VARIABLE ANNUITY ACCOUNT B OF AETNA LIFE INS & ANNUITY CO, 497, 1999-12-20

VARIABLE ANNUITY ACCOUNT B OF AETNA LIFE INS & ANNUITY CO
497, 1999-12-20

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Contract Prospectus - December 17, 1999
- --------------------------------------------------------------------------------

The Contract. The contract described in this prospectus is a group or individual
deferred variable annuity contract issued by Aetna Life Insurance and Annuity
Company (the Company, we, us). It is issued as either a qualified Individual
Retirement Annuity (IRA), a qualified Roth IRA, a qualified contract under
certain employer sponsored retirement plans, or as a nonqualified deferred
annuity contract.

Why Reading this Prospectus Is Important. This prospectus contains facts about
the contract and its investment options you should know before purchasing. This
information will help you decide if the contract is right for you. Please read
this prospectus carefully.
Table of Contents . . . page 3

Contract Design. The contract described in this prospectus is designed to:

o Help you save for retirement security while receiving beneficial tax
treatment;

o Offer a variety of investment options to help meet long-term financial
goals;

o Provide a death benefit to the beneficiary you designate; and

o Provide payments for life or for a specified period.

Purchase Payments/Premium Bonuses. We credit a premium bonus to your account for
each eligible purchase payment you make. Purchase payments and any corresponding
premium bonuses are allocated to the investment options you select.

Over time, the amount of the premium bonus may be more than offset by the fees
associated with the bonus.

Getting Additional Information. You may obtain the December 17, 1999, Statement
of Additional Information (SAI) about the separate account by indicating your
request on your application or calling us at 1-800-238-6219. You may also obtain
an SAI for any of the funds by calling that number. This prospectus, the SAI and
other information about the separate account are posted on the Securities and
Exchange Commission (SEC) web site, http://www.sec.gov and may also be obtained,
free of charge, by contacting the SEC Public Reference Room at 202-942-8090. The
SAI table of contents is listed on page 40 of this prospectus. The SAI is
incorporated into this prospectus by reference.

Additional Disclosure Information. Neither the SEC nor any state securities
commission has approved or disapproved the securities offered through this
prospectus or passed on the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense. We do not intend for this
prospectus to be an offer to sell or a solicitation of an offer to buy these
securities in any state that does not permit their sale. We have not authorized
anyone to provide you with information that is different than that contained in
this prospectus.

The contract is not a deposit with, obligation of or guaranteed or endorsed by
any bank, nor is it insured by the FDIC. The contract is subject to investment
risk, including the possible loss of the principal amount of your investment.

Investment Options. The contract offers variable investment options and fixed
interest options. When we establish your account you instruct us to direct
account dollars to any of the available options.

Variable Investment Options. These options are called subaccounts. The
subaccounts are within Variable Annuity Account B (the separate account), a
separate account of the Company. Each subaccount invests in one of the mutual
funds listed on this page. Earnings on amounts invested in a subaccount will
vary depending upon the performance of its underlying fund. You do not invest
directly in or hold shares of the funds.

The funds in which the subaccounts invest have various risks. Information about
the risks of investing in the funds is located in the "Investment Option"
section in this prospectus and in each fund prospectus. Read this prospectus in
conjunction with the fund prospectuses, and retain the prospectuses for future
reference.

Fixed Interest Options. o ALIAC Guaranteed Account (the Guaranteed Account)

o Fixed Account

Except as specifically mentioned, this prospectus describes only the investment
options offered through the separate account. However, we describe the fixed
interest options in appendices to this prospectus. There is also a separate
Guaranteed Account prospectus.

Availability of Options. Some variable investment options or fixed interest
options may be unavailable through your contract or in your state.

The Funds

o Aetna Balanced VP, Inc.

o Aetna Income Shares d/b/a Aetna Bond VP

o Aetna Growth VP

o Aetna Variable Fund d/b/a Aetna Growth and Income VP

o Aetna Index Plus Large Cap VP

o Aetna International VP

o Aetna Variable Encore Fund d/b/a Aetna Money Market VP

o Aetna Real Estate Securities VP

o Aetna Small Company VP

o AIM V.I. Capital Appreciation Fund

o AIM V.I. Growth Fund

o AIM V.I. Growth and Income Fund

o AIM V.I. Value Fund

o Fidelity Variable Insurance Products Fund (VIP) Equity-Income Portfolio

o Fidelity Variable Insurance Products Fund (VIP) Growth Portfolio

o Fidelity Variable Insurance Products Fund (VIP) High Income Portfolio

o Fidelity Variable Insurance Products Fund II (VIP II) Contrafund Portfolio

o Janus Aspen Aggressive Growth Portfolio

o Janus Aspen Balanced Portfolio

o Janus Aspen Growth Portfolio

o Janus Aspen Worldwide Growth Portfolio

o MFS Total Return Series

o Oppenheimer Aggressive Growth Fund/VA

o Oppenheimer Main Street Growth & Income Fund/VA

o Oppenheimer Strategic Bond Fund/VA

o Portfolio Partners (PPI) MFS Emerging Equities Portfolio

o Portfolio Partners (PPI) MFS Research Growth Portfolio

o Portfolio Partners (PPI) MFS Value Equity Portfolio

o Portfolio Partners (PPI) Scudder International Growth Portfolio

2
<PAGE>

TABLE OF CONTENTS
Contract Overview 4

o Contract Design -- Contract Facts -- Questions: Contacting the
Company - Sending Forms and Written Requests in Good Order - Sending
Additional Purchase Payments - Contract Phases: The Accumulation
Phase, The Income Phase

Fee Table 7

Condensed Financial Information 11

Investment Options 11

Transfers Among Investment Options 13

Purchase and Rights 15

Premium Bonus 16

Right to Cancel 19

Fees 20

Your Account Value 23

Withdrawals 26

Systematic Distribution Options 28

Death Benefit 29

The Income Phase 33

Taxation 37

Other Topics 45

o The Company -- Variable Annuity Account B -- Contract Distribution --
Payment of Commissions -- Payment Delay or Suspension -- Performance
Reporting -- Voting Rights -- Contract Modifications -- Transfer of
Ownership: Assignment -- Involuntary Terminations -- Legal Matters
and Proceedings -- Year 2000 Readiness

Contents of the Statement of Additional Information 50

Appendix I -- ALIAC Guaranteed Account 51

Appendix II -- Fixed Account 54

Appendix III -- Description of Underlying Funds 55

3
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Contract Overview
- --------------------------------------------------------------------------------

The following is intended as a summary. Please read each section of this
prospectus for additional detail.

Contract Design

The contract described in this prospectus is a group or individual deferred
variable annuity contract. It is intended to be a retirement savings vehicle
that offers a variety of investment options to help meet long-term financial
goals. The term "contract" in this prospectus refers to individual contracts and
to certificates issued under group contracts.

Contract Facts

Premium Bonus. We will credit a premium bonus to your account whenever you make
an eligible purchase payment. Your initial purchase payment is always eligible
for a premium bonus. Thereafter, any withdrawals you make from the contract
reduce dollar-for-dollar the eligibility of subsequent purchase payments for a
premium bonus.

To determine the eligibility of subsequent purchase payments for a premium
bonus, we subtract the sum of your withdrawals from the sum of your purchase
payments. The result equals your net cumulative purchase payments. Next, we
subtract from the net cumulative purchase payment amount the sum of your
previous purchase payments upon which we paid a premium bonus, which results in
the amount of the purchase payment eligible for a premium bonus. See "Premium
Bonus" for an example of the effect of withdrawals on eligibility for a premium
bonus.

The amount of your premium bonus is a certain percentage of the eligible
purchase payment. The particular percentage is determined according to the
following schedule, which is based on three ranges of net cumulative purchase
payments.

Net Cumulative Purchase Payments Premium Bonus Percentage
-------------------------------- ------------------------

$1,500 to $14,999 2.00%

$15,000 to $2,499,999 4.00%

$2,500,000 or more 5.00%

The premium bonus is included in your account value and will be allocated among
the investment options you have selected in the same proportion as the purchase
payment. In certain circumstances, a premium bonus previously credited to your
account will not be included when calculating the death benefit or income phase
payments. See "Premium Bonus," "Death Benefit - Death Benefit Amount" and "The
Income Phase - Premium Bonus." Also, if you exercise your free look privilege
and cancel your contract, the amount refunded to you will not include any
premium bonus. See "Right to Cancel."

Free Look/Right to Cancel. You may cancel your contract within 10 days (some
states require more than 10 days) of receipt. See "Right to Cancel."

Death Benefit. Your beneficiary may receive a financial benefit in the event of
your death prior to the income phase. The amount of the death benefit will
depend on the death benefit option selected, and once a death benefit option is
selected it may not be changed. Each death benefit option has a different
mortality and expense risk charge. See "Fees" and "Death Benefit." Any death
benefit during the income phase will depend upon the income phase payment option
selected. See "The Income Phase."

Withdrawals. During the accumulation phase, you may withdraw all or part of your
account value. Certain fees, taxes and early withdrawal penalties may apply. In
addition, the Internal Revenue Code of 1986, as amended (Tax Code), restricts
full and partial withdrawals in some circumstances. See "Withdrawals." Amounts
withdrawn from the Guaranteed Account may be subject to a market value
adjustment. See Appendix I.

Systematic Distribution Options. These are made available for you to receive
periodic withdrawals from your account, while retaining the account in the
accumulation phase. See "Systematic Distribution Options."

Fees and Expenses. Certain fees and expenses are deducted from the value of your
contract. See "Fee Table" and "Fees."

- --------------------------------------------------------------------------------
Questions: Contacting the Company. To answer your questions, contact your local
representative or write or call our Home Office at:

Aetna Financial Services
Annuity Services
151 Farmington Avenue
Hartford, CT 06156-1258

1-800-238-6219

Sending Forms and Written Requests in Good Order.

If you are writing to change your beneficiary, request a withdrawal, or for any
other purpose, contact your local representative or the Company to learn what
information is required for the request to be in "good order." We can only act
upon requests that are received in good order.
Sending Additional Purchase Payments.

Use one of the following addresses when sending additional purchase payments.

If using the U.S. Postal Service:

ALIAC
Attn: New Business Unit
P.O. Box 30670
Hartford, CT 06150-0670

If using express mail:

Fleet Bank/ALIAC #30670
Lockbox - CT/EH F03E
99 Founders Plaza, 3rd Floor
East Hartford, CT 06108

Express mail packages should not be sent to the P.O. Box Address.
- --------------------------------------------------------------------------------

4
<PAGE>

Taxation. You will generally not pay taxes on any earnings from the annuity
contract described in this prospectus until they are withdrawn. Tax-qualified
retirement arrangements (e.g. IRAs or 403(b) plans) also defer payment of taxes
on earnings until they are withdrawn. If you are considering funding a
tax-qualified retirement arrangement with an annuity contract, you should know
that the annuity contract does not provide any additional tax deferral of
earnings beyond the tax deferral provided by the tax-qualified retirement
arrangement. However, annuities do provide other features and benefits which may
be valuable to you. You should discuss your decision with your financial
representative.

Taxes will generally be due when you receive a distribution of earnings. Tax
penalties may apply in some circumstances. See "Taxation."

5
<PAGE>

Contract Phases

I. The Accumulation Phase (accumulating dollars under your contract)

STEP 1: You provide us with your completed application and initial purchase
payment. We establish an account for you and credit that account with your
initial purchase payment and premium bonus.

STEP 2: You direct us to invest your purchase payment and the premium bonus in
one or more of the following investment options:

(a) Fixed Interest Options; or

(b) Variable Investment Options. (The variable investment options are the
subaccounts of Variable Annuity Account B. Each one invests in a specific
mutual fund.)

STEP 3: Each subaccount you select purchases shares of its assigned fund.

------------
Payments to
Your Account
------------
Step 1
- --------------------------------------------------------------------------------
Aetna Life Insurance and Annuity Company
- --------------------------------------------------------------------------------
(a) Step 2 (b)
----------- -------------------------------
Fixed Variable Annuity
Interest Account B
Options Variable Investment Options

----------- -------------------------------
The Subaccounts
-------------------------------
A B Etc
-------------------------------
Step 3
---------------------
Mutual Mutual
Fund A Fund B
---------------------

II. The Income Phase (receiving income phase payments from your contract)

When you want to begin receiving payments from your contract, you may select
from the options available. The contract offers several income phase payment
options (see "The Income Phase"). In general, you may:

o Receive income phase payments for a specified period of time or for life;

o Receive income phase payments monthly, quarterly, semi-annually or
annually;

o Select an income phase payment option that provides for payments to your
beneficiary; or

o Select fixed income phase payments or payments that vary based upon the
performance of the variable investment options you select.

6
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Fee Table
- --------------------------------------------------------------------------------

The tables and examples in this section show the fees that may affect your
account value during the accumulation phase. See "The Income Phase" for fees
that may apply after you begin receiving income phase payments under the
contract.

Maximum Transaction Fees

Early Withdrawal Charge. (As a percentage of purchase payments withdrawn.)
- --------------------------------------------------------------------------------
Years From Receipt of Purchase Payment Early Withdrawal Charge
-------------------------------------- -----------------------

Less than 3 8%

3 or more but less than 4 7%

4 or more but less than 5 6%

5 or more but less than 6 5%

6 or more but less than 7 4%

7 or more but less than 8 3%

8 or more 0%
- --------------------------------------------------------------------------------

Annual Maintenance Fee ................................................$30.00(1)

Transfer charge ........................................................$0.00(2)

Maximum Fees Deducted from Investments in the Separate Account

Amount During the Accumulation Phase. (Daily deductions, equal to the following
percentages on an annual basis, from amounts invested in the subaccounts.)

Death Benefit Option I

Mortality and Expense Risk Charge 1.25%

Administrative Expense Charge 0.15%
-----

Total Separate Account Expenses 1.40%

Death Benefit Option II

Mortality and Expense Risk Charge 1.45%

Administrative Expense Charge 0.15%
-----

Total Separate Account Expenses 1.60%

Amount During the Income Phase. (Daily deductions, equal to the following
percentages on an annual basis, from amounts invested in the subaccounts.)

Mortality and Expense Risk Charge 1.25%

Administrative Expense Charge 0.00% - 0.25%(3)
-------------

Total Separate Account Expenses 1.25% - 1.50%(3)
-------------

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In this Section:

o Maximum Transaction Fees

o Maximum Fees Deducted from Investments in the Separate Account

o Fees Deducted by the Funds

o Hypothetical Examples

Also see the "Fees" section for:

o How, When and Why Fees are Deducted

o Reduction, Waiver and/or Elimination of Certain Fees

o Premium and Other Taxes

In addition to the fees shown in this section, state and municipal premium
taxes may apply.
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7
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(1)The annual maintenance fee will be waived if your account value is $50,000 or
greater on the date this fee is due.

(2)During the accumulation phase, we currently allow you 12 free transfers each
account year. We reserve the right to charge $10 for each additional transfer.
We currently do not impose this charge. See "Transfers" for additional
information.

(3)We currently do not deduct an administrative expense charge during the income
phase; however, we reserve the right to deduct a daily charge of not more than
0.25% per year. See "The Income Phase--Charges Deducted."

8
<PAGE>

Fees Deducted by the Funds

Using this information. The following table shows the investment advisory fees
and other expenses charged annually by each fund. Fund fees are one factor that
impacts the value of a fund share. To learn more about additional factors
impacting the share value, refer to the fund prospectus.

How fees are deducted. The fund fees are not deducted from account values.
Instead, they are deducted from the value of the fund shares on a daily basis,
which in turn affects the value of each subaccount that purchases fund shares.
Except as noted below, the following figures are a percentage of the average net
assets of each fund, and are based upon figures for the year ended December 31,
1998.

Fund Expense Table

<TABLE>
<CAPTION>
Total Fund Annual Net Fund Annual
Investment Expenses Without Total Expenses After
Advisory Other Waivers or Waivers and Waivers or
Fees(1) Expenses Reductions Reductions Reductions

<S> <C> <C> <C> <C> <C>
Aetna Balanced VP, Inc.(3) 0.50% 0.09% 0.59% -- 0.59%
Aetna Bond VP(3) 0.40% 0.10% 0.50% -- 0.50%
Aetna Growth VP(2)(3) 0.60% 0.15% 0.75% 0.00% 0.75%
Aetna Growth and Income VP(3) 0.50% 0.08% 0.58% -- 0.58%
Aetna Index Plus Large Cap VP(2)(3) 0.35% 0.10% 0.45% 0.00% 0.45%
Aetna International VP(2)(3) 0.85% 1.22% 2.07% 0.92% 1.15%
Aetna Money Market VP(3) 0.25% 0.09% 0.34% -- 0.34%
Aetna Real Estate Securities VP(2)(3) 0.75% 0.73% 1.48% 0.53% 0.95%
Aetna Small Company VP(2)(3) 0.75% 0.14% 0.89% 0.00% 0.89%
AIM V.I. Capital Appreciation Fund(4) 0.62% 0.05% 0.67% -- 0.67%
AIM V.I. Growth Fund(4) 0.64% 0.08% 0.72% -- 0.72%
AIM V.I. Growth and Income Fund(4) 0.61% 0.04% 0.65% -- 0.65%
AIM V.I. Value Fund(4) 0.61% 0.05% 0.66% -- 0.66%
Fidelity VIP Equity-Income Portfolio(5) 0.49% 0.09% 0.58% 0.00% 0.58%
Fidelity VIP Growth Portfolio(5) 0.59% 0.09% 0.68% 0.00% 0.68%
Fidelity VIP High Income Portfolio(5) 0.58% 0.12% 0.70% 0.00% 0.70%
Fidelity VIP II Contrafund Portfolio(5) 0.59% 0.11% 0.70% 0.00% 0.70%
Janus Aspen Aggressive Growth Portfolio(6) 0.72% 0.03% 0.75% 0.00% 0.75%
Janus Aspen Balanced Portfolio(6) 0.72% 0.02% 0.74% 0.00% 0.74%
Janus Aspen Growth Portfolio(6) 0.72% 0.03% 0.75% 0.07% 0.68%
Janus Aspen Worldwide Growth Portfolio(6) 0.67% 0.07% 0.74% 0.02% 0.72%
MFS Total Return Series(7) 0.75% 0.16% 0.91% 0.00% 0.91%
Oppenheimer Aggressive Growth Fund/VA(4) 0.69% 0.02% 0.71% -- 0.71%
Oppenheimer Main Street Growth & Income Fund/VA(4) 0.74% 0.05% 0.79% -- 0.79%
Oppenheimer Strategic Bond Fund/VA(4) 0.74% 0.06% 0.80% -- 0.80%
PPI MFS Emerging Equities Portfolio(8) 0.68% 0.13% 0.81% 0.00% 0.83%
PPI MFS Research Growth Portfolio(8) 0.70% 0.15% 0.85% -- 0.85%
PPI MFS Value Equity Portfolio(8) 0.65% 0.25% 0.90% -- 0.90%
PPI Scudder International Growth Portfolio(8) 0.80% 0.20% 1.00% -- 1.00%
</TABLE>

9
<PAGE>

Footnotes to the "Fund Expense Table"

(1) Certain of the fund advisers reimburse the company for administrative costs
incurred in connection with administering the funds as variable funding options
under the contract. These reimbursements are generally paid out of the
management fees and are not charged to investors. For the AIM Funds, the
reimbursements may be paid out of the fund assets in an amount up to 0.25%
annually. Any such reimbursements paid from the AIM Funds' assets are included
in the "Other Expenses" column.

(2) The investment adviser is contractually obligated through December 31, 1999
to waive all or a portion of its investment advisory fee and/or its
administrative services fee and/or to reimburse a portion of other expenses in
order to ensure that the portfolio's Total Fund Annual Expenses do not exceed
the percentage reflected under Net Fund Annual Expenses After Waivers or
Reductions.

(3) Prior to May 1, 1998, the portfolio's investment adviser provided
administrative services to the portfolio and assumed the portfolio's ordinary
recurring direct costs under an administrative services agreement. After that
date, the portfolio's investment adviser provided administrative services but no
longer assumed all of the portfolio's ordinary recurring direct costs under an
administrative services agreement. The administrative fee is 0.075% on the first
$5 billion in assets and 0.050% on all assets over $5 billion. The "Other
Expenses" shown are not based on actual figures for the year ended December 31,
1998, but reflect the fee payable under the new administrative services
agreement and estimates the portfolio's ordinary recurring direct costs.

(4) Fee waiver/expense reimbursement obligations do not apply to these
portfolios.

