President's Letter
Dear Valued Client,
In August of 1997, I assumed leadership of Aetna's retirement, investment, and
life insurance areas, known collectively as Aetna Retirement Services (ARS).
Through its operating companies, ARS provides individuals with a full range of
financial services, investment management, and other important products and
services. I'm delighted to be heading this company because our mission is to
help people clarify, plan for, and achieve their personal retirement dreams.
That's a mission that's important to us and to you.
Overall, 1997 proved to be another strong year for the stock market. The year
began with some skepticism as to whether or not stocks could produce a third
consecutive year of 20%-plus total returns. At year end, the turbulence in the
Asian markets contributed to wild swings in domestic markets. And, in spite of
it all, the S & P 500 Index rose more than 33%, while the Dow Jones Industrial
Average climbed nearly 25%. The resilience of the market helped equity investors
enjoy yet another year of record returns.*
In the fall of 1997, the ARS organization formed a management investment company
named Portfolio Partners, Inc. (PPI) in order to give many of our clients access
to a wider array of fund management styles, with reduced fees. With the addition
of PPI, our variable insurance product investment options include funds
subadvised by T. Rowe Price Associates, Inc., Massachusetts Financial Services,
Inc. (MFS), and Scudder Kemper Investments, Inc. (Scudder). Aetna funds,
subadvised by Aeltus Investment Management, Inc., remain in our expanding list
of fund families, and together, give you valuable diversification across
markets.
Market swings, economic twists, changes in state and federal tax laws. All offer
opportunities -- and confusion -- for investors. That's why it's so important
for you to pursue an investment strategy that fits your needs and to wisely
choose your retirement planning partner. Thank you for choosing Aetna Retirement
Services, and for your continued trust and business.
Sincerely,
/s/ Thomas J. McInerney
Thomas J. McInerney
*Past performance is no indication of future results.
<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>
<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>
<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>
<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
<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
<PAGE>
Variable Annuity Account B
Condensed Financial Information - Year Ended December 31, 1997
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Value
Per Unit Increase (Decrease) Units
--------- in Value of Outstanding Reserves
Beginning End of Accumulation at End at End
of Year Year Unit of Year of Year
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Variable Fund:
Non-Qualified 1964 $184.327 $236.446 28.27% 958.7 $ 226,674
Non-Qualified V 17.173 22.028 28.27% 10,689,844.8 235,479,321
Non-Qualified V (0.75) 17.246 22.233 28.92% 14,879,862.0 330,825,771
Non-Qualified VI 16.061 20.614 28.35% 2,038,705.2 42,026,682
Non-Qualified VII 17.181 22.004 28.07% 8,522,638.8 187,528,080
Non-Qualified IX 17.728 21.988 24.03% (2) 188,161.6 4,137,321
Non-Qualified X 19.527 22.060 12.97% (4) 4,106,796.0 90,594,675
Non-Qualified XI 18.267 20.644 13.01% (4) 57,540.7 1,187,857
Annuity contracts in payment period 130,876,769
- -----------------------------------------------------------------------------------------------------------------------
Aetna Income Shares:
Non-Qualified V 12.493 13.361 6.96% 1,168,987.9 15,619,413
Non-Qualified V (0.75) 12.546 13.486 7.49% 1,921,538.4 25,913,513
Non-Qualified VI 11.403 12.204 7.02% 48,355.9 590,118
Non-Qualified VII 12.294 13.128 6.78% 1,528,968.2 20,072,060
Non-Qualified IX 12.417 13.337 7.41% (2) 36,017.9 480,373
Non-Qualified X 12.747 13.373 4.91% (4) 489,430.8 6,545,113
Non-Qualified XI 11.639 12.214 4.94% (4) 1,301.6 15,898
Annuity contracts in payment period 3,681,984
- -----------------------------------------------------------------------------------------------------------------------
Aetna Variable Encore Fund:
Non-Qualified V 11.453 11.930 4.16% 974,713.6 11,628,596
