As filed with the Securities and Exchange File No. 333-87131
Commission on April 13, 2000 File No. 811-8582
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
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POST-EFFECTIVE AMENDMENT NO. 1 TO
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
and Amendment to
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
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Variable Annuity Account I of Aetna Insurance Company of America
Aetna Insurance Company of America
5100 West Lemon Street, Suite 213, Tampa, Florida 33609
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)
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It is proposed that this filing will become effective:
|_| immediately upon filing pursuant to paragraph (b) of Rule 485
|X| on May 1, 2000 pursuant to paragraph (b) of Rule 485
<PAGE>
VARIABLE ANNUITY ACCOUNT I
CROSS REFERENCE SHEET
Pursuant to Rule 481(a)
<TABLE>
<CAPTION>
FORM N-4 LOCATION - PROSPECTUS
ITEM NO. PART A (PROSPECTUS) DATED MAY 1, 2000
<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
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>
LOCATION - STATEMENT OF
FORM N-4 PART B (STATEMENT OF ADDITIONAL INFORMATION
ITEM NO. ADDITIONAL INFORMATION) DATED MAY 1, 2000
<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 - May 1, 2000
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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).
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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
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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 upon the performance and fees of its underlying fund. You
do not invest directly in or hold shares of the funds.
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.
Risks Associated with Investing in the Funds. Information about the risks of
investing in the funds is located in the "Investment Options" section of this
prospectus at page 10 and in each fund prospectus. Read this prospectus in
conjunction with the fund prospectuses, and retain the fund prospectuses for
future reference.
Getting Additional Information. You may obtain the May 1, 2000, Statement of
Additional Information (SAI) by indicating your request on your enrollment
materials or calling the Company at 1-800-262-3862. 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, www.sec.gov and copies of this information
may also be obtained, after paying a duplicating fee, by contacting the SEC
Public Reference Room electronically at the following e-mail address:
[email protected] or by writing the Commission's Public Reference Section,
Washington, D.C. 20549-0102. This information can be reviewed and copied at the
Commission's Public Reference Room in Washington, D.C. and information on the
operation of the Public Reference Room may be obtained by calling
1-202-942-8090. The SAI table of contents is listed on page 37 of this
prospectus. The SAI is incorporated into this prospectus by reference.
(1) This fund is available to the general public. See "Additional Risks of
Investing in the Fund."
[Begin sidebar]
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 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 Small Company VP
Aetna Technology 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
DEM[RegTM] Equity (Institutional Shares)(1)
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[RegTM]
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, Inc. (PPI) MFS Capital Opportunities Portfolio (formerly PPI
MFS Value Equity Portfolio)
Portfolio Partners, Inc. (PPI) MFS Emerging Equities Portfolio
Portfolio Partners, Inc. (PPI) MFS Research Growth Portfolio
Portfolio Partners, Inc. (PPI) Scudder International Growth Portfolio
Portfolio Partners, Inc. (PPI) T. Rowe Price Growth Equity Portfolio
[End sidebar]
<PAGE>
Prospectus - May 1, 2000 (continued)
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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
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<TABLE>
<S> <C>
Contract Overview: Who's Who; Contract Facts .............. 4
The Contract and Your Retirement Plan (sidebar)
Retirement Plan (sidebar)
Plan Type (sidebar)
Contract Rights (sidebar)
Contract Phases: Accumulation Phase, Income Phase ......... 5
Questions: Contacting the Company (sidebar)
Sending Forms and Written Requests in Good Order (sidebar)
</TABLE>
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<TABLE>
<S> <C>
Fee Table ................................... 6
Condensed Financial Information ............. 10
Investment Options .......................... 10
Transfers ................................... 12
Contract Purchase and Participation ......... 13
Contract Ownership and Rights ............... 14
Right to Cancel ............................. 14
Fees ........................................ 15
Your Account Value .......................... 17
Withdrawals ................................. 19
Systematic Distribution Options ............. 20
Death Benefit ............................... 21
The Income Phase ............................ 23
Taxation .................................... 27
Other Topics ................................ 32
</TABLE>
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 -- Intent to Confirm Quarterly
<TABLE>
<S> <C>
Contents of the Statement of Additional Information ......... 37
Appendix I -- Fixed Plus Account ............................ 38
Appendix II -- Employee Appointment of Employer as Agent
Under an Annuity Contract .................................. 40
Appendix III -- Fund Descriptions ........................... 41
</TABLE>
3
<PAGE>
[Begin sidebar]
The Contract and Your
Retirement Plan
Retirement Plan (plan): A plan sponsor has established a 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 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.
[End sidebar]
Contract Overview
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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 "The 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
"The 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 not generally 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 may be valuable to you.
You should discuss your alternatives with your financial representative.
Amounts you receive in a distribution will be generally included in your gross
income and will be subject to taxation. Tax penalties may apply in
some circumstances. See "Taxation."
4
<PAGE>
Contract Phases
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[Flow chart of Steps 1, 2, and 3 listed on this page]
I. The Accumulation Phase (accumulating retirement benefits)
STEP 1: You or the contract holder provide Aetna Insurance Company of America
with your completed enrollment materials.
According to the plan, we set up one or more accounts for you. We may set up
account(s) for employer contributions and/or for contributions from your
salary.
STEP 2: The contract holder, or you if permitted by your plan, directs us to
invest your account dollars in any of the following:
(a) Fixed Interest Option
account
(b) Variable Investment Options. (The variable investment options are the
subaccounts of Variable Annuity Account I. Each one invests in a specific
mutual fund.)
STEP 3: The subaccount(s) selected purchases shares of its corresponding fund.
II. The Income Phase The contract offers several payment options. See "The
Income Phase." In general, you may:
> Receive income phase payments over a lifetime or for a specified period;
> Receive income phase payments monthly, quarterly, semi-annually or annually;
> Select an option that provides a death benefit to beneficiaries; and
> Select fixed income phase payments or payments that vary based on the
performance of the variable investment options you select.
[Begin sidebar]
Questions: Contacting the Company. Contact your local representative or write
or call the Service Center:
Aetna Financial Services
Annuity Services
151 Farmington Avenue
Hartford, CT 06156-1277
1-800-262-3862.
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.
[End sidebar]
5
<PAGE>
[Begin sidebar]
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; and
>Premium and Other Taxes.
See "The Income Phase" for:
>Fees during the income phase.
[End sidebar]
Fee Table
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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 "The 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 waived, reduced or eliminated in
certain circumstances. 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."
6
<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, 1999.
<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) 0.60% 0.14% 0.74% 0.00% 0.74%
Aetna Balanced VP, Inc. 0.50% 0.09% 0.59% -- 0.59%
Aetna Bond VP 0.40% 0.09% 0.49% -- 0.49%
Aetna Crossroads VP(2) 0.60% 0.14% 0.74% 0.04% 0.70%
Aetna Growth VP(2) 0.60% 0.11% 0.71% 0.00% 0.71%
Aetna Growth and Income VP 0.50% 0.08% 0.58% -- 0.58%
Aetna Index Plus Large Cap VP(2) 0.35% 0.10% 0.45% 0.00% 0.45%
Aetna Index Plus Mid Cap VP(2) 0.40% 0.40% 0.80% 0.20% 0.60%
Aetna Index Plus Small Cap VP(2) 0.40% 0.50% 0.90% 0.30% 0.60%
Aetna International VP(2) 0.85% 0.77% 1.62% 0.47% 1.15%
Aetna Legacy VP(2) 0.60% 0.15% 0.75% 0.10% 0.65%
Aetna Money Market VP 0.25% 0.09% 0.34% -- 0.34%
Aetna Small Company VP(2) 0.75% 0.13% 0.88% 0.00% 0.88%
Aetna Technology VP(2)(3) 0.95% 0.25% 1.20% 0.05% 1.15%
Aetna Value Opportunity VP(2) 0.60% 0.13% 0.73% 0.00% 0.73%
AIM V.I. Capital Appreciation Fund 0.62% 0.11% 0.73% -- 0.73%
AIM V.I. Growth Fund 0.63% 0.10% 0.73% -- 0.73%
AIM V.I. Growth and Income Fund 0.61% 0.16% 0.77% -- 0.77%
AIM V.I. Value Fund 0.61% 0.15% 0.76% -- 0.76%
Calvert Social Balanced Portfolio(4) 0.70% 0.19% 0.89% 0.00% 0.89%
DEM[RegTM] Equity Fund(5) 0.90% 2.10% 3.00% 1.75% 1.25%
Fidelity VIP Equity-Income Portfolio(6) 0.48% 0.09% 0.57% -- 0.57%
Fidelity VIP Growth Portfolio(6) 0.58% 0.08% 0.66% -- 0.66%
Fidelity VIP Overseas Portfolio(6) 0.73% 0.18% 0.91% -- 0.91%
Fidelity VIP II Contrafund[RegTM] Portfolio(6) 0.58% 0.09% 0.67% -- 0.67%
Janus Aspen Aggressive Growth Portfolio(7) 0.65% 0.02% 0.67% 0.00% 0.67%
Janus Aspen Balanced Portfolio(7) 0.65% 0.02% 0.67% 0.00% 0.67%
Janus Aspen Flexible Income Portfolio(7) 0.65% 0.07% 0.72% 0.00% 0.72%
Janus Aspen Growth Portfolio(7) 0.65% 0.02% 0.67% 0.00% 0.67%
Janus Aspen Worldwide Growth Portfolio(7) 0.65% 0.05% 0.70% 0.00% 0.70%
Oppenheimer Global Securities Fund/VA 0.67% 0.02% 0.69% -- 0.69%
Oppenheimer Strategic Bond Fund/VA 0.74% 0.04% 0.78% -- 0.78%
PPI MFS Capital Opportunities Portfolio(8) 0.65% 0.25% 0.90% 0.00% 0.90%
PPI MFS Emerging Equities Portfolio(8) 0.67% 0.13% 0.80% 0.00% 0.80%
PPI MFS Research Growth Portfolio(8) 0.70% 0.15% 0.85% 0.00% 0.85%
PPI Scudder International Growth Portfolio(8) 0.80% 0.20% 1.00% 0.00% 1.00%
PPI T. Rowe Price Growth Equity Portfolio(8) 0.60% 0.15% 0.75% 0.00% 0.75%
</TABLE>
7
<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 Investment Advisory 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,
2000 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 fund's "Total Fund Annual Expenses
Without Waivers or Reductions" do not exceed the percentage reflected
under "Net Fund Annual Expenses After Waivers or Reductions.".
(3) Aetna Technology VP commenced operations on May 1, 2000. Amounts
reflected in "Other Expenses" and "Total Fund Annual Expenses Without
Waivers or Reductions" are estimated amounts for the current fiscal year
based on expenses for comparable funds. Actual expenses may vary from
those shown.
(4) "Other Expenses" reflect an indirect fee of 0.03% relating to an expense
offset arrangement with the portfolio's custodian. The 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
Waiver or Reductions would be 0.86%.
(5) The amount shown under "Other Expenses" includes a fee paid to the fund's
distributor for stockholder servicing and distribution services at an
annual rate of up to a total of 0.25% of average daily net assets. The
fund's investment adviser has contractually agreed to limit the total
annual operating expenses of the fund, solely attributable to the
Institutional Shares, to 1.25% of average daily net assets effective
March 17, 2000 until at least December 31, 2009. However, there is no
guarantee the fund's investment adviser will contract to limit the total
annual operating expenses of the fund attributable to the Institutional
Shares beyond December 31, 2009.
(6) A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, through arrangements with certain
funds', or the investment adviser on behalf of certain funds', custodian,
credits realized as a result of uninvested cash balances were used to
reduce a portion of each applicable fund's 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 or Reductions presented in the table would have been 0.56% for
Fidelity VIP Equity-Income Portfolio; 0.65% for Fidelity VIP Growth
Portfolio; 0.87% for Fidelity VIP Overseas Portfolio; and 0.65% for
Fidelity VIP II Contrafund[RegTM] Portfolio.
(7) Expenses are based upon expenses for the fiscal year ended December 31,
1999, restated to reflect a reduction in the management fee for
Aggressive Growth, Balanced, Growth and Worldwide Growth Portfolios. All
expenses are shown without the effect of expense offset arrangement.
(8) The investment adviser has agreed to reimburse the portfolios for
expenses and/or waive its fees, so that, through at least April 30, 2001,
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.
8
<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.
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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Aetna Ascent VP $20 $ 62 $107 $232
Aetna Balanced VP, Inc. $19 $ 58 $100 $216
Aetna Bond VP $18 $ 55 $ 94 $205
Aetna Crossroads VP $20 $ 62 $107 $232
Aetna Growth VP $20 $ 62 $106 $229
Aetna Growth and Income VP $19 $ 58 $ 99 $215
Aetna Index Plus Large Cap VP $17 $ 54 $ 92 $201
Aetna Index Plus Mid Cap VP $21 $ 64 $110 $238
Aetna Index Plus Small Cap VP $22 $ 67 $115 $248
Aetna International VP $29 $ 89 $151 $320
Aetna Legacy VP $20 $ 63 $108 $233
Aetna Money Market VP $16 $ 50 $ 87 $189
Aetna Small Company VP $22 $ 67 $114 $246
Aetna Technology VP $25 $ 76 $131 $279
Aetna Value Opportunity VP $20 $ 62 $107 $231
AIM V.I. Capital Appreciation Fund $20 $ 62 $107 $231
AIM V.I. Growth Fund $20 $ 62 $107 $231
AIM V.I. Growth and Income Fund $21 $ 63 $109 $235
AIM V.I. Value Fund $20 $ 63 $108 $234
Calvert Social Balanced Portfolio $22 $ 67 $115 $247
DEM[RegTM] Equity Fund $43 $129 $217 $441
Fidelity VIP Equity-Income Portfolio $18 $ 57 $ 99 $214
Fidelity VIP Growth Portfolio $19 $ 60 $103 $223
Fidelity VIP Overseas Portfolio $22 $ 68 $116 $249
Fidelity VIP II Contrafund[RegTM] Portfolio $20 $ 60 $104 $224
Janus Aspen Aggressive Growth Portfolio $20 $ 60 $104 $224
Janus Aspen Balanced Portfolio $20 $ 60 $104 $224
Janus Aspen Flexible Income Portfolio $20 $ 62 $106 $230
Janus Aspen Growth Portfolio $20 $ 60 $104 $224
Janus Aspen Worldwide Growth Portfolio $20 $ 61 $105 $227
Oppenheimer Global Securities Fund/VA $20 $ 61 $105 $226
Oppenheimer Strategic Bond Fund/VA $21 $ 64 $109 $236
PPI MFS Capital Opportunities Portfolio $22 $ 67 $115 $248
PPI MFS Emerging Equities Portfolio $21 $ 64 $110 $238
PPI MFS Research Growth Portfolio $21 $ 66 $113 $243
PPI Scudder International Growth Portfolio $23 $ 70 $120 $258
PPI T. Rowe Price Growth Equity Portfolio $20 $ 63 $108 $233
</TABLE>
9
<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 upon the performance and fees of its underlying 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 accessing the SEC's
web site, or by contacting the SEC's 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 subaccounts and the fixed interest option
may not be available through certain contracts and plans or in some states. We
may add, withdraw or substitute investment options, subject to the conditions
in the contract and in compliance with regulatory requirements.
10
<PAGE>
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.
Variable Funds. (Mixed and Shared Funding) Most of the funds described in this
prospectus are available only to insurance companies for their variable
contracts. Such funds are often referred to as "variable funds," and are used
for "mixed" and "shared" funding.
"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 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--bought for annuities and life insurance
> Shared--bought by more than one company
Public Funds. The following fund, which the subaccounts buy for variable
annuity contracts, is also available to the general public:
>DEM[RegTM] Equity Fund (Institutional Shares)
See "Taxation--403(b) Plans" for a discussion of investing in a public fund
under a 403(b) annuity contract.
Possible Conflicts of Interest. With respect to the variable funds and the
public fund, it is possible that a conflict of interest may arise due to mixed
and shared funding, a change in law affecting the operations of variable
annuity separate accounts, differences in the voting instructions of the
contract holder and others maintaining a voting interest in the funds, or some
other reason. Such a conflict 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 variable
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. With respect to both the retail fund and the
variable funds, in the event of a conflict, the Company will take any steps
necessary to protect contract holders and annuitants maintaining a voting
interest in the funds, including the withdrawal of Variable Annuity Account I
from participation in the funds which are involved in the conflict.
11
<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, or if you are
participating in the dollar cost averaging program, after your scheduled
transfer.
Telephone and Electronic Transfers: Security Measures. To prevent fraudulent
use of telephone or electronic transactions, (including, but not limited to,
internet 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 or other electronic transactions. We
are not liable for losses resulting from following telephone or electronic
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 purchase 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 purchase
payments for longer periods with the permission of the contract holder. If we
agree to do this, we will deposit the purchase 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 purchase payments.
Methods of Purchase Payment. The contract may allow one or more of the
following purchase payment methods:
>Lump-sum payments--A one-time payment to your account in the form of a
transfer from a previous plan; and/or
>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 Purchase 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 purchase 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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<PAGE>
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.
14
<PAGE>
Fees
- --------------------------------------------------------------------------------
The following repeats and adds to information provided in the "Fee Table"
section. Please review both this section and the "Fee Table" section for
information on 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. This 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 (but not beyond the maximum amount). 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; and
> The type and level of other factors that affect the overall administrative
expense.
[Begin sidebar]
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
[End sidebar]
15
<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 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 upon 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
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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.
17
<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.
Step 1: An investor contributes $5000.
Step 2:
A. He directs us to invest $3,000 in Fund A. His dollars purchase 300
accumulation units of Subaccount A ($3,000 divided by the current $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 then purchases shares of the applicable funds
at the current market value (net asset value or NAV).
[Flow chart of Steps 1, 2, and 3 listed on this page]
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.
Purchase Payments to Your Account. If all or a portion of initial purchase
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 purchase payments or transfers directed to the
subaccounts that we receive in good order 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.
18
<PAGE>
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 591/2, 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.
[Begin sidebar]
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."
[End sidebar]
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<PAGE>
Systematic Distribution Options
- --------------------------------------------------------------------------------
Availability of Systematic Distribution Options. 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 Systematic Distribution Options
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
Systematic Distribution Options at any time, and/or to change the terms for
future elections.
Systematic Distribution Options 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 701/2 (for certain plans, 701/2 or retirement, if later) and pays
you that amount once a year.
> Other Systematic Distribution Options may be available from time to time.
