As filed with the Securities and Exchange Registration No. 33-34370*
Commission on April 17, 1998 Registration No. 811-2512
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
- -------------------------------------------------------------------------------
POST-EFFECTIVE AMENDMENT NO. 35 TO
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
and Amendment to
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
- -------------------------------------------------------------------------------
Variable Annuity Account B of Aetna Life Insurance and Annuity Company
Aetna Life Insurance and Annuity Company
151 Farmington Avenue, RE4A, Hartford, Connecticut 06156
Depositor's Telephone Number, including Area Code: (860) 273-4686
Julie E. Rockmore, Counsel
Aetna Life Insurance and Annuity Company
151 Farmington Avenue, RE4A, Hartford, Connecticut 06156
(Name and Address of Agent for Service)
- -------------------------------------------------------------------------------
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 1998 pursuant to paragraph (b) of Rule 485
*Pursuant to Rule 429(a) under the Securities Act of 1933, Registrant has
included a combined prospectus under this Registration Statement which includes
all the information which would currently be required in a prospectus relating
to the following earlier Registration Statement: 33-87932.
<PAGE>
VARIABLE ANNUITY ACCOUNT B
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
FORM N-4
ITEM NO. PART A (PROSPECTUS) LOCATION
-------- ------------------ --------
<S> <C> <C>
1 Cover Page........................................... Cover Page
2 Definitions.......................................... Definitions
3 Synopsis............................................. Prospectus Summary; Fee Table
4 Condensed Financial Information...................... Condensed Financial Information
5 General Description of Registrant, Depositor, and
Portfolio Companies.................................. The Company; Variable Annuity Account B; The Funds
6 Deductions and Expenses.............................. Charges and Deductions; Distribution
7 General Description of Variable Annuity Contracts....
Purchase; Miscellaneous
8 Annuity Period....................................... Annuity Period
9 Death Benefit........................................ Death Benefit During Accumulation Period; Death
Benefit Payable During the Annuity Period
10 Purchases and Contract Value......................... Purchase; Contract Valuation
11 Redemptions.......................................... Right to Cancel; Withdrawals
12 Taxes................................................ Tax Status
13 Legal Proceedings.................................... Miscellaneous - Legal Matters and Proceedings
14 Table of Contents of the Statement of Additional
Information.......................................... Contents of the Statement of Additional
Information
<PAGE>
FORM N-4 PART B (STATEMENT OF LOCATION - STATEMENT OF ADDITIONAL INFORMATION
ITEM NO. ADDITIONAL INFORMATION) ----------------------------------------------
-------- -----------------------
15 Cover Page........................................... Cover page
16 Table of Contents.................................... Table of Contents
17 General Information and History...................... General Information and History
18 Services............................................. General Information and History; Independent
Auditors
19 Purchase of Securities Being Offered................. Offering and Purchase of Contracts
20 Underwriters......................................... Offering and Purchase of Contracts
21 Calculation of Performance Data...................... Performance Data; Average Annual Total Return
Quotations
22 Annuity Payments..................................... Annuity Payments
23 Financial Statements................................. Financial Statements
</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 Marathon
Plus" [Growth Plus (New York)] group and individual deferred variable annuity
contracts ("Contracts") issued by Aetna Life Insurance and Annuity Company (the
"Company"). The Contracts are available as (1) nonqualified deferred annuity
contracts, (2) Individual Retirement Annuities ("IRA") {including Roth IRAs}
under Sections 408(b) {and 408A} of the Internal Revenue Code (may be subject to
approval by state regulatory agencies); or (3) qualified contracts issued in
connection with certain employer sponsored retirement plans (may be subject to
approval by the Company and state regulatory agencies). Currently, the IRA is
not available as a "SIMPLE IRA" as defined in Section 408(p) of the Internal
Revenue Code. In most states, group Contracts are offered, 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. (See "Purchase.")
In most states, the Contracts provide that Purchase Payments may be allocated to
the ALIAC Guaranteed Account (the "Guaranteed Account"), a credited interest
option, or to one or more of the Subaccounts of Variable Annuity Account B, a
separate account of the Company. In certain states, Purchase Payments may be
allocated to the Fixed Account when the Guaranteed Account is not available. The
Subaccounts invest directly in shares of the following Funds:
<TABLE>
<S> <C>
[bullet] Aetna Variable Fund d/b/a [bullet] Fidelity VIP High Income Portfolio
Aetna Growth and Income VP [bullet] Fidelity VIP Overseas Portfolio
[bullet] Aetna Income Shares d/b/a Aetna Bond VP [bullet] Fidelity VIP II Asset Manager Portfolio
[bullet] Aetna Variable Encore Fund d/b/a [bullet] Fidelity VIP II Contrafund Portfolio
Aetna Money Market VP [bullet] Fidelity VIP II Index 500 Portfolio
[bullet] Aetna Balanced VP [bullet] Janus Aspen Aggressive Growth Portfolio
(formerly Aetna Investment Advisers Fund, Inc.) [bullet] Janus Aspen Balanced Portfolio
[bullet] Aetna Ascent VP [bullet] Janus Aspen Flexible Income Portfolio
(formerly Aetna Ascent Variable Portfolio) [bullet] Janus Aspen Growth Portfolio
[bullet] Aetna Crossroads VP [bullet] Janus Aspen Worldwide Growth Portfolio
(formerly Aetna Crossroads Variable Portfolio) [bullet] MFS Total Return Series
[bullet] Aetna Legacy VP [bullet] MFS World Governments Series
(formerly Aetna Legacy Variable Portfolio) [bullet] Oppenheimer Aggressive Growth Fund
[bullet] Aetna Value Opportunity VP (formerly Oppenheimer Capital Appreciation Fund)
(formerly Aetna Variable Capital Appreciation Portfolio) [bullet] Oppenheimer Global Securities Fund
[bullet] Aetna Growth VP [bullet] Oppenheimer Growth & Income Fund
(formerly Aetna Variable Growth Portfolio) [bullet] Oppenheimer Strategic Bond Fund
[bullet] Aetna Index Plus Large Cap VP [bullet] Portfolio Partners MFS Emerging Equities Portfolio
(formerly Aetna Variable Index Plus Portfolio) [bullet] Portfolio Partners MFS Research Growth Portfolio
[bullet] Aetna Small Company VP [bullet] Portfolio Partners MFS Value Equity Portfolio
(formerly Aetna Variable Small Company Portfolio) [bullet] Portfolio Partners Scudder International Growth Portfolio
[bullet] Aetna International VP [bullet] Portfolio Partners T. Rowe Price Growth Equity Portfolio
[bullet] Aetna Real Estate Securities VP
[bullet] Calvert Social Balanced Portfolio
(formerly Calvert Responsibly Invested Balanced
Portfolio)
[bullet] [Federated American Leaders Fund II]
[bullet] [Federated Equity Income Fund II]
[bullet] [Federated Fund for U.S. Government Securities II]
[bullet] [Federated Growth Strategies Fund II]
[bullet] [Federated High Income Bond Fund II]
[bullet] [Federated International Equity Fund II]
[bullet] [Federated Prime Money Fund II]
[bullet] [Federated Utility Fund II]
[bullet] Fidelity VIP Equity-Income Portfolio
[bullet] Fidelity VIP Growth Portfolio
</TABLE>
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 20 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.
THIS PROSPECTUS SHOULD BE READ IN CONJUNCTION WITH THE CURRENT PROSPECTUSES OF
THE FUNDS AND THE ALIAC GUARANTEED ACCOUNT. ALL PROSPECTUSES SHOULD BE RETAINED
FOR FUTURE REFERENCE.
THE CONTRACTS ARE NOT DEPOSITS OR 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 MAY 1, 1998.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
====================================================================================================================================
<S> <C>
DEFINITIONS .............................................................................................. DEFINITIONS - 1
PROSPECTUS SUMMARY ....................................................................................... SUMMARY - 1
FEE TABLE ................................................................................................ FEE TABLE - 1
CONDENSED FINANCIAL INFORMATION .......................................................................... AUV HISTORY - 1
THE COMPANY .................................................................................................................... 1
VARIABLE ANNUITY ACCOUNT B ..................................................................................................... 1
INVESTMENT OPTIONS ............................................................................................................. 1
The Funds .................................................................................................................. 1
Credited Interest Option ................................................................................................... 3
Fixed Acccount ............................................................................................................. 3
PURCHASE ....................................................................................................................... 3
Contract Availability ...................................................................................................... 3
Purchasing Interests in the Contract ....................................................................................... 3
Purchase Payments .......................................................................................................... 3
Contract Rights ............................................................................................................ 4
Designations of Beneficiary and Annuitant .................................................................................. 4
Right to Cancel ............................................................................................................ 4
CHARGES AND DEDUCTIONS ......................................................................................................... 4
Daily Deductions from the Separate Account ................................................................................. 4
Mortality and Expense Risk Charge ...................................................................................... 4
Administrative Charge .................................................................................................. 4
Maintenance Fee ............................................................................................................ 5
Reduction or Elimination of Administrative Charge and Maintenance Fee ...................................................... 5
Deferred Sales Charge ...................................................................................................... 5
Reduction or Elimination of the Deferred Sales Charge ...................................................................... 6
Fund Expenses .............................................................................................................. 6
Premium and Other Taxes .................................................................................................... 6
CONTRACT VALUATION ............................................................................................................. 6
Account Value .............................................................................................................. 6
Accumulation Units ......................................................................................................... 6
Net Investment Factor ...................................................................................................... 7
TRANSFERS ...................................................................................................................... 7
Telephone Transfers ........................................................................................................ 7
Dollar Cost Averaging Program .............................................................................................. 7
Account Rebalancing Program ................................................................................................ 8
WITHDRAWALS .................................................................................................................... 8
SYSTEMATIC DISTRIBUTION OPTIONS ................................................................................................ 8
DEATH BENEFIT DURING ACCUMULATION PERIOD ....................................................................................... 9
Death Benefit Amount ....................................................................................................... 9
Death Benefit Payment Options .............................................................................................. 10
Nonqualified Contracts ................................................................................................. 10
Qualified Contracts .................................................................................................... 10
ANNUITY PERIOD ................................................................................................................. 11
Annuity Period Elections ................................................................................................... 11
Partial Annuitization ...................................................................................................... 11
Annuity Options ............................................................................................................ 11
Annuity Payments ........................................................................................................... 12
Charges Deducted During the Annuity Period ................................................................................. 12
Death Benefit Payable During the Annuity Period ............................................................................ 12
TAX STATUS ..................................................................................................................... 13
Introduction ............................................................................................................... 13
Taxation of the Company .................................................................................................... 13
Tax Status of the Contract ................................................................................................. 13
Taxation of Annuity Contracts .............................................................................................. 14
Contracts Used with Certain Retirement Plans ............................................................................... 16
Individual Retirement Annuities and Simplified Employee Pension Plans ...................................................... 17
Withholding ................................................................................................................ 17
MISCELLANEOUS .................................................................................................................. 17
Distribution ............................................................................................................... 17
Delay or Suspension of Payments ............................................................................................ 18
Performance Reporting ...................................................................................................... 18
Voting Rights .............................................................................................................. 18
Modification of the Contract ............................................................................................... 18
Transfers of Ownership; Assignment ......................................................................................... 19
Involuntary Terminations ................................................................................................... 19
Legal Matters and Proceedings .............................................................................................. 19
Year 2000................................................................................................................... 19
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION ............................................................................ 20
APPENDIX A--ALIAC GUARANTEED ACCOUNT ........................................................................................... 21
APPENDIX B--FIXED ACCOUNT ...................................................................................................... 23
APPENDIX C--DESCRIPTION OF UNDERLYING FUNDS..................................................................................... 24
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. THE COMPANY DOES NOT AUTHORIZE ANY
PERSON TO GIVE INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE
OFFERING CONTAINED IN THIS PROSPECTUS EXCEPT AS OTHERWISE CONTAINED HEREIN.
<PAGE>
DEFINITIONS
================================================================================
The following terms are defined as they are used in this Prospectus:
Account: A record that identifies contract values accumulated on each
Certificate Holder's behalf during the Accumulation Period.
Account Value: The total dollar value of amounts held in an Account as of each
Valuation Date during the Accumulation Period.
Account Year: A period of twelve months measured from the date on which an
Account is established (the effective date) or from an anniversary of such
effective date.
Accumulation Period: The period during which Purchase Payment(s) credited to an
Account are invested to fund future annuity payments.
Accumulation Unit: A measure of the value of each Subaccount before annuity
payments begin.
Adjusted Account Value: The Account Value, plus or minus the aggregate market
value adjustment for amounts allocated to the Guaranteed Account.
Annuitant: The person on whose life or life expectancy the annuity payments are
based.
Annuity: A series of payments for life, a definite period or a combination of
the two.
Annuity Date: The date on which annuity payments begin.
Annuity Period: The period during which annuity payments are made.
Annuity Unit: A measure of the value of each Subaccount selected during the
Annuity Period.
Application: The form or collection of information required by the Company to
purchase an interest in a group contract or an individual contract.
Beneficiary(ies): The person or persons who are entitled to receive any death
benefit proceeds. Under Nonqualified Contracts, Individual Retirement Annuities,
and Section 403(b) Contracts, Beneficiary refers to the beneficiary named under
the Contract. Under Qualified Contracts sold in conjunction with 401(a) or 457
Plans, Beneficiary refers to the beneficiary under the plan.
Certificate: The document issued to a Certificate Holder for an Account
established under a group contract.
Certificate Holder (You): A person or entity who purchases an individual
Contract or acquires an interest under a group Contract.
Claim Date: The date when proof of death and the Beneficiary's claim 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.
Contract Year: The number of completed years since the date of the first payment
under an individual Contract or to an Account under a group Contract.
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: A fixed interest option available in certain states which is
described in Appendix B to this Prospectus. 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.
Home Office: The Company's principal executive offices located at 151 Farmington
Avenue, Hartford, Connecticut 06156.
Individual Contract Holder: A person or entity who has purchased an individual
variable annuity contract (also referred to as a "Certificate Holder").
- --------------------------------------------------------------------------------
DEFINITIONS - 1
<PAGE>
Individual Retirement Annuity: An individual or group variable deferred annuity
intended to qualify under 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).
Purchase Payment(s): The gross payment(s) made to the Company under an Account.
Qualified Contracts: Contracts available for use with plans entitled to special
federal income tax treatment under Code Sections 401(a), 403(b), 408(b), {408A}
or 457.
{Roth IRA: An Individual Retirement Annuity 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.
Separate Account: Variable Annuity Account B, a separate account established for
the purpose of funding variable annuity contracts issued by the Company.
Subaccount(s): The portion of the assets of the Separate Account that is
allocated to a particular Fund. Each Subaccount invests in the shares of only
one corresponding Fund.
Surrender Value: The amount payable upon the withdrawal of all or any portion of
an Account Value.
Valuation Date: The date and time at which the Accumulation Unit Value and
Annuity Unit Value of a Subaccount is calculated. Currently, this calculation
occurs after the close of business of the New York Stock Exchange on any normal
business day, Monday through Friday, that the New York Stock Exchange is open.
- --------------------------------------------------------------------------------
DEFINITIONS - 2
<PAGE>
PROSPECTUS SUMMARY
================================================================================
CONTRACTS OFFERED
The Contracts offered in connection with this Prospectus are group and
individual deferred variable annuity contracts issued by Aetna Life Insurance
and Annuity Company (the "Company"). The purpose of the Contract is to
accumulate values and to provide benefits upon retirement. The Contracts are
currently available for (1) individual nonqualified purchases (we reserve the
right to limit the ownership of nonqualified contracts to natural persons); (2)
Individual Retirement Annuities ("IRAs") {including Roth IRAs} other than
"SIMPLE IRAs" as defined in Section 408(p) of the Internal Revenue Code (may be
subject to approval by state regulatory agencies); and (3) purchases made in
conjunction with employer sponsored retirement plans under Section 403(b) of the
Code (may be subject to approval by the Company and by state regulatory
agencies). Prior to May 1, 1998, the Contracts were also available for purchases
made in conjunction with employer-sponsored retirement plans under Sections
401(a) or 457 of the Code.
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 in those states where the group Contracts are not authorized for sale.
Joint Certificate Holders are allowed only on Nonqualified Contracts. A joint
Certificate Holder must be the spouse of the other joint Certificate Holder
except in New York and Pennsylvania. 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.")
FREE LOOK PERIOD
You may cancel the Contract or Certificate within 10 days after you receive it
(or longer if required by state law) by returning it to the Company along with a
written notice of cancellation. Unless state law requires otherwise, the amount
you will receive upon cancellation will reflect the investment performance of
the Subaccounts into which your Purchase Payments were deposited. In some cases
this may be more or less than the amount of your Purchase Payments. Under a
Contract issued as an Individual Retirement Annuity, you will receive a refund
of your Purchase Payment. (See "Purchase--Right to Cancel.") {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.}
INVESTMENT OPTIONS
The Company has established Variable Annuity Account B, a registered unit
investment trust, for the purpose of funding the variable portion of the
Contracts. The Separate Account is divided into Subaccounts which invest
directly in shares of the Funds described herein. The Contract allows investment
in the Subaccounts, as well as in the Guaranteed Account (or the Fixed Account,
in certain states) described below subject to the limitations described in
"Investment Options," see page 1. 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 in this Prospectus, as well as the prospectuses for each of the
Funds.
The Guaranteed Account is the credited interest option available under the
Contract which allows you to earn a fixed rate of interest, if held for the
guaranteed term. (See Appendix A to this Prospectus and the prospectus for the
Guaranteed Account.)
The Fixed Account is an option available under the Contract in certain
states which allows you to earn a fixed rate of interest. (See the Appendix B to
this Prospectus.)
CHARGES AND DEDUCTIONS
Certain charges are associated with these Contracts. These charges include
daily deductions from the Separate Account (the mortality and expense risk
charge and an administrative charge), as well as any applicable maintenance fee,
transfer fees and premium and other taxes. The Funds also incur certain fees and
expenses which are deducted directly from the Funds. A deferred sales charge may
apply upon a full or partial withdrawal of the Account Value. (See the Fee Table
and "Charges and Deductions.")
- --------------------------------------------------------------------------------
SUMMARY - 1
<PAGE>
TRANSFERS
Prior to the Annuity Date, and subject to certain limitations, you can
transfer Account Values among the Subaccounts, and the Guaranteed Account (or
Fixed Account in certain states). During the Annuity Period and subject to state
approval, if you have elected variable payments, you can make transfers among
the Subaccounts available during the Annuity Period. Currently, during the
Accumulation Period, transfers are without charge. However, the Company reserves
the right to charge up to $10 for each additional transfer if more than 12
transfers are made in a calendar year. Any transfer charge will be applied so
that the amount being transferred will be reduced. Transfers can be requested in
writing or by telephone in accordance with the Company's transfer procedures. If
approved by your state, during the Annuity Period, you can currently make up to
four transfers each calendar year. There is no charge for these transfers.
(Transfers from the Guaranteed Account may be restricted and subject to a market
value adjustment. See 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 "Transfers.")
WITHDRAWALS
All or a part of the Account Value may be withdrawn prior to the Annuity
Date by properly completing a disbursement form and sending it to the Company.
Certain charges may be assessed upon withdrawal. Amounts withdrawn from the
Guaranteed Account may be subject to a market value adjustment. (See Appendix
A.) The taxable portion of the withdrawal may also be subject to income tax and
a federal tax penalty. (See "Withdrawals.")
The Contract also offers certain 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.")
GUARANTEED DEATH BENEFIT
These Contracts contain a guaranteed death benefit feature. 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 Option
selected. (See "Death Benefit Payable During the Annuity Period.")
THE ANNUITY PERIOD
On the Annuity Date, you may elect to begin receiving Annuity Payments.
Annuity Payments can be made on either a fixed, variable or combination fixed
and variable basis. If a variable payout is selected, the payments will continue
to vary with the investment performance of the Subaccount(s) selected. The
Company reserves the right to limit the number of Subaccounts that may be
available during the Annuity Period. (See "Annuity Period.")
TAXES
Earnings are not generally taxed until you or your Beneficiary(ies)
actually receive a distribution from the Contract. A 10% federal tax penalty may
be imposed on certain withdrawals. {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)
- --------------------------------------------------------------------------------
SUMMARY - 2
<PAGE>
FEE TABLE
================================================================================
This Fee Table describes the various charges and expenses associated with
the Contract. No sales charge is paid upon purchase of the Contract. All costs
that are borne directly or indirectly under the Subaccounts and Funds are shown
below. 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.
{CONTRACTS OTHER THAN ROTH IRA CONTRACTS}
CONTRACT HOLDER TRANSACTION EXPENSES
Deferred Sales Charge for withdrawals under each Contract (as a percentage
of each Purchase Payment withdrawn).
- ---------------------------------------------------------------
Years from Receipt Deferred Sales
of Purchase Payment Charge Deduction
------------------- ----------------
Less than 2 7%
2 or more but less than 4 6%
4 or more but less than 5 5%
5 or more but less than 6 4%
6 or more but less than 7 3%
7 or more 0%
- ---------------------------------------------------------------
CONTRACTS OR CERTIFICATES ISSUED IN NEW YORK:
- ---------------------------------------------------------------
Years from Receipt Deferred Sales
of Purchase Payment Charge Deduction
------------------- ----------------
Less than 1 7%
1 or more but less than 2 6%
2 or more but less than 3 5%
3 or more but less than 4 4%
4 or more but less than 5 3%
5 or more but less than 6 2%
6 or more but less than 7 1%
7 or more 0%
- ---------------------------------------------------------------
<PAGE>
Annual Maintenance Fee (1).................................... $30.00
Transfer Charge (2)........................................... $0.00
SEPARATE ACCOUNT ANNUAL EXPENSES
(Daily deductions, equal to the percentage shown on an annual basis, made from
amounts allocated to the variable options under each Contract).
During the Accumulation Period:
Mortality and Expense Risk Charge ............................ 1.25%(3)
Administrative Charge ........................................ 0.15%
----
Total Subaccount Annual Expenses ............................. 1.40%
====
During the Annuity Period:
Mortality and Expense Risk Charge ............................ 1.25%
Administrative Charge ........................................ 0.00%(4)
----
Total Subaccount Annual Expenses ............................. 1.25%
====
(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 without charge. However, we reserve the right 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.
- --------------------------------------------------------------------------------
FEE TABLE - 1
<PAGE>
{ROTH IRA CONTRACTS}
{CONTRACT HOLDER TRANSACTION EXPENSES-
Deferred Sales Charge for withdrawals under each Contract (as a percentage of
each Purchase Payment withdrawn). 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 Contract 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.
----------------------------------------------------------
Completed Contract Deferred Sales
Years Charge Deduction
----------------
Less than 1 5%
1 or more but less than 2 4%
2 or more but less than 3 3%
3 or more but less than 4 2%
4 or more but less than 5 1%
5 or more 0%
----------------------------------------------------------
Annual Maintenance Fee (1) ................................... $30.00
Transfer Charge (2) .......................................... $ 0.00
SEPARATE ACCOUNT ANNUAL EXPENSES
(Daily deductions, equal to the percentage shown on an annual basis, made from
amounts allocated to the variable options under each Contract)
During the Accumulation Period
Mortality and Expense Risk Charge............................. 1.10%(3)
Administrative Charge......................................... 0.15%
----
Total Subaccount Annual Expenses.............................. 1.25%
====
During the Annuity Period
Mortality and Expense Risk Charge............................. 1.25%
Administrative Charge......................................... 0.00%(4)
----
Total Subaccount Annual Expenses.............................. 1.25%
====
- -------------
(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 without charge. However, we reserve the right 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" in the
Prospectus.
(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.}
- --------------------------------------------------------------------------------
FEE TABLE - 2
<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 Other Expenses Total Fund
Fees(1) (after (after expense Annual
expense reimbursement) reimbursement) Expenses
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aetna Ascent VP(2)(3) 0.57% 0.23% 0.80%
- -------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc.(3) 0.50% 0.10% 0.60%
- -------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP(3) 0.40% 0.10% 0.50%
- -------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP(2)(3) 0.55% 0.25% 0.80%
- -------------------------------------------------------------------------------------------------------------------------
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 Legacy VP(2)(3) 0.49% 0.31% 0.80%
- -------------------------------------------------------------------------------------------------------------------------
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%
- -------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP(2)(3) 0.20% 0.60% 0.80%
- -------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio(4) 0.69% 0.12% 0.81%
- -------------------------------------------------------------------------------------------------------------------------
[Federated American Leaders Fund II(5) 0.66% 0.19% 0.85%]
- -------------------------------------------------------------------------------------------------------------------------
[Federated Equity Income Fund II(6) 0.00% 0.85% 0.85%]
- -------------------------------------------------------------------------------------------------------------------------
[Federated Fund for U.S. Government Securities II(5) 0.15% 0.65% 0.80%]
- -------------------------------------------------------------------------------------------------------------------------
[Federated Growth Strategies Fund II(5) 0.08% 0.77% 0.85%]
- -------------------------------------------------------------------------------------------------------------------------
[Federated High Income Bond Fund II(5) 0.51% 0.29% 0.80%]
- -------------------------------------------------------------------------------------------------------------------------
[Federated International Equity Fund II(5) 0.02% 1.21% 1.23%]
- -------------------------------------------------------------------------------------------------------------------------
[Federated Prime Money Fund II(5) 0.30% 0.50% 0.80%]
- -------------------------------------------------------------------------------------------------------------------------
[Federated Utility Fund II(5) 0.48% 0.37% 0.85%]
- -------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio(7) 0.50% 0.08% 0.58%
- -------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio(7) 0.60% 0.09% 0.69%
- -------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio(7) 0.59% 0.12% 0.71%
- -------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio(7) 0.75% 0.17% 0.92%
- -------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager Portfolio(7) 0.55% 0.10% 0.65%
- -------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio(7) 0.60% 0.11% 0.71%
- -------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Index 500 Portfolio(8) 0.24% 0.04% 0.28%
- -------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio(9) 0.73% 0.03% 0.76%
- -------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio(9) 0.76% 0.07% 0.83%
- -------------------------------------------------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 0.65% 0.10% 0.75%
- -------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio(9) 0.65% 0.05% 0.70%
- -------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio(9) 0.66% 0.08% 0.74%
- -------------------------------------------------------------------------------------------------------------------------
MFS Total Return Series(10) 0.75% 0.25% 1.00%
- -------------------------------------------------------------------------------------------------------------------------
MFS World Governments Series(10) 0.75% 0.25% 1.00%
- -------------------------------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth Fund 0.71% 0.02% 0.73%
- -------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund 0.70% 0.06% 0.76%
- -------------------------------------------------------------------------------------------------------------------------
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(11)(12) 0.68% 0.13% 0.81%
- -------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Research Growth Portfolio(11)(12) 0.70% 0.15% 0.85%
- -------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Value Equity Portfolio(11) 0.65% 0.25% 0.90%
- -------------------------------------------------------------------------------------------------------------------------
Portfolio Partners Scudder International Growth Portfolio(11) 0.80% 0.20% 1.00%
- -------------------------------------------------------------------------------------------------------------------------
Portfolio Partners T. Rowe Price Growth Equity
Portfolio(11) 0.60% 0.15% 0.75%
- -------------------------------------------------------------------------------------------------------------------------
</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.
(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 0.83% for Ascent
VP; 0.60% and 0.85% for Crossroads VP; 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; 0.60% and 0.91% for Legacy VP; 0.75% and 1.08% for Real
Estate Securities VP; 0.75% and 1.35% for Small Company VP; and 0.60% and
1.20% for Value Opportunity 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) The figures above are based on expenses for the fiscal year 1997, and
have been restated to reflect an increase in transfer agency expenses of
0.01% for the Portfolio expected to be incurred in 1998. "Management
Fees" includes a performance adjustment, which depending on performance,
could cause the fee to be as high as 0.85% or as low as 0.55%. "Other
Expenses" reflect an indirect fee of 0.03% (relating to an expense offset
arrangement with the Portfolio's custodian). Net fund operating expenses
after reductions for fees paid indirectly (again, restated) would be
0.78%.
(5) [The management fee for each of the funds has been reduced to reflect a
voluntary waiver of a portion of the management fee. The adviser can
terminate this voluntary waiver at any time at its sole discretion. The
maximum management fee for each of the Funds is as follows: 0.75% -
American Leaders Fund II, Growth Strategies Fund II, and Utility Fund II;
0.60% - Fund for U.S. Government Securities II and High Income Bond Fund
II; 1.00% - International Equity Fund II; and 0.50% - Prime Money Fund
II.
The total operating expenses of each of the funds, absent the voluntary
waiver of a portion of the management fee, would have been : 0.94% for
the American Leaders Fund II; 1.25% for the Fund for U.S. Government
Securities II; 1.52% for the Growth Strategies Fund II; 0.89% for the
High Income Bond Fund II; 2.21% for the International Equity Fund II;
1.00% for the Prime Money Fund II; and 1.12% for the Utility Fund II.]
(6) [The management fee has been reduced to reflect the voluntary waiver of
the management fee. The adviser can terminate this voluntary waiver at
any time at its sole discretion. The maximum investment advisory fee is
0.75%. The fund has no present intention of paying or accruing the 12b-1
fee during the fiscal year ending December 31, 1998. If the fund were
paying or accruing the 12b-1 fee, Institutional Shares would be able to
- --------------------------------------------------------------------------------
FEE TABLE - 3
<PAGE>
pay up to 0.25% of its average daily net assets for the 12b-1 fee. See
"Fund Information" in the Fund prospectus.
The total operating expenses would have been 2.29% absent the voluntary
waiver of the management fee and the voluntary reimbursement of certain
other operating expenses.]
(7) 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; 0.67% for Growth Portfolio; 0.71% for
High Income Portfolio; 0.90% for Overseas Portfolio, 0.64% for Asset
Manager Portfolio; and 0.68% for Contrafund Portfolio.
(8) The Fund's investment adviser agreed to reimburse a portion of Index 500
Portfolio's expenses during the period. Without this reimbursement, the
fund's management fee, other expenses and total expenses would have been
0.27%, 0.13% and 0.40%, respectively, for Index 500 Portfolio.
(9) 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.
(10) 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 and MFS World Governments Series would be 0.27% and
0.40%, respectively, and "Total Fund Annual Expenses" would be 1.02% and
1.15%, 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."
(11) 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.
(12) The advisory fee is 0.70% of the first $500 million in assets and 0.65%
on the excess.
- --------------------------------------------------------------------------------
FEE TABLE - 4
<PAGE>
HYPOTHETICAL ILLUSTRATION (EXAMPLE) {FOR CONTRACTS OTHER THAN ROTH IRA'S}
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>
CONTRACTS OR CERTIFICATES ISSUED IN ALL STATES EXCEPT NEW YORK
EXAMPLE A EXAMPLE B
If you withdraw the entire Account If you do not withdraw the Account
Value at the end of the periods shown, Value, or if you annuitize at the end
you would pay the following expenses, of the periods shown, you would pay
including any applicable deferred the following expenses (no deferred
sales charge: sales charge is reflected):*
1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Ascent VP $85 $123 $154 $255 $22 $69 $119 $255
Aetna Balanced VP, Inc. $83 $117 $144 $235 $20 $63 $109 $235
Aetna Bond VP $82 $114 $139 $224 $19 $60 $104 $224
Aetna Crossroads VP $85 $123 $154 $255 $22 $69 $119 $255
Aetna Growth VP $85 $123 $154 $255 $22 $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 Legacy VP $85 $123 $154 $255 $22 $69 $119 $255
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
Aetna Value Opportunity VP $85 $123 $154 $255 $22 $69 $119 $255
Calvert Social Balanced Portfolio $85 $123 $155 $256 $23 $70 $119 $256
Fidelity VIP Equity-Income Portfolio $83 $116 $143 $233 $20 $63 $108 $233
Fidelity VIP Growth Portfolio $84 $120 $149 $244 $21 $66 $113 $244
Fidelity VIP High Income Portfolio $84 $120 $150 $246 $22 $67 $114 $246
Fidelity VIP Overseas Portfolio $87 $127 $160 $268 $24 $73 $125 $268
Fidelity VIP II Asset Manager Portfolio $84 $118 $147 $240 $21 $65 $111 $240
Fidelity VIP II Contrafund Portfolio $84 $120 $150 $246 $22 $67 $114 $246
Fidelity VIP II Index 500 Portfolio $80 $107 $128 $201 $17 $54 $92 $201
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 Flexible Income Portfolio $85 $121 $152 $250 $22 $68 $116 $250
Janus Aspen Growth Portfolio $84 $120 $149 $245 $21 $66 $114 $245
Janus Aspen Worldwide Growth Portfolio $85 $121 $151 $249 $22 $68 $116 $249
MFS Total Return Series $87 $129 $164 $276 $25 $75 $129 $276
MFS World Governments Series $87 $129 $164 $276 $25 $75 $129 $276
Oppenheimer Aggressive Growth Fund $85 $121 $151 $248 $22 $67 $115 $248
Oppenheimer Global Securities Fund $85 $122 $152 $251 $22 $68 $117 $251
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 Portfolio $85 $123 $155 $256 $23 $70 $119 $256
Portfolio Partners MFS Research Growth Portfolio $86 $124 $157 $260 $23 $71 $121 $260
Portfolio Partners MFS Value Equity Portfolio $86 $126 $159 $265 $24 $72 $124 $265
Portfolio Partners Scudder International $87 $129 $164 $276 $25 $75 $129 $276
Growth Portfolio
Portfolio Partners T. Rowe Price Growth Equity $85 $121 $152 $250 $22 $68 $116 $250
Portfolio
</TABLE>
- ---------------
* This Example would not apply if a nonlifetime variable annuity option is
selected, and a lump sum settlement is requested within three years after
annuity payments start, since the lump sum payment will be treated as a
withdrawal during the Accumulation Period and will be subject to any deferred
sales charge that would then apply. (Refer to Example A.)
- --------------------------------------------------------------------------------
FEE TABLE - 5
<PAGE>
<TABLE>
<CAPTION>
CONTRACTS OR CERTIFICATES ISSUED IN NEW YORK
EXAMPLE C EXAMPLE D
If you withdraw the entire Account If you do not withdraw the Account
Value at the end of the periods Value, or if you annuitize at the
shown, you would pay the following end of the periods shown, you
expenses, including any applicable would pay the following expenses
deferred sales charge: (no 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 Ascent VP $73 $103 $135 $255 $22 $69 $119 $255
Aetna Balanced VP, Inc.. $71 $ 97 $125 $235 $20 $63 $109 $235
Aetna Bond VP $70 $ 94 $120 $224 $19 $60 $104 $224
Aetna Crossroads VP $73 $103 $135 $255 $22 $69 $119 $255
Aetna Growth VP $73 $103 $135 $255 $22 $69 $119 $255
Aetna Growth and Income VP $71 $ 96 $125 $234 $20 $63 $108 $234
Aetna Index Plus Large Cap VP $71 $ 95 $123 $229 $20 $62 $106 $229
Aetna International VP $77 $113 $153 $290 $26 $80 $136 $290
Aetna Legacy VP $73 $103 $135 $255 $22 $69 $119 $255
Aetna Money Market VP $69 $ 89 $112 $208 $18 $56 $ 96 $208
Aetna Real Estate Securities VP $75 $107 $143 $271 $24 $74 $126 $271
Aetna Small Company VP $75 $107 $143 $271 $24 $74 $126 $271
Aetna Value Opportunity VP $73 $103 $135 $255 $22 $69 $119 $255
Calvert Social Balanced Portfolio $73 $103 $136 $256 $23 $70 $119 $256
[Federated American Leaders Fund II $65 $104 $138 $260 $23 $71 $121 $260]
[Federated Equity Income Fund II $65 $104 $138 $260 $23 $71 $121 $260]
[Federated Fund for U.S. Government Securities II $65 $103 $135 $255 $23 $69 $119 $255]
[Federated Growth Strategies Fund II $65 $104 $138 $260 $23 $71 $121 $260]
[Federated High Income Bond Fund II $65 $103 $135 $255 $23 $69 $119 $255]
[Federated International Equity Fund II $69 $116 $157 $298 $27 $82 $140 $298]
[Federated Prime Money Fund II $65 $103 $135 $255 $23 $69 $119 $255]
[Federated Utility Fund II $65 $104 $138 $260 $23 $71 $121 $260]
Fidelity VIP Equity-Income Portfolio $71 $ 96 $124 $233 $20 $63 $108 $233
Fidelity VIP Growth Portfolio $72 $100 $130 $244 $21 $66 $113 $244
Fidelity VIP High Income Portfolio $72 $100 $131 $246 $22 $67 $114 $246
Fidelity VIP Overseas Portfolio $74 $107 $142 $268 $24 $73 $125 $268
Fidelity VIP II Asset Manager Portfolio $72 $98 $128 $240 $21 $65 $111 $240
Fidelity VIP II Contrafund Portfolio $72 $100 $131 $246 $22 $67 $114 $246
Fidelity VIP II Index 500 Portfolio $68 $ 87 $109 $201 $17 $54 $ 92 $201
Janus Aspen Aggressive Growth Portfolio $73 $102 $133 $251 $22 $68 $117 $251
Janus Aspen Balanced Portfolio $74 $104 $137 $258 $23 $70 $120 $258
Janus Aspen Flexible Income Portfolio $73 $101 $133 $250 $22 $68 $116 $250
Janus Aspen Growth Portfolio $72 $100 $130 $245 $21 $66 $114 $245
Janus Aspen Worldwide Growth Portfolio $73 $101 $132 $249 $22 $68 $116 $249
MFS Total Return Series $75 $109 $146 $276 $25 $75 $129 $276
MFS World Governments Series $75 $109 $146 $276 $25 $75 $129 $276
Oppenheimer Aggressive Growth Fund $73 $101 $132 $248 $22 $67 $115 $248
Oppenheimer Global Securities Fund $73 $102 $133 $251 $22 $68 $117 $251
Oppenheimer Growth & Income Fund $74 $104 $137 $258 $23 $70 $120 $258
Oppenheimer Strategic Bond Fund $74 $104 $137 $258 $23 $70 $120 $258
Portfolio Partners MFS Emerging Equities Portfolio $73 $103 $136 $256 $23 $70 $119 $256
Portfolio Partners MFS Research Growth Portfolio $74 $104 $138 $260 $23 $71 $121 $260
Portfolio Partners MFS Value Equity Portfolio $74 $106 $141 $265 $24 $72 $124 $265
Portfolio Partners Scudder International Growth $75 $109 $146 $276 $25 $75 $129 $276
Portfolio
Portfolio Partners T. Rowe Price Growth Equity Portfolio $73 $101 $133 $250 $22 $68 $116 $250
</TABLE>
- ------------
*This Example would not apply if a nonlifetime variable annuity option is
selected, and a lump sum settlement is requested within three years after
annuity payments start, since the lump sum payment will be treated as a
withdrawal during the Accumulation Period and will be subject to any deferred
sales charge that would then apply. (Refer to Example C.)
- --------------------------------------------------------------------------------
FEE TABLE - 6
<PAGE>
{HYPOTHETICAL ILLUSTRATION (EXAMPLE): CONTRACTS ISSUED AS ROTH IRAS--
INCLUDING CONTRACTS OR CERTIFICATES ISSUED IN NEW YORK
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>
CONTRACTS ISSUED AS ROTH IRAS
EXAMPLE A EXAMPLE B
If you withdraw the entire Account If you do not withdraw the Account
Value at the end of the periods shown, Value, or if you annuitize at the end
you would pay the following expenses, of the periods shown, you would pay
including any applicable deferred the following expenses (no deferred
sales charge: sales charge is reflected):*
1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Ascent VP $62 $87 $111 $240 $21 $65 $111 $240
Aetna Balanced VP, Inc. $60 $81 $101 $219 $19 $59 $101 $219
Aetna Bond VP $59 $78 $96 $208 $18 $56 $96 $208
Aetna Crossroads VP $62 $87 $111 $240 $21 $65 $111 $240
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 Legacy VP $62 $87 $111 $240 $21 $65 $111 $240
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
Aetna Value Opportunity VP $62 $87 $111 $240 $21 $65 $111 $240
Calvert Social Balanced Portfolio $62 $87 $112 $241 $21 $65 $112 $241
Fidelity VIP Equity-Income Portfolio $60 $80 $100 $217 $19 $58 $100 $217
Fidelity VIP Growth Portfolio $61 $83 $106 $228 $20 $61 $106 $228
Fidelity VIP High Income Portfolio $61 $84 $107 $231 $20 $62 $107 $231
Fidelity VIP Overseas Portfolio $63 $90 $117 $252 $22 $68 $117 $252
Fidelity VIP II Asset Manager Portfolio $61 $82 $104 $224 $19 $60 $104 $224
Fidelity VIP II Contrafund Portfolio $61 $84 $107 $231 $20 $62 $107 $231
Fidelity VIP II Index 500 Portfolio $57 $71 $84 $184 $16 $49 $84 $184
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 Flexible Income Portfolio $62 $85 $109 $235 $20 $63 $109 $235
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
MFS World Governments Series $64 $93 $121 $260 $23 $71 $121 $260
Oppenheimer Aggressive Growth Fund $61 $85 $108 $233 $20 $63 $108 $233
Oppenheimer Global Securities Fund $62 $85 $109 $236 $21 $64 $109 $236
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 Portfolio $62 $87 $112 $241 $21 $65 $112 $241
Portfolio Partners MFS Research Growth Portfolio $63 $88 $114 $245 $21 $66 $114 $245
Portfolio Partners MFS Value Equity Portfolio $63 $90 $116 $250 $22 $68 $116 $250
Portfolio Partners Scudder International Growth $64 $93 $121 $260 $23 $71 $121 $260
Portfolio
Portfolio Partners T. Rowe Price Growth Equity $62 $85 $109 $235 $20 $63 $109 $235
Portfolio
</TABLE>
- -------------
* This Example would not apply if a nonlifetime variable annuity option is
selected, and a lump sum settlement is requested within three years after
annuity payments start, since the lump sum payment will be treated as a
withdrawal during the Accumulation Period and will be subject to any deferred
sales charge that would then apply. (Refer to Example A.)}
- --------------------------------------------------------------------------------
FEE TABLE - 7
<PAGE>
CONDENSED FINANCIAL INFORMATION
(Selected data for accumulation units outstanding throughout each period)
================================================================================
The condensed financial information presented below for each of the periods in
the four-year period ended December 31, 1997 (as applicable), is derived from
the financial statements of the Separate Account, which have been audited by
KPMG Peat Marwick LLP, independent auditors. The table shows condensed financial
information for Contracts with total separate account charges of 1.40% annually.
The financial statements and the independent auditors' report thereon for the
year ended December 31, 1997 are included in the Statement of Additional
Information.
<TABLE>
<CAPTION>
1997 1996 1995 1994
<S> <C> <C> <C> <C>
AETNA ASCENT VP
Value at beginning of period $12.970 $10.645 $10.000
Value at end of period $15.333 $12.970 $10.645
Increase (decrease) in value of accumulation units(1) 18.22% 21.84% 6.45%(2)
Number of accumulation units outstanding at end of period 898,302 298,740 15,832
AETNA BALANCED VP, INC
Value at beginning of period $15.445 $13.602 $10.828 $10.000
Value at end of period $18.653 $15.445 $13.602 $10.828
Increase (decrease) in value of accumulation units(1) 20.77% 13.55% 25.62% 8.42%(3)
Number of accumulation units outstanding at end of period 2,265,203 1,544,723 919,744 911,281
AETNA BOND VP
Value at beginning of period $12.294 $12.037 $10.324 $10.000
Value at end of period $13.128 $12.294 $12.037 $10.324
Increase (decrease) in value of accumulation units(1) 6.78% 2.14% 16.59% 3.24%(4)
Number of accumulation units outstanding at end of period 1,528,968 1,129,814 988,199 983,357
AETNA CROSSROADS VP
Value at beginning of period $12.402 $10.587 $10.000
Value at end of period $14.377 $12.402 $10.587
Increase (decrease) in value of accumulation units(1) 15.93% 17.14% 5.87%(2)
Number of accumulation units outstanding at end of period 1,112,043 326,292 27,089
AETNA GROWTH VP
Value at beginning of period $11.084
Value at end of period $13.158
Increase (decrease) in value of accumulation units(1) 18.71%(5)
Number of accumulation units outstanding at end of period 241,289
AETNA GROWTH AND INCOME VP
Value at beginning of period $17.181 $14.001 $10.737 $10.000
Value at end of period $22.004 $17.181 $14.001 $10.737
Increase (decrease) in value of accumulation units(1) 28.07% 22.71% 30.40% 7.37%(6)
Number of accumulation units outstanding at end of period 8,522,639 4,919,945 3,068,782 3,178,712
AETNA INDEX PLUS LARGE CAP VP
Value at beginning of period $10.919 $10.000
Value at end of period $14.414 $10.919
Increase (decrease) in value of accumulation units(1) 32.01% 9.19%(7)
Number of accumulation units outstanding at end of period 1,179,485 19,177
AETNA LEGACY VP
Value at beginning of period $11.751 $10.438 $10.000
Value at end of period $13.267 $11.751 $10.438
Increase (decrease) in value of accumulation units(1) 12.90% 12.58% 4.38%(8)
Number of accumulation units outstanding at end of period 1,217,781 492,915 28,778
AETNA MONEY MARKET VP
Value at beginning of period $11.394 $10.968 $10.489 $10.000
Value at end of period $11.850 $11.394 $10.968 $10.489
Increase (decrease) in value of accumulation units(1) 4.00% 3.89% 4.57% 4.89%(6)
Number of accumulation units outstanding at end of period 6,770,680 4,871,015 2,694,034 3,407,448
AETNA SMALL COMPANY VP
Value at beginning of period $10.603
Value at end of period $13.638
Increase (decrease) in value of accumulation units(1) 28.63%(5)
Number of accumulation units outstanding at end of period 424,486
</TABLE>
- --------------------------------------------------------------------------------
AUV HISTORY - 1
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
(Selected data for accumulation units outstanding throughout each period)
================================================================================
<TABLE>
<CAPTION>
1997 1996 1995 1994
<S> <C> <C> <C> <C>
AETNA VALUE OPPORTUNITY VP
Value at beginning of period $10.856
Value at end of period $13.246
Increase (decrease) in value of accumulation units(1) 22.01%(5)
Number of accumulation units outstanding at end of period 289,182
[FEDERATED AMERICAN LEADERS FUND II
Value at beginning of period $15.548 $12.971 $9.838 $10.00
Value at end of period $20.287 $15.548 $12.971 $9.838
Increase (decrease) in value of accumulation units(1) 30.48% 19.87% 31.84% (1.62)%(8a)
Number of accumulation units outstanding at end of period 5,757,361 3,931,613 2,057,364 188,708]
[FEDERATED EQUITY INCOME FUND II
Value at beginning of period $10.534
Value at end of period $12.305
Increase (decrease) in value of accumulation units(1) 16.82%(8b)
Number of accumulation units outstanding at end of period 1,620,310]
[FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
Value at beginning of period $11.099 $10.804 $10.073 $10.000
Value at end of period $11.883 $11.099 $10.804 $10.073
Increase (decrease) in value of accumulation units(1) 7.06% 2.74% 7.25% 0.73%(8a)
Number of accumulation units outstanding at end of period 1,110,579 689,789 417,293 12,714]
[FEDERATED GROWTH STRATEGIES FUND II
Value at beginning of period $12.596 $10.277 $10.000
Value at end of period $15.777 $12.596 $10.277
Increase (decrease) in value of accumulation units(1) 25.25% 22.57% 2.77%(8c)
Number of accumulation units outstanding at end of period 1,439,357 570,182 17,503]
[FEDERATED HIGH INCOME BOND FUND II
Value at beginning of period $13.119 $11.640 $9.814 $10.000
Value at end of period $14.724 $13.119 $11.640 $9.814
Increase (decrease) in value of accumulation units(1) 12.24% 12.71% 18.61% (1.86)%(8a)
Number of accumulation units outstanding at end of period 3,613,943 2,069,633 1,020,321 31,309]
[FEDERATED INTERNATIONAL EQUITY FUND II
Value at beginning of period $10.952 $10.255 $10.000
Value at end of period $11.888 $10.952 $10.255
Increase (decrease) in value of accumulation units(1) 8.54% 6.80% 2.55%(12)
Number of accumulation units outstanding at end of period 1,173,166 541,970 158,319]
[FEDERATED PRIME MONEY FUND II
Value at beginning of period $10.748 $10.406 $10.033 $10.000
Value at end of period $11.119 $10.748 $10.406 $10.033
Increase (decrease) in value of accumulation units(1) 3.46% 3.29% 3.71% 0.33%(13)
Number of accumulation units outstanding at end of period 677,262 720,521 554,934 51,949]
[FEDERATED UTILITY FUND II
Value at beginning of period $13.303 $12.095 $9.881 $10.000
Value at end of period $16.611 $13.303 $12.095 $9.881
Increase (decrease) in value of accumulation units(1) 24.86% 9.99% 22.40% (1.19)%(8a)
Number of accumulation units outstanding at end of period 1,583,456 1,260,915 727,601 41,191]
CALVERT SOCIAL BALANCED PORTFOLIO
Value at beginning of period $9.805
Value at end of period $9.976
Increase (decrease) in value of accumulation units(1) 1.75%(9)
Number of accumulation units outstanding at end of period 4,827
FIDELITY VIP EQUITY-INCOME PORTFOLIO
Value at beginning of period $15.013 $13.324 $10.002 $10.000
Value at end of period $18.963 $15.013 $13.324 $10.002
Increase (decrease) in value of accumulation units(1) 26.32% 12.68% 33.21% 0.02%(10)
Number of accumulation units outstanding at end of period 6,378,264 4,200,501 913,517 17,013
FIDELITY VIP GROWTH PORTFOLIO
Value at beginning of period $15.734 $13.913 $10.423 $10.000
Value at end of period $19.157 $15.734 $13.913 $10.423
Increase (decrease) in value of accumulation units(1) 21.75% 13.09% 33.48% 4.23%(10)
Number of accumulation units outstanding at end of period 3,697,132 3,260,855 885,545 17,013
</TABLE>
- --------------------------------------------------------------------------------
AUV HISTORY - 2
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
(Selected data for accumulation units outstanding throughout each period)
================================================================================
<TABLE>
<CAPTION>
1997 1996 1995 1994
<S> <C> <C> <C> <C>
FIDELITY VIP HIGH INCOME PORTFOLIO
Value at beginning of period $12.031 $10.701 $10.000
Value at end of period $13.959 $12.031 $10.701
Increase (decrease) in value of accumulation units(1) 16.02% 12.43% 7.01%(11)
Number of accumulation units outstanding at end of period 2,522,965 1,222,580 112,819
FIDELITY VIP OVERSEAS PORTFOLIO
Value at beginning of period $12.439 $11.143 $10.000
Value at end of period $13.682 $12.439 $11.143
Increase (decrease) in value of accumulation units(1) 9.99% 11.62% 11.43%(12)
Number of accumulation units outstanding at end of period 807,976 681,094 150,017
FIDELITY VIP II ASSET MANAGER PORTFOLIO
Value at beginning of period $13.180 $11.664 $10.000
Value at end of period $15.679 $13.180 $11.664
Increase (decrease) in value of accumulation units(1) 18.79% 12.99% 16.64%(12)
Number of accumulation units outstanding at end of period 748,981 450,051 116,810
FIDELITY VIP II CONTRAFUND PORTFOLIO
Value at beginning of period $13.943 $11.658 $10.000
Value at end of period $17.066 $13.943 $11.658
Increase (decrease) in value of accumulation units(1) 22.40% 19.60% 16.58%(11)
Number of accumulation units outstanding at end of period 5,222,894 3,294,964 684,272
FIDELITY VIP II INDEX 500 PORTFOLIO
Value at beginning of period $13.728 $11.336 $10.000
Value at end of period $17.961 $13.728 $11.336
Increase (decrease) in value of accumulation units(1) 30.84% 21.10% 13.36%(11)
Number of accumulation units outstanding at end of period 4,286,245 1,994,556 191,671
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
Value at beginning of period $13.879 $13.040 $10.374 $10.000
Value at end of period $15.418 $13.879 $13.040 $10.374
Increase (decrease) in value of accumulation units(1) 11.09% 6.43% 25.71% 3.74%(13)
Number of accumulation units outstanding at end of period 1,558,985 1,248,669 187,584 0
JANUS ASPEN BALANCED PORTFOLIO
Value at beginning of period $13.865 $12.104 $10.000
Value at end of period $16.692 $13.865 $12.104
Increase (decrease) in value of accumulation units(1) 20.39% 14.55% 21.04%(12)
Number of accumulation units outstanding at end of period 1,544,831 682,296 53,016
JANUS ASPEN FLEXIBLE INCOME PORTFOLIO
Value at beginning of period $12.995 $12.071 $9.884 $10.000
Value at end of period $14.320 $12.995 $12.071 $9.884
Increase (decrease) in value of accumulation units(1) 10.20% 7.66% 22.13% (1.16)%(14)
Number of accumulation units outstanding at end of period 523,315 225,717 45,714 0
JANUS ASPEN GROWTH PORTFOLIO
Value at beginning of period $15.153 $12.975 $10.109 $10.000
Value at end of period $18.340 $15.153 $12.975 $10.109
Increase (decrease) in value of accumulation units(1) 21.03% 16.79% 28.35% 1.09%(3)
Number of accumulation units outstanding at end of period 1,863,396 1,145,305 176,111 9,588
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO
Value at beginning of period $15.701 $12.341 $10.000
Value at end of period $18.910 $15.701 $12.341
Increase (decrease) in value of accumulation units(1) 20.44% 27.22% 23.41%(15)
Number of accumulation units outstanding at end of period 6,453,536 3,060,432 252,485
MFS TOTAL RETURN SERIES
Value at beginning of period $10.894 $10.000
Value at end of period $13.030 $10.894
Increase (decrease) in value of accumulation units(1) 19.60% 8.94%(16)
Number of accumulation units outstanding at end of period 1,456,174 387,019
</TABLE>
- --------------------------------------------------------------------------------
AUV HISTORY - 3
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
Selected data for accumulation units outstanding throughout each period)
================================================================================
<TABLE>
<CAPTION>
1997 1996 1995 1994
<S> <C> <C>
MFS WORLD GOVERNMENTS SERIES
Value at beginning of period $10.471 $10.000
Value at end of period $10.207 $10.471
Increase (decrease) in value of accumulation units(1) (2.51)% 4.71%(16)
Number of accumulation units outstanding at end of period 129,739 38,958
OPPENHEIMER AGGRESSIVE GROWTH FUND
Value at beginning of period $10.725
Value at end of period $12.204
Increase (decrease) in value of accumulation units(1) 13.78%(5)
Number of accumulation units outstanding at end of period 302,223
OPPENHEIMER GLOBAL SECURITIES FUND
Value at beginning of period $10.457
Value at end of period $11.539
Increase (decrease) in value of accumulation units(1) 10.35%(5)
Number of accumulation units outstanding at end of period 232,338
OPPENHEIMER GROWTH AND INCOME FUND
Value at beginning of period $10.497
Value at end of period $12.785
Increase (decrease) in value of accumulation units(1) 21.79%(5)
Number of accumulation units outstanding at end of period 992,461
OPPENHEIMER STRATEGIC BOND FUND
Value at beginning of period $10.167
Value at end of period $10.764
Increase (decrease) in value of accumulation units(1) 5.87%(5)
Number of accumulation units outstanding at end of period 287,313
PORTFOLIO PARTNERS MFS EMERGING EQUITIES PORTFOLIO
Value at beginning of period $14.894
Value at end of period $14.707
Increase (decrease) in value of accumulation units(1) (1.26)%(17)
Number of accumulation units outstanding at end of period 5,027,952
PORTFOLIO PARTNERS MFS RESEARCH GROWTH PORTFOLIO
Value at beginning of period $12.892
Value at end of period $12.641
Increase (decrease) in value of accumulation units(1) (1.94)%(17)
Number of accumulation units outstanding at end of period 3,899,626
PORTFOLIO PARTNERS MFS VALUE EQUITY PORTFOLIO
Value at beginning of period $10.009
Value at end of period $10.152
Increase (decrease) in value of accumulation units(1) 1.43%(17)
Number of accumulation units outstanding at end of period 486,822
PORTFOLIO PARTNERS SCUDDER INTERNATIONAL GROWTH PORTFOLIO
Value at beginning of period $9.791
Value at end of period $9.912
Increase (decrease) in value of accumulation units(1) 1.24%(17)
Number of accumulation units outstanding at end of period 5,904
PORTFOLIO PARTNERS T. ROWE PRICE GROWTH EQUITY PORTFOLIO
Value at beginning of period $17.979
Value at end of period $18.343
Increase (decrease) in value of accumulation units(1) 2.03%(17)
Number of accumulation units outstanding at end of period 4,434,574
</TABLE>
- ------------------
(1) The above figures are calculated by subtracting the beginning
Accumulation Unit value from the ending Accumulation Unit value, and
dividing the result by the beginning Accumulation Unit value. These
figures do not reflect the deferred sales charge or the fixed dollar
annual maintenance fee, if any. Inclusion of these charges would reduce
the investment results shown.
(2) Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established at $10.000 during August 1995,
when the Fund became available under the Contract.
(3) Reflects less than a full year of performance activity. Funds were first
received in this option during July 1994.
(4) Reflects less than a full year of performance activity. Funds were first
received in this option during August 1994.
(5) Reflects less than a full year of performance activity. Funds were first
received in this option during May 1997.
(6) Reflects less than a full year of performance activity. Funds were first
received in this option during October 1994.
(7) Reflects less than a full year of performance activity. The initial
Accumulation Unit Value was established at $10.000 during September 1996,
when the Portfolio became available under the Contract.
- --------------------------------------------------------------------------------
AUV HISTORY - 4
<PAGE>
(8) Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established at $10.000 during September 1995,
when the Fund became available under the Contract.
(9) Reflects less than a full year of performance activity. Funds were first
received in this option during December 1997.
(10) Reflects less than a full year of performance activity. Funds were first
received in this option during December 1994.
(11) Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established at $10.000 during June 1995, when
the Fund became available under the Contract.
(12) Reflects less than a full year of performance activity. Funds were first
received in this option during January 1995.
(13) Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established at $10.000 during May 1995, when
the Fund became available under the Contract.
(14) Reflects less than a full year of performance activity. Funds were first
received in this option during November 1994.
(15) Reflects less than a full year of performance activity. Funds were first
received in this option during April 1995.
(16) Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established at $10.000 during May 1996, when
the Series became available under the Contract.
(17) Reflects less than a full year of performance activity. Funds were first
received in this option during November 1997.
- --------------------------------------------------------------------------------
AUV HISTORY - 5
<PAGE>
- --------------------------------------------------------------------------------
THE COMPANY
================================================================================
Aetna Life Insurance and Annuity Company (the "Company") is the issuer of
the Contract, and as such, it is responsible for providing the insurance and
annuity benefits under the Contract. The Company is a stock life insurance
company organized under the insurance laws of the State of Connecticut in 1976.
Through a merger, it succeeded to the business of Aetna Variable Annuity Life
Insurance Company (formerly Participating Annuity Life Insurance Company, an
Arkansas life insurance company organized in 1954). The Company is engaged in
the business of issuing life insurance policies and variable annuity contracts
in all states of the United States. The Company's principal executive offices
are located at 151 Farmington Avenue, Hartford, Connecticut 06156.
The Company is a wholly owned subsidiary of Aetna Retirement Holdings,
Inc., which is in turn a wholly owned subsidiary of Aetna Retirement Services,
Inc. and an indirect wholly owned subsidiary of Aetna Inc.
VARIABLE ANNUITY ACCOUNT B
================================================================================
The Company established Variable Annuity Account B (the "Separate Account")
in 1976 as a segregated asset account for the purpose of funding its variable
annuity contracts. The Separate Account is registered as a unit investment trust
under the Investment Company Act of 1940 (the "1940 Act"), and meets the
definition of "separate account" under federal securities laws. The Separate
Account is divided into "subaccounts" which do not invest directly in stocks,
bonds or other investments. Instead, each Subaccount buys and sells shares of a
corresponding Fund.
Although the Company holds title to the assets of the Separate Account,
such assets are not chargeable with liabilities of any other business conducted
by the Company. Income, gains or losses of the Separate Account are credited to
or charged against the assets of the Separate Account without regard to other
income, gains or losses of the Company. All obligations arising under the
Contracts are 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 option once you have made an allocation to it, even if
you no longer have amounts allocated to that 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.
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.
[bullet] [Federated Insurance Series--Federated American Leaders Fund II. The
primary objective of the Fund is to achieve long-term growth of
capital. The Fund's secondary objective is to provide income. The Fund
pursues its investment objective by investing, under normal
circumstances, at least 65% of its total assets in common stock of
"blue-chip" companies. "Blue-chip" companies generally are top-quality,
established growth companies which, in the opinion of the Adviser meet
certain criteria.(1)]
[bullet] [Federated Insurance Series--Federated Equity Income Fund II seeks to
provide above average income and capital appreciation. The Fund
attempts to achieve its objective by investing at least 65% of its
assets in income-producing equity securities. Equity securities
include common stocks, preferred stocks, and securities (including
debt securities) that are convertible into common stocks. The portion
of the Fund's total assets invested in common stocks, preferred
stocks, and convertible securities will vary according to the Fund's
assessment of market and economic conditions and outlook. (1)]
[bullet] [Federated Insurance Series--Federated Fund for U.S. Government
Securities II seeks to provide current income. The Fund pursues its
investment objective by investing at least 65% of the value of its
total assets in securities issued or guaranteed as to payment of
principal and interest by the U.S. government, its agencies or
instrumentalities.(1)]
[bullet] [Federated Insurance Series--Federated Growth Strategies Fund II
(formerly IMS Growth Stock Fund) seeks capital appreciation. The Fund
pursues its objective by investing at least 65% of its assets in
equity securities of companies with prospects for above-average growth
in earnings and dividends or companies where significant fundamental
changes are taking place. Equity securities include common stocks,
preferred stocks, and securities (including debt securities) that are
convertible into common stocks. (1)]
[bullet] [Federated Insurance Series--Federated High Income Bond Fund II
(formerly IMS Corporate Bond Fund) seeks high current income by
investing primarily in a diversified portfolio of professionally
managed fixed income securities. The fixed-income securities in which
the Fund intends to invest are lower-rated corporate debt obligations
(commonly known as "junk bonds" or "high yield, high risk bonds" which
involve significant degree of risk). (See the Fund's prospectus for a
discussion of the risk factors involved in investing in lower-rated
corporate debt obligations).(1)]
[bullet] [Federated Insurance Series--Federated International Equity Fund II
(formerly IMS International Stock Fund) seeks total return on its
assets by investing at least 65% of its assets (and under normal
market conditions, substantially all of its assets) in equity
securities of issuers located in at least three different countries
outside of the United States. Investing in non-U.S. securities carries
substantial risks in addition to those associated with domestic
investments. (2)]
[bullet] [Federated Insurance Series--Federated Prime Money Fund II (formerly
IMS Prime Money Fund) seeks to provide current income consistent with
stability of principal and liquidity. The Fund pursues its investment
objectives by investing exclusively in a portfolio of money market
instruments maturing in 397 days or less. The average maturity of the
money market instruments in the Fund's portfolio, computed on a
dollar-weighted basis, will be 90 days or less. An investment in this
Fund is neither insured nor guaranteed by the U.S. government. (1)]
[bullet] [Federated Insurance Series--Federated Utility Fund II (formerly IMS
Utility Fund) seeks to achieve high current income and moderate capital
appreciation by investing primarily in a professionally managed and
diversified portfolio of equity and debt securities of utility
companies. Under normal market conditions, the Fund will invest at
least 65% of its total assets in securities of utility
companies.(1)(3)]
[Investment Adviser: (1) Federated Advisers
(2) Federated Global Research Corp.
Subadviser: (3) Federated Global Research Corp.]
{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 this
Prospectus.}
1
<PAGE>
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.
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CREDITED INTEREST OPTION
Purchase Payments may be allocated to the ALIAC Guaranteed Account (the
"Guaranteed Account"). Through the Guaranteed Account, we guarantee stipulated
rates of interest for stated periods of time. Amounts must remain in the
Guaranteed Account for specified periods 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
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)
PURCHASE
================================================================================
CONTRACT AVAILABILITY
The Contracts are offered as (1) nonqualified deferred annuity contracts
(we reserve the right to limit ownership of nonqualified Contracts to natural
persons); (2) Individual Retirement Annuities, {including Roth IRAs,} other than
"SIMPLE IRAs" as defined in Section 408(p) of the Internal Revenue Code; or (3)
Qualified Contracts used in conjunction with certain employer sponsored
retirement plans. Individual Retirement Annuities are currently available as
rollovers, and may permit ongoing contributions subject to state regulatory
approval. Additionally, availability of the Qualified Contracts described under
item (3) is subject to approval by the Company and state regulatory agencies. {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 Individual Retirement
Annuity/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 (age 85 for those Contracts
or Certificates issued in New York and Pennsylvania).
Joint Certificate Holders. Nonqualified Contracts may be purchased by
spouses as joint Certificate Holders. In New York and Pennsylvania, the joint
Certificate Holders do not need to be spouses. 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 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.
The minimum initial Purchase Payment amount is $5,000 for Nonqualified
Contracts and $1,500 for Qualified Contracts. In some states, a Contract issued
as an Individual Retirement Annuity 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
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initially be allocated to the Subaccounts or the Guaranteed Account or the 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 under the Contract 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
401(a) qualified pension or profit sharing plan or a Code Section 457 deferred
compensation plan, the employer or trustee must be both the Certificate Holder
and the Beneficiary under the Contract, and the participant on whose behalf the
Account was established must be the Annuitant. Under such plans the participant
is generally allowed to designate a beneficiary under the plan, and the
Certificate Holder may direct that we pay any death proceeds to the plan
beneficiary. "Beneficiary" as used in this Prospectus refers to the person who
is ultimately entitled to receive such proceeds.
For Qualified Contracts issued in conjunction with a Code Section 403(b)
tax deferred annuity program subject to the Employee Retirement Income Security
Act (ERISA), the spouse of a married participant must be the Beneficiary of at
least 50% of the Account Value. If the married participant is age 35 or older,
the participant may name an alternate Beneficiary provided 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 Individual Retirement Annuity, 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.")
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 Individual Retirement Annuities, you will
receive a refund of your Purchase Payment. Account Values will be determined as
of the Valuation Date on which we receive your request for cancellation at our
Home Office. {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
equal, on an annual basis, to 1.25% of the daily net assets of the Subaccounts
and compensates the Company for the assumption of the mortality and expense
risks under the Contract. {If the Contract is issued as a Roth IRA, the
mortality and expense risk charge is equal, on an annual basis to 1.10% of the
daily net assets of the Subaccounts.} The mortality risks are those assumed for
our promise to make lifetime payments according to annuity rates specified in
the Contract. The expense risk is the risk that the actual expenses for costs
incurred under the Contract will exceed the maximum costs that can be charged
under the Contract.
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 expects to make a profit from the mortality
and expense risk charge.
Administrative Charge. During the Accumulation Period, the
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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
Option is elected, the charge will be established and will be effective during
the entire Annuity Period.
MAINTENANCE FEE
During the Accumulation Period, the Company will deduct an annual
maintenance fee from the Account Value. The maintenance fee is to reimburse the
Company for some of its administrative expenses relating to the establishment
and maintenance of the Accounts.
The maximum maintenance fee deducted under the Contract is $30. The
maintenance fee will be deducted annually on the anniversary of the Contract
effective date. It is deducted on a pro rata basis from each investment option
in which you have an interest. If your entire Account Value is withdrawn, the
full maintenance fee, if applicable, will be deducted at the time of withdrawal.
The maintenance fee will not be deducted (either annually or upon withdrawal) if
your Account Value is $50,000 or more on the day the maintenance fee is due.
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
fees will not be unfairly discriminatory against any person. We will make any
reduction in the administrative charge or annual maintenance fees 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 made. {The deferred sales charge on
withdrawals from a Roth IRA is based on the number of 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 Contract 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.}
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.
{CONTRACTS OTHER THAN ROTH IRA (NON NEW YORK)
- ---------------------------------------------------------------
Years since receipt Deferred Sales
of Purchase Payment Charge Deduction
------------------- ----------------
Less than 2 7%
2 or more but less than 4 6%
4 or more but less than 5 5%
5 or more but less than 6 4%
6 or more but less than 7 3%
7 or more 0%}
- ---------------------------------------------------------------
{CONTRACTS OTHER THAN ROTH IRA'S (NEW YORK)}
- ---------------------------------------------------------------
Years since receipt Deferred Sales
of Purchase Payment Charge Deduction
------------------- ----------------
Less than 1 7%
1 or more but less than 2 6%
2 or more but less than 3 5%
3 or more but less than 4 4%
4 or more but less than 5 3%
5 or more but less than 6 2%
6 or more but less than 7 1%
7 or more 0%
- ---------------------------------------------------------------
{ROTH IRA CONTRACTS, INCLUDING THOSE ISSUED IN NEW YORK
- ---------------------------------------------------------------
Completed Contract Years Deferred Sales
Charge Deduction
----------------
Less than 1 5%
1 or more but less than 2 4%
2 or more but less than 3 3%
3 or more but less than 4 2%
4 or more but less than 5 1%
5 or more 0%
- ---------------------------------------------------------------}
A deferred sales charge will not be deducted from any portion of a
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Purchase Payment withdrawn if the withdrawal is:
[bullet] applied to provide Annuity benefits;
[bullet] paid to a Beneficiary due to the Annuitant's death before Annuity
payments start, up to a maximum of the Purchase Payment(s) in the
Account on 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; or
[bullet] paid if we close out your Account when the value is less than $2,500
(or other amount required by state law);
[bullet] if the withdrawal is applied as a rollover to certain Roth Individual
Retirement Annuities issued by the Company or an affiliate.
After the first Account Year, you may withdraw all or a portion of your
Purchase Payments without a deferred sales charge, provided that (1) such
withdrawal occurs within three years of the Annuitant's admission to a licensed
nursing care facility (including non-licensed facilities in New Hampshire) and
(2) 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 nursing
care facility at the time the Account is established. It will also not apply if
otherwise prohibited by state law.
The Company does not anticipate that the deferred sales charge will cover
all sales and administrative expenses which it incurs in connection with the
Contract. The difference will be covered by the general assets of the Company
which are attributable, in part, to mortality and expense risk charges under the
Contract described above.
Free Withdrawals. Subject to the restrictions described below, you may
withdraw up to the greater of 10% of your current Account Value (up to 15% of
your current Account Value for Contracts or Certificates issued in the State of
New York) or the minimum distribution amount required by law during each
calendar year without imposition of a deferred sales charge. 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 distribution under a Systematic Distribution Option,
during the calendar 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 will be subject to state approval and 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 Option. However, we reserve the right to deduct state premium tax
from the Purchase Payment(s) or from the Account Values at any time, but no
earlier than when we have a tax liability under state law.
Any municipal premium tax assessed at a rate in excess of 1% will be
deducted from the Purchase Payment(s) or from the amount applied to an Annuity
Option based on our determination of when such tax is due. We will absorb any
municipal premium tax which is assessed at 1% or less. We reserve the right,
however, to reflect this added expense in our Annuity purchase rates for
residents of such municipalities.
CONTRACT VALUATION
================================================================================
ACCOUNT VALUE
Until the Annuity Date, the Account Value is the total dollar value of
amounts held in the Account as of any Valuation Date. The Account Value at any
given time is based on the value of the units held in each Subaccount, plus the
value of amounts held in the Guaranteed Account 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
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that Subaccount for the period between the immediately preceding Valuation Date
and the current Valuation Date. (See "Net Investment Factor" below.) The
Accumulation Unit Value will be affected by the investment performance, expenses
and charges of the applicable Fund and is reduced each day by a percentage that
accounts for the daily assessment of mortality and expense risk charges and the
administrative charge.
Initial Purchase Payments will be credited to your Account at the AUV 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 of a maximum of 1.25% for
mortality and expense risks {(1.10% for Roth IRA Contracts)} 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.
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
the Appendix.) 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 a
variable Annuity, you can make transfers only among the Subaccounts available
during the Annuity Period. (See "Annuity Options.") A request for transfer can
be made either in writing or by telephone (See "Telephone Transfers" below.) All
transfers must be in accordance with the terms of the Contract. Any transfer
will be based on the Accumulation Unit Value next determined after the Company
receives a valid transfer request at its Home Office.
During the Accumulation Period, twelve free transfers are allowed per
calendar year. Thereafter, the Company reserves the right to charge up to $10
for each additional transfer. This charge will be deducted from the gross amount
of the transfer. The Company currently does not impose this charge. Currently,
during the Annuity Period, four transfers are allowed each calendar year.
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 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 funding 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 fund. 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
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<PAGE>
Summary, which describes how you can obtain further information.
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 Aetna 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 Deductions") and to taxes and to tax
penalties (see "Tax Status"). {Roth IRAs provide for a tax-free withdrawal of
all assets in the Account, 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
or Fixed Account or each Subaccount in which your Account is invested,
unless you request otherwise in writing. All amounts paid will be based
on your Account Value as of the next Valuation Date after we receive a
request for withdrawal at our Home Office, or on such later date as the
disbursement form may specify.
The tax treatment of withdrawals from each Nonqualified Contract may be
affected if you own other annuity contracts issued by us (or our affiliates)
that were purchased on or after October 21, 1988. (See "Tax Status.")
Withdrawal Restrictions from 403(b) Plans. Under Section 403(b) Contracts,
the withdrawal of salary reduction contributions and earnings on such
contributions is generally prohibited prior to the participant's death,
disability, attainment of age 59 1/2, separation from service or financial
hardship. (See "Tax Status.")
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 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
Accumulation Unit Value(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 Options ("Systematic
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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 forthose who want to receive only
the minimum distribution that the Code requires each year. ECO is
available only under Qualified Contracts. Under ECO, the Company
calculates the minimum distribution amount required by law, and pays
you that amount once a year. (See "Tax Status.") Other 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.
{ECO is not available under the Roth IRA Contract.}
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.
DEATH BENEFIT DURING ACCUMULATION PERIOD
================================================================================
A death benefit will be payable to the Beneficiary(ies) 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 a contingent Beneficiary.
DEATH BENEFIT AMOUNT
If approved by your state, upon the death of the Annuitant, the death
benefit proceeds will be the greater of:
(1) The minimum guaranteed death benefit (described below) as of the date of
death, plus any Purchase Payments made, and less any amount(s) surrendered,
applied to an Annuity option or deducted from the Account, since the
minimum guaranteed death benefit was determined, or
(2) The Account Value on the Claim Date.
The minimum guaranteed death benefit is determined as follows: On the
effective date of the Contract ("Effective Date"), the minimum guaranteed death
benefit equals the amount of the initial Purchase Payment. On each Effective
Date anniversary before the Annuitant reaches age 85, the minimum guaranteed
death benefit is the greater of:
(1) The prior minimum guaranteed death benefit, plus any Purchase Payments
made, and less any amount(s) surrendered, applied to an Annuity option or
deducted from the Account, since the minimum guaranteed death benefit was
previously determined, or
(2) The Account Value on the Effective Date anniversary.
After the Annuitant reaches age 85 the minimum guaranteed death benefit is
equal to the minimum guaranteed death benefit determined on the Effective Date
anniversary immediately preceding the date the Annuitant attained age 85 plus
any Purchase Payments made, and less any amounts surrendered, applied to an
Annuity option or deducted from the Account.
On the Claim Date, if the minimum guaranteed death benefit is greater than
the Account Value, the amount by which the minimum guaranteed death benefit
exceeds the Account Value is allocated to the money market subaccount available
under the Contract. The Beneficiary may elect a death benefit option as
permitted unless the Certificate Holder has specified the form of payment to the
Beneficiary.
Under Nonqualified Contracts only, if the Certificate Holder is not the
Annuitant and dies, the minimum guaranteed death benefit will not apply. The
amount paid on account of the death of the Certificate Holder will be equal to
the Adjusted Account Value on the Claim Date. Full or partial withdrawals may be
subject to a deferred sales charge. The
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Beneficiary may elect a death benefit option available under the Contract unless
the Certificate Holder has specified the form of payment to the Beneficiary.
If the spousal Beneficiary continued the Account at the death of the
Certificate Holder who was also the Annuitant, the spousal Beneficiary will
become the Annuitant and the minimum guaranteed death benefit will also apply at
the death of the spousal Beneficiary. The initial minimum guaranteed death
benefit equals the Account Value as adjusted for any minimum guaranteed death
benefit payable at the death of the original Certificate Holder/Annuitant.
Thereafter, the minimum guaranteed death benefit is determined as above.
If the spousal Beneficiary continued the Account at the death of the
Certificate Holder who was not also the Annuitant, the Annuitant will not change
and the amount of death benefit proceeds payable upon the spousal Beneficiary's
death will be equal to the Adjusted Account Value on the Claim Date, less any
deferred sales charge.
If the death benefit described above is not approved by your state, the
following death benefit shall apply:
Upon the death of the Annuitant, the guaranteed death benefit proceeds will
be the greatest of:
(1) the total Purchase Payment(s) applied to the Account, minus the sum of all
amounts withdrawn, annuitized or deducted from such Account;
(2) the highest step-up value as of the date of death. The step-up value is
determined on each anniversary of the Effective Date, up to the Annuitant's
75th birthday (85th birthday for Contracts or Certificates issued in New
York). Each step-up value is calculated as the Account Value on the
Effective Date anniversary, increased by Purchase Payments applied, and
decreased by partial withdrawals, annuitizations and deductions taken from
the Account since the Effective Date anniversary; or
(3) the Account Value as of the date of death.
The excess, if any, of the guaranteed death benefit value over the Account
Value is determined as of the date of death. Any excess amount will be deposited
and allocated to the money market Subaccount available under the Contract. The
Account Value on the claim date plus any excess amount deposited into the
Account becomes the Certificate Holder's Account Value. The death benefit paid
will equal the Account Value when request for payment is made and no deferred
sales charge applies.
Under Nonqualified Contracts only, if the Certificate Holder is not the
Annuitant and dies, the guaranteed death benefit will not apply. The amount of
death benefit proceeds will be equal to the Adjusted Account Value on the Claim
Date. Full or partial withdrawals may be subject to a deferred sales charge.
If the spousal Beneficiary continued the Account after the death of the
Certificate Holder who was the Annuitant, the amount of the death benefit
proceeds payable upon the spousal Beneficiary's death will be equal to the
Adjusted Account Value on the Claim Date, less any deferred sales charge
applicable to any Purchase Payments made since the death of the Certificate
Holder/Annuitant.
If the spousal Beneficiary continued the Account after the death of the
Certificate Holder who was not the Annuitant, the amount of death benefit
proceeds payable upon the spousal Beneficiary's death will be equal to the
Adjusted Account Value on the Claim Date. Full or partial withdrawals may be
subject to a deferred sales charge in accordance with the usual rules regarding
the deferred sales charge. (See "Deferred Sales Charge.") If this provision was
not approved in your state, the deferred sales charge will apply only to
Purchase Payments made since the death of the Certificate Holder.
For amounts held in the Guaranteed Account, see Appendix A for a discussion
of the calculation of death benefit proceeds.
DEATH BENEFIT PAYMENT OPTIONS
Death benefit proceeds may be paid to the Beneficiary as described below.
If you die and no Beneficiary exists, the death benefit will be paid in a lump
sum to your estate. Prior to any election by the Beneficiary, the Account Value
will remain in the Account and the Account Value will continue to be affected by
the investment performance of the investment option(s) selected. The Beneficiary
has the right to allocate or transfer any amount to any available investment
option (subject to 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 Options; or (3) receive at any time a lump sum
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
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 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
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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 Options, subject to the
distribution rules in Code Section 401(a)(9), or (2) receive at any time a lump
sum payment equal to all or a portion of the Adjusted Account Value. If the
Account was established in conjunction with a Section 401(a) qualified pension
or profit sharing plan or a Section 457 deferred compensation plan, payment will
be made, as directed by the Certificate Holder, to either the Certificate Holder
or to the plan Beneficiary.
If ECO or SWO 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 or SWO
provided the election would satisfy the Code minimum distribution rules.
If ECO or SWO is in effect and the participant dies after the required
beginning date for minimum distributions, payments will continue as permitted
under the Code minimum distribution rules, unless the option is revoked.
Death benefit payments must satisfy the distribution rules in Code Section
401(a)(9). (See "Tax Status of the Contract.")
ANNUITY PERIOD
================================================================================
ANNUITY PERIOD ELECTIONS
You must notify us in writing of the date you want Annuity Payments to
start (the "Annuity Date") and the Annuity Option elected. Payments may not
begin earlier than one year after purchase, or, unless we consent, later than
the later of (a) the first day of the month following the Annuitant's 85th
birthday, or (b) the tenth anniversary of the last Purchase Payment (fifth
anniversary for Contracts issued in Pennsylvania). For Contracts or Certificates
issued in New York, Annuity Payments may not begin later than the first day of
the month following the Annuitant's 90th birthday.
Annuity Payments will not begin until you have selected an Annuity Date and
an Annuity 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 calendar year following the calendar year in which a participant attains
age 70-1/2 or retires, whichever occurs later. For IRA depositors and for
five-percent owners, minimum distributions must begin by April 1 of the calendar
year following the calendar year in which the participant attains age 70-1/2. In
addition, distributions must be in a form and amount sufficient to satisfy the
Code requirements. These requirements may be satisfied by the election of
certain Annuity Options or Systematic Distribution Options. (See "Tax Status.")
For Nonqualified Contracts, failure to select an Annuity Option and an Annuity
Date, or postponement of the Annuity Date past the Annuitant's 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 calendar year following the calendar 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
the 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 Option under which you want payments to be calculated
and paid;
[bullet] whether the payments are to be made monthly, quarterly, semi-annually
or annually; and
[bullet] the investment option(s) used to provide Annuity Payments (i.e., a
fixed Annuity using the general account or a variable Annuity using any
of the Subaccounts available at the time of annuitization or a
combination of the two).
Once Annuity Payments begin, the Annuity Option may not be changed.
PARTIAL ANNUITIZATION
You may elect an Annuity 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 are taxable as annuity payments or as withdrawals is currently unclear;
therefore, you should consult with a qualified tax adviser if you are
considering a partial annuitization of your Account.
ANNUITY OPTIONS
The Certificate Holder may choose one of the following Annuity Options:
Lifetime Annuity Options:
[bullet] Option 1--Life Annuity--An annuity with payments ending on the
Annuitant's death.
[bullet] Option 2--Life Annuity with Guaranteed Payments--An annuity with
payments guaranteed for 5-30 years.
[bullet] Option 3--Life Annuity with Cash Refund Feature--An annuity with a cash
refund feature. Payments are guaranteed for the amount applied to the
Annuity Option. If the Annuitant dies before the amount applied to the
Annuity Option (less any applicable premium tax) has been paid, any
remaining balance will be paid in one sum to the Beneficiary. This
option is available only when all payments are as a fixed Annuity.
[bullet] Option 4--Life Annuity Based Upon the Lives of Two Annuitants--
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An annuity paid during the lives of the Annuitant and a second
Annuitant. The Certificate Holder selects an Annuity with 100%, 66% or
50% of the payment to continue after the first death, or an Annuity
with 100% of the payment to continue at the death of the second
Annuitant and 50% of the payment to continue at the death of the
Annuitant.
[bullet] Option 5--Life Annuity Based Upon the Lives of Two Annuitants with
Guaranteed Payments--An Annuity with Payments for a minimum of 5-30
years, with 100% of the payment to continue after the first death.
*[bullet] Option 6--Life Annuity Based Upon the Lives of Two Annuitants with a
Cash Refund Feature--An Annuity with 100% of the payment to continue
after the first death with a cash refund feature. Payments are
guaranteed for the amount applied to the Annuity Option. If both
Annuitants die prior to the total payment of the amount applied to the
Annuity Option (less any premium tax), any remaining balance will be
paid in one sum to the Beneficiary. This option is available only when
all payments are as a fixed Annuity.
*(If approved by your state.)
If Option 1 or 4 is elected, it is possible that only one Annuity Payment
will be made if the Annuitant under Option 1, or the surviving Annuitant under
Option 4, should die prior to the due date of the second Annuity Payment. Once
lifetime Annuity payments begin, the Certificate Holder cannot elect to receive
a lump-sum settlement.
Nonlifetime Annuity Option:
Under the nonlifetime option, payments may be made for generally 5-30
years, as selected by the Certificate Holder. If this option is elected as a
variable Annuity, the Certificate Holder may request that the present value of
all or any portion of the remaining variable payments be paid in one sum.
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 settlement.
We may also offer additional Annuity Options under your Contract from time
to time. You can call the number listed in the "Inquiries" section of the
Prospectus Summary, to determine which options are available and the terms of
such options. Additional or enhanced options may not be available to those
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 net investment rate
selected (3-1/2% or 5% per annum). Selection of a 5% rate causes a higher first
payment, but Annuity Payments will increase thereafter only to the extent that
the net investment rate exceeds 5% on an annualized basis. Annuity Payments
would decline if the rate were below 5%. Use of the 3-1/2% assumed rate causes a
lower first payment, but subsequent payments would increase more rapidly or
decline more slowly as changes occur in the net investment rate. (See the
Statement of Additional Information for further discussion on the impact of
selecting an assumed net investment rate.)
CHARGES DEDUCTED DURING THE ANNUITY PERIOD
We make a daily deduction for mortality and expense risks from any amounts
held on a variable basis. Therefore, electing the nonlifetime option on a
variable basis will result in a deduction being made even though we assume no
mortality risk. We may also deduct a daily administrative charge from amounts
held under the variable options. This charge, established when a variable
Annuity Option is elected, will not exceed 0.25% per year of amounts held on a
variable basis. Once established, the charge will be effective during the entire
Annuity Period. (See "Charges and Deductions.")
DEATH BENEFIT PAYABLE DURING THE ANNUITY PERIOD
The death benefit, if any, due when the Annuitant dies after Annuity
Payments have begun, will depend on the terms of the Contract and the Annuity
Option selected. If Option 1 or Option 4 was elected, Annuity Payments will
cease on the death of the Annuitant under Option 1 or 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.
When the Annuitant dies after Annuity Payments have begun and if there is a
death benefit payable under the Annuity option elected, the remaining value must
be distributed to the Beneficiary at least as rapidly as under the original
method of distribution.
Any lump-sum payment paid under the applicable lifetime or
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nonlifetime Annuity options will be made within seven calendar days after
acceptable proof of death, and a request for payment are received at our Home
Office. The value of any death benefit proceeds will be determined as of the
next Valuation Date after we receive acceptable proof of death and a request for
payment. Under Options 2 and 5, such value will be reduced by any payments made
after the date of death.
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) or
408(b) {or 408A} of the Code, or prior to May 1, 1998 under Sections 401(a) or
457 of the Code ("Qualified Contracts"). The ultimate effect of federal income
taxes on the amounts held under a Contract, on Annuity payments, and on the
economic benefit to the Contract Holder, Certificate Holder or Beneficiary may
depend upon the tax status of the individual concerned. Any person concerned
about these tax implications should consult a competent tax adviser before
initiating any transaction.
TAXATION OF THE COMPANY
The Company is taxed as a life insurance company under the Code. Since the
Separate Account is not an entity separate from the Company, it will not be
taxed separately as a "regulated investment company" under the Code. Investment
income and realized capital gains are automatically applied to increase reserves
under the Contracts. Under existing federal income tax law, the Company believes
that the Separate Account investment income and realized net capital gains will
not be taxed to the extent that such income and gains are applied to increase
the reserves under the Contracts.
Accordingly, the Company does not anticipate that it will incur any federal
income tax liability attributable to the Separate Account and, therefore, the
Company does not intend to make provisions for any such taxes. However, if
changes in the federal tax laws or interpretation thereof result in the Company
being taxed on income or gains attributable to the Separate Account, then the
Company may impose a charge against the Separate Account (with respect to some
or all Contracts) in order to set aside provisions to pay such taxes.
TAX STATUS OF THE CONTRACT
Diversification. Section 817(h) of the Code requires that with respect to
Nonqualified Contracts, the investments of the Funds be "adequately diversified"
in accordance with Treasury Regulations in order for the Contracts to qualify as
annuity contracts under federal tax law. The Separate Account, through the
Funds, intends to comply with the diversification requirements prescribed by the
Treasury in Reg. Sec. 1.817-5, which affects how the Funds' assets may be
invested.
In addition, in certain circumstances, owners of variable annuity contracts
may be considered the owners, for federal income tax purposes, of the assets of
the separate accounts used to support their contracts. In these circumstances,
income and gains from the separate account assets would be includible in the
variable contract owner's gross income. The IRS has stated in published rulings
that a variable contract owner will be considered the owner of separate account
assets if the owner possesses incidents of investment control over the assets.
