As filed with the Securities and Exchange File No. 33-59749
Commission on February 13, 1998 File No. 811-8582
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
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POST-EFFECTIVE AMENDMENT NO. 7 TO
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
and Amendment to
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
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Variable Annuity Account I of Aetna Insurance Company of America
Aetna Insurance Company of America
151 Farmington Avenue, RE4A, Hartford, Connecticut 06156
Depositor's Telephone Number, including Area Code (860) 273-4686
Julie E. Rockmore, Counsel
Aetna Insurance Company of America
151 Farmington Avenue, RE4A, Hartford, Connecticut 06156
(Name and Address of Agent for Service)
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It is proposed that this filing will become effective:
-------- immediately upon filing pursuant to paragraph (b) of Rule 485
X on February 17, 1998 pursuant to paragraph (b) of Rule 485
--------
<PAGE>
VARIABLE ANNUITY ACCOUNT I
CROSS REFERENCE SHEET
Pursuant to Rule 481(a)
<TABLE>
<CAPTION>
LOCATION - PROSPECTUS
DATED NOVEMBER 28, 1997,
FORM N-4 AND AS AMENDED
ITEM NO. PART A (PROSPECTUS) FEBRUARY 17, 1998
<S> <C> <C>
1 Cover Page........................................... Cover Page, and as amended
2 Definitions.......................................... Definitions, and as amended
3 Synopsis............................................. Prospectus Summary, and as amended;
Fee Table, and as amended
4 Condensed Financial Information...................... Condensed Financial Information,
and as amended
5 General Description of Registrant, Depositor, and
Portfolio Companies.................................. The Company; Variable Annuity Account
I; The Funds, and as amended
6 Deductions and Expenses.............................. Charges and Deductions, and as amended;
Distribution
7 General Description of Variable Annuity Contracts.... Purchase, and as amended; Miscellaneous,
and as amended
8 Annuity Period....................................... Annuity Period, and as amended
9 Death Benefit........................................ Death Benefit During Accumulation Period;
Death Benefit Payable During the Annuity
Period
10 Purchases and Contract Value......................... Purchase, and as amended; Determining
Contract Valuation, and as amended
11 Redemptions.......................................... Contract Rights - Withdrawals, and as
amended; Right to Cancel
12 Taxes................................................ Tax Status, and as amended
13 Legal Proceedings.................................... Miscellaneous - Legal Matters and
Proceedings, and as amended
14 Table of Contents of the Statement of Additional Statement of Additional Information -
Information......................................... Table of Contents
<PAGE>
FORM N-4 PART B (STATEMENT OF LOCATION - STATEMENT OF
ITEM NO. ADDITIONAL INFORMATION) 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; Average Annual Total
Return Quotations
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>
PARTS A AND B
The Prospectus is incorporated into Part A of this Post-Effective Amendment No.
7 by reference to Post-Effective Amendment No. 6 to the Registration Statement
on Form N-4 (File No. 33-59749), as filed electronically on November 26, 1997
(Accession No. 0000950146-97-001811). A Supplement dated February 17, 1998 to
the Prospectus is included in this Post-Effective Amendment No. 7. The Statement
of Additional Information is included in Part B of this Post-Effective Amendment
No. 7.
<PAGE>
Supplement dated February 17, 1998
to Prospectus Dated November 28, 1997
Aetna Insurance Company of America
Variable Annuity Account I
Aetna Marathon Plus
The prospectus dated May 1, 1997 and amended on November 28, 1997, is amended as
follows:
1. The cover page is amended to:
a. Add references to "Roth IRAs" and Section 408A of the Internal Revenue Code,
subject to approval by state regulatory agencies, in (2) of the opening
paragraph.
b. Add "In most states," to the beginning of the third paragraph. Add the
following sentence after the first sentence: "In certain states, Purchase
Payments may be allocated to the Fixed Account when the Guaranteed Account
is not available."
c. Add the following sentence in the paragraph following the list of
investment options: "The Fixed Account is described in a separate Appendix
to this Prospectus."
d. The name of Calvert Responsibly Invested Balanced Portfolio is changed
to Calvert Social Balanced Portfolio.
2. The definitions listed below are added or amended to describe a Contract
offered as a Roth IRA or to describe a Fixed Account.
Contract Year: The number of completed years since the date of the first
payment under an individual Contract or to an Account under a group
Contract.
Fixed Account: A fixed interest option available in certain states which is
described in an Appendix to this Prospectus. Amounts allocated to the Fixed
Account are included in the Account Value.
Individual Retirement Annuity: An individual or group variable deferred
annuity intended to qualify under Code Section 408(b) or 408A.
Qualified Contracts: Contracts available for use with plans entitled to
special federal income tax treatment under Code Sections 401(a), 403(b),
408(b), 408A or 457.
Roth IRA: An Individual Retirement Annuity intended to qualify under Code
Section 408A.
3. The Prospectus Summary is amended as follows:
a. Contracts Offered is amended to add "including Roth IRAs" after
"("IRAs")" in (2) of paragraph one:
b. Free Look Period is amended to add the following sentence at the end of
the paragraph:
If the Purchase Payment to a Roth IRA is a rollover from a contract
issued by the Company or an affiliate where the deferred sales charge
was eliminated or reduced to facilitate the rollover to this Contract,
the Purchase Payment will be restored to the contract from which it
came.
c. Investment Options is amended to add "or Fixed Account" after "Guaranteed
Account" in the first paragraph. A third paragraph is added to read: "The
Fixed Account is an option available under the Contract which allows you
to earn a fixed rate of interest. (See the Appendix to this Prospectus.)"
d. Transfers is amended to add "or Fixed Account" after "Guaranteed Account"
in the first sentence. In the second paragraph, the following sentence is
added after the second sentence: "In a Contract with a Fixed Account, the
Fixed Account is only available for dollar cost averaging from the Fixed
Account to the other investment options over a period not to exceed 12
months."
e. Taxes is amended to read as follows:
Earnings are not generally taxed until you or your Beneficiary(ies)
actually receive a distribution from the Contract. A 10% federal tax
penalty may be imposed on certain withdrawals. Special rules apply to
distributions from a Roth IRA. (See "Tax Status.")
<PAGE>
4. The section entitled "Fee Table" is amended to add the following information
applicable to Roth IRAs:
CONTRACT HOLDER TRANSACTION EXPENSES
Deferred Sales Charge for withdrawals under each Contract (as a percentage
of each Purchase Payment withdrawn). If the Purchase Payment is a rollover
from another contract issued by the Company or an affiliate where the
deferred sales charge has been waived, the deferred sales charge is based on
the number of completed Contract Years since the date of the initial payment
to the predecessor contract. The Company reserves the right to not accept
any rollover contribution to an existing Contract.
Completed Contract Years
<TABLE>
<S> <C>
Less than 1 5%
1 or more but less than 2 4%
2 or more but less than 3 3%
3 or more but less than 4 2%
4 or more but less than 5 1%
5 or more 0%
Annual Maintenance Fee(1) $30.00
Transfer Charge(2) $ 0.00
</TABLE>
SEPARATE ACCOUNT ANNUAL EXPENSES
(Daily deductions, equal to the percentage shown on an annual basis, made
from amounts allocated to the variable options under each Contract)
<TABLE>
<S> <C>
During the Accumulation Period
Mortality and Expense Risk Charge ...... 1.10%(3)
Administrative Charge .................. 0.15%
Total Subaccount Annual Expenses ...... 1.25%
During the Annuity Period
Mortality and Expense Risk Charge ...... 1.25%
Administrative Charge .................. 0.00%(4)
Total Subaccount Annual Expenses ...... 1.25%
</TABLE>
- ----------
1) The maintenance fee, if applicable, will generally be deducted from each
Account annually and if the full Account Value is withdrawn. The maintenance
fee is waived when the Account Value is $50,000 or more on the date the
maintenance fee is due. The amount shown is the maximum maintenance fee that
can be deducted under the Contract.
2) During the Accumulation Period we currently allow an unlimited number of
transfers without charge. However, we reserve the right to impose a fee of
$10 for each transfer in excess of 12 per year.
3) Under certain Contracts the mortality and expense risk charge during the
Accumulation Period may be reduced. See "Charges and Deductions" in the
prospectus.
4) We currently do not impose an Administrative Charge during the Annuity
Period. However, we reserve the right to deduct a daily charge of not more
than 0.25% per year from the Subaccounts.
ANNUAL EXPENSES OF THE FUNDS--Please refer to Fee Table--2 of the
Prospectus.
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 RETURN MAY BE MORE OR LESS THAN THOSE SHOWN BELOW.
The following Examples illustrate the expenses that would have been paid
assuming a $1,000 investment in the Contract and a 5% return on assets. For
the purposes of these Examples, the maximum maintenance fee of $30.00 that
can be deducted under the Contract has been converted to a percentage of
assets equal to 0.00%.
<PAGE>
<TABLE>
<CAPTION>
EXAMPLE A EXAMPLE B
If you withdraw the entire Account If you do not withdraw the
Value at the end of the periods shown, Account Value, or if you annuitize at
you would pay the following expenses, the end of the periods shown, you would
including any applicable deferred pay the following expenses (no
sales charges: deferred sales charge is reflected)(1):
1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Variable Fund $60 $75 $98 $213 $18 $57 $98 $213
Aetna Income Shares $59 $72 $94 $204 $18 $54 $94 $204
Aetna Variable Encore Fund $58 $68 $87 $190 $16 $51 $87 $190
Aetna Investment Advisers Fund, $60 $75 $99 $215 $19 $58 $99 $215
Inc.
Aetna Ascent Variable Portfolio $62 $81 $108 $233 $20 $63 $108 $233
Aetna Crossroads Variable $62 $81 $108 $233 $20 $63 $108 $233
Portfolio
Aetna Legacy Variable Portfolio $62 $81 $108 $233 $20 $63 $108 $233
Aetna Variable Capital $62 $81 $108 $233 $20 $63 $108 $233
Appreciation Portfolio
Aetna Variable Growth Portfolio $62 $81 $108 $233 $20 $63 $108 $233
Aetna Variable Index Plus $59 $73 $95 $206 $18 $55 $95 $206
Portfolio
Aetna Variable Small Company $63 $85 $115 $248 $22 $67 $115 $248
Portfolio
Calvert Social Balanced $62 $83 $112 $242 $21 $65 $112 $242
Portfolio (formerly Calvert
Responsibly Invested Balanced
Portfolio)
Fidelity VIP Equity-Income $70 $84 $108 $215 $19 $58 $99 $215
Portfolio
Fidelity VIP Growth Portfolio $71 $88 $114 $226 $20 $61 $105 $226
Fidelity VIP High Income $71 $88 $115 $229 $20 $62 $106 $229
Portfolio
Fidelity VIP Overseas Portfolio $74 $95 $126 $251 $22 $68 $117 $251
Fidelity VIP II Asset Manager $72 $89 $116 $232 $20 $62 $107 $232
Portfolio
Fidelity VIP Contrafund Portfolio $72 $89 $116 $232 $20 $62 $107 $232
Fidelity VIP II Index 500 $67 $75 $92 $182 $16 $48 $83 $182
Portfolio
Janus Aspen Aggressive Growth $62 $81 $108 $234 $20 $63 $108 $234
Portfolio
Janus Aspen Balanced Portfolio $63 $86 $117 $252 $22 $69 $117 $252
Janus Aspen Flexible Income $62 $83 $112 $242 $21 $65 $112 $242
Portfolio
Janus Aspen Growth Portfolio $61 $79 $105 $226 $20 $61 $105 $226
Janus Aspen Worldwide Growth $62 $82 $110 $238 $21 $64 $110 $238
Portfolio
MFS Total Return Series $64 $89 $122 $261 $23 $71 $122 $261
MFS World Governments Series $64 $89 $122 $261 $23 $71 $122 $261
Oppenheimer Capital Appreciation $62 $81 $108 $233 $20 $63 $108 $233
Fund
Oppenheimer Global Securities $62 $82 $111 $239 $21 $65 $111 $239
Fund
Oppenheimer Growth & Income Fund $64 $88 $120 $258 $23 $70 $120 $258
Oppenheimer Strategic Bond Fund $62 $84 $113 $243 $21 $66 $113 $243
Portfolio Partners MFS Emerging $62 $83 $112 $241 $21 $65 $112 $241
Equities Portfolio
Portfolio Partners MFS Research $62 $84 $113 $243 $21 $66 $113 $243
Growth Portfolio
Portfolio Partners MFS Value $63 $85 $115 $248 $22 $67 $115 $248
Equity Portfolio
Portfolio Partners Scudder $64 $88 $120 $258 $23 $70 $120 $258
International Growth Portfolio
Portfolio Partners T. Rowe Price $62 $81 $108 $233 $20 $63 $108 $233
Growth Equity Portfolio
</TABLE>
- ----------
(1)This example would not apply if a nonlifetime variable annuity option is
selected, and a lump sum settlement is requested within three years after
annuity payments start, since the lump sum payment will be treated as a
withdrawal during the Accumulation Period and will be subject to any deferred
sales charge that would then apply. (Refer to Example A)
<PAGE>
5. The Funds section of Investment Options on page 1 of the Prospectus is
amended to add ", or an investment in the Fixed Account in certain Contracts
where the Guaranteed Account is not available," after the word "duration" in
the last sentence of the first paragraph.
6. A new section "Fixed Account" is added after Credited Interest Option on
page 5 of the Prospectus. It reads:
"Fixed Account
In certain states, Purchase Payments may be allocated to the Fixed Account.
Through the Fixed Account we guarantee to pay the minimum interest rate
specified in the Contract. (See the Appendix)."
7. The Purchase section of the Prospectus on page 5 is amended to add
"including Roth IRAs" after "Annuities" in the first sentence and to add the
following to the end of the first paragraph:
A Roth IRA Contract is a special form of IRA which can accept nondeductible
annual contributions. Contributions to a Simplified Employee Pension Plan
("SEP") are not permitted in a Roth IRA Contract. The Roth IRA Contract can
also accept transfers and rollovers, but only from an Individual Retirement
Annuity/Individual Retirement Account, subject to ordinary income tax, or
from another Roth IRA. If the Purchase Payment to a Roth IRA is a rollover
from a contract issued by the Company or an affiliate where the deferred
sales charge was eliminated or reduced and the Contract is canceled during
the free look period, the Purchase Payment will be restored to the
predecessor contract.
8. Add the following sentence to the end of Individual Contracts on page 5:
"However, if the Purchase Payment to a Roth IRA is a rollover from a
contract issued by the Company or an affiliate where the deferred sales
charge was eliminated or reduced and the Contract is canceled during the
free look period, the Purchase Payment will be restored to the predecessor
contract."
9. Add "or Fixed Account" after "Guaranteed Account" in Allocation of Purchase
Payments on page 6.
10. In Mortality and Expense Risk Charge on page 7, add the following sentence
after the second sentence:
"If the Contract is issued as a Roth IRA, the mortality and expense risk
charge is equal, on an annual basis, to 1.10% of the daily net assets of the
Subaccounts."
11. The first two paragraphs under Deferred Sales Charge on page 7 are replaced
with the following:
Withdrawals of all or a portion of the Account Value may be subject to a
deferred sales charge. The deferred sales charge is a percentage of Purchase
Payments withdrawn from the Subaccounts and the Guaranteed Account or Fixed
Account and, except for Roth IRAs, is based on the number of years which
have elapsed since the Purchase Payment was made. The deferred sales charge
on withdrawals from a Roth IRA is based on the number of years which have
elapsed from the Account effective date. The deferred sales charge for each
Purchase Payment is determined by multiplying the Purchase Payment withdrawn
by the appropriate percentage, in accordance with the schedule set forth in
the tables below. If the Purchase Payment is a rollover from another
contract issued by the Company or an affiliate where the deferred sales
charge has been waived, the deferred sales charge is based on the number of
completed Contract Years since the date of the initial payment to the
predecessor contract. The Company reserves the right to not accept any
rollover contribution to an existing Contract.
Withdrawals are taken first against Purchase Payments, then against any
increase in value. However, the deferred sales charge only applies to the
Purchase Payment (not to any associated changes in value). To satisfy a
partial withdrawal, the deferred sales charge is calculated as if the
Purchase Payments are withdrawn from the Subaccounts in the same order they
were applied to the Account. Partial withdrawals from the Guaranteed Account
or the Fixed Account will be treated as described in the Appendices attached
to this Prospectus and the prospectus for the Guaranteed Account. The total
charge will be the sum of the charges applicable for all of the Purchase
Payments withdrawn.
<PAGE>
The following table applies to Roth IRA Contracts, including those issued in
New York.
<TABLE>
<CAPTION>
Deferred Sales
Completed Contract Years Charge Deduction
<S> <C>
Less than 1 5%
1 or more but less than 2 4%
2 or more but less than 3 3%
3 or more but less than 4 2%
4 or more but less than 5 1%
5 or more 0%
</TABLE>
12. Deferred Sales Charge, page 7. In addition to the list of circumstances
where a deferred sales charge will not be deducted, a deferred sales charge
will not be deducted if the withdrawal is applied as a rollover to certain
Roth Individual Retirement Annuities issued by the Company or an affiliate.
13. In Account Value on page 9, add "or the Fixed Account" to the end of the
paragraph.
14. In Transfers on page 9 add as the third sentence to the first paragraph:
"Transfers may be made from the Fixed Account to any of the investment
options available subject to certain restrictions. Amounts may not be
transferred into the Fixed Account from any of the investment options."
15. In Dollar Cost Averaging on page 10, add "or Fixed Account" after
"Guaranteed Term" in the third sentence. Add as the next to the last
sentence in the first paragraph: "If Dollar Cost Averaging is stopped with
regard to amounts in the Fixed Account, the remaining balance in the Fixed
Account will be transferred to the Aetna Variable Encore Fund Subaccount (a
money market fund)."
16. Add the following to the end of the first paragraph under Withdrawals on
page 10:
Roth IRAs provide for a tax-free withdrawal of all assets in the Contract,
both contributions and earnings, provided the withdrawal is not made within
the 5-taxable year period beginning with the first tax year for which a
contribution was made, and the distribution is made after attainment of age
59-1/2, or on account of death or disability, or for a qualified first-time
home purchase.
Also add "or Fixed Account" after "Guaranteed Account" in the third
paragraph.
17. Under Systematic Distribution Option add the following:
"ECO" is not available under the Roth IRA Contract."
18. Under Annuity Period on page 14, add the following:
For Roth IRAs, the minimum distribution rules do not apply prior to your
death. You are not required to begin taking minimum annual distributions by
April 1 of the calendar year following the calendar year in which you attain
age 70-1/2. The general rule that annuity payments may not extend beyond
your life/life expectancy or beyond the joint lives/joint life expectancies
of you and your beneficiaries does not apply to a Roth IRA. The minimum
distribution rules which apply to the beneficiary at your death and which
are described in the Prospectus continue to apply. The rules differ
depending on whether you die after distributions have begun.
19. Under Individual Retirement Annuities and Simplified Employee Pension Plans
on page 22, add the following:
Section 408A of the Code permits eligible individuals to contribute to a
Roth IRA on an after-tax (nondeductible) basis.
Distributions from other types of qualified plans are not permitted to be
transferred or rolled over to a Roth IRA. A Roth IRA can accept
transfers/rollovers only from an IRA, subject to ordinary income tax, or
from another Roth IRA.
20. Under Withdrawals on page 19, add the following:
Any "qualified" distribution from a Roth IRA is not includible in gross
income. A "qualified" distribution is any distribution made after you have
attained age 59-1/2, or on account of your death or disability, or for a
qualified first-time home purchase. A distribution will not be treated as
"qualified" if it is made within the 5-taxable year period beginning with
the first taxable year for which a contribution was made. If a distribution
is not "qualified",
<PAGE>
the accumulated earnings are includible in income. The 10% premature
distribution penalty will apply to the taxable portion of the distribution
unless one of the exceptions under the Code applies. (See Section 21 of this
Supplement.) A partial distribution will first be treated as a return of
cost basis (i.e. aggregate amount of contributions.)
For Roth IRAs the minimum distribution rules do not apply prior to your
death. (See "Annuity Period" above.)
21. Under Penalty Tax on page 20, replace the language in the fourth paragraph
with the following:
In general, except for (d), the same exceptions described in the preceding
paragraph will apply to distributions made from an Individual Retirement
Annuity, including a distribution from a Roth IRA that is not a "qualified
distribution" or a rollover to a Roth IRA that is not a "qualified rollover"
contribution. Beginning January 1, 1997, the penalty tax is also waived on
distributions made from an IRA to pay for health insurance premiums for
certain unemployed individuals. Beginning January 1, 1998, the penalty tax
is waived if the amounts withdrawn are used for a qualified first-time home
purchase or for higher education expenses.
22. The following information is added as its own subsection to the end of the
section entitled "Miscellaneous" on page 23:
Year 2000
Aetna Inc. (referred to collectively with its subsidiaries and affiliates
as "Aetna"), has developed and is currently executing a plan to make its
computer systems and applications accommodate date-sensitive information
relating to the Year 2000. The plan covers four stages including (i)
inventory, (ii) assessment, (iii) remediation and (iv) testing and
certification. Aetna is currently in the assessment or remediation stages
of its plan for the systems and applications related to the Separate
Account, including those relating to the Company, and Aeltus Investment
Management, Inc., the subadviser to most Aetna affiliated mutual funds.
Testing and certification of these systems is targeted for completion by
mid 1999. The costs of these efforts will not affect the Separate Account.
The Company, its affiliates and the mutual funds that serve as investment
options for the Separate Account also have relationships with investment
advisers, broker dealers, transfer agents, custodians or other securities
industry participants or other service providers that are not affiliated
with Aetna. Aetna is currently examining its relationships with third
parties as part of its Year 2000 plan. While the Company believes that
United States securities industry participants generally are preparing their
computer systems and applications to accommodate Year 2000 date-sensitive
information, preparation by third parties is outside the Company's control.
There can be no assurance that failure of third parties to complete adequate
preparations in a timely manner, and any resulting systems interruptions or
other consequences, would not have an adverse effect, directly or
indirectly, on the Separate Account, including, without limitation, its
operation or the valuation of its assets and units.
<PAGE>
APPENDIX
FIXED ACCOUNT
The Fixed Account is an investment option available during the Accumulation
Period under the Contracts. The following summarizes material information
concerning the Fixed Account that is offered as an option under the Contract.
Additional information may be found in your Contract. Amounts allocated to the
Fixed Account are held in the Company's general account that supports insurance
and annuity obligations. Interests in the Fixed Account have not been registered
with the SEC in reliance on exemptions under the Securities Act of 1933, as
amended. Disclosure in this prospectus regarding the Fixed Account, however, may
be subject to certain generally applicable provisions of the federal securities
laws relating to the accuracy and completeness of the statements. Disclosure in
this Appendix regarding the Fixed Account has not been reviewed by the SEC.
Fixed Account
Amounts allocated to this option will earn the minimum guaranteed interest rate
specified in the Contract. The Company may credit a higher interest rate from
time to time. The Company's determination of interest rates reflects the
investment income earned on invested assets and the amortization of any capital
gains and/or losses realized on the sale of invested assets. Under this option,
the Company assumes the risk of investment gain or loss by guaranteeing Net
Purchase Payment values and promising a minimum interest rate and Annuity
payment.
Amounts applied to the Fixed Account will earn the interest rate declared on the
date the Purchase Payment is received in good order at the Company's Home
Office. The Fixed Account is only available in certain states. If a withdrawal
is made from the Fixed Account, a deferred sales charge may apply. Amounts
allocated to the Fixed Account will count as an option for purposes of the 18
investment option limit. (See the Contract Prospectus).
Dollar Cost Averaging
Amounts invested in the Fixed Account must be transferred into the other
investment options available under the Contract over a period not to exceed 12
months under the Dollar Cost Averaging Program. In the event a Certificate
Holder discontinues dollar cost averaging, the remaining balance in the Fixed
Account will be transferred into the Aetna Variable Encore Fund Subaccount (a
money market fund) unless directed otherwise.
Mortality and Expense Risk Charges
The Fixed Account will reflect a compound interest rate credited by the Company.
The interest rate quoted is an annual effective yield. The Company makes no
deductions from the credited interest rate for mortality and expense risks;
these risks are considered in determining the credited rate.
Transfers Among Investment Options
Transfers from the Fixed Account to any other available investment option under
the Contract are allowed in each calendar year during the Accumulation Period.
The amount which may be transferred may vary at the Company's discretion;
however, it will never be less than 10% of the amount held under the Fixed
Account.
By giving notice to the Company at its Home Office at least 30 days before
Annuity payments begin, the Certificate Holder may elect to have amounts which
have accumulated under the Fixed Account transferred to one or more of the
investment options available during the Annuity Period to provide Annuity
payments.
Under certain emergency conditions, we may defer payment of a Fixed Account
withdrawal value (a) for a period of up to six months, or (b) as allowed by
federal law.
Condensed Financial Information--Page AUV History--1 through AUV History--4
The following information supplements the Condensed Financial Information Table
to reflect condensed financial information for investment options available as
of September 30, 1997. Not all investment options shown here are currently
available.
<PAGE>
CONDENSED FINANCIAL INFORMATION
(Selected data for accumulation units outstanding throughout each period)
===============================================================================
The condensed financial information presented below for the period ended
September 30, 1997 (unaudited) is supplemental to the Condensed Financial
Information for the ten-year period ended December 31, 1996 (audited) in the
Prospectus.
<TABLE>
<CAPTION>
Period ended
September 30,1997
(Unaudited)
<S> <C>
AETNA VARIABLE FUND
Value at beginning of period $12.769
Value at end of period $16.692
Increase (decrease) in value of accumulation unit(1) 30.72%
Number of accumulation units outstanding at end of period 727,748.4
AETNA INCOME SHARES
Value at beginning of period $10.489
Value at end of period $11.047
Increase (decrease) in value of accumulation unit(1) 5.32%
Number of accumulation units outstanding at end of period 214,314.3
AETNA VARIABLE ENCORE FUND
Value at beginning of period $10.481
Value at end of period $10.791
Increase (decrease) in value of accumulation unit(1) 2.95%
Number of accumulation units outstanding at end of period 1,195,320.2
AETNA INVESTMENT ADVISERS FUND, INC.
