<PAGE>
As filed with the Securities and Exchange File No. 33-80750
Commission, August 15, 1995 File No. 811-8582
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
-----------------------------------------
POST-EFFECTIVE AMENDMENT NO. 3 TO
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
and Amendment to
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
-----------------------------------------
Variable Annuity Account I of Aetna Insurance Company of America
(Exact Name of Registrant)
Aetna Insurance Company of America
(Name of Depositor)
151 Farmington Avenue, RE4C, Hartford, Connecticut 06156
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (203) 273-7834
Susan E. Bryant, Counsel
Aetna Insurance Company of America
151 Farmington Avenue, RE4C, Hartford, Connecticut 06156
(Name and Address of Agent for Service)
-----------------------------------------
It is proposed that this filing will become effective (Check appropriate space):
immediately upon filing pursuant to paragraph (b) of Rule 485
---
on pursuant to paragraph (b) of Rule 485
--- -------------
60 days after filing pursuant to paragraph (a)(i) of Rule 485
---
on pursuant to paragraph (a)(i) of Rule 485
--- -----------------------
75 days after filing pursuant to paragraph (a)(ii) of Rule 485
---
on pursuant to (a)(ii) of Rule 485
--- -----------------------
X on August 31, 1995 pursuant to (a)(iii) of Rule 485
---
If appropriate check the following space:
This post-effective amendment designates a new effective date for a
-----
previously filed post-effective amendment.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant has
registered an indefinite number of securities under the Securities Act of 1933.
Pursuant to paragraph (b)(2) of Rule 24f-2, Registrant need not file a Rule
24f-2 Notice for fiscal year ended December 31, 1994 because it did not sell any
securities pursuant to such declaration during such fiscal year.
<PAGE>
VARIABLE ANNUITY ACCOUNT I
CROSS REFERENCE SHEET
Pursuant to Rule 481(a)
<TABLE>
<CAPTION>
Form N-4
--------
Item No. Part A (Prospectus) Location
-------- ------------------- --------
<C> <S> <C>
1 Cover Page................................. Cover Page
2 Definitions................................ Glossary of Terms
3 Synopsis or Highlights..................... Fee Table; Synopsis
4 Condensed Financial Information............ Performance Data
5 General Description of Registrant,
Depositor, and Portfolio Companies......... Description of the
Company, the
Distributor, Variable
Annuity Account I, the
Funds, and the Adviser
6 Deductions and Expenses.................... Charges and Deductions;
Distribution
7 General Description of Variable
Annuity Contracts.......................... Contract Rights;
Miscellaneous
8 Annuity Period............................. Annuity Period
9 Death Benefit.............................. Death Benefit
10 Purchases and Contract Value............... Contract Purchase;
Certificate Holder's
Account Value
11 Redemptions................................ Contract Rights -
Withdrawals During
Accumulation Period;
Contract Rights - Right
to Cancel; Additional
Withdrawal Options
12 Taxes...................................... Tax Status
13 Legal Proceedings.......................... Miscellaneous - Legal
Proceedings
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Form N-4
--------
Item No. Part B (Statement of Additional Information) Location
-------- -------------------------------------------- --------
<C> <S> <C>
14 Table of Contents of the Statement of
Additional Information..................... Table of Contents -
Statement of Additional
Information
15 Cover Page................................. Cover page
16 Table of Contents.......................... Table of Contents
17 General Information and
History.................................... General Information and
History
18 Services................................... General Information and
History; Independent
Auditors
19 Purchase of Securities Being Offered....... Offering and Purchase
of Contracts
20 Underwriters............................... Offering and Purchase
of Contracts
21 Calculation of Performance Data............ Performance Data
22 Annuity Payments........................... Annuity Payments
23 Financial Statements....................... Financial Statements
</TABLE>
Part C (Other Information)
--------------------------
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C to this Registration Statement.
<PAGE>
GROWTH PLUS
A Variable Annuity Contract funded through
Variable Annuity Account I
and issued by
Aetna Insurance Company of America
_______, 1995 Supplement to the May 1, 1995 Prospectus
The Company has made the following changes to this Prospectus.
NAME CHANGE
The name for the Growth Plus Guaranteed Account has been changed to "AICA
Guaranteed Account." Where the names "Growth Plus Guaranteed Account" or "GP
Guaranteed Account" appear in this Prospectus, they will now mean the AICA
Guaranteed Account.
MUTUAL FUND ANNUAL EXPENSES, page 9
The Mutual Fund Annual Expense information for the funds of the Insurance
Management Series Trust should be as follows:
As a percentage of average net assets:
<TABLE>
<CAPTION>
Total
Fund
Investment Other Annual
Advisory Fees/(1)/ Expenses Expenses
(after expense (after expense (after expense
reimbursement) reimbursement) reimbursement)
----------------- ----------------- --------------
<S> <C> <C> <C>
Equity Growth and Income Fund/(2)/ 0.00% 0.85% 0.85%
Utility Fund/(2)/ 0.00% 0.85% 0.85%
Prime Money Fund/(2)/ 0.00% 0.80% 0.80%
U.S. Government Bond Fund/(2)/ 0.00% 0.80% 0.80%
Corporate Bond Fund/(2)/ 0.00% 0.80% 0.80%
International Stock Fund/(3)/ 0.52% 0.73% 1.25%
</TABLE>
/(1)/ The Adviser has agreed to reimburse the Company for certain costs
incurred in connection with administering the Funds by payment of an
amount based on assets in the Funds attributable to the Contracts. These
amounts are not charged to the Funds or Certificate Holders, but are paid
from other assets of the Adviser.
/(2)/ The Fund's Adviser has agreed to waive all or a portion of its advisory
fee and reimburse certain expenses so that the total annual expenses for
the Equity Growth and Income Fund and the Utility Fund would not exceed
0.85% of average net assets, and the total annual expenses for the Prime
Money Fund, the U.S. Government Bond Fund and the Corporate Bond Fund
would not exceed 0.80% of average net assets. Without this waiver and
reimbursement, the maximum advisory fees and the maximum total annual
expenses for the Funds, respectively, would have been 0.75% and 25.96%
for the Equity Growth and Income Fund, 0.75% and 55.43% for the Utility
Fund, 0.50% and 72.54% for the Prime Money Fund, 0.60% and 33.35% for the
U.S. Government Bond Fund, and 0.60% and 10.42% for the Corporate Bond
Fund. The Adviser can terminate this voluntary waiver or reimbursement of
expenses at any time at its sole discretion.
/(3)/ The estimated management fee has been reduced to reflect the anticipated
voluntary waiver of a portion of the management fee. The advisor can
terminate this voluntary waiver at any time at its sole discretion. The
maximum management fee is 1.00%. The Total Fund Annual Expenses are
estimated to be 1.73% absent the anticipated voluntary waiver of a
portion of the management fee. Total Fund Annual Expenses are estimated
based on average expenses expected to be incurred during the period
ending December 31, 1995. During the course of this period, expenses may
be more or less than the average amount shown.
WITHDRAWALS, page 18
The value at which the Company reserves the right to close the Certificate
Holder's Account after a partial withdrawal should be $2,500. The Company does
not intend to exercise this right in cases where the Certificate Holder's
Account Value is reduced to $2,500 or less solely due to investment performance.
DEFERRED SALES CHARGE, page 20
The following information replaces items (d) and (f) in the third paragraph
discussing Deferred Sales Charge:
(d) paid due to the full withdrawal of a Certificate Holder's Account for
which the value is $2,500 or less and no withdrawals have been made in
the prior 12 months;
(f) paid if we close out a Certificate Holder's Account when the value is
less than $2,500. See "Contract Rights-Withdrawals."
DEATH BENEFITS-Death Benefit Amount Prior to the Annuity Date, page 26
The following paragraph, subject to state regulatory approval, has been added
after the last paragraph in "Death Benefit Amount Prior to the Annuity Date":
For amounts held in the AICA Guaranteed Account: The death benefit, if paid
within the first six months of the date of the Certificate Holder's death, is
the greater of the Certificate Holder's Account Value or the aggregate market
value adjusted amount. This provision does not apply at the death of a
spousal beneficiary or joint Certificate Holder who continued the Account in
his or her own name after the first death. If amounts are withdrawn after the
six-month period, the death benefit will be the aggregate Market Value
Adjustment. The aggregate Market Value Adjustment may be more or less than
the Certificate Holder's Account Value. (See the Appendix.)
APPENDIX - Transfers, page 36
The following information, subject to state regulatory approval, has been added
after the fourth sentence in the section discussing transfers in the Appendix to
this Prospectus:
However, only a positive aggregate MVA will be applied to transfers made due
to annuitization under one of the lifetime Annuity options described in item
(2) above.
APPENDIX - Death Benefit, page 36
The following paragraph, subject to state regulatory approval, has been added as
a new section following the section on Transfers:
Full and partial withdrawals and transfers made from the AICA Guaranteed
Account within six months after the date of the Certificate Holder's death
(including transfers due to annuitization) will be the greater of:
(a) the aggregate Market Value Adjustment (i.e., the sum of all Market
Value Adjustments calculated due to a withdrawal of amounts). This
total may be greater or less than the Certificate Holder's Account
Value of those amounts; or
(b) the applicable portion of the Certificate Holder's Account Value
attributable to the AICA Guaranteed Account.
After the six-month period, the surrender or transfer amount will be
adjusted for the aggregate Market Value Adjustment, which may be greater or
less than the Certificate Holder's Account Value of those amounts. However,
only a positive aggregate Market Value Adjustment will be applied to
transfers made due to annuitization under one of the lifetime Annuity
Options.
80750.00.1 Aetna Ed.___/95
<PAGE>
[LOGO OF AETNA AETNA INSURANCE COMPANY OF AMERICA
INSURANCE COMPANY VARIABLE ANNUITY
APPEARS HERE] ACCOUNT I
Service Unit
151 Farmington Avenue
Hartford, Connecticut 06156 Prospectus Dated:
Telephone: 1-800-531-4547 MAY 1, 1995
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GROWTH PLUS
--------------------------------------------------------------------------------
This Prospectus describes the Growth Plus variable deferred annuity
contracts ("Contracts") issued by Aetna Insurance Company of America
(the "Company"). The Contracts allow individuals to accumulate values
and elect payment of annuity benefits on a fixed or a variable basis.
Group Contracts are offered to certain broker-dealers which have agreed
to act as Distributors of the Contracts. See "Contract Purchase--
Distribution." Individuals who have established accounts with those
broker-dealers are eligible to participate in the Contract. Individual
Contracts are offered only in those states where the group Contracts are
not authorized for sale.
The Contracts described in this Prospectus are (a) nonqualified deferred
annuity contracts, and (b) contracts which may be available for use
under Section 408(b) of the Internal Revenue Code of 1986, as amended
(the "Code") as Individual Retirement Annuities. See "Contract
Purchase--How to Purchase" and "Tax Status."
The securities offered in this Prospectus are distributed through Aetna
Life Insurance and Annuity Company, an affiliate of the Company as the
Underwriter and by registered broker-dealers selected by it as
Distributors. See "Contract Purchase--Distribution."
Purchase Payments received under the Contracts on behalf of persons
participating under group Contracts or individual Contract owners
(collectively, "Certificate Holders") will be allocated at the
Certificate Holder's direction to variable funding options or to a
credited interest option for accumulation of values for the Certificate
Holder's Account. Amounts allocated to the variable funding options will
be deposited in Variable Annuity Account I (the "Separate Account"), a
separate account of the Company, for investment in the variable funding
options.
This Prospectus is intended to describe the Contract provisions relating
to the variable funding options (the "Funds") and the fees and expenses
that may be charged in connection with investment in the Separate
Account. Information with respect to the credited interest option, the
Growth Plus Guaranteed Account (GP Guaranteed Account), is included in
the Appendix to this Prospectus and in the prospectus for the GP
Guaranteed Account which should accompany this Prospectus. The GP
Guaranteed Account is offered only in those jurisdictions where it has
been qualified for sale.
The following investment series of the Insurance Management Series
("Trust"), a Massachusetts business trust that is not affiliated with
the Company, are available as variable funding options under the
Contract:
.Equity Growth and Income Fund
.Utility Fund
.Prime Money Fund
.U.S. Government Bond Fund
.Corporate Bond Fund
.International Stock Fund
Information about the Funds is found in "The Funds," and in the
prospectus for the Trust which must accompany this Prospectus.
THE PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT FUND
PROSPECTUS AND THE CURRENT GROWTH PLUS GUARANTEED ACCOUNT PROSPECTUS.
ALL PROSPECTUSES SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
THE SECURITIES OFFERED BY THIS PROSPECTUS HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
NO PERSON IS AUTHORIZED BY THE COMPANY TO GIVE INFORMATION OR TO MAKE
ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN
CONNECTION WITH OFFERS OF THE SECURITIES DESCRIBED IN THIS PROSPECTUS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN
WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
<PAGE>
THIS PROSPECTUS SETS FORTH CONCISELY THE INFORMATION ABOUT THE CONTRACTS AND
THE SEPARATE ACCOUNT THAT A PROSPECTIVE INVESTOR OUGHT TO KNOW BEFORE INVEST-
ING. ADDITIONAL INFORMATION IS CONTAINED IN A STATEMENT OF ADDITIONAL INFORMA-
TION ("SAI") DATED MAY 1, 1995, WHICH HAS BEEN FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION ("SEC") AND IS INCORPORATED HEREIN BY REFERENCE. THE TABLE
OF CONTENTS FOR THE SAI IS FOUND IN THIS PROSPECTUS. AN SAI MAY BE OBTAINED
WITHOUT CHARGE BY CALLING 1-800-531-4547.
The Company has filed registration statements (the "Registration Statements")
with the SEC under the Securities Act of 1933 relating to the Contracts offered
by this prospectus. This prospectus has been filed as a part of the Registra-
tion Statements and does not contain all of the information set forth in the
Registration Statements and exhibits thereto, and reference is hereby made to
such Registration Statements and exhibits for further information relating to
the Company and the Contracts. The Registration Statements and the exhibits
thereto may be inspected and copied at the public reference facilities of the
SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C. Copies of such mate-
rials also can be obtained by contacting the Public Reference Section of the
SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
GLOSSARY OF TERMS.......................................................... 4
PROSPECTUS SUMMARY......................................................... 6
FEE TABLE.................................................................. 8
PERFORMANCE DATA........................................................... 10
THE COMPANY................................................................ 11
VARIABLE ANNUITY ACCOUNT I................................................. 11
THE FUNDS.................................................................. 11
General................................................................... 11
Mixed and Shared Funding.................................................. 12
The Adviser............................................................... 13
Fund Additions, Limitations and Substitutions............................. 13
CONTRACT PURCHASE.......................................................... 13
How to Purchase........................................................... 13
Designations of Beneficiary and Annuitant................................. 15
Distribution.............................................................. 15
CERTIFICATE HOLDER'S ACCOUNT VALUE......................................... 15
Accumulation Units........................................................ 15
Net Investment Factor..................................................... 16
CONTRACT RIGHTS............................................................ 16
Right to Cancel........................................................... 16
Rights to the Contract and Account........................................ 16
Joint Certificate Holders................................................. 16
Transfers Among Investment Options........................................ 17
Dollar Cost Averaging Program............................................. 17
Account Rebalancing Program............................................... 17
Withdrawals............................................................... 18
CHARGES AND DEDUCTIONS..................................................... 19
Maintenance Charge........................................................ 19
Mortality and Expense Risk Charge......................................... 19
Administrative Charge..................................................... 19
Transfer Charges.......................................................... 19
Deferred Sales Charge..................................................... 20
Fund Expenses............................................................. 21
Premium Tax............................................................... 21
Commissions and Distribution Expenses..................................... 21
</TABLE>
<TABLE>
<CAPTION>
Page
<S> <C>
ADDITIONAL WITHDRAWAL OPTIONS.............................................. 22
General.................................................................... 22
Estate Conservation Option................................................. 23
Systematic Withdrawal Option............................................... 23
ANNUITY PERIOD............................................................. 23
Annuity Period Elections.................................................. 23
Annuity Options........................................................... 24
DEATH BENEFITS............................................................. 25
Death of a Certificate Holder Prior to
the Annuity Date......................................................... 25
Death Benefit Amount Prior to the Annuity Date............................ 26
Payment Methods for Death Before Annuity Date............................. 27
Death of Certificate Holder On or After
the Annuity Date......................................................... 27
Death of the Annuitant.................................................... 27
TAX STATUS................................................................. 28
Introduction.............................................................. 28
Taxation of the Company................................................... 28
Tax Status of the Contract................................................ 28
Taxation of Annuities..................................................... 29
Qualified Contracts....................................................... 31
Withholding............................................................... 31
Possible Changes in Taxation.............................................. 31
Other Tax Consequences.................................................... 31
MISCELLANEOUS.............................................................. 32
Voting Rights............................................................. 32
Modification of the Contract.............................................. 32
Transfer of Ownership--Assignment......................................... 33
Certificate Holder Inquiries.............................................. 33
Telephone Transfers....................................................... 33
Legal Proceedings......................................................... 33
Legal Matters............................................................. 33
TABLE OF CONTENTS -- STATEMENT OF ADDITIONAL INFORMATION................... 34
APPENDIX................................................................... 35
</TABLE>
3
<PAGE>
GLOSSARY OF TERMS
As used in this prospectus, the following terms have the meanings shown.
ACCUMULATION PERIOD: The period during which one or more Net Purchase Payments
applied to a Certificate Holder's Account accumulate(s) to provide future
Annuity payments.
ACCUMULATION UNIT: A measure of the value of the Separate Account assets
attributable to each Fund used as a variable funding option.
ADJUSTED ACCOUNT VALUE: For any Valuation Period, the Certificate Holder's
Account Value, plus or minus the Certificate Holder's aggregate GP Guaranteed
Account market value adjustment, if applied during that period.
ADVISER: Federated Advisers, the investment adviser of the Funds.
ANNUITANT: The natural person on whose life the Annuity benefit under the
Contract is based.
ANNUITY: A series of payments made for life, for a definite period, or for a
combination of the two.
ANNUITY DATE: The date on which Annuity payments commence under an Annuity
Option.
ANNUITY OPTIONS: Annuity payment methods available during the Annuity Period.
ANNUITY PERIOD: The period of time during which Annuity payments are made.
ANNUITY UNIT: A unit of measure used to calculate the amount of each variable
Annuity payment.
BENEFICIARY: The person(s) entitled to receive any death benefit under the
Certificate Holder's Account.
CERTIFICATE: The document issued to a Certificate Holder under a group Contract
to evidence the Certificate Holder's interest in the Contract.
CERTIFICATE HOLDER: A person who acquires an interest in a group Contract or
who purchases an individual Contract. More than one Certificate Holder may have
an interest in the same Certificate Holder's Account as joint Certificate
Holders. References to "Certificate Holder" in this prospectus mean both of the
Certificate Holders on joint accounts.
CERTIFICATE HOLDER'S ACCOUNT: A record established for each Certificate Holder
to maintain values under a Contract during the Accumulation Period.
CERTIFICATE HOLDER'S ACCOUNT VALUE: The dollar value as of any Valuation Period
of all amounts accumulated in a Certificate Holder's Account, including the
value of the Certificate Holder's Accumulation Units, GP Guaranteed Account (if
any) and amounts deposited pursuant to the guaranteed death benefit, when
applicable.
CODE: The Internal Revenue Code of 1986, as amended.
COMPANY ("US" OR "WE"): Aetna Insurance Company of America.
CONTRACT HOLDER: The entity to which a group Contract is issued and the
individual who has purchased an individual Contract.
CONTRACTS: Group variable deferred annuity contracts and individual variable
deferred annuity contracts which are described in this prospectus.
4
<PAGE>
DISTRIBUTORS: The registered broker-dealers which have entered into selling
agreements with the Underwriter to distribute interests in the Contracts. The
Underwriter may also serve as a Distributor.
EFFECTIVE DATE: The date a Certificate is issued to a Certificate Holder or the
date the Contract is issued to an individual Contract Holder.
FUNDS: The mutual funds offered as variable options for the accumulation of
values under the Contracts.
GP GUARANTEED ACCOUNT: The Growth Plus Guaranteed Account, a credited interest
option offered as a funding option under the Contract and which guarantees a
specified rate of interest for specified periods of time.
GENERAL ACCOUNT: The account into which all Company assets not held in separate
accounts are deposited. The General Account is subject to all liabilities of
the Company.
HOME OFFICE: The principal executive offices of the Company located at 151
Farmington Avenue, Hartford, Connecticut 06156.
INDIVIDUAL RETIREMENT ANNUITY: A Certificate Holder's Account which is
established so that it qualifies for special tax treatment under Section 408(b)
of the Code.
MARKET VALUE ADJUSTMENT (MVA): an amount deducted or added to amount withdrawn
early from the Growth Plus Guaranteed Account to reflect changes in the market
value of the investment since the date of deposit. See the Appendix and the
prospectus for the Guaranteed Account for a discussion of how the market value
adjustment is actually calculated.
NET PURCHASE PAYMENT: The Purchase Payment less premium taxes, if applicable.
1940 ACT: The Investment Company Act of 1940, as amended.
PURCHASE PAYMENT: The gross payment made to a Certificate Holder's Account
pursuant to the terms of the Contract. The Company reserves the right to refuse
to accept any Purchase Payment at any time for any reason.
REGISTERED REPRESENTATIVE: The individual who is registered with the
Distributor to offer and sell securities and who is licensed to sell variable
annuity contracts.
SEC: Securities and Exchange Commission.
SEPARATE ACCOUNT: Variable Annuity Account I, an account where assets are
segregated from other assets of the Company. The Separate Account holds shares
of the Funds acquired as funding options under the Contracts. The Separate
Account is not subject to other liabilities of the Company.
UNDERWRITER: The registered broker-dealer which contracts with other registered
broker-dealers to offer and sell the Contracts. Aetna Life Insurance and
Annuity Company will serve as Underwriter.
VALUATION PERIOD: The period of time for which a Fund determines its net asset
value, usually from 4:15 p.m. eastern time each day the New York Stock Exchange
is open until 4:15 p.m. the next such business day, or such other day that one
or more of the Funds determines its net asset value.
VALUATION RESERVE: A reserve established pursuant to the insurance laws of the
state of Connecticut to measure voting rights during the Annuity Period. It
also measures the value of a commutation right under the "Payments For a Stated
Period of Time" Annuity Option when elected on a variable basis.
VARIABLE ANNUITY CONTRACT: An annuity contract providing for the accumulation
of values and/or for Annuity payments, which vary in amount based on investment
results.
5
<PAGE>
PROSPECTUS SUMMARY
CONTRACTS
The Contracts described in this Prospectus are designed to provide retirement
benefits. The Contracts are group variable deferred annuity contracts under
which accounts are established for persons in the group. Individual variable
deferred annuity contracts will be issued where required in certain states.
Persons participating under a group contract and individuals acquiring
individual contracts are all referred to as "Certificate Holders." The group
and individual contracts are referred to as "Contracts."
The Contracts allow for one or more Purchase Payments to be made. The minimum
initial purchase Payment is $1,500 and additional Purchase Payments must be at
least $500 or, if paid by automatic check plan, $50 per month. See "Contract
Purchase."
Contracts may be purchased by two individuals as Joint Certificate Holders,
except for Contracts acquired by individuals for purposes of establishing an
Individual Retirement Account or Annuity under Sections 408(a) or 408(b) of the
Code. A Joint Certificate Holder must be the spouse of the other Joint
Certificate Holder (unless otherwise prohibited by state law). The Contract
gives Certificate Holders certain rights. See "Contract Rights."
A Contract is issued to a group Contract Holder once a completed master
application form is received and accepted. An account is established for an
individual when an enrollment form and/or other forms and the initial Purchase
Payment is received and accepted. See "Contract Purchase." Upon acceptance, a
Certificate is issued for each account under the group Contract. In those
states where an individual Contract is offered, an individual applies for a
Contract by completing an individual Contract application and submitting it
with the Purchase Payment to the Registered Representative or the Underwriter.
See "Contract Purchase -- How to Purchase."
WITHDRAWAL
A Certificate Holder may redeem all or a portion of his or her account value
during the Accumulation Period by completing the Company's withdrawal request
form. The maximum deferred sales charge that could be assessed on a full or
partial withdrawal is 7% of each Net Purchase Payment. In no event may
aggregate charges for deferred sales charges assessed against a Certificate
Holder exceed 8.5% of the Certificate Holder's aggregate Purchase Payments. The
Contract also provides for certain systematic withdrawal options. Amounts
withdrawn from the GP Guaranteed Account may be subject to a market value
adjustment. See "Charges and Deductions -- Deferred Sales Charge" and the
Appendix. A 10% federal penalty tax may also be imposed on the taxable portion
withdrawn. See "Tax Status."
GUARANTEED DEATH BENEFIT
The Contracts contain a death benefit feature. Upon the death of the
Certificate Holder, and subject to certain conditions, the Certificate Holder's
Account Value may be increased. If the Certificate Holder is a non-natural
person, the death benefit is paid upon the death of the Annuitant. See "Death
Benefits."
CONTRACT CHARGES
Certain charges are associated with these Contracts; for example, deferred
sales charges, mortality and expense risk charges, administrative expense
charges, fund expenses, maintenance charges and premium taxes. See "Charges and
Deductions."
SEPARATE ACCOUNT
Variable Annuity Account I is a separate account established by the Company and
registered as a unit investment trust under the 1940 Act. The Company holds
title to the assets held in the Separate
6
<PAGE>
Account. The assets of the Separate Account are not charged with Company
liabilities. Separate Account assets attributable to the Contract are invested
in shares of one or more of the Funds at the direction of the Certificate
Holder. See "Variable Annuity Account I."
FREE LOOK PROVISION
The Certificate Holder may cancel his or her interest in the Contract within
ten days after receiving the Certificate or Contract or as otherwise provided
by state law. Unless applicable state law requires otherwise, the amount the
Certificate Holder will receive on cancellation under this provision may
reflect the investment performance of the Purchase Payments deposited in the
Separate Account while invested. In certain cases, this may be less than the
amount of the Purchase Payments. For Individual Retirement Annuities, the full
Purchase Payment will be refunded. See "Contract Rights -- Right to Cancel."