Additional information relating to any of the Systematic Distribution Options
may be obtained from your local representative or from the Company's Service
Center.
Electing a Systematic Distribution Option. The contract holder, or you if
permitted by the plan, makes the election of a Systematic Distribution Option.
For some contracts, the contract holder must provide the Company with
certification that the distribution is in accordance with terms of the plan.
Terminating a Systematic Distribution Option. Once you elect a Systematic
Distribution Option, 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 Systematic Distribution Option be elected, unless the Tax Code
permits it.
Tax Consequences. Withdrawals received through these options and revocations of
elections may have tax consequences. See "Taxation."
[Begin sidebar]
Features of a Systematic Distribution Option
If available under your plan, a Systematic Distribution Option 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.
[End sidebar]
20
<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"); and
> 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.
[Begin sidebar]
During the Income Phase
This section provides information about the accumulation phase. For death
benefit information applicable to the income phase, see "The Income Phase."
[End sidebar]
21
<PAGE>
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.
22
<PAGE>
The Income Phase
- --------------------------------------------------------------------------------
During the income phase you receive payments from your accumulated account
value.
Initiating Income Phase 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;
> Income phase payment option (see the income phase payment options table in
this section);
> Income phase payment frequency (i.e., monthly, quarterly, semi-annually or
annually);
> Choice of fixed or variable income phase payments;
> Selection of an assumed net investment rate (only if variable income phase
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 income phase payments. Once an income
phase payment option is selected, it may not be changed; however, certain
options allow you to withdraw a lump sum.
What Affects Income Phase Payment Amounts? Some of the factors that may affect
income phase payment amounts include: your age, your account value, the income
phase payment option selected, number of guaranteed payments (if any) selected,
and whether you select variable or fixed payments.
Fixed Income Phase Payments. Amounts funding fixed income phase payments will
be held in the Company's general account. Fixed payments will remain the same
over time.
Variable Income Phase Payments. Amounts funding your variable income phase
payments will be held in the subaccount(s) selected. Some contracts may
restrict the subaccounts available, the number of investment options to be
selected and how many transfers, if any, are allowed among options during the
income phase. For variable payments, an assumed net investment rate must be
selected.
Income Phase Payments from Fixed Plus Account Values. If a nonlifetime income
phase 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. If you select variable income phase payments, an
assumed net investment rate must also 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 31/2% rate, your first income phase payment will be lower and
subsequent payments will increase more rapidly or decline more slowly depending
upon the investment performance of the subaccounts you selected.
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<PAGE>
For more information about selecting an assumed net investment rate, request a
copy of the Statement of Additional Information by calling us. See "Contract
Overview--Questions."
Selecting an Increasing Payment. Under certain income phase 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 income phase payment will be, while future payments will increase each
year at a greater rate.
Generally, this feature is not available with cash refund payment options and
nonlifetime options.
Charges Deducted
> If variable income phase payments are selected, we make a daily deduction for
mortality and expense risks from any amounts held in the subaccounts. If you
choose variable income phase payments and a nonlifetime income phase option,
we still make this deduction from the subaccounts selected, even though we no
longer assume any mortality risk for you. The maximum mortality and expense
risk charge during the income phase is 1.25% on an annual basis of your
account value invested in the subaccount. 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 of your
account value invested in the subaccount. 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 income phase payment or the
annual income phase 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 income phase 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 in good
order 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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<PAGE>
Income Phase Payment Options
The following tables list the income phase 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 income
phase 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>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Lifetime Income Phase Payment Options
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
Length of Payments: For as long as the annuitant lives. It is possible that only one payment will be
Life Income 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 choice
Life Income-- of 5 to 30 years, or as otherwise specified in the contract.
Guaranteed Death Benefit--Payment to the Beneficiary: If the annuitant dies before we have made all the
Payments 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-- (a) When you select this option you choose for 100%, 662/3% or 50% of the payment to continue
Two Lives to the surviving annuitant after the first death; or
(b) 100% of the payment to continue to the annuitant on the second annuitant's death, and 50%
of the payment to continue to the second annuitant 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 for your
choice of 5 to 30 years, or as otherwise specified in the contract.
Life Income-- Continuing Payments: 100% of the payment to continue to the surviving annuitant after the
Two Lives-- first death.
Guaranteed Death Benefit--Payment to the Beneficiary: If both annuitants die before the guaranteed
Payments payments 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-- Length of Payments: For as long as the annuitant lives.
Cash Refund Death Benefit--Payment to the Beneficiary: Following the annuitant's death, we will pay a lump-
Option (fixed sum payment equal to the amount originally applied to the payment option (less any premium
payment only) tax) and less the total amount of fixed income phase payments paid.
- -----------------------------------------------------------------------------------------------------------------------
Life Income-- Length of Payments: For as long as either annuitant lives.
Two Lives-- Continuing Payment: 100% of the payment to continue after the first death.
Cash Refund Death Benefit--Payment to the Beneficiary: When both annuitants die, we will pay a lump-sum
Option (fixed payment equal to the amount applied to the income phase payment option (less any premium
payment only) tax) and less the total amount of fixed income phase payments paid.
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Table continued [Right arrow]
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<PAGE>
Income Phase Payment Options Continued
<TABLE>
<CAPTION>
Nonlifetime Income Phase Payment Options
<S> <C>
Length of Payments: Payments will continue for the number of years you choose, based on what is
available under the contract. For amounts held in the Fixed Plus Account during the accumulation
Nonlifetime-- phase, the income phase payment must be on a fixed basis. In certain cases a lump-sum payment may be
Guaranteed requested at any time (see below). Death Benefit--Payment to the Beneficiary: If the annuitant dies
Payments 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 lump 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 31/2% or 5% assumed net investment rate for variable
payments.
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<PAGE>
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. You will not
generally pay taxes on earnings from the annuity contract described in this
prospectus until they are withdrawn. Tax-qualified retirement arrangements
under Tax Code sections 401(a) or 403(b) also generally defer payment of taxes
on earnings until they are withdrawn. (See "Taxation of Distributions" later in
this "Taxation" section for a discussion of how distributions under the various
types of plans are taxed.) When an annuity contract is used to fund one of
these tax-qualified retirement arrangements, 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 alternatives with your financial representative.
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.
[Begin sidebar]
In This Section
I. Introduction
II. Your Retirement Plan
III. Withdrawals and other Distributions
o Taxation of Distributions
o Taxation of Death Benefits
o 10% Penalty Tax
o Withholding for Federal Income Tax Liability
IV. Minimum Distribution Requirements
o 50% Excise Tax
V. Rules Specific to Certain Plans
o 403(b) Plans
o 401(a) Plans
VI. Taxation of the Company
When consulting a tax adviser, be certain that he or she has expertise in the
Tax Code sections applicable to your tax concerns.
[End sidebar]
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<PAGE>
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 phase
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 certain exceptions, including
one or more of the following have occurred:
(a) You have attained age 59 1/2;
(b) You have become disabled, as defined in the Tax Code;
(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 made due to an IRS levy upon your account.
In addition, the penalty tax does not apply for the amount of a distribution
equal to unreimbursed medical expenses incurred by you 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.
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<PAGE>
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.
Start Date. Generally, you must begin receiving distributions by April 1 of the
calendar year following the calendar year in which you attain age 701/2 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
701/2; 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, depending 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
29
<PAGE>
you die on September 1, 2000, your entire balance must be distributed to the
beneficiary by December 31, 2005. 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 701/2.
V. Rules Specific to Certain Plans
403(b) Plans
Shares of certain of the Funds (DEM Equity Fund) are also offered to sale to
the general public. In order to qualify for favorable tax treatment under
Section 403(b), a contract must be considered an "annuity". In Revenue
Procedure 99-44, the Internal Revenue Service concluded that it will treat a
contract as an "annuity contract" under Section 403(b) notwithstanding that
contract premiums are invested at the contract holder's direction in publicly
available securities. This treatment will be available provided no additional
federal tax liability would have been incurred if the employer of the contract
holder had instead paid amounts into a qualifying Section 403 (b)(7)(A)
custodial account rather than an annuity. You should consult with a tax adviser
before electing to invest in the Fund that is offered to sale to the general
public. See "Additional Risks of Investing in the Funds."
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 sections 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.
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<PAGE>
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 $10,500 annually (subject to indexing). Your own limit
may be higher or lower, depending upon 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
591/2, 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. Generally no amounts accumulated under
the contract will be taxable prior to the time of actual distribution.
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.
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
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<PAGE>
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
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.
Other Topics
- --------------------------------------------------------------------------------
The Company
Aetna Insurance Company of America (the Company, we, us, our) 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.
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<PAGE>
We are engaged in the business of issuing life insurance and annuities.
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)).
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
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<PAGE>
persons having a voting interest in the subaccount. 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. (NASD).
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, we may provide additional compensation
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.
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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; and/or
> 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.
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 phase payments or the income
phase payment options available. Such a change would only apply to income phase
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 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.
In recent years, several life insurance and annuity companies have been named
as defendants in lawsuits, including class action lawsuits, relating to life
insurance and annuity pricing and sales practices. A purported class action
complaint was filed in the Circuit Court of Lauderdale County, Alabama on March
28, 2000 by Loretta Shaner against ALIAC, an affiliate of the Company which
serves as principal underwriter for the securities described in this prospectus
(the "Shaner Complaint"). The Shaner Complaint seeks unspecified compensatory
damages from ALIAC and unnamed affiliates of ALIAC. The Shaner Complaint claims
that ALIAC's sale of deferred annuity products for use as investments in
tax-deferred contributory retirement plans (e.g., IRAs) is improper. This
litigation is in the preliminary stages. ALIAC intends to defend the action
vigorously.
The Company is not currently involved in any other material litigation.
35
<PAGE>
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.
Intent to Confirm Quarterly
We will provide confirmation of scheduled transactions quarterly rather than
immediately to the participant.
36
<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
37
<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 upon 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.
Interest rate guarantees are based on the claims-paying ability of the Company.
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;
38
<PAGE>
> 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.
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 your death during the accumulation phase; or
(b) Due to the election of an income phase payment option; 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 financial hardship or hardship resulting from an unforeseeable
emergency, as defined by the Tax Code and regulations thereunder, 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.
39
<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.
40
<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. Investments in the
funds are not bank deposits and are not insured or guaranteed by 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 managed 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 managed 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 managed 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 consisting primarily of common
stocks and securities convertible into common stocks believed to offer growth
potential.(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 United States.
Aetna International VP will not target any given level of current income.(1)
> 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 Technology VP seeks long-term capital
appreciation.(1)(a)
> 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 stock.(1)
41
<PAGE>
> 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 adviser to be
undervalued relative to the investment adviser'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 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)(a)
> DEM[RegTM] Equity Fund seeks to provide aggressive long-term growth through
capital appreciation.(4)
> Fidelity Variable Insurance Products Fund 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.(5)
> Fidelity Variable Insurance Products Fund--Growth Portfolio seeks capital
appreciation by investing primarily in common stocks of companies the
investment adviser believes have above-average growth potential.(5)
> Fidelity Variable Insurance Products Fund--Overseas Portfolio seeks long-term
growth of capital by investing in foreign securities, primarily in common
stocks.(5)(a)
> Fidelity Variable Insurance Products Fund II--Contrafund[RegTM] 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.(5)(b)
> 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, 1999, they ranged from approximately
$170 million to $37 billion.(6)
> 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.(6)
> 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.(6)
> 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.(6)
42
<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.(6)
> 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.(7)
> 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.(7)
> Portfolio Partners, Inc. (PPI)--MFS Capital Opportunities Portfolio (formerly
known as PPI MFS Value Equity Portfolio) seeks capital appreciation.(8)(a)
> Portfolio Partners, Inc. (PPI)--MFS Emerging Equities Portfolio seeks
long-term growth of capital.(8)(a)
> Portfolio Partners, Inc. (PPI)--MFS Research Growth Portfolio seeks long-term
growth of capital and future income.(8)(a)
> Portfolio Partners, Inc. (PPI)--Scudder International Growth Portfolio seeks
long-term growth of capital.(8)(b)
> Portfolio Partners, Inc. (PPI)--T. Rowe Price Growth Equity Portfolio seeks
long-term capital growth, and secondarily, increasing dividend income.(8)(c)
Investment Adviser:
(1) Investment Adviser: Aeltus Investment Management, Inc.
(a) Elijah Asset Management, LLC (subadviser)
(2) Investment Adviser: A I M Advisors, Inc.
(3) Investment Adviser: Calvert Asset Management Company, Inc.
(a) NCM Capital Management, Inc. (subadviser)
(4) Chapman Capital Management, Inc.
(5) Investment Adviser: Fidelity Management & Research Company
(a) Fidelity Management & Research (U.K.) Inc. (subadviser)
Fidelity Management & Research Far East Inc. (subadviser)
Fidelity International Investment Advisors (subadviser)
Fidelity International Investment Advisors (U.K.) Limited (subadviser)
Fidelity Investments Japan Limited (subadviser)
(b) Fidelity Management & Research (U.K.) Inc. (subadviser)
Fidelity Management & Research Far East Inc. (subadviser)
Fidelity Investments Japan Limited (subadviser)
(6) Investment Adviser: Janus Capital Corporation
(7) Investment Adviser: OppenheimerFunds, Inc.
(8) Investment Adviser: Aetna Life Insurance and Annuity Company
(a) Massachusetts Financial Services Company (subadviser)
(b) Scudder Kemper Investments, Inc. (subadviser)
(c) T. Rowe Price Associates, Inc. (subadviser)
43
<PAGE>
For Master Applications Only
- --------------------------------------------------------------------------------
I hereby acknowledge receipt of an Account I prospectus dated May 1, 2000, 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.87131-00) dated May 1, 2000.
- --------------------------------------------------------------------------------
CONTRACT HOLDER'S SIGNATURE
- --------------------------------------------------------------------------------
DATE
PRO.87131-00
<PAGE>
- --------------------------------------------------------------------------------
VARIABLE ANNUITY ACCOUNT I
OF
AETNA INSURANCE COMPANY OF AMERICA
- --------------------------------------------------------------------------------
Statement of Additional Information dated May 1, 2000
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 May 1, 2000.
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
1-800-262-3862
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 on January 5, 2000. We are
an indirect wholly-owned subsidiary of Aetna Inc. Our sales office is located at
151 Farmington Avenue, Hartford, Connecticut 06156. We are engaged in the
business of issuing life insurance and annuities. Our executive offices are
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 Index Plus Large Cap VP Fidelity Variable Insurance Products Fund II (VIP II)
Aetna Index Plus Mid Cap VP Contrafund[RegTM] Portfolio
Aetna Index Plus Small Cap VP Janus Aspen Aggressive Growth Portfolio
Aetna International VP Janus Aspen Balanced Portfolio
Aetna Legacy VP Janus Aspen Flexible Income Portfolio
Aetna Variable Encore Fund d/b/a Aetna Money Market VP Janus Aspen Growth Portfolio
Aetna Small Company VP Janus Aspen Worldwide Growth Portfolio
Aetna Technology VP Oppenheimer Global Securities Fund/VA
Aetna Value Opportunity VP Oppenheimer Strategic Bond Fund/VA
AIM V.I. Capital Appreciation Fund Portfolio Partners, Inc. (PPI) MFS Capital Opportunity Portfolio
AIM V.I. Growth Fund (formerly PPI MFS Value Equity Portfolio)
AIM V.I. Growth and Income Fund Portfolio Partners, Inc. (PPI) MFS Emerging Equities Portfolio
AIM V.I. Value Fund Portfolio Partners, Inc. (PPI) MFS Research Growth Portfolio
Calvert Social Balanced Portfolio Portfolio Partners, Inc. (PPI) Scudder International Growth Portfolio
DEM[RegTM] Equity Fund (Institutional Shares)* Portfolio Partners, Inc. (PPI) T. Rowe Price Growth Equity Portfolio
</TABLE>
*This fund is available to the general public.
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 entitled "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, 1999 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 13.22% 14.56% 07/31/1996
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 12.48% 15.93% 02/29/1996
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP (1.73%) 3.64% 01/31/1996
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 9.12% 12.16% 07/31/1996
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 33.63% 34.90% 05/30/1997
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP 16.26% 19.69% 01/31/1996
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 23.07% 28.72% 10/31/1996
- -------------------------------------------------------------------------------------------------------------------------------
Aetna International VP 49.83% 24.81% 05/05/1998
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 6.03% 9.28% 05/31/1996
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP(1) 4.04% 4.28% 02/29/1996
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 29.55% 18.95% 05/30/1997
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 18.39% 23.74% 05/30/1997
- -------------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 11.11% 13.25% 11/28/1997
- -------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 5.28% 13.18% 01/31/1996
- -------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 36.07% 27.27% 01/31/1996
- -------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 41.21% 18.40% 03/29/1996
- -------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund[RegTM] Portfolio 23.02% 23.99% 03/29/1996
- -------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 123.17% 36.72% 03/29/1996
- -------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 25.50% 23.90% 03/29/1996
- -------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 0.60% 7.59% 04/30/1996
- -------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 42.56% 27.94% 03/29/1996
- -------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 62.82% 33.70% 01/31/1996
- -------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund/VA 56.91% 28.72% 05/30/1997
- -------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund/VA 1.81% 3.57% 05/30/1997
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
PPI MFS Capital Opportunities Portfolio 47.32% 35.11% 11/28/1997
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
PPI MFS Emerging Equities Portfolio 49.38% 35.75% 11/28/1997
- -------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/PPI MFS
Emerging Equities(2) 49.38% 21.35% 01/31/1996
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
PPI MFS Research Growth Portfolio 22.81% 20.12% 11/28/1997
- -------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/
PPI MFS Research Growth(2) 22.81% 8.66% 03/30/1996
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
PPI Scudder International Growth Portfolio 56.84% 35.01% 11/28/1997
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
PPI T. Rowe Price Growth Equity Portfolio 21.11% 23.77% 11/28/1997
- -------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/PPI T. Rowe Price
Growth Equity(2) 21.11% 21.06% 01/31/1996
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to the discussion preceding the tables for an explanation of the
charges included and methodology used in calculating the standardized and
non-standardized figures. These figures represent historical performance and
should not be considered a projection of future performance.
* Reflects performance from the date contributions were first received in the
fund under the separate account.
(1) The current yield for the subaccount for the seven-day period ended
December 31, 1999 (on an annualized basis) was 4.80%. 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 the Separate
Account" refers to the applicable date for the replaced fund. If no date is
shown, contributions were first received in the replaced fund under the
separate account more than ten years ago.