Non-Qualified V (0.75) 11.502 12.041 4.69% 2,066,544.9 24,883,829
Non-Qualified VI 11.170 11.642 4.23% 83,981.3 977,686
Non-Qualified VII 11.394 11.850 4.00% 6,770,680.2 80,232,174
Non-Qualified IX 11.572 11.908 2.91% (2) 23,882.1 284,399
Non-Qualified X 11.654 11.930 2.37% (4) 580,411.8 6,924,469
Non-Qualified XI 11.368 11.642 2.41% (4) 685.8 7,984
- -----------------------------------------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc.:
Non-Qualified V 15.698 18.989 20.96% 3,174,737.5 60,284,925
Non-Qualified V (0.75) 15.765 19.166 21.57% 1,970,115.5 37,758,348
Non-Qualified VI 13.188 15.962 21.04% 47,783.6 762,724
Non-Qualified VII 15.445 18.653 20.77% 2,265,202.8 42,252,685
Non-Qualified IX 15.823 18.954 19.79% (2) 25,112.0 475,981
Non-Qualified X 16.898 19.016 12.53% (4) 477,504.2 9,080,220
Non-Qualified XI 14.199 15.985 12.58% (4) 9,165.0 146,501
Annuity contracts in payment period 12,080,737
- -----------------------------------------------------------------------------------------------------------------------
Aetna GET Fund, Series B:
Non-Qualified V 15.633 20.717 32.52% 921,829.3 19,097,276
Non-Qualified X 18.061 20.717 14.70% (4) 85,083.4 1,762,648
- -----------------------------------------------------------------------------------------------------------------------
Aetna GET Fund, Series C:
Non-Qualified V 10.241 12.636 23.39% 212,693.5 2,687,649
Non-Qualified V (0.75) 10.256 12.718 24.01% 616,719.6 7,843,395
Non-Qualified IX 10.413 12.613 21.13% (2) 23,943.7 302,007
Non-Qualified X 11.359 12.636 11.24% (4) 7,601.7 96,056
- -----------------------------------------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio:
Non-Qualified V 12.999 15.392 18.40% 317,578.6 4,888,088
Non-Qualified V (0.75) 13.055 15.535 19.00% 90,134.1 1,400,224
Non-Qualified VII 12.970 15.333 18.22% 898,301.6 13,773,327
Non-Qualified IX 12.994 15.364 18.24% (2) 911.3 14,001
Non-Qualified X 13.943 15.422 10.61% (4) 23,867.6 368,096
- -----------------------------------------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio:
Non-Qualified V 12.430 14.432 16.11% 175,559.4 2,533,702
Non-Qualified V (0.75) 12.483 14.566 16.69% 100,255.9 1,460,366
Non-Qualified VII 12.402 14.377 15.93% 1,112,042.6 15,987,526
</TABLE>
<PAGE>
Variable Annuity Account B
Condensed Financial Information - Year Ended December 31, 1997 (continued):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Value
Per Unit
--------
Beginning End of
of Year Year
- --------------------------------------------------------------------------------
<S> <C> <C>
Aetna Crossroads Variable Portfolio (continued):
Non-Qualified IX $12.428 $14.406
Non-Qualified X 13.178 14.461
Annuity contracts in payment period
- ------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio:
Non-Qualified V 11.776 13.317
Non-Qualified V (0.75) 11.826 13.441
Non-Qualified VII 11.751 13.267
Non-Qualified IX 12.076 13.292
Non-Qualified X 12.335 13.343
Annuity contracts in payment period
- ------------------------------------------------------------------------------
Aetna Variable Portfolio, Inc.:
Capital Appreciation Portfolio:
Non-Qualified V 12.904 13.261
Non-Qualified VII 10.856 13.246
- ------------------------------------------------------------------------------
Growth Portfolio:
Non-Qualified V 14.437 13.173
Non-Qualified VII 11.084 13.158
Annuity contracts in payment period
- ------------------------------------------------------------------------------
Index Plus Portfolio:
Non-Qualified V 10.924 14.444
Non-Qualified V (0.75) 10.940 14.538
Non-Qualified VII 10.919 14.414
Non-Qualified IX 11.345 14.418
Annuity contracts in payment period
- ------------------------------------------------------------------------------
Small Company Portfolio:
Non-Qualified V 13.503 13.654
Non-Qualified V (0.75) 13.211 13.704
Non-Qualified VII 10.603 13.638
Annuity contracts in payment period
- ------------------------------------------------------------------------------
Alger American Funds:
Balanced Portfolio:
Non-Qualified VII 13.673 16.153
- ------------------------------------------------------------------------------
Income and Growth Portfolio:
Non-Qualified VII 12.578 16.902
- ------------------------------------------------------------------------------
