[Aetna cover]
Variable Life Account B
Build for
Retirement. Manage
for Life.(SM)
1996
Annual
Report
[Aetna Logo]
ANN.VLB-96 Retirement Services (SM)
<PAGE>
As we move forward in our mission to provide the tools to help you achieve your
dreams by becoming your retirement partner, it is an opportune time to reflect
upon our achievements in 1996.
We continue to increase our financial strength. Aetna Life Insurance and Annuity
Company (Aetna) reported operating earnings* of $168 million in 1996, a 13%
increase over last year's operating earnings. During this same period, customer
assets invested through Aetna increased by 20% or $5 billion, to $30 billion as
of December 31, 1996.
Our Aetna funds had another outstanding year. Aeltus Investment Management,
Inc., our affiliate organization which manages these funds, was named one of the
World's Best Money Managers by Nelson's Publications, an organization that
compares investment performance data on over 1,700 investment managers from
around the world.
To broaden our customer service capabilities, we established a second Customer
Service site in Phoenix, Arizona. This endeavor demonstrates our strong
commitment to providing you with professional and dependable customer service at
all times.
We also introduced Internet capabilities to further expand the breadth and
flexibility of our customer service functions. In 1996, we gave many of our
customers the ability to view their account information through the Internet.
During the first quarter of 1997, some customers using Aetna's variable annuity
contracts to fund their retirement plans under internal revenue code sections
403(b), 457, and 401(k), as well as individuals holding non-qualified Aetna
variable annuities or individual retirement annuities, will be able to use the
Internet to perform allocation changes and fund transfers. We remain steadfast
in our efforts to offer all Aetna Retirement Services customers the ability to
do transactions on the Internet.
The Aetna Retirement Services organization, through its subsidiary Aetna
Financial Services, Inc., is in the process of developing financial planning
capabilities to provide customers with the tools to achieve their retirement
dreams. Once this capability is developed, Aetna Financial Services'
professional financial planners, in partnership with other Aetna Retirement
Services representatives, will be able to help customers define their financial
objectives, evaluate their options, and advise them on the steps they can take
to help turn their retirement dreams into tangible goals.
We are also presently working on an initiative to offer new options for
cost-effective electronic delivery of regulatory materials such as prospectuses
on CD-ROM or via the Internet. Enclosed you will find a consent agreement if you
would like to choose a new delivery option for these materials that better suits
your needs. Kindly take a few minutes to fill out the form and return it to us
in the attached postage paid envelope if you are interested.
Please contact us if you have any questions or comments. You are the reason
we're in business.
Thank you for your business and continued trust.
/s/Daniel P. Kearney
- -----------------------
Daniel P. Kearney
President, Aetna Retirement Services, Inc.
- ------------------------
* Operating earnings exclude net realized capital gains and losses; these
earnings have been further adjusted to exclude $40 million of severance
and facilities charges in 1996.
<PAGE>
[Aetna Logo]
Retirement Services (SM)
Consent Agreement
- ----------------------------------------------------------------------------
February, 1997
Dear Valued Customer,
As we move into the 21st Century, technology is rapidly evolving and more
information is being delivered electronically. Replacing paper documents
with electronic document delivery is not only cost effective, it conserves
and protects our finite supply of natural resources.
During 1997, Aetna Life Insurance and Annuity Company ("ALIAC") plans to
offer new options for electronic delivery, on CD-ROM or via the INTERNET, of
securities-related regulatory materials relating to ALIAC variable
annuities, variable life insurance and the underlying investment options
under such products. These options will help us to provide you with
up-to-date information with speed and efficiency. If you would like to take
advantage of electronic delivery of future regulatory material as this
delivery becomes available, please take a few minutes to check the option
you prefer, fill out the form below and return it to us in the enclosed
postage paid envelope. A toll-free number (800-USAETNA) is always available
to request paper documents and you can change your options by writing to us
(151 Farmington Ave., Hartford, CT. 06156-8972).
Aetna will keep you informed of our progress on this exciting initiative by
announcing its availability in our regular communications. Until then, you
can expect to continue to receive paper copy materials.
We thank you for giving us this opportunity to serve you better.