-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 13.22% 11.54% 14.91% 07/05/1995
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc.(1) 12.48% 16.45% 17.80% 12.15%
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP(1) (1.73%) 4.10% 6.26% 6.65%
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 9.12% 10.03% 12.61% 07/05/1995
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 33.63% 33.86% 33.90% 12/13/1996
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP(1) 16.26% 19.22% 22.29% 14.38%
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 23.07% 28.58% 29.22% 09/16/1996
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Mid Cap VP 14.66% 20.35% 12/16/1997
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Small Cap VP 9.69% 5.59% 12/19/1997
- -------------------------------------------------------------------------------------------------------------------------------
Aetna International VP 49.83% 34.10% 12/22/1997
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 6.03% 8.37% 10.26% 07/05/1995
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP(1)(2) 4.04% 4.29% 4.44% 4.28%
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 29.55% 19.97% 20.37% 12/27/1996
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 18.39% 25.56% 25.96% 12/13/1996
- -------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund 43.18% 23.88% 24.35% 21.13% 05/05/1993
- -------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth Fund 33.90% 30.73% 28.37% 21.72% 05/05/1993
- -------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth and Income Fund 32.92% 27.90% 26.92% 23.27% 05/02/1994
- -------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Value Fund 28.61% 27.35% 25.98% 21.86% 05/05/1993
- -------------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio(1) 11.11% 15.00% 16.85% 10.95%
- -------------------------------------------------------------------------------------------------------------------------------
DEM[RegTM] Equity Fund 110.44% 55.12% 04/08/1998
- -------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio(1) 5.28% 13.85% 17.43% 13.36%
- -------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio(1) 36.07% 31.95% 28.45% 18.75%
- -------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio(1) 41.21% 20.30% 16.21% 10.32%
- -------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund[RegTM]
Portfolio 23.02% 24.85% 26.49% 01/03/1995
- -------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 123.17% 49.02% 34.88% 33.09% 09/13/1993
- -------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 25.50% 26.35% 23.45% 19.43% 09/13/1993
- -------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 0.60% 6.34% 9.78% 7.43% 09/13/1993
- -------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 42.56% 32.51% 28.60% 23.05% 09/13/1993
- -------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 62.82% 35.97% 32.28% 28.43% 09/13/1993
- -------------------------------------------------------------------------------------------------------------------------------
Janus Twenty Fund
- -------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund/VA 56.91% 29.04% 20.46% 15.63% 11/12/1990
- -------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund/VA 1.81% 3.73% 7.18% 5.13% 05/03/1993
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
PPI MFS Capital Opportunities Portfolio 47.32% 35.02% 11/28/1997
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
PPI MFS Emerging Equities Portfolio 49.38% 35.75% 11/28/1997
- -------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/PPI MFS
Emerging Equities(3) 49.38% 27.53% 25.04% 18.78%
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
PPI MFS Research Growth Portfolio 22.81% 20.12% 11/28/1997
- -------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital
Appreciation/PPI MFS
Research Growth(3) 22.81% 12.84% 12.06% 9.74%
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
PPI Scudder International Growth Portfolio 56.84% 35.15% 11/28/1997
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
PPI T. Rowe Price Growth Equity Portfolio 21.11% 23.70% 11/28/1997
- -------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/PPI T. Rowe
Price Growth Equity(3) 21.11% 24.78% 24.11% 19.05%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to the discussion preceding the tables for an explanation of the
charges included and methodology used in calculating 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, 1999 (on an annualized basis) was 4.80%. 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 "The 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 take into account 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
take into account 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
VARIABLE ANNUITY ACCOUNT I
Index
<TABLE>
<CAPTION>
Page
<S> <C>
Statement of Assets and Liabilities.....................................S-2
Statement of Operations.................................................S-7
Statements of Changes in Net Assets.....................................S-7
Condensed Financial Information.........................................S-8
Notes to Financial Statements...........................................S-12
Independent Auditors' Report............................................S-24
</TABLE>
S-1
<PAGE>
Variable Annuity Account I
Statement of Assets and Liabilities - December 31, 1999
ASSETS:
Investments, at net asset value: (Note 1)
<TABLE>
<CAPTION>
Net
Shares Cost Assets
------ ---- ------
<S> <C> <C> <C>
Aetna Ascent VP: 98,549 $ 1,441,978 $ 1,470,348
Aetna Balanced VP, Inc.: 557,539 8,767,974 8,680,876
Aetna Bond VP: 739,056 9,634,497 8,994,313
Aetna Crossroads VP: 56,645 755,380 779,995
Aetna Growth and Income VP: 1,020,890 33,613,864 31,331,110
Aetna Growth VP: 292,478 4,120,278 5,065,711
Aetna Index Plus Large Cap VP: 743,541 13,901,112 15,517,692
Aetna International VP: 13,977 185,060 222,514
Aetna Legacy VP: 147,021 1,844,896 1,836,294
Aetna Money Market VP: 2,727,313 36,358,603 36,587,176
Aetna Real Estate Securities VP: 8,462 73,578 65,413
Aetna Small Company VP: 206,047 2,722,620 3,403,889
Aetna Value Opportunity VP: 237,023 3,577,573 3,891,915
Alger American Funds:
Balanced Portfolio: 107,852 1,131,021 1,679,252
Income and Growth Portfolio: 277,446 3,026,333 4,877,501
Leveraged AllCap Portfolio: 98,150 2,334,799 5,689,755
American Century VP Funds:
Balanced Fund: 56,639 431,564 441,215
International Fund: 201,394 1,363,555 2,517,425
Calvert Social Balanced Portfolio: 141,949 299,835 307,888
Federated Insurance Series:
American Leaders Fund II: 7,049,841 118,900,852 146,777,686
Equity Income Fund II: 1,972,702 25,202,208 32,115,589
Growth Strategies Fund II: 1,943,752 29,249,157 60,023,050
High Income Bond Fund II: 2,647,360 27,752,392 27,108,963
International Equity Fund II: 1,718,847 20,983,632 47,508,933
Prime Money Fund II: 5,198,805 5,198,805 5,198,805
U.S. Government Securities Fund II: 557,235 5,903,292 5,884,407
Utility Fund II: 1,718,542 21,150,847 24,661,073
Fidelity Investments Variable Insurance Product Fund:
Equity-Income Portfolio: 2,000,000 50,284,313 51,420,003
Growth Portfolio: 952,726 36,779,260 52,333,245
High Income Portfolio: 1,495,284 17,961,357 16,911,658
Overseas Portfolio: 196,306 4,027,977 5,386,624
Fidelity Investments Variable Insurance Product Fund II:
Asset Manager Portfolio: 436,199 7,454,280 8,143,844
Contrafund Portfolio: 1,672,869 34,735,648 48,764,135
Index 500 Portfolio: 339,239 47,264,972 56,791,976
Investment Grade Bond Portfolio: 80,835 979,182 982,952
Janus Aspen Series:
Aggressive Growth Portfolio: 653,778 25,668,610 39,024,034
Balanced Portfolio: 952,218 19,892,640 26,585,922
Flexible Income Portfolio: 419,102 5,053,689 4,786,150
Growth Portfolio: 1,112,231 30,223,126 37,426,575
Worldwide Growth Portfolio: 2,327,732 64,584,136 111,149,183
Lexington Emerging Markets Fund: 69,270 648,653 887,346
Lexington Natural Resources Trust Fund: 55,518 829,326 694,528
</TABLE>
S-2
<PAGE>
Variable Annuity Account I
Statement of Assets and Liabilities - December 31, 1999 (continued):
<TABLE>
<CAPTION>
Net
Shares Cost Assets
------ ---- ------
<S> <C> <C> <C>
MFS Funds:
Global Government Series: 38,832 $ 405,353 $ 389,484
Total Return Series: 870,282 15,042,240 15,447,502
Oppenheimer Funds:
Aggressive Growth Fund/VA: 94,224 6,090,644 7,755,576
Global Securities Fund/VA: 87,285 1,888,593 2,916,182
Main Street Growth & Income Fund/VA: 548,378 11,343,088 13,506,554
Strategic Bond Fund/VA: 855,465 4,315,619 4,251,662
Portfolio Partners, Inc. (PPI):
PPI MFS Emerging Equities Portfolio: 621,330 37,561,315 51,464,749
PPI MFS Research Growth Portfolio: 1,516,002 16,180,033 22,406,513
PPI MFS Value Equity Portfolio: 209,146 8,139,912 11,454,930
PPI Scudder International Growth Portfolio: 87,523 2,037,148 2,230,964
PPI T. Rowe Price Growth Equity Portfolio: 495,296 22,259,382 32,689,557
------------ ---------------
NET ASSETS $851,576,201 $1,108,440,636
============ ===============
</TABLE>
S-3
<PAGE>
Variable Annuity Account I
Statement of Assets and Liabilities - December 31, 1999 (continued):
Net assets represented by:
Reserves for annuity contracts in accumulation and payment period:
(Notes 1 and 6)
<TABLE>
<S> <C>
Aetna Ascent VP:
Annuity contracts in accumulation .............................................. $ 1,470,348
Aetna Balanced VP, Inc.:
Annuity contracts in accumulation .............................................. 8,680,876
Aetna Bond VP:
Annuity contracts in accumulation .............................................. 8,994,313
Aetna Crossroads VP:
Annuity contracts in accumulation .............................................. 779,995
Aetna Growth and Income VP:
Annuity contracts in accumulation .............................................. 31,151,698
Annuity contracts in payment period ............................................ 179,412
Aetna Growth VP:
Annuity contracts in accumulation .............................................. 5,009,118
Annuity contracts in payment period ............................................ 56,593
Aetna Index Plus Large Cap VP:
Annuity contracts in accumulation .............................................. 15,517,692
Aetna International VP:
Annuity contracts in accumulation .............................................. 222,514
Aetna Legacy VP:
Annuity contracts in accumulation .............................................. 1,694,193
Annuity contracts in payment period ............................................ 142,101
Aetna Money Market VP:
Annuity contracts in accumulation .............................................. 36,587,176
Aetna Real Estate Securities VP:
Annuity contracts in accumulation .............................................. 65,413
Aetna Small Company VP:
Annuity contracts in accumulation .............................................. 3,403,889
Aetna Value Opportunity VP:
Annuity contracts in accumulation .............................................. 3,891,915
Alger American Funds:
Balanced Portfolio:
Annuity contracts in accumulation .............................................. 1,679,252
Income and Growth Portfolio:
Annuity contracts in accumulation .............................................. 4,877,501
Leveraged AllCap Portfolio:
Annuity contracts in accumulation .............................................. 5,689,755
American Century VP Funds:
Balanced Fund:
Annuity contracts in accumulation .............................................. 441,215
International Fund:
Annuity contracts in accumulation .............................................. 2,517,425
Calvert Social Balanced Portfolio:
Annuity contracts in accumulation .............................................. 307,888
Federated Insurance Series:
American Leaders Fund II:
Annuity contracts in accumulation .............................................. 146,474,824
Annuity contracts in payment period ............................................ 302,862
Equity Income Fund II:
Annuity contracts in accumulation .............................................. 32,004,404
Annuity contracts in payment period ............................................ 111,185
</TABLE>
S-4
<PAGE>
Variable Annuity Account I
Statement of Assets and Liabilities - December 31, 1999 (continued):
<TABLE>
<S> <C>
Growth Strategies Fund II:
Annuity contracts in accumulation .................... $ 60,023,050
High Income Bond Fund II:
Annuity contracts in accumulation .................... 27,090,172
Annuity contracts in payment period .................. 18,791
International Equity Fund II:
Annuity contracts in accumulation .................... 47,471,626
Annuity contracts in payment period .................. 37,307
Prime Money Fund II:
Annuity contracts in accumulation .................... 5,198,805
U.S. Government Securities Fund II:
Annuity contracts in accumulation .................... 5,884,407
Utility Fund II:
Annuity contracts in accumulation .................... 24,581,727
Annuity contracts in payment period .................. 79,346
Fidelity Investments Variable Insurance Product Fund:
Equity-Income Portfolio:
Annuity contracts in accumulation .................... 51,420,003
Growth Portfolio:
Annuity contracts in accumulation .................... 52,333,245
High Income Portfolio:
Annuity contracts in accumulation .................... 16,911,658
Overseas Portfolio:
Annuity contracts in accumulation .................... 5,386,624
Fidelity Investments Variable Insurance Product Fund II:
Asset Manager Portfolio:
Annuity contracts in accumulation .................... 8,143,844
Contrafund Portfolio:
Annuity contracts in accumulation .................... 48,764,135
Index 500 Portfolio:
Annuity contracts in accumulation .................... 56,791,976
Investment Grade Bond Portfolio:
Annuity contracts in accumulation .................... 982,952
Janus Aspen Series:
Aggressive Growth Portfolio:
Annuity contracts in accumulation .................... 39,024,034
Balanced Portfolio:
Annuity contracts in accumulation .................... 26,585,922
Flexible Income Portfolio:
Annuity contracts in accumulation .................... 4,786,150
Growth Portfolio:
Annuity contracts in accumulation .................... 37,367,199
Annuity contracts in payment period .................. 59,376
Worldwide Growth Portfolio:
Annuity contracts in accumulation .................... 111,093,250
Annuity contracts in payment period .................. 55,933
Lexington Emerging Markets Fund:
Annuity contracts in accumulation .................... 887,346
Lexington Natural Resources Trust Fund:
Annuity contracts in accumulation .................... 694,528
MFS Funds:
Global Government Series:
Annuity contracts in accumulation .................... 389,484
</TABLE>
S-5
<PAGE>
Variable Annuity Account I
Statement of Assets and Liabilities - December 31, 1999 (continued):
<TABLE>
<S> <C>
Total Return Series:
Annuity contracts in accumulation ........... $ 15,447,502
Oppenheimer Funds:
Aggressive Growth Fund/VA:
Annuity contracts in accumulation ........... 7,755,576
Global Securities Fund/VA:
Annuity contracts in accumulation ........... 2,916,182
Main Street Growth & Income Fund/VA:
Annuity contracts in accumulation ........... 13,506,554
Strategic Bond Fund/VA:
Annuity contracts in accumulation ........... 4,251,662
Portfolio Partners, Inc. (PPI):
PPI MFS Emerging Equities Portfolio:
Annuity contracts in accumulation ........... 51,452,372
Annuity contracts in payment period ......... 12,377
PPI MFS Research Growth Portfolio:
Annuity contracts in accumulation ........... 22,406,513
PPI MFS Value Equity Portfolio:
Annuity contracts in accumulation ........... 11,377,949
Annuity contracts in payment period ......... 76,981
PPI Scudder International Growth Portfolio:
Annuity contracts in accumulation ........... 2,190,372
Annuity contracts in payment period ......... 40,592
PPI T. Rowe Price Growth Equity Portfolio:
Annuity contracts in accumulation ........... 32,676,922
Annuity contracts in payment period ......... 12,635
--------------
$1,108,440,636
==============
</TABLE>
See Notes to Financial Statements
S-6
<PAGE>
Variable Annuity Account I
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended
December 31, 1999
------------------
INVESTMENT INCOME:
<S> <C>
Income: (Notes 1, 3 and 5)
Dividends ................................................... $ 48,743,207
Expenses: (Notes 2 and 5)
Valuation period deductions ................................. (13,474,655)
-------------
Net investment income ........................................ $ 35,268,552
-------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on sales of investments: (Notes 1, 4 and 5)
Proceeds from sales ......................................... $ 725,147,683
Cost of investments sold .................................... 655,820,063
-------------
Net realized gain on investments ........................... 69,327,620
-------------
Net unrealized gain on investments: (Note 5)
Beginning of year ........................................... 129,005,870
End of year ................................................. 256,846,161
-------------
Net change in unrealized gain on investments ............... 127,840,291
-------------
Net realized and unrealized gain on investments .............. 197,167,911
-------------
Net increase in net assets resulting from operations ......... $ 232,436,463
=============
</TABLE>
See Notes to Financial Statements
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998
---- ----
FROM OPERATIONS:
<S> <C> <C>
Net investment income ................................................... $ 35,268,552 $ 26,010,214
Net realized gain on investments ........................................ 69,327,620 25,517,782
Net change in unrealized gain on investments ............................ 127,840,291 66,477,702
-------------- -------------
Net increase in net assets resulting from operations .................... 232,436,463 118,005,698
-------------- -------------
FROM UNIT TRANSACTIONS:
Variable annuity contract purchase payments ............................. 20,077,461 168,355,044
Transfer from the Company for mortality guarantee adjustments ........... (11,560) 0
Transfers from the Company's fixed account options ...................... 25,886,558 75,081,637
Redemptions by contract holders ......................................... (61,593,899) (31,854,396)
Annuity Payments ........................................................ (206,606) (83,247)
Other ................................................................... 347,722 1,337,373
-------------- -------------
Net (decrease) increase in net assets from unit transactions (Note 6) .. (15,500,324) 212,836,411
-------------- -------------
Change in net assets .................................................... 216,936,139 330,842,109
NET ASSETS:
Beginning of year ....................................................... 891,504,497 560,662,388
-------------- -------------
End of year ............................................................. $1,108,440,636 $ 891,504,497
============== =============
</TABLE>
See Notes to Financial Statements
S-7
<PAGE>
Variable Annuity Account I
Condensed Financial Information - Year Ended December 31, 1999
<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>
Aetna Ascent VP:
AICA I $ 15.409 $ 17.374 12.75% 74,094.2 $ 1,287,288
AICA II 10.059 11.359 12.92% 16,115.9 183,060
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc.:
AICA I 16.405 18.376 12.01% 387,565.2 7,121,786
AICA II 11.312 12.690 12.18% 122,859.8 1,559,090
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP:
AICA I 11.943 11.689 (2.13%) 516,265.9 6,034,654
AICA II 10.606 10.396 (1.98%) 284,699.5 2,959,659
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP:
AICA I 14.676 15.949 8.67% 42,322.1 674,993
AICA II 10.270 11.177 8.83% 9,394.2 105,002
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP:
AICA I 18.461 21.374 15.78% 1,172,636.9 25,064,085
AICA II 11.063 12.827 15.95% 474,578.0 6,087,613
Annuity contracts in payment period 179,412
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP:
AICA I 17.862 23.771 33.08% 156,242.2 3,714,086
AICA II 12.977 17.296 33.28% 74,875.1 1,295,032
Annuity contracts in payment period 56,593
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP:
AICA I 18.704 22.923 22.56% 536,794.9 12,304,926
AICA II 12.535 15.387 22.75% 208,799.8 3,212,766
- --------------------------------------------------------------------------------------------------------------------------------
Aetna International VP:
AICA I 9.754 14.554 49.21% 12,771.0 185,874
AICA II 9.764 14.592 49.45% 2,511.0 36,640
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP:
AICA I 13.825 14.599 5.60% 94,121.1 1,374,066
AICA II 10.380 10.978 5.76% 29,161.9 320,127
Annuity contracts in payment period 142,101
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP:
AICA I 11.335 11.744 3.61% 2,775,865.5 32,598,385
AICA II 10.371 10.762 3.77% 370,653.2 3,988,791
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Real Estate Securities VP:
AICA I 8.863 8.370 (5.56%) 4,887.5 40,910
AICA II 8.872 8.392 (5.41%) 2,919.9 24,503
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP:
AICA I 13.595 17.540 29.02% 136,570.6 2,395,454
AICA II 9.724 12.565 29.22% 80,257.6 1,008,435
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP:
AICA I 15.985 18.847 17.90% 150,268.2 2,832,166
AICA II 11.644 13.750 18.09% 77,072.9 1,059,749
- --------------------------------------------------------------------------------------------------------------------------------
Alger American Funds:
Balanced Portfolio:
AICA I 16.412 20.910 27.41% 80,308.9 1,679,252
- --------------------------------------------------------------------------------------------------------------------------------
Income and Growth Portfolio:
AICA I 19.880 27.923 40.46% 174,676.8 4,877,501
- --------------------------------------------------------------------------------------------------------------------------------
Leveraged AllCap Portfolio:
AICA I 20.547 36.075 75.57% 157,721.1 5,689,755
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-8
<PAGE>
Variable Annuity Account I
Condensed Financial Information - Year Ended December 31, 1999 (continued):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Value
Per Unit
--------
Beginning End of
of Year Year
- -------------------------------------------------------------------------------
<S> <C> <C>
American Century VP Funds:
Balanced Fund:
AICA I $ 14.709 $ 15.962
- -------------------------------------------------------------------------------
International Fund:
AICA I 15.853 25.642
- -------------------------------------------------------------------------------
Calvert Social Balanced Portfolio:
AICA I 11.437 12.656
AICA II 11.208 12.421
- -------------------------------------------------------------------------------
Federated Insurance Series:
American Leaders Fund II:
AICA I 20.639 21.708
Annuity contracts in payment period
- -------------------------------------------------------------------------------
Equity Income Fund II:
AICA I 14.022 16.369
Annuity contracts in payment period
- -------------------------------------------------------------------------------
Growth Strategies Fund II:
AICA I 18.269 31.060
- -------------------------------------------------------------------------------
High Income Bond Fund II:
AICA I 13.547 13.666
Annuity contracts in payment period
- -------------------------------------------------------------------------------
International Equity Fund II:
AICA I 14.682 26.765
Annuity contracts in payment period
- -------------------------------------------------------------------------------
Prime Money Fund II:
AICA I 11.253 11.610
- -------------------------------------------------------------------------------
U.S. Government Securities Fund II:
AICA I 12.284 12.040
- -------------------------------------------------------------------------------
Utility Fund II:
AICA I 17.341 17.388
Annuity contracts in payment period
- -------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Product Fund:
Equity-Income Portfolio:
AICA I 16.482 17.279
AICA II 10.806 11.346
- -------------------------------------------------------------------------------
Growth Portfolio:
AICA I 18.320 24.826
AICA II 13.253 17.986
- -------------------------------------------------------------------------------
High Income Portfolio:
AICA I 12.488 13.317
AICA II 9.222 9.849
- -------------------------------------------------------------------------------
Overseas Portfolio:
AICA I 13.997 19.684
AICA II 10.487 14.771
- -------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Product Fund II:
Asset Manager Portfolio:
AICA I 15.754 17.257
AICA II 11.165 12.248
- -------------------------------------------------------------------------------
Contrafund Portfolio:
AICA I 18.970 23.242
AICA II 12.537 15.383
- -------------------------------------------------------------------------------
<CAPTION>
Increase (Decrease) Units
in Value of Outstanding Reserves
Accumulation at End at End
Unit of Year of Year
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
American Century VP Funds:
Balanced Fund:
AICA I 8.52% 27,642.4 $ 441,215
- ---------------------------------------------------------------------------------------------------------------
International Fund:
AICA I 61.75% 98,174.8 2,517,425
- ---------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio:
AICA I 10.66% 12,297.6 155,641
AICA II 10.82% 12,257.1 152,247
- ---------------------------------------------------------------------------------------------------------------
Federated Insurance Series:
American Leaders Fund II:
AICA I 5.18% 6,747,543.1 146,474,824
Annuity contracts in payment period 302,862
- ---------------------------------------------------------------------------------------------------------------
Equity Income Fund II:
AICA I 16.74% 1,955,219.8 32,004,404
Annuity contracts in payment period 111,185
- ---------------------------------------------------------------------------------------------------------------
Growth Strategies Fund II:
AICA I 70.01% 1,932,504.3 60,023,050
- ---------------------------------------------------------------------------------------------------------------
High Income Bond Fund II:
AICA I 0.88% 1,982,372.3 27,090,172
Annuity contracts in payment period 18,791
- ---------------------------------------------------------------------------------------------------------------
International Equity Fund II:
AICA I 82.30% 1,773,642.3 47,471,626
Annuity contracts in payment period 37,307
- ---------------------------------------------------------------------------------------------------------------
Prime Money Fund II:
AICA I 3.17% 447,801.6 5,198,805
- ---------------------------------------------------------------------------------------------------------------
U.S. Government Securities Fund II:
AICA I (1.99%) 488,753.9 5,884,407
- ---------------------------------------------------------------------------------------------------------------
Utility Fund II:
AICA I 0.27% 1,413,708.9 24,581,727
Annuity contracts in payment period 79,346
- ---------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Product Fund:
Equity-Income Portfolio:
AICA I 4.84% 2,597,042.4 44,875,527
AICA II 5.00% 576,813.0 6,544,476
- ---------------------------------------------------------------------------------------------------------------
Growth Portfolio:
AICA I 35.51% 1,858,231.6 46,132,878
AICA II 35.71% 344,724.1 6,200,367
- ---------------------------------------------------------------------------------------------------------------
High Income Portfolio:
AICA I 6.64% 1,086,377.4 14,467,135
AICA II 6.80% 248,198.1 2,444,523
- ---------------------------------------------------------------------------------------------------------------
Overseas Portfolio:
AICA I 40.63% 230,681.4 4,540,849
AICA II 40.85% 57,260.2 845,775
- ---------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Product Fund II:
Asset Manager Portfolio:
AICA I 9.54% 388,585.3 6,705,729
AICA II 9.70% 117,415.2 1,438,115
- ---------------------------------------------------------------------------------------------------------------
Contrafund Portfolio:
AICA I 22.52% 1,826,355.7 42,447,250
AICA II 22.70% 410,630.3 6,316,885
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
S-9
<PAGE>
Variable Annuity Account I
Condensed Financial Information - Year Ended December 31, 1999 (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>
Index 500 Portfolio:
AICA I $ 21.063 $ 25.027 18.82% 1,838,818.7 $ 46,020,760
AICA II 12.259 14.589 19.01% 738,297.6 10,771,216
- ---------------------------------------------------------------------------------------------------------------------------
Investment Grade Bond Portfolio:
AICA I 12.066 11.772 ( 2.44%) 83,500.0 982,952
- ---------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series:
Aggressive Growth Portfolio:
AICA I 16.729 37.181 122.25% 950,030.0 35,323,066
AICA II 13.003 28.943 122.59% 127,870.3 3,700,968
- ---------------------------------------------------------------------------------------------------------------------------
Balanced Portfolio:
AICA I 19.189 23.983 24.98% 893,140.4 21,419,977
AICA II 12.689 15.883 25.17% 325,243.4 5,165,945
- ---------------------------------------------------------------------------------------------------------------------------
Flexible Income Portfolio:
AICA I 13.202 13.226 0.18% 254,250.2 3,362,650
AICA II 10.599 10.634 0.33% 133,859.8 1,423,500
- ---------------------------------------------------------------------------------------------------------------------------
Growth Portfolio:
AICA I 19.704 27.974 41.97% 1,130,099.4 31,613,802
AICA II 12.784 18.177 42.19% 316,527.3 5,753,397
Annuity contracts in payment period 59,376
- ---------------------------------------------------------------------------------------------------------------------------
Worldwide Growth Portfolio:
AICA I 20.506 33.250 62.15% 3,017,261.9 100,324,119
AICA II 11.960 19.422 62.39% 554,474.5 10,769,131
Annuity contracts in payment period 55,933
- ---------------------------------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund:
AICA I 6.399 14.331 123.96% 61,916.4 887,346
- ---------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust Fund:
AICA I 11.047 12.428 12.50% 55,886.3 694,528
- ---------------------------------------------------------------------------------------------------------------------------
MFS Funds:
Global Government Series:
AICA I 10.860 10.440 ( 3.87%) 36,449.7 380,530
AICA II 10.514 10.123 ( 3.72%) 884.5 8,954
- ---------------------------------------------------------------------------------------------------------------------------
Total Return Series:
AICA I 14.432 14.669 1.64% 833,536.8 12,227,208
AICA II 10.942 11.139 1.80% 289,103.2 3,220,294
- ---------------------------------------------------------------------------------------------------------------------------
Oppenheimer Funds:
Aggressive Growth Fund/VA:
AICA I 13.520 24.477 81.04% 224,632.4 5,498,223
AICA II 10.886 19.738 81.32% 114,364.2 2,257,353
- ---------------------------------------------------------------------------------------------------------------------------
Global Securities Fund/VA:
AICA I 12.982 20.287 56.27% 115,001.5 2,333,056
AICA II 10.949 17.136 56.51% 34,029.7 583,126
- ---------------------------------------------------------------------------------------------------------------------------
Main Street Growth & Income Fund/VA:
AICA I 13.199 15.839 20.00% 650,435.0 10,302,541
AICA II 10.111 12.153 20.20% 263,646.0 3,204,013
- ---------------------------------------------------------------------------------------------------------------------------
Strategic Bond Fund/VA:
AICA I 10.921 11.072 1.38% 285,712.3 3,163,507
AICA II 10.037 10.191 1.53% 106,774.1 1,088,155
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio Partners, Inc. (PPI):
PPI MFS Emerging Equities Portfolio:
AICA I 13.494 20.074 48.76% 2,336,393.4 46,901,720
AICA II 11.797 17.577 49.00% 258,891.9 4,550,652
Annuity contracts in payment period 12,377
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-10
<PAGE>
Variable Annuity Account I
Condensed Financial Information - Year Ended December 31, 1999 (continued):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Value
Per Unit
--------
Beginning End of
of Year Year
- ----------------------------------------------------------------------
<S> <C> <C>
PPI MFS Research Growth Portfolio:
AICA I $ 10.656 $ 13.032
AICA II 11.634 14.250
- ----------------------------------------------------------------------
PPI MFS Value Equity Portfolio:
AICA I 12.686 18.612
AICA II 12.005 17.640
Annuity contracts in payment period
- ----------------------------------------------------------------------
PPI Scudder International Growth Portfolio:
AICA I 11.640 18.181
AICA II 10.995 17.201
Annuity contracts in payment period
- ----------------------------------------------------------------------
PPI T. Rowe Price Growth Equity Portfolio:
AICA I 17.406 20.993
AICA II 12.103 14.620
Annuity contracts in payment period
- ----------------------------------------------------------------------
Total
======================================================================
<CAPTION>
Increase (Decrease) Units
in Value of Outstanding Reserves
Accumulation at End at End
Unit of Year of Year
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PPI MFS Research Growth Portfolio:
AICA I 22.30% 1,550,655.9 $ 20,207,838
AICA II 22.49% 154,289.8 2,198,675
- --------------------------------------------------------------------------------------------------------
PPI MFS Value Equity Portfolio:
AICA I 46.71% 473,281.8 8,808,785
AICA II 46.94% 145,648.0 2,569,164
Annuity contracts in payment period 76,981
- --------------------------------------------------------------------------------------------------------
PPI Scudder International Growth Portfolio:
AICA I 56.19% 87,649.8 1,593,541
AICA II 56.44% 34,698.3 596,831
Annuity contracts in payment period 40,592
- --------------------------------------------------------------------------------------------------------
PPI T. Rowe Price Growth Equity Portfolio:
AICA I 20.61% 1,472,257.8 30,907,801
AICA II 20.80% 121,007.6 1,769,121
Annuity contracts in payment period 12,635
- --------------------------------------------------------------------------------------------------------
Total $1,108,440,636
========================================================================================================
</TABLE>
<TABLE>
<S> <C>
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.
</TABLE>
S-11
<PAGE>
Variable Annuity Account I
Notes to Financial Statements - December 31, 1999
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. Actual results could
differ from these estimates.
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, 1999:
Aetna Ascent VP
Aetna Balanced VP, Inc.
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 VP Funds:
o Balanced Fund
o International Fund
Calvert Social Balanced Portfolio
Federated Insurance 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
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
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 Global Government Series
o Total Return Series
Oppenheimer Funds:
o Aggressive Growth Fund/VA
o Global Securities Fund/VA
o Main Street Growth & Income Fund/VA
o Strategic Bond Fund/VA
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.
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.
S-12
<PAGE>
Variable Annuity Account I
Notes to Financial Statements - December 31, 1999 (continued):
d. Annuity Reserves
Annuity reserves held in the Account 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 Statement of Operations.
4. Purchases and Sales of Investments
The cost of purchases and proceeds from sales of investments other than
short-term investments for the year ended December 31, 1999 aggregated
$744,897,637 and $725,147,683.