Leveraged AllCap Portfolio:
Non-Qualified VII 13.548 15.988
- ------------------------------------------------------------------------------
American Century Investments:
Balanced Fund:
Non-Qualified VII 13.410 15.312
- ------------------------------------------------------------------------------
International Fund:
Non-Qualified VII 11.782 13.782
- ------------------------------------------------------------------------------
Calvert Social Balanced Portfolio:
Non-Qualified V 14.992 17.779
Non-Qualified V (0.75) 15.056 17.944
Non-Qualified VII 9.805 9.976
- ------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio:
Non-Qualified V 12.475 15.784
Non-Qualified V (0.75) 12.529 15.930
Non-Qualified VII 15.013 18.963
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Increase (Decrease) Units
in Value of Outstanding Reserves
Accumulation at End at End
Unit of Year of Year
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aetna Crossroads Variable Portfolio (continued):
Non-Qualified IX 15.91% (2) 7,855.0 $ 113,157
Non-Qualified X 9.74% (4) 10,798.3 156,153
Annuity contracts in payment period 69,721
- ----------------------------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio:
Non-Qualified V 13.08% 133,740.5 1,780,980
Non-Qualified V (0.75) 13.65% 54,848.7 737,197
Non-Qualified VII 12.90% 1,217,781.2 16,156,486
Non-Qualified IX 10.07% (3) 397.4 5,282
Non-Qualified X 8.18% (4) 2,253.6 30,070
Annuity contracts in payment period 1,284,593
- ----------------------------------------------------------------------------------------------------------------
Aetna Variable Portfolio, Inc.:
Capital Appreciation Portfolio:
Non-Qualified V 2.77% (5) 6,193.8 82,137
Non-Qualified VII 22.01% (3) 289,182.0 3,830,457
- ----------------------------------------------------------------------------------------------------------------
Growth Portfolio:
Non-Qualified V (8.75%) (5) 2,694.8 35,500
Non-Qualified VII 18.71% (3) 241,288.8 3,174,844
Annuity contracts in payment period 8,566
- ----------------------------------------------------------------------------------------------------------------
Index Plus Portfolio:
Non-Qualified V 32.23% 266,428.6 3,848,294
Non-Qualified V (0.75) 32.89% 485,416.7 7,056,937
Non-Qualified VII 32.01% 1,179,485.1 17,001,199
Non-Qualified IX 27.09% (2) 11,671.5 168,275
Annuity contracts in payment period 165,083
- ----------------------------------------------------------------------------------------------------------------
Small Company Portfolio:
Non-Qualified V 1.12% (5) 17,392.0 237,476
Non-Qualified V (0.75) 3.73% 2,407.8 32,997
Non-Qualified VII 28.63% (3) 424,485.9 5,789,310
Annuity contracts in payment period 47,346
- ----------------------------------------------------------------------------------------------------------------
Alger American Funds:
Balanced Portfolio:
Non-Qualified VII 18.14% 350,158.0 5,656,151
- ----------------------------------------------------------------------------------------------------------------
Income and Growth Portfolio:
Non-Qualified VII 34.38% 837,069.7 14,148,460
- ----------------------------------------------------------------------------------------------------------------
Leveraged AllCap Portfolio:
Non-Qualified VII 18.00% 893,192.3 14,280,009
- ----------------------------------------------------------------------------------------------------------------
American Century Investments:
Balanced Fund:
Non-Qualified VII 14.19% 303,238.1 4,643,230
- ----------------------------------------------------------------------------------------------------------------
International Fund:
Non-Qualified VII 16.97% 424,673.5 5,852,955
- ----------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio:
Non-Qualified V 18.59% 20,121.5 357,731
Non-Qualified V (0.75) 19.18% 31,512.2 565,451
Non-Qualified VII 1.75% (6) 4,827.0 48,155
- ----------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio:
Non-Qualified V 26.53% 328,561.6 5,185,887
Non-Qualified V (0.75) 27.15% 744,774.3 11,864,536
Non-Qualified VII 26.32% 6,378,263.7 120,953,649
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Variable Annuity Account B
