As filed with the Securities and Exchange File No. 33-59749
Commission on April 17, 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. 8 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 May 1,1998 pursuant to paragraph (b) of Rule 485
<PAGE>
VARIABLE ANNUITY ACCOUNT I
CROSS REFERENCE SHEET
Pursuant to Rule 481(a)
<TABLE>
<CAPTION>
FORM N-4
ITEM NO. PART A (PROSPECTUS) LOCATION
<S> <C> <C>
1 Cover Page....................................... Cover Page
2 Definitions...................................... Definitions
3 Synopsis......................................... Prospectus Summary; Fee Table
4 Condensed Financial Information.................. Condensed Financial Information
5 General Description of Registrant,
Depositor, and Portfolio Companies............... The Company; Variable Annuity Account
I; The Funds
6 Deductions and Expenses.......................... Charges and Deductions
7 General Description of Variable Annuity
Contracts ....................................... Purchase; Miscellaneous
8 Annuity Period................................... Annuity Period
9 Death Benefit.................................... Death Benefit During Accumulation
Period; Death Benefit Payable During the
Annuity Period
10 Purchases and Contract Value..................... Purchase; Determining Contract Valuation
11 Redemptions...................................... Contract Rights - Withdrawals; Right to
Cancel
12 Taxes............................................ Tax Status
13 Legal Proceedings................................ Miscellaneous - Legal Matters and
Proceedings
14 Table of Contents of the Statement of Statement of Additional Information -
Additional Information........................... Table of Contents
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FORM N-4 PART B (STATEMENT OF LOCATION - STATEMENT OF
ITEM NO. ADDITIONAL INFORMATION) ADDITIONAL INFORMATION
<S> <C> <C>
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>
<PAGE>
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>
PROSPECTUS
================================================================================
The Contracts offered in connection with this Prospectus are the "Aetna
Marathon Plus" group and individual deferred variable annuity contracts
("Contracts") issued by Aetna Insurance Company of America (the "Company"). The
Contracts are available as (1) nonqualified deferred annuity contracts; (2)
Individual Retirement Annuities ("IRA") including Roth IRAs under Sections
408(b) and 408A of the Internal Revenue Code (may be subject to approval by
state regulatory agencies); or (3) qualified contracts issued in connection
with certain employer sponsored retirement plans (may be subject to approval by
the Company and state regulatory agencies). Currently, the IRA is not available
as a "SIMPLE IRA" as defined in Section 408(p) of the Internal Revenue Code. In
most states, group Contracts are offered to certain broker-dealers or banks
which have agreed to act as Distributors of the Contracts. Individuals who have
established accounts with those broker-dealers or banks are eligible to
participate in the Contract. Individual Contracts are offered only in those
states where the group Contracts are not authorized for sale. (See "Purchase.")
The securities offered in this Prospectus are distributed through Aetna Life
Insurance and Annuity Company, an affiliate of the Company, as the Underwriter
and by registered broker-dealers or banks selected by it as Distributors. (See
"Purchase.")
In most states, the Contracts provide that Purchase Payments may be allocated
to the AICA Guaranteed Account (the "Guaranteed Account"), a credited interest
option, or to one or more of the Subaccounts of Variable Annuity Account I, a
separate account of the Company. In certain states, Purchase Payments may be
allocated to the Fixed Account when the Guaranteed Account is not available.
The Subaccounts invest directly in shares of the following Funds:
<TABLE>
<S> <C>
[bullet] Aetna Ascent VP (formerly Aetna Ascent Variable Portfolio) [bullet] Fidelity VIP High Income Portfolio
[bullet] Aetna Balanced VP, Inc. (formerly Aetna Investment Advisers [bullet] Fidelity VIP Overseas Portfolio
Fund, Inc.) [bullet] Fidelity VIP II Asset Manager Portfolio
[bullet] Aetna Income Shares d/b/a Aetna Bond VP [bullet] Fidelity VIP II Contrafund Portfolio
[bullet] Aetna Crossroads VP (formerly Aetna Crossroads Variable [bullet] Fidelity VIP II Index 500 Portfolio
Portfolio) [bullet] Janus Aspen Aggressive Growth Portfolio
[bullet] Aetna Growth VP (formerly Aetna Variable Growth [bullet] Janus Aspen Balanced Portfolio
Portfolio) [bullet] Janus Aspen Flexible Income Portfolio
[bullet] Aetna Variable Fund d/b/a Aetna Growth and Income VP [bullet] Janus Aspen Growth Portfolio
[bullet] Aetna Index Plus Large Cap VP (formerly Aetna Variable [bullet] Janus Aspen Worldwide Growth Portfolio
Index Plus Portfolio) [bullet] MFS Total Return Series
[bullet] Aetna International VP [bullet] MFS World Governments Series
[bullet] Aetna Legacy VP (formerly Aetna Legacy Variable Portfolio) [bullet] Oppenheimer Aggressive Growth Fund (formerly
[bullet] Aetna Variable Encore Fund d/b/a Aetna Money Market VP Oppenheimer Capital Appreciation Fund)
[bullet] Aetna Real Estate Securities VP [bullet] Oppenheimer Global Securities Fund
[bullet] Aetna Small Company VP (formerly Aetna Variable Small [bullet] Oppenheimer Growth & Income Fund
Company Portfolio) [bullet] Oppenheimer Strategic Bond Fund
[bullet] Aetna Value Opportunity VP (formerly Aetna Variable [bullet] Portfolio Partners MFS Emerging Equities Portfolio
Capital Appreciation Portfolio) [bullet] Portfolio Partners MFS Research Growth Portfolio
[bullet] Calvert Social Balanced Portfolio (formerly Calvert [bullet] Portfolio Partners MFS Value Equity Portfolio
Responsibly Invested Balanced Portfolio) [bullet] Portfolio Partners Scudder International Growth
[bullet] Fidelity VIP Equity-Income Portfolio Portfolio
[bullet] Fidelity VIP Growth Portfolio [bullet] Portfolio Partners T. Rowe Price Growth Equity
Portfolio
</TABLE>
Except as specifically mentioned, this Prospectus describes only investments
through the Separate Account. The Guaranteed Account is described in Appendix A
to this Prospectus, as well as in the Guaranteed Account's prospectus. The
Fixed Account is described in Appendix B to this Prospectus. The availability
of the Funds, the Guaranteed Account and the Fixed Account is subject to
applicable regulatory authorization; not all options may be available in all
jurisdictions or under all Contracts. (See "Investment Options.")
This Prospectus provides investors with the information about the Separate
Account that they should know before investing in the Contracts. Additional
information about the Separate Account is contained in a Statement of
Additional Information ("SAI") which is available at no charge. The SAI has
been filed with the Securities and Exchange Commission and is incorporated
herein by reference. The Table of Contents for the SAI is printed on page 25 of
this Prospectus. An SAI for this Prospectus and for any Fund Prospectus may be
obtained by indicating the request on your Application or by calling the number
listed under the "Inquiries" section of the Prospectus Summary.
THIS PROSPECTUS SHOULD BE READ IN CONJUNCTION WITH THE CURRENT PROSPECTUSES OF
THE FUNDS AND THE AICA GUARANTEED ACCOUNT. ALL PROSPECTUSES SHOULD BE READ AND
RETAINED FOR FUTURE REFERENCE.
<PAGE>
THE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED BY ANY BANK, NOR
ARE THEY INSURED BY THE FDIC; THEY ARE SUBJECT TO INVESTMENT RISKS, INCLUDING
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THIS PROSPECTUS, THE STATEMENT OF ADDITIONAL INFORMATION AND OTHER INFORMATION
ABOUT THE SEPARATE ACCOUNT REQUIRED TO BE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION CAN BE FOUND IN THE SEC'S WEB SITE AT http://www.sec.gov.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION ARE DATED
MAY 1, 1998.
<PAGE>
TABLE OF CONTENTS
================================================================================
<TABLE>
<S> <C>
DEFINITIONS............................................... DEFINITIONS - 1
PROSPECTUS SUMMARY ....................................... SUMMARY - 1
FEE TABLE ................................................ FEE TABLE - 1
CONDENSED FINANCIAL INFORMATION .......................... AUV HISTORY - 1
THE COMPANY ................................................................. 1
VARIABLE ANNUITY ACCOUNT I .................................................. 1
INVESTMENT OPTIONS .......................................................... 1
The Funds ................................................................. 1
Credited Interest Option .................................................. 2
Fixed Account ............................................................. 2
PURCHASE .................................................................... 2
Contract Availability ..................................................... 2
Purchasing Interests in the Contract ...................................... 3
Purchase Payments ......................................................... 3
Contract Rights ........................................................... 3
Designations of Beneficiary and Annuitant ................................. 4
Right to Cancel ........................................................... 4
CHARGES AND DEDUCTIONS ...................................................... 4
Daily Deductions from the Separate Account ................................ 4
Mortality and Expense Risk Charge ....................................... 4
Administrative Charge ................................................... 5
Maintenance Fee ........................................................... 5
Deferred Sales Charge ..................................................... 5
Fund Expenses ............................................................. 6
Premium and Other Taxes ................................................... 6
CONTRACT VALUATION .......................................................... 7
Account Value ............................................................. 7
Accumulation Units ........................................................ 7
Net Investment Factor ..................................................... 7
TRANSFERS ................................................................... 7
Telephone Transfers ....................................................... 8
Dollar Cost Averaging Program ............................................. 8
Account Rebalancing Program ............................................... 8
WITHDRAWALS ................................................................. 9
SYSTEMATIC DISTRIBUTION OPTIONS ............................................. 10
DEATH BENEFIT DURING ACCUMULATION PERIOD .................................... 10
Death Benefit Amount ...................................................... 10
Death Benefit Payment Options ............................................. 12
ANNUITY PERIOD .............................................................. 13
Annuity Period Elections .................................................. 13
Partial Annuitization ..................................................... 13
Annuity Options ........................................................... 13
Annuity Payments .......................................................... 14
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Charges Deducted During the Annuity Period ................................ 15
Death Benefit Payable During the Annuity Period ........................... 15
TAX STATUS .................................................................. 15
Introduction .............................................................. 15
Taxation of the Company ................................................... 15
Tax Status of the Contract ................................................ 16
Taxation of Annuity Contracts ............................................. 17
Contracts Used with Certain Retirement Plans .............................. 19
MISCELLANEOUS ............................................................... 22
Distribution .............................................................. 22
Delay or Suspension of Payments ........................................... 22
Performance Reporting ..................................................... 22
Voting Rights ............................................................. 23
Modification of the Contract .............................................. 23
Transfers of Ownership; Assignment ........................................ 23
Involuntary Terminations .................................................. 24
Legal Matters and Proceedings ............................................. 24
Year 2000 ................................................................. 24
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION ......................... 25
APPENDIX A--AICA GUARANTEED ACCOUNT ......................................... 26
APPENDIX B--FIXED ACCOUNT ................................................... 29
APPENDIX C--DESCRIPTION OF UNDERLYING FUNDS ................................. 30
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. THE COMPANY DOES NOT AUTHORIZE ANY
PERSON TO GIVE INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH
THE OFFERING CONTAINED IN THIS PROSPECTUS EXCEPT AS OTHERWISE CONTAINED HEREIN.
<PAGE>
DEFINITIONS
================================================================================
The following terms are defined as they are used in this Prospectus:
Account: A record that identifies contract values accumulated on each
Certificate Holder's behalf during the Accumulation Period.
Account Value: The total dollar value of amounts held in an Account as of each
Valuation Date during the Accumulation Period.
Account Year: A period of twelve months measured from the date on which an
Account is established (the effective date) or from an anniversary of such
effective date.
Accumulation Period: The period during which Purchase Payment(s) credited to an
Account are invested to fund future annuity payments.
Accumulation Unit: A measure of the value of each Subaccount before annuity
payments begin.
Adjusted Account Value: The Account Value, plus or minus the aggregate market
value adjustment for amounts allocated to the Guaranteed Account.
Annuitant: The person on whose life or life expectancy the annuity payments are
based.
Annuity: A series of payments for life, a definite period or a combination of
the two.
Annuity Date: The date on which annuity payments begin.
Annuity Period: The period during which annuity payments are made.
Annuity Unit: A measure of the value of each Subaccount selected during the
Annuity Period.
Application: The form or collection of information required by the Company to
purchase an interest in a group contract or an individual contract.
Beneficiary(ies): The person or persons who are entitled to receive any death
benefit proceeds. Under Nonqualified Contracts, Individual Retirement Annuities
and Section 403(b) Contracts, Beneficiary refers to the beneficiary named under
the Contract. Under Qualified Contracts sold in conjunction with 401(a) or 457
Plans, Beneficiary refers to the beneficiary under the plan.
Certificate: The document issued to a Certificate Holder for an Account
established under a group contract.
Certificate Holder (You): A person or entity who purchases an individual
Contract or acquires an interest under a group Contract.
Claim Date: The date when proof of death and the Beneficiary's claim are
received in good order at the Company's Home Office.
Company (We, Us): Aetna Insurance Company of America.
Contract: The group and individual deferred, variable annuity contracts offered
by this Prospectus.
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.
Distributor(s): The registered broker-dealer(s), or banks that may be acting as
broker-dealers without separate registration under the Securities Exchange Act
of 1934, which have entered into selling agreements with the Company to offer
and sell the Contracts. The Company may also serve as a Distributor.
Fixed Account: A fixed interest option available in certain states which is
described in Appendix B to this prospectus. Amounts allocated to the Fixed
Account are included in the Account Value.
- --------------------------------------------------------------------------------
DEFINITIONS - 1
<PAGE>
Fund(s): An open-end registered management investment company whose shares are
purchased by the Separate Account to fund the benefits provided by the
Contract.
Group Contract Holder: The entity to which a group Contract is issued.
Home Office: The Company's principal executive offices located at 151
Farmington Avenue, Hartford, Connecticut 06156.
Individual Contract Holder: A person or entity who has purchased an individual
variable annuity contract (also referred to as a "Certificate Holder").
Individual Retirement Annuity: An individual or group variable deferred annuity
intended to qualify under Code Section 408(b) or 408A.
Nonqualified Contract: A contract established to supplement an individual's
retirement income, or to provide an alternative investment option under an
Individual Retirement Account qualified under Code Section 408(a).
Purchase Payment(s): The gross payment(s) made to the Company under an Account.
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.
Registered Representative: The individual who is registered with a
broker-dealer acting as Distributor to offer and sell securities, or who is an
employee of a bank acting as Distributor that is exempt from broker-dealer
registration under the Securities Exchange Act of 1934. Registered
Representatives must also be licensed as insurance agents to sell variable
annuity contracts.
Roth IRA: An Individual Retirement Annuity intended to qualify under Code
Section 408A.
Separate Account: Variable Annuity Account I, a separate account established
for the purpose of funding variable annuity contracts issued by the Company.
Subaccount(s): The portion of the assets of the Separate Account that is
allocated to a particular Fund. Each Subaccount invests in the shares of only
one corresponding Fund.
Surrender Value: The amount payable upon the withdrawal of all or any portion
of an Account Value.
Underwriter: The registered broker-dealer which contracts with other registered
broker-dealers, or with banks exempt from broker-dealer registration, to offer
and sell the Contracts. Aetna Life Insurance and Annuity Company will serve as
Underwriter.
Valuation Date: The date and time at which the Accumulation Unit Value and
Annuity Unit Value of a Subaccount is calculated. Currently, this calculation
occurs after the close of business of the New York Stock Exchange on any normal
business day, Monday through Friday, that the New York Stock Exchange is open.
- --------------------------------------------------------------------------------
DEFINITIONS - 2
<PAGE>
PROSPECTUS SUMMARY
================================================================================
CONTRACTS OFFERED
The Contracts offered in connection with this Prospectus are group and
individual deferred variable annuity contracts issued by Aetna Insurance
Company of America (the "Company"). The purpose of the Contract is to
accumulate values and to provide benefits upon retirement. The Contracts are
currently available for (1) individual nonqualified purchases (we reserve the
right to limit the ownership of nonqualified contracts to natural persons); (2)
Individual Retirement Annuities ("IRAs") including Roth IRAs, other than
"SIMPLE IRAs" as defined in Section 408(p) of the Internal Revenue Code
("Code") (may be subject to approval by state regulatory agencies); and (3)
purchases made in conjunction with employer sponsored retirement plans under
Section 403(b) of the Code (may be subject to approval by the Company and by
state regulatory agencies). Prior to May 1, 1998, the Contracts were also
available for purchases made in conjunction with employer-sponsored retirement
plans under Sections 401(a) or 457 of the Code.
In most states, group Contracts are offered to certain broker-dealers or
banks which have agreed to act as Distributors of the Contracts. Individuals
who have established accounts with those broker-dealers or banks are eligible
to participate in the Contract. Individual Contracts are offered in those
states where the group Contracts are not authorized for sale. Joint Certificate
Holders are allowed only on Nonqualified Contracts. A joint Certificate Holder
must be the spouse of the other joint Certificate Holder. In Pennsylvania, the
joint Certificate Holders do not need to be spouses. References to "Certificate
Holders" in this Prospectus mean both of the Certificate Holders on joint
Accounts.
CONTRACT PURCHASE
You may purchase an interest in the Contract by completing an Application
and submitting it to the Company. Purchase Payments can be applied to the
Contract either through a lump-sum payment or through ongoing contributions.
(See "Purchase.")
FREE LOOK PERIOD
You may cancel the Contract or Certificate within 10 days after you
receive it (or longer if required by state law) by returning it to the Company
along with a written notice of cancellation. Unless state law requires
otherwise, the amount you will receive upon cancellation will reflect the
investment performance of the Subaccounts into which your Purchase Payments
were deposited. In some cases this may be more or less than the amount of your
Purchase Payments. Under a Contract issued as an Individual Retirement Annuity,
you will receive a refund of your Purchase Payment. (See "Purchase--Right to
Cancel.") 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 and you
exercise your free look right under this provision, the Purchase Payment will
be restored to the contract from which it came.
INVESTMENT OPTIONS
The Company has established Variable Annuity Account I, a registered unit
investment trust, for the purpose of funding the variable portion of the
Contracts. The Separate Account is divided into Subaccounts which invest
directly in shares of the Funds described herein. The Contract allows
investment in the Subaccounts, as well as in the Guaranteed Account (or Fixed
Account, in certain states) described below subject to the limitations
described in "Investment Options," see page 1. For a complete list of the Funds
available under the Contracts, and a description of the investment objectives
of each of the Funds and their investment advisers, see "Investment
Options--The Funds" and Appendix C in this Prospectus, as well as the
prospectuses for each of the Funds.
The Guaranteed Account is the credited interest option available under the
Contract which allows you to earn a fixed rate of interest, if held for the
guaranteed term. (See Appendix A to this Prospectus and the prospectus for the
Guaranteed Account.)
The Fixed Account is an option available under the Contract in certain
states which allows you to earn a fixed rate of interest. (See Appendix B to
this Prospectus.)
- --------------------------------------------------------------------------------
SUMMARY - 1
<PAGE>
CHARGES AND DEDUCTIONS
Certain charges are associated with these Contracts. These charges include
daily deductions from the Separate Account (the mortality and expense risk
charge and an administrative charge), as well as any applicable maintenance
fee, transfer fees and premium and other taxes. The Funds also incur certain
fees and expenses which are deducted directly from the Funds. A deferred sales
charge may apply upon a full or partial withdrawal of the Account Value. (See
the Fee Table and "Charges and Deductions.")
TRANSFERS
Prior to the Annuity Date, and subject to certain limitations, you can
transfer Account Values among the Subaccounts and the Guaranteed Account (or
Fixed Account in certain states). During the Annuity Period and subject to
state approval, if you have elected variable payments, you can make transfers
among the Subaccounts available during the Annuity Period. Currently, during
the Accumulation Period, transfers are without charge. However, the Company
reserves the right to charge up to $10 for each additional transfer if more
than 12 transfers are made in a calendar year. Any transfer charge will be
applied so that the amount being transferred will be reduced. Transfers can be
requested in writing or by telephone in accordance with the Company's transfer
procedures. If approved by your state, during the Annuity Period, you can
currently make up to four transfers each calendar year. There is no charge for
these transfers. (Transfers from the Guaranteed Account may be restricted and
subject to a market value adjustment. See Appendix A)
The Company also offers a Dollar Cost Averaging Program and an Account
Rebalancing Program. The Dollar Cost Averaging Program permits the automatic
transfer of amounts from any of the Subaccounts and an available Guaranteed
Account term to any of the other Subaccounts on a monthly or quarterly basis.
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. The Account Rebalancing Program allows
you to request that each year, or at other more frequent intervals as we allow,
we automatically reallocate your Account value to specified percentages among
the Subaccounts in which you invest. (See "Transfers.")
WITHDRAWALS
All or a part of the Account Value may be withdrawn prior to the Annuity
Date by properly completing a disbursement form and sending it to the Company.
Certain charges may be assessed upon withdrawal. Amounts withdrawn from the
Guaranteed Account may be subject to a market value adjustment. (See Appendix
A.) The taxable portion of the withdrawal may also be subject to income tax and
a federal tax penalty. (See "Withdrawals.")
The Contract also offers certain Systematic Distribution Options during
the Accumulation Period subject to certain criteria. Some Systematic
Distribution Options are not available in all states and may not be suitable in
every situation. (See "Systematic Distribution Options.")
GUARANTEED DEATH BENEFIT
These Contracts contain a guaranteed death benefit feature. Upon the death
of the Annuitant, the Account Value may be increased under certain
circumstances. (See "Death Benefit During Accumulation Period.")
After Annuity Payments have commenced, a death benefit may be payable to
the Beneficiary depending upon the terms of the Contract and the Annuity Option
selected. (See "Death Benefit Payable During the Annuity Period.")
THE ANNUITY PERIOD
On the Annuity Date, you may elect to begin receiving Annuity Payments.
Annuity Payments can be made on either a fixed, variable or combination fixed
and variable basis. If a variable payout is selected, the payments will
continue to vary with the investment performance of the Subaccount(s) selected.
The Company reserves the right to limit the number of Subaccounts that may be
available during the Annuity Period. (See "Annuity Period.")
- --------------------------------------------------------------------------------
SUMMARY - 2
<PAGE>
TAXES
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.")
INQUIRIES
Questions, inquiries or requests for additional information can be
directed to your agent or local representative, or you may contact the Company
as follows:
<TABLE>
<S> <C>
[bullet] Write to: Aetna Insurance Company of America
151 Farmington Avenue
Hartford, Connecticut 06156-5996
Attention: Customer Service
[bullet] Call Customer Service: 1-800-531-4547 (for automated transfers
or changes in the allocation of Account
Values, call: 1-800-262-3862)
</TABLE>
- --------------------------------------------------------------------------------
SUMMARY - 3
<PAGE>
FEE TABLE
================================================================================
This Fee Table describes the various charges and expenses associated with the
Contract. No sales charge is paid upon purchase of the Contract. All costs that
are borne directly or indirectly under the Subaccounts and Funds are shown
below. Some expenses may vary as explained under "Charges and Deductions." The
charges and expenses shown below do not include premium taxes that may be
applicable. For more information regarding expenses paid out of assets of a
particular Fund, see the Fund's prospectus.
CONTRACTS OTHER THAN ROTH IRA CONTRACTS
CONTRACT HOLDER TRANSACTION EXPENSES
Deferred Sales Charge for withdrawals under each Contract (as a percentage
of each Purchase Payment withdrawn):
<TABLE>
<CAPTION>
- ----------------------------------------------
Years from Receipt of Deferred Sales
Purchase Payment Charge Deduction
- ----------------------------- ----------------
<S> <C>
Less than 2 7%
2 or more but less than 4 6%
4 or more but less than 5 5%
5 or more but less than 6 4%
6 or more but less than 7 3%
7 or more 0%
- ----------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Annual Maintenance Fee (1) ........................................................... $ 30.00
Transfer Charge (2) .................................................................. $ 0.00
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)
DURING THE ACCUMULATION PERIOD:
Mortality and Expense Risk Charge .................................................... 1.25%(3)
Administrative Charge ................................................................ 0.15%
-------
Total Subaccount Annual Expenses ................................................. 1.40%
=======
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."
(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.
- --------------------------------------------------------------------------------
FEE TABLE - 1
<PAGE>
ROTH IRA CONTRACTS
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.
<TABLE>
<CAPTION>
- ----------------------------------------------
Completed Contract Deferred Sales
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>
<TABLE>
<S> <C>
Annual Maintenance Fee (1) ........................................................... $ 30.00
Transfer Charge (2) .................................................................. $ 0.00
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)
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.
- --------------------------------------------------------------------------------
FEE TABLE - 2
<PAGE>
ANNUAL EXPENSES OF THE FUNDS (APPLIES TO ALL CONTRACTS)
The following table illustrates the advisory fees and other expenses applicable
to the Funds. Except as noted, the following figures are a percentage of
average net assets and, except where otherwise indicated, are based on figures
for the year ended December 31, 1997. A Fund's "Other Expenses" include
operating costs of the Fund. These expenses are reflected in the Fund's net
asset value and are not deducted from the Account Value.
<TABLE>
<CAPTION>
Investment Other
Advisory Fees(1) Expenses
(after expense (after expense Total Fund
reimbursement) reimbursement) Annual Expenses
--------------- -------------- ---------------
<S> <C> <C> <C>
Aetna Ascent VP(2)(3) 0.57% 0.23% 0.80%
Aetna Balanced VP, Inc.(3) 0.50% 0.10% 0.60%
Aetna Bond VP(3) 0.40% 0.10% 0.50%
Aetna Crossroads VP(2)(3) 0.55% 0.25% 0.80%
Aetna Growth VP(2)(3) 0.16% 0.64% 0.80%
Aetna Growth and Income VP(3) 0.50% 0.09% 0.59%
Aetna Index Plus Large Cap VP(2)(3) 0.32% 0.23% 0.55%
Aetna International VP(2)(3) 0.77% 0.38% 1.15%
Aetna Legacy VP(2)(3) 0.49% 0.31% 0.80%
Aetna Money Market VP(3) 0.25% 0.10% 0.35%
Aetna Real Estate Securities VP(2)(3) 0.62% 0.33% 0.95%
Aetna Small Company VP(2)(3) 0.35% 0.60% 0.95%
Aetna Value Opportunity VP(2)(3) 0.20% 0.60% 0.80%
Calvert Social Balanced Portfolio(4) 0.69% 0.12% 0.81%
Fidelity VIP Equity-Income Portfolio(5) 0.50% 0.08% 0.58%
Fidelity VIP Growth Portfolio(5) 0.60% 0.09% 0.69%
Fidelity VIP High Income Portfolio(5) 0.59% 0.12% 0.71%
Fidelity VIP Overseas Portfolio(5) 0.75% 0.17% 0.92%
Fidelity VIP II Asset Manager Portfolio(5) 0.55% 0.10% 0.65%
Fidelity VIP II Contrafund Portfolio(5) 0.60% 0.11% 0.71%
Fidelity VIP II Index 500 Portfolio(6) 0.24% 0.04% 0.28%
Janus Aspen Aggressive Growth Portfolio(7) 0.73% 0.03% 0.76%
Janus Aspen Balanced Portfolio(7) 0.76% 0.07% 0.83%
Janus Aspen Flexible Income Portfolio 0.65% 0.10% 0.75%
Janus Aspen Growth Portfolio(7) 0.65% 0.05% 0.70%
Janus Aspen Worldwide Growth Portfolio(7) 0.66% 0.08% 0.74%
MFS Total Return Series(8) 0.75% 0.25% 1.00%
MFS World Governments Series(8) 0.75% 0.25% 1.00%
Oppenheimer Aggressive Growth Fund 0.71% 0.02% 0.73%
Oppenheimer Global Securities Fund 0.70% 0.06% 0.76%
Oppenheimer Growth & Income Fund 0.75% 0.08% 0.83%
Oppenheimer Strategic Bond Fund 0.75% 0.08% 0.83%
Portfolio Partners MFS Emerging Equities Portfolio(9)(10) 0.68% 0.13% 0.81%
Portfolio Partners MFS Research Growth Portfolio(9)(10) 0.70% 0.15% 0.85%
Portfolio Partners MFS Value Equity Portfolio(9) 0.65% 0.25% 0.90%
Portfolio Partners Scudder International Growth Portfolio(9) 0.80% 0.20% 1.00%
Portfolio Partners T. Rowe Price Growth Equity Portfolio(9) 0.60% 0.15% 0.75%
</TABLE>
- ------------------
(1) Certain of the Fund advisers reimburse the Company for administrative costs
incurred in connection with administering the Funds as variable funding
options under the Contract. These reimbursements are paid out of the
investment advisory fees and are not charged to investors.
(2) Effective May 1, 1998, the Portfolios' adviser has agreed to waive a
portion of its fee or to reimburse certain expenses so that aggregate
expenses do not exceed the total expenses shown above. These fee
waiver/expense reimbursement arrangements will increase total return and
may be modified or terminated at any time.
Without these fee waiver/expense reimbursement arrangements Management Fees
and Total Expenses for the Portfolio would be higher. Management Fees and
Total Expenses would be as follows: 0.60% and 0.83% for Ascent VP; 0.60% and
0.85% for Crossroads VP; 0.60% and 1.24% for Growth VP; 0.35% and 0.58% for
Index Plus Large Cap VP; 0.85% and 1.23% for International VP; 0.60% and
0.91% for Legacy VP; 0.75% and 1.08% for Real Estate Securities VP; 0.75%
and 1.35% for Small Company VP; and 0.60% and 1.20% for Value Opportunity
VP, respectively.
- --------------------------------------------------------------------------------
FEE TABLE - 3
<PAGE>
(3) Prior to May 1, 1998, the investment adviser provided administrative
services to the Fund and assumed the Fund's ordinary recurring direct costs
under an Administrative Services Agreement. Effective May 1, 1998, the
investment adviser will continue to provide administrative services to the
Fund but will no longer assume all of the Fund's ordinary recurring direct
costs under the Administrative Services Agreement. The Administrative Fee
is 0.075% on the first $5 billion in assets and 0.050% on all assets over
$5 billion. The "Other Expenses" shown are not based on actual figures for
the year ended December 31, 1997, but reflect the fee payable under the new
Administrative Services Agreement and estimates of the Fund's ordinary
recurring direct costs.
International VP and Real Estate Securities VP commenced operations in
December 1997, therefore, estimates are based on expenses incurred for
similar funds. Actual expenses incurred may be more or less than the
amounts shown above.
(4) The figures above are based on expenses for the fiscal year 1997, and have
been restated to reflect an increase in transfer agency expenses of 0.01%
for the Portfolio expected to be incurred in 1998. "Management Fees"
includes a performance adjustment, which depending on performance, could
cause the fee to be as high as 0.85% or as low as 0.55%. "Other Expenses"
reflect an indirect fee of 0.03% (relating to an expense offset arrangement
with the Portfolio's custodian). Net fund operating expenses after
reductions for fees paid indirectly (again, restated) would be 0.78%.
(5) A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, certain funds have entered into
arrangements with their custodian whereby credits realized, as a result of
uninvested cash balances were used to reduce custodian expenses. Including
these reductions, the total operating expenses would have been 0.57% for
Equity-Income Portfolio; 0.67% for Growth Portfolio; 0.71% for High Income
Portfolio; 0.90% for Overseas Portfolio, 0.64% for Asset Manager Portfolio;
and 0.68% for Contrafund Portfolio.
(6) The Fund's investment adviser agreed to reimburse a portion of Index 500
Portfolio's expenses during the period. Without this reimbursement, the
fund's management fee, other expenses and total expenses would have been
0.27%, 0.13% and 0.40%, respectively, for Index 500 Portfolio.
(7) Management fees for Aggressive Growth, Balanced, Growth and Worldwide
Growth Portfolios reflect a reduced fee schedule effective July 1, 1997.
The management fees shown above are based on the new rate applied to net
assets as of December 31, 1997. Other expenses are based on gross expenses
of the Shares before expense offset arrangements for the fiscal year ended
December 31, 1997. The information for each Portfolio is net of fee waivers
or reductions from Janus Capital. Fee reductions for the Aggressive Growth,
Balanced, Growth and Worldwide Growth Portfolios reduce the management fee
to the level of the corresponding Janus retail fund. Other waivers, if
applicable, are first applied against the management fee and then against
other expenses. Without such waivers or reductions, the Management Fee,
Other Expenses and Total Operating Expenses for the Shares would have been
0.74%, 0.04%, and 0.78% for Aggressive Growth Portfolio; 0.77%, 0.06%, and
0.83% for Balanced Portfolio; 0.74%, 0.04%, and 0.78% for Growth Portfolio;
and 0.72%, 0.09%, and 0.81% for Worldwide Growth Portfolio, respectively.
Janus Capital may modify or terminate the waivers or reductions at any time
upon at least 90 days' notice to the Trustees.
(8) The adviser has agreed to bear expenses for each Series, subject to
reimbursement by each Series, such that each Series' "Other Expenses" shall
not exceed 0.25% of the average daily net assets of the Series during the
current fiscal year. Otherwise, "Other Expenses" for the MFS Total Return
Series and MFS World Governments Series would be 0.27% and 0.40%,
respectively, and "Total Fund Annual Expenses" would be 1.02% and 1.15%,
respectively, for these Series. Each Series has an expense offset
arrangement which reduces the Series' custodian fee based upon the amount
of cash maintained by the Series with its custodian and dividend disbursing
agent, and may enter into other such arrangements and directed brokerage
arrangements (which also have the effect of reducing the Series' expenses).
Any such fee reductions are not reflected under "Other Expenses."
(9) Each Portfolio's aggregate expenses are contractually limited to the
advisory and administrative fees disclosed above. The investment adviser
will not seek an increase in its advisory or administrative fee at any time
prior to May 1, 1999.
(10) The advisory fee is 0.70% of the first $500 million in assets and 0.65% on
the excess.
- --------------------------------------------------------------------------------
FEE TABLE - 4
<PAGE>
HYPOTHETICAL ILLUSTRATION (EXAMPLE) FOR CONTRACTS OTHER THAN ROTH IRAS
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 0.012%.
<TABLE>
<CAPTION>
EXAMPLE A EXAMPLE B
-------------------------------------- ----------------------------------------
If you withdraw the entire Account If you do not withdraw the Account
Value at the end of the periods shown, Value, or if you annuitize at the end of
you would pay the following expenses, the periods shown, you would pay th
including any applicable deferred following expenses (no deferred sales
sales charge: charge is reflected):*
1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Ascent VP $85 $123 $154 $255 $22 $69 $119 $255
Aetna Balanced VP, Inc. $83 $117 $144 $234 $20 $63 $108 $234
Aetna Bond VP $82 $113 $139 $223 $19 $60 $103 $223
Aetna Crossroads VP $85 $123 $154 $255 $22 $69 $119 $255
Aetna Growth VP $85 $123 $154 $255 $22 $69 $119 $255
Aetna Growth and Income VP $83 $116 $143 $233 $20 $63 $108 $233
Aetna Index Plus Large Cap VP $83 $115 $141 $229 $20 $62 $106 $229
Aetna International VP $89 $133 $172 $290 $26 $80 $136 $290
Aetna Legacy VP $85 $123 $154 $255 $22 $69 $119 $255
Aetna Money Market VP $81 $109 $131 $208 $18 $55 $ 96 $208
Aetna Real Estate Securities VP $87 $127 $162 $270 $24 $74 $126 $270
Aetna Small Company VP $87 $127 $162 $270 $24 $74 $126 $270
Aetna Value Opportunity VP $85 $123 $154 $255 $22 $69 $119 $255
Calvert Social Balanced Portfolio $85 $123 $154 $256 $23 $69 $119 $256
Fidelity VIP Equity-Income Portfolio $83 $116 $143 $232 $20 $63 $107 $232
Fidelity VIP Growth Portfolio $84 $119 $148 $243 $21 $66 $113 $243
Fidelity VIP High Income Portfolio $84 $120 $149 $245 $22 $66 $114 $245
Fidelity VIP Overseas Portfolio $86 $126 $160 $267 $24 $73 $125 $267
Fidelity VIP II Asset Manager Portfolio $84 $118 $146 $239 $21 $65 $111 $239
Fidelity VIP II Contrafund Portfolio $84 $120 $149 $245 $22 $66 $114 $245
Fidelity VIP II Index 500 Portfolio $80 $107 $127 $200 $17 $53 $ 92 $200
Janus Aspen Aggressive Growth Portfolio $85 $121 $152 $251 $22 $68 $117 $251
Janus Aspen Balanced Portfolio $86 $124 $156 $258 $23 $70 $120 $258
Janus Aspen Flexible Income Portfolio $85 $121 $151 $250 $22 $68 $116 $250
Janus Aspen Growth Portfolio $84 $120 $149 $244 $21 $66 $113 $244
Janus Aspen Worldwide Growth Portfolio $85 $121 $151 $248 $22 $67 $116 $248
MFS Total Return Series $87 $129 $164 $275 $24 $75 $129 $275
MFS World Governments Series $87 $129 $164 $275 $24 $75 $129 $275
Oppenheimer Aggressive Growth Fund $85 $121 $150 $247 $22 $67 $115 $247
Oppenheimer Global Securities Fund $85 $121 $152 $251 $22 $68 $117 $251
Oppenheimer Growth & Income Fund $86 $124 $156 $258 $23 $70 $120 $258
Oppenheimer Strategic Bond Fund $86 $124 $156 $258 $23 $70 $120 $258
Portfolio Partners MFS Emerging Equities Portfolio $85 $123 $154 $256 $23 $69 $119 $256
Portfolio Partners MFS Research Growth Portfolio $86 $124 $157 $260 $23 $71 $121 $260
Portfolio Partners MFS Value Equity Portfolio $86 $126 $159 $265 $23 $72 $124 $265
Portfolio Partners Scudder International Growth
Portfolio $87 $129 $164 $275 $24 $75 $129 $275
Portfolio Partners T. Rowe Price Growth Equity
Portfolio $85 $121 $151 $250 $22 $68 $116 $250
</TABLE>
- ------------------
* 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.)
- --------------------------------------------------------------------------------
FEE TABLE - 5
<PAGE>
HYPOTHETICAL ILLUSTRATION (EXAMPLE): CONTRACTS ISSUED AS ROTH IRAS
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 0.012%.
<TABLE>
<CAPTION>
EXAMPLE A EXAMPLE B
------------------------------------- -------------------------------------
If you withdraw the entire Account If you do not withdraw the Account
Value at the end of the periods Value, or if you annuitize at the end
shown, you would pay the following of the periods shown, you would pay
expenses, including any applicable the following expenses (no deferred
deferred sales charge: sales charge is reflected):*
1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
------- --------- --------- --------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Ascent VP $62 $86 $111 $239 $21 $65 $111 $239
Aetna Balanced VP, Inc. $60 $80 $101 $218 $19 $59 $101 $218
Aetna Bond VP $59 $77 $ 96 $208 $18 $55 $ 96 $208
Aetna Crossroads VP $62 $86 $111 $239 $21 $65 $111 $239
Aetna Growth VP $62 $86 $111 $239 $21 $65 $111 $239
Aetna Growth and Income VP $60 $80 $100 $217 $19 $58 $100 $217
Aetna Index Plus Large Cap VP $60 $79 $ 98 $213 $18 $57 $ 98 $213
Aetna International VP $65 $97 $129 $275 $24 $75 $129 $275
Aetna Legacy VP $62 $86 $111 $239 $21 $65 $111 $239
Aetna Money Market VP $58 $73 $ 88 $191 $16 $51 $ 88 $191
Aetna Real Estate Securities VP $64 $91 $119 $255 $22 $69 $119 $255
Aetna Small Company VP $64 $91 $119 $255 $22 $69 $119 $255
Aetna Value Opportunity VP $62 $86 $111 $239 $21 $65 $111 $239
Calvert Social Balanced Portfolio $62 $87 $111 $240 $21 $65 $111 $240
Fidelity VIP Equity-Income Portfolio $60 $80 $100 $216 $19 $58 $100 $216
Fidelity VIP Growth Portfolio $61 $83 $105 $228 $20 $61 $105 $228
Fidelity VIP High Income Portfolio $61 $84 $106 $230 $20 $62 $106 $230
Fidelity VIP Overseas Portfolio $63 $90 $117 $252 $22 $68 $117 $252
Fidelity VIP II Asset Manager Portfolio $61 $82 $103 $223 $19 $60 $103 $223
Fidelity VIP II Contrafund Portfolio $61 $84 $106 $230 $20 $62 $106 $230
Fidelity VIP II Index 500 Portfolio $57 $71 $ 84 $184 $16 $49 $ 84 $184
Janus Aspen Aggressive Growth Portfolio $62 $85 $109 $235 $21 $63 $109 $235
Janus Aspen Balanced Portfolio $62 $87 $112 $242 $21 $66 $112 $242
Janus Aspen Flexible Income Portfolio $62 $85 $108 $234 $20 $63 $108 $234
Janus Aspen Growth Portfolio $61 $83 $106 $229 $20 $62 $106 $229
Janus Aspen Worldwide Growth Portfolio $62 $85 $108 $233 $20 $63 $108 $233
MFS Total Return Series $64 $92 $121 $260 $23 $71 $121 $260
MFS World Governments Series $64 $92 $121 $260 $23 $71 $121 $260
Oppenheimer Aggressive Growth Fund $61 $84 $107 $232 $20 $63 $107 $232
Oppenheimer Global Securities Fund $62 $85 $109 $235 $21 $63 $109 $235
Oppenheimer Growth & Income Fund $62 $87 $112 $242 $21 $66 $112 $242
Oppenheimer Strategic Bond Fund $62 $87 $112 $242 $21 $66 $112 $242
Portfolio Partners MFS Emerging Equities Portfolio $62 $87 $111 $240 $21 $65 $111 $240
Portfolio Partners MFS Research Growth Portfolio $63 $88 $113 $244 $21 $66 $113 $244
Portfolio Partners MFS Value Equity Portfolio $63 $89 $116 $250 $22 $68 $116 $250
Portfolio Partners Scudder International Growth
Portfolio $64 $92 $121 $260 $23 $71 $121 $260
Portfolio Partners T. Rowe Price Growth Equity Portfolio $62 $85 $108 $234 $20 $63 $108 $234
</TABLE>
- ------------------
* 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.)
- --------------------------------------------------------------------------------
FEE TABLE - 6
<PAGE>
CONDENSED FINANCIAL INFORMATION
(Selected data for accumulation units outstanding throughout each period)
================================================================================
The condensed financial information presented below for each of the periods in
the two-year period ended December 31, 1997 (as applicable), is derived from
the financial statements of the Separate Account, which have been audited by
KPMG Peat Marwick LLP, independent auditors. It shows condensed financial
information for contracts with total separate account charges of 1.40%
annually. The financial statements and the independent auditors' report thereon
for the year ended December 31, 1997 are included in the Statement of
Additional Infrmation.
<TABLE>
<CAPTION>
1997 1996
-------- -------
<S> <C> <C>
AETNA ASCENT VP
Value at beginning of period $12.674 $11.003
Value at end of period $14.983 $12.674
Increase (decrease) in value of accumulation unit(1) 18.22% 15.19%(2)
Number of accumulation units outstanding at end of period 72,383 91,927
AETNA BALANCED VP, INC.
Value at beginning of period $11.781 $10.582
Value at end of period $14.228 $11.781
Increase (decrease) in value of accumulation unit(1) 20.77% 11.33%(3)
Number of accumulation units outstanding at end of period 314,447 59,639
AETNA BOND VP
Value at beginning of period $10.489 $10.260
Value at end of period $11.201 $10.489
Increase (decrease) in value of accumulation unit(1) 6.78% 2.23%(4)
Number of accumulation units outstanding at end of period 269,675 95,644
AETNA CROSSROADS VP
Value at beginning of period $12.123 $10.932
Value at end of period $14.054 $12.123
Increase (decrease) in value of accumulation unit(1) 15.93% 10.89%(2)
Number of accumulation units outstanding at end of period 29,532 6,330
AETNA GROWTH VP
Value at beginning of period $10.667
Value at end of period $13.158
Increase (decrease) in value of accumulation units(1) 23.35%(5)
Number of accumulation units outstanding at end of period 68,840
AETNA GROWTH AND INCOME VP
Value at beginning of period $12.769 $10.101
Value at end of period $16.354 $12.769
Increase (decrease) in value of accumulation unit(1) 28.07% 26.41%(4)
Number of accumulation units outstanding at end of period 946,796 299,882
AETNA INDEX PLUS LARGE CAP VP
Value at beginning of period $10.919 $10.000(6)
Value at end of period $14.414 $10.919
Increase (decrease) in value of accumulation units(1) 32.01% 9.19%(6)
Number of accumulation units outstanding at end of period 271,628 2,960
AETNA LEGACY VP
Value at beginning of period $11.613 $10.601
Value at end of period $13.112 $11.613
Increase (decrease) in value of accumulation unit(1) 12.90% 9.55%(7)
Number of accumulation units outstanding at end of period 60,533 8,642
AETNA MONEY MARKET VP
Value at beginning of period $10.481 $10.151
Value at end of period $10.900 $10.481
Increase (decrease) in value of accumulation unit(1) 4.00% 3.25%(3)
Number of accumulation units outstanding at end of period 1,409,840 799,456
</TABLE>
- --------------------------------------------------------------------------------
AUV HISTORY - 1
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
================================================================================
<TABLE>
<CAPTION>
1997 1996
----------- ---------
<S> <C> <C>
AETNA SMALL COMPANY VP
Value at beginning of period $11.313
Value at end of period $13.639
Increase (decrease) in value of accumulation units(1) 20.55%(5)
Number of accumulation units outstanding at end of period 188,818
AETNA VALUE OPPORTUNITY VP
Value at beginning of period $10.856
Value at end of period $13.246
Increase (decrease) in value of accumulation units(1) 22.01%(5)
Number of accumulation units outstanding at end of period 67,303
CALVERT SOCIAL BALANCED PORTFOLIO
Value at beginning of period $9.824
Value at end of period $9.976
Increase (decrease) in value of accumulation units(1) 1.55%(8)
Number of accumulation units outstanding at end of period 3,258
FIDELITY VIP EQUITY-INCOME PORTFOLIO
Value at beginning of period $11.855 $10.301
Value at end of period $14.974 $11.855
Increase (decrease) in value of accumulation unit(1) 26.32% 15.09%(4)
Number of accumulation units outstanding at end of period 2,292,971 1,000,050
FIDELITY VIP GROWTH PORTFOLIO
Value at beginning of period $10.940 $9.005
Value at end of period $13.320 $10.940
Increase (decrease) in value of accumulation unit(1) 21.75% 20.82%(4)
Number of accumulation units outstanding at end of period 1,399,424 870,922
FIDELITY VIP HIGH INCOME PORTFOLIO
Value at beginning of period $11.410 $10.493
Value at end of period $13.238 $11.410
Increase (decrease) in value of accumulation unit(1) 16.02% 8.74%(9)
Number of accumulation units outstanding at end of period 862,284 239,917
FIDELITY VIP OVERSEAS PORTFOLIO
Value at beginning of period $11.447 $10.304
Value at end of period $12.590 $11.447
Increase (decrease) in value of accumulation unit(1) 9.99% 11.09%(9)
Number of accumulation units outstanding at end of period 237,376 115,487
FIDELITY VIP II ASSET MANAGER PORTFOLIO
Value at beginning of period $11.674 $10.539
Value at end of period $13.888 $11.674
Increase (decrease) in value of accumulation unit(1) 18.96% 10.77%(10)
Number of accumulation units outstanding at end of period 272,789 104,229
FIDELITY VIP II CONTRAFUND PORTFOLIO
Value at beginning of period $12.093 $10.273
Value at end of period $14.802 $12.093
Increase (decrease) in value of accumulation unit(1) 22.40% 17.72%(9)
Number of accumulation units outstanding at end of period 1,682,029 540,936
FIDELITY VIP II INDEX 500 PORTFOLIO
Value at beginning of period $12.722 $10.828
Value at end of period $16.646 $12.722
Increase (decrease) in value of accumulation unit(1) 30.84% 17.49%(9)
Number of accumulation units outstanding at end of period 1,375,721 384,282
</TABLE>
- --------------------------------------------------------------------------------
AUV HISTORY - 2
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
================================================================================
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
JANUS ASPEN AGGRESSIVE GROWTH
Value at beginning of period $11.376 $10.988
Value at end of period $12.637 $11.376
Increase (decrease) in value of accumulation unit(1) 11.09% 3.53%(9)
Number of accumulation units outstanding at end of period 518,686 242,113
JANUS ASPEN BALANCED PORTFOLIO
Value at beginning of period $12.038 $10.836
Value at end of period $14.492 $12.038
Increase (decrease) in value of accumulation unit(1) 20.39% 11.09%(9)
Number of accumulation units outstanding at end of period 533,138 165,079
JANUS ASPEN FLEXIBLE INCOME PORTFOLIO
Value at beginning of period $11.136 $10.173
Value at end of period $12.272 $11.136
Increase (decrease) in value of accumulation unit(1) 10.20% 9.47%(10)
Number of accumulation units outstanding at end of period 163,048 35,326
JANUS ASPEN GROWTH PORTFOLIO
Value at beginning of period $12.171 $11.002
Value at end of period $14.731 $12.171
Increase (decrease) in value of accumulation unit(1) 21.03% 10.63%(9)
Number of accumulation units outstanding at end of period 684,113 255,831
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO
Value at beginning of period $13.393 $10.536
Value at end of period $16.131 $13.393
Increase (decrease) in value of accumulation unit(1) 20.44% 27.12%(4)
Number of accumulation units outstanding at end of period 2,772,831 1,030,570
MFS TOTAL RETURN SERIES
Value at beginning of period $10.894 $10.000(11)
Value at end of period $13.030 $10.894
Increase (decrease) in value of accumulation units(1) 19.60% 8.94%(11)
Number of accumulation units outstanding at end of period 523,291 108,482
MFS WORLD GOVERNMENT SERIES
Value at beginning of period $10.471 $10.000(11)
Value at end of period $10.207 $10.471
Increase (decrease) in value of accumulation units(1) (2.51)% 4.71%(11)
Number of accumulation units outstanding at end of period 52,302 20,479
OPPENHEIMER AGGRESSIVE GROWTH FUND
Value at beginning of period $10.516
Value at end of period $12.204
Increase (decrease) in value of accumulation units(1) 16.05%(5)
Number of accumulation units outstanding at end of period 65,695
OPPENHEIMER GLOBAL SECURITIES FUND
Value at beginning of period $10.488
Value at end of period $11.539
Increase (decrease) in value of accumulation units(1) 10.02%(5)
Number of accumulation units outstanding at end of period 87,559
OPPENHEIMER GROWTH AND INCOME FUND
Value at beginning of period $10.497
Value at end of period $12.785
Increase (decrease) in value of accumulation units(1) 21.79%(5)
Number of accumulation units outstanding at end of period 354,269
OPPENHEIMER STRATEGIC BOND FUND
Value at beginning of period $10.187
Value at end of period $10.764
Increase (decrease) in value of accumulation units(1) 5.67%(5)
Number of accumulation units outstanding at end of period 128,720
</TABLE>
- --------------------------------------------------------------------------------
AUV HISTORY - 3
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
================================================================================
<TABLE>
<CAPTION>
1997 1996
--------- -------
<S> <C> <C>
PORTFOLIO PARTNERS MFS EMERGING EQUITIES
PORTFOLIO
Value at beginning of period $10.689
Value at end of period $10.554
Increase (decrease) in value of accumulation units(1) (1.26)%(12)
Number of accumulation units outstanding at end of period 2,394,861
PORTFOLIO PARTNERS MFS RESEARCH GROWTH
PORTFOLIO
Value at beginning of period $8.960
Value at end of period $8.786
Increase (decrease) in value of accumulation units(1) (1.94)%(12)
Number of accumulation units outstanding at end of period 1,615,395
PORTFOLIO PARTNERS MFS VALUE EQUITY
PORTFOLIO
Value at beginning of period $10.009
Value at end of period $10.152
Increase (decrease) in value of accumulation units(1) 1.43%(12)
Number of accumulation units outstanding at end of period 216,273
PORTFOLIO PARTNERS SCUDDER INTERNATIONAL
GROWTH PORTFOLIO
Value at beginning of period $9.791
Value at end of period $9.912
Increase (decrease) in value of accumulation units(1) 1.24%(12)
Number of accumulation units outstanding at end of period 2,569
PORTFOLIO PARTNERS T. ROWE PRICE GROWTH
EQUITY PORTFOLIO
Value at beginning of period $13.560
Value at end of period $13.834
Increase (decrease) in value of accumulation units(1) 2.03%(12)
Number of accumulation units outstanding at end of period 1,572,718
</TABLE>
- ------------------
(1) The above figures are calculated by subtracting the beginning Accumulation
Unit value from the ending Accumulation Unit value during a calendar year,
and dividing the result by the beginning Accumulation Unit value. These
figures do not reflect the deferred sales charge or the fixed dollar annual
maintenance fee, if any. Inclusion of these charges would reduce the
investment results shown.
(2) Reflects less than a full year of performance activity. Funds were first
received in this option during July 1996.
(3) Reflects less than a full year of performance activity. Funds were first
received in this option during February 1996.
(4) Reflects less than a full year of performance activity. Funds were first
received in this option during January 1996.
(5) Reflects less than a full year of performance activity. Funds were first
received in this option during May 1997.
(6) Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established at $10.000 during September 1996
when the portfolio became available under the option.
(7) Reflects less than a full year of performance activity. Funds were first
received in this option during May 1996.
(8) Reflects less than a full year of performance activity. Funds were first
received in this option during December 1997.
(9) Reflects less than a full year of performance activity. Funds were first
received in this option during March 1996.
(10) Reflects less than a full year of performance activity. Funds were first
received in this option during April 1996.
(11) Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established at $10.000 during May 1996 when the
fund became available under the option.
(12) Reflects less than a full year of performance activity. Funds were first
received in this option during November 1997.
- --------------------------------------------------------------------------------
AUV HISTORY - 4
<PAGE>
THE COMPANY
================================================================================
Aetna Insurance Company of America (the "Company"), the depositor of
Variable Annuity Account I, is the issuer of the Contract, and as such, it is
responsible for providing the insurance and annuity benefits under the
Contract. 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., 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 principal executive offices are located at 151 Farmington Avenue,
Hartford, Connecticut 06156.
VARIABLE ANNUITY ACCOUNT I
================================================================================
The Company established Variable Annuity Account I (the "Separate
Account") in 1994 as a segregated asset account for the purpose of funding its
variable annuity contracts. The Separate Account is registered as a unit
investment trust under the Investment Company Act of 1940 (the "1940 Act"), and
meets the definition of "separate account" under federal securities laws. The
Separate Account is divided into "subaccounts" which do not invest directly in
stocks, bonds or other investments. Instead, each Subaccount buys and sells
shares of a corresponding Fund.
Although the Company holds title to the assets of the Separate Account,
such assets are not chargeable with liabilities of any other business conducted
by the Company. Income, gains or losses of the Separate Account are credited to
or charged against the assets of the Separate Account without regard to other
income, gains or losses of the Company. All obligations arising under the
Contracts are obligations of the Company.
INVESTMENT OPTIONS
================================================================================
THE FUNDS
Purchase Payments may be allocated to one or more of the Subaccounts as
designated on the Application. In turn, the Subaccounts invest in the
corresponding Funds at net asset value. The Company reserves the right to limit
the number of investment options selected during the Accumulation Period. At
this time there is no limit on the number of investment options selected during
the Accumulation Period, but the number of investment options that may be
selected at any one time by a Certificate Holder is limited to 18. Each
Subaccount and each Guaranteed Term of the same duration, or an investment in
the Fixed Account in certain Contracts where the Guaranteed Account is not
available, count as an option.
The availability of Funds may be subject to regulatory authorization. In
addition, the Company may add or withdraw Funds, as permitted by applicable
law. Not all Funds may be available in all jurisdictions or under all
Contracts.
Subject to state regulatory approval, if the shares of any Fund should no
longer be available for investment by the Separate Account or if in the
judgment of the Company, further investment in such shares should become
inappropriate in view of the purpose of the Contract, we may cease to make such
Fund shares available for investment under the Contract prospectively. The
Company may, alternatively, substitute shares of another Fund for shares
already acquired. The Company reserves the right to substitute shares of
another Fund for shares already acquired without a proxy vote. Any elimination,
substitution or addition of Funds will be done in accordance with applicable
state and federal securities laws.
The Funds are described in Appendix C of this prospectus. More detailed
information may be found in the current prospectus for each Fund offered. The
prospectus for the Fund should be read in conjunction with this Prospectus. A
free Fund prospectus is available upon request from the local Company office or
by writing or calling the number listed in the "Inquiries" section of the
Prospectus Summary.
Risks Associated with Investment in the Funds. Some of the Funds may use
instruments known as
- --------------------------------------------------------------------------------
1
<PAGE>
derivatives as part of their investment strategies. The use of certain
derivatives may involve high risk of volatility to a Fund, and the use of
leverage in connection with such derivatives can also increase risk of losses.
Some of the Funds may also invest in foreign or international securities which
involve greater risks than U.S. investments.
More comprehensive information, including a discussion of potential
risks, is found in the current prospectus for each Fund. You should read the
Fund prospectuses and consider carefully, and on a continuing basis, which Fund
or combination of Funds is best suited to your long-term investment objectives.
Additional prospectuses and Statements of Additional Information for this
Prospectus and for each of the Funds can be obtained from the Company's Home
Office at the address and telephone number listed under the "Inquiries" section
of the Prospectus Summary.
Conflicts of Interest (Mixed and Shared Funding). Shares of the Funds are
sold to each of the Subaccounts for funding the variable annuity contracts
issued by the Company. Shares of the Funds may also be sold to other insurance
companies for the same purpose. This is referred to as "shared funding." Shares
of the Funds may also be used for funding variable life insurance contracts
issued by the Company or by third parties. This is referred to as "mixed
funding."
Because the Funds available under the Contract are sold to fund variable
annuity contracts and variable life insurance policies issued by us or by other
companies, certain conflicts of interest could arise. If a conflict of interest
were to occur, one of the separate accounts might withdraw its investment in a
Fund, which might force that Fund to sell portfolio securities at
disadvantageous prices, causing its per share value to decrease. Each Fund's
Board of Directors or Trustees has agreed to monitor events in order to
identify any material irreconcilable conflicts which might arise and to
determine what action, if any, should be taken to address such conflict
CREDITED INTEREST OPTION
Purchase Payments may be allocated to the AICA Guaranteed Account (the
"Guaranteed Account"). Through the Guaranteed Account, we guarantee stipulated
rates of interest for stated periods of time. Amounts must remain in the
Guaranteed Account for specified periods to receive the quoted interest rates,
or a market value adjustment (which may be positive or negative) will be
applied. (See Appendix A.)
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 Appendix B.)
PURCHASE
================================================================================
CONTRACT AVAILABILITY
The Contracts are offered as (1) nonqualified deferred annuity contracts
(we reserve the right to limit ownership of nonqualified Contracts to natural
persons); (2) Individual Retirement Annuities, including Roth IRAs, other than
"SIMPLE IRAs" as defined in Section 408(p) of the Internal Revenue Code; or (3)
Qualified Contracts used in conjunction with certain employer sponsored
retirement plans. Individual Retirement Annuities are currently available as
rollovers, and may permit ongoing contributions, subject to state regulatory
approval. Additionally, availability of the Qualified Contracts described under
item (3) is subject to approval by the Company and state regulatory agencies. 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.
Eligible persons seeking to invest and accumulate money for retirement
can purchase individual interests in group Contracts, or, where required by
state law, they may purchase individual Contracts. In most states, group
Contracts are offered to certain broker-dealers which have agreed to act as
distributors of the Contracts, and individual accounts are established by the
Company for
- --------------------------------------------------------------------------------
2
<PAGE>
each Certificate Holder. In some states, an individual Contract will be owned
by the Certificate Holder. In both cases, a Certificate Holder's interest in
the Contract is known as his or her "Account."
The maximum issue age for the Annuitant is 90 (age 85 for those Contracts
issued in the state of Pennsylvania).
Joint Certificate Holders. Nonqualified Contracts may be purchased by
spouses as joint Certificate Holders. In Pennsylvania, the joint Certificate
Holders do not need to be spouses. References to "Certificate Holders" in this
Prospectus mean both of the Certificate Holders on joint Accounts. Tax law
prohibits the purchase of Qualified Contracts by joint Certificate Holders.
PURCHASING INTERESTS IN THE CONTRACT
Group Contracts. Groups will generally consist of those eligible
individuals who have established an account with a broker-dealer or bank which
has agreed to act as a Distributor for the Contracts. A group Contract is
issued to the group Contract Holder. Certificate Holders may purchase interests
in a group Contract by submitting an Application. Once the Application is
accepted a Certificate will be issued.
Individual Contracts. Certain states will not allow a group Contract due
to provisions in their insurance laws. In those states, an eligible individual
will submit an Application and will be issued a Contract rather than a
Certificate.
Regardless of whether you have purchased an interest in a group or an
individual Contract, the Company must accept or reject the Application within
two business days of receipt. If the Application is incomplete, the Company may
hold any forms and accompanying Purchase Payments for five days. Purchase
Payments may be held for longer periods only with the consent of the
Certificate Holder, pending acceptance of the Application. If the Application
is rejected, the Application and any Purchase Payments will be returned to the
Certificate Holder. 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.
PURCHASE PAYMENTS
You may make Purchase Payments under the Contract in one lump sum,
through periodic payments or as a transfer from a pre-existing plan.
The minimum initial Purchase Payment amount is $5,000 for Nonqualified
Contracts and $1,500 for Qualified Contracts. In some states, a Contract issued
as an Individual Retirement Annuity can accept only a lump sum, rollover
Purchase Payment. Additional Purchase Payments made to an existing Contract
must be at least $1,000, or at least $50 per month by electronic funds
transfer, and are subject to the terms and conditions published by us at the
time of the subsequent payment. A Purchase Payment of more than $1,000,000 will
be allowed only with the Company's consent. We also reserve the right to reject
any Purchase Payment to a prospective or existing Account without advance
notice (unless not allowed by state law).
For Qualified Contracts the Code imposes a maximum limit on annual
Purchase Payments which may be excluded from a participant's gross income. (See
"Tax Status.")