7
<PAGE>
FEE TABLE
(BASED ON THE YEAR ENDED DECEMBER 31, 1994)
THE PURPOSE OF THE FEE TABLE IS TO ASSIST CONTRACT AND CERTIFICATE HOLDERS IN
UNDERSTANDING THE VARIOUS COSTS AND EXPENSES THAT WILL BE BORNE, DIRECTLY OR
INDIRECTLY, UNDER THE CONTRACT. THE INFORMATION LISTS REFLECTS THE CHARGES DUE
UNDER THE CONTRACT AS WELL AS THE FEES AND EXPENSES DEDUCTED FROM THE FUNDS.
ADDITIONAL INFORMATION REGARDING THE CHARGES AND DEDUCTIONS ASSESSED UNDER THE
CONTRACT CAN BE FOUND UNDER "CHARGES AND DEDUCTIONS" IN THIS PROSPECTUS.
CHARGES AND EXPENSES SHOWN DO NOT TAKE INTO ACCOUNT PREMIUM TAXES THAT MAY BE
APPLICABLE.
CERTIFICATE HOLDER TRANSACTION EXPENSES
Deferred Sales Charge (as a percentage of each Net Purchase Payment
deposited) /(1)/
<TABLE>
<CAPTION>
YEARS FROM RECEIPT OF DEFERRED SALES
NET PURCHASE PAYMENT CHARGE
<S> <C>
Less than 1 year 7%
1 year or more but less than 2 6%
2 years or more but less than 3 5%
3 years or more but less than 4 4%
4 years or more but less than 5 3%
5 years or more but less than 6 2%
6 years or more but less than 7 1%
7 years or more 0%
</TABLE>
<TABLE>
<S> <C>
Transfer Fee/(2)/ $ 0.00
ANNUAL MAINTENANCE CHARGE/(3)/ $30.00
</TABLE>
SEPARATE ACCOUNT CHARGES
Deductions are made from the Separate Account during both the Accumulation
Period and the Annuity Period and are the daily equivalent of the annual
effective percentage shown in the following chart:
<TABLE>
<S> <C> <S> <C>
During the Accumulation Period: During the Annuity Period:
Administrative Expense Charge 0.15% Administrative Expense Charge(/4/) 0.00%
Mortality and Expense Risk Charge 1.25% Mortality and Expense Risk Charge 1.25%
----- -----
Total Separate Account Annual Total Separate Account Annual
Charges 1.40% Charges 1.25%
===== =====
</TABLE>
--------
/(1)/The total amount deducted for the deferred sales charge will not exceed
8.5% of the aggregate Purchase Payments made to the Certificate Holder's
Account. See "Charges and Deductions --Deferred Sales Charge," for a
description of the deferred sales charge and instances in which this
charge may be waived or reduced.
/(2)/The Company currently allows an unlimited number of transfers without
charge. However, we reserve the right to assess a fee of $10 for each
transfer in excess of 12 per year. See "Charges and Deductions -- Transfer
Charges."
/(3)/The maintenance charge is only charged during the Accumulation Period and
is waived when the Certificate Holder's Account is $50,000 or more on the
date the maintenance charge is due. A maintenance charge is also deducted
upon withdrawal of the Certificate Holder's entire Account Value. See
"Charges and Deductions -- Maintenance Charge."
/(4)/The Company does not currently impose an administrative expense charge
during the Annuity Period. However, the Company reserves the right to
deduct, on a daily basis, a charge of not more than 0.25% per year from
the Separate Account during such period. See "Charges and Deductions --
Administrative Expense Charge."
8
<PAGE>
MUTUAL FUND ANNUAL EXPENSES
As a percentage of average net assets:
<TABLE>
<CAPTION>
INVESTMENT OTHER TOTAL MUTUAL
ADVISORY FEE/(1)/ EXPENSES FUND EXPENSES
(AFTER EXPENSE (AFTER EXPENSE (AFTER EXPENSE
REIMBURSEMENT)/(2)/ REIMBURSEMENT)/(2)/ REIMBURSEMENT)/(2)/
------------------- ------------------- -------------------
<S> <C> <C> <C>
Equity Growth and In-
come Fund 0.37% 0.48% 0.85%
Utility Fund 0.40% 0.45% 0.85%
Prime Money Fund 0.00% 0.80% 0.80%
U.S. Government Bond
Fund 0.29% 0.51% 0.80%
Corporate Bond Fund 0.29% 0.51% 0.80%
International Stock
Fund/(3)/ 0.52% 0.73% 1.25%
</TABLE>
--------
/(1)/TheAdviser has agreed to reimburse the Company for certain costs incurred
in connection with administering the Funds by payment of an amount based
on assets in the Funds attributable to the Contracts. These amounts are
not charged to the Funds or Certificate Holders, but are paid from other
assets of the Adviser.
/(2)/The Fund's Adviser has agreed to waive all or a portion of its advisory
fee so that the total annual expenses for the Equity Growth and Income
Fund and the Utility Fund would not exceed 0.85% of average net assets,
total annual expenses for the Prime Money Fund, the U.S. Government Bond
Fund and the Corporate Bond Fund would not exceed 0.80% of average net
assets and total annual expenses for the International Stock Fund would
not exceed 1.00% of average net assets. Without this reimbursement, the
maximum advisory fees and the maximum total annual expenses for the Funds,
respectively, would have been 0.75% and 1.23% for the Equity Growth and
Income Fund, 0.75% and 1.20% for the Utility Fund, 0.50% and 1.30% for the
Prime Money Fund, 0.60% and 1.11% for the U.S. Government Fund and 0.60%
and 1.11% for the Corporate Bond Fund. The Adviser can terminate this
voluntary reimbursement of expenses at any time at its sole discretion.
/(3)/The total operating expenses of the International Stock Fund are estimated
based on average expenses expected to be incurred during the period ending
December 31, 1995. During this period, expenses may be more or less than
those shown.
HYPOTHETICAL ILLUSTRATION (EXAMPLE)
THIS EXAMPLE IS PURELY HYPOTHETICAL. IT SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OR EXPECTED RETURN. ACTUAL EXPENSES
AND/OR RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN BELOW.
Assuming a 5% annual return on assets, the Certificate Holder would have paid
the following expenses on a $1,000 investment(/1/):
<TABLE>
<CAPTION>
If no
For a complete withdrawal is
withdrawal at made, or if
the the
end of the Certificate
applicable Holder
time period: annuitizes:
1 year 3 years 1 year 3 years
------ ------- ------ -------
<S> <C> <C> <C> <C>
Equity Growth and Income Fund $85 $116 $24 $73
Utility Fund $85 $116 $24 $73
Prime Money Fund $85 $115 $23 $71
U.S. Government Bond Fund $85 $115 $23 $71
Corporate Bond Fund $85 $115 $23 $71
International Stock Fund $89 $128 $28 $85
</TABLE>
--------
/(1)/Theillustration reflects the $30.00 annual maintenance charge as an
annual charge of 0.058% of assets.
9
<PAGE>
PERFORMANCE DATA
From time to time, the Company may advertise different types of historical
performance for the variable funding options of the Separate Account available
under the Contracts described in this Prospectus. The Company may advertise the
"standardized average annual total returns" of the variable funding options,
calculated in a manner prescribed by the SEC, as well as the "non-standardized
return." Both methods are described below. Further information is contained in
the SAI.
"Standardized average annual total returns" are computed according to a formula
in which a hypothetical investment of $1,000 is applied to the variable funding
options under the Contract and then related to the ending redeemable values
over the most recent one, five and ten-year periods (or fractional periods
thereof). Standardized returns will reflect the deduction of all recurring
charges during each period (e.g., mortality and expense risk charges, the
annual maintenance fee, any administrative charge and any applicable deferred
sales charge).
"Non-standardized return" will be calculated in a similar manner, except that
non-standardized figures will not reflect the deduction of any applicable
deferred sales charge (which would decrease the level of performance shown if
reflected in these calculations). The non-standardized figures may also include
a three-year period.
We may distribute sales literature that compares the percentage change in
Accumulation Unit values for any of the Funds to established market indexes
such as the Standard & Poor's Composite 500 Stock Price Index and the Dow Jones
Industrial Average or to the change in values of other management investment
companies that have investment objectives similar to the Fund being compared.
We may publish in advertisements and reports to Certificate Holders the ratings
and other information assigned to the Company by one or more independent rating
organizations such as A.M. Best Company, Duff & Phelps, Standard & Poor's
Corporation and Moody's Investors Service, Inc. The purpose of the ratings is
to reflect the Company's financial strength and/or claims-paying ability. We
may also quote ranking services, such as Morningstar's Variable Annuity/Life
Performance Report and Lipper's Variable Insurance Products Performance
Analysis Service (VIPPAS) which rank variable annuity or life subaccounts by
performance and/or investment objective. From time to time, we will quote
articles from newspapers and magazines or other publications or reports
including but not limited to, The Wall Street Journal, Money Magazine, USA
Today and The VARDS (R) Report.
10
<PAGE>
THE COMPANY
Aetna Insurance Company of America, the depositor for Variable Annuity Account
I, is a stock life insurance company organized in 1990 under the laws of the
state of Connecticut, and is a wholly owned subsidiary of Aetna Life Insurance
and Annuity Company ("ALIAC"). ALIAC is a wholly owned subsidiary of Aetna
Life and Casualty Company. Together, the Aetna Companies constitute one of the
nation's largest diversified financial services organizations. The Company's
Home Office is located at 151 Farmington Avenue, Hartford, Connecticut 06156.
Between 1990 and December 31, 1994, all of the Company's income and expense
was related to investment activity on its own behalf.
VARIABLE ANNUITY ACCOUNT I
Variable Annuity Account I is a separate account established by the Company in
1994 under the insurance laws of the State of Connecticut. The Separate
Account was formed for the purpose of segregating assets attributable to the
variable portions of Contracts from other assets of the Company. Account I is
registered as a unit investment trust under the 1940 Act, and meets the
definition of "separate account" under federal securities laws.
Although the Company holds title to the assets of the Separate Account, such
assets are not chargeable with liabilities arising out of any other business
the Company may conduct. Income, gains or losses of the Separate Account,
realized or unrealized, are credited to or charged against the assets of the
Separate Account, without regard to income, gains or losses of the Company.
All obligations of the Company arising under the Contracts are general
corporate obligations of the Company.
THE FUNDS
GENERAL
Certificate Holders can choose one or more of the Funds of the Insurance
Management Series (the "Trust") as variable funding options under the
Contract. The Trust is an open-end management investment company established
under the laws of the Commonwealth of Massachusetts under a Declaration of
Trust dated September 15, 1993. The Trust was formed as a series trust to
provide funding options for variable life insurance policies and variable
annuity contracts. The Trust currently includes the following six separate
investment portfolios (individually referred to as a "Fund" or collectively as
the "Funds"), each having distinct investment objectives and policies:
EQUITY GROWTH AND INCOME FUND. The primary investment objective of the Fund is
to achieve long-term growth of capital. The Fund's secondary objective is to
provide income. The Fund pursues its investment objectives by investing, under
normal circumstances, at least 65% of its total assets in common stock of
"blue-chip" companies. "Blue-chip" companies generally are top-quality,
established growth companies which, in the opinion of the Adviser, meet
certain criteria.
UTILITY FUND. The investment objective of the Fund is to achieve high current
income and moderate capital appreciation by investing primarily in a
professionally managed and diversified portfolio of equity and debt securities
of utility companies. Under normal market conditions, the Fund will invest at
least 65% of its total assets in securities of utility companies.
PRIME MONEY FUND. The investment objective of the Fund is to provide current
income consistent with stability of principal and liquidity. The Fund pursues
its investment objective by investing exclusively in a portfolio of money
market instruments maturing in 397 days or less. The average maturity of the
money market instruments in the Fund's portfolio, computed on a dollar-
weighted basis, will be 90 days or less. An investment in this Fund is neither
insured nor guaranteed by the U.S. government.
11
<PAGE>
U.S. GOVERNMENT BOND FUND. The investment objective of the Fund is to provide
current income. The Fund invests only in securities which are primary or
direct obligations of the U.S. government or its agencies or instrumentalities
or which are guaranteed by the U.S. government, its agencies or
instrumentalities and in certain collateralized mortgage obligations and
repurchase agreements.
CORPORATE BOND FUND. The investment objective of the Fund is to seek high
current income by investing primarily in a diversified portfolio of
professionally managed fixed income securities. The fixed-income securities in
which the Fund intends to invest are lower-rated corporate debt obligations.
Lower-rated corporate debt obligations are commonly known as "junk bonds" or
"high yield, high risk bonds" and involve a significant degree of risk (see
the funds' prospectus for a discussion of the risk factors involved in
investing in lower-rated corporate debt obligations). Some of the fixed income
securities may involve equity features. Capital growth will be considered, but
only when consistent with the investment objective of high current income.
INTERNATIONAL STOCK FUND. The investment objective of the Fund is to seek
total return on its assets by investing at least 65% of its assets (and under
normal market conditions, substantially all of its assets) in equity
securities of issuers located in at least three different countries outside of
the United States, investing in non-U.S. securities carries substantial risks
in addition to those associated with domestic investments. In an attempt to
reduce some of these risks, the Fund diversifies its investments broadly among
foreign countries, including both developed and developing countries. At least
three countries will always be represented. Other risks may also be
attributable to investments in developing countries due to less mature
economies and less stable political systems. Investors should consult the
Fund's prospectus for a discussion of these risks before investing.
There is no assurance that the Funds will achieve their investment objectives.
Certificate Holders bear the complete investment risk of investments in the
Funds attributable to their Account.
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 prospectus for the Funds for a discussion of the risks associated with an
investment in those funds.
More comprehensive information, including a discussion of potential risks, is
found in the current prospectus for the Funds, which is included with this
Prospectus. Additional prospectuses and the Statement of Additional
Information can be obtained from your Registered Representative or by writing
to us at our Home Office, Attention Service Unit, or by calling us at 1-800-
531-4547.
MIXED AND SHARED FUNDING
Shares of the Funds are sold to us for allocation to our separate accounts
established for the purpose of funding variable annuity contracts and also for
purposes of funding variable life insurance contracts. This is referred to as
"mixed funding." They are also used for allocation to separate accounts of
insurance companies not affiliated with us for the same purpose (i.e., funding
variable annuity contracts and variable life insurance policies). This is
referred to as "shared funding."
It is conceivable that, in the future, it may be disadvantageous for variable
annuity separate accounts and variable life insurance separate accounts to
invest in these Funds simultaneously, since the interests of such policy
owners may differ. The Board of Trustees of the Trust has agreed to monitor
events in order to identify any material irreconcilable conflicts that may
possibly arise and to determine what action, if any, should be taken in
response thereto. If such a conflict were to occur, one of the separate
accounts might withdraw its investment in the Trust. This might force the
Trust to sell portfolio securities at disadvantageous prices.
12
<PAGE>
THE ADVISER
The Trust is managed by Federated Advisers, a Delaware business trust organized
on April 11, 1989, with its principal place of business in Pittsburgh,
Pennsylvania. Federated Advisers is a registered investment adviser under the
Investment Advisers Act of 1940, as amended.
Prospective Certificate Holders should read the accompanying prospectus for the
Funds carefully before investing. The Trust's' prospectus may be obtained from
a Distributor or by calling 1-800-531-4547.
FUND ADDITIONS, LIMITATIONS AND SUBSTITUTIONS
We may, from time to time, add additional mutual funds as eligible variable
funding options under the Contracts. In such event, the Certificate Holder may
be permitted to select from these other funds, subject to any conditions that
may be imposed in connection with these options.
The Company's current policy is to allow all of the Funds noted above to be
used as investment options during the Annuity Period. However, the Company has
reserved the right to limit which Funds can be used as investment options
during the Annuity Period. Currently, a Certificate Holder may elect no more
than four funding options during the Annuity Period. See "Annuity Period
Elections."
If the shares of any Fund should no longer be available for investment by the
Separate Account or if in the judgment of the Company, further investment in
such shares should become inappropriate in view of the purpose of the Contract,
we may cease to make such Fund shares available for investment under the
Contract prospectively. The Company may, alternatively, substitute shares of
another Fund for shares already acquired. The Company reserves the right to
substitute shares of another Fund for shares already acquired without a proxy
vote. Any elimination, substitution or addition of Funds will be done in
accordance with applicable state and federal securities laws.
CONTRACT PURCHASE
HOW TO PURCHASE
GROUP CONTRACTS -- Groups will consist of those eligible individuals who have
established an account with a broker-dealer who has agreed to act as a
Distributor for the Contracts. The Distributor or its designee will execute a
master application and return it to the Underwriter. The master application
will then be delivered to the Company for its approval. Once the application is
approved, the Contract will be issued and the Contract Holder will be entitled
to exercise certain limited rights under the Contract. See "Contract Rights."
Under certain circumstances, the person who would otherwise be the Contract
Holder may designate a trustee or other third party to act as Contract Holder
in its place subject to applicable insurance laws. In that event, the third
party would exercise the Contract rights for the group Contract.
Eligible individuals who want to purchase an interest in a Contract as part of
the group will fill out an enrollment form and return it with their initial
Purchase Payment to their Registered Representative or to the Underwriter for
delivery to the Company. Once the enrollment is accepted, a Certificate will be
issued to the individual evidencing his or her interest in the group Contract.
INDIVIDUAL CONTRACTS -- Certain states will not allow a group Contract to be
offered due to provisions in their insurance laws. In those states, an
individual will be issued a Contract rather than a Certificate. Individuals who
want to purchase a Contract must fill out an application and return it with
their initial Purchase Payment to their Registered Representative or to the
Underwriter for delivery to the Company. Once the application is accepted, an
individual Contract will be issued to the purchaser.
13
<PAGE>
INDIVIDUAL RETIREMENT ANNUITIES -- The Contract has been approved by the
Internal Revenue Service as a prototype for an Individual Retirement Annuity
under Section 408(b) of the Code. Persons acquiring Contracts for Individual
Retirement Annuities may do so by transferring amounts previously accumulated
(rollover amounts) under another Individual Retirement Annuity, an Individual
Retirement Account (as defined by the Code), or a retirement plan qualified
under Section 401 or 403 of the Code or by making contributions. Once the
application is accepted and the initial amount is credited to the Certificate
Holder's Account, subsequent Purchase Payments may be made either by
contributions (subject to the requirements of the Code) or by rolling over
additional amounts from other appropriate plans. Certificate Holders making any
contributions to Individual Retirement Annuities are urged to consult with
their tax advisers to determine if the payments meet the conditions for
contributions under the Code. See "Tax Status." Prohibitions apply to
purchasing Individual Retirement Annuities as joint Certificate Holders. See
"Joint Certificate Holders," below.
CERTIFICATE HOLDERS -- The term "Certificate Holders," as used in this
prospectus, includes individuals purchasing an interest in the Contract as part
of a group and individuals who acquire individual Contracts. Generally,
Certificate Holders must be natural persons. The maximum issue age for a
Certificate Holder is 90; however, tax laws or some state laws may limit
issuance to persons younger than 90.
JOINT CERTIFICATE HOLDERS -- Contracts may be purchased by two individuals as
joint Certificate Holders, except for Contracts acquired by individuals for
purposes of establishing an Individual Retirement Annuity under Sections 408(a)
or 408(b) of the Code. A Joint Certificate Holder must be the spouse of the
other Joint Certificate Holder unless otherwise prohibited by state law. See
"Tax Status" and "Contract Rights."
REJECTION -- Any application or enrollment form and initial Purchase Payment
tendered by a prospective Certificate Holder may be rejected for any reason by
the Company. The Company will also return any forms that are incomplete or that
do not include sufficient information to set up a Certificate Holder's Account,
unless the forms are completed within five business days from the date the
Company receives them, or unless the prospective Certificate Holder consents to
the forms being held for a longer period of time. All forms that are rejected
will be returned with a refund of all Purchase Payments submitted with them.
MINIMUM PURCHASE PAYMENTS -- The minimum initial Purchase Payment is $1,500
whether made by Purchase Payment or rollover from another account. Additional
Purchase Payments must be at least $500, or if made by automatic check plan,
$50 per month.
ADDITIONAL PURCHASE PAYMENTS -- Additional Purchase Payments may be made
subject to the terms and conditions published at the time the Purchase Payment
is tendered. The Company reserves the right to limit the total dollar amount it
will accept or to reject any Purchase Payment without advance notice. A
Purchase Payment of more than $500,000 will be allowed only with the Company's
consent. Additional payments may be delivered to your Registered Representative
or sent directly to the Underwriter at the Company's Home Office, attention:
Service Unit.
CREDITING OF PURCHASE PAYMENTS -- Once the application or enrollment form is
accepted, the initial Purchase Payment, less any premium taxes required to be
deducted at that time, is credited to the Certificate Holder's Account. See
"Charges and Deductions -- Premium Tax."
The Certificate Holder may elect to have each Net Purchase Payment accumulate
(a) on a variable basis by investment in shares of one or more of the Funds;
(b) on a fixed basis under the GP Guaranteed Account; or (c) in a combination
of (a) and (b). Net Purchase Payments allocated to the Funds will be deposited
in the Separate Account. Net Purchase Payments must be allocated in terms
14
<PAGE>
of whole percentages. Purchase Payments received after the initial payment
will be allocated in the same proportions as the last allocation, unless new
allocation instructions are received with the Purchase Payment.
DESIGNATIONS OF BENEFICIARY AND ANNUITANT
The Certificate Holder designates the Beneficiary and the Annuitant on the
enrollment or application form. For an Individual Retirement Annuity, the
Certificate Holder must be the Annuitant. For all other Contracts, the
Certificate Holder may, but need not, select a different person as the
Annuitant. See "Contract Rights -- Rights to the Contract and Account."
DISTRIBUTION
Aetna Life Insurance and Annuity Company ("ALIAC") will serve as Underwriter
for the securities sold by this Prospectus. ALIAC is registered as a broker-
dealer with the SEC and is a member of the National Association of Securities
Dealers, Inc. ("NASD"). As Underwriter, ALIAC will contract with one or more
registered broker-dealers ("Distributors") to offer and sell the Contracts.
The Underwriter and one or more affiliates may also sell the Contracts
directly. All Registered Representatives for the Distributors will also be
licensed as insurance agents to sell Variable Annuity Contracts. See "Charges
and Deductions -- Commissions and Distribution Expenses."
Federated Securities Corp. ("FSC"), an affiliate of the Adviser, may enter
into agreements with some of the Distributors to provide services to customers
in connection with the Funds acquired through the Contracts. These services
will include providing customers with information concerning the Funds, their
investment objectives, policies and limitations; portfolio securities;
performance, responding to customer inquiries and providing such other
services as the parties may agree. Fees for these services may be based on the
total number of assets in the Funds attributable to the Distributors'
customers.
CERTIFICATE HOLDER'S ACCOUNT VALUE
ACCUMULATION UNITS
A Net Purchase Payment that is allocated to one or more of the Funds is
credited to the Certificate Holder's Account in the form of Accumulation Units
in the Separate Account. The number of Accumulation Units credited is
determined by dividing the applicable portion of the Net Purchase Payment by
that Contract's Accumulation Unit value of the appropriate Fund. The
Accumulation Unit value used is computed for the Valuation Period in which the
Purchase Payment and a completed application or enrollment form are received
at the Home Office and accepted by the Company. Accumulation Units will be
credited within two business days of the initial application. Subsequent
Purchase Payments, if any, will be credited at the Accumulation Unit value
next determined following receipt of the payment. Shares in the Funds are
purchased by the Separate Account at the net asset value next determined by
the Fund following receipt of Net Purchase Payments by the Separate Account,
which will be no later than one business day following the purchase of the
Accumulation Units attributable to the Funds. The value of Accumulation Units
attributable to the Funds will be affected by the investment performance,
expenses and charges of those Funds. Generally, if the net asset value of the
fund increases, so does the Accumulation Unit value; however, performance of
the Separate Account is reduced by charges and deductions under the contract.
Accumulation Units acquired through the Contract are valued separately for
each Fund. Therefore, if the Certificate Holder elects to have a Net Purchase
Payment invested in a combination of Funds, the Certificate Holder will have
Accumulation Units credited from more than one source. The value of the
Certificate Holder's Account as of the most recent Valuation Period is
determined by adding the value of any Accumulation Units attributed to the
Fund(s) to the value of any amounts attributed to the GP Guaranteed Account.
15
<PAGE>
NET INVESTMENT FACTOR
The value of an Accumulation Unit for any Valuation Period is calculated by
multiplying the Accumulation Unit value for the immediately preceding Valuation
Period by the net investment factor of the appropriate investment option for
the current period.
The net investment factor is calculated separately for each Fund in which
assets of The Separate Account are invested. It is determined by adding
1.0000000 to the net investment rate.
The net investment rate equals (a) the net assets of the Fund held by the
Separate Account at the end of a Valuation Period, minus (b) the net assets of
the Fund held by the Separate Account at the beginning of a Valuation Period,
plus or minus (c) taxes or provision for taxes, if any, attributable to the
operation of the Separate Account divided by (d) the value of the Fund's
Accumulation and Annuity Units held by the Separate Account at the beginning of
the Valuation Period, minus (e) a daily charge at the annual effective rate of
1.25% for mortality and expense risks, and a daily administrative expense
charge at the annual effective rate of 0.15% during the Accumulation Period and
up to 0.25% during the Annuity Period. The net investment rate may be more or
less than zero percent (0%).
CONTRACT RIGHTS
RIGHT TO CANCEL
A Contract Holder may cancel the Contract no later than ten days after
receiving it from the Company by returning the Contract to the Company with a
written notice of cancellation, or to the person from whom the Contract was
purchased. A Certificate Holder under a Group Contract may cancel his or her
interest in a Contract no later than ten days after receiving the Certificate
from the Company, by returning the Certificate to the Company with a written
notice of cancellation. Certain state laws provide a longer period of time to
exercise these cancellation rights. The Contract or Certificate will state the
period of time for which a right to cancel may be exercised. The Company will
produce a refund not later than seven calendar days after we receive the
Contract or Certificate and the written notice of cancellation at our Home
Office. Unless applicable state law requires a refund of the Purchase Payments,
the Purchase Payments plus any increase or minus any decrease in the value
attributable to the Purchase Payments allocated to the variable option(s) will
be refunded. For Individual Retirement Annuities, the Purchase Payments will be
refunded.