Condensed Financial Information - Year Ended December 31, 1997 (continued):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Value
Per Unit
---------
Beginning End of
of Year Year
- --------------------------------------------------------------------------------
<S> <C> <C>
Equity-Income Portfolio (continued):
Non-Qualified IX $12.668 $15.755
Non-Qualified X 14.017 15.784
- --------------------------------------------------------------------------------
Growth Portfolio:
Non-Qualified V 11.402 13.904
Non-Qualified V (0.75) 11.451 14.034
Non-Qualified VII 15.734 19.157
Non-Qualified IX 11.373 13.879
Non-Qualified X 12.498 13.904
- --------------------------------------------------------------------------------
High Income Portfolio:
Non-Qualified VII 12.031 13.959
Annuity contracts in payment period
- --------------------------------------------------------------------------------
Overseas Portfolio:
Non-Qualified V 11.238 12.381
Non-Qualified V (0.75) 11.286 12.496
Non-Qualified VII 12.439 13.682
Non-Qualified IX 11.356 12.358
- --------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio:
Non-Qualified VII 13.180 15.679
- --------------------------------------------------------------------------------
Contrafund Portfolio:
Non-Qualified V 12.540 15.374
Non-Qualified V (0.75) 12.593 15.517
Non-Qualified VII 13.943 17.066
Non-Qualified IX 12.473 15.346
Non-Qualified X 13.535 15.374
- --------------------------------------------------------------------------------
Index 500 Portfolio:
Non-Qualified VII 13.728 17.961
- --------------------------------------------------------------------------------
Investment Grade Bond Portfolio:
Non-Qualified VII 10.784 11.597
- --------------------------------------------------------------------------------
Insurance Management Series:
American Leaders Fund II:
Non-Qualified VII 15.548 20.287
Annuity contracts in payment period
- --------------------------------------------------------------------------------
Equity Income Fund II:
Non-Qualified VII 10.534 12.305
- --------------------------------------------------------------------------------
Growth Strategies Fund II:
Non-Qualified VII 12.596 15.777
- --------------------------------------------------------------------------------
High Income Bond Fund II:
Non-Qualified VII 13.119 14.724
- --------------------------------------------------------------------------------
International Equity Fund II:
Non-Qualified VII 10.952 11.888
- --------------------------------------------------------------------------------
Prime Money Fund II:
Non-Qualified VII 10.748 11.119
- --------------------------------------------------------------------------------
U.S. Government Securities Fund II:
Non-Qualified VII 11.099 11.883
- --------------------------------------------------------------------------------
Utility Fund II:
Non-Qualified VII 13.303 16.611
- --------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Increase (Decrease) Units
in Value of Outstanding Reserves
Accumulation at End at End
Unit of Year of Year
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity-Income Portfolio (continued):
Non-Qualified IX 24.37% (2) 9,384.6 $ 147,852
Non-Qualified X 12.60% (4) 35,341.5 557,816
- ---------------------------------------------------------------------------------------------------------------
Growth Portfolio:
Non-Qualified V 21.95% 229,059.9 3,184,957
Non-Qualified V (0.75) 22.56% 444,056.9 6,231,813
Non-Qualified VII 21.75% 3,697,132.2 70,825,637
Non-Qualified IX 22.03% (2) 8,431.8 117,025
Non-Qualified X 11.26% (4) 3,029.0 42,117
- ---------------------------------------------------------------------------------------------------------------
High Income Portfolio:
Non-Qualified VII 16.02% 2,522,965.2 35,217,837
Annuity contracts in payment period 68,542
- ---------------------------------------------------------------------------------------------------------------
Overseas Portfolio:
Non-Qualified V 10.17% 51,780.3 641,095
Non-Qualified V (0.75) 10.72% 102,509.1 1,280,977
Non-Qualified VII 9.99% 807,975.8 11,054,595
Non-Qualified IX 8.83% (2) 2,263.7 27,976
- ---------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio:
Non-Qualified VII 18.97% 748,980.7 11,743,075
