As filed with the Securities and Exchange Registration No. 333-87131
Commission on December 15, 1999 Registration No. 811-8582
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
- --------------------------------------------------------------------------------
Pre-Effective Amendment No. 1 To
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
and Amendment To
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
- --------------------------------------------------------------------------------
Variable Annuity Account I of Aetna Insurance Company of America
Aetna Insurance Company of America
151 Farmington Avenue, TS31, 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, TS31, Hartford, Connecticut 06156
(Name and Address of Agent for Service)
Approximate date of Proposed Public Offering: As soon as practicable after the
effectiveness of this Registration Statement.
It is proposed that this filing will become effective on December 17, 1999.
<PAGE>
VARIABLE ANNUITY ACCOUNT I
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
FORM N-4
ITEM NO. PART A (PROSPECTUS) LOCATION - PROSPECTUS
<S> <C> <C>
1 Cover Page........................................... Cover Page
2 Definitions.......................................... Not Applicable
3 Synopsis............................................. Contract Overview; Fee Table
4 Condensed Financial Information...................... Condensed Financial Information
5 General Description of Registrant, Depositor, and
Portfolio Companies.................................. Other Topics - The Company; Variable
Annuity Account I; Appendix III - Fund
Descriptions
6 Deductions and Expenses.............................. Fees
7 General Description of Variable Annuity Contracts.... Contract Overview; Other Topics
8 Annuity Period....................................... Income Phase
9 Death Benefit........................................ Death Benefit
10 Purchases and Contract Value......................... Contract Purchase and Participation; Your
Account Value
11 Redemptions.......................................... Right to Cancel; Withdrawals; Income Phase
12 Taxes................................................ Taxation
13 Legal Proceedings.................................... Other Topics - Legal Matters and
Proceedings
14 Table of Contents of the Statement of Additional
Information.......................................... Contents of the Statement of Additional
Information
</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................................... Income Phase Payments
23 Financial Statements............................... Financial Statements
</TABLE>
Part C (Other Information)
--------------------------
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C to this Registration Statement.
<PAGE>
Prospectus -- December 17, 1999
-------------------------------
The Funds
Aetna Ascent VP
Aetna Balanced VP, Inc.
Aetna Income Shares d/b/a Aetna Bond VP
Aetna Crossroads VP
Aetna Growth VP
Aetna Variable Fund d/b/a Aetna Growth and Income VP
Aetna High Yield VP
Aetna Index Plus Large Cap VP
Aetna Index Plus Mid Cap VP
Aetna Index Plus Small Cap VP
Aetna International VP
Aetna Legacy VP
Aetna Variable Encore Fund d/b/a Aetna Money Market VP
Aetna Real Estate Securities VP
Aetna Small Company VP
Aetna Value Opportunity VP
AIM V.I. Capital Appreciation Fund
AIM V.I. Growth Fund
AIM V.I. Growth and Income Fund
AIM V.I. Value Fund
Calvert Social Balanced Portfolio
Fidelity Variable Insurance Products Fund (VIP) Equity-Income Portfolio
Fidelity Variable Insurance Products Fund (VIP) Growth Portfolio
Fidelity Variable Insurance Products Fund (VIP) Overseas Portfolio
Fidelity Variable Insurance Products Fund II (VIP II) Contrafund Portfolio
Janus Aspen Aggressive Growth Portfolio
Janus Aspen Balanced Portfolio
Janus Aspen Flexible Income Portfolio
Janus Aspen Growth Portfolio
Janus Aspen Worldwide Growth Portfolio
Oppenheimer Global Securities Fund/VA
Oppenheimer Strategic Bond Fund/VA
Portfolio Partners MFS Emerging Equities Portfolio
Portfolio Partners MFS Research Growth Portfolio
Portfolio Partners MFS Value Equity Portfolio
Portfolio Partners Scudder International Growth Portfolio
Portfolio Partners T. Rowe Price Growth Equity Portfolio
The Contracts. The contracts described in this prospectus are group deferred
variable annuity contracts issued by Aetna Insurance Company of America (the
Company). They are intended to be used as funding vehicles for certain types of
retirement plans that qualify for beneficial tax treatment and/or provide
current income reduction under certain sections of the Internal Revenue Code of
1986, as amended (Tax Code).
Why Reading This Prospectus is Important. Before you participate in a contract
through your retirement plan, you should read this prospectus. It provides facts
about the contract and its investment options. Plan sponsors (generally your
employer or a trust) should read this prospectus to help determine if the
contract is appropriate for their plan. Keep this document for future reference.
Table of Contents . . . page 3
Contract Design. The contracts, and the plans they support, are designed to:
>Help you save for retirement while receiving beneficial tax treatment;
>Offer a variety of investment options to help meet long-term financial goals;
>Provide a benefit to a beneficiary in the event of death; and
<PAGE>
>Provide future income payments over a lifetime or for a specified period.
Investment Options. The contracts offer variable investment options and a fixed
interest option. When we establish your account(s), the contract holder, or you
if permitted by the plan, instructs us to direct account dollars to any of the
available options. Some investment options may be unavailable through certain
contracts and plans, or in some states.
Variable Investment Options. These options are called subaccounts. The
subaccounts are within Variable Annuity Account I (the separate account), a
separate account of the Company. Each subaccount invests in one of the mutual
funds (funds) listed on this page. Earnings on amounts invested in a subaccount
will vary depending on the performance and fees of its underlying fund. You do
not invest directly in or hold shares of the funds.
The funds in which the subaccounts invest have various risks. For information
about risks of investing in the funds see "Investment Options" in this
prospectus and each fund prospectus. Read this prospectus in conjunction with
the fund prospectuses, and retain the fund prospectuses for future reference.
Fixed Interest Option.
>Fixed Plus Account
Except as specifically mentioned, this prospectus describes only the variable
investment options. However, we describe the Fixed Plus Account in an appendix
to this prospectus.
<PAGE>
Prospectus -- December 17, 1999 (continued)
-------------------------------------------
Getting Additional Information. You may obtain the December 17, 1999, Statement
of Additional Information (SAI) by indicating your request on your enrollment
materials or calling the Company at 1-800-525-4225. You may also obtain an SAI
for any of the funds by calling that number. This prospectus, the SAI and other
information about the separate account are posted on the Securities and Exchange
Commission (SEC) web site, http://www.sec.gov and may also be obtained, free of
charge, by contacting the SEC Public Reference Room at 202-942-8090. The SAI
table of contents is listed on page 34 of this prospectus. The SAI is
incorporated into this prospectus by reference.
Additional Disclosure Information. Neither the SEC, nor any state securities
commission, has approved or disapproved the securities offered through this
prospectus or passed on the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense. We do not intend for this
prospectus to be an offer to sell or a solicitation of an offer to buy these
securities in any state that does not permit their sale. We have not authorized
anyone to provide you with information that is different from that contained in
this prospectus.
<PAGE>
TABLE OF CONTENTS
Contract Overview 4
Who's Who
The Contract and Your Retirement Plan
Contract Rights
Contract Facts
Contract Phases: Accumulation Phase, Income Phase
Questions: Contacting the Company
Sending Requests in Good Order
Fee Table............................................................. 6
Condensed Financial Information.......................................10
Investment Options....................................................10
Transfers.............................................................11
Contract Purchase and Participation...................................12
Contract Ownership and Rights.........................................13
Right to Cancel.......................................................13
Fees..................................................................14
Your Account Value....................................................16
Withdrawals...........................................................18
Systematic Distribution Options.......................................19
Death Benefit.........................................................20
Income Phase..........................................................21
Taxation..............................................................25
Other Topics..........................................................30
The Company - Variable Annuity Account I - Performance Reporting - Voting Rights
- - Contract Distribution - Contract Modification - Legal Matters and Proceedings
- - Payment Delay or Suspension - Transfer of Ownership; Assignment - Account
Termination - Year 2000 Readiness
Contents of the Statement of Additional Information...................34
Appendix I - Fixed Plus Account.......................................35
Appendix II - Employee Appointment of Employee as Agent...............37
Appendix III - Fund Descriptions......................................38
3
<PAGE>
The Contract and Your
Retirement Plan
Retirement Plan (plan): A plan sponsor has established a retirement plan for
you. This contract is offered as a funding option for that plan. We are not a
party to the plan.
Plan Type: We refer to the retirement plan by the Tax Code section under which
it qualifies. For example: a "403(b) plan" is a plan that qualifies for tax
treatment under Tax Code section 403(b). To learn which Tax Code section applies
to your plan, contact your plan sponsor, your Aetna representative or the
Company.
Contract Rights: Rights under the contract, and who may exercise those rights,
may vary by plan type. Also, while the contract may reserve certain rights for
the contract holder, the contract holder may permit you to exercise those rights
through the plan.
Contract Overview
- -----------------
The following is a summary. Please read each section of this prospectus for
additional information.
Who's Who
You (the participant): The individual who participates in the contract through a
retirement plan.
Plan Sponsor: The sponsor of your retirement plan. Generally, your employer or a
trust.
Contract Holder: The person to whom we issue the contract. Generally, the plan
sponsor.
We (the Company): Aetna Insurance Company of America. We issue the contract.
Service Center: The location to which all inquiries, transactions and requests
should be addressed. The address is: Aetna Financial Services, Annuity Services,
151 Farmington Avenue, Hartford, CT 06156-1277.
For greater detail please review "Contract Ownership and Rights" and "Contract
Purchase and Participation."
Contract Facts
Free look/Right to Cancel: Contract holders may cancel the contract no later
than 10 days after they receive the contract (or a longer period if required by
state law). Participants in 403(b) plans or in some plans under 401(a) may
cancel their participation in the contract no later than 10 days after they
receive evidence of participation in the contract (or a longer period if
required by state law). See "Right to Cancel."
Death Benefit: A beneficiary may receive a benefit in the event of your death
prior to the income phase. Death benefits during the income phase depend on the
payment option selected. See "Death Benefit" and "Income Phase."
Withdrawals: During the accumulation phase, you may withdraw all or part of your
account value. The Tax Code may impose restrictions on withdrawals from plans,
which may vary. In addition, you may have the right to withdraw all or part of
your account value during the income phase. Amounts withdrawn may be subject to
tax withholding and taxation. See "Withdrawals," "Taxation," and "Income Phase."
Systematic Distribution Options: These allow you to receive regular payments
from your account, while retaining the account in the accumulation phase. See
"Systematic Distribution Options."
Fees: Certain fees are deducted from your account value. In addition, we reserve
the right to deduct premium taxes from your account value or from payments to
the account at any time, but not before there is a tax liability under state
law. See "Fee Table" and "Fees."
Taxation: You will generally not pay taxes on any earnings from the annuity
contract described in this prospectus until they are withdrawn. Tax-qualified
retirement arrangements (including 403(b) and 401(a) plans) also defer payment
of taxes on earnings until they are withdrawn. You should know that the annuity
contract does not provide any additional tax deferral of earnings beyond the tax
deferral provided by the tax-qualified retirement arrangement. However,
annuities do provide other features and benefits which
4
<PAGE>
may be valuable to you. You should discuss your decision with your financial
representative. Taxes will generally be due when you receive a distribution of
earnings. Tax penalties may apply in some circumstances. See "Taxation."
5
<PAGE>
Contract Phases
I. The Accumulation Phase (accumulating retirement benefits)
<TABLE>
<S> <C> <C> <C> <C>
+ +
| Payments to |
STEP 1: You or the contract | Your Account |
----------------
holder provide Aetna + +
Insurance Step 1 [arrow down]
-------------------
Company of America with your completed + +
enrollment materials. | Aetna Insurance Company of America|
-------------------------------------
According to the plan, we set + +
up one or more accounts for you. a. [arrow down] Step 2 b. [arrow down]
--------------- ------ ---------------
We may set up account(s) for + + + +
employer contributions and/or | Fixed | | Variable Annuity |
for contributions from your |Interest| | Account I |
salary. |Option | | |
| | | Variable Investment Options|
STEP 2: The contract holder, + + + +
or you if permitted by your The Subaccounts
---------------
plan, directs us to invest your + + + +
account dollars in any of the following: | A | B | Etc. |
- - ----
(a) Fixed Interest Option
(b) Variable Investment Step 2(b)[arrow down]
---------------------
Options. (The variable investment + + + +
options are the subaccounts of | Mutual | Mutual | Etc. |
Variable Annuity Account I. Each | Fund A | Fund B | |
---------- --------
one invests in a specific mutual + + + +
fund.)
STEP 2(b), continued: The subaccount(s)
selected purchases shares of its
corresponding fund.
</TABLE>
II. The Income Phase
The contract offers several payment options (see "Income Phase.") In general,
you may:
> Receive payments over a lifetime or for a specified period;
> Receive payments monthly, quarterly, semi-annually or annually;
> Select an option that provides a death benefit to beneficiaries; and
> Select fixed payments or payments that vary based on the performance of the
variable investment options you select.
Questions? Contact your local representative or write or call the Service
Center:
Aetna Financial Services
Annuity Services
151 Farmington Avenue
Hartford, CT 06156-1277
1-800-525-4225
Sending forms and written requests in good order
If you are writing to change your beneficiary, request a withdrawal, or for any
other purpose, contact your local representative or the Company to learn what
information is required in order for the request to be in "good order." We can
only act upon written requests that are received in good order.
6
<PAGE>
In This Section:
>Maximum Fees Deducted From Investments in the Subaccounts
>Fund Fees
>Examples of Fee Deductions
See "Fees" for:
>How, When and Why Fees are Deducted
>Reduction, Waiver and/or Elimination of Certain Fees
>Premium and Other Taxes
See "Income Phase" for:
>Fees during the income phase
Fee Table
- ---------
The tables and examples in this section show the fees your account may incur
while accumulating dollars under the contract (the accumulation phase). The fees
shown below do not include premium taxes that may be applicable. During the
income phase, a maximum mortality and expense charge of 1.25% and a maximum
administrative expense charge of 0.25% may be charged. See "Income Phase" for
further discussion of fees that may apply after you begin receiving payments
under the contract.
Fees Deducted From the Subaccounts On an Annual Basis (As a percentage of
average account value)
Mortality and Expense Risk Charge.............................. 1.00%(1)
Administrative Expense Charge.................................. 0.00% - 0.25%(2)
----------------
Total Separate Account Expenses................................ 1.00% - 1.25%
================
(1) This is the maximum mortality and expense risk charge during the
accumulation phase. This charge may be reduced for certain plans. See "Fees
- Mortality and Expense Risk Charge."
(2) We currently do not impose an administrative expense charge; however, we
reserve the right to charge not more than 0.25% on an annual basis from the
subaccounts. See "Fees - Administrative Expense Charge."
7
<PAGE>
Fees Deducted by the Funds
Using this Information. The following table shows the investment advisory fees
and other expenses charged annually by each fund. Fund fees are one factor that
impacts the value of a fund share. To learn about additional factors, refer to
the fund prospectuses.
How Fees are Deducted. Fund fees are not deducted from account values. Instead,
fees are deducted from the value of the fund shares on a daily basis, which in
turn will affect the value of each subaccount on a daily basis. Except as noted
below, the following figures are a percentage of the average net assets of each
fund, and are based on figures for the year ended December 31, 1998.
<TABLE>
<CAPTION>
Total Fund Net Fund
Annual Annual
Expenses Expenses
Investment Without Total After
Advisory Other Waivers or Waivers and Waivers or
Fees(1) Expenses Reductions Reductions Reductions
------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Aetna Ascent VP(2)(3) 0.60% 0.15% 0.75% 0.00% 0.75%
Aetna Balanced VP, Inc.(3) 0.50% 0.09% 0.59% -- 0.59%
Aetna Bond VP(3) 0.40% 0.10% 0.50% -- 0.50%
Aetna Crossroads VP(2)(3) 0.60% 0.15% 0.75% 0.00% 0.75%
Aetna Growth VP(2)(3) 0.60% 0.15% 0.75% 0.00% 0.75%
Aetna Growth and Income VP(3) 0.50% 0.08% 0.58% -- 0.58%
Aetna High Yield VP(2)(3) 0.65% 0.40% 1.05% 0.25% 0.80%
Aetna Index Plus Large Cap VP(2)(3) 0.35% 0.10% 0.45% 0.00% 0.45%
Aetna Index Plus Mid Cap VP(2)(3) 0.40% 0.51% 0.91% 0.31% 0.60%
Aetna Index Plus Small Cap VP(2)(3) 0.40% 0.61% 1.01% 0.41% 0.60%
Aetna International VP(2)(3) 0.85% 1.22% 2.07% 0.92% 1.15%
Aetna Legacy VP(2)(3) 0.60% 0.16% 0.76% 0.00% 0.76%
Aetna Money Market VP(3) 0.25% 0.09% 0.34% -- 0.34%
Aetna Real Estate Securities VP(2)(3) 0.75% 0.73% 1.48% 0.53% 0.95%
Aetna Small Company VP(2)(3) 0.75% 0.14% 0.89% 0.00% 0.89%
Aetna Value Opportunity VP(2)(3) 0.60% 0.14% 0.74% 0.00% 0.74%
AIM V.I. Capital Appreciation Fund(4) 0.62% 0.05% 0.67% -- 0.67%
AIM V.I. Growth Fund(4) 0.64% 0.08% 0.72% -- 0.72%
AIM V.I. Growth and Income Fund(4) 0.61% 0.04% 0.65% -- 0.65%
AIM V.I. Value Fund(4) 0.61% 0.05% 0.66% -- 0.66%
Calvert Social Balanced Portfolio(5) 0.70% 0.18% 0.88% -- 0.88%
Fidelity VIP Equity-Income Portfolio(6) 0.49% 0.09% 0.58% -- 0.58%
Fidelity VIP Growth Portfolio(6) 0.59% 0.09% 0.68% -- 0.68%
Fidelity VIP Overseas Portfolio(6) 0.74% 0.17% 0.91% -- 0.91%
Fidelity VIP II Contrafund Portfolio(6) 0.59% 0.11% 0.70% -- 0.70%
Janus Aspen Aggressive Growth Portfolio(7) 0.72% 0.03% 0.75% 0.00% 0.75%
Janus Aspen Balanced Portfolio(7) 0.72% 0.02% 0.74% 0.00% 0.74%
Janus Aspen Flexible Income Portfolio(7) 0.65% 0.08% 0.73% 0.00% 0.73%
Janus Aspen Growth Portfolio(7) 0.72% 0.03% 0.75% 0.07% 0.68%
Janus Aspen Worldwide Growth Portfolio(7) 0.67% 0.07% 0.74% 0.02% 0.72%
Oppenheimer Global Securities Fund/VA(4) 0.68% 0.06% 0.74% -- 0.74%
Oppenheimer Strategic Bond Fund/VA(4) 0.74% 0.06% 0.80% -- 0.80%
Portfolio Partners MFS Emerging Equities Portfolio (8) 0.68% 0.13% 0.81% 0.00% 0.83%
Portfolio Partners MFS Research Growth Portfolio (8) 0.70% 0.15% 0.85% -- 0.85%
Portfolio Partners MFS Value Equity Portfolio(8) 0.65% 0.25% 0.90% -- 0.90%
Portfolio Partners Scudder International Growth
Portfolio(8) 0.80% 0.20% 1.00% -- 1.00%
Portfolio Partners T. Rowe Price Growth Equity Portfolio(8) 0.60% 0.15% 0.75% -- 0.75%
</TABLE>
8
<PAGE>
Footnotes to the "Fund Expense 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 generally
paid out of the management fees and are not charged to investors. For the
AIM Funds, the reimbursements may be paid out of fund assets in an amount
up to 0.25% annually. Any such reimbursements paid from the AIM Funds'
assets are included in the "Other Expenses" column.
(2) The investment adviser is contractually obligated through December
31, 1999 to waive all or a portion of its investment advisory fee and/or
its administrative services fee and/or to reimburse a portion of other
expenses in order to ensure that the portfolio's Total Fund Annual
Expenses do not exceed the percentage reflected under Net Fund Annual
Expenses After Waivers or Reductions.
(3) Prior to May 1, 1998, the portfolio's investment adviser provided
administrative services to the portfolio and assumed the portfolio's
ordinary recurring direct costs under an administrative services
agreement. After that date, the portfolio's investment adviser provided
administrative services but no longer assumed all of the portfolio's
ordinary recurring direct costs under an 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,
1998, but reflect the fee payable under the new administrative services
agreement and estimates the portfolio's ordinary recurring direct costs.
(4) Fee waiver/expense reimbursement obligations do not apply to these
portfolios.
(5) The figures above are based on expenses for fiscal year 1998, and
have been restated to reflect the elimination of a performance
adjustment. The restatement includes an addition of 0.01% to the
portfolio management fee. Other Expenses reflect an indirect fee of 0.02%
relating to an expense offset arrangement with the portfolio's custodian.
Amount shown under Total Waivers and Reductions does not reflect a
voluntary reduction of fees paid indirectly. If this voluntary reduction
of fees paid indirectly was reflected, the amount shown under Net Fund
Annual Expenses After Waivers and Reductions would be 0.86%.
(6) A portion of the brokerage commissions that certain funds pay was
used to reduce fund expenses. In addition, certain funds, or the
investment adviser on behalf of 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. These
credits are not included under Total Waivers and Reductions. If these
credits had been included, the amounts shown under Net Fund Annual
Expenses After Waivers and Reductions would be as follows: Fidelity VIP
Equity-Income Porfolio - 0.57%; Fidelity VIP Growth Portfolio - 0.66%;
Fidelity VIP Overseas Portfolio - 0.89%; Fidelity VIP II Contrafund
Portfolio - 0.66%.
(7) All expenses are stated both with and without contractual waivers and
fee reductions by 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." Janus Capital has agreed to continue other
waivers and fee reduction until at least the next annual renewal of the
advisory agreement.
(8) The investment adviser has agreed to reimburse the portfolios for
expenses and/or waive its fees, so that, through at least April 30, 2000,
the aggregate of each portfolio's expenses will not exceed the combined
investment advisory fees and other expenses shown under the Net Fund
Annual Expenses After Waivers or Reductions column above. For the
Portfolio Partners MFS Emerging Equities Portfolio, the Total Fund Annual
Expenses Without Waivers or Reductions for 1998 were less than the
percentage reflected under the Net Fund Annual Expenses After Waivers or
Reductions column. Nevertheless, the investment adviser will waive fees
and/or reimburse expenses if that portfolio's Total Fund Annual Expenses
Without Waivers or Reductions for 1999 exceed the percentage reflected
under the Net Fund Annual Expenses After Waivers or Reductions column.
9
<PAGE>
Hypothetical Example
Account Fees Incurred Over Time. The following hypothetical examples show the
fees paid over time if $1,000 is invested in a subaccount, assuming a 5% annual
return on the investment. For the purpose of these examples, we deducted total
fund annual expenses, a mortality and expense risk charge of 1.00% on an annual
basis and the maximum administrative expense charge of 0.25% on an annual basis.
The total fund annual expenses used are those shown in the column "Total Fund
Annual Expenses Without Waivers or Reductions" in the Fund Expense Table.
> These examples are purely hypothetical.
> They should not be considered a representation of past or future fees or
expected returns.
> Actual fees and/or returns may be more or less than those shown in these
examples.
<TABLE>
<CAPTION>
Whether or not you withdraw your entire account
value or if you select an income phase payment
option at the end of the periods shown, you would
pay the following fees:
1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Aetna Ascent VP $20 $63 $108 $233
Aetna Balanced VP, Inc. $19 $58 $100 $216
Aetna Bond VP $18 $55 $95 $206
Aetna Crossroads VP $20 $63 $108 $233
Aetna Growth VP $20 $63 $108 $233
Aetna Growth and Income VP $19 $58 $99 $215
Aetna High Yield VP $23 $72 $123 $264
Aetna Index Plus Large Cap VP $17 $54 $92 $201
Aetna Index Plus Mid Cap VP $22 $68 $116 $249
Aetna Index Plus Small Cap VP $23 $71 $121 $260
Aetna International VP $33 $102 $173 $361
Aetna Legacy VP $20 $63 $108 $234
Aetna Money Market VP $16 $50 $87 $189
Aetna Real Estate Securities VP $28 $85 $144 $306
Aetna Small Company VP $22 $67 $115 $247
Aetna Value Opportunity VP $20 $62 $107 $232
AIM V.I. Capital Appreciation Fund $20 $60 $104 $224
AIM V.I. Growth Fund $20 $62 $106 $230
AIM V.I. Growth and Income Fund $19 $60 $103 $222
AIM V.I. Value Fund $19 $60 $103 $223
Calvert Social Balanced Portfolio $22 $67 $114 $246
Fidelity VIP Equity-Income Portfolio $19 $58 $99 $215
Fidelity VIP Growth Portfolio $20 $61 $104 $225
Fidelity VIP II Contrafund Portfolio $22 $68 $116 $249
Fidelity VIP Overseas Portfolio $20 $61 $105 $227
Janus Aspen Aggressive Growth Portfolio $20 $63 $108 $233
Janus Aspen Balanced Portfolio $20 $62 $107 $232
Janus Aspen Flexible Income Portfolio $20 $62 $107 $231
Janus Aspen Growth Portfolio $20 $63 $108 $233
Janus Aspen Worldwide Growth Portfolio $20 $62 $107 $232
Oppenheimer Global Securities Fund/VA $20 $62 $107 $232
Oppenheimer Strategic Bond Fund/VA $21 $64 $110 $238
Portfolio Partners MFS Emerging Equities
Portfolio $21 $65 $111 $239
Portfolio Partners MFS Research Growth
Portfolio $21 $66 $113 $243
Portfolio Partners MFS Value Equity Portfolio $22 $67 $115 $248
Portfolio Partners Scudder International
Growth Portfolio $23 $70 $120 $258
Portfolio Partners T. Rowe Price Growth
Equity Portfolio $20 $63 $108 $233
</TABLE>
10
<PAGE>
Condensed Financial Information
- -------------------------------
As of the date of this prospectus, we had not begun selling the contracts and
the subaccounts did not have any assets attributable to the contracts.
Therefore, no condensed financial information is presented herein.
Investment Options
- ------------------
The contract offers variable investment options and a fixed interest option.
When we establish your account(s), the contract holder, or you if permitted by
the plan, instructs us to direct account dollars to any of the available
options.
Variable Investment Options. These options are called subaccounts. The
subaccounts are within Variable Annuity Account I (the separate account), a
separate account of the Company. Earnings on amounts invested in the subaccount
will vary depending on the performance and fees of its underlying mutual fund.
You do not invest directly in or hold shares of the funds.
>Fund Descriptions. We provide brief descriptions of the funds in Appendix
III. Please refer to the fund prospectuses for additional information. Fund
prospectuses may be obtained, free of charge, by calling the Company at the
telephone number listed on the cover of this prospectus, by contacting the
SEC's website, or by contacting the SEC Public Reference Room.
Fixed Interest Option. For a description of the Fixed Plus Account, see
Appendix I.
Selecting Investment Options
o Choose options appropriate for you. Your Aetna representative can help you
evaluate which subaccounts and/or fixed interest option may be appropriate for
your financial goals.
o Understand the risks associated with the options you choose. Some
subaccounts invest in funds that are considered riskier than others. Funds
with additional risks are expected to have a value that rises and falls more
rapidly and to a greater degree than other funds. For example, funds investing
in foreign or international securities are subject to additional risks not
associated with domestic investments, and their performance may vary
accordingly. Also, funds using derivatives in their investment strategy may be
subject to additional risks.
o Be informed. Read this prospectus, the fund prospectuses and the Fixed Plus
Account appendix.
Limits on Option Availability. Some funds and the fixed interest option may not
be available through certain contracts and plans, or in some states. We may add,
withdraw or substitute funds, subject to the conditions in the contract and in
compliance with regulatory requirements.
Limits on Number of Options Selected. Generally, the contract holder, or you if
permitted by the plan, may select no more than 18 investment options at one time
during the accumulation phase of your account. Each subaccount and the Fixed
Plus Account counts toward these limits.
Limits Imposed by the Underlying Fund. Orders for the purchase of fund shares
may be subject to acceptance by the fund. We reserve the right to reject,
without prior notice, any allocation of payments to a subaccount if the
subaccount's investment in the corresponding fund is not accepted by the fund
for any reason.
Additional Risks of Investing in the Funds. (Mixed and Shared Funding)
"Shared funding" occurs when shares of a fund, which the subaccounts buy for
variable annuity contracts, are also bought by other insurance companies for
their variable annuity contracts.
"Mixed funding" occurs when shares of a fund, which the subaccounts buy for
variable annuity contracts, are bought for variable life insurance contracts
issued by us or other insurance companies.
>Shared--bought by more than one company.
>Mixed--bought for annuities and life insurance.
It is possible that a conflict of interest may arise due to mixed and/or shared
funding, that could adversely impact the value of a fund. For example, if a
conflict of interest occurred and one of the subaccounts withdrew its investment
in a fund, the fund may be forced to sell its securities at disadvantageous
prices, causing its share value to decrease. Each fund's board of directors or
trustees will monitor events in order to identify any conflicts which may arise
and to determine what action, if any, should be taken to address such conflicts.
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<PAGE>
Transfers
- ---------
Transfers Among Investment Options. During the accumulation phase and the income
phase, the contract holder, or you if permitted by the plan, may transfer
amounts among investment options. Transfers from the Fixed Plus Account are
restricted as outlined in Appendix I. Transfers may be requested in writing, by
telephone or, where available, electronically. Transfers must be made in
accordance with the terms of the contract.
Value of Transferred Dollars. The value of amounts transferred in or out of
subaccounts will be based on the subaccount unit values next determined after we
receive your request in good order at our Service Center.
Telephone Transfers: Security Measures. To prevent fraudulent use of telephone
transactions, we have established security procedures. These include recording
calls on our toll-free telephone lines and requiring use of a personal
identification number (PIN) to execute transactions. You are responsible for
keeping your PIN and account information confidential. If we fail to follow
reasonable security procedures, we may be liable for losses due to unauthorized
or fraudulent telephone transactions. We are not liable for losses resulting
from following telephone instructions we believe to be genuine. If a loss occurs
when we rely on such instructions, you will bear the loss.
Limits on Frequent Transfers. The contracts are not designed to serve as
vehicles for frequent trading in response to short-term fluctuations in the
market. Such frequent trading can disrupt management of a fund and raise its
expenses. This in turn can have an adverse effect on fund performance.
Accordingly, organizations or individuals that use market-timing investment
strategies and make frequent transfers should not purchase the contracts.
We reserve the right to restrict, in our sole discretion and without prior
notice, transfers initiated by a market-timing organization or individual or
other party authorized to give transfer instructions on behalf of multiple
contract holders or participants. Such restrictions could include:
(1) Not accepting transfer instructions from an agent acting on behalf of more
than one contract holder or participant; and (2) Not accepting preauthorized
transfer forms from market timers or other entities acting on behalf of more
than one contract holder or participant at a time.
We further reserve the right to impose, without prior notice, restrictions on
any transfers that we determine, in our sole discretion, will disadvantage or
potentially hurt the rights or interests of other contract holders or
participants.
The Dollar Cost Averaging Program. Certain contracts allow you to participate in
our Dollar Cost Averaging Program. There is no additional charge for this
service. Dollar cost averaging is a system of investing that buys fixed dollar
amounts of an investment at regular intervals, regardless of price. Our program
transfers, at regular intervals, a fixed dollar amount to one or more
subaccounts that you select. Dollar cost averaging neither ensures a profit nor
guarantees against loss in a declining market. You should consider your
financial ability to continue purchases through periods of low price levels. For
additional information about this program, contact your local representative or
call the Company at the number listed in "Contract Overview--Questions."
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<PAGE>
Contract Purchase and Participation
- -----------------------------------
Contracts Available for Purchase. The contracts available for purchase are group
deferred annuity contracts that the Company offers in connection with plans
established by eligible organizations under Tax Code sections 401(a) and 403(b).
Purchasing the Contract.
1. The contract holder submits the required forms and application to the
Company.
2. We approve the forms and issue a contract to the contract holder.
Participating in the Contract.
1. We provide you with enrollment materials for completion and return to us
(occasionally enrollment is conducted by someone unaffiliated with us who is
assisting the contract holder).
2. If your enrollment materials are complete and in good order, we establish one
or more accounts for you. Under certain plans we establish an employee account
for contributions from your salary and an employer account for employer
contributions.
Acceptance or Rejection. We must accept or reject an application or your
enrollment materials within two business days of receipt. If the forms are
incomplete, we may hold any forms and accompanying payments for five business
days, unless you consent to our holding them longer. Under limited
circumstances, we may also agree, for a particular plan, to hold payments for
longer periods with the permission of the contract holder. If we agree to do
this, we will deposit the payments in the Aetna Money Market VP subaccount until
the forms are completed (or for a maximum of 105 days). If we reject the
application or enrollment, we will return the forms and any payments.
Methods of Payment. The contract may allow one or more of the following payment
methods:
>Lump sum payments--A one-time payment to your account in the form of a transfer
from a previous plan.
>Installment payments--More than one payment made over time to your account.
The plan and the contract may have certain rules or restrictions that apply to
use of these two methods. For example, we may require that installment payments
meet certain minimums.
Allocation of Payments. The contract holder or you, if the contract holder
permits, directs us to allocate initial contributions to the investment options
available under the plan. Generally, you will specify this information on your
enrollment materials. After your enrollment, changes to allocations for future
payments or transfer of existing balances among investment options may be
requested in writing and, where available, by telephone or electronically.
Allocations must be in whole percentages, and there may be limitations on the
number of investment options that can be selected. (See "Investment Options" and
"Transfers.")
Tax Code Restrictions. The Tax Code places some limitations on contributions to
your account. (See "Taxation.")
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Contract Ownership and Rights
- -----------------------------
Who Owns the Contract? The contract holder. This is the person or entity to whom
we issue the contract.
Who Owns Money Accumulated Under the Contract?
Under the contract, we may establish one or more accounts for you. Generally,
we establish an employee account to receive salary reduction and rollover
amounts and an employer account to receive employer contributions. You have
the right to the value of your employee account and any employer account to
the extent that you are vested under the plan as interpreted by the contract
holder.
Who Holds Rights under the Contract?
> Under all contracts, except those issued through a voluntary 403(b) plan,
the contract holder holds all rights under the contract. The contract holder
may permit you to exercise some of those rights. For example, the contract
holder may allow you to choose investment options.
>If you participate in the contract through a voluntary 403(b) plan, you hold
all rights under the contract.
Right to Cancel
When and How to Cancel. If the contract holder chooses to cancel a contract, we
must receive the contract and a written notice of cancellation within 10 days
(or a longer period if required by state law) after the contract holder's
receipt of the contract.
If you wish to cancel participation in the contract and are allowed to do so
under the contract and the plan, you must send the document evidencing your
participation and a written notice of cancellation to the Company within 10 days
(or a longer period if required by state law) after you receive confirmation of
your participation in the contract.
Refunds. We will produce a refund not later than seven days after we receive the
required documents and written notice in good order at our Service Center. The
refund will equal amounts contributed to the contract or account(s), as
applicable, plus any earnings or less any losses attributable to the investment
options in which amounts were invested. In certain states, we are required to
refund contributions. When a refund of contributions is not required, the
investor bears any investment risk.
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<PAGE>
Types of Fees
There are certain types of fees or charges which you may incur under the
contract:
>Fees Deducted from the Subaccounts
o Mortality and Expense Risk Charge
o Administrative Expense Charge
>Fees Deducted by the Funds
o Investment Advisory Fees
o Other Expenses
>Premium and Other Taxes
Fees
- ----
I. Fees Deducted from the Subaccounts
Mortality and Expense Risk Charge
Maximum Amount: 1.00% annually of your account value invested in the subaccounts
during the accumulation phase and 1.25% annually of your account value invested
in the subaccounts during the income phase.
When/How: This fee is deducted daily from the subaccounts. We do not deduct this
from the Fixed Plus Account.
Purpose: The fee compensates us for the mortality and expense risks we assume
under the contracts.
>The mortality risks are those risks associated with our promise to make
lifetime payments based on annuity rates specified in the contracts and our
funding of the death benefits and other payments we make to owners or
beneficiaries of the accounts.
>The expense risk is the risk that the actual expenses we incur under the
contracts will exceed the maximum costs that we can charge.
If the amount we deduct for this fee is not enough to cover our mortality costs
and expenses under the contracts, we will bear the loss. We may use any excess
to recover distribution costs relating to the contract and as a source of
profit. We expect to make a profit from this fee.
Reduction: We may reduce the mortality and expense risk charge from the maximum
when the plan meets certain criteria and we agree to the reduction with the
contract holder in writing. Some contracts have a reduced mortality and expense
risk charge only during the accumulation phase of the account which then
increases during the income phase. Any reduction will reflect differences in
expenses for administration based on such factors as:
>The expected level of assets under the plan. Under some contracts, we may
aggregate accounts under different contracts issued by the Company to the same
contract holder.
>The size of the prospective group, projected annual number of eligible
participants and the program's participation rate.
>The plan design. For example, the plan may favor stability of invested assets
and limit the conditions for withdrawals and available investment options, which
in turn lowers administrative expenses.
>The frequency, consistency and method of submitting payments.
>The method and extent of onsite services we provide and the contract holder's
involvement in services such as enrollment and ongoing participant services.
>The contract holder's support and involvement in the communication, enrollment,
participant education and other administrative services.
>The projected frequency of distributions.
>The type and level of other factors that affect the overall administrative
expense.
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<PAGE>
We will determine any reduction of mortality and expense risk on a basis that is
not unfairly discriminatory according to our rules in effect at the time a
contract application is approved. We reserve the right to change these rules
from time to time.
Administrative Expense Charge
Maximum Amount: We currently do not impose this fee. However, we reserve the
right to charge an administrative expense charge of up to 0.25% annually of your
account value invested in the subaccounts.
When/How: If charged, this fee is deducted daily from the subaccounts. We will
not deduct this from the Fixed Plus Account. This fee may be assessed during the
accumulation phase and/or the income phase. If we are imposing this fee under
the contract issued in connection with your plan when you enter the income
phase, the fee will apply to you during the entire income phase.
Purpose: This fee helps defray our administrative expenses that cannot be
covered by the mortality and expense charge described above. The fee is not
intended to exceed our average expected cost of administering the contracts. We
do not expect to make a profit from this fee.
Reduction: If we charge the administrative expense charge, we may reduce it from
the maximum when the plan meets certain criteria and we agree to the reduction
with the contract holder, in writing. The level of the fee may be reassessed and
increased or decreased at each contract anniversary as the characteristics of
the group change.
II. Fund Expenses
Maximum Amount: Each fund determines its own advisory fees and expenses. For a
list of fund fees see "Fee Table." Advisory fees are described in more detail in
each fund prospectus.
When/How: Fund fees are not deducted from your account. Fund advisory fees and
expenses are reflected in the daily value of the fund shares, which will in turn
affect the daily value of each subaccount.
Purpose: These amounts help to pay the fund's investment advisor and operating
expenses.
III. Premium and Other Taxes
Maximum Amount: Some states and municipalities charge a premium tax on
annuities. These taxes currently range from 0% to 4%, depending on the
jurisdiction.
When/How: We reserve the right to deduct premium taxes from your account value
or from payments to the account at any time, but not before there is a tax
liability under state law. Our current practice is to deduct premium taxes at
the time of a full withdrawal or the commencement of income phase payments. We
will not deduct any municipal premium tax of 1% or less, but we reserve the
right to reflect such an expense in our annuity purchase rates.
In addition, the Company reserves the right to assess a charge for any federal
taxes due against the separate account. (See "Taxation.")
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<PAGE>
Your Account Value
- ------------------
During the accumulation phase, your account value at any given time equals:
>Account dollars directed to the Fixed Plus Account, including interest earnings
to date; less
>Any deductions from the Fixed Plus Account (e.g. withdrawals); plus
>The current dollar value of amounts invested in the subaccounts.
Subaccount Accumulation Units. When a fund is selected as an investment option,
your account dollars invest in "accumulation units" of the Variable Annuity
Account I subaccount corresponding to that fund. The subaccount invests directly
in the fund shares. The value of your interests in a subaccount is expressed as
the number of accumulation units you hold multiplied by an "Accumulation Unit
Value," as described below, for each unit.
Accumulation Unit Value (AUV). The value of each accumulation unit in a
subaccount is called the accumulation unit value or AUV. The value of
accumulation units vary daily in relation to the underlying fund's investment
performance. The value also reflects deductions for fund fees and expenses, the
mortality and expense risk charge, and the administrative expense charge (if
any). We discuss these deductions in more detail in "Fee Table" and "Fees."
Valuation. We determine the AUV every business day after the close of the New
York Stock Exchange. At that time, we calculate the current AUV by multiplying
the AUV last calculated by the "net investment factor" of the subaccount. The
net investment factor measures the investment performance of the subaccount from
one valuation to the next.
Current AUV = Prior AUV x Net Investment Factor
Net Investment Factor. The net investment factor for a subaccount between two
consecutive valuations equals the sum of 1.0000 plus the net investment rate.
Net Investment Rate. The net investment rate is computed according to a formula
that is equivalent to the following:
>The net assets of the fund held by the subaccount as of the current valuation;
minus
>The net assets of the fund held by the subaccount at the preceding valuation;
plus or minus
>Taxes or provisions for taxes, if any, due to subaccount operations (with any
federal income tax liability offset by foreign tax credits to the extent
allowed);
>Divided by the total value of the subaccount's units at the preceding
valuation;
>Minus a daily deduction for the mortality and expense risk charge and the
administrative expense charge (if any). See "Fees."
The net investment rate may be either positive or negative.
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<PAGE>
Hypothetical Illustration. As a hypothetical illustration, assume that an
investor contributes $5,000 to his account and directs us to invest $3,000 in
Fund A and $2,000 in Fund B. After receiving the contribution and following the
next close of business of the New York Stock Exchange, the applicable AUV's are
$10 for Subaccount A, and $25 for Subaccount B. The investor's account is
credited with 300 accumulation units of subaccount A, and 80 accumulation units
of subaccount B.
<TABLE>
<S> <C> <C> <C> <C>
+ +
|$5,000 contribution|
+ +
Step 1: An Investor Step 1 [arrow down]
-------------------
contributes $5000 + +
|Aetna Insurance Company of America|
+ ---------------------------------- +
Step 2: Step 2 [arrow down]
+ ------------------- +
A. He directs us to invest | Variable Annuity Account I |
--------------------------
$3,000 in Fund A. His + + + +
dollars purchase 300 | Subaccount A | Subaccount B | Etc. |
accumulation units of | 300 | 80 | |
Subaccount A ($3,000 | accumulation | accumulation | |
divided by the current | units | units | |
$10 AUV). | | | |
| | | |
B. He directs us to invest | | | |
$2,000 in Fund B. His | | | |
dollars purchase 80 | | | |
accumulation units of | | | |
Subaccount B ($2,000 | | | |
divided by the current | | | |
$25 AUV). | | | |
+ + + +
Step 3: The separate account Step 3 [arrow down]
-------------------
then purchases shares of the + + + +
applicable funds at the |Fund A| |Fund B|
current market value (NAV). -------- --------
+ + + +
</TABLE>
The fund's subsequent investment performance, expenses and charges, and the
daily charges deducted from the subaccount, will cause the AUV to move up or
down on a daily basis.
Payments to Your Account. If all or a portion of initial payments are directed
to the subaccounts, they will purchase subaccount accumulation units at the AUV
next computed after our acceptance of the applicable application or enrollment
forms, as described in "Contract Purchase and Participation." Subsequent
payments or transfers directed to the subaccounts that we receive by the close
of business of the New York Stock Exchange (Exchange) will purchase subaccount
accumulation units at the AUV computed after the close of the Exchange on that
day. The value of subaccounts may vary day to day.
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<PAGE>
Deductions for Taxes
Amounts withdrawn may be subject to tax penalties and withholding (see
"Taxation"). To determine which may apply, refer to the appropriate sections of
this prospectus, contact your Aetna representative or call the Company at the
number listed in "Contract Overview--Questions."
Withdrawals
- -----------
Making a Withdrawal. Subject to limitations on withdrawals from the Fixed Plus
Account and other restrictions (see "Withdrawal Restrictions" below), the
contract holder, or you if permitted by the plan, may withdraw all or a portion
of your account value at any time during the accumulation phase.
Steps for Making a Withdrawal. The contract holder, or you if permitted by the
plan, must:
>Select the withdrawal amount.
o Full Withdrawal: You will receive, reduced by any required withholding
tax, your account value allocated to the subaccounts, plus the amount
available for withdrawal from the Fixed Plus Account.
o Partial Withdrawal (Percentage or Specified Dollar Amount): You will
receive, reduced by any required withholding tax, the amount you specify,
subject to the value available in your account. The amount available from
the Fixed Plus Account may be limited.
For a description of limitations on withdrawals from the Fixed Plus Account,
see Appendix I.
>Select investment options. If this is not specified, we will withdraw dollars
proportionally from each investment option in which you have an account value.
>Properly complete a disbursement form and submit it to the Service Center.
Calculation of Your Withdrawal. We determine your account value every normal
business day after the close of the New York Stock Exchange. We pay withdrawal
amounts based on your account value either:
(1) As of the next valuation after we receive a request for withdrawal in good
order at our Service Center; or
(2) On such later date as specified on the disbursement form.
Delivery of Payment. Payments for withdrawal requests will be made in accordance
with SEC requirements. Normally, we will send your payment not later than seven
calendar days following our receipt of your disbursement form in good order.
Reinvestment Privilege. The contracts allow a one-time use of a reinvestment
privilege. Within 30 days after a full withdrawal, if allowed by law, you may
elect to reinvest all or a portion of the proceeds. We must receive reinvested
amounts within 60 days of the withdrawal. We will credit the account for the
amount reinvested based on the subaccount values next computed following our
receipt of your request and the amount to be reinvested. We will reinvest in the
same investment options and proportions in place at the time of withdrawal. Seek
competent advice regarding the tax consequences associated with reinvestment.
Withdrawal Restrictions. Some plans may have other limits on withdrawals, other
than or in addition to those listed below.
>Section 403(b)(11) of the Tax Code prohibits withdrawal under 403(b) contracts
prior to your death, disability, attainment of age 59-1/2, separation from
service, or financial hardship, of the following: (1) Salary reduction
contributions made after December 31, 1988 and; (2) Earnings on those
contributions and earnings on amounts held before 1989 and credited after
December 31, 1988.
>The contract may require that the contract holder certify that you are eligible
for the distribution.
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<PAGE>
Systematic Distribution Options
- -------------------------------
Features of a Systematic Distribution Option (SDO)
If available under your plan, an SDO allows you to receive regular payments from
your account without moving into the income phase. By remaining in the
accumulation phase, you retain certain rights and investment flexibility not
available during the income phase. Because the account remains in the
accumulation phase, all accumulation phase charges continue to apply.
Availability of Systematic Distribution Options (SDOs). To exercise one of these
options the account value must meet any minimum dollar amount and age criteria
applicable to that option. To determine what SDOs are available, check with the
contract holder or the Company. The Company reserves the right to discontinue
the availability of one or all of the SDOs at any time, and/or to change the
terms for future elections.
SDOs currently available under the contract include the following:
>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 accumulation phase investment
flexibility for amounts accumulated under the account.
>ECO--Estate Conservation Option. Also allows you to maintain the account in
the accumulation phase and provides periodic payments designed to meet the Tax
Code's minimum distribution requirement.
Under ECO, the Company calculates the minimum distribution amount required by
law at age 70-1/2 (for certain plans, 70-1/2 or retirement, if later) and pays
you that amount once a year.
>Other SDOs may be available from time to time. Additional information
relating to any of the SDOs may be obtained from your local representative or
from the Company's Service Center.
Electing an SDO. The contract holder, or you if permitted by the plan, makes the
election of an SDO. For some contracts, the contract holder must provide the
Company with certification that the distribution is in accordance with terms of
the plan.
Terminating an SDO. Once you elect an SDO, you may revoke it at any time through
a written request to our Service Center. Once revoked, an option may not be
elected again, nor may any other SDO be elected, unless the Tax Code permits it.
Tax Consequences. Withdrawals received through these options may have tax
consequences. See "Taxation."
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<PAGE>
Death Benefit
- -------------
The contract provides a death benefit in the event of your death, which is
payable to the beneficiary named under the contract (contract beneficiary).
>Under contracts issued in connection with most types of plans, the contract
holder must be named as the contract beneficiary, but may direct that we make
any payments to the beneficiary you name under the plan (plan beneficiary).
>Under contracts issued in connection with voluntary 403(b) plans, you may
generally designate your own contract beneficiary, who will normally be your
plan beneficiary as well.
During the Accumulation Phase
Payment Process
1. Following your death, the contract beneficiary (on behalf of the plan
beneficiary if applicable), must provide the Company with proof of death
acceptable to us and a payment request in good order. 2. The payment request
should include selection of a benefit payment option. 3. Within seven days after
we receive proof of death acceptable to us and payment request in good order at
our Service Center, we will mail payment, unless otherwise requested.
Until a payment option is selected, account dollars will remain invested as at
the time of your death, and no distributions will be made.
Benefit Payment Options. The following payment options are available, if allowed
by the Tax Code:
>Lump-sum payment;
>Payment under an available income phase payment option (see "Income
Phase--Payment Options"); or
>If the contract beneficiary or plan beneficiary is your spouse, payment under
an available systematic distribution option (not available under all plans).
The following option is also available, however, the Tax Code limits how long
the death benefit proceeds may be left in this option:
>Leaving the account value invested in the contract.
Death Benefit Calculation. The death benefit will be based on your account
value. The death benefit is calculated as of the next time we value your account
following the date on which we receive proof of death and payment request in
good order. In addition to this amount, some states require we pay interest
calculated from date of death at a rate specified by state law.
The contracts provide a guaranteed death benefit if the contract beneficiary (on
behalf of the plan beneficiary, if applicable) elects a lump-sum distribution or
an income phase payment option within six months of your death. The guaranteed
death benefit is the greater of:
(a) Your account value on the day that notice of death and request for payment
are received in good order at our Service Center; or
(b) The sum of payments (minus any applicable premium tax) made to your account,
minus withdrawals made from your account.
Tax Code Requirements. The Tax Code requires distribution of death benefit
proceeds within a certain period of time. Failure to begin receiving death
benefit payments within those time periods can result in tax penalties.
Regardless of the method of payment, death benefit proceeds will generally be
taxed to the beneficiary in the same manner as if you had received those
payments. See "Taxation" for additional information.
During the Income Phase
This section does not provide information about the income phase. For death
benefit information applicable to the income phase, see "Income Phase".
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<PAGE>
Income Phase
- ------------
During the income phase you receive payments from your accumulated account
value.
Initiating Payments. At least 30 days prior to the date you want to start
receiving payments, the contract holder, or you if permitted by the plan, must
notify us in writing of the following:
>Start date;
>Payment option (see the payment options table in this section);
>Payment frequency (i.e., monthly, quarterly, semi-annually or annually);
>Choice of fixed or variable payments;
>Selection of an assumed net investment rate (only if variable payments are
elected); and
>Under some plans, certification from your employer and/or submission of the
appropriate forms is also required.
The account will continue in the accumulation phase until the contract holder or
you, as applicable, properly initiate payments. Once a payment option is
selected, it may not be changed; however, certain options allow you to withdraw
a lump sum.
What Affects Payment Amounts? Some of the factors that may affect payment
amounts include: your age, your account value, the payment option selected,
number of guaranteed payments (if any) selected, and whether you select variable
or fixed payments.
Fixed Payments. Amounts funding fixed payments will be held in the Company's
general account. Fixed payments will remain the same over time.
Variable Payments. Amounts funding your income phase payments will be held in
the subaccount(s) selected, or a combination of subaccounts and the Company's
general account. Some contracts restrict the subaccounts available, the number
of investment options to be selected and how many transfers, if any, are allowed
among options. For variable payments, an assumed net investment rate must be
selected.
Payments from Fixed Plus Account Values. If a nonlifetime payment option is
selected, payment of amounts held in the Fixed Plus Account during the
accumulation phase may only be made on a fixed basis.
Assumed Net Investment Rate. For variable payments, an assumed net investment
rate must be selected. If you select a 5% rate, your first payment will be
higher, but subsequent payments will increase only if the investment performance
of the subaccounts you selected is greater than 5% annually, after deduction of
fees. Payment amounts will decline if the investment performance is less than
5%, after deduction of fees.
If you select a 3-1/2% rate, your first payment will be lower and subsequent
payments will increase more rapidly or decline more slowly depending on the
investment performance of the subaccounts you selected. For more information
about selecting an assumed net investment rate, request a copy of the Statement
of Additional Information by calling the Company. (see "Contract Overview--
Questions").
Selecting an Increasing Payment. Under certain payment options, if you select
fixed payments, you may elect an increase of one, two, or three percent,
compounded annually. The higher your percentage, the lower your initial payment
will be, while future payments will increase each year at a greater rate.
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<PAGE>
Fees Deducted
>If variable payments are elected, we make a daily deduction for mortality and
expense risks from any amounts held in the subaccounts. The maximum mortality
and expense risk charge during the income phase is 1.25% on an annual basis.
