As filed with the Securities and Exchange Commission on February 26, 1999
Registration No. 33-76018
Registration No. 811-4536
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-6
POST-EFFECTIVE AMENDMENT NO. 11 TO
REGISTRATION STATEMENT
FOR REGISTRATION
UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
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Variable Life Account B of
Aetna Life Insurance and Annuity Company
(Exact Name of Registrant)
Aetna Life Insurance and Annuity Company
(Name of Depositor)
151 Farmington Avenue, RE4A, Hartford, Connecticut 06156
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, including Area Code
(860) 273-4686
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Julie E. Rockmore, Counsel Copy to:
Aetna Life Insurance and Annuity Company George Gingold, Esq.
151 Farmington Avenue 197 King Philip Drive
RE4A West Hartford, CT 06117-1409
Hartford, Connecticut 06156
(Name and Complete Address of Agent for Service)
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It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[ ] on pursuant to paragraph (b) of Rule 485
[X] on May 3, 1999, pursuant to paragraph (a) of Rule 485
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
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Variable Life Account B
Aetna Life Insurance and Annuity Company
Home Office:
151 Farmington Avenue
Hartford, Connecticut 06156
(800) 334-7586
Administrative Office:
Personal Service Center-MVLI
350 Church Street
Hartford, CT 06103-1106
(800) 552-9898
Prospectus Dated May 3, 1999
The Flexible Premium Variable Life Insurance Policy
This Prospectus describes a flexible premium variable life insurance contract
(the "Policy"), offered by Aetna Life Insurance and Annuity Company (the
"Company"). (Page references are to this Prospectus unless otherwise stated.)
The Policy features:
- -- flexible premium payments (see pages 13-14); -- a choice of one of two death
benefit options (see page 12); and -- a choice of underlying investment options
(see pages 5-8).
Each fund has its own investment objective. You should review each fund's
Prospectus before making your decision. The mutual funds ("Funds") that make up
the Variable Account are:
o Aetna Ascent VP
o Aetna Balanced VP, Inc.
o Aetna Income Shares d/b/a Aetna Bond VP
o Aetna Crossroads VP
o Aetna Variable Fund d/b/a Aetna Growth and
Income VP
o Aetna Index Plus Large Cap VP
o Aetna Legacy VP
o Aetna Variable Encore Fund d/b/a Aetna
Money Market VP
o Fidelity VIP Equity-Income Portfolio
o Fidelity VIP II Contrafund Portfolio
o Janus Aspen Aggressive Growth Portfolio
o Janus Aspen Balanced Portfolio
o Janus Aspen Growth Portfolio
o Janus Aspen Worldwide Growth Portfolio
o Oppenheimer Global Securities Fund
o Oppenheimer Strategic Bond Fund
o Portfolio Partners MFS Emerging Equities
Portfolio
o Portfolio Partners MFS Research Growth
Portfolio
o Portfolio Partners MFS Value Equity Portfolio
o Portfolio Partners Scudder International
Growth Portfolio
o Portfolio Partners T. Rowe Price Growth
Equity Portfolio
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUSES OF
THE FUNDS, WHICH ARE IN A SEPARATE BOOKLET. PLEASE READ THESE PROSPECTUSES
CAREFULLY, AND RETAIN THEM FOR FUTURE REFERENCE.
THIS PROSPECTUS AND OTHER INFORMATION ABOUT VARIABLE LIFE ACCOUNT B FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION CAN BE FOUND IN THE SEC'S WEB SITE AT
http://www.sec.gov.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAVE THESE
COMMISSIONS PASSED UPON THE ACCURACY OF THIS PROSPECTUS. A REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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Table of Contents
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Definitions ....................................... iii
Policy Summary .................................... 1
Initial Choices to be Made ....................... 1
Level or Varying Death Benefit ................... 1
Amount of Premium Payment ........................ 2
Selection of Funding Vehicles .................... 2
Guaranteed Death Benefit Provision ............... 3
No-Lapse Coverage Provision ...................... 3
Charges and Fees ................................. 3
Policy Loans ..................................... 4
Changes in Specified Amount ...................... 4
The Separate Account .............................. 5
Allocation of Premiums ............................ 5
The Funds ........................................ 6
Mixed and Shared Funding ......................... 8
Fixed Account .................................... 8
Charges and Fees .................................. 9
Premium Load ..................................... 9
Charges and Fees Assessed Against the Total
Account Value ................................... 9
Charges and Fees Associated with the
Variable Funding Options ........................ 9
Charges Assessed Against the Underlying
Funds ........................................... 10
Surrender Charge ................................. 11
Surrender Charges on Full and Partial
Surrenders ...................................... 11
Policy Choices .................................... 12
Death Benefit .................................... 12
Guaranteed Death Benefit Provision ............... 12
Premium Payments ................................. 13
Transfers and Allocations to the Funding
Options ......................................... 14
Telephone Transfers .............................. 14
Automated Transfers (Dollar Cost Averaging) 15
Policy Values ..................................... 16
Total Account Value .............................. 16
Accumulation Unit Value .......................... 16
Maturity Value ................................... 16
Cash Surrender Value ............................. 16
Policy Rights ..................................... 17
Partial Surrenders ............................... 17
No-Lapse Coverage Provision ...................... 18
Reinstatement of a Lapsed Policy ................. 18
Policy Loans: Preferred and Nonpreferred ......... 18
Policy Changes -- Increases, Decreases,
Death Benefit Option Change ..................... 20
Right to Examine the Policy ...................... 20
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Death Benefit ..................................... 21
Policy Settlement ................................. 21
Settlement Options ............................... 21
Calculation of Settlement Payments ............... 23
Special Plans ..................................... 24
The Company ....................................... 24
Directors and Officers ............................ 26
Additional Information ............................ 28
Reports to Policy Owners ......................... 28
Right to Instruct Voting of Fund Shares .......... 28
Disregard of Voting Instructions ................. 28
State Regulation ................................. 29
Legal Matters .................................... 29
The Registration Statement ....................... 29
Distribution of the Policies ..................... 29
Records and Accounts ............................. 30
Independent Auditors ............................. 30
Year 2000 ........................................ 30
Tax Matters ....................................... 31
General .......................................... 31
Federal Tax Status of the Company ................ 31
Life Insurance Qualification ..................... 31
General Rules .................................... 32
Modified Endowment Contracts ..................... 32
Diversification Standards ........................ 33
Investor Control ................................. 33
Other Tax Considerations ......................... 34
Withholding ...................................... 34
Miscellaneous Policy Provisions ................... 35
The Policy ....................................... 35
Payment of Benefits .............................. 35
Age and Sex ...................................... 35
Incontestability ................................. 35
Suicide .......................................... 35
Coverage Beyond Maturity ......................... 36
Protection of Proceeds ........................... 36
Nonparticipation ................................. 36
Illustrations of Death Benefit, Total Account
Values and Cash Surrender Values ................. 36
Financial Statements of the Separate Account ...... S-1
Financial Statements of the Company ............... F-1
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Definitions
Accumulation Unit: A unit used to measure the value of a Policyowner's interest
in each applicable funding option used to calculate the value of the variable
portion of the Policy before election of a Settlement Option.
Amount at Risk: The Death Benefit before subtraction of outstanding loans, if
any, divided by 1.0036748, minus the Total Account Value.
Cash Surrender Value: The amount a Policy Owner can receive in cash by
surrendering the Policy. This equals the Total Account Value minus the
applicable surrender charge and the amount necessary to repay any loans in full.
Cost of Insurance: The portion of the Monthly Deduction attributable to the
basic insurance coverage, not including riders, supplemental benefits or monthly
expense charges.
Grace Period: The 61-day period beginning on the Monthly Deduction Day on which
the Policy's Cash Surrender Value is insufficient to cover the current Monthly
Deduction. The Policy will lapse without value at the end of the 61-day period
unless a sufficient payment described in the notification letter is received by
the Company.
Loan Account Value: The sum of all unpaid loans (Preferred and Nonpreferred).
The amount necessary to repay all loans in full is the Loan Account Value plus
any interest accrued since the last Policy anniversary. Such interest is payable
in order to discharge any policy indebtedness.
Maturity Value: The Total Account Value on the Maturity Date, less the amount
necessary to repay any loans in full if the Guaranteed Death Benefit Provision
is not in effect. Otherwise, the greater of the Total Account Value and the
Specified Amount on the Maturity Date, less the amount necessary to repay any
loans in full.
Policy Year/Policy Anniversary: The first Policy Year is the 12 month period
beginning on the Issue Date of the Policy. Your Policy Anniversary is the
Policy Issue Date plus 1 year, 2 years, etc.
Settlement Option Units: A measure of the net investment results of the
investment options used to calculate the amount of the Settlement Option
payments.
Valuation Period: The period of time from when the Company determines the
Accumulation Unit Value and Settlement Option Unit Value of a variable
investment option until the next time it determines such unit value. Currently,
the calculation occurs after the close of business of the New York Stock
Exchange on any normal business day, Monday through Friday, that the New York
Stock Exchange is open.
Valuation Reserve: A reserve established pursuant to the insurance laws of
Connecticut to measure voting rights during the settlement option period and
the value of a commutation right, if available, under Settlement Option 2 when
elected on a variable basis.
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Policy Summary
This section is an overview of key Policy features. (Regulations in your state
may vary the provisions of your own Policy.) Your Policy is a flexible premium
variable life insurance policy. Its value may change on a:
1) fixed basis;
2) variable basis; or a
3) combination of both fixed and variable bases.
Review your personal financial objectives and discuss them with a qualified
financial counselor before you buy a variable life insurance policy. This Policy
may, or may not, be appropriate for your individual financial goals. The value
of the Policy and, under one option, the death benefit amount depend on the
investment results of the funding options you select.
At all times, your Policy must qualify as life insurance under the Internal
Revenue Code of 1986 (the "Code") to receive favorable tax treatment under
Federal law. If these requirements are met, you may benefit from favorable
federal tax treatment. The Company reserves the right to return your premium
payment if it results in your Policy's failing to meet federal tax law
requirements.
Initial Choices to be Made
The Policy Owner (the "Owner" or "you") is the person named in the "Policy
Specifications" who has all of the Policy ownership rights. If no Owner is
named, the Insured (the person whose life is insured under the Policy) will be
the Owner of the Policy. You, as the Owner, have four important choices to make
when the Policy is first purchased. You need to choose:
1) either the level or varying Death Benefit Option (described on page 12);
2) the amount of premium you want to pay;
3) the amount of your Net Premium Payment to be placed in each of the funding
options you select. The Net Premium Payment is the balance of your Premium
Payment that remains after certain charges are deducted from it;
4) if you want the Guaranteed Death Benefit Provision, and to what age
(described on pages 12-13); or
Level or Varying Death Benefit
The Death Benefit is the amount the Company pays to the Beneficiary(ies) when
the Insured dies. Before we pay the Beneficiary(ies), any outstanding loan
account balances or outstanding amounts due are subtracted from the Death
Benefit. We calculate the Death Benefit payable, as of the date the Insured
died.
If you choose the level Death Benefit Option, the Death Benefit will be the
greater of:
1) the Specified Amount in effect for the Policy at the time of the Insured's
death (The Initial Specified Amount may be found on the Policy's
Specification Page); or
2) the Corridor Death Benefit, which is the death benefit calculated as a
percentage of the Total Account Value.
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If you choose the varying Death Benefit Option, the death benefit will be the
greater of:
1) the Specified Amount plus the Total Account Value (The Total Account Value
is the total of the balances in the Fixed Account, the Variable Account
minus any outstanding Loan Account amounts); or
2) the Corridor Death Benefit.
See pages 12-13 for more details.
If you have borrowed against your Policy or surrendered a portion of your
Policy, the Loan Account balance and any surrendered amount will reduce your
Initial Death Benefit. See pages 12-13.
You may borrow within described limits against the Policy. You may surrender the
Policy in full or withdraw part of its value. A Surrender Charge is applied if
the Policy is surrendered totally.
Amount of Premium Payment
When you first buy your Policy, you must decide how much premium to pay. Premium
payments may be changed within the limits described on pages 13-14. If your
Policy lapses because your monthly deduction is larger than the Net Accumulation
Value, you may reinstate your Policy. See page 18.
You may use the value of the Policy to pay the premiums due and continue the
Policy in force if sufficient values are available for premium payments. Be
careful; if the investment options you choose do not do as well as you expect,
there may not be enough value to continue the Policy in force without more
premium payments. Charges against Policy values for the cost of insurance (see
pages 9-10) increase as the Insured gets older.
When you first receive your Policy you will have 10 days to look it over. This
is called the "Right-to-Examine" time period. Use this time to review your
Policy and make sure it meets your needs. During this time period, your Initial
Premium Payment will be allocated to the funding options you initially select.
If you then decide you do not want your Policy, you will receive a refund of:
1) the difference between payments made and the amounts allocated to the
Separate Account as of the date the Policy is received by the Company; plus
2) the value of the amount allocated to the Separate Account as of the date the
Policy is received by the Company; plus
3) any fees imposed on the amounts allocated to the Separate Account.
However, the refund will equal total premiums paid if state laws do not allow
this type of refund. No interest will be paid to you. State laws where you live
might change the number of days in the "Right-to-Examine" time period. See page
20.
Selection of Funding Vehicles
This Prospectus focuses on the Variable Account investment information that
makes up the "variable" part of the contract. If you put money into the variable
funding options, you take all the investment risk on that money. This means that
if the mutual fund(s) you select go up in value, the value of your Policy, net
of charges and expenses, also goes up. If those funds lose value, so does your
Policy. See pages 5-8.
You must choose the Fund(s) (Sub-Accounts) in which you want to place each Net
Premium Payment. These Fund Sub-Accounts make up the Variable Account. Each
Sub-Account invests in shares of a certain Fund. A Variable Sub-Account is not
guaranteed and will increase or decrease in value according to the particular
Fund's investment performance.
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You may also choose to place your Net Premium Payment or part of it into the
Fixed Account. Net Premium payments put into the Fixed Account:
- -- become part of the Company's General Account;
- -- do not share the investment experience of the Separate Account; and
- -- have a guaranteed minimum interest rate of 4.5% per year.
For additional information on the Fixed Account, see page 8 and the Policy
itself.
Guaranteed Death Provision
You may elect to have a Guaranteed Death Benefit Provision to age 80 or age 100.
This means that your Policy will remain in force even though the cash value is
not enough to pay the current Monthly Deductions as long as the Guaranteed Death
Benefit Premium test is met. Each year the Company will determine that the sum
of premiums to that point in time is sufficient to support the Guaranteed Death
Benefit Provision. Your total premiums paid to date minus the partial surrenders
must be equal to the required monthly Guaranteed Death Benefit Premium times the
number of months that have passed since the original Policy Issue Date. See
pages 13-14.
No-Lapse Coverage Provision
Your Policy will not terminate during the first five years after the initial
Issue Date or the Issue Date of any increase in the Specified Amount if:
1) the sum of the Basic Premiums for each Policy month from the Issue Date,
along with that month's Basic Premium; plus
2) any partial surrenders; plus
3) any increase in the Loan Account Value within that same five years,
equals or is more than the sum of premiums paid.
Charges and Fees
We deduct a premium load, currently 3.5%, from all of your Premium Payments.
Monthly deductions are made for administrative expenses ($20 per month for the
first Policy Year and $7 per month afterwards) and the Cost of Insurance along
with any riders that are placed on your Policy. Daily deductions are subtracted
from the Variable Account for mortality and expense risk. At this time the
charge is at an annual rate of .70%. We reserve the right to change this charge
but it will never exceed .90% annually. Currently, we deduct from the Variable
Account a daily administrative charge for the administration and maintenance of
the Policy. This charge is at an annual rate of .30%. It will never exceed .50%
annually.