Allocation of Purchase Payments. Purchase Payments will initially be
allocated to the Subaccounts or the Guaranteed Account or the Fixed Account as
specified on the Application. Changes in such allocation may be made in writing
or by telephone transfer. Allocations must be in whole percentages, and there
may be limitations on the number of investment options that can be selected.
(See "Investment Options.")
CONTRACT RIGHTS
Under individual Contracts, Certificate Holders have all Contract rights.
Under group Contracts, the group Contract Holder has title to the
Contract and generally only the right to accept or reject any modifications to
the Contract. You have all other rights to your Account under the Contract.
However, under a Nonqualified Contract, if you and the Annuitant are not the
same, and the Annuitant dies first, your rights are automatically transferred
to the Beneficiary. (See "Death Benefit.")
Joint Certificate Holders have equal rights under the Contract and with
respect to their Account. All rights under the Contract must be exercised by
both joint Certificate Holders with the exception of transfers among investment
options, which can be exercised by one joint Certificate Holder after the
Account has been
- --------------------------------------------------------------------------------
3
<PAGE>
established. See "Death Benefit" regarding the rights of the surviving joint
Certificate Holder upon the death of a joint Certificate Holder prior to the
Annuity Date.
DESIGNATIONS OF BENEFICIARY AND ANNUITANT
You generally designate the Beneficiary under the Contract on the
Application. You may also elect to specify the form of payment to be made to
the Beneficiary. For Qualified Contracts issued in conjunction with a Code
Section 401(a) qualified pension or profit sharing plan or a Code Section 457
deferred compensation plan, the employer or trustee must be both the
Certificate Holder and the Beneficiary under the Contract, and the participant
on whose behalf the Account was established must be the Annuitant. Under such
plans the participant is generally allowed to designate a beneficiary under the
plan, and the Certificate Holder may direct that we pay any death proceeds to
the plan beneficiary. "Beneficiary" as used in this Prospectus refers to the
person who is ultimately entitled to receive such proceeds.
For Qualified Contracts issued in conjunction with a Code Section 403(b)
tax deferred annuity program subject to the Employee Retirement Income Security
Act (ERISA), the spouse of a married participant must be the Beneficiary of at
least 50% of the Account Value. If the married participant is age 35 or older,
the participant may name an alternate Beneficiary provided the participant
furnishes a waiver and spousal consent which meets the requirements of ERISA
Section 205. The participant on whose behalf the Account was established must
be the Annuitant.
For Qualified Contracts issued as an Individual Retirement Annuity, the
Certificate Holder must be the Annuitant. For Nonqualified Contracts, the
Certificate Holder and the Annuitant may, but need not, be the same person.
(See "Purchase-Contract Availability.")
RIGHT TO CANCEL
You may cancel the Contract or Certificate without penalty by returning
it to the Company with a written notice of your intent to cancel. In most
states, you have ten days to exercise this "free look" right; some states allow
you longer. Unless state law requires otherwise, the amount you will receive
upon cancellation will reflect the investment performance of the Subaccounts
into which your Purchase Payments were deposited. In some cases this may be
more or less than the amount of your Purchase Payments; therefore, you bear the
entire investment risk for amounts allocated among the Subaccounts during the
free look period. Under Contracts issued as Individual Retirement Annuities,
you will receive a refund of your Purchase Payment. Account Values will be
determined as of the Valuation Date on which we receive your request for
cancellation at our Home Office. 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.
CHARGES AND DEDUCTIONS
================================================================================
DAILY DEDUCTIONS FROM THE SEPARATE ACCOUNT
Mortality and Expense Risk Charge. The Company makes a daily deduction
from each of the Subaccounts for the mortality and expense risk charge. The
charge is equal, on an annual basis, to 1.25% of the daily net assets of the
Subaccounts and compensates the Company for the assumption of the mortality and
expense risks under the Contract. 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. The mortality risks are those assumed for
our promise to make lifetime payments according to annuity rates specified in
the Contract. The expense risk is the risk that the actual expenses for costs
incurred under the Contract will exceed the maximum costs that can be charged
under the Contract.
In certain circumstances, the risk of adverse expense experience
associated with this Contract may be reduced. In such event, the mortality and
expense risk charge applicable to that Contract may likewise be reduced.
Whether such a reduction is available will be determined by the Company based
upon consideration of one of the following factors:
(1) the size and composition of the prospective group such as a group made up
of active employees of the Company or its affiliates;
(2) the type and frequency of administrative and sales services provided; and
- --------------------------------------------------------------------------------
4
<PAGE>
(3) the level of maintenance fee and deferred sales charges.
Any reduction of the mortality and expense risk charge will not be
unfairly discriminatory against any person. We will make any reduction in the
mortality and expense risk charge according to our own rules in effect at the
time the Contract is issued. We reserve the right to change these rules from
time to time.
If the amount deducted for mortality and expense risks is not sufficient
to cover the mortality costs and expense shortfalls, the loss is borne by the
Company. If the deduction is more than sufficient, the excess may be used to
recover distribution expenses relating to the Contracts and as a source of
profit to the Company. The Company expects to make a profit from the mortality
and expense risk charge.
Administrative Charge. During the Accumulation Period, the Company makes
a daily deduction from each of the Subaccounts for an administrative charge.
The charge is equal, on an annual basis, to 0.15% of the daily net assets of
the Subaccounts and compensates the Company for administrative expenses that
exceed revenues from the maintenance fee described below. The charge is set at
a level which does not exceed the average expected cost of the administrative
services to be provided while the Contract is in force. The Company does not
expect to make a profit from this charge.
During the Annuity Period, the Company reserves the right to make a
deduction for the administrative charge of an amount equal, on an annual basis,
to a maximum of 0.25% of the daily net assets of the Subaccounts. There is
currently no administrative charge during the Annuity Period. Once an Annuity
Option is elected, the charge will be established and will be effective during
the entire Annuity Period.
MAINTENANCE FEE
During the Accumulation Period, the Company will deduct an annual
maintenance fee from the Account Value. The maintenance fee is to reimburse the
Company for some of its administrative expenses relating to the establishment
and maintenance of the Accounts.
The maximum maintenance fee deducted under the Contract is $30. The
maintenance fee will be deducted annually on the anniversary of the Contract
effective date. It is deducted on a pro rata basis from each investment option
in which you have an interest. If your entire Account Value is withdrawn, the
full maintenance fee, if applicable, will be deducted at the time of
withdrawal. The maintenance fee will not be deducted (either annually or upon
withdrawal) if your Account Value is $50,000 or more on the day the maintenance
fee is due.
DEFERRED SALES CHARGE
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 other than from a Roth IRA, 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.
- --------------------------------------------------------------------------------
5
<PAGE>
CONTRACTS OTHER THAN ROTH IRAS
<TABLE>
<CAPTION>
- -------------------------------------------------
Years since receipt of Deferred Sales
Purchase Payment Charge Deduction
- ----------------------------- -----------------
<S> <C>
Less than 2 7%
2 or more but less than 4 6%
4 or more but less than 5 5%
5 or more but less than 6 4%
6 or more but less than 7 3%
7 or more 0%
- -------------------------------------------------
</TABLE>
ROTH IRA CONTRACTS
<TABLE>
<CAPTION>
- -------------------------------------------------
Completed Contract Deferred Sales
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>
A deferred sales charge will not be deducted from any portion of a
Purchase Payment withdrawn if the withdrawal is:
[bullet] applied to provide Annuity benefits;
[bullet] paid to a Beneficiary due to the Annuitant's death before Annuity
payments start, up to a maximum of the Purchase Payment(s) in the
Account on the Annuitant's date of death;
[bullet] made due to the election of a Systematic Distribution Option (see
"Systematic Distribution Options");
[bullet] if approved by your state, under a Qualified Contract when the amount
withdrawn is equal to the minimum distribution required by the Code
for this Contract calculated using a method permitted under the Code
and agreed to by the Company;
[bullet] paid upon a full withdrawal where the Account Value is $2,500 or less
and no amount has been withdrawn during the prior 12 months; or
[bullet] paid if we close out your Account when the value is less than $2,500
(or other amount required by state law);
[bullet] if the withdrawal is applied as a rollover to certain Roth Individual
Retirement Annuities issued by the Company or an affiliate.
After the first Account Year, you may withdraw all or a portion of your
Purchase Payments without a deferred sales charge, provided that (1) such
withdrawal occurs within three years of the Annuitant's admission to a licensed
nursing care facility (including non-licensed facilities in New Hampshire) and
(2) the Annuitant has spent at least 45 consecutive days in such facility. This
waiver of deferred sales charge does not apply if the Annuitant is in a nursing
care facility at the time the Account is established. It will also not apply if
otherwise prohibited by state law.
The Company does not anticipate that the deferred sales charge will cover
all sales and administrative expenses which it incurs in connection with the
Contract. The difference will be covered by the general assets of the Company
which are attributable, in part, to mortality and expense risk charges under
the Contract described above.
Free Withdrawals. Subject to the restrictions described below, you may
withdraw up to the greater of 10% of your current Account Value or the minimum
distribution amount required by law during each calendar year without
imposition of a deferred sales charge. The free withdrawal amount will be based
on the Account Value calculated on the Valuation Date next following our
receipt of your request for withdrawal and will be adjusted for amounts
requested for distribution under a Systematic Distribution Option, during the
calendar year. If your withdrawal exceeds the applicable free withdrawal
allowance, we will deduct a deferred sales charge on the excess amount. (See
Appendix A for a discussion of withdrawals from the Guaranteed Account.)
FUND EXPENSES
Each Fund incurs certain expenses which are paid out of its net assets.
These expenses include, among other things, the investment advisory or
"management" fee. The expenses of the Funds are set forth in the Fee Table in
this Prospectus and described more fully in the accompanying Fund prospectuses.
PREMIUM AND OTHER TAXES
Several states and municipalities currently impose a premium tax on
Annuities. These taxes currently range from 0% to 4%. Ordinarily, any
applicable state premium tax will be deducted from the Account Value when it is
applied to an Annuity Option. However, we reserve the right to deduct state
premium tax from the Purchase Payment(s) or from the Account Values at any
- --------------------------------------------------------------------------------
6
<PAGE>
time, but no earlier than when we have a tax liability under state law.
Any municipal premium tax assessed at a rate in excess of 1% will be
deducted from the Purchase Payment(s) or from the amount applied to an Annuity
Option based on our determination of when such tax is due. We will absorb any
municipal premium tax which is assessed at 1% or less. We reserve the right,
however, to reflect this added expense in our Annuity purchase rates for
residents of such municipalities.
CONTRACT VALUATION
================================================================================
ACCOUNT VALUE
Until the Annuity Date, the Account Value is the total dollar value of
amounts held in the Account as of any Valuation Date. The Account Value at any
given time is based on the value of the units held in each Subaccount, plus the
value of amounts held in the Guaranteed Account or Fixed Account.
ACCUMULATION UNITS
The value of your interests in a Subaccount is expressed as the number of
"Accumulation Units" that you hold multiplied by an "Accumulation Unit Value"
(or "AUV") for each unit. The AUV on any Valuation Date is determined by
multiplying the value on the immediately preceding Valuation Date by the net
investment factor of that Subaccount for the period between the immediately
preceding Valuation Date and the current Valuation Date. (See "Net Investment
Factor" below.) The Accumulation Unit Value will be affected by the investment
performance, expenses and charges of the applicable Fund and is reduced each
day by a percentage that accounts for the daily assessment of mortality and
expense risk charges and the administrative charge.
Initial Purchase Payments will be credited to your Account at the AUV
next computed following our acceptance of the Application as described under
"Purchasing Interests in the Contract." Each subsequent Purchase Payment (or
amount transferred) received by the Company by the close of business of the New
York Stock Exchange will be credited to your Account at the AUV next computed
following our receipt of your payment or transfer request. The value of an
Accumulation Unit may increase or decrease.
NET INVESTMENT FACTOR
The net investment factor is used to measure the investment performance
of a Subaccount from one Valuation Date to the next. The net investment factor
for a Subaccount for any valuation period is equal to the sum of 1.0000 plus
the net investment rate. The net investment rate equals:
(a) the net assets of the Fund held by the Subaccount on the current
Valuation Date, minus
(b) the net assets of the Fund held by the Subaccount on the preceding
Valuation Date, plus or minus
(c) taxes or provisions for taxes, if any, attributable to the operation
of the Subaccount;
(d) divided by the total value of the Subaccount's Accumulation and
Annuity Units on the preceding Valuation Date;
(e) minus a daily charge at the annual effective rate of a maximum of
1.25% for mortality and expense risks (1.10% for Roth IRA
Contracts), and an administrative charge of 0.15% during the
Accumulation Period and up to 0.25% during the Annuity Period
(currently 0% during the Annuity Period).
The net investment rate may be either positive or negative.
TRANSFERS
================================================================================
At any time prior to the Annuity Date, you can transfer amounts held
under your Account among the investment options available subject to certain
limitations. (See "Investment Options.") Transfers from the Guaranteed Account
may be subject to certain restrictions and to a market value adjustment. (See
Appendix A.) Transfers may be made from the Fixed Account to any of the
investment options available
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subject to certain restrictions. Amounts may not be transferred into the Fixed
Account from any of the investment options. If approved by your state, during
the Annuity Period, if you have elected a variable Annuity, you can make
transfers only among the Subaccounts available during the Annuity Period. (See
"Annuity Options.") A request for transfer can be made either in writing or by
telephone. (See "Telephone Transfers" below.) All transfers must be in
accordance with the terms of the Contract. Any transfer will be based on the
Accumulation Unit Value next determined after the Company receives a valid
transfer request at its Home Office.
During the Accumulation Period, twelve free transfers are allowed per
calendar year. Thereafter, the Company reserves the right to charge up to $10
for each additional transfer. This charge will be deducted from the gross
amount of the transfer. The Company currently does not impose this charge.
Currently, during the Annuity Period, four transfers are allowed each calendar
year.
TELEPHONE TRANSFERS
You automatically have the right to make transfers among Funds by
telephone. We have enacted procedures to prevent abuses of Account transactions
by telephone, including requiring the use of a personal identification number
(PIN) to execute transactions. You are responsible for safeguarding your PIN,
and for keeping Account information confidential. Although the Company's
failure to follow reasonable procedures may result in the Company's liability
for any losses due to unauthorized or fraudulent telephone transfers, the
Company will not be liable for following instructions communicated by telephone
which it reasonably believes to be genuine. Any losses incurred pursuant to
actions taken by the Company in reliance on telephone instructions reasonably
believed to be genuine shall be borne by you. To ensure authenticity, we record
calls on the 800 line.
DOLLAR COST AVERAGING PROGRAM
You may establish automated transfers of Account Values on a monthly or
quarterly basis through the Company's Dollar Cost Averaging Program. Dollar
cost averaging is a system for investing a fixed amount of money at regular
intervals over a period of time. The Dollar Cost Averaging Program permits the
transfer of amounts from any of the variable funding options and an available
Guaranteed Term or Fixed Account subject to the Company's terms and conditions
to any of the Subaccounts. A market value adjustment will not be applied to
dollar cost averaging transfers from any such Guaranteed Term during
participation in the Dollar Cost Averaging Program. If dollar cost averaging
from a Guaranteed Term is discontinued, the Company will automatically transfer
the balance remaining in the Guaranteed Term from which dollar cost averaging
is withdrawn to a Guaranteed Term of the same duration unless the Certificate
Holder initiates a transfer to another investment option. In either case, a
market value adjustment will apply. 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 Money Market VP Subaccount. There is
no additional charge for the Dollar Cost Averaging Program. (See Appendix A for
a discussion of the restrictions and features attributable to the Guaranteed
Account.)
Dollar cost averaging does not ensure a profit nor guarantee against loss
in a declining market. You should consider your financial ability to continue
purchases through periods of low price levels. For additional information,
please refer to the "Inquiries" section of the Prospectus Summary, which
describes how you can obtain further information.
The Dollar Cost Averaging Program is not available to individuals who
have elected the Account Rebalancing Program.
ACCOUNT REBALANCING PROGRAM
The Account Rebalancing Program allows you to have portions of your
Account Value automatically reallocated annually to a specified percentage or
at other more frequent intervals as allowed by the Company under the program.
Only Account Values accumulating in the Subaccounts can be rebalanced. You may
participate in this program by completing the Account Rebalancing section of
the Application, or by sending a written request to the Company at its Home
Office. The Account Rebalancing Program does not ensure a profit nor guarantee
against loss in a declining market.
The Account Rebalancing Program is not available to Certificate Holders
who have elected the Dollar Cost Averaging Program.
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WITHDRAWALS
================================================================================
All or a portion of your Account Value may be withdrawn at any time
during the Accumulation Period. Withdrawal restrictions applicable under
Section 403(b) Contracts are described below. To request a withdrawal, you must
properly complete a disbursement form and send it to our Home Office. Payments
for withdrawal requests will be made in accordance with Securities and Exchange
Commission requirements, but normally not later than seven calendar days
following our receipt of a disbursement form. Withdrawals may be subject to a
deferred sales charge (see "Charges and Deductions") and to taxes and to tax
penalties (see "Tax Status"). Roth IRAs provide for a tax-free withdrawal of
all assets in the Account, 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.
Withdrawals may be requested in one of the following forms:
[bullet] Full Withdrawal of an Account: The amount paid for a full withdrawal
will be the Adjusted Account Value minus any applicable deferred sales
charge and maintenance fee due.
[bullet] Partial Withdrawals: (Percentage): The amount paid will be the
percentage of the Adjusted Account Value requested minus any
applicable deferred sales charge.
[bullet] Partial Withdrawals: (Specified Dollar Amount): The amount paid will
be the dollar amount requested. However, the amount withdrawn from
your Account will equal the amount you request plus any applicable
deferred sales charge and plus or minus any applicable market value
adjustment. For any partial withdrawal, the value of the Accumulation
Units canceled will be withdrawn proportionately from the Guaranteed
Account or Fixed Account or each Subaccount in which your Account is
invested, unless you request otherwise in writing. All amounts paid
will be based on your Account Value as of the next Valuation Date
after we receive a request for withdrawal at our Home Office, or on
such later date as the disbursement form may specify.
[bullet] The tax treatment of withdrawals from each Nonqualified Contract may
be affected if you own other annuity contracts issued by us (or our
affiliates) that were purchased after October 21, 1988. (See "Tax
Status.")
[bullet] Withdrawal Restrictions from 403(b) Plans. Under Section 403(b)
Contracts, the withdrawal of salary reduction contributions and
earnings on such contributions is generally prohibited prior to the
participant's death, disability, attainment of age 59-1/2, separation
from service or financial hardship. (See "Tax Status.")
[bullet] Reinstatement Privilege Following Withdrawal. You may elect to
reinstate all or a portion of the proceeds received from the full
withdrawal of your Account within 30 days after the withdrawal.
Reinvested amounts must be received by the Company within 60 days of
the withdrawal. Accumulation Units will be credited to your Account
for the amount reinstated, as well as for any maintenance fee charged
and any portion of any deferred sales charge imposed at the time of
withdrawal. However, any aggregate negative market value adjustment
made to the Guaranteed Account will not be credited. Reinstated
amounts will be reallocated to applicable investment options in the
same proportion as they were allocated at the time of withdrawal.
The number of Accumulation Units credited will be based upon the
Accumulation Unit Value(s) next computed following receipt at our Home Office
of the reinstatement request along with the amount to be reinstated. Any
maintenance fee which falls due after the withdrawal and before the
reinstatement will be deducted from the amount reinstated. The reinstatement
privilege may be used only once and does not apply to Certificate Holder's
Accounts that we close out as described in Section entitled "Involuntary
Terminations." If you are contemplating reinstatement, you should seek
competent advice regarding the tax consequences associated with this type of a
transaction.
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SYSTEMATIC DISTRIBUTION OPTIONS
================================================================================
The Company offers certain withdrawal options under the Contract that are
not considered Annuity Options ("Systematic Distribution Options"). To exercise
these options, your Account Value must meet the minimum dollar amount and age
criteria applicable to that option.
The Systematic Distribution Options currently available under the
Contract include the following:
[bullet] SWO--Systematic Withdrawal Option. SWO is a series of partial
withdrawals from your Account based on a payment method you select. It
is designed for those who want a periodic income while retaining
investment flexibility for amounts accumulated under a Contract.
[bullet] ECO--Estate Conservation Option. ECO offers the same investment
flexibility as SWO but is designed for those who want to receive only
the minimum distribution that the Code requires each year. ECO is
available only under Qualified Contracts. Under ECO, the Company
calculates the minimum distribution amount required by law, and pays
you that amount once a year. (See "Tax Status.")
ECO is not available under the Roth IRA Contract.
Other Systematic Distribution Options may be added from time to time.
Additional information relating to any of the Systematic Distribution Options
may be obtained from your local representative or from the Company at its Home
Office.
If you select one of the Systematic Distribution Options, you will retain
all of the rights and flexibility permitted under the Contract during the
Accumulation Period. Your Account Value will continue to be subject to the
charges and deductions described in this Prospectus. Taking a withdrawal under
one of these Systematic Distribution Options may have tax consequences. Any
person concerned about tax implications should consult a competent tax advisor
prior to electing an option.
Once you elect a Systematic Distribution Option, you may revoke it any
time by submitting a written request to our Home Office. Once an option is
revoked, it may not be elected again for three years, nor may any other
Systematic Distribution Option be elected unless permitted by the Code. The
Company reserves the right to discontinue the availability of one or all of
these Systematic Distribution Options for new elections at any time, and/or to
change the terms of future elections.
DEATH BENEFIT DURING ACCUMULATION PERIOD
================================================================================
A death benefit will be payable to the Beneficiary(ies) if the
Certificate Holder or the Annuitant dies before Annuity payments have
commenced. Upon the death of a joint Certificate Holder prior to the Annuity
Date, the surviving Certificate Holder, if any, will become the designated
Beneficiary. Any other Beneficiary designation on record with the Company at
the time of death will be treated as a contingent Beneficiary.
DEATH BENEFIT AMOUNT
If approved by your state, upon the death of the Annuitant, the death
benefit proceeds will be the greater of:
(1) The minimum guaranteed death benefit (described below) as of the date of
death, plus any Purchase Payments made, and less any amount(s) surrendered,
applied to an Annuity option or deducted from the Account, since the minimum
guaranteed death benefit was determined, or
(2) The Account Value on the Claim Date.
The minimum guaranteed death benefit is determined as follows: On the
effective date of the Contract ("Effective Date"), the minimum guaranteed death
benefit equals the amount of the initial Purchase Payment. On each Effective
Date anniversary before the Annuitant reaches age 85, the minimum guaranteed
death benefit is the greater of:
(1) The prior minimum guaranteed death benefit, plus any Purchase Payments made,
and less any amount(s) surrendered, applied to an Annuity option or deducted
from the Account, since the minimum guaranteed death benefit was previously
determined, or
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(2) The Account Value on the Effective Date anniversary.
After the Annuitant reaches age 85 the minimum guaranteed death benefit
is equal to the minimum guaranteed death benefit determined on the Effective
Date anniversary immediately preceding the date the Annuitant attained age 85
plus any Purchase Payments made, and less any amounts surrendered, applied to
an Annuity option or deducted from the Account.
On the Claim Date, if the minimum guaranteed death benefit is greater
than the Account Value, the amount by which the minimum guaranteed death
benefit exceeds the Account Value is allocated to Aetna Money Market VP
Subaccount. The Beneficiary may elect a death benefit option as permitted
unless the Certificate Holder has specified the form of payment to the
Beneficiary.
Under Nonqualified Contracts only, if the Certificate Holder is not the
Annuitant and dies, the minimum guaranteed death benefit will not apply. The
amount paid on account of the death benefit of the Certificate Holder will be
equal to the Adjusted Account Value on the Claim Date. Full or partial
withdrawals may be subject to a deferred sales charge. The Beneficiary may
elect a death benefit option available under the Contract unless the
Certificate Holder has specified the form of payment to the Beneficiary.
If a spousal Beneficiary continued the Account at the death of the
Certificate Holder who was also the Annuitant, the spousal Beneficiary will
become the Annuitant and the minimum guaranteed death benefit will also apply
at the death of the spousal Beneficiary. The initial minimum guaranteed death
benefit equals the Account Value as adjusted for any minimum guaranteed death
benefit payable at the death of the original Certificate Holder/Annuitant.
Thereafter, the minimum guaranteed death benefit is determined as above.
If the spousal Beneficiary continued the Account at the death of the
Certificate Holder who was not also the Annuitant, the Annuitant will not
change and the amount of death benefit proceeds payable upon the spousal
Beneficiary's death will be equal to the Adjusted Account Value on the Claim
Date, less any deferred sales charge.
If the death benefit described above has not been approved by your state,
the following death benefit shall apply:
Upon the death of the Annuitant, the guaranteed death benefit proceeds
will be the greatest of:
(1) the total Purchase Payment(s) applied to the Account, minus the sum of all
amounts withdrawn, annuitized or deducted from such Account;
(2) the highest step-up value as of the date of death. The step-up value is
determined on each anniversary of the Effective Date, up to the Annuitant's
75th birthday. Each step-up value is calculated as the Account Value on the
Effective Date anniversary, increased by Purchase Payments applied, and
decreased by partial withdrawals, annuitizations and deductions taken from
the Account since the Effective Date anniversary; or
(3) the Account Value as of the date of death.
The excess, if any, of the guaranteed death benefit value over the
Account Value is determined as of the date of death. Any excess amount will be
deposited and allocated to the Aetna Money Market VP Subaccount. The Account
Value on the claim date plus any excess amount deposited into the Account
becomes the Certificate Holder's Account Value. The death benefit paid will
equal the Account Value when request for payment is made and no deferred sales
charge applies.
Under Nonqualified Contracts only, if the Certificate Holder is not the
Annuitant and dies, the guaranteed death benefit will not apply. The amount of
death benefit proceeds, will be equal to the Adjusted Account Value on the
Claim Date. Full or partial withdrawals may be subject to a deferred sales
charge. If the spousal Beneficiary continued the Account after the death of the
Certificate Holder who was the Annuitant, the amount of the death benefit
proceeds payable upon the spousal Beneficiary's death will be equal to the
Adjusted Account Value on the Claim Date, less any deferred sales charge
applicable to any Purchase Payments made since the death of the Certificate
Holder/Annuitant.
If the spousal Beneficiary continued the Account after the death of the
Certificate Holder who was not the Annuitant, the amount of the death benefit
proceeds payable upon the spousal Beneficiary's death will be equal to the
Adjusted Account Value on the Claim Date. Full or partial withdrawals may be
subject to a deferred sales charge in accordance with the usual rules regarding
the deferred sales charge. (See "Deferred Sales Charge.") If this provision was
not
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approved in your state, the deferred sales charge will apply only to Purchase
Payments made since the death of the Certificate Holder. For amounts held in
the Guaranteed Account, see Appendix A for a discussion of the calculation of
death benefit proceeds.
DEATH BENEFIT PAYMENT OPTIONS
Death benefit proceeds may be paid to the Beneficiary as described below.
If you die and no Beneficiary exists, the death benefit will be paid in a lump
sum to your estate. Prior to any election by the Beneficiary, the Account Value
will remain in the Account and the Account Value will continue to be affected
by the investment performance of the investment option(s) selected. The
Beneficiary has the right to allocate or transfer any amount to any available
investment option (subject to a market value adjustment, as applicable). The
Code requires that distributions begin within a certain time period, as
described below. If no elections are made, no distributions will be made.
Failure to commence distributions within those time periods can result in tax
penalties.
Nonqualified Contracts. Under a Nonqualified Contract, if you die, and
the Beneficiary is your surviving spouse, or if you are a nonnatural person and
the Annuitant dies, and the Beneficiary is the Annuitant's surviving spouse, he
or she automatically becomes the successor Certificate Holder. The successor
Certificate Holder may exercise all rights under the Account and (1) continue
in the Accumulation Period; (2) elect to apply some or all of the Adjusted
Account Value to any of the Annuity Options; or (3) receive at any time a lump
sum payment equal to all or a portion of the Adjusted Account Value. If you die
and you are not the Annuitant, any applicable deferred sales charge will be
applied if a lump sum is elected. Under the Code, distributions are not
required until the successor Certificate Holder's death. If you die and the
Beneficiary is not your surviving spouse, he or she may elect option (2) or (3)
above. According to the Code, any portion of the Adjusted Account Value not
distributed in installments over the life or life expectancy beginning within
one year of your death, must be paid within five years of your death. (See "Tax
Status of the Contract.")
If you are a natural person but not the Annuitant and the Annuitant dies,
the Beneficiary may elect to apply the Adjusted Account Value to an Annuity
Option within 60 days or to receive a lump sum payment equal to the Adjusted
Account Value, subject to state regulatory approval. If the Beneficiary does
not elect an Annuity Option within 60 days of the date of death, the gain, if
any, will be includable in the Beneficiary's income in the year the Annuitant
dies.
If SWO is in effect, payments will cease at the Certificate Holder's or
Annuitant's death. A Beneficiary, however, may elect to continue SWO.
Qualified Contracts. Under a Qualified Contract, the death benefit is
paid at the death of the participant, who is the Annuitant under the Contract.
The Beneficiary has the following options: (1) apply some or all of the
Adjusted Account Value to any of the Annuity Options, subject to the
distribution rules in Code Section 401(a)(9), or (2) receive at any time a lump
sum payment equal to all or a portion of the Adjusted Account Value. If the
Account was established in conjunction with a Section 401(a) qualified pension
or profit sharing plan or a Section 457 deferred compensation plan, payment
will be made, as directed by the Certificate Holder, to either the Certificate
Holder or to the plan Beneficiary.
If ECO or SWO is in effect and the participant dies before the required
beginning date for minimum distributions, payments will cease. A Beneficiary,
or the Certificate Holder on behalf of a plan Beneficiary, may elect ECO or SWO
provided the election would satisfy the Code minimum distribution rules.
If ECO or SWO is in effect and the participant dies after the required
beginning date for minimum distributions, payments will continue as permitted
under the Code minimum distribution rules, unless the option is revoked.
Death benefit payments must satisfy the distribution rules in Code
Section 401(a)(9). (See "Tax Status of the Contract.")
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ANNUITY PERIOD
================================================================================
ANNUITY PERIOD ELECTIONS
You must notify us in writing of the date you want Annuity Payments to
start (the "Annuity Date") and the Annuity Option elected. Payments may not
begin earlier than one year after purchase, or, unless we consent, later than
the later of (a) the first day of the month following the Annuitant's 85th
birthday, or (b) the tenth anniversary of the last Purchase Payment (fifth
anniversary for Contracts issued in Pennsylvania).
Annuity Payments will not begin until you have selected an Annuity Date
and an Annuity Option. Until a date and option are elected, the Account will
continue in the Accumulation Period.
As of January 1, 1997, the Code generally requires that for Qualified
Contracts, other than for IRAs and for five-percent owners in other Qualified
Contracts, minimum annual distributions of the Account Value begin by April 1st
of the calendar year following the calendar year in which a participant attains
age 70-1/2 or retires, whichever occurs later. For IRA depositors and for
five-percent owners, minimum distributions must begin by April 1 of the
calendar year following the calendar year in which the participant attains age
70-1/2. In addition, distributions must be in a form and amount sufficient to
satisfy the Code requirements. These requirements may be satisfied by the
election of certain Annuity Options or Systematic Distribution Options. (See
"Tax Status.") For Nonqualified Contracts, failure to select an Annuity Option
and an Annuity Date, or postponement of the Annuity Date past the Annuitant's
85th birthday or tenth anniversary of your last Purchase Payment may have
adverse tax consequences. You should consult with a qualified tax adviser if
you are considering such a course of action.
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.
At least 30 days prior to the Annuity Date, you must notify us in writing
of the following:
[bullet] the date on which you would like Annuity Payments to begin;
[bullet] the Annuity Option under which you want payments to be calculated and
paid;
[bullet] whether the payments are to be made monthly, quarterly, semi-annually
or annually; and
[bullet] the investment option(s) used to provide Annuity Payments (i.e., a
fixed Annuity using the general account or a variable Annuity using
any of the Subaccounts available at the time of annuitization or a
combination of the two). ("See Annuity Options.")
Once Annuity Payments begin, the Annuity Option may not be changed.
PARTIAL ANNUITIZATION
You may elect an Annuity Option with respect to a portion of your Account
Value, while leaving the remaining portion of your Account Value invested in
the Accumulation Period. The Code and the regulations do not specifically
address the tax treatment applicable to payments provided in this way. Whether
such payments are taxable as annuity payments or as withdrawals is currently
unclear; therefore, you should consult with a qualified tax adviser if you are
considering a partial annuitization of your Account.
ANNUITY OPTIONS
The Certificate Holder may choose one of the following Annuity Options:
Lifetime Annuity Options:
Option 1--Life Annuity--An annuity with payments ending on the Annuitant's
death.
Option 2--Life Annuity with Guaranteed Payments--An annuity with payments
guaranteed for 5-30 years.
*Option 3--Life Annuity with Cash Refund Feature--An annuity with a cash refund
feature. Payments are guaranteed for the amount applied to the Annuity Option.
If the Annuitant dies before the amount applied to the Annuity Option (less any
applicable premium tax) has been paid, any remaining balance will
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be paid in one sum to the Beneficiary. This option is available only when all
payments are as a fixed Annuity.
Option 4--Life Annuity Based Upon the Lives of Two Annuitants--An annuity paid
during the lives of the Annuitant and a second Annuitant. The Certificate
Holder selects an Annuity with 100%, 66-2/3% or 50% of the payment to continue
after the first death, or an Annuity with 100% of the payment to continue at
the death of the second Annuitant and 50% of the payment to continue at the
death of the Annuitant.
Option 5--Life Annuity Based Upon the Lives of Two Annuitants with Guaranteed
Payments--An Annuity with Payments for a minimum of 5-30 years, with 100% of
the payment to continue after the first death.
*Option 6--Life Annuity Based Upon the Lives of Two Annuitants with a Cash
Refund Feature--An Annuity with 100% of the payment to continue after the first
death with a cash refund feature. Payments are guaranteed for the amount
applied to the Annuity Option. If both Annuitants die prior to the total
payment of the amount applied to the Annuity Option (less any premium tax), any
remaining balance will be paid in one sum to the Beneficiary. This option is
available only when all payments are as a fixed Annuity.
*(If approved by your state)
If Option 1 or 4 is elected, it is possible that only one Annuity Payment will
be made if the Annuitant under Option 1, or the surviving Annuitant under
Option 4, should die prior to the due date of the second Annuity Payment. Once
lifetime Annuity payments begin, the Certificate Holder cannot elect to receive
a lump-sum settlement.
Nonlifetime Annuity Option:
Under the nonlifetime option, payments may be made for generally 5-30
years, as selected by the Certificate Holder. If this option is elected as a
variable Annuity, the Certificate Holder may request that the present value of
all or any portion of the remaining variable payments be paid in one sum.
However, any lump-sum elected before three years of payments have been
completed will be treated as a withdrawal during the Accumulation Period and
any applicable deferred sales charge will be assessed. (See "Charges and
Deductions--Deferred Sales Charge.") If the nonlifetime option is elected on a
fixed basis, you cannot elect to receive a lump-sum settlement.
We may also offer additional Annuity Options under your Contract from
time to time. You can call the number listed in the "Inquiries" section of the
Prospectus Summary to determine which options are available and the terms of
such options. Additional or enhanced options may not be made available to those
already receiving Annuity payments.
ANNUITY PAYMENTS
Date Payments Start. When payments start, the age of the Annuitant plus
the number of years for which payments are guaranteed must not exceed 95. For
Qualified Contracts only, Annuity Payments may not extend beyond (a) the life
of the Annuitant, (b) the joint lives of the Annuitant and Beneficiary, (c) a
period certain greater than the Annuitant's life expectancy, or (d) a period
certain greater than the joint life expectancies of the Annuitant and
Beneficiary.
Amount of Each Annuity Payment. The amount of each payment depends on how
you allocate your Account Value between fixed and variable payouts (some
options require that all payments be made on a fixed basis). No election may be
made that would result in the first Annuity Payment of less than $50, or total
yearly Annuity Payments of less than $250 (less if required by state law). If
the Account Value on the Annuity Date is insufficient to elect an option for
the minimum amount specified, a lump-sum payment must be elected. We reserve
the right to increase the minimum first Annuity Payment amount and the minimum
annual Annuity Payment amount based on increases reflected in the Consumer
Price Index-Urban (CPI-U), since July 1, 1993.
If Annuity Payments are to be made on a variable basis, the first and
subsequent payments will vary depending on the assumed net investment rate
selected (3-1/2% 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 exceeds 5% on an annualized basis. Annuity Payments
would decline if the rate were below 5%. Use of the 3-1/2% assumed rate causes a
lower first payment, but subsequent payments would increase more rapidly or
decline more slowly as changes occur in the net investment rate. (See the
Statement of Additional Information for further discussion on the impact of
selecting an assumed net investment rate.)
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CHARGES DEDUCTED DURING THE ANNUITY PERIOD
We make a daily deduction for mortality and expense risks from any
amounts held on a variable basis. Therefore, electing the nonlifetime option on
a variable basis will result in a deduction being made even though we assume no
mortality risk. We may also deduct a daily administrative charge from amounts
held under the variable options. This charge, established when a variable
Annuity Option is elected, will not exceed 0.25% per year of amounts held on a
variable basis. Once established, the charge will be effective during the
entire Annuity Period. (See "Charges and Deductions.")
DEATH BENEFIT PAYABLE DURING THE
ANNUITY PERIOD
The death benefit, if any, due when the Annuitant dies after Annuity
Payments have begun, will depend on the terms of the Contract and the Annuity
Option selected. If Option 1 or Option 4 was elected, Annuity Payments will
cease on the death of the Annuitant under Option 1 or the death of the
surviving Annuitant under Option 4.
If Lifetime Option 2 or Option 5 was elected and the death of the
Annuitant under Option 2, or the surviving Annuitant under Option 5, occurs
prior to the end of the guaranteed minimum payment period, we will continue
payments to the Beneficiary unless the Beneficiary elects a lump sum, provided
the Certificate Holder has not prohibited such an election in the Beneficiary
designation.
If the nonlifetime option was elected, and the Annuitant dies before all
payments are made, remaining payments will be paid to the Beneficiary unless
the Beneficiary elects a lump sum, provided the Certificate Holder has not
prohibited such an election in the Beneficiary designation.
When the Annuitant dies after Annuity Payments have begun and if there is
a death benefit payable under the Annuity option elected, the remaining value
must be distributed to the Beneficiary at least as rapidly as under the
original method of distribution.
Any lump-sum payment paid under the applicable lifetime or nonlifetime
Annuity options will be made within seven calendar days after acceptable proof
of death, and a request for payment are received at our Home Office. The value
of any death benefit proceeds will be determined as of the next Valuation Date
after we receive acceptable proof of death and a request for payment. Under
Options 2 and 5, such value will be reduced by any payments made after the date
of death.
TAX STATUS
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INTRODUCTION
The following provides a general discussion and is not intended as tax
advice. This discussion reflects the Company's understanding of current federal
income tax law. Such laws may change in the future, and it is possible that any
change could be retroactive (i.e., effective prior to the date of the change).
In addition, this discussion does not cover the potential application of
federal estate and gift tax laws, or state, local or any other tax law. The
Company makes no guarantee regarding the tax treatment of any contract or
transaction involving a Contract.
The Contract may be purchased on a non-tax qualified basis ("Nonqualified
Contract") or purchased and used in connection with certain retirement
arrangements entitled to special income tax treatment under Section 403(b),
408(b) or 408A of the Code, or prior to May 1, 1998 under Sections 401(a) or
457 of the Code("Qualified Contracts"). The ultimate effect of federal income
taxes on the amounts held under a Contract, on Annuity payments, and on the
economic benefit to the Contract Holder, Certificate Holder or Beneficiary may
depend upon the tax status of the individual concerned. Any person concerned
about these tax implications should consult a competent tax adviser before
initiating any transaction.
TAXATION OF THE COMPANY
The Company is taxed as a life insurance company under the Code. Since
the Separate Account is not an entity separate from the Company, it will not be
taxed separately as a "regulated investment company" under the Code. Investment
income and realized capital gains are automatically applied to increase
reserves under the Contracts. Under existing federal income tax law, the
Company believes that the Separate Account investment income and realized net
capital gains will not be taxed to the extent that such income and gains are
applied to increase the reserves under the Contracts.
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Accordingly, the Company does not anticipate that it will incur any
federal income tax liability attributable to the Separate Account and,
therefore, the Company does not intend to make provisions for any such taxes.
However, if changes in the federal tax laws or interpretation thereof result in
the Company being taxed on income or gains attributable to the Separate
Account, then the Company may impose a charge against the Separate Account
(with respect to some or all Contracts) in order to set aside provisions to pay
such taxes.
TAX STATUS OF THE CONTRACT
Diversification. Section 817(h) of the Code requires that with respect to
Nonqualified Contracts, the investments of the Funds be "adequately
diversified" in accordance with Treasury Regulations in order for the Contracts
to qualify as annuity contracts under federal tax law. The Separate Account,
through the Funds, intends to comply with the diversification requirements
prescribed by the Treasury in Reg. Sec. 1.817-5, which affects how the Funds'
assets may be invested.
In addition, in certain circumstances, owners of variable annuity
contracts may be considered the owners, for federal income tax purposes, of the
assets of the separate accounts used to support their contracts. In these
circumstances, income and gains from the separate account assets would be
includible in the variable contract owner's gross income. The IRS has stated in
published rulings that a variable contract owner will be considered the owner
of separate account assets if the owner possesses incidents of investment
control over the assets. The ownership rights under the contract are similar
to, but different in certain respects from those described by the IRS in
rulings in which it was determined that owners were not owners of separate
account assets. For example, a Certificate Holder has additional flexibility in
allocating premium payments and account values. In addition, the number of
funds provided under the Contract is significantly greater than the number of
funds offered in contracts on which rulings have been issued. These differences
could result in a Certificate Holder being treated as the owner of a pro rata
portion of the assets of the Separate Account. The Company reserves the right
to modify the Contract as necessary to attempt to prevent a Certificate Holder
from being considered the owner of a pro rata share of the assets of the
Separate Account.
Required Distributions--Nonqualified Contracts: In order to be treated as
an annuity contract for federal income tax purposes, Section 72(s) of the Code
requires Nonqualified Contracts to provide that (a) if any Certificate Holder
dies on or after the Annuity Date but prior to the time the entire interest in
the Contract has been distributed, the remaining portion of such interest will
be distributed at least as rapidly as under the method of distribution in
effect at the time of the Certificate Holder's death, and (b) if any
Certificate Holder dies prior to the Annuity Date, the entire interest in the
Contract will be distributed within five years after the date of such
Certificate Holder's death. These requirements will be considered satisfied as
to any portion of a Certificate Holder's interest which is payable to or for
the benefit of a "designated beneficiary" and which is distributed over the
life of such "designated beneficiary" or over a period not extending beyond the
life expectancy of that beneficiary, provided that such distributions begin
within one year of the Certificate Holder's death. The "designated beneficiary"
refers to a natural person designated by the Certificate Holder as a
Beneficiary and to whom ownership of the contract passes by reason of death.
However, if the "designated beneficiary" is the surviving spouse of the
deceased Certificate Holder, the Account may be continued with the surviving
spouse as the new Certificate Holder. If the Certificate Holder is a
non-natural person, the surviving spouse who is the "designated beneficiary" of
the deceased Annuitant may continue the Account.
If the Certificate Holder is a natural person but not the Annuitant and
the Annuitant dies, if the Beneficiary does not elect an Annuity Option within
60 days of the date of death, the gain, if any, will be includible in the
Beneficiary's income in the year the Annuitant dies.
Required Distributions--Qualified Contracts: The Code has required
distribution rules for Section 401(a), 403(b) and 457 Plans and Individual
Retirement Annuities. Other than for IRAs and for five-percent owners in other
Qualified Contracts distributions must generally begin by April 1 of the
calendar year following the calendar year in which the participant attains age
70-1/2 or retires, whichever occurs later. For traditional IRA participants and
for five-percent owners, minimum distributions must begin by April 1 of the
calendar year following the calendar year in which the participant attains age
70-1/2. There is no required distribution date for participants in a Roth IRA.
Under 403(b) plans, if
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the Company maintains separate records, distribution of amounts held as of
December 31, 1986 must generally begin by the end of the calendar year in which
the participant attains age 75 (or retires, whichever occurs later). However,
special rules require that some or all of the balance be distributed earlier if
any distributions are taken in excess of the minimum required amount.
To comply with these provisions, distributions must be in a form and
amount sufficient to satisfy the minimum distribution and minimum distribution
incidental death benefit rules specified in Section 401(a) (9) of the Code.
In general, annuity payments from a traditional IRA must be distributed
over the participant's life or the joint lives of the participant and
beneficiary, or over a period not greater than the participant's life expectancy
or the joint life expectancies of the participant and beneficiary. Also, any
distribution under a Section 457 Plan payable over a period of more than one
year must be made in substantially nonincreasing amounts.
If the participant dies on or after the required beginning date for
minimum distributions, distributions to the beneficiary must be made at least as
rapidly as the method of distribution in effect at the time of the participant's
death. However, if the required minimum distribution is calculated each year
based on the participant's single life expectancy or the joint life expectancies
of the participant and beneficiary, the regulations for Code Section 401(a)(9)
provide specific rules for calculating the required minimum distributions at the
participant's death. For example, if ECO was elected with the calculation based
on the participant's single life expectancy, and the life expectancy is
recalculated each year, the recalculated life expectancy becomes zero in the
calendar year following the participant's death and the entire remaining
interest must be distributed to the beneficiary by December 31 of the year
following the participant's death. However, a spousal beneficiary, other than
under a Section 457 Plan, has certain rollover rights which can only be
exercised in the year of the participant's death. The rules are complex and the
participant should consult a tax adviser before electing the method of
calculation to satisfy the minimum distribution requirements.
If the participant dies before the required beginning date for minimum
distributions, the entire interest must be distributed by December 31 of the
calendar year containing the fifth anniversary of the date of the participant's
death. Alternatively, payments may be made over the life of the beneficiary or
over a period not extending beyond the life expectancy of the beneficiary, not
to exceed 15 years for a non-spousal beneficiary under a Section 457 Plan,
provided the distribution begins to a non-spouse beneficiary by December 31 of
the calendar year following the calendar year of the participant's death. If
payments are made to a spousal beneficiary, distributions must begin by the
later of December 31 of the calendar year following the calendar year of the
death or December 31 of the calendar year in which the participant would have
attained age 70-1/2.
An exception applies for a spousal beneficiary under an Individual
Retirement Annuity. In lieu of taking a distribution under these rules, a
spousal beneficiary may elect to treat the Account as his or her own IRA and
defer taking a distribution until his or her age 70-1/2. The surviving spouse is
deemed to have made such an election if the surviving spouse makes a rollover to
or from the Account or fails to take a distribution within the required time
period.
The minimum distribution rules also apply to beneficiaries under a Roth
IRA and are based on whether the participant dies before or after distribution
begins.
If the participant or beneficiary fails to take the required minimum
distribution for any tax year, a 50% excise tax is imposed on the required
amount that was not distributed.
TAXATION OF ANNUITY CONTRACTS
In General: Section 72 of the Code governs taxation of annuities in
general. The Company believes that a Certificate Holder under a Nonqualified
Contract who is a natural person generally is not taxed on increases in the
Account Value until distribution occurs by withdrawing all or part of such
Account Value (e.g., withdrawals or Annuity Payments under the Annuity Option
elected). The taxable portion of a distribution (in the form of a single sum
payment or an Annuity) is taxable as ordinary income.
Non-Natural Holders of a Nonqualified Contract: If the Certificate Holder
is not a natural person, a Nonqualified Contract is not treated as an annuity
for income tax purposes and the "income on the contract" for the taxable year is
currently taxable as ordinary income. "Income on the contract" is any increase
over
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the year in the Surrender Value, adjusted for Purchase Payments made during the
year, amounts previously distributed and amounts previously included in income.
There are some exceptions to the rule and a non-natural person should consult
with its tax adviser prior to purchasing this Contract. A non-natural person
exempt from federal income taxes should consult with its tax adviser regarding
treatment of "income on the contract" for purposes of the unrelated business
income tax. When the Certificate Holder is not a natural person, the Annuitant
is considered the Certificate Holder for the purpose of meeting the required
distribution-at-death rules. In addition, when the Certificate Holder is not a
natural person, a change in Annuitant is treated as the death of the
Certificate Holder.
The following discussion generally applies to Qualified Contracts or
Nonqualified Contracts owned by a natural person.
Withdrawals: In the case of a withdrawal under a Qualified Contract,
including withdrawals under SWO or ECO, the amount taxable is generally based on
the ratio of the "investment in the contract" to Account Value. The "investment
in the contract" generally equals the amount of any nondeductible Purchase
Payments paid by or on behalf of any individual less any amount received
previously which was excludable from gross income. For a Qualified Contract, the
"investment in the contract" can be zero. Special tax rules may be available for
certain distributions from a Qualified Contract.
With respect to Nonqualified Contracts, partial withdrawals, including
withdrawals under SWO, are generally treated as taxable income to the extent
that the Account Value immediately before the withdrawal exceeds the "investment
in the contract" at that time. The Account Value immediately before a withdrawal
may have to be increased by any positive market value adjustment (MVA) that
results from such a withdrawal. There is, however, no definitive guidance on the
proper tax treatment of MVAs in these circumstances, and a Certificate Holder
should contact a competent tax advisor with respect to the potential tax
consequences of any MVA that arises as a result of a partial withdrawal.
Full withdrawals of a Nonqualified Contract are treated as taxable income
to the extent that the amount received exceeds the "investment in the contract."
Any "qualified" distribution from a Roth IRA is not includible in gross
income. A "qualified" distribution is any distribution made after the
participant attains age 59-1/2, or on account of the participant's 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", 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
"Penalty Tax" below.) 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 the
participant's death. (See "Annuity Period".)
Annuity Payments: Although the tax consequences may vary depending on the
Annuity Payment elected under the Contract, in general, only the portion of the
Annuity Payment that represents the amount by which the Account Value exceeds
the "investment in the contract" will be taxed; after the "investment in the
contract" is recovered, the full amount of any additional annuity payments is
taxable. For variable Annuity Payments, the taxable portion is generally
determined by an equation that establishes a specific dollar amount of each
payment that is not taxed. The dollar amount is determined by dividing the
"investment in the contract" by the total number of expected periodic payments.
However, the entire distribution will be taxable once the recipient has
recovered the dollar amount of his or her "investment in the contract." For
fixed annuity payments, in general there is no tax on the portion of each
payment which represents the same ratio that the "investment in the contract"
bears to the expected number of payments as defined in Code Section 72(d);
however, the remainder of each Annuity Payment is taxable. Once the "investment
in the contract" has been fully recovered, the full amount of any additional
Annuity Payments is taxable. If Annuity Payments cease as a result of an
Annuitant's death before full recovery of the "investment in the contract,"
consult a competent tax advisor regarding deductibility of the unrecovered
amount.
Penalty Tax: In the case of a distribution pursuant to a Nonqualified
Contract, or a Qualified Contract
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other than a Qualified Contract sold in conjunction with a Code Section 457
Plan, there may be imposed a federal income tax penalty equal to 10% of the
amount treated as taxable income.
In general, there is no penalty tax on distributions from a Nonqualified
Contract: (1) made on or after the date on which the taxpayer attains age
59-1/2; (2) made as a result of the death of the Certificate Holder; (3)
attributable to the taxpayer's total and permanent disability; (4) received in
substantially equal periodic payments (at least annually) over the life or life
expectancy of the taxpayer or the joint lives or joint life expectancies of the
taxpayer and a "designated beneficiary"; or (5) allocable to "investment in the
contract" before August 14, 1982.
If a distribution is made from a Qualified Contract sold in conjunction
with a Section 401(a) Plan or Section 403(b) Plan, the penalty tax will not
apply on distribution made when the participant (a) attains age 59-1/2, (b)
becomes permanently and totally disabled, (c) dies, (d) separates from service
with the plan sponsor at or after age 55, (e) rolls over the distribution amount
to another plan of the same type in accordance with the terms of the Code, or
(f) takes the distributions in substantially equal periodic payments (at least
annually) over his or her life or life expectancy or the joint lives or joint
life expectancies of the participant and beneficiary, provided the participant
has separated from service with the plan sponsor. In addition, the penalty tax
does not apply for the amount of a distribution equal to unreimbursed medical
expenses incurred by the participant that qualify for deduction as specified in
the Code. The Code may impose other penalty taxes in other circumstances.
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.
Taxation of Death Benefit Proceeds: Amounts may be distributed from the
Contract because of the death of a Certificate Holder or the Annuitant.
Generally, such amounts are includible in the income of the recipient as
follows: (1) if distributed in a lump sum, they are taxed in the same manner as
a full surrender as described above, or (2) if distributed under an Annuity
Option, they are taxed in the same manner as Annuity Payments, as described
above.
Special rules may apply on Nonqualified Contracts. See "Required
Distributions--Nonqualified Contracts."
Transfers, Assignments or Exchanges of the Contract: A transfer of
ownership of a Contract, the designation of an Annuitant, payee or other
Beneficiary who is not also a Certificate Holder, the selection of certain
Annuity Dates, or the exchange of a Contract may result in certain tax
consequences. The assignment, pledge, or agreement to assign or pledge any
portion of the Account Value generally will be treated as a distribution. The
assignment or transfer of ownership of a Qualified Contract generally is not
allowed. Anyone contemplating any such designation, transfer, assignment,
selection, or exchange should contact a competent tax adviser with respect to
the potential tax effects of such a transaction.
Multiple Contracts: All deferred nonqualified annuity contracts that are
issued by the Company (or its affiliates) to the same owner during any calendar
year are treated as one annuity contract for purposes of determining the amount
includible in gross income under Section 72(e) of the Code. In addition, the
Treasury Department has specific authority to issue regulations that prevent the
avoidance of Section 72(e) through the serial purchase of annuity contracts or
otherwise.
CONTRACTS USED WITH CERTAIN RETIREMENT PLANS
Qualified Contracts in General. The Qualified Contract is designed for use
as a Code Section 408(b) Individual Retirement Annuity or as a Contract used in
connection with certain employer sponsored retirement plans. The tax rules
applicable to participants and beneficiaries in Qualified Contracts are complex.
Special favorable tax treatment may be available for certain types of
contributions and distributions. Adverse tax consequences may result from
contributions in excess of specified limits; distributions prior to age 59-1/2
(subject to certain exceptions); distributions that do not conform to specified
commencement and minimum distribution rules; and in other specified
circumstances.
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The Company makes no attempt to provide more than general information
about use of the Contracts with the various types of retirement plans.
Participants and beneficiaries under Qualified Contracts may be subject to the
terms and conditions of the retirement plans themselves, in addition to the
terms and conditions of the Contract issued in connection with such plans. Some
retirement plans are subject to distribution and other requirements that are not
incorporated in the provisions of the Contracts. Purchasers are responsible for
determining that contributions, distributions and other transactions with
respect to the Contracts satisfy applicable laws, and should consult their legal
counsel and tax adviser regarding the suitability of the Contract.
Section 457 Plans. Code Section 457 provides for certain deferred
compensation plans. These plans may be offered with respect to service for state
governments, local governments, political subdivisions, agencies,
instrumentalities and certain affiliates of such entities, and tax exempt
organizations. These plans are subject to various restrictions on contributions
and distributions. The plans may permit participants to specify the form of
investment for their deferred compensation account. Prior to the August 20, 1996
enactment of the Small Business Job Protection Act of 1996 (the "Small Business
Act") compensation deferred under the plans, all property and rights purchased
with such amounts, and all income attributable to such amounts, property or
rights remained solely the property and rights of the employer (without being
restricted to the provision of benefits) subject only to the claims of the
employer's general creditors. For that reason, depending on the terms of the
particular plan, the employer may have been entitled to draw on deferred amounts
for purposes unrelated to its Section 457 plan obligations.
Under the Small Business Act, plans maintained by State or local
governments, their political subdivisions, agencies, instrumentalities and
certain affiliates will be required to hold all assets and income of the Plan in
trust for the exclusive benefit of plan participants and their beneficiaries.
For purposes of meeting the new requirement, custodial accounts and annuity
contracts are treated as trusts. State and local government plans that were in
existence on August 20, 1996 are allowed a transition period that ends January
1, 1999 to comply with the new requirement.
In general, all amounts received under a Section 457 plan are taxable and
reportable to the IRS as taxable income. Also, all amounts except death benefit
proceeds are subject to federal income tax withholding as wages. If we make
payments directly to a participant on behalf of the employer as owner, we will
withhold federal taxes (and state taxes, if applicable).
The Code imposes a maximum limit on annual Purchase Payments which may be
excluded from the participant's gross income. Such limit is generally the lesser
of $8,000 (as adjusted to reflect changes in the cost of living) or 33-1/2% of
the participant's includible compensation (25% of gross compensation).
Section 401(a) Plans. Section 401(a) permits corporate employers to
establish various types of retirement plans for employees, and permits self-
employed individuals to establish various types of retirement plans for
themselves and for their employees. These retirement plans may permit the
purchase of the Contract to accumulate retirement savings under the plans.
Adverse tax consequences to the plan, to the participant or to both may result
if this Contract is assigned or transferred to an individual except to a
participant as a means to provide benefit payments.
The Code imposes a maximum limit on annual Purchase Payments that may be
excluded from a participant's gross income. Such limit must be calculated under
the Plan by the employer in accordance with Section 415 of the Code. This limit
is generally the lesser of 25% of the participant's compensation or $30,000.
Compensation means compensation from the participant's employer sponsoring the
plan, and for years beginning after December 31, 1997, includes any elective
deferrals under Code Section 402 (g) and any amounts not includible in gross
income under Code Sections 125 or 457. In addition, Purchase Payments will be
excluded from a participant's gross income only if the Section 401(a) Plan meets
certain nondiscrimination requirements.
All distributions will be taxed as they are received unless the
distribution is rolled over to another plan of the same type or to an individual
retirement annuity/ account ("IRA") in accordance with the Code, or unless the
participant has made after-tax contributions to the plan, which are not taxed
upon distribution. The Code has specific rules that apply, depending on the type
of distribution received, if after-tax contributions were made.
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In general, payments received by a beneficiary after the participant's
death are taxed in the same manner as if the participant had received those
payments, except that a limited death benefit exclusion may apply for payments
due to deaths that occurred on or before August 20, 1996. This exclusion no
longer applies to payments due to deaths occurring after August 20, 1996.
Section 403(b) Plans. Under Section 403(b), contributions made by public
school systems or nonprofit healthcare organizations and other Section 501(c)(3)
tax exempt organizations to purchase annuity contracts for their employees are
generally excludable from the gross income of the employee.
In order to be excludable from taxable income, total annual contributions
made by the participant and his or her employer cannot exceed either of two
limits set by the Code. The first limit, under Section 415, is generally the
lesser of 25% of includible compensation or $30,000. Compensation means
compensation from the participant's employer sponsoring the plan, and for years
beginning after December 31, 1997, includes any elective deferrals under Code
Section 402 (g) and any amounts not includible in gross income under Code
Sections 125 or 457. The second limit, which is the exclusion allowance under
Section 403(b), is usually calculated according to a formula that takes into
account the participant's length of employment and any pretax contributions you
and your employer made to the plan and to certain other retirement plans. These
two limits apply to the participant's contributions as well as to any
contributions made by the employer on behalf of the participant. There is an
additional limit that specifically limits salary reduction contributions to
generally no more than $10,000 annually (subject to indexing); a participant's
own limit may be higher or lower, depending on certain conditions. In addition,
Purchase Payments will be excluded from a participant's gross income only if the
Plan meets certain nondiscrimination requirements.
Section 403(b)(11) restricts the distribution under Section 403(b)
contracts of: (1) salary reduction contributions made after December 31, 1988;
(2) earnings on those contributions; and (3) earnings during such period on
amounts held as of December 31, 1988. Distribution of those amounts may only
occur upon death of the participant, attainment of age 59-1/2, separation from
service, total and permanent disability, or financial hardship. In addition,
income attributable to salary reduction contributions may not be distributed in
the case of hardship.
INDIVIDUAL RETIREMENT ANNUITIES AND
SIMPLIFIED EMPLOYEE PENSION PLANS
Section 408(b) of the Code permits eligible individuals to contribute to
an individual retirement program known as a traditional Individual Retirement
Annuity, hereinafter referred to as an "IRA." Also, distributions from certain
other types of qualified plans may be "rolled over" on a tax-deferred basis into
an IRA. Employers may establish Simplified Employee Pension (SEP) Plans and
contribute to an IRA owned by the employee. Purchasers of a Qualified Contract
for use with IRAs will be provided with supplemental information required by the
Internal Revenue Service. Purchasers should seek competent advice as to the
suitability of the Contract for use with IRAs.
Section 408A of the Code permits eligible individuals to contribute to a
Roth IRA on an after-tax (non-deductible) 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.
WITHHOLDING
Pension and annuity distributions generally are subject to withholding for
the recipient's federal income tax liability at rates that vary according to the
type of distribution and the recipient's tax status. Recipients may be provided
the opportunity to elect not to have tax withheld from distributions; however,
certain distributions from Section 401(a) Plans and Section 403(b) tax-deferred
annuities are subject to mandatory 20% federal income tax withholding. If the
recipient is a non-resident alien, any withholding will be governed by Code
Section 1441 based on the individual's citizenship, the country of domicile and
treaty status. We will report to the IRS the taxable portion of all
distributions.
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MISCELLANEOUS
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DISTRIBUTION
Aetna Life Insurance and Annuity Company ("ALIAC") will serve as the
principal underwriter for the securities sold by this Prospectus. ALIAC is
registered as a broker-dealer with the Securities and Exchange Commission
("SEC") and is a member of the National Association of Securities Dealers, Inc.
("NASD"). As principal underwriter, ALIAC will contract with one or more
registered broker-dealers, or with banks that may be acting as broker-dealers
without separate registration under the Securities Exchange Act of 1934 pursuant
to legal and regulatory exceptions ("Distributors") to offer and sell the
Contracts. ALIAC and one or more of its affiliates may also sell the Contracts
directly. All individuals offering and selling the Contracts must either be
registered representatives of a broker-dealer, or employees of a bank exempt
from registration under the Securities Exchange Act of 1934, and must also be
licensed as insurance agents to sell variable annuity contracts.