Under some contracts, we may reduce this fee based on certain factors. (See
"Fees--Mortality and Expense Risk Charge.")
>We may also deduct a daily administrative charge from amounts held in the
subaccounts. We are not currently deducting this charge, but reserve the right
to do so in the future. The maximum amount is 0.25% on an annual basis. If we
are imposing this fee under the contract issued in connection with your plan
when you enter the income phase, the fee will apply throughout the entire income
phase.
Required Minimum Payment Amounts. The initial payment or the annual payment
total must meet the minimums stated in the contract. If your account value is
too low to meet these minimum payment amounts, you will receive one lump sum
payment.
Death Benefit During the Income Phase. The death benefits that may be available
to a beneficiary are outlined in the payment option table below. If a lump sum
payment is due as a death benefit, we will make payment within seven calendar
days after we receive proof of death acceptable to us and the payment request at
our Service Center.
Taxation. To avoid certain tax penalties, you and any beneficiary must meet the
distribution rules imposed by the Tax Code. (See "Taxation.")
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Payment Options
The following tables list the payment options and accompanying death benefits
which may be available under the contracts. Some contracts restrict the options
and the terms available. Refer to your certificate or check with your contract
holder for details. We may offer additional payment options under the contract
from time to time.
Terms used in the Tables:
Annuitant: The person(s) on whose life expectancy the income phase payments are
calculated.
Beneficiary: The person designated to receive the death benefit payable under
the contract.
<TABLE>
<S> <C>
Lifetime Payment Options
Length of Payments: For as long as the annuitant lives. It is possible that only one payment will
Life Income be made should the annuitant die prior to the second payment's due date.
Death Benefit--None: All payments end upon the annuitant's death.
Length of Payments: For as long as the annuitant lives, with payments guaranteed for your
Life Income-- choice of 5-30 years or as otherwise specified in the contract.
Guaranteed Pay- Death Benefit--Payment to the Beneficiary: If the annuitant dies before we have made all the
ments guaranteed payments, we will pay the beneficiary a lump-sum (unless otherwise requested) equal
to the present value of the remaining guaranteed payments.
Length of Payments: For as long as either annuitant lives. It is possible that only one payment
will be made should both annuitants die before the second payment's due date.
Continuing Payments:
Life Income--Two (a) When you select this option you choose for 100%, 662/3% or 50% of the payment to continue
Lives after the first death; or
(b) 100% of the payment to continue on the second annuitant's death, and 50% of the payment to continue
on the annuitant's death.
Death Benefit--None: All payments end after the death of both annuitants.
Length of Payments: For as long as either annuitant lives, with payments guaranteed from 5 to
30 years, or as otherwise specified in the contract.
Life Income--Two Continuing Payments: 100% of the payment to continue after the first death.
Lives--Guaranteed Death Benefit--Payment to the Beneficiary: If both annuitants die before the guaranteed pay-
Payments ments have all been paid, we will pay the beneficiary a lump-sum (unless otherwise requested)
equal to the present value of the remaining guaranteed payments.
Life Income--Cash Length of Payments: For as long as the annuitant lives.
Refund Option Death Benefit--Payment to the Beneficiary: Following the annuitant's death, we will pay a lump
(fixed payment sum payment equal to the amount originally applied to the payment option (less any premium tax)
only) and less the total amount of fixed payments paid.
Life Income--Two Length of Payments: For as long as either annuitant lives.
Lives--Cash Continuing Payment: 100% of the payment to continue after the first death.
Refund Option Death Benefit--Payment to the Beneficiary: When both annuitants die, we will pay a lump sum
(fixed payment payment equal to the amount applied to the payment option (less any premium tax) and less
payment only) the total amount of fixed payments paid.
</TABLE>
Table continued [arrow right]
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Payment options continued
<TABLE>
<S> <C>
Nonlifetime Payment Options
Length of Payments: Payments will continue for the number of years you choose, based on what is
Nonlifetime-- available under the contract. For amounts held in the Fixed Plus Account during the accumulation
Guaranteed phase, the payment must be on a fixed basis. In certain cases a lump sum payment can be requested at
Payments any time (see below).
Death Benefit--Payment to the Beneficiary: If the annuitant dies before we make all the guaranteed
payments, any remaining guaranteed payments will continue to the beneficiary unless the beneficiary
elects to receive the present value of the remaining guaranteed payments in a lump sum.
</TABLE>
Lump-sum Payment: If the Nonlifetime--Guaranteed Payments option is elected with
variable payments, you may request at any time that all or a portion of the
present value of the remaining payments be paid in one sum. Lump sum payments
will be sent within seven calendar days after we receive the request for payment
in good order at the Service Center.
Calculation of Lump Sum Payments: If a lump sum payment is available to a
beneficiary or to you in the options above, the rate we use to calculate the
present value of the remaining guaranteed payments is the same rate we use to
calculate the income phase payments (i.e., the actual fixed rate used for the
fixed payments, or the 3-1/2% or 5% assumed net investment rate for variable
payments).
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In This Section
I. Introduction
II. Your Retirement Plan
III. Withdrawals and other Distributions
o Taxation of Distributions
o 10% Penalty Tax
o Withholding
IV. Minimum Distribution Requirements
o 50% Excise Tax
V. Rules Specific to Certain Plans
o Tax Code Section 403(b) Plans
o Tax Code Section 401(a) Plans
VI. Taxation of the Company
When consulting a tax advisor, be certain that he or she has expertise in
the Tax Code sections applicable to your tax concerns.
Taxation
- --------
I. Introduction
This section discusses our understanding of current federal income tax laws
affecting the contract. You should keep the following in mind when reading it:
>Your tax position (or the tax position of the beneficiary, as applicable)
determines federal taxation of amounts held or paid out under the contract.
>Tax laws change. It is possible that a change in the future could affect
contracts issued in the past.
>This section addresses federal income tax rules and does not discuss federal
estate and gift tax implications, state and local taxes or any other tax
provisions.
>We do not make any guarantee about the tax treatment of the contract or
transactions involving the contract.
We do not intend this information to be tax advice. For advice about the effect
of federal income taxes or any other taxes on amounts held or paid out under the
contract, consult a tax adviser. For more comprehensive information contact the
Internal Revenue Service.
II. Your Retirement Plan
The tax rules applicable to retirement plans vary according to plan type, and
terms and conditions of the plan. To understand what tax rules apply, you need
to know the Tax Code section under which your plan qualifies. Contact your plan
sponsor, local representative or the Company to learn which Tax Code section
applies to your plan.
Plan Types. The contract is designed for use with retirement plans that qualify
under Tax Code sections 401(a) or 403(b). The contract provides the investment
options, payout options, and other features described in this prospectus, but
does not provide tax benefits beyond those provided by the Plan.
The Contract and Retirement Plans. Contract holders and contract participants
are responsible for determining that contributions, distributions and other
transactions satisfy applicable laws. Legal counsel and a tax adviser should be
consulted regarding the suitability of the contract.
Because the plan is not part of the contract, we are not bound by any plan's
terms or conditions.
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III. Withdrawals and Other Distributions
Certain tax rules apply to distributions from the contract. A distribution is
any amount taken from the contract including withdrawals, income payments,
rollovers and any death benefit.
We report the taxable portion of all distributions to the IRS.
Taxation of Distributions.
All distributions from 401(a) and 403(b) plans are taxed as received unless:
>The distribution is rolled over to another plan of the same type or to a
traditional individual retirement annuity/account (IRA) in accordance with the
Tax Code; or
>You made after-tax contributions to the plan. In this case, depending on the
type of distribution, a portion may be excluded from gross income according to
rules detailed in the Tax Code.
Taxation of Death Benefits
In general, payments received by your beneficiaries after your death are taxed
in the same manner as if you had received those payments.
10% Penalty Tax
The Tax Code imposes a 10% penalty tax on the taxable portion of any
distribution from a 401(a) or 403(b) plan, unless one or more of the following
have occurred:
(a) You have attained age 59-1/2;
(b) You have become totally and permanently disabled;
(c) You have died;
(d) You have separated from service with the plan sponsor at or after age 55;
(e) The distribution amount is rolled over into another plan of the same type or
to an IRA in accordance with the terms of the Tax Code;
(f) The distribution amount is made in substantially equal periodic payments (at
least annually) over your life or life expectancy or the joint lives or joint
life expectancies of you and your beneficiary, and you have separated from
service with the plan sponsor; or
(g) The distribution is equal to unreimbursed medical expenses that qualify for
deduction as specified in the Tax Code.
The Tax Code may impose other penalty taxes in other circumstances.
Withholding for Federal Income Tax Liability
Any distributions under the contracts are generally subject to withholding.
Federal income tax liability rates vary according to the type of distribution
and the recipient's tax status.
Generally, under these plans you or a beneficiary may elect not to have tax
withheld from distributions. However, certain distributions from these plans are
subject to a mandatory 20% federal income tax withholding.
Non-resident Aliens. If you or a beneficiary is a non-resident alien, then any
withholding is governed by Tax Code section 1441 based on the individual's
citizenship, the country of domicile and treaty status.
IV. Minimum Distribution Requirements
To avoid certain tax penalties, you and any beneficiary must meet the minimum
distribution requirements imposed by the Tax Code. These rules may dictate one
or more of the following:
>Start date for distributions;
>The time period in which all amounts in your account(s) must be distributed;
and
>Distribution amounts.
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<PAGE>
Start Date. Generally, you must begin receiving distributions by April 1 of the
calendar year following the calendar year in which you attain age 70-1/2 or
retire, whichever occurs later, unless:
>You are a 5% owner, in which case such distributions must begin by April 1st of
the calendar year following the calendar year in which you attain age 70-1/2; or
>Under 403(b) plans, if the Company maintains records of amounts held as of
December 31, 1986. In this case, distribution of these amounts generally must
begin by the end of the calendar year in which you attain age 75 or retire, if
later. However, if you take any distributions in excess of the minimum required
amount, then special rules require that some or all of the December 31, 1986
balance be distributed earlier.
Time Period. We must pay out distributions from the contract over one of the
following time periods:
>Over your life or the joint lives of you and your beneficiary; or
>Over a period not greater than your life expectancy or the joint life
expectancies of you and your beneficiary.
50% Excise Tax. If you fail to receive the minimum required distribution for any
tax year, a 50% excise tax is imposed on the required amount that was not
distributed.
Minimum Distribution of Death Benefits. Different distribution requirements
apply if your death occurs:
>After you begin receiving minimum distributions under the contract; or
>Before you begin receiving such distributions.
If your death occurs after you begin receiving minimum distributions under the
contract, distributions must be made at least as rapidly as under the method in
effect at the time of your death. Tax Code section 401(a)(9) provides specific
rules for calculating the minimum required distributions at your death. The
rules differ, dependent upon:
>Whether your minimum required distribution was calculated each year based on
your single life expectancy or the joint life expectancies of you and your
beneficiary; and
>Whether life expectancy was recalculated.
The rules are complex and any beneficiary should consult with a tax adviser
before electing the method of calculation to satisfy the minimum distribution
requirements.
Should you die before you begin receiving minimum distributions under the
contract, your entire balance must be distributed by December 31 of the calendar
year containing the fifth anniversary of the date of your death. For example, if
you die on September 1, 1999, your entire balance must be distributed to the
beneficiary by December 31, 2004. However, if the distribution begins by
December 31 of the calendar year following the calendar year of your death, then
payments may be made in one of the following time-frames:
>Over the life of the beneficiary; or
>Over a period not extending beyond the life expectancy of the beneficiary.
Start Dates for Spousal Beneficiaries. If the beneficiary is your spouse, the
distribution must begin on or before the later of the following:
>December 31 of the calendar year following the calendar year of your death; or
>December 31 of the calendar year in which you would have attained age 70-1/2.
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<PAGE>
V. Rules Specific to Certain Plans
403(b) Plans
Under Tax Code section 403(b), contributions made by public school systems or
nonprofit healthcare organizations and other Tax Code section 501(c)(3) tax
exempt organizations to purchase annuity contracts for their employees are
generally excludable from the gross income of the employee. Adverse tax
consequences to the plan and/or to you may result if your beneficial interest in
the contract is assigned or transferred to any person except to an alternate
payee under a qualified domestic relations order in accordance with Tax Code
section 414(p) or to the Company as collateral for a loan.
Exclusions from Gross Income. In order to be excludable from gross income, total
annual contributions made by you and your employer cannot exceed the lesser of
the following limits set by the Tax Code.
>The first limit, under Tax Code section 415, is generally the lesser of 25% of
your compensation or $30,000. Compensation means your compensation from the
employer sponsoring the plan and, for years beginning after December 31, 1997,
includes any elective deferrals under Tax Code section 402(g) and any amounts
not includible in gross income under Tax Code section 125 or 457.
>The second limit, which is the exclusion allowance under Tax Code section
403(b), is usually calculated according to a formula that takes into account
your length of employment, any pretax contributions you and your employer have
already made under the plan, and any pretax contributions to certain other
retirement plans.
These two limits apply to your contributions as well as to any contributions
made by your employer on your behalf.
>An additional limit specifically limits your salary reduction contributions to
generally no more than $10,000 annually (subject to indexing). Your own limit
may be higher or lower, depending on certain conditions.
Payments to your account(s) will be excluded from your gross income only if the
plan meets certain nondiscrimination requirements.
Restrictions on Distributions. Tax Code section 403(b)(11) restricts the
distribution under Section 403(b) contracts of:
>Salary reduction contributions made after December 31, 1988;
>Earnings on those contributions; and
>Earnings during such period on amounts held as of December 31, 1988.
Distribution of those amounts may only occur upon your death, attainment of age
59-1/2, separation from service, disability, or financial hardship. Income
attributable to salary reduction contributions and credited on or after January
1, 1989 may not be distributed in the case of hardship.
Transfers from 403(b)(7) Custodial Accounts. If, pursuant to Revenue Ruling
90-24, the Company agrees to accept, under any of the contracts, amounts
transferred from a Tax Code section 403(b)(7) custodial account, such amounts
will be subject to the withdrawal restrictions set forth in Tax Code section
403(b)(7)(A)(ii).
Taxation of Gains Prior to Distribution. You will generally not pay taxes
on any earnings from the annuity contract described in this prospectus until
they are withdrawn. Tax-qualified retirement arrangements under Tax Code
sections 403(b) and 401(a) also defer payment of taxes on earnings until they
are withdrawn. You should know that the annuity contract does not provide any
additional tax deferral of earnings beyond the tax deferral provided by the
tax-qualified retirement arrangement. However, annuities do provide other
features and benefits which may be valuable to you. You should discuss your
decision with your financial representative.
However, the IRS has stated in published rulings that a variable contract owner,
including participants under Tax Code section 403(b) plans, will be considered
the owner of separate account assets if the contract owner possesses incidents
of investment control over the assets. In these circumstances, income and gains
from the separate account assets would be currently includible in the variable
contract owner's gross income.
The Treasury announced that it will issue guidance regarding the extent to which
owners could direct their investments among subaccounts without being treated as
owners of the underlying assets of the separate account. It is possible that the
Treasury's position, when announced, may adversely affect the tax treatment of
existing contracts. The Company therefore reserves the right to modify the
contract as necessary to attempt to prevent the owner from being considered the
federal tax owner of a pro rata share of the assets of the separate account.
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<PAGE>
401(a) Plans
Tax Code section 401(a) permits certain 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 contracts to
accumulate retirement savings under the plans.
Assignment or Transfer of Contracts. Adverse tax consequences to the plan and/or
to you may result if your beneficial interest in the contract is assigned or
transferred to persons other than: a plan participant as a means to provide
benefit payments; an alternate payee under a qualified domestic relations order
in accordance with Tax Code section 414(p); or to the Company as collateral for
a loan.
Exclusion From Gross Income. The Tax Code imposes a maximum limit on annual
payments to your account(s) that may be excluded from gross income. The employer
must calculate this limit under the plan in accordance with Tax Code section
415. This limit is generally the lesser of 25% of your compensation or $30,000.
Compensation means your compensation from the employer sponsoring the plan and,
for years beginning after December 31, 1997, includes any elective deferrals
under Tax Code section 402(g) and any amounts not includible in gross income
under Tax Code sections 125 or 457. The limit applies to your contributions as
well as any contributions made by your employer on your behalf. Your own limits
may be higher or lower, depending on certain conditions. In addition, payments
to your account(s) will be excluded from your gross income only if the plan
meets certain nondiscrimination requirements.
VI. Taxation of the Company
We are taxed as a life insurance company under the Tax Code. Variable Annuity
Separate Account I is not a separate entity from us. Therefore, it is not taxed
separately as a "regulated investment company," but is taxed as part of the
Company.
We automatically apply investment income and capital gains attributable to the
separate account to increase reserves under the contracts. Because of this,
under existing federal tax law we believe that any such income and gains will
not be taxed to the extent that such income and gains are applied to increase
reserves under the contracts. In addition, any foreign tax credits attributable
to the separate account will be first used to reduce any income taxes imposed on
the separate account before being used by the Company.
In summary, we do not expect that we will incur any federal income tax liability
attributable to the separate account and we do not intend to make any provision
for such taxes. However, changes in federal tax laws and/or their interpretation
may result in our being taxed on income or gains attributable to the separate
account. In this case, we may impose a charge against the separate account (with
respect to some or all of the contracts) to set aside provisions to pay such
taxes. We may deduct this amount from the separate account, including from your
account value invested in the subaccounts.
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<PAGE>
Other Topics
- ------------
The Company
Aetna Insurance Company of America (the Company, we) issues the contracts
described in this prospectus and is responsible for providing each contract's
insurance and annuity benefits.
We are a stock life insurance company organized under the insurance laws of the
State of Connecticut in 1990 and redomesticated under the insurance laws of the
State of Florida in 2000. We are an indirect wholly owned subsidiary of Aetna
Inc.
We are engaged in the business of issuing life insurance and annuities.
Prior to January 3, 2000, our principal executive offices are located at:
151 Farmington Avenue
Hartford, Connecticut 06156
Beginning on January 3, 2000, our principal executive offices are located at:
5100 West Lemon Street
Suite 213
Tampa, Florida 33609
Variable Annuity Account I
We established Variable Annuity Account I (the "separate account") in 1994 as a
segregated asset account to fund our variable annuity contracts. The separate
account is registered as a unit investment trust under the Investment Company
Act of 1940 (the "40 Act"). It also meets the definition of "separate account"
under the federal securities laws.
The separate account is divided into "subaccounts." These subaccounts invest
directly in shares of a corresponding fund.
Although we hold title to the assets of the separate account, such assets are
not chargeable with the liabilities of any other business that we conduct.
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.
Performance Reporting
We may advertise different types of historical performance for the subaccounts
including:
>Standardized average annual total returns; and
>Non-standardized average annual total returns.
We may also advertise certain ratings, rankings or other information related to
the Company, the subaccounts or the funds. For further details regarding
performance reporting and advertising, request a Statement of Additional
Information at the number listed in "Contract Overview--Questions."
Standardized Average Annual Total Returns. We calculate standardized average
annual total returns according to a formula prescribed by the SEC. This shows
the percentage return applicable to $1,000 invested in the subaccount over the
most recent one, five and 10-year periods. If the investment option was not
available for the full period, we give a history from the date money was first
received in that option under the separate account.
We include all recurring charges during each period (e.g., mortality and expense
risk charges and administrative expense charges (if any)).
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Non-Standardized Average Annual Total Returns. We calculate non-standardized
average annual total returns in a similar manner as that stated above, except
non-standardized returns 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.
Voting Rights
Each of the subaccounts holds shares in a fund and each is entitled to vote at
regular and special meetings of that fund. Under our current view of applicable
law, we will vote the shares for each subaccount as instructed by persons having
a voting interest in the separate account. Generally, under contracts issued in
connection with section 403(b) or 401(a) plans, you have a fully vested interest
in the value of your employee account, and in your employer account to the
extent of your vested percentage in the plan. Therefore, under such plans you
generally have the right to instruct the contract holder how to direct us to
vote shares attributable to your account. We will vote shares for which
instructions have not been received in the same proportion as those for which we
received instructions. Each person who has a voting interest in the separate
account will receive periodic reports relating to the funds in which he or she
has an interest, as well as any proxy materials and a form on which to give
voting instructions. Voting instructions will be solicited by a written
communication at least 14 days before the meeting.
The number of votes, whole and fractional, any person is entitled to direct will
be determined as of the record date set by any fund in which that person invests
through the subaccounts.
>During the accumulation phase the number of votes is equal to the portion of
your account value invested in the fund, divided by the net asset value of one
share of that fund.
>During the income phase the number of votes is equal to the portion of reserves
set aside for the contract's share of the fund, divided by the net asset value
of one share of that fund.
Contract Distribution
Aetna Life Insurance and Annuity Company (ALIAC), an affiliate of the Company,
serves as the principal underwriter for the securities sold by this prospectus.
ALIAC is registered as a broker-dealer with the SEC and is a member of the
National Association of Securities Dealers, Inc.
As principal underwriter, ALIAC will enter into arrangements with one or more
registered broker-dealers, including affiliates of the Company, to offer and
sell the contracts described in this prospectus. We call these entities
"distributors."
All individuals offering and selling the contracts must be registered
representatives of a broker-dealer, and must be licensed as insurance agents to
sell variable annuity contracts.
Commission Payments. Commissions may be paid to persons who offer and sell the
contracts. Pursuant to agreements between ALIAC (as underwriter) and the
distributor, commissions will be paid in varying amounts. The maximum percentage
amount paid with respect to a given purchase payment is the first-year
percentage which ranges from 1% to a maximum of 7% of the first year of payments
to an account. Renewal commissions may also be paid on payments made after the
first year and may include asset-based service fees. The average of all
commissions and asset-based service fees paid is estimated to equal
approximately 3% of the total payments made over the life of an average
contract. Some sales personnel may receive various types of non-cash
compensation as special sales incentives, including trips and educational and/or
business seminars. However, any such compensation will be paid in accordance
with NASD rules. In addition, additional compensation may be paid to the
Company's supervisory and other management personnel if the overall amount of
investments in funds advised by the Company or its affiliates increases over
time.
The distributor may be reimbursed for certain expenses. The names of the
distributor and the registered representative responsible for your account are
stated in your enrollment materials. No additional deductions or charges are
imposed for commissions and related expenses.
Third Party Compensation Arrangements. Occasionally, ALIAC may:
>Pay commissions and fees to distributors affiliated or associated with the
contract holder, you and/or other contract participants.
>Enter into agreements with entities associated with the contract holder, you
and/or other participants. Through such agreements, ALIAC may pay the entities
for certain services in connection with administering the contract.
In both these circumstances there may be an understanding that the distributor
or entities would endorse the Company as a provider of the contract. You will be
notified if you are purchasing a contract that is subject to these arrangements.
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Contract Modification
We may change the contract as required by federal or state law. In addition, we
may, upon 30 days' written notice to the contract holder, make other changes to
group contracts that would apply only to individuals who become participants
under that contract after the effective date of such changes. If the group
contract holder does not agree to a change, we reserve the right to refuse to
establish new accounts under the contract, and under some contracts, to
discontinue accepting payments to existing accounts. Certain changes will
require the approval of appropriate state or federal regulatory authorities.
In addition, we reserve the right, without contract holder consent, to change
the tables for determining the amount of income payments or the income payment
options available. Such a change would only apply to income payments
attributable to contributions accepted after the date of change.
Legal Matters and Proceedings
We are aware of no material legal proceedings pending which involve the separate
account or the Company as 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.
Payment Delay or Suspension
We reserve the right to suspend or postpone the date of any payment of benefits
or values under the following circumstances:
(a) On any valuation date when the New York Stock Exchange is closed
(except 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 us fairly to determine the value of the
subaccount's assets; or
(c) During any other periods 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.
Transfer of Ownership; Assignment
An assignment of a contract will only be binding on us if it is made in writing
and sent to us at our Service Center. We will use reasonable procedures to
confirm that the assignment is authentic, including verification of signature.
If we fail to follow our own procedures, we will 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 contract holder and the interest
of the annuitant and any beneficiary will be subject to the rights of any
assignee we have on our records.
Account Termination
Where allowed by state law, we reserve the right to terminate an individual
account if the account value is less than $3,500 and this value is not due to
negative investment performance. We will notify you or the contract holder 90
days prior to terminating the account.
Year 2000 Readiness
As a healthcare and financial services enterprise, Aetna Inc. (referred to
collectively with its affiliates and subsidiaries as "Aetna"), is dependent on
information technology ("IT") systems and other systems and facilities, such as
telephones, building access control systems and heating an ventilation equipment
("embedded systems") to conduct its business. The Company also has business
relationships with financial institutions, financial intermediaries, public
utilities and other critical vendors, as well as regulators and customers, who
are themselves reliant on IT and embedded systems to conduct their businesses.
In 1997, the Company's ultimate parent, Aetna, organized a multi-disciplinary
Year 2000 Project Team, including outside consultants. The Year 2000 Project
Team and Aetna's businesses and subsidiaries, including the Company have
developed and are currently executing a comprehensive plan designed to make
their mission-critical IT systems and embedded systems Year 2000 ready. Outside
consultants have reviewed Aetna's overall process, plan and progress to date.
Aetna's plan for IT systems consists of five phases: (i) assessment, (ii)
remediation, (iii) testing, (iv) implementation and (v) Year 2000 approval. At
year end 1997, Aetna, including the Company, had substantially completed the
assessment phase for all of its IT systems. Aetna completed the remediation,
testing and approval of substantially all of its IT systems and those of its
subsidiaries, including all of the IT systems of the Company by June 30, 1999.
The costs of these efforts will not affect the separate account.
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The Company also faces the risk that one or more of its critical suppliers
("external relationships") will not be able to interact with the Company due to
the third party's inability to resolve its own Year 2000 issues, including those
associated with its own external relationships. 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. The Company has completed its inventory of
external relationships and risk rated each external relationship based upon the
potential business impact, available alternatives and cost of substitution. In
the case of mission-critical suppliers such as certain banks, telecommunications
providers and other utilities, mutual fund companies, IT vendors and financial
market data providers, either Aetna or the Company is engaged in discussions
with the third parties and is attempting to obtain detailed information as to
those parties' Year 2000 plans and state of readiness. A significant portion of
the Company's critical external relationships have informed the Company that
they are not aware of any Year 2000 related reason that they will not be able to
perform their obligations to the Company in all material respects.
34
<PAGE>
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
Income Phase Payments
Sales Material and Advertising
Independent Auditors
Financial Statements of the Separate Account
Financial Statements of the Company
35
<PAGE>
Appendix I
Fixed Plus Account
------------------
The Fixed Plus Account is an investment option available during the accumulation
phase.
Amounts allocated to the Fixed Plus Account are held in the Company's general
account which supports insurance and annuity obligations.
Additional information about this option may be found in the contract.
General Disclosure. Interests in the Fixed Plus 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 Plus Account may be
subject to certain generally applicable provisions of the federal securities
laws relating to the accuracy and completeness of the statements. Disclosure in
this Appendix regarding the Fixed Plus Account has not been reviewed by the SEC.
Certain Restrictions. We reserve the right to limit investment in or transfers
to the Fixed Plus Account. You may not elect certain withdrawal options,
including the systematic distribution option, if you have requested a Fixed Plus
Account transfer or withdrawal in the prior 12-month period. Under certain
emergency conditions, we may defer payment of a withdrawal from the Fixed Plus
Account for a period of up to six months or as provided by federal law.
Interest Rates. The Fixed Plus Account guarantees that amounts allocated to this
option will earn the minimum interest rate specified in the contract. We may
credit a higher interest rate from time to time, but the rate we credit will
never fall below the guaranteed minimum specified in the contract. Amounts
applied to the Fixed Plus Account will earn the interest rate in effect at the
time money is applied. Amounts in the Fixed Plus Account will reflect a compound
interest rate as credited by us. The rate we quote is an annual effective yield.
Our 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, we assume the risk of
investment gain or loss by guaranteeing the amounts you allocate to this option
and promising a minimum interest rate and income phase payment.
Requests for Partial Withdrawals. The contract holder or you, if permitted by
the plan, may take up to 20% of the Fixed Plus Account value as a partial
withdrawal in each twelve (12) month period. We determine the amount eligible
for partial withdrawal as of the date we receive a request for partial
withdrawal in good order at our Service Center. The amount allowed for partial
withdrawal is reduced by any Fixed Plus Account withdrawals, transfers or
amounts applied to income phase payment options made in the prior 12 months. In
calculating the 20% limit, we reserve the right to include payments made due to
the election of a systematic distribution option.
Waiver of Partial Withdrawal Limits. We waive the 20% limit if the partial
withdrawal is due to the election of an income phase payment option. We also
waive the 20% limit for withdrawals due to your death before income phase
payments begin. The waiver upon death may only be exercised once, must occur
within six months after your date of death and must be made proportionally from
all subaccounts and the Fixed Plus Account in which the account was invested.
Additionally, we may allow other waivers of the percentage limit on partial
withdrawals to participants in certain plans. You can determine what additional
waivers, if any, apply to you by referring to the contract or certificate.
Requests for Full Withdrawals. If the contract holder or you, if allowed by the
plan, request a full withdrawal of your Fixed Plus Account value, we will pay
any amounts held in the Fixed Plus Account, with interest, in five annual
payments that will be equal to:
>One-fifth of the Fixed Plus Account value on the day the request is received in
good order, reduced by any Fixed Plus Account withdrawals, transfers or amounts
used to fund income phase payments made during the prior 12 months;
>One-fourth of the remaining Fixed Plus Account value 12 months later;
>One-third of the remaining Fixed Plus Account value 12 months later;
>One-half of the remaining Fixed Plus Account value 12 months later; and
>The balance of the Fixed Plus Account value 12 months later.
Once we receive a request for a full withdrawal, no further withdrawals or
transfers will be permitted from the Fixed Plus Account. A full withdrawal from
the Fixed Plus Account may be canceled at any time before the end of the
five-payment period.
36
<PAGE>
Waiver of Full Withdrawal Provisions. We will waive the Fixed Plus Account
five-installment payout for full withdrawals made due to one or more of the
following:
(a) Due to the election of an income phase payment option;
(b) Due to your death during the accumulation phase; or
(c) When the Fixed Plus Account value is $3,500 or less and no withdrawals,
transfers or elections of income phase payment options have been made from
the account within the prior 12 months.
Additionally, we will waive the five-payment full withdrawal provision due to
one or more of the following:
1. Due to hardship from an unforeseeable emergency, as defined by the Tax Code,
if all of the following conditions are met:
>The hardship is certified by the employer;
>The amount is paid directly to you; and
>The amount paid for all withdrawals due to hardship during the previous
12-month period does not exceed 10% of the average value of your account(s) and
all other accounts under the relevant contract during that same period.
2. Due to your separation from service with the employer, provided that all the
following apply:
>The withdrawal is due to your separation from service with your employer;
>The employer certifies that you have separated from service;
>The amount withdrawn is paid directly to you; and
> The amount paid for all partial and full withdrawals due to separation from
service during the previous 12-month period does not exceed 20% of the average
value of all your account(s) and all other accounts under the relevant contract
during that same period.
3. If we terminate your account based on our right to do so for accounts below
$3,500.
4. Additionally, we may allow other waivers of the five installment payout for
full withdrawals to participants in certain plans. You can determine what
additional waivers, if any, apply to you by referring to the contract or
certificate.
Charges. We do not make deductions from amounts in the Fixed Plus Account to
cover mortality and expense risks. We consider these risks when determining the
credited rate.
Transfers. The contract holder or you, if allowed by the plan, may transfer 20%
of your account value held in the Fixed Plus Account in each rolling 12-month
period. We determine the amount eligible for transfer on the day we receive a
transfer request in good order at our Service Center. We will reduce amounts
allowed for transfer by any Fixed Plus Account withdrawals, transfers or amounts
applied to income phase payment options during the prior 12 months. We also
reserve the right to include payments made due to the election of any of the
systematic distribution options. We will waive the percentage limit on transfers
when the value in the Fixed Plus Account is $1,000 or less.
Income Phase. Amounts accumulating under the Fixed Plus Account can be
transferred to subaccounts to fund lifetime variable payments during the income
phase. The contracts do not permit Fixed Plus Account values to fund nonlifetime
income options with variable payments. Availability of subaccounts may vary
during the income phase.
37
<PAGE>
Appendix II
Employee Appointment of Employer as Agent
Under an Annuity Contract
--------------------------
For Plans under Section 403(b) or 401(a) of the Tax Code (except voluntary
Section 403(b) plans)
My employer has adopted a plan under Internal Revenue Tax Code Sections 403(b)
or 401(a) ("Plan") and has purchased an Aetna Insurance Company of America
("Company") group variable annuity contract ("Contract") as the funding vehicle.
Contributions under this Plan will be made by me through salary reduction to an
Employee Account, and by my employer to an Employer Account.
By electing to participate in my employer's Plan, I voluntarily appoint my
employer, who is the Contract Holder, as my agent for the purposes of all
transactions under the Contract in accordance with the terms of the Plan. The
Company is not a party to the Plan and does not interpret the Plan provisions.
As a Participant in the Plan, I understand and agree to the following terms and
conditions:
>I own the value of my Employee Account subject to the restrictions of Sections
403(b)or 401(a) and the terms of the Plan. Subject to the terms of the vesting
schedule in the Plan and the restrictions of Sections 403(b) or 401(a), I have
ownership in the value of my Employer Account.
>I understand that the Company will process transactions only with my
employer's written direction to the Company. I agree to be bound by my
employer's interpretation of the Plan provisions and its written direction to
the Company.
>My employer may permit me to make investment selections under the Employee
Account and/or the Employer Account directly with the Company under the terms
of the Contract. Without my employer's written permission, I will be unable to
make any investment selections under the Contract.
>In the event of my death, my employer is the named Beneficiary under the
terms of the Contract. I have the right to name a personal Beneficiary as
determined under the terms of the Plan and file that Beneficiary election with
my employer. It is my employer's responsibility to direct the Company to
properly pay any death benefits.
38
<PAGE>
Appendix III
Fund Descriptions
-----------------
The investment results of the mutual funds (funds) are likely to differ
significantly and there is no assurance that any of the funds will achieve their
respective investment objectives. Shares of the funds will rise and fall in
value and you could lose money by investing in the funds. Shares of the funds
are not bank deposits and are not guaranteed, endorsed or insured by any
financial institution, the Federal Deposit Insurance Corporation or any other
government agency. Except as noted, all funds are diversified, as defined under
the Investment Company Act of 1940.
>Aetna Balanced VP, Inc. seeks to maximize investment return, consistent with
reasonable safety of principal by investing in a diversified portfolio of one
or more of the following asset classes: stocks, bonds, and cash equivalents,
based on the investment adviser's judgment of which of those sectors or mix
thereof offers the best investment prospects.(1)
>Aetna Income Shares d/b/a Aetna Bond VP seeks to maximize total return,
consistent with reasonable risk, through investments in a diversified
portfolio consisting primarily of debt securities. It is anticipated that
capital appreciation and investment income will both be major factors in
achieving total return.(1)
>Aetna Variable Fund d/b/a Aetna Growth and Income VP seeks to maximize total
return through investments in a diversified portfolio of common stocks and
securities convertible into common stock. It is anticipated that capital
appreciation and investment income will both be major factors in achieving
total return.(1)
>Aetna Variable Encore Fund d/b/a Aetna Money Market VP seeks to provide high
current return, consistent with preservation of capital and liquidity, through
investment in high-quality money market instruments. An investment in the fund
is neither insured nor guaranteed by the U.S. Government.(1)
>Aetna Generation Portfolios, Inc.--Aetna Ascent VP seeks to provide capital
appreciation. The Portfolio is designed for investors who generally have an
investment horizon exceeding 15 years and who have a high level of risk
tolerance.(1)
>Aetna Generation Portfolios, Inc.--Aetna Crossroads VP seeks to provide total
return (i.e., income and capital appreciation, both realized and unrealized).
The Portfolio is designed for investors who generally have an investment
horizon exceeding 10 years and who have a moderate level of risk tolerance.(1)
>Aetna Generation Portfolios, Inc.--Aetna Legacy VP seeks to provide total
return consistent with preservation of capital. The Portfolio is designed for
investors who generally have an investment horizon exceeding five years and
who have a low level of risk tolerance.(1)
>Aetna Variable Portfolios, Inc.--Aetna Growth VP seeks growth of capital
through investment in a diversified portfolio of common stocks and securities
convertible into common stocks believed to offer growth potential.(1)
>Aetna Variable Portfolios, Inc.--Aetna High Yield VP seeks high current
income and growth of capital primarily through investment in a diversified
portfolio of fixed-income securities rated lower than BBB- by Standard and
Poor's Corporation or lower than Baa3 by Moody's Investors Service, Inc.(1)
>Aetna Variable Portfolios, Inc.--Aetna Index Plus Large Cap VP seeks to
outperform the total return performance of the Standard & Poor's 500 Composite
Index (S&P 500), while maintaining a market level of risk.(1)
>Aetna Variable Portfolios, Inc.--Aetna Index Plus Mid Cap VP seeks to
outperform the total return performance of the Standard & Poor's MidCap 400
Index (S&P 400), while maintaining a market level of risk.(1)
>Aetna Variable Portfolios, Inc.--Aetna Index Plus Small Cap VP seeks to
outperform the total return performance of the Standard & Poor's SmallCap 600
Index (S&P 600), while maintaining a market level of risk.(1)
>Aetna Variable Portfolios, Inc.--Aetna International VP seeks long-term
capital growth primarily through investment in a diversified portfolio of
common stocks principally traded in countries outside of the U.S. Aetna
International VP will not target any given level of current income.(1)
>Aetna Variable Portfolios, Inc.--Aetna Real Estate Securities VP 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).(1)
39
<PAGE>
>Aetna Variable Portfolios, Inc.--Aetna Small Company VP 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.(1)
>Aetna Variable Portfolios, Inc.--Aetna Value Opportunity VP seeks growth of
capital primarily through investment in a diversified portfolio of common
stocks and securities convertible into common stocks.(1)(a)
>AIM V.I. Capital Appreciation Fund seeks growth of capital through investment
in common stocks, with emphasis on medium- and small-sized growth
companies.(2)
>AIM V.I. Growth Fund seeks growth of capital primarily by investing in
seasoned and better capitalized companies considered to have strong earnings
momentum.(2)
>AIM V.I. Growth and Income Fund seeks growth of capital with a secondary
objective of current income.(2)
>AIM V.I. Value Fund seeks to achieve long-term growth of capital by investing
primarily in equity securities judged by the fund's investment advisor to be
undervalued relative to the investment advisor's appraisal of the current or
projected earnings of the companies issuing the securities, or relative to
current market values of assets owned by the companies issuing the securities
or relative to the equity market generally. Income is a secondary
objective.(2)
>Calvert Social Balanced Portfolio is a nondiversified portfolio that seeks to
achieve a competitive total return through an actively managed, nondiversified
portfolio of stocks, bonds, and money market instruments which offer income
and capital growth opportunity and which satisfy the investment and social
criteria established for the Portfolio.(3)
>Fidelity Variable Insurance Products Fund (VIP)--Equity-Income Portfolio
seeks reasonable income. The fund will also consider the potential for capital
appreciation. The fund seeks a yield which exceeds the composite yield on the
securities comprising the S&P 500.(4)
>Fidelity Variable Insurance Products Fund (VIP)--Growth Portfolio seeks
capital appreciation by investing primarily in common stocks of companies the
investment adviser believes have above-average growth potential.(4)
>Fidelity Variable Insurance Products Fund (VIP)--Overseas Portfolio seeks
long-term growth of capital by investing in foreign securities, primarily in
common stocks.(4)
>Fidelity Variable Insurance Products Fund II (VIP II)--Contrafund Portfolio
seeks long term capital appreciation by investing primarily in common stocks
of companies whose value the investment adviser believes is not fully
recognized by the public.(4)
>Janus Aspen Series--Aggressive Growth Portfolio is a nondiversified portfolio
that seeks long-term growth of capital. The Portfolio pursues its investment
objective by investing primarily in common stocks selected for their growth
potential, and normally invests at least 50% of its equity assets in
medium-sized companies. Medium-sized companies are those whose market
capitalizations at the time of investment fall within the range of companies
in the S&P MidCap 400 Index. Market capitalization is a commonly used measure
of the size and value of a company. The market capitalizations within the
Index will vary, but as of December 31, 1998, they ranged from approximately
$142 million to $73 billion.(5)
>Janus Aspen Series--Balanced Portfolio seeks long-term capital growth,
consistent with preservation of capital and balanced by current income. The
Portfolio pursues its investment objective by normally investing 40%-60% of
its assets in securities selected primarily for their growth potential and
40%-60% of its assets in securities selected primarily for their income
potential. This Portfolio normally invests at least 25% of its assets in
fixed-income securities.(5)
>Janus Aspen Series--Flexible Income Portfolio seeks to obtain maximum total
return, consistent with preservation of capital. The Portfolio pursues its
investment objective by primarily investing in a wide variety of
income-producing securities such as corporate bonds and notes, government
securities and preferred stock. As a fundamental policy, the Portfolio will
invest at least 80% of its assets in income-producing securities. The
Portfolio may own an unlimited amount of high-yield/high-risk securities, and
these may be a big part of the portfolio. This Portfolio generates total
return from a combination of current income and capital appreciation, but
income is usually the dominant portion.(5)
>Janus Aspen Series--Growth Portfolio seeks long-term growth of capital in a
manner consistent with the preservation of capital. The Portfolio pursues its
investment objective by investing primarily in common stocks selected for
their growth potential. Although the Portfolio can invest in companies of any
size, it generally invests in larger, more established issuers.(5)
40
<PAGE>
>Janus Aspen Series--Worldwide Growth Portfolio seeks long-term growth of
capital in a manner consistent with the preservation of capital. The Portfolio
pursues its investment objective by investing primarily in common stocks of
companies of any size throughout the world. The Portfolio normally invests in
issuers from at least five different countries, including the United States.
The Portfolio may at times invest in fewer than five countries or even a
single country.(5)
>Oppenheimer Global Securities Fund/VA 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.(6)
>Oppenheimer Strategic Bond Fund/VA 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.(6)
>Portfolio Partners, Inc.--MFS Emerging Equities Portfolio seeks long-term
growth of capital.(7)(a)
>Portfolio Partners, Inc.--MFS Research Growth Portfolio seeks long-term
growth of capital and future income.(7)(a)
>Portfolio Partners, Inc.--MFS Value Equity Portfolio seeks capital
appreciation.(7)(a)
>Portfolio Partners, Inc.--Scudder International Growth Portfolio seeks
long-term growth of capital.(7)(b)
>Portfolio Partners, Inc.--T. Rowe Price Growth Equity Portfolio seeks
long-term capital growth, and, secondarily, increasing dividend income.(7)(c)
Investment Advisers for each of the Funds:
(1) Aeltus Investment Management, Inc.
(a) Bradley, Foster & Sargent, Inc. (subadviser)
(2) AIM Advisors, Inc.
(3) Calvert Asset Management Company, Inc.
(4) Fidelity Management & Research Company
(5) Janus Capital Corporation
(6) OppenheimerFunds, Inc.
(7) Aetna Life Insurance and Annuity Company (adviser);
(a) Massachusetts Financial Services Company (subadviser)
(b) Scudder Kemper Investments, Inc. (subadviser)
(c) T. Rowe Price Associates, Inc. (subadviser)
41
<PAGE>
For Master Applications Only
----------------------------
I hereby acknowledge receipt of an Account I prospectus dated December 17, 1999,
as well as all current prospectuses for the funds available under the Contracts.
________ Please send an Account I Statement of Additional Information (Form No.
SAI.87131-99) dated December 17, 1999.
CONTRACT HOLDER'S SIGNATURE
DATE
PROS.87131-99
42
<PAGE>
- --------------------------------------------------------------------------------
VARIABLE ANNUITY ACCOUNT I
OF
AETNA INSURANCE COMPANY OF AMERICA
- --------------------------------------------------------------------------------
Statement of Additional Information dated December 17, 1999
Retirement Options for Education Institutions
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 December 17, 1999.
A free prospectus is available upon request from the local Aetna Insurance
Company of America office or by writing to or calling:
Aetna Financial Services
Annuity Services
151 Farmington Avenue
Hartford, Connecticut 06156-1277
1-800-531-4547
Read the prospectus before you invest. Unless otherwise indicated, 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................................................................................. 3
General.................................................................................... 3
Average Annual Total Return Quotations..................................................... 3
Income Phase Payments............................................................................ 6
Sales Material and Advertising................................................................... 7
Independent Auditors............................................................................. 7
Financial Statements of the Separate Account..................................................... S-1
Financial Statements of Aetna Insurance Company of America....................................... F-1
</TABLE>
<PAGE>
GENERAL INFORMATION AND HISTORY
Aetna Insurance Company of America (the Company, we, us) issues the contracts
described in the prospectus and is responsible for providing each contract's
insurance and annuity benefits. We are a stock life insurance company which was
organized under the insurance laws of the State of Connecticut in 1990 and
redomesticated under the laws of the State of Florida in 2000. We are an
indirect wholly-owned subsidiary of Aetna Inc. Prior to January 3, 2000, our
Home Office address is 151 Farmington Avenue, Hartford, Connecticut 06156.
Beginning on January 3, 2000, our Home Office is located at 5100 West Lemon
Street, Suite 213, Tampa, Florida 33609.
Aetna Life Insurance and Annuity Company (ALIAC), a registered broker-dealer
under the Securities Exchange Act of 1934, serves as the principal underwriter
for the separate account. ALIAC is also a registered investment adviser under
the Investment Advisers Act of 1940.
Other than the mortality and expense risk charge and administrative expense
charge described in the prospectus, all expenses incurred in the operations of
the separate account are borne by the Company. See "Fees" in the prospectus. We
receive reimbursement for certain administrative costs from some advisers of the
funds used as funding options under the contract. These fees generally range up
to 0.425%. 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.
From this point forward, the term "contract(s)" refers only to those offered
through the prospectus.
VARIABLE ANNUITY ACCOUNT I
Variable Annuity Account I 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.
Payments to accounts 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. We 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. The funds currently available under the contracts are as
follows:
<TABLE>
<S> <C>
Aetna Ascent VP Fidelity Variable Insurance Products Fund (VIP) Equity-Income
Aetna Balanced VP, Inc. Portfolio
Aetna Income Shares d/b/a Aetna Bond VP Fidelity Variable Insurance Products Fund (VIP) Growth
Aetna Crossroads VP Portfolio
Aetna Growth VP Fidelity Variable Insurance Products Fund (VIP) Overseas
Aetna Variable Fund d/b/a Aetna Growth and Income VP Portfolio
Aetna High Yield VP Fidelity Variable Insurance Products Fund II (VIP II)
Aetna Index Plus Large Cap VP Contrafund Portfolio
Aetna Index Plus Mid Cap VP Janus Aspen Aggressive Growth Portfolio
Aetna Index Plus Small Cap VP Janus Aspen Balanced Portfolio
Aetna International VP Janus Aspen Flexible Income Portfolio
Aetna Legacy VP Janus Aspen Growth Portfolio
Aetna Variable Encore Fund d/b/a Aetna Money Market VP Janus Aspen Worldwide Growth Portfolio
Aetna Real Estate Securities VP Oppenheimer Global Securities Fund/VA
Aetna Small Company VP Oppenheimer Strategic Bond Fund/VA
Aetna Value Opportunity VP Portfolio Partners MFS Emerging Equities Portfolio
AIM V.I. Capital Appreciation Fund Portfolio Partners MFS Research Growth Portfolio
AIM V.I. Growth Fund Portfolio Partners MFS Value Equity Portfolio
AIM V.I. Growth and Income Fund Portfolio Partners Scudder International Growth Portfolio
AIM V.I. Value Fund Portfolio Partners T. Rowe Price Growth Equity Portfolio
Calvert Social Balanced 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.
-2-
<PAGE>
OFFERING AND PURCHASE OF CONTRACTS
The Company is the depositor and ALIAC is the principal underwriter for the
securities sold under the prospectus. ALIAC offers the contracts through life
insurance agents licensed to sell variable annuities who are registered
representatives of ALIAC or of other registered broker-dealers who have sales
agreements with ALIAC. The offering of the contracts is continuous. A
description of the manner in which the contracts are purchased can be found in
the prospectus under the sections titled "Contract Purchase and Participation"
and "Your Account Value."
PERFORMANCE DATA
GENERAL
From time to time, we may advertise different types of historical performance
for the subaccounts of the separate account available under the contracts. We
may advertise the "standardized average annual total returns," calculated in a
manner prescribed by the Securities and Exchange Commission (the "standardized
total return"), as well as "non-standardized total 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 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,
adjusted to reflect the deduction of the maximum recurring charges under the
contracts during each period. These charges will be deducted on a pro rata basis
in the case of fractional periods.
The non-standardized figures will be calculated in a similar manner, except that
they 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 contract value and/or 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 show the average annual standardized and non-standardized total
return quotation figures for the periods ended December 31, 1998 for the
subaccounts under the contract. Both sets of returns below reflect a mortality
and expense risk charge of 1.00% annually.
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
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 non-standardized
performance, the "Since Inception" column shows average annual total return
since the fund's inception date.
-3-
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------
Date
Contributions
STANDARDIZED First Received
Under the
Separate Account
- ------------------------------------------------------------------------------------------------------------------------------------
Since
SUBACCOUNT 1 Year 5 Year 10 Year Inception*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Ascent VP 3.27% 15.11% 07/31/1996
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 15.77% 17.17% 02/29/1996
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP 7.07% 5.55% 01/31/1996
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 4.86% 13.44% 07/31/1996
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 36.31% 35.70% 05/30/1997
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP 13.35% 20.89% 01/31/1996
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna High Yield VP (7.44%) 05/04/1998
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 30.29% 31.42% 10/31/1996
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Mid Cap VP 7.93% 05/04/1998
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Small Cap VP (11.67%) 05/04/1998
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna International VP (3.63%) 05/05/1998
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 5.88% 10.56% 05/31/1996
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP(1) 4.41% 4.37% 02/29/1996
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Real Estate Securities VP (12.14%) 05/05/1998
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 0.09% 12.72% 05/30/1997
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 21.18% 27.22% 05/30/1997
- ------------------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 15.12% 15.23% 11/28/1997
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 10.52% 16.03% 01/31/1996
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 38.10% 24.39% 01/31/1996
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 11.63% 11.07% 03/29/1996
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 28.69% 24.33% 03/29/1996
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 32.92% 14.45% 03/29/1996
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 32.95% 23.32% 03/29/1996
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 8.02% 10.32% 04/30/1996
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 34.31% 23.01% 03/29/1996
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 27.64% 24.96% 01/31/1996
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund/VA 12.97% 13.63% 05/30/1997
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund/VA 1.87% 4.69% 05/30/1997
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Emerging Equities Portfolio 28.38% 24.34% 11/28/1997
- ------------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/Portfolio Partners MFS Emerging Equities(2) 28.38% 13.00% 01/31/1996
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Research Growth Portfolio 21.78% 17.70% 11/28/1997
- ------------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/Portfolio Partners MFS
Research Growth(2) 21.78% 3.94% 03/30/1996
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Value Equity Portfolio 25.48% 24.80% 11/28/1997
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners Scudder International Growth Portfolio 17.91% 17.67% 11/28/19997
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners T. Rowe Price Growth Equity Portfolio 26.33% 26.25% 11/28/1997
- ------------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/Portfolio Partners T. Rowe Price Growth
Equity(2) 26.33% 21.04% 01/31/1996
- ------------------------------------------------------------------------------------------------------------------------------------
</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. As of the date of this statement
of additional information, the AIM V.I. Capital Appreciation Fund, AIM V.I.
Growth Fund, AIM V.I. Growth and Income Fund, and the AIM V.I. Value Fund had
not been offered under this separate account. Therefore, no standardized
performance is presented for these funds.
* 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 seven-day period ended
December 31, 1998 (on an annualized basis) was 4.02%. Current yield more closely
reflects current earnings than does total return. The current yield reflects the
deduction of all charges under the contract that are deducted from the total
return quotations shown above.
(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.