Each Fund has its own management fee charge also deducted daily. Investment
results for the Funds you choose will be affected by the fund management charges
and other expenses. The table on pages 10-11 shows you the charges and other
expenses currently in effect for each Fund.
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At any time, you may make transfers between funding options without charge.
Within 45 days after each Policy Anniversary, you may also transfer to the
Variable Account the greater of:
1) 25% of the Fixed Account Value; or
2) $500.
The Company may increase this limit in the future.
If you surrender your Policy, in full or in part, within the first 16 Policy
Years, a Surrender Charge will be deducted from the amount paid to you. The
initial Surrender charge is based on the Specified Amount and depends on the
Insured's age, risk class and, in most states, the sex of the Insured. This
Surrender Charge will remain the same for Policy Years 1-5. For Policy Years 6
through 16 this charge reduces on a monthly basis to zero.
For partial surrenders, the Surrender Charge is imposed in proportion to the
total of the account value less full Surrender Charges. A charge of the lesser
of $25 or 2% of the net surrender payment will be made against the Total Account
Value.
If you surrender your Policy within the first 16 years after an increase in the
specified Amount, a Surrender Charge will also be imposed which will be 70% of
the Surrender Charge on a new policy with a Specified Amount equal to the amount
of increase in the Specified Amount. This charge will also apply for the same
time frame as stated previously. If the Specified Amount is decreased within the
first 16 Policy Years, the Surrender Charge will remain the same. See page 11.
Policy Loans
If you decide to borrow against your Policy, interest will be charged to the
Loan Amount. Currently, the interest rate on loans accrues at the greater of:
1) an annual rate of 5.5%; or
2) the monthly average of the Composite Yield on Corporate Bonds as published
by Moody's Investors Service, Inc. for the calendar month ending two months
before the Policy Anniversary month. See page 18.
There are two types of policy loans: nonpreferred (those taken within the first
ten Policy Years); and preferred (those taken in the eleventh Policy Year and
beyond).
Interest will be credited on the Loan Account Value as follows:
1) for nonpreferred loans the annual interest rate will be the interest rate
charged on the loan minus 2%; and
2) for preferred loans the interest rate credited will be equal to the interest
rate charged. See pages 18-19.
Changes in Specified Amount
Within certain limits, you may decrease or, with satisfactory evidence of
insurability, increase the Specified Amount. A request to increase the Specified
Amount may be made beginning with the second Policy Year. A request to decrease
the Specified Amount may be made beginning with the sixth Policy Year.
Currently, the minimum Specified Amount is $100,000. Such changes will affect
other aspects of your Policy. See page 19.
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The Separate Account
The Separate Account providing Variable Options to fund the Policy is Variable
Life Account B. Amounts allocated to the Separate Account are invested in the
Funds. Each of the Funds is an open-end management investment company (mutual
fund) whose shares are purchased by the Separate Account to fund the benefits
provided by the Policy. The Funds currently available under the Separate
Account, including their investment objectives and their investment advisers,
are described briefly in this Prospectus. Complete descriptions of the Funds'
investment objectives and restrictions and other material information relating
to an investment in the Funds are contained in the prospectuses for each of the
Funds which are delivered with this Prospectus.
Variable Life Account B was established pursuant to a June 18, 1986 resolution
of the Board of Directors of the Company. Under Connecticut Insurance Law, the
income, gains or losses of the Separate Account are credited without regard to
the other income, gains or losses of the Company. These assets are held for the
Company's variable life insurance policies. Any and all distributions made by
the Funds with respect to shares held by the Separate Account will be reinvested
in additional shares at net asset value. The assets maintained in the Separate
Account will not be charged with any liabilities arising out of any other
business conducted by the Company. The Company is, however, responsible for
meeting the obligations of the Policy to the Policyowner.
No stock certificates are issued to the Separate Account for shares of the Funds
held in the Separate Account. Ownership of Fund shares is documented on the
books and records of the Funds and of the Company for the Separate Account.
The Separate Account is registered with the Securities and Exchange Commission
(SEC) as a unit investment trust under the Investment Company Act of 1940 and
meets the definition of separate account under the federal securities laws. Such
registration does not involve any approval or disapproval by the SEC of the
Separate Account or the Company's management or investment practices or
policies. The Company does not guarantee the Separate Account's investment
performance.
Allocation of Premiums
You may allocate your Net Premiums to one or more of the Funds currently
available through the Separate Account in connection with this Policy or to the
Fixed Account (part of the Company's General Account). Not all Funds are
available under all Policies or in all jurisdictions. In addition, the Company
may add, withdraw or substitute Funds, subject to the conditions in the Contract
and in compliance with regulatory requirements. We reserve the right to limit
the total number of Funds you may elect to 17 over the lifetime of the Policy.
The investment results of the Funds, whose investment objectives are described
below, are likely to differ significantly. You should consider carefully, and on
a continuing basis, which Fund or combination of Funds is best suited to your
long-term investment objectives. Except where otherwise noted, all of the Funds
are diversified, as defined in the Investment Company Act of 1940. Orders for
the purchase of Fund shares may be subject to acceptance by the Fund. We reserve
the right to reject, without prior notice, any allocation to a sub-account if
the sub-account's investment in the corresponding Fund is not accepted by the
Fund for any reason.
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The Funds
Aetna Balanced VP, Inc. 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.(1)
Aetna Income Shares d/b/a Aetna Bond VP seeks to maximize total return,
consistent with reasonable risk, through investments in a diversified portfolio
consisting primarily of debt securities.(1)
Aetna Variable Fund d/b/a Aetna Growth and Income VP seeks to maximize total
return through investments in a diversified portfolio of common stocks and
securities convertible into common stock.(1)
Aetna Variable Encore Fund d/b/a Aetna Money Market VP seeks to provide high
current return consistent with preservation of capital and liquidity through
investment in high-quality money market instruments. An investment in the Fund
is neither insured nor guaranteed by the U.S. Government.(1)
Aetna Ascent VP 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. (1)
Aetna Crossroads VP 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 10 years and who have a
moderate level of risk tolerance.(1)
Aetna Legacy VP 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.(1)
Aetna Index Plus Large Cap VP seeks to outperform the total return performance
of publicly traded common stocks represented by the S&P 500 Composite Stock
Price Index.(1)
Fidelity Investments Variable Insurance Products Fund--Equity-Income Portfolio
seeks reasonable income by investing primarily in income-producing equity
securities. In selecting investments, the fund also considers the potential for
capital appreciation.(2)
Fidelity Investments Variable Insurance Products Fund II--Contrafund Portfolio
seeks maximum total return over the long term by investing mainly in securities
of companies whose value the investment adviser believes is not fully recognized
by the public.(2)
Janus Aspen Series--Aggressive Growth Portfolio is a nondiversified portfolio
that seeks long-term growth of capital. The Portfolio pursues its investment
objective by normally investing at least 50% of its equity assets in securities
issued by medium-sized companies. Medium-sized companies are those whose market
capitalizations fall within the range of companies in the S&P MidCap 400 Index,
which as of December 31, 1998 included companies with capitalizations between
approximately $ million and $ billion, but which is expected to change on a
regular basis.(3)
Janus Aspen Series--Balanced Portfolio seeks long-term capital growth,
consistent with preservation of capital and balanced by current income. The
Portfolio pursues its investment objective by, under normal circumstances,
investing 40%-60% of its assets in securities selected primarily for their
growth potential and 40%-60% of its assets in securities selected primarily for
their income potential.(3)
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Janus Aspen Series--Growth Portfolio seeks long-term growth of capital in a
manner consistent with the preservation of capital. The Portfolio pursues its
investment objective by investing primarily in common stocks of issuers of any
size. This Portfolio generally invests in larger, more established issuers.(3)
Janus Aspen Series--Worldwide Growth Portfolio seeks long-term growth of capital
in a manner consistent with the preservation of capital. The Portfolio pursues
its investment objective primarily through investments in common stocks of
foreign and domestic issuers.(3)
Oppenheimer Global Securities Fund seeks long-term capital appreciation by
investing a substantial portion of its assets in securities of foreign issuers,
"growth-type" companies, cyclical industries and special situations which are
considered to have appreciation possibiities but which may be considered to be
speculative.(4)
Oppenheimer Strategic Bond Fund 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. The Fund intends to invest
principally in: (i) foreign government and corporate debt securities, (ii)
securities of the U.S. Government and its agencies and instrumentalities ("U.S.
Government securities"), and (iii) lower-rated high yield domestic debt
securities, commonly known as "junk bonds", which are subject to a greater risk
of loss of principal and nonpayment of interest than higher-rated securities.
These securities may be considered to be speculative. Current income is not an
objective.(4)
Portfolio Partners, Inc. --MFS Emerging Equities Portfolio 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.(5)(a)
Portfolio Partners, Inc.--MFS Research Growth Portfolio seeks long-term growth
of capital and future income.(5)(a)
Portfolio Partners, Inc.--MFS Value Equity Portfolio seeks capital
appreciation. Dividend income, if any, is a consideration incidental to the
Portfolio's objective of capital appreciation. (5)(a)
Portfolio Partners, Inc.--Scudder International Growth Portfolio seeks long-term
growth of capital primarily through a diversified portfolio of marketable
foreign equity securities.(5)(b)
Portfolio Partners, Inc.--T. Rowe Price Growth Equity Portfolio seeks long-term
growth of capital and, secondarily, to increase dividend income by investing
primarily in common stocks of well established growth companies. (5)(c)
Investment Advisers for each of the Funds:
(1)Aeltus Investment Management, Inc.
(2)Fidelity Management & Research Company
(3)Janus Capital Corporation
(4)OppenheimerFunds, Inc.
(5)Aetna Life Insurance and Annuity Company (Adviser);
(a)Massachusetts Financial Services Company ("MFS")(Subadviser)
(b)Scudder Kemper Investments, Inc. (Subadviser)
(c)T. Rowe Price Associates, Inc. (Subadviser)
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Some of the above Funds may use instruments known as derivatives as part of
their investment strategies, as described in their respective prospectuses. The
use of certain derivatives such as inverse floaters and principal only debt
instruments may involve higher risk of volatility to a Fund. The use of leverage
in connection with derivatives can also increase risk of losses. See the current
prospectuses of the Funds for a discussion of the risks associated with an
investment in those Funds.
More comprehensive information, including a discussion of potential risks, and
more complete information about their investment policies and restrictions is
found in the current prospectus for each Fund which is distributed with and
accompanies this Prospectus. You should read the Fund prospectuses and consider
carefully, and on a continuing basis, which Fund or combination of Funds is best
suited to your long-term investment objectives. Additional prospectuses and
Statements of Additional Information for each of the Funds can be obtained from
the Company's Administrative Office at the address and telephone number listed
on the cover of this Prospectus.
Mixed and Shared Funding
Shares of the Funds are available to insurance company separate accounts which
fund both variable annuity contracts and variable life insurance policies,
including the Policy described in this Prospectus. Because Fund shares are
offered to separate accounts of both affiliated and unaffiliated insurance
companies, it is conceivable that, in the future, it may not be advantageous for
variable life insurance separate accounts and variable annuity separate accounts
to invest in these Funds simultaneously, since the interests of such
Policyowners or contractholders may differ. Although neither the Company nor the
Funds currently foresees any such disadvantages either to variable life
insurance or to variable annuity Policyholders, each Fund's Board of
Trustees/Directors has agreed to monitor events in order to identify any
material irreconcilable conflicts which may possibly arise and to determine what
action, if any, should be taken in response. If such a conflict occurs, one of
the separate accounts might withdraw its investment in a Fund. This might force
that Fund to sell portfolio securities at disadvantageous prices.
Fixed Account
The Fixed Account is a fixed funding option available under the Policy that
guarantees principal and a minimum interest rate of 4.5% per year. The Company
assumes the risk of investment gain or loss. The investment gain or loss of the
Separate Account or any of the Funds does not affect the Fixed Account Value.
The Fixed Account is secured by the general assets of the Company, which include
all assets other than those held in separate accounts sponsored by the Company
or its affiliates. The Company will invest the assets of the Fixed Account in
those assets chosen by the Company, as allowed by applicable law. Investment
income of such Fixed Account assets will be allocated by the Company between
itself and those policies participating in the Fixed Account.
Amounts held in the Fixed Account are guaranteed and will be credited with
interest at rates of not less than 4.5% per year. Credited interest rates
reflect the Company's return on Fixed Account invested assets and the
amortization of any realized gains and/or losses which the Company may incur on
these assets.
Interests in the Fixed Account have not been registered with the SEC in reliance
upon exemptions under the Securities Act of 1933, as amended. However,
disclosure in this Prospectus regarding the Fixed Account may be subject to
certain generally applicable provisions of the federal securities laws relating
to the accuracy and completeness of the statements. Disclosure in this
Prospectus relating to the Fixed Account has not been reviewed by the SEC.
8
<PAGE>
Charges & Fees
Premium Load
A deduction, currently 3.5% of each premium payment and guaranteed to be no
higher than 6%, will be made to cover average applicable state premium taxes
(ranging up to 4%) as well as administrative expenses and federal income tax
liabilities. This deduction is called the premium load.
Charges and Fees Assessed Against the Total Account Value
A Monthly Deduction is made from the Total Account Value. The Monthly Deduction
includes the Cost of Insurance and any charges for supplemental riders or
benefits. The Cost of Insurance depends on the Attained Age, risk class of the
Insured, the Specified Amount of the Policy and in most states, sex of the
Insured. The Attained Age is the Issue Age of the Insured increased by the
number of elapsed Policy Years.
Once a Policy is issued, the Monthly Deductions will be charged as of the Issue
Date, even if the Issue Date is earlier than the date the application is signed
(see "Premium Payments"). The Issue Date is the effective date of initial
coverage. Coverage is conditional on payment of the first premium, if required,
and issue of the Policy as provided in the application. The Date of Issue and
the effective date for any change in coverage will be the Date of Coverage
change that is found in your supplemental Policy Specifications. If the Policy's
issuance is delayed due to underwriting requirements, the charges will not be
assessed until the underwriting is complete and the application for the policy
is approved. Cost of Insurance charges will be in amounts based on the Specified
Amount of the Policy issued, even if the temporary insurance coverage received
during the underwriting period is for a lesser amount. If we decline an
application, we will refund the full premium payment made.
The Monthly Deduction also includes a monthly administrative expense charge of
$20 during the first Policy Year and $7 during subsequent Policy Years. This
charge is for items such as premium billing and collection, policy value
calculation, confirmations and periodic reports and will not exceed our costs.
The Monthly Deduction is deducted proportionately from each funding option, if
more than one is used. This is accomplished by liquidating Accumulation Units
and withdrawing the value of the liquidated Accumulation Units from each funding
option in the same proportion as their respective values have to your Fixed
Account and Separate Account Values. The Monthly Deduction is made as of the
same day each month, beginning with the Issue Date. This day is called the
Monthly Deduction Day.
Charges and Fees Associated with the Variable Funding Options The Company
deducts a daily charge from the assets of Variable Life Account B for mortality
and expense risk assumed by it in connection with the Policy. This charge is
currently equal to an annual rate of 0.70% of the average daily net assets of
the Separate Account. The mortality and expense risk charge is assessed to
compensate the Company for assuming certain mortality and expense risks under
the Policies.
The Company reserves the right to increase the mortality and expense risk charge
if it believes that circumstances have changed so that current charges are no
longer adequate. In no event will the charge exceed 0.90% of average daily net
assets on an annual basis.