- ---------------------------------------------------------------------------------------------------------------
Contrafund Portfolio:
Non-Qualified V 22.60% 465,698.6 7,159,550
Non-Qualified V (0.75) 23.21% 710,711.2 11,027,936
Non-Qualified VII 22.40% 5,222,893.8 89,135,577
Non-Qualified IX 23.04% (2) 19,167.7 294,142
Non-Qualified X 13.59% (4) 13,675.0 210,237
- ---------------------------------------------------------------------------------------------------------------
Index 500 Portfolio:
Non-Qualified VII 30.84% 4,286,245.3 76,986,772
- ---------------------------------------------------------------------------------------------------------------
Investment Grade Bond Portfolio:
Non-Qualified VII 7.53% 567,254.2 6,578,182
- ---------------------------------------------------------------------------------------------------------------
Insurance Management Series:
American Leaders Fund II:
Non-Qualified VII 30.48% 5,757,361.2 116,800,911
Annuity contracts in payment period 48,751
- ---------------------------------------------------------------------------------------------------------------
Equity Income Fund II:
Non-Qualified VII 16.82% (1) 1,620,309.5 19,938,571
- ---------------------------------------------------------------------------------------------------------------
Growth Strategies Fund II:
Non-Qualified VII 25.25% 1,439,356.9 22,709,106
- ---------------------------------------------------------------------------------------------------------------
High Income Bond Fund II:
Non-Qualified VII 12.24% 3,613,942.5 53,212,853
- ---------------------------------------------------------------------------------------------------------------
International Equity Fund II:
Non-Qualified VII 8.54% 1,173,166.3 13,946,028
- ---------------------------------------------------------------------------------------------------------------
Prime Money Fund II:
Non-Qualified VII 3.46% 677,261.5 7,530,487
- ---------------------------------------------------------------------------------------------------------------
U.S. Government Securities Fund II:
Non-Qualified VII 7.06% 1,110,578.5 13,196,784
- ---------------------------------------------------------------------------------------------------------------
Utility Fund II:
Non-Qualified VII 24.86% 1,583,456.1 26,302,858
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Variable Annuity Account B
Condensed Financial Information - Year Ended December 31, 1997 (continued):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Value
Per Unit Increase (Decrease) Units
--------- in Value of Outstanding Reserves
Beginning End of Accumulation at End at End
of Year Year Unit of Year of Year
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Janus Aspen Series:
Aggressive Growth Portfolio:
Non-Qualified V $13.850 $15.410 11.26% 469,230.0 $ 7,230,985
Non-Qualified V (0.75) 13.909 15.554 11.82% 427,692.1 6,652,216
Non-Qualified VII 13.879 15.418 11.09% 1,558,984.9 24,036,011
Non-Qualified IX 12.282 15.382 25.24% (2) 10,356.5 159,306
Non-Qualified X 13.806 15.410 11.62% (4) 19,818.3 305,407
- --------------------------------------------------------------------------------------------------------------------------
Balanced Portfolio:
Non-Qualified V 12.431 14.990 20.58% 193,428.9 2,899,569
Non-Qualified V (0.75) 12.484 15.130 21.19% 152,645.8 2,309,496
Non-Qualified VII 13.865 16.692 20.39% 1,544,830.6 25,785,904
Non-Qualified IX 12.742 14.963 17.43% (2) 7,255.0 108,557
Non-Qualified X 13.554 14.990 10.60% (4) 2,818.6 42,252
- --------------------------------------------------------------------------------------------------------------------------
Flexible Income Portfolio:
Non-Qualified V 13.040 14.393 10.37% 109,812.2 1,580,529
Non-Qualified V (0.75) 13.096 14.527 10.93% 97,715.4 1,419,506
Non-Qualified VII 12.995 14.320 10.20% 523,315.4 7,493,855
Non-Qualified IX 13.043 14.367 10.15% (2) 2,832.8 40,698
- --------------------------------------------------------------------------------------------------------------------------
Growth Portfolio:
Non-Qualified V 12.716 15.414 21.22% 179,225.9 2,762,631
Non-Qualified V (0.75) 12.770 15.558 21.83% 197,548.4 3,073,380
Non-Qualified VII 15.153 18.340 21.03% 1,863,396.3 34,174,504
