<PAGE>
Aetna Immediate Annuity Prospectus - May 3, 1999
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The Funds
Aetna Ascent VP
Aetna Balanced VP, Inc.
Aetna Income Shares d/b/a Aetna Bond VP
Aetna Crossroads VP
Aetna Growth VP
Aetna Variable Fund d/b/a Aetna Growth and Income VP
Aetna Index Plus Large Cap VP
Aetna International VP
Aetna Legacy VP
Aetna Variable Encore Fund d/b/a Aetna Money Market VP
Aetna Real Estate Securities VP
Aetna Small Company VP
AIM V.I. Capital Appreciation Fund
AIM V.I. Growth Fund
AIM V.I. Growth and Income Fund
AIM V.I. Value Fund
Fidelity VIP High Income Portfolio
Janus Aspen Growth Portfolio
Janus Aspen Worldwide Growth Portfolio
Oppenheimer Aggressive Growth Fund
Oppenheimer Growth and Income Fund
Oppenheimer Strategic Bond Fund
Portfolio Partners MFS Emerging Equities Portfolio
Portfolio Partners MFS Value Equity Portfolio
Portfolio Partners Scudder International Growth Portfolio
Portfolio Partners T. Rowe Price Growth Equity Portfolio
The Contract. The contract described in this prospectus is a fixed and
variable, group or individual, immediate annuity contract issued by Aetna Life
Insurance and Annuity Company (the Company, we, us). It is available as a non
qualified contract, or as a qualified contract for use with a traditional
individual retirement annuity (IRA) under section 408(b) of the Internal
Revenue Code of 1986, as amended (Tax Code) or with retirement plans qualifying
under Tax Code sections 401, 403(b) or 457. Contracts sold in New York are not
available for 457 plans.
Why Reading this Prospectus is Important. This prospectus contains facts about
the contract and its investment options that you should know before investing.
The information will help you determine if the contract is right for you. If
you do invest in the contract, retain this document for future reference.
Table of Contents . . . page 3
Contract Design. The contract is designed to:
>Provide income payments for a specified period or for life
>Offer a variety of variable investment options and a fixed interest option to
fund income payments
>Provide the option to have a death benefit available for a designated
beneficiary
Investment Options. When you purchase the contract, your purchase payment, less
any premium tax, will be applied to the investment options you select. If you
select variable investment options, you will receive variable income payments.
If you select the fixed dollar option, you will receive fixed income payments.
If you select one or more variable investment options and the fixed dollar
option, a portion of your payment will vary and a portion will remain fixed.
Certain options may be unavailable through your contract, your plan or in your
state.
Variable Income Payments. If you select variable income payments, the amount of
your payments will vary based on the performance of the variable investment
options that you select. 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
(funds) listed on this page. Subaccount performance will vary depending on the
performance of the underlying fund. You do not invest directly in or hold
shares of the funds.
The funds in which the subaccounts invest have various risks. For information
about risks of investing in the funds see "Investment Options" in this
prospectus and each fund prospectus. Retain the fund prospectuses for future
reference.
Fixed Income Payments. If you select fixed payments, your purchase payment,
less any premium tax, will be applied to the fixed dollar option and your
payment amount will not vary. Except as specifically mentioned, this prospectus
describes only the variable investment options. However, we describe the fixed
dollar option in Appendix I of this prospectus.
Getting Additional Information. You may obtain the May 3, 1999, Statement of
Additional Information (SAI) about the separate account by indicating your
request on your application or by calling us at 1-800-238-6273. You may also
obtain
<PAGE>
Prospectus - May 3, 1999 (continued)
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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
Exchange Commission (SEC) web site, http://www.sec.gov. The SAI table of
contents is listed on page 31 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. This prospectus is valid
only when accompanied by current prospectuses of the funds. 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.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Contract Overview ........................... 4
Contract Design
Who's Who
Contract Rights
The Contract and Retirement Plans
Contract Facts
Questions: Contacting the Company
Sending Requests in Good Order
Fee Table .................................... 6
Condensed Financial Information .............. 10
Purchase ..................................... 10
Right to Cancel .............................. 11
Income Payments .............................. 11
Calculating Variable Income Payments ......... 14
Investment Options ........................... 15
Fees ......................................... 17
Death Benefit ................................ 20
Withdrawals .................................. 21
Taxation ..................................... 22
Other Topics ................................. 27
The Company -- Variable Annuity Account B -- Performance Reporting --
Distribution -- Transfer of Ownership -- Payment Delay or Suspension -- Voting
Rights -- Contract Modification -- Legal Matters and Proceedings -- Financial
Statements -- Year 2000 Readiness
Contents of Statement of Additional Information ......... 31
Appendix I Fixed Dollar Option .......................... 32
Appendix II Description of Underlying Funds ............. 35
Appendix III Condensed Financial Information ............ 48
</TABLE>
3
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[sidebar]
Questions: Contacting the Company. To answer your questions, contact your local
representative or write or call our Home Office:
Aetna Life Insurance and Annuity Company
Attention: ARS Settlements
151 Farmington Avenue
Hartford, CT 06156
1-800-238-6273
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 write or call us 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.
[end sidebar]
Contract Overview
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The term "contract" in this prospectus refers to individual contracts and to
certificates issued under group contracts.
Contract Design
The contract is designed for individuals who would like regular income payments
from an annuity contract.
Who's Who
Contract Holder (you): The person to whom we issue an individually owned
contract or the participant under a group contract.
Participant: The individual who participates in a group contract, generally in
connection with a retirement plan.
The Company (we, us): Aetna Life Insurance and Annuity Company. We issue the
contract.
Contract Rights
Contract holders hold the rights under the contract. Generally, the contract
holder is either an individual to whom we issue an individual contract or a
participant under a group contract. For contracts issued in connection with 457
plans, the plan sponsor is the contract holder and holds the rights under the
contract. Section 457 plan sponsors may allow their participants to exercise
certain limited contract rights. For example, the section 457 plan sponsor has
the right to make investment selections, but may permit their individual
participants to exercise that right.
The Contract and Retirement Plans
We may offer this contract to employees or other individuals in connection with
a retirement plan.
Plan Type. We refer to a retirement plan by the Tax Code section under which it
qualifies. For example: a "457 plan" is a plan that qualifies for tax treatment
under Tax Code section 457. We are not a party to the plan, so the terms and
the conditions of the contract and the plan may differ.
Contract Facts
Income Payment Options. You may select from a number of features for your
payments including: duration, number of payees, payments to beneficiaries,
guaranteed minimum payment amount, variable or fixed payments, and more. Some
features require payment of additional fees. See "Income Payments."
Free look/Right to Cancel. You may cancel the contract no later than ten days
after receipt of the contract; some states allow more than ten days.
Participants in 403(b) plans and some 401 plans may cancel their participation
in the contract no later than ten days after they receive evidence of
participation in the contract. See "Right to Cancel."
Death Benefit. If any guaranteed income payments remain to be paid at the time
of the death of the annuitant or both annuitants, if applicable, they may be
paid to your beneficiary. See "Death Benefit."
4
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Withdrawals. Some payment options allow you to withdraw a portion or all of any
remaining guaranteed payments. An early withdrawal charge may apply. See
"Withdrawals."
Fees. Certain fees associated with the contract will reduce income payments.
See "Fee Table" and "Fees."
Taxation. The Tax Code has certain rules that apply to amounts distributed
under the contract. Tax penalties may apply if rules are not followed. See
"Taxation."
5
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[sidebar]
In This Section:
>Maximum Transaction Fees
>Maximum Fees Deducted from the Subaccounts
>Fund Fees
>Examples of Fee Deductions
Also see "Fees" for:
>Early Withdrawal Charge Schedules
>How, When and Why Fees are Deducted
>Reduction or Elimination of Certain Fees
>Premium and Other Taxes
[end sidebar]
Fee Table
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Following is an overview of fees associated with the contract that may affect
the amount of variable income payments. For fees applicable to fixed income
payments, see Appendix I. Any applicable premium taxes are not reflected below.
See "Fees" for additional information.
Transaction Fees
Early Withdrawal Charge. Withdrawals of all or a portion of the present value
of remaining guaranteed payments may be subject to an early withdrawal charge.
The charge is a percentage of the amount that you withdraw. The percentage will
be determined by the early withdrawal charge schedule applicable to your
contract. The charge will never be more than 8.5% of your total payment to the
contract. See "Withdrawals." For additional information.
Maximum Early Withdrawal Charge Schedule
<TABLE>
<CAPTION>
Number of Years from
Contract Effective Date* Early Withdrawal Charge
- --------------------------------------- ------------------------
<S> <C>
Fewer than 1 7%
1 or more but fewer than 2 6%
2 or more but fewer than 3 5%
3 or more but fewer than 4 4%
4 or more but fewer than 5 3%
5 or more but fewer than 6 2%
6 or more but fewer than 7 1%
7 or more 0%
</TABLE>
*For participants under a group contract, use "Number of Years from Certificate
Effective Date."
Fees Deducted from the Subaccounts
(Daily deductions equal to the given percentage on an annual basis.)
For Contracts Without the Guaranteed Minimum Income Feature:
Mortality and Expense Risk Charge....................................1.25%
Administrative Expense Charge........................................0.00%(1)
Total Separate Account Expenses......................................1.25%
For Contracts With the Guaranteed Minimum Income Feature:
Mortality and Expense Risk Charge....................................1.25%
Administrative Expense Charge........................................0.00%(1)
Guaranteed Minimum Income Charge.....................................1.00%
Total Separate Account Expenses......................................2.25%
(1) We currently do not impose an administrative expense charge. We reserve,
however, the right to impose this charge for new contracts and to deduct a
daily charge from the subaccounts equivalent to not more than 0.25%
annually.
6
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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 about additional factors impacting
a fund, refer to the fund prospectus.
How Fees are Deducted. Fund fees are not deducted directly from your income
payments. When a subaccount purchases shares of a fund, the fees are reflected
in that purchase price, so income payments based on investments in that
subaccount will be impacted indirectly by the fund fees. The following figures
are a percentage of the average net assets of each fund, and are based on
figures for the year ended December 31, 1998, unless otherwise noted.
<TABLE>
<CAPTION>
Investment
Advisory Fees(1) Other Expenses
(before expense (before expense Total Fund
reimbursement) reimbursement) Annual Expenses
------------------ ----------------- ----------------
<S> <C> <C> <C>
Aetna Ascent VP (2)
Aetna Balanced VP, Inc. (2)
Aetna Bond VP (2)
Aetna Crossroads VP (2)
Aetna Growth VP (2)
Aetna Growth and Income VP (2)
Aetna Index Plus Large Cap VP (2)
Aetna International VP (2)
Aetna Legacy VP (2)
Aetna Money Market VP (2)
Aetna Real Estate Securities VP (2)
Aetna Small Company VP (2)
AIM V.I. Capital Appreciation Fund (2)
AIM V.I. Growth Fund (2)
AIM V.I. Growth and Income Fund (2)
AIM V.I. Value Fund (2)
Fidelity VIP High Income Portfolio (2)
Janus Aspen Growth Portfolio (2)
Janus Aspen Worldwide Growth Portfolio (2)
Oppenheimer Aggressive Growth Fund (2)
Oppenheimer Growth and Income Fund (2)
Oppenheimer Strategic Bond Fund (2)
Portfolio Partners MFS Emerging Equities Portfolio (2)
Portfolio Partners MFS Value Equity Portfolio (2)
Portfolio Partners Scudder International Growth Portfolio (2)
Portfolio Partners T. Rowe Price Growth Equity Portfolio (2)
</TABLE>
(1) Certain of the fund advisers reimburse the Company for administrative
costs incurred in connection with administering the funds as variable
investment options under the contract. These reimbursements are paid out
of the investment advisory fees and are not charged to investors.
(2) [Footnote text, as applicable, to be added by 485(b) amendment.]
7
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Hypothetical Examples--For Contracts Without the Guaranteed Minimum Income
Feature
Fees You May Incur Over Time. The following hypothetical examples show the fees
that you would pay if you invested $1000 in a subaccount, assuming the
subaccount earned a 5% annual return. For the purposes of these examples, the
calculations assume you have selected the "nonlifetime-guaranteed payments"
payment option for a 15 year period, with a 3.5% assumed annual net return
rate.
> These examples are purely hypothetical
> They should not be considered a
representation of past or future fees or
expected returns
> Actual expenses and/or returns may be
more or less than those shown in these
examples
<TABLE>
<CAPTION>
EXAMPLE A EXAMPLE B
--------------------------------------- --------------------------------------
If you withdraw your remaining If you do not withdraw your remaining
guaranteed payments at the end of the guaranteed payments, you would have
periods shown, you would have paid the paid the following fees at the end of the
following fees, including any applicable periods shown (no early withdrawal
early withdrawal charge: charge is reflected):
1 Year 3 Years 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
-------- --------- --------- ---------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Ascent VP
Aetna Balanced VP, Inc.
Aetna Bond VP
Aetna Crossroads VP
Aetna Growth VP
Aetna Growth and Income VP
Aetna Index Plus Large Cap VP
Aetna International VP
Aetna Legacy VP
Aetna Money Market VP
Aetna Real Estate Securities VP
Aetna Small Company VP
AIM V.I. Capital Appreciation Fund
AIM V.I. Growth Fund
AIM V.I. Growth and Income Fund
AIM V.I. Value Fund
Fidelity VIP High Income Portfolio
Janus Aspen Growth Portfolio
Janus Aspen Worldwide Growth Portfolio
Oppenheimer Aggressive Growth Fund
Oppenheimer Growth and Income Fund
Oppenheimer Strategic Bond Fund
Portfolio Partners MFS Emerging Equities Portfolio
Portfolio Partners MFS Value Equity Portfolio
Portfolio Partners Scudder International Growth
Portfolio
Portfolio Partners T. Rowe Price Growth Equity
Portfolio
</TABLE>
8
<PAGE>
Hypothetical Examples--For Contracts With the Guaranteed Minimum Income Feature
Fees You May Incur Over Time. The following hypothetical examples show the fees
that you would pay if you invested $1000 in a subaccount, assuming the
subaccount earned a 5% annual return. For the purposes of these examples, the
calculations assume you have selected the "life income--guaranteed payments"
payment option with payments guaranteed for 15 years, and a 3.5% assumed annual
net return rate.
> These examples are purely hypothetical
> They should not be considered a
representation of past or future fees or
expected returns
> Actual expenses and/or returns may be
more or less than those shown in these
examples
<TABLE>
<CAPTION>
EXAMPLE A EXAMPLE B
--------------------------------------- --------------------------------------
If you withdraw your remaining If you do not withdraw your
guaranteed payments at the end of remaining guaranteed payments you
the periods shown, you would have would have paid the following fees at
paid the following fees, including any the end of the periods shown (no
applicable early withdrawal charge: 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 Index Plus Large Cap VP Not Applicable. Withdrawals are
not allowed if you elect the
guaranteed minimum income
feature.
</TABLE>
9
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Condensed Financial Information
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Understanding Condensed Financial Information. In Appendix III of this
prospectus, we provide condensed financial information about the Variable
Annuity Account B subaccounts available under the contract. This information
shows the values of the subaccounts at the end of each year from the time
purchase payments were first received in the subaccounts under the contracts
described in this prospectus.
Purchase
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Contracts Available for Purchase. The contract is designed for persons who
would like to receive regular income payments from an annuity contract. It is
available to be purchased as a non qualified contract or as a qualified
contract for use with a traditional IRA under section 408(b) of the Tax Code or
with retirement plans qualifying under Tax Code sections 401, 403(b) or 457.
Contracts sold in New York are not available for 457 plans. Availability as a
group contract is subject to state approval. We reserve the right to limit
purchase of an individual contract to natural persons.
ERISA Notification. We must be notified by the employer or plan trustee if the
contract is offered in connection with a 403(b) or 401 plan that is subject to
Title I of the Employee Retirement Income Security Act of 1974 (ERISA), as
amended.
How to Purchase. To purchase a contract, send to us at least the minimum
purchase payment amount and the required application or enrollment forms.
Purchase Payment Amount. To purchase a contract you must make one payment of at
least $10,000. After your initial payment, no additional purchase payments may
be made. We reserve the right to lower the minimum required payment, to
establish a maximum payment amount and to reject any payment exceeding the
maximum.
Acceptance or Rejection. We must accept or reject an application or enrollment
materials within two business days of receipt. If the forms are incomplete, we
may hold any forms and accompanying payments for five business days pending
completion. In all cases, we may hold payments for longer periods with the
permission of the contract holder and if we deposit the payments in the Aetna
Money Market VP subaccount until the forms are completed (or for a maximum of
105 days). If we reject the application or enrollment, we will return the forms
and any payments.
Age Requirements. The maximum issue age is between 85 and 90, depending upon
the income payment option selected. We reserve the right to modify the maximum
issue age.
Allocation of Your Purchase Payment to the Investment Options. We will allocate
your purchase payment, less any applicable premium taxes, among the investment
options you select. You may select up to four of the available variable
investment options at any one time. You may also select the fixed dollar option
and allocate all or a portion of your payment to the general account. See
"Investment Options." Allocations must be in whole percentages. Any purchase
payment received before we accept the application or enrollment materials, will
be invested as of the day we do accept them.
10
<PAGE>
Right to Cancel
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When and How to Cancel. You may cancel the contract by returning it, or the
document showing your participation under a group contract, to the Company
along with written notice of your intent to cancel. In most states, you have
ten days from receipt to exercise this "free look" right; some states allow you
longer. For contracts issued in connection with 457 plans, the contract holder
may follow these procedures on behalf of the participant.
Refunds. On the day we receive the request for cancellation in good order, we
will calculate your contract value. Your refund will equal that value and will
reflect deduction of any income payments made. This amount may be more or less
than your purchase payment. In certain states (or if you have purchased the
contract as an IRA), we may be required to return your entire purchase payment.
Income Payments
- --------------------------------------------------------------------------------
Under the contract, we will make regular income payments to you or to a payee
you designate in writing.
Initiating Payments. To initiate income payments, you must make the following
selections on your application or enrollment form:
o Income payment start date
o Payment frequency (i.e., monthly, quarterly, semi-annually or annually)
o Payment option and any special withdrawal rights or guaranteed minimum income
features (described in this section and Appendix I)
o Variable and/or fixed payments
o The subaccounts to allocate your purchase payment among (only if you select
variable payments)
o An assumed annual net return rate (only if you select variable payments, see
below)
Your investment adviser can help you consider what selections may be
appropriate for your financial goals. Generally, your selections may not be
changed after the contract is issued. Some changes, such as transfers among
subaccounts, may be allowed.
What Affects Income Payment Amounts? Some of the factors that may affect your
payment amounts include: your age, your gender, the amount of your purchase
payment, the payment option selected, the number of guaranteed payments (if
any), whether variable or fixed payments are selected, and, for variable
payments, the assumed annual net return rate selected.
11
<PAGE>
Payment Options
The following chart explains the payment options and their accompanying death
benefits and rights to withdrawal. Also see "Death Benefit," "Withdrawals," and
Appendix I for additional detail. We may offer additional payment options under
the contract from time to time.
Terms to understand:
Annuitant(s): The person(s) whose life or life expectancy(ies) determines the
amount or continuation of lifetime income payments or whose death results in
payment of death benefits.
Beneficiary: The person(s) designated to receive death benefit proceeds payable
under the contract.
<TABLE>
<CAPTION>
Lifetime Payment Options
<S> <C>
Length of Payments: For as long as the annuitant lives. It is possible that no payment will be made
should the annuitant die prior to the first payment's due date.
Life Income Death Benefit--None: All payments end upon the annuitant's death.
Right to Withdraw: None.
Length of Payments: For as long as the annuitant lives, with payments guaranteed for your choice
of 5 through 30 years (or other periods we may make available at the time you select this option).
Life Income-- Death Benefit--Payment to the Beneficiary: If the annuitant dies before we have made all the
Guaranteed guaranteed payments, payments will continue to the beneficiary.
Payments Right to Withdraw: At the time of purchase, you may elect the right to withdraw all or a portion
of any remaining guaranteed payments (some restrictions apply, see "Withdrawals").
Length of Payments: For as long as either annuitant lives. It is possible that no payment will be
made should both the annuitant and joint annuitant die before the first payment's due date.
Continuing Payments--When you select this option you will also choose either:
(a) Full or reduced payments to continue to the surviving annuitant after the first annuitant's
Life Income-- death; or
Two Lives (b) 100% of the payment will continue to the annuitant on the joint annuitant's death, and a
reduced payment will continue to the joint annuitant on the annuitant's death.
In either case, payments cease upon the death of the surviving annuitant.
Right to Withdraw: None.
Length of Payments: For as long as either annuitant lives, with payments guaranteed for your
choice of 5 through 30 years (or other periods we may make available at the time you select this
option.)
Life Income-- Continuing Payments--100% of the payment will continue to the surviving annuitant after the
Two Lives-- first annuitant's death.
Guaranteed Death Benefit--Payment to the Beneficiary: If both annuitants die before the guaranteed
Payments payments have all been paid, payments will continue to the beneficiary.
Right to Withdraw: At the time of purchase, you may elect the right to withdraw all or a portion
of any remaining guaranteed payments (some restrictions apply, see "Withdrawals").
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Nonlifetime Payment Option
<S> <C>
Length of Payments: Payments will continue for your choice of 5 through 30 years (or other
periods we may make available at the time you select this option.)
Death Benefit -- Payment to the Beneficiary: If the annuitant dies before we make all the
guaranteed payments, payment will continue to the beneficiary.
Nonlifetime-- Right to Withdraw:
Guaranteed
Payments (a) If you are receiving variable income payments--you may withdraw all or a portion of any
remaining guaranteed payments at any time.
(b) If you are receiving fixed income payments--at the time of purchase, you may elect the right
to withdraw all or a portion of any remaining guaranteed payments (some restrictions apply,
see "Withdrawals").
</TABLE>
Guaranteed Minimum Income Feature
(Subject to state approval.)
If you elect this feature, we guarantee that your variable payment will never
be less than the guaranteed minimum payment amount shown in your contract. The
guaranteed minimum payment amount equals 90% of your estimated initial
payment.
This feature requires that you select:
o A lifetime payment option
o 100% variable payments
o Aetna Index Plus Large Cap VP as the only subaccount into which your purchase
payment is allocated
o 3.5% assumed annual net return rate
In addition to other contract charges, a guaranteed minimum income charge will
apply. See "Fees." There is no right to withdraw and no right to transfer if
you select this option.
Estimated Initial Payment Amount. If you elect this feature, on the date we
issue your contract we estimate the amount of your initial payment. Your
guaranteed minimum payment amount will equal 90% of this estimated amount.
Assumed Annual Net Return Rate. If you select variable payments, you will also
select an assumed annual net return rate of either 5% or 3.5%.
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 fees are deducted. Payment
amounts will decline if the investment performance is less than 5%, after
deduction of fees.
If you select a 3.5% rate, your first payment will be lower, but subsequent
payments will increase more rapidly and decline more slowly depending on the
investment performance of the subaccounts you selected.
For more information about selecting an assumed annual net return rate, request
a copy of the Statement of Additional Information by calling the Company. See
"Contract Overview--Questions."
Payment Due Dates. You will generally receive your first income payment on the
last day of the selected payment period. For example, if you elect to receive
one payment a year, we will make the payment on the day before the
13
<PAGE>
anniversary of the contract effective date. An alternate first payment date may
be elected subject to our approval and in compliance with IRS regulations.
Delay of Start Date. The contract is designed to be viewed as an immediate
annuity contract under the Tax Code, however, you may elect to delay your
payment start date for up to 12 months following purchase of the contract. See
"Taxation" for rules applicable where death occurs before the annuity starting
date under a non qualified annuity. Consult a tax adviser before electing a
delay.
Minimum Payment Amounts. For all payment options, the initial income payment
must be at least $50 per month, or a total of $250 per year for payments of any
other frequency.
Taxation. The Tax Code has rules regarding income payments. For example, for
qualified contracts, guaranteed payments may not extend beyond (a) the
estimated life expectancy of the annuitant or (b) the joint life expectancies
of the annuitant and beneficiary. Payments must comply with the minimum
distribution requirements of Tax Code section 401(a)(9). In some cases tax
penalties will apply if rules are not followed. For tax rules that may apply to
the contracts see "Taxation."
Calculating Variable Income Payments
- --------------------------------------------------------------------------------
The amount of any variable income payment is determined by multiplying the
number of annuity units that you hold, by an annuity unit value (AUV) for each
unit.
Annuity Units. When you select variable income payments, your payment purchases
annuity units of the Variable Annuity Account B subaccounts dedicated to the
funds you select. The number of units purchased is based on your purchase
payment amount and the value of each unit on the day the purchase payment is
invested. Generally, the number of units will not vary over the life of the
contract, but the value of each unit will vary daily based on the performance
of the underlying fund and deduction of fees. Some events may reduce the number
of units, including transfers among subaccounts, withdrawals, or death of an
annuitant and reduction of payment to a surviving annuitant.
Annuity Unit Value (AUV). The value of each annuity unit in a subaccount is
called the annuity unit value or AUV. As stated above, the value of annuity
units varies daily in relation to the underlying fund's investment performance.
The value also reflects daily deductions for fund fees and expenses, the
mortality and expense risk charge, the administrative charge (if any) and the
guaranteed minimum income charge (if applicable). We discuss these deductions
in more detail in "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 return factor of the subaccount, and by a
factor to reflect the assumed annual net return rate. The net return factor
measures the investment performance of the subaccount from one valuation to the
next. The assumed annual net return rate will be either 3.5% or 5% as you
selected.
14
<PAGE>
Current AUV = Prior AUV x Net Return Factor x
Assumed Annual Net Return Rate Factor
Net Return Factor. The net return factor for a subaccount between two
consecutive valuations equals the sum of 1.000000 plus the net return rate.
The net return rate is computed according to a formula that is equivalent to
the following:
>The net assets of the fund held by the subaccount as of the current valuation;
minus
>The net assets of the fund held by the subaccount at the preceding valuation;
plus or minus
>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
>The total value of the subaccount's units at the preceding valuation; minus
>A daily deduction for the mortality and expense risk charge, the
administrative expense charge (if any) and the guaranteed minimum income
charge (if applicable). See "Fees."
The net return rate may be either positive or negative.
Investment Options
- --------------------------------------------------------------------------------
When you purchase the contract, your purchase payment, less any premium tax,
will be applied to the investment options you select. If you select variable
investment options, you will receive variable income payments. If you select
the fixed dollar option, you will receive fixed income payments. If you select
one or more variable investment options and the fixed dollar option, a portion
of your payment will vary and a portion will remain fixed.
Variable Income Payments. If you select variable income payments, the amount of
your payments will vary based on the performance of the variable investment
options that you select. 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 a specific mutual fund
(fund). Subaccount performance will vary depending on the performance of the
underlying fund. You do not invest directly in or hold shares of the funds.
>Fund Descriptions. For descriptions of the funds that the subaccounts invest
in, see Appendix II and each fund prospectus.
Fixed Income Payments. If you select fixed payments, your purchase payment,
less any premium tax, will be applied to the fixed dollar option and your
payment amount will not vary. Except where noted, this prospectus describes
only the variable investment options. The fixed dollar option is described in
Appendix I.
Number of Options You May Select. You may select up to four subaccounts and/or
the fixed dollar option at any one time.
15
<PAGE>
Selecting Investment Options
o Choose options appropriate for you. Your investment advisor 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 funds are
considered riskier than others. Funds with additional risks are expected to
have a value that rises and falls 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 the fund prospectuses and the fixed dollar option Appendix
I in this prospectus.
Additional Risks of Investing in the Funds (Mixed and Shared Funding). "Shared
funding" occurs when shares of a fund, which our 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
our subaccounts buy for variable annuity contracts, are bought for variable
life insurance contracts issued by us or other insurance companies.
>Shared--bought by more than one company
>Mixed--bought for annuities and life insurance
It is possible that a conflict of interest may arise due to mixed and 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.
Investment Option Availability. Some funds may be unavailable through your
contract, a plan or in your state. At times, we may add, withdraw or substitute
funds, subject to the conditions in your contract and in compliance with
regulatory requirements.
We may disallow investment in a fund if fund shares are unavailable to the
separate account or if we judge that further investments in such shares should
become 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
a proxy vote.
Rejection of Investments by a Fund. Orders for the purchase of fund shares may
be subject to acceptance or rejection by the fund. We reserve the right to
reject any allocation of your payments to a subaccount if the subaccount's
investment in its corresponding fund is rejected or not accepted by the fund
for any reason.
Transfers Among Variable Investment Options. You may make transfers among the
subaccounts after the contract is issued by calling or writing to our Home
Office. The Company reserves the right to limit such transfers to twelve in any
calendar year and to establish a minimum transfer amount. Transfers are not
allowed into or out of the fixed dollar option.
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<PAGE>
[sidebar]
Types of Fees
There are three types of fees associated with the contract that may affect the
amount of your variable income payments. For fees applicable to fixed payments
see fixed dollar option Appendix I.
> Transaction Fee
o Early Withdrawal Charge
> Fees Deducted from the Subaccounts
o Mortality and Expense
Risk Charge
o Administrative Expense
Charge
o Guaranteed Minimum
Income Charge
> Fees Deducted by the Funds
o Investment Advisory Fees
o Other Expenses
Fees
- --------------------------------------------------------------------------------
The following repeats and adds to information provided under "Fee Table."
Please review both sections for information on fees.
Reduction or Elimination of Fees
When sales of the contract are made to individuals or a group of individuals in
a manner that results in savings of sales expenses, we may reduce or eliminate
the early withdrawal charge or mortality and expense risk charge. Our decision
to reduce or eliminate either of these charges will be based on one or more of
the following:
> The size and type of group of individuals to whom the contract is offered
> The type and frequency of administrative and sales services to be provided
> Whether there is a prior or existing relationship with the Company such as
being an employee of the Company or one of its affiliates; receiving
distributions or making internal transfers from other contracts issued by the
Company or an affiliate; or making transfers of amounts held under qualified
plans sponsored by the Company or an affiliate.
Any reduction or elimination of the early withdrawal charge or mortality and
expense risk charge will not be unfairly discriminatory against any person.
Transaction Fee
Early Withdrawal Charge
Withdrawals of all or a portion of the present value of remaining guaranteed
payments may be subject to a charge. Not all contracts permit withdrawals. (See
"Withdrawals.")
Amount: The charge is a percentage of the amount that you withdraw. The
percentage will be determined by the early withdrawal charge schedule
applicable to your contract. The charge will never be more than 8.5% of your
purchase payment to the contract.
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<PAGE>
Early Withdrawal Charge Schedules
Schedule A: Subject to state approval, Schedule A applies to contracts issued
on or after May 3, 1999.
<TABLE>
<CAPTION>
Schedule A
Number of Years from
Contract Effective Date* Early Withdrawal Charge
- --------------------------------------- ------------------------
<S> <C>
Fewer than 1** 7%
1 or more but fewer than 2 6%
2 or more but fewer than 3 5%
3 or more but fewer than 4 4%
4 or more but fewer than 5 3%
5 or more but fewer than 6 2%
6 or more but fewer than 7 1%
7 or more 0%
</TABLE>
Schedule B: Schedule B applies to contracts issued prior to May 3, 1999. It
also applies to contracts issued on or after May 3, 1999 in states where
Schedule A is not approved as of the contract effective date.