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<PAGE>
The mortality risk assumed is that insureds, as a group, may live for a shorter
period of time than estimated and, therefore, the cost of insurance charges
specified in the Policy will be insufficient to meet actual claims. The expense
risk assumed is that other expenses incurred in issuing and administering the
Policies and operating the Separate Account will be greater than the charges
assessed for such expenses.
The Company also deducts a daily administrative charge equivalent on an annual
basis to 0.30% of the average daily net assets of Variable Life Account B to
compensate the Company for expenses associated with the administration and
maintenance of the Policy. These types of expenses are described above in
connection with the monthly administrative charge. The daily administrative
charge and the monthly administrative charge work together to cover the
Company's administrative expenses. In later years of the Policy, the revenue
collected from the daily asset-based charge grows with the Total Account Value
to cover increased expenses from Account-based transactional expenses. The
charge is guaranteed not to exceed 0.50% of the average daily net assets of the
Separate Account on an annual basis.
Charges Assessed Against the Underlying Funds
The following table illustrates the investment advisory fees, other expenses and
total expenses of the Funds as a percentage of average net assets based on
figures for the year ended December 31, 1998 unless otherwise indicated.
Expenses of the Funds are not fixed or specified under the terms of the
Policies, and actual expenses may vary.
<TABLE>
<CAPTION>
Investment
Advisory Fees(1) Other Expenses Total Fund
(before expense (before expense Annual
reimbursement) reimbursement) Expenses
------------------ ----------------- -----------
<S> <C> <C> <C>
Aetna Ascent VP % % %
Aetna Balanced VP, Inc. % % %
Aetna Bond VP % % %
Aetna Crossroads VP % % %
Aetna Growth and Income VP % % %
Aetna Index Plus Large Cap VP % % %
Aetna Legacy VP % % %
Aetna Money Market VP % % %
Fidelity VIP Equity-Income Portfolio % % %
Fidelity VIP II Contrafund Portfolio % % %
Janus Aspen Aggressive Growth Portfolio % % %
Janus Aspen Balanced Portfolio % % %
Janus Aspen Growth Portfolio % % %
Janus Aspen Worldwide Growth Portfolio % % %
Oppenheimer Global Securities Fund % % %
Oppenheimer Strategic Bond Fund % % %
Portfolio Partners MFS Emerging Equities Portfolio % % %
Portfolio Partners MFS Research Growth Portfolio % % %
Portfolio Partners MFS Value Equity Portfolio % % %
Portfolio Partners Scudder International Growth Portfolio % % %
Portfolio Partners T. Rowe Price Growth Equity Portfolio % % %
</TABLE>
(1) Certain of the Fund advisers reimburse the Company for administrative costs
incurred in connection with administering the Funds as variable funding
options under the Contract. These reimbursements are paid out of the
investment advisory fees and are not charged to investors.
Footnotes may be added by Rule 485(b) amendment prior to May 3, 1999.
10
<PAGE>
For further details on each Fund's expenses, please refer to that Fund's
prospectus.
Surrender Charge
If you surrender your Policy (in whole or in part) a surrender charge may apply,
as described below.
This charge is retained by the Company and is imposed in part as a deferred
sales charge and in part to enable the Company to recover certain first year
administrative costs. The maximum portion of the Surrender Charge applied to
reimburse the Company for sales and promotional expense is 30% of the first
year's Basic Premium. (Any surrenders may result in tax implications, see "Tax
Matters.")
The initial Surrender Charge, as specified in your Policy, is based on the
Specified Amount. It also depends on the Insured's age, risk class and in most
states, sex of the Insured (except for group arrangements described under
"Special Plans"). Once determined, the Surrender Charge will remain the same for
five years following the Issue Date. Thereafter, it declines monthly so that
beginning sixteen years after the Issue Date (assuming no increases in the
Specified Amount) the Surrender Charge will be zero.
If you increase the Specified Amount, a new Surrender Charge will be applicable,
in addition to the then existing Surrender Charge. This charge will be
determined based on the Insured's Attained Age, risk class, and in most states,
sex of the Insured. The Surrender Charge applicable to the increase will be 70%
of the Surrender Charge on a new policy whose Specified Amount equals the amount
of the increase, and will cover administrative expenses. The additional
Surrender Charge will also remain constant for five years from the start of the
Policy Year in which the increase occurs, and will decrease to zero by the
beginning of the sixteenth year.
If you decrease the Specified Amount while the Surrender Charge applies, the
Surrender Charge will remain the same.
Based on its actuarial determination, the Company does not anticipate that the
Surrender Charge will cover all sales and administrative expenses which the
Company will incur in connection with the Policy. Any such shortfall, including
but not limited to payment of sales and distribution expenses, would be charged
to and paid by the Company.
Surrender Charges on Full and Partial Surrenders
Full Surrender: All applicable Surrender Charges are imposed.
Partial Surrender: A proportional percentage of all Surrender Charges is
imposed. The proportional percentage is the amount of the net partial surrender
divided by the sum of the Fixed Account Value and the Separate Account Value
less full Surrender Charges. When a partial surrender is made, any applicable
remaining Surrender Charges will be reduced in the same proportion. A
transaction charge of $25 or 2% of the amount of the net surrender payment,
whichever is less, will be made against the Total Account Value. (See "Partial
Surrenders.")
Note: The surrender charge will vary between 41% and 100% of one year's basic
annual premium, depending on the Insured's age, risk class and in most states,
sex of the Insured.
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<PAGE>
Policy Choices
When you buy a Policy, you make four important choices:
1) Which one of the two Death Benefit Options you would like;
2) Whether you want the Guaranteed Death Benefit Provision, and to what age;
3) The amount of premium you intend to pay; and
4) The way your premiums will be allocated to the Funds and/or the Fixed
Account.
Each of these choices is described in detail below.
Death Benefit
At the time of purchase, you must choose between the two available Death Benefit
Options. The amount payable under either option will be determined as of the
date of the Insured's death.
Under Option 1, the Death Benefit will be the greater of the Specified Amount (a
minimum of $100,000 on the date of this Prospectus), or the applicable
percentage of the Total Account Value. The percentage is 250% through age 40 and
decreases yearly to 100% at age 100. Option 1 generally provides a level Death
Benefit.
Under Option 2, the Death Benefit will be the greater of the Specified Amount (a
minimum of $100,000 on the date of this Prospectus), plus the Total Account
Value, or the applicable percentage (described above) of the Total Account
Value. Option 2 provides a varying Death Benefit which increases or decreases
over time, depending on the amount of premium paid and the investment
performance of the underlying funding options you choose.
Under both Option 1 and Option 2, the Death Benefit may be affected by partial
surrenders. The Death Benefit for both options will be reduced by the amount
necessary to repay any loans in full.
Guaranteed Death Benefit Provision
The Guaranteed Death Benefit Provision assures that, as long as the Guaranteed
Death Benefit Premium test as described below is met, the Policy will stay in
force even if the cash value is insufficient to cover the current Monthly
Deductions. The Guaranteed Death Benefit Premium is a specified amount of
premium required to keep the Policy in force to either age 80 or age 100.
The Guaranteed Death Benefit Provision must be selected on the application. It
may not be available to all risk classes and is only available in those states
where it has been approved. (Note: not available in New York.) The Guaranteed
Death Benefit Provision is available to age 80 or to age 100.
We will test annually to determine if the sum of all premiums paid to date is
sufficient to support the Guaranteed Death Benefit Provision. In order for the
Guaranteed Death Benefit Provision to be in effect, the sum of all premiums paid
less partial surrenders must be greater than or equal to the required monthly
Guaranteed Death Benefit Premium times the number of months elapsed since the
Policy's Issue Date.
However, if these premiums are not sufficient, the Policy Owner will be notified
and given two months (61 days in New Jersey) to pay the amount needed. If the
Guaranteed Death Benefit Provision to age 100 had been in place, and the amount
needed is not received within the two-month period; the Guaranteed Death Benefit
Provision to age 80 will be substituted, if there is enough premium; if not
12
<PAGE>
the Guaranteed Death Benefit Provision to age 100 will terminate. If the
Guaranteed Death Benefit Provision to age 80 had been in place and the amount
needed is not received within the two-month period (61 days in New Jersey), the
Guaranteed Death Benefit Provision will terminate.
If a Guaranteed Death Benefit Provision is terminated it may not be reinstated.
Increases, decreases, partial surrenders, and option changes may affect the
Guaranteed Death Benefit Premium. These events and loans may also affect the
Policy's ability to remain in force even if the cumulative annual Guaranteed
Death Benefit Provision test has been met.
Premium Payments
During the first five Policy Years, payment of the Basic Premium assures that
the Policy will remain in force, as long as there are no surrenders or loans
taken during that time. The Basic Premium is stated in the Policy. If Basic
Premiums are not paid, or there are surrenders or loans taken during the first
five Policy Years, the Policy will lapse if the Cash Surrender Value is less
than the next Monthly Deduction.
Basic Premiums are current if premiums paid, minus loans and minus partial
surrenders, are greater than or equal to the Basic Premium (expressed as a
monthly amount) multiplied by the number of months the Policy has been in force.
After the first five Policy Years, your Policy will not lapse as long as the
Policy's Cash Surrender Value is sufficient to cover the next Monthly Deduction.
Planned Premiums are those premiums you choose to pay on a scheduled basis. We
will bill you annually, semiannually, or quarterly, or at any other agreed-upon
frequency. Pre-authorized automatic monthly check payments may also be arranged.
Additional Premiums are any premiums you pay in addition to Planned Premiums.
Payment of Basic Premiums, Planned Premiums, or Additional Premiums in any
amount will not, except as noted above, guarantee that your Policy will remain
in force. Failure to pay Planned Premiums or Additional Premiums will not
necessarily cause your Policy to lapse. Not paying your Planned Premiums can,
however, cause the Guaranteed Death Benefit Provision to terminate. (See
"Guaranteed Death Benefit Provision.")
You may increase your Planned Premium at any time by submitting a written notice
to us or by paying Additional Premiums, except that:
o We may require evidence of insurability if the Additional Premium or the New
Planned Premium during the current Policy Year would increase the difference
between the Death Benefit and the Total Account Value. If satisfactory
evidence of insurability is requested and not provided, we will refund the
increase in premium without interest and without participation of such amounts
in the underlying funding options.
o In no event may the total of all premiums paid exceed the then-current maximum
premium limitations established by federal law for a Policy to qualify as life
insurance. (See "Tax Matters.") If, at any time, a premium is paid which would
result in total premiums exceeding such maximum premium limitation, we will
only accept that portion of the premium which will make total premiums equal
the maximum. Any part of the premium in excess of that amount will be returned
or applied as otherwise agreed and no further premiums will be accepted until
allowed by the then-current maximum premium limitations prescribed by law.
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<PAGE>
o If you make a sufficient premium payment when you apply for a Policy, and have
answered favorably certain questions relating to the Insured's health, a
"temporary insurance agreement" in the amount applied for (subject to stated
maximum) will be provided.
o After the first premium payment, all premiums must be sent directly to our
Home Office and will be deemed received when actually received at the Home
Office. Your premium payments will be allocated as you have directed, and
amounts allocated to the Funds will be credited to your Policy at the
Accumulation Unit value as of the next Valuation Period after each payment is
received in the Home Office.
o You may reallocate your future premium payments at any time free of charge.
Any reallocation will apply to premium payments made after you have received
written verification from us.
We may backdate a Policy, upon request and under limited circumstances, by
assigning an Issue Date earlier than the date the application is signed but no
earlier than six months prior to state approval of the Policy. Backdating may be
desirable, for example, so that you can purchase a particular Policy Specified
Amount for lower cost of insurance rates based on a younger insurance age. For a
backdated Policy, you must pay the minimum premium payable for the period
between the Issue Date and the date the initial premium is invested in the
Separate Account. Backdating of your Policy will not affect the date on which
your premium payments are credited to the Separate Account and you are credited
with Accumulation Units. You cannot be credited with Accumulation Units until
your net premium is actually deposited in the Separate Account. (See "Policy
Values--Total Account Value.")
Transfers and Allocations to Funding Options
At purchase, you must decide how to allocate your Net Premiums among the Funds
and/or the Fixed Account. Net Premiums must be allocated in whole percentages.
Up until the Maturity Date, you may transfer Policy values from one Fund to
another at any time, or from Variable Life Account B to the Fixed Account. And,
within the 45 days after each Policy anniversary, you may also transfer a
portion of the Fixed Account Value to one or more Funds before the Maturity
Date. This type of transfer is allowed only once in the 45-day period after the
Policy anniversary and will be effective as of the next Valuation Period after
your request is received in good order at the Company's Home Office. The amount
of such transfer cannot exceed the greater of (a) 25% of the Fixed Account
Value, or (b) $500. If the Fixed Account Value is less than or equal to $500,
you may transfer all or a portion of the Fixed Account Value. We may increase
this limit from time to time.
Any transfer among the Funds or to the Fixed Account will result in the
crediting and cancellation of Accumulation Units based on the Accumulation Unit
values determined for the Valuation Period in which a written request is
received at our Administrative Office. (See "Accumulation Unit Value.") You
should carefully consider current market conditions and each Fund's investment
policies and related risks before allocating money to the Funds.
Limits on Frequent Transfers
The Policy is not designed to serve as a vehicle for frequent trading in
response to short-term fluctuations in the market. Such frequent trading can
distrupt management of a Fund and raise its expenses. This in turn can have an
adverse effect on Fund performance. Accordingly, individuals that use
market-timing investment strategies and make frequent tranfers should not
purchase the Policy.
14
<PAGE>
We reserve the right to restrict, in our sole discretion and without prior
notice, transfers initiated by a market-timing organization or individual or
other party authorized to give transfer instructions on behalf of multiple
Policy Owners. Such restrictions could include:
(1) Not accepting transfer instructions from an agent acting on behalf of more
than one Policy Owner; and
(2) Not accepting preauthorized transfer forms from market-timers or other
entities acting on behalf of more than one Policy Owner at a time.
We further reserve the right to impose, without prior notice, restrictions or
transfers that we determine, in our sole discretion, will disadvantage or
potentially hurt the rights or interests of other Policy Owners.
Telephone Transfers
You may request a transfer of Account Values either in writing or by telephone.
In order to make telephone transfers, a written telephone transfer authorization
form must be completed by the Policyowner and returned to the Company at its
Administrative Office. Once the form is processed, the Policyowner may request a
transfer by telephoning the Administrative Office. All transfers must be in
accordance with the terms of the Policy.
Transfer instructions are currently accepted for each Valuation Period. Once
instructions have been accepted and processed, they may not be rescinded;
however, new telephone instructions may be given on the following day. If the
transfer instructions are not in good order, the Company will not execute the
transfer and you will be notified.
We will use reasonable procedures, such as requiring identifying information
from callers, recording telephone instructions, and providing written
confirmation of transactions, in order to confirm that telephone instructions
are genuine. Any telephone instructions which we reasonably believe to be
genuine will be your responsibility, including losses arising from any errors in
the communication of instructions. As a result of this procedure, the
Policyowner will bear the risk of loss. If the Company does not use reasonable
procedures, as described above, it may be liable for losses due to unauthorized
instructions.
Automated Transfers (Dollar Cost Averaging)
Dollar Cost Averaging describes a program of investing a uniform sum of money at
regular intervals over an extended period of time. Dollar Cost Averaging is
based on the economic fact that buying a security with a constant sum of money
at fixed intervals results in acquiring more of the item when prices are low and
less of it when prices are high.
You may establish automated transfers of Fund Account Values on a monthly or
quarterly basis from the Aetna Money Market VP to any other investment option
through Written Request or other method acceptable to the Company. You must have
a minimum of $5,000 allocated to the Aetna Money Market VP in order to enroll in
the Dollar Cost Averaging program. The minimum automated transfer amount is $50
per month. There is no additional charge for the program. You may start or stop
participation in the Dollar Cost Averaging program at any time, but you must
give the Company at least 30 days notice to change any automated transfer
instructions that are currently in place. The Company reserves the right to
suspend or modify automated transfer privileges at any time.