Value at beginning of period $11.781
Value at end of period $13.996
Increase (decrease) in value of accumulation unit(1) 18.80%
Number of accumulation units outstanding at end of period 270,139.6
AETNA ASCENT VARIABLE PORTFOLIO
Value at beginning of period $12.674
Value at end of period $15.182
Increase (decrease) in value of accumulation unit(1) 19.79%
Number of accumulation units outstanding at end of period 48,617.6
AETNA CROSSROADS VARIABLE PORTFOLIO
Value at beginning of period $12.123
Value at end of period $14.155
Increase (decrease) in value of accumulation unit(1) 16.76%
Number of accumulation units outstanding at end of period 20,507.0
AETNA LEGACY VARIABLE PORTFOLIO
Value at beginning of period $11.613
Value at end of period $13.095
Increase (decrease) in value of accumulation unit(1) 12.76%
Number of accumulation units outstanding at end of period 46,190.6
AETNA VARIABLE CAPITAL APPRECIATION PORTFOLIO(4)
Value at beginning of period $10.856
Value at end of period $13.367
Increase (decrease) in value of accumulation unit(1) 23.13%
Number of accumulation units outstanding at end of period 20,351.6
AETNA VARIABLE GROWTH PORTFOLIO(4)
Value at beginning of period $10.667
Value at end of period $13.834
Increase (decrease) in value of accumulation unit(1) 29.69%
Number of accumulation units outstanding at end of period 26,942.3
AETNA VARIABLE INDEX PLUS PORTFOLIO
Value at beginning of period $10.919
Value at end of period $14.077
Increase (decrease) in value of accumulation unit(1) 28.93%
Number of accumulation units outstanding at end of period 193,926.5
AETNA VARIABLE SMALL COMPANY PORTFOLIO(4)
Value at beginning of period $11.313
Value at end of period $14.070
Increase (decrease) in value of accumulation unit(1) 24.37%
Number of accumulation units outstanding at end of period 37,280.5
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
================================================================================
Period Ended
September 30, 1997
(Unaudited)
ALGER AMERICAN BALANCED PORTFOLIO(3)
Value at beginning of period $10.713
Value at end of period $12.879
Increase (decrease) in value of
accumulation unit(1) 20.21%
Number of accumulation units outstanding at end of period 94,600.9
ALGER AMERICAN GROWTH PORTFOLIO(2)
Value at beginning of period $10.940
Value at end of period $14.097
Increase (decrease) in value of
accumulation unit(1) 28.85%
Number of accumulation units outstanding at end of period 945,397.6
ALGER AMERICAN INCOME AND GROWTH PORTFOLIO(3)
Value at beginning of period $11.333
Value at end of period $15.103
Increase (decrease) in value of
accumulation unit(1) 33.26%
Number of accumulation units outstanding at end of period 244,778.0
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO(3)
Value at beginning of period $11.188
Value at end of period $14.051
Increase (decrease) in value of
accumulation unit(1) 25.58%
Number of accumulation units outstanding at end of period 212,806.4
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO(2)
Value at beginning of period $10.667
Value at end of period $13.087
Increase (decrease) in value of
accumulation unit(1) 22.69%
Number of accumulation units outstanding at end of period 600,542.6
ALGER AMERICAN SMALL CAP PORTFOLIO(2)
Value at beginning of period $9.800
Value at end of period $11.520
Increase (decrease) in value of accumulation unit(1) 17.56%
Number of accumulation units outstanding at end of period 1,075,053.2
AMERICAN CENTURY VP BALANCED APPRECIATION(3)
Value at beginning of period $11.284
Value at end of period $12.994
Increase (decrease) in value of accumulation unit(1) 15.15%
Number of accumulation units outstanding at end of period 52,222.8
AMERICAN CENTURY VP CAPITAL APPRECIATION(2)
Value at beginning of period $9.183
Value at end of period $10.098
Increase (decrease) in value of accumulation unit(1) 9.97%
Number of accumulation units outstanding at end of period 120,331.5
AMERICAN CENTURY VP INTERNATIONAL(3)
Value at beginning of period $11.574
Value at end of period $14.103
Increase (decrease) in value of accumulation unit(1) 21.85%
Number of accumulation units outstanding at end of period 171,760.3
FEDERATED AMERICAN LEADERS FUND II(3)
Value at beginning of period $13.639
Value at end of period $17.441
Increase (decrease) in value of accumulation unit(1) 27.88%
Number of accumulation units outstanding at end of period 6,196,311.2
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II(3)
Value at beginning of period $10.809
Value at end of period $11.338
Increase (decrease) in value of accumulation unit(1) 4.89%
Number of accumulation units outstanding at end of period 486,893.1
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
===============================================================================
Period Ended
September 30, 1997
(Unaudited)
FEDERATED HIGH INCOME BOND FUND II(3)
Value at beginning of period $11.920
Value at end of period $13.156
Increase (decrease) in value of accumulation unit(1) 10.37%
Number of accumulation units outstanding at end of period 1,838,830.9
FEDERATED UTILITY FUND II(3)
Value at beginning of period $12.361
Value at end of period $13.712
Increase (decrease) in value of accumulation unit(1) 10.93%
Number of accumulation units outstanding at end of period 1,318,619.7
FIDELITY VIP EQUITY-INCOME PORTFOLIO
Value at beginning of period $11.855
Value at end of period $14.731
Increase (decrease) in value of accumulation unit(1) 24.26%
Number of accumulation units outstanding at end of period 2,038,703.4
FIDELITY VIP GROWTH PORTFOLIO
Value at beginning of period $10.940
Value at end of period $13.475
Increase (decrease) in value of accumulation unit(1) 23.17%
Number of accumulation units outstanding at end of period 1,246,017.9
FIDELITY VIP HIGH INCOME PORTFOLIO
Value at beginning of period $11.410
Value at end of period $13.158
Increase (decrease) in value of accumulation unit(1) 15.32%
Number of accumulation units outstanding at end of period 606,434.6
FIDELITY VIP OVERSEAS PORTFOLIO
Value at beginning of period $11.447
Value at end of period $13.537
Increase (decrease) in value of accumulation unit(1) 18.26%
Number of accumulation units outstanding at end of period 216,953.3
FIDELITY VIP II ASSET MANAGER PORTFOLIO
Value at beginning of period $11.674
Value at end of period $13.643
Increase (decrease) in value of accumulation unit(1) 16.87%
Number of accumulation units outstanding at end of period 210,254.6
FIDELITY VIP II CONTRAFUND PORTFOLIO
Value at beginning of period $12.093
Value at end of period $15.048
Increase (decrease) in value of accumulation unit(1) 24.44%
Number of accumulation units outstanding at end of period 1,377,449.0
FIDELITY VIP II INDEX 500 PORTFOLIO
Value at beginning of period $12.722
Value at end of period $16.256
Increase (decrease) in value of accumulation unit(1) 27.77%
Number of accumulation units outstanding at end of period 1,221,871.2
FIDELITY VIP II INVESTMENT GRADE BOND PORTFOLIO(3)
Value at beginning of period $10.455
Value at end of period $10.986
Increase (decrease) in value of accumulation unit(1) 5.08%
Number of accumulation units outstanding at end of period 104,768.3
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
Value at beginning of period $11.376
Value at end of period $12.454
Increase (decrease) in value of accumulation unit(1) 9.48%
Number of accumulation units outstanding at end of period 503,161.2
JANUS ASPEN BALANCED PORTFOLIO
Value at beginning of period $12.038
Value at end of period $14.221
Increase (decrease) in value of accumulation unit(1) 18.14%
Number of accumulation units outstanding at end of period 449,989.5
JANUS ASPEN FLEXIBLE INCOME PORTFOLIO
Value at beginning of period $11.136
Value at end of period $11.937
Increase (decrease) in value of accumulation unit(1) 7.19%
Number of accumulation units outstanding at end of period 117,157.9
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
================================================================================
Period Ended
September 30, 1997
(Unaudited)
JANUS ASPEN GROWTH PORTFOLIO
Value at beginning of period $12.171
Value at end of period $14.943
Increase (decrease) in value of accumulation unit(1) 22.77%
Number of accumulation units outstanding at end of period 596,203.9
JANUS ASPEN SHORT-TERM BOND PORTFOLIO(2)
Value at beginning of period $10.417
Value at end of period $10.829
Increase (decrease) in value of accumulation unit(1) 3.96%
Number of accumulation units outstanding at end of period 75,325.9
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO
Value at beginning of period $13.393
Value at end of period $16.789
Increase (decrease) in value of accumulation unit(1) 25.36%
Number of accumulation units outstanding at end of period 2,523,820.9
LEXINGTON EMERGING MARKETS FUND, INC.(3)
Value at beginning of period $10.328
Value at end of period $11.372
Increase (decrease) in value of accumulation unit(1) 10.11%
Number of accumulation units outstanding at end of period 176,673.1
LEXINGTON NATURAL RESOURCES TRUST(3)
Value at beginning of period $13.194
Value at end of period $16.128
Increase (decrease) in value of accumulation unit(1) 22.24%
Number of accumulation units outstanding at end of period 111,932.5
MFS EMERGING GROWTH SERIES(2)
Value at beginning of period $10.074
Value at end of period $12.559
Increase (decrease) in value of accumulation unit(1) 24.66%
Number of accumulation units outstanding at end of period 995,245.5
MFS RESEARCH SERIES(2)
Value at beginning of period $10.970
Value at end of period $13.327
Increase (decrease) in value of accumulation unit(1) 21.49%
Number of accumulation units outstanding at end of period 866,379.0
MFS TOTAL RETURN SERIES
Value at beginning of period $10.894
Value at end of period $12.707
Increase (decrease) in value of accumulation unit(1) 16.63%
Number of accumulation units outstanding at end of period 430,869.1
MFS VALUE SERIES(2)
Value at beginning of period $10.334
Value at end of period $12.576
Increase (decrease) in value of accumulation unit(1) 21.69%
Number of accumulation units outstanding at end of period 76,223.9
MFS WORLD GOVERNMENT SERIES
Value at beginning of period $10.471
Value at end of period $10.334
Increase (decrease) in value of accumulation unit(1) (1.30%)
Number of accumulation units outstanding at end of period 73,945.6
OPPENHEIMER CAPITAL APPRECIATION FUND(4)
Value at beginning of period $10.516
Value at end of period $13.267
Increase (decrease) in value of accumulation unit(1) 26.16%
Number of accumulation units outstanding at end of period 24,148.2
OPPENHEIMER GLOBAL SECURITIES FUND(4)
Value at beginning of period $10.488
Value at end of period $11.862
Increase (decrease) in value of accumulation unit(1) 13.10%
Number of accumulation units outstanding at end of period 37,181.7
OPPENHEIMER GROWTH & INCOME FUND(4)
Value at beginning of period $10.497
Value at end of period $12.494
Increase (decrease) in value of accumulation unit(1) 19.02%
Number of accumulation units outstanding at end of period 130,134.4
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
===============================================================================
Period Ended
September 30, 1997
(Unaudited)
OPPENHEIMER STRATEGIC BOND FUND (4)
Value at beginning of period $10.187
Value at end of period $10.678
Increase (decrease) in value of accumulation unit(1) 4.82%
Number of accumulation units outstanding at end of period 59,319.2
</TABLE>
(1) The above figures are calculated by subtracting the beginning Accumulation
Unit value from the ending Accumulation Unit value during a calendar year or
shorter period, and dividing the result by the beginning Accumulation Unit
value. These figures do not reflect the deferred sales charges or the fixed
dollar annual maintenance fee, if any. Inclusion of these charges would
reduce the investment results shown.
(2) These Funds were replaced effective November 28,1997 as described in
prospectus supplement dated August 21,1997.
(3) These Funds were closed effective November 28,1997 as described in
prospectus supplement dated August 21,1997.
(4) Reflects less than a full year of performance activity. Funds were first
received in this option during May 1997.
<PAGE>
- --------------------------------------------------------------------------------
VARIABLE ANNUITY ACCOUNT I
OF
AETNA LIFE INSURANCE AND ANNUITY COMPANY
- --------------------------------------------------------------------------------
Statement of Additional Information dated February 17, 1998
AICA Marathon Plus
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the current prospectus for Variable Annuity Account I (the
"Separate Account") dated November 28, 1997 and as supplemented on February 17,
1998.
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
Customer Service
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......................................................... 7
Sales Material and Advertising........................................... 8
Independent Auditors..................................................... 8
Financial Statements of the Separate Account............................. S-1
Financial Statements of the Company...................................... F-1
<PAGE>
GENERAL INFORMATION AND HISTORY
Aetna Insurance Company of America (the "Company") is a stock life insurance
company which was organized under the insurance laws of the State of Connecticut
in 1990. The Company is a wholly owned subsidiary of Aetna Life Insurance and
Annuity Company ("ALIAC"), a wholly owned subsidiary of Aetna Retirement
Holdings, Inc., which is in turn a wholly owned subsidiary of Aetna Retirement
Services, Inc., and an indirect wholly owned subsidiary of Aetna Inc. 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.
Other than the mortality and expense risk charges and administrative 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 some unaffiliated sponsors of the Funds used as funding options under the
Contract. These fees generally range up to 0.25%.
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. Purchase Payments made under the Contract may be
allocated to one or more of the Subaccounts. Each Subaccount invests in the
shares of only one of the Funds listed below. The Company may make additions to,
deletions from or substitutions of available investment options as permitted by
law and subject to the conditions of the Contract. The availability of the Funds
is subject to applicable regulatory authorization. Not all Funds are available
in all jurisdictions or under all Contracts.
-2-
<PAGE>
The Funds currently available under the Marathon Plus Contract are as follows:
<TABLE>
<S> <C>
Aetna Variable Fund Fidelity VIP II Index 500 Portfolio
Aetna Income Shares Janus Aspen Aggressive Growth Portfolio
Aetna Variable Encore Fund Janus Aspen Balanced Portfolio
Aetna Investment Advisers Fund, Inc. Janus Aspen Flexible Income Portfolio
Aetna Ascent Variable Portfolio Janus Aspen Growth Portfolio
Aetna Crossroads Variable Portfolio Janus Aspen Worldwide Growth Portfolio
Aetna Legacy Variable Portfolio MFS Total Return Series
Aetna Variable Capital Appreciation Portfolio MFS World Governments Series
Aetna Variable Growth Portfolio Oppenheimer Capital Appreciation Fund
Aetna Variable Index Plus Portfolio Oppenheimer Global Securities Fund
Aetna Variable Small Company Portfolio Oppenheimer Growth & Income Fund
Calvert Social Balanced Portfolio Oppenheimer Strategic Bond Fund
(formerly Calvert Responsibily Portfolio Partners MFS Emerging Equities Portfolio
Invested Balanced Portfolio) Portfolio Partners MFS Research Growth Portfolio
Fidelity VIP Equity-Income Portfolio Portfolio Partners MFS Value Equity Portfolio
Fidelity VIP Growth Portfolio Portfolio Partners Scudder International
Fidelity VIP High Income Portfolio Growth Portfolio
Fidelity VIP Overseas Portfolio Portfolio Partners T. Rowe Price Growth
Fidelity VIP II Asset Manager Portfolio Equity Portfolio
Fidelity VIP II Contrafund Portfolio
</TABLE>
Complete descriptions of each of the Funds, including their investment
objectives, policies, risks and fees and expenses, are contained in the
prospectuses and statements of additional information for each of the Funds.
OFFERING AND PURCHASE OF CONTRACTS
The Company is the depositor and ALIAC is the principal underwriter for the
securities sold by the prospectus. ALIAC offers the Contracts through life
insurance agents licensed to sell variable annuities who are Registered
Representatives as defined in the prospectus. The offering of the Contracts is
continuous. A description of the manner in which Contracts are purchased may be
found in the prospectus under the sections titled "Purchase" and "Contract
Valuation."
PERFORMANCE DATA
GENERAL
From time to time, the Company may advertise different types of historical
performance for the Subaccounts of the Separate Account available under the
Contracts. The Company may advertise the "standardized average annual total
returns," calculated in a manner prescribed by the Securities and
-3-
<PAGE>
Exchange Commission (the "standardized return"), as well as "non-standardized
returns," both of which are described below.
The standardized and non-standardized total return figures are computed
according to a formula in which a hypothetical initial Purchase Payment of
$1,000 is applied to the various Subaccounts under the Contract, and then
related to the ending redeemable values over one, five and ten year periods (or
fractional periods thereof). The redeemable value is then divided by the initial
investment and this quotient is taken to the Nth root (N represents the number
of years in the period) and 1 is subtracted from the result which is then
expressed as a percentage, carried to at least the nearest hundredth of a
percent. The standardized figures use the actual returns of the Fund since the
date the Fund was first available under the Separate Account and then adjust
them to reflect the deduction of the maximum amount of recurring charges under
the Contracts during each period (e.g., 1.25% mortality and expense risk charge,
$30.00 maintenance fee, 0.15% administrative charge, and deferred sales charges
of 7% of Purchase Payment grading down to 0% after 7 years). 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 average
account size under the Contracts described in the prospectus. The total return
figures shown below may be different from the actual historical total return
under your Contract because for periods prior to 1994, the Subaccount's
investment performance reflected the investment performance of the underlying
Fund plus any cash held by the Subaccount.
The non-standardized figures will be calculated in a similar manner, except that
they 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 monthly, quarterly,
year-to-date and three-year periods and may include returns calculated from the
Fund's inception date and/or the date the Fund was added to the Separate
Account.
Investment results of the Subaccounts will fluctuate over time, and any
presentation of the Subaccounts' total return quotations for any prior period
should not be considered as a representation of how the Subaccounts will perform
in any future period. Additionally, the Account Value upon redemption may be
more or less than your original cost.
AVERAGE ANNUAL TOTAL RETURN QUOTATIONS - Standardized and Non-Standardized
The tables shown below reflect the average annual standardized and
non-standardized total return quotation figures for the periods ended September
30, 1997 for the Subaccounts available under the Separate Account as of
September 30, 1997 (not all such Funds are currently available). For those
Subaccounts where results are not available for the full calendar period
indicated, the percentage shown is an average annual return since the date
contributions were first received in the Fund under the Separate Account (in the
case of standardized performance) or the Fund's inception date (in the case of
nonstandardized performance). (Percentages reflecting partial periods are
denoted with an asterisk.)
-4-
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Date Fund
($30.00 Maintenance Fee) Standardized Contributions Non-Standardized Inception
First Date
Received
Under
Separate
Account
- ------------------------------------------------------------------------------------------------------------------------------
Subaccount One Five Ten One Three Five Ten
Year Years Years Year Year Year Year
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Ascent Variable Portfolio 19.74% 26.11%* 07/31/96 28.75% 23.37%* 07/05/95
- ------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio 15.11% 19.80%* 07/31/96 23.77% 19.28%* 07/05/95
- ------------------------------------------------------------------------------------------------------------------------------
Aetna Income Shares 0.19% 0.44%* 01/31/96 7.73% 7.77% 5.26% 8.04% 05/15/73
- ------------------------------------------------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc. 14.91% 15.77%* 02/29/96 23.56% 19.05% 12.84% 11.08%* 04/03/89
- ------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio 9.74% 11.30%* 05/31/96 17.99% 14.90%* 07/05/95
- ------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Capital Appreciation 13.27%* 05/30/97 41.54%* 12/13/96
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Encore Fund (3.30%) (0.01%)* 02/29/96 3.98% 4.12% 3.24% 4.52% 08/01/75
- ------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Fund 31.74% 27.30%* 01/31/96 41.66% 27.74% 17.39% 12.95% 05/01/75
- ------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Growth Portfolio 16.25%* 05/30/97 39.80%* 12/13/96
- ------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Index Plus Portfolio 25.40%* 10/31/96 39.90% 38.92%* 09/16/96
- ------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Small Company 15.66%* 05/30/97 38.33%* 12/27/96
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------
Alger American Balanced 13.87% 12.48%* 04/30/96 22.44% 18.07% 12.24% 8.89%* 09/05/89
Portfolio (1)
- ------------------------------------------------------------------------------------------------------------------------------
Alger American Growth 23.66% 19.04%* 01/31/96 32.97% 25.77% 21.64% 18.86%* 01/09/89
Portfolio (2)
- ------------------------------------------------------------------------------------------------------------------------------
Alger American Income & Growth 32.80% 28.24%* 03/29/96 42.80% 27.72% 17.80% 12.48%* 11/15/88
Portfolio (1)
- ------------------------------------------------------------------------------------------------------------------------------
Alger American Leveraged AllCap 16.44% 11.37%* 04/30/96 25.20% 38.37%* 01/25/95
Portfolio (1)
- ------------------------------------------------------------------------------------------------------------------------------
Alger American MidCap Growth 15.60% 23.48%* 05/03/93 24.30% 25.84% 23.89%* 05/03/93
Portfolio (2)
- ------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap (2) 4.99% 8.38%* 01/31/96 12.89% 20.82% 16.54% 19.00%* 09/21/88
- ------------------------------------------------------------------------------------------------------------------------------
American Century VP Balanced (1) 10.67% 12.71%* 05/31/96 19.00% 14.98% 10.33% 10.03%* 05/01/91
- ------------------------------------------------------------------------------------------------------------------------------
American Century VP Cap (7.16%) (1.37%)* 03/30/96 (0.17%) 10.63% 8.72% 9.59%* 11/20/87
Appreciation (2)
- ------------------------------------------------------------------------------------------------------------------------------
American Century VP 19.54% 18.19%* 03/29/96 28.54% 12.54% 11.07%* 05/01/94
International (1)
- ------------------------------------------------------------------------------------------------------------------------------
Federated Utility Fund II (1) 12.88% 13.21%* 06/30/95 21.37% 13.93% 10.26%* 02/10/94
- ------------------------------------------------------------------------------------------------------------------------------
Federated American Leaders 27.32% 26.04%* 10/31/95 36.91% 25.75% 20.71%* 02/10/94
Fund II (1)
- ------------------------------------------------------------------------------------------------------------------------------
Federated Fund for US Gov't (0.12%) 3.48%* 07/31/95 7.40% 5.22% 4.66%* 03/28/94
Securities II (1)
- ------------------------------------------------------------------------------------------------------------------------------
Federated High Income Bond 6.71% 11.12%* 07/31/95 14.74% 13.19% 9.99%* 03/01/94
Fund II (1)
- ------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 22.80% 17.18%* 01/31/96 32.05% 22.56% 19.79% 12.45% 10/09/86
- ------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 16.50% 17.78%* 01/31/96 25.27% 23.83% 19.69% 13.10% 10/09/86
- ------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio 9.13% 12.44%* 03/29/96 17.35% 14.93% 12.30% 11.08% 09/19/85
- ------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager 14.89% 14.67%* 04/30/96 23.53% 13.69% 11.77% 11.29%* 09/06/89
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 25.23% 23.26%* 03/29/96 34.66% 29.95%* 01/03/95
- ------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Index 500 Portfolio 28.22% 25.80%* 03/29/96 37.87% 27.75% 18.74% 18.64%* 08/27/92
- ------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Investment Grade 0.25% 2.11%* 03/29/96 7.79% 7.15% 5.03% 6.70%* 12/05/88
Bond Portfolio- (1)
- ------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 14.77% 13.89%* 03/29/96 23.41% 11.57% 12.90% 7.14% 02/13/87
- ------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Aggressive (1.36%) 0.36%* 03/29/96 6.06% 15.49% 18.32%* 09/13/93
Growth Portfolio
- ------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Balanced 13.12% 15.68%* 03/29/96 21.63% 17.99% 15.12%* 09/13/93
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Flexible Income 3.71% 7.01%* 04/30/96 11.52% 11.69% 8.31%* 09/13/93
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Growth Portfolio 16.61% 17.01%* 03/29/96 25.38% 22.48% 17.53%* 09/13/93
- ------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Short-Term Bond (1.64%) 0.68%* 03/29/96 5.77% 4.89% 3.38%* 09/13/93
Portfolio (2)
- ------------------------------------------------------------------------------------------------------------------------------
-5-
<PAGE>
(Continued from Previous Page)
- -----------------------------------------------------------------------------------------------------------------------------
Date Fund
($30.00 Maintenance Fee) Standardized Contributions Non-Standardized Inception
First Date
Received
Under
Separate
Account
- ------------------------------------------------------------------------------------------------------------------------------
Subaccount One Five Ten One Three Five Ten
Year Years Years Year Year Year Year
- ------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Worldwide Growth 22.24% 27.10%* 01/31/96 31.45% 25.50% 23.88%* 09/13/93
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund, (0.14%) (1.16%)* 01/31/96 7.38% (0.46%) 2.80%* 03/30/94
Inc. (1)
- ------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources 26.85% 21.48%* 04/30/96 36.39% 17.73% 12.27% 11.05%* 10/14/91
Trust (1)
- ------------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Series (2) 13.59% 12.41%* 05/31/96 22.14% 26.74%* 07/24/95
- ------------------------------------------------------------------------------------------------------------------------------
MFS Research Series (2) 18.28% 17.28%* 05/31/96 27.19% 24.45%* 07/26/95
- ------------------------------------------------------------------------------------------------------------------------------
MFS Total Return Series 14.38% 15.09%* 05/31/96 22.99% 20.10%* 01/03/95
- ------------------------------------------------------------------------------------------------------------------------------
MFS Value Series (2) 17.28% 22.39%* 08/14/96 26.11% 27.63%* 08/14/96
- ------------------------------------------------------------------------------------------------------------------------------
MFS World Governments Series (6.41%) (2.36%)* 05/31/96 0.63% 4.88% 4.11%* 06/14/94
- ------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Capital Appreciation 10.94%* 05/30/97 15.66% 22.69% 20.67% 13.56% 08/15/86
Fund
- ------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund 3.43%* 05/30/97 30.36% 10.10% 17.37% 11.55%* 11/12/90
- ------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Growth & Income Fund 7.76%* 05/30/97 36.15% 38.54%* 07/06/95
- ------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund (2.84%)* 05/30/97 9.76% 9.34% 6.30%* 05/03/93
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to the discussion preceding the Tables for an explanation of the
charges included in the Standardized and Non-Standardized figures. These figures
represent historical performance and should not be considered a projection of
future performance.
(1) These Funds were closed effective November 28, 1997 as described in
prospectus supplement dated August 21, 1997.
(2) These Funds were replaced effective November 28, 1997 as described in
prospectus supplement dated August 21, 1997.