Non-Qualified IX 12.975 15.386 18.58% (2) 3,305.1 50,853
Non-Qualified X 13.985 15.414 10.22% (4) 750.0 11,560
Annuity contracts in payment period 645,899
- --------------------------------------------------------------------------------------------------------------------------
Worldwide Growth Portfolio:
Non-Qualified V 13.880 16.745 20.64% 953,522.1 15,966,576
Non-Qualified V (0.75) 13.940 16.901 21.24% 1,273,109.8 21,516,253
Non-Qualified VII 15.701 18.910 20.44% 6,453,536.4 122,038,767
Non-Qualified IX 14.460 16.714 15.59% (2) 23,481.3 392,473
Non-Qualified X 15.851 16.745 5.64% (4) 44,433.2 744,027
Annuity contracts in payment period 1,995,445
- --------------------------------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund:
Non-Qualified VII 9.829 8.572 (12.79%) 330,540.7 2,833,416
- --------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust Fund:
Non-Qualified V 13.132 13.896 5.82% 149,148.8 2,072,517
Non-Qualified V (0.75) 13.188 14.025 6.35% 106,926.2 1,499,633
Non-Qualified VII 13.056 13.794 5.65% 237,328.3 3,273,677
Non-Qualified IX 12.300 13.870 12.77% (2) 4,338.5 60,176
Non-Qualified X 13.610 13.896 2.10% (4) 1,753.1 24,361
- --------------------------------------------------------------------------------------------------------------------------
MFS Funds:
Total Return Series:
Non-Qualified VII 10.894 13.030 19.60% (2) 1,456,173.6 18,973,878
- --------------------------------------------------------------------------------------------------------------------------
Worldwide Government Series:
Non-Qualified VII 10.471 10.207 (2.51%) (2) 129,738.5 1,324,295
- --------------------------------------------------------------------------------------------------------------------------
Oppenheimer Funds:
Capital Appreciation Fund:
Non-Qualified VII 10.725 12.204 13.78% (3) 302,223.3 3,688,200
- --------------------------------------------------------------------------------------------------------------------------
Global Securities Fund:
Non-Qualified VII 10.457 11.539 10.35% (3) 232,338.3 2,680,937
- --------------------------------------------------------------------------------------------------------------------------
Growth & Income Fund:
Non-Qualified VII 10.497 12.785 21.79% (3) 992,460.8 12,688,907
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Variable Annuity Account B
Condensed Financial Information - Year Ended December 31, 1997 (continued):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Value
Per Unit Increase (Decrease) Units
-------- in Value of Outstanding Reserves
Beginning End of Accumulation at End at End
of Year Year Unit of Year of Year
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Strategic Bond Fund:
Non-Qualified VII $10.167 $10.764 5.87% (3) 287,313.2 $ 3,092,701
- ------------------------------------------------------------------------------------------------------------------------
Portfolio Partners, Inc.:
PPI MFS Emerging Equities Portfolio:
Non-Qualified V 15.411 15.219 (1.24%) (5) 742,912.7 11,306,738
Non-Qualified V (0.75) 15.547 15.361 (1.20%) (5) 598,077.6 9,187,152
Non-Qualified VII 14.894 14.707 (1.26%) (5) 5,027,951.7 73,947,463
Non-Qualified IX 15.386 15.192 (1.26%) (5) 11,491.3 174,572
Non-Qualified X 15.411 15.219 (1.24%) (5) 11,848.1 180,322
Annuity contracts in payment period 496,447
- ------------------------------------------------------------------------------------------------------------------------
PPI MFS Research Growth Portfolio:
Non-Qualified V 12.995 12.744 (1.93%) (5) 664,978.7 8,474,776
Non-Qualified V (0.75) 13.110 12.863 (1.89%) (5) 462,382.5 5,947,692
Non-Qualified VI 10.972 10.761 (1.93%) (5) 11,076.2 119,192
Non-Qualified VII 12.892 12.641 (1.94%) (5) 3,899,625.9 49,295,370
Non-Qualified IX 12.975 12.721 (1.95%) (5) 17,743.4 225,716
Non-Qualified X 12.995 12.744 (1.93%) (5) 141,582.1 1,804,384
- ------------------------------------------------------------------------------------------------------------------------
PPI MFS Value Equity Portfolio:
Non-Qualified V 21.038 21.343 1.45% (5) 296,540.3 6,329,018
Non-Qualified V (0.75) 21.225 21.541 1.49% (5) 164,473.9 3,543,006
Non-Qualified VII 10.009 10.152 1.43% (5) 486,821.9 4,942,246