S-13
<PAGE>
Variable Annuity Account I
Notes to Financial Statements - December 31, 1999 (continued):
5. Supplemental Information to Statement of Operations
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Year Ended December 31, 1999
Valuation Proceeds Cost of
Period from Investments
Dividends Deductions Sales Sold
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aetna Ascent VP:
Annuity contracts in accumulation $98,284 ($19,735) $288,231 $299,859
- ----------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc.:
Annuity contracts in accumulation 1,102,491 (112,293) 1,339,384 1,334,254
- ----------------------------------------------------------------------------------------------
Aetna Bond VP:
Annuity contracts in accumulation 565,203 (124,557) 4,914,083 5,033,164
- ----------------------------------------------------------------------------------------------
Aetna Crossroads VP:
Annuity contracts in accumulation 46,967 (11,032) 151,762 147,343
- ----------------------------------------------------------------------------------------------
Aetna Growth and Income VP:
Annuity contracts in accumulation 5,394,486 (397,991) 71,789,245 72,446,745
- ----------------------------------------------------------------------------------------------
Aetna Growth VP:
Annuity contracts in accumulation 240,808 (73,267) 5,576,554 4,492,326
- ----------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP:
Annuity contracts in accumulation 687,527 (212,657) 13,983,564 11,767,428
- ----------------------------------------------------------------------------------------------
Aetna International VP:
Annuity contracts in accumulation 21,556 (2,872) 214,026 179,764
- ----------------------------------------------------------------------------------------------
Aetna Legacy VP:
Annuity contracts in accumulation 103,555 (23,286) 388,909 368,608
- ----------------------------------------------------------------------------------------------
Aetna Money Market VP:
Annuity contracts in accumulation 1,245,921 (452,053) 210,012,432 209,644,140
- ----------------------------------------------------------------------------------------------
Aetna Real Estate Securities VP:
Annuity contracts in accumulation 3,335 (1,811) 691,011 670,678
- ----------------------------------------------------------------------------------------------
Aetna Small Company VP:
Annuity contracts in accumulation 41,212 (44,330) 3,822,179 3,235,119
- ----------------------------------------------------------------------------------------------
Aetna Value Opportunity VP:
Annuity contracts in accumulation 182,092 (58,833) 5,626,230 4,830,502
- ----------------------------------------------------------------------------------------------
Alger American Funds:
Balanced Portfolio:
Annuity contracts in accumulation 104,509 (21,150) 117,830 76,479
- ----------------------------------------------------------------------------------------------
Income and Growth Portfolio:
Annuity contracts in accumulation 230,961 (57,179) 741,176 525,475
- ----------------------------------------------------------------------------------------------
Leveraged AllCap Portfolio:
Annuity contracts in accumulation 276,111 (60,243) 617,519 281,778
- ----------------------------------------------------------------------------------------------
American Century VP Funds:
Balanced Fund:
Annuity contracts in accumulation 65,109 (6,375) 163,077 155,590
- ----------------------------------------------------------------------------------------------
International Fund:
Annuity contracts in accumulation 0 (26,431) 358,184 261,500
- ----------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio:
Annuity contracts in accumulation 29,419 (3,758) 22,965 22,532
- ----------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1999 Net Unrealized Net Net
Net Gain (Loss) Change in Increase (Decrease)
Realized ----------- Unrealized in Net Assets
Gain (Loss) Beginning End Gain (Loss) Resulting from
on Investments of Year of Year on Investments Operations
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Ascent VP:
Annuity contracts in accumulation ($11,628) ($75,022) $28,369 $103,391 $170,312
- --------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc.:
Annuity contracts in accumulation 5,130 (36,287) (87,098) (50,811) 944,517
- --------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP:
Annuity contracts in accumulation (119,081) (118,794) (640,184) (521,390) (199,825)
- --------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP:
Annuity contracts in accumulation 4,419 (178) 24,615 24,793 65,147
- --------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP:
Annuity contracts in accumulation (657,500) (2,149,960) (2,282,754) (132,794) 4,206,201
- --------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP:
Annuity contracts in accumulation 1,084,228 784,306 945,433 161,127 1,412,896
- --------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP:
Annuity contracts in accumulation 2,216,136 1,257,214 1,616,580 359,366 3,050,372
- --------------------------------------------------------------------------------------------------------------------------
Aetna International VP:
Annuity contracts in accumulation 34,262 2,750 37,455 34,705 87,651
- --------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP:
Annuity contracts in accumulation 20,301 (6,294) (8,602) (2,308) 98,262
- --------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP:
Annuity contracts in accumulation 368,292 215,976 228,573 12,597 1,174,757
- --------------------------------------------------------------------------------------------------------------------------
Aetna Real Estate Securities VP:
Annuity contracts in accumulation 20,333 (4,325) (8,166) (3,841) 18,016
- --------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP:
Annuity contracts in accumulation 587,060 487,449 681,270 193,821 777,763
- --------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP:
Annuity contracts in accumulation 795,728 623,324 314,342 (308,982) 610,005
- --------------------------------------------------------------------------------------------------------------------------
Alger American Funds:
Balanced Portfolio:
Annuity contracts in accumulation 41,351 303,599 548,231 244,632 369,342
- --------------------------------------------------------------------------------------------------------------------------
Income and Growth Portfolio:
Annuity contracts in accumulation 215,701 776,309 1,851,167 1,074,858 1,464,341
- --------------------------------------------------------------------------------------------------------------------------
Leveraged AllCap Portfolio:
Annuity contracts in accumulation 335,741 1,364,191 3,354,956 1,990,765 2,542,374
- --------------------------------------------------------------------------------------------------------------------------
American Century VP Funds:
Balanced Fund:
Annuity contracts in accumulation 7,487 41,409 9,649 (31,760) 34,461
- --------------------------------------------------------------------------------------------------------------------------
International Fund:
Annuity contracts in accumulation 96,684 228,000 1,153,870 925,870 996,123
- --------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio:
Annuity contracts in accumulation 433 5,430 8,053 2,623 28,717
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-14
<PAGE>
Variable Annuity Account I
Notes to Financial Statements - December 31, 1999 (continued):
5. Supplemental Information to Statement of Operations (continued):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Year Ended December 31, 1999
Valuation Proceeds
Period from
Dividends Deductions Sales
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federated Insurance Series:
American Leaders Fund II:
Annuity contracts in accumulation $15,147,294 ($ 2,131,371) $ 13,419,022
- --------------------------------------------------------------------------------------------------------
Equity Income Fund II:
Annuity contracts in accumulation 814,064 (421,048) 3,515,537
- --------------------------------------------------------------------------------------------------------
Growth Strategies Fund II:
Annuity contracts in accumulation 0 (596,338) 3,338,262
- --------------------------------------------------------------------------------------------------------
High Income Bond Fund II:
Annuity contracts in accumulation 2,476,236 (408,532) 4,570,928
- --------------------------------------------------------------------------------------------------------
International Equity Fund II:
Annuity contracts in accumulation 798,535 (434,267) 2,883,792
- --------------------------------------------------------------------------------------------------------
Prime Money Fund II:
Annuity contracts in accumulation 245,672 (76,271) 5,000,204
- --------------------------------------------------------------------------------------------------------
U.S. Government Securities Fund II:
Annuity contracts in accumulation 317,095 (90,658) 1,654,760
- --------------------------------------------------------------------------------------------------------
Utility Fund II:
Annuity contracts in accumulation 1,914,787 (359,395) 2,936,845
- --------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio:
Annuity contracts in accumulation 2,429,608 (751,656) 22,950,321
- --------------------------------------------------------------------------------------------------------
Growth Portfolio:
Annuity contracts in accumulation 4,436,638 (616,924) 6,409,422
- --------------------------------------------------------------------------------------------------------
High Income Portfolio:
Annuity contracts in accumulation 1,667,722 (250,431) 4,415,632
- --------------------------------------------------------------------------------------------------------
Overseas Portfolio:
Annuity contracts in accumulation 165,653 (61,642) 23,789,913
- --------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Product Fund II:
Asset Manager Portfolio:
Annuity contracts in accumulation 576,382 (109,793) 1,653,501
- --------------------------------------------------------------------------------------------------------
Contrafund Portfolio:
Annuity contracts in accumulation 1,641,692 (601,503) 7,124,702
- --------------------------------------------------------------------------------------------------------
Index 500 Portfolio:
Annuity contracts in accumulation 792,073 (720,850) 25,115,115
- --------------------------------------------------------------------------------------------------------
Investment Grade Bond Portfolio:
Annuity contracts in accumulation 62,932 (16,016) 225,340
- --------------------------------------------------------------------------------------------------------
Janus Aspen Series:
Aggressive Growth Portfolio:
Annuity contracts in accumulation 745,754 (294,919) 107,667,722
- --------------------------------------------------------------------------------------------------------
Balanced Portfolio:
Annuity contracts in accumulation 539,596 (329,857) 6,639,707
- --------------------------------------------------------------------------------------------------------
Flexible Income Portfolio:
Annuity contracts in accumulation 339,434 (67,386) 1,183,274
- --------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1999
Net Unrealized
Net Gain (Loss)
Cost of Realized -----------
Investments Gain (Loss) Beginning End
Sold on Investments of Year of Year
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federated Insurance Series:
American Leaders Fund II:
Annuity contracts in accumulation $ 7,814,229 $5,604,793 $ 38,810,192 $ 27,876,834
- ------------------------------------------------------------------------------------------------------------------------
Equity Income Fund II:
Annuity contracts in accumulation 2,542,787 972,750 3,591,859 6,913,381
- ------------------------------------------------------------------------------------------------------------------------
Growth Strategies Fund II:
Annuity contracts in accumulation 1,771,526 1,566,736 7,028,743 30,773,893
- ------------------------------------------------------------------------------------------------------------------------
High Income Bond Fund II:
Annuity contracts in accumulation 4,349,704 221,224 1,387,517 (643,429)
- ------------------------------------------------------------------------------------------------------------------------
International Equity Fund II:
Annuity contracts in accumulation 1,785,573 1,098,219 6,385,323 26,525,301
- ------------------------------------------------------------------------------------------------------------------------
Prime Money Fund II:
Annuity contracts in accumulation 4,998,888 1,316 1,316 0
- ------------------------------------------------------------------------------------------------------------------------
U.S. Government Securities Fund II:
Annuity contracts in accumulation 1,548,456 106,304 441,091 (18,885)
- ------------------------------------------------------------------------------------------------------------------------
Utility Fund II:
Annuity contracts in accumulation 2,166,729 770,116 5,787,739 3,510,226
- ------------------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio:
Annuity contracts in accumulation 19,463,453 3,486,868 3,977,202 1,135,690
- ------------------------------------------------------------------------------------------------------------------------
Growth Portfolio:
Annuity contracts in accumulation 4,797,592 1,611,830 7,153,104 15,537,760
- ------------------------------------------------------------------------------------------------------------------------
High Income Portfolio:
Annuity contracts in accumulation 5,346,224 (930,592) (1,709,684) (1,049,699)
- ------------------------------------------------------------------------------------------------------------------------
Overseas Portfolio:
Annuity contracts in accumulation 23,405,277 384,636 131,756 1,357,297
- ------------------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Product Fund II:
Asset Manager Portfolio:
Annuity contracts in accumulation 1,506,751 146,750 560,341 689,564
- ------------------------------------------------------------------------------------------------------------------------
Contrafund Portfolio:
Annuity contracts in accumulation 4,671,234 2,453,468 8,470,707 14,028,487
- ------------------------------------------------------------------------------------------------------------------------
Index 500 Portfolio:
Annuity contracts in accumulation 17,772,843 7,342,272 7,949,380 9,526,307
- ------------------------------------------------------------------------------------------------------------------------
Investment Grade Bond Portfolio:
Annuity contracts in accumulation 214,584 10,756 91,234 3,769
- ------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series:
Aggressive Growth Portfolio:
Annuity contracts in accumulation 100,053,997 7,613,725 1,091,568 13,355,423
- ------------------------------------------------------------------------------------------------------------------------
Balanced Portfolio:
Annuity contracts in accumulation 4,272,426 2,367,281 3,925,885 6,693,282
- ------------------------------------------------------------------------------------------------------------------------
Flexible Income Portfolio:
Annuity contracts in accumulation 1,191,733 (8,459) (11,388) (267,539)
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------
Year Ended December 31, 1999 Net Net
Change in Increase (Decrease)
Unrealized in Net Assets
Gain (Loss) Resulting from
on Investments Operations
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Federated Insurance Series:
American Leaders Fund II:
Annuity contracts in accumulation ($ 10,933,358) $ 7,687,358
- -----------------------------------------------------------------------------------------------
Equity Income Fund II:
Annuity contracts in accumulation 3,321,522 4,687,288
- -----------------------------------------------------------------------------------------------
Growth Strategies Fund II:
Annuity contracts in accumulation 23,745,150 24,715,548
- -----------------------------------------------------------------------------------------------
High Income Bond Fund II:
Annuity contracts in accumulation (2,030,946) 257,982
- -----------------------------------------------------------------------------------------------
International Equity Fund II:
Annuity contracts in accumulation 20,139,978 21,602,465
- -----------------------------------------------------------------------------------------------
Prime Money Fund II:
Annuity contracts in accumulation (1,316) 169,401
- -----------------------------------------------------------------------------------------------
U.S. Government Securities Fund II:
Annuity contracts in accumulation (459,976) (127,235)
- -----------------------------------------------------------------------------------------------
Utility Fund II:
Annuity contracts in accumulation (2,277,513) 47,995
- -----------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio:
Annuity contracts in accumulation (2,841,512) 2,323,308
- -----------------------------------------------------------------------------------------------
Growth Portfolio:
Annuity contracts in accumulation 8,384,656 13,816,200
- -----------------------------------------------------------------------------------------------
High Income Portfolio:
Annuity contracts in accumulation 659,985 1,146,684
- -----------------------------------------------------------------------------------------------
Overseas Portfolio:
Annuity contracts in accumulation 1,225,541 1,714,188
- -----------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Product Fund II:
Asset Manager Portfolio:
Annuity contracts in accumulation 129,223 742,562
- -----------------------------------------------------------------------------------------------
Contrafund Portfolio:
Annuity contracts in accumulation 5,557,780 9,051,437
- -----------------------------------------------------------------------------------------------
Index 500 Portfolio:
Annuity contracts in accumulation 1,576,927 8,990,422
- -----------------------------------------------------------------------------------------------
Investment Grade Bond Portfolio:
Annuity contracts in accumulation (87,465) (29,793)
- -----------------------------------------------------------------------------------------------
Janus Aspen Series:
Aggressive Growth Portfolio:
Annuity contracts in accumulation 12,263,855 20,328,415
- -----------------------------------------------------------------------------------------------
Balanced Portfolio:
Annuity contracts in accumulation 2,767,397 5,344,417
- -----------------------------------------------------------------------------------------------
Flexible Income Portfolio:
Annuity contracts in accumulation (256,151) 7,438
- -----------------------------------------------------------------------------------------------
</TABLE>
S-15
<PAGE>
Variable Annuity Account I
Notes to Financial Statements - December 31, 1999 (continued):
5. Supplemental Information to Statement of Operations (continued):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1999
Valuation Proceeds Cost of
Period from Investments
Dividends Deductions Sales Sold
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Growth Portfolio:
Annuity contracts in accumulation $204,198 ($363,956) $19,469,244 $13,399,625
- ------------------------------------------------------------------------------------------------------------
Worldwide Growth Portfolio:
Annuity contracts in accumulation 141,437 (1,108,134) 20,066,248 12,593,996
- ------------------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund:
Annuity contracts in accumulation 3,369 (9,310) 307,273 488,538
- ------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust Fund:
Annuity contracts in accumulation 4,893 (11,436) 290,732 339,388
- ------------------------------------------------------------------------------------------------------------
MFS Funds:
Global Government Series: (1)
Annuity contracts in accumulation 41,051 (8,619) 438,014 440,709
- ------------------------------------------------------------------------------------------------------------
Total Return Series:
Annuity contracts in accumulation 834,399 (219,911) 4,128,026 3,486,251
- ------------------------------------------------------------------------------------------------------------
Oppenheimer Funds:
Aggressive Growth Fund/VA: (2)
Annuity contracts in accumulation 0 (69,464) 32,152,168 29,938,377
- ------------------------------------------------------------------------------------------------------------
Global Securities Fund/VA: (3)
Annuity contracts in accumulation 93,445 (30,739) 580,959 526,490
- ------------------------------------------------------------------------------------------------------------
Main Street Growth & Income Fund/VA: (4)
Annuity contracts in accumulation 141,299 (171,240) 5,240,486 5,262,827
- ------------------------------------------------------------------------------------------------------------
Strategic Bond Fund/VA: (5)
Annuity contracts in accumulation 271,759 (63,247) 1,488,639 1,572,382
- ------------------------------------------------------------------------------------------------------------
Portfolio Partners, Inc. (PPI):
PPI MFS Emerging Equities Portfolio:
Annuity contracts in accumulation 390,949 (542,211) 50,081,279 40,350,194
- ------------------------------------------------------------------------------------------------------------
PPI MFS Research Growth Portfolio:
Annuity contracts in accumulation 39,985 (282,277) 5,283,349 4,170,538
- ------------------------------------------------------------------------------------------------------------
PPI MFS Value Equity Portfolio:
Annuity contracts in accumulation 239,457 (103,743) 2,663,649 2,210,485
- ------------------------------------------------------------------------------------------------------------
PPI Scudder International Growth Portfolio:
Annuity contracts in accumulation 70,542 (24,961) 13,302,856 12,403,075
- ------------------------------------------------------------------------------------------------------------
PPI T. Rowe Price Growth Equity Portfolio:
Annuity contracts in accumulation 715,711 (416,697) 4,342,401 3,189,898
- ------------------------------------------------------------------------------------------------------------
Total Variable Annuity Account I $48,743,207 ($ 13,474,655) $725,147,683 $655,820,063
============================================================================================================
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1999
Net Unrealized Net Net
Net Gain (Loss) Change in Increase (Decrease)
Realized ----------- Unrealized in Net Assets
Gain (Loss) Beginning End Gain (Loss) Resulting from
on Investments of Year of Year on Investments Operations
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Growth Portfolio:
Annuity contracts in accumulation $6,069,619 $3,305,620 $7,203,450 $3,897,830 $9,807,691
- ------------------------------------------------------------------------------------------------------------------------------------
Worldwide Growth Portfolio:
Annuity contracts in accumulation 7,472,252 9,935,954 46,565,049 36,629,095 43,134,650
- ------------------------------------------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund:
Annuity contracts in accumulation (181,265) (506,254) 238,693 744,947 557,741
- ------------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust Fund:
Annuity contracts in accumulation (48,656) (281,919) (134,799) 147,120 91,921
- ------------------------------------------------------------------------------------------------------------------------------------
MFS Funds:
Global Government Series: (1)
Annuity contracts in accumulation (2,695) 38,917 (15,868) (54,785) (25,048)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return Series:
Annuity contracts in accumulation 641,775 1,378,265 405,262 (973,003) 283,260
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Funds:
Aggressive Growth Fund/VA: (2)
Annuity contracts in accumulation 2,213,791 285,448 1,664,932 1,379,484 3,523,811
- ------------------------------------------------------------------------------------------------------------------------------------
Global Securities Fund/VA: (3)
Annuity contracts in accumulation 54,469 72,806 1,027,589 954,783 1,071,958
- ------------------------------------------------------------------------------------------------------------------------------------
Main Street Growth & Income Fund/VA: (4)
Annuity contracts in accumulation (22,341) (183,690) 2,163,466 2,347,156 2,294,874
- ------------------------------------------------------------------------------------------------------------------------------------
Strategic Bond Fund/VA: (5)
Annuity contracts in accumulation (83,743) 519 (63,957) (64,476) 60,293
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners, Inc. (PPI):
PPI MFS Emerging Equities Portfolio:
Annuity contracts in accumulation 9,731,085 6,507,986 13,903,434 7,395,448 16,975,271
- ------------------------------------------------------------------------------------------------------------------------------------
PPI MFS Research Growth Portfolio:
Annuity contracts in accumulation 1,112,811 2,930,826 6,226,480 3,295,654 4,166,173
- ------------------------------------------------------------------------------------------------------------------------------------
PPI MFS Value Equity Portfolio:
Annuity contracts in accumulation 453,164 557,253 3,315,018 2,757,765 3,346,643
- ------------------------------------------------------------------------------------------------------------------------------------
PPI Scudder International Growth Portfolio:
Annuity contracts in accumulation 899,781 50,071 193,816 143,745 1,089,107
- ------------------------------------------------------------------------------------------------------------------------------------
PPI T. Rowe Price Growth Equity Portfolio:
Annuity contracts in accumulation 1,152,503 6,151,086 10,430,175 4,279,089 5,730,606
- ------------------------------------------------------------------------------------------------------------------------------------
Total Variable Annuity Account I $69,327,620 $129,005,870 $256,846,161 $127,840,291 $232,436,463
====================================================================================================================================
</TABLE>
(1) - Effective May 1, 1999, MFS Worldwide Government Series' name changed to
MFS Global Government Series.
(2) - Effective May 1, 1999, Oppenheimer Aggressive Growth Fund's name changed
to Oppenheimer Aggressive Growth Fund/VA.
(3) - Effective May 1, 1999, Oppenheimer Global Securities Fund's name changed
to Oppenheimer Global Securities Fund/VA.
(4) - Effective May 1, 1999, Oppenheimer Growth & Income Fund's name changed to
Oppenheimer Main Street Growth & Income Fund/VA.
(5) - Effective May 1, 1999, Oppenheimer Strategic Bond Fund's name changed to
Oppenheimer Strategic Bond Fund/VA.