-4-
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------
Fund
NON-STANDARDIZED Inception
Date
- ------------------------------------------------------------------------------------------------------------------------------------
Since
SUBACCOUNT 1 Year 3 Years 5 Years 10 Years Inception**
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aetna Ascent VP 3.27% 14.46% 15.40% 07/05/1995
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 15.77% 16.98% 14.75% 11.85% 04/03/1989
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP(1) 7.07% 5.59% 5.58% 8.19%
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 4.86% 12.81% 13.62% 07/05/1995
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 36.31% 34.02% 12/13/1996
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP(1) 13.35% 21.55% 18.19% 15.46%
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna High Yield VP (1.27%) 0.15% 12/10/1997
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 30.29% 32.00% 09/16/1996
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Mid Cap VP 23.06% 26.08% 12/16/1997
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Small Cap VP (2.34%) 1.77% 12/19/1997
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Internatioanl VP 17.74% 20.34% 12/22/1997
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 5.88% 10.71% 11.50% 07/05/1995
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP(1)(2) 4.41% 4.38% 4.24% 4.70%
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Real Estate Securities VP (13.71%) (10.20%) 12/15/1997
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 0.09% 16.05% 12/27/1996
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 21.18% 29.82% 12/13/1996
- ------------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund 18.13% 15.62% 16.08% 17.60% 05/05/1993
- ------------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth Fund 26.43% 23.18% 21.29% 05/02/1994
- ------------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth and Income Fund 32.80% 24.95% 20.24% 19.68% 05/05/1993
- ------------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Value Fund 31.10% 22.29% 20.51% 20.70% 05/05/1993
- ------------------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio(1) 15.12% 15.12% 13.44% 11.76%
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio(1) 10.52% 16.62% 17.60% 14.48%
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio(1) 38.10% 24.23% 20.53% 18.23%
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio(1) 11.63% 11.36% 8.61% 8.99%
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 28.69% 23.81% 27.37% 01/03/1995
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 32.92% 16.58% 18.16% 20.71% 09/13/1993
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 32.95% 22.73% 17.93% 18.31% 09/13/1993
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 8.02% 8.92% 9.23% 8.77% 09/13/1993
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 34.31% 24.16% 20.21% 19.68% 09/13/1993
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 27.64% 25.40% 20.11% 22.80% 09/13/1993
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund/VA 12.97% 16.88% 8.57% 11.37% 11/12/1990
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund/VA 1.87% 6.75% 5.76% 5.72% 05/03/1993
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Emerging Equities Portfolio 28.38% 11/28/1997
- ------------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/Portfolio Partners MFS Emerging Equities(3) 28.38% 12.71% 14.14% 19.80%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Research Growth Portfolio 21.78% 11/28/1997
- ------------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/Portfolio Partners MFS
Research Growth(3) 21.78% 3.48% 7.08% 10.15%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Value Equity Portfolio 25.48% 11/28/1997
- ------------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/Portfolio Partners MFS Value Equity(3) 25.48% 19.25% 15.78% 13.58%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners Scudder International Growth Portfolio 17.91% 11/28/1997
- ------------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio Class A/Portfolio Partners Scudder
International Growth(3) 17.91% 13.07% 9.32% 10.90%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners T. Rowe Price Growth Equity Portfolio 26.33% 11/28/1997
- ------------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/Portfolio Partners T. Rowe Price Growth
Equity(3) 26.33% 21.64% 19.54% 19.28% 01/09/1989
- ------------------------------------------------------------------------------------------------------------------------------------
</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 seven-day period ended
December 31, 1998 (on an annualized basis) was 4.02%. Current yield more closely
reflects current earnings than does total return. The current yield reflects the
deduction of all charges under the contract that are deducted from the total
return quotations shown above.
(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 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.
-5-
<PAGE>
INCOME PHASE PAYMENTS
When you begin receiving payments under the contract during the income phase
(see "Income Phase" in the prospectus), the value of your account is determined
using accumulation unit values as of the tenth valuation before the first
payment is due. Such value (less any applicable premium tax) is applied to
provide payments to you in accordance with the payment option and investment
options elected.
The annuity option tables found in the contract show, for each option, the
amount of the first payment for each $1,000 of value applied. Thereafter, the
variable 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 payments will increase thereafter only to the extent that the net
investment rate increases by more than 5% on an annual basis. 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 income phase 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 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 to the next (see "Your Account
Value" in the prospectus); such fluctuations reflect changes in the net
investment factor for the appropriate subaccount(s) (with a ten valuation lag
which gives the Company time to process 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 income phase.
EXAMPLE:
- --------
Assume that, at the date payments are to begin, there are 3,000 accumulation
units credited under a particular contract or account and that the value of an
accumulation unit for the tenth valuation 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 payment option elected, a first monthly variable
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 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 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 (assume such value to be $13.504376)
to produce an annuity unit value of $13.523359 for the valuation occurring when
the second payment is due.
The second monthly payment is then determined by multiplying the number of
annuity units by the current annuity unit value, or 20.414 times $13.523359,
which produces a payment of $276.07.
*If an assumed net investment rate of 5% is elected, the appropriate factor to
neutralize such assumed rate would be .9998663.
-6-
<PAGE>
SALES MATERIAL AND ADVERTISING
We may include hypothetical illustrations in our sales literature that explain
the mathematical principles of dollar cost averaging, compounded interest, tax
deferred accumulation, and the mechanics of variable annuity contracts. We may
also discuss the difference between variable annuity contracts and other types
of savings or investment products such as 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
Service, 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 categorize 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 such as The Wall
Street Journal, Money magazine, USA Today and The VARDS Report.
We may provide in advertising, sales literature, periodic publications or other
materials information on various topics of interest to current and prospective
contract 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 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.
-7-
<PAGE>
FINANCIAL STATEMENTS OF THE SEPARATE ACCOUNT
VARIABLE ANNUITY ACCOUNT I
Index
<TABLE>
<S> <C>
Statement of Assets and Liabilities........................................ S-2
Statements of Operations and Changes in Net Assets......................... S-6
Condensed Financial Information............................................ S-8
Notes to Financial Statements.............................................. S-10
Independent Auditors' Report............................................... S-26
</TABLE>
S-1
<PAGE>
Variable Annuity Account I
Statement of Assets and Liabilities - December 31, 1998
ASSETS:
Investments at net asset value: (Note 1)
<TABLE>
<CAPTION>
Net
Shares Cost Assets
------ ---- ------
<S> <C> <C> <C>
Aetna Ascent VP: 104,739 $ 1,543,462 $ 1,468,439
Aetna Balanced VP: 466,540 7,374,965 7,338,678
Aetna Bond VP: 628,747 8,330,232 8,211,438
Aetna Crossroads VP: 58,972 785,680 785,501
Aetna Growth and Income VP: 982,351 33,447,658 31,297,697
Aetna Growth VP: 451,105 5,319,141 6,103,448
Aetna Index Plus Large Cap VP: 849,667 13,688,423 14,945,637
Aetna International VP: 3,797 41,261 44,011
Aetna Legacy VP: 133,748 1,660,761 1,654,467
Aetna Money Market VP: 1,975,904 26,236,238 26,452,214
Aetna Real Estate Securities VP: 4,651 43,996 39,671
Aetna Small Company VP: 294,544 3,279,774 3,767,223
Aetna Value Opportunity VP: 434,406 5,636,469 6,259,793
Alger American Funds:
Balanced Portfolio: 108,171 1,100,460 1,404,059
Income and Growth Portfolio: 310,627 3,299,115 4,075,424
Leveraged AllCap Portfolio: 104,148 2,270,569 3,634,760
American Century Investments:
Balanced Fund: 66,794 515,655 557,006
International Fund: 243,103 1,624,446 1,852,446
Calvert Social Balanced Portfolio: 124,088 259,747 265,177
Fidelity Investments Variable Insurance Product Fund:
Equity-Income Portfolio: 2,013,434 47,204,298 51,181,501
Growth Portfolio: 854,304 31,178,486 38,326,577
High Income Portfolio: 1,512,768 19,151,904 17,442,220
Overseas Portfolio: 206,337 4,004,605 4,136,808
Fidelity Investments Variable Insurance Product Fund II:
Asset Manager Portfolio: 447,745 7,570,709 8,131,050
Contrafund Portfolio: 1,620,361 31,130,912 39,601,618
Index 500 Portfolio: 326,815 38,214,324 46,168,328
Investment Grade Bond Portfolio: 94,123 1,128,605 1,219,839
Insurance Management Series:
American Leaders Fund II: 6,824,761 109,150,633 147,960,825
Equity Income Fund II: 2,004,210 24,767,711 28,359,570
Growth Strategies Fund II: 1,962,559 28,120,682 35,149,425
High Income Bond Fund II: 2,717,067 28,282,860 29,670,377
International Equity Fund II: 1,796,331 21,260,207 27,645,530
Prime Money Fund II: 4,666,589 4,665,273 4,666,589
U.S. Government Securities Fund II: 585,366 6,085,740 6,526,831
Utility Fund II: 1,734,312 20,695,200 26,482,939
Janus Aspen Series:
Aggressive Growth Portfolio: 386,923 9,583,635 10,675,204
Balanced Portfolio: 921,338 16,804,227 20,730,112
Flexible Income Portfolio: 386,017 4,666,753 4,655,365
</TABLE>
S-2
<PAGE>
Variable Annuity Account I
Statement of Assets and Liabilities - December 31, 1998 (continued):
<TABLE>
<CAPTION>
Net
Shares Cost Assets
------ ---- ------
<S> <C> <C> <C>
Growth Portfolio: 774,377 $ 14,923,215 $ 18,228,835
Worldwide Growth Portfolio: 2,418,350 60,413,840 70,349,793
Lexington Emerging Markets Fund: 110,605 1,133,387 627,133
Lexington Natural Resources Trust Fund: 78,858 1,151,725 869,806
MFS Funds:
Total Return Series: 904,731 15,015,459 16,393,724
Worldwide Government Series: 70,397 727,002 765,918
Oppenheimer Funds:
Aggressive Growth Fund: 75,688 3,107,624 3,393,073
Global Securities Fund: 93,561 1,992,083 2,064,889
Growth & Income Fund: 561,831 11,689,993 11,506,303
Strategic Bond Fund: 868,342 4,445,390 4,445,909
Portfolio Partners, Inc. (PPI):
PPI MFS Emerging Equities Portfolio: 666,143 30,422,970 36,930,956
PPI MFS Research Growth Portfolio: 1,700,156 17,369,033 20,299,859
PPI MFS Value Equity Portfolio: 155,399 5,324,611 5,881,864
PPI Scudder International Growth Portfolio: 75,410 1,213,809 1,263,880
PPI T. Rowe Price Growth Equity Portfolio: 535,071 23,443,670 29,594,758
------------ ------------
NET ASSETS $762,498,627 $891,504,497
============ ============
</TABLE>
Net assets represented by:
Reserves for annuity contracts in accumulation and payment period:
(Notes 1 and 5)
<TABLE>
<S> <C>
Aetna Ascent VP:
Annuity contracts in accumulation ................................................... $ 1,468,439
Aetna Balanced VP:
Annuity contracts in accumulation ................................................... 7,338,678
Aetna Bond VP:
Annuity contracts in accumulation ................................................... 8,211,438
Aetna Crossroads VP:
Annuity contracts in accumulation ................................................... 785,501
Aetna Growth and Income VP:
Annuity contracts in accumulation ................................................... 31,263,322
Annuity contracts in payment period ................................................. 34,375
Aetna Growth VP:
Annuity contracts in accumulation ................................................... 6,066,474
Annuity contracts in payment period ................................................. 36,974
Aetna Index Plus Large Cap VP:
Annuity contracts in accumulation ................................................... 14,945,637
Aetna International VP:
Annuity contracts in accumulation ................................................... 44,011
Aetna Legacy VP:
Annuity contracts in accumulation ................................................... 1,628,799
Annuity contracts in payment period ................................................. 25,668
Aetna Money Market VP:
Annuity contracts in accumulation ................................................... 26,452,214
Aetna Real Estate Securities VP:
Annuity contracts in accumulation ................................................... 39,671
Aetna Small Company VP:
Annuity contracts in accumulation ................................................... 3,767,223
</TABLE>
S-3
<PAGE>
Variable Annuity Account I
Statement of Assets and Liabilities - December 31, 1998 (continued):
<TABLE>
<S> <C>
Aetna Value Opportunity VP:
Annuity contracts in accumulation .................. $ 6,259,793
Alger American Funds:
Balanced Portfolio:
Annuity contracts in accumulation .................. 1,404,059
Income and Growth Portfolio:
Annuity contracts in accumulation .................. 4,075,424
Leveraged AllCap Portfolio:
Annuity contracts in accumulation .................. 3,634,760
American Century Investments:
Balanced Fund:
Annuity contracts in accumulation .................. 557,006
International Fund:
Annuity contracts in accumulation .................. 1,852,446
Calvert Social Balanced Portfolio:
Annuity contracts in accumulation .................. 265,177
Fidelity Investments Variable Insurance Product Fund:
Equity-Income Portfolio:
Annuity contracts in accumulation .................. 51,181,501
Growth Portfolio:
Annuity contracts in accumulation .................. 38,326,577
High Income Portfolio:
Annuity contracts in accumulation .................. 17,442,220
Overseas Portfolio:
Annuity contracts in accumulation .................. 4,136,808
Fidelity Investments Variable Insurance Product Fund II:
Asset Manager Portfolio:
Annuity contracts in accumulation .................. 8,131,050
Contrafund Portfolio:
Annuity contracts in accumulation .................. 39,601,618
Index 500 Portfolio:
Annuity contracts in accumulation .................. 46,168,328
Investment Grade Bond Portfolio:
Annuity contracts in accumulation .................. 1,219,839
Insurance Management Series:
American Leaders Fund II:
Annuity contracts in accumulation .................. 147,843,450
Annuity contracts in payment period ................ 117,375
Equity Income Fund II:
Annuity contracts in accumulation .................. 28,317,427
Annuity contracts in payment period ................ 42,143
Growth Strategies Fund II:
Annuity contracts in accumulation .................. 35,149,425
High Income Bond Fund II:
Annuity contracts in accumulation .................. 29,644,378
Annuity contracts in payment period ................ 25,999
International Equity Fund II:
Annuity contracts in accumulation .................. 27,616,968
Annuity contracts in payment period ................ 28,562
</TABLE>
S-4
<PAGE>
Variable Annuity Account I
Statement of Assets and Liabilities - December 31, 1998 (continued):
<TABLE>
<S> <C>
Prime Money Fund II:
Annuity contracts in accumulation .................. $ 4,666,589
U.S. Government Securities Fund II:
Annuity contracts in accumulation .................. 6,526,831
Utility Fund II:
Annuity contracts in accumulation .................. 26,418,108
Annuity contracts in payment period ................ 64,831
Janus Aspen Series:
Aggressive Growth Portfolio:
Annuity contracts in accumulation .................. 10,675,204
Balanced Portfolio:
Annuity contracts in accumulation .................. 20,730,112
Flexible Income Portfolio:
Annuity contracts in accumulation .................. 4,655,365
Growth Portfolio:
Annuity contracts in accumulation .................. 18,191,718
Annuity contracts in payment period ................ 37,117
Worldwide Growth Portfolio:
Annuity contracts in accumulation .................. 70,349,793
Lexington Emerging Markets Fund:
Annuity contracts in accumulation .................. 627,133
Lexington Natural Resources Trust Fund:
Annuity contracts in accumulation .................. 869,806
MFS Funds:
Total Return Series:
Annuity contracts in accumulation .................. 16,393,724
Worldwide Government Series:
Annuity contracts in accumulation .................. 765,918
Oppenheimer Funds:
Aggressive Growth Fund:
Annuity contracts in accumulation .................. 3,393,073
Global Securities Fund:
Annuity contracts in accumulation .................. 2,064,889
Growth & Income Fund:
Annuity contracts in accumulation .................. 11,506,303
Strategic Bond Fund:
Annuity contracts in accumulation .................. 4,445,909
Portfolio Partners, Inc. (PPI):
PPI MFS Emerging Equities Portfolio:
Annuity contracts in accumulation .................. 36,930,956
PPI MFS Research Growth Portfolio:
Annuity contracts in accumulation .................. 20,299,859
PPI MFS Value Equity Portfolio:
Annuity contracts in accumulation .................. 5,846,092
Annuity contracts in payment period ................ 35,772
PPI Scudder International Growth Portfolio:
Annuity contracts in accumulation .................. 1,263,880
PPI T. Rowe Price Growth Equity Portfolio:
Annuity contracts in accumulation .................. 29,594,758
------------
$891,504,497
============
</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,
1998 1997
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Income: (Notes 1, 3 and 5)
Dividends .......................................................... $ 36,268,129 $ 13,569,495
Expenses: (Notes 2 and 5)
Valuation period deductions ........................................ (10,257,915) (5,565,448)
------------- -------------
Net investment income ............................................... 26,010,214 8,004,047
------------- -------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on sales of investments: (Notes 1, 4 and 5)
Proceeds from sales ................................................ 438,314,806 170,076,421
Cost of investments sold ........................................... 412,797,023 157,030,583
------------- -------------
Net realized gain .................................................. 25,517,783 13,045,838
Net unrealized gain on investments: (Note 5)
Beginning of year .................................................. 62,528,168 13,871,018
End of year ........................................................ 129,005,870 62,528,168
------------- -------------
Net change in unrealized gain ..................................... 66,477,702 48,657,150
------------- -------------
Net realized and unrealized gain on investments ..................... 91,995,485 61,702,988
------------- -------------
Net increase in net assets resulting from operations ................ 118,005,699 69,707,035
------------- -------------
FROM UNIT TRANSACTIONS:
Variable annuity contract purchase payments ......................... 168,355,044 230,999,062
Transfers from the Company's fixed account options .................. 75,081,637 55,038,062
Redemptions by contract holders ..................................... (31,854,396) (14,064,451)
Annuity payments .................................................... (83,247) (14,846)
Other ............................................................... 1,337,372 99,606
------------- -------------
Net increase in net assets from unit transactions (Note 5) ......... 212,836,410 272,057,433
------------- -------------
Change in net assets ................................................ 330,842,109 341,764,468
NET ASSETS:
Beginning of year ................................................... 560,662,388 218,897,920
------------- -------------
End of year ......................................................... $ 891,504,497 $ 560,662,388
============= =============
</TABLE>
See Notes to Financial Statements
S-6
<PAGE>
Variable Annuity Account I
Condensed Financial Information - Year Ended December 31, 1998
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Value
Per Unit Increase (Decrease) Units
-------- in Value of Outstanding Reserves
Beginning End of Accumulation at End at End
of Year Year Unit of Year of Year
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aetna Ascent VP:
AICA I $ 14.983 $ 15.409 2.84% 83,798.0 $ 1,291,246
AICA II 10.694 10.059 ( 5.94%) (1) 17,615.1 177,193
- ---------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP:
AICA I 14.228 16.405 15.30% 369,651.5 6,063,987
AICA II 10.708 11.312 5.64% (1) 112,689.3 1,274,691
- ---------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP:
AICA I 11.201 11.943 6.62% 500,098.0 5,972,864
AICA II 10.118 10.606 4.82% (1) 211,071.3 2,238,574
- ---------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP:
AICA I 14.054 14.676 4.43% 40,711.8 597,491
AICA II 10.504 10.270 ( 2.23%) (1) 18,307.3 188,010
- ---------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP:
AICA I 16.354 18.461 12.88% 1,217,448.2 22,475,910
AICA II 11.063 11.063 0.00% (1) 794,334.9 8,787,412
Annuity contracts in payment period 34,375
- ---------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP:
AICA I 13.158 17.862 35.75% 284,771.1 5,086,654
AICA II 11.455 12.977 13.29% (1) 75,505.9 979,820
Annuity contracts in payment period 36,974
- ---------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP:
AICA I 14.414 18.704 29.76% 654,766.9 12,246,441
AICA II 11.157 12.535 12.35% (1) 215,324.4 2,699,196
- ---------------------------------------------------------------------------------------------------------------------------
Aetna International VP:
AICA I 10.149 9.754 ( 3.89%) (1) 1,816.4 17,717
AICA II 9.851 9.764 ( 0.88%) (2) 2,693.0 26,294
- ---------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP:
AICA I 13.112 13.825 5.44% 95,815.1 1,324,652
AICA II 10.404 10.380 ( 0.23%) (1) 29,301.4 304,147
Annuity contracts in payment period 25,668
- ---------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP:
AICA I 10.900 11.335 3.99% 2,041,170.4 23,136,033
AICA II 10.097 10.371 2.71% (1) 319,752.5 3,316,181
- ---------------------------------------------------------------------------------------------------------------------------
Aetna Real Estate Securities VP:
AICA I 10.115 8.863 (12.38%) (1) 2,216.9 19,648
AICA II 9.918 8.872 (10.55%) (1) 2,256.8 20,023
- ---------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP:
AICA I 13.638 13.595 ( 0.32%) 225,981.5 3,072,277
AICA II 11.126 9.724 (12.60%) (1) 71,464.8 694,946
- ---------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP:
AICA I 13.246 15.985 20.68% 311,396.8 4,977,799
AICA II 11.097 11.644 4.93% (1) 110,096.6 1,281,994
- ---------------------------------------------------------------------------------------------------------------------------
Alger American Funds:
Balanced Portfolio:
AICA I 12.657 16.412 29.67% 85,549.6 1,404,059
- ---------------------------------------------------------------------------------------------------------------------------
Income and Growth Portfolio:
AICA I 15.229 19.880 30.54% 205,001.6 4,075,424
- ---------------------------------------------------------------------------------------------------------------------------
Leveraged AllCap Portfolio:
AICA I 13.203 20.547 55.62% 176,900.2 3,634,760
- ---------------------------------------------------------------------------------------------------------------------------
American Century Investments:
Balanced Fund:
AICA I 12.885 14.709 14.16% 37,869.0 557,006
- ---------------------------------------------------------------------------------------------------------------------------
International Fund:
AICA I 13.538 15.853 17.10% 116,852.2 1,852,446
- ---------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio:
AICA I 9.976 11.437 14.65% 12,287.9 140,540
AICA II 10.596 11.208 5.78% (1) 11,120.5 124,637
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-7
<PAGE>
Variable Annuity Account I
Condensed Financial Information - Year Ended December 31, 1998 (continued):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Value
Per Unit Increase (Decrease) Units
-------- in Value of Outstanding Reserves
Beginning End of Accumulation at End at End
of Year Year Unit of Year of Year
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fidelity Investments Variable
Insurance Product Fund:
Equity-Income Portfolio:
AICA I $ 14.974 $ 16.482 10.07% 2,792,888.9 $ 46,031,203
AICA II 10.957 10.806 ( 1.38%) (1) 476,634.1 5,150,298
- ----------------------------------------------------------------------------------------------------------------------------
Growth Portfolio:
AICA I 13.320 18.320 37.54% 1,869,305.9 34,245,624
AICA II 11.094 13.253 19.46% (1) 307,937.0 4,080,953
- ----------------------------------------------------------------------------------------------------------------------------
High Income Portfolio:
AICA I 13.238 12.488 ( 5.67%) 1,196,921.6 14,946,591
AICA II 10.292 9.222 (10.40%) (1) 270,626.6 2,495,629
- ----------------------------------------------------------------------------------------------------------------------------
Overseas Portfolio:
AICA I 12.590 13.997 11.18% 261,377.1 3,658,529
AICA II 11.082 10.487 ( 5.37%) (1) 45,606.3 478,279
Fidelity Investments Variable Insurance
- ----------------------------------------------------------------------------------------------------------------------------
Product Fund II:
Asset Manager Portfolio:
AICA I 13.888 15.754 13.44% 408,018.8 6,428,060
AICA II 10.607 11.165 5.26% (1) 152,533.0 1,702,990
- ----------------------------------------------------------------------------------------------------------------------------
Contrafund Portfolio:
AICA I 14.802 18.970 28.16% 1,853,911.1 35,169,124
AICA II 11.136 12.537 12.58% (1) 353,547.6 4,432,494
- ----------------------------------------------------------------------------------------------------------------------------
Index 500 Portfolio:
AICA I 16.646 21.063 26.53% 1,953,506.1 41,145,842
AICA II 11.159 12.259 9.86% (1) 409,684.6 5,022,486
- ----------------------------------------------------------------------------------------------------------------------------
Investment Grade Bond Portfolio:
AICA I 11.242 12.066 7.33% 101,099.9 1,219,839
- ----------------------------------------------------------------------------------------------------------------------------
Insurance Management Series:
American Leaders Fund II:
AICA I 17.796 20.639 15.98% 7,163,133.1 147,843,450
Annuity contracts in payment period 117,375
- ----------------------------------------------------------------------------------------------------------------------------
Equity Income Fund II:
AICA I 12.305 14.022 13.95% 2,019,440.7 28,317,427
Annuity contracts in payment period 42,143
- ----------------------------------------------------------------------------------------------------------------------------
Growth Strategies Fund II:
AICA I 15.777 18.269 15.80% 1,923,943.6 35,149,425
- ----------------------------------------------------------------------------------------------------------------------------
High Income Bond Fund II:
AICA I 13.379 13.547 1.26% 2,188,220.6 29,644,378
Annuity contracts in payment period 25,999
- ----------------------------------------------------------------------------------------------------------------------------
International Equity Fund II:
AICA I 11.858 14.682 23.82% 1,881,029.6 27,616,968
Annuity contracts in payment period 28,562
- ----------------------------------------------------------------------------------------------------------------------------
Prime Money Fund II:
AICA I 10.877 11.253 3.46% 414,692.7 4,666,589
U.S. Government Securities Fund II:
AICA I 11.572 12.284 6.15% 531,319.3 6,526,831
- ----------------------------------------------------------------------------------------------------------------------------
Utility Fund II:
AICA I 15.434 17.341 12.36% 1,523,423.7 26,418,108
Annuity contracts in payment period 64,831
- ----------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series:
Aggressive Growth Portfolio:
AICA I 12.637 16.729 32.38% 601,046.9 10,054,808
AICA II 11.125 13.003 16.88% (1) 47,713.2 620,396
- ----------------------------------------------------------------------------------------------------------------------------
Balanced Portfolio:
AICA I 14.492 19.189 32.41% 927,778.7 17,802,853
AICA II 10.904 12.689 16.37% (1) 230,692.8 2,927,259
- ----------------------------------------------------------------------------------------------------------------------------
Flexible Income Portfolio:
AICA I 12.272 13.202 7.58% 267,030.6 3,525,265
AICA II 10.191 10.599 4.00% (1) 106,625.5 1,130,100
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-8
<PAGE>
Variable Annuity Account I
Condensed Financial Information - Year Ended December 31, 1998 (continued):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Value
Per Unit
--------
Beginning End of
of Year Year
- --------------------------------------------------------------------
<S> <C> <C>
Growth Portfolio:
AICA I $ 14.731 $ 19.704
AICA II 11.091 12.784
Annuity contracts in payment period
- --------------------------------------------------------------------
Worldwide Growth Portfolio:
AICA I 16.131 20.506
AICA II 11.375 11.960
- --------------------------------------------------------------------
Lexington Emerging Markets Fund:
AICA I 9.007 6.399
- --------------------------------------------------------------------
Lexington Natural Resources Trust Fund:
AICA I 13.939 11.047
- --------------------------------------------------------------------
MFS Funds:
Total Return Series:
AICA I 13.030 14.432
AICA II 10.639 10.942
- --------------------------------------------------------------------
Worldwide Government Series:
AICA I 10.207 10.860
AICA II 10.032 10.514
- --------------------------------------------------------------------
Oppenheimer Funds:
Aggressive Growth Fund:
AICA I 12.204 13.520
AICA II 11.304 10.886
- --------------------------------------------------------------------
Global Securities Fund:
AICA I 11.539 12.982
AICA II 10.941 10.949
- --------------------------------------------------------------------
Growth & Income Fund:
AICA I 12.785 13.199
AICA II 11.377 10.111
- --------------------------------------------------------------------
Strategic Bond Fund:
AICA I 10.764 10.921
AICA II 10.118 10.037
- --------------------------------------------------------------------
Portfolio Partners, Inc. (PPI):
PPI MFS Emerging Equities Portfolio:
AICA I 10.554 13.494
AICA II 11.104 11.797
- --------------------------------------------------------------------
PPI MFS Research Growth Portfolio:
AICA I 8.786 10.656
AICA II 11.178 11.634
- --------------------------------------------------------------------
PPI MFS Value Equity Portfolio:
AICA I 10.152 12.686
AICA II 11.503 12.005
Annuity contracts in payment period
- --------------------------------------------------------------------
PPI Scudder International Growth Portfolio:
AICA I 9.912 11.640
AICA II 11.145 10.995
- --------------------------------------------------------------------
PPI T. Rowe Price Growth Equity Portfolio:
AICA I 13.834 17.406
AICA II 11.120 12.103
- --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Increase (Decrease) Units
in Value of Outstanding Reserves
Accumulation at End at End
Unit of Year of Year
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Growth Portfolio:
AICA I 33.76% 807,575.7 $15,912,701
AICA II 15.26% (1) 178,276.3 2,279,017
Annuity contracts in payment period 37,117
- ---------------------------------------------------------------------------------------------------
Worldwide Growth Portfolio:
AICA I 27.12% 3,185,556.5 65,321,610
AICA II 5.14% (1) 420,428.4 5,028,183
- ---------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund:
AICA I (28.96%) 98,010.6 627,133
- ---------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust Fund:
AICA I (20.75%) 78,736.7 869,806
- ---------------------------------------------------------------------------------------------------
MFS Funds:
Total Return Series:
AICA I 10.76% 943,853.4 13,621,896
AICA II 2.85% (1) 253,311.0 2,771,828
- ---------------------------------------------------------------------------------------------------
Worldwide Government Series:
AICA I 6.40% 69,956.8 759,700
AICA II 4.80% (2) 591.4 6,218
- ---------------------------------------------------------------------------------------------------
Oppenheimer Funds:
Aggressive Growth Fund:
AICA I 10.78% 179,860.9 2,431,715
AICA II (3.70%) (1) 88,309.9 961,358
- ---------------------------------------------------------------------------------------------------
Global Securities Fund:
AICA I 12.51% 134,448.6 1,745,444
AICA II 0.07% (1) 29,175.9 319,445
- ---------------------------------------------------------------------------------------------------
Growth & Income Fund:
AICA I 3.24% 693,694.9 9,156,069
AICA II (11.13%) (1) 232,433.2 2,350,234
- ---------------------------------------------------------------------------------------------------
Strategic Bond Fund:
AICA I 1.46% 328,545.6 3,588,020
AICA II (0.80%) (1) 85,476.9 857,889
- ---------------------------------------------------------------------------------------------------
Portfolio Partners, Inc. (PPI):
PPI MFS Emerging Equities Portfolio:
AICA I 27.86% 2,557,154.8 34,505,993
AICA II 6.24% (1) 205,549.0 2,424,963
- ---------------------------------------------------------------------------------------------------
PPI MFS Research Growth Portfolio:
AICA I 21.28% 1,761,234.3 18,766,935
AICA II 4.08% (1) 131,760.5 1,532,924
- ---------------------------------------------------------------------------------------------------
PPI MFS Value Equity Portfolio:
AICA I 24.96% 358,518.3 4,548,303
AICA II 4.36% (1) 108,102.4 1,297,789
Annuity contracts in payment period 35,772
- ---------------------------------------------------------------------------------------------------
PPI Scudder International Growth Portfolio:
AICA I 17.43% 79,756.2 928,340
AICA II (1.35%) (1) 30,516.2 335,540
- ---------------------------------------------------------------------------------------------------
PPI T. Rowe Price Growth Equity Portfolio:
AICA I 25.82% 1,616,747.9 28,140,515
AICA II 8.84% (1) 120,156.6 1,454,243
- ---------------------------------------------------------------------------------------------------
</TABLE>
AICA I - Certain individual and group contracts issued as non-qualified deferred
annuity contracts or Individual Retirement Annuity contracts issued since June
28, 1995.
AICA II - Certain individual and group contracts issued as
non-qualified deferred annuity contracts or Individual Retirement Annuity
contracts issued since May 1, 1998.
Notes to Condensed Financial Information:
(1) - Reflects less than a full year of performance activity. Funds were first
received in this option during May 1998.
(2) - Reflects less than a full year of
performance activity. Funds were first received in this option during June 1998.
See Notes to Financial Statements
S-9
<PAGE>
Variable Annuity Account I
Notes to Financial Statements - December 31, 1998
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, 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, 1998:
Aetna Ascent VP
Aetna Balanced VP
Aetna Bond VP
Aetna Crossroads VP
Aetna Growth and Income VP
Aetna Growth VP
Aetna Index Plus Large Cap VP
Aetna International VP
Aetna Legacy VP
Aetna Money Market VP
Aetna Real Estate Securities VP
Aetna Small Company VP
Aetna Value Opportunity VP
Alger American Funds:
o Balanced Portfolio
o Income and Growth Portfolio
o Leveraged AllCap Portfolio
American Century Investments:
o Balanced Fund
o International Fund
Calvert Social Balanced Portfolio
Fidelity Investments Variable Insurance Products Fund:
o Equity-Income Portfolio
o Growth Portfolio
o High Income Portfolio
o Overseas Portfolio
Fidelity Investments Variable Insurance Products Fund II:
o Asset Manager Portfolio
o Contrafund Portfolio
o Index 500 Portfolio
o Investment Grade Bond Portfolio
Insurance Management Series:
o American Leaders Fund II
o Equity Income Fund II
o Growth Strategies Fund II
o High Income Bond Fund II
o International Equity Fund II
o Prime Money Fund II
o U.S. Government Securities Fund II
o Utility Fund II
Janus Aspen Series:
o Aggressive Growth Portfolio
o Balanced Portfolio
o Flexible Income Portfolio
o Growth Portfolio
o Worldwide Growth Portfolio
Lexington Emerging Markets Fund
Lexington Natural Resources Trust Fund
MFS Funds:
o Total Return Series
o Worldwide Government Series
Oppenheimer Funds:
o Aggressive Growth Fund
o Global Securities Fund
o Growth & Income Fund
o Strategic Bond Fund
Portfolio Partners, Inc. (PPI):
o PPI MFS Emerging Equities Portfolio
o PPI MFS Research Growth Portfolio
o PPI MFS Value Equity Portfolio
o PPI Scudder International Growth Portfolio
o 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-10
<PAGE>
Variable Annuity Account I
Notes to Financial Statements - December 31, 1998 (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, 1998 and 1997
aggregated $677,161,429 and $438,314,806; $450,137,902 and $170,076,421,
respectively.
S-11
<PAGE>
Variable Annuity Account I
Notes to Financial Statements - December 31, 1998 (continued):
5. Supplemental information to Statements of Operations and Changes in Net
Assets
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1998
Valuation Proceeds Cost of Net
Period from Investments Realized
Dividends Deductions Sales Sold Gain (Loss)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Ascent VP: (1) $ 71,800 ($19,502) $ 673,031 $ 668,648 $ 4,383
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP: (2) 990,418 (80,461) 1,792,080 1,696,266 95,814
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
Aetna Bond VP: (3) 431,716 (72,965) 4,486,268 4,387,120 99,148
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP: (4) 29,801 (8,675) 155,691 141,072 14,619
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP: (5) 4,637,602 (297,037) 33,298,888 34,084,318 (785,430)
Annuity contracts in accumulation
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------------------------------------
Aetna Growth VP: (6) 11,767 (50,232) 2,569,530 2,639,070 (69,540)
Annuity contracts in accumulation
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP: (7) 660,099 (124,498) 9,779,183 9,124,915 654,268
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
Aetna International VP: (8) 2,114 (215) 38,105 39,540 (1,435)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP: (9) 71,808 (17,570) 157,163 143,237 13,926
Annuity contracts in accumulation
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP: (10) 821,419 (301,700) 85,211,294 84,897,725 313,569
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
Aetna Real Estate Securities VP: (11) 1,888 (319) 19,063 21,385 (2,322)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP: (12) 34,904 (47,717) 5,571,439 6,248,167 (676,728)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP: (13) 61,137 (49,913) 1,542,126 1,589,981 (47,855)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
Alger American Funds:
Balanced Portfolio: 121,184 (20,212) 372,244 302,913 69,331
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
Income and Growth Portfolio:
Annuity contracts in accumulation 379,349 (53,943) 785,199 640,145 145,054
- -----------------------------------------------------------------------------------------------------------------------
Leveraged AllCap Portfolio:
Annuity contracts in accumulation 141,107 (43,691) 747,610 539,018 208,592
- -----------------------------------------------------------------------------------------------------------------------
American Century Investments:
Balanced Fund: 81,193 (8,558) 189,467 179,893 9,574
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
International Fund: 127,270 (27,807) 562,465 470,481 91,984
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio: 19,179 (1,776) 24,753 27,598 (2,845)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
S-12
<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>
($42,941) ($75,022) ($32,081) $359,326
$1,084,513 $1,468,439
- ---------------------------------------------------------------------------------------------------------
93,604 (36,287) (129,891) 1,988,879
4,473,919 7,338,678
- ---------------------------------------------------------------------------------------------------------
(10,865) (118,794) (107,929) 4,840,848
3,020,620 8,211,438
- ---------------------------------------------------------------------------------------------------------
3,424 (178) (3,602) 338,325
415,033 785,501
- ---------------------------------------------------------------------------------------------------------
(1,131,268) (2,149,960) (1,018,692) 13,277,579
15,483,675 31,263,322
0 34,375
- ---------------------------------------------------------------------------------------------------------
(264,795) 784,306 1,049,101 4,256,569
905,783 6,066,474
0 36,974
- ---------------------------------------------------------------------------------------------------------
106,638 1,257,214 1,150,576 8,689,925
3,915,267 14,945,637
- ---------------------------------------------------------------------------------------------------------
0 2,750 2,750 40,797
0 44,011
- ---------------------------------------------------------------------------------------------------------
4,308 (6,294) (10,602) 769,986
793,678 1,628,799
33,241 25,668
- ---------------------------------------------------------------------------------------------------------
203,382 215,976 12,594 10,238,451
15,367,881 26,452,214
- ---------------------------------------------------------------------------------------------------------
0 (4,325) (4,325) 44,749
0 39,671
- ---------------------------------------------------------------------------------------------------------
(169,978) 487,449 657,427 1,224,164
2,575,173 3,767,223
- ---------------------------------------------------------------------------------------------------------
(130,696) 623,324 754,020 4,650,918
891,486 6,259,793
- ---------------------------------------------------------------------------------------------------------
125,129 303,599 178,470 (345,746)
1,401,032 1,404,059
- ---------------------------------------------------------------------------------------------------------
245,881 776,309 530,428 (693,378)
3,767,914 4,075,424
- ---------------------------------------------------------------------------------------------------------
265,618 1,364,191 1,098,573 (689,303)
2,919,482 3,634,760
- ---------------------------------------------------------------------------------------------------------
44,098 41,409 (2,689) (179,238)
656,724 557,006
- ---------------------------------------------------------------------------------------------------------
108,904 228,000 119,096 (505,703)
2,047,606 1,852,446
- ---------------------------------------------------------------------------------------------------------
(5,832) 5,430 11,262 206,857
32,500 265,177
- ---------------------------------------------------------------------------------------------------------
</TABLE>
S-13
<PAGE>
Variable Annuity Account I
Notes to Financial Statements - December 31, 1998 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets (continued):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Year Ended December 31, 1998
Valuation
Period
Dividends Deductions
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio: $2,271,527 ($618,549)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------
Growth Portfolio: 2,644,108 (381,295)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------
High Income Portfolio: 1,474,357 (221,958)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------
Overseas Portfolio: 233,121 (53,772)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Product Fund II:
Asset Manager Portfolio: 523,249 (84,936)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------
Contrafund Portfolio: 1,534,561 (426,807)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------
Index 500 Portfolio: 981,068 (488,490)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------
Investment Grade Bond Portfolio: 73,857 (18,586)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------
Insurance Management Series:
American Leaders Fund II: 8,099,929 (1,877,678)
Annuity contracts in accumulation
Annuity contracts in payment period
- ------------------------------------------------------------------------------------------
Equity Income Fund II: 91,670 (295,623)
Annuity contracts in accumulation
Annuity contracts in payment period
- ------------------------------------------------------------------------------------------
Growth Strategies Fund II: 1,646,118 (414,206)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------
High Income Bond Fund II: 795,943 (408,858)
Annuity contracts in accumulation
Annuity contracts in payment period
- ------------------------------------------------------------------------------------------
International Equity Fund II: 28,894 (359,609)
Annuity contracts in accumulation
Annuity contracts in payment period
- ------------------------------------------------------------------------------------------
Prime Money Fund II: 211,667 (62,627)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------
U.S. Government Securities Fund II: 99,559 (83,453)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------
Utility Fund II: 1,407,516 (327,505)
Annuity contracts in accumulation
Annuity contracts in payment period
- ------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Year Ended December 31, 1998
Proceeds Cost of Net
from Investments Realized
Sales Sold Gain (Loss)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio: $15,606,753 $12,759,366 $2,847,387
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------
Growth Portfolio: 12,032,669 9,870,234 2,162,435
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------
High Income Portfolio: 5,402,639 5,517,939 (115,300)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------
Overseas Portfolio: 15,311,424 15,163,882 147,542
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Product Fund II:
Asset Manager Portfolio: 1,323,072 1,302,771 20,301
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------
Contrafund Portfolio: 7,291,380 5,323,524 1,967,856
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------
Index 500 Portfolio: 8,828,912 6,299,987 2,528,925
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------
Investment Grade Bond Portfolio: 375,674 366,141 9,533
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------
Insurance Management Series:
American Leaders Fund II: 4,239,643 2,620,457 1,619,186
Annuity contracts in accumulation
Annuity contracts in payment period
- -------------------------------------------------------------------------------------------------------
Equity Income Fund II: 1,065,676 844,287 221,389
Annuity contracts in accumulation
Annuity contracts in payment period
- -------------------------------------------------------------------------------------------------------
Growth Strategies Fund II: 1,857,899 1,425,043 432,856
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------
High Income Bond Fund II: 3,342,335 3,079,403 262,932
Annuity contracts in accumulation
Annuity contracts in payment period
- -------------------------------------------------------------------------------------------------------
International Equity Fund II: 1,808,323 1,321,140 487,183
Annuity contracts in accumulation
Annuity contracts in payment period
- -------------------------------------------------------------------------------------------------------
Prime Money Fund II: 4,154,382 4,154,382 0
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------
U.S. Government Securities Fund II: 1,719,925 1,600,469 119,456
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------
Utility Fund II: 1,448,374 1,070,900 377,474
Annuity contracts in accumulation
Annuity contracts in payment period
- -------------------------------------------------------------------------------------------------------
</TABLE>
S-14
<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>
$4,573,383 $3,977,202 ($596,181) $12,941,401
$34,335,916 $51,181,501
- -----------------------------------------------------------------------------------------------------------
2,613,104 7,153,104 4,540,000 10,721,202
18,640,127 38,326,577
- -----------------------------------------------------------------------------------------------------------
678,175 (1,709,684) (2,387,859) 7,278,178
11,414,802 17,442,220
- -----------------------------------------------------------------------------------------------------------
83,223 131,756 48,533 772,708
2,988,676 4,136,808
- -----------------------------------------------------------------------------------------------------------
247,841 560,341 312,500 3,571,525
3,788,411 8,131,050
- -----------------------------------------------------------------------------------------------------------
3,303,522 8,470,707 5,167,185 6,461,571
24,897,252 39,601,618
- -----------------------------------------------------------------------------------------------------------
2,903,863 7,949,380 5,045,517 15,200,754
22,900,554 46,168,328
- -----------------------------------------------------------------------------------------------------------
63,100 91,234 28,134 (314,286)
1,441,187 1,219,839
- -----------------------------------------------------------------------------------------------------------
27,572,894 38,810,192 11,237,298 14,814,848
114,050,410 147,843,450
16,832 117,375
- -----------------------------------------------------------------------------------------------------------
716,240 3,591,859 2,875,619 12,524,130
12,942,385 28,317,427
0 42,143
- -----------------------------------------------------------------------------------------------------------
4,379,010 7,028,743 2,649,733 6,249,006
24,585,918 35,149,425
- -----------------------------------------------------------------------------------------------------------
1,855,372 1,387,517 (467,855) 3,527,318
25,944,158 29,644,378
16,739 25,999
- -----------------------------------------------------------------------------------------------------------
1,842,212 6,385,323 4,543,111 2,840,676
20,105,275 27,616,968
0 28,562
- -----------------------------------------------------------------------------------------------------------
0 1,316 1,316 757,047
3,759,186 4,666,589
- -----------------------------------------------------------------------------------------------------------
224,916 441,091 216,175 530,017
5,645,077 6,526,831
- -----------------------------------------------------------------------------------------------------------
4,421,460 5,787,739 1,366,279 2,535,912
21,104,322 26,418,108
18,941 64,831
- -----------------------------------------------------------------------------------------------------------
</TABLE>
S-15
<PAGE>
Variable Annuity Account I
Notes to Financial Statements - December 31, 1998 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets (continued):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1998
Valuation Proceeds Cost of Net
Period from Investments Realized
Dividends Deductions Sales Sold Gain (Loss)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Janus Aspen Series:
Aggressive Growth Portfolio: $0 ($115,274) $50,864,976 $48,298,175 $2,566,801
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
Balanced Portfolio: 595,970 (174,733) 2,029,779 1,535,395 494,384
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
Flexible Income Portfolio: 235,389 (45,468) 1,385,219 1,308,029 77,190
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
Growth Portfolio: 870,829 (185,099) 5,214,196 4,131,907 1,082,289
Annuity contracts in accumulation
Annuity contracts in payment period
- ------------------------------------------------------------------------------------------------------------------------------
Worldwide Growth Portfolio: 2,336,194 (835,432) 24,476,251 18,059,755 6,416,496
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund: 66,337 (11,442) 369,448 511,215 (141,767)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust Fund: 73,010 (15,445) 348,129 355,188 (7,059)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
MFS Funds:
Total Return Series: 295,218 (157,641) 1,431,298 1,180,363 250,935
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
Worldwide Government Series: 8,377 (9,148) 309,659 301,566 8,093
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Funds:
Aggressive Growth Fund: 37,225 (35,416) 47,122,397 46,966,784 155,613
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
Global Securities Fund: 149,505 (24,845) 719,379 757,991 (38,612)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
Growth & Income Fund: 475,900 (140,773) 5,499,885 5,888,453 (388,568)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
Strategic Bond Fund: 65,788 (43,976) 704,382 714,269 (9,887)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners, Inc. (PPI):
PPI MFS Emerging Equities Portfolio: 88,752 (435,112) 11,342,689 10,460,671 882,018
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
PPI MFS Research Growth Portfolio: 4,104 (238,253) 4,855,332 4,530,115 325,217
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
PPI MFS Value Equity Portfolio: 7,644 (70,872) 4,030,146 3,786,613 243,533
Annuity contracts in accumulation
Annuity contracts in payment period
- ------------------------------------------------------------------------------------------------------------------------------
PPI Scudder International Growth Portfolio: 4,297 (11,632) 40,667,463 40,626,409 41,054
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
PPI T. Rowe Price Growth Equity Portfolio: 140,691 (356,611) 3,159,498 2,822,708 336,790
Annuity contracts in accumulation
Total Variable Annuity Account I $36,268,129 ($ 10,257,915) $438,314,806 $412,797,023 $25,517,783
==============================================================================================================================
</TABLE>
(1) Effective May 1, 1998, Aetna Ascent Variable Portfolio's name changed to
Aetna Ascent VP.
(2) Effective May 1, 1998, Aetna Investment Advisors Fund's name changed to
Aetna Balanced VP.
(3) Effective May 1, 1998, Aetna Income Shares' name changed to Aetna Bond Fund
VP.
(4) Effective May 1, 1998, Aetna Crossroads Variable Portfolio's name changed
to Aetna Crossroads VP.
(5) Effective May 1, 1998, Aetna Variable Fund's name changed to Aetna Growth
and Income VP.
(6) Effective May 1, 1998, Aetna Variable Growth Portfolio's name changed to
Aetna Growth VP.
(7) Effective May 1, 1998, Aetna Variable Index Plus Portfolio's name changed
to Aetna Index Plus Large Cap VP.
(8) Effective May 1, 1998, Aetna International Portfolio's name changed to
Aetna International VP.
(9) Effective May 1, 1998, Aetna Legacy Variable Portfolio's name changed to
Aetna Legacy VP.
(10) Effective May 1, 1998, Aetna Variable Encore Fund's name changed to Aetna
Money Market VP.
(11) Effective May 1, 1998, Aetna Real Estate Securities Portfolio's name
changed to Aetna Real Estate Securities VP.
(12) Effective May 1, 1998, Aetna Variable Small Company Portfolio's name
changed to Aetna Small Company VP.
(13) Effective May 1, 1998, Aetna Variable Capital Appreciation Portfolio's name
changed to Aetna Value Opportunity VP.
S-16
<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>
$ 685,946 $ 1,091,568 $ 405,622 $ 1,263,440
$ 6,554,615 $ 10,675,204
- -------------------------------------------------------------------------------------------------------------
746,135 3,925,885 3,179,750 8,908,355
7,726,386 20,730,112
- -------------------------------------------------------------------------------------------------------------
32,134 (11,388) (43,522) 2,430,909
2,000,867 4,655,365
- -------------------------------------------------------------------------------------------------------------
1,026,518 3,305,620 2,279,102 4,104,069
10,077,645 18,191,718
0 37,117
- -------------------------------------------------------------------------------------------------------------
4,733,621 9,935,954 5,202,333 12,501,656
44,728,546 70,349,793
- -------------------------------------------------------------------------------------------------------------
(302,429) (506,254) (203,825) (312,229)
1,230,059 627,133
- -------------------------------------------------------------------------------------------------------------
11,212 (281,919) (293,131) (322,903)
1,435,334 869,806
- -------------------------------------------------------------------------------------------------------------
595,567 1,378,265 782,698 8,404,056
6,818,458 16,393,724
- -------------------------------------------------------------------------------------------------------------
4,445 38,917 34,472 190,257
533,867 765,918
- -------------------------------------------------------------------------------------------------------------
(12,997) 285,448 298,445 2,135,488
801,718 3,393,073
- -------------------------------------------------------------------------------------------------------------
6,826 72,806 65,980 902,520
1,010,341 2,064,889
- -------------------------------------------------------------------------------------------------------------
136,910 (183,690) (320,600) 7,350,914
4,529,430 11,506,303
- -------------------------------------------------------------------------------------------------------------
(6,794) 519 7,313 3,041,102
1,385,569 4,445,909
- -------------------------------------------------------------------------------------------------------------
(271,841) 6,507,986 6,779,827 4,339,155
25,276,316 36,930,956
- -------------------------------------------------------------------------------------------------------------
(235,756) 2,930,826 3,166,582 2,849,219
14,192,990 20,299,859
- -------------------------------------------------------------------------------------------------------------
24,196 557,253 533,057 2,972,891
2,195,611 5,846,092
0 35,772
- -------------------------------------------------------------------------------------------------------------
(460) 50,071 50,531 1,154,164
25,466 1,263,880
- -------------------------------------------------------------------------------------------------------------
432,009 6,151,086 5,719,077 1,997,336
21,757,475 29,594,758
- -------------------------------------------------------------------------------------------------------------
$62,528,168 $129,005,870 $66,477,702 $212,836,410 $560,662,388 $891,504,497
=============================================================================================================
</TABLE>
S-17
<PAGE>
Variable Annuity Account I
Notes to Financial Statements - December 31, 1998 (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>
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-18
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Net Unrealized
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-19
<PAGE>
Variable Annuity Account I
Notes to Financial Statements - December 31, 1998 (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
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<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-20
<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-21
<PAGE>
Variable Annuity Account I
Notes to Financial Statements - December 31, 1998 (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-22
<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-23
<PAGE>
Variable Annuity Account I
Notes to Financial Statements - December 31, 1998 (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)
================================================================================
</TABLE>
<TABLE>
<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-24
<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-25
<PAGE>
Independent Auditors' Report
The Board of Directors of Aetna Life Insurance and Annuity Company and Contract
Owners of Variable Annuity Account I:
We have audited the accompanying statement of assets and liabilities of Aetna
Life Insurance and Annuity Company Variable Annuity Account I (the "Account") as
of December 31, 1998, 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, 1998. 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, 1998, by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and condensed financial information
referred to above present fairly, in all material respects, the financial
position of Aetna Life Insurance and Annuity Company Variable Annuity Account I
as of December 31, 1998, 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, 1998, in conformity with
generally accepted accounting principles.
