period:
If the (Contract) Holder or Annuitant dies before an Annuity
Payout Option starts, the Beneficiary is entitled to a death
benefit. If the Account is owned jointly, the death benefit
applies at the death of the first joint (Contract) Holder to die.
The amount of the death benefit is determined as follows:
(a) Death of the Annuitant.
The death benefit is the greater of:
(1) The sum of all Purchase Payment(s) made, adjusted
for amount(s) withdrawn or applied to an Annuity
Payout Option as of the Claim Date; or
(2) The Account Value on the Claim Date.
GM-VA-98 Page 20
<PAGE>
4.02 Description of Option Package I (Cont'd):
On the Claim Date, if the amount of the death
benefit is greater than the Account Value, the
amount by which the death benefit exceeds the
Account Value will be deposited and allocated to
the money market fund available through the
Separate Account.
The amount paid to the Beneficiary will equal the
Adjusted Account Value on the date the payment
request is processed. This amount may be greater
or less than the amount of the death benefit on
the Claim Date. The Beneficiary may elect a death
benefit payment option as permitted in Section III
Death Benefit Options Available to Beneficiary.
(b) Death of the (Contract) Holder if the (Contract) Holder
is not the Annuitant.
On the Claim Date, the amount of the death benefit equals
the Account Value.
The amount paid to the Beneficiary will equal the
Adjusted Account Value on the date the payment request is
processed. A Deferred Sales Charge may apply to any full
or partial payment of the death benefit. The Beneficiary
may elect a death benefit payment option as permitted in
Section III - Death Benefit Options Available to
Beneficiary.
(c) Death of a spouse who is the Beneficiary of a (Contract)
Holder/Annuitant and who becomes a successor (Contract)
Holder/ Annuitant.
The amount of the death benefit paid to the Beneficiary
at the death of a successor (Contract) Holder/Annuitant
is the greater of the values as described in (a) above
except that in calculating (a)(1), the Account Value on
the Claim Date for the prior (Contract) Holder's death is
treated as the initial Purchase Payment.
Charges to Separate Account:
See Schedule-Accumulation Period.
4.03 Description of Option Package II:
Deferred Sales Charge:
In addition to the events described in Section III - Deferred
Sales Charge, the total amount that may be withdrawn each Account
Year without a Deferred Sales Charge cannot exceed 10% of the
Account Value less:
(1) Any amount(s) withdrawn and/or requested for withdrawal
under a Systematic Distribution Option, or
(2) Any amount(s) taken as a minimum required distribution as
described in Section III - Deferred Sales Charge.
No Deferred Sales Charge is deducted from any portion of the
Purchase Payment(s) which is withdrawn:
If the Annuitant has spent at least 45 consecutive days in
a licensed nursing care facility and each of the following
conditions are met:
(1) More than one Account Year has elapsed since the
Schedule Effective Date; and
(2) The withdrawal is requested within three years of
admission to a licensed nursing care facility.
This waiver does not apply if the Annuitant was in a
licensed nursing care facility for at least one day during
the two week period immediately preceding or following the
Schedule Effective Date.
GM-VA-98 Page 21
<PAGE>
4.03 Description of Option Package II (Cont'd):
Death Benefit Calculation During the Accumulation Period:
If the (Contract) Holder or Annuitant dies before an Annuity
Payout Option starts, the Beneficiary is entitled to a death
benefit. If the Account is owned jointly, the death benefit
applies at the death of the first joint (Contract) Holder to die.
The amount of the death benefit is determined as follows:
(a) Death of the Annuitant.
The death benefit is the greatest of:
(1) The sum of all Purchase Payment(s) made, adjusted
for amount(s) withdrawn or applied to an Annuity
Payout Option as of the Claim Date; or
(2) The Account Value on the Claim Date; or
(3) The "Step-up Value" on the Claim Date.
On the Schedule Effective Date, the Step-up Value is the
greater of:
(1) The Account Value; or
(2) The Step-up Value, if any, calculated on the
anniversary prior to the Schedule Effective Date,
adjusted for Purchase Payments(s) made and
amount(s) withdrawn or applied to an Annuity
Payout Option during the prior Account Year.
Thereafter, on each anniversary of the Schedule
Effective Date until the anniversary immediately
preceding the Annuitant's 85th birthday or death,
whichever is earlier, the Step-up Value is equal
to the greater of:
(a) The Step-up Value most recently
calculated, adjusted for Purchase
Payment(s) made and amount(s) withdrawn
or applied to an Annuity Payout Option
during the prior Account Year; or
(b) The Account Value on that anniversary of
the Schedule Effective Date.
On the Claim Date, the Step-up Value
shall equal the Step-up Value calculated
prior to death. It is adjusted for
Purchase Payment(s) made and amount(s)
withdrawn or applied to an Annuity Payout
Option since the anniversary on which the
Step-up Value was calculated.
On the Claim Date, if the amount of the death benefit is greater
than the Account Value, the amount by which the death benefit
exceeds the Account Value will be deposited and allocated to the
money market fund available through the Separate Account.
The amount paid to the Beneficiary will equal the Adjusted Account
Value on the date the payment request is processed. This amount
may be greater or less than the amount of the death benefit on the
Claim Date. The Beneficiary may elect a death benefit payment
option as permitted in Section III - Death Benefit Options
Available to the Beneficiary.
(b) Death of the (Contract) Holder if the (Contract) Holder is
not the Annuitant.
On the Claim Date, the amount of the death benefit equals
the Account Value.
The amount paid to the Beneficiary will equal the Adjusted
Account Value on the date the payment request is
processed. A Deferred Sales Charge may apply to any full
or partial payment of the death benefit. The Beneficiary
may elect a death benefit payment option as permitted in
Section III - Death Benefit Options Available to the
Beneficiary.
GM-VA-98 Page 22
<PAGE>
4.03 Description of Option Package II (Cont'd):
(c) Death of a spouse who is the Beneficiary of a (Contract)
Holder/Annuitant and who becomes a successor (Contract)
Holder/ Annuitant.
The amount of the death benefit paid to the Beneficiary at
the death of a successor (Contract) Holder/Annuitant is
the greater of the values as described in (a) above except
that:
(1) In calculating (a)(1), the Account Value on the
Claim Date for the prior (Contract) Holder's death
is treated as the initial Purchase Payment; and
(2) In calculating (a)(3), the Step-up Value on the
Claim Date for the prior (Contract) Holder's death
is the initial Step-up Value.
Charges to Separate Account:
See Schedule-Accumulation Period.
4.04 Description of Option Package III:
Deferred Sales Charge:
In addition to the events described in Section III - Deferred
Sales Charge, the total amount that may be withdrawn each Account
Year without a Deferred Sales Charge cannot exceed 10% of the
Account Value less:
(1) Any amount(s) withdrawn and/or requested for withdrawal
under a Systematic Distribution Option, or
(2) Any amount(s) taken as a minimum required distribution as
described in Section III - Deferred Sales Charge.
If the entire 10% of Account Value free of Deferred Sales Charge
is not taken in any Account Year, the (Contract) Holder may
accumulate in successive Account Years the percentage not taken.
The amount eligible each Account Year for withdrawal without a
Deferred Sales Charge cannot exceed 30% of the Account Value less
any amount(s) withdrawn and/or requested for withdrawal under a
Systematic Distribution Option, or taken as a minimum required
distribution as described in Section III - Deferred Sales Charge,
during the Account Year.
No Deferred Sales Charge is deducted from any portion of the
Purchase Payment(s) which is withdrawn:
If the Annuitant has spent at least 45 consecutive days in
a licensed nursing care facility and each of the following
conditions are met:
(1) More than one Account Year has elapsed since the
Schedule Effective Date; and
(2) The withdrawal is requested within three years of
admission to a licensed nursing care facility.
This waiver does not apply if the Annuitant was in a
licensed nursing care facility for at least one day during
the two week period immediately preceding or following the
Schedule Effective Date.
GM-VA-98 Page 23
<PAGE>
4.04 Description of Option Package III (Cont'd):
Death Benefit Calculation During the Accumulation Period:
If the (Contract) Holder or Annuitant dies before an Annuity
Payout Option starts, the Beneficiary is entitled to a death
benefit. If the Account is owned jointly, the death benefit
applies at the death of the first joint (Contract) Holder to die.
The amount of the death benefit is determined as follows:
(a) Death of the Annuitant.
The death benefit is the greatest of:
(1) The sum of all Purchase Payment(s) made, adjusted
for amount(s) withdrawn or applied to an Annuity
Payout Option as of the Claim Date; or
(2) The Account Value on the Claim Date; or
(3) The Step-up Value on the Claim Date; or
(4) The "Roll-up Value" on the Claim Date.
On the Schedule Effective Date, the Step-up Value is the greater
of:
(1) The Account Value; or
(2) The Step-up Value, if any, calculated on the anniversary
prior to the Schedule Effective Date, adjusted for
Purchase Payments(s) made and amount(s) withdrawn or
applied to an Annuity Payout Option during the prior
Account Year.
Thereafter, on each anniversary of the Schedule Effective Date
until the anniversary immediately preceding the Annuitant's 85th
birthday or death, whichever is earlier, the Step-up Value is
equal to the greater of:
(a) The Step-up Value most recently calculated, adjusted for
Purchase Payment(s) made and amount(s) withdrawn or
applied to an Annuity Payout Option during the prior
Account Year; or
(b) The Account Value on that anniversary of the Schedule
Effective Date.
On the Claim Date, the Step-up Value shall equal the Step-up Value
calculated prior to death. It is adjusted for Purchase Payment(s)
made and amount(s) withdrawn or applied to an Annuity Payout
Option since the anniversary on which the Step-up Value was
calculated.
On the Schedule Effective Date, the Roll-up Value is equal to the
Account Value.
Thereafter, on each anniversary of the Schedule Effective Date
until the anniversary immediately preceding the Annuitant's 76th
birthday or death, whichever is earlier, the Roll-up Value is
equal to the Roll-up Value most recently calculated, multiplied by
a factor of 1.05, adjusted for Purchase Payment(s) made, and
amount(s) withdrawn or applied to an Annuity Payout Option during
the prior Account Year. The Roll-up Value may not exceed 200% of
the Account Value on the Schedule Effective Date, adjusted for
additional Purchase Payments made, and amount(s) withdrawn or
applied to an Annuity Payout Option.
On the Claim Date, the Roll-up Value shall equal the Roll-up Value
calculated prior to death. It is adjusted for additional Purchase
Payment(s) made and amount(s) withdrawn or applied to an Annuity
Payout Option since the anniversary on which the Roll-up Value was
calculated.
On the Claim Date, if the amount of the death benefit is greater
than the Account Value, the amount by which the death benefit
exceeds the Account Value will be deposited and allocated to the
money market fund available through the Separate Account.
The amount paid to the Beneficiary will equal the Adjusted Account
Value on the date the payment request is processed. This amount
may be greater or less than the amount of the death benefit on the
Claim Date. The Beneficiary may elect a death benefit payment
option as permitted in Section III - Death Benefit Options
Available to the Beneficiary.
GM-VA-98 Page 24
<PAGE>
4.04 Description of Option Package III (Cont'd):
(b) Death of the (Contract) Holder if the (Contract) Holder is
not the Annuitant.
On the Claim Date, the amount of the death benefit equals
the Account Value.
The amount paid to the Beneficiary will equal the Adjusted
Account Value on the date the payment request is
processed. A Deferred Sales Charge may apply to any full
or partial payment of the death benefit. The Beneficiary
may elect a death benefit payment option as permitted in
Section III - Death Benefit Options Available to the
Beneficiary.
(c) Death of a spouse who is the Beneficiary of a (Contract)
Holder/Annuitant and who becomes a successor (Contract)
Holder/ Annuitant.
The amount of the death benefit paid to the Beneficiary at
the death of a successor (Contract) Holder/Annuitant is
the greater of the values as described in (a) above except
that:
(1) In calculating (a)(1), the Account Value on the
Claim Date for the prior (Contract) Holder's death
is treated as the initial Purchase Payment; and
(2) In calculating (a)(3), the Step-up Value on the
Claim Date for the prior (Contract) Holder's death
is the initial Step-up Value; and
(3) In calculating (a)(4), the Roll-up Value on the
Claim Date for the prior (Contract) Holder's death
is the initial Roll-Up Value.
Charges to Separate Account:
See Schedule-Accumulation Period.
V. Annuity Payout Provisions
- --------------------------------------------------------------------------------
5.01 Annuity Payout Options:
Annuity Payout 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.
Annuity Payout Option 2 - Life income based on the life of one
Annuitant:
When this option is elected, the Certificate Holder must 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: when the Annuitant dies, the Beneficiary will
receive a lump sum payment equal to the amount applied to
the Annuity Payout 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
Payout Option is allocated to a fixed Annuity Payment.
GM-VA-98 Page 25
<PAGE>
5.01 Annuity Payout Options (Cont'd):
Annuity Payout 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 primary Annuitant and the other the secondary
Annuitant, and cease 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;
(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
secondary Annuitant and 50% of the payment to continue at
the death of the primary Annuitant; or
(f) 100% of the payment continues after the first death with
a cash refund feature. When the primary Annuitant and
secondary Annuitant die, the Beneficiary will receive a
lump sum payment equal to the amount applied to the
Annuity Payout 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 Payout Option is
allocated to a fixed Annuity Payment.
If a fixed Annuity Payment is chosen under Annuity Payout Option
1, 2 (a) or (b), or 3 (a) or (d), the Certificate Holder may
elect, at the time the Annuity Payout Option is selected, an
annual increase of one, two or three percent compounded annually.
As allowed under applicable state law, Aetna reserves the right to
offer additional Annuity Payout Options.
5.02 Annuity Payment Choices:
The Certificate Holder may tell Aetna to apply any portion of the
Adjusted Account Value (minus any premium tax, if applicable,) to
any Annuity Payout Option . The first Annuity Payment may not be
earlier than one calendar year after the initial Purchase Payment
nor later than the later of:
(a) The first day of the month following the Annuitant's 85th
birthday; or
(b) The tenth anniversary of the last Purchase Payment. In
lieu of the election of an Annuity Payout Option, the
Certificate Holder may tell Aetna to make a lump sum
payment.
When an Annuity Payout Option is chosen, Aetna must also be told
if payments are to be made other than monthly and whether to pay:
(a) A fixed Annuity Payment using the General Account;
(b) A variable Annuity Payment using any of the Subaccount(s)
available under this Contract for the Annuity Period; or
(c) A combination of (a) and (b).
If a fixed Annuity Payment is chosen, the payment rate for the
option chosen, shown on the tables immediately following, reflects
at least the minimum guaranteed interest rate (see Schedule -
Annuity Period), but may reflect a higher interest rate.
If a variable Annuity Payment is chosen, the initial Annuity
Payment for the option elected reflects the Assumed Interest Rate
(AIR) elected (see Schedule - Annuity Period). The Certificate
Holder must allocate specified amounts among the Subaccounts
available during the Annuity Period. Aetna reserves the right to
limit the number of Subaccounts available at one time and to limit
the number of Subaccounts the Certificate Holder may select during
the Annuity Period. Subject to terms and conditions established by
Aetna, the Certificate Holder may transfer all or any portion of
the amount allocated to a Subaccount to another Subaccount. The
number of Transfers allowed without charge each year is shown on
Schedule - Annuity Period.
Transfer requests must be submitted as a percentage of the
allocation among the Subaccounts. Aetna reserves the right to
establish a minimum transfer amount. Transfers will be effective
as of the Valuation Date in which Aetna receives a transfer
request in good order at its home office.
GM-VA-98 Page 26
<PAGE>
5.03 Terms of Annuity Payout Options:
(a) When payments start, the age of the Annuitant plus the
number of years for which payments are guaranteed must
not exceed 95.
(b) An Annuity Payout Option may not be elected if the first
payment would be less than $50 or if the total payments
in a year would be less than $250 (less if required by
state law). Aetna reserves the right to increase the
minimum first Annuity Payment amount and the minimum
annual Annuity payment amount based upon increases
reflected in the Consumer Price Index-Urban, (CPI-U)
since July 1, 1993.
(c) If a fixed Annuity Payment is chosen Aetna will use the
applicable current rate if it will provide higher fixed
Annuity Payments.
(d) For purposes of calculating the guaranteed first payment
of a variable or fixed Annuity Payment, the primary
Annuitant's and secondary Annuitant's adjusted age will
be used. The primary Annuitant's and secondary
Annuitant's adjusted age is his or her age as of the
birthday closest to the Annuity Payment commencement date
reduced by one year for commencement dates occurring
during the period of time from July 1, 1993 through
December 31, 1999. The primary Annuitant's and secondary
Annuitant's age will be reduced by two years for
commencement dates occurring during the period of time
from January 1, 2000 through December 31, 2009. The
primary Annuitant's and secondary Annuitant's age will be
reduced by one additional year for Annuity commencement
dates occurring in each succeeding decade.
The attached payment rates for Annuity Payout Options 2
and 3 are based on mortality from 1983 Table a.
(e) Assumed Interest Rate (AIR) is the interest rate used to
determine the amount of the first Annuity Payment under a
variable Annuity Payment as shown on Schedule - Annuity
Period. 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,
(see Schedule - Annuity Period).
(f) Once elected, Annuity Payments cannot be commuted to a
lump sum except for variable Annuity Payments under
Annuity Payout Option 1.
5.04 Death of Annuitant/Beneficiary:
(a) Certificate Holder is the Annuitant: When the Certificate
Holder is the Annuitant and the Annuitant dies under
Annuity Payout Option 1 or 2(b), or both the primary
Annuitant and the secondary Annuitant die under Annuity
Payout Option 3(d), any remaining payments will continue
to the Beneficiary, or if elected by the Beneficiary and
not prohibited by the Certificate Holder in the
Beneficiary designation, the present value of any
remaining payments will be paid in one sum to the
Beneficiary. If Annuity Payout Option 3 has been elected
and the Certificate Holder dies, the remaining payments
will continue to the successor payee. If no successor
payee has been designated, the Beneficiary will be
treated as the successor payee. If the Account has joint
Certificate Holders, the surviving joint Certificate
Holder will be deemed the successor payee.
(b) Certificate Holder is not the Annuitant: When the
Certificate Holder is not the Annuitant and the
Certificate Holder dies, any remaining payments will
continue to the successor payee. If no successor payee
has been designated, the Beneficiary will be treated as
the successor payee. If the Account has joint Certificate
Holders, the surviving joint Certificate Holder will be
deemed the successor payee.
If the Annuitant dies under Annuity Payout Option 1 or
2(b), or both the primary Annuitant and secondary
Annuitant die under Annuity Payout Option 3(d), any
remaining payments will continue to the Beneficiary, or
if elected by the Beneficiary and not prohibited by the
Certificate Holder in the Beneficiary designation, the
present value of any remaining payments will be paid in
one sum to the Beneficiary. If Annuity Payout Option 3
has been elected and the Annuitant dies, the remaining
payments will continue to the Certificate Holder.
GM-VA-98 Page 27
<PAGE>
5.04 Death of Annuitant/Beneficiary (Cont'd):
(c) No Beneficiary Named/Surviving: If there is no
Beneficiary, the present value of any remaining payments
will be paid in one sum to the Certificate Holder, or if
the Certificate Holder is not living, then to the
Certificate Holder's estate.
(d) If the Beneficiary or the successor payee dies while
receiving Annuity Payments, any remaining payments will
continue to the successor Beneficiary/payee or upon
election by the successor Beneficiary/payee, the present
value of any remaining payments will be paid in one sum
to the successor Beneficiary/payee. If no successor
Beneficiary/payee has been designated, the present value
of any remaining payments will be paid in one sum to the
Beneficiary's/payee's estate.
(e) The present value will be determined as of the Valuation
Date in which proof of death acceptable to Aetna and a
request for payment is received at Aetna's home office.
5.05 Annuity Units - Separate Account:
The number of annuity units is based on the amount of the first
variable Annuity Payment which is equal to:
(a) The portion of the Account Value applied to pay a
variable Annuity Payment (minus any applicable premium
tax); divided by
(b) 1,000; multiplied by
(c) The payment rate on the tables immediately following, for
the option chosen.
Such amount, or portion, of the variable Annuity Payment will be
divided by the appropriate annuity unit value (see Section V -
Annuity Unit Value - Separate Account) on the tenth Valuation Date
before the due date of the first payment to determine the number
of annuity units. The number of annuity units remains fixed. Each
future payment is equal to the sum of the products of each annuity
unit value multiplied by the appropriate number of annuity units.
The annuity unit value on the tenth Valuation Date prior to the
due date of the payment is used.
5.06 Annuity Unit Value - Separate Account:
For any Valuation Date, an annuity unit value is equal to:
(a) The value for the previous Valuation Date; multiplied by
(b) The annuity net return factor(s) (see Section V - Net
Return Factor(s) - Separate Account) for the Valuation
Date; multiplied by
(c) A factor to reflect the AIR (see Schedule - Annuity
Period).
The annuity unit value and Annuity Payment amount may go up or
down due to investment gain or loss.
5.07 Net Return Factor(s) - Separate Account:
The net return factor(s) are used to compute all variable Annuity
Payments for any Subaccount.
The net return factor for each Subaccount 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 Subaccount at the end of a
Valuation Date; minus
(b) The value of the shares of the Subaccount at the start of
the Valuation Date; plus or minus
(c) Taxes (or reserves for taxes) on the Separate Account (if
any); divided by
(d) The total value of the annuity units at the start of the
Valuation Date; minus
GM-VA-98 Page 28
<PAGE>
5.07 Net Return Factor(s) - Separate Account (Cont'd):
(e) A daily charge for mortality and expense risks, which may
include profit, and a daily administrative charge at the
annual rate as shown on Schedule - Annuity Period.
A net return rate may be more or less than 0%.
The value of a share of the Subaccount is equal to the net assets
of the Subaccount divided by the number of shares outstanding.
Annuity Payments shall not be changed due to changes in the
mortality or expense results or administrative charges.
GM-VA-98 Page 29
<PAGE>
OPTION 1: Payments for a Specified Period
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Monthly Amount for Each $1,000*
Rates for a Fixed Annuity with a 3% Guaranteed Interest Rate
- --------------------------------------------------------------------------------
Years Payment Years Payment
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
5 $17.91 18 $5.96
6 15.14 19 5.73
7 13.16 20 5.51
8 11.68 21 5.32
9 10.53 22 5.15
10 9.61 23 4.99
11 8.86 24 4.84
12 8.24 25 4.71
13 7.71 26 4.59
14 7.26 27 4.47
15 6.87 28 4.37
16 6.53 29 4.27
17 6.23 30 4.18
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
First Monthly Amount for Each $1,000*
Rates for a Variable Annuity with a 3.5% AIR
- --------------------------------------------------------------------------------
Years Payment Years Payment
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
5 $18.12 18 $6.20
6 15.35 19 5.97
7 13.38 20 5.75
8 11.90 21 5.56
9 10.75 22 5.39
10 9.83 23 5.24
11 9.09 24 5.09
12 8.46 25 4.96
13 7.94 26 4.84
14 7.49 27 4.73
15 7.10 28 4.63
16 6.76 29 4.53
17 6.47 30 4.45
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
First Monthly Amount for Each $1,000*
Rates for a Variable Annuity with a 5% AIR
- --------------------------------------------------------------------------------
Years Payment Years Payment
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
5 $18.74 18 $6.94
6 15.99 19 6.71
7 14.02 20 6.51
8 12.56 21 6.33
9 11.42 22 6.17
10 10.51 23 6.02
11 9.77 24 5.88
12 9.16 25 5.76
13 8.64 26 5.65
14 8.20 27 5.54
15 7.82 28 5.45
16 7.49 29 5.36
17 7.20 30 5.28
- --------------------------------------------------------------------------------
</TABLE>
* Net of any applicable premium tax deduction
GM-VA-98 Page 30
<PAGE>
Option 2: Life Income Based on the Life of One Annuitant
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Monthly Payment Amount for Each $1,000*
Rates for a Fixed Annuity with 3% Guaranteed Interest Rate
- ------------------------------------------------------------------------------------------------------------------------------------
Option 2(a): Option 2(b): Option 2(b): Option 2(b): Option 2(b): Option 2(c):
Adjusted payments for payments payments payments payments Cash Refund
Age of life guaranteed guaranteed guaranteed guaranteed
Annuitant 5 years 10 years 15 years 20 years
---------------------------------------------------------------------------------------------------------------------
Male Female Male Female Male Female Male Female Male Female Male Female
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <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 $4.04 $3.78
51 4.34 3.97 4.33 3.96 4.30 3.95 4.23 3.92 4.14 3.88 4.10 3.84
52 4.43 4.03 4.41 4.03 4.37 4.01 4.30 3.98 4.20 3.93 4.16 3.89
53 4.51 4.10 4.50 4.10 4.45 4.08 4.37 4.04 4.26 3.99 4.23 3.95
54 4.60 4.18 4.59 4.17 4.54 4.15 4.45 4.11 4.32 4.04 4.29 4.01
55 4.70 4.25 4.68 4.25 4.62 4.22 4.53 4.18 4.39 4.11 4.37 4.07
56 4.80 4.34 4.78 4.33 4.72 4.30 4.61 4.25 4.45 4.17 4.44 4.13
57 4.91 4.42 4.89 4.41 4.82 4.38 4.69 4.32 4.51 4.23 4.52 4.20
58 5.03 4.52 5.00 4.51 4.92 4.47 4.78 4.40 4.58 4.30 4.61 4.28
59 5.15 4.61 5.12 4.60 5.03 4.56 4.87 4.48 4.65 4.37 4.69 4.35
60 5.28 4.72 5.25 4.70 5.14 4.66 4.96 4.57 4.71 4.44 4.78 4.43
61 5.43 4.83 5.39 4.81 5.27 4.76 5.06 4.66 4.78 4.51 4.88 4.52
62 5.58 4.95 5.53 4.93 5.39 4.87 5.16 4.75 4.84 4.58 4.98 4.60
63 5.74 5.08 5.69 5.05 5.53 4.98 5.26 4.85 4.90 4.65 5.09 4.70
64 5.91 5.21 5.85 5.18 5.66 5.10 5.36 4.95 4.96 4.72 5.20 4.80
65 6.10 5.36 6.03 5.32 5.81 5.22 5.46 5.05 5.02 4.79 5.31 4.90
66 6.30 5.51 6.21 5.47 5.96 5.36 5.56 5.16 5.08 4.86 5.44 5.01
67 6.51 5.67 6.41 5.63 6.12 5.50 5.66 5.26 5.13 4.93 5.56 5.12
68 6.73 5.85 6.62 5.80 6.28 5.65 5.77 5.37 5.18 5.00 5.70 5.24
69 6.97 6.04 6.84 5.98 6.44 5.80 5.86 5.49 5.23 5.06 5.84 5.37
70 7.23 6.25 7.07 6.18 6.61 5.97 5.96 5.60 5.27 5.12 5.98 5.51
71 7.51 6.47 7.32 6.39 6.79 6.14 6.05 5.71 5.31 5.18 6.14 5.65
72 7.80 6.71 7.58 6.62 6.96 6.32 6.14 5.83 5.34 5.23 6.30 5.80
73 8.12 6.98 7.85 6.86 7.14 6.50 6.23 5.94 5.37 5.28 6.47 5.96
74 8.46 7.26 8.14 7.12 7.32 6.69 6.31 6.04 5.40 5.32 6.65 6.13
75 8.82 7.57 8.45 7.40 7.50 6.89 6.38 6.14 5.42 5.35 6.83 6.31
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Net of any applicable premium tax deduction
GM-VA-98 Page 31
<PAGE>
Option 2: Life Income Based on the Life of One Annuitant
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
First Monthly Payment Amount for Each $1,000*
Rates for a Variable Annuity with 3.5% AIR
- -------------------------------------------------------------------------------------------------------------------
Option 2(a): Option 2(b): Option 2(b): Option 2(b): Option 2(b):
Adjusted payments for payments payments payments payments
Age of life guaranteed guaranteed guaranteed guaranteed
Annuitant 5 years 10 years 15 years 20 years
---------------------------------------------------------------------------------------------------
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>
* Net of any applicable premium tax deduction
GM-VA-98 Page 32
<PAGE>
Option 2: Life Income Based on the Life of One Annuitant
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
First Monthly Payment Amount for Each $1,000*
Rates for a Variable Annuity with 5% AIR
- -------------------------------------------------------------------------------------------------------------------
Option 2(a): Option 2(b): Option 2(b): Option 2(b): Option 2(b):
Adjusted payments for payments payments payments payments
Age of life guaranteed guaranteed guaranteed guaranteed
Annuitant 5 years 10 years 15 years 20 years
---------------------------------------------------------------------------------------------------
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 5.97 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>
* Net of any applicable premium tax deduction
GM-VA-98 Page 33
<PAGE>
Option 3: Life Income Based on the Lives of Two Annuitants
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Monthly Payment Amount for Each $1,000*
Rates for a Fixed Annuity with 3% Guaranteed Interest Rate
Primary Annuitant is Female and Secondary Annuitant is Male
- -----------------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- ----------------------------
payments
guaranteed
Primary Secondary 10 years
Annuitant Annuitant Option 3(a) Option 3(b) Option 3(c) Option 3(d) Option 3(e) Option 3(f)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
55 50 $3.75 $4.07 $4.26 $3.75 $3.98 $3.72
55 55 3.88 4.25 4.47 3.87 4.06 3.85
55 60 3.99 4.44 4.71 3.98 4.12 3.94
60 55 4.06 4.47 4.71 4.06 4.37 4.02
60 60 4.24 4.71 4.99 4.23 4.47 4.17
60 65 4.38 4.97 5.32 4.38 4.54 4.29
65 60 4.49 5.01 5.32 4.48 4.89 4.39
65 65 4.72 5.33 5.70 4.71 5.02 4.59
65 70 4.93 5.68 6.15 4.91 5.14 4.74
70 65 5.07 5.75 6.17 5.05 5.60 4.87
70 70 5.40 6.21 6.70 5.36 5.79 5.13
70 75 5.69 6.68 7.32 5.62 5.96 5.29
75 70 5.89 6.82 7.40 5.81 6.63 5.48
75 75 6.37 7.45 8.15 6.23 6.92 5.78
75 80 6.78 8.11 8.99 6.54 7.15 5.93
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Net of any applicable premium tax deduction
GM-VA-98 Page 34
<PAGE>
Option 3: Life Income Based on the Lives of Two Annuitants
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
First Monthly Payment Amount for Each $1,000*
Rates for a Variable Annuity with 3.5% AIR
Primary Annuitant Is Female and Secondary Annuitant Is Male
- -------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- ----------------------------------
payments
guaranteed
Primary Secondary 10 years
Annuitant Annuitant Option 3(a) Option 3(b) Option 3(c) Option 3(d) Option 3(e)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $4.03 $4.36 $4.55 $4.03 $4.27
55 55 4.16 4.54 4.76 4.15 4.34
55 60 4.27 4.73 5.00 4.26 4.40
60 55 4.34 4.76 5.00 4.34 4.65
60 60 4.51 4.99 5.27 4.50 4.74
60 65 4.66 5.25 5.61 4.65 4.82
65 60 4.76 5.29 5.60 4.75 5.16
65 65 4.99 5.61 5.99 4.98 5.30
65 70 5.19 5.97 6.44 5.17 5.41
70 65 5.34 6.03 6.46 5.31 5.88
70 70 5.67 6.49 6.99 5.62 6.07
70 75 5.95 6.96 7.61 5.87 6.23
75 70 6.16 7.10 7.68 6.07 6.90
75 75 6.64 7.73 8.43 6.48 7.19
75 80 7.04 8.39 9.29 6.79 7.42
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Net of any applicable premium tax deduction
GM-VA-98 Page 35
<PAGE>
Option 3: Life Income Based on the Lives of Two Annuitants
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
First Monthly Payment Amount for Each $1,000*
Rates for a Variable Annuity with 5% AIR
Primary Annuitant is Female and Secondary Annuitant is Male
- -------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- ----------------------------------
payments
guaranteed
Primary Secondary 10 years
Annuitant Annuitant Option 3(a) Option 3(b) Option 3(c) Option 3(d) Option 3(e)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $4.93 $5.27 $5.46 $4.93 $5.17
55 55 5.04 5.44 5.66 5.04 5.23
55 60 5.15 5.63 5.91 5.14 5.29
60 55 5.21 5.65 5.89 5.21 5.53
60 60 5.37 5.87 6.16 5.37 5.62
60 65 5.52 6.14 6.51 5.51 5.70
65 60 5.61 6.16 6.49 5.60 6.03
65 65 5.83 6.49 6.87 5.82 6.15
65 70 6.04 6.84 7.34 6.00 6.27
70 65 6.17 6.90 7.33 6.13 6.73
70 70 6.49 7.35 7.87 6.44 6.91
70 75 6.77 7.84 8.51 6.68 7.07
75 70 6.97 7.96 8.56 6.87 7.75
75 75 7.45 8.60 9.33 7.27 8.04
75 80 7.86 9.28 10.20 7.57 8.27
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Net of any applicable premium tax deduction
GM-VA-98 Page 36
<PAGE>
Option 3: Life Income Based on the Lives of Two Annuitants
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Monthly Payment Amount for Each $1,000*
Rates for a Fixed Annuity with 3% Guaranteed Interest Rate
Primary Annuitant is Male and Secondary Annuitant is Female
- -----------------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- ----------------------------
payments
guaranteed
Primary Secondary 10 years
Annuitant Annuitant Option 3(a) Option 3(b) Option 3(c) Option 3(d) Option 3(e) Option 3(f)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
55 50 $3.69 $4.05 $4.27 $3.69 $4.13 $3.67
55 55 3.88 4.25 4.47 3.87 4.25 3.85
55 60 4.06 4.47 4.71 4.06 4.36 4.02
60 55 3.99 4.44 4.71 3.98 4.55 3.94
60 60 4.24 4.71 4.99 4.23 4.70 4.17
60 65 4.49 5.01 5.32 4.48 4.85 4.39
65 60 4.38 4.97 5.32 4.38 5.10 4.29
65 65 4.72 5.33 5.70 4.71 5.32 4.59
65 70 5.07 5.75 6.17 5.05 5.54 4.87
70 65 4.93 5.68 6.15 4.91 5.86 4.74
70 70 5.40 6.21 6.70 5.36 6.18 5.13
70 75 5.89 6.82 7.40 5.81 6.49 5.48
75 70 5.69 6.68 7.32 5.62 6.92 5.29
75 75 6.37 7.45 8.15 6.23 7.40 5.78
75 80 7.07 8.34 9.16 6.78 7.85 6.17
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Net of any applicable premium tax deduction
GM-VA-98 Page 37
<PAGE>
Option 3: Life Income Based on the Lives of Two Annuitants
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
First Monthly Payment Amount for Each $1,000*
Rates for a Variable Annuity with 3.5% AIR
Primary Annuitant is Male and Secondary Annuitant is Female
- -------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- ----------------------------------
payments
guaranteed
Primary Secondary 10 years
Annuitant Annuitant Option 3(a) Option 3(b) Option 3(c) Option 3(d) Option 3(e)
- -------------------------------------------------------------------------------------------------------------------------
<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>
* Net of any applicable premium tax deduction
GM-VA-98 Page 38
<PAGE>
Option 3: Life Income Based on the Lives of Two Annuitants
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
First Monthly Payment Amount for Each $1,000*
Rates for a Variable Annuity with 5% AIR
Primary Annuitant Is Male and Secondary Annuitant is Female
- -------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- ----------------------------------
payments
guaranteed
Primary Secondary 10 years
Annuitant Annuitant Option 3(a) Option 3(b) Option 3(c) Option 3(d) Option 3(e)
- -------------------------------------------------------------------------------------------------------------------------
<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>
* Net of any applicable premium tax deduction
GM-VA-98 Page 39
<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. AMOUNTS ALLOCATED TO THE GUARANTEED ACCOUNT, IF WITHDRAWN
BEFORE THE GUARANTEED TERM MATURITY DATE, MAY BE SUBJECT TO A MARKET VALUE
ADJUSTMENT. THE MARKET VALUE ADJUSTMENT MAY RESULT IN AN INCREASE, OR A
DECREASE, IN THE ACCOUNT VALUE.