The ownership rights under the contract are similar to, but different in certain
respects from those described by the IRS in rulings in which it was determined
that owners were not owners of separate account assets. For example, a
Certificate Holder has additional flexibility in allocating premium payments and
account values. In addition, the number of funds provided under the Contract is
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 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.
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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 401(a), 403(b) and 457 Plans and Individual
Retirement Annuities. Other than for IRAs and for five-percent owners in other
Qualified Contracts, distributions must generally begin by April 1 of the
calendar year following the calendar year in which the participant attains age
70-1/2 or retires, whichever occurs later. For traditional IRA participants and
for five-percent owners, minimum distributions must begin by April 1 of the
calendar year following the calendar year in which the participant attains age
70-1/2. {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 generally begin by the end of the
calendar year in which the participant attains age 75 (or retires, whichever
occurs later). However, special rules require that some or all of the balance be
distributed earlier if any distributions are taken in excess of the minimum
required amount.
To comply with these provisions, distributions must be in a form and amount
sufficient to satisfy the minimum distribution and minimum distribution
incidental death benefit rules specified in Section 401(a) (9) of the Code.
In general, annuity payments 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. Also, any
distribution under a Section 457 Plan payable over a period of more than one
year must be made in substantially nonincreasing amounts.
If the participant dies on or after the required beginning date for minimum
distributions, distributions to the beneficiary must be made at least as rapidly
as the method of distribution in effect at the time of the participant's death.
However, if the required minimum distribution is calculated each year based on
the participant's single life expectancy or the joint life expectancies of the
participant and beneficiary, the regulations for Code Section 401(a)(9) provide
specific rules for calculating the required minimum distributions at the
participant's death. For example, if ECO was elected with the calculation based
on the participant's single life expectancy, and the life expectancy is
recalculated each year, the recalculated life expectancy becomes zero in the
calendar year following the participant's death and the entire remaining
interest must be distributed to the beneficiary by December 31 of the year
following the participant's death. However, a spousal beneficiary, other than
under a Section 457 Plan, has certain rollover rights which can only be
exercised in the year of the participant's death. The rules are complex and the
participant should consult a tax adviser before electing the method of
calculation to satisfy the minimum distribution requirements.
If the participant dies before the required beginning date for minimum
distributions, the entire interest must be distributed by December 31 of the
calendar year containing the fifth anniversary of the date of the participant's
death. Alternatively, payments may be made over the life of the beneficiary or
over a period not extending beyond the life expectancy of the beneficiary, not
to exceed 15 years for a non-spousal beneficiary under a Section 457 Plan,
provided the distribution begins to a non-spouse beneficiary by December 31 of
the calendar year following the calendar year of the participant's death. If
payments are made to a spousal beneficiary, distributions must begin by the
later of December 31 of the calendar year following the calendar year of the
death or December 31 of the calendar year in which the participant would have
attained age 70-1/2.
An exception applies for a spousal beneficiary under an Individual
Retirement Annuity. In lieu of taking a distribution under these rules, a
spousal beneficiary may elect to treat the Account as his or her own IRA and
defer taking a distribution until his or her age 70-1/2. The surviving spouse is
deemed to have made such an election if the surviving spouse makes a rollover to
or from the Account or fails to take a distribution within the required time
period.
{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 Option
elected). The taxable portion of a distribution (in the form of a single sum
payment or an Annuity) is taxable as ordinary income.
Non-Natural Holders of a Nonqualified Contract: If the Certificate Holder
is not a natural person, a Nonqualified Contract is not treated as an annuity
for income tax purposes and the "income on the contract" for the taxable year is
currently taxable as ordinary income. "Income on the contract" is any increase
over the year in the Surrender Value, adjusted for Purchase Payments made during
the year, amounts previously distributed and amounts previously included in
income. There are some exceptions to the rule and a non-natural person should
consult with its tax 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.
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Withdrawals: In the case of a withdrawal under a Qualified Contract,
including withdrawals under SWO or ECO, the amount taxable is generally based on
the ratio of the "investment in the contract" to Account Value. The "investment
in the contract" generally equals the amount of any nondeductible Purchase
Payments paid by or on behalf of any individual less any amount received
previously which was excludable from gross income. For a Qualified Contract, the
"investment in the contract" can be zero. Special tax rules may be available for
certain distributions from a Qualified Contract.
With respect to Nonqualified Contracts, partial withdrawals, including
withdrawals under SWO, are generally treated as taxable income to the extent
that the Account Value immediately before the withdrawal exceeds the "investment
in the contract" at that time. The Account Value immediately before a withdrawal
may have to be increased by any positive market value adjustment (MVA) that
results from such a withdrawal. There is, however, no definitive guidance on the
proper tax treatment of MVAs in these circumstances, and a Certificate Holder
should contact a competent tax 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 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, or a Qualified Contract other than a Qualified Contract sold in
conjunction with a Code Section 457 Plan, there may be imposed a federal income
tax penalty equal to 10% of the amount treated as taxable income.
In general, there is no penalty tax on distributions from a Nonqualified
Contract: (1) made on or after the date on which the taxpayer attains age
59-1/2; (2) made as a result of the death of the Certificate Holder; (3)
attributable to the taxpayer's total and permanent disability; (4) received in
substantially equal periodic payments (at least annually) over the life or life
expectancy of the taxpayer or the joint lives or joint life expectancies of the
taxpayer and a "designated beneficiary;" or (5) allocable to "investment in the
contract" before August 14, 1982.
If a distribution is made from a Qualified Contract sold in conjunction
with a Section 401(a) Plan or Section 403(b) Plan, the penalty tax will not
apply on 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 Individual Retirement
Annuity, {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
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."
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Transfers, Assignments or Exchanges of the Contract: A transfer of
ownership of a Contract, the designation of an Annuitant, payee or other
Beneficiary who is not also a Certificate Holder, the selection of certain
Annuity Dates, or the exchange of a Contract may result in certain tax
consequences. The assignment, pledge, or agreement to assign or pledge any
portion of the Account Value generally will be treated as a distribution. The
assignment or transfer of ownership of a Qualified Contract generally is not
allowed. Anyone contemplating any such designation, transfer, assignment,
selection, or exchange should contact a competent tax adviser with respect to
the potential tax effects of such a transaction.
Multiple Contracts: All deferred nonqualified annuity contracts that are
issued by the Company (or its affiliates) to the same owner during any calendar
year are treated as one annuity contract for purposes of determining the amount
includible in gross income under Section 72(e) of the Code. In addition, the
Treasury Department has specific authority to issue regulations that prevent the
avoidance of Section 72(e) through the serial purchase of annuity contracts or
otherwise.
CONTRACTS USED WITH CERTAIN RETIREMENT PLANS
Qualified Contracts in General: The Qualified Contract is designed for use
as a Code Section 408(b) Individual Retirement Annuity or as a Contract used in
connection with certain employer sponsored retirement plans. The tax rules
applicable to participants and beneficiaries in Qualified Contracts are complex.
Special favorable tax treatment may be available for certain types of
contributions and distributions. Adverse tax consequences may result from
contributions in excess of specified limits; distributions prior to age 59
(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 457 Plans. Code Section 457 provides for certain deferred
compensation plans. These plans may be offered with respect to service for state
governments, local governments, political subdivisions, agencies,
instrumentalities and certain affiliates of such entities, and tax exempt
organizations. These plans are subject to various restrictions on contributions
and distributions. The plans may permit participants to specify the form of
investment for their deferred compensation account. Prior to the August 20, 1996
enactment of the Small Business Job Protection Act of 1996 (the "Small Business
Act") compensation deferred under the plans, all property and rights purchased
with such amounts, and all income attributable to such amounts, property or
rights remained solely the property and rights of the employer (without being
restricted to the provision of benefits) subject only to the claims of the
employer's general creditors. For that reason, depending on the terms of the
particular plan, the employer may have been entitled to draw on deferred amounts
for purposes unrelated to its Section 457 plan obligations.
Under the Small Business Act, plans maintained by State or local
governments, their political subdivisions, agencies, instrumentalities and
certain affiliates will be required to hold all assets and income of the Plan in
trust for the exclusive benefit of plan participants and their beneficiaries.
For purposes of meeting the new requirement, custodial accounts and annuity
contracts are treated as trusts. State and local government plans that were in
existence on August 20, 1996 are allowed a transition period that ends January
1, 1999 to comply with the new requirement.
In general, all amounts received under a Section 457 plan are taxable and
reportable to the IRS as taxable income. Also, all amounts except death benefit
proceeds are subject to federal income tax withholding as wages. If we make
payments directly to a participant on behalf of the employer as owner, we will
withhold federal taxes (and state taxes, if applicable).
The Code imposes a maximum limit on annual Purchase Payments which may be
excluded from the participant's gross income. Such limit is generally the lesser
of $8,000 (as adjusted to reflect changes in the cost of living) or 33-1/2% of
the participant's includible compensation (25% of gross compensation).
Section 401(a) Plans. Section 401(a) permits corporate employers to
establish various types of retirement plans for employees, and permits
self-employed individuals to establish various types of retirement plans for
themselves and for their employees. These retirement plans may permit the
purchase of the Contract to accumulate retirement savings under the plans.
Adverse tax consequences to the plan, to the participant or to both may result
if this Contract is assigned or transferred to an individual except to a
participant as a means to provide benefit payments.
The Code imposes a maximum limit on annual Purchase Payments that may be
excluded from a participant's gross income. Such limit must be calculated under
the Plan by the employer in accordance with Section 415 of the Code. This limit
is generally the lesser of 25% of the participant's compensation or $30,000
Compensation means compensation from the participant's employer sponsoring the
plan and, for years beginning after December 31, 1997, includes any elective
deferrals under Code Section 402 (g) and any amounts not includible in gross
income under Code Sections 125 or 457. In addition, Purchase Payments will be
excluded from a participant's gross income only if the Section 401(a) Plan meets
certain nondiscrimination requirements.
All distributions will be taxed as they are received unless the
distribution is rolled over to another plan of the same type or to an individual
retirement annuity/account ("IRA") in accordance with the Code, or unless the
participant has made after-tax contributions to the plan, which are not taxed
upon distribution. The Code has specific rules that apply, depending on the type
of distribution received, if after-tax contributions were made.
In general, payments received by a beneficiary after the participant's
death are taxed in the same manner as if the participant had
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received those payments, except that a limited death benefit exclusion may apply
for payments due to deaths that occurred on or before August 20, 1996. This
exclusion no longer applies to payments due to deaths occurring after August 20,
1996.
Section 403(b) Plans. Under Section 403(b), contributions made by public
school systems or nonprofit healthcare organizations and other Section 501(c)(3)
tax exempt organizations to purchase annuity contracts for their employees are
generally excludable from the gross income of the employee.
In order to be excludable from taxable income, total annual contributions
made by the participant and his or her employer cannot exceed either of two
limits set by the Code. The first limit, under Section 415, is generally the
lesser of 25% of compensation or $30,000. Compensation means compensation from
the participant's employer sponsoring the plan and for years beginning after
December 31, 1997, includes any elective deferrals under Code Section 402 (g)
and any amounts not includible in gross income under Code Sections 125 or 457.
The second limit, which is the exclusion allowance under Section 403(b), is
usually calculated according to a formula that takes into account the
participant's length of employment and any pretax contributions you and your
employer made to the plan and to certain other retirement plans. These two
limits apply to the participant's contributions as well as to any contributions
made by the employer on behalf of the participant. There is an additional limit
that specifically limits salary reduction contributions to generally no more
than $10,000 annually (subject to indexing); a participant's own limit may be
higher or lower, depending on certain conditions. In addition, Purchase Payments
will be excluded from a participant's gross income only if the Plan meets
certain nondiscrimination requirements.
Section 403(b)(11) restricts the distribution under Section 403(b)
contracts of: (1) salary reduction contributions made after December 31, 1988;
(2) earnings on those contributions; and (3) earnings during such period on
amounts held as of December 31, 1988. Distribution of those amounts may only
occur upon death of the participant, attainment of age 59 1/2, separation from
service, total and permanent disability, or financial hardship. In addition,
income attributable to salary reduction contributions may not be distributed in
the case of hardship.
INDIVIDUAL RETIREMENT ANNUITIES AND SIMPLIFIED EMPLOYEE PENSION PLANS
Section 408(b) of the Code permits eligible individuals to contribute to an
individual retirement program known as a traditional Individual Retirement
Annuity, hereinafter referred to as an "IRA." Also, distributions from certain
other types of qualified plans may be "rolled over" on a tax-deferred basis into
an IRA. Employers may establish Simplified Employee Pension (SEP) Plans and
contribute to an IRA owned by the employee. Purchasers of a Qualified Contract
for use with IRAs will be provided with supplemental information required by the
Internal Revenue Service. Purchasers should seek competent advice as to the
suitability of the Contract for use with IRAs.
{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.}
WITHHOLDING
Pension and annuity distributions generally are subject to withholding for
the recipient's federal income tax liability at rates that vary according to the
type of distribution and the recipient's tax status. Recipients may be provided
the opportunity to elect not to have tax withheld from distributions; however,
certain distributions from Section 401(a) Plans and Section 403(b) tax-deferred
annuities are subject to mandatory 20% federal income tax withholding. 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
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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.}
[Federated Securities Corp. ("FES"), an affiliate of the adviser to the
Funds in the Federated Insurance Series, may enter into agreements with some of
the Distributors to provide services to customers in connection with Funds
acquired through the Contracts. These services will include providing customers
with information concerning the Funds, their investment objectives, policies
and limitations; portfolio securities; performance, responding to customer
inquiries and providing such other services as the parties may agree. Fees
paid to FSC to Distributors for these services may be based on the total number
of assets in the Funds attributable to the Distributor's customers.]
{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 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.}
[Payment of Commissions. Commissions will be paid to Distributors who sell
the Contracts. Distributors will be paid commissions, up to an amount equal to
6.5% of Purchase Payments for promotional or distribution expenses associated
with the marketing of the Contracts.]
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 ten years). Standardized
returns will reflect the reduction of all recurring charges during each period
(e.g., mortality and expense risk charges, annual maintenance fees,
administrative 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 Contract Holder may direct us in the voting of shares at shareholders'
meetings of the appropriate Funds(s). The number of votes to which each Contract
Holder may give direction will be determined as of the record date. The number
of votes each Contract Holder is entitled to direct with respect to a particular
Fund during the Accumulation Period equals the portion of the Account Values(s)
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.
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 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 Contract Holder,
make other changes to group Contracts that would apply only to individuals who
become Certificate Holders under that
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Contract after the effective date of such changes. If the Contract Holder does
not agree to a change, the Company reserves the right to refuse to establish new
Accounts under the Contract. Certain changes will require the approval of
appropriate state or federal regulatory authorities.
TRANSFERS OF OWNERSHIP; ASSIGNMENT
Assignments or transfers of ownership of a Qualified Contract generally are
not allowed except as permitted under the Code, incident to a divorce. The
prohibition does not apply to a Qualified Contract sold in conjunction with (1)
a Section 457 deferred compensation plan, or (2) a Section 401(a) plan where the
Contract is owned by a trustee. We will accept assignments or transfers of
ownership of a Nonqualified Contract or a Qualified Contract where assignments
or transfers of ownership are not prohibited, with proper notification. The date
of any such transfer will be the date we receive the notification at our Home
Office. (Refer to "Tax Status" for general tax information.) If you are
contemplating a transfer of ownership or assignment you should consult a tax
adviser due to the potential for tax liability.
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 Individual Retirement Annuity may only be closed out
when Purchase Payments have not been received for a 24-month period and the
paid-up annuity benefit at maturity would be less than $20 per month. If such
right is exercised, you will be given 90 days advance written notice. No
deferred sales charge will be deducted for involuntary terminations. The Company
does not intend to exercise this right in cases where the Account Value is
reduced to $2,500 or less solely due to investment performance.
LEGAL MATTERS AND PROCEEDINGS
The Company knows of no material legal proceedings pending to which the
Separate Account or the Company is a party or which would materially affect the
Separate Account. The validity of the securities offered by this Prospectus has
been passed upon by Counsel to the Company.
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 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.
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CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION
================================================================================
The Statement of Additional Information contains more specific information
on the Separate Account and the Contract, as well as the financial statements of
the Separate Account and the Company. A list of the contents of the SAI is set
forth below:
General Information and History
Variable Annuity Account B
Offering and Purchase of Contracts
Performance Data
General
Average Annual Total Return Quotations
Annuity Payments
Sales Material and Advertising
Independent Auditors
Financial Statements of the Separate Account
Financial Statements of the Company
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APPENDIX 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 (except for those Contracts or Certificates issued in the state of New
York), 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 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
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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 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 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 and have amounts that have been accumulating under the
Guaranteed Account transferred to one or more of the Subaccounts available
during the Annuity Period. The Guaranteed Account cannot be used as an
investment option during the Annuity Period. Transfers made due to the election
of a lifetime Annuity Option will be subject to only a positive aggregate MVA.
DEATH BENEFIT
Full and partial withdrawals and transfers made from the Guaranteed Account
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.
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APPENDIX B
FIXED ACCOUNT
The Fixed Account is an investment option available during the Accumulation
Period under Contracts offered in certain states. 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 the Contract
Prospectus).
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 in the Fixed
Account will be transferred into the money market fund 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 calendar 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.
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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. (formerly Aetna Investment Advisers Fund, 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 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.
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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.
An investment in the Fund is neither insured nor guaranteed by the U.S.
Government.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Generation Portfolios, Inc. - Aetna Ascent VP
(formerly Aetna Ascent Variable Portfolio)
Investment Objective
Seeks to provide capital appreciation. The Portfolio is designed for
investors who have an investment horizon exceeding 15 years and who have a high
level of risk tolerance.
Policies
Invests assets within specified maximum percentage ranges and adjusts the
allocation mix in response to market trends and indicators:
o Equity securities are chosen on the basis of their potential for
capital appreciation.
o Fixed income securities may include obligations of the U.S. and
foreign governments as well as obligations of corporations and
high-yield bonds.
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o Money market investments are high quality and present minimal credit
risk.
The benchmark portfolio is 80 percent equities and 20 percent fixed income
under neutral market conditions.
Risks
Equity securities are subject to a decline in the stock market or in the
value of the company, while debt securities may be affected by changes in
general interest rates and in the creditworthiness of the issuer. High-yield
bonds have additional credit risks, including lack of liquidity, greater
likelihood of default and increased sensitivity to difficult economic and
corporate developments.
Foreign securities involve currency and other special risks not present in
domestic securities. Real estate securities may be subject to the same risks
associated with direct ownership of real estate.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Generation Portfolios, Inc. - Aetna Crossroads VP
(formerly Aetna Crossroads Variable Portfolio)
Investment Objective
Seeks to provide total return (i.e., income and capital appreciation, both
realized and unrealized). The Portfolio is designed for investors who have an
investment horizon exceeding ten years and who have a moderate level of risk
tolerance.
Policies
Invests assets within specified maximum percentage ranges and adjusts the
allocation mix in response to market trends and indicators:
o Equity securities are chosen on the basis of their potential for
capital appreciation.
o Fixed income securities may include obligations of the U.S. and
foreign governments as well as obligations of corporations and
high-yield bonds.
o Money market investments are high quality and present minimal credit
risk.
The benchmark portfolio is 60 percent equities and 40 percent fixed income
under neutral market conditions.
Risks
Equity securities are subject to a decline in the stock market or in the
value of the company; debt securities may be affected by changes in general
interest rates and in the creditworthiness of the issuer. High-yield bonds have
additional credit risks. International securities involve currency and other
special risks not present in domestic securities. Real estate securities may be
subject to the same risks associated with direct ownership of real estate.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Generation Portfolios, Inc. - Aetna Legacy VP
(formerly Aetna Legacy Variable Portfolio)
Investment Objective
Seeks to provide total return consistent with preservation of capital. The
Portfolio is designed for investors who have an investment horizon exceeding
five years and who have a low level of risk tolerance.
Policies
Invests assets within specified maximum percentage ranges and adjusts the
allocation mix in response to market trends and indicators:
o Equity securities are chosen on the basis of their potential for
capital appreciation.
o Fixed income securities may include obligations of the U.S. and
foreign governments as well as obligations of corporations and
high-yield bonds.
o Money market investments are high-quality and present minimal credit
risk.
The benchmark portfolio is 40 percent equities and 60 percent fixed income
under neutral market conditions.
Risks
Equity securities are subject to a decline in the stock market or value of
the issuer; debt securities may be affected by changes in general interest rates
and creditworthiness of the issuer. High-yield bonds have additional credit
risks. International securities involve currency and other special
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risks not present in domestic securities. Real estate securities may be subject
to the same risks associated with direct ownership of real estate.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Variable Portfolios, Inc. - Aetna Growth VP
(formerly Aetna Variable Growth Portfolio)
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
(formerly Aetna Variable Index Plus Portfolio)
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.
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
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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. 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
(formerly Aetna Variable Small Company Portfolio)
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
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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.
Aetna Variable Portfolios, Inc. - Aetna Value Opportunity VP
(formerly Aetna Variable Capital Appreciation Portfolio)
Investment Objective
Seeks growth of capital primarily through investment in a diversified
portfolio of common stocks and securities convertible into common stock.
Policies
Normally invests at least 65 percent of its net assets in common stocks.
May also invest in convertible and non-convertible preferred stocks. The
Portfolio will use a value oriented approach to stock selection. The Portfolio
may invest up to 25 percent of its total assets in foreign securities, buy and
sell put and call options on stock indices and on individual stocks, purchase
futures contracts, options contracts, engage in currency hedging and purchase
securities on a "when-issued," delayed-delivery or forward-commitment basis.
Risks
Equity securities are subject to a decline in the stock market or in the
value of the issuer, and preferred stocks have price risk and some interest rate
and credit risk. The value of debt securities may be affected by changes in
general interest rates and in the creditworthiness of the issuer. Investments in
securities of foreign issuers or securities denominated in foreign currencies
involve risks not present in domestic markets. 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.
Calvert Social Balanced Portfolio
(formerly Calvert Responsibly Invested Balanced Portfolio)
Investment Objective
Seeks to achieve a total return above the rate of inflation through an
actively managed, nondiversified portfolio of common and preferred stocks, bonds
and money market instruments which offer income and capital growth opportunity
and which satisfy the social criteria established for the Portfolio.
Policies
The Portfolio may purchase both common and preferred stocks. Although there
is no predetermined percentage of assets allocated to stocks, bonds, or money
market instruments, the Portfolio will invest a least 25 percent of its assets
in senior fixed income securities. The Portfolio normally invests in
investment-grade bonds rated in one of the four highest rating categories by
Standard & Poor's Corporation or by Moody's Investors Service, Inc. or, if not
rated, that are determined by the Portfolio's investment adviser to be of
comparable quality. The Portfolio may invest up to 10 percent of its assets in
foreign securities.
Risks
Since the Portfolio is nondiversified, the value of the shares may be more
susceptible to any single economic, political, or regulatory event than the
shares of a diversified portfolio. Fixed income investments are subject to
interest rate risk. There are also risks involved in investing in foreign
securities. These include currency risks, less publicly available information
about foreign companies, different audit and financial reporting standards, and
less government supervision and regulation.
Investment Adviser: Calvert Asset Management Company, Inc.
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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 - Growth Portfolio
Investment Objective
Seeks capital appreciation by investing in common stock, although its
investments are not restricted to any one type of security.
Policies
The Portfolio may, however, pursue growth in larger companies that hold a
strong position in the market or industry. These may be found in mature or
declining industries. Companies that have strong growth potential often have new
products, technologies, distribution channels, or other opportunities.
Generally, these domestic and foreign companies tend to be small- and mid-sized
companies that have higher than average price/earnings (P/E) ratios. A high P/E
ratio means that the stock is more expensive than average relative to the
company's earnings. May not invest more than 50 percent of its assets in foreign
securities.
Risks
Stock values may fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. The market
prices of stocks with high P/E ratios may be particularly sensitive to economic
market or company news. 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
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.
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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 - Overseas Portfolio
Investment Objective
Seeks long-term growth by investing mainly in foreign securities.
Policies
Normally invests at least 65 percent of the Portfolio's total assets in
securities of issuers whose principal activities are located outside the United
States. Expects to invest a majority of its assets in equity securities, but may
also invest in debt securities of any quality. Invests in securities of both
developed and emerging markets. May invest in the securities of any issuer,
including companies and other business organizations as well as governments and
government agencies. Will tend to focus on the equity securities of both large
and small companies. May invest in short-term debt securities and money market
instruments for cash management purposes. When allocating the Portfolio's
investments among countries and regions, the Portfolio managers consider the
size of the market in each country and region relative to the size of the
international market as a whole. May not invest more than 25 percent of its
total assets in any one industry.
Risks
Stock values fluctuate in response to the activities of individual
companies, and general market and economic conditions. International funds have
increased economic and political risks because they are exposed to events and
factors in the various world markets, especially in emerging markets. In
addition, changes in the value of foreign currencies can significantly affect
the Portfolio's share price. The Portfolio seeks to reduce investment risk by
diversifying its holdings among many companies and industries.
Investment Adviser: Fidelity Management & Research Company
Fidelity Investments Variable Insurance
Products Fund II - Asset Manager Portfolio
Investment Objective
Seeks high total return with reduced risk over the long term by allocating
its assets among domestic and foreign stocks, bonds and short-term money market
instruments.
Policies
Invests in a diverse range of stocks, bonds, short-term, and money market
instruments, issued in the United States and abroad. The stock class includes
equity securities of all types. The bond class includes all varieties of fixed
income instruments with maturities of more than three years. The short-term
instruments class includes all types of short-term instruments with remaining
maturities of three years or less. The Portfolio has a neutral mix which
represents the way investments generally will be allocated over the long term.
This mix will vary over short-term periods - within defined ranges based on the
current outlook for the different markets. May invest up to 50 percent of its
total assets in foreign securities.
Risks
The Portfolio seeks to reduce its overall risk by diversifying among
different types of investments, but aggressively invests in a wide variety of
security types, including stocks and bonds issued in developed and developing
countries. Stock values fluctuate in response to the activities of individual
companies and general market and economic conditions. The value of bonds and
short-term instruments 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.
Investment Adviser: Fidelity Management & Research Company
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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
Fidelity Investments Variable Insurance
Products Fund II - Index 500 Portfolio
Investment Objective
Seeks to provide investment results that correspond to the total return of
common stocks publicly traded in the United States by duplicating the
composition and total return of the Standard & Poor's Composite Index of 500
Stocks (S&P 500).
Policies
Normally invests at least 80 percent (65 percent if Portfolio assets are
below $20 million) of the Portfolio's assets in equity securities of companies
that comprise the S&P 500. In seeking a 98 percent or better long-term
correlation of the Portfolio's total return to that of the S&P 500, The
investment adviser employs a "passive" or "indexing" approach and tries to
allocate its assets similarly to those of the index. The Portfolio's composition
may not always be identical to that of the index. If extraordinary circumstances
warrant, the investment adviser may exclude a stock held in the S&P 500 and
include a similar stock in its place if doing so will help the Portfolio achieve
its objective. The investment adviser monitors the correlation between the
performance of the Portfolio and the S&P 500 on a regular basis. Although the
Portfolio focuses on common stocks, it may invest in other equity securities and
other types of instruments. The Portfolio may invest up to 50 percent of its
assets in foreign securities.
Risks
Stock values fluctuate in response to the activities of individual
companies, and general market and economic conditions. Foreign securities,
foreign currencies, and securities issued by U.S. entities with substantial
foreign operations may involve additional risks and considerations. These
include risks related to political or economic conditions in foreign countries,
fluctuations in foreign debt currencies, withholding or other taxes, operational
risks, increased regulatory burdens, and potentially less stringent investor
protection and disclosure standards of foreign markets.
Investment Adviser: Fidelity Management & Research Company; Subadviser:
Bankers Trust 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 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
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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 - Flexible Income Portfolio
Investment Objective
Seeks to obtain maximum total return, consistent with the preservation of
capital.
Policies
The Portfolio invests at least 80 percent of its assets in income-producing
securities which may include: corporate bonds and notes, preferred stock,
income-producing common stocks, debt securities convertible or exchangeable into
equity securities, and debt securities with the right to acquire equity
securities as evidenced by warrants attached to or acquired with the securities.
May invest to a lesser degree in common stocks, other equity securities, or debt
securities not currently paying dividends or interest. May purchase securities
of any maturity and quality. Average maturity and quality of its portfolio may
vary substantially. May invest without limit in foreign securities, including
those of corporate and government issuers, as well as in high-yield/high-risk
securities. May have substantial holdings of such securities, as well as in
high-yield/high-risk securities (or "junk bonds") which are debt securities
rated below investment grade by the primary rating agencies such as Standard &
Poor's and Moody's.
Risks
Foreign investing involves risks that are different in some respects from
investments in securities of U.S. issuers including: economic/political
volatility; less government regulation and supervision of foreign stock
exchanges, brokers and listed companies; and price, interest rate and currency
risk. The value of lower-quality securities generally depends more on the
ability of the issuer to meet interest and principal payments than is true for
higher-quality securities. Issuers of high-yield securities are more vulnerable
to real or perceived economic and political changes or adverse developments
specific to the issuer. In the event of a default, the Portfolio would
experience a reduction of its income and a decline in the market value of the
defaulted securities.
Investment Adviser: Janus Capital Corporation
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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 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
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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.
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")
MFS World Governments Series
Investment Objective
Seeks not only preservation but also growth of capital, together with
moderate current income.
Policies
The Series seeks to achieve its investment objective through a
professionally managed, internationally diversified portfolio consisting
primarily in debt securities and, to a lesser extent, equity securities. Under
normal circumstances, the Series invests at least 80 percent of its assets in
debt securities. The Series may invest up to 100 percent (although it generally
expects to invest not more than 80 percent) of its net assets in foreign
securities. At least 65 percent of the Series' assets will be invested in at
least three different countries, one of which may be the U.S., except when the
Adviser believes that investing for temporary defensive purposes is appropriate.
U.S. assets will be invested in high-quality debt securities, and the remainder
of the assets will be diversified among countries where opportunities for total
return are expected to be most attractive. It is currently expected that
investments in foreign countries will be primarily in government securities to
minimize credit risks.
Risks
Investing in 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
(formerly Oppenheimer Capital Appreciation 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.
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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 Global Securities Fund
Investment Objective
Seeks long-term capital appreciation by investing a substantial portion of
its assets in securities of foreign issuers, "growth-type" companies, cyclical
industries and special situations which are considered to have appreciation
possibilities but which may be considered to be speculative.
Policies
Invests a substantial portion of its assets in securities of foreign
issuers, "growth-type" companies (those which, in the opinion of the manager,
have relatively favorable long-term prospects for increasing demand or which
develop new products and retain a significant part of earnings for research and
development), cyclical industries, and special investment situations which are
considered to have appreciation possibilities. May invest in foreign securities
and the relative amount of such investments will change from time to time.
Risks
Stock prices will fluctuate. Foreign securities markets may be less liquid
and more volatile than the 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. Investments 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.
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, 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.
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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 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
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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 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.
<PAGE>
Portfolio Partners T. Rowe Price Growth Equity Portfolio
Investment Objective
Seeks long-term growth of capital and, secondarily, to increase dividend
income by investing primarily in common stocks of well established growth
companies.
Policies
Under normal market conditions the Portfolio invests at least 65 percent of
its total assets in common stocks issued by a diversified group of growth
companies. The companies in which the Portfolio invests normally (but not
always) pay dividends, which are generally expected to rise in future years as
earnings increase. Most of its assets will be invested in U.S. common stocks.
However, the Portfolio may invest in foreign securities and convertible
securities and warrants, when the subadviser considers such investments
consistent with he Portfolio's investment objective and policies.
The Portfolio generally seeks to invest in securities of companies that
satisfy one or more of several criteria established by the subadviser. For
example, the subadviser generally seeks companies with superior growth in
earnings and cash flow; the ability to sustain earnings momentum even during
economic slowdowns by operating in so-called "fertile fields" (areas where
earnings and dividends can outpace inflation and the overall economy); and the
capability to expand even during times of slow growth. The subadviser generally
favors companies whose profits increase due to economic factors rather than
one-time events such as lower taxes. The Portfolio may engage in strategic
transactions, which may include the use of derivatives.
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. 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: Aetna Life Insurance and Annuity Company; Subadviser:
T. Rowe Price Associates, Inc.
<PAGE>
PROSPECTUS
================================================================================
The Contracts offered in connection with this Prospectus are the "Aetna Marathon
Plus" 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 available as (1) nonqualified deferred
annuity contracts, (2) Individual Retirement Annuities ("IRA") including Roth
IRAs under Sections 408(b) and 408A of the Internal Revenue Code (may be subject
to approval by state regulatory agencies); or (3) qualified contracts issued in
connection with certain employer sponsored retirement plans (may be subject to
approval by the Company and state regulatory agencies). Currently, the IRA is
not available as a "SIMPLE IRA" as defined in Section 408(p) of the Internal
Revenue Code. In most states, group Contracts are offered, 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. (See "Purchase.")
In most states, the Contracts provide that Purchase Payments may be allocated to
the ALIAC Guaranteed Account (the "Guaranteed Account"), a credited interest
option, or to one or more of the Subaccounts of Variable Annuity Account B, a
separate account of the Company. In certain states, Purchase Payments may be
allocated to the Fixed Account when the Guaranteed Account is not available. The
Subaccounts invest directly in shares of the following Funds:
<TABLE>
<S> <C>
[bullet] Aetna Variable Fund d/b/a [bullet] Fidelity VIP High Income Portfolio
Aetna Growth and Income VP [bullet] Fidelity VIP Overseas Portfolio
[bullet] Aetna Income Shares d/b/a Aetna Bond VP [bullet] Fidelity VIP II Asset Manager Portfolio
[bullet] Aetna Variable Encore Fund d/b/a [bullet] Fidelity VIP II Contrafund Portfolio
Aetna Money Market VP [bullet] Fidelity VIP II Index 500 Portfolio
[bullet] Aetna Balanced VP [bullet] Janus Aspen Aggressive Growth Portfolio
(formerly Aetna Investment Advisers Fund, Inc.) [bullet] Janus Aspen Balanced Portfolio
[bullet] Aetna Ascent VP [bullet] Janus Aspen Flexible Income Portfolio
(formerly Aetna Ascent Variable Portfolio) [bullet] Janus Aspen Growth Portfolio
[bullet] Aetna Crossroads VP [bullet] Janus Aspen Worldwide Growth Portfolio
(formerly Aetna Crossroads Variable Portfolio) [bullet] MFS Total Return Series
[bullet] Aetna Legacy VP [bullet] MFS World Governments Series
(formerly Aetna Legacy Variable Portfolio) [bullet] Oppenheimer Aggressive Growth Fund
[bullet] Aetna Value Opportunity VP (formerly Oppenheimer Capital Appreciation Fund)
(formerly Aetna Variable Capital Appreciation Portfolio) [bullet] Oppenheimer Global Securities Fund
[bullet] Aetna Growth VP [bullet] Oppenheimer Growth & Income Fund
(formerly Aetna Variable Growth Portfolio) [bullet] Oppenheimer Strategic Bond Fund
[bullet] Aetna Index Plus Large Cap VP [bullet] Portfolio Partners MFS Emerging Equities Portfolio
(formerly Aetna Variable Index Plus Portfolio) [bullet] Portfolio Partners MFS Research Growth Portfolio
[bullet] Aetna Small Company VP [bullet] Portfolio Partners MFS Value Equity Portfolio
(formerly Aetna Variable Small Company Portfolio) [bullet] Portfolio Partners Scudder International Growth Portfolio
[bullet] Aetna International VP [bullet] Portfolio Partners T. Rowe Price Growth Equity Portfolio
[bullet] Aetna Real Estate Securities VP
[bullet] Calvert Social Balanced Portfolio
(formerly Calvert Responsibly Invested Balanced
Portfolio)
[bullet] Fidelity VIP Equity-Income Portfolio
[bullet] Fidelity VIP Growth Portfolio
</TABLE>
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 20 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.
THIS PROSPECTUS SHOULD BE READ IN CONJUNCTION WITH THE CURRENT PROSPECTUSES OF
THE FUNDS AND THE ALIAC GUARANTEED ACCOUNT. ALL PROSPECTUSES SHOULD BE RETAINED
FOR FUTURE REFERENCE.
THE CONTRACTS ARE NOT DEPOSITS OR 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 MAY 1, 1998.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
====================================================================================================================================
<S> <C>
DEFINITIONS .............................................................................................. DEFINITIONS - 1
PROSPECTUS SUMMARY ....................................................................................... SUMMARY - 1
FEE TABLE ................................................................................................ FEE TABLE - 1
THE COMPANY .................................................................................................................... 1
VARIABLE ANNUITY ACCOUNT B ..................................................................................................... 1
INVESTMENT OPTIONS ............................................................................................................. 1
The Funds .................................................................................................................. 1
Credited Interest Option ................................................................................................... 3
Fixed Account .......... ................................................................................................... 3
PURCHASE ....................................................................................................................... 3
Contract Availability ...................................................................................................... 3
Purchasing Interests in the Contract ....................................................................................... 3
Purchase Payments .......................................................................................................... 3
Contract Rights ............................................................................................................ 4
Designations of Beneficiary and Annuitant .................................................................................. 4
Right to Cancel ............................................................................................................ 4
CHARGES AND DEDUCTIONS ......................................................................................................... 4
Daily Deductions from the Separate Account ................................................................................. 4
Mortality and Expense Risk Charge ...................................................................................... 4
Administrative Charge .................................................................................................. 4
Maintenance Fee ............................................................................................................ 5
Reduction or Elimination of Administrative Charge and Maintenance Fee ...................................................... 5
Deferred Sales Charge ...................................................................................................... 5
Reduction or Elimination of the Deferred Sales Charge ...................................................................... 6
Fund Expenses .............................................................................................................. 6
Premium and Other Taxes .................................................................................................... 6
CONTRACT VALUATION ............................................................................................................. 6
Account Value .............................................................................................................. 6
Accumulation Units ......................................................................................................... 6
Net Investment Factor ...................................................................................................... 7
TRANSFERS ...................................................................................................................... 7
Telephone Transfers ........................................................................................................ 7
Dollar Cost Averaging Program .............................................................................................. 7
Account Rebalancing Program ................................................................................................ 8
WITHDRAWALS .................................................................................................................... 8
SYSTEMATIC DISTRIBUTION OPTIONS ................................................................................................ 8
DEATH BENEFIT DURING ACCUMULATION PERIOD ....................................................................................... 9
Death Benefit Amount ....................................................................................................... 9
Death Benefit Payment Options .............................................................................................. 10
Nonqualified Contracts ................................................................................................. 10
Qualified Contracts .................................................................................................... 10
ANNUITY PERIOD ................................................................................................................. 11
Annuity Period Elections ................................................................................................... 11
Partial Annuitization ...................................................................................................... 11
Annuity Options ............................................................................................................ 11
Annuity Payments ........................................................................................................... 12
Charges Deducted During the Annuity Period ................................................................................. 12
Death Benefit Payable During the Annuity Period ............................................................................ 12
TAX STATUS ..................................................................................................................... 13
Introduction ............................................................................................................... 13
Taxation of the Company .................................................................................................... 13
Tax Status of the Contract ................................................................................................. 13
Taxation of Annuity Contracts .............................................................................................. 14
Contracts Used with Certain Retirement Plans ............................................................................... 16
Individual Retirement Annuities and Simplified Employee Pension Plans ...................................................... 17
Withholding ................................................................................................................ 17
MISCELLANEOUS .................................................................................................................. 17
Distribution ............................................................................................................... 17
Delay or Suspension of Payments ............................................................................................ 18
Performance Reporting ...................................................................................................... 18
Voting Rights .............................................................................................................. 18
Modification of the Contract ............................................................................................... 18
Transfers of Ownership; Assignment ......................................................................................... 19
Involuntary Terminations ................................................................................................... 19
Legal Matters and Proceedings .............................................................................................. 19
Year 2000................................................................................................................... 19
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION ............................................................................ 20
APPENDIX A--ALIAC GUARANTEED ACCOUNT ........................................................................................... 21
APPENDIX B--FIXED ACCOUNT ...................................................................................................... 23
APPENDIX C--DESCRIPTION OF UNDERLYING FUNDS..................................................................................... 24
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. THE COMPANY DOES NOT AUTHORIZE ANY
PERSON TO GIVE INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE
OFFERING CONTAINED IN THIS PROSPECTUS EXCEPT AS OTHERWISE CONTAINED HEREIN.
<PAGE>
DEFINITIONS
================================================================================
The following terms are defined as they are used in this Prospectus:
Account: A record that identifies contract values accumulated on each
Certificate Holder's behalf during the Accumulation Period.
Account Value: The total dollar value of amounts held in an Account as of each
Valuation Date during the Accumulation Period.
Account Year: A period of twelve months measured from the date on which an
Account is established (the effective date) or from an anniversary of such
effective date.
Accumulation Period: The period during which Purchase Payment(s) credited to an
Account are invested to fund future annuity payments.
Accumulation Unit: A measure of the value of each Subaccount before annuity
payments begin.
Adjusted Account Value: The Account Value, plus or minus the aggregate market
value adjustment for amounts allocated to the Guaranteed Account.
Annuitant: The person on whose life or life expectancy the annuity payments are
based.
Annuity: A series of payments for life, a definite period or a combination of
the two.
Annuity Date: The date on which annuity payments begin.
Annuity Period: The period during which annuity payments are made.
Annuity Unit: A measure of the value of each Subaccount selected during the
Annuity Period.
Application: The form or collection of information required by the Company to
purchase an interest in a group contract or an individual contract.
Beneficiary(ies): The person or persons who are entitled to receive any death
benefit proceeds. Under Nonqualified Contracts, Individual Retirement Annuities,
and Section 403(b) Contracts, Beneficiary refers to the beneficiary named under
the Contract.
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 claim 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.
Contract Year: The number of completed years since the date of the first payment
under an individual Contract or to an Account under a group Contract.
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: A fixed interest option available in certain states which is
described in Appendix B to this Prospectus. 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.
Home Office: The Company's principal executive offices located at 151 Farmington
Avenue, Hartford, Connecticut 06156.
Individual Contract Holder: A person or entity who has purchased an individual
variable annuity contract (also referred to as a "Certificate Holder").
- --------------------------------------------------------------------------------
DEFINITIONS - 1
<PAGE>
Individual Retirement Annuity: An individual or group variable deferred annuity
intended to qualify under 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).
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 Individual Retirement Annuity 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.
Separate Account: Variable Annuity Account B, a separate account established for
the purpose of funding variable annuity contracts issued by the Company.
Subaccount(s): The portion of the assets of the Separate Account that is
allocated to a particular Fund. Each Subaccount invests in the shares of only
one corresponding Fund.
Surrender Value: The amount payable upon the withdrawal of all or any portion of
an Account Value.
Valuation Date: The date and time at which the Accumulation Unit Value and
Annuity Unit Value of a Subaccount is calculated. Currently, this calculation
occurs after the close of business of the New York Stock Exchange on any normal
business day, Monday through Friday, that the New York Stock Exchange is open.
- --------------------------------------------------------------------------------
DEFINITIONS - 2
<PAGE>
PROSPECTUS SUMMARY
================================================================================
CONTRACTS OFFERED
The Contracts offered in connection with this Prospectus are group and
individual deferred variable annuity contracts issued by Aetna Life Insurance
and Annuity Company (the "Company"). The purpose of the Contract is to
accumulate values and to provide benefits upon retirement. The Contracts are
currently available for (1) individual nonqualified purchases (we reserve the
right to limit the ownership of nonqualified contracts to natural persons); (2)
Individual Retirement Annuities ("IRAs") including Roth IRAs, other than "SIMPLE
IRAs" as defined in Section 408(p) of the Internal Revenue Code (may be subject
to approval by state regulatory agencies); and (3) purchases made in conjunction
with employer sponsored retirement plans under Section 403(b) of the Code (may
be subject to approval by the Company and by 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 participate in the Contract. Individual Contracts are
offered in those states where the group Contracts are not authorized for sale.
Joint Certificate Holders are allowed only on Nonqualified Contracts. A joint
Certificate Holder must be the spouse of the other joint Certificate Holder
except in New York and Pennsylvania. 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.")
FREE LOOK PERIOD
You may cancel the Contract or Certificate within 10 days after you receive
it (or longer if required by state law) by returning it to the Company along
with a written notice of cancellation. Unless state law requires otherwise, the
amount you will receive upon cancellation will reflect the investment
performance of the Subaccounts into which your Purchase Payments were deposited.
In some cases this may be more or less than the amount of your Purchase
Payments. Under a Contract issued as an Individual Retirement Annuity, you will
receive a refund of your Purchase Payment. (See "Purchase--Right to Cancel.") 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, Purchase Payment will be restored to the
contract from which it came.
INVESTMENT OPTIONS
The Company has established Variable Annuity Account B, a registered unit
investment trust, for the purpose of funding the variable portion of the
Contracts. The Separate Account is divided into Subaccounts which invest
directly in shares of the Funds described herein. The Contract allows investment
in the Subaccounts, as well as in the Guaranteed Account (or the Fixed Account,
in certain states) subject to the limitations described in "Investment Options,"
see page 1. 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 in this
Prospectus, as well as the prospectuses for each of the Funds.
The Guaranteed Account is the credited interest option available under the
Contract which allows you to earn a fixed rate of interest, if held for the
guaranteed term. (See Appendix A to this Prospectus and the prospectus for the
Guaranteed Account.)
The Fixed Account is an option available under the Contract in certain
states which allows you to earn a fixed rate of interest. (See the Appendix B to
this Prospectus.)
CHARGES AND DEDUCTIONS
Certain charges are associated with these Contracts. These charges include
daily deductions from the Separate Account (the mortality and expense risk
charge and an administrative charge), as well as any applicable maintenance fee,
transfer fees and premium and other taxes. The Funds also incur certain fees and
expenses which are deducted directly from the Funds. A deferred sales charge may
apply upon a full or partial withdrawal of the Account Value. (See the Fee Table
and "Charges and Deductions.")
- --------------------------------------------------------------------------------
SUMMARY - 1
<PAGE>
TRANSFERS
Prior to the Annuity Date, and subject to certain limitations, you can
transfer Account Values among the Subaccounts, and the Guaranteed Account (or
Fixed Account in certain states). During the Annuity Period and subject to state
approval, if you have elected variable payments, you can make transfers among
the Subaccounts available during the Annuity Period. Currently, during the
Accumulation Period, transfers are without charge. However, the Company reserves
the right to charge up to $10 for each additional transfer if more than 12
transfers are made in a calendar year. Any transfer charge will be applied so
that the amount being transferred will be reduced. Transfers can be requested in
writing or by telephone in accordance with the Company's transfer procedures. If
approved by your state, during the Annuity Period, you can currently make up to
four transfers each calendar year. There is no charge for these transfers.
(Transfers from the Guaranteed Account may be restricted and subject to a market
value adjustment. See 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 "Transfers.")
WITHDRAWALS
All or a part of the Account Value may be withdrawn prior to the Annuity
Date by properly completing a disbursement form and sending it to the Company.
Certain charges may be assessed upon withdrawal. Amounts withdrawn from the
Guaranteed Account may be subject to a market value adjustment. (See Appendix
A.) The taxable portion of the withdrawal may also be subject to income tax and
a federal tax penalty. (See "Withdrawals.")
The Contract also offers certain 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.")
GUARANTEED DEATH BENEFIT
These Contracts contain a guaranteed death benefit feature. 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 Option
selected. (See "Death Benefit Payable During the Annuity Period.")
THE ANNUITY PERIOD
On the Annuity Date, you may elect to begin receiving Annuity Payments.
Annuity Payments can be made on either a fixed, variable or combination fixed
and variable basis. If a variable payout is selected, the payments will continue
to vary with the investment performance of the Subaccount(s) selected. The
Company reserves the right to limit the number of Subaccounts that may be
available during the Annuity Period. (See "Annuity Period.")
TAXES
Earnings are not generally taxed until you or your Beneficiary(ies)
actually receive a distribution from the Contract. A 10% federal tax penalty may
be imposed on certain withdrawals. 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)
- --------------------------------------------------------------------------------
SUMMARY - 2
<PAGE>
FEE TABLE
================================================================================
This Fee Table describes the various charges and expenses associated with
the Contract. No sales charge is paid upon purchase of the Contract. All costs
that are borne directly or indirectly under the Subaccounts and Funds are shown
below. 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.
CONTRACT HOLDER TRANSACTION EXPENSES
Deferred Sales Charge for withdrawals under each Contract (as a percentage
of each Purchase Payment withdrawn). For Roth IRA Contracts, 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 Contract 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.
CONTRACTS OTHER THAN ROTH IRA CONTRACTS:
- ---------------------------------------------------------------
Years from Receipt Deferred Sales
of Purchase Payment Charge Deduction
------------------- ----------------
Less than 2 7%
2 or more but less than 4 6%
4 or more but less than 5 5%
5 or more but less than 6 4%
6 or more but less than 7 3%
7 or more 0%
- ---------------------------------------------------------------
ROTH IRA CONTRACTS:
- ---------------------------------------------------------------
Deferred Sales
Completed Contract Years Charge Deduction
------------------------ ----------------
Less than 1 5%
1 or more but less than 2 4%
2 or more but less than 3 3%
3 or more but less than 4 2%
4 or more but less than 5 1%
5 or more 0%
- ---------------------------------------------------------------
<PAGE>
Annual Maintenance Fee (1).................................... $30.00
Transfer Charge (2)........................................... $0.00
SEPARATE ACCOUNT ANNUAL EXPENSES
(Daily deductions, equal to the percentage shown on an annual basis, made from
amounts allocated to the variable options under each Contract).
During the Accumulation Period:
Mortality and Expense Risk Charge ............................ 1.10%(3)
Administrative Charge ........................................ 0.15%
----
Total Subaccount Annual Expenses ............................. 1.25%
====
During the Annuity Period:
Mortality and Expense Risk Charge ............................ 1.25%
Administrative Charge ........................................ 0.00%(4)
----
Total Subaccount Annual Expenses ............................. 1.25%
====
(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 without charge. However, we reserve the right 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.
- --------------------------------------------------------------------------------
FEE TABLE - 1
<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) Other Expenses
(after expense (after expense Total Fund
reimbursement) reimbursement) Annual Expenses
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aetna Ascent VP(2)(3) 0.57% 0.23% 0.80%
- -----------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc.(3) 0.50% 0.10% 0.60%
- -----------------------------------------------------------------------------------------------------
Aetna Bond VP(3) 0.40% 0.10% 0.50%
- -----------------------------------------------------------------------------------------------------
Aetna Crossroads VP(2)(3) 0.55% 0.25% 0.80%
- -----------------------------------------------------------------------------------------------------
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 Legacy VP(2)(3) 0.49% 0.31% 0.80%
- -----------------------------------------------------------------------------------------------------
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%
- -----------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP(2)(3) 0.20% 0.60% 0.80%
- -----------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio(4) 0.69% 0.12% 0.81%
- -----------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio(5) 0.50% 0.08% 0.58%
- -----------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio(5) 0.60% 0.09% 0.69%
- -----------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio(5) 0.59% 0.12% 0.71%
- -----------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio(5) 0.75% 0.17% 0.92%
- -----------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager Portfolio(5) 0.55% 0.10% 0.65%
- -----------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio(5) 0.60% 0.11% 0.71%
- -----------------------------------------------------------------------------------------------------
Fidelity VIP II Index 500 Portfolio(6) 0.24% 0.04% 0.28%
- -----------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio(7) 0.73% 0.03% 0.76%
- -----------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio(7) 0.76% 0.07% 0.83%
- -----------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 0.65% 0.10% 0.75%
- -----------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio(7) 0.65% 0.05% 0.70%
- -----------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio(7) 0.66% 0.08% 0.74%
- -----------------------------------------------------------------------------------------------------
MFS Total Return Series(8) 0.75% 0.25% 1.00%
- -----------------------------------------------------------------------------------------------------
MFS World Governments Series(8) 0.75% 0.25% 1.00%
- -----------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth Fund 0.71% 0.02% 0.73%
- -----------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund 0.70% 0.06% 0.76%
- -----------------------------------------------------------------------------------------------------
Oppenheimer Growth & Income Fund 0.75% 0.08% 0.83%
- -----------------------------------------------------------------------------------------------------
<PAGE>
- -----------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund 0.75% 0.08% 0.83%
- -----------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Emerging Equities Portfolio(9)(10) 0.68% 0.13% 0.81%
- -----------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Research Growth Portfolio(9)(10) 0.70% 0.15% 0.85%
- -----------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Value Equity Portfolio(9) 0.65% 0.25% 0.90%
- -----------------------------------------------------------------------------------------------------
Portfolio Partners
Scudder International Growth Portfolio(9) 0.80% 0.20% 1.00%
- -----------------------------------------------------------------------------------------------------
Portfolio Partners
T. Rowe Price Growth Equity Portfolio(9) 0.60% 0.15% 0.75%
- -----------------------------------------------------------------------------------------------------
</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.
(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 0.83% for Ascent VP; 0.60%
and 0.85% for Crossroads VP; 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; 0.60%
and 0.91% for Legacy VP; 0.75% and 1.08% for Real Estate Securities VP;
0.75% and 1.35% for Small Company VP; and 0.60% and 1.20% for Value
Opportunity 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) The figures above are based on expenses for the fiscal year 1997, and have
been restated to reflect an increase in transfer agency expenses of 0.01%
for the Portfolio expected to be incurred in 1998. "Management Fees"
includes a performance adjustment, which depending on performance, could
cause the fee to be as high as 0.85% or as low as 0.55%. "Other Expenses"
reflect an indirect fee of 0.03% (relating to an expense offset arrangement
with the Portfolio's custodian). Net fund operating expenses after
reductions for fees paid indirectly (again, restated) would be 0.78%.
(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; 0.67% for Growth Portfolio; 0.71% for High Income
Portfolio; 0.90% for Overseas Portfolio, 0.64% for Asset Manager Portfolio;
and 0.68% for Contrafund Portfolio.
(6) The Fund's investment adviser agreed to reimburse a portion of Index 500
Portfolio's expenses during the period. Without this reimbursement, the
fund's management fee, other expenses and total expenses would have been
0.27%, 0.13% and 0.40%, respectively, for Index 500 Portfolio.
(7) Management fees for Aggressive Growth, Balanced, Growth and Worldwide
Growth Portfolios reflect a reduced fee schedule effective July
- --------------------------------------------------------------------------------
FEE TABLE - 2
<PAGE>
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.
(8) 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 and MFS World Governments Series would be 0.27% and 0.40%,
respectively, and "Total Fund Annual Expenses" would be 1.02% and 1.15%,
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."
(9) 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.
(10) The advisory fee is 0.70% of the first $500 million in assets and 0.65% on
the excess.
- --------------------------------------------------------------------------------
FEE TABLE - 3
<PAGE>
HYPOTHETICAL ILLUSTRATION (EXAMPLE): CONTRACTS OTHER THAN ROTH IRA'S
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>
CONTRACTS OTHER THAN ROTH IRA CONTRACTS
EXAMPLE A EXAMPLE B
If you withdraw the entire Account If you do not withdraw the Account
Value at the end of the periods shown, Value, or if you annuitize at the
you would pay the following expenses, end of the periods shown, you would
including any applicable deferred pay the following expenses (no
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 Ascent VP $84 $118 $147 $240 $21 $65 $111 $240
Aetna Balanced VP, Inc. $82 $112 $136 $219 $19 $59 $101 $219
Aetna Bond VP $81 $109 $131 $208 $18 $56 $96 $208
Aetna Crossroads VP $84 $118 $147 $240 $21 $65 $111 $240
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 Legacy VP $84 $118 $147 $240 $21 $65 $111 $240
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
Aetna Value Opportunity VP $84 $118 $147 $240 $21 $65 $111 $240
Calvert Social Balanced Portfolio $84 $119 $147 $241 $21 $65 $112 $241
Fidelity VIP Equity-Income Portfolio $82 $112 $135 $217 $19 $58 $100 $217
Fidelity VIP Growth Portfolio $83 $115 $141 $228 $20 $62 $106 $228
Fidelity VIP High Income Portfolio $83 $116 $142 $231 $20 $62 $107 $231
Fidelity VIP Overseas Portfolio $85 $122 $153 $252 $22 $68 $117 $252
Fidelity VIP II Asset Manager Portfolio $82 $114 $139 $224 $19 $60 $104 $224
Fidelity VIP II Contrafund Portfolio $83 $116 $142 $231 $20 $62 $107 $231
Fidelity VIP II Index 500 Portfolio $79 $102 $120 $184 $16 $49 $84 $184
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 Flexible Income Portfolio $83 $117 $144 $235 $20 $63 $109 $235
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
MFS World Governments Series $86 $124 $157 $260 $23 $71 $121 $260
Oppenheimer Aggressive Growth Fund $83 $116 $143 $233 $20 $63 $108 $233
Oppenheimer Global Securities Fund $83 $117 $145 $236 $21 $64 $109 $236
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 Portfolio $85 $121 $152 $250 $22 $68 $116 $250
Portfolio Partners Scudder International $86 $124 $157 $260 $23 $71 $121 $260
Growth Portfolio
Portfolio Partners T. Rowe Price Growth $83 $117 $144 $235 $20 $63 $109 $235
Equity
Portfolio
</TABLE>
- ---------------
* This Example would not apply if a nonlifetime variable annuity option is
selected, and a lump sum settlement is requested within three years after
annuity payments start, since the lump sum payment will be treated as a
withdrawal during the Accumulation Period and will be subject to any deferred
sales charge that would then apply. (Refer to Example A.)
- --------------------------------------------------------------------------------
FEE TABLE - 6
<PAGE>
HYPOTHETICAL ILLUSTRATION (EXAMPLE): 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>
ROTH IRA CONTRACTS
EXAMPLE A EXAMPLE B
If you withdraw the entire Account If you do not withdraw the Account
Value at the end of the periods Value, or if you annuitize at the
shown, you would pay the following end of the periods shown, you would
expenses, including any applicable pay 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 Ascent VP $62 $87 $111 $240 $21 $65 $111 $240
Aetna Balanced VP, Inc. $60 $81 $101 $219 $19 $59 $101 $219
Aetna Bond VP $59 $78 $96 $208 $18 $56 $96 $208
Aetna Crossroads VP $62 $87 $111 $240 $21 $65 $111 $240
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 Legacy VP $62 $87 $111 $240 $21 $65 $111 $240
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
Aetna Value Opportunity VP $62 $87 $111 $240 $21 $65 $111 $240
Calvert Social Balanced Portfolio $62 $87 $112 $241 $21 $65 $112 $241
Fidelity VIP Equity-Income Portfolio $60 $80 $100 $217 $19 $58 $100 $217
Fidelity VIP Growth Portfolio $61 $83 $106 $228 $20 $61 $106 $228
Fidelity VIP High Income Portfolio $61 $84 $107 $231 $20 $62 $107 $231
Fidelity VIP Overseas Portfolio $63 $90 $117 $252 $22 $68 $117 $252
Fidelity VIP II Asset Manager Portfolio $61 $82 $104 $224 $19 $60 $104 $224
Fidelity VIP II Contrafund Portfolio $61 $84 $107 $231 $20 $62 $107 $231
Fidelity VIP II Index 500 Portfolio $57 $71 $84 $184 $16 $49 $84 $184
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 Flexible Income Portfolio $62 $85 $109 $235 $20 $63 $109 $235
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
MFS World Governments Series $64 $93 $121 $260 $23 $71 $121 $260
Oppenheimer Aggressive Growth Fund $61 $85 $108 $233 $20 $63 $108 $233
Oppenheimer Global Securities Fund $62 $85 $109 $236 $21 $64 $109 $236
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
Portfolio $62 $87 $112 $241 $21 $65 $112 $241
Portfolio Partners MFS Research Growth
Portfolio $63 $88 $114 $245 $21 $66 $114 $245
Portfolio Partners MFS Value Equity Portfolio $63 $90 $116 $250 $22 $68 $116 $250
Portfolio Partners Scudder International
Growth Portfolio $64 $93 $121 $260 $23 $71 $121 $260
Portfolio Partners T. Rowe Price Growth
Equity Portfolio $62 $85 $109 $235 $20 $63 $109 $235
</TABLE>
- -------------
* This Example would not apply if a nonlifetime variable annuity option is
selected, and a lump sum settlement is requested within three years after
annuity payments start, since the lump sum payment will be treated as a
withdrawal during the Accumulation Period and will be subject to any deferred
sales charge that would then apply. (Refer to Example A.)
- --------------------------------------------------------------------------------
FEE TABLE - 6
<PAGE>
- --------------------------------------------------------------------------------
THE COMPANY
================================================================================
Aetna Life Insurance and Annuity Company (the "Company") is the issuer of
the Contract, and as such, it is responsible for providing the insurance and
annuity benefits under the Contract. The Company is a stock life insurance
company organized under the insurance laws of the State of Connecticut in 1976.
Through a merger, it succeeded to the business of Aetna Variable Annuity Life
Insurance Company (formerly Participating Annuity Life Insurance Company, an
Arkansas life insurance company organized in 1954). The Company is engaged in
the business of issuing life insurance policies and variable annuity contracts
in all states of the United States. The Company's principal executive offices
are located at 151 Farmington Avenue, Hartford, Connecticut 06156.
The Company is a wholly owned subsidiary of Aetna Retirement Holdings,
Inc., which is in turn a wholly owned subsidiary of Aetna Retirement Services,
Inc. and an indirect wholly owned subsidiary of Aetna Inc.
VARIABLE ANNUITY ACCOUNT B
================================================================================
The Company established Variable Annuity Account B (the "Separate Account")
in 1976 as a segregated asset account for the purpose of funding its variable
annuity contracts. The Separate Account is registered as a unit investment trust
under the Investment Company Act of 1940 (the "1940 Act"), and meets the
definition of "separate account" under federal securities laws. The Separate
Account is divided into "subaccounts" which do not invest directly in stocks,
bonds or other investments. Instead, each Subaccount buys and sells shares of a
corresponding Fund.
Although the Company holds title to the assets of the Separate Account,
such assets are not chargeable with liabilities of any other business conducted
by the Company. Income, gains or losses of the Separate Account are credited to
or charged against the assets of the Separate Account without regard to other
income, gains or losses of the Company. All obligations arising under the
Contracts are 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 option once you have made an allocation to it, even if
you no longer have amounts allocated to that 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.
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 this
Prospectus.
1
<PAGE>
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.
2
<PAGE>
CREDITED INTEREST OPTION
Purchase Payments may be allocated to the ALIAC Guaranteed Account (the
"Guaranteed Account"). Through the Guaranteed Account, we guarantee stipulated
rates of interest for stated periods of time. Amounts must remain in the
Guaranteed Account for specified periods 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
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)
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 (we reserve the right to limit ownership of
nonqualified Contracts to natural persons); (2) Individual Retirement Annuities,
including Roth IRAs, other than "SIMPLE IRAs" as defined in Section 408(p) of
the Internal Revenue Code; or (3) Qualified Contracts used in conjunction with
certain employer sponsored retirement plans. Individual Retirement Annuities are
currently available as rollovers, and may permit ongoing contributions subject
to state regulatory approval. Additionally, availability of the Qualified
Contracts described under item (3) is subject to approval by the Company and
state regulatory agencies. 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
Individual Retirement Annuity/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 (age 85 for those Contracts
or Certificates issued in Pennsylvania).
Joint Certificate Holders. Nonqualified Contracts may be purchased by
spouses as joint Certificate Holders. In Pennsylvania, the joint Certificate
Holders do not need to be spouses. 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 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.
The minimum initial Purchase Payment amount is $5,000 for Nonqualified
Contracts and $1,500 for Qualified Contracts. In some states, a Contract issued
as an Individual Retirement Annuity 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
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initially be allocated to the Subaccounts or the Guaranteed Account or the 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 under the Contract on the
Application. You may also elect to specify the form of payment to be made to the
Beneficiary. Under such plans the participant is generally allowed to designate
a beneficiary under the plan, and the Certificate Holder may direct that we pay
any death proceeds to the plan beneficiary. "Beneficiary" as used in this
Prospectus refers to the person who is ultimately entitled to receive such
proceeds.
For Qualified Contracts issued in conjunction with a Code Section 403(b)
tax deferred annuity program subject to the Employee Retirement Income Security
Act (ERISA), the spouse of a married participant must be the Beneficiary of at
least 50% of the Account Value. If the married participant is age 35 or older,
the participant may name an alternate Beneficiary provided 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 Individual Retirement Annuity, 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.")
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 Individual Retirement Annuities, you will
receive a refund of your Purchase Payment. Account Values will be determined as
of the Valuation Date on which we receive your request for cancellation at our
Home Office. 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
equal, on an annual basis, to 1.10% of the daily net assets of the Subaccounts
and compensates the Company for the assumption of the mortality and expense
risks under the Contract. The mortality risks are those assumed for our promise
to make lifetime payments according to annuity rates specified in the Contract.
The expense risk is the risk that the actual expenses for costs incurred under
the Contract will exceed the maximum costs that can be charged under the
Contract.
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 expects to make a profit from the mortality
and expense risk charge.
Administrative Charge. During the Accumulation Period, the
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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
Option is elected, the charge will be established and will be effective during
the entire Annuity Period.
MAINTENANCE FEE
During the Accumulation Period, the Company will deduct an annual
maintenance fee from the Account Value. The maintenance fee is to reimburse the
Company for some of its administrative expenses relating to the establishment
and maintenance of the Accounts.
The maximum maintenance fee deducted under the Contract is $30. The
maintenance fee will be deducted annually on the anniversary of the Contract
effective date. It is deducted on a pro rata basis from each investment option
in which you have an interest. If your entire Account Value is withdrawn, the
full maintenance fee, if applicable, will be deducted at the time of withdrawal.
The maintenance fee will not be deducted (either annually or upon withdrawal) if
your Account Value is $50,000 or more on the day the maintenance fee is due.
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
fees will not be unfairly discriminatory against any person. We will make any
reduction in the administrative charge or annual maintenance fees 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 made. The deferred sales charge on
withdrawals from a Roth IRA is based on the number of 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 Contract 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.
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.
CONTRACTS OTHER THAN ROTH IRAs
- ---------------------------------------------------------------
Years since receipt Deferred Sales
of Purchase Payment Charge Deduction
------------------- ----------------
Less than 2 7%
2 or more but less than 4 6%
4 or more but less than 5 5%
5 or more but less than 6 4%
6 or more but less than 7 3%
7 or more 0%
- ---------------------------------------------------------------
ROTH IRA CONTRACTS
- ---------------------------------------------------------------
Completed Contract Years Deferred Sales
Charge Deduction
----------------
Less than 1 5%
1 or more but less than 2 4%
2 or more but less than 3 3%
3 or more but less than 4 2%
4 or more but less than 5 1%
5 or more 0%
- ---------------------------------------------------------------
A deferred sales charge will not be deducted from any portion of a
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Purchase Payment withdrawn if the withdrawal is:
[bullet] applied to provide Annuity benefits;
[bullet] paid to a Beneficiary due to the Annuitant's death before Annuity
payments start, up to a maximum of the Purchase Payment(s) in the
Account on 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; or
[bullet] paid if we close out your Account when the value is less than $2,500
(or other amount required by state law);
[bullet] if the withdrawal is applied as a rollover to certain Roth Individual
Retirement Annuities issued by the Company or an affiliate.
After the first Account Year, you may withdraw all or a portion of your
Purchase Payments without a deferred sales charge, provided that (1) such
withdrawal occurs within three years of the Annuitant's admission to a licensed
nursing care facility (including non-licensed facilities in New Hampshire) and
(2) 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 nursing
care facility at the time the Account is established. It will also not apply if
otherwise prohibited by state law.
The Company does not anticipate that the deferred sales charge will cover
all sales and administrative expenses which it incurs in connection with the
Contract. The difference will be covered by the general assets of the Company
which are attributable, in part, to mortality and expense risk charges under the
Contract described above.
Free Withdrawals. Subject to the restrictions described below, you may
withdraw up to the greater of 10% of your current Account Value or the minimum
distribution amount required by law during each calendar year without imposition
of a deferred sales charge. 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
distribution under a Systematic Distribution Option, during the calendar 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 will be subject to state approval and 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 Option. However, we reserve the right to deduct state premium tax
from the Purchase Payment(s) or from the Account Values at any time, but no
earlier than when we have a tax liability under state law.
Any municipal premium tax assessed at a rate in excess of 1% will be
deducted from the Purchase Payment(s) or from the amount applied to an Annuity
Option based on our determination of when such tax is due. We will absorb any
municipal premium tax which is assessed at 1% or less. We reserve the right,
however, to reflect this added expense in our Annuity purchase rates for
residents of such municipalities.
CONTRACT VALUATION
================================================================================
ACCOUNT VALUE
Until the Annuity Date, the Account Value is the total dollar value of
amounts held in the Account as of any Valuation Date. The Account Value at any
given time is based on the value of the units held in each Subaccount, plus the
value of amounts held in the Guaranteed Account 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
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that Subaccount for the period between the immediately preceding Valuation Date
and the current Valuation Date. (See "Net Investment Factor" below.) The
Accumulation Unit Value will be affected by the investment performance, expenses
and charges of the applicable Fund and is reduced each day by a percentage that
accounts for the daily assessment of mortality and expense risk charges and the
administrative charge.
Initial Purchase Payments will be credited to your Account at the AUV 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 of a maximum of 1.10% for
mortality and expense risks 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.
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
the Appendix.) 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 a
variable Annuity, you can make transfers only among the Subaccounts available
during the Annuity Period. (See "Annuity Options.") A request for transfer can
be made either in writing or by telephone. (See "Telephone Transfers" below.)
All transfers must be in accordance with the terms of the Contract. Any transfer
will be based on the Accumulation Unit Value next determined after the Company
receives a valid transfer request at its Home Office.
During the Accumulation Period, twelve free transfers are allowed per
calendar year. Thereafter, the Company reserves the right to charge up to $10
for each additional transfer. This charge will be deducted from the gross amount
of the transfer. The Company currently does not impose this charge. Currently,
during the Annuity Period, four transfers are allowed each calendar year.
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 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 funding 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 fund. 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
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Summary, which describes how you can obtain further information.
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 Aetna 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 Deductions") and to taxes and to tax
penalties (see "Tax Status"). Roth IRAs provide for a tax-free withdrawal of all
assets in the Account, 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
or Fixed Account or each Subaccount in which your Account is invested,
unless you request otherwise in writing. All amounts paid will be based
on your Account Value as of the next Valuation Date after we receive a
request for withdrawal at our Home Office, or on such later date as the
disbursement form may specify.
The tax treatment of withdrawals from each Nonqualified Contract may be
affected if you own other annuity contracts issued by us (or our affiliates)
that were purchased on or after October 21, 1988. (See "Tax Status.")
Withdrawal Restrictions from 403(b) Plans. Under Section 403(b) Contracts,
the withdrawal of salary reduction contributions and earnings on such
contributions is generally prohibited prior to the participant's death,
disability, attainment of age 59 1/2, separation from service or financial
hardship. (See "Tax Status.")
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 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
Accumulation Unit Value(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 Options ("Systematic
8
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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 forthose who want to receive only
the minimum distribution that the Code requires each year. ECO is
available only under Qualified Contracts. Under ECO, the Company
calculates the minimum distribution amount required by law, and pays
you that amount once a year. (See "Tax Status.") Other 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.
ECO is not available under the Roth IRA Contract.
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.
DEATH BENEFIT DURING ACCUMULATION PERIOD
================================================================================
A death benefit will be payable to the Beneficiary(ies) 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 a contingent Beneficiary.
DEATH BENEFIT AMOUNT
If approved by your state, upon the death of the Annuitant, the death
benefit proceeds will be the greater of:
(1) The minimum guaranteed death benefit (described below) as of the date of
death, plus any Purchase Payments made, and less any amount(s) surrendered,
applied to an Annuity option or deducted from the Account, since the
minimum guaranteed death benefit was determined, or
(2) The Account Value on the Claim Date.
The minimum guaranteed death benefit is determined as follows: On the
effective date of the Contract ("Effective Date"), the minimum guaranteed death
benefit equals the amount of the initial Purchase Payment. On each Effective
Date anniversary before the Annuitant reaches age 85, the minimum guaranteed
death benefit is the greater of:
(1) The prior minimum guaranteed death benefit, plus any Purchase Payments
made, and less any amount(s) surrendered, applied to an Annuity option or
deducted from the Account, since the minimum guaranteed death benefit was
previously determined, or
(2) The Account Value on the Effective Date anniversary.
After the Annuitant reaches age 85 the minimum guaranteed death benefit is
equal to the minimum guaranteed death benefit determined on the Effective Date
anniversary immediately preceding the date the Annuitant attained age 85 plus
any Purchase Payments made, and less any amounts surrendered, applied to an
Annuity option or deducted from the Account.
On the Claim Date, if the minimum guaranteed death benefit is greater than
the Account Value, the amount by which the minimum guaranteed death benefit
exceeds the Account Value is allocated to the money market subaccount available
under the Contract. The Beneficiary may elect a death benefit option as
permitted unless the Certificate Holder has specified the form of payment to the
Beneficiary.
Under Nonqualified Contracts only, if the Certificate Holder is not the
Annuitant and dies, the minimum guaranteed death benefit will not apply. The
amount paid on account of the death of the Certificate Holder will be equal to
the Adjusted Account Value on the Claim Date. Full or partial withdrawals may be
subject to a deferred sales charge. The
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Beneficiary may elect a death benefit option available under the Contract unless
the Certificate Holder has specified the form of payment to the Beneficiary.
If the spousal Beneficiary continued the Account at the death of the
Certificate Holder who was also the Annuitant, the spousal Beneficiary will
become the Annuitant and the minimum guaranteed death benefit will also apply at
the death of the spousal Beneficiary. The initial minimum guaranteed death
benefit equals the Account Value as adjusted for any minimum guaranteed death
benefit payable at the death of the original Certificate Holder/Annuitant.
Thereafter, the minimum guaranteed death benefit is determined as above.
If the spousal Beneficiary continued the Account at the death of the
Certificate Holder who was not also the Annuitant, the Annuitant will not change
and the amount of death benefit proceeds payable upon the spousal Beneficiary's
death will be equal to the Adjusted Account Value on the Claim Date, less any
deferred sales charge.
If the death benefit described above is not approved by your state, the
following death benefit shall apply:
Upon the death of the Annuitant, the guaranteed death benefit proceeds will
be the greatest of:
(1) the total Purchase Payment(s) applied to the Account, minus the sum of all
amounts withdrawn, annuitized or deducted from such Account;
(2) the highest step-up value as of the date of death. The step-up value is
determined on each anniversary of the Effective Date, up to the Annuitant's
75th birthday. Each step-up value is calculated as the Account Value on the
Effective Date anniversary, increased by Purchase Payments applied, and
decreased by partial withdrawals, annuitizations and deductions taken from
the Account since the Effective Date anniversary; or
(3) the Account Value as of the date of death.
The excess, if any, of the guaranteed death benefit value over the Account
Value is determined as of the date of death. Any excess amount will be deposited
and allocated to the money market Subaccount available under the Contract. The
Account Value on the claim date plus any excess amount deposited into the
Account becomes the Certificate Holder's Account Value. The death benefit paid
will equal the Account Value when request for payment is made and no deferred
sales charge applies.
Under Nonqualified Contracts only, if the Certificate Holder is not the
Annuitant and dies, the guaranteed death benefit will not apply. The amount of
death benefit proceeds will be equal to the Adjusted Account Value on the Claim
Date. Full or partial withdrawals may be subject to a deferred sales charge.
If the spousal Beneficiary continued the Account after the death of the
Certificate Holder who was the Annuitant, the amount of the death benefit
proceeds payable upon the spousal Beneficiary's death will be equal to the
Adjusted Account Value on the Claim Date, less any deferred sales charge
applicable to any Purchase Payments made since the death of the Certificate
Holder/Annuitant.
If the spousal Beneficiary continued the Account after the death of the
Certificate Holder who was not the Annuitant, the amount of death benefit
proceeds payable upon the spousal Beneficiary's death will be equal to the
Adjusted Account Value on the Claim Date. Full or partial withdrawals may be
subject to a deferred sales charge in accordance with the usual rules regarding
the deferred sales charge. (See "Deferred Sales Charge.") If this provision was
not approved in your state, the deferred sales charge will apply only to
Purchase Payments made since the death of the Certificate Holder.
For amounts held in the Guaranteed Account, see Appendix A for a discussion
of the calculation of death benefit proceeds.
DEATH BENEFIT PAYMENT OPTIONS
Death benefit proceeds may be paid to the Beneficiary as described below.
If you die and no Beneficiary exists, the death benefit will be paid in a lump
sum to your estate. Prior to any election by the Beneficiary, the Account Value
will remain in the Account and the Account Value will continue to be affected by
the investment performance of the investment option(s) selected. The Beneficiary
has the right to allocate or transfer any amount to any available investment
option (subject to 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 Options; or (3) receive at any time a lump sum
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
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 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
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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 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 or SWO 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 or SWO
provided the election would satisfy the Code minimum distribution rules.
If ECO or SWO is in effect and the participant dies after the required
beginning date for minimum distributions, payments will continue as permitted
under the Code minimum distribution rules, unless the option is revoked.
Death benefit payments must satisfy the distribution rules in Code Section
401(a)(9). (See "Tax Status of the Contract.")
ANNUITY PERIOD
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ANNUITY PERIOD ELECTIONS
You must notify us in writing of the date you want Annuity Payments to
start (the "Annuity Date") and the Annuity Option elected. Payments may not
begin earlier than one year after purchase, or, unless we consent, later than
the later of (a) the first day of the month following the Annuitant's 85th
birthday, or (b) the tenth anniversary of the last Purchase Payment (fifth
anniversary for Contracts issued in Pennsylvania).
Annuity Payments will not begin until you have selected an Annuity Date and
an Annuity 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 calendar year following the calendar year in which a participant attains
age 70-1/2 or retires, whichever occurs later. For IRA depositors and for
five-percent owners, minimum distributions must begin by April 1 of the calendar
year following the calendar year in which the participant attains age 70-1/2. In
addition, distributions must be in a form and amount sufficient to satisfy the
Code requirements. These requirements may be satisfied by the election of
certain Annuity Options or Systematic Distribution Options. (See "Tax Status.")
For Nonqualified Contracts, failure to select an Annuity Option and an Annuity
Date, or postponement of the Annuity Date past the Annuitant's 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 calendar year following the calendar 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
the 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 Option under which you want payments to be calculated
and paid;
[bullet] whether the payments are to be made monthly, quarterly, semi-annually
or annually; and
[bullet] the investment option(s) used to provide Annuity Payments (i.e., a
fixed Annuity using the general account or a variable Annuity using any
of the Subaccounts available at the time of annuitization or a
combination of the two).
Once Annuity Payments begin, the Annuity Option may not be changed.
PARTIAL ANNUITIZATION
You may elect an Annuity 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 are taxable as annuity payments or as withdrawals is currently unclear;
therefore, you should consult with a qualified tax adviser if you are
considering a partial annuitization of your Account.
ANNUITY OPTIONS
The Certificate Holder may choose one of the following Annuity Options:
Lifetime Annuity Options:
[bullet] Option 1--Life Annuity--An annuity with payments ending on the
Annuitant's death.
[bullet] Option 2--Life Annuity with Guaranteed Payments--An annuity with
payments guaranteed for 5-30 years.
[bullet] Option 3--Life Annuity with Cash Refund Feature--An annuity with a cash
refund feature. Payments are guaranteed for the amount applied to the
Annuity Option. If the Annuitant dies before the amount applied to the
Annuity Option (less any applicable premium tax) has been paid, any
remaining balance will be paid in one sum to the Beneficiary. This
option is available only when all payments are as a fixed Annuity.
[bullet] Option 4--Life Annuity Based Upon the Lives of Two Annuitants--
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An annuity paid during the lives of the Annuitant and a second
Annuitant. The Certificate Holder selects an Annuity with 100%, 66% or
50% of the payment to continue after the first death, or an Annuity
with 100% of the payment to continue at the death of the second
Annuitant and 50% of the payment to continue at the death of the
Annuitant.
[bullet] Option 5--Life Annuity Based Upon the Lives of Two Annuitants with
Guaranteed Payments--An Annuity with Payments for a minimum of 5-30
years, with 100% of the payment to continue after the first death.
*[bullet] Option 6--Life Annuity Based Upon the Lives of Two Annuitants with a
Cash Refund Feature--An Annuity with 100% of the payment to continue
after the first death with a cash refund feature. Payments are
guaranteed for the amount applied to the Annuity Option. If both
Annuitants die prior to the total payment of the amount applied to the
Annuity Option (less any premium tax), any remaining balance will be
paid in one sum to the Beneficiary. This option is available only when
all payments are as a fixed Annuity.
*(If approved by your state.)
If Option 1 or 4 is elected, it is possible that only one Annuity Payment
will be made if the Annuitant under Option 1, or the surviving Annuitant under
Option 4, should die prior to the due date of the second Annuity Payment. Once
lifetime Annuity payments begin, the Certificate Holder cannot elect to receive
a lump-sum settlement.
Nonlifetime Annuity Option:
Under the nonlifetime option, payments may be made for generally 5-30
years, as selected by the Certificate Holder. If this option is elected as a
variable Annuity, the Certificate Holder may request that the present value of
all or any portion of the remaining variable payments be paid in one sum.
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 settlement.
We may also offer additional Annuity Options under your Contract from time
to time. You can call the number listed in the "Inquiries" section of the
Prospectus Summary, to determine which options are available and the terms of
such options. Additional or enhanced options may not be available to those
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 net investment rate
selected (3-1/2% or 5% per annum). Selection of a 5% rate causes a higher first
payment, but Annuity Payments will increase thereafter only to the extent that
the net investment rate exceeds 5% on an annualized basis. Annuity Payments
would decline if the rate were below 5%. Use of the 3-1/2% assumed rate causes a
lower first payment, but subsequent payments would increase more rapidly or
decline more slowly as changes occur in the net investment rate. (See the
Statement of Additional Information for further discussion on the impact of
selecting an assumed net investment rate.)
CHARGES DEDUCTED DURING THE ANNUITY PERIOD
We make a daily deduction for mortality and expense risks from any amounts
held on a variable basis. Therefore, electing the nonlifetime option on a
variable basis will result in a deduction being made even though we assume no
mortality risk. We may also deduct a daily administrative charge from amounts
held under the variable options. This charge, established when a variable
Annuity Option is elected, will not exceed 0.25% per year of amounts held on a
variable basis. Once established, the charge will be effective during the entire
Annuity Period. (See "Charges and Deductions.")
DEATH BENEFIT PAYABLE DURING THE ANNUITY PERIOD
The death benefit, if any, due when the Annuitant dies after Annuity
Payments have begun, will depend on the terms of the Contract and the Annuity
Option selected. If Option 1 or Option 4 was elected, Annuity Payments will
cease on the death of the Annuitant under Option 1 or 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.
When the Annuitant dies after Annuity Payments have begun and if there is a
death benefit payable under the Annuity option elected, the remaining value must
be distributed to the Beneficiary at least as rapidly as under the original
method of distribution.
Any lump-sum payment paid under the applicable lifetime or
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nonlifetime Annuity options will be made within seven calendar days after
acceptable proof of death, and a request for payment are received at our Home
Office. The value of any death benefit proceeds will be determined as of the
next Valuation Date after we receive acceptable proof of death and a request for
payment. Under Options 2 and 5, such value will be reduced by any payments made
after the date of death.
TAX STATUS
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INTRODUCTION
The following provides a general discussion and is not intended as tax
advice. This discussion reflects the Company's understanding of current federal
income tax law. Such laws may change in the future, and it is possible that any
change could be retroactive (i.e., effective prior to the date of the change).
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 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.
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 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.
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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 Individual Retirement Annuities.
Other than for IRAs and for five-percent owners in other Qualified Contracts,
distributions must generally begin by April 1 of the calendar year following the
calendar year in which the participant attains age 70-1/2 or retires, whichever
occurs later. For traditional IRA participants and for five-percent owners,
minimum distributions must begin by April 1 of the calendar year following the
calendar year in which the participant attains age 70-1/2. 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 generally begin by the end of the calendar year in which the
participant attains age 75 (or retires, whichever occurs later). However,
special rules require that some or all of the balance be distributed earlier if
any distributions are taken in excess of the minimum required amount.
To comply with these provisions, distributions must be in a form and amount
sufficient to satisfy the minimum distribution and minimum distribution
incidental death benefit rules specified in Section 401(a) (9) of the Code.
In general, annuity payments 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
calendar year following the participant's death and the entire remaining
interest must be distributed to the beneficiary by December 31 of the year
following the participant's death. However, a spousal beneficiary has certain
rollover rights which can only be exercised in the year of the participant's
death. The rules are complex and the participant should consult a tax adviser
before electing the method of calculation to satisfy the minimum distribution
requirements.
If the participant dies before the required beginning date for minimum
distributions, the entire interest must be distributed by December 31 of the
calendar year containing the fifth anniversary of the date of the participant's
death. Alternatively, payments may be made over the life of the beneficiary or
over a period not extending beyond the life expectancy of the beneficiary
provided the distribution begins to a non-spouse beneficiary by December 31 of
the calendar year following the calendar year of the participant's death. If
payments are made to a spousal beneficiary, distributions must begin by the
later of December 31 of the calendar year following the calendar year of the
death or December 31 of the calendar year in which the participant would have
attained age 70-1/2.
An exception applies for a spousal beneficiary under an Individual
Retirement Annuity. In lieu of taking a distribution under these rules, a
spousal beneficiary may elect to treat the Account as his or her own IRA and
defer taking a distribution until his or her age 70-1/2. The surviving spouse is
deemed to have made such an election if the surviving spouse makes a rollover to
or from the Account or fails to take a distribution within the required time
period.
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 Option
elected). The taxable portion of a distribution (in the form of a single sum
payment or an Annuity) is taxable as ordinary income.
Non-Natural Holders of a Nonqualified Contract: If the Certificate Holder
is not a natural person, a Nonqualified Contract is not treated as an annuity
for income tax purposes and the "income on the contract" for the taxable year is
currently taxable as ordinary income. "Income on the contract" is any increase
over the year in the Surrender Value, adjusted for Purchase Payments made during
the year, amounts previously distributed and amounts previously included in
income. There are some exceptions to the rule and a non-natural person should
consult with its tax 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.
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Withdrawals: In the case of a withdrawal under a Qualified Contract,
including withdrawals under SWO or ECO, the amount taxable is generally based on
the ratio of the "investment in the contract" to Account Value. The "investment
in the contract" generally equals the amount of any nondeductible Purchase
Payments paid by or on behalf of any individual less any amount received
previously which was excludable from gross income. For a Qualified Contract, the
"investment in the contract" can be zero. Special tax rules may be available for
certain distributions from a Qualified Contract.
With respect to Nonqualified Contracts, partial withdrawals, including
withdrawals under SWO, are generally treated as taxable income to the extent
that the Account Value immediately before the withdrawal exceeds the "investment
in the contract" at that time. The Account Value immediately before a withdrawal
may have to be increased by any positive market value adjustment (MVA) that
results from such a withdrawal. There is, however, no definitive guidance on the
proper tax treatment of MVAs in these circumstances, and a Certificate Holder
should contact a competent tax 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
Section 21 of this Supplement.) 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 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, or a Qualified 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 a 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 Individual Retirement
Annuity, 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
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."
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Transfers, Assignments or Exchanges of the Contract: A transfer of
ownership of a Contract, the designation of an Annuitant, payee or other
Beneficiary who is not also a Certificate Holder, the selection of certain
Annuity Dates, or the exchange of a Contract may result in certain tax
consequences. The assignment, pledge, or agreement to assign or pledge any
portion of the Account Value generally will be treated as a distribution. The
assignment or transfer of ownership of a Qualified Contract generally is not
allowed. Anyone contemplating any such designation, transfer, assignment,
selection, or exchange should contact a competent tax adviser with respect to
the potential tax effects of such a transaction.
Multiple Contracts: All deferred nonqualified annuity contracts that are
issued by the Company (or its affiliates) to the same owner during any calendar
year are treated as one annuity contract for purposes of determining the amount
includible in gross income under Section 72(e) of the Code. In addition, the
Treasury Department has specific authority to issue regulations that prevent the
avoidance of Section 72(e) through the serial purchase of annuity contracts or
otherwise.