RIGHTS TO THE CONTRACT AND ACCOUNT
The Contract Holder has title to the Contract and has the right to accept or
reject any modifications to the Contract. For group Contracts, this is the only
right the Contract Holder has. All other rights, specifically those relating to
the Certificate Holder's Account under the Contract, are held by the
Certificate Holder. Certificate Holders' rights are subject to rights of any
assignee under an assignment filed with the Company and to the rights of any
irrevocably named beneficiary.
JOINT CERTIFICATE HOLDERS
Two individuals may have an interest in the same Certificate Holder's Account
as Joint Certificate Holders. See "Contract Purchase -- How to Purchase --
Joint Certificate Holders." Joint Certificate Holders have equal rights under
the Contract and with respect to their Certificate Holder's Account. On the
death of a Joint Certificate Holder prior to the Annuity Date, the surviving
Certificate Holder may retain all ownership rights under the Contract or elect
to have the proceeds distributed. See "Death Benefits." All rights under the
Contract must be exercised by both Joint Certificate Holders except, at the
Company's discretion, one Joint Certificate Holder can elect or change
investment options after the account has been established.
16
<PAGE>
TRANSFERS AMONG INVESTMENT OPTIONS
The Company currently allows unlimited transfers of accumulated amounts to
available investment options during the Accumulation Period; however, it
reserves the right to charge up to $10 if more than 12 transfers are made in a
calendar year. See "Charges and Deductions -- Transfer Charges." The Company
reserves the right to establish a minimum transfer amount. Unless the transfer
is made from the one-year term in connection with the Dollar Cost Averaging
Program (where regulatory approval has been received), transfers from the GP
Guaranteed Account, will be subject to a market value adjustment, if
applicable. (See "Dollar Cost Averaging Program" below, as well as the Appendix
and the prospectus for the GP Guaranteed Account.) Any transfer will be based
on the Accumulation Unit value next determined after the Company receives a
valid request at its Home Office. During the Annuity Period, transfers are not
available.
DOLLAR COST AVERAGING PROGRAM
Dollar Cost Averaging (DCA) is a system for investing a fixed amount of money
at regular intervals over a period of time. It is based on the economic fact
that buying a variably priced item with a constant sum of money at fixed
intervals affords the buyer the opportunity to automatically buy more of that
item when prices are low and less of it when prices are high, thus reducing the
average cost per item. Dollar Cost Averaging does not ensure a profit nor
guarantee against loss in a declining market. Certificate Holders should
consider their financial ability to continue purchases through periods of low
price levels.
The Dollar Cost Averaging Program permits Certificate Holders to systematically
transfer amounts from any of the variable funding options and the one-year
Guaranteed Account Term, to any of the variable investment options. Where state
regulatory approval has been received, a market value adjustment will not be
applied to Dollar Cost Averaging transfers from the one-year Guaranteed Account
Term. Consult your representative to determine whether the waiver is approved
in your state. (See the Appendix for a discussion of the restrictions and
features attributable to the GP Guaranteed Account.)
You must have an Account Value of at least $5,000 to participate in the Dollar
Cost Averaging Program. The minimum amount that may be transferred into a
particular variable funding option is $50. DCA can be elected at any time
during the Accumulation Period by completing the DCA section of the application
or by completing a DCA Election Form available from the Company at its Home
Office. All DCA transfers will be made on the 15th of each month (or the next
Valuation Period, if applicable). Any transfer made under the DCA program will
not affect any transfer limitations imposed under the Contract. A Certificate
Holder may terminate the Dollar Cost Averaging program at any time. The Company
reserves the right to modify or terminate the DCA program at any time.
Dollar Cost Averaging is not available to individuals who have elected the
Systematic Withdrawal Option or the Account Rebalancing Program (described
below).
ACCOUNT REBALANCING PROGRAM
The Account Rebalancing Program allows Certificate Holders to have portions of
their Account automatically reallocated annually to a specified percentage.
Only those Purchase Payments accumulating in the variable funding options can
be rebalanced. Certificate Holders may participate in this program by
completing the Account Rebalancing Section of the Contract Application, or by
requesting the service in writing from the Company's Home Office.
Account Rebalancing is not available to Certificate Holders who have elected
the Dollar Cost Averaging Program.
Account Rebalancing does not ensure a profit nor guarantee against loss in a
declining market.
17
<PAGE>
WITHDRAWALS
The Certificate Holder may withdraw all or a portion of his or her Certificate
Holder's Account during the Accumulation Period by properly completing a
withdrawal request form provided by us and sending it to our Home Office. The
following types of withdrawals may be requested:
. Full Withdrawal: The Adjusted Account Value minus any applicable deferred
sales charge and maintenance fee.
. Partial Withdrawal (Percentage): The percentage of the Adjusted Account
Value requested minus any applicable deferred sales charge.
. Partial Withdrawal (Specified Dollar Amount): The dollar amount
requested. However, the amount withdrawn from the Certificate Holder's
Account Value will equal the dollar amount requested plus any applicable
deferred sales charge, plus or minus any applicable market value
adjustment.
The Company will pay all amounts based on the Certificate Holder's Account
Value next computed after the request is received in the Home Office or at a
later date, if specified. For any partial withdrawal, if instructions from the
Certificate Holder are not provided, amounts are withdrawn on a pro rata basis
from the Certificate Holder's interests in the Fund(s) and the GP Guaranteed
Account. See the Appendix and the prospectus for the GP Guaranteed Account for
the treatment of amounts withdrawn from the GP Guaranteed Account and see
"Charges and Deductions -- Deferred Sales Charge" for information regarding
deferred sales charges. Amounts withdrawn may be subject to income taxes or
withholding for taxes. See "Tax Status --Taxation of Annuities."
The Company reserves the right to close out, upon 90 days' written notice, any
Certificate Holder's Account which has a value of $1,500 or less immediately
following a partial withdrawal. However, an Individual Retirement Annuity may
only be closed out when Purchase Payments have not been received for a 24-
month period and the paid-up annuity benefit at maturity would be less than
$20 per month. If the Company closes out a Certificate Holder's Account, no
deferred sales charge will be deducted. The Company does not intend to
exercise this right in cases where the Certificate Holder's Account Value is
reduced to $1,500 or less solely due to investment performance.
The Company's policy is to make payments for withdrawal requests, subject to
SEC requirements, within seven calendar days after receipt of a properly
completed withdrawal request form in its Home Office or within seven calendar
days of the date the withdrawal request may specify. Payments may be delayed
for: (a) any period in which the New York Stock Exchange ("Exchange") is
closed (other than customary weekend and holiday closings) or in which trading
on the Exchange is restricted; (b) any period in which an emergency exists
where disposal of securities held by the Funds is not reasonably practicable
or it is not reasonably practicable for the value of the assets of the Funds
to be fairly determined; or (c) such other periods as the SEC by order may
permit for the protection of Certificate Holders. The conditions under which
restricted trading or an emergency exists will be determined by the rules and
regulations of the SEC.
If a Certificate Holder has an account under more than one Contract issued
within a calendar year by the Company or its affiliates, all accounts may have
to be aggregated in determining the tax consequences of any amounts
distributed to the Certificate Holder. See "Tax Status -- Taxation of
Annuities."
The Company reserves the right to defer payment of amounts requested to be
withdrawn or transferred from the GP Guaranteed Account for up to six months
from the time a written request is received by the Company.
18
<PAGE>
CHARGES AND DEDUCTIONS
This section describes the maximum charges that may be deducted for
maintenance fees, administrative expenses, sales-related expenses and transfer
charges. A description of mortality and expense risk charges and Fund expenses
is also included.
MAINTENANCE CHARGE
We will deduct an annual maintenance charge of $30 from the Certificate
Holder's Account Value during the Accumulation Period. This charge is to
reimburse us for administrative expenses relating to the establishment and
maintenance of the Certificate Holder's Account. We will deduct the charge on
the anniversary of the Effective Date (or the next valuation date, if the
anniversary is not a valuation date). The charge is also deducted upon
withdrawal of the entire Certificate Holder's Account. The fee is deducted
proportionately from each investment option used, including the GP Guaranteed
Account.
We will not deduct a maintenance charge when the Certificate Holder's Account
is $50,000 or more on the day the maintenance charge is due.
MORTALITY AND EXPENSE RISK CHARGE
We make a daily deduction from the Separate Account for mortality and expense
risks (insurance charges). The deduction, equal to the annual effective rate
of 1.25% per year, is made as part of the calculation of Accumulation and
Annuity Unit value(s).
The mortality risk charge is to compensate us for the risks we assume (a) for
the death benefit and (b) when we promise to continue making lifetime payments
according to annuity rates specified in our Contract. The expense risk charge
is to compensate us for the risk that actual expenses for costs incurred under
the Contract will exceed the maximum costs that can be charged under the
Contract. We hope to profit from the daily deduction for mortality and expense
risks. Any such profit, as well as any other profit realized by us and held in
our General Account (that supports insurance and annuity obligations), would
be available for any proper corporate purpose, including, but not limited to,
payment of sales and distribution expenses.
ADMINISTRATIVE CHARGE
During the Accumulation Period, we deduct a daily charge of 0.15% per year
from the Separate Account. This charge is to reimburse us for expenses we
incur in administering the Contract. Since the administrative charge is a
percentage of the assets of the Separate Account there may be no relationship
between the amount so deducted and the amount of expenses attributable to a
Certificate Holder's Account. We do not profit from this charge.
An administrative expense charge will also be established for the Annuity
Period. The administrative expense charge applicable will be that charge in
effect for the valuation date when annuitization begins. This charge will not
exceed 0.25% per year, deducted on a daily basis from any variable portion of
the benefit payments. Through April 30, 1996, this charge is guaranteed to be
zero percent (0%). Once an Annuity Option is elected and an administrative
expense charge is established, that Certificate Holder's Account charge will
not change.
TRANSFER CHARGES
For each Certificate Holder's Account, unlimited transfers are allowed during
the Accumulation Period. Twelve free transfers are allowed per calendar year
without charge. Thereafter, the Company reserves the right to charge up to $10
for each additional transfer. If the charge is assessed, it will be deducted
from the Certificate Holder's Account Value. During the Annuity Period,
transfers are not available.
19
<PAGE>
DEFERRED SALES CHARGE
The Certificate Holder may withdraw the Adjusted Account Value at any time;
however, if all or any portion of the Adjusted Account Value is withdrawn
during the Accumulation Period, a deferred sales charge may be deducted so that
the Company may recover sales expenses.
A deferred sales charge only applies to the portion of a Certificate Holder's
Account Value that represents Net Purchase Payments (not to any associated
changes in value), and gradually decreases so that seven years after the date
of receipt of a Net Purchase Payment, the charge associated with that payment
is $0. To satisfy a partial withdrawal, amounts are withdrawn proportionately
from each investment option elected, including the GP Guaranteed Account. See
Appendix. For purposes of determining deferred sales charges, all amounts
attributable to Net Purchase Payments are withdrawn before any amounts
attributable to increases in value. Amounts withdrawn from the values
attributable to Net Purchase Payments are treated as withdrawn from the oldest
payments first received. The deferred sales charge attributable to each Net
Purchase Payment is determined by multiplying the Net Purchase Payment
withdrawn by the appropriate percentage, depending on the number of years
completed since the Net Purchase Payment was received as shown in the table
below. The total charge will be the sum of the charges applicable for all of
the Net Purchase Payments withdrawn. In no event may the aggregate deferred
sales charges assessed against a Certificate Holder's Account exceed 8.5% of
the Certificate Holder's aggregate Purchase Payments. Reduced charges apply to
Purchase Payments in excess of $1.5 million.
<TABLE>
<CAPTION>
YEARS FROM RECEIPT OF DEFERRED
NET PURCHASE PAYMENT SALES CHARGE
--------------------- ------------
<S> <C>
Less than 1 year 7%
1 year or more but less than 2 6%
2 years or more but less than 3 5%
3 years or more but less than 4 4%
4 years or more but less than 5 3%
5 years or more but less than 6 2%
6 years or more but less than 7 1%
7 years or more 0%
</TABLE>
We will not deduct a deferred sales charge from any Net Purchase Payment that
is:
(a) paid to a Beneficiary as a death benefit, except for the withdrawal of
Purchase Payments that were made by a surviving joint Certificate
Holder after the Company has received at its Home Office due proof of
the death of the first joint Certificate Holder, where the surviving
joint Certificate Holder elects to continue the Certificate Holder's
Account in his or her own name;
(b) paid as premium for an Annuity Option;
(c) withdrawn due to the election of the Systematic Withdrawal Option or
Estate Conservation Option. (See "Additional Withdrawal Options.");
(d) paid due to the full withdrawal of a Certificate Holder's Account for
which the value is $1,500 or less and no withdrawals have been made in
the prior 12 months;
(e) paid at least 12 months after the date of the first Purchase Payment to
the Certificate Holder's Account in an amount equal to or less than 15%
of the Certificate Holder's Account Value. This applies to the first
withdrawal request, partial or full, in a calendar year. The
Certificate Holder's Account Value is calculated as of the date the
withdrawal request is received in good order at our Home Office. If a
withdrawal is made that exceeds 15%, the applicable deferred sales
charge on the amount over 15% will be deducted from the Certificate
Holder's Account. See "Withdrawals During Accumulation Period." This
provision may not be exercised if SWO is elected; or
(f) paid if we close out a Certificate Holder's Account when the value is
less than $1,500. See "Contract Rights -- Withdrawals During
Accumulation Period."
20
<PAGE>
In some states, the Contract has been endorsed to provide that the deferred
sales charge will not be deducted when Net Purchase Payments are withdrawn
after the Certificate Holder has spent at least 45 consecutive days in a
licensed nursing care facility (in New Hampshire only, the facility does not
have to be licensed). The withdrawal must be made after the first year
anniversary of the Effective Date and must be requested within three (3) years
of admission to a licensed nursing care facility. This waiver does not apply
if the Certificate Holder is in a licensed nursing care facility at the time
the Certificate Holder's Account is established.
In the instances cited above, no deferred sales charge is deducted. However,
the amount withdrawn may be subject to a 10% federal penalty tax. See "Tax
Status." A market value adjustment may also apply to amounts withdrawn from
the GP Guaranteed Account in instances other than withdrawals from the one-
year term in connection with the Dollar Cost Averaging Program.
Based on our actuarial determination, we do not anticipate that the deferred
sales charge will cover all sales and administrative expenses that we will
incur in connection with the Contract. The balance will be paid from the
Company's other profits and from its reimbursements for mortality and expense
risks.
FUND EXPENSES
Pursuant to an investment advisory contract with the Funds, the Adviser is
entitled to receive an annual investment advisory fee equal to 0.75% of the
average daily net assets for the Equity Growth and Income Fund and Utility
Fund, 0.60% of the average daily net assets for the U.S. Government Bond Fund
and Corporate Bond Funds, 0.50% of the average daily net assets of the Prime
Money Fund, and 0.52% for the International Stock Fund. The Adviser has agreed
to waive a portion of its advisory fees for the Funds so that total annual
expenses for the Equity Growth and Income Fund and the Utility Fund would not
exceed 0.85% of average net assets, total annual expenses for the Prime Money
Fund, the U.S. Government Bond Fund, and the Corporate Bond Fund would not
exceed 0.80% of average net assets, and total annual expenses of the
International Stock Fund would not exceed 1.00% of average net assets. The
Adviser can terminate this voluntary reimbursement of expenses at any time at
its sole discretion.
For further details on each Fund's expenses, prospective Certificate Holders
should read the accompanying prospectus for the Funds and refer to the Fee
Table in this Prospectus.
PREMIUM TAX
Several states and municipalities impose a premium tax on Annuities either
when made or when an Annuity Option is elected. Currently such taxes range up
to 4%. Ordinarily, the Company will pay the amount of any premium taxes on
behalf of the Certificate Holder and any state premium tax will be deducted
from the Certificate Holder's Account Value when it is applied to an Annuity
Option.
Any municipal premium tax assessed at a rate in excess of 1% will be deducted
from the Purchase Payments or from the amount applied to an Annuity Option
based on our determination of when such tax is due. We will absorb any
municipal premium tax which is assessed at 1% or less. We reserve the right,
however, to reflect this added expense in our Annuity purchase rates for
residents of such municipalities.
COMMISSIONS AND DISTRIBUTION EXPENSES
Commissions will be paid to broker-dealers who sell the Contracts. Broker-
dealers will be paid commissions, up to an amount currently equal to 6.5% of
Purchase Payments.The Company may, by agreement with the broker-dealer, pay
commissions as a combination of a certain percentage amount at the time of
sale and a trail commission of up to 0.40% of assets attributable to Purchase
Payments (which, when combined, could exceed 6.5% of Purchase Payments).
21
<PAGE>
Other than the mortality and expense risk charge, the administrative expense
charge and the reimbursements by Federated Advisers for administrative
charges, all expenses incurred in the operations of the Separate Account are
borne by the Company.
ADDITIONAL WITHDRAWAL OPTIONS
GENERAL
The Company offers two withdrawal options that are not considered Annuity
options -- the Estate Conservation Option ("ECO"), which is available only for
individual retirement Annuity Contracts, and the Systematic Withdrawal Option
("SWO"). These options may be withdrawn at any time by the Company and are
subject to any state law or tax law that may affect their availability. These
options are available to Certificate Holders whose Certificate Holder's
Account Value is equal to at least $25,000 at the time of election and are
available at certain ages, as described below. (The Company reserves the right
to change the Minimum Account Value required.) Under SWO, the Certificate
Holder receives a series of partial withdrawals from the account based on the
payment method selected. It is designed for those who want a periodic income
while retaining investment flexibility for amounts accumulating under the
Contract. ECO offers the same investment flexibility as SWO, but is designed
for those who want to receive only the minimum distribution that the Code
requires each year. Under ECO, the Company calculates the minimum distribution
amount required by law and pays that amount once a year.
No deferred sales charges will be assessed on amounts distributed under an ECO
or SWO election. Additionally, where state regulatory approval has been
received, no market value adjustment will be applied to amounts distributed
under an ECO or SWO election. (See your representative to determine whether
the waiver is approved in your state.) As these options are not annuity
options, the Annuity Date is not reached and the Certificate Holder's Account
is still in the Accumulation Period. All the rights and obligations relating
to the Accumulation Period remain in effect with respect to the Certificate
Holder's Account, including fees and charges.
Amounts required to meet either a SWO or ECO payment will be obtained by
liquidating Accumulation Units attributable to the Funds allocable to the
Certificate Holder's Account and liquidating amounts from the Certificate
Holder's GP Guaranteed Account. Amounts will be withdrawn pro rata from each
funding option currently attributable to the Certificate Holder's Account. See
the Appendix for the treatment of withdrawals from the GP Guaranteed Account.
Once elected, the applicable option(s) may be revoked by the Certificate
Holder at any time, by submitting a written request to our Home Office. Any
revocation will apply only to the amounts not yet paid. Once ECO or SWO is
revoked, it may not be elected again. The Company reserves the right to change
the terms of these options for future elections and discontinue the
availability of these options.
SWO is different from ECO in the following ways: (1) SWO payments are made for
a fixed dollar amount, fixed time period or fixed percentage whereas ECO
payments vary in dollar amount and can continue indefinitely during your
lifetime; and (2) generally, SWO payments will be higher than expected ECO
payments; and (3) ECO is available only for amounts in an Individual
Retirement Annuity Contract, whereas SWO payments are available under both
Individual Retirement Annuity Contracts and nonqualified deferred annuity
contracts. You should carefully assess your future income needs when
considering the election of these withdrawal options.
Amounts withdrawn pursuant to an ECO or SWO may be subject to income taxes or
withholding from taxes, including possible penalties for withdrawals before
the Certificate Holder attains age 59 1/2. See "Tax Status -- Taxation of
Annuities." Certificate Holders should consult their tax advisers prior to
electing either of these options concerning the tax consequences of the
election.
For a discussion of certain provisions that will apply if the Certificate
Holder or beneficiary dies after SWO or ECO has been elected, see "Death
Benefits."
22
<PAGE>
ESTATE CONSERVATION OPTION
The first distribution may not be made before the calendar year in which the
Certificate Holder attains age 70 1/2. ECO is available only for amounts in an
Individual Retirement Annuity Contract.
We will calculate and distribute an annual amount using the method contained in
the Code's minimum distribution regulations. The annual distribution is
determined generally by dividing the Certificate Holder's Account Value by a
life expectancy factor from tables designated under Treasury regulations. The
factor will be based on either the Certificate Holder's life expectancy or the
joint life expectancies of the Certificate Holder and his or her designated
beneficiary. If ECO is based on the Certificate Holder's life expectancy, the
full Certificate Holder's portion of the Account must be distributed in the
year following the Certificate Holder's death as required by current Treasury
regulations. This calculation will be changed, if necessary, to conform to
changes in the Code or applicable regulations.
SYSTEMATIC WITHDRAWAL OPTION
SWO payments are available on a monthly, quarterly, semiannual, or annual
basis. The Certificate Holder specifies the initial distribution date.
Subsequent distributions will be made on such date as we may designate or
allow.
A Certificate Holder may elect one of the following methods of distribution:
(1) Specified Payment: Payments of a designated dollar amount. The annual
amount may not be greater than 10% of the Certificate Holder's Account
Value at time of the election. This annual dollar amount will remain
constant. At our discretion, we may require a minimum payment amount;
or
(2) Specified Period: Payments which are made over a period of time which
must be at least 10 years. The annual amount paid each year is
calculated by dividing the Certificate Holder's Account Value as of
December 31 of the prior year by the number of payment years remaining;
or
(3) Specified Percentage: Payment of a designated percentage which cannot
be greater than 10% of the Certificate Holder's Account Value at the
time of election. The percentage chosen may be changed by written
request. We reserve the right to limit the number of times the
percentage may be changed. The annual amount is calculated by
multiplying the Certificate Holder's Account Value as of December 31 of
the year prior to the payment by the designated percentage.
Note: For an Individual Retirement Annuity, the annual minimum SWO
distribution, or maximum SWO time period, as the Certificate Holder directs,
will be determined by a life expectancy factor from tables designated by
Treasury regulations. Under both the Specified Payment and Specified Period
methods, a higher amount will be paid in any year, if required under the
Treasury's minimum distribution rules. Life expectancy factors will be reduced
by one for each distribution year.
ANNUITY PERIOD
ANNUITY PERIOD ELECTIONS
The Certificate Holder must notify the Company in writing of the Annuity Date
and Annuity Option elected. Until a date and option are elected, the
Certificate Holder's Account will remain in the Accumulation Period. Once an
Annuity Option is elected, it cannot be changed. The Certificate Holder elects
the Annuity Date. Current underwriting rules require that payment must begin no
later than the later of the Annuitant's 90th birthday or the tenth anniversary
of the last Purchase Payment. As required by the Code, distributions from an
Individual Retirement Annuity must begin no later than April 1 of the calendar
year after the calendar year in which the Certificate Holder attains age 70
1/2. The Certificate Holder designates the Annuitant. During the Accumulation
Period, the Certificate Holder may change the designated Annuitant. The
Annuitant must be the Certificate Holder for Individual Retirement Annuities.
23
<PAGE>
At least 30 days before the Annuity Date, the Certificate Holder must notify
the Company in writing to elect or change (a) the date on which Annuity
payments are to begin, (b) the Annuity Option, (c) whether the payments are to
be made monthly, quarterly, semiannually, or annually, and (d) the investment
option(s) used to provide Annuity payments (i.e., a fixed annuity using the
general account, one or more of the available Funds or any combination
thereof). The Company has reserved the right to limit which funding options and
the number of funding options which will be available as investment options
during the Annuity Period. Currently, a Certificate Holder may elect no more
than four funding options during the Annuity Period. Once Annuity Payments
begin, the Annuity Option may not be changed, nor may transfers be made among
funding options.
If Annuity payments are on a variable basis (i.e., one or more of the Funds are
chosen), the first and subsequent Annuity payments will depend on the assumed
net investment rate (3 1/2% annually, unless a 5% annual rate is elected). Use
of the 3 1/2% assumed rate causes a lower first payment, but subsequent
payments would increase more rapidly or decline more slowly as changes occur in
the net investment rate. A 5% rate causes a higher first payment, but Annuity
payments will increase thereafter only to the extent that the net investment
rate exceeds 5% annually (plus up to 0.25% to offset any applicable
administrative charge). Annuity payments would decline if the rate were below
5% (assuming an administrative charge of zero).
For purposes of Annuity payments, the Annuitant's adjusted age (and joint
Annuitant's, if applicable) will be used. The Annuitant's adjusted age is his
or her age as of the birthday closest to the date of the first Annuity payment,
reduced by one year for Annuity start dates occurring from July 1, 1994 through
December 31, 1999. The Annuitant's age (and joint Annuitant's, if applicable)
will be reduced by two years for Annuity start dates occurring from January 1,
2000 through December 31, 2009. The Annuitant's adjusted age (and joint
Annuitant's, if applicable) will be reduced by one additional year for Annuity
start dates in each succeeding decade.
No election may be made that would result in an Annuity payment of less than
$50 per month or total yearly Annuity payments of less than $250 (less if
required by state law). If the Certificate Holder's Account Value on the
Annuity Date is insufficient to elect an option for the minimum amount
specified, a lump-sum payment must be elected.
For an Individual Retirement Annuity, the payments must satisfy the minimum
distribution incidental death benefit rule described in Treasury regulations.
This rule assures that any death benefits payable are incidental to the primary
purpose of the Contract, which is to provide the Certificate Holder with
retirement benefits. The amount to be distributed under this rule is determined
based on age and tables contained in the Treasury regulations.
ANNUITY OPTIONS
Option 1 -- Payments For a Stated Period of Time -- An Annuity will be paid for
the number of years chosen. The number of years must be at least 5 and not more
than 30.
If payments for this option are made under a variable annuity, the present
value of any remaining payments may be withdrawn at any time; however, amounts
withdrawn under this provision before 5 years of payments have been made will
be treated as occurring during the Accumulation Period and any applicable
deferred sales charge will apply.
Option 2 -- Life Income -- An Annuity will be paid for the life of the
Annuitant. If also chosen, we will guarantee payments for 60, 120, 180, or 240
months.