GM-VA-98
----------------------------------------------------
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 to
request information about this Contract.
Aetna Life Insurance and Annuity Company, a stock
company, herein called Aetna, agrees to pay the
benefits stated in this Contract.
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
Certificate of Group To the Certificate Holder:
Annuity Coverage
Aetna certifies that coverage is in force for you
under the stated Group Annuity Contract and Account
numbers. All data shown here is taken from Aetna
records and is based upon information furnished by
you.
This Certificate is a summary of the Group Annuity
Contract provisions. It replaces any and all prior
certificates or endorsements issued to you under the
stated Contract and Account numbers. This
Certificate is for information only and is not part
of the Contract. The Schedule - Accumulation Period
reflects the Option Package you elected and its
effective date.
The variable features of the Group Contract are
described in parts III, IV and V.
- --------------------------------------------------------------------------------
Right to Cancel You may cancel your Account within 10 days
by returning it to the agent from whom it was
purchased, or to Aetna at the address shown above.
Within seven days of receiving this Certificate at
its home office, Aetna will return the amount of
Purchase Payment(s) received, plus any increase, or
minus any decrease, on the amount, if any, of
Purchase Payment(s) allocated to the Separate
Account Subaccount(s).
</TABLE>
<TABLE>
<S> <C>
President Secretary
- ------------------------------------------------------------------- ----------------------------------------------------------------
Contract Holder Group Annuity Contract No.
SPECIMEN SPECIMEN
- ------------------------------------------------------------------- ----------------------------------------------------------------
Certificate Holder Account No.
SPECIMEN SPECIMEN
SPECIMEN Account Effective Date
SPECIMEN
- ------------------------------------------------------------------- ----------------------------------------------------------------
Annuitant Name Type of Plan
SPECIMEN SPECIMEN
</TABLE>
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. AMOUNTS ALLOCATED TO THE GUARANTEED ACCOUNT, IF WITHDRAWN
BEFORE THE GUARANTEED TERM MATURITY DATE, MAY BE SUBJECT TO A MARKET VALUE
ADJUSTMENT. THE MARKET VALUE ADJUSTMENT MAY RESULT IN AN INCREASE OR A DECREASE
IN THE ACCOUNT VALUE.
GMC-VA-98
<PAGE>
Specifications
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Guaranteed There is a minimum guaranteed rate for Purchase Payment(s) held in the Guaranteed Account. (See Schedule -
Rate Accumulation Period.)
- -----------------------------------------------------------------------------------------------------------------------------------
Deductions from the There will be deductions for mortality and expense risk as well as administrative charges. (See Schedule -
Separate Account Accumulation Period and Schedule - Annuity Period.)
- -----------------------------------------------------------------------------------------------------------------------------------
Deduction from Purchase Purchase Payment(s) may be subject to a deduction for premium taxes. (See Section III - Purchase Payment.)
Payment(s)
- -----------------------------------------------------------------------------------------------------------------------------------
Deferred Sales Charge There may be a charge deducted upon withdrawal. (See Schedule - Accumulation Period.)
</TABLE>
This Contract is a legal contract and constitutes the entire legal relationship
between Aetna and the Contract Holder.
READ THIS CONTRACT CAREFULLY. This Contract sets forth, in detail, all of the
rights and obligations of both you and Aetna. THEREFORE, IT IS IMPORTANT THAT
YOU READ THIS CONTRACT CAREFULLY.
<PAGE>
Schedule - Accumulation Period
Option Package
- --------------------------------------------------------------------------------
Option Package Selected - A different Schedule - Accumulation Period may apply
to each Account depending upon the Option Package selected. (See Section IV -
OPTION PACKAGES.)
Option Package I was selected.
Schedule Effective Date
June 1, 1998
Separate Account
- --------------------------------------------------------------------------------
Separate Account
Variable Annuity Account B
Charges to Separate Account
A daily charge is deducted from any portion of the Account Value
allocated to the Separate Account. The deduction is the daily
equivalent of the annual effective percentage shown in the
following chart:
<TABLE>
<S> <C>
Administrative Charge 0.15%
Mortality and Expense Risk Charge 0.80%
-----
Total Separate Account Charges 0.95%
</TABLE>
Guaranteed Account
- --------------------------------------------------------------------------------
Minimum Guaranteed Rate
3.0% (effective annual rate of return)
Separate Account and Guaranteed Account
- --------------------------------------------------------------------------------
Transfers
An unlimited number of Transfers are allowed during the
Accumulation Period. Aetna allows 12 free Transfers in any Account
Year. Thereafter, Aetna reserves the right to charge $10 for each
subsequent Transfer.
Maintenance Fee
The annual Maintenance Fee is $30. If the Account Value is $50,000
or more on the date the Maintenance Fee is to be deducted, the
Maintenance Fee is $0.
GMC-VA-98 Page 3
<PAGE>
Schedule - Accumulation Period (continued)
Separate Account and Guaranteed Account
- --------------------------------------------------------------------------------
Deferred Sales Charge
For each withdrawal, the Deferred Sales Charge will be determined
as follows:
<TABLE>
<CAPTION>
Deferred Sales Charge
Length of Time from Receipt of (as percentage of
Purchase Payment (Years) Purchase Payment)
------------------------------------------------------------------
<S> <C>
Less than 2 years 7%
More than 2 but less than 4 years 6%
More than 4 but less than 5 years 5%
More than 5 but less than 6 years 4%
More than 6 but less than 7 years 3%
7 years or more 0%
</TABLE>
See Section I - DEFINITIONS for explanations.
GMC-VA-98 Page 4
<PAGE>
Schedule - Annuity Period
Separate Account - Variable Annuity Payment
- --------------------------------------------------------------------------------
Charges to Separate Account
A daily charge is deducted at an annual effective rate of l.25%
for mortality and expense risks. The administrative charge is
established upon election of an Annuity Payout Option. This charge
will not exceed 0.25%.
Assumed Interest Rate (AIR)
If a variable Annuity Payment is chosen, an AIR of 5.0% may be
elected. If 5.0% is not elected, Aetna will use an AIR of 3.5%.
The AIR factor for 3.5% per year is 0.9999058.
The AIR factor for 5.0% per year is 0.9998663.
If the portion of a variable Annuity Payment for any Subaccount is
not to decrease, the annuity return factor under the Separate
Account for that Subaccount must be:
(a) 4.75% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity Payments commence if an AIR of 3.5% is chosen; or
(b) 6.25% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity Payments commence, if an AIR of 5% is chosen.
Transfers
When a variable Annuity Payment has been elected, four free
Transfers are allowed each Account Year among the Subaccounts
available during the Annuity Period. Thereafter, Aetna reserves
the right to charge $10 for each subsequent Transfer.
General Account - Fixed Annuity Payment
- --------------------------------------------------------------------------------
Minimum Guaranteed Interest Rate
3.0% (effective annual rate of return)
See Section I - DEFINITIONS for explanations.
GMC-VA-98 Page 5
<PAGE>
Schedule - Accumulation Period
Option Package
- --------------------------------------------------------------------------------
Option Package Selected - A different Schedule - Accumulation Period may apply
to each Account depending upon the Option Package selected. (See Section IV -
OPTION PACKAGES.)
Option Package I was selected.
Schedule Effective Date
June 1, 1998
Separate Account
- --------------------------------------------------------------------------------
Separate Account
Variable Annuity Account B
Charges to Separate Account
A daily charge is deducted from any portion of the Account Value
allocated to the Separate Account. The deduction is the daily
equivalent of the annual effective percentage shown in the
following chart:
<TABLE>
<S> <C>
Administrative Charge 0.15%
Mortality and Expense Risk Charge 0.80%
-----
Total Separate Account Charges 0.95%
</TABLE>
Guaranteed Account
- --------------------------------------------------------------------------------
Minimum Guaranteed Rate
3.0% (effective annual rate of return)
Separate Account and Guaranteed Account
- --------------------------------------------------------------------------------
Transfers
An unlimited number of Transfers are allowed during the
Accumulation Period. Aetna allows 12 free Transfers in any Account
Year. Thereafter, Aetna reserves the right to charge $10 for each
subsequent Transfer.
Maintenance Fee
The annual Maintenance Fee is $30. If the Account Value is $50,000
or more on the date the Maintenance Fee is to be deducted, the
Maintenance Fee is $0.
GMC-VA-98 Page 3
<PAGE>
Schedule - Accumulation Period (continued)
Separate Account and Guaranteed Account
- --------------------------------------------------------------------------------
Deferred Sales Charge
For each withdrawal, the Deferred Sales Charge will be determined
as follows:
<TABLE>
<CAPTION>
Deferred Sales Charge
Length of Time from Receipt of (as percentage of
Purchase Payment (Years) Purchase Payment)
------------------------------------------------------------------
<S> <C>
Less than 1 year 3%
More than 1 but less than 2 years 2%
More than 2 but less than 3 years 1%
More than 3 years 0%
</TABLE>
See Section I - DEFINITIONS for explanations.
GMC-VA-98 Page 4
<PAGE>
Schedule - Annuity Period
Separate Account - Variable Annuity Payment
- --------------------------------------------------------------------------------
Charges to Separate Account
A daily charge is deducted at an annual effective rate of l.25%
for mortality and expense risks. The administrative charge is
established upon election of an Annuity Payout Option. This charge
will not exceed 0.25%.
Assumed Interest Rate (AIR)
If a variable Annuity Payment is chosen, an AIR of 5.0% may be
elected. If 5.0% is not elected, Aetna will use an AIR of 3.5%.
The AIR factor for 3.5% per year is 0.9999058.
The AIR factor for 5.0% per year is 0.9998663.
If the portion of a variable Annuity Payment for any Subaccount is
not to decrease, the annuity return factor under the Separate
Account for that Subaccount must be:
(a) 4.75% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity Payments commence if an AIR of 3.5% is chosen; or
(b) 6.25% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity Payments commence, if an AIR of 5% is chosen.
Transfers
When a variable Annuity Payment has been elected, four free
Transfers are allowed each Account Year among the Subaccounts
available during the Annuity Period. Thereafter, Aetna reserves
the right to charge $10 for each subsequent Transfer.
General Account - Fixed Annuity Payment
- --------------------------------------------------------------------------------
Minimum Guaranteed Interest Rate
3.0% (effective annual rate of return)
See Section I - DEFINITIONS for explanations.
GMC-VA-98 Page 5
<PAGE>
Schedule- Accumulation Period
Option Package
- --------------------------------------------------------------------------------
Option Package Selected - A different Schedule - Accumulation Period may apply
to each Account depending upon the Option Package selected. (See Section IV -
OPTION PACKAGES.)
Option Package I was selected.
Schedule Effective Date
June 1, 1998
Separate Account
- --------------------------------------------------------------------------------
Separate Account
Variable Annuity Account B
Charges to Separate Account
A daily charge is deducted from any portion of the Account Value
allocated to the Separate Account. The deduction is the daily
equivalent of the annual effective percentage shown in the
following chart:
<TABLE>
<S> <C>
Administrative Charge 0.15%
Mortality and Expense Risk Charge 0.80%
-----
Total Separate Account Charges 0.95%
</TABLE>
Guaranteed Account
- --------------------------------------------------------------------------------
Minimum Guaranteed Rate
3.0% (effective annual rate of return)
Separate Account and Guaranteed Account
- --------------------------------------------------------------------------------
Transfers
An unlimited number of Transfers are allowed during the
Accumulation Period. Aetna allows 12 free Transfers in any Account
Year. Thereafter, Aetna reserves the right to charge $10 for each
subsequent Transfer.
Maintenance Fee
The annual Maintenance Fee is $30. If the Account Value is $50,000
or more on the date the Maintenance Fee is to be deducted, the
Maintenance Fee is $0.
GMC-VA-98 Page 3
<PAGE>
Schedule - Accumulation Period (continued)
Separate Account and Guaranteed Account
- --------------------------------------------------------------------------------
Deferred Sales Charge
For each withdrawal, the Deferred Sales Charge will be determined
as follows:
<TABLE>
<CAPTION>
Deferred Sales Charge
Length of Time from Account Effective Date (as percentage of
Purchase Payment)
-------------------------------------------------------------------------
<S> <C>
Less than 1 year 5%
1 year but less than 2 years 4%
2 years but less than 3 years 3%
3 years but less than 4 years 2%
4 years but less than 5 years 1%
5 years or more 0%
</TABLE>
See Section I - DEFINITIONS for explanations.
GMC-VA-98 Page 4
<PAGE>
Schedule - Annuity Period
Separate Account - Variable Annuity Payment
- --------------------------------------------------------------------------------
Charges to Separate Account
A daily charge is deducted at an annual effective rate of l.25%
for mortality and expense risks. The administrative charge is
established upon election of an Annuity Payout Option. This charge
will not exceed 0.25%.
Assumed Interest Rate (AIR)
If a variable Annuity Payment is chosen, an AIR of 5.0% may be
elected. If 5.0% is not elected, Aetna will use an AIR of 3.5%.
The AIR factor for 3.5% per year is 0.9999058.
The AIR factor for 5.0% per year is 0.9998663.
If the portion of a variable Annuity Payment for any Subaccount is
not to decrease, the annuity return factor under the Separate
Account for that Subaccount must be:
(a) 4.75% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity Payments commence if an AIR of 3.5% is chosen; or
(b) 6.25% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity Payments commence, if an AIR of 5% is chosen.
Transfers
When a variable Annuity Payment has been elected, four free
Transfers are allowed each Account Year among the Subaccounts
available during the Annuity Period. Thereafter, Aetna reserves
the right to charge $10 for each subsequent Transfer.
General Account - Fixed Annuity Payment
- --------------------------------------------------------------------------------
Minimum Guaranteed Interest Rate
3.0% (effective annual rate of return)
See Section I - DEFINITIONS for explanations.
GMC-VA-98 Page 5
<PAGE>
Schedule - Accumulation Period
Option Package
- --------------------------------------------------------------------------------
Option Package Selected - A different Schedule - Accumulation Period may apply
to each Account depending upon the Option Package selected. (See Section IV -
OPTION PACKAGES.)
Option Package II was selected.
Schedule Effective Date
June 1, 1998
Separate Account
- --------------------------------------------------------------------------------
Separate Account
Variable Annuity Account B
Charges to Separate Account
A daily charge is deducted from any portion of the Account Value
allocated to the Separate Account. The deduction is the daily
equivalent of the annual effective percentage shown in the
following chart:
<TABLE>
<S> <C>
Administrative Charge 0.15%
Mortality and Expense Risk Charge 1.10%
-----
Total Separate Account Charges 1.25%
</TABLE>
Guaranteed Account
- --------------------------------------------------------------------------------
Minimum Guaranteed Rate
3.0% (effective annual rate of return)
Separate Account and Guaranteed Account
- --------------------------------------------------------------------------------
Transfers
An unlimited number of Transfers are allowed during the
Accumulation Period. Aetna allows 12 free Transfers in any Account
Year. Thereafter, Aetna reserves the right to charge $10 for each
subsequent Transfer.
Maintenance Fee
The annual Maintenance Fee is $30. If the Account Value is $50,000
or more on the date the Maintenance Fee is to be deducted, the
Maintenance Fee is $0.
GMC-VA-98 Page 3
<PAGE>
Schedule - Accumulation Period (continued)
Separate Account and Guaranteed Account
- --------------------------------------------------------------------------------
Deferred Sales Charge
For each withdrawal, the Deferred Sales Charge will be determined
as follows:
<TABLE>
<CAPTION>
Deferred Sales Charge
Length of Time from Receipt of (as percentage of
Purchase Payment (Years) Purchase Payment)
------------------------------------------------------------------
<S> <C>
Less than 2 years 7%
More than 2 but less than 4 years 6%
More than 4 but less than 5 years 5%
More than 5 but less than 6 years 4%
More than 6 but less than 7 years 3%
7 years or more 0%
</TABLE>
See Section I - DEFINITIONS for explanations.
GMC-VA-98 Page 4
<PAGE>
Schedule - Annuity Period
Separate Account - Variable Annuity Payment
- --------------------------------------------------------------------------------
Charges to Separate Account
A daily charge is deducted at an annual effective rate of l.25%
for mortality and expense risks. The administrative charge is
established upon election of an Annuity Payout Option. This charge
will not exceed 0.25%.
Assumed Interest Rate (AIR)
If a variable Annuity Payment is chosen, an AIR of 5.0% may be
elected. If 5.0% is not elected, Aetna will use an AIR of 3.5%.
The AIR factor for 3.5% per year is 0.9999058.
The AIR factor for 5.0% per year is 0.9998663.
If the portion of a variable Annuity Payment for any Subaccount is
not to decrease, the annuity return factor under the Separate
Account for that Subaccount must be:
(a) 4.75% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity Payments commence if an AIR of 3.5% is chosen; or
(b) 6.25% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity Payments commence, if an AIR of 5% is chosen.
Transfers
When a variable Annuity Payment has been elected, four free
Transfers are allowed each Account Year among the Subaccounts
available during the Annuity Period. Thereafter, Aetna reserves
the right to charge $10 for each subsequent Transfer.
General Account - Fixed Annuity Payment
- --------------------------------------------------------------------------------
Minimum Guaranteed Interest Rate
3.0% (effective annual rate of return)
See Section I - DEFINITIONS for explanations.
GMC-VA-98 Page 5
<PAGE>
Schedule - Accumulation Period
Option Package
- --------------------------------------------------------------------------------
Option Package Selected - A different Schedule - Accumulation Period may apply
to each Account depending upon the Option Package selected. (See Section IV -
OPTION PACKAGES.)
Option Package II was selected.
Schedule Effective Date
June 1, 1998
Separate Account
- --------------------------------------------------------------------------------
Separate Account
Variable Annuity Account B
Charges to Separate Account
A daily charge is deducted from any portion of the Account Value
allocated to the Separate Account. The deduction is the daily
equivalent of the annual effective percentage shown in the
following chart:
<TABLE>
<S> <C>
Administrative Charge 0.15%
Mortality and Expense Risk Charge 1.10%
-----
Total Separate Account Charges 1.25%
</TABLE>
Guaranteed Account
- --------------------------------------------------------------------------------
Minimum Guaranteed Rate
3.0% (effective annual rate of return)
Separate Account and Guaranteed Account
- --------------------------------------------------------------------------------
Transfers
An unlimited number of Transfers are allowed during the
Accumulation Period. Aetna allows 12 free Transfers in any Account
Year. Thereafter, Aetna reserves the right to charge $10 for each
subsequent Transfer.
Maintenance Fee
The annual Maintenance Fee is $30. If the Account Value is $50,000
or more on the date the Maintenance Fee is to be deducted, the
Maintenance Fee is $0.
GMC-VA-98 Page 3
<PAGE>
Schedule - Accumulation Period (continued)
Separate Account and Guaranteed Account
- --------------------------------------------------------------------------------
Deferred Sales Charge
For each withdrawal, the Deferred Sales Charge will be determined
as follows:
<TABLE>
<CAPTION>
Deferred Sales Charg
Length of Time from Receipt of (as percentage of
Purchase Payment (Years) Purchase Payment)
------------------------------------------------------------------
<S> <C>
Less than 1 year 3%
More than 1 but less than 2 years 2%
More than 2 but less than 3 years 1%
More than 3 years 0%
</TABLE>
See Section I - DEFINITIONS for explanations.
GMC-VA-98 Page 4
<PAGE>
Schedule - Annuity Period
Separate Account - Variable Annuity Payment
- --------------------------------------------------------------------------------
Charges to Separate Account
A daily charge is deducted at an annual effective rate of l.25%
for mortality and expense risks. The administrative charge is
established upon election of an Annuity Payout Option. This charge
will not exceed 0.25%.
Assumed Interest Rate (AIR)
If a variable Annuity Payment is chosen, an AIR of 5.0% may be
elected. If 5.0% is not elected, Aetna will use an
AIR of 3.5%.
The AIR factor for 3.5% per year is 0.9999058.
The AIR factor for 5.0% per year is 0.9998663.
If the portion of a variable Annuity Payment for any Subaccount is
not to decrease, the annuity return factor under the Separate
Account for that Subaccount must be:
(a) 4.75% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity Payments commence if an AIR of 3.5% is chosen; or
(b) 6.25% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity Payments commence, if an AIR of 5% is chosen.
Transfers
When a variable Annuity Payment has been elected, four free
Transfers are allowed each Account Year among the Subaccounts
available during the Annuity Period. Thereafter, Aetna reserves
the right to charge $10 for each subsequent Transfer.
General Account - Fixed Annuity Payment
- --------------------------------------------------------------------------------
Minimum Guaranteed Interest Rate
3.0% (effective annual rate of return)
See Section I - DEFINITIONS for explanations.
GMC-VA-98 Page 5
<PAGE>
Schedule- Accumulation Period
Option Package
- --------------------------------------------------------------------------------
Option Package Selected - A different Schedule - Accumulation Period may apply
to each Account depending upon the Option Package selected. (See Section IV -
OPTION PACKAGES.)
Option Package II was selected.
Schedule Effective Date
June 1, 1998
Separate Account
- --------------------------------------------------------------------------------
Separate Account
Variable Annuity Account B
Charges to Separate Account
A daily charge is deducted from any portion of the Account Value
allocated to the Separate Account. The deduction is the daily
equivalent of the annual effective percentage shown in the
following chart:
<TABLE>
<S> <C>
Administrative Charge 0.15%
Mortality and Expense Risk Charge 1.10%
-----
Total Separate Account Charges 1.25%
</TABLE>
Guaranteed Account
- --------------------------------------------------------------------------------
Minimum Guaranteed Rate
3.0% (effective annual rate of return)
Separate Account and Guaranteed Account
- --------------------------------------------------------------------------------
Transfers
An unlimited number of Transfers are allowed during the
Accumulation Period. Aetna allows 12 free Transfers in any Account
Year. Thereafter, Aetna reserves the right to charge $10 for each
subsequent Transfer.
Maintenance Fee
The annual Maintenance Fee is $30. If the Account Value is $50,000
or more on the date the Maintenance Fee is to be deducted, the
Maintenance Fee is $0.
GMC-VA-98 Page 3
<PAGE>
Schedule - Accumulation Period (continued)
Separate Account and Guaranteed Account
- --------------------------------------------------------------------------------
Deferred Sales Charge
For each withdrawal, the Deferred Sales Charge will be determined
as follows:
<TABLE>
<CAPTION>
Deferred Sales Charge
Length of Time from Account Effective Date (as percentage of
Purchase Payment)
------------------------------------------------------------------
<S> <C>
Less than 1 year 5%
1 year but less than 2 years 4%
2 years but less than 3 years 3%
3 years but less than 4 years 2%
4 years but less than 5 years 1%
5 years or more 0%
</TABLE>
See Section I - DEFINITIONS for explanations.
GMC-VA-98 Page 4
<PAGE>
Schedule - Annuity Period
Separate Account - Variable Annuity Payment
- --------------------------------------------------------------------------------
Charges to Separate Account
A daily charge is deducted at an annual effective rate of l.25%
for mortality and expense risks. The administrative charge is
established upon election of an Annuity Payout Option. This charge
will not exceed 0.25%.
Assumed Interest Rate (AIR)
If a variable Annuity Payment is chosen, an AIR of 5.0% may be
elected. If 5.0% is not elected, Aetna will use an AIR of 3.5%.
The AIR factor for 3.5% per year is 0.9999058.
The AIR factor for 5.0% per year is 0.9998663.
If the portion of a variable Annuity Payment for any Subaccount is
not to decrease, the annuity return factor under the Separate
Account for that Subaccount must be:
(a) 4.75% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity Payments commence if an AIR of 3.5% is chosen; or
(b) 6.25% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity Payments commence, if an AIR of 5% is chosen.
Transfers
When a variable Annuity Payment has been elected, four free
Transfers are allowed each Account Year among the Subaccounts
available during the Annuity Period. Thereafter, Aetna reserves
the right to charge $10 for each subsequent Transfer.
General Account - Fixed Annuity Payment
- --------------------------------------------------------------------------------
Minimum Guaranteed Interest Rate
3.0% (effective annual rate of return)
See Section I - DEFINITIONS for explanations.
GMC-VA-98 Page 5
<PAGE>
Schedule - Accumulation Period
Option Package
- --------------------------------------------------------------------------------
Option Package Selected - A different Schedule - Accumulation Period may apply
to each Account depending upon the Option Package selected. (See Section IV -
OPTION PACKAGES.)
Option Package III was selected.
Schedule Effective Date
June 1, 1998
Separate Account
- --------------------------------------------------------------------------------
Separate Account
Variable Annuity Account B
Charges to Separate Account
A daily charge is deducted from any portion of the Account Value
allocated to the Separate Account. The deduction is the daily
equivalent of the annual effective percentage shown in the
following chart:
<TABLE>
<S> <C>
Administrative Charge 0.15%
Mortality and Expense Risk Charge 1.25%
-----
Total Separate Account Charges 1.40%
</TABLE>
Guaranteed Account
- --------------------------------------------------------------------------------
Minimum Guaranteed Rate
3.0% (effective annual rate of return)
Separate Account and Guaranteed Account
- --------------------------------------------------------------------------------
Transfers
An unlimited number of Transfers are allowed during the
Accumulation Period. Aetna allows 12 free Transfers in any Account
Year. Thereafter, Aetna reserves the right to charge $10 for each
subsequent Transfer.
Maintenance Fee
The annual Maintenance Fee is $30. If the Account Value is $50,000
or more on the date the Maintenance Fee is to be deducted, the
Maintenance Fee is $0.
GMC-VA-98 Page 3
<PAGE>
Schedule - Accumulation Period (continued)
Separate Account and Guaranteed Account
- --------------------------------------------------------------------------------
Deferred Sales Charge
For each withdrawal, the Deferred Sales Charge will be determined
as follows:
<TABLE>
<CAPTION>
Deferred Sales Charge
Length of Time from Receipt of (as percentage of
Purchase Payment (Years) Purchase Payment)
------------------------------------------------------------------
<S> <C>
Less than 2 years 7%
More than 2 but less than 4 years 6%
More than 4 but less than 5 years 5%
More than 5 but less than 6 years 4%
More than 6 but less than 7 years 3%
7 years or more 0%
</TABLE>
See Section I - DEFINITIONS for explanations.
GMC-VA-98 Page 4
<PAGE>
Schedule - Annuity Period
Separate Account - Variable Annuity Payment
- --------------------------------------------------------------------------------
Charges to Separate Account
A daily charge is deducted at an annual effective rate of l.25%
for mortality and expense risks. The administrative charge is
established upon election of an Annuity Payout Option. This charge
will not exceed 0.25%.
Assumed Interest Rate (AIR)
If a variable Annuity Payment is chosen, an AIR of 5.0% may be
elected. If 5.0% is not elected, Aetna will use an AIR of 3.5%.
The AIR factor for 3.5% per year is 0.9999058.
The AIR factor for 5.0% per year is 0.9998663.
If the portion of a variable Annuity Payment for any Subaccount is
not to decrease, the annuity return factor under the Separate
Account for that Subaccount must be:
(a) 4.75% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity Payments commence if an AIR of 3.5% is chosen; or
(b) 6.25% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity Payments commence, if an AIR of 5% is chosen.
Transfers
When a variable Annuity Payment has been elected, four free
Transfers are allowed each Account Year among the Subaccounts
available during the Annuity Period. Thereafter, Aetna reserves
the right to charge $10 for each subsequent Transfer.
General Account - Fixed Annuity Payment
- --------------------------------------------------------------------------------
Minimum Guaranteed Interest Rate
3.0% (effective annual rate of return)
See Section I - DEFINITIONS for explanations.
GMC-VA-98 Page 5
<PAGE>
Schedule - Accumulation Period
Option Package
- --------------------------------------------------------------------------------
Option Package Selected - A different Schedule - Accumulation Period may apply
to each Account depending upon the Option Package selected. (See Section IV -
OPTION PACKAGES.)
Option Package III was selected.
Schedule Effective Date
June 1, 1998
Separate Account
- --------------------------------------------------------------------------------
Separate Account
Variable Annuity Account B
Charges to Separate Account
A daily charge is deducted from any portion of the Account Value
allocated to the Separate Account. The deduction is the daily
equivalent of the annual effective percentage shown in the
following chart:
<TABLE>
<S> <C>
Administrative Charge 0.15%
Mortality and Expense Risk Charge 1.25%
-----
Total Separate Account Charges 1.40%
</TABLE>
Guaranteed Account
- --------------------------------------------------------------------------------
Minimum Guaranteed Rate
3.0% (effective annual rate of return)
Separate Account and Guaranteed Account
- --------------------------------------------------------------------------------
Transfers
An unlimited number of Transfers are allowed during the
Accumulation Period. Aetna allows 12 free Transfers in any Account
Year. Thereafter, Aetna reserves the right to charge $10 for each
subsequent Transfer.
Maintenance Fee
The annual Maintenance Fee is $30. If the Account Value is $50,000
or more on the date the Maintenance Fee is to be deducted, the
Maintenance Fee is $0.
GMC-VA-98 Page 3
<PAGE>
Schedule - Accumulation Period (continued)
Separate Account and Guaranteed Account
- --------------------------------------------------------------------------------
Deferred Sales Charge
For each withdrawal, the Deferred Sales Charge will be determined
as follows:
<TABLE>
<CAPTION>
Deferred Sales Charge
Length of Time from Receipt of (as percentage of
Purchase Payment (Years) Purchase Payment)
------------------------------------------------------------------
<S> <C>
Less than 1 year 3%
More than 1 but less than 2 years 2%
More than 2 but less than 3 years 1%
More than 3 years 0%
</TABLE>
See Section I - DEFINITIONS for explanations.
GMC-VA-98 Page 4
<PAGE>
Schedule - Annuity Period
Separate Account - Variable Annuity Payment
- --------------------------------------------------------------------------------
Charges to Separate Account
A daily charge is deducted at an annual effective rate of l.25%
for mortality and expense risks. The administrative charge is
established upon election of an Annuity Payout Option. This charge
will not exceed 0.25%.
Assumed Interest Rate (AIR)
If a variable Annuity Payment is chosen, an AIR of 5.0% may be
elected. If 5.0% is not elected, Aetna will use an AIR of 3.5%.
The AIR factor for 3.5% per year is 0.9999058.
The AIR factor for 5.0% per year is 0.9998663.
If the portion of a variable Annuity Payment for any Subaccount is
not to decrease, the annuity return factor under the Separate
Account for that Subaccount must be:
(a) 4.75% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity Payments commence if an AIR of 3.5% is chosen; or
(b) 6.25% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity Payments commence, if an AIR of 5% is chosen.
Transfers
When a variable Annuity Payment has been elected, four free
Transfers are allowed each Account Year among the Subaccounts
available during the Annuity Period. Thereafter, Aetna reserves
the right to charge $10 for each subsequent Transfer.
General Account - Fixed Annuity Payment
- --------------------------------------------------------------------------------
Minimum Guaranteed Interest Rate
3.0% (effective annual rate of return)
See Section I - DEFINITIONS for explanations.
GMC-VA-98 Page 5
<PAGE>
Schedule - Accumulation Period
Option Package
- --------------------------------------------------------------------------------
Option Package Selected - A different Schedule - Accumulation Period may apply
to each Account depending upon the Option Package selected. (See Section IV -
OPTION PACKAGES.)
Option Package III was selected.
Schedule Effective Date
June 1, 1998
Separate Account
- --------------------------------------------------------------------------------
Separate Account
Variable Annuity Account B
Charges to Separate Account
A daily charge is deducted from any portion of the Account Value
allocated to the Separate Account. The deduction is the daily
equivalent of the annual effective percentage shown in the
following chart:
<TABLE>
<S> <C>
Administrative Charge 0.15%
Mortality and Expense Risk Charge 1.25%
-----
Total Separate Account Charges 1.40%
</TABLE>
Guaranteed Account
- --------------------------------------------------------------------------------
Minimum Guaranteed Rate
3.0% (effective annual rate of return)
Separate Account and Guaranteed Account
- --------------------------------------------------------------------------------
Transfers
An unlimited number of Transfers are allowed during the
Accumulation Period. Aetna allows 12 free Transfers in any Account
Year. Thereafter, Aetna reserves the right to charge $10 for each
subsequent Transfer.
Maintenance Fee
The annual Maintenance Fee is $30. If the Account Value is $50,000
or more on the date the Maintenance Fee is to be deducted, the
Maintenance Fee is $0.
GMC-VA-98 Page 3
<PAGE>
Schedule - Accumulation Period (continued)
Separate Account and Guaranteed Account
- --------------------------------------------------------------------------------
Deferred Sales Charge
For each withdrawal, the Deferred Sales Charge will be determined
as follows:
<TABLE>
<CAPTION>
Deferred Sales Charge
Length of Time from Account Effective Date (as percentage of
Purchase Payment)
---------------------------------------------------------------------------
<S> <C>
Less than 1 year 5%
1 year but less than 2 years 4%
2 years but less than 3 years 3%
3 years but less than 4 years 2%
4 years but less than 5 years 1%
5 years or more 0%
</TABLE>
See Section I - DEFINITIONS for explanations.
GMC-VA-98 Page 4
<PAGE>
Schedule - Annuity Period
Separate Account - Variable Annuity Payment
- --------------------------------------------------------------------------------
Charges to Separate Account
A daily charge is deducted at an annual effective rate of l.25%
for mortality and expense risks. The administrative charge is
established upon election of an Annuity Payout Option. This charge
will not exceed 0.25%.
Assumed Interest Rate (AIR)
If a variable Annuity Payment is chosen, an AIR of 5.0% may be
elected. If 5.0% is not elected, Aetna will use an AIR of 3.5%.
The AIR factor for 3.5% per year is 0.9999058.
The AIR factor for 5.0% per year is 0.9998663.
If the portion of a variable Annuity Payment for any Subaccount is
not to decrease, the annuity return factor under the Separate
Account for that Subaccount must be:
(a) 4.75% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity Payments commence if an AIR of 3.5% is chosen; or
(b) 6.25% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity Payments commence, if an AIR of 5% is chosen.
Transfers
When a variable Annuity Payment has been elected, four free
Transfers are allowed each Account Year among the Subaccounts
available during the Annuity Period. Thereafter, Aetna reserves
the right to charge $10 for each subsequent Transfer.