From time to time, ALIAC may offer customers of certain broker-dealers
special guaranteed rates in connection with the Guaranteed Account offered
through the Contracts, and may negotiate different commissions for these
broker-dealers.
ALIAC may also contract with independent third party broker-dealers who
will act as wholesalers by assisting ALIAC in finding broker-dealers or banks
interested in acting as Distributors for the Contracts. These wholesalers may
also provide training, marketing and other sales related functions for ALIAC and
other Distributors and may provide certain administrative services to ALIAC in
connection with the Contracts. ALIAC may pay such wholesalers compensation based
on Purchase Payments for the Contracts purchased through Distributors selected
by the wholesaler.
ALIAC may also designate third parties to provide services in connection
with the Contracts such as reviewing applications for completeness and
compliance with insurance requirements and providing the Distributors with
approved marketing material, prospectuses or other supplies. These parties will
also receive payments based on Purchase Payments for their services, to the
extent such payments are allowed by applicable securities laws. All costs and
expenses related to these services will be paid by ALIAC.
Payment of Commissions. Commissions will be paid to Distributors who sell
the Contracts. Distributors will be paid commissions up to an amount currently
equal to 6.5% of Purchase Payments. Pursuant to agreements between the
Underwriter and the Distributor, commissions may be paid as a combination of a
certain percentage amount at the time of sale and a trail commission of up to
0.40% of assets due to Purchase Payments (which, when combined, could exceed
6.5% of Purchase Payments). At times the Company may offer certain Distributors
an enhanced commission for a limited period of time. In addition, some sales
personnel may receive various types of non-cash compensation such as special
sales incentives, including trips and educational and/or business seminars.
Supervisory and other management personnel of the Company may receive
compensation that will vary based on the relative profitability to the Company
of the funding options you select. Funding options that invest in Funds advised
by the Company or its affiliates are generally more profitable to the Company.
Other than the mortality and expense risk charge and the administrative
charge, all expenses incurred in the operations of the Separate Account are
borne by the Company.
DELAY OR SUSPENSION OF PAYMENTS
The Company reserves the right to suspend or postpone the date of payment
for any benefit or values (a) on any Valuation Date on which the New York Stock
Exchange ("Exchange") is closed (other than customary weekend and holiday
closings) or when trading on the Exchange is restricted; (b) when an emergency
exists, as determined by the SEC, so that disposal of securities held in the
Subaccounts is not reasonably practicable or it is not reasonably practicable
for the Company fairly to determine the value of the Subaccount's assets; or (c)
during such other periods as the SEC may by order permit for the protection of
investors. The conditions under which restricted trading or an emergency exists
shall be determined by the rules and regulations of the SEC.
PERFORMANCE REPORTING
From time to time, the Company may advertise different types of historical
performance for the Subaccounts of the Separate Account. The Company may
advertise the "standardized average annual total
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returns" of the Subaccounts, calculated in a manner prescribed by the SEC, as
well as the "non-standardized returns." "Standardized average annual total
returns" are computed according to a formula in which a hypothetical investment
of $1,000 is applied to the Subaccount and then related to the ending
redeemable values over the most recent one, five and ten-year periods (or since
contributions were first received in the Fund under the Separate Account, if
less than the full period). Standardized returns will reflect the reduction of
all recurring charges during each period (e.g., mortality and expense risk
charges, annual maintenance fees, administrative charge and any applicable
deferred sales charge). "Non-standardized returns" will be calculated in a
similar manner, except that non-standardized figures will not reflect the
deduction of any applicable deferred sales charge (which would decrease the
level of performance shown if reflected in these calculations). The
non-standardized figures may also include monthly, quarterly, year-to-date and
three-year periods and may include performance from the Fund's inception date.
The Company may also advertise certain ratings, rankings or other
information related to the Company, the Subaccounts or the Funds. Further
details regarding performance reporting and advertising are described in the
Statement of Additional Information.
VOTING RIGHTS
Each Contract Holder may direct us in the voting of shares at
shareholders' meetings of the appropriate Funds(s). The number of votes to which
each Contract Holder may give direction will be determined as of the record
date. The number of votes each Contract Holder is entitled to direct with
respect to a particular Fund during the Accumulation Period equals the portion
of the Account Values(s) of the Contract attributable to that Fund, divided by
the net asset value of one share of that Fund. During the Annuity Period, the
number of votes is equal to the valuation reserve for the portion of the
Contract attributable to that Fund, divided by the net asset value of one share
of that Fund. In determining the number of votes, fractional votes will be
recognized. Where the value of the Contract or valuation reserve relates to more
than one Fund, the calculation of votes will be performed separately for each
Fund.
If you are a Certificate Holder under a group Contract, you have a fully
vested (100%) interest in the benefits provided to you under your Account.
Therefore, you may instruct the group Contract Holder how to direct the Company
to cast the votes for the portion or the value of valuation reserve attributable
to your Account. Votes attributable to those Certificate Holders who do not
instruct the group Contract Holder will be cast by the Company in the same
proportion as votes for which instructions have been received by the group
Contract Holder. Votes attributable to individual or group Contract Holders who
do not direct us will be cast by us in the same proportion as votes for which
directions we have received.
You will receive a notice of each meeting of shareholders, together with
any proxy solicitation materials, and a statement of the number of votes
attributable to your Account.
MODIFICATION OF THE CONTRACT
The Company may change the Contract as required by federal or state law.
In addition, the Company may, upon 30 days written notice to the Contract
Holder, make other changes to group Contracts that would apply only to
individuals who become Certificate Holders under that Contract after the
effective date of such changes. If the Contract Holder does not agree to a
change, the Company reserves the right to refuse to establish new Accounts under
the Contract. Certain changes will require the approval of appropriate state or
federal regulatory authorities.
TRANSFERS OF OWNERSHIP; ASSIGNMENT
Assignments or transfers of ownership of a Qualified Contract generally
are not allowed except as permitted under the Code, incident to a divorce. The
prohibition does not apply to a Qualified Contract sold in conjunction with (1)
a Section 457 deferred compensation plan, or (2) a Section 401(a) plan where the
Contract is owned by a trustee. We will accept assignments or transfers of
ownership of a Nonqualified Contract or a Qualified Contract where assignments
or transfers of ownership are not prohibited, with proper notification. The date
of any such transfer will be the date we receive the notification at our Home
Office. (Refer to "Tax Status" for general tax information.) If you are
contemplating a transfer of ownership or assignment you should consult a tax
adviser due to the potential for tax liability.
No assignment of a Contract will be binding on us unless made in writing
and sent to us at our Home Office. The Company will use reasonable procedures to
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confirm that the assignment is authentic, including verification of signature.
If the Company fails to follow its procedures, it would be liable for any
losses to you directly resulting from the failure. Otherwise, we are not
responsible for the validity of any assignment. The rights of the Certificate
Holder and the interest of the Annuitant and any Beneficiary will be subject to
the rights of any assignee of record.
INVOLUNTARY TERMINATIONS
We reserve the right to terminate any Account with a value of $2,500 or
less immediately following a partial withdrawal (unless otherwise required by
State law). However, an Individual Retirement Annuity may only be closed out
when Purchase Payments have not been received for a 24-month period and the
paid-up annuity benefit at maturity would be less than $20 per month. If such
right is exercised, you will be given 90 days advance written notice. No
deferred sales charge will be deducted for involuntary terminations. The Company
does not intend to exercise this right in cases where the Account Value is
reduced to $2,500 or less solely due to investment performance.
LEGAL MATTERS AND PROCEEDINGS
The Company knows of no material legal proceedings pending to which the
Separate Account or the Company is a party or which would materially affect the
Separate Account. The validity of the securities offered by this Prospectus has
been passed upon by Counsel to the Company.
YEAR 2000
As a healthcare and financial services enterprise, Aetna Inc. (referred to
collectively with its affiliates and subsidiaries as Aetna), is dependent on
computer systems and applications to conduct its business. Aetna has developed
and is currently executing a comprehensive risk-based plan designed to make its
computer systems, applications and facilities Year 2000 ready. The plan covers
four stages including (i) inventory, (ii) assessment, (iii) remediation and (iv)
testing and certification. At year end 1997, Aetna , including the Company, had
substantially completed the inventory and assessment stages. The remediation
process is currently underway and targeted for completion by December 31, 1998.
Testing and certification of these systems and applications are 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, including the Company, is initiating communication with its
critical external relationships to determine the extent to which Aetna may be
vulnerable to such parties' failure to resolve their own Year 2000 issues. Where
practicable Aetna and the Company will assess and attempt to mitigate their
risks with respect to the failure of these parties' to be Year 2000 ready. There
can be no assurance that failure of third parties to complete adequate
preparations in a timely manner, and any resulting systems interruptions or
other consequences, would not have an adverse effect, directly or indirectly, on
the Separate Account, including, without limitation, its operation or the
valuation of its assets and units.
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CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION
================================================================================
The Statement of Additional Information contains more specific information
on the Separate Account and the Contract, as well as the financial statements
of the Separate Account and the Company. A list of the contents of the SAI is
set forth below:
General Information and History
Variable Annuity Account I
Offering and Purchase of Contracts
Performance Data
General
Average Annual Total Return Quotations
Annuity Payments
Sales Material and Advertising
Independent Auditors
Financial Statements of the Separate Account
Financial Statements of the Company
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APPENDIX A
AICA GUARANTEED ACCOUNT
================================================================================
The AICA Guaranteed Account (the "Guaranteed Account") is a credited
interest option available during the Accumulation Period under the Contracts.
This Appendix is a summary of the Guaranteed Account and is not intended to
replace the Guaranteed Account prospectus. You should read the accompanying
Guaranteed Account prospectus carefully before investing.
The Guaranteed Account is a credited interest option in which we guarantee
stipulated rates of interest for stated periods of time on amounts directed to
the Guaranteed Account. A guaranteed rate is credited for the full term. The
interest rate stipulated is an annual effective yield; that is, it reflects a
full year's interest. Interest is credited daily at a rate that will provide the
guaranteed annual effective yield for one year. Guaranteed interest rates will
never be less than an annual effective rate of 3%.
During a deposit period, amounts may be applied to any of the available
guaranteed terms. A Guaranteed Term is the period of time specified by the
Company for which a specific Guaranteed Rate or Rates are offered on amounts
invested during a specific Deposit Period. Guaranteed Terms are made available
by the Company subject to the Company's terms and conditions. The Company may
offer more than one Guaranteed Term of the same duration and credit one with a
higher rate contingent upon use only with the Dollar Cost Averaging Program. If
amounts are applied to a Guaranteed Term which is credited with a higher rate
using dollar cost averaging and the dollar cost averaging is discontinued, the
amounts will be transferred to another Guaranteed Term of the same duration and
a market value adjustment ("MVA") will apply. The Company also reserves the
right to limit the number of Guaranteed Terms or the availability of certain
Guaranteed Terms. See the prospectus for the Guaranteed Account for further
details regarding Guaranteed Term. Purchase Payments received after the initial
payment will be allocated in the same proportions as the last allocation, if no
new allocation instructions are received with the Purchase Payment. If the same
guaranteed term(s) are not available, the next shortest term will be used. If no
shorter guaranteed term is available, the next longer guaranteed term will be
used.
Except for transfers from an available Guaranteed Term subject to the
Company's terms and conditions in connection with the Dollar Cost Averaging
Program, withdrawals taken in connection with an Estate Conservation or
Systematic Withdrawal distribution option, and, if approved by your state,
withdrawals for minimum distributions required by the Code for which the
deferred sales charge is waived, withdrawals or transfers from a guaranteed term
before the guaranteed term matures may be subject to an MVA. An MVA reflects the
change in the value of the investment due to changes in interest rates since the
date of deposit. When interest rates increase after the date of deposit, the
value of the investment decreases, and the MVA is negative. Conversely, when
interest rates decrease after the date of deposit, the value of the investment
increases, and the MVA is positive. It is possible that a negative MVA could
result in the Certificate Holder receiving an amount which is less than the
amount paid into the Guaranteed Account.
For partial withdrawals during the Accumulation Period, amounts to be
withdrawn from the Guaranteed Account will be withdrawn on a pro rata basis from
each group of deposits having the same length of time until the Maturity Date
("Guaranteed Term Group"). Within a Guaranteed Term Group, the amount will be
withdrawn first from the oldest Deposit Period, then from the next oldest, and
so on until the amount requested is satisfied.
As a Guaranteed Term matures, assets accumulating under the Guaranteed
Account may be (a) transferred to a new Guaranteed Term, (b) transferred to
other available investment options, or (c) withdrawn. Amounts withdrawn may be
subject to a deferred sales charge. If no direction is received by the Company
at its Home Office by the maturity date of a guaranteed term, the amount from
the maturing guaranteed term will be transferred to the current deposit period
for a similar length guaranteed term. If the same guaranteed term is no longer
available the next shortest guaranteed term available in the current deposit
period will be used. If no shorter guaranteed term is available, the next longer
guaranteed term will be used.
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If you do not provide instructions concerning the maturity value of a
maturing guaranteed term, the maturity value transfer provision applies. This
provision allows you to transfer without an MVA to available guaranteed terms of
the current deposit period or to other available investment options, or
surrender without an MVA (if applicable, a deferred sales charge is assessed on
the surrendered amount). The provision is available only during the calendar
month immediately following a guaranteed term maturity date and only applies to
the first transaction regardless of the amount involved in the transaction.
MORTALITY AND EXPENSE RISK CHARGES
We make no deductions from the credited interest rate for mortality and
expense risks; these risks are considered in determining the credited rate.
TRANSFERS
Amounts applied to a guaranteed term during a deposit period may not be
transferred to any other funding option or to another guaranteed term during
that deposit period or for 90 days after the close of that deposit period. This
does not apply to (1) amounts transferred on the Maturity Date or under the
maturity value transfer provision; (2) amounts transferred from the Guaranteed
Account before the Maturity Date due to the election of an Annuity Option; (3)
amounts distributed under the Estate Conservation or Systematic Withdrawal
Options; and (4) amounts transferred from an available Guaranteed Term in
connection with the Dollar Cost Averaging Program. However, if the Certificate
Holder discontinues the Dollar Cost Averaging Program and the amounts in it are
transferred in accordance with the Company's terms and conditions governing
Guaranteed Terms, an MVA will apply. Transfers after the 90-day period are
permitted from guaranteed term(s) to other guaranteed term(s) available during a
deposit period or to other available investment options. Except for transactions
described in items (1), (3) and (4) above, amounts withdrawn or transferred from
the Guaranteed Account prior to the maturity date will be subject to an MVA.
However, only a positive aggregate MVA will be applied to transfers made due to
annuitization under one of the lifetime Annuity Options described in item (2)
above.
The Company reserves the right to limit the number of investment options
selected during the Accumulation Period. At this time there is no limit on the
number of options selected during the Accumulation Period, but the number of
investment options that may be selected at any one time by a Certificate Holder
presently is limited to 18. Under the Guaranteed Account, each guaranteed term
is counted as one funding option. If a guaranteed term matures, and is renewed
for the same term, it will not count as an additional investment option.
Transfers of the Guaranteed Account values on or within one calendar month
of a term's maturity date are not counted as one of the 12 free transfers of
accumulated values in the Account.
By notifying us at least 30 days prior to the Annuity Date, you may elect a
variable annuity and have amounts that have been accumulating under the
Guaranteed Account transferred to one or more of the Subaccounts available
during the Annuity Period. The Guaranteed Account cannot be used as an
investment option during the Annuity Period. Transfers made due to the election
of a lifetime Annuity Option will be subject to only a positive aggregate MVA.
DEATH BENEFIT
Full and partial withdrawals and transfers made from the Guaranteed
Account within six months after the date of the Annuitant's death will be the
greater of:
(1) the aggregate MVA amount (i.e., the sum of all market value adjusted
amounts calculated due to a withdrawal of amounts) which may be greater or
less than the Account Value of those amounts; or
(2) the applicable portion of the Account Value attributable to the Guaranteed
Account.
After the six-month period, the surrender or transfer amount will be
adjusted for the aggregate MVA amount, which may be greater or less than the
Account Value of those amounts.
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DISTRIBUTION
Aetna Life Insurance and Annuity Company ("ALIAC") is the principal
underwriter of the Contract. ALIAC is registered with the Securities and
Exchange Commission under the Securities Exchange Act of 1934 as a broker-
dealer, and is a member of the National Association of Securities Dealers, Inc.
From time to time, ALIAC may offer customers of certain broker-dealers
special guaranteed rates in connection with the Guaranteed Account offered
through the Contracts, and may negotiate different commissions for these
broker-dealers.
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APPENDIX B
FIXED ACCOUNT
================================================================================
The Fixed Account is an investment option available during the Accumulation
Period under Contracts offered in certain states. 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 in effect
when actually applied to the Fixed Account 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 "Investment Options.")
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 amounts in the
Fixed Account will be transferred into the Aetna Money Market VP Subaccount
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 been accumulated under the Fixed Account transferred to one or more of the
investment options available during the Annuity Period to provide variable
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 allow provided
by federal law.
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APPENDIX C
DESCRIPTION OF UNDERLYING FUNDS
================================================================================
The investment results of the Funds described below are likely to differ
significantly and there is no assurance that any of the Funds will achieve their
respective investment objectives. Except where otherwise noted, all of the Funds
are diversified, as defined in the 1940 Act.
Aetna Balanced VP, Inc. (formerly Aetna Investment Advisers Fund, Inc.)
Investment Objective
Seeks to maximize investment return, consistent with reasonable safety of
principal by investing in a diversified portfolio of one or more of the
following asset classes: stocks, bonds, and cash equivalents, based on the
investment adviser's judgment of which of those sectors or mix thereof offers
the best investment prospects.
Policies
Assets are allocated among common and preferred stocks, bonds, U.S.
Government securities and derivatives, and money market instruments. The Fund
may also invest in when-issued or delayed-delivery securities. The Fund
generally will maintain at least 25 percent of its total assets in fixed income
securities.
Risks
There can be no assurance that the investment adviser will always allocate
assets to the best performing sectors. The Fund's performance would suffer if a
major proportion of its assets were allocated to stocks in a declining market
or, similarly, if a major portion of its assets were allocated to bonds in a
time of adverse interest rate movement. High -yield bonds involve additional
investment risk. Foreign securities may involve certain additional risks. Such
risks include: currency fluctuations and related currency conversion costs; less
liquidity; price or income volatility; less government supervision and
regulation of foreign stock exchanges, brokers and listed companies; adverse
foreign political and economic developments; different accounting procedures and
auditing standards; and less publicly available information about foreign
issuers.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Income Shares d/b/a Aetna Bond VP
Investment Objective
Seeks to maximize total return, consistent with reasonable risk, through
investments in a diversified portfolio consisting primarily of debt securities.
Policies
The Fund will invest at least 65 percent of its total assets in debt
securities. It is anticipated that the portfolio's effective average maturity
will normally be between three and ten years. The Fund will normally invest at
least 70 percent of its assets in one or more of the following: a) debt
securities or obligations that are rated at the time of purchase within the four
highest categories assigned by Moody's Investors Service, Inc., Standard &
Poor's Corporation, or other rating agencies, or, if not rated, that are
considered by the investment adviser to be of comparable quality; b) securities
of, or guaranteed by, the U.S. Government, its agencies or instrumentalities; c)
marketable securities or obligations of, or guaranteed by, foreign governments;
d) commercial paper and other short-term investments having a maturity of less
than one year that are considered by the investment adviser to be investment
grade; and, e) cash or cash equivalents. May invest up to 30 percent of its
total assets in high-yield bonds. May invest up to 25 percent of its total
assets in foreign debt and/or equity securities.
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Risks
The value of debt securities may be affected by changes in general interest
rates. High-yield bonds tend to offer higher yields than investment-grade bonds,
but additional risks are associated with them. Foreign securities may involve
certain additional risks. Such risks include: currency fluctuations and related
currency conversion costs; less liquidity; price or income volatility; less
government supervision and regulation of foreign stock exchanges, brokers and
listed companies; adverse foreign political and economic developments; different
accounting procedures and auditing standards; and less publicly available
information about foreign issuers.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Variable Fund d/b/a Aetna Growth and Income VP
Investment Objective
Seeks to maximize total return through investments in a diversified
portfolio of common stocks and securities convertible into common stock. It is
anticipated that capital appreciation and investment income will both be major
factors in achieving total return.
Policies
The Fund will invest principally in common stocks and securities
convertible into common stock that the investment adviser believes have
significant potential for capital appreciation and/or investment income. May
invest up to 25 percent of its total assets in foreign equity securities. The
Fund may invest in nonconvertible preferred stocks, debt securities, rights and
warrants; the Fund may maintain a reserve of cash and high-grade, short-term
debt securities and the Fund may purchase securities on a when-issued or
delayed-delivery basis.
Risks
Share prices will fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. Foreign
securities may involve certain additional risks. Such risks include: currency
fluctuations and related currency conversion costs; less liquidity; price or
income volatility; less government supervision and regulation of foreign stock
exchanges, brokers and listed companies; adverse foreign political and economic
developments; different accounting procedures and auditing standards; and less
publicly available information about foreign issuers.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Variable Encore Fund d/b/a Aetna Money Market VP
Investment Objective
Seeks to provide high current return, consistent with preservation of
capital and liquidity, through investment in high-quality money market
instruments.
Policies
The Fund will Invest primarily in: a) money market instruments that have a
maturity at the time of purchase, of 397 days or less (762 days or less for U.S.
government securities), and b) debt securities with a longer maturity, if the
Fund has the absolute right to sell such securities back to the issuer for at
least the face amount of the debt obligation within 397 days after the date of
purchase. At least 95 percent of total Fund assets are invested in high- quality
securities (those receiving the highest credit rating by any two rating agencies
or one if only one agency has rated the security). May invest up to 25 percent
of its total assets in foreign securities.
Risks
Yield will fluctuate with interest rates. The Fund is neither insured nor
guaranteed by the U.S. government. Foreign securities may involve certain
additional risks. Such risks include: currency fluctuations and related
currency conversion costs; less liquidity; price or income volatility; less
government supervision and regulation of foreign stock exchanges, brokers and
listed companies; adverse foreign political and economic developments;
different accounting procedures and auditing standards; and less publicly
available information about foreign issuers.
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An investment in the Fund is neither insured nor guaranteed by the U.S.
Government.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Generation Portfolios, Inc.--Aetna Ascent VP (formerly Aetna Ascent
Variable Portfolio)
Investment Objective
Seeks to provide capital appreciation. The Portfolio is designed for
investors who have an investment horizon exceeding 15 years and who have a high
level of risk tolerance.
Policies
Invests assets within specified maximum percentage ranges and adjusts the
allocation mix in response to market trends and indicators:
[bullet] Equity securities are chosen on the basis of their potential for
capital appreciation.
[bullet] Fixed income securities may include obligations of the U.S. and
foreign governments as well as obligations of corporations and
high-yield bonds.
[bullet] Money market investments are high quality and present minimal
credit risk.
The benchmark portfolio is 80 percent equities and 20 percent fixed income
under neutral market conditions.
Risks
Equity securities are subject to a decline in the stock market or in the
value of the company, while debt securities may be affected by changes in
general interest rates and in the creditworthiness of the issuer. High-yield
bonds have additional credit risks, including lack of liquidity, greater
likelihood of default and increased sensitivity to difficult economic and
corporate developments.
Foreign securities involve currency and other special risks not present in
domestic securities. Real estate securities may be subject to the same risks
associated with direct ownership of real estate.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Generation Portfolios, Inc.--Aetna Crossroads VP (formerly Aetna
Crossroads Variable Portfolio)
Investment Objective
Seeks to provide total return (i.e., income and capital appreciation, both
realized and unrealized). The Portfolio is designed for investors who have an
investment horizon exceeding ten years and who have a moderate level of risk
tolerance.
Policies
Invests assets within specified maximum percentage ranges and adjusts the
allocation mix in response to market trends and indicators:
[bullet] Equity securities are chosen on the basis of their potential for
capital appreciation.
[bullet] Fixed income securities may include obligations of the U.S. and
foreign governments as well as obligations of corporations and
high-yield bonds.
[bullet] Money market investments are high quality and present minimal
credit risk.
The benchmark portfolio is 60 percent equities and 40 percent fixed income
under neutral market conditions.
Risks
Equity securities are subject to a decline in the stock market or in the
value of the company; debt securities may be affected by changes in general
interest rates and in the creditworthiness of the issuer. High-yield bonds have
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additional credit risks. International securities involve currency and other
special risks not present in domestic securities. Real estate securities may be
subject to the same risks associated with direct ownership of real estate.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Generation Portfolios, Inc.--Aetna Legacy VP (formerly Aetna Legacy
Variable Portfolio)
Investment Objective
Seeks to provide total return consistent with preservation of capital. The
Portfolio is designed for investors who have an investment horizon exceeding
five years and who have a low level of risk tolerance.
Policies
Invests assets within specified maximum percentage ranges and adjusts the
allocation mix in response to market trends and indicators:
[bullet] Equity securities are chosen on the basis of their potential for
capital appreciation.
[bullet] Fixed income securities may include obligations of the U.S. and
foreign governments as well as obligations of corporations and
high-yield bonds.
[bullet] Money market investments are high-quality and present minimal
credit risk.
The benchmark portfolio is 40 percent equities and 60 percent fixed income
under neutral market conditions.
Risks
Equity securities are subject to a decline in the stock market or value of
the issuer; debt securities may be affected by changes in general interest
rates and creditworthiness of the issuer. High-yield bonds have additional
credit risks. International securities involve currency and other special risks
not present in domestic securities. Real estate securities may be subject to
the same risks associated with direct ownership of real estate.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Variable Portfolios, Inc.--Aetna Growth VP (formerly Aetna Variable
Growth Portfolio)
Investment Objective
Seeks growth of capital through investment in a diversified portfolio of
common stocks and securities convertible into common stocks believed to offer
growth potential.
Policies
Normally invests at least 65 percent of its total assets in common stocks
that have significant potential for capital growth. May also invest in
convertible and nonconvertible preferred stocks. May buy and sell put and call
options, and stock index futures and options. May enter into repurchase
agreements and invest up to 25 percent of its total assets in foreign
securities. Will not invest more than 15 percent of the total value of its
assets in high-yield bonds.
Risks
Equity securities are subject to a decline in the stock market or in the
value of the company and preferred stocks have price risk and some interest
rate and credit risk. Foreign investing involves certain additional risks not
present in U.S. securities. Such risks may include: currency fluctuations and
related currency conversion costs: less liquidity; price or income volatility;
less government supervision and regulation of foreign stock exchanges, brokers
and listed companies; adverse foreign political and economic developments;
different accounting procedures and auditing standards; and less publicly
available information about foreign issuers. High-yield bonds may provide a
higher return, but have added risk. Derivatives may experience greater price
swings and may be less liquid than other securities.
Investment Adviser: Aeltus Investment Management, Inc.
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Aetna Variable Portfolios, Inc.--Aetna Index Plus Large Cap VP (formerly
Aetna Variable Index Plus Portfolio)
Investment Objective
Seeks to outperform the total return performance of publicly traded common
stocks represented in the Standard & Poor's 500 Composite Stock Price Index
(S&P 500).
Policies
The Portfolio attempts to be fully invested in common stocks and normally
invests at least 90 percent of its assets in certain common stocks represented
in the S&P 500. Portfolio managers will attempt to outperform the S&P 500 by
creating a portfolio that has similar market risk characteristics to the S&P
500, but will use a disciplined quantitative analysis to identify those stocks
having the greatest likelihood of either outperforming or underperforming the
market.
Risks
Because the Portfolio invests in common stocks, it is subject to the
possibility that common stock prices will decline over short or even extended
periods. The U.S. stock market tends to be cyclical, with periods when stock
prices generally rise and periods when prices generally decline. There is no
assurance that the Portfolio's objectives will be met.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Variable Portfolios, Inc.--Aetna International VP
Investment objective
Seeks long-term capital growth primarily though investment in a
diversified portfolio of common stocks principally traded in countries outside
of the United States. The Portfolio will not target any given level of current
income.
Policies
Invests at least 65 percent of its total assets among securities
principally traded in three or more countries outside of North America. The
Portfolio will invest primarily in equity securities, including securities
convertible into stocks. The Portfolio will invest in a broad spectrum of
companies and industries. Further, from time to time, the Portfolio may hold up
to 10 percent of its total assets in long-term debt securities with an S&P or
Moody's rating of AA/Aa or above, or, if unrated, are considered by the
investment adviser to be of comparable quality. Additionally, the Portfolio may
invest in options, futures, enter into repurchase agreements and engage in
currency hedging.
Risks
Equity securities are subject to a decline in the stock market or in the
value of the company. Investments in foreign securities involve certain
additional risks. Such risks may include: currency fluctuations and related
currency conversion costs; less liquidity; price or income volatility; less
government supervision and regulation of foreign stock exchanges, brokers and
listed companies; adverse foreign economic and political developments;
different accounting procedures and auditing standards; and less publicly
available information about foreign issuers. Derivatives may experience greater
price swings and may be less liquid than other securities.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Variable Portfolios, Inc.--Aetna Real Estate Securities VP
Investment Objective
Seeks maximum total return primarily through investment in a diversified
portfolio of equity securities issued by real estate companies, the majority of
which are real estate investment trusts (REITs).
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Policies
Normally invests at least 65 percent of total assets in income-producing
equity securities of publicly-traded companies "principally engaged" in the real
estate industry, including those companies that, at the time of purchase, derive
a significant proportion (at least 50 percent) of their revenues or profits from
real estate operations or related services. The Portfolio may invest in
convertible securities and preferred stock. Additionally, the Portfolio may
invest in options and futures, enter into repurchase agreements, and invest up
to 25 percent of its total assets in foreign securities. The Portfolio will not
invest more than 15 percent of the total value of its assets in high-yield
bonds.
Risks
There are a number of risk factors to be considered when investing in Real
Estate Securities VP. Derivatives may experience greater price swings than other
securities and may be less liquid than other securities. Risks involved in
futures contracts include, but are not limited to: transactions to close out
futures contracts may not be able to be effected at favorable prices; possible
reduction in a fund's total return and yield; possible reduction the value of
the futures instrument, and potential losses in excess of the amount invested in
the futures contracts themselves. Writing call options involves the risk of not
being able to effect closing transactions at favorable prices or to participate
in the appreciation of the underlying securities. Purchasing put options
involves the risk of losing the entire purchase price of the option. High-yield
bonds have additional risks associated with them, including but not limited to:
lack of liquidity; an unpredictable secondary market and a higher risk of
default. Special consideration to an investment in real estate include those
risks associated with the direct ownership of real estate: declines in the value
of real estate, risks related to general and local economic conditions,
over-building and increased competition, increases in property taxes and
operating expenses, changes in zoning laws and other risks particular to this
market. The value of securities of companies which service the real estate
industry may also be affected by such risks.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Variable Portfolios, Inc.--Aetna Small Company VP (formerly Aetna
Variable Small Company Portfolio)
Investment Objective
Seeks growth of capital primarily through investment in a diversified
portfolio of common stocks and securities convertible into common stocks of
companies with smaller market capitalizations.
Policies
Normally invests at least 65 percent of its total assets in the common
stock of companies with equity market capitalizations at the time of purchase of
$1 billion or less. May also invest in convertible and nonconvertible preferred
stock. The securities of small capitalization companies may be in an early
developmental stage or older companies entering a new stage of growth due to
management changes, new technology, products, or markets. Such companies may
also be undervalued due to poor economic conditions, market decline, or actual
or unanticipated unfavorable developments affecting the companies. May invest in
lower-risk derivatives for hedging and other investment purposes.
Risks
Equity securities are subject to a decline in the stock market or in the
value of the company. Although securities of small capitalization companies tend
to offer greater potential for growth than securities of larger, more
established issuers, there are additional risks associated with them. These
include: limited marketability, more abrupt or erratic market movements than
securities of larger capitalization companies, and less publicly available
information about the issuer. These companies may also be dependent on
relatively few products or services, have limited financial resources and lack
of management depth, and may have less of a track record or historical pattern
of performance. Derivatives may experience greater price swings and may be less
liquid than other securities.
Investment Adviser: Aeltus Investment Management, Inc.
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Aetna Variable Portfolios, Inc.--Aetna Value Opportunity VP
(formerly Aetna Variable Capital Appreciation Portfolio)
Investment Objective
Seeks growth of capital primarily through investment in a diversified
portfolio of common stocks and securities convertible into common stock.
Policies
Normally invests at least 65 percent of its net assets in common stocks.
May also invest in convertible and non-convertible preferred stocks. The
Portfolio will use a value oriented approach to stock selection. The Portfolio
may invest up to 25 percent of its total assets in foreign securities, buy and
sell put and call options on stock indices and on individual stocks, purchase
futures contracts, options contracts, engage in currency hedging and purchase
securities on a "when-issued," delayed-delivery or forward-commitment basis.
Risks
Equity securities are subject to a decline in the stock market or in the
value of the issuer, and preferred stocks have price risk and some interest
rate and credit risk. The value of debt securities may be affected by changes
in general interest rates and in the creditworthiness of the issuer.
Investments in securities of foreign issuers or securities denominated in
foreign currencies involve risks not present in domestic markets. Such risks
include: currency fluctuations and related currency conversion costs; less
liquidity; price or income volatility; less government supervision and
regulation of foreign stock exchanges, brokers and listed companies; adverse
foreign political and economic developments; different accounting procedures
and auditing standards; and less publicly available information about foreign
issuers.
Investment Adviser: Aeltus Investment Management, Inc.
Calvert Social Balanced Portfolio (formerly Calvert Responsibly
Invested Balanced Portfolio)
Investment Objective
Seeks to achieve a total return above the rate of inflation through an
actively managed, nondiversified portfolio of common and preferred stocks,
bonds and money market instruments which offer income and capital growth
opportunity and which satisfy the social criteria established for the
Portfolio.
Policies
The Portfolio may purchase both common and preferred stocks. Although
there is no predetermined percentage of assets allocated to stocks, bonds, or
money market instruments, the Portfolio will invest a least 25 percent of its
assets in senior fixed income securities. The Portfolio normally invests in
investment-grade bonds rated in one of the four highest rating categories by
Standard & Poor's Corporation or by Moody's Investors Service, Inc. or, if not
rated, that are determined by the Portfolio's investment adviser to be of
comparable quality. The Portfolio may invest up to 10 percent of its assets in
foreign securities.
Risks
Since the Portfolio is nondiversified, the value of the shares may be more
susceptible to any single economic, political, or regulatory event than the
shares of a diversified portfolio. Fixed income investments are subject to
interest rate risk. There are also risks involved in investing in foreign
securities. These include currency risks, less publicly available information
about foreign companies, different audit and financial reporting standards, and
less government supervision and regulation.
Investment Adviser: Calvert Asset Management Company, Inc.
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Fidelity Investments Variable Insurance Products Fund--Equity-Income Portfolio
Investment Objective
Seeks reasonable income by investing primarily in income-producing equity
securities. Also considers the potential for capital appreciation.
Policies
Seeks to achieve a yield that will beat that of the Standard & Poor's (S&P)
500 Index. The Portfolio normally invests at least 65 percent of its total
assets in income-producing equity securities. The Portfolio has the flexibility,
however, to invest the balance in all types of domestic and foreign securities,
including bonds. Portfolio managers do not expect to invest in debt securities
of companies that do not have proven earnings or credit.
Risks
Share prices will fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. The value of
bonds fluctuates based on changes in interest rates and in the credit quality of
the issuer. Foreign securities, foreign currencies and securities issued by U.S.
entities with substantial foreign operations may involve additional risks. These
include political or economic risks, fluctuations in foreign currencies
withholding or other taxes, operational risks, increased regulatory burdens, and
less stringent investor protection and disclosure standards of foreign markets.
Investment Adviser: Fidelity Management & Research Company
Fidelity Investments Variable Insurance Products Fund--Growth Portfolio
Investment Objective
Seeks capital appreciation by investing in common stock, although its
investments are not restricted to any one type of security.
Policies
The Portfolio may, however, pursue growth in larger companies that hold a
strong position in the market or industry. These may be found in mature or
declining industries. Companies that have strong growth potential often have new
products, technologies, distribution channels, or other opportunities.
Generally, these domestic and foreign companies tend to be small- and mid-sized
companies that have higher than average price/earnings (P/E) ratios. A high P/E
ratio means that the stock is more expensive than average relative to the
company's earnings. May not invest more than 50 percent of its assets in foreign
securities.
Risks
Stock values may fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. The market
prices of stocks with high P/E ratios may be particularly sensitive to economic
market or company news. Foreign securities, foreign currencies, and securities
issued by U.S. entities with substantial foreign operations may involve
additional risks. These include political or economic risks, fluctuations in
foreign currencies, withholding or other taxes, operational risks, increased
regulatory burdens, and less stringent investor protection and disclosure
standards of foreign markets.
Investment Adviser: Fidelity Management & Research Company
Fidelity Investments Variable Insurance Products Fund--High Income Portfolio
Investment Objective
Seeks to obtain a high level of current income by investing primarily in
high-yielding, lower-rated, fixed income securities, while also considering
growth of capital.
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Policies
Invests primarily in all types of income-producing debt securities,
preferred stocks, and convertible securities. The Portfolio normally invests at
least 65 percent of its assets in these securities. If consistent with its
investment objectives, the Portfolio may also invest in common stocks, other
equity securities, and debt securities that are not currently paying interest
but that are expected to do so in the future. The Portfolio manager focuses on
assembling a portfolio of income-producing securities that it believes will
provide the best tradeoff between risk and return within the range of securities
that are eligible investments for the Portfolio. The Portfolio may invest up to
50 percent of its total assets in foreign securities.
Risks
Yield and share price change daily and are based on changes in interest
rates, market conditions, other economic and political news, and on the quality
and maturity of the Portfolio's investments. Lower quality debt securities (also
known as "junk bonds") are considered to have speculative characteristics and
involve greater risk of default or price changes. Foreign securities, foreign
currencies and securities issued by U.S. entities with substantial foreign
operations may involve additional risks. These include political or economic
risks, fluctuations in foreign currencies, withholding or other taxes,
operational risks, increased regulatory burdens, and less stringent investor
protection and disclosure standards of foreign markets.
Investment Adviser: Fidelity Management & Research Company
Fidelity Investments Variable Insurance Products Fund--Overseas Portfolio
Investment Objective
Seeks long-term growth by investing mainly in foreign securities.
Policies
Normally invests at least 65 percent of the Portfolio's total assets in
securities of issuers whose principal activities are located outside the United
States. Expects to invest a majority of its assets in equity securities, but may
also invest in debt securities of any quality. Invests in securities of both
developed and emerging markets. May invest in the securities of any issuer,
including companies and other business organizations as well as governments and
government agencies. Will tend to focus on the equity securities of both large
and small companies. May invest in short-term debt securities and money market
instruments for cash management purposes. When allocating the Portfolio's
investments among countries and regions, the Portfolio managers consider the
size of the market in each country and region relative to the size of the
international market as a whole. May not invest more than 25 percent of its
total assets in any one industry.
Risks
Stock values fluctuate in response to the activities of individual
companies, and general market and economic conditions. International funds have
increased economic and political risks because they are exposed to events and
factors in the various world markets, especially in emerging markets. In
addition, changes in the value of foreign currencies can significantly affect
the Portfolio's share price. The Portfolio seeks to reduce investment risk by
diversifying its holdings among many companies and industries.
Investment Adviser: Fidelity Management & Research Company
Fidelity Investments Variable Insurance Products
Fund II--Asset Manager Portfolio
Investment Objective
Seeks high total return with reduced risk over the long term by allocating
its assets among domestic and foreign stocks, bonds and short-term money market
instruments.
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Policies
Invests in a diverse range of stocks, bonds, short-term, and money market
instruments, issued in the United States and abroad. The stock class includes
equity securities of all types. The bond class includes all varieties of fixed
income instruments with maturities of more than three years. The short-term
instruments class includes all types of short-term instruments with remaining
maturities of three years or less. The Portfolio has a neutral mix which
represents the way investments generally will be allocated over the long term.
This mix will vary over short-term periods--within defined ranges--based on the
current outlook for the different markets. May invest up to 50 percent of its
total assets in foreign securities.
Risks
The Portfolio seeks to reduce its overall risk by diversifying among
different types of investments, but aggressively invests in a wide variety of
security types, including stocks and bonds issued in developed and developing
countries. Stock values fluctuate in response to the activities of individual
companies and general market and economic conditions. The value of bonds and
short-term instruments fluctuates based on changes in interest rates and in the
credit quality of the issuer. Foreign securities, foreign currencies, and
securities issued by U.S. entities with substantial foreign operations may
involve additional risks.
Investment Adviser: Fidelity Management & Research Company
Fidelity Investments Variable Insurance Products Fund II--Contrafund Portfolio
Investment Objective
Seeks maximum total return over the long term by investing mainly in
securities of companies whose value the investment adviser believes is not
fully recognized by the public.
Policies
Usually invests in common stock and securities convertible into common
stock, but may invest in any type of security that may produce capital
appreciation. Seeks companies that are: 1) unpopular, but that may improve due
to developments such as a change in management, a new product line, or an
improved balance sheet; or 2) recently popular, but temporarily out of favor
due to short-term or one-time factors; or, undervalued compared to other
companies in the same industry. May not invest more than 25 percent of its
total assets in any one industry.
Risks
Stock values may fluctuate in response to the activities of an individual
company or general market and economic conditions. The Portfolio's strategy can
lead to investments in small- and medium-sized companies, which carry more risk
than larger ones. Generally, such companies rely on limited product lines and
markets, financial resources or other factors. This may make them more
susceptible to downturns. Foreign securities, foreign currencies, and
securities issued by U.S. entities with substantial foreign operations may
involve additional risks. These include political or economic risks,
fluctuations in foreign currencies, withholding or other taxes, operational
risks, increased regulatory burdens, and less stringent investor protection and
disclosure standards of foreign markets. Seeks to manage risk by diversifying
its holdings among many companies and industries.
Investment Adviser: Fidelity Management & Research Company
Fidelity Investments Variable Insurance Products Fund II--Index 500 Portfolio
Investment Objective
Seeks to provide investment results that correspond to the total return of
common stocks publicly traded in the United States by duplicating the
composition and total return of the Standard & Poor's Composite Index of 500
Stocks (S&P 500).
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Policies
Normally invests at least 80 percent (65 percent if Portfolio assets are
below $20 million) of the Portfolio's assets in equity securities of companies
that comprise the S&P 500. In seeking a 98 percent or better long-term
correlation of the Portfolio's total return to that of the S&P 500, The
investment adviser employs a "passive" or "indexing" approach and tries to
allocate its assets similarly to those of the index. The Portfolio's composition
may not always be identical to that of the index. If extraordinary circumstances
warrant, the investment adviser may exclude a stock held in the S&P 500 and
include a similar stock in its place if doing so will help the Portfolio achieve
its objective. The investment adviser monitors the correlation between the
performance of the Portfolio and the S&P 500 on a regular basis. Although the
Portfolio focuses on common stocks, it may invest in other equity securities and
other types of instruments. The Portfolio may invest up to 50 percent of its
assets in foreign securities.
Risks
Stock values fluctuate in response to the activities of individual
companies, and general market and economic conditions. Foreign securities,
foreign currencies, and securities issued by U.S. entities with substantial
foreign operations may involve additional risks and considerations. These
include risks related to political or economic conditions in foreign countries,
fluctuations in foreign debt currencies, withholding or other taxes, operational
risks, increased regulatory burdens, and potentially less stringent investor
protection and disclosure standards of foreign markets.
Investment Adviser: Fidelity Management & Research Company; Subadviser:
Bankers Trust Company
Janus Aspen Series--Aggressive Growth Portfolio
Investment Objective
Seeks long-term growth of capital.
Policies
A nondiversified portfolio that invests primarily in common stocks of
foreign and domestic companies selected for their growth potential. Normally
invests at least 50 percent of its equity assets in securities issued by
medium-sized companies--those whose market capitalizations fall within the range
of companies in the Standard and Poor's (S&P) Mid Cap 400 Index. May invest, to
a lesser degree, in other types of securities including preferred stocks,
warrants, convertible securities, and debt securities. May invest up to 35
percent of its net assets in high-yield/high-risk debt securities ("junk
bonds"). May at times hold substantial positions in cash equivalents or
interest-bearing securities.
Risks
Stock values may fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. Historically,
common stocks have provided greater long-term returns and have entailed greater
short-term risks than other investment choices. Smaller or newer issuers are
more likely to realize more substantial growth as well as suffer more
significant losses than larger or more established issuers. Investments in such
companies can be both more volatile and more speculative. Investments in foreign
securities, including those of foreign governments, involve greater risks than
investing in comparable domestic securities. These risks include currency,
political, economic, regulatory, and market risk factors. High-yield/high-risk
securities are generally more dependent on the ability of the issuer to meet
interest and principal payments (i.e., credit risk). Issuers of high-yield
securities may not be as strong financially as those issuing bonds with higher
credit ratings. They are more vulnerable to real or perceived economic changes,
political changes or other adverse developments.
Investment Adviser: Janus Capital Corporation
Janus Aspen Series--Balanced Portfolio
Investment Objective
Seeks long-term capital growth, consistent with preservation of capital and
balanced by current income.
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Policies
Normally invests 40-60 percent of its assets in securities selected
primarily for their growth potential and 40-60 percent of its assets in
securities selected primarily for their income potential. Invests in common
stocks of domestic and foreign companies. May invest to a lesser degree in other
types of securities including preferred stocks, warrants, convertible
securities, and debt securities when the portfolio manager perceives an
opportunity for capital growth. Assets may shift between the growth and income
components of the Portfolio based on the portfolio manager's analysis of
relevant market financial and economic conditions. The portfolio manager
generally takes a "bottom up" approach to building the Portfolio, seeking to
identify individual companies with earnings growth potential that may not be
recognized by the market at large.
Risks
Share prices will fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. Investments
in foreign securities, including those of foreign governments, involve greater
risks than investing in comparable domestic securities. These risks include
currency, political, economic, regulatory and market risk factors. Risk is
reduced through diversification.
Investment Adviser: Janus Capital Corporation
Janus Aspen Series--Flexible Income Portfolio
Investment Objective
Seeks to obtain maximum total return, consistent with the preservation of
capital.
Policies
The Portfolio invests at least 80 percent of its assets in income-producing
securities which may include: corporate bonds and notes, preferred stock,
income-producing common stocks, debt securities convertible or exchangeable into
equity securities, and debt securities with the right to acquire equity
securities as evidenced by warrants attached to or acquired with the securities.
May invest to a lesser degree in common stocks, other equity securities, or debt
securities not currently paying dividends or interest. May purchase securities
of any maturity and quality. Average maturity and quality of its portfolio may
vary substantially. May invest without limit in foreign securities, including
those of corporate and government issuers, as well as in high-yield/high-risk
securities. May have substantial holdings of such securities, as well as in
high-yield/high-risk securities (or "junk bonds") which are debt securities
rated below investment grade by the primary rating agencies such as Standard &
Poor's and Moody's.
Risks
Foreign investing involves risks that are different in some respects from
investments in securities of U.S. issuers including: economic/political
volatility; less government regulation and supervision of foreign stock
exchanges, brokers and listed companies; and price, interest rate and currency
risk. The value of lower-quality securities generally depends more on the
ability of the issuer to meet interest and principal payments than is true for
higher-quality securities. Issuers of high-yield securities are more vulnerable
to real or perceived economic and political changes or adverse developments
specific to the issuer. In the event of a default, the Portfolio would
experience a reduction of its income and a decline in the market value of the
defaulted securities.
Investment Adviser: Janus Capital Corporation
Janus Aspen Series--Growth Portfolio
Investment Objective
Seeks long-term growth of capital in a manner consistent with the
preservation of capital.
Policies
Invests in common stocks of companies of any size, although it generally
invests in larger, more established issuers. Invests primarily in stocks of
domestic and foreign companies selected for their growth potential. May at times
hold substantial positions in cash equivalents or interest bearing securities.
May invest to a lesser degree in other
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types of securities including preferred stocks, warrants, convertible
securities, and debt securities when its portfolio manager perceives an
opportunity for capital growth. Using a "bottom up" approach to building the
Portfolio, the portfolio manager seeks to identify individual companies with
earnings growth potential that may not be recognized by the market at large.
Securities are generally selected without regard to any defined industry
sector. Securities are selected solely for their capital growth potential;
investment income is not a consideration.
Risks
Share prices will fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. Historically,
common stocks have provided greater long-term returns and have entailed greater
short-term risks than other investment choices. Smaller or newer issuers are
more likely to realize more substantial growth as well as suffer more
significant losses than larger or more established issuers. Investments in such
companies can be both more volatile and more speculative. Investments in foreign
securities, including those of foreign governments, involve greater risks than
investing in comparable domestic securities. These risks include currency,
political, economic, regulatory and market risk factors. Risk is reduced through
diversification.
Investment Adviser: Janus Capital Corporation
Janus Aspen Series--Worldwide Growth Portfolio
Investment Objective
Seeks long-term growth of capital in a manner consistent with the
preservation of capital.
Policies
A diversified portfolio that invests primarily in common stocks of foreign
and domestic issuers. Invests worldwide in companies and organizations of any
size, regardless of country of organization or place of principal business
activity. Normally invests in issuers from at least five different countries,
including the United States. May at times invest in fewer than five countries or
even in a single country. May hold substantial positions in cash equivalents or
interest-bearing securities. May invest to a lesser degree in other types of
securities, including preferred stocks, warrants, convertible securities, and
debt securities, when the portfolio manager perceives an opportunity for growth.
May invest up to 35 percent of net assets in high-yield/high-risk securities
(also called "junk bonds"). May invest without limit in foreign equity and debt
securities.
Risks
Stock values may fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. Historically,
common stocks have provided greater long-term returns and have entailed greater
short-term risks than other investment choices. Investment in foreign
securities, including those of foreign governments, involve greater risks than
investing in comparable domestic securities. These include currency, political,
economic, regulatory and market risk factors. High-yield/high-risk securities
are generally more dependent on the ability of the issuer to meet interest and
principal payments (i.e., credit risk). Issuers of high-yield securities may not
be as strong financially as those issuing bonds with higher credit ratings. They
are more vulnerable to real or perceived economic changes, political changes or
other adverse developments.
Investment Adviser: Janus Capital Corporation
MFS Total Return Series
Investment Objective
Seeks to provide above average income (compared to a portfolio invested
entirely in equity securities) consistent with the prudent employment of
capital. Its secondary objective is to provide a reasonable opportunity for
growth of capital and income.
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Policies
Under normal market conditions, at least 25 percent of the Series' assets
will be invested in fixed income securities, and at least 40 percent (but no
more than 75 percent) of the Series' assets will be invested in equity
securities. The Series invests in a broad list of securities, including
short-term obligations. The list may be diversified not only by companies and
industries, but also by type of security. May vary the percentage of assets
invested in any one type of security depending on the Adviser's interpretation
of economic and money market conditions, fiscal and monetary policy, and
underlying security values. The Series debt investment may consist of both
investment grade securities and securities that are lower rated or unrated
categories (commonly known as "junk bonds"). May hold up to 20 percent of its
assets in foreign securities (including emerging market securities and Brady
Bonds) which are not traded on a U.S. exchange.
Risks
Investing in the securities of foreign issuers generally involves risks not
ordinarily associated with investing in securities of domestic issuers. These
include changes in currency rates, exchange control regulations, governmental
administration or economic or monetary policy (in the U.S. or abroad), or
circumstances in dealing between nations. Other considerations include limited
information about foreign issuers, higher brokerage costs, different accounting
standards, and thinner trading markets.
Investment Adviser: Massachusetts Financial Services Company ("MFS")
MFS World Governments Series
Investment Objective
Seeks not only preservation but also growth of capital, together with
moderate current income.
Policies
The Series seeks to achieve its investment objective through a
professionally managed, internationally diversified portfolio consisting
primarily in debt securities and, to a lesser extent, equity securities. Under
normal circumstances, the Series invests at least 80 percent of its assets in
debt securities. The Series may invest up to 100 percent (although it generally
expects to invest not more than 80 percent) of its net assets in foreign
securities. At least 65 percent of the Series' assets will be invested in at
least three different countries, one of which may be the U.S., except when the
Adviser believes that investing for temporary defensive purposes is appropriate.
U.S. assets will be invested in high-quality debt securities, and the remainder
of the assets will be diversified among countries where opportunities for total
return are expected to be most attractive. It is currently expected that
investments in foreign countries will be primarily in government securities to
minimize credit risks.
Risks
Investing in securities of foreign issuers generally involves risks not
ordinarily associated with investing in securities of domestic issuers. These
include changes in currency rates, exchange control regulations, governmental
administration or economic or monetary policy (in the U.S. or abroad), or
circumstances in dealing between nations. Other considerations include limited
information about foreign issuers, higher brokerage costs, different accounting
standards, and thinner trading markets.
Investment Adviser: Massachusetts Financial Services Company ("MFS")
Oppenheimer Aggressive Growth Fund
(formerly Oppenheimer Capital Appreciation Fund)
Investment Objective
Seeks to achieve capital appreciation by investing in "growth-type"
companies.
Policies
"Growth-type" companies are believed to have relatively favorable
long-term prospects for increasing demand for their goods or services, or to be
developing new products, services, or markets and normally retain a relatively
larger portion of their earnings for research, development, and investment in
capital assets. The Fund will invest no more
- --------------------------------------------------------------------------------
43
<PAGE>
than 25 percent of its total assets in foreign securities or in government
securities of any foreign country or in obligations of foreign banks.
Risks
Stock prices will fluctuate. Additional risk is present in growth-type
investments since the price of the security may decline if the anticipated
development fails to occur. Investing in small, unseasoned companies (those
that have been in operation for less than three years, counting the operations
of any predecessors) may have limited liquidity, and the prices of these
securities may be volatile. Foreign securities markets may be less liquid and
more volatile than markets in the U.S. Risks of foreign securities may include
foreign withholding taxation, changes in currency, less publicly available
information, and differences between domestic and foreign legal, auditing,
brokerage and economic standards.
Investment Adviser: OppenheimerFunds, Inc.
Oppenheimer Global Securities Fund
Investment Objective
Seeks long-term capital appreciation by investing a substantial portion of
its assets in securities of foreign issuers, "growth-type" companies, cyclical
industries and special situations which are considered to have appreciation
possibilities but which may be considered to be speculative.
Policies
Invests a substantial portion of its assets in securities of foreign
issuers, "growth-type" companies (those which, in the opinion of the manager,
have relatively favorable long-term prospects for increasing demand or which
develop new products and retain a significant part of earnings for research and
development), cyclical industries, and special investment situations which are
considered to have appreciation possibilities. May invest in foreign securities
and the relative amount of such investments will change from time to time.
Risks
Stock prices will fluctuate. Foreign securities markets may be less liquid
and more volatile than the markets in the U.S. Risks of foreign securities may
include foreign withholding taxation, changes in currency, less publicly
available information, and differences between domestic and foreign legal,
auditing brokerage and economic standards. Investments in small, unseasoned
companies (those that have been in operation for less than three years, counting
the operations of any predecessors) may have limited liquidity, and the prices
of these securities may be volatile.
Investment Adviser: OppenheimerFunds, Inc.
Oppenheimer Growth & Income Fund
Investment Objective
Seeks a high total return (which includes growth in the value of its
shares as well as current income) from equity and debt securities.
Policies
Invests primarily in equity and debt securities and focuses on all market
capitalization including small to medium capitalization companies. Equity
investments include common stocks, preferred stocks, convertible securities, and
warrants. Debt securities include bonds, participation interests, asset-backed
securities, private label mortgage backed securities and collateralized mortgage
obligations (CMOs), zero coupon securities, and U.S. Government obligations. The
proportion of equity and fixed income investments will vary based upon the
manager's evaluation of economic and market trends and perceived relative total
anticipated return from such types of investments. There is no minimum or
maximum percentage of assets that may, at any given time, be invested in either
type of investment. The Fund may invest in foreign securities without limit.
- --------------------------------------------------------------------------------
44
<PAGE>
Risks
Changes in overall market movements or interest rates, or factors affecting
a particular industry or issuer can affect the value of the Fund's investments
and their price per share. Equity investments are generally subject to a number
of risks, including the risk that values will fluctuate as a result of changing
expectations for the economy and individual issuers; stocks with small- to
medium-size capitalization may fluctuate more than large capitalization stocks.
Foreign investments are subject to the risk of adverse currency fluctuation and
additional risks and expenses in comparison to U.S. investments.
Investment Adviser: OppenheimerFunds, Inc.
Oppenheimer Strategic Bond Fund
Investment Objective
Seeks a high level of current income principally derived from interest on
debt securities and seeks to enhance such income by writing covered call
options on debt securities.
Policies
Invests principally in lower-rated, high-yield domestic debt securities
(commonly shown as "junk bonds"), U.S. Government securities, and foreign
government and corporate debt securities. Under normal circumstances, the Fund's
assets will be invested in each of these three sectors. However, Strategic Bond
Fund may occasionally invest up to 100 percent of its total assets in any one
sector, if, in the manager's judgment, the Fund has the opportunity to seek a
high level of current income without undue risk to principal. Accordingly, the
Fund's investments should be considered speculative. Distributable income will
fluctuate as the Fund's assets are shifted among the three sectors.
Risks
The higher yields and income sought by Strategic Bond Fund are generally
associated with securities in the lower-rating categories of the established
rating services. Such securities are considered speculative and involve greater
risk than lower-yielding, higher-rated fixed income securities, while providing
higher yields than such securities. Lower-rated securities may be less liquid,
and significant losses could be experienced if a substantial number of other
holders of such securities decide to sell at the same time. Issuers of
lower-rated or unrated securities are generally not as financially secure or
creditworthy as issuers of higher-rated securities.
Investment Adviser: OppenheimerFunds, Inc.
Portfolio Partners MFS Emerging Equities Portfolio
Investment Objective
Seeks to provide long-term growth of capital. Dividend and interest income
from portfolio securities, if any, is incidental to the Portfolio's investment
objective.
Policies
Normally invests at least 80 percent of its assets in common stocks of
companies the subadviser believes are in an early phase of their life cycle, but
that have the potential to become major enterprises. Such companies would be
expected to show earnings growth over time well above the growth rate of the
overall economy and inflation and have the products, technologies, management
and market and other opportunities usually necessary to become more widely
recognized as growth companies. Emerging growth companies can be of any size.
The Portfolio may invest in larger or more established companies whose rates of
earnings growth are expected to accelerate because of special factors or basic
changes in the economic environment. Up to 25 percent of the Portfolio's net
assets may be invested in foreign issuers.
Risks
Share prices will fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. Investing in
emerging growth companies involves greater risk than is customarily associated
with investments in more established companies. Such companies may have limited
product lines, markets or
- --------------------------------------------------------------------------------
45
<PAGE>
financial resources and they may be dependent on one person's management. In
addition, there may be less research available on many promising small- and
medium-sized emerging growth companies, making it more difficult to find and
analyze these companies. The securities of these companies may have limited
marketability and may be subject to more abrupt or erratic market movements
than securities of larger, more established growth companies or the market
averages in general. Foreign investing involves risks that are different in
some respects from investments in the securities of U.S. issuers. Risks include
less availability of information about issuers or foreign markets, economic and
political volatility, and price, interest rate and currency risk.
Investment Adviser: Aetna Life Insurance and Annuity Company; Subadviser:
Massachusetts Financial Services Company
Portfolio Partners MFS Research Growth Portfolio
Investment Objective
Seeks long-term growth of capital and future income.
Policies
Invests at least 65 percent of its total assets in common stocks, or
securities convertible into common stocks, of companies believed to possess
better than average prospects for long-term growth. A smaller proportion of the
assets may be invested in bonds, short-term obligations, preferred stocks or
common stocks whose principal characteristic is income production rather than
growth. In the case of both growth stocks and income issues, emphasis is placed
on the selection of progressive, well-managed companies. The Portfolio may
invest up to 20 percent of its net assets in foreign securities, including
emerging market securities.
Risks
Share prices will fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. Investing in
securities of foreign issuers generally involves risks not ordinarily
associated with investing in securities of domestic issuers. These include less
availability of information about issuers or foreign markets, economic and
political volatility, and price, interest rate and currency risk.
Investment Adviser: Aetna Life Insurance and Annuity Company; Subadviser:
Massachusetts Financial Services Company
Portfolio Partners MFS Value Equity Portfolio
Investment Objectives
Seeks capital appreciation. Dividend income, if any, is a consideration
incidental to the Portfolio's objective of capital appreciation.
Policies
While the Portfolio's policy is to invest at least 65 percent of its total
assets in common stocks, it may seek appreciation other types of securities
(such as fixed-income, convertible bonds, convertible preferred stocks and
warrants) when relative values make such purchases appear attractive, either as
individual issues or as types of securities in certain economic environments.
The Portfolio may invest in high-yield fixed-income (below investment grade),
but will invest no more than 25 percent of its net assets in these securities.
The Portfolio may also invest up to 50 percent (but generally expects to invest
not more than 25 percent) of its net assets in foreign securities.
Risks
Share prices will fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. Historically,
common stocks have provided greater long-term returns and have entailed greater
short-term risks than other investment choices. Lower-rated bonds have
speculated characteristics. Changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than in the case of higher-grade securities. Investing in
securities of foreign issuers generally involves risks not ordinarily
associated with investing in securities of domestic issuers. These include less
availability of
- --------------------------------------------------------------------------------
46
<PAGE>
information about issuers or foreign markets, economic and political
volatility, and price, interest rate and currency risk.
Investment Adviser: Aetna Life Insurance and Annuity Company; Subadviser:
Massachusetts Financial Services Company
Portfolio Partners Scudder International Growth Portfolio
Investment Objective
Seeks long-term growth of capital primarily through a diversified
portfolio of marketable foreign equity investments.
Policies
Invests in companies, wherever organized, that do business primarily
outside the United States. The Portfolio intends to diversify investments among
several countries and to have represented in its holdings business activities in
not less than three different countries. Does not intend to concentrate
investments in any particular industry. Invests primarily in equity securities
of established companies, listed on foreign exchanges, that the subadviser
believes have favorable characteristics. Although the Portfolio will consist
primarily of equity securities, it may also invest in fixed-income securities of
foreign governments and companies.