CONTRACTS USED WITH CERTAIN RETIREMENT PLANS
Qualified Contracts in General: The Qualified Contract is designed for use
as a Code Section 408(b) Individual Retirement Annuity or as a Contract used in
connection with certain employer sponsored retirement plans. The tax rules
applicable to participants and beneficiaries in Qualified Contracts are complex.
Special favorable tax treatment may be available for certain types of
contributions and distributions. Adverse tax consequences may result from
contributions in excess of specified limits; distributions prior to age 59
(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.
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Section 403(b) Plans. Under Section 403(b), contributions made by public
school systems or nonprofit healthcare organizations and other Section 501(c)(3)
tax exempt organizations to purchase annuity contracts for their employees are
generally excludable from the gross income of the employee.
In order to be excludable from taxable income, total annual contributions
made by the participant and his or her employer cannot exceed either of two
limits set by the Code. The first limit, under Code Section 415, is generally
the lesser of 25% of compensation or $30,000. Compensation means compensation
from the participant's employer sponsoring the plan and for years beginning
after December 31, 1997, includes any elective deferrals under Code Section 402
(g) and any amounts not includible in gross income under Code Sections 125 or
457. The second limit, which is the exclusion allowance under Section 403(b), is
usually calculated according to a formula that takes into account the
participant's length of employment and any pretax contributions you and your
employer made to the plan and to certain other retirement plans. These two
limits apply to the participant's contributions as well as to any contributions
made by the employer on behalf of the participant. There is an additional limit
that specifically limits salary reduction contributions to generally no more
than $10,000 annually (subject to indexing); a participant's own limit may be
higher or lower, depending on certain conditions. In addition, Purchase Payments
will be excluded from a participant's gross income only if the Plan meets
certain nondiscrimination requirements.
Section 403(b)(11) restricts the distribution under Section 403(b)
contracts of: (1) salary reduction contributions made after December 31, 1988;
(2) earnings on those contributions; and (3) earnings during such period on
amounts held as of December 31, 1988. Distribution of those amounts may only
occur upon death of the participant, attainment of age 59 1/2, separation from
service, total and permanent disability, or financial hardship. In addition,
income attributable to salary reduction contributions may not be distributed in
the case of hardship.
INDIVIDUAL RETIREMENT ANNUITIES AND SIMPLIFIED EMPLOYEE PENSION PLANS
Section 408(b) of the Code permits eligible individuals to contribute to an
individual retirement program known as a traditional Individual Retirement
Annuity, hereinafter referred to as an "IRA." Also, distributions from certain
other types of qualified plans may be "rolled over" on a tax-deferred basis into
an IRA. Employers may establish Simplified Employee Pension (SEP) Plans and
contribute to an IRA owned by the employee. Purchasers of a Qualified Contract
for use with IRAs will be provided with supplemental information required by the
Internal Revenue Service. Purchasers should seek competent advice as to the
suitability of the Contract for use with IRAs.
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.
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
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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 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 ten years). Standardized
returns will reflect the reduction of all recurring charges during each period
(e.g., mortality and expense risk charges, annual maintenance fees,
administrative 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 Contract Holder may direct us in the voting of shares at shareholders'
meetings of the appropriate Funds(s). The number of votes to which each Contract
Holder may give direction will be determined as of the record date. The number
of votes each Contract Holder is entitled to direct with respect to a particular
Fund during the Accumulation Period equals the portion of the Account Values(s)
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.
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 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 Contract Holder,
make other changes to group Contracts that would apply only to individuals who
become Certificate Holders under that
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Contract after the effective date of such changes. If the 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 Individual Retirement Annuity may only be closed out
when Purchase Payments have not been received for a 24-month period and the
paid-up annuity benefit at maturity would be less than $20 per month. If such
right is exercised, you will be given 90 days advance written notice. No
deferred sales charge will be deducted for involuntary terminations. The Company
does not intend to exercise this right in cases where the Account Value is
reduced to $2,500 or less solely due to investment performance.
LEGAL MATTERS AND PROCEEDINGS
The Company knows of no material legal proceedings pending to which the
Separate Account or the Company is a party or which would materially affect the
Separate Account. The validity of the securities offered by this Prospectus has
been passed upon by Counsel to the Company.
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.
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CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION
================================================================================
The Statement of Additional Information contains more specific information
on the Separate Account and the Contract, as well as the financial statements of
the Separate Account and the Company. A list of the contents of the SAI is set
forth below:
General Information and History
Variable Annuity Account B
Offering and Purchase of Contracts
Performance Data
General
Average Annual Total Return Quotations
Annuity Payments
Sales Material and Advertising
Independent Auditors
Financial Statements of the Separate Account
Financial Statements of the Company
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APPENDIX 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 (except for those Contracts or Certificates issued in the state of New
York), 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 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
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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 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 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 and have amounts that have been accumulating under the
Guaranteed Account transferred to one or more of the Subaccounts available
during the Annuity Period. The Guaranteed Account cannot be used as an
investment option during the Annuity Period. Transfers made due to the election
of a lifetime Annuity Option will be subject to only a positive aggregate MVA.
DEATH BENEFIT
Full and partial withdrawals and transfers made from the Guaranteed Account
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.
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APPENDIX B
FIXED ACCOUNT
The Fixed Account is an investment option available during the Accumulation
Period under Contracts offered in certain states. 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 the Contract
Prospectus).
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 in the Fixed
Account will be transferred into the money market fund 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 calendar 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.
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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. (formerly Aetna Investment Advisers Fund, 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 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.
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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.
An investment in the Fund is neither insured nor guaranteed by the U.S.
Government.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Generation Portfolios, Inc. - Aetna Ascent VP
(formerly Aetna Ascent Variable Portfolio)
Investment Objective
Seeks to provide capital appreciation. The Portfolio is designed for
investors who have an investment horizon exceeding 15 years and who have a high
level of risk tolerance.
Policies
Invests assets within specified maximum percentage ranges and adjusts the
allocation mix in response to market trends and indicators:
o Equity securities are chosen on the basis of their potential for
capital appreciation.
o Fixed income securities may include obligations of the U.S. and
foreign governments as well as obligations of corporations and
high-yield bonds.
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o Money market investments are high quality and present minimal credit
risk.
The benchmark portfolio is 80 percent equities and 20 percent fixed income
under neutral market conditions.
Risks
Equity securities are subject to a decline in the stock market or in the
value of the company, while debt securities may be affected by changes in
general interest rates and in the creditworthiness of the issuer. High-yield
bonds have additional credit risks, including lack of liquidity, greater
likelihood of default and increased sensitivity to difficult economic and
corporate developments.
Foreign securities involve currency and other special risks not present in
domestic securities. Real estate securities may be subject to the same risks
associated with direct ownership of real estate.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Generation Portfolios, Inc. - Aetna Crossroads VP
(formerly Aetna Crossroads Variable Portfolio)
Investment Objective
Seeks to provide total return (i.e., income and capital appreciation, both
realized and unrealized). The Portfolio is designed for investors who have an
investment horizon exceeding ten years and who have a moderate level of risk
tolerance.
Policies
Invests assets within specified maximum percentage ranges and adjusts the
allocation mix in response to market trends and indicators:
o Equity securities are chosen on the basis of their potential for
capital appreciation.
o Fixed income securities may include obligations of the U.S. and
foreign governments as well as obligations of corporations and
high-yield bonds.
o Money market investments are high quality and present minimal credit
risk.
The benchmark portfolio is 60 percent equities and 40 percent fixed income
under neutral market conditions.
Risks
Equity securities are subject to a decline in the stock market or in the
value of the company; debt securities may be affected by changes in general
interest rates and in the creditworthiness of the issuer. High-yield bonds have
additional credit risks. International securities involve currency and other
special risks not present in domestic securities. Real estate securities may be
subject to the same risks associated with direct ownership of real estate.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Generation Portfolios, Inc. - Aetna Legacy VP
(formerly Aetna Legacy Variable Portfolio)
Investment Objective
Seeks to provide total return consistent with preservation of capital. The
Portfolio is designed for investors who have an investment horizon exceeding
five years and who have a low level of risk tolerance.
Policies
Invests assets within specified maximum percentage ranges and adjusts the
allocation mix in response to market trends and indicators:
o Equity securities are chosen on the basis of their potential for
capital appreciation.
o Fixed income securities may include obligations of the U.S. and
foreign governments as well as obligations of corporations and
high-yield bonds.
o Money market investments are high-quality and present minimal credit
risk.
The benchmark portfolio is 40 percent equities and 60 percent fixed income
under neutral market conditions.
Risks
Equity securities are subject to a decline in the stock market or value of
the issuer; debt securities may be affected by changes in general interest rates
and creditworthiness of the issuer. High-yield bonds have additional credit
risks. International securities involve currency and other special
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risks not present in domestic securities. Real estate securities may be subject
to the same risks associated with direct ownership of real estate.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Variable Portfolios, Inc. - Aetna Growth VP
(formerly Aetna Variable Growth Portfolio)
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
(formerly Aetna Variable Index Plus Portfolio)
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.
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
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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. 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
(formerly Aetna Variable Small Company Portfolio)
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
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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.
Aetna Variable Portfolios, Inc. - Aetna Value Opportunity VP
(formerly Aetna Variable Capital Appreciation Portfolio)
Investment Objective
Seeks growth of capital primarily through investment in a diversified
portfolio of common stocks and securities convertible into common stock.
Policies
Normally invests at least 65 percent of its net assets in common stocks.
May also invest in convertible and non-convertible preferred stocks. The
Portfolio will use a value oriented approach to stock selection. The Portfolio
may invest up to 25 percent of its total assets in foreign securities, buy and
sell put and call options on stock indices and on individual stocks, purchase
futures contracts, options contracts, engage in currency hedging and purchase
securities on a "when-issued," delayed-delivery or forward-commitment basis.
Risks
Equity securities are subject to a decline in the stock market or in the
value of the issuer, and preferred stocks have price risk and some interest rate
and credit risk. The value of debt securities may be affected by changes in
general interest rates and in the creditworthiness of the issuer. Investments in
securities of foreign issuers or securities denominated in foreign currencies
involve risks not present in domestic markets. 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.
Calvert Social Balanced Portfolio
(formerly Calvert Responsibly Invested Balanced Portfolio)
Investment Objective
Seeks to achieve a total return above the rate of inflation through an
actively managed, nondiversified portfolio of common and preferred stocks, bonds
and money market instruments which offer income and capital growth opportunity
and which satisfy the social criteria established for the Portfolio.
Policies
The Portfolio may purchase both common and preferred stocks. Although there
is no predetermined percentage of assets allocated to stocks, bonds, or money
market instruments, the Portfolio will invest a least 25 percent of its assets
in senior fixed income securities. The Portfolio normally invests in
investment-grade bonds rated in one of the four highest rating categories by
Standard & Poor's Corporation or by Moody's Investors Service, Inc. or, if not
rated, that are determined by the Portfolio's investment adviser to be of
comparable quality. The Portfolio may invest up to 10 percent of its assets in
foreign securities.
Risks
Since the Portfolio is nondiversified, the value of the shares may be more
susceptible to any single economic, political, or regulatory event than the
shares of a diversified portfolio. Fixed income investments are subject to
interest rate risk. There are also risks involved in investing in foreign
securities. These include currency risks, less publicly available information
about foreign companies, different audit and financial reporting standards, and
less government supervision and regulation.
Investment Adviser: Calvert Asset Management Company, Inc.
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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 - Growth Portfolio
Investment Objective
Seeks capital appreciation by investing in common stock, although its
investments are not restricted to any one type of security.
Policies
The Portfolio may, however, pursue growth in larger companies that hold a
strong position in the market or industry. These may be found in mature or
declining industries. Companies that have strong growth potential often have new
products, technologies, distribution channels, or other opportunities.
Generally, these domestic and foreign companies tend to be small- and mid-sized
companies that have higher than average price/earnings (P/E) ratios. A high P/E
ratio means that the stock is more expensive than average relative to the
company's earnings. May not invest more than 50 percent of its assets in foreign
securities.
Risks
Stock values may fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. The market
prices of stocks with high P/E ratios may be particularly sensitive to economic
market or company news. 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
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.
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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 - Overseas Portfolio
Investment Objective
Seeks long-term growth by investing mainly in foreign securities.
Policies
Normally invests at least 65 percent of the Portfolio's total assets in
securities of issuers whose principal activities are located outside the United
States. Expects to invest a majority of its assets in equity securities, but may
also invest in debt securities of any quality. Invests in securities of both
developed and emerging markets. May invest in the securities of any issuer,
including companies and other business organizations as well as governments and
government agencies. Will tend to focus on the equity securities of both large
and small companies. May invest in short-term debt securities and money market
instruments for cash management purposes. When allocating the Portfolio's
investments among countries and regions, the Portfolio managers consider the
size of the market in each country and region relative to the size of the
international market as a whole. May not invest more than 25 percent of its
total assets in any one industry.
Risks
Stock values fluctuate in response to the activities of individual
companies, and general market and economic conditions. International funds have
increased economic and political risks because they are exposed to events and
factors in the various world markets, especially in emerging markets. In
addition, changes in the value of foreign currencies can significantly affect
the Portfolio's share price. The Portfolio seeks to reduce investment risk by
diversifying its holdings among many companies and industries.
Investment Adviser: Fidelity Management & Research Company
Fidelity Investments Variable Insurance
Products Fund II - Asset Manager Portfolio
Investment Objective
Seeks high total return with reduced risk over the long term by allocating
its assets among domestic and foreign stocks, bonds and short-term money market
instruments.
Policies
Invests in a diverse range of stocks, bonds, short-term, and money market
instruments, issued in the United States and abroad. The stock class includes
equity securities of all types. The bond class includes all varieties of fixed
income instruments with maturities of more than three years. The short-term
instruments class includes all types of short-term instruments with remaining
maturities of three years or less. The Portfolio has a neutral mix which
represents the way investments generally will be allocated over the long term.
This mix will vary over short-term periods - within defined ranges based on the
current outlook for the different markets. May invest up to 50 percent of its
total assets in foreign securities.
Risks
The Portfolio seeks to reduce its overall risk by diversifying among
different types of investments, but aggressively invests in a wide variety of
security types, including stocks and bonds issued in developed and developing
countries. Stock values fluctuate in response to the activities of individual
companies and general market and economic conditions. The value of bonds and
short-term instruments 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.
Investment Adviser: Fidelity Management & Research Company
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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
Fidelity Investments Variable Insurance
Products Fund II - Index 500 Portfolio
Investment Objective
Seeks to provide investment results that correspond to the total return of
common stocks publicly traded in the United States by duplicating the
composition and total return of the Standard & Poor's Composite Index of 500
Stocks (S&P 500).
Policies
Normally invests at least 80 percent (65 percent if Portfolio assets are
below $20 million) of the Portfolio's assets in equity securities of companies
that comprise the S&P 500. In seeking a 98 percent or better long-term
correlation of the Portfolio's total return to that of the S&P 500, The
investment adviser employs a "passive" or "indexing" approach and tries to
allocate its assets similarly to those of the index. The Portfolio's composition
may not always be identical to that of the index. If extraordinary circumstances
warrant, the investment adviser may exclude a stock held in the S&P 500 and
include a similar stock in its place if doing so will help the Portfolio achieve
its objective. The investment adviser monitors the correlation between the
performance of the Portfolio and the S&P 500 on a regular basis. Although the
Portfolio focuses on common stocks, it may invest in other equity securities and
other types of instruments. The Portfolio may invest up to 50 percent of its
assets in foreign securities.
Risks
Stock values fluctuate in response to the activities of individual
companies, and general market and economic conditions. Foreign securities,
foreign currencies, and securities issued by U.S. entities with substantial
foreign operations may involve additional risks and considerations. These
include risks related to political or economic conditions in foreign countries,
fluctuations in foreign debt currencies, withholding or other taxes, operational
risks, increased regulatory burdens, and potentially less stringent investor
protection and disclosure standards of foreign markets.
Investment Adviser: Fidelity Management & Research Company; Subadviser:
Bankers Trust 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 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
9
<PAGE>
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 - Flexible Income Portfolio
Investment Objective
Seeks to obtain maximum total return, consistent with the preservation of
capital.
Policies
The Portfolio invests at least 80 percent of its assets in income-producing
securities which may include: corporate bonds and notes, preferred stock,
income-producing common stocks, debt securities convertible or exchangeable into
equity securities, and debt securities with the right to acquire equity
securities as evidenced by warrants attached to or acquired with the securities.
May invest to a lesser degree in common stocks, other equity securities, or debt
securities not currently paying dividends or interest. May purchase securities
of any maturity and quality. Average maturity and quality of its portfolio may
vary substantially. May invest without limit in foreign securities, including
those of corporate and government issuers, as well as in high-yield/high-risk
securities. May have substantial holdings of such securities, as well as in
high-yield/high-risk securities (or "junk bonds") which are debt securities
rated below investment grade by the primary rating agencies such as Standard &
Poor's and Moody's.
Risks
Foreign investing involves risks that are different in some respects from
investments in securities of U.S. issuers including: economic/political
volatility; less government regulation and supervision of foreign stock
exchanges, brokers and listed companies; and price, interest rate and currency
risk. The value of lower-quality securities generally depends more on the
ability of the issuer to meet interest and principal payments than is true for
higher-quality securities. Issuers of high-yield securities are more vulnerable
to real or perceived economic and political changes or adverse developments
specific to the issuer. In the event of a default, the Portfolio would
experience a reduction of its income and a decline in the market value of the
defaulted securities.
Investment Adviser: Janus Capital Corporation
10
<PAGE>
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 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
11
<PAGE>
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.
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")
MFS World Governments Series
Investment Objective
Seeks not only preservation but also growth of capital, together with
moderate current income.
Policies
The Series seeks to achieve its investment objective through a
professionally managed, internationally diversified portfolio consisting
primarily in debt securities and, to a lesser extent, equity securities. Under
normal circumstances, the Series invests at least 80 percent of its assets in
debt securities. The Series may invest up to 100 percent (although it generally
expects to invest not more than 80 percent) of its net assets in foreign
securities. At least 65 percent of the Series' assets will be invested in at
least three different countries, one of which may be the U.S., except when the
Adviser believes that investing for temporary defensive purposes is appropriate.
U.S. assets will be invested in high-quality debt securities, and the remainder
of the assets will be diversified among countries where opportunities for total
return are expected to be most attractive. It is currently expected that
investments in foreign countries will be primarily in government securities to
minimize credit risks.
Risks
Investing in 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
(formerly Oppenheimer Capital Appreciation 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.
12
<PAGE>
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 Global Securities Fund
Investment Objective
Seeks long-term capital appreciation by investing a substantial portion of
its assets in securities of foreign issuers, "growth-type" companies, cyclical
industries and special situations which are considered to have appreciation
possibilities but which may be considered to be speculative.
Policies
Invests a substantial portion of its assets in securities of foreign
issuers, "growth-type" companies (those which, in the opinion of the manager,
have relatively favorable long-term prospects for increasing demand or which
develop new products and retain a significant part of earnings for research and
development), cyclical industries, and special investment situations which are
considered to have appreciation possibilities. May invest in foreign securities
and the relative amount of such investments will change from time to time.
Risks
Stock prices will fluctuate. Foreign securities markets may be less liquid
and more volatile than the 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. Investments 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.
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, 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.
13
<PAGE>
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 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
14
<PAGE>
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 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.
<PAGE>
Portfolio Partners T. Rowe Price Growth Equity Portfolio
Investment Objective
Seeks long-term growth of capital and, secondarily, to increase dividend
income by investing primarily in common stocks of well established growth
companies.
Policies
Under normal market conditions the Portfolio invests at least 65 percent of
its total assets in common stocks issued by a diversified group of growth
companies. The companies in which the Portfolio invests normally (but not
always) pay dividends, which are generally expected to rise in future years as
earnings increase. Most of its assets will be invested in U.S. common stocks.
However, the Portfolio may invest in foreign securities and convertible
securities and warrants, when the subadviser considers such investments
consistent with he Portfolio's investment objective and policies.
The Portfolio generally seeks to invest in securities of companies that
satisfy one or more of several criteria established by the subadviser. For
example, the subadviser generally seeks companies with superior growth in
earnings and cash flow; the ability to sustain earnings momentum even during
economic slowdowns by operating in so-called "fertile fields" (areas where
earnings and dividends can outpace inflation and the overall economy); and the
capability to expand even during times of slow growth. The subadviser generally
favors companies whose profits increase due to economic factors rather than
one-time events such as lower taxes. The Portfolio may engage in strategic
transactions, which may include the use of derivatives.
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. 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: Aetna Life Insurance and Annuity Company; Subadviser:
T. Rowe Price Associates, Inc.
<PAGE>
- --------------------------------------------------------------------------------
VARIABLE ANNUITY ACCOUNT B
OF
AETNA LIFE INSURANCE AND ANNUITY COMPANY
- --------------------------------------------------------------------------------
Statement of Additional Information dated May 1, 1998
Marathon Plus
New York Growth Plus
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the current Prospectus for Variable Annuity Account B (the
"Separate Account") dated May 1, 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
Page
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
-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
("ALIAC") 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 Marathon Plus Contracts are as follows:
<TABLE>
<S> <C>
Aetna Ascent VP (formerly Aetna Ascent Variable Fidelity VIP II Asset Manager Portfolio
Portfolio) Fidelity VIP II Contrafund Portfolio
Aetna Balanced VP, Inc. (formerly Aetna Fidelity VIP II Index 500 Portfolio
Investment Advisers Fund, Inc.) Janus Aspen Aggressive Growth Portfolio
Aetna Income Shares d/b/a Aetna Bond VP Janus Aspen Balanced Portfolio
Aetna Crossroads VP (formerly Aetna Crossroads Janus Aspen Flexible Income Portfolio
Variable Portfolio) Janus Aspen Growth Portfolio
Aetna Growth VP (formerly Aetna Variable Growth Janus Aspen Worldwide Growth Portfolio
Portfolio) MFS Total Return Series
Aetna Variable Fund d/b/a/ Aetna Growth and MFS World Government Series
Income VP Oppenheimer Aggressive Growth Fund
Aetna Index Plus Large Cap VP (formerly Aetna (formerly Oppenheimer Capital Appreciation
Variable Index Plus Portfolio) Fund)
Aetna International VP Oppenheimer Global Securities Fund
Aetna Legacy VP (formerly Aetna Legacy Variable Oppenheimer Growth & Income Fund
Portfolio) Oppenheimer Strategic Bond Fund
Aetna Variable Encore Fund d/b/a Aetna Money Market VP Portfolio Partners MFS Emerging Equities
Aetna Real Estate Securities VP Portfolio
Aetna Small Company VP (formerly Aetna Variable Portfolio Partners MFS Research Growth
Small Company Portfolio) Portfolio
Aetna Value Opportunity VP (formerly Aetna Portfolio Partners MFS Value Equity Portfolio
Variable Capital Appreciation Portfolio) Portfolio Partners Scudder International
Calvert Social Balanced Portfolio (formerly Calvert Growth Portfolio
Responsibly Invested Balanced Portfolio) Portfolio Partners T. Rowe Price Growth
Fidelity VIP Equity-Income Portfolio Equity Portfolio
Fidelity VIP Growth Portfolio
Fidelity VIP High Income Portfolio
Fidelity VIP Overseas Portfolio
</TABLE>
The Funds currently available under the New York Growth Plus Contracts are as
follows:
Federated American Leaders Fund II
Federated Equity Income Fund II
Federated Fund for U. S. Government Securities II
Federated Growth Strategies Fund II
Federated High Income Bond Fund II
Federated International Equity Fund II
Federated Prime Money Fund II
Federated Utility Fund II
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.
-3-
<PAGE>
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 amount recurring
charges under the Contracts during each period (e.g., 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 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.
-4-
<PAGE>
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 as described under
"General" above; the Company may also advertise returns based on lower charges
that may apply to particular Contracts. Table A reflects the total return
quotations for Contracts issued nationwide (other than Contracts or Certificates
issued in New York). Table B reflects the total return quotations for Marathon
Plus and Growth Plus Contracts or Certificates issued in the state of New York.
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 nonstandardized
performance, the "Since Inception" column shows average annual total return
since the Fund's inception date.
-5-
<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 Ascent VP 12.02% 17.77% 08/31/95
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 14.60% 12.42% 11.05% 06/30/89
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP(1) 0.51% 4.85% 7.68%
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 9.72% 14.47% 08/31/95
- -----------------------------------------------------------------------------------------------------------------------------------
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 Legacy VP 6.67% 11.06% 08/31/95
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP(1)(2) (2.29%) 2.71% 4.45%
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 12.09% 05/30/97
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 12.23% 05/30/97
- -----------------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 12.21% 10.86% 11.06% 11/30/92
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 20.18% 22.66% 12/30/94
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 15.59% 21.36% 12/30/94
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio 9.81% 12.49% 06/30/95
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 3.74% 10.41% 01/31/95
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager Portfolio 12.78% 15.21% 01/31/95
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 16.24% 19.87% 06/30/95
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Index 500 Portfolio 24.74% 25.00% 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 Flexible Income Portfolio 3.95% 10.71% 10/31/94
- -----------------------------------------------------------------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------------------------------------------------------------
MFS World Governments Series (8.85%) (2.82%) 05/31/96
- -----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth Fund 2.03% 05/30/97
- -----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund 0.59% 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
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners T. Rowe Price Growth Equity Portfolio (5.14%) 11/28/97
- -----------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/Portfolio Partners T. Rowe Price Growth 20.32% 22.41% 02/28/95
Equity(3)
- -----------------------------------------------------------------------------------------------------------------------------------
</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.
-6-
<PAGE>
TABLE A (continued)
<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 Ascent VP 18.20% 20.15% 07/05/95
- ------------------------------------------------------------------------------------------------------------------------------------
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 Crossroads VP 15.91% 16.84% 07/05/95
- ------------------------------------------------------------------------------------------------------------------------------------
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 Legacy VP 12.88% 13.35% 07/05/95
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP(1)(2) 3.98% 4.13% 3.34% 4.45%
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 32.59% 33.01% 12/27/96
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 37.39% 38.04% 12/13/96
- ------------------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio(1) 18.38% 18.91% 11.30% 10.83%
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio(1) 26.30% 23.75% 18.47% 15.08%
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio(1) 21.73% 22.48% 16.34% 15.54%
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio(1) 16.00% 15.78% 12.30% 11.22%
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio(1) 9.98% 9.89% 12.51% 8.08%
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager Portfolio 18.94% 15.72% 11.39% 11.15% 09/06/89
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 22.39% 26.39% 01/03/95
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Index 500 Portfolio 30.82% 28.92% 18.22% 18.19% 08/27/92
- ------------------------------------------------------------------------------------------------------------------------------------
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 Flexible Income Portfolio 10.18% 13.14% 8.48% 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
- ------------------------------------------------------------------------------------------------------------------------------------
MFS World Governments Series (2.53%) 4.07% 3.43% 06/14/94
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth Fund 10.09% 19.46% 14.28% 14.45%
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund 20.69% 12.20% 17.13% 10.67% 11/12/90
- ------------------------------------------------------------------------------------------------------------------------------------
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%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners T. Rowe Price Growth Equity Portfolio 2.01% 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/Portfolio Partners T. Rowe Price Growth
Equity(3) 26.43% 23.85% 18.07% 18.02% 01/09/89
- ------------------------------------------------------------------------------------------------------------------------------------
</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.
-7-
<PAGE>
TABLE B
Contracts or Certificates Issued in New York
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Date
Contributions
First
STANDARDIZED Received
Under the
Separate
Account
- -----------------------------------------------------------------------------------------------------------------------
SUBACCOUNT 1 Year 5 Year 10 Year Inception*
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Ascent VP 12.02% 17.77% 08/31/95
- -----------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 14.60% 12.42% 11.05% 06/30/89
- -----------------------------------------------------------------------------------------------------------------------
Aetna Bond VP(1) 0.51% 4.85% 7.68%
- -----------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 9.72% 14.47% 08/31/95
- -----------------------------------------------------------------------------------------------------------------------
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 Legacy VP 6.67% 11.06% 08/31/95
- -----------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP(1)(2) (2.29%) 2.71% 4.45%
- -----------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 12.09% 05/30/97
- -----------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 12.23% 05/30/97
- -----------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 12.21% 10.86% 11.06% 11/30/92
- -----------------------------------------------------------------------------------------------------------------------
Federated American Leaders Fund II 22.64% 23.76% 09/30/94
- -----------------------------------------------------------------------------------------------------------------------
Federated Equity Income Fund II 8.34% 02/28/97
- -----------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II 0.62% 4.55% 09/30/94
- -----------------------------------------------------------------------------------------------------------------------
Federated Growth Strategies Fund II 17.72% 21.26% 11/30/95
- -----------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II 5.49% 11.93% 09/30/94
- -----------------------------------------------------------------------------------------------------------------------
Federated International Equity Fund II 2.01% 5.46% 05/31/95
- -----------------------------------------------------------------------------------------------------------------------
Federated Prime Money Fund II(2) (2.76%) 2.45% 11/30/94
- -----------------------------------------------------------------------------------------------------------------------
Federated Utility Fund II 17.35% 16.30% 09/30/94
- -----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 20.18% 22.66% 12/30/94
- -----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 15.59% 21.36% 12/30/94
- -----------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio 9.81% 12.49% 06/30/95
- -----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 3.74% 10.41% 01/31/95
- -----------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager Portfolio 12.78% 15.21% 01/31/95
- -----------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 16.24% 19.87% 06/30/95
- -----------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Index 500 Portfolio 24.74% 25.00% 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 Flexible Income Portfolio 3.95% 10.71% 10/31/94
- -----------------------------------------------------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------------------------------------------------
MFS World Governments Series (8.85%) (2.82%) 05/31/96
- -----------------------------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth Fund 2.03% 05/30/97
- -----------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund 0.59% 05/30/97
- -----------------------------------------------------------------------------------------------------------------------
Oppenheimer Growth & Income Fund 10.25% 05/30/97
- -----------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund (2.07%) 05/30/97
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Date
Contributions
First
STANDARDIZED Received
Under the
Separate
Account
- -----------------------------------------------------------------------------------------------------------------------------------
SUBACCOUNT 1 Year 5 Year 10 Year Inception*
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners T. Rowe Price Growth Equity Portfolio (5.14%) 11/28/97
- -----------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/Portfolio Partners T. Rowe Price Growth
Equity(3) 20.32% 22.41% 02/28/95
- -----------------------------------------------------------------------------------------------------------------------------------
</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 Aetna Money Market VP and Federated Prime Money Fund
II for the 7-day period ended December 31, 1997 (on an annualized basis)
was 4.061% and 3.68%, respectively. 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.
-9-
<PAGE>
TABLE B (continued)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
NON-STANDARDIZED Fund
Inception
Date
- -----------------------------------------------------------------------------------------------------------------------
SUBACCOUNT 1 Year 3 Years 5 Years 10 Years Inception**
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aetna Ascent VP 18.20% 20.15% 07/05/95
- -----------------------------------------------------------------------------------------------------------------------
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 Crossroads VP 15.91% 16.84% 07/05/95
- -----------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP(1) 28.05% 27.01% 16.04% 14.99%
- -----------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 31.13% 31.13% 12/13/96
- -----------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 32.00% 32.76% 09/16/96
- -----------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 12.88% 13.35% 07/05/95
- -----------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP(1)(2) 3.98% 4.13% 3.34% 4.45%
- -----------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 32.59% 33.01% 12/27/96
- -----------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 37.39% 38.04% 12/13/96
- -----------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio(1) 18.38% 18.91% 11.30% 10.83%
- -----------------------------------------------------------------------------------------------------------------------
Federated American Leaders Fund II 30.47% 27.27% 19.85% 02/10/94
- -----------------------------------------------------------------------------------------------------------------------
Federated Equity Income Fund II 23.04% 01/02/97
- -----------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II 7.04% 5.65% 4.89% 03/28/94
- -----------------------------------------------------------------------------------------------------------------------
Federated Growth Strategies Fund II 25.24% 22.42% 10/02/95
- -----------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II 12.22% 14.50% 9.77% 03/01/94
- -----------------------------------------------------------------------------------------------------------------------
Federated International Equity Fund II 8.53% 6.72% 05/07/95
- -----------------------------------------------------------------------------------------------------------------------
Federated Prime Money Fund II(2) 3.45% 3.47% 3.44% 11/17/94
- -----------------------------------------------------------------------------------------------------------------------
Federated Utility Fund II 24.85% 18.91% 12.93% 02/10/94
- -----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio(1) 26.30% 23.75% 18.47% 15.08%
- -----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio(1) 21.73% 22.48% 16.34% 15.54%
- -----------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio(1) 16.00% 15.78% 12.30% 11.22%
- -----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio(1) 9.98% 9.89% 12.51% 8.08%
- -----------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager Portfolio 18.94% 15.72% 11.39% 11.15% 09/06/89
- -----------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 22.39% 26.39% 01/03/95
- -----------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Index 500 Portfolio 30.82% 28.92% 18.22% 18.19% 08/27/92
- -----------------------------------------------------------------------------------------------------------------------
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 Flexible Income Portfolio 10.18% 13.14% 8.48% 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
- -----------------------------------------------------------------------------------------------------------------------
MFS World Governments Series (2.53%) 4.07% 3.43% 06/14/94
- -----------------------------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth Fund 10.09% 19.46% 14.28% 14.45%
- -----------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund 20.69% 12.20% 17.13% 10.67% 11/12/90
- -----------------------------------------------------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
-10-
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
NON-STANDARDIZED Fund
Inception
Date
- -----------------------------------------------------------------------------------------------------------------------------------
SUBACCOUNT 1 Year 3 Years 5 Years 10 Years Inception**
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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%
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners T. Rowe Price Growth Equity Portfolio 2.01% 11/28/97
- -----------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/Portfolio Partners T. Rowe Price Growth
Equity(3) 26.43% 23.85% 18.07% 18.02% 01/09/89
- -----------------------------------------------------------------------------------------------------------------------------------
</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 Aetna Money Market VP and Federated Prime Money Fund
II for the 7-day period ended December 31, 1997 (on an annualized basis)
was 4.061% and 3.68%, respectively. 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.
-11-
<PAGE>
ANNUITY PAYMENTS
When Annuity payments are to begin, the value of the Account is determined using
Accumulation Unit values as of the tenth Valuation Date before the first Annuity
payment is due. Such value (less any applicable premium tax) is applied to
provide an Annuity in accordance with the Annuity and investment options
elected.
The Annuity option tables found in the Contract show, for each form of Annuity,
the amount of the first Annuity payment for each $1,000 of value applied.
Thereafter, variable Annuity payments fluctuate as the Annuity Unit value(s)
fluctuates with the investment experience of the selected investment option(s).
The first payment and subsequent payments also vary depending on the assumed net
investment rate selected (3.5% or 5% per annum). Selection of a 5% rate causes a
higher first payment, but Annuity payments will increase thereafter only to the
extent that the net investment rate increases by more than 5% on an annual
basis. Annuity payments would decline if the rate failed to increase by 5%. Use
of the 3.5% assumed rate causes a lower first payment, but subsequent payments
would increase more rapidly or decline more slowly as changes occur in the net
investment rate.
When the Annuity Period begins, the Annuitant is credited with a fixed number of
Annuity Units (which does not change thereafter) in each of the designated
investment options. This number is calculated by dividing (a) by (b), where (a)
is the amount of the first Annuity payment based on a particular investment
option, and (b) is the then current Annuity Unit value for that investment
option. As noted, Annuity Unit values fluctuate from one Valuation Date to the
next; such fluctuations reflect changes in the net investment factor for the
appropriate Subaccount(s) (with a ten Valuation Date lag which gives the Company
time to process Annuity payments) and a mathematical adjustment which offsets
the assumed net investment rate of 3.5% or 5% per annum.
The operation of all these factors can be illustrated by the following
hypothetical example. These procedures will be performed separately for the
investment options selected during the Annuity Period.
EXAMPLE:
Assume that, at the date Annuity payments are to begin, there are 3,000
Accumulation Units credited under a particular Account and that the value of an
Accumulation Unit for the tenth Valuation Date prior to retirement was
$13.650000. This produces a total value of $40,950.
Assume also that no premium tax is payable and that the Annuity table in the
Contract provides, for the option elected, a first monthly variable Annuity
payment of $6.68 per $1000 of value applied; the Annuitant's first monthly
payment would thus be 40.950 multiplied by $6.68, or $273.55.
Assume then that the value of an Annuity Unit for the Valuation Date on which
the first payment was due was $13.400000. When this value is divided into the
first monthly payment, the number of Annuity Units is determined to be 20.414.
The value of this number of Annuity Units will be paid in each subsequent month.
If the net investment factor with respect to the appropriate Subaccount is
1.0015000 as of the tenth Valuation Date preceding the due date of the second
monthly payment, multiplying this factor by .9999058* (to neutralize the assumed
net investment rate of 3.5% per annum built into the number of 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.
-12-
<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 assumed net investment rate of 5% is elected, the appropriate factor to
neutralize such assumed rate would be .9998663.
SALES MATERIAL AND ADVERTISING
The Company may include hypothetical illustrations in its sales literature that
explain the mathematical principles of dollar cost averaging, compounded
interest, tax deferred accumulation, and the mechanics of variable annuity
contracts. The Company may also discuss the difference between variable annuity
contracts and other types of savings or investment products, including, but not
limited to, personal savings accounts and certificates of deposit.
We may distribute sales literature that compares the percentage change in
Accumulation Unit values for any of the Subaccounts to established market
indices such as the Standard & Poor's 500 Stock Index and the Dow Jones
Industrial Average or to the percentage change in values of other management
investment companies that have investment objectives similar to the Subaccount
being compared.
We may publish in advertisements and reports, the ratings and other information
assigned to us by one or more independent rating organizations such as A.M. Best
Company, Duff & Phelps, Standard & Poor's Corporation and Moody's Investors
Services, Inc. The purpose of the ratings is to reflect our financial strength
and/or claims-paying ability. We may also quote ranking services such as
Morningstar's Variable Annuity/Life Performance Report and Lipper's Variable
Insurance Products Performance Analysis Service (VIPPAS), which rank variable
annuity or life Subaccounts or their underlying funds by performance and/or
investment objective. 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.
-13-
<PAGE>
FINANCIAL STATEMENTS
VARIABLE ANNUITY ACCOUNT B
Index
Statement of Assets and Liabilities..................................... S-2
Statements of Operations and Changes in Net Assets...................... S-6
Notes to Financial Statements........................................... S-7
Independent Auditors' Report............................................ S-25
S-1
<PAGE>
Variable Annuity Account B
Statement of Assets and Liabilities - December 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at net asset value: (Note 1)
Aetna Variable Fund; 30,411,094 shares (cost $955,207,313) ...................... $1,022,883,150
Aetna Income Shares; 5,674,428 shares (cost $72,136,754) ........................ 72,918,472
Aetna Variable Encore Fund; 9,348,762 shares (cost $123,509,269) ................ 124,939,137
Aetna Investment Advisers Fund, Inc.; 10,156,919 shares (cost $141,710,363) ..... 162,842,121
Aetna GET Fund, Series B; 1,326,295 shares (cost $14,665,182) ................... 20,859,924
Aetna GET Fund, Series C; 866,713 shares (cost $8,784,556) ...................... 10,929,107
Aetna Ascent Variable Portfolio; 1,448,001 shares (cost $19,409,307) ............ 20,443,736
Aetna Crossroads Variable Portfolio; 1,552,948 shares (cost $19,616,465) ........ 20,320,625
Aetna Legacy Variable Portfolio; 1,652,443 shares (cost $19,438,586) ............ 19,994,608
Aetna Variable Portfolio, Inc.:
Capital Appreciation Portfolio; 328,354 shares (cost $4,457,675) ............... 3,912,594
Growth Portfolio; 326,907 shares (cost $4,163,981) ............................. 3,218,910
Index Plus Portfolio; 2,014,660 shares (cost $26,897,404) ...................... 28,239,788
Small Company Portfolio; 478,249 shares (cost $6,406,805) ...................... 6,107,129
Alger American Funds:
Balanced Portfolio; 525,665 shares (cost $4,964,549) ........................... 5,656,151
Income and Growth Portfolio; 1,287,394 shares (cost $11,439,405) ............... 14,148,460
Leveraged AllCap Portfolio; 616,315 shares (cost $12,739,767) .................. 14,280,009
American Century Investments:
Balanced Fund; 563,499 shares (cost $4,180,851) ................................ 4,643,230
International Fund; 855,695 shares (cost $5,491,134) ........................... 5,852,955
Calvert Social Balanced Portfolio; 490,079 shares (cost $912,050) ............... 971,337
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio; 5,712,922 shares (cost $118,902,067) .................. 138,709,740
Growth Portfolio; 2,167,158 shares (cost $65,817,036) .......................... 80,401,549
High Income Portfolio; 2,598,408 shares (cost $32,563,692) ..................... 35,286,379
Overseas Portfolio; 677,325 shares (cost $12,543,713) .......................... 13,004,643
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio; 652,031 shares (cost $10,605,372) ..................... 11,743,075
Contrafund Portfolio; 5,407,595 shares (cost $89,625,610) ...................... 107,827,442
Index 500 Portfolio; 673,020 shares (cost $66,103,932) ......................... 76,986,772
Investment Grade Bond Portfolio; 523,741 shares (cost $6,191,022) .............. 6,578,182
Insurance Management Series:
American Leaders Fund II; 5,952,606 shares (cost $86,738,072) .................. 116,849,662
Equity Income Fund II; 1,619,705 shares (cost $19,027,165) ..................... 19,938,571
Growth Strategies Fund II; 1,406,137 shares (cost $19,150,654) ................. 22,709,106
High Income Bond Fund II; 4,859,621 shares (cost $49,449,772) .................. 53,212,853
International Equity Fund II; 1,136,596 shares (cost $13,007,527) .............. 13,946,028
Prime Money Fund II; 7,530,487 shares (cost $7,530,487) ........................ 7,530,487
U.S. Government Securities Fund II; 1,252,067 shares (cost 12,683,585) ......... 13,196,784
Utility Fund II; 1,840,648 shares (cost $20,501,843) ........................... 26,302,858
Janus Aspen Series:
Aggressive Growth Portfolio; 1,867,831 shares (cost $33,789,408) ............... 38,383,925
Balanced Portfolio; 1,782,815 shares (cost $27,682,920) ........................ 31,145,778
Flexible Income Portfolio; 894,277 shares (cost $10,167,023) ................... 10,534,588
Growth Portfolio; 2,203,400 shares (cost $34,954,619) .......................... 40,718,827
Worldwide Growth Portfolio; 6,953,978 shares (cost $144,443,276) ............... 162,653,541
Lexington Emerging Markets Fund; 318,004 shares (cost $3,542,964) ............... 2,833,416
Lexington Natural Resources Trust Fund; 464,813 shares (cost $6,752,492) ........ 6,930,364
</TABLE>
S-2
<PAGE>
Variable Annuity Account B
Statement of Assets and Liabilities - December 31, 1997 (continued):
<TABLE>
<S> <C>
MFS Funds:
Total Return Series; 1,140,943 shares (cost $16,998,729) ............................ $ 18,973,878
Worldwide Government Series; 129,706 shares (cost $1,330,232) ....................... 1,324,295
Oppenheimer Funds:
Capital Appreciation Fund; 90,044 shares (cost $3,554,414) .......................... 3,688,200
Global Securities Fund; 125,453 shares (cost $2,681,784) ............................ 2,680,937
Growth & Income Fund; 616,565 shares (cost $12,222,979) ............................. 12,688,907
Strategic Bond Fund; 604,043 shares (cost $3,113,874) ............................... 3,092,701
Portfolio Partners, Inc. (PPI):
PPI MFS Emerging Equities Portfolio; 2,221,275 shares (cost $96,046,526) ............ 95,292,694
PPI MFS Research Growth Portfolio; 6,783,433 shares (cost $67,030,057) .............. 65,867,130
PPI MFS Value Equity Portfolio; 515,803 shares (cost $15,207,018) ................... 15,427,681
PPI Scudder International Growth Portfolio; 897,175 shares (cost $12,454,736) ....... 12,650,163
PPI T. Rowe Price Growth Equity Portfolio; 2,067,651 shares (cost $88,372,335) ...... 90,170,258
--------------
NET ASSETS (cost $2,666,918,351) ..................................................... $2,922,442,857
==============
Net assets represented by:
Reserves for annuity contracts in accumulation and payment period: (Notes 1 and 5)
</TABLE>
<TABLE>
<S> <C>
Aetna Variable Fund:
Annuity contracts in accumulation ........... $892,006,381
Annuity contracts in payment period ......... 130,876,769
Aetna Income Shares:
Annuity contracts in accumulation ........... 69,236,488
Annuity contracts in payment period ......... 3,681,984
Aetna Variable Encore Fund:
Annuity contracts in accumulation ........... 124,939,137
Aetna Investment Advisers Fund, Inc.:
Annuity contracts in accumulation ........... 150,761,384
Annuity contracts in payment period ......... 12,080,737
Aetna GET Fund, Series B:
Annuity contracts in accumulation ........... 20,859,924
Aetna GET Fund, Series C:
Annuity contracts in accumulation ........... 10,929,107
Aetna Ascent Variable Portfolio:
Annuity contracts in accumulation ........... 20,443,736
Aetna Crossroads Variable Portfolio:
Annuity contracts in accumulation ........... 20,250,904
Annuity contracts in payment period ......... 69,721
Aetna Legacy Variable Portfolio:
Annuity contracts in accumulation ........... 18,710,015
Annuity contracts in payment period ......... 1,284,593
Aetna Variable Portfolio, Inc.:
Capital Appreciation Portfolio:
Annuity contracts in accumulation ........... 3,912,594
Growth Portfolio:
Annuity contracts in accumulation ........... 3,210,344
Annuity contracts in payment period ......... 8,566
Index Plus Portfolio:
Annuity contracts in accumulation ........... 28,074,705
Annuity contracts in payment period ......... 165,083
</TABLE>
S-3
<PAGE>
Variable Annuity Account B
Statement of Assets and Liabilities - December 31, 1997 (continued):
<TABLE>
<S> <C>
Small Company Portfolio:
Annuity contracts in accumulation .................... $ 6,059,783
Annuity contracts in payment period .................. 47,346
Alger American Funds:
Balanced Portfolio:
Annuity contracts in accumulation .................... 5,656,151
Income and Growth Portfolio:
Annuity contracts in accumulation .................... 14,148,460
Leveraged AllCap Portfolio:
Annuity contracts in accumulation .................... 14,280,009
American Century Investments:
Balanced Fund:
Annuity contracts in accumulation .................... 4,643,230
International Fund:
Annuity contracts in accumulation .................... 5,852,955
Calvert Social Balanced Portfolio:
Annuity contracts in accumulation .................... 971,337
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio:
Annuity contracts in accumulation .................... 138,709,740
Growth Portfolio:
Annuity contracts in accumulation .................... 80,401,549
High Income Portfolio:
Annuity contracts in accumulation .................... 35,217,837
Annuity contracts in payment period .................. 68,542
Overseas Portfolio:
Annuity contracts in accumulation .................... 13,004,643
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio:
Annuity contracts in accumulation .................... 11,743,075
Contrafund Portfolio:
Annuity contracts in accumulation .................... 107,827,442
Index 500 Portfolio:
Annuity contracts in accumulation .................... 76,986,772
Investment Grade Bond Portfolio:
Annuity contracts in accumulation .................... 6,578,182
Insurance Management Series:
American Leaders Fund II:
Annuity contracts in accumulation .................... 116,800,911
Annuity contracts in payment period .................. 48,751
Equity Income Fund II:
Annuity contracts in accumulation .................... 19,938,571
Growth Strategies Fund II:
Annuity contracts in accumulation .................... 22,709,106
High Income Bond Fund II:
Annuity contracts in accumulation .................... 53,212,853
International Equity Fund II:
Annuity contracts in accumulation .................... 13,946,028
Prime Money Fund II:
Annuity contracts in accumulation .................... 7,530,487
</TABLE>
S-4
<PAGE>
Variable Annuity Account B
Statement of Assets and Liabilities - December 31, 1997 (continued):
<TABLE>
<S> <C>
U.S. Government Securities Fund II:
Annuity contracts in accumulation ........... $ 13,196,784
Utility Fund II:
Annuity contracts in accumulation ........... 26,302,858
Janus Aspen Series:
Aggressive Growth Portfolio:
Annuity contracts in accumulation ........... 38,383,925
Balanced Portfolio:
Annuity contracts in accumulation ........... 31,145,778
Flexible Income Portfolio:
Annuity contracts in accumulation ........... 10,534,588
Growth Portfolio:
Annuity contracts in accumulation ........... 40,072,928
Annuity contracts in payment period ......... 645,899
Worldwide Growth Portfolio:
Annuity contracts in accumulation ........... 160,658,096
Annuity contracts in payment period ......... 1,995,445
Lexington Emerging Markets Fund:
Annuity contracts in accumulation ........... 2,833,416
Lexington Natural Resources Trust Fund:
Annuity contracts in accumulation ........... 6,930,364
MFS Funds:
Total Return Series:
Annuity contracts in accumulation ........... 18,973,878
Worldwide Government Series:
Annuity contracts in accumulation ........... 1,324,295
Oppenheimer Funds:
Capital Appreciation Fund:
Annuity contracts in accumulation ........... 3,688,200
Global Securities Fund:
Annuity contracts in accumulation ........... 2,680,937
Growth & Income Fund:
Annuity contracts in accumulation ........... 12,688,907
Strategic Bond Fund:
Annuity contracts in accumulation ........... 3,092,701
Portfolio Partners, Inc:
PPI MFS Emerging Equities Portfolio:
Annuity contracts in accumulation ........... 94,796,247
Annuity contracts in payment period ......... 496,447
PPI MFS Research Growth Portfolio:
Annuity contracts in accumulation ........... 65,867,130
PPI MFS Value Equity Portfolio:
Annuity contracts in accumulation ........... 15,049,606
Annuity contracts in payment period ......... 378,075
PPI Scudder International Growth Portfolio:
Annuity contracts in accumulation ........... 12,650,163
PPI T. Rowe Price Growth Equity Portfolio:
Annuity contracts in accumulation ........... 90,170,258
--------------
$2,922,442,857
==============
</TABLE>
See Notes to Financial Statements
S-5
<PAGE>
Variable Annuity Account B
Statements of Operations and Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996
----- ----
<S> <C> <C>
INVESTMENT INCOME:
Income: (Notes 1, 3 and 5)
Dividends ............................................................. $ 278,833,116 $ 120,367,178
Expenses: (Notes 2 and 5)
Valuation period deductions ........................................... (29,243,851) (17,483,870)
-------------- --------------
Net investment income .................................................. 249,589,265 102,883,308
-------------- --------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on sales of investments: (Notes 1, 4 and 5)
Proceeds from sales ................................................... 1,004,789,371 365,025,974
Cost of investments sold .............................................. 933,728,508 347,598,566
-------------- --------------
Net realized gain .................................................... 71,060,863 17,427,408
-------------- --------------
Net unrealized gain on investments: (Note 5)
Beginning of Year ..................................................... 122,191,053 28,746,944
End of Year ........................................................... 255,524,506 122,191,053
-------------- --------------
Net change in unrealized gain ........................................ 133,333,453 93,444,109
-------------- --------------
Net realized and unrealized gain on investments ........................ 204,394,316 110,871,517
-------------- --------------
Net increase in net assets resulting from operations ................... 453,983,581 213,754,825
-------------- --------------
FROM UNIT TRANSACTIONS:
Variable annuity contract purchase payments ............................ 571,517,770 538,586,667
Sales and administrative charges deducted by the Company ............... (16,265) (17,370)
-------------- --------------
Net variable annuity contract purchase payments ...................... 571,501,505 538,569,297
Transfers from the Company for mortality guarantee adjustments ......... 371,835 690,779
Transfers from the Company's fixed account options ..................... 144,526,667 50,549,121
Redemptions by contract holders ........................................ (82,942,177) (73,738,526)
Annuity Payments ....................................................... (16,137,431) (12,108,943)
Other .................................................................. 2,327,153 159,467
-------------- --------------
Net increase in net assets from unit transactions (Note 5) ........... 619,647,552 504,121,195
-------------- --------------
Change in net assets ................................................... 1,073,631,133 717,876,020
NET ASSETS:
Beginning of Year ...................................................... 1,848,811,724 1,130,935,704
-------------- --------------
End of Year ............................................................ $2,922,442,857 $1,848,811,724
============== ==============
</TABLE>
See Notes to Financial Statements
S-6
<PAGE>
Variable Annuity Account B
Notes to Financial Statements - December 31, 1997
1. Summary of Significant Accounting Policies
Variable Annuity Account B (the "Account") is a separate account established
by Aetna Life Insurance and Annuity Company (the "Company") registered under
the Investment Company Act of 1940 as a unit investment trust. The Account is
sold exclusively for use with variable annuity contracts that may be entitled
to tax-deferred treatment under specific sections of the Internal Revenue
Code of 1986, as amended.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect amounts reported therein. Although actual results could differ
from these estimates, any such differences are expected to be immaterial to
the net assets of the Account.
a. Valuation of Investments
Investments in the following Funds are stated at the closing net asset value
per share as determined by each Fund on December 31, 1997:
<TABLE>
<S> <C>
Aetna Variable Fund Insurance Management Series:
Aetna Income Shares [bullet] American Leaders Fund II [bullet]
Aetna Variable Encore Fund [bullet] Equity Income Fund II
Aetna Investment Advisers Fund, Inc. [bullet] Growth Strategies Fund II
Aetna GET Fund, Series B [bullet] High Income Bond Fund II
Aetna GET Fund, Series C [bullet] International Equity Fund II
Aetna Ascent Variable Portfolio [bullet] Prime Money Fund II
Aetna Crossroads Variable Portfolio [bullet] U.S. Government Securities Fund II
Aetna Legacy Variable Portfolio [bullet] Utility Fund II
Aetna Variable Portfolio, Inc.: Janus Aspen Series:
[bullet] Capital Appreciation Portfolio [bullet] Aggressive Growth Portfolio
[bullet] Growth Portfolio [bullet] Balanced Portfolio
[bullet] Index Plus Portfolio [bullet] Flexible Income Portfolio
[bullet] Small Company Portfolio [bullet] Growth Portfolio
Alger American Funds: [bullet] Worldwide Growth Portfolio
[bullet] Balanced Portfolio Lexington Emerging Markets Fund
[bullet] Income and Growth Portfolio Lexington Natural Resources Trust Fund
[bullet] Leveraged AllCap Portfolio MFS Funds:
American Century Investments: [bullet] Total Return Series
[bullet] Balanced Fund [bullet] Worldwide Government Series
[bullet] International Fund Oppenheimer Funds:
Calvert Social Balanced Portfolio [bullet] Capital Appreciation Fund
Fidelity Investments Variable Insurance Products Fund: [bullet] Global Securities Fund
[bullet] Equity-Income Portfolio [bullet] Growth & Income Fund
[bullet] Growth Portfolio [bullet] Strategic Bond Fund
[bullet] High Income Portfolio Portfolio Partners, Inc.:
[bullet] Overseas Portfolio [bullet] PPI MFS Emerging Equities Portfolio
Fidelity Investments Variable Insurance Products Fund II: [bullet] PPI MFS Research Growth Portfolio
[bullet] Asset Manager Portfolio [bullet] PPI MFS Value Equity Portfolio
[bullet] Contrafund Portfolio [bullet] PPI Scudder International Growth Portfolio
[bullet] Index 500 Portfolio [bullet] PPI T. Rowe Price Growth Equity Portfolio
[bullet] Investment Grade Bond Portfolio
</TABLE>
b. Other
Investment transactions are accounted for on a trade date basis and dividend
income is recorded on the ex-dividend date. The cost of investments sold is
determined by specific identification.
S-7
<PAGE>
Variable Annuity Account B
Notes to Financial Statements - December 31, 1997 (continued):
c. Federal Income Taxes
The operations of the Account form a part of, and are taxed with, the total
operations of the Company which is taxed as a life insurance company under
the Internal Revenue Code of 1986, as amended.
d. Annuity Reserves
Annuity reserves held in the Separate Accounts are computed for currently
payable contracts according to the Progressive Annuity, a49, 1971 Individual
Annuity Mortality, 1971 Group Annuity Mortality, 83a, and 1983 Group Annuity
Mortality tables using various assumed interest rates not to exceed seven
percent. Mortality experience is monitored by the Company. Charges to annuity
reserves for mortality experience are reimbursed to the Company if the
reserves required are less than originally estimated. If additional reserves
are required, the Company reimburses the Account.
2. Valuation Period Deductions
Deductions by the Account for mortality and expense risk charges are made in
accordance with the terms of the contracts and are paid to the Company.
3. Dividend Income
On an annual basis, the Funds distribute substantially all of their taxable
income and realized capital gains to their shareholders. Distributions to the
Account are automatically reinvested in shares of the Funds. The Account's
proportionate share of each Fund's undistributed net investment income
(distributions in excess of net investment income) and accumulated net
realized gain (loss) on investments is included in net unrealized gain (loss)
in the Statements of Operations and Changes in Net Assets.
4. Purchases and Sales of Investments
The cost of purchases and proceeds from sales of investments other than
short-term investments for the years ended December 31, 1997 and 1996
aggregated $1,874,026,188 and $1,004,789,371; $972,030,476 and $365,025,974,
respectively.
S-8
<PAGE>
Variable Annuity Account B
Notes to Financial Statements - December 31, 1997 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1997
Valuation Proceeds Cost of Net
Period from Investments Realized
Dividends Deductions Sales Sold Gain (Loss)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Variable Fund: $206,171,606 ($9,508,053) $64,103,032 $51,274,099 $12,828,933
Annuity contracts in accumulation
Annuity contracts in payment period
- ----------------------------------------------------------------------------------------------------------------------
Aetna Income Shares: 4,333,850 (737,718) 12,717,950 11,951,670 766,280
Annuity contracts in accumulation
Annuity contracts in payment period
- ----------------------------------------------------------------------------------------------------------------------
Aetna Variable Encore Fund: 4,149,350 (1,373,114) 187,177,845 187,281,193 (103,348)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc.: 20,983,218 (1,660,805) 12,262,658 9,696,803 2,565,855
Annuity contracts in accumulation
Annuity contracts in payment period
- ----------------------------------------------------------------------------------------------------------------------
Aetna GET Fund, Series B: 3,422,687 (286,592) 1,109,194 713,521 395,673
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------------------------
Aetna GET Fund, Series C: 169,021 (119,214) 963,591 833,090 130,501
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio: 1,293,085 (171,542) 2,422,808 2,093,544 329,264
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio: 1,366,067 (170,121) 1,119,794 921,119 198,675
Annuity contracts in accumulation
Annuity contracts in payment period
- ----------------------------------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio: 1,122,530 (176,596) 1,280,095 1,125,823 154,272
Annuity contracts in accumulation
Annuity contracts in payment period
- ----------------------------------------------------------------------------------------------------------------------
Aetna Variable Portfolio, Inc.:
Capital Appreciation Portfolio: 621,617 (11,486) 125,792 110,176 15,616
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------------------------
Growth Portfolio: 848,691 (9,678) 592,546 560,620 31,926
Annuity contracts in accumulation
Annuity contracts in payment period
- ----------------------------------------------------------------------------------------------------------------------
Index Plus Portfolio: 1,110,445 (154,416) 2,229,246 1,790,247 438,999
Annuity contracts in accumulation
Annuity contracts in payment period
- ----------------------------------------------------------------------------------------------------------------------
Small Company Portfolio: 366,132 (19,387) 261,692 230,152 31,540
Annuity contracts in accumulation
Annuity contracts in payment period
- ----------------------------------------------------------------------------------------------------------------------
Alger American Funds:
Balanced Portfolio: 142,299 (73,798) 1,098,365 1,473,706 (375,341)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
S-9
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Net
Net Unrealized
Gain (Loss) Net Increase (Decrease) Net Assets
- -------------------------------------- Change in In Net Assets -------------------------------
Beginning End Unrealized from Unit Beginning End
of Year of Year Gain (Loss) Transactions of Year of Year
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$59,979,314 $67,675,837 $7,696,523 $71,233,894
$644,728,031 $892,006,381
89,732,216 130,876,769
- ---------------------------------------------------------------------------------------------------------------
379,633 781,718 402,085 (1,964,060)
66,534,546 69,236,488
3,583,489 3,681,984
- ---------------------------------------------------------------------------------------------------------------
(540,607) 1,429,868 1,970,475 13,513,776
106,781,998 124,939,137
- ---------------------------------------------------------------------------------------------------------------
15,114,435 21,131,758 6,017,323 7,591,834
119,402,212 150,761,384
7,942,484 12,080,737
- ---------------------------------------------------------------------------------------------------------------
4,487,610 6,194,743 1,707,133 (712,316)
16,333,339 20,859,924
- ---------------------------------------------------------------------------------------------------------------
144,834 2,144,550 1,999,716 (532,193)
9,281,276 10,929,107
- ---------------------------------------------------------------------------------------------------------------
276,453 1,034,430 757,977 12,596,284
5,638,668 20,443,736
- ---------------------------------------------------------------------------------------------------------------
151,493 704,161 552,668 13,077,636
5,295,700 20,250,904
0 69,721
- ---------------------------------------------------------------------------------------------------------------
46,576 556,022 509,446 12,197,969
6,186,987 18,710,015
0 1,284,593
- ---------------------------------------------------------------------------------------------------------------
0 (545,082) (545,082) 3,831,929
0 3,912,594
- ---------------------------------------------------------------------------------------------------------------
0 (945,071) (945,071) 3,293,042
0 3,210,344
0 8,566
- ---------------------------------------------------------------------------------------------------------------
(4,046) 1,342,384 1,346,430 23,512,958
1,985,372 28,074,705
0 165,083
- ---------------------------------------------------------------------------------------------------------------
0 (299,676) (299,676) 6,028,520
0 6,059,783
0 47,346
- ---------------------------------------------------------------------------------------------------------------
(461,380) 691,602 1,152,982 1,032,718
3,777,291 5,656,151
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
S-10
<PAGE>
Variable Annuity Account B
Notes to Financial Statements - December 31, 1997 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets (continued):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Year Ended December 31, 1997
Valuation
Period
Dividends Deductions
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Alger American Funds (continued):
Growth Portfolio: (1) $506,477 ($685,927)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Income and Growth Portfolio: 401,543 (156,768)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Leveraged AllCap Portfolio: 0 (196,601)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
MidCap Growth Portfolio: (1) 350,028 (308,858)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Small Capitalization Portfolio: (2) 2,260,717 (722,118)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
American Century Investments:
Balanced Fund: 199,265 (58,943)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Capital Appreciation Fund: (3) 725,963 (365,809)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
International Fund: 176,899 (85,324)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio: 67,562 (7,128)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio: 7,870,976 (1,400,361)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Growth Portfolio: 2,159,319 (938,752)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
High Income Portfolio: 1,270,071 (337,944)
Annuity contracts in accumulation
Annuity contracts in payment period
- -------------------------------------------------------------------------------------------
Overseas Portfolio: 863,493 (164,196)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio: 761,827 (120,783)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Contrafund Portfolio: 1,931,363 (1,125,088)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Index 500 Portfolio: 1,159,193 (771,581)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Investment Grade Bond Portfolio: 277,920 (79,205)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Year Ended December 31, 1997
Proceeds Cost of Net
from Investments Realized
Sales Sold Gain (Loss)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Alger American Funds (continued):
Growth Portfolio: (1) $78,591,434 $64,519,617 $14,071,817
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Income and Growth Portfolio: 2,602,037 3,401,714 (799,677)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Leveraged AllCap Portfolio: 7,570,244 6,461,486 1,108,758
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
MidCap Growth Portfolio: (1) 49,795,194 45,404,313 4,390,881
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Small Capitalization Portfolio: (2) 118,175,863 114,437,088 3,738,775
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
American Century Investments:
Balanced Fund: 704,536 619,119 85,417
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Capital Appreciation Fund: (3) 47,909,593 51,060,683 (3,151,090)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
International Fund: 4,226,767 3,417,937 808,830
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio: 212,241 199,799 12,442
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio: 17,887,517 15,251,625 2,635,892
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Growth Portfolio: 10,659,015 9,711,716 947,299
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
High Income Portfolio: 4,857,948 4,277,783 580,165
Annuity contracts in accumulation
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------------------------
Overseas Portfolio: 5,725,552 5,116,905 608,647
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio: 1,009,159 904,890 104,269
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Contrafund Portfolio: 13,933,668 10,543,199 3,390,469
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Index 500 Portfolio: 17,678,295 13,392,232 4,286,063
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Investment Grade Bond Portfolio: 1,100,211 1,085,995 14,216
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
</TABLE>
S-11
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Net Unrealized Net
Gain (Loss) Net Increase (Decrease) Net Assets
----------- Change in In Net Assets ----------
Beginning End Unrealized from Unit Beginning End
of Year of Year Gain (Loss) Transactions of Year of Year
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$2,349,936 $0 ($2,349,936) ($55,087,434)
$43,545,003 $0
- ----------------------------------------------------------------------------------------------------------
(828,912) 2,709,055 3,537,967 4,693,808
6,471,587 14,148,460
- ----------------------------------------------------------------------------------------------------------
220,810 1,540,243 1,319,433 628,691
11,419,728 14,280,009
- ----------------------------------------------------------------------------------------------------------
682,424 0 (682,424) (23,592,354)
19,842,727 0
- ----------------------------------------------------------------------------------------------------------
(495,260) 0 495,260 (64,524,063)
58,751,429 0
- ----------------------------------------------------------------------------------------------------------
145,325 462,379 317,054 1,109,081
2,991,356 4,643,230
- ----------------------------------------------------------------------------------------------------------
(1,588,390) 0 1,588,390 (43,166,616)
44,369,162 0
- ----------------------------------------------------------------------------------------------------------
375,835 361,821 (14,014) 259,970
4,706,594 5,852,955
- ----------------------------------------------------------------------------------------------------------
(881) 59,286 60,167 241,657
596,637 971,337
- ----------------------------------------------------------------------------------------------------------
5,773,475 19,807,673 14,034,198 43,088,538
72,480,497 138,709,740
- ----------------------------------------------------------------------------------------------------------
3,258,300 14,584,513 11,326,213 8,978,986
57,928,484 80,401,549
- ----------------------------------------------------------------------------------------------------------
814,429 2,722,687 1,908,258 17,156,365
14,709,464 35,217,837
0 68,542
- ----------------------------------------------------------------------------------------------------------
743,689 460,930 (282,759) 2,276,187
9,703,271 13,004,643
- ----------------------------------------------------------------------------------------------------------
484,182 1,137,702 653,520 4,412,778
5,931,464 11,743,075
- ----------------------------------------------------------------------------------------------------------
6,210,754 18,201,832 11,991,078 35,101,002
56,538,618 107,827,442
- ----------------------------------------------------------------------------------------------------------
2,241,040 10,882,841 8,641,801 36,290,926
27,380,370 76,986,772
- ----------------------------------------------------------------------------------------------------------
175,829 387,160 211,331 1,392,243
4,761,677 6,578,182
- ----------------------------------------------------------------------------------------------------------
</TABLE>
S-12
<PAGE>
Variable Annuity Account B
Notes to Financial Statements - December 31, 1997 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets (continued):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1997
Valuation Proceeds Cost of Net
Period from Investments Realized
Dividends Deductions Sales Sold Gain (Loss)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Insurance Management Series:
American Leaders Fund II: $2,033,587 ($1,272,645) $2,239,581 $1,354,167 $885,414
Annuity contracts in accumulation
Annuity contracts in payment period
- ------------------------------------------------------------------------------------------------------------------------------
Equity Income Fund II: 52,763 (108,244) 188,614 167,057 21,557
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
Growth Strategies Fund II: 63,162 (214,573) 650,403 461,919 188,484
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
High Income Bond Fund II: 2,232,254 (576,880) 5,856,816 5,388,542 468,274
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
International Equity Fund II: 8,680 (138,835) 787,960 678,156 109,804
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
Prime Money Fund II: 365,689 (107,783) 7,931,948 7,931,971 (23)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
U.S. Government Securities Fund II: 366,225 (147,271) 3,825,499 3,747,648 77,851
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
Utility Fund II: 838,523 (291,277) 1,512,321 1,157,193 355,128
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series:
Aggressive Growth Portfolio: 0 (419,040) 19,586,639 19,136,007 450,632
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
Balanced Portfolio: 786,909 (294,871) 2,053,281 1,687,149 366,132
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
Flexible Income Portfolio: 528,359 (93,943) 1,111,581 1,079,357 32,224
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
Growth Portfolio: 967,832 (429,682) 2,254,366 1,752,378 501,988
Annuity contracts in accumulation
Annuity contracts in payment period
- ------------------------------------------------------------------------------------------------------------------------------
Short-Term Bond Portfolio: (4) 62,602 (36,643) 13,023,397 12,927,175 96,222
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
Worldwide Growth Portfolio: 2,077,847 (1,645,928) 21,615,276 15,329,845 6,285,431
Annuity contracts in accumulation
Annuity contracts in payment period
- ------------------------------------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund: 2,717 (53,043) 4,235,697 4,177,632 58,065
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust Fund: 209,099 (85,086) 3,246,699 2,653,024 593,675
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-13
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Net Unrealized Net
Gain (Loss) Net Increase (Decrease) Net Assets
----------- Change in In Net Assets ----------
Beginning End Unrealized from Unit Beginning End
of Year of Year Gain (Loss) Transactions of Year of Year
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$8,810,467 $30,111,589 $21,301,122 $32,775,129
$61,127,055 $116,800,911
0 48,751
- --------------------------------------------------------------------------------------------------------
0 911,406 911,406 19,061,089
0 19,938,571
- --------------------------------------------------------------------------------------------------------
733,393 3,558,451 2,825,058 12,664,797
7,182,178 22,709,106
- --------------------------------------------------------------------------------------------------------
1,022,582 3,763,082 2,740,500 21,197,568
27,151,137 53,212,853
- --------------------------------------------------------------------------------------------------------
307,602 938,501 630,899 7,399,890
5,935,590 13,946,028
- --------------------------------------------------------------------------------------------------------
0 0 0 (471,714)
7,744,318 7,530,487
- --------------------------------------------------------------------------------------------------------
73,398 513,199 439,801 4,803,969
7,656,209 13,196,784
- --------------------------------------------------------------------------------------------------------
1,730,892 5,801,015 4,070,123 4,555,867
16,774,494 26,302,858
- --------------------------------------------------------------------------------------------------------
534,823 4,594,517 4,059,694 2,750,579
31,542,060 38,383,925
- --------------------------------------------------------------------------------------------------------
373,883 3,462,858 3,088,975 15,424,389
11,774,244 31,145,778
- --------------------------------------------------------------------------------------------------------
73,395 367,565 294,170 4,626,561
5,147,217 10,534,588
- --------------------------------------------------------------------------------------------------------
1,093,423 5,764,208 4,670,785 14,123,750
20,884,154 40,072,928
0 645,899
- --------------------------------------------------------------------------------------------------------
(27,376) 0 27,376 (2,070,168)
1,920,611 0
- --------------------------------------------------------------------------------------------------------
5,151,123 18,210,266 13,059,143 76,404,357
66,472,691 160,658,096
0 1,995,445
- --------------------------------------------------------------------------------------------------------
(66,591) (709,548) (642,957) 952,674
2,515,960 2,833,416
- --------------------------------------------------------------------------------------------------------
538,139 177,872 (360,267) 1,821,159
4,751,784 6,930,364
- --------------------------------------------------------------------------------------------------------
</TABLE>
S-14
<PAGE>
Variable Annuity Account B
Notes to Financial Statements - December 31, 1997 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets (continued):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1997
Valuation Proceeds Cost of Net
Period from Investments Realized
Dividends Deductions Sales Sold Gain (Loss)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MFS Funds:
Emerging Growth Series: (2) $0 ($232,144) $37,594,997 $34,076,137 $3,518,860
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
Research Series: (3) 0 (273,185) 37,686,630 34,109,865 3,576,765
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
Total Return Series: 0 (154,993) 689,861 564,440 125,421
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
Value Series: (5) 0 (19,996) 4,332,717 3,942,044 390,673
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
Worldwide Government Series: 15,502 (12,983) 124,845 123,607 1,238
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers Management Trust:
Growth Portfolio: (5) 741,183 (92,357) 17,383,777 16,347,694 1,036,083
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
Oppenheimer Funds:
Capital Appreciation Fund: 0 (13,374) 8,964,190 9,092,515 (128,325)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
Global Securities Fund: 0 (12,451) 850,938 802,777 48,161
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
Growth & Income Fund: 37,178 (35,759) 188,084 164,087 23,997
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
Strategic Bond Fund: 84,234 (10,842) 122,739 121,006 1,733
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
Portfolio Partners, Inc.:
PPI MFS Emerging Equities Portfolio: 0 (120,211) 43,880,815 44,111,392 (230,577)
Annuity contracts in accumulation
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------------------------------------
PPI MFS Research Growth Portfolio: 0 (82,490) 37,923,531 37,983,794 (60,263)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
PPI MFS Value Equity Portfolio: 0 (16,913) 4,632,658 4,633,034 (376)
Annuity contracts in accumulation
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------------------------------------
PPI Scudder International Growth Portfolio: 0 (12,760) 259,410 255,379 4,031
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
PPI T. Rowe Price Growth Portfolio: 0 (115,952) 33,484,569 33,491,822 (7,253)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
Scudder Variable Life Investment Fund:
International Portfolio: (6) 275,557 (123,791) 16,445,650 14,417,831 2,027,819
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
S-15
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Net Unrealized Net
Gain (Loss) Net Increase (Decrease) Net Assets
----------- Change in In Net Assets ----------
Beginning End Unrealized from Unit Beginning End
of Year of Year Gain (Loss) Transactions of Year of Year
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
($85,796) $0 $85,796 ($12,370,520)
$8,998,008 $0
- -------------------------------------------------------------------------------------------------------
204,764 0 (204,764) (9,875,328)
6,776,512 0
- -------------------------------------------------------------------------------------------------------
72,010 1,975,149 1,903,139 12,883,941
4,216,370 18,973,878
- -------------------------------------------------------------------------------------------------------
935 0 (935) (578,583)
208,841 0
- -------------------------------------------------------------------------------------------------------
9,304 (5,937) (15,241) 927,866
407,913 1,324,295
- -------------------------------------------------------------------------------------------------------
(6,666) 0 6,666 (9,934,149)
8,242,574 0
- -------------------------------------------------------------------------------------------------------
0 133,786 133,786 3,696,113
0 3,688,200
- -------------------------------------------------------------------------------------------------------
0 (846) (846) 2,646,073
0 2,680,937
- -------------------------------------------------------------------------------------------------------
0 465,927 465,927 12,197,564
0 12,688,907
- -------------------------------------------------------------------------------------------------------
0 (21,173) (21,173) 3,038,749
0 3,092,701
- -------------------------------------------------------------------------------------------------------
0 (753,832) (753,832) 96,397,314
0 94,796,247
0 496,447
- -------------------------------------------------------------------------------------------------------
0 (1,162,926) (1,162,926) 67,172,809
0 65,867,130
- -------------------------------------------------------------------------------------------------------
0 220,662 220,662 15,224,308
0 15,049,606
0 378,075
- -------------------------------------------------------------------------------------------------------
0 195,427 195,427 12,463,465
0 12,650,163
- -------------------------------------------------------------------------------------------------------
0 1,797,922 1,797,922 88,495,541
0 90,170,258
- -------------------------------------------------------------------------------------------------------
1,510,449 0 (1,510,449) (12,719,263)
12,050,127 0
-------------------------------------------------------------------------------------------------------
</TABLE>
S-16
<PAGE>
Variable Annuity Account B
Notes to Financial Statements - December 31, 1997 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets (continued):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1997
Valuation Proceeds Cost of Net
Period from Investments Realized
Dividends Deductions Sales Sold Gain (Loss)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Variable Annuity Account B $278,833,116 ($29,243,851) $1,004,789,371 $933,728,508 $71,060,863
=======================================================================================================================
</TABLE>
(1) - Effective November 28, 1997, this funds assets were transferred to the PPI
T. Rowe Price Growth Equity Portfolio.
(2) - Effective November 28, 1997, this funds assets were transferred to the PPI
MFS Emerging Equities Portfolio.
(3) - Effective November 28, 1997, this funds assets were transferred to PPI MFS
Research Growth Fund.
(4) - Effective November 28, 1997, this funds assets were transferred to the
Aetna Variable Encore Fund.
(5) - Effective November 28, 1997, this funds assets were transferred to the PPI
MFS Value Equity Portfolio.
(6) - Effective November 28, 1997, this funds assets were transferred to the PPI
Scudder International Growth Portfolio.