General Account - Fixed Annuity Payment
- --------------------------------------------------------------------------------
Minimum Guaranteed Interest Rate
3.0% (effective annual rate of return)
See Section I - DEFINITIONS for explanations.
GMC-VA-98 Page 5
<PAGE>
Table of Contents
<TABLE>
<S> <C> <C>
I. DEFINITIONS PAGE
1.01 Account......................................................... 8
1.02 Account Effective Date.......................................... 8
1.03 Account Value................................................... 8
1.04 Account Year.................................................... 8
1.05 Accumulation Period ............................................ 8
1.06 Adjusted Account Value.......................................... 8
1.07 Annuitant....................................................... 8
1.08 Annuity Payment................................................. 8
1.09 Annuity Payout Options.......................................... 8
1.10 Annuity Period.................................................. 8
1.11 Beneficiary..................................................... 9
1.12 Certificate Holder.............................................. 9
1.13 Claim Date...................................................... 9
1.14 Code............................................................ 9
1.15 Contract ....................................................... 9
1.16 Contract Holder ................................................ 9
1.17 Deferred Sales Charge........................................... 9
1.18 Deposit Period.................................................. 9
1.19 Dollar Cost Averaging .......................................... 9
1.20 Fund(s) ........................................................ 10
1.21 General Account ................................................ 10
1.22 Guaranteed Account.............................................. 10
1.23 Guaranteed Rates - Guaranteed Account .......................... 10
1.24 Guaranteed Term ................................................ 10
1.25 Guaranteed Term(s) Groups ...................................... 10
1.26 Maintenance Fee ................................................ 10
1.27 Market Value Adjustment (MVA) .................................. 11
1.28 Matured Term Value.............................................. 11
1.29 Maturity Value Transfer......................................... 11
1.30 Maturity Date................................................... 11
1.31 Option Package.................................................. 11
1.32 Purchase Payment(s) ............................................ 11
1.33 Reinvestment.................................................... 11
1.34 Schedule Effective Date......................................... 11
1.35 Separate Account ............................................... 11
1.36 Subaccount(s)................................................... 12
1.37 Systematic Distribution Option.................................. 12
1.38 Transfers....................................................... 12
1.39 Withdrawal Value ............................................... 12
1.40 Valuation Date ................................................. 12
II. GENERAL PROVISIONS
2.01 Change of Contract ............................................. 12
2.02 Change of Fund(s) .............................................. 13
2.03 Nonparticipating Contract ...................................... 13
2.04 Payments and Elections ......................................... 13
2.05 State Laws ..................................................... 13
2.06 Control of Contract ............................................ 13
2.07 Designation of Beneficiary ..................................... 14
2.08 Misstatements and Adjustments .................................. 14
2.09 Incontestability ............................................... 14
2.10 Grace Period ................................................... 14
2.11 Individual Certificates......................................... 14
</TABLE>
GMC-VA-98 Page 6
<PAGE>
<TABLE>
<S> <C> <C>
III. PURCHASE PAYMENT, ACCOUNT VALUE, AND WITHDRAWAL PROVISIONS
3.01 Purchase Payment ....................................................................................... 14
3.02 Certificate Holder's Account............................................................................ 14
3.03 Accumulation Units -- Separate Account ................................................................. 15
3.04 Net Investment Factor(s) -- Separate Account ........................................................... 15
3.05 Accumulation Unit Value -- Separate Account ............................................................ 15
3.06 Market Value Adjustment (MVA)........................................................................... 15
3.07 Transfer of Account Value from the Subaccount(s) or Guaranteed Account During the Accumulation Period... 16
3.08 Notice to the Certificate Holder ....................................................................... 17
3.09 Loans .................................................................................................. 17
3.10 Systematic Distribution Options......................................................................... 17
3.11 Death Benefit Amount.................................................................................... 17
3.12 Death Benefit Options Available to Beneficiary ......................................................... 18
3.13 Liquidation of Withdrawal Value ........................................................................ 19
3.14 Deferred Sales Charge .................................................................................. 19
3.15 Payment of Withdrawal Value ............................................................................ 19
3.16 Payment of Adjusted Account Value ...................................................................... 19
3.17 Reinstatement........................................................................................... 19
IV. OPTION PACKAGES
4.01 Election of Option Packages............................................................................ 20
4.02 Description of Option Package I........................................................................ 20
4.03 Description of Option Package II....................................................................... 21
4.04 Description of Option Package III ..................................................................... 23
V. ANNUITY PAYOUT PROVISIONS
5.01 Annuity Payout Options ................................................................................ 25
5.02 Annuity Payment Choices................................................................................ 26
5.03 Terms of Annuity Payout Options........................................................................ 27
5.04 Death of Annuitant/Beneficiary ........................................................................ 27
5.05 Annuity Units -- Separate Account ..................................................................... 28
5.06 Annuity Unit Value -- Separate Account ................................................................ 28
5.07 Annuity Net Return Factor(s) - Separate Account ....................................................... 28
</TABLE>
GMC-VA-98 Page 7
<PAGE>
I. DEFINITIONS
- --------------------------------------------------------------------------------
1.01 Account:
A record that identifies contract values accumulated on each
Certificate Holder's behalf.
1.02 Account Effective Date:
The date on which an Account is established on a Certificate
Holder's behalf.
1.03 Account Value:
As of the most recent Valuation Date, the Account Value is equal
to the total of the Purchase Payment(s) made to the Account;
(a) Plus or minus the investment experience for the amount, if
any, allocated to one or more of the Subaccounts;
(b) Plus interest added to the amount, if any, allocated to the
Guaranteed Account;
(c) Plus any additional amount deposited to the Account (see
Section IV - OPTION PACKAGES);
(d) Less the amount of any Maintenance Fee deducted;
(e) Less any additional fee(s) deducted;
(f) Less any amount(s) withdrawn; and
(g) Less any amount(s) applied to an Annuity Payout Option.
1.04 Account Year:
A period of twelve months measured from the Account Effective Date
or an anniversary of such Account Effective Date.
1.05 Accumulation Period:
The period during which the Purchase Payment(s) are applied to an
Account to provide future Annuity Payment(s).
1.06 Adjusted Account Value:
The Account Value plus or minus the aggregate Market Value
Adjustment (MVA), if applicable, for the amount(s) allocated to
the Guaranteed Account (see Section III - Market Value
Adjustment).
1.07 Annuitant:
The person on whose death, during the Accumulation Period, a death
benefit becomes payable and on whose life or life expectancy the
Annuity Payments are based under the Contract.
1.08 Annuity Payment:
A series of payments for life, a definite period or a combination
of the two. The Annuity Payments may be variable or fixed in
amount or a combination of both.
1.09 Annuity Payout Options:
The Certificate Holder may choose to receive Annuity Payments
under one of the following options:
(a) For the life of one or two persons;
(b) For a stated period; or
(c) For some combination of (a) and (b).
1.10 Annuity Period:
The period during which Annuity Payments are made.
GMC-VA-98 Page 8
<PAGE>
1.11 Beneficiary:
The individual(s) or entity entitled to receive any death benefit
due under the Contract. Any designated Beneficiary has the right
to name another Beneficiary. If the Account is owned by joint
Certificate Holders, the survivor will be deemed the designated
Beneficiary and any other Beneficiary on record will then be
treated as the primary or contingent Beneficiary, as originally
designated, unless and until changed by the new designated
Beneficiary.
1.12 Certificate Holder:
A person who purchases an interest in this Contract as evidenced
by a certificate. Aetna reserves the right to limit ownership to
natural persons. If more than one Certificate Holder owns an
Account, each Certificate Holder will be a joint Certificate
Holder. Joint Certificate Holders have joint ownership rights and
both must authorize exercising any ownership rights unless Aetna
allows otherwise.
1.13 Claim Date:
The date when proof of death and the Beneficiary's entitlement to
the death benefit are received in good order at Aetna's home
office. This is also the date that the excess of the death benefit
over the Account Value, if any, is allocated to the money market
fund available through the Separate Account.
1.14 Code:
The Internal Revenue Code of 1986, as it may be amended from time
to time.
1.15 Contract:
This agreement between Aetna and the Contract Holder.
1.16 Contract Holder:
The entity to which the Contract is issued.
1.17 Deferred Sales Charge:
The charge that is applied to a Purchase Payment(s) upon
withdrawal. This charge may be waived under certain circumstances
or after a certain length of time (see Section III - Deferred
Sales Charge).
1.18 Deposit Period:
A day, a calendar week, a calendar month, a calendar quarter, or
any other period of time specified by Aetna during which a
Purchase Payment(s), Transfer(s) and/or Reinvestment(s) may be
allocated to one or more Guaranteed Account Guaranteed Terms.
Aetna reserves the right to shorten or to extend the Deposit
Period.
During a Deposit Period, Aetna may offer any number of Guaranteed
Terms and more than one Guaranteed Term of the same duration may
be offered.
1.19 Dollar Cost Averaging:
A program that permits the Certificate Holder to systematically
transfer amounts from one of the available Subaccounts, or an
available Guaranteed Account Guaranteed Term, to one or more of
the Subaccounts. If the Certificate Holder elects a Guaranteed
Account Guaranteed Term available for Dollar Cost Averaging, no
MVA applies to amounts transferred under Dollar Cost Averaging. If
Dollar Cost Averaging from a Guaranteed Account Guaranteed Term is
discontinued before the end of the Dollar Cost Averaging period
elected, Aetna will automatically transfer the balance to a
Guaranteed Term of the same duration and an MVA will apply. The
Certificate Holder may initiate a transfer to another investment
option and an MVA will apply. If a Guaranteed Term of the same
duration is not available, Aetna will transfer the amount to the
Guaranteed Term with the next shortest duration. If no shorter
Guaranteed Term is available, the next longer Guaranteed Term will
be used. Aetna reserves the right to establish and change terms
and conditions governing Dollar Cost Averaging.
GMC-VA-98 Page 9
<PAGE>
1.20 Fund(s):
The open-end registered management investment companies whose
shares are purchased by the Separate Account to fund the benefits
provided by the Contract.
The Funds, and the number of Funds, available during the
Accumulation Period may be different from those available during
the Annuity Period. Aetna reserves the right to limit the number
of Funds available at any one time and to limit the number of
investment options the Certificate Holder may select during the
Accumulation Period and/or during the Annuity Period.
1.21 General Account:
The account holding the assets of Aetna, other than those assets
held in Aetna's separate accounts.
1.22 Guaranteed Account:
A separate account, established by Aetna Life Insurance and
Annuity Company (herein Aetna) under Section 38a-433 of the
Connecticut General Statutes, that holds assets for Guaranteed
Terms. There are no discrete units for this account. The
Certificate Holder does not participate in any gain or loss
resulting from the performance of the investments held in the
account. Income, gains or losses realized or unrealized, are gains
or losses of Aetna. Aetna liabilities, except for liabilities
under this Contract and reserves required by federal and state
law, may not be charged against the nonunitized separate account.
1.23 Guaranteed Rates -- Guaranteed Account:
Aetna will declare the interest rate(s) applicable to a specific
Guaranteed Term at the start of the Deposit Period for that
Guaranteed Term. The rate(s) are guaranteed by Aetna for the
period beginning with the first day of the Deposit Period and
ending on the Maturity Date. Guaranteed Rates are credited
beginning with the date of allocation. The Guaranteed Rates are
annual effective yields. That is, interest is credited daily at a
rate that will produce the Guaranteed Rate over the period of a
year. No Guaranteed Rate will ever be less than the minimum
Guaranteed Rate shown on the Schedule - Accumulation Period.
For Guaranteed Terms of one year or less, one Guaranteed Rate is
credited for the full Guaranteed Term. For longer Guaranteed
Terms, an initial Guaranteed Rate is credited from the date of
deposit to the end of a specified period within the Guaranteed
Term. There may be different Guaranteed Rate(s) declared for
subsequent specified time intervals throughout the Guaranteed
Term.
Aetna may offer more than one Guaranteed Term of the same duration
and credit one with a higher rate contingent upon use only with
Dollar Cost Averaging.
1.24 Guaranteed Term:
The period of time specified by Aetna for which a specific
Guaranteed Rate(s) is offered on amounts invested during a
specific Deposit Period. Guaranteed Terms are made available
subject to Aetna's terms and conditions, including, but not
limited to, Aetna's right to restrict allocations to new Purchase
Payments (such as by prohibiting Transfers into a particular
Guaranteed Term from any other Guaranteed Term or from any of the
Subaccounts, or by prohibiting Reinvestment of a Matured Term
Value to a particular Guaranteed Term). More than one Guaranteed
Term of the same duration may be offered within the Contract.
1.25 Guaranteed Term(s) Groups:
All Guaranteed Account Guaranteed Term(s) of the same duration
(from the close of the Deposit Period until the designated
Maturity Date).
1.26 Maintenance Fee:
The Maintenance Fee (see Schedule - Accumulation Period) will be
deducted during the Accumulation Period from the Account Value on
each anniversary of the Account Effective Date and upon withdrawal
of the entire Account.
GMC-VA-98 Page 10
<PAGE>
1.27 Market Value Adjustment ( MVA) :
An adjustment that may apply to an amount withdrawn or transferred
from a Guaranteed Account Guaranteed Term prior to the end of that
Guaranteed Term. The adjustment reflects the change in the value
of the investment due to changes in interest rates since the date
of deposit and is computed using the formula given. The adjustment
is expressed as a percentage of each dollar being withdrawn (see
Section III- Market Value Adjustment).
1.28 Matured Term Value:
The amount due on a Guaranteed Account Guaranteed Term's Maturity
Date.
1.29 Maturity Value Transfer:
During the calendar month following a Guaranteed Account Maturity
Date, the Certificate Holder may notify Aetna's home office in
writing to Transfer or withdraw all or part of the Matured Term
Value, plus accrued interest at the new Guaranteed Rate, from the
Guaranteed Account without an MVA. This provision only applies to
the first such written request received from the Certificate
Holder during this period for any Matured Term Value.
1.30 Maturity Date:
The last day of a Guaranteed Account Guaranteed Term.
1.31 Option Package:
The version of the Contract selected which defines, among other
things, the amount of the mortality and expense risk charge, the
calculation of the death benefit, and the availability of certain
withdrawals without imposition of a Deferred Sales Charge.
1.32 Purchase Payment(s):
The Purchase Payment(s) less premium taxes, if applicable,
accepted by Aetna at its home office. Aetna reserves the right to
refuse to accept any Purchase Payment at any time for any reason.
No advance notice will be given to the Contract Holder or
Certificate Holder.
1.33 Reinvestment:
Aetna will mail a notice to the Certificate Holder at least 18
calendar days before a Guaranteed Term's Maturity Date. This
notice will contain the Terms available during current Deposit
Periods with their Guaranteed Rate(s), and projected Matured Term
Value. If no specific direction is given by the Certificate Holder
prior to the Maturity Date, each Matured Term 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. Aetna
will mail a confirmation statement to the Certificate Holder the
next business day after the Maturity Date. This notice will state
the Guaranteed Term and Guaranteed Rate(s) which will apply to the
reinvested Matured Term Value.
1.34 Schedule Effective Date:
The date that an Option Package becomes effective. This date is
indicated on the Schedule - Accumulation Period. At initial
purchase, this date is the same as the Account Effective Date.
1.35 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 other income,
gains or losses of Aetna. Aetna owns the assets held in the
Separate Account and is not a trustee as to such amounts. The
Separate Account generally is not guaranteed and is held at market
value. The assets of the Separate Account, to the extent of
reserves and other contract liabilities of the Separate Account,
shall not be charged with other Aetna liabilities.
GMC-VA-98 Page 11
<PAGE>
1.36 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.
1.37 Systematic Distribution Option:
An option elected by the Certificate Holder during the
Accumulation Period which establishes a schedule of withdrawals to
be made automatically from the Certificate Holder's Account.
1.38 Transfers:
The movement of invested amounts among the available Subaccount(s)
and/or any Guaranteed Account Guaranteed Term made available,
subject to terms and conditions established by Aetna, during the
Accumulation Period or the Annuity Period.
1.39 Withdrawal Value:
The amount payable by Aetna upon the withdrawal of any portion of
an Account.
1.40 Valuation Date:
The date and time for which a Subaccount calculates its net asset
value, usually from 4:00 p.m. Eastern time each day the New York
Stock Exchange is open, to 4:00 p.m. the next such business day.
II. GENERAL PROVISIONS
- --------------------------------------------------------------------------------
2.01 Change of Contract:
Only an authorized officer of Aetna may change the terms of this
Contract. Aetna will notify the 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 Payout Option
which begins before the change.
Aetna may make any change that affects the Market Value Adjustment
(see Section III- Market Value Adjustment) with at least 30 days
advance written notice to the 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 Accounts.
Any change that affects any of the following under this Contract
will not apply to Accounts in existence before the effective date
of the change:
The following will not be changed:
(a) Account Value
(b) Guaranteed Rates - Guaranteed Account
(c) Purchase Payment
(d) Withdrawal Value
(e) Transfers
(f) Net Investment Factor(s) -- Separate Account (see Section
III)
(g) Minimum Guaranteed Interest Rates (see Section V)
(h) Annuity Unit Value -- Separate Account (see Section V)
(i) Annuity Payout Options (see Section V).
Any change that affects the Annuity Payout Options and the tables
for the Annuity Payout Options may be made:
(a) No earlier than 12 months after the Account Effective Date;
and
(b) No earlier than 12 months after the effective date of any
prior change.
GMC-VA-98 Page 12
<PAGE>
2.01 Change of Contract (Cont'd):
Any Account established on or after the effective date of any
change will be subject to the change. If the Contract Holder does
not agree to any change under this provision, no new Accounts may
be established under the Contract. The Contract may also be
changed as deemed necessary by Aetna to comply with federal or
state law.
2.02 Change of Fund(s):
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, Aetna may cease to make such Fund shares available
for investment under the Contract prospectively, or Aetna may
substitute shares of another Fund for shares already acquired.
Aetna 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.
Aetna reserves the right to substitute shares of another Fund for
shares already acquired without a proxy vote.
2.03 Nonparticipating Contract:
The Contract Holder, Certificate Holders or Beneficiaries will not
have a right to share in the earnings of Aetna.
2.04 Payments and Elections:
While the Certificate Holder is living, Aetna will pay the
Certificate Holder any Annuity Payments as and when due. After the
Certificate Holder's death, or at the death of the first
Certificate Holder if the Account is owned jointly, any Annuity
Payments required to be made will be paid in accordance with
Section V - Death of Annuitant/Beneficiary. Aetna will determine
other payments and/or elections as of the end of the Valuation
Date in which the request is received at its home office. Such
payments will be made within 7 calendar days of receipt at its
home office of a written claim for payment which is in good order,
except as provided in Section III - Payment of Withdrawal Value.
2.05 State Laws:
The Contract and Certificate comply with the laws of the state in
which they are delivered. Any withdrawal, death benefit amount, or
Annuity Payments are equal to or greater than the minimum required
by such laws. Annuity tables for legal reserve valuation shall be
as required by state law. Such tables may be different from
annuity tables used to determine Annuity Payments.
2.06 Control of Contract:
This is a Contract between the Contract Holder and Aetna. The
Contract Holder has title to the Contract. Contract Holder rights
are limited to accepting or rejecting Contract modifications. The
Certificate Holder has all other rights to amounts held in his or
her Account.
Each Certificate Holder shall own all amounts held in his or her
Account. Each Certificate Holder may make any choices allowed by
this Contract for his or her Account. Choices made under this
Contract must be in writing. If the Account is owned jointly, both
joint Certificate Holders must authorize any Certificate Holder
change in writing. Until receipt of such choices at Aetna's home
office, Aetna may rely on any previous choices made.
The Contract is not subject to the claims of any creditors of the
Contract Holder or the Certificate Holder, except to the extent
permitted by law.
The Certificate Holder may assign or transfer his or her rights
under the Contract. Aetna reserves the right not to accept
assignment or transfer to a nonnatural person. Any assignment or
transfer made under the Contract must be submitted to Aetna's home
office in writing and will not be effective until accepted by
Aetna.
GMC-VA-98 Page 13
<PAGE>
2.07 Designation of Beneficiary:
Each Certificate Holder shall name his or her Beneficiary and when
designating the Beneficiary may elect to specify in writing the
form of payment to the Beneficiary. Aetna will honor the specified
form of payment to the extent permitted under section 72(s) of the
Code. If the Account is owned jointly, both joint Certificate
Holders must agree in writing to the Beneficiary designated. The
Beneficiary may be changed at any time. Changes to a Beneficiary
must be submitted to Aetna's home office in writing and will not
be effective until accepted by Aetna. If the Account is owned
jointly, at the death of one joint Certificate Holder, the
survivor will be deemed the designated Beneficiary; any other
Beneficiary on record will then be treated as a primary or a
contingent Beneficiary, as originally designated unless and until
changed by the new designated Beneficiary. If a designated
Beneficiary defers taking payment of a death benefit, the
designated Beneficiary has the right to name another Beneficiary.
2.08 Misstatements and Adjustments:
If Aetna finds the age of any Annuitant to be misstated, the
correct facts will be used to adjust payments.
2.09 Incontestability:
Aetna may cancel the Contract if, upon discovery of erroneous
information, the Contract would not have been issued.
2.10 Grace Period:
The Contract will remain in effect even if Purchase Payments are
not continued except as provided in the Payment of Adjusted
Account Value provision (see Section III - Payment of Adjusted
Account Value).
2.11 Individual Certificates:
Aetna shall issue a certificate to each Certificate Holder. The
certificate will summarize certain provisions of the Contract.
Certificates are for information only and are not a part of the
Contract.
III. PURCHASE PAYMENT, ACCOUNT VALUE, AND WITHDRAWAL PROVISIONS
- --------------------------------------------------------------------------------
3.01 Purchase Payment:
This amount is the actual Purchase Payment. Aetna reserves the
right to pay premium taxes when due and deduct the amount from the
Account Value when we pay the tax or at a later date.
Each Purchase Payment will be allocated, as directed by the
Certificate Holder, among:
(a) Guaranteed Account Guaranteed Terms made available, subject
to terms and conditions established by Aetna; and/or
(b) The Subaccount(s) offered through the Separate Account.
For each Purchase Payment, the Certificate Holder shall tell Aetna
the percentage of each Purchase Payment to allocate to any
available Guaranteed Account Guaranteed Term and/or each
Subaccount. Unless different allocation instructions are received
for any additional Purchase Payment, the allocation will be the
same as for the initial Purchase Payment. If the same Guaranteed
Term is no longer available, the Purchase Payment will be
allocated to the next shortest Guaranteed Term available in the
current Deposit Period. If no shorter Guaranteed Term is
available, the next longer Guaranteed Term will be used.
3.02 Certificate Holder's Account:
Aetna will maintain an Account for each Certificate Holder.
Aetna will declare from time to time the acceptability and the
minimum amount for initial and additional Purchase Payments.
GMC-VA-98 Page 14
<PAGE>
3.03 Accumulation Units - Separate Account:
The portion of the Purchase Payment(s) applied to each Subaccount
under the Separate Account will determine the number of
accumulation units for that Subaccount. This number is equal to
the portion of the Purchase Payment(s) applied to each Subaccount
divided by the accumulation unit value (see Section III -
Accumulation Unit Value Separate Account) for the Valuation Date
in which the Purchase Payment is received in good order at Aetna's
home office.
3.04 Net Investment Factor(s) -- Separate Account:
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 Date
is equal to the sum of 1.0000 plus the net investment rate. The
net investment rate equals:
(a) the net assets of the Subaccount on the current Valuation
Date, minus
(b) the net assets of 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 for
mortality and expense risks as stated in the Schedule -
Accumulation Period and Schedule - Annuity Period, and an
administrative charge of 0.15% (unless reduced or
eliminated) 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.
3.05 Accumulation Unit Value - Separate Account:
An accumulation unit value is computed by multiplying the net
investment factor for the current Valuation Date by the
accumulation unit value for the previous Valuation Date. The
dollar value of accumulation units, Separate Account assets, and
variable Annuity Payments may go up or down due to investment gain
or loss.
3.06 Market Value Adjustment (MVA):
An MVA will apply to any withdrawal from the Guaranteed Account
before the end of a Guaranteed Term when the withdrawal is:
(a) A Transfer (including a Transfer from a Guaranteed Account
Guaranteed Term if Dollar Cost Averaging is discontinued);
except for Transfers under Dollar Cost Averaging, or as
specified in Section I - Maturity Term Value Transfer;
(b) A full or partial withdrawal (including a free withdrawal,
see Section III - Deferred Sales Charge), except for a
payment made:
(1) under a Systematic Distribution Option, or
(2) under a qualified Contract, when the amount withdrawn
is equal to the required minimum distribution for the
Account calculated using a method permitted under the
Code and agreed to by Aetna; or
(c) Due to an election of Annuity Payout Option 1. Only a
positive MVA will apply upon election of Annuity Payout
Option 2 or 3 (see Section V - Annuity Payout Options).
Full and partial withdrawals and Transfers made within six months
after the date of the Annuitant's death will be the greater of:
(a) The aggregate MVA amount which is the sum of all market
value adjusted amounts resulting from a withdrawal(s). This
total may be greater or less than the Account Value of those
amounts; or
(b) The applicable portion of the Account Value in the
Guaranteed Account.
After the six-month period, the withdrawal or Transfer will be the
aggregate MVA amount, which may be greater or less than the
Account Value of those amounts.
GMC-VA-98 Page 15
<PAGE>
3.06 Market Value Adjustment (MVA) (Cont'd):
Market value adjusted amounts will be equal to the amount
withdrawn multiplied by the following ratio:
x
---
365
(1 + i)
----------
x
---
365
(1 + j)
Where:
i is the Deposit Period yield
j is the current yield
x is the number of days remaining in the Guaranteed
Term, computed from Wednesday of the week of
withdrawal.
The Deposit Period yield will be determined as follows:
(a) At the close of the last business day of each week of the
Deposit Period, a yield will be computed as the average of
the yields on that day of U.S. Treasury Notes which mature
in the last three months of the Guaranteed Term.
(b) The Deposit Period yield is the average of those yields for
the Deposit Period. If withdrawal is made before 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.
In the event that no U.S. Treasury Notes which mature in the last
three months of the Guaranteed Term exist, Aetna reserves the
right to use the U.S. Treasury Notes that mature in the following
quarter.
3.07 Transfer of Account Value from the Subaccount(s) or Guaranteed Account
During the Accumulation Period:
Before an Annuity Payout Option is elected, all or any portion of
the Adjusted Account Value of the Certificate Holder's Account may
be transferred from any Subaccount or Guaranteed Term of the
Guaranteed Account:
a) To any other Subaccount; or
b) To any Guaranteed Term of the Guaranteed Account made
available in the current Deposit Period, subject to terms
and conditions specified by Aetna.
Transfer requests can be submitted as a percentage or as a dollar
amount. Aetna may establish a minimum transfer amount. Within a
Guaranteed Term Group, the amount to be withdrawn or transferred
will be 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 by Aetna is shown on the Schedule - Accumulation Period.
Additional Transfers may be subject to a Transfer fee as shown on
the Schedule - Accumulation Period.
GMC-VA-98 Page 16
<PAGE>
3.07 Transfer of Account Value from the Subaccount(s) or Guaranteed Account
During the Accumulation Period (Cont'd):
Amounts transferred from the Guaranteed Account under the Dollar
Cost Averaging program, or amounts transferred as a Matured Term
Value on or within one calendar month of a Maturity Date do not
count against the annual Transfer limit.
Amounts allocated to Guaranteed Account Guaranteed Terms may not
be transferred to the Subaccounts or to another Guaranteed Term
during a Deposit Period or for 90 days after the close of a
Deposit Period except for:
(a) Matured Term Value(s) during the calendar month following
the Maturity Date;
(b) Amounts applied to an Annuity Payout Option;
(c) Amounts transferred under the Dollar Cost Averaging program;
(d) Amounts distributed under a Systematic Distribution Option;
and
(e) Amounts transferred by Aetna if Dollar Cost Averaging is
discontinued.
3.08 Notice to the Certificate Holder:
The Certificate Holder will receive quarterly statements from
Aetna of:
(a) The value of any amounts held in:
(1) The Guaranteed Account; and
(2) The Subaccount(s) under the Separate Account;
(b) The number of any accumulation units; and
(c) The accumulation unit value.
Such number or values will be as of a specific date no more than
60 days before the date of the notice.
3.09 Loans:
Loans are not available under this Contract.
3.10 Systematic Distribution Options:
Aetna may, from time to time, make one or more Systematic
Distribution Options available during the Accumulation Period.
When a Systematic Distribution Option is elected, Aetna will make
automatic payments from the Certificate Holder's Account. No
Deferred Sales Charge or MVA will apply to the automatic payments
made under a Systematic Distribution Option.
Any Systematic Distribution Option will be subject to the
following criteria:
(a) Any Systematic Distribution Option will be made available on
the basis of objective criteria consistently applied;
(b) The availability of any Systematic Distribution Option may
be limited by terms and conditions applicable to the
election of such Systematic Distribution Option; and
(c) Aetna may discontinue the availability of a Systematic
Distribution Option at any time. Except to the extent
required to comply with applicable law, discontinuance of a
Systematic Distribution Option will apply only to future
elections and will not affect Systematic Distribution
Options in effect at the time an option is discontinued.
3.11 Death Benefit Amount:
The amount of the death benefit is described in Section IV -
OPTION PACKAGES.
GMC-VA-98 Page 17
<PAGE>
3.12 Death Benefit Options Available to Beneficiary:
Prior to any election, or until amounts must be otherwise
distributed under this section, the Account Value will be retained
in the Account. The Beneficiary has the right to allocate or
reallocate any amount to any of the available investment options
(subject to an MVA, if applicable). If the Certificate Holder has
specified the form of payment to the Beneficiary, the death
benefit will be paid as elected by the Certificate Holder in the
Beneficiary designation, to the extent permitted by section 72(s)
of the Code. If the Certificate Holder has not specified a form of
payment, the Beneficiary may elect one of the following options.
(a) When the Certificate Holder is the Annuitant or when the
Certificate Holder is a nonnatural person, and the Annuitant
dies:
(1) If the Beneficiary is the surviving spouse, the
spousal Beneficiary will be the successor
Certificate Holder and may exercise all
Certificate Holder rights under the Contract and
continue in the Accumulation Period, or may elect
(i) or (ii) below. Under the Code, distributions
from the Account are not required until the
spousal Beneficiary's death. The spousal
Beneficiary may elect to:
(i) Apply some or all of the Adjusted Account
Value to an Annuity Payout Option (see
Section V); or
(ii) Receive, at any time, a lump sum payment
equal to the Adjusted Account Value.
(2) If the Beneficiary is other than the surviving
spouse, then options (i) or (ii) above apply. Any
portion of the Adjusted Account Value not applied
to an Annuity Payout Option within one year of the
death must be distributed within five years of the
date of death.
(3) If no Beneficiary exists, a lump sum payment equal
to the Adjusted Account Value must be made to the
Annuitant's estate within five years of the date
of death.
(4) If the Beneficiary is an entity, a lump sum
payment equal to the Adjusted Account Value must
be made within five years of the date of death,
unless otherwise permitted by IRS regulation or
ruling.
(b) When the Certificate Holder is not the Annuitant and the
Certificate Holder dies:
(1) If the Beneficiary is the Certificate Holder's
surviving spouse, the spousal Beneficiary will be
the successor Certificate Holder and may exercise
all Certificate Holder rights under the Contract
and continue in the Accumulation Period, or may
elect (i) or (ii) below. Under the Code,
distributions from the Account are not required
until the spousal Beneficiary's death. The spousal
Beneficiary may elect to:
(i) Apply some or all of the Adjusted Account
Value to an Annuity Payout Option (see
Section V); or
(ii) Receive, at any time, a lump sum payment
equal to the Withdrawal Value.
(2) If the Beneficiary is other than the Certificate
Holder's surviving spouse, then options (i) or
(ii) under (1) above apply. Any portion of the
death benefit not applied to an Annuity Payout
Option within one year of the Certificate Holder's
death must be distributed within five years of the
date of death.
(3) If no Beneficiary exists, a lump sum payment equal
to the Withdrawal Value must be made to the
Certificate Holder's estate within five years of
the date of death.
(4) If the Beneficiary is an entity, a lump sum
payment equal to the Withdrawal Value must be made
within five years of the date of death, unless
otherwise permitted by IRS regulation or ruling.
(c) When the Certificate Holder is a natural person and not the
Annuitant and the Annuitant dies, the Beneficiary (or the
Certificate Holder if no Beneficiary exists) may elect to:
(1) Apply all or some of the Adjusted Account Value to
an Annuity Payout Option within 60 days of the
date of death; or
(2) Receive a lump sum payment equal to the Adjusted
Account Value.
GMC-VA-98 Page 18
<PAGE>
3.13 Liquidation of Withdrawal Value:
All or any portion of the Account Value may be withdrawn at any
time. Withdrawal requests may be submitted as a percentage of the
Account Value or as a specific dollar amount. Purchase Payment
amounts are withdrawn first, and then the excess value, if any.
Partial withdrawal amounts are withdrawn on a pro rata basis from
the Subaccount(s) and/or the Guaranteed Term(s) Groups of the
Guaranteed Account in which the Account Value is invested. Within
a Guaranteed Term Group, the amount to be withdrawn or transferred
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 Fee, if applicable, the
withdrawn amount shall be reduced by a Deferred Sales Charge, if
applicable. An MVA may apply to amounts withdrawn from the
Guaranteed Account.
3.14 Deferred Sales Charge:
The Deferred Sales Charge only applies to the Purchase Payment(s)
portion withdrawn and varies according to the elapsed time since
deposit (see Schedule - Accumulation Period). Purchase Payment
amounts are withdrawn in the same order they were applied.
No Deferred Sales Charge is deducted from any portion of the
Purchase Payment which is paid:
(a) To a Beneficiary due to the Annuitant's death before Annuity
Payments start, up to a maximum of the aggregate Purchase
Payment(s) minus the total of all partial surrenders,
amounts applied to an Annuity Payout Option and deductions
made prior to the Annuitant's date of death;
(b) For an Annuity Payout Option (see Section V);
(c) As a distribution under a Systematic Distribution Option;
(d) For a full withdrawal of the Account where the Account Value
is $2,500 or less and no withdrawals have been taken from
the Account within the prior 12 months;
(e) By Aetna under Section III - Payment of Adjusted Account
Value;
(f) Under a qualified Contract when the amount withdrawn is
equal to the minimum distribution required by the Code for
the Account, calculated using a method permitted under the
Code and agreed to by Aetna;
(g) As a free withdrawal as described in Section IV - OPTION
PACKAGES; or
(h) Under the Nursing Home Waiver, if available, and as
described in Section IV - OPTION PACKAGES.
3.15 Payment of Withdrawal Value:
Under certain emergency conditions, Aetna may defer payment:
(a) For a period of up to six months (unless not allowed by
state law); or
(b) As provided by federal law.
3.16 Payment of Adjusted Account Value:
Upon 90 days written notice to the Certificate Holder, Aetna will
terminate any Account if the Account Value becomes less than
$2,500 immediately following any partial withdrawal. Aetna does
not intend to exercise this right in cases where an Account is
reduced to $2,500 or less solely due to investment performance. A
Deferred Sales Charge will not be deducted from the Adjusted
Account Value.