Risks
Share prices will fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. Historically,
common stocks have provided greater long-term returns and have entailed greater
short-term risks than other investment choices. Investing in foreign securities
may involve a greater degree of risk than investing in domestic securities.
Additional risk factors include the possibility of exchange rate fluctuations,
less publicly available information, more volatile markets, less securities
regulation and less favorable tax provisions.
Investment Adviser: Aetna Life Insurance and Annuity Company; Subadviser:
Scudder Kemper Investments, Inc.
Portfolio Partners T. Rowe Price Growth Equity Portfolio
Investment Objective
Seeks long-term growth of capital and, secondarily, to increase dividend
income by investing primarily in common stocks of well established growth
companies.
Policies
Under normal market conditions the Portfolio invests at least 65 percent of
its total assets in common stocks issued by a diversified group of growth
companies. The companies in which the Portfolio invests normally (but not
always) pay dividends, which are generally expected to rise in future years as
earnings increase. Most of its assets will be invested in U.S. common stocks.
However, the Portfolio may invest in foreign securities and convertible
securities and warrants, when the subadviser considers such investments
consistent with he Portfolio's investment objective and policies.
The Portfolio generally seeks to invest in securities of companies that
satisfy one or more of several criteria established by the subadviser. For
example, the subadviser generally seeks companies with superior growth in
earnings and cash flow; the ability to sustain earnings momentum even during
economic slowdowns by operating in so-called "fertile fields" (areas where
earnings and dividends can outpace inflation and the overall economy); and the
capability to expand even during times of slow growth. The subadviser generally
favors companies whose profits increase due to economic factors rather than
one-time events such as lower taxes. The Portfolio may engage in strategic
transactions, which may include the use of derivatives.
- --------------------------------------------------------------------------------
47
<PAGE>
Risks
Share prices will fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. Historically,
common stocks have provided greater long-term returns and have entailed greater
short-term risks than other investment choices. Investments in foreign
securities, including those of foreign governments, involve greater risks than
investing in comparable domestic securities. These risks include currency,
political, economic, regulatory and market risk factors. Risk is reduced
through diversification.
Investment Adviser: Aetna Life Insurance and Annuity Company; Subadviser:
T. Rowe Price Associates, Inc.
- --------------------------------------------------------------------------------
48
<PAGE>
PROSPECTUS
================================================================================
The Contracts offered in connection with this Prospectus are the "Aetna
Marathon Plus" group and individual deferred variable annuity contracts
("Contracts") issued by Aetna Insurance Company of America (the "Company"). The
Contracts, offered only in those states authorized to sell, are available as (1)
nonqualified deferred annuity contracts; (2) Individual Retirement Annuities
("IRA") including Roth IRAs under Sections 408(b) and 408A of the Internal
Revenue Code (may be subject to approval by state regulatory agencies); or (3)
qualified contracts issued in connection with certain employer sponsored
retirement plans (may be subject to approval by the Company and state regulatory
agencies). Currently, the IRA is not available as a "SIMPLE IRA" as defined in
Section 408(p) of the Internal Revenue Code. In most states, group Contracts are
offered to certain broker-dealers or banks which have agreed to act as
Distributors of the Contracts. Individuals who have established accounts with
those broker-dealers or banks are eligible to participate in the Contract.
Individual Contracts are offered only in those states where the group Contracts
are not authorized for sale. (See "Purchase.")
The securities offered in this Prospectus are distributed through Aetna Life
Insurance and Annuity Company, an affiliate of the Company, as the Underwriter
and by registered broker-dealers or banks selected by it as Distributors. (See
"Purchase.")
In most states, the Contracts provide that Purchase Payments may be allocated to
the AICA Guaranteed Account (the "Guaranteed Account"), a credited interest
option, or to one or more of the Subaccounts of Variable Annuity Account I, a
separate account of the Company. In certain states, Purchase Payments may be
allocated to the Fixed Account when the Guaranteed Account is not available. The
Subaccounts invest directly in shares of the following Funds:
<TABLE>
<S> <C> <C> <C>
[bullet] Aetna Ascent VP (formerly Aetna Ascent Variable Portfolio) [bullet] Fidelity VIP High Income Portfolio
[bullet] Aetna Balanced VP, Inc. (formerly Aetna Investment Advisers [bullet] Fidelity VIP Overseas Portfolio
Fund, Inc.) [bullet] Fidelity VIP II Asset Manager Portfolio
[bullet] Aetna Income Shares d/b/a Aetna Bond VP [bullet] Fidelity VIP II Contrafund Portfolio
[bullet] Aetna Crossroads VP (formerly Aetna Crossroads Variable [bullet] Fidelity VIP II Index 500 Portfolio
Portfolio) [bullet] Janus Aspen Aggressive Growth Portfolio
[bullet] Aetna Growth VP (formerly Aetna Variable Growth [bullet] Janus Aspen Balanced Portfolio
Portfolio) [bullet] Janus Aspen Flexible Income Portfolio
[bullet] Aetna Variable Fund d/b/a Aetna Growth and Income VP [bullet] Janus Aspen Growth Portfolio
[bullet] Aetna Index Plus Large Cap VP (formerly Aetna Variable [bullet] Janus Aspen Worldwide Growth Portfolio
Index Plus Portfolio) [bullet] MFS Total Return Series
[bullet] Aetna International VP [bullet] MFS World Governments Series
[bullet] Aetna Legacy VP (formerly Aetna Legacy Variable Portfolio) [bullet] Oppenheimer Aggressive Growth Fund (formerly
[bullet] Aetna Variable Encore Fund d/b/a Aetna Money Market VP Oppenheimer Capital Appreciation Fund)
[bullet] Aetna Real Estate Securities VP [bullet] Oppenheimer Global Securities Fund
[bullet] Aetna Small Company VP (formerly Aetna Variable Small [bullet] Oppenheimer Growth & Income Fund
Company Portfolio) [bullet] Oppenheimer Strategic Bond Fund
[bullet] Aetna Value Opportunity VP (formerly Aetna Variable [bullet] Portfolio Partners MFS Emerging Equities Portfolio
Capital Appreciation Portfolio) [bullet] Portfolio Partners MFS Research Growth Portfolio
[bullet] Calvert Social Balanced Portfolio (formerly Calvert [bullet] Portfolio Partners MFS Value Equity Portfolio
Responsibly Invested Balanced Portfolio) [bullet] Portfolio Partners Scudder International Growth
[bullet] Fidelity VIP Equity-Income Portfolio Portfolio
[bullet] Fidelity VIP Growth Portfolio [bullet] Portfolio Partners T. Rowe Price Growth Equity
Portfolio
</TABLE>
Except as specifically mentioned, this Prospectus describes only investments
through the Separate Account. The Guaranteed Account is described in Appendix A
to this Prospectus, as well as in the Guaranteed Account's prospectus. The Fixed
Account is described in Appendix B to this Prospectus. The availability of the
Funds, the Guaranteed Account and the Fixed Account is subject to applicable
regulatory authorization; not all options may be available in all jurisdictions
or under all Contracts. (See "Investment Options.")
This Prospectus provides investors with the information about the Separate
Account that they should know before investing in the Contracts. Additional
information about the Separate Account is contained in a Statement of Additional
Information ("SAI") which is available at no charge. The SAI has been filed with
the Securities and Exchange Commission and is incorporated herein by reference.
The Table of Contents for the SAI is printed on page 24 of this Prospectus. An
SAI for this Prospectus and for any Fund Prospectus may be obtained by
indicating the request on your Application or by calling the number listed under
the "Inquiries" section of the Prospectus Summary.
THIS PROSPECTUS SHOULD BE READ IN CONJUNCTION WITH THE CURRENT PROSPECTUSES OF
THE FUNDS AND THE AICA GUARANTEED ACCOUNT. ALL PROSPECTUSES SHOULD BE READ AND
RETAINED FOR FUTURE REFERENCE.
<PAGE>
THE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED BY ANY BANK, NOR
ARE THEY INSURED BY THE FDIC; THEY ARE SUBJECT TO INVESTMENT RISKS, INCLUDING
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THIS PROSPECTUS, THE STATEMENT OF ADDITIONAL INFORMATION AND OTHER INFORMATION
ABOUT THE SEPARATE ACCOUNT REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION CAN BE FOUND IN THE SEC'S WEB SITE AT http://www.sec.gov.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION ARE
DATED MAY 1, 1998.
<PAGE>
TABLE OF CONTENTS
================================================================================
<TABLE>
<S> <C>
DEFINITIONS.................................................... DEFINITIONS - 1
PROSPECTUS SUMMARY............................................. SUMMARY - 1
FEE TABLE...................................................... FEE TABLE - 1
THE COMPANY ................................................................ 1
VARIABLE ANNUITY ACCOUNT I ................................................. 1
INVESTMENT OPTIONS ......................................................... 1
The Funds ............................................................... 1
Credited Interest Option ................................................ 2
Fixed Account ........................................................... 2
PURCHASE ................................................................... 2
Contract Availability ................................................... 2
Purchasing Interests in the Contract .................................... 3
Purchase Payments ....................................................... 3
Contract Rights ......................................................... 3
Designations of Beneficiary and Annuitant ............................... 4
Right to Cancel ......................................................... 4
CHARGES AND DEDUCTIONS ..................................................... 5
Daily Deductions from the Separate Account .............................. 5
Mortality and Expense Risk Charge ..................................... 5
Administrative Charge ................................................. 5
Maintenance Fee ......................................................... 5
Deferred Sales Charge . ................................................. 5
Fund Expenses ........................................................... 7
Premium and Other Taxes ................................................. 7
CONTRACT VALUATION ......................................................... 7
Account Value ........................................................... 7
Accumulation Units ...................................................... 7
Net Investment Factor . ................................................. 7
TRANSFERS .................................................................. 8
Telephone Transfers ..................................................... 8
Dollar Cost Averaging Program ........................................... 8
Account Rebalancing Program ............................................. 9
WITHDRAWALS ................................................................ 9
SYSTEMATIC DISTRIBUTION OPTIONS ............................................ 10
DEATH BENEFIT DURING ACCUMULATION PERIOD ................................... 11
Death Benefit Amount .................................................... 11
Death Benefit Payment Options ........................................... 12
ANNUITY PERIOD ............................................................. 13
Annuity Period Elections ................................................ 13
Partial Annuitization . ................................................. 14
Annuity Options ......................................................... 14
Annuity Payments ........................................................ 14
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Charges Deducted During the Annuity Period .............................. 15
Death Benefit Payable During the Annuity Period ......................... 15
TAX STATUS ................................................................. 15
Introduction ............................................................ 15
Taxation of the Company ................................................. 16
Tax Status of the Contract .............................................. 16
Taxation of Annuity Contracts ........................................... 18
Contracts Used with Certain Retirement Plans ............................ 20
MISCELLANEOUS .............................................................. 21
Distribution ............................................................ 21
Delay or Suspension of Payments ......................................... 22
Performance Reporting ................................................... 22
Voting Rights ........................................................... 22
Modification of the Contract ............................................ 22
Transfers of Ownership; Assignment ...................................... 23
Involuntary Terminations ................................................ 23
Legal Matters and Proceedings ........................................... 23
Year 2000 ............................................................... 23
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION ........................ 24
APPENDIX A--AICA GUARANTEED ACCOUNT ........................................ 25
APPENDIX B--FIXED ACCOUNT .................................................. 28
APPENDIX C--DESCRIPTION OF UNDERLYING FUNDS ................................ 29
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. THE COMPANY DOES NOT AUTHORIZE ANY
PERSON TO GIVE INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE
OFFERING CONTAINED IN THIS PROSPECTUS EXCEPT AS OTHERWISE CONTAINED HEREIN.
<PAGE>
DEFINITIONS
================================================================================
The following terms are defined as they are used in this Prospectus:
Account: A record that identifies contract values accumulated on each
Certificate Holder's behalf during the Accumulation Period.
Account Value: The total dollar value of amounts held in an Account as of each
Valuation Date during the Accumulation Period.
Account Year: A period of twelve months measured from the date on which an
Account is established (the effective date) or from an anniversary of such
effective date.
Accumulation Period: The period during which Purchase Payment(s) credited to an
Account are invested to fund future annuity payments.
Accumulation Unit: A measure of the value of each Subaccount before annuity
payments begin.
Adjusted Account Value: The Account Value, plus or minus the aggregate market
value adjustment for amounts allocated to the Guaranteed Account.
Annuitant: The person on whose life or life expectancy the annuity payments are
based.
Annuity: A series of payments for life, a definite period or a combination of
the two.
Annuity Date: The date on which annuity payments begin.
Annuity Period: The period during which annuity payments are made.
Annuity Unit: A measure of the value of each Subaccount selected during the
Annuity Period.
Application: The form or collection of information required by the Company to
purchase an interest in a group contract or an individual contract.
Beneficiary(ies): The person or persons who are entitled to receive any death
benefit proceeds. Under Nonqualified Contracts, Individual Retirement Annuities
and Section 403(b) Contracts, Beneficiary refers to the beneficiary named under
the Contract.
Certificate: The document issued to a Certificate Holder for an Account
established under a group contract.
Certificate Holder (You): A person or entity who purchases an individual
Contract or acquires an interest under a group Contract.
Claim Date: The date when proof of death and the Beneficiary's claim are
received in good order at the Company's Home Office.
Company (We, Us): Aetna Insurance Company of America.
Contract: The group and individual deferred, variable annuity contracts offered
by this Prospectus.
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.
Distributor(s): The registered broker-dealer(s), or banks that may be acting as
broker-dealers without separate registration under the Securities Exchange Act
of 1934, which have entered into selling agreements with the Company to offer
and sell the Contracts. The Company may also serve as a Distributor.
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.
- --------------------------------------------------------------------------------
DEFINITIONS - 1
<PAGE>
Fund(s): An open-end registered management investment company whose shares are
purchased by the Separate Account to fund the benefits provided by the
Contract.
Group Contract Holder: The entity to which a group Contract is issued.
Home Office: The Company's principal executive offices located at 151
Farmington Avenue, Hartford, Connecticut 06156.
Individual Contract Holder: A person or entity who has purchased an individual
variable annuity contract (also referred to as a "Certificate Holder").
Individual Retirement Annuity: An individual or group variable deferred annuity
intended to qualify under Code Section 408(b) or 408A.
Nonqualified Contract: A contract established to supplement an individual's
retirement income, or to provide an alternative investment option under an
Individual Retirement Account qualified under Code Section 408(a).
Purchase Payment(s): The gross payment(s) made to the Company under an Account.
Qualified Contracts: Contracts available for use with plans entitled to special
federal income tax treatment under Code Sections 403(b), 408(b), or 408A.
Registered Representative: The individual who is registered with a
broker-dealer acting as Distributor to offer and sell securities, or who is an
employee of a bank acting as Distributor that is exempt from broker-dealer
registration under the Securities Exchange Act of 1934. Registered
Representatives must also be licensed as insurance agents to sell variable
annuity contracts.
Roth IRA: An Individual Retirement Annuity intended to qualify under Code
Section 408A.
Separate Account: Variable Annuity Account I, a separate account established
for the purpose of funding variable annuity contracts issued by the Company.
Subaccount(s): The portion of the assets of the Separate Account that is
allocated to a particular Fund. Each Subaccount invests in the shares of only
one corresponding Fund.
Surrender Value: The amount payable upon the withdrawal of all or any portion
of an Account Value.
Underwriter: The registered broker-dealer which contracts with other registered
broker-dealers, or with banks exempt from broker-dealer registration, to offer
and sell the Contracts. Aetna Life Insurance and Annuity Company will serve as
Underwriter.
Valuation Date: The date and time at which the Accumulation Unit Value and
Annuity Unit Value of a Subaccount is calculated. Currently, this calculation
occurs after the close of business of the New York Stock Exchange on any normal
business day, Monday through Friday, that the New York Stock Exchange is open.
- --------------------------------------------------------------------------------
DEFINITIONS - 2
<PAGE>
PROSPECTUS SUMMARY
================================================================================
CONTRACTS OFFERED
The Contracts offered in connection with this Prospectus are group and
individual deferred variable annuity contracts issued by Aetna Insurance Company
of America (the "Company"). The purpose of the Contract is to accumulate values
and to provide benefits upon retirement. The Contracts are currently available
for (1) individual nonqualified purchases (we reserve the right to limit the
ownership of nonqualified contracts to natural persons); (2) Individual
Retirement Annuities ("IRAs") including Roth IRAs, other than "SIMPLE IRAs" as
defined in Section 408(p) of the Internal Revenue Code ("Code") (may be subject
to approval by state regulatory agencies); and (3) purchases made in conjunction
with employer sponsored retirement plans under Section 403(b) of the Code (may
be subject to approval by the Company and by state regulatory agencies).
In most states, group Contracts are offered to certain broker-dealers or
banks which have agreed to act as Distributors of the Contracts. Individuals who
have established accounts with those broker-dealers or banks are eligible to
participate in the Contract. Individual Contracts are offered in those states
where the group Contracts are not authorized for sale. Joint Certificate Holders
are allowed only on Nonqualified Contracts. A joint Certificate Holder must be
the spouse of the other joint Certificate Holder. In Pennsylvania, the joint
Certificate Holders do not need to be spouses. References to "Certificate
Holders" in this Prospectus mean both of the Certificate Holders on joint
Accounts.
CONTRACT PURCHASE
You may purchase an interest in the Contract by completing an Application
and submitting it to the Company. Purchase Payments can be applied to the
Contract either through a lump-sum payment or through ongoing contributions.
(See "Purchase.")
FREE LOOK PERIOD
You may cancel the Contract or Certificate within 10 days after you
receive it (or longer if required by state law) by returning it to the Company
along with a written notice of cancellation. Unless state law requires
otherwise, the amount you will receive upon cancellation will reflect the
investment performance of the Subaccounts into which your Purchase Payments
were deposited. In some cases this may be more or less than the amount of your
Purchase Payments. Under a Contract issued as an Individual Retirement Annuity,
you will receive a refund of your Purchase Payment. (See "Purchase--Right to
Cancel.") 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 and you
exercise your free look right under this provision, the Purchase Payment will
be restored to the contract from which it came.
INVESTMENT OPTIONS
The Company has established Variable Annuity Account I, a registered unit
investment trust, for the purpose of funding the variable portion of the
Contracts. The Separate Account is divided into Subaccounts which invest
directly in shares of the Funds described herein. The Contract allows
investment in the Subaccounts, as well as in the Guaranteed Account (or Fixed
Account, in certain states) described below subject to the limitations
described in "Investment Options," see page 1. For a complete list of the Funds
available under the Contracts, and a description of the investment objectives
of each of the Funds and their investment advisers, see "Investment
Options--The Funds" and Appendix C in this Prospectus, as well as the
prospectuses for each of the Funds.
The Guaranteed Account is the credited interest option available under the
Contract which allows you to earn a fixed rate of interest, if held for the
guaranteed term. (See Appendix A to this Prospectus and the prospectus for the
Guaranteed Account.)
The Fixed Account is an option available under the Contract in certain
states which allows you to earn a fixed rate of interest. (See Appendix B to
this Prospectus.)
- --------------------------------------------------------------------------------
SUMMARY - 1
<PAGE>
CHARGES AND DEDUCTIONS
Certain charges are associated with these Contracts. These charges include
daily deductions from the Separate Account (the mortality and expense risk
charge and an administrative charge), as well as any applicable maintenance
fee, transfer fees and premium and other taxes. The Funds also incur certain
fees and expenses which are deducted directly from the Funds. A deferred sales
charge may apply upon a full or partial withdrawal of the Account Value. (See
the Fee Table and "Charges and Deductions.")
TRANSFERS
Prior to the Annuity Date, and subject to certain limitations, you can
transfer Account Values among the Subaccounts and the Guaranteed Account (or
Fixed Account in certain states). During the Annuity Period and subject to
state approval, if you have elected variable payments, you can make transfers
among the Subaccounts available during the Annuity Period. Currently, during
the Accumulation Period, transfers are without charge. However, the Company
reserves the right to charge up to $10 for each additional transfer if more
than 12 transfers are made in a calendar year. Any transfer charge will be
applied so that the amount being transferred will be reduced. Transfers can be
requested in writing or by telephone in accordance with the Company's transfer
procedures. If approved by your state, during the Annuity Period, you can
currently make up to four transfers each calendar year. There is no charge for
these transfers. (Transfers from the Guaranteed Account may be restricted and
subject to a market value adjustment. See Appendix A)
The Company also offers a Dollar Cost Averaging Program and an Account
Rebalancing Program. The Dollar Cost Averaging Program permits the automatic
transfer of amounts from any of the Subaccounts and an available Guaranteed
Account term to any of the other Subaccounts on a monthly or quarterly basis. 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. The Account Rebalancing Program allows you to
request that each year, or at other more frequent intervals as we allow, we
automatically reallocate your Account value to specified percentages among the
Subaccounts in which you invest. (See "Transfers.")
WITHDRAWALS
All or a part of the Account Value may be withdrawn prior to the Annuity
Date by properly completing a disbursement form and sending it to the Company.
Certain charges may be assessed upon withdrawal. Amounts withdrawn from the
Guaranteed Account may be subject to a market value adjustment. (See Appendix
A.) The taxable portion of the withdrawal may also be subject to income tax and
a federal tax penalty. (See "Withdrawals.")
The Contract also offers certain Systematic Distribution Options during the
Accumulation Period subject to certain criteria. Some Systematic Distribution
Options are not available in all states and may not be suitable in every
situation. (See "Systematic Distribution Options.")
GUARANTEED DEATH BENEFIT
These Contracts contain a guaranteed death benefit feature. Upon the death
of the Annuitant, the Account Value may be increased under certain
circumstances. (See "Death Benefit During Accumulation Period.")
After Annuity Payments have commenced, a death benefit may be payable to
the Beneficiary depending upon the terms of the Contract and the Annuity Option
selected. (See "Death Benefit Payable During the Annuity Period.")
THE ANNUITY PERIOD
On the Annuity Date, you may elect to begin receiving Annuity Payments.
Annuity Payments can be made on either a fixed, variable or combination fixed
and variable basis. If a variable payout is selected, the payments will
continue to vary with the investment performance of the Subaccount(s) selected.
The Company reserves the right to limit the number of Subaccounts that may be
available during the Annuity Period. (See "Annuity Period.")
- --------------------------------------------------------------------------------
SUMMARY - 2
<PAGE>
TAXES
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.")
INQUIRIES
Questions, inquiries or requests for additional information can be
directed to your agent or local representative, or you may contact the Company
as follows:
<TABLE>
<S> <C>
[bullet] Write to: Aetna Insurance Company of America
151 Farmington Avenue
Hartford, Connecticut 06156-5996
Attention: Customer Service
[bullet] Call Customer Service: 1-800-531-4547 (for automated transfers
or changes in the allocation of Account
Values, call: 1-800-262-3862)
</TABLE>
- --------------------------------------------------------------------------------
SUMMARY - 3
<PAGE>
FEE TABLE
================================================================================
This Fee Table describes the various charges and expenses associated with the
Contract. No sales charge is paid upon
purchase of the Contract. All costs that are borne directly or indirectly under
the Subaccounts and Funds are shown below. Some expenses may vary as explained
under "Charges and Deductions." The charges and expenses shown below do not
include premium taxes that may be applicable. For more information regarding
expenses paid out of assets of a particular Fund, see the Fund's prospectus.
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.
CONTRACTS OTHER THAN ROTH IRA CONTRACTS:
<TABLE>
<CAPTION>
- -----------------------------------------------
Years from Receipt of Deferred Sales
Purchase Payment Charge Deduction
- ----------------------------- ----------------
<S> <C>
Less than 2 7%
2 or more but less than 4 6%
4 or more but less than 5 5%
5 or more but less than 6 4%
6 or more but less than 7 3%
7 or more 0%
- -----------------------------------------------
</TABLE>
ROTH IRA CONTRACTS:
<TABLE>
<CAPTION>
- -----------------------------------------------
Years from Receipt of Deferred Sales
Purchase Payment 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>
<TABLE>
<S> <C>
Annual Maintenance Fee (1) ........................................................... $30.00
Transfer Charge (2) .................................................................. $ 0.00
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)
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."
(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.
- --------------------------------------------------------------------------------
FEE TABLE - 1
<PAGE>
ANNUAL EXPENSES OF THE FUNDS (APPLIES TO ALL CONTRACTS)
The following table illustrates the advisory fees and other expenses applicable
to the Funds. Except as noted, the following figures are a percentage of
average net assets and, except where otherwise indicated, are based on figures
for the year ended December 31, 1997. A Fund's "Other Expenses" include
operating costs of the Fund. These expenses are reflected in the Fund's net
asset value and are not deducted from the Account Value.
<TABLE>
<CAPTION>
Investment Other Total
Advisory Fees(1) Expenses Fund
(after expense (after expense Annual
reimbursement) reimbursement) Expenses
---------------- -------------- --------
<S> <C> <C> <C>
Aetna Ascent VP(2)(3) 0.57% 0.23% 0.80%
Aetna Balanced VP, Inc. (3) 0.50% 0.10% 0.60%
Aetna Bond VP(3) 0.40% 0.10% 0.50%
Aetna Crossroads VP(2)(3) 0.55% 0.25% 0.80%
Aetna Growth VP(2)(3) 0.16% 0.64% 0.80%
Aetna Growth and Income VP(3) 0.50% 0.09% 0.59%
Aetna Index Plus Large Cap VP(2)(3) 0.32% 0.23% 0.55%
Aetna International VP(2)(3) 0.77% 0.38% 1.15%
Aetna Legacy VP(2)(3) 0.49% 0.31% 0.80%
Aetna Money Market VP(3) 0.25% 0.10% 0.35%
Aetna Real Estate Securities VP(2)(3) 0.62% 0.33% 0.95%
Aetna Small Company VP(2)(3) 0.35% 0.60% 0.95%
Aetna Value Opportunity VP(2)(3) 0.20% 0.60% 0.80%
Calvert Social Balanced Portfolio(4) 0.69% 0.12% 0.81%
Fidelity VIP Equity-Income Portfolio(5) 0.50% 0.08% 0.58%
Fidelity VIP Growth Portfolio(5) 0.60% 0.09% 0.69%
Fidelity VIP High Income Portfolio(5) 0.59% 0.12% 0.71%
Fidelity VIP Overseas Portfolio(5) 0.75% 0.17% 0.92%
Fidelity VIP II Asset Manager Portfolio(5) 0.55% 0.10% 0.65%
Fidelity VIP II Contrafund Portfolio(5) 0.60% 0.11% 0.71%
Fidelity VIP II Index 500 Portfolio(6) 0.24% 0.04% 0.28%
Janus Aspen Aggressive Growth Portfolio(7) 0.73% 0.03% 0.76%
Janus Aspen Balanced Portfolio(7) 0.76% 0.07% 0.83%
Janus Aspen Flexible Income Portfolio 0.65% 0.10% 0.75%
Janus Aspen Growth Portfolio(7) 0.65% 0.05% 0.70%
Janus Aspen Worldwide Growth Portfolio(7) 0.66% 0.08% 0.74%
MFS Total Return Series(8) 0.75% 0.25% 1.00%
MFS World Governments Series(8) 0.75% 0.25% 1.00%
Oppenheimer Aggressive Growth Fund 0.71% 0.02% 0.73%
Oppenheimer Global Securities Fund 0.70% 0.06% 0.76%
Oppenheimer Growth & Income Fund 0.75% 0.08% 0.83%
Oppenheimer Strategic Bond Fund 0.75% 0.08% 0.83%
Portfolio Partners MFS Emerging Equities Portfolio(9)(10) 0.68% 0.13% 0.81%
Portfolio Partners MFS Research Growth Portfolio(9)(10) 0.70% 0.15% 0.85%
Portfolio Partners MFS Value Equity Portfolio(9) 0.65% 0.25% 0.90%
Portfolio Partners Scudder International Growth Portfolio(9) 0.80% 0.20% 1.00%
Portfolio Partners T. Rowe Price Growth Equity Portfolio(9) 0.60% 0.15% 0.75%
</TABLE>
- ------------------
(1) Certain of the Fund advisers reimburse the Company for administrative
costs incurred in connection with administering the Funds as variable
funding options under the Contract. These reimbursements are paid out of
the investment advisory fees and are not charged to investors.
(2) Effective May 1, 1998, the Portfolios' adviser has agreed to waive a
portion of its fee or to reimburse certain expenses so that aggregate
expenses do not exceed the total expenses shown above. These fee
waiver/expense reimbursement arrangements will increase total return and
may be modified or terminated at any time.
Without these fee waiver/expense reimbursement arrangements Management Fees
and Total Expenses for the Portfolio would be higher. Management Fees and
Other Expenses would be as follows: 0.60% and 0.83% for Ascent VP; 0.60%
and 0.85% for Crossroads VP; 0.60% and 1.24% for Growth VP; 0.35% and 0.58%
for Index Plus Large Cap VP; 0.85% and 1.23% for
- --------------------------------------------------------------------------------
FEE TABLE - 2
<PAGE>
International VP; 0.60% and 0.91% for Legacy VP; 0.75% and 1.08% for Real
Estate Securities VP; 0.75% and 1.35% for Small Company VP; and 0.60% and
1.20% for Value Opportunity VP, respectively.
(3) Prior to May 1, 1998, the investment adviser provided administrative
services to the Fund and assumed the Fund's ordinary recurring direct
costs under an Administrative Services Agreement. Effective May 1, 1998,
the investment adviser will continue to provide administrative services to
the Fund but will no longer assume all of the Fund's ordinary recurring
direct costs under the Administrative Services Agreement. The
Administrative Fee is 0.075% on the first $5 billion in assets and 0.050%
on all assets over $5 billion. The "Other Expenses" shown are not based on
actual figures for the year ended December 31, 1997, but reflect the fee
payable under the new Administrative Services Agreement and estimates of
the Fund's ordinary recurring direct costs.
International VP and Real Estate Securities VP commenced operations in
December 1997, therefore, estimates are based on expenses incurred for
similar funds. Actual expenses incurred may be more or less than the
amounts shown above.
(4) The figures above are based on expenses for the fiscal year 1997, and have
been restated to reflect an increase in transfer agency expenses of 0.01%
for the Portfolio expected to be incurred in 1998. "Management Fees"
includes a performance adjustment, which depending on performance, could
cause the fee to be as high as 0.85% or as low as 0.55%. "Other Expenses"
reflect an indirect fee of 0.03% (relating to an expense offset
arrangement with the Portfolio's custodian). Net fund operating expenses
after reductions for fees paid indirectly (again, restated) would be
0.78%.
(5) A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, certain funds have entered into
arrangements with their custodian whereby credits realized, as a result of
uninvested cash balances were used to reduce custodian expenses. Including
these reductions, the total operating expenses would have been 0.57% for
Equity-Income Portfolio; 0.67% for Growth Portfolio; 0.71% for High Income
Portfolio; 0.90% for Overseas Portfolio, 0.64% for Asset Manager
Portfolio; and 0.68% for Contrafund Portfolio.
(6) The Fund's investment adviser agreed to reimburse a portion of Index 500
Portfolio's expenses during the period. Without this reimbursement, the
fund's management fee, other expenses and total expenses would have been
0.27%, 0.13% and 0.40%, respectively, for Index 500 Portfolio.
(7) Management fees for Aggressive Growth, Balanced, Growth and Worldwide
Growth Portfolios reflect a reduced fee schedule effective July 1, 1997.
The management fees shown above are based on the new rate applied to net
assets as of December 31, 1997. Other expenses are based on gross expenses
of the Shares before expense offset arrangements for the fiscal year ended
December 31, 1997. The information for each Portfolio is net of fee
waivers or reductions from Janus Capital. Fee reductions for the
Aggressive Growth, Balanced, Growth and Worldwide Growth Portfolios reduce
the management fee to the level of the corresponding Janus retail fund.
Other waivers, if applicable, are first applied against the management fee
and then against other expenses. Without such waivers or reductions, the
Management Fee, Other Expenses and Total Operating Expenses for the Shares
would have been 0.74%, 0.04%, and 0.78% for Aggressive Growth Portfolio;
0.77%, 0.06%, and 0.83% for Balanced Portfolio; 0.74%, 0.04%, and 0.78%
for Growth Portfolio; and 0.72%, 0.09%, and 0.81% for Worldwide Growth
Portfolio, respectively. Janus Capital may modify or terminate the waivers
or reductions at any time upon at least 90 days' notice to the Trustees.
(8) The adviser has agreed to bear expenses for each Series, subject to
reimbursement by each Series, such that each Series' "Other Expenses"
shall not exceed 0.25% of the average daily net assets of the Series
during the current fiscal year. Otherwise, "Other Expenses" for the MFS
Total Return Series and MFS World Governments Series would be 0.27% and
0.40%, respectively, and "Total Fund Annual Expenses" would be 1.02% and
1.15%, respectively, for these Series. Each Series has an expense offset
arrangement which reduces the Series' custodian fee based upon the amount
of cash maintained by the Series with its custodian and dividend
disbursing agent, and may enter into other such arrangements and directed
brokerage arrangements (which also have the effect of reducing the Series'
expenses). Any such fee reductions are not reflected under "Other
Expenses."
(9) Each Portfolio's aggregate expenses are contractually limited to the
advisory and administrative fees disclosed above. The investment adviser
will not seek an increase in its advisory or administrative fee at any
time prior to May 1, 1999.
(10) The advisory fee is 0.70% of the first $500 million in assets and 0.65% on
the excess.
- --------------------------------------------------------------------------------
FEE TABLE - 3
<PAGE>
HYPOTHETICAL ILLUSTRATION (EXAMPLE): CONTRACTS OTHER THAN ROTH IRA CONTRACTS
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 0.012%.
<TABLE>
<CAPTION>
EXAMPLE A EXAMPLE B
---------- ---------
If you withdraw the entire Account If you do not withdraw the Account Value,
Value at the end of the periods shown, or if you annuitize at the end of the
you would pay the following expenses, periods shown, you would pay the
including any applicable deferred sales following expenses (no deferred sales
charge: charge is reflected):*
1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Ascent VP $84 $118 $146 $239 $21 $65 $111 $239
Aetna Balanced VP, Inc. $82 $112 $136 $218 $19 $59 $101 $218
Aetna Bond VP $81 $109 $131 $208 $18 $55 $ 96 $208
Aetna Crossroads VP $84 $118 $146 $239 $21 $65 $111 $239
Aetna Growth VP $84 $118 $146 $239 $21 $65 $111 $239
Aetna Growth and Income VP $82 $112 $135 $217 $19 $58 $100 $217
Aetna Index Plus Large Cap VP $81 $110 $133 $213 $18 $57 $ 98 $213
Aetna International VP $87 $129 $164 $275 $24 $75 $129 $275
Aetna Legacy VP $84 $118 $146 $239 $21 $65 $111 $239
Aetna Money Market VP $79 $104 $123 $191 $16 $51 $ 88 $191
Aetna Real Estate Securities VP $85 $123 $154 $255 $22 $69 $119 $255
Aetna Small Company VP $85 $123 $154 $255 $22 $69 $119 $255
Aetna Value Opportunity VP $84 $118 $146 $239 $21 $65 $111 $239
Calvert Social Balanced Portfolio $84 $118 $147 $240 $21 $65 $111 $240
Fidelity VIP Equity-Income Portfolio $81 $111 $135 $216 $19 $58 $100 $216
Fidelity VIP Growth Portfolio $83 $115 $141 $228 $20 $61 $105 $228
Fidelity VIP High Income Portfolio $83 $115 $142 $230 $20 $62 $106 $230
Fidelity VIP Overseas Portfolio $85 $122 $152 $252 $22 $68 $117 $252
Fidelity VIP II Asset Manager Portfolio $82 $113 $139 $223 $19 $60 $103 $223
Fidelity VIP II Contrafund Portfolio $83 $115 $142 $230 $20 $62 $106 $230
Fidelity VIP II Index 500 Portfolio $78 $102 $119 $184 $16 $49 $ 84 $184
Janus Aspen Aggressive Growth Portfolio $83 $117 $144 $235 $21 $63 $109 $235
Janus Aspen Balanced Portfolio $84 $119 $148 $242 $21 $66 $112 $242
Janus Aspen Flexible Income Portfolio $83 $117 $144 $234 $20 $63 $108 $234
Janus Aspen Growth Portfolio $83 $115 $141 $229 $20 $62 $106 $229
Janus Aspen Worldwide Growth Portfolio $83 $116 $143 $233 $20 $63 $108 $233
MFS Total Return Series $86 $124 $157 $260 $23 $71 $121 $260
MFS World Governments Series $86 $124 $157 $260 $23 $71 $121 $260
Oppenheimer Aggressive Growth Fund $83 $116 $143 $232 $20 $63 $107 $232
Oppenheimer Global Securities Fund $83 $117 $144 $235 $21 $63 $109 $235
Oppenheimer Growth & Income Fund $84 $119 $148 $242 $21 $66 $112 $242
Oppenheimer Strategic Bond Fund $84 $119 $148 $242 $21 $66 $112 $242
Portfolio Partners MFS Emerging Equities
Portfolio $84 $118 $147 $240 $21 $65 $111 $240
Portfolio Partners MFS Research Growth Portfolio $84 $120 $149 $244 $21 $66 $113 $244
Portfolio Partners MFS Value Equity Portfolio $85 $121 $151 $250 $22 $68 $116 $250
Portfolio Partners Scudder International Growth
Portfolio $86 $124 $157 $260 $23 $71 $121 $260
Portfolio Partners T. Rowe Price Growth Equity
Portfolio $83 $117 $144 $234 $20 $63 $108 $234
</TABLE>
- ------------------
* 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.)
- --------------------------------------------------------------------------------
FEE TABLE - 4
<PAGE>
HYPOTHETICAL ILLUSTRATION (EXAMPLE): CONTRACTS ISSUED AS ROTH IRAS
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 0.012%.
<TABLE>
<CAPTION>
EXAMPLE A EXAMPLE B
---------- ---------
If you withdraw the entire Account If you do not withdraw the Account Value,
Value at the end of the periods shown, or if you annuitize at the end of the
you would pay the following expenses, periods shown, you would pay the
including any applicable deferred sales following expenses (no deferred sales
charge: charge is reflected):*
1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Ascent VP $62 $86 $111 $239 $21 $65 $111 $239
Aetna Balanced VP, Inc. $60 $80 $101 $218 $19 $59 $101 $218
Aetna Bond VP $59 $77 $ 96 $208 $18 $55 $ 96 $208
Aetna Crossroads VP $62 $86 $111 $239 $21 $65 $111 $239
Aetna Growth VP $62 $86 $111 $239 $21 $65 $111 $239
Aetna Growth and Income VP $60 $80 $100 $217 $19 $58 $100 $217
Aetna Index Plus Large Cap VP $60 $79 $ 98 $213 $18 $57 $ 98 $213
Aetna International VP $65 $97 $129 $275 $24 $75 $129 $275
Aetna Legacy VP $62 $86 $111 $239 $21 $65 $111 $239
Aetna Money Market VP $58 $73 $ 88 $191 $16 $51 $ 88 $191
Aetna Real Estate Securities VP $64 $91 $119 $255 $22 $69 $119 $255
Aetna Small Company VP $64 $91 $119 $255 $22 $69 $119 $255
Aetna Value Opportunity VP $62 $86 $111 $239 $21 $65 $111 $239
Calvert Social Balanced Portfolio $62 $87 $111 $240 $21 $65 $111 $240
Fidelity VIP Equity-Income Portfolio $60 $80 $100 $216 $19 $58 $100 $216
Fidelity VIP Growth Portfolio $61 $83 $105 $228 $20 $61 $105 $228
Fidelity VIP High Income Portfolio $61 $84 $106 $230 $20 $62 $106 $230
Fidelity VIP Overseas Portfolio $63 $90 $117 $252 $22 $68 $117 $252
Fidelity VIP II Asset Manager Portfolio $61 $82 $103 $223 $19 $60 $103 $223
Fidelity VIP II Contrafund Portfolio $61 $84 $106 $230 $20 $62 $106 $230
Fidelity VIP II Index 500 Portfolio $57 $71 $ 84 $184 $16 $49 $ 84 $184
Janus Aspen Aggressive Growth Portfolio $62 $85 $109 $235 $21 $63 $109 $235
Janus Aspen Balanced Portfolio $62 $87 $112 $242 $21 $66 $112 $242
Janus Aspen Flexible Income Portfolio $62 $85 $108 $234 $20 $63 $108 $234
Janus Aspen Growth Portfolio $61 $83 $106 $229 $20 $62 $106 $229
Janus Aspen Worldwide Growth Portfolio $62 $85 $108 $233 $20 $63 $108 $233
MFS Total Return Series $64 $92 $121 $260 $23 $71 $121 $260
MFS World Governments Series $64 $92 $121 $260 $23 $71 $121 $260
Oppenheimer Aggressive Growth Fund $61 $84 $107 $232 $20 $63 $107 $232
Oppenheimer Global Securities Fund $62 $85 $109 $235 $21 $63 $109 $235
Oppenheimer Growth & Income Fund $62 $87 $112 $242 $21 $66 $112 $242
Oppenheimer Strategic Bond Fund $62 $87 $112 $242 $21 $66 $112 $242
Portfolio Partners MFS Emerging Equities
Portfolio $62 $87 $111 $240 $21 $65 $111 $240
Portfolio Partners MFS Research Growth Portfolio $63 $88 $113 $244 $21 $66 $113 $244
Portfolio Partners MFS Value Equity Portfolio $63 $89 $116 $250 $22 $68 $116 $250
Portfolio Partners Scudder International Growth
Portfolio $64 $92 $121 $260 $23 $71 $121 $260
Portfolio Partners T. Rowe Price Growth Equity
Portfolio $62 $85 $108 $234 $20 $63 $108 $234
</TABLE>
- ------------------
* 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.)
- --------------------------------------------------------------------------------
FEE TABLE - 5
<PAGE>
THE COMPANY
================================================================================
Aetna Insurance Company of America (the "Company"), the depositor of
Variable Annuity Account I, is the issuer of the Contract, and as such, it is
responsible for providing the insurance and annuity benefits under the Contract.
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., 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 principal executive offices are located at 151 Farmington Avenue,
Hartford, Connecticut 06156.
VARIABLE ANNUITY ACCOUNT I
================================================================================
The Company established Variable Annuity Account I (the "Separate
Account") in 1994 as a segregated asset account for the purpose of funding its
variable annuity contracts. The Separate Account is registered as a unit
investment trust under the Investment Company Act of 1940 (the "1940 Act"), and
meets the definition of "separate account" under federal securities laws. The
Separate Account is divided into "subaccounts" which do not invest directly in
stocks, bonds or other investments. Instead, each Subaccount buys and sells
shares of a corresponding Fund.
Although the Company holds title to the assets of the Separate Account,
such assets are not chargeable with liabilities of any other business conducted
by the Company. Income, gains or losses of the Separate Account are credited to
or charged against the assets of the Separate Account without regard to other
income, gains or losses of the Company. All obligations arising under the
Contracts are obligations of the Company.
INVESTMENT OPTIONS
================================================================================
THE FUNDS
Purchase Payments may be allocated to one or more of the Subaccounts as
designated on the Application. In turn, the Subaccounts invest in the
corresponding Funds at net asset value. The Company reserves the right to limit
the number of investment options selected during the Accumulation Period. At
this time there is no limit on the number of investment options selected during
the Accumulation Period, but the number of investment options that may be
selected at any one time by a Certificate Holder is limited to 18. Each
Subaccount and each Guaranteed Term of the same duration, or an investment in
the Fixed Account in certain Contracts where the Guaranteed Account is not
available, count as an option.
The availability of Funds may be subject to regulatory authorization. In
addition, the Company may add or withdraw Funds, as permitted by applicable law.
Not all Funds may be available in all jurisdictions or under all Contracts.
Subject to state regulatory approval, if the shares of any Fund should no
longer be available for investment by the Separate Account or if in the judgment
of the Company, further investment in such shares should become inappropriate in
view of the purpose of the Contract, we may cease to make such Fund shares
available for investment under the Contract prospectively. The Company may,
alternatively, substitute shares of another Fund for shares already acquired.
The Company reserves the right to substitute shares of another Fund for shares
already acquired without a proxy vote. Any elimination, substitution or addition
of Funds will be done in accordance with applicable state and federal securities
laws.
The Funds are described in Appendix C of this prospectus. More detailed
information may be found in the current prospectus for each Fund offered. The
prospectus for the Fund should be read in conjunction with this Prospectus. A
free Fund prospectus is available upon request from the local Company office or
by writing or calling the number listed in the "Inquiries" section of the
Prospectus Summary.
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1
<PAGE>
Risks Associated with Investment in the Funds. Some of the Funds may use
instruments known as derivatives as part of their investment strategies. The use
of certain derivatives may involve high risk of volatility to a Fund, and the
use of leverage in connection with such derivatives can also increase risk of
losses. Some of the Funds may also invest in foreign or international securities
which involve greater risks than U.S. investments.
More comprehensive information, including a discussion of potential
risks, is found in the current prospectus for each Fund. You should read the
Fund prospectuses and consider carefully, and on a continuing basis, which Fund
or combination of Funds is best suited to your long-term investment objectives.
Additional prospectuses and Statements of Additional Information for this
Prospectus and for each of the Funds can be obtained from the Company's Home
Office at the address and telephone number listed under the "Inquiries" section
of the Prospectus Summary.
Conflicts of Interest (Mixed and Shared Funding). Shares of the Funds are
sold to each of the Subaccounts for funding the variable annuity contracts
issued by the Company. Shares of the Funds may also be sold to other insurance
companies for the same purpose. This is referred to as "shared funding." Shares
of the Funds may also be used for funding variable life insurance contracts
issued by the Company or by third parties. This is referred to as "mixed
funding."
Because the Funds available under the Contract are sold to fund variable
annuity contracts and variable life insurance policies issued by us or by other
companies, certain conflicts of interest could arise. If a conflict of interest
were to occur, one of the separate accounts might withdraw its investment in a
Fund, which might force that Fund to sell portfolio securities at
disadvantageous prices, causing its per share value to decrease. Each Fund's
Board of Directors or Trustees has agreed to monitor events in order to identify
any material irreconcilable conflicts which might arise and to determine what
action, if any, should be taken to address such conflict
CREDITED INTEREST OPTION
Purchase Payments may be allocated to the AICA Guaranteed Account (the
"Guaranteed Account"). Through the Guaranteed Account, we guarantee stipulated
rates of interest for stated periods of time. Amounts must remain in the
Guaranteed Account for specified periods to receive the quoted interest rates,
or a market value adjustment (which may be positive or negative) will be
applied. (See Appendix A.)
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 Appendix B.)
PURCHASE
================================================================================
CONTRACT AVAILABILITY
The Contracts are offered only in those states where the Contract has been
approved for sale in that state. The Contracts are offered as (1) nonqualified
deferred annuity contracts (we reserve the right to limit ownership of
nonqualified Contracts to natural persons); (2) Individual Retirement Annuities,
including Roth IRAs, other than "SIMPLE IRAs" as defined in Section 408(p) of
the Internal Revenue Code; or (3) Qualified Contracts used in conjunction with
certain employer sponsored retirement plans. Individual Retirement Annuities are
currently available as rollovers, and may permit ongoing contributions, subject
to state regulatory approval. Additionally, availability of the Qualified
Contracts described under item (3) is subject to approval by the Company and
state regulatory agencies. 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.
- --------------------------------------------------------------------------------
2
<PAGE>
Eligible persons seeking to invest and accumulate money for retirement can
purchase individual interests in group Contracts, or, where required by state
law, they may purchase individual Contracts. In most states, group Contracts are
offered to certain broker-dealers which have agreed to act as distributors of
the Contracts, and individual accounts are established by the Company for each
Certificate Holder. In some states, an individual Contract will be owned by the
Certificate Holder. In both cases, a Certificate Holder's interest in the
Contract is known as his or her "Account."
The maximum issue age for the Annuitant is 90 (age 85 for those Contracts
issued in the state of Pennsylvania).
Joint Certificate Holders. Nonqualified Contracts may be purchased by
spouses as joint Certificate Holders. In Pennsylvania, the joint Certificate
Holders do not need to be spouses. References to "Certificate Holders" in this
Prospectus mean both of the Certificate Holders on joint Accounts. Tax law
prohibits the purchase of Qualified Contracts by joint Certificate Holders.
PURCHASING INTERESTS IN THE CONTRACT
Group Contracts. Groups will generally consist of those eligible
individuals who have established an account with a broker-dealer or bank which
has agreed to act as a Distributor for the Contracts. A group Contract is
issued to the group Contract Holder. Certificate Holders may purchase interests
in a group Contract by submitting an Application. Once the Application is
accepted a Certificate will be issued.
Individual Contracts. Certain states will not allow a group Contract due
to provisions in their insurance laws. In those states, an eligible individual
will submit an Application and will be issued a Contract rather than a
Certificate.
Regardless of whether you have purchased an interest in a group or an
individual Contract, the Company must accept or reject the Application within
two business days of receipt. If the Application is incomplete, the Company may
hold any forms and accompanying Purchase Payments for five days. Purchase
Payments may be held for longer periods only with the consent of the Certificate
Holder, pending acceptance of the Application. If the Application is rejected,
the Application and any Purchase Payments will be returned to the Certificate
Holder. 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.
PURCHASE PAYMENTS
You may make Purchase Payments under the Contract in one lump sum,
through periodic payments or as a transfer from a pre-existing plan.
The minimum initial Purchase Payment amount is $5,000 for Nonqualified
Contracts and $1,500 for Qualified Contracts. In some states, a Contract issued
as an Individual Retirement Annuity can accept only a lump sum, rollover
Purchase Payment. Additional Purchase Payments made to an existing Contract must
be at least $1,000, or at least $50 per month by electronic funds transfer, and
are subject to the terms and conditions published by us at the time of the
subsequent payment. A Purchase Payment of more than $1,000,000 will be allowed
only with the Company's consent. We also reserve the right to reject any
Purchase Payment to a prospective or existing Account without advance notice
(unless not allowed by state law).
For Qualified Contracts the Code imposes a maximum limit on annual
Purchase Payments which may be excluded from a participant's gross income. (See
"Tax Status.")
Allocation of Purchase Payments. Purchase Payments will initially be
allocated to the Subaccounts or the Guaranteed Account or the Fixed Account as
specified on the Application. Changes in such allocation may be made in writing
or by telephone transfer. Allocations must be in whole percentages, and there
may be limitations on the number of investment options that can be selected.
(See "Investment Options.")
CONTRACT RIGHTS
Under individual Contracts, Certificate Holders have all Contract rights.
Under group Contracts, the group Contract Holder has title to the Contract
and generally only the right to accept or reject any modifications to the
Contract. You have all other rights to your Account under the Contract. However,
under a Nonqualified Contract, if you and the Annuitant are not the same, and
the Annuitant dies first, your rights are automatically transferred to the
Beneficiary. (See "Death Benefit.")
- --------------------------------------------------------------------------------
3
<PAGE>
Joint Certificate Holders have equal rights under the Contract and with
respect to their Account. All rights under the Contract must be exercised by
both joint Certificate Holders with the exception of transfers among investment
options, which can be exercised by one joint Certificate Holder after the
Account has been established. See "Death Benefit" regarding the rights of the
surviving joint Certificate Holder upon the death of a joint Certificate Holder
prior to the Annuity Date.
DESIGNATIONS OF BENEFICIARY AND ANNUITANT
You generally designate the Beneficiary under the Contract on the
Application. You may also elect to specify the form of payment to be made to
the Beneficiary.
For Qualified Contracts issued in conjunction with a Code Section 403(b)
tax deferred annuity program subject to the Employee Retirement Income Security
Act (ERISA), the spouse of a married participant must be the Beneficiary of at
least 50% of the Account Value. If the married participant is age 35 or older,
the participant may name an alternate Beneficiary provided the participant
furnishes a waiver and spousal consent which meets the requirements of ERISA
Section 205. The participant on whose behalf the Account was established must be
the Annuitant.
For Qualified Contracts issued as an Individual Retirement Annuity, the
Certificate Holder must be the Annuitant. For Nonqualified Contracts, the
Certificate Holder and the Annuitant may, but need not, be the same person. (See
"Purchase-Contract Availability.")
RIGHT TO CANCEL
You may cancel the Contract or Certificate without penalty by returning it
to the Company with a written notice of your intent to cancel. In most states,
you have ten days to exercise this "free look" right; some states allow you
longer. Unless state law requires otherwise, the amount you will receive upon
cancellation will reflect the investment performance of the Subaccounts into
which your Purchase Payments were deposited. In some cases this may be more or
less than the amount of your Purchase Payments; therefore, you bear the entire
investment risk for amounts allocated among the Subaccounts during the free look
period. Under Contracts issued as Individual Retirement Annuities, you will
receive a refund of your Purchase Payment. Account Values will be determined as
of the Valuation Date on which we receive your request for cancellation at our
Home Office. 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.
- --------------------------------------------------------------------------------
4
<PAGE>
CHARGES AND DEDUCTIONS
================================================================================
DAILY DEDUCTIONS FROM THE SEPARATE ACCOUNT
Mortality and Expense Risk Charge. The Company makes a daily deduction
from each of the Subaccounts for the mortality and expense risk charge. The
charge is equal, on an annual basis, to 1.10% of the daily net assets of the
Subaccounts and compensates the Company for the assumption of the mortality and
expense risks under the Contract The mortality risks are those assumed for our
promise to make lifetime payments according to annuity rates specified in the
Contract. The expense risk is the risk that the actual expenses for costs
incurred under the Contract will exceed the maximum costs that can be charged
under the Contract.
In certain circumstances, the risk of adverse expense experience
associated with this Contract may be reduced. In such event, the mortality and
expense risk charge applicable to that Contract may likewise be reduced. Whether
such a reduction is available will be determined by the Company based upon
consideration of one of the following factors:
(1) the size and composition of the prospective group such as a group made up
of active employees of the Company or its affiliates;
(2) the type and frequency of administrative and sales services provided; and
(3) the level of maintenance fee and deferred sales charges.
Any reduction of the mortality and expense risk charge will not be
unfairly discriminatory against any person. We will make any reduction in the
mortality and expense risk charge according to our own rules in effect at the
time the Contract is issued. We reserve the right to change these rules from
time to time.
If the amount deducted for mortality and expense risks is not sufficient
to cover the mortality costs and expense shortfalls, the loss is borne by the
Company. If the deduction is more than sufficient, the excess may be used to
recover distribution expenses relating to the Contracts and as a source of
profit to the Company. The Company expects to make a profit from the mortality
and expense risk charge.
Administrative Charge. During the Accumulation Period, the Company makes a
daily deduction from each of the Subaccounts for an administrative charge. The
charge is equal, on an annual basis, to 0.15% of the daily net assets of the
Subaccounts and compensates the Company for administrative expenses that exceed
revenues from the maintenance fee described below. The charge is set at a level
which does not exceed the average expected cost of the administrative services
to be provided while the Contract is in force. The Company does not expect to
make a profit from this charge.
During the Annuity Period, the Company reserves the right to make a
deduction for the administrative charge of an amount equal, on an annual basis,
to a maximum of 0.25% of the daily net assets of the Subaccounts. There is
currently no administrative charge during the Annuity Period. Once an Annuity
Option is elected, the charge will be established and will be effective during
the entire Annuity Period.
MAINTENANCE FEE
During the Accumulation Period, the Company will deduct an annual
maintenance fee from the Account Value. The maintenance fee is to reimburse the
Company for some of its administrative expenses relating to the establishment
and maintenance of the Accounts.
The maximum maintenance fee deducted under the Contract is $30. The
maintenance fee will be deducted annually on the anniversary of the Contract
effective date. It is deducted on a pro rata basis from each investment option
in which you have an interest. If your entire Account Value is withdrawn, the
full maintenance fee, if applicable, will be deducted at the time of withdrawal.
The maintenance fee will not be deducted (either annually or upon withdrawal) if
your Account Value is $50,000 or more on the day the maintenance fee is due.
DEFERRED SALES CHARGE
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
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5
<PAGE>
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 other than from a Roth IRA, 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.
CONTRACTS OTHER THAN ROTH IRAS
<TABLE>
<CAPTION>
- -------------------------------------------------
Years since receipt of Deferred Sales
Purchase Payment Charge Deduction
- ----------------------------- ----------------
<S> <C>
Less than 2 7%
2 or more but less than 4 6%
4 or more but less than 5 5%
5 or more but less than 6 4%
6 or more but less than 7 3%
7 or more 0%
- -------------------------------------------------
</TABLE>
ROTH IRA CONTRACTS
<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>
A deferred sales charge will not be deducted from any portion of a
Purchase Payment withdrawn if the withdrawal is:
[bullet] applied to provide Annuity benefits;
[bullet] paid to a Beneficiary due to the Annuitant's death before Annuity
payments start, up to a maximum of the Purchase Payment(s) in the
Account on the Annuitant's date of death;
[bullet] made due to the election of a Systematic Distribution Option (see
"Systematic Distribution Options");
[bullet] if approved by your state, under a Qualified Contract when the amount
withdrawn is equal to the minimum distribution required by the Code
for this Contract calculated using a method permitted under the Code
and agreed to by the Company;
[bullet] paid upon a full withdrawal where the Account Value is $2,500 or less
and no amount has been withdrawn during the prior 12 months; or
[bullet] paid if we close out your Account when the value is less than $2,500
(or other amount required by state law);
[bullet] if the withdrawal is applied as a rollover to certain Roth Individual
Retirement Annuities issued by the Company or an affiliate.
After the first Account Year, you may withdraw all or a portion of your
Purchase Payments without a deferred sales charge, provided that (1) such
withdrawal occurs within three years of the Annuitant's admission to a licensed
nursing care facility (including non-licensed facilities in New Hampshire) and
(2) the Annuitant has spent at least 45 consecutive days in such facility. This
waiver of deferred sales charge does not apply if the Annuitant is in a nursing
care facility at the time the Account is established. It will also not apply if
otherwise prohibited by state law.
The Company does not anticipate that the deferred sales charge will cover
all sales and administrative expenses which it incurs in connection with the
Contract. The difference will be covered by the general assets of the Company
which are attributable, in part, to mortality and expense risk charges under the
Contract described above.
Free Withdrawals. Subject to the restrictions described below, you may
withdraw up to the greater of 10% of your current Account Value or the minimum
distribution amount required by law during each calendar year without imposition
of a deferred sales charge. The free withdrawal amount will be based on the
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<PAGE>
Account Value calculated on the Valuation Date next following our receipt of
your request for withdrawal and will be adjusted for amounts requested for
distribution under a Systematic Distribution Option, during the calendar year.
If your withdrawal exceeds the applicable free withdrawal allowance, we will
deduct a deferred sales charge on the excess amount. (See Appendix A for a
discussion of withdrawals from the Guaranteed Account.)
FUND EXPENSES
Each Fund incurs certain expenses which are paid out of its net assets.
These expenses include, among other things, the investment advisory or
"management" fee. The expenses of the Funds are set forth in the Fee Table in
this Prospectus and described more fully in the accompanying Fund prospectuses.
PREMIUM AND OTHER TAXES
Several states and municipalities currently impose a premium tax on
Annuities. These taxes currently range from 0% to 4%. Ordinarily, any applicable
state premium tax will be deducted from the Account Value when it is applied to
an Annuity Option. However, we reserve the right to deduct state premium tax
from the Purchase Payment(s) or from the Account Values at any time, but no
earlier than when we have a tax liability under state law.
Any municipal premium tax assessed at a rate in excess of 1% will be
deducted from the Purchase Payment(s) or from the amount applied to an Annuity
Option based on our determination of when such tax is due. We will absorb any
municipal premium tax which is assessed at 1% or less. We reserve the right,
however, to reflect this added expense in our Annuity purchase rates for
residents of such municipalities.
CONTRACT VALUATION
================================================================================
ACCOUNT VALUE
Until the Annuity Date, the Account Value is the total dollar value of
amounts held in the Account as of any Valuation Date. The Account Value at any
given time is based on the value of the units held in each Subaccount, plus the
value of amounts held in the Guaranteed Account or Fixed Account.
ACCUMULATION UNITS
The value of your interests in a Subaccount is expressed as the number of
"Accumulation Units" that you hold multiplied by an "Accumulation Unit Value"
(or "AUV") for each unit. The AUV on any Valuation Date is determined by
multiplying the value on the immediately preceding Valuation Date by the net
investment factor of that Subaccount for the period between the immediately
preceding Valuation Date and the current Valuation Date. (See "Net Investment
Factor" below.) The Accumulation Unit Value will be affected by the investment
performance, expenses and charges of the applicable Fund and is reduced each day
by a percentage that accounts for the daily assessment of mortality and expense
risk charges and the administrative charge.
Initial Purchase Payments will be credited to your Account at the AUV next
computed following our acceptance of the Application as described under
"Purchasing Interests in the Contract." Each subsequent Purchase Payment (or
amount transferred) received by the Company by the close of business of the New
York Stock Exchange will be credited to your Account at the AUV next computed
following our receipt of your payment or transfer request. The value of an
Accumulation Unit may increase or decrease.
NET INVESTMENT FACTOR
The net investment factor is used to measure the investment performance
of a Subaccount from one Valuation Date to the next. The net investment factor
for a Subaccount for any valuation period is equal to the sum of 1.0000 plus
the net investment rate. The net investment rate equals:
(a) the net assets of the Fund held by the Subaccount on the current
Valuation Date, minus
(b) the net assets of the Fund held by the Subaccount on the preceding
Valuation Date, plus or minus
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7
<PAGE>
(c) taxes or provisions for taxes, if any, attributable to the operation
of the Subaccount;
(d) divided by the total value of the Subaccount's Accumulation and
Annuity Units on the preceding Valuation Date;
(e) minus a daily charge at the annual effective rate of a maximum of
1.10% for mortality and expense risks and an administrative charge
of 0.15% during the Accumulation Period and up to 0.25% during the
Annuity Period (currently 0% during the Annuity Period).
The net investment rate may be either positive or negative.
TRANSFERS
================================================================================
At any time prior to the Annuity Date, you can transfer amounts held under
your Account among the investment options available subject to certain
limitations. (See "Investment Options.") Transfers from the Guaranteed Account
may be subject to certain restrictions and to a market value adjustment. (See
Appendix A.) 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 If
approved by your state, during the Annuity Period, if you have elected a
variable Annuity, you can make transfers only among the Subaccounts available
during the Annuity Period. (See "Annuity Options.") A request for transfer can
be made either in writing or by telephone. (See "Telephone Transfers" below.)