S-17
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Net Unrealized Net
Gain (Loss) Net Increase (Decrease) Net Assets
----------- Change in In Net Assets ----------
Beginning End Unrealized from Unit Beginning End
of Year of Year Gain (Loss) Transactions of Year of Year
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$122,191,053 $255,524,506 $133,333,453 $619,647,552 $1,848,811,724 $2,922,442,857
=======================================================================================================================
</TABLE>
S-18
<PAGE>
Variable Annuity Account B
Notes to Financial Statements - December 31, 1997 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets (continued):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Year Ended December 31, 1996
Valuation
Period
Dividends Deductions
- ------------------------------------------------------------------------------------
<S> <C> <C>
Aetna Variable Fund: $77,000,986 ($7,148,689)
Annuity contracts in accumulation
Annuity contracts in payment period
- ------------------------------------------------------------------------------------
Aetna Income Shares: 4,527,825 (813,024)
Annuity contracts in accumulation
Annuity contracts in payment period
- ------------------------------------------------------------------------------------
Aetna Variable Encore Fund: 5,358,925 (1,043,955)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc.: 11,247,847 (1,372,478)
Annuity contracts in accumulation
Annuity contracts in payment period
- ------------------------------------------------------------------------------------
Aetna GET Fund, Series B: 1,055,590 (226,340)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------
Aetna GET Fund, Series C: 46,499 (14,753)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio: 235,037 (27,609)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio: 257,055 (29,943)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio: 363,749 (38,623)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------
Aetna Variable Index Plus Portfolio: 10,290 (2,403)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------
Alger American Funds:
Balanced Portfolio: 775,351 (33,904)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------
Growth Portfolio: 758,872 (394,360)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------
Income and Growth Portfolio: 2,009,995 (55,929)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------
Leveraged AllCap Portfolio: 61,186 (116,503)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------
MidCap Portfolio: 190,158 (166,087)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------
Small Capitalization Portfolio: 184,900 (588,663)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------
Calvert Responsibly Invested Balanced Portfolio: 44,676 (3,984)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------
Year Ended December 31, 1996
Proceeds Cost of Net
from Investments Realized
Sales Sold Gain (Loss)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aetna Variable Fund: $96,146,932 $97,318,697 ($1,171,765)
Annuity contracts in accumulation
Annuity contracts in payment period
- --------------------------------------------------------------------------------------------------
Aetna Income Shares: 19,585,006 18,826,116 758,890
Annuity contracts in accumulation
Annuity contracts in payment period
- --------------------------------------------------------------------------------------------------
Aetna Variable Encore Fund: 78,888,315 76,637,102 2,251,213
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc.: 16,403,009 13,386,571 3,016,438
Annuity contracts in accumulation
Annuity contracts in payment period
- --------------------------------------------------------------------------------------------------
Aetna GET Fund, Series B: 915,330 681,610 233,720
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Aetna GET Fund, Series C: 361,353 354,510 6,843
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio: 317,740 277,917 39,823
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio: 362,140 312,870 49,270
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio: 406,948 384,407 22,541
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Aetna Variable Index Plus Portfolio: 139,030 133,438 5,592
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Alger American Funds:
Balanced Portfolio: 244,368 332,405 (88,037)
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Growth Portfolio: 6,990,444 6,528,212 462,232
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Income and Growth Portfolio: 390,051 732,537 (342,486)
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Leveraged AllCap Portfolio: 4,991,495 4,605,949 385,546
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
MidCap Portfolio: 3,198,308 3,039,709 158,599
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Small Capitalization Portfolio: 31,506,275 29,929,826 1,576,449
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Calvert Responsibly Invested Balanced Portfolio: 141,022 137,780 3,242
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
</TABLE>
S-19
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Net Unrealized Net
Gain (Loss) Net Increase (Decrease) Net Assets
----------- Change in In Net Assets ----------
Beginning End Unrealized from Unit Beginning End
of Year of Year Gain (Loss) Transactions of Year of Year
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
($8,051,873) $59,979,314 $68,031,187 $4,966,306
$530,231,821 $644,728,031
62,550,401 89,732,216
- ---------------------------------------------------------------------------------------------------------------
3,224,044 379,633 (2,844,411) (9,600,618)
74,693,652 66,534,546
3,395,721 3,583,489
- ---------------------------------------------------------------------------------------------------------------
2,487,618 (540,607) (3,028,225) 22,111,260
81,132,780 106,781,998
- ---------------------------------------------------------------------------------------------------------------
12,419,220 15,114,435 2,695,215 602,270
104,415,595 119,402,212
6,739,809 7,942,484
- ---------------------------------------------------------------------------------------------------------------
2,566,580 4,487,610 1,921,030 (650,835)
14,000,174 16,333,339
- ---------------------------------------------------------------------------------------------------------------
0 144,834 144,834 9,097,853
0 9,281,276
- ---------------------------------------------------------------------------------------------------------------
5,570 276,453 270,883 4,773,151
347,383 5,638,668
- ---------------------------------------------------------------------------------------------------------------
8,209 151,493 143,284 4,409,627
466,407 5,295,700
- ---------------------------------------------------------------------------------------------------------------
1,609 46,576 44,967 5,470,774
323,579 6,186,987
- ---------------------------------------------------------------------------------------------------------------
0 (4,046) (4,046) 1,975,940
(1) 1,985,372
- ---------------------------------------------------------------------------------------------------------------
1,644 (461,380) (463,024) 2,897,855
689,050 3,777,291
- ---------------------------------------------------------------------------------------------------------------
(63,817) 2,349,936 2,413,753 29,514,421
10,790,085 43,545,003
- ---------------------------------------------------------------------------------------------------------------
(6,769) (828,912) (822,143) 4,660,630
1,021,520 6,471,587
- ---------------------------------------------------------------------------------------------------------------
32,561 220,810 188,249 8,946,454
1,954,796 11,419,728
- ---------------------------------------------------------------------------------------------------------------
7,193 682,424 675,231 15,727,261
3,257,565 19,842,727
- ---------------------------------------------------------------------------------------------------------------
46,283 (495,260) (541,543) 32,655,969
25,464,317 58,751,429
- ---------------------------------------------------------------------------------------------------------------
(13,512) (881) 12,631 193,226
346,846 596,637
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
S-20
<PAGE>
Variable Annuity Account B
Notes to Financial Statements - December 31, 1997 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets (continued):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Year Ended December 31, 1996
Valuation
Period
Dividends Deductions
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio: $940,850 ($608,164)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
Growth Portfolio: 1,412,110 (540,670)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
High Income Portfolio: 178,909 (112,363)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
Overseas Portfolio: 75,181 (91,010)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio: 119,231 (54,259)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
Contrafund Portfolio: 146,164 (428,708)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
Index 500 Portfolio: 143,406 (203,362)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
Investment Grade Bond Portfolio: 45,797 (42,799)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
Insurance Management Series:
American Leaders Fund II: 857,970 (631,122)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
Growth Strategies Fund II: 405 (44,481)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
High Income Bond Fund II: 1,647,290 (260,987)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
International Equity Fund II: 10,567 (51,003)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
Prime Money Fund II: 289,134 (87,958)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
U.S. Government Securities Fund II: 367,608 (86,361)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
Utility Fund II: 547,259 (186,219)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
Janus Aspen Series:
Aggressive Growth Portfolio: 243,931 (266,292)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
Balanced Portfolio: 181,099 (68,277)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Year Ended December 31, 1996
Proceeds Cost of Net
from Investments Realized
Sales Sold Gain (Loss)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio: $4,030,269 $3,343,817 $686,452
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------
Growth Portfolio: 2,600,136 2,280,711 319,425
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------
High Income Portfolio: 1,318,057 1,318,142 (85)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------
Overseas Portfolio: 880,668 813,434 67,234
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio: 540,553 465,407 75,146
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------
Contrafund Portfolio: 5,044,449 4,308,117 736,332
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------
Index 500 Portfolio: 6,086,685 5,356,843 729,842
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------
Investment Grade Bond Portfolio: 882,619 925,636 (43,017)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------
Insurance Management Series:
American Leaders Fund II: 6,368,961 4,596,688 1,772,273
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------
Growth Strategies Fund II: 119,084 103,727 15,357
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------
High Income Bond Fund II: 5,863,283 5,644,702 218,581
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------
International Equity Fund II: 250,169 236,027 14,142
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------
Prime Money Fund II: 12,400,851 12,398,826 2,025
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------
U.S. Government Securities Fund II: 5,011,311 5,085,345 (74,034)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------
Utility Fund II: 1,034,753 867,262 167,491
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------
Janus Aspen Series:
Aggressive Growth Portfolio: 6,134,481 4,875,603 1,258,878
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------
Balanced Portfolio: 2,812,822 2,536,688 276,134
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------
</TABLE>
S-21
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Net Unrealized Net
Gain (Loss) Net Increase (Decrease) Net Assets
----------- Change in In Net Assets ----------
Beginning End Unrealized from Unit Beginning End
of Year of Year Gain (Loss) Transactions of Year of Year
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$966,600 $5,773,475 $4,806,875 $51,230,275
$15,424,209 $72,480,497
- ----------------------------------------------------------------------------------------------------
(34,190) 3,258,300 3,292,490 38,219,867
15,225,262 57,928,484
- ----------------------------------------------------------------------------------------------------
15,029 814,429 799,400 12,636,277
1,207,326 14,709,464
- ----------------------------------------------------------------------------------------------------
51,434 743,689 692,255 6,948,020
2,011,591 9,703,271
- ----------------------------------------------------------------------------------------------------
98,360 484,182 385,822 4,043,035
1,362,489 5,931,464
- ----------------------------------------------------------------------------------------------------
122,841 6,210,754 6,087,913 38,043,675
11,953,242 56,538,618
- ----------------------------------------------------------------------------------------------------
70,864 2,241,040 2,170,176 22,367,490
2,172,818 27,380,370
- ----------------------------------------------------------------------------------------------------
11,466 175,829 164,363 3,931,632
705,701 4,761,677
- ----------------------------------------------------------------------------------------------------
2,916,888 8,810,467 5,893,579 26,548,788
26,685,567 61,127,055
- ----------------------------------------------------------------------------------------------------
3,614 733,393 729,779 6,301,239
179,879 7,182,178
- ----------------------------------------------------------------------------------------------------
229,008 1,022,582 793,574 12,876,189
11,876,490 27,151,137
- ----------------------------------------------------------------------------------------------------
43,172 307,602 264,430 4,073,916
1,623,538 5,935,590
- ----------------------------------------------------------------------------------------------------
(1,182) 0 1,182 1,765,443
5,774,492 7,744,318
- ----------------------------------------------------------------------------------------------------
75,600 73,398 (2,202) 2,942,870
4,508,328 7,656,209
- ----------------------------------------------------------------------------------------------------
799,746 1,730,892 931,146 6,514,735
8,800,082 16,774,494
- ----------------------------------------------------------------------------------------------------
1,164,909 534,823 (630,086) 19,085,222
11,850,407 31,542,060
- ----------------------------------------------------------------------------------------------------
26,040 373,883 347,843 10,311,561
725,884 11,774,244
- ----------------------------------------------------------------------------------------------------
</TABLE>
S-22
<PAGE>
Variable Annuity Account B
Notes to Financial Statements - December 31, 1997 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets (continued):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Year Ended December 31, 1996
Valuation
Period
Dividends Deductions
<S> <C> <C>
Flexible Income Portfolio: $ 304,512 ($43,754)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------
Growth Portfolio: 324,844 (141,840)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------
Short-Term Bond Portfolio: 79,326 (23,159)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------
Worldwide Growth Portfolio: 642,050 (384,732)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------
Lexington Emerging Markets Fund: 0 (27,131)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------
Lexington Natural Resources Trust Fund: 15,653 (38,378)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------
MFS Funds:
Emerging Growth Series: 73,635 (33,243)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------
Research Series: 94,710 (22,219)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------
Total Return Series: 87,973 (13,218)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------
Value Series: 4,089 (372)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------
World Government Series: 0 (1,705)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------
Neuberger & Berman Advisers Management Trust:
Growth Portfolio: 770,877 (98,063)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------
Scudder Variable Life Investment Fund:
International Portfolio: 276,128 (136,107)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------
TCI Portfolios, Inc.:
Balanced Fund: 67,198 (24,832)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------
Growth Fund: 6,228,055 (611,968)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------
International Fund: 62,276 (41,867)
Annuity contracts in accumulation
Total Variable Annuity Account B $120,367,178 ($17,483,870)
==================================================================================
<CAPTION>
- -----------------------------------------------------------------------------------------------
Year Ended December 31, 1996
Proceeds Cost of Net
from Investments Realized
Sales Sold Gain (Loss)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Flexible Income Portfolio: $1,127,628 $1,090,808 $36,820
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------
Growth Portfolio: 1,249,735 1,041,911 207,824
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------
Short-Term Bond Portfolio: 2,910,009 2,872,811 37,198
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------
Worldwide Growth Portfolio: 4,899,145 3,899,490 999,655
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund: 1,463,410 1,431,864 31,546
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------
Lexington Natural Resources Trust Fund: 2,192,808 1,809,743 383,065
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------
MFS Funds:
Emerging Growth Series: 190,630 186,959 3,671
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------
Research Series: 253,406 258,774 (5,368)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------
Total Return Series: 140,628 132,113 8,515
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------
Value Series: 496 486 10
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------
World Government Series: 19,663 19,513 150
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------
Neuberger & Berman Advisers Management Trust:
Growth Portfolio: 3,864,131 3,857,033 7,098
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------
Scudder Variable Life Investment Fund:
International Portfolio: 4,557,311 4,016,790 540,521
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------
TCI Portfolios, Inc.:
Balanced Fund: 247,893 231,495 16,398
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------
Growth Fund: 19,145,021 17,607,144 1,537,877
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------
International Fund: 397,143 365,001 32,142
Annuity contracts in accumulation
Total Variable Annuity Account B $365,025,974 $347,598,566 $17,427,408
===============================================================================================
</TABLE>
S-23
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Net Unrealized Net
Gain (Loss) Net Increase (Decrease) Net Assets
----------- Change in In Net Assets ----------
Beginning End Unrealized from Unit Beginning End
of Year of Year Gain (Loss) Transactions of Year of Year
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$29,809 $73,395 $43,586 $3,237,811
$1,568,242 $5,147,217
----------------------------------------------------------------------------------------------------------------
84,852 1,093,423 1,008,571 16,916,813
2,567,942 20,884,154
----------------------------------------------------------------------------------------------------------------
1,330 (27,376) (28,706) 1,106,654
749,298 1,920,611
----------------------------------------------------------------------------------------------------------------
253,639 5,151,123 4,897,484 54,723,321
5,594,913 66,472,691
----------------------------------------------------------------------------------------------------------------
(4,024) (66,591) (62,567) 2,232,953
341,159 2,515,960
----------------------------------------------------------------------------------------------------------------
188,717 538,139 349,422 2,162,813
1,879,209 4,751,784
----------------------------------------------------------------------------------------------------------------
0 (85,796) (85,796) 9,039,741
0 8,998,008
----------------------------------------------------------------------------------------------------------------
0 204,764 204,764 6,504,625
0 6,776,512
----------------------------------------------------------------------------------------------------------------
0 72,010 72,010 4,061,090
0 4,216,370
----------------------------------------------------------------------------------------------------------------
0 935 935 204,179
0 208,841
----------------------------------------------------------------------------------------------------------------
0 9,304 9,304 400,164
0 407,913
----------------------------------------------------------------------------------------------------------------
77,158 (6,666) (83,824) (710,088)
8,356,574 8,242,574
----------------------------------------------------------------------------------------------------------------
652,411 1,510,449 858,038 (54,117)
10,565,664 12,050,127
----------------------------------------------------------------------------------------------------------------
16,540 145,325 128,785 2,313,929
489,878 2,991,356
----------------------------------------------------------------------------------------------------------------
8,206,103 (1,588,390) (9,794,493) (7,301,710)
54,311,401 44,369,162
----------------------------------------------------------------------------------------------------------------
15,650 375,835 360,185 3,691,239
602,619 4,706,594
----------------------------------------------------------------------------------------------------------------
$28,746,944 $122,191,053 $93,444,109 $504,121,195 $1,130,935,704 $1,848,811,724
=========== ============ =========== ============ ============== ==============
</TABLE>
S-24
<PAGE>
Independent Auditors' Report
The Board of Directors of Aetna Life Insurance and Annuity Company and
Contract Owners of Variable Annuity Account B:
We have audited the accompanying statement of assets and liabilities of Aetna
Life Insurance and Annuity Company Variable Annuity Account B (the "Account") as
of December 31, 1997, and the related statements of operations and changes in
net assets for each of the years in the two-year period then ended and condensed
financial information for the year ended December 31, 1997. These financial
statements and condensed financial information are the responsibility of the
Account's management. Our responsibility is to express an opinion on these
financial statements and condensed financial information based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and condensed
financial information are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and condensed financial information. Our procedures
included confirmation of securities owned as of December 31, 1997, by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and condensed financial information
referred to above present fairly, in all material respects, the financial
position of Aetna Life Insurance and Annuity Company Variable Annuity Account B
as of December 31, 1997, the results of its operations and changes in its net
assets for each of the years in the two-year period then ended and condensed
financial information for the year ended December 31, 1997 in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
February 27, 1998
S-25
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
Index to Consolidated Financial Statements
------------------------------------------
Page
Independent Auditors' Report F-2
Consolidated Financial Statements:
Consolidated Statements of Income for the Years Ended
December 31, 1997, 1996 and 1995 F-3
Consolidated Balance Sheets as of December 31, 1997
and 1996 F-4
Consolidated Statements of Changes in Shareholder's Equity
for the Years Ended December 31, 1997, 1996 and 1995 F-5
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1997, 1996 and 1995 F-6
Notes to Consolidated Financial Statements F-7
F-1
<PAGE>
Independent Auditors' Report
The Shareholder and Board of Directors
Aetna Life Insurance and Annuity Company:
We have audited the accompanying consolidated balance sheets of Aetna Life
Insurance and Annuity Company and Subsidiary as of December 31, 1997 and 1996,
and the related consolidated statements of income, changes in shareholder's
equity and cash flows for each of the years in the three-year period ended
December 31, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Aetna Life Insurance
and Annuity Company and Subsidiary at December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1997, in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
February 3, 1998
F-2
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Statements of Income
(millions)
Years Ended December 31,
--------------------------------
1997 1996 1995
------- ------- -------
Revenue:
Premiums $267.1 $133.6 $212.7
Charges assessed against policyholders 475.0 396.5 318.9
Net investment income 1,080.5 1,045.6 1,004.3
Net realized capital gains 36.0 19.7 41.3
Other income 39.7 45.4 42.0
------- ------- -------
Total revenue 1,898.3 1,640.8 1,619.2
------- ------- -------
Benefits and expenses:
Current and future benefits 1,127.8 968.6 997.2
Operating expenses 347.4 342.2 310.8
Amortization of deferred policy
acquisition costs 128.4 69.8 48.0
Severance and facilities charges -- 61.3 --
------- ------- -------
Total benefits and expenses 1,603.6 1,441.9 1,356.0
------- ------- -------
Income before income taxes 294.7 198.9 263.2
Income taxes 89.4 57.8 87.3
------- ------- -------
Net income $205.3 $141.1 $175.9
======= ======= =======
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Balance Sheets
(millions, except share data)
<TABLE>
<CAPTION>
December 31, December 31,
Assets 1997 1996
- ------ ---- ----
<S> <C> <C>
Investments:
Debt securities available for sale, at fair value
(amortized cost: $12,912.2 and $12,539.1) $13,463.8 $12,905.5
Equity securities, available for sale:
Nonredeemable preferred stock (cost: $131.7 and $107.6) 147.6 119.0
Investment in affiliated mutual funds (cost: $78.1 and $77.3) 83.0 81.1
Common stock (cost: $0.2 and $0.0) .6 .3
Short-term investments 95.6 34.8
Mortgage loans 12.8 13.0
Policy loans 469.6 399.3
--------- --------
Total investments 14,273.0 13,553.0
Cash and cash equivalents 565.4 459.1
Accrued investment income 163.0 159.0
Premiums due and other receivables 63.7 26.6
Deferred policy acquisition costs 1,654.6 1,515.3
Reinsurance loan to affiliate 397.2 628.3
Other assets 46.8 33.7
Separate accounts assets 22,982.7 15,318.3
--------- --------
Total assets $40,146.4 $31,693.3
========= ========
Liabilities and Shareholder's Equity
Liabilities:
Future policy benefits $3,763.7 $3,617.0
Unpaid claims and claim expenses 38.0 28.9
Policyholders' funds left with the Company 11,143.5 10,663.7
--------- --------
Total insurance reserve liabilities 14,945.2 14,309.6
Other liabilities 312.8 354.7
Income taxes:
Current 12.4 20.7
Deferred 72.0 80.5
Separate accounts liabilities 22,970.0 15,318.3
--------- --------
Total liabilities 38,312.4 30,083.8
--------- --------
Shareholder's equity:
Common stock, par value $50 (100,000 shares
authorized; 55,000 shares issued and outstanding) 2.8 2.8
Paid-in capital 418.0 418.0
Accumulated other comprehensive income 92.9 60.5
Retained earnings 1,320.3 1,128.2
--------- --------
Total shareholder's equity 1,834.0 1,609.5
--------- --------
Total liabilities and shareholder's equity $40,146.4 $31,693.3
========= ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Statements of Changes in Shareholder's Equity
(millions)
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Shareholder's equity, beginning of year $1,609.5 $1,583.0 $1,088.5
Comprehensive income
Net income 205.3 141.1 175.9
Other comprehensive income, net of tax
Unrealized gains (losses) on securities ($50.1
million, $(110.8) million and $494.6 million, 32.4 (72.0) 321.5
pretax, respectively)
-------- -------- --------
Total comprehensive income 237.7 69.1 497.4
-------- -------- --------
Capital contributions -- 10.4 0.0
Other changes 4.1 (49.5) 0.0
Common stock dividends (17.3) (3.5) (2.9)
-------- -------- --------
Shareholder's equity, end of year $1,834.0 $1,609.5 $1,583.0
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Statements of Cash Flows
(millions)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $205.3 $141.1 $175.9
Adjustments to reconcile net income to net cash provided by
(used for) operating activities:
(Increase) decrease in accrued investment income (4.0) 16.5 (33.3)
(Increase) decrease in premiums due and other receivables (33.3) 1.6 25.4
Increase in policy loans (70.3) (60.7) (89.9)
Increase in deferred policy acquisition costs (139.3) (174.0) (177.0)
Decrease in reinsurance loan to affiliate 231.1 27.2 34.8
Net increase in universal life account balances 286.4 243.2 393.4
(Decrease) increase in other insurance reserve liabilities (249.6) (211.5) 79.0
Net (decrease) increase in other liabilities and other assets (41.7) 3.1 13.0
Decrease in income taxes (31.4) (26.7) (4.5)
Net accretion of discount on investments (66.4) (68.0) (66.4)
Net realized capital gains (36.0) (19.7) (41.3)
Other, net -- 1.1 --
-------- -------- --------
Net cash provided by (used for) operating activities 50.8 (126.8) 309.1
-------- -------- --------
Cash Flows from Investing Activities:
Proceeds from sales of:
Debt securities available for sale 5,311.3 5,182.2 4,207.2
Equity securities 103.1 190.5 180.8
Mortgage loans 0.2 8.7 10.7
Limited partnership -- -- 26.6
Investment maturities and collections of:
Debt securities available for sale 1,212.7 885.2 583.9
Short-term investments 89.3 35.0 106.1
Cost of investment purchases in:
Debt securities available for sale (6,732.8) (6,534.3) (6,034.0)
Equity securities (113.3) (118.1) (170.9)
Short-term investments (149.9) (54.7) (24.7)
Mortgage loans -- -- (21.3)
Other, net -- (17.6) --
-------- -------- --------
Net cash used for investing activities (279.4) (423.1) (1,135.6)
-------- -------- --------
Cash Flows from Financing Activities:
Deposits and interest credited for investment contracts 1,621.2 1,579.5 1,884.5
Withdrawals of investment contracts (1,256.3) (1,146.2) (1,109.6)
Capital contribution to Separate Account (25.0) -- --
Return of capital from Separate Account 12.3 -- --
Capital contribution from HOLDCO -- 10.4 --
Dividends paid to shareholder (17.3) (3.5) (2.9)
-------- -------- --------
Net cash provided by financing activities 334.9 440.2 772.0
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 106.3 (109.7) (54.5)
Cash and cash equivalents, beginning of year 459.1 568.8 623.3
-------- -------- --------
Cash and cash equivalents, end of year $565.4 $459.1 $568.8
======== ======== ========
Supplemental cash flow information:
Income taxes paid, net $119.6 $85.5 $92.8
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Aetna Life Insurance and Annuity Company and its wholly owned subsidiary
(collectively, the "Company") are providers of financial services and life
insurance products in the United States. The Company has two business
segments: financial services and individual life insurance.
Financial services products include annuity contracts that offer a variety
of funding and payout options for individual and employer-sponsored
retirement plans qualified under Internal Revenue Code Sections 401, 403,
408 and 457, and non-qualified annuity contracts. These contracts may be
deferred or immediate ("payout annuities"). Financial services also include
investment advisory services and pension plan administrative services.
Individual life insurance products include universal life, variable
universal life, traditional whole life and term insurance.
Basis of Presentation
---------------------
The consolidated financial statements include Aetna Life Insurance and
Annuity Company and its wholly owned subsidiary, Aetna Insurance Company of
America. Aetna Life Insurance and Annuity Company is a wholly owned
subsidiary of Aetna Retirement Holdings, Inc. ("HOLDCO"). HOLDCO is a
wholly owned subsidiary of Aetna Retirement Services, Inc., whose ultimate
parent is Aetna Inc. ("Aetna").
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles. Certain reclassifications have
been made to 1996 and 1995 financial information to conform to the 1997
presentation.
New Accounting Standard
-----------------------
As of December 31, 1997 the Company adopted Financial Accounting Standard
("FAS") No. 130, Reporting Comprehensive Income. This statement establishes
standards for the reporting and presentation of comprehensive income and
its components in a full set of financial statements. Comprehensive income
encompasses all changes in shareholder's equity (except those arising from
transactions with shareholders) and includes net income and net unrealized
capital gains or losses on available-for-sale securities. As this new
standard only requires additional information in a financial statement, it
does not affect the Company's financial position or results of operations.
Future Application of Accounting Standards
------------------------------------------
Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities
FAS No. 125, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, was issued in June 1996 and provides
accounting and reporting standards for transfers of financial assets and
extinguishments of liabilities.
F-7
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
1. Summary of Significant Accounting Policies (Continued)
Future Application of Accounting Standards (Continued)
FAS No. 125 is effective for 1997 financial statements; however, certain
provisions relating to accounting for repurchase agreements and securities
lending are not effective until January 1, 1998. Provisions effective in
1997 did not have a material effect on the Company's financial position or
results of operations. The Company does not expect adoption of this
statement for provisions effective in 1998 to have a material effect on its
financial position or results of operations.
Accounting by Insurance and Other Enterprises for Insurance-Related
Assessments
In December 1997, the American Institute of Certified Public Accountants
issued Statement of Position 97-3, Accounting by Insurance and Other
Enterprises for Insurance-Related Assessments, which provides guidance for
determining when an insurance or other enterprise should recognize a
liability for guaranty-fund and other insurance related assessments and
guidance for measuring the liability. This statement is effective for 1999
financial statements with early adoption permitted. The Company does not
expect adoption of this statement to have a material effect on its
financial position or results of operations.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from reported results
using those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, money market instruments
and other debt issues with a maturity of 90 days or less when purchased.
Investments
Debt and equity securities are classified as available for sale and carried
at fair value. These securities are written down (as realized capital
losses) for other than temporary declines in value. Unrealized capital
gains and losses related to available for sale investments, other than
amounts allocable to experience rated contractholders, are reflected in
shareholder's equity, net of related taxes.
Fair values for debt and equity securities are based on quoted market
prices or dealer quotations. Where quoted market prices or dealer
quotations are not available, fair values are measured utilizing quoted
market prices for similar securities or by using discounted cash flow
methods. Cost for mortgage-backed securities is adjusted for unamortized
premiums and discounts, which are amortized using the interest method over
the estimated remaining term of the securities, adjusted for anticipated
prepayments.
F-8
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
1. Summary of Significant Accounting Policies (Continued)
Investments (Continued)
The company engages in securities lending whereby certain securities from
its portfolio are loaned to other institutions for short periods of time.
Initial collateral, primarily cash, is required at a rate of 102% of the
market value of a loaned domestic security and 105% of the market value of
a loaned foreign security. The collateral is deposited by the borrower with
a lending agent, and retained and invested by the lending agent according
to the Company's guidelines to generate additional income. The market value
of the loaned securities is monitored on a daily basis with additional
collateral obtained or refunded as the market value of the loaned
securities fluctuates. At December 31, 1997 and 1996, the Company loaned
securities (which are reflected as invested assets) with a market value of
approximately $385.1 million and $444.7 million, respectively.
Purchases and sales of debt and equity securities are recorded on the trade
date.
The investment in affiliated mutual funds represents an investment in Aetna
managed mutual funds which have been seeded by the Company, and is carried
at fair value.
Mortgage loans and policy loans are carried at unpaid principal balances,
net of impairment reserves. Sales of mortgage loans are recorded on the
closing date.
Short-term investments, consisting primarily of money market instruments
and other debt issues purchased with a maturity of 91 days to one year, are
considered available for sale and are carried at fair value, which
approximates amortized cost.
The Company utilizes futures contracts, swap agreements and warrants for
other than trading purposes in order to manage investment returns and price
risk and to align maturities, interest rates, and funds availability with
its obligations. (Refer to Note 3.)
Futures contracts are carried at fair value and require daily cash
settlement. Changes in the fair value of futures contracts that qualify as
hedges are deferred and recognized as an adjustment to the hedged asset or
liability. Deferred gains or losses on such futures contracts are amortized
over the life of the acquired asset or liability as a yield adjustment or
through net realized capital gains or losses upon disposal of an asset.
Changes in the fair value of futures contracts that do not qualify as
hedges are recorded in net realized capital gains or losses. Hedge
designation requires specific asset or liability identification, a
probability at inception of high correlation with the position underlying
the hedge, and that high correlation be maintained throughout the hedge
period. If a hedging instrument ceases to be highly correlated with the
position underlying the hedge, hedge accounting ceases at that date and
excess gains and losses on the hedging instrument are reflected in net
realized capital gains or losses.
Interest rate swap agreements which are designated as interest rate risk
management instruments at inception are accounted for using the accrual
method. Accordingly, the difference between amounts
F-9
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
1. Summary of Significant Accounting Policies (Continued)
Investments (Continued)
paid and received on such agreements is reported in net investment income.
There is no recognition in the Consolidated Balance Sheets for changes in
the fair value of the agreement.
Warrants represent the right to purchase specific securities and are
accounted for as hedges. Upon exercise, the cost of the warrants are added
to the basis of the securities purchased.
Deferred Policy Acquisition Costs
Certain costs of acquiring insurance business are deferred. These costs,
all of which vary with and are primarily related to the production of new
and renewal business, consist principally of commissions, certain expenses
of underwriting and issuing contracts, and certain agency expenses. For
fixed ordinary life contracts, such costs are amortized over expected
premium-paying periods (up to 20 years). For universal life and certain
annuity contracts, such costs are amortized in proportion to estimated
gross profits and adjusted to reflect actual gross profits over the life of
the contracts (up to 20 years). Deferred policy acquisition costs are
written off to the extent that it is determined that future policy premiums
and investment income or gross profits are not adequate to cover related
losses and expenses.
Insurance Reserve Liabilities
Future policy benefits include reserves for universal life, immediate
annuities with life contingent payouts and traditional life insurance
contracts. Reserves for universal life contracts are equal to cumulative
deposits less charges and withdrawals plus credited interest thereon.
Reserves for immediate annuities with life contingent payouts and
traditional life insurance contracts are computed on the basis of assumed
investment yield, mortality, and expenses, including a margin for adverse
deviations. Such assumptions generally vary by plan, year of issue and
policy duration. Reserve interest rates range from 2.25% to 12.00% for all
years presented. Investment yield is based on the Company's experience.
Mortality and withdrawal rate assumptions are based on relevant Aetna
experience and are periodically reviewed against both industry standards
and experience.
Policyholders' funds left with the Company include reserves for deferred
annuity investment contracts and immediate annuities without life
contingent payouts. Reserves on such contracts are equal to cumulative
deposits less charges and withdrawals plus credited interest thereon (rates
range from 3.50% to 9.50% for all years presented) net of adjustments for
investment experience that the Company is entitled to reflect in future
credited interest. Reserves on contracts subject to experience rating
reflect the rights of contractholders, plan participants and the Company.
Unpaid claims for all lines of insurance include benefits for reported
losses and estimates of benefits for losses incurred but not reported.
F-10
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
1. Summary of Significant Accounting Policies (Continued)
Premiums, Charges Assessed Against Policyholders, Benefits and Expenses
For universal life and certain annuity contracts, charges assessed against
policyholders' funds for the cost of insurance, surrender charges,
actuarial margin and other fees are recorded as revenue in charges assessed
against policyholders. Other amounts received for these contracts are
reflected as deposits and are not recorded as revenue. Life insurance
premiums, other than premiums for universal life and certain annuity
contracts, are recorded as premium revenue when due. Related policy
benefits are recorded in relation to the associated premiums or gross
profit so that profits are recognized over the expected lives of the
contracts. When annuity payments with life contingencies begin under
contracts that were initially investment contracts, the accumulated balance
in the account is treated as a single premium for the purchase of an
annuity and reflected as an offsetting amount in both premiums and current
and future benefits in the Consolidated Statements of Income.
Separate Accounts
Assets held under variable universal life and variable annuity contracts
are segregated in Separate Accounts and are invested, as designated by the
contractholder or participant under a contract, in shares of mutual funds
which are managed by the Company, or other selected mutual funds not
managed by the Company.
Separate Accounts assets and liabilities are carried at fair value except
for those relating to a guaranteed interest option. Since the Company bears
the investment risk where the contract is held to maturity, the assets of
the Separate Account supporting the guaranteed interest option are carried
at an amortized cost of $658.6 million for 1997 (fair value $668.7 million)
and $515.6 million for 1996 (fair value $523.0 million). Reserves relating
to the guaranteed interest option are maintained at fund value and reflect
interest credited at rates ranging from 4.10% to 8.00% in both 1997 and in
1996.
Separate Accounts assets and liabilities are shown as separate captions in
the Consolidated Balance Sheets. Deposits, investment income and net
realized and unrealized capital gains and losses of the Separate Accounts
are not reflected in the Consolidated Statements of Income (with the
exception of realized capital gains and losses on the sale of assets
supporting the guaranteed interest option). The Consolidated Statements of
Cash Flows do not reflect investment activity of the Separate Accounts.
Income Taxes
The Company is included in the consolidated federal income tax return of
Aetna. The Company is taxed at regular corporate rates after adjusting
income reported for financial statement purposes for certain items.
Deferred income tax expenses/benefits result from changes during the year
in cumulative temporary differences between the tax basis and book basis of
assets and liabilities.
F-11
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
2. Investments
Debt securities available for sale as of December 31, 1997 were as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ------
(millions)
<S> <C> <C> <C> <C>
U.S. government and government
agencies and authorities $1,219.7 $74.0 $0.1 $1,293.6
States, municipalities and political
subdivisions 0.3 -- -- 0.3
U.S. corporate securities:
Financial 2,370.7 84.6 1.3 2,454.0
Food & fiber 195.4 9.3 -- 204.7
Healthcare & consumer products 728.5 27.0 2.6 752.9
Media & broadcast 252.9 14.7 0.1 267.5
Natural resources 143.5 5.5 - 149.0
Transportation & capital goods 528.2 33.2 0.1 561.3
Utilities 521.3 23.5 0.9 543.9
Other corporate securities 96.9 3.2 - 100.1
---------- -------- -------- -----------
Total U.S. corporate securities 4,837.4 201.0 5.0 5,033.4
Foreign Securities:
Government 612.5 36.7 23.6 625.6
Utilities 177.5 28.7 -- 206.2
Other 857.9 27.7 42.8 842.8
---------- -------- -------- -----------
Total foreign securities 1,647.9 93.1 66.4 1,674.6
Residential mortgage-backed securities:
Pass-throughs 784.4 71.3 2.0 853.7
Collateralized mortgage obligations 2,280.5 137.4 2.0 2,415.9
---------- -------- -------- -----------
Total residential mortgage-
backed securities 3,064.9 208.7 4.0 3,269.6
Commercial/Multifamily mortgage-
backed securities 1,127.8 34.0 0.4 1,161.4
Other asset-backed securities 1,014.2 17.1 0.4 1,030.9
---------- -------- -------- -----------
Total Debt Securities $12,912.2 $627.9 $76.3 $13,463.8
========== ======== ======== ===========
</TABLE>
F-12
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
2. Investments (Continued)
Debt securities available for sale as of December 31, 1996 were as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ------
(millions)
<S> <C> <C> <C> <C>
U.S. government and government
agencies and authorities $1,072.4 $20.5 $4.5 $1,088.4
States, municipalities and political
subdivisions 6.0 1.2 -- 7.2
U.S. corporate securities:
Financial 2,143.4 43.1 9.7 2,176.8
Food & fiber 198.2 4.6 1.3 201.5
Healthcare & consumer products 735.9 20.2 6.3 749.8
Media & broadcast 274.9 7.0 2.8 279.1
Natural resources 187.7 4.5 0.4 191.8
Transportation & capital goods 521.9 22.0 1.8 542.1
Utilities 448.8 14.8 2.8 460.8
Other corporate securities 141.5 3.0 -- 144.5
--------- --------- -------- ---------
Total U.S. corporate securities 4,652.3 119.2 25.1 4,746.4
Foreign Securities:
Government 758.6 36.0 5.7 788.9
Utilities 187.8 16.1 -- 203.9
Other 945.5 30.9 6.3 970.1
--------- -------- --------- ---------
Total foreign securities 1,891.9 83.0 12.0 1,962.9
Residential mortgage-backed securities:
Pass-throughs 792.2 78.3 3.1 867.4
Collateralized mortgage obligations 2,227.8 94.9 13.7 2,309.0
--------- --------- -------- ---------
Total residential mortgage-
backed securities 3,020.0 173.2 16.8 3,176.4
Commercial/Multifamily mortgage-
backed securities 1,008.7 24.8 5.6 1,027.9
Other asset-backed securities 887.8 10.7 2.2 896.3
--------- -------- --------- --------
Total Debt Securities $12,539.1 $432.6 $66.2 $12,905.5
========= ======== ========= ========
</TABLE>
F-13
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
2. Investments (Continued)
At December 31, 1997 and 1996, net unrealized appreciation of $551.6
million and $366.4 million, respectively, on available-for-sale debt
securities included $429.3 million and $288.5 million, respectively,
related to experience rated contracts, which were not reflected in
shareholder's equity but in future policy benefits and policyholders' funds
left with the Company.
The carrying and fair value of debt securities for the year ended December
31, 1997 are shown below by contractual maturity. Actual maturities may
differ from contractual maturities because securities may be restructured,
called, or prepaid.
Amortized Fair
Cost Value
--------- ------
(millions)
Due to mature:
One year or less $367.3 $367.6
After one year through five years 2,165.1 2,195.4
After five years through ten years 2,367.3 2,407.0
After ten years 2,805.6 3,031.9
Mortgage-backed securities 4,192.7 4,431.0
Other asset-backed securities 1,014.2 1,030.9
--------- ---------
Total $12,912.2 $13,463.8
========= =========
At December 31, 1997 and 1996, debt securities carried at $8.2 million and
$7.6 million, respectively, were on deposit as required by regulatory
authorities.
The Company did not have any investments in a single issuer, other than
obligations of the U.S. government, with a carrying value in excess of 10%
of the Company's shareholder's equity at December 31, 1997.
F-14
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
2. Investments (Continued)
Included in the Company's debt securities were residential collateralized
mortgage obligations ("CMOs") supporting the following:
<TABLE>
<CAPTION>
1997 1996
--------------------- ------------------------
Fair Amortized Fair Amortized
Value Cost Value Cost
-------- -------- -------- --------
(millions)
<S> <C> <C> <C> <C>
Total residential CMOs(1) $2,415.9 $2,280.5 $2,309.0 $2,227.8
======== ======== ======== ========
Percentage of total:
Supporting experience rated products 81.6% 84.2%
Supporting remaining products 18.4% 15.8%
----- -----
100.0% 100.0%
===== =====
</TABLE>
(1) At December 31, 1997 and 1996, approximately 73% and 71%,
respectively, of the Company's residential CMO holdings were
backed by government agencies such as GNMA, FNMA, FHLMC.
There are various categories of CMOs which are subject to different degrees
of risk from changes in interest rates and, for nonagency-backed CMOs,
defaults. The principal risks inherent in holding CMOs are prepayment and
extension risks related to dramatic decreases and increases in interest
rates resulting in the repayment of principal from the underlying mortgages
either earlier or later than originally anticipated. At December 31, 1997
and 1996, approximately 4% and 3%, respectively, of the Company's CMO
holdings were invested in types of CMOs which are subject to more
prepayment and extension risk than traditional CMOs (such as interest- or
principal-only strips).
F-15
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
2. Investments (Continued)
Investments in equity securities available for sale were as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -----
(millions)
1997
Equity Securities $210.0 $21.3 $0.1 $231.2
====== ===== ==== ======
1996
Equity Securities $184.9 $16.3 $0.8 $200.4
====== ===== ==== ======
3. Financial Instruments
Estimated Fair Value
--------------------
The carrying values and estimated fair values of certain of the Company's
financial instruments at December 31, 1997 and 1996 were as follows:
1997 1996
-------------------- -----------------
Carrying Fair Carrying Fair
Value Value Value Value
--------- ------ -------- -----
(millions)
Assets:
Mortgage loans $ 12.8 $ 12.4 $ 13.0 $ 13.2
Liabilities:
Investment contract
liabilities:
With a fixed maturity $ 1,030.3 $1,005.4 $1,014.1 $1,028.8
Without a fixed
maturity 10,113.2 9,587.5 9,649.6 9,427.6
Fair value estimates are made at a specific point in time, based on
available market information and judgments about the financial instrument,
such as estimates of timing and amount of future cash flows. Such estimates
do not reflect any premium or discount that could result from offering for
sale at one time the Company's entire holdings of a particular financial
instrument, nor do they consider the tax impact of the realization of
unrealized gains or losses. In many cases, the fair value estimates cannot
be substantiated by comparison to independent markets, nor can the
disclosed value be realized in immediate settlement of the instrument. In
evaluating the Company's management of interest rate, price and liquidity
risks, the fair values of all assets and liabilities should be taken into
consideration, not only those presented above.
F-16
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
3. Financial Instruments (Continued)
Estimated Fair Value (Continued)
The following valuation methods and assumptions were used by the Company in
estimating the fair value of the above financial instruments:
Mortgage loans: Fair values are estimated by discounting expected mortgage
loan cash flows at market rates which reflect the rates at which similar
loans would be made to similar borrowers. The rates reflect management's
assessment of the credit quality and the remaining duration of the loans.
Investment contract liabilities (included in policyholders' funds left with
the Company):
With a fixed maturity: Fair value is estimated by discounting cash flows at
interest rates currently being offered by, or available to, the Company for
similar contracts.
Without a fixed maturity: Fair value is estimated as the amount payable to
the contractholder upon demand. However, the Company has the right under
such contracts to delay payment of withdrawals which may ultimately result
in paying an amount different than that determined to be payable on demand.
Off-Balance-Sheet and Other Financial Instruments (including Derivative
Instruments)
The Company uses off-balance-sheet and other financial instruments
primarily to manage portfolio risks, including interest rate,
prepayment/call, credit, price, and liquidity risks. In 1997 and 1996,
Treasury futures contracts were used to manage interest rate risk in the
Company's bond portfolio; and, in 1996, stock index futures contracts were
used to manage price risk in the Company's equity portfolio. In 1996 and
1995, interest rate swaps and forward commitments to enter into interest
rate swaps, respectively, were also used to manage interest rate risk in
the Company's bond portfolio.
Futures Contracts:
Futures contracts represent commitments to either purchase or sell
securities at a specified future date and at a specified price or yield.
Futures contracts trade on organized exchanges and, therefore, have minimal
credit risk. Cash settlements are made daily based on changes in the prices
of the underlying assets. There were no futures contracts open as of
December 31, 1997 and 1996.
Interest Rate Swaps:
Under interest rate swaps, the Company agrees with other parties to
exchange interest amounts calculated by reference to an agreed notional
principal amount. Generally, no cash is exchanged at the outset of the
contract and no principal payments are made. A single net payment is
usually made by one counterparty at each due date or upon termination of
the contract. The Company would be
F-17
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
3. Financial Instruments (Continued)
Off-Balance-Sheet and Other Financial Instruments (Including Derivative
Instruments) (Continued)
exposed to credit-related losses in the event of nonperformance by
counterparties to financial instruments, however, the Company controls its
exposure to credit risk through credit approvals, credit limits and regular
monitoring procedures. The credit exposure of interest rate swaps is
represented by the fair value (market value) of contracts with a positive
fair value (market value) at the reporting date. There were no interest
rate swap agreements open as of December 31, 1997 and 1996.
During 1995, the Company received $0.4 million for writing call options on
underlying securities. The Company did not write any call options in 1997
and 1996.
Warrants:
Warrants are instruments giving the Company the right, but not the
obligation to buy a security at a given price during a specified period. As
of December 31, 1997 and 1996, the Company had open warrants to purchase
equity securities with a fair value of $0.6 million and $0.3 million,
respectively.
Debt Instruments with Derivative Characteristics:
The Company also had investments in certain debt instruments with
derivative characteristics, including those whose market value is at least
partially determined by, among other things, levels of or changes in
domestic and/or foreign interest rates (short or long term), exchange
rates, prepayment rates, equity markets or credit ratings/spreads. The
amortized cost and fair value of these securities, included in the debt
securities portfolio, as of December 31, 1997 was as follows:
Amortized Fair
Cost Value
--------- ----
(millions)
Residential collateralized mortgage
obligations $2,280.5 $2,415.9
Principal-only strips (included above) 59.0 67.0
Interest-only strips (included above) 12.8 24.3
Other structured securities with derivative
characteristics (1) 107.4 105.2
(1) Represents non-leveraged instruments whose fair values and credit
risk are based on underlying securities, including fixed income
securities and interest rate swap agreements.
F-18
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
4. Net Investment Income
Sources of net investment income were as follows:
1997 1996 1995
---- ---- ----
(millions)
Debt securities $962.8 $945.3 $891.5
Nonredeemable preferred stock 13.7 5.9 4.2
Investment in affiliated
mutual funds 4.9 14.3 14.9
Mortgage loans 1.3 2.2 1.4
Policy loans 19.9 18.4 13.7
Reinsurance loan to affiliate 37.5 44.1 46.5
Cash equivalents 44.2 29.4 38.9
Other 10.0 2.1 8.4
-------- -------- --------
Gross investment income 1,094.3 1,061.7 1,019.5
Less investment expenses (13.8) (16.1) (15.2)
-------- -------- --------
Net investment income $1,080.5 $1,045.6 $1,004.3
======== ======== ========
Net investment income includes amounts allocable to experience rated
contractholders of $823.1 million, $787.6 million and $744.2 million for
the years ended December 31, 1997, 1996 and 1995, respectively. Interest
credited to contractholders is included in current and future benefits.
5. Dividend Restrictions and Shareholder's Equity
The Company paid $17.3 million and $3.5 million in cash dividends to HOLDCO
in 1997 and 1996, respectively.
The amount of dividends that may be paid to the shareholder in 1998 without
prior approval by the Insurance Commissioner of the State of Connecticut is
$77.6 million.
The Insurance Department of the State of Connecticut (the "Department")
recognizes as net income and shareholder's capital and surplus those
amounts determined in conformity with statutory accounting practices
prescribed or permitted by the Department, which differ in certain respects
from generally accepted accounting principles. Statutory net income was
$80.5 million, $57.8 million and $70.0 million for the years ended December
31, 1997, 1996 and 1995, respectively. Statutory capital and surplus was
$778.7 million and $713.6 million as of December 31, 1997 and 1996,
respectively.
As of December 31, 1997 the Company does not utilize any statutory
accounting practices which are not prescribed by state regulatory
authorities that, individually or in the aggregate, materially affect
statutory capital and surplus.
F-19
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
6. Capital Gains and Losses on Investment Operations
Realized capital gains or losses are the difference between the carrying
value and sale proceeds of specific investments sold.
Net realized capital gains on investments were as follows:
1997 1996 1995
---- ---- ----
(millions)
Debt securities $22.5 $11.1 $32.8
Equity securities 9.9 8.6 8.3
Other 3.6 -- 0.2
------ -------- ------
Pretax realized capital gains $36.0 $19.7 $41.3
====== ======== ======
After tax realized capital gains $23.2 $13.0 $25.8
====== ======== ======
Net realized capital gains of $96.1 million, $53.1 million and $61.1
million for 1997, 1996 and 1995, respectively, allocable to experience
rated contracts, were deducted from net realized capital gains and an
offsetting amount was reflected in policyholders' funds left with the
Company. Net unamortized gains were $138.1 million and $53.3 million at
December 31, 1997 and 1996, respectively.
Proceeds from the sale of available-for-sale debt securities and the
related gross gains and losses were as follows:
1997 1996 1995
----- ----- ----
(millions)
Proceeds on Sales $5,311.3 $5,182.2 $4,207.2
Gross Gains 25.8 24.3 44.6
Gross Losses 3.3 13.2 11.8
F-20
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
6. Capital Gains and Losses on Investment Operations (Continued)
Changes in shareholder's equity related to changes in accumulated other
comprehensive income (unrealized capital gains and losses on securities)
(excluding those related to experience rated contractholders) were as
follows:
1997 1996 1995
---- ---- ----
(millions)
Debt securities $44.3 $(100.1) $255.9
Equity securities 5.6 (10.5) 27.3
Limited partnership -- -- 1.8
----- ------- ------
49.9 (110.6) 285.0
Increase (decrease) in deferred
income taxes (See Note 8) 17.5 (38.6) (36.5)
----- ------- ------
Net changes in accumulated other
comprehensive income $32.4 $(72.0) $321.5
===== ======= ======
Net unrealized capital gains allocable to experience rated contracts of
$356.7 million and $72.6 million at December 31, 1997 and $245.2 million
and $43.3 million at December 31, 1996 are reflected on the Consolidated
Balance Sheets in policyholders' funds left with the Company and future
policy benefits, respectively, and are not included in shareholder's
equity.
Shareholder's equity included the following accumulated other comprehensive
income, which are net of amounts allocable to experience rated
contractholders, at December 31:
1997 1996 1995
---- ---- ----
(millions)
Debt securities
Gross unrealized capital gains $140.6 $101.7 $179.3
Gross unrealized capital losses (18.4) (23.8) (1.3)
----- ----- -----
122.2 77.9 178.0
Equity securities
Gross unrealized capital gains 21.2 16.3 27.2
Gross unrealized capital losses (0.1) (0.8) (1.2)
---- ---- -----
21.1 15.5 26.0
Deferred income taxes (See Note 8) 50.4 32.9 71.5
---- ---- -----
Net accumulated other
comprehensive income $92.9 $60.5 $132.5
==== ==== =====
F-21
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
6. Capital Gains and Losses on Investment Operations (Continued)
Changes in accumulated other comprehensive income related to changes in
unrealized gains (losses) on securities (excluding those related to
experience rated contractholders) were as follows:
1997 1996 1995
---- ---- ----
(millions)
Unrealized holding gains (losses)
arising during the period (1) $98.8 $(14.8) $390.5
Less: reclassification adjustment
for gains and other items included
in net income (2) 66.4 57.2 69.0
----- ------ ------
Net unrealized gains (losses)
on securities $32.4 $(72.0) $321.5
===== ====== ======
(1) Pretax unrealized holding gains (losses) arising during the
period were $152.0 million, ($22.8) million and $600.8 million
for 1997, 1996 and 1995, respectively.
(2) Pretax reclassification adjustments for gains and other items
included in net income were $102.4 million, $87.7 million and
$107.5 million for 1997, 1996 and 1995, respectively.
7. Severance and Facilities Charges
Severance and facilities charges during 1996, as described below, included
the following (pretax):
<TABLE>
<CAPTION>
Vacated
Asset Leased Corporate
(Millions) Severance Write-off Property Other Allocation Total
-------------------------- --------- --------- --------- ----- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Financial Services $29.1 $1.0 $1.3 $1.7 $ -- $33.1
Individual Life Insurance 12.5 0.4 0.5 0.8 -- 14.2
Corporate Allocation -- -- -- -- 14.0 14.0
--------- --------- --------- ----- ---------- ---------
Total Company $41.6 $1.4 $1.8 $2.5 $14.0 $61.3
-------------------------- --------- --------- --------- ----- ---------- ---------
</TABLE>
In the third quarter of 1996, the Company recorded a $30.7 million after
tax ($47.3 million pretax) charge principally related to actions taken or
expected to be taken to improve its cost structure relative to its
competitors. The severance portion of the charge is based on a plan to
eliminate 702 positions (primarily customer service, sales and information
technology support staff). The facilities portion of the charge is based on
a plan to consolidate sales/service field offices.
F-22
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
7. Severance and Facilities Charges (Continued)
In addition to the above charge, Aetna recorded a facilities and severance
charge in the second quarter of 1996, primarily as a result of actions
taken or expected to be taken to reduce the level of corporate expenses and
other costs previously absorbed by Aetna's property-casualty operations,
which were sold in April 1996. The cost allocated to the Company associated
with this charge was $9.1 million after tax ($14.0 million pretax).
Activity for 1997 and 1996 within the severance and facilities reserve
(pretax, in millions) and the number of positions eliminated related to
such actions were as follows:
(Millions) Reserve Positions
----------------------------------- ---------- ---------
Balance at December 31, 1995 $ -- --
Severance and facilities charges 47.3 702
Corporate Allocation 14.0 --
Actions taken (1) (13.4) (178)
---------- ---------
Balance at December 31, 1996 47.9 524
Actions taken (1) (27.1) (163)
---------- ---------
Balance at December 31, 1997 $20.8 361
========== =========
(1) Includes $15.9 million and $8.0 million in 1997 and 1996,
respectively, of severance-related actions and $7.9 million and $4.1
million in 1997 and 1996, respectively, of corporate
allocation-related actions.
The Company's severance actions are expected to be substantially completed
by September 30, 1998. The corporate allocation actions were substantially
completed in 1997.
F-23
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
8. Income Taxes
The Company is included in the consolidated federal income tax return, the
Illinois Unitary return and the Connecticut and the New York combined state
income tax returns of Aetna. Aetna allocates to each member an amount
approximating the tax it would have incurred were it not a member of the
consolidated group, and credits the member for the use of its tax saving
attributes used in the consolidated federal income tax return.
Income taxes for the years ended December 31, consist of:
1997 1996 1995
---- ---- ----
(millions)
Current taxes:
Income Taxes:
Federal income tax $64.5 $50.9 $82.9
State income tax 3.7 3.7 3.2
Net realized capital gains 45.6 25.3 28.5
----- ---- ----
113.8 79.9 114.6
----- ---- -----
Deferred taxes (benefits):
Income taxes:
Federal 8.4 (3.5) (14.4)
Net realized capital gains (losses) (32.8) (18.6) (12.9)
----- ----- -----
(24.4) (22.1) (27.3)
----- ----- -----
Total $89.4 $57.8 $87.3
===== ===== =====
Income taxes were different from the amount computed by applying the
federal income tax rate to income before income taxes for the following
reasons:
1997 1996 1995
---- ---- ----
(millions)
Income before income taxes $294.7 $198.9 $263.2
Tax rate 35% 35% 35%
------- ------- -------
Application of the tax rate 103.1 69.6 92.1
------- ------- -------
Tax effect of:
State income tax, net of
federal benefit 2.4 2.4 2.1
Excludable dividends (15.9) (8.7) (9.3)
Other, net (0.2) (5.5) 2.4
------- ------- --------
Income taxes $89.4 $57.8 $87.3
======= ======= ========
F-24
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
8. Income Taxes (Continued)
The tax effects of temporary differences that give rise to deferred tax
assets and deferred tax liabilities at December 31 are presented below:
1997 1996
---- ----
(millions)
Deferred tax assets:
Insurance reserves $415.8 $344.6
Unrealized gains allocable to
experience rated contracts 150.1 100.8
Investment losses 6.6 7.5
Postretirement benefits other
than pensions 26.3 27.0
Deferred compensation 31.2 25.0
Pension (3.6) 7.6
Restructuring charge 9.5 17.6
Depreciation 3.9 2.6
Other 8.8 9.1
--------- --------
Total gross assets 648.6 541.8
Deferred tax liabilities:
Deferred policy acquisition costs 515.6 482.1
Market discount 5.1 6.8
Net unrealized capital gains 200.5 133.7
Other (0.6) (0.3)
--------- ---------
Total gross liabilities 720.6 622.3
--------- ---------
Net deferred tax liability $72.0 $80.5
========= =========
Net unrealized capital gains and losses are presented in shareholder's
equity net of deferred taxes. As of December 31, 1997 and 1996, no
valuation allowances were required for unrealized capital gains and losses.
The "Policyholders' Surplus Account," which arose under prior tax law, is
generally that portion of a life insurance company's statutory income that
has not been subject to taxation. As of December 31, 1983, no further
additions could be made to the Policyholders' Surplus Account for tax
return purposes under the Deficit Reduction Act of 1984. The balance in
such account was approximately $17.2 million at December 31, 1997. This
amount would be taxed only under certain conditions. No income taxes have
been provided on this amount since management believes the conditions under
which such taxes would become payable are remote.
F-25
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
8. Income Taxes (Continued)
The Internal Revenue Service ("Service") has completed examinations of the
consolidated federal income tax returns of Aetna through 1990. Discussions
are being held with the Service with respect to proposed adjustments.
Management believes there are adequate defenses against, or sufficient
reserves to provide for, any such adjustments. The Service has commenced
its examinations for the years 1991 through 1994.
9. Benefit Plans
Employee Pension Plans - The Company, in conjunction with Aetna, has
noncontributory defined benefit pension plans covering substantially all
employees. The plans provide pension benefits based on years of service and
average annual compensation (measured over 60 consecutive months of highest
earnings in a 120-month period). Contributions are determined using the
Projected Unit Credit Method and, for qualified plans subject to ERISA
requirements, are limited to amounts that are tax-deductible. As of
December 31, 1997, Aetna's accrued pension cost has been allocated to its
subsidiaries, including the Company, under an allocation based on eligible
salaries. Data on a separate company basis regarding the proportionate
share of the projected benefit obligation and plan assets is not available.
The accumulated benefit obligation and plan assets are recorded by Aetna.
As of the measurement date (i.e., September 30), the accumulated plan
assets exceeded accumulated plan benefits. Allocated pretax charges to
operations for the pension plan (based on the Company's total salary cost
as a percentage of Aetna's total salary cost) were $2.7 million, $4.3
million and $6.1 million for the years ended December 31, 1997, 1996 and
1995, respectively.
Employee Postretirement Benefits - In addition to providing pension
benefits, Aetna currently provides certain health care and life insurance
benefits for retired employees. A comprehensive medical and dental plan is
offered to all full-time employees retiring at age 50 with 15 years of
service or at age 65 with 10 years of service. There is a cap on the
portion of the cost paid by the Company relating to medical and dental
benefits. Retirees are generally required to contribute to the plans based
on their years of service with Aetna. The costs to the Company associated
with the Aetna postretirement plans for 1997, 1996 and 1995 were $2.7
million, $1.8 million and $1.4 million, respectively.
As of December 31, 1996, Aetna transferred to the Company approximately
$77.7 million of accrued liabilities, primarily related to the pension and
postretirement benefit plans described above, that had been previously
recorded by Aetna. The after tax amount of this transfer (approximately
$50.5 million) is reported as a reduction in retained earnings. In 1997,
other changes in shareholder's equity includes an additional $0.8 million
reduction reflecting revisions to the allocation of these accrued
liabilities.
Agent Pension Plans - The Company, in conjunction with Aetna, has a
non-qualified pension plan covering certain agents. The plan provides
pension benefits based on annual commission earnings. As of the measurement
date (i.e., September 30), the accumulated plan assets exceeded accumulated
plan benefits.
F-26
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
9. Benefit Plans (Continued)
Agent Postretirement Benefits - The Company, in conjunction with Aetna,
also provides certain postretirement health care and life insurance
benefits for certain agents. The costs to the Company associated with the
agents' postretirement plans for 1997, 1996 and 1995 were $0.6 million,
$0.7 million and $0.8 million, respectively.
Incentive Savings Plan - Substantially all employees are eligible to
participate in a savings plan under which designated contributions, which
may be invested in common stock of Aetna or certain other investments, are
matched, up to 5% of compensation, by Aetna. Pretax charges to operations
for the incentive savings plan were $4.4 million, $5.4 million and $4.9
million in 1997, 1996 and 1995, respectively.
Stock Plans - Aetna has a stock incentive plan that provides for stock
options, deferred contingent common stock or equivalent cash awards or
restricted stock to certain key employees. Executive and middle management
employees may be granted options to purchase common stock of Aetna at or
above the market price on the date of grant. Options generally become 100%
vested three years after the grant is made, with one-third of the options
vesting each year. Aetna does not recognize compensation expense for stock
options granted at or above the market price on the date of grant under its
stock incentive plans. In addition, executives may be granted incentive
units which are rights to receive common stock or an equivalent value in
cash. The incentive units may vest within a range from 0% to 175% at the
end of a four year period based on the attainment of performance goals. The
costs to the Company associated with the Aetna stock plans for 1997, 1996
and 1995, were $2.9 million, $8.1 million and $6.3 million, respectively.
As of December 31, 1996, Aetna transferred to the Company approximately
$1.1 million of deferred tax benefits related to stock options. This amount
is reported as an increase in retained earnings. In 1997, other changes in
shareholder's equity include an additional increase of $2.3 million
reflecting revisions to the allocation of the deferred tax benefit.
10. Related Party Transactions
The Company is compensated by the Separate Accounts for bearing mortality
and expense risks pertaining to variable life and annuity contracts. Under
the insurance contracts, the Separate Accounts pay the Company a daily fee
which, on an annual basis, ranges, depending on the product, from 0.10% to
1.90% of their average daily net assets. The Company also receives fees
from Aetna managed mutual funds for serving as investment adviser. Under
the advisory agreements, these funds pay the Company a daily fee which, on
an annual basis, ranges, depending on the fund, from 0.25% to 0.85% of
their average daily net assets. The Company also receives fees (expressed
as a percentage of the average daily net assets) from some of its funds for
providing administration services, and from The Aetna Series Fund for
providing shareholder services and promoting sales. The amount of
compensation and fees received from the Separate Accounts and mutual funds,
included in charges assessed against policyholders, amounted to $271.2
million, $186.8 million and $128.1 million in 1997, 1996 and 1995,
respectively. The Company may waive advisory fees at its discretion.
F-27
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
10. Related Party Transactions (Continued)
The Company acts as an investment adviser for its affiliated mutual funds.
Since August 1996, Aeltus Investment Management, Inc. ("Aeltus"), a wholly
owned subsidiary of HOLDCO and an affiliate of the Company, has been acting
as Subadvisor for affiliated mutual funds and adviser for most of the
General Account assets. Fees paid by the Company to Aeltus, included in
both charges assessed against policyholders and net investment income, on
an annual basis, range from 0.06% to 0.55% of the average daily net assets
under management. For the years ended December 31, 1997 and 1996, the
Company paid $45.5 million and $16.0 million in such fees.
The Company may, from time to time, make reimbursements to an Aetna managed
mutual fund for some or all of its operating expenses. Reimbursement
arrangements may be terminated at any time without notice.
Since 1981, all domestic individual non-participating life insurance of
Aetna and its subsidiaries has been issued by the Company. Effective
December 31, 1988, the Company entered into a reinsurance agreement with
Aetna Life Insurance Company ("Aetna Life") in which substantially all of
the non-participating individual life and annuity business written by Aetna
Life prior to 1981 was assumed by the Company. A $6.1 million and a $108.0
million commission, paid by the Company to Aetna Life in 1996 and 1988,
respectively, was capitalized as deferred policy acquisition costs. In
consideration for the assumption of this business, a loan was established
relating to the assets held by Aetna Life which support the insurance
reserves. Effective January 1, 1997, this agreement has been amended to
transition (based on underlying investment rollover in Aetna Life) from a
modified coinsurance to a coinsurance arrangement. As a result of this
change, reserves will be ceded to the Company from Aetna Life as investment
rollover occurs and the loan previously established will be reduced. The
Company maintained insurance reserves of $574.5 million ($397.2 million
relating to the modified coinsurance agreement and $177.3 million relating
to the coinsurance agreement) and $628.3 million as of December 31, 1997
and 1996, respectively, relating to the business assumed. The fair value of
the loan relating to assets held by Aetna Life was $412.3 million and
$625.3 million as of December 31, 1997 and 1996, respectively, and is based
upon the fair value of the underlying assets. Premiums of $176.7 million,
$25.3 million and $28.0 million and current and future benefits of $183.9
million, $39.5 million and $43.0 million were assumed in 1997, 1996 and
1995, respectively.
Investment income of $37.5 million, $44.1 million and $46.5 million was
generated from the reinsurance loan to affiliate in 1997, 1996 and 1995,
respectively.
On December 16, 1988, the Company assumed $25.0 million of premium revenue
from Aetna Life for the purchase and administration of a life contingent
single premium variable payout annuity contract. In addition, the Company
also is responsible for administering fixed annuity payments that are made
to annuitants receiving variable payments. Reserves of $32.5 million and
$28.9 million were maintained for this contract as of December 31, 1997 and
1996, respectively.
Effective February 1, 1992, the Company increased its retention limit per
individual life to $2.0 million and entered into a reinsurance agreement
with Aetna Life to reinsure amounts in excess of this
F-28
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
10. Related Party Transactions (Continued)
limit, up to a maximum of $8.0 million on any new individual life business,
on a yearly renewable term basis. Premium amounts related to this agreement
were $5.9 million, $5.2 million and $3.2 million for 1997, 1996 and 1995,
respectively.
Effective October 1, 1997, the Company entered into a reinsurance agreement
with Aetna Life to assume amounts in excess of $0.2 million for certain of
its participating life insurance, on a yearly renewable term basis. Premium
amounts related to this agreement were $0.7 million in 1997.
The Company received a capital contribution of $10.4 million in cash from
HOLDCO in 1996. The Company received no capital contributions in 1997 or
1995.
The Company paid $17.3 million and $3.5 million in cash dividends to HOLDCO
in 1997 and 1996, respectively. In 1995, the Company dividended $2.9
million in the form of two of its subsidiaries, Systematized Benefits
Administrators, Inc. and Aetna Investment Services, Inc., to Aetna
Retirement Services, Inc. (the Company's former parent).
Premiums due and other receivables include $37.0 million and $2.8 million
due from affiliates in 1997 and 1996, respectively. Other liabilities
include $1.2 million and $10.7 million due to affiliates for 1997 and 1996,
respectively.
As of December 31, 1997, Aetna transferred to the Company $2.5 million
based on its decision not to settle state tax liabilities for the years
1996 and 1997. This amount has been reported as an other increase in
retained earnings.
Substantially all of the administrative and support functions of the
Company are provided by Aetna and its affiliates. The financial statements
reflect allocated charges for these services based upon measures
appropriate for the type and nature of service provided.
11. Reinsurance
The Company utilizes indemnity reinsurance agreements to reduce its
exposure to large losses in all aspects of its insurance business. Such
reinsurance permits recovery of a portion of losses from reinsurers,
although it does not discharge the primary liability of the Company as
direct insurer of the risks reinsured. The Company evaluates the financial
strength of potential reinsurers and continually monitors the financial
condition of reinsurers. Only those reinsurance recoverables deemed
probable of recovery are reflected as assets on the Company's Consolidated
Balance Sheets.
F-29
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
11. Reinsurance (Continued)
The following table includes premium amounts ceded/assumed to/from
affiliated companies as discussed in Note 10 above.
<TABLE>
<CAPTION>
Ceded to Assumed
Direct Other from Other Net
Amount Companies Companies Amount
(millions)
------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
1997
----
Premiums:
Life Insurance $ 35.7 $15.1 $177.4 $198.0
Accident and Health Insurance 5.6 5.6 -- --
Annuities 67.9 -- 1.2 69.1
------- ------------- ----------- ---------
Total earned premiums $109.2 $20.7 $178.6 $267.1
======= ============= =========== =========
1996
----
Premiums:
Life Insurance $ 34.6 $11.2 $25.3 $ 48.7
Accident and Health Insurance 6.3 6.3 -- --
Annuities 84.3 -- 0.6 84.9
------- ------------- ----------- ---------
Total earned premiums $125.2 $17.5 $25.9 $133.6
======= ============= =========== =========
1995
----
Premiums:
Life Insurance $ 28.8 $ 8.6 $28.0 $ 48.2
Accident and Health Insurance 7.5 7.5 -- --
Annuities 164.0 -- 0.5 164.5
------- ------------- ----------- ---------
Total earned premiums $200.3 $16.1 $28.5 $212.7
======= ============= =========== =========
</TABLE>
12. Commitments and Contingent Liabilities
Commitments
Through the normal course of investment operations, the Company commits to
either purchase or sell securities or money market instruments at a
specified future date and at a specified price or yield. The inability of
counterparties to honor these commitments may result in either higher or
lower replacement cost. Also, there is likely to be a change in the value
of the securities underlying the commitments. At December 31, 1997, the
Company had commitments to purchase investments of $38.7 million. The fair
value of the investments at December 31, 1997 approximated $39.0 million.
F-30
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
12. Commitments and Contingent Liabilities (Continued)
Litigation
The Company is involved in numerous lawsuits arising, for the most part, in
the ordinary course of its business operations. While the ultimate outcome
of litigation against the Company cannot be determined at this time, after
consideration of the defenses available to the Company and any related
reserves established, it is not expected to result in liability for amounts
material to the financial condition of the Company, although it may
adversely affect results of operations in future periods.
13. Segment Information (1)
The Company's operations are reported through two major business segments:
Financial Services and Individual Life Insurance. Summarized financial
information for the Company's principal operations was as follows:
1997 1996 1995
--------- --------- ---------
(millions)
Revenue:
Financial Services $1,277.9 $1,195.1 $1,211.3
Individual Life Insurance 620.4 445.7 407.9
--------- --------- ---------
Total revenue $1,898.3 $1,640.8 $1,619.2
========= ========= =========
Income before income taxes: (2)
Financial Services $188.2 $129.9 $160.1
Individual Life Insurance 106.5 83.0 103.1
--------- --------- ---------
Total income before
income taxes $294.7 $212.9 $263.2
========= ========= =========
Net income: (2)
Financial Services $137.5 $94.3 $113.8
Individual Life Insurance 67.8 55.9 62.1
--------- --------- ---------
Net income $205.3 $150.2 $175.9
========= ========= =========
Assets under management: (3)
Financial Services (4) $37,609.3 $27,268.1 $22,534.4
Individual Life Insurance 3,096.1 2,830.5 2,590.9
--------- --------- ---------
Total assets under management 40,705.4 $30,098.6 $25,125.3
========= ========= =========
(1) The 1996 results include severance and facilities charges of
$30.7 million, after tax. Of this charge $21.5 million related to
the Financial Services segment and $9.2 million related to the
Individual Life Insurance segment.
(2) Excludes any effect of the corporate facilities and severance
charge recorded in 1996 which is not directly allocable to the
Financial Services and Individual Life Insurance segments. (Refer
to Note 7).
(3) Excludes net unrealized capital gains (losses) of $551.5 million,
$366.4 million and $797.1 million at December 31, 1997, 1996 and
1995, respectively.
(4) The December 31, 1997 balance includes the transfer of $4,078.5
million of assets under management that were previously reported
by an affiliate.
F-31
<PAGE>
Form No. SAI 34370-98 ALIAC Ed. May 1998
<PAGE>
VARIABLE ANNUITY ACCOUNT B
PART C - OTHER INFORMATION
--------------------------
<TABLE>
<CAPTION>
Item 24. Financial Statements and Exhibits
- ------------------------------------------
(a) Financial Statements:
<S> <C> <C>
(1) Included in Part A:
Condensed Financial Information
(2) Included in Part B:
Financial Statements of Variable Annuity Account B:
- Statement of Assets and Liabilities as of December 31, 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 fo 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) Selling Agreement(2)
(3.2) Alternative Form of Wholesaling Agreement and Related Selling Agreement(3)
(3.3) Federated Broker Dealer Agreement (9/2/94)(4)
(4.1) Variable Annuity Contract G-CDA-97(NY)(5)
(4.2) Variable Annuity Contract Certificate GMCC-97(NY) to Contract G-CDA-97(NY)(5)
(4.3) Variable Annuity Contract G-MP1(5/97)(6)
(4.4) Variable Annuity Contract Certificate MP1CERT(5/97)(6)
(4.5) Variable Annuity Contract I-MP1(5/97)(6)
(4.6) Variable Annuity Contract G-MP1(5/96)(7)
(4.7) Variable Annuity Contract Certificate MP1CERT(5/96)(7)
(4.8) Variable Annuity Contract I-MP1(5/96)(7)
(4.9) Variable Annuity Contract G-CDA-96(NY)(7)
<PAGE>
(4.10) Variable Annuity Contract Certificate GMCC-96(NY)(7)
(4.11) Variable Annuity Contracts G-CDA-IC(NQ)
(4.12) Variable Annuity Contract G-CDA-IC(IR)
(4.13) Variable Annuity Contract I-CDA-IC(NQ/MP)
(4.14) Variable Annuity Contract I-CDA-IC(IR/MP)
(4.15) Variable Annuity Certificate GMCC-IC(NQ)
(4.16) Variable Annuity Contracts and Certificates G-CDA-IC(IR/NY), GMCC-IC(IR/NY), G-CDA-IC(NQ/NY),
and GMCC-IC(NQ/NY (8)
(4.17) Endorsements MP1IRA(5/97) and I-MP1IRA(5/97) to Contract G-MP1(5/96) and Certificate
MP1CERT(5/96)(7)
(4.18) Endorsements MP1QP(5/97) and I-MP1QP(5/97) to Contract G-MP1(5/96) and Certificate
MP1CERT(5/96)(7)
(4.19) Endorsements MP1TDA(5/97) and I-MP1TDA(5/97) to Contract G-MP1(5/96) and Certificate
MP1CERT(5/96)(7)
(4.20) Endorsements MP1DC(5/97) and I-MP1DC(5/97) to Contract G-MP1(5/96) and Certificate
MP1CERT(5/96)(7)
(4.21) Endorsement G-MP1IRA(11/96) to Contract G-CDA-96(NY) and Certificate GMCC-96(NY)(7)
(4.22) Endorsement I-MP1END(9/97) to Contract I-MP1(5/96)(6)
(4.23) Endorsement E1-MPROTH-97 to Contract G-MP1(5/97)(5)
(4.24) Endorsement EI1MPROTH-97 to Contract I-MP1(5/97)(5)
(4.25) Endorsement MP1IRA(11/97) to Contract G-MP1(5/97)(5)
(4.26) Endorsement I-MP1IRA(11/97) to Contract I-MP1(5/97)(5)
(4.27) Endorsement MP1END(9/97) to Contract G-MP1(5/97) and Certificate MP1CERT(5/97)(9)
(4.28) Endorsement I-MP1END(9/97) to Contract I-MP1(5/97)(9)
(4.29) Endorsement MPNQEND(4/95) to Contract G-CDA-IC(NQ)(10)
(4.30) Endorsement MPIREND(4/95) to Contract G-CDA-IC(IR)(10)
(4.31) Endorsement IMPNQEND(4/95) to Contract I-CDA-IC(NQ/MP)(10)
(4.32) Endorsement IMPIREND(4/95) to Contract I-CDA-IC(IR/MP)(10)
(4.33) Endorsement MPNQCERTEND(4/95) to Certificate GMCC-IC(NQ)(10)
(4.34) Endorsement MPIRCERTEND(4/95) to Certificate GMCC-IC(IR)(10)
(4.35) Contract Schedule I Accumulation Period (G-MP1(11/97)-5) to Group Contract (G-MP1(5/97))(5)
(4.36) Contract Schedule I Accumulation Period (I-MP1(11/97)-5) to Individual Contract
(I-MP1(5/97))(5)
(5.1) Variable Annuity Contract Application MPAPPNY(1/96)(5)
(5.2) Variable Annuity Contract Application (300-MAR-IB)(11)
(5.3) Variable Annuity Contract Application (710.6.13)(11)
(6.1) Certificate of Incorporation of Aetna Life Insurance and Annuity Company(12)
<PAGE>
(6.2) Amendment of Certificate of Incorporation of Aetna Life Insurance and Annuity Company(13)
(6.3) By-Laws as amended September 17, 1997 of Aetna Life Insurance and Annuity Company(14)
(7) Not applicable
(8.1) Fund Participation Agreement (Amended and Restated) between Aetna Life Insurance and Annuity
Company, Alger American Fund and Fred Alger Management, Inc. dated as of March 31, 1995(3)
(8.2) Fund Participation Agreement among Calvert Responsibly Invested Balanced Portfolio, Calvert
Asset Management Company, Inc. and Aetna Life Insurance and Annuity Company dated December 1,
1997(15)
(8.3) Service Agreement between Calvert Asset Management Company, Inc. and Aetna Life Insurance and
Annuity Company dated December 1, 1997(15)
(8.4) Fund Participation Agreement by and among Aetna Life Insurance and Annuity Company, Insurance
Management Series and Federated Advisors dated July 1, 1994(16)
(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(13)
(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(17)
(8.8) Form of 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(18)
(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(13)
(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)
(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(19)
(8.12) Form of 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(18)
<PAGE>
(8.13) Service Agreement between Aetna Life Insurance and Annuity Company and Fidelity Investments
Institutional Operations Company dated as of November 1, 1995(20)
(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(21)
(8.16) Service Agreement between Janus Capital Corporation and Aetna Life Insurance and Annuity
Company dated December 8, 1997(21)
(8.17) Fund Participation Agreement between Aetna Life Insurance and Annuity Company and Lexington
Management Corporation regarding Natural Resources Trust dated December 1, 1988 and amended
February 11, 1991(3)
(8.18) Fund Participation Agreement between Aetna Life Insurance and Annuity Company, Lexington
Emerging Markets Fund, Inc. and Lexington Management Corporation (its investment advisor)
dated April 28, 1994(2)
(8.19) Fund Participation Agreement among MFS Variable Insurance Trust, Aetna Life Insurance and
Annuity Company and Massachusetts Financial Services Company(7)
(8.20) 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(22)
(8.21) 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(16)
(8.22) Fund Participation Agreement between Aetna Life Insurance and Annuity Company and Oppenheimer
Variable Annuity Account Funds and Oppenheimer Funds, Inc. dated March 11, 1997(16)
(8.23) Service Agreement between Oppenheimer Funds, Inc. and Aetna Life Insurance and Annuity Company
dated March 11, 1997(16)
(8.24) Fund Participation Agreement between Aetna Life Insurance and Annuity Company, Investors
Research Corporation and TCI Portfolios, Inc. dated July 29, 1992 and amended December 22,
1992 and June 1, 1994(3)
(8.25) Administrative Service Agreement between Aetna Life Insurance and Annuity Company and Agency,
Inc.(2)
(9) Opinion and Consent of Counsel
(10) Consent of Independent Auditors
(11) Not applicable
<PAGE>
(12) Not applicable
(13) Schedule for Computation of Performance Data
(14) Not applicable
(15.1) Powers of Attorney(18)
(15.2) Authorization for Signatures(3)
</TABLE>
<TABLE>
<S> <C>
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. 22 to
Registration Statement on Form N-4 (File No. 33-34370), as filed
electronically on April 22, 1996 (Accession No. 0000912057-96-006805).
3. 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).
4. Incorporated by reference to Post-Effective Amendment No. 3 to Registration
Statement on Form N-4 (File No. 33-79122), as filed electronically on
August 16, 1995 (Accession No. 0000950109-95-003265).
5. Incorporated by reference to Post-Effective Amendment No. 32 to
Registration Statement on Form N-4 (File No. 33-34370), as filed
electronically on December 16, 1997 (Accession No. 0000950146-97-001918).
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. 26 to
Registration Statement on Form N-4 (File No. 33-34370), as filed
electronically on February 21, 1997 (Accession No. 0000950146-97-000226).
8. Incorporated by reference to Post-Effective Amendment No. 1 to Registration
Statement on Form N-4 (File No. 33-87932), as filed electronically on
September 19, 1995 (Accession No. 0000950109-95-003821).
9. Incorporated by reference to Post-Effective Amendment No. 33 to
Registration Statement on Form N-4 (File No. 33-34370), as filed
electronically on February 12, 1998 (Accession No. 0000950146-98-000194).
10. Incorporated by reference to Post-Effective Amendment No. 34 to
Registration Statement on Form N-4 (File No. 33-34370), as filed
electronically on February 27, 1998 (Accession No. 0000950146-98-000311).
11. Incorporated by reference to Post-Effective Amendment No. 29 to
Registration Statement on Form N-4 (File No. 33-34370), as filed
electronically on August 18, 1997 (Accession No. 0000950146-97-001290).
12. 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).
<PAGE>
13. 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).
14. 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).
15. Incorporated by reference to Post-Effective Amendment No. 8 to Registration
Statement on Form N-4 (File No. 333-01107), as filed electronically on
February 19, 1998 (Accession No. 0000950146-98-00000248).
16. 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).
17. 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).
18. Incorporated by reference to Post-Effective Amendment No. 9 to
Registration Statement on Form N-4 (File No. 333-01107), as filed
electronically on April 7, 1998 (Accession No. 0000950146-98-000564).
19. 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).
20. 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).
21. 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).
22. Incorporated by reference to Post-Effective Amendment No. 24 to
Registration Statement on Form N-4 (File No. 33-34370), as filed
electronically on September 16, 1996 (Accession No. 0000912057-96-020393).
</TABLE>
<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
Shaun P. Mathews Director and Senior Vice President
Catherine H. Smith Director, Chief Financial Officer 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
----------
Incorporated herein by reference to Item 26 of Post-Effective Amendment No.
9 to the Registration Statement on Form N-4 (File No. 333-01107), as filed
electronically on April 7, 1998 (Accession No. 0000950146-98-000564).
Item 27. Number of Contract Owners
- ----------------------------------
As of February 28, 1998, there were 63,194 individuals holding interests in
variable annuity contracts funded through Variable Annuity Account B.
Item 28. Indemnification
- ------------------------
Reference is hereby made to Section 33-771(f) of the Connecticut General
Statutes ("C.G.S.") regarding indemnification of directors and Section 33-776(4)
regarding indemnification of officers, employees and agents of Connecticut
corporations. These statutes provide in general that Connecticut corporations
incorporated prior to January 1, 1997 shall indemnify their officers, directors,
employees and agents against "liability" (defined as the obligation to pay a
judgment, settlement, penalty, fine, excise tax in the case of an employee
benefit plan or reasonable expenses incurred with respect to a proceeding). In
the case of a proceeding by or in the right of the corporation, indemnification
is limited to reasonable expenses incurred in connection with the proceeding
against the corporation to which the individual was named a party. The
<PAGE>
corporation's obligation to provide such indemnification does not apply unless
(1) the individual has met the standard of conduct set forth in Section 33-771;
and (2) a determination is made (by majority vote of a quorum of the board of
directors who were not parties to the proceeding, or if a quorum cannot be
obtained, by a committee of the board selected as described in Section
33-775(b)(2); by special legal counsel selected by the board of directors or
members thereof as described in Section 33-775(b)(3); by shareholders) that the
individual met the standard set forth in Section 33-771; or (3) the court, upon
application by the individual, determines in view of all the circumstances that
such person is reasonably entitled to be indemnified. Also, unless limited by
its Certificate of Incorporation, a corporation must indemnify an individual who
was wholly successful on the merits or otherwise against reasonable expenses
incurred by him in connection with a proceeding to which he was a party because
of his relationship as director, officer, employee or agent of the corporation.
The statute does specifically authorize a corporation to procure indemnification
insurance on behalf of an individual who is or was a director, officer, employer
or agent of the corporation. Consistent with the statute, Aetna Inc. has
procured insurance from Lloyd's of London and several major United States excess
insurers for its directors and officers and the directors and officers of its
subsidiaries, including the Depositor.
Item 29. Principal Underwriter
- ------------------------------
(a) In addition to serving as the principal underwriter and depositor for
the Registrant, Aetna Life Insurance and Annuity Company (Aetna) also
acts as the principal underwriter and investment adviser for Portfolio
Partners, Inc., 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. (all management investment
companies registered under the Investment Company Act of 1940 (1940
Act)). Effective May 1, 1998, Aetna will no longer be the investment
adviser 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. 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)
Name of Net Underwriting Compensation on
Principal Discounts and Redemption or Brokerage
Underwriter Commissions Annuitization Commissions Compensation*
- ----------- ---------------- --------------- ----------- -------------
<S> <C> <C>
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 will comply
the provisions of Paragraphs (1) through (4) of the SEC Staff's
No-Action Letter dated November 22, 1988 with respect to language
concerning withdrawal restrictions applicable to plans established
pursuant to Section 403(b) of the Internal Revenue Code. See American
Counsel of Life Insurance; SEC No-Action Letter, [1989 Transfer Binder]
Fed. SEC. L. Rep. (CCH) [Paragraph Symbol] 78,904 at 78,523 (November
22, 1988).
(e) Insofar as indemnification for liability arising under the Securities
of 1933 may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
(f) Aetna Life Insurance and Annuity Company represents that the fees and
charges deducted under the contracts covered by this registration
statement, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed
by the insurance company.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, Variable Annuity Account B of Aetna Life Insurance and
Annuity Company, certifies that it meets the requirements of Securities Act Rule
485(b) for effectiveness of this Post-Effective Amendment to its Registration
Statement on Form N-4 (File No.33-34370) and has duly caused this Post-Effective
Amendment to its Registration Statement on Form N-4 (File No. 34370) to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Hartford, State of Connecticut, on the 17th day of April, 1998.
VARIABLE ANNUITY ACCOUNT B OF AETNA
LIFE INSURANCE AND ANNUITY COMPANY
(Registrant)
By: AETNA LIFE INSURANCE AND ANNUITY
COMPANY
(Depositor)
By: Thomas J. McInerney*
--------------------------------------
Thomas J. McInerney
President
As required by the Securities Act of 1933, this Post-Effective Amendment
No. 35 to the Registration Statement on Form N-4 (File No. 33-34370) has been
signed by the following persons in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
Thomas J. McInerney* Director and President )
- ----------------------------- (principal executive )
Thomas J. McInerney officer) )
)
)
Shaun P. Mathews* Director ) April
- ----------------------------- )
Shaun P. Mathews ) 17, 1998
)
)
Catherine H. Smith* Director and Chief Financial )
- ----------------------------- Officer )
Catherine H. Smith )
)
)
Deborah Koltenuk* Vice President and Treasurer, )
- ----------------------------- Corporate Controller )
Deborah Koltenuk )
By: /s/ Julie E. Rockmore
----------------------
Julie E. Rockmore
*Attorney-in-Fact
<PAGE>
VARIABLE ANNUITY ACCOUNT B
EXHIBIT INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
Exhibit No. Exhibit Page
- ----------- ------- ----
99-B.1 Resolution of the Board of Directors of Aetna Life Insurance and Annuity *
Company establishing Variable Annuity Account B
99-B.3.1 Selling Agreement *
99-B.3.2 Alternative Form of Wholesaling Agreement and Related Selling Agreement *
99-B.3.3 Federated Broker Dealer Agreement (9/2/94) *
99-B.4.1 Variable Annuity Contract G-CDA-97(NY) *
99-B.4.2 Variable Annuity Contract Certificate GMCC-97(NY) to Contract G-CDA-97(NY) *
99-B.4.3 Variable Annuity Contract G-MP1(5/97) *
99-B.4.4 Variable Annuity Contract Certificate MP1CERT(5/97) *
99-B.4.5 Variable Annuity Contract I-MP1(5/97) *
99-B.4.6 Variable Annuity Contract G-MP1(5/96) *
99-B.4.7 Variable Annuity Contract Certificate MP1CERT(5/96) *
99-B.4.8 Variable Annuity Contract I-MP1(5/96) *
99-B.4.9 Variable Annuity Contract G-CDA-96(NY) *
99-B.4.10 Variable Annuity Contract Certificate GMCC-96(NY) *
99-B.4.11 Variable Annuity Contracts G-CDA-IC(NQ)
----
99-B.4.12 Variable Annuity Contract G-CDA-IC(IR)
----
99-B.4.13 Variable Annuity Contract I-CDA-IC(NQ/MP)
----
*Incorporated by reference
<PAGE>
Exhibit No. Exhibit Page
- ----------- ------- ----
99-B.4.14 Variable Annuity Contract I-CDA-IC(IR/MP)
----
99-B.4.15 Variable Annuity Certificate GMCC-IC(NQ)
----
99-B.4.16 Variable Annuity Contracts and Certificates *
G-CDA-IC(IR/NY), GMCC-IC(IR/NY), G-CDA-IC(NQ/NY), and GMCC-IC(NQ/NY)
99-B.4.17 Endorsements MP1IRA(5/97) and I-MP1IRA(5/97) to Contract G-MP1(5/96) and *
Certificate MP1CERT(5/96)
99-B.4.18 Endorsements MP1QP(5/97) and I-MP1QP(5/97) to Contract *
G-MP1(5/96) and Certificate MP1CERT(5/96)
99-B.4.19 Endorsements MP1TDA(5/97) and I-MP1TDA(5/97) to Contract G-MP1(5/96) and *
Certificate MP1CERT(5/96)
99-B.4.20 Endorsements MP1DC(5/97) and I-MP1DC(5/97) to Contract G-MP1(5/96) and *
Certificate MP1CERT(5/96)
99-B.4.21 Endorsement G-MP1IRA(11/96)) to Contract *
G-CDA-96(NY) and Certificate GMCC-96(NY)
99-B.4.22 Endorsement I-MP1END(9/97) to Contract I-MP1(5/96) *
99-B.4.23 Endorsement E1-MPROTH-97 to Contract G-MP1(5/97) *
99-B.4.24 Endorsement EI1MPROTH-97 to Contract I-MP1(5/97) *
99-B.4.25 Endorsement MP1IRA(11/97) to Contract G-MP1(5/97) *
99-B.4.26 Endorsement I-MP1IRA(11/97) to Contract I-MP1(5/97) *
99-B.4.27 Endorsement MP1END(9/97) to Contract G-MP1(5/97) and Certificate *
MP1CERT(5/97)
99.B.4.28 Endorsement I-MP1END(9/97) to Contract I-MP1(5/97) *
99-B.4.29 Endorsement MPNQEND(4/95) to Contract G-CDA-IC(NQ) *
*Incorporated by reference
<PAGE>
Exhibit No. Exhibit Page
- ----------- ------- ----
99-B.4.30 Endorsement MPIREND(4/95) to Contract G-CDA-IC(IR) *
99-B.4.31 Endorsement IMPNQEND(4/95) to Contract *
I-CDA-IC(NQ/MP)
99-B.4.32 Endorsement IMPIREND(4/95) to Contract I-CDA-IC(IR/MP) *
99-B.4.33 Endorsement MPNQCERTEND(4/95) to Certificate *
GMCC-IC(NQ)
99-B.4.34 Endorsement MPIRCERTEND(4/95) to Certificate *
GMCC-IC(IR)
99-B.4.35 Contract Schedule I Accumulation Period (G-MP1(11/97)-5) to Group Contract *
(G-MP1(5/97))
99-B.4.36 Contract Schedule I Accumulation Period (I-MP1(11/97)-5) to Individual *
Contract (I-MP1(5/97))
99-B.5.1 Variable Annuity Contract Application MPAPPNY(1/96) *
99-B.5.2 Variable Annuity Contract Application (300-MAR-IB) *
99-B.5.3 Variable Annuity Contract Application (710.6.13) *
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 Fund Participation Agreement (Amended and Restated) between Aetna Life *
Insurance and Annuity Company, Alger American Fund and Fred Alger
Management, Inc. dated as of March 31, 1995
*Incorporated by reference
<PAGE>
Exhibit No. Exhibit Page
- ----------- ------- ----
99-B.8.2 Fund Participation Agreement among Calvert Responsibly Invested Balanced *
Portfolio, Calvert Asset Management Company, Inc. and Aetna Life Insurance
and Annuity Company dated December 1, 1997
99-B.8.3 Service Agreement between Calvert Asset Management Company, Inc. and Aetna *
Life Insurance and Annuity Company dated December 1, 1997
99-B.8.4 Fund Participation Agreement by and among Aetna Life Insurance and Annuity *
Company, Insurance Management Series and Federated Advisors dated
July 1, 1994
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 Form of 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
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
*Incorporated by reference
<PAGE>
Exhibit No. Exhibit Page
- ----------- ------- ----
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 Form of 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
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 between Aetna Life Insurance and Annuity *
Company and Lexington Management Corporation regarding Natural Resources
Trust dated December 1, 1988 and amended February 11, 1991
99-B.8.18 Fund Participation Agreement between Aetna Life Insurance and Annuity *
Company, Lexington Emerging Markets Fund, Inc. and Lexington Management
Corporation (its investment advisor) dated April 28, 1994
*Incorporated by reference
<PAGE>
Exhibit No. Exhibit Page
- ----------- ------- ----
99-B.8.19 Fund Participation Agreement among MFS Variable Insurance Trust, Aetna Life *
Insurance and Annuity Company and Massachusetts Financial Services Company
99-B.8.20 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.8.21 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.8.22 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.8.23 Service Agreement between Oppenheimer Funds, Inc. and Aetna Life Insurance *
and Annuity Company dated March 11, 1997
99-B.8.24 Fund Participation Agreement between Aetna Life Insurance and Annuity *
Company, Investors Research Corporation and TCI Portfolios, Inc. dated July
29, 1992 and amended December 22, 1992 and June 1, 1994
99-B.8.25 Administrative Service Agreement between Aetna Life Insurance and Annuity *
Company and Agency, Inc.
99-B.9 Opinion and Consent of Counsel
----
99-B.10 Consent of Independent Auditors
----
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
</TABLE>
Home Office: 151 Farmington Ave.
Hartford, Connecticut 06156
(800) 525-4225
Aetna Life Insurance and Annuity Company, herein called Aetna,
agrees to pay the benefits stated in this Contract.
Specifications
- --------------------------------------------------------------------------------
Plan
Marathon Plus
- --------------------------------------------------------------------------------
Type of Plan
Flexible Premium Account
- --------------------------------------------------------------------------------
Contract Holder
E. G. Anybroker
- --------------------------------------------------------------------------------
Contract No.
Specimen
- --------------------------------------------------------------------------------
Effective Date
September 1, 1993
- --------------------------------------------------------------------------------
This Contract is Delivered in Your State and is Subject to the
Laws of that Jurisdiction
THE VARIABLE FEATURES OF THE GROUP CONTRACT ARE DESCRIBED IN PARTS III AND IV.
Right To Cancel
- -------------------------------------------------------------------------------
The Contract Holder may cancel this Contract within 20 days of receiving it, by
returning this Contract along with a written notice to Aetna at the above
address or to the agent from whom it was purchased. Within 7 days after it
receives the notice of cancellation and this Contract at its Home Office, Aetna
will return the entire consideration paid plus any increase or minus any
decrease in the current value of any funds allocated to the Separate Accounts.
This page, the following pages, and the application make up the entire Contract.
Signed at the Home Office on the Effective Date.
/s/ G. G. Benanav /s/ George N. Gingold
Gary G. Benanav George N. Gingold
President Secretary
G-CDA-IC (NQ)
<PAGE>
Group Variable, Fixed, or Combination Annuity Contract
Nonparticipating
ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT, WHEN BASED ON INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT. THIS CONTRACT CONTAINS A MARKET VALUE ADJUSTMENT FORMULA.
APPLICATION OF A MARKET VALUE ADJUSTMENT MAY RESULT IN EITHER AN INCREASE OR
DECREASE IN THE CURRENT VALUE. THE MARKET VALUE ADJUSTMENT FORMULA DOES NOT
APPLY TO A GUARANTEED TERM AT THE TIME OF ITS MATURITY.
2
<PAGE>
Specifications
- --------------------------------------------------------------------------------
Guaranteed There is a guaranteed interest rate for Purchase
Interest Rate Payment(s) held in the MG Account. (See Contract
Schedule I).
- --------------------------------------------------------------------------------
Deductions from the There will be deductions for mortality and expense risks
Separate Account and administrative fees. (See Contract Schedule I and
II).
- --------------------------------------------------------------------------------
Deduction from Purchase Payment(s) are subject to a deduction for
Purchase Payment(s) premium taxes, if any. (See 3.01.)
- --------------------------------------------------------------------------------
Surrender Fee There will be a charge deducted upon surrender. (See
Contract Schedule I).
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. IT IS THEREFORE IMPORTANT THAT YOU
READ THIS CONTRACT CAREFULLY.
3
<PAGE>
Contract Schedule I
Accumulation Period
Separate Account
- --------------------------------------------------------------------------------
Separate Account: Variable Annuity Account B
Charges to Separate A daily charge is deducted from any portion of the
Account: Current 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 Risk Charge 0.35%
Expense Risk Charge 0.90%
-----
Total Separate Account
Charges 1.40%
Marathon Guaranteed Account (MG Account)
- --------------------------------------------------------------------------------
Minimum Guaranteed Interest Rate (effective annual
rate of return): 3.0%.
Separate Account and MG Account
- --------------------------------------------------------------------------------
Transfers: An unlimited number of Transfers may be made during
the Accumulation Period. Aetna allows 12 free
Transfers in any calendar year. Thereafter, Aetna
reserves the right to charge $10 for each subsequent
Transfer.
Maintenance Fee: The annual Maintenance Fee is $30. If the Account's
Current Value is $50,000 or more on the date the
Maintenance Fee is to be deducted, the Maintenance
Fee is $0.
4
<PAGE>
Contract Schedule II
Annuity Period
Separate Account
- --------------------------------------------------------------------------------
Charges to Separate A daily charge at an annual effective rate of 1.25%
Account: for Annuity mortality and expense risks. The
administrative charge is established upon election of
an Annuity option. This charge will not exceed 0.25%.
Variable Annuity Assumed If a Variable Annuity is chosen, an assumed annual
Annual Net Return Rate: net return rate of 5.0% may be elected. If 5.0% is
not elected, Aetna will use an assumed annual net
return rate of 3.5%.
The assumed annual net return rate factor for 3.5%
per year is 0.9999058.
The assumed annual net return rate factor for 5.0%
per year is 0.9998663.
If the portion of a Variable Annuity payment for any
Fund is not to decrease, the Annuity return factor
under the Separate Account for that Fund 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 assumed annual net
return rate 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 assumed annual net
return rate of 5% is chosen.
Fixed Annuity
- -------------------------------------------------------------------------------
Minimum Guaranteed Interest Rate (effective annual
rate of return): 3.0%
See 1. GENERAL DEFINITIONS for explanations.