Before participating in the Dollar Cost Averaging program, you should consider
the risks involved in switching between investments available under the Policy.
Dollar Cost Averaging requires regular
15
<PAGE>
investments regardless of fluctuating price levels, and does not guarantee
profits or prevent losses. Therefore, You should carefully consider market
conditions and each Fund's investment policies and related risks before electing
to participate in the Dollar Cost Averaging program.
Policy Values
Total Account Value
Once your Policy has been issued, each Net Premium (the premium paid less the
premium load) allocated to a variable funding option of the Separate Account is
credited in the form of Accumulation Units of the funding option based on that
funding option's Accumulation Unit value. Each Net Premium will be credited to
your Policy at the Accumulation Unit value(s) determined for the Valuation
Period in which it is received and accepted by us at our Administrative Office
following the Issue Date of the Policy. The number of Accumulation Units
credited is determined by dividing the Net Premium by the value of an
Accumulation Unit next computed after we receive the premium. Shares in the
Funds are purchased by the Separate Account at the net asset value determined by
the Fund for the Valuation Period in which the Net Premium is received by the
Company. Since each Fund has a unique Accumulation Unit value, a Policy Owner
who has elected a combination of funding options will have Accumulation Units
credited to each funding option.
The Total Account Value of your Policy is the sum of the Separate Account Value,
the Fixed Account Value and the Loan Account Value. It is determined by:
(a) multiplying the total number of Accumulation Units credited to the Policy
for each applicable Fund by its appropriate current Accumulation Unit value;
(b) if you have elected a combination of Funds, totaling the resulting values;
and
(c) adding any values attributable to the Fixed Account and
(d) adding any values attributable to the Loan Account Value.
The number of Accumulation Units credited to a Policy will not be changed by any
subsequent change in the value of an Accumulation Unit. The number is increased
by subsequent contributions to or transfers into that funding option, and
decreased by charges and withdrawals from that funding option.
The Fixed Account Value reflects amounts allocated to the General Account
through payment of premiums or transfers from the Separate Account. The Fixed
Account Value is guaranteed; however, there is no assurance that the Separate
Account Value of the Policy will equal or exceed the Net Premiums paid and
allocated to the Separate Account.
You will be advised at least annually as to the number of Accumulation Units
which remain credited to the Policy, the current Accumulation Unit values, the
Separate Account Value, the Fixed Account Value, and the Total Account Value.
Accumulation Unit Value
The value of an Accumulation Unit for any Valuation Period is determined by
multiplying the value of an Accumulation Unit for the immediately preceding
Valuation Period by the net investment factor for the current period for the
appropriate Fund. The net investment factor equals the net investment rate plus
1.0000000. The net investment rate is determined separately for each Fund as
follows.
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<PAGE>
The net investment rate equals
(a) the net assets of the Fund held in Variable Life Account B at the end of a
Valuation Period, minus
(b) the net assets of the Fund held in Variable Life Account B at the beginning
of that Valuation Period, plus or minus
(c) taxes or provisions for taxes, if any, attributable to the operation of
Variable Life Account B (with any federal tax liability offset by foreign tax
credits to the extent allowed), divided by
(d) the value of the Accumulation Units held by Variable Life Account B at the
beginning of the Valuation Period, minus
(e) a daily charge for mortality and expense risk, and administrative expenses.
(See "Charges and Fees Associated with the Variable Funding Options.")
Maturity Value
The Maturity Value of the Policy is the Total Account Value on the Maturity
Date, less the Loan Account Value and any unpaid accrued interest.
Cash Surrender Value
The Cash Surrender Value of your Policy is the amount you can receive in cash
by surrendering the Policy. All or part of the Cash Surrender Value may be
applied to one or more of the Settlement Options. (See "Surrender Charge.")
Policy Rights
Partial Surrenders
A partial surrender may be made at any time after the first Policy Year.
The amount of a partial surrender may not exceed the Cash Surrender Value on the
date the request is received and may not be less than $500.
Partial surrenders may only be made prior to election of a Settlement Option.
For an Option 1 Policy (see "Death Benefit"), a partial surrender will reduce
the Total Account Value, Death Benefit, and Specified Amount. The Specified
Amount and Total Account Value will be reduced by equal amounts and will reduce
any past increases in the reverse order in which they occurred.
For an Option 2 Policy (see "Death Benefit"), a partial surrender will reduce
the Total Account Value and the Death Benefit, but it will not reduce the
Specified Amount.
Payment of any amount due from the Separate Account Values on a full or partial
surrender will be made within seven calendar days after we receive your written
request at our Administrative Office in form satisfactory to us. Payment may be
postponed when the New York Stock Exchange has been closed and for such other
periods as the SEC may require. Payment from the Fixed Account Values may be
deferred up to 6 months, except when used to pay premiums to the Company.
The Specified Amount remaining in force after a partial surrender may not be
less than $100,000. Any request for a partial surrender that would reduce the
Specified Amount below this amount will not be granted. In addition, if,
following the partial surrender and the corresponding decrease in the Specified
17
<PAGE>
Amount, the Policy would not comply with the maximum premium limitations
required by federal tax law, the decrease may be limited to the extent necessary
to meet the federal tax law requirements.
If, at the time of a partial surrender, your Total Account Value is attributable
to more than one funding option, the Surrender Charge, transaction charge and
the amount paid to you upon the surrender will be taken proportionately from the
Accumulation Unit values in each funding option.
No-Lapse Coverage Provision
This Policy will not terminate during the five-year period after its Issue Date
or the Issue Date of any increase if, on each Monthly Deduction Day within that
period, the sum of premiums paid equals or exceeds:
1) the sum of the Basic Premiums for each Policy month from the Issue Date,
including the current month; plus
2) any partial surrenders; plus
3) any increase in Loan Account Value since the Policy's Issue Date or the
Issue Date of any increase.
If, on each Monthly Deduction Day within the five-year period, the sum of
premiums paid is less than the sum of the items 1, 2, and 3 above, and the Cash
Surrender Value is insufficient to cover the current Monthly Deduction, the
Grace Period provision will apply. (See "Grace Period.")
After the five-year period expires, and depending on the investment performance
of the Funds, the Total Account Value may be insufficient to keep this Policy in
force, and payment of an additional premium may be necessary, unless the
Guaranteed Death Benefit Provision has been elected.
Reinstatement of a Lapsed Policy
A lapse occurs if your Monthly Deduction is greater than the Cash Surrender
Value and no payment to cover the deduction is made within the 61 days of our
notifying you. This may happen after the first five Policy Years, or during the
first five Policy Years if your Basic Premiums are not current.
You can apply for reinstatement within five years after the date of termination
and before the Maturity Date. To reinstate your Policy we will require
satisfactory evidence of insurability and an amount sufficient to pay for the
current Monthly Deduction plus two additional Monthly Deductions.
If the Policy is reinstated within five years of this Policy's Issue Date or
while the No-Lapse Coverage Provision (see "No-Lapse Coverage Provision") would
be in effect if this Policy had not lapsed, all values including the Loan
Account Value will be reinstated to the point they were on the date of lapse.
However, the Guaranteed Death Benefit Provision will not be reinstated.
If the Policy is reinstated after the No-Lapse Coverage Provision (see "No-Lapse
Coverage Provision") has expired, this Policy will be reinstated on the Monthly
Deduction Day following our approval. This Policy's Total Account Value at
reinstatement will be the Net Premium paid less the Monthly Deduction due that
day. Any Loan Account Value will not be reinstated, and the Guaranteed Death
Benefit will not be reinstated.
If the Policy's Cash Surrender Value less any Loan Account Value plus accrued
interest is not sufficient to cover the full Surrender Charge at the time of
lapse, the remaining portion of the Surrender Charge will also be reinstated at
the time of Policy reinstatement.
Policy Loans: Preferred and Nonpreferred
Unless otherwise required by state law, the maximum loan amount is 90% of the
Cash Surrender Value at the time of a loan.
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<PAGE>
Loans taken during the first ten Policy Years are considered nonpreferred loans.
Beginning in the eleventh Policy Year, up to 10% of the maximum loan amount
available at the beginning of a Policy Year can be taken as a preferred loan
during that Policy Year. Amounts borrowed that are in excess of the maximum loan
amount available for a preferred loan will be considered a nonpreferred loan. An
amount equal to what you receive for a loan, together with any interest added to
the loan for due and unpaid interest, as described below, will be added to the
Loan Account Value.
If you are using more than one underlying funding option, the amount of the loan
will be withdrawn in proportion to the value of each funding option.
Interest on loans will accrue at an annual rate which will be the greater of:
1) The monthly average (i.e., the Composite Yield on Corporate Bonds as
published by Moody's Investors Service, Inc.) for the calendar month which ends
two months before the month in which the Policy Anniversary occurs, or
2) 5.5%.
Increases or decreases to the current interest rate will occur only when the new
Policy Year's annual interest rate is greater or lower than the prior Policy
Year's annual interest rate by at least 0.5%.
We will notify you of the current interest rate charged for a loan at the time a
loan is made. If your Policy has a loan outstanding, we will notify you of any
change in the interest rate before the new rate becomes effective.
Interest is payable by you once a year on each anniversary of the loan, or
earlier upon surrender, payment of proceeds, or maturity of a Policy. Any
interest you do not pay when due becomes part of the loan and bears interest.
An amount equal to what you receive for a loan, together with any interest
accrued but not paid, will be added to the Loan Account Value. We will credit
interest on the Loan Account Value. The Loan Account Value for nonpreferred
loans will be credited interest, during any Policy Year, at an annual rate that
is the interest rate charged on the loan minus 2%. However, in no case will the
credited interest rate be less than 4.5% annually.
The Loan Account Value on preferred loans will be credited interest at a rate
equal to the interest rate charged. In no case will the credited interest rate
be less than 5.5% annually.
If a policy loan is requested, the amount to be borrowed will be withdrawn by
the Company from the funding options and Fixed Account Value in proportion to
the value of the Policy attributable to each funding option and the Fixed
Account. Repayments on the loan will be allocated among the funding options in
the same proportion the loan was taken from the funding options. The Loan
Account Value will be reduced by the amount of any loan repayment.
Policy Changes
You may make changes to your Policy, as described below, by submitting a written
request to our Administrative Office in a form satisfactory to us.
Increases: Beginning in the second Policy Year, you may increase the Specified
Amount of your Policy subject to the following conditions:
o Satisfactory evidence of insurability may be required.
o The Cash Surrender Value at the time of an increase must be at least three
times the sum of (a) the most recent Monthly Deduction from the Total Account
Value and (b) the amount of the increase, divided by 1000, times the
applicable Cost of Insurance Rate.
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<PAGE>
o An increase in the Specified Amount will increase the Surrender Charge.
o The Basic Monthly Premium will be increased when the Specified Amount is
increased. The Policy will not terminate within five years of the Issue Date
of the increase if the conditions of this provision and the No-Lapse Coverage
Provision are met.
o Increases through the fifth year are limited to four times the initial
Specified Amount.
o Increases in the Specified Amount will increase the Guaranteed Death Benefit
Provision amount and will affect the Guaranteed Death Benefit Premium.
Decreases: Beginning in the sixth Policy Year decreases will be allowed,
however:
o No decrease may reduce the Specified Amount to less than the minimum for this
type of policy. (See Death Benefit.)
o Any decrease will cause a decrease in the Guaranteed Death Benefit Provision.
Death Benefit Option Change: A Death Benefit Option change will be allowed,
subject to the following conditions:
o The change will take effect on the Monthly Deduction Day on or next following
the date on which the Administrative Office receives your written request.
o There will be no change in the Surrender Charge, and evidence of insurability
may be required.
o We will not allow a change in the Death Benefit Option if the Specified Amount
will be reduced below the minimum Specified Amount.
o Changes from Option 1 to Option 2 are allowed beginning in the sixth Policy
Year. The new Specified Amount will equal the Specified Amount less the Total
Account Value at the time of the change.*
o Changes from Option 2 to Option 1 are allowed after the first Policy Year. The
new Specified Amount will equal the Specified Amount plus the Total Account
Value as of the time of the change.*
*Changes in the Death Benefit Option also affect the Guaranteed Death Benefit
Provision amount and the Guaranteed Death Benefit Premium.
Right to Examine the Policy
The Policy has a free-look period during which you may examine the Policy. If
for any reason you are dissatisfied, it may be returned to our Administrative
Office for a refund. It must be returned within ten days (state variations may
apply) after you receive the Policy and the written notice of withdrawal right,
or within 45 days after you sign the application for the Policy, whichever
occurs latest. If you return (cancel) the Policy, we will pay a refund of
(1) the difference between payments made and amounts allocated to the Separate
Account, plus
(2) the value of the amount allocated to the Separate Account as of the date the
returned Policy is received by us, plus
(3) any fees imposed on the amounts allocated to the Separate Account.
If state law does not permit such a refund, then the refund will equal premiums
paid, without interest. Refunds will usually occur within seven days of notice
of cancellation, although a refund of premiums paid by check may be delayed
until the check clears your bank.
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Death Benefit
The Death Benefit is the amount payable to the beneficiary upon the death of the
Insured. Any outstanding loan amounts or overdue deductions are withheld from
the Death Benefit prior to payment.
The Death Benefit under the Policy will be paid in a lump sum within seven days
after we receive due proof of the Insured's death (a certified copy of the death
certificate) at our Administrative Office, unless you or the beneficiary have
elected that it be paid under one or more of the Settlement Options. (See
"Settlement Options.")
Payment of the Death Benefit may be delayed if the Policy is being contested.
While the Insured is living, you may elect a Settlement Option for the
beneficiary and deem it irrevocable. You may revoke or change a prior election.
The beneficiary may make or change an election within 90 days of the death of
the Insured, unless you have made an irrevocable election. A beneficiary who has
elected Settlement Option 1 may elect another option within two years after the
Insured's death.
All or a part of the Death Benefit may be applied under one or more of the
Settlement Options, or such options as we may choose to make available in the
future.
If the Policy is assigned as collateral security, we will pay any amount due the
assignee in one lump sum. Any excess Death Benefit due will be paid as elected.
Policy Settlement
There are several ways in which a beneficiary may receive Annuity payments from
a Death Benefit. These are called Settlement Options. If the Owner surrenders
the Policy, Settlement Options are available for the amount of the Policy Cash
Surrender Value.
Proceeds in the form of Settlement Options are payable by the Company upon the
Insured's death, upon Maturity of the Policy, or upon election of one of the
following Settlement Options or any we make available (after any applicable
Surrender Charges have been deducted).
A written request may be made to elect, change, or revoke a Settlement Option
before payments begin under any Settlement Option. This request must be in form
satisfactory to us, and will take effect upon its filing at our Administrative
Office. If no Settlement Option has been elected by the Policy Owner when the
Death Benefit becomes payable to the beneficiary, that beneficiary may make the
election.
The first variable Settlement Option payment will be as of the tenth Valuation
Period following our receipt of the properly completed election form.
Settlement Options
Options 2, 3 and 4 are in the form of an annuity, which is a series of payments
for life or a definite period of time. The person receiving the payments is
called the Annuitant.