All transfers must be in accordance with the terms of the Contract. Any transfer
will be based on the Accumulation Unit Value next determined after the Company
receives a valid transfer request at its Home Office.
During the Accumulation Period, twelve free transfers are allowed per
calendar year. Thereafter, the Company reserves the right to charge up to $10
for each additional transfer. This charge will be deducted from the gross amount
of the transfer. The Company currently does not impose this charge. Currently,
during the Annuity Period, four transfers are allowed each calendar year.
TELEPHONE TRANSFERS
You automatically have the right to make transfers among Funds by
telephone. We have enacted procedures to prevent abuses of Account transactions
by telephone, including requiring the use of a personal identification number
(PIN) to execute transactions. You are responsible for safeguarding your PIN,
and for keeping Account information confidential. Although the Company's failure
to follow reasonable procedures may result in the Company's liability for any
losses due to unauthorized or fraudulent telephone transfers, the Company will
not be liable for following instructions communicated by telephone which it
reasonably believes to be genuine. Any losses incurred pursuant to actions taken
by the Company in reliance on telephone instructions reasonably believed to be
genuine shall be borne by you. To ensure authenticity, we record calls on the
800 line.
DOLLAR COST AVERAGING PROGRAM
You may establish automated transfers of Account Values on a monthly or
quarterly basis through the Company's Dollar Cost Averaging Program. Dollar cost
averaging is a system for investing a fixed amount of money at regular intervals
over a period of time. The Dollar Cost Averaging Program permits the transfer of
amounts from any of the variable funding options and an available Guaranteed
Term or Fixed Account subject to the Company's terms and conditions to any of
the Subaccounts. A market value adjustment will not be applied to dollar cost
averaging transfers from any such Guaranteed Term during participation in the
Dollar Cost Averaging Program. If dollar cost averaging from a Guaranteed Term
is discontinued, the Company will automatically transfer the balance remaining
in the Guaranteed Term from which dollar cost averaging is withdrawn to a
Guaranteed Term of the same duration unless the Certificate Holder initiates a
transfer to another investment option. In either case, a market value adjustment
will apply. 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 Money Market VP Subaccount. There is no additional charge for the
Dollar Cost Averaging Program. (See Appendix A for a discussion of the
restrictions and features attributable to the Guaranteed Account.)
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8
<PAGE>
Dollar cost averaging does not ensure a profit nor guarantee against loss
in a declining market. You should consider your financial ability to continue
purchases through periods of low price levels. For additional information,
please refer to the "Inquiries" section of the Prospectus Summary, which
describes how you can obtain further information.
The Dollar Cost Averaging Program is not available to individuals who have
elected the Account Rebalancing Program.
ACCOUNT REBALANCING PROGRAM
The Account Rebalancing Program allows you to have portions of your
Account Value automatically reallocated annually to a specified percentage or at
other more frequent intervals as allowed by the Company under the program. Only
Account Values accumulating in the Subaccounts can be rebalanced. You may
participate in this program by completing the Account Rebalancing section of the
Application, or by sending a written request to the Company at its Home Office.
The Account Rebalancing Program does not ensure a profit nor guarantee against
loss in a declining market.
The Account Rebalancing Program is not available to Certificate Holders
who have elected the Dollar Cost Averaging Program.
WITHDRAWALS
================================================================================
All or a portion of your Account Value may be withdrawn at any time during
the Accumulation Period. Withdrawal restrictions applicable under Section 403(b)
Contracts are described below. To request a withdrawal, you must properly
complete a disbursement form and send it to our Home Office. Payments for
withdrawal requests will be made in accordance with Securities and Exchange
Commission requirements, but normally not later than seven calendar days
following our receipt of a disbursement form. Withdrawals may be subject to a
deferred sales charge (see "Charges and Deductions") and to taxes and to tax
penalties (see "Tax Status"). Roth IRAs provide for a tax-free withdrawal of all
assets in the Account, 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.
Withdrawals may be requested in one of the following forms:
[bullet] Full Withdrawal of an Account: The amount paid for a full withdrawal
will be the Adjusted Account Value minus any applicable deferred sales
charge and maintenance fee due.
[bullet] Partial Withdrawals: (Percentage): The amount paid will be the
percentage of the Adjusted Account Value requested minus any
applicable deferred sales charge.
[bullet] Partial Withdrawals: (Specified Dollar Amount): The amount paid will
be the dollar amount requested. However, the amount withdrawn from
your Account will equal the amount you request plus any applicable
deferred sales charge and plus or minus any applicable market value
adjustment. For any partial withdrawal, the value of the Accumulation
Units canceled will be withdrawn proportionately from the Guaranteed
Account, Fixed Account or each Subaccount in which your Account is
invested, unless you request otherwise in writing. All amounts paid
will be based on your Account Value as of the next Valuation Date
after we receive a request for withdrawal at our Home Office, or on
such later date as the disbursement form may specify.
[bullet] The tax treatment of withdrawals from each Nonqualified Contract may
be affected if you own other annuity contracts issued by us (or our
affiliates) that were purchased after October 21, 1988. (See "Tax
Status.")
Withdrawal Restrictions from 403(b) Plans. Under Section 403(b) Contracts,
the withdrawal of salary reduction contributions and earnings on such
contributions is generally prohibited prior to the participant's death,
disability, attainment of age 59-1/2, separation from service or financial
hardship. (See "Tax Status.")
Reinstatement Privilege Following Withdrawal. You may elect to reinstate
all or a portion of the proceeds received from the full withdrawal of your
Account within 30 days after the withdrawal. Reinvested amounts must be received
by the Company within 60 days of the withdrawal. Accumulation Units will be
credited to your
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Account for the amount reinstated, as well as for any maintenance fee charged
and any portion of any deferred sales charge imposed at the time of withdrawal.
However, any aggregate negative market value adjustment made to the Guaranteed
Account will not be credited. Reinstated amounts will be reallocated to
applicable investment options in the same proportion as they were allocated at
the time of withdrawal.
The number of Accumulation Units credited will be based upon the
Accumulation Unit Value(s) next computed following receipt at our Home Office of
the reinstatement request along with the amount to be reinstated. Any
maintenance fee which falls due after the withdrawal and before the
reinstatement will be deducted from the amount reinstated. The reinstatement
privilege may be used only once and does not apply to Certificate Holder's
Accounts that we close out as described in Section entitled "Involuntary
Terminations." If you are contemplating reinstatement, you should seek competent
advice regarding the tax consequences associated with this type of a
transaction.
SYSTEMATIC DISTRIBUTION OPTIONS
================================================================================
The Company offers certain withdrawal options under the Contract that are
not considered Annuity Options ("Systematic Distribution Options"). To exercise
these options, your Account Value must meet the minimum dollar amount and age
criteria applicable to that option.
The Systematic Distribution Options currently available under the Contract
include the following:
[bullet] SWO--Systematic Withdrawal Option. SWO is a series of partial
withdrawals from your Account based on a payment method you select. It
is designed for those who want a periodic income while retaining
investment flexibility for amounts accumulated under a Contract.
[bullet] ECO--Estate Conservation Option. ECO offers the same investment
flexibility as SWO but is designed for those who want to receive only
the minimum distribution that the Code requires each year. ECO is
available only under Qualified Contracts. Under ECO, the Company
calculates the minimum distribution amount required by law, and pays
you that amount once a year. (See "Tax Status.")
Other Systematic Distribution Options may be added from time to time.
Additional information relating to any of the Systematic Distribution Options
may be obtained from your local representative or from the Company at its Home
Office.
ECO is not available under the Roth IRA Contract.
If you select one of the Systematic Distribution Options, you will retain
all of the rights and flexibility permitted under the Contract during the
Accumulation Period. Your Account Value will continue to be subject to the
charges and deductions described in this Prospectus. Taking a withdrawal under
one of these Systematic Distribution Options may have tax consequences. Any
person concerned about tax implications should consult a competent tax advisor
prior to electing an option.
Once you elect a Systematic Distribution Option, you may revoke it any
time by submitting a written request to our Home Office. Once an option is
revoked, it may not be elected again for three years, nor may any other
Systematic Distribution Option be elected unless permitted by the Code. The
Company reserves the right to discontinue the availability of one or all of
these Systematic Distribution Options for new elections at any time, and/or to
change the terms of future elections.
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DEATH BENEFIT DURING ACCUMULATION PERIOD
================================================================================
A death benefit will be payable to the Beneficiary(ies) if the Certificate
Holder or the Annuitant dies before Annuity payments have commenced. Upon the
death of a joint Certificate Holder prior to the Annuity Date, the surviving
Certificate Holder, if any, will become the designated Beneficiary. Any other
Beneficiary designation on record with the Company at the time of death will be
treated as a contingent Beneficiary.
DEATH BENEFIT AMOUNT
If approved by your state, upon the death of the Annuitant, the death
benefit proceeds will be the greater of:
(1) The minimum guaranteed death benefit (described below) as of the date of
death, plus any Purchase Payments made, and less any amount(s)
surrendered, applied to an Annuity option or deducted from the Account,
since the minimum guaranteed death benefit was determined, or
(2) The Account Value on the Claim Date.
The minimum guaranteed death benefit is determined as follows: On the
effective date of the Contract ("Effective Date"), the minimum guaranteed death
benefit equals the amount of the initial Purchase Payment. On each Effective
Date anniversary before the Annuitant reaches age 85, the minimum guaranteed
death benefit is the greater of:
(1) The prior minimum guaranteed death benefit, plus any Purchase Payments
made, and less any amount(s) surrendered, applied to an Annuity option or
deducted from the Account, since the minimum guaranteed death benefit was
previously determined, or
(2) The Account Value on the Effective Date anniversary.
After the Annuitant reaches age 85 the minimum guaranteed death benefit is
equal to the minimum guaranteed death benefit determined on the Effective Date
anniversary immediately preceding the date the Annuitant attained age 85 plus
any Purchase Payments made, and less any amounts surrendered, applied to an
Annuity option or deducted from the Account.
On the Claim Date, if the minimum guaranteed death benefit is greater than
the Account Value, the amount by which the minimum guaranteed death benefit
exceeds the Account Value is allocated to the Aetna Money Market VP Subaccount.
The Beneficiary may elect a death benefit option as permitted unless the
Certificate Holder has specified the form of payment to the Beneficiary.
Under Nonqualified Contracts only, if the Certificate Holder is not the
Annuitant and dies, the minimum guaranteed death benefit will not apply. The
amount paid on account of the death benefit of the Certificate Holder will be
equal to the Adjusted Account Value on the Claim Date. Full or partial
withdrawals may be subject to a deferred sales charge. The Beneficiary may elect
a death benefit option available under the Contract unless the Certificate
Holder has specified the form of payment to the Beneficiary.
If a spousal Beneficiary continued the Account at the death of the
Certificate Holder who was also the Annuitant, the spousal Beneficiary will
become the Annuitant and the minimum guaranteed death benefit will also apply at
the death of the spousal Beneficiary. The initial minimum guaranteed death
benefit equals the Account Value as adjusted for any minimum guaranteed death
benefit payable at the death of the original Certificate Holder/Annuitant.
Thereafter, the minimum guaranteed death benefit is determined as above.
If the spousal Beneficiary continued the Account at the death of the
Certificate Holder who was not also the Annuitant, the Annuitant will not change
and the amount of death benefit proceeds payable upon the spousal Beneficiary's
death will be equal to the Adjusted Account Value on the Claim Date, less any
deferred sales charge.
If the death benefit described above has not been approved by your state,
the following death benefit shall apply: Upon the death of the Annuitant, the
guaranteed death benefit proceeds will be the greatest of:
(1) the total Purchase Payment(s) applied to the Account, minus the sum of all
amounts withdrawn, annuitized or deducted from such Account;
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(2) the highest step-up value as of the date of death. The step-up value is
determined on each anniversary of the Effective Date, up to the
Annuitant's 75th birthday. Each step-up value is calculated as the Account
Value on the Effective Date anniversary, increased by Purchase Payments
applied, and decreased by partial withdrawals, annuitizations and
deductions taken from the Account since the Effective Date anniversary; or
(3) the Account Value as of the date of death.
The excess, if any, of the guaranteed death benefit value over the Account
Value is determined as of the date of death. Any excess amount will be deposited
and allocated to the Aetna Money Market VP Subaccount. The Account Value on the
claim date plus any excess amount deposited into the Account becomes the
Certificate Holder's Account Value. The death benefit paid will equal the
Account Value when request for payment is made and no deferred sales charge
applies.
Under Nonqualified Contracts only, if the Certificate Holder is not the
Annuitant and dies, the guaranteed death benefit will not apply. The amount of
death benefit proceeds, will be equal to the Adjusted Account Value on the Claim
Date. Full or partial withdrawals may be subject to a deferred sales charge. If
the spousal Beneficiary continued the Account after the death of the Certificate
Holder who was the Annuitant, the amount of the death benefit proceeds payable
upon the spousal Beneficiary's death will be equal to the Adjusted Account Value
on the Claim Date, less any deferred sales charge applicable to any Purchase
Payments made since the death of the Certificate Holder/Annuitant.
If the spousal Beneficiary continued the Account after the death of the
Certificate Holder who was not the Annuitant, the amount of the death benefit
proceeds payable upon the spousal Beneficiary's death will be equal to the
Adjusted Account Value on the Claim Date. Full or partial withdrawals may be
subject to a deferred sales charge in accordance with the usual rules regarding
the deferred sales charge. (See "Deferred Sales Charge.") If this provision was
not approved in your state, the deferred sales charge will apply only to
Purchase Payments made since the death of the Certificate Holder. For amounts
held in the Guaranteed Account, see Appendix A for a discussion of the
calculation of death benefit proceeds.
DEATH BENEFIT PAYMENT OPTIONS
Death benefit proceeds may be paid to the Beneficiary as described below.
If you die and no Beneficiary exists, the death benefit will be paid in a lump
sum to your estate. Prior to any election by the Beneficiary, the Account Value
will remain in the Account and the Account Value will continue to be affected by
the investment performance of the investment option(s) selected. The Beneficiary
has the right to allocate or transfer any amount to any available investment
option (subject to a market value adjustment, as applicable). The Code requires
that distributions begin within a certain time period, as described below. If no
elections are made, no distributions will be made. Failure to commence
distributions within those time periods can result in tax penalties.
Nonqualified Contracts. Under a Nonqualified Contract, if you die, and the
Beneficiary is your surviving spouse, or if you are a nonnatural person and the
Annuitant dies, and the Beneficiary is the Annuitant's surviving spouse, he or
she automatically becomes the successor Certificate Holder. The successor
Certificate Holder may exercise all rights under the Account and (1) continue in
the Accumulation Period; (2) elect to apply some or all of the Adjusted Account
Value to any of the Annuity Options; or (3) receive at any time a lump sum
payment equal to all or a portion of the Adjusted Account Value. If you die and
you are not the Annuitant, any applicable deferred sales charge will be applied
if a lump sum is elected. Under the Code, distributions are not required until
the successor Certificate Holder's death. If you die and the Beneficiary is not
your surviving spouse, he or she may elect option (2) or (3) above. According to
the Code, any portion of the Adjusted Account Value not distributed in
installments over the life or life expectancy beginning within one year of your
death, must be paid within five years of your death. (See "Tax Status of the
Contract.")
If you are a natural person but not the Annuitant and the Annuitant dies,
the Beneficiary may elect to apply the Adjusted Account Value to an Annuity
Option within 60 days or to receive a lump sum payment equal to the Adjusted
Account Value, subject to state regulatory approval. If the Beneficiary does not
elect an Annuity Option within 60 days of the date of death, the gain, if any,
will be includable in the Beneficiary's income in the year the Annuitant dies.
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If SWO is in effect, payments will cease at the Certificate Holder's or
Annuitant's death. A Beneficiary, however, may elect to continue SWO.
Qualified Contracts. Under a Qualified Contract, the death benefit is paid
at the death of the participant, who is the Annuitant under the Contract. The
Beneficiary has the following options: (1) apply some or all of the Adjusted
Account Value to any of the Annuity Options, subject to the distribution rules
in Code Section 401(a)(9), or (2) receive at any time a lump sum payment equal
to all or a portion of the Adjusted Account Value.
If ECO or SWO is in effect and the participant dies before the required
beginning date for minimum distributions, payments will cease. A Beneficiary, or
the Certificate Holder on behalf of a plan Beneficiary, may elect ECO or SWO
provided the election would satisfy the Code minimum distribution rules.
If ECO or SWO is in effect and the participant dies after the required
beginning date for minimum distributions, payments will continue as permitted
under the Code minimum distribution rules, unless the option is revoked.
Death benefit payments must satisfy the distribution rules in Code Section
401(a)(9). (See "Tax Status of the Contract.")
ANNUITY PERIOD
================================================================================
ANNUITY PERIOD ELECTIONS
You must notify us in writing of the date you want Annuity Payments to
start (the "Annuity Date") and the Annuity Option elected. Payments may not
begin earlier than one year after purchase, or, unless we consent, later than
the later of (a) the first day of the month following the Annuitant's 85th
birthday, or (b) the tenth anniversary of the last Purchase Payment (fifth
anniversary for Contracts issued in Pennsylvania).
Annuity Payments will not begin until you have selected an Annuity Date
and an Annuity Option. Until a date and option are elected, the Account will
continue in the Accumulation Period.
As of January 1, 1997, the Code generally requires that for Qualified
Contracts, other than for IRAs and for five-percent owners in other Qualified
Contracts, minimum annual distributions of the Account Value begin by April 1st
of the calendar year following the calendar year in which a participant attains
age 70-1/2 or retires, whichever occurs later. For IRA depositors and for
five-percent owners, minimum distributions must begin by April 1 of the calendar
year following the calendar year in which the participant attains age 70-1/2. In
addition, distributions must be in a form and amount sufficient to satisfy the
Code requirements. These requirements may be satisfied by the election of
certain Annuity Options or Systematic Distribution Options. (See "Tax Status.")
For Nonqualified Contracts, failure to select an Annuity Option and an Annuity
Date, or postponement of the Annuity Date past the Annuitant's 85th birthday or
tenth anniversary of your last Purchase Payment may have adverse tax
consequences. You should consult with a qualified tax adviser if you are
considering such a course of action.
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.
At least 30 days prior to the Annuity Date, you must notify us in writing
of the following:
[bullet] the date on which you would like Annuity Payments to begin;
[bullet] the Annuity Option under which you want payments to be calculated and
paid;
[bullet] whether the payments are to be made monthly, quarterly, semi-annually
or annually; and
[bullet] the investment option(s) used to provide Annuity Payments (i.e., a
fixed Annuity using the general account or a variable Annuity using
any of the Subaccounts available at the time of annuitization or a
combination of the two). ("See Annuity Options.")
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Once Annuity Payments begin, the Annuity Option may not be changed.
PARTIAL ANNUITIZATION
You may elect an Annuity Option with respect to a portion of your Account
Value, while leaving the remaining portion of your Account Value invested in the
Accumulation Period. The Code and the regulations do not specifically address
the tax treatment applicable to payments provided in this way. Whether such
payments are taxable as annuity payments or as withdrawals is currently unclear;
therefore, you should consult with a qualified tax adviser if you are
considering a partial annuitization of your Account.
ANNUITY OPTIONS
The Certificate Holder may choose one of the following Annuity Options:
Lifetime Annuity Options:
[bullet] Option 1--Life Annuity--An annuity with payments ending on the
Annuitant's death.
[bullet] Option 2--Life Annuity with Guaranteed Payments-- An annuity with
payments guaranteed for 5-30 years.
*[bullet] Option 3--Life Annuity with Cash Refund Feature-- An annuity with a
cash refund feature. Payments are guaranteed for the amount applied to
the Annuity Option. If the Annuitant dies before the amount applied to
the Annuity Option (less any applicable premium tax) has been paid,
any remaining balance will be paid in one sum to the Beneficiary. This
option is available only when all payments are as a fixed Annuity.
[bullet] Option 4--Life Annuity Based Upon the Lives of Two Annuitants--An
annuity paid during the lives of the Annuitant and a second Annuitant.
The Certificate Holder selects an Annuity with 100%, 66-2/3% or 50% of
the payment to continue after the first death, or an Annuity with 100%
of the payment to continue at the death of the second Annuitant and
50% of the payment to continue at the death of the Annuitant.
[bullet] Option 5--Life Annuity Based Upon the Lives of Two Annuitants with
Guaranteed Payments--An Annuity with Payments for a minimum of 5-30
years, with 100% of the payment to continue after the first death.
*[bullet] Option 6--Life Annuity Based Upon the Lives of Two Annuitants with a
Cash Refund Feature--An Annuity with 100% of the payment to continue
after the first death with a cash refund feature. Payments are
guaranteed for the amount applied to the Annuity Option. If both
Annuitants die prior to the total payment of the amount applied to the
Annuity Option (less any premium tax), any remaining balance will be
paid in one sum to the Beneficiary. This option is available only when
all payments are as a fixed Annuity.
*(If approved by your state)
If Option 1 or 4 is elected, it is possible that only one Annuity Payment
will be made if the Annuitant under Option 1, or the surviving Annuitant under
Option 4, should die prior to the due date of the second Annuity Payment. Once
lifetime Annuity payments begin, the Certificate Holder cannot elect to receive
a lump-sum settlement.
Nonlifetime Annuity Option:
Under the nonlifetime option, payments may be made for generally 5-30
years, as selected by the Certificate Holder. If this option is elected as a
variable Annuity, the Certificate Holder may request that the present value of
all or any portion of the remaining variable payments be paid in one sum.
However, any lump-sum elected before three years of payments have been completed
will be treated as a withdrawal during the Accumulation Period and any
applicable deferred sales charge will be assessed. (See "Charges and
Deductions--Deferred Sales Charge.") If the nonlifetime option is elected on a
fixed basis, you cannot elect to receive a lump-sum settlement.
We may also offer additional Annuity Options under your Contract from time
to time. You can call the number listed in the "Inquiries" section of the
Prospectus Summary, to determine which options are available and the terms of
such options. Additional or enhanced options may not be made available to those
already receiving Annuity payments.
ANNUITY PAYMENTS
Date Payments Start. When payments start, the age of the Annuitant plus
the number of years for which payments are guaranteed must not exceed 95. For
Qualified Contracts only, Annuity Payments may not extend beyond (a) the life of
the Annuitant, (b) the joint lives of the Annuitant and Beneficiary, (c) a
period certain greater than the Annuitant's life expectancy, or (d) a period
certain greater than the joint life expectancies of the Annuitant and
Beneficiary.
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Amount of Each Annuity Payment. The amount of each payment depends on how
you allocate your Account Value between fixed and variable payouts (some options
require that all payments be made on a fixed basis). No election may be made
that would result in the first Annuity Payment of less than $50, or total yearly
Annuity Payments of less than $250 (less if required by state law). If the
Account Value on the Annuity Date is insufficient to elect an option for the
minimum amount specified, a lump-sum payment must be elected. We reserve the
right to increase the minimum first Annuity Payment amount and the minimum
annual Annuity Payment amount based on increases reflected in the Consumer Price
Index-Urban (CPI-U), since July 1, 1993.
If Annuity Payments are to be made on a variable basis, the first and
subsequent payments will vary depending on the assumed net investment rate
selected (3-1/2% 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 exceeds 5% on an annualized basis. Annuity Payments
would decline if the rate were below 5%. Use of the 3-1/2% assumed rate causes a
lower first payment, but subsequent payments would increase more rapidly or
decline more slowly as changes occur in the net investment rate. (See the
Statement of Additional Information for further discussion on the impact of
selecting an assumed net investment rate.)
CHARGES DEDUCTED DURING THE ANNUITY PERIOD
We make a daily deduction for mortality and expense risks from any amounts
held on a variable basis. Therefore, electing the nonlifetime option on a
variable basis will result in a deduction being made even though we assume no
mortality risk. We may also deduct a daily administrative charge from amounts
held under the variable options. This charge, established when a variable
Annuity Option is elected, will not exceed 0.25% per year of amounts held on a
variable basis. Once established, the charge will be effective during the entire
Annuity Period. (See "Charges and Deductions.")
DEATH BENEFIT PAYABLE DURING THE ANNUITY PERIOD
The death benefit, if any, due when the Annuitant dies after Annuity
Payments have begun, will depend on the terms of the Contract and the Annuity
Option selected. If Option 1 or Option 4 was elected, Annuity Payments will
cease on the death of the Annuitant under Option 1 or the death of the surviving
Annuitant under Option 4.
If Lifetime Option 2 or Option 5 was elected and the death of the
Annuitant under Option 2, or the surviving Annuitant under Option 5, occurs
prior to the end of the guaranteed minimum payment period, we will continue
payments to the Beneficiary unless the Beneficiary elects a lump sum, provided
the Certificate Holder has not prohibited such an election in the Beneficiary
designation.
If the nonlifetime option was elected, and the Annuitant dies before all
payments are made, remaining payments will be paid to the Beneficiary unless the
Beneficiary elects a lump sum, provided the Certificate Holder has not
prohibited such an election in the Beneficiary designation.
When the Annuitant dies after Annuity Payments have begun and if there is
a death benefit payable under the Annuity option elected, the remaining value
must be distributed to the Beneficiary at least as rapidly as under the original
method of distribution.
Any lump-sum payment paid under the applicable lifetime or nonlifetime
Annuity options will be made within seven calendar days after acceptable proof
of death, and a request for payment are received at our Home Office. The value
of any death benefit proceeds will be determined as of the next Valuation Date
after we receive acceptable proof of death and a request for payment. Under
Options 2 and 5, such value will be reduced by any payments made after the date
of death.
TAX STATUS
================================================================================
INTRODUCTION
The following provides a general discussion and is not intended as tax
advice. This discussion reflects the Company's understanding of current federal
income tax law. Such laws may change in the future, and it is possible that any
change could be retroactive (i.e., effective prior to the date of the change).
In addition, this discussion does not cover the potential application of federal
estate and gift tax laws, or state, local or any
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other tax law. The Company makes no guarantee regarding the tax treatment of
any contract or transaction involving a Contract.
The Contract may be purchased on a non-tax qualified basis ("Nonqualified
Contract") or purchased and used in connection with certain retirement
arrangements entitled to special income tax treatment under Sections 403(b),
408(b) or 408A of the Code ("Qualified Contracts"). The ultimate effect of
federal income taxes on the amounts held under a Contract, on Annuity payments,
and on the economic benefit to the Contract Holder, Certificate Holder or
Beneficiary may depend upon the tax status of the individual concerned. Any
person concerned about these tax implications should consult a competent tax
adviser before initiating any transaction.
TAXATION OF THE COMPANY
The Company is taxed as a life insurance company under the Code. Since the
Separate Account is not an entity separate from the Company, it will not be
taxed separately as a "regulated investment company" under the Code. Investment
income and realized capital gains are automatically applied to increase reserves
under the Contracts. Under existing federal income tax law, the Company believes
that the Separate Account investment income and realized net capital gains will
not be taxed to the extent that such income and gains are applied to increase
the reserves under the Contracts.
Accordingly, the Company does not anticipate that it will incur any
federal income tax liability attributable to the Separate Account and,
therefore, the Company does not intend to make provisions for any such taxes.
However, if changes in the federal tax laws or interpretation thereof result in
the Company being taxed on income or gains attributable to the Separate Account,
then the Company may impose a charge against the Separate Account (with respect
to some or all Contracts) in order to set aside provisions to pay such taxes.
TAX STATUS OF THE CONTRACT
Diversification. Section 817(h) of the Code requires that with respect to
Nonqualified Contracts, the investments of the Funds be "adequately diversified"
in accordance with Treasury Regulations in order for the Contracts to qualify as
annuity contracts under federal tax law. The Separate Account, through the
Funds, intends to comply with the diversification requirements prescribed by the
Treasury in Reg. Sec. 1.817-5, which affects how the Funds' assets may be
invested.
In addition, in certain circumstances, owners of variable annuity
contracts may be considered the owners, for federal income tax purposes, of the
assets of the separate accounts used to support their contracts. In these
circumstances, income and gains from the separate account assets would be
includible in the variable contract owner's gross income. The IRS has stated in
published rulings that a variable contract owner will be considered the owner of
separate account assets if the owner possesses incidents of investment control
over the assets. The ownership rights under the contract are similar to, but
different in certain respects from those described by the IRS in rulings in
which it was determined that owners were not owners of separate account assets.
For example, a Certificate Holder has additional flexibility in allocating
premium payments and account values. In addition, the number of funds provided
under the Contract is significantly greater than the number of funds offered in
contracts on which rulings have been issued. These differences could result in a
Certificate Holder being treated as the owner of a pro rata portion of the
assets of the Separate Account. The Company reserves the right to modify the
Contract as necessary to attempt to prevent a Certificate Holder from being
considered the owner of a pro rata share of the assets of the Separate Account.
Required Distributions--Nonqualified Contracts: In order to be treated as
an annuity contract for federal income tax purposes, Section 72(s) of the Code
requires Nonqualified Contracts to provide that (a) if any Certificate Holder
dies on or after the Annuity Date but prior to the time the entire interest in
the Contract has been distributed, the remaining portion of such interest will
be distributed at least as rapidly as under the method of distribution in effect
at the time of the Certificate Holder's death, and (b) if any Certificate Holder
dies prior to the Annuity Date, the entire interest in the Contract will be
distributed within five years after the date of such Certificate Holder's death.
These requirements will be considered satisfied as to any portion of a
Certificate Holder's interest which is payable to or for the benefit of a
"designated beneficiary" and which is distributed over the life of such
"designated beneficiary" or over a period not extending beyond the life
expectancy of that beneficiary, provided that such distributions begin within
one year of the Certificate Holder's death. The
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"designated beneficiary" refers to a natural person designated by the
Certificate Holder as a Beneficiary and to whom ownership of the contract
passes by reason of death. However, if the "designated beneficiary" is the
surviving spouse of the deceased Certificate Holder, the Account may be
continued with the surviving spouse as the new Certificate Holder. If the
Certificate Holder is a non-natural person, the surviving spouse who is the
"designated beneficiary" of the deceased Annuitant may continue the Account.
If the Certificate Holder is a natural person but not the Annuitant and
the Annuitant dies, if the Beneficiary does not elect an Annuity Option within
60 days of the date of death, the gain, if any, will be includible in the
Beneficiary's income in the year the Annuitant dies.
Required Distributions--Qualified Contracts: The Code has required
distribution rules for Section 403(b) Plans and Individual Retirement Annuities.
Other than for IRAs and for five-percent owners in other Qualified Contracts
distributions must generally begin by April 1 of the calendar year following the
calendar year in which the participant attains age 70-1/2 or retires, whichever
occurs later. For traditional IRA participants and for five-percent owners,
minimum distributions must begin by April 1 of the calendar year following the
calendar year in which the participant attains age 70-1/2. There is no required
distribution date for participants in a Roth IRA. Under 403(b) plans, if the
Company maintains separate records, distribution of amounts held as of December
31, 1986 must generally begin by the end of the calendar year in which the
participant attains age 75 (or retires, whichever occurs later). However,
special rules require that some or all of the balance be distributed earlier if
any distributions are taken in excess of the minimum required amount.
To comply with these provisions, distributions must be in a form and
amount sufficient to satisfy the minimum distribution and minimum distribution
incidental death benefit rules specified in Section 401(a) (9) of the Code.
In general, annuity payments from a traditional IRA must be distributed
over the participant's life or the joint lives of the participant and
beneficiary, or over a period not greater than the participant's life expectancy
or the joint life expectancies of the participant and beneficiary.
If the participant dies on or after the required beginning date for
minimum distributions, distributions to the beneficiary must be made at least as
rapidly as the method of distribution in effect at the time of the participant's
death. However, if the required minimum distribution is calculated each year
based on the participant's single life expectancy or the joint life expectancies
of the participant and beneficiary, the regulations for Code Section 401(a)(9)
provide specific rules for calculating the required minimum distributions at the
participant's death. For example, if ECO was elected with the calculation based
on the participant's single life expectancy, and the life expectancy is
recalculated each year, the recalculated life expectancy becomes zero in the
calendar year following the participant's death and the entire remaining
interest must be distributed to the beneficiary by December 31 of the year
following the participant's death. However, a spousal beneficiary has certain
rollover rights which can only be exercised in the year of the participant's
death. The rules are complex and the participant should consult a tax adviser
before electing the method of calculation to satisfy the minimum distribution
requirements.
If the participant dies before the required beginning date for minimum
distributions, the entire interest must be distributed by December 31 of the
calendar year containing the fifth anniversary of the date of the participant's
death. Alternatively, payments may be made over the life of the beneficiary or
over a period not extending beyond the life expectancy of the beneficiary
provided the distribution begins to a non-spouse beneficiary by December 31 of
the calendar year following the calendar year of the participant's death. If
payments are made to a spousal beneficiary, distributions must begin by the
later of December 31 of the calendar year following the calendar year of the
death or December 31 of the calendar year in which the participant would have
attained age 70-1/2.
An exception applies for a spousal beneficiary under an Individual
Retirement Annuity. In lieu of taking a distribution under these rules, a
spousal beneficiary may elect to treat the Account as his or her own IRA and
defer taking a distribution until his or her age 70-1/2. The surviving spouse is
deemed to have made such an election if the surviving spouse makes a rollover to
or from the Account or fails to take a distribution within the required time
period.
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The minimum distribution rules also apply to beneficiaries under a Roth
IRA and are based on whether the participant dies before or after distribution
begins.
If the participant or beneficiary fails to take the required minimum
distribution for any tax year, a 50% excise tax is imposed on the required
amount that was not distributed.
TAXATION OF ANNUITY CONTRACTS
In General: Section 72 of the Code governs taxation of annuities in
general. The Company believes that a Certificate Holder under a Nonqualified
Contract who is a natural person generally is not taxed on increases in the
Account Value until distribution occurs by withdrawing all or part of such
Account Value (e.g., withdrawals or Annuity Payments under the Annuity Option
elected). The taxable portion of a distribution (in the form of a single sum
payment or an Annuity) is taxable as ordinary income.
Non-Natural Holders of a Nonqualified Contract: If the Certificate Holder
is not a natural person, a Nonqualified Contract is not treated as an annuity
for income tax purposes and the "income on the contract" for the taxable year is
currently taxable as ordinary income. "Income on the contract" is any increase
over the year in the Surrender Value, adjusted for Purchase Payments made during
the year, amounts previously distributed and amounts previously included in
income. There are some exceptions to the rule and a non-natural person should
consult with its tax adviser prior to purchasing this Contract. A non-natural
person exempt from federal income taxes should consult with its tax adviser
regarding treatment of "income on the contract" for purposes of the unrelated
business income tax. When the Certificate Holder is not a natural person, the
Annuitant is considered the Certificate Holder for the purpose of meeting the
required distribution-at-death rules. In addition, when the Certificate Holder
is not a natural person, a change in Annuitant is treated as the death of the
Certificate Holder.
The following discussion generally applies to Qualified Contracts or
Nonqualified Contracts owned by a natural person.
Withdrawals: In the case of a withdrawal under a Qualified Contract,
including withdrawals under SWO or ECO, the amount taxable is generally based on
the ratio of the "investment in the contract" to Account Value. The "investment
in the contract" generally equals the amount of any nondeductible Purchase
Payments paid by or on behalf of any individual less any amount received
previously which was excludable from gross income. For a Qualified Contract, the
"investment in the contract" can be zero. Special tax rules may be available for
certain distributions from a Qualified Contract.
With respect to Nonqualified Contracts, partial withdrawals, including
withdrawals under SWO, are generally treated as taxable income to the extent
that the Account Value immediately before the withdrawal exceeds the "investment
in the contract" at that time. The Account Value immediately before a withdrawal
may have to be increased by any positive market value adjustment (MVA) that
results from such a withdrawal. There is, however, no definitive guidance on the
proper tax treatment of MVAs in these circumstances, and a Certificate Holder
should contact a competent tax advisor with respect to the potential tax
consequences of any MVA that arises as a result of a partial withdrawal.
Full withdrawals of a Nonqualified Contract are treated as taxable income
to the extent that the amount received exceeds the "investment in the contract."
Any "qualified" distribution from a Roth IRA is not includible in gross
income. A "qualified" distribution is any distribution made after the
participant attains age 59-1/2, or on account of the participant's 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", 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
"Penalty Tax" below.) 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 the
participant's death. (See "Annuity Period" above.)
Annuity Payments: Although the tax consequences may vary depending on the
Annuity Payment elected under the Contract, in general, only the portion of the
Annuity Payment that represents the amount by which
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the Account Value exceeds the "investment in the contract" will be taxed; after
the "investment in the contract" is recovered, the full amount of any
additional annuity payments is taxable. For variable Annuity Payments, the
taxable portion is generally determined by an equation that establishes a
specific dollar amount of each payment that is not taxed. The dollar amount is
determined by dividing the "investment in the contract" by the total number of
expected periodic payments. However, the entire distribution will be taxable
once the recipient has recovered the dollar amount of his or her "investment in
the contract." For fixed annuity payments, in general there is no tax on the
portion of each payment which represents the same ratio that the "investment in
the contract" bears to the expected number of payments as defined in Code
Section 72(d) ; however, the remainder of each Annuity Payment is taxable. Once
the "investment in the contract" has been fully recovered, the full amount of
any additional Annuity Payments is taxable. If Annuity Payments cease as a
result of an Annuitant's death before full recovery of the "investment in the
contract," consult a competent tax advisor regarding deductibility of the
unrecovered amount.
Penalty Tax: In the case of a distribution pursuant to a Nonqualified
Contract there may be imposed a federal income tax penalty equal to 10% of the
amount treated as taxable income.
In general, there is no penalty tax on distributions from a Nonqualified
Contract: (1) made on or after the date on which the taxpayer attains age
59-1/2; (2) made as a result of the death of the Certificate Holder; (3)
attributable to the taxpayer's total and permanent disability; (4) received in
substantially equal periodic payments (at least annually) over the life or life
expectancy of the taxpayer or the joint lives or joint life expectancies of the
taxpayer and a "designated beneficiary"; or (5) allocable to "investment in the
contract" before August 14, 1982.
If a distribution is made from a Qualified Contract sold in conjunction
with Section 403(b) Plan, the penalty tax will not apply on distribution made
when the participant (a) attains age 59-1/2, (b) becomes permanently and totally
disabled, (c) dies, (d) separates from service with the plan sponsor at or after
age 55, (e) rolls over the distribution amount to another plan of the same type
in accordance with the terms of the Code, or (f) takes the distributions in
substantially equal periodic payments (at least annually) over his or her life
or life expectancy or the joint lives or joint life expectancies of the
participant and beneficiary, provided the participant has separated from service
with the plan sponsor. In addition, the penalty tax does not apply for the
amount of a distribution equal to unreimbursed medical expenses incurred by the
participant that qualify for deduction as specified in the Code. The Code may
impose other penalty taxes in other circumstances.
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.
Taxation of Death Benefit Proceeds: Amounts may be distributed from the
Contract because of the death of a Certificate Holder or the Annuitant.
Generally, such amounts are includible in the income of the recipient as
follows: (1) if distributed in a lump sum, they are taxed in the same manner as
a full surrender as described above, or (2) if distributed under an Annuity
Option, they are taxed in the same manner as Annuity Payments, as described
above.
Special rules may apply on Nonqualified Contracts. See "Required
Distributions--Nonqualified Contracts."
Transfers, Assignments or Exchanges of the Contract: A transfer of
ownership of a Contract, the designation of an Annuitant, payee or other
Beneficiary who is not also a Certificate Holder, the selection of certain
Annuity Dates, or the exchange of a Contract may result in certain tax
consequences. The assignment, pledge, or agreement to assign or pledge any
portion of the Account Value generally will be treated as a distribution. The
assignment or transfer of ownership of a Qualified Contract generally is not
allowed. Anyone contemplating any such designation, transfer, assignment,
selection, or exchange should contact a competent tax adviser with respect to
the potential tax effects of such a transaction.
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Multiple Contracts: All deferred nonqualified annuity contracts that are
issued by the Company (or its affiliates) to the same owner during any calendar
year are treated as one annuity contract for purposes of determining the amount
includible in gross income under Section 72(e) of the Code. In addition, the
Treasury Department has specific authority to issue regulations that prevent the
avoidance of Section 72(e) through the serial purchase of annuity contracts or
otherwise.
CONTRACTS USED WITH CERTAIN RETIREMENT PLANS
Qualified Contracts in General. The Qualified Contract is designed for use
as a Code Section 408(b) Individual Retirement Annuity or as a Contract used in
connection with certain employer sponsored retirement plans. The tax rules
applicable to participants and beneficiaries in Qualified Contracts are complex.
Special favorable tax treatment may be available for certain types of
contributions and distributions. Adverse tax consequences may result from
contributions in excess of specified limits; distributions prior to age 59-1/2
(subject to certain exceptions); distributions that do not conform to specified
commencement and minimum distribution rules; and in other specified
circumstances.
The Company makes no attempt to provide more than general information
about use of the Contracts with the various types of retirement plans.
Participants and beneficiaries under Qualified Contracts may be subject to the
terms and conditions of the retirement plans themselves, in addition to the
terms and conditions of the Contract issued in connection with such plans. Some
retirement plans are subject to distribution and other requirements that are not
incorporated in the provisions of the Contracts. Purchasers are responsible for
determining that contributions, distributions and other transactions with
respect to the Contracts satisfy applicable laws, and should consult their legal
counsel and tax adviser regarding the suitability of the Contract.
Section 403(b) Plans. Under Section 403(b), contributions made by public
school systems or nonprofit healthcare organizations and other Section 501(c)(3)
tax exempt organizations to purchase annuity contracts for their employees are
generally excludable from the gross income of the employee.
In order to be excludable from taxable income, total annual contributions
made by the participant and his or her employer cannot exceed either of two
limits set by the Code. The first limit, under Section 415, is generally the
lesser of 25% of includible compensation or $30,000. Compensation means
compensation from the participant's employer sponsoring the plan, and for years
beginning after December 31, 1997, includes any elective deferrals under Code
Section 402 (g) and any amounts not includible in gross income under Code
Sections 125. The second limit, which is the exclusion allowance under Section
403(b), is usually calculated according to a formula that takes into account the
participant's length of employment and any pretax contributions you and your
employer made to the plan and to certain other retirement plans. These two
limits apply to the participant's contributions as well as to any contributions
made by the employer on behalf of the participant. There is an additional limit
that specifically limits salary reduction contributions to generally no more
than $10,000 annually (subject to indexing); a participant's own limit may be
higher or lower, depending on certain conditions. In addition, Purchase Payments
will be excluded from a participant's gross income only if the Plan meets
certain nondiscrimination requirements.
Section 403(b)(11) restricts the distribution under Section 403(b)
contracts of: (1) salary reduction contributions made after December 31, 1988;
(2) earnings on those contributions; and (3) earnings during such period on
amounts held as of December 31, 1988. Distribution of those amounts may only
occur upon death of the participant, attainment of age 59-1/2, separation from
service, total and permanent disability, or financial hardship. In addition,
income attributable to salary reduction contributions may not be distributed in
the case of hardship.
Individual Retirement Annuities and Simplified Employee Pension Plans.
Section 408(b) of the Code permits eligible individuals to contribute to an
individual retirement program known as a traditional Individual Retirement
Annuity, hereinafter referred to as an "IRA." Also, distributions from certain
other types of qualified plans may be "rolled over" on a tax-deferred basis into
an IRA. Employers may establish Simplified Employee Pension (SEP) Plans and
contribute to an IRA owned by the employee. Purchasers of a Qualified Contract
for use with IRAs will be provided with supplemental information required by the
Internal Revenue Service. Purchasers should seek competent advice as to the
suitability of the Contract for use with IRAs.
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Section 408A of the Code permits eligible individuals to contribute to a
Roth IRA on an after-tax (non-deductible) 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.
Withholding. Pension and annuity distributions generally are subject to
withholding for the recipient's federal income tax liability at rates that vary
according to the type of distribution and the recipient's tax status. Recipients
may be provided the opportunity to elect not to have tax withheld from
distributions; however, certain distributions from Section 403(b) tax-deferred
annuities are subject to mandatory 20% federal income tax withholding. If the
recipient is a non-resident alien, any withholding will be governed by Code
Section 1441 based on the individual's citizenship, the country of domicile and
treaty status. We will report to the IRS the taxable portion of all
distributions.
MISCELLANEOUS
================================================================================
DISTRIBUTION
Aetna Life Insurance and Annuity Company ("ALIAC") will serve as the
principal underwriter for the securities sold by this Prospectus. ALIAC is
registered as a broker-dealer with the Securities and Exchange Commission
("SEC") and is a member of the National Association of Securities Dealers, Inc.
("NASD"). As principal underwriter, ALIAC will contract with one or more
registered broker-dealers, or with banks that may be acting as broker-dealers
without separate registration under the Securities Exchange Act of 1934 pursuant
to legal and regulatory exceptions ("Distributors") to offer and sell the
Contracts. ALIAC and one or more of its affiliates may also sell the Contracts
directly. All individuals offering and selling the Contracts must either be
registered representatives of a broker-dealer, or employees of a bank exempt
from registration under the Securities Exchange Act of 1934, and must also be
licensed as insurance agents to sell variable annuity contracts.
From time to time, ALIAC may offer customers of certain broker-dealers
special guaranteed rates in connection with the Guaranteed Account offered
through the Contracts, and may negotiate different commissions for these
broker-dealers.
ALIAC may also contract with independent third party broker-dealers who
will act as wholesalers by assisting ALIAC in finding broker-dealers or banks
interested in acting as Distributors for the Contracts. These wholesalers may
also provide training, marketing and other sales related functions for ALIAC and
other Distributors and may provide certain administrative services to ALIAC in
connection with the Contracts. ALIAC may pay such wholesalers compensation based
on Purchase Payments for the Contracts purchased through Distributors selected
by the wholesaler.
ALIAC may also designate third parties to provide services in connection
with the Contracts such as reviewing applications for completeness and
compliance with insurance requirements and providing the Distributors with
approved marketing material, prospectuses or other supplies. These parties will
also receive payments based on Purchase Payments for their services, to the
extent such payments are allowed by applicable securities laws. All costs and
expenses related to these services will be paid by ALIAC.
Payment of Commissions. Commissions will be paid to Distributors who sell
the Contracts. Distributors will be paid commissions up to an amount currently
equal to 6.5% of Purchase Payments. Pursuant to agreements between the
Underwriter and the Distributor, commissions may be paid as a combination of a
certain percentage amount at the time of sale and a trail commission of up to
0.40% of assets due to Purchase Payments (which, when combined, could exceed
6.5% of Purchase Payments). At times the Company may offer certain Distributors
an enhanced commission for a limited period of time. In addition, some sales
personnel may receive various types of non-cash compensation such as special
sales incentives, including trips and educational and/or business seminars.
Supervisory and other management personnel of the Company may receive
compensation that will vary based on the relative profitability to the Company
of the funding options you select. Funding options that invest in Funds advised
by the Company or its affiliates are generally more profitable to the Company.
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Other than the mortality and expense risk charge and the administrative
charge, all expenses incurred in the operations of the Separate Account are
borne by the Company.
DELAY OR SUSPENSION OF PAYMENTS
The Company reserves the right to suspend or postpone the date of payment
for any benefit or values (a) on any Valuation Date on which the New York Stock
Exchange ("Exchange") is closed (other than customary weekend and holiday
closings) or when trading on the Exchange is restricted; (b) when an emergency
exists, as determined by the SEC, so that disposal of securities held in the
Subaccounts is not reasonably practicable or it is not reasonably practicable
for the Company fairly to determine the value of the Subaccount's assets; or (c)
during such other periods as the SEC may by order permit for the protection of
investors. The conditions under which restricted trading or an emergency exists
shall be determined by the rules and regulations of the SEC.
PERFORMANCE REPORTING
From time to time, the Company may advertise different types of historical
performance for the Subaccounts of the Separate Account. The Company may
advertise the "standardized average annual total returns" of the Subaccounts,
calculated in a manner prescribed by the SEC, as well as the "non-standardized
returns." "Standardized average annual total returns" are computed according to
a formula in which a hypothetical investment of $1,000 is applied to the
Subaccount and then related to the ending redeemable values over the most recent
one, five and ten-year periods (or since contributions were first received in
the Fund under the Separate Account, if less than the full period). Standardized
returns will reflect the reduction of all recurring charges during each period
(e.g., mortality and expense risk charges, annual maintenance fees,
administrative charge and any applicable deferred sales charge).
"Non-standardized returns" will be calculated in a similar manner, except that
non-standardized figures will not reflect the deduction of any applicable
deferred sales charge (which would decrease the level of performance shown if
reflected in these calculations). The non-standardized figures may also include
monthly, quarterly, year-to-date and three-year periods and may include
performance from the Fund's inception date.
The Company may also advertise certain ratings, rankings or other
information related to the Company, the Subaccounts or the Funds. Further
details regarding performance reporting and advertising are described in the
Statement of Additional Information.
VOTING RIGHTS
Each Contract Holder may direct us in the voting of shares at
shareholders' meetings of the appropriate Funds(s). The number of votes to which
each Contract Holder may give direction will be determined as of the record
date. The number of votes each Contract Holder is entitled to direct with
respect to a particular Fund during the Accumulation Period equals the portion
of the Account Values(s) of the Contract attributable to that Fund, divided by
the net asset value of one share of that Fund. During the Annuity Period, the
number of votes is equal to the valuation reserve for the portion of the
Contract attributable to that Fund, divided by the net asset value of one share
of that Fund. In determining the number of votes, fractional votes will be
recognized. Where the value of the Contract or valuation reserve relates to more
than one Fund, the calculation of votes will be performed separately for each
Fund.
If you are a Certificate Holder under a group Contract, you have a fully
vested (100%) interest in the benefits provided to you under your Account.
Therefore, you may instruct the group Contract Holder how to direct the Company
to cast the votes for the portion or the value of valuation reserve attributable
to your Account. Votes attributable to those Certificate Holders who do not
instruct the group Contract Holder will be cast by the Company in the same
proportion as votes for which instructions have been received by the group
Contract Holder. Votes attributable to individual or group Contract Holders who
do not direct us will be cast by us in the same proportion as votes for which
directions we have received.
You will receive a notice of each meeting of shareholders, together with
any proxy solicitation materials, and a statement of the number of votes
attributable to your Account.
MODIFICATION OF THE CONTRACT
The Company may change the Contract as required by federal or state law.
In addition, the Company may, upon 30 days written notice to the Contract
Holder, make other changes to group Contracts that would apply only to
individuals who become Certificate
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Holders under that Contract after the effective date of such changes. If the
Contract Holder does not agree to a change, the Company reserves the right to
refuse to establish new Accounts under the Contract. Certain changes will
require the approval of appropriate state or federal regulatory authorities.
TRANSFERS OF OWNERSHIP; ASSIGNMENT
Assignments or transfers of ownership of a Qualified Contract generally
are not allowed except as permitted under the Code, incident to a divorce.. We
will accept assignments or transfers of ownership of a Nonqualified Contract or
a Qualified Contract where assignments or transfers of ownership are not
prohibited, with proper notification. The date of any such transfer will be the
date we receive the notification at our Home Office. (Refer to "Tax Status" for
general tax information.) If you are contemplating a transfer of ownership or
assignment you should consult a tax adviser due to the potential for tax
liability.
No assignment of a Contract will be binding on us unless made in writing
and sent to us at our Home Office. The Company will use reasonable procedures to
confirm that the assignment is authentic, including verification of signature.
If the Company fails to follow its procedures, it would be liable for any losses
to you directly resulting from the failure. Otherwise, we are not responsible
for the validity of any assignment. The rights of the Certificate Holder and the
interest of the Annuitant and any Beneficiary will be subject to the rights of
any assignee of record.
INVOLUNTARY TERMINATIONS
We reserve the right to terminate any Account with a value of $2,500 or
less immediately following a partial withdrawal (unless otherwise required by
State law). However, an Individual Retirement Annuity may only be closed out
when Purchase Payments have not been received for a 24-month period and the
paid-up annuity benefit at maturity would be less than $20 per month. If such
right is exercised, you will be given 90 days advance written notice. No
deferred sales charge will be deducted for involuntary terminations. The Company
does not intend to exercise this right in cases where the Account Value is
reduced to $2,500 or less solely due to investment performance.
LEGAL MATTERS AND PROCEEDINGS
The Company knows of no material legal proceedings pending to which the
Separate Account or the Company is a party or which would materially affect the
Separate Account. The validity of the securities offered by this Prospectus has
been passed upon by Counsel to the Company.
YEAR 2000
As a healthcare and financial services enterprise, Aetna Inc. (referred to
collectively with its af filiates and subsidiaries as Aetna), is dependent on
computer systems and applications to conduct its business. Aetna has developed
and is currently executing a comprehensive risk-based plan designed to make its
computer systems, applications and facilities Year 2000 ready. The plan covers
four stages including (i) inventory, (ii) assessment, (iii) remediation and (iv)
testing and certification. At year end 1997, Aetna , including the Company, had
substantially completed the inventory and assessment stages. The remediation
process is currently underway and targeted for completion by December 31, 1998.
Testing and certification of these systems and applications are 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, including the Company, is initiating communication with its
critical external relationships to determine the extent to which Aetna may be
vulnerable to such parties' failure to resolve their own Year 2000 issues. Where
practicable Aetna and the Company will assess and attempt to mitigate their
risks with respect to the failure of these parties' to be Year 2000 ready. There
can be no assurance that failure of third parties to complete adequate
preparations in a timely manner, and any resulting systems interruptions or
other consequences, would not have an adverse effect, directly or indirectly, on
the Separate Account, including, without limitation, its operation or the
valuation of its assets and units.
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CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION
================================================================================
The Statement of Additional Information contains more specific information
on the Separate Account and the Contract, as well as the financial statements of
the Separate Account and the Company. A list of the contents of the SAI is set
forth below:
General Information and History
Variable Annuity Account I
Offering and Purchase of Contracts
Performance Data
General
Average Annual Total Return Quotations
Annuity Payments
Sales Material and Advertising
Independent Auditors
Financial Statements of the Separate Account
Financial Statements of the Company
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APPENDIX A AICA GUARANTEED ACCOUNT
================================================================================
The AICA Guaranteed Account (the "Guaranteed Account") is a credited
interest option available during the Accumulation Period under the Contracts.
This Appendix is a summary of the Guaranteed Account and is not intended to
replace the Guaranteed Account prospectus. You should read the accompanying
Guaranteed Account prospectus carefully before investing.
The Guaranteed Account is a credited interest option in which we guarantee
stipulated rates of interest for stated periods of time on amounts directed to
the Guaranteed Account. A guaranteed rate is credited for the full term. The
interest rate stipulated is an annual effective yield; that is, it reflects a
full year's interest. Interest is credited daily at a rate that will provide the
guaranteed annual effective yield for one year. Guaranteed interest rates will
never be less than an annual effective rate of 3%.
During a deposit period, amounts may be applied to any of the available
guaranteed terms. A Guaranteed Term is the period of time specified by the
Company for which a specific Guaranteed Rate or Rates are offered on amounts
invested during a specific Deposit Period. Guaranteed Terms are made available
by the Company subject to the Company's terms and conditions. The Company may
offer more than one Guaranteed Term of the same duration and credit one with a
higher rate contingent upon use only with the Dollar Cost Averaging Program. If
amounts are applied to a Guaranteed Term which is credited with a higher rate
using dollar cost averaging and the dollar cost averaging is discontinued, the
amounts will be transferred to another Guaranteed Term of the same duration and
a market value adjustment ("MVA") will apply. The Company also reserves the
right to limit the number of Guaranteed Terms or the availability of certain
Guaranteed Terms. See the prospectus for the Guaranteed Account for further
details regarding Guaranteed Term. Purchase Payments received after the initial
payment will be allocated in the same proportions as the last allocation, if no
new allocation instructions are received with the Purchase Payment. If the same
guaranteed term(s) are not available, the next shortest term will be used. If no
shorter guaranteed term is available, the next longer guaranteed term will be
used.
Except for transfers from an available Guaranteed Term subject to the
Company's terms and conditions in connection with the Dollar Cost Averaging
Program, withdrawals taken in connection with an Estate Conservation or
Systematic Withdrawal distribution option, and, if approved by your state,
withdrawals for minimum distributions required by the Code for which the
deferred sales charge is waived, withdrawals or transfers from a guaranteed term
before the guaranteed term matures may be subject to an MVA. An MVA reflects the
change in the value of the investment due to changes in interest rates since the
date of deposit. When interest rates increase after the date of deposit, the
value of the investment decreases, and the MVA is negative. Conversely, when
interest rates decrease after the date of deposit, the value of the investment
increases, and the MVA is positive. It is possible that a negative MVA could
result in the Certificate Holder receiving an amount which is less than the
amount paid into the Guaranteed Account.
For partial withdrawals during the Accumulation Period, amounts to be
withdrawn from the Guaranteed Account will be withdrawn on a pro rata basis from
each group of deposits having the same length of time until the Maturity Date
("Guaranteed Term Group"). Within a Guaranteed Term Group, the amount will be
withdrawn first from the oldest Deposit Period, then from the next oldest, and
so on until the amount requested is satisfied.
As a Guaranteed Term matures, assets accumulating under the Guaranteed
Account may be (a) transferred to a new Guaranteed Term, (b) transferred to
other available investment options, or (c) withdrawn. Amounts withdrawn may be
subject to a deferred sales charge. If no direction is received by the Company
at its Home Office by the maturity date of a guaranteed term, the amount from
the maturing guaranteed term will be transferred to the current deposit period
for a similar length guaranteed term. If the same guaranteed term is no longer
available the next shortest guaranteed term available in the current deposit
period will be used. If no shorter guaranteed term is available, the next longer
guaranteed term will be used.
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If you do not provide instructions concerning the maturity value of a
maturing guaranteed term, the maturity value transfer provision applies. This
provision allows you to transfer without an MVA to available guaranteed terms of
the current deposit period or to other available investment options, or
surrender without an MVA (if applicable, a deferred sales charge is assessed on
the surrendered amount). The provision is available only during the calendar
month immediately following a guaranteed term maturity date and only applies to
the first transaction regardless of the amount involved in the transaction.
MORTALITY AND EXPENSE RISK CHARGES
We make no deductions from the credited interest rate for mortality and
expense risks; these risks are considered in determining the credited rate.
TRANSFERS
Amounts applied to a guaranteed term during a deposit period may not be
transferred to any other funding option or to another guaranteed term during
that deposit period or for 90 days after the close of that deposit period. This
does not apply to (1) amounts transferred on the Maturity Date or under the
maturity value transfer provision; (2) amounts transferred from the Guaranteed
Account before the Maturity Date due to the election of an Annuity Option; (3)
amounts distributed under the Estate Conservation or Systematic Withdrawal
Options; and (4) amounts transferred from an available Guaranteed Term in
connection with the Dollar Cost Averaging Program. However, if the Certificate
Holder discontinues the Dollar Cost Averaging Program and the amounts in it are
transferred in accordance with the Company's terms and conditions governing
Guaranteed Terms, an MVA will apply. Transfers after the 90-day period are
permitted from guaranteed term(s) to other guaranteed term(s) available during a
deposit period or to other available investment options. Except for transactions
described in items (1), (3) and (4) above, amounts withdrawn or transferred from
the Guaranteed Account prior to the maturity date will be subject to an MVA.
However, only a positive aggregate MVA will be applied to transfers made due to
annuitization under one of the lifetime Annuity Options described in item (2)
above.
The Company reserves the right to limit the number of investment options
selected during the Accumulation Period. At this time there is no limit on the
number of options selected during the Accumulation Period, but the number of
investment options that may be selected at any one time by a Certificate Holder
presently is limited to 18. Under the Guaranteed Account, each guaranteed term
is counted as one funding option. If a guaranteed term matures, and is renewed
for the same term, it will not count as an additional investment option.
Transfers of the Guaranteed Account values on or within one calendar month
of a term's maturity date are not counted as one of the 12 free transfers of
accumulated values in the Account.
By notifying us at least 30 days prior to the Annuity Date, you may elect a
variable annuity and have amounts that have been accumulating under the
Guaranteed Account transferred to one or more of the Subaccounts available
during the Annuity Period. The Guaranteed Account cannot be used as an
investment option during the Annuity Period. Transfers made due to the election
of a lifetime Annuity Option will be subject to only a positive aggregate MVA.
DEATH BENEFIT
Full and partial withdrawals and transfers made from the Guaranteed
Account within six months after the date of the Annuitant's death will be the
greater of:
(1) the aggregate MVA amount (i.e., the sum of all market value adjusted
amounts calculated due to a withdrawal of amounts) which may be greater or
less than the Account Value of those amounts; or
(2) the applicable portion of the Account Value attributable to the Guaranteed
Account.
After the six-month period, the surrender or transfer amount will be
adjusted for the aggregate MVA amount, which may be greater or less than the
Account Value of those amounts.
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DISTRIBUTION
Aetna Life Insurance and Annuity Company ("ALIAC") is the principal
underwriter of the Contract. ALIAC is registered with the Securities and
Exchange Commission under the Securities Exchange Act of 1934 as a broker-
dealer, and is a member of the National Association of Securities Dealers, Inc.
From time to time, ALIAC may offer customers of certain broker-dealers
special guaranteed rates in connection with the Guaranteed Account offered
through the Contracts, and may negotiate different commissions for these
broker-dealers.
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APPENDIX B
FIXED ACCOUNT
================================================================================
The Fixed Account is an investment option available during the Accumulation
Period under Contracts offered in certain states. 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 in effect
when actually applied to the Fixed Account, 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 "Investment Options.")
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 amounts in the
Fixed Account will be transferred into the Aetna Money Market VP Subaccount
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 been accumulated under the Fixed Account transferred to one or more of the
investment options available during the Annuity Period to provide variable
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
provided by federal law.
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APPENDIX C
DESCRIPTION OF UNDERLYING FUNDS
================================================================================
The investment results of the Funds described below are likely to differ
significantly and there is no assurance that any of the Funds will achieve their
respective investment objectives. Except where otherwise noted, all of the Funds
are diversified, as defined in the 1940 Act.
Aetna Balanced VP, Inc. (formerly Aetna Investment Advisers Fund, Inc.)