24
<PAGE>
Option 3 -- Life Income Based upon the Lives of Two Annuitants -- An Annuity
will be paid during the lives of the Annuitant and a second Annuitant. Payments
will continue until both Annuitants have died. When this option is chosen, a
choice must be made of:
(a) 100% of the payment to continue after the first death;
(b) 66 2/3% of the payment to continue after the first death;
(c) 50% of the payment to continue after the first death;
(d) Payments for a minimum of 120 months with 100% of the payment to
continue after the first death; or
(e) 100% of the payment to continue at the death of the second Annuitant
and 50% of the payment to continue at the death of the Annuitant.
We may make other options available as allowed by law.
We make a daily deduction for mortality and expense risks from any amounts held
on a variable basis. See "Charges and Deductions--Mortality and Expense Risk
Charges." Therefore, electing Option 1 or any other nonlifetime option on a
variable basis will result in a deduction being made even though the Company
assumes no mortality risk.
DEATH BENEFITS
The following section provides information about the death benefit, should a
Certificate Holder or the Annuitant die. In many cases, the rights available
will depend on whether the Beneficiary is the Certificate Holder's spouse and
whether they are joint Certificate Holders.
Note: The Company will not allow Annuity payments made to a Beneficiary to
extend beyond the Beneficiary's life or any period certain greater than the
Beneficiary's life expectancy.
DEATH OF A CERTIFICATE HOLDER PRIOR TO THE ANNUITY DATE
In the event of the death of a Certificate Holder prior to the Annuity Date, a
death benefit is payable to the Beneficiary(ies) designated by the Certificate
Holder. Upon the death of a joint Certificate Holder, the surviving Certificate
Holder, if any, will be the designated Beneficiary. Any other Beneficiary
designation on record with the Company at the time of death will be treated as
a contingent Beneficiary and payments will be made to such Beneficiary only
upon the death of the surviving Certificate Holder. If the Certificate Holder
is a non-natural person, the death benefit will be paid to the beneficiary(ies)
at the death of the Annuitant.
A Beneficiary may elect the death benefit to be paid under one of the options
described below or if the designated Beneficiary is the spouse of the
Certificate Holder, he or she may continue as a Certificate Holder and exercise
all the deceased Certificate Holder's rights under the Contract.
25
<PAGE>
DEATH BENEFIT AMOUNT PRIOR TO THE ANNUITY DATE
(a) Except as described in Section (b), the value of the guaranteed death
benefit is equal to the greater of:
(i) the Certificate Holder's Account Value at the end of the Valuation
Period during which we receive at our Home Office proof of death
and election of the type of payment to be made; or
(ii) the amount of the death benefit determined as of the Valuation
Period corresponding to the date of death as follows:
Until the first Effective Date anniversary, the death benefit is
equal to the Purchase Payments made by the Certificate Holder
during that year, less any withdrawals and any amounts applied to
an Annuity Option.
For each year thereafter, the death benefit during the year is
equal to the death benefit at the beginning of the year plus all
Purchase Payments made during the year less any withdrawals and any
amounts applied to an Annuity Option during that year.
On the anniversary of the Effective Date each year, the death
benefit is determined as follows:
(A) The death benefit on the previous Effective Date anniversary
increased by the death benefit factor of 4%; plus
(B) Purchase Payments made by the Certificate Holder during the
year since the last anniversary of the Effective Date increased
by the death benefit factor of 4% for the portion of the year
since the Purchase Payment was made; less
(C) Any withdrawals or amounts applied to an Annuity Option during
the year increased by the death benefit factor of 4% for the
portion of the year since the withdrawal or election of an
Annuity Option; or
(iii) The Certificate Holder's Account Value on the most recent seventh
year anniversary of the Effective Date plus any Purchase Payments
made after such Effective Date anniversary less any withdrawals
and any amounts applied to an Annuity Option.
Currently there is no limitation on the maximum death benefit payable;
however, the Company reserves the right, in the future, to impose a
limitation on the maximum allowable death benefit under subsections
(ii) and (iii). The Company currently does not anticipate imposing such
a limitation prior to May 1, 1996.
The death benefit calculation described in (ii) and (iii) above applies
until the Certificate Holder attains 85 years of age. Thereafter, the
death benefit is only adjusted for Purchase Payments, withdrawals and
amounts applied to Annuity Options. If the Certificate Holder attains
85 years of age prior to the seventh anniversary of the Effective Date,
the death benefit will be the greater of (i) or (ii) above.
The excess, if any, of the guaranteed death benefit value over the
Certificate Holder's Account Value is determined when the Company
receives at its Home Office proof of death. Any excess amount is
allocated through the Separate Account to the Prime Money Fund. The
Certificate Holder's Account Value plus any excess amount deposited
becomes the Certificate Holder's Account Value.
(b) In the case of a Beneficiary of a surviving joint Certificate Holder
who continues the Certificate Holder's Account in his or her own name,
the death benefit shall be equal to the Adjusted Account Value less any
applicable deferred sales charge on any Purchase Payment made after the
Company receives at its Home Office proof of death of the first joint
Certificate Holder.
26
<PAGE>
PAYMENT METHODS FOR DEATH BEFORE ANNUITY DATE
A Beneficiary who is the spouse of the Certificate Holder, or spouse of the
Annuitant if the Certificate Holder is a non-natural person, may (a) elect to
continue the Certificate Holder's Account in his or her name, in which case
the account value will continue to be affected by the investment performance
of the investment option(s) selected, (b) elect a lump sum payment of the
death benefit, or (c) apply the Certificate Holder's Adjusted Account Value to
an Annuity Option, in which case the amount of payout will depend on the
annuity option elected and the investment option(s) used to provide such
payments.
A Beneficiary who is not the spouse of the Certificate Holder must elect one
of the following options for payment of the death benefit in the event of the
death of the Certificate Holder prior to the Annuity Date:
Option 1 -- lump sum payment of the death benefit; or
Option 2 -- the payment of the entire death benefit within 5 years of the
date of the Certificate Holder's death; or
Option 3 -- payment of the death benefit over the lifetime of the
designated Beneficiary or over a period not extending beyond the life
expectancy of the designated Beneficiary with distribution beginning within
one year of the date of death of the Certificate Holder.
In general, regardless of the method of payment, payments received by your
Beneficiaries after your death are taxed in the same manner as if you had
received those payments. See "Tax Status."
Any portion of the death benefit not applied under Option 3 within one year of
the date of the Certificate Holder's death, must be distributed within five
years of the date of death. A market value adjustment will apply at the time
the death benefit is paid.
Until the election of a method of payment, amounts will remain invested as
they were before death, and the Beneficiary will assume rights under the
Contracts. However, the Code requires that distributions begin within a
certain time period as described above. If no elections are made, no
distributions will be made. Failure to commence distributions within the above
time periods can result in tax penalties.
DEATH OF CERTIFICATE HOLDER ON OR AFTER THE ANNUITY DATE
If the Certificate Holder is the Annuitant, and the Annuity Payments are
solely life contingent, the death of the Certificate Holder after the Annuity
Date terminates the Annuity payments. If the Certificate Holder is not the
Annuitant, or if Annuity Payments are for a stated period of time, the
Certificate Holder's death after the Annuity Date will not affect the Annuity
payment except as provided under "Death of the Annuitant." The remaining
payments under the Annuity Option elected will be made to the Beneficiary at
least as rapidly as under the method of distribution in effect at the time of
the Certificate Holder's death. See "Annuity Options."
DEATH OF THE ANNUITANT
If the Certificate Holder is a non-natural person and a death benefit is paid
at the death of the Annuitant, a new Annuitant may not be named. In all other
circumstances, if the Annuitant who is not a Certificate Holder dies on or
before the Annuity Date, a new Annuitant may be named. If no Annuitant is
named, the Certificate Holder will be the Annuitant. If the Annuitant dies
after the Annuity Date, the death benefit, if any, will be payable to the
Beneficiary as specified in the Annuity Option elected. We will require proof
of the Annuitant's death. Death benefits will be paid at least as rapidly as
would have been paid under the method of distribution in effect at the time of
the Annuitant's death.
27
<PAGE>
TAX STATUS
INTRODUCTION
The following discussion is a general discussion of federal income tax
considerations relating to the Contract and is not intended as tax advice. This
discussion is not intended to address the tax consequences resulting from all
of the situations in which a person may be entitled to or may receive a
distribution under the Contract. Any person concerned about these tax
implications should consult a competent tax adviser before initiating any
transaction. This discussion is based upon the Company's understanding of the
present federal income tax laws as they are currently interpreted by the
Internal Revenue Service ("IRS"). No representation is made as to the
likelihood of the continuation of the present federal income tax laws or of the
current interpretation by the IRS. Moreover, no attempt has been made to
consider any applicable state or other tax laws.
The Contract may be purchased on a non-tax qualified basis ("Nonqualified
Contract") or purchased and used in connection with certain arrangements
entitled to special income tax treatment under section 408 of the Code
("Qualified Contracts"). The ultimate effect of federal income taxes on the
amounts held under a Contract, on Annuity Payments, and on the economic benefit
to the Certificate Holder, the Annuitant, or the Beneficiary may depend on the
tax status of the individual concerned.
TAXATION OF THE COMPANY
The Company is taxed as an insurance company under Subchapter L of the Code.
Since the Separate Account is not an entity separate from the Company, and its
operation forms a part of the Company, it will not be taxed separately as a
"regulated investment company" under Subchapter M of the Code or as any other
separate entity. Investment income and capital gains are automatically applied
to increase reserves under the Contracts. Under existing federal income tax
law, the Company believes that the Separate Account investment income and net
capital gains will not be taxed to the extent that such income and gains are
applied to increase the reserves under the Contracts.
Accordingly, the Company does not anticipate that it will incur any federal
income tax liability attributable to the Separate Account and, therefore, the
Company does not intend to make provisions for any such taxes. However, if
changes in the federal tax laws or interpretations thereof result in the
Company being taxed on income or gains attributable to the Separate Account,
then the Company may impose a charge against the Separate Account (with respect
to some or all Contracts) in order to set aside provisions to pay such taxes.
TAX STATUS OF THE CONTRACT
DIVERSIFICATION. Section 817(h) of the Code requires that with respect to
Nonqualified Contracts, the investments of the Funds be "adequately
diversified" in accordance with Treasury Regulations in order for the Contracts
to qualify as annuity contracts under federal tax law. The Separate Account,
through the Funds, intends to comply with the diversification requirements
prescribed by the Treasury in Reg. Sec. 1.817-5, which affect how the Fund's
assets may be invested.
In certain circumstances, owners of variable annuity contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate accounts used to support their contracts. In these circumstances,
income and gains from the separate account assets would be includible in the
variable contract owner's gross income. The IRS has stated in published rulings
that a variable contract owner will be considered the owner of separate account
assets if the contract owner possesses incidents of investment control over the
assets. The ownership rights under the contract are similar to, but different
in certain respects from those described by the IRS in rulings in which it was
determined that contract owners were not owners of separate account assets. For
example, a Certificate Holder has additional flexibility in allocating premium
payments and account values. In addition, the number of
28
<PAGE>
funds provided under the Contract is greater than the number of funds offered
in contracts on which rulings have been issued. These differences could result
in a Certificate Holder being treated as the owner of a pro rata portion of the
assets of the Separate Account. The Company reserves the right to modify the
Contract as necessary to attempt to prevent a Certificate Holder from being
considered the owner of a pro rata share of the assets of the Separate Account.
REQUIRED DISTRIBUTIONS. In order to be treated as an annuity contract for
federal income tax purposes, section 72(s) of the Code requires Nonqualified
Contracts to provide that (a) if any Certificate Holder or Joint Certificate
Holder dies on or after the annuity date but prior to the time the entire
interest in the Contract has been distributed, the remaining portion of such
interest will be distributed at least as rapidly as under the method of
distribution being used as of the date of such owner's death; and (b) if any
Certificate Holder or Joint Certificate Holder dies prior to the annuity date,
the entire interest in the Contract will be distributed within five years after
the date of such Certificate Holder's death. These requirements will be
considered satisfied as to any portion of a Certificate Holder's interest which
is payable to or for the benefit of a "designated beneficiary" and which is
distributed over the life of such "designated beneficiary" or over a period not
extending beyond the life expectancy of that beneficiary, provided that such
distributions begin within one year of the Certificate Holder's death. The
"designated beneficiary" refers to a natural person designated by the
Certificate Holder as a Beneficiary and to whom ownership of the contract
passes by reason of death. However, if the "designated beneficiary" is the
surviving spouse of the deceased Certificate Holder, the contract may be
continued with the surviving spouse as the new Certificate Holder.
The Nonqualified Contracts contain provisions which are intended to comply with
the requirements of section 72(s) of the Code, although no regulations
interpreting these requirements have yet been issued. The Company intends to
review such provisions and modify them if necessary to assure that they comply
with the requirements of Code section 72(s) when clarified by regulation or
otherwise. Other rules may apply to Qualified Contracts.
The following discussion is based on the assumption that the Contract qualifies
as an annuity contract for federal income tax purposes.
TAXATION OF ANNUITIES
IN GENERAL. Section 72 of the Code governs taxation of annuities in general.
The Company believes that a Certificate Holder who is a natural person
generally is not taxed on increases in the Certificate Holder's Account Value
until distribution occurs by withdrawing all or part of such Account Value
(e.g., withdrawals or Annuity payments under the Annuity Option elected). The
assignment, pledge, or agreement to assign or pledge any portion of the Account
Value generally will be treated as a distribution. The taxable portion of a
distribution (in the form of a single sum payment or an annuity) is taxable as
ordinary income.
The following discussion generally applies to a Contract owned by a natural
person.
WITHDRAWALS. In the case of a withdrawal under a Qualified Contract, including
withdrawals under SWO or ECO, the amount taxable is generally based on the
ratio of the "investment in the contract" to the Certificate Holder's Account
Value. The "investment in the contract" generally equals the amount of any
nondeductible Purchase Payments paid by or on behalf of any individual less any
amount received previously which was excludable from gross income. For a
Qualified Contract, the "investment in the contract" can be zero. Special tax
rules may be available for certain distributions from a Qualified Contract.
With respect to Nonqualified Contracts, partial withdrawals, including
withdrawals under SWO, are generally treated as taxable income to the extent
that the Account Value immediately before the
29
<PAGE>
withdrawal exceeds the "investment in the contract" at that time. The Account
Value immediately before a withdrawal may have to be increased by any positive
market value adjustment (MVA) that results from such a withdrawal. There is,
however, no definitive guidance on the proper tax treatment of MVAs in these
circumstances, and a Certificate Holder should contact a competent tax advisor
with respect of the potential tax consequences of any MVA that arises as a
result of a partial withdrawal.
Full withdrawals of a Nonqualified Contract are treated as taxable income to
the extent that the amount received exceeds the "investment in the contract."
ANNUITY PAYMENTS. Although the tax consequences may vary depending on the
Annuity payment elected under the Contract, in general, only the portion of the
Annuity payment that represents the amount by which the Account Value exceeds
the "investment in the contract" will be taxed; after the "investment in the
contract" is recovered, the full amount of any additional Annuity payments is
taxable. For Variable Annuity payments, the taxable portion is generally
determined by an equation that establishes a specific dollar amount of each
payment that is not taxed. The dollar amount is determined by dividing the
"investment in the contract" by the total number of expected periodic payments.
However, the entire distribution will be taxable once the recipient has
recovered the dollar amount of his or her "investment in the contract." For
Fixed Annuity payments, in general there is no tax on the portion of each
payment which represents the same ratio that the "investment in the contract"
bears to the total expected value of the Annuity payments for the term of the
payments; however, the remainder of each Annuity payment is taxable. Once the
"investment in the contract" has been fully recovered, the full amount of any
additional Annuity payments is taxable. If Annuity payments cease as a result
of an Annuitant's death before full recovery of the "investment in the
contract," consult a competent tax advisor regarding deductibility of the
unrecovered amount.
PENALTY TAX. In the case of a distribution pursuant to a Non-Qualified
Contract, there may be imposed a federal income tax penalty equal to 10% of the
amount treated as taxable income. In general, however, there is no penalty tax
on distributions: (1) made on or after the date on which the taxpayer attains
age 59 1/2; (2) made as a result of death or disability of a Certificate
Holder; (3) received in substantially equal periodic payments as a life annuity
or a joint and survivor annuity for the lives or life expectancies of the
Certificate Holder and a "designated beneficiary." Other tax penalties may
apply to certain distributions pursuant to a Qualified Contract.
TAXATION OF DEATH BENEFIT PROCEEDS. Amounts may be distributed from the
Contract because of the death of a Certificate Holder or the Annuitant.
Generally, such amounts are includible in the income of the recipient as
follows: (1) if distributed in a lump sum, they are taxed in the same manner as
a full surrender as described above, or (2) if distributed under an Annuity
Option, they are taxed in the same manner as Annuity payments, as described
above.
TRANSFERS, ASSIGNMENTS, OR EXCHANGES OF THE CONTRACT. A transfer of ownership
of a Contract, the designation of an Annuitant, Payee or other Beneficiary who
is not also a Certificate Holder, the selection of certain Annuity Dates, or
the exchange of a Contract may result in certain tax consequences that are not
discussed herein. Assignments or transfers of ownership of an IRA are not
allowed except as permitted under Section 408(d)(6) of the Code in connection
with a divorce. Anyone contemplating any such designation, transfer,
assignment, selection, or exchange should contact a competent tax adviser with
respect to the potential tax effects of such a transaction. (See also "Transfer
of Ownership -- Assignment.")
MULTIPLE CONTRACTS. All deferred nonqualified annuity contracts that are issued
by the Company (or its affiliates) to the same owner during any calendar year
are treated as one annuity contract for purposes of determining the amount
includible in gross income under section 72(e) of the Code. In addition, the
Treasury Department has specific authority to issue regulations that prevent
the avoidance of section 72(e) through the serial purchase of annuity contracts
or otherwise. Congress has also
30
<PAGE>
indicated that the Treasury Department may have authority to treat the
combination purchase of an immediate annuity contract and separate deferred
annuity contracts as a single annuity contract under its general authority to
prescribe rules as may be necessary to enforce the income tax laws.
QUALIFIED CONTRACTS
IN GENERAL. The Qualified Contract is designed for use as an Individual
Retirement Annuity. The tax rules applicable to participants and beneficiaries
in Individual Retirement Annuities are complex. Special favorable tax treatment
may be available for certain types of contributions and distributions. Adverse
tax consequences may result from contributions in excess of specified limits;
distributions prior to age 59 1/2 (subject to certain exceptions);
distributions that do not conform to specified commencement and minimum
distribution rules; aggregate distributions in excess of a specified annual
amount; and in other specified circumstances.
INDIVIDUAL RETIREMENT ANNUITIES. Section 408 of the Code permits eligible
individuals to contribute to an individual retirement program known as an
Individual Retirement Annuity or Individual Retirement Account, each
hereinafter referred to as an "IRA." Also, distributions from certain other
types of qualified plans may be "rolled over" on a tax-deferred basis into an
IRA. The sale of a Contract for use with an IRA may be subject to special
disclosure requirements of the Internal Revenue Service. Purchasers of a
Contract for use with IRAs will be provided with supplemental information
required by the Internal Revenue Service or other appropriate agency. Such
purchasers will have the right to revoke their purchase within 7 days of the
earlier of the establishment of the IRA or their purchase. A Qualified Contract
issued in connection with an IRA will be amended as necessary to conform to the
requirements of the Code. Purchasers should seek competent advice as to the
suitability of the Contract for use with IRAs.
WITHHOLDING
Pension and annuity distributions generally are subject to withholding for the
recipient's federal income tax liability at rates that vary according to the
type of distribution and the recipient's tax status. Recipients, however,
generally are provided the opportunity to elect not have tax withheld from
distributions.
POSSIBLE CHANGES IN TAXATION
In past years, legislation has been proposed that would have adversely modified
the federal taxation of certain annuities. For example, one such proposal would
have changed the tax treatment of nonqualified annuities that did not have
"substantial life contingencies" by taxing income as it is credited to the
annuity. Although as of the date of this prospectus Congress is not actively
considering any legislation regarding the taxation of annuities, there is
always the possibility that the tax treatment of annuities could change by
legislation or other means (such as IRS regulations, revenue rulings, judicial
decisions, etc.). Moreover, it is also possible that any change could be
retroactive (that is, effective prior to the date of the change).
OTHER TAX CONSEQUENCES
As noted above, the foregoing discussion of the federal income tax consequences
is not exhaustive and special rules are provided with respect to other tax
situations not discussed in this Prospectus. Further, the federal income tax
consequences discussed herein reflect the Company's understanding of the
current law and the law may change. Federal estate and gift tax consequences of
ownership or receipt of distributions under the Contract depend on the
individual circumstances of each Certificate Holder or recipient of a
distribution. A competent tax adviser should be consulted for further
information.
31
<PAGE>
MISCELLANEOUS
VOTING RIGHTS
Each Certificate Holder may direct the Company in the voting of shares at
meetings of shareholders of the appropriate Fund(s). The number of votes to
which each Certificate Holder may give direction will be determined as of the
record date. The number of votes each Certificate Holder is entitled to direct
with respect to a particular Fund during the Accumulation Period is equal to
the portion of the current value of the Certificate Holder's Account Value
attributable to that Fund divided by the net asset value of one share of that
Fund. During the Annuity Period, the number of votes is equal to the Valuation
Reserve for the portion of the Contract attributable to the Certificate
Holder's interest in that Fund, divided by the net asset value of one share of
that Fund. In determining the number of votes, fractional votes will be
recognized. Where the value of the Contract or Valuation Reserve relates to
more than one Fund, the calculation of votes will be performed separately for
each Fund.
Certificate Holders have a fully vested (100%) interest in the benefits
provided under a group Contract. Therefore, Certificate Holders may instruct
the Contract Holder of a group Contract how to direct the Company to cast the
votes for the portion of the value or Valuation Reserve attributable to their
Certificate Holder's Account. Votes attributable to Certificate Holders who do
not direct the Company will be cast by the Company in the same proportion as
votes for which directions have been received by the Company.
Each Certificate Holder will receive a notice of each meeting of shareholders,
together with any proxy solicitation materials, and a statement of the number
of votes attributable to his or her Certificate Holder's Account.
MODIFICATION OF THE CONTRACT
The Company may modify the Contract when it deems an amendment appropriate,
subject to the limitations described below, by notifying Contract Holders in
writing at least 30 days before the effective date of any change to a
Contract. No change will affect the amount or terms of any Annuity which
begins before the change.
The Company may make any change that affects the GP Guaranteed Account market
value adjustment with at least thirty (30) days' advance written notice to the
Contract Holder and the Certificate Holder. Any such change shall become
effective for any new guaranteed term and will apply to all present and future
Certificate Holders' Accounts.
The Company reserves the right to change the terms of the Estate Conservation
and Systematic Withdrawal Options for future elections and discontinue the
availability of these options at any time.
Any change to any of the following provisions under an existing Contract will
not apply to Certificate Holder's Accounts established under that Contract
before the effective date of the change:
(a) Net Purchase Payment
(b) GP Guaranteed Account Guaranteed Interest Rate
(c) Net Investment Factor
(d) Certificate Holder's Account Value
(e) Increasing the Deferred Sales Charge
(f) Annuity Unit Value
(g) Annuity Options
(h) Fixed Annuity Interest Rates
(i) Transfers
32
<PAGE>
Modification of items (a), (c) and (e) above specifically require the approval
by the SEC to the extent the proposed charges are not currently authorized by
existing orders issued to us by the SEC.
Any change that affects the Annuity Option and the tables for the Annuity
Options may be made no earlier than twelve (12) months after the Effective
Date, and no earlier than twelve (12) months after the effective date of any
prior change.
Any Certificate Holder's Account established on or after the effective date of
any change will be subject to the change. If the Group Contract Holder does not
agree to any change under this provision, the Company reserves the right to
disallow any new Certificate Holder's Accounts from being established under
this Contract. The Contract may also be changed as deemed necessary by the
Company to comply with federal or state law.
TRANSFER OF OWNERSHIP--ASSIGNMENT
The Company generally will accept assignments or transfers of ownership of
Contracts or Certificate Holder's Accounts with proper notification. The date
of any such transfer will be the date on which the Company receives such
notification. Assignments or transfers of ownership of an Individual Retirement
Annuity are restricted under the Code. Certificate Holders contemplating a
transfer of ownership or assignment should consult a tax adviser due to the
potential for tax liability. See "Tax Status of the Contract."
CERTIFICATE HOLDER INQUIRIES
Certificate Holders may direct inquiries to their Registered Representatives or
they may contact the Company by writing to the address shown on the cover page
of this Prospectus or by calling 1-800-531-4547.
TELEPHONE TRANSFERS
Certificate Holders are automatically given the right to make transfers among
investment options by telephone, using the Company's "800" number. The Company
has enacted procedures to prevent abuses in account transactions made by
telephone. The procedures include requiring the use of a personal
identification number (PIN) to execute transactions. The Certificate Holder is
responsible for safeguarding his or her PIN, and for keeping account
information confidential. To ensure authenticity, the Company records all calls
on the "800" line. Where two individuals have an interest in a Certificate
Holder's Account as joint Certificate Holders, either may make telephone
transfers. If the Company does not maintain reasonable safeguards, it would be
liable for any losses to the Certificate Holder's Account resulting from the
failure.
LEGAL PROCEEDINGS
The Company knows of no material legal proceedings pending to which the Company
is a party or which would materially affect the Company.
LEGAL MATTERS
The validity of the securities offered by this Prospectus has been passed upon
by Susan E. Bryant, Esq., Counsel to the Company.
33
<PAGE>
TABLE OF CONTENTS -- STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<S> <C>
General Information and History............................................. 3
Variable Annuity Account I.................................................. 3
Offering and Purchase of Contracts.......................................... 3
Performance................................................................. 3
General...................................................................
Average Annual Total Return Quotations....................................