Option 1 -- Payment of interest on the sum left with us;
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<PAGE>
Option 2 -- Payments for a stated number of years, at least three but no more
than thirty;
Option 3 -- Payments for the lifetime of the Annuitant. If also chosen, we will
guarantee payments for 60, 120, 180, or 240 months;
Option 4 -- Payments during the joint lifetimes of two Annuitants. At the death
of either, payments will continue to the survivor. When this option is chosen, a
choice must be made of:
a) 100% of the payment to continue to the survivor;
b) 66 2/3% of the payment to continue to the survivor;
c) 50% of the payment to continue to the survivor;
d) Payments for a minimum of 120 months, with 100% of the payment to continue
to the survivor;
e) 100% of the payment to continue to the survivor if the survivor is the
Annuitant, and 50% of the payment to continue to the survivor if the survivor is
the Second Annuitant.
In most states, no election may be made that would result in a first payment of
less than $25 or that would result in total yearly payments of less than $120.
If the value of the Policy is insufficient to elect an option for the minimum
amount specified, a lump-sum payment must be elected.
Proceeds applied under Option 1 will be held by us in the General Account.
Proceeds in the General Account will be used to make payments on a fixed-dollar
basis. We will add interest to such proceeds at an annual rate of not less than
3%. We may add interest daily at any higher rate.
Under Option 1, the Annuitant may later tell the Company to (a) pay to him or
her a portion or all of the sum held by the Company; or (b) apply a portion or
all of the sum held by the Company to another Settlement Option.
Proceeds applied under Options 2, 3 and 4 will be held (a) in the General
Account; or (b) in Variable Annuity Account B, invested in one or more of the
available investment options, or (c) a mix of (a) and (b). Proceeds held in
Variable Annuity Account B will be used to make payments on a variable basis.
If payments are to be funded on a variable basis (by the Funds), the first and
subsequent payments will vary depending on the Assumed Net Investment Rate. This
rate will be 3% per year, unless a 5% annual rate is chosen. The Assumed Net
Investment Rate is chosen by the payee.
Selection of a 5% rate causes a higher first payment, but subsequent payments
will increase only to the extent the actual net investment rate exceeds 5% on an
annualized basis, and they will decline if the rate is less than 5%. Use of the
3% Assumed Net Investment Rate causes a lower first payment, but subsequent
payments will increase more rapidly or decline more slowly as changes occur in
the actual net investment rate. The investment performance of the underlying
funding option(s) must equal such assumed rate, plus enough to cover the
mortality and expense risk and administrative fee charges, if future payments on
a variable basis are to remain level.
If payments on a variable basis are not to decrease, gross return on the assets
of the underlying funding option must be:
a) 4.75% on an annual basis, plus an annual return of up to .25% needed to
offset the administrative charge in effect at the time Settlement Option
payments start, if an Assumed Net Investment Rate of 3% is chosen; or
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<PAGE>
b) 6.25% on an annual basis, plus an annual return of up to .25% needed to
offset the administrative charge in effect at the time Settlement Option
payments start, if an Assumed Net Investment Rate of 5% is chosen.
Option 2, 3 or 4 may be chosen on a fixed-dollar basis. However, if the
guaranteed payments are less than the payments which would be made from the
purchase of the Company's current single premium immediate annuity, the larger
payment will be made instead.
As to funds held under Option 1, the Annuitant may elect to make a withdrawal or
to change options. Under Option 2, if payments are made on a variable basis, the
current value may be withdrawn at any time. Amounts held in the Fixed Account
may not be withdrawn under Option 2. No withdrawals or changes of option may be
made under Options 3 and 4.
When an Annuitant dies while receiving payments under Option 2, 3 or 4, the
present value of any remaining guaranteed payments will either be paid in one
sum to the Annuitant's beneficiary, or upon election by that beneficiary, any
remaining guaranteed payments will continue to that beneficiary. If no
beneficiary exists, the present value of any remaining guaranteed payments will
be paid in one sum to the Annuitant's estate. If the Annuitant dies while
receiving payments under Option 1, the current value of the Option will be paid
in one sum to the beneficiary, or to the Annuitant's estate.
If the Annuitant's beneficiary dies (and there is no contingent beneficiary),
while receiving payments, the current value of the account (Option 1), or the
present value of any remaining guaranteed payments will be paid in one sum to
the estate of that beneficiary. The interest rate used to determine the first
payment will be used to calculate the present value.
Calculation of Settlement Payments
When you have chosen payment on a variable basis, the first payment is
calculated as follows:
a) the portion of the proceeds applied to make payments on the variable basis;
divided by
b) 1,000; times
c) the payment rate per $1000 of proceeds for the option chosen as shown in
the policy.
Such amount, or portion, of the variable payment will be divided by the
Settlement Option Unit value (described below), as of the tenth Valuation Period
before the due date of the first payment, to determine the number of Settlement
Option Units. Each future payment is equal to the number of Settlement Option
Units, times the Settlement Option Unit value as of the tenth Valuation Period
prior to the due date of the payment.
For any Valuation Period, the Fund(s) Settlement Option Unit value is equal to:
a) The Settlement Option Unit value for the previous Valuation Period; times
b) The Net Return Factor (as defined below) for the Valuation Period; times
c) A factor to reflect the Assumed Net Investment Rate.
The factor for 3.5% per year is 0.9999058; for 5% per year, it is 0.9998663.
The Net Return Factor equals:
1) The net assets of the applicable fund held in Variable Annuity Account B at
the end of a Valuation Period; minus
2) The net assets of the applicable fund held in Variable Annuity Account B at
the beginning of that Valuation Period; plus or minus
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<PAGE>
3) Taxes or provision for taxes, if any, attributable to the operations of
Variable Annuity Account B; divided by
4) The value of Settlement Option Units and other accumulation units held in
Variable Annuity Account B at the beginning of the Valuation Period; minus
5) A daily charge at an annual rate of 1.25% for annuity mortality and expense
risk and the then-current daily administrative expense charge.
The number of Settlement Option Units remains fixed. However, the dollar value
of the Settlement Option Unit values and the payment may increase or decrease
due to investment gain or loss.
Payments will not be affected by changes in the mortality or expense results or
administrative expense charges.
Special Plans
Where allowed by law, the Company may reduce or eliminate certain charges for
Policies issued under special circumstances that result in lower expenses to the
Company (i.e., group arrangements with a sponsoring employer). The amount of any
reduction, the charges to be reduced, and the criteria for applying a reduction
will reflect the reduced sales effort, costs and differing mortality experience
appropriate to the circumstances giving rise to the reduction. The charges will
be reduced in accordance with the Company's practice in effect when the Policies
are issued. Reductions will not be unfairly discriminatory against any person,
including the purchasers to whom the reduction applies and all other owners of
the Policies.
The Company offers Policies on a unisex and simplified underwriting basis to
certain group or sponsored arrangements. A "group arrangement" includes a
program under which an employer purchases individual Policies covering a group
of individuals on a group basis. A "sponsored arrangement" includes a program
under which an employer permits group solicitation of its employees for the
purchase of the Policies on an individual basis. Under both arrangements, the
employer pays all or part of the premium. The benefits and values of these
Policies do not vary based on the sex of the insured in order to be used by
employers in employee benefit plans where sex discrimination is prohibited by
federal or state laws. The Company recommends that any employer proposing to
offer the Policies to employees under either arrangement consult its attorney
before doing so.
The Company
Aetna Life Insurance and Annuity Company is a stock life insurance company
organized under the insurance laws of the State of Connecticut in 1976. Through
a merger, it succeeded to the business of Aetna Variable Annuity Life Insurance
Company (formerly Participating Annuity Life Insurance Company organized in
1954). The Company is engaged in the business of issuing life insurance policies
and variable annuity contracts. The Company is an indirect wholly owned
subsidiary of Aetna Inc., a publicly traded healthcare and financial services
company, whose principal offices are at the same location as the Company's Home
Office.
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<PAGE>
The Company serves as the principal underwriter for the securities offered
hereunder and also acts as the principal underwriter for Variable Annuity
Accounts B, C and G (separate accounts of the Company registered as unit
investment trusts), and Variable Annuity Account I (a separate account of Aetna
Insurance Company of America, registered as a unit investment trust).
Additionally, the Company is registered as an investment adviser under the
Investment Advisers Act of 1940, and as such, is the investment adviser for
Portfolio Partners, Inc. The Company is also the depositor of Variable Annuity
Accounts B, C and G.
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<PAGE>
Directors & Officers
<TABLE>
<CAPTION>
Name and Address*
- ---------------------------
Position with Company Business Experience During Past 5 Years
- --------------------------- ----------------------------------------------------------------------------
<S> <C>
Thomas J. McInerney President (since October 1998) Aetna Investment Advisor Holding
Director, President and Company, Inc., Aetna Retail Holding Company, Inc., Aetna Services
Chairman, Executive Holding Company, Inc.; President (since September 1997), Aetna Life
Committee (Principal Insurance and Annuity Company; President (since September 1997),
Executive Officer) Aetna Insurance Company of America; President (since September 1997),
Aetna Retirement Holdings, Inc.; President (since August 1997), Aetna
Retirement Services, Inc.; Executive Vice President (since August 1997),
Aetna Inc., Aetna Services, Inc. and Aetna Life Insurance Company; Vice
President, Strategy (March 1997 - August 1997) Aetna Inc., Aetna Services,
Inc. and Aetna Life Insurance Company, Vice President, Sales (December 1996 -
March 1997) and Vice President National Accounts (April 1996 - March 1997),
Aetna US Healthcare Inc.; Vice President, Strategy, Finance, & Administration
(July 1995 - April 1996), Aetna Inc.; Vice President, Guaranteed Products
(November 1992 - July 1995), Aetna Life Insurance Company.
Shaun P. Mathews President (December 1998 - February 1999) Aetna Investment Services,
Director and Senior Vice Inc.; Senior Vice President (since October 1998) Aetna Investment Advisor
President Holding Company, Inc., Aetna Retail Holding Company, Inc., Aetna
Services Holding Company, Inc.; Senior Vice President, Product and Brand
Management (since September 1998), Senior Vice President, Product Management
(September 1997 - September 1998). Vice President, Products Group (February
1996 - September 1997), Senior Vice President, Strategic Markets and Products
(February 1993 - February 1996) Aetna Life Insurance and Annuity Company.
Catherine Hale Smith Senior Vice President (since October 1998) Aetna Investment Advisor
Director, Chief Financial Holding Company, Inc., Aetna Retail Holding Company, Inc., Aetna
Officer and Senior Vice Services Holding Company, Inc.; Chief Financial Officer and Senior Vice
President President, Business Strategy and Finance (Since February 1998), Aetna
Life Insurance and Annuity Company; Chief Financial Officer (since February
1998), Aetna Retirement Services, Inc.; Vice President, Strategy, Finance and
Administration, Financial Relations (September 1996 - February 1998), Aetna
Inc.; Chief of Staff, Health/Group Life, Strategy and Communication (April
1993 - September 1996) Aetna Life Insurance Company.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Name and Address*
- --------------------------
Position with Company Business Experience During Past 5 Years
- -------------------------- -------------------------------------------------------------------------
<S> <C>
Kirk P. Wickman Vice President, General Counsel and Corporate Secretary (since October
Vice President, General 1998) Aetna Investment Advisor Holding Company, Inc., Aetna Retail
Counsel and Corporate Holding Company, Inc., Aetna Services Holdings Company, Inc.; Vice
Secretary President, General Counsel and Assistant Secretary (since April 1997)
Aetna Retirement Services, Inc.; Vice President, General Counsel and
Corporate Secretary (since November 1996), Aetna Life Insurance and Annuity
Company; Vice President and Counsel (June 1992 - November 1996), Aetna Life
Insurance Company.
Deborah Koltenuk Vice President, Treasurer and Corporate Controller (since October 1998)
Vice President and Aetna Investment Advisor Holding Company, Inc., Aetna Retail Holding
Treasurer, Corporate Company, Inc., Aetna Services Holding Company, Inc.; Vice President,
Controller Treasurer and Corporate Controller (since July 1996), Aetna Life
Insurance and Annuity Company and Aetna Retirement Holdings, Inc.; Vice
President, Investment Financial Reporting and Securities Operations (April
1996 - July 1996), Aetna Life Insurance Company; Vice President, Investment
Planning and Financial Reporting (October 1994 - April 1996), The Aetna
Casualty and Surety Company and The Standard Fire and Insurance Company;
Assistant Vice President, Finance and Administration (June 1994 - October
1994), Aetna Life Insurance Company; Controller (September 1993 - June 1994),
Aetna Information Technology.
Therese A. Squillacote Vice President and Chief Compliance Officer (since February 1999) Aetna
Vice President and Chief Insurance Company of America; Vice President and Chief Compliance Officer
Compliance Officer (since December 1998) Aetna Life Insurance and Annuity Company; Vice President
and Chief Compliance Officer (since December 1998) Aetna Investment Services,
Inc.; Chief Compliance Officer (since December 1998) Systematized Benefits
Administrators, Inc.; Vice President, Compliance (since March 1998) Aetna
Financial Services, Inc.; Compliance Manager (May 1997 to December 1998) Aetna
Life Insurance and Annuity Company; Registered Principal (since July 1997)
Aetna Investment Services, Inc.; Director, Compliance (December 1995 to May
1997) Connecticut General Life Insurance Company; Registered Principal
(December 1995 to May 1997) CIGNA Financial Advisors, Inc.; Chief Compliance
Officer (September 1989 to December 1995) G.R. Phelps & Co., Inc.; Chief
Compliance Officer (December 1992 to December 1995) Connecticut Mutual
Financial Services, Inc.
</TABLE>
*The address of all Directors and Officers listed is 151 Farmington Avenue,
Hartford, Connecticut.
These individuals may also be directors and/or officers of other affiliates of
the Company.
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<PAGE>
Additional Information
Reports to Policy Owners
Within 30 days after each Policy Anniversary and before proceeds are applied to
a Settlement Option, we will send you a report containing the following
information:
1) A statement of changes in the Total Account Value and Cash Surrender Value
since the prior report or since the Issue Date, if there has been no prior
report. This includes a statement of monthly deductions and investment results
and any interest earnings for the report period;
2) Cash Surrender Value, Death Benefit, and any Loan Account Value as of the
Policy Anniversary;
3) A projection of the Total Account Value, Loan Account Value and Cash
Surrender Value as of the succeeding Policy Anniversary.
If you have Policy values funded in either Separate Account you will receive
such additional periodic reports as may be required by the SEC.
Some state laws require additional reports; these requirements vary from state
to state.
Right to Instruct Voting of Fund Shares
In accordance with our view of present applicable law, we will vote the shares
of each of the Funds held in each Separate Account. The votes will be cast at
meetings of the shareholders of the Fund and will be based on instructions
received from Policy Owners. However, if the Investment Company Act of 1940 or
any regulations thereunder should be amended or if the present interpretation
should change, and as a result we determine that we are permitted to vote the
shares of the Fund in our own right, we may elect to do so.
The number of votes each Policy Owner is entitled to direct with respect to a
Fund will be determined by dividing the portion of Total Account Value
attributable to a Fund, if any, by the net asset value of one share in the Fund.
During the settlement option period, the number of votes is determined by
dividing the Valuation Reserve attributable in the Fund, if any, by the net
asset value of one share of the Fund. Fractional votes will be counted. Where
the value of the Total Account Value or the Valuation Reserve relates to more
than one Fund, the calculation of votes will be performed separately for each
Fund.
The number of shares which a person has a right to vote will be determined as of
a date to be chosen by us, but not more than 90 days before the meeting of the
Fund. Voting instructions will be solicited by written communication at least 14
days before such meeting.
Fund shares for which no timely instructions are received, and Fund shares which
are not otherwise attributable to Policy Owners, will be voted by us in the same
proportion as the voting instructions which are received for all Policies
participating in each Fund through Variable Life Account B. Policy Owners having
a voting interest will receive periodic reports relating to the Fund, proxy
material and a form for giving voting instructions.