(5) A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, certain funds, or the investment adviser on
behalf of certain funds, have entered into arrangements with their custodian
whereby credits realized as a result of uninvested cash balances were used to
reduce custodian expenses. Expenses do not take into account these expense
reductions, and are therefore higher than the actual expenses of the series.

(6) All expenses are stated both with and without contractual waivers and fee
reductions by Janus Capital. Fee reductions for the Aggressive Growth, Balanced,
Growth and Worldwide Growth Portfolios reduce the Management fee to the level of
the corresponding Janus retail fund. Other waivers, if applicable, are first
applied against the Management Fee and then against Other Expenses. Janus
Capital has agreed to continue the other waivers and fee reduction until at
least the next annual renewal of the advisory agreement.

(7) Each series has an expense offset arrangement which reduces the series'
custodian fee based upon the amount of cash maintained by the series with its
custodian and dividend disbursing agent. Each series may enter into other such
arrangements and directed brokerage arrangements, which would also have the
effect of reducing the series' expenses. Expenses do not take into account these
expense reductions, and are therefore higher than the actual expenses of the
series.

(8) The investment adviser has agreed to reimburse the portfolios for expenses
and/or waive its fees, so that, through at least April 30, 2000, the aggregate
of each portfolio's expenses will not exceed the combined investment advisory
fees and other expenses shown under the Net Fund Annual Expenses After Waivers
or Reductions column above. For the Portfolio Partners MFS Emerging Equities
Portfolio, the Total Fund Annual Expenses Without Waivers or Reductions for 1998
were less than the percentage reflected under the Net Annual Fund Expenses After
Waivers or Reductions column. Nevertheless, the investment adviser will waive
fees and/or reimburse expenses if that portfolio's Total Fund Annual Expenses
Without Waivers or Reductions for 1999 exceed the percentage reflected under the
Net Fund Annual Expenses After Waivers or Reductions column.

10
<PAGE>

Hypothetical Example

Account Fees You May Incur Over Time. The following hypothetical examples show
the fees and expenses paid over time if you invest $1,000 and a 2% premium bonus
in the contract and assume a 5% annual return on the investment. For the purpose
of these examples, we deducted total annual fund expenses and the maximum
charges under the contract (i.e., a mortality and expense risk charge of 1.45%
annually for Death Benefit Option II, an administrative expense charge of 0.15%
annually and a maximum annual maintenance fee of $30 (converted to a percentage
of assets equal to 0.022%)). The total annual fund expenses used are those shown
in the column "Total Annual Expenses Without Waivers or Reductions" in the Fund
Expense Table.
<TABLE>
<CAPTION>
- ----------------------------------------
o These examples are purely
hypothetical.

o They should not be considered a EXAMPLE A EXAMPLE B
representation of past or future
expenses or expected returns. If you withdraw your entire account If at the end of the periods shown you
value at the end of the periods shown, (1) leave your entire account value
o Actual expenses and/or returns may you would pay the following expenses, invested or (2) select an income phase
be more or less than those shown including any applicable early payment option, you would pay the
in these examples. withdrawal charge: following expenses (no early withdrawal
- ---------------------------------------- charge is reflected):*

1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
------ ------- ------- -------- ------ ------- ------- --------

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Balanced VP, Inc. $96 $134 $166 $260 $23 $71 $121 $260

Aetna Bond VP $95 $131 $161 $250 $22 $68 $116 $250

Aetna Growth VP $98 $139 $174 $276 $25 $75 $129 $276

Aetna Growth and Income VP $96 $134 $166 $259 $23 $70 $120 $259

Aetna Index Plus Large Cap VP $95 $130 $159 $245 $21 $66 $114 $245

Aetna International VP $111 $179 $240 $402 $38 $115 $195 $402

Aetna Money Market VP $94 $126 $153 $233 $20 $63 $108 $233

Aetna Real Estate Securities VP $105 $161 $211 $348 $32 $98 $166 $348

Aetna Small Company VP $99 $143 $182 $290 $26 $80 $136 $290

AIM V.I. Capital Appreciation Fund $97 $137 $170 $268 $24 $73 $125 $268

AIM V.I. Growth Fund $97 $138 $173 $273 $24 $75 $128 $273

AIM V.I. Growth & Income Fund $97 $136 $169 $266 $23 $72 $124 $266

AIM V.I. Value Fund $97 $136 $170 $267 $24 $73 $125 $267

Fidelity VIP Equity-Income Portfolio $96 $134 $166 $259 $23 $70 $120 $259

Fidelity VIP Growth Portfolio $97 $137 $171 $269 $24 $73 $126 $269

Fidelity VIP High Income Portfolio $97 $138 $172 $271 $24 $74 $127 $271

Fidelity VIP II Contrafund Portfolio $97 $138 $172 $271 $24 $74 $127 $271

Janus Aspen Aggressive Growth Portfolio $98 $139 $174 $276 $25 $75 $129 $276

Janus Aspen Balanced Portfolio $98 $139 $174 $275 $24 $75 $129 $275

Janus Aspen Growth Portfolio $98 $139 $174 $276 $25 $75 $129 $276

Janus Aspen Worldwide Growth Portfolio $98 $139 $174 $275 $24 $75 $129 $275

MFS Total Return Series $99 $144 $183 $292 $26 $80 $137 $292

Oppenheimer Aggressive Growth Fund/VA $97 $138 $172 $272 $24 $74 $127 $272

Oppenheimer Main Street Growth & Income
Fund/VA $98 $140 $176 $280 $25 $77 $131 $280

Oppenheimer Strategic Bond Fund/VA $98 $141 $177 $281 $25 $77 $132 $281

PPI MFS Emerging Equities Portfolio $98 $141 $177 $282 $25 $77 $132 $282

PPI MFS Research Growth Portfolio $99 $142 $180 $286 $26 $79 $134 $286

PPI MFS Value Equity Portfolio $99 $144 $182 $291 $26 $80 $137 $291

PPI Scudder International Growth Portfolio $100 $147 $187 $301 $27 $83 $142 $301
</TABLE>

11
<PAGE>

* This example does not apply during the income phase if you select a
nonlifetime income phase payment option with variable payments and take a
lump-sum withdrawal after payments start. In this case, the lump sum payment is
treated as a withdrawal during the accumulation phase and may be subject to an
early withdrawal charge (refer to Example A).

12
<PAGE>

Condensed Financial Information
- --------------------------------------------------------------------------------

As of the date of this prospectus, we had not begun selling the contract and the
subaccounts did not have any assets attributable to the contract. Therefore, no
condensed financial information is presented herein.

Investment Options
- --------------------------------------------------------------------------------

The contract offers variable investment options and fixed interest options.

o Mutual Fund (fund) Descriptions. We provide brief descriptions of the
funds in Appendix III. Investment results of the funds are likely to
differ significantly and there is no assurance that any of the funds will
achieve their respective investment objectives. Shares of the funds will
rise and fall in value and you could lose money by investing in the funds.
Shares of the funds are not bank deposits and are not guaranteed, endorsed
or insured by any financial institution, the Federal Deposit Insurance
Corporation or any other government agency. Unless otherwise noted, all
funds are diversified as defined under the Investment Company Act of 1940.
Refer to the fund prospectuses for additional information. Fund
prospectuses may be obtained, free of charge, from our Home Office at the
address and phone number listed in "Contract Overview -- Questions:
Contacting the Company" or by contacting the SEC Public Reference Room.

Fixed Interest Options. If available in your state, the ALIAC Guaranteed Account
(the Guaranteed Account) or the Fixed Account. The Guaranteed Account offers
certain guaranteed minimum interest rates for a stated period of time. Amounts
must remain in the Guaranteed Account for specific periods to receive the quoted
interest rates, or a market value adjustment will be applied. The market value
adjustment may be positive or negative. The Fixed Account guarantees payment of
the minimum interest rate specified in the contract. The Fixed Account is only
available in certain states. For a description of these options see Appendices I
and II and the Guaranteed Account prospectus.

- --------------------------------------------------------------------------------
Selecting Investment Options

o Choose options appropriate for you. Your Company representative can
help you evaluate which investment options may be appropriate for
your financial goals.

o Understand the risks associated with the options you choose. Some
subaccounts invest in funds that are considered riskier than others.
Funds with additional risks are expected to have values that rise
and fall more rapidly and to a greater degree than other funds. For
example: Funds investing in foreign or international securities are
subject to additional risks not associated with domestic
investments, and their performance may vary accordingly. Also, funds
using derivatives in their investment strategy may be subject to
additional risks.

o Be informed. Read this prospectus, the fund prospectuses, the
Guaranteed Account and Fixed Account appendices and the Guaranteed
Account prospectus.
- --------------------------------------------------------------------------------

Limits on Availability of Options. Some funds or fixed interest options may be
unavailable through your contract or in your state. We may add, withdraw or
substitute funds, subject to the conditions in your contract and compliance with
regulatory requirements.

We may disallow investment in a subaccount if fund shares are unavailable to the
separate account or if we judge that further investments in such shares would be
inappropriate for the contract. In addition, we may substitute shares of another
fund for shares already acquired. We reserve the right to do so without proxy
vote.

Limits on How Many Investment Options You May Select. Although there is
currently no limit, we reserve the right to limit the number of investment
options you may select at any one time or during the life of the contract. For
purposes of determining any limit, each subaccount and each guaranteed term of
the Guaranteed Account, or an investment in the Fixed Account in certain
contracts, will be considered an investment option.

Limits Imposed by the Underlying Fund. Orders for the purchase of fund shares
may be subject to acceptance by the fund. We reserve the right to reject,
without prior notice, any allocation of a purchase payment or premium bonus to a
subaccount if the subaccount's investment in the corresponding fund is not
accepted by the fund for any reason.

Additional Risks of Investing in the Funds (Mixed and Shared Funding).

"Shared funding" occurs when shares of a fund, which the subaccounts buy for
variable annuity contracts, are also bought by other insurance companies for
their variable annuity contracts.

"Mixed funding" occurs when shares of a fund, which the subaccounts buy for
variable annuity contracts, are bought for variable life insurance contracts
issued by the Company or other insurance companies.

13
<PAGE>

o Shared--bought by more than one company.

o Mixed--bought for annuities and life insurance.

It is possible that a conflict of interest may arise due to mixed and/or shared
funding, which could adversely impact the value of a fund. For example: If a
conflict of interest occurred and one of the subaccounts withdrew its investment
in a fund, the fund may be forced to sell its securities at disadvantageous
prices, causing its share value to decrease. Each fund's Board of Directors or
Trustees will monitor events to identify any conflicts which may arise and to
determine what action, if any, should be taken to address such conflicts.

Transfers Among Investment Options
- --------------------------------------------------------------------------------

You may transfer amounts among the available subaccounts. During the
accumulation phase, we allow you 12 free transfers each account year. We reserve
the right to charge $10 for each additional transfer. We currently do not impose
this charge. During the income phase, if approved in your state, transfers are
limited to 12 each account year and allowed only if you select variable income
phase payments.

Transfers from the Guaranteed Account are subject to certain restrictions and
may be subject to a market value adjustment. Transfers from the Fixed Account
are subject to certain restrictions and transfers into the Fixed Account from
any of the other investment options are not allowed. Transfers must be made in
accordance with the terms of your contract.

Transfer Requests. Requests may be made in writing, by telephone or, where
applicable, electronically.

Limits on Frequent Transfers. The contract is not designed to serve as a vehicle
for frequent trading in response to short-term fluctuations in the market. Such
frequent trading can disrupt management of a fund and raise its expenses. This
in turn can have an adverse effect on fund performance. Accordingly,
organizations or individuals that use market-timing investment strategies and
make frequent transfers should not purchase the contract.

We reserve the right to restrict, in our sole discretion and without prior
notice, transfers initiated by a market-timing organization or an individual or
other party authorized to give transfer instructions on behalf of multiple
contract holders. Such restrictions could include: (1) not accepting transfer
instructions from an agent acting on behalf of more than one contract holder;
and (2) not accepting preauthorized transfer forms from market timers or other
entities acting on behalf of more than one contract holder at a time.

We further reserve the right to impose, without prior notice, restrictions on
transfers that we determine, in our sole discretion, will disadvantage or
potentially hurt the rights or interests of other contract holders.

Additionally, orders for the purchase of fund shares may be subject to
acceptance by the fund. We reserve the right to reject, without prior notice,
any transfer request to a subaccount if the subaccount's investment in the
corresponding fund is not accepted for any reason.

Value of Your Transferred Dollars. The value of amounts transferred into or out
of subaccounts will be based upon the subaccount unit values next determined
after we receive your transfer request at our Home Office, or, if you are
participating in the dollar cost averaging or account rebalancing program, after
your scheduled transfer or reallocation.

Telephone Transfers: Security Measures. To prevent fraudulent use of telephone
transactions, we have established security procedures. These include recording
calls on our toll-free telephone lines and requiring use of a personal
identification number (PIN) to execute transactions. You are responsible for
keeping your PIN and account information confidential. If we fail to follow
reasonable security procedures, we may be liable for losses due to unauthorized
or fraudulent telephone transactions. We are not liable for losses resulting
from telephone instructions we believe to be genuine. If a loss occurs when we
rely on such instructions, you will bear the loss.

The Dollar Cost Averaging Program. Dollar cost averaging is an investment
strategy whereby you purchase fixed dollar amounts of an investment at regular
intervals, regardless of price. Under this program a fixed dollar amount is
automatically transferred from certain subaccounts, the Guaranteed Account or
Fixed Account to any of the other subaccounts. A market value adjustment will
not be applied to dollar cost averaging transfers from a guaranteed term of the
Guaranteed Account during participation in the dollar cost averaging program. If
such participation is discontinued, we will automatically transfer the remaining
balance in that guaranteed term to another guaranteed term of the same duration,
unless you initiate a transfer into another investment option. In either case, a
market value adjustment will apply. See Appendix I for more information about
dollar cost averaging from the Guaranteed Account. If dollar cost averaging is
stopped with respect to amounts invested in the Fixed Account, the remaining
balance will be transferred to the money market subaccount.

Dollar cost averaging neither ensures a profit nor guarantees against loss in a
declining market. You should consider your financial ability to continue
purchases through periods of low price levels. There is no additional charge for
this program and transfers made under this program do not count as transfers
when determining the number of free transfers that may be made each calendar
year. For additional information about this program, contact your local
representative or call us at the number listed in "Contract Overview --
Questions: Contacting the Company."

In certain states, purchase payments and premium bonuses allocated to the Fixed
Account may require participation in the dollar cost averaging program.

14
<PAGE>

Dollar cost averaging is not available if you elect to participate in the
account rebalancing program.

The Account Rebalancing Program. Account rebalancing allows you to reallocate
your account value to match the investment allocations you originally selected.
Only account values invested in the subaccounts may be rebalanced. We
automatically reallocate your account value annually (or more frequently as we
allow). Account rebalancing neither ensures a profit nor guarantees against loss
in a declining market. There is no additional charge for this program and
transfers made under this program do not count as transfers when determining the
number of free transfers that may be made each calendar year. You may
participate in this program by completing the account rebalancing section of
your application, or by contacting us at the address and/or number listed in
"Contract Overview -- Questions: Contacting the Company."

Account rebalancing is not available if you elect to participate in the dollar
cost averaging program.

Purchase And Rights
- --------------------------------------------------------------------------------

How to Purchase

o Individual Contracts. In some states, where group contracts are not
available, you may purchase the contract directly from us by completing an
application and delivering it and your initial purchase payment to us.
Upon our approval we will issue you a contract, set up an account for you
under the contract and credit your account with a premium bonus.

o Group Contracts. In most states we have distributors, usually
broker/dealers or banks, who hold the contract as a group contract (see
"Distribution"). You may purchase an interest (or, in other words,
participate) in the group contract by contacting a distributor and
completing an application and delivering it with your initial purchase
payment to that distributor. Upon our approval, we will set up an account
for you under the group contract, issue you a certificate showing your
rights under the contract and credit your account with a premium bonus.

o Joint Contracts (generally spouses). For a nonqualified contract, you may
participate in a group contract as a joint contract holder. References to
"contract holder" in this prospectus mean both contract holders under
joint contracts. Tax law prohibits the purchase of qualified contracts by
joint contract holders.

Maximum Issue Age. The maximum ages for you and the annuitant (if you are not
the annuitant) on the date we establish your account are as follows:

Maximum Issue Age
-----------------

Death Benefit Option I 85

Death Benefit Option II 75

Your Rights Under the Contract.

o Individual Contracts. You have all contract rights.

o Group Contracts. The holder of the group contract has title to the
contract and, generally, only the right to accept or reject any
modifications to the contract. You have all other rights to your account
under the contract.

o Joint Contracts. Joint contract holders have equal rights under the
contract with respect to their account. All rights under the contract must
be exercised by both joint contract holders with the exception of
transfers among investment options. See the "Death Benefit" section for
the rights of the surviving joint contract holder upon the death of a
joint contract holder prior to the income phase start date.

Purchase Payment Methods. The following purchase payment methods are allowed:

o One lump sum;

o Periodic payments; or

o Transfer or rollover from a pre-existing retirement plan or account.

We reserve the right to reject any purchase payments to a prospective or
existing account without advance notice.

Purchase Payment Amounts. The minimum initial purchase payment amounts are as
follows:

Non-Qualified: Qualified:*
-------------- -----------

Minimum Initial Purchase Payment $15,000 $1,500

*The Tax Code imposes a maximum limit on annual purchase payments which may
be excluded from your gross income.

Additional purchase payments must be at least $50 (we may change this amount
from time to time). A purchase payment of more than $1,000,000 will be allowed
only with our consent.

The amount of any premium bonus credited to your account is not considered part
of the purchase payment.

15
<PAGE>

Reduction of Purchase Payment Amounts. In certain circumstances we may reduce
the minimum initial or additional purchase payment amount we will accept under a
contract. Whether such a reduction is available is based upon consideration of
one or more of the following factors:

o The size and type of the prospective group, if any, to which the reduction
would apply;

o The method and frequency of purchase payments to be made under the
contract; or

o The amount of compensation to be paid to distributors and their registered
representative on each purchase payment.

Any reduction of the minimum initial or additional purchase payment amount will
not be unfairly discriminatory against any person. We will make any such
reduction according to our own rules in effect at the time the purchase payment
is received. We reserve the right to change these rules from time to time.

Acceptance or Rejection of Your Application. We must accept or reject your
application within two business days of receipt. If the application is
incomplete, we may hold any forms and accompanying purchase payment(s) for five
business days. We may hold purchase payments for longer periods, pending
acceptance of the application, only with your permission. If the application is
rejected, the application and any purchase payments will be returned to you.

Allocating Purchase Payments to the Investment Options. We will allocate your
purchase payments and any premium bonuses among the investment options you
select. Allocations must be in whole percentages and there may be limits on the
number of investment options you may select. When selecting investment options,
you may find it helpful to review the "Investment Options" section.

Premium Bonus
- --------------------------------------------------------------------------------

Net Cumulative Premium
Purchase Payments Bonus Percentage
----------------- ----------------

$1,500 to $14,999 2.00%

$15,000 to $2,499,999 4.00%

$2,500,000 or more 5.00%

Example: If you make the following purchase payments and withdrawals under a
qualified contract, we will credit premium bonuses to your account, calculated
as follows:

Purchase Premium Bonus
Payment Amount Withdrawal Explanation
- ------- ------ ---------- -----------

$10,000 $200 This entire purchase payment is eligible
for a 2.00% premium bonus. Therefore, a
$200 premium bonus would be credited to
your account ($10,000 multiplied by
2.00%).

$5,000 This withdrawal will reduce the
eligibility of subsequent purchase
payments to receive the premium bonus.

$3,000 $0 This purchase payment is not eligible
for a premium bonus because it is
completely offset by the prior $5,000
withdrawal.

$4,000 $40 The amount of the purchase payment
eligible for the premium bonus is $2,000
(the sum of purchase payments made
reduced by prior withdrawals minus the
sum of purchase payments upon which a
premium bonus has previously been paid).
The premium bonus percentage is 2% based
upon a $12,000 net cumulative purchase
payment amount. Therefore, a $40 premium
bonus would be credited to your account
($2,000 multiplied by 2.00%).

16
<PAGE>

$5,000 $200 All of this purchase payment is eligible
for a premium bonus because the prior
withdrawal was completely used to offset
the premium bonuses on the prior two
purchase payments. The premium bonus
percentage is 4% based upon a $17,000
net cumulative purchase payment amount.
Accordingly, a $200 premium bonus would
be credited to your account ($5,000
multiplied by 4%).