Dollar-Cost Averaging....................................................... 4
Sales Material.............................................................. 4
Annuity Payments............................................................ 4
Independent Auditors........................................................ 5
Financial Statements of the Company ........................................ F-1
</TABLE>
34
<PAGE>
APPENDIX
GROWTH PLUS GUARANTEED ACCOUNT
GENERAL
The Growth Plus Guaranteed Account ("GP Guaranteed Account") is a credited
interest option available during the Accumulation Period under the Contracts
described in this prospectus. The GP Guaranteed Account is only offered in
states where the offer and sale has been authorized by the appropriate
regulatory authorities. The GP Guaranteed Account is a funding option under
the Contract which is described in the accompanying GP Guaranteed Account
prospectus. Certificate Holders should read that prospectus carefully before
investing payments in the GP Guaranteed Account. This Appendix is intended as
a summary description of the GP Guaranteed Account and is not intended as a
replacement for the GP Guaranteed Account prospectus.
INTEREST RATES
The GP Guaranteed Account is a guaranteed interest option for which the
Company guarantees stipulated rates of interest for stated periods of time on
amounts invested in the GP Guaranteed Account. A guaranteed rate is credited
for the full term. The interest rate stipulated is an annual effective yield;
that is, it reflects a full year's interest. Interest is credited daily at a
rate that will provide the guaranteed annual effective yield over the period
of one year. The Company has guaranteed that interest rates for investments in
the GP Guaranteed Account through the Contracts will never be less than an
annual effective rate of 3%.
ALLOCATION TO GUARANTEED TERMS
During the deposit period, amounts may be applied to any of the available
guaranteed terms. Purchase Payments received after the initial payment will be
allocated in the same proportions as the last allocation, if no new allocation
instructions are received with the Purchase Payment. For amounts allocated to
the GP Guaranteed Account, if the same guaranteed term(s) are not available,
the next shortest will be used. If no shorter guaranteed term is available,
the next longer guaranteed term will be used.
WITHDRAWALS
Except for transfers from the one-year Guaranteed Term taken in connection
with the Dollar Cost Averaging Program, and withdrawals taken in connection
with an Estate Conservation or Systematic Withdrawal distribution option
(where regulatory approval for such waivers has been received) withdrawals or
transfers from a guaranteed term before the guaranteed term matures may be
subject to a market value adjustment ("MVA"). An MVA reflects the change in
the value of the investment due to changes in interest rates since the date of
deposit. When interest rates increase after the date of deposit, the value of
the investment decreases, and the MVA is negative. Conversely, when interest
rates decrease after the date of deposit, the value of the investment
increases, and the MVA is positive. It is possible that a negative MVA could
result in the payment of an amount that is less than the amount initially
allocated to the GP Guaranteed Account. If a Certificate Holder requests a
partial withdrawal of the Certificate Holder's Account Value without
designating from which investment option it should be taken, a proportionate
share will be withdrawn from the GP Guaranteed Account. The amount will be
withdrawn from all guaranteed term groups as defined in the prospectus.
MATURITY OF A GUARANTEED TERM
As a guaranteed term matures, assets accumulating under the GP Guaranteed
Account may be (a) transferred to a new guaranteed term, (b) transferred to
any other available investment option, or (c) withdrawn. Amounts withdrawn may
be subject to a deferred sales charge. If no direction is received by the
Company at its Home Office by the maturity date of a guaranteed term, the
amount from the maturing guaranteed term will be transferred to a similar-
length guaranteed term during the current
35
<PAGE>
deposit period. If the same guaranteed term is no longer available, the next
shortest guaranteed term available in the current deposit period will be used.
If no shorter guaranteed term is available, the next longer guaranteed term
will be used.
If the Certificate Holder does not provide instructions concerning the maturity
value of a maturing guaranteed term, the maturity value transfer provision
applies. This provision allows Certificate Holders to transfer without an MVA
to available guaranteed terms of the current deposit period or to other
available investment options, or surrender without an MVA. A deferred sales
charge may be assessed, if applicable, on the surrendered amount. The provision
is available only during the calendar month immediately following a guaranteed
term maturity date and only applies to the first transaction regardless of the
amount involved in the transaction.
MORTALITY AND EXPENSE RISK CHARGES
We make no deductions from the credited interest rate for mortality and expense
risks; these risks are considered in determining the credited interest rate.
TRANSFERS
Amounts applied to a guaranteed term during a deposit period may not be
transferred to any other funding option or to another guaranteed term during
that deposit period or for 90 days after the close of that deposit period
except for matured term value(s) during the calendar month following the
guaranteed term's maturity date. This does not apply to (1) amounts transferred
on the Maturity Date or under the maturity value transfer provision; (2)
amounts transferred from the Guaranteed Account before the Maturity Date due to
the election of an Annuity Option; (3) amounts transferred from the one-year
Guaranteed Term in connection with the Dollar Cost Averaging Program; and (4)
amounts distributed under the Estate Conservation or Systematic Withdrawal
distribution option. Transfers after the 90-day period are permitted from
guaranteed term(s) to other guaranteed term(s) available during a deposit
period or to other available investment options. Except for transactions
described in items (1), (3) and (4) above, amounts withdrawn or transferred
from the Guaranteed Account prior to the Maturity Date will be subject to a
Market Value Adjustment. These waivers are subject to regulatory approval and
may not be available in all states. See your representative to determine
whether the waiver is approved in your state.
Transfers of GP Guaranteed Account values on or within one calendar month of a
term's maturity date are not counted against any free transfer limit.
36
<PAGE>
--------------------------------------------------------------------------------
VARIABLE ANNUITY ACCOUNT I
OF
AETNA INSURANCE COMPANY OF AMERICA
--------------------------------------------------------------------------------
Statement of Additional Information dated May 1, 1995
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the current prospectus for the Growth Plus contract funded
by Variable Annuity Account I (the "Separate Account") dated May 1, 1995.
A free prospectus is available upon request from the local Aetna Insurance
Company of America office or by writing to or calling:
Aetna Insurance Company of America
Service Unit
151 Farmington Avenue
Hartford, Connecticut 06156
1-800-531-4547
Read the prospectus before you invest. Terms used in this Statement of
Additional Information shall have the same meaning as in the prospectus.
TABLE OF CONTENTS
Page
General Information and History.................................. 2
Variable Annuity Account I....................................... 2
Offering and Purchase of Contracts............................... 3
Performance Data................................................. 3
General........................................................ 3
Average Annual Total Return Quotations......................... 4
Annuity Payments................................................. 4
Dollar-Cost Averaging............................................ 5
Sales Material................................................... 6
Independent Auditors............................................. 6
Financial Statements of Aetna Insurance Company of
America.......................................................... F-1
<PAGE>
GENERAL INFORMATION AND HISTORY
Aetna Insurance Company of America (the "Company" or "AICA") is a stock life
insurance company which was organized in 1990 under the insurance laws of the
State of Connecticut. The Company is a wholly owned subsidiary of Aetna Life
Insurance and Annuity Company ("ALIAC"). ALIAC, in turn, is a wholly owned
subsidiary of Aetna Life and Casualty Company which, with its subsidiaries,
constitutes one of the nation's largest diversified financial services
organizations. The Company's Home Office is located at 151 Farmington Avenue,
Hartford, Connecticut 06156.
ALIAC, a registered broker-dealer under the Securities Exchange Act of 1934,
serves as the principal underwriter for Account I. ALIAC is also a registered
investment adviser under the Investment Advisers Act of 1940, and provides
investment advice to several of the registered management investment companies
offered as variable investment options under the Contracts funded by Account I
(see "Charges and Deductions" below).
Other than the mortality and expense risk charges and administrative expense
charge described in the prospectus, all expenses incurred in the operations of
the Separate Account are borne by the Company. See "Charges and Deductions" in
the prospectus. The Company receives reimbursement for certain administrative
costs from the Funds' investment adviser used as funding options under the
Contract.
The assets of the Separate Account are held by the Company. The Separate Account
has no custodian. However, the Funds in whose shares the assets of the Separate
Account are invested each have custodians, as discussed in their respective
prospectuses.
VARIABLE ANNUITY ACCOUNT I
Variable Annuity Account I (the "Separate Account") is a separate account
established by the Company for the purpose of funding variable annuity contracts
issued by the Company. The Separate Account is registered with the Securities
and Exchange Commission as a unit investment trust under the Investment Company
Act of 1940, as amended. The assets of Account I will be invested exclusively
in shares of the mutual funds described in the Prospectus. Purchase Payments
made under the Contract may be allocated to one or more of the variable
investment options. The Company may make additions to or deletions from
available investment options as permitted by law. The Funds currently available
under the Contract are as follows:
Equity Growth and Income Fund
Utility Fund
Prime Money Fund
U.S. Government Bond Fund
Corporate Bond Fund
International Stock Fund
Complete descriptions of each of the Funds, including their investment
objectives, policies, risks and fees and expenses, are contained in the
prospectuses and statements of additional information for each of the Funds.
2
<PAGE>
OFFERING AND PURCHASE OF CONTRACTS
As principal underwriter, ALIAC offers the Contracts through life insurance
agents licensed to sell variable annuities who are registered representatives of
ALIAC or of other registered broker-dealers who have sales agreements with
ALIAC. The offering of the Contracts is continuous. A description of the
manner in which Contracts are purchased may be found in the prospectus under the
sections titled "Contract Purchase" and "Certificate Holder's Account Value."
PERFORMANCE DATA
GENERAL
From time to time, the Company may advertise different types of historical
performance for the variable options of the Separate Account available under the
Contracts issued by the Company in connection with Plans described in the
Prospectus. The Company may advertise the "standardized average annual total
returns," calculated in a manner prescribed by the Securities and Exchange
Commission (the "standardized return"), as well as the "non-standardized total
return," both of which are described below.
The standardized and non-standardized total return figures are computed
according to a formula in which a hypothetical initial Purchase Payment of
$1,000 is applied to the variable options under the Contract, and then related
to the ending redeemable values over one, three, five and ten year periods (or
fractional periods thereof). The standardized figures reflect the deduction of
all recurring charges during each period (e.g., mortality and expense risk
charges, maintenance fees, administrative charges, and deferred sales charges).
These charges will be deducted on a pro rata basis in the case of fractional
periods. The maintenance fee is converted to a percentage of assets based on
the estimated average account size under these Contracts.
The non-standardized figures will be calculated in a similar manner, except that
non-standardized figures will not reflect the deduction of any applicable
deferred sales charge (which would decrease the level of performance shown if
reflected in these calculations). The non-standardized figures may also include
a three year period.
The total return quotations are based upon historical earnings and are not
necessarily representative of future performance. Investment results of the
Funds will fluctuate over time, and any presentation of the Funds' total return
quotations for any prior period should not be considered as a representation of
how the variable options will perform in any future period. Additionally, your
Contract Value upon redemption may be more or less than your original cost.
3
<PAGE>
AVERAGE ANNUAL TOTAL RETURN QUOTATIONS - Standardized and Non-Standardized
The table shown below reflects the average annual standardized and non-
standardized quotation figures for the periods ended December 31, 1994 for the
variable options available under the Contract.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
Fund
STANDARDIZED NON-STANDARDIZED Inception
Date
-------------------------------------------------------------------------------------------------------------------------
Installment Payment Contract
($30 annual maintenance fee) 1 Year 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
* *
Equity Growth and Income Fund (7.61)% N/A N/A (1.64)% N/A N/A N/A 02/10/94
-------------------------------------------------------------------------------------------------------------------------
* *
Utility Fund (12.85)% N/A N/A (6.83)% N/A N/A N/A 02/10/94
-------------------------------------------------------------------------------------------------------------------------
* *
Prime Money Fund (5.69)% N/A N/A 0.25% N/A N/A N/A 11/15/94
-------------------------------------------------------------------------------------------------------------------------
* *
U.S. Government Bond Fund (6.12)% N/A N/A (0.17)% N/A N/A N/A 03/28/94
-------------------------------------------------------------------------------------------------------------------------
*
Corporate Bond Fund (15.84)% N/A N/A (9.79)% N/A N/A N/A 03/01/94
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Although results are not available for the full calendar indicated, the
percentage shown is an average annual return since inception.
ANNUITY PAYMENTS
When Annuity payments are to commence, the value of the Certificate Holder's
Account is determined using Accumulation Unit values as of the tenth Valuation
Period before the first Annuity payment is due. Such value (less any applicable
premium tax) is applied to provide an Annuity in accordance with the Annuity and
investment options elected.
The Annuity option tables found in the Contract show, for each form of Annuity,
the amount of the first Annuity payment for each $1,000 of value applied.
Thereafter, variable Annuity payments fluctuate as the Annuity Unit value(s)
fluctuates with the investment experience of the selected investment option(s).
The first payment and subsequent payments also vary depending on the assumed net
investment rate selected (3.5% or 5% per annum). Selection of a 5% rate causes a
higher first payment, but Annuity payments will increase thereafter only to the
extent that the net investment rate increases by more than 5% on an annual
basis. Annuity payments would decline if the rate failed to increase by 5%. Use
of the 3.5% assumed rate causes a lower first payment, but subsequent payments
would increase more rapidly or decline more slowly as changes occur in the net
investment rate.
When the Annuity Period begins, the Annuitant is credited with a fixed number of
Annuity Units (which does not change thereafter) of the variable options
selected. This number is calculated by dividing (a) the amount of the first
Annuity payment based on a particular investment medium by (b) the then current
Annuity Unit value for that investment medium. As noted, Annuity Unit values
fluctuate from one Valuation Period to the next; such fluctuations reflect
changes in the net investment factor for the appropriate Fund(s) (with a ten
Valuation Period lag which gives the Company time to process Annuity payments)
and a mathematical adjustment which offsets the assumed net investment rate of
3.5% or 5% per annum.
4
<PAGE>
The operation of all these factors can be illustrated by the following
hypothetical example. These procedures will be performed separately for
investment options selected during the Annuity Period.
EXAMPLE:
Assume that, at the date Annuity payments are to commence, there are 3,000
Accumulation Units credited under a particular Certificate Holder's Account and
that the value of an Accumulation Unit for the tenth Valuation Period prior to
retirement was $13.650000. This produces a total value of $40,950.
Assume also that no premium tax is payable and that the Annuity table in the
Contract provides, for the option elected, a first monthly variable Annuity
payment of $6.68 per $1000 of value applied; the Annuitant's first monthly
payment would thus be 40.950 multiplied by $6.68, or $273.55.
Assume then that the value of an Annuity Unit for the Valuation Period in which
the first payment was due was $13.400000. When this value is divided into the
first monthly payment, the number of Annuity Units is determined to be 20.414.
The value of this number of Annuity Units will be paid in each subsequent month.
If the net investment factor with respect to the appropriate Fund is 1.0015000
as of the tenth Valuation Period preceding the due date of the second monthly
payment, multiplying this factor by .9999058* (to neutralize the assumed net
investment rate of 3.5% per annum built into the number of Annuity Units
determined above) produces a result of 1.0014057. This is then multiplied by the
Annuity Unit value for the prior Valuation Period (assume such value to be
$13.504376) to produce an Annuity Unit value of $13.523359 for the Valuation
Period in which the second payment is due.
The second monthly payment is then determined by multiplying the number of
Annuity Units by the current Annuity Unit value, or 20.414 times $13.523359,
which produces a payment of $276.07.
*If an assumed net investment rate of 5% is elected, the appropriate factor to
neutralize such assumed rate would be .9998663.
DOLLAR-COST AVERAGING
The term "dollar-cost averaging" describes a system of investing a uniform sum
of money at regular intervals over an extended period of time. It is based on
the economic fact that buying a variably priced item 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. In order to maximize the effectiveness
of dollar-cost averaging, it is important that investors consider their
financial ability to continue purchasing the securities through periods of high
and low price levels. Investors should also note that no system can protect
against reduced values in a declining market.
5
<PAGE>
SALES MATERIAL
The Company or ALIAC may include hypothetical illustrations in their sales
literature that explain the mathematical principles of dollar cost averaging,
compounded interest, tax deferred accumulation, and the mechanics of variable
annuity contracts. The Company or ALIAC may also discuss the difference between
variable annuity contracts and other types of savings or investment products,
including, but not limited to, personal savings accounts and Certificates of
Deposit (CD).
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, CityPlace II, Hartford, Connecticut 06103-4103, are the
independent auditors for the Separate Account and for the Company. The services
provided to the Separate Account include primarily the examination of the
Separate Account's financial statements and the review of filings made with the
SEC.
6
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
VARIABLE ANNUITY ACCOUNT I
VARIABLE ANNUITY CONTRACTS
ISSUED BY
AETNA INSURANCE COMPANY OF AMERICA
Form No. 80750(S) ALIAC Ed. 5/95
<PAGE>
FINANCIAL STATEMENTS
AETNA INSURANCE COMPANY OF AMERICA
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.............................................. 2
Financial Statements:
Statements of Income for the Years Ended December 31, 1994, 1993 and 1992. 3
Balance Sheets as of December 31, 1994 and 1993........................... 4
Statements of Changes in Shareholder's Equity for the Years Ended December
31, 1994, 1993 and 1992.................................................. 5
Statements of Cash Flows for the Years Ended December 31, 1994, 1993 and
1992..................................................................... 6
Notes to Financial Statements December 31, 1994, 1993 and 1992............ 7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholder and Board of Directors
Aetna Insurance Company of America:
We have audited the accompanying balance sheets of Aetna Insurance Company of
America as of December 31, 1994 and 1993, and the related statements of income,
changes in shareholder's equity, and cash flows for each of the years in the
three-year period ended December 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Aetna Insurance Company of
America at December 31, 1994 and 1993, and the results of its operations and
its cash flows for each of the years in the three-year period ended December
31, 1994, in conformity with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, in 1993 the Company changed
its methods of accounting for certain investments in debt and equity
securities.
KPMG Peat Marwick LLP
Hartford, Connecticut
March 17, 1995
F-2
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE INSURANCE AND ANNUITY COMPANY)
STATEMENTS OF INCOME
(THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Revenue:
Net investment income............................. $ 619.3 $ 560.0 $ 645.0
-------- -------- --------
Total revenue................................... 619.3 560.0 645.0
-------- -------- --------
Expenses:
Operating expenses................................ 83.0 79.5 135.6
-------- -------- --------
Total expenses.................................. 83.0 79.5 135.6
-------- -------- --------
Income before federal income taxes.................. 536.3 480.5 509.4
Federal income taxes.............................. 187.7 168.2 173.2
-------- -------- --------
Net income.......................................... $ 348.6 $ 312.3 $ 336.2
======== ======== ========
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE INSURANCE AND ANNUITY COMPANY)
BALANCE SHEETS
(THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1993
--------- ---------
<S> <C> <C>
ASSETS
------
Investments:
Debt securities, available for sale: (amortized cost
$7,043.9 and $7,132.0) $ 6,906.5 $ 7,316.7
--------- ---------
Total investments..................................... 6,906.5 7,316.7
Cash and cash equivalents................................. 4,732.7 4,512.9
Accrued investment income................................. 91.5 91.5
Deferred tax asset........................................ 0.4 --
Other assets.............................................. 5.1 0.2
--------- ---------
Total assets.......................................... $11,736.2 $11,921.3
========= =========
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
Liabilities:
Due to parent and affiliates............................. 10.5 89.7
Other liabilities........................................ 21.0 14.9
Federal income taxes payable.............................
Current................................................... 29.4 167.9
Deferred.................................................. -- 64.6
--------- ---------
Total liabilities..................................... 60.9 337.1
--------- ---------
Shareholder's equity:
Common capital stock, par value $2,000 (1,275 shares
authorized, issued and outstanding)..................... 2,550.0 2,550.0
Paid-in capital.......................................... 7,550.0 7,550.0
Net unrealized capital gains (losses).................... (137.4) 120.1
Retained earnings........................................ 1,712.7 1,364.1
--------- ---------
Total shareholder's equity............................ 11,675.3 11,584.2
--------- ---------
Total liabilities and shareholder's equity............ $11,736.2 $11,921.3
========= =========
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE INSURANCE AND ANNUITY COMPANY)
STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
(THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Shareholder's equity, beginning of year....... $11,584.2 $11,151.8 $10,815.6
Net change in unrealized capital gains (loss-
es) ......................................... (257.5) 120.1 0.0
Net income.................................... 348.6 312.3 336.2
--------- --------- ---------
Shareholder's equity, end of year............. $11,675.3 $11,584.2 $11,151.8
========= ========= =========
</TABLE>
See Notes to Financial Statements.
F-5
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE INSURANCE AND ANNUITY COMPANY)
STATEMENTS OF CASH FLOWS
(THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income..................................... $ 348.6 $ 312.3 $ 336.2
Decrease in accrued investment income.......... -- 46.3 51.4
Increase (decrease) in amounts due to/from par-
ent and affiliates............................ (79.2) 184.9 (44.9)
Decrease (increase) in other assets and liabil-
ities......................................... 1.2 (76.0) 71.1
Increase (decrease) in federal income taxes
payable....................................... (138.9) 50.2 (2.8)
Net amortization of premium on debt securities. 88.1 78.4 38.3
-------- -------- --------
Net cash provided by operating activities.... 219.8 596.1 449.3
-------- -------- --------
Cash Flows from Investing Activities:
Proceeds from maturities and repayments of debt
securities.................................... -- 2,290.0 1,485.0
Cost of investments purchased.................. -- (2,452.8) (1,532.4)
-------- -------- --------
Net cash used for investing activities....... -- (162.8) (47.4)
-------- -------- --------
Net increase in cash and cash equivalents........ 219.8 433.3 401.9
Cash and cash equivalents, beginning of year..... 4,512.9 4,079.6 3,677.7
-------- -------- --------
Cash and cash equivalents, end of year........... $4,732.7 $4,512.9 $4,079.6
======== ======== ========
Supplemental cash flow information:
Income taxes paid, net......................... $ 326.6 $ 118.0 $ 176.0
======== ======== ========
</TABLE>
See Notes to Financial Statements.
F-6
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE INSURANCE AND ANNUITY COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
---------------------
Aetna Insurance Company of America (the "Company") is a stock life insurance
company organized in 1990 under the insurance laws of Connecticut. The Company
is a wholly owned subsidiary of Aetna Life Insurance and Annuity Company
("ALIAC"). ALIAC is a wholly owned subsidiary of Aetna Life and Casualty
Company ("Aetna"). The Company is expected to begin marketing and servicing
individual and group annuity contracts in 1995. These financial statements
have been prepared in conformity with generally accepted accounting
principles.
Accounting changes
------------------
Accounting for Certain Investments in Debt and Equity Securities
On December 31, 1993, the Company adopted Financial Accounting Standard
("FAS") No. 115, Accounting for Certain Investments in Debt and Equity
Securities, which requires the classification of debt securities into three
categories: "held to maturity", which are carried at amortized cost;
"available for sale", which are carried at fair value with changes in fair
value recognized as a component of shareholder's equity; and "trading", which
are carried at fair value with immediate recognition in income of changes in
fair value.
Initial adoption of this standard in 1993 resulted in a net increase of $120.1
thousand, net of taxes of $64.6 thousand, to net unrealized gains in
shareholder's equity.
Cash and Cash Equivalents
-------------------------
Cash and cash equivalents include cash on hand, money market instruments and
other debt issues with a maturity of ninety days or less when purchased.
Investments
-----------
At December 31, 1993 and 1994, all of the Company's debt securities are
classified as available for sale and carried at fair value. These securities
are written down (as realized losses) for other than temporary decline in
value. Unrealized gains and losses are reflected in shareholder's equity. Fair
values for debt securities are based on quoted market prices or dealer
quotations. Purchases and sales of debt securities are recorded on the trade
date.
Federal Income Taxes
--------------------
The Company is included in the consolidated federal income tax return of
Aetna. The Company is taxed at regular corporate rates after adjusting income
reported for financial statement purposes for certain items. Deferred income
tax benefits result from changes during the year in cumulative temporary
differences between the tax basis and book basis of assets and liabilities.
F-7
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE INSURANCE AND ANNUITY COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
2. INVESTMENTS
Investments in debt securities available for sale were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- --------
(Thousands)
<S> <C> <C> <C> <C>
1994
U.S. Treasury securities............ $7,043.9 4.2 141.6 $6,906.5
======== ===== ===== ========
1993
U.S. Treasury securities............ $7,132.0 184.7 -- $7,316.7
======== ===== ===== ========
</TABLE>
The amortized cost and fair value of debt securities for the year ended
December 31, 1994 are shown below by contractual maturity. Actual maturities
may differ from contractual maturities because securities may be restructured,
called or prepaid.
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
--------- --------
(Thousands)
<S> <C> <C>
Due to mature:
One year or less.............................. $3,016.0 $3,019.7
After one year through five years............. 4,027.9 3,886.8
-------- --------
Total....................................... $7,043.9 $6,906.5
======== ========
</TABLE>
At December 31, 1994 and 1993, debt securities with an amortized cost of $3.9
million were on deposit as required by various state regulatory agencies.
3. CAPITAL GAINS AND LOSSES ON INVESTMENTS
Realized capital gains or losses are the difference between proceeds received
from investments sold or prepaid and amortized cost. For the three years ended
December 31, 1994, there were no realized capital gains or losses.
Unrealized gains and losses on investments carried at fair value, net of
related taxes, reflected in shareholder's equity, were as follows for December
31,
<TABLE>
<CAPTION>
1994 1993
------- ------
(Thousands)
<S> <C> <C>
Debt securities
Gross unrealized gains................................ $ 4.2 $184.7
Gross unrealized losses............................... (141.6) --
------- ------
(137.4) 184.7
Deferred federal income taxes (See Note 6).............. -- 64.6
------- ------
Net unrealized capital gains (losses)................. $(137.4) $120.1
======= ======
</TABLE>
F-8
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE INSURANCE AND ANNUITY COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. NET INVESTMENT INCOME
Sources of net investment income were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
(Thousands)
<S> <C> <C> <C>
Debt securities.................................. $414.1 $425.7 $492.7
Cash equivalents................................. 205.2 135.3 152.3
------ ------ ------
Gross investment income.......................... 619.3 561.0 645.0
Less investment expenses......................... -- 1.0 --
------ ------ ------
Net investment income............................ $619.3 $560.0 $645.0
====== ====== ======
</TABLE>
5. DIVIDEND RESTRICTIONS AND SHAREHOLDER'S EQUITY
The amount of dividends that may be paid to the shareholder in 1995 without
prior approval by the Insurance Commissioner of the State of Connecticut is
$922.8 thousand.