Disregard of Voting Instructions
We may, when required by state insurance regulatory authorities, disregard
voting instructions if the instructions require that the shares be voted so as
to cause a change in the sub-classification or investment objectives of a Fund
or to approve or disapprove an investment advisory contract for a
28
<PAGE>
Fund. In addition, we may disregard voting instructions in favor of changes
initiated by a Policy Owner in the investment policy or the investment adviser
of the Fund if we reasonably disapprove of such changes.
A change would be disapproved only if the proposed change is contrary to state
law or prohibited by state regulatory authorities or we determined that the
change would have an adverse effect on the Separate Accounts in that the
proposed investment policy for a Fund may result in overly speculative or
unsound investments. In the event we do disregard voting instructions, a summary
of that action and the reasons for such action will be included in the next
annual report to Policy Owners.
State Regulation
We are subject to regulation and supervision by the Insurance Department of the
state of Connecticut, which periodically examines our affairs. We are also
subject to the insurance laws and regulations of all jurisdictions where we are
authorized to do business. The Policies have been approved by the Insurance
Department of the state of Connecticut and in other jurisdictions.
We are required to submit annual statements of our operations, including
financial statements, to the insurance departments of the various jurisdictions
in which we do business, for the purposes of determining solvency and compliance
with local insurance laws and regulations.
Legal Matters
The Company knows of no material legal proceedings pending to which the Separate
Account is a party or which would materially affect the Separate Account.
The legal validity of the securities described in the prospectus has been passed
on by Counsel for the Company.
The Registration Statement
A Registration Statement under the Securities Act of 1933 has been filed with
the Securities and Exchange Commission relating to the offering described in
this Prospectus. This Prospectus does not include all the information set forth
in the Registration Statement, certain portions of which have been omitted
pursuant to the rules and regulations of the SEC. The omitted information may be
obtained at the SEC's principal office in Washington, DC, upon payment of the
SEC's prescribed fees.
The Policies are offered for sale in all jurisdictions where we are authorized
to do business except Guam, Puerto Rico, and the Virgin Islands.
Distribution of the Policies
The Company will serve as underwriter of the securities offered hereunder as
defined by the federal securities laws. The Company is registered as a
broker-dealer with the SEC and is a member of the National Association of
Securities Dealers, Inc. ("NASD"). The Company will contract with one or more
registered broker-dealers including broker-dealers affiliated with it
("Distributors") to offer and sell the Policies. The Company may also offer and
sell policies directly. All persons selling the Policies will be registered
representatives of the Distributors, and will also be licensed as insurance
agents to sell variable life insurance.
The maximum commission payable by the Company to salespersons and their
supervising broker-dealers for policy distribution is 55% of the Guaranteed
Death Benefit Premium to age 80, or, in the event of an increase in the
Specified Amount, 55% of the Guaranteed Death Benefit Premium to age 80,
attributable to the increase. In lieu of premium-based commission, the Company
may pay equivalent amounts based on Total Account Value. In particular
circumstances, we may also pay
29
<PAGE>
certain of these professionals for their administrative expenses. In addition,
some sales personnel may receive various types of non-cash compensation as
special sales incentives, including trips and educational and/or business
seminars. However, all such compensation will be paid in accordance with NASD
rules.
The Company may also contract with independent third party broker-dealers who
will act as wholesalers by assisting the Company in finding broker-dealers to
offer and sell the Policies. These parties may also provide training, marketing
and other sales related functions for the Company and other broker-dealers and
may provide certain administrative services to the Company in connection with
the Policies. The Company may pay such parties compensation based on premium
payments for the Policies purchased through broker-dealers selected by the
wholesaler.
Records and Accounts
All records and accounts relating to the Separate Accounts and the Funds will be
maintained by the Company. All reports required to be made and information
required to be given will be provided by the Company.
Independent Auditors
KPMG Peat Marwick LLP, City Place II, Hartford Connecticut 06103-4103, are the
independent auditors for the Separate Account and for the Company. The services
provided to the Separate Account include primarily the examination of the
Separate Account's financial statements and review of filings made with the SEC.
Year 2000
As a healthcare and financial services enterprise, Aetna Inc. (referred to
collectively with its affiliates and subsidiaries as "Aetna"), is dependent on
computer systems and applications to conduct its business. Aetna has developed
and is currently executing a comprehensive risk-based plan designed to make its
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
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.
The Company, its affiliates and the mutual funds that serve as investment
options for the Separate Account also have relationships with investment
advisers, brokers, 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 communications 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.
30
<PAGE>
Tax Matters
General
The following is a discussion of the federal income tax considerations relating
to the Policy. This discussion is based on the Company's understanding of
federal income tax laws as they now exist and are currently interpreted by the
Internal Revenue Service ("IRS"). These laws are complex, and tax results may
vary among individuals. A person or persons contemplating the purchase of or the
exercise of elections under the Policy described in this Prospectus should seek
competent tax advice.
Federal Tax Status of the Company
The Company is taxed as a life insurance company under the Internal Revenue Code
of 1986, as amended ("Code"). The Separate Account is a not a separate entity
from the Company. Therefore, the Separate Account is not taxed separately as a
"regulated investment company", but is taxed as part of the Company. Investment
income and realized capital gains attributable to the Separate Account are
automatically applied to increase reserves under the policy. Because of this,
under existing federal income 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 policy. In addition, any foreign tax credits
attributable to the Separate Account will first be 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 provisions for
any such taxes. However, if changes in the federal tax laws or their
interpretation result in our being taxed in income or gains attributable to the
Separate Account, then we may impose a charge against the Separate Account (with
respect to the policy) to set aside provisions to pay such taxes.
Life Insurance Qualification
Section 7702 of the Code includes a definition of life insurance for tax
purposes. These rules generally place limits on the amount of premiums payable
under the contract and the level of cash surrender value. In no event may the
total of all premiums paid exceed the then-current maximum premium limitations
established by federal law for a Policy to qualify as life insurance. If, at any
time, a premium is paid which would result in total premiums exceeding such
maximum premium limitation, we will only accept that portion of the premium
which will make total premiums equal the maximum. Any part of the premium in
excess of that amount will be returned or applied as otherwise agreed and no
further premiums will be accepted until allowed by the then-current maximum
premium limitations prescribed by law. The Secretary of the Treasury has been
granted authority to prescribe regulations to carry out the purposes of Section
7702, and proposed regulations governing mortality charges were issued in 1991.
The Company believes that the Policy meets the statutory definition of life
insurance. As such, and assuming the diversification standards of Section 817(h)
(discussed below) are satisfied, then except in limited circumstances (a) death
benefits paid under the Policy should generally be excluded from the gross
income of the beneficiary for federal income tax purposes under Section
101(a)(1) of the Code, and (b) a Policyowner should not generally be taxed on
the cash value under a Policy, including increments thereof, prior to actual
receipt. The principal exceptions to these rules are corporations that are
subject to the alternative minimum tax, and thus may be subject to tax on
increments in the Policy's Total Account Value, and Policyowners who acquire a
Policy in a "transfer for value" and thus can become subject to tax on the
portion of the Death Benefit which exceeds the total of their cost of
acquisition and subsequent premium payments.
31
<PAGE>
The Company intends to comply with any future final regulations issued under
Sections 7702 and 817(h) of the Code, and therefore reserves the right to make
such changes as it deems necessary to ensure such compliance. Any such changes
will apply uniformly to affected Policyowners and will be made only after
advance written notice.
General Rules
Upon the surrender or cancellation of any Policy, whether or not it is a
Modified Endowment Contract, the Policyowner will be taxed on the Surrender
Value only to the extent that it exceeds the gross premiums paid less prior
untaxed withdrawals. The amount of any unpaid Policy Loans will, upon surrender,
be added to the Surrender Value and will be treated for this purpose as if it
had been received.
Assuming the Policy is not a Modified Endowment Contract, the proceeds of any
Partial Surrenders are generally not taxable unless the total amount received
due to such surrenders exceeds total premiums paid less prior untaxed Partial
Surrender amounts. However, Partial Surrenders made within the first 15 Policy
Years in connection with reductions in Death Benefits may be taxable in limited
circumstances in certain limited instances where the Surrender Value plus any
unpaid Policy debt exceeds the total premiums paid less the untaxed portion of
any prior Partial Surrenders. This result may occur even if the total amount of
any Partial Surrenders does not exceed total premiums paid to that date.
Loans received under the Policy will ordinarily be considered indebtedness of
the Policy Owner, and assuming the Policy is not considered a Modified Endowment
Contract, Policy Loans will not be treated as current distributions subject to
tax. Generally, amounts of loan interest paid by individuals will be considered
nondeductible "personal interest."
Modified Endowment Contracts
A class of contracts known as "Modified Endowment Contracts" has been created
under Section 7702A of the Code. The tax rules applicable to loan proceeds and
proceeds of a Partial Surrender of any Policy that is considered to be a
Modified Endowment Contract will differ from the general rules noted above.
A contract will be considered a Modified Endowment Contract if it fails the
"7-pay test." A Policy fails the 7-pay test if, at any time in the first seven
Policy Years, the amount paid into the Policy exceeds the amount that would have
been paid had the Policy provided for the payment of seven (7) level annual
premiums. In the event of a distribution under the Policy, the Company will
notify the Policy Owner if the Policy is a Modified Endowment Contract.
Each Policy is subject to testing under the 7-pay test during the first seven
Policy Years and at any time a material change takes effect. A material change,
for these purposes, includes the exchange of a life insurance policy for another
life insurance policy or the conversion of a term life insurance policy into a
whole life or universal life insurance policy. In addition, an increase in the
future benefits provided constitutes a material change unless the increase is
attributable to (1) the payment of premiums necessary to fund the lowest Death
Benefit payable in the first seven Policy Years or (2) the crediting of interest
or other earnings with respect to such premiums. A reduction in death benefits
during the first seven Policy Years may also cause a Policy to be considered a
Modified Endowment Contract.
If the Policy is considered to be a Modified Endowment Contract, the proceeds of
any Partial Surrenders, any Policy Loans and most assignments, will be currently
taxable to the extent that the
32
<PAGE>
Policy's Total Account Value immediately before payment exceeds gross premiums
paid (increased by the amount of loans previously taxed and reduced by untaxed
amounts previously received). These rules may also apply to Policy Loans or
Partial Surrender proceeds received during the two-year period prior to the time
that a Policy becomes a Modified Endowment Contract. If the Policy becomes a
Modified Endowment Contract, it may be aggregated with other Modified Endowment
Contracts purchased by you from the Company (and its affiliates) during any one
calendar year for purposes of determining the taxable portion of withdrawals
from the Policy.
A penalty tax equal to 10% of the amount includable in income will apply to the
taxable portion of the proceeds of any Policy Surrender or Policy Loan received
by any Policy Owner of a Modified Endowment Contract who is not an individual.
The penalty tax will also apply where taxable Policy Loans are received by an
individual who has not reached the age of 59. Taxable policy distributions made
to an individual who has not reached the age of 59 will also be subject to the
penalty tax unless those distributions are attributable to the individual
becoming disabled, or are part of a series of equal periodic payments made not
less frequently than annually for the life or life expectancy of such individual
(i.e., an annuity).
Diversification Standards
Section 817(h) of the Code provides that separate account investments (or the
investments of a mutual fund, the shares of which are owned by separate accounts
of insurance companies) underlying the Policy must be "adequately diversified"
in accordance with Treasury regulations in order for the Policy to qualify as
life insurance. The Treasury Department has issued regulations prescribing the
diversification requirements in connection with variable contracts. The Separate
Account, through the Funds, intends to comply with these requirements.
Investor Control
In certain circumstances, owners of variable contracts may be considered the
owners for federal income tax purposes of the assets of the separate account
used to support their contracts. In those circumstances, income and gains from
separate account assets would be includable in the variable contractowner's
gross income. In several rulings published prior to the enactment of Section
817(h), the IRS stated that a variable contractowner will be considered the
owner of separate account assets if the contractowner possesses incidents of
ownership in those assets, such as the ability to exercise investment control
over the assets. The Treasury Department has also announced, in connection with
the issuance of regulations under Section 817(h) concerning diversification,
that those regulations "do not provide guidance concerning the circumstances in
which investor control of the investments of a segregated asset account may
cause the investor (i.e., you), rather than the insurance company, to be treated
as the owner of the assets in the account." This announcement also stated that
guidance would be issued by way of regulations or rulings on the "extent to
which policyholders may direct their investments to particular Funds without
being treated as owners of the underlying assets." As of the date of this
Prospectus, no such guidance has been issued.
The ownership rights under the Policy are similar to, but different in certain
respects from those described by the IRS in pre-Section 817(h) rulings in which
it was determined that Policy Owners were not owners of separate account assets.
For example, a Policy Owner has additional flexibility in allocating premium
payments and account values. While the Company does not believe that these
differences would result in a Policy Owner being treated as the owner of a pro
rata portion of the assets of the Separate Account, there is no regulation or
ruling of the IRS that confirms this conclusion. In addition, the Company does
not know what standards will be set forth, if any, in the
33
<PAGE>
regulations or rulings which the Treasury Department has stated it expects to
issue. The Company therefore reserves the right to modify the Policy as
necessary to attempt to prevent a Policy Owner from being considered the owner
of a pro rata share of the assets of the Separate Account.
Other Tax Considerations
Business-owned life insurance may be subject to certain additional rules.
Section 264(a)(1) of the Code generally prohibits employers from deducting
premiums on policies covering officers, employees or other financially
interested parties where the employer is a beneficiary under the Policy.
Additions to the Policy's Total Account Value may also be subject to tax under
the corporation alternative minimum tax provisions. In addition, Section
264(a)(4) of the Code limits the Policy Owner's deduction for interest on loans
taken against life insurance covering the lives of officers, employees, or other
financially interested in the Policy Owner's trade or business. Under current
tax law, interest may generally be deducted on an aggregate total of $50,000 of
loans per covered life only with respect to life insurance policies covering
each officer, employee or others who may have a financial interest in the Policy
Owner's trade or business.
Generally, a key person means an officer or a 20 percent owner. However, the
number of key persons will be limited to the greater of (a) 5 individuals, or
(b) the lesser of 5 percent of the total officers and employees of the taxpayer
or 20 individuals. Deductible interest for these contracts will be capped based
on applicable Moody's Corporate Bond Rates.
Section 264(f) of the Code denies a deduction for a portion of a Policyowner's
otherwise deductible interest that is allocable to unborrowed policy cash
values. The nondeductible interest amount is the amount that bears the same
ratio to such interest as the company's average unborrowed cash value of life
insurance and annuity policies issued after June 8, 1997 bears to the sum of the
average unborrowed cash values of policies plus the average adjusted tax basis
of other assets owned by the company. This provision does not apply to policies
in which the insured is a 20 percent owner, officer, director or employee of the
business, including policies jointly covering such individual and his or her
spouse. The rule also will not apply where the Policyowner is a natural person,
unless a trade or business is directly or indirectly the beneficiary of the
policy.
Depending on the circumstances, the exchange of a policy, a change in the
Policy's Death Benefit Option, a Policy Loan, a Full or Partial Surrender, a
change in Ownership or an assignment of the Policy may have federal income tax
consequences. In addition, federal, state and local transfer, estate,
inheritance and other tax consequences of policy ownership, premium payments and
receipt of policy proceeds depend on the circumstances of each Policy Owner or
beneficiary.
Withholding
Generally, unless you provide us with a written election to the contrary before
we make the distribution, we are required to withhold income tax from any
portion of a distribution we make to you that is includable in your income. If
you do not wish us to withhold tax from the payment, or if enough is not
withheld, you may have to pay later. You may also have to pay penalties if your
withholding and estimated tax payments are insufficient.