3.17 Reinstatement:
The Certificate Holder may reinstate the proceeds of a full
withdrawal, subject to terms and conditions established by Aetna.
GMC-VA-98 Page 19
<PAGE>
IV. OPTION PACKAGES
- --------------------------------------------------------------------------------
The Contract offers three Option Packages regarding calculation of the death
benefit and the ability to withdraw money free of Deferred Sales Charge. The
Option Package selected is reflected in the Schedule-Accumulation Period
attached to the Certificate. At initial purchase, the Schedule Effective Date is
the same as the Account Effective Date. If, at a later date, the (Contract)
Holder wishes to replace the current Option Package with another available
Option Package, the (Contract) Holder may do so upon any anniversary of the
Account Effective Date.
A different Schedule-Accumulation Period may apply to each Certificate Holder
depending upon the Option Package selected.
Below is a description of the ability to elect other Option Packages and the
contractual provisions of each Option Package.
4.01 Election of Option Packages:
Any (Contract) Holder, who meets the applicable minimum Account
Value required by Aetna, may elect to replace the Option Package
in effect with one of the other available Option Packages. The
eligible (Contract) Holder may make the election during the sixty
day period prior to and including any anniversary of the Account
Effective Date. Such election must be made in writing and received
in good order at Aetna's home office during the election period.
The effective date of the newly elected Option Package is the
anniversary of the Account Effective Date at the end of the 60 day
election period. Aetna will issue another Schedule reflecting the
new Option Package chosen. The new Schedule will reflect the
revisions to the (Contract) Holder's benefits during the
Accumulation Period, namely:
(bullet) The new Schedule Effective Date,
(bullet) The revised Charges to Separate Account,
(bullet) The calculation of the death benefit, and
(bullet) The revised ability to withdraw money free of Deferred
Sales Charge.
All other Contract features remain in effect from the Account
Effective Date.
4.02 Description of Option Package I:
Deferred Sales Charge:
In addition to the events described in Section III - Deferred
Sales Charge, the total amount that may be withdrawn each Account
Year without a Deferred Sales Charge cannot exceed 10% of the
Account Value less:
(1) Any amount(s) withdrawn and/or requested for withdrawal
under a Systematic Distribution Option, or
(2) Any amount(s) taken as a minimum required distribution as
described in Section III - Deferred Sales Charge.
Death Benefit Calculation During the Accumulation Period:
If the (Contract) Holder or Annuitant dies before an Annuity
Payout Option starts, the Beneficiary is entitled to a death
benefit. If the Account is owned jointly, the death benefit
applies at the death of the first joint (Contract) Holder to die.
The amount of the death benefit is determined as follows:
(a) Death of the Annuitant.
The death benefit is the greater of:
(1) The sum of all Purchase Payment(s) made, adjusted
for amount(s) withdrawn or applied to an Annuity
Payout Option as of the Claim Date; or
(2) The Account Value on the Claim Date.
GMC-VA-98 Page 20
<PAGE>
4.02 Description of Option Package I (Cont'd):
On the Claim Date, if the amount of the death
benefit is greater than the Account Value, the
amount by which the death benefit exceeds the
Account Value will be deposited and allocated to
the money market fund available through the
Separate Account.
The amount paid to the Beneficiary will equal the
Adjusted Account Value on the date the payment
request is processed. This amount may be greater
or less than the amount of the death benefit on
the Claim Date. The Beneficiary may elect a death
benefit payment option as permitted in Section III
Death Benefit Options Available to Beneficiary.
(b) Death of the (Contract) Holder if the (Contract) Holder is
not the Annuitant.
On the Claim Date, the amount of the death benefit equals
the Account Value.
The amount paid to the Beneficiary will equal the
Adjusted Account Value on the date the payment request is
processed. A Deferred Sales Charge may apply to any full
or partial payment of the death benefit. The Beneficiary
may elect a death benefit payment option as permitted in
Section III - Death Benefit Options Available to
Beneficiary.
(c) Death of a spouse who is the Beneficiary of a (Contract)
Holder/Annuitant and who becomes a successor (Contract)
Holder/ Annuitant.
The amount of the death benefit paid to the Beneficiary
at the death of a successor (Contract) Holder/Annuitant
is the greater of the values as described in (a) above
except that in calculating (a)(1), the Account Value on
the Claim Date for the prior (Contract) Holder's death is
treated as the initial Purchase Payment.
Charges to Separate Account:
See Schedule-Accumulation Period.
4.03 Description of Option Package II:
Deferred Sales Charge:
In addition to the events described in Section III - Deferred
Sales Charge, the total amount that may be withdrawn each Account
Year without a Deferred Sales Charge cannot exceed 10% of the
Account Value less:
(1) Any amount(s) withdrawn and/or requested for withdrawal
under a Systematic Distribution Option, or
(2) Any amount(s) taken as a minimum required distribution as
described in Section III - Deferred Sales Charge.
No Deferred Sales Charge is deducted from any portion of the
Purchase Payment(s) which is withdrawn:
If the Annuitant has spent at least 45 consecutive days in
a licensed nursing care facility and each of the following
conditions are met:
(1) More than one Account Year has elapsed since the
Schedule Effective Date; and
(2) The withdrawal is requested within three years of
admission to a licensed nursing care facility.
This waiver does not apply if the Annuitant was in a
licensed nursing care facility for at least one day during
the two week period immediately preceding or following the
Schedule Effective Date.
GMC-VA-98 Page 21
<PAGE>
4.03 Description of Option Package II (Cont'd):
Death Benefit Calculation During the Accumulation Period:
If the (Contract) Holder or Annuitant dies before an Annuity
Payout Option starts, the Beneficiary is entitled to a death
benefit. If the Account is owned jointly, the death benefit
applies at the death of the first joint (Contract) Holder to die.
The amount of the death benefit is determined as follows:
(a) Death of the Annuitant.
The death benefit is the greatest of:
(1) The sum of all Purchase Payment(s) made, adjusted
for amount(s) withdrawn or applied to an Annuity
Payout Option as of the Claim Date; or
(2) The Account Value on the Claim Date; or
(3) The "Step-up Value" on the Claim Date.
On the Schedule Effective Date, the Step-up Value is the
greater of:
(1) The Account Value; or
(2) The Step-up Value, if any, calculated on the
anniversary prior to the Schedule Effective Date,
adjusted for Purchase Payments(s) made and
amount(s) withdrawn or applied to an Annuity
Payout Option during the prior Account Year.
Thereafter, on each anniversary of the Schedule
Effective Date until the anniversary immediately
preceding the Annuitant's 85th birthday or death,
whichever is earlier, the Step-up Value is equal
to the greater of:
(a) The Step-up Value most recently
calculated, adjusted for Purchase
Payment(s) made and amount(s) withdrawn
or applied to an Annuity Payout Option
during the prior Account Year; or
(b) The Account Value on that anniversary of
the Schedule Effective Date.
On the Claim Date, the Step-up Value
shall equal the Step-up Value calculated
prior to death. It is adjusted for
Purchase Payment(s) made and amount(s)
withdrawn or applied to an Annuity Payout
Option since the anniversary on which the
Step-up Value was calculated.
On the Claim Date, if the amount of the death benefit is greater
than the Account Value, the amount by which the death benefit
exceeds the Account Value will be deposited and allocated to the
money market fund available through the Separate Account.
The amount paid to the Beneficiary will equal the Adjusted Account
Value on the date the payment request is processed. This amount
may be greater or less than the amount of the death benefit on the
Claim Date. The Beneficiary may elect a death benefit payment
option as permitted in Section III - Death Benefit Options
Available to the Beneficiary.
(b) Death of the (Contract) Holder if the (Contract) Holder is
not the Annuitant.
On the Claim Date, the amount of the death benefit equals
the Account Value.
The amount paid to the Beneficiary will equal the Adjusted
Account Value on the date the payment request is
processed. A Deferred Sales Charge may apply to any full
or partial payment of the death benefit. The Beneficiary
may elect a death benefit payment option as permitted in
Section III - Death Benefit Options Available to the
Beneficiary.
GMC-VA-98 Page 22
<PAGE>
4.03 Description of Option Package II (Cont'd):
(c) Death of a spouse who is the Beneficiary of a (Contract)
Holder/Annuitant and who becomes a successor (Contract)
Holder/ Annuitant.
The amount of the death benefit paid to the Beneficiary at
the death of a successor (Contract) Holder/Annuitant is
the greater of the values as described in (a) above except
that:
(1) In calculating (a)(1), the Account Value on the
Claim Date for the prior (Contract) Holder's death
is treated as the initial Purchase Payment; and
(2) In calculating (a)(3), the Step-up Value on the
Claim Date for the prior (Contract) Holder's death
is the initial Step-up Value.
Charges to Separate Account:
See Schedule-Accumulation Period.
4.04 Description of Option Package III:
Deferred Sales Charge:
In addition to the events described in Section III - Deferred
Sales Charge, the total amount that may be withdrawn each Account
Year without a Deferred Sales Charge cannot exceed 10% of the
Account Value less:
(1) Any amount(s) withdrawn and/or requested for withdrawal
under a Systematic Distribution Option, or
(2) Any amount(s) taken as a minimum required distribution
as described in Section III - Deferred Sales Charge.
If the entire 10% of Account Value free of Deferred Sales Charge
is not taken in any Account Year, the (Contract) Holder may
accumulate in successive Account Years the percentage not taken.
The amount eligible each Account Year for withdrawal without a
Deferred Sales Charge cannot exceed 30% of the Account Value less
any amount(s) withdrawn and/or requested for withdrawal under a
Systematic Distribution Option, or taken as a minimum required
distribution as described in Section III - Deferred Sales Charge,
during the Account Year.
No Deferred Sales Charge is deducted from any portion of the
Purchase Payment(s) which is withdrawn:
If the Annuitant has spent at least 45 consecutive days in
a licensed nursing care facility and each of the following
conditions are met:
(1) More than one Account Year has elapsed since the
Schedule Effective Date; and
(2) The withdrawal is requested within three years of
admission to a licensed nursing care facility.
This waiver does not apply if the Annuitant was in a
licensed nursing care facility for at least one day during
the two week period immediately preceding or following the
Schedule Effective Date.
GMC-VA-98 Page 23
<PAGE>
4.04 Description of Option Package III (Cont'd):
Death Benefit Calculation During the Accumulation Period:
If the (Contract) Holder or Annuitant dies before an Annuity
Payout Option starts, the Beneficiary is entitled to a death
benefit. If the Account is owned jointly, the death benefit
applies at the death of the first joint (Contract) Holder to die.
The amount of the death benefit is determined as follows:
(a) Death of the Annuitant.
The death benefit is the greatest of:
(1) The sum of all Purchase Payment(s) made, adjusted
for amount(s) withdrawn or applied to an Annuity
Payout Option as of the Claim Date; or
(2) The Account Value on the Claim Date; or
(3) The Step-up Value on the Claim Date; or
(4) The "Roll-up Value" on the Claim Date.
On the Schedule Effective Date, the Step-up Value is the greater
of:
(1) The Account Value; or
(2) The Step-up Value, if any, calculated on the anniversary
prior to the Schedule Effective Date, adjusted for
Purchase Payments(s) made and amount(s) withdrawn or
applied to an Annuity Payout Option during the prior
Account Year.
Thereafter, on each anniversary of the Schedule Effective Date
until the anniversary immediately preceding the Annuitant's 85th
birthday or death, whichever is earlier, the Step-up Value is
equal to the greater of:
(a) The Step-up Value most recently calculated, adjusted
for Purchase Payment(s) made and amount(s) withdrawn or
applied to an Annuity Payout Option during the prior
Account Year; or
(b) The Account Value on that anniversary of the Schedule
Effective Date.
On the Claim Date, the Step-up Value shall equal the Step-up Value
calculated prior to death. It is adjusted for Purchase Payment(s)
made and amount(s) withdrawn or applied to an Annuity Payout
Option since the anniversary on which the Step-up Value was
calculated.
On the Schedule Effective Date, the Roll-up Value is equal to the
Account Value.
Thereafter, on each anniversary of the Schedule Effective Date
until the anniversary immediately preceding the Annuitant's 76th
birthday or death, whichever is earlier, the Roll-up Value is
equal to the Roll-up Value most recently calculated, multiplied by
a factor of 1.05, adjusted for Purchase Payment(s) made, and
amount(s) withdrawn or applied to an Annuity Payout Option during
the prior Account Year. The Roll-up Value may not exceed 200% of
the Account Value on the Schedule Effective Date, adjusted for
additional Purchase Payments made, and amount(s) withdrawn or
applied to an Annuity Payout Option.
On the Claim Date, the Roll-up Value shall equal the Roll-up Value
calculated prior to death. It is adjusted for additional Purchase
Payment(s) made and amount(s) withdrawn or applied to an Annuity
Payout Option since the anniversary on which the Roll-up Value was
calculated.
On the Claim Date, if the amount of the death benefit is greater
than the Account Value, the amount by which the death benefit
exceeds the Account Value will be deposited and allocated to the
money market fund available through the Separate Account.
The amount paid to the Beneficiary will equal the Adjusted Account
Value on the date the payment request is processed. This amount
may be greater or less than the amount of the death benefit on the
Claim Date. The Beneficiary may elect a death benefit payment
option as permitted in Section III - Death Benefit Options
Available to the Beneficiary.
GMC-VA-98 Page 24
<PAGE>
4.04 Description of Option Package III (Cont'd):
(b) Death of the (Contract) Holder if the (Contract) Holder is
not the Annuitant.
On the Claim Date, the amount of the death benefit equals
the Account Value.
The amount paid to the Beneficiary will equal the Adjusted
Account Value on the date the payment request is
processed. A Deferred Sales Charge may apply to any full
or partial payment of the death benefit. The Beneficiary
may elect a death benefit payment option as permitted in
Section III - Death Benefit Options Available to the
Beneficiary.
(c) Death of a spouse who is the Beneficiary of a (Contract)
Holder/Annuitant and who becomes a successor (Contract)
Holder/ Annuitant.
The amount of the death benefit paid to the Beneficiary at
the death of a successor (Contract) Holder/Annuitant is
the greater of the values as described in (a) above except
that:
(1) In calculating (a)(1), the Account Value on the
Claim Date for the prior (Contract) Holder's death
is treated as the initial Purchase Payment; and
(2) In calculating (a)(3), the Step-up Value on the
Claim Date for the prior (Contract) Holder's death
is the initial Step-up Value; and
(3) In calculating (a)(4), the Roll-up Value on the
Claim Date for the prior (Contract) Holder's death
is the initial Roll-Up Value.
Charges to Separate Account:
See Schedule-Accumulation Period.
V. Annuity Payout Provisions
- --------------------------------------------------------------------------------
5.01 Annuity Payout Options:
Annuity Payout 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.
Annuity Payout Option 2 - Life income based on the life of one
Annuitant:
When this option is elected, the Certificate Holder must 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: when the Annuitant dies, the Beneficiary will
receive a lump sum payment equal to the amount applied to
the Annuity Payout 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
Payout Option is allocated to a fixed Annuity Payment.
GMC-VA-98 Page 25
<PAGE>
5.01 Annuity Payout Options (Cont'd):
Annuity Payout 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 primary Annuitant and the other the secondary
Annuitant, and cease 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;
(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
secondary Annuitant and 50% of the payment to continue at
the death of the primary Annuitant; or
(f) 100% of the payment continues after the first death with
a cash refund feature. When the primary Annuitant and
secondary Annuitant die, the Beneficiary will receive a
lump sum payment equal to the amount applied to the
Annuity Payout 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 Payout Option is
allocated to a fixed Annuity Payment.
If a fixed Annuity Payment is chosen under Annuity Payout Option
1, 2 (a) or (b), or 3 (a) or (d), the Certificate Holder may
elect, at the time the Annuity Payout Option is selected, an
annual increase of one, two or three percent compounded annually.
As allowed under applicable state law, Aetna reserves the right to
offer additional Annuity Payout Options.
5.02 Annuity Payment Choices:
The Certificate Holder may tell Aetna to apply any portion of the
Adjusted Account Value (minus any premium tax, if applicable,) to
any Annuity Payout Option . The first Annuity Payment may not be
earlier than one calendar year after the initial Purchase Payment
nor later than the later of:
(a) The first day of the month following the Annuitant's 85th
birthday; or
(b) The tenth anniversary of the last Purchase Payment. In
lieu of the election of an Annuity Payout Option, the
Certificate Holder may tell Aetna to make a lump sum
payment.
When an Annuity Payout Option is chosen, Aetna must also be told
if payments are to be made other than monthly and whether to pay:
(a) A fixed Annuity Payment using the General Account;
(b) A variable Annuity Payment using any of the Subaccount(s)
available under this Contract for the Annuity Period; or
(c) A combination of (a) and (b).
If a fixed Annuity Payment is chosen, the payment rate for the
option chosen, shown on the tables immediately following, reflects
at least the minimum guaranteed interest rate (see Schedule -
Annuity Period), but may reflect a higher interest rate.
If a variable Annuity Payment is chosen, the initial Annuity
Payment for the option elected reflects the Assumed Interest Rate
(AIR) elected (see Schedule - Annuity Period). The Certificate
Holder must allocate specified amounts among the Subaccounts
available during the Annuity Period. Aetna reserves the right to
limit the number of Subaccounts available at one time and to limit
the number of Subaccounts the Certificate Holder may select during
the Annuity Period. Subject to terms and conditions established by
Aetna, the Certificate Holder may transfer all or any portion of
the amount allocated to a Subaccount to another Subaccount. The
number of Transfers allowed without charge each year is shown on
Schedule - Annuity Period.
Transfer requests must be submitted as a percentage of the
allocation among the Subaccounts. Aetna reserves the right to
establish a minimum transfer amount. Transfers will be effective
as of the Valuation Date in which Aetna receives a transfer
request in good order at its home office.
GMC-VA-98 Page 26
<PAGE>
5.03 Terms of Annuity Payout Options:
(a) When payments start, the age of the Annuitant plus the
number of years for which payments are guaranteed must
not exceed 95.
(b) An Annuity Payout Option may not be elected if the first
payment would be less than $50 or if the total payments
in a year would be less than $250 (less if required by
state law). Aetna reserves the right to increase the
minimum first Annuity Payment amount and the minimum
annual Annuity payment amount based upon increases
reflected in the Consumer Price Index-Urban, (CPI-U)
since July 1, 1993.
(c) If a fixed Annuity Payment is chosen Aetna will use the
applicable current rate if it will provide higher fixed
Annuity Payments.
(d) For purposes of calculating the guaranteed first payment
of a variable or fixed Annuity Payment, the primary
Annuitant's and secondary Annuitant's adjusted age will
be used. The primary Annuitant's and secondary
Annuitant's adjusted age is his or her age as of the
birthday closest to the Annuity Payment commencement date
reduced by one year for commencement dates occurring
during the period of time from July 1, 1993 through
December 31, 1999. The primary Annuitant's and secondary
Annuitant's age will be reduced by two years for
commencement dates occurring during the period of time
from January 1, 2000 through December 31, 2009. The
primary Annuitant's and secondary Annuitant's age will be
reduced by one additional year for Annuity commencement
dates occurring in each succeeding decade.
The attached payment rates for Annuity Payout Options 2
and 3 are based on mortality from 1983 Table a.
(e) Assumed Interest Rate (AIR) is the interest rate used to
determine the amount of the first Annuity Payment under a
variable Annuity Payment as shown on Schedule - Annuity
Period. 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,
(see Schedule - Annuity Period).
(f) Once elected, Annuity Payments cannot be commuted to a
lump sum except for variable Annuity Payments under
Annuity Payout Option 1.
5.04 Death of Annuitant/Beneficiary:
(a) Certificate Holder is the Annuitant: When the Certificate
Holder is the Annuitant and the Annuitant dies under
Annuity Payout Option 1 or 2(b), or both the primary
Annuitant and the secondary Annuitant die under Annuity
Payout Option 3(d), any remaining payments will continue
to the Beneficiary, or if elected by the Beneficiary and
not prohibited by the Certificate Holder in the
Beneficiary designation, the present value of any
remaining payments will be paid in one sum to the
Beneficiary. If Annuity Payout Option 3 has been elected
and the Certificate Holder dies, the remaining payments
will continue to the successor payee. If no successor
payee has been designated, the Beneficiary will be
treated as the successor payee. If the Account has joint
Certificate Holders, the surviving joint Certificate
Holder will be deemed the successor payee.
(b) Certificate Holder is not the Annuitant: When the
Certificate Holder is not the Annuitant and the
Certificate Holder dies, any remaining payments will
continue to the successor payee. If no successor payee
has been designated, the Beneficiary will be treated as
the successor payee. If the Account has joint Certificate
Holders, the surviving joint Certificate Holder will be
deemed the successor payee.
If the Annuitant dies under Annuity Payout Option 1 or
2(b), or both the primary Annuitant and secondary
Annuitant die under Annuity Payout Option 3(d), any
remaining payments will continue to the Beneficiary, or
if elected by the Beneficiary and not prohibited by the
Certificate Holder in the Beneficiary designation, the
present value of any remaining payments will be paid in
one sum to the Beneficiary. If Annuity Payout Option 3
has been elected and the Annuitant dies, the remaining
payments will continue to the Certificate Holder.
GMC-VA-98 Page 27
<PAGE>
5.04 Death of Annuitant/Beneficiary (Cont'd):
(c) No Beneficiary Named/Surviving: If there is no
Beneficiary, the present value of any remaining payments
will be paid in one sum to the Certificate Holder, or if
the Certificate Holder is not living, then to the
Certificate Holder's estate.
(d) If the Beneficiary or the successor payee dies while
receiving Annuity Payments, any remaining payments will
continue to the successor Beneficiary/payee or upon
election by the successor Beneficiary/payee, the present
value of any remaining payments will be paid in one sum to
the successor Beneficiary/payee. If no successor
Beneficiary/payee has been designated, the present value
of any remaining payments will be paid in one sum to the
Beneficiary's/payee's estate.
(e) The present value will be determined as of the Valuation
Date in which proof of death acceptable to Aetna and a
request for payment is received at Aetna's home office.
5.05 Annuity Units - Separate Account:
The number of annuity units is based on the amount of the first
variable Annuity Payment which is equal to:
(a) The portion of the Account Value applied to pay a variable
Annuity Payment (minus any applicable premium tax);
divided by
(b) 1,000; multiplied by
(c) The payment rate on the tables immediately following, for
the option chosen.
Such amount, or portion, of the variable Annuity Payment will be
divided by the appropriate annuity unit value (see Section V -
Annuity Unit Value - Separate Account) on the tenth Valuation Date
before the due date of the first payment to determine the number
of annuity units. The number of annuity units remains fixed. Each
future payment is equal to the sum of the products of each annuity
unit value multiplied by the appropriate number of annuity units.
The annuity unit value on the tenth Valuation Date prior to the
due date of the payment is used.
5.06 Annuity Unit Value - Separate Account:
For any Valuation Date, an annuity unit value is equal to:
(a) The value for the previous Valuation Date; multiplied by
(b) The annuity net return factor(s) (see Section V - Net
Return Factor(s) - Separate Account) for the Valuation
Date; multiplied by
(c) A factor to reflect the AIR (see Schedule - Annuity
Period).
The annuity unit value and Annuity Payment amount may go up or
down due to investment gain or loss.
5.07 Net Return Factor(s) - Separate Account:
The net return factor(s) are used to compute all variable Annuity
Payments for any Subaccount.
The net return factor for each Subaccount 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 Subaccount at the end of a
Valuation Date; minus
(b) The value of the shares of the Subaccount at the start of
the Valuation Date; plus or minus
(c) Taxes (or reserves for taxes) on the Separate Account (if
any); divided by
(d) The total value of the annuity units at the start of the
Valuation Date; minus
GMC-VA-98 Page 28
<PAGE>
5.07 Net Return Factor(s) - Separate Account (Cont'd):
(e) A daily charge for mortality and expense risks, which may
include profit, and a daily administrative charge at the
annual rate as shown on Schedule - Annuity Period.
A net return rate may be more or less than 0%.
The value of a share of the Subaccount is equal to the net assets
of the Subaccount divided by the number of shares outstanding.
Annuity Payments shall not be changed due to changes in the
mortality or expense results or administrative charges.
GMC-VA-98 Page 29
<PAGE>
OPTION 1: Payments for a Specified Period
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Monthly Amount for Each $1,000*
Rates for a Fixed Annuity with a 3% Guaranteed Interest Rate
- ----------------------------------------------------------------------------------
Years Payment Years Payment
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
5 $17.91 18 $5.96
6 15.14 19 5.73
7 13.16 20 5.51
8 11.68 21 5.32
9 10.53 22 5.15
10 9.61 23 4.99
11 8.86 24 4.84
12 8.24 25 4.71
13 7.71 26 4.59
14 7.26 27 4.47
15 6.87 28 4.37
16 6.53 29 4.27
17 6.23 30 4.18
- ----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
First Monthly Amount for Each $1,000*
Rates for a Variable Annuity with a 3.5% AIR
- ----------------------------------------------------------------------------------
Years Payment Years Payment
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
5 $18.12 18 $6.20
6 15.35 19 5.97
7 13.38 20 5.75
8 11.90 21 5.56
9 10.75 22 5.39
10 9.83 23 5.24
11 9.09 24 5.09
12 8.46 25 4.96
13 7.94 26 4.84
14 7.49 27 4.73
15 7.10 28 4.63
16 6.76 29 4.53
17 6.47 30 4.45
- ----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
First Monthly Amount for Each $1,000*
Rates for a Variable Annuity with a 5% AIR
- ----------------------------------------------------------------------------------
Years Payment Years Payment
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
5 $18.74 18 $6.94
6 15.99 19 6.71
7 14.02 20 6.51
8 12.56 21 6.33
9 11.42 22 6.17
10 10.51 23 6.02
11 9.77 24 5.88
12 9.16 25 5.76
13 8.64 26 5.65
14 8.20 27 5.54
15 7.82 28 5.45
16 7.49 29 5.36
17 7.20 30 5.28
- ----------------------------------------------------------------------------------
</TABLE>
* Net of any applicable premium tax deduction
GMC-VA-98 Page 30
<PAGE>
Option 2: Life Income Based on the Life of One Annuitant
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Monthly Payment Amount for Each $1,000*
Rates for a Fixed Annuity with 3% Guaranteed Interest Rate
- ------------------------------------------------------------------------------------------------------------------------------------
Option 2(a): Option 2(b): Option 2(b): Option 2(b): Option 2(b): Option 2(c):
Adjusted payments for payments payments payments payments Cash Refund
Age of life guaranteed guaranteed guaranteed guaranteed
Annuitant 5 years 10 years 15 years 20 years
--------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- -------
Male Female Male Female Male Female Male Female Male Female Male Female
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <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 $4.04 $3.78
51 4.34 3.97 4.33 3.96 4.30 3.95 4.23 3.92 4.14 3.88 4.10 3.84
52 4.43 4.03 4.41 4.03 4.37 4.01 4.30 3.98 4.20 3.93 4.16 3.89
53 4.51 4.10 4.50 4.10 4.45 4.08 4.37 4.04 4.26 3.99 4.23 3.95
54 4.60 4.18 4.59 4.17 4.54 4.15 4.45 4.11 4.32 4.04 4.29 4.01
55 4.70 4.25 4.68 4.25 4.62 4.22 4.53 4.18 4.39 4.11 4.37 4.07
56 4.80 4.34 4.78 4.33 4.72 4.30 4.61 4.25 4.45 4.17 4.44 4.13
57 4.91 4.42 4.89 4.41 4.82 4.38 4.69 4.32 4.51 4.23 4.52 4.20
58 5.03 4.52 5.00 4.51 4.92 4.47 4.78 4.40 4.58 4.30 4.61 4.28
59 5.15 4.61 5.12 4.60 5.03 4.56 4.87 4.48 4.65 4.37 4.69 4.35
60 5.28 4.72 5.25 4.70 5.14 4.66 4.96 4.57 4.71 4.44 4.78 4.43
61 5.43 4.83 5.39 4.81 5.27 4.76 5.06 4.66 4.78 4.51 4.88 4.52
62 5.58 4.95 5.53 4.93 5.39 4.87 5.16 4.75 4.84 4.58 4.98 4.60
63 5.74 5.08 5.69 5.05 5.53 4.98 5.26 4.85 4.90 4.65 5.09 4.70
64 5.91 5.21 5.85 5.18 5.66 5.10 5.36 4.95 4.96 4.72 5.20 4.80
65 6.10 5.36 6.03 5.32 5.81 5.22 5.46 5.05 5.02 4.79 5.31 4.90
66 6.30 5.51 6.21 5.47 5.96 5.36 5.56 5.16 5.08 4.86 5.44 5.01
67 6.51 5.67 6.41 5.63 6.12 5.50 5.66 5.26 5.13 4.93 5.56 5.12
68 6.73 5.85 6.62 5.80 6.28 5.65 5.77 5.37 5.18 5.00 5.70 5.24
69 6.97 6.04 6.84 5.98 6.44 5.80 5.86 5.49 5.23 5.06 5.84 5.37
70 7.23 6.25 7.07 6.18 6.61 5.97 5.96 5.60 5.27 5.12 5.98 5.51
71 7.51 6.47 7.32 6.39 6.79 6.14 6.05 5.71 5.31 5.18 6.14 5.65
72 7.80 6.71 7.58 6.62 6.96 6.32 6.14 5.83 5.34 5.23 6.30 5.80
73 8.12 6.98 7.85 6.86 7.14 6.50 6.23 5.94 5.37 5.28 6.47 5.96
74 8.46 7.26 8.14 7.12 7.32 6.69 6.31 6.04 5.40 5.32 6.65 6.13
75 8.82 7.57 8.45 7.40 7.50 6.89 6.38 6.14 5.42 5.35 6.83 6.31
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Net of any applicable premium tax deduction
GMC-VA-98 Page 31
<PAGE>
Option 2: Life Income Based on the Life of One Annuitant
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
First Monthly Payment Amount for Each $1,000*
Rates for a Variable Annuity with 3.5% AIR
- -------------------------------------------------------------------------------------------------------------------
Option 2(a): Option 2(b): Option 2(b): Option 2(b): Option 2(b):
Adjusted payments for payments payments payments payments
Age of life guaranteed guaranteed guaranteed guaranteed
Annuitant 5 years 10 years 15 years 20 years
------------------- ------------------- ------------------- ------------------- -------------------
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>
* Net of any applicable premium tax deduction
GMC-VA-98 Page 32
<PAGE>
Option 2: Life Income Based on the Life of One Annuitant
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
First Monthly Payment Amount for Each $1,000*
Rates for a Variable Annuity with 5% AIR
- -------------------------------------------------------------------------------------------------------------------
Option 2(a): Option 2(b): Option 2(b): Option 2(b): Option 2(b):
Adjusted payments for payments payments payments payments
Age of life guaranteed guaranteed guaranteed guaranteed
Annuitant 5 years 10 years 15 years 20 years
------------------- ------------------- ------------------- ------------------- -------------------
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 5.97 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>
* Net of any applicable premium tax deduction
GMC-VA-98 Page 33
<PAGE>
Option 3: Life Income Based on the Lives of Two Annuitants
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Monthly Payment Amount for Each $1,000*
Rates for a Fixed Annuity with 3% Guaranteed Interest Rate
Primary Annuitant is Female and Secondary Annuitant is Male
- -----------------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- ----------------------------
payments
guaranteed
Primary Secondary 10 years
Annuitant Annuitant Option 3(a) Option 3(b) Option 3(c) Option 3(d) Option 3(e) Option 3(f)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
55 50 $3.75 $4.07 $4.26 $3.75 $3.98 $3.72
55 55 3.88 4.25 4.47 3.87 4.06 3.85
55 60 3.99 4.44 4.71 3.98 4.12 3.94
60 55 4.06 4.47 4.71 4.06 4.37 4.02
60 60 4.24 4.71 4.99 4.23 4.47 4.17
60 65 4.38 4.97 5.32 4.38 4.54 4.29
65 60 4.49 5.01 5.32 4.48 4.89 4.39
65 65 4.72 5.33 5.70 4.71 5.02 4.59
65 70 4.93 5.68 6.15 4.91 5.14 4.74
70 65 5.07 5.75 6.17 5.05 5.60 4.87
70 70 5.40 6.21 6.70 5.36 5.79 5.13
70 75 5.69 6.68 7.32 5.62 5.96 5.29
75 70 5.89 6.82 7.40 5.81 6.63 5.48
75 75 6.37 7.45 8.15 6.23 6.92 5.78
75 80 6.78 8.11 8.99 6.54 7.15 5.93
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Net of any applicable premium tax deduction
GMC-VA-98 Page 34
<PAGE>
Option 3: Life Income Based on the Lives of Two Annuitants
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
First Monthly Payment Amount for Each $1,000*
Rates for a Variable Annuity with 3.5% AIR
Primary Annuitant Is Female and Secondary Annuitant Is Male
- -------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- ----------------------------------
payments
guaranteed
Primary Secondary 10 years
Annuitant Annuitant Option 3(a) Option 3(b) Option 3(c) Option 3(d) Option 3(e)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $4.03 $4.36 $4.55 $4.03 $4.27
55 55 4.16 4.54 4.76 4.15 4.34
55 60 4.27 4.73 5.00 4.26 4.40
60 55 4.34 4.76 5.00 4.34 4.65
60 60 4.51 4.99 5.27 4.50 4.74
60 65 4.66 5.25 5.61 4.65 4.82
65 60 4.76 5.29 5.60 4.75 5.16
65 65 4.99 5.61 5.99 4.98 5.30
65 70 5.19 5.97 6.44 5.17 5.41
70 65 5.34 6.03 6.46 5.31 5.88
70 70 5.67 6.49 6.99 5.62 6.07
70 75 5.95 6.96 7.61 5.87 6.23
75 70 6.16 7.10 7.68 6.07 6.90
75 75 6.64 7.73 8.43 6.48 7.19
75 80 7.04 8.39 9.29 6.79 7.42
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Net of any applicable premium tax deduction
GMC-VA-98 Page 35
<PAGE>
Option 3: Life Income Based on the Lives of Two Annuitants
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
First Monthly Payment Amount for Each $1,000*
Rates for a Variable Annuity with 5% AIR
Primary Annuitant is Female and Secondary Annuitant is Male
- -------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- ----------------------------------
payments
guaranteed
Primary Secondary 10 years
Annuitant Annuitant Option 3(a) Option 3(b) Option 3(c) Option 3(d) Option 3(e)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $4.93 $5.27 $5.46 $4.93 $5.17
55 55 5.04 5.44 5.66 5.04 5.23
55 60 5.15 5.63 5.91 5.14 5.29
60 55 5.21 5.65 5.89 5.21 5.53
60 60 5.37 5.87 6.16 5.37 5.62
60 65 5.52 6.14 6.51 5.51 5.70
65 60 5.61 6.16 6.49 5.60 6.03
65 65 5.83 6.49 6.87 5.82 6.15
65 70 6.04 6.84 7.34 6.00 6.27
70 65 6.17 6.90 7.33 6.13 6.73
70 70 6.49 7.35 7.87 6.44 6.91
70 75 6.77 7.84 8.51 6.68 7.07
75 70 6.97 7.96 8.56 6.87 7.75
75 75 7.45 8.60 9.33 7.27 8.04
75 80 7.86 9.28 10.20 7.57 8.27
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Net of any applicable premium tax deduction
GMC-VA-98 Page 36
<PAGE>
Option 3: Life Income Based on the Lives of Two Annuitants
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Monthly Payment Amount for Each $1,000*
Rates for a Fixed Annuity with 3% Guaranteed Interest Rate
Primary Annuitant is Male and Secondary Annuitant is Female
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- ----------------------------
payments
guaranteed
Primary Secondary 10 years
Annuitant Annuitant Option 3(a) Option 3(b) Option 3(c) Option 3(d) Option 3(e) Option 3(f)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
55 50 $3.69 $4.05 $4.27 $3.69 $4.13 $3.67
55 55 3.88 4.25 4.47 3.87 4.25 3.85
55 60 4.06 4.47 4.71 4.06 4.36 4.02
60 55 3.99 4.44 4.71 3.98 4.55 3.94
60 60 4.24 4.71 4.99 4.23 4.70 4.17
60 65 4.49 5.01 5.32 4.48 4.85 4.39
65 60 4.38 4.97 5.32 4.38 5.10 4.29
65 65 4.72 5.33 5.70 4.71 5.32 4.59
65 70 5.07 5.75 6.17 5.05 5.54 4.87
70 65 4.93 5.68 6.15 4.91 5.86 4.74
70 70 5.40 6.21 6.70 5.36 6.18 5.13
70 75 5.89 6.82 7.40 5.81 6.49 5.48
75 70 5.69 6.68 7.32 5.62 6.92 5.29
75 75 6.37 7.45 8.15 6.23 7.40 5.78
75 80 7.07 8.34 9.16 6.78 7.85 6.17
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Net of any applicable premium tax deduction
GMC-VA-98 Page 37
<PAGE>
Option 3: Life Income Based on the Lives of Two Annuitants
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
First Monthly Payment Amount for Each $1,000*
Rates for a Variable Annuity with 3.5% AIR
Primary Annuitant is Male and Secondary Annuitant is Female
- -------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- ----------------------------------
payments
guaranteed
Primary Secondary 10 years
Annuitant Annuitant Option 3(a) Option 3(b) Option 3(c) Option 3(d) Option 3(e)
- -------------------------------------------------------------------------------------------------------------------------
<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>
* Net of any applicable premium tax deduction
GMC-VA-98 Page 38
<PAGE>
Option 3: Life Income Based on the Lives of Two Annuitants
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
First Monthly Payment Amount for Each $1,000*
Rates for a Variable Annuity with 5% AIR
Primary Annuitant Is Male and Secondary Annuitant is Female
- -------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- ----------------------------------
payments
guaranteed
Primary Secondary 10 years
Annuitant Annuitant Option 3(a) Option 3(b) Option 3(c) Option 3(d) Option 3(e)
- -------------------------------------------------------------------------------------------------------------------------
<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>
* Net of any applicable premium tax deduction
GMC-VA-98 Page 39
<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. AMOUNTS ALLOCATED TO THE GUARANTEED ACCOUNT, IF WITHDRAWN
BEFORE THE GUARANTEED TERM MATURITY DATE, MAY BE SUBJECT TO A MARKET VALUE
ADJUSTMENT. THE MARKET VALUE ADJUSTMENT MAY RESULT IN AN INCREASE, OR A
DECREASE, IN THE ACCOUNT VALUE.