- --------------------------------------------------------------------------------
Consent Agreement
- --------------------------------------------------------------------------------
When and to the extent that ALIAC makes available such delivery, I will
accept future regulatory materials (Annual Financial Reports and Semi-annual
Financial Reports, as well as prospectuses and supplements for ALIAC's
variable annuity and variable life insurance separate accounts and their
underlying funding options) on:
[ ] Internet via http://www.aetna.com (There may be potential costs to you
associated with such delivery, depending on your access carrier.)
[ ] CD ROM until INTERNET access is available
[ ] CD ROM only
- --------------------------------------------------------------------------------
This consent will be in effect until revoked in writing, which may be done
at any time.
- --------------------------------------------------------------------------------
Last Name First Name Middle Initial
- --------------------------------------------------------------------------------
Number and Street Address
- --------------------------------------------------------------------------------
City State Zip Code
- --------------------------------------------------------------------------------
Signature Date
- --------------------------------------------------------------------------------
Social Security Number/Tax ID Number
- --------------------------------------------------------------------------------
82949 (2-97)
<PAGE>
Variable Life Account B
Statement of Assets and Liabilities - December 31, 1996
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments, at net asset value: (Note 1)
Aetna Variable Fund; 2,867,163 shares (cost $85,576,983) .................................................. $ 92,871,626
Aetna Income Shares; 1,044,098 shares (cost $13,369,967) .................................................. 13,179,787
Aetna Variable Encore Fund; 689,138 shares (cost $8,985,791) .............................................. 9,092,185
Aetna Investment Advisers Fund, Inc.; 1,044,556 shares (cost $14,407,610) ................................. 15,791,541
Aetna Ascent Variable Portfolio; 43,217 shares (cost $529,733) ............................................ 545,378
Aetna Crossroads Variable Portfolio; 10,326 shares (cost $123,882) ........................................ 123,692
Aetna Legacy Variable Portfolio; 1,241 shares (cost $13,943) .............................................. 13,963
Alger American Small Capitalization Portfolio; 319,875 shares (cost $12,914,026) .......................... 13,086,083
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio; 632,915 shares (cost $12,213,929) .............................................. 13,310,213
Growth Portfolio; 162,252 shares (cost $4,757,662) ...................................................... 5,052,529
Overseas Portfolio; 28,255 shares (cost $494,386) ....................................................... 532,327
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio; 83,295 shares (cost $1,275,209) ................................................ 1,410,186
Contrafund Portfolio; 417,373 shares (cost $6,180,807) .................................................. 6,911,690
Janus Aspen Series:
Aggressive Growth Portfolio; 529,766 shares (cost $9,413,853) ........................................... 9,662,927
Balanced Portfolio; 242,000 shares (cost $3,331,182) .................................................... 3,574,345
Growth Portfolio; 462,582 shares (cost $6,608,169) ...................................................... 7,174,647
Short-Term Bond Portfolio; 383,937 shares (cost $3,801,075) ............................................. 3,827,848
Worldwide Growth Portfolio; 510,038 shares (cost $9,042,860) ............................................ 9,915,136
Scudder Variable Life Investment Fund -
International Portfolio; 801,151 shares (cost $9,370,711) ............................................... 10,615,255
TCI Portfolios, Inc. - Growth Fund; 633,059 shares (cost $6,629,436) ...................................... 6,482,525
-------------
NET ASSETS (cost $209,041,214) .............................................................................. $ 223,173,883
=============
Net assets represented by:
Policyholders' account values: (Notes 1 and 5)
Aetna Variable Fund:
Policyholders' account values ........................................................................... $ 92,871,626
Aetna Income Shares:
Policyholders' account values ........................................................................... 13,179,787
Aetna Variable Encore Fund:
Policyholders' account values ........................................................................... 9,092,185