34
<PAGE>
Miscellaneous Policy
Provisions
The Policy
The Policy which you receive and the application you make when you purchase the
Policy are the whole contract. A copy of the application is attached to the
Policy when it is issued to you. An application for changes, once approved by
us, will become part of the Policy.
Application forms are completed by the applicant and forwarded to the Company
for acceptance. Upon acceptance, the Policy is prepared, executed by duly
authorized officers of the Company, and forwarded to the Policy Owner.
Payment of Benefits
All benefits are payable at our Administrative Office. We may require submission
of the Policy before we grant loans, make changes or pay benefits.
Age and Sex
If age or sex is misstated on the application, the amount payable on death will
be that which would have been purchased by the most recent monthly deduction at
the correct age and sex. (If the application is taken in a state or under an
agreement where unisex rates are used, the Insured's sex is inapplicable.)
Incontestability
We will not contest coverage under the Policy after the Policy has been in force
during the lifetime of the Insured for a period of two years from the Policy
Issue Date. Our right to contest coverage is not affected by the Guaranteed
Death Benefit Provision.
For coverage which takes effect on a later date (e.g., an increase in coverage),
we will not contest such coverage after it has been in force during the lifetime
of the Insured more than two years from its effective date.
Suicide
In most states, if the Insured commits suicide within two years from the Issue
Date, the only benefit paid will be the sum of:
a) premiums paid less amounts allocated to the Separate Account; and
b) the Separate Account Value on the date of suicide, plus the portion of the
Monthly Deduction from the Separate Account Value, minus
c) the amount necessary to repay any loans in full and any interest earned on
the Loan Account Value transferred to the Separate Account Value, and any
surrenders from the Fixed Account.
If the Insured commits suicide within two years from the effective date of any
increase in coverage, we will pay as a benefit only the Monthly Deduction for
the increase, in lieu of the face amount of the increase.
All amounts described in (a) and (c) above will be calculated as of the date of
death.
35
<PAGE>
Coverage Beyond Maturity
The Policy is considered matured on the Issue Date anniversary on which the
Insured reaches Attained Age 100. This is the Maturity Date.
You may, by written request, in the 30 days before the Maturity Date of this
Policy, elect to continue coverage beyond the Maturity Date. At Age 100, the
Separate Account Value will be transferred to the Fixed Account. If coverage
beyond maturity is elected, we will continue to credit interest to the Total
Account Value of this Policy. Monthly Deductions will be calculated with a Cost
of Insurance rate equal to zero (this provision is not available in New York).
At this time, uncertainties exist regarding the tax treatment of the Policy
should it continue beyond the Maturity Date. You should therefore consult with
your tax advisor prior to making this election. (See "Tax Matters.")
Protection of Proceeds
To the extent provided by law, the proceeds of the Policy are subject neither to
claims by a beneficiary's creditors nor to any legal process against any
beneficiary.
Nonparticipation
The Policy is not entitled to share in the divisible surplus of the Company. No
dividends are payable.
Illustrations of Death
Benefit, Total Account
Values and Cash
Surrender Values
The tables on the following pages illustrate how the Death Benefit, Total
Account Values, and Cash Surrender Values of a Policy change with the investment
experience of the variable funding options. The tables show how the Death
Benefit, Total Account Values, and Cash Surrender Values of a Policy issued to
an insured of a given age and a given premium would vary over time if the
investment return on the assets held in each Fund were a uniform, gross, annual
rate of 0%, 6%, and 12%, respectively.
Tables I through IV illustrate Policies issued to males, age 45, in the
preferred nonsmoker rate class and Policies issued on a unisex basis according
to the Special Plans section of this Prospectus for both males and females, age
45, in the preferred nonsmoker rate class. Tables V through VIII illustrate
Policies issued on a unisex basis, age 45, in the preferred nonsmoker rate class
for contracts issued in states where unisex rates are required. The Death
Benefit, Total Account Values, and Cash Surrender Values would be different from
those shown if the gross annual investment rates
36
<PAGE>
of return averaged 0%, 6%, and 12%, respectively, over a period of years, but
fluctuated above and below those averages for individual Policy Years.
The second column of each table shows the accumulated values of the premiums
paid at an assumed interest rate of 5%. The third through fifth columns
illustrate the Death Benefit of a Policy over the designated period. The sixth
through eighth columns illustrate the Total Account Values, while the ninth
through the eleventh columns illustrate the Cash Surrender Values of each Policy
over the designated period. Tables I, II, V and VI assume that the maximum Cost
of Insurance Rates allowable under the Policy are charged in all Policy Years.
These tables also assume that the maximum allowable mortality and expense risk
charge of 0.90% on an annual basis, the maximum allowable administrative expense
charge of 0.50% on an annual basis, and the maximum allowable premium load of 6%
are assessed in each Policy Year. Tables III, IV, VII and VIII assume that the
current scale of Cost of Insurance Rates applies during all Policy Years. These
tables also assume that the current mortality and expense risk charge of 0.70%
on an annual basis, the current administrative expense charge of 0.30% on an
annual basis, and the current premium load of 3.5% are assessed.
The amounts shown for Death Benefit, Cash Surrender Values, and Total Account
Values reflect the fact that the net investment return is lower than the gross
return on the assets held in each Fund as a result of expenses paid by each Fund
and other charges levied by the Separate Account. After deduction of these
amounts, the illustrated gross annual investment rates of return of 0%, 6%, and
12% correspond to approximate net annual rates of %, %, and %,
respectively on a current basis. On a guaranteed basis, the illustrated gross
annual investment rates of return of 0%, 6%, and 12% correspond to approximate
net annual rates of %, %, and %, respectively.
The investment advisory fees and other Fund expenses vary by Fund from % to
%. A weighted average of % has been used for the illustrations.
The hypothetical values shown in the tables do not reflect any Separate Account
charges for federal income taxes, since we are not currently making such
charges. However, such charges may be made in the future, and in that event, the
gross annual investment rate of return would have to exceed 0%, 6%, or 12% by an
amount sufficient to cover the tax charges in order to produce the Death
Benefit, Total Account Values, and Cash Surrender Values illustrated.
The tables illustrate the Policy Values that would result based upon the
hypothetical investment rates of return if premiums were paid as indicated, if
all Net Premiums are allocated to Variable Life Account B and if no Policy loans
have been made. The tables are also based on the assumptions that the Policy
Owner has not requested an increase or decrease in the Specified Amount of the
Policy, and no partial surrenders have been made.
Upon request, we will provide an illustration based upon the proposed Insured's
age, sex of Insured (if necessary), and underwriting classification, the
Specified Amount or premium requested, the proposed frequency of premium
payments and any available riders requested. A fee of $25 is charged for each
such illustration.
The hypothetical gross annual investment return assumed in such an illustration
will not exceed 12%.
37
<PAGE>
AetnaVest Plus Policy
Table I
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY(1)
MALE ISSUE AGE 45 - UNISEX FOR SPECIAL PLAN POLICIES
$6,720.00 ANNUAL GUARANTEED DEATH BENEFIT PREMIUM TO AGE 80
PREFERRED NONSMOKER RISK
FACE AMOUNT $500,000
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums Death Benefit
Accumulated Gross Annual Investment Total Account Value Cash Surrender Value
at Return of Annual Investment Return of Annual Investment Return of
Policy 5% Interest --------------------------------- --------------------------------- --------------------------------
Year Per Year Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12%
- ------------- ------------ ---------- ---------- ----------- ---------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 7,056 500,000 500,000 500,000
2 14,465 500,000 500,000 500,000
3 22,244 500,000 500,000 500,000
4 30,412 500,000 500,000 500,000
5 38,989 500,000 500,000 500,000
6 47,994 500,000 500,000 500,000
7 57,450 500,000 500,000 500,000
8 67,379 500,000 500,000 500,000
9 77,803 500,000 500,000 500,000
10 88,750 500,000 500,000 500,000
15 152,258 500,000 500,000 500,000
20 233,313 500,000 500,000 500,000
25 336,762 500,000 500,000 500,000
30 468,793 500,000 500,000
20 (Age 65) 233,313 500,000 500,000 500,000
</TABLE>
(1) Assumes no Policy loan has been made. Guaranteed cost of insurance rates
assumed. Maximum mortality and expense risk charges, administrative charges,
and premium load assumed.
If premiums are paid more frequently than annually, the Death Benefits, Total
Account Values, and Cash Surrender Values would be less than those illustrated.
The investment results are illustrative only and should not be considered a
representation of past or future investments results. Actual investment results
may be more or less than those shown and will depend on a number of factors
including the Policy Owner's allocations, and the Fund's rate of return. The
Total Account Value and Cash Value for a Policy would be different from those
shown in the actual investment rates of return averaged 0%, 6%, and 12% over a
period of years, but fluctuated above or below those averages for individual
Policy Years. No representations can be made that these rates of return will
definitely be achieved for any one year or sustained over a period of time.
38
<PAGE>
AetnaVest Plus Policy
Table II
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY(1)
MALE ISSUE AGE 45 - UNISEX FOR SPECIAL PLAN POLICIES
$4,080.00 ANNUAL BASIC PREMIUM
PREFERRED NONSMOKER RISK
FACE AMOUNT $500,000
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums Death Benefit
Accumulated Gross Annual Investment Total Account Value Cash Surrender Value
at Return of Annual Investment Return of Annual Investment Return of
Policy 5% Interest --------------------------------- --------------------------------- --------------------------------
Year Per Year Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12%
- ------------- ------------ ---------- ---------- ----------- ---------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4,284 500,000 500,000 500,000
2 8,782 500,000 500,000 500,000
3 13,505 500,000 500,000 500,000
4 18,465 500,000 500,000 500,000
5 23,672 500,000 500,000 500,000
6 29,139 500,000 500,000 500,000
7 34,880 500,000 500,000 500,000
8 40,908 500,000 500,000 500,000
9 47,238 500,000 500,000 500,000
10 53,884 500,000 500,000 500,000
15 92,443 500,000 500,000 500,000
20 141,655
25 204,463
30 284,624
20 (Age 65) 141,655
</TABLE>
(1) Assumes no Policy loan has been made. Guaranteed cost of insurance rates
assumed. Maximum mortality and expense risk charges, administrative charges,
and premium load assumed.
If premiums are paid more frequently than annually, the Death Benefits, Total
Account Values, and Cash Surrender Values would be less than those illustrated.
The investment results are illustrative only and should not be considered a
representation of past or future investments results. Actual investment results
may be more or less than those shown and will depend on a number of factors
including the Policy Owner's allocations, and the Fund's rate of return. The
Total Account Value and Cash Value for a Policy would be different from those
shown in the actual investment rates of return averaged 0%, 6%, and 12% over a
period of years, but fluctuated above or below those averages for individual
Policy Years. No representations can be made that these rates of return will
definitely be achieved for any one year or sustained over a period of time.
39
<PAGE>
AetnaVest Plus Policy
Table III
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY(1)
MALE ISSUE AGE 45 - UNISEX FOR SPECIAL PLAN POLICIES
$6,720.00 ANNUAL GUARANTEED DEATH BENEFIT PREMIUM TO AGE 80
PREFERRED NONSMOKER RISK
FACE AMOUNT $500,000
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums Death Benefit
Accumulated Gross Annual Investment Total Account Value Cash Surrender Value
at Return of Annual Investment Return of Annual Investment Return of
Policy 5% Interest --------------------------------- --------------------------------- --------------------------------
Year Per Year Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12%
- ------------- ------------ ---------- ---------- ----------- ---------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 7,056 500,000 500,000 500,000
2 14,465 500,000 500,000 500,000
3 22,244 500,000 500,000 500,000
4 30,412 500,000 500,000 500,000
5 38,989 500,000 500,000 500,000
6 47,994 500,000 500,000 500,000
7 57,450 500,000 500,000 500,000
8 67,379 500,000 500,000 500,000
9 77,803 500,000 500,000 500,000
10 88,750 500,000 500,000 500,000
15 152,258 500,000 500,000 500,000
20 233,313 500,000 500,000 500,000
25 336,762 500,000 500,000
30 468,793 500,000 500,000
20 (Age 65) 233,313 500,000 500,000 500,000
</TABLE>
(1) Assumes no Policy loan has been made. Current cost of insurance rates
assumed. Current mortality and expense risk charges, administrative charges,
and premium load assumed.
If premiums are paid more frequently than annually, the Death Benefits, Total
Account Values, and Cash Surrender Values would be less than those illustrated.
The investment results are illustrative only and should not be considered a
representation of past or future investments results. Actual investment results
may be more or less than those shown and will depend on a number of factors
including the Policy Owner's allocations, and the Fund's rate of return. The
Total Account Value and Cash Value for a Policy would be different from those
shown in the actual investment rates of return averaged 0%, 6%, and 12% over a
period of years, but fluctuated above or below those averages for individual
Policy Years. No representations can be made that these rates of return will
definitely be achieved for any one year or sustained over a period of time.
40
<PAGE>
AetnaVest Plus Policy
Table IV
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY(1)
MALE ISSUE AGE 45 - UNISEX FOR SPECIAL PLAN POLICIES
$4,080.00 ANNUAL BASIC PREMIUM
PREFERRED NONSMOKER RISK
FACE AMOUNT $500,000
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums Death Benefit
Accumulated Gross Annual Investment Total Account Value Cash Surrender Value
at Return of Annual Investment Return of Annual Investment Return of
Policy 5% Interest --------------------------------- --------------------------------- --------------------------------
Year Per Year Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12%
- ------------- ------------ ---------- ---------- ----------- ---------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4,284 500,000 500,000 500,000
2 8,782 500,000 500,000 500,000
3 13,505 500,000 500,000 500,000
4 18,465 500,000 500,000 500,000
5 23,672 500,000 500,000 500,000
6 29,139 500,000 500,000 500,000
7 34,880 500,000 500,000 500,000
8 40,908 500,000 500,000 500,000
9 47,238 500,000 500,000 500,000
10 53,884 500,000 500,000 500,000
15 92,443 500,000 500,000 500,000
20 141,655 500,000 500,000 500,000
25 204,463 500,000 500,000 500,000
30 284,624
20 (Age 65) 141,655 500,000 500,000 500,000
</TABLE>
(1) Assumes no Policy loan has been made. Current cost of insurance rates
assumed. Current mortality and expense risk charges, administrative charges,
and premium load assumed.
If premiums are paid more frequently than annually, the Death Benefits, Total
Account Values, and Cash Surrender Values would be less than those illustrated.
The investment results are illustrative only and should not be considered a
representation of past or future investments results. Actual investment results
may be more or less than those shown and will depend on a number of factors
including the Policy Owner's allocations, and the Fund's rate of return. The
Total Account Value and Cash Value for a Policy would be different from those
shown in the actual investment rates of return averaged 0%, 6%, and 12% over a
period of years, but fluctuated above or below those averages for individual
Policy Years. No representations can be made that these rates of return will
definitely be achieved for any one year or sustained over a period of time.
41
<PAGE>
AetnaVest Plus Policy
Table V
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY(1)
UNISEX ISSUE AGE 45
$6,360.00 ANNUAL GUARANTEED DEATH BENEFIT PREMIUM TO AGE 80
PREFERRED NONSMOKER RISK
FACE AMOUNT $500,000
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums Death Benefit
Accumulated Gross Annual Investment Total Account Value Cash Surrender Value
at Return of Annual Investment Return of Annual Investment Return of
Policy 5% Interest --------------------------------- --------------------------------- --------------------------------
Year Per Year Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12%
- ------------- ------------ ---------- ---------- ----------- ---------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 6,678 500,000 500,000 500,000
2 13,690 500,000 500,000 500,000
3 21,052 500,000 500,000 500,000
4 28,783 500,000 500,000 500,000
5 36,900 500,000 500,000 500,000
6 45,423 500,000 500,000 500,000
7 54,372 500,000 500,000 500,000
8 63,769 500,000 500,000 500,000
9 73,635 500,000 500,000 500,000
10 83,995 500,000 500,000 500,000
15 144,102 500,000 500,000 500,000
20 220,814 500,000 500,000 500,000
25 318,722 500,000 500,000 500,000
30 443,679 500,000 500,000
20 (Age 65) 220,814 500,000 500,000 500,000
</TABLE>
(1) Assumes no Policy loan has been made. Guaranteed cost of insurance rates
assumed. Maximum mortality and expense risk charges, administrative charges,
and premium load assumed.