-6-
<PAGE>
ANNUITY PAYMENTS
When Annuity payments are to begin, the value of the Account is determined using
Accumulation Unit values as of the tenth Valuation Date 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) in each of the designated
investment options. This number is calculated by dividing (a) by (b), where (a)
is the amount of the first Annuity payment based on a particular investment
option, and (b) is the then current Annuity Unit value for that investment
option. As noted, Annuity Unit values fluctuate from one Valuation Date to the
next; such fluctuations reflect changes in the net investment factor for the
appropriate Subaccount(s) (with a ten Valuation Date 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.
The operation of all these factors can be illustrated by the following
hypothetical example. These procedures will be performed separately for the
investment options selected during the Annuity Period.
EXAMPLE:
- --------
Assume that, at the date Annuity payments are to begin, there are 3,000
Accumulation Units credited under a particular Account and that the value of an
Accumulation Unit for the tenth Valuation Date 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 Date on 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 Subaccount is
1.0015000 as of the tenth Valuation Date 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 Date (assume such value to be
$13.504376) to produce an Annuity Unit value of $13.523359 for the Valuation
Date on which the second payment is due.
-7-
<PAGE>
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.
SALES MATERIAL AND ADVERTISING
The Company may include hypothetical illustrations in its 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 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.
We may distribute sales literature that compares the percentage change in
Accumulation Unit values for any of the Subaccounts to established market
indices such as the Standard & Poor's 500 Stock Index and the Dow Jones
Industrial Average or to the percentage change in values of other management
investment companies that have investment objectives similar to the Subaccount
being compared.
We may publish in advertisements and reports, the ratings and other information
assigned to us by one or more independent rating organizations such as A.M. Best
Company, Duff & Phelps, Standard & Poor's Corporation and Moody's Investors
Services, Inc. The purpose of the ratings is to reflect our financial strength
and/or claims-paying ability. We may also quote ranking services such as
Morningstar's Variable Annuity/Life Performance Report and Lipper's Variable
Insurance Products Performance Analysis Service (VIPPAS), which rank variable
annuity or life Subaccounts or their underlying funds by performance and/or
investment objective. We may illustrate in advertisements the performance of the
underlying funds, if accompanied by performance which also shows the performance
of such funds, reduced by applicable charges under the Separate Account. We may
also show in advertisements the portfolio holdings of the underlying funds,
updated at various intervals. From time to time, we will quote articles from
newspapers and magazines or other publications or reports, including, but not
limited to The Wall Street Journal, Money magazine, USA Today and The VARDS
Report.
The Company may provide in advertising, sales literature, periodic publications
or other materials information on various topics of interest to current and
prospective Certificate Holders. These topics may include the relationship
between sectors of the economy and the economy as a whole and its effect on
various securities markets, investment strategies and techniques (such as value
investing, market timing, dollar cost averaging, asset allocation, constant
ratio transfer and account rebalancing), the advantages and disadvantages of
investing in tax-deferred and taxable investments, customer profiles and
hypothetical purchase and investment scenarios, financial management and tax and
retirement planning, and investment alternatives to certificates of deposit and
other financial instruments, including comparison between the Contracts and the
characteristics of and market for such financial instruments.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, CityPlace II, Hartford, Connecticut 06103-4103, are the
independent auditors for the Separate Account and for the Company. The services
provided to the Separate Account include primarily the examination of the
Separate Account's financial statements and the review of filings made with the
SEC.
-8-
<PAGE>
VARIABLE ANNUITY ACCOUNT I
FINANCIAL STATEMENTS
Index
<TABLE>
<S> <C>
Statement of Assets and Liabilities as of September 30, 1997 (unaudited) ........................ S-1
Statement of Operations and Changes in Net Assets for the nine-months
ended September 30, 1997 and 1996 (unaudited) ................................................. S-5
Condensed Financial Information for the nine-months
ended September 30, 1997 (unaudited) .......................................................... S-6
Notes to Financial Statements -- September 30, 1997 (unaudited) ................................. S-9
Statement of Assets and Liabilities -- December 31, 1996 ........................................ S-17
Statement of Operations and Changes in Net Assets for the years
ended December 31, 1996 and 1995 .............................................................. S-20
Notes to Financial Statements -- December 31, 1996 .............................................. S-21
Independent Auditors' Report .................................................................... S-29
</TABLE>
<PAGE>
Variable Annuity Account I
Statement of Assets and Liabilities - September 30, 1997 (Unaudited):
<TABLE>
<S> <C>
ASSETS:
Investments, at net asset value: (Note 1)
Aetna Variable Fund; 296,330 shares (cost $10,476,615) ....................... $ 12,147,482
Aetna Income Shares; 181,087 shares (cost $2,320,526) ........................ 2,367,501
Aetna Variable Encore Fund; 978,424 shares (cost $12,701,827) ................ 12,898,434
Aetna Investment Advisers Fund, Inc.; 229,132 shares (cost $3,521,431) ....... 3,780,811
Aetna Ascent Variable Portfolio; 48,879 shares (cost $707,808) ............... 738,130
Aetna Crossroads Variable Portfolio; 20,789 shares (cost $261,592) ........... 290,272
Aetna Legacy Variable Portfolio; 50,474 shares (cost $588,441) ............... 638,057
Aetna Variable Portfolios, Inc.:
Aetna Variable Capital Appreciation; 19,034 shares (cost $265,691) ......... 272,033
Aetna Variable Growth Portfolio; 26,363 shares (cost $358,694) ............. 372,732
Aetna Variable Index Plus Portfolio; 192,116 shares (cost $2,426,604) ...... 2,729,871
Aetna Variable Small Company Portfolio; 37,517 shares (cost $476,712) ...... 524,552
Alger American Funds:
Balanced Portfolio; 111,671 shares (cost $1,060,457) ....................... 1,218,334
Growth Portfolio; 300,975 shares (cost $10,697,338) ........................ 13,327,179
Income and Growth Portfolio; 340,408 shares (cost $3,308,122) .............. 3,696,826
Leveraged AllCap Portfolio; 121,695 shares (cost $2,415,438) ............... 2,990,043
MidCap Portfolio; 301,476 shares (cost $6,539,418) ......................... 7,859,467
Small Capitalization Portfolio; 265,431 shares (cost $10,752,264) .......... 12,385,023
American Century Investments:
Balanced Fund; 81,954 shares (cost $623,223) ............................... 678,581
Capital Appreciation Fund; 109,270 shares (cost $1,084,475) ................ 1,215,088
International Fund; 341,169 shares (cost $2,142,961) ....................... 2,422,299
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio; 1,261,822 shares (cost $25,948,382) ............... 30,031,364
Growth Portfolio; 448,945 shares (cost $14,024,989) ........................ 16,790,553
High Income Portfolio; 593,261 shares (cost $7,292,219) .................... 7,979,358
Overseas Portfolio; 142,774 shares (cost $2,646,031) ....................... 2,936,870
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio; 162,707 shares (cost $2,638,454) .................. 2,868,519
Contrafund Portfolio; 1,026,154 shares (cost $17,052,720) .................. 20,728,303
Index 500 Portfolio; 178,441 shares (cost $16,989,270) ..................... 19,862,300
Investment Grade Bond Portfolio; 94,112 shares (cost $1,122,545) ........... 1,150,990
Insurance Management Series:
American Leaders Fund II; 5,638,457 shares (cost $82,217,731) .............. 108,089,212
Equity Income Fund II; 755,241 shares (cost $8,631,649) .................... 9,274,363
Growth Strategies Fund II; 1,376,056 shares (cost $17,738,421) ............. 23,558,087
High Income Bond Fund II; 2,256,282 shares (cost $22,827,318) .............. 24,209,902
International Equity Fund II; 1,542,512 shares (cost $17,016,582) .......... 19,574,477
Prime Money Fund II; 4,307,426 shares (cost $4,307,426) .................... 4,307,426
U.S. Government Securities Fund II; 536,485 shares (cost $5,422,705) ...... 5,520,434
Utility Fund II; 1,430,698 shares (cost $15,989,481) ....................... 18,098,332
Janus Aspen Series:
Aggressive Growth Portfolio; 310,514 shares (cost $5,647,596) .............. 6,266,171
Balanced Portfolio; 371,405 shares (cost $5,740,033) ....................... 6,399,316
Flexible Income Portfolio; 119,433 shares (cost $1,367,508) ................ 1,398,558
Growth Portfolio; 475,648 shares (cost $7,701,148) ......................... 8,908,888
Short-Term Bond Portfolio; 79,813 shares (cost $807,813) ................... 815,687
Worldwide Growth Portfolio; 1,743,038 shares (cost $35,726,058) ............ 42,373,264
S-1
<PAGE>
Variable Annuity Account I
Statement of Assets and Liabilities - September 30, 1997 (Unaudited &
continued):
Lexington Emerging Markets Fund; 179,227 shares (cost $1,987,062) ............ $ 2,009,136
Lexington Natural Resources Trust Fund; 105,015 shares (cost $1,530,018) ..... 1,805,207
MFS Funds:
Emerging Growth Series; 749,342 shares (cost $10,419,131) .................. 12,499,024
Research Series; 716,292 shares (cost $9,955,446) .......................... 11,546,629
Total Return Series; 338,796 shares (cost $5,002,542) ...................... 5,474,948
Value Series; 73,122 shares (cost $882,128) ................................ 958,624
World Government Series; 74,190 shares (cost $755,248) ..................... 764,158
Oppenheimer Funds:
Capital Appreciation Fund; 7,220 shares (cost $293,544) .................... 320,366
Global Securities Fund; 20,148 shares (cost $420,282) ...................... 441,042
Growth and Income Fund; 80,928 shares (cost $1,563,273) .................... 1,625,845
Strategic Bond Fund; 122,754 shares (cost $628,703) ........................ 633,408
------------
NET ASSETS (cost $425,023,093) ................................................. $501,773,476
============
</TABLE>
Net assets represented by:
Reserves for annuity contracts in accumulation and payment period: (Notes 1 and
Note 5)
<TABLE>
<S> <C>
Aetna Variable Fund:
Annuity contracts in accumulation ............................................. $12,147,482
Aetna Income Shares:
Annuity contracts in accumulation ............................................. 2,367,501
Aetna Variable Encore Fund:
Annuity contracts in accumulation ............................................. 12,898,434
Aetna Investment Advisers Fund, Inc.:
Annuity contracts in accumulation ............................................. 3,780,811
Aetna Ascent Variable Portfolio:
Annuity contracts in accumulation ............................................. 738,130
Aetna Crossroads Variable Portfolio:
Annuity contracts in accumulation ............................................. 290,272
Aetna Legacy Variable Portfolio:
Annuity contracts in accumulation ............................................. 604,868
Annuity contracts in payment period ........................................... 33,189
Aetna Variable Portfolios, Inc.
Aetna Variable Capital Appreciation Fund:
Annuity contracts in accumulation ............................................. 272,033
Aetna Variable Growth Fund:
Annuity contracts in accumulation ............................................. 372,732
Aetna Variable Index Plus Portfolio:
Annuity contracts in accumulation ............................................. 2,729,871
Aetna Variable Small Company Portfolio:
Annuity contracts in accumulation ............................................. 524,552
Alger American Funds:
Balanced Portfolio:
Annuity contracts in accumulation ............................................. 1,218,334
S-2
<PAGE>
Variable Annuity Account I
Statement of Assets and Liabilities - September 30, 1997 (Unaudited &
continued):
Growth Portfolio:
Annuity contracts in accumulation ............................................. $ 13,327,179
Income and Growth Portfolio:
Annuity contracts in accumulation ............................................. 3,696,826
Leveraged AllCap Portfolio:
Annuity contracts in accumulation ............................................. 2,990,043
MidCap Portfolio:
Annuity contracts in accumulation ............................................. 7,859,467
Small Capitalization Portfolio:
Annuity contracts in accumulation ............................................. 12,385,023
American Century Investments:
Balanced Fund:
Annuity contracts in accumulation ............................................. 678,581
Capital Appreciation Fund:
Annuity contracts in accumulation ............................................. 1,215,088
International Fund:
Annuity contracts in accumulation ............................................. 2,422,299
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio:
Annuity contracts in accumulation ............................................. 30,031,364
Growth Portfolio:
Annuity contracts in accumulation ............................................. 16,790,553
High Income Portfolio:
Annuity contracts in accumulation ............................................. 7,979,358
Overseas Portfolio:
Annuity contracts in accumulation ............................................. 2,936,870
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio:
Annuity contracts in accumulation ............................................. 2,868,519
Contrafund Portfolio:
Annuity contracts in accumulation ............................................. 20,728,303
Index 500 Portfolio:
Annuity contracts in accumulation ............................................. 19,862,300
Investment Grade Bond Portfolio:
Annuity contracts in accumulation ............................................. 1,150,990
Insurance Management Series:
American Leaders Fund II:
Annuity contracts in accumulation ............................................. 108,071,685
Annuity contracts in payment period ........................................... 17,527
Equity Income Fund II:
Annuity contracts in accumulation ............................................. 9,274,363
Growth Strategies Fund II:
Annuity contracts in accumulation ............................................. 23,558,087
High Income Bond Fund II:
Annuity contracts in accumulation ............................................. 24,192,411
Annuity contracts in payment period ........................................... 17,491
International Equity Fund II:
Annuity contracts in accumulation ............................................. 19,574,477
Prime Money Fund II:
Annuity contracts in accumulation ............................................. 4,307,426
S-3
<PAGE>
Variable Annuity Account I
Statement of Assets and Liabilities - September 30, 1997 (Unaudited &
continued):
U.S. Government Securities Fund II:
Annuity contracts in accumulation ............................................. $ 5,520,434
Utility Fund II:
Annuity contracts in accumulation ............................................. 18,080,453
Annuity contracts in payment period ........................................... 17,879
Janus Aspen Series:
Aggressive Growth Portfolio:
Annuity contracts in accumulation ............................................. 6,266,171
Balanced Portfolio:
Annuity contracts in accumulation ............................................. 6,399,316
Flexible Income Portfolio:
Annuity contracts in accumulation ............................................. 1,398,558
Growth Portfolio:
Annuity contracts in accumulation ............................................. 8,908,888
Short-Term Bond Portfolio:
Annuity contracts in accumulation ............................................. 815,687
Worldwide Growth Portfolio:
Annuity contracts in accumulation ............................................. 42,373,264
Lexington Emerging Markets Fund:
Annuity contracts in accumulation ............................................. 2,009,136
Lexington Natural Resources Trust Fund:
Annuity contracts in accumulation ............................................. 1,805,207
MFS Funds:
Emerging Growth Series:
Annuity contracts in accumulation ............................................. 12,499,024
Research Series:
Annuity contracts in accumulation ............................................. 11,546,629
Total Return Series:
Annuity contracts in accumulation ............................................. 5,474,948
Value Series:
Annuity contracts in accumulation ............................................. 958,624
World Government Series:
Annuity contracts in accumulation ............................................. 764,158
Oppenheimer Funds:
Capital Appreciation Fund:
Annuity contracts in accumulation ............................................. 320,366
Global Securities Fund:
Annuity contracts in accumulation ............................................. 441,042
Growth and Income Fund:
Annuity contracts in accumulation ............................................. 1,625,845
Strategic Bond Fund:
Annuity contracts in accumulation ............................................. 633,408
------------
$501,773,476
============
</TABLE>
See Notes to Financial Statements
S-4
<PAGE>
Variable Annuity Account I
Statements of Operations and Changes in Net Assets
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
September 30, 1997 September 30, 1996
(Unaudited) (Unaudited)
<S> <C> <C>
INVESTMENT INCOME:
Income: (Notes 1, 3 and 5)
Dividends ......................................................... $ 9,576,456 $ 1,825,813
Expenses: (Notes 2 and 5)
Valuation Period Deductions ....................................... (3,691,799) (816,837)
------------- -------------
Net investment income ................................................ 5,884,657 1,008,976
------------- -------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on sales of investments: (Notes 1, 4 and 5)
Proceeds from sales ................................................ 44,998,697 18,790,714
Cost of investments sold ........................................... 42,074,222 18,924,065
------------- -------------
Net realized gain ................................................ 2,924,475 (133,351)
Net unrealized gain on investments: (Note 5)
Beginning of period ................................................ 13,871,018 1,366,008
End of period ...................................................... 76,750,381 7,027,946
------------- -------------
Net change in unrealized gain .................................... 62,879,363 5,661,938
------------- -------------
Net realized and unrealized gain on investments ...................... 65,803,838 5,528,587
------------- -------------
Net increase in net assets resulting from operations ................. 71,688,495 6,537,563
------------- -------------
FROM UNIT TRANSACTIONS:
Variable annuity contract purchase payments .......................... 177,663,705 98,843,484
Sales and administrative charges deducted by the Company ............. 0 0
------------- -------------
Net variable annuity contract purchase payments .................. 177,663,705 98,843,484
Transfers from the Company's fixed account options ................... 42,754,647 12,148,592
Redemptions by contract holders ...................................... (9,384,054) (1,432,605)
Other ................................................................ 152,763 37,116
------------- -------------
Net increase in net assets from unit transactions (Note 5) ....... 211,187,061 109,596,587
------------- -------------
Change in net assets ................................................. 282,875,556 116,134,150
NET ASSETS:
Beginning of period .................................................. 218,897,920 33,757,616
------------- -------------
End of period ........................................................ $ 501,773,476 $ 149,891,766
============= =============
</TABLE>
See Notes to Financial Statements
S-5
<PAGE>
Variable Annuity Account I
Condensed Financial Information - Period Ended September 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Value Increase (Decrease) Units
Per Unit in Value of Outstanding Reserves
Beginning End of Accumulation at End at End
of Period Period Unit of Period of Period
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Variable Fund:
AICA I $12.769 $16.692 30.72% 727,748.4 $12,147,482
- -------------------------------------------------------------------------------------------------------------------------
Aetna Income Shares:
AICA I $10.489 $11.047 5.32% 214,314.3 2,367,501
- -------------------------------------------------------------------------------------------------------------------------
Aetna Variable Encore Fund:
AICA I $10.481 $10.791 2.95% 1,195,320.2 12,898,434
- -------------------------------------------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc.:
AICA I $11.781 $13.996 18.80% 270,139.6 3,780,811
- -------------------------------------------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio:
AICA I $12.674 $15.182 19.79% 48,617.6 738,130
- -------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio:
AICA I $12.123 $14.155 16.76% 20,507.0 290,272
- -------------------------------------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio:
AICA I $11.613 $13.095 12.76% 46,190.6 604,868
Annuity contracts in payment period 33,189
- -------------------------------------------------------------------------------------------------------------------------
Aetna Variable Portfolios, Inc.:
Aetna Variable Capital Appreciation Portfolio:
AICA I $10.856 $13.367 23.13%(2) 20,351.6 272,033
- -------------------------------------------------------------------------------------------------------------------------
Aetna Variable Growth Portfolio:
AICA I $10.667 $13.834 29.69%(2) 26,942.3 372,732
- -------------------------------------------------------------------------------------------------------------------------
Aetna Variable Index Plus Portfolio:
AICA I $10.919 $14.077 28.93% 193,926.5 2,729,871
- -------------------------------------------------------------------------------------------------------------------------
Aetna Variable Small Company Portfolio:
AICA I $11.313 $14.070 24.37%(2) 37,280.5 524,552
- -------------------------------------------------------------------------------------------------------------------------
Alger American Funds:
Balanced Portfolio:
AICA I $10.713 $12.879 20.21% 94,600.9 1,218,334
- -------------------------------------------------------------------------------------------------------------------------
Growth Portfolio:
AICA I $10.940 $14.097 28.85% 945,397.6 13,327,178
- -------------------------------------------------------------------------------------------------------------------------
Income and Growth Portfolio:
AICA I $11.333 $15.103 33.26% 244,778.0 3,696,826
- -------------------------------------------------------------------------------------------------------------------------
Leveraged AllCap Portfolio:
AICA I $11.188 $14.051 25.58% 212,806.4 2,990,043
- -------------------------------------------------------------------------------------------------------------------------
MidCap Portfolio:
AICA I $10.667 $13.087 22.69% 600,542.6 7,859,467
- -------------------------------------------------------------------------------------------------------------------------
Small Capitalization Portfolio:
AICA I $9.800 $11.520 17.56% 1,075,053.2 12,385,023
- -------------------------------------------------------------------------------------------------------------------------
American Century Investments:
Balanced Fund:
AICA I $11.284 $12.994 15.15% 52,222.8 678,581
- -------------------------------------------------------------------------------------------------------------------------
Capital Appreciation Fund:
AICA I $9.183 $10.098 9.97% 120,331.5 1,215,088
- -------------------------------------------------------------------------------------------------------------------------
International Fund:
AICA I $11.574 $14.103 21.85% 171,760.3 2,422,299
- -------------------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio:
AICA I $11.855 $14.731 24.26% 2,038,703.4 30,031,364
- -------------------------------------------------------------------------------------------------------------------------
Growth Portfolio:
AICA I $10.940 $13.475 23.17% 1,246,017.9 16,790,553
- -------------------------------------------------------------------------------------------------------------------------
High Income Portfolio:
AICA I $11.410 $13.158 15.32% 606,434.6 7,979,358
- -------------------------------------------------------------------------------------------------------------------------
Overseas Portfolio:
AICA I $11.447 $13.537 18.26% 216,953.3 2,936,870
- -------------------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio:
AICA I $11.674 $13.643 16.87% 210,254.6 2,868,519
- -------------------------------------------------------------------------------------------------------------------------
Contrafund Portfolio:
AICA I $12.093 $15.048 24.44% 1,377,449.0 20,728,303
- -------------------------------------------------------------------------------------------------------------------------
S-6
<PAGE>
Variable Annuity Account I
Condensed Financial Information - Period Ended September 30, 1997 (Unaudited &
continued):
- -------------------------------------------------------------------------------------------------------------------------
Value Increase (Decrease) Units
Per Unit in Value of Outstanding Reserves
Beginning End of Accumulation at End at End
of Period Period Unit of Period of Period
- -------------------------------------------------------------------------------------------------------------------------
Index 500 Portfolio:
AICA I $12.722 $16.256 27.77% 1,221,871.2 $19,862,300
- -------------------------------------------------------------------------------------------------------------------------
Investment Grade Bond Portfolio:
AICA I $10.455 $10.986 5.08% 104,768.3 1,150,990
- -------------------------------------------------------------------------------------------------------------------------
Insurance Management Series:
American Leaders Fund II:
AICA I $13.639 $17.441 27.88% 6,196,311.2 108,071,685
Annuity contracts in payment period 17,527
- -------------------------------------------------------------------------------------------------------------------------
Equity Income Fund II
AICA I $10.539 $12.319 16.90%(1) 752,843.5 9,274,363
- -------------------------------------------------------------------------------------------------------------------------
Growth Strategies Fund II:
AICA I $12.596 $16.784 33.25% 1,403,562.4 23,558,087
- -------------------------------------------------------------------------------------------------------------------------
High Income Bond Fund II:
AICA I $11.920 $13.156 10.37% 1,838,830.9 24,192,411
Annuity contracts in payment period 17,491
- -------------------------------------------------------------------------------------------------------------------------
International Equity Fund II:
AICA I $10.924 $12.307 12.66% 1,590,492.1 19,574,477
- -------------------------------------------------------------------------------------------------------------------------
Prime Money Fund II:
AICA I $10.515 $10.781 2.54% 399,553.2 4,307,426
- -------------------------------------------------------------------------------------------------------------------------
U.S. Government Securities Fund II:
AICA I $10.809 $11.338 4.89% 486,893.1 5,520,434
- -------------------------------------------------------------------------------------------------------------------------
Utility Fund II:
AICA I $12.361 $13.712 10.93% 1,318,619.7 18,080,453
Annuity contracts in payment period 17,879
- -------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series:
Aggressive Growth Portfolio:
AICA I $11.376 $12.454 9.48% 503,161.2 6,266,171
- -------------------------------------------------------------------------------------------------------------------------
Balanced Portfolio:
AICA I $12.038 $14.221 18.14% 449,989.5 6,399,316
- -------------------------------------------------------------------------------------------------------------------------
Flexible Income Portfolio:
AICA I $11.136 $11.937 7.19% 117,157.9 1,398,558
- -------------------------------------------------------------------------------------------------------------------------
Growth Portfolio:
AICA I $12.171 $14.943 22.77% 596,203.9 8,908,888
- -------------------------------------------------------------------------------------------------------------------------
Short-Term Bond Portfolio:
AICA I $10.417 $10.829 3.96% 75,325.9 815,687
- -------------------------------------------------------------------------------------------------------------------------
Worldwide Growth Portfolio:
AICA I $13.393 $16.789 25.36% 2,523,820.9 42,373,264
- -------------------------------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund:
AICA I $10.328 $11.372 10.11% 176,673.1 2,009,136
- -------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust Fund:
AICA I $13.194 $16.128 22.24% 111,932.5 1,805,207
- -------------------------------------------------------------------------------------------------------------------------
MFS Funds:
Emerging Growth Series:
AICA I $10.074 $12.559 24.66% 995,245.5 12,499,024
- -------------------------------------------------------------------------------------------------------------------------
Research Series:
AICA I $10.970 $13.327 21.49% 866,379.0 11,546,629
- -------------------------------------------------------------------------------------------------------------------------
Total Return Series:
AICA I $10.894 $12.707 16.63% 430,869.1 5,474,948
- -------------------------------------------------------------------------------------------------------------------------
Value Series:
AICA I $10.334 $12.576 21.69% 76,223.9 958,624
- -------------------------------------------------------------------------------------------------------------------------
World Government Series:
AICA I $10.471 $10.334 (1.30%) 73,945.6 764,158
- -------------------------------------------------------------------------------------------------------------------------
Oppenheimer Funds:
Capital Appreciation Fund:
AICA I $10.516 $13.267 26.16%(2) 24,148.2 320,366
- -------------------------------------------------------------------------------------------------------------------------
Global Securities Fund:
AICA I $10.488 $11.862 13.10%(2) 37,181.7 441,042
- -------------------------------------------------------------------------------------------------------------------------
Growth and Income Fund:
AICA I $10.497 $12.494 19.02%(2) 130,134.4 1,625,845
- -------------------------------------------------------------------------------------------------------------------------
S-7
<PAGE>
Variable Annuity Account I
Condensed Financial Information - Period Ended September 30, 1997 (Unaudited &
continued):
- -------------------------------------------------------------------------------------------------------------------------
Value Increase (Decrease) Units
Per Unit in Value of Outstanding Reserves
Beginning End of Accumulation at End at End
of Period Period Unit of Period of Period
- -------------------------------------------------------------------------------------------------------------------------
Strategic Bond Fund:
AICA I $10.187 $10.678 4.82%(2) 59,319.2 $633,408
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
AICA I - Certain individual and group contracts issued as non-qualified
deferred annuity contracts or Individual Retirement Annuity
contracts issued since June 28, 1995.