GMC-VA-98
Exhibit 99.B.8.1
FORM OF PARTICIPATION AGREEMEENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
AETNA LIFE INSURANCE AND ANNUITY COMPANY,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
AND
AETNA LIFE INSURANCE AND ANNUITY COMPANY
<PAGE>
Description
Section 1. Available Funds........................................2
1.1 Availability ................................................2
1.2 Addition, Deletion or Modification of Funds..................2
1.3 No Sales to the General Public...............................2
Section 2. Processing Transactions.........................................2
2.1 Timely Pricing and Orders....................................2
2.2 Timely Payments .............................................3
2.3 Applicable Price ............................................3
2.4 Dividends and Distributions .................................4
2.5 Book Entry ..................................................4
Section 3. Costs and Expenses..............................................4
3.1 General .....................................................4
3.2 Registration ................................................4
3.3 Other (Non-Sales-Related) ...................................5
3.4 Other (Sales-Related) .......................................5
3.5 Parties To Cooperate.........................................5
Section 4. Legal Compliance................................................5
4.1 Tax Laws ....................................................5
4.2 Insurance and Certain Other Laws.............................8
4.3 Securities Laws..............................................8
4.4 Notice of Certain Proceedings and Other Circumstances........9
4.5 LIFE COMPANY To Provide Documents; Information About AVIF 10
4.6 AVIF To Provide Documents; Information About LIFE COMPANY 11
Section 5. Mixed and Shared Funding.......................................12
5.1 General ....................................................12
5.2 Disinterested Directors.....................................13
5.3 Monitoring for Material Irreconcilable Conflicts............13
5.4 Conflict Remedies...........................................14
5.5 Notice to LME COMPANY.......................................15
5.6. Information Requested by Board of Directors.................15
5.7 Compliance with SEC Rules...................................15
5.8 Other Requirements..........................................16
2
<PAGE>
Section 6. Termination ...................................................16
6.1 Events of Termination.......................................16
6.2 Notice Requirement for Termination..........................17
6.3 Funds To Remain Available...................................17
6.4 Survival of Warranties and Indemnifications.................18
6.5 Continuance of Agreement for Certain Purposes...............18
Section 7. Parties To Cooperate Respecting Termination....................18
Section 8. Assignment ....................................................18
Section 9. Notices .......................................................18
Section 10. Voting Procedures............................................19
Section II. Foreign Tax Credits..........................................20
Section 12. Indemnification..............................................20
12.1 Of AVIF by LIFE COMPANY and UNDERWRITER.....................20
12.2 Of LIFE COMPANY and UNDERWRITER by AVIF.....................22
12.3 Effect of Notice............................................25
12.4 Successors ...............................................25
Section 13. Applicable Law ...............................................25
Section 14. Execution in Counterparts.....................................25
Section 15. Severability..................................................25
Section 16. Rights Cumulative.............................................25
Section 17. Headings .....................................................25
Section 18. Confidentiality...............................................26
Section 19. Trademarks and Fund Names.....................................26
Section 20. Parties to Cooperate.........................................28
3
<PAGE>
PARTICIPATION AGREEMEENT
THIS AGREEMEENT, made and entered into as of the day of 1998
("Agreement"), by and among AIM Variable Insurance Funds, Inc., a
Maryland corporation ("AVIF"); _______________, a _____________
corporation ("the Adviser"), Aetna Life Insurance and Annuity Company,
a Connecticut life insurance company ("ALIAC"), on behalf of itself and
each of its segregated asset accounts listed in Schedule A hereto, as
the parties hereto may amend from time to time (each, an "Account, "
and collectively, the "Accounts"); and AETNA LIFE INSURANCE AND ANNUITY
COMPANY, the principal underwriter of the Contracts ("UNDERWRITER")
(collectively, the "Parties').
WITNESSETH THAT:
WHEREAS, AVIF is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended (the " 1940 Act"); and
WHEREAS, AVIF currently consists of nine separate series ("Series"),
shares ("Shares") of each of which are registered under the Securities Act of
1933, as amended (the " 1933 Act") and are currently sold to one or more
separate accounts of life insurance companies to fund benefits under variable
annuity contracts and variable life insurance contracts; and
WHEREAS, AVIF will make Shares of each Series listed on Schedule A hereto
as the Parties hereto may amend from time to time (each a "Fund"; reference
herein to "AVIF" includes reference to each Fund, to the extent the context
requires) available for purchase by the Accounts; and
[INSERT WHEREAS ABOUT ADVISER]
WHEREAS, ALIAC represents that it has established Variable Annuity
Account B, C and D and may establish such other accounts as may be set forth in
Schedule A attached hereto and as may be amended from time to time with the
mutual consent of the parties hereto (the "Accounts"), each of which is a
separate account under Connecticut Insurance law, and has registered or will
registered each of the Accounts (except for such Accounts for which no such
registration is required) as a unit investment trust under the Investment
Company Act of 1940 (the "1940 Act"), to serve as an investment vehicle for the
Contracts. Each Contract provides for the allocation of net amounts received by
the Company to an Account for investment in the shares of one or more specified
open-end management investment companies available through that Account as
underlying investment media. Selection of a particular investment management
company and
4
<PAGE>
changes therein from time to time are made by the participant or Contract
owner, as applicable under a particular Contract.
WHEREAS, LIFE COMPANY will be the issuer of certain variable annuity
contracts and variable life insurance contracts ("Contracts") which Contracts
(hereinafter collectively, the "Contracts"), if required by applicable law, will
be registered under the 1933 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, LIFE COMPANY intends to purchase Shares in one or more of the Funds
on behalf of the Accounts to fund the Contracts; and
WHEREAS, UNDERWRITER is a broker-dealer registered with the SEC under the
Securities Exchange Act of 1934 (" 1934 Act") and a member in good standing of
the National Association of Securities Dealers, Inc. ("NASD");
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Parties hereto agree as follows:
Section 1. Available Funds
1.1 Availability
AVIF will make Shares of each Fund available to LIFE COMPANY for purchase
and redemption at net asset value and with no sales charges, subject to the
terms and conditions of this Agreement. The Board of Directors of AVIF may
refuse to sell Shares of any Fund to any person, or suspend or terminate the
offering of Shares of any Fund if such action is required by law or by
regulatory authorities having jurisdiction or if, in the sole discretion of the
Directors acting in good faith and in light of their fiduciary duties under
federal and any applicable state laws, such action is deemed in the best
interests of the shareholders of such Fund.
1.2 Addition, Deletion or Modification of Funds.
The Parties hereto may agree, from time to time, to add other Funds to
provide additional funding media for the Contracts, or to delete, combine, or
modify existing Funds, by amending Schedule A hereto. Upon such amendment to
Schedule A, any applicable reference to a Fund, AVIF, or its Shares herein shall
include a reference to any such additional Fund. Schedule A, as amended from
time to time, is incorporated herein by reference and is a part hereof.
1.3 No Sales to the General Public.
5
<PAGE>
The Fund and the Adviser represent and warrant that the investments of
the series of the Fund (each designated a "Portfolio") specified in Schedule A
attached hereto (as may be amended from time to time with the mutual consent of
the parties hereto) will at all times be adequately diversified within the
meaning of Section 817(h) of the Internal Revenue Service Code of 1986, as
amended (the "Code"), and the Regulations thereunder, and that at all times
while this agreement is in effect, all beneficial interests will be owned by one
or more insurance companies or by any other party permitted under Section
1.817-5(f)(3) of the Regulations promulgated under the Code or by the successor
thereto, or by any other party permitted under a Revenue Ruling or private
letter ruling granted by the Internal Revenue Service.
Section 2. Processing Transactions
2.1 Timely Pricing and Orders.
(a) AVIF or its designated agent will use its best efforts to provide LIFE
COMPANY with the net asset value per Share, dividend and capital gain
information for each Fund by 6:30 p.m. Eastern l Time on each Business Day. As
used herein, "Business Day" shall mean any day on which (i) the New York Stock
Exchange is, open for regular trading, (ii) AVIF calculates the Fund's net asset
value, and (iii) LIFE COMPANY is open for business.
(b) LIFE COMPANY will use the data provided by AVIF each Business Day
pursuant to paragraph (a) immediately above to calculate Account unit values and
to process transactions that receive that same Business Day's Account unit
values. LIFE COMPANY will perform such Account processing the same Business Day,
and will place corresponding orders to purchase or redeem Shares with AVIF by
10:00 a.m. Eastern Time the following Business Day; provided, however, that AVIF
shall provide additional time to LIFE COMPANY in the event that AVIF is unable
to meet the 6:30 p.m. time stated in paragraph (a) immediately above. Such
additional time shall be equal to the additional time that AVIF takes to make
the net asset values available to LIFE COMPANY.
(c) With respect to payment of the purchase price by LIFE COMPANY and of
redemption proceeds by AVIF, LIFE COMPANY and AVIF shall net purchase and
redemption orders with respect to each Fund and shall transmit one net payment
for all Fund in accordance with Section 2.2, below.
(d) If AVIF provides materially incorrect Share net asset value information
(as determined under SEC guidelines), LIFE COMPANY shall be entitled to an
adjustment to the number of Shares purchased or redeemed to reflect the correct
net asset value per Share. Any material error in the calculation or reporting of
net asset value per Share,
6
<PAGE>
dividend or capital gain information shall be reported promptly upon discovery
to LIFE COMPANY.
2.2 Timely Payments.
LIFE COMPANY will wire payment for net purchases to a custodial account
designated by AVIF by 4:00 p.m. Eastern Time on the same day as the order for
Shares is placed, to the extent practicable. AVIF will wire payment for net
redemptions to an account designated by LIFE COMPANY by 2:00 p.m. Eastern Time
on the same day as the Order is placed, to the extent practicable.
2.3 Applicable Price.
(a) Share purchase payments and redemption orders that result from
purchase payments, premium payments, surrenders and other transactions under
Contracts (collectively, "Contract transactions") and that LIFE COMPANY
receives prior to the close of regular trading on the New-York Stock Exchange on
a Business Day will be executed at the net asset values OF the appropriate Funds
next computed after receipt by AVIF or its designated agent of the orders. For
purposes of this Section 2.3(a), LIFE COMPANY shall be the designated agent of
AVIF for receipt of orders relating to Contract transactions on each Business
Day and receipt by such designated agent shall constitute receipt by AVIF;
provided that AVIF receives notice of such orders by 10:00 a.m. Eastern Time on
the next following Business Day or such later time as computed in accordance
with Section 2. 1 (b) hereof.
(b) All other Share purchases and redemptions by LIFE COMPANY will be
effected at the net asset values of the appropriate Funds next computed after
receipt by AVIF or its designated agent of the order therefor, and such orders
will be irrevocable.
2.4 Dividends and Distributions.
LIFE COMPANY hereby elects to reinvest all dividends and capital gains
distributions in additional Shares of the corresponding Fund at the dividend
date net asset values until LIFE COMPANY otherwise notifies AVIF in writing, it
being agreed by the Parties that the ex-dividend date and the payment date with
respect to any dividend or distribution will be the same Business Day. LIFE
COMPANY reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash.
2.5 Book Entry.
Issuance and transfer of AVIF Shares will be by book entry only. Stock
certificates will not be issued to LIFE COMPANY. Shares ordered from AVIF will
be recorded in an appropriate title for LIFE COMPANY, on behalf of its Account.
7
<PAGE>
Section 3. Costs and Expenses
3.1 Expenses.
(a) Except as otherwise provided in this Agreement, all expenses
incident to the performance by the Fund under this Agreement shall
be paid by the Fund, including the cost of registration of Fund
shares with the Securities and Exchange Commission (the "SEC") and
in states where required. The Fund and Adviser shall pay no fee or
other compensation to the Company under this Agreement, and the
Company shall pay no fee or other compensation to the Fund or
Adviser, except as provided herein and in Schedule C attached
hereto and made a part of this Agreement as may be amended from
time to time with the mutual consent of the parties hereto. All
expenses incident to performance by each party of its respective
duties under this Agreement shall be paid by that party, unless
otherwise specified in this Agreement.
(b) The Fund or the Adviser shall provide to the Company Post Script
files of periodic fund reports to shareholders and other materials
that are required by law to be sent to Contract owners. In
addition, the Fund or the Adviser shall provide the Company with a
sufficient quantity of its prospectuses, statements of additional
information and any supplements to any of these materials, to be
used in connection with the offerings and transactions
contemplated by this Agreement. In addition, the Fund shall
provide the Company with a sufficient quantity of its proxy
material that is required to be sent to Contract owners. The
Adviser shall be permitted to review and approve the typeset form
of such material prior to such printing provided such material has
been provided by the Adviser to the Company within a reasonable
period of time prior to typesetting.
(c) In lieu of the Fund's or Adviser's providing printed copies of
prospectuses, statements of additional information and any
supplements to any of these materials, and periodic fund reports
to shareholders, the Company shall have the right to request that
the Fund transmit a copy of such materials in an electronic format
(Post Script files), which the Company may use to have such
materials printed together with similar materials of other Account
funding media that the Company or any distributor will distribute
to existing or prospective Contract owners or participants.
Section 4. Legal Compliance
4.1 Tax Laws.
8
<PAGE>
(a) AVIF represents and warrants that each Fund is currently qualified as
a regulated investment company ("RIC") under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), and represents that it will use
its best efforts to qualify and to maintain qualification of each Fund as a RIC.
AVIF will notify LIFE COMPANY immediately upon having a reasonable basis for
believing that a Fund has ceased to so qualify or that it might not so qualify
in the future.
(b) AVIF represents that it will use its best efforts to comply and to
maintain each Fund's compliance with the diversification requirements set forth
in Section 817(h) of the Code and Section 1.817-5(b) of the regulations under
the Code. AVIF will notify LIFE COMPANY immediately upon having a reasonable
basis for believing that a Fund has ceased to so comply or that a Fund might not
so comply in the future. In the event of a breach of this Section 4. 1 (b) by
AVIF, it will take all reasonable steps to adequately diversify the Fund so as
to achieve compliance within the grace period afforded by Section 1.817-5 of the
regulations under the Code.
(c) LIFE COMPANY agrees that if the Internal Revenue Service ("IRS")
asserts in writing in connection with any governmental audit or review of LIFE
COMPANY or, to LIFE COMPANY's knowledge, of any Participant, that any Fund has
failed to comply with the diversification requirements of Section 817(h) of the
Code or LIFE COMPANY otherwise becomes aware of any facts that could give rise
to any claim against AVIF or its affiliates as a result of such a failure or
alleged failure:
(i) LIFE COMPANY shall promptly notify AVIF of such assertion or
potential claim (subject to the Confidentiality provisions of
Section 18 as to any Participant);
(ii) LIFE COMPANY shall consult with AVIF as to how to minimize any
liability that may arise as a result of such failure or
alleged failure;
(iii) LIFE COMPANY shall use its best efforts to minimum any
liability of AVIF or its affiliates resulting from such
failure, including, without limitation, demonstrating,
pursuant to Treasury Regulations Section 1.8175(a)(2), to the
Commissioner of the IRS that such failure was inadvertent;
(iv) LIFE COMPANY shall permit AVIF, its affiliates and their legal
and accounting advisors to participate in any conferences,
settlement discussions or other administrative or judicial
proceeding or contests (including judicial appeals thereof)
with the IRS, any Participant or any other claimant regarding
any claims that could give rise to liability to AVIF or its
affiliates as a result of such a failure or alleged failure;
provided, however, that LIFE COMPANY will retain control of
the conduct of such conferences discussions, proceedings,
contests or appeals;
9
<PAGE>
(v) any written materials to be submitted by LIFE COMPANY to the
IRS, any Participant or any other claimant in connection with
any of the foregoing proceedings or contests (including,
without limitation, any such materials to be submitted to the
IRS pursuant to Treasury Regulations Section 1. 8 17-5(a)(2)),
shall be provided by LIFE COMPANY to AVIF (together with any
supporting information or analysis); subject to the
confidentiality provisions of Section 18, at least five (5)
business days or such shorter period to which the Parties
hereto agree prior to the day on which such proposed materials
are to be submitted;
(vi) LIFE COMPANY shall provide AVIF or its affiliates and their
accounting and legal advisors with such cooperation as AVIF
shall reasonably request (including, without limitation, by
permitting AVIF and its accounting and legal advisors to
review the relevant books and records of LIFE COMPANY) in
order to facilitate review by AVIF or its advisors of any
written submissions provided to it pursuant to the preceding
clause or its assessment of the validity or amount of any
claim against its arising from such a failure or alleged
failure;
(vii) LIFE COMPANY shall not with respect to any claim of the IRS or
any Participant that would give rise to a claim against AVIF
or its affiliates (a) compromise or settle any claim, (b)
accept any adjustment on audit, or (c) forego any allowable
administrative or judicial appeals, without the express
written consent of AVIF or its affiliates, which shall not be
unreasonably withheld, provided that LIFE COMPANY shall not be
required to appeal any adverse judicial decision;
(viii) AVIF and its affiliates shall have no liability as a result of
such failure or alleged failure if LIFE COMPANY fails to
comply with any of the foregoing clauses (i) through (vii),
and such failure could be shown to have materially contributed
to the liability.
Should AVIF or Adviser or any of its affiliates refuse to give its
written consent to any compromise or settlement of any claim or liability
hereunder, LIFE COMPANY may, in its discretion, authorize AVIF or its affiliates
to act in the name of LIFE COMPANY in, and to control the conduct of, such
conferences, discussions, proceedings, contests or appeals and all
administrative or judicial appeals thereof, and in that event AVIF or its
affiliates shall bear the fees and expenses associated with the conduct of the
proceedings that it is so authorized to control; provided, that in no eve LIFE
COMPANY have any liability resulting from AVIF's refusal to accept the proposed
settlement or compromise with respect to any failure caused by AVIF. As used in
this Agreement, the term "affiliates" shall have the same meaning as "affiliated
person" as defined in Section 2(a)(3) of the 1940 Act.
10
<PAGE>
(d) LIFE COMPANY represents and warrants that the Contracts are
intended to qualify as annuity contracts or life insurance contracts under
applicable provisions of the Code and that it will use its best efforts to
maintain such treatment; LIFE COMPANY will notify AVIF immediately upon having a
reasonable basis for believing that any of the Contracts have ceased to be so
treated or that they might not be so treated in the near future.
(e) LIFE COMPANY represents and warrants that each Account is a
"segregated asset account" and that interests in each Account are offered
exclusively through the purchase of or transfer into a "variable contract,"
within the meaning of such terms under Section 817 of the Code and the
regulations thereunder. LIFE COMPANY will use its best efforts to continue to
meet such definitional requirements, and it will notify AVIF immediately upon
having a reasonable basis for believing that such requirements have ceased to be
met or that they might not be met in the near future.
4.2 Insurance and Certain Other Laws.
(a) AVIF or Adviser represent and warrant that they will comply with any
applicable state insurance laws or regulations, and will furnish information not
otherwise available to LIFE COMPANY which is required by state insurance law to
enable LIFE COMPANY to obtain the authority needed to issue the Contracts in any
applicable state.
(b) LIFE COMPANY represents and warrants that (i) it is an insurance
company duly organized, validly existing and in good standing under the laws of
the State of Connecticut and has full corporate power, authority and legal right
to execute, deliver and perform its duties and comply with its obligations under
this Agreement, (ii) it has legally and validly established and maintains each
Account as a segregated asset account under Section 38a of the Connecticut
Insurance Law and the regulations thereunder, and (iii) the Contracts comply in
all material respects with all other applicable federal and state laws and
regulations.
(c) AVIF represents and warrants that (i) it is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Maryland and has full power, authority, and legal right to execute, deliver, and
perform its duties and comply with its obligations under this Agreement, (ii) it
has provided to LIFE COMPANY the Shared Funding Exemptive Order issued by the
SEC dated _____ (File No. ___), and (iii) the Funds and Accounts comply in all
mutual respects with all applicable federal and state laws and regulations.
4.3 Securities Laws.
(a) LIFE COMPANY represents and warrants that (i) interests in each
Account pursuant to the Contracts will be registered under the 1933 Act to the
extent required by the 1933 Act, (ii) the Contracts will be duly authorized for
issuance and sold in compliance with all applicable federal and state laws;
including, without limitation, the
11
<PAGE>
1933 Act, the 1934 Act, the 1940 Act and Connecticut law, (iii) each Account is
and will remain registered under the1940 Act, to the extent required by the 1940
Act, (iv) each Account does and will comply in all material respects with the
requirements of the 1940 Act and the rules thereunder, to the extent required,
(v) each Account's 1933 Act registration statement relating to the Contracts,
together with any amendments thereto, with at all times comply in all material
respects with the requirements of the 1933 Act and the rules thereunder, (vi)
LIFE COMPANY will amend the registration statement for its Contracts under the
1933 Act and for its Accounts under the 1940 Act from time to time as required
in order to effect the continuous offering of its Contracts or as may otherwise
be required by applicable law, and (vii) each Account Prospectus will at all
times comply in all material respects with the requirements of the 1933 Act and
the rules thereunder.
(b) AVIF and Adviser represent and warrant that (i) Shares sold pursuant
to this Agreement will be registered under the 1933 Act to the extent required
by the 1933 Act and duly authorized for issuance and sold in compliance with
Maryland law, (ii) AVIF is and will remain registered under the 1940 Act to the
extent required by the 1940 Act, (iii) AVIF will amend the registration
statement for its Shares under the 1933 Act and itself under the 1940 Act from
time to time as required in order to effect the continuous offering of its
Shares, (iv) AVIF does and will comply in all material respects with the
requirements of the 1940 Act and the rules thereunder, (v) AVIF's 1933 Act
registration statement, together with any amendments thereto, will at all times
comply in all material respects with the requirements of the 1933 Act and rules
thereunder, and (vi) AVIF's Prospectus will at all times comply in all material
respects with the requirements of the 1933 Act and the rules thereunder.
(c) AVIF will at its expense register and qualify its Shares for sale in
accordance with the laws of any state or other jurisdiction if and to the extent
reasonably deemed advisable by AVIF.
(d) AVIF currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it reserves the right to make such payments in the future. To the
extent that it decides to finance distribution expenses pursuant to Rule 12b-1,
AVIF undertakes to have its Board of Directors, a majority of whom are not
"interested" persons of the Fund, formulate and approve any plan under Rule
12b-1 to finance distribution expenses.
(e) AVIF represents and warrants that all of its trustees, officers,
employees, investment advisers, and other individuals/entities having access to
the funds and/or securities of the Fund are and continue to be at all times
covered by a blanket fidelity bond or similar coverage for the benefit of the
Fund in an amount not less than the minimal coverage as required currently by
Rule 17g-(l) of the 1940 Act or related provisions as may be promulgated from
time to time. The aforesaid bond includes coverage for larceny and embezzlement
and is issued by a reputable bonding company.
12
<PAGE>
4.4 Notice of Certain Proceedings and Other Circumstances.
(a) AVIF and Adviser will immediately notify LIFE COMPANY of (i) the
issuance by any court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to AVIF's registration statement
under the 1933 Act or AVIF Prospectus, (ii) any request by the SEC for any
amendment to such registration statement or AVIF Prospectus that may affect the
offering of Shares of AVIF, (iii) the initiation of any proceedings for that
purpose or for any other purpose relating to the registration or offering of
AVIF's Shares, or (iv) any other action or circumstances that may prevent the
lawful offer or sale of Shares of any Fund in any state or jurisdiction,
including, without limitation, any circumstances in which (a) such Shares are
not registered and, in all material respects, issued and sold in accordance with
applicable state and federal law, or (b) such law precludes the use of such
Shares as an underlying investment medium of the Contracts issued or to be
issued by LIFE COMPANY. AVIIF will make every reasonable effort to prevent the
issuance, with respect to any Fund, of any such stop order, cease and desist
order or similar order and, if any such order is issued, to obtain the lifting
thereof at the earliest possible time.
(b) LIFE COMPANY will immediately notify AVIF and Adviser of (i) the
issuance by any court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to each Account's registration
statement under the 1933 Act relating to the Contracts or each Account
Prospectus, (ii) any request by the SEC for any amendment to such registration
statement or Account Prospectus that may affect the offering of Shares of AVIF,
(iii) the initiation of any proceedings for that purpose or for any other
purpose relating to the registration or offering of each Account's interests
pursuant to the Contracts, or (iv) any other action or circumstances that may
prevent the lawful offer or sale of said interests in any state or jurisdiction,
including, without limitation, any circumstances in which said interests are not
registered and, in all material respects, issued and sold in accordance with
applicable state and federal law. LIFE COMPANY will make every reasonable effort
to prevent the issuance of any such stop order, cease and desist order or
similar order and, if any such order is issued, to obtain the lifting thereof at
the earliest possible time.
4.5 LIFE COMPANY To Provide Documents: Information About AVIF.
(a) LIFE COMPANY will, upon reasonable request, provide to AVIF or its
designated agent at least one (1) complete copy of all SEC registration
statements, Account Prospectuses, reports, any preliminary and final voting
instruction solicitation material, applications for exemptions, requests for
no action letters, and all amendments to any of the above, that relate to each
Account or the Contracts, as soon as possible after the filing with the filing
of such document with the SEC or other regulatory authorities.
(b) LIFE COMPANY will provide to AVIF or its designated agent at least
one (1) complete copy of each piece of sales literature or other promotional
material in which AVIF or any of its affiliates is named, at least two (2)
Business Days prior to its use or
13
<PAGE>
such shorter period as the Parties hereto may, from time to time, agree upon. No
such material shall be used if AVIF or its designated agent reasonably objects
to such use within two (2) Business Days after receipt of such material or such
shorter period as the Parties hereto may, from time to time, agree upon. The
parties recognize that once a sales piece has been approved, it may be altered
slightly or parts of the text may be used in different settings without a
reapproval process. AVIF hereby designates AIM as the entity to receive such
sales literature, until such time as AVIF appoints another designated agent by
giving notice to LIFE COMPANY in the manner required by Section 9 hereof.
(c) Neither LIFE COMPANY nor any of its affiliates, will give any
information or make any representations or statements on behalf of or concerning
AVIF or its affiliates in connection with the sale of the Contracts other than
(i) the information or representations contained in the registration statement,
including the AVIF Prospectus contained therein, relating to Shares, as such
registration statement and AVEP Prospectus may be amended from time to time; or
(ii) in reports or proxy materials for AVIF; or (iii) in published reports for
AVIF that are in the public domain and approved by AVIF for distribution; or
(iv) in sales literature or other promotional material approved by AVIF, except
with the express written permission of AVIF.
(d) LIFE COMPANY shall adopt and implement procedures reasonably
designed to ensure that information concerning AVIF and its affiliates that is
intended for use only by brokers or agents selling the Contracts (i.e.,
information that is not intended for distribution to Participants) ("broker only
materials") is so used, and neither AVIF nor any of its affiliates shall e
liable for any losses, damages or expenses relating to the improper use of such
broker only materials.
(e) For the purposes of this Section 4.5, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media, (e.g.,
on-line networks such as the Internet or other electronic messages), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under the NASD rules, the 1933 Act or the 1940 Act.
4.6 AVIF To Provide Documents: Information About LIFE COMPANY.
(a) AVIF wi1l provide to LIFE COMPANY at least one (1) complete copy of
all SEC registration statements, AVIF Prospectuses, reports, any preliminary and
final proxy material, applications for exemptions, requests for no-action
letters, and all amendments
14
<PAGE>
to any of the above, that relate to AVIF or the Shares of a Fund,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
(b) AVIF will provide to LIFE COMPANY camera ready or computer diskette
copies of all AVIF prospectuses and printed copies, in an amount specified by
LIFE COMPANY, of AVIF statements of additional information, proxy materials,
periodic reports to shareholders and other materials required by law to be sent
to Participants who have allocated any Contract value to a Fund. AVIF will
provide such copies to LIFE COMPANY in a timely manner so as to enable LIFE
COMPANY, as the case may be, to print and distribute such materials within the
time required by law to be furnished to Participants.
(c) AVIF will provide to LIFE COMPANY or its designated agent at least
one (1) complete copy of each piece of sales literature or other promotional
material in which LIFE COMPANY, or any of its respective affiliates is named, or
that refers to the Contracts, at least five (5) Business-Days prior to its use
or such shorter period as the Parties hereto may, from time to time, agree upon.
No such material shall be used if LIFE COMPANY or its designated agent objects
to such use within five (5) Business Days after receipt of such material or such
shorter period as the Parties hereto may, from time to time, agree upon. LIFE
COMPANY shall receive all such sales literature until such time as it appoints a
designated agent by giving notice to AVI:F in the manner required by Section 9
hereof.
(d) Neither AVIF nor any of its affiliates will give any information or
make any representations or statements on behalf of or concerning LIFE COMPANY,
each Account, or the Contracts other than (i) the information or representations
contained in the registration statement, including each Account Prospectus
contained therein, relating to the Contracts, as such registration statement and
Account Prospectus may be amended from time to time; or (ii) in published
reports for the Account or the Contracts that are in the public domain and
approved by LIFE COMPANY for distribution; or (iii) in sales literature or other
promotional material approved by LIFE COMPANY or its affiliates, except with the
express written permission of LIFE COMPANY.
(e) AVIF shall cause its principal underwriter to adopt and implement
procedures reasonably designed to ensure that information concerning LIFE
COMPANY, and its respective affiliates that is intended for use only by brokers
or agents selling the Contracts (i.e., information that is not intended for
distribution to Participants) ("broker only materials") is so used, and neither
LIFE COMPANY, nor any of its respective affiliates shall be liable for any
losses, damages or expenses relating to the improper use of such broker only
materials.
(f) For purposes of this Section 4.6, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion
15
<PAGE>
pictures, or other public media, (e.g., on-line networks such as the Internet or
other electronic messages), sales literature (i.e., any written communication
distributed or made generally available to customers or the public, including
brochures, circulars, research reports, market letters, form letters, seminar
texts, reprints or excerpts of any other advertisement, sales literature, or
published article), educational or training materials or other communications
distributed or made generally available to some or all agents or employees,
registration statements, prospectuses, statements of additional information,
shareholder reports, and proxy materials and any other material constituting
sales literature or advertising under the NASD rules, the 1933 Act or the 1940
Act.
Section 5. Mixed and Shared Funding
5.1. General.
The SEC has granted an order to AVIF exempting it from certain
provisions of the 1940 Act and rules thereunder so that AVIF may be available
for investment by certain other entities, including, without limitation,
separate accounts funding variable annuity contracts or variable life insurance
contracts, separate accounts of insurance companies unaffiliated with LIFE
COMPANY, and trustees of qualified pension and retirement plans (collectively,
"Mixed and Shared Funding"). The Parties recognize that the SEC has imposed
terms and conditions for such orders that are substantially identical to many of
the provisions of this Section 5. Sections 5.2 through 5.8 below shall apply
pursuant to such an exemptive order granted to AVIF. AVIF hereby notifies LIFE
COMPANY that, in the event that AVIF implements Mixed and Shared Funding, it may
be appropriate to include in the prospectus pursuant to which a Contract is
offered disclosure regarding the potential risks of Mixed and Shared Funding.
5.2 Disinterested Directors.
AVIF agrees that its Board of Directors shall at all times consist of
directors a majority of whom (the "Disinterested Directors") are not interested
persons of AVIF within the meaning of Section 2(a)(19) of the 1940 Act and the
rules thereunder and as modified by any applicable orders of the SEC, except
that if this condition is not met by reason of the death, disqualification, or
bona fide resignation of any director, then the operation of this condition
shall be suspended (a) for a period of forty-five (45) days if the vacancy or
vacancies may be filled by the Board; (b) for a period of sixty (60) days if a
vote of shareholders is required to fill the vacancy or vacancies; or (c) for
such longer period as the SEC may prescribe by order upon application.