/s/ KPMG LLP
Hartford, Connecticut
February 26, 1999
S-26
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
Index to Financial Statements
------------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report F-2
Financial Statements:
Statements of Income for the Years Ended
December 31, 1998, 1997 and 1996 F-3
Balance Sheets as of December 31, 1998 and 1997 F-4
Statements of Changes in Shareholder's Equity
For the Years Ended December 31, 1998, 1997 and 1996 F-5
Statements of Cash Flows for the Years
Ended December 31, 1998, 1997 and 1996 F-6
Notes to Financial Statements F-7
</TABLE>
F-1
<PAGE>
Independent Auditors' Report
The Shareholder and Board of Directors
Aetna Insurance Company of America:
We have audited the accompanying balance sheets of Aetna Insurance Company of
America as of December 31, 1998 and 1997, 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, 1998. 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, 1998 and 1997, and the results of its operations and its
cash flows for each of the years in the three-year period ended December 31,
1998, 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 LLP
Hartford, Connecticut
March 24, 1999
F-2
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Statements of Income
(Millions)
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------
1998 1997 1996
-------- ------- -------
<S> <C> <C> <C>
Revenue:
Charges assessed against policyholders $ 11.5 $ 6.1 $ 1.3
Net investment income 10.4 7.1 1.5
Net realized capital gains (losses) (0.2) 0.1 --
Other income 0.6 0.2 0.1
-------- ------- -------
Total revenue 22.3 13.5 2.9
Benefits and expenses:
Current and future benefits 9.0 6.5 1.7
Operating expenses 6.2 3.7 2.4
Amortization of deferred policy acquisition costs 3.9 0.8 0.2
-------- ------- -------
Total benefits and expenses 19.1 11.0 4.3
Income (loss) before income taxes (benefits)
and cumulative effect adjustment 3.2 2.5 (1.4)
Income taxes (benefits) 0.6 0.8 (0.7)
-------- ------- -------
Income (loss) before cumulative effect
adjustments 2.6 1.7 (0.7)
Cumulative effect adjustment, net of tax -- 0.5 --
-------- ------- -------
Net income (loss) $ 2.6 $ 1.2 $ (0.7)
======== ======= ========
</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
(Millions, except share data)
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
----------------- -----------------
<S> <C> <C>
Assets
Investments:
Debt securities, available for sale, at fair value
(amortized cost: $138.2 and $135.8) $ 142.3 $ 137.9
Equity securities, available for sale
Nonredeemable preferred stock (amortized cost: $3.1) 3.0 --
Cash and cash equivalents 16.5 12.5
Deferred policy acquisition costs 59.9 45.4
Accrued investment income 2.1 2.0
Premiums due and other receivables 13.3 1.6
Deferred tax asset -- 2.1
Income taxes receivable -- 1.4
Other assets 0.4 2.5
Separate Accounts assets 1,008.0 676.7
----------- ----------
Total assets $ 1,245.5 $ 882.1
=========== ==========
Liabilities and Shareholder's Equity
Liabilities:
Policyholders' funds left with the Company $ 153.2 $ 145.6
Other liabilities 13.3 6.8
Due to parent and affiliates 0.9 0.8
Income taxes
Current 0.1 --
Deferred 0.7 --
Separate Accounts liabilities 1,006.5 676.7
----------- ----------
Total liabilities 1,174.7 829.9
----------- ----------
Shareholder's equity:
Common capital stock, par value $2,000 (1,275 shares authorized,
issued and outstanding) 2.5 2.5
Paid-in capital 62.5 47.5
Accumulated other comprehensive income 1.2 0.2
Retained earnings 4.6 2.0
----------- ----------
Total shareholder's equity 70.8 52.2
----------- ----------
Total liabilities and shareholder's equity $ 1,245.5 $ 882.1
=========== ==========
</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
(Millions)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------
1998 1997 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Shareholder's equity, beginning of year $ 52.2 $ 31.3 $ 12.1
Comprehensive income:
Net income (loss) 2.6 1.2 (0.7)
Other comprehensive income (loss), net of tax
Unrealized gains (losses), on securities
($1.5 million, $0.0 million and $(0.1)
million, pretax) 1.0 -- (0.1)
----------- ----------- -----------
Total comprehensive income (loss) 3.6 1.2 (0.8)
----------- ----------- -----------
Capital contributions 15.0 20.0 20.0
Other changes -- (0.3) --
----------- ----------- -----------
Shareholder's equity, end of year $ 70.8 $ 52.2 $ 31.3
=========== =========== ===========
</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
(Millions)
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------
1998 1997 1996
---------- ---------- -----------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ 2.6 $ 1.2 $ (0.7)
Adjustments to reconcile net income (loss) to net cash
used for operating activities:
Net amortization of discount on debt securities (0.1) (0.4) (0.1)
------- -------- --------
Cash flows provided by (used for) operating activities
and net realized capital (gains) losses before changes
in assets and liabilities 2.5 0.8 (0.8)
Net realized capital (gains) losses 0.2 (0.1) --
------- -------- --------
Cash flows provided by (used for) operating activities
before changes in assets and liabilities 2.7 0.7 (0.8)
Changes in assets and liabilities:
Increase in accrued investment income (0.1) (1.7) (0.2)
Increase in deferred policy acquisition costs (14.5) (24.3) (19.0)
Net change in amounts due to/from parent and affiliates 0.9 0.5 0.2
Net (decrease) increase in other assets and liabilities (2.2) 0.9 --
Net change in income taxes 2.4 (1.4) (2.7)
------- -------- --------
Net cash used for operating activities (10.8) (25.3) (22.5)
------- -------- --------
Cash Flows from Investing Activities:
Proceeds from sales of:
Debt securities available for sale 27.8 16.6 2.5
Investment maturities and repayments of:
Debt securites available for sale 3.4 3.2 --
Short-term investments -- 1.0 --
Cost of investment purchases in:
Debt securities available for sale (36.8) (132.8) (16.7)
Short-term investments -- (1.0) --
------- -------- --------
Net cash used for investing activities (5.6) (113.0) (14.2)
------- -------- --------
Cash Flows from Financing Activities:
Deposits and interest credited for investment contracts 19.7 84.7 65.0
Withdrawals of investment contracts (14.3) (5.7) (0.4)
Capital contributions 15.0 20.0 20.0
------- -------- --------
Net cash provided by financing activities 20.4 99.0 84.6
------- -------- --------
Net increase (decrease) in cash and cash equivalents 4.0 (39.3) 47.8
Cash and cash equivalents, beginning of year 12.5 51.8 4.0
------- -------- --------
Cash and cash equivalents, end of year $ 16.5 $ 12.5 $ 51.8
======= ======== ========
Supplemental cash flow information:
Income taxes (received) paid, net $ (3.3) $ 1.5 $ 1.9
======= ======== ========
</TABLE>
See Notes to Financial Statements.
F-6
<PAGE>
Notes to Financial Statements
1. Summary of Significant Accounting Policies
Aetna Insurance Company of America (the "Company") is a provider of financial
services in the United States. 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").
Basis of Presentation
These financial statements have been prepared in conformity with generally
accepted accounting principles. Certain reclassifications have been made to
1997 and 1996 financial information to conform to the 1998 presentation.
New Accounting Standards
Disclosures about Segments of an Enterprise and Related Information
As of December 31, 1998, the Company adopted Financial Accounting Standard
("FAS") No. 131, Disclosures about Segments of an Enterprise and Related
Information. This statement establishes standards for the reporting of
information relating to operating segments. This statement supersedes FAS No.
14, Financial Reporting for Segments of a Business Enterprise, which requires
reporting segment information by industry and geographic area (industry
approach). Under FAS No. 131, operating segments are defined as components of
a company for which separate financial information is available and is used
by management to allocate resources and assess performance (management
approach). The adoption of this statement did not change the composition or
the results of operations of the operating segment of the Company, which are
consistent with the management approach.
Accounting for the costs of Computer Software Developed and Obtained for
Internal Use
On January 1, 1998, the Company adopted Statement of Position ("SOP") 98-1,
Accounting for the costs of Computer Software Developed or Obtained for
Internal Use, issued by the American Institute of Certified Public
Accountants ("AICPA"). This statement requires that certain costs incurred in
developing internal-use computer software (in process at, and subsequent to
the adoption date) be capitalized, and provides guidance for determining
whether computer software is considered to be for internal use. The Company
will amortize these costs over a period of 3 to 5 years. Previously, the
Company expensed the cost of internal-use computer software as incurred. The
Company did not receive any allocation of benefits due to the adoption of
this statement.
Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities
In June 1996, the Financial Accounting Standard Board ("FASB") issued No. 125
, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, that provides accounting and reporting
standards for transfers of financial assets and extinguishments of
liabilities. FAS No. 125 was effective for 1997 financial statements,
however, certain provisions
F-7
<PAGE>
Notes to Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
relating to accounting for repurchase agreements and securities lending are
not effective until January 1, 1998. The adoption of those provisions
effective in 1998 did not have a material effect on 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 AICPA's 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 not be reasonably estimated. A cumulative
effect charge of $0.5 million, net of taxes of $0.3 million, related to the
adoption of this statement is reflected in the 1997 Statements of Income.
There was no after-tax charge to earnings for guaranty fund obligations for
the year ended December 31, 1998.
Future Application Accounting Standards
Accounting for Derivative Instruments and Hedging Activities
In June 1998, the Financial Accounting Standards Board issued FAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. This standard
requires companies to record all derivatives on the balance sheet as either
assets or liabilities and measure those instruments at fair value. The manner
in which companies are to record gains or losses resulting from changes in
the values of those derivatives depends on the use of the derivative and
whether it qualifies for hedge accounting. This standard is effective for the
Company's financial statements beginning January 1, 2000, with early adoption
permitted. The Company is currently evaluating the impact of adoption of this
statement and the potential effect on its financial position and results of
operations.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from reported results using those
estimates.
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.
F-8
<PAGE>
Notes to Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Investments
Debt and equity securities are classified as available for sale and carried
at fair value. These securities are written down (as realized capital losses)
for other than temporary declines in value. Unrealized capital gains and
losses related to available for sale investments, other than amounts
allocable to experience-rated contractholders, are reflected in shareholder's
equity, net of related taxes.
Fair values for debt and equity 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, 1998 and 1997, the Company had no securities out on loan.
Purchases and sales of debt and equity 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
F-9
<PAGE>
Notes to Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
equal to cumulative deposits less charges and withdrawals plus credited
interest thereon (rates range from 3.00% to 8.10% 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. These reserves also include unrealized gains/losses related
to FAS No. 115. Reserves on contracts subject to experience rating reflect
the rights of contractholders, plan participants and the Company.
Charges Assessed Against Policyholders and Other Income
Charges assessed against policyholders' funds for surrender charges,
actuarial margin and other fees are recorded as revenue when earned. Other
amounts received for these contracts are reflected as deposits and are not
recorded as revenue.
Separate Accounts
Assets held under variable annuity contracts are segregated in Separate
Accounts and are invested, as designated by the contractholder (who bears the
investment risk subject, in some cases, to minimum guarantee) in shares of
mutual funds that are managed by Aeltus Investment Management, Inc.
("Aeltus") or other selected mutual funds not managed by Aeltus.
As of December 31, 1998 Separate Accounts assets are carried at fair value.
At December 31, 1998, unrealized gains of $1.0 million, after taxes, on
assets supporting the guaranteed interest option are reflected in
shareholder's equity. At December 31, 1997, Separate Accounts assets
supporting the guaranteed interest option were carried at an amortized cost
of $90.8 million (fair value $91.5 million). Separate Accounts liabilities
are carried at fair value, except those relating to the guaranteed interest
option. Reserves relating to the guaranteed interest option are maintained at
fund value and reflect interest credited at rates ranging from 3.00% to 8.10%
in 1998 and 4.10% to 8.00% in 1997.
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 Financial Statements (with the exception of realized and
unrealized capital gains and losses on the 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>
Notes to Financial Statements (continued)
2. Investments
Debt securities available for sale as of December 31, were as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
1998 (Millions) Cost Gains Losses Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. government and government
agencies and authorities $ 22.6 $ 0.7 $ -- $ 23.3
- --------------------------------------------------------------------------------------------------------
U.S. corporate securities:
Utilities 7.0 0.1 -- 7.1
Financial 37.9 1.2 0.1 39.0
Transportation/capital goods 8.6 0.3 -- 8.9
Health care/consumer products 15.3 0.6 -- 15.9
Natural resources 8.6 0.3 -- 8.9
Other corporate securities 0.7 0.2 -- 0.9
- --------------------------------------------------------------------------------------------------------
Total U.S. corporate securities 78.1 2.7 0.1 80.7
- --------------------------------------------------------------------------------------------------------
Foreign securities:
Government 1.1 -- -- 1.1
Other 8.0 0.2 0.3 7.9
- --------------------------------------------------------------------------------------------------------
Total foreign securities 9.1 0.2 0.3 9.0
- --------------------------------------------------------------------------------------------------------
Residential mortgage-backed securities:
Pass-throughs 0.7 -- -- 0.7
Collateralized mortgage obligations 8.7 0.4 -- 9.1
- --------------------------------------------------------------------------------------------------------
Total residential mortgage-backed securities 9.4 0.4 -- 9.8
- --------------------------------------------------------------------------------------------------------
Commercial/multifamily mortgage-
backed securities 10.3 0.3 -- 10.6
- --------------------------------------------------------------------------------------------------------
Other asset-backed securities 8.7 0.2 -- 8.9
- --------------------------------------------------------------------------------------------------------
Total debt securities $ 138.2 $ 4.5 $ 0.4 $ 142.3
========================================================================================================
</TABLE>
F-11
<PAGE>
Notes to Financial Statements (continued)
2. Investments (continued)
Debt securities available for sale as of December 31, were as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
1997 (Millions) Cost Gains Losses Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. government and government
agencies and authorities $ 37.8 $ 1.0 $ -- $ 38.8
- --------------------------------------------------------------------------------------------------------
U.S. corporate securities:
Financial 31.3 0.7 -- 32.0
Healthcare & consumer products 6.5 0.2 -- 6.7
Media & broadcast 1.0 0.1 -- 1.1
Natural resources 5.1 0.1 -- 5.2
Transportation & capital goods 5.3 0.1 -- 5.4
Utilities 6.0 0.1 -- 6.1
Other corporate securities 0.8 -- -- 0.8
- --------------------------------------------------------------------------------------------------------
Total U.S. corporate securities 56.0 1.3 -- 57.3
- --------------------------------------------------------------------------------------------------------
Foreign securities:
Government 1.0 -- 0.3 0.7
Other 12.2 0.2 0.8 11.6
- --------------------------------------------------------------------------------------------------------
Total foreign securities 13.2 0.2 1.1 12.3
- --------------------------------------------------------------------------------------------------------
Residential mortgage-backed securities:
Pass-throughs 1.2 -- -- 1.2
Collateralized mortgage obligations 8.6 0.4 -- 9.0
- --------------------------------------------------------------------------------------------------------
Total residential mortgage-backed securities 9.8 0.4 -- 10.2
- --------------------------------------------------------------------------------------------------------
Commercial/multifamily mortgage
backed securities 8.6 0.2 -- 8.8
- --------------------------------------------------------------------------------------------------------
Other asset-backed securities 10.4 0.1 -- 10.5
- --------------------------------------------------------------------------------------------------------
Total Debt Securities $ 135.8 $ 3.2 $ 1.1 $ 137.9
========================================================================================================
</TABLE>
F-12
<PAGE>
Notes to Financial Statements (continued)
2. Investments (continued)
At December 31, 1998 and 1997 net unrealized appreciation of $4.1 million and
$2.1 million respectively, on available-for-sale debt securities included
unrealized gains of $3.8 million and $1.8 million, respectively, related to
experience-rated contracts, which were not reflected in shareholder's equity
but in policyholders' funds left with the Company.
The amortized cost and fair value of debt securities for the year ended
December 31, 1998 are shown below by contractual maturity. Actual maturities
may differ from contractual maturities because securities may be
restructured, called or prepaid.
<TABLE>
<CAPTION>
December 31, 1998
-----------------------------------------------------------------
Amortized Fair
(Millions) Cost Value
-----------------------------------------------------------------
<S> <C> <C>
Due to mature:
One year or less $ 12.0 $ 12.0
After one year through five years 53.2 54.4
After five years through ten years 20.1 21.2
After ten years 24.5 25.4
Mortgage-backed securities 19.7 20.4
Other asset-backed securities 8.7 8.9
-----------------------------------------------------------------
Total $ 138.2 $ 142.3
=================================================================
</TABLE>
At December 31, 1998 and 1997, debt securities carried at $5.4 million and
$5.0 million, respectively, were on deposit as required by various state
regulatory agencies.
Investments in equity securities available for sale as of December 31, were
as follows:
<TABLE>
<CAPTION>
(Millions) 1998 1997
--------------------------------------------
<S> <C> <C>
Cost $ 3.1 --
Gross unrealized gains -- --
Gross unrealized losses (0.1) --
--------------------------------------------
Fair value $ 3.0 --
=============================================
</TABLE>
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, 1998.
F-13
<PAGE>
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, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
------------------------ ------------------------
Carrying Fair Carrying Fair
(Millions) Value Value Value Value
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Liabilities:
Investment contract liabilities:
With a fixed maturity $ 0.6 $ 0.5 $ 0.3 $ 0.3
Without a fixed maturity $ 152.6 $ 143.8 $ 145.3 $ 134.8
----------------------------------------------------------------------------------------
</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
1998 or 1997.
F-14
<PAGE>
Notes to Financial Statements (continued)
4. Net Investment Income
Sources of net investment income were as follows:
<TABLE>
<CAPTION>
(Millions) 1998 1997 1996
------------------------------------------------------------------------
<S> <C> <C> <C>
Debt securities $ 9.0 $ 6.0 $ 0.5
Nonredeemable preferred stock 0.3 -- --
Cash equivalents 0.7 1.2 1.0
Other 0.6 -- --
------------------------------------------------------------------------
Gross investment income 10.6 7.2 1.5
Less: investment expenses 0.2 0.1 --
------------------------------------------------------------------------
Net investment income $ 10.4 $ 7.1 $ 1.5
========================================================================
</TABLE>
Net investment income includes amounts allocable to experience-rated
contractholders of $8.9 million, $7.0 million and $0.9 million for the years
ended December 31, 1998, 1997 and 1996, respectively. Interest credited to
contractholders is included in current and future benefits.
5. Dividend Restrictions and Shareholder's Equity
All dividends that may be paid to the shareholder in 1999 must have prior
approval by the Insurance Commissioner of the State of Connecticut.
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
$(5.2) million, $0.4 million and $(7.9) million for the years ended December
31, 1998, 1997 and 1996, respectively. Statutory capital and surplus was
$53.4 million and $43.4 million as of December 31, 1998 and 1997,
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. The Company received capital
contributions relating to these agreements of $15.0 million and $20.0 million
from ALIAC in 1998 and 1997, respectively.
As of December 31, 1998, 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.
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, 1998 and 1997, were
$(0.2) million and $0.1 million, respectively. Net realized capital gains
(losses) on debt securities for 1996 were immaterial.
F-15
<PAGE>
Notes to Financial Statements (continued)
6. Capital Gains and Losses on Investment Operations (continued)
Net realized capital (losses) gains of $(0.2) million and $0.2 million
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 1998 and 1997, respectively. Net unamortized gains
were $0.2 million at December 31, 1997. The amounts in 1998 were immaterial.
There were no such amounts for 1996.
Proceeds from the sale of available-for-sale debt securities and the related
gross gains and losses (excluding those related to experience rated
contractholders in 1998 and 1997) were as follows:
<TABLE>
<CAPTION>
(Millions) 1998 1997 1996
---------------------------------------------------------
<S> <C> <C> <C>
Proceeds on sales $ 27.8 $ 16.6 $ 2.5
Gross gains 0.6 0.1 --
Gross losses 0.8 -- --
---------------------------------------------------------
</TABLE>
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 1998 and
1997), were as follows:
<TABLE>
<CAPTION>
(Millions) 1998 1997 1996
----------------------------------------------------------------------------------
<S> <C> <C> <C>
Debt securities $ 0.1 -- $ (0.1)
Equity securities (0.1) -- --
Other 1.6 --
----------------------------------------------------------------------------------
Subtotal 1.6 -- (0.1)
Increase in deferred income taxes (See Note 7) 0.6 -- --
----------------------------------------------------------------------------------
Net change in accumulated other
comprehensive income $ 1.0 -- $ (0.1)
==================================================================================
</TABLE>
Net unrealized capital gains (losses) allocable to experience-rated contracts
of $3.8 million and $1.8 million at December 31, 1998 and 1997, 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>
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 1998 and 1997, at December 31:
<TABLE>
<CAPTION>
(Millions) 1998 1997 1996
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Debt securities:
Gross unrealized gains $ 0.3 $ 0.2 $ 0.2
Gross unrealized losses -- -- --
---------------------------------------------------------------------------------------
0.3 0.2 0.2
---------------------------------------------------------------------------------------
Equity securities:
Gross unrealized gains -- -- --
Gross unrealized losses (0.1) -- --
---------------------------------------------------------------------------------------
(0.1) -- --
---------------------------------------------------------------------------------------
Other:
Gross unrealized gains 1.9 -- --
Gross unrealized losses (0.3) -- --
---------------------------------------------------------------------------------------
1.6 -- --
---------------------------------------------------------------------------------------
Less: deferred federal income taxes (see Note 7) 0.6 -- --
---------------------------------------------------------------------------------------
Net unrealized capital gains $ 1.2 $ 0.2 $ 0.2
=======================================================================================
</TABLE>
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>
(Millions) 1998 1997 1996
------------------------------------------------------------------------------------
<S> <C> <C> <C>
Unrealized holding gains (losses) arising
during the period (1) $ 0.9 $ 0.3 $ --
Less: reclassification adjustment for gains and
other items included in net income (2) (0.1) 0.3 0.1
------------------------------------------------------------------------------------
Net unrealized gains (losses) on securities $ 1.0 $ -- $ (0.1)
====================================================================================
</TABLE>
(1) Pretax unrealized holding gains (losses) arising during the period were
$1.3 million and $0.4 million for 1998 and 1997, respectively. There were
no unrealized holding gains (losses) arising in 1996.
(2) Pretax reclassification adjustments for gains and other items included in
net income were $(0.2) million, $0.4 million and $0.1 million for 1998,
1997 and 1996, respectively.
F-17
<PAGE>
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>
(Millions) 1998 1997 1996
----------------------------------------------------------------------------
<S> <C> <C> <C>
Current taxes (benefits):
Federal $ (1.7) $ 1.2 $ 0.1
State 0.1 -- (0.1)
Net realized capital gains (losses) (0.1) 0.1 --
----------------------------------------------------------------------------
(1.7) 1.3 --
----------------------------------------------------------------------------
Deferred taxes (benefits):
Federal 2.3 (0.4) (0.7)
Net realized capital losses -- (0.1) --
----------------------------------------------------------------------------
2.3 (0.5) (0.7)
----------------------------------------------------------------------------
Total $ 0.6 $ 0.8 $ (0.7)
============================================================================
</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>
(Millions) 1998 1997 1996
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income (loss) before income taxes (benefits) and
cumulative effect adjustment $ 3.2 $ 2.5 $ (1.4)
Tax rate 35% 35% 35%
---------------------------------------------------------------------------------------
Application of the tax rate 1.1 0.9 (0.5)
Tax effect of:
Excludable dividends (0.5) (0.1) (0.2)
---------------------------------------------------------------------------------------
Income taxes (benefits) $ 0.6 $ 0.8 $ (0.7)
=======================================================================================
</TABLE>
F-18
<PAGE>
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>
(Millions) 1998 1997
-------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Policyholders' funds left with the Company $ 16.6 $ 14.3
Unrealized gains allocable to experience-rated
contracts 1.3 0.7
Guaranty fund assessments 0.1 0.1
Pension -- 0.2
Other 0.1 --
-------------------------------------------------------------------------
Total gross assets 18.1 15.3
-------------------------------------------------------------------------
Deferred tax liabilities:
Deferred policy acquisition costs 16.9 12.5
Net unrealized capital gains 1.9 0.7
-------------------------------------------------------------------------
Total gross liabilities 18.8 13.2
-------------------------------------------------------------------------
Net deferred tax (asset) liability $ 0.7 $ (2.1)
=========================================================================
</TABLE>
Net unrealized capital gains and losses are presented in shareholder's equity
net of deferred taxes. As of December 31, 1998 and 1997, no valuation
allowances were required for unrealized capital gains and losses.
The Internal Revenue Service (the "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 were $0.2 million
in 1998. In 1997 and 1996 the charges were immaterial.
As of December 31, 1996, Aetna transferred to the Company approximately $0.1
million 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 $0.1 million) is
reported as a reduction in retained earnings. In 1997, other changes in
shareholder's equity includes an additional $0.3 million reduction reflecting
revisions to the allocation of these accrued liabilities.
F-19
<PAGE>
Notes to Financial Statements (continued)
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 $10.5 million and $7.3 million for the years ended December
31, 1998 and 1997, respectively, (of which $5.5 million and $4.5 million,
respectively, were capitalized as deferred policy acquisition costs).
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, ranged from 1.25% to 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 $10.3
million, $5.6 million and $1.3 million for the years ended December 31, 1998,
1997 and 1996, respectively.
The Company received capital contributions of $15.0 million in cash from
ALIAC in 1998 and $20.0 million in both 1997 and 1996.
Since August 1996, Aeltus, 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, 1998 and 1997
amounted to $0.2 million and $0.1 million, respectively. The amount for such
fees in 1996 was immaterial.
10. Commitments and Contingent Liabilities
Commitments
At December 31, 1998 and 1997 the Company had no commitments or contingent
liabilities.
Litigation
The Company is not currently involved in any material litigation.
F-20
<PAGE>
Form No. SAI.87131-99 AICA Ed. December 1999
<PAGE>
VARIABLE ANNUITY ACCOUNT I
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
- -------------------------------------------
(a) Financial Statements:
(1) Incorporated by reference in Part A:
Condensed Financial Information
(2) Incorporated by reference in Part B:
Financial Statements of Variable Annuity Account I:
- Statement of Assets and Liabilities as of December 31,
1998
- Statements of Operations and Changes in Net Assets for the
years ended December 31, 1998 and 1997
- Condensed Financial Information for the year ended
December 31, 1998
- Notes to Financial Statements
- Independent Auditors' Report
Financial Statements of Depositor:
- Independent Auditors' Report
- Statements of Income for the years ended December 31,
1998, 1997 and 1996
- Balance Sheets for the years ended December 31, 1998 and
1997
- Statements of Changes in Shareholder's Equity for the
years ended December 31, 1998, 1997 and 1996
- Statements of Cash Flows for the years ended December 31,
1998, 1997 and 1996
- 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 January 11, 1996 to Principal
Underwriting Agreement(2)
(4.1) Variable Annuity Contract (G2-CDA-99(TORP)FL)
(4.2) Certificate (GTCC2-99(TORP)FL) to Variable Annuity Contract
G2-CDA-99(TORP)FL
(5) Variable Annuity Contract Application
(6.1) Certificate of Incorporation (Connecticut) of Aetna Insurance
Company of America(1)
(6.2) Certificate of Incorporation (Florida) of Aetna Insurance
Company of America
(6.3) By-laws of Aetna Insurance Company of America(1)
(6.4) By-laws of Aetna Insurance Company of America
(7) Not Applicable
(8.1) Fund Participation Agreement between Aetna Insurance Company
of America and AIM
(8.2) Service Agreement between Aetna Insurance Company of America
and AIM
(8.3) Fund Participation Agreement among Aetna Insurance Company of
America, Alger American Fund and Fred Alger Management, Inc.
dated August 30, 1995(3)
(8.4) Fund Participation Agreement among Calvert Responsibly
Invested Balanced Portfolio, Calvert Asset Management Company,
Inc. and Aetna Insurance Company of America dated December 1,
1997(4)
(8.5) Service Agreement between Calvert Asset Management Company,
Inc. and Aetna Insurance Company of America dated December 1,
1997(4)
(8.6) Fund Participation Agreement by and among Insurance Management
Series, Federated Advisers and Aetna Insurance Company of
America dated July 1, 1994(5)
(8.7) Fund Participation Agreement among Aetna Insurance Company of
America, Variable Insurance Products Fund and Fidelity
Distributors Corporation dated October 20, 1995(3)
(8.8) Fund Participation Agreement among Aetna Insurance Company of
America, Variable Insurance Products Fund II and Fidelity
Distributors Corporation dated October 20, 1995(3)
(8.9) Fund Participation Agreement among Janus Capital Corporation,
Aetna Insurance Company of America and Janus Aspen Series
dated December 8, 1997(6)
(8.10) Amendment to Fund Participation Agreement made as of October
12, 1998 to Fund Participation Agreement among Janus Capital
Corporation, Aetna Insurance Company of America and Janus
Aspen Series dated December 8, 1997(6)
(8.11) Service Agreement between Janus Capital Corporation and Aetna
Insurance Company of America dated as of December 8, 1997(6)
(8.12) Fund Participation Agreement among MFS Variable Insurance
Trust, Aetna Insurance Company of America and Massachusetts
Financial Services Company dated April 30, 1996(3)
(8.13) First Amendment dated September 3, 1996 to Fund Participation
Agreement among MFS Variable Insurance Trust, Aetna Insurance
Company of America and Massachusetts Financial Services
Company dated April 30, 1996(7)
(8.14) Fund Participation Agreement between Aetna Insurance Company
of America, Oppenheimer Variable Account Funds and Oppenheimer
Fund, Inc. dated April 1, 1997(8)
(8.15) Service Agreement between Aetna Insurance Company of America
and Oppenheimer Funds, Inc. dated April 1, 1997(8)
(8.16) Fund Participation Agreement among Aetna Insurance Company of
America, TCI Portfolios, Inc. and Investors Research
Corporation dated October 9, 1995(3)
(8.17) Administrative Service Agreement between Aetna Insurance
Company of America and Agency, Inc.(3)
(9) Opinion and Consent of Counsel
(10) Consent of Independent Auditors
(11) Not applicable
(12) Not applicable
(13) Schedule for Computation of Performance Data
(14.1) Powers of Attorney
(14.2) Certificate of Resolution Authorizing Signatures(1)
1. Incorporated by reference to Registration Statement on Form N-4 (File No.
33-59749), as filed on June 1, 1995.
2. Incorporated by reference to Registration Statement on Form S-2 (File No.
333-22723), as filed on March 4, 1997.
3. Incorporated by reference to Post-Effective Amendment No. 1 to Registration
Statement on Form N-4 (File No. 33-59749), as filed on April 22, 1996.
4. Incorporated by reference to Post-Effective Amendment No. 7 to Registration
Statement on Form N-4 (File No. 33-59749), as filed on February 13, 1998.
5. Incorporated by reference to Post-Effective Amendment No. 5 to Registration
Statement on Form N-4 (File No. 33-59749), as filed on July 29, 1997.
6. Incorporated by reference to Registration Statement on Form N-4 (File No.
333-87131), as filed on September 15, 1999.
7. Incorporated by reference to Post-Effective Amendment No. 3 to Registration
Statement on Form N-4 (File No. 33-59749), as filed on September 16, 1996.
8. Incorporated by reference to Post-Effective Amendment No. 4 to Registration
Statement on Form N-4 (File No. 33-59749), as filed on April 16, 1997.
<PAGE>
Item 25. Directors and Officers of the Depositor
- -------------------------------------------------
<TABLE>
<CAPTION>
Name and Principal
Business Address* Positions and Offices with Depositor
- ---------------- ------------------------------------
<S> <C>
Thomas J. McInerney Director and President
Shaun P. Mathews Director and Senior Vice President
Steven A. Haxton Director
David W. O'Leary Director
Catherine H. Smith Director
Deborah Koltenuk Vice President, Corporate Controller, and
Assistant Treasurer
Jane A. Boyle Corporate Secretary and Counsel
Therese A. Squillacote Vice President and Chief Compliance Officer
Alastair G. Longley-Cook Vice President and Corporate Actuary
</TABLE>
* The principal business address of all directors and officers listed is 151
Farmington Avenue, Hartford, Connecticut 06156.
Item 26. Persons Controlled by or Under Common Control with the Depositor
or Registrant
- --------------------------------------------------------------------------
Incorporated herein by reference to Item 26 of Registration Statement on
Form N-4 (File No. 333-56297), as filed on November 23, 1999.
Item 27. Number of Contract Owners
- -----------------------------------
As of October 31, 1999, there were 15,605 individuals holding interests in
variable annuity contracts funded through Variable Annuity Account I.
Item 28. Indemnification
- -------------------------
Section 21 of Public Act No. 97-246 of the Connecticut General Assembly (the
"Act") provides that a corporation may provide indemnification of or advance
expenses to a director, officer, employee or agent only as permitted by Sections
33-770 to 33-778, inclusive, of the Connecticut General Statutes, as amended by
Sections 12 to 20, inclusive, of this Act. Reference is hereby made to Section
33-771(e) of the Connecticut General Statutes ("CGS") regarding indemnification
of directors and Section 33-776(d) of CGS 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, except to the extent that
<PAGE>
their certificate of incorporation expressly provides otherwise, indemnify their
directors, officers, employees and agents against "liability" (defined as the
obligation to pay a judgment, settlement, penalty, fine, including an excise tax
assessed with respect to an employee benefit plan, or reasonable expenses
incurred with respect to a proceeding) when (1) a determination is made pursuant
to Section 33-775 that the party seeking indemnification has met the standard of
conduct set forth in Section 33-771 or (2) a court has determined that
indemnification is appropriate pursuant to Section 33-774. Under Section 33-775,
the determination of and the authorization for indemnification are made (a) by
the disinterested directors, as defined in Section 33-770(3); (b) by special
counsel; (c) by the shareholders; or (d) in the case of indemnification of an
officer, agent or employee of the corporation, by the general counsel of the
corporation or such other officer(s) as the board of directors may specify.
Also, Section 33-772 provides that a corporation shall 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
he was a director of the corporation. In the case of a proceeding by or in the
right of the corporation or with respect to conduct for which the director,
officer, agent or employee was adjudged liable on the basis that he received a
financial benefit to which he was not entitled, indemnification is limited to
reasonable expenses incurred in connection with the proceeding against the
corporation to which the individual was named a party.
The statute does specifically authorize a corporation to procure indemnification
insurance on behalf of an individual who 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 Underwriter
- -------------------------------
(a) In addition to serving as the principal underwriter for the Registrant,
Aetna Life Insurance and Annuity Company (ALIAC) also acts as the
principal underwriter, only, for 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. and as the
principal underwriter and investment adviser for Portfolio Partners,
Inc. (all management investment companies registered under the
Investment Company Act of 1940 (1940 Act)). Additionally, ALIAC also
acts as the principal underwriter and depositor for Variable Life
Account B of ALIAC, Variable Annuity Account B of ALIAC, Variable
Annuity Account C of ALIAC and Variable Annuity Account G of ALIAC
(separate accounts of ALIAC registered as unit investment trusts under
the 1940 Act).
(b) Directors and Officers of the Underwriter:
<TABLE>
<CAPTION>
Name and Principal
Business Address* Positions and Offices with Depositor
- ------------------ ------------------------------------
<S> <C>
Thomas J. McInerney Director and President
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Shaun P. Mathews Director and Senior Vice President
Catherine H. Smith Director
Deborah Koltenuk Vice President, Corporate Controller, and
Assistant Treasurer
Therese M. Squillacote Vice President and Chief Compliance Officer
Kirk P. Wickman Senior Vice President, General Counsel and
Corporate Secretary
</TABLE>
* The principal business address of all directors and officers listed is 151
Farmington Avenue, Hartford, Connecticut 06156.
(c) Compensation as of December 31, 1998:
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Name of Net Underwriting Compensation on
Principal Discounts and Redemption Brokerage
Underwriter Commissions or Annuitization Commissions Compensation*
- ----------- ----------- ----------------- ----------- -------------
<S> <C> <C> <C>
Aetna Life Insurance $486,000 $10,435,000
and Annuity Company
</TABLE>
* 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
Service Center of the Depositor as follows:
Aetna Insurance Company of America
151 Farmington Avenue
Hartford, Connecticut 06156
Item 31. Management Services
- -----------------------------
Not applicable
<PAGE>
Item 32. Undertakings
- ----------------------
Registrant hereby undertakes:
(a) to file a post-effective amendment to this registration statement on
Form N-4 as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never more than
sixteen months old for as long as payments under the variable annuity
contracts may be accepted;
(b) to include as part of any application to purchase a contract offered by
a prospectus which is part of this registration statement on Form N-4,
a space that an applicant can check to request a Statement of
Additional Information; and
(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 will comply
with the provisions of Paragraphs (1) through (4) of the SEC Staff's
No-Action Letter dated November 28, 1988 with respect to language
concerning 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, [1988 WL 235221, *13
(S.E.C.)].
(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, has duly caused this Pre-Effective Amendment to its Registration
Statement on Form N-4 (File No. 333-87131) to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Hartford, State of
Connecticut, on the 15th day of December, 1999.
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 Pre-Effective Amendment No.
1 to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
Thomas J. McInerney* Director and President )
- ----------------------------------- (principal executive officer) )
Thomas J. McInerney )
)
Deborah Koltenuk* Vice President, Corporate Controller, and Assistant Treasurer ) December
- ----------------------------------- (principal accounting and financial officer) ) 15, 1999
Deborah Koltenuk )
)
Steven A. Haxton* Director )
- ----------------------------------- )
Steven A. Haxton )
)
Shaun P. Mathews* Director )
- ----------------------------------- )
Shaun P. Mathews )
)
David W. O'Leary* Director )
- ----------------------------------- )
David W. O'Leary )
)
Catherine H. Smith* Director )
- ----------------------------------- )
Catherine H. Smith )
</TABLE>
By: /s/ Michael A. Pignatella
------------------------------------
Michael A. Pignatella
*Attorney-in-Fact
<PAGE>
VARIABLE ANNUITY ACCOUNT I
Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ----------- -------
<S> <C> <C>
99-B.4.1 Variable Annuity Contract (G2-CDA-99(TORP)FL)
-----------------
99-B.4.2 Certificate (GTCC2-99(TORP)FL) to Variable Annuity Contract
G2-CDA-99(TORP)FL -----------------
99-B.5 Variable Annuity Contract Application
-----------------
99-B.6.1 Certificate of Incorporation of Aetna Insurance Company of
America -----------------
99-B.6.2 By-laws of Aetna Insurance Company of America
-----------------
99-B.8.1 Fund Participation Agreement between Aetna Insurance Company of
America and AIM
-----------------
99-B.8.2 Service Agreement between Aetna Insurance Company of America and AIM
-----------------
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.14.1 Powers of Attorney
-----------------
</TABLE>
EX-99-B.4.1
============================================================
Aetna Insurance Company of America
Home Office: 5100 West Lemon Street, Suite 213
Tampa, Florida 33609
Service Center: 151 Farmington Avenue
Hartford, Connecticut 06156
(800) 525-4225
This telephone number may be used to request information
about this Contract.
Aetna Insurance Company of America, herein called Aetna,
agrees to pay the benefits stated in this Contract.
Specifications
- --------------------------------------------------------------------------------
Plan
SPECIMEN
- --------------------------------------------------------------------------------
Type of Plan
SPECIMEN
- --------------------------------------------------------------------------------
Contract Holder
SPECIMEN
- --------------------------------------------------------------------------------
Contract No.
SPECIMEN
- --------------------------------------------------------------------------------
Effective Date
SPECIMEN
- --------------------------------------------------------------------------------
This Contract is Delivered in FLORIDA and is Subject to the Laws of that
Jurisdiction
THE VARIABLE FEATURES OF THE GROUP CONTRACT ARE DESCRIBED IN PARTS III AND V.
Right to Cancel
================================================================================
The Contract Holder may cancel this Contract within 10 days of receiving it by
returning this Contract along with a written notice to Aetna at one of the above
addresses or to the agent from whom it was purchased. Within 7 days after it
receives the notice of cancellation and this Contract at its Home Office, or
Service Center, Aetna will return the entire consideration paid plus any
increase or minus any decrease in the current value of any funds allocated to
the Separate Account.
Signed on the Effective Date.
/s/ Thomas J. McInerney /s/ Jane A. Boyle
President Secretary
Group Combination Annuity Contract
Nonparticipating
ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT, WHEN BASED ON INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT.
G2-CDA-99(TORP)FL
<PAGE>
Specifications
- --------------------------------------------------------------------------------
Deductions from There will be deductions for mortality and expense risks.
the Separate There also may be deductions for administrative charges and
Account asset based sales charges. (See 3.06 and 5.06.)
- --------------------------------------------------------------------------------
Deductions from Contribution(s) are subject to a deduction for premium taxes,
Contribution(s) if any. (See 3.02.)
This Contract is a legal Contract. This Contract and any attached document and
subsequent endorsements constitutes the entire legal relationship between Aetna
and the Contract Holder.
This Contract sets forth, in detail, all of the rights and obligations of both
you and Aetna. IT IS, THEREFORE, IMPORTANT THAT YOU READ THIS CONTRACT
CAREFULLY.
2
<PAGE>
Contract Schedule I
Accumulation Period
Separate Account
- --------------------------------------------------------------------------------
Separate Account:
Variable Annuity Account 1
Charges to Separate Account:
A daily charge is deducted from any portion of the Current Value allocated
to the Separate Account. The daily charge is at an annual effective rate
that will not exceed 1.00% for Annuity mortality and expense risks, 0.00%
for asset based sales charge and a daily administrative charge which will
not exceed 0.25% on an annual basis.
Fixed Plus Account Is Available
- --------------------------------------------------------------------------------
Minimum Guaranteed Interest Rate:
3% (effective annual rate of return).
Partial Withdrawal:
The 20% limit applicable to partial withdrawal from the Fixed Plus Account
will be waived when the withdrawal is:
(a) due to the Participant's death, (and made within six (6) months of
the Participant's date of death), before Annuity payments begin.
This partial withdrawal may only be exercised once; or
(b) used to purchase Annuity benefits.
i
<PAGE>
Contract Schedule I
Accumulation Period (Cont'd)
Separate Account and Fixed Plus Account
- --------------------------------------------------------------------------------
Systematic Withdrawal Option (SWO):
Is Available
The Specified Payment may not be greater than 20% of the Individual
Account's Current Value at the time of election.
The Specified Period may not be less than five years.
The Specified Percentage may not be greater than 20%.
Estate Conservation Option (ECO):
Is Available
Life Expectancy Option (LEO):
Is Available
See Section 1. - DEFINITIONS for explanations.
ii
<PAGE>
Contract Schedule II
Annuity Period
Separate Account
- --------------------------------------------------------------------------------
Fund Transfers:
Maximum number of allowable transfers in the Annuity Period is 4.
Charges to Separate Account:
A daily charge at an annual effective rate that will not exceed 1.25% for
Annuity mortality and expense risks. The administrative charge is
established upon election of an Annuity option. This charge will not
exceed 0.25%.
Variable Annuity Assumed Annual Net Return Rate:
If a Variable Annuity is chosen, an assumed annual net return rate of 5.0%
may be elected. If 5.0% is not elected, Aetna will use an assumed annual
net return rate of 3.5%.
The assumed annual net return rate factor for 3.5% per year is 0.9999058.
The assumed annual net return rate factor for 5.0% per year is 0.9998663.
If the portion of a Variable Annuity payment for any Fund is not to
decrease, the Annuity return factor under the Separate Account for that
Fund must be:
(a) 4.75% on an annual basis plus an annual return of up to 0.25% to
offset the administrative charge set at the time Annuity payments
commence if an assumed annual net return rate of 3.5% is chosen; or
(b) 6.25% on an annual basis plus an annual return of up to 0.25% to
offset the administrative charge set at the time Annuity payments
commence, if an assumed annual net return rate of 5% is chosen.
Annuity Option:
Under the option "Payments for a Stated Period of Time":
For amounts invested in one or more of the Fund(s), the number of years
must be at least five (5) and not more than thirty (30) and the Annuity
may be a Fixed or Variable Annuity.
For amounts invested in the Fixed Plus Account, the number of years must
be at least five (5) and not more than thirty (30) and the Annuity must be
a Fixed Annuity.
Fixed Annuity
- --------------------------------------------------------------------------------
Minimum Guaranteed Interest Rate:
3% (effective annual rate of return).
See Section 1. - DEFINITIONS for explanations.
iii
<PAGE>
TABLE OF GUARANTEED VALUES -
FIXED PLUS
------------------------------------------------------------------------
End of Minimum Contract Withdrawal
Years Value Value
------------------------------------------------------------------------
1 1,219.41 1,219.41
2 2,475.41 2,475.41
3 3,769.08 3,769.08
4 5,101.56 5,101.56
5 6,474.02 6,474.02
6 7,887.66 7,887.66
7 9,343.70 9,343.70
8 10,843.42 10,843.42
9 12,388.14 12,388.14
10 13,979.19 13,979.19
11 15,617.98 15,617.98
12 17,305.93 17,305.93
13 19,044.52 19,044.52
14 20,835.27 20,835.27
15 22,679.74 22,679.74
16 24,579.54 24,579.54
17 26,536.34 26,536.34
18 28,551.84 28,551.84
19 30,627.81 30,627.81
20 32,766.06 32,766.06
21 34,968.45 34,968.45
22 37,236.91 37,236.91
23 39,573.43 39,573.43
24 41,980.05 41,980.05
25 44,458.86 44,458.86
30 58,014.03 58,014.03
35 73,728.18 73,728.18
40 91,945.20 91,945.20
45 113,063.71 113,063.71
50 137,545.85 137,545.85
------------------------------------------------------------------------
Values illustrated are based on monthly purchase payments of $100 and a minimum
interest rate of 3%.
Full withdrawal is available in certain limited situations as described in the
Contract. Otherwise, no full withdrawal is available under this option.
The payout schedule is as follows:
1/5 of Fixed Plus account current value at the time requested - the 1/5 is
reduced by any amount from the Fixed Plus Account that was transferred,
withdrawn or used for a loan or to purchase Annuity Benefits during the
prior 12 months;
1/4 of remaining value of Fixed Plus account current value 12 months
later. The 1/4 is reduced by any amount from the Fixed Plus Account that
was transferred, withdrawn or used for a loan or to purchase Annuity
Benefits during the prior 12 months;
1/3 of remaining value of Fixed Plus account current value 12 months
later. The 1/3 is reduced by any amount from the Fixed Plus Account that
was transferred, withdrawn or used for a loan or to purchase Annuity
Benefits during the prior 12 months;
1/2 of remaining value of Fixed Plus account current value 12 months
later. The 1/2 is reduced by any amount from the Fixed Plus Account that
was transferred, withdrawn or used for a loan or to purchase Annuity
Benefits during the prior 12 months;
and the balance value of Fixed Plus account current value 12 months later.
The balance is reduced by any amount from the Fixed Plus Account that was
transferred, withdrawn or used for a loan or to purchase Annuity Benefits
during the prior 12 months.
iv
<PAGE>
TABLE OF CONTENTS
I. DEFINITIONS
- --------------------------------------------------------------------------------
Page
1.01 Accumulation Period ............................................. 5
1.02 Adjusted Current Value .......................................... 5
1.03 Annuitant ....................................................... 5
1.04 Annuity ......................................................... 5
1.05 Beneficiary ..................................................... 5
1.06 Code ............................................................ 5
1.07 Contract Holder ................................................. 5
1.08 Contribution .................................................... 5
1.09 Current Value ................................................... 5
1.10 Fixed Plus Account .............................................. 5
1.11 Fixed Plus Account Guaranteed Interest Rate ..................... 5
1.12 Fixed Annuity ................................................... 6
1.13 Fund(s) ......................................................... 6
1.14 Fund Transfer(s) ................................................ 6
1.15 General Account ................................................. 6
1.16 Individual Account .............................................. 6
1.17 Net Contribution ................................................ 6
1.18 Participant ..................................................... 6
1.19 Plan ............................................................ 6
1.20 Separate Account ................................................ 6
1.21 Valuation Date .................................................. 6
1.22 Valuation Period ................................................ 6
1.23 Variable Annuity ................................................ 7
II. GENERAL PROVISIONS
- --------------------------------------------------------------------------------
2.01 Change of Contract .............................................. 7
2.02 Change of Fund .................................................. 7
2.03 Nonparticipating Contract ....................................... 7
2.04 Payments ........................................................ 7
2.05 State Laws ...................................................... 7
2.06 Control of Contract ............................................. 7
2.07 Designation of Beneficiary ...................................... 8
2.08 Misstatements and Adjustments ................................... 8
2.09 Incontestability ................................................ 8
2.10 Grace Period .................................................... 8
2.11 Individual Certificates ......................................... 8
3
<PAGE>
Page
III. CONTRIBUTIONS, CURRENT VALUE, and WITHDRAWAL PROVISIONS
- --------------------------------------------------------------------------------
3.01 Limitations on Contributions .................................... 8
3.02 Net Contribution(s) ............................................. 9
3.03 Experience Credits .............................................. 9
3.04 Fund Record Units ............................................... 9
3.05 Fund Record Unit Value .......................................... 9
3.06 Fund Net Return Factors ......................................... 9
3.07 Fund Transfer(s) ................................................ 10
3.08 Notice to the Participant ....................................... 10
3.09 Withdrawal Restrictions ......................................... 10
3.10 Manner and Timing of Distributions .............................. 11
3.11 Withdrawal ...................................................... 11
3.12 Partial Withdrawal from the Fixed Plus Account .................. 12
3.13 Payment of Fixed Plus Account Full Withdrawal ................... 12
3.14 Payment of Minimum Current Value ................................ 13
3.15 Amount Payable at Death (Before Annuity Payments Start) ......... 13
3.16 Reinstatement ................................................... 13
IV. NON-ANNUITY DISTRIBUTION OPTIONS
- --------------------------------------------------------------------------------
4.01 Distribution Options ............................................ 14
4.02 Estate Conservation Option ...................................... 14
4.03 Life Expectancy Option .......................................... 15
4.04 Systematic Withdrawal Option .................................... 15
V. ANNUITY PROVISIONS
- --------------------------------------------------------------------------------
5.01 General Provisions .............................................. 16
5.02 Annuity Options ................................................. 16
5.03 Payments ........................................................ 17
5.04 Investment Option ............................................... 18
5.05 Fund Annuity Units .............................................. 18
5.06 Fund Annuity Unit Value ......................................... 18
5.07 Fund Annuity Net Return Factor .................................. 19
5.08 Fund Transfers During the Annuity Period ........................ 19
5.09 Death Benefit ................................................... 19
4
<PAGE>
I. DEFINITIONS
================================================================================
1.01 Accumulation Period:
The period during which Net Contribution(s) are applied to an Individual
Account.
1.02 Adjusted Current Value:
The Current Value (See 1.09) of an Individual Account (See 1.16).
1.03 Annuitant:
If an Annuity provides lifetime benefits, the person whose life expectancy
determines the amount and/or duration of Annuity benefit payments.
1.04 Annuity:
Payment of an income under the Annuity Provisions of Section V:
(a) For the life of one or two persons;
(b) For a stated period; or
(c) For some combination of (a) and (b).
1.05 Beneficiaries:
The person(s) named to receive any benefits which remain under the
Contract after the Participant's death. Participants designate a
Beneficiary for their Individual Account(s). (See 2.07)
1.06 Code:
The Internal Revenue Code of 1986, as amended.
1.07 Contract Holder:
The entity, named on the cover of this Contract, to which the Contract is
issued.
1.08 Contribution:
A payment received at Aetna's Service Center and allocated to this
Contract.
1.09 Current Value:
For an Individual Account (See 1.16), the Current Value is the total of:
(a) The amount, if any, in the Fixed Plus Account, with interest earned
to date and
(b) The value of all Fund record units (See 3.05), if any, as of the
most recent Valuation Period.
1.10 Fixed Plus Account:
If offered as an investment option under the Contract (see Contract
Schedule I) the Fixed Plus Account is an accumulation option with a
guaranteed minimum interest rate. Aetna may credit a higher rate which is
not guaranteed. The portion that may be withdrawn or transferred in a 12
month period is restricted (See 3.07, 3.12 and 3.13).
1.11 Fixed Plus Account Guaranteed Interest Rate:
If the Fixed Plus Account is an investment option under the Plan (see
Contract Schedule I) then Aetna will add interest at an annual rate no
less than that shown on Contract Schedule I on any Net Contribution(s) to
the Fixed Plus Account. Aetna may add interest at a higher rate determined
by its Board of Directors.
5
<PAGE>
1.12 Fixed Annuity:
An Annuity with payments that do not vary in amount.
1.13 Fund(s):
The open-end registered management investment companies whose shares are
purchased by the Separate Account to fund the benefits provided by the
Contract.
1.14 Fund Transfers:
The movement of invested amounts among the available Fund(s) and the Fixed
Plus Account (if available).
1.15 General Account:
The account holding the assets of Aetna, other than those assets held in
Aetna's Separate Account(s).
1.16 Individual Account:
This Contract is issued to the Contract Holder. However, Aetna will
maintain Individual Accounts for each Participant to keep a record of
Current Value (See 1.09) and transactions. These may include:
(a) An Employer Account: This Individual Account will be credited with
employer Net Contribution(s) and transferred amounts of 403(b)
funds, attributable to employer contributions; and
(b) An Employee Account: This Individual Account will be credited with
employee Net Contribution(s) and transferred amounts of 403(b)
funds, attributable to employee contributions including after tax
contributions.
1.17 Net Contribution:
A Contribution less any applicable premium taxes.
1.18 Participant:
A person who participates in the Plan named on the cover of this Contract.
1.19 Plan:
The Plan named on the cover of this Contract and established under Section
403(b) of the Code. The Plan is not a part of the Contract and Aetna is
not bound by its terms.
1.20 Separate Account:
An account, established by Aetna under Florida Law, that buys and holds
shares of the Fund(s) available under this Contract. Income, gains or
losses, realized or unrealized are credited or charged to the Separate
Account without regard to other income, gains or losses of Aetna. Aetna
owns the assets held in the Separate Account and is not a trustee of such
amounts. Amounts in the Separate Account are not generally guaranteed and
are held at market value. The assets of the Separate Account, to the
extent of reserves and other Contract liabilities of the Account, cannot
be charged with other Aetna liabilities.