Notes to Condensed Financial Information:
(1) - Reflects less than a full year of performance activity. Funds were first
received in this option during January 1997.
(2) - Reflects less than a full year of performance activity. Funds were first
received in this option during May 1997.
See Notes to Financial Statements
S-8
<PAGE>
Variable Annuity Account I
Notes to Financial Statements - September 30, 1997 (Unaudited)
1. Summary of Significant Accounting Policies
Variable Annuity Account I ("Account") is a separate account established by
Aetna Insurance Company of America ("Company") and is registered under the
Investment Company Act of 1940 as a unit investment trust. The Account is
sold exclusively for use with variable annuity contracts that may be
entitled to tax-deferred treatment under specific sections of the Internal
Revenue Code of 1986, as amended. The account commenced operations on June
28, 1995.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect amounts reported therein. Although actual results
could differ from these estimates, any such differences are expected to be
immaterial to the net assets of the Account.
a. Valuation of Investments
Investments in the following Funds are stated at the closing net asset
value per share as determined by each Fund on September 30, 1997:
<TABLE>
<S> <C>
Aetna Variable Fund Insurance Management Series:
Aetna Income Shares [bullet] American Leaders Fund II
Aetna Variable Encore Fund [bullet] Equity Income Fund II
Aetna Investment Advisers Fund, Inc. [bullet] Growth Strategies Fund II
Aetna Ascent Variable Portfolio [bullet] High Income Bond Fund II
Aetna Crossroads Variable Portfolio [bullet] International Equity Fund II
Aetna Legacy Variable Portfolio [bullet] Prime Money Fund II
Aetna Variable Portfolios, Inc.: [bullet] U.S. Government Securities Fund II
[bullet] Aetna Variable Capital Appreciation [bullet] Utility Fund II
[bullet] Aetna Variable Growth Fund Janus Aspen Series:
[bullet] Aetna Variable Index Plus Fund [bullet] Aggressive Growth Portfolio
[bullet] Aetna Variable Small Company Fund [bullet] Balanced Portfolio
Alger American Funds: [bullet] Flexible Income Portfolio
[bullet] Balanced Portfolio [bullet] Growth Portfolio
[bullet] Growth Portfolio [bullet] Short-Term Bond Portfolio
[bullet] Income and Growth Portfolio [bullet] Worldwide Growth Portfolio
[bullet] Leveraged AllCap Portfolio Lexington Emerging Markets Fund
[bullet] MidCap Portfolio Lexington Natural Resources Trust Fund
[bullet] Small Capitalization Portfolio MFS Funds:
American Century Investments: [bullet] Emerging Growth Series
[bullet] Balanced Fund [bullet] Research Series
[bullet] Capital Appreciation Fund [bullet] Total Return Series
[bullet] International Fund [bullet] Value Series
Fidelity Investments Variable Insurance Products Fund: [bullet] World Government Series
[bullet] Equity-Income Portfolio Oppenheimer Funds:
[bullet] Growth Portfolio [bullet] Capital Appreciation Fund
[bullet] High Income Portfolio [bullet] Global Securities Fund
[bullet] Overseas Portfolio [bullet] Growth and Income Fund
Fidelity Investments Variable Insurance Products Fund II: [bullet] Strategic Bond Fund
[bullet] Asset Manager Portfolio
[bullet] Contrafund Portfolio
[bullet] Index 500 Portfolio
[bullet] Investment Grade Bond Portfolio
</TABLE>
S-9
<PAGE>
Variable Annuity Account I
Notes to Financial Statements - September 30, 1997 (Unaudited & continued):
b. Other
Investment transactions are accounted for on a trade date basis and
dividend income is recorded on the ex-dividend date. The cost of
investments sold is determined by specific identification.
c. Federal Income Taxes
The operations of the Account form a part of, and are taxed with, the total
operations of the Company which is taxed as a life insurance company under
the Internal Revenue Code of 1986, as amended.
d. Annuity Reserves
Annuity reserves held in the Separate Accounts are computed for currently
payable contracts according to the 83a and 83GAM tables using various
assumed interest rates. Mortality experience is monitored by the Company.
Charges to annuity reserves for mortality experience are reimbursed to the
Company if the reserves required are less than originally estimated. If
additional reserves are required, the Company reimburses the Account.
2. Valuation Period Deductions
Deductions by the Account for mortality and expense risk charges are made
in accordance with the terms of the contracts and are paid to the Company.
3. Dividend Income
On an annual basis, the Funds distribute substantially all of their taxable
income and realized capital gains to their shareholders. Distributions to
the Account are automatically reinvested in shares of the Funds. The
Account's proportionate share of each Fund's undistributed net investment
income (distributions in excess of net investment income) and accumulated
net realized gain (loss) on investments is included in net unrealized gain
(loss) in the Statements of Operations and Changes in Net Assets.
4. Purchases and Sales of Investments
The cost of purchases and proceeds from sales of investments other than
short-term investments for the nine month period ended September 30, 1997
and September 30, 1996 aggregated $262,070,414 and $44,998,697;
$129,396,277 and $18,790,714, respectively.
S-10
<PAGE>
Variable Annuity Account I
Notes to Financial Statements - September 30, 1997 (Unaudited & continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets - Period Ended September 30, 1997
<TABLE>
- ---------------------------------------------------------------------------------------------------------------
Valuation Proceeds Cost of Net
Period from Investments Realized
Dividend Deductions Sales Sold Gain (Loss)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Variable Fund: $376,462 ($ 79,272) $ 447,723 $ 390,800 $ 56,923
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------
Aetna Income Shares: 50,972 (17,779) 567,237 565,228 2,009
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------
Aetna Variable Encore Fund: 322,525 (117,974) 13,193,995 13,206,372 (12,377)
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc.: 230,525 (21,869) 119,855 114,350 5,505
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio: 5,732 (5,957) 1,501,972 1,371,162 130,810
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio: 2,375 (1,631) 3,652 3,304 348
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio: 6,012 (3,732) 91,618 92,624 (1,006)
Annuity contracts in accumulation
Annuity contracts in payment period
- ---------------------------------------------------------------------------------------------------------------
Aetna Variable Portfolios, Inc.:
Aetna Variable Capital Appreciation Portfolio: 0 (508) 31,409 28,386 3,023
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------
Aetna Variable Growth Portfolio: 0 (529) 29,199 26,711 2,488
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------
Aetna Variable Index Plus Portfolio: 0 (16,502) 974,577 893,342 81,235
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------
Aetna Variable Small Company Portfolio: 0 (1,124) 22,056 18,064 3,992
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------
Alger American Funds:
Balanced Portfolio: 24,076 (8,848) 53,412 45,233 8,179
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------
Growth Portfolio: 89,153 (103,211) 1,966,264 1,728,020 238,244
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------
Income and Growth Portfolio: 65,111 (17,805) 492,118 395,889 96,229
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------
Leveraged AllCap Portfolio: 0 (25,626) 810,898 731,655 79,243
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------
MidCap Portfolio: 80,363 (57,660) 1,428,066 1,308,239 119,827
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------
Small Capitalization Portfolio: 338,930 (92,058) 819,181 894,521 (75,340)
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------
American Century Investments:
Balanced Fund: 29,309 (5,754) 140,702 131,485 9,217
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
S-11
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Net
Net Unrealized Net Increase (Decrease)
Gain (Loss) Change in In Net Assets Net Assets
Beginning End Unrealized from Unit Beginning End
of Period of Period Gain (Loss) Transactions of Period of Period
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
($143,001) $1,670,867 $1,813,868 $6,150,192
$3,829,309 $12,147,482
- --------------------------------------------------------------------------------------------------------------------------------
(21,783) 46,974 68,757 1,260,298
1,003,244 2,367,501
- --------------------------------------------------------------------------------------------------------------------------------
61,606 196,606 135,000 4,191,884
8,379,376 12,898,434
- --------------------------------------------------------------------------------------------------------------------------------
15,913 259,380 243,467 2,620,568
702,615 3,780,811
- --------------------------------------------------------------------------------------------------------------------------------
56,427 30,322 (26,105) (531,458)
1,165,108 738,130
- --------------------------------------------------------------------------------------------------------------------------------
(282) 28,680 28,962 183,478
76,740 290,272
- --------------------------------------------------------------------------------------------------------------------------------
(3,582) 49,615 53,197 $483,222
100,364 604,868
0 33,189
- --------------------------------------------------------------------------------------------------------------------------------
0 6,343 6,343 263,175
0 272,033
- --------------------------------------------------------------------------------------------------------------------------------
0 14,038 14,038 356,735
0 372,732
- --------------------------------------------------------------------------------------------------------------------------------
(786) 303,266 304,052 2,328,765
32,321 2,729,871
- --------------------------------------------------------------------------------------------------------------------------------
0 47,840 47,840 473,844
0 524,552
- --------------------------------------------------------------------------------------------------------------------------------
19,051 157,878 138,827 548,285
507,815 1,218,334
- --------------------------------------------------------------------------------------------------------------------------------
331,002 2,629,840 2,298,838 4,339,414
6,464,740 13,327,178
- --------------------------------------------------------------------------------------------------------------------------------
43,184 388,703 345,519 2,560,502
647,270 3,696,826
- --------------------------------------------------------------------------------------------------------------------------------
53,728 574,605 520,877 402,982
2,012,567 2,990,043
- --------------------------------------------------------------------------------------------------------------------------------
172,467 1,320,049 1,147,582 2,467,156
4,102,199 7,859,467
- --------------------------------------------------------------------------------------------------------------------------------
(40,650) 1,632,760 1,673,410 3,534,910
7,005,171 12,385,023
- --------------------------------------------------------------------------------------------------------------------------------
10,011 55,358 45,347 226,989
373,473 678,581
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-12
<PAGE>
Variable Annuity Account I
Notes to Financial Statements - September 30, 1997 (Unaudited & continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets - Period Ended September 30, 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Valuation Proceeds Cost of Net
Period from Investments Realized
Dividends Deductions Sales Sold Gain (Loss)
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Captial Appreciation Fund: $13,359 ($8,104) $404,632 $423,410 ($18,778)
Annuity contracts in accumulation
--------------------------------------------------------------------------------------------------------------------------------
International Fund: 43,440 (16,978) 322,932 278,651 44,281
Annuity contracts in accumulation
--------------------------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio: 1,381,407 (216,854) 616,412 545,113 71,299
Annuity contracts in accumulation
--------------------------------------------------------------------------------------------------------------------------------
Growth Portfolio: 387,748 (136,859) 1,412,360 1,299,664 112,696
Annuity contracts in accumulation
--------------------------------------------------------------------------------------------------------------------------------
High Income Portfolio: 258,910 (54,668) 791,427 739,736 51,691
Annuity contracts in accumulation
--------------------------------------------------------------------------------------------------------------------------------
Overseas Portfolio: 123,104 (21,889) 319,109 296,973 22,136
Annuity contracts in accumulation
--------------------------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio: 167,003 (21,168) 77,985 75,445 2,540
Annuity contracts in accumulation
--------------------------------------------------------------------------------------------------------------------------------
Contrafund Portfolio: 273,634 (144,749) 345,760 280,413 65,347
Annuity contracts in accumulation
--------------------------------------------------------------------------------------------------------------------------------
Index 500 Portfolio: 198,117 (122,586) 705,260 552,700 152,560
Annuity contracts in accumulation
--------------------------------------------------------------------------------------------------------------------------------
Investment Grade Bond Portfolio: 34,282 (8,269) 207,396 206,768 628
Annuity contracts in accumulation
--------------------------------------------------------------------------------------------------------------------------------
Insurance Management Series:
American Leaders Fund II: 2,021,951 (863,206) 1,198,390 778,206 420,184
Annuity contracts in accumulation
Annuity contracts in payment period
--------------------------------------------------------------------------------------------------------------------------------
Equity Income Fund II: 42,089 (35,735) 124,981 116,644 8,337
Annuity contracts in accumulation
--------------------------------------------------------------------------------------------------------------------------------
Growth Strategies Fund II: 83,791 (164,328) 531,394 390,435 140,959
Annuity contracts in accumulation
--------------------------------------------------------------------------------------------------------------------------------
High Income Bond Fund II: 1,053,521 (186,107) 972,732 885,411 87,321
Annuity contracts in accumulation
Annuity contracts in payment period
--------------------------------------------------------------------------------------------------------------------------------
International Equity Fund II: 15,632 (156,862) 424,446 375,491 48,955
Annuity contracts in accumulation
--------------------------------------------------------------------------------------------------------------------------------
Prime Money Fund II: 161,787 (48,298) 4,388,355 4,388,355 0
Annuity contracts in accumulation
--------------------------------------------------------------------------------------------------------------------------------
U.S. Government Securities Fund II: 136,009 (38,341) 415,572 419,867 (4,295)
Annuity contracts in accumulation
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-13
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Net
Net Unrealized Net Increase (Decrease)
Gain (Loss) Change in In Net Assets Net Assets
Beginning End Unrealized from Unit Beginning End
of Period of Period Gain (Loss) Transactions of Period of Period
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
($11,204) $130,612 $141,816 $626,654
$460,141 $1,215,088
- --------------------------------------------------------------------------------------------------------------------------------
47,176 279,338 232,162 1,294,135
825,259 2,422,299
- --------------------------------------------------------------------------------------------------------------------------------
763,902 4,082,983 3,319,081 13,621,079
11,855,352 30,031,364
- --------------------------------------------------------------------------------------------------------------------------------
339,925 2,765,564 2,425,639 4,473,396
9,527,933 16,790,553
- --------------------------------------------------------------------------------------------------------------------------------
99,376 687,139 587,763 4,398,204
2,737,458 7,979,358
- --------------------------------------------------------------------------------------------------------------------------------
66,703 290,840 224,137 1,267,454
1,321,928 2,936,870
- --------------------------------------------------------------------------------------------------------------------------------
56,785 230,065 173,280 1,330,098
1,216,766 2,868,519
- --------------------------------------------------------------------------------------------------------------------------------
438,859 3,675,583 3,236,724 10,756,016
6,541,331 20,728,303
- --------------------------------------------------------------------------------------------------------------------------------
375,527 2,873,031 2,497,504 12,247,708
4,888,997 19,862,300
- --------------------------------------------------------------------------------------------------------------------------------
10,325 28,445 18,120 657,595
448,634 1,150,990
- --------------------------------------------------------------------------------------------------------------------------------
7,073,040 25,871,482 18,798,442 29,674,479
58,037,362 108,071,685
0 17,527
- --------------------------------------------------------------------------------------------------------------------------------
0 642,714 642,714 8,616,958
0 9,274,363
- --------------------------------------------------------------------------------------------------------------------------------
890,268 5,819,666 4,929,398 8,767,589
9,800,678 23,558,087
- --------------------------------------------------------------------------------------------------------------------------------
442,872 1,382,584 939,712 $10,724,029
11,591,426 24,192,411
0 17,491
- --------------------------------------------------------------------------------------------------------------------------------
599,852 2,557,895 1,958,043 6,373,380
11,335,329 19,574,477
- --------------------------------------------------------------------------------------------------------------------------------
0 0 0 686,272
3,507,665 4,307,426
- --------------------------------------------------------------------------------------------------------------------------------
(201) 97,729 97,930 2,872,679
2,456,452 5,520,434
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-14
<PAGE>
Variable Annuity Account I
Notes to Financial Statements - September 30, 1997 (Unaudited & continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets - Year Ended September 30, 1997
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Valuation Proceeds Cost of Net
Period from Investments Realized
Dividend Deductions Sales Sold Gain (Loss)
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Utility Fund II: $698,490 ($168,691) $945,724 $779,163 $166,561
Annuity contracts in accumulation
Annuity contracts in payment period
--------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series:
Aggressive Growth Portfolio: 0 (42,768) 1,011,674 983,161 28,513
Annuity contracts in accumulation
--------------------------------------------------------------------------------------------------------------------------------
Balanced Portfolio: 115,708 (44,954) 375,567 313,598 61,969
Annuity contracts in accumulation
--------------------------------------------------------------------------------------------------------------------------------
Flexible Income Portfolio: 40,240 (8,724) 297,324 288,483 8,841
Annuity contracts in accumulation
--------------------------------------------------------------------------------------------------------------------------------
Growth Portfolio: 192,636 (66,024) 687,914 568,525 119,389
Annuity contracts in accumulation
--------------------------------------------------------------------------------------------------------------------------------
Short-Term Bond Portfolio: 10,649 (4,623) 97,953 95,805 2,148
Annuity contracts in accumulation
--------------------------------------------------------------------------------------------------------------------------------
Worldwide Growth Portfolio: 427,020 (295,035) 1,021,097 824,766 196,331
Annuity contracts in accumulation
--------------------------------------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund: 1,295 (15,290) 593,120 552,419 40,701
Annuity contracts in accumulation
--------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust Fund: 41,161 (12,945) 1,090,294 988,447 101,847
Annuity contracts in accumulation
--------------------------------------------------------------------------------------------------------------------------------
MFS Funds:
Emerging Growth Series: 0 (87,490) 1,504,705 1,367,513 137,192
Annuity contracts in accumulation
--------------------------------------------------------------------------------------------------------------------------------
Research Series: 0 (73,912) 352,154 306,693 45,461
Annuity contracts in accumulation
--------------------------------------------------------------------------------------------------------------------------------
Total Return Series: 0 (32,555) 446,720 386,712 60,008
Annuity contracts in accumulation
--------------------------------------------------------------------------------------------------------------------------------
Value Series: 0 (3,261) 129,115 120,933 8,182
Annuity contracts in accumulation
--------------------------------------------------------------------------------------------------------------------------------
World Government Series: 15,615 (6,537) 420,982 432,870 (11,888)
Annuity contracts in accumulation
--------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Funds:
Capital Appreciation Fund: 0 (723) 28,242 26,358 1,884
Annuity contracts in accumulation
--------------------------------------------------------------------------------------------------------------------------------
Global Securities Fund: 0 (951) 447 405 42
Annuity contracts in accumulation
--------------------------------------------------------------------------------------------------------------------------------
Growth and Income Fund: 2,097 (2,525) 24,400 21,703 2,697
Annuity contracts in accumulation
--------------------------------------------------------------------------------------------------------------------------------
Strategic Bond Fund: 14,217 (1,948) 18,188 18,001 187
Annuity contracts in accumulation
--------------------------------------------------------------------------------------------------------------------------------
Total Variable Annuity Account I $9,576,456 ($3,691,799) $44,998,697 $42,074,222 $2,924,475
==================================================================================================================================
</TABLE>
S-15
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Net
Net Unrealized Net Increase (Decrease)
Gain (Loss) Change in In Net Assets Net Assets
Beginning End Unrealized from Unit Beginning End
of Period of Period Gain (Loss) Transactions of Period of Period
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$1,106,478 $2,108,851 $1,002,373 $3,064,378
$13,335,221 $18,080,453
0 17,879
- --------------------------------------------------------------------------------------------------------------------------------
17,905 618,575 600,670 2,925,542
2,754,214 6,266,171
- --------------------------------------------------------------------------------------------------------------------------------
46,718 659,283 612,565 3,666,878
1,987,150 6,399,316
- --------------------------------------------------------------------------------------------------------------------------------
5,974 31,051 25,077 939,730
393,394 1,398,558
- --------------------------------------------------------------------------------------------------------------------------------
90,906 1,207,740 1,116,834 4,432,214
3,113,839 8,908,888
- --------------------------------------------------------------------------------------------------------------------------------
(1,799) 7,874 9,673 483,795
314,045 815,687
- --------------------------------------------------------------------------------------------------------------------------------
658,071 6,647,206 5,989,135 22,253,396
13,802,417 42,373,264
- --------------------------------------------------------------------------------------------------------------------------------
(4,649) 22,074 26,723 1,189,837
765,870 2,009,136
- --------------------------------------------------------------------------------------------------------------------------------
98,720 275,190 176,470 168,824
1,329,850 1,805,207
- --------------------------------------------------------------------------------------------------------------------------------
13,628 2,079,892 2,066,264 6,166,736
4,216,322 12,499,024
- --------------------------------------------------------------------------------------------------------------------------------
66,161 1,591,182 1,525,021 7,560,622
2,489,437 11,546,629
- --------------------------------------------------------------------------------------------------------------------------------
22,362 472,406 450,044 3,815,602
1,181,849 5,474,948
- --------------------------------------------------------------------------------------------------------------------------------
156 76,494 76,338 832,504
44,861 958,624
- --------------------------------------------------------------------------------------------------------------------------------
3,877 8,910 5,033 547,508
214,428 764,159
- --------------------------------------------------------------------------------------------------------------------------------
0 26,823 26,823 292,382
0 320,366
- --------------------------------------------------------------------------------------------------------------------------------
0 20,760 20,760 421,191
0 441,042
- --------------------------------------------------------------------------------------------------------------------------------
0 62,571 62,571 1,561,005
0 1,625,845
- --------------------------------------------------------------------------------------------------------------------------------
0 4,705 4,705 616,247
0 633,408
- --------------------------------------------------------------------------------------------------------------------------------
$13,871,018 $76,750,381 $62,879,363 $211,187,061 $218,897,920 $501,773,476
================================================================================================================================
</TABLE>
S-16
<PAGE>
Variable Annuity Account I
Statement of Assets and Liabilities - December 31, 1996:
<TABLE>
<S> <C>
ASSETS:
Investments, at net asset value: (Note 1)
Aetna Variable Fund; 118,220 shares (cost $3,972,310) ........................ $3,829,309
Aetna Income Shares; 79,477 shares (cost $1,025,028) ......................... 1,003,244
Aetna Variable Encore Fund; 635,111 shares (cost $8,317,770) ................. 8,379,376
Aetna Investment Advisers Fund, Inc.; 46,476 shares (cost $686,701) .......... 702,615
Aetna Ascent Variable Portfolio; 92,327 shares (cost $1,108,682) ............. 1,165,108
Aetna Crossroads Variable Portfolio; 6,406 shares (cost $77,022) ............. 76,740
Aetna Legacy Variable Portfolio; 8,918 shares (cost $103,946) ................ 100,364
Aetna Variable Index Plus Portfolio; 2,964 shares (cost $33,107) ............. 32,321
Alger American Funds:
Balanced Portfolio; 54,958 shares (cost $488,764) .......................... 507,815
Growth Portfolio; 188,312 shares (cost $6,133,738) ......................... 6,464,740
Income and Growth Portfolio; 76,873 shares (cost $604,086) ................. 647,270
Leveraged AllCap Portfolio; 103,955 shares (cost $1,958,838) ............... 2,012,567
MidCap Portfolio; 192,140 shares (cost $3,929,732) ......................... 4,102,199
Small Capitalization Portfolio; 171,234 shares (cost $7,045,821) ........... 7,005,171
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio; 563,735 shares (cost $11,091,451) ................. 11,855,352
Growth Portfolio; 305,971 shares (cost $9,188,009) ......................... 9,527,933
High Income Portfolio; 218,647 shares (cost $2,638,083) .................... 2,737,458
Overseas Portfolio; 70,166 shares (cost $1,255,226) ........................ 1,321,928
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio; 71,870 shares (cost $1,159,980) ................... 1,216,766
Contrafund Portfolio; 395,008 shares (cost $6,102,472) ..................... 6,541,331
Index 500 Portfolio; 54,852 shares (cost $4,513,469) ....................... 4,888,997
Investment Grade Bond Portfolio; 36,653 shares (cost $438,309) ............. 448,634
Insurance Management Series:
American Leaders Fund II; 3,803,235 shares (cost $50,964,321)............... 58,037,362
Growth Strategies Fund II; 765,678 shares (cost $8,910,410)................. 9,800,678
High Income Bond Fund II; 1,131,975 shares (cost $11,148,554)............... 11,591,426
International Equity Fund II; 1,015,711 shares (cost $10,735,477)........... 11,335,329
Prime Money Fund II; 3,507,665 shares (cost $3,507,665)..................... 3,507,665
U.S. Government Securities Fund II; 243,454 shares (cost $2,456,653)....... 2,456,452
Utility Fund II; 1,129,147 shares (cost $12,228,743)........................ 13,335,221
Janus Aspen Series:
Aggressive Growth Portfolio; 150,999 shares (cost $2,736,309)............... 2,754,214
Balanced Portfolio; 134,540 shares (cost $1,940,432)........................ 1,987,150
Flexible Income Portfolio; 34,999 shares (cost $387,419).................... 393,394
Growth Portfolio; 200,763 shares (cost $3,022,933).......................... 3,113,839
Short-Term Bond Portfolio; 31,499 shares (cost $315,844).................... 314,045
Worldwide Growth Portfolio; 710,001 shares (cost $13,144,346)............... 13,802,417
Lexington Emerging Markets Fund; 75,979 shares (cost $770,519)................ 765,870
Lexington Natural Resources Trust Fund; 93,062 shares (cost $1,231,130)....... 1,329,850
MFS Funds:
Emerging Growth Series; 318,453 shares (cost $4,202,694).................... 4,216,322
Research Series; 189,599 shares (cost $2,423,276)........................... 2,489,437
Total Return Series; 86,203 shares (cost $1,159,487)........................ 1,181,849
Value Series; 4,208 shares (cost $44,704)................................... 44,861
World Government Series; 20,267 shares (cost $210,551)...................... 214,428
TCI Portfolios, Inc.:
Balanced Fund; 49,532 shares (cost $363,463)................................ 373,473
Growth Fund; 44,936 shares (cost $471,345).................................. 460,141
International Fund; 138,466 shares (cost $778,083).......................... 825,259
------------
NET ASSETS (cost $205,026,902) ................................................. $218,897,920
============
</TABLE>
S-17
<PAGE>
Variable Annuity Account I
Statement of Assets and Liabilities - December 31, 1996 (continued):
Net assets represented by:
Reserves for annuity contracts in accumulation and payment period:
(Notes 1 and 5)
<TABLE>
<S> <C>
Aetna Variable Fund:
Annuity contracts in accumulation............................ $3,829,309
Aetna Income Shares:
Annuity contracts in accumulation............................ 1,003,244
Aetna Variable Encore Fund:
Annuity contracts in accumulation............................ 8,379,376
Aetna Investment Advisers Fund, Inc.:
Annuity contracts in accumulation............................ 702,615
Aetna Ascent Variable Portfolio:
Annuity contracts in accumulation............................ 1,165,108
Aetna Crossroads Variable Portfolio:
Annuity contracts in accumulation............................ 76,740
Aetna Legacy Variable Portfolio:
Annuity contracts in accumulation............................ 100,364
Aetna Variable Index Plus Portfolio:
Annuity contracts in accumulation............................ 32,321
Alger American Funds:
Balanced Portfolio:
Annuity contracts in accumulation............................ 507,815
Growth Portfolio:
Annuity contracts in accumulation............................ 6,464,740
Income and Growth Portfolio:
Annuity contracts in accumulation............................ 647,270
Leveraged AllCap Portfolio:
Annuity contracts in accumulation............................ 2,012,567
MidCap Portfolio:
Annuity contracts in accumulation............................ 4,102,199
Small Capitalization Portfolio:
Annuity contracts in accumulation............................ 7,005,171
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio:
Annuity contracts in accumulation............................ 11,855,352
Growth Portfolio:
Annuity contracts in accumulation............................ 9,527,933
High Income Portfolio:
Annuity contracts in accumulation............................ 2,737,458
Overseas Portfolio:
Annuity contracts in accumulation............................ 1,321,928
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio:
Annuity contracts in accumulation............................ 1,216,766
Contrafund Portfolio:
Annuity contracts in accumulation............................ 6,541,331
Index 500 Portfolio:
Annuity contracts in accumulation............................ 4,888,997
Investment Grade Bond Portfolio:
Annuity contracts in accumulation............................ 448,634
Insurance Management Series:
American Leaders Fund II:
Annuity contracts in accumulation............................ 58,037,362
Growth Strategies Fund II:
Annuity contracts in accumulation............................ 9,800,678
High Income Bond Fund II:
Annuity contracts in accumulation............................ 11,591,426
International Equity Fund II:
Annuity contracts in accumulation............................ 11,335,329
</TABLE>
S-18
<PAGE>
Variable Annuity Account I
Statement of Assets and Liabilities - December 31, 1996 (continued):
<TABLE>
<S> <C>
Prime Money Fund II:
Annuity contracts in accumulation..................... $3,507,665
U.S. Government Securities Fund II:
Annuity contracts in accumulation..................... 2,456,452
Utility Fund II:
Annuity contracts in accumulation..................... 13,335,221
Janus Aspen Series:
Aggressive Growth Portfolio:
Annuity contracts in accumulation..................... 2,754,214
Balanced Portfolio:
Annuity contracts in accumulation..................... 1,987,150
Flexible Income Portfolio:
Annuity contracts in accumulation..................... 393,394
Growth Portfolio:
Annuity contracts in accumulation..................... 3,113,839
Short-Term Bond Portfolio:
Annuity contracts in accumulation..................... 314,045
Worldwide Growth Portfolio:
Annuity contracts in accumulation..................... 13,802,417
Lexington Emerging Markets Fund:
Annuity contracts in accumulation..................... 765,870
Lexington Natural Resources Trust Fund:
Annuity contracts in accumulation..................... 1,329,850
MFS Funds:
Emerging Growth Series:
Annuity contracts in accumulation..................... 4,216,322
Research Series:
Annuity contracts in accumulation..................... 2,489,437
Total Return Series:
Annuity contracts in accumulation..................... 1,181,849
Value Series:
Annuity contracts in accumulation..................... 44,861
World Government Series:
Annuity contracts in accumulation..................... 214,428
TCI Portfolios, Inc.:
Balanced Fund:
Annuity contracts in accumulation..................... 373,473
Growth Fund:
Annuity contracts in accumulation..................... 460,141
International Fund:
Annuity contracts in accumulation..................... 825,259
--------------
$218,897,920
==============
</TABLE>
See Notes to Financial Statements
S-19
<PAGE>
Variable Annuity Account I
Statements of Operations and Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended December 31,
1996 *1995
---- -----
<S> <C> <C>
INVESTMENT INCOME:
Income: (Notes 1, 3 and 5)
Dividends ........................................................... $3,142,826 $344,085
Expenses: (Notes 2 and 5)
Valuation Period Deductions ......................................... (1,469,442) (129,615)
---------- --------
Net investment income .................................................. 1,673,384 214,470
---------- --------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on sales of investments: (Notes 1, 4 and 5)
Proceeds from sales .................................................. 30,774,009 1,768,297
Cost of investments sold ............................................. 30,447,382 1,764,665
---------- --------
Net realized gain .................................................. 326,627 3,632
Net unrealized gain on investments: (Note 5)
Beginning of period .................................................. 1,366,008 0
End of period ........................................................ 13,871,018 1,366,008
---------- --------
Net change in unrealized gain ...................................... 12,505,010 1,366,008
---------- --------
Net realized and unrealized gain on investments ........................ 12,831,637 1,369,640
---------- --------
Net increase in net assets resulting from operations ................... 14,505,021 1,584,110
---------- --------
FROM UNIT TRANSACTIONS:
Variable annuity contract purchase payments ............................ 151,305,122 29,988,730
Sales and administrative charges deducted by the Company ............... 0 (98,694)
---------- --------
Net variable annuity contract purchase payments..................... 151,305,122 29,890,036
Transfers from the Company's fixed account options ..................... 21,839,958 2,369,036
Redemptions by contract holders ........................................ (2,630,806) (100,005)
Other .................................................................. 121,009 14,439
---------- --------
Net increase in net assets from unit transactions (Note 5) ......... 170,635,283 32,173,506
---------- --------
Change in net assets ................................................... 185,140,304 33,757,616
NET ASSETS:
Beginning of period .................................................... 33,757,616 0
---------- --------
End of period .......................................................... $218,897,920 $33,757,616
============ ===========
</TABLE>
* Statements of Operations and Changes in Net Assets for the Period June 28,
1995 through December 31, 1995.