<TABLE>
<CAPTION>
Schedule B
Number of Years from
Contract Effective Date* Early Withdrawal Charge
- ---------------------------------------- ------------------------
<S> <C>
Fewer than 1** 5%
1 or more, but fewer than 2 5%
2 or more, but fewer than 3 4%
3 or more, but fewer than 4 4%
4 or more, but fewer than 5 3%
5 or more, but fewer than 6 2%
6 or more, but fewer than 7 1%
7 or more 0%
</TABLE>
*For participants under a group contract, use "Number of Years from Certificate
Effective Date."
**Certain contracts do not allow withdrawals during the first contract year.
When/How: At the time of withdrawal we deduct this from the amount withdrawn.
Purpose: This is a deferred sales charge. It reimburses us for some of the
sales and administrative expenses associated with the contract.
Fees Deducted from the Subaccounts
Mortality and Expense Risk Charge
Maximum Amount: 1.25% annually of values invested in the subaccounts.
When/How: We deduct this fee daily from the subaccounts corresponding to the
funds you select.
Purpose: This fee compensates us for the mortality and expense risks we assume
under the contracts.
> The mortality risks are those risks associated with our promise to make
lifetime payments based on annuity rates specified in the contracts.
> The expense risk is the risk that the actual expenses we incur under the
contracts will exceed the maximum costs that we can charge.
If the amount we deduct for this fee is not enough to cover our mortality costs
and expenses under the contracts, 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.
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<PAGE>
Administrative Expense Charge
Maximum Amount: We currently do not charge an administrative expense charge. We
reserve, however, the right to charge up to 0.25% annually of values invested
in the subaccounts.
When/How: If imposed, we deduct this fee daily from the subaccounts
corresponding to the funds you select.
Purpose: This fee helps defray our administrative expenses. The fee is not
intended to exceed the average expected cost of administering the contracts. We
do not expect to make a profit from this fee.
Guaranteed Minimum Income Charge
This is assessed only if you select the guaranteed minimum income feature.
Maximum Amount: 1.00% annually of values invested in the subaccounts.
When/How: We deduct this fee daily from the subaccounts corresponding to the
funds you select.
Purpose: This includes compensating us for the additional mortality and expense
risks we assume by guaranteeing minimum income payments. For additional
information regarding those risks, see "Mortality and Expense Risk
Charge--Purpose" in this section.
Fund Expenses
Investment Advisory Fees and Other Expenses
Maximum Amount: Each fund's advisory fees and expenses are different. They are
set forth in the "Fees Deducted by the Funds" table (see "Fee Table") and are
described in more detail in each fund's prospectus.
When/How: The fund fees are reflected in the daily value of fund shares. These
values affect the daily value of the subaccounts.
Purpose: These expenses help to pay the fund's investment advisor and operating
expenses.
Other Expenses
Premium and Other Taxes
Maximum Amount: 4% or less, depending on the jurisdiction.
When/How: We reserve the right to deduct premium taxes from your purchase
payment on the contract effective date. Under certain circumstances, we reserve
the right not to deduct premium taxes where the purchase payment is provided
through an internal transfer from an annuity or other contract issued by us (or
one of our affiliates) under which we previously deducted a premium tax.
19
<PAGE>
Death Benefit
- --------------------------------------------------------------------------------
The following describes the death benefit applicable to variable income
payments. These are also outlined in the "Income Phase--Payment Option" table.
For information on the death benefit applicable to the fixed dollar option,
refer to Appendix I.
Payment of Death Benefit. Upon the death of the annuitant and any surviving
joint annuitant, if applicable, a death benefit may be payable if your contract
is issued under any of the following payment options:
1. Life Income -- Guaranteed Payments
2. Life Income -- Two Lives- Guaranteed Payments
3. Nonlifetime -- Guaranteed Payments
Any death benefit will be paid in the form specified in the contract and will
be distributed at least as rapidly as under the method of distribution in
effect upon the date of death. See "Taxation" for rules where you have elected
to delay your payment start date under a non qualified annuity and you die
before the annuity starting date. Under payment options 1 and 2 above, a
lump-sum payment of the present value of any death benefit may be requested
within six months following the date of death. A lump sum payment may be
requested at any time (even after the six month period) if you had elected the
right to withdraw. Under payment option 3 above, a lump-sum payment of the
present value of any death benefit may be requested at any time. If a lump-sum
payment is requested, no early withdrawal charge is applied and payment will be
sent within seven days following our receipt of request in good order.
Calculation of Lump-Sum Payment of the Death Benefit. The value of the lump-sum
payment of the death benefit will equal the present value of any remaining
guaranteed payments, calculated using the assumed annual net return rate stated
in your contract. We will calculate this value on the next valuation date
following our receipt of proof of death acceptable to us and payment request in
good order. Such value will reflect any payments made after date of death.
Who Receives Death Benefit Proceeds? The beneficiary is the person entitled to
receive any death benefit proceeds. We will pay any death benefit proceeds
based on the last written beneficiary designation on file at our Home Office as
of the date of death.
Changes in Beneficiary Designations. The designated beneficiary may be changed
at any time during the lifetime of the annuitant and the joint annuitant (if
applicable). Such change must be submitted to the Company in writing, and
except for contracts issued in New York, will become effective as of the date
written notice of the change is received and recorded by the Company. For
contracts issued in New York, the change will become effective as of the date
the notice is signed. However, our obligation to pay death benefits will be
fully discharged upon payment to the beneficiary named in the written notice of
beneficiary designation that we last received as of the date of such payment.
Some restrictions may apply to beneficiary changes under qualified contracts.
20
<PAGE>
Withdrawals
- --------------------------------------------------------------------------------
Withdrawals of Variable Payments
You may make partial or full withdrawals of the present value of any remaining
guaranteed variable income payments if you are receiving payments under either:
>A lifetime payment option with guaranteed payments and you elected a right to
make withdrawals. In this circumstance withdrawals are allowed once each year,
beginning after the first contract year. (Subject to state approval.)
>The nonlifetime payment option.
Partial withdrawals are allowed only if each remaining guaranteed payment will
be at least $50. If you select the guaranteed minimum income feature, you may
not make any withdrawals.
Withdrawals of Fixed Payments
(For additional detail see Appendix I--Fixed Dollar Option)
You may make partial or full withdrawals of the present value of any remaining
fixed income payments if you are receiving payments under either:
> A lifetime payment option with guaranteed payments and you elected a right to
make withdrawals. In this circumstance withdrawals are allowed once each year,
beginning after the first contract year. (Subject to state approval.)
> The nonlifetime payment option and you elected a right to make withdrawals. In
this circumstance withdrawals are allowed once each year, beginning after the
first contract year.
Partial withdrawals are allowed only if each remaining guaranteed payment will
be at least $50.
Amount Available for Withdrawal
Variable Income Payments. For any withdrawal of remaining variable guaranteed
income payments, the amount available for withdrawal is equal to the present
value of any remaining guaranteed variable payments (less any applicable early
withdrawal charge) calculated using the assumed annual net return rate stated
in your contract. Withdrawal values are determined as of the valuation date
following our receipt of your written request in good order at our Home Office.
Fixed Income Payments. See fixed dollar option Appendix I for details regarding
withdrawals of fixed payments.
Early Withdrawal Charge
Withdrawals may be subject to an early withdrawal charge as described in
"Fees--Early Withdrawal Charge."
Reduction of Remaining Payments
Any withdrawal will result in a proportionate reduction of any remaining
guaranteed payments. Additionally, the withdrawal amount will be taken from the
subaccounts proportionately, unless you designate otherwise. For lifetime
options, any payments to be made beyond the guaranteed payment period will be
unaffected by any withdrawals.
21
<PAGE>
[sidebar]
In This Section:
> Introduction
> Terms to Understand
> The Contract
> Withdrawals and Other Distributions
> Taxation of Distributions
> 10% Penalty Tax
> Withholding
> Rules Specific to Certain Plans
> Non Qualified Contracts
> Diversification
> Assignment of Right to Payments
> Delay of Start Date
> Taxation of the Company
Taxation
- --------------------------------------------------------------------------------
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:
> Your tax position (or the tax position of the beneficiary, as applicable)
determines federal taxation of amounts held or paid out under the contract.
> Tax laws change. It is possible that a change in the future could affect
contracts issued in the past.
> 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.
> We do not make any guarantee about the tax treatment of the contract or a
transaction involving the contract.
Terms to Understand
> Contract holder means the person to whom we issue an individually owned
contract or the participant under a group contract.
> The term "payment" in this section refers to income payments.
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.
The Contract
The contract is designed for use on a non-tax qualified basis as a non
qualified contract, or as a qualified contract under certain retirement
arrangements under Tax Code sections 401, 403(b), 408(b) or 457.
The tax rules vary according to whether the contract is a non qualified
contract or qualified contract. If used as a qualified contract under 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.
Contract holders and participants 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.
Withdrawals and Other Distributions
Certain tax rules apply to distributions from the contract. A distribution is
any amount taken from the contract including payments, full or partial
withdrawals of the value of remaining payments (if permitted under the
contract), rollovers, exchanges and death benefit proceeds.
We report the taxable portion of all distributions to the Internal Revenue
Service (IRS).
22
<PAGE>
Taxation of Distributions
Non Qualified Contracts. A full withdrawal of the present value of any
remaining guaranteed payments under a non qualified contract is taxable to the
extent that the amount received exceeds any remaining investment in the
contract.
If a partial withdrawal of the present value of any remaining payments is made
and the continuing payments you receive are reduced because of the partial
withdrawal, a part of the withdrawal may not be taxable. The part that is not
taxable is equal to any remaining investment in the contract multiplied by a
fraction. The numerator (top part of the fraction) is the reduction in each
payment because of the partial withdrawal. The denominator (bottom part of the
fraction) is the full amount of each payment originally provided.
For income 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 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 annuity payment will be taxable once the
recipient has recovered the investment in the contract.
For variable income 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 payment will be taxable once the
recipient has recovered the investment in the contract.
401 and 403(b) Plans. All distributions from these plans are taxed as received
unless one of the following applies:
> The distribution is an eligible rollover distribution and is rolled over to
another plan of the same type or to a traditional individual retirement
annuity/account (IRA) in accordance with the Tax Code.
> You made after-tax contributions to the plan. In this case, depending on the
type of distribution, the amount will be taxed according to the rules detailed
in the Tax Code.
A payment can be an eligible rollover distribution only if it is both of the
following:
> Made under a nonlifetime payment option with a period of less than ten years.
> Only to the extent it is not attributable to after-tax contributions and/or is
not a required minimum distribution under Tax Code section 401(a)(9).
408(b) Individual Retirement Annuity (IRA). All distributions from a
traditional IRA are taxed as received unless one of the following applies:
> 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.
> You made after-tax contributions to the plan. In this case, the distribution
will be taxed according to rules detailed in the Tax Code.
A payment can be rolled over only if it is one or more of the following:
> Not attributable to after-tax contributions
23
<PAGE>
> Not a required minimum distribution under Tax Code section 401(a)(9).
There are limitations on the number of rollovers that may be made in any one
year period. You should consult a tax adviser prior to making a rollover.
Death Benefit Proceeds. In general, payments received by your beneficiaries
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 non qualified contract or from a
contract used with a 401, 403(b) or 408(b) arrangement. The 10% penalty tax
does not apply to a distribution from a 457 plan.
An exception to the 10% penalty discussed below requires that the payment or
distribution be part of a series of substantially equal periodic payments. If
you select an increasing annuity or an early withdrawal of the value of
remaining payments, the payment or distribution may be subject to the 10%
penalty unless one of the other exceptions applies. You should consult with a
tax advisor to determine how this will affect your tax liability.
Non Qualified Contract. There is an exception to the 10% penalty if payment is
made under an immediate annuity contract. An immediate annuity is defined as a
contract to which all of the following apply:
> Is purchased with a single premium
> Has an annuity starting date, as defined by the Tax Code, no later than one
year from date of purchase
> Provides for a series of substantially equal periodic payments to be made no
less frequently than annually
The IRS has ruled, however, that where an immediate annuity is received in
exchange for a deferred annuity contract in a Tax Code section 1035 exchange,
the immediate annuity does not qualify for this exception to the 10% penalty.
One of the other exceptions to the penalty may apply.
In addition to the immediate annuity exception, the 10% penalty tax does not
apply to the taxable portion of payments made in one or more of the following
circumstances:
> On or after the taxpayer becomes age 59-1/2
> After the taxpayer has become totally and permanently disabled (as defined by
the Tax Code)
> On or after the death of the contract holder
> As part of a series of 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
Modification of the series of payments prior to the later of age 59-1/2 or 5
years may result in an additional tax in the year of modification equal to the
penalty which would have been imposed, plus interest, if the exception had not
applied.
401 and 403(b) Plans. The 10% penalty tax applies to the taxable portion of a
distribution from a 401 or a 403(b) plan, unless one or more of the following
have occurred:
> You have attained age 59-1/2
24
<PAGE>
> You have become totally and permanently disabled (as defined by the Tax Code)
> You have died
> You have separated from service with the plan sponsor at or after age 55
> The distribution is rolled over into another plan of the same type or to an
IRA in accordance with the Tax Code
> 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 you and your beneficiary. Also, if a 401 or 403(b) plan, you
must have separated from service with the plan sponsor.
In addition, the penalty tax does not apply for the amount of distribution
equal to unreimbursed medical expenses you incur that qualify for a deduction
under the Tax Code.
IRA. In general, except for the exception relating to separation from service
with the plan sponsor at or after age 55, the exceptions listed above for 401
and 403(b) plans also apply to distributions from an IRA. 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.
Non Qualified Contract. Generally, you or a beneficiary may elect not to have
tax withheld from distributions.
401 and 403(b) Plans. Generally, you or a beneficiary may elect not to have tax
withheld from certain distributions. However, if the distribution is an
eligible rollover distribution (see "Taxation of Distributions" in this
section) and the amount is not directly rolled over, the distribution is
subject to mandatory 20% federal income tax withholding.
IRA. 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 on the individual's
citizenship, the country of domicile and treaty status.
Rules Specific to Certain Plans
Code Section 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).
25
<PAGE>
> Restrictions on Distributions. Tax Code section 403(b)(11) restricts the
distribution under 403(b) contracts of the following:
o Salary reduction contributions made after December 31, 1988
o Earnings on those contributions
o 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.
Code Section 408(b) IRAs. Tax Code section 408(b) permits eligible individuals
to contribute to a traditional Individual Retirement Annuity (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.
> 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.
> 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.
Non Qualified Contracts
Non-Natural Holders of a Non Qualified Contract. If the contract holder is not
a natural person, a non qualified 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. This rule does not apply to an
immediate annuity which is defined in the same way as for penalty tax purposes.
(See "10% Penalty Tax--Non Qualified Contract" above.) Therefore, if you elect
an increasing annuity or elect to receive an early withdrawal of all or a
portion of the value of any remaining payments, you should consult with a tax
advisor to determine how this will affect your tax liability. 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.
Diversification
Tax Code section 817(h) requires that in a non qualified contract the
investments of the funds be "adequately diversified" in accordance with
Treasury Regulations in order for the contracts to qualify as annuity contracts
under federal tax law. The separate account, through the funds, intends to
comply with the diversification requirements prescribed by the Treasury in Reg.
Sec. 1.817-5, which affects how the funds' assets may be invested.
Assignment of Right to Payments
A transfer of the right to payments under a non qualified contract or the
exchange of a contract may result in tax consequences. Generally, if you direct
payment to another party, the payments will be tax reported to you. Anyone
contemplating any such assignment or exchange should contact a tax adviser
regarding the potential tax effects of such a transaction.
26
<PAGE>
Delay of Start Date
If you have elected to delay your annuity starting date, as defined below, and
you die before the annuity starting date, specific rules for payment of any
death benefit apply.
The annuity starting date is defined by the Tax Code to mean the first day of
the period (month, quarter, half year, year depending on whether payments will
be made monthly, quarterly, semi-annually or annually) which ends on the date
of the first annuity payment.
A delayed annuity starting date occurs any time a monthly payment begins later
than one month, a quarterly payment begins later than three months or a
semi-annual payment begins later than six months from date of purchase. For
example, if you purchase the contract on June 1 with monthly payments to begin
October 1, your annuity starting date is September 1, and would be considered a
delayed annuity starting date.
If you die before a delayed annuity starting date, the entire interest in the
account must be paid within five years of the date of death, or payments may be
made over the life or over a period not extending beyond the life expectancy of
the beneficiary or payee, as applicable, provided such payments begin not later
than one year after the date of death. This rule does not apply if the
beneficiary or payee is your spouse.
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 contracts. 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 contracts. 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
- --------------------------------------------------------------------------------
The Company
Aetna Life Insurance and Annuity Company (the Company, we, us) issues the
contracts described in this prospectus and is responsible for providing each
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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 policies and variable
annuity contracts. 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. 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 contracts are
obligations of the Company.
Performance Reporting
We may illustrate the hypothetical values of income payments made from each of
the subaccounts over certain periods of time based on historical net asset
values of the funds. These numbers will reflect the mortality and expense risk
charge, the administrative expense charge (if any), any applicable guaranteed
minimum income charge and the advisory fees and other expenses of the funds.
We may also advertise different types of historical performance for the
subaccounts including:
>Standardized average annual total returns
>Non-standardized average annual total returns
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, request a Statement of Additional
Information at the number listed in "Contract Overview--Questions."
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 subaccount over the
most recent one, five and ten-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. We include all recurring
charges during each period (e.g., mortality and
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<PAGE>
expense risk charges, administrative expense charges (if any), any applicable
guaranteed minimum income charges and any applicable early withdrawal charges).
Non-Standardized Average Annual Total Returns. We calculate non-standardized
average annual total returns in a similar manner as that stated above, except
we do not include the deduction of any applicable early withdrawal charges. 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.
Distribution
The Company acts as the Principal Underwriter for the securities sold by this
prospectus, and as the distributor of the contracts.
Compensation will be paid to broker-dealers who sell the contracts. Broker-
dealers will be paid commissions up to an amount currently equal to 7.0% of
payment to a contract or as a combination of a certain percentage amount of
payments to a contract at time of sale and a trail commission as a percentage
of assets. Under the latter arrangement, commission payments may exceed 7.0% of
payments to the contract over the life of the contract. In limited
circumstances, we also pay certain of these professionals compensation,
overrides or reimbursement for expenses associated with the distribution of the
contract. At times the Company may offer certain distributors an enhanced
commission for a limited period of time. In addition, some sales personnel may
receive various types of non-cash compensation such as special sales
incentives, including trips and educational and/or business seminars.
Supervisory and other management personnel of the Company may receive
compensation that will vary based on the relative profitability to the Company
of the funding options you select. Funding options that invest in funds advised
by the Company or its affiliates are generally more profitable to the Company.
We pay these commissions, fees and related distribution expenses out of any
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.
The names of the broker-dealer and the registered representative responsible
for your contract are set forth on your application. Commissions and sales
related expenses are paid by the Company and are not deducted from your payment
to the contract. To the extent that the early withdrawal charge is insufficient
to cover the actual costs of distribution, the Company may use any of its
corporate assets, including any profit from the mortality and expense risk
charge, to make up any difference.
Transfer of Ownership
Ownership of the contract may be changed to the extent permitted by law. You
should immediately notify the Company, in writing, of any change in ownership.
No such ownership change will be binding until such notification is received
and recorded at our Home Office. Aetna reserves the right to reject transfer or
assignment to a non-natural person.
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Payment Delay or Suspension
We reserve the right to suspend or postpone the date of any payment of benefits
or values under the following circumstances: (a) when the New York Stock
Exchange is closed (except customary holidays or weekends); (b) when trading on
the New York Stock Exchange is restricted; (c) 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 determine the value of the subaccount's assets; (d) during any other periods
the SEC permits 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.
Voting Rights
The Company is the legal owner of the shares of the funds. However, we believe
that when a fund solicits proxies in conjunction with a vote of shareholders,
we are required to obtain from you and other owners instructions as to how to
vote those shares. When we receive those instructions, we will vote all of the
shares we own in proportion to those instructions. This will also include any
shares that the Company owns on its own behalf. Should we determine that we are
no longer required to comply with the above, we will vote the shares in our own
right.
Contract Modification
We reserve the right to modify the contract to meet the requirements of state
or federal laws or regulations. We will notify you in writing of any changes.
Legal Matters And Proceedings
We know of no material legal proceedings pending to which the separate account
or the Company is a party or which would materially affect the separate
account. The validity of the securities offered by this prospectus has been
passed upon by Counsel to the Company.
Financial Statements
The consolidated financial statements of the Company and the financial
statements of the separate account have been included in the Statement of
Additional Information (SAI). Request an SAI at the number listed in "Contract
Overview--Questions."
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
computer systems and applications to conduct its business. Aetna has developed
and is currently executing a comprehensive risk-based plan designed to make its
mission-critical information technology (IT) systems and embedded systems Year
2000 ready. The plan for IT systems covers five stages including (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 stage. The remediation of mission-
critical IT systems was completed by year end 1998. Testing of all mission-
critical IT systems is underway with Year 2000 approval targeted for completion
by mid-1999. The costs of these efforts will not affect the separate account.
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<PAGE>
The Company, its affiliates and the mutual funds that serve as investment
options for the separate account also have relationships with investment
advisers, broker-dealers, transfer agents, custodians or other securities
industry participants or other service providers that are not affiliated with
Aetna. Aetna, including the Company, has initiated communication with its
critical external relationships to determine the extent to which Aetna may be
vulnerable to such parties' failure to resolve their own Year 2000 issues.
Aetna and the Company have assessed and are prioritizing responses in an
attempt to mitigate risks with respect to the failure of these parties to be
Year 2000 ready. There can be no assurance that failure of third parties to
complete adequate preparations in a timely manner, and any resulting systems
interruptions or other consequences, would not have an adverse effect, directly
or indirectly, on the separate account, including, without limitation, its
operation or the valuation of its assets and units.
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. A list of the contents of
the SAI is set forth below:
General Information and History
Variable Annuity Account B
Offering and Purchase of Contract
Performance Data
Income Payments
Sales Material and Advertising
Independent Auditors
Financial Statements of the Separate Account
Financial Statements of the Company
Request an SAI by calling the Company at the number listed in "Contract
Overview--Questions."
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<PAGE>
Appendix I
Fixed Dollar Option
- --------------------------------------------------------------------------------
The following summarizes material information concerning the fixed dollar
option. You may choose to allocate all or a portion of your purchase payment to
the fixed dollar option. If you choose the fixed dollar option, your income
payments will generally remain fixed as specified in your contract over the
term of the contract. Your fixed payment may vary due to factors including your
selection of an increasing annuity or your use of a right to withdraw. In
certain cases, you may elect a right to withdraw any remaining guaranteed
payments, (see "Withdrawals" in this appendix). Amounts allocated to the fixed
dollar option are held in the Company's general account that supports general
insurance and annuity obligations.
Interests in the fixed dollar option have not been registered with the SEC in
reliance upon exemptions under the Securities Act of 1933, as amended.
Disclosure in this prospectus regarding the fixed dollar option may, however,
be subject to certain generally applicable provisions of the federal securities
laws relating to the accuracy and completeness of such statements. Disclosure
in this appendix regarding the fixed dollar option has not been reviewed by the
SEC.
Payment Options
All of the payment options described under "Income Payments" in this prospectus
are available for the fixed dollar option. If you allocate all or a portion of
your purchase payment to the fixed dollar option, you may also elect one of the
following features in connection with your fixed income payments:
(a) A Cash Refund Feature. (Only available if you select 100% fixed payments.)
With this feature, if the annuitant or both annuitants (as applicable)
die, then the beneficiary will receive a lump sum payment equal to the
purchase payment allocated to the fixed dollar option less any premium tax
and less the total amount of fixed income payments paid prior to such
death. The cash refund feature may be elected only with a "life income" or
"life income-two lives" payment option that has no reduction in payment to
the survivor, see "Income Payments--Payment Options." You may not elect a
right to withdraw or elect an increasing annuity with this feature.
(b) An Increasing Annuity. (Only available if you select 100% fixed payments.)
With this feature you may elect for your payments to increase by either
one, two, or three percent, compounded annually. The higher your
percentage, the lower your initial payment will be. This is available with
any payment option, except for those with a reduction in payment to the
survivor, see "Income Payments--Payment Options." You may not elect a
right to withdraw or elect the cash refund feature with an increasing
annuity. The feature is not available under contracts purchased in
conjunction with Section 457 deferred compensation plans.
Fixed Income Payment Amounts
The amount of each payment depends on (1) the purchase payment that you
allocate to the fixed dollar option, less any premium tax, and (2) the payment
option and features chosen.
Withdrawals
Withdrawal Amount--Lifetime Payment Options. If you select a lifetime payment
option with a right to withdraw, the withdrawal amount available from any fixed
portion of remaining guaranteed payments is equal to the present value of the
remaining fixed portion of guaranteed payments calculated using the contract
rate adjusted by the change in the ten year on-the-run Treasury rate from your
contract effective date to the date we calculate the withdrawal amount. Any
applicable early withdrawal charge will be deducted.
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Withdrawal Amount--Nonlifetime Payment Options. If you select a nonlifetime
payment option with a right to withdraw, the withdrawal amount available from
any fixed portion of remaining guaranteed payments is equal to the present
value of the remaining fixed portion of guaranteed payments calculated using
the adjusted contract rate. The calculation is presented below. Any applicable
early withdrawal charge will be deducted.
The adjusted contract rate equals (Rate of Return) + WY - IY, where:
Rate of Return is the fixed annuity present value interest rate shown in your
contract
WY is the withdrawal yield
IY is the issue yield
WY is determined as follows:
(1) WY is the average of the yields, as published in the Wall Street Journal on
the Friday before the date of the withdrawal, of the three (or more if the
Company deems necessary) noncallable, noninflation adjusted Treasury Notes
or Bonds maturing on or closest to the withdrawal duration date.
(2) The withdrawal duration date is the date (month and year) obtained when the
withdrawal duration is added to the date of the withdrawal.
(3) Withdrawal duration equals 1 plus the number of whole years from the date
of the withdrawal until the final guaranteed payment is due, divided by 2.
Any resulting fraction will be rounded up to the next whole number.
IY is determined as follows:
(1) IY is the average of the yields, as published in the Wall Street Journal on
the Friday before the contract effective date shown in your contract, of
the three (or more if the Company deems necessary) noncallable,
noninflation adjusted Treasury Notes or Bonds maturing on or closest to
the issue duration date.
(2) The issue duration date (month and year) is obtained when the issue
duration is added to the contract effective date.
(3) Issue duration equals 1 plus the number of whole years from issue until the
final payment is due, divided by 2. Any resulting fraction will be rounded
up to the next whole number.
Early Withdrawal Charge
Withdrawals may be subject to an early withdrawal charge. The charge is a
percentage of the amount that you withdraw. The percentage will be determined
by the early withdrawal charge schedule applicable to your contract:
Subject to state approval, Schedule A applies to contracts issued on or after
May 3, 1999.
<TABLE>
<CAPTION>
Schedule A
Number of Years from
Contract Effective Date* Early Withdrawal Charge
- ------------------------------- ------------------------
<S> <C>
1 or more, but fewer than 2 6%
2 or more, but fewer than 3 5%
3 or more, but fewer than 4 4%
4 or more, but fewer than 5 3%
5 or more, but fewer than 6 2%
6 or more, but fewer than 7 1%
7 or more 0%
</TABLE>
Schedule B applies to contracts issued prior to May 3, 1999. It also applies to
contracts issued on or after May 3, 1999 in states where Schedule A is not
approved as of the contract effective date.
<TABLE>
<CAPTION>
Schedule B
Number of Years from
Contract Effective Date* Early Withdrawal Charge
- ------------------------------- ------------------------
<S> <C>
1 or more, but fewer than 2 5%
2 or more, but fewer than 3 4%
3 or more, but fewer than 4 4%
4 or more, but fewer than 5 3%
5 or more, but fewer than 6 2%
6 or more, but fewer than 7 1%
7 or more 0%
</TABLE>
*For participants under a group contract, use "Number of Years from Certificate
Effective Date."
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The early withdrawal charge, in effect, is a deferred sales charge imposed to
reimburse the Company for unrecovered acquisition and distribution costs.
Reduction or Elimination of the Early Withdrawal Charge. We may reduce or
eliminate the early withdrawal charge when sales of the contract are made to
individuals or a group of individuals in such a manner that results in savings
of sales expenses. The entitlement to such a reduction in the early withdrawal
charge will be based on one or more of the following criteria:
(a) The size and type of group of individuals to whom the contract is offered
(b) The type and frequency of administrative and sales services to be provided
(c) Whether there is a prior or existing relationship with the Company such as
being an employee of the Company or one of its affiliate; receiving
distributions or making internal transfers from other contracts issued by
the Company or one of its affiliates; or making transfers of amounts held
under qualified plans sponsored by the Company or an affiliate
Any reduction or elimination of the early withdrawal charge will not be
unfairly discriminatory against any person.
Death Benefit
If the annuitant or both annuitants, as applicable, die before all guaranteed
payments are paid, payments will continue to the beneficiary in the manner
stated in your contract.
Payment of Death Benefit. Any death benefit will be paid in the form specified
in the contract and will be distributed at least as rapidly as under the method
of distribution in effect upon the date of death. See "Taxation" for rules that
apply if you have elected to delay your payment start date under a non
qualified annuity and you die before the annuity starting date. A lump-sum
payment of any death benefit may be requested within six months following the
date of death. If a lump-sum payment is requested, no early withdrawal charge
is applied and payment will be sent within seven days following our receipt of
request in good order. A lump-sum payment may be requested at anytime (even
after the six month period) if you had elected the right to withdraw. If a cash
refund feature was elected, the death benefit will be paid in one sum to the
beneficiary.
If the contract holder who is not the annuitant dies, income payments will
continue to be paid to the payee in the form specified in the contract. If no
payee survives the death of the contract holder, income payments will be made
to the annuitant. Such payments will be paid at least as rapidly as under the
method of distribution then in effect.
Death Benefit Amount. If you elect a right to withdraw, the death benefit value
will be determined as described under "Withdrawal Amount" in this appendix. No
early withdrawal charge will apply. If the contract is issued with guaranteed
payments and with no right to withdraw, the rate used to determine the value of
the remaining guaranteed payments will be the fixed annuity present value
interest rate shown in the contract.
The value of the death benefit will be determined as of the next valuation
following the Company's receipt at its Home Office of proof of death acceptable
to us and a request for payment in good order.
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Appendix II
Description of Underlying Funds
- --------------------------------------------------------------------------------
The investment results of the funds described below are likely to differ
significantly and there is no assurance that any of the funds will achieve
their respective investment objectives. Except where otherwise noted, all of
the funds are diversified, as defined in the 1940 Act.
Aetna Ascent VP
Investment Objective
Seeks to provide capital appreciation. The Portfolio is designed for investors
who have an investment horizon exceeding 15 years and who have a high level of
risk tolerance.
Policies
Invests assets within specified maximum percentage ranges and adjusts the
allocation mix in response to market trends and indicators:
>Equity securities are chosen on the basis of their potential for capital
appreciation.
>Fixed income securities may include obligations of the U.S. and foreign
governments as well as obligations of corporations and high-yield bonds.
>Money market investments are high quality and present minimal credit risk.
The benchmark portfolio is 80 percent equities and 20 percent fixed income
under neutral market conditions.