This example is intended to illustrate how the premium bonus is calculated; it
does not include the effect of any early withdrawal charge, or market value
adjustment for amounts invested in the guaranteed account, related to any
withdrawals.

The premium bonus is included in your account value and will be allocated among
the investment options you have selected in the same proportion as the purchase
payment. The amount of any premium bonus credited to your account is not
considered part of the purchase payment. Rather, it is considered gain under the
contract.

The amount of the death benefit will not include any premium bonus credited to
your account after or within 12 months of the date of death. See "Death Benefit
- -- Death Benefit Amount." Likewise, any premium bonus credited to your account
within 24 months of electing an income phase payment option will be forfeited
and not included in your account value when calculating the payment amount. See
"The Income Phase -- Premium Bonus." Also, if you exercise your free look
privilege and cancel your contract, the amount refunded to you will not include
any premium bonus. See "Right to Cancel." No premium bonus will be credited on
amounts reinvested following a full withdrawal. See "Withdrawals -- Reinvesting
a Full Withdrawal."

We use a portion of the early withdrawal charge and mortality and expense risk
charge to help recover the cost of providing the premium bonus under the
contract. See "Fees." Under certain circumstances (such as a period of poor
market performance) the cost associated with the premium bonus may exceed the
sum of the premium bonus and any related earnings. You should consider this
possibility before purchasing the contract.

Right to Cancel
- --------------------------------------------------------------------------------

When and How to Cancel. You may cancel your contract within ten days of receipt
(some states allow longer) by returning it to our Home Office along with a
written notice of cancellation.

Refunds. We will issue you a refund within seven days of our receipt of your
contract and written notice of cancellation. Unless your state requires
otherwise or unless you purchased an IRA, your refund will equal the purchase
payments made plus any earnings or minus any losses attributable to those
purchase payments allocated among the subaccounts. In other words, you will bear
the entire investment risk for amounts allocated among the subaccounts during
this period and the amount refunded could be less than the amount paid. If your
state requires or if you purchased an IRA, we will refund all purchase payments
made. Any refund will not include any premium bonus credited to your account.

If the purchase payments for your canceled contract came from a rollover from
another contract issued by us or one of our affiliates where an early withdrawal
charge was reduced or eliminated, the purchase payments will be restored to your
prior contract.

17
<PAGE>

Fees
- --------------------------------------------------------------------------------

The following repeats and adds to information provided in the "Fee Table"
section. Please review both sections for information on fees.

TRANSACTION FEES

Early Withdrawal Charge

Withdrawals of all or a portion of your account value may be subject to a
charge.

Amount. A percentage of the purchase payments that you withdraw.

Early Withdrawal Charge Schedule
- --------------------------------------------------------------------------------
Years From Receipt of Purchase Payment Early Withdrawal Charge
-----------------------

Less than 3 8%

3 or more but less than 4 7%

4 or more but less than 5 6%

5 or more but less than 6 5%

6 or more but less than 7 4%

7 or more but less than 8 3%

8 or more 0%
- --------------------------------------------------------------------------------
Purpose. This is a deferred sales charge. It reimburses us for some of the
sales, administrative and premium bonus expenses associated with the contract.
Our remaining sales, administrative and premium bonus expenses will be covered
by the mortality and expense risk charge described in this section and, to the
extent necessary, our other general assets.

- --------------------------------------------------------------------------------
Types of Fees

There are four types of fees or deductions that may affect your account.

TRANSACTION FEES

o Early Withdrawal Charge

o Annual Maintenance Fee

o Transfer Charge

FEES DEDUCTED FROM INVESTMENTS IN THE SEPARATE ACCOUNT

o Mortality and Expense Risk Charge

o Administrative Expense Charge

FEES DEDUCTED BY THE FUNDS

o Investment Advisory Fees

o Other Expenses

PREMIUM AND OTHER TAXES
- --------------------------------------------------------------------------------

18
<PAGE>

First In, First Out. The early withdrawal charge is calculated separately for
each purchase payment withdrawn. For purposes of calculating your early
withdrawal charge, we consider that your first purchase payment to the account
(first in) is the first you withdraw (first out).

For example: We calculate the early withdrawal charge based upon the number of
years since the purchase payment was received. If your initial purchase payment
was made four years ago, we will deduct an early withdrawal charge equal to 6%
of the portion of that purchase payment withdrawn. The next time you make a
withdrawal we will assess the charge against the portion of the first purchase
payment that you did not withdraw and/or your subsequent purchase payments to
your account in the order they were received.

Earnings (including any premium bonus) may be withdrawn after all purchase
payments have been withdrawn. There is no early withdrawal charge for withdrawal
of earnings.

Free Withdrawals. There is no early withdrawal charge if, during each account
year, the amount withdrawn is 10% or less of your account value on the later of
the date we established your account or the most recent anniversary of that
date.

The free withdrawal amount will be adjusted for amounts withdrawn under a
systematic distribution option or taken as a required minimum distribution
during the account year.

Waiver. The early withdrawal charge is waived for purchase payments withdrawn if
the withdrawal is:

o Used to provide income phase payments to you;

o Paid due to the annuitant's death during the accumulation phase in an
amount up to the sum of purchase payments made, minus the total of all
partial withdrawals and deductions made prior to the annuitant's death;

o Paid upon a full withdrawal where your account value is $2,500 or less and
no part of the account has been withdrawn during the prior 12 months;

o If approved in your state, taken under a qualified contract when the
amount withdrawn is equal to the minimum distribution required by the Tax
Code for your account calculated using a method permitted under the Tax
Code and agreed to by us (including required minimum distributions using
the ECO systematic distribution option); or

o Paid upon termination of your account by us (see "Other Topics --
Involuntary Terminations").

Annual Maintenance Fee

Maximum Amount. $30.00

When/How. Each year during the accumulation phase we deduct this fee from your
account value. We deduct it on your account anniversary and at the time of full
withdrawal. It is deducted proportionally from each investment option.

Purpose. This fee reimburses us for administrative expenses relating to the
establishment and maintenance of your account.

Elimination. We will not deduct the annual maintenance fee if your account value
is $50,000 or more on the date this fee is to be deducted.

19
<PAGE>

Transfer Charge

Amount. During the accumulation phase, we currently allow you 12 free transfers
each account year. We reserve the right to charge $10 for each additional
transfer. We currently do not impose this charge.

Purpose. This fee reimburses us for administrative expenses associated with
transferring your dollars among investment options.

FEES DEDUCTED FROM INVESTMENTS IN THE SEPARATE ACCOUNT

Mortality and Expense Risk Charge

Maximum Amount. During the accumulation phase the amount of this charge depends
on which death benefit option you select. For Death Benefit Option I, this
charge, on an annual basis, is equal to 1.25% of your account value invested in
the subaccounts. For Death Benefit Option II, this charge, on an annual basis,
is equal to 1.45% of your account value invested in the subaccounts. During the
income phase, this charge, on an annual basis, is equal to 1.25% of amounts held
in the subaccounts.

When/How. We deduct this fee daily from the subaccounts corresponding to the
funds you select. We do not deduct this fee from any fixed interest option.

Purpose. This fee compensates us for the mortality and expense risks we assume
under the contract and the expense associated with the premium bonus.

o The mortality risk is the risk associated with our promises to pay the
death benefit available under the contract and to make lifetime income
phase payments based upon annuity rates specified in the contract.

o The expense risk is the risk that the actual expenses we incur under the
contract will exceed the maximum costs that we can charge.

If the amount we deduct for this fee is not enough to cover our mortality and
expense risk costs and premium bonus expenses under the contract, we will bear
the loss. We may use any excess to recover distribution costs relating to the
contract and as a source of profit. We expect to make a profit from this fee.

Administrative Expense Charge

Maximum Amount. This charge, on an annual basis, is equal to 0.15% of your
account value invested in the subaccounts during the accumulation phase. There
is currently no administrative expense charge during the income phase; however,
we reserve the right to assess an administrative expense charge of up to 0.25%
during the income phase.

When/How. If imposed, we deduct this fee daily from the subaccounts
corresponding to the funds you select. We do not deduct this fee from the fixed
interest options. This charge may be assessed during the accumulation phase or
the income phase. If we are imposing this fee when you enter the income phase,
the fee will apply to you during the entire income phase.

Purpose. This fee helps defray our administrative expenses that cannot be
covered by the mortality and expense risk charges described above. The charge is
not intended to exceed the average expected cost of administering the contract.
We do not expect to make a profit from this fee.

REDUCTION OR ELIMINATION OF CERTAIN FEES

When sales of the contract are made to individuals or a group of individuals in
a manner that results in savings of sales or administrative expenses, we may
reduce or eliminate the early withdrawal charge, annual maintenance fee,
mortality and expense risk charge or administrative expense charge. Our decision
to reduce or eliminate any of these charges will be based on one or more of the
following:

o The size and type of group to whom the contract is issued;

o The amount of expected purchase payments;

o A prior or existing relationship with the Company, such as being an
employee or former employee of the Company or one of our affiliates,
receiving distributions or making transfers from other contracts issued by
us or one of our affiliates, or transferring amounts held under qualified
retirement plans sponsored by us or one of our affiliates;

o The type and frequency of administrative and sales services provided; or

o The level of annual maintenance fee and early withdrawal charges.

The reduction or elimination of any of these charges will not be unfairly
discriminatory against any person and will be done according to our rules in
effect at the time the contract is issued. We reserve the right to change these
rules from time to time. The right to reduce or eliminate any of these charges
may be subject to state approval.

20
<PAGE>

FEES DEDUCTED BY THE FUNDS

Maximum Amount. Each fund's advisory fee and expenses are different. They are
set forth in "Fee Table--Fees Deducted by the Funds" and described in more
detail in each fund prospectus.

When/How. The fund fees are not deducted from your account value. Instead, fund
expenses are reflected in the daily value of fund shares, which in turn will
affect the daily value of the subaccounts.

Purpose. These expenses help to pay the fund investment adviser and operating
expenses.

PREMIUM AND OTHER TAXES

Maximum Amount. Some states and municipalities charge a premium tax on
annuities. These taxes currently range from 0% to 4%, depending upon
jurisdiction.

When/How. We reserve the right to deduct premium taxes from your account value
or from purchase payments to the account at any time, but not before there is a
tax liability under state law. Our current practice is to deduct premium taxes
at the time of a complete withdrawal or the commencement of income phase
payments. We will not deduct any municipal premium tax of 1% or less, but we
reserve the right to reflect such an expense in our annuity purchase rates.

In addition, the Company reserves the right to assess a charge for any federal
taxes due against the separate account. See "Taxation."

Your Account Value
- --------------------------------------------------------------------------------

During the accumulation phase, your account value at any given time equals:

o The current dollar value of amounts invested in the subaccounts; plus

o The current dollar values of amounts invested in the fixed interest
options, including interest earnings to date.

Subaccount Accumulation Units. When a fund is selected as an investment option,
your account dollars invest in "accumulation units" of the Variable Annuity
Account B subaccount dedicated to that fund. The subaccount invests directly in
the fund shares. The value of your interests in a subaccount is expressed as the
number of accumulation units you hold multiplied by an "Accumulation Unit
Value," as described below, for each unit.

Accumulation Unit Value (AUV). The value of each accumulation unit in a
subaccount is called the accumulation unit value or AUV. The AUV varies daily in
relation to the underlying fund's investment performance. The value also
reflects deductions for fund fees and expenses, the mortality and expense risk
charge, and the administrative charge (if any). We discuss these deductions in
more detail in "Fee Table" and "Fees."

Valuation. We determine the AUV every business day after the close of the New
York Stock Exchange. At that time, we calculate the current AUV by multiplying
the AUV last calculated by the "net investment factor" of the subaccount. The
net investment factor measures the investment performance of the subaccount from
one valuation to the next.

Current AUV = Prior AUV x Net Investment Factor

Net Investment Factor. The net investment factor for a subaccount between two
consecutive valuations equals the sum of 1.0000 plus the net investment rate.

Net Investment Rate. The net investment rate is computed according to a formula
that is equivalent to the following:

o The net assets of the fund held by the subaccount as of the current
valuation; minus

o The net assets of the fund held by the subaccount at the preceding
valuation; plus or minus

o Taxes or provisions for taxes, if any, due to subaccount operations (with
any federal income tax liability offset by foreign tax credits to the
extent allowed); divided by

o The total value of the subaccount's units at the preceding valuation;
minus

o A daily deduction for the mortality and expense risk charge, the
administrative expense charge (if any) and any other fees deducted from
investments in the separate account. See "Fees."

The net investment rate may be either positive or negative.

21
<PAGE>

Hypothetical Illustration. As a hypothetical illustration, assume that your
initial purchase payment to a qualified contract is $5,000 and you direct us to
invest $3,000 in Fund A and $2,000 in Fund B. Also assume that on the day we
receive the purchase payment and credit a 2% premium bonus to your account, the
applicable AUV's after the next close of business of the New York Stock Exchange
are $10 for Subaccount A, and $20 for Subaccount B. Your account is credited
with 306 accumulation units of Subaccount A, and 102 accumulation units of
Subaccount B.
Step 1: You make an initial purchase payment of $5000 and we credit your
account with a corresponding 2% ($100) premium bonus.
Step 2:

A. You direct us to invest $3,000 in Fund A. The portion of the premium bonus
related to the amount directed to Fund A is $60 ($3000 multiplied by 2%).
The purchase payment and premium bonus purchase 306 accumulation units of
Subaccount A ($3,060 divided by the $10 AUV).

B. You direct us to invest $2,000 in Fund B. The portion of the premium bonus
related to the amount directed to Fund B is $40 ($2000 multiplied by 2%).
The purchase payment and premium bonus purchase 102 accumulation units of
Subaccount B ($2,040 divided by the $20 AUV).

Step 3: The separate account purchases shares of the applicable funds at the
then current market value.

The fund's subsequent investment performance, expenses and charges, and the
daily charges deducted from the subaccount, will cause the AUV to move up or
down on a daily basis.

---------------------------------------------------
$5,000 contribution
---------------------------------------------------
Step 1
---------------------------------------------------
Aetna Life Insurance and Annuity Company
---------------------------------------------------
Step 2
---------------------------------------------------
Variable Annuity Account B

Subaccount A Subaccount B Etc.
306 102
accumulation accumulation
units units
---------------------------------------------------
Step 3
------------------------------------
Fund A Fund B
------------------------------------

22
<PAGE>

Purchase Payments to Your Account. If all or a portion of initial purchase
payments are directed to the subaccounts, they and the corresponding premium
bonus will purchase subaccount accumulation units at the AUV next computed after
our acceptance of the applicable application as described in "Purchase and
Rights." Any subsequent purchase payment and premium bonus or transfer directed
to the subaccounts will purchase subaccount accumulation units at the AUV next
computed following our receipt of the purchase payment or transfer request. The
value of subaccounts may vary day to day.

Withdrawals
- --------------------------------------------------------------------------------

You may withdraw all or a portion of your account value at any time during the
accumulation phase. If you participate in the contract through a 403(b) plan,
certain restrictions apply. See "Restrictions on Withdrawals From 403(b) Plan
Accounts."

Steps for Making A Withdrawal

o Select the withdrawal amount.

1. Full Withdrawal: You will receive, reduced by any required withholding
tax, your account value allocated to the subaccounts, the Guaranteed
Account (plus or minus any applicable market value adjustment) and the
Fixed Account, minus any applicable early withdrawal charge and annual
maintenance fee.

2. Partial Withdrawal (Percentage or Specified Dollar Amount): You will
receive, reduced by any required withholding tax, the amount you specify,
subject to the value available in your account. However, the amount
actually withdrawn from your account will be adjusted by any applicable
early withdrawal charge for amounts withdrawn from the subaccounts, the
Guaranteed Account and/or the Fixed Account, and any positive or negative
market value adjustment for amounts withdrawn from the Guaranteed Account.

See Appendices I and II and the Guaranteed Account prospectus for more
information.

o Select investment options. If you do not specify this, we will withdraw
dollars proportionally from each of your investment options.

o Properly complete a disbursement form and deliver it to our Home Office.

Restrictions on Withdrawals From 403(b) Plan Accounts

Under Section 403(b) contracts, the withdrawal of salary reduction contributions
and earnings on such contributions is generally prohibited prior to the
participant's death, disability, attainment of age 59 1/2 , separation from
service or financial hardship. See "Taxation."

Calculation of Your Withdrawal. We determine your account value every normal
business day after the close of the New York Stock Exchange. We pay withdrawal
amounts based upon your account value as of the next valuation after we receive
a request for withdrawal in good order at our Home Office.

Delivery of Payment. Payments for withdrawal requests will be made in accordance
with SEC requirements. Normally, your withdrawal amount will be sent no later
than seven calendar days following our receipt of a properly-completed
disbursement form in good order.

Reinvesting a Full Withdrawal. Within 30 days after a full withdrawal, if
allowed by law and the contract, you may elect to reinvest all or a portion of
your withdrawal. We must receive reinvested amounts within 60 days of the
withdrawal. We reserve the right, however, to accept a reinvestment election
received more than 30 days after the withdrawal and accept proceeds received
more than 60 days after the withdrawal. We will credit the account for the
amount reinvested based upon the subaccount values next computed following our
receipt of your request and the amount to be reinvested. No premium bonus will
be credited on amounts reinvested. We will credit the amount reinvested
proportionally for maintenance fees and early withdrawal charges imposed at the
time of withdrawal. We will deduct from the amounts reinvested any maintenance
fee which fell due after the withdrawal and before the reinvestment. We will
reinvest in the same investment options and proportions in place at the time of
withdrawal. If you withdraw amounts from a series of the Aetna GET Fund and then
elect to reinvest them, we will reinvest them in a GET Fund series then
accepting deposits, if one is available. If one is not available, we will
reallocate your GET amounts among the other investment options in which you
invested, on a pro rata basis. The reinvestment privilege may be used only once.
Special rules apply to reinvestments of amounts withdrawn from the Guaranteed
Account (see Appendix I and the Guaranteed Account prospectus). We will not
credit your account for market value adjustments that we deducted at the time of
your withdrawal. Seek competent advice regarding the tax consequences associated
with reinvestment.

- --------------------------------------------------------------------------------
Taxes, Fees and Deductions

Amounts withdrawn may be subject to one or more of the following:

o Early Withdrawal Charge (see "Fees--Early Withdrawal Charge")

o Maintenance Fee (see "Fees--Maintenance Fee")

o Market Value Adjustment for amounts held in the Guaranteed Account (see
Appendix I and the Guaranteed Account prospectus)

o Tax Penalty (see "Taxation")

o Tax Withholding (see "Taxation")

To determine which may apply, refer to the appropriate sections of this
prospectus, contact your local representative or call us at the number listed in
"Contract Overview -- Questions: Contacting the Company."
- --------------------------------------------------------------------------------

23
<PAGE>

Systematic Distribution Options
- --------------------------------------------------------------------------------

The following systematic distribution options may be available:

o SWO--Systematic Withdrawal Option. SWO is a series of automatic partial
withdrawals from your account based upon a payment method you select.
Consider this option if you would like a periodic income while retaining
investment flexibility for amounts accumulated under the account.

o ECO--Estate Conservation Option. ECO offers the same investment
flexibility as SWO, but is designed for those who want to receive only the
minimum distribution that the Tax Code requires each year. Under ECO, we
calculate the minimum distribution amount required by law, generally at
age 70 1/2 and pay you that amount once a year. ECO is not available under
nonqualified contracts. An early withdrawal charge will not be deducted
from and a market value adjustment will not be applied to any part of your
account value paid under an ECO.

o LEO--Life Expectancy Option. LEO provides for annual payments for a number
of years equal to your life expectancy or the life expectancy of you and a
designated beneficiary. It is designed to meet the substantially equal
periodic payment exception to the 10% premature distribution penalty under
Tax Code section 72. See "Taxation."

Other Systematic Distribution Options. We may add additional systematic
distribution options from time to time. You may obtain additional information
relating to any of the systematic distribution options from your local
representative or by calling us at the number listed in "Contract Overview --
Contract Questions: Contacting the Company."

Eligibility for a Systematic Distribution Option. To determine if you meet the
age and account value criteria and to assess terms and conditions that may
apply, contact your local representative or the Company at the number listed in
"Contract Overview -- Questions: Contacting the Company."

Systematic Distribution Option Availability. If allowed by applicable law, we
reserve the right to discontinue the availability of one or all of the
systematic distribution options for new elections at any time, and/or to change
the terms of future elections.