Investment Objective
Seeks to maximize investment return, consistent with reasonable safety of
principal by investing in a diversified portfolio of one or more of the
following asset classes: stocks, bonds, and cash equivalents, based on the
investment adviser's judgment of which of those sectors or mix thereof offers
the best investment prospects.
Policies
Assets are allocated among common and preferred stocks, bonds, U.S.
Government securities and derivatives, and money market instruments. The Fund
may also invest in when-issued or delayed-delivery securities. The Fund
generally will maintain at least 25 percent of its total assets in fixed income
securities.
Risks
There can be no assurance that the investment adviser will always allocate
assets to the best performing sectors. The Fund's performance would suffer if a
major proportion of its assets were allocated to stocks in a declining market
or, similarly, if a major portion of its assets were allocated to bonds in a
time of adverse interest rate movement. High-yield bonds involve additional
investment risk. Foreign securities may involve certain additional risks. Such
risks include: currency fluctuations and related currency conversion costs; less
liquidity; price or income volatility; less government supervision and
regulation of foreign stock exchanges, brokers and listed companies; adverse
foreign political and economic developments; different accounting procedures and
auditing standards; and less publicly available information about foreign
issuers.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Income Shares d/b/a Aetna Bond VP
Investment Objective
Seeks to maximize total return, consistent with reasonable risk, through
investments in a diversified portfolio consisting primarily of debt securities.
Policies
The Fund will invest at least 65 percent of its total assets in debt
securities. It is anticipated that the portfolio's effective average maturity
will normally be between three and ten years. The Fund will normally invest at
least 70 percent of its assets in one or more of the following: a) debt
securities or obligations that are rated at the time of purchase within the four
highest categories assigned by Moody's Investors Service, Inc., Standard &
Poor's Corporation, or other rating agencies, or, if not rated, that are
considered by the investment adviser to be of comparable quality; b) securities
of, or guaranteed by, the U.S. Government, its agencies or instrumentalities; c)
marketable securities or obligations of, or guaranteed by, foreign governments;
d) commercial paper and other short-term investments having a maturity of less
than one year that are considered by the investment adviser to be investment
grade; and, e) cash or cash equivalents. May invest up to 30 percent of its
total assets in high-yield bonds. May invest up to 25 percent of its total
assets in foreign debt and/or equity securities.
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Risks
The value of debt securities may be affected by changes in general interest
rates. High-yield bonds tend to offer higher yields than investment-grade bonds,
but additional risks are associated with them. Foreign securities may involve
certain additional risks. Such risks include: currency fluctuations and related
currency conversion costs; less liquidity; price or income volatility; less
government supervision and regulation of foreign stock exchanges, brokers and
listed companies; adverse foreign political and economic developments; different
accounting procedures and auditing standards; and less publicly available
information about foreign issuers.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Variable Fund d/b/a Aetna Growth and Income VP
Investment Objective
Seeks to maximize total return through investments in a diversified
portfolio of common stocks and securities convertible into common stock. It is
anticipated that capital appreciation and investment income will both be major
factors in achieving total return.
Policies
The Fund will invest principally in common stocks and securities
convertible into common stock that the investment adviser believes have
significant potential for capital appreciation and/or investment income. May
invest up to 25 percent of its total assets in foreign equity securities. The
Fund may invest in nonconvertible preferred stocks, debt securities, rights and
warrants; the Fund may maintain a reserve of cash and high-grade, short-term
debt securities and the Fund may purchase securities on a when-issued or
delayed-delivery basis.
Risks
Share prices will fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. Foreign
securities may involve certain additional risks. Such risks include: currency
fluctuations and related currency conversion costs; less liquidity; price or
income volatility; less government supervision and regulation of foreign stock
exchanges, brokers and listed companies; adverse foreign political and economic
developments; different accounting procedures and auditing standards; and less
publicly available information about foreign issuers.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Variable Encore Fund d/b/a Aetna Money Market VP
Investment Objective
Seeks to provide high current return, consistent with preservation of
capital and liquidity, through investment in high-quality money market
instruments.
Policies
The Fund will Invest primarily in: a) money market instruments that have a
maturity at the time of purchase, of 397 days or less (762 days or less for U.S.
government securities), and b) debt securities with a longer maturity, if the
Fund has the absolute right to sell such securities back to the issuer for at
least the face amount of the debt obligation within 397 days after the date of
purchase. At least 95 percent of total Fund assets are invested in high- quality
securities (those receiving the highest credit rating by any two rating agencies
or one if only one agency has rated the security). May invest up to 25 percent
of its total assets in foreign securities.
Risks
Yield will fluctuate with interest rates. The Fund is neither insured nor
guaranteed by the U.S. government. Foreign securities may involve certain
additional risks. Such risks include: currency fluctuations and related currency
conversion costs; less liquidity; price or income volatility; less government
supervision and regulation of foreign stock exchanges, brokers and listed
companies; adverse foreign political and economic developments; different
accounting procedures and auditing standards; and less publicly available
information about foreign issuers.
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An investment in the Fund is neither insured nor guaranteed by the U.S.
Government.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Generation Portfolios, Inc.--Aetna Ascent VP
(formerly Aetna Ascent Variable Portfolio)
Investment Objective
Seeks to provide capital appreciation. The Portfolio is designed for
investors who have an investment horizon exceeding 15 years and who have a high
level of risk tolerance.
Policies
Invests assets within specified maximum percentage ranges and adjusts the
allocation mix in response to market trends and indicators:
[bullet] Equity securities are chosen on the basis of their potential for
capital appreciation.
[bullet] Fixed income securities may include obligations of the U.S. and
foreign governments as well as obligations of corporations and
high-yield bonds.
[bullet] Money market investments are high quality and present minimal credit
risk.
The benchmark portfolio is 80 percent equities and 20 percent fixed income
under neutral market conditions.
Risks
Equity securities are subject to a decline in the stock market or in the
value of the company, while debt securities may be affected by changes in
general interest rates and in the creditworthiness of the issuer. High-yield
bonds have additional credit risks, including lack of liquidity, greater
likelihood of default and increased sensitivity to difficult economic and
corporate developments.
Foreign securities involve currency and other special risks not present in
domestic securities. Real estate securities may be subject to the same risks
associated with direct ownership of real estate.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Generation Portfolios, Inc.--Aetna Crossroads VP
(formerly Aetna Crossroads Variable Portfolio)
Investment Objective
Seeks to provide total return (i.e., income and capital appreciation, both
realized and unrealized). The Portfolio is designed for investors who have an
investment horizon exceeding ten years and who have a moderate level of risk
tolerance.
Policies
Invests assets within specified maximum percentage ranges and adjusts the
allocation mix in response to market trends and indicators:
[bullet] Equity securities are chosen on the basis of their potential for
capital appreciation.
[bullet] Fixed income securities may include obligations of the U.S. and
foreign governments as well as obligations of corporations and
high-yield bonds.
[bullet] Money market investments are high quality and present minimal credit
risk.
The benchmark portfolio is 60 percent equities and 40 percent fixed income
under neutral market conditions.
Risks
Equity securities are subject to a decline in the stock market or in the
value of the company; debt securities may be affected by changes in general
interest rates and in the creditworthiness of the issuer. High-yield bonds have
additional credit risks. International securities involve currency and other
special risks not present in domestic
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securities. Real estate securities may be subject to the same risks associated
with direct ownership of real estate.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Generation Portfolios, Inc.--Aetna Legacy VP
(formerly Aetna Legacy Variable Portfolio)
Investment Objective
Seeks to provide total return consistent with preservation of capital. The
Portfolio is designed for investors who have an investment horizon exceeding
five years and who have a low level of risk tolerance.
Policies
Invests assets within specified maximum percentage ranges and adjusts the
allocation mix in response to market trends and indicators:
[bullet] Equity securities are chosen on the basis of their potential for
capital appreciation.
[bullet] Fixed income securities may include obligations of the U.S. and
foreign governments as well as obligations of corporations and
high-yield bonds.
[bullet] Money market investments are high-quality and present minimal credit
risk.
The benchmark portfolio is 40 percent equities and 60 percent fixed income
under neutral market conditions.
Risks
Equity securities are subject to a decline in the stock market or value of
the issuer; debt securities may be affected by changes in general interest
rates and creditworthiness of the issuer. High-yield bonds have additional
credit risks. International securities involve currency and other special risks
not present in domestic securities. Real estate securities may be subject to
the same risks associated with direct ownership of real estate.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Variable Portfolios, Inc.--Aetna Growth VP
(formerly Aetna Variable Growth Portfolio)
Investment Objective
Seeks growth of capital through investment in a diversified portfolio of
common stocks and securities convertible into common stocks believed to offer
growth potential.
Policies
Normally invests at least 65 percent of its total assets in common stocks
that have significant potential for capital growth. May also invest in
convertible and nonconvertible preferred stocks. May buy and sell put and call
options, and stock index futures and options. May enter into repurchase
agreements and invest up to 25 percent of its total assets in foreign
securities. Will not invest more than 15 percent of the total value of its
assets in high-yield bonds.
Risks
Equity securities are subject to a decline in the stock market or in the
value of the company and preferred stocks have price risk and some interest
rate and credit risk. Foreign investing involves certain additional risks not
present in U.S. securities. Such risks may include: currency fluctuations and
related currency conversion costs: less liquidity; price or income volatility;
less government supervision and regulation of foreign stock exchanges, brokers
and listed companies; adverse foreign political and economic developments;
different accounting procedures and auditing standards; and less publicly
available information about foreign issuers. High-yield bonds may provide a
higher return, but have added risk. Derivatives may experience greater price
swings and may be less liquid than other securities.
Investment Adviser: Aeltus Investment Management, Inc.
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Aetna Variable Portfolios, Inc.--Aetna Index Plus Large Cap VP
(formerly Aetna Variable Index Plus Portfolio)
Investment Objective
Seeks to outperform the total return performance of publicly traded common
stocks represented in the Standard & Poor's 500 Composite Stock Price Index
(S&P 500).
Policies
The Portfolio attempts to be fully invested in common stocks and normally
invests at least 90 percent of its assets in certain common stocks represented
in the S&P 500. Portfolio managers will attempt to outperform the S&P 500 by
creating a portfolio that has similar market risk characteristics to the S&P
500, but will use a disciplined quantitative analysis to identify those stocks
having the greatest likelihood of either outperforming or underperforming the
market.
Risks
Because the Portfolio invests in common stocks, it is subject to the
possibility that common stock prices will decline over short or even extended
periods. The U.S. stock market tends to be cyclical, with periods when stock
prices generally rise and periods when prices generally decline. There is no
assurance that the Portfolio's objectives will be met.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Variable Portfolios, Inc.--Aetna International VP
Investment Objective
Seeks long-term capital growth primarily though investment in a
diversified portfolio of common stocks principally traded in countries outside
of the United States. The Portfolio will not target any given level of current
income.
Policies
Invests at least 65 percent of its total assets among securities
principally traded in three or more countries outside of North America. The
Portfolio will invest primarily in equity securities, including securities
convertible into stocks. The Portfolio will invest in a broad spectrum of
companies and industries. Further, from time to time, the Portfolio may hold up
to 10 percent of its total assets in long-term debt securities with an S&P or
Moody's rating of AA/Aa or above, or, if unrated, are considered by the
investment adviser to be of comparable quality. Additionally, the Portfolio may
invest in options, futures, enter into repurchase agreements and engage in
currency hedging.
Risks
Equity securities are subject to a decline in the stock market or in the
value of the company. Investments in foreign securities involve certain
additional risks. Such risks may include: currency fluctuations and related
currency conversion costs; less liquidity; price or income volatility; less
government supervision and regulation of foreign stock exchanges, brokers and
listed companies; adverse foreign economic and political developments;
different accounting procedures and auditing standards; and less publicly
available information about foreign issuers. Derivatives may experience greater
price swings and may be less liquid than other securities.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Variable Portfolios, Inc.--Aetna Real Estate Securities VP
Investment Objective
Seeks maximum total return primarily through investment in a diversified
portfolio of equity securities issued by real estate companies, the majority of
which are real estate investment trusts (REITs).
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Policies
Normally invests at least 65 percent of total assets in income-producing
equity securities of publicly-traded companies "principally engaged" in the
real estate industry, including those companies that, at the time of purchase,
derive a significant proportion (at least 50 percent) of their revenues or
profits from real estate operations or related services. The Portfolio may
invest in convertible securities and preferred stock. Additionally, the
Portfolio may invest in options and futures, enter into repurchase agreements,
and invest up to 25 percent of its total assets in foreign securities. The
Portfolio will not invest more than 15 percent of the total value of its assets
in high-yield bonds.
Risks
There are a number of risk factors to be considered when investing in Real
Estate Securities VP. Derivatives may experience greater price swings than
other securities and may be less liquid than other securities. Risks involved
in futures contracts include, but are not limited to: transactions to close out
futures contracts may not be able to be effected at favorable prices; possible
reduction in a fund's total return and yield; possible reduction the value of
the futures instrument, and potential losses in excess of the amount invested
in the futures contracts themselves. Writing call options involves the risk of
not being able to effect closing transactions at favorable prices or to
participate in the appreciation of the underlying securities. Purchasing put
options involves the risk of losing the entire purchase price of the option.
High-yield bonds have additional risks associated with them, including but not
limited to: lack of liquidity; an unpredictable secondary market and a higher
risk of default. Special consideration to an investment in real estate include
those risks associated with the direct ownership of real estate: declines in
the value of real estate, risks related to general and local economic
conditions, over-building and increased competition, increases in property
taxes and operating expenses, changes in zoning laws and other risks particular
to this market. The value of securities of companies which service the real
estate industry may also be affected by such risks.
Investment Adviser: Aeltus Investment Management, Inc.
Aetna Variable Portfolios, Inc.--Aetna Small Company VP
(formerly Aetna Variable Small Company Portfolio)
Investment Objective
Seeks growth of capital primarily through investment in a diversified
portfolio of common stocks and securities convertible into common stocks of
companies with smaller market capitalizations.
Policies
Normally invests at least 65 percent of its total assets in the common
stock of companies with equity market capitalizations at the time of purchase
of $1 billion or less. May also invest in convertible and nonconvertible
preferred stock. The securities of small capitalization companies may be in an
early developmental stage or older companies entering a new stage of growth due
to management changes, new technology, products, or markets. Such companies may
also be undervalued due to poor economic conditions, market decline, or actual
or unanticipated unfavorable developments affecting the companies. May invest
in lower-risk derivatives for hedging and other investment purposes.
Risks
Equity securities are subject to a decline in the stock market or in the
value of the company. Although securities of small capitalization companies
tend to offer greater potential for growth than securities of larger, more
established issuers, there are additional risks associated with them. These
include: limited marketability, more abrupt or erratic market movements than
securities of larger capitalization companies, and less publicly available
information about the issuer. These companies may also be dependent on
relatively few products or services, have limited financial resources and lack
of management depth, and may have less of a track record or historical pattern
of performance. Derivatives may experience greater price swings and may be less
liquid than other securities.
Investment Adviser: Aeltus Investment Management, Inc.
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Aetna Variable Portfolios, Inc.--Aetna Value Opportunity VP
(formerly Aetna Variable Capital Appreciation Portfolio)
Investment Objective
Seeks growth of capital primarily through investment in a diversified
portfolio of common stocks and securities convertible into common stock.
Policies
Normally invests at least 65 percent of its net assets in common stocks.
May also invest in convertible and non-convertible preferred stocks. The
Portfolio will use a value oriented approach to stock selection. The Portfolio
may invest up to 25 percent of its total assets in foreign securities, buy and
sell put and call options on stock indices and on individual stocks, purchase
futures contracts, options contracts, engage in currency hedging and purchase
securities on a "when-issued," delayed-delivery or forward-commitment basis.
Risks
Equity securities are subject to a decline in the stock market or in the
value of the issuer, and preferred stocks have price risk and some interest
rate and credit risk. The value of debt securities may be affected by changes
in general interest rates and in the creditworthiness of the issuer.
Investments in securities of foreign issuers or securities denominated in
foreign currencies involve risks not present in domestic markets. Such risks
include: currency fluctuations and related currency conversion costs; less
liquidity; price or income volatility; less government supervision and
regulation of foreign stock exchanges, brokers and listed companies; adverse
foreign political and economic developments; different accounting procedures
and auditing standards; and less publicly available information about foreign
issuers.
Investment Adviser: Aeltus Investment Management, Inc.
Calvert Social Balanced Portfolio
(formerly Calvert Responsibly Invested Balanced Portfolio)
Investment Objective
Seeks to achieve a total return above the rate of inflation through an
actively managed, nondiversified portfolio of common and preferred stocks,
bonds and money market instruments which offer income and capital growth
opportunity and which satisfy the social criteria established for the
Portfolio.
Policies
The Portfolio may purchase both common and preferred stocks. Although
there is no predetermined percentage of assets allocated to stocks, bonds, or
money market instruments, the Portfolio will invest a least 25 percent of its
assets in senior fixed income securities. The Portfolio normally invests in
investment-grade bonds rated in one of the four highest rating categories by
Standard & Poor's Corporation or by Moody's Investors Service, Inc. or, if not
rated, that are determined by the Portfolio's investment adviser to be of
comparable quality. The Portfolio may invest up to 10 percent of its assets in
foreign securities.
Risks
Since the Portfolio is nondiversified, the value of the shares may be more
susceptible to any single economic, political, or regulatory event than the
shares of a diversified portfolio. Fixed income investments are subject to
interest rate risk. There are also risks involved in investing in foreign
securities. These include currency risks, less publicly available information
about foreign companies, different audit and financial reporting standards, and
less government supervision and regulation.
Investment Adviser: Calvert Asset Management Company, Inc.
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Fidelity Investments Variable Insurance Products Fund--Equity-Income Portfolio
Investment Objective
Seeks reasonable income by investing primarily in income-producing equity
securities. Also considers the potential for capital appreciation.
Policies
Seeks to achieve a yield that will beat that of the Standard & Poor's
(S&P) 500 Index. The Portfolio normally invests at least 65 percent of its
total assets in income-producing equity securities. The Portfolio has the
flexibility, however, to invest the balance in all types of domestic and
foreign securities, including bonds. Portfolio managers do not expect to invest
in debt securities of companies that do not have proven earnings or credit.
Risks
Share prices will fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. The value of
bonds fluctuates based on changes in interest rates and in the credit quality
of the issuer. Foreign securities, foreign currencies and securities issued by
U.S. entities with substantial foreign operations may involve additional risks.
These include political or economic risks, fluctuations in foreign currencies
withholding or other taxes, operational risks, increased regulatory burdens,
and less stringent investor protection and disclosure standards of foreign
markets.
Investment Adviser: Fidelity Management & Research Company
Fidelity Investments Variable Insurance Products Fund--Growth Portfolio
Investment Objective
Seeks capital appreciation by investing in common stock, although its
investments are not restricted to any one type of security.
Policies
The Portfolio may, however, pursue growth in larger companies that hold a
strong position in the market or industry. These may be found in mature or
declining industries. Companies that have strong growth potential often have
new products, technologies, distribution channels, or other opportunities.
Generally, these domestic and foreign companies tend to be small- and mid-sized
companies that have higher than average price/earnings (P/E) ratios. A high P/E
ratio means that the stock is more expensive than average relative to the
company's earnings. May not invest more than 50 percent of its assets in
foreign securities.
Risks
Stock values may fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. The market
prices of stocks with high P/E ratios may be particularly sensitive to economic
market or company news. Foreign securities, foreign currencies, and securities
issued by U.S. entities with substantial foreign operations may involve
additional risks. These include political or economic risks, fluctuations in
foreign currencies, withholding or other taxes, operational risks, increased
regulatory burdens, and less stringent investor protection and disclosure
standards of foreign markets.
Investment Adviser: Fidelity Management & Research Company
Fidelity Investments Variable Insurance Products Fund--High Income Portfolio
Investment Objective
Seeks to obtain a high level of current income by investing primarily in
high-yielding, lower-rated, fixed income securities, while also considering
growth of capital.
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Policies
Invests primarily in all types of income-producing debt securities,
preferred stocks, and convertible securities. The Portfolio normally invests at
least 65 percent of its assets in these securities. If consistent with its
investment objectives, the Portfolio may also invest in common stocks, other
equity securities, and debt securities that are not currently paying interest
but that are expected to do so in the future. The Portfolio manager focuses on
assembling a portfolio of income-producing securities that it believes will
provide the best tradeoff between risk and return within the range of
securities that are eligible investments for the Portfolio. The Portfolio may
invest up to 50 percent of its total assets in foreign securities.
Risks
Yield and share price change daily and are based on changes in interest
rates, market conditions, other economic and political news, and on the quality
and maturity of the Portfolio's investments. Lower quality debt securities
(also known as "junk bonds") are considered to have speculative characteristics
and involve greater risk of default or price changes. Foreign securities,
foreign currencies and securities issued by U.S. entities with substantial
foreign operations may involve additional risks. These include political or
economic risks, fluctuations in foreign currencies, withholding or other taxes,
operational risks, increased regulatory burdens, and less stringent investor
protection and disclosure standards of foreign markets.
Investment Adviser: Fidelity Management & Research Company
Fidelity Investments Variable Insurance Products Fund--Overseas Portfolio
Investment Objective
Seeks long-term growth by investing mainly in foreign securities.
Policies
Normally invests at least 65 percent of the Portfolio's total assets in
securities of issuers whose principal activities are located outside the United
States. Expects to invest a majority of its assets in equity securities, but
may also invest in debt securities of any quality. Invests in securities of
both developed and emerging markets. May invest in the securities of any
issuer, including companies and other business organizations as well as
governments and government agencies. Will tend to focus on the equity
securities of both large and small companies. May invest in short-term debt
securities and money market instruments for cash management purposes. When
allocating the Portfolio's investments among countries and regions, the
Portfolio managers consider the size of the market in each country and region
relative to the size of the international market as a whole. May not invest
more than 25 percent of its total assets in any one industry.
Risks
Stock values fluctuate in response to the activities of individual
companies, and general market and economic conditions. International funds have
increased economic and political risks because they are exposed to events and
factors in the various world markets, especially in emerging markets. In
addition, changes in the value of foreign currencies can significantly affect
the Portfolio's share price. The Portfolio seeks to reduce investment risk by
diversifying its holdings among many companies and industries.
Investment Adviser: Fidelity Management & Research Company
Fidelity Investments Variable Insurance Products Fund II--
Asset Manager Portfolio
Investment Objective
Seeks high total return with reduced risk over the long term by allocating
its assets among domestic and foreign stocks, bonds and short-term money market
instruments.
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Policies
Invests in a diverse range of stocks, bonds, short-term, and money market
instruments, issued in the United States and abroad. The stock class includes
equity securities of all types. The bond class includes all varieties of fixed
income instruments with maturities of more than three years. The short-term
instruments class includes all types of short-term instruments with remaining
maturities of three years or less. The Portfolio has a neutral mix which
represents the way investments generally will be allocated over the long term.
This mix will vary over short-term periods--within defined ranges--based on the
current outlook for the different markets. May invest up to 50 percent of its
total assets in foreign securities.
Risks
The Portfolio seeks to reduce its overall risk by diversifying among
different types of investments, but aggressively invests in a wide variety of
security types, including stocks and bonds issued in developed and developing
countries. Stock values fluctuate in response to the activities of individual
companies and general market and economic conditions. The value of bonds and
short-term instruments fluctuates based on changes in interest rates and in the
credit quality of the issuer. Foreign securities, foreign currencies, and
securities issued by U.S. entities with substantial foreign operations may
involve additional risks.
Investment Adviser: Fidelity Management & Research Company
Fidelity Investments Variable Insurance Products Fund II--Contrafund Portfolio
Investment Objective
Seeks maximum total return over the long term by investing mainly in
securities of companies whose value the investment adviser believes is not
fully recognized by the public.
Policies
Usually invests in common stock and securities convertible into common
stock, but may invest in any type of security that may produce capital
appreciation. Seeks companies that are: 1) unpopular, but that may improve due
to developments such as a change in management, a new product line, or an
improved balance sheet; or 2) recently popular, but temporarily out of favor
due to short-term or one-time factors; or, undervalued compared to other
companies in the same industry. May not invest more than 25 percent of its
total assets in any one industry.
Risks
Stock values may fluctuate in response to the activities of an individual
company or general market and economic conditions. The Portfolio's strategy can
lead to investments in small- and medium-sized companies, which carry more risk
than larger ones. Generally, such companies rely on limited product lines and
markets, financial resources or other factors. This may make them more
susceptible to downturns. Foreign securities, foreign currencies, and
securities issued by U.S. entities with substantial foreign operations may
involve additional risks. These include political or economic risks,
fluctuations in foreign currencies, withholding or other taxes, operational
risks, increased regulatory burdens, and less stringent investor protection and
disclosure standards of foreign markets. Seeks to manage risk by diversifying
its holdings among many companies and industries.
Investment Adviser: Fidelity Management & Research Company
Fidelity Investments Variable Insurance Products Fund II--Index 500 Portfolio
Investment Objective
Seeks to provide investment results that correspond to the total return of
common stocks publicly traded in the United States by duplicating the
composition and total return of the Standard & Poor's Composite Index of 500
Stocks (S&P 500).
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Policies
Normally invests at least 80 percent (65 percent if Portfolio assets are
below $20 million) of the Portfolio's assets in equity securities of companies
that comprise the S&P 500. In seeking a 98 percent or better long-term
correlation of the Portfolio's total return to that of the S&P 500, The
investment adviser employs a "passive" or "indexing" approach and tries to
allocate its assets similarly to those of the index. The Portfolio's
composition may not always be identical to that of the index. If extraordinary
circumstances warrant, the investment adviser may exclude a stock held in the
S&P 500 and include a similar stock in its place if doing so will help the
Portfolio achieve its objective. The investment adviser monitors the
correlation between the performance of the Portfolio and the S&P 500 on a
regular basis. Although the Portfolio focuses on common stocks, it may invest
in other equity securities and other types of instruments. The Portfolio may
invest up to 50 percent of its assets in foreign securities.
Risks
Stock values fluctuate in response to the activities of individual
companies, and general market and economic conditions. Foreign securities,
foreign currencies, and securities issued by U.S. entities with substantial
foreign operations may involve additional risks and considerations. These
include risks related to political or economic conditions in foreign countries,
fluctuations in foreign debt currencies, withholding or other taxes,
operational risks, increased regulatory burdens, and potentially less stringent
investor protection and disclosure standards of foreign markets.
Investment Adviser: Fidelity Management & Research Company; Subadviser:
Bankers Trust Company
Janus Aspen Series--Aggressive Growth Portfolio
Investment Objective
Seeks long-term growth of capital.
Policies
A nondiversified portfolio that invests primarily in common stocks of
foreign and domestic companies selected for their growth potential. Normally
invests at least 50 percent of its equity assets in securities issued by
medium-sized companies--those whose market capitalizations fall within the
range of companies in the Standard and Poor's (S&P) Mid Cap 400 Index. May
invest, to a lesser degree, in other types of securities including preferred
stocks, warrants, convertible securities, and debt securities. May invest up to
35 percent of its net assets in high-yield/high-risk debt securities ("junk
bonds"). May at times hold substantial positions in cash equivalents or
interest-bearing securities.
Risks
Stock values may fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. Historically,
common stocks have provided greater long-term returns and have entailed greater
short-term risks than other investment choices. Smaller or newer issuers are
more likely to realize more substantial growth as well as suffer more
significant losses than larger or more established issuers. Investments in such
companies can be both more volatile and more speculative. Investments in
foreign securities, including those of foreign governments, involve greater
risks than investing in comparable domestic securities. These risks include
currency, political, economic, regulatory, and market risk factors.
High-yield/high-risk securities are generally more dependent on the ability of
the issuer to meet interest and principal payments (i.e., credit risk). Issuers
of high-yield securities may not be as strong financially as those issuing
bonds with higher credit ratings. They are more vulnerable to real or perceived
economic changes, political changes or other adverse developments.
Investment Adviser: Janus Capital Corporation
Janus Aspen Series--Balanced Portfolio
Investment Objective
Seeks long-term capital growth, consistent with preservation of capital and
balanced by current income.
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Policies
Normally invests 40-60 percent of its assets in securities selected
primarily for their growth potential and 40-60 percent of its assets in
securities selected primarily for their income potential. Invests in common
stocks of domestic and foreign companies. May invest to a lesser degree in
other types of securities including preferred stocks, warrants, convertible
securities, and debt securities when the portfolio manager perceives an
opportunity for capital growth. Assets may shift between the growth and income
components of the Portfolio based on the portfolio manager's analysis of
relevant market financial and economic conditions. The portfolio manager
generally takes a "bottom up" approach to building the Portfolio, seeking to
identify individual companies with earnings growth potential that may not be
recognized by the market at large.
Risks
Share prices will fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. Investments
in foreign securities, including those of foreign governments, involve greater
risks than investing in comparable domestic securities. These risks include
currency, political, economic, regulatory and market risk factors. Risk is
reduced through diversification.
Investment Adviser: Janus Capital Corporation
Janus Aspen Series--Flexible Income Portfolio
Investment Objective
Seeks to obtain maximum total return, consistent with the preservation of
capital.
Policies
The Portfolio invests at least 80 percent of its assets in
income-producing securities which may include: corporate bonds and notes,
preferred stock, income-producing common stocks, debt securities convertible or
exchangeable into equity securities, and debt securities with the right to
acquire equity securities as evidenced by warrants attached to or acquired with
the securities. May invest to a lesser degree in common stocks, other equity
securities, or debt securities not currently paying dividends or interest. May
purchase securities of any maturity and quality. Average maturity and quality
of its portfolio may vary substantially. May invest without limit in foreign
securities, including those of corporate and government issuers, as well as in
high-yield/high-risk securities. May have substantial holdings of such
securities, as well as in high-yield/high-risk securities (or "junk bonds")
which are debt securities rated below investment grade by the primary rating
agencies such as Standard & Poor's and Moody's.
Risks
Foreign investing involves risks that are different in some respects from
investments in securities of U.S. issuers including: economic/political
volatility; less government regulation and supervision of foreign stock
exchanges, brokers and listed companies; and price, interest rate and currency
risk. The value of lower-quality securities generally depends more on the
ability of the issuer to meet interest and principal payments than is true for
higher-quality securities. Issuers of high-yield securities are more vulnerable
to real or perceived economic and political changes or adverse developments
specific to the issuer. In the event of a default, the Portfolio would
experience a reduction of its income and a decline in the market value of the
defaulted securities.
Investment Adviser: Janus Capital Corporation
Janus Aspen Series--Growth Portfolio
Investment Objective
Seeks long-term growth of capital in a manner consistent with the
preservation of capital.
Policies
Invests in common stocks of companies of any size, although it generally
invests in larger, more established issuers. Invests primarily in stocks of
domestic and foreign companies selected for their growth potential. May at
times hold substantial positions in cash equivalents or interest bearing
securities. May invest to a lesser degree in other
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types of securities including preferred stocks, warrants, convertible
securities, and debt securities when its portfolio manager perceives an
opportunity for capital growth. Using a "bottom up" approach to building the
Portfolio, the portfolio manager seeks to identify individual companies with
earnings growth potential that may not be recognized by the market at large.
Securities are generally selected without regard to any defined industry
sector. Securities are selected solely for their capital growth potential;
investment income is not a consideration.
Risks
Share prices will fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. Historically,
common stocks have provided greater long-term returns and have entailed greater
short-term risks than other investment choices. Smaller or newer issuers are
more likely to realize more substantial growth as well as suffer more
significant losses than larger or more established issuers. Investments in such
companies can be both more volatile and more speculative. Investments in
foreign securities, including those of foreign governments, involve greater
risks than investing in comparable domestic securities. These risks include
currency, political, economic, regulatory and market risk factors. Risk is
reduced through diversification.
Investment Adviser: Janus Capital Corporation
Janus Aspen Series--Worldwide Growth Portfolio
Investment Objective
Seeks long-term growth of capital in a manner consistent with the
preservation of capital.
Policies
A diversified portfolio that invests primarily in common stocks of foreign
and domestic issuers. Invests worldwide in companies and organizations of any
size, regardless of country of organization or place of principal business
activity. Normally invests in issuers from at least five different countries,
including the United States. May at times invest in fewer than five countries
or even in a single country. May hold substantial positions in cash equivalents
or interest-bearing securities. May invest to a lesser degree in other types of
securities, including preferred stocks, warrants, convertible securities, and
debt securities, when the portfolio manager perceives an opportunity for
growth. May invest up to 35 percent of net assets in high-yield/high-risk
securities (also called "junk bonds"). May invest without limit in foreign
equity and debt securities.
Risks
Stock values may fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. Historically,
common stocks have provided greater long-term returns and have entailed greater
short-term risks than other investment choices. Investment in foreign
securities, including those of foreign governments, involve greater risks than
investing in comparable domestic securities. These include currency, political,
economic, regulatory and market risk factors. High-yield/high-risk securities
are generally more dependent on the ability of the issuer to meet interest and
principal payments (i.e., credit risk). Issuers of high-yield securities may
not be as strong financially as those issuing bonds with higher credit ratings.
They are more vulnerable to real or perceived economic changes, political
changes or other adverse developments.
Investment Adviser: Janus Capital Corporation
MFS Total Return Series
Investment Objective
Seeks to provide above average income (compared to a portfolio invested
entirely in equity securities) consistent with the prudent employment of
capital. Its secondary objective is to provide a reasonable opportunity for
growth of capital and income.
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Policies
Under normal market conditions, at least 25 percent of the Series' assets
will be invested in fixed income securities, and at least 40 percent (but no
more than 75 percent) of the Series' assets will be invested in equity
securities. The Series invests in a broad list of securities, including
short-term obligations. The list may be diversified not only by companies and
industries, but also by type of security. May vary the percentage of assets
invested in any one type of security depending on the Adviser's interpretation
of economic and money market conditions, fiscal and monetary policy, and
underlying security values. The Series debt investment may consist of both
investment grade securities and securities that are lower rated or unrated
categories (commonly known as "junk bonds"). May hold up to 20 percent of its
assets in foreign securities (including emerging market securities and Brady
Bonds) which are not traded on a U.S. exchange.
Risks
Investing in the securities of foreign issuers generally involves risks
not ordinarily associated with investing in securities of domestic issuers.
These include changes in currency rates, exchange control regulations,
governmental administration or economic or monetary policy (in the U.S. or
abroad), or circumstances in dealing between nations. Other considerations
include limited information about foreign issuers, higher brokerage costs,
different accounting standards, and thinner trading markets.
Investment Adviser: Massachusetts Financial Services Company ("MFS")
MFS World Governments Series
Investment Objective
Seeks not only preservation but also growth of capital, together with
moderate current income.
Policies
The Series seeks to achieve its investment objective through a
professionally managed, internationally diversified portfolio consisting
primarily in debt securities and, to a lesser extent, equity securities. Under
normal circumstances, the Series invests at least 80 percent of its assets in
debt securities. The Series may invest up to 100 percent (although it generally
expects to invest not more than 80 percent) of its net assets in foreign
securities. At least 65 percent of the Series' assets will be invested in at
least three different countries, one of which may be the U.S., except when the
Adviser believes that investing for temporary defensive purposes is
appropriate. U.S. assets will be invested in high-quality debt securities, and
the remainder of the assets will be diversified among countries where
opportunities for total return are expected to be most attractive. It is
currently expected that investments in foreign countries will be primarily in
government securities to minimize credit risks.
Risks
Investing in securities of foreign issuers generally involves risks not
ordinarily associated with investing in securities of domestic issuers. These
include changes in currency rates, exchange control regulations, governmental
administration or economic or monetary policy (in the U.S. or abroad), or
circumstances in dealing between nations. Other considerations include limited
information about foreign issuers, higher brokerage costs, different accounting
standards, and thinner trading markets.
Investment Adviser: Massachusetts Financial Services Company ("MFS")
Oppenheimer Aggressive Growth Fund
(formerly Oppenheimer Capital Appreciation Fund)
Investment Objective
Seeks to achieve capital appreciation by investing in "growth-type"
companies.
Policies
"Growth-type" companies are believed to have relatively favorable
long-term prospects for increasing demand for their goods or services, or to be
developing new products, services, or markets and normally retain a relatively
larger portion of their earnings for research, development, and investment in
capital assets. The Fund will invest no more
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than 25 percent of its total assets in foreign securities or in government
securities of any foreign country or in obligations of foreign banks.
Risks
Stock prices will fluctuate. Additional risk is present in growth-type
investments since the price of the security may decline if the anticipated
development fails to occur. Investing in small, unseasoned companies (those
that have been in operation for less than three years, counting the operations
of any predecessors) may have limited liquidity, and the prices of these
securities may be volatile. Foreign securities markets may be less liquid and
more volatile than markets in the U.S. Risks of foreign securities may include
foreign withholding taxation, changes in currency, less publicly available
information, and differences between domestic and foreign legal, auditing,
brokerage and economic standards.
Investment Adviser: OppenheimerFunds, Inc.
Oppenheimer Global Securities Fund
Investment Objective
Seeks long-term capital appreciation by investing a substantial portion of
its assets in securities of foreign issuers, "growth-type" companies, cyclical
industries and special situations which are considered to have appreciation
possibilities but which may be considered to be speculative.
Policies
Invests a substantial portion of its assets in securities of foreign
issuers, "growth-type" companies (those which, in the opinion of the manager,
have relatively favorable long-term prospects for increasing demand or which
develop new products and retain a significant part of earnings for research and
development), cyclical industries, and special investment situations which are
considered to have appreciation possibilities. May invest in foreign securities
and the relative amount of such investments will change from time to time.
Risks
Stock prices will fluctuate. Foreign securities markets may be less liquid
and more volatile than the markets in the U.S. Risks of foreign securities may
include foreign withholding taxation, changes in currency, less publicly
available information, and differences between domestic and foreign legal,
auditing brokerage and economic standards. Investments in small, unseasoned
companies (those that have been in operation for less than three years,
counting the operations of any predecessors) may have limited liquidity, and
the prices of these securities may be volatile.
Investment Adviser: OppenheimerFunds, Inc.
Oppenheimer Growth & Income Fund
Investment Objective
Seeks a high total return (which includes growth in the value of its
shares as well as current income) from equity and debt securities.
Policies
Invests primarily in equity and debt securities and focuses on all market
capitalization including small to medium capitalization companies. Equity
investments include common stocks, preferred stocks, convertible securities,
and warrants. Debt securities include bonds, participation interests,
asset-backed securities, private label mortgage backed securities and
collateralized mortgage obligations (CMOs), zero coupon securities, and U.S.
Government obligations. The proportion of equity and fixed income investments
will vary based upon the manager's evaluation of economic and market trends and
perceived relative total anticipated return from such types of investments.
There is no minimum or maximum percentage of assets that may, at any given
time, be invested in either type of investment. The Fund may invest in foreign
securities without limit.
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Risks
Changes in overall market movements or interest rates, or factors
affecting a particular industry or issuer can affect the value of the Fund's
investments and their price per share. Equity investments are generally subject
to a number of risks, including the risk that values will fluctuate as a result
of changing expectations for the economy and individual issuers; stocks with
small- to medium-size capitalization may fluctuate more than large
capitalization stocks. Foreign investments are subject to the risk of adverse
currency fluctuation and additional risks and expenses in comparison to U.S.
investments.
Investment Adviser: OppenheimerFunds, Inc.
Oppenheimer Strategic Bond Fund
Investment Objective
Seeks a high level of current income principally derived from interest on
debt securities and seeks to enhance such income by writing covered call
options on debt securities.
Policies
Invests principally in lower-rated, high-yield domestic debt securities
(commonly shown as "junk bonds"), U.S. Government securities, and foreign
government and corporate debt securities. Under normal circumstances, the
Fund's assets will be invested in each of these three sectors. However,
Strategic Bond Fund may occasionally invest up to 100 percent of its total
assets in any one sector, if, in the manager's judgment, the Fund has the
opportunity to seek a high level of current income without undue risk to
principal. Accordingly, the Fund's investments should be considered
speculative. Distributable income will fluctuate as the Fund's assets are
shifted among the three sectors.
Risks
The higher yields and income sought by Strategic Bond Fund are generally
associated with securities in the lower-rating categories of the established
rating services. Such securities are considered speculative and involve greater
risk than lower-yielding, higher-rated fixed income securities, while providing
higher yields than such securities. Lower-rated securities may be less liquid,
and significant losses could be experienced if a substantial number of other
holders of such securities decide to sell at the same time. Issuers of
lower-rated or unrated securities are generally not as financially secure or
creditworthy as issuers of higher-rated securities.
Investment Adviser: OppenheimerFunds, Inc.
Portfolio Partners MFS Emerging Equities Portfolio
Investment Objective
Seeks to provide long-term growth of capital. Dividend and interest income
from portfolio securities, if any, is incidental to the Portfolio's investment
objective.
Policies
Normally invests at least 80 percent of its assets in common stocks of
companies the subadviser believes are in an early phase of their life cycle,
but that have the potential to become major enterprises. Such companies would
be expected to show earnings growth over time well above the growth rate of the
overall economy and inflation and have the products, technologies, management
and market and other opportunities usually necessary to become more widely
recognized as growth companies. Emerging growth companies can be of any size.
The Portfolio may invest in larger or more established companies whose rates of
earnings growth are expected to accelerate because of special factors or basic
changes in the economic environment. Up to 25 percent of the Portfolio's net
assets may be invested in foreign issuers.
Risks
Share prices will fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. Investing in
emerging growth companies involves greater risk than is customarily associated
with investments in more established companies. Such companies may have limited
product lines, markets or
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financial resources and they may be dependent on one person's management. In
addition, there may be less research available on many promising small- and
medium-sized emerging growth companies, making it more difficult to find and
analyze these companies. The securities of these companies may have limited
marketability and may be subject to more abrupt or erratic market movements
than securities of larger, more established growth companies or the market
averages in general. Foreign investing involves risks that are different in
some respects from investments in the securities of U.S. issuers. Risks include
less availability of information about issuers or foreign markets, economic and
political volatility, and price, interest rate and currency risk.
Investment Adviser: Aetna Life Insurance and Annuity Company; Subadviser:
Massachusetts Financial Services Company
Portfolio Partners MFS Research Growth Portfolio
Investment Objective
Seeks long-term growth of capital and future income.
Policies
Invests at least 65 percent of its total assets in common stocks, or
securities convertible into common stocks, of companies believed to possess
better than average prospects for long-term growth. A smaller proportion of the
assets may be invested in bonds, short-term obligations, preferred stocks or
common stocks whose principal characteristic is income production rather than
growth. In the case of both growth stocks and income issues, emphasis is placed
on the selection of progressive, well-managed companies. The Portfolio may
invest up to 20 percent of its net assets in foreign securities, including
emerging market securities.
Risks
Share prices will fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. Investing in
securities of foreign issuers generally involves risks not ordinarily
associated with investing in securities of domestic issuers. These include less
availability of information about issuers or foreign markets, economic and
political volatility, and price, interest rate and currency risk.
Investment Adviser: Aetna Life Insurance and Annuity Company; Subadviser:
Massachusetts Financial Services Company
Portfolio Partners MFS Value Equity Portfolio
Investment Objectives
Seeks capital appreciation. Dividend income, if any, is a consideration
incidental to the Portfolio's objective of capital appreciation.
Policies
While the Portfolio's policy is to invest at least 65 percent of its total
assets in common stocks, it may seek appreciation other types of securities
(such as fixed-income, convertible bonds, convertible preferred stocks and
warrants) when relative values make such purchases appear attractive, either as
individual issues or as types of securities in certain economic environments.
The Portfolio may invest in high-yield fixed-income (below investment grade),
but will invest no more than 25 percent of its net assets in these securities.
The Portfolio may also invest up to 50 percent (but generally expects to invest
not more than 25 percent) of its net assets in foreign securities.
Risks
Share prices will fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. Historically,
common stocks have provided greater long-term returns and have entailed greater
short-term risks than other investment choices. Lower-rated bonds have
speculated characteristics. Changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than in the case of higher-grade securities. Investing in
securities of foreign issuers generally involves risks not ordinarily
associated with investing in securities of domestic issuers. These include less
availability of
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information about issuers or foreign markets, economic and political
volatility, and price, interest rate and currency risk.
Investment Adviser: Aetna Life Insurance and Annuity Company; Subadviser:
Massachusetts Financial Services Company
Portfolio Partners Scudder International Growth Portfolio
Investment Objective
Seeks long-term growth of capital primarily through a diversified
portfolio of marketable foreign equity investments.
Policies
Invests in companies, wherever organized, that do business primarily
outside the United States. The Portfolio intends to diversify investments among
several countries and to have represented in its holdings business activities
in not less than three different countries. Does not intend to concentrate
investments in any particular industry. Invests primarily in equity securities
of established companies, listed on foreign exchanges, that the subadviser
believes have favorable characteristics. Although the Portfolio will consist
primarily of equity securities, it may also invest in fixed-income securities
of foreign governments and companies.
Risks
Share prices will fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. Historically,
common stocks have provided greater long-term returns and have entailed greater
short-term risks than other investment choices. Investing in foreign securities
may involve a greater degree of risk than investing in domestic securities.
Additional risk factors include the possibility of exchange rate fluctuations,
less publicly available information, more volatile markets, less securities
regulation and less favorable tax provisions.
Investment Adviser: Aetna Life Insurance and Annuity Company; Subadviser:
Scudder Kemper Investments, Inc.
Portfolio Partners T. Rowe Price Growth Equity Portfolio
Investment Objective
Seeks long-term growth of capital and, secondarily, to increase dividend
income by investing primarily in common stocks of well established growth
companies.
Policies
Under normal market conditions the Portfolio invests at least 65 percent
of its total assets in common stocks issued by a diversified group of growth
companies. The companies in which the Portfolio invests normally (but not
always) pay dividends, which are generally expected to rise in future years as
earnings increase. Most of its assets will be invested in U.S. common stocks.
However, the Portfolio may invest in foreign securities and convertible
securities and warrants, when the subadviser considers such investments
consistent with he Portfolio's investment objective and policies.
The Portfolio generally seeks to invest in securities of companies that
satisfy one or more of several criteria established by the subadviser. For
example, the subadviser generally seeks companies with superior growth in
earnings and cash flow; the ability to sustain earnings momentum even during
economic slowdowns by operating in so-called "fertile fields" (areas where
earnings and dividends can outpace inflation and the overall economy); and the
capability to expand even during times of slow growth. The subadviser generally
favors companies whose profits increase due to economic factors rather than
one-time events such as lower taxes. The Portfolio may engage in strategic
transactions, which may include the use of derivatives.
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Risks
Share prices will fluctuate in response to the activities of an individual
company or in response to general market and economic conditions. Historically,
common stocks have provided greater long-term returns and have entailed greater
short-term risks than other investment choices. Investments in foreign
securities, including those of foreign governments, involve greater risks than
investing in comparable domestic securities. These risks include currency,
political, economic, regulatory and market risk factors. Risk is reduced
through diversification.
Investment Adviser: Aetna Life Insurance and Annuity Company; Subadviser:
T. Rowe Price Associates, Inc.
- --------------------------------------------------------------------------------
47
<PAGE>
- --------------------------------------------------------------------------------
VARIABLE ANNUITY ACCOUNT I
OF
AETNA INSURANCE COMPANY OF AMERICA
- --------------------------------------------------------------------------------
Statement of Additional Information dated May 1, 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 May 1, 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
<TABLE>
<CAPTION>
Page
<S> <C>
General Information and History.............................................. 2
Variable Annuity Account I................................................... 2
Offering and Purchase of Contracts........................................... 3
Performance Data............................................................. 4
General................................................................ 4
Average Annual Total Return Quotations................................. 4
Annuity Payments............................................................. 8
Sales Material and Advertising............................................... 9
Independent Auditors......................................................... 9
Financial Statements of the Separate Account.................................S-1
Financial Statements of the Company..........................................F-1
</TABLE>
<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 advisers 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 Contracts are as follows:
<TABLE>
<S> <C>
Aetna Ascent VP (formerly Aetna Ascent Variable Janus Aspen Aggressive Growth Portfolio
Portfolio)
Aetna Balanced VP, Inc. (formerly Janus Aspen Balanced Portfolio
Aetna Investment Advisers Fund, Inc.)
Aetna Income Shares d/b/a Aetna Bond VP Janus Aspen Flexible Income Portfolio
Aetna Crossroads VP (formerly Aetna Crossroads Janus Aspen Growth Portfolio
Variable Portfolio)
Aetna Growth VP (formerly Aetna Variable Growth Janus Aspen Worldwide Growth Portfolio
Portfolio)
Aetna Variable Fund d/b/a Aetna Growth and MFS Total Return Series
Income VP
Aetna Index Plus Large Cap VP (formerly Aetna MFS World Government Series
Variable Index Plus Portfolio)
Aetna International VP Oppenheimer Aggressive Growth Fund
(formerly Oppenheimer Capital Appreciation Fund)
Aetna Legacy VP (formerly Aetna Legacy Variable Oppenheimer Global Securities Fund
Portfolio)
Aetna Variable Encore Fund d/b/a Aetna Money Oppenheimer Growth & Income Fund
Market VP
Aetna Real Estate Securities VP Oppenheimer Strategic Bond Fund
Aetna Small Company VP (formerly Aetna Partners MFS Emerging Equities
Variable Small Company Portfolio) Portfolio
Aetna Value Opportunity VP (formerly Aetna Portfolio Partners MFS Research Growth
Variable Capital Appreciation Portfolio) Portfolio
Calvert Social Balanced Portfolio (formerly Calvert Portfolio Partners MFS Value Equity Portfolio
Responsibly Invested Balanced Portfolio)
Fidelity VIP Equity-Income Portfolio Partners Scudder International Growth
Portfolio
Fidelity VIP Growth Portfolio Portfolio Partners T. Rowe Price Growth
Equity Portfolio
Fidelity VIP High Income Portfolio
Fidelity VIP Overseas Portfolio
Fidelity VIP II Asset Manager Portfolio
Fidelity VIP II Contrafund Portfolio
Fidelity VIP II Index 500 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."
-3-
<PAGE>
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 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 contributions were first received in the Fund under the Separate Account
and then adjust them to reflect the deduction of the maximum amount 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 a
deferred sales charge of 7% of Purchase Payments 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 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 below reflect the average annual standardized and non-standardized
total return quotation figures for the periods ended December 31, 1997 for the
variable investment options under the Contracts issued by the Company. These
returns reflect the maximum charges under the Contract as described under
"General" above; the Company may also advertise returns based on lower charges
that may apply to particular Contracts. For the Subaccounts funded by the
Portfolio Partners portfolios, two sets of performance returns are shown for
each Subaccount: one showing performance based solely on the performance of the
Portfolio Partners portfolio from November 28, 1997, the date the Portfolio
commenced operations; and one quotation based on (a) performance through
November 26, 1997 of the fund it replaced under many Company contracts and; (b)
after November 26, 1997, based on the performance of the Portfolio Partners
portfolio.
For those Subaccounts where results are not available for the full calendar
period indicated, performance for such partial periods is shown in the column
labeled "Since Inception". For standardized performance, the "Since Inception"
column shows the average annual return since the date contributions were first
received in the Fund under the Separate Account. For nonstandardized
performance, the "Since Inception" column shows average annual total return
since the Fund's inception date.
-4-
<PAGE>
TABLE A
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Date
Contributions
STANDARDIZED First Received
Under the
Separate Account
- ------------------------------------------------------------------------------------------------------------------------------------
SUBACCOUNT 1 Year 5 Year 10 Year Inception*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Ascent VP 12.03% 19.82% 07/31/96
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 14.60% 14.53% 02/29/96
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP 0.52% 1.15% 01/31/96
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 9.73% 15.38% 07/31/96
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 10.55% 05/30/97
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP 21.96% 21.94% 01/31/96
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 25.93% 26.88% 10/31/96
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 6.68% 9.50% 05/31/96
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP(1) (2.29%) 0.57% 02/29/96
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 12.10% 05/30/97
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 12.23% 05/30/97
- -----------------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio (5.57%) 12/22/97
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 20.19% 15.79% 01/31/96
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 15.59% 14.52% 01/31/96
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio 9.82% 10.96% 03/29/96
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 3.75% 6.99% 03/29/96
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager Portfolio 12.78% 13.58% 04/30/96
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 16.25% 18.43% 03/29/96
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Index 500 Portfolio 24.75% 23.45% 03/29/96
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 4.85% 1.19% 03/29/96
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 14.22% 14.57% 03/29/96
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 3.96% 7.79% 04/30/96
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 14.86% 13.41% 03/29/96
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 14.28% 20.48% 01/31/96
- -----------------------------------------------------------------------------------------------------------------------------------
MFS Total Return Series 13.43% 14.44% 05/31/96
- -----------------------------------------------------------------------------------------------------------------------------------
MFS World Governments Series (8.84%) (2.81%) 05/31/96
- -----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth Fund 2.04% 05/30/97
- -----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund 0.60% 05/30/97
- -----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Growth & Income Fund 10.26% 05/30/97
- -----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund (2.06%) 05/30/97
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Emerging Equities Portfolio (8.18%) 11/28/97
- -----------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/Portfolio Partners MFS Emerging Equities(2) 1.44% 2.13% 01/31/96
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Research Growth Portfolio (8.82%) 11/28/97
- -----------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/Portfolio Partners MFS
Research Growth(2) (10.66%) (9.28%) 03/30/96
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Value Equity Portfolio (5.68%) 11/28/97
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners Scudder International Growth Portfolio (5.86%) 11/28/97
- -----------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio Class A/Portfolio Partners Scudder
International Growth(2) (5.53%) 12/15/97
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners T. Rowe Price Growth Equity Portfolio (5.13%) 11/28/97
- -----------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/Portfolio Partners T. Rowe Price Growth Equity(2) 20.33% 15.13% 01/31/96
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to the discussion preceding the tables for an explanation of the
charges included and methodology used in the standardized and non-standardized
figures. These figures represent historical performance and should not be
considered a projection of future performance.
* Reflects performance from the date contributions were first received in the
Fund under the Separate Account.
(1) The current yield for the Subaccount for the 7-day period ended December 31,
1997 (on an annualized basis) was 4.068%. The current yield reflects the
deduction of all charges under the Contract that are deducted from the total
return quotations shown above except the maximum 7% deferred sales charge.
(2) The Fund first listed was replaced with the applicable Portfolio Partners
Portfolio after the close of business on November 26, 1997. The performance
shown is based on the performance of the replaced Fund until November 26, 1997,
and the performance of the applicable Portfolio Partners Portfolio after that
date. The replaced Fund may not have been available under all Contracts. The
"Date Contributions First Received Under Separate Account" refers to the
applicable date for the replaced Fund.
-6-
<PAGE>
TABLE B
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
NON-STANDARDIZED Fund
Inception
Date
- ------------------------------------------------------------------------------------------------------------------------------------
SUBACCOUNT 1 Year 3 Years 5 Years 10 Years Inception**
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aetna Ascent VP 18.20% 20.16% 07/05/95
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 20.76% 19.82% 12.83% 10.94% 04/03/89
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP(1) 6.77% 8.33% 5.43% 7.68%
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 15.92% 16.85% 07/05/95
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 31.13% 31.14% 12/13/96
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP(1) 28.06% 27.01% 16.05% 15.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 32.00% 32.76% 09/16/96
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 12.89% 13.36% 07/05/95
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP(1)(2) 3.99% 4.14% 3.34% 4.46%
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 32.60% 33.02% 12/27/96
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 37.40% 38.05% 12/13/96
- ------------------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio(1) 18.39% 18.92% 11.30% 10.84%
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio(1) 26.30% 23.76% 18.48% 15.09%
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio(1) 21.74% 22.49% 16.35% 15.54%
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio(1) 16.01% 15.79% 12.31% 11.22%
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio(1) 9.98% 9.90% 12.51% 8.08%
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager Portfolio 18.95% 15.72% 11.39% 11.16% 09/06/89
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 22.39% 26.40% 01/03/95
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Index 500 Portfolio 30.83% 28.93% 18.23% 18.20% 08/27/92
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 11.08% 14.11% 17.55% 09/13/93
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 20.38% 19.27% 14.66% 09/13/93
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 10.18% 13.15% 8.48% 09/13/93
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 21.02% 21.96% 16.02% 09/13/93
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 20.43% 24.38% 21.19% 09/13/93
- ------------------------------------------------------------------------------------------------------------------------------------
MFS Total Return Series 19.59% 19.25% 01/03/95
- ------------------------------------------------------------------------------------------------------------------------------------
MFS World Governments Series (2.53%) 4.08% 3.44% 06/14/94
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth Fund 10.10% 19.46% 14.29% 14.46%
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund 20.70% 12.21% 17.14% 10.68% 11/12/90
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Growth & Income Fund 30.61% 35.28% 07/05/95
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund 7.17% 10.42% 6.12% 05/03/93
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Emerging Equities Portfolio (1.27%) 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/Portfolio Partners MFS Emerging Equities(3) 7.69% 16.32% 10.63% 17.32% 09/21/88
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Research Growth Portfolio (1.96%) 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/Portfolio Partners MFS
Research Growth(3) (4.33%) 5.27% 4.33% 7.19%
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Value Equity Portfolio 1.42% 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/Portfolio Partners MFS Value Equity( 24.56% 20.29% 11.41% 13.03%
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners Scudder International Growth Portfolio 1.23% 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio Class A/Portfolio Partners Scudder
International Growth(3) 7.45% 10.03% 12.09% 10.22%
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners T. Rowe Price Growth Equity Portfolio 2.01% 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/Portfolio Partners T. Rowe Price Growth
Equity(3) 26.44% 23.86% 18.07% 18.02% 01/09/89
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to the discussion preceding the tables for an explanation of the
charges included and methodology used in the standardized and non-standardized
figures. These figures represent historical performance and should not be
considered a projection of future performance.
** Reflects performance from the Fund's inception date.
(1) These Funds have been in operation for more than ten years.
(2) The current yield for the Subaccount for the 7-day period ended December 31,
1997 (on an annualized basis) was 4.068%. The current yield reflects the
deduction of all charges under the Contract that are deducted from the total
return quotations shown above. As in the table above, the maximum 7% deferred
sales charge is not reflected.
(3) The Fund first listed was replaced with the applicable Portfolio Partners
Portfolio after the close of business on November 26, 1997. The performance
shown is based on the performance of the replaced Fund until November 26, 1997,
and the performance of the applicable Portfolio
-7-
<PAGE>
Partners Portfolio after that date. The replaced Fund may not have
been available under all Contracts. The "Fund Inception Date" refers to the
applicable date for the replaced Fund. If no date is shown, the replaced Fund
has been in operation for more than ten years.
-8-
<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.
-9-
<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 categorized the underlying Funds in terms of the
assets classes they represent and use such categories in marketing materials for
the Contracts. 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 review of filings made with the SEC.