Risks
Equity securities are subject to a decline in the stock market or in the value
of the company, while debt securities may be affected by changes in general
interest rates and in the creditworthiness of the issuer. High-yield bonds have
additional credit risks, including lack of liquidity, greater likelihood of
default and increased sensitivity to difficult economic and corporate
developments.
Foreign securities involve currency and other special risks not present in
domestic securities. Real estate securities may be subject to the same risks
associated with direct ownership of real estate.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Balanced VP, Inc.
Investment Objective
Seeks to maximize investment return, consistent with reasonable safety of
principal by investing in a diversified portfolio of one or more of the
following asset classes: stocks, bonds, and cash equivalents, based on the
investment adviser's judgment of which of those sectors or mix thereof offers
the best investment prospects.
Policies
Assets are allocated among common and preferred stocks, bonds, U.S. Government
securities and derivatives, and money market instruments. The Fund may also
invest in when-issued or delayed-delivery securities. The Fund generally will
maintain at least 25 percent of its total assets in fixed income securities.
Risks
There can be no assurance that the investment adviser will always allocate
assets to the best performing sectors. The Fund's performance would suffer if a
major proportion of its assets were allocated to stocks in a declining market
or, similarly, if a major portion of its assets were allocated to bonds in a
time of adverse interest rate movement. High-yield bonds involve additional
investment risk. Foreign securities may involve certain additional risks. Such
risks include: currency fluctuations and related currency conversion costs;
less liquidity; price or income volatility; less government supervision and
regulation of foreign stock exchanges, brokers and listed
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<PAGE>
companies; adverse foreign political and economic developments; different
accounting procedures and auditing standards; and less publicly available
information about foreign issuers.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Income Shares d/b/a Aetna Bond VP
Investment Objective
Seeks to maximize total return, consistent with reasonable risk, through
investments in a diversified portfolio consisting primarily of debt securities.
Policies
The Fund will invest at least 65 percent of its total assets in debt
securities. It is anticipated that the portfolio's effective average maturity
will normally be between three and ten years. The Fund will normally invest at
least 70 percent of its assets in one or more of the following: a) debt
securities or obligations that are rated at the time of purchase within the
four highest categories assigned by Moody's Investors Service, Inc., Standard &
Poor's Corporation, or other rating agencies, or, if not rated, that are
considered by the investment adviser to be of comparable quality; b) securities
of, or guaranteed by, the U.S. Government, its agencies or instrumentalities;
c) marketable securities or obligations of, or guaranteed by, foreign
governments; d) commercial paper and other short-term investments having a
maturity of less than one year that are considered by the investment adviser to
be investment grade; and, e) cash or cash equivalents. May invest up to 30
percent of its total assets in high-yield bonds. May invest up to 25 percent of
its total assets in foreign debt and/or equity securities.
Risks
The value of debt securities may be affected by changes in general interest
rates. High-yield bonds tend to offer higher yields than investment-grade
bonds, but additional risks are associated with them. Foreign securities may
involve certain additional risks. Such risks include: currency fluctuations and
related currency conversion costs; less liquidity; price or income volatility;
less government supervision and regulation of foreign stock exchanges, brokers
and listed companies; adverse foreign political and economic developments;
different accounting procedures and auditing standards; and less publicly
available information about foreign issuers.
Investment Adviser: Aeltus Investment Management Inc.
Aetna Crossroads VP
Investment Objective
Seeks to provide total return (i.e., income and capital appreciation, both
realized and unrealized). The Portfolio is designed for investors who have an
investment horizon exceeding ten years and who have a moderate level of risk
tolerance.
Policies
Invests assets within specified maximum percentage ranges and adjusts the
allocation mix in response to market trends and indicators:
> Equity securities are chosen on the basis of their potential for capital
appreciation.
> Fixed income securities may include obligations of the U.S. and foreign
governments as well as obligations of corporations and high-yield bonds.
> Money market investments are high quality and present minimal credit risk.
The benchmark portfolio is 60 percent equities and 40 percent fixed income
under neutral market conditions.
Risks
Equity securities are subject to a decline in the stock market or in the value
of the company; debt securities may be affected by changes in general interest
rates and in the creditworthiness of the issuer. High-yield bonds have
additional credit risks. International securities involve currency and other
special risks not present in
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<PAGE>
domestic securities. Real estate securities may be subject to the same risks
associated with direct ownership of real estate.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Growth VP
Investment Objective
Seeks growth of capital through investment in a diversified portfolio of common
stocks and securities convertible into common stocks believed to offer growth
potential.
Policies
Normally invests at least 65 percent of its total assets in common stocks that
have significant potential for capital growth. May also invest in convertible
and nonconvertible preferred stocks. May buy and sell put and call options, and
stock index futures and options. May enter into repurchase agreements and
invest up to 25 percent of its total assets in foreign securities. Will not
invest more than 15 percent of the total value of its assets in high-yield
bonds.
Risks
Equity securities are subject to a decline in the stock market or in the value
of the company and preferred stocks have price risk and some interest rate and
credit risk. Foreign investing involves certain additional risks not present in
U.S. securities. Such risks may include: currency fluctuations and related
currency conversion costs: less liquidity; price or income volatility; less
government supervision and regulation of foreign stock exchanges, brokers and
listed companies; adverse foreign political and economic developments;
different accounting procedures and auditing standards; and less publicly
available information about foreign issuers. High-yield bonds may provide a
higher return, but have added risk. Derivatives may experience greater price
swings and may be less liquid than other securities.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Variable Fund d/b/a Aetna Growth and Income VP
Investment Objective
Seeks to maximize total return through investments in a diversified portfolio
of common stocks and securities convertible into common stock. It is
anticipated that capital appreciation and investment income will both be major
factors in achieving total return.
Policies
The Fund will invest principally in common stocks and securities convertible
into common stock that the investment adviser believes have significant
potential for capital appreciation and/or investment income. May invest up to
25 percent of its total assets in foreign equity securities. The Fund may
invest in nonconvertible preferred stocks, debt securities, rights and
warrants; the Fund may maintain a reserve of cash and high-grade, short-term
debt securities and the Fund may purchase securities on a when-issued or
delayed-delivery basis.
Risks
Share prices will fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. Foreign
securities may involve certain additional risks. Such risks include: currency
fluctuations and related currency conversion costs; less liquidity; price or
income volatility; less government supervision and regulation of foreign stock
exchanges, brokers and listed companies; adverse foreign political and economic
developments; different accounting procedures and auditing standards; and less
publicly available information about foreign issuers.
Investment Adviser: Aeltus Investment Management, Inc.
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Aetna Index Plus Large Cap VP
Investment Objective
Seeks to outperform the total return performance of publicly traded common
stocks represented in the Standard & Poor's 500 Composite Stock Price Index
(S&P 500).
Policies
The Portfolio attempts to be fully invested in common stocks and normally
invests at least 90 percent of its assets in certain common stocks represented
in the S&P 500. Portfolio managers will attempt to outperform the S&P 500 by
creating a portfolio that has similar market risk characteristics to the S&P
500, but will use a disciplined quantitative analysis to identify those stocks
having the greatest likelihood of either outperforming or underperforming the
market.
Risks
Because the Portfolio invests in common stocks, it is subject to the
possibility that common stock prices will decline over short or even extended
periods. The U.S. stock market tends to be cyclical, with periods when stock
prices generally rise and periods when prices generally decline. There is no
assurance that the Portfolio's objectives will be met.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna International VP
Investment Objective
Seeks long-term capital growth primarily though investment in a diversified
portfolio of common stocks principally traded in countries outside of the
United States. The Portfolio will not target any given level of current income.
Policies
Invests at least 65 percent of its total assets among securities principally
traded in three or more countries outside of North America. The Portfolio will
invest primarily in equity securities, including securities convertible into
stocks. The Portfolio will invest in a broad spectrum of companies and
industries. Further, from time to time, the Portfolio may hold up to 10 percent
of its total assets in long-term debt securities with an S&P or Moody's rating
of AA/Aa or above, or, if unrated, are considered by the investment adviser to
be of comparable quality. Additionally, the Portfolio may invest in options,
futures, enter into repurchase agreements and engage in currency hedging.
Risks
Equity securities are subject to a decline in the stock market or in the value
of the company. Investments in foreign securities involve certain additional
risks. Such risks may include: currency fluctuations and related currency
conversion costs; less liquidity; price or income volatility; less government
supervision and regulation of foreign stock exchanges, brokers and listed
companies; adverse foreign economic and political developments; different
accounting procedures and auditing standards; and less publicly available
information about foreign issuers. Derivatives may experience greater price
swings and may be less liquid than other securities.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Legacy VP
Investment Objective
Seeks to provide total return consistent with preservation of capital. The
Portfolio is designed for investors who have an investment horizon exceeding
five years and who have a low level of risk tolerance.
Policies
Invests assets within specified maximum percentage ranges and adjusts the
allocation mix in response to market trends and indicators:
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<PAGE>
> Equity securities are chosen on the basis of their potential for capital
appreciation.
> Fixed income securities may include obligations of the U.S. and foreign
governments as well as obligations of corporations and high-yield bonds.
> Money market investments are high-quality and present minimal credit risk.
The benchmark portfolio is 40 percent equities and 60 percent fixed income
under neutral market conditions.
Risks
Equity securities are subject to a decline in the stock market or value of the
issuer; debt securities may be affected by changes in general interest rates
and creditworthiness of the issuer. High-yield bonds have additional credit
risks. International securities involve currency and other special risks not
present in domestic securities. Real estate securities may be subject to the
same risks associated with direct ownership of real estate.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Variable Encore Fund d/b/a Aetna Money Market VP
Investment Objective
Seeks to provide high current return, consistent with preservation of capital
and liquidity, through investment in high-quality money market instruments.
Policies
The Fund will Invest primarily in: a) money market instruments that have a
maturity at the time of purchase, of 397 days or less (762 days or less for
U.S. government securities), and b) debt securities with a longer maturity, if
the Fund has the absolute right to sell such securities back to the issuer for
at least the face amount of the debt obligation within 397 days after the date
of purchase. At least 95 percent of total Fund assets are invested in
high-quality securities (those receiving the highest credit rating by any two
rating agencies or one if only one agency has rated the security). May invest
up to 25 percent of its total assets in foreign securities.
Risks
Yield will fluctuate with interest rates. The Fund is neither insured nor
guaranteed by the U.S. government. Foreign securities may involve certain
additional risks. Such risks include: currency fluctuations and related
currency conversion costs; less liquidity; price or income volatility; less
government supervision and regulation of foreign stock exchanges, brokers and
listed companies; adverse foreign political and economic developments;
different accounting procedures and auditing standards; and less publicly
available information about foreign issuers.
An investment in the Fund is neither insured nor guaranteed by the U.S.
Government.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Real Estate Securities VP
Investment Objective
Seeks maximum total return primarily through investment in a diversified
portfolio of equity securities issued by real estate companies, the majority of
which are real estate investment trusts (REITs).
Policies
Normally invests at least 65 percent of total assets in income-producing equity
securities of publicly-traded companies "principally engaged" in the real
estate industry, including those companies that, at the time of purchase,
derive a significant proportion (at least 50 percent) of their revenues or
profits from real estate operations or related services. The Portfolio may
invest in convertible securities and preferred stock. Additionally, the
Portfolio may invest in options and futures, enter into repurchase agreements,
and invest up to 25 percent of its total assets in foreign securities. The
Portfolio will not invest more than 15 percent of the total value of its assets
in high-yield bonds.
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<PAGE>
Risks
There are a number of risk factors to be considered when investing in Real
Estate Securities VP. Derivatives may experience greater price swings than
other securities and may be less liquid than other securities. Risks involved
in futures contracts include, but are not limited to: transactions to close out
futures contracts may not be able to be effected at favorable prices; possible
reduction in a fund's total return and yield; possible reduction the value of
the futures instrument, and potential losses in excess of the amount invested
in the futures contracts themselves. Writing call options involves the risk of
not being able to effect closing transactions at favorable prices or to
participate in the appreciation of the underlying securities. Purchasing put
options involves the risk of losing the entire purchase price of the option.
High-yield bonds have additional risks associated with them, including but not
limited to: lack of liquidity; an unpredictable secondary market and a higher
risk of default. Special consideration to an investment in real estate include
those risks associated with the direct ownership of real estate: declines in
the value of real estate, risks related to general and local economic
conditions, over-building and increased competition, increases in property
taxes and operating expenses, changes in zoning laws and other risks particular
to this market. The value of securities of companies which service the real
estate industry may also be affected by such risks.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Small Company VP
Investment Objective
Seeks growth of capital primarily through investment in a diversified portfolio
of common stocks and securities convertible into common stocks of companies
with smaller market capitalizations.
Policies
Normally invests at least 65 percent of its total assets in the common stock of
companies with equity market capitalizations at the time of purchase of $1
billion or less. May also invest in convertible and nonconvertible preferred
stock. The securities of small capitalization companies may be in an early
developmental stage or older companies entering a new stage of growth due to
management changes, new technology, products, or markets. Such companies may
also be undervalued due to poor economic conditions, market decline, or actual
or unanticipated unfavorable developments affecting the companies. May invest
in lower-risk derivatives for hedging and other investment purposes.
Risks
Equity securities are subject to a decline in the stock market or in the value
of the company. Although securities of small capitalization companies tend to
offer greater potential for growth than securities of larger, more established
issuers, there are additional risks associated with them. These include:
limited marketability, more abrupt or erratic market movements than securities
of larger capitalization companies, and less publicly available information
about the issuer. These companies may also be dependent on relatively few
products or services, have limited financial resources and lack of management
depth, and may have less of a track record or historical pattern of
performance. Derivatives may experience greater price swings and may be less
liquid than other securities.
Investment Adviser: Aeltus Investment Management, Inc.
AIM V.I. Capital Appreciation Fund
Investment Objective
Seeks capital appreciation through investments in common stocks, with emphasis
on medium-sized and smaller emerging growth companies.
Policies
AIM will be particularly interested in companies that are likely to benefit
from new and innovative products, services or processes that should enhance
such companies' prospects for future growth in earnings. Any income received
from securities held by the Fund will be incidental. The Fund's portfolio is
primarily comprised of securities of two bias
40
<PAGE>
categories of companies: (1) "core" companies, which AIM considers to have
experienced above-average and consistent long-term growth in earnings and to
have excellent prospects for outstanding future growth, and (2) "earnings
acceleration" companies which AIM believes are currently enjoying a dramatic
increase in profits.
Risks
There is no guarantee that the Fund's objective will be met. The market prices
of many of the securities purchased and held by the Fund may fluctuate widely.
Investing in equity securities of small-and-medium-sized companies may involve
greater risk than associated with investing in more established companies.
Equity securities are subject to a decline in the stock market or in the value
of the issuer, and preferred stocks have price risk and some credit risk. The
Fund may invest in convertible securities, which may be subject to redemption
at the option of the issuer at a price established in the convertible
security's governing instrument. The Fund may invest in foreign securities.
Investments in securities of foreign issuers or foreign securities involve
risks not present in domestic markets, including: currency fluctuations and
related currency conversion costs, political instability, expropriation or
confiscatory taxation and limited government regulations, accounting and
auditing processes; and market due to a lesser trade volume than is generally
expected of domestic markets.
Investment Adviser: AIM Advisors, Inc.
AIM V.I. Growth Fund
Investment Objective
Seeks growth of capital principally through investment in common stocks of
seasoned and better capitalized companies considered by AIM to have strong
earnings momentum. Current income will not be an important criterion of
investment selection, and any such income should be considered incidental.
Policies
The Fund's portfolio is primarily comprised of securities of two basic
categories: (1)"core" companies, which AIM considers to have experienced
above-average and consistent long-term growth in earnings and to have excellent
prospects for outstanding future growth, and (2) "earnings acceleration"
companies which Fund management believes are currently enjoying a dramatic
increase in profits.
Risks
There is no guarantee that the Fund will achieve its objective. Because the
Fund invests in common stocks, it is subject to the possibility that common
stock prices will decline over short or even extended periods. The U.S. stock
market tends to be cyclical, with periods when prices generally rise, and
periods when prices generally decline. The Fund may invest in convertible
securities, which may be subject to redemption at the option of the issuer at a
price established in the convertible security's governing instrument. The Fund
may invest in foreign securities. Investments in foreign securities involve
risks not present in domestic markets, including: currency fluctuations and
related currency conversion costs, political and economical risk due to less
stringent government regulations, accounting and auditing processes; and market
risk due to a lesser trade volume than is generally expected of domestic
markets.
Investment Adviser: AIM Advisors, Inc.
AIM V.I. Growth and Income Fund
Investment Objective
Seeks growth of capital, with current income as a secondary objective. Although
the amount of the Fund's current income will vary from time to time, it is
anticipated that the current income realized by the Fund will generally be
greater than that realized by the mutual funds whose sole objective is growth
of capital.
Policies
The Fund seeks to achieve its objective by generally investing at the least 65%
if its net assets in stocks of companies believed by management to have the
potential for the above-average growth in revenues and earnings. The Fund
generally will also invest at least 80% of its assets in securities which pay
income to the Fund.
41
<PAGE>
Risks
There is no guarantee that the Fund will achieve its objective. Equity
securities are subject to a decline in the stock market or in the value of the
issuer. The U.S. stock market tends to be cyclical, with periods when stock
prices generally rise and periods when prices generally decline. The value of
debt securities may be affected by changes in general interest rates and in the
creditworthiness of the issuer. The Fund may invest in convertible securities,
which may be subject to redemption at the option of the issuer at a price
established in the convertible security's governing instrument. The Fund may
invest in foreign securities. Investments in securities of foreign issuers or
in foreign securities involve risks not present in domestic markets, including:
currency fluctuation and related currency conversion costs, political and
economic risk due to social or political instability, expropriation or
confiscatory taxation and limited liquidity: regulatory risk due to less
stringent government regulations, accounting and auditing processes; and market
risk due to a lesser trade volume is generally expected to domestic markets.
Investment Adviser: AIM Advisors, Inc.
AIM V.I. Value Fund
Investment Objective
To achieve long-term growth of capital by investing primarily in equity
securities judged by AIM to be undervalued relative to the current or projected
earnings of the companies issuing the securities, or relative to the current
market values of assets owned by the companies issuing the securities, or
relative to the equity market, generally.
Policies
Income as the secondary objective would be satisfied principally from the
income generated by the common stocks, convertible bonds and convertible
preferred stocks that make up the Fund's portfolio. The Fund may also acquire
preferred stocks and debt instruments having prospects for growth of capital.
The primary thrust of AIM's search for undervalued equity securities is in four
categories: (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 which 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 its assets and where
there is no reason to expect realization of this potential in the form of
increased equity values. The Fund may invest up to 15% of its net assets in
securities which are illiquid, and may invest up to 25% if its assets in
foreign securities.
Risks
Investment in equity securities involves certain risks. Equity securities offer
no guaranteed return, and prices will fluctuate. During certain market
conditions, purchases and sales of futures contracts may not completely offset
a decline or rise in the value of the Fund's portfolio. In the futures market,
it may not always be possible to execute a buy or sell order at the desired
price, or to close out an open position due to market conditions, limits on
open positions and/ or daily price fluctuations. Unanticipated price movements
in a futures contract may result in a loss substantially greater than the
Fund's initial investment in the contract. Limitations on the resale of
illiquid securities may have an adverse affect on their marketability, which
may prevent the Fund from disposing of them promptly at reasonable prices.
Investment in the foreign securities carries the following primary risks:
Currency risks due to changing currency exchange rates; political and social
due to political/social instability and other factors; regulatory risk due to
less stringent regulation and government supervision of foreign issuers; and
market risks whereby foreign securities may be less liquid and more volatile
due to lower trading volume and higher transactions costs.
Investment Adviser: AIM Advisors, Inc.
Fidelity Investments Variable Insurance Products Fund-- High Income Portfolio
Investment Objective
Seeks to obtain a high level of current income by investing primarily in
high-yielding, lower-rated, fixed income securities, while also considering
growth of capital.
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<PAGE>
Policies
Invests primarily in all types of income-producing debt securities, preferred
stocks, and convertible securities. The Portfolio normally invests at least 65
percent of its assets in these securities. If consistent with its investment
objectives, the Portfolio may also invest in common stocks, other equity
securities, and debt securities that are not currently paying interest but that
are expected to do so in the future. The Portfolio manager focuses on
assembling a portfolio of income-producing securities that it believes will
provide the best tradeoff between risk and return within the range of
securities that are eligible investments for the Portfolio. The Portfolio may
invest up to 50 percent of its total assets in foreign securities.
Risks
Yield and share price change daily and are based on changes in interest rates,
market conditions, other economic and political news, and on the quality and
maturity of the Portfolio's investments. Lower quality debt securities (also
known as "junk bonds") are considered to have speculative characteristics and
involve greater risk of default or price changes. Foreign securities, foreign
currencies and securities issued by U.S. entities with substantial foreign
operations may involve additional risks. These include political or economic
risks, fluctuations in foreign currencies, withholding or other taxes,
operational risks, increased regulatory burdens, and less stringent investor
protection and disclosure standards of foreign markets.
Investment Adviser: Fidelity Management & Research Company
Janus Aspen Series--Growth Portfolio
Investment Objective
Seeks long-term growth of capital in a manner consistent with the preservation
of capital.
Policies
Invests in common stocks of companies of any size, although it generally
invests in larger, more established issuers. Invests primarily in stocks of
domestic and foreign companies selected for their growth potential. May at
times hold substantial positions in cash equivalents or interest bearing
securities. May invest to a lesser degree in other types of securities
including preferred stocks, warrants, convertible securities, and debt
securities when its portfolio manager perceives an opportunity for capital
growth. Using a "bottom up" approach to building the Portfolio, the portfolio
manager seeks to identify individual companies with earnings growth potential
that may not be recognized by the market at large. Securities are generally
selected without regard to any defined industry sector. Securities are selected
solely for their capital growth potential; investment income is not a
consideration.
Risks
Share prices will fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. Historically,
common stocks have provided greater long-term returns and have entailed greater
short-term risks than other investment choices. Smaller or newer issuers are
more likely to realize more substantial growth as well as suffer more
significant losses than larger or more established issuers. Investments in such
companies can be both more volatile and more speculative. Investments in
foreign securities, including those of foreign governments, involve greater
risks than investing in comparable domestic securities. These risks include
currency, political, economic, regulatory and market risk factors. Risk is
reduced through diversification.
Investment Adviser: Janus Capital Corporation
Janus Aspen Series--Worldwide Growth Portfolio
Investment Objective
Seeks long-term growth of capital in a manner consistent with the preservation
of capital.
Policies
A diversified portfolio that invests primarily in common stocks of foreign and
domestic issuers. Invests worldwide in companies and organizations of any size,
regardless of country of organization or place of principal business
43
<PAGE>
activity. Normally invests in issuers from at least five different countries,
including the United States. May at times invest in fewer than five countries
or even in a single country. May hold substantial positions in cash equivalents
or interest-bearing securities. May invest to a lesser degree in other types of
securities, including preferred stocks, warrants, convertible securities, and
debt securities, when the portfolio manager perceives an opportunity for
growth. May invest up to 35 percent of net assets in high-yield/high-risk
securities (also called "junk bonds"). May invest without limit in foreign
equity and debt securities.
Risks
Stock values may fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. Historically,
common stocks have provided greater long-term returns and have entailed greater
short-term risks than other investment choices. Investment in foreign
securities, including those of foreign governments, involve greater risks than
investing in comparable domestic securities. These include currency, political,
economic, regulatory and market risk factors. High-yield/high-risk securities
are generally more dependent on the ability of the issuer to meet interest and
principal payments (i.e., credit risk). Issuers of high-yield securities may
not be as strong financially as those issuing bonds with higher credit ratings.
They are more vulnerable to real or perceived economic changes, political
changes or other adverse developments.
Investment Adviser: Janus Capital Corporation
Oppenheimer Aggressive Growth Fund
Investment Objective
Seeks to achieve capital appreciation by investing in "growth-type" companies.
Policies
"Growth-type" companies are believed to have relatively favorable long-term
prospects for increasing demand for their goods or services, or to be
developing new products, services, or markets and normally retain a relatively
larger portion of their earnings for research, development, and investment in
capital assets. The Fund will invest no more than 25 percent of its total
assets in foreign securities or in government securities of any foreign country
or in obligations of foreign banks.
Risks
Stock prices will fluctuate. Additional risk is present in growth-type
investments since the price of the security may decline if the anticipated
development fails to occur. Investing in small, unseasoned companies (those
that have been in operation for less than three years, counting the operations
of any predecessors) may have limited liquidity, and the prices of these
securities may be volatile. Foreign securities markets may be less liquid and
more volatile than markets in the U.S. Risks of foreign securities may include
foreign withholding taxation, changes in currency, less publicly available
information, and differences between domestic and foreign legal, auditing,
brokerage and economic standards.
Investment Adviser: OppenheimerFunds, Inc.
Oppenheimer Growth & Income Fund
Investment Objective
Seeks a high total return (which includes growth in the value of its shares as
well as current income) from equity and debt securities.
Policies
Invests primarily in equity and debt securities and focuses on all market
capitalization including small to medium capitalization companies. Equity
investments include common stocks, preferred stocks, convertible securities,
and warrants. Debt securities include bonds, participation interests,
asset-backed securities, private label mortgage backed securities and
collateralized mortgage obligations (CMOs), zero coupon securities, and U.S.
Government obligations. The proportion of equity and fixed income investments
will vary based upon the manager's
44
<PAGE>
evaluation of economic and market trends and perceived relative total
anticipated return from such types of investments. There is no minimum or
maximum percentage of assets that may, at any given time, be invested in either
type of investment. The Fund may invest in foreign securities without limit.
Risks
Changes in overall market movements or interest rates, or factors affecting a
particular industry or issuer can affect the value of the Fund's investments
and their price per share. Equity investments are generally subject to a number
of risks, including the risk that values will fluctuate as a result of changing
expectations for the economy and individual issuers; stocks with small- to
medium-size capitalization may fluctuate more than large capitalization stocks.
Foreign investments are subject to the risk of adverse currency fluctuation and
additional risks and expenses in comparison to U.S. investments.
Investment Adviser: OppenheimerFunds, Inc.
Oppenheimer Strategic Bond Fund
Investment Objective
Seeks a high level of current income principally derived from interest on debt
securities and seeks to enhance such income by writing covered call options on
debt securities.
Policies
Invests principally in lower-rated, high-yield domestic debt securities
(commonly known as "junk bonds"), U.S. Government securities, and foreign
government and corporate debt securities. Under normal circumstances, the
Fund's assets will be invested in each of these three sectors. However,
Strategic Bond Fund may occasionally invest up to 100 percent of its total
assets in any one sector, if, in the manager's judgment, the Fund has the
opportunity to seek a high level of current income without undue risk to
principal. Accordingly, the Fund's investments should be considered
speculative. Distributable income will fluctuate as the Fund's assets are
shifted among the three sectors.
Risks
The higher yields and income sought by Strategic Bond Fund are generally
associated with securities in the lower-rating categories of the established
rating services. Such securities are considered speculative and involve greater
risk than lower-yielding, higher-rated fixed income securities, while providing
higher yields than such securities. Lower-rated securities may be less liquid,
and significant losses could be experienced if a substantial number of other
holders of such securities decide to sell at the same time. Issuers of
lower-rated or unrated securities are generally not as financially secure or
creditworthy as issuers of higher-rated securities.
Investment Adviser: OppenheimerFunds, Inc.
Portfolio Partners MFS Emerging Equities Portfolio
Investment Objective
Seeks to provide long-term growth of capital. Dividend and interest income from
portfolio securities, if any, is incidental to the Portfolio's investment
objective.
Policies
Normally invests at least 80 percent of its assets in common stocks of
companies the subadviser believes are in an early phase of their life cycle,
but that have the potential to become major enterprises. Such companies would
be expected to show earnings growth over time well above the growth rate of the
overall economy and inflation and have the products, technologies, management
and market and other opportunities usually necessary to become more widely
recognized as growth companies. Emerging growth companies can be of any size.
The Portfolio may invest in larger or more established companies whose rates of
earnings growth are expected to accelerate because of special factors or basic
changes in the economic environment. Up to 25 percent of the Portfolio's net
assets may be invested in foreign issuers.
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<PAGE>
Risks
Share prices will fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. Investing in
emerging growth companies involves greater risk than is customarily associated
with investments in more established companies. Such companies may have limited
product lines, markets or financial resources and they may be dependent on one
person's management. In addition, there may be less research available on many
promising small- and medium-sized emerging growth companies, making it more
difficult to find and analyze these companies. The securities of these
companies may have limited marketability and may be subject to more abrupt or
erratic market movements than securities of larger, more established growth
companies or the market averages in general. Foreign investing involves risks
that are different in some respects from investments in the securities of U.S.
issuers. Risks include less availability of information about issuers or
foreign markets, economic and political volatility, and price, interest rate
and currency risk.
Investment Adviser: Aetna Life Insurance and Annuity Company;
Subadviser: Massachusetts Financial Services Company
Portfolio Partners MFS Value Equity Portfolio
Investment Objectives
Seeks capital appreciation. Dividend income, if any, is a consideration
incidental to the Portfolio's objective of capital appreciation.
Policies
While the Portfolio's policy is to invest at least 65 percent of its total
assets in common stocks, it may seek appreciation other types of securities
(such as fixed-income, convertible bonds, convertible preferred stocks and
warrants) when relative values make such purchases appear attractive, either as
individual issues or as types of securities in certain economic environments.
The Portfolio may invest in high-yield fixed-income (below investment grade),
but will invest no more than 25 percent of its net assets in these securities.
The Portfolio may also invest up to 50 percent (but generally expects to invest
not more than 25 percent) of its net assets in foreign securities.
Risks
Share prices will fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. Historically,
common stocks have provided greater long-term returns and have entailed greater
short-term risks than other investment choices. Lower-rated bonds have
speculated characteristics. Changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than in the case of higher-grade securities. Investing in
securities of foreign issuers generally involves risks not ordinarily
associated with investing in securities of domestic issuers. These include less
availability of information about issuers or foreign markets, economic and
political volatility, and price, interest rate and currency risk.
Investment Adviser: Aetna Life Insurance and Annuity Company;
Subadviser: Massachusetts Financial Services Company
Portfolio Partners Scudder International Growth Portfolio
Investment Objective
Seeks long-term growth of capital primarily through a diversified portfolio of
marketable foreign equity investments.
Policies
Invests in companies, wherever organized, that do business primarily outside
the United States. The Portfolio intends to diversify investments among several
countries and to have represented in its holdings business activities in not
less than three different countries. Does not intend to concentrate investments
in any particular industry. Invests primarily in equity securities of
established companies, listed on foreign exchanges, that the subadviser
believes have favorable characteristics. Although the Portfolio will consist
primarily of equity securities, it may also invest in fixed-income securities
of foreign governments and companies.
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<PAGE>
Risks
Share prices will fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. Historically,
common stocks have provided greater long-term returns and have entailed greater
short-term risks than other investment choices. Investing in foreign securities
may involve a greater degree of risk than investing in domestic securities.
Additional risk factors include the possibility of exchange rate fluctuations,
less publicly available information, more volatile markets, less securities
regulation and less favorable tax provisions.
Investment Adviser: Aetna Life Insurance and Annuity Company;
Subadviser: Scudder Kemper Investments, Inc.