Aetna Investment Advisers Fund, Inc.:
Policyholders' account values ........................................................................... 15,791,541
Aetna Ascent Variable Portfolio:
Policyholders' account values ........................................................................... 545,378
Aetna Crossroads Variable Portfolio:
Policyholders' account values ........................................................................... 123,692
Aetna Legacy Variable Portfolio:
Policyholders' account values ........................................................................... 13,963
Alger American Small Capitalization Portfolio:
Policyholders' account values ........................................................................... 13,086,083
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio:
Policyholders' account values ........................................................................... 13,310,213
Growth Portfolio:
Policyholders' account values ........................................................................... 5,052,529
Overseas Portfolio:
Policyholders' account values ........................................................................... 532,327
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio:
Policyholders' account values ........................................................................... 1,410,186
Contrafund Portfolio:
Policyholders' account values ........................................................................... 6,911,690
</TABLE>
<PAGE>
Variable Life Account B
<TABLE>
<CAPTION>
Statement of Assets and Liabilities - December 31, 1996 (continued):
<S> <C>
Janus Aspen Series:
Aggressive Growth Portfolio:
Policyholders' account values ............................................................................ $ 9,662,927
Balanced Portfolio:
Policyholders' account values ............................................................................ 3,574,345
Growth Portfolio:
Policyholders' account values ............................................................................ 7,174,647
Short-Term Bond Portfolio:
Policyholders' account values ............................................................................ 3,827,848
Worldwide Growth Portfolio:
Policyholders' account values ............................................................................ 9,915,136
Scudder Variable Life Investment Fund - International Portfolio:
Policyholders' account values ............................................................................ 10,615,255
TCI Portfolios, Inc. - Growth Fund:
Policyholders' account values ............................................................................ 6,482,525
-------------
$223,173,883
=============
</TABLE>
See Notes to Financial Statements
<PAGE>
Variable Life Account B
Statements of Operations and Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995
------------- -------------
<S> <C> <C>
INVESTMENT INCOME:
Income: (Notes 1, 3 and 5)
Dividends ........................................................ $ 13,813,478 $ 12,965,237
Expenses: (Notes 2 and 5)
Valuation Period Deductions ...................................... (1,905,137) (1,149,801)
------------- -------------
Net investment income ............................................... 11,908,341 11,815,436
------------- -------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on sales of investments: (Notes 1, 4 and 5)
Proceeds from sales ............................................... 29,656,908 28,828,178
Cost of investments sold .......................................... 26,434,292 25,993,679
------------- -------------
Net realized gain ............................................... 3,222,616 2,834,499
Net unrealized gain (loss) on investments: (Note 5)
Beginning of year ................................................. 4,391,574 (4,407,131)
End of year ....................................................... 14,132,669 4,391,574
------------- -------------
Net change in unrealized gain ................................... 9,741,095 8,798,705
------------- -------------
Net realized and unrealized gain on investments ..................... 12,963,711 11,633,204
------------- -------------
Net increase in net assets resulting from operations ................ 24,872,052 23,448,640
------------- -------------
FROM UNIT TRANSACTIONS:
Variable life premium payments ...................................... 101,416,302 44,310,537
Sales and administrative charges deducted by the Company ............ (3,032,151) (1,381,985)
Premiums allocated to the fixed account ............................. (3,127,437) (3,260,098)
------------- -------------
Net premiums allocated to the variable account .................. 95,256,714 39,668,454