5.3 Monitoring for Material Irreconcilable Conflicts.
AVIF agrees that its Board of Directors will monitor for the existence
of any material irreconcilable conflict between the interests of the
Participants in all separate
16
<PAGE>
accounts of life insurance companies utilizing AVIF ("Participating Insurance
Companies"), including each Account, and participants in all qualified
retirement and pension plans investing in AVIF ("Participating Plans'). LIFE
COMPANY agrees to inform the Board of Directors of AVIF of the existence of or
any potential for any such material irreconcilable conflict of which it is
aware. The concept of a "material irreconcilable conflict" is not defined by the
1940 Act or the rules thereunder, but the Parties recognize that such a conflict
may arise for a variety of reasons, including, without limitation:
(a) an action by any state insurance or other regulatory authority;
(b) a change in applicable federal or state insurance, tax or securities
laws or regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax or securities
regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding;
(d) the manner in which the investments of any Fund are being managed;
(e) a difference in voting instructions given by variable annuity
contract and variable life insurance contract Participants or by Participants of
different Participating Insurance companies;
(f) a decision by a Participating Insurance Company to disregard the
voting instructions of Participants; or
(g) a decision by a Participating Plan to disregard the voting
instructions of Plan participants.
Consistent with the SEC's requirements in connection with exemptive
orders of the type referred to in Section 5.1 hereof, LIFE COMPANY will assist
the Board of Directors in carrying out its responsibilities by providing the
Board of Directors with all information reasonably necessary for the Board of
Directors to consider any issue raised, including information as to a decision
by LIFE COMPANY to disregard voting instructions of Participants.
5.4 Conflict Remedies.
(a) It is agreed that if it is determined by a majority of the members of
the Board of Directors or a majority of the Disinterested Directors that a
material irreconcilable conflict exists, LIFE COMPANY will, if it is a
Participating Insurance Company for which a material irreconcilable conflict is
relevant, at its own expense and to the extent reasonably practicable (as
determined by a majority of the Disinterested Directors), take whatever steps
are necessary to remedy or eliminate the material irreconcilable conflict, which
steps may include, but are not limited to:
17
<PAGE>
(i) withdrawing the assets allocable to some or all of the Accounts
from AVIF or any Fund and reinvesting such assets in a different
investment medium, including another Fund of AVIF, or submitting
the question whether such segregation should be implemented to a
vote of all affected Participants and, as appropriate, segregating
the assets of any particular group (e.g., annuity Participants,
life insurance Participants or all Participants) that votes in
favor of such segregation, or offering to the affected
Participants the option of making such a change; and
(ii) establishing a new registered investment company of the type
defined as a "management company" in Section 4(3) of the 1940 Act
or a new separate account that is operated as a management
company.
(b) If the material irreconcilable conflict arises because of LIFE
COMPANY's decision to disregard Participant voting instructions and that
decision represents a minority position or would preclude a majority vote, LIFE
COMPANY may be required, at AVIF's election, to withdraw each Account's
investment in AVIF or any Fund. No charge or penalty will be imposed as a result
of such withdrawal. Any such withdrawal must take place within six (6) months
after AVIF gives notice to LIFE COMPANY that this provision is being
implemented, and until such withdrawal AVIF shall continue to accept and
implement orders by LIFE COMPANY for the purchase and redemption of Shares of
AVIF.
(c) If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to LIFE COMPANY conflicts with
the majority of other state regulators, then LIFE COMPANY will withdraw each
Account's investment in AVIF within six (6) months after AVIF's Board of
Directors informs LIFE COMPANY that it has determined that such decision has
created a material irreconcilable conflict, and until such withdrawal AVIF shall
continue to accept and implement orders by LIFE COMPANY for the purchase and
redemption of Shares of AVIF. No charge or penalty will be imposed as a result
of such withdrawal.
(d) LIFE COMPANY agrees that any remedial action taken by it in resolving
any material irreconcilable conflict will be carried out at its expense and with
a view only to the interests of Participants.
(e) For purposes hereof, a majority of the Disinterested Directors will
determine whether or not any proposed action adequately remedies any material
irreconcilable conflict. In no event, however, will AVIF or any of its
affiliates be required to establish a new funding medium for any Contracts. LIFE
COMPANY will not be required by the terms hereof to establish a new funding
medium for any Contracts if an offer to do so has been declined by vote of a
majority of Participants materially adversely affected by the material
irreconcilable conflict.
18
<PAGE>
5.5 Notice to LIFE COMPANY.
AVIF will promptly make known in writing to LIFE COMPANY the Board of
Directors' determination of the existence of a material irreconcilable conflict,
a description of the facts that give rise to such conflict and the implications
of such conflict.
5.6 Information Requested by Board of Directors.
LIFE COMPANY and AVIF (or its investment adviser) will at least annually
submit to the Board of Directors of AVIF such reports, materials or data as the
Board of Directors may reasonably request so that the Board of Directors may
fully carry out the obligations imposed upon it by the provisions hereof or any
exemptive order granted by the SEC to permit Mixed and Shared Funding, and said
reports, materials and data will be submitted at any reasonable time deemed
appropriate by the Board of Directors. All reports received by the Board of
Directors of potential or existing conflicts, and all Board of Directors actions
with regard to determining the existence of a conflict, notifying Participating
Insurance Companies and Participating Plan of a conflict, and determining
whether any proposed action adequately remedies a conflict, will be properly
recorded in the minutes of the Board of Directors or other appropriate records,
and such minutes or other records will be made available to the SEC upon
request.
5.7 Compliance with SEC Rules.
If, at any time during which AVIF is serving as an investment medium for
variable life insurance Contracts, 1940 Act Rules 6e-3(T) or, if applicable,
6e-2 are amended or Rule 6e-3 is adopted to provide exemptive relief with
respect to Mixed and Shared Funding, AVIF agrees that it will comply with the
terms and conditions thereof and that the terms of this Section 5 shall be
deemed modified if and only to the extent required in order also to comply with
the terms and conditions of such exemptive relief that is afforded by any of
said rules that are applicable.
5.8 Other Requirements.
AVIF will require that each Participating Insurance Company and
Participating Plan enter into an agreement with AVIF that contains in substance
the same provisions as are set forth in Sections 4. 1 (b), 4. 1 (d), 4.3 (a),
4.4(b), 4.5 (a), 5, and 10 of this Agreement.
19
<PAGE>
Section 6. Termination
6.1 Events of Termination.
Subject to Section 6.3 below, this Agreement will terminate as to a Fund:
(a) at the option of either the Company, the Adviser or the Fund, upon
sixty days advance written notice to the other parties;
(b) at the option of the Company, upon one week advance written notice
to the Adviser and the Fund, if Fund shares are not available for
any reason to meet the requirement of Contracts as determined by
the Company. Reasonable advance notice of election to terminate
shall be furnished by Company;
(c) at the option of either the Company, the Adviser or the Fund,
immediately upon institution of formal proceedings against the
broker-dealer or broker-dealers marketing the Contracts, the
Account, the Company, the Fund or the Adviser by the National
Association of Securities Dealers, Inc. (the "NASD"), the SEC or
any other regulatory body;
(d) upon the determination of the Accounts to substitute for the
Fund's shares the shares of another investment company in
accordance with the terms of the applicable Contracts. The Company
will give 60 days written notice to the Fund and the Adviser of
any decision to replace the Fund's shares;
(e) upon assignment of this Agreement, unless made with the written
consent of all other parties hereto;
(f) if Fund shares are not registered, issued or sold in conformance
with Federal law or such law precludes the use of Fund shares as
an underlying investment medium for Contracts issued or to be
issued by the Company. Prompt notice shall be given by the
appropriate party should such situation occur.
6.2 Funds To Remain Available.
Notwithstanding any termination of this Agreement, AVIF will, at the
option of LIFE COMPANY, continue to make available additional shares of the Fund
pursuant to the terms and conditions of this Agreement, for all Contracts in
effect on the effective date of termination of this Agreement hereinafter
referred to as "Existing Contracts"). Specifically, without limitation, the
owners of the Existing Contracts will be permitted to reallocate investments in
the Fund (as in effect on such date), redeem investments in the Fund and/or
invest in the Fund upon the making of additional purchase payments under the
Existing Contracts. The parties agree that this Section 6.3 will not apply to
any
20
<PAGE>
terminations under Section 5 and the effect of such terminations will be
governed by Section 5 of this Agreement.
6.3 Survival of Warranties and Indemnifications.
All warranties and indemnifications will survive the termination of
this Agreement.
6.4 Continuance of Agreement for Certain Purposes.
If any Party terminates this Agreement with respect to any Fund pursuant
to Sections 6.1(b), 6.1(c), 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof,
this Agreement shall nevertheless continue in effect as to any Shares of that
Fund that are outstanding as of the date of such termination (the "Initial
Termination Date"). This continuation shall extend to the earlier of the date as
of which an Account owns no Shares of the affected Fund or a date (the "Final
Termination Date") six (6) months following the Initial Termination Date, except
that LIFE COMPANY may, by written notice shorten said six (6) month period in
the case of a termination pursuant to Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or
6.1(i).
Section 7. Parties To Cooperate Respecting Termination
The Parties hereto agree to cooperate and give reasonable assistance to
one another in taking all necessary and appropriate steps for the purpose of
ensuring that an Account owns no Shares of a Fund after the Final Termination
Date with respect thereto, or, in the case of a termination pursuant to Section
6.1(a), the termination date specified in the notice of termination. Such steps
may include combining the affected Account with another Account, substituting
other mutual fund shares for those of the affected Fund, or otherwise
terminating participation by the Contracts in such Fund.
Section 8. Assignment
This Agreement may not be assigned by any Party, except with the written consent
of each other Party.
Section 9. Notices
Notices and communications required or permitted by Section 9 hereof
will be given by means mutually acceptable to the Parties concerned. Each other
notice or communication required or permitted by this Agreement will be given to
the following persons at the following addresses and facsimile numbers, or such
other persons,
21
<PAGE>
addresses or facsimile numbers as the Party receiving such notices or
communications may subsequently direct in writing:
AIM VARIABLE INSURANCE FUNDS, INC.
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Facsimile: (713) 993-9185
Attn: Nancy L. Martin, Esq.
AETNA LIFE INSURANCE AND ANNUITY COMPANY
151 Farmington Avenue
Hartford, Connecticut 06156
Facsimile:(860) 273-8340
Attn: Maria F. McKeon, Counsel
AETNA LIFE INSURANCE AND ANNUITY COMPANY
151 Farmington Avenue
Hartford, Connecticut 06156
Facsimile:(860) 273-8340
Attn: Maria F. McKeon, Counsel
Section 10. Voting Procedures
(a) The Company shall provide pass-through voting privileges on Fund
shares held by registered separate accounts to all Contract owners
and participants to the extent the SEC continues to interpret the
1940 Act as requiring such privileges. The Company shall provide
pass-through voting privileges on Fund shares held by unregistered
separate accounts to all Contract owners.
(b) The Company will distribute to Contract owners and participants,
as appropriate, all proxy material furnished by the Fund and will
vote Fund shares in accordance with instructions received from
such Contract owners and participants. If and to the extent
required by law, the Company, with respect to each group Contract
and in each Account, shall vote Fund shares for which no
instructions have been received in the same proportion as shares
for
22
<PAGE>
which such instructions have been received. The Company and its
agents shall not oppose or interfere with the solicitation of
proxies for Fund shares held for such Contract owners and
participants.
Section 11. Foreign Tax Credits
AVIF agrees to consult in advance with LIFE COMPANY concerning any
decision to elect or not to elect pursuant to Section 853 of the Code to pass
through the benefit of any foreign tax credits to its shareholders.
Section 12. 1 Indemnification
(a) The Company agrees to indemnify and hold harmless the Fund and the
Adviser, and its directors, officers, employees, agents and each
person, if any, who controls the Fund or its Adviser within the
meaning of the Securities Act of 1933 (the "1933 Act") against any
losses, claims, damages or liabilities to which the Fund or any
such director, officer, employee, agent, or controlling person may
become subject, under the 1933 Act or otherwise, insofar as such
losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
Registration Statement, prospectus or sales literature of the
Company or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or arise out of or as a result of conduct, statements
or representations (other than statements or representations
contained in the prospectuses or sales literature of the Fund) of
the Company or its agents, with respect to the sale and
distribution of Contracts for which Fund shares are the underlying
investment. The Company will reimburse any legal or other expenses
reasonably incurred by the Fund or any such director, officer,
employee, agent, investment adviser, or controlling person in
connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company
will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon
(i) an untrue statement or omission or alleged omission made in
such Registration Statement or prospectus in conformity with
written materials furnished to the Company by the Fund
specifically for use therein or (ii) the willful misfeasance, bad
faith, or gross negligence by the Fund or Adviser in the
performance of its duties or the Fund's or Adviser's reckless
disregard of obligations or duties under this Agreement or to the
Company, whichever is applicable. This indemnity agreement will be
in addition to any liability which Company may otherwise have.
(b) The Fund and the Adviser agree to indemnify and hold harmless the
Company and its directors, officers, employees, agents and each
person, if any, who
23
<PAGE>
controls the Company within the meaning of the 1933 Act against
any losses, claims, damages or liabilities to which the Company or
any such director, officer, employee, agent or controlling person
may become subject, under the 1933 Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
Registration Statement, prospectuses or sales literature of the
Fund or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or material fact required to be stated therein or
necessary to make the statements therein not misleading. The Fund
will reimburse any legal or other expenses reasonably incurred by
the Company or any such director, officer, employee, agent, or
controlling person in connection with investigating or defending
any such loss, claim, damage, liability or action; provided,
however, that the Fund will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or omission or alleged
omission made in such Registration Statement or prospectuses which
are in conformity with written materials furnished to the Fund by
the Company specifically for use therein.
(c) Promptly after receipt by an indemnified party hereunder of notice
of the commencement of action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying
party hereunder, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any
indemnified party otherwise than under this Section 10. In case
any such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to
the extent that it may wish to, assume the defense thereof, with
counsel satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its
election to assume the defense thereof, the indemnifying party
will not be liable to such indemnified party under this Section 9
for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other
than reasonable costs of investigation.
12.2 Effect of Notice.
Any notice given by the indemnifying Party to an Indemnified Party
referred to in Sections 12. l(c) or 12.2(d) above of participation in or control
of any action by the indemnifying Party will in no event be deemed to be an
admission by the indemnifying Party of liability, culpability or responsibility,
and the indemnifying Party will remain free to contest liability with respect to
the claim among the Parties or otherwise.
24
<PAGE>
12.3 Successors.
A successor by law of any Party shall be entitled to the benefits of the
indemnification contained in this Section 12.
Section 13. Applicable Law
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with Connecticut law, without regard for that state's
principles of conflict of laws.
Section 14. Execution in Counterparts
This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute one and the same
instrument.
Section 15. Severability
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
Section 16. Rights Cumulative
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, that the Parties are entitled to under federal and state
laws.
Section 17. Headings
The Table of Contents and headings used in this Agreement are for
purposes of reference only and shall not limit or define the meaning of the
provisions of this Agreement.
25
<PAGE>
Section 18. Confidentiality
AVIF acknowledges that the identities of the customers of LIFE COMPANY
or any of its affiliates (collectively, the "LIFE COMPANY Protected Parties" for
purposes of this Section 18), information maintained regarding those customers,
and all computer programs and procedures or other information developed by the
LIFE COMPANY Protected Parties or any of their employees or agents in connection
with LIFE COMPANY's performance of its duties under this Agreement are the
valuable property of the LIFE COMPANY Protected Parties. AVIF agrees that if it
comes into possession of any list or compilation of the identities of or other
information about the LIFE COMPANY Protected Parties' customers, or any other
information or property of the LIFE COMPANY Protected Parties, other than such
information as may be independently developed or compiled by AVIF from
information supplied to it by the LIFE COMPANY Protected Parties' customers who
also maintain accounts directly with AVIF, AVIF will hold such information or
property in confidence and refrain from using, disclosing or distributing any of
such information or other property except: (a) with LIFE COMPANY's prior written
consent; or (b) as required by law or judicial process. LIFE COMPANY
acknowledges that the identities of the customers of AVIF or any of its
affiliates (collectively, the "AVIF Protected Parties' for purposes of this
Section 18), information maintained regarding those customers, and all computer
programs and procedures or other information developed by the AVIF Protected
Parties or any of their employees or agents in connection with AVIF's
performance of its duties under this Agreement are the valuable property of the
AVIF Protected Parties. LIFE COMPANY agrees that if it comes into possession of
any list or compilation of the identities of or other information about the AVIF
Protected Parties' customers or any other information or property of the AVIF
Protected Parties, other than such information as may be independently developed
or compiled by LIFE COMPANY from information supplied to it by the AVIF
Protected Parties' customers who also maintain accounts directly with LIFE
COMPANY, LIFE COMPANY will hold such information or property in confidence and
refrain from using, disclosing or distributing any of such information or other
property except: (a) with AVIF's prior written consent; or (b) as required by
law or judicial process. Each party acknowledges that any breach of the
agreements in this Section 18 would result in immediate and irreparable harm to
the other parties for which there would be no adequate remedy at law and agree
that in the event of such a breach, the other parties will be entitled to
equitable relief by way of temporary and permanent injunctions, as well as such
other relief as any court of competent jurisdiction deems appropriate.
Section 19. Trademarks and Fund Names
AIM Management Group Inc. ("AIM" or "licensor"), an affiliate of AVIF,
owns all right, title and interest in and to the name, trademark and service
mark "AIM" and such other registered tradenames, trademarks and service marks
(the "AIM licensed marks" or
26
<PAGE>
the "licensor's licensed marks") and is authorized to use and to license other
persons to use such marks. LIFE -COMPANY and its affiliates are hereby granted a
non-exclusive license to use the AIM licensed marks in connection with LIFE
COMPANY's performance of the services contemplated under this Agreement, subject
to the terms and conditions set forth in this Section 19.
(b) The grant of license to LIFE COMPANY and its affiliates ( the
"licensee') shall terminate automatically upon termination of this Agreement.
Upon automatic termination, the licensee shall cease to use the licensor's
licensed marks, except that LIFE COMPANY shall have the right to continue to
service any outstanding Contracts bearing any of the AIM licensed marks. Upon
AIM's elective termination of this license, LIFE COMPANY and its affiliates
shall immediately cease to issue any new annuity or life insurance contracts
bearing any of the AIM licensed marks and shall likewise cease any activity
which suggests that it has any right under any of the AIM licensed marks or that
it has any association with AIM, except that LIFE COMPANY shall have the right
to continue to service outstanding Contracts bearing any of the AIM licensed
marks.
(c) The licensee shall obtain the prior written approval of the licensor
for the public release by such licensee of any materials bearing the licensor's
licensed marks. The licensor's approvals shall not be unreasonably withheld.
(d) During the term of this grant of license, a licensor may request
that a licensee submit samples of any materials bearing any of the licensor's
licensed marks which were previously approved by the licensor but, due to
changed circumstances, the licensor may wish to reconsider. If, on
reconsideration, or on initial review, respectively, any such samples fail to
meet with the written approval of the licensor, then the licensee shall
immediately cease distributing such disapproved materials. The licensor's
approval shall not be unreasonably withheld, and the licensor, when requesting
reconsideration of a prior approval, shall assume the reasonable expenses of
withdrawing and replacing such disapproved materials. The licensee shall obtain
the prior written approval of the licensor for the use of any new materials
developed to replace the disapproved materials, in the manner set forth above.
(e) The licensee hereunder: (i) acknowledges and stipulates that, to the
best of the knowledge of the licensee, the licensor's licensed marks are valid
and enforceable trademarks and/or service marks and that such licensee does not
own the licensor's licensed marks and claims no rights therein other than as a
licensee under this Agreement; (ii) agrees never to contend otherwise in legal
proceedings or in other circumstances; and (iii) acknowledges and agrees that
the use of the licensor's licensed marks pursuant to this grant of license shall
inure to the benefit of the licensor.
27
<PAGE>
Section 20. Parties to Cooperate
Each party to this Agreement will cooperate with each other party and
all appropriate governmental authorities (including, without limitation, the
SEC, the NASD and state insurance regulators) and will permit each other and
such authorities reasonable access to its books and records (including copies
thereof) in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed in their names and, on their behalf by and through their duly
authorized officers signing below.
<TABLE>
<S> <C>
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: _______________________________ By: _____________________________________
Nancy L. Martin
Assistant Secretary Name: ___________________________________
Title: ________________________________
AETNA LIFE INSURANCE AND ANNUITY COMPANY,
on behalf of itself and its separate
accounts
Attest: _______________________________ By: _____________________________________
Name: RoseMarie Derensis
Title: Assistant Corporate Secretary Name: ___________________________________
Title: _________________________________
AETNA LIFE INSURANCE AND ANNUITY COMPANY
Attest: _______________________________
By: _____________________________________
Name: RoseMarie Derensis
Title: Assistant Corporate Secretary Name: ___________________________________
Title __________________________________
</TABLE>
28
<PAGE>
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
[bullet] AIM VARIABLE INSURANCE FUNDS, INC.
(LIST APPLICABLE PORTFOLIOS]
SEPARATE ACCOUNTS UTILIZING THE FUNDS
ALIAC SEPARATE ACCOUNTS B, C AND D
29
<PAGE>
SCHEDULE B
[bullet] AIM VARIABLE INSURANCE FUNDS, INC.
AIM ______________________________________Fund
[bullet] AIM and Design
30
<PAGE>
Schedule C
31
FORM OF SERVICE AGREEMENT
WITH
INVESTMENT ADVISER
AGREEMENT, effective as of _____________ 1998, between _______________.
(the "Adviser"), a ____________________________Maryland corporation, and Aetna
Life Insurance and Annuity Company (the "Company"), a Connecticut corporation,
for the provision of described administrative services by the Company in
connection with the sale of shares of the ___________________ (the "Fund") as
described in the Fund Participation Agreement dated __________, 1998 between the
Company, the Fund and the Adviser (the "Fund Participation Agreement").
In consideration of their mutual promises, the Adviser and the Company agree as
follows:
1. The Company agrees to provide the following services to the Adviser:
a. responding to inquiries from owners of the Company variable
annuity contracts and variable life insurance policies using the
Funds as an investment vehicle ("Contractholders") regarding the
services performed by the Company that relate to the Funds;
b. providing information to Adviser and Contractholders with respect
to Fund shares attributable to Contractholder accounts;
c. communicating directly with Contractholders concerning the Funds'
operations;
d. providing such other similar services as Adviser may reasonably
request pursuant to Adviser's agreement with the Funds to the
extent permitted under applicable federal and state requirements.
2. (a) Administrative services to Contractholders owners and participants
shall be the responsibility of the Company and shall not be the
responsibility of the Fund or the Adviser. The Adviser recognizes
the Company as the sole shareholder of Fund shares issued under
the Fund Participation Agreement, and that substantial savings
will be derived in administrative expenses, such as significant
reductions in postage expense and shareholder communications, by
virtue of having a sole shareholder for each of the Accounts
rather than multiple shareholders. In consideration of the savings
resulting from such arrangement, and to compensate the Company for
its costs, the Adviser agrees to pay to the Company and the
Company agrees to accept as full compensation for all services
rendered hereunder an amount described in Schedule A
<PAGE>
attached hereto and made a part of this Agreement as may be
amended from time to time with the mutual consent of the parties
hereto.
(b) The parties agree that the Adviser's payments to the Company are
for administrative services only and do not constitute payment in
any manner for investment advisory services or for costs of
distribution.
(c) For the purposes of computing the administrative fee reimbursement
contemplated by this Section 2, the average aggregate amount
invested by the Company over a one month period shall be computed
by totaling the Company's aggregate investment (share net asset
value multiplied by total number of shares held by the Company) on
each business day during the month and dividing by the total
number of business days during each month.
(d) The Fund will calculate the reimbursement of administrative
expenses at the end of each month and will make such reimbursement
to the Company within 30 days thereafter. The reimbursement
payment will be accompanied by a statement showing the calculation
of the monthly amounts payable by the Adviser and such other
supporting data as may be reasonably requested by the Company.
Payment will be wired by the Adviser to an account designated by
the Company.
3. The Company agrees to indemnify and hold harmless the Adviser and its
directors, officers, and employees from any and all loss, liability and
expense resulting from any gross negligence or willful wrongful act of
the Company under this Agreement or a breach of a material provision of
this Agreement, except to the extent such loss, liability or expense is
the result of the Adviser's own willful misfeasance, bad faith or gross
negligence in the performance of its duties.
4. The Adviser agrees to indemnify and hold harmless the Company and its
directors, officers, and employees from any and all loss, liability and
expense resulting from any gross negligence or willful wrongful act of
the Adviser under this Agreement or a breach of a material provision
under this Agreement, except to the extent such loss, liability or
expense is the result of the Company's own willful misfeasance, bad faith
or gross negligence in the performance of its duties.
5. Either party may terminate this Agreement, without penalty, (i) on sixty
(60) days written notice to the other party, for any cause or without
cause, or (ii) on reasonable notice to the other party, if it is not
permissible to continue the arrangement described herein under laws,
rules or regulations applicable to either party or the Fund, or if the
Participation Agreement is terminated.
6. The terms of this arrangement will be held confidential by each party
except to the extent that either party or its counsel may deem it
necessary to disclose this arrangement.
2
<PAGE>
7. This Agreement represents the entire Agreement of the parties on the
subject matter hereof and it cannot be amended or modified except in
writing, signed by the parties. This Agreement may be executed in one or
more separate counterparts, all of which, when taken together, shall
constitute one and the same Agreement.
8. All notices and other communications hereunder shall be given or made in
writing and shall be delivered personally, or sent by telex, telecopier
or registered or certified mail, postage prepaid, return receipt
requested, or recognized overnight courier service to the party to whom
they are directed at the following addresses, or at such other addresses
as may be designated by notice from such party to the other party.
To Aetna:
Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Hartford, Connecticut 06156
Attention: Maria F. McKeon, Counsel
To AIM
AIM VARIABLE INSURANCE FUNDS, INC.
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Facsimile: (713) 993-9185
Attn: Nancy L. Martin, Esq.
Any notice, demand or other communication given in a manner prescribed in this
Section 8 shall be deemed to have been delivered on receipt.
IN WITNESS WHEREOF, the parties to this Agreement have caused this Agreement to
be executed by their authorized officers as of the day and year first above
written.
AIM VARIABLE INSURANCE FUNDS, INC.
By:_____________________________________________
Date:___________________________________________
3
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY
By:_____________________________________________
Date:___________________________________________
4
<PAGE>
Schedule A
In consideration of the services provided by the Company, the Adviser agrees to
pay the Company an amount equal to 15 basis points (0.15%) per annum on the
first $50 million of the average aggregate amount invested by the Company in the
Fund under the Fund Participation Agreement, and 25 basis points (0.25%) per
annum on the next $200 million of the average aggregate amount invested by the
Company in the Fund under the Fund Participation Agreement and 25 basis points
(0.25%) per annum on the total average aggregate amount invested by the Company
in the Fund under the Fund Participation Agreement, in excess of $250 million.
Dated this _______ day of ________ 1998.
AIM VARIABLE INSURANCE FUNDS, INC.
By:_______________________________________________
Date:_____________________________________________
AETNA LIFE INSURANCE AND ANNUITY COMPANY
By:_______________________________________________
Date:_____________________________________________
5
FUND PARTICIPATION AGREEMENT
Aetna Life Insurance and Annuity Company (the "Company"), and Aetna
Variable Fund, Aetna Variable Encore Fund, Aetna Income Shares, Aetna Balanced
VP, Inc., Aetna GET Fund, on behalf of each of its series, Aetna Generation
Portfolios, Inc., on behalf of each of its series, and Aetna Variable
Portfolios, Inc., on behalf of each of its series ("Funds"), and Aeltus
Investment Management, Inc. ("Aeltus" or "Adviser") hereby agree to an
arrangement whereby the Funds shall be made available to serve as underlying
investment media for Variable Annuity Contracts ("Contracts") to be issued by
the Company.
1. Establishment of Account.
The Company represents that it has established Variable Annuity Accounts
B, C and D and Variable Life Account B and may establish such other
accounts as may be set forth in Schedule A attached hereto (as may be
amended from time to time with the mutual consent of the parties hereto)
(the "Accounts"), each of which is a separate account registered under
the Investment Company Act of 1940 (except for such accounts for which no
registration is required), to serve as investment vehicles for the
Contracts. Each Contract provides for the allocation of net amounts
received by the Company to an Account for investment in the shares of one
of more specified open-end management investment companies available
through that Account as underlying investment media. Selection of a
particular investment management company and changes therein from time to
time are made by the participant or Contract owner, as applicable under a
particular Contract.
2. Pricing Information; Orders; Settlement.
(a) Each Fund will make shares available to be purchased by the
Company, and will accept redemption orders from the Company, on
behalf of each Account at the net asset value applicable to each
order on those days on which the Fund calculates its net asset
value (a "Business Day"). Fund shares shall be purchased and
redeemed in such quantity and at such times as determined by the
Company to be necessary to meet the requirements of those
Contracts for which the Fund serves as underlying investment
media, provided, however, that the Board of Directors of the Fund
(hereinafter the "Directors") may, upon reasonable notice to the
Company, refuse to sell shares of any Fund to any person, or
suspend or terminate the offering of shares of any Fund if such
action is required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Directors acting
in good faith and in light of their fiduciary duties under federal
and/or any applicable state laws, necessary in the best interests
of the shareholders of such Fund.
<PAGE>
(b) Each Fund will provide to the Company closing net asset value,
dividend and capital gain information at the close of trading each
day that the New York Stock Exchange (the "Exchange") is open
(each such day a "Business Day"), and in no event later than 6:30
p.m. eastern time on such Business Day. The Company will send via
facsimile or electronic transmission to each Fund or its specified
agent orders to purchase and/or redeem Fund shares by 9:30 a.m.
eastern time the following business day. Payment for net purchases
will be wired by the Company to an account designated by the Fund.
(c) Each Fund hereby appoints the Company as its agent for the limited
purpose of accepting purchase and redemption orders for Fund
shares relating to the Contracts from Contract owners or
participants. Orders from Contract owners or participants received
from any distributor of the Contracts (including affiliates of the
Company) by the Company, acting as agent for the Fund, prior to
the close of the Exchange on any given business day will be
executed by the Fund at the net asset value determined as of the
close of the Exchange on such Business Day, provided that the Fund
receives written (or facsimile) notice of such order by 9:30 a.m.
eastern time on the next following Business Day. Any orders
received by the Company acting as agent on such day but after the
close of the Exchange will be executed by the Fund at the net
asset value determined as of the close of the Exchange on the next
business day following the day of receipt of such order, provided
that the Fund receives written (or facsimile) notice of such order
by 9:30 a.m. eastern time within two days following the day of
receipt of such order.
(d) Payments for net redemptions of shares of a Fund will be wired by
the Fund to an account designated by the Company. Payments for net
purchases of the Fund will be wired by the Company to an account
designated by the Fund on the same Business Day the Company places
an order to purchase Fund shares. Payments shall be in federal
funds transmitted by wire.
(e) Each party has the right to rely on information or confirmations
provided by the other party (or by any affiliate of the other
party), and shall not be liable in the event that an error is a
result of any misinformation supplied by the other party. The
Company shall assume responsibility as herein described for any
loss to a Fund caused by a cancellation or correction made to an
Instruction by a Plan Representative or Participant subsequent to
the date as of which such Instruction has been received by the
Company and originally relayed to Aeltus, and the Company will
immediately pay such loss to such Fund upon the Company's receipt
of written notification, with supporting data. Aeltus shall
indemnify and hold the Company harmless, from the effective date
of this Agreement, against any amount the Company is required to
pay to Plans, Plan Representatives, or Participants due to: (i) an
incorrect calculation of a Fund's daily net asset value, dividend
rate, or capital gains distribution rate or (ii) incorrect or
unreasonably late reporting of the daily net asset value deemed
material in accordance with the Fund's error correction policy,
dividend rate, or capital gain
2
<PAGE>
distribution rate, upon written notification by the Company, with
supporting data, to Aeltus.
(f) The Company agrees to purchase and redeem the shares of the Funds
named in this Agreement or in Schedule B hereof in accordance with
the provisions of each Fund's then-current prospectus and
statement of additional information. The Company shall not permit
any person other than a Contract owner or Participant to give
instructions to the Company which would require the Company to
redeem or exchange shares of a Fund. This provision shall not be
construed to prohibit the Company from substituting shares of
another fund, as permitted by law.
3. Expenses.
(a) Except as otherwise provided in this Agreement, all expenses
incident to the performance by each respective Fund under this
Agreement shall be paid by that Fund, including the cost of
registration of its shares with the Securities and Exchange
Commission (the "SEC") and in states where required. All expenses
incident to performance by each party of its respective duties
under this Agreement shall be paid by that party, unless otherwise
specified in this Agreement.
(b) The Funds or the Adviser shall provide to the Company periodic
fund reports to shareholders and other materials that are required
by law to be sent to Contract owners. In addition, the Funds or
the Adviser shall provide the Company with a sufficient quantity
of prospectuses, statements of additional information and any
supplements to any of these materials, to be used in connection
with the offerings and transactions contemplated by this
Agreement. In addition, the Funds shall provide the Company with a
sufficient quantity of proxy material that is required to be sent
to Contract owners. The Adviser shall be permitted to review and
approve the typeset form of such material prior to such printing
provided such material has been provided by the Adviser to the
Company within a reasonable period of time prior to typesetting.
(c) In lieu of the Funds' or Adviser's providing printed copies of
prospectuses, statements of additional information and any
supplements to any of these materials, and periodic fund reports
to shareholders, the Company shall have the right to request that
the Funds transmit a copy of such materials in an electronic
format (Post Script files), which the Company may use to have such
materials printed together with similar materials of other Account
funding media that the Company or any distributor will distribute
to existing or prospective Contract owners or participants.
4. Representations.
The Company agrees that it and its agents shall not, without the written
consent of a Fund or the Adviser, make representations concerning the
Fund, or its shares except those contained in the then current
prospectuses and in current printed sales literature approved by or
deemed approved by the Fund or the Adviser.
3
<PAGE>
4
<PAGE>
5. Termination.
This agreement shall terminate as to the sale and issuance of new
Contracts:
(a) at the option of either the Company, the Adviser or with respect
to any Fund, upon sixty days advance written notice to the other
parties;
(b) at the option of the Company, upon one week advance written notice
to the Adviser and to any Fund, if Fund shares are not available
for any reason to meet the requirement of Contracts as determined
by the Company. Reasonable advance notice of election to terminate
shall be furnished by Company;
(c) at the option of either the Company, the Adviser or any Fund,
immediately upon institution of formal proceedings against the
broker-dealer or broker-dealers marketing the Contracts, the
Account, the Company, the Fund or the Adviser by the National
Association of Securities Dealers, Inc. (the "NASD"), the SEC or
any other regulatory body;
(d) upon the determination of the Accounts to substitute for the
shares of a Fund the shares of another investment company in
accordance with the terms of the applicable Contracts. The Company
will give sixty days written notice to the Fund and the Adviser of
any decision to replace the shares of that Fund;
(e) upon assignment of this Agreement, unless made with the written
consent of all other parties hereto;
(f) if shares of a Fund are not registered, issued or sold in
conformance with Federal law or such law precludes the use of such
shares as an underlying investment medium for Contracts issued or
to be issued by the Company. Prompt notice shall be given by the
appropriate party should such situation occur.