Portfolio Partners T. Rowe Price Growth Equity Portfolio
Investment Objective
Seeks long-term growth of capital and, secondarily, to increase dividend income
by investing primarily in common stocks of well established growth companies.
Policies
Under normal market conditions the Portfolio invests at least 65 percent of its
total assets in common stocks issued by a diversified group of growth
companies. The companies in which the Portfolio invests normally (but not
always) pay dividends, which are generally expected to rise in future years as
earnings increase. Most of its assets will be invested in U.S. common stocks.
However, the Portfolio may invest in foreign securities and convertible
securities and warrants, when the subadviser considers such investments
consistent with the Portfolio's investment objective and policies.
The Portfolio generally seeks to invest in securities of companies that satisfy
one or more of several criteria established by the subadviser. For example, the
subadviser generally seeks companies with superior growth in earnings and cash
flow; the ability to sustain earnings momentum even during economic slowdowns
by operating in so-called "fertile fields" (areas where earnings and dividends
can outpace inflation and the overall economy); and the capability to expand
even during times of slow growth. The subadviser generally favors companies
whose profits increase due to economic factors rather than one-time events such
as lower taxes. The Portfolio may engage in strategic transactions, which may
include the use of derivatives.
Risks
Share prices will fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. Historically,
common stocks have provided greater long-term returns and have entailed greater
short-term risks than other investment choices. Investments in foreign
securities, including those of foreign governments, involve greater risks than
investing in comparable domestic securities. These risks include currency,
political, economic, regulatory and market risk factors. Risk is reduced
through diversification.
Investment Adviser: Aetna Life Insurance and Annuity Company; Subadviser: T.
Rowe Price Associates, Inc.
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Appendix III
Condensed Financial Information
- --------------------------------------------------------------------------------
(Selected data for annuity and accumulation units outstanding throughout each
period)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The condensed financial information presented below for each of the periods in
the two-year period ended December 31, 1998 (as applicable), is derived from
information included in the financial statements of the separate account, which
have been audited by ---------- , independent auditors. The financial
statements and the independent auditors' report thereon for the year ended
December 31, 1998 are included in the Statement of Additional Information. The
annuity unit values shown below are derived from accumulation unit values and
reflect the application of a factor corresponding to the assumed annual net
return rates of 3.50% and 5.00% as noted. See "Calculating Variable Payment
Values" for more information. Only those subaccounts with annuity units
outstanding at the end of the period are listed below.
<TABLE>
<CAPTION>
Assumed Annual Net Return Rate Assumed Annual Net Return Rate
of 3.50% of 5.00%
----------------------------- -----------------------------
1998 1997 1998 1997
---------- ------------------ ---------- ------------------
<S> <C> <C> <C> <C>
AETNA BALANCED VP, INC.
Value at beginning of period $15.488 $ 13.448 $14.800 $ 13.209
Value at end of period $ 15.488 $ 14.800
Increase (decrease) in value of annuity unit(1) 15.17%(2) 12.04%(3)
AETNA BOND VP
Value at beginning of period $11.529 $ 11.087 $11.017 $ 10.990
Value at end of period $ 11.529 $ 11.017
Increase (decrease) in value of annuity unit(1) 3.99%(4) 0.25%(5)
AETNA CROSSROADS VP
Value at beginning of period $10.242 $ 10.108 $10.223 $ 10.032
Value at end of period $ 10.242 $ 10.223
Increase (decrease) in value of annuity unit(1) 1.32%(3) 1.90%(4)
AETNA GROWTH VP
Value at beginning of period $13.015 $ 13.538
Value at end of period $ 13.015
Increase (decrease) in value of annuity unit(1) (3.86)%(4)
AETNA GROWTH AND INCOME VP
Value at beginning of period $18.426 $ 15.431 $17.607 $ 15.123
Value at end of period $ 18.426 $ 17.607
Increase (decrease) in value of annuity unit(1) 19.41%(5) 16.43%(3)
AETNA INDEX PLUS LARGE CAP VP
Value at beginning of period $12.402 $ 11.263 $12.277 $ 10.848
Value at end of period $ 12.402 $ 12.277
Increase (decrease) in value of annuity unit(1) 10.11%(6) 13.17%(7)
AETNA LEGACY VP
Value at beginning of period $11.201 $ 10.372 $11.017 $ 10.264
Value at end of period $ 11.201 $ 11.017
Increase (decrease) in value of annuity unit(1) 8.00%(8) 7.34%(3)
AETNA SMALL COMPANY VP
Value at beginning of period $13.444 $ 12.930 $13.308 $ 13.322
Value at end of period $ 13.444 $ 13.308
Increase (decrease) in value of annuity unit(1) 3.97%(2) (0.10)%(4)
FIDELITY VIP HIGH INCOME PORTFOLIO
Value at beginning of period $10.060 $ 10.058
Value at end of period $ 10.060
Increase (decrease) in value of annuity unit(1) 0.02%(4)
JANUS ASPEN GROWTH PORTFOLIO
Value at beginning of period $11.789 $ 10.481 $11.580 $ 10.433
Value at end of period $ 11.789 $ 11.580
Increase (decrease) in value of annuity unit(1) 12.48%(9) 11.00%(2)
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO
Value at beginning of period $12.007 $ 10.576 $11.794 $ 10.638
Value at end of period $ 12.007 $ 11.794
Increase (decrease) in value of annuity unit(1) 13.53%(5) 10.87%(3)
PORTFOLIO PARTNERS MFS EMERGING EQUITIES PORTFOLIO
Value at beginning of period $ 9.894 $ 10.050 $ 9.719 $ 9.885
Value at end of period $ 9.894 $ 9.719
Increase (decrease) in value of annuity unit(1) (1.55)%(9) (1.68)%(9)
PORTFOLIO PARTNERS MFS VALUE EQUITY PORTFOLIO
Value at beginning of period $12.474 $ 12.335 $12.253 $ 12.132
Value at end of period $ 12.474 $ 12.253
Increase (decrease) in value of annuity unit(1) 1.13%(9) 1.00%(9)
</TABLE>
- -----------------
(1) The above figures are calculated by subtracting the beginning annuity unit
value from the ending annuity unit value, and dividing the result by the
beginning annuity unit value. These figures do not reflect the early
withdrawal charge or the fixed dollar annual maintenance fee, if any.
Inclusion of these charges would reduce the investment results shown.
48
<PAGE>
(2) Reflects less than a full year of performance activity. Funds were first
received in this option during March 1997.
(3) Reflects less than a full year of performance activity. Funds were first
received in this option during January 1997.
(4) Reflects less than a full year of performance activity. Funds were first
received in this option during December 1997.
(5) Reflects less than a full year of performance activity. Funds were first
received in this option during October 1997.
(6) Reflects less than a full year of performance activity. Funds were first
received in this option during February 1997.
(7) Reflects less than a full year of performance activity. Funds were first
received in this option during May 1997.
(8) Reflects less than a full year of performance activity. Funds were first
received in this option during August 1997.
(9) Reflects less than a full year of performance activity. Funds were first
received in this option during November 1997.
49
<PAGE>
For Master Applications Only
- --------------------------------------------------------------------------------
I hereby acknowledge receipt of an Account B Aetna Immediate Annuity prospectus
dated May 3, 1999, as well as all current fund prospectuses pertaining to the
subaccounts available under the contract.
- --- Please send an Account B Statement of Additional Information (Form No.
SAI.09515-99) dated May 3, 1999.
- --------------------------------------------------------------------------------
CONTRACT HOLDER'S SIGNATURE
- --------------------------------------------------------------------------------
DATE
PROS.09515-99
50
<PAGE>
- -------------------------------------------------------------------------------
VARIABLE ANNUITY ACCOUNT B
OF
AETNA LIFE INSURANCE AND ANNUITY COMPANY
- -------------------------------------------------------------------------------
Statement of Additional Information dated May 3, 1999
A Fixed and Variable Single Premium, Group or Individual,
Immediate Annuity Contract
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the current prospectus for Variable Annuity Account B (the
"separate account") dated May 3, 1999.
A free prospectus is available upon request from the local Aetna Life Insurance
and Annuity Company office or by writing to or calling:
Aetna Life Insurance and Annuity Company
Attn: ARS Settlements
151 Farmington Avenue
Hartford, Connecticut 06156
1-800-238-6273
Read the prospectus before you invest. Terms used in this Statement of
Additional Information shall have the same meaning as in the prospectus.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
General Information and History........................................ 2
Variable Annuity Account B............................................. 2
Offering and Purchase of Contracts..................................... 3
Performance Data....................................................... 3
General.......................................................... 3
Average Annual Total Return Quotations........................... 4
Income Payments........................................................ 7
Sales Material and Advertising......................................... 8
Independent Auditors................................................... 8
Financial Statements of the Separate Account........................... S-1
Financial Statements of Aetna Life Insurance and Annuity Company....... F-1
</TABLE>
<PAGE>
GENERAL INFORMATION AND HISTORY
Aetna Life Insurance and Annuity Company (the "Company," we, us, our) is a stock
life insurance company which was organized under the insurance laws of the State
of Connecticut in 1976. Through a merger, it succeeded to the business of Aetna
Variable Annuity Life Insurance Company (formerly Participating Annuity Life
Insurance Company organized in 1954). The Company is an indirect wholly owned
subsidiary of Aetna Inc. The Company is engaged in the business of issuing life
insurance policies and annuity contracts. Our Home Office is located at 151
Farmington Avenue, Hartford, Connecticut 06156. As of December 31, 1998, the
Company had $___ billion invested through its products, including $___ billion
in its separate accounts (of which the Company or an affiliate oversees the
management of $___ billion) and $___ billion in its mutual funds offered outside
of its separate accounts. The Company is ranked among the top __% of all U.S.
life insurance companies based on assets as of December 31, 1997.
In addition to serving as the principal underwriter and the depositor for the
separate account, the Company is a registered investment adviser under the
Investment Advisers Act of 1940, and a registered broker-dealer under the
Securities Exchange Act of 1934. We provide investment advice to several of the
registered management investment companies offered as variable investment
options under the contracts funded by the separate account (see "Variable
Annuity Account B" below).
Other than the mortality and expense risk charge, the administrative expense
charge and the guaranteed minimum income charge described in the prospectus, all
expenses incurred in the operations of the separate account are borne by the
Company. (See "Fees" in the prospectus.) We receive reimbursement for certain
administrative costs from some advisers of the funds used as funding options
under the contract. These fees generally range up to 0.425%.
The assets of the separate account are held by the Company. The separate account
has no custodian. However, the funds in whose shares the assets of the separate
account are invested each have custodians, as discussed in their respective
prospectuses.
From this point forward, the term "contract(s)" refers only to those offered
through the prospectus.
VARIABLE ANNUITY ACCOUNT B
Variable Annuity Account B is a separate account established by the Company for
the purpose of funding variable annuity contracts issued by the Company. The
separate account is registered with the Securities and Exchange Commission as a
unit investment trust under the Investment Company Act of 1940, as amended.
Payments to accounts under the contract may be allocated to one or more of the
subaccounts. Each subaccount invests in the shares of only one of the funds
listed below. We may make additions to, deletions from or substitutions of
available investment options as permitted by law and subject to the conditions
of the contract. The availability of the funds is subject to applicable
regulatory authorization. Not all funds may be available in all jurisdictions or
under all contracts.
2
<PAGE>
The funds currently available under the contract are as follows:
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
o Aetna Ascent VP o AIM V.I. Growth Fund
- -----------------------------------------------------------------------------------------------------------------------------
o Aetna Balanced VP, Inc. o AIM V.I. Growth and Income Fund
- -----------------------------------------------------------------------------------------------------------------------------
o Aetna Income Shares d/b/a Aetna Bond VP o AIM V.I. Value Fund
- -----------------------------------------------------------------------------------------------------------------------------
o Aetna Crossroads VP o Fidelity VIP High Income Portfolio
- -----------------------------------------------------------------------------------------------------------------------------
o Aetna Growth VP o Janus Aspen Growth Portfolio
- -----------------------------------------------------------------------------------------------------------------------------
o Aetna Variable Fund d/b/a Aetna Growth and Income VP o Janus Aspen Worldwide Growth Portfolio
- -----------------------------------------------------------------------------------------------------------------------------
o Aetna Index Plus Large Cap VP o Oppenheimer Aggressive Growth Fund
- -----------------------------------------------------------------------------------------------------------------------------
o Aetna International VP o Oppenheimer Growth and Income Fund
- -----------------------------------------------------------------------------------------------------------------------------
o Aetna Legacy VP o Oppenheimer Strategic Bond Fund
- -----------------------------------------------------------------------------------------------------------------------------
o Aetna Variable Encore Fund d/b/a Aetna Money Market VP o Portfolio Partners MFS Emerging Equities Portfolio
- -----------------------------------------------------------------------------------------------------------------------------
o Aetna Real Estate Securities VP o Portfolio Partners MFS Value Equity Portfolio
- -----------------------------------------------------------------------------------------------------------------------------
o Aetna Small Company VP o Portfolio Partners Scudder International Growth Portfolio
- -----------------------------------------------------------------------------------------------------------------------------
o AIM V.I. Capital Appreciation Fund o Portfolio Partners T. Rowe Price Growth Equity Portfolio
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Complete descriptions of each of the funds, including their investment
objectives, policies, risks and fees and expenses, are contained in the
prospectuses and statements of additional information for each of the funds.
OFFERING AND PURCHASE OF CONTRACTS
The Company is both the depositor and the principal underwriter for the
securities sold by the prospectus. We offer the contracts through life insurance
agents licensed to sell variable annuities who are registered representatives of
the Company or of other registered broker-dealers who have sales agreements with
the Company. The offering of the contracts is continuous. A description of the
manner in which contracts are purchased may be found in the prospectus under the
sections titled "Purchase."
PERFORMANCE DATA
GENERAL
From time to time, we may advertise different types of historical performance
for the subaccounts of the separate account available under the contracts. We
may advertise the "standardized average annual total returns," calculated in a
manner prescribed by the Securities and Exchange Commission (the "standardized
return"), as well as the "non-standardized returns," both of which are described
below.
The standardized and non-standardized total return figures are computed
according to a formula in which a hypothetical initial payment of $1,000 is
applied under a deferred annuity contract to the various subaccounts available
under the contract, and then related to the ending redeemable values over one,
five and ten year periods (or fractional periods thereof). The redeemable value
is then divided by the initial investment and this quotient is taken to the Nth
root (N represents the number of years in the period) and 1 is subtracted from
the result which is then expressed as a percentage, carried to at least the
nearest hundredth of a percent. The standardized figures use the actual returns
of the fund since the date contributions were first received in the fund under
the separate account and then adjust them to reflect the deduction of all
recurring charges under the contracts during each period (e.g., mortality and
expense risk charges, administrative expense charges, guaranteed minimum income
charges and the early withdrawal charge). These charges will be deducted on a
pro rata basis in the case of fractional periods.
3
<PAGE>
The non-standardized figures will be calculated in a similar manner, except that
they will not reflect the deduction of any applicable early withdrawal charge.
The deduction of the early withdrawal charge would decrease the level of
performance shown if reflected in these calculations. The non-standardized
figures may also include monthly, quarterly, year-to-date and three year
periods, and may include returns calculated from the fund's inception date
and/or the date contributions were first received in the fund under the separate
account.
Investment results of the funds will fluctuate over time, and any presentation
of the subaccounts' total return quotations for any prior period should not be
considered as a representation of how the subaccounts will perform in any future
period.
AVERAGE ANNUAL TOTAL RETURN QUOTATIONS - Standardized and Non-Standardized
The table shown below reflects the average annual standardized and
non-standardized total return quotation figures for the periods ended December
31, 1998 for the Subaccounts. The standardized returns assume a mortality and
expense risk charge of 1.25% and the maximum early withdrawal charges of 7%
grading down to 0% after 7 years. The non-standardized returns assume the same
charges but do not include the early withdrawal charges. Also reflected in both
tables is the guaranteed minimum income charge as it applies to Aetna Index Plus
Large Cap fund. As reflected in the tables, this charge only applies when the
guaranteed minimum income feature is selected.
For the subaccounts funded by the Portfolio Partners portfolios, two sets of
performance returns are shown for each subaccount: one showing performance based
solely on the performance of the Portfolio Partners portfolio from November 28,
1997, the date the Portfolio commenced operations; and one quotation based on
(a) performance through November 26, 1997 of the fund it replaced under many
contracts and; (b) after November 26, 1997, based on the performance of the
Portfolio Partners portfolio.
For those subaccounts where results are not available for the full calendar
period indicated, performance for such partial periods is shown in the column
labeled "Since Inception." For standardized performance, the "Since Inception"
column shows average annual return since the date contributions were first
received in the fund under the separate account. For non-standardized
performance, the "Since Inception" column shows average annual total return
since the fund's inception date.
4
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------
Date
Contributions
First
STANDARDIZED Received
Under the
Separate
Account
- -------------------------------------------------------------------------------------------------------------------------------
SUBACCOUNT 1 Year 5 Years 10 Years Inception*
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Aetna Ascent VP 07/05/95
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 06/30/89
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP(1)
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 08/31/95
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 05/30/97
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP(1)
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 10/31/96
- -------------------------------------------------------------------------------------------------------------------------------
Aetna International VP 05/04/98
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 08/31/95
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP(1)(2)
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Real Estate Securities VP 05/04/98
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 05/30/97
- -------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund
- -------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth Fund
- -------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth and Income Fund
- -------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Value Fund
- -------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio 06/30/95
- -------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 07/29/94
- -------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 04/28/95
- -------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund 05/30/97
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Emerging Equities Portfolio 11/28/97
- -------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/Portfolio Partners MFS Emerging Equities(3) 09/30/93
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Value Equity Portfolio 11/28/97
- -------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/Portfolio Partners MFS Value Equity(3) 11/30/92
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners Scudder International Growth Portfolio 11/28/97
- -------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio Class A/Portfolio Partners Scudder
International Growth(3) 08/31/92
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners T. Rowe Price Growth Equity Portfolio 11/28/97
- -------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/Portfolio Partners T. Rowe Price Growth Equity(3) 02/28/95
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to the discussion preceding the tables for an explanation of the
charges included and methodology used in the standardized and non-standardized
figures. These figures represent historical performance and should not be
considered a projection of future performance.
* Reflects performance from the date contributions were first received in the
fund under the separate account.
(1) These funds have been available through the separate account for more than
ten years.
(2) The current yield for the subaccount for the 7-day period ended December
31, 1998 (on an annualized basis) was ____%. Current yield more closely
reflects current earnings than does total return. The current yield
reflects the deduction of all charges under the contract that are deducted
from the total return quotations shown above except the maximum 7% early
withdrawal charge.
(3) The fund first listed was replaced with the applicable Portfolio Partners
Portfolio after the close of business on November 26, 1997. The performance
shown is based on the performance of the replaced fund until November 26,
1997, and the performance of the applicable Portfolio Partners Portfolio
after that date. The replaced fund may not have been available under all
contracts. The "Date Contributions First Received Under the Separate
Account" refers to the applicable date for the replaced fund.
5
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------
Fund
NON-STANDARDIZED Inception
Date
- ---------------------------------------------------------------------------------------------------------------------------------
SUBACCOUNT 1 Year 3 Years 5 Years 10 Years Inception**
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Aetna Ascent VP 07/05/95
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 04/03/89
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP(1)
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 07/05/95
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 12/13/96
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP(1)
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 09/16/96
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP(4) 09/16/96
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna International VP 01/03/92
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 07/05/95
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP(1)(2)
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Real Estate Securities VP 02/02/98
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 12/27/96
- ---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund 05/05/93
- ---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth Fund 05/05/93
- ---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth and Income Fund 05/02/94
- ---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Value Fund 05/05/93
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio(1)
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 09/13/93
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 09/13/93
- ---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth Fund(1)
- ---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Growth and Income Fund 07/05/95
- ---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund 05/03/93
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Emerging Equities Portfolio 11/28/97
- ---------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/Portfolio Partners MFS Emerging Equities(3) 09/21/88
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Value Equity Portfolio 11/28/97
- ---------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/Portfolio Partners MFS Value Equity(3)
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners Scudder International Growth Portfolio 11/28/97
- ---------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio Class A/Portfolio Partners Scudder
International Growth(3)
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners T. Rowe Price Growth Equity Portfolio 11/28/97
- ---------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/Portfolio Partners T. Rowe Price Growth Equity(3) 01/09/89
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to the discussion preceding the tables for an explanation of the
charges included and methodology used in the standardized and non-standardized
figures. These figures represent historical performance and should not be
considered a projection of future performance.
** Reflects performance from the fund's inception date.
(1) These funds have been in operation for more than ten years.
(2) The current yield for the subaccount for the 7-day period ended December
31, 1998 (on an annualized basis) was ____%. Current yield more closely
reflects current earnings than does total return. The current yield
reflects the deduction of all charges under the contract that are deducted
from the total return quotations shown above. As in the table above, the
maximum 7% early withdrawal charge is not reflected.
(3) The fund first listed was replaced with the applicable Portfolio Partners
Portfolio after the close of business on November 26, 1997. The performance
shown is based on the performance of the replaced fund until November 26,
1997, and the performance of the applicable Portfolio Partners Portfolio
after that date. The replaced fund may not have been available under all
contracts. The "Fund Inception Date" refers to the applicable date for the
replaced fund. If no date is shown, the replaced fund has been in operation
for more than ten years.
(4) The non-standardized returns in this row reflect deduction of applicable
charges including the guaranteed minimum income charge. The numbers are
only applicable if the guaranteed minimum income feature was elected.
6
<PAGE>
INCOME PAYMENTS
Your variable payments will fluctuate as the annuity unit value(s) fluctuates
with the investment experience of the selected subaccount(s). The first payment
and subsequent payments also vary depending on the assumed annual net return
rate selected (3.5% or 5% per annum). Selection of a 5% rate causes a higher
first payment, but payments will increase thereafter only to the extent that the
net investment rate increases by more than 5% on an annual basis. Payments would
decline if the rate failed to increase by 5%. Use of the 3.5% assumed rate
causes a lower first payment, but subsequent payments would increase more
rapidly or decline more slowly as changes occur in the net investment rate.
A fixed number of annuity units is determined in each of the designated
subaccounts on the contract effective date. The number of annuity units, which
generally does not change thereafter, is calculated by dividing (a) by (b),
where (a) is the amount of the income payment as if the payment was calculated
as of the contract effective date, and (b) is the annuity unit value for that
investment option on the contract effective date. The first payment will be
calculated as of the tenth valuation before the payment due date which depends
upon the payment frequency you have selected. As noted above, annuity unit
values fluctuate from one valuation to the next (see "Calculating Variable
Income Payments" in the prospectus); such fluctuations reflect changes in the
net investment factor for the applicable subaccount(s) (with a ten valuation lag
which gives the Company time to process payments) and a mathematical adjustment
which offsets the assumed annual net return rate of 3.5% or 5% per annum.
The operation of all these factors can be illustrated by the following
hypothetical example. These procedures will be performed separately for each
subaccount selected.
EXAMPLE:
Assume that you purchase a single premium immediate annuity contract with a
$50,000 premium. The payment option that you select has a payment factor of
$6.68 per $1,000 of value applied. Also assume that no premium tax is payable.
If a payment was determined as of the contract effective date, that payment
would be calculated by multiplying $6.68 per $1,000 by 50.000. This would
produce an initial payment of $334.00.
Assume that the value of the annuity unit on the contract effective date is
13.400000. The payment calculated as of the contract effective date is divided
by the annuity unit value to determine the number of annuity units (that is,
$334.00/13.400000 = 24.925 annuity units). The number of annuity units will
generally remain constant over the term of your contract as determined by your
annuity option. The value of each payment will be determined on the tenth
valuation before the payment due date by multiplying the number of annuity units
by that date's annuity unit value.
Payments will subsequently fluctuate depending upon the net investment
performance that occurs between payment valuation dates less a factor that
represents the assumed annual net return rate. This offsets the assumed annual
net return rate built into the number of annuity units determined above.
Annuity unit values are calculated on a daily basis by multiplying the annuity
unit value by the daily net return factor and by a factor to reflect the daily
assumed annual net return rate. The factor for a 3.5% assumed annual net return
rate is 0.9999058 and for 5.0%, 0.9998663. The new payment is calculated by
multiplying the number of annuity units by the new annuity unit value.
7
<PAGE>
SALES MATERIAL AND ADVERTISING
We may illustrate the hypothetical values of income payments made from each of
the subaccounts over certain time periods based on the historical net asset
values of the funds. We may also advertise returns based on other fee schedules
that apply to a particular contract holder. These fee schedules may result in
higher returns than those shown.
We may also include hypothetical illustrations in our sales literature that
explain the mathematical principles of compounded interest, tax deferred
accumulation, and the mechanics of variable annuity contracts. We may also
discuss the difference between variable annuity contracts and savings or
investment products such as personal savings accounts and certificates of
deposit.
We may publish in advertisements and reports, the ratings and other information
assigned to us by one or more independent rating organizations such as A.M. Best
Company, Duff & Phelps, Standard & Poor's Corporation and Moody's Investors
Service, Inc. The purpose of the ratings is to reflect our financial strength
and/or claims-paying ability. We may also quote ranking services such as
Morningstar's Variable Annuity/Life Performance Report and Lipper's Variable
Insurance Products Performance Analysis Service (VIPPAS), which rank variable
annuity or life subaccounts or their underlying funds by performance and/or
investment objective. We may illustrate in advertisements the performance of the
underlying funds, if accompanied by performance which also shows the performance
of such funds reduced by applicable charges under the separate account. We may
categorize funds in terms of the asset classes they represent and use such
categories in marketing materials for the contracts. We may also show in
advertisements the portfolio holdings of the underlying funds, updated at
various intervals. From time to time, we will quote articles from newspapers and
magazines or other publications or reports such as The Wall Street Journal,
Money magazine, USA Today and The VARDS Report.
We may provide in advertising, sales literature, periodic publications or other
materials information on various topics of interest to current and prospective
contract holders. These topics may include the relationship between sectors of
the economy and the economy as a whole and its effect on various securities
markets, investment strategies and techniques (such as value investing, market
timing, asset allocation, constant ratio transfer and account rebalancing), the
advantages and disadvantages of investing in tax-deferred and taxable
investments, customer profiles and hypothetical purchase and investment
scenarios, financial management and tax and retirement planning, and investment
alternatives to certificates of deposit and other financial instruments,
including comparison between the contracts and the characteristics of and market
for such financial instruments.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, CityPlace II, Hartford, Connecticut 06103-4103, are the
independent auditors for the separate account and for the Company. The services
provided to the separate account include primarily the examination of the
separate account's financial statements and the review of filings made with the
SEC.
8
<PAGE>
FINANCIAL STATEMENTS
VARIABLE ANNUITY ACCOUNT B
Index
<TABLE>
<S> <C>
Statement of Assets and Liabilities........................................ S-2
Statements of Operations and Changes in Net Assets......................... S-6
Notes to Financial Statements.............................................. S-7
Independent Auditors' Report............................................... S-25
</TABLE>
[To Be Filed By Amendment]
S-1
<PAGE>
Form No. SAI.09515-99 ALIAC Ed. May 1999
<PAGE>
VARIABLE ANNUITY ACCOUNT B
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
- ------------------------------------------
<TABLE>
<S> <C> <C>
(a) Financial Statements:
(1) Included in Part A:
Condensed Financial Information *
(2) Included in Part B:
Financial Statements of Variable Annuity Account B: *
- Statement of Assets and Liabilities as of December 31, 1998
- Statements of Operations and Changes in Net Assets for the years ended
December 31, 1998 and 1997
- Notes to Financial Statements
- Independent Auditors' Report
Financial Statements of the Depositor: *
- Independent Auditors' Report
- Consolidated Statements of Income for the years ended December 31, 1998, 1997 and 1996
- Consolidated Balance Sheets as of December 31, 1998 and 1997
- Consolidated Statements of Changes in Shareholder's Equity for the years ended December 31, 1998, 1997
and 1996
- Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996
- Notes to Consolidated Financial Statements
* To be filed by amendment
(b) Exhibits
(1) Resolution of the Board of Directors of Aetna Life Insurance and Annuity Company establishing Variable Annuity
Account B(1)
(2) Not applicable
(3.1) Broker-Dealer Agreement(2)
(3.2) Alternative Form of Wholesaling Agreement and Related Selling Agreement(3)
(4.1) Variable Annuity Contract (A050SP96)(4)
(4.2) Form of Variable Annuity Contract A050SP99
(4.3) Form of Endorsement SPIAE99 to Variable Annuity Contract A050SP99
(4.4) Form of Endorsement SPIAEVW99 to Variable Annuity Contract A050SP99
(4.5) Form of Endorsement SPIAEW99 to Variable Annuity Contract A050SP99
(4.6) Form of Endorsement SPIAEVPG99 to Variable Annuity Contract A050SP99
(4.7) Form of Endorsement E401SP99 to Variable Annuity Contract A050SP99
(4.8) Form of Endorsement E403SP99 to Variable Annuity Contract A050SP99
(4.9) Form of Endorsement E457SP99 to Variable Annuity Contract A050SP99
(4.10) Form of Variable Annuity Contract SPIA(GR)-99
(4.11) Form of Variable Annuity Contract Certificate SPIA(GR)-99 CERT
(4.12) Form of Endorsement SPIAE(GR)99 to Variable Annuity Contract SPIA(GR)-99
(4.13) Form of Endorsement SPIAEVW99 to Variable Annuity Contract SPIA(GR)-99
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
(4.14) Form of Endorsement SPIAEW99 to Variable Annuity Contract SPIA(GR)-99
(4.15) Form of Endorsement SPIAEVPG99 to Variable Annuity Contract SPIA(GR)-99
(4.16) Form of Endorsement SPIAE401(GR)99 to Variable Annuity Contract SPIA(GR)-99
(4.17) Form of Endorsement SPIAE403(GR)99 to Variable Annuity Contract SPIA(GR)-99
(4.18) Form of Endorsement SPIAE457(GR)99 to Variable Annuity Contract SPIA(GR)-99
(4.19) Form of Endorsement SPIAEIRA(GR)99 to Variable Annuity Contract SPIA(GR)-99
(5.1) Variable Annuity Contract Application (82941-3(5/98))(5)
(5.2) Variable Annuity Contract Application (82950-2(NY)(5/98))(5)
(6.1) Certificate of Incorporation of Aetna Life Insurance and Annuity Company(6)
(6.2) Amendment to Certificate of Incorporation of Aetna Life Insurance and Annuity Company(7)
(6.3) By-Laws as amended September 17, 1997 of Aetna Life Insurance and Annuity Company(8)
(7) Not applicable
(8.1) Fund Participation Agreement between Aetna Life Insurance and Annuity Company and AIM dated June 30, 1998(9)
(8.2) Service Agreement between Aetna Life Insurance and Annuity Company and AIM effective June 30, 1998(9)
(8.3) Fund Participation Agreement by and among Aetna Life Insurance and Annuity Company and Aetna Variable Fund,
Aetna Variable Encore Fund, Aetna Income Shares, Aetna Balanced VP, Inc., Aetna GET Fund on behalf of each of
its series, Aetna Generation Portfolios, Inc. on behalf of each of its series, Aetna Variable Portfolios, Inc.
on behalf of each of its series, and Aeltus Investment Management, Inc. dated as of May 1, 1998(2)
(8.4) Amendment dated November 9, 1998 to Fund Participation Agreement by and among Aetna Life Insurance and Annuity
Company and Aetna Variable Fund, Aetna Variable Encore Fund, Aetna Income Shares, Aetna Balanced VP, Inc., Aetna
GET Fund on behalf of each of its series, Aetna Generation Portfolios, Inc. on behalf of each of its series,
Aetna Variable Portfolios, Inc. on behalf of each of its series, and Aeltus Investment Management, Inc. dated as
of May 1, 1998(10)
(8.5) Service Agreement between Aeltus Investment Management, Inc. and Aetna Life Insurance and Annuity Company in
connection with the sale of shares of Aetna Variable Fund, Aetna Variable Encore Fund, Aetna Income Shares,
Aetna Balanced VP, Inc., Aetna GET Fund on behalf of each of its series, Aetna Generation Portfolios, Inc. on
behalf of each of its series, and Aetna Variable Portfolios, Inc. on behalf of each of its series dated as of
May 1, 1998(2)
(8.6) Amendment dated November 4, 1998 to Service Agreement between Aeltus Investment Management, Inc. and Aetna Life
Insurance and Annuity Company in connection with the sale of shares of Aetna Variable Fund, Aetna Variable
Encore Fund, Aetna Income Shares, Aetna Balanced VP, Inc., Aetna GET Fund on behalf of each of its series, Aetna
Generation Portfolios, Inc. on behalf of each of its series and Aetna Variable Portfolios, Inc. on behalf of
each of its series dated as of May 1, 1998(10)
(8.7) Fund Participation Agreement between Aetna Life Insurance and Annuity Company, Variable Insurance Products Fund
and Fidelity Distributors Corporation dated February 1, 1994 and amended on December 15, 1994, February 1, 1995,
May 1, 1995, January 1, 1996 and March 1, 1996(7)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
(8.8) Fifth Amendment dated as of May 1, 1997 to the Fund Participation Agreement between Aetna Life Insurance and
Annuity Company, Variable Insurance Products Fund and Fidelity Distributors Corporation dated February 1, 1994
and amended on December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996 and March 1, 1996(11)
(8.9) Sixth Amendment dated November 6, 1997 to the Fund Participation Agreement between Aetna Life Insurance and
Annuity Company, Variable Insurance Products Fund and Fidelity Distributors Corporation dated February 1, 1994
and amended on December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996, March 1, 1996 and May 1,
1997(12)
(8.10) Seventh Amendment dated as of May 1, 1998 to the Fund Participation Agreement between Aetna Life Insurance and
Annuity Company, Variable Insurance Products Fund and Fidelity Distributors Corporation dated February 1, 1994
and amended on December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996, March 1, 1996, May 1, 1997 and
November 6, 1997(2)
(8.11) Service Agreement between Aetna Life Insurance and Annuity Company and Fidelity Investments Institutional
Operations Company dated as of November 1, 1995(13)
(8.12) Amendment dated January 1, 1997 to Service Agreement between Aetna Life Insurance and Annuity Company and
Fidelity Investments Institutional Operations Company dated as of November 1, 1995(11)
(8.13) Service Contract between Fidelity Distributors Corporation and Aetna Life Insurance and Annuity Company dated
May 2, 1997(10)
(8.14) Fund Participation Agreement among Janus Aspen Series and Aetna Life Insurance and Annuity Company and Janus
Capital Corporation dated December 8, 1997(14)
(8.15) Amendment dated October 12, 1998 to Fund Participation Agreement among Janus Aspen Series and Aetna Life
Insurance and Annuity Company and Janus Capital Corporation dated December 8, 1997(10)
(8.16) Service Agreement between Janus Capital Corporation and Aetna Life Insurance and Annuity Company dated December
8, 1997(14)
(8.17) Fund Participation Agreement dated March 11, 1997 between Aetna Life Insurance and Annuity Company and
Oppenheimer Variable Annuity Account Funds and Oppenheimer Funds, Inc.(15)
(8.18) Service Agreement effective as of March 11, 1997 between Oppenheimer Funds, Inc. and Aetna Life Insurance and
Annuity Company(15)
(9) Opinion and Consent of Counsel *
(10) Consent of Independent Auditors *
(11) Not applicable
(12) Not applicable
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
(13) Schedule for Computation of Performance Data(16)
(14) Not applicable
(15.1) Powers of Attorney
(15.2) Authorization for Signatures(3)
</TABLE>
* To be filed by amendment
<TABLE>
<S> <C>
1. Incorporated by reference to Post-Effective Amendment No. 6 to Registration Statement on Form N-4 (File No. 33-75986), as
filed electronically on April 22, 1996 (Accession No. 0000950146-96-000563).