The Insurance Department of the State of Connecticut (the "Department")
recognizes as net income and shareholder's equity those amounts determined in
conformity with statutory accounting practices prescribed or permitted by the
Department, which differ in certain respects from generally accepted accounting
principles ("GAAP"). Statutory net income was $348.1 thousand, $312.3 thousand
and $336.2 thousand for the years ended December 31, 1994, 1993 and 1992,
respectively. Statutory shareholder's equity was $11.8 million and $11.4
million as of December 31, 1994 and 1993, respectively.
As of December 31, 1994, the Company does not utilize any statutory accounting
practices which are not prescribed by insurance regulators that, individually
or in the aggregate, materially affect statutory shareholder's equity.
6. FEDERAL INCOME TAXES
The Company is included in the consolidated federal income tax return of Aetna.
Aetna allocates to each member an amount approximating the tax it would have
incurred were it not a member of the consolidated group, and credits the member
for the use of its tax saving attributes in the consolidated return.
In August 1993, the Omnibus Budget Reconciliation Act of 1993 (OBRA) was
enacted which resulted in an increase in the federal corporate tax rate from
34% to 35% retroactive to January 1, 1993. The enactment of OBRA resulted in an
increase in current taxes of $4.8 thousand which is included in the 1993
current tax expense.
F-9
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE INSURANCE AND ANNUITY COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Components of income tax expense (benefits) were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
(thousands)
<S> <C> <C> <C>
Current tax expense:
Income from operations............................... $188.1 $168.2 $173.2
Deferred tax benefit:
Income from operations............................... (.4) -- --
------ ------ ------
Total................................................ $187.7 $168.2 $173.2
====== ====== ======
</TABLE>
Income tax expense was equal to the federal income tax rate applied to income
before federal income taxes as shown below:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
(thousands)
<S> <C> <C> <C>
Income before federal income taxes................... $536.3 $480.5 $509.4
Tax rate............................................. 35% 35% 34%
------ ------ ------
Income tax expense................................. $187.7 $168.2 $173.2
====== ====== ======
</TABLE>
The tax effects of temporary differences that give rise to deferred tax assets
and deferred tax liabilities under FAS No. 109 at December 31, 1994 and 1993
are presented below:
<TABLE>
<CAPTION>
1994 1993
----- -----
(thousands)
<S> <C> <C>
Deferred tax assets:
Net unrealized capital losses.............................. $48.1 $ --
Other, net................................................. .4 --
----- -----
Total gross assets........................................... 48.5 --
Less valuation allowance..................................... 48.1 --
----- -----
Assets net of valuation.................................... .4 --
----- -----
Deferred tax liabilities:
Net unrealized capital gains............................... -- 64.6
----- -----
Total gross liabilities...................................... -- 64.6
----- -----
Net deferred tax liability (asset)......................... $ (.4) $64.6
===== =====
</TABLE>
Net unrealized capital gains and losses are presented in shareholder's equity
net of deferred taxes. At December 31, 1994, $137.4 thousand of net unrealized
capital losses were reflected in shareholder's equity without deferred tax
benefits. For federal income tax purposes, capital losses are deductible only
against capital gains in the year of sale or during the carryback and
carryforward periods (three and five years, respectively). Due to the expected
full utilization of capital gains in the carryback period and the uncertainty
of future capital gains, a valuation
F-10
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE INSURANCE AND ANNUITY COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
allowance of $48.1 thousand related to the net unrealized capital losses has
been reflected in shareholder's equity. Any reversals of the valuation
allowance are contingent upon the recognition of future capital gains in
Aetna's federal income tax return or a change in circumstances which causes the
recognition of the benefits to become more likely than not. Non-recognition of
the deferred tax benefits on net unrealized losses described above had no
impact on net income for 1994, but has the potential to adversely affect future
results if such losses are realized.
The Internal Revenue Service ("Service") has completed examinations of the
consolidated federal income tax returns of Aetna through 1986. Discussions are
being held with the Service with respect to proposed adjustments. However,
management believes there are adequate defenses against, or sufficient reserves
to provide for, such adjustments. The Service has commenced its examinations
for the years 1987 through 1990.
7. BENEFIT PLANS
The Company has no employees, when it does, the employees of the Company will
be eligible for the same benefit plans as the employees of ALIAC. The following
is a discussion of benefit plans as they apply to ALIAC. Charges were allocated
to the Company based on appropriate measures. There were no charges to
operations during 1994 and 1993 for the benefit plans described below. Charges
to operations during 1992 were $2.8 thousand.
Employee Pension Plans -- ALIAC, in conjunction with Aetna, has non-
contributory defined benefit pension plans covering substantially all
employees. The plans provide pension benefits based on years of service and
average annual compensation (measured over sixty consecutive months of highest
earnings in a 120 month period). Contributions are determined using the Entry
Age Normal Cost Method and, for qualified plans subject to ERISA requirements,
are limited to the amounts that are currently deductible for tax reporting
purposes. The accumulated plan assets exceed accumulated plan benefits.
Agent Pension Plans -- ALIAC, in conjunction with Aetna, has a non-qualified
pension plan covering certain agents. The plan provides pension benefits based
on annual commission earnings. The accumulated plan assets exceed accumulated
plan benefits. There has been no funding to the plan for the years 1992 through
1994.
Employee Postretirement Benefits -- In addition to providing pension benefits,
Aetna also provides certain postretirement health care and life insurance
benefits, subject to certain caps, for retired employees. Medical and dental
benefits are offered to all full-time employees retiring at age 50 with at
least 15 years of service or at age 65 with at least 10 years of service.
Retirees are required to contribute to the plans based on their years of
service with Aetna.
Aetna implemented FAS No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions on the immediate recognition basis in 1992. The
cumulative effect charge for all Aetna employees was reflected in Aetna's 1992
Statement of Income. Prior to the adoption of FAS No. 106, cost of
postretirement benefits was charged to operations as payments were made.
Agent Postretirement Benefits -- ALIAC, in conjunction with Aetna, also
provides certain postemployment health care and life insurance benefits for
certain agents.
F-11
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE INSURANCE AND ANNUITY COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Incentive Savings Plan -- Substantially all employees are eligible to
participate in a savings plan under which designated contributions, which may
be invested in common stock of Aetna or certain other investments, are matched,
up to 5% of compensation, by Aetna.
Stock Plans -- Aetna has a stock incentive plan that provides for stock options
and deferred contingent common stock or cash awards to certain key employees.
Aetna also has a stock option plan under which executive and middle management
employees of Aetna may be granted options to purchase common stock of Aetna at
the market price on the date of grant or, in connection with certain business
combinations, may be granted options to purchase common stock on different
terms.
8. RELATED PARTY TRANSACTIONS
Substantially all of the administrative and support functions of the Company
are provided by Aetna and its affiliates. The financial statements reflect
allocated charges for these services based upon measures appropriate for the
type and nature of service provided. Total charges allocated to the Company,
including rent, salaries and other administrative expenses, were $1.0 thousand
in 1993. There were no charges allocated to the Company for these services in
1994 and 1992.
9. ESTIMATED FAIR VALUE
The carrying values and estimated fair values of the Company's financial
instruments at December 31, 1994 and 1993 were as follows:
<TABLE>
<CAPTION>
1994 1993
----------------- -----------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-------- -------- -------- --------
(Thousands)
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents................ $4,732.7 $4,732.7 $4,512.9 $4,512.9
Debt securities.......................... 6,906.5 6,906.5 7,316.7 7,316.7
</TABLE>
Fair value estimates are made at a specific point in time, based on available
market information and judgments about the financial instrument, such as
estimates of timing and amount of expected future cash flows. Such estimates do
not reflect any premium or discount that could result from offering for sale at
one time the Company's entire holdings of a particular financial instrument,
nor do they consider the tax impact of the realization of unrealized gains or
losses. In evaluating the Company's management of interest rate and liquidity
risk, the fair values of all assets and liabilities should be taken into
consideration, not only those above.
F-12
<PAGE>
VARIABLE ANNUITY ACCOUNT I
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
-------------------------------------------
(a) Financial Statements:
(1) Included in Part A:
Not Applicable
(2) Included in Part B:
Financial Statements of Depositor:
- Independent Auditors' Report
- Statement of Income for the years ended December 31, 1994,
1993 and 1992
- Balance Sheets for the year ended December 31, 1994 and 1993
- Statements of Changes in Shareholder's Equity for the years
ended December 31, 1994, 1993 and 1992
- Statements of Cash Flows for the years ended December 31, 1994,
1993 and 1992
- Notes to Financial Statements
(b) Exhibits
(1) Resolution of the Board of Directors of Aetna Insurance
Company of America establishing Variable Annuity Account I/1/
(2) Not applicable
(3.1) Form of Selling Agreement/1/
(3.2) Form of Principal Underwriting Agreement/1/
(4) Form of Variable Annuity Contracts including endorsements/2/
(G-CDA-GP2, I-CDA-GP2, C-GP2QEND, GP2QEND and GP2NHEND)
(5) Form of Application for Aetna Growth Plus Group Variable,
Fixed or Combination Annuity Contract (Nonparticipating)
(6) Certification of Incorporation and By-Laws of Depositor/1/
(7) Form of Reinsurance Agreement
(8) Form of Fund Participation Agreement between Insurance
Management Series, Federated Advisors and Aetna Insurance Company
of America
(9) Consent and Opinion of Counsel
(10) Consent of Independent Auditors
(11) Not applicable
(12) Not applicable
(13) Computation of Performance Data/3/
(14) Not applicable
(15.1) Powers of Attorney/4/
(15.2) Authorization for Signatures/1/
<PAGE>
1. Incorporated by reference to Registration Statement on Form N-4
(File No. 33-59749) filed electronically by Variable Annuity Account
I of Aetna Insurance Company of America on May 31, 1995.
2. Incorporated by reference to Registration Statement on Form N-4
(File Nos. 33-80750 and 811-8582) filed by Variable Annuity Account I of
Aetna Insurance Company of America on June 23, 1994.
3. Incorporated by reference to Post-Effective Amendment No. 2 to
Registration Statement on Form N-4 (File No. 33-80750) filed by
Variable Annuity Account I of Aetna Insurance Company of America on
April 27, 1995.
4. Power of Attorney for Shaun P. Mathews included herein. Powers of Attorney
for James C. Hamilton, Daniel P. Kearney and Scott A. Striegel incorporated
by reference to Post-Effective Amendment No. 2 to Registration Statement on
Form S-1 (File No. 33-81010) filed by Variable Annuity Account I of Aetna
Insurance Company of America on July 7, 1995.
Item 25. Directors and Officers of the Depositor
---------------------------------------------------
<TABLE>
<CAPTION>
Name and Principal
Business Address* Positions and Offices with Depositor
------------------ ------------------------------------
<S> <C>
Daniel P. Kearney Director and President
James C. Hamilton Director, Vice President, Treasurer
& Alternate Qualified Actuary
Shaun P. Mathews Director and Senior Vice President
Scott A. Striegel Director and Senior Vice President
Maria F. McKeon Corporate Secretary and Counsel
</TABLE>
*The principal business address of all directors and officers listed is 151
Farmington Avenue, Hartford, Connecticut 06156.
Item 26. Persons Controlled by or Under Common Control with the Depositor or
-----------------------------------------------------------------------------
Registrant
----------
Incorporated herein by reference to Exhibit 24(c) to the Registration
Statement on Form N-4 (File No. 33-88720) filed by Variable Annuity Account C
of Aetna Life Insurance and Annuity Company on January 20, 1995.
Item 27. Number of Contract Owners
-----------------------------------
As of June 30, 1995, there were five contract owners of variable annuity
contracts funded through Variable Annuity Account I.
Item 28. Indemnification
-------------------------
Reference is hereby made to Section 33-320a of the Connecticut General
Statutes ("C.G.S.") regarding indemnification of directors and officers of
Connecticut corporations. The statute provides in general that Connecticut
corporations shall indemnify their officers, directors, employees, agents, and
certain other defined individuals against judgments, fines, penalties, amounts
paid in settlement and reasonable expenses actually incurred in connection with
proceedings against the corporation. The corporation's obligation to provide
such indemnification
<PAGE>
does not apply unless (1) the individual is successful on the merits in the
defense of any such proceeding; or (2) a determination is made (by a majority of
the board of directors not a party to the proceeding by written consent; by
independent legal counsel selected by a majority of the directors not involved
in the proceeding; or by a majority of the shareholders not involved in the
proceeding) that the individual acted in good faith and in the best interests of
the corporation; or (3) the court, upon application by the individual,
determines in view of all the circumstances that such person is reasonably
entitled to be indemnified.
C.G.S. Section 33-320a provides an exclusive remedy: a Connecticut
corporation cannot indemnify a director or officer to an extent either greater
or less than that authorized by the statute, e.g., pursuant to its certificate
of incorporation, bylaws, or any separate contractual arrangement. However, the
statute does specifically authorize a corporation to procure indemnification
insurance to provide greater indemnification rights. The premiums for such
insurance may be shared with the insured individuals on an agreed basis.
Consistent with the statute, Aetna Life and Casualty Company has procured
insurance from Lloyd's of London and several major United States excess insurers
for its directors and officers and the directors and officers of its
subsidiaries, including the Depositor, which supplements the indemnification
rights provided by C.G.S. Section 33-320a to the extent such coverage does not
violate public policy.
Item 29. Principal Underwriters
--------------------------------
(a) In addition to serving as the principal underwriter for the Registrant,
Aetna Life Insurance and Annuity Company ("ALIAC") also acts as the
principal underwriter for Aetna Variable Fund, Aetna Income Shares, and
Aetna GET Fund. ALIAC is also the depositor of Variable Life Account B
and Variable Annuity Accounts B and C (separate accounts of ALIAC
registered as unit investment trusts). Additionally, ALIAC is the
investment adviser for Aetna Variable Fund, Aetna Income Shares, Aetna
Variable Encore Fund, Aetna Investment Advisers Fund, Inc., Series B of
Aetna GET Fund, Aetna Series Fund, Inc., and Aetna Generation Portfolios,
Inc.
(b) Directors and Officers of the Underwriter
<TABLE>
<CAPTION>
Name and Principal
Business Address* Positions and Offices with Underwriter
------------------ --------------------------------------
<S> <C>
Daniel P. Kearney Director and President
Gary G. Benanav Director
Christopher J. Burns Director and Senior Vice President, Life
Laura R. Estes Director and Senior Vice President, ALIAC Pensions
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Shaun P. Mathews Director and Senior Vice President, Strategic
Markets & Products
Scott A. Striegel Director and Senior Vice President, Annuity
James C. Hamilton Director, Vice President and Treasurer
Dominick J. Agostino Director, Senior Vice President and Chief
Financial Officer
John Y. Kim Director and Senior Vice President, ALIAC
Investments
Robert E. Broatch Senior Vice President and Corporate Controller
Zoe Baird Senior Vice President and General Counsel
Fred J. Franklin Vice President and Chief Compliance Officer
Susan E. Schechter Corporate Secretary and Counsel
</TABLE>
* The principal business address of all directors and officers listed is 151
Farmington Avenue, Hartford, Connecticut 06156.
(c) Not applicable.
Item 30. Location of Accounts and Records
------------------------------------------
All records concerning contract owners of Variable Annuity Account I are
located at the home office of the Registrant as follows:
Aetna Insurance Company of America
151 Farmington Avenue
Hartford, Connecticut 06156
Item 31. Management Services
-----------------------------
Not applicable.
Item 32. Undertakings
----------------------
Registrant hereby undertakes:
(a) to file a post-effective amendment to this registration statement on
Form N-4 as frequently as is necessary to ensure that the audited
financial statements in the registration statement
<PAGE>
are never more than sixteen months old for as long as payments under the
variable annuity contracts may be accepted;
(b) to include as part of any application to purchase a contract offered by
a prospectus which is part of this registration statement on Form N-4, a
space that an applicant can check to request a Statement of Additional
Information; and
(c) to deliver any Statement of Additional Information and any financial
statements required to be made available under this Form N-4 promptly
upon written or oral request.
(d) 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.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, the Registrant, Variable Annuity Account I of Aetna
Insurance Company of America, has duly caused this Post-Effective Amendment No.
3 to Registration Statement on Form N-4 (File No. 33-80750) to be signed on its
behalf in the City of Hartford, and State of Connecticut, on the 15th day of
August, 1995.
VARIABLE ANNUITY ACCOUNT I OF AETNA
INSURANCE COMPANY OF AMERICA
(Registrant)
By: AETNA INSURANCE COMPANY OF AMERICA
(Depositor)
By Daniel P. Kearney*
-------------------------------------
Daniel P. Kearney
President
As required by the Securities Act of 1933, as amended, this Post-Effective
Amendment No. 3 to Registration Statement on Form N-4 (File No. 33-80750) has
been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Daniel P. Kearney* Director and President )
--------------------------- (Principal Executive Officer) )
Daniel P. Kearney )
)
James C. Hamilton* Director )
--------------------------- (Principal Accounting Officer) )
James C. Hamilton )
) August
) 15, 1995
Shaun P. Mathews* Director )
--------------------------- )
Shaun P. Mathews )
)
Scott A. Striegel* Director )
--------------------------- )
Scott A. Striegel )
By: /s/ Julie E. Rockmore
--------------------------------------------
*Julie E. Rockmore
Attorney-in-Fact
</TABLE>
<PAGE>
VARIABLE ANNUITY ACCOUNT I
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit Page
----------- -------- ----
<S> <C> <C>
99.B.1 Resolution of the Board of Directors of Aetna *
Insurance Company of America establishing
Variable Annuity Account I
99.B.3.1 Form of Selling Agreement *
99.B.3.2 Form of Principal Underwriting Agreement *
99.B.4 Form of Variable Annuity Contracts *
99.B.5 Form of Application for Aetna Growth Plus Group
Variable, Fixed or Combination Annuity Contract
(Nonparticipating) _______
99.B.6 Certification of Incorporation and By-Laws
of Depositor *
99.B.7 Form of Reinsurance Agreement _______
99.B.8 Form of Fund Participation Agreement between Insurance
Management Series, Federated Advisors and Aetna
Insurance Company of America _______
99.B.9 Consent and Opinion of Counsel _______
99.B.10 Consent of Independent Auditors _______
99.B.13 Computation of Performance Data *
99.B.15.1 Powers of Attorney _______
99.B.15.2 Authorization for Signatures *
</TABLE>
*Incorporated by reference
<PAGE>
Exhibit 99-b(5)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
[LOGO OF AETNA Aetna Insurance Company of America
APPEARS HERE] 151 Farmington Avenue
Individual Annuity Application Hartford, CT 06156
Please Print. Type of Contract: [_] Nonqualified Annuity [_] Individual Retirement Annuity
----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Primary Name (Last, First, Middle Initial) Social Security Number
Contract Holder
-----------------------------------------------------------------------------------------------------
This Information will be Street Address City State Zip
used for tax reporting.
-----------------------------------------------------------------------------------------------------
Date of Birth Marital Status [_] Male Telephone Number [_] Home [_] Work
[_] M [_] S [_] Female
-----------------------------------------------------------------------------------------------------
Are you associated with a National Association of Securities Dealers U.S. citizen? [_]Yes [_] No
firm? [_] No [_] Yes If yes, specify: If no, please specify:
----------------------------------------------------------------------------------------------------------------------------------
Joint Name (Last, First, Middle Initial) Social Security Number
Contract Holder
-----------------------------------------------------------------------------------------------------
A joint contract holder Street Address City State Zip
must be the spouse of the
primary Contract Holder. -----------------------------------------------------------------------------------------------------
Not allowed with IRA. Date of Birth Marital Status [_] Male
[_] M [_] S [_] Female
-----------------------------------------------------------------------------------------------------
Are you associated with a National Association of Securities Dealers firm?
[_] No [_] Yes If yes, please specify:
----------------------------------------------------------------------------------------------------------------------------------
Primary Name (Last, First, Middle Initial) Social Security Number
Annuitant
-----------------------------------------------------------------------------------------------------
If different than Contract Street Address City State Zip
Holder.
-----------------------------------------------------------------------------------------------------
If IRA, the annuitant Date of Birth Marital Status [_] Male
contract holder must be [_] M [_] S [_] Female
the same person.
----------------------------------------------------------------------------------------------------------------------------------
Joint Name (Last, First, Middle Initial) Social Security Number
Annuitant
-----------------------------------------------------------------------------------------------------
If different than Joint Street Address City State Zip
Contract Holder.
-----------------------------------------------------------------------------------------------------
Not allowed with IRA. Date of Birth Marital Status [_] Male
[_] M [_] S [_] Female
----------------------------------------------------------------------------------------------------------------------------------
Payment [_] Single Payment [_] Installment Payment
Amount $__________________ Amount $__________________
Frequency [_] Monthly [_] Quarterly [_] Semiannual [_] Annual
Beginning_________________
----------------------------------------------------------------------------------------------------------------------------------
Investment Options Variable Fund Options GP Guaranteed Account
Please use whole _____% Equity Growth and Income Fund _____% 3-year guaranteed term
percentages.
Percentages must total _____% Utility Fund _____% 5-year guaranteed term
100%.
_____% Prime Money Fund _____% 8-year guaranteed term
_____% U.S. Government Bond Fund
_____% Corporate Bond Fund
[_] I wish to use Dollar Cost Averaging. Please submit a Dollar Cost Averaging Election Form.
----------------------------------------------------------------------------------------------------------------------------------
Home Office Accepted
Use Only
I-GP2APP(4/94)
</TABLE>
<PAGE>
<TABLE>
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Beneficiary Beneficiary Relationship Social Security Number
Designations
-------------------------------------------------------------------------------------------------------
For additional Beneficiary Relationship Social Security Number
beneficiaries, attach and
sign a separate sheet. -------------------------------------------------------------------------------------------------------
Beneficiary Relationship Social Security Number
-------------------------------------------------------------------------------------------------------
Unless directed otherwise, we will pay any death benefits due in equal shares to the beneficiaries
named or to all living members of a class (e.g., children).
-----------------------------------------------------------------------------------------------------------------------------------
Special Requests
-----------------------------------------------------------------------------------------------------------------------------------
Signatures I declare the information above is correct and true to the best of my knowledge. I understand that
this application will be a part of the contract Aetna Insurance Company of America issues to me. Under
penalty of perjury, I certify that the social security number(s) shown on this form is (are) correct.
I understand: (1) When based on investment experience of a Separate Account, all payments and contract
values are variable and are not guaranteed as to fixed dollar amount; and (2) all payments made from
the GP Guaranteed Account are subject to Market Value Adjustment provisions which may result in a
positive or negative adjustment to amounts payable.
I have received the current Aetna Growth Plus prospectus dated ___________ and all current prospectuses
for variable fund options available under this contract. [_] Please send me a Statement of Additional
Information.
[_] AICA may hold my application and Purchase Payment if it cannot accept my application within five
business days after receiving it at its home office.
Will this contract change or replace any existing life insurance and annuity contracts? [_] No [_] Yes
If yes, please submit any required replacement form(s) with this application. If contract is funded
through a 1035 Exchange, please provide the following information:
Name of Company ________ Contract Number
_______________
Signed at _____________________________________________________ _________________________________
City and State Date
_______________________________________________________________ _________________________________
Contract Holder Witness
_______________________________________________________________ _________________________________
Joint Contract Holder (if applicable) Witness
-----------------------------------------------------------------------------------------------------------------------------------
Producer's Note Do you have any reason to believe any existing insurance and annuity contracts will be modified or
replaced if this contract is issued? [_] Yes [_] No I have reviewed the details of the client's
retirement program during the solicitation of the application, and believe the Contract applied for is
suitable for that program.
-------------------------------------------------------------------------------------------------------
Signature Of Producer/Agent Date
-------------------------------------------------------------------------------------------------------
Print Name Social Security Number
-------------------------------------------------------------------------------------------------------
State License Number Aetna Code
-----------------------------------------------------------------------------------------------------------------------------------
Additional Corrections and amendments. AICA may correct errors and omissions, but any change in the Annuitant's
Information or Join Annuitant's age or sex, or terms of annuity payments requires written consent of the Contract
Holder(s).
(Not valid in W. Va.)
I-GP2APP(4/94)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
[LOGO OF AETNA Aetna Insurance Company of America Aetna Growth Plus
APPEARS HERE] Home Office: 151 Farmington Avenue Group Annuity Contract
Hartford, Connecticut 06156-8022 Application
(SPECIMEN)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Contract 1. Name of Contract Holder
Holder Any Broker
-------------------------------------------------------------------------------------------------------------------
Information 2. Address
(Please print 1 Main Street
or type.) -------------------------------------------------------------------------------------------------------------------
City State Zip Code
Terryille CT 08788
-------------------------------------------------------------------------------------------------------------------
3. Tax Identification Number
00-0000
-------------------------------------------------------------------------------------------------------------------
4. Contract Effective Date
September 9, 1994
-------------------------------------------------------------------------------------------------------------------
5. Type of Contract: [X] Nonqualified [_] IRA Rollover (IRC Section 408)
-------------------------------------------------------------------------------------------------------------------
6. Special Requests
-------------------------------------------------------------------------------------------------------------------
7. I acknowledge receipt of the Aetna Growth Plus Annuity Contract Prospectus dated ______________ and all current
prospectuses pertaining to all of the variable investment options under the contract. [_] check here to receive
a Statement of Additional Information for the Growth Plus Annuity Contract.
-------------------------------------------------------------------------------------------------------------------
8. Will this contract change or replace any existing life insurance or annuity contract?
[_] Yes [X] No If yes, please provide carrier name, policy number and proposed cancellation date.
-------------------------------------------------------------------------------------------------------------------
9. The following will receive compensation when Aetna issues the annuity described in this application:
Any Broker (to be completed by the agent)
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
I understand that any amount withdrawn from the GP Guaranteed Account prior to the maturity date of a guaranteed
term is subject to a market value adjustment as specified in the contract. I further understand that annuity
payments and account values, when based on the investment experience of a Separate Account are variable and not
guaranteed as to fixed dollar amount.
Dated at Terryville, CT this 6 day of July 19 94 .