5
<PAGE>
TABLE OF CONTENTS
Page
I. GENERAL DEFINITIONS
1.01 Account.........................................................8
1.02 Accumulation Period.............................................8
1.03 Adjusted Current Value..........................................8
1.04 Annuitant.......................................................8
1.05 Annuity.........................................................8
1.06 Beneficiary.....................................................8
1.07 Certificate Holder..............................................8
1.08 Code............................................................8
1.09 Contract........................................................8
1.10 Contract Holder.................................................9
1.11 Current Value...................................................9
1.12 Deposit Period..................................................9
1.13 Fixed Annuity...................................................9
1.14 Fund(s).........................................................9
1.15 General Account.................................................9
1.16 Guaranteed Rates - MG Account..................................10
1.17 Guaranteed Term................................................10
1.18 Guaranteed Term(s) Groups......................................10
1.19 Maintenance Fee................................................10
1.20 Marathon Guaranteed Account (MG Account).......................11
1.21 Market Value Adjustment (MVA)..................................11
1.22 Matured Term Value.............................................11
1.23 Matured Term Value Transfer....................................11
1.24 Maturity Date..................................................11
1.25 Net Purchase Payment(s)........................................11
1.26 Nonunitized Separate Account...................................11
1.27 Purchase Payment(s)............................................11
1.28 Reinvestment...................................................12
1.29 Separate Account...............................................12
1.30 Surrender Value................................................12
1.31 Transfers......................................................12
1.32 Valuation Period (Period)......................................12
1.33 Variable Annuity...............................................12
II. GENERAL PROVISIONS
2.01 Change of Contract.............................................13
2.02 Change of Fund(s)..............................................14
2.03 Nonparticipating Contract......................................14
2.04 Payments and Elections.........................................15
2.05 State Laws.....................................................15
2.06 Control of Contract............................................15
2.07 Designation of Beneficiary.....................................16
2.08 Misstatements and Adjustments..................................16
2.09 Incontestability...............................................16
2.10 Grace Period...................................................16
2.11 Individual Certificates........................................16
6
<PAGE>
III. PURCHASE PAYMENT, CURRENT VALUE, AND SURRENDER PROVISIONS
3.01 Net Purchase Payment............................................16
3.02 Certificate Holder's Account....................................17
3.03 Fund(s) Record Units -- Separate Account........................17
3.04 Net Return Factor(s) -- Separate Account........................17
3.05 Fund Record Unit Value -- Separate Account......................18
3.06 Market Value Adjustment.........................................18
3.07 Transfer of Current Value from the Funds or MG Account..........20
3.08 Notice to the Certificate Holder................................21
3.09 Loans...........................................................21
3.10 Systematic Withdrawal Option (SWO)..............................21
3.11 Death Benefit Amount............................................23
3.12 Death Benefit Options available to Beneficiary..................24
3.13 Liquidation of Surrender Value..................................26
3.14 Surrender Fee...................................................26
3.15 Payment of Surrender Value......................................27
3.16 Reinstatement...................................................27
3.17 Payment of Adjusted Current Value...............................28
IV. ANNUITY PROVISIONS
4.01 Choices to be Made..............................................28
4.02 Terms of Annuity Options........................................29
4.03 Death of Annuitant/Beneficiary..................................31
4.04 Fund(s) Annuity Units -- Separate Account.......................32
4.05 Fund(s) Annuity Unit Value -- Separate Account..................32
4.06 Annuity Net Return Factor(s) -- Separate Account................33
4.07 Annuity Options.................................................34
7
<PAGE>
I. GENERAL DEFINITIONS
- --------------------------------------------------------------------------------
1.01 Account: A record established for each Certificate Holder to
maintain the value of all Net Purchase Payments held
on his/her behalf during the Accumulation Period.
1.02 Accumulation The period during which the Net Purchase Payment(s)
Period: are applied to an Account to provide future Annuity
payment(s).
1.03 Adjusted The Current Value of an Account plus or minus any
Current Value: aggregate MG Account MVA, if applicable. (See 1.21)
1.04 Annuitant: The person whose life is measured for purposes of the
guaranteed death benefit and the duration of Annuity
payments under this Contract.
1.05 Annuity: Payment of an income:
(a) For the life of one or two persons; (b) For a
stated period; or (c) For some combination of (a) and
(b).
1.06 Beneficiary: The individual or estate entitled to receive any
payment from the Account upon the death of the
Annuitant.
1.07 Certificate A person who purchases an interest in this Contract
Holder: as evidenced by a certificate. A Certificate Holder
cannot be a nonnatural person (i.e. a trustee for a
trust, an executor or administrator for an estate, or
an incorporated or unincorporated business).
1.08 Code: The Internal Revenue Code of 1986, as it may be
amended from time to time.
1.09 Contract: This agreement between Aetna and the Contract Holder.
8
<PAGE>
1.10 Contract Holder: The entity to which the Contract is issued. The
Contract is offered to:
(a) National Association of Securities
Dealers, Inc. ("NASD") member
broker-dealers selected by Aetna, who
have a minimum net capital of $250,000
or more, including broker-dealer
subsidiaries of banks and savings and
loan associations;
(b) Employers who sponsor nonqualified benefit
plans for their employees (exempt from ERISA
Title I);
(c) Entities that contribute to annuities on
behalf of their customers; and
(d) Custodians of custodial accounts and trustees
of trusts that have been established for
Individual Retirement Accounts under Code
Section 408.
1.11 Current Value: As of the most recent Valuation Period, the Net
Purchase Payment and any additional amount deposited
pursuant to 3.11 plus any interest added to the
portion allocated to the MG Account; and plus or
minus the investment experience of the portion
allocated to the Funds since deposit; less all
Maintenance Fees deducted, any amounts surrendered
and any amounts applied to an Annuity.
1.12 Deposit Period: A calendar week, a calendar month, a
calendar quarter, or any other period of time
specified by Aetna during which Net Purchase
Payment(s), Transfers and Reinvestments are accepted
into the MG Account for one or more Guaranteed Terms.
Aetna reserves the right to extend the Deposit
Period.
1.13 Fixed Annuity: An Annuity with payments that do not vary in amount.
1.14 Fund(s): The open-end management investment companies
(mutual funds) in which the Separate Account invests.
1.15 General Account: The Account holding the assets of
Aetna, other than those assets held in Aetna's
separate accounts.
9
<PAGE>
1.16 Guaranteed Rates - Aetna will declare the interest rate(s) applicable to
MG Account: a specific Guaranteed Term at the start of the
Deposit Period for that Guaranteed Term. The rate(s)
are guaranteed by Aetna for that Deposit Period and
the ensuing Guaranteed Term. 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 Contract Schedule I.
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.
1.17 Guaranteed Term: The period of time for which MG Account Guaranteed
Rates are guaranteed on Net Purchase Payments,
Transfers and Reinvestments made into a current
Deposit Period for the MG Account. Such period begins
on the day following the close of the Deposit Period
and ends on the designated Maturity Date. Guaranteed
Terms are offered at Aetna's discretion for various
lengths of time ranging up to and including ten
years.
During a Deposit Period, Aetna may make available any
number of Guaranteed Terms. The Certificate Holder
may allocate Net Purchase Payments and Transfers into
any or all of the available Guaranteed Terms.
1.18 Guaranteed Term(s) All MG Account Guaranteed Term(s) with the same
Groups: length of time from the close of the Deposit Period
until the designated Maturity Date.
1.19 Maintenance Fee: The Maintenance Fee (see Contract Schedule I) will be
deducted during the Accumulation Period from the
Current Value on each anniversary of the date the
Account is established and upon surrender of the
entire Account.
10
<PAGE>
1.20 Marathon An accumulation option where Aetna guarantees
Guaranteed Account stipulated rate(s) of interest for specified periods
(MG Account): of time. All assets of Aetna, including amounts in
the Nonunitized Separate Account, are available to
meet the guarantees under the MG Account.
1.21 Market Value An adjustment to the amount withdrawn or transferred
Adjustment (MVA): from an MG 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 in 3.06. The
adjustment is expressed as a percentage of each
dollar being withdrawn.
1.22 Matured Term Value: The amount payable on an MG Account Guaranteed Term's
Maturity Date.
1.23 Matured Term During the calendar month following an MG Account
Value Transfer: Maturity Date, the Certificate Holder may notify
Aetna's Home Office in writing to Transfer or
surrender all or part of the Matured Term Value, plus
interest at the new Guaranteed Rate accrued thereon,
from the MG 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.
1.24 Maturity Date: The last day of an MG Account Guaranteed Term.
1.25 Net Purchase The Purchase Payment less premium taxes, as
Payment(s): applicable.
1.26 Nonunitized A separate account set up by Aetna under Title 38,
Separate Account: Section 38a-433, of the Connecticut General Statutes,
that holds assets for MG Account Terms. There are no
discrete units for this Account. The Certificate
Holder does not participate in the investment gain or
loss from the assets held in the Nonunitized Separate
Account. Such gain or loss is borne entirely by
Aetna. These assets may be chargeable with
liabilities arising out of any other business of
Aetna.
1.27 Purchase Payment(s) accepted by Aetna at its Home Office.
Payment(s): 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.
11
<PAGE>
1.28 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 the 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.
1.29 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. This 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 Account, shall not
be charged with other Aetna liabilities.
1.30 Surrender Value: The amount payable by Aetna upon the surrender of any
portion of an Account.
1.31 Transfers: The movement of invested amounts among the available
Fund(s) and the MG Account under this Contract during
the Accumulation Period.
1.32 Valuation Period The period of time for which a Fund determines its
(Period): net asset value, usually from 4:15 p.m. Eastern time
each day the New York Stock Exchange is open until
4:15 p.m. the next such day, or such other day that
one or more of the Funds determines its net asset
value.
1.33 Variable Annuity: An Annuity with payments that vary
with the net investment results of one or more Funds
under the Separate Account.
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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 which begins before the change.
Aetna reserves the right to refuse to accept any
Purchase Payment at any time for any reason. This
applies to an initial Purchase Payment to establish a
new Account or to subsequent Purchase Payments to
existing Accounts under the Contract. No advance
notice will be given to the Contract Holder or
Certificate Holder.
Aetna may make any change that affects the MG Account
Market Value Adjustment (3.06) 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 Term and will apply to all
present and future Accounts.
Aetna reserves the right to change the terms of the
Systematic Withdrawal Option (3.10) for future
elections and discontinue the availability of this
option after proper notification.
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:
(a) Net Purchase Payment (1.25)
(b) MG Account Guaranteed Rate (1.16)
(c) Net Return Factor(s) -- Separate Account (3.04)
(d) Current Value (1.11)
(e) Surrender Value (1.30)
(f) Fund(s) Annuity Unit Value -- Separate Account
(4.05)
(g) Annuity options (4.07)
(h) Fixed Annuity Interest Rates (4.01)
(i) Transfers (1.31).
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<PAGE>
2.01 Change of Contract Any change that affects the Annuity options and the
(Cont'd): tables for the options may be made:
(a) No earlier than 12 months after the effective
date of this Contract; and
(b) No earlier than 12 months after the effective
date of any prior change.
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 this Contract. This Contract may
also be changed as deemed necessary by Aetna to
comply with federal or state law.
2.02 Change of Fund(s): Aetna, or the Separate Account, may:
(a) Change the Fund(s) which may be invested in by
the Separate Account; and
(b) Replace the shares of any Fund(s) held in the
Separate Account with shares of any other
Fund(s).
Changes must be:
(a) Approved by a majority vote in the Separate
Account with respect to the Fund(s) whose shares
are to be replaced; or
(b) Deemed necessary by Aetna under the Investment
Company Act of 1940; or
(c) Deemed necessary by Aetna to accomplish the
purpose of the Separate Account.
Aetna will notify the Contract Holder and the
Certificate Holder of any change.
2.03 Nonparticipating The Contract Holder, Certificate Holders or
Contract: Beneficiaries will not have a right to share in the
earnings of Aetna.
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2.04 Payments and While the Certificate Holder is living, Aetna will
Elections: pay the Certificate Holder any Annuity payments as
and when due. After the Certificate Holder's death,
any Annuity payments required to be made will be paid
in accordance with 4.03. Aetna will determine other
payments and/or elections as of the end of the
Valuation Period 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 3.15.
2.05 State Laws: The Contract and the Certificates comply with the
laws of the state in which they are delivered. Any
surrender, death, 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 Contact: 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. 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 to one or more natural
persons. Any assignment or transfer made must be
submitted to Aetna's Home Office in writing and will
not be effective until accepted by Aetna.
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<PAGE>
2.07 Designation of Each Certificate Holder shall name his or her
Beneficiary: Beneficiary. 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.
2.08 Misstatements and If Aetna finds the age of any Annuitant to be
Adjustments: misstated, the correct facts will be used to adjust
payments.
2.09 Incontestability: Aetna cannot cancel this Contract because of any
error of fact on the application. Aetna cannot cancel
an Account because of any error of fact on the
enrollment form.
2.10 Grace Period: This Contract will remain in effect even if Purchase
Payments are not continued except as provided in the
Payment of Adjusted Current Value provision (see
3.17).
2.11 Individual Aetna shall issue a certificate to each Certificate
Certificates: 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, CURRENT VALUE, AND SURRENDER PROVISIONS
- --------------------------------------------------------------------------------
3.01 Net Purchase This amount is the actual Purchase Payment less any
Payment: premium tax. Aetna will generally deduct the premium
tax when Annuity benefits are elected (see Part IV).
If Aetna determines that under applicable state law,
it must pay a premium tax when the Purchase Payment
is received or at any other time, it will deduct the
tax at that time.
The Net Purchase Payment will be credited among:
(a) The current Deposit Period(s) for Guaranteed
Terms under the MG Account; and
(b) The Fund(s) in which the Separate Account
invests.
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<PAGE>
3.01 Net Purchase For each Net Purchase Payment, the Certificate Holder
Payment (Cont'd): shall tell Aetna the allocation percentage to be
applied to the current Deposit Period for each of the
available Guaranteed Terms in the MG Account and/or
each Fund. If allocation instructions are not
received along with any subsequent Net Purchase
Payment, the allocation will be the same as that
indicated on the original enrollment form. If the
same Guaranteed Term is no longer available, the Net
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 Aetna will maintain an Account for each Certificate
Holder's Account: Holder.
Aetna will declare from time to time the
acceptability and the minimum amount for additional
Purchase Payments. Each Account will be subject to
the Terms and Conditions of the Contract in effect at
the time the first Purchase Payment for such Account
is applied to the Contract except for changes made to
comply with federal or state law.
3.03 Fund(s) Record The portion of the Net Purchase Payment(s) applied to
Units --Separate each Fund under the Separate Account will determine
Account: the number of Fund record units for that Fund. This
number is equal to the portion of the Net Purchase
Payment(s) applied to each Fund divided by the Fund
record unit value (see 3.05) for the Valuation Period
in which the Purchase Payment is received in good
order at Aetna's Home Office.
3.04 Net Return The net return factor(s) are used to compute all
Factor(s) -- Separate Account record units for any Fund.
Separate Account: The net return factor(s) for each Fund is equal to
1.0000000 plus the net return rate.
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<PAGE>
3.04 Net Return The net return rate is equal to:
Factor(s) --
Separate Account (a) The value of the shares of the Fund held by the
(Cont'd): Separate Account at the end of the Valuation
Period; minus
(b) The value of the shares of the Fund held by the
Separate Account at the start of the Valuation
Period; plus or minus
(c) Taxes (or reserves for taxes) on the Separate
Account (if any); divided by
(d) The total value of the Fund(s) record units and
Fund(s) annuity units of the Separate Account at
the start of the Valuation Period; minus
(e) A daily Separate Account charge at an annual rate
as shown on Contract Schedule I for mortality and
expense risks, which may include profit; and a
daily administrative charge.
A net return rate may be more or less than 0%. The
value of a share of the Fund is equal to the not
assets of the Fund divided by the number of shares
outstanding.
3.05 Fund Record Unit A Fund record unit value is computed by multiplying
Value -- Separate the net return factors for the current Valuation
Account: Period by the Fund record unit value for the previous
Period. The dollar value of Fund record units,
Separate Account assets, and Variable Annuity
payments may go up or down due to investment gain or
loss.
3.06 Market Value There will be an MVA for a withdrawal from the MG
Adjustment: Account before the end of a Guaranteed Term when the
withdrawal is due to:
(a) A Transfer; except as specified in MG Account
Matured Term Value Transfer;
(b) A full or partial surrender, including a 1O% free
withdrawal under 3.14; or
(c) An election of Annuity option 2 (see 4.07).
Full and partial surrenders and Transfers made within
six months after the date of the Annuitant's death
will be the greater of:
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<PAGE>
3.06 Market Value (a) The aggregate MVA amount which is the sum of all
Adjustment market value adjusted amounts calculated due to a
(Cont'd): withdrawal of amounts. This total may be greater
or less than the Current Value of those amounts;
or
(b) The applicable portion of the Current Value in
the MG Account.
After the six-month period, the surrender or Transfer
will be the aggregate MVA amount, which may be
greater or less than the Current Value of those
amounts.
The greater of the aggregate MVA amount or the
applicable portion of the Current Value applies to
amounts withdrawn from the MG Account on account of
an election of Annuity options 3 or 4 (see 4.07).
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, (computed
from Wednesday of the week of withdrawal) in
the Guaranteed Term.
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.
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<PAGE>
3.06 Market Value The Current Yield is the average of the yields on the
Adjustment last business day of the week preceding withdrawal on
(Cont'd): 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 Before an Annuity option is elected, all or any
Current Value portion of the Adjusted Current Value of the
from the Funds Certificate Holder's Account may be transferred from
or MG Account: any Fund or Guaranteed Term of the MG Account:
(a) To any other Fund; or
(b) To any Guaranteed Term of the MG Account
available in the current Deposit Period.
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 surrendered 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
Contract Schedule I. Additional Transfers may be
subject to a Transfer fee as shown on Contract
Schedule I.
Transfers from the MG Account of a Matured Term Value
on or within one calendar month of a Term's Maturity
Date do not count against the annual Transfer limit.
Amounts applied to Guaranteed Terms of the MG Account
may not be transferred to the Funds or to another
Guaranteed Term during the Deposit Period or for 90
days after the close of the Deposit Period except for
Matured Term Value(s) during the calendar month
following the Term's Maturity Date.
Transfers from Guaranteed Terms of the MG Account are
subject to the MVA provisions of 3.06.
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<PAGE>
3.08 Notice to the The Certificate Holder will receive quarterly
Certificate Holder: statements from Aetna of:
(a) The value of any amounts held in:
(1) The MG Account; and
(2) The Fund(s) under the Separate Account.
(b) The number of any Fund(s) record units; and
(c) The Fund(s) record 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 A distribution option under which a portion of the
Withdrawal Option Account's Current Value will automatically be
(SWO): surrendered and distributed each year. SWO payments
will be calculated on the Account's full Current
Value. The distributed amount is withdrawn pro rata
from each investment option under the Account. A
Surrender Fee will not be deducted from any portion
of the Adjusted Current Value which is paid as a
distribution under SWO.
Certificate Holders should consult their tax adviser
prior to requesting this distribution option. Aetna
will not be responsible for any adverse tax
consequences due to receiving SWO payments.
(a) Amount of Distribution: The Certificate Holder
may elect one of the three payment methods
described below.
(1) Specified Payment: Payments of a designated
dollar amount. The annual amount may not be
greater than the percentage of the Current
Value at time of election as shown on
Contract Schedule I. This annual dollar
amount will remain constant. At its
discretion, Aetna may require a minimum
initial payment amount;
(2) Specified Period: Payments which are made
over a period of time which must be at least
10 years. The annual amount paid each year is
calculated by dividing the Current Value as
of December 31 of the prior year by the
number of payment years remaining; or
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<PAGE>
3.10 Systematic (3) Specified Percentage: Payment of a designated
Withdrawal Option percentage which cannot be greater than the
(SWO) (Cont'd): percentage of the Current Value at the time
of election as shown on Contract Schedule I.
The percentage may be changed by written
request. Aetna reserves the right to limit
the number of times the percentage may be
changed. The annual amount is calculated by
multiplying the Current Value as of December
31 of the year prior to the payment by the
designated percentage.
Payments upon the Certificate Holder's or Annuitant's
death will be made to the Beneficiary in the manner
described in 3.12.
(b) Minimum Initial Current Value: At its discretion,
Aetna may require a minimum initial Current Value
for election of this option. If after election of
this option the Current Value is insufficient to
make a scheduled SWO payment, Aetna will
distribute the entire Account balance.
(c) Date of Distribution: The Certificate Holder
shall specify the initial distribution date. The
earliest date for distribution is the date on
which the Certificate Holder attains age 59 1/2.
As elected by the Certificate Holder, SWO
payments will be made on a monthly, quarterly,
semi-annual or annual basis. If SWO payments are
made more frequently than annually, the
designated annual amount is divided by the number
of payments due each calendar year. Subsequent
distributions will be made on the 15th of any
month or such other date Aetna may designate or
allow.
(d) Election and Revocation: SWO may be elected by
submitting a completed and signed election form
to Aetna's Home Office. Once elected, this option
may be revoked by the Certificate Holder or
spousal Beneficiary, if elected after the
Certificate Holder's death, by submitting a
written request to Aetna at its Home Office. Any
revocation will apply only to amounts not yet
paid. SWO may be elected only once by the
Certificate Holder or by the spousal Beneficiary.
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<PAGE>
3.11 Death Benefit If the Certificate Holder or Annuitant dies before
Amount: Annuity payments start, the Beneficiary is entitled
to a death benefit under the Account. The claim date
is the date when proof of death and the Beneficiary's
claim are received in good order at Aetna's Home
Office. The amount of the death benefit is determined
as follows:
(a) Death of Annuitant less than 75 years of age: The
guaranteed death benefit is the greatest of:
(1) The gross sum of all Purchase Payment(s) made
to the Account (as of the date of death)
minus the sum of all amounts surrendered,
applied to an Annuity, or deducted from the
Account;
(2) The step up value as of the date of death
plus all Net Purchase Payments made to the
Account, minus the total of all partial
surrenders, amounts applied to an Annuity and
deductions made from the Account since
determination of the step up value. The step
up value is the Current Value on the most
recent seventh year anniversary of the date
the first Net Purchase Payment is applied to
the Account;
(3) The Account's Current Value as of the date of
death.
The excess, if any, of the guaranteed death
benefit value over the Account's Current Value is
determined as of the date of death. Any excess
amount will be deposited to the Account and
allocated to Aetna Variable Encore Fund as of the
claim date. The Current Value on the claim date
plus any excess amount deposited becomes the
Account's Current Value.
(b) Death of Annuitant age 75 or greater: The death
benefit amount is the Account Current Value on
the claim date.
(c) Death of the Certificate Holder if the
Certificate Holder is not the Annuitant: The
death benefit amount is the Account's Adjusted
Current Value on the claim date. A Surrender Fee
may apply to any full or partial surrender (see
3.14 and Contract Schedule I).
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<PAGE>
3.12 Death Benefit Prior to any election, or until amounts must be
Options available otherwise distributed under this section, the Current
to Beneficiary: Value of the Account will be retained in the Account.
The Beneficiary has the right under the Account to
allocate or reallocate any amount to any of the
available investment options (subject to an MVA, as
applicable). The following options are available to
the Beneficiary:
(a) When the Certificate Holder is the Annuitant: If
the Certificate Holder/Annuitant dies, and:
(1) If the Beneficiary is the Certificate
Holder's surviving spouse, the Beneficiary
will be the successor Certificate Holder of
the Account on Aetna's records. Such
successor Certificate Holder may exercise all
Certificate Holder rights under the Contract
and continue in the Accumulation Period, or
may elect (i), (ii), or (iii) below. Under
the Code, distributions from the Account are
not required until the successor Certificate
Holder's death. The Beneficiary may elect to:
(i) Apply some or all of the Adjusted
Current Value of the Account to Annuity
option 2, 3 or 4 (see 4.07);
(ii) Apply some or all of the Adjusted
Current Value of the Account to Annuity
option 1 (see 4.07); or
(iii) Receive, at any time, a lump sum
payment equal to the Adjusted Current
Value of the Account.
(2) If the Beneficiary is other than the
Certificate Holder's surviving spouse, then
options (i), (ii), or (iii) under (1) above
apply. Any portion of the Adjusted Current
Value of the Account not applied to Annuity
option 2, 3 or 4 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 Adjusted Current Value will be
made to the Certificate Holder's estate.
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<PAGE>
3.12 Death Benefit (b) When the Certificate Holder is not the Annuitant
Options available to and the Certificate Holder dies, and:
Beneficiary (Cont'd): (1) If the Beneficiary is the Certificate
Holder's surviving spouse, the Beneficiary
will be the successor Certificate Holder of
the Account on Aetna's records. Such
successor Certificate Holder may exercise all
Certificate Holder rights under the Contract
and continue in the Accumulation Period, or
may elect (i), (ii), or (iii) below. Under
the Code, distributions from the Account are
not required until the successor Certificate
Holder's death. The Beneficiary may elect to:
(i) Apply some or all of the Adjusted
Current Value of the Account to Annuity
option 2, 3 or 4 (see 4.07);
(ii) Apply some or all of the Surrender
Value of the Account to Annuity option
1 (see 4.07); or
(iii) Receive, at any time, a lump sum
payment equal to the Surrender Value of
the Account.
(2) If the Beneficiary is other than the
Certificate Holder's surviving spouse, then
options (i), (ii), or (iii) under (1) above
apply. Any portion of the Adjusted Current
Value of the Account not applied to Annuity
option 2, 3 or 4 within one year of the
Certificate Holder's death will be subject to
a Surrender Fee, if applicable, and must be
distributed within five years of the date of
death.
(3) If no Beneficiary exists, a lump sum payment
equal to the Surrender Value will be made to
the Certificate Holder's estate.
(c) When the Certificate Holder is not the Annuitant
and the Annuitant dies: The Beneficiary must
elect Annuity option 2, 3 or 4 within 60 days of
the date of death or the gain, if any, will be
includable in the Beneficiary's income in the tax
year in which the Annuitant dies.
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<PAGE>
3.13 Liquidation of All or any portion of the Account's Adjusted
Surrender Value: Current Value may be surrendered at any time.
Surrender requests can be submitted as a percentage
of the Account value or as a specific dollar amount.
Net Purchase Payment amounts are withdrawn first, and
then the excess value, if any. For any partial
surrender, amounts are withdrawn on a pro rata basis
from the Fund(s) and/or the Guaranteed Term(s) Groups
of the MG Account in which the Current Value is
invested. Within a Guaranteed Term Group, the amount
to be surrendered 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 surrendered amount shall be reduced
by a Surrender Fee, if applicable.
3.14 Surrender Fee: The Surrender Fee only applies to the Net Purchase
Payment(s) portion surrendered and varies according
to the elapsed time since deposit (see Contract
Schedule I). Net Purchase Payment amounts are
withdrawn in the same order they were applied.
No Surrender Fee is deducted from any portion of the
Current Value which is paid:
(a) To a Beneficiary due to the Annuitant's death
before Annuity payments start, up to a maximum of
the aggregate Net Purchase Payment(s) minus the
total of all partial surrenders, amounts applied
to an Annuity and deductions made prior to the
Annuitant's date of death;
(b) As a premium for an Annuity option 2, 3 or 4
under this Contract (see 4.07);
(c) As a distribution under the SWO provision (see
3.10);
(d) At least 12 months after the date of the first
Purchase Payment to the Account, in an amount
equal to or less than 10% of the Current Value.
This applies to the first surrender request,
partial or full, in a calendar year. The Current
Value is calculated as of the date the surrender
request is received in good order at Aetna's Home
Office. This waiver is not available to the
Certificate Holder while SWO is in effect;
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<PAGE>
3.14 Surrender Fee (e) For a full surrender of the Account where the
(Cont'd): Current Value of the Account is $2,500 or less
and no surrenders have been taken from the
Account within the prior 12 months;
(f) By Aetna under 3.17; or
(g) 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 calendar year has elapsed since
the date the certificate was issued; and
(2) the surrender is requested within 3 years of
admission to a licensed nursing care
facility.
This waiver does not apply if the Annuitant was
in a nursing care facility at the time the
certificate was issued.
3.15 Payment of Under certain emergency conditions, Aetna may defer
Surrender Value: payment:
(a) For a period of up to 6 months (unless not
allowed by state law); or
(b) As provided by federal law.
3.16 Reinstatement: All or a portion of the proceeds of a full surrender
of an Account may be reinvested within 30 days after
the surrender. Any Maintenance Fee and Surrender Fee
charged at the time of surrender on the amount being
reinvested will be included in the reinstatement. Any
Market Value Adjustment(s) deducted from surrenders
will not be included in the reinstatement.
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<PAGE>
3.16 Reinstatement Amounts will be reinstated among the MG Account and
(Cont'd): the Funds in the Separate Account in the same
proportion as they were at the time of surrender. Any
amounts reinstated to the MG Account will be credited
to the Guaranteed Terms available during the current
Deposit Period in the same proportion as they were at
the time of surrender. In the event that a Guaranteed
Term of the same duration is unavailable, amounts
will be reinvested in 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. The number of Fund(s)
Record Units reinstated will be based on the Record
Unit Value(s) next computed after receipt at Aetna's
Home Office of the reinstatement request and the
amount to be reinstated.
Any Maintenance Fee which falls due after the
surrender and before the reinstatement will be
deducted from the amount reinstated.
Any Account(s) surrendered because the Current Value
was less than $2,500 immediately following any
partial surrender may not be reinstated (see 3.17).
Reinstatement of an Account is permitted only once.
3.17 Payment of Adjusted Upon 90 days' written notice to the Certificate
Current Value: Holder, Aetna will terminate any Account if the
Current Value becomes less than $2,500 immediately
following any partial surrender. Aetna does not
intend to exercise this right in cases where an
Account Current Value is reduced to $2,500 or less
solely due to investment performance. A Surrender Fee
will not be deducted from the Adjusted Current Value.
This terminated Adjusted Current Value of an Account
may not be reinstated.
IV. ANNUITY PROVISIONS
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4.01 Choices to be Made: The Certificate Holder may tell Aetna to apply any
portion of the Adjusted Current Value (minus any
premium tax) for an Annuity under option 2, 3, or 4
(see 4.07). The first Annuity payment may not be
earlier than one calendar year after the initial
Purchase Payment nor later than the later of:
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<PAGE>
4.01 Choices to (a) The first day of the month following the
be Made (Cont'd): Annuitant's 85th birthday; or
(b) The tenth anniversary of the last Purchase
Payment. In lieu of the election of an Annuity,
the Certificate Holder may tell Aetna to make a
lump sum payment.
When an Annuity 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 using the General Account;
(b) A Variable Annuity using any of the Fund(s)
available under this Contract for Annuity
purposes; or
(c) A combination of (a) and (b).
If a Fixed Annuity is chosen, the Annuity purchase
rate for the option chosen reflects the Minimum
Guaranteed Interest Rate (see Contract Schedule II),
but may reflect higher interest rates. If a Variable
Annuity is chosen, the initial Annuity payment for
the option chosen reflects the assumed annual return
rate elected. (see Contract Schedule II).
4.02 Terms of (a) When payments start, the age of the Annuitant
Annuity Options: plus the number of years for which payments are
guaranteed must not exceed 95.
(b) An Annuity 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 annual minimum Annuity
payment amount based upon increases reflected in
the Consumer Price Index-Urban, (CPI-U) since
July 1, 1993.
(c) If a Fixed Annuity under option 2, 3 or 4 is
chosen and a larger payment would result from
applying the Surrender Value to a current Aetna
single premium immediate Annuity, Aetna will make
the larger payment.
29
<PAGE>
4.02 Terms of Annuity (d) For purposes of calculating the guaranteed first
Options (Cont'd): payment of a Variable Annuity or the payments for
a Fixed Annuity, the Annuitant's and second
Annuitant's adjusted age will be used. The
Annuitant's and second Annuitant's adjusted age
is his or her age as of the birthday closest to
the Annuity commencement date reduced by one year
for Annuity commencement dates occurring during
the period of time from July 1, 1993 through
December 31, 1999. The Annuitant's and second
Annuitant's age will be reduced by two years for
Annuity commencement dates occurring during the
period of time from January 1, 2000 through
December 31, 2009. The Annuitant's and second
Annuitant's age will be reduced by one additional
year for Annuity commencement dates occurring in
each succeeding decade.
The Annuity purchase rates for options 3 and 4 are
based on mortality from 1983 Table a.
(e) Assumed Annual Net Return Rate is the interest
rate used to determine the amount of the first
Annuity payment under a Variable Annuity as shown
on Contract Schedule II. 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 Annuity return factor under Variable
Annuity Assumed Annual Net Return Rate on
Contract Schedule II).
(f) Once elected, Annuity payments cannot be commuted
to a lump sum except for Variable Annuity
payments under option 2 (see 4.07). The life
expectancy of the Annuitant or the Annuitant and
second Annuitant shall be irrevocable upon the
election of an Annuity option.
30
<PAGE>
4.03 Death of (a) Certificate Holder is Annuitant: When the
Annuitant/ Certificate Holder is the Annuitant and the
Beneficiary: Annuitant dies under option 2 or 3, or both the
Annuitant and the second Annuitant die under
option 4(d), the present value of any remaining
guaranteed payments will be paid in one sum to
the Beneficiary, or upon election by the
Beneficiary, any remaining payments will continue
to the Beneficiary. If option 4 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.
(b) Certificate Holder is Not Annuitant: When the
Certificate Holder is not the Annuitant and the
Certificate Holder dies, the remaining payments
under options 2, 3 or 4 will continue to the
successor payee. If no successor payee has been
designated, the Beneficiary will be treated as
the successor payee.
If the Annuitant dies under option 2 or 3, of if
both the Annuitant and the second Annuitant die
under option 4(d), the present value of any
remaining guaranteed payments will be paid in one
sum to the Beneficiary, or upon the election by
the Beneficiary, any remaining payments will
continue to the Beneficiary. If option 4 has been
elected, and the Annuitant dies, the remaining
payments will continue to the Certificate Holder.
(c) No Beneficiary Named/Surviving: If there is no
Beneficiary under option 2, 3, or 4, 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 designated under option 1
dies, the amount held plus accrued interest will
be paid in one sum to a successor Beneficiary, if
any, named by the designated Beneficiary. If
there is no successor Beneficiary, the lump sum
will be paid to the designated Beneficiary's
estate.
31
<PAGE>
4.03 Death of (e) If the Beneficiary or the successor payee dies
Annuitant/ while receiving Annuity payments, the present
Beneficiary value of any remaining guaranteed payments will
(Cont'd): be paid in one sum to the successor
Beneficiary/payee, or upon election by the
successor Beneficiary/payee, any remaining
payments will continue to the successor
Beneficiary/payee. If no successor
Beneficiary/payee has been designated, the
present value of any remaining guaranteed
payments will be paid in one sum to the
Beneficiary's/payee's estate.
(f) The present value will be determined as of the
Valuation Period in which proof of death
acceptable to Aetna and a request for payment is
received at Aetna's Home Office. The interest
rate used to determine the first payment will be
used to calculate the present value.
4.04 Fund(s) Annuity The number of each Fund's Annuity Units is based on
Units - Separate the amount of the first Variable Annuity payment
Account: which is equal to:
(a) The portion of the Current Value applied to pay a
Variable Annuity (minus any premium tax); divided
by
(b) 1,000; multiplied by
(c) The payment rate for the option chosen.
Such amount, or portion, of the variable payment will
be divided by the appropriate Fund Annuity unit value
(see 4.05) on the tenth Valuation Period before the
due date of the first payment to determine the number
of each Fund Annuity units. The number of each Fund
Annuity units remains fixed. Each future payment is
equal to the sum of the products of each Fund Annuity
unit value multiplied by the appropriate number of
units. The Fund Annuity unit value on the tenth
Valuation Period prior to the due date of the payment
is used.
4.05 Fund(s) Annuity For any Valuation Period, a Fund Annuity unit value
Unit Value -- is equal to:
Separate Account:
(a) The value for the previous Period; multiplied by
(b) The Annuity net return factor(s) (see 4.06 below)
for the Period; multiplied by
(c) A factor to reflect the assumed annual net return
rate (see Contract Schedule II).
32
<PAGE>
4.05 Fund(s) Annuity Unit The dollar value of a Fund Annuity unit values and
Value -- Separate Annuity payments may go up or down due to investment
Account (Cont'd): gain or loss.
4.06 Annuity Net Return The Annuity net return factor(s) are used to compute
Factor(s) -- all Separate Account Annuity Payments for any Fund.
Separate Account:
The Annuity net return factor(s) for each Fund is
equal to 1.0000000 plus the net return rate.
The net return rate is equal to:
(a) The value of the shares of the Fund held by the
Separate Account at the end of a Valuation
Period; minus
(b) The value of the shares of the Fund held by the
Separate Account at the start of the Valuation
Period; plus or minus
(c) Taxes (or reserves for taxes) on the Separate
Account (if any); divided by
(d) The total value of the Fund(s) record units and
Fund(s) Annuity units of the Separate Account at
the start of the Valuation Period; minus
(e) A daily charge for Annuity mortality and expense
risks, which may include profit, and a daily
administrative charge ( at the annual rate as
shown on Contract Schedule II).
A net return rate may be more or less than 0%.
The value of a share of the Fund is equal to the net
assets of the Fund divided by the number of shares
outstanding.
Payments shall not be changed due to changes in the
mortality or expense results or administrative
charges.
33
<PAGE>
4.07 Annuity Options: Option 1 -- Payment of interest on Sum Left with
Aetna -- This option may be used only by the
Beneficiary when the Certificate Holder dies before
Aetna has started paying an Annuity. A portion or all
of the sum paid upon death may be held under this
option and will be held in the General Account of
Aetna at interest (see 4.01). The Beneficiary may
later tell Aetna to:
(a) Pay a portion or all of the sum held by Aetna; or
(b) Apply a portion or all of the sum held by Aetna
to any Annuity option below.
If a nonspouse Beneficiary elects that some or all of
the Current Value is to be held under this option,
the Beneficiary must tell Aetna to pay the full sum
held under this option within 5 years of the date of
death.
Option 2 -- Payments for a Stated Period of Time --
An Annuity will be paid for the number of years
chosen. The number of years must be at least 5 and
not more than 30.
If payments for this option are made under a Variable
Annuity, the present value of any remaining payments
may be withdrawn at any time. If a withdrawal is
requested within 3 years after the start of payments,
it will be treated as a surrender and any applicable
Surrender Fee will be applied (see 3.14).
If a nonspouse Beneficiary elects this option at the
death of the Certificate Holder, the period selected
may not extend beyond the Beneficiary's life
expectancy.
Option 3 -- Life Income -- An Annuity will be paid
for the life of the Annuitant. If also chosen, Aetna
will guarantee payments for 60, 120, 180, or 240
months.
Option 4 -- Life Income Based upon the Lives of Two
Annuitants -- An Annuity will be paid during the
lives of the Annuitant and a second Annuitant.
Payments will continue until both Annuitants have
died. When this option is chosen, a choice must be
made of:
34
<PAGE>
(a) 100% of the payment to continue after the first
death;
(b) 66-2/3% of the payment to continue after the
first death;
(c) 50% of the payment to continue after the first
death;
(d) Payments for a minimum of 120 months with 100% of
the payment to continue after the first death; or
4.07 Annuity Options (e) 100% of the payment to continue at the death of
(Cont'd): the second Annuitant and 50% of the payment to
continue at the death of the Annuitant.
Other Options -- Aetna may make other options
available as allowed by the laws of the state in
which this Contract and the Certificate is delivered.
35
<PAGE>
OPTION 2
Payments for a Stated Period of Time
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
- -----------------------------------------------------------------------------
Guaranteed Monthly Quarterly Semi-Annual Annual
Years Rate Payment Payment Payment Payment
- -----------------------------------------------------------------------------
3 3.00% $28.99 $86.76 $172.88 $343.23
4 3.00% 22.06 66.02 131.56 261.19
5 3.00% 17.91 53.59 106.78 211.99
6 3.00% 15.14 45.30 90.27 179.22
7 3.00% 13.16 39.39 78.49 155.83
8 3.00% 11.68 34.96 69.66 138.31
9 3.00% 10.53 31.52 62.81 124.69
10 3.00% 9.61 28.77 57.33 113.82
11 3.00% 8.86 26.52 52.85 104.93
12 3.00% 8.24 24.65 49.13 97.54
13 3.00% 7.71 23.08 45.98 91.29
14 3.00% 7.26 21.73 43.29 85.95
15 3.00% 6.87 20.56 40.96 81.33
16 3.00% 6.53 19.54 38.93 77.29
17 3.00% 6.23 18.64 37.14 73.74
18 3.00% 5.96 17.84 35.56 70.59
19 3.00% 5.73 17.13 34.14 67.78
20 3.00% 5.51 16.50 32.87 65.26
21 3.00% 5.32 15.92 31.72 62.98
22 3.00% 5.15 15.40 30.68 60.92
23 3.00% 4.99 14.92 29.74 59.04
24 3.00% 4.84 14.49 28.88 57.33
25 3.00% 4.71 14.09 28.08 55.76
26 3.00% 4.59 13.73 27.36 54.31
27 3.00% 4.47 13.39 26.68 52.97
28 3.00% 4.37 13.08 26.06 51.74
29 3.00% 4.27 12.79 25.49 50.60
30 3.00% 4.18 12.52 24.95 49.53
- -----------------------------------------------------------------------------
36
<PAGE>
OPTION 3
LIFE INCOME
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge For Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
Payments Guaranteed for a Stated Period of Months
- -----------------------------------------------------------------------------
Adjusted
Age of None 60 120 180 240
Annuitant
- -----------------------------------------------------------------------------
50 $ 4.05 $ 4.05 $ 4.03 $ 3.99 $ 3.93
51 4.12 4.11 4.09 4.05 3.99
52 4.19 4.19 4.16 4.11 4.04
53 4.27 4.26 4.23 4.18 4.10
54 4.35 4.34 4.31 4.25 4.16
55 4.44 4.42 4.39 4.32 4.22
56 4.53 4.51 4.47 4.40 4.29
57 4.62 4.61 4.56 4.48 4.35
58 4.72 4.71 4.65 4.56 4.42
59 4.83 4.81 4.75 4.64 4.49
60 4.95 4.93 4.86 4.73 4.55
61 5.07 5.05 4.97 4.83 4.62
62 5.20 5.17 5.08 4.92 4.69
63 5.34 5.31 5.20 5.02 4.76
64 5.49 5.45 5.33 5.12 4.83
65 5.65 5.61 5.47 5.22 4.89
66 5.82 5.77 5.61 5.33 4.96
67 6.01 5.94 5.75 5.44 5.02
68 6.20 6.13 5.91 5.54 5.08
69 6.41 6.33 6.07 5.65 5.14
70 6.64 6.54 6.23 5.76 5.19
71 6.88 6.76 6.41 5.86 5.24
72 7.14 7.00 6.59 5.97 5.28
73 7.43 7.26 6.77 6.06 5.32
74 7.73 7.53 6.96 6.16 5.35
75 8.06 7.82 7.14 6.25 5.38
- -----------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
37
<PAGE>
OPTION 4
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
- -------------------------------------------------------------------------------
Adjusted Ages
- ---------------------
Second
Annuitant Annuitant Option 4a Option 4b Option 4c Option 4d Option 4e
- -------------------------------------------------------------------------------
55 50 $ 3.69 $ 4.05 $ 4.27 $ 3.69 $ 4.03
55 55 3.88 4.25 4.47 3.87 4.14
55 60 3.99 4.44 4.71 3.98 4.42
60 55 3.99 4.44 4.71 3.98 4.42
60 60 4.24 4.71 4.99 4.23 4.57
60 65 4.38 4.97 5.32 4.38 4.93
65 60 4.38 4.97 5.32 4.38 4.93
65 65 4.72 5.33 5.70 4.71 5.14
65 70 4.93 5.68 6.15 4.91 5.66
70 65 4.93 5.68 6.15 4.91 5.66
70 70 5.40 6.21 6.70 5.36 5.96
70 75 5.69 6.68 7.32 5.62 6.67
75 70 5.69 6.68 7.32 5.62 6.67
75 75 6.37 7.45 8.15 6.23 7.12
75 80 6.78 8.11 8.99 6.54 8.13
- -------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
38
<PAGE>
OPTION 2
Payments for a Stated Period of Time
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
- -----------------------------------------------------------------------------
Guaranteed Monthly Quarterly Semi-Annual Annual
Years Rate Payment Payment Payment Payment
- -----------------------------------------------------------------------------
3 3.50% $ 29.19 $ 87.33 $ 173.91 $ 344.86
4 3.50% 22.27 66.61 132.65 263.04
5 3.50% 18.12 54.19 107.92 213.99
6 3.50% 15.35 45.92 91.44 181.32
7 3.50% 13.38 40.01 79.69 158.01
8 3.50% 11.90 35.59 70.88 140.56
9 3.50% 10.75 32.16 64.05 127.00
10 3.50% 9.83 29.42 58.59 116.18
11 3.50% 9.09 27.18 54.13 107.34
12 3.50% 8.46 25.32 50.42 99.98
13 3.50% 7.94 23.75 47.29 93.78
14 3.50% 7.49 22.40 44.62 88.47
15 3.50% 7.10 21.24 42.31 83.89
16 3.50% 6.76 20.23 40.29 79.89
17 3.50% 6.47 19.34 38.51 76.37
18 3.50% 6.20 18.55 36.94 73.25
19 3.50% 5.97 17.85 35.54 70.47
20 3.50% 5.75 17.22 34.28 67.98
21 3.50% 5.56 16.65 33.15 65.74
22 3.50% 5.39 16.13 32.13 63.70
23 3.50% 5.24 15.66 31.19 61.85
24 3.50% 5.09 15.24 30.34 60.17
25 3.50% 4.96 14.85 29.56 58.62
26 3.50% 4.84 14.49 28.85 57.20
27 3.50% 4.73 14.15 28.19 55.90
28 3.50% 4.63 13.85 27.58 54.69
29 3.50% 4.53 13.57 27.02 53.57
30 3.50% 4.45 13.30 26.49 52.53
- -----------------------------------------------------------------------------
39
<PAGE>
OPTION 2
Payments for a Stated Period of Time
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
- -----------------------------------------------------------------------------
Guaranteed Monthly Quarterly Semi-Annual Annual
Years Rate Payment Payment Payment Payment
- -----------------------------------------------------------------------------
3 5.00% $ 29.80 $ 89.04 $ 176.99 $ 349.72
4 5.00% 22.89 68.38 135.93 268.58
5 5.00% 18.74 56.00 111.33 219.98
6 5.00% 15.99 47.77 94.96 187.64
7 5.00% 14.02 41.90 83.30 164.59
8 5.00% 12.56 37.52 74.58 147.35
9 5.00% 11.42 34.11 67.81 133.99
10 5.00% 10.51 31.40 62.42 123.34
11 5.00% 9.77 29.19 58.03 114.66
12 5.00% 9.16 27.36 54.38 107.45
13 5.00% 8.64 25.81 51.31 101.39
14 5.00% 8.20 24.50 48.69 96.21
15 5.00% 7.82 23.36 46.44 91.75
16 5.00% 7.49 22.37 44.47 87.88
17 5.00% 7.20 21.51 42.75 84.48
18 5.00% 6.94 20.74 41.23 81.47
19 5.00% 6.71 20.06 39.88 78.80
20 5.00% 6.51 19.46 38.68 76.42
21 5.00% 6.33 18.91 37.59 74.28
22 5.00% 6.17 18.42 36.62 72.35
23 5.00% 6.02 17.98 35.73 70.61
24 5.00% 5.88 17.57 34.93 69.02
25 5.00% 5.76 17.20 34.20 67.57
26 5.00% 5.65 16.87 33.53 66.25
27 5.00% 5.54 16.56 32.92 65.04
28 5.00% 5.45 16.28 32.35 63.93
29 5.00% 5.36 16.01 31.83 62.90
30 5.00% 5.28 15.77 31.35 61.95
- -----------------------------------------------------------------------------
40
<PAGE>
OPTION 3
LIFE INCOME
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
Payments Guaranteed for a Stated Period of Months
- -----------------------------------------------------------------------------
Adjusted
Age of Annuitant None 60 120 180 240
- -----------------------------------------------------------------------------
50 $ 4.34 $ 4.34 $ 4.31 $ 4.27 $ 4.22
51 4.41 4.40 4.38 4.33 4.27
52 4.48 4.47 4.45 4.40 4.32
53 4.56 4.55 4.52 4.46 4.38
54 4.64 4.63 4.59 4.53 4.44
55 4.72 4.71 4.67 4.60 4.50
56 4.81 4.80 4.75 4.67 4.56
57 4.91 4.89 4.84 4.75 4.62
58 5.01 4.99 4.93 4.83 4.69
59 5.12 5.10 5.03 4.92 4.75
60 5.23 5.21 5.13 5.00 4.82
61 5.36 5.33 5.24 5.09 4.88
62 5.49 5.45 5.35 5.19 4.95
63 5.63 5.59 5.47 5.28 5.02
64 5.78 5.73 5.60 5.38 5.08
65 5.94 5.89 5.73 5.48 5.15
66 6.11 6.05 5.87 5.58 5.21
67 6.29 6.22 6.02 5.69 5.27
68 6.49 6.41 6.17 5.79 5.33
69 6.70 6.60 6.33 5.90 5.38
70 6.92 6.81 6.49 6.00 5.43
71 7.17 7.04 6.66 6.10 5.48
72 7.43 7.27 6.84 6.20 5.52
73 7.71 7.53 7.02 6.30 5.55
74 8.02 7.80 7.20 6.39 5.59
75 8.35 8.08 7.38 6.48 5.62
- -----------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
41
<PAGE>
OPTION 3
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
Payments Guaranteed for a Stated Period of Months
- -----------------------------------------------------------------------------
Adjusted
Age of Annuitant None 60 120 180 240
- -----------------------------------------------------------------------------
50 $ 5.26 $ 5.25 $ 5.22 $ 5.17 $ 5.11
51 5.33 5.32 5.28 5.23 5.15
52 5.40 5.38 5.34 5.29 5.20
53 5.47 5.45 5.41 5.35 5.26
54 5.54 5.53 5.48 5.41 5.31
55 5.63 5.61 5.56 5.47 5.36
56 5.71 5.69 5.63 5.54 5.42
57 5.80 5.78 5.72 5.61 5.47
58 5.90 5.88 5.81 5.69 5.53
59 6.01 5.98 5.90 5.77 5.59
60 6.12 6.09 6.00 5.85 5.65
61 6.24 6.21 6.10 6.93 5.71
62 6.37 6.33 6.21 6.02 5.77
63 6.51 6.46 6.33 6.11 5.83
64 6.66 6.60 6.45 6.20 5.89
65 6.82 6.75 6.57 6.30 5.95
66 6.99 6.91 6.71 6.39 6.01
67 7.17 7.08 6.85 6.49 6.06
68 7.36 7.27 6.99 6.59 6.12
69 7.57 7.46 7.15 6.69 6.17
70 7.80 7.67 7.30 6.78 6.21
71 8.05 7.89 7.47 6.88 6.25
72 8.31 8.13 7.64 6.97 6.29
73 8.59 8.38 7.81 7.06 6.33
74 8.90 8.64 7.99 7.15 6.36
75 9.23 8.93 8.16 7.23 6.38
- -----------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
42
<PAGE>
OPTION 4
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
- --------------------------------------------------------------------------------
Adjusted Ages
- -----------------------
Second
Annuitant Annuitant Option 4a Option 4b Option 4c Option 4d Option 4e
- -----------------------------------------------------------------------------
55 50 $ 3.97 $ 4.35 $ 4.56 $ 3.97 $ 4.31
55 55 4.16 4.54 4.76 4.15 4.42
55 60 4.27 4.73 5.00 4.26 4.48
60 55 4.27 4.73 5.00 4.26 4.70
60 60 4.51 4.99 5.27 4.50 4.84
60 65 4.66 5.25 5.61 4.65 4.93
65 60 4.66 5.25 5.61 4.65 5.22
65 65 4.99 5.61 5.99 4.98 5.42
65 70 5.19 5.97 6.44 5.17 5.54
70 65 5.19 5.97 6.44 5.17 5.93
70 70 5.67 6.49 6.99 5.62 6.23
70 75 5.95 6.96 7.61 5.87 6.40
75 70 5.95 6.96 7.61 5.87 6.95
75 75 6.64 7.73 8.43 6.48 7.40
75 80 7.04 8.39 9.29 6.79 7.64
- -----------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
43
<PAGE>
OPTION 4
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
- -----------------------------------------------------------------------------
Adjusted Ages
- --------------------------------
Second
Annuitant Annuitant Option 4a Option 4b Option 4c Option 4d Option 4e
- --------- --------- --------- --------- --------- --------- ---------
55 50 $ 4.88 $ 5.26 $ 5.48 $ 4.88 $ 5.23
55 55 5.04 5.44 5.66 5.04 5.32
55 60 5.15 5.63 5.91 5.14 5.38
60 55 5.15 5.63 5.91 5.14 5.59
60 60 5.37 5.87 6.16 5.37 5.72
60 65 5.52 6.14 6.51 5.51 5.80
65 60 5.52 6.14 6.51 5.51 6.10
65 65 5.83 6.49 6.87 5.82 6.29
65 70 6.04 6.84 7.34 6.00 6.41
70 65 6.04 6.84 7.34 6.00 6.81
70 70 6.49 7.35 7.87 6.44 7.08
70 75 6.77 7.84 8.51 6.68 7.25
75 70 6.77 7.84 8.51 6.68 7.81
75 75 7.45 8.60 9.33 7.27 8.25
75 80 7.86 9.28 10.20 7.57 8.49
- -----------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
44
<PAGE>
- --------------------------------------------------------------------------------
Aetna Life Insurance and Annuity Company
Home Office: 151 Farmington Ave.
Hartford, Connecticut 06156
(800) 525-4225
Group Variable, Fixed, or Combination Annuity Contract
Nonparticipating
- --------------------------------------------------------------------------------
ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT, WHEN BASED ON
INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT
GUARANTEED AS TO FIXED DOLLAR AMOUNT. THIS CONTRACT CONTAINS A MARKET
VALUE ADJUSTMENT FORMULA. APPLICATION OF A MARKET VALUE ADJUSTMENT MAY
RESULT IN EITHER AN INCREASE OR DECREASE IN THE CURRENT VALUE. THE
MARKET VALUE ADJUSTMENT FORMULA DOES NOT APPLY TO A GUARANTEED TERM AT
THE TIME OF ITS MATURITY.
45
Aetna Life Insurance and Annuity Company
Home Office: 151 Farmington Ave.
Hartford, Connecticut 06156
(800) 525-4225
Aetna Life Insurance and Annuity Company, herein called Aetna,
agrees to pay the benefits stated in this Contract.
Specifications
- --------------------------------------------------------------------------------
Plan
MARATHON PLUS
- --------------------------------------------------------------------------------
Type of Plan
INDIVIDUAL RETIREMENT ANNUITY ROLLOVER ACCOUNT
- --------------------------------------------------------------------------------
Contract Holder
JOHN D. JONES
- --------------------------------------------------------------------------------
Contract No.
SPECIMEN
- --------------------------------------------------------------------------------
Effective Date
XXXXXXX XX, 1995
- --------------------------------------------------------------------------------
This Contract is Delivered in YOUR STATE and is Subject to the Laws
of that Jurisdiction
THE VARIABLE FEATURES OF THE GROUP CONTRACT ARE DESCRIBED IN PARTS III AND IV.
Right to Cancel
- --------------------------------------------------------------------------------
The Contract Holder may cancel this Contract within 10 days of receiving it, by
sending a written notice to Aetna at the above address or to the agent from whom
it was purchased. Aetna will return all payments made for this Contract within 7
days after it receives the notice of cancellation and this Contract at its Home
Office.
This page, the following pages, and the application make up the entire Contract.
Signed at the Home Office on the Effective Date.
/s/ Dan Kearney /s/ Susan E. Schechter
President Secretary
G-CDA-IC (IR)
<PAGE>
Group Variable, Fixed, or Combination Annuity Contract
Nonparticipating
ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT, WHEN BASED ON INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT. THIS CONTRACT CONTAINS A MARKET VALUE ADJUSTMENT FORMULA.
APPLICATION OF A MARKET VALUE ADJUSTMENT MAY RESULT IN EITHER AN INCREASE OR
DECREASE IN THE CURRENT VALUE. THE MARKET VALUE ADJUSTMENT FORMULA DOES NOT
APPLY TO A GUARANTEED TERM AT THE TIME OF ITS MATURITY.
2
<PAGE>
Specifications
- --------------------------------------------------------------------------------
Guaranteed Interest Rate There is a guaranteed interest rate for Purchase
Payment(s) held in the AG Account. (See Contract
Schedule I).
- --------------------------------------------------------------------------------
Deductions from the There will be deductions for mortality and expense
Separate Account risks and administrative fees (See Contract Schedule
I and II).
- --------------------------------------------------------------------------------
Deduction from Purchase Purchase Payment(s) are subject to a deduction for
Payment(s) premium taxes, if any (See 3.01.)
- --------------------------------------------------------------------------------
Surrender Fee There will be a charge deducted upon surrender.
(See Contract Schedule I).
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. IT IS THEREFORE IMPORTANT THAT YOU
READ THIS CONTRACT CAREFULLY.
3
<PAGE>
Contract Schedule I
Accumulation Period
Separate Account
- -------------------------------------------------------------------------------
Separate Account: Variable Annuity Account B
Charges to Separate A daily charge is deducted from any portion of the
Account: Current Value allocated to the Separate Account. The
deduction is the daily equivalent of the
annual effective percentages shown in the
following chart:
Administrative Charge 0.15%
Mortality Risk Charge 0.35%
Expense Risk Charge 0.90%
----
Total Separate Account
Charges 1.40%
ALIAC Guaranteed Account (AG Account)
- -------------------------------------------------------------------------------
Minimum Guaranteed Interest Rate (effective annual
rate of return): 3.0%.
Separate Account and AG Account
- -------------------------------------------------------------------------------
Transfers: An unlimited number of Transfers may be made during
the Accumulation Period. Aetna allows 12 free
Transfers in any calendar year. Thereafter, Aetna
reserves the right to charge $10 for each subsequent
Transfer.
Maintenance Fee: The annual Maintenance Fee is $30. If the Account's
Current Value is $50,000 or more on the date the
Maintenance Fee is to be deducted, the Maintenance
Fee is $0.
4
<PAGE>
Contract Schedule I (Continued)
Accumulation Period
Separate Account and AG Account (Cont'd)
- --------------------------------------------------------------------------------
Surrender Fee: For each surrender, the surrender fee will be
determined as follows:
Surrender Fee
(as percentage of
Length of Time from Deposit of Net Net Purchase
Purchase Payment (Years) Payment)
Less than 2 years 7%
2 or more but less than 4 years 6%
4 or more but less than 5 years 5%
5 or more but less than 6 years 4%
6 or more but less than 7 years 3%
7 years or more 0%
Systematic Withdrawal The specified payment or specified percentage may
Option (SWO): not be greater than 10% of the Account's Current
Value at time of election.
See I. GENERAL DEFINITIONS for explanations.
5
<PAGE>
Contract Schedule II
Annuity Period
Separate Account
- --------------------------------------------------------------------------------
Charges to A daily charge at an annual effective rate of 1.25%
Separate Account: for Annuity mortality and expense risks. The
administrative charge is stablished upon election of
an Annuity option. This charge will not exceed 0.25%.
Variable Annuity If a Variable Annuity is chosen, an assumed annual
Assumed Annual net return rate of 5.0% may be elected. If 5.0% is
Net Return Rate: not elected, Aetna will use an assumed annual net
return rate of 3.5%.
The assumed annual net return rate factor for 3.5%
per year is 0.9999058.
The assumed annual net return rate factor for 5.0%
per year is 0.9998663.
If the portion of a Variable Annuity payment for any
Fund is not to decrease, the Annuity return factor
under the Separate Account for that Fund 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
assumed annual net return rate 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
assumed annual net return rate of 5% is chosen.
Fixed Annuity
- --------------------------------------------------------------------------------
Minimum Guaranteed Interest Rate (effective annual
rate of return): 3.0%
See I. GENERAL DEFINITIONS for explanations.
6
<PAGE>
TABLE OF CONTENTS
Page
I. GENERAL DEFINITIONS
1.01 Account......................................................9
1.02 Accumulation Period..........................................9
1.03 Adjusted Current Value.......................................9
1.04 Annuitant....................................................9
1.05 Annuity......................................................9
1.06 Beneficiary..................................................9
1.07 Certificate Holder...........................................9
1.08 Code.........................................................9
1.09 Contract.....................................................9
1.10 Contract Holder.............................................10
1.11 Current Value...............................................10
1.12 Deposit Period..............................................10
1.13 Fixed Annuity...............................................10
1.14 Fund(s).....................................................10
1.15 General Account.............................................10
1.16 Guaranteed Rates - AG Account...............................11
1.17 Guaranteed Term.............................................11
1.18 Guaranteed Term(s) Groups...................................11
1.19 Maintenance Fee.............................................11
1.20 ALIAC Guaranteed Account (AG Account).......................12
1.21 Market Value Adjustment (MVA)...............................12
1.22 Matured Term Value..........................................12
1.23 Matured Term Value Transfer.................................12
1.24 Maturity Date...............................................12
1.25 Net Purchase Payment........................................12
1.26 Nonunitized Separate Account................................12
1.27 Purchase Payment............................................13
1.28 Reinvestment................................................13
1.29 Separate Account............................................13
1.30 Surrender Value.............................................13
1.31 Transfers...................................................14
1.32 Valuation Period (Period)...................................14
1.33 Variable Annuity............................................14
II. GENERAL PROVISIONS
2.01 Change of Contract..........................................14
2.02 Change of Fund(s)...........................................15
2.03 Nonparticipating Contract...................................16
2.04 Payments and Elections......................................16
2.05 State Laws..................................................16
2.06 Control of Contract.........................................16
7
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2.07 Designation of Beneficiary..................................17
2.08 Misstatements and Adjustments...............................17
2.09 Incontestability............................................17
2.10 Grace Period................................................17
2.11 Individual Certificates.....................................17
III. PURCHASE PAYMENT, CURRENT VALUE, AND SURRENDER PROVISIONS
3.01 Net Purchase Payment........................................17
3.02 Certificate Holder's Account................................17
3.03 Fund(s) Record Units -- Separate Account....................18
3.04 Net Return Factor(s) -- Separate Account....................18
3.05 Fund Record Unit Value -- Separate Account..................18
3.06 Market Value Adjustment.....................................19
3.07 Transfer of Current Value from the Funds or AG Account......20
3.08 Reports.....................................................21
3.09 Notice to the Certificate Holder............................21
3.10 Loans.......................................................21
3.11 Distribution Options........................................21
3.12 Death Benefit Amount........................................26
3.13 Death Benefit Options available to Beneficiary..............27
3.14 Required Distribution to Certificate Holder/Beneficiary.....29
3.15 Liquidation of Surrender Value..............................30
3.16 Surrender Fee...............................................30
3.17 Payment of Surrender Value..................................31
3.18 Reinstatement...............................................31
3.19 Payment of Adjusted Current Value...........................32
IV. ANNUITY PROVISIONS
4.01 Choices to be Made..........................................32
4.02 Annuity Payments to Certificate Holder......................33
4.03 Annuity Payments to Beneficiary.............................33
4.04 Terms of Annuity Options....................................34
4.05 Death of Annuitant/ Beneficiary.............................35
4.06 Fund(s) Annuity Units -- Separate Account...................36
4.07 Fund(s) Annuity Unit Value -- Separate Account..............36
4.08 Annuity Net Return Factor(s) -- Separate Account............37
4.09 Annuity Options.............................................38
8
<PAGE>
I. GENERAL DEFINITIONS
- --------------------------------------------------------------------------------
1.01 Account: A record established for each Certificate Holder to
maintain the value of the Net Purchase Payments held
on his/her behalf during the Accumulation Period.
1.02 Accumulation Period: The period during which the Net Purchase Payment is
applied to an Account to provide future Annuity
payment(s).
1.03 Adjusted Current The Current Value of an Account plus or minus any
Value: aggregate AG Account MVA, if applicable. (See 1.21)
1.04 Annuitant: The person whose life is measured for purposes of the
guaranteed death benefit and the duration of Annuity
payments under an Account. The Certificate Holder and
Annuitant must be the same person under an Account.
1.05 Annuity: Payment of an income:
(a) For the life of one or two persons; (b) For a
stated period; or (c) For some combination of (a) and
(b).
1.06 Beneficiary: The individual or estate entitled to receive any
payment from an Account upon the death of the
Annuitant.
1.07 Certificate Holder: A person who purchases an interest in this Contract
as evidenced by a certificate.
1.08 Code: The Internal Revenue Code of 1986, as it may be
amended from time to time.
1.09 Contract: This agreement between Aetna and the Contract Holder
to provide annuities which qualify as Individual
Retirement Annuities under Code Section 408(b) for
the exclusive benefit of the Certificate Holder(s) or
their Beneficiaries.
9
<PAGE>
1.10 Contract Holder: The entity to which the Contract is issued. The
Contract is offered to:
(a) National Association of Securities Dealers, Inc.
("NASD") member broker-dealers selected by Aetna,
who have a minimum net capital of $250,000 or
more, including broker-dealer subsidiaries of
banks and savings and loan associations, to
provide Individual Retirement Annuities under
Code Section 408 to their customers; and
(b) Employers who sponsor Individual Retirement
Annuity plans under Code Section 408 for their
employees.
1.11 Current Value: As of the most recent Valuation Period, the Net
Purchase Payment and any additional amount deposited
pursuant to 3.12 plus any interest added to the
portion allocated to the AG Account; and plus or
minus the investment experience of the portion
allocated to the Funds since deposit; less all
Maintenance Fees deducted, any amounts surrendered
and any amounts applied to an Annuity.
1.12 Deposit Period: A calendar week, a calendar month, a calendar
quarter, or any other period of time specified by
Aetna during which the Net Purchase Payment,
Transfers and Reinvestments are accepted into the
AG Account for one or more Guaranteed Terms. Aetna
reserves the right to extend the Deposit Period.
1.13 Fixed Annuity: An Annuity with payments that do not vary in amount.
1.14 Fund(s): The open-end management investment companies
(mutual funds) in which the Separate Account invests.
1.15 General Account: The Account holding the assets of Aetna, other than
those assets held in Aetna's separate accounts.
10
<PAGE>
1.16 Guaranteed Rates - Aetna will declare the interest rate(s) applicable to
AG Account: a specific Guaranteed Term at the start of the
Deposit Period for that Guaranteed Term. The rate(s)
are guaranteed by Aetna for that Deposit Period and
the ensuing Guaranteed Term. 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 Contract Schedule I.
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.
1.17 Guaranteed Term: The period of time for which AG Account Guaranteed
Rates are guaranteed on Net Purchase Payments,
Transfers and Reinvestments made into a current
Deposit Period for the AG Account. Such period begins
on the day following the close of the Deposit Period
and ends on the designated Maturity Date. Guaranteed
Terms are offered at Aetna's discretion for various
lengths of time ranging up to and including ten
years.
During a Deposit Period, Aetna may make available any
number of Guaranteed Terms. The Certificate Holder
may allocate Net Purchase Payment and Transfers into
any or all of the available Guaranteed Terms.
1.18 Guaranteed Term(s) All AG Account Guaranteed Term(s) with the same
Groups: length of time from the close of the Deposit Period
until the designated Maturity Date.
1.19 Maintenance Fee: The Maintenance Fee (see Contract Schedule I) will be
deducted during the Accumulation Period from the
Current Value on each anniversary of the date the
Account is established and upon surrender of the
entire Account.
11
<PAGE>
1.20 ALIAC Guaranteed An accumulation option where Aetna guarantees
Account (AG Account): stipulated rate(s) of interest for specified periods
of time. All assets of Aetna, including amounts in
the Nonunitized Separate Account, are available to
meet the guarantees under the AG Account.
1.21 Market Value An adjustment to the amount withdrawn or transferred
Adjustment (MVA): from an AG 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 in 3.06. The
adjustment is expressed as a percentage of each
dollar being withdrawn.
1.22 Matured Term Value: The amount payable on an AG Account Guaranteed Term's
Maturity Date.
1.23 Matured Term Value During the calendar month following an AG Account
Transfer: Maturity Date, the Certificate Holder may notify
Aetna's Home Office in writing to Transfer or
surrender all or part of the Matured Term Value, plus
interest at the new Guaranteed Rate accrued thereon,
from the AG 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.
1.24 Maturity Date: The last day of an AG Account Guaranteed Term.
1.25 Net Purchase The Purchase Payment less premium taxes, as
Payment: applicable.
1.26 Nonunitized A separate account set up by Aetna under Title 38,
Separate Account: Section 38a-433, of the Connecticut General Statutes,
that holds assets for AG Account Terms. There are no
discrete units for this Account. The Certificate
Holder does not participate in the investment gain or
loss from the assets held in the Nonunitized Separate
Account. Such gain or loss is borne entirely by
Aetna. These assets may be chargeable with
liabilities arising out of any other business of
Aetna.
12
<PAGE>
1.27 Purchase Payment: A cash payment accepted by Aetna at its Home Office
which is a rollover amount under Code Section 402(c),
403(a), 403(b)(8), or 408(d)(3). Aetna may require
verification that a rollover amount qualifies as such
under the Code. Payments to Simplified Employee
Pension plans and annual deductible and nondeductible
contributions to Individual Retirement Annuities are
not accepted under this Contract.
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.
1.28 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.
1.29 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. This 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 Account, shall not
be charged with other Aetna liabilities.
1.30 Surrender Value: The amount payable by Aetna upon the surrender of any
portion of an Account.
13
<PAGE>
1.31 Transfers: The movement of invested amounts among the available
Fund(s) and the AG Account under this Contract during
the Accumulation Period.
1.32 Valuation Period The period of time for which a Fund determines its
(Period): net asset value, usually from 4:15 p.m. Eastern time
each day the New York Stock Exchange is open until
4:15 p.m. the next such day, or such other day that
one or more of the Funds determines its net asset
value.
1.33 Variable Annuity: An Annuity with payments that vary with the net
investment results of one or more of the Funds under
the Separate Account.
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 which
begins before the change.
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.
Aetna may make any change that affects the AG Account
Market Value Adjustment (3.06) 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 Term and will apply to all
present and future Accounts.
Aetna reserves the right to change the terms of the
distribution option (3.11) for future elections and
discontinue the availability of these options after
proper notification.
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:
14
<PAGE>
(a) Net Purchase Payment (1.25)
(b) AG Account Guaranteed Rate (1.16)
(c) Net Return Factor(s) -- Separate Account (3.04)
(d) Current Value (1.11)
(e) Surrender Value (1.30)
(f) Fund(s) Annuity Unit Value -- Separate Account
(4.05)
(g) Annuity options (4.09)
(h) Fixed Annuity Interest Rates (4.01)
(i) Transfers (1.31).
Any change that affects the Annuity options and the
tables for the options may be made:
(a) No earlier than 12 months after the effective
date of this Contract; and
(b) No earlier than 12 months after the effective
date of any prior change.
2.01 Change of Contract Any Account established on or after the effective
(Cont'd): 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 this Contract. This Contract may
also be changed as deemed necessary by Aetna to
comply with federal or state law.
2.02 Change of Fund(s): Aetna, or the Separate Account, may:
(a) Change the Fund(s) which may be invested in by
the Separate Account; and
(b) Replace the shares of any Fund(s) held in the
Separate Account with shares of any other
Fund(s).
Changes must be:
(a) Approved by a majority vote in the Separate
Account with respect to the Fund(s) whose shares
are to be replaced; or
(b) Deemed necessary by Aetna under the Investment
Company Act of 1940; or
(c) Deemed necessary by Aetna to accomplish the
purpose of the Separate Account.
Aetna will notify the Contract Holder and the
Certificate Holder of any change.
15
<PAGE>
2.03 Nonparticipating The Contract Holder, Certificate Holders or
Contract: Beneficiaries will not have a right to share in the
earnings of Aetna.
2.04 Payments and While the Certificate Holder is living, Aetna will
Elections: pay the Certificate Holder any Annuity payments as
and when due. After the Certificate Holder's death,
any Annuity payments required to be made will be paid
in accordance with 4.05. Aetna will determine other
payments and/or elections as of the end of the
Valuation Period 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 3.17.
2.05 State Laws: The Contract and the Certificates comply with the
laws of the state in which they are delivered. Any
surrender, death, 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 itle to the Contract.
Contract Holder rights are limited to accepting or
rejecting Contract modifications.
Each Certificate Holder has a nonforfeitable right to
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. 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 Account may not be attached, alienated, or
subject to the claims of any creditors of the
Certificate Holder except to the extent permitted by
law. The Account is nontransferable by the
Certificate Holder. The Certificate Holder may not
assign, transfer, pledge or use as collateral his or
her rights under the Contract.
16
<PAGE>
2.07 Designation of Each Certificate Holder shall name his or her
Beneficiary: Beneficiary. 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.
2.08 Misstatements If Aetna finds the age of any Annuitant to be
and Adjustments: misstated, the correct facts will be used to adjust
payments.
2.09 Incontestability: Aetna cannot cancel this Contract because of any
error of fact on the application. Aetna cannot cancel
an Account because of any error of fact on the
enrollment form.
2.10 Grace Period: This Contract will remain in effect except as
provided in the Payment of Adjusted Current Value
provision (see 3.19).
2.11 Individual Aetna shall issue a certificate to each Certificate
Certificates: 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, CURRENT VALUE, AND SURRENDER PROVISIONS
- --------------------------------------------------------------------------------
3.01 Net Purchase Payment: This amount is the actual Purchase Payment less any
premium tax. Aetna will generally deduct the premium
tax when Annuity benefits are elected (see Part IV).
If Aetna determines that under applicable state law,
it must pay a premium tax when the Purchase Payment
is received or at any other time, it will deduct the
tax at that time.
The Net Purchase Payment will be credited among:
(a) The current Deposit Period(s) for Guaranteed
Terms under the AG Account; and
(b) The Fund(s) in which the Separate Account
invests.
The Certificate Holder shall tell Aetna the
allocation percentage to be applied to the current
Deposit Period for each of the available Guaranteed
Terms in the AG Account and/or each Fund.
3.02 Certificate Aetna will maintain an Account for each Certificate
Holder's Account: Holder.
17
<PAGE>
Aetna will declare from time to time the
acceptability and the minimum amount for a Purchase
Payment.
3.03 Fund(s) Record The portion of the Net Purchase Payment applied to
Units -- Separate each Fund under the Separate Account will determine
Account: the number of Fund record units for that Fund. This
number is equal to the portion of the Net Purchase
Payment applied to each Fund divided by the Fund
record unit value (see 3.05) for the Valuation Period
in which the Purchase Payment is received in good
order at Aetna's Home Office.
3.04 Net Return The net return factor(s) are used to compute all
Factor(s) -- Separate Account record units for any Fund.
Separate Account:
The net return factor(s) for each Fund is equal to
1.0000000 plus the net return rate.
The net return rate is equal to:
(a) The value of the shares of the Fund held by the
Separate Account at the end of the Valuation
Period; minus
(b) The value of the shares of the Fund held by the
Separate Account at the start of the Valuation
Period; plus or minus
(c) Taxes (or reserves for taxes) on the Separate
Account (if any); divided by
(d) The total value of the Fund(s) record units and
Fund(s) annuity units of the Separate Account at
the start of the Valuation Period; minus
(e) A daily Separate Account charge at an annual rate
as shown on Contract Schedule I for mortality and
expense risks, which may include profit; and a
daily administrative charge.
A net return rate may be more or less than 0%. The
value of a share of the Fund is equal to the net
assets of the Fund divided by the number of shares
outstanding.
3.05 Fund(s) Record Unit A Fund record unit value is computed by multiplying
Value -- Separate the net return factors for the current Valuation
Account: Period by the Fund record unit value for the previous
Period. The dollar value of a Fund record units,
Separate Account assets, and Variable Annuity
payments may go up or down due to investment gain or
loss.
18
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3.06 Market Value There will be an MVA for a withdrawal from the AG
Adjustment: Account before the end of a Guaranteed Term when the
withdrawal is due to:
(a) A Transfer: except as specified in AG Account
Matured Term Value Transfer;
(b) A full or partial surrender, including a 10% free
withdrawal under 3.16; or
(c) An election of Annuity option 2 (see 4.09).
3.06 Market Value Full and partial surrenders and Transfers made within
Adjustment six months after the date of the Annuitant's death
(Cont'd): will be the greater of:
(a) The aggregate MVA amount which is the sum of all
market value adjusted amounts calculated due to a
withdrawal of amounts. This total may be greater
or less than the Current Value of those amounts;
or
(b) The applicable portion of the Current Value in
the AG Account.
After the six-month period, the surrender or Transfer
will be the aggregate MVA amount, which may be
greater or less than the Current Value of those
amounts.
The greater of the aggregate MVA amount or the
applicable portion of the Current Value applies to
amounts withdrawn from the AG Account on account of
an election of Annuity options 3 or 4 (see 4.09).
Market value adjusted amounts will be equal to the
amount withdrawn multiplied by the following ratio:
x
---
365
(1 + i)
--------
x
---
365
(1 + j)
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Where:
i is the Deposit Period Yield
j is the Current Yield
x is the number of days
remaining, (computed from
Wednesday of the week of
withdrawal) in the Guaranteed
Term.
3.06 Market Value The Deposit Period Yield will be determined as
Adjustment follows:
(Cont'd):
(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 Before an Annuity option is elected, all or any
Current Value portion of the Adjusted Current Value of the
from the Funds Certificate Holder's Account may be transferred from
or AG Account any Fund or Guaranteed Term of the AG Account:
(a) To any other Fund; or
(b) To any Guaranteed Term of the AG Account
available in the current Deposit Period.
Transfer requests can be submitted as a percentage or
as a dollar amount. Aetna may establish a minimum
transfer amount. Within a Guaranteed Term Group, the
amount to be surrendered 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.
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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
Contract Schedule I. Additional Transfers may be
subject to a Transfer fee as shown on Contract
Schedule I. Transfers from the AG Account of a
Matured Term Value on or within one calendar month of
a Term's Maturity Date do not count against the
annual Transfer limit.
3.07 Transfer of Current Amounts applied to Guaranteed Terms of the AG Account
Value from the Funds may not be transferred to the Funds or to another
or AG Account Guaranteed Term during the Deposit Period or for 90
(cont'd): days after the close of the Deposit Period except for
Matured Term Value(s) during the calendar month
following the Term's Maturity Date.
Transfers from Guaranteed Terms of the AG Account are
subject to the MVA provisions of 3.06.
3.08 Reports: Aetna, as issuer of the Contract, will make any
reports required of it by federal law. Aetna will
furnish annual calendar year reports concerning the
status of the annuity.
3.09 Notice to the The Certificate Holder will receive quarterly
Certificate Holder: statements from Aetna of:
(a) The value of any amounts held in:
(1) The AG Account; and (2) The Fund(s) under the
Separate Account.
(b) The number of any Fund(s) record units; and
(c) The Fund(s) record unit value.
Such number or values will be as of a specific date
no more than 60 days before the date of the notice.
3.10 Loans: Loans are not available under this Contract.
3.11 Distribution The following distribution options may be elected by
Options: the Certificate Holder during the Accumulation
Period.
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3.11 Distribution (a) Estate Conservation Option (ECO) - A distribution
Options: option under which a portion of the Account's
Current Value will automatically be surrendered
and distributed each year. ECO payments will be
calculated based on the Account's full Current
Value. The distributed amount will be withdrawn
pro rata from each investment option used under
the Account. A Surrender Fee will not be deducted
from any portion of the Adjusted Current Value
which is paid as a distribution under ECO.
Certificate Holders should consult their tax
adviser prior to requesting this distribution
option. Aetna will not be responsible for any
adverse tax consequences due to receiving ECO
payments.
3.11 Distribution (1) Amount of Distribution: Each year that ECO is
Options (Cont'd): in effect, Aetna will calculate and
distribute an amount equal to the minimum
required distribution under the Code. The
annual distribution will be determined by
dividing the Current Value as of December 31
of the year prior to the payment year, by a
life expectancy factor.
The Certificate Holder, or spouse Beneficiary
if ECO is elected after the Certificate
Holder's death, shall elect either single
life expectancy or joint life expectancy.
Life expectancy is computed by use of the
expected return multiples in Table V and VI
of section 1.72-9 of the Income Tax
Regulations.
Joint life expectancy can only be elected
based on the joint life expectancy of the
Certificate Holder and his or her
Beneficiary. If the Certificate Holder makes
any changes in the Beneficiary designation
under the Certificate, ECO distributions
after the change will be recalculated as
required by IRS regulations.
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<PAGE>
Life expectancies shall be recalculated
annually. If the joint life expectancy is
elected with a non-spouse Beneficiary, the
life expectancy of the non-spouse Beneficiary
may not recalculated. Instead, the life
expectancy will be calculated using the
attained age of the Beneficiary during the
calendar year in which the Certificate Holder
attains age 70 1/2, and payments for
subsequent years shall be recalculated based
on such life expectancy reduced by one for
each calendar year which has elapsed since
the calendar year life expectancy was first
calculated.
If joint life expectancy is elected with a
spouse Beneficiary, at the death of either,
the payments can continue and will be
calculated based solely on the survivor's
life expectancy. If joint life expectancy is
elected with a non-spouse Beneficiary and the
non-spouse Beneficiary dies first, payments
will continue based on the joint life
expectancy.
3.11 Distribution If a single life expectancy is elected and
Options (Cont'd): the Certificate Holder dies, or if a joint
life expectancy is elected and the survivor
dies, the death benefits determined under
Section 3.12 will be paid to the Beneficiary
in a lump sum not later than December 31
following the year of death.
(2) Minimum Initial Current Value: At its
discretion, Aetna may require a minimum
initial Account Current Value for election of
this option. If after election of this
option, the Current Value is insufficient to
make a scheduled ECO payment, Aetna will
distribute the entire Account balance.
(3) Date of Distribution: Distribution will be
made annually on the 15th of any month or
such other date Aetna may designate or allow.
The Certificate Holder shall specify an
initial distribution month, not earlier than
the calendar date in which the Certificate
Holder attains age 70 1/2, or such later time
when distributions must commence as specified
under the Code, whichever is appropriate. For
a spouse Beneficiary, the earliest date is
the date of the Certificate Holder's death.
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<PAGE>
(4) Election and Revocation: ECO may be elected
by the Certificate Holder by submitting a
written request to Aetna at its Home Office.
Once elected, this option may be revoked by the
Certificate Holder, or spouse Beneficiary if
elected after the Certificate Holder's death, by
submitting a written request to Aetna at its Home
Office. Any revocation will apply only to amounts
not yet paid. The Certificate Holder assumes
responsibility for compliance with minimum
distribution rules under the Code. ECO may be
elected only once by the Certificate Holder or by
a spouse Beneficiary.
3.11 Distribution (b) Systematic Withdrawal Option (SWO): A
Options (Cont'd): distribution option under which a portion of the
Account's Current Value will automatically be
surrendered and distributed each year. SWO
payments will be calculated based on the
Account's Current Value. The distributed amount
will be withdrawn pro rata from each investment
option used under the Account. A Surrender Fee
will not be deducted from any portion of the
Adjusted Current Value which is paid as a
distribution under SWO. Certificate Holders
should consult their tax adviser prior to
requesting this distribution option. Aetna will
not be responsible for any adverse tax
consequences due to receiving SWO payments.
(1) Amount of Distribution: The Certificate
Holder may elect one of the three payment
methods described below.
(i) Specified Payment: Payments of a
designated dollar amount. The annual
amount may not be greater than the
percentage of the Current Value at time
of election as shown on Contract
Schedule I. This annual dollar amount
will remain constant. At its
discretion, Aetna may require a minimum
initial payment amount; or
24
<PAGE>
(ii) Specified Period: Payments made over a
period of time of at least 10 years.
The maximum specified period shall be
determined under the Code minimum
distribution rules. The annual amount
paid each year is calculated by
dividing the Account's Current Value as
of December 31 of the prior year by the
number of payment years remaining; or
3.11 Distribution (iii) Specified Percentage: Payment of a
Options (Cont'd): designated percentage which cannot be
greater than the percentage of the
Current Value at the time of election
as shown on Contract Schedule I. The
percentage may be changed by written
request. Aetna reserves the right to
limit the number of times the
percentage may be changed. The annual
amount is calculated by multiplying the
Current Value as of December 31 of the
year prior to the payment year by the
designated percentage.
Payments will be made until the year
the Certificate Holder attains age
70-1/2 or, if elected by the spouse
Beneficiary, the year the Certificate
Holder would have attained age 70-1/2.
Under both the Specified Payment and
Specified Period payment methods, a higher
amount shall be paid in any year if required
under the Code minimum distribution rules.
For purposes of this determination, life
expectancy for the initial distribution year
shall be calculated based on single life
expectancy Table V of Section 1.72-9 of the
Income Tax Regulations. With each subsequent
year, the life expectancy will be the life
expectancy for the previous year reduced by
one.
Payments upon the Certificate Holder's death
will be made to the Beneficiary in the manner
described in 3.13.
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<PAGE>
(2) Minimum Initial Current Value: At its
discretion, Aetna may require a minimum
initial Current Value for election of this
option. If after election of this option the
Current Value is insufficient to make a
scheduled SWO payment, Aetna will distribute
the entire Account balance.
3.11 Distribution (3) Date of Distribution: The Certificate Holder
Options (Cont'd): shall specify the initial distribution date.
The earliest date for distribution is the
first date on which the Certificate Holder
attains age 59 1/2. As elected by the
Certificate Holder, SWO payments will be made
on a monthly, quarterly, semi-annual or
annual basis. If SWO payments are to be made
more frequently than annually, the designated
annual amount is divided by the number of
payments due each year. Subsequent
distributions will be made on the 15th of any
month or such other date Aetna may designate
or allow.
(4) Election and Revocation: SWO may be elected
by the Certificate Holder, or spouse
Beneficiary if elected after the Certificate
Holder's death, by submitting a completed and
signed election form to Aetna's Home Office.
Once elected, this option may be revoked by
the Certificate Holder, or spouse Beneficiary
if elected after the Certificate Holder's
death, by submitting a written request to
Aetna at its Home Office. Any revocation will
apply only to amounts not yet paid. SWO may
be elected only once by the Certificate
Holder or by the spouse Beneficiary.
3.12 Death Benefit If the Certificate Holder/Annuitant dies before
Amount: Annuity payments start, the beneficiary is entitled
to a death benefit under the Account. The claim date
is the date when proof of death and the Beneficiary's
claim are received in good order at Aetna's Home
Office. The amount of the death benefit is determined
as follows:
(a) Death of Certificate Holder/Annuitant less than
75 years of age: The guaranteed death benefit is
the greatest of:
(1) The net Purchase Payment made to the Account
minus the sum of all amounts surrendered,
applied to an Annuity, or deducted from the
Account;
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<PAGE>
3.12 Death Benefit (2) The step up value as of the date of death
Amount (Cont'd): minus the total of all partial surrenders,
amounts applied to an Annuity and deductions
made from the Account since determination of
the step up value. The step up value is the
Current Value on the most recent seventh year
anniversary of the date the first Net
Purchase Payment is applied to the Account;
(3) The Account's Current Value as of the date of
death.
The excess, if any, of the guaranteed death
benefit value over the Account's Current Value is
determined as of the date of death. Any excess
amount will be deposited to the Account and
allocated to Aetna Variable Encore Fund as of the
claim date. The Current Value on the claim date
plus any excess amount deposited becomes the
Account's Current Value.
(b) Death of Certificate Holder/Annuitant age 75 or
greater: The death benefit amount is the Account
Current Value on the claim date.
3.13 Death Benefit Prior to any election, or until amounts must be
Options Available otherwise distributed under this section, the Current
to Beneficiary: Value of the Account will be retained in the Account.
The Beneficiary has the right under the Account to
allocate or reallocate any amount to any of the
available investment options (subject to an MVA, as
applicable). The following options are available to
the Beneficiary:
(a) If the Beneficiary is the Certificate Holder's
surviving spouse, the surviving spouse may
exercise all rights under the Contract and
continue in the Accumulation Period, or may elect
(1), (2), or (3) below. Under the Code,
distributions from the Account are not required
until December 31st of the year in which the
original Certificate Holder would have attained
age 70-1/2. The Beneficiary may elect to:
(1) Apply some or all of the Adjusted Current
Value of the Account to Annuity option 2, 3
or 4 (See 4.09);
(2) Apply some or all of the Adjusted Current
Value of the Account to Annuity option 1 (see
4.09); or
27
<PAGE>
3.13 Death Benefit (3) Receive, at any time, a lump sum payment
Options Available equal to the Adjusted Current Value of the
to Beneficiary Account.
(Cont'd):
If ECO is in effect on the Certificate Holder's
date of death, the surviving spouse can elect to
continue receiving ECO payments if a joint life
expectancy was chosen. Otherwise, the surviving
spouse must receive a lump sum payment equal to
the Adjusted Current Value.
If SWO is in effect and the Certificate Holder
dies before the required beginning date for
minimum distributions (see 3.14), SWO payments
will cease and the surviving spouse may claim the
death benefit in accordance with the terms of
this section.
If SWO is in effect and the Certificate Holder
dies after the required beginning date for
minimum distributions, the surviving spouse may
elect to continue receiving the SWO payments.
Otherwise, the surviving spouse must elect to
receive a lump sum payment equal to the Adjusted
Current Value.
(b) If the Beneficiary is other than the Certificate
Holder's surviving spouse, then options (1), (2),
or (3) under (a) above apply. Any portion of the
Adjusted Current Value of the Account that is not
applied to Annuity option 2, 3 or 4 by December
31st of the year following the year of the
Certificate Holder's death must be distributed by
December 31st of the year containing the fifth
anniversary of the Certificate Holder's date of
death.
If ECO or SWO is in effect on the Certificate
Holder's date of death, the Beneficiary must
receive an automatic and immediate lump sum
payment equal to the Adjusted Current Value.