2. Incorporated by reference to Registration Statement on Form N-4 (File No. 333-56297), as filed electronically on June 8, 1998
(Accession No. 0000950146-98-000983).
3. Incorporated by reference to Post-Effective Amendment No. 5 to Registration Statement on Form N-4 (File No. 33-75986), as
filed electronically on April 12, 1996 (Accession No. 0000912057-96-006383).
4. Incorporated by reference to Registration Statement on Form N-4 (File No. 333-09515), as filed electronically on August 2,
1996 (Accession No. 0000950146-96-001270).
5. Incorporated by reference to Post-Effective Amendment No. 5 to Registration Statement on Form N-4 (File No. 333-09515), as
filed electronically on September 30, 1998 (Accession No. 0000950146-98-001671).
6. Incorporated by reference to Post-Effective Amendment No. 1 to Registration Statement on Form S-1 (File No. 33-60477), as
filed electronically on April 15, 1996 (Accession No. 0000950146-96-000534).
7. Incorporated by reference to Post-Effective Amendment No. 12 to Registration Statement on Form N-4 (File No. 33-75964), as
filed electronically on February 11, 1997 (Accession No. 0000950146-97-000159).
8. Incorporated by reference to Post-Effective Amendment No. 12 to Registration Statement on Form N-4 (File No. 33-91846), as
filed electronically on October 30, 1997 (Accession No. 0000950146-97-001589).
9. Incorporated by reference to Pre-Effective Amendment No. 1 to Registration Statement on Form N-4 (File No. 333-56297), as
filed electronically on August 4, 1998 (Accession No. 0000950146-98-001283).
10. Incorporated by reference to Post-Effective Amendment No. 2 to Registration Statement on Form N-4 (File No. 333-56297), as
filed electronically on December 14, 1998 (Accession No. 0000950146-98-002092).
11. Incorporated by reference to Post-Effective Amendment No. 30 to Registration Statement on Form N-4 (File No. 33-34370), as
filed electronically on September 29, 1997 (Accession No. 0000950146-97-001485).
12. Incorporated by reference to Post-Effective Amendment No. 16 to Registration Statement on Form N-4 (File No. 33-75964), as
filed electronically on February 9, 1998 (Accession No. 0000950146-98-000179).
13. Incorporated by reference to Post-Effective Amendment No. 3 to Registration Statement on Form N-4 (File No. 33-88720), as
filed electronically on June 28, 1996 (Accession No. 0000928389-96-000136).
</TABLE>
<PAGE>
<TABLE>
<S> <C>
14. Incorporated by reference to Post-Effective Amendment No. 10 to Registration Statement on Form N-4 (File No. 33-75992), as
filed electronically on December 31, 1997 (Accession No. 0000950146-97-001982).
15. Incorporated by reference to Post-Effective Amendment No. 27 to Registration Statement on Form N-4 (File No. 33-34370), as
filed electronically on April 16, 1997 (Accession No. 0000950146-97-000617).
16. Incorporated by reference to Post-Effective Amendment No. 4 to Registration Statement on Form N-4 (File No. 333-09515), as
filed electronically on April 9, 1998 (Accession No. 0000950146-98-000594).
</TABLE>
<PAGE>
Item 25. Directors and Officers of the Depositor
- ------------------------------------------------
<TABLE>
<CAPTION>
Name and Principal
Business Address* Positions and Offices with Depositor
- ----------------- ------------------------------------
<S> <C>
Thomas J. McInerney Director and President
Shaun P. Mathews Director and Senior Vice President
Catherine H. Smith Director, Chief Financial Officer and Senior Vice President
Deborah Koltenuk Vice President, Treasurer and Corporate Controller
Therese M. Squillacote Vice President and Chief Compliance Officer
Kirk P. Wickman Vice President, General Counsel and Corporate Secretary
</TABLE>
* The principal business address of all directors and officers listed is 151
Farmington Avenue, Hartford, Connecticut 06156.
Item 26. Persons Controlled by or Under Common Control with the Depositor or
- ----------------------------------------------------------------------------
Registrant
- ----------
Incorporated herein by reference to Item 26 to Post-Effective Amendment No.
2 to Registration Statement on Form N-4 (File No. 333-56297), as filed
electronically on December 14, 1998 (Accession No. 0000950146-98-002092).
Item 27. Number of Contract Owners
- ----------------------------------
As of December 31, 1998, there were 75,102 individuals holding interests in
variable annuity contracts funded through Variable Annuity Account B.
Item 28. Indemnification
- ------------------------
Section 21 of Public Act No. 97-246 of the Connecticut General Assembly (the
"Act") provides that a corporation may provide indemnification of or advance
expenses to a director, officer, employee or agent only as permitted by Sections
33-770 to 33-778, inclusive, of the Connecticut General Statutes, as amended by
Sections 12 to 20, inclusive, of this Act. Reference is hereby made to Section
33-771(e) of the Connecticut General Statutes ("CGS") regarding indemnification
of directors and Section 33-776(d) of CGS regarding indemnification of officers,
employees and agents of Connecticut corporations. These statutes provide in
general that Connecticut corporations incorporated prior to January 1, 1997
shall, except to the extent that their certificate of incorporation expressly
provides otherwise, indemnify their directors, officers,
<PAGE>
employees and agents against "liability" (defined as the obligation to pay a
judgment, settlement, penalty, fine, including an excise tax assessed with
respect to an employee benefit plan, or reasonable expenses incurred with
respect to a proceeding) when (1) a determination is made pursuant to Section
33-775 that the party seeking indemnification has met the standard of conduct
set forth in Section 33-771 or (2) a court has determined that indemnification
is appropriate pursuant to Section 33-774. Under Section 33-775, the
determination of and the authorization for indemnification are made (a) by the
disinterested directors, as defined in Section 33-770(3); (b) by special
counsel; (c) by the shareholders; or (d) in the case of indemnification of an
officer, agent or employee of the corporation, by the general counsel of the
corporation or such other officer(s) as the board of directors may specify.
Also, Section 33-772 provides that a corporation shall indemnify an individual
who was wholly successful on the merits or otherwise against reasonable expenses
incurred by him in connection with a proceeding to which he was a party because
he was a director. In the case of a proceeding by or in the right of the
corporation or with respect to conduct for which the director, officer, agent or
employee was adjudged liable on the basis that he received a financial benefit
to which he was not entitled, indemnification is limited to reasonable expenses
incurred in connection with the proceeding against the corporation to which the
individual was named a party.
The statute does specifically authorize a corporation to procure indemnification
insurance on behalf of an individual who was a director, officer, employer or
agent of the corporation. Consistent with the statute, Aetna Inc. has procured
insurance from Lloyd's of London and several major United States excess insurers
for its directors and officers and the directors and officers of its
subsidiaries, including the Depositor.
Item 29. Principal Underwriter
- ------------------------------
(a) In addition to serving as the principal underwriter and depositor for
the Registrant, Aetna Life Insurance and Annuity Company (Aetna) also
acts as the principal underwriter, only, for Aetna Variable Encore
Fund, Aetna Variable Fund, Aetna Generation Portfolios, Inc., Aetna
Income Shares, Aetna Balanced VP, Inc. (formerly Aetna Investment
Advisers Fund, Inc.), Aetna GET Fund, and Aetna Variable Portfolios,
Inc. and as principal underwriter and investment adviser for Portfolio
Partners, Inc. (all management investment companies registered under
the Investment Company Act of 1940 (1940 Act)). Additionally, Aetna
acts as the principal underwriter and depositor for Variable Life
Account B of Aetna, Variable Annuity Account C of Aetna and Variable
Annuity Account G of Aetna (separate accounts of Aetna registered as
unit investment trusts under the 1940 Act). Aetna is also the principal
underwriter for Variable Annuity Account I of Aetna Insurance Company
of America (AICA) (a separate account of AICA registered as a unit
investment trust under the 1940 Act).
(b) See Item 25 regarding the Depositor.
<PAGE>
(c) Compensation as of December 31, 1998: *
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Name of Net Underwriting Compensation on
Principal Discounts and Redemption or Brokerage
Underwriter Commissions Annuitization Commissions Compensation**
- ----------- ----------- ------------- ----------- --------------
<S> <C> <C>
Aetna Life Insurance $_________ $_________
and Annuity Company
</TABLE>
* To be filed by amendment.
** Compensation shown in column 5 includes deductions for mortality and
expense risk guarantees and contract charges assessed to cover costs
incurred in the sales and administration of the contracts issued under
Variable Annuity Account B.
Item 30. Location of Accounts and Records
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the rules under it relating to the securities
described in and issued under this Registration Statement are located at the
home office of the Depositor as follows:
Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Hartford, Connecticut 06156
Item 31. Management Services
- ----------------------------
Not applicable
Item 32. Undertakings
- ---------------------
Registrant hereby undertakes:
(a) to file a post-effective amendment to this registration statement on
Form N-4 as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never more than
sixteen months old for as long as payments under the variable annuity
contracts may be accepted;
(b) to include as part of any application to purchase a contract offered by
a prospectus which is part of this registration statement on Form N-4,
a space that an applicant can check to request a Statement of
Additional Information; and
<PAGE>
(c) to deliver any Statement of Additional Information and any financial
statements required to be made available under this Form N-4 promptly
upon written or oral request.
(d) The Company hereby represents that it is relying upon and will comply
with the provisions of Paragraphs (1) through (4) of the SEC Staff's
No-Action Letter dated November 22, 1988 with respect to language
concerning withdrawal restrictions applicable to plans established
pursuant to Section 403(b) of the Internal Revenue Code. See American
Counsel of Life Insurance; SEC No-Action Letter, [1989 Transfer Binder]
Fed. SEC. L. Rep. (CCH) P. 78,904 at 78,523 (November 22, 1988).
(e) Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
(f) Aetna Life Insurance and Annuity Company represents that the fees and
charges deducted under the contracts covered by this registration
statement, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed
by the insurance company.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, Variable Annuity Account B of Aetna Life Insurance and
Annuity Company has duly caused this Post-Effective Amendment to its
Registration Statement on Form N-4 (File No. 333-09515) to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Hartford,
State of Connecticut, on the 26th day of February, 1999.
VARIABLE ANNUITY ACCOUNT B OF AETNA
LIFE INSURANCE AND ANNUITY COMPANY
(Registrant)
By: AETNA LIFE INSURANCE AND ANNUITY COMPANY
(Depositor)
By: Thomas J. McInerney*
---------------------
Thomas J. McInerney
President
As required by the Securities Act of 1933, this Post-Effective Amendment
No. 6 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
Thomas J. McInerney* Director and President )
- -------------------------------- (principal executive officer) )
Thomas J. McInerney )
)
Catherine H. Smith* Director and Chief Financial Officer ) February
- -------------------------------- )
Catherine H. Smith ) 26, 1999
)
Shaun P. Mathews* Director )
- -------------------------------- )
Shaun P. Mathews )
)
Deborah Koltenuk* Vice President, Treasurer and Corporate Controller )
- -------------------------------- )
Deborah Koltenuk )
By: /s/ J. Neil McMurdie
-----------------------------
J. Neil McMurdie
*Attorney-in-Fact
</TABLE>
<PAGE>
VARIABLE ANNUITY ACCOUNT B
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ----------- -------
<S> <C> <C>
99-B.1 Resolution of the Board of Directors of Aetna Life Insurance and Annuity Company *
establishing Variable Annuity Account B
99-B.3.1 Broker-Dealer Agreement *
99-B.3.2 Alternative Form of Wholesaling Agreement and Related Selling Agreement *
99-B.4.1 Variable Annuity Contract (A050SP96) *
99-B.4.2 Form of Variable Annuity Contract A050SP99
-------------
99-B.4.3 Form of Endorsement SPIAE99 to Variable Annuity Contract A050SP99
-------------
99-B.4.4 Form of Endorsement SPIAEVW99 to Variable Annuity Contract A050SP99
-------------
99-B.4.5 Form of Endorsement SPIAEW99 to Variable Annuity Contract A050SP99
-------------
99-B.4.6 Form of Endorsement SPIAEVPG99 to Variable Annuity Contract A050SP99
-------------
99-B.4.7 Form of Endorsement E401SP99 to Variable Annuity Contract A050SP99
-------------
99-B.4.8 Form of Endorsement E403SP99 to Variable Annuity Contract A050SP99
-------------
99-B.4.9 Form of Endorsement E457SP99 to Variable Annuity Contract A050SP99
-------------
99-B.4.10 Form of Variable Annuity Contract SPIA(GR)-99
-------------
99-B.4.11 Form of Variable Annuity Contract Certificate SPIA (GR)-99 CERT
-------------
99-B.4.12 Form of Endorsement SPIAE(GR)99 to Variable Annuity Contract SPIA(GR)-99
-------------
99-B.4.13 Form of Endorsement SPIAEVW99 to Variable Annuity Contract SPIA(GR)-99
-------------
99-B.4.14 Form of Endorsement SPIAEW99 to Variable Annuity Contract SPIA(GR)-99
-------------
99-B.4.15 Form of Endorsement SPIAEVPG99 to Variable Annuity Contract SPIA(GR)-99
-------------
99-B.4.16 Form of Endorsement SPIAE401(GR)99 to Variable Annuity Contract SPIA(GR)-99
-------------
99-B.4.17 Form of Endorsement SPIAE403(GR)99 to Variable Annuity Contract SPIA(GR)-99
-------------
99-B.4.18 Form of Endorsement SPIAE457(GR)99 to Variable Annuity Contract SPIA(GR)-99
-------------
99-B.4.19 Form of Endorsement SPIAEIRA(GR)99 to Variable Annuity Contract SPIA(GR)-99
-------------
</TABLE>
*Incorporated by reference
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ----------- -------
<S> <C> <C>
99-B.5.1 Variable Annuity Contract Application (82941-3(5/98)) *
99-B.5.2 Variable Annuity Contract Application (82950-2(NY)(5/98)) *
99-B.6.1 Certificate of Incorporation of Aetna Life Insurance and Annuity Company *
99-B.6.2 Amendment to Certificate of Incorporation of Aetna Life Insurance and Annuity *
Company
99-B.6.3 By-Laws as amended September 17, 1997 of Aetna Life Insurance and Annuity Company *
99-B.8.1 Fund Participation Agreement between Aetna Life *
Insurance and Annuity Company and AIM dated June 30, 1998
99-B.8.2 Service Agreement between Aetna Life Insurance and Annuity Company and AIM *
effective June 30, 1998
99-B.8.3 Fund Participation Agreement by and among Aetna Life Insurance and Annuity *
Company and Aetna Variable Fund, Aetna Variable Encore Fund, Aetna Income
Shares, Aetna Balanced VP, Inc., Aetna GET Fund on behalf of each of its series,
Aetna Generation Portfolios, Inc. on behalf of each of its series, Aetna
Variable Portfolios, Inc. on behalf of each of its series and Aeltus Investment
Management, Inc. dated as of May 1, 1998
99-B.8.4 Amendment dated November 9, 1998 to Fund Participation Agreement by and among *
Aetna Life Insurance and Annuity Company and Aetna Variable Fund, Aetna Variable
Encore Fund, Aetna Income Shares, Aetna Balanced VP, Inc., Aetna GET Fund on
behalf of each of its series, Aetna Generation Portfolios, Inc. on behalf of
each of its series, Aetna Variable Portfolios, Inc. on behalf of each of its
series, and Aeltus Investment Management, Inc. dated as of May 1, 1998
</TABLE>
*Incorporated by reference
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ----------- -------
<S> <C> <C>
99-B.8.5 Service Agreement between Aeltus Investment Management, Inc. and Aetna Life *
Insurance and Annuity Company in connection with the sale of shares of Aetna
Variable Fund, Aetna Variable Encore Fund, Aetna Income Shares, Aetna Balanced
VP, Inc., Aetna GET Fund on behalf of each of its series, Aetna Generation
Portfolios, Inc. on behalf of each of its series, and Aetna Variable Portfolios,
Inc. on behalf of each of its series dated as of May 1, 1998
99-B.8.6 Amendment dated November 4, 1998 to Service Agreement between Aeltus Investment *
Management, Inc. and Aetna Life Insurance and Annuity Company in connection with
the sale of shares of Aetna Variable Fund, Aetna Variable Encore Fund, Aetna
Income Shares, Aetna Balanced VP, Inc., Aetna GET Fund on behalf of each of its
series, Aetna Generation Portfolios, Inc. on behalf of each of its series and
Aetna Variable Portfolios, Inc. on behalf of each of its series dated as of May
1, 1998
99-B.8.7 Fund Participation Agreement between Aetna Life Insurance and Annuity Company, *
Variable Insurance Products Fund and Fidelity Distributors Corporation dated
February 1, 1994 and amended on December 15, 1994, February 1, 1995, May 1, 1995,
January 1, 1996 and March 1, 1996
99-B.8.8 Fifth Amendment dated as of May 1, 1997 to the Fund Participation Agreement *
between Aetna Life Insurance and Annuity Company, Variable Insurance Products
Fund and Fidelity Distributors Corporation dated February 1, 1994 and amended on
December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996 and March 1, 1996
99-B.8.9 Sixth Amendment dated November 6, 1997 to the Fund Participation Agreement *
between Aetna Life Insurance and Annuity Company, Variable Insurance Products
Fund and Fidelity Distributors Corporation dated February 1, 1994 and amended on
December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996, March 1, 1996
and May 1, 1997
</TABLE>
*Incorporated by reference
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ----------- -------
<S> <C> <C>
99-B.8.10 Seventh Amendment dated as of May 1, 1998 to the Fund Participation Agreement *
between Aetna Life Insurance and Annuity Company, Variable Insurance Products
Fund and Fidelity Distributors Corporation dated February 1, 1994 and amended on
December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996, March 1,
1996, May 1, 1997 and November 6, 1997
99-B.8.11 Service Agreement between Aetna Life Insurance and Annuity Company and Fidelity *
Investments Institutional Operations Company dated as of November 1, 1995
99-B.8.12 Amendment dated January 1, 1997 to Service Agreement between Aetna Life *
Insurance and Annuity Company and Fidelity Investments Institutional Operations
Company dated as of November 1, 1995
99-B.8.13 Service Contract between Fidelity Distributors Corporation and Aetna Life *
Insurance and Annuity Company dated May 2, 1997
99-B.8.14 Fund Participation Agreement among Janus Aspen Series and Aetna Life Insurance *
and Annuity Company and Janus Capital Corporation dated December 8, 1997
99-B.8.15 Amendment dated October 12, 1998 to Fund Participation Agreement among Janus *
Aspen Series and Aetna Life Insurance and Annuity Company and Janus Capital
Corporation dated December 8, 1997
99-B.8.16 Service Agreement between Janus Capital Corporation and Aetna Life Insurance and *
Annuity Company dated December 8, 1997
99-B.8.17 Fund Participation Agreement dated March 11, 1997 between Aetna Life Insurance *
and Annuity Company and Oppenheimer Variable Annuity Account Funds and
Oppenheimer Funds, Inc.
</TABLE>
*Incorporated by reference
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ----------- -------
<S> <C> <C>
99-B.8.18 Service Agreement effective as of March 11, 1997 between Oppenheimer Funds, Inc. *
and Aetna Life Insurance and Annuity Company
99-B.9 Opinion and Consent of Counsel **
99-B.10 Consent of Independent Auditors **
99-B.13 Schedule for Computation of Performance Data *
99-B.15.1 Powers of Attorney
-------------
99-B.15.2 Authorization for Signatures *
</TABLE>
*Incorporated by reference
**To be filed by amendment
--------------------------------------------------
Aetna Life Insurance and Annuity Company
Home Office: 151 Farmington Avenue
Hartford, Connecticut 06156
(800) 238-6273
A Stock Company
Aetna Life Insurance and Annuity Company, herein called Aetna, agrees to pay the
benefits stated in this contract.
Individual Single Premium Immediate Fixed, Variable or Combination Annuity
Contract (Nonparticipating)
Right to Cancel
- -------------------------------------------------------------------------------
THE CONTRACT HOLDER MAY CANCEL THIS CONTRACT WITHIN 10 DAYS OF RECEIVING IT BY
RETURNING THIS CONTRACT, ALONG WITH A WRITTEN NOTICE, TO AETNA AT THE ABOVE
ADDRESS OR TO THE AGENT FROM WHOM IT WAS PURCHASED. WITHIN 7 DAYS AFTER AETNA
RECEIVES THE NOTICE OF CANCELLATION AND THIS CONTRACT AT ITS HOME OFFICE, AETNA
WILL RETURN THE ENTIRE CONSIDERATION PAID LESS ANY PAYMENTS MADE PLUS ANY
INCREASE OR MINUS ANY DECREASE IN THE ACCOUNT VALUE OF ANY FUNDS ALLOCATED TO
THE SEPARATE ACCOUNT.
Signed at the Home Office on the Effective Date.
- ----------------------- --------------------
President Secretary
This contract sets forth, in detail, all of the rights and obligations of both
the Contract Holder and Aetna. IT IS THEREFORE IMPORTANT THAT YOU READ THIS
CONTRACT CAREFULLY.
This contract and any attached documents constitute the entire legal
relationship between Aetna and the Contract Holder.
ALL PAYMENTS AND VALUES PROVIDED BY THE CONTRACT, WHEN BASED ON INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT.
A050SP99
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A050SP99 Page 2
<PAGE>
Table of Contents
<TABLE>
<S> <C>
Separate Account .................................................... 6
Charges to Separate Account .................................... 6
Variable Annuity Assumed Annual Net Return Rate ................ 6
Transfers ........................................................... 6
I. DEFINITIONS ...................................................... 7
1.01 Annuitant/Joint Annuitant ................................ 7
1.02 Annuity .................................................. 7
1.03 Beneficiary(ies) ......................................... 7
1.04 Contract Holder .......................................... 7
1.05 Fixed Annuity ............................................ 7
1.06 Fund(s) .................................................. 7
1.07 Guaranteed Payment ....................................... 7
1.08 Life Annuity ............................................. 7
1.09 Payee .................................................... 7
1.10 Period Certain Annuity ................................... 7
1.11 Separate Account ......................................... 8
1.12 Survivor ................................................. 8
1.13 Valuation Date ........................................... 8
1.14 Valuation Period ......................................... 8
1.15 Variable Annuity ........................................ 8
II. GENERAL PROVISIONS .............................................. 8
2.01 Premiums ................................................. 8
2.02 Payments ................................................. 8
2.03 Change of Contract ....................................... 8
2.04 Ownership ................................................ 8
2.05 Misstatements and Adjustments ............................ 9
2.06 Incontestability ......................................... 9
2.07 Beneficiary Designation .................................. 9
2.08 Nonparticipating Contract ................................ 9
2.09 State Laws ............................................... 9
III. VARIABLE ANNUITY PROVISIONS .................................... 9
3.01 Fund Annuity Units - Separate Account .................... 9
3.02 Fund Annuity Unit Value .................................. 9
3.03 Fund Annuity Net Return Factors .......................... 9
3.04 Transfer(s) .............................................. 10
3.05 Notice to the Contract Holder ............................ 10
3.06 Change of Fund(s) ........................................ 10
IV. BENEFIT PROVISIONS .............................................. 11
4.01 Death Benefit Provision ................................... 11
</TABLE>
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Page 4
<PAGE>
SPECIFICATIONS
<TABLE>
<S> <C> <C> <C>
Contract Number: [xxxx] Contract Effective Date: [xxxx]
Annuitant: [xxxx] Annuitant Issue Age: [xxxx]
Joint Annuitant: [xxxx] Joint Annuitant Issue Age: [xxxx]
First Payment Date: [xxxx] Payment Frequency: [xxxx]
Single Premium: [xxxx]
Contract Holder: [xxxx]
</TABLE>
SCHEDULE OF BENEFITS
Joint and 100% Survivor Annuity with Guaranteed Payments: Annuity payments begin
on the First Payment Date and will continue for the lives of the Annuitant and
Joint Annuitant. At the death of either the Annuitant or Joint Annuitant, the
payment amount will continue to be paid for the life of the survivor. If the
survivor dies prior to the payment of all guaranteed payments, any remaining
payments will be paid to the beneficiary.
Payment Information: Payments will be made on a Fixed basis.
Number of Guaranteed Payments: [xxxx]
Fixed Payment from General Account: [xxxx]
Fixed Annuity Present Value Interest Rate: [xxxx]%
FUNDING ELECTIONS
<TABLE>
<CAPTION>
Number of Fund's
Percent Fund Name Annuity Units Per Payment:
<S> <C> <C>
[xxxx] [xxxx] [xxxx]
</TABLE>
Variable Annuity Assumed Annual Net Return Rate: [xxxx]%
Page 5
<PAGE>
Contract Schedule
Separate Account
- -------------------------------------------------------------------------------
Charges to Separate Account
A daily charge at an annual effective rate of 1.25% for mortality
and expense risk and profit (M & E) is deducted from any portion
of the account value allocated to a Variable Annuity. A daily
charge at an annual effective rate of up to 0.25% for
administration is deducted from any portion of the account value
allocated to a Variable Annuity.
Variable Annuity Assumed Annual Net Return Rate
If a Variable Annuity is chosen, an assumed annual net return
rate of 5.0% may be elected. If 5.0% is not elected, Aetna will
use an assumed annual net return rate of 3.5%.
The daily net return rate factor for an assumed annual net return
rate of 3.5% per year is 0.9999058. The daily net return rate
factor for an assumed annual net return rate 5.0% per year is
0.9998663.
If the portion of a Variable Annuity payment for any Fund is not
to decrease, the Annuity return factor under the Separate Account
for that Fund must be:
a) 4.75% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity payments commence if an assumed annual net return
rate of 3.5% is chosen; or
b) 6.25% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity payments commence, if an assumed annual net return
rate of 5% is chosen.
Transfers
- -------------------------------------------------------------------------------
Maximum Number of Allowable Fund Transfers: Twelve per calendar Year
Page 6
<PAGE>
I. DEFINITIONS
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1.01 Annuitant/Joint Annuitant
An individual named on the Specifications page of this contract
(1) whose death terminates or adjusts the amount of
life-contingent payments, and/or (2) whose death results in the
payment of death benefits; a measured life.
1.02 Annuity
Payment of a specified amount(s) or specified number of units
made:
a) On specified dates or intervals for the lifetime of one or
more Annuitants with or without Guaranteed Payments; or
b) On specified dates or intervals for a specified period of
time.
Annuity benefits payable under this contract are shown in the
Schedule of Benefits on the Specifications page.
1.03 Beneficiary(ies)
The person(s), named by the Contract Holder, entitled to receive
death benefits, if any, under the terms of this contract.
1.04 Contract Holder
The person to whom this contract is issued. Aetna reserves the
right to limit ownership to natural persons.
1.05 Fixed Annuity
An Annuity that is not a Variable Annuity.
1.06 Fund(s)
The open-end registered management investment companies whose
shares are purchased by the Separate Account to fund the
benefits provided by the contract.