Transfers to the Company for monthly deductions ..................... (15,491,673) (11,297,188)
Redemptions by contract holders ..................................... (4,154,465) (3,238,332)
Transfers on account of policy loans ................................ (3,783,533) (2,076,373)
Other ............................................................... (40,991) 41,863
------------- -------------
Net increase in net assets from unit transactions (Note 5) ...... 71,786,052 23,098,424
------------- -------------
Change in net assets ................................................ 96,658,104 46,547,064
NET ASSETS:
Beginning of year ................................................... 126,515,779 79,968,715
------------- -------------
End of year ......................................................... $ 223,173,883 $ 126,515,779
============= =============
</TABLE>
<PAGE>
Variable Life Account B
Condensed Financial Information - Year Ended December 31, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Value Increase(Decrease) Units
Per Unit in Value of Outstanding Reserves
Beginning End of Accumulation at End At End
of Year Year Unit of Year of Year
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Variable Fund:
Aetna Vest $28.351 $34.932 23.21% 1,517,474.5 $53,008,643
Aetna Vest II 15.831 19.507 23.21% 794,275.5 15,493,624
Aetna Vest Plus 13.301 16.389 23.21% 1,323,444.4 21,689,765
Aetna Vest Estate Protector 10.000 11.675 16.75% (2) 11,748.7 137,170
Corporate Specialty Market 12.016 14.805 23.21% 171,723.7 2,542,424
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Income Shares:
Aetna Vest $21.305 $21.850 2.56% 279,436.3 6,105,721
Aetna Vest II 14.324 14.691 2.56% 67,932.7 997,974
Aetna Vest Plus 11.470 11.764 2.56% 132,814.7 1,562,403
Aetna Vest Estate Protector 10.000 10.452 4.52% (2) 17.0 177
Corporate Specialty Market 11.071 11.354 2.56% 397,512.3 4,513,512
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Encore Fund:
Aetna Vest $15.891 $16.577 4.32% 165,067.7 2,736,269
Aetna Vest II 11.616 12.117 4.32% 17,257.4 209,105
Aetna Vest Plus 10.917 11.388 4.32% 277,635.4 3,161,633
Aetna Vest Estate Protector 10.000 10.333 3.33% (2) 55,176.3 570,162
Corporate Specialty Market 10.444 10.895 4.32% 221,672.3 2,415,016
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc.:
Aetna Vest $15.390 $17.547 14.02% 106,202.5 1,863,538
Aetna Vest II 15.561 17.742 14.02% 228,951.9 4,062,177
Aetna Vest Plus 13.050 14.880 14.02% 393,635.7 5,857,138
Corporate Specialty Market 11.361 12.954 14.02% 309,462.5 4,008,688
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio:
Aetna Vest $10.000 $11.828 18.28% (2) 3,460.3 40,930
Aetna Vest II 10.000 11.828 18.28% (2) 2,054.0 24,295
Aetna Vest Plus 10.000 11.828 18.28% (2) 40,593.4 480,153
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio:
Aetna Vest $10.000 $11.474 14.74% (2) 99.8 1,145
Aetna Vest Plus 10.000 11.474 14.74% (2) 10,665.0 122,368
Aetna Vest Estate Protector 10.000 11.487 14.87% (2) 15.6 179
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio:
Aetna Vest Plus $10.000 $11.118 11.18% (2) 1,255.9 13,963
- --------------------------------------------------------------------------------------------------------------------------------
Alger American Small Capitalization Portfolio:
Aetna Vest $15.562 $16.051 3.14% 77,047.6 1,236,667
Aetna Vest II 15.563 16.052 3.14% 52,282.1 839,239
Aetna Vest Plus 15.555 16.043 3.14% 381,746.1 6,124,522
Aetna Vest Estate Protector 10.000 9.982 (0.18%) (2) 21,147.3 211,085
Corporate Specialty Market 12.799 13.201 3.14% 354,114.8 4,674,570
- --------------------------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund :
Equity-Income Portfolio:
Aetna Vest $10.000 $10.871 8.71% (2) 6,532.8 71,015
Aetna Vest II 10.000 10.871 8.71% (2) 2,200.1 23,916
Aetna Vest Plus 10.000 10.871 8.71% (2) 118,798.4 1,291,404
Aetna Vest Estate Protector 10.000 10.883 8.83% (2) 10,991.4 119,619
Corporate Specialty Market 11.058 12.512 13.14% 943,466.6 11,804,259
- --------------------------------------------------------------------------------------------------------------------------------
Growth Portfolio:
Corporate Specialty Market $9.911 $11.255 13.56% 448,921.8 5,052,529
- --------------------------------------------------------------------------------------------------------------------------------
Overseas Portfolio:
Corporate Specialty Market $10.029 $11.241 12.09% 47,354.8 532,327
- --------------------------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio:
Corporate Specialty Market $10.596 $12.022 13.46% 117,298.4 1,410,186
- --------------------------------------------------------------------------------------------------------------------------------