(c) If no Beneficiary exists, a lump sum payment
equal to the Adjusted Current Value will be made
to the Certificate Holder's estate.
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<PAGE>
3.14 Required Distribution (a) Certificate Holder: The entire interest of the
to Certificate Certificate Holder will be distributed or begin
Holder/Beneficiary: to be distributed no later than April 1 following
the calendar year in which the Certificate Holder
attains age 70-1/2 (required beginning date),
over (a) the life of the Certificate Holder, or
the lives of the Certificate Holder and his or
her designated Beneficiary, or (b) a period
certain not extending beyond the life expectancy
of the Certificate Holder, or the joint and last
survivor expectancy of the Certificate Holder and
his or her designated Beneficiary. Payments must
be made in periodic payments at intervals no
longer than one year. In addition, payments must
be either nonincreasing or they may increase only
as provided in Q&A F-3 of section 1.401(a)(9)-1
of the Proposed Income Tax Regulations.
All distributions made hereunder shall be made in
accordance with the requirements of section
401(a)(9) of the Code, and the regulations
thereunder, including the minimum distribution
incidental benefit requirement of section
1.401(a)(9)-2 of the Proposed Income Tax
Regulations.
Distribution may be an Annuity as set forth in
Sections 4.01 through 4.04, payments under ECO or
SWO as defined in Section 3.11, or a lump sum
payment.
(b) Beneficiary: If the Certificate holder dies after
distribution of his or her interest has begun,
the remaining portion of such interest will
continue to be distributed at least as rapidly as
under the method of distribution being used prior
to the Certificate Holder's death.
Distributions are considered to have begun if
distributions are made on account of the
Certificate Holder's reaching his or her required
beginning date or if prior to the required
beginning date distributions irrevocably commence
to the Certificate Holder over a period permitted
and in an Annuity form acceptable under section
1.401(a)(9) of the Income Tax Regulations.
29
<PAGE>
3.15 Liquidation All or any portion of the Account's Adjusted Current
of Surrender Value may be surrendered at any time. Surrender
Value: requests can be submitted as a percentage of the
Account value or as a specific dollar amount. The Net
Purchase Payment amount is withdrawn first, and then
the excess value, if any. Amounts are withdrawn on a
pro rata basis from the Fund(s) and/or the Guaranteed
Term(s) Groups of the AG Account in which the Current
Value is invested. Within a Guaranteed Term Group,
the amount to be surrendered 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 surrendered amount shall be reduced
by a Surrender Fee, if applicable.
3.16 Surrender Fee: The Surrender Fee only applies to the Net Purchase
Payment portion surrendered and varies according to
the elapsed time since deposit (see Contract
Schedule I).
No Surrender Fee is deducted from any portion of the
Current Value which is paid:
(a) To a Beneficiary due to the Certificate Holder's
death before Annuity payments start;
(b) As a premium for an Annuity option 2, 3 or 4
under this Contract (see 4.09);
(c) As a distribution under the ECO or SWO provision
(see 3.11);
(d) At least 12 months after the date of the first
Purchase Payment to the Account, in an amount
equal to or less than 10% of the Current Value.
This applies to the first surrender request,
partial or full, in a calendar year. The Current
Value is calculated as of the date the surrender
request is received in good order at Aetna's Home
Office. This waiver is not available to the
Certificate Holder while SWO is in effect;
30
<PAGE>
3.16 Surrender Fee (e) For a full surrender of the Account where the
(Cont'd): Current Value of the Account is $2,500 or less
and no surrenders have been taken from the
Account within the prior 12 months;
(f) By Aetna under 3.19; or
(g) If the Certificate Holder 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 calendar year has elapsed since
the date the certificate was issued; and
(2) the surrender is requested within 3 years of
admission to a licensed nursing care
facility.
This waiver does not apply if the Certificate
Holder was in a nursing care facility at the time
the certificate was issued.
3.17 Payment of Under certain emergency conditions, Aetna may defer
Surrender Value: payment:
(a) For a period of up to 6 months (unless not
allowed by state law); or
(b) As provided by federal law.
3.18 Reinstatement: All or a portion of the proceeds of a full surrender
of an Account may be reinvested within 30 days after
the surrender. Any Maintenance Fee and Surrender Fee
charged at the time of surrender on the amount being
reinvested will be included in the reinstatement. Any
Market Value Adjustment(s) deducted from surrenders
will not be included in the reinstatement.
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3.18 Reinstatement Amounts will be reinstated among the AG Account and
(Cont'd): the Funds in the Separate Account in the same
proportion as they were at the time of surrender. Any
amounts reinstated to the AG Account will be credited
to the available Guaranteed Terms of the current
Deposit Period in the same proportion as they were at
the time of surrender. In the event that a Guaranteed
Term of the same duration is unavailable, amounts
will be reinvested in 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. The number of Fund(s)
record units reinstated will be based on the record
unit value(s) next computed after receipt at Aetna's
Home Office of the reinstatement request and the
amount to be reinstated. Any Maintenance Fee which
falls due after the surrender and before the
reinstatement will be deducted from the amount
reinstated.
Any Account(s) surrendered because the Current Value
was less than $2,500 immediately following any
partial surrender may not be reinstated (see 3.19).
Reinstatement of an Account is permitted only once.
3.19 Payment of Upon 90 days' written notice to the Certificate
Adjusted Current Holder, Aetna will terminate any Account if the
Value: Current Value becomes less than $2,500 immediately
following any partial surrender. Aetna does not
intend to exercise this right in cases where an
Account Current Value is reduced to $2,500 or less
solely due to investment performance. A Surrender Fee
will not be deducted from the Adjusted Current Value.
This terminated Adjusted Current Value of an Account
may not be reinstated.
IV. ANNUITY PROVISIONS
- --------------------------------------------------------------------------------
4.01 Choices to be Made: The Certificate Holder may tell Aetna to apply any
portion of the Adjusted Current Value (minus any
premium tax) for an Annuity under option 2, 3, or 4
(see 4.09). The first Annuity payment may not be
earlier than one calendar year after the Purchase
Payment nor later than the later of:
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4.01 Choices to (a) The first day of the month following the
be Made (Cont'd): Annuitant's 85th birthday; or
(b) The tenth anniversary of the last Purchase
Payment. In lieu of the election of an Annuity,
the Certificate Holder may tell Aetna to make a
lump sum payment.
When an Annuity 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 using the General Account;
(b) A Variable Annuity using any of the Fund(s)
available under this Contract for Annuity
purposes; or
(c) A combination of (a) and (b).
If a Fixed Annuity is chosen, the Annuity purchase
rate for the option chosen reflects the Minimum
Guaranteed Interest Rate (see Contract Schedule II),
but may reflect higher interest rates. If a Variable
Annuity is chosen, the initial Annuity payment for
the option chosen reflects the assumed annual return
rate elected. (see Contract Schedule II).
4.02 Annuity Payments In no event may any payments under an Annuity option
to Certificate extend beyond:
Holder:
(a) The life of the Certificate Holder;
(b) The lives of the Certificate Holder and
Beneficiary;
(c) Any certain period greater than the Certificate
Holder's life expectancy according to regulations
under Code Section 401(a)(9), determined as of
the date payments are to begin; or
(d) A period greater than the joint and last survivor
life expectancies of the Certificate Holder and
the Certificate Holder's Beneficiary according to
regulations under Code Section 401(a)(9),
determined as of the date payments are to begin.
4.03 Annuity Payments In no event may payments to the Beneficiary under an
to Beneficiary: Annuity option extend beyond:
(a) The life of the Beneficiary; or
(b) Any certain period greater than the Beneficiary's
life expectancy as determined by regulations
under Code Section 401(a)(9).
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4.04 Terms of Annuity (a) When payments start, the age of the Annuitant
Options: plus the number of years for which payments are
guaranteed must not exceed 95.
(b) An Annuity 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 annual minimum Annuity
payment amount based upon increases reflected in
the Consumer Price Index-Urban, (CPI-U) since
July 1, 1993.
(c) If a Fixed Annuity under option 2, 3 or 4 is
chosen and a larger payment would result from
applying the Surrender Value to a current Aetna
single premium immediate Annuity, Aetna will make
the larger payment.
(d) For purposes of calculating the guaranteed first
payment of a Variable Annuity or the payments for
a Fixed Annuity, the Annuitant's and second
Annuitant's adjusted age will be used. The
Annuitant's and second Annuitant's adjusted age
is his or her age as of the birthday closest to
the Annuity commencement date reduced by one year
for Annuity commencement dates occurring during
the period of time from July 1, 1993 through
December 31, 1999. The Annuitant's and second
Annuitant's age will be reduced by two years for
Annuity commencement dates occurring during the
period of time from January 1, 2000 through
December 31, 2009. The Annuitant's and second
Annuitant's age will be reduced by one additional
year for Annuity commencement dates occurring in
each succeeding decade.
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4.04 Terms of The Annuity rates for options 3 and 4 are based on
Annuity Options mortality from 1983 Table a.
(Cont'd):
(e) Assumed Annual Net Return Rate is the interest
rate used to determine the amount of the first
Annuity payment under a Variable Annuity as shown
on Contract Schedule II. 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 Annuity return factor under Variable
Annuity Assumed Annual Net Return Rate on
Contract Schedule II).
(f) Once elected, Annuity payments cannot be commuted
to a lump sum except for Variable Annuity
payments under option 2 (see 4.09). The life
expectancy of the Certificate Holder or
Certificate Holder and second Annuitant shall be
irrevocable upon the election of an Annuity
option.
4.05 Death of (a) When the Annuitant dies under option 2 or 3, or
Annuitant/Beneficiary: both the Annuitant and the second Annuitant die
under option 4(d), the present value of any
remaining guaranteed payments will be paid in one
sum to the Beneficiary, or upon election by the
Beneficiary, any remaining payments will continue
to the Beneficiary. If option 4 has been elected
and the Annuitant dies, the remaining payments
will continue to the second Annuitant as
successor payee.
(b) If there is no Beneficiary under options 2, 3 or
4, the present value of any remaining payments
will be paid in one sum to the Certificate
Holder's estate.
(c) If the Beneficiary designated under option 1
dies, the amount held plus accrued interest will
be paid in one sum to a successor Beneficiary, if
any, named by the designated Beneficiary. If
there is no successor Beneficiary, the lump sum
will be paid to the designated Beneficiary's
estate.
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4.05 Death of (d) If the Beneficiary dies while receiving Annuity
Annuitant/Beneficiary payments, the present value of any remaining
(Cont'd): guaranteed payments will be paid in one sum to
the successor Beneficiary, or upon election by
the successor Beneficiary, may remaining payments
will continue to the successor Beneficiary. If no
successor Beneficiary has been designated, the
present value of any remaining guaranteed
payments will be paid in one sum to the
Beneficiary's estate.
(e) The present value will be determined as of the
Valuation Period in which proof of death
acceptable to Aetna and a request for payment is
received at Aetna's Home Office. The interest
rate used to determine the first payment will be
used to calculate the present value.
4.06 Fund(s) Annuity The number of each Fund's Annuity Units is based on
Units -- Separate the amount of the first Variable Annuity payment
Account: which is equal to:
(a) The portion of the Current Value applied to pay a
Variable Annuity (minus any premium tax); divided
by
(b) 1,000; multiplied by
(c) The payment rate for the option chosen.
Such amount, or portion, of the variable payment will
be divided by the appropriate Fund Annuity unit value
(see 4.07) on the tenth Valuation Period before the
due date of the first payment to determine the number
of each Fund Annuity units. The number of each Fund
Annuity units remains fixed. Each future payment is
equal to the sum of the products of each Fund Annuity
unit value multiplied by the appropriate number of
units. The Fund Annuity unit value on the tenth
Valuation Period prior to the due date of the payment
is used.
4.07 Fund(s) Annuity For any Valuation Period, a Fund Annuity unit value
Unit Value -- is equal to:
Separate Account:
(a) The value for the previous Period; multiplied by
(b) The Annuity net return factor(s) (see 4.08 below)
for the Period: multiplied by
(c) A factor to reflect the assumed annual net return
rate (see Contract Schedule II).
36
<PAGE>
The dollar value of a Fund(s) Annuity unit values and
Annuity payments may go up or down due to investment
gain or loss.
4.08 Annuity Net The Annuity not return factor(s) are used to compute
Return Factor(s) -- all Separate Account Annuity Payments for any Fund.
Separate Account:
The Annuity net return factor(s) for each Fund is
equal to 1.0000000 plus the net return rate.
The net return rate is equal to:
(a) The value of the shares of the Fund held by the
Separate Account at the end of a Valuation
Period; minus
(b) The value of the shares of the Fund held by the
Separate Account at the start of the Valuation
Period; plus or minus
(c) Taxes (or reserves for taxes) on the Separate
Account (if any); divided by
(d) The total value of the Fund(s) Record Units and
Fund(s) Annuity Units of the Separate Account at
the start of the Valuation Period; minus
(e) A daily charge for Annuity mortality and expense
risks, which may include profit, and a daily
administrative charge (at the annual rate as
shown on Contract Schedule II).
A net return rate may be more or less than 0%.
The value of a share of the Fund is equal to the net
assets of the Fund divided by the number of shares
outstanding.
Payments shall not be changed due to changes in the
mortality or expense results or administrative
charges.
37
<PAGE>
4.09 Annuity Options: Option 1 -- Payment of Interest on Sum Left with
Aetna -- This option may be used only by the
Beneficiary when the Certificate Holder dies before
Aetna has started paying an Annuity. A portion or all
of the sum paid upon death may be held under this
option add will be held in the General Account of
Aetna at interest (see 4.01). The Beneficiary may
later tell Aetna to:
(a) Pay a portion or all of the sum held by Aetna; or
(b) Apply a portion or all of the sum held by Aetna
to any Annuity option below.
4.09 Annuity If a nonspouse Beneficiary elects that some or all of
Options (Cont'd): the Account is to be held under this option, the
Beneficiary must tell Aetna to pay the full sum held
under this option by December 31st of the year
containing the fifth anniversary of the Certificate
Holder's date of death.
Option 2 -- Payments for a Stated Period of Time --
An Annuity will be paid for the number of years
chosen. The number of years must be at least 5 and
not more than 30.
If payments for this option are made under a Variable
Annuity, the present value of any remaining payments
may be withdrawn at any time. If a withdrawal is
requested within 3 years after the start of payments,
it will be treated as a surrender and any applicable
Surrender Fee will be applied (see 3.16).
Option 3 -- Life Income -- An Annuity will be paid
for the life of the Annuitant. If also chosen, Aetna
will guarantee payments for 60, 120, 180, or 240
months.
Option 4 -- Life Income Based upon the Lives of Two
Annuitants -- An Annuity will be paid during the
lives of the Annuitant and a second Annuitant.
Payments will continue until both Annuitants have
died. When this option is chosen, a choice must be
made of:
(a) 100% of the payment to continue after the first
death;
(b) 66-2/3% of the payment to continue after the
first death;
(c) 50% of the payment to continue after the first
death;
(d) Payments for a minimum of 120 months with 100% of
the payment to continue after the first death; or
38
<PAGE>
(e) 100% of the payment to continue at the death of
the second Annuitant and 50% of the payment to
continue at the death of the Annuitant.
Other Options -- Aetna may make other options
available as allowed by the laws of the state in
which this Contract and the Certificate is delivered.
39
<PAGE>
OPTION 2
Payments for a Stated Period of Time
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
- ----------------------------------------------------------------------
Guaranteed Monthly Quarterly Semi-Annual Annual
Years Rate Payment Payment Payment Payment
- ----------------------------------------------------------------------
3 3.00% $28.99 $86.76 $172.88 $343.23
4 3.00% 22.06 66.02 131.56 261.19
5 3.00% 17.91 53.59 106.78 211.99
6 3.00% 15.14 45.30 90.27 179.22
7 3.00% 13.16 39.39 78.49 155.83
8 3.00% 11.68 34.96 69.66 138.31
9 3.00% 10.53 31.52 62.81 124.69
10 3.00% 9.61 28.77 57.33 113.82
11 3.00% 8.86 26.52 52.85 104.93
12 3.00% 8.24 24.65 49.13 97.54
13 3.00% 7.71 23.08 45.98 91.29
14 3.00% 7.26 21.73 43.29 85.95
15 3.00% 6.87 20.56 40.96 81.33
16 3.00% 6.53 19.54 38.93 77.29
17 3.00% 6.23 18.64 37.14 73.74
18 3.00% 5.96 17.84 35.56 70.59
19 3.00% 5.73 17.13 34.14 67.78
20 3.00% 5.51 16.50 32.87 65.26
21 3.00% 5.32 15.92 31.72 62.98
22 3.00% 5.15 15.40 30.68 60.92
23 3.00% 4.99 14.92 29.74 59.04
24 3.00% 4.84 14.49 28.88 57.33
25 3.00% 4.71 14.09 28.08 55.76
26 3.00% 4.59 13.73 27.36 54.31
27 3.00% 4.47 13.39 26.68 52.97
28 3.00% 4.37 13.08 26.06 51.74
29 3.00% 4.27 12.79 25.49 50.60
30 3.00% 4.18 12.52 24.95 49.53
- ----------------------------------------------------------------------
40
<PAGE>
OPTION 3
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge For Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
Payments Guaranteed for a Stated Period of Months
- -----------------------------------------------------------------
Adjusted
Age of Annuitant None 60 120 180 240
- -----------------------------------------------------------------
50 $ 4.05 $ 4.05 $ 4.03 $ 3.99 $ 3.93
51 4.12 4.11 4.09 4.05 3.99
52 4.19 4.19 4.16 4.11 4.04
53 4.27 4.26 4.23 4.18 4.10
54 4.35 4.34 4.31 4.25 4.16
55 4.44 4.42 4.39 4.32 4.22
56 4.53 4.51 4.47 4.40 4.29
57 4.62 4.61 4.56 4.48 4.35
58 4.72 4.71 4.65 4.56 4.42
59 4.83 4.81 4.75 4.64 4.49
60 4.95 4.93 4.86 4.73 4.55
61 5.07 5.05 4.97 4.83 4.62
62 5.20 5.17 5.08 4.92 4.69
63 5.34 5.31 5.20 5.02 4.76
64 5.49 5.45 5.33 5.12 4.83
65 5.65 5.61 5.47 5.22 4.89
66 5.82 5.77 5.61 5.33 4.96
67 6.01 5.94 5.75 5.44 5.02
68 6.20 6.13 5.91 5.54 5.08
69 6.41 6.33 6.07 5.65 5.14
70 6.64 6.54 6.23 5.76 5.19
71 6.88 6.76 6.41 5.86 5.24
72 7.14 7.00 6.59 5.97 5.28
73 7.43 7.26 6.77 6.06 5.32
74 7.73 7.53 6.96 6.16 5.35
41
<PAGE>
75 8.06 7.82 7.14 6.25 5.38
- -----------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
42
<PAGE>
OPTION 4
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
- --------------------------------------------------------------------------------
Adjusted Ages
- --------------------
Second
Annuitant Annuitant Option 4a Option 4b Option 4c Option 4d Option 4e
- --------------------------------------------------------------------------------
55 50 $ 3.69 $ 4.05 $ 4.27 $ 3.69 $ 4.03
55 55 3.88 4.25 4.47 3.87 4.14
55 60 3.99 4.44 4.71 3.98 4.42
60 55 3.99 4.44 4.71 3.98 4.42
60 60 4.24 4.71 4.99 4.23 4.57
60 65 4.38 4.97 5.32 4.38 4.93
65 60 4.38 4.97 5.32 4.38 4.93
65 65 4.72 5.33 5.70 4.71 5.14
65 70 4.93 5.68 6.15 4.91 5.66
70 65 4.93 5.68 6.15 4.91 5.66
70 70 5.40 6.21 6.70 5.36 5.96
70 75 5.69 6.68 7.32 5.62 6.67
75 70 5.69 6.68 7.32 5.62 6.67
75 75 6.37 7.45 8.15 6.23 7.12
75 80 6.78 8.11 8.99 6.54 8.13
- --------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
43
<PAGE>
OPTION 2
Payments for a Stated Period of Time
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
- --------------------------------------------------------------------------
Guaranteed Monthly Quarterly Semi-Annual Annual
Years Rate Payment Payment Payment Payment
- --------------------------------------------------------------------------
3 3.50% $ 29.19 $ 87.33 $ 173.91 $ 344.86
4 3.50% 22.27 66.61 132.65 263.04
5 3.50% 18.12 54.19 107.92 213.99
6 3.50% 15.35 45.92 91.44 181.32
7 3.50% 13.38 40.01 79.69 158.01
8 3.50% 11.90 35.59 70.88 140.56
9 3.50% 10.75 32.16 64.05 127.00
10 3.50% 9.83 29.42 58.59 116.18
11 3.50% 9.09 27.18 54.13 107.34
12 3.50% 8.46 25.32 50.42 99.98
13 3.50% 7.94 23.75 47.29 93.78
14 3.50% 7.49 22.40 44.62 88.47
15 3.50% 7.10 21.24 42.31 83.89
16 3.50% 6.76 20.23 40.29 79.89
17 3.50% 6.47 19.34 38.51 76.37
18 3.50% 6.20 18.55 36.94 73.25
19 3.50% 5.97 17.85 35.54 70.47
20 3.50% 5.75 17.22 34.28 67.98
21 3.50% 5.56 16.65 33.15 65.74
22 3.50% 5.39 16.13 32.13 63.70
23 3.50% 5.24 15.66 31.19 61.85
24 3.50% 5.09 15.24 30.34 60.17
25 3.50% 4.96 14.85 29.56 58.62
26 3.50% 4.84 14.49 28.85 57.20
27 3.50% 4.73 14.15 28.19 55.90
28 3.50% 4.63 13.85 27.58 54.69
29 3.50% 4.53 13.57 27.02 53.57
30 3.50% 4.45 13.30 26.49 52.53
- --------------------------------------------------------------------------
44
<PAGE>
OPTION 2
Payments for a Stated Period of Time
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
- --------------------------------------------------------------------------
Guaranteed Monthly Quarterly Semi-Annual Annual
Years Rate Payment Payment Payment Payment
- --------------------------------------------------------------------------
3 5.00% $ 29.80 $ 89.04 $ 176.99 $ 349.72
4 5.00% 22.89 68.38 135.93 268.58
5 5.00% 18.74 56.00 111.33 219.98
6 5.00% 15.99 47.77 94.96 187.64
7 5.00% 14.02 41.90 83.30 164.59
8 5.00% 12.56 37.52 74.58 147.35
9 5.00% 11.42 34.11 67.81 133.99
10 5.00% 10.51 31.40 62.42 123.34
11 5.00% 9.77 29.19 58.03 114.66
12 5.00% 9.16 27.36 54.38 107.45
13 5.00% 8.64 25.81 51.31 101.39
14 5.00% 8.20 24.50 48.69 96.21
15 5.00% 7.82 23.36 46.44 91.75
16 5.00% 7.49 22.37 44.47 87.88
17 5.00% 7.20 21.51 42.75 84.48
18 5.00% 6.94 20.74 41.23 81.47
19 5.00% 6.71 20.06 39.88 78.80
20 5.00% 6.51 19.46 38.68 76.42
21 5.00% 6.33 18.91 37.59 74.28
22 5.00% 6.17 18.42 36.62 72.35
23 5.00% 6.02 17.98 35.73 70.61
24 5.00% 5.88 17.57 34.93 69.02
25 5.00% 5.76 17.20 34.20 67.57
26 5.00% 5.65 16.87 33.53 66.25
27 5.00% 5.54 16.56 32.92 65.04
28 5.00% 5.45 16.28 32.35 63.93
29 5.00% 5.36 16.01 31.83 62.90
30 5.00% 5.28 15.77 31.35 61.95
- --------------------------------------------------------------------------
45
<PAGE>
OPTION 3
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
Payments Guaranteed for a Stated Period of Months
- -----------------------------------------------------------------------
Adjusted
Age of Annuitant None 60 120 180 240
- -----------------------------------------------------------------------
50 $ 4.34 $ 4.34 $ 4.31 $ 4.27 $ 4.22
51 4.41 4.40 4.38 4.33 4.27
52 4.48 4.47 4.45 4.40 4.32
53 4.56 4.55 4.52 4.46 4.38
54 4.64 4.63 4.59 4.53 4.44
55 4.72 4.71 4.67 4.60 4.50
56 4.81 4.80 4.75 4.67 4.56
57 4.91 4.89 4.84 4.75 4.62
58 5.01 4.99 4.93 4.83 4.69
59 5.12 5.10 5.03 4.92 4.75
60 5.23 5.21 5.13 5.00 4.82
61 5.36 5.33 5.24 5.09 4.88
62 5.49 5.45 5.35 5.19 4.95
63 5.63 5.59 5.47 5.28 5.02
64 5.78 5.73 5.60 5.38 5.08
65 5.94 5.89 5.73 5.48 5.15
66 6.11 6.05 5.87 5.58 5.21
67 6.29 6.22 6.02 5.69 5.27
68 6.49 6.41 6.17 5.79 5.33
69 6.70 6.60 6.33 5.90 5.38
70 6.92 6.81 6.49 6.00 5.43
71 7.17 7.04 6.66 6.10 5.48
72 7.43 7.27 6.84 6.20 5.52
73 7.71 7.53 7.02 6.30 5.55
74 8.02 7.80 7.20 6.39 5.59
46
<PAGE>
75 8.35 8.08 7.38 6.48 5.62
- -----------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
47
<PAGE>
OPTION 3
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
Payments Guaranteed for a Stated Period of Months
- -----------------------------------------------------------------------
Adjusted
Age of Annuitant None 60 120 180 240
- -----------------------------------------------------------------------
50 $ 5.26 $ 5.25 $ 5.22 $ 5.17 $ 5.11
51 5.33 5.32 5.28 5.23 5.15
52 5.40 5.38 5.34 5.29 5.20
53 5.47 5.45 5.41 5.35 5.26
54 5.54 5.53 5.48 5.41 5.31
55 5.63 5.61 5.56 5.47 5.36
56 5.71 5.69 5.63 5.54 5.42
57 5.80 5.78 5.72 5.61 5.47
58 5.90 5.88 5.81 5.69 5.53
59 6.01 5.98 5.90 5.77 5.59
60 6.12 6.09 6.00 5.85 5.65
61 6.24 6.21 6.10 6.93 5.71
62 6.37 6.33 6.21 6.02 5.77
63 6.51 6.46 6.33 6.11 5.83
64 6.66 6.60 6.45 6.20 5.89
65 6.82 6.75 6.57 6.30 5.95
66 6.99 6.91 6.71 6.39 6.01
67 7.17 7.08 6.85 6.49 6.06
68 7.36 7.27 6.99 6.59 6.12
69 7.57 7.46 7.15 6.69 6.17
70 7.80 7.67 7.30 6.78 6.21
71 8.05 7.89 7.47 6.88 6.25
72 8.31 8.13 7.64 6.97 6.29
73 8.59 8.38 7.81 7.06 6.33
74 8.90 8.64 7.99 7.15 6.36
48
<PAGE>
75 9.23 8.93 8.16 7.23 6.38
- -----------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
49
<PAGE>
OPTION 4
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
- ----------------------------------------------------------------------------
Adjusted Ages
- --------------------
Second
Annuitant Annuitant Option 4a Option 4b Option 4c Option 4d Option 4e
- ----------------------------------------------------------------------------
55 50 $ 3.97 $ 4.35 $ 4.56 $ 3.97 $ 4.31
55 55 4.16 4.54 4.76 4.15 4.42
55 60 4.27 4.73 5.00 4.26 4.48
60 55 4.27 4.73 5.00 4.26 4.70
60 60 4.51 4.99 5.27 4.50 4.84
60 65 4.66 5.25 5.61 4.65 4.93
65 60 4.66 5.25 5.61 4.65 5.22
65 65 4.99 5.61 5.99 4.98 5.42
65 70 5.19 5.97 6.44 5.17 5.54
70 65 5.19 5.97 6.44 5.17 5.93
70 70 5.67 6.49 6.99 5.62 6.23
70 75 5.95 6.96 7.61 5.87 6.40
75 70 5.95 6.96 7.61 5.87 6.95
75 75 6.64 7.73 8.43 6.48 7.40
75 80 7.04 8.39 9.29 6.79 7.64
- --------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
50
<PAGE>
OPTION 4
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
- --------------------------------------------------------------------------------
Adjusted Ages
- -------------------
Second
Annuitant Annuitant Option 4a Option 4b Option 4c Option 4d Option 4e
- --------------------------------------------------------------------------------
55 50 $ 4.88 $ 5.26 $ 5.48 $ 4.88 $ 5.23
55 55 5.04 5.44 5.66 5.04 5.32
55 60 5.15 5.63 5.91 5.14 5.38
60 55 5.15 5.63 5.91 5.14 5.59
60 60 5.37 5.87 6.16 5.37 5.72
60 65 5.52 6.14 6.51 5.51 5.80
65 60 5.52 6.14 6.51 5.51 6.10
65 65 5.83 6.49 6.87 5.82 6.29
65 70 6.04 6.84 7.34 6.00 6.41
70 65 6.04 6.84 7.34 6.00 6.81
70 70 6.49 7.35 7.87 6.44 7.08
70 75 6.77 7.84 8.51 6.68 7.25
75 70 6.77 7.84 8.51 6.68 7.81
75 75 7.45 8.60 9.33 7.27 8.25
75 80 7.86 9.28 10.20 7.57 8.49
- --------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
51
<PAGE>
- --------------------------------------------------------------------------------
Aetna Life Insurance and Annuity Company
Home Office: 151 Farmington Ave.
Hartford, Connecticut 06156
(800) 525-4225
Group Variable, Fixed, or Combination Annuity Contract
Nonparticipating
- --------------------------------------------------------------------------------
ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT, WHEN BASED ON
INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT
GUARANTEED AS TO FIXED DOLLAR AMOUNT. THIS CONTRACT CONTAINS A MARKET VALUE
ADJUSTMENT FORMULA. APPLICATION OF A MARKET VALUE ADJUSTMENT MAY RESULT IN
EITHER AN INCREASE OR DECREASE IN THE CURRENT VALUE. THE MARKET VALUE
ADJUSTMENT FORMULA DOES NOT APPLY TO A GUARANTEED TERM AT THE TIME OF ITS
MATURITY.
52
---------------------------------------------------
Aetna Life Insurance and Annuity Company
Home Office: 151 Farmington Avenue
Hartford, Connecticut 06156
(800) 531-4547
Aetna Life Insurance and Annuity Company, herein
called Aetna, agrees to pay the benefits stated in
this Contract.
Specifications
- --------------------------------------------------------------------------------
Plan
- --------------------------------------------------------------------------------
Type of Plan
- --------------------------------------------------------------------------------
Contract Holder
- --------------------------------------------------------------------------------
Annuitant
- --------------------------------------------------------------------------------
Contract No.
- --------------------------------------------------------------------------------
Effective Date
- --------------------------------------------------------------------------------
This Contract is Delivered in and is Subject to
the Laws of that Jurisdiction
THE VARIABLE FEATURES OF THE CONTRACT ARE DESCRIBED IN PARTS III AND IV.
Right to Cancel
- --------------------------------------------------------------------------------
The Contract Holder may cancel this Contract within 10 days of receiving it by
returning this Contract along with a written notice to Aetna at the above
address or to the agent from whom it was purchased. Within 7 days after it
receives the notice of cancellation and this Contract at its Home Office, Aetna
will return the entire consideration paid plus any increase or minus any
decrease in the current value of any funds allocated to the Separate Account.
This page, the following pages, and the application make up the entire Contract.
Signed at the Home Office on the Effective Date.
/s/ Dan Kearney /s/ Susan E. Schechter
President Secretary
Individual Variable, Fixed, or Combination Annuity Contract
Nonparticipating
ALL PAYMENTS AND VALUES PROVIDED BY THE CONTRACT, WHEN BASED ON INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT. THIS CONTRACT CONTAINS A MARKET VALUE ADJUSTMENT FORMULA.
APPLICATION OF A MARKET VALUE ADJUSTMENT MAY RESULT IN EITHER AN INCREASE OR
DECREASE IN THE CURRENT VALUE. THE MARKET VALUE ADJUSTMENT FORMULA DOES NOT
APPLY TO A GUARANTEED TERM AT THE TIME OF ITS MATURITY.
I-CDA-IC (NQ/MP)
<PAGE>
Specifications
- --------------------------------------------------------------------------------
Guaranteed Interest Rate There is a guaranteed interest rate for Purchase
Payment(s) held in the AG Account. (See Contract
Schedule I).
- --------------------------------------------------------------------------------
Deductions from the There will be deductions for mortality and expense
Separate Account risks and administrative fees. (See Contract
Schedules I and II).
- --------------------------------------------------------------------------------
Deduction from Purchase Payment(s) are subject to a deduction for
Purchase premium taxes, if any. (See 3.01.)
Payment(s)
- --------------------------------------------------------------------------------
Surrender Fee A charge is deducted upon surrender.
(See Contract Schedule I).
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. IT IS THEREFORE IMPORTANT THAT YOU
READ THIS CONTRACT CAREFULLY.
2
<PAGE>
Contract Schedule I
Accumulation Period
Separate Account
- --------------------------------------------------------------------------------
Separate Account: Variable Annuity Account B
Charges to A daily charge is deducted from any portion of the
Separate Account: Current 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 Risk Charge 0.35%
Expense Risk Charge 0.90%
----
Total Separate Account
Charges 1.40%
ALIAC Guaranteed Account (AG Account)
- --------------------------------------------------------------------------------
Minimum Guaranteed Interest Rate (effective annual
rate of return): 3.0%.
Separate Account and AG Account
- --------------------------------------------------------------------------------
Transfers: An unlimited number of Transfers may be made during
the Accumulation Period. Aetna allows 12 free
Transfers in any calendar year. Thereafter, Aetna
reserves the right to charge $10 for each subsequent
Transfer.
Maintenance Fee: The annual Maintenance Fee is $30. If the Current
Value is $50,000 or more on the date the Maintenance
Fee is to be deducted, the Maintenance Fee is $0.
3
<PAGE>
Contract Schedule I (Continued)
Accumulation Period
Separate Account and AG Account
- --------------------------------------------------------------------------------
Surrender Fee: For each surrender, the Surrender Fee for each Net
Purchase Payment will be determined as follows:
Surrender Fee
Length of Time from Deposit of (as percentage of
Net Purchase Payment (Years) Net Purchase Payment)
Less than 2 years 7%
2 or more but less than 4 years 6%
4 or more but less than 5 years 5%
5 or more but less than 6 years 4%
6 or more but less than 7 years 3%
7 years or more 0%
Systematic Withdrawal The specified payment or specified percentage may not
Option (SWO): be greater than 10% of the Current Value at time of
election.
See 1. GENERAL DEFINITIONS for explanations.
4
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Contract Schedule II
Annuity Period
Separate Account
- --------------------------------------------------------------------------------
Charges to Separate A daily charge at an annual effective rate of 1.25%
Account: for Annuity mortality and expense risks. The
administrative charge is established upon election of
an Annuity option. This charge will not exceed 0.25%.
Variable Annuity Assumed If a Variable Annuity is chosen, an assumed annual
Annual Net Return Rate: net return rate of 5.0% may be elected. If 5.0% is
not elected, Aetna will use an assumed annual net
return rate of 3.5%.
The assumed annual net return rate factor for 3.5%
per year is 0.9999058.
The assumed annual net return rate factor for 5.0%
per year is 0.9998663.
If the portion of a Variable Annuity payment for any
Fund is not to decrease, the Annuity return factor
under the Separate Account for that Fund 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
assumed annual net return rate 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
assumed annual net return rate of 5% is chosen.
Fixed Annuity
- --------------------------------------------------------------------------------
Minimum Guaranteed Interest Rate (effective annual
rate of return): 3.0%
See 1. GENERAL DEFINITIONS for explanations.
5
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TABLE OF CONTENTS
I-CDA-IC(NQ/MP)
I. GENERAL DEFINITIONS
- -----------------------------------------------------------------------------
Page
1.01 Accumulation Period..............................................8
1.02 Adjusted Current Value...........................................8
1.03 Annuitant........................................................8
1.04 Annuity..........................................................8
1.05 Beneficiary......................................................8
1.06 Code.............................................................8
1.07 Contract.........................................................8
1.08 Contract Holder..................................................8
1.09 Current Value....................................................8
1.10 Deposit Period...................................................8
1.11 Fixed Annuity....................................................8
1.12 Fund(s)..........................................................9
1.13 General Account..................................................9
1.14 Guaranteed Rate -- AG Account....................................9
1.15 Guaranteed Term..................................................9
1.16 Guaranteed Term(s) Groups........................................9
1.17 Maintenance Fee..................................................9
1.18 ALIAC Guaranteed Account (AG Account)...........................10
1.19 Market Value Adjustment (MVA)...................................10
1.20 Matured Term Value..............................................10
1.21 Matured Term Value Transfer.....................................10
1.22 Maturity Date...................................................10
1.23 Net Purchase Payment(s).........................................10
1.24 Nonunitized Separate Account....................................10
1.25 Purchase Payment(s).............................................10
1.26 Reinvestment....................................................11
1.27 Separate Account................................................11
1.28 Surrender Value.................................................11
1.29 Transfers.......................................................11
1.30 Valuation Period (Period).......................................11
1.31 Variable Annuity................................................11
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
6
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Page
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
III. PURCHASE PAYMENT, CURRENT VALUE, AND SURRENDER PROVISIONS
- -----------------------------------------------------------------------------
3.01 Net Purchase Payment............................................14
3.02 Fund(s) Record Units - Separate Account.........................15
3.03 Net Return Factor(s) - Separate Account.........................15
3.04 Fund Record Unit Value - Separate Account......................16
3.05 Market Value Adjustment........................................16
3.06 Transfer of Current Value from the Funds or AG Account..........17
3.07 Notice to the Contract Holder...................................18
3.08 Loans...........................................................18
3.09 Systematic Withdrawal Option (SWO)..............................18
3.10 Death Benefit Amount............................................20
3.11 Death Benefit Options...........................................21
3.12 Liquidation of Surrender Value..................................22
3.13 Surrender Fee...................................................23
3.14 Payment of Surrender Value......................................24
3.15 Reinstatement...................................................24
3.16 Payment of Adjusted Current Value...............................24
IV. ANNUITY PROVISIONS
- -----------------------------------------------------------------------------
4.01 Choices to be Made..............................................25
4.02 Terms of Annuity Options........................................25
4.03 Death of Annuitant/Beneficiary..................................26
4.04 Fund(s) Annuity Units -- Separate Account.......................28
4.05 Fund Annuity Unit Value -- Separate Account.....................28
4.06 Annuity Net Return Factor(s) -- Separate Account................28
4.07 Annuity Options.................................................29
7
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I. GENERAL DEFINITIONS
- --------------------------------------------------------------------------------
1.01 Accumulation The period during which the Net Purchase Payment(s)
Period: are applied to a Contract to provide future Annuity
payment(s).
1.02 Adjusted The Current Value of a Contract plus or minus any
Current Value aggregate AG Account MVA, if applicable. (See 1.19)
1.03 Annuitant: The person whose life is measured for purposes of the
Guaranteed Death Benefit and the duration of Annuity
payments under this Contract.
1.04 Annuity: Payment of an income:
(a) For the life of one or two persons;
(b) For a stated period; or
(c) For some combination of (a) and (b).
1.05 Beneficiary: The individual or estate entitled to receive any
payment from the Contract upon the death of the
Annuitant.
1.06 Code: The Internal Revenue Code of 1986, as it may be
amended from time to time.
1.07 Contract: This agreement between Aetna and the Contract Holder.
1.08 Contract Holder: A person who purchases this
Contract. A Contract Holder cannot be a nonnatural
person (i.e. a trustee for a trust, an executor or
administrator for an estate, or an incorporated or
unincorporated business). The Contract Holder has all
right, title and interest under the Contract.
1.09 Current Value: As of the most recent Valuation Period, the Net
Purchase Payment and any additional amount deposited
pursuant to 3.10 plus any interest added to the
portion allocated to the AG Account; and plus or
minus the investment experience of the portion
allocated to the Funds since deposit; less all
Maintenance Fees deducted, any amounts surrendered
and any amounts applied to an Annuity.
1.10 Deposit Period: A calendar week, a calendar month, a
calendar quarter, or any other period of time
specified by Aetna during which Net Purchase
Payment(s), Transfers and Reinvestments are accepted
into the AG Account for one or more Guaranteed Terms.
Aetna reserves the right to extend the Deposit
Period.
1.11 Fixed Annuity: An Annuity with payments that do not vary in amount.
8
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1.12 Fund(s): The open-end management investment companies
(mutual funds) in which the Separate Account invests.
1.13 General Account: The Account holding the assets of Aetna, other than
those assets held in Aetna's separate accounts.
1.14 Guaranteed Rate -- Aetna will declare the interest rate(s) applicable to
AG Account: a specific Guaranteed Term at the start of the
Deposit Period for that Guaranteed Term. The rate(s)
are guaranteed by Aetna for that Deposit Period and
the ensuing Guaranteed Term. 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 Contract Schedule I.
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.
1.15 Guaranteed Term: The period of time for which AG Account Guaranteed
Rates are guaranteed on Net Purchase Payments,
Transfers and Reinvestments made into a current
Deposit Period for the AG Account. Such period begins
on the day following the close of the Deposit Period
and ends on the designated Maturity Date. Guaranteed
Terms are offered at Aetna's discretion for various
lengths of time ranging up to and including ten
years.
During a Deposit Period, Aetna may make available any
number of Guaranteed Terms. The Contract Holder may
allocate Net Purchase Payments and Transfers into any
or all of the available Guaranteed Terms.
1.16 Guaranteed Term(s) All AG Account Guaranteed Term(s) with the same
Groups: length of time from the close of the Deposit Period
until the designated Maturity Date.
1.17 Maintenance Fee: The Maintenance Fee (see Contract Schedule I) will be
deducted during the Accumulation Period from the
Current Value on each anniversary of the date the
Contract is established and upon surrender of the
entire Contract.
9
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1.18 ALIAC Guaranteed An accumulation option where Aetna guarantees
Account (AG Account): stipulated rate(s) of interest for specified periods
of time. All assets of Aetna, including amounts in
the Nonunitized Separate Account, are available to
meet the guarantees under the AG Account.
1.19 Market Value An adjustment to the amount withdrawn or transferred
Adjustment from an AG Account Guaranteed Term prior to the end
(MVA): 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 in 3.05. The
adjustment is expressed as a percentage of each
dollar being withdrawn.
1.20 Matured Term Value: The amount due on an AG Account Guaranteed Term's
Maturity Date.
1.21 Matured Term During the calendar month following an AG Account
Value Transfer: Maturity Date, the Contract Holder may notify Aetna's
Home Office in writing to Transfer or surrender all
or part of the Matured Term Value, plus interest at
the new Guaranteed Rate accrued thereon, from the AG
Account without an MVA. This provision only applies
to the first such written request received from the
Contract Holder during this period for any Matured
Term Value.
1.22 Maturity Date: The last day of an AG Account Guaranteed Term.
1.23 Net Purchase The Purchase Payment less premium taxes, if
Payment(s): applicable.
1.24 Nonunitized A separate account set up by Aetna under Title 38,
Separate Section 38a-433, of the Connecticut General Statutes,
Account: that holds assets for AG Account Terms. There are no
discrete units for this Account. The Contract Holder
does not participate in the investment gain or loss
from the assets held in the Nonunitized Separate
Account. Such gain or loss is borne entirely by
Aetna. These assets may be chargeable with
liabilities arising out of any other business of
Aetna.
1.25 Purchase Payment(s): Payment(s) 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.
10
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1.26 Reinvestment: Aetna will mail a notice to the Contract 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 Contract
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
Contract 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.
1.27 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. This 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 Account, shall not
be charged with other Aetna liabilities.
1.28 Surrender Value: The amount payable by Aetna upon the surrender of any
portion of the Contract.
1.29 Transfers: The movement of invested amounts among the available
Fund(s) and the AG Account under this Contract during
the Accumulation Period.
1.30 Valuation Period The period of time for which a Fund determines its
(Period): net asset value, usually from 4:15 p.m. Eastern time
each day the New York Stock Exchange is open until
4:15 p.m. the next such day, or such other day that
one or more of the Funds determines its net asset
value.
1.31 Variable Annuity: An Annuity with payments that vary with the net
investment results of one or more Funds held under
the Separate Account.
11
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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 which
begins before the change.
Aetna reserves the right to refuse to accept any
Purchase Payment at any time for any reason. This
applies to subsequent Purchase Payments under the
Contract. No advance notice will be given to the
Contract Holder.
Aetna may make any change that affects the AG Account
Market Value Adjustment (3.05) with at least 30 days'
advance written notice to the Contract Holder. Any
such change shall become effective for any new Term.
Aetna reserves the right to change the terms of the
Systematic Withdrawal Option (3.09) for future
elections and discontinue the availability of this
option after proper notification.
The following will not be changed:
(a) Net Purchase Payment (1.23)
(b) AG Account Guaranteed Rate (1.14)
(c) Net Return Factor(s) -- Separate Account (3.03)
(d) Current Value (1.09)
(e) Surrender Value (1.28)
(f) Fund(s) Annuity Unit Value -- Separate Account
(4.05)
(g) Annuity options (4.07)
(h) Fixed Annuity Interest Rates (4.01)
(i) Transfers (1.29).
Any change that affects the Annuity Options and the
tables for the Options may be made:
(a) No earlier than 12 months after the effective
date of this Contract; and
(b) No earlier than 12 months after the effective
date of any prior change.
This Contract may be changed as deemed necessary by
Aetna to comply with federal or state law.
12
<PAGE>
2.02 Change of Fund(s): Aetna, or the Separate Account, may:
(a) Change the Fund(s) which may be invested in by
the Separate Account; and
(b) Replace the shares of any Fund(s) held in the
Separate Account with shares of any other
Fund(s).
Changes must be:
(a) Approved by a majority vote in the Separate
Account with respect to the Fund(s) whose shares
are to be replaced; or
(b) Deemed necessary by Aetna under the Investment
Company Act of 1940; or
(c) Deemed necessary by Aetna to accomplish the
purpose of the Separate Account.
Aetna will notify the Contract Holder of any change.
2.03 Nonparticipating The Contract Holder or Beneficiaries will not have a
Contract: right to share in the earnings of Aetna.
2.04 Payments and While the Contract Holder is living, Aetna will pay
Elections: the Contract Holder any Annuity payments as and when
due. After the Contract Holder's death, any Annuity
payments required to be made will be paid in
accordance with 4.03. Aetna will determine other
payments and/or elections as of the end of the
Valuation Period 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 3.14.
2.05 State Laws: The Contract complies with the laws of the state in
which it is delivered. Any surrender, death, 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 all rights, title and
interest for amounts held in the Contract. Choices
made under this Contract must be in writing. Until
receipt of such choices at Aetna's Home Office, Aetna
may rely on any previous choices made.
13
<PAGE>
2.06 Control of Contract The Contract is not subject to the claims of any
(Cont'd): creditors of the Contract Holder, except to the
extent permitted by law. The Contract Holder may
assign or transfer his or her rights under the
Contract to one or more natural persons. 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.
2.07 Designation of Each Contract Holder shall name his or her
Beneficiary: Beneficiary. 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.
2.08 Misstatements and If Aetna finds the age of any Annuitant to be
Adjustments: misstated, the correct facts will be used to adjust
payments.
2.09 Incontestability: Aetna cannot cancel this Contract because of any
error of fact on the application.
2.10 Grace Period: This Contract will remain in effect even if Purchase
Payments are not continued except as provided in the
Payment of Adjusted Current Value provision (see
3.16).
III. PURCHASE PAYMENT, CURRENT VALUE, AND SURRENDER PROVISIONS
- --------------------------------------------------------------------------------
3.01 Net Purchase This amount is the actual Purchase Payment less any
Payment: premium tax. Aetna will generally deduct the premium
tax when Annuity benefits are elected (see Part IV).
If Aetna determines that under applicable state law,
it must pay a premium tax when the Purchase Payment
is received or at any other time, it will deduct the
tax at that time.
The Net Purchase Payment will be credited among:
(a) The current Deposit Period(s) for Guaranteed
Terms under the AG Account; and
(b) The Fund(s) in which the Separate Account
invests.
14
<PAGE>
3.01 Net Purchase For each Net Purchase Payment, the Contract Holder
Payment (Cont'd): shall tell Aetna the allocation percentage to be
applied to the current Deposit Period for each of the
available Guaranteed Terms in the AG Account and/or
each Fund. If allocation instructions are not
received along with any subsequent Net Purchase
Payment, the allocation will be the same as that
indicated on the original application. If the same
Guaranteed Term is no longer available, the Net
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.
Aetna will declare from time to time the
acceptability and the minimum amount for additional
Purchase Payments.
3.02 Fund(s) Record The portion of the Net Purchase Payment(s) applied to
Units -- Separate each Fund under the Separate Account will determine
Account: the number of Fund record units for that Fund. This
number is equal to the portion of the Net Purchase
Payment(s) applied to each Fund divided by the Fund
record unit value (see 3.04) for the Valuation Period
in which the Purchase Payment is received in good
order at Aetna's Home Office.
3.03 Net Return The net return factor(s) are used to compute all
Factor(s) -- Separate Account record units for any Fund.
Separate Account:
The net return factor for each Fund is equal to
1.0000000 plus the net return rate.
The net return rate is equal to:
(a) The value of the shares of the Fund held by the
Separate Account at the end of the Valuation
Period; minus
(b) The value of the shares of the Fund held by the
Separate Account at the start of the Valuation
Period; plus or minus
(c) Taxes (or reserves for taxes) on the Separate
Account (if any); divided by
(d) The total value of the Fund record units and Fund
Annuity units of the Separate Account at the
start of the Valuation Period; minus
(e) A daily Separate Account charge at an annual rate
as shown on Contract Schedule I for mortality and
expense risks, which may include profit; and a
daily administrative charge.
A net return rate may be more or less than 0%. The
value of a share of the Fund is equal to the net
assets of the Fund divided by the number of shares
outstanding.
15
<PAGE>
3.04 Fund Record Unit A Fund record unit value is computed by multiplying
Value - Separate the net return factors for the current Valuation
Account: Period by the Fund record unit value for the previous
Period. The dollar value of Fund record units,
Separate Account assets, and Variable Annuity
payments may go up or down due to investment gain or
loss.
3.05 Market Value There will be an MVA for a withdrawal from the AG
Adjustment: Account before the end of a Guaranteed Term when the
withdrawal is due to:
(a) A Transfer; except as specified in AG Account
Matured Term Value Transfer;
(b) A full or partial surrender, including a 10% free
withdrawal under 3.13; or
(c) An election of Annuity option 2 (see 4.07).
Full and partial surrenders 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 calculated due to a
withdrawal of amounts. This total may be greater
or less than the Current Value of those amounts;
or
(b) The applicable portion of the Current Value in
the AG Account.
After the six-month period, the surrender or Transfer
will be the aggregate MVA amount, which may be
greater or less than the Current Value of those
amounts.
The greater of the aggregate MVA amount or the
applicable portion of the Current Value applies to
amounts withdrawn from the AG Account on account of
an election of Annuity options 3 or 4 (see 4.07).
Market value adjusted amounts will be equal to the
amount withdrawn multiplied by the following ratio:
x
---
365
(1 + i)
----------
x
---
365
(1 + j)
----------
16
<PAGE>
3.05 Market Value Where:
Adjustment
(Cont'd): i is the Deposit Period Yield
j is the Current Yield
x is the number of days remaining, (computed from
Wednesday of the week of withdrawal) in the
Guaranteed Term.
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.
3.06 Transfer of Before an Annuity option is elected, all or any
Current Value portion of the Adjusted Current Value may be
from the Funds transferred from any Fund or Guaranteed Term of the
or AG Account: AG Account:
(a) To any other Fund; or
(b) To any Guaranteed Term of the AG Account
available in the current Deposit Period.
Transfer requests can be submitted as a percentage or
as a dollar amount. Aetna may establish a minimum
transfer amount. Within a Guaranteed Term Group, the
amount to be surrendered 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.
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<PAGE>
3.06 Transfer of The Contract Holder may make an unlimited number of
Current Value Transfers during the Accumulation Period. The number
from the Funds of free Transfers allowed by Aetna is shown on
or AG Account Contract Schedule I. Additional Transfers may be
(Cont'd): subject to a Transfer fee as shown on Contract
Schedule I. Transfers from the AG Account of a
Matured Term Value on or within one calendar month
after a Term's Maturity Date do not count against the
annual Transfer limit.
Amounts applied to Guaranteed Terms of the AG Account
may not be transferred to the Funds or to another
Guaranteed Term during the Deposit Period or for 90
days after the close of the Deposit Period except for
Matured Term Value(s) during the calendar month
following the Term's Maturity Date.
Transfers from Guaranteed Terms of the AG Account are
subject to the MVA provisions in 3.05.
3.07 Notice to the The Contract Holder will receive quarterly statements
Contract Holder: from Aetna of:
(a) The value of any amounts held in:
(1) The AG Account; and
(2) The Fund(s) under the Separate Account.
(b) The number of any Fund(s) record units; and
(c) The Fund(s) record unit value.
Such number or values will be as of a specific date
no more than 60 days before the date of the notice.
3.08 Loans: Loans are not available under this Contract.
3.09 Systematic A distribution option under which a portion of the
Withdrawal Current Value will automatically be surrendered and
Option (SWO): distributed each year. SWO payments will be
calculated on the Contract's full Current Value. The
distributed amount is withdrawn pro rata from each
investment option used under the Contract. A
Surrender Fee will not be deducted from any portion
of the Adjusted Current Value which is paid as a
distribution under SWO. Contract Holders should
consult their tax advisers prior to requesting this
distribution option. Aetna will not be responsible
for any adverse tax consequences due to receiving SWO
payments.
(a) Amount of Distribution: The Contract Holder may
elect one of the three payment methods described
below.
18
<PAGE>
3.09 Systematic (1) Specified Payment: Payments of a designated
Withdrawal dollar amount. The annual amount may not be
Option (SWO) greater than the percentage of the Current
(Cont'd): Value on the date of the SWO election as
shown on Contract Schedule I. This annual
dollar amount will remain constant. At its
discretion, Aetna may require a minimum
payment amount. If SWO payments are made more
frequently than annually, the designated
annual amount is divided by the number of
payments due each year; or
(2) Specified Period: Payments made over a
designated period of time of at least 10
years. The annual amount is calculated by
dividing the Current Value as of December 31
of the year prior to the payment year by the
number of payment years remaining; or
(3) Specified Percentage: Payments of a
designated percentage which cannot be greater
than the percentage of the Current Value at
the time of election as shown on Contract
Schedule I. The percentage may be changed by
written request. Aetna reserves the right to
limit the number of times the percentage may
be changed. The annual amount is calculated
by multiplying the Current Value as of
December 31 of the year prior to the payment
year by the designated percentage.
Payments upon the Contract Holder's death will
continue to the Beneficiary in the manner described
in 3.11.
(b) Minimum Initial Current Value: At its discretion,
Aetna may require a minimum initial Current Value
for election of this option. If after election of
this option the Current Value is insufficient to
make a scheduled SWO payment, Aetna will
distribute the entire balance.
(c) Date of Distribution: The Contract Holder shall
specify the first payment date. The earliest
allowable first payment date is the date on which
the Contract Holder attains age 59-1/2. As
elected by the Contract Holder, SWO payments will
be made on a monthly, quarterly, semi-annual or
annual basis. If SWO payments are made more
frequently than annually, the designated annual
amount is divided by the number of payments due
each year. Subsequent payments will be made on
the 15th of the appropriate months or on such
other date Aetna may designate or allow.
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<PAGE>
3.09 Systematic (d) Election and Revocation: SWO may be elected by
Withdrawal submitting a completed and signed election form
Option (SWO) to Aetna's Home Office. Once elected, this option
(Cont'd): may be revoked by the Contract Holder or spousal
Beneficiary, if elected after the Contract
Holder's death, by submitting a written request
to Aetna at its Home Office. Any revocation will
apply only to amounts not yet paid. SWO may be
elected only once by the Contract Holder or by
the spouse Beneficiary.
3.10 Death Benefit If the Contract Holder or Annuitant dies before
Amount: Annuity payments start, the Beneficiary is entitled
to a death benefit under the Contract. The claim date
is the date when proof of death and the Beneficiary's
claim are received in good order at Aetna's Home
Office. The amount of the death benefit is determined
as follows:
(a) Death of Annuitant less than 75 years of age: The
guaranteed death benefit is the greatest of:
(1) The gross sum of all Purchase Payment(s) made
to the Contract (as of the date of death)
minus the sum of all amounts surrendered,
applied to an Annuity, or deducted from the
Contract;
(2) The step up value as of the date of death
plus all Net Purchase Payments made to the
Contract, minus the total of all partial
surrenders, amounts applied to an Annuity and
deductions made from the Contract since
determination of the step up value. The step
up value is the Current Value on the most
recent seventh year anniversary of the date
the first Net Purchase Payment is applied to
the Contract;
(3) The Contract's Current Value as of the date
of death.
The excess, if any, of the guaranteed death
benefit value over the Contract's Current
Value is determined as of the date of death.
Any excess amount will be deposited to the
Contract and allocated to Aetna Variable
Encore Fund as of the claim date. The Current
Value on the claim date plus any excess
amount deposited becomes the Contract's
Current Value.
(b) Death of Annuitant age 75 or greater: The death
benefit amount is the Current Value on the claim
date.
20
<PAGE>
3.10 Death Benefit (c) Death of the Contract Holder if the Contract
Amount (Cont'd): Holder is not the Annuitant: The death benefit
amount is the Adjusted Current Value on the Claim
Date. A Surrender Fee may apply to any full or
partial surrender (see 3.13 and Contract Schedule
I).
3.11 Death Benefit Prior to any election, or until amounts must be
Options available otherwise distributed under this section, the Current
to Beneficiary: Value will be retained in the Contract. The
Beneficiary has the right under the Contract to
allocate or reallocate any amount to any of the
available investment options (subject to an MVA, as
applicable). The following options are available to
the Beneficiary:
(a) When the Contract Holder is the Annuitant: If the
Contract Holder/Annuitant dies, and:
(1) If the Beneficiary is the Contract Holder's
surviving spouse, the Beneficiary will be the
successor Contract Holder on Aetna's records.
Such successor Contract Holder may exercise
all rights under the Contract and continue in
the Accumulation Period, or may elect (i),
(ii), or (iii) below. Under the Code,
distributions from the Contract are not
required until the successor Contract
Holder's death. The Beneficiary may elect to:
(i) Apply some or all of the Adjusted Current
Value to Annuity option 2, 3 or 4 (see
4.07);
(ii)Apply some or all of the Adjusted
Current Value to Annuity option 1 (see
4.07); or
(iii) Receive, at any time, a lump sum
payment equal to the Adjusted Current
Value.
(2) If the Beneficiary is other than the Contract
Holder's surviving spouse, then options (i),
(ii), or (iii) under (1) above apply. Any
portion of the Adjusted Current Value not
applied to Annuity option 2, 3 or 4 within
one year of the Contract 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 Adjusted Current Value will be
made to the Contract Holder's estate.
(b) When the Contract Holder is not the Annuitant and
the Contract Holder dies, and:
21
<PAGE>
3.11 Death Benefit (1) If the Beneficiary is the Contract Holder's
Options available surviving spouse, the Beneficiary will be the
to Beneficiary successor Contract Holder on Aetna's records.
(Cont'd): Such successor Contract Holder may exercise
all rights under the Contract and continue in
the Accumulation Period, or may elect (i),
(ii), or (iii) below. Under the Code,
distributions from the Contract are not
required until the successor Contract
Holder's death. The Beneficiary may elect to:
(i) Apply some or all of the Adjusted
Current Value to Annuity option 2, 3 or
4 (see 4.07);
(ii) Apply some or all of the Surrender
Value to Annuity option 1 (see 4.07);
or
(iii) Receive, at any time, a lump sum
payment equal to the Surrender Value.
(2) If the Beneficiary is other than the Contract
Holder's surviving spouse, then options (i),
(ii), or (iii) under (1) above apply. Any
portion of the Adjusted Current Value not
applied to Annuity option 2, 3 or 4 within
one year of the Contract 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 Surrender Value will be made to
the Contract Holder's estate.
(c) When the Contract Holder is not the Annuitant and
the Annuitant dies: The Beneficiary must elect
Annuity option 2, 3 or 4 within 60 days of the
date of death or the gain, if any, will be
includible in the Beneficiary's income in the tax
year in which the Annuitant dies.
3.12 Liquidation of All or any portion of the Adjusted Current Value may
Surrender Value: be surrendered at any time. Surrender requests can be
submitted as a percentage of the Adjusted Current
Value or as a specific dollar amount. Net Purchase
Payment amounts are withdrawn first, and then the
excess value, if any. For any partial surrender,
amounts are withdrawn on a pro rata basis from the
Fund(s) and/or the Guaranteed Term(s) Groups of the
AG Account in which the Current Value is invested.
Within a Guaranteed Term Group, the amount to be
surrendered 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.
22
<PAGE>
3.12 Liquidation of After deduction of the Maintenance Fee, if
Surrender Value applicable, the surrendered amount shall be reduced
(Cont'd): by a Surrender Fee, if applicable.
3.13 Surrender Fee: The Surrender Fee only applies to the Net Purchase
Payment(s) portion surrendered and varies according
to the elapsed time since deposit (see Contract
Schedule I). Net Purchase Payment amounts are
withdrawn in the same order they were applied.
No Surrender Fee is deducted from any portion of the
Net 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 Net Purchase Payment(s) minus the
total of all partial surrenders, amounts applied
to an Annuity and deductions made prior to the
Annuitant's date of death;
(b) As a premium for an Annuity option 2, 3 or 4
under this Contract (see 4.07);
(c) As a distribution under the SWO provision (see
3.09);
(d) At least 12 months after the date of the first
Purchase Payment to the Contract, in an amount
equal to or less than 10% of the Current Value.
This applies to the first surrender request,
partial or full, in a calendar year. The Current
Value is calculated as of the date the surrender
request is received in good order at Aetna's Home
Office. This waiver is not available to the
Contract Holder while SWO is in effect;
(e) For a full surrender where the Contract's Current
Value is $2,500 or less and no surrenders have
been taken from the Contract within the prior 12
months;
(f) By Aetna under 3.16; or
(g) 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 calendar year has elapsed since
the date the Contract was issued; and
(2) the surrender is requested within 3 years of
admission to a licensed nursing care
facility.
This waiver does not apply if the Annuitant was in a
nursing care facility at the time the Contract was
issued.
23
<PAGE>
3.14 Payment of Under certain emergency conditions, Aetna may defer
Surrender Value: payment:
(a) For a period of up to 6 months (unless not
allowed by state law); or
(b) As provided by federal law.
3.15 Reinstatement: All or a portion of the proceeds of a full surrender
may be reinvested within 30 days after the surrender.
Any Maintenance Fee and Surrender Fee charged at the
time of surrender on the amount being reinvested will
be included in the reinstatement. Any Market Value
Adjustment(s) deducted from surrenders will not be
included in the reinstatement.
Amounts will be reinstated among the AG Account and
the Fund(s) in the Separate Account in the same
proportion as they were at the time of surrender. Any
amounts reinstated to the AG Account will be credited
to the Guaranteed Terms available during the current
Deposit Period in the same proportion as they were at
the time of surrender. In the event that a Guaranteed
Term of the same duration is unavailable, amounts
will be reinvested in 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. The number of Fund(s)
Record Units reinstated will be based on the Record
Unit Value(s) next computed after receipt at Aetna's
Home Office of the reinstatement request and the
amount to be reinstated.
Any Maintenance Fee which falls due after the
surrender and before the reinstatement will be
deducted from the amount reinstated.
Any Contract surrendered because the Current Value
was less than $2,500 immediately following any
partial surrender may not be reinstated (see 3.16).
Reinstatement is permitted only once.
3.16 Payment of Upon 90 days' written notice to the Contract Holder,
Adjusted Aetna will terminate any Contract if the Current
Current Value: Value becomes less than $2,500 immediately following
any partial surrender. Aetna does not intend to
exercise this right in cases where the Current Value
is reduced to $2,500 or less solely due to investment
performance. A surrender fee will not be deducted
from the Adjusted Current Value. The terminated
Adjusted Current Value may not be reinstated.
24
<PAGE>
IV. ANNUITY PROVISIONS
- --------------------------------------------------------------------------------
4.01 Choices to The Contract Holder may tell Aetna to apply any
be Made: portion of the Adjusted Current Value (minus any
premium tax) for an Annuity under option 2, 3, or 4
(see 4.07). 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,
the Contract Holder may tell Aetna to make a lump
sum payment.
When an Annuity 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 using the General Account;
(b) A Variable Annuity using any of the Fund(s)
available under this Contract for Annuity
purposes; or
(c) A combination of (a) and (b).
If a Fixed Annuity is chosen, the Annuity purchase
rate for the option chosen reflects at least the
Minimum Guaranteed Interest Rate (see Contract
Schedule II), but may reflect a higher interest rate.
If a Variable Annuity is chosen, the initial Annuity
payment for the option chosen reflects the assumed
annual return rate elected. (see Contract Schedule
II).
4.02 Terms of (a) When payments start, the age of the Annuitant
Annuity Options: plus the number of years for which payments are
guaranteed must not exceed 95.
(b) An Annuity 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 under option 2, 3, or 4 is
chosen and a larger payment would result from
applying the Surrender Value to a current Aetna
single premium immediate Annuity, Aetna will make
the larger payment.
25
<PAGE>
4.02 Terms of (d) For purposes of calculating the guaranteed first
Annuity Options payment of a Variable Annuity or the payments for
(Cont'd): a Fixed Annuity, the Annuitant's and second
Annuitant's adjusted age will be used. The
Annuitant's and second Annuitant's adjusted age
is his or her age as of the birthday closest to
the Annuity commencement date reduced by one year
for Annuity commencement dates occurring during
the period of time from July 1, 1993 through
December 31, 1999. The Annuitant's and second
Annuitant's age will be reduced by two years for
Annuity commencement dates occurring during the
period of time from January 1, 2000 through
December 31, 2009. The Annuitant's and second
Annuitant's age will be reduced by one additional
year for Annuity commencement dates occurring in
each succeeding decade.
The Annuity purchase rates for options 3 and 4
are based on mortality from 1983 Table a.
(e) Assumed Annual Net Return Rate is the interest
rate used to determine the amount of the first
Annuity payment under a Variable Annuity as shown
on Contract Schedule II. 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 Annuity return factor under Variable
Annuity Assumed Annual Net Return Rate on
Contract Schedule II).
(f) Once elected, Annuity payments cannot be commuted
to a lump sum except for Variable Annuity
payments under option 2 (see 4.07). The life
expectancy of the Annuitant and second Annuitant
shall be irrevocable upon the election of an
Annuity option.
4.03 Death of (a) Contract Holder is Annuitant: When the Contract
Annuitant/ Holder is the Annuitant and the Annuitant dies
Beneficiary: under option 2 or 3, or both the Annuitant and
the second Annuitant die under option 4(d), the
present value of any remaining guaranteed
payments will be paid in one sum to the
Beneficiary, or upon election by the Beneficiary,
any remaining payments will continue to the
Beneficiary. If option 4 has been elected and the
Contract 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.
26
<PAGE>
4.03 Death of (b) Contract Holder is Not Annuitant: When the
Annuitant/ Contract Holder is not the Annuitant and the
Beneficiary Contract Holder dies, the remaining payments
(Cont'd): under options 2, 3, or 4 will continue to the
successor payee. If no successor payee has been
designated, the Beneficiary will be treated as
the successor payee.
If the Annuitant dies under option 2 or 3, or if
both the Annuitant and the second Annuitant die
under option 4(d), the present value of any
remaining guaranteed payments will be paid in one
sum to the Beneficiary, or upon the election by
the Beneficiary, any remaining payments will
continue to the Beneficiary. If option 4 has been
elected, and the Annuitant dies, the remaining
payments will continue to the Contract Holder.
(c) No Beneficiary Named/Surviving: If there is no
Beneficiary under option 2, 3, or 4, the present
value of any remaining payments will be paid in
one sum to the Contract Holder, or if the
Contract Holder is not living, then to the
Contract Holder's estate.
(d) If the Beneficiary designated under option 1
dies, the amount held plus accrued interest will
be paid in one sum to a successor Beneficiary, if
any, named by the designated Beneficiary. If
there is no successor Beneficiary, the lump sum
will be paid to the designated Beneficiary's
estate.
(e) If the Beneficiary or the successor payee dies
while receiving Annuity payments, the present
value of any remaining guaranteed payments will
be paid in one sum to the successor
Beneficiary/payee, or upon election by the
successor Beneficiary/payee, any remaining
payments will continue to the successor
Beneficiary/payee. If no successor
Beneficiary/payee has been designated, the
present value of any remaining guaranteed
payments will be paid in one sum to the
Beneficiary's/payee's estate.
(f) The present value will be determined as of the
Valuation Period in which proof of death
acceptable to Aetna and a request for payment is
received at Aetna's Home Office. The interest
rate used to determine the first payment will be
used to calculate the present value.
27
<PAGE>
4.04 Fund(s) Annuity The number of each Fund's Annuity units is based on
Units -- Separate the amount of the first Variable Annuity payment
Account: which is equal to: (a) The portion of the Current
Value applied to pay a Variable Annuity (minus any
premium tax); divided by
(b) 1,000; multiplied by
(c) The payment rate for the option chosen.
Such amount, or portion, of the variable payment will
be divided by the appropriate Fund Annuity unit value
(see 4.05) on the tenth Valuation Period before the
due date of the first payment to determine the number
of each Fund Annuity units. The number of each Fund
Annuity units remains fixed. Each future payment is
equal to the sum of the products of each Fund Annuity
unit value multiplied by the appropriate number of
Units. The Fund Annuity unit value on the tenth
Valuation Period prior to the due date of the payment
is used.
4.05 Fund Annuity For any Valuation Period, a Fund Annuity unit value
Unit Value-- is equal to:
Separate Account:
(a) The value for the previous Period; multiplied by
(b) The Annuity net return factor(s) (see 4.06 below)
for the Period; multiplied by
(c) A factor to reflect the assumed annual net return
rate (see Contract Schedule II).
The dollar value of a Fund Annuity unit values and
Annuity payments may go up or down due to investment
gain or loss.
4.06 Annuity Net The Annuity net return factor(s) are used to compute
Return Factor(s) -- Annuity payments for any Fund.
Separate Account:
The Annuity net return factor for each Fund is equal
to 1.0000000 plus the net return rate.
The net return rate is equal to:
(a) The value of the shares of the Fund held by the
Separate Account at the end of a Valuation
Period; minus
(b) The value of the shares of the Fund held by the
Separate Account at the start of the Valuation
Period; plus or minus
(c) Taxes (or reserves for taxes) on the Separate
Account (if any); divided by
28
<PAGE>
4.06 Annuity Net Return (d) The total value of the Fund record units and Fund
Factor(s) -- Separate Annuity units of the Separate Account at the
Account (Cont'd): start of the Valuation Period; minus
(e) A daily charge for Annuity mortality and expense
risks, which may include profit, and a daily
administrative charge (at the annual rate as
shown on Contract Schedule II).
A net return rate may be more or less than 0%.
The value of a share of the Fund is equal to the net
assets of the Fund divided by the number of shares
outstanding.
Payments shall not be changed due to changes in the
mortality or expense results or administrative
charges.
4.07 Annuity Options: Option 1 -- Payment of Interest on Sum Left with
Aetna -- This option may be used only by the
Beneficiary when the Contract Holder dies before
Aetna has started paying an Annuity. A portion or all
of the sum paid upon death may be held under this
option and will be held in the General Account of
Aetna at interest (see 4.01). The Beneficiary may
later tell Aetna to:
(a) Pay a portion or all of the sum held by Aetna; or
(b) Apply a portion or all of the sum held by Aetna
to any Annuity Option below.
If a nonspouse Beneficiary elects that some or all of
the Current Value is to be held under this option,
the Beneficiary must tell Aetna to pay the full sum
held under this option within 5 years of the date of
death.
Option 2 -- Payments for a Stated Period of Time --
An Annuity will be paid for the number of years
chosen. The number of years must be at least 5 and
not more than 30.
If payments for this option are made under a Variable
Annuity, the present value of any remaining payments
may be withdrawn at any time. If a withdrawal is
requested within 3 years after the start of payments,
it will be treated as a surrender and any applicable
Surrender Fee will be applied (see 3.13).
If a nonspouse Beneficiary elects this option at the
death of the Contract Holder, the period selected may
not extend beyond the Beneficiary's life expectancy.
29
<PAGE>
4.07 Annuity Options Option 3 -- Life Income -- An Annuity will be paid
(Cont'd): for the life of the Annuitant. If also chosen, Aetna
will guarantee payments for 60, 120, 180, or 240
months.
Option 4 -- Life Income Based upon the Lives of Two
Annuitants -- An Annuity will be paid during the
lives of the Annuitant and a second Annuitant.
Payments will continue until both Annuitants have
died. When this option is chosen, a choice must be
made of:
(a) 100% of the payment to continue after the first
death;
(b) 66-2/3% of the payment to continue after the
first death;
(c) 50% of the payment to continue after the first
death;
(d) Payments for a minimum of 120 months with 100% of
the payment to continue after the first death; or
(e) 100% of the payment to continue at the death of
the second Annuitant and 50% of the payment to
continue at the death of the Annuitant.
Other Options -- Aetna may make other options
available as allowed by the laws of the state in
which this Contract is delivered.
30
<PAGE>
OPTION 2
Payments for a Stated Period of Time
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
- ----------------------------------------------------------------------
Guaranteed Monthly Quarterly Semi-Annual Annual
Years Rate Payment Payment Payment Payment
- ----------------------------------------------------------------------
3 3.00% $ 28.99 $ 86.76 $ 172.88 $ 343.23
4 3.00% 22.06 66.02 131.56 261.19
5 3.00% 17.91 53.59 106.78 211.99
6 3.00% 15.14 45.30 90.27 179.22
7 3.00% 13.16 39.39 78.49 155.83
8 3.00% 11.68 34.96 69.66 138.31
9 3.00% 10.53 31.52 62.81 124.69
10 3.00% 9.61 28.77 57.33 113.82
11 3.00% 8.86 26.52 52.85 104.93
12 3.00% 8.24 24.65 49.13 97.54
13 3.00% 7.71 23.08 45.98 91.29
14 3.00% 7.26 21.73 43.29 85.95
15 3.00% 6.87 20.56 40.96 81.33
16 3.00% 6.53 19.54 38.93 77.29
17 3.00% 6.23 18.64 37.14 73.74
18 3.00% 5.96 17.84 35.56 70.59
19 3.00% 5.73 17.13 34.14 67.78
20 3.00% 5.51 16.50 32.87 65.26
21 3.00% 5.32 15.92 31.72 62.98
22 3.00% 5.15 15.40 30.68 60.92
23 3.00% 4.99 14.92 29.74 59.04
24 3.00% 4.84 14.49 28.88 57.33
25 3.00% 4.71 14.09 28.08 55.76
26 3.00% 4.59 13.73 27.36 54.31
27 3.00% 4.47 13.39 26.68 52.97
28 3.00% 4.37 13.08 26.06 51.74
29 3.00% 4.27 12.79 25.49 50.60
30 3.00% 4.18 12.52 24.95 49.53
- ----------------------------------------------------------------------
31
<PAGE>
OPTION 3
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
Payments Guaranteed for a Stated Period of Months
- ----------------------------------------------------------------------
Adjusted Age of
Annuitant None 60 120 180 240
- ----------------------------------------------------------------------
50 $ 4.05 $ 4.50 $ 4.03 $ 3.99 $ 3.93
51 4.12 4.11 4.09 4.05 3.99
52 4.19 4.19 4.16 4.11 4.04
53 4.27 4.26 4.23 4.18 4.10
54 4.35 4.34 4.31 4.25 4.16
55 4.44 4.42 4.39 4.32 4.22
56 4.53 4.51 4.47 4.40 4.29
57 4.62 4.61 4.56 4.48 4.35
58 4.72 4.71 4.65 4.56 4.42
59 4.83 4.81 4.75 4.64 4.49
60 4.95 4.93 4.86 4.73 4.55
61 5.07 5.05 4.97 4.83 4.62
62 5.20 5.17 5.08 4.92 4.69
63 5.34 5.31 5.20 5.02 4.76
64 5.49 5.45 5.33 5.12 4.83
65 5.65 5.61 5.47 5.22 4.89
66 5.82 5.77 5.61 5.33 4.96
67 6.01 5.94 5.75 5.44 5.02
68 6.20 6.13 5.91 5.54 5.08
69 6.41 6.33 6.07 5.65 5.14
70 6.64 6.54 6.23 5.76 5.19
71 6.88 6.76 6.41 5.86 5.24
72 7.14 7.00 6.59 5.97 5.28
73 7.43 7.26 6.77 6.06 5.32
74 7.73 7.53 6.96 6.16 5.35
75 8.06 7.82 7.14 6.25 5.38
- ----------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
32
<PAGE>
OPTION 4
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
- --------------------------------------------------------------------------------
Adjusted Ages
- -------------------
Second
Annuitant Annuitant Option 4a Option 4b Option 4c Option 4d Option 4e
- --------------------------------------------------------------------------------
55 50 $ 3.69 $ 4.05 $ 4.27 $ 3.69 $ 4.03
55 55 3.88 4.25 4.47 3.87 4.14
55 60 3.99 4.44 4.71 3.98 4.42
60 55 3.99 4.44 4.71 3.98 4.42
60 60 4.24 4.71 4.99 4.23 4.57
60 65 4.38 4.97 5.32 4.38 4.93
65 60 4.38 4.97 5.32 4.38 4.93
65 65 4.72 5.33 5.70 4.71 5.14
65 70 4.93 5.68 6.15 4.91 5.66
70 65 4.93 5.68 6.15 4.91 5.66
70 70 5.40 6.21 6.70 5.36 5.96
70 75 5.69 6.68 7.32 5.62 6.67
75 70 5.69 6.68 7.32 5.62 6.67
75 75 6.37 7.45 8.15 6.23 7.12
75 80 6.78 8.11 8.99 6.54 8.13
- --------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
33
<PAGE>
OPTION 2
Payments for a Stated Period of Time
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
- --------------------------------------------------------------------
Guaranteed Monthly Quarterly Semi-Annual Annual
Years Rate Payment Payment Payment Payment
- --------------------------------------------------------------------
3 3.50% $ 29.19 $ 87.33 $ 173.91 $ 344.86
4 3.50% 22.27 66.61 132.65 263.04
5 3.50% 18.12 54.19 107.92 213.99
6 3.50% 15.35 45.92 91.44 181.32
7 3.50% 13.38 40.01 79.69 158.01
8 3.50% 11.90 35.59 70.88 140.56
9 3.50% 10.75 32.16 64.05 127.00
10 3.50% 9.83 29.42 58.59 116.18
11 3.50% 9.09 27.18 54.13 107.34
12 3.50% 8.46 25.32 50.42 99.98
13 3.50% 7.94 23.75 47.29 93.78
14 3.50% 7.49 22.40 44.62 88.47
15 3.50% 7.10 21.24 42.31 83.89
16 3.50% 6.76 20.23 40.29 79.89
17 3.50% 6.47 19.34 38.51 76.37
18 3.50% 6.20 18.55 36.94 73.25
19 3.50% 5.97 17.85 35.54 70.47
20 3.50% 5.75 17.22 34.28 67.98
21 3.50% 5.56 16.65 33.15 65.74
22 3.50% 5.39 16.13 32.13 63.70
23 3.50% 5.24 15.66 31.19 61.85
24 3.50% 5.09 15.24 30.34 60.17
25 3.50% 4.96 14.85 29.56 58.62
26 3.50% 4.84 14.49 28.85 57.20
27 3.50% 4.73 14.15 28.19 55.90
28 3.50% 4.63 13.85 27.58 54.69
29 3.50% 4.53 13.57 27.02 53.57
30 3.50% 4.45 13.30 26.49 52.53
- --------------------------------------------------------------------
34
<PAGE>
OPTION 2
Payments for a Stated Period of Time
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
- --------------------------------------------------------------------
Guaranteed Monthly Quarterly Semi-Annual Annual
Years Rate Payment Payment Payment Payment
- --------------------------------------------------------------------
3 5.00% $ 29.80 $ 89.04 $ 176.99 $ 349.72
4 5.00% 22.89 68.38 135.93 268.58
5 5.00% 18.74 56.00 111.33 219.98
6 5.00% 15.99 47.77 94.96 187.64
7 5.00% 14.02 41.90 83.30 164.59
8 5.00% 12.56 37.52 74.58 147.35
9 5.00% 11.42 34.11 67.81 133.99
10 5.00% 10.51 31.40 62.42 123.34
11 5.00% 9.77 29.19 58.03 114.66
12 5.00% 9.16 27.36 54.38 107.45
13 5.00% 8.64 25.81 51.31 101.39
14 5.00% 8.20 24.50 48.69 96.21
15 5.00% 7.82 23.36 46.44 91.75
16 5.00% 7.49 22.37 44.47 87.88
17 5.00% 7.20 21.51 42.75 84.48
18 5.00% 6.94 20.74 41.23 81.47
19 5.00% 6.71 20.06 39.88 78.80
20 5.00% 6.51 19.46 38.68 76.42
21 5.00% 6.33 18.91 37.59 74.28
22 5.00% 6.17 18.42 36.62 72.35
23 5.00% 6.02 17.98 35.73 70.61
24 5.00% 5.88 17.57 34.93 69.02
25 5.00% 5.76 17.20 34.20 67.57
26 5.00% 5.65 16.87 33.53 66.25
27 5.00% 5.54 16.56 32.92 65.04
28 5.00% 5.45 16.28 32.35 63.93
29 5.00% 5.36 16.01 31.83 62.90
30 5.00% 5.28 15.77 31.35 61.95
- --------------------------------------------------------------------
35
<PAGE>
OPTION 3
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
Payments Guaranteed for a Stated Period of Months
- ----------------------------------------------------------------
Age of
Annuitant None 60 120 180 240
- ----------------------------------------------------------------
50 $ 4.34 $ 4.34 $ 4.31 $ 4.27 $ 4.22
51 4.41 4.40 4.38 4.33 4.27
52 4.48 4.47 4.45 4.40 4.32
53 4.56 4.55 4.52 4.46 4.38
54 4.64 4.63 4.59 4.53 4.44
55 4.72 4.71 4.67 4.60 4.50
56 4.81 4.80 4.75 4.67 4.56
57 4.91 4.89 4.84 4.75 4.62
58 5.01 4.99 4.93 4.83 4.69
59 5.12 5.10 5.03 4.92 4.75
60 5.23 5.21 5.13 5.00 4.82
61 5.36 5.33 5.24 5.09 4.88
62 5.49 5.45 5.35 5.19 4.95
63 5.63 5.59 5.47 5.28 5.02
64 5.78 5.73 5.60 5.38 5.08
65 5.94 5.89 5.73 5.48 5.15
66 6.11 6.05 5.87 5.58 5.21
67 6.29 6.22 6.02 5.69 5.27
68 6.49 6.41 6.17 5.79 5.33
69 6.70 6.60 6.33 5.90 5.38
70 6.92 6.81 6.49 6.00 5.43
71 7.17 7.04 6.66 6.10 5.48
72 7.43 7.27 6.84 6.20 5.52
73 7.71 7.53 7.02 6.30 5.55
74 8.02 7.80 7.20 6.39 5.59
75 8.35 8.08 7.38 6.48 5.62
- ----------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
36
<PAGE>
OPTION 3
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
Payments Guaranteed for a Stated Period of Months
- ----------------------------------------------------------------
Age of
Annuitant None 60 120 180 240
- ----------------------------------------------------------------
50 $ 5.26 $ 5.25 $ 5.22 $ 5.17 $ 5.11
51 5.33 5.32 5.28 5.23 5.15
52 5.40 5.38 5.34 5.29 5.20
53 5.47 5.45 5.41 5.35 5.26
54 5.54 5.53 5.48 5.41 5.31
55 5.63 5.61 5.56 5.47 5.36
56 5.71 5.69 5.63 5.54 5.42
57 5.80 5.78 5.72 5.61 5.47
58 5.90 5.88 5.81 5.69 5.53
59 6.01 5.98 5.90 5.77 5.59
60 6.12 6.09 6.00 5.85 5.65
61 6.24 6.21 6.10 6.93 5.71
62 6.37 6.33 6.21 6.02 5.77
63 6.51 6.46 6.33 6.11 5.83
64 6.66 6.60 6.45 6.20 5.89
65 6.82 6.75 6.57 6.30 5.95
66 6.99 6.91 6.71 6.39 6.01
67 7.17 7.08 6.85 6.49 6.06
68 7.36 7.27 6.99 6.59 6.12
69 7.57 7.46 7.15 6.69 6.17
70 7.80 7.67 7.30 6.78 6.21
71 8.05 7.89 7.47 6.88 6.25
72 8.31 8.13 7.64 6.97 6.29
73 8.59 8.38 7.81 7.06 6.33
74 8.90 8.64 7.99 7.15 6.36
75 9.23 8.93 8.16 7.23 6.38
- ----------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
37
<PAGE>
OPTION 4
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
- ----------------------------------------------------------------------------
Adjusted Ages
- --------------------
Second
Annuitant Annuitant Option 4a Option 4b Option 4c Option 4d Option 4e
- ----------------------------------------------------------------------------
55 50 $ 3.97 $ 4.35 $ 4.56 $ 3.97 $ 4.31
55 55 4.16 4.54 4.76 4.15 4.42
55 60 4.27 4.73 5.00 4.26 4.48
60 55 4.27 4.73 5.00 4.26 4.70
60 60 4.51 4.99 5.27 4.50 4.84
60 65 4.66 5.25 5.61 4.65 4.93
65 60 4.66 5.25 5.61 4.65 5.22
65 65 4.99 5.61 5.99 4.98 5.42
65 70 5.19 5.97 6.44 5.17 5.54
70 65 5.19 5.97 6.44 5.17 5.93
70 70 5.67 6.49 6.99 5.62 6.23
70 75 5.95 6.96 7.61 5.87 6.40
75 70 5.95 6.96 7.61 5.87 6.95
75 75 6.64 7.73 8.43 6.48 7.40
75 80 7.04 8.39 9.29 6.79 7.64
- ----------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
38
<PAGE>
OPTION 4
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
- --------------------------------------------------------------------------------
Adjusted Ages
- ----------------------------------
Second
Annuitant Annuitant Option 4a Option 4b Option 4c Option 4d Option 4e
- --------------------------------------------------------------------------------
55 50 $ 4.88 $ 5.26 $ 5.48 $ 4.88 $ 5.23
55 55 5.04 5.44 5.66 5.04 5.32
55 60 5.15 5.63 5.91 5.14 5.38
60 55 5.15 5.63 5.91 5.14 5.59
60 60 5.37 5.87 6.16 5.37 5.72
60 65 5.52 6.14 6.51 5.51 5.80
65 60 5.52 6.14 6.51 5.51 6.10
65 65 5.83 6.49 6.87 5.82 6.29
65 70 6.04 6.84 7.34 6.00 6.41
70 65 6.04 6.84 7.34 6.00 6.81
70 70 6.49 7.35 7.87 6.44 7.08
70 75 6.77 7.84 8.51 6.68 7.25
75 70 6.77 7.84 8.51 6.68 7.81
75 75 7.45 8.60 9.33 7.27 8.25
75 80 7.86 9.28 10.20 7.57 8.49
- --------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
39
<PAGE>
- --------------------------------------------------------------------------------
Aetna Life Insurance and Annuity Company
Home Office: 151 Farmington Avenue
Hartford, Connecticut 06156
(800) 531-4547
Individual Variable, Fixed, or Combination Annuity Contract
Nonparticipating
- --------------------------------------------------------------------------------
ALL PAYMENTS AND VALUES PROVIDED BY THE CONTRACT, WHEN BASED ON INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT. THIS CONTRACT CONTAINS A MARKET VALUE ADJUSTMENT FORMULA.
APPLICATION OF A MARKET VALUE ADJUSTMENT MAY RESULT IN EITHER AN INCREASE OR
DECREASE IN THE CURRENT VALUE. THE MARKET VALUE ADJUSTMENT FORMULA DOES NOT
APPLY TO A GUARANTEED TERM AT THE TIME OF ITS MATURITY.
------------------------------------------------------------
Aetna Life Insurance and Annuity Company
Home Office: 151 Farmington Avenue
Hartford, Connecticut 06156
(800) 525-4225
Aetna Life Insurance and Annuity Company, herein called
Aetna, agrees to pay the benefits stated in this Contract.