1.07 Guaranteed Payment
A payment that is due whether or not the Annuitant, or Joint
Annuitant, if applicable, is alive on the payment due date, as
described in the Schedule of Benefits on the Specifications
page.
1.08 Life Annuity
An Annuity with payments that are based solely on whether or not
the Annuitant, or Joint Annuitant, if applicable, is alive on
the payment due date as described in the Schedule of Benefits on
the Specifications page.
1.09 Payee
A person that receives Annuity payments. The Contract Holder
shall be the Payee unless the Contract Holder designates
otherwise in writing.
1.10 Period Certain Annuity
An Annuity with a specified number of Guaranteed Payments
without a life contingency.
Page 7
<PAGE>
1.11 Separate Account
An account, established by Aetna under Section 38a-433 of the
Connecticut General Statutes, that buys and holds shares of the
Fund(s) available under this contract. Income, gains or losses,
realized or unrealized are credited or charged to the Separate
Account without regard to other income, gains or losses of
Aetna. Aetna owns the assets held in the Separate Account and is
not a trustee of such amounts. Amounts in the Separate Account
are not generally guaranteed and are held at market value. The
assets of the Separate Account, to the extent of reserves and
other contract liabilities of the Separate Account, cannot be
charged with other Aetna liabilities arising out of any other
Aetna business.
1.12 Survivor
With an Annuity based on the lives of an Annuitant and Joint
Annuitant, the individual who is not the first to die.
1.13 Valuation Date
The date and time on which a Fund Annuity Unit Value is
calculated. Currently, this calculation will be determined at
the close of business of the New York Stock Exchange on any
normal business day, Monday through Friday, that the New York
Stock Exchange is open.
1.14 Valuation Period
The period of time between successive Valuation Dates.
1.15 Variable Annuity
An Annuity with payments that vary with the net investment
results of the Funds available under this contract. Aetna
reserves the right to limit the Fund(s) available with the
Variable Annuity Payment Guarantee, if applicable.
II. GENERAL PROVISIONS
- -------------------------------------------------------------------------------
2.01 Premium
The amount of the premium applied to this contract will be the
premium received minus a deduction for premium taxes, if any.
2.02 Payments
Aetna will pay to the Payee a Fixed or Variable Annuity or a
combination of the two as selected by the Contract Holder and as
shown in the Schedule of Benefits on the Specifications page.
Aetna discharges its obligation to pay when it makes payment by
check or electronic funds transfer to the Payee's address or the
bank that Aetna has on record as of 15 business days before the
payment due date.
We reserve the right to suspend any life-contingent payments to
a Payee if acceptable proof of life of an Annuitant or Joint
Annuitant is not furnished when requested.
2.03 Change of Contract
Only an authorized officer of Aetna may change the terms of this
contract. Aetna reserves the right to modify this contract to
meet the requirements of applicable state and federal laws or
regulations. Aetna will notify the Contract Holder in writing of
any changes.
2.04 Ownership
This is a contract between the Contract Holder and Aetna. The
Contract Holder has title to the contract and, during the
lifetime of the Annuitant, and, if applicable, Joint Annuitant,
all rights to amounts held in the contract. Any choice allowed
under this contract must be made by the Contract Holder in
writing, unless Aetna allows otherwise. Until receipt of such
choices in Aetna's home office, Aetna may rely on any previous
choices made.
Page 8
<PAGE>
The contract is not subject to the claims of any creditors
except to the extent permitted by law.
Ownership of the contract may be changed to the extent permitted
by law by notifying Aetna in writing in a form acceptable to
Aetna. No such ownership change is binding until such
notification is received and recorded by Aetna at its home
office. Aetna reserves the right not to accept assignment or
transfer to a non natural person.
2.05 Misstatements and Adjustments
If the age, sex, or any relevant fact concerning any Annuitant
is found to be misstated, the correct facts will be used to
adjust payments.
2.06 Incontestability
Aetna will not contest this contract from its effective date.
2.07 Beneficiary Designation
If the contract provides for any Guaranteed Payments following
the death of the Annuitant, and the Joint Annuitant if
applicable, the Contract Holder has the right to name a
Beneficiary(ies).
The Beneficiary designation may be changed by the Contract
Holder during the lifetime of the Annuitant, and, if applicable,
the Joint Annuitant, by sending written notice of the change in
a form acceptable to Aetna to Aetna's home office. Such change
will not be effective until received and recorded by Aetna.
In all cases, Aetna will pay death benefits based on the last
written Beneficiary designation it has on record on the date of
the death.
2.08 Nonparticipating Contract
The Contract Holder or Beneficiaries do not have a right to
share in the earnings of Aetna.
2.09 State Laws
This contract complies with the laws of the state in which it is
delivered. Annuity payments under this contract are equal to or
greater than the minimum required by such laws.
III. VARIABLE ANNUITY PROVISIONS
- -------------------------------------------------------------------------------
3.01 Fund Annuity Units - Separate Account
The initial number of a Fund's Annuity units is stated on the
Specifications page. Each future payment is equal to the sum of
the products of each Fund Annuity unit value multiplied by the
appropriate number of units. The Fund Annuity unit value on the
tenth Valuation Date prior to the due date of the payment is
used.
3.02 Fund Annuity Unit Value
For any Valuation Date, a Fund's Annuity unit value is equal to:
a) The value for the preceding Valuation Date; multiplied by
b) The Annuity net return factor(s) for the Valuation Period;
multiplied by
c) A factor to reflect the assumed annual net return rate.
The factors for the assumed annual net return are shown on the
Contract Schedule.
3.03 Fund Annuity Net Return Factors
The Annuity net return factor(s) are used to compute all
Separate Account Annuity unit values for any Fund. The Annuity
net return factor for each Fund is equal to 1.0000000 plus the
net return rate.
Page 9
<PAGE>
The net return rate is equal to:
a) The value of the shares of the Fund held by the Separate
Account at the end of a Valuation Period; minus
b) The value of the shares of the Fund held by the Separate
Account at the start of the Valuation Period; plus or
minus
c) Taxes (or reserves for taxes) on the Separate Account
(if any); divided by
d) The total value of the Fund Annuity units of the Separate
Account at the start of the Valuation Period; minus
e) A Separate Account charge at an annual effective rate as
shown on the Contract Schedule for Annuity mortality and
expense risks and profit and a daily administrative
charge which will not exceed the amount shown on the
Contract Schedule on an annual basis. The daily
administrative charge will be established on the
Effective Date of this contract.
A net return rate may be more or less than 0%.
The value of a share of the Fund is equal to the net assets of
the Fund divided by the number of shares outstanding.
3.04 Transfer(s)
At the request of a Contract Holder, all or any portion of the
account value may be transferred from any Fund to any other
allowable Fund. Transfers will be processed as of the Valuation
Date next following when a transfer request is received in good
order at Aetna's home office. The maximum number of allowable
transfers in a calendar year is shown on the Contract Schedule.
Aetna reserves the right to increase the number of allowable
transfers.
Transfer requests must be expressed as a percentage of the
allocation among the Funds of the amount upon which the Variable
Annuity will be based. Aetna may establish a minimum transfer
amount.
3.05 Notice to the Contract Holder
Once a year, Aetna will notify the Contract Holder of:
a) The number of Fund(s) Annuity units; and
b) The value of Fund(s) Annuity units.
Such numbers or values will be as of a date no more than 60 days
before the date of the notice.
3.06 Change of Fund(s)
The assets of the Separate Account are segregated by Fund. If
the shares of any Fund are no longer available for investment by
the Separate Account or if in Aetna's judgment further
investment in such shares should become inappropriate in view of
the purpose of the contract, Aetna may cease to make such Fund
shares available for investment under the contract
prospectively, or Aetna may substitute shares of another Fund
for shares already acquired. Aetna may also, from time to time,
add additional Funds. Any elimination, substitution or addition
of Funds will be done in accordance with applicable state and
federal securities laws. Aetna reserves the right to substitute
shares of another Fund for shares already acquired without a
proxy vote.
Page 10
<PAGE>
IV. BENEFIT PROVISIONS
- -------------------------------------------------------------------------------
4.01 Death Benefit Provision
a) If the Annuitant dies, or under a joint Annuity option the
Survivor dies, any remaining Guaranteed Payments will be paid
to the Beneficiary in the form specified in the Schedule of
Benefits on the Specifications page. Such payments will be
paid at least as rapidly as under the method of distribution
then in effect. Within six months of such death, the
Beneficiary may elect to receive the withdrawal value of any
remaining Guaranteed Payments less any early withdrawal
charge. The rate used to determine the withdrawal value will
be the Fixed Annuity Present Value Interest Rate shown on the
Specifications page. No early withdrawal charge will apply to
the withdrawal value in this situation.
If this contract is issued as a Variable Period Certain
Annuity, the Beneficiary may elect to receive the withdrawal
value of any remaining Guaranteed Payments at any time. No
early withdrawal charge will apply to the withdrawal value in
this situation.
b) If the Contract Holder who is not the Annuitant(s) dies,
payments will be paid to the Payee in the form specified in
the Schedule of Benefits on the Specifications page. If no
Payee designated by the Contract Holder survives the death of
the Contract Holder, payments will be made to the Annuitant.
Such payments will be paid at least as rapidly as under the
method of distribution then in effect.
c) If the Contract Holder dies before the annuity starting date
the entire interest in the contract must be distributed
within five years of the date of death, or payments may be
made over the life or over a period not extending beyond the
life expectancy of the Beneficiary or Payee, as applicable,
provided such payments begin not later than one year after
the date of death. The annuity starting date is generally
defined by the Internal Revenue Code to mean the first day of
the period (month, quarter, half-year, year depending on
whether payments will be made monthly, quarterly,
semi-annually or annually) which ends on the date of the
first annuity payment. This provision will not apply if the
Beneficiary or Payee, as applicable, is the Contract Holder's
spouse.
Page 11
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<PAGE>
- -------------------------------------------------------------------------------
Aetna Life Insurance and Annuity Company
Home Office: 151 Farmington Avenue
Hartford, Connecticut 06156
(800) 238-6273
Individual Single Premium Immediate Fixed, Variable or
Combination Annuity Contract Nonparticipating
- -------------------------------------------------------------------------------
ALL PAYMENTS AND VALUES PROVIDED BY THE CONTRACT, WHEN BASED ON INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT.
A050SP99
Aetna Life Insurance and Annuity Company
ENDORSEMENT
The Contract is hereby endorsed as follows:
New sections entitled Withdrawal Frequency and Amounts and Early Withdrawal
Charge Schedule are added to the Contract Schedule to include the following
language
Withdrawal Frequency and Amounts
Fixed Period Certain Annuity Withdrawals: Under a Fixed Period
Certain Annuity, withdrawals may be elected once a year. No
withdrawals are allowed from a Fixed Period Certain Annuity in the
first contract year. In subsequent contract years, full or partial
withdrawals are allowed, provided that under a partial withdrawal
the remaining Annuity payments would equal [$50] or more.
Early Withdrawal Charge Schedule
<TABLE>
<CAPTION>
Early Withdrawal Charge
Number of Years from Contract Effective Date (% of Withdrawal Value)
---------------------------------------------------------------------------
<S> <C>
1 or more, but fewer than 2 6%
2 or more, but fewer than 3 5%
3 or more, but fewer than 4 4%
4 or more, but fewer than 5 3%
5 or more, but fewer than 6 2%
6 or more, but fewer than 7 1%
7 or more 0%
</TABLE>
If this contract is established as a rollover from another contract
issued by Aetna or an affiliate, the early withdrawal charge will be
determined according to the effective date of the account under such
predecessor contract.
New sections entitled Withdrawal/Partial Withdrawal and Withdrawal Value are
added to "Benefit Provisions" to include the following language:
4.02 Withdrawal/Partial Withdrawal
If this contract is issued as a Fixed Period Certain Annuity as
described on the Specifications page, the Contract Holder may elect
to receive the withdrawal value of all or a portion of the
Guaranteed Payments. If a portion of the Guaranteed Payments under a
Fixed Period Certain Annuity is withdrawn, the remaining Annuity
payments will be reduced proportionally. Withdrawals are subject to
an early withdrawal charge as shown on the Contract Schedule page,
unless an exception under this contract applies.
4.03 Withdrawal Value
a) The withdrawal value is equal to the present value of the
remaining Guaranteed Payments calculated using the assumed
net return rate stated on the Contract Schedule.
b) All withdrawal values will be determined as of the
Valuation Date next following when a written request for
withdrawal is received in good order by Aetna at its home
office.
c) Under a Fixed Period Certain Annuity, the withdrawal value
is equal to the present value of the remaining Guaranteed
Payments calculated using the adjusted contract rate.
SPIAE99
<PAGE>
The adjusted contract rate equals:
(Rate of Return) + WY - IY
where: Rate of Return is the Fixed Annuity Present Value Interest
Rate shown on the Specifications page
WY is the Withdrawal Yield
IY is the Issue Yield
WY is determined as follows:
1) WY is the average of the yields, as published in the Wall
Street Journal on the Friday before the date of
withdrawal, of the three, or more if Aetna deems
necessary, noncallable noninflation adjusted Treasury
Notes or Bonds maturing on or closest to the Withdrawal
Duration Date.
2) "Withdrawal Duration Date" is the date (month and year)
obtained when the withdrawal duration is added to the
date of withdrawal.
3) "Withdrawal Duration" equals 1 plus the number of whole
years from the date of withdrawal until the final
Guaranteed Payment is due, divided by 2. Any resulting
fraction will be rounded up to the next whole number.
IY is determined as follows:
1) IY is the average of the yields as published in the Wall
Street Journal on the Friday before the Contract Effective
Date, of the three, or more if Aetna deems necessary,
noncallable noninflation adjusted Treasury Notes or Bonds
maturing on or closest to the Issue Duration Date.
2) "Issue Duration Date" (month and year) is obtained when
Issue Duration is added to the Contract Effective Date.
3) "Issue Duration" equals 1 plus the number of whole years
from issue until the final payment is due, divided by 2.
Any resulting fraction will be rounded up to the next
whole number.
The section entitled Death Benefit Provision is amended by replacing item a)
and adding item d) with the following language:
a) If the Annuitant dies, or under a joint Annuity option the
Survivor dies, any remaining Guaranteed Payments will be
paid to the Beneficiary as specified in the Schedule of
Benefits on the Specifications page. Such payments will be
paid at least as rapidly as under the method of
distribution then in effect. The Beneficiary may elect to
receive the withdrawal value of any remaining Guaranteed
Payments. No early withdrawal charge will apply to the
withdrawal value in this situation.
d) The withdrawal value under this death benefit provision
will be determined as of the Valuation Date next following
when proof of death acceptable to Aetna and a request for
payment are received in good order at Aetna's home office.
If this contract is issued as a Fixed Period Certain
Annuity, the withdrawal value will be determined as
described in the section entitled withdrawal value.
Endorsed and made a part of this contract on the Contract Effective Date.
----------------------------------------
President
Aetna Life Insurance and Annuity Company
SPIAE99
Aetna Life Insurance and Annuity Company
ENDORSEMENT
The Contract is hereby endorsed as follows:
New sections entitled Withdrawal Frequency and Amounts and Early Withdrawal
Charge Schedule are added to the Contract Schedule to include the following
language
Withdrawal Frequency and Amounts
Variable Annuity Withdrawals: Under a Variable Period Certain
Annuity full or partial withdrawals are allowed provided that
under a partial withdrawal the remaining annuity payments would
equal [$50], or more.
Early Withdrawal Charge Schedule
<TABLE>
<CAPTION>
Early Withdrawal Charge
Number of Years from Contract Effective Date (% of Withdrawal Value)
------------------------------------------------------------------------------
<S> <C>
Fewer than 1 7%
1 or more, but fewer than 2 6%
2 or more, but fewer than 3 5%
3 or more, but fewer than 4 4%
4 or more, but fewer than 5 3%
5 or more, but fewer than 6 2%
6 or more, but fewer than 7 1%
7 or more 0%
</TABLE>
If this contract is established as a rollover from another
contract issued by Aetna or an affiliate, the early withdrawal
charge will be determined according to the effective date of the
account under such predecessor contract.
New sections entitled Withdrawal/Partial Withdrawal and Withdrawal Value are
added to "Benefit Provisions" to include the following language:
4.02 Withdrawal/Partial Withdrawal
If this contract is issued as a Variable Period Certain Annuity,
the Contract Holder may elect to receive the withdrawal value of
all or a portion of the Guaranteed Payments. If a portion of the
Guaranteed Payments under a Variable Period Certain Annuity is
withdrawn, the remaining Variable Annuity payments will be reduced
pro-rata from all of the Funds or otherwise as the Contract Holder
so designates. Withdrawals may be subject to a early withdrawal
charge as shown on the Contract Schedule.
SPIAEVW99
<PAGE>
4.03 Withdrawal Value
a) Under a Variable Period Certain Annuity, the withdrawal
value is equal to the present value of the remaining
Guaranteed Payments calculated using the assumed annual net
return rate stated on the Contract Schedule.
b) All withdrawal values will be determined as of the
Valuation Date next following when a written request for
withdrawal is received in good order by Aetna at its home
office.
Endorsed and made a part of this contract on the Contract Effective Date.
----------------------------------------
President
Aetna Life Insurance and Annuity Company
SPIAEVW99
Aetna Life Insurance and Annuity Company
ENDORSEMENT
The Contract is hereby endorsed as follows:
New sections entitled Withdrawal Frequency and Amounts and Early Withdrawal
Charge Schedule are added to the Contract Schedule to include the following
language:
Withdrawal Frequency and Amounts
Life with Guaranteed Period Annuity Withdrawals: Withdrawals may
be elected within the Guaranteed Period once a year. No
withdrawals are allowed from a Life with Guaranteed Period Annuity
in the first contract year. In subsequent contract years within
the Guaranteed Period, full or partial withdrawals are allowed,
provided that under a partial withdrawal the remaining Annuity
payments would equal [$50] or more. At the end of the Guaranteed
Period, payments as defined in section 2.02 will continue for the
life of the annuitant or joint annuitant if applicable.
Early Withdrawal Charge Schedule
<TABLE>
<CAPTION>
Early Withdrawal Charge
Number of Years from Contract Effective Date (% of Withdrawal Value)
---------------------------------------------------------------------------------
<S> <C>
1 or more, but fewer than 2 6%
2 or more, but fewer than 3 5%
3 or more, but fewer than 4 4%
4 or more, but fewer than 5 3%
5 or more, but fewer than 6 2%
6 or more, but fewer than 7 1%
7 or more 0%
</TABLE>
If this contract is established as a rollover from another
contract issued by Aetna or an affiliate, the early withdrawal
charge will be determined according to the effective date of the
account under such predecessor contract.
New sections entitled Withdrawal/Partial Withdrawal and Withdrawal Value are
added to "Benefit Provisions" to include the following language:
4.02 Withdrawal/Partial Withdrawal
If this contract is issued as a Life with Guaranteed Period
Annuity as described on the Specifications page, the Contract
Holder may elect to receive the withdrawal value of all or a
portion of the Guaranteed Payments in the amounts and frequency as
stated on the Contract Schedule. If a portion of the Guaranteed
Payments under a Life with Guaranteed Period Annuity is withdrawn,
the remaining Annuity payments within the Guaranteed Period will
be reduced proportionally. Withdrawals are subject to an early
withdrawal charge as shown on the Contract Schedule, unless an
exception under this contract applies.
SPIAEW99
<PAGE>
4.03 Withdrawal Value
The Withdrawal Value is equal to:
a) For the variable portion the present value of the
remaining Guaranteed Payments calculated using the
assumed annual net return rate stated on the
Specifications page effective as of the Valuation Date
next following the receipt of the written request by
Aetna at its home office. The resulting value will be
reduced by any applicable early withdrawal charge.
b) For the fixed portion the present value of the remaining
Guaranteed Payments calculated using the adjusted contract
rate, less any early withdrawal charge, if applicable. The
adjusted contract rate equals the Fixed Annuity Present
Value Interest Rate, as shown in the Specifications page,
plus the increase or minus the decrease in the published
10 year on-the-run Treasury rate from the contract
effective date to the withdrawal calculation date.
The section entitled Death Benefit Provision is amended by replacing item a) and
adding item d) with the following language:
a) If the Annuitant dies, or under a joint Annuity option the
Survivor dies, any remaining Guaranteed Payments will be
paid to the Beneficiary as specified in the Schedule of
Benefits on the Specifications page. Such payments will be
paid at least as rapidly as under the method of
distribution then in effect. The Beneficiary may elect to
receive the withdrawal value of any remaining Guaranteed
Payments. No early withdrawal charge will apply to the
withdrawal value in this situation.
d) The withdrawal value under this death benefit provision
will be determined as of the Valuation Date next following
when proof of death acceptable to Aetna and a request for
payment are received in good order at Aetna's home office.
Endorsed and made a part of this contract on the Contract Effective Date.
----------------------------------------
President
Aetna Life Insurance and Annuity Company
SPIAEW99
Aetna Life Insurance and Annuity Company
ENDORSEMENT
The Contract is hereby endorsed as follows:
The Definitions section is amended by adding the following:
1.16 Variable Annuity Minimum Income Guarantee:
Available only with Life Annuity options, the Variable Annuity
Minimum Income Guarantee will ensure that the annuity payment will
never be less than the Guaranteed Minimum Income Payment shown in
the Schedule of Benefits on the Specifications page.
The section Charges to Separate Account on the Contract Schedule is amended by
adding the following:
If the Variable Annuity Minimum Income Guarantee has been chosen, an
additional daily charge at an annual effective rate of 1.00% will be
deducted from any portion of the account value allocated to a Variable
Annuity.
The section Variable Annuity Assumed Annual Net Return Rate on the Contract
Schedule is deleted and replaced with the following language.
If the Variable Annuity Minimum Income Guarantee has been chosen, an
assumed annual net return rate of 3.5% will apply.
The daily net return rate factor for an assumed annual net return rate of
3.5% per year is 0.9999058.
If the portion of a Variable Annuity payment for any Fund is not to
decrease, the Annuity return factor under the Separate Account for that
Fund must be [5.75%] on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time Annuity
payments commence for an assumed annual net return rate of 3.5%.
Should the Variable Annuity payment, as described in 3.01, fall below the
Guaranteed Minimum Income Payment, Aetna will calculate and pay the
difference between the Guaranteed Minimum Income Payment and the current
Variable Annuity payment such that the total payment remitted for that
payment date will not be less than the Guaranteed Minimum Income Payment.
The section Transfers is deleted and replaced with the following:
If the Variable Annuity Minimum Income Guarantee is in effect no
transfers will be allowed.
Endorsed and made a part of this contract on the Contract Effective Date.
President
Aetna Life Insurance and Annuity Company
SPIAEVPG99
<PAGE>
EXAMPLE SPECIFICATIONS
<TABLE>
<S> <C> <C> <C>
Contract Number: M2828 123123121 Contract Effective Date: February 14, 1999
Contract Holder: John F. Smith Single Premium: $10,000.00
Annuitant: John F. Smith Joint Annuitant: Mary F. Smith
Annuitant Issue Age: 56 Joint Annuitant Issue Age: 55
First Payment Date: March 14, 1999 Payment Frequency: Monthly
</TABLE>
SCHEDULE OF BENEFITS
Joint and Full Survivor Annuity: Annuity payments begin on the First Payment
Date and will continue for the lives of the Annuitant and Joint Annuitant. At
the death of either the Annuitant or Joint Annuitant, the payment amount will
continue to be paid for the life of the Survivor. Payments cease upon the death
of the Survivor.
Payment Information: Payments will be made on a Fixed and Variable basis
Fixed Payment from General Account: $ xx.xx
Fixed Annuity Present Value Interest Rate: 5.9%
<TABLE>
<CAPTION>
Number of Fund's Annuity
Variable Funding Elections: Units per Payment:
<S> <C>
Aetna Index Plus Large Cap VP x.xxxx (Rule #1)
</TABLE>
Variable Annuity Assumed Annual Net Return Rate: 3.5% (Rule #2)
Guaranteed Minimum Income Payment: 90% of the Initial Variable Annuity Payment
valued as of the first payment date (Rule #3)
SPIAEVPG99
Aetna Life Insurance and Annuity Company
ENDORSEMENT
The contract is endorsed to permit the contract to be used to pay benefits under
a pension or profit sharing plan qualified under Section 401(a) of the Internal
Revenue Code ("Code") and, if applicable, the Employee Retirement Income
Security Act (ERISA). The following provisions apply and, in the case of a
conflict with any provision in the contract, this endorsement controls.
Nontransferable. The contract is nontransferable in accordance with Code Section
401(g). The contract may not be sold, assigned, transferred or pledged as
collateral for a loan or as security for the performance of an obligation or for
any other purpose, except pursuant to a qualified domestic relations order as
described in Code Section 414(p). This restriction shall not apply to the
trustee of any trust described in Code Section 401(a), which is exempt from tax
under Section 501(a).
Contract Holder. The Contract Holder must be the employer sponsoring the plan
or, if the plan has a trust, the trustee of such trust. The Contract Holder may
assign ownership of the contract to the Participant in which case the
Participant shall become the Contract Holder.
Participant. The Participant is the participant under the Code Section 401(a)
plan on whose behalf the contract is purchased.
Beneficiary. If the Contract Holder is the employer or plan trustee, the
Beneficiary is the Contract Holder. If the contract has been assigned to the
Participant, the Participant shall name a Beneficiary
Distributions. The Annuity payments will only be paid to the Contract Holder, or
to the Participant at the direction of the Contract Holder.
Death Benefit. At the death of the Annuitant, Aetna will pay any remaining
Guaranteed Payments, as directed by the Contract Holder or, if the Participant
is the Contract Holder, by the designated Beneficiary.
Withdrawal/Partial Withdrawal. If the Contract is subject to ERISA and payment
is made in the form of a qualified joint and survivor annuity, as defined in
ERISA Section 205, and the Contract Holder has a right of withdrawal under this
contract, to exercise such right the Contract Holder must certify in a form
acceptable to Aetna that the distribution complies with the waiver and spousal
consent requirements of Code Section 417. In the absence of such certification,
Aetna will pay the withdrawal value to the Contract Holder provided the Contract
Holder is the employer or plan trustee.
Endorsed and made a part of the contract as of the Contract Effective Date.
----------------------------------------
President
Aetna Life Insurance and Annuity Company
E401SP99
Aetna Life Insurance and Annuity Company
ENDORSEMENT
The contract is endorsed in order to meet the requirements of Section 403(b) of
the Internal Revenue Code ("Code") and, if applicable, the Employee Retirement
Income Security Act (ERISA). The following provisions apply and, in the case of
a conflict with any provision in the contract, this endorsement controls.
Nontransferable. The contract is nontransferable in accordance with Code Section
401(g). The contract may not be sold, assigned, transferred or pledged as
collateral for a loan or as security for the performance of an obligation or for
any other purpose, except pursuant to a qualified domestic relations order as
described in Code Section 414(p).
Contract Holder. The Contract Holder must be a participant under a Code Section
403(b) Tax Deferred Annuity program.
Annuitant. The Annuitant is the Contract Holder.
Premium. The premium applied to the contract must be an amount rolled over from
(1) another contract qualified under Code Section 403(b) or a custodial account
qualified under Code Section 403(b)(7), or (2) from an Individual Retirement
Account or Annuity qualified under Code Sections 408(a) or 408(b) that contains
only amounts previously rolled over from a 403(b) Tax Deferred Annuity. Any
amount rolled over from a Code Section 403(b) contract or custodial account must
be eligible for distribution under the withdrawal instructions set forth in Code
Section 403(b)(7) or 403(b)(11), as applicable.
Distributions. The Annuity payments will only be paid to the Contract Holder, or
to an alternate payee pursuant to a qualified domestic relations order as
described in Code Section 414(p).
Commutation/Partial Commutation. If the contract is subject to ERISA and payment
is made in the form of a qualified joint and survivor annuity, as defined in
ERISA Section 205, and if the Contract Holder has a right of commutation under
this contract, to exercise such right the Contract Holder must furnish to Aetna
a waiver and spousal consent satisfying the requirements of ERISA Section 205.
Endorsed and made a part of the contract as of the Contract Effective Date.
----------------------------------------
President
Aetna Life Insurance and Annuity Company
E403SP99
Aetna Life Insurance and Annuity Company
ENDORSEMENT
This contract is endorsed to permit an employer to purchase the contract in
conjunction with a nonqualified deferred compensation plan or a deferred
compensation plan under Section 457 of the Internal Revenue Code ("Code"). The
following provisions apply and, in the case of a conflict with any provision in
the contract, this endorsement controls.
Contract Holder. The Contract Holder must be the employer who sponsors the
deferred compensation plan.
Annuitant. The Annuitant is a participant or plan beneficiary under the deferred
compensation plan.
Beneficiary. The Beneficiary is the Contract Holder.
Death Benefit. At the death of the Annuitant, Aetna will pay any remaining
Guaranteed Payments as directed by the Contract Holder.
Exclusive Benefit. This provision applies if this contract is issued in
conjunction with a Code Section 457(b) deferred compensation plan to a
government employer, as defined in Code Section 457(e)(1)(A). Any amounts
withdrawn or paid from this contract are required to be utilized for the
exclusive benefit of the participant and plan beneficiary in accordance with
Code Section 457(g). This requirement shall be effective (I) immediately if the
plan was not in existence on August 20, 1996 or (ii) if the plan was already for
the exclusive benefit of participants and their beneficiaries in accordance with
Code Section 457(g) and January 1, 1999.
Endorsed and made a part of the contract as of the Contract Effective Date.
----------------------------------------
President
Aetna Life Insurance and Annuity Company
E457PS99
[Aetna logo]
------------------------------------------------------------
Aetna Life Insurance and Annuity Company
Home Office: 151 Farmington Avenue
Hartford, Connecticut 06156
(800) 531-4547
A Stock Company
Aetna Life Insurance and Annuity Company, herein called Aetna, agrees to pay the
benefits stated in this contract.
Group Single Premium Immediate Fixed, Variable or Combination Annuity
Contract (Nonparticipating)
Right to Cancel
- -------------------------------------------------------------------------------
THE CONTRACT HOLDER MAY CANCEL THIS CONTRACT WITHIN 10 DAYS OF RECEIVING IT BY
RETURNING THIS CONTRACT, ALONG WITH A WRITTEN NOTICE, TO AETNA AT THE ABOVE
ADDRESS OR TO THE AGENT FROM WHOM IT WAS PURCHASED. WITHIN 7 DAYS AFTER AETNA
RECEIVES THE NOTICE OF CANCELLATION AND THIS CONTRACT AT ITS HOME OFFICE, AETNA
WILL RETURN THE AMOUNT OF CERTIFICATE HOLDER PURCHASE PAYMENT(S) RECEIVED PLUS
ANY INCREASE OR MINUS ANY DECREASE IN THE ACCOUNT VALUE OF ANY FUNDS ALLOCATED
TO THE SEPARATE ACCOUNT.
Signed at the Home Office on the Effective Date.
President Secretary
The contract sets forth, in detail, all of the rights and obligations
of both the Contract Holder and Aetna. IT IS THEREFORE IMPORTANT THAT
YOU READ THIS CONTRACT CAREFULLY.
The contract and any attached documents constitute the entire legal relationship
between Aetna and the Contract Holder.