6. Continuation of Agreement.
Termination as the result of any cause listed in Section 5 shall not
affect the Funds' obligation to furnish shares to Contracts then in force
for which such shares serve or may serve as the underlying medium unless
such further sale of Fund shares is prohibited by law or the SEC or other
regulatory body.
7. Advertising Materials; Filed Documents.
(a) Advertising and sales literature with respect to any Fund prepared
by the Company or its agents for use in marketing its Contracts
will be submitted to that Fund or its designee for review before
such material is submitted to any regulatory body for review. No
such material shall be used if the Fund or its designee reasonably
objects
5
<PAGE>
to such use in writing, transmitted by facsimile within two
business days after receipt of such material.
(b) Each Fund will provide additional copies of its financials as soon
as available to the Company and at least one complete copy of all
registration statements, prospectuses, statements of additional
information, annual and semi-annual reports, proxy statements and
all amendments or supplements to any of the above that relate to
the Fund promptly after the filing of such document with the SEC
or other regulatory authorities. At the Adviser's request, the
Company will provide to the Adviser at least one complete copy of
all registration statements, prospectuses, statements of
additional information, annual and semi-annual reports, proxy
statements, and all amendments or supplements to any of the above
that relate to the Accounts promptly after the filing of such
document with the SEC or other regulatory authority.
(c) Each Fund or the Adviser will provide via Excel spreadsheet
diskette format or in electronic transmission to the Company at
least quarterly portfolio information necessary to update Fund
profiles within seven business days following the end of each
quarter.
8. Proxy Voting.
(a) The Company shall provide pass-through voting privileges on shares
of a Fund held by the separate accounts to all Contract owners.
(b) The Company will distribute to Contract owners all proxy material
furnished by any Fund and will vote shares of the Fund in
accordance with instructions received from such Contract owners.
The Company and its agents shall not oppose or interfere with the
solicitation of proxies for shares of a Fund held for such
Contract owners and participants.
9. Indemnification.
(a) The Company agrees to indemnify and hold harmless each Fund and
the Adviser, and their directors, officers, employees, agents and
each person, if any, who controls any Fund or its Adviser within
the meaning of the Securities Act of 1933 (the "1933 Act") against
any losses, claims, damages or liabilities to which the Fund or
any such director, officer, employee, agent, or controlling person
may become subject, under the 1933 Act or otherwise, insofar as
such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact
contained in the Registration Statement, prospectus or sales
literature of the Company or arise out of or are based upon the
omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or arise out of or as a result of conduct,
statements or representations (other than statements or
representations contained in the prospectuses or sales literature
of the Fund) of the
6
<PAGE>
Company or its agents, with respect to the sale and distribution
of Contracts for which shares of the Fund are the underlying
investment. The Company will reimburse any legal or other expenses
reasonably incurred by a Fund or any such director, officer,
employee, agent, investment adviser, or controlling person in
connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company
will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon
(i) an untrue statement or omission or alleged omission made in
such Registration Statement or prospectus in conformity with
written materials furnished to the Company by the Fund
specifically for use therein or (ii) the willful misfeasance, bad
faith, or gross negligence by the Fund or Adviser in the
performance of their duties or the Fund's or Adviser's reckless
disregard of obligations or duties under this Agreement or to the
Company, whichever is applicable. This indemnity agreement will be
in addition to any liability which the Company may otherwise have.
(b) Each Fund and the Adviser agree to indemnify and hold harmless the
Company and its directors, officers, employees, agents and each
person, if any, who controls the Company within the meaning of the
1933 Act against any losses, claims, damages or liabilities to
which the Company or any such director, officer, employee, agent
or controlling person may become subject, under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, prospectuses or sales
literature of the Fund or arise out of or are based upon the
omission or the alleged omission to state therein a material fact
required to be stated therein or material fact required to be
stated therein or necessary to make the statements therein not
misleading. Each Fund, as appropriate, will reimburse any legal or
other expenses reasonably incurred by the Company or any such
director, officer, employee, agent, or controlling person in
connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Fund will
not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an
untrue statement or omission or alleged omission made in such
Registration Statement or prospectuses which are in conformity
with written materials furnished to the Fund by the Company
specifically for use therein.
(c) Promptly after receipt by an indemnified party hereunder of notice
of the commencement of action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying
party hereunder, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any
indemnified party otherwise than under this Section 9. In case any
such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to
the extent that it may wish to, assume the defense thereof, with
counsel satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its
7
<PAGE>
election to assume the defense thereof, the indemnifying party
will not be liable to such indemnified party under this Section 9
for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other
than reasonable costs of investigation.
10. Miscellaneous.
(a) Amendment and Waiver. Neither this Agreement, nor any provision
hereof, may be amended, waived, discharged or terminated orally,
but only by an instrument in writing signed by all parties hereto.
(b) Notices. All notices and other communications hereunder shall be
given or made in writing and shall be delivered personally, or
sent by telex, facsimile or registered or certified mail, postage
prepaid, return receipt requested, or recognized overnight courier
service to the party or parties to whom they are directed at the
following addresses, or at such other addresses as may be
designated by notice from such party to all other parties.
<TABLE>
<CAPTION>
To the Company: To the Adviser:
<S> <C>
Aetna Life Insurance and Annuity Company Aeltus Investment Management, Inc.
151 Farmington Avenue 242 Trumbull Street
Hartford, Connecticut 06156 Hartford, Connecticut 06103-1205
Attn: Shaun P. Mathews Attn: Daniel F. Wilcox
To any Fund:
151 Farmington Avenue
Hartford, Connecticut 06156
Attn: J. Scott Fox
</TABLE>
Any notice, demand or other communication given in a manner prescribed in
this subsection (b) shall be deemed to have been delivered on receipt.
(c) Successors and Assigns. This agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
permitted successors and assigns.
(d) Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one
agreement, and any party hereto may execute this Agreement by
signing any such counterpart.
8
<PAGE>
(e) Severability. In case any one or more of the provisions contained
in this Agreement should be invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be
affected or impaired thereby.
(f) Entire Agreement. This Agreement constitutes the entire agreement
and understanding between the parties hereto and supersedes all
prior agreement and understandings relating to the subject matter
hereof.
(g) Governing Law. This Agreement shall be governed and interpreted
in accordance with the laws of the State of Connecticut.
(h) It is understood by the parties that this Agreement is not an
exclusive arrangement in any respect.
(i) The terms of this Agreement and the Schedules thereto will be held
confidential by each party except to the extent that either party
or its counsel may deem it necessary to disclose such terms.
IN WITNESS WHEREOF, the undersigned have executed this Agreement by their
duly authorized officers effective as of the 1st day of May, 1998.
AETNA LIFE INSURANCE AND ANNUITY COMPANY
By: /s/Shaun P. Mathews
_________________________________
Name: Shaun P. Mathews
_______________________________
Title: Senior Vice President
______________________________
9
<PAGE>
AETNA VARIABLE FUND
AETNA VARIABLE ENCORE FUND
AETNA INCOME SHARES
AETNA BALANCED VP, INC.
AETNA GET FUND
AETNA GENERATION PORTFOLIOS, INC.
AETNA VARIABLE PORTFOLIOS, INC.
By: /s/Frank J. Litwin
_________________________________
Name: Frank J. Litwin
_______________________________
Title: Managing Director
______________________________
AELTUS INVESTMENT MANAGEMENT, INC.
By: /s/J. Scott Fox
_________________________________
Name: J. Scott Fox
_______________________________
Title: Managing Director, Chief Operating Officer
10
<PAGE>
Schedule A
(For any future separate accounts - See Section 1)
<PAGE>
Schedule B
Aetna Variable Fund
Aetna Variable Encore Fund
Aetna Income Shares
Aetna Balanced VP, Inc.
Aetna GET Fund
Series B
Series C
Aetna Generation Portfolios, Inc.
Aetna Ascent VP
Aetna Crossroads VP
Aetna Legacy VP
Aetna Variable Portfolios, Inc.
Aetna Value Opportunity VP
Aetna Growth VP
Aetna Small Company VP
Aetna Index Plus Large Cap VP
Aetna High Yield VP
Aetna Real Estate Securities VP
Aetna Mid Cap VP
Aetna Index Plus Mid Cap VP
Aetna Index Plus Small Cap VP
Aetna Index Plus Bond VP
Aetna International VP
SERVICE AGREEMENT
WITH
INVESTMENT ADVISER
AGREEMENT, effective as of May 1, 1998, between Aeltus Investment
Management, Inc. (the "Adviser"), a Connecticut Corporation, and Aetna Life
Insurance and Annuity Company (the "Company"), a Connecticut corporation, for
the provision of described administrative services by the Company in connection
with the sale of shares of Aetna Variable Fund, Aetna Variable Encore Fund,
Aetna Income Shares, Aetna Balanced VP, Inc., Aetna GET Fund, on behalf of each
of its series, Aetna Generation Portfolios, Inc., on behalf of each of its
series, and Aetna Variable Portfolios, Inc., on behalf of each of its series
(the "Funds") as described in the Fund Participation Agreement dated May 1,
1998, between the Company, the Funds and the Adviser (the "Fund Participation
Agreement").
In consideration of their mutual promises, the Adviser and the Company agree as
follows:
1. The Company agrees to provide the following services to the Adviser:
a. responding to inquiries from owners of, or participants in,
the Company variable annuity or variable life contracts using
the Funds as an investment vehicle ("Contractholders")
regarding the services performed by the Company that relate to
the Funds;
b. providing information to Adviser and Contractholders with
respect to Fund shares attributable to Contractholder
accounts;
c. communicating directly with Contractholders concerning the
Funds' operations;
d. providing such other similar services as Adviser may
reasonably request pursuant to Adviser's agreement with the
Funds to the extent permitted under applicable federal and
state requirements.
2. (a) Administrative services to Contractholders and participants
shall be the responsibility of the Company and shall not be
the responsibility of the Funds or the Adviser. The Adviser
recognizes the Company as the sole shareholder of Fund shares
issued under the Fund Participation Agreement, and that
substantial savings will be derived in administrative
expenses, such as significant reductions in shareholder
services, by virtue of having a sole shareholder for each of
the Accounts rather than multiple shareholders. In
consideration of the savings resulting from such arrangement,
and to compensate the Company for its costs, the Adviser
agrees to pay to the Company and the Company agrees to accept
as
<PAGE>
full compensation for all services rendered hereunder amounts
indicated on the attached Schedule A, with respect to all
shares sold through the Company.
(b) The parties agree that the Adviser's payments to the Company
are for administrative services only and do not constitute
payment in any manner for investment advisory services or for
costs of distribution.
3. The Company agrees to indemnify and hold harmless the Adviser and its
directors, officers, and employees from any and all loss, liability and
expense resulting from any gross negligence or willful wrongful act of
the Company under this Agreement or a breach of a material provision of
this Agreement, except to the extent such loss, liability or expense is
the result of the Adviser's misfeasance, bad faith or gross negligence
in the performance of its duties.
4. The Adviser agrees to indemnify and hold harmless the Company and its
directors, officers, and employees from any and all loss, liability and
expense resulting from any gross negligence or willful wrongful act of
the Adviser under this Agreement or a breach of a material provision
under this Agreement, except to the extent such loss, liability or
expense is the result of the Company's own misfeasance, bad faith or
gross negligence in the performance of its duties.
5. Either party may terminate this Agreement, without penalty, (i) on
sixty (60) days written notice to the other party, for any cause or
without cause, or (ii) on reasonable notice to the other party, if it
is not permissible to continue the arrangement described herein under
laws, rules or regulations applicable to either party or the Funds, or
if the Participation Agreement is terminated.
6. The terms of this arrangement will be held confidential by each party
except to the extent that either party or its counsel may deem it
necessary to disclose this arrangement.
7. This Agreement represents the entire Agreement of the parties on the
subject matter hereof and it cannot be amended or modified except in
writing, signed by the parties. This Agreement may be executed in one
or more separate counterparts, all of which, when taken together, shall
constitute one and the same Agreement.
8. All notices and other communications hereunder shall be given or made
in writing and shall be delivered personally, or sent by telex,
telecopier or registered or certified mail, postage prepaid, return
receipt requested, or recognized overnight courier service to the party
to whom they are directed at the following addresses, or at such other
addresses as may be designated by notice from such party to the other
party.
To the Company:
Aetna Life Insurance and Annuity Company
151 Farmington Avenue
<PAGE>
Hartford, Connecticut 06156
Attention: Shaun P. Mathews
<PAGE>
To the Adviser:
Aeltus Investment Management, Inc.
242 Trumbull Street
Hartford, Connecticut 06103-1205
Attention: Daniel F. Wilcox
Any notice, demand or other communication given in a manner prescribed in this
Section 8 shall be deemed to have been delivered on receipt.
IN WITNESS WHEREOF, the parties to this Agreement have caused this Agreement to
be executed by their authorized officers as of the day and year first above
written.
AELTUS INVESTMENT MANAGEMENT, INC.
By: /s/J. Scott Fox
______________________________________
Managing Director and Chief Operating Officer
AETNA LIFE INSURANCE AND ANNUITY COMPANY
By: /s/Shaun P. Mathews
_________________________________________
Senior Vice President
SEVENTH AMENDMENT TO
PARTICIPATION AGREEMENT
THIS SEVENTH AMENDMENT TO THE FUND PARTICIPATION AGREEMENT (the "Seventh
Amendment") is made and entered into as of the 1st day of May, 1998, by and
among AETNA LIFE INSURANCE AND ANNUITY COMPANY (the "Company") a Connecticut
corporation, on its own behalf and on behalf of each segregated asset account of
the Company (each an "Account") set forth on Schedule A of the Original
Agreement (defined below), and the VARIABLE INSURANCE PRODUCTS FUND, an
unincorporated business trust organized under the laws of the Commonwealth of
Massachusetts (the "Fund") and FIDELITY DISTRIBUTORS CORPORATION (the
"Underwriter"), a Massachusetts corporation.
WITNESSETH
WHEREAS, the Company, the Fund and the Underwriter are parties to a
Participation Agreement, dated February 1, 1994, as supplemented by Amendments
to the Participation Agreement dated as of December 15, 1994, February 1, 1995,
May 1, 1995, January 1, 1996, March 1, 1996, May 1, 1997 and November 6, 1997
(the "Original Agreement"); and
WHEREAS, the Company, the Fund and the Underwriter now desire to modify
the Original Agreement to add additional Contracts funded by certain Accounts.
NOW THEREFORE, in consideration of the premises and the mutual covenants
and promises expressed herein, the parties agree as follows:
1. Schedule A of the Original Agreement is hereby deleted and replaced
with Schedule A effective as of May 1, 1998;
2. The Original Agreement, as supplemented by this Seventh Amendment,
is ratified and confirmed; and
3. This Seventh Amendment may be executed in two or more counterparts,
which together shall constitute one instrument.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Seventh Amendment as
of the date first above written.
AETNA LIFE INSURANCE AND ANNUITY COMPANY
By: /s/ Laurie M. LeBlanc
----------------------------------------
Name: Laurie M. Leblanc
----------------------------------------
Title: Vice President
----------------------------------------
VARIABLE INSURANCE PRODUCTS FUND
By: /s/ Robert C. Pozen
----------------------------------------
Name: Robert C. Pozen
----------------------------------------
Title: Senior Vice President
----------------------------------------
FIDELITY DISTRIBUTORS CORPORATION
By: /s/ Kevin Kelly
----------------------------------------
Name: Kevin Kelly
----------------------------------------
Title: Vice President
----------------------------------------
2
<PAGE>
SCHEDULE A
<TABLE>
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
Policy Form Numbers of Contracts Issued Through
Name of Separate Account Separate Account
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Variable Annuity Account B I-CDA-IC(IR/NY) I-CDA-HI(NQ)
I-CDA-IC(NQ/NY) G-CDA-ID(DC)
I-CDA-IC(IR/MP) G-CDA-GP1(4/94)
I-CDA-IC(NQ/MP) I-CDA-GP1(4/94)
G-CDA-IB(IR) A050SP96
G-CDA-IC(IR) G-MP1(5/97)
G-CDA-IC(NQ) MP1CERT(5/97)
G-CDA-IC(NQ/NY) I-MP1CERT(5/96)
GMCC-IC(NQ) I-MP1(5/96)
GMCC-IC(NQ/NY) G-CDA-96(NY)
GMCC-IC(IR/NY) GMCC-96(NY)
G-CDA-HF I-CDA-HD
I-CDA-IA
- ------------------------------------------------------------------------------------------------------------
Variable Life Account B 70180-93US 70225-95
70182-93US 70267-97
70181-94US 70263-97
38899 70225-97
38899-90 70180-98US
38899-93 70182-98US
- ------------------------------------------------------------------------------------------------------------
Variable Annuity Account C G-CDA-IB(XC/SM) G-TDA-HH(XC/S)
G-CDA-IA(RPM/XC) GTCC-HH(XC/S)
G-CDA-IB(AORP) GLID-CDA-HO
G-CDA-IB(ATORP) GIT-CDA-HO
G-CDA-95(TORP) GLIT-CDA-HO
GTCC-95(TORP) IST-CDA-HO
G-CDA-95(ORP) IRA-CDA-IC
GTCC-95(ORP) IP-CDA-IB(WI)
G-CDA-96(TORP) IP-CDA-IB(MN)
G-CDA-96(ORP) IP-CDA-IB(WA)
GTCC-96(TORP) G-CDA-ID(DC)
GTCC-96(ORP) GIP-CDA-HB
G-401-IB(X/M) I-CDA-HD
G-CDA-HF I-CDA-HD(XC)
G-CDA-HD IA-CDA-IA
GTCC-HF IA-CDA-IA(RP)
G-CDA-IA(RP) G-CDA-IB(IR)
GST-CDA-HO A001RP95
GSD-CDA-HO A007RC95
GID-CDA-HO A020RV95
G-TDA-HH(XC/M) A027RV95
GTCC-HH(XC/M)
- ------------------------------------------------------------------------------------------------------------
Separate Account D GF-PVA-IC(NY) GFA-PVA-IC
GF-PVA-IC(CA) F.6F-PVA-TR
GF-PVA-IC(NJ)
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Any state variation of the above-referenced contracts are considered included on
this Schedule A.
Date of Amendment: May 1, 1998
3
SEVENTH AMENDMENT TO
PARTICIPATION AGREEMENT
THIS SEVENTH AMENDMENT TO THE FUND PARTICIPATION AGREEMENT (the "Seventh
Amendment") is made and entered into as of the 1st day of May, 1998, by and
among AETNA LIFE INSURANCE AND ANNUITY COMPANY (the "Company") a Connecticut
corporation, on its own behalf and on behalf of each segregated asset account of
the Company (each an "Account") set forth on Schedule A of the Original
Agreement (defined below), and the VARIABLE INSURANCE PRODUCTS FUND II, an
unincorporated business trust organized under the laws of the Commonwealth of
Massachusetts (the "Fund") and FIDELITY DISTRIBUTORS CORPORATION (the
"Underwriter"), a Massachusetts corporation.
WITNESSETH
WHEREAS, the Company, the Fund and the Underwriter are parties to a
Participation Agreement, dated February 1, 1994, as supplemented by Amendments
to the Participation Agreement dated as of December 15, 1994, February 1, 1995,
May 1, 1995, January 1, 1996, March 1, 1996, May 1, 1997 and January 20, 1998
(the "Original Agreement"); and
WHEREAS, the Company, the Fund and the Underwriter now desire to modify
the Original Agreement (i) to add additional Contracts funded by certain
Accounts.
NOW THEREFORE, in consideration of the premises and the mutual covenants
and promises expressed herein, the parties agree as follows:
1. Schedule A of the Original Agreement is hereby deleted and replaced
with Schedule A effective as of May 1, 1998;
2. The Original Agreement, as supplemented by this Seventh Amendment, is
ratified and confirmed; and
3. This Seventh Amendment may be executed in two or more counterparts,
which together shall constitute one instrument.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Seventh Amendment as
of the date first above written.
AETNA LIFE INSURANCE AND ANNUITY COMPANY
By: /s/ Laurie M. LeBlanc
----------------------------------------
Name: Laurie M. Leblanc
----------------------------------------
Title: Vice President
----------------------------------------
VARIABLE INSURANCE PRODUCTS FUND II
By: /s/ Robert C. Pozen
----------------------------------------
Name: Robert C. Pozen
----------------------------------------
Title: Senior Vice President
----------------------------------------
FIDELITY DISTRIBUTORS CORPORATION
By: /s/ Kevin Kelly
----------------------------------------
Name: Kevin Kelly
----------------------------------------
Title: Vice President
----------------------------------------
2
<PAGE>
SCHEDULE A
<TABLE>
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
Policy Form Numbers of Contracts Issued Through
Name of Separate Account Separate Account
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Variable Annuity Account B I-CDA-IC(IR/NY) I-CDA-HI(NQ)
I-CDA-IC(NQ/NY) G-CDA-ID(DC)
I-CDA-IC(IR/MP) G-CDA-GP1(4/94)
I-CDA-IC(NQ/MP) I-CDA-GP1(4/94)
G-CDA-IB(IR) A050SP96
G-CDA-IC(IR) G-MP1(5/97)
G-CDA-IC(NQ) MP1CERT(5/97)
G-CDA-IC(NQ/NY) I-MP1CERT(5/96)
GMCC-IC(NQ) I-MP1(5/96)
GMCC-IC(NQ/NY) G-CDA-96(NY)
GMCC-IC(IR/NY) GMCC-96(NY)
G-CDA-HF I-CDA-HD
I-CDA-IA
- ------------------------------------------------------------------------------------------------------------
Variable Life Account B 70180-93US 70225-95
70182-93US 70267-97
70181-94US 70263-97
38899 70225-97
38899-90 70180-98US
38899-93 70182-98US
- ------------------------------------------------------------------------------------------------------------
Variable Annuity Account C G-CDA-IB(XC/SM) G-TDA-HH(XC/S)
G-CDA-IA(RPM/XC) GTCC-HH(XC/S)
G-CDA-IB(AORP) GLID-CDA-HO
G-CDA-IB(ATORP) GIT-CDA-HO
G-CDA-95(TORP) GLIT-CDA-HO
GTCC-95(TORP) IST-CDA-HO
G-CDA-95(ORP) IRA-CDA-IC
GTCC-95(ORP) IP-CDA-IB(WI)
G-CDA-96(TORP) IP-CDA-IB(MN)
G-CDA-96(ORP) IP-CDA-IB(WA)
GTCC-96(TORP) G-CDA-ID(DC)
GTCC-96(ORP) GIP-CDA-HB
G-401-IB(X/M) I-CDA-HD
G-CDA-HF I-CDA-HD(XC)
G-CDA-HD IA-CDA-IA
GTCC-HF IA-CDA-IA(RP)
G-CDA-IA(RP) G-CDA-IB(IR)
GST-CDA-HO A001RP95
GSD-CDA-HO A007RC95
GID-CDA-HO A020RV95
G-TDA-HH(XC/M) A027RV95
GTCC-HH(XC/S)
- ------------------------------------------------------------------------------------------------------------
Separate Account D GF-PVA-IC(NY) GFA-PVA-IC
GF-PVA-IC(CA) F.6F-PVA-TR
GF-PVA-IC(NJ)
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Any state variation of the above-referenced contracts are considered included on
this Schedule A.
Date of Amendment: May 1, 1998
3
PARTICIPATION AGREEMENT
AMONG
MFS VARIABLE INSURANCE TRUST,
AETNA LIFE INSURANCE AND ANNUITY COMPANY
AND
MASSACHUSETTS FINANCIAL SERVICES COMPANY
THIS AGREEMENT, made and entered into this 30th day of April 1996, by and
among MFS VARIABLE INSURANCE TRUST, a Massachusetts business trust (the
"Trust"), AETNA LIFE INSURANCE AND ANNUITY COMPANY, a Connecticut corporation
(the "Company") on its own behalf and on behalf of each of the segregated asset
accounts of the Company set forth in Schedule A hereto, as may be amended from
time to time (the "Accounts"), and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a
Delaware corporation ("MFS").
WHEREAS, the Trust is registered as, an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and its shares are registered or will be registered under the Securities Act of
1933, as amended (the "1933 Act");
WHEREAS, shares of beneficial interest of the Trust are divided into
several series of shares, each representing the interests in a particular
managed pool of securities and other assets;
WHEREAS, the series of shares of the Trust offered by the Trust to the
Company and the Accounts are set forth on Schedule A attached hereto (each, a
"Portfolio," and, collectively, the "Portfolios");
WHEREAS, MFS is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state securities
law, and is the Trust's investment adviser;
WHEREAS, the Company will issue certain variable annuity and/or variable
life insurance contracts (individually, the "Policy" or, collectively, the
"Policies") which, if required by applicable law, will be registered under the
1933 Act;
WHEREAS, the Accounts are duly organized, validly existing segregated asset
accounts, established by resolution of the Board of Directors of the Company, to
set aside and invest assets attributable to the aforesaid variable annuity
and/or variable life insurance contracts that are allocated to the Accounts (the
Policies and the Accounts covered by this Agreement, and each corresponding
Portfolio covered by this Agreement in which the Accounts invest, is specified
in Schedule A attached hereto as may be modified from time to time);
<PAGE>
WHEREAS, the Company has registered or will register the Accounts as unit
investment trusts under the 1940 Act (unless exempt therefrom);
WHEREAS, MFS Fund Distributors, Inc. (the "Underwriter") is registered as a
broker-dealer with the Securities and Exchange Commission (the "SEC") under the
Securities Exchange Act of 1934, as amended (hereinafter the "1934 Act"), and is
a member in good standing of the National Association of Securities Dealers,
Inc. (the "NASD");
WHEREAS, the Company, the underwriter for the variable annuity and the
variable life policies, is registered as a broker-dealer with the SEC under the
1934 Act and is a member in good standing of the NASD; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in one or more of the
Portfolios specified in Schedule A attached hereto (the "Shares") on behalf of
the Accounts to fund the Policies, and the Trust intends to sell such Shares to
the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Trust, MFS,
and the Company agree as follows:
ARTICLE 1. SALE OF TRUST SHARES
1.1. The Trust agrees to sell to the Company those Shares which the
Accounts order (based on orders placed by Policy holders on that
Business Day, as defined below) and which are available for purchase by
such Accounts, executing such orders on a daily basis at the net asset
value next computed after receipt by the Trust or its designee of the
order for the Shares. For purposes of this Section 1.1, the Company
shall be the designee of the Trust for receipt of such orders from
Policy owners and receipt by such designee shall constitute receipt by
the Trust; provided that the Trust receives notice of such orders by
9:30 a.m. New York time on the next following Business Day. "Business
Day" shall mean any day on which the New York Stock Exchange, Inc. (the
"NYSE") is open for trading and on which the Trust calculates its net
asset value pursuant to the rules of the SEC.
1.2. The Trust agrees to make the Shares available indefinitely for
purchase at the applicable net asset value per share by the Company and
the Accounts on those days on which the Trust calculates its net asset
value pursuant to rules of the SEC and the Trust shall calculate such
net asset value on each day which the NYSE is open for trading.
Notwithstanding the foregoing, the Board of Trustees of the Trust (the
"Board") may refuse to sell any Shares to the Company and the Accounts,
or suspend or terminate the offering of the Shares if such action is
required by law or by regulatory authorities having jurisdiction or is,
in the sole discretion of the Board acting in good faith and in light
of its fiduciary duties under federal and any applicable state laws,
necessary in the best interest of the Shareholders of such Portfolio.
1.3. The Trust and MFS agree that the Shares will be sold only to
insurance companies which have entered into participation agreements
with the Trust and MFS (the "Participating Insurance Companies") and
their separate accounts, qualified pension and retirement plans and MFS
or its affiliates. The Trust and MFS will not sell Trust shares to any
insurance company
2
<PAGE>
or separate account unless an agreement containing provisions
substantially the same as Articles III and VII of this Agreement is in
effect to govern such sales. The Company will not resell the Shares
except to the Trust or its agents.
1.4. The Trust agrees to redeem for cash, on the Company's request, any
full or fractional Shares held by the Accounts (based on orders placed
by Policy holders on that Business Day), executing such requests on a
daily basis at the net asset value next computed after receipt by the
Trust or its designee of the request for redemption. For purposes of
this Section 1.4, the Company shall be the designee of the Trust for
receipt of requests for redemption from Policy owners and receipt by
such designee shall constitute receipt by the Trust; provided that the
Trust receives notice of such request for redemption by 9:30 a.m. New
York time on the next following Business Day.
1.5. Each purchase, redemption and exchange order placed by the Company
shall be placed separately for each Portfolio and shall not be netted
with respect to any Portfolio. However, with respect to payment of the
purchase price by the Company and of redemption proceeds by the Trust,
the Company and the Trust shall net purchase and redemption orders with
respect to each Portfolio and shall transmit one net payment for all of
the Portfolios in accordance with Section 1.6 hereof.
1.6. In the event of net purchases, the Company shall pay for the
Shares by 2:00 p.m. New York time on the next Business Day after an
order to purchase the Shares is made in accordance with the provisions
of Section 1.1. hereof. In the event of net redemptions, the Trust
shall pay the redemption proceeds by 2:00 p.m. New York time on the
next Business Day after an order to redeem the shares is made in
accordance with the provisions of Section 1.4. hereof. All such
payments shall be in federal funds transmitted by wire.
1.7. Issuance and transfer of the Shares will be by book entry only.
Stock certificates will not be issued to the Company or the Accounts.
The Shares ordered from the Trust will be recorded in an appropriate
title for the Accounts or the appropriate subaccounts of the Accounts.
1.8. The Trust shall furnish same day notice (by wire or telephone
followed by written confirmation) to the Company of any dividends or
capital gain distributions payable on the Shares. The Company hereby
elects to receive all such dividends and distributions as are payable
on a Portfolio's Shares in additional Shares of that Portfolio. The
Trust shall notify the Company of the number of Shares so issued as
payment of such dividends and distributions.
1.9. The Trust or its custodian shall make the net asset value per
share for each Portfolio available to the Company on each Business Day
as soon as reasonably practical after the net asset value per share is
calculated and shall use its best efforts to make such net asset value
per share available by 6:30 p.m. New York time. In the event that the
Trust is unable to meet the 6:30 p.m. time stated herein, it shall
provide additional time for the Company to place orders for the
purchase and redemption of Shares. Such additional time shall be equal
to the additional time which the Trust takes to make the net asset
value available to the Company. If the Trust provides materially
incorrect share net asset value or dividend or capital gain
distribution information, the Trust shall make an adjustment to the
number of shares purchased
3
<PAGE>
or redeemed for the Accounts to reflect the correct net asset value per
share or dividend or capital gain distribution. Any material error in
the calculation or reporting of net asset value per share, dividend or
capital gains information shall be reported promptly upon discovery to
the Company.
ARTICLE II. CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1. The Company represents and warrants that the Policies are or will
be registered under the 1933 Act or are exempt from or not subject to
registration thereunder, and that the Policies will be issued, sold,
and distributed in compliance in all material respects with all
applicable state and federal laws, including without limitation the
1933 Act, the Securities Exchange Act of 1934, as amended (the "1934
Act"), and the 1940 Act. The Company further represents and warrants
that it is an insurance company duly organized and in good standing
under applicable law and that it has legally and validly established
the Account as a segregated asset account under applicable law and has
registered or, prior to any issuance or sale of the Policies, will
register the Accounts as unit investment trusts in accordance with the
provisions of the 1940 Act (unless exempt therefrom) to serve as
segregated investment accounts for the Policies, and that it will
maintain such registration for so long as any Policies are outstanding.
The Company shall amend the registration statements under the 1933 Act
for the Policies and the registration statements under the 1940 Act for
the Accounts from time to time as required in order to effect the
continuous offering of the Policies or as may otherwise be required by
applicable law. The Company shall register and qualify the Policies for
sales accordance with the securities laws of the various states only if
and to the extent deemed necessary by the Company.
2.2. The Company represents and warrants that the Policies are
currently and at the time of issuance will be treated as life
insurance, endowment or annuity contract under applicable provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), that it
will maintain such treatment and that it will notify the Trust or MFS
immediately upon having a reasonable basis for believing that the
Policies have ceased to be so treated or that they might not be so
treated in the future.
2.3. The Company represents and warrants that it is the underwriter for
the variable annuity and the variable life policies, is a member in
good standing of the NASD and is a registered broker-dealer with the
SEC. The Company represents and warrants that it, as the issuer and
underwriter, will sell and distribute such policies in accordance in
all material respects with all applicable state and federal securities
laws, including without limitation the 1933 Act, the 1934 Act, and the
1940 Act.
2.4. The Trust and MFS represent and warrant that the Shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold in compliance with the laws of The
Commonwealth of Massachusetts and all applicable federal and state
securities laws and that the Trust is and shall remain registered under
the 1940 Act. The Trust shall amend the registration statement for its
Shares under the 1933 Act and the 1940 Act from time to time as
required in order to effect the continuous offering of its Shares. The
Trust shall register and qualify the Shares for sale in accordance with
the laws of the various states only if and to the extent deemed
necessary by the Trust.
4
<PAGE>
2.5. MFS represents and warrants that the Underwriter is a member in
good standing of the NASD and is registered as a broker-dealer with the
SEC. The Trust and MFS represent that the Trust and the Underwriter
will sell and distribute the Shares in accordance in all material
respects with all applicable state and federal securities laws,
including without limitation the 1933 Act, the 1934 Act, and the 1940
Act.
2.6. The Trust represents that it is lawfully organized and validly
existing under the laws of The Commonwealth of Massachusetts and that
it does and will comply in all material respects with the 1940 Act and
any applicable regulations thereunder.
2.7. MFS represents and warrants that it is and shall remain duly
registered under all applicable federal securities laws and that it
shall perform its obligations for the Trust in compliance in all
material respects with any applicable federal securities laws and with
the securities laws of The Commonwealth of Massachusetts. MFS
represents and warrants that it is not subject to state securities laws
other than the securities laws of The Commonwealth of Massachusetts and
that it is exempt from registration as an investment adviser under the
securities laws of The Commonwealth of Massachusetts.
2.8. No less frequently than annually, the Company shall submit to the
Board such reports, material or data as the Board may reasonably
request so that it may carry out fully the obligations imposed upon it
by the conditions contained in the exemptive application pursuant to
which the SEC has granted exemptive relief to permit mixed and shared
funding (the "Mixed and Shared Funding Exemptive Order").