Non-Qualified IX 21.005 21.304 1.42% (5) 2,467.5 52,568
Non-Qualified X 21.038 21.343 1.45% (5) 8,563.4 182,768
Annuity contracts in payment period 378,075
- ------------------------------------------------------------------------------------------------------------------------
PPI Scudder International Growth Portfolio:
Non-Qualified V 17.682 17.903 1.25% (5) 411,599.5 7,368,901
Non-Qualified V (0.75) 17.838 18.070 1.30% (5) 280,632.6 5,070,932
Non-Qualified VII 9.791 9.912 1.24% (5) 5,903.8 58,520
Non-Qualified IX 17.653 17.870 1.23% (5) 4,501.9 80,450
Non-Qualified X 17.682 17.903 1.25% (5) 3,985.9 71,360
- ------------------------------------------------------------------------------------------------------------------------
PPI T. Rowe Price Growth Equity Portfolio:
Non-Qualified V 14.112 14.400 2.04% (5) 231,297.4 3,330,704
Non-Qualified V (0.75) 14.237 14.534 2.09% (5) 360,614.7 5,241,201
Non-Qualified VII 17.979 18.343 2.03% (5) 4,434,573.9 81,343,288
Non-Qualified IX 14.090 14.374 2.02% (5) 14,428.8 207,397
Non-Qualified X 14.112 14.400 2.04% (5) 3,310.3 47,668
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Variable Annuity Account B
Condensed Financial Information - Year Ended December 31, 1997 (continued):
Non-Qualified 1964 Individual contracts issued from December 1, 1964 to
March 14, 1967.
Non-Qualified V Group AetnaPlus contracts issued in connection with
Deferred Compensation Plans issued since August 28,
1992.
Non-Qualified VI Certain existing contracts that were converted to
ACES, an administrative system (previously valued
under Non-Qualified I).
Non-Qualified VII Certain individual and group contracts issued as
non-qualified deferred annuity contracts or Individual
Retirement Annuity contracts issued since May 4, 1994.
Non-Qualified IX Group AetnaPlus contracts issued in connection with
Deferred Compensation Plans having contract
modifications effective April 7, 1997.
Non-Qualified X Group AetnaPlus contracts issued in connection with
Deferred Compensation Plans having contract
modifications effective May 29, 1997.
Non-Qualified XI Certain contracts previously valued under
Non-Qualified VI having contract modifications
effective May 29, 1997.
Notes to Condensed Financial Information:
(1) - Reflects less than a full year of performance activity. Funds were first
received in this option during February 1997.
(2) - Reflects less than a full year of performance activity. Funds were first
received in this option during April 1997.
(3) - Reflects less than a full year of performance activity. Funds were first
received in this option during May 1997.
(4) - Reflects less than a full year of performance activity. Funds were first
received in this option during June 1997.
(5) - Reflects less than a full year of performance activity. Funds were first
received in this option during November 1997.
(6) - Reflects less than a full year of performance activity. Funds were first
received in this option during December 1997.
See Notes to Financial Statements
<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 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.
<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.
<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>
<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>
<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>
<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>
<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>
<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>
<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>
<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>
<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.
<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>
<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>
<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>
<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>
<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>
<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>
<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>
<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.
KPMG Peat Marwick LLP
Hartford, Connecticut
February 27, 1998