ALL PAYMENTS AND VALUES PROVIDED BY THE CONTRACT, WHEN BASED ON
INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT
GUARANTEED AS TO FIXED DOLLAR AMOUNT.
SPIA(GR)-99
<PAGE>
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Page 2
<PAGE>
Table of Contents
<TABLE>
<S> <C>
Separate Account ..............................................................6
Charges to Separate Account ................................................6
Variable Annuity Assumed Annual Net Return Rate ............................6
Transfers .....................................................................6
I. DEFINITIONS ................................................................7
1.01 Account...............................................................7
1.02 Annuitant/Joint Annuitant ............................................7
1.03 Annuity ..............................................................7
1.04 Beneficiary(ies) .....................................................7
1.05 Certificate Holder ...................................................7
1.06 Contract .............................................................7
1.07 Contract Holder ......................................................7
1.08 Fixed Annuity ........................................................7
1.09 Fund(s) ..............................................................7
1.10 Guaranteed Payment ...................................................7
1.11 Life Annuity .........................................................7
1.12 Payee ................................................................8
1.13 Period Certain Annuity ...............................................8
1.14 Separate Account .....................................................8
1.15 Survivor .............................................................8
1.16 Valuation Date .......................................................8
1.17 Valuation Period .....................................................8
1.18 Variable Annuity ...................................................
II. GENERAL PROVISIONS ........................................................8
2.01 Premiums .............................................................8
2.02 Payments .............................................................8
2.03 Change of Contract ...................................................9
2.04 Control of Contract ..................................................9
2.05 Misstatements and Adjustments ........................................9
2.06 Incontestability .....................................................9
2.07 Beneficiary Designation ..............................................9
2.08 Nonparticipating Contract ............................................9
2.09 State Laws
III. VARIABLE ANNUITY PROVISIONS ..............................................9
3.01 Fund Annuity Units - Separate Account ................................9
3.02 Fund Annuity Unit Value ..............................................9
3.03 Fund Annuity Net Return Factors .....................................10
3.04 Transfer(s) .........................................................10
3.05 Notice to the Contract Holder .......................................10
3.06 Change of Fund(s) ...................................................10
IV. BENEFIT PROVISIONS .......................................................11
4.01 Death Benefit Provision ..............................................11
</TABLE>
Page 3
<PAGE>
SPECIFICATIONS
<TABLE>
<S> <C> <C> <C>
Group Certificate No.: [xxxx]
Contract Holder: [xxxx]
Certificate Number: [xxxx] Certificate Number: [xxxx]
Contract Effective
Date: [xxxx] Single Premium:: [xxxx]
Annuitant: [xxxx] Annuitant Issue Age: [xxxx]
Joint Annuitant: [xxxx] Joint Annuitant Issue Age [xxxx]
First Payment Date: [xxxx] Payment Frequency: [xxxx]
Single Premium: [xxxx]
</TABLE>
SCHEDULE OF BENEFITS
Joint and 100% Survivor Annuity with Guaranteed Payments: Annuity payments begin
on the First Payment Date and will continue for the lives of the Annuitant and
Joint Annuitant. At the death of either the Annuitant or Joint Annuitant, the
payment amount will continue to be paid for the life of the survivor. If the
survivor dies prior to the payment of all guaranteed payments, any remaining
payments will be paid to the beneficiary.
Payment Information: Payments will be made on a Fixed basis.
Number of Guaranteed Payments: [xxxx]
Fixed Payment from General Account: [xxxx]
Fixed Annuity Present Value Interest Rate: [xxxx]%
FUNDING ELECTIONS
<TABLE>
<CAPTION>
Number of Fund's
Percent Fund Name Annuity Units Per Payment:
<S> <C> <C>
[xxxx] [xxxx] [xxxx]
</TABLE>
Variable Annuity Assumed Annual Net Return Rate: [xxxx]%
Page 5
<PAGE>
Contract Schedule
Separate Account
- -------------------------------------------------------------------------------
Charges to Separate Account
A daily charge at an annual effective rate of 1.25% for mortality and
expense risk and profit (M & E) is deducted from any portion of the
account value allocated to a Variable Annuity. A daily charge at an
annual effective rate of up to 0.25% for administration is deducted
from any portion of the account value allocated to a Variable Annuity.
Variable Annuity Assumed Annual Net Return Rate
If a Variable Annuity is chosen, an assumed annual net return rate of
5.0% may be elected. If 5.0% is not elected, Aetna will use an assumed
annual net return rate of 3.5%.
The daily net return rate factor for an assumed annual net return rate
of 3.5% per year is 0.9999058. The daily net return rate factor for an
assumed annual net return rate 5.0% per year is 0.9998663.
If the portion of a Variable Annuity payment for any Fund is not to
decrease, the Annuity return factor under the Separate Account for that
Fund must be:
a) 4.75% on an annual basis plus an annual return of up to 0.25% to
offset the administrative charge set at the time Annuity payments
commence if an assumed annual net return rate of 3.5% is chosen;
or
b) 6.25% on an annual basis plus an annual return of up to 0.25% to
offset the administrative charge set at the time Annuity payments
commence, if an assumed annual net return rate of 5% is chosen.
Transfers
- -------------------------------------------------------------------------------
Maximum Number of Allowable Fund Transfers: Twelve per calendar Year
Page 6
<PAGE>
I. DEFINITIONS
- -------------------------------------------------------------------------------
1.01 Account
A record that identifies contract values accumulated on each
Certificate Holder's behalf.
1.02 Annuitant/Joint Annuitant
An individual named on the Specifications page of this contract (1)
whose death terminates or adjusts the amount of life-contingent
payments, and/or (2) whose death results in the payment of death
benefits; a measured life.
1.03 Annuity
Payment of a specified amount(s) or specified number of units made:
a) On specified dates or intervals for the lifetime of one or more
Annuitants with or without Guaranteed Payments; or
b) On specified dates or intervals for a specified period of time.
Annuity benefits payable under this contract are shown in the Schedule
of Benefits on the Specifications page.
1.04 Beneficiary(ies)
The individual or entity entitled to receive any death benefit due
under the Account.
1.05 Certificate Holder
A person who purchases an interest in this Contract as evidenced by a
certificate. Aetna reserves the right to limit ownership to natural
persons. If more than one Certificate Holder owns an Account each
Certificate Holder will be a joint Certificate Holder. Joint
Certificate Holders have joint ownership rights and both must authorize
exercising any ownership rights unless Aetna allows otherwise.
1.06 Contract
The agreement between Aetna and the Contract Holder.
1.07 Contract Holder
The person to whom this contract is issued.
1.08 Fixed Annuity
An Annuity that is not a Variable Annuity.
1.09 Fund(s)
The open-end registered management investment companies whose shares
are purchased by the Separate Account to fund the benefits provided by
the contract.
1.10 Guaranteed Payment
A payment that is due whether or not the Annuitant, or Joint Annuitant,
if applicable, is alive on the payment due date, as described in the
Schedule of Benefits on the Specifications page.
1.11 Life Annuity
An Annuity with payments that are based solely on whether or not the
Annuitant, or Joint Annuitant, if applicable, is alive on the payment
due date as described in the Schedule of Benefits on the Specifications
page.
Page 7
<PAGE>
1.12 Payee
A person that receives Annuity payments. The Certficate Holder shall be
the Payee unless the Certificate Holder designates otherwise in
writing.
1.13 Period Certain Annuity
An Annuity with a specified number of Guaranteed Payments without a
life contingency.
1.14 Separate Account
An account, established by Aetna under Section 38a-433 of the
Connecticut General Statutes, that buys and holds shares of the Fund(s)
available under this contract. Income, gains or losses, realized or
unrealized are credited or charged to the Separate Account without
regard to other income, gains or losses of Aetna. Aetna owns the assets
held in the Separate Account and is not a trustee of such amounts.
Amounts in the Separate Account are not generally guaranteed and are
held at market value. The assets of the Separate Account, to the extent
of reserves and other contract liabilities of the Separate Account,
cannot be charged with other Aetna liabilities arising out of any other
Aetna business.
1.15 Survivor
With an Annuity based on the lives of an Annuitant and Joint Annuitant,
the individual who is not the first to die.
1.16 Valuation Date
The date and time on which a Fund Annuity Unit Value is calculated.
Currently, this calculation will be determined at the close of business
of the New York Stock Exchange on any normal business day, Monday
through Friday, that the New York Stock Exchange is open.
1.17 Valuation Period
The period of time between successive Valuation Dates.
1.18 Variable Annuity
An Annuity with payments that vary with the net investment results of
the Funds available under this contract. Aetna reserves the right to
limit the Fund(s) available with the Variable Annuity Payment
Guarantee, if applicable.
II. GENERAL PROVISIONS
- -------------------------------------------------------------------------------
2.01 Premium
The amount of the premium applied to this contract will be the premium
received minus a deduction for premium taxes, if any.
2.02 Payments
Aetna will pay to the Payee a Fixed or Variable Annuity or a
combination of the two as selected by the Certificate Holder and as
shown in the Schedule of Benefits on the Specifications page. Aetna
discharges its obligation to pay when it makes payment by check or
electronic funds transfer to the Payee's address or the bank that Aetna
has on record as of 15 business days before the payment due date.
We reserve the right to suspend any life-contingent payments to a Payee
if acceptable proof of life of an Annuitant or Joint Annuitant is not
furnished when requested.
2.03 Change of Contract
Only an authorized officer of Aetna may change the terms of this
contract. Aetna will notify the Contract Holder in writing of any
changes. Aetna reserves the right to modify this contract to meet the
requirements of applicable state and federal laws or regulations.
Page 8
<PAGE>
2.04 Control of Contract
This is a contract between the Contract Holder and Aetna. The Contract
Holder has title to the contract. Contract Holder rights are limited to
accepting or rejecting contract modifications. The Certificate Holder
has all other rights to amounts held in the contract. Any choice
allowed under this contract must be made by the Certificate Holder in
writing or both Certificate Holders, if jointly owned. Until receipt of
such choices in Aetna's home office, Aetna may rely on any previous
choices made.
The contract is not subject to the claims of any creditors of the
Contract Holder or Certificate Holder, except to the extent permitted
by law.
The Certificate Holder may assign or transfer his or her rights under
the contract. Aetna reserves the right not to accept assignment or
transfer to a nonnatural person. Any assignment or transfer made must
be submitted to Aetna's Home office in writing and will not be
effective until accepted by Aetna.
2.05 Misstatements and Adjustments
If the age, sex, or any relevant fact concerning any Annuitant is found
to be misstated, the correct facts will be used to adjust payments.
2.06 Incontestability
Aetna will not contest this contract from its effective date.
2.07 Beneficiary Designation
If the contract provides for any Guaranteed Payments following the
death of the Annuitant, and the Joint Annuitant if applicable, the
Certificate Holder has the right to name a Beneficiary(ies). If the
Account is owned jointly, both joint Certificate Holders must agree in
writing to the Beneficiary designated.
The Beneficiary designation may be changed by the Certificate Holder
during the lifetime of the Annuitant, and, if applicable, the Joint
Annuitant, by sending written notice of the change in a form acceptable
to Aetna to Aetna's home office. Such change will not be effective
until received and recorded by Aetna.
In all cases, Aetna will pay death benefits based on the last written
Beneficiary designation it has on record on the date of the death.
2.08 Nonparticipating Contract
The Contract Holder, Certificate Holders or Beneficiaries will not have
a right to share in the earnings of Aetna.
2.09 State Laws
The contract and the certificate comply with the laws of the state in
which it is delivered. Annuity payments are equal to or greater than
the minimum required by such laws.
III. VARIABLE ANNUITY PROVISIONS
- -------------------------------------------------------------------------------
3.01 Fund Annuity Units - Separate Account
The initial number of a Fund's Annuity units is stated on the
Specifications page. Each future payment is equal to the sum of the
products of each Fund Annuity unit value multiplied by the appropriate
number of units. The Fund Annuity unit value on the tenth Valuation
Date prior to the due date of the payment is used.
3.02 Fund Annuity Unit Value
For any Valuation Date, a Fund's Annuity unit value is equal to:
a) The value for the preceding Valuation Date; multiplied by
b) The Annuity net return factor(s) for the Valuation Period;
multiplied by
c) A factor to reflect the assumed annual net return rate.
The factors for the assumed annual net return are shown on the Contract
Schedule.
Page 9
<PAGE>
3.03 Fund Annuity Net Return Factors
The Annuity net return factor(s) are used to compute all Separate
Account Annuity unit values for any Fund. The Annuity net return factor
for each Fund is equal to 1.0000000 plus the net return rate.
The net return rate is equal to:
a) The value of the shares of the Fund held by the Separate Account
at the end of a Valuation Period; minus
b) The value of the shares of the Fund held by the Separate Account
at the start of the Valuation Period; plus or minus
c) Taxes (or reserves for taxes) on the Separate Account (if any);
divided by
d) The total value of the Fund Annuity units of the Separate Account
at the start of the Valuation Period; minus
e) A Separate Account charge at an annual effective rate as shown on
the Contract Schedule for Annuity mortality and expense risks and
profit and a daily administrative charge which will not exceed
the amount shown on the Contract Schedule on an annual basis. The
daily administrative charge will be established on the Effective
Date of this contract.
A net return rate may be more or less than 0%.
The value of a share of the Fund is equal to the net assets of the Fund
divided by the number of shares outstanding.
3.04 Transfer(s)
At the request of a Certificate Holder, all or any portion of the
account value may be transferred from any Fund to any other allowable
Fund. Transfers will be processed as of the Valuation Date next
following when a transfer request is received in good order at Aetna's
home office. The maximum number of allowable transfers in a calendar
year is shown on the Contract Schedule. Aetna reserves the right to
increase the number of allowable transfers.
Transfer requests must be expressed as a percentage of the allocation
among the Funds of the amount upon which the Variable Annuity will be
based. Aetna may establish a minimum transfer amount.
3.05 Notice to the Certificate Holder
Once a year, Aetna will notify the Certificate Holder of:
a) The number of Fund(s) Annuity units; and
b) The value of Fund(s) Annuity units.
Such numbers or values will be as of a date no more than 60 days before
the date of the notice.
3.06 Change of Fund(s)
The assets of the Separate Account are segregated by Fund. If the
shares of any Fund are no longer available for investment by the
Separate Account or if in Aetna's judgment further investment in such
shares should become inappropriate in view of the purpose of the
contract, Aetna may cease to make such Fund shares available for
investment under the contract prospectively, or Aetna may substitute
shares of another Fund for shares already acquired. Aetna may also,
from time to time, add additional Funds. Any elimination, substitution
or addition of Funds will be done in accordance with applicable state
and federal securities laws. Aetna reserves the right to substitute
shares of another Fund for shares already acquired without a proxy
vote.
Page 10
<PAGE>
IV. BENEFIT PROVISIONS
- -------------------------------------------------------------------------------
4.01 Death Benefit Provision
a) If the Annuitant dies, or under a joint Annuity option the
Survivor dies, any remaining Guaranteed Payments will be paid to
the Beneficiary in the form specified in the Schedule of Benefits
on the Specifications page. Such payments will be paid at least
as rapidly as under the method of distribution then in effect.
Within six months of such death, the Beneficiary may elect to
receive the withdrawal value of any remaining Guaranteed Payments
less any early withdrawal charge. The rate used to determine the
withdrawal value will be the Fixed Annuity Present Value Interest
Rate shown on the Specifications page. No early withdrawal charge
will apply to the withdrawal value in this situation.
If this contract is issued as a Variable Period Certain Annuity,
the Beneficiary may elect to receive the withdrawal value of any
remaining Guaranteed Payments at any time. No early withdrawal
charge will apply to the withdrawal value in this situation.
b) If the Certificate Holder who is not the Annuitant(s) dies,
payments will be paid to the Payee in the form specified in the
Schedule of Benefits on the Specifications page. If no Payee
designated by the Contract Holder survives the death of the
Certificate Holder, payments will be made to the Annuitant. Such
payments will be paid at least as rapidly as under the method of
distribution then in effect.
c) If the Certificate Holder dies before the annuity starting date
the entire interest in the contract must be distributed within
five years of the date of death, or payments may be made over the
life or over a period not extending beyond the life expectancy of
the Beneficiary or Payee, as applicable, provided such payments
begin not later than one year after the date of death. The
annuity starting date is generally defined by the Internal
Revenue Code to mean the first day of the period (month, quarter,
half-year, year depending on whether payments will be made
monthly, quarterly, semi-annually or annually) which ends on the
date of the first annuity payment. This provision will not apply
if the Beneficiary or Payee, as applicable, is the Certificate
Holder's spouse.
Page 11
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<PAGE>
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<PAGE>
- -------------------------------------------------------------------------------
Aetna Life Insurance and Annuity Company
Home Office: 151 Farmington Avenue
Hartford, Connecticut 06156
(800) 238-6273
Certificate of Group Annuity Coverage
- -------------------------------------------------------------------------------
ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT, WHEN BASED ON
INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT
GUARANTEED AS TO FIXED DOLLAR AMOUNT.
SPIA(GR)-99
[Aetna Logo] --------------------------------------------------
Aetna Life Insurance and Annuity Company
Home Office: 151 Farmington Avenue
P.O. Box 30670
Hartford, Connecticut 06156-0670
(800) 238-6273
You may call the toll-free number shown above for
answers to questions or to resolve a complaint.
Aetna Life Insurance and Annuity Company (Aetna), a
stock company, agrees to pay the benefits stated in
this contract.
--------------------------------------------------
Certificate of To the Certificate Holder:
Group Annuity
Coverage Aetna certifies that coverage is in force for you
under the stated Group Annuity Contract and
Certificate numbers. All data shown here is taken
from Aetna records and is based upon information
furnished by you.
This Certificate is a summary of the Group Annuity
Contract provisions. It replaces any and all prior
certificates or endorsements issued to you under
the stated Contract and Certificate numbers. This
Certificate is for information only and is not a
part of the Contracts.
The variable features of the Group Contract are
described in parts XXXXX
--------------------------------------------------
Right to Cancel You may cancel your Account within 10 days by
returning it to the agent from whom it was
purchased, or to Aetna at the address shown above.
Within seven days of receiving this Certificate at
its home office, Aetna will return the amount of
Purchase Payment(s) received, plus any increase, or
minus any decrease, on the amount, if any, of
Purchase Payment(s) allocated to the Separate
Account fund(s).
Signed at the Home Office on the Effective Date
President Secretary
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
Contract Holder. Group Annuity Contract Holder No
SPECIMEN SPECIMEN
- --------------------------------------------------------------------------------
Certificate Holder Certificate No.
SPECIMEN SPECIMEN
- --------------------------------------------------------------------------------
Annuitant Name Type of Plan
SPECIMEN SPECIMEN
- --------------------------------------------------------------------------------
</TABLE>
ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT, WHEN BASED ON INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT.
SPIA(GR)-99 CERT Page 1
<PAGE>
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Page 2
<PAGE>
Table of Contents
<TABLE>
<S> <C>
Separate Account ................................................ 6
Charges to Separate Account ................................ 6
Variable Annuity Assumed Annual Net Return Rate ............ 6
Transfers ....................................................... 6
I. DEFINITIONS .................................................. 7
1.01 Annuitant/Joint Annuitant ............................ 7
1.02 Annuity .............................................. 7
1.03 Beneficiary(ies) ..................................... 7
1.04 Certificate Holder ................................... 7
1.04 Contract ............................................. 7
1.04 Contract Holder ...................................... 7
1.05 Fixed Annuity ........................................ 7
1.06 Fund(s) .............................................. 7
1.07 Guaranteed Payment ................................... 7
1.08 Life Annuity ......................................... 7
1.09 Payee ................................................ 7
1.10 Period Certain Annuity ............................... 7
1.11 Separate Account ..................................... 8
1.12 Survivor ............................................. 8
1.13 Valuation Date ....................................... 8
1.14 Valuation Period ..................................... 8
1.15 Variable Annuity .................................... 8
II. GENERAL PROVISIONS .......................................... 8
2.01 Premiums ............................................. 8
2.02 Payments ............................................. 8
2.03 Change of Contract ................................... 8
2.04 Ownership ............................................ 8
2.05 Misstatements and Adjustments ........................ 9
2.06 Incontestability ..................................... 9
2.07 Beneficiary Designation .............................. 9
2.08 Nonparticipating Contract ............................ 9
2.09 State Laws ........................................... 9
III. VARIABLE ANNUITY PROVISIONS ................................ 9
3.01 Fund Annuity Units - Separate Account ................ 9
3.02 Fund Annuity Unit Value .............................. 9
3.03 Fund Annuity Net Return Factors ...................... 9
3.04 Transfer(s) .......................................... 10
3.05 Notice to the Contract Holder ........................ 10
3.06 Change of Fund(s) .................................... 10
IV. BENEFIT PROVISIONS .......................................... 11
4.01 Death Benefit Provision .............................. 11
</TABLE>
Page 3
<PAGE>
SPECIFICATIONS
<TABLE>
<S> <C> <C>
Group Contract No.: [xxxx]
Contract Holder: [xxxx]
Certificate Number: [xxxx]
Certificate Effective Date:
[xxxx] Single Premium:: [xxxx]
Annuitant: [xxxx] Annuitant Issue Age: [xxxx]
Joint Annuitant: [xxxx] Joint Annuitant Issue Age: [xxxx]
First Payment Date: [xxxx] Payment Frequency: [xxxx]
SCHEDULE OF BENEFITS
</TABLE>
Joint and 100% Survivor Annuity with Guaranteed Payments: Annuity payments begin
on the First Payment Date and will continue for the lives of the Annuitant and
Joint Annuitant. At the death of either the Annuitant or Joint Annuitant, the
payment amount will continue to be paid for the life of the survivor. If the
survivor dies prior to the payment of all guaranteed payments, any remaining
payments will be paid to the beneficiary.
Payment Information: Payments will be made on a Fixed basis.
Number of Guaranteed Payments: [xxxx]
Fixed Payment from General Account: [xxxx]
Fixed Annuity Present Value Interest Rate: [xxxx]%
FUNDING ELECTIONS
<TABLE>
<CAPTION>
Number of Fund's
Percent Fund Name Annuity Units Per Payment:
<S> <C> <C>
[xxxx] [xxxx] [xxxx]
</TABLE>
Variable Annuity Assumed Annual Net Return Rate: [xxxx]%
Page 5
<PAGE>
Contract Schedule
Separate Account
- -------------------------------------------------------------------------------
Charges to Separate Account
A daily charge at an annual effective rate of 1.25% for mortality
and expense risk and profit (M & E) is deducted from any portion
of the account value allocated to a Variable Annuity. A daily
charge at an annual effective rate of up to 0.25% for
administration is deducted from any portion of the account value
allocated to a Variable Annuity.
Variable Annuity Assumed Annual Net Return Rate
If a Variable Annuity is chosen, an assumed annual net return rate
of 5.0% may be elected. If 5.0% is not elected, Aetna will use an
assumed annual net return rate of 3.5%.
The daily net return rate factor for an assumed annual net return
rate of 3.5% per year is 0.9999058. The daily net return rate
factor for an assumed annual net return rate 5.0% per year is
0.9998663.
If the portion of a Variable Annuity payment for any Fund is not
to decrease, the Annuity return factor under the Separate Account
for that Fund must be:
a) 4.75% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity payments commence if an assumed annual net return
rate of 3.5% is chosen; or
b) 6.25% on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time
Annuity payments commence, if an assumed annual net return
rate of 5% is chosen.
Transfers
- -------------------------------------------------------------------------------
Maximum Number of Allowable Fund Transfers: Twelve per calendar Year
Page 6
<PAGE>
I. DEFINITIONS
- -------------------------------------------------------------------------------
1.01 Annuitant/Joint Annuitant
An individual named on the Specifications page of this contract
(1) whose death terminates or adjusts the amount of
life-contingent payments, and/or (2) whose death results in the
payment of death benefits; a measured life.
1.02 Annuity
Payment of a specified amount(s) or specified number of units
made:
a) On specified dates or intervals for the lifetime of one or
more Annuitants with or without Guaranteed Payments; or
b) On specified dates or intervals for a specified period of
time.
Annuity benefits payable under this contract are shown in the
Schedule of Benefits on the Specifications page.
1.03 Beneficiary(ies)
The individual or entity entitled to receive any death benefit due
under the Account.
1.04 Certificate Holder
A person who purchases an interest in this Contract as evidenced
by a certificate. Aetna reserves the right to limit ownership to
natural persons. If more than one Certificate Holder owns an
Account, each Certificate Holder will be a joint Certificate
Holder. Joint Certificate Holders have joint ownership rights and
both must authorize excercising any ownership rights unless Aetna
allows otherwise.
1.04 Contract
The agreement between Aetna and the Contract Holder.
1.04 Contract Holder
The person to whom this contract is issued.
1.05 Fixed Annuity
An Annuity that is not a Variable Annuity.
1.06 Fund(s)
The open-end registered management investment companies whose
shares are purchased by the Separate Account to fund the benefits
provided by the contract.
1.07 Guaranteed Payment
A payment that is due whether or not the Annuitant, or Joint
Annuitant, if applicable, is alive on the payment due date, as
described in the Schedule of Benefits on the Specifications page.
1.08 Life Annuity
An Annuity with payments that are based solely on whether or not
the Annuitant, or Joint Annuitant, if applicable, is alive on the
payment due date as described in the Schedule of Benefits on the
Specifications page.
1.09 Payee
A person that receives Annuity payments. The Certficate Holder
shall be the Payee unless the Certificate Holder designates
otherwise in writing.
1.10 Period Certain Annuity
An Annuity with a specified number of Guaranteed Payments without
a life contingency.
Page 7
<PAGE>
1.11 Separate Account
An account, established by Aetna under Section 38a-433 of the
Connecticut General Statutes, that buys and holds shares of the
Fund(s) available under this contract. Income, gains or losses,
realized or unrealized are credited or charged to the Separate
Account without regard to other income, gains or losses of Aetna.
Aetna owns the assets held in the Separate Account and is not a
trustee of such amounts. Amounts in the Separate Account are not
generally guaranteed and are held at market value. The assets of
the Separate Account, to the extent of reserves and other contract
liabilities of the Separate Account, cannot be charged with other
Aetna liabilities arising out of any other Aetna business.
1.12 Survivor
With an Annuity based on the lives of an Annuitant and Joint
Annuitant, the individual who is not the first to die.
1.13 Valuation Date
The date and time on which a Fund Annuity Unit Value is
calculated. Currently, this calculation will be determined at the
close of business of the New York Stock Exchange on any normal
business day, Monday through Friday, that the New York Stock
Exchange is open.
1.14 Valuation Period
The period of time between successive Valuation Dates.
1.15 Variable Annuity
An Annuity with payments that vary with the net investment results
of the Funds available under this contract. Aetna reserves the
right to limit the Fund(s) available with the Variable Annuity
Payment Guarantee, if applicable.
II. GENERAL PROVISIONS
- -------------------------------------------------------------------------------
2.01 Premium
The amount of the premium applied to this contract will be the
premium received minus a deduction for premium taxes, if any.
2.02 Payments
Aetna will pay to the Payee a Fixed or Variable Annuity or a
combination of the two as selected by the Certificate Holder and
as shown in the Schedule of Benefits on the Specifications page.
Aetna discharges its obligation to pay when it makes payment by
check or electronic funds transfer to the Payee's address or the
bank that Aetna has on record as of 15 business days before the
payment due date.
We reserve the right to suspend any life-contingent payments to a
Payee if acceptable proof of life of an Annuitant or Joint
Annuitant is not furnished when requested.
2.03 Change of Contract
Only an authorized officer of Aetna may change the terms of this
contract. Aetna will notify the Contract Holder in writing of any
changes. Aetna reserves the right to modify this contract to meet
the requirements of applicable state and federal laws or
regulations.
2.04 Control of Contract
This is a contract between the Contract Holder and Aetna. The
Contract Holder has title to the contract. Contract Holder rights
are limited to accepting or rejecting contract modifications. The
Certificate Holder has all other rights to amounts held in the
contract. Any choice allowed under this contract must be made by
the Certificate Holder in writing or both Certificate Holders, if
jointly owned. Until receipt of such choices in Aetna's home
office, Aetna may rely on any previous choices made.
The contract is not subject to the claims of any creditors of the
Contract Holder or Certificate Holder, except to the extent
permitted by law.
The Certificate Holder may assign or transfer his or her rights
under the contract. Aetna reserves the right not to accept
assignment or transfer to a nonnatural person. Any assignment or
transfer made must be submitted to Aetna's Home office in writing
and will not be effective until accepted by Aetna.
Page 8
<PAGE>
2.05 Misstatements and Adjustments
If the age, sex, or any relevant fact concerning any Annuitant is
found to be misstated, the correct facts will be used to adjust
payments.
2.06 Incontestability
Aetna will not contest this contract from its effective date.
2.07 Beneficiary Designation
If the contract provides for any Guaranteed Payments following the
death of the Annuitant, and the Joint Annuitant if applicable, the
Certificate Holder has the right to name a Beneficiary(ies). If
the Account is owned jointly, both joint Certificate Holders must
agree in writing to the Beneficiary designated.
The Beneficiary designation may be changed by the Certificate
Holder during the lifetime of the Annuitant, and, if applicable,
the Joint Annuitant, by sending written notice of the change in a
form acceptable to Aetna to Aetna's home office. Such change will
not be effective until received and recorded by Aetna.
In all cases, Aetna will pay death benefits based on the last
written Beneficiary designation it has on record on the date of
the death.
2.08 Nonparticipating Contract
The Contract Holder, Certificate Holders or Beneficiaries will not
have a right to share in the earnings of Aetna.
2.09 State Laws
The contract and the certificate comply with the laws of the
state in which it is delivered. Annuity payments are equal to or
greater than the minimum required by such laws.
III. VARIABLE ANNUITY PROVISIONS
- -------------------------------------------------------------------------------
3.01 Fund Annuity Units - Separate Account
The initial number of a Fund's Annuity units is stated on the
Specifications page. Each future payment is equal to the sum of
the products of each Fund Annuity unit value multiplied by the
appropriate number of units. The Fund Annuity unit value on the
tenth Valuation Date prior to the due date of the payment is used.
3.02 Fund Annuity Unit Value
For any Valuation Date, a Fund's Annuity unit value is equal to:
a) The value for the preceding Valuation Date; multiplied by
b) The Annuity net return factor(s) for the Valuation Period;
multiplied by
c) A factor to reflect the assumed annual net return rate.
The factors for the assumed annual net return are shown on the
Contract Schedule.
3.03 Fund Annuity Net Return Factors
The Annuity net return factor(s) are used to compute all Separate
Account Annuity unit values for any Fund. The Annuity net return
factor for each Fund is equal to 1.0000000 plus the net return
rate.
Page 9
<PAGE>
The net return rate is equal to:
a) The value of the shares of the Fund held by the Separate
Account at the end of a Valuation Period; minus
b) The value of the shares of the Fund held by the Separate
Account at the start of the Valuation Period; plus or minus
c) Taxes (or reserves for taxes) on the Separate Account (if any);
divided by
d) The total value of the Fund Annuity units of the Separate
Account at the start of the Valuation Period; minus
e) A Separate Account charge at an annual effective rate as shown
on the Contract Schedule for Annuity mortality and expense
risks and profit and a daily administrative charge which will
not exceed the amount shown on the Contract Schedule on an
annual basis. The daily administrative charge will be
established on the Effective Date of this contract.