Terminating a Systematic Distribution Option. You may revoke a systematic
distribution option at any time by submitting a written request to our Home
Office. ECO, once revoked, may not, unless allowed under the Tax Code, be
elected again.

Charges and Taxation. When you elect a systematic distribution option, your
account value remains in the accumulation phase and subject to the charges and
deductions described in the "Fees" and "Fee Table" sections. Taking a withdrawal
under a systematic distribution option may have tax consequences. If you are
concerned about tax implications, consult a qualified tax adviser before
electing an option.

- --------------------------------------------------------------------------------
Features of a Systematic Distribution Option

A systematic distribution option allows you to receive regular payments from
your contract without moving into the income phase. By remaining in the
accumulation phase, you retain certain rights and investment flexibility not
available during the income phase.
- --------------------------------------------------------------------------------

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<PAGE>

Death Benefit
- --------------------------------------------------------------------------------

During the Accumulation Phase

Who Receives the Death Benefit? If you would like certain individuals or
entities to receive the death benefit when it becomes payable, you may name them
as your beneficiary. However, if you are a joint contract holder and you die,
the beneficiary will automatically be the surviving joint contract holder. In
this circumstance, any other beneficiary you named will be treated as the
primary or contingent beneficiary, as originally named, of the surviving joint
contract holder. The surviving joint contract holder may change the beneficiary
designation. If you die and no beneficiary exists, the death benefit will be
paid in a lump sum to your estate.

Designating Your Beneficiary. You may designate a beneficiary on your
application or by contacting your local representative or calling us at the
number listed in "Contract Overview--Questions: Contacting the Company."

When is a Death Benefit Payable? During the accumulation phase a death benefit
is payable when the contract holder or the annuitant dies. If there are joint
contract holders, the death benefit is payable when either one dies.

Death Benefit Amount

The amount of the death benefit will depend on which death benefit option you
selected when you purchased the contract.

Death Benefit Option I. Upon the death of the annuitant, the death benefit
(which is calculated on the claim date) will be the greater of:

(1) The sum of all purchase payments, plus any premium bonus credited to your
account at least 12 months prior to the date of death, adjusted for
amounts withdrawn or applied to an income phase payment option; or

(2) The account value on the claim date, less any premium bonus credited to
your account after or within 12 months of the date of death.

Death Benefit Option II. Upon the death of the annuitant, the death benefit
(which is calculated on the claim date) will be the greatest of:

(1) The sum of all purchase payments made, plus any premium bonus credited to
your account at least 12 months prior to the date of death, adjusted for
amounts withdrawn or applied to an income phase payment option; or

(2) The account value on the claim date, less any premium bonus credited to
your account after or within 12 months of the date of death; or

(3) The "step-up value" (as described below) on the claim date.

Step-up value. The step-up value is equal to highest account value on the date
we establish your account or any anniversary of that date prior to the
annuitant's 85th birthday or death, whichever is earlier, adjusted for purchase
payments made and amounts withdrawn or applied to an income phase payment option
since the date of the highest account value and less any premium bonus credited
to your account after or within 12 months of the date of death.

Adjustment. For purposes of determining the death benefit, the adjustment for
purchase payments made will be dollar for dollar. The adjustment for amounts
withdrawn or applied to an income phase payment option will be proportionate,
reducing the sum of all purchase payments made and the highest account value in
the same proportion that the account value was reduced on the date of the
withdrawal or application to an income phase payment option.

Death Benefit Greater than the Account Value. Notwithstanding which death
benefit option is selected, on the claim date, if the amount of the death
benefit is greater than the account value, the amount by which the death benefit
exceeds the account value will be deposited and allocated to the money market
subaccount available under the contract, thereby increasing the account value
available to the beneficiary to an amount equal to the death benefit.

Prior to the election of a method of payment of the death benefit by the
beneficiary, the account value will remain in the account and continue to be
affected by the investment performance of the investment option(s) selected. The
beneficiary has the right to allocate or transfer any amount to any available
investment option (subject to a market value adjustment, as applicable). The
amount paid to the beneficiary will equal the adjusted account value on the day
the payment is processed.

- --------------------------------------------------------------------------------
This section provides information about the death benefit during the
accumulation phase. For death benefit information applicable to the income phase
see "The Income Phase."

Terms to Understand:

Account Year/Account Anniversary: A period of 12 months measured from the date
we established your account and each anniversary of this date. Account
anniversaries are measured from this date.

Annuitant: The person(s) on whose life or life expectancy(ies) the income phase
payments are based.

Beneficiary: The person(s) or entity(ies) entitled to receive a death benefit
under the contract.

Claim Date: The date proof of death and the beneficiary's right to receive the
death benefit are received in good order at our Home Office.

Contract Holder (You/Your): The contract holder of an individually owned
contract or the certificate holder of a group contract. The contract holder and
annuitant may be the same person.
- --------------------------------------------------------------------------------

25
<PAGE>

Death Benefit Amounts in Certain Cases

If the Contract Holder is the Annuitant and a Spousal Beneficiary Continues the
Account. If the spousal beneficiary continues the account at the death of a
contract holder who was also the annuitant, the spousal beneficiary becomes the
annuitant. The death benefit option in effect at the death of the contract
holder will also apply to the spousal beneficiary, and the death benefit payable
at the spousal beneficiary's death shall be determined under that death benefit
option, except that:

(1) In calculating the sum of all purchase payments, plus any premium bonus
credited to your account at least 12 months prior to the date of death,
adjusted for amounts withdrawn or applied to an income phase payment
option, the account value on the claim date following the original
contract holder's/annuitant's death shall be treated as the spousal
beneficiary's initial purchase payment; and

(2) In calculating the step-up value, the step-up value on the claim date
following the original contract holder's/annuitant's death shall be
treated as the spousal beneficiary's initial step-up value.

If the Contract Holder is not the Annuitant. Under nonqualified contracts only,
the death benefit described under the death benefit options above will not apply
if a contract holder (including a spousal beneficiary who continues the account)
who is not the annuitant dies. In these circumstances, the amount paid will be
equal to the account value on the date the payment is processed, plus or minus
any market value adjustment and minus any premium bonus credited to the account
after or within 12 months of the date of death. An early withdrawal charge may
apply to any full or partial payment of this death benefit.

Because the death benefit in these circumstances equals the account value, plus
or minus any market value adjustment and minus any premium bonus credited to the
account after or within 12 months of the date of death, a contract holder who is
not also the annuitant should seriously consider whether Death Benefit Option II
is suitable for their situation.

If the spousal beneficiary who is the annuitant continues the account at the
death of the contract holder who was not the annuitant, the annuitant will not
change. The death benefit option in effect at the death of the contract holder
will also apply to the spousal beneficiary, and the death benefit payable at the
spousal beneficiary's death shall be determined under that death benefit option.

Guaranteed Account. For amounts held in the Guaranteed Account, see Appendix I
for a discussion of the calculation of the death benefit.

Death Benefit -- Methods of Payment

For Qualified Contracts. Under a qualified contract, if the annuitant dies the
beneficiary may choose one of the following three methods of payment:

o Apply some or all of the account value, plus or minus any market value
adjustment, to any of the income phase payment options (subject to the Tax
Code distribution rules). See "Taxation -- Minimum Distribution
Requirements."

o Receive, at any time, a lump sum payment equal to all or a portion of the
account value, plus or minus any market value adjustment; or

o Elect SWO, ECO or LEO (described in "Systematic Distribution Options"),
provided the election would satisfy the Tax Code minimum distribution
rules.

Payments from a Systematic Distribution Option. If the annuitant was receiving
payments under a systematic distribution option and died before the Tax Code's
required beginning date for minimum distributions, payments under the systematic
distribution option will stop. The beneficiary, or contract holder on behalf of
the beneficiary, may elect a systematic distribution option provided the
election is permitted under the Tax Code minimum distribution rules. If the
annuitant dies after the required beginning date for minimum distributions,
payments will continue as permitted under the Tax Code minimum distribution
rules, unless the option is revoked.

Distribution Requirements. Subject to Tax Code limitations, a beneficiary may be
able to defer distribution of the death benefit. Death benefit payments must
satisfy the distribution rules in Tax Code Section 401(a)(9). See "Taxation."

For Nonqualified Contracts.

(1) If you die and the beneficiary is your surviving spouse, or if you are a
non-natural person and the annuitant dies and the beneficiary is the
annuitant's surviving spouse, then the beneficiary becomes the successor
contract holder.

As the successor contract holder, the beneficiary may exercise all rights
under the account and has the following options:

(a) Continue the contract in the accumulation phase;

(b) Elect to apply some or all of the account value, plus or minus any
market value adjustment, to any of the income phase payment options;
or

(c) Receive at any time a lump-sum payment equal to all or a portion of
the account value, plus or minus any market value adjustment.

If you die and are not the annuitant, an early withdrawal charge will
apply if a lump sum is elected. In this circumstance, the Tax Code does
not require distributions under the contract until the successor contract
holder's death.

26
<PAGE>

(2) If you die and the beneficiary is not your surviving spouse, he or she may
elect option 1(b) or option 1(c) above (subject to the Tax Code
distribution rules). See "Taxation - Minimum Distribution Requirements."

(3) If you are a natural person but not the annuitant and the annuitant dies,
the beneficiary may elect option 1(b) or 1(c) above. If the beneficiary
does not elect option 1(b) within 60 days from the date of death, the
gain, if any, will be included in the beneficiary's income in the year the
annuitant dies.

Payments from a Systematic Distribution Option. If the contract holder or
annuitant dies and payments were being made under a SWO, payments will stop. A
beneficiary, however, may elect to continue the SWO.

Taxation. Your beneficiary may be subject to tax penalties if he or she does not
begin receiving death benefit payments within a time frame required by the Tax
Code. See "Taxation."

The Income Phase
- --------------------------------------------------------------------------------

During the income phase you stop contributing dollars to your account and start
receiving payments from your accumulated account value.

Initiating Income Phase Payments. At least 30 days prior to the date you want to
start receiving income phase payments, you must notify us in writing of all of
the following:

o Payment start date;

o Income phase payment option (see the income phase payment options table in
this section);

o Payment frequency (i.e., monthly, quarterly, semi-annually or annually);

o Choice of fixed, variable or a combination of both fixed and variable
payments; and

o Selection of an assumed net investment rate (only if variable payments are
elected).

Your account will continue in the accumulation phase until you properly initiate
income phase payments. Once an income phase payment option is selected, it may
not be changed.

- --------------------------------------------------------------------------------
We may have used the following terms in prior prospectuses:

Annuity Phase -- Income Phase

Annuity Option -- Income Phase Payment Option

Annuity Payment -- Income Phase Payment
- --------------------------------------------------------------------------------

What Affects Payment Amounts? Some of the factors that may affect the amount of
your income phase payments include your age, your gender, your account value,
the income phase payment option selected, number of guaranteed payments (if any)
selected, whether you select fixed, variable or a combination of both fixed and
variable payments and, for variable payments, the assumed net investment rate
selected.

Fixed Payments. Amounts funding fixed income phase payments will be held in the
Company's general account. The amount of fixed payments does not vary over time.

Variable Payments. Amounts funding your variable income phase payments will be
held in the subaccount(s) you select. Not all subaccounts available during the
accumulation phase may be available during the income phase. Payment amounts
will vary depending upon the performance of the subaccounts you select. For
variable payments, an assumed net investment rate must be selected.

Assumed Net Investment Rate. If you select variable income phase payments, you
must also select an assumed net investment rate of either 5% or 3 1/2%. If you
select a 5% rate, your first payment will be higher, but subsequent payments
will increase only if the investment performance of the subaccounts you selected
is greater than 5% annually, after deduction of fees. Payment amounts will
decline if the investment performance is less than 5%, after deduction of fees.

If you select a 3 1/2% rate, your first income phase payment will be lower and
subsequent payments will increase more rapidly or decline more slowly depending
upon changes in the net investment performance of the subaccounts you selected.
For more information about selecting an assumed net investment rate, call us for
a copy of the SAI. See "Contract Overview -- Questions: Contacting the Company."

Premium Bonus. Any premium bonus credited to your account within 24 months of
electing an income phase payment option will not be included in your account
value when calculating the amount of your income phase payments.

Minimum Payment Amounts. The income phase payment option you select must result
in:

o A first income phase payment of at least $50; or

o Total yearly income phase payments of at least $250.

If your account value is too low to meet these minimum payment amounts, you will
receive one lump sum payment. Unless prohibited by law, we reserve the right to
increase the minimum payment amount based upon increases reflected in the
Consumer Price Index-Urban (CPI-U), since July 1, 1993.

Restrictions on Start Dates and the Duration of Payments. Income phase payments
may not begin during the first account year, or,

27
<PAGE>

unless we consent, later than the later of:

- - (a) The first day of the month following the annuitant's 85th birthday;
or

- - (b) The tenth anniversary of the last purchase payment made to your
account.

- - For qualified contracts only, income phase payments may not extend beyond:

- - (a) The life of the annuitant;

- - (b) The joint lives of the annuitant and beneficiary;

- - (c) A guaranteed period greater than the annuitant's life expectancy; or

- - (d) A guaranteed period greater than the joint life expectancies of the
annuitant and beneficiary.

When income phase payments start, the age of the annuitant plus the number of
years for which payments are guaranteed must not exceed 95.

See "Taxation" for further discussion of rules relating to income phase
payments.

Charges Deducted. We make a daily deduction for mortality and expense risks from
amounts held in the subaccounts. Therefore, if you choose variable income phase
payments and a nonlifetime income phase payment option, we still make this
deduction from the subaccounts you select, even though we no longer assume any
mortality risks. We may also deduct a daily administrative charge from amounts
held in the subaccounts. See "Fees."

Death Benefit during the Income Phase. The death benefits that may be available
to a beneficiary are outlined in the income phase payment option table below. If
a lump-sum payment is due as a death benefit, we will make payment within seven
calendar days after we receive proof of death acceptable to us and the request
for the payment in good order at our Home Office. If continuing income phase
payments are elected, the beneficiary may not elect to receive a lump sum at a
future date unless the income phase payment option specifically allows a
withdrawal right. We will calculate the value of any death benefit at the next
valuation after we receive proof of death and a request for payment. Such value
will be reduced by any payments made after the date of death.

Beneficiary Rights. A beneficiary's right to elect an income phase payment
option or receive a lump sum payment may have been restricted by the contract
holder. If so, such rights or options will not be available to the beneficiary.

Taxation. To avoid certain tax penalties, you or your beneficiary must meet the
distribution rules imposed by the Tax Code. Additionally, when selecting an
income phase payment option, the Tax Code requires that your expected payments
will not exceed certain amounts. See "Taxation" for additional information.

Income Phase Payment Options

The following table lists the income phase payment options and accompanying
death benefits available during the income phase. We may offer additional income
phase payment options under the contract from time to time.

Once income phase payments begin, the income phase payment option selected may
not be changed.

Terms to understand:

Annuitant: The person(s) on whose life expectancy(ies) the income phase payments
are based.

Beneficiary: The person(s) or entity(ies) entitled to receive a death benefit.

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<PAGE>

Lifetime Income Phase Payment Options
- --------------------------------------------------------------------------------
Life Income Length of Payments: For as long as the
annuitant lives. It is possible that only one
payment will be made should the annuitant die
prior to the second payment's due date.
Death Benefit--None: All payments end upon the
annuitant's death.
- --------------------------------------------------------------------------------
Life Income -- Length of Payments: For as long as the
Guaranteed Payments annuitant lives, with payments guaranteed for
your choice of 5-30 years or as otherwise
specified in the contract.
Death Benefit--Payment to the Beneficiary: If
the annuitant dies before we have made all the
guaranteed payments, we will continue to pay
the beneficiary the remaining payments. Unless
prohibited by a prior election of the contract
holder, the beneficiary may elect to receive a
lump-sum payment equal to the present value of
the remaining guaranteed payments.
- --------------------------------------------------------------------------------
Life Income -- Two Lives Length of Payments: For as long as either
annuitant lives. It is possible that only one
payment will be made should both annuitants
die before the second payment's due date.
Continuing Payments:
(a) When you select this option you choose for
100%, 66 2/3% or 50% of the payment to
continue to the surviving annuitant after the
first death; or
(b) 100% of the payment to continue to the
annuitant on the second annuitant's death, and
50% of the payment will continue to the second
annuitant on the annuitant's death.
Death Benefit--None: All payments end upon the
death of both annuitants.
- --------------------------------------------------------------------------------
Life Income -- Two Lives -- Length of Payments: For as long as either
Guaranteed Payments annuitant lives, with payments guaranteed from
5-30 years or as otherwise specified in the
contract.
Continuing Payments: 100% of the payment to
continue after the first death.
Death Benefit--Payment to the Beneficiary: If
both annuitants die before the guaranteed
payments have all been paid, we will continue
to pay the beneficiary the remaining payments.
Unless prohibited by a prior election of the
contract holder, the beneficiary may elect to
receive a lump-sum payment equal to the
present value of the remaining guaranteed
payments.
- --------------------------------------------------------------------------------
Life Income -- Cash Refund Length of Payments: For as long as the
Option (limited availability -- annuitant lives.
fixed payment only) Death Benefit--Payment to the Beneficiary:
Following the annuitant's death, we will pay a
lump sum payment equal to the amount originally
applied to the income phase payment option
(less any premium tax) and less the total
amount of income payments paid.
- --------------------------------------------------------------------------------
Life Income -- Two Lives -- Length of Payments: For as long as either
Cash Refund Option (limited annuitant lives.
availability -- fixed payment Continuing Payments: 100% of the payment to
only) continue after the first death.
Death Benefit--Payment to the Beneficiary: When
both annuitants die, we will pay a lump sum
payment equal to the amount applied to the
income phase payment option (less any premium
tax) and less the total amount of income
payments paid.
- --------------------------------------------------------------------------------

Nonlifetime Income Phase Payment Option
- --------------------------------------------------------------------------------
Nonlifetime -- Guaranteed Length of Payments: You may select payments
Payments for 10 to 30 years. In certain cases a
lump-sum payment may be requested at any time
(see below).
Death Benefit--Payment to the Beneficiary: If
the annuitant dies before we make all the
guaranteed payments, we will continue to pay
the beneficiary the remaining payments. Unless
prohibited by a prior election of the contract
holder, the beneficiary may elect to receive a
lump-sum payment equal to the present value of
the remaining guaranteed payments. We will not
impose any early withdrawal charge.
- --------------------------------------------------------------------------------
Lump-sum Payment. If the "Nonlifetime--Guaranteed Payments" option is elected
with variable payments, you may request at any time that all or a portion of the
present value of the remaining payments be paid in one lump-sum. Any such lump
sum payment will be treated as if it is a withdrawal during the accumulation
phase and may be subject to an early withdrawal charge. See "Fees -- Early
Withdrawal Charge." Lump-sum payments will be sent within seven calendar days
after we receive the request for payment in good order at the Home Office.
- --------------------------------------------------------------------------------
Calculation of Lump-sum Payments. If a lump-sum payment is available under the
income phase payment options above, the rate used to calculate the present value
of the remaining guaranteed payments is the same rate we used to calculate the
income phase payments (i.e., the actual fixed rate used for fixed payments or
the 3 1/2% or 5% assumed net investment rate used for variable payments).

29
<PAGE>

Taxation
- --------------------------------------------------------------------------------

<PAGE>

INTRODUCTION

This section discusses our understanding of current federal income tax laws
affecting the contract. You should keep the following in mind when reading it:

o Your tax position (or the tax position of the beneficiary, as applicable)
determines federal taxation of amounts held or paid out under the
contract;

o Tax laws change. It is possible that a change in the future could affect
contracts issued in the past;

o This section addresses federal income tax rules and does not discuss
federal estate and gift tax implications, state and local taxes or any
other tax provisions;

o We do not make any guarantee about the tax treatment of the contract or
transaction involving the contract; and

o Contract holder means the contract holder of an individually owned
contract or the certificate holder of a group contract.

We do not intend this information to be tax advice. For advice about the effect
of federal income taxes or any other taxes on amounts held or paid out under the
contract, consult a tax adviser.

Taxation of Gains Prior to Distribution. You will generally not pay taxes on any
earnings from the annuity contract described in this prospectus until they are
withdrawn. Tax-qualified retirement arrangements under Tax Code sections 408(a),
408(b), 408A and 403(b) also defer payment of taxes on earnings until they are
withdrawn. If you are considering funding one of these tax-qualified retirement
arrangements with an annuity contract, you should know that the annuity contract
does not provide any additional tax deferral of earnings beyond the tax deferral
provided by the tax-qualified retirement arrangement. However, annuities do
provide other features and benefits which may be valuable to you. You should
discuss your decision with your financial representative.