Specifications
- --------------------------------------------------------------------------------
Plan
Marathon Plus
- --------------------------------------------------------------------------------
Type of Plan
Individual Retirement Annuity Rollover Account
- --------------------------------------------------------------------------------
Contract Holder
John D. Jones
- --------------------------------------------------------------------------------
Contract No.
Specimen
- --------------------------------------------------------------------------------
Effective Date
September 1, 1993
- --------------------------------------------------------------------------------
This Contract is Delivered in Your State and is Subject to the Laws of that
Jurisdiction
THE VARIABLE FEATURES OF THE CONTRACT ARE DESCRIBED IN PARTS III AND IV.
Right to Cancel
- --------------------------------------------------------------------------------
The Contract Holder may cancel this Contract within 10 days of receiving it, by
sending a written notice to Aetna at the above address or to the agent from whom
it was purchased. Aetna will return all payments made for this Contract within 7
days after it receives the notice of cancellation and this Contract at its Home
Office.
This page, the following pages, and the application make up the entire Contract.
Signed at the Home Office on the Effective Date.
/s/ G. G. Benanav /s/ George N. Gingold
Gary G. Benanav George N. Gingold
President Secretary
Individual Variable, Fixed, or Combination Annuity Contract
Nonparticipating
ALL PAYMENTS AND VALUES PROVIDED BY THE CONTRACT, WHEN BASED ON INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT. THIS CONTRACT CONTAINS A MARKET VALUE ADJUSTMENT FORMULA.
APPLICATION OF A MARKET VALUE ADJUSTMENT MAY RESULT IN EITHER AN INCREASE OR
DECREASE IN THE CURRENT VALUE. THE MARKET
I-CDA-IC(IR/MP)
<PAGE>
VALUE ADJUSTMENT FORMULA DOES NOT APPLY TO A GUARANTEED TERM AT THE TIME OF ITS
MATURITY.
2
<PAGE>
Specifications
- --------------------------------------------------------------------------------
Guaranteed There is a guaranteed interest rate for Purchase
Interest Rate Payment(s) held in the MG Account. (See Schedule I).
- --------------------------------------------------------------------------------
Deductions from There will be deductions for mortality and expense
the Separate risks and administrative fees. (See Contract
Account Schedule I and II).
- --------------------------------------------------------------------------------
Deduction from Purchase Purchase Payment(s) are subject to a deduction for
Purchase premium taxes, if any. (See 3.01.)
Payment(s)
- --------------------------------------------------------------------------------
Surrender Fee There will be a charge deducted upon surrender.
(See Contract Schedule I).
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. IT IS THEREFORE IMPORTANT THAT YOU
READ THIS CONTRACT CAREFULLY.
3
<PAGE>
Contract Schedule I
Accumulation Period
Separate Account
- --------------------------------------------------------------------------------
Separate Account: Variable Annuity Account B
Charges to Separate A daily charge is deducted from any portion of the
Account: Current 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 Risk Charge 0.35%
Expense Risk Charge 0.90%
-----
Total Separate Account
Charges 1.40%
Marathon Guaranteed Account (MG Account)
- --------------------------------------------------------------------------------
Minimum Guaranteed Interest Rate (effective annual
rate of return): 3.0%.
Separate Account and MG Account
- --------------------------------------------------------------------------------
Transfers: An unlimited number of Transfers may be made during
the Accumulation Period. Aetna allows 12 free
Transfers in any calendar year. Thereafter, Aetna
reserves the right to charge $10 for each subsequent
Transfer.
Maintenance Fee: The annual Maintenance Fee is $30. If the Current
Value is $50,000 or more on the date the Maintenance
Fee is to be deducted, the Maintenance Fee is $0.
Surrender Fee: For each surrender, the Surrender Fee will be
determined as follows:
<TABLE>
<CAPTION>
Surrender Fee
Length of Time from Deposit of Net (as percentage of
Purchase Payment (Years) Net Purchase Payments
<S> <C>
Less than 2 years 7%
2 or more but less than 4 years 6%
4 or more but less than 5 years 5%
5 or more but less than 6 years 4%
6 or more but less than 7 years 3%
7 years or more 0%
</TABLE>
4
<PAGE>
Contract Schedule I (Continued)
Accumulation Period
Separate Account and MG Account (Cont'd)
- --------------------------------------------------------------------------------
Systematic Withdrawal The specified payment or specified percentage may not
Option (SWO): be greater than 10% of the Current Value at time of
election.
See 1. GENERAL DEFINITIONS for explanations.
5
<PAGE>
Contract Schedule II
Annuity Period
Separate Account
- --------------------------------------------------------------------------------
Charges to Separate A daily charge at an annual effective of 1.25% for
Account: Annuity mortality and expense risks. The
administrative charge is established upon election of
an Annuity option. This charge will not exceed 0.25%
Variable Annuity Assumed If a Variable Annuity is chosen, an assumed annual net
Annual Net Return Rate: return rate of 5.0% may elected. If 5.0% is not
elected, Aetna will use an assumed annual net return
rate of 3.5%.
The assumed annual net return rate factor for 3.5% per
year is 0.9999058.
The assumed annual net return rate factor for 5.0% per
year is 0.9998663.
If the portion of a Variable Annuity payment for any
Fund is not to decrease, the Annuity return factor
under the Separate Account for that Fund 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
assumed annual net return rate 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
assumed annual net return rate of 5% is chosen.
Fixed Annuity
- --------------------------------------------------------------------------------
Minimum Guaranteed Interest Rate (effective annual
rate of return): 3.0%
See 1. GENERAL DEFINITIONS for explanations.
6
<PAGE>
TABLE OF CONTENTS
Page
I. GENERAL DEFINITIONS
- --------------------------------------------------------------------------------
1.01 Accumulation Period.................................................9
1.02 Adjusted Current Value..............................................9
1.03 Annuitant...........................................................9
1.04 Annuity.............................................................9
1.05 Beneficiary.........................................................9
1.06 Code................................................................9
1.07 Contract............................................................9
1.08 Contract Holder.....................................................9
1.09 Current Value.......................................................9
1.10 Deposit Period......................................................9
1.11 Fixed Annuity......................................................10
1.12 Fund(s)............................................................10
1.13 General Account....................................................10
1.14 Guaranteed Rates - MG Account......................................10
1.15 Guaranteed Term....................................................10
1.16 Guaranteed Term(s) Groups..........................................10
1.17 Maintenance Fee....................................................10
1.18 Marathon Guaranteed Account (MG Account)...........................11
1.19 Market Value Adjustment (MVA)......................................11
1.20 Matured Term Value.................................................11
1.21 Matured Term Value Transfer........................................11
1.22 Maturity Date......................................................11
1.23 Net Purchase Payment...............................................11
1.24 Nonunitized Separate Account.......................................11
1.25 Purchase Payment...................................................11
1.26 Reinvestment.......................................................12
1.27 Separate Account...................................................12
1.28 Surrender Value....................................................12
1.29 Transfers..........................................................12
1.30 Valuation Period (Period)..........................................12
1.31 Variable Annuity...................................................12
II. GENERAL PROVISIONS
- --------------------------------------------------------------------------------
2.01 Change of Contract.................................................13
2.02 Change of Fund(s)..................................................13
2.03 Nonparticipating Contract..........................................14
2.04 Payments and Elections.............................................14
2.05 State Laws.........................................................14
7
<PAGE>
Page
2.06 Control of Contract................................................14
2.07 Designation of Beneficiary.........................................14
2.08 Misstatements and Adjustments......................................15
2.09 Incontestability...................................................15
2.10 Grace Period.......................................................15
III. PURCHASE PAYMENT, CURRENT VALUE, AND SURRENDER PROVISIONS
- --------------------------------------------------------------------------------
3.01 Net Purchase Payment...............................................15
3.02 Fund(s) Record Units -- Separate Account...........................15
3.03 Net Return Factor(s) -- Separate Account...........................15
3.04 Fund Record Unit Value -- Separate Account.........................16
3.05 Market Value Adjustment............................................16
3.06 Transfer of Current Value from the Funds or MG Account.............18
3.07 Reports............................................................18
3.08 Notice to the Contract Holder......................................18
3.09 Loans..............................................................19
3.10 Distribution Options...............................................19
3.11 Death Benefit Amount...............................................23
3.12 Death Benefit Options Available to Beneficiary.....................24
3.13 Required Distribution to Contract Holder/Beneficiary...............25
3.14 Liquidation of Surrender Value.....................................26
3.15 Surrender Fee......................................................26
3.16 Payment of Surrender Value.........................................27
3.17 Reinstatement......................................................27
3.18 Payment of Adjustment Current Value................................28
IV. ANNUITY PROVISIONS
- --------------------------------------------------------------------------------
4.01 Choices to be Made.................................................28
4.02 Annuity Payments to Contract Holder................................29
4.03 Annuity Payments to Beneficiary....................................29
4.04 Terms of Annuity Options...........................................29
4.05 Death of Annuitant/ Beneficiary....................................30
4.06 Fund(s) Annuity Units -- Separate Account..........................31
4.07 Fund Annuity Unit Value -- Separate Account........................31
4.08 Annuity Net Return Factor(s) -- Separate Account...................32
4.09 Annuity Options....................................................32
8
<PAGE>
I. GENERAL DEFINITIONS
- --------------------------------------------------------------------------------
1.01 Accumulation Period: The period during which the Net Purchase
Payment is allied to the Contract to provide
future Annuity payment(s).
1.02 Adjusted Current Value: The Current Value of a Contract plus or minus
any aggregate MG Account MVA, if applicable.
(See 1.19)
1.03 Annuitant: The person whose life is measured for purposes
of the guaranteed death benefit and the
duration of Annuity payments under this
Contract. The Contract Holder and Annuitant
must be the same person under this Contract.
1.04 Annuity: Payment of an income:
(a) For the life of one or two persons;
(b) For a stated period; or
(c) For some combination of (a) and (b).
1.05 Beneficiary: The individual or estate entitled to receive
any payment from the Contract upon the death
of the Annuitant.
1.06 Code: The Internal Revenue Code of 1986, as it may
be amended from time to time.
1.07 Contract: This agreement between Aetna and the Contract
Holder to provide an annuity which qualifies
as an Individual Retirement. Annuity under
Code Section 408(b) for the exclusive benefit
of the Contract Holder or his or her
Beneficiary(ies).
1.08 Contract Holder: A person who purchases this Contract. The
Contract Holder has all right, title and
interest under the Contract.
1.09 Current Value: As of the most recent Valuation Period, the
Net Purchase Payment and any additional amount
deposited pursuant to 3.11 plus any interest
added to the portion allocated to the MG
Account; and plus or minus the investment
experience of the portion allocated to the
Funds since deposit; less all Maintenance Fees
deducted, any amounts surrendered and any
amounts applied to an Annuity.
1.10 Deposit Period: A calendar week, a calendar month, a calendar
quarter, or any other period of time specified
by Aetna during which the Net Purchase
Payment, Transfers and Reinvestments are
accepted into the MG Account for one or more
Guaranteed Terms. Aetna reserves the right to
extend the Deposit Period.
1.11 Fixed Annuity: An Annuity with payments that do not vary in
amount.
9
<PAGE>
1.12 Fund(s): The open-end management investment companies
(mutual funds) in which the Separate Account
invests.
1.13 General Account: The account holding the assets of Aetna, other
than those assets held in Aetna's separate
accounts.
1.14 Guaranteed Rates - MG Aetna will declare the interest rate(s)
Account: 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 that Deposit Period and the ensuing
Guaranteed Term. The Guaranteed Rates are
annual effective yields. That is, interest is
credited daily at a rate that will produce
time Guaranteed Rate over the period of a
year. No Guaranteed Rate will ever be less
than the Minimum Guaranteed Rate shown on
Contract Schedule I.
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.
1.15 Guaranteed Term: The period of time for which MG Account
Guaranteed Rates are guaranteed on Net
Purchase Payments. Transfers and Reinvestments
made into a current Deposit Period for the MG
Account. Such period begins on the day
following the close of the Deposit Period and
ends on the designated Maturity Date.
Guaranteed Terms are offered at Aetna's
discretion for various lengths of time ranging
up to and including ten years.
During a Deposit Period, Aetna may make
available any number of Guaranteed Terms. The
Contract Holder may allocate the Net Purchase
Payment and Transfers into any or all of the
available Guaranteed Terms.
1.16 Guaranteed Term(s) All MG Account Guaranteed Term(s) with the
Groups: same length of time from the close of the
Deposit Period until the designated Maturity
Date.
1.17 Maintenance Fee: The Maintenance Fee (see Contract Schedule I)
will be deducted during the Accumulation
Period from the Current Value on each
anniversary of the date the Contract is
established and upon the surrender of the
entire Contract.
10
<PAGE>
1.18 Marathon Guaranteed An accumulation option where Aetna guarantees
Account (MG Account): stipulated rate(s) of interest for specified
periods of time. All assets of Aetna,
including amounts in the Nonunitized Separate
Account, are available to meet the guarantees
under the MG Account.
1.19 Market Value An adjustment to the amount withdrawn or
Adjusted (MVA): transferred from an MG Account Guaranteed Term
prior to the end of that Guaranteed Term. The
adjustment reflects the change in the value of
the investment due toe changes in interest
rates since the date of deposit and is
computed using the formula given in 3.05. The
adjustment is expressed as a percentage of
each dollar being withdrawn.
1.20 Matured Term Value: The amount due on an MG Account Guaranteed
Term's Maturity Date.
1.21 Matured Term Value During the calendar month following an MG
Transfer: Account Maturity Date, the Contract Holder may
notify Aetna's Home Office in writing to
Transfer or surrender all or part of the
Matured Term Value, plus interest at the new
Guaranteed Rate accrued thereon, from the MG
Account without an MVA. This provision only
applies to the first such written request
received from the Contract Holder during this
period for any Matured Term Value.
1.22 Maturity Date: The last day of an MG Account Guaranteed Term.
1.23 Net Purchase Payment: The Purchase Payment less premium taxes,
as applicable.
1.24 Nonunitized Separate A separate account set up by Aetna under Title
Account: 38, Section 38a-433, of the Connecticut
General Statutes, that holds assets for MG
Account Terms. There are no discrete units for
this Account. The Contract Holder does not
participate in the investment gain or loss
from the assets held in the Nonunitized
Separate Account. Such gain or loss is borne
entirely by Aetna. These assets may be
chargeable with liabilities arising out of any
other business of Aetna.
1.25 Purchase Payment: The cash payment accepted by Aetna at its Home
office which is a rollover amount under Code
Section 402(c), 403(a)(4), 403(b)(8), or
408(d)(3). Aetna may require verification that
a rollover amount qualifies as such under the
Code. Payments to Simplified Employee Pension
plans and annual deductible and nondeductible
contributions to Individual Retirement
Annuities are not accepted under this
Contract.
11
<PAGE>
1.26 Reinvestment: Aetna will mail a notice to the Contract
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 Contract
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
Contract 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.
1.27 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. This 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 Account, shall not be
charged with other Aetna liabilities.
1.28 Surrender Value: The amount payable by Aetna upon the surrender
of any portion of the Contract.
1.29 Transfers: The movement of invested amounts among the
available Fund(s) and the MG Account under
this Contract during the Accumulation Period.
1.30 Valuation Period (Period): The period of time for which a fund determines
its net asset value, usually from 4:15 p.m.
Eastern time each day the New York Stock
Exchange is open until 4:15 p.m. the next such
day, or such other day that one or more of the
Funds determines its net asset value.
1.31 Variable Annuity: An Annuity with payments that vary with the
net investment results of one or more Funds
held under the Separate Account.
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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 which begins before the change.
Aetna may make any change that affects the MG
Account Market Value Adjustment (3.05) with at
least 30 days' advance written notice to the
Contract Holder. Any such change shall become
effective for any new Term.
Aetna reserves the right to change the terms
of the distribution options (3.10) for future
elections and discontinue the availability of
these options after proper notification.
The following will not be changed:
(a) Net Purchase Payment (1.23)
(b) MG Account Guaranteed Rate (1.14)
(c) Net Return Factor(s)
-- Separate Account (3.03)
(d) Current Value (1.09)
(e) Surrender Value (1.28)
(f) Fund(s) Annuity Unit Value
-- Separate Account (4.05)
(g) Annuity options (4.09)
(h) Fixed Annuity Interest Rates (4.01)
(i) Transfers (1.29)
Any change that affects the tables for the
Annuity options may be made:
(a) No earlier than 12 months after the
effective date of this Contract; and
(b) No earlier than 12 months after the
effective date of any prior change.
This Contract may be changed as deemed
necessary by Aetna to comply with federal or
state law.
2.02 Change of Fund(s): Aetna, or the Separate Account, may:
(a) Change the Fund(s) which may be invested
in by the Separate Account; and
(b) Replace the shares of any Fund(s) held in
the Separate Account with shares of any
other Fund(s).
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<PAGE>
2.02 Change of Fund(s)
(Cont'd):
Changes must be:
(a) Approved by a majority vote in the
Separate Account with respect to the
Fund(s) whose shares are to be replaced;
or
(b) Deemed necessary by Aetna under the
Investment Company Act of 1940; or
(c) Deemed necessary by Aetna to accomplish
the purpose of the Separate Account.
Aetna will notify the Contract Holder of
any change.
2.03 Nonparticipating Contract: The Contract Holder or Beneficiaries will not
have a right to share in the earnings of
Aetna.
2.04 Payments and Elections: While the Contract Holder is living, Aetna
will pay the Contract Holder any Annuity
payments as and when due. After the Contract
Holder's death, any Annuity payments required
to be made will be paid in accordance with
4.05. Aetna will determine other payments
and/or elections as of the end of the
Valuation Period 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 3.16.
2.05 State Laws: The Contract complies with the laws of the
state in which it is delivered. Any surrender,
death, 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 a
nonforfeitable right to all amounts held under
this Contract. Choices made under this
Contract must be in writing. Until receipt of
such choices at Aetna's Home Office. Aetna may
rely on any previous choices made.
The Contract may not be attached, alienated,
or subject to the claims of any creditors of
the Contract Holder except to the extent
permitted by law. This Contract is
nontransferable by the Contract Holder. The
Contract Holder may not assign, transfer,
pledge or use as collateral his or her rights
under the Contract.
2.07 Designation of Beneficiary: Each Contract Holder shall name his or her
Beneficiary. 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.
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<PAGE>
2.08 Misstatements and If Aetna finds the age of any Annuitant to be
Adjustments: misstated, the correct facts will be used to
adjust payments.
2.09 Incontestability: Aetna cannot cancel this Contract because of
any error of fact on the application.
2.10 Grace Period: This Contract will remain in effect except as
provided in the Payment of Adjusted Current
Value provision (see 3.18).
III. PURCHASE PAYMENT, CURRENT VALUE, AND SURRENDER PROVISIONS
- -------------------------------------------------------------------------------
3.01 Net Purchase Payment: This amount is the actual Purchase Payment
less any premium tax. Aetna will generally
deduct the premium tax when Annuity benefits
are elected (see Part IV). If Aetna determines
that under applicable state law, it must pay a
premium tax when the Purchase Payment is
received or at any other time, it will deduct
the tax at that time.
The Net Purchase Payment will be credited
among:
(a) The current Deposit Period(s) for
Guaranteed Terms under the MG Account; and
(b) The Fund(s) in which the Separate Account
invests.
The Contract Holder shall tell Aetna the
allocation percentage to be applied to the
current Deposit Period for each of the
available Guaranteed Terms in the MG Account
and/or each Fund.
3.02 Fund(s) Record Units -- The portion of the Net Purchase Payment
applied to each Fund under the Separate
Account will determine the number of Fund
record units for that Fund. This number is
equal to the portion of the Net Purchase
Payment applied to each Fund divided by the
Fund record unit value (see 3.04) for the
Valuation Period in which the Purchase Payment
is received in good order at Aetna's Home
Office.
3.03 Net Return Factor(s) -- The net return factor(s) are used to compute
Separate Account: all Separate Account record units for any
Fund.
The net return factor for each Fund is equal
to 1.0000000 plus the net return rate.
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<PAGE>
3.03 Net Return Factor(s) -- The net return rate is equal to:
Separate Account (Cont'd)
(a) The value of the shares of the Fund held
by the Separate Account at the end of the
Valuation Period; minus
(b) The value of the shares of the Fund held
by the Separate Account at the start of
the Valuation Period; plus or minus
(c) Taxes (or reserves for taxes) on the
Separate Account (if any); divided by
(d) The total value of the Fund record units
and Fund Annuity units of the Separate
Account at the start of the Valuation
Period; minus
(e) A daily Separate Account charge at an
annual rate as shown on Contract Schedule
I for mortality and expense risks, which
may include profit; and a daily
administrative charge.
A net return rate may be more or less than 0%.
The value of a share of the Fund is equal to
the net assets of the Fund divided by the
number of shares outstanding.
3.04 Fund Record Unit Value -- A Fund record unit value is computed by
Separate Account: multiplying the net return factors for the
current Valuation Period by the Fund record
unit value for the previous Period. The dollar
value of Fund record units, Separate Account
assets, and Variable Annuity payments may go
up or down due to investment gain or loss.
3.05 Market Value Adjustment: There will be an MVA for a withdrawal from the
MG Account before the end of a Guaranteed Term
when the withdrawal is due to:
(a) A Transfer; except as specified in MG
Account Matured Term Value Transfer;
(b) A full or partial surrender, including a
10% free withdrawal under 3.15; or
(c) An election of Annuity option 2 (see
4.09).
Full and partial surrenders 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
calculated due to a withdrawal of amounts.
This total may be greater or less than the
Current Value of those amounts; or
(b) The applicable portion of the Current
Value in the MG Account.
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<PAGE>
3.05 Market Value After the six-month period, the surrender or
Adjustment (Cont'd) Transfer will be the aggregate MVA amount,
which may be greater or less than the Current
Value of those Adjustment (Cont'd): amounts.
The greater of the aggregate MVA amount or the
applicable portion of the Current Value
applies to amounts withdrawn from the MG
Account on account of an election of Annuity
options 3 or 4 (see 4.09).
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, (computed
from Wednesday of the week of withdrawal)
in the Guaranteed Term.
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.
17
<PAGE>
3.06 Transfer of Current Before an Annuity option is elected, all
Value from the Funds or or any portion of the Adjusted Current Value
MG AccountL of the Contract may be transferred from any
Fund or Guaranteed the Funds or MG Account:
(a) To any other Fund; or
(b) To any Guaranteed Term of the MG Account
available in the current Deposit Period.
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
surrendered 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 Contract Holder may make an unlimited
number of Transfers during the Accumulation
Period. The number of free Transfers allowed
by Aetna is shown on Contract Schedule I.
Additional transfers may be subject to a
Transfer fee as shown on Contract Schedule I.
Transfers from the MG Account of a Matured
Term Value on or within one calendar month
after a Term's Maturity Date do not count
against the annual Transfer limit.
Amounts applied to Guaranteed Terms of the MG
Account may not be transferred to the Funds or
to another Guaranteed Term during the Deposit
or for 90 days after the close of the Deposit
Period except for Matured Term Value(s) during
the calendar month following the Term's
Maturity Date.
Transfers from Guaranteed Terms of the MG
Account are subject to the MVA provisions in
3.05.
3.07 Reports: Aetna, as issuer of the Contract, will make
any reports required of it by federal law.
Aetna will furnish annual calendar year
reports concerning the status of the annuity.
3.08 Notice to the Contract The Contract Holder will receive
Holder quarterly statements from Aetna of:
(a) The value of any amounts held in:
(1) The MG Account; and
(2) The Fund(s) under the Separate
Account.
(b) The number of any Fund(s) record units;
and
(c) The Fund(s) record unit value.
Such number or values will be as of a specific
date no more than 60 days before the date of
the notice.
18
<PAGE>
3.09 Loans: Loans are not available under this Contract.
3.10 Distribution Options: The following distribution options may be
elected by the Contract Holder during the
Accumulation Period.
(a) Estate Conservation Option (ECO) - A
distribution option under which a portion
of the Current Value will automatically be
surrendered and distributed each year. ECO
payments will be calculated based on the
Contract's full Current Value. The
distributed amount will be withdrawn pro
rata from each investment option used
under the Contract. A Surrender Fee will
not be deducted from any portion of the
Adjusted Current Value which is paid as
a distribution under ECO. Contract
Holders should consult their tax advisers
prior to requesting this distribution
option. Aetna will not be responsible
for any adverse tax consequences due to
receiving ECO payments.
(1) Amount of Distribution: Each year
that ECO is in effect, Aetna will
calculate and distribute an amount
equal to the minimum required
distribution under the Code. The
annual distribution will be
determined by dividing the Current
Value as of December 31 of the year
prior to the payment year, by a life
expectancy factor.
The Contract Holder, or spouse
Beneficiary if ECO is elected after
the Contract Holder's death, shall
elect either single life expectancy
or joint life expectancy. Life
expectancy is computed by use of the
expected return multiples in Tables V
and VI of section 1.72-9 of the
Income Tax Regulations.
Joint life expectancy can only be
elected based on the joint life
expectancy of the Contract Holder and
his or her Beneficiary. If the
Contract Holder makes any changes in
the Beneficiary designation under the
Contract, ECO distributions after the
change will be recalculated as
required by IRS regulations.
19
<PAGE>
3.10 Distribution Options Life expectancies shall be
(Conr'd) recalculated annually. If the joint
life expectancy is elected with a
non-spouse Beneficiary, the life
expectancy of the non-spouse
Beneficiary must not be recalculated.
Instead, the life expectancy will be
calculated using the attained age of
the Beneficiary during the calendar
year in which the Contract Holder
attains age 70 1/2, and payments for
subsequent years shall be recalculated
based on such life expectancy reduced
by one for each calendar year which
has elapsed since the calendar year
life expectancy was first (Cont'd):
calculated.
If joint life expectancy is elected
with a spouse Beneficiary, at the
death of either, the payments can
continue and will be calculated based
solely on the survivor's life
expectancy. If joint life expectancy
is elected with a non-spouse
Beneficiary and the non-spouse
Beneficiary dies first, payments will
continue based on the joint life
expectancy.
If a single life expectancy is elected
and the Contract Holder dies, or if a
joint life expectancy is elected and
the survivor dies, the death benefits
determined under Section 3.11 will be
paid to the Beneficiary in a lump sum
not later than December 31 following
the year of death.
(2) Minimum Initial Current Value: At its
discretion, Aetna may require a
minimum initial Current Value for
election of this option. If after
election of this option, the Current
Value is insufficient to make a
scheduled ECO payment, Aetna will
distribute the entire balance.
(3) Date of Distribution: Distribution
will be made annually on the 15th of
any month or such other date Aetna may
designate or allow. The Contract
Holder shall specify an initial
distribution month, not earlier than
the calendar year in which the
Contract Holder attains age 70 1/2, or
such later time when distributions
must commence as specified under the
Code, whichever is appropriate. For a
spouse Beneficiary, the earliest date
is the date of the Contract Holder's
death.
(4) Election and Revocation: ECO may be
elected by the Contract Holder by
submitting a written request to Aetna
at its Home Office.
20
<PAGE>
3.10 Distribution Options Once elected, this option may be
(Cont'd): revoked by the Contract Holder, or
spouse Beneficiary if elected after
the Contract Holder's death, by
submitting a written request to Aetna
at its Home Office. Any revocation
will apply only to amounts not yet
paid. The Contract Holder assumes
responsibility for compliance with
minimum distribution rules under the
Code. ECO may be elected only once by
the Contract Holder or by a spouse
Beneficiary.
(b) Systematic Withdrawal Option (SWO): A
distribution option under which a portion
of the Current Value will automatically
be surrendered and distributed each year.
SWO payments will be calculated based on
the Contract's full Current Value. The
distributed amount will be withdrawn pro
rata from each investment option used
under the Contract. A Surrender Fee will
not be deducted from any portion of the
Adjusted Current Value which is paid as a
distribution under SWO. Contract Holders
should consult their tax advisers prior
to requesting this distribution option.
Aetna will not be responsible for any
adverse tax consequences due to receiving
SWO payments.
(1) Amount of Distribution: The Contract
Holder may elect one of the three
payment methods described below.
(i) Specified Payment: Payments of a
designated dollar amount. The
annual amount may not be greater
than the percentage of the
Current Value at time of
election as shown on Contract
Schedule I. This annual dollar
amount will remain constant. At
its discretion, Aetna may
require a minimum initial
payment amount; or
(ii) Specified Period: Payments made
over a period of time of at
least 10 years. The maximum
specified period shall be
determined under the Code
minimum distribution rules. The
annual amount is calculated by
dividing the Current Value as of
December 31 of the year prior to
the payment year by the number
of payment years remaining; or
21
<PAGE>
3.10 Distribution Options (iii) Specified Percentage: Payments
(Cont'd): of a designated percentage which
cannot be greater than the
percentage of the Current Value
at the time of election as shown
on Contract Schedule I. The
percentage may be changed by
written request. Aetna reserves
the right to limit the number of
times the percentage may be
changed. The annual amount is
calculated by multiplying the
Current Value as of December 31
of the year prior to the payment
year by the designated
percentage. Payments will be
made until the year the Contract
Holder attains age 70-1/2 or, if
elected by the spouse
Beneficiary, the year the
Contract 3.10 Distribution
Options (Cont'd): Holder would
have attained age 70-1/2.
Under both the Specified Payment and
Specified Period payment methods, a
higher amount shall be paid in any
year if required under the Code
minimum distribution rules. For
purposes of this determination, life
expectancy for the initial
distribution year shall be calculated
based on single life expectancy Table
V of section 1.72-9 of the Income Tax
Regulations. With each subsequent
year, the life expectancy will be the
life expectancy for the previous year
reduced by one.
Payments upon the Contract Holder's
death will be made to the Beneficiary
in the manner described in 3.12.
(2) Minimum Initial Current Value: At its
discretion, Aetna may require a
minimum initial Current Value for
election of this option. If after
election of this option the Current
Value is insufficient to make a
scheduled SWO payment, Aetna will
distribute the entire balance.
(3) Date of Distribution: The Contract
Holder shall specify the initial
distribution date. The earliest date
for distribution is the first date on
which the Contract Holder attains age
59 1/2. As elected by the Contract
Holder, SWO payments will be made on
a monthly, quarterly, semi-annual or
annual basis. If SWO payments are
made more frequently than annually,
the designated annual amount is
divided by the number of payments due
each year. Subsequent distributions
will be made on the 15th of any month
or such other date Aetna may
designate or allow.
22
<PAGE>
3.10 Distribution Options (Cont'd): (4) Election and Revocation: SWO may be
elected by submitting a completed
and signed election form to Aetna's
Home Office.
Once elected, this option may be
revoked by the Contract Holder, or
spouse Beneficiary if elected after
the Contract Holder's death, by
submitting a written request to Aetna
at its Home Office. Any revocation
will apply only to amounts not yet
paid. SWO may be elected only once by
the Contract Holder or by the spouse
Beneficiary.
3.11 Death Benefit Amount: If the Contract Holder/Annuitant dies before
Annuity payments start, the Beneficiary is
entitled to a deathbenefit under the Contract.
The claimdate is the date when proof of death
and the Beneficiary's claim are received in
good order at Aetna's Home Office. The amount
of the deathbenefit is determined as follows:
(a) Death of Contract Holder/
Annuitant less than 75 years of
age: The guaranteed death benefit
is the greatest of:
(1) The Net Purchase Payment
made to the Contract minus
the sum of all amounts
surrendered, applied to an
Annuity, or deducted from
the Contract;
(2) The step up value as of the
date of death minus the total
of all partial surrenders,
amounts applied to an Annuity
and deductions made from the
Contract since determination
of the step up value. The
step up value is the Current
Value on the most recent
seventh year anniversary of
the date the Net Purchase
Payment is applied to the
Contract;
(3) The Contract's Current Value
as of the date of death.
The excess, if any, of the
guaranteed death benefit value
over the Contract's Current
Value is determined as of the
date of death. Any excess amount
will be deposited to the
Contract and allocated to Aetna
Variable Encore Fund as of the
claim date. The Current Value on
the claim date plus any excess
amount deposited becomes the
Contract's Current Value.
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<PAGE>
3.11 Death Benefit (b) Death of Contract Holder/Annuitant age
Amount (Cont'd): 75 or greater: The death benefit amount
is the Contract Current Value on the
claim date.
3.12 Death Benefit Options Prior to any election, or until amounts must
be otherwise distributed under this section,
the Current Value will be retained in the
Contract. The Beneficiary has the right under
the Contract to allocate or reallocate any
Available amount to any of the available
investment options (subject to an MVA, as to
Beneficiary: applicable). The following
options are available to the Beneficiary:
(a) If the Beneficiary is the Contract
Holder's surviving spouse, the surviving
spouse may exercise all rights under the
Contract and continue in the
Accumulation Period, or below. Under the
Code, distributions from the Contract
are not required until December 31st of
the year in which the original Contract
Holder would have attained age 70 1/2.
The Beneficiary may elect to:
(1) Apply some or all of the Adjusted
Current Value to Annuity option 2,
3 or 4 (see 4.09);
(2) Apply some or all of the Adjusted
Current Value to Annuity option 1
(see 4.09); or
(3) Receive, at any time, a lump sum
payment equal to the Adjusted
Current Value.
If ECO is in effect on the Contract
Holder's date of death, the surviving
spouse can elect to continue receiving
ECO payments if a joint life expectancy
was chosen. Otherwise, the surviving
spouse must receive a lump sum payment
equal to the Adjusted Current Value.
If SWO is in effect and the Contract
Holder dies before the required
beginning date for minimum distributions
(see 3.13), SWO payments will cease and
the surviving spouse may claim the death
benefit in accordance with the terms of
this section.
If SWO is in effect and the Contract
Holder dies after the required beginning
date for minimum distributions, the
surviving spouse can elect to continue
to receive the SWO payments. Otherwise,
the surviving spouse must elect to
receive a lump sum payment equal to the
Adjusted Current Value.
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<PAGE>
3.12 Death Benefit Options (b) If the Beneficiary is other than the
Contract Holder's surviving spouse, then
options (1), (2), or (3) under (a) above
apply. Any portion of the Adjusted
Current Value that is not applied to
Annuity option 2, 3 or 4 by December
31st of the year following the year of
the Contract Holder's death must be
distributed by December 31st of the
Available year containing the fifth
anniversary of the Contract Holder's
date of to Beneficiary (Cont'd): death.
If ECO or SWO is in effect on the
Contract Holder's date of death, the
Beneficiary must receive an automatic
and immediate lump sum payment equal to
the Adjusted Current Value.
(c) If no Beneficiary exists, a lump sum
payment equal to the Adjusted Current
Value will be made to the Contract
Holder's estate.
3.13 Required Distribution (a) Contract Holder: The entire
to Contract Holder/ interest of the Contract Holder
Beneficiary: will be distributed or begin to be
distributed no later than April 1
following the calendar year in
which the Contract Holder attains
age 70 1/2 (required beginning
date), over (a) the life of the
Contract Holder, or the lives of
the Contract Holder and his or her
designated Beneficiary, or (b) a
period certain not extending beyond
the life expectancy of the Contract
Holder, or the joint and last
survivor expectancy of the Contract
Holder and his or her designated
Beneficiary. Payments must be made
in periodic payments at intervals
no longer than one year. In
addition, payments must be either
nonincreasing or they may increase
3.13 Required Distribution only as
provided in Q&A F-3 of section
1.401(a)(9)-1 of the Proposed to
Contract Holder/ Beneficiary:
Income Tax Regulations.
All distributions made hereunder
shall be made in accordance with
the requirements of section
401(a)(9) of the Code, and the
regulations thereunder, including
the minimum distribution incidental
benefit requirement of section
1.401(a)(9)-2 of the Proposed
Income Tax Regulations.
Distribution may be an Annuity as
set forth in Sections 4.01 through
4.04, payments under ECO or SWO as
defined in Section 3.10 or a lump
sum payment.
(b) Beneficiary: If the Contract Holder
dies after distribution of his or
her interest has begun, the
remaining portion of such interest
will continue to be distributed at
least as rapidly as under the
method of distribution being used
prior to the Contract Holder's
death.
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<PAGE>
3.13 Required Distribution Distributions are considered to have begun if
to Contract Holder/ distributions are made on account of the
Beneficiary (Cont'd): Contract Holder's reaching his or her
required beginning date or if prior to the
required beginning date distributions
irrevocably commence to the Contract Holder
over a period permitted and in an Annuity
form acceptable under section 1.401(a)(9) of
the Income Tax Regulations.
3.14 Liquidation of Surrender All or any portion of the Adjusted Current
Value: Value may be surrendered at any time.
Surrender requests can be submitted as a
percentage of the Adjusted Current Value or
as a specific dollar amount. The Net Purchase
Payment amount is withdrawn first, and then
the excess value, if any. Amounts are
withdrawn on a pro rata basis from the
Fund(s) and or the Guaranteed Term(s) Groups
of the MG Account in which the Current Value
is invested. Within a Guaranteed Term Group,
the amount to be surrendered 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 surrendered amounts shall be
reduced by a Surrender Fee, if applicable.
3.15 Surrender Fee: The Surrender Fee only applies to the Net
Purchase Payment portion surrendered and
varies according to the elapsed time since
deposit (see Contract Schedule I).
No Surrender Fee is deducted from any portion
of the Current Value which is paid:
(a) To a Beneficiary due to the Contract
Holder's death before Annuity payments
start;
(b) As a premium for an Annuity option 2, 3
or 4 under this Contract (see 4.09);
(c) As a distribution under the ECO or SWO
provision (see 3.10);
(d) At least 12 months after the date of the
Purchase Payment to the Contract, in an
amount equal to or less than 10% of the
Current Value. This applies to the first
surrender request, partial or full, in a
calendar year. The Current Value is
calculated as of the date the surrender
request is received in good order at
Aetna's Home Office. This waiver is not
available to the Contract Holder while
SWO is in effect;
26
<PAGE>
3.15 Surrender Fee (Cont'd): (e) For a full surrender of the Contract
where the Contract's Current Value is
$2,500 or less and no surrenders have
been taken from the Contract within the
prior 12 months;
(f) By Aetna under 3.18; or
(g) If the Contract Holder 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 calendar year has
elapsed since the date the Contract
was issued; and
(2) the surrender is requested within 3
years of admission to a licensed
nursing care facility.
The waiver does not apply if the
Contract Holder was in a nursing care
facility at the time the Contract was
issued.
3.16 Payment of Surrender Value: Under certain emergency conditions, Aetna
may defer payment:
(a) For a period of up to 6 months (unless
not allowed by state law); or
(b) As provided by federal law.
3.17 Reinstatement: All or a portion of the proceeds of a full
surrender may be reinvested within 30 days
after the surrender. Any Maintenance Fee
and Surrender Fee charged at the time of
surrender on the amount being reinvested
will be included in the reinstatement. Any
Market Value Adjustment(s) deducted from
surrenders will not be included in the
reinstatement.
Amounts will be reinstated among the MG
Account and the Funds in the Separate
Account in the same proportion as they were
at the time of surrender. Any amounts
reinstated to the MG Account will be
credited to the Guaranteed Terms available
during the current Deposit Period in the
same proportion as they were at the time of
surrender. In the event that a Guaranteed
Term of the same duration is unavailable,
amounts will be reinvested in 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. The
number of Fund(s) record units reinstated
will be based on the record unit value(s)
next computed after receipt at Aetna's Home
Office to the reinstatement request and the
amount to be reinstated.
27
<PAGE>
3.17 Reinstatement (Cont'd): Any Maintenance Fee which falls due after
the surrender and before the reinstatement
will be deducted from the amount
reinstated.
Any Contract surrendered because the
Current Value was less than $2,500
immediately following any partial surrender
may not be reinstated (see 3.18).
Reinstatement is permitted only once.
3.18 Payment of Adjustment Upon 90 days' written notice to the
Current Value: Contract Holder, Aetna will terminate any
Contract if the Current Value becomes less
than $2,500 immediately following any
partial surrender. Aetna does not intend to
exercise this right in cases where the
Current Value is reduced to $2,500 or less
solely due to investment performance. A
Surrender Fee will not be deducted from the
Adjusted Current Value: Value. This
terminated Adjusted Current Value may not
be reinstated.
IV. ANNUITY PROVISIONS
- -------------------------------------------------------------------------------
4.01 Choices to be Made: The Contract Holder may tell Aetna to apply
any portion of the Adjusted Current Value
(minus any premium tax) for an Annuity
under option 2, 3, or 4 (see 4.09). The
first Annuity payment may not be earlier
than one calendar year after the 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, the Contract
Holder may tell Aetna to make a lump
sum payment.
When an Annuity 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 using the General
Account;
(b) A Variable Annuity using any of the
Fund(s) available under this Contract
for Annuity purposes; or
(c) A combination of (a) and (b).
If a Fixed Annuity is chosen, the Annuity
purchase rate for the option chosen
reflects at least the Minimum Guaranteed
Interest Rate (see Contract Schedule II),
but may reflect a higher interest rate. If
a Variable Annuity is chosen, the initial
Annuity payment for the option chosen
reflects the assumed annual return rate
elected. (see Contract Schedule II).
28
<PAGE>
4.02 Annuity Payments to Contract In no event may any payments to the
Contract Holder: Annuitant under an Annuity Option extend
beyond:
(a) The life of the Contract Holder;
(b) The lives of the Contract Holder and
Beneficiary;
(c) Any certain period greater than the
Contract Holder's life expectancy
according to regulations under Code
Section 401(a)(9), determined as of the
date payments are to begin; or
(d) A period greater than the joint and
last survivor life expectancies of the
Contract Holder and the Contract
Holder's Beneficiary according to
regulations under Code Section
401(a)(9), determined as of the date
payments are to begin.
4.03 Annuity Payments to Beneficiary: In no event may payments to the
Beneficiary under an Annuity option
extend beyond:
(a) The life of the Beneficiary; or (b)
Any certain period greater than the
Beneficiary's life expectancy as
determined by regulations under Code
Section 401(a)(9).
4.04 Terms of Annuity 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 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
annual 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 under option 2, 3 or
4 is chosen and a larger payment would
result from applying the Surrender
Value to a current Aetna single premium
immediate Annuity, Aetna will make the
larger payment.
29
<PAGE>
4.04 Terms of Annuity (d) For purposes of calculating the
Options (Cont'd) guaranteed first payment of a Variable
Annuity or the payments for a Fixed
Annuity, the Annuitant's and second
Annuitant's adjusted age will be used.
The Annuitant's and second Annuitant's
adjusted age is his or her age as of
the birthday closest to the Annuity
commencement date reduced by one year
for Annuity commencement dates
occurring during the period of time
from July 1, 1993 through December 31,
1999. The Annuitant's and second
Annuitant's age will be reduced by two
years for Annuity commencement dates
occurring during the period of time
from January 1, 2000 through December
31, 2009. The Annuitant's and second
Annuitant's age will be reduced by one
additional year for Annuity
commencement dates occurring in each
succeeding decade.
The Annuity purchase rates for options
3 and 4 are based on mortality from
1983 Table a.
(e) Assumed Annual Net Return Rate is the
interest rate used to determine the
amount of the first Annuity payment
under a Variable Annuity as shown on
Contract Schedule II. 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 Annuity return
factor under Variable Annuity Assumed
Annual Net Return Rate on Contract
Schedule II).
(f) Once elected, Annuity payments cannot
be commuted to a lump sum except for
Variable Annuity payments under option
2 (see 4.09). The life expectancy of
the Contract Holder or Contract Holder
and second Annuitant shall be
irrevocable upon the election of an
Annuity option.
4.05 Death of Annuitant/ (a) When an Annuitant dies under option 2
Beneficiary: or 3, or both the Annuitant and the
second Annuitant die under option 4(d),
the present value of any remaining
guaranteed payments will be paid in one
sum to the Beneficiary, or upon
election by the Beneficiary, any
remaining payments will continue to the
Beneficiary. If option 4 has been
elected and the Annuitant dies, the
remaining payments will continue to
the second Annuitant as successor
payee.
(b) If there is no Beneficiary under option
2, 3 or 4, the present value of any
remaining payments will be paid in one
sum to the Contract Holder's estate.
30
<PAGE>
Death of Annuitant/ (c) If the Beneficiary designated under
Beneficiary (Cont'd): option 1 dies, the amount held plus
accrued interest will be paid in one
sum to a successor Beneficiary, if any,
named by the designated Beneficiary. If
there is no successor 4.05 Death of
Annuitant/ Beneficiary Beneficiary, the
lump sum will be paid to the designated
Beneficiary's (Cont'd): estate.
(d) If the Beneficiary dies while receiving
Annuity payments, the present value of
any remaining guaranteed payments will
be paid in one sum to the successor
Beneficiary, or upon election by the
successor Beneficiary, any remaining
payments will continue to the successor
Beneficiary. If no successor
Beneficiary has been designated, the
present value of any remaining
guaranteed payments will be paid in one
sum to the Beneficiary's estate.
(e) The present value will be determined as
of the Valuation Period in which proof
of death acceptable to Aetna and a
request for payment is received at
Aetna's Home Office. The interest rate
used to determine the first payment
will be used to calculate the present
value.
4.06 Fund(s) Annuity Units -- The number of each Fund's Annuity units
Separate Account: is based on the amount of the first
Variable Annuity payment which is equal
to:
(a) The portion of the Current Value
applied to pay a Variable Annuity
(minus any premium tax); divided by
(b) 1,000; multiplied by
(c) The payment rate for the option chosen.
Such amount, or portion, of the variable
payment will be divided by the appropriate
Fund Annuity unit value (see 4.07) on the
tenth Valuation Period before the due date
of the first payment to determine the
number of each Fund Annuity units. The
number of each Fund Annuity units remains
fixed. Each future payment is equal to the
sum of the products of each Fund Annuity
unit value multiplied by the appropriate
number of units. The Fund Annuity unit
value on the tenth Valuation Period prior
to the due date of the payment is used.
4.07 Fund(s) Annuity Unit Value -- For any Valuation Period, a Fund Annuity
Separate Account: unit value is equal to:
(a) The Value for the previous Period;
multiplied by
(b) The Annuity net return factor(s) (see
4.08 below) for the Period; multiplied
by
(c) A factor to reflect the assumed annual
net return rate (see Contract Separate
Schedule II).
31
<PAGE>
4.07 Fund(s) Annuity Unit Value -- The dollar value of a Fund Annuity unit
Separate Account (Cont'd): values and Annuity payments may go up
or down due to investment gain or loss.
4.08 Annuity Net Return Factor(s) -- The Annuity net return factor are used
Separate Account: to compute Annuity payments for any Fund.
The Annuity net return factor for each
Fund is equal to 1.0000000 plus the net
return rate.
The net return rate is equal to:
(a) The value of the shares of the Fund
held by the Separate Account at the
end of a Valuation Period; minus
(b) The value of the shares of the Fund
held by the Separate Account at the
start of the Valuation Period; plus or
minus
(c) Taxes (or reserves for taxes) on the
Separate Account (it any); divided by
(d) The total value of the Fund record
units and Fund Annuity units of the
Separate Account at the start of the
Valuation Period; minus
(e) A daily charge for Annuity mortality
and expense risks, which may include
profit, and a daily administrative
charge (at the annual rate as shown on
Contract Schedule II).
A net return rate may be more or less
than 0%.
The value of a share of the Fund is equal
to the net assets of the Fund divided by
the number of shares outstanding.
Payments shall not be changed due to
changes in the mortality or expense
results or administrative charges.
4.09 Annuity Options: Option 1 -- Payment of Interest on Sum
Left with Aetna -- This option may be
used only by the Beneficiary when the
Contract Holder dies before Aetna has
started paying an Annuity. A portion or
all of the sum paid upon death may be
held under this option and will be held
in the General Account of Aetna at
interest (see 3.12 and 4.01). The
Beneficiary may later tell Aetna to:
(a) Pay a portion or all of the sum
held by Aetna; or
(b) Apply a portion or all of the sum
held by Aetna to any Annuity option
below.
32
<PAGE>
4.09 Annuity Options (Cont'd): If a nonspouse Beneficiary elects that
some or all of the Current Value is to be
held under this option, the Beneficiary
must tell Aetna to pay the full sum held
under this option by December 31st of the
year containing the fifth anniversary of
the Contract Holder's date of death.
Option 2 -- Payments for a Stated Period
of Time -- An Annuity will be paid for
the number of years chosen. The number of
years must be at least 5 and not more
than 30.
If payments for this option are made
under a Variable Annuity, the present
value of any remaining payments may be
withdrawn at any time. If a withdrawal is
requested within 3 years after the start
of payments, it will be treated as a
surrender and any applicable Surrender
Fee will be applied (see 3.15).
Option 3 -- Life Income - An Annuity will
be paid for the life of the Annuitant. If
also chosen, Aetna will guarantee
payments for 60, 120, 180, or 240 months.
Option 4 -- Life Income Based upon the
Lives of Two Annuitants -- An Annuity
will be paid during the lives of the
Annuitant and a second Annuitant.
Payments will continue until both
Annuitants have died. When this option is
chosen, a choice must be made of:
(a) 100% of the payment to continue
after the first death;
(b) 66-2/3% of the payment to continue
after the first death;
(c) 50% of the payment to continue after
the first death;
(d) Payments for a minimum of 120 months
with 100% of the payment to continue
after the first death; or
(e) 100% of the payment to continue at
the death of the second Annuitant
and 50% of the payment to continue
at the death of the Annuitant.
Other Options -- Aetna may make other
options available as allowed by the laws
of the state in which this Contract is
delivered.
33
<PAGE>
OPTION 2
Payments for a Stated Period of Time
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
<TABLE>
<CAPTION>
- -------------------- ----------------- ---------------- ----------------- ------------------- -----------------
Guaranteed Quarterly Semi-Annual Annual
Years Rate Monthly Payment Payment Payment Payment
- -------------------- ----------------- ---------------- ----------------- ------------------- -----------------
<S> <C> <C> <C> <C> <C>
3 3.00% $ 28.99 $ 86.76 $172.88 $343.23
4 3.00% 22.06 66.02 131.56 261.19
5 3.00% 17.91 53.59 106.78 211.99
6 3.00% 15.14 45.30 90.27 179.22
7 3.00% 13.16 39.39 78.49 155.83
8 3.00% 11.68 34.96 69.66 138.31
9 3.00% 10.53 31.52 62.81 124.69
10 3.00% 9.61 28.77 57.33 113.82
11 3.00% 8.86 26.52 52.85 104.93
12 3.00% 8.24 24.65 49.13 97.54
13 3.00% 7.71 23.08 45.98 91.29
14 3.00% 7.26 21.73 43.29 85.95
15 3.00% 6.87 20.56 40.96 81.33
16 3.00% 6.53 19.54 38.93 77.29
17 3.00% 6.23 18.64 37.14 73.74
18 3.00% 5.96 17.84 35.56 70.59
19 3.00% 5.73 17.13 34.14 67.78
20 3.00% 5.51 16.50 32.87 65.26
21 3.00% 5.32 15.92 31.72 62.98
22 3.00% 5.15 15.40 30.68 60.92
23 3.00% 4.99 14.92 29.74 59.04
24 3.00% 4.84 14.49 28.88 57.33
25 3.00% 4.71 14.09 28.08 55.76
26 3.00% 4.59 13.73 27.36 54.31
27 3.00% 4.47 13.39 26.68 52.97
28 3.00% 4.37 13.08 26.06 51.74
29 3.00% 4.27 12.79 25.49 50.60
30 3.00% 4.18 12.52 24.95 49.53
- -------------------- ----------------- ---------------- ----------------- ------------------- -----------------
</TABLE>
34
<PAGE>
OPTION 3
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
Payments Guaranteed for a Stated Period of Months
<TABLE>
<CAPTION>
- -------------------- ----------------- ---------------- ----------------- ---------------- ------------------
Adjusted
Age of Annuitant None 60 120 180 240
- -------------------- ----------------- ---------------- ----------------- ---------------- ------------------
<S> <C> <C> <C> <C> <C>
50 $ 4.05 $ 4.05 $4.03 $3.99 $3.93
51 4.12 4.11 4.09 4.05 3.99
52 4.19 4.19 4.16 4.11 4.04
53 4.27 4.26 4.23 4.18 4.10
54 4.35 4.34 4.31 4.25 4.16
55 4.44 4.42 4.39 4.32 4.22
56 4.53 4.51 4.47 4.40 4.29
57 4.62 4.61 4.56 4.48 4.35
58 4.72 4.71 4.65 4.56 4.42
59 4.83 4.81 4.75 4.64 4.49
60 4.95 4.93 4.86 4.73 4.55
61 5.07 5.05 4.97 4.83 4.62
62 5.20 5.17 5.08 4.92 4.69
63 5.34 5.31 5.20 5.02 4.76
64 5.49 5.45 5.33 5.12 4.83
65 5.65 5.61 5.47 5.22 4.89
66 5.82 5.77 5.61 5.33 4.96
67 6.01 5.94 5.75 5.44 5.02
68 6.20 6.13 5.91 5.54 5.08
69 6.41 6.33 6.07 5.65 5.14
70 6.64 6.54 6.23 5.76 5.19
71 6.88 6.76 6.41 5.86 5.24
72 7.14 7.00 6.59 5.97 5.28
73 7.43 7.26 6.77 6.06 5.32
74 7.73 7.53 6.96 6.16 5.35
75 8.06 7.82 7.14 6.25 5.38
- -------------------- ----------------- ---------------- ----------------- ---------------- ------------------
</TABLE>
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
35
<PAGE>
OPTION 4
Life Income for Two Payees
Amount of First Monthly Payment for Each $l,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
<TABLE>
<CAPTION>
- ------------------------------------ --------------- --------------- ---------------- --------------- -----------------
Adjusted Ages
- ------------------------------------
Second
Annuitant Annuitant Option 4a Option 4b Option 4c Option 4d Option 4e
- ------------------ ----------------- --------------- --------------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $ 3.69 $ 4.05 $ 4.27 $3.69 $4.03
55 55 3.88 4.25 4.47 3.87 4.14
55 60 3.99 4.44 4.71 3.98 4.42
60 55 3.99 4.44 4.71 3.98 4.42
60 60 4.24 4.71 4.99 4.23 4.57
60 65 4.38 4.97 5.32 4.38 4.93
65 60 4.38 4.97 5.32 4.38 4.93
65 65 4.72 5.33 5.70 4.71 5.14
65 70 4.93 5.68 6.15 4.91 5.66
70 65 4.93 5.68 6.15 4.91 5.66
70 70 5.40 6.21 6.70 5.36 5.96
70 75 5.69 6.68 7.32 5.62 6.67
75 70 5.69 6.68 7.32 5.62 6.67
75 75 6.37 7.45 8.15 6.23 7.12
75 80 6.78 8.11 8.99 6.54 8.13
- ------------------ ----------------- --------------- --------------- ---------------- --------------- -----------------
</TABLE>
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
36
<PAGE>
OPTION 2
Payments for a Stated Period of Time
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
<TABLE>
<CAPTION>
- ------------------ ----------------- ---------------- ----------------- ------------------ ----------------
Quarterly Semi-Annual Annual
Years Guaranteed Rate Monthly Payment Payment Payment Payment
- ------------------ ----------------- ---------------- ----------------- ------------------ ----------------
<S> <C> <C> <C> <C> <C>
3 3.50% $29.19 $87.33 $173.91 $344.86
4 3.50% 22.27 66.61 132.65 263.04
5 3.50% 18.12 54.19 107.92 213.99
6 3.50% 15.35 45.92 91.44 181.32
7 3.50% 13.38 40.01 79.69 158.01
8 3.50% 11.90 35.59 70.88 140.56
9 3.50% 10.75 32.16 64.05 127.00
10 3.50% 9.83 29.42 58.59 116.18
11 3.50% 9.09 27.18 54.13 107.34
12 3.50% 8.46 25.32 50.42 99.98
13 3.50% 7.94 23.75 47.29 93.78
14 3.50% 7.49 22.40 44.62 88.47
15 3.50% 7.10 21.24 42.31 83.89
16 3.50% 6.76 20.23 40.29 79.89
17 3.50% 6.47 19.34 38.51 76.37
18 3.50% 6.20 18.55 36.94 73.25
19 3.50% 5.97 17.85 35.54 70.47
20 3.50% 5.75 17.22 34.28 67.98
21 3.50% 5.56 16.65 33.15 65.74
22 3.50% 5.39 16.13 32.13 63.70
23 3.50% 5.24 15.66 31.19 61.85
24 3.50% 5.09 15.24 30.34 60.17
25 3.50% 4.96 14.85 29.56 58.62
26 3.50% 4.84 14.49 28.85 57.20
27 3.50% 4.73 14.15 28.19 55.90
28 3.50% 4.63 13.85 27.58 54.69
29 3.50% 4.53 13.57 27.02 53.57
30 3.50% 4.45 13.30 26.49 52.53
- ------------------ ----------------- ---------------- ----------------- ------------------ ----------------
</TABLE>
37
<PAGE>
OPTION 2
Payments for a Stated Period of Time
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
<TABLE>
<CAPTION>
- ------------------- ------------------ ---------------- ------------------ ------------------- -----------------
Semi-Annual Annual
Years Guaranteed Rate Monthly Payment Quarterly Payment Payment Payment
- ------------------- ------------------ ---------------- ------------------ ------------------- -----------------
<S> <C> <C> <C> <C> <C>
3 5.00% $ 29.80 $ 89.04 $ 176.99 $ 349.72
4 5.00% 22.89 68.38 135.93 268.58
5 5.00% 18.74 56.00 111.33 219.98
6 5.00% 15.99 47.77 94.96 187.64
7 5.00% 14.02 41.90 83.30 164.59
8 5.00% 12.56 37.52 74.58 147.35
9 5.00% 11.42 34.11 67.81 133.99
10 5.00% 10.51 31.40 62.42 123.34
11 5.00% 9.77 29.19 58.03 114.66
12 5.00% 9.16 27.36 54.38 107.45
13 5.00% 8.64 25.81 51.31 101.39
14 5.00% 8.20 24.50 48.69 96.21
15 5.00% 7.82 23.36 46.44 91.75
16 5.00% 7.49 22.37 44.47 87.88
17 5.00% 7.20 21.51 42.75 84.48
18 5.00% 6.94 20.74 41.23 81.47
19 5.00% 6.71 20.06 39.88 78.80
20 5.00% 6.51 19.46 38.68 76.42
21 5.00% 6.33 18.91 37.59 74.28
22 5.00% 6.17 18.42 36.62 72.35
23 5.00% 6.02 17.98 35.73 70.61
24 5.00% 5.88 17.57 34.93 69.02
25 5.00% 5.76 17.20 34.20 67.57
26 5.00% 5.65 16.87 33.53 66.25
27 5.00% 5.54 16.56 32.92 65.04
28 5.00% 5.45 16.28 32.35 63.93
29 5.00% 5.36 16.01 31.83 62.90
30 5.00% 5.28 15.77 31.35 61.95
- ------------------- ------------------ ---------------- ------------------ ------------------- -----------------
</TABLE>
38
<PAGE>
OPTION 3
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
Payments Guaranteed for a Stated Period of Months
<TABLE>
<CAPTION>
- -------------------- ----------------- ---------------- ----------------- ---------------- -------------------
Adjusted
Age of Annuitant None 60 120 180 240
- -------------------- ----------------- ---------------- ----------------- ---------------- -------------------
<S> <C> <C> <C> <C> <C>
50 $ 4.34 $ 4.34 $ 4.31 $ 4.27 $ 4.22
51 4.41 4.40 4.38 4.33 4.27
52 4.48 4.47 4.45 4.40 4.32
53 4.56 4.55 4.52 4.46 4.38
54 4.64 4.63 4.59 4.53 4.44
55 4.72 4.71 4.67 4.60 4.50
56 4.81 4.80 4.75 4.67 4.56
57 4.91 4.89 4.84 4.75 4.62
58 5.01 4.99 4.93 4.83 4.69
59 5.12 5.10 5.03 4.92 4.75
60 5.23 5.21 5.13 5.00 4.82
61 5.36 5.33 5.24 5.09 4.88
62 5.49 5.45 5.35 5.19 4.95
63 5.63 5.59 5.47 5.28 5.02
64 5.78 5.73 5.60 5.38 5.08
65 5.94 5.89 5.73 5.48 5.15
66 6.11 6.05 5.87 5.58 5.21
67 6.29 6.22 6.02 5.69 5.27
68 6.49 6.41 6.17 5.79 5.33
69 6.70 6.60 6.33 5.90 5.38
70 6.92 6.81 6.49 6.00 5.43
71 7.17 7.04 6.66 6.10 5.48
72 7.43 7.27 6.84 6.20 5.52
73 7.71 7.53 7.02 6.30 5.55
74 8.02 7.80 7.20 6.39 5.59
75 8.35 8.08 7.38 6.48 5.62
- -------------------- ----------------- ---------------- ----------------- ---------------- -------------------
</TABLE>
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
39
<PAGE>
OPTION 3
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
Payments Guaranteed for a Stated Period of Months
<TABLE>
<CAPTION>
- ------------------- ----------------- ----------------- ----------------- ---------------- ------------------
Adjusted
Age of Annuitant None 60 120 180 240
- ------------------- ----------------- ----------------- ----------------- ---------------- ------------------
<S> <C> <C> <C> <C> <C>
50 $ 5.26 $ 5.25 $ 5.22 $ 5.17 $ 5.11
51 5.33 5.32 5.28 5.23 5.15
52 5.40 5.38 5.34 5.29 5.20
53 5.47 5.45 5.41 5.35 5.26
54 5.54 5.53 5.48 5.41 5.31
55 5.63 5.61 5.56 5.47 5.36
56 5.71 5.69 5.63 5.54 5.42
57 5.80 5.78 5.72 5.61 5.47
58 5.90 5.88 5.81 5.69 5.53
59 6.01 5.98 5.90 5.77 5.59
60 6.12 6.09 6.00 5.85 5.65
61 6.24 6.21 6.10 6.93 5.71
62 6.37 6.33 6.21 6.02 5.77
63 6.51 6.46 6.33 6.11 5.83
64 6.66 6.60 6.45 6.20 5.89
65 6.82 6.75 6.57 6.30 5.95
66 6.99 6.91 6.71 6.39 6.01
67 7.17 7.08 6.85 6.49 6.06
68 7.36 7.27 6.99 6.59 6.12
69 7.57 7.46 7.15 6.69 6.17
70 7.80 7.67 7.30 6.78 6.21
71 8.05 7.89 7.47 6.88 6.25
72 8.31 8.13 7.64 6.97 6.29
73 8.59 8.38 7.81 7.06 6.33
74 8.90 8.64 7.99 7.15 6.36
75 9.23 8.93 8.16 7.23 6.38
- ------------------- ----------------- ----------------- ----------------- ---------------- ------------------
</TABLE>
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
40
<PAGE>
OPTION 4
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
<TABLE>
<CAPTION>
- --------------------------------- ---------------- ---------------- ----------------- ------------------ -----------------
Adjusted Ages
- ---------------------------------
Second
Annuitant Annuitant Option 4a Option 4b Option 4c Option 4d Option 4e
- --------------- ------------------ ---------------- ---------------- ----------------- ------------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $ 3.97 $ 4.35 $ 4.56 $ 3.97 $4.31
55 55 4.16 4.54 4.76 4.15 4.42
55 60 4.27 4.73 5.00 4.26 4.48
60 55 4.27 4.73 5.00 4.26 4.70
60 60 4.51 4.99 5.27 4.50 4.84
60 65 4.66 5.25 5.61 4.65 4.93
65 60 4.66 5.25 5.61 4.65 5.22
65 65 4.99 5.61 5.99 4.98 5.42
65 70 5.19 5.97 6.44 5.17 5.54
70 65 5.19 5.97 6.44 5.17 5.93
70 70 5.67 6.49 6.99 5.62 6.23
70 75 5.95 6.96 7.61 5.87 6.40
75 70 5.95 6.96 7.61 5.87 6.95
75 75 6.64 7.73 8.43 6.48 7.40
75 80 7.04 8.39 9.29 6.79 7.64
- ----------------- --------------- ---------------- ---------------- ----------------- ------------------ -----------------
</TABLE>
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
41
<PAGE>
OPTION 4
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
<TABLE>
<CAPTION>
- ---------------------------------- ----------------- ----------------- ---------------- ----------------- -----------------
Adjusted Ages
- ----------------------------------
Second
Annuitant Annuitant Option 4a Option 4b Option 4c Option 4d Option 4e
- ---------------- ----------------- ----------------- ----------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $4.88 $5.26 $5.48 $4.88 $5.23
55 55 5.04 5.44 5.66 5.04 5.32
55 60 5.15 5.63 5.91 5.14 5.38
60 55 5.15 5.63 5.91 5.14 5.59
60 60 5.37 5.87 6.16 5.37 5.72
60 65 5.52 6.14 6.51 5.51 5.80
65 60 5.52 6.14 6.51 5.51 6.10
65 65 5.83 6.49 6.87 5.82 6.29
65 70 6.04 6.84 7.34 6.00 6.41
70 65 6.04 6.84 7.34 6.00 6.81
70 70 6.49 7.35 7.87 6.44 7.08
70 75 6.77 7.84 8.51 6.68 7.25
75 70 6.77 7.84 8.51 6.68 7.81
75 75 7.45 8.60 9.33 7.27 8.25
75 80 7.86 9.28 10.20 7.57 8.49
- ----------------- ---------------- ----------------- ----------------- ---------------- ----------------- -----------------
</TABLE>
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
42
<PAGE>
- --------------------------------------------------------------------------------
Aetna Life Insurance and Annuity Company
Home Office: 151 Farmington Avenue
Hartford, Connecticut 06156
(800) 525-4225
Individual Variable, Fixed, or Combination Annuity Contract
Nonparticipating
- --------------------------------------------------------------------------------
ALL PAYMENTS AND VALUES PROVIDED BY THE CONTRACT, WHEN BASED ON INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT. THIS CONTRACT CONTAINS A MARKET VALUE ADJUSTMENT FORMULA.
APPLICATION OF A MARKET VALUE ADJUSTMENT MAY RESULT IN EITHER AN INCREASE OR
DECREASE IN THE CURRENT VALUE. THE MARKET VALUE ADJUSTMENT FORMULA DOES NOT
APPLY TO A GUARANTEED TERM AT THE TIME OF ITS MATURITY.
Exhibit 99-B.4.15
-----------------------------------------------------
Aetna Life Insurance and Annuity Company
Home Office: 151 Farmington Avenue
Hartford, Connecticut 06156
(800) 525-4225
Aetna Life Insurance and Annuity Company, herein
called Aetna, agrees to pay the benefits stated
in the Contract.
- --------------------------------------------------------------------------------
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
Certificate 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, riders, or amendments
issued to you under the stated Contract and
Certificate numbers. This Certificate is for
information only and is not a part of the
Contract.
THE VARIABLE FEATURES OF THE GROUP CONTRACT ARE
DESCRIBED IN PARTS III AND IV.
- --------------------------------------------------------------------------------
Right to Cancel You may cancel the Account evidenced by this
Certificate within 10 days of receiving it, by
returning this Certificate along with a written
notice to Aetna at the above address or to the
agent from whom it was purchased. Within 7 days
after it receives the notice of cancellation
and this Certificate at its Home Office, Aetna
will return the entire consideration paid plus
and increase or minus any decrease in the
current value of any funds allocation to the
Separate Account.
/s/ Gary G. Benanav /s/ George N. Gingold
Gary G. Benanav George N. Gingold
President Secretary
- --------------------------------------------------------------------------------
Contract Holder Group Annuity Contract No.
E. G. Anybroker Specimen
- --------------------------------------------------------------------------------
Your Name Certificate No.
John Doe Specimen
- --------------------------------------------------------------------------------
Annuitant Name Type of Plan
John Doe Jr. Flexible Premium
- --------------------------------------------------------------------------------
ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT, WHEN BASED ON INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT. THIS CERTIFICATE CONTAINS A MARKET VALUE ADJUSTMENT
FORMULA. APPLICATION OF A MARKET VALUE ADJUSTMENT MAY RESULT IN EITHER AN
INCREASE OR DECREASE IN THE CURRENT
GMCC-IC-(NQ)
<PAGE>
VALUE. THE MARKET VALUE ADJUSTMENT FORMULA DOES NOT APPLY TO A GUARANTEED TERM
AT THE TIME OF ITS MATURITY.
2
<PAGE>
Specifications
- --------------------------------------------------------------------------------
Guaranteed Interest There are guaranteed interest rates for amounts
Rate held in the MG Account (See Certificate Schedule I).
- -------------------------------------------------------------------------------
Deductions from the There will be deductions for mortality and expense
Separate Account risks and administrative fees. (See Certificate
Schedule I and II).
- --------------------------------------------------------------------------------
Deduction from Purchase Payment(s) are subject to a deduction for
Purchase Payment(s) premium taxes, if any. (See 3.01.)
- --------------------------------------------------------------------------------
Surrender Fee There will be a charge deducted upon surrender.
(See Certificate Schedule I).
3
<PAGE>
Contract Schedule I
Accumulation Period
Separate Account
- --------------------------------------------------------------------------------
Separate Account: Variable Annuity Account B
Charges to Separate Account: A daily charge is deducted from any portion
of the Current 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 Risk Charge 0.35%
Expense Risk Charge 0.90%
----
Total Separate Account
Charges 1.40%
Marathon Guaranteed Account (MG Account)
- --------------------------------------------------------------------------------
Minimum Guaranteed Interest Rate (effective
annual rate of return): 3.0%
Separate Account and MG Account
- --------------------------------------------------------------------------------
Transfers: An unlimited number of Transfers may be made
during the Accumulation Period. Aetna allows
12 free Transfers in any calendar year.
Thereafter, Aetna reserves the right to
charge $10 for each subsequent Transfer.
Maintenance Fee: The Annual Maintenance Fee is $30. If the
Account's Current Value is $50,000 or more on
the date the Maintenance Fee is to be
deducted, the Maintenance Fee is $0.
Surrender Fee: For each surrender, the Surrender Fee for
each Net Purchase Payment will be determined
as follows:
<TABLE>
<CAPTION>
Surrender Fee
Length of Time from Deposit of Net (as percentage of
Purchase Payment (Years) Net Purchase Payment)
<S> <C>
Less than 2 years 7%
2 or more but less than 4 years 6%
4 or more but less than 5 years 5%
5 or more but less than 6 years 4%
6 or more but less than 7 years 3%
7 years or more 0%
</TABLE>
4
<PAGE>
Contract Schedule I (Continued)
Accumulation Period
Systematic Withdrawal Option The specified payment or specified percentage
(SWO): may not be greater than 10% of the Account's
Current Value at time of election.
See 1 - GENERAL DEFINITIONS for explanations.
5
<PAGE>
Contract Schedule II
Annuity Period
Separate Account
- --------------------------------------------------------------------------------
Charges to Separate Account: A daily charge at an annual effective
rate of 1.25% for Annuity mortality
and expense risks. The administrative
charge is established upon election of
an Annuity option. This charge will
not exceed 0.25%.
Variable Annuity Assumed Annual If a Variable Annuity is chosen,
Net Return Rate: an assumed annual net return rate of
5.0% may be elected. If 5.0% is not
elected, Aetna will use an assumed
annual net return rate of 3.5%
The assumed annual net return rate
factor for 3.5% per year is 0.9999058.
The assumed annual net return rate
factor for 5.0% per year is 0.9998663.
If the portion of a Variable Annuity
payment for any Fund is not to
decrease, the Annuity return factor
under the Separate Account for that
Fund 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 assumed annual net
return rate 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 assumed annual
net return rate of 5% is chosen.
Fixed Annuity
- --------------------------------------------------------------------------------
Minimum Guaranteed Interest Rate
(effective annual rate of return):
3.0%
See 1. GENERAL DEFINITIONS for explanations.
6
<PAGE>
TABLE OF CONTENTS
I. GENERAL DEFINITIONS
- --------------------------------------------------------------------------------
Page
1.01 Account..............................................................9
1.02 Accumulation Period..................................................9
1.03 Adjusted Current Value...............................................9
1.04 Annuitant............................................................9
1.05 Annuity..............................................................9
1.06 Beneficiary..........................................................9
1.07 Certificate Holder...................................................9
1.08 Code.................................................................9
1.09 Contract.............................................................9
1.10 Contract Holder......................................................9
1.11 Current Value.......................................................10
1.12 Deposit Period......................................................10
1.13 Fixed Annuity.......................................................10
1.14 Fund(s).............................................................10
1.15 General Account.....................................................10
1.16 Guaranteed Rates - MG Account.......................................10
1.17 Guaranteed Term.....................................................11
1.18 Guaranteed Term(s) Groups...........................................11
1.19 Maintenance Fee.....................................................11
1.20 Marathon Guaranteed Account (MG Account)............................11
1.21 Market Value Adjustment (MVA).......................................11
1.22 Matured Term Value..................................................11
1.23 Matured Term Value Transfer.........................................11
1.24 Maturity Date.......................................................11
1.25 Net Purchase Payment(s).............................................12
1.26 Nonunitized Separate Account........................................12
1.27 Purchase Payment(s).................................................12
1.28 Reinvestment........................................................12
1.29 Separate Account....................................................12
1.30 Surrender Value.....................................................12
1.31 Transfers...........................................................12
1.32 Valuation Period (Period)...........................................13
1.33 Variable Annuity....................................................13
7
<PAGE>
II. GENERAL PROVISIONS
- --------------------------------------------------------------------------------
Page
2.01 Change of Contract...................................................13
2.02 Change of Fund(s)....................................................14
2.03 Nonparticipating Contract............................................14
2.04 Payments and Elections...............................................14
2.05 State Laws...........................................................15
2.06 Control of Contract..................................................15
2.07 Designation of Beneficiary...........................................15
2.08 Misstatements and Adjustments........................................15
2.09 Incontestability.....................................................15
2.10 Grace Period.........................................................15
III. PURCHASE PAYMENT, CURRENT VALUE, AND SURRENDER PROVISIONS
- --------------------------------------------------------------------------------
3.01 Net Purchase Payment.................................................16
3.02 Certificate Holder's Account.........................................16
3.03 Fund(s) Record Units -- Separate Account.............................16
3.04 Net Return Factor(s) -- Separate Account.............................16
3.05 Fund Record Unit Value -- Separate Account...........................17
3.06 Market Value Adjustment..............................................17
3.07 Transfer of Current Value from the Funds or MG Account...............18
3.08 Notice to the Certificate Holder.....................................19
3.09 Loans................................................................19
3.10 Systematic Withdrawal Option (SWO)...................................19
3.11 Death Benefit Amount.................................................21
3.12 Death Benefit Options available to Beneficiary.......................22
3.13 Liquidation of Surrender Value.......................................23
3.14 Surrender Fee........................................................24
3.15 Payment of Surrender Value...........................................25
3.16 Reinstatement........................................................25
3.17 Payment of Adjusted Current Value....................................25
IV. ANNUITY PROVISIONS
- --------------------------------------------------------------------------------
4.01 Choices to be Made...................................................26
4.02 Terms of Annuity Options.............................................26
4.03 Death of Annuitant/Beneficiary.......................................27
4.04 Fund(s) Annuity Units - Separate Account.............................28
4.05 Fund(s) Annuity Unit Value - Separate Account........................29
4.06 Annuity Net Return Factor(s) -- Separate Account.....................29
4.07 Annuity Options......................................................30
8
<PAGE>
I. GENERAL DEFINITIONS
- --------------------------------------------------------------------------------
1.01 Account: A record established for each
Certificate Holder to maintain the
value of all Net Purchase Payments
held on his her behalf during the
Accumulation Period.
1.02 Accumulation Period: The period during which the Net
Purchase Payment(s) are applied to an
Account to provide future Annuity
payment(s).
1.03 Adjusted Current Value: The Current Value of an Account plus
or minus any aggregate MG Account MVA,
if applicable. (See 1.21)
1.04 Annuitant: The person whose life is measured for
purposes of the guaranteed death
benefit and the duration of Annuity
payments under the Contract.
1.05 Annuity: Payment of an income:
(a) For the life of one or two
persons;
(b) For a stated period; or
(c) For some combination of (a) and
(b).
1.06 Beneficiary: The individual or estate entitled to
receive any payment from the Account
upon the death of the Annuitant.
1.07 Certificate Holder: A person who purchases an interest in
the Contract as evidenced by a
certificate. A Certificate Holder
cannot be a nonnatural person (i.e. a
trustee for a trust, an executor or
administrator for an estate, or an
incorporated or unincorporated
business).
1.08 Code: The Internal Revenue Code of
1986, as it may be amended from time
to time.
1.09 Contract: The agreement between Aetna and the
Contract Holder.
1.10 Contract Holder: The entity to which the Contract is
issued. The Contract is offered to:
(a) National Association of Securities
Dealers, Inc. ("NASD") member
broker-dealers selected by Aetna,
who have a minimum net capital of
$250,000 or more, including
broker-dealer subsidiaries of
banks and savings and loan
associations;
(b) Employers who sponsor nonqualified
benefit plans for their employees
(exempt from ERISA Title I);
(c) Entities that contribute to
annuities on behalf of their
customers; and
9
<PAGE>
1.10 Contract Holder (Cont'd): (d) Custodians of custodial accounts
and trustees of trusts that have
been established for Individual
Retirement Accounts under Code
Section 408.
1.11 Current Value: As of the most recent Valuation
Period, the Net Purchase Payment and
any additional amount deposited
pursuant to 3.11 plus any interest
added to the portion allocated to the
MG Account; and plus or minus the
investment experience of the portion
allocated to the Funds since deposit;
less all Maintenance Fees deducted,
any amounts surrendered and any
amounts applied to an Annuity.
1.12 Deposit Period: A calendar week, a calendar month, a
calendar quarter, or any other period
of time specified by Aetna during
which Net Purchase Payment(s),
Transfers and Reinvestments are
accepted into the MG Account for one
or more Guaranteed Terms. Aetna
reserves the right to extend the
Deposit Period.
1.13 Fixed Annuity: An Annuity with payments that do not
vary in amount.
1.14 Fund(s): The open-end management investment
companies (mutual funds) in which the
Separate Account invests.
1.15 General Account: The Account holding the assets of
Aetna, other than those assets held in
Aetna's separate accounts.
1.16 Guaranteed Rates -- MG Aetna will declare the interest
Account: 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 that Deposit Period and the
ensuing Guaranteed Term. 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 Contract Schedule I.
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.
1.17 Guaranteed Term: The period of time for which MG
Account Guaranteed Rates are
guaranteed on Net Purchase Payments.
Transfers and Reinvestments made into
a current Deposit Period for the MG
Account. Such period begins on the day
following the close of the Deposit
Period and ends on the designated
Maturity Date. Guaranteed Terms are
offered at Aetna's discretion for
various lengths of time ranging up to
and including ten years.
10
<PAGE>
1.17 Guaranteed Term (Cont'd): During a Deposit Period, Aetna may
make available any number of
Guaranteed Terms. The Certificate
Holder may allocate Net Purchase
Payments and Transfers into any or all
of the available Guaranteed Terms.
1.18 Guaranteed Term(s) Groups: All MG Account Guaranteed Term(s) with
the same length of time from the close
of the Deposit Period until the
designated Maturity Date.
1.19 Maintenance Fee: The Maintenance Fee (see Contract
Schedule I) will be deducted during
the Accumulation Period from the
Current Value on each anniversary of
the date the Account is established
and upon surrender of the entire
Account.
1.20 Marathon Guaranteed An accumulation option where Aetna
Account (MG Account): guarantees stipulated rate(s) of
interest for specified period of time.
All assets of Aetna, including amounts
in the Nonunitized Separate Account,
are available to meet the guarantees
under the MG Account.
1.21 Market Value An adjustment to the amount withdrawn
Adjustment (MVA): or transferred from an MG Account
Guaranteed Term prior to the end of
that Guaranteed Term. The adjustments
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 in 3.06. The adjustment
is expressed as a percentage of each
dollar being withdrawn.
1.22 Matured Term Value: The amount payable on an MG Account
Guaranteed Term's Maturity Date.
1.23 Matured Term Value Transfer: During the calendar month following an
MG Account Maturity Date, the
Certificate Holder may notify Aetna's
Home Office in writing to Transfer or
surrender all or part of the Matured
Term Value, plus interest at the new
Guaranteed Rate accrued thereon, from
the MG 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.
1.24 Maturity Date: The last day of an MG Account
Guaranteed Term.
1.25 Net Purchase Payment(s): The Purchase Payment less premium
taxes, as applicable.
1.26 Nonunitized Separate A separate account set up by Aetna
Account: under Title 38. Section 38a-433, of
the Connecticut General Statutes, that
holds assets for MG Account Terms.
There are no discrete units for this
Account. The Certificate Holder does
not participate in the investment gain
or loss from the assets held in the
Nonunitized Separate Account. Such
gain or loss is borne entirely by
Aetna. These assets may be chargeable
with liabilities arising out of any
other business of Aetna.
11
<PAGE>
1.27 Purchase Payment(s): Payment(s) 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.
1.28 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 current Terms available
during the 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.
1.29 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. This 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 Account, shall not
be charged with other Aetna
liabilities.
1.30 Surrender Value: The amount payable by Aetna upon the
surrender of any portion of an
Account.
1.31 Transfers: The movement of invested amounts among
the available Fund(s) and the MG
Account under the Contract during the
Accumulation Period.
1.32 Valuation Period (Period): The period of time for which a Fund
determines its net asset value,
usually from 4:15 p.m. Eastern time
each day the New York Stock Exchange
is open until 4:15 p.m. the next such
day, or such other day that one or
more of the Funds determines its net
asset value.
1.33 Variable Annuity: An Annuity with payments that vary
with the net investment results of one
or more Funds under the Separate
Account.
12
<PAGE>
II. GENERAL PROVISIONS
- --------------------------------------------------------------------------------
2.01 Change of Contract: Only an authorized officer of Aetna
may change the terms of the 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 which begins
before the change.
Aetna reserves the right to refuse to
accept any Purchase Payment at any
time for any reason. This applies to
an initial Purchase Payment to
establish a new Account or to
subsequent Purchase Payments to
existing Accounts under the Contract.
No advance notice will be given to the
Contract Holder or Certificate Holder.
Aetna may make any change that affects
the MG Account Market Value Adjustment
(3.06) 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 Term and will apply to all present
and future Accounts.
Aetna reserves the right to change the
terms of the Systematic Withdrawal
Option (3.10) for future elections and
discontinue the availability of this
option after proper notification.
Any change that affects any of the
following under the Contract will not
apply to Accounts in existence before
the effective date of the change:
(a) Net Purchase Payment (1.25)
(b) MG Account Guaranteed Rate (1.16)
(c) Net Return Factor(s) -- Separate
Account (3.04)
(d) Current Value (1.11)
(e) Surrender Value (1.30)
(f) Fund(s) Annuity Unit Value -
Separate Account (4.05)
(g) Annuity options (4.07)
(h) Fixed Annuity Interest Rates
(4.01)
(i) Transfers (1.31).
Any change that affects the Annuity
options and the tables for the options
may be made:
(a) No earlier than 12 months after
the effective date of the
Contract; and
(b) No earlier than 12 months after
the effective date of any prior
change.
13
<PAGE>
2.02 Change of Fund(s): 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.
Aetna, or the Separate Account, may:
(a) Change the Fund(s) which may be
invested in by the Separate
Account; and
(b) Replace the shares of any Fund(s)
held in the Separate Account with
shares of any other Fund(s).
Changes must be:
(a) Approved by a majority vote in the
Separate Account with respect to
the Fund(s) whose shares are to be
replaced; or
(b) Deemed necessary by Aetna under
the Investment Company Act of
1940; or
(c) Deemed necessary by Aetna to
accomplish the purpose of the
Separate Account.
Aetna will notify the Contract Holder
and the Certificate Holder of any
change.
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, any Annuity payments
required to be made will be paid in
accordance with 4.03. Aetna will
determine other payments and/or
elections as of the end of the
Valuation Period 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 3.15.
2.05 State Laws: The Contract and the Certificates
comply with the laws of the state in
which they are delivered. Any
surrender, death, 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.
14
<PAGE>
2.06 Control of Contract: The Contract is 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 the Contract for
his or her Account. Choices made under
the Contract must be 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 to one or more natural
persons. Any assignment or transfer
must be submitted to Aetna's Home
Office in writing and will not be
effective until accepted by Aetna.
2.07 Designation of Beneficiary: Each Certificate Holder shall name his
or her Beneficiary. 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.
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 cannot cancel the Contract
because of any error of fact on the
application. Aetna cannot cancel an
Account because of any error of fact
on the enrollment form.
2.10 Grace Period: The Contract and this Certificate will
remain in effect even if Purchase
Payments are not continued except as
provided in the Payment of Adjusted
Current Value provision (See 3.17).
III. PURCHASE PAYMENT, CURRENT VALUE, AND SURRENDER PROVISIONS
- --------------------------------------------------------------------------------
3.01 Net Purchase Payment: This amount is the actual Purchase
Payment less any premium tax. Aetna
will generally deduct the premium tax
when Annuity benefits are elected (see
Part IV). If Aetna determines that
under applicable state law, it must
pay a premium tax when the Purchase
Payment is received or at any other
time, it will deduct the tax at that
time.
The Net Purchase Payment will be
credited among:
(a) The current Deposit Period(s) for
Guaranteed Terms under the MG
Account; and
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<PAGE>
3.01 Net Purchase Payment (b) The Fund(s) in which the Separate
(Cont'd): Account invests.
For each Net Purchase Payment, the
Certificate Holder shall tell Aetna
the allocation percentage to be
applied to the current Deposit Period
for each of the available Guaranteed
Terms in the MG Account and/or each
Fund. If allocation instructions are
not received along with any subsequent
Net Purchase Payment, the allocation
will be the same as that indicated on
the original enrollment form. If the
same Guaranteed Term is no longer
available, the Net 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 additional Purchase
Payments. Each Account will be subject
to the Terms and Conditions of the
Contract in effect at the time the
first Purchase Payment for such
Account is applied to the Contract
except for changes made to comply with
federal or state law.
3.03 Fund(s) Record Units -- The portion of the Net Purchase
Separate Account: Payment(s) applied to each Fund under
the Separate Account will determine
the number of Fund record units for
that Fund. This number is equal to the
portion of the Net Purchase Payment(s)
applied to each Fund divided by the
Fund record unit Value (see 3.05) for
the Valuation Period in which the
Purchase Payment is received in good
order at Aetna's Home Office.
3.04 Net Return Factor(s) -- The net return factor(s) are used to
Separate Account: compute all Separate Account record
units for any Fund.
The net return factor(s) for each Fund
is equal to 1.0000000 plus the net
return rate.
The net return rate is equal to:
(a) The value of the Shares of the
Fund held by the Separate Account
at the end of the Valuation
Period; minus
(b) The value of the shares of the
Fund held by the Separate Account
at the start of the Valuation
Period; plus or minus
(c) Taxes (or reserves for taxes) on
the Separate Account (if any);
divided by
(d) The total value of the Fund(s)
record units and Fund(s) annuity
units of the Separate Account at
the start of the Valuation Period;
minus
(e) A daily Separate Account charge at
an annual rate as shown on
Contract Schedule I for mortality
and expense risks, which may
include profit; and a daily
administrative charge.
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<PAGE>
3.04 Net Return Factor(s) -- A net return rate may be more or less
Separate Account (Cont'd): than 0%. The value of a share of the
Fund is equal to the net assets of the
Fund divided by the number of shares
outstanding.
3.05 Fund Record Unit Value -- A Fund record unit value is computed
Separate Account: by multiplying the net return factors
for the current Valuation Period by
the Fund record unit value for the
previous Period. The dollar value of
Fund record units, Separate Account
assets, and Variable Annuity payments
may go up or down due to investment
gain or loss.
3.06 Market Value Adjustment: There will be an MVA for a withdrawal
from the MG Account before the end of
a Guaranteed Term when the withdrawal
is due to:
(a) A Transfer; except as specified in
MG Account Matured Term Value
Transfer;
(b) A full or partial surrender,
including a 10% free withdrawal
under 3.14; or
(c)An election of Annuity option 2
(see 4.07).
Full and partial surrenders 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 calculated due to
a withdrawal of amounts. This
total may be greater or less than
the Current Value of those
amounts; or
(b) The applicable portion of the
Current Value in the MG Account.
After the six-month period, the
surrender or Transfer will be the
aggregate MVA amount, which may be
greater or less than the Current Value
of those amounts.
The greater of the aggregate MVA
amount or the applicable portion of
the Current Value applies to amounts
withdrawn from the MG Account on
account of an election of Annuity
options 3 or 4 (see 4.07).