Contrafund Portfolio:
Aetna Vest $10.000 $11.525 15.25% (2) 17,996.4 207,415
Aetna Vest II 10.000 11.525 15.25% (2) 3,659.1 42,173
Aetna Vest Plus 10.000 11.525 15.25% (2) 80,966.3 933,168
Aetna Vest Estate Protector 10.000 11.538 15.38% (2) 10,537.3 121,585
Corporate Specialty Market 10.322 12.396 20.10% 452,333.3 5,607,349
- --------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series:
Aggressive Growth Portfolio:
Aetna Vest $15.114 $16.153 6.87% 55,921.6 903,288
Aetna Vest II 15.114 16.153 6.87% 35,775.8 577,877
Aetna Vest Plus 15.114 16.153 6.87% 221,641.2 3,580,130
Aetna Vest Estate Protector 10.000 9.797 (2.03%) (2) 15,306.0 149,948
Corporate Specialty Market 11.340 12.120 6.87% 367,315.7 4,451,684
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Variable Life Account B
Condensed Financial Information - Year Ended December 31, 1996 (continued):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Value Increase(Decrease) Units
Per Unit in Value of Outstanding Reserves
Beginning End of Accumulation at End At End
of Year Year Unit of Year of Year
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balanced Portfolio:
Aetna Vest $12.142 $13.966 15.02% 6,502.2 $ 90,808
Aetna Vest II 12.237 14.075 15.02% 4,206.4 59,204
Aetna Vest Plus 12.136 13.960 15.02% 124,211.8 1,733,938
Aetna Vest Estate Protector 10.000 11.101 11.01% (2) 3,134.9 34,800
Corporate Specialty Market 10.643 12.242 15.02% 135,240.2 1,655,595
- -------------------------------------------------------------------------------------------------------------------------------
Growth Portfolio:
Aetna Vest $12.704 $14.898 17.27% 30,969.1 461,370
Aetna Vest II 12.692 14.884 17.27% 65,830.7 979,838
Aetna Vest Plus 12.674 14.863 17.27% 234,144.3 3,480,132
Aetna Vest Estate Protector 10.000 10.857 8.57% (2) 1,608.1 17,459
Corporate Specialty Market 10.430 12.232 17.27% 182,790.8 2,235,848
- -------------------------------------------------------------------------------------------------------------------------------
Short-Term Bond Portfolio:
Aetna Vest $10.967 $11.289 2.94% 595.3 6,721
Aetna Vest II 10.955 11.277 2.94% 751.0 8,469
Aetna Vest Plus 10.925 11.247 2.94% 17,621.2 198,177
Corporate Specialty Market 10.094 10.468 3.71% (1) 345,277.1 3,614,481
- -------------------------------------------------------------------------------------------------------------------------------
Worldwide Growth Portfolio:
Aetna Vest $12.809 $16.364 27.75% 75,637.0 1,237,686
Aetna Vest II 12.813 16.368 27.75% 50,270.3 822,823
Aetna Vest Plus 12.797 16.348 27.75% 279,744.3 4,573,155
Aetna Vest Estate Protector 10.000 11.811 18.11% (2) 10,429.7 123,180
Corporate Specialty Market 10.964 13.459 22.76% (3) 234,655.4 3,158,292
- -------------------------------------------------------------------------------------------------------------------------------
Scudder Variable Life Investment Fund -
International Portfolio:
Aetna Vest $12.798 $14.543 13.63% 164,419.0 2,391,112
Aetna Vest II 12.719 14.453 13.63% 48,351.0 698,823
Aetna Vest Plus 12.648 14.373 13.63% 360,050.5 5,174,856
Aetna Vest Estate Protector 10.000 10.898 8.98% (2) 4,363.0 47,548
Corporate Specialty Market 10.598 12.043 13.63% 191,221.6 2,302,916
- -------------------------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc. - Growth Fund:
Aetna Vest $13.248 $12.534 (5.39%) 84,078.3 1,053,865
Aetna Vest II 13.307 12.590 (5.39%) 29,273.6 368,568
Aetna Vest Plus 13.126 12.419 (5.39%) 361,778.0 4,492,803
Aetna Vest Estate Protector 10.000 9.511 (4.89%) (2) 29.2 278
Corporate Specialty Market 12.005 11.358 (5.39%) 49,922.3 567,011
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes to Condensed Financial Information:
(1) - Reflects less than a full year of performance activity. Funds were first
received in this option during February 1996.
(2) - Available for investment less than 1 year, contract commenced operations
during March 1996.
(3) - Reflects less than a full year of performance activity. Funds were first
received in this option during March 1996.
See Notes to Financial Statements
<PAGE>
Variable Life Account B
Notes to Financial Statements - December 31, 1996
1. Summary of Significant Accounting Policies
Variable Life Account B ("Account") is a separate account established by
Aetna Life Insurance and Annuity Company and is registered under the
Investment Company Act of 1940 as a unit investment trust. The Account is
sold exclusively for use with variable life insurance product contracts as
defined under the Internal Revenue Code of 1986, as amended.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect amounts reported therein. Although actual results could differ
from these estimates, any such differences are expected to be immaterial to
the net assets of the Account.