A net return rate may be more or less than 0%.
The value of a share of the Fund is equal to the net assets of the
Fund divided by the number of shares outstanding.
3.04 Transfer(s)
At the request of a Certificate Holder, all or any portion of the
account value may be transferred from any Fund to any other
allowable Fund. Transfers will be processed as of the Valuation
Date next following when a transfer request is received in good
order at Aetna's home office. The maximum number of allowable
transfers in a calendar year is shown on the Contract Schedule.
Aetna reserves the right to increase the number of allowable
transfers.
Transfer requests must be expressed as a percentage of the
allocation among the Funds of the amount upon which the Variable
Annuity will be based. Aetna may establish a minimum transfer
amount.
3.05 Notice to the Certificate Holder
Once a year, Aetna will notify the Certificate Holder of:
a) The number of Fund(s) Annuity units; and
b) The value of Fund(s) Annuity units.
Such numbers or values will be as of a date no more than 60 days
before the date of the notice.
3.06 Change of Fund(s)
The assets of the Separate Account are segregated by Fund. If the
shares of any Fund are no longer available for investment by the
Separate Account or if in Aetna's judgment further investment in
such shares should become inappropriate in view of the purpose of
the contract, Aetna may cease to make such Fund shares available
for investment under the contract prospectively, or Aetna may
substitute shares of another Fund for shares already acquired.
Aetna may also, from time to time, add additional Funds. Any
elimination, substitution or addition of Funds will be done in
accordance with applicable state and federal securities laws.
Aetna reserves the right to substitute shares of another Fund for
shares already acquired without a proxy vote.
Page 10
<PAGE>
IV. BENEFIT PROVISIONS
- -------------------------------------------------------------------------------
4.01 Death Benefit Provision
a) If the Annuitant dies, or under a joint Annuity option the
Survivor dies, any remaining Guaranteed Payments will be paid
to the Beneficiary in the form specified in the Schedule of
Benefits on the Specifications page. Such payments will be paid
at least as rapidly as under the method of distribution then in
effect. Within six months of such death, the Beneficiary may
elect to receive the withdrawal value of any remaining
Guaranteed Payments less any early withdrawal charge. The rate
used to determine the withdrawal value will be the Fixed
Annuity Present Value Interest Rate shown on the Specifications
page. No early withdrawal charge will apply to the withdrawal
value in this situation.
If this contract is issued as a Variable Period Certain
Annuity, the Beneficiary may elect to receive the withdrawal
value of any remaining Guaranteed Payments at any time. No
early withdrawal charge will apply to the withdrawal value in
this situation.
b) If the Certificate Holder who is not the Annuitant(s) dies,
payments will be paid to the Payee in the form specified in the
Schedule of Benefits on the Specifications page. If no Payee
designated by the Contract Holder survives the death of the
Certificate Holder, payments will be made to the Annuitant.
Such payments will be paid at least as rapidly as under the
method of distribution then in effect.
c) If the Certificate Holder dies before the annuity starting date
the entire interest in the contract must be distributed within
five years of the date of death, or payments may be made over
the life or over a period not extending beyond the life
expectancy of the Beneficiary or Payee, as applicable, provided
such payments begin not later than one year after the date of
death. The annuity starting date is generally defined by the
Internal Revenue Code to mean the first day of the period
(month, quarter, half-year, year depending on whether payments
will be made monthly, quarterly, semi-annually or annually)
which ends on the date of the first annuity payment. This
provision will not apply if the Beneficiary or Payee, as
applicable, is the Certificate Holder's spouse.
Page 11
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<PAGE>
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<PAGE>
- -------------------------------------------------------------------------------
Aetna Life Insurance and Annuity Company
Home Office: 151 Farmington Avenue
Hartford, Connecticut 06156
(800) 238-6273
Certificate of Group Annuity Coverage
- -------------------------------------------------------------------------------
ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT, WHEN BASED ON INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT.
SPIA(GR)-99 CERT
Aetna Life Insurance and Annuity Company
ENDORSEMENT
The Contract is hereby endorsed as follows:
New sections entitled Withdrawal Frequency and Amounts and Early Withdrawal
Charge Schedule are added to the Contract Schedule to include the following
language
Withdrawal Frequency and Amounts
Fixed Period Certain Annuity Withdrawals: Under a Fixed Period
Certain Annuity, withdrawals may be elected once a year. No
withdrawals are allowed from a Fixed Period Certain Annuity in the
first contract year. In subsequent contract years, full or partial
withdrawals are allowed, provided that under a partial withdrawal
the remaining Annuity payments would equal [$50] or more.
Early Withdrawal Charge Schedule
<TABLE>
<CAPTION>
Early Withdrawal Charge
Number of Years from Contract Effective Date (% of Withdrawal Value)
----------------------------------------------------------------------------------
<S> <C>
1 or more, but fewer than 2 6%
2 or more, but fewer than 3 5%
3 or more, but fewer than 4 4%
4 or more, but fewer than 5 3%
5 or more, but fewer than 6 2%
6 or more, but fewer than 7 1%
7 or more 0%
</TABLE>
If this contract is established as a rollover from another
contract issued by Aetna or an affiliate, the early withdrawal
charge will be determined according to the effective date of the
account under such predecessor contract.
New sections entitled Withdrawal/Partial Withdrawal and Withdrawal Value are
added to "Benefit Provisions" to include the following language:
4.02 Withdrawal/Partial Withdrawal
If this contract is issued as a Fixed Period Certain Annuity as
described on the Specifications page, the Certificate Holder may
elect to receive the withdrawal value of all or a portion of the
Guaranteed Payments. If a portion of the Guaranteed Payments under
a Fixed Period Certain Annuity is withdrawn, the remaining Annuity
payments will be reduced proportionally. Withdrawals are subject
to an early withdrawal charge as shown on the Contract Schedule
page, unless an exception under this contract applies.
4.03 Withdrawal Value
a) The withdrawal value is equal to the present value of the
remaining Guaranteed Payments calculated using the assumed
net return rate stated on the Contract Schedule.
b) All withdrawal values will be determined as of the
Valuation Date next following when a written request for
withdrawal is received in good order by Aetna at its home
office.
c) Under a Fixed Period Certain Annuity, the withdrawal value
is equal to the present value of the remaining Guaranteed
Payments calculated using the adjusted contract rate.
SPIAE(GR)99
<PAGE>
The adjusted contract rate equals:
(Rate of Return) + WY - IY
where: Rate of Return is the Fixed Annuity Present Value Interest
Rate shown on the Specifications page
WY is the Withdrawal Yield
IY is the Issue Yield
WY is determined as follows:
1) WY is the average of the yields, as published in the Wall
Street Journal on the Friday before the date of withdrawal, of
the three, or more if Aetna deems necessary, noncallable
noninflation adjusted Treasury Notes or Bonds maturing on or
closest to the Withdrawal Duration Date.
2) "Withdrawal Duration Date" is the date (month and year)
obtained when the withdrawal duration is added to the date of
withdrawal.
3) "Withdrawal Duration" equals 1 plus the number of whole years
from the date of withdrawal until the final Guaranteed Payment
is due, divided by 2. Any resulting fraction will be rounded up
to the next whole number.
IY is determined as follows:
1) IY is the average of the yields as published in the Wall Street
Journal on the Friday before the Contract Effective Date, of
the three, or more if Aetna deems necessary, noncallable
noninflation adjusted Treasury Notes or Bonds maturing on or
closest to the Issue Duration Date.
2) "Issue Duration Date" (month and year) is obtained when Issue
Duration is added to the Contract Effective Date.
3) "Issue Duration" equals 1 plus the number of whole years from
issue until the final payment is due, divided by 2. Any
resulting fraction will be rounded up to the next whole number.
The section entitled Death Benefit Provision is amended by replacing item
a) and adding item d) with the following language:
a) If the Annuitant dies, or under a joint Annuity option the
Survivor dies, any remaining Guaranteed Payments will be paid
to the Beneficiary as specified in the Schedule of Benefits on
the Specifications page. Such payments will be paid at least as
rapidly as under the method of distribution then in effect. The
Beneficiary may elect to receive the withdrawal value of any
remaining Guaranteed Payments. No early withdrawal charge will
apply to the withdrawal value in this situation.
d) The withdrawal value under this death benefit provision will be
determined as of the Valuation Date next following when proof
of death acceptable to Aetna and a request for payment are
received in good order at Aetna's home office. If this contract
is issued as a Fixed Period Certain Annuity, the withdrawal
value will be determined as described in the section entitled
withdrawal value.
Endorsed and made a part of this contract on the Contract Effective Date.
President
Aetna Life Insurance and Annuity Company
SPIAE(GR)99
Aetna Life Insurance and Annuity Company
ENDORSEMENT
The Contract is hereby endorsed as follows:
New sections entitled Withdrawal Frequency and Amounts and Early Withdrawal
Charge Schedule are added to the Contract Schedule to include the following
language:
Withdrawal Frequency and Amounts
Variable Annuity Withdrawals: Under a Variable Period Certain
Annuity, withdrawals may be elected an unlimited number of times a
year.
Early Withdrawal Charge Schedule
<TABLE>
<CAPTION>
Early Withdrawal Charge
Number of Years from Contract Effective Date (% of Withdrawal Value)
----------------------------------------------------------------------------
<S> <C>
Fewer than 1 7%
1 or more, but fewer than 2 6%
2 or more, but fewer than 3 5%
3 or more, but fewer than 4 4%
4 or more, but fewer than 5 3%
5 or more, but fewer than 6 2%
6 or more, but fewer than 7 1%
7 or more 0%
</TABLE>
If this contract is established as a rollover from another
contract issued by Aetna or an affiliate, the early withdrawal
charge will be determined according to the effective date of the
account under such predecessor contract.
New sections entitled Withdrawal/Partial Withdrawal and Withdrawal Value are
added to "Benefit Provisions" to include the following language:
4.02 Withdrawal/Partial Withdrawal
If this contract is issued as a Variable Period Certain Annuity,
the Certificate Holder may elect to receive the withdrawal value
of all or a portion of the Guaranteed Payments. If a portion of
the Guaranteed Payments under a Variable Period Certain Annuity is
withdrawn, the remaining Variable Annuity payments will be reduced
pro-rata from all of the Funds or otherwise as the Certificate
Holder so designates. Withdrawals may be subject to a early
withdrawal charge as shown on the Contract Schedule.
SPIAEVW99
<PAGE>
4.03 Withdrawal Value
a) Under a Variable Period Certain Annuity, the withdrawal
value is equal to the present value of the remaining
Guaranteed Payments calculated using the assumed annual net
return rate stated on the Contract Schedule.
b) All withdrawal values will be determined as of the
Valuation Date next following when a written request for
withdrawal is received in good order by Aetna at its home
office.
Endorsed and made a part of this contract on the Contract Effective Date.
President
Aetna Life Insurance and Annuity Company
SPIAEVW99
Aetna Life Insurance and Annuity Company
ENDORSEMENT
The Contract is hereby endorsed as follows:
New sections entitled Withdrawal Frequency and Amounts and Early Withdrawal
Charge Schedule are added to the Contract Schedule to include the following
language:
Withdrawal Frequency and Amounts
Life with Guaranteed Period Annuity Withdrawals: Withdrawals may
be elected within the Guaranteed Period once a year. No
withdrawals are allowed from a Life with Guaranteed Period Annuity
in the first contract year. In subsequent contract years within
the Guaranteed Period, full or partial withdrawals are allowed,
provided that under a partial withdrawal the remaining Annuity
payments would equal [$50] or more. Early withdrawal charges may
apply. At the end of the Guaranteed Period, payments as defined in
section 2.02 will continue for the life of the annuitant or joint
annuitant if applicable.
Early Withdrawal Charge Schedule
<TABLE>
<CAPTION>
Early Withdrawal Charge
Number of Years from Contract Effective Date (% of Withdrawal Value)
----------------------------------------------------------------------------
<S> <C>
1 or more, but fewer than 2 6%
2 or more, but fewer than 3 5%
3 or more, but fewer than 4 4%
4 or more, but fewer than 5 3%
5 or more, but fewer than 6 2%
6 or more, but fewer than 7 1%
7 or more 0%
</TABLE>
If this contract is established as a rollover from another
contract issued by Aetna or an affiliate, the early withdrawal
charge will be determined according to the effective date of the
account under such predecessor contract.
New sections entitled Withdrawal/Partial Withdrawal and Withdrawal Value are
added to "Benefit Provisions" to include the following language:
4.02 Withdrawal/Partial Withdrawal
If this contract is issued as a Life with Guaranteed Period
Annuity as described on the Specifications page, the Certificate
Holder may elect to receive the withdrawal value of all or a
portion of the Guaranteed Payments in the amounts and frequency as
stated on the Contract Schedule. If a portion of the Guaranteed
Payments under a Life with Guaranteed Period Annuity is withdrawn,
the remaining Annuity payments within the Guaranteed Period will
be reduced proportionally. Withdrawals are subject to an early
withdrawal charge as shown on the Contract Schedule, unless an
exception under this contract applies.
SPIAEW99
<PAGE>
4.03 Withdrawal Value
The Withdrawal Value is equal to:
a) For the variable portion the present value of the remaining
Guaranteed Payments calculated using the assumed annual net
return rate stated on the Specifications page effective as of
the Valuation Date next following the receipt of the written
request by Aetna at its home office. The resulting value will
be reduced by any applicable early withdrawal charge.
b) For the fixed portion the present value of the remaining
Guaranteed Payments calculated using the adjusted contract
rate, less any early withdrawal charge, if applicable. The
adjusted contract rate equals the Fixed Annuity Present Value
Interest Rate, as shown in the Specifications page, plus the
increase or minus the decrease in the published 10 year
on-the-run Treasury rate from the contract effective date to
the withdrawal calculation date.
The section entitled Death Benefit Provision is amended by replacing item
a) and adding item d) with the following language:
a) If the Annuitant dies, or under a joint Annuity option the
Survivor dies, any remaining Guaranteed Payments will be paid
to the Beneficiary as specified in the Schedule of Benefits on
the Specifications page. Such payments will be paid at least as
rapidly as under the method of distribution then in effect. The
Beneficiary may elect to receive the withdrawal value of any
remaining Guaranteed Payments. No early withdrawal charge will
apply to the withdrawal value in this situation.
d) The withdrawal value under this death benefit provision will be
determined as of the Valuation Date next following when proof
of death acceptable to Aetna and a request for payment are
received in good order at Aetna's home office.
Endorsed and made a part of this contract on the Contract Effective Date.
President
Aetna Life Insurance and Annuity Company
SPIAEW99
Aetna Life Insurance and Annuity Company
ENDORSEMENT
The Contract is hereby endorsed as follows:
The Definitions section is amended by adding the following:
1.16 Variable Annuity Minimum Income Guarantee:
Available only with Life Annuity options, the Variable Annuity
Minimum Income Guarantee will ensure that the annuity payment will
never be less than the Guaranteed Minimum Income Payment shown in
the Schedule of Benefits on the Specifications page.
The section Charges to Separate Account on the Contract Schedule is amended by
adding the following:
If the Variable Annuity Minimum Income Guarantee has been chosen, an
additional daily charge at an annual effective rate of 1.00% will be
deducted from any portion of the account value allocated to a Variable
Annuity.
The section Variable Annuity Assumed Annual Net Return Rate on the Contract
Schedule is deleted and replaced with the following language.
If the Variable Annuity Minimum Income Guarantee has been chosen, an
assumed annual net return rate of 3.5% will apply.
The daily net return rate factor for an assumed annual net return rate of
3.5% per year is 0.9999058.
If the portion of a Variable Annuity payment for any Fund is not to
decrease, the Annuity return factor under the Separate Account for that
Fund must be [5.75%] on an annual basis plus an annual return of up to
0.25% to offset the administrative charge set at the time Annuity payments
commence for an assumed annual net return rate of 3.5%.
Should the Variable Annuity amount, as described in 3.01, fall below the
Guaranteed Minimum Income Payment, Aetna will calculate and pay the
difference between the Guaranteed Minimum Income Payment and the current
Variable Annuity payment such that the total payment remitted for that
payment date will not be less than the Guaranteed Minimum Income Payment.
The section Transfers is deleted and replaced with the following:
If the Variable Annuity Minimum Income Guarantee is in effect no transfers
will be allowed.
Endorsed and made a part of this contract on the Contract Effective Date.
President
Aetna Life Insurance and Annuity Company
SPIAEVPG99
Aetna Life Insurance and Annuity Company
ENDORSEMENT
The contract and certificate are endorsed to permit the contract to be used to
pay benefits under a pension or profit sharing plan qualified under Section
401(a) of the Internal Revenue Code ("Code") and, if applicable, the Employee
Retirement Income Security Act (ERISA). The following provisions apply and, in
the case of a conflict with any provision in the contract, this endorsement
controls.
Nontransferable. The contract is nontransferable in accordance with Code Section
401(g). The contract may not be sold, assigned, transferred or pledged as
collateral for a loan or as security for the performance of an obligation or for
any other purpose, except pursuant to a qualified domestic relations order as
described in Code Section 414(p). This restriction shall not apply to the
trustee of any trust described in Code Section 401(a), which is exempt from tax
under Section 501(a).
Contract Holder. The Contract Holder must be the employer sponsoring the plan
or, if the plan has a trust, the trustee of such trust. The Contract Holder may
assign ownership of the contract to the Participant in which case the
Participant shall become the Contract Holder.
Certificate Holder. The Certificate Holder is the participant under the Code
Section 401(a) plan on whose behalf an Account is established. The Certificate
Holder and the Annuitant must be the same person. Joint Certificate Holders are
not permitted.
Beneficiary. If the Contract Holder is the employer or plan trustee, the
Beneficiary is the Contract Holder. If the contract has been assigned to the
participant, the participant shall name a Beneficiary
Distributions. The Annuity payments will only be paid to the Contract Holder, or
to the participant at the direction of the Contract Holder.
Death Benefit. At the death of the Annuitant, Aetna will pay any remaining
Guaranteed Payments, as directed by the Contract Holder or, if the participant
is the Contract Holder, by the designated Beneficiary.
Withdrawal/Partial Withdrawal. If the Contract is subject to ERISA and payment
is made in the form of a qualified joint and survivor annuity, as defined in
ERISA Section 205, and the Certificate Holder has a right of withdrawal under
this contract, to exercise such right the Certificate Holder must certify in a
form acceptable to Aetna that the distribution complies with the waiver and
spousal consent requirements of Code Section 417. In the absence of such
certification, Aetna will pay the withdrawal value to the Contract Holder
provided the Contract Holder is the employer or plan trustee.
Endorsed and made a part of the contract as of the Contract Effective Date.
----------------------------------------
President
Aetna Life Insurance and Annuity Company
SPIAE401(GR)99
Aetna Life Insurance and Annuity Company
ENDORSEMENT
The contract and certificate are endorsed in order to meet the requirements of
Section 403(b) of the Internal Revenue Code ("Code") and, if applicable, the
Employee Retirement Income Security Act (ERISA). The following provisions apply
and, in the case of a conflict with any provision in the contract, this
endorsement controls.
Nontransferable. The contract is nontransferable in accordance with Code Section
401(g). The contract may not be sold, assigned, transferred or pledged as
collateral for a loan or as security for the performance of an obligation or for
any other purpose, except pursuant to a qualified domestic relations order as
described in Code Section 414(p).
Contract Holder. The Contract Holder must be the employer sponsoring a Code
Section 403(b) Tax Deferred Annuity program.
Certificate Holder. The Certificate Holder is the participant under the Code
Section 403(b) Tax Deferred Annuity program on whose behalf an Account is
established. The Certificate Holder and the Annuitant must be the same person.
Joint Certificate Holders are not permitted.
Premium. The premium applied to the contract must be an amount rolled over from
(1) another contract qualified under Code Section 403(b) or a custodial account
qualified under Code Section 403(b)(7), or (2) an Individual Retirement Account
or Annuity qualified under Code Section 408(a) or 408(b) that contains only
amounts previously rolled over from a 403(b) Tax Deferred Annuity. Any amount
rolled over from a Code Section 403(b) contract or custodial account must be
eligible for distribution under the withdrawal instructions set forth in Code
Section 403(b)(7) or 403(b)(11), as applicable.
Distributions. The Annuity payments will only be paid to the Certificate Holder,
or to an alternate payee pursuant to a qualified domestic relations order as
described in Code Section 414(p).
Commutation/Partial Commutation. If the contract is subject to ERISA and payment
is made in the form of a qualified joint and survivor annuity, as defined in
ERISA Section 205, and if the Certificate Holder has a right of commutation
under this contract, to exercise such right the Certificate Holder must furnish
to Aetna a waiver and spousal consent satisfying the requirements of ERISA
Section 205.
Endorsed and made a part of the contract as of the Contract Effective Date.
----------------------------------------
President
Aetna Life Insurance and Annuity Company
SPIAE403(GR)99
Aetna Life Insurance and Annuity Company
ENDORSEMENT
The contract and certificate are endorsed to permit an employer to purchase the
contract in conjunction with a nonqualified deferred compensation plan or a
deferred compensation plan under Section 457 of the Internal Revenue Code
("Code"). The following provisions apply and, in the case of a conflict with any
provision in the contract, this endorsement controls.
Contract Holder. The Contract Holder must be the employer who sponsors the
deferred compensation plan. The Contract Holder has all rights under the
contract.
Certificate Holder. The Certificate Holder is a participant or plan beneficiary
under the deferred compensation plan on whose behalf an Account is established.
The Certificate Holder and the Annuitant must be the same person. Joint
Certificate Holders are not permitted. The Certificate Holder has no rights
under the contract.
Beneficiary. The Beneficiary is the Contract Holder.
Death Benefit. At the death of the Annuitant, Aetna will pay any remaining
Guaranteed Payments as directed by the Contract Holder.
Exclusive Benefit. This provision applies if the contract is issued in
conjunction with a Code Section 457(b) deferred compensation plan to a
government employer, as defined in Code Section 457(e)(1)(A). Any amounts
withdrawn or paid from this contract are required to be utilized for the
exclusive benefit of the participant and plan beneficiary in accordance with
Code Section 457(g). This requirement shall be effective (i) immediately if the
plan was not in existence on August 20, 1996 or (ii) if the plan was already for
the exclusive benefit of participants and their beneficiaries in accordance with
Code Section 457(g) and January 1, 1999.
Endorsed and made a part of the contract as of the Contract Effective Date.
----------------------------------------
President
Aetna Life Insurance and Annuity Company
SPIAE457(GR)99
Aetna Life Insurance and Annuity Company
ENDORSEMENT
The contract and certificate are endorsed to meet the qualification requirements
for an Individual Retirement Annuity under Internal Revenue Code ("Code")
Section 408(b). The following provisions apply and, in the case of a conflict
with any provision in the contract, this endorsement controls.
Certificate Holder. The Certificate Holder and the Annuitant must be the same
person. Joint Certificate Holders are not permitted.
Nontransferable/Nonforfeitable. The contract is nontransferable. The Certificate
Holder may not sell, assign, transfer, pledge or use as collateral for a loan or
as security for the performance of an obligation or for any other purpose, his
or her interest in the contract to any person other than the issuer of the
contract or to a spouse incident to a divorce under the provisions of Code
Section 408(d)(6). The Certificate Holder's entire interest in the Contract is
nonforfeitable.
Exclusive Benefit. The Account is established for the exclusive benefit of the
Certificate Holder or his or her Beneficiary(ies).
Premium. The premium applied to the Account must be a rollover contribution as
permitted under Code Section 402(c), 403(a)(4), 403(b)(8) or 408(d)(3).
Distributions. The Annuity payments will be paid only to the Certificate Holder.
Annuity payments must be made at intervals of no longer than one year and must
be either nonincreasing or they may increase only as provided in Section
1.401(a)(9)-1 of the Proposed Income Tax Regulations.
Annual Reports. Aetna will furnish annual calendar year reports concerning the
status of the Account under the contract.
Right to Cancel. The Certificate Holder may cancel the certificate within 10
days of receiving it by returning it to Aetna at the address above or to the
person from whom it was purchased. Within seven days from the cancellation
request, Aetna will return all the Certificate Holder's premium Payments, less
any Annuity payments made.
Endorsed and made a part of the contract as of the Contract Effective Date.
----------------------------------------
President
Aetna Life Insurance and Annuity Company
SPIAEIRA(GR)99
EXHIBIT 99-B.15.1
POWER OF ATTORNEY
I, the undersigned Director and President of Aetna Life Insurance and Annuity
Company, hereby constitute and appoint Julie E. Rockmore, Kirk P. Wickman and J.
Neil McMurdie and each of them individually, my true and lawful attorneys, with
full power to them and each of them to sign for me, and in my name and in the
capacities indicated below, any and all amendments, to the Registration
Statements listed below filed with the Securities and Exchange Commission under
the Securities Act of 1933 and the Investment Company Act of 1940:
Registration Statements filed under the Securities Act of 1933:
<TABLE>
<S> <C> <C> <C>
2-52448 33-75960 33-75998 333-49593
2-52449 33-75962 33-75996 333-49599
33-02339 33-75964 33-76000 333-56297
33-34370 33-75966 33-76002 333-72079
33-34583 33-75968 33-76004
33-42555 33-75970 33-76018
33-60477 33-75972 33-76024
33-61897 33-75974 33-76026
33-62473 33-75976 33-79118
333-01107 33-75978 33-79122
33-63611 33-75980 33-81216
33-64277 33-75982 33-87642
33-64331 33-75984 33-87932
33-75248 33-75986 33-88720
33-75954 33-75988 33-88722
33-75956 33-75990 33-88724
33-75958 33-75992 33-89858
333-15817 33-75994 33-91846
333-24645 333-09515 333-27337
</TABLE>
Registration Statements filed under the Investment Company Act of 1940:
811-2512 811-2513 811-4536 811-5906
hereby ratifying and confirming on this 18th day of February, 1999, my signature
as it may be signed by my said attorneys to any such Registration Statements and
any and all amendments thereto.
Signature/Title
---------------
/s/ Thomas J. McInerney
---------------------------
Thomas J. McInerney
Director and President
(Principal Executive Officer)
<PAGE>
POWER OF ATTORNEY
I, the undersigned Director of Aetna Life Insurance and Annuity Company, hereby
constitute and appoint Julie E. Rockmore, Kirk P. Wickman and J. Neil McMurdie
and each of them individually, my true and lawful attorneys, with full power to
them and each of them to sign for me, and in my name and in the capacity
indicated below, any and all amendments, to the Registration Statements listed
below filed with the Securities and Exchange Commission under the Securities Act
of 1933 and the Investment Company Act of 1940:
Registration Statements filed under the Securities Act of 1933:
<TABLE>
<S> <C> <C> <C>
2-52448 33-75960 33-75998 333-49593
2-52449 33-75962 33-75996 333-49599
33-02339 33-75964 33-76000 333-56297
33-34370 33-75966 33-76002 333-72079
33-34583 33-75968 33-76004
33-42555 33-75970 33-76018
33-60477 33-75972 33-76024
33-61897 33-75974 33-76026
33-62473 33-75976 33-79118
333-01107 33-75978 33-79122
33-63611 33-75980 33-81216
33-64277 33-75982 33-87642
33-64331 33-75984 33-87932
33-75248 33-75986 33-88720
33-75954 33-75988 33-88722
33-75956 33-75990 33-88724
33-75958 33-75992 33-89858
333-15817 33-75994 33-91846
333-24645 333-09515 333-27337
</TABLE>
Registration Statements filed under the Investment Company Act of 1940:
811-2512 811-2513 811-4536 811-5906
hereby ratifying and confirming on this 18th day of February, 1999, my signature
as it may be signed by my said attorneys to any such Registration Statements and
any and all amendments thereto.
Signature/Title
---------------
/s/ Shaun P. Mathews
-------------------------
Shaun P. Mathews
Director
<PAGE>
POWER OF ATTORNEY
I, the undersigned Director and Chief Financial Officer of Aetna Life Insurance
and Annuity Company, hereby constitute and appoint Julie E. Rockmore, Kirk P.
Wickman and J. Neil McMurdie and each of them individually, my true and lawful
attorneys, with full power to them and each of them to sign for me, and in my
name and in the capacities indicated below, any and all amendments, to the
Registration Statements listed below filed with the Securities and Exchange
Commission under the Securities Act of 1933 and the Investment Company Act of
1940:
Registration Statements filed under the Securities Act of 1933:
<TABLE>
<S> <C> <C> <C>
2-52448 33-75960 33-75998 333-49593
2-52449 33-75962 33-75996 333-49599
33-02339 33-75964 33-76000 333-56297
33-34370 33-75966 33-76002 333-72079
33-34583 33-75968 33-76004
33-42555 33-75970 33-76018
33-60477 33-75972 33-76024
33-61897 33-75974 33-76026
33-62473 33-75976 33-79118
333-01107 33-75978 33-79122
33-63611 33-75980 33-81216
33-64277 33-75982 33-87642
33-64331 33-75984 33-87932
33-75248 33-75986 33-88720
33-75954 33-75988 33-88722
33-75956 33-75990 33-88724
33-75958 33-75992 33-89858
333-15817 33-75994 33-91846
333-24645 333-09515 333-27337
</TABLE>
Registration Statements filed under the Investment Company Act of 1940:
811-2512 811-2513 811-4536 811-5906
hereby ratifying and confirming on this 18th day of February, 1999, my signature
as it may be signed by my said attorneys to any such Registration Statements and
any and all amendments thereto.
Signature/Title
---------------
/s/ Catherine H. Smith
------------------------------------
Catherine H. Smith
Director and Chief Financial Officer
<PAGE>
POWER OF ATTORNEY
I, the undersigned Vice President, Treasurer and Corporate Controller of Aetna
Life Insurance and Annuity Company, hereby constitute and appoint Julie E.
Rockmore, Kirk P. Wickman and J. Neil McMurdie and each of them individually, my
true and lawful attorneys, with full power to them and each of them to sign for
me, and in my name and in the capacities indicated below, any and all
amendments, to the Registration Statements listed below filed with the
Securities and Exchange Commission under the Securities Act of 1933 and the
Investment Company Act of 1940:
Registration Statements filed under the Securities Act of 1933:
<TABLE>
<S> <C> <C> <C>
2-52448 33-75960 33-75998 333-49593
2-52449 33-75962 33-75996 333-49599
33-02339 33-75964 33-76000 333-56297
33-34370 33-75966 33-76002 333-72079
33-34583 33-75968 33-76004
33-42555 33-75970 33-76018
33-60477 33-75972 33-76024
33-61897 33-75974 33-76026
33-62473 33-75976 33-79118
333-01107 33-75978 33-79122
33-63611 33-75980 33-81216
33-64277 33-75982 33-87642
33-64331 33-75984 33-87932
33-75248 33-75986 33-88720
33-75954 33-75988 33-88722
33-75956 33-75990 33-88724
33-75958 33-75992 33-89858
333-15817 33-75994 33-91846
333-24645 333-09515 333-27337
</TABLE>
Registration Statements filed under the Investment Company Act of 1940:
811-2512 811-2513 811-4536 811-5906
hereby ratifying and confirming on this 18th day of February, 1999, my signature
as it may be signed by my said attorneys to any such Registration Statements and
any and all amendments thereto.
Signature/Title
---------------
/s/ Deborah Koltenuk
--------------------------------------------------
Deborah Koltenuk
Vice President, Treasurer and Corporate Controller