1.21 Valuation Date:
The date and time on which a Fund annuity unit value and a Fund record
unit value are calculated. Currently, this calculation will be determined
at 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.
1.22 Valuation Period:
The period of time commencing at the end of one Valuation Date and ending
at the end of the next Valuation Date.
6
<PAGE>
1.23 Variable Annuity:
An Annuity with payments that vary with the net investment results of
the Funds available during the Annuity period.
II. GENERAL PROVISIONS
================================================================================
2.01 Change of Contract:
Only an authorized officer of Aetna may change the terms of this Contract.
Aetna reserves the right to modify this Contract to meet the requirements
of applicable state and federal laws or regulations. Aetna will notify the
Contract Holder in writing of any changes.
Aetna may change the tables for determining the amount of Annuity benefit
payments attributable only to Contributions accepted after the effective
date of change, without Contract Holder consent. Such a change will not
become effective earlier than twelve months after (1) the effective date
of the Contract, or (2) the effective date of a previous change. Aetna
will notify the Contract Holder in writing at least thirty days before the
effective date of the change. Aetna may not make Contract changes which
adversely affect the Annuity benefits attributable to Contributions
already made to the Contract.
2.02 Change of Fund:
The assets of the Separate Account are segregated by Fund. If the shares
of any Fund are no longer available for investment by the Separate Account
or if in our judgment, further investment in such shares should become
inappropriate in view of the purpose of the Contract, Aetna may cease to
make such Fund shares available for investment under the Contract
prospectively, or Aetna may substitute shares of another Fund for shares
already acquired. Aetna may also, from time to time, add additional Funds.
Any elimination, substitution or addition of Funds will be done in
accordance with applicable state and federal securities laws. Aetna
reserves the right to substitute shares of another Fund for shares already
acquired without a proxy vote.
2.03 Nonparticipating Contract:
The Contract Holder, Participants, or Beneficiaries will not have a right
to share in the earnings of Aetna.
2.04 Payments:
(a) Aetna will make distributions as directed by the Contract Holder.
Aetna will determine the amount of payments based on the Individual
Account's Current Value as of the date on which a request is
received in good order at Aetna's Service Center. Payments will be
made within seven (7) calendar days of receipt of a written request
in good order at Aetna's Service Center.
(b) Aetna may defer payments: (1) for a period of up to six (6) months
(unless not allowed by state law); and (2) as allowed by federal
law.
2.05 State Laws:
This Contract complies with the laws of the state in which it is
delivered. Any cash, death or Annuity payments are equal to or greater
than the minimum required by such laws. Annuity tables for legal reserve
valuation shall be as required by state law. Such tables may be different
from Annuity tables used to determine Annuity payments.
2.06 Control of Contract:
This Contract is designed to fund a plan which provides for retirement
income.
7
<PAGE>
The Contract Holder may, by written direction to Aetna, allow Participants
to select the investment options of their Employer and/or Employee
Accounts. Choices made under this Contract must be in writing or in a form
satisfactory to Aetna. Until receipt of such choices in its Service
Center, Aetna may rely on any previous choices made. An in-service
transfer pursuant to IRS Revenue Ruling 90-24, may be made only by written
direction from the Contract Holder and Participant to Aetna. Checks for
in-service transfers will be made payable only to the acquiring investment
provider.
(a) Nontransferable and Nonassignable: This Contract and any Individual
Accounts are nontransferable and nonassignable, except pursuant to a
"qualified domestic relations order" as set forth under the Internal
Revenue Code of 1986, as it may be amended from time to time.
(b) Distributions: A Participant may apply for a distribution from his
or her Employee Account or Employer Account. However, the Contract
Holder must certify in writing that the distribution is in
accordance with the terms of the Plan.
(c) Participant Rights/Employee Account: The Participant has a
nonforfeitable right to the value of his or her Employee Account
pursuant to the terms of the Plan as interpreted by the Contract
Holder.
(d) Participant Rights/Employer Account: The Participant has a
nonforfeitable right to the value of his or her Employer Account
pursuant to the terms of, and to the extent of his or her vested
percentage under, the Plan as interpreted by the Contract Holder. It
is the Contract Holder's responsibility to maintain records of the
Participant's vesting percentages. Aetna will not maintain nor keep
such records.
2.07 Designation of Beneficiary:
The Participant shall designate a Beneficiary.
2.08 Misstatements and Adjustments:
If Aetna finds the age of any payee to be misstated, the correct facts
will be used to adjust payments.
2.09 Incontestability:
Aetna cannot cancel this Contract because of any error of fact.
2.10 Grace Period:
This Contract will remain in effect even if Contributions are not
continued except as provided in 3.14.
2.11 Individual Certificates:
Aetna shall issue certificates to Participants as required by the state in
which this Contract is delivered. The certificate will summarize certain
provisions of the Contract. Certificates are for information only and are
not a part of the Contract.
III. CONTRIBUTIONS, CURRENT VALUE, AND WITHDRAWAL PROVISIONS
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3.01 Limitations on Contributions:
The Contribution(s) made to the Employee and Employer Account in any year,
other than transferred amounts, cannot exceed the lesser of the amount
determined under the exclusion allowance of Code Section 403(b)(2) or the
annual additions limitation of Code Section 415(c)(1). In addition, in no
event may the Contribution(s) attributable to elective deferrals as
defined in Code Section 402(g) exceed $10,000 (or, such larger amount as
adjusted by the Secretary of the Treasury) during any calendar year,
unless the alternate limitation of Code Section 402(g)(8) applies.
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3.02 Net Contribution(s):
The Net Contribution equals the actual Contribution less any applicable
premium tax. Generally, Aetna will deduct the premium tax when Annuity
benefits are purchased (See Section V). If Aetna determines that under
applicable state law, it must pay a premium tax when the Contribution is
received, or at any other time, it may deduct the tax at that time. The
Net Contribution(s) may be allocated among the following investment
options:
(a) The Fixed Plus Account (if available); and
(b) The Fund(s) in which the Separate Account invests.
Aetna must be told the percentage of all Net Contributions to allocate to
one or more of the investment options. Aetna reserves the right to require
a minimum Contribution amount per Individual Account.
Aetna reserves the right not to accept any Contribution.
3.03 Experience Credits:
Aetna may apply experience credits under this Contract. Any such credits
will be computed as decided by Aetna.
3.04 Fund Record Units:
The portion of the Net Contribution(s) applied to each Fund under the
Separate Account will determine the number of Fund record units credited
to the Individual Account for that Fund. This number is equal to the Net
Contribution applied to the Fund divided by the Fund record unit value
(See 3.05) for the Valuation Period in which the Contribution is received
in good order.
3.05 Fund Record Unit Value:
A Fund record unit value is computed by multiplying the net return factor
(See 3.06) for the current Valuation Date by the Fund record unit value
for the previous Date. The dollar value of a Fund record unit, Separate
Account assets, and Variable Annuity payments may go up or down due to
investment gain or loss.
3.06 Fund Net Return Factors:
The net return factor(s) are used to compute all Separate Account record
units for any Fund. The net return factor for each Fund is equal to
1.0000000 plus the net return rate.
The net return rate is equal to:
(a) The value of the shares of the Fund held by the Separate Account at
the end of a Valuation Period; minus
(b) The value of the shares of the Fund held by the Separate Account at
the start of the Valuation Period; plus or minus
(c) Taxes (or reserves for taxes) on the Separate Account (if any);
divided by
(d) The total value of the Fund record units and Fund annuity units of
the Separate Account at the start of the Valuation Period; minus
(e) A Separate Account charge at an annual effective rate as shown on
Contract Schedule I for Annuity mortality and expense risks, asset
based sales charge, if any, a daily administrative charge which will
not exceed the amount shown on Contract Schedule I on an annual
basis and any other fees deducted from investments in the Separate
Account. The administrative charge may be changed annually except
for amounts which have been used to purchase an Annuity.
A net return rate may be more or less than 0%.
The value of a share of the Fund is equal to the net assets of the Fund
divided by the number of shares outstanding.
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3.07 Fund Transfers(s);
All or any portion of the Adjusted Current Value of the Individual Account
(subject to the limitations described below) many be transferred from any
Fund or the Fixed Plus Account (if available).
(a) To any Fund; or
(b) To the Fixed Plus Account (if available).
Fund Transfers can be submitted as a percentage or as a dollar amount.
Aetna may establish a minimum Fund Transfer amount.
During each rolling twelve (12) month period, up to 20% of the Fixed Plus
Account value may be transferred to one or more of the Fund(s). The 20%
limit is reduced by any partial withdrawals, Fund Transfers or amounts
taken to purchase an Annuity during the twelve(12) month period. Aetna
reserves the right to include amounts paid under ECO, LEO and SWO for
purposes of applying this 20% limit. This limit is waived when the balance
in the Fixed Plus Account is $1,000 or less on the date the Fund Transfer
request is received in good order at Aetna's Service Center.
The Participant may make an unlimited number of Fund Transfers during the
Accumulation Period.
3.08 Notice to the Participant:
Each year, Aetna will notify the Participant of:
(a) The value of any amounts held in:
(i) The Fixed Plus Account (if available),
(ii) The Fund(s) for the Separate Account;
(b) The number of any fund(s) record units;
(c) The fund(s) record unit value(s); and
(d) The amount available for withdrawal.
This information will be as of a date no more than sixty (60) days before
the date of the notice.
3.09 Withdrawal Restrictions:
Limitations apply to withdrawals of any Restricted Amount from this
Contract, as required by Code Section 403(b)(11). The Restricted Amount is
the sum of:
(a) Net Contributions attributable to Participant salary reduction
contributions made on and after January 1, 1989 if any; plus
(b) The net increase, if any, in the Current Value of the Employee
Account after December 31, 1988 attributable to investment gains and
losses and credited interest.
The Restricted Amount may be fully or partially surrendered only if one or
more of the following conditions are met:
(a) The Participant has reached age 59 1/2;
(b) The Participant has separated from service;
(c) The Participant has died;
(d) The Participant has become disabled, totally and permanently within
the meaning of Code Section 72 (m)(7); or
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(e) The withdrawal is otherwise allowed by federal law, regulations or
rulings.
A full or partial withdrawal is also allowed if the Participant incurs a
"hardship" as that term is defined in the Code or regulations under Code
Section 403(b).
However, the amount available for hardship is limited to the lesser of the
amount necessary to satisfy the need, or the Net Contributions
attributable to Participant salary reduction contributions made on and
after January 1, 1989.
The Contract Holder must certify that one of these conditions has been met
before a withdrawal request will be considered to be in good order. The
Contract Holder must notify Aetna in writing when a lump sum payment is to
be made or Annuity payments are to commence. Also, for all withdrawals,
the Contract Holder must certify in writing that they are being made in
accordance with the Plan.
If, pursuant to IRS Revenue Ruling 90-24, Aetna agrees to accept under
this Contract amounts transferred from a Code Section 403(b)(7) custodial
account, such amounts will be subject to the withdrawal restrictions set
forth in Code Section 403(b)(7)(A)(ii).
3.10 Manner and Timing of Distributions:
(a) As directed by the Contract Holder, a distribution to a Participant
or Beneficiary may be made in a lump sum, as one of the Distribution
Options described in Section IV, or as one of the Annuity options in
Section V. The Participant or Beneficiary may elect the form of
distribution subject to certification in writing by the Contract
Holder that the Participant or Beneficiary is eligible both as to
the timing and form of distribution. All distributions must satisfy
the minimum distribution rules set forth in Code Section 401(a)(9).
(b) The distribution of benefits from the Employee and Employer Accounts
must generally begin no later than 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 a Participant who
attained age 70 1/2 before January 1, 1988, the distribution of such
benefits must be made or must begin not later than the April 1 of
the calendar year following the calendar year in which the
Participant retires.
The entire value of the Individual Account must be distributed, or
distribution must be made over the life of the Participant, the
joint lives of the Participant and Beneficiary or over a period that
does not extend beyond the life expectancy of the Participant or the
joint life expectancies of the Participant and Beneficiary.
(c) If the Participant does not request commencement of benefits from
the Employee and Employer Accounts as described above, Aetna will
not be responsible for compliance with the Code Section 401(a)(9)
minimum distribution requirements or for any adverse tax or other
consequences that may result.
If Aetna maintains separate records of the value as of December 31,
1986, this value is not required to be taken before the year the
Participant attains age 75. Aetna will maintain separate records
provided the Participant does not take any distribution other than
the minimum distribution required under Code Section 401(a)(9).
3.11 Withdrawal:
(a) The Participant may withdraw any portion or all of an Individual
Account Adjusted Current Value and transfer such amount to another
investment provider under the Plan or roll over such amount that
qualifies as an eligible rollover distribution in accordance with
Code Sections 403(b)(8), 401(a)(31) and 402(c) and applicable
regulations.
(b) Except as described in Section 3.12, unless the Participant
specifies otherwise, partial withdrawals are satisfied by
withdrawing amounts on a pro rata basis from each of the investment
options in which the Individual Account is invested.
(c) Any amount withdrawn from the Fixed Plus Account will be subject to
the limitations in 3.12, 3.13 and 3.14.
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3.12 Partial Withdrawal from the Fixed Plus Account:
The amount eligible for partial withdrawal is 20% of the Current Value of
the amount held in the Fixed Plus Account on the day Aetna's Service
Center receives a written request, reduced by any previous Fund Transfer,
partial withdrawal or amounts taken to purchase Annuity benefits during
the prior 12 months. Aetna reserves the right to include amounts paid
under ECO, LEO and SWO for purposes of applying this 20% limit. However,
SWO and LEO are unavailable if a Fixed Plus Account Transfer or withdrawal
is requested within the current 12-month period.
The 20% limit applicable to partial withdrawals from the Fixed Plus
Account will be waived under certain conditions and will apply when the
partial withdrawal is made on a pro rata basis from all options used under
the Participant's Individual Account. (See Contract Schedule I).
3.13 Payment of Fixed Plus Account Full Withdrawal:
When Aetna receives a full withdrawal request, no additional partial
withdrawals or Fund Transfers from the Fixed Plus Account are permitted
during the payout period. If a full withdrawal is requested, Aetna will
pay any Current Value from the Fixed Plus Account in five payments as
follows:
(a) One-fifth of the Current Value on the day the request is received in
good order at Aetna's Service Center, reduced by any amount from the
Fixed Plus Account that was transferred, withdrawn or used to
purchase Annuity benefits during the prior 12 months;
(b) One-fourth of the remaining Current Value 12 months later;
(c) One-third of the remaining Current Value 12 months later;
(d) One-half of the remaining Current Value 12 months later; and
(e) The balance of the Current Value 12 months later.
The Fixed Plus Account full withdrawal payment provision will be waived
when a withdrawal is:
(a) Due to the Participant's death before Annuity benefit payments
begin;
(b) Used to purchase Annuity benefits;
(c) When the amount in the Fixed Plus Account is $3,500 or less and no
amount has been withdrawn, transferred, or used to purchase Annuity
benefits during the previous 12 months;
(d) Due to hardship when the following conditions are met:
(1) the withdrawal is due to an employer certified hardship;
(2) the amount withdrawn is paid directly to the Participant; and
(3) the amount paid for all partial and full withdrawals due to
hardship during the previous 12-month period does not exceed
10% of the average Current Value for all Individual Accounts
during the same period of time; or
(e) Due to separation from service provided that:
(1) the withdrawal is due to the Participant's separation from
service with the employer;
(2) the employer certifies that the Participant has separated from
service;
(3) the amount withdrawn is paid directly to the Participant; and
(4) the amount paid for all partial and full withdrawals due to
separation from service during the previous 12-month period
does not exceed 20% of the average Current Value of all
Individual Accounts during that same period of time.
Any full withdrawal from the Fixed Plus Account may be cancelled at any
time before the end of the payment period.
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3.14 Payment of Minimum Current Value:
If the Individual Accounts Current Value is less than $3,500, and no
Contributions have been received for three (3) years, Aetna may close the
Account and pay the Current Value as directed by the Contract Holder in
one lump sum.
3.15 Amount Payable at Death (Before Annuity Payments Start):
Aetna will pay any portion of the Individual Account(s) Current Value, to
the Beneficiary when:
(a) The Participant dies before Annuity payments start; and
(b) The certified copy of the death certificate is received by Aetna;
and
(c) A completed and signed election form is submitted to the Service
Center. The form must include Contract Holder certification that the
Beneficiary is eligible for a distribution under the terms of the
Plan.
A guaranteed death benefit is available if the Beneficiary requests either
a lump-sum payment or an Annuity option within six months of the
Participant's death.
For each Individual Account, the death benefit is guaranteed to be the
greater of:
(a) The Current Value of the Individual Account on the date the notice
of death and the request for payment are received in good order at
Aetna's Service Center; or
(b) The total of Net Contribution(s) made to the Individual Account
minus the total of all partial withdrawals and annuitizations made
from the Individual Account.
If the Participant dies before distributions begin in accordance with the
provisions of Code Section 401(a)(9), the entire value of the Account must
be distributed by December 31 of the calendar year containing the fifth
anniversary of the date of the Participant's death. Alternatively, if the
Participant has a designated Beneficiary, payments may be made over the
life of the Beneficiary or over a period not extending beyond the life
expectancy of the Beneficiary provided distribution to a non-spouse
Beneficiary begins by December 31 of the calendar year following the
calendar year of the Participant's death. For a spousal Beneficiary, such
payments must begin by the later of December 31 of the calendar year
following the calendar year of the Participant's death or December 31 of
the calendar year in which the Participant would have attained age 70 1/2.
If the Participant dies after distributions begin in accordance with the
provisions of Code Section 401(a)(9), payments 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. If the minimum distribution requirements
have been met by partial withdrawals based on the participant's life
expectancy or the joint life expectancies of the Participant and
Beneficiary, death benefit payments to the Beneficiary must also satisfy
any additional requirements of Code Section 401(a)(9).
3.16 Reinstatement:
All or a portion of the proceeds of a full withdrawal of an Individual
Account may be reinvested within 30 days after the surrender if allowed by
law. Amounts will be reinstated among the Fixed Plus Account and the
Fund(s) in the same proportion as they were at the time of withdrawal. The
number of record units reinstated will be based on the record unit
value(s) next computed after receipt at Aetna's Service Center of the
reinstatement request and the amount to be reinvested.
Any Individual Account(s) closed because the Current Value was less than
$3,500 may not be reinstated (see 3.14).
A Reinstatement is permitted only once per Individual Account.
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IV. NON-ANNUITY DISTRIBUTION OPTIONS
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4.01 Distribution Options:
Distribution Options: ECO, LEO and SWO are distribution options under
which a portion of the Individual Account Current Value will automatically
be surrendered and distributed each calendar year. The distributed amount
is withdrawn pro rata from each investment option under the Individual
Account. The Contract Holder must certify in writing that distributions
are being made in accordance with the Plan.
Minimum Current Value: At its discretion, Aetna may require a minimum
initial Current Value for election of a distribution option. If after
election of the option the Current Value is insufficient to make a
scheduled payment, Aetna will distribute the entire Individual Account
balance.
Reservations of Rights: Aetna reserves the right to change the terms of
ECO, LEO or SWO for future elections, to discontinue the availability of
these options after proper notification, or to make other distribution
options available as allowed by the state in which this Contract is
delivered. Aetna also reserves the right to allow ECO and LEO payments to
be made more frequently than annually.
Election and Revocation: The Participant or Beneficiary may elect a
distribution option by submitting a completed and signed election form to
Aetna's Service Center. However, the Contract Holder must certify in
writing that the distribution option is in accordance with the terms of
the Plan. Once elected, the Participant or Beneficiary may revoke the
option by submitting a written request to Aetna's Service Center. Any
revocation will apply only to amounts not yet paid.
Availability of ECO, LEO and SWO: The Participant may elect any one of the
following three distribution options, if they are available as an option
under the Contract (see Contract Schedule I) and if the Contract Holder
certifies that the election is in accordance with the terms of the Plan.
The Beneficiary may elect either ECO or SWO, if they are available as an
option under the Contract (see Contract Schedule I) and if the Contract
Holder certifies that the election is in accordance with the terms of the
Plan.
An individual who has revoked ECO, LEO or SWO may not subsequently elect
that option again, nor may the individual elect another withdrawal option
unless permitted under the Code minimum distribution rules.
LEO and SWO are not available if a Fixed Plus Account transfer or
surrender has occurred within the prior 12-month period.
If LEO is in effect and the Participant dies, or if ECO or SWO is in
effect and the Participant dies before the required beginning date for
minimum distributions, payments will cease. A Beneficiary may elect ECO or
SWO provided the election satisfies 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 revoked.
4.02 Estate Conservation Option (ECO):
Amount of Distribution: Each year that ECO is in effect, Aetna will
calculate and distribute an amount equal to the minimum required
distribution under the Code. The annual distribution will be determined by
dividing the Individual Account Current Value as of December 31 of the
year prior to the year for which payment is to be made by a life
expectancy factor based on expected return multiples in Table V and VI of
Section 1.72-9 of the Income Tax Regulations.
If Aetna maintains separate records of the value as of December 31, 1986,
payments made during or after the year in which the Participant attains
age 70 1/2 and before the year the Participant attains age 75, will only
be calculated on amounts contributed after December 31, 1986, plus all
earnings on all amounts after that date. If age 70 1/2 was attained prior
to 1988, the Participant must be retired in order to qualify for this
exception.
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The Participant may elect either the single or joint life expectancy
factor. If the joint life expectancy factor is elected, the second life
must be the Beneficiary under the Plan. If the Beneficiary selects ECO
after the Participant's death, only a single life expectancy factor may be
used. The life expectancy or joint life expectancy factor will be
recalculated each year in accordance with the rules under Code Section
401(a)(9).
Date of Distribution: The Participant shall specify the initial
distribution date. The earliest date is the first day of the calendar year
in which the Participant attains age 70 1/2 or retires, whichever is
later. If a Beneficiary elects ECO, the earliest date is the date of the
Participant's death. Subsequent distribution will be made annually on such
date as Aetna may designate or allow.
4.03 Life Expectancy Option (LEO):
Amount of Distribution: Each year that LEO is in effect, Aetna will
calculate and distribute an amount determined by dividing the Individual
Account Current Value as of December 31 of the year prior to the year for
which payment is to be made by a life expectancy factor based on expected
return multiples in Table V and VI of Section 1.72-9 of the Income Tax
Regulations. Payments will be made each year until the year the
Participant attains age 70 1/2, or until the Participant dies, if earlier.
The Participant may elect either the single or joint life expectancy
factor. If the joint life expectancy factor is elected, the second life
must be the Beneficiary under the Plan. The life expectancy or joint life
expectancy factor will be recalculated each year in accordance with the
rules under Code Section 401(a)(9), or reduced by one for each calendar
year which has elapsed since the life expectancy was first calculated, as
elected by the Participant.
Date of Distribution: The Participant shall specify the initial
distribution date. The earliest date is the date on which the Participant
separates from service with the employer. Subsequent distribution will be
made annually on such date as Aetna may designate or allow.
4.04 Systematic Withdrawal Option (SWO):
Amount of Distribution: The Participant may elect one of the three payment
methods described below.
(1) Specified Payment: Payments of a designated dollar amount. The
annual amount may not be greater than the percentage of the Current
Value at time of election as shown in Contract Schedule I. This
annual dollar amount will remain constant, unless a higher amount is
required under Code minimum distribution rules. At its discretion,
Aetna may require a minimum initial payment amount; or
(2) Specified Period: Payments which are made over a period of time
which must be at least the minimum number of years shown in Contract
Schedule I. The annual amount paid each year is calculated by
dividing the Current Value as of December 31 of the prior year by
the number of payment years remaining; or
(3) Specified Percentage: Payment of a designated percentage which
cannot be greater than the percentage of the Current Value at the
time of election as shown in Contract Schedule I. The percentage may
be changed by written request. Aetna reserves the right to limit the
number of times the percentage may be changed. The annual amount is
calculated by multiplying the Current Value as of December 31 of the
year prior to the payment by the designated percentage. Payments
will be made each year until the year the Participant attains age
70 1/2.
Minimum Distribution Requirements: If distributions are made under SWO
after payments are required to begin under the minimum distribution
requirements of Code Section 401(a)(9), the amount distributed in any year
will be increased if required under the Code minimum distribution rules.
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For this purpose, the minimum required distribution will be determined
each year by dividing the Individual Account Current Value as of December
31 of the year prior to the year for which payment is to be made by a life
expectancy factor, which for the initial distribution year shall be based
on either the single life expectancy factor or joint life expectancy
factor in Table V or VI of Section 1.72.9 of the Income Tax Regulations,
as elected by the Participant. If the joint life expectancy factor is
elected, the second life must be the Beneficiary under the Plan. If a
Beneficiary elects SWO after the Participant's death, only a single life
expectancy factor may be used. Minimum distributions for any subsequent
year will be calculated based on such life expectancy factor reduced by
one for each calendar year which has elapsed since the life expectancy was
first calculated. If the specified period method is elected, the maximum
specified period will be limited by the single life expectancy factor or
joint life expectancy factor in Table V or VI of Section 1.72-9 of the
Income Tax Regulations, as elected by the Participant. If elected by a
Beneficiary, only a single life expectancy may be used.
Date of Distribution: The Participant shall specify the initial
distribution date. The earliest date is the date on which the Participant
attains age 59 1/2 or age 55, if separated from service with the employer
at or after age 55. If a Beneficiary elects SWO, the earliest date is the
date of the Participant's death.
SWO payments will be made on a monthly, quarterly, semi-annual or annual
basis, as elected by the Participant or Beneficiary. If SWO payments are
made more frequently than annually, the designated annual amount is
divided by the number of payments due each calendar year. Subsequent
distribution will be made periodically on such date as Aetna may designate
or allow.
V. ANNUITY PROVISIONS
================================================================================
5.01 General Provisions:
(a) Upon certification by the Contract Holder of the Participants' total
disability, acceptance of retirement or separation from service, the
Participant has the right to elect an Annuity option.
(b) The Participant may elect an Annuity option by telling Aetna to pay
all or any portion of the Individual Account(s) Current Value (minus
any applicable premium tax if not previously deducted) as a premium
for an Annuity under Option 1, 2, or 3 (See 5.02).
(c) A completed and signed election form must be submitted to the
Service Center. The form must include Contract Holder certification
that the Participant is eligible for a distribution under the terms
of the Plan and that the Annuity option chosen is permitted under
the terms of the Plan.
(d) Any election of an Annuity option must comply with the minimum
distribution requirements of Code Section 401(a)(9), including the
incidental death benefit rule, and the regulations thereunder. This
restriction does not apply if Option 3 is chosen and the second
Annuitant is the spouse of the Participant.
(e) Once elected, an Annuity option may not be revoked, except for
Option 1 when elected on a variable basis.
5.02 Annuity Options:
Option 1 - Payments for a Stated Period of Time.
An Annuity will be paid for the number of years chosen (See Contract
Schedule II). If payments for this option are made under a Variable
Annuity, the present value of any remaining payments may be withdrawn at
any time.
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Option 2 - Life Income based on the life of the Annuitant.
Payments will be made until the death of the Annuitant. When this option
is chosen, a choice of the following must be made:
(a) Payments cease at the death of the Annuitant;
(b) Payments may be guaranteed for 5-30 years; or
(c) Payments may be guaranteed for the amount applied to the Annuity
option. If the Annuitant dies prior to the 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
only available on a fixed basis.
Option 3 - Life Income based upon the lives of two Annuitants.
An Annuity will be paid during the lives of the Annuitant and a second
Annuitant. Payments will continue until both Annuitants have died. When
this option is chosen, a choice of the following must be made:
(a) 100% of the payment to continue after the first death;
(b) 66 2/3% of the payment to continue after the first death;
(c) 50% of the payment to continue after the first death;
(d) 100% of the payment to continue after the first death with a
guarantee of 5-30 years;
(e) 100% of the payment to continue at the death of the second Annuitant
and 50% of the payment to continue at the death of the Annuitant; or
(f) 100% of the payment to continue after the first death. 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 only
available on a fixed basis.
If a Fixed Annuity option is chosen under Option 1, Option 2 (a) or (b) or
Option 3 (a) or (d), then the Participant may elect a payment increase of
1, 2 or 3%, compounded annually. An election of such a payment increase
will result in an adjustment of the policy guarantees by an actuarially
equivalent payment factor.
Other Options - Aetna may make other options available as allowed by the
laws of the state in which this Contract is delivered.
5.03 Payments:
(a) Upon written direction from the Contract Holder, Aetna will pay
Annuity benefits directly to the Participant and as payor, Aetna
will be responsible for withholding any applicable federal or state
taxes and reporting such sums and filing any related forms with the
Internal Revenue Service and/or to any applicable state taxing
authorities.
(b) Generally, the first Annuity payment must be made by April 1 of the
calendar year following the year in which the Participant turns age
70 1/2, or retires, whichever occurs later. For a Participant who
attained age 70 1/2 before January 1, 1988, the distribution of such
benefits must be made or must begin not later than April 1 of the
calendar year following the calendar year in which the Participant
retires.
(c) Payments will be made on a monthly basis unless the Participant
requests otherwise. If payments are made on a quarterly, semi-annual
or annual basis, Aetna will calculate an actuarially equivalent
payment factor.
(d) No choice of any Annuity option may be made if the first payment
would be less than $50 per month or if the total payments in a year
would be less than $250.
17
<PAGE>
(e) For purposes of calculating the first payment of a Variable Annuity
or the guaranteed payments for a Fixed Annuity, the Annuitant's and
second Annuitant's adjusted age will be used. The Annuitant's and
second Annuitant's adjusted age is his or her age as of the birthday
closest to the Annuity commencement date reduced by one year for
Annuity commencement dates occurring during the period of time from
July 1, 1992 through December 31, 1999. The Annuitant's and second
Annuitant's age will be reduced by two years for Annuity
commencement dates occurring during the period of time from January
1, 2000 through December 31, 2009. The Annuitant's and second
Annuitant's age will be reduced by one additional year for Annuity
commencement dates occurring in each succeeding decade.
(f) If a Fixed Annuity under Option 1, 2 or 3 is elected, Aetna will use
the applicable current settlement option rates if these will provide
higher Fixed Annuity payments.
5.04 Investment Option:
(a) When an Annuity option is chosen the Participant must designate
whether the Annuity will be fixed or variable and whether the
underlying investment will be:
(1) The General Account;
(2) One or more of the available Fund(s); or
(3) A combination of (1) and (2).
If a Fixed Annuity is chosen, the Annuity purchase rate for the option
chosen reflects at least the Minimum Guaranteed Interest Rate (See
Contract Schedule II), but may reflect a higher interest rate.
If a Variable Annuity is chosen, the initial Annuity payment for the
option chosen reflects the Assumed Annual Net Return Rate elected (See
Contract Schedule II). The Assumed Annual Net Return Rate is the interest
rate used to determine the amount of the first Annuity payment under a
Variable Annuity. The Separate Account must earn this rate plus enough to
cover the mortality and expense risks charges (which may include profit)
(at the annual rate shown on Contract Schedule II) and a daily
administrative charge if future Variable Annuity payments are to remain
level.
5.05 Fund Annuity Units:
The number of Fund(s) annuity units is based on the amount of the first
Variable Annuity payment which is equal to:
(a) The portion of the Current Value (minus any premium tax) applied to
pay a variable Annuity; divided by (b) 1,000; multiplied by (c) the
payment rate for the option chosen.
Such amount, or portion, of the variable payment will be divided by the
appropriate Fund(s) Annuity unit value (See 5.06) on the tenth Valuation
Date before the due date of the first payment to determine the number of
each Fund Annuity units. The number of each Fund Annuity units remains
fixed. Each future payment is equal to the sum of the products of each
Fund Annuity unit value multiplied by the appropriate number of Units. The
Fund Annuity unit value on the tenth Valuation Date prior to the due date
of the payment is used.
5.06 Fund Annuity Unit Value:
For any Valuation Date, a Fund(s) Annuity unit value is equal to:
(a) The value for the previous Valuation Date; multiplied by
(b) The Annuity net return factor(s) (See 5.07) for the Period;
multiplied by
(c) A factor to reflect the assumed annual net return rate. (See
Contract Schedule II).
The dollar value of a Fund Annuity unit and Annuity payments may go up or
down due to investment gain or loss. Payments shall not be changed due to
changes in the mortality or expense results or administrative charges.
18
<PAGE>
5.07 Fund Annuity Net Return Factor:
The Annuity net return factor(s) are used to compute all Separate Account
Annuity payments for any Fund.
The Annuity net return factor(s) for each Fund is equal to 1.0000000 plus
the net return rate.
The net return rate is equal to:
(a) The value of the shares of the Fund held by the Separate Account at
the end of a Valuation Period, minus
(b) The value of the shares of the Fund held by the Separate Account at
the start of the Valuation Period, plus or minus
(c) Taxes (or reserves for taxes) on the Separate Account (if any);
divided by
(d) The total value of the Fund(s) record units and Fund(s) Annuity
units of the Separate Account at the start of the Valuation Period;
minus
(e) A daily charge for Annuity mortality and expense risks, which may
include a profit, (at the annual rate as shown on Contract Schedule
II), a daily administrative charge and any other fees deducted from
investments in the Separate Account.
A net return rate may be more or less than 0%. The value of a share of the
Fund is equal to the net assets of the Fund divided by the number of
shares outstanding.
5.08 Fund Transfers During the Annuity Period:
At the request of the Contract Holder or the Participant if the Contract
Holder has directed Aetna to accept such a request from the Participant,
all or any portion of the Current Value may be transferred from any
variable Fund to any other allowable Fund. Aetna reserves the right to
allow no more than four Funds to be selected at any one time. Fund
Transfers will be processed as of the Valuation Date next following when a
transfer request is received in good order at Aetna's Service Center. The
maximum number of allowable transfers (during the Annuity period) in a
calendar year is shown on Contract Schedule II.
Fund Transfer requests must be expressed as a percentage of each Fund's
allocation to the Annuity payment. Aetna may establish a minimum transfer
amount.
5.09 Death Benefit:
Upon the death of the Annuitant(s), any remaining guaranteed payments will
continue to the Beneficiary unless the Beneficiary elects to receive the
present value of any remaining guaranteed payments in a lump sum. Such
payments will be paid at least as rapidly as under the method of
distribution then in effect. If the Beneficiary dies while receiving
payments, the present value of any remaining guaranteed payments will be
paid in one sum to the Beneficiary's estate.
The interest rate used to determine the first Annuity payment will be used
to calculate the present value. The present value will be determined as of
the Valuation Period in which proof of death acceptable to Aetna and a
request for payment is received at Aetna's Service Center.
19
<PAGE>
OPTION 1
Payments for a Stated Period of Time
Amount of Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
------------------------------------------------------------------------
Monthly Monthly
Years Payment Years Payment
------------------------------------------------------------------------
5 17.91 18 5.96
6 15.14 19 5.73
7 13.16 20 5.51
8 11.68 21 5.32
9 10.53 22 5.15
10 9.61 23 4.99
11 8.86 24 4.84
12 8.24 25 4.71
13 7.71 26 4.59
14 7.26 27 4.47
15 6.87 28 4.37
16 6.53 29 4.27
17 6.23 30 4.18
------------------------------------------------------------------------
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
------------------------------------------------------------------------
Monthly Monthly
Years Payment Years Payment
------------------------------------------------------------------------
5 18.12 18 6.20
6 15.35 19 5.97
7 13.38 20 5.75
8 11.90 21 5.56
9 10.75 22 5.39
10 9.83 23 5.24
11 9.09 24 5.09
12 8.46 25 4.96
13 7.94 26 4.84
14 7.49 27 4.73
15 7.10 28 4.63
16 6.76 29 4.53
17 6.47 30 4.45
------------------------------------------------------------------------
20
<PAGE>
OPTION 1
Payments for a Stated Period of Time
Amount of Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
------------------------------------------------------------------------
Monthly Monthly
Years Payment Years Payment
------------------------------------------------------------------------
5 18.74 18 6.94
6 15.99 19 6.71
7 14.02 20 6.51
8 12.56 21 6.33
9 11.42 22 6.17
10 10.51 23 6.02
11 9.77 24 5.88
12 9.16 25 5.76
13 8.64 26 5.65
14 8.20 27 5.54
15 7.82 28 5.45
16 7.49 29 5.36
17 7.20 30 5.28
------------------------------------------------------------------------
21
<PAGE>
OPTION 2
Life Income
Amount of Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
Payments Guaranteed for a Stated Period of Years
------------------------------------------------------------------------
Adjusted
Age of None 5 10 15 20 Cash
Annuitant Refund
------------------------------------------------------------------------
50 $4.05 $4.05 $4.03 $3.99 $3.93 $3.89
51 4.12 4.11 4.09 4.05 3.99 3.94
52 4.19 4.19 4.16 4.11 4.04 4.00
53 4.27 4.26 4.23 4.18 4.10 4.06
54 4.35 4.34 4.31 4.25 4.16 4.12
55 4.44 4.42 4.39 4.32 4.22 4.19
56 4.53 4.51 4.47 4.40 4.29 4.26
57 4.62 4.61 4.56 4.48 4.35 4.33
58 4.72 4.71 4.65 4.56 4.42 4.41
59 4.83 4.81 4.75 4.64 4.49 4.49
60 4.95 4.93 4.86 4.73 4.55 4.57
61 5.07 5.05 4.97 4.83 4.62 4.66
62 5.20 5.17 5.08 4.92 4.69 4.76
63 5.34 5.31 5.20 5.02 4.76 4.85
64 5.49 5.45 5.33 5.12 4.83 4.96
65 5.65 5.61 5.47 5.22 4.89 5.06
66 5.82 5.77 5.61 5.33 4.96 5.18
67 6.01 5.94 5.75 5.44 5.02 5.30
68 6.20 6.13 5.91 5.54 5.08 5.42
69 6.41 6.33 6.07 5.65 5.14 5.56
70 6.64 6.54 6.23 5.76 5.19 5.70
71 6.88 6.76 6.41 5.86 5.24 5.84
72 7.14 7.00 6.59 5.97 5.28 6.00
73 7.43 7.26 6.77 6.06 5.32 6.16
74 7.73 7.53 6.96 6.16 5.35 6.33
75 8.06 7.82 7.14 6.25 5.38 6.51
------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
22
<PAGE>
OPTION 2
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
Payments Guaranteed for a Stated Period of Years
------------------------------------------------------------------------
Adjusted
Age of None 5 10 15 20
Annuitant
------------------------------------------------------------------------
50 $4.34 $4.34 $4.31 $4.27 $4.22
51 4.41 4.40 4.38 4.33 4.27
52 4.48 4.47 4.45 4.40 4.32
53 4.56 4.55 4.52 4.46 4.38
54 4.64 4.63 4.59 4.53 4.44
55 4.72 4.71 4.67 4.60 4.50
56 4.81 4.80 4.75 4.67 4.56
57 4.91 4.89 4.84 4.75 4.62
58 5.01 4.99 4.93 4.83 4.69
59 5.12 5.10 5.03 4.92 4.75
60 5.23 5.21 5.13 5.00 4.82
61 5.36 5.33 5.24 5.09 4.88
62 5.49 5.45 5.35 5.19 4.95
63 5.63 5.59 5.47 5.28 5.02
64 5.78 5.73 5.60 5.38 5.08
65 5.94 5.89 5.73 5.48 5.15
66 6.11 6.05 5.87 5.58 5.21
67 6.29 6.22 6.02 5.69 5.27
68 6.49 6.41 6.17 5.79 5.33
69 6.70 6.60 6.33 5.90 5.38
70 6.92 6.81 6.49 6.00 5.43
71 7.17 7.04 6.66 6.10 5.48
72 7.43 7.27 6.84 6.20 5.52
73 7.71 7.53 7.02 6.30 5.55
74 8.02 7.80 7.20 6.39 5.59
75 8.35 8.08 7.38 6.48 5.62
------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
23
<PAGE>
OPTION 2
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
Payments Guaranteed for a Stated Period of Years
------------------------------------------------------------------------
Adjusted
Age of None 5 10 15 20
Annuitant
------------------------------------------------------------------------
50 $5.26 $5.25 $5.22 $5.17 $5.11
51 5.33 5.32 5.28 5.23 5.15
52 5.40 5.38 5.34 5.29 5.20
53 5.47 5.45 5.41 5.35 5.26
54 5.54 5.53 5.48 5.41 5.31
55 5.63 5.61 5.56 5.47 5.36
56 5.71 5.69 5.63 5.54 5.42
57 5.80 5.78 5.72 5.61 5.47
58 5.90 5.88 5.81 5.69 5.53
59 6.01 5.98 5.90 5.77 5.59
60 6.12 6.09 6.00 5.85 5.65
61 6.24 6.21 6.10 5.93 5.71
62 6.37 6.33 6.21 6.02 5.77
63 6.51 6.46 6.33 6.11 5.83
64 6.66 6.60 6.45 6.20 5.89
65 6.82 6.75 6.57 6.30 5.95
66 6.99 6.91 6.71 6.39 6.01
67 7.17 7.08 6.85 6.49 6.06
68 7.36 7.27 6.99 6.59 6.12
69 7.57 7.46 7.15 6.69 6.17
70 7.80 7.67 7.30 6.78 6.21
71 8.05 7.89 7.47 6.88 6.25
72 8.31 8.13 7.64 6.97 6.29
73 8.59 8.38 7.81 7.06 6.33
74 8.90 8.64 7.99 7.15 6.36
75 9.23 8.93 8.16 7.23 6.38
------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
24
<PAGE>
OPTION 3
Life Income for Two Annuitants
Amount of Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Adjusted Ages
- ----------------------- Option 3d
Second 10 Years
Annuitant Annuitant Option 3a Option 3b Option 3c Guaranteed Option 3e Option 3f
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
55 50 $3.69 $4.05 $4.27 $3.69 $4.03 $3.69
55 55 3.88 4.25 4.47 3.87 4.14 3.87
55 60 3.99 4.44 4.71 3.98 4.20 3.98
60 55 3.99 4.44 4.71 3.98 4.42 3.98
60 60 4.24 4.71 4.99 4.23 4.57 4.23
60 65 4.38 4.97 5.32 4.38 4.65 4.38
65 60 4.38 4.97 5.32 4.38 4.93 4.38
65 65 4.72 5.33 5.70 4.71 5.14 4.72
65 70 4.93 5.68 6.15 4.91 5.27 4.91
70 65 4.93 5.68 6.15 4.91 5.66 4.91
70 70 5.40 6.21 6.70 5.36 5.96 5.38
70 75 5.69 6.68 7.32 5.62 6.13 5.66
75 70 5.69 6.68 7.32 5.62 6.67 5.66
75 75 6.37 7.45 8.15 6.23 7.12 6.33
75 80 6.78 8.11 8.99 6.54 7.36 6.71
- -------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
25
<PAGE>
OPTION 3
Life Income for Two Annuitants
Amount of Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Adjusted Ages
- ------------------------ Option 3d
Second 10 Years
Annuitant Annuitant Option 3a Option 3b Option 3c Guaranteed Option 3e
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $3.97 $4.35 $4.56 $3.97 $4.31
55 55 4.16 4.54 4.76 4.15 4.42
55 60 4.27 4.73 5.00 4.26 4.48
60 55 4.27 4.73 5.00 4.26 4.70
60 60 4.51 4.99 5.27 4.50 4.84
60 65 4.66 5.25 5.61 4.65 4.93
65 60 4.66 5.25 5.61 4.65 5.22
65 65 4.99 5.61 5.99 4.98 5.42
65 70 5.19 5.97 6.44 5.17 5.54
70 65 5.19 5.97 6.44 5.17 5.93
70 70 5.67 6.49 6.99 5.62 6.23
70 75 5.95 6.96 7.61 5.87 6.40
75 70 5.95 6.96 7.61 5.87 6.95
75 75 6.64 7.73 8.43 6.48 7.40
75 80 7.04 8.39 9.29 6.79 7.64
- ------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
26
<PAGE>
OPTION 3
Life Income for Two Annuitants
Amount of Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Adjusted Ages
- ------------------------ Option 3d
Second 10 Years
Annuitant Annuitant Option 3a Option 3b Option 3c Guaranteed Option 3e
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $4.88 $5.26 $5.48 $4.88 $5.23
55 55 5.04 5.44 5.66 5.04 5.32
55 60 5.15 5.63 5.91 5.14 5.38
60 55 5.15 5.63 5.91 5.14 5.59
60 60 5.37 5.87 6.16 5.37 5.72
60 65 5.52 6.14 6.51 5.51 5.80
65 60 5.52 6.14 6.51 5.51 6.10
65 65 5.83 6.49 6.87 5.82 6.29
65 70 6.04 6.84 7.34 6.00 6.41
70 65 6.04 6.84 7.34 6.00 6.81
70 70 6.49 7.35 7.87 6.44 7.08
70 75 6.77 7.84 8.51 6.68 7.25
75 70 6.77 7.84 8.51 6.68 7.81
75 75 7.45 8.60 9.33 7.27 8.25
75 80 7.86 9.28 10.20 7.57 8.49
- ------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
27
<PAGE>
================================================================================
Aetna Insurance Company of America
Home Office: 5100 West Lemon Street, Suite 213
Tampa, Florida 33609
Service Center: 151 Farmington Avenue
Hartford, Connecticut 06156
(800) 525-4225
Group Combination Annuity Contract
Nonparticipating
================================================================================
ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT, WHEN BASED ON INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT.
G2-CDA-99(TORP)FL
EX-99.B.4.2
============================================================
Aetna Insurance Company of America
Home Office: 5100 West Lemon Street, Suite 213
Tampa, Florida 33609
Service Center: 151 Farmington Avenue
Hartford, Connecticut 06156
(800) 525-4225
This telephone number may be used to request information
about this certificate.
Aetna Insurance Company of America, herein called Aetna,
agrees to pay the benefits stated in this Contract.
Certificate of Group Annuity Coverage
================================================================================
To the Certificate Holder:
Aetna certifies that coverage is in force for you under the stated Group Annuity
Contract and Certificate numbers. All data shown here is taken from Aetna
records and is based upon information furnished by you.
This Certificate is a summary of the Group Annuity Contract provisions. It
replaces any and all prior certificates, riders, or amendments issued to you
under the stated Contract and Certificate numbers. This Certificate is for
information only and is not a part of the Contract.
THE VARIABLE FEATURES OF THE GROUP CONTRACT ARE DESCRIBED IN PART III AND V.
Right to Cancel
================================================================================
You may cancel this Certificate within 10 days of receiving it by returning this
Certificate along with a written notice to Aetna at the above address or to the
agent from whom it was purchased. Within 7 days after it receives the notice of
cancellation and this Certificate at its Home Office, Aetna will return the
entire consideration paid plus any increase or minus any decrease in the current
value of any funds allocated to the Separate Account.
/s/ Thomas J. McInerney /s/ Jane A. Boyle
President Secretary
- --------------------------------------------------------------------------------
Contract Holder Group Annuity Contract No
SPECIMEN SPECIMEN
- --------------------------------------------------------------------------------
Your Name Certificate No.
SPECIMEN SPECIMEN
- --------------------------------------------------------------------------------
Type of Plan
SPECIMEN
- --------------------------------------------------------------------------------
The underlying group combination annuity contract is delivered in FLORIDA and is
subject to the laws of that jurisdiction.
ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT, WHEN BASED ON INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT.
GTCC2-99(TORP)FL
<PAGE>
Specifications
- --------------------------------------------------------------------------------
Guaranteed There is a guaranteed interest rate for Contribution(s) held in
Interest Rate the Fixed Plus Account
- --------------------------------------------------------------------------------
Deductions from There will be deductions for mortality and expense risks. There
the Separate also may be deductions for administrative charges and asset
Account based sales charges. (See 3.06 and 5.06.)
- --------------------------------------------------------------------------------
Deductions from Contribution(s) are subject to a deduction for premium taxes,
Contribution(s) if any. (See 3.02.)
This Certificate and any attached document and subsequent endorsements
constitutes the entire legal relationship between Aetna and the Certificate
Holder.
2
<PAGE>
Contract Schedule I
Accumulation Period
Separate Account
- --------------------------------------------------------------------------------
Separate Account:
Variable Annuity Account 1
Charges to Separate Account:
A daily charge is deducted from any portion of the Current Value allocated
to the Separate Account. The daily charge is at an annual effective rate
that will not exceed 1.00% for Annuity mortality and expense risks, 0.00%
for asset based sales charge and a daily administrative charge which will
not exceed 0.25% on an annual basis.
Fixed Plus Account Is Available
- --------------------------------------------------------------------------------
Minimum Guaranteed Interest Rate:
3% (effective annual rate of return).
Partial Withdrawal:
The 20% limit applicable to partial withdrawal from the Fixed Plus Account
will be waived when the withdrawal is:
(a) due to the Participant's death, (and made within six (6) months of
the Participant's date of death), before Annuity payments begin.
This partial withdrawal may only be exercised once; or
(b) used to purchase Annuity benefits.
i
<PAGE>
Contract Schedule I
Accumulation Period (Cont'd)
Separate Account and Fixed Plus Account
- --------------------------------------------------------------------------------
Systematic Withdrawal Option (SWO):
Is Available
The Specified Payment may not be greater than 20% of the Individual
Account's Current Value at the time of election.
The Specified Period may not be less than five years.
The Specified Percentage may not be greater than 20%.
Estate Conservation Option (ECO):
Is Available
Life Expectancy Option (LEO):
Is Available
See Section 1. - DEFINITIONS for explanations.
ii
<PAGE>
Contract Schedule II
Annuity Period
Separate Account
- --------------------------------------------------------------------------------
Fund Transfers:
Maximum number of allowable transfers in the Annuity Period is 4.
Charges to Separate Account:
A daily charge at an annual effective rate that will not exceed 1.25% for
Annuity mortality and expense risks. The administrative charge is
established upon election of an Annuity option. This charge will not
exceed 0.25%.
Variable Annuity Assumed Annual Net Return Rate:
If a Variable Annuity is chosen, an assumed annual net return rate of 5.0%
may be elected. If 5.0% is not elected, Aetna will use an assumed annual
net return rate of 3.5%.
The assumed annual net return rate factor for 3.5% per year is 0.9999058.
The assumed annual net return rate factor for 5.0% per year is 0.9998663.
If the portion of a Variable Annuity payment for any Fund is not to
decrease, the Annuity return factor under the Separate Account for that
Fund must be:
(a) 4.75% on an annual basis plus an annual return of up to 0.25% to
offset the administrative charge set at the time Annuity payments
commence if an assumed annual net return rate of 3.5% is chosen; or
(b) 6.25% on an annual basis plus an annual return of up to 0.25% to
offset the administrative charge set at the time Annuity payments
commence, if an assumed annual net return rate of 5% is chosen.
Annuity Option:
Under the option "Payments for a Stated Period of Time":
For amounts invested in one or more of the Fund(s), the number of years
must be at least five (5) and not more than thirty (30) and the Annuity
may be a Fixed or Variable Annuity.
For amounts invested in the Fixed Plus Account, the number of years must
be at least five (5) and not more than thirty (30) and the Annuity must be
a Fixed Annuity.
Fixed Annuity
- --------------------------------------------------------------------------------
Minimum Guaranteed Interest Rate:
3% (effective annual rate of return).
See Section 1. - DEFINITIONS for explanations.
iii
<PAGE>
TABLE OF GUARANTEED VALUES -
FIXED PLUS
-------------------------------------------------------------------------
End of Minimum Contract Withdrawal
Years Value Value
-------------------------------------------------------------------------
1 1,219.41 1,219.41
2 2,475.41 2,475.41
3 3,769.08 3,769.08
4 5,101.56 5,101.56
5 6,474.02 6,474.02
6 7,887.66 7,887.66
7 9,343.70 9,343.70
8 10,843.42 10,843.42
9 12,388.14 12,388.14
10 13,979.19 13,979.19
11 15,617.98 15,617.98
12 17,305.93 17,305.93
13 19,044.52 19,044.52
14 20,835.27 20,835.27
15 22,679.74 22,679.74
16 24,579.54 24,579.54
17 26,536.34 26,536.34
18 28,551.84 28,551.84
19 30,627.81 30,627.81
20 32,766.06 32,766.06
21 34,968.45 34,968.45
22 37,236.91 37,236.91
23 39,573.43 39,573.43
24 41,980.05 41,980.05
25 44,458.86 44,458.86
30 58,014.03 58,014.03
35 73,728.18 73,728.18
40 91,945.20 91,945.20
45 113,063.71 113,063.71
50 137,545.85 137,545.85
-------------------------------------------------------------------------
Values illustrated are based on monthly purchase payments of $100 and a minimum
interest rate of 3%.
Full withdrawal is available in certain limited situations as described in the
Contract. Otherwise, no full withdrawal is available under this option.