S-16
<PAGE>
Variable Annuity Account I
Notes to Financial Statements - December 31, 1999 (continued):
6. Supplemental Information to Statements of Changes in Net Assets
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Year Ended December 31, 1999 Net
Net Change in
Net Realized Unrealized
Investment Gain (Loss) Gain (Loss)
Income on Investments on Investments
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aetna Ascent VP:
Annuity contracts in accumulation $78,549 ($11,628) $103,391
- -------------------------------------------------------------------------------------
Aetna Balanced VP, Inc.:
Annuity contracts in accumulation 990,198 5,130 (50,811)
- -------------------------------------------------------------------------------------
Aetna Bond VP:
Annuity contracts in accumulation 440,646 (119,081) (521,390)
- -------------------------------------------------------------------------------------
Aetna Crossroads VP:
Annuity contracts in accumulation 35,935 4,419 24,793
- -------------------------------------------------------------------------------------
Aetna Growth and Income VP:
Annuity contracts in accumulation 4,996,495 (657,500) (132,794)
Annuity contracts in payment period
- -------------------------------------------------------------------------------------
Aetna Growth VP:
Annuity contracts in accumulation 167,541 1,084,228 161,127
Annuity contracts in payment period
- -------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP:
Annuity contracts in accumulation 474,870 2,216,136 359,366
- -------------------------------------------------------------------------------------
Aetna International VP:
Annuity contracts in accumulation 18,684 34,262 34,705
- -------------------------------------------------------------------------------------
Aetna Legacy VP:
Annuity contracts in accumulation 80,269 20,301 (2,308)
Annuity contracts in payment period
- -------------------------------------------------------------------------------------
Aetna Money Market VP:
Annuity contracts in accumulation 793,868 368,292 12,597
- -------------------------------------------------------------------------------------
Aetna Real Estate Securities VP:
Annuity contracts in accumulation 1,524 20,333 (3,841)
- -------------------------------------------------------------------------------------
Aetna Small Company VP:
Annuity contracts in accumulation (3,118) 587,060 193,821
- -------------------------------------------------------------------------------------
Aetna Value Opportunity VP:
Annuity contracts in accumulation 123,259 795,728 (308,982)
- -------------------------------------------------------------------------------------
Alger American Funds:
Balanced Portfolio:
Annuity contracts in accumulation 83,359 41,351 244,632
- -------------------------------------------------------------------------------------
Income and Growth Portfolio:
Annuity contracts in accumulation 173,782 215,701 1,074,858
- -------------------------------------------------------------------------------------
Leveraged AllCap Portfolio:
Annuity contracts in accumulation 215,868 335,741 1,990,765
- -------------------------------------------------------------------------------------
American Century VP Funds:
Balanced Fund:
Annuity contracts in accumulation 58,734 7,487 (31,760)
- -------------------------------------------------------------------------------------
International Fund:
Annuity contracts in accumulation (26,431) 96,684 925,870
- -------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio:
Annuity contracts in accumulation 25,661 433 2,623
- -------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------
Year Ended December 31, 1999 Net
Increase (Decrease) Net Assets
in Net Assets ----------------------------
from Unit Beginning End
Transactions of Year of Year
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aetna Ascent VP:
Annuity contracts in accumulation ($168,403) $1,468,439 $1,470,348
- ----------------------------------------------------------------------------------------
Aetna Balanced VP, Inc.:
Annuity contracts in accumulation 397,681 7,338,678 8,680,876
- ----------------------------------------------------------------------------------------
Aetna Bond VP:
Annuity contracts in accumulation 982,700 8,211,438 8,994,313
- ----------------------------------------------------------------------------------------
Aetna Crossroads VP:
Annuity contracts in accumulation (70,653) 785,501 779,995
- ----------------------------------------------------------------------------------------
Aetna Growth and Income VP:
Annuity contracts in accumulation (4,172,788) 31,263,322 31,151,698
Annuity contracts in payment period 34,375 179,412
- ----------------------------------------------------------------------------------------
Aetna Growth VP:
Annuity contracts in accumulation (2,450,633) 6,066,474 5,009,118
Annuity contracts in payment period 36,974 56,593
- ----------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP:
Annuity contracts in accumulation (2,478,317) 14,945,637 15,517,692
- ----------------------------------------------------------------------------------------
Aetna International VP:
Annuity contracts in accumulation 90,852 44,011 222,514
- ----------------------------------------------------------------------------------------
Aetna Legacy VP:
Annuity contracts in accumulation 83,565 1,628,799 1,694,193
Annuity contracts in payment period 25,668 142,101
- ----------------------------------------------------------------------------------------
Aetna Money Market VP:
Annuity contracts in accumulation 8,960,205 26,452,214 36,587,176
- ----------------------------------------------------------------------------------------
Aetna Real Estate Securities VP:
Annuity contracts in accumulation 7,726 39,671 65,413
- ----------------------------------------------------------------------------------------
Aetna Small Company VP:
Annuity contracts in accumulation (1,141,097) 3,767,223 3,403,889
- ----------------------------------------------------------------------------------------
Aetna Value Opportunity VP:
Annuity contracts in accumulation (2,977,883) 6,259,793 3,891,915
- ----------------------------------------------------------------------------------------
Alger American Funds:
Balanced Portfolio:
Annuity contracts in accumulation (94,149) 1,404,059 1,679,252
- ----------------------------------------------------------------------------------------
Income and Growth Portfolio:
Annuity contracts in accumulation (662,264) 4,075,424 4,877,501
- ----------------------------------------------------------------------------------------
Leveraged AllCap Portfolio:
Annuity contracts in accumulation (487,379) 3,634,760 5,689,755
- ----------------------------------------------------------------------------------------
American Century VP Funds:
Balanced Fund:
Annuity contracts in accumulation (150,252) 557,006 441,215
- ----------------------------------------------------------------------------------------
International Fund:
Annuity contracts in accumulation (331,144) 1,852,446 2,517,425
- ----------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio:
Annuity contracts in accumulation 13,994 265,177 307,888
- ----------------------------------------------------------------------------------------
</TABLE>
S-17
<PAGE>
Variable Annuity Account I
Notes to Financial Statements - December 31, 1999 (continued):
6. Supplemental Information to Statements of Changes in Net Assets (continued):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Year Ended December 31, 1999 Net
Net Change in
Net Realized Unrealized
Investment Gain (Loss) Gain (Loss)
Income on Investments on Investments
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federated Insurance Series:
American Leaders Fund II:
Annuity contracts in accumulation $13,015,923 $5,604,793 ($ 10,933,358)
Annuity contracts in payment period
- ---------------------------------------------------------------------------------------------------------
Equity Income Fund II:
Annuity contracts in accumulation 393,016 972,750 3,321,522
Annuity contracts in payment period
- ---------------------------------------------------------------------------------------------------------
Growth Strategies Fund II:
Annuity contracts in accumulation (596,338) 1,566,736 23,745,150
- ---------------------------------------------------------------------------------------------------------
High Income Bond Fund II:
Annuity contracts in accumulation 2,067,704 221,224 (2,030,946)
Annuity contracts in payment period
- ---------------------------------------------------------------------------------------------------------
International Equity Fund II:
Annuity contracts in accumulation 364,268 1,098,219 20,139,978
Annuity contracts in payment period
- ---------------------------------------------------------------------------------------------------------
Prime Money Fund II:
Annuity contracts in accumulation 169,401 1,316 (1,316)
- ---------------------------------------------------------------------------------------------------------
U.S. Government Securities Fund II:
Annuity contracts in accumulation 226,437 106,304 (459,976)
- ---------------------------------------------------------------------------------------------------------
Utility Fund II:
Annuity contracts in accumulation 1,555,392 770,116 (2,277,513)
Annuity contracts in payment period
- ---------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio:
Annuity contracts in accumulation 1,677,952 3,486,868 (2,841,512)
- ---------------------------------------------------------------------------------------------------------
Growth Portfolio:
Annuity contracts in accumulation 3,819,714 1,611,830 8,384,656
- ---------------------------------------------------------------------------------------------------------
High Income Portfolio:
Annuity contracts in accumulation 1,417,291 (930,592) 659,985
- ---------------------------------------------------------------------------------------------------------
Overseas Portfolio:
Annuity contracts in accumulation 104,011 384,636 1,225,541
- ---------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Product Fund II:
Asset Manager Portfolio:
Annuity contracts in accumulation 466,589 146,750 129,223
- ---------------------------------------------------------------------------------------------------------
Contrafund Portfolio:
Annuity contracts in accumulation 1,040,189 2,453,468 5,557,780
- ---------------------------------------------------------------------------------------------------------
Index 500 Portfolio:
Annuity contracts in accumulation 71,223 7,342,272 1,576,927
- ---------------------------------------------------------------------------------------------------------
Investment Grade Bond Portfolio:
Annuity contracts in accumulation 46,916 10,756 (87,465)
- ---------------------------------------------------------------------------------------------------------
Janus Aspen Series:
Aggressive Growth Portfolio:
Annuity contracts in accumulation 450,835 7,613,725 12,263,855
- ---------------------------------------------------------------------------------------------------------
Balanced Portfolio:
Annuity contracts in accumulation 209,739 2,367,281 2,767,397
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1999 Net
Increase (Decrease) Net Assets
in Net Assets ---------
from Unit Beginning End
Transactions of Year of Year
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federated Insurance Series:
American Leaders Fund II:
Annuity contracts in accumulation ($ 8,870,497) $147,843,450 $146,474,824
Annuity contracts in payment period 117,375 302,862
- ----------------------------------------------------------------------------------------------------------------
Equity Income Fund II:
Annuity contracts in accumulation (931,269) 28,317,427 32,004,404
Annuity contracts in payment period 42,143 111,185
- ----------------------------------------------------------------------------------------------------------------
Growth Strategies Fund II:
Annuity contracts in accumulation 158,077 35,149,425 60,023,050
- ----------------------------------------------------------------------------------------------------------------
High Income Bond Fund II:
Annuity contracts in accumulation (2,819,396) 29,644,378 27,090,172
Annuity contracts in payment period 25,999 18,791
- ----------------------------------------------------------------------------------------------------------------
International Equity Fund II:
Annuity contracts in accumulation (1,739,062) 27,616,968 47,471,626
Annuity contracts in payment period 28,562 37,307
- ----------------------------------------------------------------------------------------------------------------
Prime Money Fund II:
Annuity contracts in accumulation 362,815 4,666,589 5,198,805
- ----------------------------------------------------------------------------------------------------------------
U.S. Government Securities Fund II:
Annuity contracts in accumulation (515,189) 6,526,831 5,884,407
- ----------------------------------------------------------------------------------------------------------------
Utility Fund II:
Annuity contracts in accumulation (1,869,861) 26,418,108 24,581,727
Annuity contracts in payment period 64,831 79,346
- ----------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio:
Annuity contracts in accumulation (2,084,806) 51,181,501 51,420,003
- ----------------------------------------------------------------------------------------------------------------
Growth Portfolio:
Annuity contracts in accumulation 190,468 38,326,577 52,333,245
- ----------------------------------------------------------------------------------------------------------------
High Income Portfolio:
Annuity contracts in accumulation (1,677,246) 17,442,220 16,911,658
- ----------------------------------------------------------------------------------------------------------------
Overseas Portfolio:
Annuity contracts in accumulation (464,372) 4,136,808 5,386,624
- ----------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Product Fund II:
Asset Manager Portfolio:
Annuity contracts in accumulation (729,768) 8,131,050 8,143,844
- ----------------------------------------------------------------------------------------------------------------
Contrafund Portfolio:
Annuity contracts in accumulation 111,080 39,601,618 48,764,135
- ----------------------------------------------------------------------------------------------------------------
Index 500 Portfolio:
Annuity contracts in accumulation 1,633,226 46,168,328 56,791,976
- ----------------------------------------------------------------------------------------------------------------
Investment Grade Bond Portfolio:
Annuity contracts in accumulation (207,094) 1,219,839 982,952
- ----------------------------------------------------------------------------------------------------------------
Janus Aspen Series:
Aggressive Growth Portfolio:
Annuity contracts in accumulation 8,020,415 10,675,204 39,024,034
- ----------------------------------------------------------------------------------------------------------------
Balanced Portfolio:
Annuity contracts in accumulation 511,393 20,730,112 26,585,922
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
S-18
<PAGE>
Variable Annuity Account I
Notes to Financial Statements - December 31, 1999 (continued):
6. Supplemental Information to Statements of Changes in Net Assets (continued):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Year Ended December 31, 1999 Net
Net Change in
Net Realized Unrealized
Investment Gain (Loss) Gain (Loss)
Income on Investments on Investments
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Flexible Income Portfolio:
Annuity contracts in accumulation $272,048 ($8,459) ($ 256,151)
- -----------------------------------------------------------------------------------------------
Growth Portfolio:
Annuity contracts in accumulation (159,758) 6,069,619 3,897,830
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------------
Worldwide Growth Portfolio:
Annuity contracts in accumulation (966,697) 7,472,252 36,629,095
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund:
Annuity contracts in accumulation (5,941) (181,265) 744,947
- -----------------------------------------------------------------------------------------------
Lexington Natural Resources Trust Fund:
Annuity contracts in accumulation (6,543) (48,656) 147,120
- -----------------------------------------------------------------------------------------------
MFS Funds:
Global Government Series: (1)
Annuity contracts in accumulation 32,432 (2,695) (54,785)
- -----------------------------------------------------------------------------------------------
Total Return Series:
Annuity contracts in accumulation 614,488 641,775 (973,003)
- -----------------------------------------------------------------------------------------------
Oppenheimer Funds:
Aggressive Growth Fund/VA: (2)
Annuity contracts in accumulation (69,464) 2,213,791 1,379,484
- -----------------------------------------------------------------------------------------------
Global Securities Fund/VA: (3)
Annuity contracts in accumulation 62,706 54,469 954,783
- -----------------------------------------------------------------------------------------------
Main Street Growth & Income Fund/VA: (4)
Annuity contracts in accumulation (29,941) (22,341) 2,347,156
- -----------------------------------------------------------------------------------------------
Strategic Bond Fund/VA: (5)
Annuity contracts in accumulation 208,512 (83,743) (64,476)
- -----------------------------------------------------------------------------------------------
Portfolio Partners, Inc. (PPI):
PPI MFS Emerging Equities Portfolio:
Annuity contracts in accumulation (151,262) 9,731,085 7,395,448
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------------
PPI MFS Research Growth Portfolio:
Annuity contracts in accumulation (242,292) 1,112,811 3,295,654
- -----------------------------------------------------------------------------------------------
PPI MFS Value Equity Portfolio:
Annuity contracts in accumulation 135,714 453,164 2,757,765
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------------
PPI Scudder International Growth Portfolio:
Annuity contracts in accumulation 45,581 899,781 143,745
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------------
PPI T. Rowe Price Growth Equity Portfolio:
Annuity contracts in accumulation 299,014 1,152,503 4,279,089
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------------
Total Variable Annuity Account I $35,268,552 $69,327,620 $127,840,291
===============================================================================================
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Year Ended December 31, 1999 Net
Increase (Decrease) Net Assets
in Net Assets ----------
from Unit Beginning End
Transactions of Year of Year
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Flexible Income Portfolio:
Annuity contracts in accumulation $123,347 $4,655,365 $4,786,150
- -----------------------------------------------------------------------------------------------------
Growth Portfolio:
Annuity contracts in accumulation 9,390,049 18,191,718 37,367,199
Annuity contracts in payment period 37,117 59,376
- -----------------------------------------------------------------------------------------------------
Worldwide Growth Portfolio:
Annuity contracts in accumulation (2,335,260) 70,349,793 111,093,250
Annuity contracts in payment period 0 55,933
- -----------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund:
Annuity contracts in accumulation (297,528) 627,133 887,346
- -----------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust Fund:
Annuity contracts in accumulation (267,199) 869,806 694,528
- -----------------------------------------------------------------------------------------------------
MFS Funds:
Global Government Series: (1)
Annuity contracts in accumulation (351,386) 765,918 389,484
- -----------------------------------------------------------------------------------------------------
Total Return Series:
Annuity contracts in accumulation (1,229,482) 16,393,724 15,447,502
- -----------------------------------------------------------------------------------------------------
Oppenheimer Funds:
Aggressive Growth Fund/VA: (2)
Annuity contracts in accumulation 838,692 3,393,073 7,755,576
- -----------------------------------------------------------------------------------------------------
Global Securities Fund/VA: (3)
Annuity contracts in accumulation (220,665) 2,064,889 2,916,182
- -----------------------------------------------------------------------------------------------------
Main Street Growth & Income Fund/VA: (4)
Annuity contracts in accumulation (294,623) 11,506,303 13,506,554
- -----------------------------------------------------------------------------------------------------
Strategic Bond Fund/VA: (5)
Annuity contracts in accumulation (254,540) 4,445,909 4,251,662
- -----------------------------------------------------------------------------------------------------
Portfolio Partners, Inc. (PPI):
PPI MFS Emerging Equities Portfolio:
Annuity contracts in accumulation (2,441,478) 36,930,956 51,452,372
Annuity contracts in payment period 0 12,377
- -----------------------------------------------------------------------------------------------------
PPI MFS Research Growth Portfolio:
Annuity contracts in accumulation (2,059,519) 20,299,859 22,406,513
- -----------------------------------------------------------------------------------------------------
PPI MFS Value Equity Portfolio:
Annuity contracts in accumulation 2,226,423 5,846,092 11,377,949
Annuity contracts in payment period 35,772 76,981
- -----------------------------------------------------------------------------------------------------
PPI Scudder International Growth Portfolio:
Annuity contracts in accumulation (122,023) 1,263,880 2,190,372
Annuity contracts in payment period 0 40,592
- -----------------------------------------------------------------------------------------------------
PPI T. Rowe Price Growth Equity Portfolio:
Annuity contracts in accumulation (2,635,807) 29,594,758 32,676,922
Annuity contracts in payment period 0 12,635
- -----------------------------------------------------------------------------------------------------
Total Variable Annuity Account I ($15,500,324) $891,504,497 $1,108,440,636
=====================================================================================================
</TABLE>
(1) - Effective May 1, 1999, MFS Worldwide Government Series' name changed to
MFS Global Government Series.
(2) - Effective May 1, 1999, Oppenheimer Aggressive Growth Fund's name changed
to Oppenheimer Aggressive Growth Fund/VA.
(3) - Effective May 1, 1999, Oppenheimer Global Securities Fund's name changed
to Oppenheimer Global Securities Fund/VA.
(4) - Effective May 1, 1999, Oppenheimer Growth & Income Fund's name changed to
Oppenheimer Main Street Growth & Income Fund/VA.