a. Valuation of Investments
Investments in the following Funds are stated at the closing net asset value
per share as determined by each fund on December 31, 1996:
Aetna Variable Fund Janus Aspen Series:
Aetna Income Shares [bullet]Aggressive Growth Portfolio
Aetna Variable Encore Fund [bullet]Balanced Portfolio
Aetna Investment Advisers Fund, Inc. [bullet]Growth Portfolio
Aetna Ascent Variable Portfolio [bullet]Short-Term Bond Portfolio
Aetna Crossroads Variable Portfolio [bullet]Worldwide Growth Portfolio
Aetna Legacy Variable Portfolio Scudder Variable Life
Alger American Small Investment Fund -
Capitalization Portfolio International Portfolio
Fidelity Investments Variable Insurance TCI Portfolios, Inc. - Growth
Products Fund: Fund
[bullet]Equity-Income Portfolio
[bullet]Growth Portfolio
[bullet]Overseas Portfolio
Fidelity Investments Variable Insurance
Products Fund II:
[bullet]Asset Manager Portfolio
[bullet]Contrafund Portfolio
b. Other
Investment transactions are accounted for on a trade date basis and dividend
income is recorded on the ex-dividend date. The cost of investments sold is
determined by specific identification.
c. Federal Income Taxes
The operations of the Account form a part of, and are taxed with, the total
operations of Aetna Life Insurance and Annuity Company ("Company") which is
taxed as a life insurance company under the Internal Revenue Code of 1986, as
amended.
2. Valuation Period Deductions
Deductions by the Account for mortality and expense risk charges are made in
accordance with the terms of the policies and are paid to the Company.
<PAGE>
Variable Life Account B
Notes to Financial Statements - December 31, 1996 (continued):
3. Dividend Income
On an annual basis the Funds distribute substantially all of their taxable
income and realized capital gains to their shareholders. Distributions paid
to the Account are automatically reinvested in shares of the Funds. The
Account's proportionate share of each Fund's undistributed net investment
income (distributions in excess of net investment income) and accumulated net
realized gain (loss) on investments is included in net unrealized gain (loss)
on investments in the Statements of Operations and Changes in Net Assets.
4. Purchases and Sales of Investments
The cost of purchases and proceeds from sales of investments other than
short-term investments for the years ended December 31, 1996 and December 31,
1995 aggregated $113,349,117 and $29,656,908 and $71,231,087 and $28,828,178,
respectively.
<PAGE>
Variable Life Account B
Notes to Financial Statements - December 31, 1996 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets - Year Ended December 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Valuation Proceeds Cost of Net
Period from Investments Realized
Dividends Deductions Sales Sold Gain (Loss)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Variable Fund: $ 9,712,578 $ (991,737) $ 5,373,083 $ 4,466,494 $ 906,589
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Income Shares: 810,294 (121,325) 1,564,483 1,544,041 20,442
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Encore Fund: 477,308 (71,555) 9,490,775 9,560,169 (69,394)
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc.: 1,201,085 (127,990) 1,717,127 1,435,761 281,366
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio: 18,222 (1,210) 127,981 124,671 3,310
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio: 2,462 (91) 1,317 1,263 54
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio: 671 (36) 503 486 17
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
Alger American Small Capitalization
Portfolio: 33,925 (93,143) 2,003,029 1,400,608 602,421
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable
Insurance Products Fund:
Equity-Income Portfolio: 19,619 (57,181) 625,427 574,716 50,711
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
Growth Portfolio: 85,627 (30,149) 243,345 245,938 (2,593)
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
Overseas Portfolio: 14,172 (4,004) 478,644 450,003 28,641
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable
Insurance Products Fund II:
Asset Manager Portfolio: 62,788 (13,383) 981,022 966,124 14,898
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
Contrafund Portfolio: 10,199 (36,829) 353,531 314,886 38,645
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series:
Aggressive Growth Portfolio: 79,809 (68,571) 1,171,119 858,482 312,637
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
Balanced Portfolio: 70,301 (23,444) 452,062 367,517 84,545
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
Growth Portfolio: 140,964 (46,593) 808,709 590,651 218,058
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
Short-Term Bond Portfolio: 84,482 (17,596) 424,360 415,377 8,983
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
Worldwide Growth Portfolio: 105,214 (49,874) 1,127,422 777,300 350,122
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
Scudder Variable Life Investment Fund -
International Portfolio: 173,534 (85,922) 1,752,475 1,537,715 214,760
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc. - Growth Fund: 710,224 (64,504) 960,494 802,090 158,404
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
Total Variable Life Account B $ 13,813,478 $ (1,905,137) $ 29,656,908 $ 26,434,292 $ 3,222,616
====================================================================================================================================