-10-
<PAGE>
FINANCIAL STATEMENTS
VARIABLE ANNUITY ACCOUNT I
Index
Statement of Assets and Liabilities....................................... S-2
Statements of Operations and Changes in Net Assets........................ S-6
Notes to Financial Statements............................................. S-7
Independent Auditors' Report.............................................. S-23
S-1
<PAGE>
Variable Annuity Account I
Statement of Assets and Liabilities - December 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at net asset value: (Note 1)
Aetna Variable Fund; 460,341 shares (cost $16,614,943) .............................. $15,483,675
Aetna Income Shares; 235,061 shares (cost $3,031,485) ............................... 3,020,620
Aetna Variable Encore Fund; 1,149,925 shares (cost $15,164,499) ..................... 15,367,881
Aetna Investment Advisers Fund, Inc.; 279,051 shares (cost $4,380,315) .............. 4,473,919
Aetna Ascent Variable Portfolio; 76,815 shares (cost $1,127,454) .................... 1,084,513
Aetna Crossroads Variable Portfolio; 31,718 shares (cost $411,609) .................. 415,033
Aetna Legacy Variable Portfolio; 68,340 shares (cost $822,611) ...................... 826,919
Aetna Variable Portfolios, Inc.:
Aetna Variable Capital Appreciation Portfolio; 74,816 shares (cost $1,022,182) ..... 891,486
Aetna Variable Growth Portfolio; 91,990 shares (cost $1,170,578) ................... 905,783
Aetna Variable Index Plus Portfolio; 279,320 shares (cost $3,808,630) .............. 3,915,267
Aetna Variable Small Company Portfolio; 201,662 shares (cost $2,745,151) ........... 2,575,173
Alger American Funds:
Balanced Portfolio; 130,207 shares (cost $1,275,903) ............................... 1,401,032
Income and Growth Portfolio; 342,849 shares (cost $3,522,033) ...................... 3,767,914
Leveraged AllCap Portfolio; 126,003 shares (cost $2,653,864) ....................... 2,919,482
American Century Investments:
Balanced Fund; 79,700 shares (cost $612,625) ....................................... 656,724
International Fund; 299,358 shares (cost $1,938,702) ............................... 2,047,606
Calvert Social Balanced Portfolio; 16,398 shares (cost $38,333) ..................... 32,500
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio; 1,414,165 shares (cost $29,762,531) ....................... 34,335,916
Growth Portfolio; 502,429 shares (cost $16,027,024) ................................ 18,640,127
High Income Portfolio; 840,560 shares (cost $10,736,627) ........................... 11,414,802
Overseas Portfolio; 155,660 shares (cost $2,905,453) ............................... 2,988,676
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio; 210,350 shares (cost $3,540,570) .......................... 3,788,411
Contrafund Portfolio; 1,248,608 shares (cost $21,593,730) .......................... 24,897,252
Index 500 Portfolio; 200,197 shares (cost $19,996,691) ............................. 22,900,554
Investment Grade Bond Portfolio; 114,744 shares (cost $1,378,087) .................. 1,441,187
Insurance Management Series:
American Leaders Fund II; 5,810,863 shares (cost $86,494,347) ...................... 114,067,242
Equity Income Fund II; 1,051,372 shares (cost $12,226,145) ......................... 12,942,385
Growth Strategies Fund II; 1,522,348 shares (cost $20,206,907) ..................... 24,585,918
High Income Bond Fund II; 2,370,858 shares (cost $24,105,525) ...................... 25,960,897
International Equity Fund II; 1,638,572 shares (cost $18,263,063) .................. 20,105,275
Prime Money Fund II; 3,759,186 shares (cost $3,759,186) ............................ 3,759,186
U.S. Government Securities Fund II; 535,586 shares (cost $5,420,161) ............... 5,645,077
Utility Fund II; 1,478,185 shares (cost $16,701,803) ............................... 21,123,263
Janus Aspen Series:
Aggressive Growth Portfolio; 318,959 shares (cost $5,868,670) ...................... 6,554,615
Balanced Portfolio; 442,266 shares (cost $6,980,252) ............................... 7,726,386
Flexible Income Portfolio; 169,853 shares (cost $1,968,733) ........................ 2,000,867
Growth Portfolio; 545,327 shares (cost $9,051,127) ................................. 10,077,645
Worldwide Growth Portfolio; 1,912,294 shares (cost $39,994,925) .................... 44,728,546
Lexington Emerging Markets Fund; 138,054 shares (cost $1,532,488) ................... 1,230,059
Lexington Natural Resources Trust Fund; 96,267 shares (cost $1,424,122) ............. 1,435,334
MFS Funds:
Total Return Series; 410,009 shares (cost $6,222,891) .............................. 6,818,458
World Government Series; 52,289 shares (cost $529,421) ............................. 533,867
</TABLE>
S-2
<PAGE>
Variable Annuity Account I
Statement of Assets and Liabilities - December 31, 1997 (continued):
<TABLE>
<S> <C>
Oppenheimer Funds:
Capital Appreciation Fund; 19,573 shares (cost $814,715) ........................... $ 801,718
Global Securities Fund; 47,278 shares (cost $1,003,515) ............................ 1,010,341
Growth and Income Fund; 220,089 shares (cost $4,392,520) ........................... 4,529,430
Strategic Bond Fund; 270,619 shares (cost $1,392,363) .............................. 1,385,569
Portfolio Partners, Inc. (PPI):
PPI MFS Emerging Equities Portfolio; 589,192 shares (cost $25,548,157) ............. 25,276,316
PPI MFS Research Growth Portfolio; 1,461,688 shares (cost $14,428,746) ............. 14,192,990
PPI MFS Value Equity Portfolio; 73,407 shares (cost $2,171,416) .................... 2,195,611
PPI Scudder International Growth Portfolio; 1,806 shares (cost $25,926) ............ 25,466
PPI T. Rowe Price Growth Equity Portfolio; 498,910 shares (cost $21,325,466) ....... 21,757,475
------------
NET ASSETS (cost $498,134,220) ...................................................... $560,662,388
============
Net assets represented by:
Reserves for annuity contracts in accumulation and payment period: (Notes 1 and 5)
Aetna Variable Fund:
Annuity contracts in accumulation .................................................. $ 15,483,675
Aetna Income Shares:
Annuity contracts in accumulation .................................................. 3,020,620
Aetna Variable Encore Fund:
Annuity contracts in accumulation .................................................. 15,367,881
Aetna Investment Advisers Fund, Inc.:
Annuity contracts in accumulation .................................................. 4,473,919
Aetna Ascent Variable Portfolio:
Annuity contracts in accumulation .................................................. 1,084,513
Aetna Crossroads Variable Portfolio:
Annuity contracts in accumulation .................................................. 415,033
Aetna Legacy Variable Portfolio:
Annuity contracts in accumulation .................................................. 793,678
Annuity contracts in payment period ................................................ 33,241
Aetna Variable Portfolios, Inc.:
Aetna Variable Capital Appreciation Portfolio:
Annuity contracts in accumulation .................................................. 891,486
Aetna Variable Growth Portfolio:
Annuity contracts in accumulation .................................................. 905,783
Aetna Variable Index Plus Portfolio:
Annuity contracts in accumulation .................................................. 3,915,267
Aetna Variable Small Company Portfolio:
Annuity contracts in accumulation .................................................. 2,575,173
Alger American Funds:
Balanced Portfolio:
Annuity contracts in accumulation .................................................. 1,401,032
Income and Growth Portfolio:
Annuity contracts in accumulation .................................................. 3,767,914
Leveraged AllCap Portfolio:
Annuity contracts in accumulation .................................................. 2,919,482
American Century Investments:
Balanced Fund:
Annuity contracts in accumulation .................................................. 656,724
</TABLE>
S-3
<PAGE>
Variable Annuity Account I
Statement of Assets and Liabilities - December 31, 1997 (continued):
<TABLE>
<S> <C>
International Fund:
Annuity contracts in accumulation ...................... $ 2,047,606
Calvert Social Balanced Portfolio:
Annuity contracts in accumulation ...................... 32,500
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio:
Annuity contracts in accumulation ...................... 34,335,916
Growth Portfolio:
Annuity contracts in accumulation ...................... 18,640,127
High Income:
Annuity contracts in accumulation ...................... 11,414,802
Overseas Portfolio:
Annuity contracts in accumulation ...................... 2,988,676
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio:
Annuity contracts in accumulation ...................... 3,788,411
Contrafund Portfolio:
Annuity contracts in accumulation ...................... 24,897,252
Index 500 Portfolio:
Annuity contracts in accumulation ...................... 22,900,554
Investment Grade Bond Portfolio:
Annuity contracts in accumulation ...................... 1,441,187
Insurance Management Series:
American Leaders Fund II:
Annuity contracts in accumulation ...................... 114,050,410
Annuity contracts in payment period .................... 16,832
Equity Income Fund II:
Annuity contracts in accumulation ...................... 12,942,385
Growth Strategies Fund II:
Annuity contracts in accumulation ...................... 24,585,918
High Income Bond Fund II:
Annuity contracts in accumulation ...................... 25,944,158
Annuity contracts in payment period .................... 16,739
International Equity Fund II:
Annuity contracts in accumulation ...................... 20,105,275
Prime Money Fund II:
Annuity contracts in accumulation ...................... 3,759,186
U.S. Government Securities Fund II:
Annuity contracts in accumulation ...................... 5,645,077
Utility Fund II:
Annuity contracts in accumulation ...................... 21,104,322
Annuity contracts in payment period .................... 18,941
Janus Aspen Series:
Aggressive Growth Portfolio:
Annuity contracts in accumulation ...................... 6,554,615
Balanced Portfolio:
Annuity contracts in accumulation ...................... 7,726,386
Flexible Income Portfolio:
Annuity contracts in accumulation ...................... 2,000,867
Growth Portfolio:
Annuity contracts in accumulation ...................... 10,077,645
</TABLE>
S-4
<PAGE>
Variable Annuity Account I
Statement of Assets and Liabilities - December 31, 1997 (continued):
<TABLE>
<S> <C>
Worldwide Growth Portfolio:
Annuity contracts in accumulation ......... $ 44,728,546
Lexington Emerging Markets Fund:
Annuity contracts in accumulation ......... 1,230,059
Lexington Natural Resources Trust Fund:
Annuity contracts in accumulation ......... 1,435,334
MFS Funds:
Total Return Series:
Annuity contracts in accumulation ......... 6,818,458
World Government Series:
Annuity contracts in accumulation ......... 533,867
Oppenheimer Funds:
Capital Appreciation Fund:
Annuity contracts in accumulation ......... 801,718
Global Securities Fund:
Annuity contracts in accumulation ......... 1,010,341
Growth and Income Fund:
Annuity contracts in accumulation ......... 4,529,430
Strategic Bond Fund:
Annuity contracts in accumulation ......... 1,385,569
Portfolio Partners, Inc.:
PPI MFS Emerging Equities Portfolio:
Annuity contracts in accumulation ......... 25,276,316
PPI MFS Research Growth Portfolio:
Annuity contracts in accumulation ......... 14,192,990
PPI MFS Value Equity Portfolio:
Annuity contracts in accumulation ......... 2,195,611
PPI Scudder International Growth Portfolio:
Annuity contracts in accumulation ......... 25,466
PPI T. Rowe Price Growth Equity Portfolio:
Annuity contracts in accumulation ......... 21,757,475
------------
$560,662,388
============
</TABLE>
See Notes to Financial Statements
S-5
<PAGE>
Variable Annuity Account I
Statements of Operations and Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Income: (Notes 1, 3 and 5)
Dividends .......................................................... $ 13,569,495 $ 3,142,826
Expenses: (Notes 2 and 5)
Valuation period deductions ........................................ (5,565,448) (1,469,442)
------------- ------------
Net investment income ............................................... 8,004,047 1,673,384
------------- ------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on sales of investments: (Notes 1, 4 and 5)
Proceeds from sales ................................................ 170,076,421 30,774,009
Cost of investments sold ........................................... 157,030,583 30,447,382
------------- ------------
Net realized gain ................................................. 13,045,838 326,627
Net unrealized gain on investments: (Note 5)
Beginning of year .................................................. 13,871,018 1,366,008
End of year ........................................................ 62,528,168 13,871,018
------------- ------------
Net change in unrealized gain ..................................... 48,657,150 12,505,010
------------- ------------
Net realized and unrealized gain on investments ..................... 61,702,988 12,831,637
------------- ------------
Net increase in net assets resulting from operations ................ 69,707,035 14,505,021
------------- ------------
FROM UNIT TRANSACTIONS:
Variable annuity contract purchase payments ......................... 230,999,062 151,305,122
Transfers from the Company's fixed account options .................. 55,038,062 21,839,958
Redemptions by contract holders ..................................... (14,064,451) (2,630,806)
Annuity Payments .................................................... (14,846) 0
Other ............................................................... 99,606 121,009
------------- ------------
Net increase in net assets from unit transactions (Note 5) ......... 272,057,433 170,635,283
------------- ------------
Change in net assets ................................................ 341,764,468 185,140,304
NET ASSETS:
Beginning of year ................................................... 218,897,920 33,757,616
------------- ------------
End of year ......................................................... $ 560,662,388 $218,897,920
============= ============
</TABLE>
See Notes to Financial Statements
S-6
<PAGE>
Variable Annuity Account I
Notes to Financial Statements - December 31, 1997
1. Summary of Significant Accounting Policies
Variable Annuity Account I (the "Account") is a separate account
established by Aetna Insurance Company of America (the "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, 1997:
Aetna Variable Fund
Aetna Income Shares
Aetna Variable Encore Fund
Aetna Investment Advisers Fund, Inc.
Aetna Ascent Variable Portfolio
Aetna Crossroads Variable Portfolio
Aetna Legacy Variable Portfolio
Aetna Variable Portfolios, Inc.:
[bullet] Aetna Variable Capital Appreciation Portfolio
[bullet] Aetna Variable Growth Portfolio
[bullet] Aetna Variable Index Plus Portfolio
[bullet] Aetna Variable Small Company Portfolio
Alger American Funds:
[bullet] Balanced Portfolio
[bullet] Income and Growth Portfolio
[bullet] Leveraged AllCap Portfolio
American Century Investments:
[bullet] Balanced Fund
[bullet] International Fund
Calvert Social Balanced Portfolio
Fidelity Investments Variable Insurance Products Fund:
[bullet] Equity-Income Portfolio
[bullet] Growth Portfolio
[bullet] High Income Portfolio
[bullet] Overseas Portfolio
Fidelity Investments Variable Insurance Products Fund II:
[bullet] Asset Manager Portfolio
[bullet] Contrafund Portfolio
[bullet] Index 500 Portfolio
[bullet] Investment Grade Bond Portfolio
Insurance Management Series:
[bullet] American Leaders Fund II
[bullet] Equity Income Fund II
[bullet] Growth Strategies Fund II
[bullet] High Income Bond Fund II
[bullet] International Equity Fund II
[bullet] Prime Money Fund II
[bullet] U.S. Government Securities Fund II
[bullet] Utility Fund II
Janus Aspen Series:
[bullet] Aggressive Growth Portfolio
[bullet] Balanced Portfolio
[bullet] Flexible Income Portfolio
[bullet] Growth Portfolio
[bullet] Worldwide Growth Portfolio
Lexington Emerging Markets Fund
Lexington Natural Resources Trust Fund
MFS Funds:
[bullet] Total Return Series
[bullet] World Government Series
Oppenheimer Funds:
[bullet] Capital Appreciation Fund
[bullet] Global Securities Fund
[bullet] Growth and Income Fund
[bullet] Strategic Bond Fund
Portfolio Partners, Inc.:
[bullet] PPI MFS Emerging Equities Portfolio
[bullet] PPI MFS Research Growth Portfolio
[bullet] PPI MFS Value Equity Portfolio
[bullet] PPI Scudder International Growth Portfolio
[bullet] PPI T. Rowe Price Growth Equity Portfolio
b. Other
Investment transactions are accounted for on a trade date basis and
dividend income is recorded on the ex-dividend date. The cost of
investments sold is determined by specific identification.
S-7
<PAGE>
Variable Annuity Account I
Notes to Financial Statements - December 31, 1997 (continued):
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, 1997 and 1996
aggregated $450,137,902 and $170,076,421; $203,082,676 and $30,774,009,
respectively.
S-8
<PAGE>
Variable Annuity Account I
Notes to Financial Statements - December 31, 1997 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1997
Valuation Proceeds Cost of Net
Period from Investments Realized
Dividends Deductions Sales Sold Gain (Loss)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Variable Fund: $2,917,442 ($125,993) $ 772,972 $ 648,307 $ 124,665
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Income Shares: 151,053 (26,889) 754,709 750,000 4,709
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Variable Encore Fund: 322,525 (170,170) 19,808,667 19,627,696 180,971
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc.: 443,088 (36,303) 411,120 371,132 39,988
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio: 66,289 (9,238) 1,580,817 1,443,402 137,415
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio: 26,978 (2,883) 5,444 4,842 602
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio: 45,122 (6,136) 199,255 188,641 10,614
Annuity contracts in accumulation
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Variable Portfolios, Inc.:
Aetna Variable Capital Appreciation Portfolio: 141,848 (2,366) 140,737 134,978 5,759
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Variable Growth Portfolio: 242,318 (2,483) 311,238 305,917 5,321
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Variable Index Plus Portfolio: 156,860 (28,110) 1,772,894 1,552,332 220,562
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Variable Small Company Portfolio: 155,307 (7,993) 104,643 86,811 17,832
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------
Alger American Funds:
Balanced Portfolio: 24,076 (13,590) 120,684 99,159 21,525
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------
Growth Portfolio: (1) 89,153 (132,536) 15,600,119 13,181,627 2,418,492
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------
Income and Growth Portfolio: 65,111 (31,295) 1,374,610 1,109,169 265,441
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------
Leveraged AllCap Portfolio: 0 (36,689) 1,293,544 1,102,668 190,876
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------
MidCap Portfolio: (1) 80,363 (75,046) 9,541,316 8,551,109 990,207
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------
Small Capitalization Portfolio: (2) 338,930 (118,559) 12,725,130 12,057,293 667,837
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------
American Century Investments:
Balanced Fund: 29,309 (8,128) 203,349 186,540 16,809
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-9
<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>
($143,001) ($ 1,131,268) ($ 988,267) $ 9,726,519
$3,829,309 $15,483,675
- -----------------------------------------------------------------------------------------------------------------------------
(21,783) (10,865) 10,918 1,877,585
1,003,244 3,020,620
- -----------------------------------------------------------------------------------------------------------------------------
61,606 203,382 141,776 6,513,403
8,379,376 15,367,881
- -----------------------------------------------------------------------------------------------------------------------------
15,913 93,604 77,691 3,246,840
702,615 4,473,919
- -----------------------------------------------------------------------------------------------------------------------------
56,427 (42,941) (99,368) (175,693)
1,165,108 1,084,513
- -----------------------------------------------------------------------------------------------------------------------------
(282) 3,424 3,706 309,890
76,740 415,033
- -----------------------------------------------------------------------------------------------------------------------------
(3,582) 4,308 7,890 669,065
100,364 793,678
0 33,241
- -----------------------------------------------------------------------------------------------------------------------------
0 (130,696) (130,696) 876,941
0 891,486
- -----------------------------------------------------------------------------------------------------------------------------
0 (264,795) (264,795) 925,422
0 905,783
- -----------------------------------------------------------------------------------------------------------------------------
(786) 106,638 107,424 3,426,210
32,321 3,915,267
- -----------------------------------------------------------------------------------------------------------------------------
0 (169,978) (169,978) 2,580,005
0 2,575,173
- -----------------------------------------------------------------------------------------------------------------------------
19,051 125,129 106,078 755,128
507,815 1,401,032
- -----------------------------------------------------------------------------------------------------------------------------
331,002 0 (331,002) (8,508,847)
6,464,740 0
- -----------------------------------------------------------------------------------------------------------------------------
43,184 245,881 202,697 2,618,690
647,270 3,767,914
- -----------------------------------------------------------------------------------------------------------------------------
53,728 265,618 211,890 540,838
2,012,567 2,919,482
- -----------------------------------------------------------------------------------------------------------------------------
172,467 0 (172,467) (4,925,256)
4,102,199 0
- -----------------------------------------------------------------------------------------------------------------------------
(40,650) 0 40,650 (7,934,029)
7,005,171 0
- -----------------------------------------------------------------------------------------------------------------------------
10,011 44,098 34,087 211,174
373,473 656,724
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-10
<PAGE>
Variable Annuity Account I
Notes to Financial Statements - December 31, 1997 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets (continued):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Year Ended December 31, 1997
Valuation
Period
Dividends Deductions
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Capital Appreciation Fund: (3) $ 13,359 ($10,581)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------
International Fund: 43,440 (24,794)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio: 0 (2)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio: 1,381,407 (329,134)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------
Growth Portfolio: 387,748 (199,645)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------
High Income Portfolio: 258,910 (88,291)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------
Overseas Portfolio: 123,104 (32,314)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio: 167,003 (32,759)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------
Contrafund Portfolio: 273,634 (226,793)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------
Index 500 Portfolio: 198,117 (197,448)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------
Investment Grade Bond Portfolio: 34,282 (13,109)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------
Insurance Management Series:
American Leaders Fund II: 2,021,951 (1,254,649)
Annuity contracts in accumulation
Annuity contracts in payment period
- ----------------------------------------------------------------------------------------------------
Equity Income Fund II: 42,089 (75,051)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------
Growth Strategies Fund II: 83,791 (249,588)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------
High Income Bond Fund II: 1,053,521 (275,549)
Annuity contracts in accumulation
Annuity contracts in payment period
- ----------------------------------------------------------------------------------------------------
International Equity Fund II: 15,632 (226,665)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------
Prime Money Fund II: 210,825 (62,256)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Year Ended December 31, 1997
Proceeds Cost of Net
from Investments Realized
Sales Sold Gain (Loss)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital Appreciation Fund: (3) $1,483,901 $1,555,024 ($71,123)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
International Fund: 793,249 675,144 118,105
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio: 6,738 7,426 (688)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio: 1,006,879 870,117 136,762
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Growth Portfolio: 1,523,787 1,391,777 132,010
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
High Income Portfolio: 1,389,256 1,263,386 125,870
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Overseas Portfolio: 372,931 345,379 27,552
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio: 95,686 90,640 5,046
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Contrafund Portfolio: 624,535 485,003 139,532
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Index 500 Portfolio: 2,562,053 1,860,408 701,645
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Investment Grade Bond Portfolio: 292,775 284,565 8,210
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Insurance Management Series:
American Leaders Fund II: 3,672,802 2,283,020 1,389,782
Annuity contracts in accumulation
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------------------------
Equity Income Fund II: 125,938 117,498 8,440
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Growth Strategies Fund II: 644,437 464,629 179,808
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
High Income Bond Fund II: 1,329,211 1,199,797 129,414
Annuity contracts in accumulation
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------------------------
International Equity Fund II: 792,013 683,940 108,073
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Prime Money Fund II: 5,616,613 5,616,577 36
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
</TABLE>
S-11
<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>
($11,204) $0 $11,204 ($403,000)
$460,141 $0
- ------------------------------------------------------------------------------------------------------------------------
47,176 108,904 61,728 1,023,868
825,259 2,047,606
- ------------------------------------------------------------------------------------------------------------------------
0 (5,832) (5,832) 39,022
0 32,500
- ------------------------------------------------------------------------------------------------------------------------
763,902 4,573,383 3,809,481 17,482,048
11,855,352 34,335,916
- ------------------------------------------------------------------------------------------------------------------------
339,925 2,613,104 2,273,179 6,518,902
9,527,933 18,640,127
- ------------------------------------------------------------------------------------------------------------------------
99,376 678,175 578,799 7,802,056
2,737,458 11,414,802
- ------------------------------------------------------------------------------------------------------------------------
66,703 83,223 16,520 1,531,886
1,321,928 2,988,676
- ------------------------------------------------------------------------------------------------------------------------
56,785 247,841 191,056 2,241,299
1,216,766 3,788,411
- ------------------------------------------------------------------------------------------------------------------------
438,859 3,303,522 2,864,663 15,304,885
6,541,331 24,897,252
- ------------------------------------------------------------------------------------------------------------------------
375,527 2,903,863 2,528,336 14,780,907
4,888,997 22,900,554
- ------------------------------------------------------------------------------------------------------------------------
10,325 63,100 52,775 910,396
448,634 1,441,187
- ------------------------------------------------------------------------------------------------------------------------
7,073,040 27,572,894 20,499,854 33,372,942
58,037,362 114,050,410
0 16,832
- ------------------------------------------------------------------------------------------------------------------------
0 716,240 716,240 12,250,666
0 12,942,385
- ------------------------------------------------------------------------------------------------------------------------
890,268 4,379,010 3,488,742 11,282,487
9,800,678 24,585,918
- ------------------------------------------------------------------------------------------------------------------------
442,872 1,855,372 1,412,500 12,049,585
11,591,426 25,944,158
0 16,739
- ------------------------------------------------------------------------------------------------------------------------
599,852 1,842,212 1,242,360 7,630,546
11,335,329 20,105,275
- ------------------------------------------------------------------------------------------------------------------------
0 0 0 102,916
3,507,665 3,759,186
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-12
<PAGE>
Variable Annuity Account I
Notes to Financial Statements - December 31, 1997 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets (continued):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1997
Valuation Proceeds Cost of Net
Period from Investments Realized
Dividends Deductions Sales Sold Gain (Loss)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. Government Securities Fund II: $136,009 ($57,878) $815,197 $816,209 ($1,012)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------
Utility Fund II: 698,490 (236,725) 1,251,178 1,013,333 237,845
Annuity contracts in accumulation
Annuity contracts in payment period
- ------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series:
Aggressive Growth Portfolio: 0 (64,625) 1,801,019 1,701,173 99,846
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------
Balanced Portfolio: 181,361 (69,510) 417,457 346,860 70,597
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------
Flexible Income Portfolio: 87,894 (14,471) 333,439 322,660 10,779
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------
Growth Portfolio: 219,777 (99,435) 947,759 774,701 173,058
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------
Short-Term Bond Portfolio: (4) 10,649 (6,397) 1,087,777 1,072,304 15,473
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------
Worldwide Growth Portfolio: 522,386 (448,359) 2,135,232 1,701,774 433,458
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund: 1,295 (21,167) 1,232,664 1,305,131 (72,467)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust Fund: 41,210 (18,555) 1,350,194 1,215,906 134,288
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------
MFS Funds:
Emerging Growth Series: (2) 0 (116,977) 15,517,072 13,662,725 1,854,347
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------
Research Series: (3) 0 (100,752) 13,471,461 12,125,968 1,345,493
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------
Total Return Series: 0 (54,566) 831,314 702,549 128,765
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------
Value Series: (5) 0 (5,724) 1,671,063 1,502,195 168,868
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------
World Government Series: 15,615 (8,914) 711,009 723,530 (12,521)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------
Oppenheimer Funds:
Capital Appreciation Fund: 0 (2,638) 62,476 58,435 4,041
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------
Global Securities Fund: 0 (3,510) 38,265 35,536 2,729
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------
Growth and Income Fund: 12,626 (13,385) 107,192 95,273 11,919
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-13
<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>
($201) $224,916 $225,117 $2,886,389
$2,456,452 $5,645,077
- -----------------------------------------------------------------------------------------------------------------
1,106,478 4,421,460 3,314,982 3,773,450
13,335,221 21,104,322
0 18,941
- -----------------------------------------------------------------------------------------------------------------
17,905 685,946 668,041 3,097,139
2,754,214 6,554,615
- -----------------------------------------------------------------------------------------------------------------
46,718 746,135 699,417 4,857,371
1,987,150 7,726,386
- -----------------------------------------------------------------------------------------------------------------
5,974 32,134 26,160 1,497,111
393,394 2,000,867
- -----------------------------------------------------------------------------------------------------------------
90,906 1,026,518 935,612 5,734,794
3,113,839 10,077,645
- -----------------------------------------------------------------------------------------------------------------
(1,799) 0 1,799 (335,569)
314,045 0
- -----------------------------------------------------------------------------------------------------------------
658,071 4,733,621 4,075,550 26,343,094
13,802,417 44,728,546
- -----------------------------------------------------------------------------------------------------------------
(4,649) (302,429) (297,780) 854,308
765,870 1,230,059
- -----------------------------------------------------------------------------------------------------------------
98,720 11,212 (87,508) 36,049
1,329,850 1,435,334
- -----------------------------------------------------------------------------------------------------------------
13,628 0 (13,628) (5,940,064)
4,216,322 0
- -----------------------------------------------------------------------------------------------------------------
66,161 0 (66,161) (3,668,017)
2,489,437 0
- -----------------------------------------------------------------------------------------------------------------
22,362 595,567 573,205 4,989,205
1,181,849 6,818,458
- -----------------------------------------------------------------------------------------------------------------
156 0 (156) (207,849)
44,861 0
- -----------------------------------------------------------------------------------------------------------------
3,877 4,445 568 324,691
214,428 533,867
- -----------------------------------------------------------------------------------------------------------------
0 (12,997) (12,997) 813,312
0 801,718
- -----------------------------------------------------------------------------------------------------------------
0 6,826 6,826 1,004,296
0 1,010,341
- -----------------------------------------------------------------------------------------------------------------
0 136,910 136,910 4,381,360
0 4,529,430
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
S-14
<PAGE>
Variable Annuity Account I
Notes to Financial Statements - December 31, 1997 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets (continued):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Year Ended December 31, 1997
Valuation
Period
Dividends Deductions
- -------------------------------------------------------------------------------
<S> <C> <C>
Strategic Bond Fund: $37,598 ($5,530)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------
Portfolio Partners, Inc.:
PPI MFS Emerging Equities Portfolio: 0 (33,567)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------
PPI MFS Research Growth Portfolio: 0 (18,615)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------
PPI MFS Value Equity Portfolio: 0 (2,523)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------
PPI Scudder International Growth Portfolio: 0 (5)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------
PPI T. Rowe Price Growth Equity Portfolio: 0 (28,585)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------
Total Variable Annuity Account I $13,569,495 ($5,565,448)
===============================================================================
<CAPTION>
- --------------------------------------------------------------------------------------------------
Year Ended December 31, 1997
Proceeds Cost of Net
from Investments Realized
Sales Sold Gain (Loss)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Strategic Bond Fund: $50,466 $49,763 $703
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Portfolio Partners, Inc.:
PPI MFS Emerging Equities Portfolio: 14,301,627 14,309,825 (8,198)
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
PPI MFS Research Growth Portfolio: 13,341,021 13,351,443 (10,422)
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
PPI MFS Value Equity Portfolio: 1,560,760 1,560,280 480
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
PPI Scudder International Growth Portfolio: 4 4 0
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
PPI T. Rowe Price Growth Equity Portfolio: 7,986,723 7,987,053 (330)
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Total Variable Annuity Account I $170,076,421 $157,030,583 $13,045,838
==================================================================================================
</TABLE>
(1) Effective November 28, 1997, assets from these funds were transferred to the
PPI T. Rowe Price Growth Equity Portfolio.
(2) Effective November 28, 1997, assets from these funds were transferred to the
PPI MFS Emerging Equities Portfolio.
(3) Effective November 28, 1997, assets from these funds were transferred to the
PPI MFS Research Growth Portfolio.
(4) Effective November 28, 1997, assets from these funds were transferred to the
Aetna Variable Encore Fund.
(5) Effective November 28, 1997, assets from these funds were transferred to the
PPI MFS Value Equity Portfolio.
S-15
<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>
$0 ($6,794) ($6,794) $1,359,592
$0 $1,385,569
- --------------------------------------------------------------------------------------------------------------------
0 (271,841) (271,841) 25,589,922
0 25,276,316
- --------------------------------------------------------------------------------------------------------------------
0 (235,756) (235,756) 14,457,783
0 14,192,990
- --------------------------------------------------------------------------------------------------------------------
0 24,196 24,196 2,173,458
0 2,195,611
- --------------------------------------------------------------------------------------------------------------------
0 (460) (460) 25,931
0 25,466
- --------------------------------------------------------------------------------------------------------------------
0 432,009 432,009 21,354,381
0 21,757,475
- --------------------------------------------------------------------------------------------------------------------
$13,871,018 $62,528,168 $48,657,150 $272,057,433 $218,897,920 $560,662,388
====================================================================================================================
</TABLE>
S-16
<PAGE>
Variable Annuity Account I
Notes to Financial Statements - December 31, 1997 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets (continued):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1996
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:
Equity-Income 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
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-17
<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>
$0 ($143,001) ($143,001) $3,559,569
$0 $3,829,309
- ----------------------------------------------------------------------------------------------------------
0 (21,783) (21,783) 980,564
0 1,003,244
- ----------------------------------------------------------------------------------------------------------
0 61,606 61,606 8,262,668
0 8,379,376
- ----------------------------------------------------------------------------------------------------------
0 15,913 15,913 639,143
0 702,615
- ----------------------------------------------------------------------------------------------------------
0 56,427 56,427 1,070,098
0 1,165,108
- ----------------------------------------------------------------------------------------------------------
0 (282) (282) 73,943
0 76,740
- ----------------------------------------------------------------------------------------------------------
0 (3,582) (3,582) 98,789
(1) 100,364
- ----------------------------------------------------------------------------------------------------------
0 (786) (786) 31,313
0 32,321
- ----------------------------------------------------------------------------------------------------------
0 19,051 19,051 489,854
0 507,815
- ----------------------------------------------------------------------------------------------------------
(303) 331,002 331,305 6,071,518
36,711 6,464,740
- ----------------------------------------------------------------------------------------------------------
0 43,184 43,184 592,011
0 647,270
- ----------------------------------------------------------------------------------------------------------
0 53,728 53,728 1,974,038
0 2,012,567
- ----------------------------------------------------------------------------------------------------------
0 172,467 172,467 3,999,130
1 4,102,199
- ----------------------------------------------------------------------------------------------------------
(1,042) (40,650) (39,608) 7,044,153
35,778 7,005,171
- ----------------------------------------------------------------------------------------------------------
0 763,902 763,902 11,149,944
0 11,855,352
- ----------------------------------------------------------------------------------------------------------
0 339,925 339,925 9,199,562
0 9,527,933
- ----------------------------------------------------------------------------------------------------------
0 99,376 99,376 2,614,682
0 2,737,458
- ----------------------------------------------------------------------------------------------------------
0 66,703 66,703 1,253,524
0 1,321,928
- ----------------------------------------------------------------------------------------------------------
</TABLE>
S-18
<PAGE>
Variable Annuity Account I
Notes to Financial Statements - December 31, 1997 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets (continued):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1996
Valuation Proceeds Cost of Net
Period from Investments Realized
Dividends Deductions Sales Sold Gain (Loss)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
- ---------------------------------------------------------------------------------------------------------------------------------
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
- ---------------------------------------------------------------------------------------------------------------------------------
Short-Term 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
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-19
<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>
$0 $56,785 $56,785 $1,163,217
$0 $1,216,766
- -----------------------------------------------------------------------------------------------------------
0 438,859 438,859 6,105,333
0 6,541,331
- -----------------------------------------------------------------------------------------------------------
0 375,527 375,527 4,514,462
0 4,888,997
- -----------------------------------------------------------------------------------------------------------
0 10,325 10,325 440,327
0 448,634
- -----------------------------------------------------------------------------------------------------------
871,936 7,073,040 6,201,104 35,057,409
16,434,144 58,037,362
- -----------------------------------------------------------------------------------------------------------
4,198 890,268 886,070 8,762,085
187,382 9,800,678
- -----------------------------------------------------------------------------------------------------------
47,839 442,872 395,033 7,472,858
3,197,071 11,591,426
- -----------------------------------------------------------------------------------------------------------
77,134 599,852 522,718 7,793,953
3,076,039 11,335,329
- -----------------------------------------------------------------------------------------------------------
0 0 0 (713,688)
4,106,739 3,507,665
- -----------------------------------------------------------------------------------------------------------
32,984 (201) (33,185) 816,834
1,587,267 2,456,452
- -----------------------------------------------------------------------------------------------------------
332,527 1,106,478 773,951 7,162,934
5,071,628 13,335,221
- -----------------------------------------------------------------------------------------------------------
0 17,905 17,905 2,779,331
0 2,754,214
- -----------------------------------------------------------------------------------------------------------
0 46,718 46,718 1,912,197
0 1,987,150
- -----------------------------------------------------------------------------------------------------------
0 5,974 5,974 371,127
0 393,394
- -----------------------------------------------------------------------------------------------------------
0 90,906 90,906 2,949,911
0 3,113,839
- -----------------------------------------------------------------------------------------------------------
0 (1,799) (1,799) 306,346
0 314,045
- -----------------------------------------------------------------------------------------------------------
0 658,071 658,071 13,048,547
0 13,802,417
- -----------------------------------------------------------------------------------------------------------
735 (4,649) (5,384) 750,550
24,857 765,870
- -----------------------------------------------------------------------------------------------------------
</TABLE>
S-20
<PAGE>
Variable Annuity Account I
Notes to Financial Statements - December 31, 1997 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets (continued):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1996
Valuation Proceeds Cost of Net
Period from Investments Realized
Dividends Deductions Sales Sold Gain (Loss)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
- ---------------------------------------------------------------------------------------------------------------------------------
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-21
<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>
$0 $98,720 $98,720 $1,238,511
$0 $1,329,850
- ----------------------------------------------------------------------------------------------------------------
0 13,628 13,628 4,190,575
0 4,216,322
- ----------------------------------------------------------------------------------------------------------------
0 66,161 66,161 2,397,579
0 2,489,437
- ----------------------------------------------------------------------------------------------------------------
0 22,362 22,362 1,134,335
0 1,181,849
- ----------------------------------------------------------------------------------------------------------------
0 156 156 44,087
0 44,861
- ----------------------------------------------------------------------------------------------------------------
0 3,877 3,877 210,327
0 214,428
- ----------------------------------------------------------------------------------------------------------------
0 10,011 10,011 362,627
0 373,473
- ----------------------------------------------------------------------------------------------------------------
0 (11,204) (11,204) 478,565
0 460,141
- ----------------------------------------------------------------------------------------------------------------
0 47,176 47,176 780,441
0 825,259
- ----------------------------------------------------------------------------------------------------------------
$1,366,008 $13,871,018 $12,505,010 $170,635,283 $33,757,616 $218,897,920
================================================================================================================
</TABLE>
S-22
<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, 1997, and the related statements of operations and changes in net
assets for each of the years in the two-year period then ended and condensed
financial information for the year ended December 31, 1997. 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 and condensed financial information. Our procedures
included confirmation of securities owned as of December 31, 1997, 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, 1997, the results of its operations and changes in its net assets
for each of the years in the two-year period then ended and condensed financial
information for the year ended December 31, 1997 in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
February 27, 1998
S-23
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
Index to Financial Statements
Page
----
Independent Auditors' Report F-2
Financial Statements:
Statements of Income for the Years Ended
December 31, 1997, 1996 and 1995 F-3
Balance Sheets as of December 31, 1997
and 1996 F-4
Statements of Changes in Shareholder's Equity for
the Years Ended December 31, 1997, 1996 and 1995 F-5
Statements of Cash Flows for the Years
Ended December 31, 1997, 1996 and 1995 F-6
Notes to Financial Statements F-7
F-1
<PAGE>
Independent Auditors' Report
The Shareholder and Board of Directors
Aetna Insurance Company of America:
We have audited the accompanying balance sheets of Aetna Insurance Company of
America as of December 31, 1997 and 1996, 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, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Aetna Insurance Company of
America at December 31, 1997 and 1996, and the results of its operations and its
cash flows for each of the years in the three-year period ended December 31,
1997, in conformity with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, in 1997, the Company changed
its method for accounting for guaranty-fund and other insurance related
assessments.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
March 25 , 1998
F-2
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Statements of Income
(thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Revenue:
Charges assessed against policyholders $ 6,072.9 $ 1,293.0 $ 132.7
Net investment income 7,083.2 1,556.9 721.0
Net realized capital gains (losses) 101.6 (11.2) 8.3
Other income 243.2 66.4 --
---------- ----------- -----------
Total revenue 13,500.9 2,905.1 862.0
Benefits and expenses:
Current and future benefits 6,534.5 1,651.9 --
Operating expenses 3,675.6 2,430.4 481.8
Amortization of deferred policy acquisition costs 809.0 242.0 --
---------- ----------- -----------
Total benefits and expenses 11,019.1 4,324.3 481.8
Income (loss) before income taxes (benefits) and 2,481.8 (1,419.2) 380.2
cumulative effect adjustment
Income taxes (benefits) 768.7 (723.4) 212.3
---------- ----------- -----------
Income (loss) before cumulative effect adjustments 1,713.1 (695.8) 167.9
Cumulative effect adjustment, net of tax 520.0 -- --
---------- ----------- -----------
Net income (loss) $ 1,193.1 $ (695.8) $ 167.9
========= =========== ==========
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Balance Sheets
(thousands, except share data)
<TABLE>
<CAPTION>
December 31,
Assets 1997 1996
- ------ ---- ----
<S> <C> <C>
Investments:
Debt securities, available for sale, at fair value:
(amortized cost: $135,850.1 and $24,736.8) $ 137,918.4 $ 24,770.3
Cash and cash equivalents 12,494.2 51,842.3
Deferred policy acquisition costs 45,364.0 21,057.0
Accrued investment income 2,041.5 325.8
Deferred tax asset 2,139.2 1,289.7
Income taxes receivable 1,429.7 1,133.2
Other assets 2,514.6 447.6
Separate Accounts assets 676,640.7 303,518.6
----------- -----------
Total assets $ 880,542.3 $ 404,384.5
=========== ===========
Liabilities and Shareholder's Equity
- ------------------------------------
Liabilities:
Policyholders' funds left with the Company 145,625.9 64,445.4
Other liabilities 5,212.1 4,753.2
Due to parent and affiliates 813.6 347.2
Separate Accounts liabilities 676,640.7 303,518.6
----------- -----------
Total liabilities 828,292.3 373,064.4
----------- -----------
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 47,550.0 27,550.0
Accumulated other comprehensive income 155.4 90.3
Retained earnings 1,994.6 1,129.8
----------- -----------
Total shareholder's equity 52,250.0 31,320.1
----------- -----------
Total liabilities and shareholder's equity $ 880,542.3 $ 404,384.5
=========== ===========
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Statements of Changes in Shareholder's Equity
(thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Shareholder's equity, beginning of year $ 31,320.1 $ 12,133.0 $ 11,675.3
Comprehensive income
Net income (loss) 1,193.1 (695.8) 167.9
Other comprehensive income, net of tax
Unrealized gains (losses) on securities ($100.2
thousand, ($95.5) thousand and $371.8 thousand,
pretax, respectively) 65.1 (62.1) 289.8
---------- ---------- ----------
Total comprehensive income 1,258.2 (757.9) 457.7
---------- ---------- ----------
Capital contributions 20,000.0 20,000.0 --
Other changes (328.3) (55.0) --
---------- ---------- ----------
Shareholder's equity, end of year $ 52,250.0 $ 31,320.1 $ 12,133.0
========== ========== ==========
</TABLE>
See Notes to Financial Statements.
F-5
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Statements of Cash Flows
(thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ 1,193.1 $ (695.8) $ 167.9
Adjustments to reconcile net income (loss) to net cash (used for)
provided by operating activities:
Increase in accrued investment income (1,715.7) (213.2) (21.1)
Increase in deferred policy acquisition costs (24,307.0) (18,990.6) (2,066.4)
Net change in amounts due to/from parent and affiliates 466.5 172.6 164.1
Net increase (decrease) in other assets and liabilities 924.1 (25.6) 1,915.9
Net change in income taxes (1,388.4) (2,710.7) 60.2
Net amortization of (discount) premium on debt securities (419.5) (104.6) 22.2
Net realized capital (gains) losses (101.6) 11.2 --
---------- ---------- ---------
Net cash (used for) provided by operating activities (25,348.5) (22,556.7) 242.8
---------- ---------- ---------
Cash Flows from Investing Activities:
Proceeds from sales of:
Debt securities available for sale 16,576.8 2,510.0 3,000.0
Investment maturities and repayments of:
Debt securites available for sale 3,192.0 -- --
Short-term investments 1,000.0 -- 500.0
Cost of investment purchases in:
Debt securities available for sale (132,734.8) (16,706.0) (3,939.2)
Short-term investments (1,000.0) -- (492.1)
---------- ---------- ---------
Net cash used for investing activities (112,966.0) (14,196.0) (931.3)
---------- ---------- ---------
Cash Flows from Financing Activities:
Deposits and interest credited for investment contracts 84,673.2 64,936.2 --
Withdrawal of investment contracts (5,706.8) (385.4) --
Capital contribution 20,000.0 20,000.0 --
---------- ---------- ---------
Net cash provided by financing activities 98,966.4 84,550.8 --
---------- ---------- ---------
Net (decrease) increase in cash and cash equivalents (39,348.1) 47,798.1 (688.5)
Cash and cash equivalents, beginning of year 51,842.3 4,044.2 4,732.7
---------- ---------- ---------
Cash and cash equivalents, end of year $ 12,494.2 $ 51,842.3 $ 4,044.2
========== ========== =========
Supplemental cash flow information:
Income taxes paid, net $ 1,493.0 $ 1,866.8 $ 92.4
========== ========== =========
</TABLE>
See Notes to Financial Statements.
F-6
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Notes to Financial Statements
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
1996 and 1995 financial information to conform to the 1997 presentation.
New Accounting Standards
Reporting Comprehensive Income
As of December 31, 1997 the Company adopted Financial Accounting Standard
("FAS") No. 130, Reporting Comprehensive Income. This statement 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 shareholders) and includes net income and net unrealized
capital gains or losses on available-for-sale securities. As this new
standard only requires additional information in a financial statement, it
does not affect the Company's financial position or results of operations.
Accounting by Insurance and Other Enterprises for Insurance-Related
Assessments
In 1997, the Company adopted the American Institute of Certified Public
Accountants' Statement of Position ("SOP") 97-3, Accounting by Insurance
and Other Enterprises for Insurance-Related Assessments, effective as of
January 1, 1997. This statement required that the Company recognize a
liability for guaranty-fund and other insurance related assessments when
such assessments were probable and could be reasonably estimated. A
cumulative effect charge of $520.0 thousand, net of taxes of $280.0
thousand, related to the adoption of this statement is reflected in the
1997 Statements of Income.
F-7
<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)
Future Application of Accounting Standards
Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities
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.
Accounting for Internal Use Software
In March of 1998, the AICPA issued SOP 98-1, Accounting for internal use
software, which provides guidance for determining when internal use
software costs (acquired or internally developed) are expensed as incurred
or capitalized. This Statement is effective for 1999 financial statements
with early adoption permitted. The Company has not determined, at this
time, the impact on the financial statements of adopting this standard.
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.
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
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.
F-8
<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)
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.
The Company engages in securities lending whereby certain securities from
its portfolio are loaned to other institutions for short periods of time.
Initial collateral, primarily cash, is required at a rate of 102% of the
market value of a loaned domestic security and 105% of the market value of
a loaned foreign security. The collateral is deposited by the borrower with
a lending agent, and retained and invested by the lending agent according
to the Company's guidelines to generate additional income. The market value
of the loaned securities is monitored on a daily basis with additional
collateral obtained or refunded as the market value of the loaned
securities fluctuates. At December 31, 1997 and 1996, the Company had no
securities out on loan.
Purchases and sales of debt securities are recorded on the trade date.
Short-term investments, consisting primarily of money market instruments
and other debt issues purchased with a maturity of 91 days to one year, are
considered available for sale and are carried at fair value, which
approximates amortized cost.
Deferred Policy Acquisition Costs
Certain costs of acquiring insurance business are deferred. These costs,
all of which vary with and are primarily related to the production of new
and renewal 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.
Reserves
Policyholders' funds left with the Company include reserves for deferred
annuity investment contracts and immediate annuities without life
contingent payouts. Reserves on such contracts are equal to cumulative
deposits less charges and withdrawals plus credited interest thereon (rates
range from 4.85% to 7.00% for all years presented), 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.
F-9
<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)
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 $90.8 million for 1997 (fair value of $91.5
million) and $82.5 million for 1996 (fair value of $82.9 million). Reserves
relating to the guaranteed interest option are maintained at fund value and
reflect interest credited at rates ranging from 4.1% to 8.0% for all years
presented.
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 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.
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.
F-10
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Notes to Financial Statements (Continued)
2. Investments
Debt securities available for sale at December 31, 1997 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 $ 37,839.6 $1,066.0 $ 1.2 $ 38,904.4
agencies and authorities
U.S. corporate securities:
Financial 31,267.3 705.3 12.1 31,960.5
Healthcare & consumer products 6,509.7 170.8 20.0 6,660.5
Media & broadcast 993.6 119.2 - 1,112.8
Natural resources 5,122.7 49.7 - 5,172.4
Transportation & capital goods 5,334.6 134.1 - 5,468.7
Utilities 6,049.0 66.2 - 6,115.2
Other corporate securities 764.2 45.9 - 810.1
---------- -------- --------- ----------
Total U.S. corporate securities 56,041.1 1,291.2 32.1 57,300.2
Foreign securities:
Government 991.3 - 243.1 748.2
Other 12,190.3 153.7 809.2 11,534.8
---------- -------- --------- ----------
Total foreign securities 13,181.6 153.7 1,052.3 12,283.0
Residential mortgage-backed
securities:
Pass-throughs 1,152.1 - 3.0 1,149.1
Collateralized mortgage obligations 8,602.9 399.3 12.1 8,990.1
---------- -------- --------- ----------
Total residential mortgage-backed
securities 9,755.0 399.3 15.1 10,139.2
Commercial/multifamily mortgage-
backed securities 8,555.3 165.3 - 8,720.6
Other asset-backed securities 10,477.5 93.5 - 10,571.0
---------- -------- --------- ----------
Total Debt Securities $135,850.1 $3,169.0 $1,100.7 $137,918.4
========== ======== ========= ==========
</TABLE>
F-11
<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 at 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 - Other 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>
At December 31, 1997 and 1996 net unrealized appreciation of $2,068.3
thousand and $33.5 thousand respectively, on available for sale debt
securities included unrealized gains (losses) of $1,829.2 thousand and
($105.4) thousand, respectively, related to experience rated contracts,
which were not reflected in shareholder's equity but in policyholders'
funds left with the Company.
F-12
<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)
The carrying and fair value of debt securities for the year ended December
31, 1997 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:
After one year through five years $ 55,170.9 $ 55,726.9
After five years through ten years 26,682.4 26,824.3
After ten years 25,209.0 25,936.4
Mortgage-backed securities 18,310.3 18,859.8
Other asset-backed securities 10,477.5 10,571.0
---------- ----------
Total $135,850.1 $137,918.4
========== ==========
At December 31, 1997 and 1996, debt securities carried at $5.0 million and
$4.7 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, 1997.
F-13
<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 certain of the Company's
financial instruments at December 31, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
Carrying Fair Carrying Fair
Value Value Value Value
----- ----- ----- -----
(thousands) (thousands)
<S> <C> <C> <C> <C>
Liabilities:
Investment contract liabilities:
With a fixed maturity $ 279.4 $ 275.6 $ - $ -
Without a fixed maturity $145,346.5 $134,795.4 $ 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):
With a fixed maturity: Fair value is estimated by discounting cash flows at
interest rates currently being offered by, or available to, the Company for
similar contracts.
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.
Off-Balance-Sheet and Other Financial Instruments
The Company did not have transactions in off-balance-sheet instruments in
1997 or 1996.
F-14
<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:
1997 1996 1995
---- ---- ----
(thousands)
Debt securities $ 6,009.4 $ 547.6 $ 457.5
Cash equivalents 1,190.3 1,039.2 261.1
Other 3.2 2.4 2.4
--------- --------- -------
Gross investment income 7,202.9 1,589.2 721.0
Less investment expenses 119.7 32.3 -
--------- --------- -------
Net investment income $ 7,083.2 $ 1,556.9 $ 721.0
========= ========= =======
Net investment income includes amounts allocable to experience rated
contractholders of $6,997.2 thousand and $855.2 thousand for the years
ended December 31, 1997 and 1996, respectively. There were no such amounts
for the year ended December 31, 1995. Interest credited to contractholders
is included in current and future benefits.
5. Dividend Restrictions and Shareholder's Equity
The amount of dividends that may be paid to the shareholder in 1998 without
prior approval by the Insurance Commissioner of the State of Connecticut is
$4.1 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 $408.2 thousand, ($7,874.4) thousand and $378.9 thousand
for the years ended December 31, 1997, 1996 and 1995, respectively.
Statutory capital and surplus was $43.4 million and $23.5 million as of
December 31, 1997 and 1996, respectively. The Company has entered into
support agreements with ALIAC under which ALIAC has agreed to cause the
Company to have sufficient capital to meet a certain capital and surplus
level.
As of December 31, 1997 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.
F-15
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Notes to Financial Statements (Continued)
6. Capital Gains and Losses on Investment Operations
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, 1997, 1996 and 1995,
were $101.6 thousand, ($11.2) thousand and $8.3 thousand, respectively.
Net realized capital gains of $211.0 thousand allocable to experience rated
contracts, were deducted from net realized capital gains and an offsetting
amount was reflected in policyholders' funds left with the Company in 1997.
Net unamortized gains were $206.6 thousand at December 31, 1997. There were
no such amounts for 1996 and 1995.
Proceeds from the sale of available-for-sale debt securities and the
related gross gains and losses were as follows:
1997 1996 1995
---- ---- ----
(thousands)
Proceeds on sales $16,576.8 $2,510.0 $3,000.0
Gross gains 104.7 12.7 8.3
Gross losses 3.1 23.9 -
Changes in shareholder's equity related to changes in accumulated other
comprehensive income (unrealized capital gains and losses on securities),
(excluding those related to experience rated contractholders in 1997 and
1996), were as follows:
1997 1996 1995
---- ---- ----
(thousands)
Debt securities $100.2 $(95.5) $371.8
Increase (decrease) in deferred income taxes
(See Note 7) 35.1 (33.4) 82.0
------ ------ ------
Net change in accumulated other
comprehensive income $ 65.1 $(62.1) $289.8
====== ====== ======
Net unrealized capital gains (losses) allocable to experience rated
contracts of $1,829.2 thousand and ($105.4) at December 31, 1997 and 1996,
respectively, are reflected on the Balance Sheets in policyholders' funds
left with the Company and are not included in shareholder's equity.
F-16
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Notes to Financial Statements (Continued)
6. Capital Gains and Losses on Investment Operations (Continued)
Shareholder's equity included the following accumulated other comprehensive
income, which is net of amounts allocable to experience rated
contractholders in 1997 and 1996, at December 31:
1997 1996 1995
---- ---- ----
(thousands)
Debt securities
Gross unrealized gains $239.5 $140.0 $237.4
Gross unrealized losses (0.4) (1.1) (3.0)
------ ------ ------
239.1 138.9 234.4
Deferred federal income taxes (see Note 7) 83.7 48.6 82.0
------ ------ ------
Net unrealized capital gains $155.4 $ 90.3 $152.4
====== ====== ======
Changes in accumulated other comprehensive income related to changes in
unrealized gains (losses) on securities (excluding those related to
experience rated contractholders) were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(thousands)
<S> <C> <C> <C>
Unrealized holding gains (losses) arising during the
period (1) $ 404.1 $ (1.4) $ 280.8
Less: reclassification adjustment for gains and
other items included in net income (2) 339.0 60.7 (9.0)
------- ------- --------
Net unrealized gains (losses) on securities $ 65.1 $ (62.1) $ 289.8
======= ======= ========
</TABLE>
(1) Pretax unrealized holding gains (losses) arising during the period
were $621.7 thousand, ($2.2) thousand and $432 thousand for 1997,
1996 and 1995, respectively.
(2) Pretax reclassification adjustments for gains and other items
included in net income were $521.5 thousand, $93.3 thousand and
($13.8) thousand for 1997, 1996 and 1995, respectively.
F-17
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Notes to Financial Statements (Continued)
7. 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:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(thousands)
<S> <C> <C> <C>
Current taxes (benefits):
Income taxes (benefits):
Federal $1,219.2 $ 98.8 $ 635.2
State 0.2 (58.4) 123.4
Net realized capital gains (losses) 109.4 (3.9) 2.9
-------- --------- -------
1,328.8 36.5 761.5
-------- --------- -------
Deferred tax benefits:
Federal (486.2) (759.9) (549.2)
Net realized capital losses (73.9) - -
-------- --------- -------
(560.1) (759.9) (549.2)
-------- --------- -------
Total $ 768.7 $ (723.4) $ 212.3
======== ========= =======
</TABLE>
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>
1997 1996 1995
---- ---- ----
(thousands)
<S> <C> <C> <C>
Income (loss) before income taxes and
cumulative effect adjustment $2,481.8 $(1,419.2) $380.2
Tax rate 35% 35% 35%
-------- --------- ------
Application of the tax rate 868.6 (496.7) 133.1
Tax effect of:
State income tax, net of federal benefit 0.1 (37.9) 80.2
Excludable dividends (129.5) (190.5) -
Adjustment to prior year tax provision 3.7 2.1 (1.0)
Other, net 25.8 ( .4) -
-------- --------- ------
Income taxes (benefits) $ 768.7 $ (723.4) $212.3
======== ========= ======
</TABLE>
F-18
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Notes to Financial Statements (Continued)
7. 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:
<TABLE>
<CAPTION>
1997 1996
---- ----
(thousands)
<S> <C> <C>
Deferred tax assets:
Policyholders' funds left with the Company $14,242.8 $6,932.6
Unrealized gains allocable to experience rated
contracts 640.2 -
Postretirement benefits other than pensions 21.8 41.7
Guaranty fund assessments 146.0 ( .7)
Pension 163.5 52.6
Other 78.2 9.9
--------- --------
Total gross assets 15,292.5 7,036.1
Deferred tax liabilities:
Deferred policy acquisition costs 12,425.2 5,697.5
Net unrealized capital gains 723.9 48.6
Other 4.2 0.3
--------- --------
Total gross liabilities 13,153.3 5,746.4
--------- --------
Net deferred tax asset $ 2,139.2 $1,289.7
========= ========
</TABLE>
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, 1997 and 1996, no valuation allowances were
required.
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.
8. Benefit Plans
The Company utilizes the employees of Aetna and its affiliates (primarily
ALIAC). The benefit plan charges allocated to the Company in 1997, 1996 and
1995 were immaterial.
F-19
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Notes to Financial Statements (Continued)
8. Benefit Plans (Continued)
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. In 1997,
other changes in shareholder's equity includes an additional $328.3
thousand reduction reflecting revisions to the allocation of these accrued
liabilities.
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 $7.3 million and $4.7 million for the years ended December
31, 1997 and 1996, respectively, (of which $4.5 million and $2.7 million,
respectively, were capitalized as deferred policy acquisition costs). Total
charges allocated to the Company for the year ended December 31, 1995 were
$.3 million.
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 $5,565.4
thousand, $1,293.0 thousand and $129.6 thousand for the years ended
December 31, 1997, 1996 and 1995, respectively.
The Company received capital contributions of $20.0 million in cash from
ALIAC in both 1997 and 1996. The Company received no capital contributions
in 1995.
Since August 1996, Aeltus Investment Management, Inc. ("Aeltus"), a wholly
owned subsidiary of HOLDCO and an affiliate of the Company, has been acting
as adviser for the general account assets. 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 years ended December 31, 1997
and 1996 amounted to $119.7 thousand and $32.4 thousand, respectively.
F-20
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Notes to Financial Statements (Continued)
10. Commitments and Contingent Liabilities
Commitments
At December 31, 1997 and 1996 the Company had no commitments or contingent
liabilities.
Litigation
The Company is not currently involved in litigation.
F-21
<PAGE>
Form No. SAI. 59749-98 AICA Ed. May 1998
<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, 1997
- Statements of Operations and Changes in Net Assets for the
years ended December 31, 1997 and December 31, 1996
- Notes to Financial Statements
- Independent Auditors' Report
Financial Statements of Depositor:
- Independent Auditors' Report
- Statements of Income for the years ended December 31, 1997,
1996 and 1995
- Balance Sheets for the years ended December 31, 1997 and 1996
- Statements of Changes in Shareholder's Equity for the years
ended December 31, 1997, 1996 and 1995
- Statements of Cash Flows for the years ended December 31,
1997, 1996 and 1995
- Notes to Financial Statements
(b) Exhibits
(1) Resolution of the Board of Directors of Aetna Insurance Company
of America establishing Variable Annuity Account I(1)
(2) Not Applicable
(3.1) Selling Agreement(1)
(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 MP2NQEND(4/95)
(4.9) Endorsement MP2NQCERTEND(4/95)
(4.10) Endorsement MP2IREND(4/95)
<PAGE>
(4.11) Endorsement (MP2END(9/97)) to Contract G-MP2(5/96) and
Certificate MP2CERT(5/96)(3)
(4.12) 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 and By-laws 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(6)
(8.3) Service Agreement between Calvert Asset Management Company, Inc.
and Aetna Insurance Company of America dated December 1, 1997(6)
(8.4) Fund Participation Agreement by and among Insurance Management
Series, Federated Advisers and Aetna Insurance Company of
America dated July 1, 1994(7)
(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)
(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(8)
(8.12) Fund Participation Agreement between Aetna Insurance Company of
America, Oppenheimer Variable Account Funds and Oppenheimer
Fund, Inc. dated April 1, 1997(4)
<PAGE>
(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
(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. 7 to Registration
Statement on Form N-4 (File No. 33-59749), as filed electronically on
February 13, 1998 (Accession No. 0000950146-98-000207).
7. 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).
8. 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 Vice President and Treasurer, Corporate
Controller
Shaun P. Mathews Director and Senior Vice President
Catherine H. Smith Director
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. 9 to the Registration Statement on Form N-4 (File No. 333-01107), as filed
electronically on April 7, 1998 (Accession No. 0000950146-98-000564).
Item 27. Number of Contract Owners
- ---------------------------------------
As of February 28, 1998, there were 13,988 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
principal underwriter and investment adviser for Portfolio Partners, Inc., Aetna
Variable Encore Fund, Aetna Variable Fund, Aetna Generation Portfolios, Inc.,
Aetna Income Shares, Aetna Balanced VP, Inc., (formerly Aetna Investment
Advisers Fund, Inc.), Aetna GET Fund and Aetna Variable Portfolios, Inc. (all
management investment companies registered under the Investment Company Act of
1940 (1940 Act)). Effective May 1, 1998, Aetna will no longer be the investment
adviser Aetna Variable Encore Fund, Aetna Variable Fund, Aetna Generation
Portfolios, Inc., Aetna Income Shares, Aetna Balanced VP, Inc. (formerly Aetna
Investment Advisers Fund, Inc.), Aetna GET Fund, and Aetna Variable Portfolios,
Inc. 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
Shaun P. Mathews Director and Senior Vice President
Catherine H. Smith Director
Deborah Koltenuk Vice President and Treasurer, Corporate
Controller
<PAGE>
Name and Principal
Business Address* Positions and Offices with Underwriter
- ----------------- --------------------------------------
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) Compensation as of December 31, 1997:
(1) (2) (3) (4) (5)
Name of Net Underwriting Compensation
Principal Discounts and on Redemption Brokerage
Underwriter Commissions or Annuitization Commissions Compensation*
- ----------- ------------ ---------------- ----------- -------------
Aetna Insurance $272,793 $5,651,756
Company of
America
* Compensation shown in column 5 includes deductions for mortality and
expense risk guarantees and contract charges assessed to cover costs
incurred in the sales and administration of the contracts issued under
Variable Annuity Account I.
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:
<PAGE>
(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
(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 17th day of April, 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. 8 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
Thomas J. McInerney* Director and President )
- --------------------- (principal executive officer) )
Thomas J. McInerney )
)
Deborah Koltenuk* Vice President and Treasurer, Corporate ) April
- --------------------- Controller (principal accounting and ) 17, 1998
Deborah Koltenuk financial officer) )
)
Shaun P. Mathews* Director )
- --------------------- )
Shaun P. Mathews )
)
Catherine H. Smith* Director )
- --------------------- )
Catherine H. Smith )
By: /s/ Julie E. Rockmore
-----------------------
Julie E. Rockmore
*Attorney-in-Fact
<PAGE>
VARIABLE ANNUITY ACCOUNT I
EXHIBIT INDEX
Exhibit No. Exhibit Page
- ----------- ------- ----
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 MP2NQEND(4/95)
------------
99-B.4.9 Endorsement MP2NQCERTEND(4/95)
------------
99-B.4.10 Endorsement MP2IREND(4/95)
------------
99-B.4.11 Endorsement (MP2END(9/97)) to Contract G-MP2(5/96) *
and Certificate MP2CERT(5/96)
99-B.4.12 Endorsement (IMP2END(9/97)) to Contract G-MP2(5/96) *
and Certificate MP2CERT(5/96)
*Incorporated by reference
<PAGE>
Exhibit No. Exhibit Page
- ----------- ------- ----
99-B.5 Variable Annuity Contract Application *
99-B.6 Certificate of Incorporation and By-laws 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
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
*Incorporated by reference
<PAGE>
Exhibit No. Exhibit Page
- ----------- ------- ----
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
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 *
*Incorporated by reference
Endorsement
This Contract is endorsed as follows.
Add the following to Section I, General Definitions:
Dollar Cost Averaging - A program that permits the Certificate Holder to
systematically transfer amounts from any of the Funds and the one-year MG
Account Guaranteed Term to any of the Funds by completing the appropriate
section of the enrollment form or a Dollar Cost Averaging election form.
Delete Section 1.06, Beneficiary, and replace it with the following:
1.06 Beneficiary - The individual or estate entitled to receive any
payment from the Account upon the death of the Annuitant, or if
the Certificate Holder is different from the Annuitant, upon the
death of the Certificate Holder. If the Account is held by joint
Certificate Holders, the survivor will be deemed the designated
Beneficiary and any other Beneficiary on record will be treated as
the contingent Beneficiary.