S-20
<PAGE>
Variable Annuity Account I
Notes to Financial Statements December 31, 1996
1. Summary of Significant Accounting Policies
Variable Annuity Account I ("Account") is a separate account established
by Aetna Insurance Company of America ("Company") and is registered under
the Investment Company Act of 1940 as a unit investment trust. The Account
is sold exclusively for use with variable annuity contracts that may be
entitled to tax - deferred treatment under specific sections of the
Internal Revenue Code of 1986, as amended. The account commenced
operations on June 28, 1995.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect amounts reported therein. Although actual results
could differ from these estimates, any such differences are expected to be
immaterial to the net assets of the Account.
a. Valuation of Investments
Investments in the following Funds are stated at the closing net asset
value per share as determined by each Fund on December 31, 1996:
<TABLE>
<S> <C>
Aetna Variable Fund Insurance Management Series:
Aetna Income Shares [bullet]American Leaders Fund II
Aetna Variable Encore Fund [bullet]Growth Strategies Fund II
Aetna Investment Advisers Fund, Inc. [bullet]High Income Bond Fund II
Aetna Ascent Variable Portfolio [bullet]International Equity Fund II
Aetna Crossroads Variable Portfolio [bullet]Prime Money Fund II
Aetna Legacy Variable Portfolio [bullet]U.S. Government Securities Fund II
Aetna Variable Index Plus Portfolio [bullet]Utility Fund II
Alger American Funds: Janus Aspen Series:
[bullet]Balanced Portfolio [bullet]Aggressive Growth Portfolio
[bullet]Growth Portfolio [bullet]Balanced Portfolio
[bullet]Income and Growth Portfolio [bullet]Flexible Income Portfolio
[bullet]Leveraged AllCap Portfolio [bullet]Growth Portfolio
[bullet]MidCap Portfolio [bullet]Short - Term Bond Portfolio
[bullet]Small Capitalization Portfolio [bullet]Worldwide Growth Portfolio
Fidelity Investments Variable Insurance Products Fund: Lexington Emerging Markets Fund
[bullet]Equity - Income Portfolio Lexington Natural Resources Trust Fund
[bullet]Growth Portfolio MFS Funds:
[bullet]High Income Portfolio [bullet]Emerging Growth Series
[bullet]Overseas Portfolio [bullet]Research Series
Fidelity Investments Variable Insurance Products Fund II: [bullet]Total Return Series
[bullet]Asset Manager Portfolio [bullet]Value Series
[bullet]Contrafund Portfolio [bullet]World Government Series
[bullet]Index 500 Portfolio TCI Portfolios, Inc.:
[bullet]Investment Grade Bond Portfolio [bullet]Balanced Fund
[bullet]Growth Fund
[bullet]International Fund
</TABLE>
S-21
<PAGE>
Notes to Financial Statements December 31, 1996 (continued):
b. Other
Investment transactions are accounted for on a trade date basis and
dividend income is recorded on the ex-dividend date. The cost of
investments sold is determined by specific identification.
c. Federal Income Taxes
The operations of the Account form a part of, and are taxed with, the total
operations of the Company which is taxed as a life insurance company under
the Internal Revenue Code of 1986, as amended.
d. Annuity Reserves
Annuity reserves held in the Separate Accounts are computed for currently
payable contracts according to the 83a and 83GAM tables using various
assumed interest rates. Mortality experience is monitored by the Company.
Charges to annuity reserves for mortality experience are reimbursed to the
Company if the reserves required are less than originally estimated. If
additional reserves are required, the Company reimburses the Account.
2. Valuation Period Deductions
Deductions by the Account for mortality and expense risk charges are made
in accordance with the terms of the contracts and are paid to the Company.
3. Dividend Income
On an annual basis, the Funds distribute substantially all of their taxable
income and realized capital gains to their shareholders. Distributions to
the Account are automatically reinvested in shares of the Funds. The
Account's proportionate share of each Fund's undistributed net investment
income (distributions in excess of net investment income) and accumulated
net realized gain (loss) on investments is included in net unrealized gain
(loss) in the Statements of Operations and Changes in Net Assets.
4. Purchases and Sales of Investments
The cost of purchases and proceeds from sales of investments other than
short-term investments for the years ended December 31, 1996 and December
31, 1995 aggregated $203,082,676 and $30,774,009; $34,156,273 and
$1,768,297, respectively.
S-22
<PAGE>
Variable Annuity Account I
Notes to Financial Statements December 31, 1996 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets Year Ended December 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Valuation Proceeds Cost of Net
Period from Investments Realized
Dividends Deductions Sales Sold Gain (Loss)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Variable Fund: $377,243 ($16,848) $678,021 $625,675 $52,346
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Aetna Income Shares: 53,910 (6,342) 361,706 364,811 (3,105)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Aetna Variable Encore Fund: 271,781 (42,460) 8,817,411 8,991,630 (174,219)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc.: 49,621 (6,268) 445,891 441,685 4,206
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio: 41,723 (4,767) 103,743 102,116 1,627
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio: 3,213 (150) 245 229 16
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio: 6,160 (98) 32,715 33,619 (904)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Aetna Variable Index Plus Portfolio: 175 (59) 32,626 30,948 1,678
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Alger American Funds:
Balanced Portfolio: 1,752 (2,640) 164,226 164,428 (202)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Growth Portfolio: 41,079 (39,330) 505,561 482,104 23,457
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Income and Growth Portfolio: 30,956 (3,277) 116,013 131,617 (15,604)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Leveraged AllCap Portfolio: 1,193 (10,216) 138,877 145,053 (6,176)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
MidCap Portfolio: 6,167 (19,638) 1,125,112 1,181,040 (55,928)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Small Capitalization Portfolio: 5,402 (43,782) 967,209 963,981 3,228
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Fidelity Investments Variable
Insurance Products Fund:
EquityIncome Portfolio: 5,013 (60,690) 388,307 391,124 (2,817)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Growth Portfolio: 6,182 (51,253) 683,984 650,467 33,517
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
High Income Portfolio: 0 (13,207) 809,332 772,725 36,607
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Overseas Portfolio: 0 (6,706) 553,209 544,802 8,407
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Fidelity Investments Variable
Insurance Products Fund II:
Asset Manager Portfolio: 0 (4,829) 32,049 30,456 1,593
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Contrafund Portfolio: 0 (23,542) 531,787 511,106 20,681
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
</TABLE>
S-23
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Net Unrealized Net
Gain (Loss) Net Increase (Decrease) Net Assets
----------- Change in in Net Assets ----------
Beginning End Unrealized from Unit Beginning End
of Year of Year Gain (Loss) Transactions of Year of Year
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aetna Variable Fund: $0 ($143,001) ($143,001) $3,559,569
Annuity contracts in accumulation $0 $3,829,309
- ------------------------------------------------------------------------------------------------------------------
Aetna Income Shares: 0 (21,783) (21,783) 980,564
Annuity contracts in accumulation 0 1,003,244
- ------------------------------------------------------------------------------------------------------------------
Aetna Variable Encore Fund: 0 61,606 61,606 8,262,668
Annuity contracts in accumulation 0 8,379,376
- ------------------------------------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc.: 0 15,913 15,913 639,143
Annuity contracts in accumulation 0 702,615
- ------------------------------------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio: 0 56,427 56,427 1,070,098
Annuity contracts in accumulation 0 1,165,108
- ------------------------------------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio: 0 (282) (282) 73,943
Annuity contracts in accumulation 0 76,740
- ------------------------------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio: 0 (3,582) (3,582) 98,789
Annuity contracts in accumulation (1) 100,364
- ------------------------------------------------------------------------------------------------------------------
Aetna Variable Index Plus Portfolio: 0 (786) (786) 31,313
Annuity contracts in accumulation 0 32,321
- ------------------------------------------------------------------------------------------------------------------
Alger American Funds:
Balanced Portfolio: 0 19,051 19,051 489,854
Annuity contracts in accumulation 0 507,815
- ------------------------------------------------------------------------------------------------------------------
Growth Portfolio: (303) 331,002 331,305 6,071,518
Annuity contracts in accumulation 36,711 6,464,740
- ------------------------------------------------------------------------------------------------------------------
Income and Growth Portfolio: 0 43,184 43,184 592,011
Annuity contracts in accumulation 0 647,270
- ------------------------------------------------------------------------------------------------------------------
Leveraged AllCap Portfolio: 0 53,728 53,728 1,974,038
Annuity contracts in accumulation 0 2,012,567
- ------------------------------------------------------------------------------------------------------------------
MidCap Portfolio: 0 172,467 172,467 3,999,130
Annuity contracts in accumulation 1 4,102,199
- ------------------------------------------------------------------------------------------------------------------
Small Capitalization Portfolio: (1,042) (40,650) (39,608) 7,044,153
Annuity contracts in accumulation 35,778 7,005,171
- ------------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable
Insurance Products Fund:
EquityIncome Portfolio: 0 763,902 763,902 11,149,944
Annuity contracts in accumulation 0 11,855,352
- ------------------------------------------------------------------------------------------------------------------
Growth Portfolio: 0 339,925 339,925 9,199,562
Annuity contracts in accumulation 0 9,527,933
- ------------------------------------------------------------------------------------------------------------------
High Income Portfolio: 0 99,376 99,376 2,614,682
Annuity contracts in accumulation 0 2,737,458
- ------------------------------------------------------------------------------------------------------------------
Overseas Portfolio: 0 66,703 66,703 1,253,524
Annuity contracts in accumulation 0 1,321,928
- ------------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable
Insurance Products Fund II:
Asset Manager Portfolio: 0 56,785 56,785 1,163,217
Annuity contracts in accumulation 0 1,216,766
- ------------------------------------------------------------------------------------------------------------------
Contrafund Portfolio: 0 438,859 438,859 6,105,333 0 6,541,331
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
S-24
<PAGE>
Variable Annuity Account I
Notes to Financial Statements December 31, 1996 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets Year Ended December 31, 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Valuation Proceeds Cost of Net
Period from Investments Realized
Dividends Deductions Sales Sold Gain (Loss)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Index 500 Portfolio: $0 ($22,040) $334,354 $313,306 $21,048
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------
Investment Grade Bond Portfolio: 0 (1,771) 67,878 68,125 (247)
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------
Insurance Management Series:
American Leaders Fund II: 662,642 (497,245) 925,465 746,157 179,308
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------
Growth Strategies Fund II: 295 (52,685) 106,659 89,128 17,531
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------
High Income Bond Fund II: 611,472 (95,132) 310,773 300,649 10,124
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------
International Equity Fund II: 20,351 (96,657) 280,807 261,882 18,925
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------
Prime Money Fund II: 164,619 (50,003) 6,053,920 6,053,922 (2)
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------
U.S. Government Securities Fund II: 113,351 (26,261) 844,719 846,273 (1,554)
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------
Utility Fund II: 381,276 (128,189) 639,721 566,100 73,621
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------
Janus Aspen Series:
Aggressive Growth Portfolio: 7,466 (12,856) 1,050,437 1,088,069 (37,632)
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------
Balanced Portfolio: 23,543 (7,391) 221,223 209,140 12,083
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------
Flexible Income Portfolio: 18,252 (2,109) 41,760 41,610 150
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------
Growth Portfolio: 25,286 (14,653) 1,183,201 1,120,812 62,389
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------
ShortTerm Bond Portfolio: 9,170 (2,222) 652,610 650,060 2,550
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------
Worldwide Growth Portfolio: 106,093 (61,217) 446,507 395,584 50,923
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund: 0 (3,899) 109,987 110,241 (254)
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust Fund: 4,095 (5,265) 418,184 424,395 (6,211)
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------
MFS Funds:
Emerging Growth Series: 33,270 (14,548) 145,356 151,959 (6,603)
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------
Research Series: 32,798 (7,629) 69,685 69,157 528
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------
Total Return Series: 22,438 (3,611) 191,249 184,924 6,325
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------
</TABLE>
S-25
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Net Unrealized Net
Gain (Loss) Net Increase (Decrease) Net Assets
----------- Change in in Net Assets ----------
Beginning End Unrealized from Unit Beginning End
of Year of Year Gain (Loss) Transactions of Year of Year
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Index 500 Portfolio: $0 $375,527 $375,527 $4,514,462
Annuity contracts in accumulation $0 $4,888,997
- -----------------------------------------------------------------------------------------------------------------
Investment Grade Bond Portfolio: 0 10,325 10,325 440,327
Annuity contracts in accumulation 0 448,634
- -----------------------------------------------------------------------------------------------------------------
Insurance Management Series:
American Leaders Fund II: 871,936 7,073,040 6,201,104 35,057,409
Annuity contracts in accumulation 16,434,144 58,037,362
- -----------------------------------------------------------------------------------------------------------------
Growth Strategies Fund II: 4,198 890,268 886,070 8,762,085
Annuity contracts in accumulation 187,382 9,800,678
- -----------------------------------------------------------------------------------------------------------------
High Income Bond Fund II: 47,839 442,872 395,033 7,472,858
Annuity contracts in accumulation 3,197,071 11,591,426
- -----------------------------------------------------------------------------------------------------------------
International Equity Fund II: 77,134 599,852 522,718 7,793,953
Annuity contracts in accumulation 3,076,039 11,335,329
- -----------------------------------------------------------------------------------------------------------------
Prime Money Fund II: 0 0 0 (713,688)
Annuity contracts in accumulation 4,106,739 3,507,665
- -----------------------------------------------------------------------------------------------------------------
U.S. Government Securities Fund II: 32,984 (201) (33,185) 816,834
Annuity contracts in accumulation 1,587,267 2,456,452
- -----------------------------------------------------------------------------------------------------------------
Utility Fund II: 332,527 1,106,478 773,951 7,162,934
Annuity contracts in accumulation 5,071,628 13,335,221
- -----------------------------------------------------------------------------------------------------------------
Janus Aspen Series:
Aggressive Growth Portfolio: 0 17,905 17,905 2,779,331
Annuity contracts in accumulation 0 2,754,214
- -----------------------------------------------------------------------------------------------------------------
Balanced Portfolio: 0 46,718 46,718 1,912,197
Annuity contracts in accumulation 0 1,987,150
- -----------------------------------------------------------------------------------------------------------------
Flexible Income Portfolio: 0 5,974 5,974 371,127
Annuity contracts in accumulation 0 393,394
- -----------------------------------------------------------------------------------------------------------------
Growth Portfolio: 0 90,906 90,906 2,949,911
Annuity contracts in accumulation 0 3,113,839
- -----------------------------------------------------------------------------------------------------------------
ShortTerm Bond Portfolio: 0 (1,799) (1,799) 306,346
Annuity contracts in accumulation 0 314,045
- -----------------------------------------------------------------------------------------------------------------
Worldwide Growth Portfolio: 0 658,071 658,071 13,048,547
Annuity contracts in accumulation 0 13,802,417
- -----------------------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund: 735 (4,649) (5,384) 750,550
Annuity contracts in accumulation 24,857 765,870
- -----------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust Fund: 0 98,720 98,720 1,238,511
Annuity contracts in accumulation 0 1,329,850
- -----------------------------------------------------------------------------------------------------------------
MFS Funds:
Emerging Growth Series: 0 13,628 13,628 4,190,575
Annuity contracts in accumulation 0 4,216,322
- -----------------------------------------------------------------------------------------------------------------
Research Series: 0 66,161 66,161 2,397,579
Annuity contracts in accumulation 0 2,489,437
- -----------------------------------------------------------------------------------------------------------------
Total Return Series: 0 22,362 22,362 1,134,335
Annuity contracts in accumulation 0 1,181,849
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
S-26
<PAGE>
Variable Annuity Account I
Notes to Financial Statements December 31, 1996 (continued):
5. Supplemental Information to Statements of Operations and Changes in
Net Assets-Year Ended December 31, 1996
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Valuation Proceeds Cost of Net
Period from Investments Realized
Dividends Deductions Sales Sold Gain (Loss)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Value Series: $606 ($47) $3,366 $3,307 $59
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------
World Government Series: 0 (961) 35,795 34,610 1,185
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.:
Balanced Fund: 1,396 (1,261) 21,355 20,655 700
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------
Growth Fund: 2,369 (2,424) 89,869 97,034 (7,165)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------
International Fund: 468 (3,264) 41,105 40,667 438
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------
Total Variable Annuity Account I $3,142,826 ($1,469,442) $30,774,009 $30,447,382 $326,627
=======================================================================================================
</TABLE>
S-27
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Net Net Assets
Net Unrealized Net Increase (Decrease) ------------
Gain (Loss) Unrealized in Net Assets
Beginning End Change in from Unit Beginning End
of Year of Year Gain (Loss) Transactions of Year of Year
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Value Series: $0 $156 $156 $44,087
Annuity contracts in accumulation $0 $44,861
- --------------------------------------------------------------------------------------------------------------------
World Government Series: 0 3,877 3,877 210,327
Annuity contracts in accumulation 0 214,428
- --------------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.:
Balanced Fund: 0 10,011 10,011 362,627
Annuity contracts in accumulation 0 373,473
- --------------------------------------------------------------------------------------------------------------------
Growth Fund: 0 (11,204) (11,204) 478,565
Annuity contracts in accumulation 0 460,141
- --------------------------------------------------------------------------------------------------------------------
International Fund: 0 47,176 47,176 780,441
Annuity contracts in accumulation 0 825,259
- --------------------------------------------------------------------------------------------------------------------
Total Variable Annuity Account I $1,366,008 $13,871,018 $12,505,010 $170,635,283 $33,757,616 $218,897,920
=====================================================================================================================
</TABLE>
S-28
<PAGE>
Independent Auditors' Report
The Board of Directors of Aetna Insurance Company of America and
Contract Owners of Variable Annuity Account I:
We have audited the accompanying statement of assets and liabilities of Aetna
Insurance Company of America Variable Annuity Account I (the "Account") as of
December 31, 1996, the related statements of operations and changes in net
assets for the year then ended and the period from June 28, 1995 (commencement
of operations) to December 31, 1995 and condensed financial information for the
year ended December 31, 1996. These financial statements and condensed financial
information are the responsibility of the Account's management. Our
responsibility is to express an opinion on these financial statements and
condensed financial information based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and condensed
financial information are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1996, by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and condensed financial information
referred to above present fairly, in all material respects, the financial
position of Aetna Insurance Company of America Variable Annuity Account I as of
December 31, 1996, the results of its operations and the changes in its net
assets for the year ended December 31, 1996 and the period from June 28, 1995 to
December 31, 1995 and condensed financial information for the year ended
December 31, 1996 in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Hartford, Connecticut
February 14, 1997
S-29
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Index to Financial Statements
Page
----
Item 1. Financial Statements
Statements of Income for the three and nine months ended F-2
September 30, 1997 and 1996 (unaudited)
Balance Sheets as of September 30, 1997 (unaudited) and
December 31, 1996 F-3
Statements of Changes in Shareholder's Equity for the nine
months ended September 30, 1997 and 1996 (unaudited) F-4
Statements of Cash Flows for the nine months ended September
30, 1997 and 1996 (unaudited) F-5
Condensed Notes to Financial Statements F-6
Independent Auditors' Review Report F-8
Statements of Income for the Years Ended December 31, 1996,
1995 and 1994 F-9
Balance Sheets as of December 31, 1996 and 1995 F-10
Statements of Changes in Shareholder's Equity for the Years
Ended December 31, 1996, 1995 and 1994 F-11
Statements of Changes in Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994 F-12
Notes to Financial Statements F-13
F-1
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Statements of Income
(thousands)
<TABLE>
<CAPTION>
3 Months Ended September 30, 9 Months Ended September 30,
--------------------------- ----------------------------
1997 1996 1997 1996
(unaudited) (unaudited) (unaudited) (unaudited)
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Revenue:
Charges assessed against policyholders .......... 1,760.1 $ 373.2 $4,057.5 $ 757.6
Net investment income............................ 1,975.2 341.0 4,853.0 673.5
Net realized capital gains (losses) ............. 18.5 -- 88.6 (17.1)
Other income .................................... 55.0 -- 168.4 --
-------- ------- ------- -------
Total revenue ............................. 3,808.8 714.2 9,167.5 1,414.0
Benefits and expenses:
Current and future benefits ..................... 1,622.6 533.6 4,241.8 714.8
Operating expenses .............................. 786.1 306.2 2,544.9 1,903.6
Amortization of deferred policy acquisition costs 408.8 -- 1,026.2 --
-------- ------- ------- -------
Total benefits and expenses ................ 2,817.5 839.8 7,812.9 2,618.4
Income (loss) before income
taxes (benefits) ............................... 991.3 (125.6) 1,354.6 (1,204.4)
Income taxes (benefits) ........................... 342.6 (41.1) 387.8 (363.7)
-------- ------- ------- -------
Net income (loss) ................................. $ 648.7 $ (84.5) $ 966.8 $ (840.7)
======== ======= ======== ========
</TABLE>
See Condensed Notes to Financial Statements.