--------------------------------- ------- ----------- ----
City and State
Any Broker Vice President Witness
-----------------------------------------------------------------------------------------
Contract Holder Title Witness
-------------------------------------------------------------------------------------------------------------------
Agent's Do you have any reason to believe any existing life insurance or annuity contracts will be modified or replaced if
Note this contract is issued? [_] Yes [X] No
Agent
-------------------------------------------------------------------------------------------------------------------
Signature of Agent State License (if applicable)
-------------------------------------------------------------------------------------------------------------------
Home Errors and omissions may be corrected by a company agent number but no change in plan, classification, amount, or
Office extra benefits can be made without written consent of the Contract Holder. (N/A in W. Va)
Use Only
Accepted___________________________
I-GP2APP(4/94)
</TABLE>
<PAGE>
Exhibit 99B(7)
FORM OF REINSURANCE AGREEMENT
(hereinafter called Agreement)
between
AETNA LIFE INSURANCE AND ANNUITY COMPANY
AETNA INSURANCE COMPANY OF AMERICA
(hereinafter called AETNA)
and
It is agreed by the two companies as follows:
ARTICLE I PARTIES TO THE AGREEMENT
----------------------------------
This Agreement is solely between AETNA and ___________________________________
and the performance of obligations of each party under the Agreement shall be
rendered solely to the other party. It shall not create any right, interest or
legal relationship to or with anyone other than AETNA or ______________________.
Nor shall this Agreement create any legal relationship, interest or right
whatever between ____________________________________ and any certificate
holder, beneficiary, policyowner, applicant, or assignee under any contracts
issued by AETNA.
This Agreement covers various variable annuity contracts, which depending on
situs, could be either group or individual contracts. The term "contract" is
used generically in this treaty to refer to any policy, certificate, or contract
covered herein.
1
<PAGE>
ARTICLE II AMOUNTS AT RISK
--------------------------
A. The reinsurance death benefit is the excess of the minimum guaranteed death
benefit over the contract value. At issue, the minimum guaranteed death
benefit is equal to the purchase price of the contract. Thereafter, the
minimum guaranteed death benefit equals the greater of : a) contract value;
b) the contract value on the prior seventh year anniversary of the contract;
or c) the initial purchase price compounded at 4% annually. The minimum
guaranteed death benefit is adjusted for subsequent premiums and withdrawals
subsequent to the most recent determination of b) or c), as shown in the
example in Schedule C.
B. The contract value represents the contract holder's invested assets as it
appears in the records of AETNA before application of any surrender charges
on any given date.
C. The amount at risk each quarter will be calculated as the death benefit less
the contract value for each variable annuity contract covered under this
agreement. For determining the amount at risk, the minimum guaranteed death
benefit and the contract value are calculated as the average of the values at
the end of the current quarter and the end of the prior quarter. The amount
at risk cannot fall below zero.
2
<PAGE>
ARTICLE III AUTOMATIC EXCESS REINSURANCE
----------------------------------------
A. On and after the effective date of this Agreement, AETNA shall cede and
________________________________ shall accept reinsurance of the amount at
risk for all variable annuity contracts subject to the following:
1. the maximum reinsurance provided on any one life shall not exceed the
amounts set forth in Schedule A;
2. the contract issued by AETNA shall be on the specimen forms and state
variations that AETNA has furnished __________________________ and
identified on Schedule B, attached hereto;
3. reinsurance will only apply to assets invested in those funds identified
on Schedule B attached hereto;
4. the contracts underwritten by AETNA shall be issued pursuant to the limits
and rules furnished ____________________________ and attached to this
Agreement as Schedule C;
5. the terms, conditions and restrictions contained in this Agreement.
B. AETNA and _____________________ further agree that the forms and funds
identified on Schedule B were reviewed and approved by _____________________
prior to the effective date of this Agreement. It is also agreed that AETNA
shall not issue coverage under new or revised forms, state variations, or
funds unless such new or revised forms, state variations or funds have been
reviewed and approved by ________________________. AETNA shall provide
written notice of its intention to issue coverage based on new or revised
forms, state variations, or funds and _______________________ shall be
entitled to thirty (30) calendar days following receipt of such notice in
which to review such new or revised forms, state variations or funds. If
____________________________ fails to provide written notice within the
thirty 30 calendar day review period of its decision to deny approval,
___________________________ shall be deemed to have provided approval on the
basis that AETNA requested.
C. AETNA shall provide written notice to _______________________ of any changes
in its published limits and rules identified on Schedule C, and
____________________________ shall have no liability pursuant to revised
limits and rules unless and until ______________________________ provides
written notice to AETNA that such revised limits and rules are acceptable.
If ______________________ fails to provide written notice of acceptance
within thirty (30) days, such changes in limits shall be considered to have
been approved.
3
<PAGE>
ARTICLE IV LIABILITY OF
-----------------------
_________________________ liability for reinsurance under this Agreement shall
follow that of AETNA in every case and be subject in all respects to the general
stipulations, terms, clauses, conditions, waivers and modifications of the
contracts issued by AETNA.
In no event shall __________________ have any reinsurance liability unless the
contract issued by AETNA is in force and the underwriting and issuance of
coverage by AETNA constitutes the doing of business in a state of the United
States of America in which AETNA is properly licensed and authorized to do
business.
ARTICLE V REINSURANCE PREMIUMS
------------------------------
4
<PAGE>
ARTICLE VI PREMIUM ACCOUNTING
-----------------------------
A. AETNA shall forward to _________________ on or before the last calendar day
of April, July, October and January a quarterly statement as set forth in
Schedule E. AETNA shall also remit any premium due for the prior quarter
along with an advance minimum premium for the current quarter in accordance
with Section (2) of Article V.
B. The payment of the reinsurance premium by AETNA shall be a condition
precedent to any liability by ______________________, under the terms and
conditions of this Agreement. If the reinsurance premium payment is not paid
by AETNA in accordance with the preceding paragraph, _______________________
shall have the right to terminate reinsurance under this Agreement. If
_____________________________ elects to exercise its right of termination,
_____________________________ shall provide written notice to AETNA not less
than thirty (30) calendar days prior to termination. If all reinsurance
premiums in arrears, including any which may fall due within the thirty (30)
day period, are not received by _____________________________ prior to the
expiration date of such period, _____________________________ shall be
relieved of all liability incurred after the termination date.
_____________________________ may, at its option, reinstate the reinsurance
at any time within sixty (60) calendar days following such termination if
AETNA makes payment of all reinsurance premiums due and payable up to the
date of reinstatement and provides full disclosure of all claims incurred
between the date of termination and the reinstatement date. If
_____________________________ agrees to such reinstatement, it shall be
liable for reinsurance on only those claims incurred by AETNA between the
termination date and reinstatement date that AETNA discloses to
_____________________________. In the event that AETNA is unaware of such
claim, _____________________________ will nevertheless be liable for claims
that are reported to AETNA in the ninety day period following reinstatement.
C. _________________________ right to terminate reinsurance pursuant to this
ARTICLE shall be without prejudice to its right to collect reinsurance
premiums for the period that reinsurance was in force prior to the expiration
of the thirty (30) calendar day notice. Pursuant to Article X of this
Agreement, _________________________ may set off against amounts due AETNA
the amount of reinsurance premium in arrears, up to and including the
termination date.
5
<PAGE>
ARTICLE VII CLAIMS
------------------
A. AETNA is solely responsible for payment of its claims under the contracts
identified on Schedule B. For all contracts reinsured hereunder. AETNA
shall provide _________________________ with proof of claim, proof of claim
payment and any other claim documentation requested by
_________________________. Payment of reinsurance shall be made by
________________________ in one sum regardless of method of payment by AETNA
and within thirty (30) calendar days following receipt of required claim
documentation.
B. AETNA shall notify ________________________ of its intentions to contest,
compromise, or litigate a claim involving reinsurance.
_________________________ liability shall then be determined under the
provisions of Articles VIII and IX.
6
<PAGE>
ARTICLE VIII EXTRA CONTRACTUAL OBLIGATIONS
------------------------------------------
A. In no event shall _________________________ participate in punitive,
exemplary or compensatory damages or statutory penalties (hereinafter
referred to as "extra contractual obligations") which are awarded against
AETNA as a result of an act, omission or course of conduct committed by AETNA
in connection with the reinsurance under this Agreement, unless
_________________________ shall have been made aware of and shall have
concurred in written notice to AETNA pursuant to the provisions of the
following paragraph, with the actions taken, or not taken, by AETNA which
lead to the awarding of extra contractual obligations.
B. AETNA shall provide written notice to _________________________ of any act,
omission, course of conduct or impending claim which potentially may involve
extra contractual obligations within ten (10) days after becoming aware of
such act, omission, course of conduct or claim and such notification shall
include a suggested course of action or inaction for
_________________________ review. _________________________ then has the
obligation to provide AETNA with written notice of its decision to concur or
not concur with AETNA's suggested course of action or inaction. If
_________________________ concurs, payment of any extra contractual
obligations, including attorney's fees, legal or arbitration costs, special
investigations and similar expenses, but excluding the salaries of employees
of AETNA, will be shared by _________________________ and AETNA based on the
proportionate share of contractual liability of each party under this
Agreement. If _______________________ does not concur,
________________________________ shall then be liable only to the extent of
its liability under this Agreement pursuant to the limitations set forth in
Schedule A.
The following definitions shall apply:
(1) "Punitive damages" are those damages awarded as a penalty, the amount of
which is not governed, nor fixed by statute.
(2) "Statutory penalties" are those amounts which are awarded as a penalty
but fixed in amount by statute.
(3) "Compensatory damages" are those amounts awarded to compensate for the
actual damages sustained, and are not awarded as a penalty nor fixed in
amount by statute.
(4) "Proportionate share" is the amount of liability that each party to the
Agreement bears related to total claim. For example, if total claim is
$100,000 and the account value is $50,000, and ____________________ is
liable for reinsurance coverage for the remaining $50,000, the
proportionate share of each party is 50%.
7
<PAGE>
The language of the article shall be deemed effective only as and
to the extent permitted by the law of any applicable jurisdiction.
C. Notwithstanding anything stated herein, this Agreement shall not apply to any
extra contractual obligations incurred by AETNA as a result of any fraudulent
and or criminal act by any employee, officer, agent, or director of AETNA
acting individually or collectively or in collusion with any person or
corporation or any other entity or organization or party involved in the
representation, defense or settlement of any claim covered hereunder.
D. Recoveries under any form of insurance or reinsurance which protects AETNA
against extra contractual obligations under this article or claims under
Article 8 shall inure to the benefit of this Agreement and will be shared by
________________________ and AETNA based on the proportionate share of
contractual liability of each party.
8
<PAGE>
ARTICLE IX LITIGATION
---------------------
A. In the event of any action brought against AETNA under any contract that is
subject to the terms and conditions of this Agreement, AETNA shall provide a
copy of such action and written notice of such action within five (5)
business days of notification to _________________________. AETNA and
___________________________ shall mutually agree on the selection and
appointment of local counsel to represent AETNA in such action. If AETNA and
_________________________ are unable to agree within (30) calendar days,
AETNA shall have the sole and exclusive right to select and appoint local
counsel to represent AETNA.
B. AETNA shall have primary responsibility for managing any litigation or any
response made to any action brought against AETNA and for all decisions to be
made concerning the representation, defense and/or settlement of such
actions.
C. AETNA and __________________________ agree that all litigation costs,
excluding the salaries of employees of AETNA and _________________________
shall be shared by _________________________ and AETNA based on the
proportionate share of liability of AETNA and _________________________ as
defined in Section (d) of Article VIII.
ARTICLE X OFFSET
----------------
_________________________ shall have, and may exercise at any time and from time
to time, the right to offset any balance or balances whether on account of
premiums or on account of losses or otherwise, due from one party to the other
under the terms of this Agreement. However, in the event of insolvency of AETNA
subject to the provisions of Article XV, offset shall only be allowed in
accordance with the statutes and/or regulations of the state having jurisdiction
over the insolvency.
ARTICLE XI ACCESS TO RECORDS
----------------------------
_________________________ or its duly authorized representative, shall have
reasonable access to the books and records of AETNA as far as they relate to
insurance or reinsurance falling within the terms and conditions of this
Agreement, and in the event of any claim for loss being made hereunder shall
have reasonable access to all claims records at any time until the final
settlement of all claims.
9
<PAGE>
ARTICLE XII DELAYS, ERROR OR OMISSIONS
--------------------------------------
No accidental delay, error or omissions on the part of AETNA shall relieve
_______________ of liability provided such delay, errors or omissions are
rectified as soon as possible after discovery. However, _______________ shall
not be liable with respect to any reinsurance which may have been inadvertently
included in the premium computation but which ought not to have been included by
reason of the terms and conditions of this Agreement. Adjustment(s) of premiums
payable and claims incurred as a result of delay, errors, or omissions shall be
limited to the year in which they are discovered and the calendar year prior to
such discovery.
ARTICLE XIII CURRENCY
---------------------
All retentions and limits hereunder are expressed in United States dollars and
all premium and loss payments shall be made in United States currency. For the
purposes of this Agreement, amounts paid or received by ____________________ in
any other currency shall be converted into United States dollars at the rates of
exchange on the date such transactions are entered on the books of
______________________________.
ARTICLE XIV HOLD HARMLESS
-------------------------
A. _______________ shall indemnify and hold AETNA harmless from any and all
liability, loss, damage, fines, punitive damages, penalties and costs,
including expenses and attorney's fees, which results from any negligence or
willful misconduct of _______________ in fulfilling its duties and
obligations under this Agreement or which results from any action which
exceeds its authority under this Agreement.
B. AETNA shall indemnify and hold _________________ harmless from any and all
liability, loss, damage, fines, punitive damages, penalties and costs,
including expenses and attorney's fees, which results from any negligence or
willful misconduct of AETNA in fulfilling its duties and obligations under
this Agreement or which results from any action which exceeds its authority
under this Agreement.
10
<PAGE>
ARTICLE XV INSOLVENCY
---------------------
In the event of insolvency of AETNA, the reinsurance under this Agreement shall
be payable directly by __________________ to AETNA or to its liquidator,
receiver, conservator or statutory successor on the basis of __________________
liability to AETNA without diminution because of the insolvency of AETNA or
because the liquidator, receiver, conservator or statutory successor of AETNA
has failed to pay all or a portion of any claim. It is agreed, however, that
the liquidator, receiver, conservator or statutory successor of AETNA shall give
written notice to ___________________ of the pendency of a claim against AETNA
within a reasonable time after such claim is filed in the receivership,
conservation, insolvency or liquidation proceeding and that during the pendency
of such claim, ___________________ may investigate such claim and interpose, at
its own expense, in the proceeding where such claim is to be adjudicated, any
defense or defenses that it may deem available to AETNA or its liquidator,
receiver, conservator or statutory successor. The expense thus incurred by
_________________ shall be chargeable, subject to the approval of the Court,
against AETNA as part of the expense of conservation or liquidation to the
extent of a pro-rate share of the benefit which may accrue to AETNA solely as a
result of the defense undertaken by ___________________.
Where two or more reinsurers are involved in the same claim and a majority in
interest elect to interpose defense to such claim, the expense shall be
apportioned in accordance with the terms of this Agreement as though such
expense had been incurred by AETNA.
11
<PAGE>
ARTICLE XVI ARBITRATION
-----------------------
In the event of any dispute or difference of opinion between the parties
hereafter arising with respect to the rights of liabilities of either party,
AETNA and _______________ mutually agree that such dispute or difference of
opinion shall be submitted to arbitration. One arbiter shall be chosen by
AETNA, the other arbiter by __________________ and the third arbiter chosen by
the two arbiters before they enter arbitration. All arbiters shall be active or
retired disinterested executive officers of insurance or reinsurance companies
or active or retired members of the Society of Actuaries. If either AETNA or
__________________ fail to choose an arbiter within (30) calendar days following
the written request by the other party to do so, the requesting party shall have
the right to choose the two arbiters who shall, in turn, choose the third
arbiter before entering into arbitration. If the two arbiters fail to agree
upon the selection of the third arbiter within thirty (30) calendar days
following the last to be chosen, the two arbiters shall each recommend one name
within ten (10) calendar days thereafter and one name shall be drawn by lots to
determine the third arbiter. The arbiters shall interpret this Agreement as an
honorable engagement and not merely as a legal obligation, and a majority
decision of these arbiters shall be final and binding on both parties and there
shall be no appeal from the decision. The arbiters shall interpret this
Agreement liberally rather than according to the rules of law.
The arbiters are released from judicial formalities and may abstain from
following the strict rules of law. The meeting of the arbiters shall be in
Hartford, Connecticut unless some other place is mutually agreed upon by the
arbiters. The cost of arbitration shall be borne equally by both parties unless
the arbiters decide otherwise. It is specially the intent of both parties that
this arbitration provision shall replace and be in lieu of any statutory
arbitration provision. Judgment upon the final decision of the arbiters may be
entered in any court of competent jurisdiction.
This article shall survive the termination of this Agreement.
12
<PAGE>
ARTICLE XVII DAC TAX REGULATION ELECTION
----------------------------------------
_______________ and AETNA hereby agree to make an election pursuant to Internal
Revenue Code Regulation Section 1.848-2(g)(8). This election shall be effective
for all taxable years for which the Reinsurance Agreement remains in effect.
The terms used in this article are defined by reference to Regulation
Section 1.848-2 promulgated on December 28, 1992.
_______________ and AETNA agree that the entity with net positive consideration
for the reinsurance agreement for each taxable year will capitalize specified
contract acquisition expenses with respect to the reinsurance agreement without
regard to the general deductions limitation of Section 848(c)(1) of the Internal
Revenue Code of 1986, as amended.
_______________ and AETNA agree to exchange information pertaining to the amount
of net consideration under the reinsurance agreement each year to ensure
consistency. To achieve this, AETNA shall provide __________________ with a
schedule of its calculation of the net consideration for all reinsurance
agreements in force between them for a taxable year by no later than April 30 of
the succeeding year. _______________ shall advise AETNA if it disagrees with
the amounts provided by no later than May 31, otherwise the amounts will be
presumed correct and shall be reported by both parties in their respective tax
returns for such tax year. If _______________ contests AETNA's calculation of
the net consideration, the Parties agree to act in good faith to resolve and
differences within thirty (30) days of the date _______________ submits its
alternative calculation and report the amounts agreed upon in their respective
tax returns for such tax year.
_______________ represents and warrants that it is subject to U.S. taxation
under either Subchapter L or Subpart F of Part III of Subchapter N of the
Internal Revenue Code of 1986, as amended.
13
<PAGE>
ARTICLE XVIII EFFECTIVE DATE: TERM AND TERMINATION
---------------------------------------------------
14
<PAGE>
ARTICLE XIX NOTICES
-------------------
All notices required to be given hereunder shall be in writing and shall be
deemed delivered if personally delivered, sent via facsimile if transmission is
confirmed, or dispatched by certified or registered mail, returned receipt
requested, postage prepaid, addressed to the parties as follows:
Notice shall be deemed given on the date it is deposited in the mail or sent via
facsimile in accordance with the foregoing. Any party may change the address to
which to send notices by notifying the other party of such change of address in
writing in accordance with the foregoing.
This Agreement constitutes the entire contract between the parties and shall be
deemed to have been made under and governed by the laws of the State of
Connecticut. Any amendment or modification hereto shall be in writing, endorsed
upon or attached hereto and signed by both AETNA and __________________________.
In witness whereof, the parties hereto have caused this Agreement to be signed
in duplicate on the dates indicated to be effective as of the date specified
above.
AETNA LIFE INSURANCE AND
ANNUITY COMPANY
AETNA INSURANCE COMPANY OF AMERICA
Date:___________, 19___ By: __________________________________
Date:___________, 19___ By: __________________________________
15
<PAGE>
SCHEDULE A
----------
Maximum Limits of Reinsurance in
--------------------------------
Maximum Purchase Amount issued on the life of each insured
Maximum Amount =
16
<PAGE>
SCHEDULE B
----------
Contracts and Funds Subject to this Reinsurance Agreement
<TABLE>
<CAPTION>
Contract Number Contract Description
--------------- --------------------
<S> <C>
I-CDA-GP1(4/94) Individual Annuity Contract - ALIAC
I-GP1QEND(4/94) Individual Annuity Contract Endorsement - ALIAC
G-CDA-GP1(4/94) Group Annuity Contract - ALIAC
GP1QEND(4/94) Group Annuity Contract Endorsement - ALIAC
I-CDA-GP2(4/94) Individual Annuity Contract - AICA
I-GP2QEND(4/94) Individual Annuity Contract Endorsement - AICA
G-CDA-GP2(4/94) Group Annuity Contract - AICA
GP2QEND(4/94) Group Annuity Contract Endorsement - AICA
<CAPTION>
Effective Date Fund Description
-------------- ----------------
<S> <C>
7/1/94 Equity Growth and Income Fund
7/1/94 Utility Fund
7/1/94 Prime Money Fund
7/1/94 U.S. Government Bond Fund
7/1/94 Corporate Bond Fund
7/1/94 Growth Plus Guaranteed Account
</TABLE>
17
<PAGE>
SCHEDULE C
----------
Limits and Rules of AETNA
1) AETNA will determine the Minimum Guaranteed Death Benefit for each deceased
within seven (7) working days of written notice of death.
2) After age 85 the guaranteed minimum death benefit is frozen, subject to
subsequent additions or withdrawals. There are no additional 4% allocation
after age 85, nor are any additional seventh year step ups applicable.
3) AETNA has the right to refuse annuity contributions of $500,000 or more.
18
<PAGE>
Schedule C - Example of Guaranteed Minimum Death Benefit Calculation
19
<PAGE>
SCHEDULE D
----------
Quarterly Reinsurance Premium Rates
20
<PAGE>
SCHEDULE E
----------
Quarterly Reporting Format
21
<PAGE>
Exhibit 99.B.8
FORM OF
FUND PARTICIPATION AGREEMENT
by and among
INSURANCE MANAGEMENT SERIES
FEDERATED ADVISORS
and
AETNA INSURANCE COMPANY OF AMERICA
THIS AGREEMENT is made as of the _________ day of ______________, 1994, by
and among INSURANCE MANAGEMENT SERIES, an open-end management investment company
organized as a Massachusetts business trust (the "Trust"), FEDERATED ADVISORS,
an insurance trust organized under the laws of the state of Delaware
("Adviser"), and AETNA INSURANCE COMPANY OF AMERICA, a life insurance company
organized under the laws of the State of Connecticut ("AICA"), on its own behalf
and on behalf of each segregated asset account of AICA set forth on Schedule A
hereto, as may be amended from time to time (the "Accounts").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Trust is registered with the Securities and Exchange Commission
(the "SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), and has registered its shares
under the Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, beneficial interests in the Trust are divided into several series of
shares, each series representing an interest in a particular managed portfolio
of securities and other assets set forth in Schedule B hereto, as may be amended
from time to time ("the "Portfolios"); and
WHEREAS, the Trust desires to act as an investment vehicle for separate
accounts established to fund variable annuity contracts and variable life
insurance policies to be offered by unaffiliated insurance companies that have
entered into participation agreements with the Trust (the "Participating
Insurance Companies"); and
WHEREAS, AICA has established the Accounts to serve as investment vehicles
for certain variable annuity contracts or life insurance policies set forth in
Schedule A hereto, as may be amended from time to time ("Contracts").
NOW, THEREFORE, in consideration of their mutual promises, the parties agree
as follows:
<PAGE>
ARTICLE I.
Sale of Trust Shares
--------------------
1.1. The Trust shall make shares of its Portfolios available to the Accounts
at the net asset value next computed after receipt of such purchase order by the
Trust (or its agent), as established in accordance with the provisions of the
then current prospectus of the Trust. Shares of a particular Portfolio of the
Trust shall be ordered in such quantities and at such times as determined by
AICA to be necessary to meet the requirements of the Contracts. The Trustees of
the Trust (the "Trustees") may refuse to sell shares of any Portfolio to any
person, or suspend or terminate the offering of shares of any Portfolio if such
action is required by law or by regulatory authorities having jurisdiction or
is, in the sole discretion of the Trustees acting in good faith and in light of
their fiduciary duties under federal and any applicable state laws, necessary in
the best interests of the shareholders of such Portfolio.
1.2. The Trust will redeem any full or fractional shares of any Portfolio
when requested by AICA on behalf of an Account at the net asset value next
computed after receipt by the Trust (or its agent) of the request for
redemption, as established in accordance with the provisions of the then current
prospectus of the Trust. The Trust shall make payment for such shares in the
manner established from time to time by the Trust, but in no event shall payment
be delayed for a greater period than is permitted by the 1940 Act.
1.3. AICA will transmit orders from time to time to the Trust for the
purchase of shares of its Portfolios as directed by Contractholders. Orders for
shares of the Portfolios placed by the Company with the Trust by 5:30 p.m.,
Eastern time, on any Business day shall be priced at the net asset value
determined by the Trust as of the end of that Business Day. "Business Day"
shall mean any day on which the New York Stock Exchange is open for trading and
on which the Trust calculates its asset value pursuant to the rules of the SEC.
1.4. Purchase orders that are transmitted to the Trust in accordance with
Section 1.3. shall be paid for no later than 3:00 p.m., Eastern time, on the
Business Day following the Business Day that the Trust receives notice of the
order. Payments shall be made in federal funds transmitted by wire to the Trust
or its agent. Upon receipt by the Trust of the federal funds so wired, such
funds shall cease to be the responsibility of AICA and shall become the
responsibility of the Trust for this purpose.
1.5. Issuance and transfer of the Trust's shares will be by book entry only.
Stock certificates will not be issued to AICA or the Accounts. Shares ordered
from the Trust will be recorded in the appropriate title for each Account or the
appropriate subaccount of each Account.
1.6. The Trust shall furnish prompt notice to AICA of any income dividends
or capital gain distributions payable on the Trust's shares. AICA hereby elects
to receive all such income dividends and capital gain distributions as are
payable on a Portfolio's shares in additional shares of
2
<PAGE>
that Portfolio. The Trust shall notify AICA of the number of shares so issued
as payment of such dividends and distributions. AICA may change this election
from time to time.
1.7. In accordance with Section 1.1., the Trust shall calculate the net
asset value of shares of its Portfolios on each Business Day and shall make the
net asset value per share for each Portfolio available to AICA on a daily basis
as soon as reasonably practical after the net asset value per share is
calculated and shall use its best efforts to make such net asset value per share
available by 6:00 p.m., Eastern time.
1.8. The Trust agrees that its shares will be sold only to Participating
Insurance Companies and their separate accounts and to certain qualified pension
and retirement plans to the extent permitted by the Shared Trust Exemptive
Order. No shares of any Portfolio will be sold directly to the general public.