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Net Unrealized Net
Gain (Loss) Net Increase(Decrease) Net Assets
--------------------- Change in In Net Assets ---------------------------
Beginning End Unrealized from Unit Beginning End
of Year of Year Gain (Loss) Transactions of Year of Year
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aetna Variable Fund: $ 65,391 $ 7,294,643 $ 7,229,252 $ 5,056,913 $ 70,958,031 $ 92,871,626
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Income Shares: 189,278 (190,180) (379,458) 2,798,667 10,051,167 13,179,787
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Encore Fund: 138,935 106,394 (32,541) 3,268,179 5,520,188 9,092,185
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc.: 1,031,584 1,383,931 352,347 4,815,033 9,269,700 15,791,541
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio: 0 15,645 15,645 509,411 0 545,378
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio: 0 (191) (191) 121,458 0 123,692
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio: 0 20 20 13,291 0 13,963
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
Alger American Small Capitalization
Portfolio: 595,950 172,057 (423,893) 7,688,994 5,277,779 13,086,083
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable
Insurance Products Fund:
Equity-Income Portfolio: 28,202 1,096,283 1,068,081 11,810,807 418,176 13,310,213
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
Growth Portfolio: (36,211) 294,867 331,078 3,470,007 1,198,559 5,052,529
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
Overseas Portfolio: 21,923 37,941 16,018 (102,302) 579,802 532,327
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable
Insurance Products Fund II:
Asset Manager Portfolio: 47,435 134,978 87,543 298,650 959,690 1,410,186
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
Contrafund Portfolio: 10,253 730,883 720,630 5,090,135 1,088,910 6,911,690
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series:
Aggressive Growth Portfolio: 376,606 249,074 (127,532) 5,949,433 3,517,151 9,662,927
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
Balanced Portfolio: 60,589 243,163 182,574 2,648,699 611,670 3,574,345
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
Growth Portfolio: 196,848 566,478 369,630 3,974,072 2,518,516 7,174,647
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
Short-Term Bond Portfolio: 6,078 26,773 20,695 3,383,696 347,588 3,827,848
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
Worldwide Growth Portfolio: 227,523 872,277 644,754 7,436,957 1,427,963 9,915,136
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
Scudder Variable Life Investment Fund-
International Portfolio: 431,463 1,244,544 813,081 2,808,258 6,691,544 10,615,255
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc. - Growth Fund: 999,727 (146,911) (1,146,638) 745,694 6,079,345 6,482,525
PolicyHolders' account values
- ------------------------------------------------------------------------------------------------------------------------------------
Total Variable Life Account B $ 4,391,574 $ 14,132,669 $ 9,741,095 $ 71,786,052 $126,515,779 $223,173,883
====================================================================================================================================
</TABLE>
<PAGE>
Independent Auditors' Report
The Board of Directors of Aetna Life Insurance and
Annuity Company and Policyholders of Variable Life Account B:
We have audited the accompanying statement of assets and liabilities of Aetna
Life Insurance and Annuity Company Variable Life Account B (the "Account") as of
December 31, 1996, and the related statements of operations and changes in net
assets for each of the years in the two-year period then ended, and condensed
financial information for the year ended December 31, 1996. These financial
statements and condensed financial information are the responsibility of the
Account's management. Our responsibility is to express an opinion on these
financial statements and condensed financial information based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and condensed
financial information are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1996, by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and condensed financial information
referred to above present fairly, in all material respects, the financial
position of Aetna Life Insurance and Annuity Company Variable Life Account B as
of December 31, 1996, the results of its operations and the changes in its net
assets for each of the years in the two-year period then ended, and condensed
financial information for the year ended December 31, 1996 in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Hartford, Connecticut
February 14, 1997
<PAGE>
[Aetna Back Cover]
[Aetna Logo]
Retirement Services (SM)
Insurance products offered by Aetna Life Insurance and Annuity Company and
subsidiaries. Mutual funds and variable annuities are available through local
representatives of Aetna Investment Services, Inc., 151 Farmington Avenue,
Hartford, Connecticut 06156.
Visit our home page an the Internet
http://www.aetna.com
These reports are authorized for distribution to other persons only when
preceded or accompanied by an effective prospectus or disclosure booklet for
that product which gives sales expense and other pertinent information.
Printed on recycled paper
ANN.VLB-96