F-2
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Balance Sheets
(thousands, except share data)
<TABLE>
<CAPTION>
September 30,
1997 December 31,
Assets (unaudited) 1996
- ----- -------------- ------------
<S> <C> <C>
Investments:
Debt securities available for sale, at fair value
(amortized cost $112,896.5 and $24,736.8) $114,776.2 $ 24,770.3
Cash and cash equivalents 13,766.6 51,842.3
Deferred policy acquisition costs 39,049.8 21,057.0
Accrued investment income 1,683.5 325.8
Deferred tax asset 3,002.4 1,289.7
Income taxes receivable -- 1,133.2
Other assets 1,055.2 447.6
Separate accounts assets 601,301.3 303,518.6
---------- ----------
Total assets $774,635.0 $404,384.5
========== ==========
Liabilities and Shareholder's Equity
- ------------------------------------
Liabilities:
Policyholders' funds left with the Company $133,718.4 $ 64,445.4
Other liabilities 2,025.2 4,753.2
Due to parent and affiliates 526.6 347.2
Income taxes payable 73.5 --
Separate accounts liabilities 601,301.3 303,518.6
---------- ----------
Total liabilities 737,645.0 373,064.4
---------- ----------
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 32,550.0 27,550.0
Net unrealized capital gains 121.7 90.3
Retained earnings 1,768.3 1,129.8
---------- ----------
Total shareholder's equity 36,990.0 31,320.1
---------- ----------
Total liabilities and shareholder's equity $774,635.0 $404,384.5
========== ==========
</TABLE>
See Condensed Notes to Financial Statements.
F-3
<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)
9 Months Ended September 30,
----------------------------
1997
(unaudited) 1996
----------- ----
Shareholder's equity, beginning of period $31,320.1 $12,133.0
Capital contribution 5,000.0 --
Net change in unrealized capital gains (losses) 31.4 (102.2)
Net income (loss) 966.8 (840.7)
Other changes (328.3) --
--------- ---------
Shareholder's equity, end of period $36,990.0 $11,190.1
========= =========
See Condensed 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 Cash Flows
(thousands)
<TABLE>
<CAPTION>
9 Months Ended September 30,
----------------------------
1997
(unaudited) 1996
----------- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ 966.8 $ (840.7)
Adjustments to reconcile net income (loss) to net cash used for
operating activities:
Increase in accrued investment income (1,357.7) (69.7)
Increase in deferred policy acquisition costs (17,992.8) (13,657.6)
Net change in amounts due to/from parent and affiliates 179.4 (174.6)
Net (decrease) increase in other assets and liabilities (1,003.8) 5,555.5
Net decrease in income taxes (730.4) (2,782.4)
Net accretion of discount on debt securities (309.6) (61.3)
Net realized capital (gains) losses (88.6) 17.1
---------- ---------
Net cash used for operating activities (20,336.7) (12,013.7)
---------- ---------
Cash Flows from Investing Activities:
Proceeds from sales of:
Debt securities available for sale 12,012.6 2,410.0
Short-term investments 1,000.0 --
Investment maturities and repayments of:
Debt securities available for sale 2,802.9 --
Cost of investment purchases in:
Debt securities available for sale (105,029.5) (2,458.8)
Short-term investments (1,000.0) --
---------- ---------
Net cash used for investing activities (90,214.0) (48.8)
---------- ---------
Cash Flows from Financing Activities:
Deposits and interest credited for investment contracts 71,075.9 43,734.9
Withdrawal of investment contracts (3,600.8) --
Capital contribution 5,000.0 --
---------- ---------
Net cash provided by financing activities 72,475.1 43,734.9
Net (decrease) increase in cash and cash equivalents (38,075.6) 31,672.4
Cash and cash equivalents, beginning of period 51,842.3 4,044.2
---------- ---------
Cash and cash equivalents, end of period $ 13,766.6 $ 35,716.6
=========== ==========
Supplemental cash flow information:
Income taxes paid, net $ 734.0 $ 2,232.0
=========== ==========
</TABLE>
See Condensed Notes to Financial Statements.
F-5
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Condensed Notes to Financial Statements (unaudited)
1. 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 and is a
wholly owned subsidiary of Aetna Life Insurance and Annuity Company
("ALIAC"). ALIAC is a wholly owned subsidiary of Aetna Retirement Holdings,
Inc. ("HOLDCO"). HOLDCO is a wholly owned subsidiary of Aetna Retirement
Services, Inc., whose ultimate parent is Aetna Inc.("Aetna").
The financial statements have been prepared in accordance with generally
accepted accounting principles and are unaudited. Certain reclassifications
have been made to 1996 financial information to conform to the 1997
presentation. These interim statements necessarily rely heavily on
estimates, including assumptions as to annualized tax rates. In the opinion
of management, all adjustments necessary for a fair statement of results for
the interim periods have been made. All such adjustments are of a normal,
recurring nature. The accompanying condensed financial statements should be
read in conjunction with the financial statements and related notes as
presented in the Company's 1996 Annual Report on Form 10-K. Certain
financial information that is normally included in annual financial
statements prepared in accordance with generally accepted accounting
principles, but that is not required for interim reporting purposes, has
been condensed or omitted.
2. Future Applications of Accounting Standards
-------------------------------------------
Financial Accounting Standard ("FAS") No. 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities, was issued
in June 1996 and provides accounting and reporting standards for transfers
of financial assets and extinguishments of liabilities.
FAS No. 125 is effective for 1997 financial statements; however, certain
provisions relating to accounting for repurchase agreements and securities
lending are not effective until January 1, 1998. Provisions effective in
1997 did not have a material effect on the Company's financial position or
results of operations. The Company does not expect adoption of this
statement for provisions effective in 1998 to have a material effect on its
financial position or results of operations.
F-6
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Condensed Notes to Financial Statements (unaudited)
(Continued)
2. Future Applications of Accounting Standards (Continued)
-------------------------------------------------------
FAS No. 130, Reporting Comprehensive Income, was issued in June 1997 and
establishes standards for the reporting and presentation of comprehensive
income and its components in a full set of financial statements.
Comprehensive income encompasses all changes in shareholder's equity (except
those arising from transactions with owners) and includes net income, net
unrealized capital losses on available for sale securities. As this new
standard only requires additional information in a financial statement, it
will not affect the Company's financial position or results of operations.
FAS No. 130 is effective for fiscal years beginning after December 15, 1997,
with earlier application permitted. The Company is currently evaluating the
presentation alternatives permitted by the statement.
3. Benefit Plans
-------------
As of March 31, 1997, ALIAC transferred to the Company, approximately $505.0
thousand of accrued liabilities, primarily related to the allocation of
pension and postretirement benefit expenses that had been previously
allocated to ALIAC. The after-tax amount of this transfer (approximately
$328.3 thousand) is reported as a reduction of retained earnings.
4. Litigation
----------
The Company is not currently involved in litigation.
5. Shareholder's Equity
--------------------
On June 26, 1997, the Company received a $5.0 million capital contribution
from ALIAC.
F-7
<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, 1996 and 1995, 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, 1996. 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 priciples 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 as of December 31, 1996 and 1995, and the results of its operations and
its cash flows for each of the years in the three-year period ended December 31,
1996, in conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
Hartford, Connecticut
March 20, 1997
F-8
<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
-----------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenue:
Charges assessed against policyholders $ 1,293.0 $ 132.7 $ --
Net investment income 1,556.9 721.0 619.3
Net realized capital gains (losses) (11.2) 8.3 --
Other income 66.4 -- --
---------------------------------
Total revenue 2,905.1 862.0 619.3
Benefits and expenses:
Current and future benefits 1,651.9 -- --
Operating expenses 2,430.4 481.8 85.6
Amortization of deferred policy acquisition costs 242.0 -- --
------------ ---------- --------
Total benefits and expenses 4,324.3 481.8 85.6
Income (loss) before income taxes (benefits) (1,419.2) 380.2 533.7
Income taxes (benefits) (723.4) 212.3 185.1
------------ ---------- --------
Net Income (loss) $ (695.8) $ 167.9 $ 348.6
============ ========== ========
</TABLE>
See Notes to Financial Statements.
F-9
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Balance Sheets
(thousands, except share data)
<TABLE>
<CAPTION>
December 31,
Assets 1996 1995
- ------ ---- ----
<S> <C> <C>
Investments:
Debt securities, available for sale:
(amortized cost: $24,736.8 and $7,953.0) $ 24,770.3 $ 8,187.4
Cash and cash equivalents 51,842.3 4,044.2
Deferred policy acquisition costs 21,057.0 2,066.4
Accrued investment income 325.8 112.6
Deferred tax asset 1,289.7 467.6
Income taxes receivable 1,133.2 --
Other assets 447.6 0.8
Separate Accounts assets 303,518.6 43,810.0
------------- ------------
Total assets $ 404,384.5 $ 58,689.0
------------- ------------
------------- ------------
Liabilities and Shareholder's Equity
- ------------------------------------
Liabilities:
Policyholders' funds left with the Company $ 64,445.4 $ --
Other liabilities 4,753.2 1,874.2
Due to parent and affiliates 347.2 174.6
Income taxes payable -- 697.2
Separate Accounts liabilities 303,518.6 43,810.0
------------- ------------
Total liabilities 373,064.4 46,556.0
------------- ------------
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 27,550.0 7,550.0
Net unrealized capital gains 90.3 152.4
Retained earnings 1,129.8 1,880.6
------------- ------------
Total shareholder's equity 31,320.1 12,133.0
------------- ------------
Total liabilities and shareholder's equity $ 404,384.5 $ 58,689.0
============= ============
</TABLE>
See Notes to financial Statements.
F-10
<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,
------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Shareholder's equity, beginning of year $ 12,133.0 $ 11,675.3 $ 11,584.2
Capital contribution 20,000.0 -- --
Net income (loss) (695.8) 167.9 348.6
Net change in unrealized capital gains (losses) (62.1) 289.8 (257.5)
Other changes (55.0) -- --
-------------- ------------- ----------
Shareholder's equity, end of year $ 31,320.1 $ 12,133.0 $ 11,675.3
============== ============= ==========
</TABLE>
See Notes to Financial Statements.
F-11
<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,
------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ (695.8) $ 167.9 $ 348.6
Adjustments to reconcile net income (loss) to net cash (used for)
provided by operating activities:
Increase in accrued investment income (213.2) (21.1) --
Increase in deferred policy acquisition costs (18,990.6) (2,066.4) --
Net change in amounts due to/from parent and affiliates 172.6 164.1 (79.2)
Net increase (decrease) in other assets and liabilities (25.6) 1,915.9 1.2
Net (decrease) increase in income taxes (2,710.7) 60.2 (138.9)
Net amortization of (discount) premium on debt securities (104.6) 22.2 88.1
Net realized capital losses 11.2 -- --
---------- -------- --------
Net cash (used for) provided by operating activities (22,556.7) 242.8 219.8
---------- -------- --------
Cash Flows from Investing Activities:
Proceeds from sales of:
Debt securities available for sale 2,510.0 3,000.0 --
Investment maturities and repayments of:
Short-term investments -- 500.0 --
Cost of investment purchases in:
Debt securities available for sale (16,706.0) (3,939.2) --
Short-term investments -- (492.1) --
---------- --------- --------
Net cash used for investing activities (14,196.0) (931.3) --
---------- --------- --------
Cash Flows from Financing Activities:
Deposits and interest credited for investment contracts 64,936.2 -- --
Withdrawal of investment contracts (385.4)
Capital contribution 20,000.0 -- --
---------- --------- --------
Net cash provided by financing activities 84,550.8 -- --
---------- --------- --------
Net increase (decrease) in cash and cash equivalents 47,798.1 (688.5) 219.8
Cash and cash equivalents, beginning of year 4,044.2 4,732.7 4,512.9
---------- --------- --------
Cash and cash equivalents, end of year $51,842.3 $4,044.2 $4,732.7
---------- --------- --------
---------- --------- --------
Supplemental cash flow information:
Income taxes paid, net $ 1,866.8 $ 92.4 $336.7
========== ========== =========
</TABLE>
See Notes to Financial Statements.
F-12
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Notes to Financial Statements
1. Summary of Significant Accounting Policies
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 Retirement Holdings, Inc. ("HOLDCO"). HOLDCO is a
wholly owned subsidiary of Aetna Retirement Services, Inc., whose ultimate
parent is Aetna Inc. ("Aetna"). During the second quarter of 1995, the
Company began marketing and servicing variable annuities to individuals in
the qualified and non-qualified markets.
Basis of Presentation
These financial statements have been prepared in conformity with generally
accepted accounting principles. Certain reclassifications have been made
to 1995 and 1994 financial information to conform to the 1996
presentation.
Future Application of Accounting Standards
Financial Accounting Standard ("FAS") No. 125 , Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities, was
issued in June 1996. This statement provides accounting and reporting
standards for transfers of financial assets and extinguishments of
liabilities. Transactions covered by this statement would include
securitizations, sales of partial interests in assets, repurchase
agreements and securities lending. This statement requires that after a
transfer of financial assets, an entity would recognize any assets it
controls and liabilities it has incurred. An entity would not recognize
assets when control has been surrendered or liabilities have been
satisfied. Portions of this statement are effective for each of 1997 and
1998 financial statements and early adoption is not permitted. The Company
does not expect adoption of this statement to have a material effect on
its financial position or results of operations.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from reported results
using those estimates.
F-13
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Notes to Financial Statements (Continued)
1. Summary of Significant Accounting Policies (Continued)
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, money market instruments
and other debt issues with a maturity of 90 days or less when purchased.
Investments
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
capital losses) for other than temporary declines in value. Unrealized
capital gains and losses related to available for sale investments, other
than amounts allocable to experience rated contractholders, are reflected
in shareholder's equity, net of related taxes.
Fair values for debt securities are based on quoted market prices or
dealer quotations. Where quoted market prices or dealer quotations are not
available, fair values are measured utilizing quoted market prices for
similar securities or by using discounted cash flow methods. Cost for
mortgage-backed securities is adjusted for unamortized premiums and
discounts, which are amortized using the interest method over the
estimated remaining term of the securities, adjusted for anticipated
prepayments.
Purchases and sales of debt securities are recorded on the trade date.
Deferred Policy Acquisition Costs
Certain costs of acquiring insurance business have been deferred. These
costs, all of which vary with and are primarily related to the production
of new business, consist principally of commissions, certain expenses of
underwriting and issuing contracts and certain agency expenses. Such costs
are amortized in proportion to estimated gross profits and adjusted to
reflect actual gross profits and are amortized over a period of up to
twenty years.
Deferred policy acquisition costs are written off to the extent that it is
determined that future policy premiums and investment income or gross
profits are not adequate to cover related losses and expenses.
F-14
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Notes to Financial Statements (Continued)
1. Summary of Significant Accounting Policies (Continued)
Reserves
Policyholders' funds left with the Company include reserves for deferred
annuity investment contracts. Reserves on such contracts are equal to
cumulative deposits less charges and withdrawals plus credited interest
thereon (rates range from 4.85% to 6.75%), net of adjustments for
investment experience that the Company is entitled to reflect in future
credited interest. Reserves on contracts subject to experience rating
reflect the rights of contractholders, plan participants and the Company.
Charges Assessed Against Policyholders and Other Income
Charges assessed against policyholders' funds for surrender charges,
actuarial margin and other fees are recorded as revenue when earned. Other
amounts received for these contracts are reflected as deposits and are not
recorded as revenue. Other income includes maintenance and surrender fees.
Separate Accounts
Assets held under variable annuity contracts are segregated in separate
accounts and are invested, as designated by the contractholder, in shares
of mutual funds that are managed by Aeltus or other selected mutual funds
not managed by Aeltus.
Separate accounts assets and liabilities are carried at fair value except
for those relating to a guaranteed interest option. Since the Company
bears the investment risk where the contract is held to maturity, the
assets of the separate account supporting the guaranteed interest option
are carried at an amortized cost of $82.5 million for 1996 (fair value of
$82.9 million) and $10.1 million for 1995 (fair value $9.3 million).
Reserves relating to the guaranteed interest option are maintained at fund
value and reflect interest credited at rates ranging from 4.74% to 6.60%
in 1996 and 4.65% to 6.0% in 1995. Separate accounts assets and
liabilities are shown as separate captions in the Balance Sheets.
Deposits, investment income and net realized and unrealized capital gains
and losses of the non-guaranteed separate accounts are not reflected in
the Statements of Income (with the exception of realized capital gains and
losses on the sale of assets supporting the guaranteed interest option).
The Statements of Cash Flows do not reflect investment activity of the
separate accounts.
F-15
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Notes to Financial Statements (Continued)
1. Summary of Significant Accounting Policies (Continued)
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 expenses/benefits result from changes during the year
in cumulative temporary differences between the tax basis and book basis
of assets and liabilities.
2. Investments
Debt securities available for sale as of December 31, 1996 were as
follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
(thousands)
<S> <C> <C> <C> <C>
U.S. government and government agencies and
authorities $ 8,111.1 $ 140.0 $ 1.1 $ 8,250.0
U.S. corporate securities:
Financial 7,375.4 -- 59.2 7,316.2
Healthcare & consumer products 2,506.2 -- 4.1 2,502.1
Natural resources 1,250.0 0.8 -- 1,250.8
--------- --------- --------- ---------
Total U.S. corporate securities 11,131.6 0.8 63.3 11,069.1
Foreign securities 2,032.3 -- 46.0 1,986.3
Commercial/multifamily mortgage-backed
securities 2,480.9 3.5 -- 2,484.4
Other asset-backed securities 980.9 -- 0.4 980.5
--------- --------- --------- ---------
Total Debt Securities $24,736.8 $ 144.3 $ 110.8 $24,770.3
========= ========= ========= =========
</TABLE>
F-16
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Notes to Financial Statements (Continued)
2. Investments (Continued)
Debt securities available for sale as of December 31, 1995 were as
follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
(thousands)
<S> <C> <C> <C> <C>
U.S. government and government agencies
and authorities $7,953.0 $ 237.4 $ 3.0 $8,187.4
======== ======== ======== ========
</TABLE>
At December 31, 1996 net unrealized appreciation of $33.5 thousand on
available for sale debt securities included unrealized losses of $105.4
thousand related to experience rated contracts, which were not reflected
in shareholder's equity but in Policyholders' funds left with the Company.
The amortized cost and fair value of debt securities for the year ended
December 31, 1996 are shown below by contractual maturity. Actual
maturities may differ from contractual maturities because securities may
be restructured, called or prepaid.
Amortized Fair
Cost Value
---- -----
(thousands)
Due to mature:
One year or less $ 1,477.5 $ 1,480.6
After one year through five years 10,785.5 10,907.8
After five years through ten years 7,998.6 7,936.0
After ten years 1,013.4 981.0
Mortgage-backed securities 2,480.9 2,484.4
Other asset-backed securities 980.9 980.5
--------- ---------
Total $24,736.8 $24,770.3
========= =========
The Company engages in securities lending whereby certain securities from
its portfolio are loaned to other institutions for short periods of time.
Collateral, primarily cash, which is in excess of the market value of the
loaned securities, is deposited by the borrower with a lending agent, and
retained and invested by the lending agent to generate additional income
for the Company. The market value of the loaned securities is monitored on
a daily basis with additional collateral obtained or refunded as the
market value fluctuates. At December 31, 1996 and 1995, the Company had no
securities out on loan.
F-17
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Notes to Financial Statements (Continued)
2. Investments (Continued)
At December 31, 1996 and 1995, debt securities carried at $4.7 million and
$4.4 million, respectively, were on deposit as required by various state
regulatory agencies.
The Company does not have any investments in a single issuer, other than
obligations of the U.S. government, with a carrying value in excess of 10%
of the Company's shareholder's equity at December 31, 1996.
F-18
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Notes to Financial Statements (Continued)
3. Financial Instruments
Estimated Fair Value
The carrying values and estimated fair values of the Company's financial
instruments at December 31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
-------------------- -------------------
Carrying Fair Carrying Fair
Value Value Value Value
----- ----- ----- -----
(thousands) (thousands)
<S> <C> <C> <C> <C>
Liabilities:
Investment contract liabilities:
Without a fixed maturity $64,445.4 $59,401.6 $ -- $ --
</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 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 many cases, the fair
value estimates cannot be substantiated by comparison to independent
markets, nor can the disclosed value be realized in immediate settlement
of the instrument. In evaluating the Company's management of interest
rate, price and liquidity risks, the fair values of all assets and
liabilities should be taken into consideration, not only those presented
above.
The following valuation methods and assumptions were used by the Company
in estimating the fair value of the above financial instruments:
Investment contract liabilities (included in policyholders' funds left
with the Company) without a fixed maturity:
Fair value is estimated as the amount payable to the contractholder upon
demand. However, the Company has the right under such contracts to delay
payment of withdrawals which may ultimately result in paying an amount
different than that determined to be payable on demand.
Off-Balance-Sheet and Other Financial Instruments
The Company did not have transactions in off-balance sheet instruments in
1996 or 1995.
F-19
<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:
1996 1995 1994
---- ---- ----
(thousands)
Debt securities $ 547.6 $ 457.5 $ 414.1
Cash equivalents 1,041.6 261.1 205.2
Other -- 2.4 --
-------- -------- --------
Gross investment income 1,589.2 721.0 619.3
Less investment expenses 32.3 -- --
-------- -------- --------
Net investment income $1,556.9 $ 721.0 $ 619.3
======== ======== ========
Net investment income includes amounts allocable to experience rated
contractholders of $855.2 thousand for the year ended December 31, 1996.
There were no experience rated contractholders in 1995 and 1994. Interest
credited to contractholders is included in current and future benefits.
5. Capital Gains and Losses
Realized capital gains or losses are the difference between the carrying
value and sale proceeds of specific investments sold.
Net realized capital gains (losses) on debt securities, as reflected in
the Statements of Income for the years ended December 31, 1996 and 1995,
were $(11.2) thousand and $8.3 thousand, respectively. For the year ended
December 31, 1994 there was no realized capital gains or losses.
Proceeds from the sale of available for sale debt securities and the
related gross gains and losses were as follows:
1996 1995 1994
---- ---- ----
(thousands)
Proceeds on sales $2,510.0 $3,000.0 $ --
Gross gains 12.7 8.3 --
Gross losses 23.9 -- --
F-20
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Notes to Financial Statements (Continued)
5. Capital Gains and Losses on Investment Operations (Continued)
Changes in shareholder's equity related to changes in unrealized capital
gains (losses), (excluding those related to experience rated
contractholders in 1996), were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
(thousands)
<S> <C> <C> <C>
Debt securities $(95.5) $371.8 $(257.5)
Deferred income taxes (See Note 6) (33.4) 82.0 --
------ ------ -------
Net change in unrealized capital gains (losses) $(62.1) $289.8 $(257.5)
====== ====== =======
</TABLE>
Net unrealized capital losses allocable to experience rated contracts of
$105.4 thousand at December 31, 1996 are reflected on the Balance Sheets
in policyholders' funds left with the Company and are not included in
shareholder's equity.
Shareholder's equity included the following unrealized capital gains
(losses), which are net of amounts allocable to experience rated
contractholders in 1996, at December 31:
1996 1995 1994
---- ---- ----
(thousands)
Debt securities
Gross unrealized gains $140.0 $237.4 $ 4.2
Gross unrealized losses (1.1) (3.0) (141.6)
------ ------ ------
138.9 234.4 (137.4)
Deferred federal income taxes (see Note 6) 48.6 82.0 --
------ ------ ------
Net unrealized capital gains (losses) $ 90.3 $152.4 $(137.4)
====== ====== ======
F-21
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Notes to Financial Statements (Continued)
6. Income Taxes
The Company is included in the consolidated federal income tax return of
Aetna and combined Connecticut state 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 used in the consolidated
returns.
Income taxes for the years ended December 31, consist of:
1996 1995 1994
---- ---- ----
(thousands)
Current taxes (benefits):
Income taxes:
Federal $ 98.8 $635.2 $188.1
State (58.4) 123.4 (2.6)
Net realized capital gains (losses) (3.9) 2.9 --
------- ------ ------
36.5 761.5 185.5
------- ------ ------
Deferred tax benefits:
Federal (759.9) (549.2) (0.4)
------- ------ ------
Total $(723.4) $212.3 $185.1
======= ====== ======
Income taxes were different from the amount computed by applying the
federal income tax rate to income before income taxes for the following
reasons:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
(thousands)
<S> <C> <C> <C>
Income (loss) before income taxes $(1,419.2) $ 380.2 $ 533.7
Tax rate 35% 35% 35%
-------- -------- --------
Application of the tax rate (496.7) 133.1 186.8
Tax effect of:
State income tax, net of federal benefit (37.9) 80.2 (1.7)
Excludable dividends (182.0) -- --
Other, net (6.8) (1.0) --
-------- -------- --------
Income taxes (benefit) $ (723.4) $ 212.3 $ 185.1
======== ======== ========
</TABLE>
F-22
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Notes to Financial Statements (Continued)
6. Income Taxes (Continued)
The tax effects of temporary differences that give rise to deferred tax
assets and deferred tax liabilities at December 31 are presented below:
1996 1995
---- ----
(thousands)
Deferred tax assets:
Insurance reserves $6,932.6 $1,054.6
Postretirement benefits other than pensions 41.7 --
Pension 52.6 --
Other 9.2 0.2
-------- --------
Total gross assets 7,036.1 1,054.8
Deferred tax liabilities:
Deferred policy acquisition costs 5,697.5 496.4
Net unrealized capital gains 48.6 82.0
Other 0.3 8.8
-------- --------
Total gross liabilities 5,746.4 587.2
-------- --------
Net deferred tax asset $1,289.7 $ 467.6
======== ========
Net unrealized capital gains and losses are presented in shareholder's
equity net of deferred taxes. Valuation allowances are provided when it is
not considered more likely than not that deferred tax assets will be
realized. As of December 31, 1996 and 1995, no valuation allowances were
required for unrealized capital gains and losses.