Market value adjusted amounts will be
equal to the amount withdrawn
multiplied by the following ratio:
X
---
365
(1 + i)
---------------
X
---
365
(1 + j)
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<PAGE>
3.06 Market Value Adjustment Where:
(Cont'd): i is the Deposit Period Yield
j is the Current Yield
x is the number of days
remaining, (computed from
Wednesday of the week of
withdrawal) in the Guaranteed
Term.
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 Current Value Before an Annuity option is elected,
from the Funds or MG Account: all or any portion of the Adjusted
Current Value of the Certificate
Holder's Account may be transferred
from any Fund or Guaranteed Term of
the MG Account:
(a) To any other Fund; or
(b) To any Guaranteed Term of the MG
Account available in the current
Deposit Period.
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 surrendered 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 Contract Schedule I.
Additional Transfers may be subject to
a Transfer fee as shown on Contract
Schedule I.
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<PAGE>
3.07 Transfer of Current Value Transfers from the MG Account of a
from the Funds or Matured Term Value on or within one
MG Account (Cont'd): calendar month of a Term's Maturity
Date do not count against the annual
Transfer limit.
Amounts applied to Guaranteed Terms of
the MG Account may not be transferred
to the Funds or to another Guaranteed
Term during the Deposit Period or for
90 days after the close of the Deposit
Period except for Matured Term
Value(s) during the calendar month
following the Term's Maturity Date.
Transfers from Guaranteed Terms of the
MG Account are subject to the MVA
provisions of 3.06.
3.08 Notice to the Certificate The Certificate Holder will receive
Holder: quarterly statements from Aetna of:
(a) The value of any amounts held in:
(1)The MG Account; and
(2)The Fund(s) under the
Separate Account.
(b) The number of any Fund(s) record
units; and
(c) the Fund(s) record unit value.
Such number of 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
certificate.
3.10 Systematic Withdrawal Option A distribution option under which a
(SWO): portion of the Account's Current Value
will automatically be surrendered and
distributed each year. SWO payments
will be calculated on the Account's
full Current Value. The distributed
amount is withdrawn pro rata from each
investment option under the Account. A
Surrender Fee will not be deducted
from any portion of the Adjusted
Current Value which is paid as a
distribution under SWO. Certificate
Holders should consult their tax
adviser prior to requesting this
distribution option. Aetna will not be
responsible for any adverse tax
consequences due to receiving SWO
payments.
(a) Amount of Distribution: The
Certificate Holder may elect one
of the three payment methods
described below.
(1) Specified Payment: Payments
of a designated dollar
amount. The annual amount
may not be greater than the
percentage of the Current
Value at time of election as
shown on Contract Schedule I.
This annual dollar amount
will remain constant. At its
discretion, Aetna may require
a minimum initial payment
amount;
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<PAGE>
3.10 Systematic Withdrawal Option (2) Specified Period: Payments
(SWO) (Cont'd): which are made over a period
of time which must be at
least 10 years. The annual
amount paid each year is
calculated by dividing the
Current Value as of December
31 of the prior year by the
number of payment years
remaining; or
(3) Specified Percentage:
Payment of a designated
percentage which cannot be
greater than the percentage
of the Current Value at the
time of election as shown
on Contract Schedule I. The
percentage may be changed
by written request. Aetna
reserves the right to limit
the number of times the
percentage may be changed.
The annual amount is
calculated by multiplying
the Current Value as of
December 31 of the year
prior to the payment by the
designated percentage.
Payments upon the Certificate Holder's
or Annuitant's death will be made to
the Beneficiary in the manner
described in 3.12.
(b) Minimum Initial Current Value: At
its discretion, Aetna may require
a minimum initial Current Value
for election of this option. If
after election of this option the
Current Value is insufficient to
make a scheduled SWO payment,
Aetna will distribute the entire
Account balance.
(c) Date of Distribution: The
Certificate Holder shall specify
the initial distribution date. The
earliest date for distribution is
the date on which the Certificate
Holder attains age 59 1/2. As
elected by the Certificate Holder,
SWO payments will be made on a
monthly, quarterly, semi-annual or
annual basis. If SWO payments are
made more frequently than
annually, the designated annual
amount is divided by the number of
payments due each calendar year.
Subsequent distributions will be
made on the 15th of any month or
such other date Aetna may
designate or allow.
(d) Election and Revocation: SWO may
be elected by the Certificate
Holder by submitting a completed
and signed election form to
Aetna's Home Office. Once elected,
this option may be revoked by the
Certificate Holder or spousal
Beneficiary, if elected after the
Certificate Holder's death, by
submitting a written request to
Aetna at its Home Office. Any
revocation will apply only to
amounts not yet paid. SWO may be
elected only once by the
Certificate Holder or by the
spouse Beneficiary.
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<PAGE>
3.11 Death Benefit Amount: If the Certificate Holder or Annuitant
dies before Annuity payments start,
the Beneficiary is entitled to a death
benefit under the Account. The claim
date is the date when proof of death
and the Beneficiary's claim are
received in good order at Aetna's Home
Office. The amount of the death
benefit is determined as follows:
(a) Death of Annuitant less than 75
years of age: The guaranteed death
benefit is the greatest of:
(1) The gross sum of all
Purchase Payment(s) made to
the Account (as of the date
of death) minus the sum of
all amounts surrendered,
applied to an Annuity, or
deducted from the Account;
(2) The step up value as of the
date of death plus all Net
Purchase Payments made to the
Account, minus the total of
all partial surrenders,
amounts applied to an Annuity
and deductions made from the
Account since determination
of the step up value. The
step up value is the Current
Value on the most recent
seventh year anniversary of
the date the first Net
Purchase Payment is applied
to the Account;
(3) The Account's Current Value
as of the date of death. The
excess, if any, of the
guaranteed death benefit
value over the Account's
Current Value is determined
as of the date of death. Any
excess amount will be
deposited to the Account and
allocated to Aetna Variable
Encore Fund as the claim
date. The Current Value on
the claim date plus any
excess amount deposited
becomes the Account's Current
Value.
(b) Death of Annuitant age 75 or
greater: The death benefit amount
is the Account Current Value on
the claim date.
(c) Death of the Certificate Holder if
the Certificate Holder is not the
Annuitant: The death benefit
amount is the Account Adjusted
Current Value on the claim date. A
Surrender Fee may apply to any
full or partial surrender (see
3.14 and Contract Schedule I).
3.12 Death Benefit Options Prior to any election, or until
available to Beneficiary: amounts must be otherwise distributed
under this section, the Current Value
of the Account will be retained in the
Account. The Beneficiary has the right
under the Account to allocate or
reallocate any amount to any of the
available investment options (subject
to an MVA, as applicable). The
following options are available to the
Beneficiary:
(a) When the Certificate Holder is the
Annuitant: If the Certificate
Holder/Annuitant dies, and:
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<PAGE>
3.12 Death Benefit Options (1) If the Beneficiary is the
available to Beneficiary Certificate Holder's
(Cont'd): surviving spouse, the
Beneficiary will be the
successor Certificate Holder
of the Account on Aetna's
records. Such successor
Certificate Holder may
exercise all Certificate
Holder rights under the
Contract and continue in the
Accumulation Period, or may
elect (i), (ii), or (iii)
below. Under the Code,
distributions from the
Account are not required
until the successor
Certificate Holder's death.
The Beneficiary may elect to:
(i) Apply some or all of
the Adjusted Current
Value of the Account to
Annuity option 2, 3 or
4 (see 4.07);
(ii) Apply some or all of
the Adjusted Current
Value of the Account to
Annuity option 1 (see
4.07); or
(iii) Receive, at any time, a
lump sum payment equal
to the Adjusted Current
Value of the Account.
(2) If the Beneficiary is other
than the Certificate
Holder's surviving spouse,
then options (i), (ii), or
(iii) under (1) above
apply. Any portion of the
Adjusted Current Value of
the Account not applied to
Annuity option 2, 3 or 4
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
Adjusted Current Value will
be made to the Certificate
Holder's estate.
(b) When the Certificate Holder is not
the Annuitant and the Certificate
Holder dies, and:
(1) If the Beneficiary is the
Certificate Holder's
surviving spouse, the
Beneficiary will be the
successor Certificate
Holder of the Account on
Aetna's records. Such
successor Certificate
Holder may exercise all
Certificate Holder rights
under the Contract and
continue in the
Accumulation Period, or may
elect (i), (ii), or (iii)
below. Under the Code,
distributions from the
Account are not required
until the successor
Certificate Holder's death.
The Beneficiary may elect
to:
(i) Apply some or all of
the Adjusted Current
Value of the Account to
Annuity option 2, 3 or
4 (see 4.07);
(ii) Apply some or all of
the Surrender Value of
the Account to Annuity
option 1 (see 4.07); or
22
<PAGE>
3.12 Death Benefit Options (iii) Receive, at any time,
available to Beneficiary a lump sum payment
(Cont'd): equal to the Surrender
Value of the Account.
(2) If the Beneficiary is other
than the Certificate
Holder's surviving spouse,
then options (i), (ii), or
(iii) under (1) above
apply. Any portion of the
Adjusted Current Value of
the Account not applied to
Annuity option 2, 3 or 4
within one year of the
Certificate Holder's death
will be subject to a
Surrender Fee, if
applicable, and must be
distributed within five
years of the date of death.
(3) If no Beneficiary exists, a
lump sum payment equal to the
Surrender Value will be made
to the Certificate Holder's
estate.
(c) When the Certificate Holder is not
the Annuitant and the Annuitant
dies: The Beneficiary must elect
Annuity option 2, 3 or 4 within 60
days of the date of death or the
gain, if any, will be includable
in the Beneficiary's income in the
tax year in which the Annuitant
dies.
3.13 Liquidation of All or any portion of the Account's
Surrender Value: Adjusted Current Value may be
surrendered at any time. Surrender
requests can be submitted as a
percentage of the Account value or as
a specific dollar amount. Net
Purchase Payment amounts are withdrawn
first, and then the excess value, if
any. For any partial surrender,
amounts are withdrawn on a pro rata
basis from the Fund(s) and/or the
Guaranteed Term(s) Groups of the MG
Account in which the Current Value is
invested. Within a Guaranteed Term
Group, the amount to be surrendered
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 surrendered
amount shall be reduced by a Surrender
Fee; if applicable.
3.14 Surrender Fee: The Surrender Fee only applies to the
Net Purchase Payment(s) portion
surrendered and varies according to
the elapsed time since deposit (see
Contract Schedule I). Net Purchase
Payment amounts are withdrawn in the
same order they were applied.
No Surrender Fee is deducted from any
portion of the Current Value which is
paid:
(a) To a Beneficiary due to the
Annuitant's death before Annuity
payments start, up to a maximum of
the aggregate Net Purchase
Payment(s) minus the total of all
partial surrenders, amounts
applied to an Annuity and
deductions made prior to the
Annuitant's date of death;
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<PAGE>
3.14 Surrender Fee (Cont'd): (b) As a premium for an Annuity option
2, 3 or 4 under this Contract (see
4.07);
(c) As a distribution under the SWO
provision (see 3.10);
(d) At least 12 months after the date
of the first Purchase Payment to
the Account, in an amount equal to
or less than 10% of the Current
Value. This applies to the first
surrender request, partial or
full, in a calendar year. The
Current Value is calculated as of
the date the surrender request is
received in good order at Aetna's
Home Office. This waiver is not
available to the Certificate
Holder while SWO is in effect.
(e) For a full surrender of the
Account where the Current Value of
the Account is $2,500 or less and
no surrenders have been taken from
the Account within the prior 12
months;
(f) By Aetna under 3.17; or
(g) 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 calendar year
has elapsed since the date
the certificate was issued;
and
(2) the surrender is requested
within 3 years of admission
to a licensed nursing care
facility.
This waiver does not apply if the
Annuitant was in a nursing care
facility at the time this
certificate was issued.
3.15 Payment of Surrender Under certain emergency conditions,
Value: Aetna may defer payment:
(a) For a period of up to 6 months
(unless not allowed by state law);
or
(b) As provided by federal law.
3.16 Reinstatement: All or a portion of the proceeds of a
full surrender of an Account may be
reinvested within 30 days after the
surrender. Any Maintenance Fee and
Surrender Fee charged at the time of
surrender on the amount being
reinvested will be included in the
reinvestment. Any Market Value
Adjustment(s) deducted from surrenders
will not be included in the
reinstatement.
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<PAGE>
3.16 Reinstatement (Cont'd): Amounts will be reinstated among the
MG Account and the Funds in the
Separate Account in the same
proportion as they were at the time
of surrender. Any amounts
reinstated to the MG Account will be
credited to the Guaranteed Terms
available during the current Deposit
Period in the same proportion as they
were at the time of surrender. In the
event that a Guaranteed Term of the
same duration is unavailable, amounts
will be reinvested in 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. The number of Fund(s)
Record Units reinstated will be based
on the Record Unit Value(s) next
computed after receipt at Aetna's Home
Office of the reinstatement request
and the amount to be reinstated.
Any Maintenance Fee which falls due
after the surrender and before the
reinstatement will be deducted from
the amount reinstated.
Any Account(s) surrendered because the
Current Value was less than $2,500
immediately following any partial
surrender may not be reinstated (see
3.17).
Reinstatement of an Account is
permitted only once.
3.17 Payment of Adjusted Upon 90 days' written notice to the
CurrentValue: Certificate Holder, Aetna will
terminate any Account if the Current
Value becomes less than $2,500
immediately following any partial
surrender. Aetna does not intend to
exercise this right in cases where an
Account Current Value is reduced to
$2,500 or less solely due to
investment performance. A surrender
fee will not be deduced from the
Adjusted Current Value. This
terminated Adjusted Current Value of
an Account may not be reinstated.
IV. ANNUITY PROVISIONS
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4.01 Choices to be Made: The Certificate Holder may tell Aetna
to apply any portion of the Adjusted
Current Value (minus any premium tax)
for an Annuity under option 2, 3, or 4
(see 4.07). 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, the
Certificate Holder may tell Aetna
to make a lump sum payment.
When an Annuity Option is chosen,
Aetna must also be told if payments
are to be made other than monthly and
whether to pay:
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<PAGE>
4.01 Choices to be Made (Cont'd): (a) A Fixed Annuity using the General
Account;
(b) A Variable Annuity using any of
the Fund(s) available under this
Contract for Annuity purposes; or
(c) A combination of (a) and (b).
If a Fixed Annuity is chosen, the
Annuity purchase rate for the option
chosen reflects the Minimum Guaranteed
Interest Rate (see Contract Schedule
II), but may reflect higher interest
rates. If a Variable Annuity is
chosen, the initial Annuity payment
for the option chosen reflects the
assumed annual return rate elected.
(see Contract Schedule II).
4.02 Terms of Annuity (a) When payments start, the age of
Options the Annuitant plus the number of
years for which payments are
guaranteed must not exceed 95.
(b) An Annuity 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 annual minimum Annuity payment
amount based upon increases
reflected in the Consumer Price
Index-Urban, (CPI-U) since July 1,
1983.
(c) If a Fixed Annuity under option 2,
3 or 4 is chosen and a larger
payment would result from applying
the Surrender Value to a current
Aetna single premium immediate
Annuity, Aetna will make the
larger payment.
(d) For purposes of calculating the
guaranteed first payment of a
Variable Annuity or the payments
for a Fixed Annuity, the
Annuitant's and second Annuitant's
adjusted age will be used. The
Annuitant's and second Annuitant's
adjusted age is his or her age as
of the birthday closest to the
Annuity commencement date reduced
by one year for Annuity
commencement dates occurring
during the period of time from
July 1, 1993 through December 31,
1999. The Annuitant's and second
Annuitant's age will be reduced by
two years for Annuity commencement
dates occurring during the period
of time from January 1, 2000
through December 31, 2009. The
Annuitant's and second Annuitant's
age will be reduced by one
additional year for Annuity
commencement dates occurring in
each succeeding decade.
The Annuity purchase rates for
options 3 and 4 are based on
mortality from 1983 Table a.
26
<PAGE>
4.02 Terms of Annuity (e) Assumed Annual Net Return Rate is
Options (Cont'd): the interest rate used to
determine the amount of the first
Annuity payment under Variable
Annuity as shown on Contract
Schedule II. 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
Annuity return factor under
Variable Annuity Assumed Annual
Net Return Rate on Contract
Schedule II).
(f) Once elected, Annuity payments
cannot be commuted to a lump sum
except for Variable Annuity
payments under option 2 (see
4.07). The life expectancy of the
Annuitant and second Annuitant
shall be irrevocable upon the
election of an Annuity option.
4.03 Death of Annuitant/ (a) Certificate Holder is Annuitant:
Beneficiary: When the Certificate Holder is the
Annuitant and the Annuitant dies
under option 2 or 3, or both the
Annuitant and the second Annuitant
die under option 4(d), the present
value of any remaining guaranteed
payments will be paid in one sum
to the Beneficiary, or upon
election by the Beneficiary, any
remaining payments will continue
to the Beneficiary. If option 4
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.
(b) Certificate Holder is Not
Annuitant: When the Certificate
Holder is not the Annuitant and
the Certificate Holder dies, the
remaining payments under options
2, 3 or 4 will continue to the
successor payee. If no successor
payee has been designated, the
Beneficiary will be treated as the
successor payee.
If the Annuitant dies under option
2 or 3, or if both the Annuitant
and the second Annuitant die under
option 4(d), the present value of
any remaining guaranteed payments
will be paid in one sum to the
Beneficiary, or upon the election
by the Beneficiary any remaining
payments will continue to the
Beneficiary. If option 4 has been
elected, and the Annuitant dies,
the remaining payments will
continue to the Certificate
Holder.
(c) No Beneficiary Named/Surviving: If
there is no Beneficiary under
option 2, 3 or 4, 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.
27
<PAGE>
4.03 Death of Annuitant/ (d) If the Beneficiary designated
Beneficiary (Cont'd): under option 1 dies, the amount
held plus accrued interest will be
paid in one sum to a successor
Beneficiary, if any, named by the
designated Beneficiary. If there
is no successor Beneficiary, the
lump sum will be paid to the
designated Beneficiary's estate.
(e) If the Beneficiary or the
successor payee dies while
receiving Annuity payments, the
present value of any remaining
guaranteed payments will be paid
in one sum to the successor
Beneficiary/payee, or upon
election by the successor
Beneficiary/payee, any remaining
payments will continue to the
successor Beneficiary/payee. If no
successor Beneficiary/payee has
been designated, the present value
of any remaining guaranteed
payments will be paid in one sum
to the Beneficiary's/payee's
estate.
(f) The present value will be
determined as of the Valuation
Period in which proof of death
acceptable to Aetna and a request
for payment is received at Aetna's
Home Office. The interest rate
used to determine the first
payment will be used to calculate
the present value.
4.04 Fund(s) Annuity Units - The number of each Fund's Annuity
Separate Account: units is based on the amount of the
first Variable Annuity payment which
is equal to:
(a) The portion of the Current Value
applied to pay a Variable Annuity
(minus any premium tax); divided
by
(b) 1,000; multiplied by (c) The
payment rate for the option
chosen.
Such amount, or portion, of the
variable payment will be divided by
the appropriate Fund Annuity unit
value (see 4.05) on the tenth
Valuation Period before the due date
of the first payment to determine the
number of each Fund Annuity units. The
number of each Fund Annuity units
remains fixed. Each future payment is
equal to the sum of the products of
each Fund Annuity unit value
multiplied by the appropriate number
of units. The Fund(s) Annuity unit
value on the tenth Valuation Period
prior to the due date of the payment
is used.
4.05 Fund(s) Annuity Unit For any Valuation Period, a Fund
Value - Separate Annuity Unit Value is equal to:
Account: (a) The value for the previous Period;
multiplied by
(b) The Annuity net return factor(s)
(see 4.06 below) for the Period
multiplied by
(c) A factor to reflect the assumed
annual net return rate (see
Contract Schedule II).
28
<PAGE>
4.05 Fund(s) Annuity Unit The dollar value of a Fund Annuity
Value - Separate unit values and Annuity payments may
Account (Cont'd): go up or down due to investment gain
or loss.
4.06 Annuity Net Return The Annuity net return factor(s) are
Factor(s) -- Separate used to compute all Separate Account
Account Annuity Payments for any Fund.
The Annuity net return factor(s) for
each Fund is equal to 1.0000000 plus
the net return rate.
The net return rate is equal to:
(a) The value of the shares of the
Fund held by the Separate Account
at the end of a Valuation Period;
minus
(b) The value of the shares of the
Fund held by the Separate Account
at the start of the Valuation
Period; plus or minus
(c) Taxes (or reserves for taxes) on
the Separate Account (if any);
divided by
(d) The total value of the Fund(s)
record units and Fund(s) Annuity
units of the Separate Account at
the start of the Valuation Period;
minus
(e) A daily charge for Annuity
mortality and expense risks, which
may include profit, and a daily
administrative charge (at the
annual rate as shown on Contract
Schedule II).
A Net Return Rate may be more or less
than 0%.
The value of a share of the Fund is
equal to the net assets of the Fund
divided by the number of shares
outstanding.
Payments shall not be changed due to
changes in the mortality or expense
results or administrative charges.
4.07 Annuity Options: Option 1 -- Payment of Interest on Sum
Left with Aetna -- This option may be
used only by the Beneficiary when the
Certificate Holder dies before Aetna
has started paying an Annuity. A
portion or all of the sum paid upon
death may be held under this option
and will be held in the General
Account of Aetna at interest
(see 4.01). The Beneficiary may later
tell Aetna to:
(a) Pay a portion or all of the sum
held by Aetna; or
(b) Apply a portion or all of the sum
held by Aetna to any Annuity
option below.
29
<PAGE>
4.07 Annuity Options If the nonspouse Beneficiary elects
(Cont'd): this option, the Beneficiary must tell
Aetna to pay the full sum held under
this option within 5 years of the date
of death.
Option 2 - Payments for a Stated
Period of Time -- An Annuity will be
paid for the number of years chosen.
The number of years must be at least 5
and not more than 30.
If payments for this option are made
under a Variable Annuity, the present
value of any remaining payments may be
withdrawn at any time. If a
withdrawal is requested within 3
years after the start of payments, it
will be treated as a surrender and any
applicable Surrender Fee will be
applied (see 3.14).
If a nonspouse Beneficiary elects this
option at the death of the Certificate
Holder, the period selected may not
extend beyond the Beneficiary's life
expectancy.
Option 3 -- Life Income -- An Annuity
will be paid for the life of the
Annuitant. If also chosen, Aetna will
guarantee payments for 60, 120, 180,
or 240 months.
Option 4 -- Life Income Based upon the
Lives of Two Annuitants -- An Annuity
will be paid during the lives of the
Annuitant and a second Annuitant.
Payments will continue until both
Annuitants have died. When this option
is chosen, a choice must be made of:
(a) 100% of the payment to continue
after the first death;
(b) 66-2/3% of the payment to continue
after the first death;
(c) 50% of the payment to continue
after the first death;
(d) Payments for a minimum of 120
months with 100% of the payment to
continue after the first death; or
(e) 100% of the payment to continue at
the death of the second Annuitant
and 50% of the payment to continue
at the death of the first
Annuitant.
Other Options -- Aetna may make other
options available as allowed by the
laws of the state in which the
Contract and this Certificate is
delivered.
30
<PAGE>
OPTION 2
Payments for a Stated Period of Time
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
- ---------------------------------------------------------------------
Guaranteed Monthly Quarterly Semi-Annual Annual
Years Rate Payment Payment Payment Payment
- ---------------------------------------------------------------------
3 3.00% $28.99 $86.76 $172.88 $343.23
4 3.00% 22.06 66.02 131.56 261.19
5 3.00% 17.91 53.59 106.78 211.99
6 3.00% 15.14 45.30 90.27 179.22
7 3.00% 13.16 39.39 78.49 155.83
8 3.00% 11.68 34.96 69.66 138.31
9 3.00% 10.53 31.52 62.81 124.69
10 3.00% 9.61 28.77 57.33 113.82
11 3.00% 8.86 26.52 52.85 104.93
12 3.00% 8.24 24.65 49.13 97.54
13 3.00% 7.71 23.08 45.98 91.29
14 3.00% 7.26 21.73 43.29 85.95
15 3.00% 6.87 20.56 40.96 81.33
16 3.00% 6.53 19.54 38.93 77.29
17 3.00% 6.23 18.64 37.14 73.74
18 3.00% 5.96 17.84 35.56 70.59
19 3.00% 5.73 17.13 34.14 67.78
20 3.00% 5.51 16.50 32.87 65.26
21 3.00% 5.32 15.92 31.72 62.98
22 3.00% 5.15 15.40 30.68 60.92
23 3.00% 4.99 14.92 29.74 59.04
24 3.00% 4.84 14.49 28.88 57.33
25 3.00% 4.71 14.09 28.08 55.76
26 3.00% 4.59 13.73 27.36 54.31
27 3.00% 4.47 13.39 26.68 52.97
28 3.00% 4.37 13.08 26.06 51.74
29 3.00% 4.27 12.79 25.49 50.60
30 3.00% 4.18 12.52 24.95 49.53
- ---------------------------------------------------------------------
31
<PAGE>
OPTION 3
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge For Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
Payments Guaranteed for a Stated Period of Months
- -----------------------------------------------------------------
Adjusted
Age of
Annuitant None 60 120 180 240
- -----------------------------------------------------------------
50 $ 4.05 $ 4.05 $ 4.03 $ 3.99 $ 3.93
51 4.12 4.11 4.09 4.05 3.99
52 4.19 4.19 4.16 4.11 4.04
53 4.27 4.26 4.23 4.18 4.10
54 4.35 4.34 4.31 4.25 4.16
55 4.44 4.42 4.39 4.32 4.22
56 4.53 4.51 4.47 4.40 4.29
57 4.62 4.61 4.56 4.48 4.35
58 4.72 4.71 4.65 4.56 4.42
59 4.83 4.81 4.75 4.64 4.49
60 4.95 4.93 4.86 4.73 4.55
61 5.07 5.05 4.97 4.83 4.62
62 5.20 5.17 5.08 4.92 4.69
63 5.34 5.31 5.20 5.02 4.76
64 5.49 5.45 5.33 5.12 4.83
65 5.65 5.61 5.47 5.22 4.89
66 5.82 5.77 5.61 5.33 4.96
67 6.01 5.94 5.75 5.44 5.02
68 6.20 6.13 5.91 5.54 5.08
69 6.41 6.33 6.07 5.65 5.14
70 6.64 6.54 6.23 5.76 5.19
71 6.88 6.76 6.41 5.86 5.24
72 7.14 7.00 6.59 5.97 5.28
73 7.43 7.26 6.77 6.06 5.32
74 7.73 7.53 6.96 6.16 5.35
75 8.06 7.82 7.14 6.25 5.38
- -----------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
32
<PAGE>
OPTION 4
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
- --------------------------------------------------------------------------------
Adjusted Ages
- --------------------
Second
Annuitant Annuitant Option 4a Option 4b Option 4c Option 4d Option 4e
- --------------------------------------------------------------------------------
55 50 $ 3.69 $ 4.05 $ 4.27 $ 3.69 $ 4.03
55 55 3.88 4.25 4.47 3.87 4.14
55 60 3.99 4.44 4.71 3.98 4.42
60 55 3.99 4.44 4.71 3.98 4.42
60 60 4.24 4.71 4.99 4.23 4.57
60 65 4.38 4.97 5.32 4.38 4.93
65 60 4.38 4.97 5.32 4.38 4.93
65 65 4.72 5.33 5.70 4.71 5.14
65 70 4.93 5.68 6.15 4.91 5.66
70 65 4.93 5.68 6.15 4.91 5.66
70 70 5.40 6.21 6.70 5.36 5.96
70 75 5.69 6.68 7.32 5.62 6.67
75 70 5.69 6.68 7.32 5.62 6.67
75 75 6.37 7.45 8.15 6.23 7.12
75 80 6.78 8.11 8.99 6.54 8.13
- --------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
33
<PAGE>
OPTION 2
Payments for a Stated Period of Time
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
- --------------------------------------------------------------------------
Guaranteed Monthly Quarterly Semi-Annual Annual
Years Rate Payment Payment Payment Payment
- --------------------------------------------------------------------------
3 3.50% $ 29.19 $ 87.33 $ 173.91 $ 344.86
4 3.50% 22.27 66.61 132.65 263.04
5 3.50% 18.12 54.19 107.92 213.99
6 3.50% 15.35 45.92 91.44 181.32
7 3.50% 13.38 40.01 79.69 158.01
8 3.50% 11.90 35.59 70.88 140.56
9 3.50% 10.75 32.16 64.05 127.00
10 3.50% 9.83 29.42 58.59 116.18
11 3.50% 9.09 27.18 54.13 107.34
12 3.50% 8.46 25.32 50.42 99.98
13 3.50% 7.94 23.75 47.29 93.78
14 3.50% 7.49 22.40 44.62 88.47
15 3.50% 7.10 21.24 42.31 83.89
16 3.50% 6.76 20.23 40.29 79.89
17 3.50% 6.47 19.34 38.51 76.37
18 3.50% 6.20 18.55 36.94 73.25
19 3.50% 5.97 17.85 35.54 70.47
20 3.50% 5.75 17.22 34.28 67.98
21 3.50% 5.56 16.65 33.15 65.74
22 3.50% 5.39 16.13 32.13 63.70
23 3.50% 5.24 15.66 31.19 61.85
24 3.50% 5.09 15.24 30.34 60.17
25 3.50% 4.96 14.85 29.56 58.62
26 3.50% 4.84 14.49 28.85 57.20
27 3.50% 4.73 14.15 28.19 55.90
28 3.50% 4.63 13.85 27.58 54.69
29 3.50% 4.53 13.57 27.02 53.57
30 3.50% 4.45 13.30 26.49 52.53
- --------------------------------------------------------------------------
34
<PAGE>
OPTION 2
Payments for a Stated Period of Time
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
- ---------------------------------------------------------------------------
Guaranteed Monthly Quarterly Semi-Annual Annual
Years Rate Payment Payment Payment Payment
- ---------------------------------------------------------------------------
3 5.00% $ 29.80 $ 89.04 $ 176.99 $ 349.72
4 5.00% 22.89 68.38 135.93 268.58
5 5.00% 18.74 56.00 111.33 219.98
6 5.00% 15.99 47.77 94.96 187.64
7 5.00% 14.02 41.90 83.30 164.59
8 5.00% 12.56 37.52 74.58 147.35
9 5.00% 11.42 34.11 67.81 133.99
10 5.00% 10.51 31.40 62.42 123.34
11 5.00% 9.77 29.19 58.03 114.66
12 5.00% 9.16 27.36 54.38 107.45
13 5.00% 8.64 25.81 51.31 101.39
14 5.00% 8.20 24.50 48.69 96.21
15 5.00% 7.82 23.36 46.44 91.75
16 5.00% 7.49 22.37 44.47 87.88
17 5.00% 7.20 21.51 42.75 84.48
18 5.00% 6.94 20.74 41.23 81.47
19 5.00% 6.71 20.06 39.88 78.80
20 5.00% 6.51 19.46 38.68 76.42
21 5.00% 6.33 18.91 37.59 74.28
22 5.00% 6.17 18.42 36.62 72.35
23 5.00% 6.02 17.98 35.73 70.61
24 5.00% 5.88 17.57 34.93 69.02
25 5.00% 5.76 17.20 34.20 67.57
26 5.00% 5.65 16.87 33.53 66.25
27 5.00% 5.54 16.56 32.92 65.04
28 5.00% 5.45 16.28 32.35 63.93
29 5.00% 5.36 16.01 31.83 62.90
30 5.00% 5.28 15.77 31.35 61.95
- ---------------------------------------------------------------------------
35
<PAGE>
OPTION 3
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
Payments Guaranteed for a Stated Period of Months
- -----------------------------------------------------------------------
Adjusted
Age of
Annuitant None 60 120 180 240
- -----------------------------------------------------------------------
50 $ 4.34 $ 4.34 $ 4.31 $ 4.27 $ 4.22
51 4.41 4.40 4.38 4.33 4.27
52 4.48 4.47 4.45 4.40 4.32
53 4.56 4.55 4.52 4.46 4.38
54 4.64 4.63 4.59 4.53 4.44
55 4.72 4.71 4.67 4.60 4.50
56 4.81 4.80 4.75 4.67 4.56
57 4.91 4.89 4.84 4.75 4.62
58 5.01 4.99 4.93 4.83 4.69
59 5.12 5.10 5.03 4.92 4.75
60 5.23 5.21 5.13 5.00 4.82
61 5.36 5.33 5.24 5.09 4.88
62 5.49 5.45 5.35 5.19 4.95
63 5.63 5.59 5.47 5.28 5.02
64 5.78 5.73 5.60 5.38 5.08
65 5.94 5.89 5.73 5.48 5.15
66 6.11 6.05 5.87 5.58 5.21
67 6.29 6.22 6.02 5.69 5.27
68 6.49 6.41 6.17 5.79 5.33
69 6.70 6.60 6.33 5.90 5.38
70 6.92 6.81 6.49 6.00 5.43
71 7.17 7.04 6.66 6.10 5.48
72 7.43 7.27 6.84 6.20 5.52
73 7.71 7.53 7.02 6.30 5.55
74 8.02 7.80 7.20 6.39 5.59
75 8.35 8.08 7.38 6.48 5.62
- -----------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
36
<PAGE>
OPTION 3
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
Payments Guaranteed for a Stated Period of Months
- ---------------------------------------------------------------------------
Adjusted
Age of
Annuitant None 60 120 180 240
- ---------------------------------------------------------------------------
50 $ 5.26 $ 5.25 $ 5.22 $ 5.17 $ 5.11
51 5.33 5.32 5.28 5.23 5.15
52 5.40 5.38 5.34 5.29 5.20
53 5.47 5.45 5.41 5.35 5.26
54 5.54 5.53 5.48 5.41 5.31
55 5.63 5.61 5.56 5.47 5.36
56 5.71 5.69 5.63 5.54 5.42
57 5.80 5.78 5.72 5.61 5.47
58 5.90 5.88 5.81 5.69 5.53
59 6.01 5.98 5.90 5.77 5.59
60 6.12 6.09 6.00 5.85 5.65
61 6.24 6.21 6.10 6.93 5.71
62 6.37 6.33 6.21 6.02 5.77
63 6.51 6.46 6.33 6.11 5.83
64 6.66 6.60 6.45 6.20 5.89
65 6.82 6.75 6.57 6.30 5.95
66 6.99 6.91 6.71 6.39 6.01
67 7.17 7.08 6.85 6.49 6.06
68 7.36 7.27 6.99 6.59 6.12
69 7.57 7.46 7.15 6.69 6.17
70 7.80 7.67 7.30 6.78 6.21
71 8.05 7.89 7.47 6.88 6.25
72 8.31 8.13 7.64 6.97 6.29
73 8.59 8.38 7.81 7.06 6.33
74 8.90 8.64 7.99 7.15 6.36
75 9.23 8.93 8.16 7.23 6.38
- ---------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
37
<PAGE>
OPTION 4
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
- --------------------------------------------------------------------------------
Adjusted Ages
- -----------------------
Second
Annuitant Annuitant Option 4a Option 4b Option 4c Option 4d Option 4e
- ------------------------------------------------------------------------------
55 50 $ 3.97 $ 4.35 $ 4.56 $ 3.97 $ 4.31
55 55 4.16 4.54 4.76 4.15 4.42
55 60 4.27 4.73 5.00 4.26 4.48
60 55 4.27 4.73 5.00 4.26 4.70
60 60 4.51 4.99 5.27 4.50 4.84
60 65 4.66 5.25 5.61 4.65 4.93
65 60 4.66 5.25 5.61 4.65 5.22
65 65 4.99 5.61 5.99 4.98 5.42
65 70 5.19 5.97 6.44 5.17 5.54
70 65 5.19 5.97 6.44 5.17 5.93
70 70 5.67 6.49 6.99 5.62 6.23
70 75 5.95 6.96 7.61 5.87 6.40
75 70 5.95 6.96 7.61 5.87 6.95
75 75 6.64 7.73 8.43 6.48 7.40
75 80 7.04 8.39 9.29 6.79 7.64
- ------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
38
<PAGE>
OPTION 4
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
- --------------------------------------------------------------------------------
Adjusted Ages
- --------------------------------
Second
Annuitant Annuitant Option 4a Option 4b Option 4c Option 4d Option 4e
- --------------------------------------------------------------------------------
55 50 $ 4.88 $ 5.26 $ 5.48 $ 4.88 $ 5.23
55 55 5.04 5.44 5.66 5.04 5.32
55 60 5.15 5.63 5.91 5.14 5.38
60 55 5.15 5.63 5.91 5.14 5.59
60 60 5.37 5.87 6.16 5.37 5.72
60 65 5.52 6.14 6.51 5.51 5.80
65 60 5.52 6.14 6.51 5.51 6.10
65 65 5.83 6.49 6.87 5.82 6.29
65 70 6.04 6.84 7.34 6.00 6.41
70 65 6.04 6.84 7.34 6.00 6.81
70 70 6.49 7.35 7.87 6.44 7.08
70 75 6.77 7.84 8.51 6.68 7.25
75 70 6.77 7.84 8.51 6.68 7.81
75 75 7.45 8.60 9.33 7.27 8.25
75 80 7.86 9.28 10.20 7.57 8.49
- --------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
39
<PAGE>
- --------------------------------------------------------------------------------
Aetna Life Insurance and Annuity Company
Home Office: 151 Farmington Avenue
Hartford, Connecticut 06156
(800) 525-4225
Certificate of Group Annuity Coverage
- --------------------------------------------------------------------------------
ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT, WHEN BASED ON INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT. THIS CERTIFICATE CONTAINS A MARKET VALUE ADJUSTMENT
FORMULA. APPLICATION OF A MARKET VALUE ADJUSTMENT MAY RESULT IN EITHER AN
INCREASE OR DECREASE IN THE CURRENT VALUE. THE MARKET VALUE ADJUSTMENT FORMULA
DOES NOT APPLY TO A GUARANTEED TERM AT THE TIME OF ITS MATURITY.
[Aetna letterhead]
[Aetna logo]
151 Farmington Avenue
Hartford, CT 06156
Julie E. Rockmore
Counsel
Law Division, RE4A
April 17, 1998 Investments & Financial Services
(860) 273-4686
Fax: (860) 273-8340
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: Aetna Life Insurance and Annuity Company and its Variable Annuity
Account B
Post-Effective Amendment No. 35 to Registration Statement on Form N-4
Prospectus Title: Aetna Marathon Plus - Group and Individual Deferred
Variable Annuity Contracts
File Nos. 33-34370* and 811-2512
Dear Sir or Madam:
The undersigned serves as counsel to Aetna Life Insurance and Annuity Company, a
Connecticut life insurance company (the "Company"). It is my understanding that
the Company, as depositor, has registered an indefinite amount of securities
(the "Securities") under the Securities Act of 1933 (the "Securities Act") as
provided in Rule 24f-2 under the Investment Company Act of 1940 (the "Investment
Company Act").
In connection with this opinion, I have reviewed the N-4 Registration Statement,
as amended to the date hereof, and this Post-Effective Amendment No. 35. I have
also examined originals or copies, certified or otherwise identified to my
satisfaction, of such documents, trust records and other instruments I have
deemed necessary or appropriate for the purpose of rendering this opinion. For
purposes of such examination, I have assumed the genuineness of all signatures
on original documents and the conformity to the original of all copies.
I am admitted to practice law in Connecticut, and do not purport to be an expert
on the laws of any other state. My opinion herein as to any other law is based
upon a limited inquiry thereof which I have deemed appropriate under the
circumstances.
- --------
* Pursuant to Rule 429(a) under the Securities Act of 1933, Registrant has
included a combined prospectus under this Registration Statement which
includes all the information which would currently be required in a
prospectus relating to the following earlier Registration Statement:
33-87932.
<PAGE>
Based upon the foregoing, and, assuming the Securities are sold in accordance
with the provisions of the prospectus, I am of the opinion that the Securities
being registered will be legally issued and will represent binding obligations
of the Company.
I consent to the filing of this opinion as an exhibit to the Registration
Statement.
Sincerely,
/s/ Julie E. Rockmore
- -----------------------
Julie E. Rockmore
The Board of Directors of Aetna Life Insurance and Annuity Company and
Contractholders of Aetna Variable Annuity Account B:
We consent to the use of our reports dated February 3, 1998 and February 27,
1998 included in this Post-Effective Amendment No. 35 to Registration Statement
(No. 33-34370) on Form N-4 and to the references to our firm under the headings
"Condensed Financial Information" in the prospectuses and "Independent Auditors"
in the statement of additional information.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
April 17, 1998
SCHEDULE FOR COMPUTATION OF TOTAL RETURN CALCULATIONS
TOTAL RETURN CALCULATION (STANDARDIZED)
The standardized rate represents fund performance for the most recent 1-year,
5-year and 10-year periods. The "1-year rate" represents fund performance for
the period January 1, 1997 through December 31, 1997; the "5-year rate" is for
the period January 1, 1993 through December 31, 1997; the "10-year rate" is for
the period January 1, 1988 through December 31, 1997. "Since inception" figures
assume the redemption on December 31, 1997 of values attributable to a $1,000
payment made on the date contributions were first received in the fund under the
separate account.
The formula used in the computation of the total return calculation is as
follows:
Formula
P(1 + T) (n) = ERV
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of 1, 5, or
10 year periods (or a fractional portion thereof)
of a hypothetical $1,000 payment made at the
beginning of the 1, 5, or 10 year periods
The total returns reflect the deduction of all recurring charges during each
period (e.g., mortality and expense risk charges, maintenance fees,
administrative charges (if applicable) and deferred sales charges).
TOTAL RETURN CALCULATION (NON-STANDARDIZED)
The non-standardized rate represents fund performance for the most recent
1-year, 3-year, 5-year and 10-year periods. The "1-year rate" represents fund
performance for the period January 1, 1997 through December 31, 1997; the
"3-year rate" is for the period January 1, 1995 through December 31, 1997; the
"5-year rate" is for the period January 1, 1993 through December 31, 1997; and
the "10-year rate" is for the period January 1, 1988 through December 31, 1997.
The non-standardized figures will be calculated in a manner similar to the one
discussed above for the standardized figures, 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), and the "since inception" figures assume the redemption on
December 31, 1997 of values attributable to a $1,000 payment made on the
inception dates of the funds.
For an illustration of the Computation of the Total Return Quotations, both
Standardized and Non-Standardized, see attached.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Fund Name Maintenance Fee As of Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Aetna Ascent VP 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager Portfolio 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Index 500 Portfolio 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund, Inc. 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
MFS Total Return Series 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
MFS World Governments Series 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth Fund 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Growth & Income Fund 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Emerging Equities Portfolio 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/PPI-MFS Emerging Equities 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Research Growth Portfolio 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/PPI -MFS Research Growth 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Value Equity Portfolio 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/PPI-MFS Value Equity 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners Scudder International Growth Portfolio 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio Class A/PPI-Scudder International Growth 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners T. Rowe Price Growth Equity Portfolio 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/PPI-T. Rowe Price Growth Equity 30 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
One Year One Year One Year Five Year Five Year Five Year Ten Year
As of AUV as of Date as of AUV w/ DSC as of Date as of AUV w/ DSC as of Date
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
15.332631 12/31/96 12.970018 12.02% 08/31/95 08/31/95
- ---------------------------------------------------------------------------------------------------------------------------------
18.652937 12/31/96 15.445102 14.60% 12/31/92 10.195532 12.42% 06/30/89
- ---------------------------------------------------------------------------------------------------------------------------------
13.127847 12/31/96 12.293777 0.51% 12/31/92 10.073661 4.85% 12/31/87
- ---------------------------------------------------------------------------------------------------------------------------------
14.376721 12/31/96 12.401562 9.72% 08/31/95 08/31/95
- ---------------------------------------------------------------------------------------------------------------------------------
22.003523 12/31/96 17.180818 21.95% 12/31/92 10.449228 15.69% 12/31/87
- ---------------------------------------------------------------------------------------------------------------------------------
13.157858 05/30/97 05/30/97 05/30/97
- ---------------------------------------------------------------------------------------------------------------------------------
14.414086 12/31/96 10.918586 25.92% 10/31/96 10/31/96
- ---------------------------------------------------------------------------------------------------------------------------------
13.26715 12/31/96 11.751041 6.67% 08/31/95 08/31/95
- ---------------------------------------------------------------------------------------------------------------------------------
11.849943 12/31/96 11.394343 (2.29%) 12/31/92 10.047829 2.71% 12/31/87
- ---------------------------------------------------------------------------------------------------------------------------------
13.638404 05/30/97 05/30/97 05/30/97
- ---------------------------------------------------------------------------------------------------------------------------------
13.245833 05/30/97 05/30/97 05/30/97
- ---------------------------------------------------------------------------------------------------------------------------------
9.976286 12/31/96 8.426156 12.21% 12/31/92 5.836772 10.86% 11/30/92
- ---------------------------------------------------------------------------------------------------------------------------------
18.963413 12/31/96 15.012705 20.18% 12/30/94 12/30/94
- ---------------------------------------------------------------------------------------------------------------------------------
19.156912 12/31/96 15.734234 15.59% 12/30/94 12/30/94
- ---------------------------------------------------------------------------------------------------------------------------------
13.958907 12/31/96 12.031496 9.81% 06/30/95 06/30/95
- ---------------------------------------------------------------------------------------------------------------------------------
13.68184 12/31/96 12.438771 3.74% 01/31/95 01/31/95
- ---------------------------------------------------------------------------------------------------------------------------------
15.678741 12/31/96 13.179543 12.78% 01/31/95 01/31/95
- ---------------------------------------------------------------------------------------------------------------------------------
17.06632 12/31/96 13.94256 16.24% 06/30/95 06/30/95
- ---------------------------------------------------------------------------------------------------------------------------------
17.961355 12/31/96 13.727554 24.74% 06/30/95 06/30/95
- ---------------------------------------------------------------------------------------------------------------------------------
15.417732 12/31/96 13.87894 4.85% 10/31/94 10/31/94
- ---------------------------------------------------------------------------------------------------------------------------------
16.691735 12/31/96 13.864503 14.22% 01/31/95 01/31/95
- ---------------------------------------------------------------------------------------------------------------------------------
14.319958 12/31/96 12.994995 3.95% 10/31/94 10/31/94
- ---------------------------------------------------------------------------------------------------------------------------------
18.339901 12/31/96 15.153365 14.86% 07/29/94 07/29/94
- ---------------------------------------------------------------------------------------------------------------------------------
18.910371 12/31/96 15.70061 14.27% 04/28/95 04/28/95
- ---------------------------------------------------------------------------------------------------------------------------------
8.572064 12/31/96 9.829389 (19.20%) 07/29/94 07/29/94
- ---------------------------------------------------------------------------------------------------------------------------------
13.793875 12/31/96 13.056374 (0.63%) 05/26/93 05/26/93
- ---------------------------------------------------------------------------------------------------------------------------------
13.029956 12/31/96 10.89448 13.42% 05/31/96 05/31/96
- ---------------------------------------------------------------------------------------------------------------------------------
10.207412 12/31/96 10.470592 (8.85%) 05/31/96 05/31/96
- ---------------------------------------------------------------------------------------------------------------------------------
12.203557 05/30/97 05/30/97 05/30/97
- ---------------------------------------------------------------------------------------------------------------------------------
11.538939 05/30/97 05/30/97 05/30/97
- ---------------------------------------------------------------------------------------------------------------------------------
12.785298 05/30/97 05/30/97 05/30/97
- ---------------------------------------------------------------------------------------------------------------------------------
10.764213 05/30/97 05/30/97 05/30/97
- ---------------------------------------------------------------------------------------------------------------------------------
14.707274 11/28/97 11/28/97 11/28/97
- ---------------------------------------------------------------------------------------------------------------------------------
14.707274 12/31/96 13.656006 1.43% 09/30/93 09/30/93
- ---------------------------------------------------------------------------------------------------------------------------------
12.641051 11/28/97 11/28/97 11/28/97
- ---------------------------------------------------------------------------------------------------------------------------------
12.641051 12/31/96 13.211476 (10.67%) 12/31/92 10.220014 3.73% 08/31/92
- ---------------------------------------------------------------------------------------------------------------------------------
10.152061 11/28/97 11/28/97 11/28/97
- ---------------------------------------------------------------------------------------------------------------------------------
10.152061 12/31/96 8.149264 18.43% 12/31/92 5.910992 10.97% 11/30/92
- ---------------------------------------------------------------------------------------------------------------------------------
9.912244 11/28/97 11/28/97 11/28/97
- ---------------------------------------------------------------------------------------------------------------------------------
9.912244 12/31/96 9.223832 1.20% 12/31/92 5.597697 11.67% 08/31/92
- ---------------------------------------------------------------------------------------------------------------------------------
18.342977 11/28/97 11/28/97 11/28/97
- ---------------------------------------------------------------------------------------------------------------------------------
18.342977 12/31/96 14.505789 20.32% 02/28/95 02/28/95
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Separate
Ten Year Ten Year Inception Inception Inception Account One Year Three Year
as of AUV w/ DSC Date AUV w/ DSC Charge Free Out DSC DSC
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
08/31/95 10.112036 17.77% 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
06/30/89 7.635956 11.05% 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
6.254743 7.68% 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
08/31/95 10.10305 14.47% 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
5.435129 14.99% 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
05/30/97 11.067831 10.54% 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
10/31/96 10.440059 26.87% 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
08/31/95 9.97621 11.06% 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
7.651098 4.45% 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
05/30/97 11.31339 12.09% 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
05/30/97 10.974826 12.23% 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
11/30/92 5.73602 11.06% 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
12/30/94 10.00095 22.66% 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
12/30/94 10.421875 21.36% 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
06/30/95 10.007485 12.49% 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
01/31/95 9.863898 10.41% 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
01/31/95 10.035116 15.21% 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
06/30/95 10.501518 19.87% 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
06/30/95 9.987517 25.00% 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
10/31/94 10.533284 11.50% 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
01/31/95 9.999046 17.96% 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
10/31/94 9.996697 10.71% 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
07/29/94 10.033526 18.30% 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
04/28/95 9.999069 25.63% 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
07/29/94 9.94517 (6.09%) 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
05/26/93 9.936907 6.64% 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
05/31/96 10.027655 14.43% 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
05/31/96 10.018389 (2.82%) 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
05/30/97 11.121607 2.03% 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
05/30/97 10.665977 0.59% 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
05/30/97 10.782609 10.25% 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
05/30/97 10.220422 (2.07%) 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
11/28/97 14.894208 (8.19%) 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
09/30/93 9.714719 9.49% 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
11/28/97 12.891778 (8.83%) 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
08/31/92 9.309769 5.37% 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
11/28/97 10.00865 (5.69%) 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
11/30/92 5.811138 11.16% 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
11/28/97 9.791134 (5.87%) 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
08/31/92 5.908484 9.75% 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
11/28/97 17.978836 (5.14%) 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
02/28/95 10.049969 22.41% 140 0.100000001 7.00% 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------
Five Year DSC Ten Year DSC Inception DSC
- ---------------------------------------------
<S> <C> <C>
4.00% 0.00% 6.00%
- ---------------------------------------------
4.00% 0.00% 0.00%
- ---------------------------------------------
4.00% 0.00%
- ---------------------------------------------
4.00% 0.00% 6.00%
- ---------------------------------------------
4.00% 0.00%
- ---------------------------------------------
4.00% 0.00% 7.00%
- ---------------------------------------------
4.00% 0.00% 7.00%
- ---------------------------------------------
4.00% 0.00% 6.00%
- ---------------------------------------------
4.00% 0.00%
- ---------------------------------------------
4.00% 0.00% 7.00%
- ---------------------------------------------
4.00% 0.00% 7.00%
- ---------------------------------------------
4.00% 0.00% 4.00%
- ---------------------------------------------
4.00% 0.00% 6.00%
- ---------------------------------------------
4.00% 0.00% 6.00%
- ---------------------------------------------
4.00% 0.00% 6.00%
- ---------------------------------------------
4.00% 0.00% 6.00%
- ---------------------------------------------
4.00% 0.00% 6.00%
- ---------------------------------------------
4.00% 0.00% 6.00%
- ---------------------------------------------
4.00% 0.00% 6.00%
- ---------------------------------------------
4.00% 0.00% 6.00%
- ---------------------------------------------
4.00% 0.00% 6.00%
- ---------------------------------------------
4.00% 0.00% 6.00%
- ---------------------------------------------
4.00% 0.00% 6.00%
- ---------------------------------------------
4.00% 0.00% 6.00%
- ---------------------------------------------
4.00% 0.00% 6.00%
- ---------------------------------------------
4.00% 0.00% 5.00%
- ---------------------------------------------
4.00% 0.00% 7.00%
- ---------------------------------------------
4.00% 0.00% 7.00%
- ---------------------------------------------
4.00% 0.00% 7.00%
- ---------------------------------------------
4.00% 0.00% 7.00%
- ---------------------------------------------
4.00% 0.00% 7.00%
- ---------------------------------------------
4.00% 0.00% 7.00%
- ---------------------------------------------
4.00% 0.00% 7.00%
- ---------------------------------------------
4.00% 0.00% 5.00%
- ---------------------------------------------
4.00% 0.00% 7.00%
- ----------------------------------------------
4.00% 0.00% 4.00%
- ---------------------------------------------
4.00% 0.00% 7.00%
- ---------------------------------------------
4.00% 0.00% 4.00%
- ---------------------------------------------
4.00% 0.00% 7.00%
- ---------------------------------------------
4.00% 0.00% 4.00%
- ---------------------------------------------
4.00% 0.00% 7.00%
- ---------------------------------------------
4.00% 0.00% 6.00%
- ---------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Fund Name Maintenance Fee As of Date
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Aetna Ascent VP 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager Portfolio 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Index 500 Portfolio 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund, Inc. 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
MFS Total Return Series 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
MFS World Governments Series 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth Fund 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Growth & Income Fund 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Emerging Equities Portfolio 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/PPI-MFS Emerging Equities 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Research Growth Portfolio 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/PPI -MFS Research Growth 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Value Equity Portfolio 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/PPI-MFS Value Equity 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners Scudder International Growth Portfolio 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio Class A/PPI-Scudder International Growth 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners T. Rowe Price Growth Equity Portfolio 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/PPI-T. Rowe Price Growth Equity 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
One Year One Year One Year Three Year Three Year Three Year
As of AUV as of Date as of AUV w/out DSC as of Date as of AUV w/out DSC
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
15.332631 12/31/96 12.970018 18.20%
- -----------------------------------------------------------------------------------------------------------------------------
18.652937 12/31/96 15.445102 20.75% 12/30/94 10.841212 19.81%
- -----------------------------------------------------------------------------------------------------------------------------
13.127847 12/31/96 12.293777 6.77% 12/30/94 10.323201 8.32%
- -----------------------------------------------------------------------------------------------------------------------------
14.376721 12/31/96 12.401562 15.91%
- -----------------------------------------------------------------------------------------------------------------------------
22.003523 12/31/96 17.180818 28.05% 12/30/94 10.735782 27.01%
- -----------------------------------------------------------------------------------------------------------------------------
13.157858 12/31/96 10.033073 31.13%
- -----------------------------------------------------------------------------------------------------------------------------
14.414086 12/31/96 10.918586 32.00%
- -----------------------------------------------------------------------------------------------------------------------------
13.26715 12/31/96 11.751041 12.88%
- -----------------------------------------------------------------------------------------------------------------------------
11.849943 12/31/96 11.394343 3.98% 12/30/94 10.488699 4.13%
- -----------------------------------------------------------------------------------------------------------------------------
13.638404 12/31/96 10.284789 32.59%
- -----------------------------------------------------------------------------------------------------------------------------
13.245833 12/31/96 9.639742 37.39%
- -----------------------------------------------------------------------------------------------------------------------------
9.976286 12/31/96 8.426156 18.38% 12/30/94 5.930471 18.91%
- -----------------------------------------------------------------------------------------------------------------------------
18.963413 12/31/96 15.012705 26.30% 12/30/94 10.00095 23.75%
- -----------------------------------------------------------------------------------------------------------------------------
19.156912 12/31/96 15.734234 21.73% 12/30/94 10.421875 22.48%
- -----------------------------------------------------------------------------------------------------------------------------
13.958907 12/31/96 12.031496 16.00% 12/30/94 8.989752 15.78%
- -----------------------------------------------------------------------------------------------------------------------------
13.68184 12/31/96 12.438771 9.98% 12/30/94 10.303726 9.89%
- -----------------------------------------------------------------------------------------------------------------------------
15.678741 12/31/96 13.179543 18.94% 12/30/94 10.113563 15.72%
- -----------------------------------------------------------------------------------------------------------------------------
17.06632 12/31/96 13.94256 22.39%
- -----------------------------------------------------------------------------------------------------------------------------
17.961355 12/31/96 13.727554 30.82% 12/30/94 8.378737 28.92%
- -----------------------------------------------------------------------------------------------------------------------------
15.417732 12/31/96 13.87894 11.07% 12/30/94 10.373155 14.10%
- -----------------------------------------------------------------------------------------------------------------------------
16.691735 12/31/96 13.864503 20.37% 12/30/94 9.835531 19.26%
- -----------------------------------------------------------------------------------------------------------------------------
14.319958 12/31/96 12.994995 10.18% 12/30/94 9.882568 13.14%
- -----------------------------------------------------------------------------------------------------------------------------
18.339901 12/31/96 15.153365 21.01% 12/30/94 10.107619 21.95%
- -----------------------------------------------------------------------------------------------------------------------------
18.910371 12/31/96 15.70061 20.43% 12/30/94 9.825317 24.37%
- -----------------------------------------------------------------------------------------------------------------------------
8.572064 12/31/96 9.829389 (12.81%) 12/30/94 9.794269 (4.36%)
- -----------------------------------------------------------------------------------------------------------------------------
13.793875 12/31/96 13.056374 5.63% 12/30/94 9.055683 15.04%
- -----------------------------------------------------------------------------------------------------------------------------
13.029956 12/31/96 10.89448 19.58%
- -----------------------------------------------------------------------------------------------------------------------------
10.207412 12/31/96 10.470592 (2.53%) 12/30/94 9.051104 4.07%
- -----------------------------------------------------------------------------------------------------------------------------
12.203557 12/31/96 11.08312 10.09% 12/30/94 7.155756 19.46%
- -----------------------------------------------------------------------------------------------------------------------------
11.538939 12/31/96 9.559142 20.69% 12/30/94 8.164565 12.20%
- -----------------------------------------------------------------------------------------------------------------------------
12.785298 12/31/96 9.787799 30.61%
- -----------------------------------------------------------------------------------------------------------------------------
10.764213 12/31/96 10.042736 7.17% 12/30/94 7.992699 10.41%
- -----------------------------------------------------------------------------------------------------------------------------
14.707274 11/26/97 11/26/97
- -----------------------------------------------------------------------------------------------------------------------------
14.707274 12/31/96 13.656006 7.68% 12/30/94 9.341557 16.31%
- -----------------------------------------------------------------------------------------------------------------------------
12.641051 11/26/97 11/26/97
- -----------------------------------------------------------------------------------------------------------------------------
12.641051 12/31/96 13.211476 (4.34%) 12/30/94 10.833061 5.26%
- -----------------------------------------------------------------------------------------------------------------------------
10.152061 11/26/97 11/26/97
- -----------------------------------------------------------------------------------------------------------------------------
10.152061 12/31/96 8.149264 24.56% 12/30/94 5.83085 20.28%
- -----------------------------------------------------------------------------------------------------------------------------
9.912244 11/26/97 11/26/97
- -----------------------------------------------------------------------------------------------------------------------------
9.912244 12/31/96 9.223832 7.44% 12/30/94 7.439523 10.02%
- -----------------------------------------------------------------------------------------------------------------------------
18.342977 11/26/97 11/26/97
- -----------------------------------------------------------------------------------------------------------------------------
18.342977 12/31/96 14.505789 26.43% 12/31/94 9.651037 23.85%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Five Year Five Year Ten Year Ten Year Ten Year Inception Inception Inception
as of AUV w/out DSC as of Date as of AUV w/out DSC Date AUV w/out DSC
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
07/04/95 07/05/95 9.703259 20.15%
- ----------------------------------------------------------------------------------------------------------------------------------
10.195532 12.82% 04/03/89 04/03/89 7.518949 10.93%
- ----------------------------------------------------------------------------------------------------------------------------------
10.073661 5.42% 12/31/87 6.254743 7.68%
- ----------------------------------------------------------------------------------------------------------------------------------
07/04/95 07/05/95 9.752348 16.84%
- ----------------------------------------------------------------------------------------------------------------------------------
10.449228 16.04% 12/31/87 5.435129 14.99%
- ----------------------------------------------------------------------------------------------------------------------------------
12/12/96 12/13/96 9.899466 31.13%
- ----------------------------------------------------------------------------------------------------------------------------------
09/15/96 09/16/96 10.000313 32.76%
- ----------------------------------------------------------------------------------------------------------------------------------
07/04/95 07/05/95 9.705906 13.35%
- ----------------------------------------------------------------------------------------------------------------------------------
10.047829 3.34% 12/31/87 7.651098 4.45%
- ----------------------------------------------------------------------------------------------------------------------------------
12/26/96 12/27/96 10.220423 33.01%
- ----------------------------------------------------------------------------------------------------------------------------------
12/12/96 12/13/96 9.443427 38.04%
- ----------------------------------------------------------------------------------------------------------------------------------
5.836772 11.30% 12/31/87 3.561818 10.83%
- ----------------------------------------------------------------------------------------------------------------------------------
8.119838 18.47% 12/31/87 4.64659 15.08%
- ----------------------------------------------------------------------------------------------------------------------------------
8.98055 16.34% 12/31/87 4.512445 15.54%
- ----------------------------------------------------------------------------------------------------------------------------------
7.807175 12.30% 12/31/87 4.813354 11.22%
- ----------------------------------------------------------------------------------------------------------------------------------
7.58338 12.51% 12/31/87 6.282154 8.08%
- ----------------------------------------------------------------------------------------------------------------------------------
9.136495 11.39% 09/06/89 09/06/89 6.498917 11.15%
- ----------------------------------------------------------------------------------------------------------------------------------
01/03/95 01/03/95 8.46433 26.39%
- ----------------------------------------------------------------------------------------------------------------------------------
7.771991 18.22% 08/27/92 08/27/92 7.346378 18.19%
- ----------------------------------------------------------------------------------------------------------------------------------
09/13/93 09/13/93 7.691564 17.54%
- ----------------------------------------------------------------------------------------------------------------------------------
09/13/93 09/13/93 9.265213 14.66%
- ----------------------------------------------------------------------------------------------------------------------------------
09/13/93 09/13/93 10.086038 8.48%
- ----------------------------------------------------------------------------------------------------------------------------------
09/13/93 09/13/93 9.67814 16.01%
- ----------------------------------------------------------------------------------------------------------------------------------
09/13/93 09/13/93 8.273505 21.19%
- ----------------------------------------------------------------------------------------------------------------------------------
03/30/94 03/30/94 9.824706 (3.59%)
- ----------------------------------------------------------------------------------------------------------------------------------
8.875999 9.20% 10/14/91 10/14/91 8.543907 7.99%
- ----------------------------------------------------------------------------------------------------------------------------------
01/03/95 01/03/95 7.692372 19.24%
- ----------------------------------------------------------------------------------------------------------------------------------
06/14/94 06/14/94 9.049518 3.43%
- ----------------------------------------------------------------------------------------------------------------------------------
6.255692 14.28% 12/31/87 3.158544 14.45%
- ----------------------------------------------------------------------------------------------------------------------------------
5.229659 17.13% 11/12/90 11/12/90 5.589732 10.67%
- ----------------------------------------------------------------------------------------------------------------------------------
07/05/95 07/05/95 6.022462 35.28%
- ----------------------------------------------------------------------------------------------------------------------------------
05/03/93 05/03/93 8.156291 6.11%
- ----------------------------------------------------------------------------------------------------------------------------------
11/26/97 11/28/97 14.894208 (1.27%)
- ----------------------------------------------------------------------------------------------------------------------------------
8.869783 10.62% 09/21/88 09/21/88 3.340306 17.31%
- ----------------------------------------------------------------------------------------------------------------------------------
11/26/97 11/28/97 12.891778 (1.96%)
- ----------------------------------------------------------------------------------------------------------------------------------
10.220014 4.32% 12/31/87 6.304567 7.19%
- ----------------------------------------------------------------------------------------------------------------------------------
11/26/97 11/28/97 10.00865 1.41%
- ----------------------------------------------------------------------------------------------------------------------------------
5.910992 11.41% 12/31/87 2.978655 13.03%
- ----------------------------------------------------------------------------------------------------------------------------------
11/26/97 11/28/97 9.791134 1.22%
- ----------------------------------------------------------------------------------------------------------------------------------
5.597697 12.09% 12/31/87 3.742802 10.21%
- ----------------------------------------------------------------------------------------------------------------------------------
11/26/97 11/28/97 17.978836 2.01%
- ----------------------------------------------------------------------------------------------------------------------------------
7.988416 18.07% 01/09/89 01/09/89 4.141044 18.02%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------
Separate Account Charge Free Out
- -------------------------------------------
<S> <C>
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
140 0.100000001
- -------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Fund Name Maintenance Fee As of Date
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Aetna Ascent VP 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
Aetna Bond VP 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager Portfolio 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Index 500 Portfolio 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund, Inc. 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
MFS Total Return Series 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
MFS World Governments Series 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth Fund 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
Oppenheimer Growth & Income Fund 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Emerging Equities Portfolio 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/PPI-MFS Emerging Equities 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Research Growth Portfolio 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/PPI -MFS Research Growth 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Value Equity Portfolio 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/PPI-MFS Value Equity 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
Portfolio Partners Scudder International Growth Portfolio 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio Class A/PPI-Scudder International Growth 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
Portfolio Partners T. Rowe Price Growth Equity Portfolio 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
Alger American Growth/PPI-T. Rowe Price Growth Equity 30 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
One Year One Year One Year Five Year Five Year Five Year Ten Year
As of AUV as of Date as of AUV w/ DSC as of Date as of AUV w/ DSC as of Date
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
15.332631 12/31/96 12.970018 13.26% 08/31/95 08/31/95
- ---------------------------------------------------------------------------------------------------------------------------------
18.652937 12/31/96 15.445102 15.84% 12/31/92 10.195532 12.64% 06/30/89
- ---------------------------------------------------------------------------------------------------------------------------------
13.127847 12/31/96 12.293777 1.73% 12/31/92 10.073661 5.16% 12/31/87
- ---------------------------------------------------------------------------------------------------------------------------------
14.376721 12/31/96 12.401562 10.95% 08/31/95 08/31/95
- ---------------------------------------------------------------------------------------------------------------------------------
22.003523 12/31/96 17.180818 23.20% 12/31/92 10.449228 15.89% 12/31/87
- ---------------------------------------------------------------------------------------------------------------------------------
13.157858 05/30/97 05/30/97 05/30/97
- ---------------------------------------------------------------------------------------------------------------------------------
14.414086 12/31/96 10.918586 27.18% 10/31/96 10/31/96
- ---------------------------------------------------------------------------------------------------------------------------------
13.26715 12/31/96 11.751041 7.90% 08/31/95 08/31/95
- ---------------------------------------------------------------------------------------------------------------------------------
11.849943 12/31/96 11.394343 (1.09%) 12/31/92 10.047829 3.05% 12/31/87
- ---------------------------------------------------------------------------------------------------------------------------------
13.638404 05/30/97 05/30/97 05/30/97
- ---------------------------------------------------------------------------------------------------------------------------------
13.245833 05/30/97 05/30/97 05/30/97
- ---------------------------------------------------------------------------------------------------------------------------------
9.976286 12/31/96 8.426156 13.44% 12/31/92 5.836772 11.10% 11/30/92
- ---------------------------------------------------------------------------------------------------------------------------------
18.963413 12/31/96 15.012705 21.43% 12/30/94 12/30/94
- ---------------------------------------------------------------------------------------------------------------------------------
19.156912 12/31/96 15.734234 16.83% 12/30/94 12/30/94
- ---------------------------------------------------------------------------------------------------------------------------------
13.958907 12/31/96 12.031496 11.05% 06/30/95 06/30/95
- ---------------------------------------------------------------------------------------------------------------------------------
13.68184 12/31/96 12.438771 4.96% 01/31/95 01/31/95
- ---------------------------------------------------------------------------------------------------------------------------------
15.678741 12/31/96 13.179543 14.01% 01/31/95 01/31/95
- ---------------------------------------------------------------------------------------------------------------------------------
17.06632 12/31/96 13.94256 17.49% 06/30/95 06/30/95
- ---------------------------------------------------------------------------------------------------------------------------------
17.961355 12/31/96 13.727554 26.00% 06/30/95 06/30/95
- ---------------------------------------------------------------------------------------------------------------------------------
15.417732 12/31/96 13.87894 6.07% 10/31/94 10/31/94
- ---------------------------------------------------------------------------------------------------------------------------------
16.691735 12/31/96 13.864503 15.46% 01/31/95 01/31/95
- ---------------------------------------------------------------------------------------------------------------------------------
14.319958 12/31/96 12.994995 5.17% 10/31/94 10/31/94
- ---------------------------------------------------------------------------------------------------------------------------------
18.339901 12/31/96 15.153365 16.10% 07/29/94 07/29/94
- ---------------------------------------------------------------------------------------------------------------------------------
18.910371 12/31/96 15.70061 15.51% 04/28/95 04/28/95
- ---------------------------------------------------------------------------------------------------------------------------------
8.572064 12/31/96 9.829389 (18.03%) 07/29/94 07/29/94
- ---------------------------------------------------------------------------------------------------------------------------------
13.793875 12/31/96 13.056374 0.58% 05/26/93 05/26/93
- ---------------------------------------------------------------------------------------------------------------------------------
13.029956 12/31/96 10.89448 14.66% 05/31/96 05/31/96
- ---------------------------------------------------------------------------------------------------------------------------------
10.207412 12/31/96 10.470592 (7.66%) 05/31/96 05/31/96
- ---------------------------------------------------------------------------------------------------------------------------------
12.203557 05/30/97 05/30/97 05/30/97
- ---------------------------------------------------------------------------------------------------------------------------------
11.538939 05/30/97 05/30/97 05/30/97
- ---------------------------------------------------------------------------------------------------------------------------------
12.785298 05/30/97 05/30/97 05/30/97
- ---------------------------------------------------------------------------------------------------------------------------------
10.764213 05/30/97 05/30/97 05/30/97
- ---------------------------------------------------------------------------------------------------------------------------------
14.707274 11/28/97 11/28/97 11/28/97
- ---------------------------------------------------------------------------------------------------------------------------------
14.707274 12/31/96 13.656006 2.65% 09/30/93 09/30/93
- ---------------------------------------------------------------------------------------------------------------------------------
12.641051 11/28/97 11/28/97 11/28/97
- ---------------------------------------------------------------------------------------------------------------------------------
12.641051 12/31/96 13.211476 (9.48%) 12/31/92 10.220014 4.05% 08/31/92
- ---------------------------------------------------------------------------------------------------------------------------------
10.152061 11/28/97 11/28/97 11/28/97
- ---------------------------------------------------------------------------------------------------------------------------------
10.152061 12/31/96 8.149264 19.68% 12/31/92 5.910992 11.21% 11/30/92
- ---------------------------------------------------------------------------------------------------------------------------------
9.912244 11/28/97 11/28/97 11/28/97
- ---------------------------------------------------------------------------------------------------------------------------------
9.912244 12/31/96 9.223832 2.41% 12/31/92 5.597697 11.90% 08/31/92
- ---------------------------------------------------------------------------------------------------------------------------------
18.342977 11/28/97 11/28/97 11/28/97
- ---------------------------------------------------------------------------------------------------------------------------------
18.342977 12/31/96 14.505789 21.57% 02/28/95 02/28/95
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Separate
Ten Year Ten Year Inception Inception Inception Account One Year Three Year
as of AUV w/ DSC Date AUV w/ DSC Charge Free Out DSC DSC
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
08/31/95 10.112036 18.19% 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
06/30/89 7.635956 11.05% 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
6.254743 7.68% 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
08/31/95 10.10305 14.91% 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
5.435129 14.99% 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
05/30/97 11.067831 10.54% 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
10/31/96 10.440059 27.92% 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
08/31/95 9.97621 11.50% 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
7.651098 4.45% 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
05/30/97 11.31339 12.09% 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
05/30/97 10.974826 12.23% 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
11/30/92 5.73602 11.29% 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
12/30/94 10.00095 23.10% 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
12/30/94 10.421875 21.81% 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
06/30/95 10.007485 12.89% 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
01/31/95 9.863898 10.75% 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
01/31/95 10.035116 15.53% 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
06/30/95 10.501518 20.24% 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
06/30/95 9.987517 25.36% 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
10/31/94 10.533284 12.00% 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
01/31/95 9.999046 18.27% 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
10/31/94 9.996697 11.22% 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
07/29/94 10.033526 18.68% 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
04/28/95 9.999069 25.96% 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
07/29/94 9.94517 (5.41%) 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
05/26/93 9.936907 6.97% 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
05/31/96 10.027655 15.17% 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
05/31/96 10.018389 (2.05%) 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
05/30/97 11.121607 2.03% 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
05/30/97 10.665977 0.59% 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
05/30/97 10.782609 10.25% 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
05/30/97 10.220422 (2.07%) 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
11/28/97 14.894208 (8.19%) 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
09/30/93 9.714719 9.83% 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
11/28/97 12.891778 (8.83%) 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
08/31/92 9.309769 5.65% 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
11/28/97 10.00865 (5.69%) 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
11/30/92 5.811138 11.39% 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
11/28/97 9.791134 (5.87%) 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
08/31/92 5.908484 9.98% 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
11/28/97 17.978836 (5.14%) 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
02/28/95 10.049969 22.72% 140 0.150000006 6.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------
Five Year DSC Ten Year DSC Inception DSC
- ----------------------------------------------------
<S> <C> <C>
2.00% 0.00% 5.00%
- --------------------------------------------------
2.00% 0.00% 0.00%
- --------------------------------------------------
2.00% 0.00%
- --------------------------------------------------
2.00% 0.00% 5.00%
- --------------------------------------------------
2.00% 0.00%
- --------------------------------------------------
2.00% 0.00% 7.00%
- --------------------------------------------------
2.00% 0.00% 6.00%
- --------------------------------------------------
2.00% 0.00% 5.00%
- --------------------------------------------------
2.00% 0.00%
- --------------------------------------------------
2.00% 0.00% 7.00%
- --------------------------------------------------
2.00% 0.00% 7.00%
- --------------------------------------------------
2.00% 0.00% 2.00%
- --------------------------------------------------
2.00% 0.00% 4.00%
- --------------------------------------------------
2.00% 0.00% 4.00%
- --------------------------------------------------
2.00% 0.00% 5.00%
- --------------------------------------------------
2.00% 0.00% 5.00%
- --------------------------------------------------
2.00% 0.00% 5.00%
- --------------------------------------------------
2.00% 0.00% 5.00%
- --------------------------------------------------
2.00% 0.00% 5.00%
- --------------------------------------------------
2.00% 0.00% 4.00%
- --------------------------------------------------
2.00% 0.00% 5.00%
- --------------------------------------------------
2.00% 0.00% 4.00%
- --------------------------------------------------
2.00% 0.00% 4.00%
- --------------------------------------------------
2.00% 0.00% 5.00%
- --------------------------------------------------
2.00% 0.00% 4.00%
- --------------------------------------------------
2.00% 0.00% 3.00%
- --------------------------------------------------
2.00% 0.00% 6.00%
- --------------------------------------------------
2.00% 0.00% 6.00%
- --------------------------------------------------
2.00% 0.00% 7.00%
- --------------------------------------------------
2.00% 0.00% 7.00%
- --------------------------------------------------
2.00% 0.00% 7.00%
- --------------------------------------------------
2.00% 0.00% 7.00%
- --------------------------------------------------
2.00% 0.00% 7.00%
- --------------------------------------------------
2.00% 0.00% 3.00%
- --------------------------------------------------
2.00% 0.00% 7.00%
- --------------------------------------------------
2.00% 0.00% 2.00%
- --------------------------------------------------
2.00% 0.00% 7.00%
- --------------------------------------------------
2.00% 0.00% 2.00%
- --------------------------------------------------
2.00% 0.00% 7.00%
- --------------------------------------------------
2.00% 0.00% 2.00%
- --------------------------------------------------
2.00% 0.00% 7.00%
- --------------------------------------------------
2.00% 0.00% 5.00%
- --------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Fund Name Maintenance Fee As of Date
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Aetna Ascent VP 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
Aetna Bond VP 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager Portfolio 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Index 500 Portfolio 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund, Inc. 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
MFS Total Return Series 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
MFS World Governments Series 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth Fund 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
Oppenheimer Growth & Income Fund 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Emerging Equities Portfolio 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/PPI-MFS Emerging Equities 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Research Growth Portfolio 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/PPI -MFS Research Growth 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Value Equity Portfolio 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/PPI-MFS Value Equity 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
Portfolio Partners Scudder International Growth Portfolio 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio Class A/PPI-Scudder International Growth 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
Portfolio Partners T. Rowe Price Growth Equity Portfolio 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
Alger American Growth/PPI-T. Rowe Price Growth Equity 30 12/31/97
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
One Year One Year One Year Three Year Three Year Three Year Five Year
As of AUV as of Date as of AUV w/out DSC as of Date as of AUV w/out DSC as of Date
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
15.332631 12/31/96 12.970018 18.20% 07/04/95
- ----------------------------------------------------------------------------------------------------------------------------------
18.652937 12/31/96 15.445102 20.75% 12/30/94 10.841212 19.81% 12/31/92
- ----------------------------------------------------------------------------------------------------------------------------------
13.127847 12/31/96 12.293777 6.77% 12/30/94 10.323201 8.32% 12/31/92
- ----------------------------------------------------------------------------------------------------------------------------------
14.376721 12/31/96 12.401562 15.91% 07/04/95
- ----------------------------------------------------------------------------------------------------------------------------------
22.003523 12/31/96 17.180818 28.05% 12/30/94 10.735782 27.01% 12/31/92
- ----------------------------------------------------------------------------------------------------------------------------------
13.157858 12/31/96 10.033073 31.13% 12/12/96
- ----------------------------------------------------------------------------------------------------------------------------------
14.414086 12/31/96 10.918586 32.00% 09/15/96
- ----------------------------------------------------------------------------------------------------------------------------------
13.26715 12/31/96 11.751041 12.88% 07/04/95
- ----------------------------------------------------------------------------------------------------------------------------------
11.849943 12/31/96 11.394343 3.98% 12/30/94 10.488699 4.13% 12/31/92
- ----------------------------------------------------------------------------------------------------------------------------------
13.638404 12/31/96 10.284789 32.59% 12/26/96
- ----------------------------------------------------------------------------------------------------------------------------------
13.245833 12/31/96 9.639742 37.39% 12/12/96
- ----------------------------------------------------------------------------------------------------------------------------------
9.976286 12/31/96 8.426156 18.38% 12/30/94 5.930471 18.91% 12/31/92
- ----------------------------------------------------------------------------------------------------------------------------------
18.963413 12/31/96 15.012705 26.30% 12/30/94 10.00095 23.75% 12/31/92
- ----------------------------------------------------------------------------------------------------------------------------------
19.156912 12/31/96 15.734234 21.73% 12/30/94 10.421875 22.48% 12/31/92
- ----------------------------------------------------------------------------------------------------------------------------------
13.958907 12/31/96 12.031496 16.00% 12/30/94 8.989752 15.78% 12/31/92
- ----------------------------------------------------------------------------------------------------------------------------------
13.68184 12/31/96 12.438771 9.98% 12/30/94 10.303726 9.89% 12/31/92
- ----------------------------------------------------------------------------------------------------------------------------------
15.678741 12/31/96 13.179543 18.94% 12/30/94 10.113563 15.72% 12/31/92
- ----------------------------------------------------------------------------------------------------------------------------------
17.06632 12/31/96 13.94256 22.39% 01/03/95
- ----------------------------------------------------------------------------------------------------------------------------------
17.961355 12/31/96 13.727554 30.82% 12/30/94 8.378737 28.92% 12/31/92
- ----------------------------------------------------------------------------------------------------------------------------------
15.417732 12/31/96 13.87894 11.07% 12/30/94 10.373155 14.10% 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
16.691735 12/31/96 13.864503 20.37% 12/30/94 9.835531 19.26% 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
14.319958 12/31/96 12.994995 10.18% 12/30/94 9.882568 13.14% 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
18.339901 12/31/96 15.153365 21.01% 12/30/94 10.107619 21.95% 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
18.910371 12/31/96 15.70061 20.43% 12/30/94 9.825317 24.37% 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
8.572064 12/31/96 9.829389 (12.81%) 12/30/94 9.794269 (4.36%) 03/30/94
- ----------------------------------------------------------------------------------------------------------------------------------
13.793875 12/31/96 13.056374 5.63% 12/30/94 9.055683 15.04% 12/31/92
- ----------------------------------------------------------------------------------------------------------------------------------
13.029956 12/31/96 10.89448 19.58% 01/03/95
- ----------------------------------------------------------------------------------------------------------------------------------
10.207412 12/31/96 10.470592 (2.53%) 12/30/94 9.051104 4.07% 06/14/94
- ----------------------------------------------------------------------------------------------------------------------------------
12.203557 12/31/96 11.08312 10.09% 12/30/94 7.155756 19.46% 12/31/92
- ----------------------------------------------------------------------------------------------------------------------------------
11.538939 12/31/96 9.559142 20.69% 12/30/94 8.164565 12.20% 12/31/92
- ----------------------------------------------------------------------------------------------------------------------------------
12.785298 12/31/96 9.787799 30.61% 07/05/95
- ----------------------------------------------------------------------------------------------------------------------------------
10.764213 12/31/96 10.042736 7.17% 12/30/94 7.992699 10.41% 05/03/93
- ----------------------------------------------------------------------------------------------------------------------------------
14.707274 11/26/97 11/26/97 11/26/97
- ----------------------------------------------------------------------------------------------------------------------------------
14.707274 12/31/96 13.656006 7.68% 12/30/94 9.341557 16.31% 12/31/92
- ----------------------------------------------------------------------------------------------------------------------------------
12.641051 11/26/97 11/26/97 11/26/97
- ----------------------------------------------------------------------------------------------------------------------------------
12.641051 12/31/96 13.211476 (4.34%) 12/30/94 10.833061 5.26% 12/31/92
- ----------------------------------------------------------------------------------------------------------------------------------
10.152061 11/26/97 11/26/97 11/26/97
- ----------------------------------------------------------------------------------------------------------------------------------
10.152061 12/31/96 8.149264 24.56% 12/30/94 5.83085 20.28% 12/31/92
- ----------------------------------------------------------------------------------------------------------------------------------
9.912244 11/26/97 11/26/97 11/26/97
- ----------------------------------------------------------------------------------------------------------------------------------
9.912244 12/31/96 9.223832 7.44% 12/30/94 7.439523 10.02% 12/31/92
- ----------------------------------------------------------------------------------------------------------------------------------
18.342977 11/26/97 11/26/97 11/26/97
- ----------------------------------------------------------------------------------------------------------------------------------
18.342977 12/31/96 14.505789 26.43% 12/31/94 9.651037 23.85% 12/31/92
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Five Year Five Year Ten Year Ten Year Ten Year Inception Inception Inception
as of AUV w/out DSC as of Date as of AUV w/out DSC Date AUV w/out DSC
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
07/04/95 07/05/95 9.703259 20.15%
- ------------------------------------------------------------------------------------------------------------------------------
10.195532 12.82% 04/03/89 04/03/89 7.518949 10.93%
- ------------------------------------------------------------------------------------------------------------------------------
10.073661 5.42% 12/31/87 6.254743 7.68%
- ------------------------------------------------------------------------------------------------------------------------------
07/04/95 07/05/95 9.752348 16.84%
- ------------------------------------------------------------------------------------------------------------------------------
10.449228 16.04% 12/31/87 5.435129 14.99%
- ------------------------------------------------------------------------------------------------------------------------------
12/12/96 12/13/96 9.899466 31.13%
- ------------------------------------------------------------------------------------------------------------------------------
09/15/96 09/16/96 10.000313 32.76%
- ------------------------------------------------------------------------------------------------------------------------------
07/04/95 07/05/95 9.705906 13.35%
- ------------------------------------------------------------------------------------------------------------------------------
10.047829 3.34% 12/31/87 7.651098 4.45%
- ------------------------------------------------------------------------------------------------------------------------------
12/26/96 12/27/96 10.220423 33.01%
- ------------------------------------------------------------------------------------------------------------------------------
12/12/96 12/13/96 9.443427 38.04%
- ------------------------------------------------------------------------------------------------------------------------------
5.836772 11.30% 12/31/87 3.561818 10.83%
- ------------------------------------------------------------------------------------------------------------------------------
8.119838 18.47% 12/31/87 4.64659 15.08%
- ------------------------------------------------------------------------------------------------------------------------------
8.98055 16.34% 12/31/87 4.512445 15.54%
- ------------------------------------------------------------------------------------------------------------------------------
7.807175 12.30% 12/31/87 4.813354 11.22%
- ------------------------------------------------------------------------------------------------------------------------------
7.58338 12.51% 12/31/87 6.282154 8.08%
- ------------------------------------------------------------------------------------------------------------------------------
9.136495 11.39% 09/06/89 09/06/89 6.498917 11.15%
- ------------------------------------------------------------------------------------------------------------------------------
01/03/95 01/03/95 8.46433 26.39%
- ------------------------------------------------------------------------------------------------------------------------------
7.771991 18.22% 08/27/92 08/27/92 7.346378 18.19%
- ------------------------------------------------------------------------------------------------------------------------------
09/13/93 09/13/93 7.691564 17.54%
- ------------------------------------------------------------------------------------------------------------------------------
09/13/93 09/13/93 9.265213 14.66%
- ------------------------------------------------------------------------------------------------------------------------------
09/13/93 09/13/93 10.086038 8.48%
- ------------------------------------------------------------------------------------------------------------------------------
09/13/93 09/13/93 9.67814 16.01%
- ------------------------------------------------------------------------------------------------------------------------------
09/13/93 09/13/93 8.273505 21.19%
- ------------------------------------------------------------------------------------------------------------------------------
03/30/94 03/30/94 9.824706 (3.59%)
- ------------------------------------------------------------------------------------------------------------------------------
8.875999 9.20% 10/14/91 10/14/91 8.543907 7.99%
- ------------------------------------------------------------------------------------------------------------------------------
01/03/95 01/03/95 7.692372 19.24%
- ------------------------------------------------------------------------------------------------------------------------------
06/14/94 06/14/94 9.049518 3.43%
- ------------------------------------------------------------------------------------------------------------------------------
6.255692 14.28% 12/31/87 3.158544 14.45%
- ------------------------------------------------------------------------------------------------------------------------------
5.229659 17.13% 11/12/90 11/12/90 5.589732 10.67%
- ------------------------------------------------------------------------------------------------------------------------------
07/05/95 07/05/95 6.022462 35.28%
- ------------------------------------------------------------------------------------------------------------------------------
05/03/93 05/03/93 8.156291 6.11%
- ------------------------------------------------------------------------------------------------------------------------------
11/26/97 11/28/97 14.894208 (1.27%)
- ------------------------------------------------------------------------------------------------------------------------------
8.869783 10.62% 09/21/88 09/21/88 3.340306 17.31%
- ------------------------------------------------------------------------------------------------------------------------------
11/26/97 11/28/97 12.891778 (1.96%)
- ------------------------------------------------------------------------------------------------------------------------------
10.220014 4.32% 12/31/87 6.304567 7.19%
- ------------------------------------------------------------------------------------------------------------------------------
11/26/97 11/28/97 10.00865 1.41%
- ------------------------------------------------------------------------------------------------------------------------------
5.910992 11.41% 12/31/87 2.978655 13.03%
- ------------------------------------------------------------------------------------------------------------------------------
11/26/97 11/28/97 9.791134 1.22%
- ------------------------------------------------------------------------------------------------------------------------------
5.597697 12.09% 12/31/87 3.742802 10.21%
- ------------------------------------------------------------------------------------------------------------------------------
11/26/97 11/28/97 17.978836 2.01%
- ------------------------------------------------------------------------------------------------------------------------------
7.988416 18.07% 01/09/89 01/09/89 4.141044 18.02%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------
Separate Account Charge Free Out
- -------------------------------------------------
<S> <C> <C>
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
140 0.150000006
- -------------------------------------------------
</TABLE>