The payout schedule is as follows:
1/5 of Fixed Plus account current value at the time requested - the 1/5 is
reduced by any amount from the Fixed Plus Account that was transferred,
withdrawn or used for a loan or to purchase Annuity Benefits during the
prior 12 months;
1/4 of remaining value of Fixed Plus account current value 12 months
later. The 1/4 is reduced by any amount from the Fixed Plus Account that
was transferred, withdrawn or used for a loan or to purchase Annuity
Benefits during the prior 12 months;
1/3 of remaining value of Fixed Plus account current value 12 months
later. The 1/3 is reduced by any amount from the Fixed Plus Account that
was transferred, withdrawn or used for a loan or to purchase Annuity
Benefits during the prior 12 months;
1/2 of remaining value of Fixed Plus account current value 12 months
later. The 1/2 is reduced by any amount from the Fixed Plus Account that
was transferred, withdrawn or used for a loan or to purchase Annuity
Benefits during the prior 12 months;
and the balance value of Fixed Plus account current value 12 months later.
The balance is reduced by any amount from the Fixed Plus Account that was
transferred, withdrawn or used for a loan or to purchase Annuity Benefits
during the prior 12 months.
iv
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TABLE OF CONTENTS
I. DEFINITIONS
- --------------------------------------------------------------------------------
Page
1.01 Accumulation Period ............................................. 5
1.02 Adjusted Current Value .......................................... 5
1.03 Annuitant ....................................................... 5
1.04 Annuity ......................................................... 5
1.05 Beneficiary ..................................................... 5
1.06 Code ............................................................ 5
1.07 Contract Holder ................................................. 5
1.08 Contribution .................................................... 5
1.09 Current Value ................................................... 5
1.10 Fixed Plus Account .............................................. 5
1.11 Fixed Plus Account Guaranteed Interest Rate ..................... 5
1.12 Fixed Annuity ................................................... 6
1.13 Fund(s) ......................................................... 6
1.14 Fund Transfer(s) ................................................ 6
1.15 General Account ................................................. 6
1.16 Individual Account .............................................. 6
1.17 Net Contribution ................................................ 6
1.18 Participant ..................................................... 6
1.19 Plan ............................................................ 6
1.20 Separate Account ................................................ 6
1.21 Valuation Date .................................................. 6
1.22 Valuation Period ................................................ 6
1.23 Variable Annuity ................................................ 7
II. GENERAL PROVISIONS
- --------------------------------------------------------------------------------
2.01 Change of Contract .............................................. 7
2.02 Change of Fund .................................................. 7
2.03 Nonparticipating Contract ....................................... 7
2.04 Payments ........................................................ 7
2.05 State Laws ...................................................... 7
2.06 Control of Contract ............................................. 7
2.07 Designation of Beneficiary ...................................... 8
2.08 Misstatements and Adjustments ................................... 8
2.09 Incontestability ................................................ 8
2.10 Grace Period .................................................... 8
2.11 Individual Certificates ......................................... 8
3
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Page
III. CONTRIBUTIONS, CURRENT VALUE, and WITHDRAWAL PROVISIONS
- --------------------------------------------------------------------------------
3.01 Limitations on Contributions .................................... 8
3.02 Net Contribution(s) ............................................. 9
3.03 Experience Credits .............................................. 9
3.04 Fund Record Units ............................................... 9
3.05 Fund Record Unit Value .......................................... 9
3.06 Fund Net Return Factors ......................................... 9
3.07 Fund Transfer(s) ................................................ 10
3.08 Notice to the Participant ....................................... 10
3.09 Withdrawal Restrictions ......................................... 10
3.10 Manner and Timing of Distributions .............................. 11
3.11 Withdrawal ...................................................... 11
3.12 Partial Withdrawal from the Fixed Plus Account .................. 12
3.13 Payment of Fixed Plus Account Full Withdrawal ................... 12
3.14 Payment of Minimum Current Value ................................ 13
3.15 Amount Payable at Death (Before Annuity Payments Start) ......... 13
3.16 Reinstatement ................................................... 13
IV. NON-ANNUITY DISTRIBUTION OPTIONS
- --------------------------------------------------------------------------------
4.01 Distribution Options ............................................ 14
4.02 Estate Conservation Option ...................................... 14
4.03 Life Expectancy Option .......................................... 15
4.04 Systematic Withdrawal Option .................................... 15
V. ANNUITY PROVISIONS
- --------------------------------------------------------------------------------
5.01 General Provisions .............................................. 16
5.02 Annuity Options ................................................. 16
5.03 Payments ........................................................ 17
5.04 Investment Option ............................................... 18
5.05 Fund Annuity Units .............................................. 18
5.06 Fund Annuity Unit Value ......................................... 18
5.07 Fund Annuity Net Return Factor .................................. 19
5.08 Fund Transfers During the Annuity Period ........................ 19
5.09 Death Benefit ................................................... 19
4
<PAGE>
I. DEFINITIONS
================================================================================
1.01 Accumulation Period:
The period during which Net Contribution(s) are applied to an Individual
Account.
1.02 Adjusted Current Value:
The Current Value (See 1.09) of an Individual Account (See 1.16).
1.03 Annuitant:
If an Annuity provides lifetime benefits, the person whose life expectancy
determines the amount and/or duration of Annuity benefit payments.
1.04 Annuity:
Payment of an income under the Annuity Provisions of Section V:
(a) For the life of one or two persons;
(b) For a stated period; or
(c) For some combination of (a) and (b).
1.05 Beneficiaries:
The person(s) named to receive any benefits which remain under the
Contract after the Participant's death. Participants designate a
Beneficiary for their Individual Account(s). (See 2.07)
1.06 Code:
The Internal Revenue Code of 1986, as amended.
1.07 Contract Holder:
The entity, named on the cover of this Contract, to which the Contract is
issued.
1.08 Contribution:
A payment received at Aetna's Service Center and allocated to this
Contract.
1.09 Current Value:
For an Individual Account (See 1.16), the Current Value is the total of:
(a) The amount, if any, in the Fixed Plus Account, with interest earned
to date and
(b) The value of all Fund record units (See 3.05), if any, as of the
most recent Valuation Period.
1.10 Fixed Plus Account:
If offered as an investment option under the Contract (see Contract
Schedule I) the Fixed Plus Account is an accumulation option with a
guaranteed minimum interest rate. Aetna may credit a higher rate which is
not guaranteed. The portion that may be withdrawn or transferred in a 12
month period is restricted (See 3.07, 3.12 and 3.13).
1.11 Fixed Plus Account Guaranteed Interest Rate:
If the Fixed Plus Account is an investment option under the Plan (see
Contract Schedule I) then Aetna will add interest at an annual rate no
less than that shown on Contract Schedule I on any Net Contribution(s) to
the Fixed Plus Account. Aetna may add interest at a higher rate determined
by its Board of Directors.
5
<PAGE>
1.12 Fixed Annuity:
An Annuity with payments that do not vary in amount.
1.13 Fund(s):
The open-end registered management investment companies whose shares are
purchased by the Separate Account to fund the benefits provided by the
Contract.
1.14 Fund Transfers:
The movement of invested amounts among the available Fund(s) and the Fixed
Plus Account (if available).
1.15 General Account:
The account holding the assets of Aetna, other than those assets held in
Aetna's Separate Account(s).
1.16 Individual Account:
This Contract is issued to the Contract Holder. However, Aetna will
maintain Individual Accounts for each Participant to keep a record of
Current Value (See 1.09) and transactions. These may include:
(a) An Employer Account: This Individual Account will be credited with
employer Net Contribution(s) and transferred amounts of 403(b)
funds, attributable to employer contributions; and
(b) An Employee Account: This Individual Account will be credited with
employee Net Contribution(s) and transferred amounts of 403(b)
funds, attributable to employee contributions including after tax
contributions.
1.17 Net Contribution:
A Contribution less any applicable premium taxes.
1.18 Participant:
A person who participates in the Plan named on the cover of this Contract.
1.19 Plan:
The Plan named on the cover of this Contract and established under Section
403(b) of the Code. The Plan is not a part of the Contract and Aetna is
not bound by its terms.
1.20 Separate Account:
An account, established by Aetna under Florida Law, that buys and holds
shares of the Fund(s) available under this Contract. Income, gains or
losses, realized or unrealized are credited or charged to the Separate
Account without regard to other income, gains or losses of Aetna. Aetna
owns the assets held in the Separate Account and is not a trustee of such
amounts. Amounts in the Separate Account are not generally guaranteed and
are held at market value. The assets of the Separate Account, to the
extent of reserves and other Contract liabilities of the Account, cannot
be charged with other Aetna liabilities.
1.21 Valuation Date:
The date and time on which a Fund annuity unit value and a Fund record
unit value are calculated. Currently, this calculation will be determined
at 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.
1.22 Valuation Period:
The period of time commencing at the end of one Valuation Date and ending
at the end of the next Valuation Date.
6
<PAGE>
1.23 Variable Annuity:
An Annuity with payments that vary with the net investment results of the
Funds available during the Annuity period.
II. GENERAL PROVISIONS
================================================================================
2.01 Change of Contract:
Only an authorized officer of Aetna may change the terms of this Contract.
Aetna reserves the right to modify this Contract to meet the requirements
of applicable state and federal laws or regulations. Aetna will notify the
Contract Holder in writing of any changes.
Aetna may change the tables for determining the amount of Annuity benefit
payments attributable only to Contributions accepted after the effective
date of change, without Contract Holder consent. Such a change will not
become effective earlier than twelve months after (1) the effective date
of the Contract, or (2) the effective date of a previous change. Aetna
will notify the Contract Holder in writing at least thirty days before the
effective date of the change. Aetna may not make Contract changes which
adversely affect the Annuity benefits attributable to Contributions
already made to the Contract.
2.02 Change of Fund:
The assets of the Separate Account are segregated by Fund. If the shares
of any Fund are no longer available for investment by the Separate Account
or if in our judgment, further investment in such shares should become
inappropriate in view of the purpose of the Contract, Aetna may cease to
make such Fund shares available for investment under the Contract
prospectively, or Aetna may substitute shares of another Fund for shares
already acquired. Aetna may also, from time to time, add additional Funds.
Any elimination, substitution or addition of Funds will be done in
accordance with applicable state and federal securities laws. Aetna
reserves the right to substitute shares of another Fund for shares already
acquired without a proxy vote.
2.03 Nonparticipating Contract:
The Contract Holder, Participants, or Beneficiaries will not have a right
to share in the earnings of Aetna.
2.04 Payments:
(a) Aetna will make distributions as directed by the Contract Holder.
Aetna will determine the amount of payments based on the Individual
Account's Current Value as of the date on which a request is
received in good order at Aetna's Service Center. Payments will be
made within seven (7) calendar days of receipt of a written request
in good order at Aetna's Service Center.
(b) Aetna may defer payments: (1) for a period of up to six (6) months
(unless not allowed by state law); and (2) as allowed by federal
law.
2.05 State Laws:
This Contract complies with the laws of the state in which it is
delivered. Any cash, death or Annuity payments are equal to or greater
than the minimum required by such laws. Annuity tables for legal reserve
valuation shall be as required by state law. Such tables may be different
from Annuity tables used to determine Annuity payments.
2.06 Control of Contract:
This Contract is designed to fund a plan which provides for retirement
income.
7
<PAGE>
The Contract Holder may, by written direction to Aetna, allow Participants
to select the investment options of their Employer and/or Employee
Accounts. Choices made under this Contract must be in writing or in a form
satisfactory to Aetna. Until receipt of such choices in its Service
Center, Aetna may rely on any previous choices made. An in-service
transfer pursuant to IRS Revenue Ruling 90-24, may be made only by written
direction from the Contract Holder and Participant to Aetna. Checks for
in-service transfers will be made payable only to the acquiring investment
provider.
(a) Nontransferable and Nonassignable: This Contract and any Individual
Accounts are nontransferable and nonassignable, except pursuant to a
"qualified domestic relations order" as set forth under the Internal
Revenue Code of 1986, as it may be amended from time to time.
(b) Distributions: A Participant may apply for a distribution from his
or her Employee Account or Employer Account. However, the Contract
Holder must certify in writing that the distribution is in
accordance with the terms of the Plan.
(c) Participant Rights/Employee Account: The Participant has a
nonforfeitable right to the value of his or her Employee Account
pursuant to the terms of the Plan as interpreted by the Contract
Holder.
(d) Participant Rights/Employer Account: The Participant has a
nonforfeitable right to the value of his or her Employer Account
pursuant to the terms of, and to the extent of his or her vested
percentage under, the Plan as interpreted by the Contract Holder. It
is the Contract Holder's responsibility to maintain records of the
Participant's vesting percentages. Aetna will not maintain nor keep
such records.
2.07 Designation of Beneficiary:
The Participant shall designate a Beneficiary.
2.08 Misstatements and Adjustments:
If Aetna finds the age of any payee to be misstated, the correct facts
will be used to adjust payments.
2.09 Incontestability:
Aetna cannot cancel this Contract because of any error of fact.
2.10 Grace Period:
This Contract will remain in effect even if Contributions are not
continued except as provided in 3.14.
2.11 Individual Certificates:
Aetna shall issue certificates to Participants as required by the state in
which this Contract is delivered. The certificate will summarize certain
provisions of the Contract. Certificates are for information only and are
not a part of the Contract.
III. CONTRIBUTIONS, CURRENT VALUE, AND WITHDRAWAL PROVISIONS
================================================================================
3.01 Limitations on Contributions:
The Contribution(s) made to the Employee and Employer Account in any year,
other than transferred amounts, cannot exceed the lesser of the amount
determined under the exclusion allowance of Code Section 403(b)(2) or the
annual additions limitation of Code Section 415(c)(1). In addition, in no
event may the Contribution(s) attributable to elective deferrals as
defined in Code Section 402(g) exceed $10,000 (or, such larger amount as
adjusted by the Secretary of the Treasury) during any calendar year,
unless the alternate limitation of Code Section 402(g)(8) applies.
8
<PAGE>
3.02 Net Contribution(s):
The Net Contribution equals the actual Contribution less any applicable
premium tax. Generally, Aetna will deduct the premium tax when Annuity
benefits are purchased (See Section V). If Aetna determines that under
applicable state law, it must pay a premium tax when the Contribution is
received, or at any other time, it may deduct the tax at that time. The
Net Contribution(s) may be allocated among the following investment
options:
(a) The Fixed Plus Account (if available); and
(b) The Fund(s) in which the Separate Account invests.
Aetna must be told the percentage of all Net Contributions to allocate to
one or more of the investment options. Aetna reserves the right to require
a minimum Contribution amount per Individual Account.
Aetna reserves the right not to accept any Contribution.
3.03 Experience Credits:
Aetna may apply experience credits under this Contract. Any such credits
will be computed as decided by Aetna.
3.04 Fund Record Units:
The portion of the Net Contribution(s) applied to each Fund under the
Separate Account will determine the number of Fund record units credited
to the Individual Account for that Fund. This number is equal to the Net
Contribution applied to the Fund divided by the Fund record unit value
(See 3.05) for the Valuation Period in which the Contribution is received
in good order.
3.05 Fund Record Unit Value:
A Fund record unit value is computed by multiplying the net return factor
(See 3.06) for the current Valuation Date by the Fund record unit value
for the previous Date. The dollar value of a Fund record unit, Separate
Account assets, and Variable Annuity payments may go up or down due to
investment gain or loss.
3.06 Fund Net Return Factors:
The net return factor(s) are used to compute all Separate Account record
units for any Fund. The net return factor for each Fund is equal to
1.0000000 plus the net return rate.
The net return rate is equal to:
(a) The value of the shares of the Fund held by the Separate Account at
the end of a Valuation Period; minus
(b) The value of the shares of the Fund held by the Separate Account at
the start of the Valuation Period; plus or minus
(c) Taxes (or reserves for taxes) on the Separate Account (if any);
divided by
(d) The total value of the Fund record units and Fund annuity units of
the Separate Account at the start of the Valuation Period; minus
(e) A Separate Account charge at an annual effective rate as shown on
Contract Schedule I for Annuity mortality and expense risks, asset
based sales charge, if any, a daily administrative charge which will
not exceed the amount shown on Contract Schedule I on an annual
basis and any other fees deducted from investments in the Separate
Account. The administrative charge may be changed annually except
for amounts which have been used to purchase an Annuity.
A net return rate may be more or less than 0%.
The value of a share of the Fund is equal to the net assets of the Fund
divided by the number of shares outstanding.
9
<PAGE>
3.07 Fund Transfers(s);
All or any portion of the Adjusted Current Value of the Individual Account
(subject to the limitations described below) many be transferred from any
Fund or the Fixed Plus Account (if available).
(a) To any Fund; or
(b) To the Fixed Plus Account (if available).
Fund Transfers can be submitted as a percentage or as a dollar amount.
Aetna may establish a minimum Fund Transfer amount.
During each rolling twelve (12) month period, up to 20% of the Fixed Plus
Account value may be transferred to one or more of the Fund(s). The 20%
limit is reduced by any partial withdrawals, Fund Transfers or amounts
taken to purchase an Annuity during the twelve(12) month period. Aetna
reserves the right to include amounts paid under ECO, LEO and SWO for
purposes of applying this 20% limit. This limit is waived when the balance
in the Fixed Plus Account is $1,000 or less on the date the Fund Transfer
request is received in good order at Aetna's Service Center.
The Participant may make an unlimited number of Fund Transfers during the
Accumulation Period.
3.08 Notice to the Participant:
Each year, Aetna will notify the Participant of:
(a) The value of any amounts held in:
(i) The Fixed Plus Account (if available),
(ii) The Fund(s) for the Separate Account;
(b) The number of any fund(s) record units;
(c) The fund(s) record unit value(s); and
(d) The amount available for withdrawal.
This information will be as of a date no more than sixty (60) days before
the date of the notice.
3.09 Withdrawal Restrictions:
Limitations apply to withdrawals of any Restricted Amount from this
Contract, as required by Code Section 403(b)(11). The Restricted Amount is
the sum of:
(a) Net Contributions attributable to Participant salary reduction
contributions made on and after January 1, 1989 if any; plus
(b) The net increase, if any, in the Current Value of the Employee
Account after December 31, 1988 attributable to investment gains and
losses and credited interest.
The Restricted Amount may be fully or partially surrendered only if one or
more of the following conditions are met:
(a) The Participant has reached age 59 1/2;
(b) The Participant has separated from service;
(c) The Participant has died;
(d) The Participant has become disabled, totally and permanently within
the meaning of Code Section 72 (m)(7); or
10
<PAGE>
(e) The withdrawal is otherwise allowed by federal law, regulations or
rulings.
A full or partial withdrawal is also allowed if the Participant incurs a
"hardship" as that term is defined in the Code or regulations under Code
Section 403(b).
However, the amount available for hardship is limited to the lesser of the
amount necessary to satisfy the need, or the Net Contributions
attributable to Participant salary reduction contributions made on and
after January 1, 1989.
The Contract Holder must certify that one of these conditions has been met
before a withdrawal request will be considered to be in good order. The
Contract Holder must notify Aetna in writing when a lump sum payment is to
be made or Annuity payments are to commence. Also, for all withdrawals,
the Contract Holder must certify in writing that they are being made in
accordance with the Plan.
If, pursuant to IRS Revenue Ruling 90-24, Aetna agrees to accept under
this Contract amounts transferred from a Code Section 403(b)(7) custodial
account, such amounts will be subject to the withdrawal restrictions set
forth in Code Section 403(b)(7)(A)(ii).
3.10 Manner and Timing of Distributions:
(a) As directed by the Contract Holder, a distribution to a Participant
or Beneficiary may be made in a lump sum, as one of the Distribution
Options described in Section IV, or as one of the Annuity options in
Section V. The Participant or Beneficiary may elect the form of
distribution subject to certification in writing by the Contract
Holder that the Participant or Beneficiary is eligible both as to
the timing and form of distribution. All distributions must satisfy
the minimum distribution rules set forth in Code Section 401(a)(9).
(b) The distribution of benefits from the Employee and Employer Accounts
must generally begin no later than 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 a Participant who
attained age 70 1/2 before January 1, 1988, the distribution of such
benefits must be made or must begin not later than the April 1 of
the calendar year following the calendar year in which the
Participant retires.
The entire value of the Individual Account must be distributed, or
distribution must be made over the life of the Participant, the
joint lives of the Participant and Beneficiary or over a period that
does not extend beyond the life expectancy of the Participant or the
joint life expectancies of the Participant and Beneficiary.
(c) If the Participant does not request commencement of benefits from
the Employee and Employer Accounts as described above, Aetna will
not be responsible for compliance with the Code Section 401(a)(9)
minimum distribution requirements or for any adverse tax or other
consequences that may result.
If Aetna maintains separate records of the value as of December 31,
1986, this value is not required to be taken before the year the
Participant attains age 75. Aetna will maintain separate records
provided the Participant does not take any distribution other than
the minimum distribution required under Code Section 401(a)(9).
3.11 Withdrawal:
(a) The Participant may withdraw any portion or all of an Individual
Account Adjusted Current Value and transfer such amount to another
investment provider under the Plan or roll over such amount that
qualifies as an eligible rollover distribution in accordance with
Code Sections 403(b)(8), 401(a)(31) and 402(c) and applicable
regulations.
(b) Except as described in Section 3.12, unless the Participant
specifies otherwise, partial withdrawals are satisfied by
withdrawing amounts on a pro rata basis from each of the investment
options in which the Individual Account is invested.
(c) Any amount withdrawn from the Fixed Plus Account will be subject to
the limitations in 3.12, 3.13 and 3.14.
11
<PAGE>
3.12 Partial Withdrawal from the Fixed Plus Account:
The amount eligible for partial withdrawal is 20% of the Current Value of
the amount held in the Fixed Plus Account on the day Aetna's Service
Center receives a written request, reduced by any previous Fund Transfer,
partial withdrawal or amounts taken to purchase Annuity benefits during
the prior 12 months. Aetna reserves the right to include amounts paid
under ECO, LEO and SWO for purposes of applying this 20% limit. However,
SWO and LEO are unavailable if a Fixed Plus Account Transfer or withdrawal
is requested within the current 12-month period.
The 20% limit applicable to partial withdrawals from the Fixed Plus
Account will be waived under certain conditions and will apply when the
partial withdrawal is made on a pro rata basis from all options used under
the Participant's Individual Account. (See Contract Schedule I).
3.13 Payment of Fixed Plus Account Full Withdrawal:
When Aetna receives a full withdrawal request, no additional partial
withdrawals or Fund Transfers from the Fixed Plus Account are permitted
during the payout period. If a full withdrawal is requested, Aetna will
pay any Current Value from the Fixed Plus Account in five payments as
follows:
(a) One-fifth of the Current Value on the day the request is received in
good order at Aetna's Service Center, reduced by any amount from the
Fixed Plus Account that was transferred, withdrawn or used to
purchase Annuity benefits during the prior 12 months;
(b) One-fourth of the remaining Current Value 12 months later;
(c) One-third of the remaining Current Value 12 months later;
(d) One-half of the remaining Current Value 12 months later; and
(e) The balance of the Current Value 12 months later.
The Fixed Plus Account full withdrawal payment provision will be waived
when a withdrawal is:
(a) Due to the Participant's death before Annuity benefit payments
begin;
(b) Used to purchase Annuity benefits;
(c) When the amount in the Fixed Plus Account is $3,500 or less and no
amount has been withdrawn, transferred, or used to purchase Annuity
benefits during the previous 12 months;
(d) Due to hardship when the following conditions are met:
(1) the withdrawal is due to an employer certified hardship;
(2) the amount withdrawn is paid directly to the Participant; and
(3) the amount paid for all partial and full withdrawals due to
hardship during the previous 12-month period does not exceed
10% of the average Current Value for all Individual Accounts
during the same period of time; or
(e) Due to separation from service provided that:
(1) the withdrawal is due to the Participant's separation from
service with the employer;
(2) the employer certifies that the Participant has separated from
service;
(3) the amount withdrawn is paid directly to the Participant; and
(4) the amount paid for all partial and full withdrawals due to
separation from service during the previous 12-month period
does not exceed 20% of the average Current Value of all
Individual Accounts during that same period of time.
Any full withdrawal from the Fixed Plus Account may be cancelled at any
time before the end of the payment period.
12
<PAGE>
3.14 Payment of Minimum Current Value:
If the Individual Accounts Current Value is less than $3,500, and no
Contributions have been received for three (3) years, Aetna may close the
Account and pay the Current Value as directed by the Contract Holder in
one lump sum.
3.15 Amount Payable at Death (Before Annuity Payments Start):
Aetna will pay any portion of the Individual Account(s) Current Value, to
the Beneficiary when:
(a) The Participant dies before Annuity payments start; and
(b) The certified copy of the death certificate is received by Aetna;
and
(c) A completed and signed election form is submitted to the Service
Center. The form must include Contract Holder certification that the
Beneficiary is eligible for a distribution under the terms of the
Plan.
A guaranteed death benefit is available if the Beneficiary requests either
a lump-sum payment or an Annuity option within six months of the
Participant's death.
For each Individual Account, the death benefit is guaranteed to be the
greater of:
(a) The Current Value of the Individual Account on the date the notice
of death and the request for payment are received in good order at
Aetna's Service Center; or
(b) The total of Net Contribution(s) made to the Individual Account
minus the total of all partial withdrawals and annuitizations made
from the Individual Account.
If the Participant dies before distributions begin in accordance with the
provisions of Code Section 401(a)(9), the entire value of the Account must
be distributed by December 31 of the calendar year containing the fifth
anniversary of the date of the Participant's death. Alternatively, if the
Participant has a designated Beneficiary, payments may be made over the
life of the Beneficiary or over a period not extending beyond the life
expectancy of the Beneficiary provided distribution to a non-spouse
Beneficiary begins by December 31 of the calendar year following the
calendar year of the Participant's death. For a spousal Beneficiary, such
payments must begin by the later of December 31 of the calendar year
following the calendar year of the Participant's death or December 31 of
the calendar year in which the Participant would have attained age 70 1/2.
If the Participant dies after distributions begin in accordance with the
provisions of Code Section 401(a)(9), payments 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. If the minimum distribution requirements
have been met by partial withdrawals based on the participant's life
expectancy or the joint life expectancies of the Participant and
Beneficiary, death benefit payments to the Beneficiary must also satisfy
any additional requirements of Code Section 401(a)(9).
3.16 Reinstatement:
All or a portion of the proceeds of a full withdrawal of an Individual
Account may be reinvested within 30 days after the surrender if allowed by
law. Amounts will be reinstated among the Fixed Plus Account and the
Fund(s) in the same proportion as they were at the time of withdrawal. The
number of record units reinstated will be based on the record unit
value(s) next computed after receipt at Aetna's Service Center of the
reinstatement request and the amount to be reinvested.
Any Individual Account(s) closed because the Current Value was less than
$3,500 may not be reinstated (see 3.14).
A Reinstatement is permitted only once per Individual Account.
13
<PAGE>
IV. NON-ANNUITY DISTRIBUTION OPTIONS
================================================================================
4.01 Distribution Options:
Distribution Options: ECO, LEO and SWO are distribution options under
which a portion of the Individual Account Current Value will automatically
be surrendered and distributed each calendar year. The distributed amount
is withdrawn pro rata from each investment option under the Individual
Account. The Contract Holder must certify in writing that distributions
are being made in accordance with the Plan.
Minimum Current Value: At its discretion, Aetna may require a minimum
initial Current Value for election of a distribution option. If after
election of the option the Current Value is insufficient to make a
scheduled payment, Aetna will distribute the entire Individual Account
balance.
Reservations of Rights: Aetna reserves the right to change the terms of
ECO, LEO or SWO for future elections, to discontinue the availability of
these options after proper notification, or to make other distribution
options available as allowed by the state in which this Contract is
delivered. Aetna also reserves the right to allow ECO and LEO payments to
be made more frequently than annually.
Election and Revocation: The Participant or Beneficiary may elect a
distribution option by submitting a completed and signed election form to
Aetna's Service Center. However, the Contract Holder must certify in
writing that the distribution option is in accordance with the terms of
the Plan. Once elected, the Participant or Beneficiary may revoke the
option by submitting a written request to Aetna's Service Center. Any
revocation will apply only to amounts not yet paid.
Availability of ECO, LEO and SWO: The Participant may elect any one of the
following three distribution options, if they are available as an option
under the Contract (see Contract Schedule I) and if the Contract Holder
certifies that the election is in accordance with the terms of the Plan.
The Beneficiary may elect either ECO or SWO, if they are available as an
option under the Contract (see Contract Schedule I) and if the Contract
Holder certifies that the election is in accordance with the terms of the
Plan.
An individual who has revoked ECO, LEO or SWO may not subsequently elect
that option again, nor may the individual elect another withdrawal option
unless permitted under the Code minimum distribution rules.
LEO and SWO are not available if a Fixed Plus Account transfer or
surrender has occurred within the prior 12-month period.
If LEO is in effect and the Participant dies, or if ECO or SWO is in
effect and the Participant dies before the required beginning date for
minimum distributions, payments will cease. A Beneficiary may elect ECO or
SWO provided the election satisfies 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 revoked.
4.02 Estate Conservation Option (ECO):
Amount of Distribution: Each year that ECO is in effect, Aetna will
calculate and distribute an amount equal to the minimum required
distribution under the Code. The annual distribution will be determined by
dividing the Individual Account Current Value as of December 31 of the
year prior to the year for which payment is to be made by a life
expectancy factor based on expected return multiples in Table V and VI of
Section 1.72-9 of the Income Tax Regulations.
If Aetna maintains separate records of the value as of December 31, 1986,
payments made during or after the year in which the Participant attains
age 70 1/2 and before the year the Participant attains age 75, will only
be calculated on amounts contributed after December 31, 1986, plus all
earnings on all amounts after that date. If age 70 1/2 was attained prior
to 1988, the Participant must be retired in order to qualify for this
exception.
14
<PAGE>
The Participant may elect either the single or joint life expectancy
factor. If the joint life expectancy factor is elected, the second life
must be the Beneficiary under the Plan. If the Beneficiary selects ECO
after the Participant's death, only a single life expectancy factor may be
used. The life expectancy or joint life expectancy factor will be
recalculated each year in accordance with the rules under Code Section
401(a)(9).
Date of Distribution: The Participant shall specify the initial
distribution date. The earliest date is the first day of the calendar year
in which the Participant attains age 70 1/2 or retires, whichever is
later. If a Beneficiary elects ECO, the earliest date is the date of the
Participant's death. Subsequent distribution will be made annually on such
date as Aetna may designate or allow.
4.03 Life Expectancy Option (LEO):
Amount of Distribution: Each year that LEO is in effect, Aetna will
calculate and distribute an amount determined by dividing the Individual
Account Current Value as of December 31 of the year prior to the year for
which payment is to be made by a life expectancy factor based on expected
return multiples in Table V and VI of Section 1.72-9 of the Income Tax
Regulations. Payments will be made each year until the year the
Participant attains age 70 1/2, or until the Participant dies, if earlier.
The Participant may elect either the single or joint life expectancy
factor. If the joint life expectancy factor is elected, the second life
must be the Beneficiary under the Plan. The life expectancy or joint life
expectancy factor will be recalculated each year in accordance with the
rules under Code Section 401(a)(9), or reduced by one for each calendar
year which has elapsed since the life expectancy was first calculated, as
elected by the Participant.
Date of Distribution: The Participant shall specify the initial
distribution date. The earliest date is the date on which the Participant
separates from service with the employer. Subsequent distribution will be
made annually on such date as Aetna may designate or allow.
4.04 Systematic Withdrawal Option (SWO):
Amount of Distribution: The Participant may elect one of the three payment
methods described below.
(1) Specified Payment: Payments of a designated dollar amount. The
annual amount may not be greater than the percentage of the Current
Value at time of election as shown in Contract Schedule I. This
annual dollar amount will remain constant, unless a higher amount is
required under Code minimum distribution rules. At its discretion,
Aetna may require a minimum initial payment amount; or
(2) Specified Period: Payments which are made over a period of time
which must be at least the minimum number of years shown in Contract
Schedule I. The annual amount paid each year is calculated by
dividing the Current Value as of December 31 of the prior year by
the number of payment years remaining; or
(3) Specified Percentage: Payment of a designated percentage which
cannot be greater than the percentage of the Current Value at the
time of election as shown in Contract Schedule I. The percentage may
be changed by written request. Aetna reserves the right to limit the
number of times the percentage may be changed. The annual amount is
calculated by multiplying the Current Value as of December 31 of the
year prior to the payment by the designated percentage. Payments
will be made each year until the year the Participant attains age
70 1/2.
Minimum Distribution Requirements: If distributions are made under SWO
after payments are required to begin under the minimum distribution
requirements of Code Section 401(a)(9), the amount distributed in any year
will be increased if required under the Code minimum distribution rules.
15
<PAGE>
For this purpose, the minimum required distribution will be determined
each year by dividing the Individual Account Current Value as of December
31 of the year prior to the year for which payment is to be made by a life
expectancy factor, which for the initial distribution year shall be based
on either the single life expectancy factor or joint life expectancy
factor in Table V or VI of Section 1.72.9 of the Income Tax Regulations,
as elected by the Participant. If the joint life expectancy factor is
elected, the second life must be the Beneficiary under the Plan. If a
Beneficiary elects SWO after the Participant's death, only a single life
expectancy factor may be used. Minimum distributions for any subsequent
year will be calculated based on such life expectancy factor reduced by
one for each calendar year which has elapsed since the life expectancy was
first calculated. If the specified period method is elected, the maximum
specified period will be limited by the single life expectancy factor or
joint life expectancy factor in Table V or VI of Section 1.72-9 of the
Income Tax Regulations, as elected by the Participant. If elected by a
Beneficiary, only a single life expectancy may be used.
Date of Distribution: The Participant shall specify the initial
distribution date. The earliest date is the date on which the Participant
attains age 59 1/2 or age 55, if separated from service with the employer
at or after age 55. If a Beneficiary elects SWO, the earliest date is the
date of the Participant's death.
SWO payments will be made on a monthly, quarterly, semi-annual or annual
basis, as elected by the Participant or Beneficiary. If SWO payments are
made more frequently than annually, the designated annual amount is
divided by the number of payments due each calendar year. Subsequent
distribution will be made periodically on such date as Aetna may designate
or allow.
V. ANNUITY PROVISIONS
================================================================================
5.01 General Provisions:
(a) Upon certification by the Contract Holder of the Participants' total
disability, acceptance of retirement or separation from service, the
Participant has the right to elect an Annuity option.
(b) The Participant may elect an Annuity option by telling Aetna to pay
all or any portion of the Individual Account(s) Current Value (minus
any applicable premium tax if not previously deducted) as a premium
for an Annuity under Option 1, 2, or 3 (See 5.02).
(c) A completed and signed election form must be submitted to the
Service Center. The form must include Contract Holder certification
that the Participant is eligible for a distribution under the terms
of the Plan and that the Annuity option chosen is permitted under
the terms of the Plan.
(d) Any election of an Annuity option must comply with the minimum
distribution requirements of Code Section 401(a)(9), including the
incidental death benefit rule, and the regulations thereunder. This
restriction does not apply if Option 3 is chosen and the second
Annuitant is the spouse of the Participant.
(e) Once elected, an Annuity option may not be revoked, except for
Option 1 when elected on a variable basis.
5.02 Annuity Options:
Option 1 - Payments for a Stated Period of Time.
An Annuity will be paid for the number of years chosen (See Contract
Schedule II). If payments for this option are made under a Variable
Annuity, the present value of any remaining payments may be withdrawn at
any time.
16
<PAGE>
Option 2 - Life Income based on the life of the Annuitant.
Payments will be made until the death of the Annuitant. When this option
is chosen, a choice of the following must be made:
(a) Payments cease at the death of the Annuitant;
(b) Payments may be guaranteed for 5-30 years; or
(c) Payments may be guaranteed for the amount applied to the Annuity
option. If the Annuitant dies prior to the 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
only available on a fixed basis.
Option 3 - Life Income based upon the lives of two Annuitants.
An Annuity will be paid during the lives of the Annuitant and a second
Annuitant. Payments will continue until both Annuitants have died. When
this option is chosen, a choice of the following must be made:
(a) 100% of the payment to continue after the first death;
(b) 66 2/3% of the payment to continue after the first death;
(c) 50% of the payment to continue after the first death;
(d) 100% of the payment to continue after the first death with a
guarantee of 5-30 years;
(e) 100% of the payment to continue at the death of the second Annuitant
and 50% of the payment to continue at the death of the Annuitant; or
(f) 100% of the payment to continue after the first death. 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 only
available on a fixed basis.
If a Fixed Annuity option is chosen under Option 1, Option 2 (a) or (b) or
Option 3 (a) or (d), then the Participant may elect a payment increase of
1, 2 or 3%, compounded annually. An election of such a payment increase
will result in an adjustment of the policy guarantees by an actuarially
equivalent payment factor.
Other Options - Aetna may make other options available as allowed by the
laws of the state in which this Contract is delivered.
5.03 Payments:
(a) Upon written direction from the Contract Holder, Aetna will pay
Annuity benefits directly to the Participant and as payor, Aetna
will be responsible for withholding any applicable federal or state
taxes and reporting such sums and filing any related forms with the
Internal Revenue Service and/or to any applicable state taxing
authorities.
(b) Generally, the first Annuity payment must be made by April 1 of the
calendar year following the year in which the Participant turns age
70 1/2, or retires, whichever occurs later. For a Participant who
attained age 70 1/2 before January 1, 1988, the distribution of such
benefits must be made or must begin not later than April 1 of the
calendar year following the calendar year in which the Participant
retires.
(c) Payments will be made on a monthly basis unless the Participant
requests otherwise. If payments are made on a quarterly, semi-annual
or annual basis, Aetna will calculate an actuarially equivalent
payment factor.
(d) No choice of any Annuity option may be made if the first payment
would be less than $50 per month or if the total payments in a year
would be less than $250.
17
<PAGE>
(e) For purposes of calculating the first payment of a Variable Annuity
or the guaranteed payments for a Fixed Annuity, the Annuitant's and
second Annuitant's adjusted age will be used. The Annuitant's and
second Annuitant's adjusted age is his or her age as of the birthday
closest to the Annuity commencement date reduced by one year for
Annuity commencement dates occurring during the period of time from
July 1, 1992 through December 31, 1999. The Annuitant's and second
Annuitant's age will be reduced by two years for Annuity
commencement dates occurring during the period of time from January
1, 2000 through December 31, 2009. The Annuitant's and second
Annuitant's age will be reduced by one additional year for Annuity
commencement dates occurring in each succeeding decade.
(f) If a Fixed Annuity under Option 1, 2 or 3 is elected, Aetna will use
the applicable current settlement option rates if these will provide
higher Fixed Annuity payments.
5.04 Investment Option:
(a) When an Annuity option is chosen the Participant must designate
whether the Annuity will be fixed or variable and whether the
underlying investment will be:
(1) The General Account;
(2) One or more of the available Fund(s) ; or
(3) A combination of (1) and (2).
If a Fixed Annuity is chosen, the Annuity purchase rate for the option
chosen reflects at least the Minimum Guaranteed Interest Rate (See
Contract Schedule II), but may reflect a higher interest rate.
If a Variable Annuity is chosen, the initial Annuity payment for the
option chosen reflects the Assumed Annual Net Return Rate elected (See
Contract Schedule II). The Assumed Annual Net Return Rate is the interest
rate used to determine the amount of the first Annuity payment under a
Variable Annuity. The Separate Account must earn this rate plus enough to
cover the mortality and expense risks charges (which may include profit)
(at the annual rate shown on Contract Schedule II) and a daily
administrative charge if future Variable Annuity payments are to remain
level.
5.05 Fund Annuity Units:
The number of Fund(s) annuity units is based on the amount of the first
Variable Annuity payment which is equal to:
(a) The portion of the Current Value (minus any premium tax) applied to
pay a variable Annuity; divided by (b) 1,000; multiplied by (c) the
payment rate for the option chosen.
Such amount, or portion, of the variable payment will be divided by the
appropriate Fund(s) Annuity unit value (See 5.06) on the tenth Valuation
Date before the due date of the first payment to determine the number of
each Fund Annuity units. The number of each Fund Annuity units remains
fixed. Each future payment is equal to the sum of the products of each
Fund Annuity unit value multiplied by the appropriate number of Units. The
Fund Annuity unit value on the tenth Valuation Date prior to the due date
of the payment is used.
5.06 Fund Annuity Unit Value:
For any Valuation Date, a Fund(s) Annuity unit value is equal to:
(a) The value for the previous Valuation Date; multiplied by
(b) The Annuity net return factor(s) (See 5.07) for the Period;
multiplied by
(c) A factor to reflect the assumed annual net return rate. (See
Contract Schedule II).
The dollar value of a Fund Annuity unit and Annuity payments may go up or
down due to investment gain or loss. Payments shall not be changed due to
changes in the mortality or expense results or administrative charges.
18
<PAGE>
5.07 Fund Annuity Net Return Factor:
The Annuity net return factor(s) are used to compute all Separate Account
Annuity payments for any Fund.
The Annuity net return factor(s) for each Fund is equal to 1.0000000 plus
the net return rate.
The net return rate is equal to:
(a) The value of the shares of the Fund held by the Separate Account at
the end of a Valuation Period, minus
(b) The value of the shares of the Fund held by the Separate Account at
the start of the Valuation Period, plus or minus
(c) Taxes (or reserves for taxes) on the Separate Account (if any);
divided by
(d) The total value of the Fund(s) record units and Fund(s) Annuity
units of the Separate Account at the start of the Valuation Period;
minus
(e) A daily charge for Annuity mortality and expense risks, which may
include a profit, (at the annual rate as shown on Contract Schedule
II), a daily administrative charge and any other fees deducted from
investments in the Separate Account.
A net return rate may be more or less than 0%. The value of a share of the
Fund is equal to the net assets of the Fund divided by the number of
shares outstanding.
5.08 Fund Transfers During the Annuity Period:
At the request of the Contract Holder or the Participant if the Contract
Holder has directed Aetna to accept such a request from the Participant,
all or any portion of the Current Value may be transferred from any
variable Fund to any other allowable Fund. Aetna reserves the right to
allow no more than four Funds to be selected at any one time. Fund
Transfers will be processed as of the Valuation Date next following when a
transfer request is received in good order at Aetna's Service Center. The
maximum number of allowable transfers (during the Annuity period) in a
calendar year is shown on Contract Schedule II.
Fund Transfer requests must be expressed as a percentage of each Fund's
allocation to the Annuity payment. Aetna may establish a minimum transfer
amount.
5.09 Death Benefit:
Upon the death of the Annuitant(s), any remaining guaranteed payments will
continue to the Beneficiary unless the Beneficiary elects to receive the
present value of any remaining guaranteed payments in a lump sum. Such
payments will be paid at least as rapidly as under the method of
distribution then in effect. If the Beneficiary dies while receiving
payments, the present value of any remaining guaranteed payments will be
paid in one sum to the Beneficiary's estate.
The interest rate used to determine the first Annuity payment will be used
to calculate the present value. The present value will be determined as of
the Valuation Period in which proof of death acceptable to Aetna and a
request for payment is received at Aetna's Service Center.
19
<PAGE>
OPTION 1
Payments for a Stated Period of Time
Amount of Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
------------------------------------------------------------------------
Monthly Monthly
Years Payment Years Payment
------------------------------------------------------------------------
5 17.91 18 5.96
6 15.14 19 5.73
7 13.16 20 5.51
8 11.68 21 5.32
9 10.53 22 5.15
10 9.61 23 4.99
11 8.86 24 4.84
12 8.24 25 4.71
13 7.71 26 4.59
14 7.26 27 4.47
15 6.87 28 4.37
16 6.53 29 4.27
17 6.23 30 4.18
------------------------------------------------------------------------
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
------------------------------------------------------------------------
Monthly Monthly
Years Payment Years Payment
------------------------------------------------------------------------
5 18.12 18 6.20
6 15.35 19 5.97
7 13.38 20 5.75
8 11.90 21 5.56
9 10.75 22 5.39
10 9.83 23 5.24
11 9.09 24 5.09
12 8.46 25 4.96
13 7.94 26 4.84
14 7.49 27 4.73
15 7.10 28 4.63
16 6.76 29 4.53
17 6.47 30 4.45
------------------------------------------------------------------------
20
<PAGE>
OPTION 1
Payments for a Stated Period of Time
Amount of Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
------------------------------------------------------------------------
Monthly Monthly
Years Payment Years Payment
------------------------------------------------------------------------
5 18.74 18 6.94
6 15.99 19 6.71
7 14.02 20 6.51
8 12.56 21 6.33
9 11.42 22 6.17
10 10.51 23 6.02
11 9.77 24 5.88
12 9.16 25 5.76
13 8.64 26 5.65
14 8.20 27 5.54
15 7.82 28 5.45
16 7.49 29 5.36
17 7.20 30 5.28
------------------------------------------------------------------------
21
<PAGE>
OPTION 2
Life Income
Amount of Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
Payments Guaranteed for a Stated Period of Years
------------------------------------------------------------------------
Adjusted
Age of None 5 10 15 20 Cash
Annuitant Refund
------------------------------------------------------------------------
50 $4.05 $4.05 $4.03 $3.99 $3.93 $3.89
51 4.12 4.11 4.09 4.05 3.99 3.94
52 4.19 4.19 4.16 4.11 4.04 4.00
53 4.27 4.26 4.23 4.18 4.10 4.06
54 4.35 4.34 4.31 4.25 4.16 4.12
55 4.44 4.42 4.39 4.32 4.22 4.19
56 4.53 4.51 4.47 4.40 4.29 4.26
57 4.62 4.61 4.56 4.48 4.35 4.33
58 4.72 4.71 4.65 4.56 4.42 4.41
59 4.83 4.81 4.75 4.64 4.49 4.49
60 4.95 4.93 4.86 4.73 4.55 4.57
61 5.07 5.05 4.97 4.83 4.62 4.66
62 5.20 5.17 5.08 4.92 4.69 4.76
63 5.34 5.31 5.20 5.02 4.76 4.85
64 5.49 5.45 5.33 5.12 4.83 4.96
65 5.65 5.61 5.47 5.22 4.89 5.06
66 5.82 5.77 5.61 5.33 4.96 5.18
67 6.01 5.94 5.75 5.44 5.02 5.30
68 6.20 6.13 5.91 5.54 5.08 5.42
69 6.41 6.33 6.07 5.65 5.14 5.56
70 6.64 6.54 6.23 5.76 5.19 5.70
71 6.88 6.76 6.41 5.86 5.24 5.84
72 7.14 7.00 6.59 5.97 5.28 6.00
73 7.43 7.26 6.77 6.06 5.32 6.16
74 7.73 7.53 6.96 6.16 5.35 6.33
75 8.06 7.82 7.14 6.25 5.38 6.51
------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
22
<PAGE>
OPTION 2
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
Payments Guaranteed for a Stated Period of Years
------------------------------------------------------------------------
Adjusted
Age of None 5 10 15 20
Annuitant
------------------------------------------------------------------------
50 $4.34 $4.34 $4.31 $4.27 $4.22
51 4.41 4.40 4.38 4.33 4.27
52 4.48 4.47 4.45 4.40 4.32
53 4.56 4.55 4.52 4.46 4.38
54 4.64 4.63 4.59 4.53 4.44
55 4.72 4.71 4.67 4.60 4.50
56 4.81 4.80 4.75 4.67 4.56
57 4.91 4.89 4.84 4.75 4.62
58 5.01 4.99 4.93 4.83 4.69
59 5.12 5.10 5.03 4.92 4.75
60 5.23 5.21 5.13 5.00 4.82
61 5.36 5.33 5.24 5.09 4.88
62 5.49 5.45 5.35 5.19 4.95
63 5.63 5.59 5.47 5.28 5.02
64 5.78 5.73 5.60 5.38 5.08
65 5.94 5.89 5.73 5.48 5.15
66 6.11 6.05 5.87 5.58 5.21
67 6.29 6.22 6.02 5.69 5.27
68 6.49 6.41 6.17 5.79 5.33
69 6.70 6.60 6.33 5.90 5.38
70 6.92 6.81 6.49 6.00 5.43
71 7.17 7.04 6.66 6.10 5.48
72 7.43 7.27 6.84 6.20 5.52
73 7.71 7.53 7.02 6.30 5.55
74 8.02 7.80 7.20 6.39 5.59
75 8.35 8.08 7.38 6.48 5.62
------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
23
<PAGE>
OPTION 2
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
Payments Guaranteed for a Stated Period of Years
------------------------------------------------------------------------
Adjusted
Age of None 5 10 15 20
Annuitant
------------------------------------------------------------------------
50 $5.26 $5.25 $5.22 $5.17 $5.11
51 5.33 5.32 5.28 5.23 5.15
52 5.40 5.38 5.34 5.29 5.20
53 5.47 5.45 5.41 5.35 5.26
54 5.54 5.53 5.48 5.41 5.31
55 5.63 5.61 5.56 5.47 5.36
56 5.71 5.69 5.63 5.54 5.42
57 5.80 5.78 5.72 5.61 5.47
58 5.90 5.88 5.81 5.69 5.53
59 6.01 5.98 5.90 5.77 5.59
60 6.12 6.09 6.00 5.85 5.65
61 6.24 6.21 6.10 5.93 5.71
62 6.37 6.33 6.21 6.02 5.77
63 6.51 6.46 6.33 6.11 5.83
64 6.66 6.60 6.45 6.20 5.89
65 6.82 6.75 6.57 6.30 5.95
66 6.99 6.91 6.71 6.39 6.01
67 7.17 7.08 6.85 6.49 6.06
68 7.36 7.27 6.99 6.59 6.12
69 7.57 7.46 7.15 6.69 6.17
70 7.80 7.67 7.30 6.78 6.21
71 8.05 7.89 7.47 6.88 6.25
72 8.31 8.13 7.64 6.97 6.29
73 8.59 8.38 7.81 7.06 6.33
74 8.90 8.64 7.99 7.15 6.36
75 9.23 8.93 8.16 7.23 6.38
------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
24
<PAGE>
OPTION 3
Life Income for Two Annuitants
Amount of Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Adjusted Ages
- ----------------------- Option 3d
Second 10 Years
Annuitant Annuitant Option 3a Option 3b Option 3c Guaranteed Option 3e Option 3f
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
55 50 $3.69 $4.05 $4.27 $3.69 $4.03 $3.69
55 55 3.88 4.25 4.47 3.87 4.14 3.87
55 60 3.99 4.44 4.71 3.98 4.20 3.98
60 55 3.99 4.44 4.71 3.98 4.42 3.98
60 60 4.24 4.71 4.99 4.23 4.57 4.23
60 65 4.38 4.97 5.32 4.38 4.65 4.38
65 60 4.38 4.97 5.32 4.38 4.93 4.38
65 65 4.72 5.33 5.70 4.71 5.14 4.72
65 70 4.93 5.68 6.15 4.91 5.27 4.91
70 65 4.93 5.68 6.15 4.91 5.66 4.91
70 70 5.40 6.21 6.70 5.36 5.96 5.38
70 75 5.69 6.68 7.32 5.62 6.13 5.66
75 70 5.69 6.68 7.32 5.62 6.67 5.66
75 75 6.37 7.45 8.15 6.23 7.12 6.33
75 80 6.78 8.11 8.99 6.54 7.36 6.71
- -------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
25
<PAGE>
OPTION 3
Life Income for Two Annuitants
Amount of Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Adjusted Ages
- ------------------------ Option 3d
Second 10 Years
Annuitant Annuitant Option 3a Option 3b Option 3c Guaranteed Option 3e
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $3.97 $4.35 $4.56 $3.97 $4.31
55 55 4.16 4.54 4.76 4.15 4.42
55 60 4.27 4.73 5.00 4.26 4.48
60 55 4.27 4.73 5.00 4.26 4.70
60 60 4.51 4.99 5.27 4.50 4.84
60 65 4.66 5.25 5.61 4.65 4.93
65 60 4.66 5.25 5.61 4.65 5.22
65 65 4.99 5.61 5.99 4.98 5.42
65 70 5.19 5.97 6.44 5.17 5.54
70 65 5.19 5.97 6.44 5.17 5.93
70 70 5.67 6.49 6.99 5.62 6.23
70 75 5.95 6.96 7.61 5.87 6.40
75 70 5.95 6.96 7.61 5.87 6.95
75 75 6.64 7.73 8.43 6.48 7.40
75 80 7.04 8.39 9.29 6.79 7.64
- ------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
26
<PAGE>
OPTION 3
Life Income for Two Annuitants
Amount of Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Adjusted Ages
- ------------------------ Option 3d
Second 10 Years
Annuitant Annuitant Option 3a Option 3b Option 3c Guaranteed Option 3e
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $4.88 $5.26 $5.48 $4.88 $5.23
55 55 5.04 5.44 5.66 5.04 5.32
55 60 5.15 5.63 5.91 5.14 5.38
60 55 5.15 5.63 5.91 5.14 5.59
60 60 5.37 5.87 6.16 5.37 5.72
60 65 5.52 6.14 6.51 5.51 5.80
65 60 5.52 6.14 6.51 5.51 6.10
65 65 5.83 6.49 6.87 5.82 6.29
65 70 6.04 6.84 7.34 6.00 6.41
70 65 6.04 6.84 7.34 6.00 6.81
70 70 6.49 7.35 7.87 6.44 7.08
70 75 6.77 7.84 8.51 6.68 7.25
75 70 6.77 7.84 8.51 6.68 7.81
75 75 7.45 8.60 9.33 7.27 8.25
75 80 7.86 9.28 10.20 7.57 8.49
- ------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
27
<PAGE>
================================================================================
Aetna Insurance Company of America
Home Office: 5100 West Lemon Street, Suite 213
Tampa, Florida 33609
Service Center: 151 Farmington Avenue
Hartford, Connecticut 06156
(800) 525-4225
Certificate of Group Annuity Coverage
================================================================================
ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT, WHEN BASED ON INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT.