Delete Section 1.07, Certificate Holder, and replace it with the following:
1.07 Certificate Holder - A person who purchases an interest in this
Contract as evidenced by a certificate. Aetna reserves the right
to limit ownership to natural persons. If more than one
Certificate Holder owns an Account, each Certificate Holder will
be a joint Certificate Holder. Any joint Certificate Holder must
be the spouse of the other joint Certificate Holder. Joint
Certificate Holders have joint ownership rights and both must
authorize exercising any ownership rights unless Aetna allows
otherwise. If the Account is owned by a nonnatural person, the
death benefit will be paid at the death of the Annuitant.
Delete Section 1.21, Market Value Adjustment, and replace it with the following.
1.21 Market Value Adjustment - An adjustment that may apply to an
amount withdrawn or transferred from an MG Account Guaranteed Term
prior to the end of that Guaranteed Term. The adjustment reflects
the change in the value of the investment due to changes in
interest rates since the date of deposit and is computed using the
1
MP2IREND(4/95)
<PAGE>
formula given in 3.06. The adjustment is expressed as a percentage
of each dollar withdrawn or transferred.
Delete Section 2.04, Payments and Elections, and replace it with the following:
2.04 Payments and Elections - While the Certificate Holder is living,
Aetna will pay the Certificate Holder any Annuity payments as and
when due. After the Certificate Holder's death, or at the death of
the first Certificate Holder if the Account is owned jointly, any
Annuity payments remaining to be made will be paid in accordance
with 4.03. Aetna will determine other payments and/or elections as
of the end of the Valuation Period in which the request is
received at its Home Office. Such payments will be made within
seven calendar days of receipt at its Home Office of a written
claim for payment which is in good order, except as provided in
3.15.
Delete Section 2.06, Control of Contract, and replace it with the following:
2.06 Control of Contract - This is a Contract between the Contract
Holder and Aetna. The Contract Holder has title to the Contract.
Contract Holder rights are limited to accepting or rejecting
Contract modifications. The Certificate Holder has all other
rights to amounts held in his or her Account.
Each Certificate Holder shall own all amounts held in his or her
Account. Each Certificate Holder may make any Certificate Holder
choices allowed under this Contract. Certificate Holder choices
made under this Contract must be in writing. If the Account is
owned jointly both joint Certificate Holders must authorize any
Certificate Holder change in writing. Until receipt of such
choices at Aetna's Home Office, Aetna may rely on any previous
choices made.
The Contract is not subject to the claims of any creditors of the
Contract Holder or Certificate Holder, except to the extent
permitted by law.
The Certificate Holder may assign or transfer his or her rights
under the Contract. Aetna reserves the right not to accept
assignment or transfer to a nonnatural person. Any assignment or
transfer made must be submitted to Aetna's Home Office in writing
and will not be effective until accepted by Aetna.
Delete Section 2.07, Designation of Beneficiary, and replace it with the
following:
2.07 Designation of Beneficiary - Each Certificate Holder shall name
his or her Beneficiary. If the Account is owned jointly, both
joint Certificate Holders must agree in writing to the Beneficiary
designated. The Beneficiary may be changed at
2
<PAGE>
any time. Changes to a Beneficiary must be submitted to Aetna's
Home Office in writing and will not be effective until accepted by
Aetna.
Delete the first two paragraphs of Section 3.06, Market Value Adjustment, and
replace them with the following:
3.06 Market Value Adjustment - Except as noted below, an MVA will apply
to a withdrawal from the MG Account before the end of a Guaranteed
Term when the withdrawal is:
(a) A Transfer; except for Transfers from the one-year MG Account
Guaranteed Term under the Dollar Cost Averaging program or, as
specified in 1.23, MG Account Matured Term Value Transfer;
(b) A full or partial surrender (including a 10% free withdrawal
under 3.14), except for a partial withdrawal under the
Systematic Withdrawal Option (see 3.10); or
(c) An election of Annuity option 2 (see 4.07).
Full and partial surrenders and Transfers made within six months
after the date of the Annuitant's death will be the greater of:
(a) The aggregate MVA amount which is the sum of all market value
adjusted amounts calculated due to a withdrawal of amounts.
This total may be greater or less than the Current Value of
those amounts; or
(b) The applicable portion of the Current Value in the MG Account.
Delete Section 3.07, Transfer of Current Value from the Funds or MG Account, and
replace them with the following:
3.07 Transfer of Current Value from the Funds or MG Account - Before an
Annuity option is elected, all or any portion of the Adjusted
Current Value of the Certificate Holder's Account may be
transferred from any Fund or Guaranteed Term of the MG Account:
(a) To any other Fund; or
(b) To a Guaranteed Term of the MG Account available in the
current Deposit Period.
Transfer requests can be submitted as a percentage or as a dollar
amount. Aetna may establish a minimum transfer amount. Within a
Guaranteed Term Group, the amount to be surrendered to transferred
will be withdrawn first from the oldest Deposit Period, then from
the next oldest, and so on until the amount requested is
satisfied.
3
<PAGE>
The Certificate Holder may make an unlimited number of Transfers
during the Accumulation Period. The number of free Transfers
allowed by Aetna is shown on Contract Schedule I. Additional
Transfers may be subject to a Transfer fee as shown on Contract
Schedule I.
Amounts transferred from the MG Account under the Dollar Cost
Averaging program, or amounts transferred as a Matured Term Value
on or within one calendar month of the Term's Maturity Date, do
not count against the annual Transfer limit.
Amounts applied to Guaranteed Terms of the MG Account may not be
transferred to the Funds or to another Guaranteed Term during the
Deposit Period or for 90 days after the close of the Deposit
Period except for (1) a Matured Term Value(s) during the calendar
month following the Term's Maturity Date and (2) amounts
transferred from the one-year MG Account Guaranteed Term under the
Dollar Cost Averaging program.
Delete the first paragraph in Section 3.10, Systematic Withdrawal Option (SWO),
and replace it with the following:
3.10 Systematic Withdrawal Option (SWO) - A distribution option under
which a portion of the Account's Current Value will be
automatically surrendered and distributed each year. SWO payments
will be calculated on the Account's full Current Value. The
distributed amount is withdrawn pro rata from each investment
option under the Account. A Surrender Fee will not be deducted
from any portion of the Current Value which is paid as a
distribution under SWO. Certificate Holders should consult their
tax advisor prior to requesting this distribution option. Aetna
will not be responsible for any adverse tax consequences due to
receiving SWO payments.
Delete Section 3.11, Death Benefit Amount, and replace it with the following:
3.11 Death Benefit Amount - If the Certificate Holder or Annuitant dies
before Annuity payments start, the Beneficiary is entitled to a
death benefit under the Account. If the Account is owned jointly,
the death benefit is paid at the death of the first joint
Certificate Holder to die. The claim date is the date when proof
of death and the Beneficiary's claim are received in good order at
Aetna's Home Office. The amount of the death benefit is determined
as follows:
(a) Death of Annuitant less than 75 years of age: The guaranteed
death benefit is the greatest of:
4
<PAGE>
(1) The sum of all Net Purchase Payment(s) made to the Account (as
of the date of death) minus the sum of all amounts
surrendered, applied to an Annuity, or deducted from the
Account;
(2) The highest step-up value as of the date of death. A step-up
value is determined on each anniversary of the Effective Date.
Each step-up value is calculated as the Account's Current
Value on the Effective Date anniversary, increased by the
amount of any Purchase Payment(s) made, and decreased by the
sum of all amounts surrendered, deducted, and/or applied to an
Annuity option since the Effective Date anniversary.
(3) The Account's Current Value as of the date of death.
The excess, if any, of the guaranteed death benefit value over the
Account's Current Value is determined as of the date of death. Any
excess amount will be deposited in the Account and allocated to
the Aetna Variable Encore Fund as of the claim date. The Current
Value on the claim date, plus any excess amount deposited, becomes
the Account's Current Value.
(b) Death of Annuitant age 75 or greater: The death benefit amount is
the greatest of:
(1) The sum of all Net Purchase Payment(s) made to the Account (as
of the date of death) minus the sum of all amounts
surrendered, applied to an Annuity, or deducted from the
Account;
(2) The highest step-up value prior to the Certificate Holder's
75th birthday. A step-up value is determined on each
anniversary of the Effective Date. Each step-up value is
calculated as the Account's Current Value on the Effective
Date anniversary, increased by the amount of any Purchase
Payment(s) made, and decreased by the sum of all amounts
surrendered, deducted, and/or applied to an Annuity option
since the Effective Date anniversary.
(3) The Account's Current Value as of the date of death.
The excess, if any, of the guaranteed death benefit value over the
Account's Current Value is determined as of the date of death. Any
excess amount will be deposited in the Account and allocated to
the Aetna Variable Encore Fund as of the claim date. The Current
Value on the claim date, plus any excess amount deposited, becomes
the Account's Current Value.
(c) Death of Certificate Holder if the Certificate Holder is not the
Annuitant: The death benefit amount is the Account's Adjusted
Current Value on the claim
5
<PAGE>
date. A Surrender Fee may apply to any full or partial surrender
(see 3.14 and Contract Schedule I).
(d) At the death of a surviving spouse Beneficiary who continued the
Account in his or her own name, the death benefit amount is equal
to the Account's Current Value less any applicable Surrender Fee
on the amount of any Purchase Payment(s) made since the death of
the Certificate Holder.
Delete Section 3.12, Death Benefit Options available to Beneficiary, and replace
it with the following:
3.12 Death Benefit Options available to Beneficiary - Prior to any
election, or until amounts must be otherwise distributed under
this section, the Account's Current Value will be retained in the
Account. The Beneficiary has the right to allocate or reallocate
any amount to any available investment option (subject to an MVA
if applicable). The following options are available to the
Beneficiary:
(a) When the Certificate Holder is the Annuitant: If the
Certificate Holder/Annuitant dies, and:
(1) If the Beneficiary is the Certificate Holder's surviving
spouse, the Beneficiary may exercise all Certificate
Holder rights under the Contract and continue in the
Accumulation Period, or may elect (i), (ii), or (iii)
below. Under the Code, distributions from the Account are
not required until the spousal Beneficiary's death. The
spousal Beneficiary may elect to:
(i) Apply some or all of the Adjusted Current Value to
Annuity option 2, 3 or 4 (see 4.07);
(ii) Apply some or all of the Adjusted Current Value to
Annuity option 1 (see 4.07); or
(iii) Receive, at any time, a lump sum payment equal to
the Account's Adjusted Current Value.
(2) If the Beneficiary is other than the Certificate Holder's
surviving spouse, then options (i), (ii), or (iii) under
(1) above apply. Any portion of the Adjusted Current Value
not applied to Annuity option 2, 3, or 4 within one year
of the Certificate Holder's death, must be distributed
within five years of the date of death.
6
<PAGE>
(3) If no Beneficiary exists, a lump sum payment equal to the
Adjusted Current Value will be made to the Certificate
Holder's estate.
(b) When the Certificate Holder is not the Annuitant and the
Certificate Holder dies, and:
(1) If the Beneficiary is the Certificate Holder's surviving
spouse, the Beneficiary may exercise all Certificate
Holder rights under the Contract and continue in the
Accumulation Period, or may elect (i), (ii), or (iii)
below. Under the Code, distributions from the Account are
not required until the spousal Beneficiary's death. The
spousal Beneficiary may elect to:
(i) Apply some or all of the Adjusted Current Value to
Annuity option 2, 3 or 4 (see 4.07);
(ii) Apply some or all of the Surrender Value to Annuity
option 1 (see 4.07); or
(iii) Receive, at any time, a lump sum payment equal to
the Account's Surrender Value.
(2) If the Beneficiary is other than the Certificate Holder's
surviving spouse, then options (i), (ii), or (iii) under
(1) above apply. Any portion of the Adjusted Current Value
not applied to Annuity Option 2, 3, or 4 within one year
of the Certificate Holder's death, must be distributed
within five years of the date of death.
(3) If no Beneficiary exists, a lump sum payment equal to the
Surrender Value will be made to the Certificate Holder's
estate.
(c) When the Certificate Holder is not the Annuitant and the
Annuitant dies: The Beneficiary must elect Annuity option 2,
3, or 4 within 60 days of the date of death or the gain, if
any, will be includable in the Beneficiary's income in the tax
year in which the Annuitant dies.
Delete Section 3.13, Liquidation of Surrender Value, and replace it with the
following:
3.13 Liquidation of Surrender Value - All or any portion of the
Account's Current Value may be surrendered at any time. Surrender
requests can be submitted as a percentage of the Account's Current
Value or as a specific dollar amount. Net Purchase Payment amounts
are withdrawn first, and then the excess value, if any. For any
partial surrender, amounts are withdrawn on a pro rata basis from
the Fund(s) and/or the
7
<PAGE>
Guaranteed Term(s) Groups of the MG Account in which the Current
Value is invested. Within a Guaranteed Term Group, the amount to
be surrendered or transferred will be withdrawn first from the
oldest Deposit Period, then from the next oldest, and so on until
the amount requested is satisfied.
After deduction of the Maintenance Fee, if applicable, the
surrendered amount shall be reduced by a Surrender Fee, if
applicable. An MVA may apply to amounts surrendered from the MG
Account.
Delete subsection (a) of Section 4.03, Death of Annuitant/Beneficiary, and
replace it with the following:
4.03 Death of Annuitant/Beneficiary: (a) Certificate Holder is
Annuitant: When the Certificate Holder is the Annuitant and the
Annuitant dies under option 2 or 3, or both the Annuitant and the
second Annuitant die under option 4(d), the present value of any
remaining guaranteed payments will be paid in one sum to the
Beneficiary, or upon election by the Beneficiary, any payments
remaining will continue to the Beneficiary. If option 4 has been
elected and the Certificate Holder dies, the remaining payments
will continue to the successor payee. If no successor payee has
been designated, the Beneficiary will be treated as the successor
payee. If the Account has joint Certificate Holders, the surviving
joint Certificate Holder will be deemed the successor payee.
Delete the first paragraph of subsection (b) of Section 4.03, Death of
Annuitant/Beneficiary, and replace it with the following:
(b) Certificate Holder is Not Annuitant: When the Certificate Holder
is not the Annuitant and the Certificate Holder dies, the
remaining payments under options 2, 3 or 4 will continue to the
successor payee. If no successor payees has been designated, the
Beneficiary will be treated as the successor payee. If the Account
has joint Certificate Holders, the surviving joint Certificate
Holder will be deemed the successor payee.
Endorsed and made part of the Certificate on the Effective Date of the Contract.
/s/ Dan Kearney
President
Aetna Insurance Company of America
8
Endorsement
This Certificate is endorsed as follows.
Add the following to Section I, General Definitions:
Dollar Cost Averaging - A program that permits the Certificate Holder to
systematically transfer amounts from any of the Funds and the one-year MG
Account Guaranteed Term to any of the Funds by completing the appropriate
section of the enrollment form or a Dollar Cost Averaging election form.
Delete Section 1.06, Beneficiary, and replace it with the following:
1.06 Beneficiary - The individual or estate entitled to receive any
payment from the Account upon the death of the Annuitant, or if
the Certificate Holder is different from the Annuitant, upon the
death of the Certificate Holder. If the Account is held by joint
Certificate Holders, the survivor will be deemed the designated
Beneficiary and any other Beneficiary on record will be treated as
the contingent Beneficiary.
Delete Section 1.07, Certificate Holder, and replace it with the following:
1.07 Certificate Holder - A person who purchases an interest in this
Contract as evidenced by a certificate. Aetna reserves the right
to limit ownership to natural persons. If more than one
Certificate Holder owns an Account, each Certificate Holder will
be a joint Certificate Holder. Any joint Certificate Holder must
be the spouse of the other joint Certificate. Joint Certificate
Holders have joint ownership rights and both must authorize
exercising any ownership rights unless Aetna allows otherwise. If
the Account is owned by a nonnatural person, the death benefit
will be paid at the death of the Annuitant.
Delete Section 1.21, Market Value Adjustment, and replace it with the following.
1.21 Market Value Adjustment - An adjustment that may apply to an
amount withdrawn or transferred from an MG Account Guaranteed Term
prior to the end of that Guaranteed Term. The adjustment reflects
the change in the value of the investment due to changes in
interest rates since the date of deposit and is computed using the
1
MP2NQEND(4/95)
<PAGE>
formula given in 3.06. The adjustment is expressed as a percentage
of each dollar withdrawn or transferred.
Delete Section 2.04, Payments and Elections, and replace it with the following:
2.04 Payments and Elections - While the Certificate Holder is living,
Aetna will pay the Certificate Holder any Annuity payments as and
when due. After the Certificate Holder's death, or at the death of
the first Certificate Holder if the Account is owned jointly, any
Annuity payments remaining to be made will be paid in accordance
with 4.03. Aetna will determine other payments and/or elections as
of the end of the Valuation Period in which the request is
received at its Home Office. Such payments will be made within
seven calendar days of receipt at its Home Office of a written
claim for payment which is in good order, except as provided in
3.15.
Delete Section 2.06, Control of Contract, and replace it with the following:
2.06 Control of Contract - This is a Contract between the Contract
Holder and Aetna. The Contract Holder has title to the Contract.
Contract Holder rights are limited to accepting or rejecting
Contract modifications. The Certificate Holder has all other
rights to amounts held in his or her Account.
Each Certificate Holder shall own all amounts held in his or her
Account. Each Certificate Holder may make any Certificate Holder
choices allowed under this Contract. Certificate Holder choices
made under this Contract must be in writing. If the Account is
owned jointly both joint Certificate Holders must authorize any
Certificate Holder change in writing. Until receipt of such
choices at Aetna's Home Office, Aetna may rely on any previous
choices made.
The Contract is not subject to the claims of any creditors of the
Contract Holder or Certificate Holder, except to the extent
permitted by law.
The Certificate Holder may assign or transfer his or her rights
under the Contract. Aetna reserves the right not to accept
assignment or transfer to a nonnatural person. Any assignment or
transfer made must be submitted to Aetna's Home Office in writing
and will not be effective until accepted by Aetna.
Delete Section 2.07, Designation of Beneficiary, and replace it with the
following:
2.07 Designation of Beneficiary - Each Certificate Holder shall name
his or her Beneficiary. If the Account is owned jointly, both
joint Certificate Holders must agree in writing to the Beneficiary
designated. The Beneficiary may be changed at
2
<PAGE>
any time. Changes to a Beneficiary must be submitted to Aetna's
Home Office in writing and will not be effective until accepted by
Aetna.
Delete the first two paragraphs of Section 3.06, Market Value Adjustment, and
replace them with the following:
3.06 Market Value Adjustment - Except as noted below, an MVA will apply
to a withdrawal from the MG Account before the end of a Guaranteed
Term when the withdrawal is:
(a) A Transfer; except for Transfers from the one-year MG Account
Guaranteed Term under the Dollar Cost Averaging program or, as
specified in 1.23, MG Account Matured Term Value Transfer;
(b) A full or partial surrender (including a 10% free withdrawal
under 3.14), except for a partial withdrawal under the
Systematic Withdrawal Option (see 3.10); or
(c) An election of Annuity option 2 (see 4.07).
Full and partial surrenders and Transfers made within six months
after the date of the Annuitant's death will be the greater of:
(a) The aggregate MVA amount which is the sum of all market value
adjusted amounts calculated due to a withdrawal of amounts.
This total may be greater or less than the Current Value of
those amounts; or
(b) The applicable portion of the Current Value in the MG Account.
Delete Section 3.07, Transfer of Current Value from the Funds or MG Account, and
replace them with the following:
3.07 Transfer of Current Value from the Funds or MG Account - Before an
Annuity option is elected, all or any portion of the Adjusted
Current Value of the Certificate Holder's Account may be
transferred from any Fund or Guaranteed Term of the MG Account:
(a) To any other Fund; or
(b) To an Guaranteed Term of the MG Account available in the
current Deposit Period.
Transfer requests can be submitted as a percentage or as a dollar
amount. Aetna may establish a minimum transfer amount. Within a
Guaranteed Term Group, the amount to be surrendered to transferred
will be withdrawn first from the oldest Deposit Period, then from
the next oldest, and so on until the amount requested is
satisfied.
3
<PAGE>
The Certificate Holder may make an unlimited number of Transfers
during the Accumulation Period. The number of free Transfers
allowed by Aetna is shown on Contract Schedule I. Additional
Transfers may be subject to a Transfer fee as shown on Contract
Schedule I.
Amounts transferred from the MG Account under the Dollar Cost
Averaging program, or amounts transferred as a Matured Term Value
on or within one calendar month of the Term's Maturity Date, do
not count against the annual Transfer limit.
Amounts applied to Guaranteed Terms of the MG Account may not be
transferred to the Funds or to another Guaranteed Term during the
Deposit Period or for 90 days after the close of the Deposit
Period except for (1) a Matured Term Value(s) during the calendar
month following the Term's Maturity Date and (2) amounts
transferred from the one-year MG Account Guaranteed Term under the
Dollar Cost Averaging program.
Delete the first paragraph in Section 3.10, Systematic Withdrawal Option (SWO),
and replace it with the following:
3.10 Systematic Withdrawal Option (SWO) - A distribution option under
which a portion of the Account's Current Value will be
automatically surrendered and distributed each year. SWO payments
will be calculated on the Account's full Current Value. The
distributed amount is withdrawn pro rata from each investment
option under the Account. A Surrender Fee will not be deducted
from any portion of the Current Value which is paid as a
distribution under SWO. Certificate Holders should consult their
tax advisor prior to requesting this distribution option. Aetna
will not be responsible for any adverse tax consequences due to
receiving SWO payments.
Delete Section 3.11, Death Benefit Amount, and replace it with the following:
3.11 Death Benefit Amount - If the Certificate Holder or Annuitant dies
before Annuity payments start, the Beneficiary is entitled to a
death benefit under the Account. If the Account is owned jointly,
the death benefit is paid at the death of the first joint
Certificate Holder to die. The claim date is the date when proof
of death and the Beneficiary's claim are received in good order at
Aetna's Home Office. The amount of the death benefit is determined
as follows:
(a) Death of Annuitant less than 75 years of age: The guaranteed
death benefit is the greatest of:
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<PAGE>
(1) The sum of all Net Purchase Payment(s) made to the Account (as
of the date of death) minus the sum of all amounts
surrendered, applied to an Annuity, or deducted from the
Account;
(2) The highest step-up value as of the date of death. A step-up
value is determined on each anniversary of the Effective Date.
Each step-up value is calculated as the Account's Current
Value on the Effective Date anniversary, increased by the
amount of any Purchase Payment(s) made, and decreased by the
sum of all amounts surrendered, deducted, and/or applied to an
Annuity option since the Effective Date anniversary.
(3) The Account's Current Value as of the date of death.
The excess, if any, of the guaranteed death benefit value over the
Account's Current Value is determined as of the date of death. Any
excess amount will be deposited in the Account and allocated to
the Aetna Variable Encore Fund as of the claim date. The Current
Value on the claim date, plus any excess amount deposited, becomes
the Account's Current Value.
(b) Death of Annuitant age 75 or greater: The death benefit amount is
the greatest of:
(1) The sum of all Net Purchase Payment(s) made to the Account (as
of the date of death) minus the sum of all amounts
surrendered, applied to an Annuity, or deducted from the
Account;
(2) The highest step-up value prior to the Certificate Holder's
75th birthday. A step-up value is determined on each
anniversary of the Effective Date. Each step-up value is
calculated as the Account's Current Value on the Effective
Date anniversary, increased by the amount of any Purchase
Payment(s) made, and decreased by the sum of all amounts
surrendered, deducted, and/or applied to an Annuity option
since the Effective Date anniversary.
(3) The Account's Current Value as of the date of death.
The excess, if any, of the guaranteed death benefit value over the
Account's Current Value is determined as of the date of death. Any
excess amount will be deposited in the Account and allocated to
the Aetna Variable Encore Fund as of the claim date. The Current
Value on the claim date, plus any excess amount deposited, becomes
the Account's Current Value.
(c) Death of Certificate Holder if the Certificate Holder is not the
Annuitant: The death benefit amount is the Account's Adjusted
Current Value on the claim
5
<PAGE>
date. A Surrender Fee may apply to any full or partial surrender
(see 3.14 and Contract Schedule I).
(d) At the death of a surviving spouse Beneficiary who continued the
Account in his or her own name, the death benefit amount is equal
to the Account's Current Value less any applicable Surrender Fee
on the amount of any Purchase Payment(s) made since the death of
the Certificate Holder.
Delete Section 3.12, Death Benefit Options available to Beneficiary, and replace
it with the following:
3.12 Death Benefit Options available to Beneficiary - Prior to any
election, or until amounts must be otherwise distributed under
this section, the Account's Current Value will be retained in the
Account. The Beneficiary has the right to allocate or reallocate
any amount to any available investment option (subject to an MVA
if applicable). The following options are available to the
Beneficiary:
(a) When the Certificate Holder is the Annuitant: If the
Certificate Holder/Annuitant dies, and:
(1) If the Beneficiary is the Certificate Holder's surviving
spouse, the Beneficiary may exercise all Certificate
Holder rights under the Contract and continue in the
Accumulation Period, or may elect (i), (ii), or (iii)
below. Under the Code, distributions from the Account are
not required until the spousal Beneficiary's death. The
spousal Beneficiary may elect to:
(i) Apply some or all of the Adjusted Current Value to
Annuity option 2, 3 or 4 (see 4.07);
(ii) Apply some or all of the Adjusted Current Value to
Annuity option 1 (see 4.07); or
(iii) Receive, at any time, a lump sum payment equal to
the Account's Adjusted Current Value.
(2) If the Beneficiary is other than the Certificate Holder's
surviving spouse, then options (i), (ii), or (iii) under
(1) above apply. Any portion of the Adjusted Current Value
not applied to Annuity option 2, 3, or 4 within one year
of the Certificate Holder's death, must be distributed
within five years of the date of death.
6
<PAGE>
(3) If no Beneficiary exists, a lump sum payment equal to the
Adjusted Current Value will be made to the Certificate
Holder's estate.
(b) When the Certificate Holder is not the Annuitant and the
Certificate Holder dies, and:
(1) If the Beneficiary is the Certificate Holder's surviving
spouse, the Beneficiary may exercise all Certificate
Holder rights under the Contract and continue in the
Accumulation Period, or may elect (i), (ii), or (iii)
below. Under the Code, distributions from the Account are
not required until the spousal Beneficiary's death. The
spousal Beneficiary may elect to:
(i) Apply some or all of the Adjusted Current Value to
Annuity option 2, 3 or 4 (see 4.07);
(ii) Apply some or all of the Surrender Value to Annuity
option 1 (see 4.07); or
(iii) Receive, at any time, a lump sum payment equal to
the Account's Surrender Value.
(2) If the Beneficiary is other than the Certificate Holder's
surviving spouse, then options (i), (ii), or (iii) under
(1) above apply. Any portion of the Adjusted Current Value
not applied to Annuity Option 2, 3, or 4 within one year
of the Certificate Holder's death, must be distributed
within five years of the date of death.
(3) If no Beneficiary exists, a lump sum payment equal to the
Surrender Value will be made to the Certificate Holder's
estate.
(c) When the Certificate Holder is not the Annuitant and the
Annuitant dies: The Beneficiary must elect Annuity option 2,
3, or 4 within 60 days of the date of death or the gain, if
any, will be includable in the Beneficiary's income in the tax
year in which the Annuitant dies.
Delete Section 3.13, Liquidation of Surrender Value, and replace it with the
following:
3.13 Liquidation of Surrender Value - All or any portion of the
Account's Current Value may be surrendered at any time. Surrender
requests can be submitted as a percentage of the Account's Current
Value or as a specific dollar amount. Net Purchase Payment amounts
are withdrawn first, and then the excess value, if any. For any
partial surrender, amounts are withdrawn on a pro rata basis from
the Fund(s) and/or the
7
<PAGE>
Guaranteed Term(s) Groups of the MG Account in which the Current
Value is invested. Within a Guaranteed Term Group, the amount to
be surrendered or transferred will be withdrawn first from the
oldest Deposit Period, then from the next oldest, and so on until
the amount requested is satisfied.
After deduction of the Maintenance Fee, if applicable, the
surrendered amount shall be reduced by a Surrender Fee, if
applicable. An MVA may apply to amounts surrendered from the MG
Account.
Delete subsection (a) of Section 4.03, Death of Annuitant/Beneficiary, and
replace it with the following:
4.03 Death of Annuitant/Beneficiary: (a) Certificate Holder is
Annuitant: When the Certificate Holder is the Annuitant and the
Annuitant dies under option 2 or 3, or both the Annuitant and the
second Annuitant die under option 4(d), the present value of any
remaining guaranteed payments will be paid in one sum to the
Beneficiary, or upon election by the Beneficiary, any payments
remaining will continue to the Beneficiary. If option 4 has been
elected and the Certificate Holder dies, the remaining payments
will continue to the successor payee. If no successor payee has
been designated, the Beneficiary will be treated as the successor
payee. If the Account has joint Certificate Holders, the surviving
joint Certificate Holder will be deemed the successor payee.
Delete the first paragraph of subsection (b) of Section 4.03, Death of
Annuitant/Beneficiary, and replace it with the following:
(b) Certificate Holder is Not Annuitant: When the Certificate Holder
is not the Annuitant and the Certificate Holder dies, the
remaining payments under options 2, 3 or 4 will continue to the
successor payee. If no successor payees has been designated, the
Beneficiary will be treated as the successor payee. If the Account
has joint Certificate Holders, the surviving joint Certificate
Holder will be deemed the successor payee.
Endorsed and made part of the Certificate on the Effective Date of the Contract.
/s/ Dan Kearney
President
Aetna Insurance Company of America
8
Endorsement
This Contract is endorsed as follows.
Add the following to Section I General Definitions:
Dollar Cost Averaging - A program that permits the Certificate Holder to
systematically transfer amounts from any of the Funds and the one-year MG
Account Guaranteed Term to any of the Funds by completing the appropriate
section of the enrollment form or a Dollar Cost Averaging election form.
Delete Section 1.21, Market Value Adjustment, and replace it with the following.
1.21 Market Value Adjustment - An adjustment that may apply to an
amount withdrawn or transferred from an MG Account Guaranteed Term
prior to the end of that Guaranteed Term. The adjustment reflects
the change in the value of the investment due to changes in
interest rates since the date of deposit and is computed using the
formula given in 3.06. The adjustment is expressed as a percentage
of each dollar withdrawn or transferred.
Delete the first two paragraphs of Section 3.06, Market Value Adjustment, and
replace it with the following:
3.06 Market Value Adjustment - Except as noted below, there will be an
MVA for a withdrawal from the MG Account before the end of a
Guaranteed Term when the withdrawal is due to:
(a) A Transfer; except for Transfers from the one-year MG Account
Guaranteed Term under the Dollar Cost Averaging program or, as
specified in MG Account Matured Term Value Transfer;
(b) A full or partial surrender (including a 10% free withdrawal
under 3.16), except for a partial withdrawal under the
Systematic Withdrawal Option (see 3.10); or
(c) An election of Annuity option 2 (see 4.09).
Full and partial surrenders and Transfers made within six months
after the date of the Annuitant's death will be the greater of:
(a) The aggregate MVA amount which is the sum of all market value
adjusted amounts calculated due to a withdrawal of amounts.
This total may be greater or less than the Current Value of
those amounts; or
(b) The applicable portion of the Current Value in the MG Account.
1
MP2IREND (4/95)
<PAGE>
Delete Section 3.07, Transfer of Current Value from the Funds or MG Account, and
replace it with the following:
3.07 Tansfer of Current Value from the Funds or MG Account - Before an
Annuity option is elected, all or any portion of the Adjusted
Current Value of the Certificate Holder's Account may be
transferred from any Fund or Guaranteed Term of the MG Account:
(a) To any other Fund; or
(b) To an Guaranteed Term of the MG Account available in the
current Deposit Period.
Transfer requests can be submitted as a percentage or as a dollar
amount. Aetna may establish a minimum transfer amount. Within a
Guaranteed Term Group, the amount to be surrendered to transferred
will be withdrawn first from the oldest Deposit Period, then from
the next oldest, and so on until the amount requested is
satisfied.
The Certificate Holder may make an unlimited number of Transfers
during the Accumulation Period. The number of free Transfers
allowed by Aetna is shown on Contract Schedule I. Additional
Transfers may be subject to a Transfer fee as shown on Contract
Schedule I.
Amounts transferred from the MG Account under the Dollar Cost
Averaging program, or amounts transferred as a Matured Term Value
on or within one calendar month of the Term's Maturity Date, do
not count against the annual Transfer limit.
Amounts applied to Guaranteed Terms of the MG Account may not be
transferred to the Funds or to another Guaranteed Term during the
Deposit Period or for 90 days after the close of the Deposit
Period except for (1) a Matured Term Value(s) during the calendar
month following the Term's Maturity Date and (2) amounts
transferred from the one-year MG Account Guaranteed Term under the
Dollar Cost Averaging program.
Delete the first paragraph in Subsection 3.11(a), Estate Conservation Option
(ECO), and replace it with the following:
(a) Estate Conservation Option (ECO) - A distribution option under
which a portion of the Account's Current Value will be surrendered
automatically and distributed each year. ECO payments will be
calculated based on the Account's full Current Value. The
distributed amount will be withdrawn pro rata from each investment
option used under the Account. A Surrender Fee will not be
deducted from any portion of the Current Value which is paid as a
distribution under ECO. Certificate Holders should consult their
tax advisor prior to requesting this distribution option. Aetna
will not be responsible for any adverse tax consequences due to
receiving ECO payments.
2
<PAGE>
Delete the first paragraph in Subsection 3.11(b), Systematic Withdrawal Option
(SWO), and replace it with the following:
(b) Systematic Withdrawal Option (SWO) - A distribution option under
which a portion of the Account's Current Value will be surrendered
automatically and distributed each year. SWO payments will be
calculated based on the Account's full Current Value. The
distributed amount will be withdrawn pro rata from each investment
option used under the Account. A Surrender Fee will not be
deducted from any portion of the Current Value which is paid as a
distribution under SWO. Certificate Holders should consult their
tax advisor prior to requesting this distribution option. Aetna
will not be responsible for any adverse tax consequences due to
receiving SWO payments.
Delete Section 3.12, Death Benefit Amount, and replace it with the following:
3.12 Death Benefit Amount - If the Certificate Holder or Annuitant dies
before Annuity payments start, the Beneficiary is entitled to a
death benefit under the Account. The claim date is the date when
proof of death and the Beneficiary's claim are received in good
order at Aetna's Home Office. The amount of the death benefit is
determined as follows:
(a) Death of Certificate Holder/Annuitant less than 75 years of
age: The guaranteed death benefit is the greatest of:
(1) The sum of all Net Purchase Payment(s) made to the Account
(as of the date of death) minus the sum of all amounts
surrendered, applied to an Annuity, or deducted from the
Account;
(2) The highest step-up value as of the date of death. A
step-up value is determined on each anniversary of the
Effective Date. Each step-up value is calculated as the
Account's Current Value on the Effective Date anniversary,
increased by the amount of any Purchase Payment(s) made,
and decreased by the sum of all amounts surrendered,
deducted, and/or applied to an Annuity option since the
Effective Date anniversary.
(3) The Account's Current Value as of the date of death.
The excess, if any, of the guaranteed death benefit value over
the Account's Current Value is determined as of the date of
death. Any excess amount will be deposited in the Account and
allocated to the Aetna Variable Encore Fund as of the claim
date. The Current Value on the claim date, plus any excess
amount deposited, becomes the Account's Current Value.
(b) Death of Certificate Holder/Annuitant age 75 or greater: The
death benefit amount is the greatest of:
(1) The sum of all Net Purchase Payment(s) made to the Account
(as of the date of death) minus the sum of all amounts
surrendered, applied to an Annuity, or deducted from the
Account;
3
<PAGE>
(2) The highest step-up value prior to the Certificate
Holder's 75th birthday. A step-up value is determined on
each anniversary of the Effective Date. Each step-up value
is calculated as the Account's Current Value on the
Effective Date anniversary, increased by the amount of any
Purchase Payment(s) made, and decreased by the sum of all
amounts surrendered, deducted, and/or applied to an
Annuity option since the Effective Date anniversary.
(3) The Account's Current Value as of the date of death.
The excess, if any, of the guaranteed death benefit value over
the Account's Current Value is determined as of the date of
death. Any excess amount will be deposited in the Account and
allocated to the Aetna Variable Encore Fund as of the claim
date. The Current Value on the claim date, plus any excess
amount deposited, becomes the Account's Current Value.
(c) At the death of a surviving spouse Beneficiary who continued
the Account in his or her own name, the death benefit amount
is equal to the Account's Current Value less any applicable
Surrender Fee on the amount of any Purchase Payment(s) made
since the death of the Certificate Holder.
Delete Section 3.15, Liquidation of Surrender Value, and replace it with the
following:
3.15 Liquidation of Surrender Value - All or any portion of the
Account's Current Value may be surrendered at any time. Surrender
requests can be submitted as a percentage of the Account's Current
Value or as a specific dollar amount. Net Purchase Payment amounts
are withdrawn first, and then the excess value, if any. For any
partial surrender, amounts are withdrawn on a pro rata basis from
the Fund(s) and/or the Guaranteed Term(s) Groups of the MG Account
in which the Current Value is invested. Within a Guaranteed Term
Group, the amount to be surrendered or transferred will be
withdrawn first from the oldest Deposit Period, then from the next
oldest, and so on until the amount requested is satisfied.
After deduction the Maintenance Fee, if applicable, the
surrendered amount shall be reduced by a Surrender Fee, if
applicable. An MVA may apply to amounts surrendered from the MG
Account.
Endorsed and made part of this Contract on the Effective Date of the
Contract.
/s/ Dan Kearney
President
Aetna Insurance Company of America
[Aetna Letterhead]
[Aetna Logo]
151 Farmington Avenue
Hartford, CT 06156
Julie E. Rockmore
Counsel
Law Division, RE4A
April 17, 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.8 to Registration Statement on Form N-4
Prospectus Title: Aetna Marathon Plus
File Nos. 33-59749 and 811-8582
Dear Sir or Madam:
The undersigned serves 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. 8. 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.
<PAGE>
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.
I consent to the filing of this opinion as an exhibit to the Registration
Statement.
Sincerely,
/s/ Julie E. Rockmore
Julie E. Rockmore
Consent of Independent Auditors
The Board of Directors of Aetna Insurance Company of America and
Contractholders of Aetna Variable Annuity Account I:
We consent to the use of our reports dated March 25, 1998 and February 27, 1998
included in this Post-Effective Amendment No. 8 to Registration Statement (No.
33-59749) on Form N-4 and to the references to our firm under the headings
"Condensed Financial Information" in the prospectuses and "Independent Auditors"
in the statement of additional information.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
April 17, 1998
SCHEDULE FOR COMPUTATION OF TOTAL RETURN CALCULATIONS
TOTAL RETURN CALCULATION (STANDARDIZED)
The standardized rate represents fund performance for the most recent 1-year,
5-year and 10-year periods. The "1-year rate" represents fund performance for
the period January 1, 1997 through December 31, 1997; the "5-year rate" is for
the period January 1, 1993 through December 31, 1997; the "10-year rate" is for
the period January 1, 1988 through December 31, 1997. "Since inception" figures
assume the redemption on December 31, 1997 of values attributable to a $1,000
payment made on the date contributions were first received in the fund under the
separate account.
The formula used in the computation of the total return calculation is as
follows:
Formula
P(1 + T) (n) = ERV
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of 1,
5, or 10 year periods (or a fractional
portion thereof) of a hypothetical $1,000
payment made at the beginning of the 1, 5,
or 10 year periods
The total returns reflect the deduction of all recurring charges during each
period (e.g., mortality and expense risk charges, maintenance fees,
administrative charges (if applicable) and deferred sales charges).
TOTAL RETURN CALCULATION (NON-STANDARDIZED)
The non-standardized rate represents fund performance for the most recent
1-year, 3-year, 5-year and 10-year periods. The "1-year rate" represents fund
performance for the period January 1, 1997 through December 31, 1997; the
"3-year rate" is for the period January 1, 1995 through December 31, 1997; the
"5-year rate" is for the period January 1, 1993 through December 31, 1997; and
the "10-year rate" is for the period January 1, 1988 through December 31, 1997.
The non-standardized figures will be calculated in a manner similar to the one
discussed above for the standardized figures, except that non-standardized
figures will not reflect the deduction of any applicable deferred sales charge
(which would decrease the level of performance shown if reflected in these
calculations), and the "since inception" figures assume the redemption on
December 31, 1997 of values attributable to a $1,000 payment made on the
inception dates of the funds.
For an illustration of the Computation of the Total Return Quotations, both
Standardized and Non-Standardized, see attached.
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Maintenance
Fund Name Fee As of Date
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Aetna Ascent VP 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
Aetna Bond VP 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager Portfolio 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Index 500 Portfolio 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund, Inc. 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
MFS Total Return Series 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
MFS World Governments Series 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth Fund 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
Oppenheimer Growth & Income Fund 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Emerging Equities Portfolio 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/Portfolio Partners-MFS Emerging Equities 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Research Growth Portfolio 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/Portfolio Partners-MFS Research Growth 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Value Equity Portfolio 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
Portfolio Partners Scudder International Growth Portfolio 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio Class A/Portfolio Partners-Scudder International Growth 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
Portfolio Partners T. Rowe Price Growth Equity Portfolio 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
Alger American Growth/Portfolio Partners-T. Rowe Price Growth Equity 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
Page 1
<PAGE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
One Year One Year One Year Five Year Five Year Five Year Ten Year
As of AUV as of Date as of AUV w/ DSC as of Date as of AUV w/ DSC as of Date
- --------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
14.983039 12/31/96 12.6743 12.03% 07/31/96 07/31/96
- --------------------------------------------------------------------------------------------------------------------------------
14.227915 12/31/96 11.781066 14.60% 02/29/96 02/29/96
- --------------------------------------------------------------------------------------------------------------------------------
11.20098 12/31/96 10.48933 0.52% 01/31/96 01/31/96
- --------------------------------------------------------------------------------------------------------------------------------
14.05373 12/31/96 12.122954 9.73% 07/31/96 07/31/96
- --------------------------------------------------------------------------------------------------------------------------------
16.353765 12/31/96 12.769371 21.96% 01/31/96 01/31/96
- --------------------------------------------------------------------------------------------------------------------------------
13.157858 05/30/97 05/30/97 05/30/97
- --------------------------------------------------------------------------------------------------------------------------------
14.414086 12/31/96 10.918586 25.93% 10/31/96 10/31/96
- --------------------------------------------------------------------------------------------------------------------------------
13.111548 12/31/96 11.613223 6.68% 05/31/96 05/31/96
- --------------------------------------------------------------------------------------------------------------------------------
10.900442 12/31/96 10.481343 (2.29%) 02/29/96 02/29/96
- --------------------------------------------------------------------------------------------------------------------------------
13.638404 05/30/97 05/30/97 05/30/97
- --------------------------------------------------------------------------------------------------------------------------------
13.245833 05/30/97 05/30/97 05/30/97
- --------------------------------------------------------------------------------------------------------------------------------
9.976286 12/22/97 12/22/97 12/22/97
- --------------------------------------------------------------------------------------------------------------------------------
14.974423 12/31/96 11.854756 20.19% 01/31/96 01/31/96
- --------------------------------------------------------------------------------------------------------------------------------
13.319853 12/31/96 10.940052 15.59% 01/31/96 01/31/96
- --------------------------------------------------------------------------------------------------------------------------------
13.237867 12/31/96 11.410013 9.82% 03/29/96 03/29/96
- --------------------------------------------------------------------------------------------------------------------------------
12.590458 12/31/96 11.446544 3.75% 03/29/96 03/29/96
- --------------------------------------------------------------------------------------------------------------------------------
13.88772 12/31/96 11.674007 12.78% 04/30/96 04/30/96
- --------------------------------------------------------------------------------------------------------------------------------
14.801917 12/31/96 12.092624 16.25% 03/29/96 03/29/96
- --------------------------------------------------------------------------------------------------------------------------------
16.646222 12/31/96 12.722419 24.75% 03/29/96 03/29/96
- --------------------------------------------------------------------------------------------------------------------------------
12.636971 12/31/96 11.375727 4.85% 03/29/96 03/29/96
- --------------------------------------------------------------------------------------------------------------------------------
14.492275 12/31/96 12.03758 14.22% 03/29/96 03/29/96
- --------------------------------------------------------------------------------------------------------------------------------
12.27167 12/31/96 11.136219 3.96% 04/30/96 04/30/96
- --------------------------------------------------------------------------------------------------------------------------------
14.730961 12/31/96 12.171469 14.86% 03/29/96 03/29/96
- --------------------------------------------------------------------------------------------------------------------------------
16.131003 12/31/96 13.392992 14.28% 01/31/96 01/31/96
- --------------------------------------------------------------------------------------------------------------------------------
9.006614 12/31/96 10.327674 (19.19%) 01/31/96 01/31/96
- --------------------------------------------------------------------------------------------------------------------------------
13.939247 12/31/96 13.19396 (0.62%) 04/30/96 04/30/96
- --------------------------------------------------------------------------------------------------------------------------------
13.029956 12/31/96 10.89448 13.43% 05/31/96 05/31/96
- --------------------------------------------------------------------------------------------------------------------------------
10.207412 12/31/96 10.470592 (8.84%) 05/31/96 05/31/96
- --------------------------------------------------------------------------------------------------------------------------------
12.203557 05/30/97 05/30/97 05/30/97
- --------------------------------------------------------------------------------------------------------------------------------
11.538939 05/30/97 05/30/97 05/30/97
- --------------------------------------------------------------------------------------------------------------------------------
12.785298 05/30/97 05/30/97 05/30/97
- --------------------------------------------------------------------------------------------------------------------------------
10.764213 05/30/97 05/30/97 05/30/97
- --------------------------------------------------------------------------------------------------------------------------------
10.554396 11/28/97 11/28/97 11/28/97
- --------------------------------------------------------------------------------------------------------------------------------
10.554396 12/31/96 9.79997 1.44% 01/31/96 01/31/96
- --------------------------------------------------------------------------------------------------------------------------------
8.786079 11/28/97 11/28/97 11/28/97
- --------------------------------------------------------------------------------------------------------------------------------
8.786079 12/31/96 9.18255 (10.66%) 03/30/96 03/30/96
- --------------------------------------------------------------------------------------------------------------------------------
10.152061 11/28/97 11/28/97 11/28/97
- --------------------------------------------------------------------------------------------------------------------------------
9.912244 11/28/97 11/28/97 11/28/97
- --------------------------------------------------------------------------------------------------------------------------------
9.912244 12/15/97 12/15/97 12/15/97
- --------------------------------------------------------------------------------------------------------------------------------
13.834311 11/28/97 11/28/97 11/28/97
- --------------------------------------------------------------------------------------------------------------------------------
13.834311 12/31/96 10.940286 20.33% 01/31/96 01/31/96
- --------------------------------------------------------------------------------------------------------------------------------
Page 2
<PAGE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Separate
Ten Year Ten Year Inception Inception Inception Account Free One Year Three
as of AUV w/ DSC Date AUV w/ DSC Charge Out DSC Year DSC
- -----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
07/31/96 11.073745 19.82% 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
02/29/96 10.58882 14.53% 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
01/31/96 10.326094 1.15% 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
07/31/96 10.927078 15.38% 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
01/31/96 10.746692 21.94% 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
05/30/97 11.067831 10.55% 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
10/31/96 10.440059 26.88% 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
05/31/96 10.779066 9.50% 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
02/29/96 10.157347 0.57% 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
05/30/97 11.31339 12.10% 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
05/30/97 10.974826 12.23% 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
12/22/97 9.824388 (5.57%) 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
01/31/96 10.813188 15.79% 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
01/31/96 9.813564 14.52% 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
03/29/96 10.491502 10.96% 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
03/29/96 10.599034 6.99% 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
04/30/96 10.698791 13.58% 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
03/29/96 10.52474 18.43% 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
03/29/96 11.041022 23.45% 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
03/29/96 11.661147 1.19% 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
03/29/96 10.889774 14.57% 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
04/30/96 10.267558 7.79% 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
03/29/96 11.258011 13.41% 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
01/31/96 10.836541 20.48% 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
01/31/96 10.89782 (13.23%) 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
04/30/96 11.703748 7.55% 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
05/31/96 10.027655 14.44% 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
05/31/96 10.018389 (2.81%) 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
05/30/97 11.121607 2.04% 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
05/30/97 10.665977 0.60% 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
05/30/97 10.782609 10.26% 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
05/30/97 10.220422 (2.06%) 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
11/28/97 10.688545 (8.18%) 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
01/31/96 9.562606 2.13% 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
11/28/97 8.960343 (8.82%) 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
03/30/96 9.688678 (9.28%) 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
11/28/97 10.00865 (5.68%) 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
11/28/97 9.791134 (5.86%) 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
12/15/97 9.756577 (5.53%) 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
11/28/97 13.559674 (5.13%) 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
01/31/96 10.094087 15.13% 140 0.1 7.00% 6.00%
- -----------------------------------------------------------------------------------------------------------------------
Page 3
<PAGE>
<CAPTION>
- -----------------------------
Five Year Ten Year Inception
DSC DSC DSC
- -----------------------------
<C> <C> <C>
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
4.00% 0.00% 7.00%
- -----------------------------
Page 4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Maintenance
Fund Name Fee As of Date
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Aetna Ascent VP 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager Portfolio 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Index 500 Portfolio 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund, Inc. 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
MFS Total Return Series 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
MFS World Governments Series 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth Fund 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Growth & Income Fund 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Emerging Equities Portfolio 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/Portfolio Partners-MFS Emerging Equities 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Research Growth Portfolio 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/Portfolio Partners-MFS Research Growth 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Value Equity Portfolio 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/Portfolio Partners-MFS Value Equity 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners Scudder International Growth Portfolio 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio Class A/Portfolio Partners-Scudder International Growth 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners T. Rowe Price Growth Equity Portfolio 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/Portfolio Partners-T. Rowe Price Growth Equity 30 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
Page 1
<PAGE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
One Year One Year One Year Three Year Three Year Three Year Five Year
As of AUV as of Date as of AUV w/out DSC as of Date as of AUV w/out DSC as of Date
- ---------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
14.983039 12/31/96 12.6743 18.20% 07/04/95
- ---------------------------------------------------------------------------------------------------------------------
14.227915 12/31/96 11.781066 20.76% 12/30/94 8.269365 19.82% 12/31/92
- ---------------------------------------------------------------------------------------------------------------------
11.20098 12/31/96 10.48933 6.77% 12/30/94 8.807994 8.33% 12/31/92
- ---------------------------------------------------------------------------------------------------------------------
14.05373 12/31/96 12.122954 15.92% 07/04/95
- ---------------------------------------------------------------------------------------------------------------------
16.353765 12/31/96 12.769371 28.06% 12/30/94 7.979199 27.01% 12/31/92
- ---------------------------------------------------------------------------------------------------------------------
13.157858 12/31/96 10.033073 31.13% 12/12/96
- ---------------------------------------------------------------------------------------------------------------------
14.414086 12/31/96 10.918586 32.00% 09/15/96
- ---------------------------------------------------------------------------------------------------------------------
13.111548 12/31/96 11.613223 12.89% 07/04/95
- ---------------------------------------------------------------------------------------------------------------------
10.900442 12/31/96 10.481343 3.99% 12/30/94 9.648265 4.14% 12/31/92
- ---------------------------------------------------------------------------------------------------------------------
13.638404 12/31/96 10.284789 32.60% 12/26/96
- ---------------------------------------------------------------------------------------------------------------------
13.245833 12/31/96 9.639742 37.40% 12/12/96
- ---------------------------------------------------------------------------------------------------------------------
9.976286 12/31/96 8.426156 18.39% 12/30/94 5.930471 18.92% 12/31/92
- ---------------------------------------------------------------------------------------------------------------------
14.974423 12/31/96 11.854756 26.30% 12/30/94 7.897236 23.76% 12/31/92
- ---------------------------------------------------------------------------------------------------------------------
13.319853 12/31/96 10.940052 21.74% 12/30/94 7.246354 22.49% 12/31/92
- ---------------------------------------------------------------------------------------------------------------------
13.237867 12/31/96 11.410013 16.01% 12/30/94 8.525394 15.79% 12/31/92
- ---------------------------------------------------------------------------------------------------------------------
12.590458 12/31/96 11.446544 9.98% 12/30/94 9.481809 9.90% 12/31/92
- ---------------------------------------------------------------------------------------------------------------------
13.88772 12/31/96 11.674007 18.95% 12/30/94 8.958271 15.72% 12/31/92
- ---------------------------------------------------------------------------------------------------------------------
14.801917 12/31/96 12.092624 22.39% 01/03/95
- ---------------------------------------------------------------------------------------------------------------------
16.646222 12/31/96 12.722419 30.83% 12/30/94 7.765237 28.93% 12/31/92
- ---------------------------------------------------------------------------------------------------------------------
12.636971 12/31/96 11.375727 11.08% 12/30/94 8.502243 14.11% 09/13/93
- ---------------------------------------------------------------------------------------------------------------------
14.492275 12/31/96 12.03758 20.38% 12/30/94 8.539501 19.27% 09/13/93
- ---------------------------------------------------------------------------------------------------------------------
12.27167 12/31/96 11.136219 10.18% 12/30/94 8.468988 13.15% 09/13/93
- ---------------------------------------------------------------------------------------------------------------------
14.730961 12/31/96 12.171469 21.02% 12/30/94 8.118623 21.96% 09/13/93
- ---------------------------------------------------------------------------------------------------------------------
16.131003 12/31/96 13.392992 20.43% 12/30/94 8.381221 24.38% 09/13/93
- ---------------------------------------------------------------------------------------------------------------------
9.006614 12/31/96 10.327674 (12.80%) 12/30/94 10.290777 (4.36%) 03/30/94
- ---------------------------------------------------------------------------------------------------------------------
13.939247 12/31/96 13.19396 5.64% 12/30/94 9.15111 15.05% 12/31/92
- ---------------------------------------------------------------------------------------------------------------------
13.029956 12/31/96 10.89448 19.59% 01/03/95
- ---------------------------------------------------------------------------------------------------------------------
10.207412 12/31/96 10.470592 (2.53%) 12/30/94 9.051104 4.08% 06/14/94
- ---------------------------------------------------------------------------------------------------------------------
12.203557 12/31/96 11.08312 10.10% 12/30/94 7.155756 19.46% 12/31/92
- ---------------------------------------------------------------------------------------------------------------------
11.538939 12/31/96 9.559142 20.70% 12/30/94 8.164565 12.21% 12/31/92
- ---------------------------------------------------------------------------------------------------------------------
12.785298 12/31/96 9.787799 30.61% 07/05/95
- ---------------------------------------------------------------------------------------------------------------------
10.764213 12/31/96 10.042736 7.17% 12/30/94 7.992699 10.42% 05/03/93
- ---------------------------------------------------------------------------------------------------------------------
10.554396 11/26/97 11/26/97 11/26/97
- ---------------------------------------------------------------------------------------------------------------------
10.554396 12/31/96 9.79997 7.69% 12/30/94 6.703795 16.32% 12/31/92
- ---------------------------------------------------------------------------------------------------------------------
8.786079 11/26/97 11/26/97 11/26/97
- ---------------------------------------------------------------------------------------------------------------------
8.786079 12/31/96 9.18255 (4.33%) 12/30/94 7.529448 5.27% 12/31/92
- ---------------------------------------------------------------------------------------------------------------------
10.152061 11/26/97 11/26/97 11/26/97
- ---------------------------------------------------------------------------------------------------------------------
10.152061 12/31/96 8.149264 24.56% 12/30/94 5.83085 20.29% 12/31/92
- ---------------------------------------------------------------------------------------------------------------------
9.912244 11/26/97 11/26/97 11/26/97
- ---------------------------------------------------------------------------------------------------------------------
9.912244 12/31/96 9.223832 7.45% 12/30/94 7.439523 10.03% 12/31/92
- ---------------------------------------------------------------------------------------------------------------------
13.834311 11/26/97 11/26/97 11/26/97
- ---------------------------------------------------------------------------------------------------------------------
13.834311 12/31/96 10.940286 26.44% 12/31/94 7.278828 23.86% 12/31/92
- ---------------------------------------------------------------------------------------------------------------------
Page 2
<PAGE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Five Year Five Year Ten Year Ten Year Ten Year Inception Inception Inception
as of AUV w/out DSC as of Date as of AUV w/out DSC Date AUV w/out DSC
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
07/04/95 07/05/95 9.482021 20.16%
- ------------------------------------------------------------------------------------------------------------------
7.776863 12.83% 04/03/89 04/03/89 5.735238 10.94%
- ------------------------------------------------------------------------------------------------------------------
8.595081 5.43% 12/31/87 5.336688 7.68%
- ------------------------------------------------------------------------------------------------------------------
07/04/95 07/05/95 9.533254 16.85%
- ------------------------------------------------------------------------------------------------------------------
7.766221 16.05% 12/31/87 4.039574 15.00%
- ------------------------------------------------------------------------------------------------------------------
12/12/96 12/13/96 9.899466 31.14%
- ------------------------------------------------------------------------------------------------------------------
09/15/96 09/16/96 10.000313 32.76%
- ------------------------------------------------------------------------------------------------------------------
07/04/95 07/05/95 9.592086 13.36%
- ------------------------------------------------------------------------------------------------------------------
9.242721 3.34% 12/31/87 7.038035 4.46%
- ------------------------------------------------------------------------------------------------------------------
12/26/96 12/27/96 10.220423 33.02%
- ------------------------------------------------------------------------------------------------------------------
12/12/96 12/13/96 9.443427 38.05%
- ------------------------------------------------------------------------------------------------------------------
5.836772 11.30% 12/31/87 3.561818 10.84%
- ------------------------------------------------------------------------------------------------------------------
6.411822 18.48% 12/31/87 3.669174 15.09%
- ------------------------------------------------------------------------------------------------------------------
6.244197 16.35% 12/31/87 3.137515 15.54%
- ------------------------------------------------------------------------------------------------------------------
7.403903 12.31% 12/31/87 4.564725 11.22%
- ------------------------------------------------------------------------------------------------------------------
6.978463 12.51% 12/31/87 5.781034 8.08%
- ------------------------------------------------------------------------------------------------------------------
8.092813 11.39% 09/06/89 09/06/89 5.756537 11.16%
- ------------------------------------------------------------------------------------------------------------------
01/03/95 01/03/95 7.34125 26.40%
- ------------------------------------------------------------------------------------------------------------------
7.202915 18.23% 08/27/92 08/27/92 6.808467 18.20%
- ------------------------------------------------------------------------------------------------------------------
09/13/93 09/13/93 6.304307 17.55%
- ------------------------------------------------------------------------------------------------------------------
09/13/93 09/13/93 8.044333 14.66%
- ------------------------------------------------------------------------------------------------------------------
09/13/93 09/13/93 8.643353 8.48%
- ------------------------------------------------------------------------------------------------------------------
09/13/93 09/13/93 7.773658 16.02%
- ------------------------------------------------------------------------------------------------------------------
09/13/93 09/13/93 7.05749 21.19%
- ------------------------------------------------------------------------------------------------------------------
03/30/94 03/30/94 10.322756 (3.58%)
- ------------------------------------------------------------------------------------------------------------------
8.969536 9.21% 10/14/91 10/14/91 8.633948 8.00%
- ------------------------------------------------------------------------------------------------------------------
01/03/95 01/03/95 7.692372 19.25%
- ------------------------------------------------------------------------------------------------------------------
06/14/94 06/14/94 9.049518 3.44%
- ------------------------------------------------------------------------------------------------------------------
6.255692 14.29% 12/31/87 3.158544 14.46%
- ------------------------------------------------------------------------------------------------------------------
5.229659 17.14% 11/12/90 11/12/90 5.589732 10.68%
- ------------------------------------------------------------------------------------------------------------------
07/05/95 07/05/95 6.022462 35.28%
- ------------------------------------------------------------------------------------------------------------------
05/03/93 05/03/93 8.156291 6.12%
- ------------------------------------------------------------------------------------------------------------------
11/26/97 11/28/97 10.688545 (1.27%)
- ------------------------------------------------------------------------------------------------------------------
6.365231 10.63% 09/21/88 09/21/88 2.397107 17.32%
- ------------------------------------------------------------------------------------------------------------------
11/26/97 11/28/97 8.960343 (1.96%)
- ------------------------------------------------------------------------------------------------------------------
7.103352 4.33% 12/31/87 4.381943 7.19%
- ------------------------------------------------------------------------------------------------------------------
11/26/97 11/28/97 10.00865 1.42%
- ------------------------------------------------------------------------------------------------------------------
5.910992 11.41% 12/31/87 2.978655 13.03%
- ------------------------------------------------------------------------------------------------------------------
11/26/97 11/28/97 9.791134 1.23%
- ------------------------------------------------------------------------------------------------------------------
5.597697 12.09% 12/31/87 3.742802 10.22%
- ------------------------------------------------------------------------------------------------------------------
11/26/97 11/28/97 13.559674 2.01%
- ------------------------------------------------------------------------------------------------------------------
6.024877 18.07% 01/09/89 01/09/89 3.123186 18.02%
- ------------------------------------------------------------------------------------------------------------------
Page 3
<PAGE>
<CAPTION>
- -----------------------------------------
Separate
Account Free
Charge Out
- -----------------------------------------
<C> <C>
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
140 0.1
- -----------------------------------------
Page 4
</TABLE>
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
333-49581
Registration Statements filed under the Investment Company Act of 1940:
811-08582
hereby ratifying and confirming on this 14th day of April, 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
333-49581
Registration Statements filed under the Investment Company Act of 1940:
811-08582
hereby ratifying and confirming on this 14th day of April, 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/ Catherine H. Smith
-----------------------------------
Catherine H. Smith
Director
2
<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
333-49581
Registration Statements filed under the Investment Company Act of 1940:
811-08582
hereby ratifying and confirming on this 14th day of April, 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
3
<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
333-49581
Registration Statements filed under the Investment Company Act of 1940:
811-08582
hereby ratifying and confirming on this 14th day of April, 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)
4