The Internal Revenue Service ("Service") has completed examinations of the
consolidated federal income tax returns of Aetna through 1990. Discussions
are being held with the Service with respect to proposed adjustments.
Management believes there are adequate defenses against, or sufficient
reserves to provide for, any such adjustments. The Service has commenced
its examinations for the years 1991 through 1994.
F-23
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Notes to Financial Statements (Continued)
7. Benefit Plans
The Company utilizes the employees of Aetna and its affiliates (primarily
ALIAC). The benefit plan charges allocated to the Company in 1996 and 1995
were immaterial. There were no charges to the Company in 1994.
As of December 31, 1996, Aetna transferred to the Company approximately
$84.0 thousand of accrued liabilities, primarily related to the allocation
of ALIAC pension and postretirement benefit plans that had been previously
recorded by Aetna. The after tax amount of this transfer (approximately
$55.0 thousand) is reported as a reduction in retained earnings.
8. Dividend Restrictions and Shareholder's Equity
The amount of dividends that may be paid to the shareholder in 1997
without prior approval by the Insurance Commissioner of the State of
Connecticut is $2.1 million.
The Insurance Department of the State of Connecticut (the "Department")
recognizes as net income and shareholder's capital and surplus 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 (loss) was $(7.9) million, $378.9 thousand and $348.1 thousand
for the years ended December 31, 1996, 1995 and 1994, respectively.
Statutory capital and surplus was $23.5 million and $12.1 million as of
December 31, 1996 and 1995, respectively.
As of December 31, 1996 the Company does not utilize any statutory
accounting practices which are not prescribed by state regulatory
authorities that, individually or in the aggregate, materially affect
statutory capital and surplus.
9. 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, at cost, 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 $4,716.5 thousand (of which $2,728 thousand
was capitalized as deferred policy acquisition costs) and $350.0 thousand
for the years ended December 31, 1996 and 1995, respectively. There were
no charges in 1994.
F-24
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Notes to Financial Statements (continued)
9. Related Party Transactions (Continued)
The Company is compensated by the separate accounts for bearing mortality
and expense risks pertaining to variable annuity contracts. Under the
insurance contracts, the separate accounts pay the Company a daily fee
which, on an annual basis, is 1.40% of their average daily net assets. The
amount of compensation and fees received from the separate accounts,
included in Charges Assessed Against Policyholders, amounted to $1,293
thousand and $132.7 thousand for the years ended December 31, 1996 and
1995, respectively. There were no charges assessed against policyholders
for the year ended December 31, 1994.
The Company received a capital contribution of $20.0 million in cash from
ALIAC in 1996. The Company received no capital contributions in 1995 and
1994.
Aeltus Investment Management, Inc. ("Aeltus"), a wholly owned subsidiary
of HOLDCO, was named the subadviser of all of the Company's affiliated
mutual funds and general account investments effective August 1, 1996 when
ALIAC combined its investment management operations into those of Aeltus.
The Company pays Aeltus a fee which, on an annual basis, is .06% of the
average daily net assets under management. The amount of such fees for the
year ended December 31, 1996 amounted to $32.4 thousand.
10. Commitments and Contingent Liabilities
Commitments
At December 31, 1996 and 1995 the Company had no commitments or contingent
liabilities.
Litigation
The Company is not currently involved in litigation.
F-25
<PAGE>
VARIABLE ANNUITY ACCOUNT I
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
(1) Included in Part A:
Condensed Financial Information
(2) Included in Part B:
Financial Statements of Variable Annuity Account I:
- Statement of Assets and Liabilities as of December 31,
1996
- Statements of Operations and Changes in Net Assets for the
years ended December 31, 1996 and December 31, 1995
- Notes to Financial Statements
- Independent Auditors' Report
- Unaudited Statement of Assets and Liabilities as of
September 30, 1997
- Unaudited Statements of Operations for the nine-month
periods ended September 30, 1997 and 1996
- Unaudited Statement of Changes in the Net Assets for the
nine-month period ended September 30, 1997
Financial Statements of Depositor:
- Independent Auditors' Report
- Consolidated Statements of Income for the years ended
December 31, 1996, 1995 and 1994
- Consolidated Balance Sheets for the years ended December
31, 1996 and 1995
- Consolidated Statements of Changes in Shareholder's Equity
for the years ended December 31, 1996, 1995 and 1994
- Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994
- Notes to Consolidated Financial Statements
- Unaudited Consolidated Balance Sheets as of September 30,
1997
- Unaudited Consolidated Statements of Income for the three-
and nine-month periods ended September 30, 1997 and 1996
- Unaudited Consolidated Statements of Changes in
Shareholder's Equity for the nine-month periods ended
September 30, 1997 and 1996
- Unaudited Consolidated Statements of Cash Flows for the
nine-month periods ended September 30, 1997 and 1996
- Condensed Notes to Consolidated 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) Selling Agreement(1)
<PAGE>
(3.2) Principal Underwriting Agreement(2)
(3.3) First Amendment dated April 22, 1996 to Principal Underwriting
Agreement(2)
(4.1) Variable Annuity Contract G-MP2(5/97)(3)
(4.2) Variable Annuity Contract Certificate MP2CERT(5/97)(3)
(4.3) Variable Annuity Contract IMP2(5/97)(3)
(4.4) Variable Annuity Contract (G2-CDA-94(IR))(1)
(4.5) Variable Annuity Contract (G2-CDA-94(NQ))(1)
(4.6) Variable Annuity Contract (G-MP2(5/96))(4)
(4.7) Certificate of Group Annuity Coverage (MP2CERT(5/96))(4)
(4.8) Endorsement (MP2END(9/97)) to Contract G-MP2(5/96) and
Certificate MP2CERT(5/96)(3)
(4.9) Endorsement (IMP2END(9/97)) to Contract G-MP2(5/96) and
Certificate MP2CERT(5/96)(3)
(5) Variable Annuity Contract Application(1)
(6) Certificate of Incorporation of Aetna Insurance Company of
America(1)
(7) Not Applicable
(8.1) Fund Participation Agreement among Aetna Insurance Company of
America, Alger American Fund and Fred Alger Management, Inc.
dated August 30, 1995(5)
(8.2) Fund Participation Agreement among Calvert Responsibly
Invested Balanced Portfolio, Calvert Asset Management Company,
Inc. and Aetna Insurance Company of America dated
December 1, 1997
(8.3) Service Agreement between Calvert Asset Management Company,
Inc. and Aetna Insurance Company of America dated
December 1, 1997
(8.4) Fund Participation Agreement by and among Insurance Management
Series, Federated Advisers and Aetna Insurance Company of
America dated July 1, 1994(6)
(8.5) Fund Participation Agreement among Aetna Insurance Company of
America, Variable Insurance Products Fund and Fidelity
Distributors Corporation dated October 20, 1995(5)
(8.6) Fund Participation Agreement among Aetna Insurance Company of
America, Variable Insurance Products Fund II and Fidelity
Distributors Corporation dated October 20, 1995(5)
(8.7) Fund Participation Agreement between Aetna Insurance Company
of America and Janus Aspen Series dated October 3, 1995(5)
(8.8) Fund Participation Agreement among Aetna Insurance Company of
America and Lexington Natural Resources Trust and Lexington
Management Corporation dated September 1, 1995(5)
(8.9) Fund Participation Agreement among Aetna Insurance Company of
America, Lexington Emerging Markets Fund, Inc. and Lexington
Management Corporation dated September 1, 1995(5)
<PAGE>
(8.10) Fund Participation Agreement among MFS Variable Insurance
Trust, Aetna Insurance Company of America and Massachusetts
Financial Services Company dated April 30, 1996(5)
(8.11) First Amendment dated September 3, 1996 to Fund Participation
Agreement among MFS Variable Insurance Trust, Aetna Insurance
Company of America and Massachusetts Financial Services
Company dated April 30, 1996(7)
(8.12) Fund Participation Agreement between Aetna Insurance Company
of America, Oppenheimer Variable Account Funds and Oppenheimer
Fund, Inc. dated April 1, 1997(4)
(8.13) Service Agreement between Aetna Insurance Company of America
and Oppenheimer Funds, Inc. dated April 1, 1997(4)
(8.14) Fund Participation Agreement among Aetna Insurance Company of
America, TCI Portfolios, Inc. and Investors Research
Corporation dated October 9, 1995(5)
(8.15) Administrative Service Agreement between Aetna Insurance
Company of America and Agency, Inc.(5)
(9) Opinion and Consent of Counsel
(10) Consent of Independent Auditors
(11) Not applicable
(12) Not applicable
(13) Schedule for Computation of Performance Data(1)
(14) Not applicable
(15.1) Powers of Attorney
(15.2) Certificate of Resolution Authorizing Signatures(1)
1. Incorporated by reference to Registration Statement on Form N-4 (File No.
33-59749), as filed electronically on June 1, 1995 (Accession No.
0000950109-95-002138).
2. Incorporated by reference to Registration Statement on Form S-2 (File No.
333-22723), as filed electronically on March 4, 1997 (Accession No.
0000950146-97-000292).
3. Incorporated by reference to Post-Effective Amendment No. 6 to Registration
Statement on Form N-4 (File No. 33-59749), as filed electronically on
November 26, 1997 (Accession No. 0000950146-97-001811).
4. Incorporated by reference to Post-Effective Amendment No. 4 to Registration
Statement on Form N-4 (File No. 33-59749), as filed electronically on April
16, 1997 (Accession No. 0000950416-97-000620).
5. Incorporated by reference to Post-Effective Amendment No. 1 to Registration
Statement on Form N-4 (File No. 33-59749), as filed electronically on April
22, 1996 (Accession No. 0000912057-96-006719).
6. Incorporated by reference to Post-Effective Amendment No. 5 to Registration
Statement on Form N-4 (File No. 33-59749), as filed electronically on July
29, 1997 (Accession No. 0000950146-97-001105).
<PAGE>
7. Incorporated by reference to Post-Effective Amendment No. 3 to Registration
Statement on Form N-4 (File No. 33-59749), as filed electronically on
September 16, 1996 (Accession No. 0000912057-96-020392).
<PAGE>
Item 25. Directors and Officers of the Depositor
Name and Principal
Business Address* Positions and Offices with Depositor
Thomas J. McInerney Director and President
Deborah Koltenuk Director, Vice President and Treasurer,
Corporate Controller
David W. O'Leary Director and Vice President
Shaun P. Mathews Director and Senior Vice President
Maria F. McKeon Corporate Secretary and Counsel
Alastair G. Longley-Cook Vice President and Corporate Actuary
*The principal business address of all directors and officers listed is 151
Farmington Avenue, Hartford, Connecticut 06156.
Item 26. Persons Controlled by or Under Common Control with the Depositor
or Registrant
Incorporated herein by reference to Item 26 of Post-Effective Amendment No.
16 to the Registration Statement on Form N-4 (File No. 33-75964), as filed
electronically on February 9, 1998 (Accession No. 0000950146-98-00179).
Item 27. Number of Contract Owners
As of December 31, 1997, there were 13,426 individuals holding interests in
variable annuity contracts funded through Variable Annuity Account I.
Item 28. Indemnification
Reference is hereby made to Section 33-771(f) of the Connecticut General
Statutes ("C.G.S.") regarding indemnification of directors and Section 33-776(4)
regarding indemnification of officers, employees and agents of Connecticut
corporations. These statutes provide in general that Connecticut corporations
incorporated prior to January 1, 1997 shall indemnify their officers, directors,
employees and agents against "liability" (defined as the obligation to pay a
judgment, settlement, penalty, fine, excise tax in the case of an employee
benefit plan or reasonable expenses incurred with respect to a proceeding). In
the case of a proceeding by or in the right of the corporation, indemnification
is limited to reasonable expenses incurred in connection with the proceeding
against the corporation to which the individual was named a party. The
corporation's obligation to provide such indemnification does not apply unless
(1) the individual has met the standard of conduct set forth in Section 33-771;
and (2) a determination is made (by
<PAGE>
majority vote of a quorum of the board of directors who were not parties to the
proceeding, or if a quorum cannot be obtained, by a committee of the board
selected as described in Section 33-775(b)(2); by special legal counsel selected
by the board of directors or members thereof as described in Section
33-775(b)(3); by shareholders) that the individual met the standard set forth in
Section 33-771; 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. Also, unless limited by its Certificate of Incorporation, a
corporation must indemnify an individual who was wholly successful on the merits
or otherwise against reasonable expenses incurred by him in connection with a
proceeding to which he was a party because of his relationship as director,
officer, employee or agent of the corporation.
The statute does specifically authorize a corporation to procure indemnification
insurance on behalf of an individual who is or was a director, officer, employer
or agent of the corporation. Consistent with the statute, Aetna Inc. has
procured insurance from Lloyd's of London and several major United States excess
insurers for its directors and officers and the directors and officers of its
subsidiaries, including the Depositor.
Item 29. Principal Underwriters
(a) In addition to serving as the principal underwriter for the Registrant,
Aetna Life Insurance and Annuity Company (Aetna) also acts as the
investment adviser, only, for Aetna Series Fund, Inc. and the principal
underwriter and investment adviser for Portfolio Partners, Inc., Aetna
Variable Encore Fund, Aetna Variable Fund, Aetna Generation Portfolios,
Inc., Aetna Income Shares, Aetna Investment Advisers Fund, Inc., Aetna
GET Fund and Aetna Variable Portfolios, Inc. (all management investment
companies registered under the Investment Company Act of 1940 (1940
Act)). Additionally, Aetna also acts as the principal underwriter and
depositor for Variable Life Account B of Aetna, Variable Annuity
Account B of Aetna, Variable Annuity Account C of Aetna and Variable
Annuity Account G of Aetna (separate accounts of Aetna registered as
unit investment trusts under the 1940 Act).
(b) Directors and Officers of the Underwriter
Name and Principal
Business Address* Positions and Offices with Underwriter
Thomas J. McInerney Director and President
Timothy A. Holt Director, Senior Vice President and Chief
Financial Officer
J. Scott Fox Director and Senior Vice President
John Y. Kim Director and Senior Vice President
Shaun P. Mathews Director and Senior Vice President
<PAGE>
Name and Principal
Business Address* Positions and Offices with Underwriter
Thomas P. Waldron Director
Deborah Koltenuk Vice President and Treasurer, Corporate
Controller
Frederick D. Kelsven Vice President and Chief Compliance Officer
Kirk P. Wickman Vice President, General Counsel and Corporate
Secretary
* 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 accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the rules under it relating to the securities
described in and issued under this Registration Statement are located at the
home office of the Depositor as follows:
Aetna 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 are never more than
sixteen months old for as long as payments under the variable annuity
contracts may be accepted;
(b) to include as part of any application to purchase a contract offered by
a prospectus which is part of this registration statement on Form N-4,
a space that an applicant can check to request a Statement of
Additional Information; and
<PAGE>
(c) to deliver any Statement of Additional Information and any financial
statements required to be made available under this Form N-4 promptly
upon written or oral request.
(d) The Company hereby represents that it is relying upon and complies with
the provisions of Paragraphs (1) through (4) of the SEC Staff's
No-Action Letter dated November 22, 1988 with respect to language
covering withdrawal restrictions applicable to plans established
pursuant to Section 403(b) of the Internal Revenue Code, See American
Counsel of Life Insurance; SEC No-Action Letter, [1989 Transfer Binder]
Fed. SEC. L.Rep. (CCH) 78,904 at 78,523 (November 22, 1988).
(e) Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
(f) Aetna Insurance Company of America represents that the fees and charges
deducted under the contracts covered by this registration statement, in
the aggregate, are reasonable in relation to the services rendered, the
expenses expected to be incurred, and the risks assumed by the
insurance company.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act
of 1940, the Registrant, Variable Annuity Account I of Aetna Insurance Company
of America, certifies that it meets the requirements of Securities Act Rule
485(b) for effectiveness of this Post-Effective Amendment to its Registration
Statement on Form N-4 (File No. 33-59749) and has duly caused this
Post-Effective Amendment to be signed on its behalf in the City of Hartford, and
State of Connecticut, on the 13th day of February, 1998.
VARIABLE ANNUITY ACCOUNT I OF AETNA
INSURANCE COMPANY OF AMERICA
(Registrant)
By: AETNA INSURANCE COMPANY OF AMERICA
(Depositor)
By Thomas J. McInerney*
---------------------------------------------
Thomas J. McInerney
President
As required by the Securities Act of 1933, this Post-Effective Amendment
No. 7 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
Thomas J. McInerney* Director and President )
- ------------------------------------ (principal executive officer) )
Thomas J. McInerney )
)
Deborah Koltenuk* Director, Vice President and Treasurer, )
- ------------------------------------ Corporate Controller )
Deborah Koltenuk (principal accounting and financial officer) ) February
) 13, 1998
)
Shaun P. Mathews* Director )
- ------------------------------------ )
Shaun P. Mathews )
)
David W. O'Leary* Director )
- ------------------------------------ )
David W. O'Leary )
</TABLE>
By: /s/ Julie E. Rockmore
-----------------------------------------------------------
Julie E. Rockmore
*Attorney-in-Fact
<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 Selling Agreement *
99-B.3.2 Principal Underwriting Agreement *
99-B.3.3 First Amendment dated April 22, 1996 to Principal Underwriting Agreement *
99-B.4.1 Variable Annuity Contract G-MP2(5/97) *
99-B.4.2 Variable Annuity Contract Certificate MP2CERT(5/97) *
99-B.4.3 Variable Annuity Contract IMP2(5/97) *
99-B.4.4 Variable Annuity Contract (G2-CDA-94(IR)) *
99-B.4.5 Variable Annuity Contract (G2-CDA-94(NQ)) *
99-B.4.6 Variable Annuity Contract (G-MP2(5/96)) *
99-B.4.7 Certificate of Group Annuity Coverage (MP2CERT(5/96)) *
99-B.4.8 Endorsement (MP2END(9/97)) to Contract G-MP2(5/96) and Certificate *
MP2CERT(5/96)
99-B.4.9 Endorsement (IMP2END(9/97)) to Contract G-MP2(5/96) and Certificate *
MP2CERT(5/96)
99-B.5 Variable Annuity Contract Application *
99-B.6 Certificate of Incorporation of Aetna Insurance Company of America *
99-B.8.1 Fund Participation Agreement among Aetna Insurance Company of America, Alger *
American Fund and Fred Alger Management, Inc. dated August 30, 1995
<PAGE>
Exhibit No. Exhibit Page
99-B.8.2 Fund Participation Agreement among Calvert Responsibly Invested Balanced
Portfolio, Calvert Asset Management Company, Inc. and Aetna Insurance
Company of America dated December 1, 1997
-----------------
99-B.8.3 Service Agreement between Calvert Asset Management Company, Inc. and Aetna
Insurance Company of America dated December 1, 1997
-----------------
99-B.8.4 Fund Participation Agreement by and among Insurance Management Series, *
Federated Advisers and Aetna Insurance Company of America dated July 1, 1994
99-B.8.5 Fund Participation Agreement among Aetna Insurance Company of America, *
Variable Insurance Products Fund and Fidelity Distributors Corporation dated
October 20, 1995
99-B.8.6 Fund Participation Agreement among Aetna Insurance Company of America, *
Variable Insurance Products Fund II and Fidelity Distributors Corporation
dated October 20, 1995
99-B.8.7 Fund Participation Agreement between Aetna Insurance Company of America and *
Janus Aspen Series dated October 3, 1995
99-B.8.8 Fund Participation Agreement among MFS Variable Insurance Trust, Aetna *
Insurance Company of America and Massachusetts Financial Services Company
dated April 30, 1996
99-B.8.9 Fund Participation Agreement among Aetna Insurance Company of America and *
Lexington Natural Resources Trust and Lexington Management Corporation dated
September 1, 1995
99-B.8.10 Fund Participation Agreement among Aetna Insurance Company of America, *
Lexington Emerging Markets Fund, Inc. and Lexington Management Corporation
dated September 1, 1995
99-B.8.11 First Amendment dated September 3, 1996 to Fund Participation Agreement *
among MFS Variable Insurance Trust, Aetna Insurance Company of America and
Massachusetts Financial Services Company dated April 30, 1996
<PAGE>
Exhibit No. Exhibit Page
99-B.8.12 Fund Participation Agreement between Aetna Insurance Company of America, *
Oppenheimer Variable Account Funds and Oppenheimer Fund, Inc. dated April 1,
1997
99-B.8.13 Service Agreement between Aetna Insurance Company of America and Oppenheimer *
Funds, Inc. dated April 1, 1997
99-B.8.14 Fund Participation Agreement among Aetna Insurance Company of America, TCI *
Portfolios, Inc. and Investors Research Corporation dated October 9, 1995
99-B.8.15 Administrative Service Agreement between Aetna Insurance Company of America *
and Agency, Inc.
99-B.9 Opinion and Consent of Counsel
-----------------
99-B.10 Consent of Independent Auditors
-----------------
99-B.13 Schedule for Computation of Performance Data *
99-B.15.1 Powers of Attorney
-----------------
99-B.15.2 Certificate of Resolution Authorizing Signatures *
</TABLE>
*Incorporated by reference
FUND PARTICIPATION AGREEMENT
among
CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO
and
CALVERT ASSET MANAGEMENT COMPANY, INC.
and
AETNA INSURANCE COMPANY OF AMERICA
Aetna Insurance Company of America (the "Company"), CALVERT RESPONSIBLY
INVESTED BALANCED PORTFOLIO (the "Fund") and CALVERT ASSET MANAGEMENT COMPANY,
INC. (the "Adviser") hereby agree to an arrangement whereby the Fund shall be
made available to serve as underlying investment media for Variable Annuity or
Variable Life Contracts ("Contracts") to be issued by the Company.
1. Establishment of Accounts; Availability of Fund.
(a) The Company represents that it has established Variable Annuity
Accounts I and II and may establish such other accounts as may be set
forth in Schedule A attached hereto and as may be amended from time to
time with the mutual consent of the parties hereto (the "Accounts"),
each of which is a separate account under Connecticut Insurance law,
and has registered or will register each of the Accounts (except for
such Accounts for which no such registration is required) as a unit
investment trust under the Investment Company Act of 1940 (the "1940
Act"), to serve as an investment vehicle for the Contracts. Each
Contract provides for the allocation of net amounts received by the
Company to an Account for investment in the shares of one or more
specified open-end management investment companies available through
that Account as underlying investment media. Selection of a particular
investment management company and changes therein from time to time
are made by the participant, beneficiary or Contract owner, as
applicable under a particular Contract.
(b) The Adviser represents and warrants that the investments of the series
of the Fund (each designated a "Portfolio") specified in Schedule B
attached hereto (as may be amended from time to time with the mutual
consent of the parties hereto) will at all times be adequately
diversified within the meaning of Section 817(h) of the Internal
Revenue Code of 1986, as amended (the "Code"), and the Regulations
thereunder, and that at all times while this Agreement is in effect,
all beneficial interests will be owned by one or more insurance
companies or by any other party permitted under Section 1.817-5(f)(3)
of the Regulations promulgated under the Code or by the successor
thereto, or by any other party permitted under a Revenue Ruling or
private letter ruling granted by the Internal Revenue Service.
<PAGE>
2. Pricing Information; Orders; Settlement.
(a) The Fund will make Fund shares available to be purchased by the
Company, and will accept redemption orders from the Company, on behalf
of each Account at the net asset value applicable to each order on
those days on which the Fund calculates its net asset value (a
"Business Day"). Fund shares shall be purchased and redeemed in such
quantity and at such time determined by the Company to be necessary to
meet the requirements of those Contracts for which the Fund serve as
underlying investment media, provided, however, that the Board of
Directors of the Fund (hereinafter the "Directors") may upon
reasonable notice to the Company, 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 Directors, acting in good faith and in the best
interests of the shareholders of any Portfolio and is acting in
compliance with their fiduciary obligations under federal and/or any
applicable state laws.
(b) The Fund will provide to the Company closing net asset value, dividend
and capital gain information at the close of trading each day that the
New York Stock Exchange (the "Exchange") is open (each such day a
"Business Day"), and in no event later than 7:00 p.m. Eastern Standard
Time on such Business Day. The Company will send via facsimile or
electronic transmission to the Fund or its specified agent orders to
purchase and/or redeem Fund shares by 10:00 a.m. Eastern Standard Time
the following business day. Payment for net purchases will be wired by
the Company to an account designated by the Fund to coincide with the
order for shares of the Fund.
(c) The Fund hereby appoints the Company as its agent for the limited
purpose of accepting purchase and redemption orders for Fund shares
relating to the Contracts from Contract owners or participants. Orders
from Contract owners, participants or beneficiaries received from any
distributor of the Contracts (including affiliates of the Company) by
the Company, acting as agent for the Fund, prior to the close of the
Exchange on any given business day will be executed by the Fund at the
net asset value determined as of the close of the Exchange on such
Business Day, provided that the Fund receives written (or facsimile)
notice of such order by 10 a.m. Eastern Standard Time on the next
following Business Day. Any orders received by the Company acting as
agent on such day but after the close of the Exchange will be executed
by the Fund at the net asset value determined as of the close of the
Exchange on the next business day following the day of receipt of such
order, provided that the Fund receives written (or facsimile) notice
of such order by 10 a.m. Eastern Standard Time within two days
following the day of receipt of such order.
(d) Payments for net redemptions of shares of the Fund will be wired by
the Fund to an account designated by the Company. Payments for net
purchases of the Fund will be wired by the Company to an account
designated by the Fund on
2
<PAGE>
the same Business Day the Company places an order to purchase Fund
shares. Payments shall be in federal funds transmitted by wire.
(e) Each party has the right to rely on information or confirmations
provided by the other party (or by any affiliate of the other party),
and shall not be liable in the event that an error is a result of any
misinformation supplied by the other party.
(f) The Company agrees to purchase and redeem the shares of the Portfolios
named in Schedule B offered by the then current prospectus and
statement of additional information of the Fund in accordance with the
provisions of such prospectus and statement of additional information.