GTCC2-99(TORP)FL
Exhibit 99-B.5
[AETNA LOGO]
Application Form Home Office: Aetna Insurance Company of America
Group Annuity Contracts 5100 West Lemon Street, Suite 213
Tampa, FL 33609
Service Center: Aetna Insurance Company of America
151 Farmington Avenue
Hartford, CT 06156-8022
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Client Information Name of Applicant/Employer
---------------------------------------------------------------------------------------------------------
Address (No. & Street)
---------------------------------------------------------------------------------------------------------
City/Town State Zip Code
---------------------------------------------------------------------------------------------------------
Tax Identification No.
- ------------------------------------------------------------------------------------------------------------------------------------
Account Information Name of Plan (if any)
---------------------------------------------------------------------------------------------------------
Type of plan and section of Internal Revenue Code (if any) under which plan is to qualify:
|_| 403(b) Public School System Tax Deferred Annuity
|_| Optional Retirement Plan for Higher Education
|_| 403(b) |_| 401(a)
|_| Non-ERISA 403(b) for 501(c)(3) Organization Tax-Deferred Annuity
(Organizations formed after 10/9/69 must have IRS ruling regarding 501(c)(3) status)
|_| Other: ___________________________________________________________________
---------------------------------------------------------------------------------------------------------
Contracts is to be:
|_| Allocated |_| Unallocated
---------------------------------------------------------------------------------------------------------
Contract Effective Date
---------------------------------------------------------------------------------------------------------
Will this contract change or replace any existing life insurance or annuity contracts? |_| Yes |_| No
If yes, provide carrier name and account number: Aetna Account No. _______________________________
Other Carrier _________________________ Account No. ____________________________________
---------------------------------------------------------------------------------------------------------
Special Requests:
- ------------------------------------------------------------------------------------------------------------------------------------
Investment Options Participants may elect the investment allocation for:
|_| Employer and Employee Contributions |_| Employee Contributions only |_| None, Contract Holder
elects
---------------------------------------------------------------------------------------------------------
For Employer directed allocations: Enter the percentage of payment and the investment option chosen for
allocation purposes.
|_| Employer Modal Contributions: _______________________________________________________________
|_| Employee Modal Contributions: _______________________________________________________________
|_| Transferred Assets: _______________________________________________________________
</TABLE>
300-MOP-96FL (AICA) (10/99) Page 1 of 2 - Incomplete without all pages
<PAGE>
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Investment I understand that Annuity payments and account values, if any, when based on the investment experience of
Options - Continued a separate account, are variable and not guaranteed as to fixed dollar amount.
Certain states require the following statement: Any person who knowingly presents a false or fraudulent
claim for payment of a loss or benefit or knowingly presents false information in an application for
insurance may be guilty of a crime and may be subject to fines and confinement in prison. (This statement
does not apply in Virgina.)
Dated at__________________________ this _______ day of ______________________ year __________
City and State
------------------------------- -------------------------------
Witness Contract Holder/Title
Service Center Use: Accepted ________________
- ------------------------------------------------------------------------------------------------------------------------------------
Producer's Note Do you have any reason to believe any existing life insurance or annuity contracts will be modified or
replaced if this contract is issued? |_| Yes |_| No
---------------------------------------------------------------------------------------------------------
Producer Signature Date (mm/dd/yy)
---------------------------------------------------------------------------------------------------------
Printed Name of Producer Florida License Identification No.
---------------------------------------------------------------------------------------------------------
Corrections and amendments (Service Center Use only): Errors and omissions may be corrected by the
Company but no change in plan, classification, amount, age at issue, or extra benefits shall be made
without written consent of the Contract Holder.
------------------------------------------------------------------
Affix Prospectus
Receipt Here
------------------------------------------------------------------
</TABLE>
300-MOP-96FL (AICA) (10/99) Page 2 of 2 - Incomplete without all pages
EX-99.B.6.1
ARTICLES OF INCORPORATION
OF
AETNA INSURANCE COMPANY OF AMERICA
The undersigned incorporators, all of whom are United States citizens,
natural persons over the age of eighteen (18) years, and competent to contract,
hereby form a stock insurance company under the laws of the State of Florida.
ARTICLE I
NAME AND PLACE OF BUSINESS
The name of the corporation shall be AETNA INSURANCE COMPANY OF AMERICA.
The initial principal place of business of the corporation shall be 5100 West
Lemon Street, Suite 213, Tampa, Hillsborough County, Florida 33609. The
corporation may establish and maintain the principal place of business at such
other place within the State of Florida and may establish such other offices
within or outside of Florida as may be determined by the Board of Directors from
time to time.
ARTICLE II
NATURE OF BUSINESS
The purposes of the corporation shall be to engage in every aspect of
life, annuity, and health insurance and reinsurance and such other business as
may be permitted for such an insurance company under applicable law.
ARTICLE III
REDOMESTICATION FROM CONNECTICUT
The Company is a going concern, having been formed under the laws of the
State of Connecticut on January 3, 1990, and having been authorized by
regulatory officials in the State of Connecticut and other jurisdictions to
transact insurance therein. The Company submits these Articles of Incorporation
as required in connection with the Company's application submitted to the
Florida Department of Insurance on October 8, 1999, to become a Florida-domestic
insurance company, and that Department's subsequent authorization to file these
articles.
<PAGE>
ARTICLE IV
CAPITAL STOCK
The corporation shall be authorized to issue not more than 1275 (One
Thousand Two Hundred Seventy-Five) shares of common stock having a par value of
One Hundred Dollars ($100) per share. The corporation shall not begin
transacting insurance until it achieves capital and surplus equal to or
exceeding the amount of capital and surplus required under applicable law.
ARTICLE V
STATUTORY AGENT AND OFFICE
The corporation hereby appoints the Florida Insurance Commissioner and
Treasurer as its attorney in fact to receive service of legal process issued
against it in any civil action or proceeding in this state, and such appointment
shall remain in effect for so long as is required by applicable law,
specifically including section 624.422, Florida Statutes, or any successor
thereto.
ARTICLE VI
TERM OF EXISTENCE
The corporation shall have perpetual existence, unless sooner dissolved as
provided for by the laws of the State of Florida.
ARTICLE VII
DIRECTORS
The corporation shall have five (5) or more directors, the exact number of
which shall be determined from time to time in accordance with the corporation's
Bylaws. The names and residence addresses of the initial Board of Directors of
the corporation, who shall hold office until the annual meeting of the
stockholders next succeeding the adoption of these Articles of Incorporation,
such meeting to be held not later than one year from the date of incorporation,
and until their successors have been duly elected and qualified, are as follows:
Steven A. Haxton Shaun P. Mathews
4 Cobtail Way 19 Brook Drive
Simsbury, CT 06070 Simsbury, CT 06070
Thomas J. McInerney David W. O'Leary
4 Brook Ridge 77 Lofgren Road
West Simsbury, CT 06092 Avon, CT 06001
Catherine H. Smith
90 Foote Hill Road
Northford, CT 06472
<PAGE>
In addition to the powers and authorities herein or by statute expressly
conferred upon them, the directors are hereby empowered to exercise all such
powers and do all such acts and things as may be exercised or done by the
corporation, subject to the provisions of the laws of the State of Florida,
these Articles of Incorporation, and the Bylaws of the corporation; provided,
however, that no Bylaw hereafter adopted by the stockholders shall invalidate
any prior act of the directors which would have been valid if such Bylaw had not
been adopted.
ARTICLE VIII
INCORPORATORS
The names and residence street addresses of the incorporations, all of
whom are over the age of eighteen (18) and United States citizens are as
follows:
Steven A. Haxton Shaun P. Mathews
4 Cobtail Way 19 Brook Drive
Simsbury, CT 06070 Simsbury, CT 06070
Thomas J. McInerney David W. O'Leary
4 Brook Ridge 77 Lofgren Road
West Simsbury, CT 06092 Avon, CT 06001
Catherine H. Smith
90 Foote Hill Road
Northford, CT 06472
ARTICLE IX
TRANSACTIONS IN WHICH DIRECTORS
OR OFFICERS ARE INTERESTED
A. No contract or other transaction between the corporation and one or
more of its directors or officers, or between the corporation and any other
corporation, firm, or entity in which one or more of the corporation's directors
or officers are directors or officers, or have a financial interest, shall be
void or voidable solely because of such relationship or interest, or solely
because such director or directors are present at or participate in the meetings
of the Board of Directors or a committee thereof which authorizes, approves, or
ratifies such contract or transaction, or solely because his or their votes are
counted for such purpose, if:
1. The fact of such relationship or interest is disclosed or known
to the Board of Directors or the committee which authorizes, approves, or
ratifies the contract or transact by a vote or written consent sufficient for
the purpose without counting the votes or consents of such interested director
or directors; or
<PAGE>
2. The fact of such relationship or interest is disclosed or known
to the stockholders of the corporation entitled to vote thereon, and they
authorize, approve, or ratify such contract or transaction; or
3. The contract or transaction is fair and reasonable as to the
corporation at the time it is authorized by the Board of Directors, a committee
thereof, or the stockholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
thereof which authorizes, approves, or ratifies such contract or transaction,
and shares held by them may be counted in determining the presence of a quorum
at a meeting of shareholders at which action is taken pursuant to this Article.
ARTICLE X
DIRECTOR LIABILITY
The personal liability of any director of the corporation to the
corporation or its shareholders for monetary damages for breach of duty as a
director shall be limited to an amount that is equal to the compensation
received by the director for serving the corporation during the year of the
violation if such breach did not (i) involve a knowing and culpable violation of
law by the director; (ii) enable the director or an associate (defined as any
corporation or organization of which such person is an officer or partner or is,
directly or indirectly, the beneficial owner of ten percent or more of any class
of voting stock; any trust or other estate in which such person has at least a
ten percent beneficial interest or as to which such person serves as trustee or
in a similar fiduciary capacity; and any relative or spouse of such persons, or
any relative of such spouse, who has the same home as such person) to receive an
improper personal gain; (iii) show a lack of good faith and a conscious
disregard for the duty of the director to the corporation under circumstances in
which the director was aware that his conduct or omission created an
unjustifiable risk of serious injury to the corporation; (iv) constitute a
sustained and unexcused pattern of inattention that amounted to an abdication of
the director's duty to the corporation; or (v) create liability under Section
607.0834, Florida Statutes. Any repeal or modification of this Section shall not
adversely affect any right or protection of a director of the corporation
existing hereunder with respect to any act or omission occurring prior to such
repeal or modification.
The corporation shall have the power to indemnify, and may insure, its
directors and officers to the fullest extent permitted by applicable Florida
law.
ARTICLE XI
AMENDMENTS
<PAGE>
The corporation reserves the right to amend, alter, change or repeal any
provision contained in these Articles of Incorporation, subject to applicable
laws of the State of Florida, and all rights conferred upon stockholders are
granted subject to this reservation.
<PAGE>
SIGNED by the incorporators this 22nd day of November, 1999.
/s/ Steven A. Haxton
--------------------
Steven A. Haxton
/s/ Shaun P. Mathews
--------------------
Shaun P. Mathews
/s/ Thomas J. McInerney
-----------------------
Thomas J. McInerney
/s/ David W. O'Leary
--------------------
David W. O'Leary
/s/ Catherine H. Smith
----------------------
Catherine H. Smith
STATE OF Connecticut
COUNTY OF Hartford
I hereby certify that on this day personally appeared before me, the
undersigned authority, Steven A. Haxton, Shaun P. Mathews, Thomas J. McInerney,
David W. O'Leary, and Catherine H. Smith, to me personally known and known to me
to be the person who executed the foregoing instrument, and acknowledged before
me that he or she executed the same freely and voluntarily for the uses and
purposes therein set forth.
IN WITNESS WHEREOF, I have set my hand and official seal this 22nd day of
November, 1999.
/s/ Rose M. DeRensis
-------------------
Notary Public
My Commission Expires: 5/31/00
Commission Number: 97284
EX-99-B.6.2
BYLAWS
OF
AETNA INSURANCE COMPANY OF AMERICA
ARTICLE I
SHAREHOLDERS' MEETINGS
Section 1. The Annual Meeting of the Shareholders of the Company shall be
held in a location within or outside of Florida as may be determined by the
Board of Directors and shall take place in each year on such date and at such
hour as the Board of Directors may determine.
Section 2. Special meetings of the shareholders may be called by the Board
of Directors or the President. Each such meeting shall be held on the date and
at the hour specified in the call for the meeting and, unless another place
within or outside of Florida has been specified in any such call by the Board of
Directors or the President, at such office as the company may maintain in the
City of Hartford, Connecticut.
Section 3. The quorum for each meeting of the shareholders shall consist
of a majority of the voting power of shares entitled to vote at such meeting.
Each share of common stock shall have one vote on all matters on which
shareholders are entitled to vote by the Articles of Incorporation, these
Bylaws, or applicable law.
ARTICLE II
DIRECTORS
Section 1. The Board of Directors shall consist of not less than five and
not more than twenty-one directors, and the number of directorships at any time
within such minimum and maximum range shall be the number fixed by vote of the
Shareholders or Directors or, in the absence thereof, shall be the number of
Directors elected at the preceding Annual Meeting of Shareholders. If a vacancy
in the Board of Directors is created by an increase in the number of
directorships, it may be filled for the unexpired term by action of the
Shareholders or by the concurring vote of Directors holding a majority of the
directorships, which number of directorships shall be the number prior to the
vote on the increase. All other vacancies in the Board shall be filled in the
manner provided by law.
Section 2. The Board of Directors may, by resolution or resolutions passed
by a majority of the whole Board, designate one or more committees, each
committee to consist of two or more of the Directors of the Company. The Board
may designate one or more Directors as alternate members(s) of any committee,
who may replace any absent or disqualified member(s) at any meeting of the
committee. In the absence or disqualification of any member of such committee or
committees, the member or members thereof present at any meeting and not
disqualified from
<PAGE>
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board to act at the meeting in the place of any such
absent or disqualified member.
Any such committee, to the extent provided in the resolution of the Board,
shall have and may exercise all the powers and authority of the Board in the
management of the business and affairs of the Company.
Section 3. Regular meetings of the Board shall be held at such place and
on such day and hour at such periodic intervals as the Board may from time to
time designate. Notice of such regular meetings need not be given.
Section 4. Special meetings of the Board shall be held at the call of the
President or not less than one-third of the Directors then in office.
Section 5. A quorum shall consist of a majority of the Directors at the
time in office, but not less than two Directors nor less than one-third of the
number of Directors provided for by Article II, Section 1.
Section 6. The Board shall fix the compensation of each Director and of
each member of a committee appointed by the Board pursuant to Article II,
Section 2.
ARTICLE III
OFFICERS
Section 1. The officers of the Company shall be a President, a Secretary
and a Treasurer. The Board may also appoint, or authorize an officer to appoint,
one or more Senior Vice Presidents, Executive Vice Presidents, Vice Presidents,
Assistant Vice Presidents, Assistant Secretaries, Assistant Treasurers, and any
other officers or agents as the Board or President may deem advisable.
Section 2. The President shall be the chief executive and operating
officer of the Company, subject to the discretion of the Board. The President
shall be responsible for the general operations of the Company and shall have
such authority and responsibility and perform such duties as are specifically
prescribed for such office.
Section 3. The Secretary shall keep accurate minutes of all meetings of
shareholders, directors and committees, and shall perform all duties commonly
incident to such office and as provided by law and shall perform such other
duties and have such other powers as the Board may from time to time designate.
In the Secretary's absence or disability, an Assistant Secretary or such other
person as may be designated by the Board or the chairman of the meeting shall
perform the Secretary's duties.
Section 4. The Treasurer shall be the principal financial officer of the
Company, and shall perform all duties commonly incident to such office and as
provided by law, and shall have
<PAGE>
such other authority and responsibility and perform such other duties as the
Board may from time to time designate. In the Treasurer's absence or disability,
an Assistant Treasurer or such other person as may be designated by the Board
shall perform the Treasurer's duties.
ARTICLE IV
CORPORATE SEAL
Section 1. The corporate seal of the Company shall consist of the
corporate name in a circle and the state of incorporation within the circle.
Section 2. The corporate seal shall be in the custody of the Secretary and
shall be affixed by the Secretary, or with the approval of the President, by the
Secretary's delegate to documents required to be executed under the seal of the
Company. Duplicate seals may be in the possession of such other officers of the
Company, and affixed to such documents, as the Board of Directors or officers
acting under its authorization, may from time to time determine necessary or
desirable.
ARTICLE V
AMENDMENT OF BYLAWS
These Bylaws may be rescinded or amended:
(1) By an affirmative vote of the holders or a majority of the voting
power of share entitled to vote thereon at a meeting of the
shareholders in the call for which written notice of such proposed
action shall have been given, or
(2) By vote of a majority of the number of Directors provided for by
Article II, Section 1, at any meeting of the Board upon written
notice to each Director of the action proposed to be taken.
ARTICLE VI
OTHER MATTERS
Section 1. The Company shall maintain books and records within the State
of Florida pursuant to Section 628.271, Florida Statutes, except as may be
allowed or authorized pursuant to Section 628.281, Florida Statutes.
Section 2. The Board of Directors shall be authorized to declare and cause
the Company to pay dividends pursuant to Section 628.371, Florida Statutes, and
any other applicable laws.
Section 3. To the fullest extent permissible under applicable law, the
Shareholders and Directors of the Company shall be entitled to take action
through written consents, shall be entitled to convene by telephone or other
electronic means by which all participants may each
<PAGE>
hear other at the same time, and shall be entitled to use and rely upon
facsimiles and other electronic transmissions to accomplish the business and
affairs of the Company.
EX-99-B.8.1
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
A I M DISTRIBUTORS, INC.,
AETNA INSURANCE COMPANY OF AMERICA,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
AND
AETNA LIFE INSURANCE AND ANNUITY COMPANY,
AS PRINCIPAL UNDERWRITER
S:\AGR\PA-AET-1.DOC PA-AET-1.doc
110499 (5) dmr
<PAGE>
Description
Section 1. Available Funds.....................................................2
1.1 Availability..........................................................2
1.2 Addition, Deletion or Modification of Funds...........................3
Section 2. Processing Transactions.............................................3
2.1 Timely Pricing and Orders.............................................3
2.2 Timely Payments.......................................................4
2.3 Applicable Price......................................................4
2.4 Dividends and Distributions...........................................5
2.5 Book Entry 4..........................................................5
Section 3. Costs and Expenses..................................................5
3.1 General...............................................................5
Section 4. Legal Compliance....................................................6
4.1 Tax Laws..............................................................6
4.2 Insurance and Certain Other Laws......................................8
4.3 Securities Laws.......................................................9
4.4 Notice of Certain Proceedings and Other Circumstances................10
4.5 LIFE COMPANY To Provide Documents; Information About AVIF............11
4.6 AVIF To Provide Documents; Information About LIFE COMPANY............12
Section 5. Mixed and Shared Funding...........................................13
5.1 General..............................................................13
5.2 Disinterested Directors..............................................14
5.3 Monitoring for Material Irreconcilable Conflicts.....................14
5.4 Conflict Remedies....................................................15
5.5 Notice to LIFE COMPANY...............................................16
5.6.Information Requested by Board of Directors..........................16
5.7 Compliance with SEC Rules............................................17
5.8 Other Requirements...................................................17
Section 6. Termination........................................................17
6.1 Events of Termination................................................17
6.2 Funds To Remain Available............................................18
6.3 Survival of Warranties and Indemnifications..........................19
i
<PAGE>
Section 7. Parties To Cooperate Respecting Termination........................19
Section 8. Assignment.........................................................19
Section 9. Notices............................................................19
Section 10. Voting Procedures.................................................20
Section 11. Foreign Tax Credits...............................................20
Section 12. Indemnification...................................................20
12.1 General.............................................................20
12.2 Effect of Notice....................................................22
12.3 Successors..........................................................22
Section 13. Applicable Law....................................................22
Section 14. Execution in Counterparts.........................................22
Section 15. Severability......................................................22
Section 16. Rights Cumulative.................................................23
Section 17. Headings..........................................................23
Section 18. Confidentiality...................................................23
Section 19. Parties to Cooperate..............................................24
ii
<PAGE>
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 1st day of November, 1999
("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland
corporation ("AVIF"); A I M Distributors, Inc., a Delaware corporation ("AIM"),
Aetna Insurance Company of America, a Connecticut life insurance company ("LIFE
COMPANY"), on behalf of itself and each of its segregated asset accounts listed
in Schedule A hereto, as the parties hereto may amend from time to time (each,
an "Account, " and collectively, the "Accounts"); and Aetna Life Insurance and
Annuity Company, a registered broker-dealer, the principal underwriter of the
Contracts ("UNDERWRITER") (collectively, the "Parties').
WITNESSETH THAT:
WHEREAS, AVIF is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, AVIF currently consists of fifteen separate series ("Series"),
shares ("Shares") of each of which are registered under the Securities Act of
1933, as amended (the "1933 Act") and are currently sold to one or more separate
accounts of life insurance companies to fund benefits under variable annuity
contracts and variable life insurance contracts; and
WHEREAS, AVIF will make Shares of each Series listed on Schedule A hereto
as the Parties hereto may amend from time to time (each a "Fund"; reference
herein to "AVIF" includes reference to each Fund, to the extent the context
requires) available for purchase by the Accounts; and
WHEREAS A I M is registered as a broker-dealer with the SEC under the Securities
Exchange Act of 1934 as amended (the "1934 Act") and is a member in good
standing of the National Association of Securities Dealers, Inc. (the "NASD");
and;
WHEREAS, LIFE COMPANY represents that it has established Variable Annuity
Account I and may establish such other accounts as may be set forth in Schedule
A attached hereto and as may be amended from time to time with the mutual
consent of the parties hereto (the "Accounts"), each of which is a separate
account under Connecticut Insurance law, and has registered or will register
each of the Accounts (except for such Accounts for which no such registration is
required) as a unit investment trust under the Investment Company Act of 1940
(the "1940 Act"), to serve as an investment vehicle for the Contracts. Each
Contract provides for the allocation of net amounts received by LIFE COMPANY to
an Account for investment in the shares of one or more specified open-
1
<PAGE>
end management investment companies available through that Account as underlying
investment media. Selection of a particular investment management company and
changes therein from time to time are made by the participant or Contract owner,
as applicable under a particular Contract.
WHEREAS, LIFE COMPANY will be the issuer of certain group and individual
variable annuity contracts and variable life insurance contracts and
Certificates issued to individuals under a group contract (collectively referred
to as "Contracts") which Contracts, if required by applicable law, will be
registered under the 1933 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, LIFE COMPANY intends to purchase Shares in one or more of the Funds
on behalf of the Accounts to fund the Contracts; and
WHEREAS, UNDERWRITER is a broker-dealer registered with the SEC under the
Securities Exchange Act of 1934 (" 1934 Act") and a member in good standing of
the National Association of Securities Dealers, Inc. ("NASD");
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Parties hereto agree as follows:
Section 1. Available Funds
1.1 Availability
(a) AVIF will make Shares of each Fund available to LIFE COMPANY for
purchase and redemption at net asset value and with no sales charges,
subject to the terms and conditions of this Agreement. The Board of
Directors of AVIF may refuse to sell Shares of any Fund to any person, or
suspend or terminate the offering of Shares of any Fund if such action is
required by law or by regulatory authorities having jurisdiction or if, in
the sole discretion of the Directors acting in good faith and in light of
their fiduciary duties under federal and any applicable state laws, such
action is deemed in the best interests of the shareholders of such Fund.
(b) AVIF represents and warrants that it will give LIFE COMPANY at least
30 days written notice prior to closing any Fund or Series or to limit
sales of Shares of any Fund or Series in any way. In addition, AVIF will
use its best efforts to send any agendas or proposed agendas concerning a
closing or restriction with respect to a Fund to LIFE COMPANY within 24
hours of the creation of such agenda or proposed agenda.
(c) Notwithstanding the above, if severe market conditions exist which
require immediate action in order to comply with all applicable laws and
regulations or if the continued offering is disadvantageous to the best
interest of the shareholders of the
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Fund being closed or restricted and it is disadvantageous to the best
interest of the shareholders of the Fund to give 30 days notice, AVIF
warrants and represents that it will give notice within 24 hours of a
decision to close or restrict the offering of a Fund.
1.2 Addition, Deletion or Modification of Funds.
The Parties hereto may agree, from time to time, to add other Funds to
provide additional funding media for the Contracts, or to delete, combine, or
modify existing Funds, by amending Schedule A hereto. Upon such amendment to
Schedule A, any applicable reference to a Fund, AVIF, or its Shares herein shall
include a reference to any such additional Fund. Schedule A, as amended from
time to time, is incorporated herein by reference and is a part hereof.
Section 2. Processing Transactions
2.1 Timely Pricing and Orders.
(a) AVIF or its designated agent will use its best efforts to provide LIFE
COMPANY with the net asset value per Share, dividend and capital gain
information for each Fund by 6:30 p.m. Eastern Time on each Business Day. In the
event such information will not be provided by 6:30.p.m Eastern Time, AVIF will
notify LIFE COMPANY no later than 7:00 p.m. Eastern Time as to when such
information is forthcoming and will grant LIFE COMPANY any additional time it
needs under (b) below. As used herein, "Business Day" shall mean any day on
which (i) the New York Stock Exchange is open for regular trading, (ii) AVIF
calculates the Fund's net asset value, and (iii) LIFE COMPANY is open for
business.
(b) LIFE COMPANY will use the data provided by AVIF each Business Day
pursuant to paragraph (a) immediately above to calculate Account unit values and
to process transactions that receive that same Business Day's Account unit
values. LIFE COMPANY will perform such Account processing the same Business Day,
and will place corresponding orders to purchase or redeem Shares with AVIF by
10:00 a.m. Eastern Time the following Business Day; provided, however, that AVIF
shall provide additional time to LIFE COMPANY in the event that AVIF is unable
to meet the 7:00 p.m. time stated in paragraph (a) immediately above. Such
additional time shall be equal to the additional time that AVIF takes to make
the net asset values available to LIFE COMPANY.
(c) With respect to payment of the purchase price by LIFE COMPANY and of
redemption proceeds by AVIF, LIFE COMPANY and AVIF shall net purchase and
redemption orders with respect to each Fund and shall transmit one net payment
for all Funds in accordance with Section 2.2 below.
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(d) If AVIF provides materially incorrect Share net asset value
information (as determined under SEC guidelines), LIFE COMPANY shall be entitled
to an adjustment to the number of Shares purchased or redeemed to reflect the
correct net asset value per Share. Any material error in the calculation or
reporting of net asset value per Share, dividend or capital gain information
shall be reported promptly upon discovery to LIFE COMPANY.
2.2 Timely Payments.
LIFE COMPANY will wire payment for net purchases to a custodial account
designated by AVIF by 4:00 p.m. Eastern Time on the same day as the order for
Shares is placed, to the extent practicable. AVIF will wire payment for net
redemptions to an account designated by LIFE COMPANY by 2:00 p.m. Eastern Time
on the same day as the Order is placed, to the extent practicable.
2.3 Applicable Price.
(a) Share purchase payments and redemption orders that result from
purchase payments, premium payments, surrenders and other transactions under
Contracts (collectively, "Contract transactions") and that LIFE COMPANY receives
prior to the close of regular trading on the New York Stock Exchange on a
Business Day will be executed at the net asset values of the appropriate Funds
next computed after receipt by AVIF or its designated agent of the orders. For
purposes of this Section 2.3(a), LIFE COMPANY shall be the designated agent of
AVIF for receipt of orders relating to Contract transactions on each Business
Day and receipt by such designated agent shall constitute receipt by AVIF;
provided that AVIF receives notice of such orders by 10:00 a.m. Eastern Time on
the next following Business Day or such later time as computed in accordance
with Section 2.1(b) hereof.
(b) All other Share purchases and redemptions by LIFE COMPANY will be
effected at the net asset values of the appropriate Funds next computed after
receipt by AVIF or its designated agent of the order therefor, and such orders
will be irrevocable.
2.4 Dividends and Distributions.
LIFE COMPANY hereby elects to reinvest all dividends and capital gains
distributions in additional Shares of the corresponding Fund at the dividend
date net asset values until LIFE COMPANY otherwise notifies AVIF in writing, it
being agreed by the Parties that the ex-dividend date and the payment date with
respect to any dividend or distribution will be the same Business Day. LIFE
COMPANY reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash.
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2.5 Book Entry.
Issuance and transfer of AVIF Shares will be by book entry only. Stock
certificates will not be issued to LIFE COMPANY. Shares ordered from AVIF will
be recorded in an appropriate title for LIFE COMPANY, on behalf of its Account.
Section 3. Costs and Expenses
3.1 Expenses.
(a) Except as otherwise provided in this Agreement, all expenses incident
to the performance by the Fund under this Agreement shall be paid by AVIF,
including the cost of registration of Fund shares with the Securities and
Exchange Commission (the "SEC") and in states where required. AVIF and A I M
shall pay no fee or other compensation to LIFE COMPANY under this Agreement, and
LIFE COMPANY shall pay no fee or other compensation to AVIF or AIM , except as
provided herein and in Schedule B attached hereto and made a part of this
Agreement as may be amended from time to time with the mutual consent of the
parties hereto. All expenses incident to performance by each party of its
respective duties under this Agreement shall be paid by that party, unless
otherwise specified in this Agreement.
(b) AVIF or AIM shall provide to LIFE COMPANY Post Script files of
periodic fund reports to shareholders and other materials that are required by
law to be sent to Contract owners. In addition, AVIF or AIM shall provide LIFE
COMPANY with a sufficient quantity of its prospectuses, statements of additional
information and any supplements to any of these materials, to be used in
connection with the offerings and transactions contemplated by this Agreement.
In addition, AVIF shall provide LIFE COMPANY with a sufficient quantity of its
proxy material that is required to be sent to Contract owners. AIM shall be
permitted to review and approve the typeset form of such material prior to such
printing provided such material has been provided by AIM to LIFE COMPANY within
a reasonable period of time prior to typesetting.
(c) In lieu of AVIF's or AIM's providing printed copies of prospectuses,
statements of additional information and any supplements to any of these
materials, and periodic fund reports to shareholders, LIFE COMPANY shall have
the right to request that AVIF transmit a copy of such materials (Post Script
files), which LIFE COMPANY may use to have such materials printed together with
similar materials of other Account funding media that LIFE COMPANY or any
distributor will distribute to existing or prospective Contract owners or
participants.
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Section 4. Legal Compliance
4.1 Tax Laws.
(a) AVIF represents and warrants that each Fund is currently qualified as
a regulated investment company ("RIC") under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), and represents that it will use
qualify and maintain qualification of each Fund as a RIC. AVIF will notify LIFE
COMPANY immediately upon having a reasonable basis for believing that a Fund has
ceased to so qualify or that it might not so qualify in the future.
(b) AVIF represents and warrants that it will comply and maintain each
Fund's compliance with the diversification requirements set forth in Section
817(h) of the Code and Section 1.817-5(b) of the regulations under the Code.
AVIF will notify LIFE COMPANY immediately upon having a reasonable basis for
believing that a Fund has ceased to so comply or that a Fund might not so comply
in the future. In the event of a breach of this Section 4.1(b) by AVIF, it will
adequately diversify the Fund so as to achieve compliance within the grace
period afforded by Section 1.817-5 of the regulations under the Code.
(c) AVIF and A I M represent and warrant that at all times while this
agreement is in effect, all beneficial interests will be owned by one or more
insurance companies or by any other party permitted under Section 1.817-5(f)(3)
of the Regulations promulgated under the Code or by the successor thereto, or by
any other party permitted under a Revenue Ruling or private letter ruling
granted by the Internal Revenue Service.
(d) LIFE COMPANY agrees that if the Internal Revenue Service ("IRS")
asserts in writing in connection with any governmental audit or review of LIFE
COMPANY or, to LIFE COMPANY's knowledge, of any Participant, that any Fund has
failed to comply with the diversification requirements of Section 817(h) of the
Code or LIFE COMPANY otherwise becomes aware of any facts that could give rise
to any claim against AVIF or its affiliates as a result of such a failure or
alleged failure:
(i) LIFE COMPANY shall promptly notify AVIF of such assertion or
potential claim (subject to the Confidentiality provisions of
Section 18 as to any Participant);
(ii) LIFE COMPANY shall consult with AVIF as to how to minimize any
liability that may arise as a result of such failure or alleged
failure;
(iii) LIFE COMPANY shall use its best efforts to minimum any liability of
AVIF or its affiliates resulting from such failure, including,
without limitation, demonstrating, pursuant to Treasury Regulations
Section 1.8175(a)(2), to the Commissioner of the IRS that such
failure was inadvertent;
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<PAGE>
(iv) LIFE COMPANY shall permit AVIF, its affiliates and their legal and
accounting advisers to participate in any conferences, settlement
discussions or other administrative or judicial proceeding or
contests (including judicial appeals thereof) with the IRS, any
Participant or any other claimant regarding any claims that could
give rise to liability to AVIF or its affiliates as a result of
such a failure or alleged failure; provided, however, that LIFE
COMPANY will retain control of the conduct of such conferences
discussions, proceedings, contests or appeals;
(v) any written materials to be submitted by LIFE COMPANY to the IRS,
any Participant or any other claimant in connection with any of
the foregoing proceedings or contests (including, without
limitation, any such materials to be submitted to the IRS pursuant
to Treasury Regulations Section 1.817-5(a)(2)), shall be provided
by LIFE COMPANY to AVIF (together with any supporting information
or analysis); subject to the confidentiality provisions of Section
18, at least seven (7) business days or such shorter period to
which the Parties hereto agree prior to the day on which such
proposed materials are to be submitted;
(vi) LIFE COMPANY shall provide AVIF or its affiliates and their
accounting and legal advisers with such cooperation as AVIF shall
reasonably request (including, without limitation, by permitting
AVIF and its accounting and legal advisers to review the relevant
books and records of LIFE COMPANY) in order to facilitate review
by AVIF or its advisers of any written submissions provided to it
pursuant to the preceding clause or its assessment of the validity
or amount of any claim against its arising from such a failure or
alleged failure;
(vii) LIFE COMPANY shall not with respect to any claim of the IRS or any
Participant that would give rise to a claim against AVIF or its
affiliates (a) compromise or settle any claim, (b) accept any
adjustment on audit, or (c) forego any allowable administrative or
judicial appeals, without the express written consent of AVIF or
its affiliates, which shall not be unreasonably withheld, provided
that LIFE COMPANY shall not be required to appeal any adverse
judicial decision unless (i) counsel, reasonably agreed to by all
Parties, provide an opinion that there is a reasonable basis for
making such an appeal and (ii) the appeal is limited to a
determination as to whether a Fund is adequately diversified
within the meaning of Section 817(h) of the Internal Revenue Code.
In the event an appeal is made, AVIF and A I M agree to pay LIFE
COMPANY for all costs and expenses incurred in its efforts to
carry out the appeal;
(viii) AVIF and its affiliates shall have no liability as a result of
such failure or alleged failure if LIFE COMPANY fails to comply
with any of the
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<PAGE>
foregoing clauses (i) through (vii), and such failure could be
shown to have materially contributed to the liability.
Should AVIF or A I M or any of its affiliates refuse to give its written
consent to any compromise or settlement of any claim or liability hereunder,
LIFE COMPANY may, in its discretion, authorize AVIF or its affiliates to act in
the name of LIFE COMPANY in, and to control the conduct of, such conferences,
discussions, proceedings, contests or appeals and all administrative or judicial
appeals thereof, and in that event AVIF or its affiliates shall bear the fees
and expenses associated with the conduct of the proceedings that it is so
authorized to control; provided, that in no event shall LIFE COMPANY have any
liability resulting from AVIF's refusal to accept the proposed settlement or
compromise with respect to any failure caused by AVIF. As used in this
Agreement, the term "affiliates" shall have the same meaning as "affiliated
person" as defined in Section 2(a)(3) of the 1940 Act.
(e) LIFE COMPANY represents and warrants that the Contracts currently are
and will be treated as annuity contracts or life insurance contracts under
applicable provisions of the Code and that it will maintain such treatment; LIFE
COMPANY will notify AVIF immediately upon having a reasonable basis for
believing that any of the Contracts have ceased to be so treated or that they
might not be so treated in the near future.
(f) LIFE COMPANY represents and warrants that each Account is a
"segregated asset account" and that interests in each Account are offered
exclusively through the purchase of or transfer into a "variable contract,"
within the meaning of such terms under Section 817 of the Code and the
regulations thereunder. LIFE COMPANY will use its best efforts to continue to
meet such definitional requirements, and it will notify AVIF immediately upon
having a reasonable basis for believing that such requirements have ceased to be
met or that they might not be met in the near future.
4.2 Insurance and Certain Other Laws.
(a) AVIF and A I M represent and warrant that they will notify LIFE
COMPANY of any material changes in the operation or diversification of the Funds
that may impact the LIFE COMPANY's compliance with state insurance laws,
regulation or pronouncements.
(b) LIFE COMPANY represents and warrants that (i) it is an insurance
company duly organized, validly existing and in good standing under the laws of
the State of Connecticut and has full corporate power, authority and legal right
to execute, deliver and perform its duties and comply with its obligations under
this Agreement, (ii) it has legally and validly established and maintains each
Account as a segregated asset account under Section 38a of the Connecticut
Insurance Law and the regulations thereunder, and (iii) the Contracts comply in
all material respects with all other applicable federal and state laws and
regulations.
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(c) AVIF represents and warrants that (i) it is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Maryland and has full power, authority, and legal right to execute, deliver, and
perform its duties and comply with its obligations under this Agreement, (ii) it
has provided to LIFE COMPANY the Shared Funding Exemptive Order issued by the
SEC dated December 6, 1995 (File No. 812-9642), and (iii) the Funds comply in
all material respects with all applicable federal and state laws and
regulations.
4.3 Securities Laws.
(a) LIFE COMPANY represents and warrants that (i) interests in each
Account pursuant to the Contracts will be registered under the 1933 Act to the
extent required by the 1933 Act, (ii) the Contracts will be duly authorized for
issuance and sold in compliance with all applicable federal and state laws;
including, without limitation, the 1933 Act, the 1934 Act, the 1940 Act and
Connecticut law, (iii) each Account is and will remain registered under the1940
Act, to the extent required by the 1940 Act, (iv) each Account does and will
comply in all material respects with the requirements of the 1940 Act and the
rules thereunder, to the extent required, (v) each Account's 1933 Act
registration statement relating to the Contracts, together with any amendments
thereto, with at all times comply in all material respects with the requirements
of the 1933 Act and the rules thereunder, (vi) LIFE COMPANY will amend the
registration statement for its Contracts under the 1933 Act and for its Accounts
under the 1940 Act from time to time as required in order to effect the
continuous offering of its Contracts or as may otherwise be required by
applicable law, and (vii) each Account Prospectus will at all times comply in
all material respects with the requirements of the 1933 Act and the rules
thereunder.
(b) AVIF and A I M represent and warrant that (i) Shares sold pursuant to
this Agreement will be registered under the 1933 Act to the extent required by
the 1933 Act and duly authorized for issuance and sold in compliance with
Maryland law, (ii) AVIF is and will remain registered under the 1940 Act to the
extent required by the 1940 Act, (iii) AVIF will amend the registration
statement for its Shares under the 1933 Act and itself under the 1940 Act from
time to time as required in order to effect the continuous offering of its
Shares, (iv) AVIF does and will comply in all material respects with the
requirements of the 1940 Act and the rules thereunder, (v) AVIF's 1933 Act
registration statement, together with any amendments thereto, will at all times
comply in all material respects with the requirements of the 1933 Act and rules
thereunder, and (vi) AVIF's Prospectus will at all times comply in all material
respects with the requirements of the 1933 Act and the rules thereunder.
(c) AVIF will at its expense register and qualify its Shares for sale in
accordance with the laws of any state or other jurisdiction if and to the extent
reasonably deemed advisable by AVIF.
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<PAGE>
(d) AVIF currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it reserves the right to make such payments in the future. To the
extent that it decides to finance distribution expenses pursuant to Rule 12b-1,
AVIF undertakes to have its Board of Directors, a majority of whom are not
"interested" persons of the Fund, formulate and approve any plan under Rule
12b-1 to finance distribution expenses.
(e) AVIF represents and warrants that all of its trustees, officers,
employees, investment advisers, and other individuals/entities having access to
the funds and/or securities of the Fund are and continue to be at all times
covered by a blanket fidelity bond or similar coverage for the benefit of the
Fund in an amount not less than the minimal coverage as required currently by
Rule 17g-(l) of the 1940 Act or related provisions as may be promulgated from
time to time. The aforesaid bond includes coverage for larceny and embezzlement
and is issued by a reputable bonding company.
4.4 Notice of Certain Proceedings and Other Circumstances.
(a) AVIF and AIM will immediately notify LIFE COMPANY of (i) the issuance
by any court or regulatory body of any stop order, cease and desist order, or
other similar order with respect to AVIF's registration statement under the 1933
Act or AVIF Prospectus, (ii) any request by the SEC for any amendment to such
registration statement or AVIF Prospectus that may affect the offering of Shares
of AVIF, (iii) the initiation of any proceedings for that purpose or for any
other purpose relating to the registration or offering of AVIF's Shares, or (iv)
any other action or circumstances-that may prevent the lawful offer or sale of
Shares of any Fund in any state or jurisdiction, including, without limitation,
any circumstances in which (a) such Shares are not registered and, in all
material respects, issued and sold in accordance with applicable state and
federal law, or (b) such law precludes the use of such Shares as an underlying
investment medium of the Contracts issued or to be issued by LIFE COMPANY. AVIF
will make every reasonable effort to prevent the issuance, with respect to any
Fund, of any such stop order, cease and desist order or similar order and, if
any such order is issued, to obtain the lifting thereof at the earliest possible
time.
(b) LIFE COMPANY will immediately notify AVIF and AIM of (i) the issuance
by any court or regulatory body of any stop order, cease and desist order, or
other similar order with respect to each Account's registration statement under
the 1933 Act relating to the Contracts or each Account Prospectus, (ii) any
request by the SEC for any amendment to such registration statement or Account
Prospectus that may affect the offering of Shares of AVIF, (iii) the initiation
of any proceedings for that purpose or for any other purpose relating to the
registration or offering of each Account's interests pursuant to the Contracts,
or (iv) any other action or circumstances that may prevent the lawful offer or
sale of said interests in any state or jurisdiction, including, without
limitation, any circumstances in which said interests are not registered and, in
all material respects, issued and sold in accordance with applicable state and
federal law. LIFE COMPANY will make every reasonable effort to prevent the
issuance of any such stop
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order, cease and desist order or similar order and, if any such order is issued,
to obtain the lifting thereof at the earliest possible time.
4.5 LIFE COMPANY To Provide Documents: Information About AVIF.
(a) LIFE COMPANY will, upon reasonable request, provide to AVIF or its
designated agent at least one (1) complete copy of all SEC registration
statements, Account Prospectuses, reports, any preliminary and final voting
instruction solicitation material, applications for exemptions, requests for
no-action letters, and all amendments to any of the above, that relate to each
Account or the Contracts, as soon as possible after the filing with the filing
of such document with the SEC or other regulatory authorities.
(b) LIFE COMPANY will provide AVIF or its designated agent at least one
(1) complete copy of each piece of sales literature or other promotional
material in which AVIF or any of its affiliates is named (except "standardized
material" as defined hereafter), at least two (2) business days, or such shorter
period as the Parties hereto may, from time to time, agree upon, prior to its
first use. For purposes of this paragraph, "standardized material" is sales
literature or other promotional material that is not materially different, in
format and/or content, from materials that have previously been reviewed and
authorized for use under the terms of this paragraph. LIFE COMPANY agrees to
bear all responsibility and liability for any error in any standardized material
(e.g., transposition of numbers) to the extent any information contained therein
does not conform to the information provided to LIFE COMPANY by A I M or AVIF.
No such sales literature or other promotional material shall be used if AVIF or
its designated agent reasonably objects to such use within two (2) business
days, or such shorter period as the Parties hereto may, from time to time, agree
upon, after receipt of such materials. AVIF hereby designates A I M as the
entity to receive such literature, until such time as AVIF appoints another
designated agent by giving notice to LIFE COMPANY in the manner required by
Section 9 hereof. LIFE COMPANY will notify AVIF when it is sending material for
review for purposes of confirmation of receipt. AVIF has the right to request
subsequent review of standardized material and it proposed usage.
(c) Neither LIFE COMPANY nor any of its affiliates, will give any
information or make any representations or statements on behalf of or concerning
AVIF or its affiliates in connection with the sale of the Contracts other than
(i) the information or representations contained in the registration statement,
including the AVIF Prospectus contained therein, relating to Shares, as such
registration statement and AVIF Prospectus may be amended from time to time; or
(ii) in reports or proxy materials for AVIF; or (iii) in published reports for
AVIF that are in the public domain and approved by AVIF for distribution; or
(iv) in sales literature or other promotional material approved by AVIF, except
with the express written permission of AVIF.
(d) LIFE COMPANY shall adopt and implement procedures reasonably designed
to ensure that information concerning AVIF and its affiliates that is intended
for use only by brokers or agents selling the Contracts (i.e., information that
is not intended for
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<PAGE>
distribution to Participants) ("broker only materials") is so used, and neither
AVIF nor any of its affiliates shall be liable for any losses, damages or
expenses relating to the improper use of such broker only materials.
(e) For the purposes of this Section 4.5, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media, (e.g.,
on-line networks such as the Internet or other electronic messages), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under the NASD rules, the 1933 Act or the 1940 Act.
4.6 AVIF To Provide Documents: Information About LIFE COMPANY.
(a) AVIF wi1l provide to LIFE COMPANY at least one (1) complete copy of
all SEC registration statements, AVIF Prospectuses, reports, any preliminary and
final proxy material, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to AVIF or the
Shares of a Fund, contemporaneously with the filing of such document with the
SEC or other regulatory authorities.
(b) AVIF will provide to LIFE COMPANY Post Script files for all AVIF
prospectuses and printed copies, in an amount specified by LIFE COMPANY, of AVIF
statements of additional information, proxy materials, periodic reports to
shareholders and other materials required by law to be sent to Participants who
have allocated any Contract value to a Fund. AVIF will provide such copies to
LIFE COMPANY in a timely manner so as to enable LIFE COMPANY, as the case may
be, to print and distribute such materials within the time required by law to be
furnished to Participants.
(c) AVIF will provide to LIFE COMPANY or its designated agent at least one
(1) complete copy of each piece of sales literature or other promotional
material in which LIFE COMPANY, or any of its respective affiliates is named, or
that refers to the Contracts, at least five (5) Business-Days prior to its use
or such shorter period as the Parties hereto may, from time to time, agree upon.
No such material shall be used if LIFE COMPANY or its designated agent objects
to such use within five (5) Business Days after receipt of such material or such
shorter period as the Parties hereto may, from time to time, agree upon. LIFE
COMPANY shall receive all such sales literature until such time as it appoints a
designated agent by giving notice to AVIF in the manner required by Section 9
hereof.
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(d) Neither AVIF nor any of its affiliates will give any information or
make any representations or statements on behalf of or concerning LIFE COMPANY,
each Account, or the Contracts other than (i) the information or representations
contained in the registration statement, including each Account Prospectus
contained therein, relating to the Contracts, as such registration statement and
Account Prospectus may be amended from time to time; or (ii) in published
reports for the Account or the Contracts that are in the public domain and
approved by LIFE COMPANY for distribution; or (iii) in sales literature or other
promotional material approved by LIFE COMPANY or its affiliates, except with the
express written permission of LIFE COMPANY.
(e) AVIF shall cause its principal underwriter to adopt and implement
procedures reasonably designed to ensure that information concerning LIFE
COMPANY, and its respective affiliates that is intended for use only by brokers
or agents selling the Contracts (i.e., information that is not intended for
distribution to Participants) ("broker only materials") is so used, and neither
LIFE COMPANY, nor any of its respective affiliates shall be liable for any
losses, damages or expenses relating to the improper use of such broker only
materials.
(f) For purposes of this Section 4.6, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media, (e.g.,
on-line networks such as the Internet or other electronic messages), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under the NASD rules, the 1933 Act or the 1940 Act.
Section 5. Mixed and Shared Funding
5.1. General.
The SEC has granted an order to AVIF exempting it from certain provisions
of the 1940 Act and rules thereunder so that AVIF may be available for
investment by certain other entities, including, without limitation, separate
accounts funding variable annuity contracts or variable life insurance
contracts, separate accounts of insurance companies unaffiliated with LIFE
COMPANY, and trustees of qualified pension and retirement plans (collectively,
"Mixed and Shared Funding"). The Parties recognize that the SEC has imposed
terms and conditions for such orders that are substantially identical to many of
the provisions of this Section 5. Sections 5.2 through 5.8 below shall apply
pursuant to
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such an exemptive order granted to AVIF. AVIF hereby notifies LIFE COMPANY that,
in the event that AVIF implements Mixed and Shared Funding, it may be
appropriate to include in the prospectus pursuant to which a Contract is offered
disclosure regarding the potential risks of Mixed and Shared Funding.
5.2 Disinterested Directors.
AVIF agrees that its Board of Directors shall at all times consist of
directors a majority of whom (the "Disinterested Directors") are not interested
persons of AVIF within the meaning of Section 2(a)(19) of the 1940 Act and the
rules thereunder and as modified by any applicable orders of the SEC, except
that if this condition is not met by reason of the death, disqualification, or
bona fide resignation of any director, then the operation of this condition
shall be suspended (a) for a period of forty-five (45) days if the vacancy or
vacancies may be filled by the Board; (b) for a period of sixty (60) days if a
vote of shareholders is required to fill the vacancy or vacancies; or (c) for
such longer period as the SEC may prescribe by order upon application.
5.3 Monitoring for Material Irreconcilable Conflicts.
AVIF agrees that its Board of Directors will monitor for the existence of
any material irreconcilable conflict between the interests of the Participants
in all separate accounts of life insurance companies utilizing AVIF
("Participating Insurance Companies"), including each Account, and participants
in all qualified retirement and pension plans investing in AVIF ("Participating
Plans"). LIFE COMPANY agrees to inform the Board of Directors of AVIF of the
existence of or any potential for any such material irreconcilable conflict of
which it is aware. The concept of a "material irreconcilable conflict" is not
defined by the 1940 Act or the rules thereunder, but the Parties recognize that
such a conflict may arise for a variety of reasons, including, without
limitation:
(a) an action by any state insurance or other regulatory authority;
(b) a change in applicable federal or state insurance, tax or securities
laws or regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax or securities
regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding;
(d) the manner in which the investments of any Fund are being managed;
(e) a difference in voting instructions given by variable annuity contract
and variable life insurance contract Participants or by Participants of
different Participating Insurance companies;
14
<PAGE>
(f) a decision by a Participating Insurance Company to disregard the
voting instructions of Participants; or
(g) a decision by a Participating Plan to disregard the voting
instructions of Plan participants.
Consistent with the SEC's requirements in connection with exemptive orders
of the type referred to in Section 5.1 hereof, LIFE COMPANY will assist the
Board of Directors in carrying out its responsibilities by providing the Board
of Directors with all information reasonably necessary for the Board of
Directors to consider any issue raised, including information as to a decision
by LIFE COMPANY to disregard voting instructions of Participants.
5.4 Conflict Remedies.
(a) It is agreed that if it is determined by a majority of the members of
the Board of Directors or a majority of the Disinterested Directors that a
material irreconcilable conflict exists, LIFE COMPANY will, if it is a
Participating Insurance Company for which a material irreconcilable conflict is
relevant, at its own expense and to the extent reasonably practicable (as
determined by a majority of the Disinterested Directors), take whatever steps
are necessary to remedy or eliminate the material irreconcilable conflict, which
steps may include, but are not limited to:
(i) withdrawing the assets allocable to some or all of the Accounts from
AVIF or any Fund and reinvesting such assets in a different
investment medium, including another Fund of AVIF, or submitting the
question whether such segregation should be implemented to a vote of
all affected Participants and, as appropriate, segregating the
assets of any particular group (e.g., annuity Participants, life
insurance Participants or all Participants) that votes in favor of
such segregation, or offering to the affected Participants the
option of making such a change; and
(ii) establishing a new registered investment company of the type defined
as a "management company" in Section 4(3) of the 1940 Act or a new
separate account that is operated as a management company.