AICA agrees that Trust shares will be used only for the purposes of funding the
Contracts and Accounts listed in Schedule A.
1.9. The Trust agrees that all Participating Insurance Companies shall have
the obligations and responsibilities regarding pass-through voting and conflicts
of interest corresponding to those contained in Section 2.8. and Article IV.
ARTICLE II.
Obligations of the Parties
--------------------------
2.1. The Trust shall prepare and be responsible for filing with the SEC and
any state regulators requiring such filing all shareholder reports, notices,
proxy materials (or similar materials such as voting instruction solicitation
materials), prospectuses and statements of additional information of the Trust.
The Trust shall bear the costs of registration and qualification of its shares,
preparation and filing of the documents listed in this Section 2.1. and all
taxes to which an issuer is subject on the issuance and transfer of its shares.
2.2. At the option of AICA, the Trust shall either (a) provide AICA (at
AICA's expense) with as many copies of the Trust's current prospectus, statement
of additional information, annual report, semi-annual report and other
shareholder communications, including any amendments or supplements to any of
the foregoing, as AICA shall reasonably request, or (b) provide AICA with a
camera ready copy of such documents in a form suitable for printing. The Trust
shall provide AICA with a copy of its statement of additional information in a
form suitable for duplication by AICA. The Trust (at its expense) shall provide
AICA with copies of any Trust-sponsored proxy materials in such quantity as AICA
shall reasonably require for distribution to Contract holders.
2.3. AICA shall bear the costs of printing and distributing the Trust's
prospectus, statement of additional information, shareholder reports and other
shareholder communications to holders of and applicants for Contracts for which
the Trust is serving or is to serve as an investment vehicle. AICA shall bear
the costs of distributing proxy materials (or similar materials such as voting
3
<PAGE>
solicitation instructions) to Contract holders. AICA assumes sole
responsibility for ensuring that such materials are delivered to Contract
holders in accordance with applicable federal and state securities laws.
2.4. The Trust recognizes AICA as the sole shareholder of Trust Shares
purchased in accordance with this Agreement. The Adviser and Trust further
recognize that the Trust will derive substantial savings with respect to its
administrative expenses, including significant reductions in expenses
attributable to postage, shareholder communications, and recordkeeping by virtue
of the Trust's having a sole shareholder rather then multiple shareholders. In
consideration of these administrative savings, the Adviser agrees to pay AICA a
fee equivalent to 15 basis points per annum of the amount invested in the Trust
through the Accounts in accordance with the Agreement (the "Fee").
2.5. The Adviser will calculate the amount of the total Fee to be paid to
AICA at the end of each calendar quarter and will make such payment to AICA
within 30 days thereafter. Each payment will be accompanied by a statement
showing the calculation of the Fee for the relevant calendar quarter and such
other supporting data as may be reasonably requested by AICA.
2.6. AICA agrees and acknowledges that Adviser is the sole owner of the name
and mark "Federated" and that all use of any designation comprised in whole or
part of Federated (a "Federated Mark") under this Agreement shall inure to the
benefit of Adviser. Except as provided in Section 2.5., AICA shall not use any
Federated Mark on its own behalf or on behalf of the Accounts or Contracts in
any registration statement, advertisement, sales literature or other materials
relating to the Accounts or Contracts without the prior written consent of
Adviser. Upon termination of this Agreement for any reason, AICA shall cease
all use of any Federated Mark(s) as soon as reasonably practicable.
2.7. AICA shall furnish, or cause to be furnished, to the Trust or its
designee, a copy of each Contract prospectus or statement of additional
information in which the Trust or Adviser is named promptly after the filing of
such document with the SEC or other regulatory authorities. AICA shall furnish,
or shall cause to be furnished, to the Trust or its designee, each piece of
sales literature or other promotional material in which the Trust or its
investment adviser is named, at least five Business Days prior to its use. No
such material shall be used if the Trust or its designee reasonably objects to
such use within five Business Days after receipt of such material.
2.8. The Trust shall furnish, or cause to be furnished, to AICA at least one
copy of the application for the order, the order, and any amendments thereto,
all prospectuses, statements of additional information, reports, proxy
statements and other voting solicitation materials, all amendments and
supplements thereto, and any other filings that relate to the Trust or its
shares, promptly after the filing of such document with the SEC or other
regulatory authorities.
4
<PAGE>
2.9. AICA shall not give any information or make any representations or
statements on behalf of the Trust or concerning the Trust or Adviser in
connection with the sale of the Contracts other than information or
representations contained in and accurately derived from the registration
statement or prospectus for the Trust shares (as such registration statement and
prospectus may be amended or supplemented from time to time), reports of the
Trust, Trust-sponsored proxy statements, or in sales literature or other
promotional material approved by the Trust or its designee, except as required
by legal process or regulatory authorities or with the written permission of the
Trust or its designee.
2.10. The Trust shall not give any information or make any representations or
statements on behalf of AICA or concerning AICA, the Accounts or the Contracts,
other than information or representations contained in and accurately derived
from the registration statement or prospectus for the Contracts (as such
registration statement and prospectus may be amended or supplemented from time
to time), or in materials approved by AICA for distribution, including sales
literature or other promotional materials, except as required by legal process
or regulatory authorities or with the written permission of AICA.
2.11. So long as, and to the extent that the SEC interprets the 1940 Act to
require pass-through voting privileges for variable annuity contract and
variable life insurance policy holders, AICA will provide pass-through voting
privileges to holders of Contracts, the assets of which are invested, through
the Accounts, in shares of the Trust. The Trust shall require all Participating
Insurance Companies to calculate voting privileges in the same manner and AICA
shall be responsible for assuring that the Accounts calculate voting privileges
in the manner established by the Trust. With respect to each Account, AICA will
vote shares of the Trust held by the Account and for which no timely voting
instructions from Contract holders are received as well as shares it owns that
are held by that Account, in the same proportion as those shares for which
voting instructions are received. AICA and its agents will not recommend or
oppose or interfere with the solicitation of proxies for Trust shares held by
Contract holders without the prior written consent of the Trust, which consent
may be withheld in the Trust's sole discretion.
ARTICLE III.
Representations and Warranties
------------------------------
3.1. AICA represents and warrants that it is an insurance company duly
organized and in good standing under the laws of the State of Connecticut and
that it has legally and validly established each Account as a segregated asset
account under such law on the date set forth in Schedule A.
3.2. AICA represents and warrants that it has registered or, prior to any
issuance or sale of the Contracts, will register each Account as a unit
investment trust in accordance with the provisions of the 1940 Act to serve as a
segregated investment account for the Contracts, or that the Accounts are exempt
from registration.
5
<PAGE>
3.3. AICA represents and warrants that the Contracts will be registered
under the 1933 Act prior to any issuance or sale of the Contracts or that the
Contracts are exempt from registration thereunder; the Contracts will be issued
and sold in compliance in all material respects with all applicable federal and
state laws, and the sale of the Contracts shall comply in all material respects
with state insurance suitability requirements.
3.4. AICA warrants and represents that it is duly authorized to enter this
Agreement and that the Agreement is legal, valid and enforceable against it
except as may be limited by bankruptcy or principles of equity.
3.5. AICA represents and warrants that all it directors, officers and
employees dealing with the money and/or securities of the Trust are, and shall
continue to be at all times, covered by a blanket fidelity bond or similar
coverage for the benefit of the Trust, in an amount not less than $2 million.
The aforesaid bond shall include coverage for larceny and embezzlement and shall
be issued by a reputable bonding company.
3.6. The Trust and Adviser represent and warrant that the Trust is duly
organized and validly existing under the laws of the Commonwealth of
Massachusetts.
3.7. The Trust and Adviser represent and warrant that the Trust received an
order from the SEC that exempts the Trust from certain 1940 Act requirements and
permits Participating Insurance Companies to purchase Trust shares for their
respective separate accounts funding variable annuity contracts and variable
life insurance policies without regard to such requirements (the "Order").
3.8. The Trust and Adviser represent and warrant that the Adviser is duly
organized and validly existing under the laws of the State of Delaware, and is,
and shall remain, duly registered in all material respects under applicable
federal and state securities laws, and further that Adviser shall perform its
obligations for the Trust in compliance in all material respects with such laws.
3.9. The Trust and Adviser represent and warrant that the Trust shares
offered and sold pursuant to this Agreement will be registered under the 1933
Act and the Trust shall be registered under the 1940 Act prior to any issuance
or sale of such shares. The Trust shall amend its registration statement under
the 1933 Act and the 1940 Act from time to time as required in order to effect
the continuous offering of its shares. The Trust shall register and qualify its
shares for sale in accordance with the laws of the various states only if and to
the extent deemed advisable by the Trust.
3.10. The Trust and Adviser represent and warrant that the investments of
each Portfolio will comply with the diversification requirements set forth in
Section 817(h) of the Internal Revenue Code of 1986, as amended ("Code"), and
the rules and regulations thereunder.
6
<PAGE>
3.11. The Trust and Adviser represent and warrant that each is duly
authorized to enter into this Agreement and the Agreement is legal, valid and
enforceable against each except as may be limited by bankruptcy or principles of
equity.
3.12. The Trust and Adviser represent and warrant that all their respective
Trustees or directors, officers, and employees dealing with the money and/or
securities of the Trust are, and shall continue to be at all times, covered by a
blanket fidelity bond or similar coverage for the benefit of the Trust in an
amount not less than the minimal coverage as required currently by Rule 17g-(1)
of the 1940 Act or related provisions as may be promulgated from time to time.
The aforesaid bond shall be issued by a reputable bonding company.
ARTICLE IV.
Potential Conflicts
-------------------
4.1. The parties acknowledge that the Trust's shares may be made available
for investment to other Participating Insurance Companies. In such event, the
Trustees will monitor the Trust for the existence of any material irreconcilable
conflict between the interests of the contract holders of all Participating
Insurance Companies. An irreconcilable material conflict may arise for a
variety of reasons, including: (a) an action by any state insurance regulatory
authority; (b) a change in applicable federal or state insurance, tax, or
securities laws or regulations, or a public ruling, private letter ruling, no-
action or interpretative letter, or any similar action by insurance, tax, or
securities regulatory authorities; (c) an administrative or judicial decision in
any relevant proceeding; (d) the manner in which the investments of any
Portfolio are being managed; (e) a difference in voting instructions given by
variable annuity contract and variable life insurance contract owners; or (f) a
decision by an insurer to disregard the voting instructions of contract owners.
The Trustees shall promptly inform AICA if they determine that an irreconcilable
material conflict exists and the implications thereof.
4.2. AICA agrees to promptly report any potential or existing conflicts of
which it is aware to the Trustees. AICA will assist the Trustees in carrying
out their responsibilities under the Order by providing the Trustees with all
information reasonably necessary for the Trustees to consider any issues raised
including, but not limited to, information as to a decision by AICA to disregard
Contract holder voting instructions.
4.3. If it is determined by a majority of the Trustees, or a majority of
disinterested Trustees, that a material irreconcilable conflict exists that
affects the interests of Contract holders, AICA shall, in cooperation with other
Participating Insurance Companies whose contract holders are also affected, at
its expense and to the extent reasonably practicable (as determined by the
Trustees) take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, which steps could include: (a) withdrawing
the assets allocable to some or all of the Accounts from the Trust or any
Portfolio and reinvesting such assets in a different investment medium,
including (but not limited to) another Portfolio of the Trust, or submitting the
question of whether or not such
7
<PAGE>
segregation should be implemented to a vote of all affected Contract holders, as
appropriate, segregating the assets of any appropriate group (i.e., variable
annuity contract holders or variable life insurance policy holders of one or
more Participating Insurance Companies) that votes in favor of such segregation,
or offering to the affected Contract holders the option of making such a change
and (b) establishing a new registered management investment company or managed
separate account.
4.4. If a material irreconcilable conflict arises because of a decision by
AICA to disregard Contract holder voting instructions and that decision
represents a minority position or would preclude a majority vote, AICA may be
required, at the Trust's election, to withdraw the affected Account's investment
in the Trust and terminate this Agreement with respect to such Account;
provided, however that such withdrawal and termination shall be limited to the
extent required by the foregoing material irreconcilable conflict as determined
by a majority of the disinterested Trustees. Any such withdrawal and
termination must take place within six (6) months after the Trust gives written
notice that this provision is being implemented. Until the end of such six (6)
month period, the Trust shall continue to accept and implement orders by AICA
for the purchase and redemption of shares of the Trust.
4.5. If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to AICA conflicts with the majority of
other state regulators, AICA will withdraw the affected Account's investment in
the Trust and terminate this Agreement with respect to such Account within six
(6) months after the Trustees inform AICA in writing that it has determined that
such decision has created an irreconcilable material conflict; provided,
however, that such withdrawal and termination shall be limited to the extent
required by the foregoing material irreconcilable conflict as determined by a
majority of the disinterested Trustees. Until the end of such six (6) month
period, the Trust shall continue to accept and implement orders by AICA for the
purchase and redemption of shares of the Trust.
4.6. For purposes of Sections 4.3. through 4.6., a majority of the
disinterested Trustees shall determine whether any proposed action adequately
remedies any irreconcilable material conflict, but in no event will AICA be
required to establish a new funding medium for the Contracts if an offer to do
so has been declined by vote of a majority of Contract holders materially
adversely affected by the irreconcilable material conflict. In the event that
the Trustees determine that any proposed action does not adequately remedy any
irreconcilable material conflict, AICA will withdraw the Account's investment in
the Trust and terminate this Agreement within six (6) months after the Trustees
inform AICA in writing of the foregoing determination; provided, however, that
such withdrawal and termination shall be limited to the extent required by any
such material irreconcilable conflict as determined by a majority of the
disinterested Trustees.
4.7. AICA shall at least annually submit to the Trustees such reports,
materials or data as the Trustees may reasonably request so that the Trustees
may fully carry out the duties imposed upon
<PAGE>
them by the Order, and said reports, materials and data shall be submitted more
frequently if deemed appropriate by the Trustees.
4.8. If any rule issued under those provisions of the 1940 Act that are the
bases of the Order is revised in any material respect, the Trust and/or the
Participating Insurance Companies, as appropriate, shall take such steps as may
be necessary to comply with such revised rule as adopted to the extent it is
applicable.
ARTICLE V.
Indemnification
---------------
5.1. AICA agrees to indemnify and hold harmless the Trust and Adviser and
each of its respective Trustees or directors, officers, employees and agents and
each person, if any, who controls the Trust or the Adviser within the meaning of
Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes
of this Article V.) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of AICA) or
expenses (including the reasonable costs of investigating or defending any
alleged loss, claim, damage, liability or expense and reasonable legal counsel
fees incurred in connection therewith) (collectively, "Losses"), to which the
Indemnified Parties may become subject under any statute or regulation, or at
common law or otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in a registration
statement or prospectus for the Contracts or in the Contracts themselves or
in sales literature generated or approved by AICA on behalf of the
Contracts or Accounts (or any amendment or supplement to any of the
foregoing) (collectively, "AICA Documents" for the purposes of this Article
V.), or arise out of or are based upon the omission or the alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, provided that this indemnity
shall not apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon and was
accurately derived from written information furnished to AICA by or on
behalf of the Trust or Adviser for use in AICA Documents or otherwise for
use in connection with the sale of the Contracts or Trust shares; or
(b) arise out of or result from statements or representations (other
than statements or representations contained in and accurately derived from
Trust Documents as defined in Section 5.2.(a)) or wrongful conduct of AICA
or persons under its control, with respect to the sale or acquisition of
the Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or alleged untrue
statement of a material fact contained in Trust Documents as defined in
Section 5.2.(a) or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to
9
<PAGE>
make the statements therein not misleading if such statement or omission
was made in reliance upon and accurately derived from written information
furnished to the Trust by or on behalf of AICA; or
(d) arise out of or result from any failure by AICA to provide the
services or furnish the materials required under the terms of this
Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by AICA in this Agreement or arise out
of or result from any other material breach of this Agreement by AICA.
5.2. The Trust and Adviser agree to indemnify and hold harmless AICA and its
directors, officers, employees and agents and each person, if any, who controls
AICA within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Article V.) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Trust) or expenses (including the reasonable costs of
investigating or defending any alleged loss, claim, damage, liability or expense
and reasonable legal counsel fees incurred in connection therewith)
(collectively, "Losses"), to which the Indemnified Parties may become subject
under any statute or regulation, or at common law or otherwise, insofar as such
Losses:
(a) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the registration
statement, prospectus or sales literature for the Trust (or any amendment
or supplement thereto) (collectively, "Trust Documents" for the purposes of
this Article V), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
provided that this indemnity shall not apply as to any Indemnified Party if
such statement or omission or such alleged statement or omission was made
in reliance upon and was accurately derived from written information
furnished to the Trust by or on behalf of AICA for use in Trust Documents
or otherwise for use in connection with the sale of the Contracts or Trust
shares; or
(b) arise out of or result from statements or representations (other
than statements or representations contained in and accurately derived from
AICA Documents) or wrongful conduct of the Trust or persons under its
control, with respect to the sale or acquisition of the Contracts or Trust
shares; or
(c) arise out of or result from any untrue statement or alleged untrue
statement of a material fact contained in AICA Documents or the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading if such
statement or omission was made in reliance upon and
10
<PAGE>
accurately derived from written information furnished to AICA by or on
behalf of the Trust; or
(d) arise out of or result from any failure by the Trust or Adviser to
provide the services or furnish the materials required under the terms of
this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this Agreement or arise
out of or result from any other material breach of this Agreement by the
Trust.
5.3. Neither AICA nor the Trust or Adviser shall be liable under the
indemnification provisions of Sections 5.1. or 5.2., as applicable, with respect
to any Losses incurred or assessed against an Indemnified Party that arise from
any Indemnified Party's willful misfeasance, bad faith or negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
5.4. Neither AICA nor the Trust or Adviser shall be liable under the
indemnification provisions of Sections 5.1. or 5.2., as applicable, with respect
to any claim made against an Indemnified Party unless such Indemnified Party
shall have notified the other party or parties in writing within a reasonable
time after the summons, or other first written notification, giving information
concerning the nature of the claim shall have been served upon or otherwise
received by such Indemnified Party (or after such Indemnified Party shall have
received notice of service upon or other notification to any designated agent),
but failure to notify the party or parties against whom indemnification is
sought of any such claim shall not relieve that party from any liability which
it may have to the Indemnified Party in the absence of Sections 5.1. and 5.2.
5.5. In case any such action is brought against the Indemnified Parties, the
indemnifying party or parties shall be entitled to participate, at its or their
own expense, in the defense of such action. The indemnifying party or parties
also shall be entitled to assume the defense thereof, with counsel reasonably
satisfactory to the party or parties named in the action. After notice from the
indemnifying party or parties to the Indemnified Party of an election to assume
such defense, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the indemnifying party or parties will
not be liable to the Indemnified Party under this Agreement for any legal or
other expenses subsequently incurred by such party or parties independently in
connection with the defense thereof other than reasonable costs of
investigation.
ARTICLE VI.
Termination
-----------
6.1. This Agreement shall continue in full force and effect until the first
to occur of:
11
<PAGE>
(a) termination by any party for any reason by sixty (60) days' advance
written notice delivered to the other parties; or
(b) termination by AICA by written notice to the Trust and Adviser with
respect to any Portfolio based upon AICA's determination that shares of
such Portfolio are not reasonably available to meet the needs of the
Contracts; or
(c) termination by AICA by written notice to the Trust and Adviser with
respect to any Portfolio in the event any of the Portfolio's shares are not
registered, issued or sold in accordance with applicable state and/or
federal law or such law precludes the use of such shares as the underlying
investment media of the Contracts issued or to be issued by AICA; or
(d) termination by AICA by written notice to the Trust and Adviser with
respect to any Portfolio in the event that such Portfolio ceases to qualify
as a regulated investment company under Subchapter M of the Code or under
any successor or similar provision, or if AICA reasonably believes the
Trust may fail to so qualify; or
(e) termination by AICA by written notice to the Trust and Adviser with
respect to any Portfolio in the event that such Portfolio fails to meet the
diversification requirements of Section 3.10.; or
(f) termination by AICA by written notice to the Trust and Adviser, if
AICA shall determine, in its sole judgment exercised in good faith, that
either the Trust or Adviser has suffered a material adverse change in its
business, operations, financial condition, or prospects since the date of
this Agreement or is the subject of material adverse publicity; or
(g) termination by either the Trust or Adviser by written notice to
AICA, if either one or both of the Trust or Adviser shall determine, in its
sole judgment exercised in good faith, that AICA has suffered a material
adverse change in its business, operations, financial condition, or
prospects since the date of this Agreement or is the subject of material
adverse publicity.
6.2. Notwithstanding any termination of this Agreement, the Trust shall, at
the option of AICA, continue to make available additional shares of the Trust
(or any Portfolio) pursuant to the terms and conditions of this Agreement for
all Contracts in effect on the effective date of termination of this Agreement;
provided, however, that AICA continues to pay the costs set forth in Section
2.3.
6.3. The provisions of Article V. shall survive the termination of this
Agreement, and the provisions of Article IV. and Section 2.8. shall survive the
termination of this Agreement as long as shares of the Trust are held on behalf
of Contract holders in accordance with Section 6.2.
12
<PAGE>
ARTICLE VII.
Notices
-------
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Trust or Advisers:
------------------------------
------------------------------
------------------------------
Attention:
If to AICA:
Aetna Insurance Company
of America
151 Farmington Avenue
Hartford, Connecticut
Attention: Barrett N. Sidel
ARTICLE VIII.
Miscellaneous
-------------
8.1. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
8.2. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
8.3. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
8.4. This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of Connecticut. This
Agreement shall be subject to the provisions of the 1933 Act, the 1934 Act and
the 1940 Act and the rules and regulations thereunder, including exemptions from
those statutes, rules and regulations as the SEC may grant (including, but not
limited to, the Order) and the terms hereof shall be interpreted and construed
in accordance thereof.
13
<PAGE>
8.5. The parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising, directly or indirectly, under this Agreement,
of any and every nature whatsoever, shall be satisfied solely out of the assets
of the Trust and that no Trustee, officer or agent of the Trust, or holder of
shares of beneficial interest of the Trust shall be personally liable for any
such liabilities.
8.6. Each party shall cooperate with each other party and all appropriate
governmental authorities (including, without limitation, the SEC, the National
Association of Dealers, Inc. and state insurance or securities regulators) and
shall permit such authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby.
8.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
8.8. The parties to this Agreement acknowledge and agree that this Agreement
shall not be exclusive in any respect.
8.9. Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the prior written approval of the other party.
8.10. No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties.
IN WITNESS WHEREOF, the parties have caused their duly authorized officers to
execute this Agreement as of the date and year first above written.
AETNA INSURANCE COMPANY INSURANCE MANAGEMENT SERIES
OF AMERICA
By: By:
----------------------------- -----------------------------
Name: Name:
Title: Title:
FEDERATED ADVISERS
By:
-----------------------------
Name:
Title:
14
<PAGE>
Schedule A
Separate Accounts and Associated Contracts
------------------------------------------
Name of Separate Account and Contracts Funded
Date Established by Board of Directors By Separate Account
-------------------------------------- -------------------
15
<PAGE>
Schedule B
Name of Fund
------------
16
<PAGE>
Exhibit 99.B.9
[LOGO OF AETNA Susan E. Bryant
APPEARS HERE] Counsel
151 Farmington Avenue Law & Regulatory Affairs, RE4C
Hartford, CT 06156 (203) 273-7834
203-273-0123 Fax:(203) 273-8340
August 10, 1995
Securities and Exchange Commission
450 Fifth Street N.W.
Washington, DC 20549
RE: Aetna Insurance Company of America and its Variable Annuity Account I
Post-Effective Amendment No. 3 to Registration Statement on Form N-4
File No. 33-80750
Prospectus Title: AICA Growth Plus
Dear Sirs:
As Counsel of Aetna Insurance Company of America (the "Company"), I have
represented the Company in connection with AICA Growth Plus, a group and
individual variable annuity contract (the "Contract"), to be funded by the
Company's Variable Annuity Account I and the Post-Effective Amendment No. 3 to
the Registration Statement on Form N-4 under the Securities Act of 1933 and the
Investment Company Act of 1940 relating to the Contract.
In connection with such representation, I have reviewed the Registration
Statement for the Contract, including the prospectus, and relevant proceedings
of the Board of Directors.
Based upon this review, and assuming the securities represented by the Contract
are issued in accordance with the provisions of the prospectus, I am of the
opinion that the securities, when issued, will have been validly issued, and
will constitute a legal and binding obligation of the Company.
I further consent to the use of this opinion as an exhibit to the Registration
Statement and to my being named under the caption "Legal Matters" therein.
Sincerely,
/s/Susan E. Bryant
Susan E. Bryant
Counsel
Aetna Insurance Company of America
<PAGE>
Exhibit 99.B.10
Consent of Independent Auditors
The Board of Directors
Aetna Insurance Company of America:
We consent to the use of our report dated March 17, 1995, included herein, and
to the reference to our firm under the caption "Independent Auditors" in the
statement of additional information.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
August 8, 1995
<PAGE>
Exhibit 99.B.15.1
POWER OF ATTORNEY
I, Shaun P. Mathews, an officer and director of Aetna Insurance Company of
America, do hereby constitute and appoint Susan E. Bryant, Steven J. Lauwers,
Julie E. Rockmore, and Maria F. McKeon and each of them individually, my true
and lawful attorneys, with full power to them and each of them to sign for me,
and in my name and in the capacity indicated below, any and all amendments to
the Registration Statements listed below filed with the Securities and Exchange
Commission by Aetna Insurance Company of America under the Securities Act of
1933, as amended, and/or the Investment Company Act of 1940, including by not
limited to pre-effective amendments and post-effective amendments to such
filings.
Registration Statements filed under the Securities Act of 1933, as amended:
33-80750
33-81010
33-59749
Registration Statements filed under the Investment Company Act of 1940:
811-8582
and I do hereby ratify and confirm on this 4th day of August, 1995, my
signature as it may be signed by my said attorneys on any and all amendments to
such registration statements.
/s/ Shaun P. Mathews
---------------------
Shaun P. Mathews
Director