If premiums are paid more frequently than annually, the Death Benefits, Total
Account Values, and Cash Surrender Values would be less than those illustrated.
The investment results are illustrative only and should not be considered a
representation of past or future investments results. Actual investment results
may be more or less than those shown and will depend on a number of factors
including the Policy Owner's allocations, and the Fund's rate of return. The
Total Account Value and Cash Value for a Policy would be different from those
shown in the actual investment rates of return averaged 0%, 6%, and 12% over a
period of years, but fluctuated above or below those averages for individual
Policy Years. No representations can be made that these rates of return will
definitely be achieved for any one year or sustained over a period of time.
42
<PAGE>
AetnaVest Plus Policy
Table VI
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY(1)
UNISEX ISSUE AGE 45
$3,900.00 ANNUAL BASIC PREMIUM
PREFERRED NONSMOKER RISK
FACE AMOUNT $500,000
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums Death Benefit
Accumulated Gross Annual Investment Total Account Value Cash Surrender Value
at Return of Annual Investment Return of Annual Investment Return of
Policy 5% Interest --------------------------------- --------------------------------- --------------------------------
Year Per Year Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12%
- ------------- ------------ ---------- ---------- ----------- ---------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4,095 500,000 500,000 500,000
2 8,395 500,000 500,000 500,000
3 12,909 500,000 500,000 500,000
4 17,650 500,000 500,000 500,000
5 22,627 500,000 500,000 500,000
6 27,854 500,000 500,000 500,000
7 33,342 500,000 500,000 500,000
8 39,104 500,000 500,000 500,000
9 45,154 500,000 500,000 500,000
10 51,506 500,000 500,000 500,000
15 88,364 500,000 500,000 500,000
20 135,405
25 195,442
30 272,067
20 (Age 65) 135,405
</TABLE>
(1) Assumes no Policy loan has been made. Guaranteed cost of insurance rates
assumed. Maximum mortality and expense risk charges, administrative charges,
and premium load assumed.
If premiums are paid more frequently than annually, the Death Benefits, Total
Account Values, and Cash Surrender Values would be less than those illustrated.
The investment results are illustrative only and should not be considered a
representation of past or future investments results. Actual investment results
may be more or less than those shown and will depend on a number of factors
including the Policy Owner's allocations, and the Fund's rate of return. The
Total Account Value and Cash Value for a Policy would be different from those
shown in the actual investment rates of return averaged 0%, 6%, and 12% over a
period of years, but fluctuated above or below those averages for individual
Policy Years. No representations can be made that these rates of return will
definitely be achieved for any one year or sustained over a period of time.
43
<PAGE>
AetnaVest Plus Policy
Table VII
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY(1)
UNISEX ISSUE AGE 45
$3,900.00 ANNUAL GUARANTEED DEATH BENEFIT PREMIUM TO AGE 80
PREFERRED NONSMOKER RISK
FACE AMOUNT $500,000
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums Death Benefit
Accumulated Gross Annual Investment Total Account Value Cash Surrender Value
at Return of Annual Investment Return of Annual Investment Return of
Policy 5% Interest --------------------------------- --------------------------------- --------------------------------
Year Per Year Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12%
- ------------- ------------ ---------- ---------- ----------- ---------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 6,678 500,000 500,000 500,000
2 13,690 500,000 500,000 500,000
3 21,052 500,000 500,000 500,000
4 28,783 500,000 500,000 500,000
5 36,900 500,000 500,000 500,000
6 45,423 500,000 500,000 500,000
7 54,372 500,000 500,000 500,000
8 63,769 500,000 500,000 500,000
9 73,635 500,000 500,000 500,000
10 83,995 500,000 500,000 500,000
15 144,102 500,000 500,000 500,000
20 220,814 500,000 500,000 500,000
25 318,722 500,000 500,000
30 443,679 500,000 500,000
20 (Age 65) 220,814 500,000 500,000 500,000
</TABLE>
(1) Assumes no Policy loan has been made. Current cost of insurance rates
assumed. Current mortality and expense risk charges, administrative charges,
and premium load assumed.
If premiums are paid more frequently than annually, the Death Benefits, Total
Account Values, and Cash Surrender Values would be less than those illustrated.
The investment results are illustrative only and should not be considered a
representation of past or future investments results. Actual investment results
may be more or less than those shown and will depend on a number of factors
including the Policy Owner's allocations, and the Fund's rate of return. The
Total Account Value and Cash Value for a Policy would be different from those
shown in the actual investment rates of return averaged 0%, 6%, and 12% over a
period of years, but fluctuated above or below those averages for individual
Policy Years. No representations can be made that these rates of return will
definitely be achieved for any one year or sustained over a period of time.
44
<PAGE>
AetnaVest Plus Policy
Table VIII
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY(1)
UNISEX ISSUE AGE 45
$3,900.00 ANNUAL BASIC PREMIUM
PREFERRED NONSMOKER RISK
FACE AMOUNT $500,000
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums Death Benefit
Accumulated Gross Annual Investment Total Account Value Cash Surrender Value
at Return of Annual Investment Return of Annual Investment Return of
Policy 5% Interest --------------------------------- --------------------------------- --------------------------------
Year Per Year Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12%
- ------------- ------------ ---------- ---------- ----------- ---------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 495 500,000 500,000 500,000
2 8,395 500,000 500,000 500,000
3 12,909 500,000 500,000 500,000
4 17,650 500,000 500,000 500,000
5 22,627 500,000 500,000 500,000
6 27,854 500,000 500,000 500,000
7 33,342 500,000 500,000 500,000
8 39,104 500,000 500,000 500,000
9 45,154 500,000 500,000 500,000
10 51,506 500,000 500,000 500,000
15 88,364 500,000 500,000 500,000
20 135,405 500,000 500,000 500,000
25 195,442 500,000 500,000 500,000
30 272,067
20 (Age 65) 135,405 500,000 500,000 500,000
</TABLE>
(1) Assumes no Policy loan has been made. Current cost of insurance rates
assumed. Current mortality and expense risk charges, administrative charges,
and premium load assumed.
If premiums are paid more frequently than annually, the Death Benefits, Total
Account Values, and Cash Surrender Values would be less than those illustrated.
The investment results are illustrative only and should not be considered a
representation of past or future investments results. Actual investment results
may be more or less than those shown and will depend on a number of factors
including the Policy Owner's allocations, and the Fund's rate of return. The
Total Account Value and Cash Value for a Policy would be different from those
shown in the actual investment rates of return averaged 0%, 6%, and 12% over a
period of years, but fluctuated above or below those averages for individual
Policy Years. No representations can be made that these rates of return will
definitely be achieved for any one year or sustained over a period of time.
P 45
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
Index to Consolidated Financial Statements
<TABLE>
<CAPTION>
Page
<S> <C>
Independent Auditors' Report .............................................................................
Consolidated Financial Statements:
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 ...............................................................
</TABLE>
TO BE FILED BY AMENDMENT
F-1
<PAGE>
FINANCIAL STATEMENTS
VARIABLE LIFE ACCOUNT B
Index
<TABLE>
<S> <C>
Statement of Assets and Liabilities ...........................................
Statements of Operations and Changes in Net Assets ............................
Condensed Financial Information ...............................................
Notes to Financial Statements .................................................
Independent Auditors' Report ..................................................
</TABLE>
TO BE FILED BY AMENDMENT
S-1
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
UNDERTAKING PURSUANT TO RULE 484
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.
REPRESENTATION PURSUANT TO SECTION 26(e)(2)(A) OF
THE INVESTMENT COMPANY ACT OF 1940
Aetna Life Insurance and Annuity Company represents that the fees and
charges deducted under the policies 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.
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 11 TO THE REGISTRATION STATEMENT
This Post-Effective Amendment No. 11 to Registration Statement No.
33-76018 is comprised of the following papers and documents:
o The facing sheet.
o One Prospectus for the AetnaVest Plus Variable Life Insurance Policy
consisting of 45 pages
o The undertaking to file reports
o The undertaking pursuant to Rule 484
o Representation pursuant to Section 26(e)(2)(A) of the Investment Company
Act of 1940
o The signatures
o Written consents of the following persons:
A. Consent of Counsel (to be filed by amendment)
B. Actuarial Consent (to be filed by amendment)
C. Consent of Independent Auditors (to be filed by amendment)
1
<PAGE>
The following Exhibits:
1. Exhibits required by paragraph A of instructions to exhibits for Form N-8B-2:
<TABLE>
<S> <C>
(1) Resolution establishing Variable Life Account B(1)
(2) Not applicable
(3)(i) Master General Agent Agreement(1)
(3)(ii) Life Insurance General Agent Agreement(1)
(3)(iii) Broker Agreement(1)
(3)(iv) Life Insurance Broker-Dealer Agreement(1)
(4) Not applicable
(5)(i) AetnaVest Plus Policy (38899-93)(2)
(5)(ii) Disability Benefit Rider (70174-93) to AetnaVest Plus Policy 38899-93(2) (5)(iii)
Unisex Amendment rider (70211-95US) for use with AetnaVest Plus Policy 38899-93(2)
(6)(i) Certificate of Incorporation of Aetna Life Insurance and Annuity Company,
Depositor(3) (6)(ii) Amendment of Certificate of Incorporation of Aetna Life
Insurance and Annuity Company(4)
(6)(iii) By-Laws as amended September 17, 1997 of Aetna Life Insurance and Annuity Company(5)
(7) Not applicable
(8)(i) 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(4)
(8)(ii) Fifth Amendment dated as of May 1, 1997 to the Fund Participation Agreement between
Aetna Life Insurance and Annuity Company, Variable Insurance Products Fund and
Fidelity Distributors Corporation dated February 1, 1994 and amended on December 15,
1994, February 1, 1995, May 1, 1995, January 1, 1996 and March 1, 1996(6)
(8)(iii) 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(7)
(8)(iv) 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(8)
(8)(v) Fund Participation Agreement between Aetna Life Insurance and Annuity Company,
Variable Insurance Products Fund II and Fidelity Distributors Corporation dated
February 1, 1994 and amended on December 15, 1994, February 1, 1995, May 1, 1995,
January 1, 1996 and March 1,1996(4)
(8)(vi) Fifth Amendment, dated as of May 1, 1997 to the Fund Participation Agreement between
Aetna Life Insurance and Annuity Company, Variable Insurance Products Fund II and
Fidelity Distributors Corporation dated February 1, 1994 and amended on December 15,
1994, February 1, 1995, May 1, 1995, January 1, 1996, and March 1, 1996(6)
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
(8)(vii) Sixth Amendment dated as of January 20, 1998 to the Fund Participation Agreement
between Aetna Life Insurance and Annuity Company, Variable Insurance Products Fund
II and Fidelity Distributors Corporation dated February 1, 1994 and amended on
December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996, March 1, 1996 and
May 1, 1997(9)
(8)(viii) Seventh Amendment dated as of May 1, 1998 to the Fund Participation Agreement
between Aetna Life Insurance and Annuity Company, Variable Insurance Products Fund
II and Fidelity Distributors Corporation dated February 1, 1994 and amended on
December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996, March 1, 1996,
May 1, 1997 and January 20, 1998(8)
(8)(ix) Service Agreement between Aetna Life Insurance and Annuity Company and Fidelity
Investments Institutional Operations Company dated as of November 1, 1995(10)
(8)(x) Amendment dated January 1, 1997 to Service Agreement between Aetna Life Insurance
and Annuity Company and Fidelity Investments Institutional Operations Company dated
as of November 1, 1995(6)
(8)(xi) Fund Participation Agreement among Janus Aspen Series and Aetna Life Insurance and
Annuity Company and Janus Capital Corporation dated December 8, 1997(11)
(8)(xii) Service Agreement between Janus Capital Corporation and Aetna Life Insurance and
Annuity Company dated December 8, 1997(11)
(8)(xiii) Fund Participation Agreement between Aetna Life Insurance and Annuity Company and
Oppenheimer Variable Annuity Account Funds and Oppenheimer Funds, Inc.(12)
(8)(xiv) Service Agreement between Oppenheimer Funds, Inc. and Aetna Life Insurance and
Annuity Company(12)
(9) Not applicable
(10)(i) Application (70059-96)(13)
(10)(ii) Application (70059-96ZNY)(13)
(10)(iii) Application Supplement (70268-97(3/98))(13)
</TABLE>
2. Opinion and Consent of Counsel*
3. Not Applicable
4. Not Applicable
5. Not Applicable
6. Actuarial Opinion and Consent*
7. Consent of Independent Auditors*
8. Copy of Power of Attorney(14)
1. Incorporated by reference to Post-Effective Amendment No. 2 to Registration
Statement on Form S-6 (File No. 33-76004), as filed electronically on
February 16, 1996.
2. Incorporated by reference to Post-Effective Amendment No. 7 to Registration
Statement on Form S-6 (File No. 33-76018), as filed electronically on April
22, 1997.
3. 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.
3
<PAGE>
4. 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.
5. 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.
6. Incorporated by Reference to Post-Effective Amendment No. 30 to
Registration Statement on Form N-4 (File No. 33-34370), as filed
electronically on September 29, 1997.
7. 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.
8. Incorporated by reference to Registration Statement on Form N-4 (File No.
333-56297), as filed electronically on June 8, 1998.
9. Incorporated by Reference to Post-Effective Amendment No. 7 to Registration
Statement on Form S-6 (File No. 33-75248), as filed electronically on
February 24, 1998.
10. 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.
11. 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.
12. 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.
13. Incorporated by reference to Post-Effective Amendment No. 3 to Registration
Statement on Form S-6 (File No. 33-64277), as filed electronically on
February 25, 1998.
14. 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. In addition, a certified copy of the resolution adopted by
the Depositor's Board of Directors authorizing filings pursuant to a power
of attorney as required by Rule 478 under the Securities Act of 1933 is
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.
*To be filed by Amendment.
4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Variable Life Account B of Aetna Life Insurance and Annuity Company, has duly
caused this Post-Effective Amendment to its Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, and the seal of the
Depositor to be hereunto affixed and attested, all in the City of Hartford, and
State of Connecticut, on this 26 day of February, 1999.
VARIABLE LIFE ACCOUNT B OF
AETNA LIFE INSURANCE AND
ANNUITY COMPANY
(Registrant)
(SEAL)
ATTEST: /s/ Karen A. Peddle
-------------------
Karen A. Peddle
Assistant Corporate Secretary
By: AETNA LIFE INSURANCE AND
ANNUITY COMPANY
(Depositor)
By: Thomas J. McInerney*
----------------------------------
Thomas J. McInerney
Principal Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 11 to the Registration Statement has be signed below by the
following persons in the capacities indicated 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 )
- ---------------------- )
Catherine H. Smith )
)
Shaun P. Mathews* Director )
- ---------------------- )
Shaun P. Mathews )
)
Deborah Koltenuk* Vice President, Treasurer and Corporate Controller ) February
- ---------------------- ) 26, 1999
Deborah Koltenuk )
By: /s/ J. Neil McMurdie
---------------------------------
J. Neil McMurdie
*Attorney-in-Fact
</TABLE>