S-19
<PAGE>
Variable Annuity Account I
Notes to Financial Statements - December 31, 1999 (continued):
6. Supplemental Information to Statements of Changes in Net Assets (continued):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Year Ended December 31, 199 Net
Net Change in
Net Realized Unrealized
Investment Gain (Loss) Gain (Loss)
Income on Investments on Investments
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aetna Ascent VP: (1)
Annuity contracts in accumulation $52,298 $4,383 ($32,081)
- ---------------------------------------------------------------------------------------
Aetna Balanced VP: (2)
Annuity contracts in accumulation 909,957 95,814 (129,891)
- ---------------------------------------------------------------------------------------
Aetna Bond VP: (3)
Annuity contracts in accumulation 358,751 99,148 (107,929)
- ---------------------------------------------------------------------------------------
Aetna Crossroads VP: (4)
Annuity contracts in accumulation 21,126 14,619 (3,602)
- ---------------------------------------------------------------------------------------
Aetna Growth and Income VP: (5)
Annuity contracts in accumulation 4,340,565 (785,430) (1,018,692)
Annuity contracts in payment period
- ---------------------------------------------------------------------------------------
Aetna Growth VP: (6)
Annuity contracts in accumulation (38,465) (69,540) 1,049,101
Annuity contracts in payment period
- ---------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP: (7)
Annuity contracts in accumulation 535,601 654,268 1,150,576
- ---------------------------------------------------------------------------------------
Aetna International VP: (8)
Annuity contracts in accumulation 1,899 (1,435) 2,750
- ---------------------------------------------------------------------------------------
Aetna Legacy VP: (9)
Annuity contracts in accumulation 54,238 13,926 (10,602)
Annuity contracts in payment period
- ---------------------------------------------------------------------------------------
Aetna Money Market VP: (10)
Annuity contracts in accumulation 519,719 313,569 12,594
- ---------------------------------------------------------------------------------------
Aetna Real Estate Securities VP: (11)
Annuity contracts in accumulation 1,569 (2,322) (4,325)
- ---------------------------------------------------------------------------------------
Aetna Small Company VP: (12)
Annuity contracts in accumulation (12,813) (676,728) 657,427
- ---------------------------------------------------------------------------------------
Aetna Value Opportunity VP: (13)
Annuity contracts in accumulation 11,224 (47,855) 754,020
- ---------------------------------------------------------------------------------------
Alger American Funds:
Balanced Portfolio:
Annuity contracts in accumulation 100,972 69,331 178,470
- ---------------------------------------------------------------------------------------
Income and Growth Portfolio:
Annuity contracts in accumulation 325,406 145,054 530,428
- ---------------------------------------------------------------------------------------
Leveraged AllCap Portfolio:
Annuity contracts in accumulation 97,416 208,592 1,098,573
- ---------------------------------------------------------------------------------------
American Century VP Funds:
Balanced Fund:
Annuity contracts in accumulation 72,635 9,574 (2,689)
- ---------------------------------------------------------------------------------------
International Fund:
Annuity contracts in accumulation 99,463 91,984 119,096
- ---------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio:
Annuity contracts in accumulation 17,403 (2,845) 11,262
- ---------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------
Year Ended December 31, 1998 Net
Increase (Decrease) Net Assets
in Net Assets ----------
from Unit Beginning End
Transactions of Year of Year
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aetna Ascent VP: (1)
Annuity contracts in accumulation $ 359,326 $ 1,084,513 $ 1,468,439
- -----------------------------------------------------------------------------------------
Aetna Balanced VP: (2)
Annuity contracts in accumulation 1,988,879 4,473,919 7,338,678
- -----------------------------------------------------------------------------------------
Aetna Bond VP: (3)
Annuity contracts in accumulation 4,840,848 3,020,620 8,211,438
- -----------------------------------------------------------------------------------------
Aetna Crossroads VP: (4)
Annuity contracts in accumulation 338,325 415,033 785,501
- -----------------------------------------------------------------------------------------
Aetna Growth and Income VP: (5)
Annuity contracts in accumulation 13,277,579 15,483,675 31,263,322
Annuity contracts in payment period 0 34,375
- -----------------------------------------------------------------------------------------
Aetna Growth VP: (6)
Annuity contracts in accumulation 4,256,569 905,783 6,066,474
Annuity contracts in payment period 0 36,974
- -----------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP: (7)
Annuity contracts in accumulation 8,689,925 3,915,267 14,945,637
- -----------------------------------------------------------------------------------------
Aetna International VP: (8)
Annuity contracts in accumulation 40,797 0 44,011
- -----------------------------------------------------------------------------------------
Aetna Legacy VP: (9)
Annuity contracts in accumulation 769,986 793,678 1,628,799
Annuity contracts in payment period 33,241 25,668
- -----------------------------------------------------------------------------------------
Aetna Money Market VP: (10)
Annuity contracts in accumulation 10,238,451 15,367,881 26,452,214
- -----------------------------------------------------------------------------------------
Aetna Real Estate Securities VP: (11)
Annuity contracts in accumulation 44,749 0 39,671
- -----------------------------------------------------------------------------------------
Aetna Small Company VP: (12)
Annuity contracts in accumulation 1,224,164 2,575,173 3,767,223
- -----------------------------------------------------------------------------------------
Aetna Value Opportunity VP: (13)
Annuity contracts in accumulation 4,650,918 891,486 6,259,793
- -----------------------------------------------------------------------------------------
Alger American Funds:
Balanced Portfolio:
Annuity contracts in accumulation (345,746) 1,401,032 1,404,059
- -----------------------------------------------------------------------------------------
Income and Growth Portfolio:
Annuity contracts in accumulation (693,378) 3,767,914 4,075,424
- -----------------------------------------------------------------------------------------
Leveraged AllCap Portfolio:
Annuity contracts in accumulation (689,303) 2,919,482 3,634,760
- -----------------------------------------------------------------------------------------
American Century VP Funds:
Balanced Fund:
Annuity contracts in accumulation (179,238) 656,724 557,006
- -----------------------------------------------------------------------------------------
International Fund:
Annuity contracts in accumulation (505,703) 2,047,606 1,852,446
- -----------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio:
Annuity contracts in accumulation 206,857 32,500 265,177
- -----------------------------------------------------------------------------------------
</TABLE>
S-20
<PAGE>
Variable Annuity Account I
Notes to Financial Statements - December 31, 1999 (continued):
6. Supplemental Information to Statements of Changes in Net Assets (continued):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Year Ended December 31, 1998 Net
Net Change in
Net Realized Unrealized
Investment Gain (Loss) Gain (Loss)
Income on Investments on Investments
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio:
Annuity contracts in accumulation $1,652,978 $2,847,387 ($596,181)
- -----------------------------------------------------------------------------------------------------------
Growth Portfolio:
Annuity contracts in accumulation 2,262,813 2,162,435 4,540,000
- -----------------------------------------------------------------------------------------------------------
High Income Portfolio:
Annuity contracts in accumulation 1,252,399 (115,300) (2,387,859)
- -----------------------------------------------------------------------------------------------------------
Overseas Portfolio:
Annuity contracts in accumulation 179,349 147,542 48,533
- -----------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Product Fund II:
Asset Manager Portfolio:
Annuity contracts in accumulation 438,313 20,301 312,500
- -----------------------------------------------------------------------------------------------------------
Contrafund Portfolio:
Annuity contracts in accumulation 1,107,754 1,967,856 5,167,185
- -----------------------------------------------------------------------------------------------------------
Index 500 Portfolio:
Annuity contracts in accumulation 492,578 2,528,925 5,045,517
- -----------------------------------------------------------------------------------------------------------
Investment Grade Bond Portfolio:
Annuity contracts in accumulation 55,271 9,533 28,134
- -----------------------------------------------------------------------------------------------------------
Insurance Management Series:
American Leaders Fund II:
Annuity contracts in accumulation 6,222,251 1,619,186 11,237,298
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------------------------
Equity Income Fund II:
Annuity contracts in accumulation (203,953) 221,389 2,875,619
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------------------------
Growth Strategies Fund II:
Annuity contracts in accumulation 1,231,912 432,856 2,649,733
- -----------------------------------------------------------------------------------------------------------
High Income Bond Fund II:
Annuity contracts in accumulation 387,085 262,932 (467,855)
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------------------------
International Equity Fund II:
Annuity contracts in accumulation (330,715) 487,183 4,543,111
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------------------------
Prime Money Fund II:
Annuity contracts in accumulation 149,040 0 1,316
- -----------------------------------------------------------------------------------------------------------
U.S. Government Securities Fund II:
Annuity contracts in accumulation 16,106 119,456 216,175
- -----------------------------------------------------------------------------------------------------------
Utility Fund II:
Annuity contracts in accumulation 1,080,011 377,474 1,366,279
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------------------------
Janus Aspen Series:
Aggressive Growth Portfolio:
Annuity contracts in accumulation (115,274) 2,566,801 405,622
- -----------------------------------------------------------------------------------------------------------
Balanced Portfolio:
Annuity contracts in accumulation 421,237 494,384 3,179,750
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1998 Net
Increase (Decrease) Net Assets
in Net Assets ----------
from Unit Beginning End
Transactions of Year of Year
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio:
Annuity contracts in accumulation $12,941,401 $ 34,335,916 $ 51,181,501
- -------------------------------------------------------------------------------------------------------------
Growth Portfolio:
Annuity contracts in accumulation 10,721,202 18,640,127 38,326,577
- -------------------------------------------------------------------------------------------------------------
High Income Portfolio:
Annuity contracts in accumulation 7,278,178 11,414,802 17,442,220
- -------------------------------------------------------------------------------------------------------------
Overseas Portfolio:
Annuity contracts in accumulation 772,708 2,988,676 4,136,808
- -------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Product Fund II:
Asset Manager Portfolio:
Annuity contracts in accumulation 3,571,525 3,788,411 8,131,050
- -------------------------------------------------------------------------------------------------------------
Contrafund Portfolio:
Annuity contracts in accumulation 6,461,571 24,897,252 39,601,618
- -------------------------------------------------------------------------------------------------------------
Index 500 Portfolio:
Annuity contracts in accumulation 15,200,754 22,900,554 46,168,328
- -------------------------------------------------------------------------------------------------------------
Investment Grade Bond Portfolio:
Annuity contracts in accumulation (314,286) 1,441,187 1,219,839
- -------------------------------------------------------------------------------------------------------------
Insurance Management Series:
American Leaders Fund II:
Annuity contracts in accumulation 14,814,848 114,050,410 147,843,450
Annuity contracts in payment period 16,832 117,375
- -------------------------------------------------------------------------------------------------------------
Equity Income Fund II:
Annuity contracts in accumulation 12,524,130 12,942,385 28,317,427
Annuity contracts in payment period 0 42,143
- -------------------------------------------------------------------------------------------------------------
Growth Strategies Fund II:
Annuity contracts in accumulation 6,249,006 24,585,918 35,149,425
- -------------------------------------------------------------------------------------------------------------
High Income Bond Fund II:
Annuity contracts in accumulation 3,527,318 25,944,158 29,644,378
Annuity contracts in payment period 16,739 25,999
- -------------------------------------------------------------------------------------------------------------
International Equity Fund II:
Annuity contracts in accumulation 2,840,676 20,105,275 27,616,968
Annuity contracts in payment period 0 28,562
- -------------------------------------------------------------------------------------------------------------
Prime Money Fund II:
Annuity contracts in accumulation 757,047 3,759,186 4,666,589
- -------------------------------------------------------------------------------------------------------------
U.S. Government Securities Fund II:
Annuity contracts in accumulation 530,017 5,645,077 6,526,831
- -------------------------------------------------------------------------------------------------------------
Utility Fund II:
Annuity contracts in accumulation 2,535,912 21,104,322 26,418,108
Annuity contracts in payment period 18,941 64,831
- -------------------------------------------------------------------------------------------------------------
Janus Aspen Series:
Aggressive Growth Portfolio:
Annuity contracts in accumulation 1,263,440 6,554,615 10,675,204
- -------------------------------------------------------------------------------------------------------------
Balanced Portfolio:
Annuity contracts in accumulation 8,908,355 7,726,386 20,730,112
- -------------------------------------------------------------------------------------------------------------
</TABLE>
S-21
<PAGE>
Variable Annuity Account I
Notes to Financial Statements - December 31, 1999 (continued):
6. Supplemental Information to Statements of Changes in Net Assets (continued):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Year Ended December 31, 1998 Net
Net Change in
Net Realized Unrealized
Investment Gain (Loss) Gain (Loss)
Income on Investments on Investments
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Flexible Income Portfolio:
Annuity contracts in accumulation $189,921 $77,190 ($43,522)
- -----------------------------------------------------------------------------------------------
Growth Portfolio:
Annuity contracts in accumulation 685,730 1,082,289 2,279,102
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------------
Worldwide Growth Portfolio:
Annuity contracts in accumulation 1,500,762 6,416,496 5,202,333
- -----------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund:
Annuity contracts in accumulation 54,895 (141,767) (203,825)
- -----------------------------------------------------------------------------------------------
Lexington Natural Resources Trust Fund:
Annuity contracts in accumulation 57,565 (7,059) (293,131)
- -----------------------------------------------------------------------------------------------
MFS Funds:
Total Return Series:
Annuity contracts in accumulation 137,577 250,935 782,698
- -----------------------------------------------------------------------------------------------
Worldwide Government Series:
Annuity contracts in accumulation (771) 8,093 34,472
- -----------------------------------------------------------------------------------------------
Oppenheimer Funds:
Aggressive Growth Fund:
Annuity contracts in accumulation 1,809 155,613 298,445
- -----------------------------------------------------------------------------------------------
Global Securities Fund:
Annuity contracts in accumulation 124,660 (38,612) 65,980
- -----------------------------------------------------------------------------------------------
Growth & Income Fund:
Annuity contracts in accumulation 335,127 (388,568) (320,600)
- -----------------------------------------------------------------------------------------------
Strategic Bond Fund:
Annuity contracts in accumulation 21,812 (9,887) 7,313
- -----------------------------------------------------------------------------------------------
Portfolio Partners, Inc. (PPI):
PPI MFS Emerging Equities Portfolio:
Annuity contracts in accumulation (346,360) 882,018 6,779,827
- -----------------------------------------------------------------------------------------------
PPI MFS Research Growth Portfolio:
Annuity contracts in accumulation (234,149) 325,217 3,166,582
- -----------------------------------------------------------------------------------------------
PPI MFS Value Equity Portfolio:
Annuity contracts in accumulation (63,228) 243,533 533,057
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------------
PPI Scudder International Growth Portfolio:
Annuity contracts in accumulation (7,335) 41,054 50,531
- -----------------------------------------------------------------------------------------------
PPI T. Rowe Price Growth Equity Portfolio:
Annuity contracts in accumulation (215,920) 336,790 5,719,077
- -----------------------------------------------------------------------------------------------
Total Variable Annuity Account I $26,010,214 $25,517,782 $66,477,702
===============================================================================================
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Year Ended December 31, 1998 Net
Increase (Decrease) Net Assets
in Net Assets ----------
from Unit Beginning End
Transactions of Year of Year
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Flexible Income Portfolio:
Annuity contracts in accumulation $2,430,909 $2,000,867 $4,655,365
- ---------------------------------------------------------------------------------------------------
Growth Portfolio:
Annuity contracts in accumulation 4,104,069 10,077,645 18,191,718
Annuity contracts in payment period 0 37,117
- ---------------------------------------------------------------------------------------------------
Worldwide Growth Portfolio:
Annuity contracts in accumulation 12,501,656 44,728,546 70,349,793
- ---------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund:
Annuity contracts in accumulation (312,229) 1,230,059 627,133
- ---------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust Fund:
Annuity contracts in accumulation (322,903) 1,435,334 869,806
- ---------------------------------------------------------------------------------------------------
MFS Funds:
Total Return Series:
Annuity contracts in accumulation 8,404,056 6,818,458 16,393,724
- ---------------------------------------------------------------------------------------------------
Worldwide Government Series:
Annuity contracts in accumulation 190,257 533,867 765,918
- ---------------------------------------------------------------------------------------------------
Oppenheimer Funds:
Aggressive Growth Fund:
Annuity contracts in accumulation 2,135,488 801,718 3,393,073
- ---------------------------------------------------------------------------------------------------
Global Securities Fund:
Annuity contracts in accumulation 902,520 1,010,341 2,064,889
- ---------------------------------------------------------------------------------------------------
Growth & Income Fund:
Annuity contracts in accumulation 7,350,914 4,529,430 11,506,303
- ---------------------------------------------------------------------------------------------------
Strategic Bond Fund:
Annuity contracts in accumulation 3,041,102 1,385,569 4,445,909
- ---------------------------------------------------------------------------------------------------
Portfolio Partners, Inc. (PPI):
PPI MFS Emerging Equities Portfolio:
Annuity contracts in accumulation 4,339,155 25,276,316 36,930,956
- ---------------------------------------------------------------------------------------------------
PPI MFS Research Growth Portfolio:
Annuity contracts in accumulation 2,849,219 14,192,990 20,299,859
- ---------------------------------------------------------------------------------------------------
PPI MFS Value Equity Portfolio:
Annuity contracts in accumulation 2,972,891 2,195,611 5,846,092
Annuity contracts in payment period 0 35,772
- ---------------------------------------------------------------------------------------------------
PPI Scudder International Growth Portfolio:
Annuity contracts in accumulation 1,154,164 25,466 1,263,880
- ---------------------------------------------------------------------------------------------------
PPI T. Rowe Price Growth Equity Portfolio:
Annuity contracts in accumulation 1,997,336 21,757,475 29,594,758
- ---------------------------------------------------------------------------------------------------
Total Variable Annuity Account I $212,836,411 $560,662,388 $891,504,497
===================================================================================================
</TABLE>
S-22
<PAGE>
Variable Annuity Account I
Notes to Financial Statements - December 31, 1999 (continued):
(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 began doing business under
the name Aetna Bond 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 began doing business under
the name 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 began doing business
under the name 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-23
<PAGE>
Independent Auditors' Report
The Board of Directors of Aetna Insurance Company of America and
Contract Owners of Variable Annuity Account I:
We have audited the accompanying statement of assets and liabilities of Aetna
Insurance Company of America Variable Annuity Account I (the "Account") as of
December 31, 1999, and the related statement of operations for the year then
ended, statements of 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, 1999. These financial statements and condensed financial
information are the responsibility of the Account's management. Our
responsibility is to express an opinion on these financial statements and
condensed financial information based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and condensed
financial information are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1999, by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and condensed financial information
referred to above present fairly, in all material respects, the financial
position of Aetna Insurance Company of America Variable Annuity Account I as of
December 31, 1999, the results of its operations for the year then ended,
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, 1999,
in conformity with generally accepted accounting principles.
/s/ KPMG LLP
Hartford, Connecticut
February 11, 2000
S-24
<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, 1999,
1998 and 1997 ................................................ F-3
Balance Sheets as of December 31, 1999 and 1998 ............... F-4
Statements of Changes in Shareholder's Equity for the Years
Ended December 31, 1999, 1998 and 1997 ....................... F-5
Statements of Cash Flows for the Years Ended December 31, 1999,
1998 and 1997 ................................................ 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, 1999 and 1998, 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, 1999. 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, 1999 and 1998, and the results of its operations and
its cash flows for each of the years in the three-year period ended December
31, 1999, in conformity with generally accepted accounting principles.