The Company shall not permit any person other than a Contract owner,
participant or beneficiary to give instructions to the Company which
would require the Company to redeem or exchange shares of the Fund.
This provision shall not be construed to prohibit the Company from
substituting shares of another fund, as permitted by law.
3. Expenses.
(a) Except as otherwise provided in this Agreement, all expenses incident
to the performance by the Fund under this Agreement shall be paid by
the Fund or the Adviser, including the cost of registration of Fund
shares with the Securities and Exchange Commission (the "SEC") and in
states where required. The Fund and Adviser shall pay no fee or other
compensation to the Company under this Agreement, and the Company
shall pay no fee or other compensation to the Fund or Adviser, except
as provided herein and in Schedule C attached hereto and made a part
of this Agreement as may be amended from time to time with the mutual
consent of the parties hereto. All expenses incident to performance by
each party of its respective duties under this Agreement shall be paid
by that party, unless otherwise specified in this Agreement.
(b) The Fund or the Adviser shall provide to the Company Post Script files
of periodic fund reports to shareholders and other materials that are
required by law to be sent to Contract owners. In addition, the Fund
or the Adviser shall provide the Company with a sufficient quantity of
its prospectuses, statements of additional information and any
supplements to any of these materials, to be used in connection with
the offerings and transactions contemplated by this Agreement. In
addition, the Fund shall provide the Company with a sufficient
quantity of its proxy material that is required to be sent to Contract
owners. The Adviser shall be permitted to review and approve the
typeset form of such material prior to such printing provided such
material has been provided by the Adviser to the Company within a
reasonable period of time prior to typesetting.
(c) In lieu of the Fund's or Adviser's providing printed copies of
prospectuses, statements of additional information and any supplements
to any of these
3
<PAGE>
materials, the Company shall have the right to request that the Fund
transmit a copy of such materials in an electronic format (Post Script
files), which the Company may use to have such materials printed
together with similar materials of other Account funding media that
the Company or any distributor will distribute to existing or
prospective Contract owners, participants or beneficiaries.
4. Representations.
The Company agrees that it and its agents shall not, without the written
consent of the Fund or the Adviser, make representations concerning the Fund, or
its shares except those contained in the then current prospectuses and in
current printed sales literature approved by or deemed approved by the Fund or
the Adviser.
5. Termination.
This Agreement shall terminate as to the sale and issuance of new
Contracts:
(a) at the option of either the Company, the Adviser or the Fund, upon
sixty days advance written notice to the other parties;
(b) at the option of the Company, upon one week advance written notice to
the Adviser and the Fund, if Fund shares are not available for any
reason to meet the requirement of Contracts as determined by the
Company. Reasonable advance notice of election to terminate shall be
furnished by Company;
(c) at the option of either the Company, the Adviser or the Fund,
immediately upon institution of formal proceedings against the
broker-dealer or broker-dealers marketing the Contracts, the Account,
the Company, the Fund or the Adviser by the National Association of
Securities Dealers, Inc. (the "NASD"), the SEC or any other regulatory
body;
(d) upon the determination of the Accounts to substitute for the Fund's
shares the shares of another investment company in accordance with the
terms of the applicable Contracts. The Company will give 60 days
written notice to the Fund and the Adviser of any decision to replace
the Fund's' shares;
(e) upon assignment of this Agreement, unless made with the written
consent of all other parties hereto;
(f) if Fund shares are not registered, issued or sold in conformance with
Federal law or such law precludes the use of Fund shares as an
underlying investment medium for Contracts issued or to be issued by
the Company. Prompt notice shall be given by the appropriate party
should such situation occur.
4
<PAGE>
6. Continuation of Agreement.
Termination as the result of any cause listed in Section 5 shall not
affect the Fund's obligation to furnish its shares to Contracts then in force
for which its shares serve or may serve as the underlying medium unless such
further sale of Fund shares is prohibited by law or the SEC or other regulatory
body, or is determined by the Directors to be necessary to remedy or eliminate
an irreconcilable conflict pursuant to Section 10 hereof.
7. Advertising Materials; Filed Documents.
(a) Advertising and sales literature with respect to the Fund prepared by
the Company or its agents for use in marketing its Contracts will be
submitted to the Fund or its designee for review before such material
is submitted to any regulatory body for review. No such material shall
be used if the Fund or its designee reasonably object to such use in
writing, transmitted by facsimile within two business days after
receipt of such material.
(b) At the Company's request, the Fund will provide additional copies of
its financials as soon as available to the Company and at least one
complete copy of all registration statements, prospectuses, statements
of additional information, annual and semi-annual reports, proxy
statements and/or all amendments or supplements to any of the above
that relate to the Fund promptly after the filing of such document
with the SEC or other regulatory authorities. At the Adviser's
request, the Company will provide to the Adviser at least one complete
copy of all registration statements, prospectuses, statements of
additional information, annual and semi-annual reports, proxy
statements, and all amendments or supplements to any of the above that
relate to the Account promptly after the filing of such document with
the SEC or other regulatory authority.
(c) The Fund or the Adviser will provide via Excel spreadsheet diskette
format or in electronic transmission to the Company at least quarterly
portfolio information necessary to update Fund profiles within seven
business days following the end of each quarter.
(d) The Adviser will reimburse the Company for any incorrect information
provided to the Company under this Section as provided for in Schedule
C.
8. Proxy Voting.
(a) The Company shall provide pass-through voting privileges on Fund
shares held by registered separate accounts to all Contract owners and
participants to the extent the SEC continues to interpret the 1940 Act
as requiring such privileges. The Company shall provide pass-through
voting privileges on Fund shares held by unregistered separate
accounts to all Contract owners.
5
<PAGE>
(b) The Company will distribute to Contract owners, participants and
beneficiaries, as appropriate, all proxy material furnished by the
Fund and will vote Fund shares in accordance with instructions
received from such Contract owners, participants and beneficiaries. If
and to the extent required by law, the Company, with respect to each
group Contract and in each Account, shall vote Fund shares for which
no instructions have been received in the same proportion as shares
for which such instructions have been received. The Company and its
agents shall not oppose or interfere with the solicitation of proxies
for Fund shares held for such Contract owners, participants and
beneficiaries.
9. Indemnification.
(a) The Company agrees to indemnify and hold harmless the Adviser, and its
directors, officers, employees, agents and each person, if any, who
controls the Fund or its Adviser within the meaning of the Securities
Act of 1933 (the "1933 Act") against any losses, claims, damages or
liabilities to which the Fund or any such director, officer, employee,
agent, or controlling person may become subject, under the 1933 Act or
otherwise, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained
in the Registration Statement, prospectus or sales literature of the
Company 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, or
arise out of or as a result of conduct, statements or representations
(other than statements or representations contained in the
prospectuses or sales literature of the Fund) of the Company or its
agents, with respect to the sale and distribution of Contracts for
which Fund shares are the underlying investment. The Company will
reimburse any legal or other expenses reasonably incurred by the Fund
or any such director, officer, employee, agent, investment adviser, or
controlling person in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that
the Company will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon
(i) an untrue statement or omission or alleged omission made in such
Registration Statement or prospectus in conformity with written
materials furnished to the Company by the Fund specifically for use
therein or (ii) the willful misfeasance, bad faith, or gross
negligence by the Fund or Adviser in the performance of its duties or
the Fund's or Adviser's reckless disregard of obligations or duties
under this Agreement or to the Company, whichever is applicable. This
indemnity agreement will be in addition to any liability which Company
may otherwise have.
(b) The Adviser agree to indemnify and hold harmless the Company and its
directors, officers, employees, agents and each person, if any, who
controls the Company within the meaning of the 1933 Act against any
losses, claims, damages or liabilities to which the Company or any
such director, officer,
6
<PAGE>
employee, agent or controlling person may become subject, under the
1933 Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement, prospectuses or sales
literature of the Fund 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 material fact required to be stated therein or
necessary to make the statements therein not misleading. The Adviser
will reimburse any legal or other expenses reasonably incurred by the
Company or any such director, officer, employee, agent, or controlling
person in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the
Adviser will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon
an untrue statement or omission or alleged omission made in such
Registration Statement or prospectuses which are in conformity with
written materials furnished to the Adviser by the Company specifically
for use therein.
(c) Promptly after receipt by an indemnified party hereunder of notice of
the commencement of action, such indemnified party will, if a claim in
respect thereof is to be made against the indemnifying party
hereunder, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party
otherwise than under this Section 9. In case any such action is
brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party
will be entitled to participate therein and, to the extent that it may
wish to, assume the defense thereof, with counsel satisfactory to such
indemnified party, and after notice from the indemnifying party to
such indemnified party of its election to assume the defense thereof,
the indemnifying party will not be liable to such indemnified party
under this Section 9 for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation.
10. Potential Conflicts.
(a) The Company has received a copy of an application for exemptive
relief, as amended, filed by the Fund on and with the SEC and the
order issued by the SEC dated 11/21/88 (File No. 812-7095) in response
thereto (the "Shared Funding Exemptive Order"). The Company has
reviewed the conditions to the requested relief set forth in such
application for exemptive relief. As set forth in such application,
the Directors will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contractholders
of all separate accounts ("Participating Companies") investing in the
Fund. An irreconcilable material conflict may arise for a variety of
reasons, including: (i) an action by any state insurance regulatory
authority; (ii) 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
7
<PAGE>
letter, or any similar actions by insurance, tax or securities
regulatory authorities; (iii) an administrative or judicial decision
in any relevant proceeding; (iv) the manner in which the investments
of any portfolio are being managed; (v) a difference in voting
instructions given by variable annuity contractholders and variable
life insurance contractholders; or (vi) a decision by an insurer to
disregard the voting instructions of contractholders. The Board shall
promptly inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
(b) The Company will report any potential or existing conflicts of which
it is aware to the Directors. The Company will assist the Directors in
carrying out its responsibilities under the Shared Funding Exemptive
Order by providing the Directors with all information reasonably
necessary for the Directors to consider any issues raised. This
includes, but is not limited to, an obligation by the Company to
inform the Directors whenever contractholder voting instructions are
disregarded.
(c) If a majority of the Directors, or a majority of its disinterested
Directors, determines that a material irreconcilable conflict exists
with regard to contractholder investments in a Fund, the Directors
shall give prompt notice to all Participating Companies. If the
Directors determines that the Company is responsible for causing or
creating said conflict, the Company shall at its sole cost and
expense, and to the extent reasonably practicable (as determined by a
majority of the disinterested Directors), take such action as is
necessary to remedy or eliminate the irreconcilable material conflict.
Such necessary action may include but shall not be limited to:
(i) withdrawing the assets allocable to the Account from the Fund and
reinvesting such assets in a different investment medium or
submitting the question of whether such segregation should be
implemented to a vote of all affected contractholders and as
appropriate, segregating the assets of any appropriate group
(i.e., annuity contract owners, life insurance contract owners,
or variable contract owners of one or more Participating
Companies) that votes in favor of such segregation, or offering
to the affected contractholders the option of making such a
change; and/or
(ii) establishing a new registered management investment company or
managed separate account.
(d) If a material irreconcilable conflict arises as a result of a decision
by the Company to disregard its contractholder voting instructions and
said decision represents a minority position or would preclude a
majority vote by all of its contractholders having an interest in the
Fund, the Company at its sole cost, may be required, at the Directors'
election, to withdraw an Account's investment in the Fund and
terminate this Agreement; 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 Directors.
8
<PAGE>
(e) For the purpose of this Section 10, a majority of the disinterested
Directors shall determine whether or not any proposed action
adequately remedies any irreconcilable material conflict, but in no
event will the Fund be required to establish a new funding medium for
any Contract. The Company shall not be required by this Section 10 to
establish a new funding medium for any Contract if an offer to do so
has been declined by vote of a majority of the Contract owners,
participants or beneficiaries materially adversely affected by the
irreconcilable material conflict.
11. Miscellaneous.
(a) Amendment and Waiver. Neither this Agreement, nor any provision
hereof, may be amended, waived, discharged or terminated orally, but
only by an instrument in writing signed by all parties hereto.
(b) Notices. All notices and other communications hereunder shall be given
or made in writing and shall be delivered personally, or sent by
telex, telecopier or registered or certified mail, postage prepaid,
return receipt requested or recognized overnight courier service to
the party or parties to whom they are directed at the following
addresses, or at such other addresses as may be designated by notice
from such party to all other parties.
To the Company:
Aetna Insurance Company of America
151 Farmington Avenue
Hartford, Connecticut 06156
Attention: Julie E. Rockmore, Counsel
To the Fund:
Calvert Group, Ltd.
4550 Montgomery Avenue, Suite 1000N
Bethesda, Maryland 20814
Attn: Legal Department
Any notice, demand or other communication given in a manner prescribed in
this subsection (b) shall be deemed to have been delivered on receipt.
(c) Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective permitted
successors and assigns.
9
<PAGE>
(d) Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one
agreement, and any party hereto may execute this Agreement by signing
any such counterpart.
(e) Severability. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or
impaired thereby.
(f) Entire Agreement. This Agreement constitutes the entire agreement and
understanding between the parties hereto and supersedes all prior
agreement and understandings relating to the subject matter hereof.
(g) Governing Law. This Agreement shall be governed and interpreted in
accordance with the laws of the State of Connecticut.
(h) It is understood by the parties that this Agreement is not an
exclusive arrangement in any respect.
(i) The terms of this Agreement and the Schedules thereto will be held
confidential by each party except to the extent that either party or
its counsel may deem it necessary to disclose such terms.
12. Limitation on Liability of Trustees, etc.
This Agreement has been executed on behalf of the Fund by the undersigned
officer of the Fund in his or her capacity as an officer of the Fund and on
behalf of the Advisor by an undersigned officer of the Advisor in his or her
capacity as an officer of the Advisor. Any obligations imposed on the Fund by
this Agreement shall be binding upon the assets and property of the Fund only
and shall not be binding on any Director, officer or shareholder of the Fund
individually.
IN WITNESS WHEREOF, the undersigned have executed this Agreement by their
duly authorized officers effective as of the 1st day of December, 1997.
AETNA INSURANCE COMPANY OF AMERICA
By: /s/ Shaun P. Mathews
------------------------
Name: Shaun P. Mathews
Title: Vice President
Date: 12/11/97
10
<PAGE>
- -------------------------------------- ----------------------------------
CALVERT RESPONSIBILITY INVESTED CALVERT ASSET MANAGEMENT
BALANCED PORTFOLIO COMPANY, INC.
By: /s/ Susan Walker Bender By: /s/ Susan Walker Bender
------------------------- --------------------------
Name: Susan Walker Bender Name: Susan Walker Bender
Title: Assistant Secretary Title: Assistant General Counsel
Date: December 11, 1997 Date: December 11, 1997
11
<PAGE>
Schedule A
(For any future separate accounts - See Section 1(a)
12
<PAGE>
Schedule B
Calvert Responsibly Invested Balanced Portfolio
13
SERVICE AGREEMENT
WITH
CALVERT ASSET MANAGEMENT COMPANY, INC.
AGREEMENT, effective as of December 1, 1997, between Calvert Asset
Management Company, Inc. (the "Adviser"), a Delaware corporation, and Aetna
Insurance Company of America (the "Company"), a Connecticut corporation, for the
provision of described administrative services by the Company in connection with
the sale of shares of the CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO (the
"Fund") as described in the Fund Participation Agreement dated December 1, 1997
between the Company, the Fund and the Adviser (the "Fund Participation
Agreement").
In consideration of their mutual promises, the Adviser and the Company agree as
follows:
1. The Company agrees to provide the following services to the Adviser:
a. responding to inquiries from owners of the Company variable annuity
contracts using the Funds as an investment vehicle ("Contractholders")
regarding the services performed by the Company that relate to the
Funds;
b. providing information to Adviser and Contractholders with respect to
Fund shares attributable to Contractholder accounts;
c. communicating directly with Contractholders concerning the Funds'
operations;
d. providing such other similar services as Adviser may reasonably
request pursuant to Adviser's agreement with the Funds to the extent
permitted under applicable federal and state requirements.
2. (a) Administrative services to Contractholders, owners and participants
shall be the responsibility of the Company and shall not be the
responsibility of the Fund or the Adviser. The Adviser recognizes the
Company as the sole shareholder of Fund shares issued under the Fund
Participation Agreement, and that substantial savings will be derived
in administrative expenses, such as significant reductions in postage
expense and shareholder communications, by virtue of having a sole
shareholder for each of the Accounts rather than multiple
shareholders. In consideration of the savings resulting from such
arrangement, and to compensate the Company for its costs, the Adviser
agrees to pay to the Company and the Company agrees to accept as full
compensation for all services rendered hereunder an amount described
in Schedule A attached hereto and made a part of this Agreement as may
be amended from time to time with the mutual consent of the parties
hereto.
<PAGE>
(b) The parties agree that the Adviser's payments to the Company are for
administrative services only and do not constitute payment in any
manner for investment advisory services or for costs of distribution.
(c) For the purposes of computing the administrative fee reimbursement
contemplated by this Section 2, the average aggregate amount invested
by the Company over a one month period shall be computed by totaling
the Company's aggregate investment (share net asset value multiplied
by total number of shares held by the Company) on each business day
during the month and dividing by the total number of business days
during each month.
(d) The Fund will calculate the reimbursement of administrative expenses
at the end of each month and will make such reimbursement to the
Company within 30 days thereafter. The reimbursement payment will be
accompanied by a statement showing the calculation of the monthly
amounts payable by the Adviser and such other supporting data as may
be reasonably requested by the Company. Payment will be wired by the
Adviser to an account designated by the Company.
3. The Company agrees to indemnify and hold harmless the Adviser and its
directors, officers, and employees from any and all loss, liability and
expense resulting from any gross negligence or willful wrongful act of the
Company under this Agreement or a breach of a material provision of this
Agreement, except to the extent such loss, liability or expense is the
result of the Adviser's misfeasance, bad faith or gross negligence in the
performance of its duties.
4. The Adviser agrees to indemnify and hold harmless the Company and its
directors, officers, and employees from any and all loss, liability and
expense resulting from any gross negligence or willful wrongful act of the
Adviser under this Agreement or a breach of a material provision under this
Agreement, except to the extent such loss, liability or expense is the
result of the Company's own willful misfeasance, bad faith or gross
negligence in the performance of its duties.
5. Either party may terminate this Agreement, without penalty, (i) on sixty
(60) days written notice to the other party, for any cause or without
cause, or (ii) on reasonable notice to the other party, if it is not
permissible to continue the arrangement described herein under laws, rules
or regulations applicable to either party or the Fund, or if the
Participation Agreement is terminated.
6. The terms of this arrangement will be held confidential by each party
except to the extent that either party or its counsel may deem it necessary
to disclose this arrangement.
7. This Agreement represents the entire Agreement of the parties on the
subject matter hereof and it cannot be amended or modified except in
writing, signed by the parties. This Agreement may be executed in one or
more separate counterparts, all of which, when taken together, shall
constitute one and the same Agreement.
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<PAGE>
8. All notices and other communications hereunder shall be given or made in
writing and shall be delivered personally, or sent by telex, telecopier or
registered or certified mail, postage prepaid, return receipt requested or
recognized overnight courier service to the party to whom they are directed
at the following addresses, or at such other addresses as may be designated
by notice from such party to the other party.
To Aetna:
Aetna Insurance Company of America
151 Farmington Avenue
Hartford, Connecticut 06156
Attention: Julie E. Rockmore, Counsel
To Calvert Asset Management Company, Inc.
Calvert Asset Management Company, Inc.
4550 Montgomery Avenue, Suite 1000N
Bethesda, Maryland, 2014
Attention: Legal Department
Any notice, demand or other communication given in a manner prescribed in this
Section 8 shall be deemed to have been delivered on receipt.
IN WITNESS WHEREOF, the parties to this Agreement have caused this Agreement to
be executed by their authorized officers as of the day and year first above
written.
CALVERT ASSET MANAGEMENT COMPANY, INC.
By: /s/ Susan Walker Bender
-----------------------------
Name: Susan Walker Bender
Title: Assistant General Counsel
Date: December 11, 1997
3
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
By: /s/ Shaun P. Mathews
-----------------------------
Name: Shaun P. Mathews
Title: Vice President
Date: December 11, 1997
4
[Aetna letterhead]
[Aetna logo]
151 Farmington Avenue
Hartford, CT 06156-3124
Julie E. Rockmore
Counsel
Law Division, RE4A
February 13, 1998 Investments & Financial Services
(860) 273-4686
Fax: (860) 273-8340
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. 7 to Registration Statement on Form N-4
Prospectus Title: Aetna Marathon Plus - Group and Individual Deferred
Variable Annuity Contracts
File Nos. 33-59749 and 811-8582
Dear Sir or Madam:
The undersigned has acted as counsel to Aetna Insurance Company of America, a
Connecticut life insurance company (the "Company"). It is my understanding that
the Company, as depositor, has registered an indefinite amount of securities
(the "Securities") under the Securities Act of 1933 (the "Securities Act") as
provided in Rule 24f-2 under the Investment Company Act of 1940 (the "Investment
Company Act").
In connection with this opinion, I have reviewed the N-4 Registration Statement
as amended to the date hereof and this Post-Effective Amendment No. 7. I have
also examined originals or copies, certified or otherwise identified to my
satisfaction, of such documents, trust records and other instruments I have
deemed necessary or appropriate for the purpose of rendering this opinion. For
purposes of such examination, I have assumed the genuineness of all signatures
on original documents and the conformity to the original of all copies.
I am admitted to practice law in Connecticut, and do not purport to be an expert
on the laws of any other state. My opinion herein as to any other law is based
upon a limited inquiry thereof which I have deemed appropriate under the
circumstances.
Based upon the foregoing, and assuming the Securities are sold in accordance
with the provisions of the prospectus, I am of the opinion that the Securities
being registered will be legally issued and will represent binding obligations
of the Company.
Sincerely,
/s/ Julie E. Rockmore
Julie E. Rockmore
Counsel
Aetna Insurance Company of America
Consent of Independent Auditors
The Board of Directors of Aetna Insurance Company of America
and Contractholders of Aetna Annuity Account I:
We consent to the use of our reports dated March 20, 1997 and February 14, 1997
incorporated herein by reference in Registration Statement (No. 33-59749) on
Form N-4 and to the reference to our firm under the heading "Independent
Auditors" in the statement of additional information.
/s/ KPMG Peat Marwick LLP
Hartford Connecticut
February 13, 1998
POWER OF ATTORNEY
I, the undersigned Director and Officer of Aetna Insurance Company of America,
hereby constitute and appoint Julie E. Rockmore, Kirk P. Wickman and Mary
Katherine Johnson and each of them individually, my true and lawful attorneys,
with full power to them and each of them to sign for me, and in my name and in
the capacities indicated below, any and all amendments, to the Registration
Statements listed below filed with the Securities and Exchange Commission under
the Securities Act of 1933 and the Investment Company Act of 1940:
Registration Statements filed under the Securities Act of 1933:
33-59749
33-62481
33-63611
33-63657
33-80750
333-22723
Registration Statements filed under the Investment Company Act of 1940:
811-08582
hereby ratifying and confirming on this 20th day of January, 1998, my signature
as it may be signed by my said attorneys to any such Registration Statements and
any and all amendments thereto.
Signature/Title
/s/ Thomas J. McInerney
- -------------------------------------------------------
Thomas J. McInerney
Director and President
(Principal Executive Officer)
<PAGE>
POWER OF ATTORNEY
I, the undersigned Director of Aetna Insurance Company of America, hereby
constitute and appoint Julie E. Rockmore, Kirk P. Wickman and Mary Katherine
Johnson and each of them individually, my true and lawful attorneys, with full
power to them and each of them to sign for me, and in my name and in the
capacity indicated below, any and all amendments, to the Registration Statements
listed below filed with the Securities and Exchange Commission under the
Securities Act of 1933 and the Investment Company Act of 1940:
Registration Statements filed under the Securities Act of 1933:
33-59749
33-62481
33-63611
33-63657
33-80750
333-22723
Registration Statements filed under the Investment Company Act of 1940:
811-08582
hereby ratifying and confirming on this 20th day of January, 1998, my signature
as it may be signed by my said attorneys to any such Registration Statements and
any and all amendments thereto.
Signature/Title
/s/ David W. O'Leary
- -------------------------------------------------------
David W. O'Leary
Director
<PAGE>
POWER OF ATTORNEY
I, the undersigned Director and Officer of Aetna Insurance Company of America,
hereby constitute and appoint Julie E. Rockmore, Kirk P. Wickman and Mary
Katherine Johnson and each of them individually, my true and lawful attorneys,
with full power to them and each of them to sign for me, and in my name and in
the capacities indicated below, any and all amendments, to the Registration
Statements listed below filed with the Securities and Exchange Commission under
the Securities Act of 1933 and the Investment Company Act of 1940:
Registration Statements filed under the Securities Act of 1933:
33-59749
33-62481
33-63611
33-63657
33-80750
333-22723
Registration Statements filed under the Investment Company Act of 1940:
811-08582
hereby ratifying and confirming on this 20th day of January, 1998, my signature
as it may be signed by my said attorneys to any such Registration Statements and
any and all amendments thereto.
Signature/Title
/s/ Deborah Koltenuk
- -------------------------------------------------------
Deborah Koltenuk
Director and Vice President
and Treasurer, Corporate Controller
(Chief Financial Officer)
<PAGE>
POWER OF ATTORNEY
I, the undersigned Director of Aetna Insurance Company of America, hereby
constitute and appoint Julie E. Rockmore, Kirk P. Wickman and Mary Katherine
Johnson and each of them individually, my true and lawful attorneys, with full
power to them and each of them to sign for me, and in my name and in the
capacity indicated below, any and all amendments, to the Registration Statements
listed below filed with the Securities and Exchange Commission under the
Securities Act of 1933 and the Investment Company Act of 1940:
Registration Statements filed under the Securities Act of 1933:
33-59749
33-62481
33-63611
33-63657
33-80750
333-22723
Registration Statements filed under the Investment Company Act of 1940:
811-08582
hereby ratifying and confirming on this 20th day of January, 1998, my signature
as it may be signed by my said attorneys to any such Registration Statements and
any and all amendments thereto.
Signature/Title
/s/ Shaun P. Mathews
------------------------------------------------------
Shaun P. Mathews
Director