Additionally, although earnings under the contract are generally not taxed until
withdrawn, the IRS has stated in published rulings that a variable contract
owner will be considered the owner of separate account assets if the owner
possesses incidents of investment control over the assets. In these
circumstances, income and gains from the separate account assets would be
includible in the variable contract owner's gross income. The Treasury announced
that it will issue guidance regarding the extent to which owners could direct
their investments among subaccounts without being treated as owners of the
underlying assets of the separate account. It is possible that the Treasury's
position, when announced, may adversely affect the tax treatment of existing
contracts. The Company reserves the right to modify the Contract as necessary to
attempt to prevent a contract holder from being considered the federal tax owner
of a pro rata share of the assets of the separate account.

CONTRACT TYPE

The contract is designed to be used as a nonqualified deferred annuity,
including contracts offered to a custodian for an Individual Retirement Account
as described in Tax Code section 408(a), and with certain qualified retirement
arrangements under Tax Code sections 403(b), 408(b) or 408A . The Contract is
not available as a SIMPLE IRA under Tax Code Section 408(p).

Tax Rules. The tax rules vary according to whether the contract is a
nonqualified contract or used with a retirement arrangement. If used with a
retirement arrangement, you need to know the Tax Code section under which your
arrangement qualifies. Contact your plan sponsor, local representative or the
Company to learn which Tax Code section applies to your arrangement.

The Contract. Contract holders are responsible for determining that
contributions, distributions and other transactions satisfy applicable laws.
Legal counsel and a tax adviser should be consulted regarding the suitability of
the contract. If the contract is purchased in conjunction with a retirement
plan, the plan is not a part of the contract and we are not bound by the plan's
terms or conditions.

- --------------------------------------------------------------------------------
In this Section

INTRODUCTION

CONTRACT TYPE

WITHDRAWALS AND OTHER DISTRIBUTIONS

o Taxation of Distributions

o 10% Penalty Tax

o Withholding for Federal Income Tax Liability

MINIMUM DISTRIBUTION REQUIREMENTS

o 50% Excise Tax

o Minimum Distribution of Death Benefit Proceeds (Except Nonqualified
Contracts)

o Minimum Distribution of Death Benefit Proceeds (Nonqualified Contracts)

RULES SPECIFIC TO CERTAIN PLANS

o 403(b) Plans

o 408(b) and 408A IRAs

TAXATION OF NONQUALIFIED CONTRACTS

TAXATION OF THE COMPANY

When consulting a tax adviser, be certain that he or she has expertise in the
Tax Code sections applicable to your tax concerns.
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WITHDRAWALS AND OTHER DISTRIBUTIONS

Certain tax rules apply to distributions from the contract. A distribution is
any amount taken from the contract including withdrawals, income phase payments,
rollovers, exchanges and death benefit proceeds.

We report the taxable portion of all distributions to the IRS.

Taxation of Distributions

Nonqualified Contracts. A full withdrawal of a nonqualified contract is taxable
to the extent that the amount received exceeds the investment in the contract. A
partial withdrawal is taxable to the extent that the account value immediately
before the withdrawal exceeds the investment in the contract. In other words, a
partial withdrawal is treated first as a withdrawal of taxable earnings.

For income phase payments, a portion of each payment which represents the
investment in the contract is not taxable. An exclusion ratio is calculated to
determine the nontaxable portion.

For fixed income phase payments, in general, there is no tax on the portion of
each payment which represents the same ratio that the investment in the contract
bears to the total dollar amount of the expected payments as defined in Tax Code
section 72(d). The entire income phase payment will be taxable once the
recipient has recovered the investment in the contract.

For variable income phase payments, an equation is used to establish a specific
dollar amount of each payment that is not taxed. The dollar amount is determined
by dividing the investment in the contract by the total number of expected
periodic payments. The entire income phase payment will be taxable once the
recipient has recovered the investment in the contract.

All deferred nonqualified annuity contracts that are issued by the Company (or
its affiliates) to the same contract holder during any calendar year are treated
as one annuity contract for purposes of determining the amount includible in
gross income under Tax Code section 72(e). In addition, the Treasury Department
has specific authority to issue regulations that prevent the avoidance of Tax
Code section 72(e) through the serial purchase of annuity contracts or
otherwise.

403(b) Plans. All distributions from these plans are taxed as received unless
either of the following is true:

o The distribution is rolled over to another plan of the same type or to a
traditional IRA in accordance with the Tax Code; or

o You made after-tax contributions to the plan. In this case, depending upon
the type of distribution, the amount will be taxed according to the rules
detailed in the Tax Code.

408(b) IRA. All distributions from a traditional IRA are taxed as received
unless either one of the following is true:

o The distribution is rolled over to another traditional IRA or, if the IRA
contains only amounts previously rolled over from a 401(a), 401(k), or
403(b) plan, to another plan of the same type; or

o You made after-tax contributions to the plan. In this case, the
distribution will be taxed according to rules detailed in the Tax Code.

408A Roth IRA. A qualified distribution from a Roth IRA is not taxed when it is
received. A qualified distribution is a distribution:

o Made after the five-taxable year period beginning with the first taxable
year for which a contribution was made; or

o Made after you attain age 59 1/2, die, become permanently and totally
disabled, or for a qualified first-time home purchase.

If a distribution is not qualified, the accumulated earnings are taxable. A
partial distribution will first be treated as a return of contributions which is
not taxable.

Taxation of Death Benefit Proceeds. In general, payments received by your
beneficiary after your death are taxed in the same manner as if you had received
those payments.

10% Penalty Tax

Under certain circumstances, the Tax Code may impose a 10% penalty tax on the
taxable portion of any distribution from a nonqualified contract or from a
contract used with a 403(b), 408(b) or 408A arrangement.

Nonqualified Contract. The 10% penalty tax applies to the taxable portion of a
distribution from a nonqualified annuity unless one or more of the following
have occurred:

(a) The taxpayer has attained age 59-1/2;

(b) The taxpayer has become totally and permanently disabled;

(d) The distribution is made in substantially equal periodic payments (at
least annually) over the life or life expectancy of the taxpayer or the
joint lives or joint life expectancies of the taxpayer and beneficiary; or

(e) The distribution is allocable to investment in the contract before August
14, 1982.

403(b) Plan. The 10% penalty tax applies to the taxable portion of a
distribution from a 403(b) plan, unless one or more of the

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following have occurred:

(a) You have attained age 59 1/2;

(b) You have become totally and permanently disabled;

(d) You have separated from service with the plan sponsor at or after age 55;

(e) The distribution is rolled over into another plan of the same type or to
an IRA in accordance with the Tax Code;

(f) The distribution is made in substantially equal periodic payments (at
least annually) over your life or life expectancy or the joint lives or
joint life expectancies of your and your beneficiary. Also, you must have
separated from service with the plan sponsor; or

(g) The distribution is equal to unreimbursed medical expenses that qualify
for deduction as specified in the Tax Code.

IRA. In general, except for (d), the exceptions for 403(b) plans also apply to
distributions from an IRA, including a distribution from a Roth IRA that is not
a qualified distribution or a rollover to a Roth IRA that is not a qualified
rollover contribution. The penalty tax is also waived on a distribution made
from an IRA to pay for health insurance premiums for certain unemployed
individuals or used for qualified first-time home purchase or for higher
education expenses.

Withholding for Federal Income Tax Liability

Any distributions under the contract are generally subject to withholding.
Federal income tax liability rates vary according to the type of distribution
and the recipient's tax status.

Nonqualified Contract. Generally, you or a beneficiary may elect not to have tax
withheld from distributions.

403(b) Plans. Generally, distributions from these plans are subject to a
mandatory 20% federal income tax withholding. However, you or a beneficiary may
elect not to have tax withheld from certain distributions.

408(b) and 408A IRAs. Generally, you or a beneficiary may elect not to have tax
withheld from distributions.

Non-resident Aliens. If you or your beneficiary is a non-resident alien, then
any withholding is governed by Tax Code section 1441 based upon the individual's
citizenship, the country of domicile and treaty status.

MINIMUM DISTRIBUTION REQUIREMENTS

To avoid certain tax penalties, you and any beneficiary must meet the minimum
distribution requirements imposed by the Tax Code. The requirements do not apply
to either nonqualified contracts or Roth IRA contracts, except with regard to
death benefits. These rules may dictate one or more of the following:

o Start date for distributions;

o The time period in which all amounts in your account(s) must be
distributed; or

o Distribution amounts.

Start Date. Generally, you must begin receiving distributions by April 1 of the
calendar year following the calendar year in which you attain age 70-1/2 or
retire, whichever occurs later, unless:

o You are a 5% owner or the contract is an IRA, in which case such
distributions must begin by April 1 of the calendar year following the
calendar year in which you attain age 70-1/2; or

o Under 403(b) plans, if the Company maintains separate records of amounts
held as of December 31, 1986. In this case, distribution of these amounts
generally must begin by the end of the calendar year in which you attain
age 75 or retire, if later. However, if you take any distributions in
excess of the minimum required amount, then special rules require that
some or all of the December 31, 1986 balance be distributed earlier.

Time Period. We must pay out distributions from the contract over one of the
following time periods:

o Over your life or the joint lives of you and your beneficiary; or

o Over a period not greater than your life expectancy or the joint life
expectancies of you and your beneficiary.

50% Excise Tax

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

Minimum Distribution of Death Benefit Proceeds (Except Nonqualified Contracts)

The following applies to 403(b), 408(b) and 408A plans. Different distribution
requirements apply if your death occurs:

o After you begin receiving minimum distributions under the contract; or

o Before you begin receiving such distribution.

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If your death occurs after you begin receiving minimum distributions under the
contract, distributions must be made at least as rapidly as under the method in
effect at the time of your death. Tax Code section 401(a)(9) provides specific
rules for calculating the minimum required distributions at your death. The
rules differ, dependent upon:

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o Whether your minimum required distribution was calculated each year based
upon your single life expectancy or the joint life expectancies of you and
your beneficiary; or

o Whether life expectancy was recalculated.

The rules are complex and any beneficiary should consult with a tax adviser
before electing the method of calculation to satisfy the minimum distribution
requirements.

If your death occurs before you begin receiving minimum distributions under the
contract, your entire balance must be distributed by December 31 of the calendar
year containing the fifth anniversary of the date of your death. For example: If
you die September 1, 1999, your entire balance must be distributed to the
beneficiary by December 31, 2004. However, if the distribution begins by
December 31 of the calendar year following the calendar year of your death, then
payments may be made in either of the following timeframes:

o Over the life of the beneficiary; or

o Over a period not extending beyond the life expectancy of the beneficiary.

Start Dates for Spousal Beneficiaries. If the beneficiary is your spouse, the
distribution must begin on or before the later of the following:

o December 31 of the calendar year following the calendar year of your
death; or

o December 31 of the calendar year in which you would have attained age
70-1/2.

Special Rule for IRA Spousal Beneficiaries. In lieu of taking a distribution
under these rules, a spousal beneficiary may elect to treat the account as his
or her own IRA and defer taking a distribution until his or her age 70-1/2. The
surviving spouse is deemed to have made such an election if the surviving spouse
makes a rollover to or from the account or fails to take a distribution within
the required time period.

Minimum Distribution of Death Benefit Proceeds (Nonqualified Contracts)

Death of the Contract Holder. The following requirements apply to nonqualified
contracts at the death of the contract holder. Different distribution
requirements apply if you are the contract holder and your death occurs:

o After you begin receiving income phase payments under the contract; or

o Before you begin receiving such distributions.

If your death occurs after you begin receiving income phase payments,
distribution must be made at least as rapidly as under the method in effect at
the time of your death.

If your death occurs before you begin receiving income phase payments, your
entire balance must be distributed within five years after the date of your
death. For example: If you die on September 1, 1999, your entire balance must be
distributed by August 31, 2004. However, if the distribution begins within one
year of your death, then payments may be made in one of the following
time-frames:

o Over the life of the beneficiary; or

o Over a period not extending beyond the life expectancy of the beneficiary.

Spousal Beneficiaries. If the beneficiary is your spouse, the account may be
continued with the surviving spouse as the new contract holder.

Death of Annuitant. If the contract holder is a non-natural person and the
annuitant dies, the same rules apply as outlined above for death of a contract
holder. If the contract holder is a natural person but not the annuitant and the
annuitant dies, the beneficiary must elect an income phase payment option within
60 days of the date of death, or any gain under the contract will be includible
in the beneficiary's income in the year the annuitant dies.

RULES SPECIFIC TO CERTAIN PLANS
403(b) Plans

Under Tax Code section 403(b), contributions made by public school systems or
nonprofit healthcare organizations and other Tax Code section 501(c)(3) tax
exempt organizations to purchase annuity contracts for their employees are
generally excludable from the gross income of the employee.

Assignment or Transfer of Contracts. Adverse tax consequences to the plan and/or
to you may result if your beneficial interest in the contract is assigned or
transferred to any person except to an alternate payee under a qualified
domestic relations order in accordance with Tax Code section 414(p) or to the
Company as collateral for a loan.

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Exclusions from Gross Income. In order to be excludable from gross income, total
annual contributions made by you and your employer to a 403(b) plan cannot
exceed the lesser of the following limits set by the Tax Code:

o The first limit, under Tax Code section 415, is generally the lesser of
25% of your compensation or $30,000. Compensation means your compensation
from the employer sponsoring the plan and, for years beginning after
December 31, 1997, includes any elective deferrals under Tax Code section
402(g) and any amounts not includible in gross income under Tax Code
sections 125 or 457;

o The second limit, which is the exclusion allowance under Tax Code section
403(b), is usually calculated according to a formula that takes into
account your length of employment, any pretax contributions you and your
employer have already made under the plan, and any pretax contributions to
certain other retirement plans; or

o An additional limit specifically limits your salary reduction
contributions to generally no more than $10,000 annually (subject to
indexing). Your own limit may be higher or lower, depending upon certain
conditions.

The first two limits apply to your contributions as well as to any contributions
made by your employer on your behalf.

Purchase payments to your account(s) will be excluded from your gross income
only if the plan meets certain nondiscrimination requirements.

Restrictions on Distributions. Tax Code section 403(b)(11) restricts the
distribution under Tax Code section 403(b) contracts of:

(1) Salary reduction contributions made after December 31, 1988;

(2) Earnings on those contributions; and

(3) Earnings during such period on amounts held as of December 31, 1988.

Distribution of those amounts may only occur upon your death, attainment of age
59-1/2, separation from service, disability, or financial hardship. Income
attributable to salary reduction contributions and credited on or after January
1, 1989 may not be distributed in the case of hardship.

408(b) and 408A IRAs

Tax Code section 408(b) permits eligible individuals to contribute to a
traditional IRA on a pre-tax (deductible) basis. Employers may establish
Simplified Employee Pension (SEP) plans and contribute to a traditional IRA
owned by the employee. Tax Code section 408A permits eligible individuals to
contribute to a Roth IRA on an after-tax (nondeductible) basis.

Assignment or transfer of contracts. Adverse tax consequences may result if you
assign or transfer your interest in the contract to persons other than your
spouse incident to a divorce.

Eligibility. Eligibility to contribute to a traditional IRA on a pre-tax basis
or to establish a Roth IRA or to roll over or transfer from a traditional IRA to
a Roth IRA depends upon your adjusted gross income.

Rollovers and Transfers. Rollovers and direct transfers are permitted from a
401, 403(a) or a 403(b) arrangement to a traditional IRA. Distributions from
these arrangements are not permitted to be transferred or rolled over to a Roth
IRA. A Roth IRA can accept transfers/rollovers only from a traditional IRA,
subject to ordinary income tax, or from another Roth IRA.

TAXATION OF NONQUALIFIED CONTRACTS

In General. Tax Code section 72 governs taxation of annuities in general. A
contract holder under a nonqualified contract who is a natural person generally
is not taxed on increases in the account value until distribution occurs by
withdrawing all or part of such account value. The taxable portion of a
distribution is taxable as ordinary income.

Non-Natural Holders of a Nonqualified Contract. If the contract holder is not a
natural person, a nonqualified contract generally is not treated as an annuity
for income tax purposes and the income on the contract for the taxable year is
currently taxable as ordinary income. Income on the contract is any increase
over the year in the surrender value, adjusted for purchase payments made during
the year, amounts previously distributed and amounts previously included in
income. There are some exceptions to the rule and a non-natural person should
consult with its tax adviser prior to purchasing this contract. A non-natural
person exempt from federal income taxes should consult with its tax adviser
regarding treatment of income on the contract for purposes of the unrelated
business income tax. When the contract holder is not a natural person, a change
in annuitant is treated as the death of the contract holder.

Diversification. Tax Code section 817(h) requires that in a nonqualified
contract the investments of the funds be "adequately diversified" in accordance
with Treasury Regulations in order for the contract to qualify as an annuity
contract under federal tax law. The Separate Account, through the funds, intends
to comply with the diversification requirements prescribed by the Treasury in
Reg. Sec. 1.817-5, which affects how the funds' assets may be invested.

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Transfers, Assignments or Exchanges of a Nonqualified Contract. A transfer of
ownership of a nonqualified contract, the designation of an annuitant, payee or
other beneficiary who is not also the contract holder, the selection of certain
annuity dates, or the exchange of a contract may result in certain tax
consequences. The assignment, pledge, or agreement to assign or pledge any
portion of the account value generally will be treated as a distribution. Anyone
contemplating any such designation, transfer, assignment, selection, or exchange
should contact a tax adviser regarding the potential tax effects of such a
transaction.

TAXATION OF THE COMPANY

We are taxed as a life insurance company under the Tax Code. Variable Annuity
Separate Account B is not a separate entity from us. Therefore, it is not taxed
separately as a "regulated investment company", but is taxed as part of the
Company.

We automatically apply investment income and capital gains attributable to the
separate account to increase reserves under the contract. Because of this, under
existing federal tax law we believe that any such income and gains will not be
taxed to the extent that such income and gains are applied to increase reserves
under the contract. In addition, any foreign tax credits attributable to the
separate account will be first used to reduce any income taxes imposed on the
separate account before being used by the Company.

In summary, we do not expect that we will incur any federal income tax liability
attributable to the separate account and we do not intend to make any provision
for such taxes. However, changes in federal tax laws and/or their interpretation
may result in our being taxed on income or gains attributable to the separate
account. In this case, we may impose a charge against the separate account (with
respect to some or all of the contracts) to set aside provisions to pay such
taxes. We may deduct this amount from the separate account, including from your
account value invested in the subaccounts.

Other Topics
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The Company

Aetna Life Insurance and Annuity Company (the Company, we, us) issues the
contract described in this prospectus and is responsible for providing each
contract's insurance and annuity benefits.

We are a stock life insurance company organized under the insurance laws of the
State of Connecticut in 1976 and an indirect wholly-owned subsidiary of Aetna
Inc. Through a merger our operations include the business of Aetna Variable
Annuity Life Insurance Company (formerly known as Participating Annuity Life
Insurance Company, an Arkansas life insurance company organized in 1954).

We are engaged in the business of issuing life insurance and annuities. Our
principal executive offices are located at:

151 Farmington Avenue
Hartford, Connecticut 06156

Variable Annuity Account B

We established Variable Annuity Account B (the separate account) in 1976 as a
segregated asset account to fund our variable annuity contracts. The separate
account is registered as a unit investment trust under the Investment Company
Act of 1940 (the "40 Act"). It also meets the definition of "separate account"
under the federal securities laws.

The separate account is divided into subaccounts. These subaccounts invest
directly in shares of a pre-assigned fund.

Although we hold title to the assets of the separate account, such assets are
not chargeable with the liabilities of any other business that we conduct.
Income, gains or losses of the separate account are credited to or charged
against the assets of the separate account without regard to other income, gains
or losses of the Company. All obligations arising under the contract are
obligations of the Company.

Contract Distribution

We serve as the principal underwriter for the securities sold by this
prospectus. We are registered as a broker-dealer with the SEC and a member of
the National Association of Securities Dealers, Inc. (NASD).

As principal underwriter, we will enter into arrangements with one or more
registered broker-dealers, including at least one affiliate of the Company, to
offer and sell the contract described in this prospectus. We may also enter into
these arrangements with banks that may be acting as broker-dealers without
separate registration under the Securities Exchange Act of 1934 pursuant to
legal and regulatory exceptions. In this prospectus, we refer to the registered
broker-dealers and the banks described above as "distributors." We and one or
more of our affiliates may also sell the contract directly. All individuals
offering and selling the contract must be registered representatives of a
broker-dealer, or employees of a bank exempt from registration under the
Securities Exchange Act of 1934, and must be licensed as insurance agents to
sell variable annuity contracts.