ARTICLE III. PROSPECTUS AND PROXY STATEMENTS; VOTING
3.1. At least annually, the Trust or its designee shall provide the
Company, free of charge, with as many copies of the current prospectus
(describing only the Portfolios listed in Schedule A hereto) for the
Shares as the Company may reasonably request for distribution to
existing Policy owners whose Policies are funded by such Shares. The
Trust or its designee shall provide the Company, at the Company's
expense, with as many copies of the current prospectus for the Shares
as the Company may reasonably request for distribution to prospective
purchasers of Policies. If requested by the Company in lieu thereof,
the Trust or its designee shall provide such documentation (including a
"camera ready" copy of the new prospectus as set in type or, at the
request of the Company, as a diskette in the form sent to the financial
printer) and other assistance as is reasonably necessary in order for
the parties hereto once each year (or more frequently if the prospectus
for the Shares is supplemented or amended) to have the prospectus for
the Policies and the prospectus for the Shares printed together in one
document; the expenses of such printing to be apportioned between (a)
the Company and (b) the Trust or its designee in proportion to the
number of pages of the Policy and Shares' prospectuses, taking account
of other relevant factors affecting the expense of printing, such as
covers, columns, graphs and charts; the Trust or its designee to bear
the cost of printing the Shares' prospectus portion of such document
for distribution to owners of existing Policies funded by the Shares
and the Company to bear the expenses of printing the portion of such
document relating to the Accounts; provided, however, that the Company
shall bear all printing expenses of such combined documents where used
for distribution to prospective purchasers or to owners of existing
Policies not funded by the Shares. In the event that the Company
requests
5
<PAGE>
that the Trust or its designee provides the Trust's prospectus in a
"camera ready" or diskette format, the Trust shall be responsible for
providing the prospectus in the format in which it or MFS is accustomed
to formatting prospectuses and shall bear the expense of providing the
prospectus in such format (e.g., typesetting expenses), and the Company
shall bear the expense of adjusting or changing the format to conform
with any of its prospectuses.
3.2. The prospectus for the Shares shall state that the statement of
additional information for the Shares is available from the Trust or
its designee. The Trust or its designee, at its expense, shall print
and provide such statement of additional information to the Company (or
a master of such statement suitable for duplication by the Company) for
distribution to any owner of a Policy funded by the Shares. The Trust
or its designee, at the Company's expense, shall print and provide such
statement to the Company (or a master of such statement suitable for
duplication by the Company) for distribution to a prospective purchaser
who requests such statement or to an owner of a Policy not funded by
the Shares.
3.3. The Trust or its designee shall provide the Company free of charge
copies, if and to the extent applicable to the Shares, of the Trust's
proxy materials, reports to Shareholders and other communications to
Shareholders in such quantity as the Company shall reasonably require
for distribution to Policy owners.
3.4. Notwithstanding the provisions of Sections 3.1, 3.2, and 3.3
above, or of Article V below, the Company shall pay the expense of
printing or providing documents to the extent such cost is considered a
distribution expense. Distribution expenses would include by way of
illustration, but are not limited to, the printing of the Shares'
prospectus or prospectuses for distribution to prospective purchasers
or to owners of existing Policies not funded by such Shares.
3.5. The Trust hereby notifies the Company that it may be appropriate
to include in the prospectus pursuant to which a Policy is offered
disclosure regarding the potential risks of mixed and shared funding.
3.6. If and to the extent required by law, the Company shall:
(a) solicit voting instructions from Policy owners;
(b) vote the Shares in accordance with instructions
received from Policy owners; and
(c) vote the Shares for which no instructions have been
received in the same proportion as the Shares of such
Portfolio for which instructions have been received
from Policy owners;
so long as and to the extent that the SEC continues to interpret the
1940 Act to require pass through voting privileges for variable
contract owners. The Company will in no way recommend action in
connection with or oppose or interfere with the solicitation of proxies
for the Shares held for such Policy owners. The Company reserves the
right to vote shares held in any segregated asset account in its own
right, to the extent permitted by law. Participating Insurance
Companies shall be responsible for assuring that each of their separate
accounts
6
<PAGE>
holding Shares calculates voting privileges in the manner required by
the Mixed and Shared Funding Exemptive Order. The Trust and MFS will
notify the Company of any changes of interpretations or amendments to
the Mixed and Shared Funding Exemptive Order.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee, each piece of sales literature or other
promotional material in which the Trust, MFS, any other investment
adviser to the Trust, or any affiliate of MFS are named, at least three
(3) Business Days prior to its use. No such material shall be used if
the Trust, MFS, or their respective designees reasonably objects to
such use within three (3) Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statement on behalf of the Trust, MFS, any other
investment adviser to the Trust, or any affiliate of MFS or concerning
the Trust or any other such entity in connection with the sale of the
Policies other than the information or representations contained in the
registration statement, prospectus or statement of additional
information for the Shares, as such registration statement, prospectus
and statement of additional information may be amended or supplemented
from time to time, or in reports or proxy statements for the Trust, or
in sales literature or other promotional material approved by the
Trust, MFS or their respective designees, except with the permission of
the Trust, MFS or their respective designees. The Trust, MFS or their
respective designees each agrees to respond to any request for approval
on a prompt and timely basis. The Company shall adopt and implement
procedures reasonably designed to ensure that information concerning
the Trust, MFS or any of their affiliates which is intended for use
only by brokers or agents selling the Policies (i.e., information that
is not intended for distribution to Policy holders or prospective
Policy holders) is so used, and neither the Trust, MFS nor any of their
affiliates shall be liable for any losses, damages or expenses relating
to the improper use of such broker only materials.
4.3. The Trust or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or
the Accounts is named, at least three (3) Business Days prior to its
use. No such material shall be used if the Company or its designee
reasonably objects to such use within three (3) Business Days after
receipt of such material.
4.4. The Trust and MFS shall not give, and agree that the Underwriter
shall not give, any information or make any representations on behalf
of the Company or concerning the Company, the Accounts, or the Policies
in connection with the sale of the Policies other than the information
or representations contained in a registration statement, prospectus,
or statement of additional information for the Policies, as such
registration statement, prospectus and statement of additional
information may be amended or supplemented from time to time, or in
reports for the Accounts, or in sales literature or other promotional
material approved by the Company or its designee, except with the
permission of the Company. The Company or its designee agrees to
respond to any request for approval on a prompt and timely basis. The
parties hereto agree that this Section 4.4. is neither intended to
designate nor otherwise imply that MFS is an underwriter or distributor
of the Policies.
7
<PAGE>
4.5. The Company and the Trust (or its designee in lieu of the Company
or the Trust, as appropriate) will each provide to the other at least
one complete copy of all registration statements, prospectuses,
statements of additional information, reports, proxy statements, sales
literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to any
of the above, that relate to the Policies, or to the Trust or its
Shares, prior to or contemporaneously with the filing of such document
with the SEC or other regulatory authorities. The Company and the Trust
shall also each promptly inform the other or the results of any
examination by the SEC (or other regulatory authorities) that relates
to the Policies, the Trust or its Shares, and the party that was the
subject of the examination shall provide the other party with a copy of
relevant portions of any "deficiency letter" or other correspondence or
written report regarding any such examination.
4.6. The Trust and MFS will provide the Company with as much notice as
is reasonably practicable of any proxy solicitation for any Portfolio,
and of any material change in the Trust's registration statement,
particularly any change resulting in change to the registration
statement or prospectus or statement of additional information for any
Account. The Trust and MFS will cooperate with the Company so as to
enable the Company to solicit proxies from Policy owners or to make
changes to its prospectus, statement of additional information or
registration statement, in an orderly manner. The Trust and MFS will
make reasonable efforts to attempt to have changes affecting Policy
prospectuses become effective simultaneously with the annual updates
for such prospectuses.
4.7. For purpose of this Article IV and Article VIII, the phrase "sales
literature or other promotional material" includes but is not limited
to advertisements (such as material published, or designed for use in,
a newspaper, magazine, or other periodical, radio, television,
telephone or tape recording, videotape display, signs or billboards,
motion pictures, or other public media), and sales literature (such as
brochures, circulars, reprints or excerpts or any other advertisement,
sales literature, or published articles), distributed or made generally
available to customers or the public, educational or training materials
or communications distributed or made generally available to some or
all agents or employees.
ARTICLE V. FEES AND EXPENSES
5.1. The Trust shall pay no fee or other compensation to the Company
under this Agreement, and the Company shall pay no fee or other
compensation to the Trust, except that if the Trust or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 under the 1940 Act
to finance distribution and Shareholder servicing expenses, then,
subject to obtaining any required exemptive orders or regulatory
approvals, the Trust may make payments to the Company or to the
underwriter for the Policies if and in amounts agreed to by the Trust
in writing. Each party, however, shall, in accordance with the
allocation of expenses specified in Articles III and V hereof,
reimburse other parties for expense initially paid by one party but
allocated to another party. In addition, nothing herein shall prevent
the parties hereto from otherwise agreeing to perform, and arranging
for appropriate compensation for, other services relating to the Trust
and/or to the Accounts.
8
<PAGE>
5.2. The Trust or its designee shall bear the expenses for the cost of
registration and qualification of the Shares under all applicable
federal and state laws, including preparation and filing of the Trust's
registration statement, and payment of filing fees and registration
fees; preparation and filing of the Trust's proxy materials and reports
to Shareholders; setting in type and printing its prospectus and
statement of additional information (to the extent provided by and as
determined in accordance with Article III above); setting in type and
printing the proxy materials and reports to Shareholders (to the extent
provided by and as determined in accordance with Article III above);
the preparation of all statements and notices required of the Trust by
any federal or state law with respect to its Shares; all taxes on the
issuance or transfer of the Shares; and the costs of distributing the
Trust's prospectuses and proxy materials to owners of Policies funded
by the Shares and any expenses permitted to be paid or assumed by the
Trust pursuant to a plan, if any, under Rule 12b-1 under the 1940 Act.
The Trust shall not bear any expenses of marketing the Policies.
5.3. The Company shall bear the expenses of distributing the Shares'
prospectus or prospectuses in connection with new sales of the Policies
and of distributing the Trust's Shareholder reports to Policy owners.
The Company shall bear all expenses associated with the registration,
qualification, and filing of the Policies under applicable federal
securities and state insurance laws; the cost of preparing, printing
and distributing the Policy prospectus and statement of additional
information; and the cost of preparing, printing and distributing
annual individual account statements for Policy owners as required by
state insurance laws.
5.4. MFS will quarterly reimburse the Company certain of the
administrative costs and expenses incurred by the Company as a result
of operations necessitated by the beneficial ownership by Policy owners
of shares of the Portfolios in the Trust, equal to 0.15% per annum of
the aggregate net assets of the Trust attributable to such Policy
owners. In no event shall such fee be paid by the Trust, its
shareholders or by the Policy holders.
ARTICLE VI. DIVERSIFICATION AND RELATED LIMITATIONS
6.1. The Trust and MFS represent and warrant that each Portfolio will
meet the diversification requirements of Section 851 of the Code
("Section 851 Diversification Requirements") and Section 817(h)(1) of
the Code and Treas. Reg. 1.817-5 relating to the diversification
requirements for variable annuity, endowment, or life insurance
contracts ("Section 817(h)(1) Diversification Requirements"), as they
may be amended from time to time (and any revenue rulings, revenue
procedures, notices, and other published announcements of the Internal
Revenue Service interpreting these sections) (collectively,
"Diversification Requirements"). In the event that any Portfolio is not
so diversified at the end of any applicable quarter, the Trust and MFS
will make every effort to adequately diversify the Portfolio so as to
achieve compliance within the grace periods afforded by Treas. Reg.
1.817-5 and Section 851(d) of the Code (the "Grace Periods"). In the
event that any Portfolio is not so diversified at the end of any
applicable Grace Period, the Trust or MFS will promptly notify the
Company of such non-diversification, such notification to be provided
in no event later than 20 days after the end of the applicable Grace
Period.
9
<PAGE>
6.2. The Trust and MFS represent that each Portfolio will elect to be
qualified as a Regulated Investment Company under Subchapter M of the
Code and that they will maintain such qualification (under Subchapter M
or any successor or similar provision).
ARTICLE VII. POTENTIAL MATERIAL CONFLICTS
7.1. The Trust agrees that the Board, constituted with a majority of
disinterested trustees, will monitor each Portfolio of the Trust for
the existence of any material irreconcilable conflict between the
interests of the variable annuity contract owners and the variable life
insurance policy owners of the Company and/or affiliated companies
("contract owners") investing in the Trust. The Board shall have the
sole authority to determine if a material irreconcilable conflict
exists, and such determination shall be binding on the Company only if
approved in the form of a resolution by a majority of the Board, or a
majority of the disinterested trustees of the Board. The Board will
give prompt notice of any such determination to the Company.
7.2. The Company agrees that it will be responsible for assisting the
Board in carrying out its responsibilities under the conditions set
forth in the Trust's exemptive application pursuant to which the SEC
has granted the Mixed and Shared Funding Exemptive Order by providing
the Board, as it may reasonably request, with all information necessary
for the Board to consider any issues raised and agrees that it will be
responsible for promptly reporting any potential or existing conflicts
of which it is aware to the Board including, but not limited to, an
obligation by the Company to inform the Board whenever contract owner
voting instructions are disregard. The Company also agrees that, if a
material irreconcilable conflict arises, it will at its own cost and to
the extent reasonably practicable (as determined by a majority of the
disinterested trustees) remedy such conflict up to and including (a)
withdrawing the assets allocable to some or all of the Accounts from
the Trust or any Portfolio and reinvesting such assets in a different
investment medium, including (but not limited to) another Portfolio of
the Trust, or submitting to a vote of all affected contract owners
whether to withdraw assets from the Trust or any Portfolio and
reinvesting such assets in a different investment medium and, as
appropriate, segregating the assets attributable to any appropriate
group of contract owners that votes in favor of such segregation, or
offering to any of the affected contract owners the option of
segregating the assets attributable to their contracts or policies, and
(b) establishing a new registered management investment company and
segregating the assets underlying the Policies, unless a majority of
Policy owners materially adversely affected by the conflict have voted
to decline the offer to establish a new registered management
investment company.
7.3. A majority of the disinterested trustees of the Board shall
determine whether any proposed action by the Company adequately
remedies any material irreconcilable conflict. In the event that the
Board determines that any proposed action does not adequately remedy
any material irreconcilable conflict, the Company will withdraw from
investment in the Trust each of the Accounts designated by the
disinterested trustees and terminate this Agreement within six (6)
months after the Board informs the Company in writing of the foregoing
determination; provided, however, that such withdrawal and termination
shall be limited to the extent required to remedy any such material
irreconcilable conflict as determined by a majority of the
disinterested trustees of the Board.
10
<PAGE>
7.4. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision
of the 1940 Act or the rules promulgated thereunder with respect to
mixed or shares funding (as defined in the Mixed and Shared Funding
Exemptive Order) on terms and conditions materially different from
those contained in the Mixed Shared Funding Exemptive Order, then (a)
the Trust and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rule 6e-2 and
6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable; and (b) Sections 3.5, 3.6, 7.1, 7.2, 7.3 and 7.4
of this Agreement shall continue in effect only to the extent that
terms and conditions substantially identical to such Sections are
contained in such Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. Indemnification by the Company
The Company agrees to indemnify and hold harmless the Trust,
MFS, any affiliates of MFS, and each of their respective
directors/trustees, officers and each person, if any, who controls the
Trust or MFS within the meaning of Section 15 of the 1933 Act, and any
agents or employees of the foregoing (each an "Indemnified Party," or
collectively, the "Indemnified Parties" for purposes of this Section
8.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Company) or expenses (including reasonable counsel fees) to which an
Indemnified Party may become subject under any statute, regulation, at
common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Shares or the Policies
and:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement, prospectus or statement of additional
information for the Policies or contained in the Policies or
sales literature or other promotional material for the
Policies (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the commission
or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading provided that this agreement
to indemnify shall not apply as to any Indemnified Party if
such statement or omission or such alleged statement or
omission was made in reasonable reliance upon and in
conformity with information furnished to the Company or its
designee by or on behalf of the Trust or MFS for use in the
registration statement, prospectus or statement of additional
information for the Policies or in the Policies or sales
literature or other promotional material (or any amendment or
supplement) or otherwise for use in connection with the sale
of the Policies or Shares; or
(b) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material
of the Trust not supplied by the Company or this designee, or
persons under its control and on which the Company has
reasonably relied) or wrongful conduct of the Company or
persons under its control, with respect to the sale or
distribution of the Policies or Shares; or
11
<PAGE>
(c) arise out of any untrue statement or alleged untrue statement
of a material fact contained in the registration statement,
prospectus, statement of additional information, or sales
literature or other promotional literature of the Trust, or
any amendment thereof or supplement thereto, or the omission
or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statement or
statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to
the Trust by or on behalf of the Company; or
(d) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company; or
(e) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this
Agreement;
as limited by and in accordance with the provisions of this
Article VIII.
8.2. Indemnification by the Trust
The Trust agrees to indemnify and hold harmless the Company and each of
its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act, and any
agents or employees of the foregoing (each an "Indemnified Party," or
collectively, the "Indemnified Parties" for purposes of this Section
8.2) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Trust) or expenses (including reasonable counsel fees) to which any
Indemnified Party may become subject under any statute, at common law
or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related to
the sale or acquisition of the Shares or the Policies and:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material
of the Trust (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statement
therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission
was made in reasonable reliance upon and in conformity with
information furnished to the Trust, MFS, the Underwriter or
their respective designees by or on behalf of the Company for
use in the registration statement, prospectus or statement of
additional information for the Trust or in sales literature or
other promotional material for the Trust (or any amendment or
supplement) or otherwise for use in connection with the sale
of the Policies or Shares; or
(b) arise out of or as a result of statements or representations
(other than statement or representations contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material
for the Policies
12
<PAGE>
not supplied by the Trust, MFS, the Underwriter or any of
their respective designees or persons under their respective
control and on which any such entity has reasonably relied) or
wrongful conduct of the Trust or persons under its control,
with respect to the sale or distribution of the Policies or
Shares; or
(c) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this
Agreement (including a failure, whether unintentional or in
good faith or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement) or
arise out of or result from any other material breach of this
Agreement by the Trust; or
(d) arise out of or result from the materially incorrect or
untimely calculation or reporting of the daily net asset value
per share or dividend or capital gain distribution rate; or
(e) arise as a result of any failure by the Trust to provide the
services and furnish the materials under the terms of the
Agreement;
as limited by and in accordance with the provisions of this
Article VIII.
8.3. In no event shall the Trust be liable under the indemnification
provisions contained in this Agreement to any individual or entity,
including without limitation, the Company, or any Participating
Insurance Company or any Policy owner, with respect to any losses,
claims, damages, liabilities or expenses that arise out of or result
from (i) a breach of any representation, warranty, and/or covenant made
by the Company hereunder or by any Participating Insurance Company
under an agreement containing substantially similar representations,
warranties and covenants; (ii) the failure by the Company or any
Participating Insurance Company to maintain its segregated asset
account (which invests in any Portfolio) as a legally and validly
established segregated asset account under applicable state law and as
a duly registered unit investment trust under the provisions of the
1940 Act (unless exempt therefrom); or (iii) the failure by the Company
or any Participating Insurance Company to maintain its variable annuity
and/or variable life insurance contracts (with respect to which any
Portfolio serves as an underlying funding vehicle) as life insurance,
endowment or annuity contracts under applicable provisions of the Code.
8.4. Neither the Company nor the Trust shall be liable under the
indemnification provisions contained in this Agreement with respect to
any losses, claims, damages, liabilities or expenses to which an
Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, willful misconduct, or gross
negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations
and duties under this Agreement.
8.5. Promptly after receipt by an Indemnified Party under this Section
8.5. of commencement of action, such Indemnified Party will, if a claim
in respect thereof is to be made against the indemnifying party under
this section, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not
relieve it from any liability which it may have to any Indemnified
Party otherwise than under this section. In case any such action is
brought against any Indemnified Party, and it notified the
13
<PAGE>
indemnifying party of the commencement thereof, the indemnifying party
will be entitled to participate therein and, to the extent that it may
wish, assume the defense thereof, with counsel satisfactory to such
Indemnified Party. After notice from the indemnifying party of its
intention to assume the defense of an action, the Indemnified Party
shall bear the expenses of any additional counsel obtained by it, and
the indemnifying party shall not be liable to such Indemnified Party
under this section for any legal or other expenses subsequently
incurred by such Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation.
8.6. Each of the parties agrees promptly to notify the other parties of
the commencement of any litigation or proceeding against it or any of
its respective officers, directors, trustees, employees or 1933 Act
control persons in connection with the Agreement, the issuance or sale
of the Policies, the operation of the Accounts, or the sale or
acquisition of Shares.
8.7. A successor by law of the parties to this Agreement shall be
entitled to the benefits of the indemnification contained in this
Article VIII. The indemnification provisions contained in this Article
VIII shall survive any termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of The Commonwealth
of Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings
thereunder, including such exemptions from those statutes, rules and
regulations as the SEC may grant and the terms hereof shall be
interpreted and construed in accordance therewith.
ARTICLE X. NOTICE OF FORMAL PROCEEDINGS
The Trust, MFS, and the Company agree that each such party shall
promptly notify the other parties to this Agreement, in writing, of the
institution of any formal proceedings brought against such party or its
designees by the NASD, the SEC, or any insurance department or any other
regulatory body regarding such party's duties under this Agreement or related to
the sale of the Policies, the operation of the Accounts, or the purchase of the
Shares.
ARTICLE XI. TERMINATION
11.1. This Agreement shall terminate with respect to the Accounts,
or one, some, or all Portfolios:
(a) at the option of any party upon six (6) months' advance
written notice to the other parties; or
(b) at the option of the Company to the extent that the
Shares of Portfolios are not reasonably available to
meet the requirements of the Policies or are not
"appropriate funding vehicles" for the Policies, as
reasonably determined by the
14
<PAGE>
Company. Without limiting the generality of the
foregoing, the Shares of a Portfolio would not be
"appropriate funding vehicles" if, for example, such
Shares did not meet the diversification or other
requirements referred to in Article VI hereof; or if
the Company would be permitted to disregard Policy
owner voting instructions pursuant to Rule 6e-2 or
6e-3(T) under the 1940 Act. Prompt notice of the
election to terminate for such cause and an explanation
of such cause shall be furnished to the Trust by the
Company; or
(c) at the option of the Trust or MFS upon institution of
formal proceedings against the Company by the NASD, the
SEC, or any insurance department or any other
regulatory body regarding the Company's duties under
this Agreement or related to the sale of the Policies,
the operation of the Accounts, or the purchase of the
Shares; or
(d) at the option of the Company upon institution of formal
proceedings against the Trust by the NASD, the SEC, or
any state securities or insurance department or any
other regulatory body regarding the Trust's or MFS'
duties under this Agreement or related to the sale of
the Shares; or
(e) at the option of the Company, the Trust or MFS upon
receipt of any necessary regulatory approvals and/or
the vote of the Policy owners having an interest in the
Accounts (or any subaccounts) to substitute the shares
of another investment company for the corresponding
Portfolio Shares in accordance with the terms of the
Policies for which those Portfolio Shares had been
selected to serve as the underlying investment media.
The Company will give thirty (30) days' prior written
notice to the Trust of the Date of any proposed vote or
other action taken to replace the Shares; or
(f) termination by either the Trust or MFS by written
notice to the Company, if either one or both of the
Trust or MFS respectively, shall determine, in their
sole judgment exercised in good faith, that the Company
has suffered a material adverse change in its business,
operations, financial condition, or prospects since the
date of this Agreement or is the subject of material
adverse publicity; or
(g) termination by the Company by written notice to the
Trust and MFS, if the Company shall determine, in its
sole judgment exercised in good faith, that the Trust
or MFS has suffered a material adverse change in this
business, operations, financial condition or prospects
since the date of this Agreement or is the subject of
material adverse publicity; or
(h) at the option of any party to this Agreement, upon
another party's material breach of any provision of
this Agreement; or
(i) upon assignment of this Agreement, unless made with the
written consent of the parties hereto.
15
<PAGE>
11.2. The notice shall specify the Portfolio or Portfolios, Policies
and, if applicable, the Accounts as to which the Agreement is to be
terminated.
11.3. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 11.1(a) may be exercised
for cause or for no cause.
11.4. Except as necessary to implement Policy owner initiated
transactions, or as required by state insurance laws or regulations,
the Company shall not redeem the Shares attributable to the Policies
(as opposed to the Shares attributable to the Company's assets held in
the Accounts), and the Company shall not prevent Policy owners from
allocating payments to a Portfolio that was otherwise available under
the Policies, until thirty (30) days after the Company shall have
notified the Trust of its intention to do so.
11.5. Notwithstanding any termination of this Agreement, the Trust and
MFS shall, at the option of the Company, continue to make available
additional shares of the Portfolios pursuant to the terms and
conditions of this Agreement, for all Policies in effect on the
effective date of termination of this Agreement (the "Existing
Policies"), except as otherwise provided under Article VII of this
Agreement. Specifically, without limitation, the owners of the Existing
Policies shall be permitted to transfer or reallocate investment under
the Policies, redeem investments in any Portfolio and/or invest in the
Trust upon the making of additional purchase payments under the
Existing Policies.
ARTICLE XII. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Trust:
MFS Variable Insurance Trust
500 Boylston Street
Boston, Massachusetts 02116
Attn: Stephen E. Cavan, Secretary
If to the Company:
Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Hartford, Connecticut 06156
Attn: Drew E. Lawton
16
<PAGE>
If to MFS:
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
Attn: Stephen E. Cavan, General Counsel
ARTICLE XIII. MISCELLANEOUS
13.1. Subject to the requirement of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Policies and all information reasonably
identified as confidential in writing by any other party hereto and,
except as permitted by this Agreement or as otherwise required by
applicable law or regulation, shall not disclose, disseminate or
utilize such names and addresses and other confidential information
without the express written consent of the affected party until such
time as it may come into the public domain.
13.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
13.3. This Agreement may be executed simultaneously in one or more
counterparts, each of which taken together shall constitute one and the
same instrument.
13.4. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
13.5. The Schedule attached hereto, as modified from time to time, is
incorporated herein by reference and is part of this Agreement.
13.6. Each party hereto shall cooperate with each other party in
connection with inquiries by appropriate Governmental authorities
(including without limitation the SEC, the NASD, and state insurance
regulators) relating to this Agreement or the transactions contemplated
hereby.
13.7. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled
to under state and federal laws.
13.8. A copy of the Trust's Declaration of Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The Company
acknowledges that the obligations of or arising out of this instrument
are not binding upon any of the Trust's trustees, officers, employees,
agents or shareholders individually, but are binding solely upon the
assets and property of the Trust in accordance with its proportionate
interest hereunder. The Company further acknowledges that the assets
and liabilities of each Portfolio are separate and distinct and that
the obligations of or arising out of this instrument are binding solely
upon the assets or property of the Portfolio on whose behalf the Trust
has executed this instrument. The Company also agrees that the
obligations of each Portfolio hereunder shall be several and not joint,
in
17
<PAGE>
accordance with its proportionate interest hereunder, and the
Company agrees not to proceed against any Portfolio for the obligations
of another Portfolio.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified above.
AETNA LIFE INSURANCE AND ANNUITY COMPANY
By its authorized officer,
By: /s/ Shaun P. Mathews
___________________________________
Title:__________________________________
MFS VARIABLE INSURANCE TRUST, on behalf of the
Portfolios
By its authorized officer and notindividually,
By: /s/ A. Keith Brodkin
-----------------------------------
A. Keith Brodkin, Chairman
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By its authorized officer,
By: /s/ Arnold D. Scott
-------------------------------------
Arnold D. Scott, Senior Executive Vice President
18
<PAGE>
As of April 30, 1996
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
<TABLE>
=====================================================================================================================
<S> <C> <C>
Name of Separate
Account and Date Policies Funded Portfolios
Established by Board of Directors by Separate Account Applicable to Policies
=====================================================================================================================
Variable Annuity Account B Variable Annuity World Government Series
(Est. October 18, 1976) Emerging Growth Series
Total Return Series
Research Series
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
19
FIRST AMENDMENT TO
PARTICIPATION AGREEMENT
THIS FIRST AMENDMENT TO THE PARTICIPATION AGREEMENT (the "First
Amendment") is made and entered into as of the 3rd day of September, 1996, by
and among MFS VARIABLE INSURANCE TRUST, a Massachusetts business trust (the
"Trust"), AETNA LIFE INSURANCE AND ANNUITY COMPANY, a Connecticut corporation
(the "Company") on its own behalf and on behalf of each of the segregated asset
accounts of the Company set forth in Schedule A hereto (the "Accounts") and
MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware corporation ("MFS").
WITNESSETH
WHEREAS the Trust, the Company and MFS are parties to a Participation
Agreement dated April 30, 1996 (the "Original Agreement"); and
WHEREAS the Trust, the Company and MFS now desire to modify the Original
Agreement to add an additional portfolio of the Trust.
NOW THEREFORE, in consideration of the premises and the mutual covenants
and promises expressed herein, the parties agree as follows:
1. Schedule A of the Original Agreement is hereby deleted and replaced with
Schedule A, attached hereto, effective as of September 3, 1996;
2. the Original Agreement, as supplemented by this First Amendment, is
ratified and confirmed, and
3. this First Amendment may be executed in two or more counterparts, which
together shall constitute one instrument.
IN WITNESS WHEREOF, the parties have executed this First Amendment as of
the date first above written.
AETNA LIFE INSURANCE AND ANNUITY COMPANY
By its authorized officer,
By: /s/ Shaun P. Mathews
--------------------------
Title: Vice President
--------------------------
MFS VARIABLE INSURANCE TRUST, on behalf of the
Portfolios By its authorized officer and not
individually,
By: /s/ A. Keith Brodkin
------------------------------
MASSACHUSETTS FINANCIAL SERVICES COMPANY by its
authorized officer,
By: /s/ Arnold D. Scott
--------------------
<PAGE>
September 3, 1996
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Name of Separate
Account and Date Policies Funded by Separate Account Portfolios
Established by Board of Applicable to Policies
Directors
- ---------------------------------------------------------------------------------------------------------------------
Variable Annuity Account B Variable Annuity World Governments Series
(Est. October 18, 1976) Emerging Growth Series
Total Return Series
Research Series
Value Series
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
SECOND AMENDMENT TO
PARTICIPATION AGREEMENT
THIS SECOND AMENDMENT TO THE PARTICIPATION AGREEMENT (the "Second
Amendment") is made and entered into as of the 14th day of March, 1997, by and
among MFS VARIABLE INSURANCE TRUST, a Massachusetts business trust (the
"Trust"), AETNA LIFE INSURANCE AND ANNUITY COMPANY, a Connecticut corporation,
(the "Company") on its own behalf and on behalf of each of the segregated asset
accounts of the Company set forth on Schedule A hereto (the "Account") and
MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware corporation ("MFS").
WITNESSETH
WHEREAS, the Trust, the Company and MFS are parties to a Participation
Agreement dated April 30, 1996 and amended as of September 3, 1996 (the
"Agreement"); and
WHEREAS, the Trust, the Company and MFS now desire to modify the
Agreement to add an additional segregated asset account to which shares of the
listed portfolio will be made available.
NOW THEREFORE, in consideration of the premises and the mutual covenants
and promises expressed herein, the parties agree as follows:
1. Schedule A of the Agreement is hereby deleted and replaced with
Schedule A, attached hereto; and
2. the Agreement, as supplemented by this Second Amendment, is
ratified and confirmed; and
3. this Second Amendment may be executed in two or more counterparts,
which together shall constitute one instrument.
IN WITNESS WHEREOF, the parties have executed this Second Amendment as of
the date first above written.
AETNA LIFE INSURANCE AND ANNUITY COMPANY
by its authorized officer,
By: /s/ Laurie Estes
----------------------------------------
Title: Senior Vice President
----------------------------------------
<PAGE>
MFS VARIABLE INSURANCE TRUST, on behalf of the Portfolios
By its authorized officer and not individually,
By: /s/ A. Keith Brodkin
----------------------------------------
Name: Chairman
----------------------------------------
Title: Senior Vice President
----------------------------------------
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By its authorized officer,
By: /s/ Arnold D. Scott
----------------------------------------
Title: Senior Executive Vice President
----------------------------------------
2
<PAGE>
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Name of Separate
Account and Date Policies Funded by Separate Account Portfolios
Established by Board of Directors Applicable to Policies
- ---------------------------------------------------------------------------------------------------------------------
Variable Annuity Account B Variable Annuity World Governments Series
(Est. October 18, 1976) Emerging Growth Series
Total Return Series
Research Series
Value Series
- ---------------------------------------------------------------------------------------------------------------------
Variable Annuity Account B Variable Annuity Emerging Growth Series
(Est. October 18, 1976) Research Series
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
3
THIRD AMENDMENT TO
PARTICIPATION AGREEMENT
THIS THIRD AMENDMENT TO THE PARTICIPATION AGREEMENT (the "Third
Amendment") is made and entered into as of the 28th day of November, 1997, by
and among MFS VARIABLE INSURANCE TRUST, a Massachusetts business trust (the
"Trust"), AETNA LIFE INSURANCE AND ANNUITY COMPANY, a Connecticut corporation
(the "Company") on its own behalf and on behalf of each of the segregated asset
accounts of the Company set forth in Schedule A hereto (the "Accounts") and
MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware corporation ("MFS").
WITNESSETH
WHEREAS the Trust, the Company and MFS are parties to a Participation
Agreement dated April 30, 1996, as supplemented by First Amendment to
Participation Agreement dated as of September 3rd, 1996 and Second Amendment to
Participation Agreement dated March 14, 1997 (the "Original Agreement"); and
WHEREAS the Trust, the Company and MFS now desire to modify the Original
Agreement to add an additional segregated asset account (Variable Life Account
B) to which shares of the listed portfolios will be made available, to delete a
previously listed segregated asset account (Variable Annuity Account D) which
will no longer utilize the portfolios, and to delete certain portfolios
previously used in Variable Annuity Account B.
NOW THEREFORE, in consideration of the premises and the mutual covenants
and promises expressed herein, the parties agree as follows:
1. Schedule A of the Original Agreement is hereby deleted and replaced
with Schedule A, attached hereto; and
2. the Original Agreement, as supplemented by this Third Amendment, is
ratified and confirmed, and
3. this Third Amendment may be executed in two or more counterparts, which
together shall constitute one instrument.
IN WITNESS WHEREOF, the parties have executed this Third Amendment as of
the date first above written.
AETNA LIFE INSURANCE AND
ANNUITY COMPANY
By its authorized officer,
By: /s/ Laurie M. LeBlanc
----------------------------------
Name: Laurie M. Leblanc
----------------------------------
Title: Vice President
----------------------------------
<TABLE>
<S> <C>
MFS VARIABLE INSURANCE TRUST, MASSACHUSETTS FINANCIAL SERVICES COMPANY by its
on behalf of the Portfolios authorized officer
By its authorized officer and not individually,
By: /s/ Arnold D. Scott By: /s/ A. Keith Brodkin
--------------------------------------- -----------------------------------------
Name: Arnold D. Scott Name: A. Keith Brodkin
--------------------------------------- -----------------------------------------
Title: Senior Executive Vice President and Title: Chairman
Secretary
--------------------------------------- ----------------------------------------
</TABLE>
<PAGE>
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Name of Separate Account and Date Policies Funded by Separate Account Portfolios Applicable to Policies
Established by Board of Directors
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Variable Annuity Account B Variable Annuity World Governments Series
(Est. October 18, 1976)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Variable Life Account B Variable Life World Governments Series
(Est. June 18, 1986) Total Return Series
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
2