(b) If the material irreconcilable conflict arises because of LIFE
COMPANY's decision to disregard Participant voting instructions and that
decision represents a minority position or would preclude a majority vote, LIFE
COMPANY may be required, at AVIF's election, to withdraw each Account's
investment in AVIF or any Fund. No charge or penalty will be imposed as a result
of such withdrawal. Any such withdrawal must take place within six (6) months
after AVIF gives notice to LIFE COMPANY that this provision is being
implemented, and until such withdrawal AVIF shall continue to accept and
implement orders by LIFE COMPANY for the purchase and redemption of Shares of
AVIF.
15
<PAGE>
(c) If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to LIFE COMPANY conflicts with
the majority of other state regulators, then LIFE COMPANY will withdraw each
Account's investment in AVIF within six (6) months after AVIF's Board of
Directors informs LIFE COMPANY that it has determined that such decision has
created a material irreconcilable conflict, and until such withdrawal AVIF shall
continue to accept and implement orders by LIFE COMPANY for the purchase and
redemption of Shares of AVIF. No charge or penalty will be imposed as a result
of such withdrawal.
(d) LIFE COMPANY agrees that any remedial action taken by it in resolving
any material irreconcilable conflict will be carried out at its expense and with
a view only to the interests of Participants.
(e) For purposes hereof, a majority of the Disinterested Directors will
determine whether or not any proposed action adequately remedies any material
irreconcilable conflict. In no event, however, will AVIF or any of its
affiliates be required to establish a new funding medium for any Contracts. LIFE
COMPANY will not be required by the terms hereof to establish a new funding
medium for any Contracts if an offer to do so has been declined by vote of a
majority of Participants materially adversely affected by the material
irreconcilable conflict.
5.5 Notice to LIFE COMPANY.
AVIF will promptly make known in writing to LIFE COMPANY the Board of
Directors' determination of the existence of a material irreconcilable conflict,
a description of the facts that give rise to such conflict and the implications
of such conflict.
5.6 Information Requested by Board of Directors.
LIFE COMPANY and AVIF (or its investment adviser) will at least annually
submit to the Board of Directors of AVIF such reports, materials or data as the
Board of Directors may reasonably request so that the Board of Directors may
fully carry out the obligations imposed upon it by the provisions hereof or any
exemptive order granted by the SEC to permit Mixed and Shared Funding, and said
reports, materials and data will be submitted at any reasonable time deemed
appropriate by the Board of Directors. All reports received by the Board of
Directors of potential or existing conflicts, and all Board of Directors actions
with regard to determining the existence of a conflict, notifying Participating
Insurance Companies and Participating Plan of a conflict, and determining
whether any proposed action adequately remedies a conflict, will be properly
recorded in the minutes of the Board of Directors or other appropriate records,
and such minutes or other records will be made available to the SEC upon
request.
16
<PAGE>
5.7 Compliance with SEC Rules.
If, at any time during which AVIF is serving as an investment medium for
variable life insurance Contracts, 1940 Act Rules 6e-3(T) or, if applicable,
6e-2 are amended or Rule 6e-3 is adopted to provide exemptive relief with
respect to Mixed and Shared Funding, AVIF agrees that it will comply with the
terms and conditions thereof and that the terms of this Section 5 shall be
deemed modified if and only to the extent required in order also to comply with
the terms and conditions of such exemptive relief that is afforded by any of
said rules that are applicable.
5.8 Other Requirements.
AVIF will require that each Participating Insurance Company and
Participating Plan enter into an agreement with AVIF that contains in substance
the same provisions as are set forth in Sections 4.1(b), 4.1(e), 4.3(a), 4.4(b),
4.5(a), 5, and 10 of this Agreement.
Section 6. Termination
6.1 Events of Termination.
Subject to Section 6.3 below, this Agreement will terminate as to a Fund:
(a) at the option of either LIFE COMPANY, A I M or the Fund, upon sixty
days advance written notice to the other parties;
(b) at the option of LIFE COMPANY, upon one week advance written notice
to A I M and the Fund, if Fund shares are not available for any reason to meet
the requirement of Contracts as determined by LIFE COMPANY.
(c) at the option of AVIF upon institution of formal proceedings against
LIFE COMPANY or its affiliates by the NASD, the SEC, any state insurance
regulator or any other regulatory body regarding LIFE COMPANY's obligations
under this Agreement or related to the sale of the Contracts, the operation of
each Account, or the purchase of Shares, if, in each case, AVIF reasonably
determines that such proceedings, or the facts on which such proceedings would
be based, have a material likelihood of imposing material adverse consequences
on the Fund with respect to which the Agreement is to be terminated;
(d) at the option of LIFE COMPANY upon institution of formal proceedings
against AVIF, its principal underwriter, or its investment adviser by the NASD,
the SEC, or any state insurance regulator or any other regulatory body regarding
AVIF's obligations under this Agreement or related to the operation or
management of AVIF or the purchase of AVIF Shares, if, in each case, LIFE
COMPANY reasonably determines
17
<PAGE>
that such proceedings, or the facts on which such proceedings would be based,
have a material likelihood of imposing material adverse consequences on LIFE
COMPANY, or the Subaccount corresponding to the Fund with respect to which the
Agreement is to be terminated;
(e) upon the determination of the Accounts to substitute for the Fund's
shares the shares of another investment company in accordance with the terms of
the applicable Contracts. LIFE COMPANY will give 60 days written notice to the
Fund and A I M of any decision to replace the Fund's shares;
(f) upon assignment of this Agreement, unless made with the written
consent of all other parties hereto;
(g) if Fund shares are not registered, issued or sold in conformance with
Federal law or such law precludes the use of Fund shares as an underlying
investment medium for Contracts issued or to be issued by LIFE COMPANY. Prompt
notice shall be given by the appropriate party should such situation occur;
(h) upon termination of the corresponding Subaccount's investment in the
Fund pursuant to Section 5 hereof;
(i) at the option of AVIF if the Contracts issued by LIFE COMPANY cease to
qualify as annuity contracts or life insurance contracts under the Code (other
than by reason of the Fund's noncompliance with Section 817(h) or Subchapter M
of the Code) or if interests in an Account under the Contracts are not
registered, where required, and in all material respects, are not issued or sold
in accordance with any applicable federal state law
(j) upon another Party's material breach of any provision of this
Agreement, provided the breaching party is given five days notice of the breach
and a reasonable opportunity to cure.
6.2 Funds To Remain Available.
Notwithstanding any termination of this Agreement, except for termination
because the Contracts ceased to qualify as annuity contracts or life insurance
contracts under the code (other than by reason of the Fund's noncompliance with
Section 817(h) or Subchapter M of the Code), AVIF will, at the option of LIFE
COMPANY, continue to make available additional shares of the Fund pursuant to
the terms and conditions of this Agreement, for all Contracts in effect on the
effective date of termination of this Agreement (hereinafter referred to as
"Existing Contracts"). Specifically, without limitation, the owners of the
Existing Contracts will be permitted to reallocate investments in the Fund (as
in effect on such date), redeem investments in the Fund and/or invest in the
Fund upon the making of additional purchase payments under the Existing
Contracts. The Parties agree that this Section 6.2 will not apply to any
18
<PAGE>
terminations under Section 5 and the effect of such terminations will be
governed by-Section 5 of this Agreement.
6.3 Survival of Warranties and Indemnifications.
All warranties and indemnifications will survive the termination of this
Agreement to the extent they apply to this Agreement.
Section 7. Parties To Cooperate Respecting Termination
The Parties hereto agree to cooperate and give reasonable assistance to
one another in taking all necessary and appropriate steps for the purpose of
ensuring that an Account owns no Shares of a Fund after the termination date
specified in the notice of termination. Such steps may include combining the
affected Account with another Account, substituting other mutual fund shares for
those of the affected Fund, or otherwise terminating participation by the
Contracts in such Fund.
Section 8. Assignment
This Agreement may not be assigned by any Party, except with the written consent
of each other Party.
Section 9. Notices
All notices and other communications hereunder shall be given or made in writing
and shall be delivered personally, or sent by telex, telecopier or registered or
certified mail, postage prepaid, return receipt requested, or recognized
overnight courier service to the party or parties to whom they are directed at
the following addresses, or at such other addresses as may be designated by
notice from such party to all other parties.
AIM VARIABLE INSURANCE FUNDS, INC.
A I M DISTRIBUTORS, INC.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Facsimile: (713) 993-9185
Attn: Nancy L. Martin, Esq.
AETNA INSURANCE COMPANY OF AMERICA
AETNA LIFE INSURANCE AND ANNUITY COMPANY
151 Farmington Avenue
Hartford, Connecticut 06156
19
<PAGE>
Facsimile: (860) 273-9407
Attn: Julie Rockmore, Counsel
Any notice, demand or other communication given in a manner prescribed in this
section shall be deemed to have been delivered on receipt.
Section 10. Voting Procedures
(a) LIFE COMPANY shall provide pass-through voting privileges on Fund shares
held by registered separate accounts to all Contract owners and
participants or Certificate Holders to the extent the SEC continues to
interpret the 1940 Act as requiring such privileges. LIFE COMPANY shall
ensure that each registered Separate Account calculates voting privileges
in a manner consistent with other insurance companies whose registered
separate accounts invest in the Fund Shares. LIFE COMPANY shall provide
pass-through voting privileges on Fund shares held by unregistered
separate accounts to all Contract owners.
(b) LIFE COMPANY will distribute to Contract owners and participants, or as
appropriate, all proxy material furnished by the Fund and will vote Fund
shares in accordance with instructions received from such Contract owners
and participants. If and to the extent required by law, LIFE COMPANY, with
respect to each group Contract and in each Account shall vote Fund shares
for which no instructions have been received, as well as any shares it
owns, in the same proportion as shares for which such instructions have
been received. LIFE COMPANY and its agents shall not oppose or interfere
with the solicitation of proxies for Fund shares held for such Contract
owners and participants or Certificate Holders.
Section 11. Foreign Tax Credits
AVIF agrees to consult in advance with LIFE COMPANY concerning any
decision to elect or not to elect pursuant to Section 853 of the Code to pass
through the benefit of any foreign tax credits to its shareholders.
Section 12. Indemnification
12.1 General.
(a) LIFE COMPANY agrees to indemnify and hold harmless AVIF and A I M ,
and their directors, officers, employees, agents and each person, if any, who
controls AVIF or A I M within the meaning of the Securities Act of 1933 (the
"1933 Act") against any losses, claims, damages or liabilities to which AVIF or
A I M or any director, officer, employee, agent, or controlling person of AVF or
A I M may become subject, under the
20
<PAGE>
1933 Act or otherwise, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, prospectus or sales literature of LIFE COMPANY, or (ii)
any omission or the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or (iii) conduct, statements or representations (other than statements or
representations contained in the prospectuses or sales literature of AVIF) of
LIFE COMPANY or its agents, with respect to the sale and distribution of
Contracts for which Fund shares are the underlying investment or (iv) any breach
of LIFE COMPANY's representations and warranties under this Agreement. LIFE
COMPANY will reimburse any legal or other expenses reasonably incurred by AVIF
or A I M or any director, officer, employee, agent, investment adviser, or
controlling person of AVIF or A I M in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that LIFE COMPANY will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon (i) an
untrue statement or omission or alleged omission made in such Registration
Statement or prospectus in conformity with written materials furnished to LIFE
COMPANY by AVIF or AIM specifically for use therein or (ii) the willful
misfeasance, bad faith, or gross negligence by AVIF or AIM in the performance of
its duties or AVIF's or A I M's reckless disregard of obligations or duties
under this Agreement or to LIFE COMPANY, whichever is applicable. This indemnity
agreement will be in addition to any liability which LIFE COMPANY may otherwise
have.
(b) AVIF and A I M agree to indemnify and hold harmless LIFE COMPANY and
its directors, officers, employees, agents and each person, if any, who controls
LIFE COMPANY within the meaning of the 1933 Act against any losses, claims,
damages or liabilities to which LIFE COMPANY or any such director, officer,
employee, agent or controlling person may become subject, under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, prospectuses or sales literature of AVIF, or (ii) any omission or the
alleged omission to state therein a material fact required to be stated therein
or material fact required to be stated therein or necessary to make the
statements therein not misleading or (iii) any breach of the Fund's or A I M's
representations and warranties under this Agreement. AVIF and AIM will reimburse
any legal or other expenses reasonably incurred by LIFE COMPANY or any such
director, officer, employee, agent, or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that AVIF and A I M will not be liable in any such case to
the extent that any such loss, claim, damage or liability arises out of or is
based upon (i) an untrue statement or omission or alleged omission made in such
Registration Statement or prospectuses which are in conformity with written
materials furnished to AVIF or A I M by LIFE COMPANY specifically for use
therein, or (ii) the willful misfeasance, bad faith, or gross negligence by LIFE
COMPANY in the performance of its duties or LIFE COMPANY's reckless disregard of
obligations or duties under this Agreement or to A I M or AVIF, whichever is
applicable.
21
<PAGE>
This indemnity agreement will be in addition to any liability which A I M or
AVIF may otherwise have.
(c) Promptly after receipt by an indemnified party hereunder of notice of
the commencement of action, such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party hereunder, notify the
indemnifying Party of the commencement thereof; but the failure so to notify the
indemnifying Party will not relieve it from any liability which it may have to
any indemnified Party otherwise than under this Section 12. In case any such
action is brought against any indemnified Party, and it notifies the
indemnifying Party of the commencement thereof, the indemnifying Party will be
entitled to participate therein and, to the extent that it may wish to, assume
the defense thereof, with counsel satisfactory to such indemnified Party, and
after notice from the indemnifying Party to such indemnified Party of its
election to assume the defense thereof, the indemnifying Party will not be
liable to such indemnified party under this Section 12 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation.
12.2 Effect of Notice.
Any notice given by the indemnifying Party to an indemnified Party
referred to in Sections 12.l(c) or 12.2(d) above of participation in or control
of any action by the indemnifying Party will in no event be deemed to be an
admission by the indemnifying Party of liability, culpability or responsibility,
and the indemnifying Party will remain free to contest liability with respect to
the claim among the Parties or otherwise.
12.3 Successors.
A successor by law of any Party shall be entitled to the benefits of the
indemnification contained in this Section 12.
Section 13. Applicable Law
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with Connecticut law, without regard for that state's
principles of conflict of laws.
Section 14. Execution in Counterparts
This Agreement may be executed simultaneously in two or more counterparts,
each of which taken together will constitute one and the same instrument.
Section 15. Severability
22
<PAGE>
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
Section 16. Rights Cumulative
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, that the Parties are entitled to under federal and state
laws.
Section 17. Headings
The Table of Contents and headings used in this Agreement are for purposes
of reference only and shall not limit or define the meaning of the provisions of
this Agreement.
Section 18. Confidentiality
AVIF acknowledges that the identities of the customers of LIFE COMPANY or
any of its affiliates (collectively, the "LIFE COMPANY Protected Parties" for
purposes of this Section 18), information maintained regarding those customers,
and all computer programs and procedures or other information developed by the
LIFE COMPANY Protected Parties or any of their employees or agents in connection
with LIFE COMPANY's performance of its duties under this Agreement are the
valuable property of the LIFE COMPANY Protected Parties. AVIF agrees that if it
comes into possession of any list or compilation of the identities of or other
information about the LIFE COMPANY Protected Parties' customers, or any other
information or property of the LIFE COMPANY Protected Parties, other than such
information as may be independently developed or compiled by AVIF from
information supplied to it by the LIFE COMPANY Protected Parties' customers who
also maintain accounts directly with AVIF, AVIF will hold such information or
property in confidence and refrain from using, disclosing or distributing any of
such information or other property except: (a) with LIFE COMPANY's prior written
consent (executed by an officer at a Vice President level or higher); or (b) as
required by law or judicial process. LIFE COMPANY acknowledges that the
identities of the customers of AVIF or any of its affiliates (collectively, the
"AVIF Protected Parties' for purposes of this Section 18), information
maintained regarding those customers, and all computer programs and procedures
or other information developed by the AVIF Protected Parties or any of their
employees or agents in connection with AVIF's performance of its duties under
this Agreement are the valuable property of the AVIF Protected Parties. LIFE
COMPANY agrees that if it comes into possession of any list or compilation of
the identities of or other information about the AVIF Protected Parties'
customers or any other information or property of the AVIF Protected Parties,
other than such information as may be independently developed or compiled by
LIFE COMPANY from information supplied to it by the AVIF Protected
23
<PAGE>
Parties' customers who also maintain accounts directly with LIFE COMPANY, LIFE
COMPANY will hold such information or property in confidence and refrain from
using, disclosing or distributing any of such information or other property
except: (a) with AVIF's prior written consent (executed by an officer at a Vice
President level or higher); or (b) as required by law or judicial process. Each
party acknowledges that any breach of the agreements in this Section 18 would
result in immediate and irreparable harm to the other parties for which there
would be no adequate remedy at law and agree that in the event of such a breach,
the other parties will be entitled to equitable relief by way of temporary and
permanent injunctions, as well as such other relief as any court of competent
jurisdiction deems appropriate.
Section 19. Parties to Cooperate
Each party to this Agreement will cooperate with each other party and all
appropriate governmental authorities (including, without limitation, the SEC,
the NASD and state insurance regulators) and will permit each other and such
authorities reasonable access to its books and records (including copies
thereof) in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby.
------------------------------------------------------------
24
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
in their names and, on their behalf by and through their duly authorized
officers signing below.
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: /s/ Nancy L. Martin By: /s/ Robert H. Graham
------------------- --------------------
Name: Nancy L. Martin Name: Robert H. Graham
Title: Assistant Secretary Title: President
A I M DISTRIBUTORS, INC.
Attest: /s/ Nancy L. Martin By: /s/ Michael J. Cemo
------------------- -------------------
Name: Nancy L. Martin Name: Michael J. Cemo
Title: Assistant Secretary Title: President
AETNA INSURANCE COMPANY OF AMERICA, on
behalf of itself and its separate
accounts
Attest: /s/ RoseMarie DeRensis By: /s/ Laurie M. LeBlanc
---------------------- ---------------------
Name: RoseMarie Derensis Name: Laurie M. LeBlanc
Title: Assistant Corporate Title: Pursuant to a Delegation of
Secretary Authority dated August 12, 1998
AETNA LIFE INSURANCE AND ANNUITY
COMPANY, as Principal Underwriter
Attest: /s/ RoseMarie DeRensis By: /s/ Laurie M. LeBlanc
---------------------- ---------------------
Name: RoseMarie Derensis Name: Laurie M. LeBlanc
Title: Assistant Corporate Title: Vice President
Secretary
25
<PAGE>
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
AIM V.I. Capital Appreciation Fund
AIM V.I. Government Securities Fund
AIM V.I. Growth Fund
AIM V.I. Growth and Income Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
Variable Annuity Account I
26
<PAGE>
SCHEDULE B
The following costs, expenses and reimbursements will be paid by the party
indicated:
1. For purposes of Sections 2, 3 and 4, AVIF or A I M shall be liable to LIFE
COMPANY for systems and out of pocket costs incurred by the LIFE COMPANY
in making a Contract owner's, a participant's or beneficiary's account
whole, if such costs or expenses are a result of A I M's or AVIF's failure
to provide timely or correct net asset values (determined in accordance
with the pricing error policies established by AVIF's Board of Directors),
dividend and capital gains or financial information and if such
information is not corrected by 4 p.m. EST of the next business day after
releasing such incorrect information provided the incorrect NAV as well as
the correct NAV for each day that the error occurred is provided. If a
mistake is caused in supplying such information or confirmations, which
results in a determination by the Fund that a material error has occurred
in the calculation of the net asset values of the Fund, the amount
required to make a Contract owner's, Participant's or a beneficiary's
account whole shall be borne by the Fund, regardless of when the error is
corrected.
The following limits shall apply to the collective liabilities of A I M
and/or AVIF, as appropriate to LIFE COMPANY for systems and out of pocket
costs incurred by LIFE COMPANY if such costs or expenses are a result of
the A I M or AVIF's failure to provide LIFE COMPANY with such correct or
timely information: (i) $1,000 per day for each day that incorrect
information provided by either A I M or AVIF is not corrected, if such
period does not include a month-end or a fiscal quarter-end, (ii) $1,500
per day for each day that such incorrect information provided by either A
I M or AVIF is not corrected, if such period does include a month-end or a
fiscal quarter-end, and (iii) up to $50,000 per occurrence in the
aggregate under (i) or (ii) above. Any incorrect information that has as a
common nexus any single error shall be deemed to be one occurrence for
these purposes provided all corrections are provided all corrections are
provided at the same time.
2. For purposes of this Agreement, AVIF or A I M shall pay for the cost of
typesetting and printing periodic fund reports to shareholders,
prospectuses, prospectus supplements, statements of additional information
and other materials that are required by law to be sent to Contract owners
or participants, as well as the cost of distributing such materials. LIFE
COMPANY shall pay for the cost of prospectuses and statements of
additional information and the distribution thereof for prospective
Contract owners or participants. Each party shall be provided with such
supporting data as may reasonably be requested for determining expenses
under this Agreement.
27
<PAGE>
3. AVIF shall pay all expenses in connection with the provision to LIFE
COMPANY of a sufficient quantity of its proxy material under this
Agreement. The cost associated with proxy preparation, group authorization
letters, programming for tabulation and necessary materials (including
postage) will be paid by AVIF.
Dated this 1st day of November, 1999.
AETNA INSURANCE COMPANY OF AMERICA
By: /s/ Laurie M. LeBlanc
---------------------
Name: Laurie M. LeBlanc
-----------------
Title: Pursuant to a Delegation of authority
dated August 12, 1998
-------------------------------------
AIM VARIABLE INSURANCE FUNDS, INC.
By: /s/ Robert H. Graham
--------------------
Name: Robert H. Graham
Title: President
A I M DISTRIBUTORS, INC.
By: /s/ Michael J. Cemo
-------------------
Name: Michael J. Cemo
Title: President
28
S:\AGR\PA-AETNA_AGR.doc
110499 (4) dmr
EX-99-B.8.2
SERVICE AGREEMENT
WITH
INVESTMENT ADVISER
AGREEMENT, effective as of November 1, 1999, between A I M ADVISORS, INC.
("A I M"), a Delaware corporation, and Aetna Insurance Company of America (the
"LIFE COMPANY"), a Connecticut corporation, for the provision of described
administrative services by the LIFE COMPANY in connection with the sale of
shares of the AIM Variable Insurance Funds, Inc. (the "Fund" or "Funds") as
described in the Fund Participation Agreement dated November 1, 1999 between the
LIFE COMPANY, the Funds and A I M (the "Fund Participation Agreement").
WHEREAS, A I M is the investment adviser to A I M Variable Insurance
Funds, Inc. (the "Fund"); and
WHEREAS, A I M has entered into an amended Master Administrative Services
Agreement ("Master Agreement"), dated May 1, 1998, with the Fund pursuant to
which it has agreed to provide, or arrange to provide, certain administrative
services, including such services as may be requested by the Fund's Board of
Directors from time to time; and
WHEREAS, LIFE COMPANY issues group and individual variable life insurance
policies and/or variable annuity contracts and Certificates under the group
contracts (collectively, the "Contracts"); and
WHEREAS, LIFE COMPANY has entered into a participation agreement, dated
November 1, 1999 ("Participation Agreement") with the Fund; pursuant to which
the Fund has agreed to make shares of certain of its portfolio ("Portfolios")
available for purchase by one or more of LIFE COMPANY'S separate accounts or
divisions thereof (each, an "Account"), in connection with the allocation by
Contract owners of purchase payments to corresponding investment options offered
under the Contracts; and
WHEREAS, LIFE COMPANY has no contractual or other legal obligation to
perform the administrative services listed on Schedule A hereto, other than
pursuant to this Agreement and the Participation Agreement; and
WHEREAS, LIFE COMPANY desires to be compensated for providing such
administrative services; and
WHEREAS, A I M desires to retain the administrative services of LIFE
COMPANY and to compensate LIFE COMPANY for providing such administrative
services;
NOW THEREFORE, the Parties agree as follows:
In consideration of their mutual promises, A I M and the LIFE COMPANY agree as
follows:
1. The LIFE COMPANY agrees to provide the following services to A I M:
a. responding to inquiries from owners of the LIFE COMPANY variable
annuity Contracts and variable life insurance policies using the
Funds as an investment vehicle ("Contractholders") regarding the
services performed by the LIFE COMPANY that relate
AIMSERV.DOC
<PAGE>
to the Funds;
b. providing information to A I M and Contractholders with respect to
Fund shares attributable to Contractholder accounts;
c. communicating directly with Contractholders concerning the Funds'
operations;
d. providing such other similar services as A I M may reasonably
request pursuant to A I M's agreement with the Funds to the extent
permitted under applicable federal and state requirements.
2. a. Administrative services to Contractholders owners and participants
shall be the responsibility of LIFE COMPANY and shall not be the
responsibility of the Fund or A I M. To compensate LIFE COMPANY for
its costs, A I M agrees to pay to the LIFE COMPANY and LIFE COMPANY
agrees to accept as full compensation for all services rendered
hereunder an amount described in Schedule B attached hereto and made
a part of this Agreement as may be amended from time to time with
the mutual consent of the parties hereto.
b. The parties agree that A I M's payments to LIFE COMPANY are for
administrative services only and do not constitute payment in any
manner for investment advisory services or for costs of
distribution. LIFE COMPANY represents and warrants that the fees to
be paid by A I M for services to be rendered by LIFE COMPANY
pursuant to the terms of this Agreement are to compensate the LIFE
COMPANY for providing administrative services relating to the Fund
or Fund Shares and are not designed to exceed the reasonable costs
of such services and are not intended to reimburse or compensate
LIFE COMPANY for services paid for by other fees under the
Contracts.
c. For the purposes of computing the administrative fee reimbursement
contemplated by this Section 2, the average aggregate amount
invested by the LIFE COMPANY over a one month period shall be
computed by totaling LIFE COMPANY's aggregate investment (share net
asset value multiplied by total number of shares held by the LIFE
COMPANY) on each business day during the month and dividing by the
total number of business days during each month.
d. The Fund will calculate the reimbursement of administrative expenses
at the end of each month and will make such reimbursement to the
LIFE COMPANY within 30 days thereafter. The reimbursement payment
will be accompanied by a statement showing the calculation of the
monthly amounts payable by A I M and such other supporting data as
may be reasonably requested by LIFE COMPANY. Payment will be wired
by A I M to an account designated by the LIFE COMPANY.
3. LIFE COMPANY agrees to indemnify and hold harmless A I M and its
directors, officers, and employees from any and all loss, liability and
expense resulting from any gross negligence or willful wrongful act of the
LIFE COMPANY under this Agreement or a breach of a material provision of
this Agreement, except to the extent such loss, liability or expense is
the result of A I M's own willful misfeasance, bad faith or gross
negligence in the performance of its duties.
<PAGE>
4. A I M agrees to indemnify and hold harmless the LIFE COMPANY and its
directors, officers, and employees from any and all loss, liability and
expense resulting from any gross negligence or willful wrongful act of
A I M under this Agreement or a breach of a material provision under this
Agreement, except to the extent such loss, liability or expense is the
result of the LIFE COMPANY's own willful misfeasance, bad faith or gross
negligence in the performance of its duties.
5. Either party may terminate this Agreement, without penalty, (i) on sixty
(60) days written notice to the other party, for any cause or without
cause, or (ii) on reasonable notice to the other party, if it is not
permissible to continue the arrangement described herein under laws, rules
or regulations applicable to either party or the Fund, or if the
Participation Agreement is terminated.
6. The terms of this arrangement will be held confidential by each party
except to the extent that either party or its counsel may deem it
necessary to disclose this arrangement.
7. This Agreement represents the entire Agreement of the parties on the
subject matter hereof and it cannot be amended or modified except in
writing, signed by the parties. This Agreement may be executed in one or
more separate counterparts, all of which, when taken together, shall
constitute one and the same Agreement
All notices and other communications hereunder shall be given or made in writing
and shall be delivered personally, or sent by telex, telecopier or registered or
certified mail, postage prepaid, return receipt requested, or recognized
overnight courier service to the party to whom they are directed at the
following addresses, or at such other addresses as may be designated by notice
from such party to the other party.
To LIFE COMPANY:
Aetna Insurance Company of America
151 Farmington Avenue
Hartford, Connecticut 06156
Attention: Julie Rockmore, Counsel
To ADVISER:
A I M ADVISORS, INC.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Facsimile: (713)993-9185
Attention: Nancy Martin, Esq.
<PAGE>
Any notice, demand or other communication given in a manner prescribed in this
Section shall be deemed to have been delivered on receipt.
IN WITNESS WHEREOF, the parties to this Agreement have caused this Agreement to
be executed by their authorized officers as of the day and year first above
written.
A I M ADVISORS, INC.
By: /s/ Robert H. Graham
--------------------
Name: Robert H. Graham
Title: President
AETNA INSURANCE COMPANY OF
AMERICA
By: /s/ Laurie M. LeBlanc
---------------------
Name: Laurie M. LeBlanc
Pursuant to a Delegation of Authority
dated August 12, 1998
<PAGE>
Schedule A
In consideration of the services provided by LIFE COMPANY, A I M agrees to pay
LIFE COMPANY on a quarterly basis an amount equal to 15 basis points (0.15%)
per annum on the first $50 million of the daily average aggregate amount
invested by LIFE COMPANY in each Fund under the Fund Participation Agreement,
and 20 basis points (0.20%) per annum on the next $200 million of the daily
average aggregate amount invested by LIFE COMPANY in each Fund under the Fund
Participation Agreement and 25 basis points (0.25%) per annum on the total daily
average aggregate amount invested by LIFE COMPANY in each Fund under the Fund
Participation Agreement, in excess of $250 million.
Dated this 1st day of November 1999.
A I M ADVISORS, INC.
By: /s/ Robert H. Graham
--------------------
Name: Robert H. Graham
Title: President
AETNA INSURANCE COMPANY OF
AMERICA
By: /s/ Laurie M. LeBlanc
---------------------
Name: Laurie M. LeBlanc
Pursuant to a Delegation of Authority
dated August 12, 1998
AIMSERV.DOC
Aetna, Inc.
151 Farmington Avenue
Hartford, CT 06156-8975
[Aetna Logo]
Julie E. Rockmore
Counsel
AFS Law, TS31
December 15, 1999 (860) 273-4686
Fax: (860) 273-0385
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: Aetna Insurance Company of America and its Variable Annuity Account 1
Pre-Effective Amendment No. 1 to Registration Statement on Form N-4
Prospectus Title: Retirement Options for Education Institutions
File Nos. 333-87131 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 or those for whom I have supervisory
responsibility, have reviewed the N-4 Registration Statement Pre-Effective
Amendment No. 1. 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.
Very truly yours,
/s/ Julie E. Rockmore
- -------------------------
Julie E. Rockmore
Exhibit 99.B.10
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 report dated February 26, 1999, relating to the
financial statements of the Aetna Variable Annuity Account I and our report
dated March 24, 1999 relating to the financial statements of Aetna Insurance
Company of America, which are included in this Amendment No. 1 to Registration
Statement (File no. 333-87131) and to the references to our firm under the
heading "Independent Auditors" in the Statement of Additional Information.
/s/ KPMG LLP
Hartford, Connecticut
December 15, 1999
Exhibit 99.B.13
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, 1998 through December 31, 1998; the "5-year rate" is for
the period January 1, 1994 through December 31, 1998; the "10-year rate" is for
the period January 1, 1988 through December 31, 1998. "Since inception" figures
assume the redemption on December 31, 1977 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, 1998 through December 31, 1998; the
"3-year rate" is for the period January 1, 1995 through December 31, 1998; the
"5-year rate" is for the period January 1, 1994 through December 31, 1998; and
the "10-year rate" is for the period January 1, 1988 through December 31, 1998.
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>
- -------------------------------------------------------------------------------------------------------------------
One Year
Fund Name Maintenance As of Date AUV % -
Fee Fund Inc
Date
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aetna Ascent VP 0.00% 12/31/1998 3.27%
Aetna Balanced VP, Inc. 0.00% 12/31/1998 15.77%
Aetna Bond VP 0.00% 12/31/1998 7.07%
Aetna Crossroads VP 0.00% 12/31/1998 4.86%
Aetna Growth and Income VP 0.00% 12/31/1998 13.35%
Aetna Growth VP 0.00% 12/31/1998 36.31%
Aetna High Yield VP 0.00% 12/31/1998 (1.26%)
Aetna Index Plus Large Cap VP 0.00% 12/31/1998 30.29%
Aetna Index Plus Mid Cap VP 0.00% 12/31/1998 23.06%
Aetna Index Plus Small Cap VP 0.00% 12/31/1998 (2.34%)
Aetna International VP 0.00% 12/31/1998 17.74%
Aetna Legacy VP 0.00% 12/31/1998 5.88%
Aetna Money Market VP 0.00% 12/31/1998 4.41%
Aetna Real Estate Securities VP 0.00% 12/31/1998 (13.71%)
Aetna Small Company VP 0.00% 12/31/1998 0.09%
Aetna Value Opportunity VP 0.00% 12/31/1998 21.18%
AIM V.I. Capital Appreciation Fund 0.00% 12/31/1998 18.13%
AIM V.I. Growth and Income Fund 0.00% 12/31/1998 26.43%
AIM V.I. Growth Fund 0.00% 12/31/1998 32.80%
AIM V.I. Value Fund 0.00% 12/31/1998 31.10%
Calvert Social Balanced Portfolio 0.00% 12/31/1998 15.12%
Fidelity VIP Equity-Income Portfolio 0.00% 12/31/1998 10.52%
Fidelity VIP Growth Portfolio 0.00% 12/31/1998 38.10%
Fidelity VIP II Contrafund Portfolio 0.00% 12/31/1998 28.69%
Fidelity VIP Overseas Portfolio 0.00% 12/31/1998 11.63%
Janus Aspen Series Aggressive Growth Portfolio 0.00% 12/31/1998 32.92%
Janus Aspen Series Balanced Portfolio 0.00% 12/31/1998 32.95%
Janus Aspen Series Flexible Income Portfolio 0.00% 12/31/1998 8.02%
Janus Aspen Series Growth Portfolio 0.00% 12/31/1998 34.31%
Janus Aspen Series Worldwide Growth Portfolio 0.00% 12/31/1998 27.64%
Oppenheimer Global Securities Fund/VA 0.00% 12/31/1998 12.97%
Oppenheimer Strategic Bond Fund/VA 0.00% 12/31/1998 1.87%
PPI MFS Emerging Equities / Alger Amer Small Cap (3) 0.00% 12/31/1998 28.38%
PPI MFS Emerging Equities Portfolio 0.00% 12/31/1998 28.38%
PPI MFS Research Growth / Amer Century VP Cap Apprec (4) 0.00% 12/31/1998 21.78%
PPI MFS Research Growth Portfolio 0.00% 12/31/1998 21.78%
PPI MFS Value Equity / Neuberger Berman AMT Growth (5) 0.00% 12/31/1998 25.48%
PPI MFS Value Equity Portfolio 0.00% 12/31/1998 25.48%
PPI Scudder International / Scudder VLIF International (6) 0.00% 12/31/1998 17.91%
PPI Scudder International Growth Portfolio 0.00% 12/31/1998 17.91%
PPI T. Rowe Price Growth Equity / Alger Amer Growth (7) 0.00% 12/31/1998 26.33%
PPI T. Rowe Price Growth Equity Portfolio 0.00% 12/31/1998 26.33%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Three Five Year Ten Year Inception
Year AUV AUV % - AUV % - AUV % -
% - Fund Fund Inc Fund Inc Fund Inc
Inc Date Date Date Date
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aetna Ascent VP 14.46% 15.40%
Aetna Balanced VP, Inc. 16.98% 14.75% 11.85%
Aetna Bond VP 5.59% 5.58% 8.19%
Aetna Crossroads VP 12.81% 13.62%
Aetna Growth and Income VP 21.55% 18.19% 15.46%
Aetna Growth VP 34.02%
Aetna High Yield VP 0.15%
Aetna Index Plus Large Cap VP 32.00%
Aetna Index Plus Mid Cap VP 26.08%
Aetna Index Plus Small Cap VP 1.77%
Aetna International VP 20.34%
Aetna Legacy VP 10.71% 11.50%
Aetna Money Market VP 4.38% 4.24% 4.70%
Aetna Real Estate Securities VP (10.20%)
Aetna Small Company VP 16.05%
Aetna Value Opportunity VP 29.82%
AIM V.I. Capital Appreciation Fund 15.62% 16.08% 17.60%
AIM V.I. Growth and Income Fund 23.18% 21.29%
AIM V.I. Growth Fund 24.95% 20.24% 19.68%
AIM V.I. Value Fund 22.29% 20.51% 20.70%
Calvert Social Balanced Portfolio 15.12% 13.44% 11.76%
Fidelity VIP Equity-Income Portfolio 16.62% 17.60% 14.48%
Fidelity VIP Growth Portfolio 24.23% 20.53% 18.23%
Fidelity VIP II Contrafund Portfolio 23.81% 27.37%
Fidelity VIP Overseas Portfolio 11.36% 8.61% 8.99%
Janus Aspen Series Aggressive Growth Portfolio 16.58% 18.16% 20.71%
Janus Aspen Series Balanced Portfolio 22.73% 17.93% 18.31%
Janus Aspen Series Flexible Income Portfolio 8.92% 9.23% 8.77%
Janus Aspen Series Growth Portfolio 24.16% 20.21% 19.68%
Janus Aspen Series Worldwide Growth Portfolio 25.40% 20.11% 22.80%
Oppenheimer Global Securities Fund/VA 16.88% 8.57% 11.37%
Oppenheimer Strategic Bond Fund/VA 6.75% 5.76% 5.72%
PPI MFS Emerging Equities / Alger Amer Small Cap (3) 12.71% 14.14% 19.80%
PPI MFS Emerging Equities Portfolio 24.34%
PPI MFS Research Growth / Amer Century VP Cap Apprec (4) 3.48% 7.08% 10.15%
PPI MFS Research Growth Portfolio 17.70%
PPI MFS Value Equity / Neuberger Berman AMT Growth (5) 19.25% 15.78% 13.58%
PPI MFS Value Equity Portfolio 24.80%
PPI Scudder International / Scudder VLIF International (6) 13.07% 9.32% 10.90%
PPI Scudder International Growth Portfolio 17.67%
PPI T. Rowe Price Growth Equity / Alger Amer Growth (7) 21.64% 19.54% 19.28%
PPI T. Rowe Price Growth Equity Portfolio 26.25%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Three
One Year Year Five Year Ten Year Inception
Product Product Product Product Product
% w/out % w/out % w/out % w/out % w/out
DSC - SA DSC - SA DSC- SA DSC - SA DSC - SA
Inc Date Inc Date Inc Date Inc Date Inc Date
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Aetna Ascent VP 3.27% 15.11%
Aetna Balanced VP, Inc. 15.77% 17.17%
Aetna Bond VP 7.07% 5.55%
Aetna Crossroads VP 4.86% 13.44%
Aetna Growth and Income VP 13.35% 20.89%
Aetna Growth VP 36.31% 35.70%
Aetna High Yield VP (7.44%)
Aetna Index Plus Large Cap VP 30.29% 31.42%
Aetna Index Plus Mid Cap VP 7.93%
Aetna Index Plus Small Cap VP (11.67%)
Aetna International VP (3.63%)
Aetna Legacy VP 5.88% 10.56%
Aetna Money Market VP 4.41% 4.37%
Aetna Real Estate Securities VP (12.14%)
Aetna Small Company VP 0.09% 12.72%
Aetna Value Opportunity VP 21.18% 27.22%
AIM V.I. Capital Appreciation Fund
AIM V.I. Growth and Income Fund
AIM V.I. Growth Fund
AIM V.I. Value Fund
Calvert Social Balanced Portfolio 15.12% 15.23%
Fidelity VIP Equity-Income Portfolio 10.52% 16.03%
Fidelity VIP Growth Portfolio 38.10% 24.39%
Fidelity VIP II Contrafund Portfolio 28.69% 24.33%
Fidelity VIP Overseas Portfolio 11.63% 11.07%
Janus Aspen Series Aggressive Growth Portfolio 32.92% 14.45%
Janus Aspen Series Balanced Portfolio 32.95% 23.32%
Janus Aspen Series Flexible Income Portfolio 8.02% 10.32%
Janus Aspen Series Growth Portfolio 34.31% 23.01%
Janus Aspen Series Worldwide Growth Portfolio 27.64% 24.96%
Oppenheimer Global Securities Fund/VA 12.97% 13.63%
Oppenheimer Strategic Bond Fund/VA 1.87% 4.69%
PPI MFS Emerging Equities / Alger Amer Small Cap (3) 28.38% 13.00%
PPI MFS Emerging Equities Portfolio 28.38% 24.34%
PPI MFS Research Growth / Amer Century VP Cap Apprec (4) 21.78% 3.94%
PPI MFS Research Growth Portfolio 21.78% 17.70%
PPI MFS Value Equity / Neuberger Berman AMT Growth (5)
PPI MFS Value Equity Portfolio 25.48% 24.80%
PPI Scudder International / Scudder VLIF International (6)
PPI Scudder International Growth Portfolio 17.91% 17.67%
PPI T. Rowe Price Growth Equity / Alger Amer Growth (7) 26.33% 21.04%
PPI T. Rowe Price Growth Equity Portfolio 26.33% 26.25%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Separate Fund Sep
Account Inception Acct Free DSC
Inception Date Charge Out Method
Date
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Ascent VP 07/31/1996 07/05/1995 100 0.00% C
Aetna Balanced VP, Inc. 02/29/1996 04/03/1989 100 0.00% C
Aetna Bond VP 01/31/1996 05/15/1973 100 0.00% C
Aetna Crossroads VP 07/31/1996 07/05/1995 100 0.00% C
Aetna Growth and Income VP 01/31/1996 05/01/1975 100 0.00% C
Aetna Growth VP 05/30/1997 12/13/1996 100 0.00% C
Aetna High Yield VP 05/04/1998 12/10/1997 100 0.00% C
Aetna Index Plus Large Cap VP 10/31/1996 09/16/1996 100 0.00% C
Aetna Index Plus Mid Cap VP 05/04/1998 12/16/1997 100 0.00% C
Aetna Index Plus Small Cap VP 05/04/1998 12/19/1997 100 0.00% C
Aetna International VP 05/05/1998 12/22/1997 100 0.00% C
Aetna Legacy VP 05/31/1996 07/05/1995 100 0.00% C
Aetna Money Market VP 02/29/1996 08/01/1975 100 0.00% C
Aetna Real Estate Securities VP 05/05/1998 12/15/1997 100 0.00% C
Aetna Small Company VP 05/30/1997 12/27/1996 100 0.00% C
Aetna Value Opportunity VP 05/30/1997 12/13/1996 100 0.00% C
AIM V.I. Capital Appreciation Fund 05/05/1993 100 0.00% C
AIM V.I. Growth and Income Fund 05/02/1994 100 0.00% C
AIM V.I. Growth Fund 05/05/1993 100 0.00% C
AIM V.I. Value Fund 05/05/1993 100 0.00% C
Calvert Social Balanced Portfolio 11/28/1997 09/02/1986 100 0.00% C
Fidelity VIP Equity-Income Portfolio 01/31/1996 10/09/1986 100 0.00% C
Fidelity VIP Growth Portfolio 01/31/1996 10/09/1986 100 0.00% C
Fidelity VIP II Contrafund Portfolio 03/29/1996 01/03/1995 100 0.00% C
Fidelity VIP Overseas Portfolio 03/29/1996 02/13/1987 100 0.00% C
Janus Aspen Series Aggressive Growth Portfolio 03/29/1996 09/13/1993 100 0.00% C
Janus Aspen Series Balanced Portfolio 03/29/1996 09/13/1993 100 0.00% C
Janus Aspen Series Flexible Income Portfolio 04/30/1996 09/13/1993 100 0.00% C
Janus Aspen Series Growth Portfolio 03/29/1996 09/13/1993 100 0.00% C
Janus Aspen Series Worldwide Growth Portfolio 01/31/1996 09/13/1993 100 0.00% C
Oppenheimer Global Securities Fund/VA 05/30/1997 11/12/1990 100 0.00% C
Oppenheimer Strategic Bond Fund/VA 05/30/1997 05/03/1993 100 0.00% C
PPI MFS Emerging Equities / Alger Amer Small Cap (3) 01/31/1996 09/21/1988 100 0.00% C
PPI MFS Emerging Equities Portfolio 11/28/1997 11/28/1997 100 0.00% C
PPI MFS Research Growth / Amer Century VP Cap Apprec (4) 03/30/1996 11/20/1987 100 0.00% C
PPI MFS Research Growth Portfolio 11/28/1997 11/28/1997 100 0.00% C
PPI MFS Value Equity / Neuberger Berman AMT Growth (5) 09/10/1984 100 0.00% C
PPI MFS Value Equity Portfolio 11/28/1997 11/28/1997 100 0.00% C
PPI Scudder International / Scudder VLIF International (6) 05/01/1987 100 0.00% C
PPI Scudder International Growth Portfolio 11/28/1997 11/28/1997 100 0.00% C
PPI T. Rowe Price Growth Equity / Alger Amer Growth (7) 01/31/1996 01/09/1989 100 0.00% C
PPI T. Rowe Price Growth Equity Portfolio 11/28/1997 11/28/1997 100 0.00% C
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Separate
One Three Five Ten Fund Account
Year Year Year Year Inception Inception
DSC DSC DSC DSC DSC DSC
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aetna Ascent VP 0.00% 0.00% 0.00% 0.00% 0.00% 0%
Aetna Balanced VP, Inc. 0.00% 0.00% 0.00% 0.00% 0.00% 0%
Aetna Bond VP 0.00% 0.00% 0.00% 0.00% 0%
Aetna Crossroads VP 0.00% 0.00% 0.00% 0.00% 0.00% 0%
Aetna Growth and Income VP 0.00% 0.00% 0.00% 0.00% 0%
Aetna Growth VP 0.00% 0.00% 0.00% 0.00% 0.00% 0%
Aetna High Yield VP 0.00% 0.00% 0.00% 0.00% 0.00% 0%
Aetna Index Plus Large Cap VP 0.00% 0.00% 0.00% 0.00% 0.00% 0%
Aetna Index Plus Mid Cap VP 0.00% 0.00% 0.00% 0.00% 0.00% 0%
Aetna Index Plus Small Cap VP 0.00% 0.00% 0.00% 0.00% 0.00% 0%
Aetna International VP 0.00% 0.00% 0.00% 0.00% 0.00% 0%
Aetna Legacy VP 0.00% 0.00% 0.00% 0.00% 0.00% 0%
Aetna Money Market VP 0.00% 0.00% 0.00% 0.00% 0%
Aetna Real Estate Securities VP 0.00% 0.00% 0.00% 0.00% 0.00% 0%
Aetna Small Company VP 0.00% 0.00% 0.00% 0.00% 0.00% 0%
Aetna Value Opportunity VP 0.00% 0.00% 0.00% 0.00% 0.00% 0%
AIM V.I. Capital Appreciation Fund 0.00% 0.00% 0.00% 0.00% 0.00%
AIM V.I. Growth and Income Fund 0.00% 0.00% 0.00% 0.00% 0.00%
AIM V.I. Growth Fund 0.00% 0.00% 0.00% 0.00% 0.00%
AIM V.I. Value Fund 0.00% 0.00% 0.00% 0.00% 0.00%
Calvert Social Balanced Portfolio 0.00% 0.00% 0.00% 0.00% 0%
Fidelity VIP Equity-Income Portfolio 0.00% 0.00% 0.00% 0.00% 0%
Fidelity VIP Growth Portfolio 0.00% 0.00% 0.00% 0.00% 0%
Fidelity VIP II Contrafund Portfolio 0.00% 0.00% 0.00% 0.00% 0.00% 0%
Fidelity VIP Overseas Portfolio 0.00% 0.00% 0.00% 0.00% 0%
Janus Aspen Series Aggressive Growth Portfolio 0.00% 0.00% 0.00% 0.00% 0.00% 0%
Janus Aspen Series Balanced Portfolio 0.00% 0.00% 0.00% 0.00% 0.00% 0%
Janus Aspen Series Flexible Income Portfolio 0.00% 0.00% 0.00% 0.00% 0.00% 0%
Janus Aspen Series Growth Portfolio 0.00% 0.00% 0.00% 0.00% 0.00% 0%
Janus Aspen Series Worldwide Growth Portfolio 0.00% 0.00% 0.00% 0.00% 0.00% 0%
Oppenheimer Global Securities Fund/VA 0.00% 0.00% 0.00% 0.00% 0.00% 0%
Oppenheimer Strategic Bond Fund/VA 0.00% 0.00% 0.00% 0.00% 0.00% 0%
PPI MFS Emerging Equities / Alger Amer Small Cap (3) 0.00% 0.00% 0.00% 0.00% 0%
PPI MFS Emerging Equities Portfolio 0.00% 0.00% 0.00% 0.00% 0.00% 0%
PPI MFS Research Growth / Amer Century VP Cap Apprec (4) 0.00% 0.00% 0.00% 0.00% 0%
PPI MFS Research Growth Portfolio 0.00% 0.00% 0.00% 0.00% 0.00% 0%
PPI MFS Value Equity / Neuberger Berman AMT Growth (5) 0.00% 0.00% 0.00% 0.00%
PPI MFS Value Equity Portfolio 0.00% 0.00% 0.00% 0.00% 0.00% 0%
PPI Scudder International / Scudder VLIF International (6) 0.00% 0.00% 0.00% 0.00%
PPI Scudder International Growth Portfolio 0.00% 0.00% 0.00% 0.00% 0.00% 0%
PPI T. Rowe Price Growth Equity / Alger Amer Growth (7) 0.00% 0.00% 0.00% 0.00% 0.00% 0%
PPI T. Rowe Price Growth Equity Portfolio 0.00% 0.00% 0.00% 0.00% 0.00% 0%
</TABLE>
EXHIBIT 99-B.14.1
POWER OF ATTORNEY
I, the undersigned Director and President of Aetna Insurance Company of America,
hereby constitute and appoint Julie E. Rockmore, Kirk P. Wickman, J. Neil
McMurdie and Michael A. Pignatella, 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
333-87131
Registration Statements filed under the Investment Company Act of 1940:
811-8582
hereby ratifying and confirming on this 2nd day of December, 1999, 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
<PAGE>
POWER OF ATTORNEY
I, the undersigned Director of Aetna Insurance Company of America, hereby
constitute and appoint Julie E. Rockmore, Kirk P. Wickman, J. Neil McMurdie and
Michael A. Pignatella, 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
333-87131
Registration Statements filed under the Investment Company Act of 1940:
811-8582
hereby ratifying and confirming on this 2nd day of December, 1999, 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
<PAGE>
POWER OF ATTORNEY
I, the undersigned Director of Aetna Insurance Company of America, hereby
constitute and appoint Julie E. Rockmore, Kirk P. Wickman, J. Neil McMurdie and
Michael A. Pignatella, 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
333-87131
Registration Statements filed under the Investment Company Act of 1940:
811-8582
hereby ratifying and confirming on this 2nd day of December, 1999, 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
<PAGE>
POWER OF ATTORNEY
I, the undersigned Vice President, Corporate Controller and Assistant Treasurer
of Aetna Insurance Company of America, hereby constitute and appoint Julie E.
Rockmore, Kirk P. Wickman, J. Neil McMurdie, Michael A. Pignatella, 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
333-87131
Registration Statements filed under the Investment Company Act of 1940:
811-8582
hereby ratifying and confirming on this 2nd day of December, 1999, 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
Vice President,
Corporate Controller and
Assistant Treasurer
<PAGE>
POWER OF ATTORNEY
I, the undersigned Director of Aetna Insurance Company of America, hereby
constitute and appoint Julie E. Rockmore, Kirk P. Wickman, J. Neil McMurdie and
Michael A. Pignatella, 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
333-87131
Registration Statements filed under the Investment Company Act of 1940:
811-8582
hereby ratifying and confirming on this 2nd day of December, 1999, my signature
as it may be signed by my said attorneys to any such Registration Statements and
any and all amendments thereto.
Signature/Title
---------------
/s/ David W. O'Leary
- --------------------------------------------------------
David W. O'Leary
Director
<PAGE>
POWER OF ATTORNEY
I, the undersigned Director of Aetna Insurance Company of America, hereby
constitute and appoint Julie E. Rockmore, Kirk P. Wickman, J. Neil McMurdie and
Michael A. Pignatella, 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
333-87131
Registration Statements filed under the Investment Company Act of 1940:
811-8582
hereby ratifying and confirming on this 2nd day of December, 1999, 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/ Steven A. Haxton
- --------------------------------------------------------
Steven A. Haxton
Director