Occasionally, we may enter into arrangements with independent entities to help
find broker-dealers or banks interested in distributing the contract or to
provide training, marketing and other sales-related functions, or administrative
services. We will reimburse such entities for expenses related to and may pay
fees to such entities in return for these services.

We may offer customers of certain broker-dealers special guaranteed rates in
connection with the Guaranteed Account offered through the contract, and may
negotiate different commissions for these broker-dealers.

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<PAGE>

We may also contract with independent third party broker-dealers who will act as
wholesalers by assisting us in selecting broker-dealers or banks interested in
acting as distributors. These wholesalers may also provide training, marketing
and other sales related functions and the distributors and may provide certain
administrative services in connection with the contract. We may pay such
wholesalers compensation based upon purchase payments to contracts purchased
through distributors that they select.

We may also designate third parties to provide services in connection with the
contract such as reviewing applications for completeness and compliance with
insurance requirements and providing the distributors with approved marketing
material, prospectuses or other supplies. These parties will also receive
payments for their services based upon purchase payments, to the extent such
payments are allowed by applicable securities laws. We will pay all costs and
expenses related to these services.

Payment of Commissions. We pay distributors and their registered representatives
who sell the contract commissions and service fees. Distributors will be paid
commissions up to an amount currently equal to 7% of purchase payments or as a
combination of a certain percentage of purchase payments at time of sale and a
trail commission as a percentage of assets. Under the latter arrangement,
commission payments may exceed 7% of purchase payments over the life of the
contract. Some sales personnel may receive various types of non-cash
compensation as special sales incentives, including trips and educational and/or
business seminars. However, any such compensation will be paid in accordance
with NASD rules. In addition, we may provide additional compensation to the
Company's supervisory and other management personnel if the overall amount of
investments in funds advised by the Company or its affiliates increases over
time.

We pay these commissions, fees and related distribution expenses out of any
early withdrawal charges assessed or out of our general assets, including
investment income and any profit from investment advisory fees and mortality and
expense risk charges. No additional deductions or charges are imposed for
commissions and related expenses.

Payment Delay or Suspension

We reserve the right to suspend or postpone the date of any payment of benefits
or values under any one of the following circumstances:

o On any valuation date when the New York Stock Exchange is closed (except
customary weekend and holiday closings) or when trading on the New York
Stock Exchange is restricted;

o When an emergency exists as determined by the SEC so that disposal of the
securities held in the subaccounts is not reasonably practicable or it is
not reasonably practicable to fairly determine the value of the
subaccount's assets; or

o During any other periods the SEC may by order permit for the protection of
investors.

The conditions under which restricted trading or an emergency exists shall be
determined by the rules and regulations of the SEC.

Performance Reporting

We may advertise different types of historical performance for the subaccounts
including:

o Standardized average annual total returns; and

o Non-standardized average annual total returns.

Standardized Average Annual Total Returns. We calculate standardized average
annual total returns according to a formula prescribed by the SEC. This shows
the percentage return applicable to $1,000 invested in the subaccounts over the
most recent one, five and 10-year periods. If the investment option was not
available for the full period, we give a history from the date money was first
received in that option under the separate account. Standardized average annual
total returns reflect deduction of all recurring charges during each period
(i.e., mortality and expense risk charges, annual maintenance fees,
administrative expense charges, if any, and any applicable early withdrawal
charges) and currently do not include any premium bonus. To the extent permitted
by applicable law, we may include the premium bonus in standardized average
annual total returns in the future.

Non-Standardized Average Annual Total Returns. We calculate non-standardized
average annual total returns in a similar manner as that stated above, except we
will not include the deduction of any applicable early withdrawal charge. Some
non-standardized returns may also exclude the effect of a maintenance fee. If we
reflected these charges in the calculation, they would decrease the level of
performance reflected by the calculation. Non-standardized returns may also
include performance from the fund's inception date, if that date is earlier than
the one we use for standardized returns. Non-standardized calculations do not
include the premium bonus.

We may also advertise certain ratings, rankings or other information related to
the Company, the subaccounts or the funds. For further details regarding
performance reporting and advertising, you may request an SAI by calling us at
the number listed in "Contract Overview -- Questions: Contacting the Company."

Voting Rights

Each of the subaccounts holds shares in a fund and each is entitled to vote at
regular and special meetings of that fund. Under our current view of applicable
law, we will vote the shares for each subaccount as instructed by persons having
a voting interest in the separate account. If you are a contract holder under a
group contract, you have a fully vested interest in the contract and may
instruct the group contract holder how to direct the Company to cast a certain
number of votes. We will vote shares for which instructions have

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<PAGE>

not been received in the same proportion as those for which we received
instructions. Each person who has a voting interest in the separate account will
receive periodic reports relating to the funds in which he or she has an
interest, as well as any proxy materials and a form on which to give voting
instructions. Voting instructions will be solicited by a written communication
at least 14 days before the meeting.

The number of votes (including fractional votes) you are entitled to direct will
be determined as of the record date set by any fund you invest in through the
subaccounts.

o During the accumulation phase the number of votes is equal to the portion
of your account value invested in the fund, divided by the net asset value
of one share of that fund.

o During the income phase the number of votes is equal to the portion of
reserves set aside for the contract's share of the fund, divided by the
net asset value of one share of that fund.

Contract Modifications

We may change the contract as required by federal or state law or as otherwise
permitted in the contract. In addition, we may, upon 30 days' written notice to
the group contract holder, make other changes to a group contract that would
apply only to individuals who become participants under that contract after the
effective date of such changes. If a group contract holder does not agree to a
change, we reserve the right to refuse to establish new accounts under the
contract. Certain changes will require the approval of appropriate state or
federal regulatory authorities.

Transfer of Ownership: Assignment

We will accept assignments or transfers of ownership of a nonqualified contract
or a qualified contract where such assignments or transfers are not prohibited,
with proper notification. The date of any assignment or transfer of ownership
will be the date we receive the notification at our Home Office. An assignment
or transfer of ownership may have tax consequences and you should consult with a
tax adviser before assigning or transferring ownership of the contract.

An assignment of a contract will only be binding on the Company if it is made in
writing and sent to the Company at our Home Office. We will use reasonable
procedures to confirm that the assignment is authentic, including verification
of signature. If we fail to follow our own procedures, we will be liable for any
losses to you directly resulting from such failure. Otherwise, we are not
responsible for the validity of any assignment. The rights of the contract
holder and the interest of the annuitant and any beneficiary will be subject to
the rights of any assignee we have on our records.

Involuntary Terminations

We reserve the right to terminate any account with a value of $2,500 or less
immediately following a partial withdrawal. However, an IRA may only be closed
out when purchase payments to the contract have not been received for a 24-month
period and the paid-up annuity benefit at maturity would be less than $20 per
month. If such right is exercised, you will be given 90 days' advance written
notice. No early withdrawal charge will be deducted for involuntary
terminations. We do not intend to exercise this right in cases where the account
value is reduced to $2,500 or less solely due to investment performance.

Legal Matters and Proceedings

We are aware of no material legal proceedings pending which involve the separate
account or the Company as a party or which would materially affect the separate
account. The validity of the securities offered by this prospectus has been
passed upon by Counsel to the Company.

Year 2000 Readiness

As a healthcare and financial services enterprise, Aetna Inc. (referred to
collectively with its affiliates and subsidiaries as "Aetna"), is dependent on
information technology ("IT") systems and other systems and facilities, such as
telephones, building access control systems and heating and ventilation
equipment ("embedded systems") to conduct its business. The Company also has
business relationships with financial institutions, financial intermediaries,
public utilities and other critical vendors, as well as regulators and
customers, who are themselves reliant on IT and embedded systems to conduct
their businesses.

In 1997, the Company's ultimate parent, Aetna, organized a multi-disciplinary
Year 2000 Project Team, including outside consultants. The Year 2000 Project
Team and Aetna's businesses and subsidiaries, including the Company, have
developed and are currently executing a comprehensive plan designed to make
their mission-critical IT systems and embedded systems Year 2000 ready. Outside
consultants have reviewed Aetna's overall process, plan and progress to date.
Aetna's plan for IT systems consists of five phases: (i) assessment, (ii)
remediation, (iii) testing, (iv) implementation and (v) Year 2000 approval. At
year end 1997, Aetna including the Company, had substantially completed the
assessment phase for all of its IT systems. Aetna completed the remediation,
testing and approval of substantially all of its IT systems and those of its
subsidiaries, including all of the IT systems of the Company by June 30, 1999.
The costs of these efforts will not affect the separate account.

The Company also faces the risk that one or more of its critical suppliers
("external relationships") will not be able to interact with the Company due to
the third party's inability to resolve its own Year 2000 issues, including those
associated with its own external relationships. The Company, its affiliates and
the mutual funds that serve as investment options for the separate account also
have

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relationships with investment advisers, broker dealers, transfer agents,
custodians or other securities industry participants or other service providers
that are not affiliated with Aetna. The Company has completed its inventory of
external relationships and risk rated each external relationship based upon the
potential business impact, available alternatives and cost of substitution. In
the case of mission-critical suppliers such as certain banks, telecommunications
providers and other utilities, mutual fund companies, IT vendors and financial
market data providers, either Aetna or the Company is engaged in discussions
with the third parties and is attempting to obtain detailed information as to
those parties' Year 2000 plans and state of readiness. A significant portion of
the Company's critical external relationships have informed the Company that
they are not aware of any Year 2000 related reason that they will not be able to
perform their obligations to the Company in all material respects.

Contents of the Statement of Additional Information
- --------------------------------------------------------------------------------

The Statement of Additional Information (SAI) contains more specific information
on the separate account and the contract, as well as the financial statements of
the separate account and the Company. The following is a list of the contents of
the SAI.

General Information and History

Variable Annuity Account B

Offering and Purchase of Contract

Performance Data

General

Average Annual Total Return Quotations

Income Phase Payments

Sales Material and Advertising

Independent Auditors

Financial Statements of the Separate Account

Financial Statements of Aetna Life Insurance and Annuity Company

You may request an SAI by calling the Company at the number listed in "Contract
Overview -- Questions: Contacting the Company."

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Appendix I
ALIAC Guaranteed Account
- --------------------------------------------------------------------------------

The ALIAC Guaranteed Account (the Guaranteed Account) is a fixed interest option
available during the accumulation phase under the contract. This appendix is
only a summary of certain facts about the Guaranteed Account. Please read the
Guaranteed Account prospectus carefully before investing in this option.

In General. Amounts invested in the Guaranteed Account earn specified interest
rates if left in the Guaranteed Account for specified periods of time. If you
withdraw or transfer those amounts before the specified periods elapse, we may
apply a market value adjustment (described below) which may be positive or
negative.

When deciding to invest in the Guaranteed Account, contact your representative
or the Company to learn:

o The interest rate(s) we will apply to amounts invested in the Guaranteed
Account. We change the rate(s) periodically. Be certain you know the rate
we guarantee on the day your account dollars are invested in the
Guaranteed Account. Guaranteed interest rates will never be less than an
annual effective rate of 3%.

o The period of time your account dollars need to remain in the Guaranteed
Account in order to earn the rate(s). You are required to leave your
account dollars in the Guaranteed Account for a specified period of time
in order to earn the guaranteed interest rate(s).

Deposit Period. During a deposit period, we offer a specific interest rate for
dollars invested for a certain guaranteed term. For a specific interest rate and
guaranteed term to apply, account dollars must be invested in the Guaranteed
Account during the deposit period for which that rate and term are offered.

Interest Rates. We guarantee different interest rates, depending upon when
account dollars are invested in the Guaranteed Account. For guaranteed terms one
year or longer, we may apply more than one specified interest rate. The interest
rate we guarantee is an annual effective yield. That means the rate reflects a
full year's interest. We credit interest daily at a rate that will provide the
guaranteed annual effective yield over one year. Guaranteed interest rates will
never be less than an annual effective rate of 3%.

Guaranteed Terms. The guaranteed term is the period of time account dollars must
be left in the Guaranteed Account in order to earn the guaranteed interest rate.
For guaranteed terms one year or longer, we may offer different rates for
specified time periods within a guaranteed term. We offer different guaranteed
terms at different times. We also may offer more than one guaranteed term of the
same duration with different interest rates. Check with your representative or
the Company to learn what terms are being offered. The Company also reserves the
right to limit the number of guaranteed terms or the availability of certain
guaranteed terms.

Fees and Other Deductions. If all or a portion of your account value in the
Guaranteed Account is withdrawn or transferred, you may incur one or more of the
following:

o Market Value Adjustment (MVA) -- as described in this appendix and in the
Guaranteed Account prospectus;

o Tax penalties and/or tax withholding -- see "Taxation";

o Early withdrawal charge--see "Fees"; or

o Maintenance fee--see "Fees".

We do not make deductions from amounts in the Guaranteed Account to cover
mortality and expense risks. Rather, we consider these risks when determining
the interest rate to be credited.

Market Value Adjustment (MVA). If your account value is withdrawn or transferred
from the Guaranteed Account before the guaranteed term is completed, an MVA may
apply. The MVA reflects investment value changes caused by changes in interest
rates occurring since the date of deposit. The MVA may be positive or negative.

If interest rates at the time of withdrawal or transfer have increased since the
date of deposit, the value of the investment decreases and the MVA will be
negative. This could result in your receiving less than the amount you paid into
the Guaranteed Account. If interest rates at the time of withdrawal or transfer
have decreased since the date of deposit, the value of the investment increases
and the MVA will be positive.

MVA Waiver. For withdrawals or transfers from a guaranteed term before the
guaranteed term matures, the MVA may be waived for:

o Transfers due to participation in the dollar cost averaging program;

o Withdrawals taken due to your election of SWO or ECO (described in
"Systematic Distribution Options"), if available; and

o Withdrawals for minimum distributions required by the Tax Code and for
which the early withdrawal charge is waived.

Death Benefit. When a death benefit is paid under the contract within six months
of the date of death, only a positive aggregate MVA amount, if any, is applied
to the account value attributable to amounts withdrawn from the Guaranteed
Account. This provision does not apply upon the death of a spousal beneficiary
or joint contract holder who continued the account after the first death. If a
death benefit is paid more than six months from the date of death, a positive or
negative aggregate MVA amount, as applicable, will be

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applied.

Partial Withdrawals. For partial withdrawals during the accumulation phase,
amounts to be withdrawn from the Guaranteed Account will be withdrawn
proportionally from each group of deposits having the same length of time until
the maturity date ("Guaranteed Term Group"). Within a Guaranteed Term Group, the
amount will be withdrawn first from the oldest deposit period, then from the
next oldest, and so on until the amount requested is satisfied.

Guaranteed Terms Maturity. As a guaranteed term matures, assets accumulating
under the Guaranteed Account may be (a) transferred to a new guaranteed term,
(b) transferred to other available investment options, or (c) withdrawn. Amounts
withdrawn may be subject to an early withdrawal charge, taxation and, if you are
under age 59-1/2, tax penalties may apply.

If no direction is received from you at our Home Office by the maturity date of
a guaranteed term, the amount from the maturing guaranteed term will be
transferred to a new guaranteed term of a similar length. If the same guaranteed
term is no longer available, the next shortest guaranteed term available in the
current deposit period will be used. If no shorter guaranteed term is available,
the next longer guaranteed term will be used.

If you do not provide instructions concerning the maturity value of a maturing
guaranteed term, the maturity value transfer provision applies. This provision
allows transfers or withdrawals without an MVA if the transfer or withdrawal
occurs during the calendar month immediately following a guaranteed term
maturity date. This waiver of the MVA only applies to the first transaction
regardless of the amount involved in the transaction.

Under the Guaranteed Account, each guaranteed term is counted as one funding
option. If a guaranteed term matures, and is renewed for the same term, it will
not count as an additional investment option for purposes of any limitation on
the number of investment options.

Subsequent Purchase Payments. Purchase payments received after your initial
purchase payment to the Guaranteed Account will be allocated in the same
proportions as the last allocation, unless you properly instruct us to do
otherwise. If the same guaranteed term(s) are not available, the next shortest
term will be used. If no shorter guaranteed term is available, the next longer
guaranteed term will be used.

Dollar Cost Averaging. The Company may offer more than one guaranteed term of
the same duration and credit one with a higher rate contingent upon use only
with the dollar cost averaging program. If amounts are applied to a guaranteed
term which is credited with a higher rate using dollar cost averaging and the
dollar cost averaging is discontinued, the amounts will be transferred to
another guaranteed term of the same duration and an MVA will apply.

Transfer of Account Dollars. Generally, account dollars invested in the
Guaranteed Account may be transferred among guaranteed terms offered through the
Guaranteed Account, and/or to other investment options offered through the
contract. However, transfers may not be made during the deposit period in which
your account dollars are invested in the Guaranteed Account or for 90 days after
the close of that deposit period. We will apply an MVA to transfers made before
the end of a guaranteed term. The 90 day wait does not apply to (1) amounts
transferred on the maturity date or under the maturity value transfer provision;
(2) amounts transferred from the Guaranteed Account before the maturity date due
to the election of an income phase payment option; (3) amounts distributed under
the ECO or SWO (See "Systematic Distribution Options"); and (4) amounts
transferred from an available guaranteed term in connection with the dollar cost
averaging program.

Transfers after the 90-day period are permitted from guaranteed term(s) to other
guaranteed term(s) available during a deposit period or to other available
investment options. Transfers of the Guaranteed Account values on or within one
calendar month of a term's maturity date are not counted as one of the 12 free
transfers of accumulated values in the account.

Reinvesting Amounts Withdrawn from the Guaranteed Account. If amounts are
withdrawn and then reinvested in the Guaranteed Account, we apply the reinvested
amount to the current deposit period. This means the guaranteed annual interest
rate and guaranteed terms available on the date of reinvestment will apply. We
reinvest amounts proportionately in the same way as they were allocated before
withdrawal. Your account value will not be credited for any negative MVA that
was deducted at the time of withdrawal.

The Income Phase. The Guaranteed Account cannot be used as an investment option
during the income phase. However, you may notify us at least 30 days in advance
to elect a fixed or variable income phase payment option and to transfer your
Guaranteed Account dollars to the general account or any of the subaccounts
available during the income phase. Transfers made due to the election of a
lifetime income phase payment option will be subject to only a positive
aggregate MVA.

Distribution. The Company is the principal underwriter of the contract. The
Company is registered with the Securities and Exchange Commission under the
Securities Exchange Act of 1934 as a broker-dealer, and is a member of the
National Association of Securities Dealers, Inc. From time to time, the Company
may offer customers of certain broker-dealers special guaranteed rates in
connection with the Guaranteed Account offered through the contracts, and may
negotiate different commissions for these broker-dealers.

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Appendix II
Fixed Account
- --------------------------------------------------------------------------------

General Disclosure.

The Fixed Account is an investment option available during the accumulation
phase under the contract.

o Amounts allocated to the Fixed Account are held in the Company's general
account which supports insurance and annuity obligations.

o Interests in the Fixed Account have not been registered with the SEC in
reliance on exemptions under the Securities Act of 1933, as amended.

o Disclosure in this prospectus regarding the Fixed Account may be subject
to certain generally applicable provisions of the federal securities laws
relating to the accuracy and completeness of the statements.

o Disclosure in this appendix regarding the Fixed Account has not been
reviewed by the SEC.

o Additional information about this option may be found in the contract.

Interest Rates.

o The Fixed Account guarantees that amounts allocated to this option will
earn the minimum interest rate specified in the contract. We may credit a
higher interest rate from time to time, but the rate we credit will never
fall below the guaranteed minimum specified in the contract. Amounts
applied to the Fixed Account will earn the interest rate in effect at the
time money is applied. Amounts in the Fixed Account will reflect a
compound interest rate as credited by us. The rate we quote is an annual
effective yield.

o Our determination of interest rates reflects the investment income earned
on invested assets and the amortization of any capital gains and/or losses
realized on the sale of invested assets. Under this option, we assume the
risk of investment gain or loss by guaranteeing the amounts you allocate
to this option and promising a minimum interest rate and income phase
payment.

Dollar Cost Averaging. Amounts you invest in the Fixed Account must be
transferred into the other investment options available under the contract over
a period not to exceed 12 months. If you discontinue dollar cost averaging, the
remaining balance amounts in the Fixed Account will be transferred into the
money market subaccount available under the contract, unless you direct us to
transfer the balance into other available options.

Withdrawals. Under certain emergency conditions, we may defer payment of any
withdrawal for a period of up to 6 months or as provided by federal law.

Charges. We do not make deductions from amounts in the Fixed Account to cover
mortality and expense risks. We consider these risks when determining the
credited rate. If you make a withdrawal from amounts in the Fixed Account, an
early withdrawal charge may apply. See "Fees."

Transfers. During the accumulation phase, you may transfer account dollars from
the Fixed Account to any other available investment option. We may vary the
dollar amount that you are allowed to transfer, but it will never be less than
10% of your account value held in the Fixed Account.

By notifying the Home Office at least 30 days before income phase payments
begin, you may elect to have amounts transferred to one or more of the
subaccounts available during the income phase to provide variable payments.

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Appendix III
Description of Underlying Funds
- --------------------------------------------------------------------------------

The investment results of the mutual funds (funds) are likely to differ
significantly and there is no assurance that any of the funds will achieve their
respective investment objectives. Shares of the funds will rise and fall in
value and you could lose money by investing in the funds. Shares of the funds
are not bank deposits and are not guaranteed, endorsed or insured by any
financial institution, the Federal Deposit Insurance Corporation or any other
government agency. Except as noted, all funds are diversified, as defined under
the Investment Company Act of 1940.

Aetna Balanced VP, Inc.

Investment Objective

Seeks to maximize investment return, consistent with reasonable safety of
principal by investing in a diversified portfolio of one or more of the
following asset classes: stocks, bonds, and cash equivalents, based on the
investment adviser's judgment of which of those sectors or mix thereof offers
the best investment prospects.

Policies

Under normal market conditions, allocates assets among the following asset
classes: 1) equities such as common and preferred stocks; and 2) debt such as
bonds, mortgage-related and other asset-backed securities, and U.S. Government
securities. Typically maintains approximately 60% of total assets in equities
and 40% of total assets in debt (including money market instruments), although
those percentages may vary from time to time.

Risks

Principal risks are those generally attributable to stock and bond investing.
The success of the fund's strategy depends on the investment adviser's skill in
allocating fund assets between equities and debt and in choosing investments
within those categories. Risks attributable to stock investing include sudden
and unpredictable drops in the value of the market as a whole and periods of
lackluster or negative performance. Stocks of smaller companies tend to be less
liquid and more volatile than stocks of larger companies and can be particularly
sensitive to expected changes in interest rates, borrowing costs and earnings.
Fixed-income investments are subject to the risk that interest rates will rise,
which generally causes bond prices to fall. Also, economic and market conditions
may cause issuers to default or go bankrupt. Values of high-yield bonds are even
more sensitive to economic and market conditions than other bonds. Prices of
mortgage-related securities, in addition to being sensitive to changes in
interest rates, also are sensitive to changes in the prepayment patterns on the
underlying instruments.

Investment Adviser:

Aeltus Investment Management, Inc.

Aetna Income Shares d/b/a Aetna Bond VP

Investment Objective

Seeks to maximize total return, consistent with reasonable risk, through
investments in a diversified portfolio consisting primarily of debt securities.
It is anticipated that capital appreciation and investment income will both be
major factors in achieving total return.

Policies

Under normal market conditions, invests at least 65% of total assets in
high-grade corporate bonds, mortgage-related and other asset-backed securities,
and securities issued or guaranteed by the U.S. government, its agencies and
instrumentalities. High-grade securities are rated at least A by Standard &
Poor's Corporation (S&P) or Moody's Investors Service, Inc. (Moody's), or if
unrated, considered by the investment adviser to be of comparable quality. May
also invest up to 15% of total assets in high-yield bonds, and up to 25% of
total assets in foreign debt securities.

Risks

Principal risks are those generally attributable to debt investing, including
increases in interest rates and loss of principal. Generally, when interest
rates rise, bond prices fall. Bonds with longer maturities tend to be more
sensitive to changes in interest rates. For all bonds there is a risk that the
issuer will default. High-yield bonds generally are more susceptible to the risk
of default than higher rated bonds. Prices of mortgage-related securities, in
addition to being sensitive to changes in interest rates, also are sensitive to
changes in the prepayment patterns on the underlying instruments. Foreign
securities have additional risks. Some foreign securities tend to be less liquid
and more volatile than their U.S. counterparts. In addition, accounting
standards and market regulations tend to be less standardized. These risks are
usually higher for securities of companies in emerging markets. Securities of
foreign companies may be denominated in foreign currency. Exchange rate
fluctuations may reduce or eliminate gains or create losses.

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Investment Adviser: Aeltus Investment Management, Inc.

Aetna Variable Fund d/b/a Aetna Growth and Income VP

Investment Objective

Seeks to maximize total return through investments in a diversified portfolio of
common stocks and securities convertible into common stock. It is anticipated
that capital appreciation and investment income will both be major factors in
achieving total return.

Policies

Under normal market conditions, invests at least 65% of total assets in common
stocks that the investment adviser believes have significant potential for
capital or income growth. Tends to emphasize stocks of larger companies. Also
invests assets across other asset classes (including stocks of small and
medium-sized companies, international stock, real estate securities and fixed
income securities).

Risks

Principal risks are those generally attributable to stock investing. These risks
include sudden and unpredictable drops in the value of the market as a whole and
periods of lackluster or negative performance. The success of the fund's
strategy also depends significantly on the investment adviser's skill in
allocating assets and in choosing investments within each asset class.
Growth-oriented stocks typically sell at relatively high valuations as compared
to other types of stocks. If a growth stock does not exhibit the level of growth
expected, its price may drop sharply. Historically, growth-oriented stocks have
been more volatile than value-oriented stocks. Although the investment adviser
emphasizes large cap stocks, the fund is more diversified across asset classes
than most other funds with a similar investment objective. Therefore, it may not
perform as well as those funds when large cap stocks are in favor.

Investment Adviser: Aeltus Investment Management, Inc.

Aetna Variable Encore Fund d/b/a Aetna Money Market VP

Investment Objective

Seeks to provide high current return, consistent with preservation of capital
and liquidity, through investment in high-quality money market instruments.

Policies

Invests only in a diversified portfolio of high-quality fixed income securities
denominated in U.S. dollars, with short remaining maturities. These securities
include U.S. Government securities, such as U.S. Treasury bills and securities
issued or sponsored by U.S. government agencies. They also may include corporate
debt securities, finance company commercial paper, asset-backed securities and
certain obligations of U.S. and foreign banks, each of which must be highly
rated by independent rating agencies or, if unrated, considered by the
investment adviser to be of comparable quality. Maintains a dollar-weighted
average portfolio maturity of 90 days or less.

Risks

It is possible to lose money by investing in the fund. There is no guaranty the
fund will achieve its investment objective. Shares of the fund are not bank
deposits and are not guaranteed, endorsed or insured by any financial
institution, the FDIC or any other government agency.

A weak economy, strong equity markets and changes by the Federal Reserve in its
monetary policies all could affect short-term interest rates and therefore the
value and yield of the fund's shares.

Investment Adviser: Aeltus Investment Management, Inc.

Aetna Variable Portfolios, Inc.--Aetna Growth VP

Investment Objective

Seeks growth of capital through investment in a diversified portfolio of common
stocks and securities convertible into common stocks believed to offer growth
potential.

Policies

Under normal market conditions, invests at least 65% of total assets in common
stocks. Tends to emphasize stocks of larger companies, although may invest in
companies of any size. Focuses on companies that the investment adviser believes
have strong, sustainable and improving earnings growth, and established market
positions in a particular industry.

Risks

Principal risks are those generally attributable to stock investing. They
include sudden and unpredictable drops in the value of the market as a whole and
periods of lackluster or negative performance. Growth-oriented stocks typically
sell at relatively high valuations as compared to other types of stocks. If a
growth stock does not exhibit the consistent level of growth expected, its price
may drop sharply. Historically, growth-oriented stocks have been more volatile
than value-oriented stocks.

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Investment Adviser: Aeltus Investment Management, Inc.

Aetna Variable Portfolios, Inc.--Aetna Index Plus Large Cap VP

Investment Objective

Seeks to outperform the total return performance of the Standard & Poor's 500
Composite Index (S&P 500), while maintaining a market level of risk.

Policies

Invests at least 80% of net assets in stocks included in the S&P 500 (other than
Aetna Inc. common stock). The investment adviser attempts to achieve the
objective by overweighting those stocks in the S&P 500 that the investment
adviser believes will outperform the index, and underweighting (or avoiding
altogether) those stocks that the investment adviser believes will underperform
the index. In determining stock weightings, the portfolio manager uses
quantitative computer models to evaluate various criteria, such as the financial
strength of each company and its potential for strong, sustained earnings
growth. Although the fund will not hold all the stocks in the S&P 500, the
investment adviser expects that there will be a close correlation between the
performance of the fund and that of the S&P 500 in both rising and falling
markets.

Risks

Principal risks are those generally attributable to stock investing. These risks
include sudden and unpredictable drops in the value of the market as a whole and
periods of lackluster or negative performance. The success of the fund's
strategy depends significantly on the investment adviser's skill in determining
which securities to overweight, underweight or avoid altogether.

Investment Adviser: Aeltus Investment Management, Inc.

Aetna Variable Portfolios, Inc.--Aetna International VP

Investment Objective

Seeks long-term capital growth primarily through investment in a diversified
portfolio of common stocks principally traded in countries outside of the United
States. The fund will not target any given level of current income.

Policies

Under normal market conditions, invests at least 65% of total assets in
securities principally traded in three or more countries outside of North
America. These securities may include common stocks as well as securities
convertible into common stocks. Invests primarily in established foreign
securities markets, although may invest in emerging markets as well. Employs
currency hedging strategies to protect from adverse effects on the U.S. dollar.

Risks

Principal risks are those generally attributable to stock investing. These risks
include sudden and unpredictable drops in the value of the market as a whole and
periods of lackluster or negative performance. Stocks of foreign companies
present additional risks for U.S. investors, including the following: stocks of
foreign companies tend to be less liquid and more volatile than their U.S.
counterparts; accounting standards and market regulations tend to be less
standardized in certain foreign countries; and economic and political climates
tend to be less stable. Stocks of foreign companies may be denominated in
foreign currency. Exchange rate fluctuations may reduce or eliminate gains or
create losses. A hedging strategy adds to the fund's expenses and may not
perform as expected.

Investment Adviser: Aeltus Investment Management, Inc.

Aetna Variable Portfolios, Inc.--Aetna Real Estate Securities VP

Investment Objective

Seeks maximum total return primarily through investment in a diversified
portfolio of equity securities issued by real estate companies, the majority of
which are real estate investment trusts (REITs).

Policies

Under normal market conditions, invests at least 65% of total assets in stocks,
convertible securities and preferred stocks of companies principally engaged in
the real estate industry. These companies may invest in, among other things,
shopping malls, healthcare facilities, office parks and apartment communities,
or may provide real estate management and development services.

Risks

Concentrating in stocks of real estate-related companies presents certain risks
that are more closely associated with investing in real estate directly than
with investing in the stock market generally. Those risks include: periodic
declines in the value of real estate, generally, or in the rents and other
income generated by real estate; periodic over-building, which creates gluts in
the market, as well as changes in laws (such as zoning laws) that impair the
property rights of real estate owners; adverse developments in the real estate
industry, which may have a greater impact on this fund than a fund that is more
broadly diversified. Performance also may be adversely affected by sudden and
unpredictable drops in the value of the market as a whole and periods of
lackluster or negative stock market

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performance. Although the fund is subject to the risks generally attributable to
stock investing, because the fund has concentrated its assets in one industry it
may be subject to more abrupt swings in value than would a fund that does not
concentrate its assets in one industry.

Investment Adviser: Aeltus Investment Management, Inc.

Aetna Variable Portfolios, Inc.--Aetna Small Company VP

Investment Objective

Seeks growth of capital primarily through investment in a diversified portfolio
of common stocks and securities convertible into common stocks of companies with
smaller market capitalizations.

Policies

Under normal market conditions, invests at least 65% of total assets in common
stocks of small-capitalization companies, defined as: the 2,000 smallest of the
3,000 largest U.S. companies (as measured by market capitalization); all
companies not included above that are included in the Standard & Poor's SmallCap
600 Index or the Russell 2000 Index; and companies with market capitalizations
lower than any companies included in the first two categories. For purposes of
the 65% policy, the largest company in this group in which the fund intends to
invest currently has a market capitalization of approximately $1.5 billion.

Risks

Principal risks are those generally attributable to stock investing. These risks
include sudden and unpredictable drops in the value of the market as a whole and
periods of lackluster or negative performance. Stocks of smaller companies carry
higher risks than stocks of larger companies. This is because smaller companies
may lack the management experience, financial resources, product
diversification, and competitive strengths of larger companies. In many
instances, the frequency and volume of trading in these stocks is substantially
less than is typical of stocks of larger companies. As a result, the stocks of
smaller companies may be subject to wider price fluctuations or may be less
liquid. When selling a large quantity of a particular stock, the fund may have
to sell at a discount from quoted prices or may have to make a series of small
sales over an extended period of time due to the more limited trading volume of
smaller company stocks. Stocks of smaller companies can be particularly
sensitive to expected changes in interest rates, borrowing costs and earnings.

Investment Adviser: Aeltus Investment Management, Inc.

AIM V.I. Capital Appreciation Fund

Investment Objective

Seeks growth of capital through investment in common stocks, with emphasis on
medium- and small-sized growth companies.

Policies

The portfolio managers focus on companies they believe are likely to benefit
from new or innovative products, services or processes as well as those that
have experienced above-average, long-term growth in earnings and have excellent
prospects for future growth. The portfolio managers consider whether to sell a
particular security when any of those factors materially changes.
The fund may also invest up to 20% of its total assets in foreign securities.

In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash,
money market instruments, bonds or other debt securities. As a result, the fund
may not achieve its investment objective.

Risks

The prices of equity securities change in response to many factors, including
the historical and prospective earnings of the issuer, the value of its assets,
general economic conditions, interest rates, investor perceptions and market
liquidity. This is especially true with respect to common stocks of smaller
companies, whose prices may go up and down more than common stocks of larger,
more-established companies. Also, since common stocks of smaller companies may
not be traded as often as common stocks of larger, more-established companies,
it may be difficult or impossible for the fund to sell securities at a desirable
price.

Investment Adviser: AIM Advisors, Inc.

AIM V.I. Growth Fund

Investment Objective

Seeks growth of capital primarily by investing in seasoned and better
capitalized companies considered to have strong earnings momentum.

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Policies

The portfolio managers focus on companies that have experienced above-average
growth in earnings and have excellent prospects for future growth. The portfolio
managers consider whether to sell a particular security when any of those
factors materially changes. The fund may also invest up to 20% of its total
assets in foreign securities.

Risks

Investment Adviser: AIM Advisors, Inc.

AIM V.I. Growth and Income Fund

Investment Objective

Seeks growth of capital with a secondary objective of current income.

Policies

The fund seeks to meet these objectives by investing at least 65% of its net
assets in income-producing securities, including dividend-paying common stocks
and convertible securities. The portfolio managers purchase securities of
established companies that have long-term above-average growth in earnings and
dividends, and growth companies that they believe have the potential for
above-average growth in earnings and dividends. The portfolio managers consider
whether to sell a particular security when they believe the security no longer
has that potential or the capacity to generate income. The fund may also invest
up to 20% of its total assets in foreign securities.

The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objectives. If the fund does trade in this way, it may
incur increased transaction costs and brokerage commissions, both of which can
lower the actual return on your investment.

Risks

The prices of equity securities change in response to many factors, including
the historical and prospective earnings of the issuer, the value of its assets,
general economic conditions, interest rates, investor perceptions and market
liquidity. The values of the convertible securities in which the fund may invest
also will be affected by market interest rates, the risk that the issuer may
default on interest or principal payments and the value of the underlying common
stock into which these securities may be converted. Specifically, since these
types of convertible securities pay fixed interest and dividends, their values
may fall if market interest rates rise and rise if market interest rates fall.
Additionally, an issuer may have the right to buy back certain of the
convertible securities at a time and at a price that is unfavorable to the fund.

Investment Adviser: AIM Advisors, Inc.

AIM V.I. Value Fund

Investment Objective

Seeks to achieve long-term growth of capital by investing primarily in equity
securities judged by the fund's investment advisor to be undervalued relative to
the investment advisor's appraisal of the current or projected earnings of the
companies issuing the securities, or relative to current market values of assets
owned by the companies issuing the securities or relative to the equity market
generally. Income is a secondary objective.

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Policies

The fund also may invest in preferred stocks and debt instruments that have
prospects for growth of capital. The fund may also invest up to 25% of its total
assets in foreign securities.

The portfolio managers focus on undervalued equity securities of (1)
out-of-favor cyclical growth companies; (2) established growth companies that
are undervalued compared to historical relative valuation parameters; (3)
companies where there is early but tangible evidence of improving prospects that
are not yet reflected in the price of the company's equity securities; and (4)
companies whose equity securities are selling at prices that do not reflect the
current market value of their assets and where there is reason to expect
realization of this potential in the form of increased equity values. The
portfolio managers consider whether to sell a particular security when they
believe the company no longer fits into any of the above categories.

Risks

If the seller of a repurchase agreement in which the fund invests defaults on
its obligation or declares bankruptcy, the fund may experience delays in selling
the securities underlying the repurchase agreement. As a result, the fund may
incur losses arising from decline in the value of those securities, reduced
levels of income and expenses of enforcing its rights.

Investment Adviser: AIM Advisors, Inc.

Fidelity Variable Insurance Products Fund--Equity Income Portfolio

Investment Objective

Seeks reasonable income. Also considers the potential for capital appreciation.
Seeks a yield which exceeds the composite yield on the securities comprising the
S&P 500.

Policies

Normally invests at least 65% of total assets in income-producing equity
securities. May also invest in other types of equity securities and debt
securities, including lower-quality debt securities. May invest in securities of
both foreign and domestic issuers. Emphasis on above-average income-producing
equity securities tends to lead to investments in large cap "value" stocks. In
making investment decisions, the investment adviser relies on fundamental
analysis of each issuer and its potential for success in light of its current
financial condition, its industry position, and economic and market conditions.
May use various techniques, such as buying and selling futures contracts, to
increase or decrease exposure to changing security prices, or other factors that
affect security values.

Risks

The value of equity securities fluctuates in response to issuer, political,
market and economic developments. In the short term, equity prices can fluctuate
dramatically in response to these developments. Debt securities have varying
levels of sensitivity to changes in interest rates. In general, the price of a
debt security can fall when interest rates rise. Securities with longer
maturities and mortgage securities can be more sensitive to interest rate
changes. Foreign investments, especially those in emerging markets, can be more
volatile and potentially less liquid than U.S. investments due to increased
risks of adverse issuer, political, regulatory, market or economic developments.
Lower-quality debt securities (those of less than investment-grade quality) can
be more volatile due to increased sensitivity to adverse issuer, political,
regulatory, market or economic developments. Lower-quality debt securities
involve greater risk of default or price changes due to changes in the credit
quality of the issuer. "Value" stocks can react differently to issuer,
political, market and economic developments than the market as a whole and other
types of stocks. "Value" stocks may not ever realize their full value.

Investment Adviser: Fidelity Management & Research Company

Fidelity Variable Insurance Products Fund--Growth Portfolio

Investment Objective

Seeks capital appreciation.

Policies

Normally invests primarily in common stocks of companies the investment adviser
believes have above-average growth potential. Companies with high growth
potential tend to be companies with higher than average price/earning (P/E)
ratios and are often called "growth" stocks. May invest in securities of both
foreign and domestic issuers. In making investment decisions, the investment
adviser relies on fundamental analysis of each issuer and its potential for
success in light of its current financial condition, its industry position, and
economic and market conditions. May use various techniques, such as buying and
selling futures contracts, to increase or decrease exposure to changing security
prices, or other factors that affect security values.

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Risks

The value of equity securities fluctuates in response to issuer, political,
market and economic developments. In the short term, equity prices can fluctuate
dramatically in response to these developments. Foreign investments, especially
those in emerging markets, can be more volatile and potentially less liquid than
U.S. investments due to increased risks of adverse issuer, political,
regulatory, market or economic developments. "Growth" stocks tend to be
sensitive to changes in their earnings and more volatile than other types of
stocks.

Investment Adviser: Fidelity Management & Research Company

Fidelity Variable Insurance Products Fund--High Income Portfolio

Investment Objective

Seeks a high level of current income while also considering growth of capital.

Policies

Normally invests at least 65% of total assets in income-producing debt
securities, preferred stocks and convertible securities, with an emphasis on
lower-quality debt securities. May also invest in non-income producing
securities, including defaulted securities and common stocks. Currently intends
to limit common stocks to 10% of total assets. May invest in securities of both
foreign and domestic issuers. In making investment decisions, the investment
adviser relies on fundamental analysis of each issuer and its potential for
success in light of its current financial condition, its industry position, and
economic and market conditions. May use various techniques, such as buying and
selling futures contracts, to increase or decrease exposure to changing security
prices, interest rates or other factors that affect security values.

Risks

Debt securities have varying levels of sensitivity to changes in interest rates.
In general, the price of a debt security can fall when interest rates rise.
Securities with longer maturities and mortgage securities can be more sensitive
to interest rate changes. The value of equity securities fluctuates in response
to issuer, political, market and economic developments. In the short term,
equity prices can fluctuate dramatically in response to these developments.
Foreign investments, especially those in emerging markets, can be more volatile
and potentially less liquid than U.S. investments due to increased risks of
adverse issuer, political, regulatory, market or economic developments.
Lower-quality debt securities (those of less than investment-grade quality) can
be more volatile due to increased sensitivity to adverse issuer, political,
regulatory, market or economic developments. Lower-quality debt securities
involve greater risk of default or price changes due to changes in the credit
quality of the issuer.

Investment Adviser: Fidelity Management & Research Company

Fidelity Variable Insurance Products Fund II--Contrafund Portfolio

Investment Objective

Seeks long-term capital appreciation.

Policies

Normally invests primarily in common stocks of companies whose value the
investment adviser believes is not fully recognized by the public. May invest in
securities of both foreign and domestic issuers. May tend to buy "growth" stocks
or "value" stocks, or a combination of both types. In making investment
decisions, the investment adviser relies on fundamental analysis of each issuer
and its potential for success in light of its current financial condition, its
industry position, and economic and market conditions. May use various
techniques, such as buying and selling futures contracts, to increase or
decrease exposure to changing security prices, interest rates or other factors
that affect security values.

Risks

The value of equity securities fluctuates in response to issuer, political,
market and economic developments. In the short term, equity prices can fluctuate
dramatically in response to these developments. Debt securities have varying
levels of sensitivity to changes in interest rates. In general, the price of a
debt security can fall when interest rates rise. Securities with longer
maturities and mortgage securities can be more sensitive to interest rate
changes. Foreign investments, especially those in emerging markets, can be more
volatile and potentially less liquid than U.S. investments due to increased
risks of adverse issuer, political, regulatory, market or economic developments.
"Growth" stocks tend to be sensitive to changes in their earnings and more
volatile than other types of stocks. "Value" stocks can react differently to
issuer, political, market and economic developments than the market as a whole
and other types of stocks. "Value" stocks may not ever realize their full value.

Investment Adviser: Fidelity Management & Research Company

Janus Aspen Series--Aggressive Growth Portfolio

Investment Objective

Seeks long-term growth of capital.

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Policies

A nondiversified portfolio that invests primarily in common stocks selected for
their growth potential and normally invests at least 50 percent of its equity
assets in medium-sized companies. Medium-sized companies are those whose market
capitalizations at the time of investment fall within the range of companies in
the Standard and Poor's (S&P) MidCap 400 Index. The market capitalizations
within the Index will vary, but as of December 31, 1998, they ranged from
approximately $142 million to $73 billion. May at times hold substantial
positions in cash or similar investments.

Risks

Because the Portfolio may invest substantially all of its assets in common
stocks, the main risk is that the value of the stocks it holds might decrease in
response to the activities of an individual company or in response to general
market and/or economic conditions. In addition, a nondiversified portfolio has
the ability to take larger positions in a smaller number of issuers. Because the
appreciation or depreciation of a single stock may have a greater impact on the
net asset value of a nondiversified portfolio, its share price can be expected
to fluctuate more than a diversified portfolio. Performance may also be affected
by risks specific to certain types of investments, such as foreign securities,
derivative investments, non-investment grade debt securities
(high-yield/high-risk securities or "junk" bonds) or companies with relatively
small market capitalizations. Smaller or newer companies may suffer more
significant losses as well as realize more substantial growth than larger or
more established issuers. Investments in such companies tend to be more volatile
and somewhat more speculative. Issues associated with investing in foreign
securities include currency risk, political and economic risk, regulatory risk,
market risk and transaction costs. High-yield/high-risk securities are generally
more dependent on the ability of the issuer to meet interest and principal
payments (i.e., credit risk). They are more vulnerable to real or perceived
economic changes, political changes or other adverse developments specific to
the issuer.

Investment Adviser: Janus Capital Corporation

Janus Aspen Series--Balanced Portfolio

Investment Objective

Seeks long-term capital growth, consistent with preservation of capital and
balanced by current income.

Policies

Normally invests 40-60 percent of its assets in securities selected primarily
for their growth potential and 40-60 percent of its assets in securities
selected primarily for their income potential. Will normally invest at least 25
percent of its assets in fixed-income securities. Assets may shift between the
growth and income components of the Portfolio based on the portfolio manager's
analysis of relevant market, financial and economic conditions. May at times
hold substantial positions in cash or similar investments.

Risks

Because the Portfolio may invest a significant portion of its assets in common
stocks, the main risk is that the value of the stocks it holds might decrease in
response to the activities of an individual company or in response to general
market and/or economic conditions. The income component of the Portfolio's
holdings includes fixed-income securities which generally will decrease in value
when interest rates rise. Another risk associated with fixed-income securities
is the risk that an issuer of a bond will be unable to make principal and
interest payments when due (i.e. credit risk). Performance may also be affected
by risks specific to certain types of investments, such as foreign securities,
derivative investments, non-investment grade debt securities
(high-yield/high-risk securities or "junk" bonds) or companies with relatively
small market capitalizations. Smaller or newer companies may suffer more
significant losses as well as realize more substantial growth than larger or
more established issuers. Investments in such companies tend to be more volatile
and somewhat more speculative. Issues associated with investing in foreign
securities include currency risk, political and economic risk, regulatory risk,
market risk and transaction costs. High-yield/high-risk securities are generally
more susceptible to credit risk. They are more vulnerable to real or perceived
economic changes, political changes or other adverse developments specific to
the issuer.

Investment Adviser: Janus Capital Corporation

Janus Aspen Series--Growth Portfolio

Investment Objective

Seeks long-term growth of capital in a manner consistent with the preservation
of capital.

Policies

Generally invests primarily in common stocks of larger, more established
companies selected for their growth potential, although it can invest in
companies of any size. May at times hold substantial positions in cash or
similar investments.

Risks

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non-investment grade debt securities (high-yield/high-risk securities or "junk"
bonds) or companies with relatively small market capitalizations. Smaller or
newer companies may suffer more significant losses as well as realize more
substantial growth than larger or more established issuers. Investments in such
companies tend to be more volatile and somewhat more speculative. Issues
associated with investing in foreign securities include currency risk, political
and economic risk, regulatory risk, market risk and transaction costs.
High-yield/high-risk securities are generally more dependent on the ability of
the issuer to meet interest and principal payments (i.e., credit risk). They are
more vulnerable to real or perceived economic changes, political changes or
other adverse developments specific to the issuer.

Investment Adviser: Janus Capital Corporation

Janus Aspen Series--Worldwide Growth Portfolio

Investment Objective

Seeks long-term growth of capital in a manner consistent with the preservation
of capital.

Policies

Invests primarily in common stocks of companies of any size throughout the
world. Normally invests in issuers from at least five different countries,
including the United States. May at times invest in fewer than five countries or
even in a single country. May hold substantial positions in cash or similar
investments.

Risks

Because the Portfolio may invest substantially all of its assets in common
stocks, the main risk is that the value of the stocks it holds might decrease in
response to the activities of an individual company or in response to general
market and/or economic conditions. Performance may also be affected by risks
specific to certain types of investments, such as foreign securities, derivative
investments, non-investment grade debt securities (high-yield/high-risk
securities or "junk" bonds) or companies with relatively small market
capitalizations. Smaller or newer companies may suffer more significant losses
as well as realize more substantial growth than larger or more established
issuers. Investments in such companies tend to be more volatile and somewhat
more speculative. Issues associated with investing in foreign securities include
currency risk, political and economic risk, regulatory risk, market risk and
transaction costs. High-yield/high-risk securities are generally more dependent
on the ability of the issuer to meet interest and principal payments (i.e.,
credit risk). They are more vulnerable to real or perceived economic changes,
political changes or other adverse developments specific to the issuer.

Investment Adviser: Janus Capital Corporation

MFS Total Return Series

Investment Objective

Seeks primarily to provide above-average income (compared to a portfolio
invested entirely in equity securities) consistent with the prudent employment
of capital. Its secondary objective is to provide a reasonable opportunity for
growth of capital and income.

Policies

Under normal market conditions, invests at least 40%, but no more than 75%, of
net assets in common stocks and related securities (referred to as equity
securities); bonds, warrants or rights convertible into stock; and depositary
receipts for those securities. Invests at least 25% of net assets in
non-convertible fixed income securities. May vary the percentage of assets
invested in any one type of security (within the limits described above).
Generally, seeks to purchase equity securities that the investment adviser
believes are undervalued in the market relative to their long-term potential
focusing on companies with relatively large market capitalization (i.e., market
capitalizations of $5 billion or more). Fixed income securities include U.S.
government securities, mortgage-backed and asset-backed securities, and
corporate bonds.

Risks

In allocating investments, the series could miss attractive investment
opportunities by underweighting markets where there are significant returns, and
could lose value by overweighting markets where there are significant declines.
The value of securities held by the series may decline due to changing economic,
political or market conditions, or disappointing earnings results. If
anticipated events do not occur or are delayed, or if investor perceptions about
undervalued securities do not improve, the market price of these securities may
not rise or may fall. Fixed income securities are subject to interest rate risk
(the risk that when interest rates rise, the prices of fixed income securities
will generally fall) and credit risk (the risk that the issuer of a fixed income
security will not be able to pay principal and interest when due). Securities
with longer maturities are affected more by interest rate risk. Fixed income
securities traded in the over-the-counter market may be harder to purchase or
sell at a fair price. The inability to purchase or sell these fixed income
securities at a fair price could have a negative impact on the series'
performance.

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Investment Adviser: Massachusetts Financial Services Company

Oppenheimer Aggressive Growth Fund/VA

Investment Objective

Seeks to achieve long-term capital appreciation by investing in "growth-type"
companies.

Policies

Invests mainly in equity securities, such as common stocks, preferred stocks and
convertible securities, of issuers in the U.S. and foreign countries. The fund
can invest in any country, including countries with developed or emerging
markets, but currently emphasizes investments in developed markets. As a
fundamental policy, the fund will normally invest in at least four countries
(including the United States). The fund emphasizes investments in securities of
"growth-type" companies. The fund may also invest in cyclical industries and in
"special situations" that the fund's investment manager believes present
opportunities for capital growth. "Special situations" are anticipated
acquisitions, mergers or other unusual developments which, in the opinion of the
manager, will increase the value of an issuer's securities, regardless of
general business conditions or market movements.

Risks

The fund's investments in stocks are subject to changes in their value from a
number of factors. They include changes in general stock market movements, or
the change in value of particular stocks because of an event affecting the
issuer. The fund expects to have substantial amounts of its investments in
foreign securities. Therefore, it will be subject to the risks that economic,
political or other events can have on the values of securities of issuers in
particular foreign countries. Changes in interest rates can also affect stock
prices. Investing in securities with high growth potential, which are often
newer companies having a market capitalization of $200 million or less, involves
substantially greater risks of loss and price fluctuations than larger cap
issuers. Small-cap stock investments also pose certain risks because their
stocks may be less liquid than those of larger issuers.

Investment Adviser: OppenheimerFunds, Inc.

Oppenheimer Main Street Growth & Income Fund/VA

Investment Objective

Seeks a high total return (which includes growth in the value of its shares as
well as current income) from equity and debt securities.

Policies

Invests in equity securities, such as common stocks, preferred stocks and
convertible securities and in debt securities, of issuers in the U.S. and
foreign countries. Although the fund can invest in securities of issues of all
market capitalization ranges, it may focus from time to time on small to medium
capitalization issuers (having a market capitalization of less than $5 billion).
The fund can also use hedging instruments and certain derivative investments to
try to manage investment risks.

Risks

The fund's investments in stocks and bonds are subject to changes in their value
from a number of factors. They include changes in general stock and bond market
movements, or the change in value of particular stocks or bonds because of an
event affecting the issuer. High-yield, lower-grade bonds are subject to greater
credit risks than investment-grade securities. The fund can have significant
amounts of its assets invested in foreign securities. Therefore, it will be
subject to the risks of economic, political or other events that can affect the
values of securities of issuers in particular foreign countries. Changes in
interest rates can also affect stock and bond prices.

Investment Adviser: OppenheimerFunds, Inc.

Oppenheimer Strategic Bond Fund/VA

Investment Objective

Seeks a high level of current income principally derived from interest on debt
securities and seeks to enhance such income by writing covered call options on
debt securities.

Policies

Invests mainly in debt securities of issuers in three market sectors: foreign
governments and companies, U.S. government securities and lower-rated high-yield
securities of U.S. companies. Under normal market conditions, the fund invests
in each of those three market sectors. However, the fund is not obligated to do
so, and the amount of its assets in each of the three sectors will vary over
time. The fund can invest up to 100% of its assets in any one sector at any
time, if the manager believes that in doing so the fund can achieve its
objective without undue risk. The fund's foreign investments can include debt
securities of issuers in developed markets as well as emerging markets, which
have special risks. The fund can also use hedging instruments and certain
derivative investments to try to enhance income or try to manage investment
risks.

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Risks

The fund's investments in debt securities are subject to changes in their value
from a number of factors. They include changes in general bond market movements
in the U.S. and abroad, or the change in value of particular bonds because of an
event affecting the issuer. The fund can focus significant amounts of its
investments in foreign debt securities. Therefore, it will be subject to the
risks that economic, political or other events can have on the values of
securities of issuers in particular foreign countries. These risks are
heightened in the case of emerging market debt securities. Changes in interest
rates can also affect securities prices.

Investment Adviser: OppenheimerFunds, Inc.

Portfolio Partners (PPI) MFS Emerging Equities Portfolio

Investment Objective

Seeks long-term growth of capital.

Policies

Invests, under normal market conditions, at least 80% of total assets in common
stocks and related securities, such as preferred stock, convertible securities
and depositary receipts, of emerging growth companies. Emerging growth companies
are companies believed to be either early in their life cycle but which have the
potential to become major enterprises, or major enterprises whose rates of
earnings growth are expected to accelerate. Investments may include securities
traded in the over-the-counter markets.

May also invest in foreign securities and may have exposure to foreign
currencies through its investment in these securities, its direct holdings of
foreign currencies or through its use of foreign currency exchange contracts for
the purchase or sale of a fixed quantity of foreign currency at a future date.

Risks

Investment in the portfolio is subject to the following risks:

o Emerging Growth Risk: The portfolio's performance is particularly
sensitive to changes in the value of emerging growth companies.
Investments in emerging growth companies may be subject to more abrupt or
erratic market movements and may involve greater risks than investments in
other companies.

o Over the Counter Risk: Equity securities that are traded over the counter
may be more volatile than exchange listed securities, and the portfolio
may experience difficulty in purchasing or selling these securities at a
fair price.

o Foreign Markets Risk: Investment in foreign securities involves risks
related to political, social and economic developments abroad. These risks
result from differences between the regulations to which U.S. and foreign
issuers and markets are subject.

o Currency Risk: The portfolio's exposure to foreign currencies may cause
the value of the portfolio to decline if the U.S. dollar strengthens
against these currencies or if foreign governments intervene in the
currency markets.

Investment Adviser: Aetna Life Insurance and Annuity Company; Subadviser:
Massachusetts Financial Services Company

Portfolio Partners (PPI) MFS Research Growth Portfolio

Investment Objective

Seeks long-term growth of capital and future income.

Policies

Invests primarily (at least 65% of total assets) in common stocks and related
securities, such as preferred stock, convertible securities and depositary
receipts. Focuses on companies believed to have favorable prospects for
long-term growth, attractive valuations based on current and expected earnings
or cash flow, dominant or growing market share and superior management. May
invest in companies of any size. Investments may also include securities traded
on securities exchanges or in the over-the-counter markets.

May invest in foreign securities and may have exposure to foreign currencies
through its investment in these securities, its direct holdings of foreign
currencies or through its use of foreign currency exchange contracts for the
purchase or sale of a fixed quantity of foreign currency at a future date.

Risks

Investment in the portfolio is subject to the following risks:

o Market and Company Risk: The value of the securities in which the
portfolio invests may decline due to changing economic, political or
market conditions, or due to the financial condition of the company which
issued the security. In addition, securities of growth companies may be
more volatile because such companies usually invest a high portion of
their earnings in their businesses

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and may lack the dividends of value companies, which can cushion the
security prices in a declining market.

o Over-the-Counter Risk: Equity securities that are traded over-the-counter
may be more volatile than exchange-listed stocks, and the portfolio may
experience difficulty in purchasing or selling these securities at a fair
price.

o Foreign Markets Risk: Investment in foreign securities involves additional
risks relating to political, social and economic developments abroad.
Other risks from these investments result from the differences between the
regulations to which U.S. and foreign issuers and markets are subject.

Investment Adviser: Aetna Life Insurance and Annuity Company; Subadviser:
Massachusetts Financial Services Company

Portfolio Partners (PPI) MFS Value Equity Portfolio

Investment Objectives

Seeks capital appreciation

Policies

Invests primarily (at least 65% of total assets) in common stocks and related
securities, such as preferred stock, convertible securities and depositary
receipts. Focuses on companies believed to have favorable growth prospects and
attractive valuations based on current and expected earnings or cash flow.
Investments may include securities traded in the over-the-counter markets.

May invest in foreign securities (including emerging market securities) and may
have exposure to foreign currencies through its investment in these securities,
its direct holdings of foreign currencies or through its use of foreign currency
exchange contracts for the purchase or sale of a fixed quantity of a foreign
currency at a future date.

Also may invest in debt securities issued by both U.S. and foreign companies,
including non-investment grade debt securities.

Risks

Investment in the portfolio is subject to the following risks:

o Foreign Markets Risk: The portfolio's investment in foreign securities
involves additional risks relating to political, social and economic
developments abroad. Other risks from these investments result from the
differences between the regulations to which U.S. and foreign issuers and
markets are subject.

o Emerging Markets Risk: Emerging markets are generally defined as countries
in the initial stages of their industrialization cycles with low per
capita income. Investments in emerging markets securities involve all of
the risks of investment in foreign securities, and also have additional
risks.

o Currency Risk: The portfolio's exposure to foreign currencies may cause
the value of the portfolio to decline in the event that the U.S. dollar
strengthens against these currencies, or in the event that foreign
governments intervene in the currency markets.

o Interest Rate Risk: The portfolio's investment in debt securities involves
risks relating to interest rate movement. If interest rates go up, the
value of debt securities held by the portfolio will decline.

o Credit Risk: The portfolio's investment in non-investment grade debt
securities involves credit risk because issuers of non-investment grade
securities are more likely to have difficulty making timely payments of
interest or principal.

Investment Adviser: Aetna Life Insurance and Annuity Company; Subadviser:
Massachusetts Financial Services Company

Portfolio Partners (PPI) Scudder International Growth Portfolio

Investment Objective

Seeks long-term growth of capital.

Policies

Invests primarily (at least 65% of total assets) in the equity securities of
foreign companies believed to have high growth potential. Normally invests in
securities of at least three different countries other than the U.S. Focuses on
issuers located primarily in Europe, Latin America, and the emerging markets of
the Pacific Basin and Japan, but also may invest in select issues from elsewhere
outside the U.S. Will invest in securities in both developed and developing
markets. Seeks to invest in those companies believed to be best

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able to capitalize on the growth and changes taking place within and between
various regions of the world. Typically, these are companies with leading or
rapidly developing business franchises, strong financial positions, and high
quality management capable of defining and implementing strategies to take
advantage of local, regional or global markets.

Also may invest in debt securities issued by both U.S. and foreign companies,
including non-investment grade debt securities.

Risks

Investment in the portfolio is subject to the following risks:

Investment Adviser: Aetna Life Insurance and Annuity Company; Subadviser:
Scudder Kemper Investments, Inc.