/s/ KPMG LLP
Hartford, Connecticut
March 22, 2000
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,
--------------------------------
1999 1998 1997
------- ------- -----
<S> <C> <C> <C>
Revenues:
Charges assessed against policyholders $ 15.5 $ 11.5 $ 6.1
Net investment income 10.9 10.4 7.1
Net realized capital (losses) gains (0.3) (0.2) 0.1
Other income 1.5 0.6 0.2
------- ------- -----
Total revenue 27.6 22.3 13.5
------- ------- -----
Benefits and expenses:
Current and future benefits 8.0 9.0 6.5
Operating expenses:
Salaries and related benefits 2.4 2.5 1.6
Other 4.5 3.7 2.1
Amortization of deferred policy acquisition costs 4.6 3.9 0.8
------- ------- -----
Total benefits and expenses 19.5 19.1 11.0
------- ------- -----
Income before income taxes and cumulative
effect adjustment 8.1 3.2 2.5
Income taxes 2.7 0.6 0.8
------- ------- -----
Income before cumulative effect adjustments 5.4 2.6 1.7
Cumulative-effect adjustment, net of tax -- -- 0.5
------- ------- -----
Net income $ 5.4 $ 2.6 $ 1.2
======= ======= =====
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Balance Sheets
(Millions, except share data)
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
-------------- --------------
<S> <C> <C>
Assets
Investments:
Debt securities, available-for-sale, at fair value:
(amortized cost: $132.8 and $138.2) $ 128.3 $ 142.3
Equity securities, available-for-sale, at fair value:
Nonredeemable preferred stock (amortized cost: $1.0 and $3.1) 0.9 3.0
Cash and cash equivalents 22.9 16.5
Deferred policy acquisition costs 58.8 59.9
Accrued investment income 2.0 2.1
Premiums due and other receivables 9.0 13.3
Other assets 0.6 0.4
Separate Accounts assets 1,194.6 1,006.5
-------------- --------------
Total assets $ 1,417.1 $ 1,244.0
============== ==============
Liabilities and Shareholder's Equity
Liabilities:
Policyholders' funds left with the Company 138.8 153.2
Other liabilities 6.5 11.8
Due to parent and affiliates 0.5 0.9
Income taxes
Current 0.7 0.1
Deferred 2.6 0.7
Separate Accounts liabilities 1,194.6 1,006.5
-------------- --------------
Total liabilities 1,343.7 1,173.2
-------------- --------------
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 62.5
Accumulated other comprehensive (loss) income (1.6) 1.2
Retained earnings 10.0 4.6
-------------- --------------
Total shareholder's equity 73.4 70.8
-------------- --------------
Total liabilities and shareholder's equity $ 1,417.1 $ 1,244.0
============== ==============
</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,
------------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Shareholder's equity, beginning of year $ 70.8 $ 52.2 $ 31.3
Comprehensive income
Net income 5.4 2.6 1.2
Other comprehensive income, net of tax
Unrealized (losses) gains on securities
(($4.3) million, $1.5 million and $0.0
million, pretax) (2.8) 1.0 --
----------- ----------- -----------
Total comprehensive income 2.6 3.6 1.2
----------- ----------- -----------
Capital contributions -- 15.0 20.0
Other changes -- -- (0.3)
----------- ----------- -----------
Shareholder's equity, end of year $ 73.4 $ 70.8 $ 52.2
=========== =========== ===========
</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,
-----------------------------------
1999 1998 1997
------- ------- --------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $ 5.4 $ 2.6 $ 1.2
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Net amortization of discount on debt securities (0.1) (0.1) (0.4)
------- ------- --------
Cash flows provided by operating activities and
net realized capital gains before changes in
assets and liabilities 5.3 2.5 0.8
Net realized capital losses (gains) 0.3 0.2 (0.1)
------- ------- --------
Cash flows provided by operating activities
before changes in assets and liabilities 5.6 2.7 0.7
Changes in assets and liabilities:
Decrease (increase) in accrued investment income 0.1 (0.1) (1.7)
Decrease (increase) in deferred policy acquisition costs 1.1 (14.5) (24.3)
Net change in amounts due to/from parent and affiliates (0.4) 0.9 0.5
Net (decrease) increase in other assets and liabilities (10.1) 9.2 3.4
Net change in income taxes 4.0 2.4 (1.4)
------- ------- --------
Net cash provided by (used for) operating activities 0.3 0.6 (22.8)
------- ------- --------
Cash Flows from Investing Activities:
Proceeds from sales of:
Debt securities available-for-sale 34.2 27.8 16.6
Equity securities 2.1 -- --
Investment maturities and repayments of:
Debt securites available-for-sale 17.9 3.4 3.2
Short-term investments -- -- 1.0
Cost of investment purchases in:
Debt securities available-for-sale (47.6) (36.8) (132.8)
Short-term investments -- -- (1.0)
------- ------- --------
Net cash provided by (used for) investing activities 6.6 (5.6) (113.0)
------- ------- --------
Cash Flows from Financing Activities:
Deposits and interest credited for investment contracts 12.8 19.7 84.7
Withdrawal of investment contracts (19.0) (14.3) (5.7)
Capital contribution -- 15.0 20.0
Other, net 5.7 (11.4) (2.5)
------- ------- --------
Net cash (used for) provided by financing activities (0.5) 9.0 96.5
------- ------- --------
Net increase (decrease) in cash and cash equivalents 6.4 4.0 (39.3)
Cash and cash equivalents, beginning of year 16.5 12.5 51.8
------- ------- --------
Cash and cash equivalents, end of year $ 22.9 $ 16.5 $ 12.5
======= ======= ========
Supplemental cash flow information:
Income taxes (received) paid, net $ (1.3) $ (3.3) $ 1.5
======= ======= ========
</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").
The Company has one operating segment and all revenue reported by the Company
comes from external customers.
Basis of Presentation
These financial statements have been prepared in conformity with generally
accepted accounting principles. Certain reclassifications have been made to
1998 and 1997 financial information to conform to the 1999 presentation.
Future Application of Accounting Standards
Deposit Accounting: Accounting for Insurance and Reinsurance Contracts That Do
Not Transfer Insurance Risk
In October 1998, the American Institute of Certified Public Accountants issued
SOP 98-7, Deposit Accounting: Accounting for Insurance and Reinsurance
Contracts That Do Not Transfer Insurance Risk, which provides guidance on how
to account for all insurance and reinsurance contracts that do not transfer
insurance risk, except for long-duration life and health insurance contracts.
This statement is effective for the Company's financial statements beginning
January 1, 2000. The Company does not expect the adoption of this standard to
have a material effect on its financial position and results of operations.
Accounting for Derivative Instruments and Hedging Activities
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Financial Accounting Standard ("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. As amended by FAS No. 137, Accounting for Derivative
Instruments and Hedging Activities -- Deferral of the Effective Date of FASB
Statement No. 133, this standard is effective for the Company's financial
statements beginning January 1, 2001, with early adoption permitted. The impact
of FAS No. 133 on the Company's financial statements will vary based on certain
factors including future interpretative guidance from the FASB, the extent of
the Company's hedging activities, the types of hedging instruments used and the
effectiveness of such instruments. The Company is evaluating the impact of
adoption of this standard and currently does not believe that it will have a
material effect on its financial position and results of operations.
F-7
<PAGE>
Notes to Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from reported results using those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, money market instruments and
other debt issues with a maturity of 90 days or less when purchased.
Investments
Debt and equity securities are classified as available for sale and carried at
fair value. Securities are written down (as realized capital losses) for other
than temporary declines in value. Included in available-for-sale securities are
investments that support experience-rated products.
Experience-rated products are products where the customer, not the Company,
assumes investment (including realized capital gains and losses) and other
risks, subject to, among other things, minimum guarantees. As long as minimum
guarantees are not triggered, the effect of experience- rated products'
investment performance does not impact the Company's results of operations.
Realized and unrealized capital gains and losses on investments supporting
these products are reflected in policyholder's funds left with the Company.
Realized capital gains and losses on all other investments are reflected in the
Company's results of operations. Unrealized capital gains and losses on all
other investments are reflected in shareholder's equity, net of related income
taxes. Purchases and sales of debt and equity securities are recorded on the
trade date.
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 does not accrue
interest on problem debt securities when management believes the collection of
interest is unlikely.
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
F-8
<PAGE>
Notes to Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
additional collateral obtained or refunded as the market value of the loaned
securities fluctuates. At December 31, 1999 and 1998, the Company had no
securities on loan.
Short-term investments, consisting primarily of money market instruments and
other debt issues purchased with an original 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 certain 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. For certain
annuity contracts, such costs are amortized in proportion to estimated gross
profits and adjusted to reflect actual gross profits over the life of the
contracts (up to 20 years for annuity and pension contracts.)
Periodically, modifications may be made to deferred annuity contract features,
such as shortening the surrender charge period or waiving the surrender charge,
changing the mortality and expense fees, etc. Unamortized deferred policy
acquisition costs associated with these modified contracts are not written off,
but rather, continue to be associated with the original block of business to
which these costs were previously recorded. Such costs are amortized based on
revised estimates of expected gross profits based upon the contract after the
modification. Unamortized deferred policy acquisition costs related to deferred
annuity products were approximately $58.8 million and $59.9 million as of
December 31, 1999 and 1998, respectively.
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 expenses.
Reserves
Policyholders' funds left with the Company include reserves for deferred
annuity investment contracts and immediate annuities without life contingent
payouts. Reserves on such contracts are equal to cumulative deposits less
charges and withdrawals plus credited interest thereon (rates range from 5.40%
to 7.50% for all years presented), net of adjustments for investment experience
that the Company is entitled to reflect in future credited interest. 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.
Revenue Recognition
For certain annuity contracts, charges assessed against policyholders' funds
for the cost of insurance, surrender charges, actuarial margin and other fees
are recorded as revenue in charges assessed against policyholders. Other
amounts received for these contracts are reflected as deposits and are not
recorded as revenue. Related policy benefits are recorded in relation to the
associated premiums or gross profit so that profits are recognized over the
expected lives of the contracts.
F-9
<PAGE>
Notes to Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Separate Accounts
Separate Accounts assets and liabilities generally represent funds maintained
to meet specific investment objectives of contractholders who bear the
investment risk, subject, in some cases, to minimum guaranteed rates.
Investment income and investment gains and losses generally accrue directly to
such contractholders. The assets of each account are legally segregated and are
not subject to claims that arise out of any other business of the Company.
Separate Account assets supporting variable options under annuity contracts are
invested, as designated by the contractholder or participant under a contract
(who bears the investment risk subject, in limited cases, to minimum guaranteed
rates) in shares of mutual funds which are managed by an affiliate of the
Company, or other selected mutual funds not managed by the Company or an
affiliate.
Separate Accounts assets are carried at fair value. At December 31, 1999 and
1998, unrealized losses of $(0.8) million and unrealized gains of $1.0 million,
respectively, after taxes, on assets supporting a guaranteed interest option
are reflected in shareholder's equity. Separate Accounts liabilities are
carried at fair value, except for 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 3.70% to 12.00%
in 1999 and 3.00% to 8.10% in 1998.
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 at December 31, 1999 were as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
(Millions) Cost Gains Losses Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. government and government
agencies and authorities $ 21.5 $ -- $ 0.3 $ 21.2
- --------------------------------------------------------------------------------------------------------
U.S. corporate securities:
Utilities 5.7 -- 0.2 5.5
Financial 33.3 -- 0.6 32.7
Transportation/capital goods 1.6 -- -- 1.6
Health care/consumer products 12.6 -- 0.9 11.7
Natural resources 14.5 -- 0.7 13.8
Other corporate securities 6.7 -- 0.4 6.3
- --------------------------------------------------------------------------------------------------------
Total U.S. corporate securities 74.4 -- 2.8 71.6
- --------------------------------------------------------------------------------------------------------
Foreign securities:
Government 1.0 -- -- 1.0
Other 9.9 0.1 0.5 9.5
- --------------------------------------------------------------------------------------------------------
Total foreign securities 10.9 0.1 0.5 10.5
- --------------------------------------------------------------------------------------------------------
Residential mortgage-backed securities:
Pass-throughs -- -- -- --
Collateralized mortgage obligations 10.6 -- 0.5 10.1
- --------------------------------------------------------------------------------------------------------
Total residential mortgage-backed securities 10.6 -- 0.5 10.1
- --------------------------------------------------------------------------------------------------------
Commercial/multifamily mortgage-
backed securities 9.0 -- 0.3 8.7
- --------------------------------------------------------------------------------------------------------
Other asset-backed securities 6.4 -- 0.2 6.2
- --------------------------------------------------------------------------------------------------------
Total debt securities $ 132.8 $ 0.1 $ 4.6 $ 128.3
========================================================================================================
</TABLE>
F-11
<PAGE>
Notes to Financial Statements (continued)
2. Investments (continued)
Debt securities available-for-sale at December 31, 1998 were as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
(Millions) Cost Gain 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
Healthcare & 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-12
<PAGE>
Notes to Financial Statements (continued)
2. Investments (continued)
At December 31, 1999 and 1998 net unrealized (depreciation) appreciation of
$(4.5) million and $4.1 million respectively, on available-for-sale debt
securities included unrealized (losses) gains of $(4.5) million and $3.8
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, 1999 are shown below by contractual maturity. Actual maturities
may differ from contractual maturities because securities may be restructured,
called or prepaid.
<TABLE>
<CAPTION>
Amortized Fair
(Millions) Cost Value
- ---------------------------------------------------------------
<S> <C> <C>
Due to mature:
One year or less $ 9.3 $ 9.3
After one year through five years 49.8 49.0
After five years through ten years 18.2 17.6
After ten years 29.5 27.3
Mortgage-backed securities 19.6 18.9
Other asset-backed securities 6.4 6.2
- ---------------------------------------------------------------
Total $ 132.8 $ 128.3
===============================================================
</TABLE>
At December 31, 1999 and 1998, debt securities carried at $5.6 million and $5.4
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) 1999 1998
- --------------------------------------------------
<S> <C> <C>
Cost $ 1.0 $ 3.1
Gross unrealized gains -- --
Gross unrealized losses (0.1) (0.1)
- --------------------------------------------------
Fair value $ 0.9 $ 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, 1999.
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, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------ ------------------------
Carrying Fair Carrying Fair
(Millions) Value Value Value Value
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Liabilities:
Investment contract liabilities:
With a fixed maturity $ 1.2 $ 1.3 $ 0.6 $ 0.5
Without a fixed maturity $ 137.6 $ 131.6 $ 152.6 $ 143.8
- ----------------------------------------------------------------------------------------
</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 1999
or 1998.
F-14
<PAGE>
Notes to Financial Statements (continued)
4. Net Investment Income
Sources of net investment income were as follows:
<TABLE>
<CAPTION>
(Millions) 1999 1998 1997
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Debt securities $ 9.4 $ 9.0 $ 6.0
Nonredeemable preferred stock 0.1 0.3 --
Cash equivalents 0.7 0.7 1.2
Other 0.8 0.6 --
- ------------------------------------------------------------------------
Gross investment income 11.0 10.6 7.2
Less: investment expenses 0.1 0.2 0.1
- ------------------------------------------------------------------------
Net investment income $ 10.9 $ 10.4 $ 7.1
========================================================================
</TABLE>
Net investment income includes amounts allocable to experience-rated
contractholders of $8.6 million, $8.9 million and $7.0 million for the years
ended December 31, 1999, 1998 and 1997, respectively. Interest credited to
contractholders is included in current and future benefits.
5. Dividend Restrictions and Shareholder's Equity
Effective January 5, 2000 the Company changed its state of domicile from
Connecticut to Florida. All dividends paid to shareholders in 2000 must have
prior approval by the Insurance Commissioner of the State of Florida.
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 $(0.1)
million, $(5.2) million and $0.4 million for the years ended December 31, 1999,
1998 and 1997, respectively. Statutory capital and surplus was $52.5 million
and $53.4 million as of December 31, 1999 and 1998, 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 no capital contributions relating to these
agreements in 1999. The Company received $15.0 million and $20.0 million from
ALIAC in 1998 and 1997, respectfully.
As of December 31, 1999, 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, 1999, 1998 and 1997 were
$(0.3) million, $(0.2) million and $0.1 million, respectively.
F-15
<PAGE>
Notes to Financial Statements (continued)
6. Capital Gains and Losses on Investment Operations (continued)
Net realized capital (losses) gains of $(1.1) million, $(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 1999, 1998 and 1997, respectively. Net
unamortized (losses) gains were $(1.0) million and $0.2 million at December 31,
1999 and 1997, respectively. The amounts in 1998 were immaterial.
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 1999, 1998 and 1997) were as follows:
<TABLE>
<CAPTION>
(Millions) 1999 1998 1997
- ---------------------------------------------------------
<S> <C> <C> <C>
Proceeds on sales $ 34.2 $ 27.8 $ 16.6
Gross gains 0.2 0.6 0.1
Gross losses 0.5 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), were as follows:
<TABLE>
<CAPTION>
(Millions) 1999 1998 1997
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Debt securities $ (0.3) $ 0.1 --
Equity securities -- (0.1) --
Other (4.1) 1.6
- ----------------------------------------------------------------------------------
Subtotal (4.4) 1.6 --
Increase in deferred income taxes (See Note 7) (1.6) 0.6 --
- ----------------------------------------------------------------------------------
Net change in accumulated other
comprehensive income $ (2.8) $ 1.0 --
==================================================================================
</TABLE>
Net unrealized capital gains (losses) allocable to experience-rated contracts
of $(4.5) million and $3.8 million at December 31, 1999 and 1998, 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,
at December 31:
<TABLE>
<CAPTION>
(Millions) 1999 1998 1997
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Debt securities:
Gross unrealized gains $ 0.1 $ 0.3 $ 0.2
Gross unrealized losses (0.1) -- --
- ------------------------------------------------------------------------------------
-- 0.3 0.2
- ------------------------------------------------------------------------------------
Equity securities:
Gross unrealized gains -- -- --
Gross unrealized losses (0.1) (0.1) --
- ------------------------------------------------------------------------------------
(0.1) (0.1) --
- ------------------------------------------------------------------------------------
Other:
Gross unrealized gains -- 1.9 --
Gross unrealized losses (2.4) (0.3) --
- ------------------------------------------------------------------------------------
(2.4) 1.6 --
- ------------------------------------------------------------------------------------
Less: deferred federal income (benefits) taxes
(see Note 7) (0.9) 0.6 --
- ------------------------------------------------------------------------------------
Net unrealized capital (losses) gains $ (1.6) $ 1.2 $ 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) 1999 1998 1997
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Unrealized holding gains (losses) arising
during the period (1) $ (2.9) $ 0.9 $ 0.3
Less: reclassification adjustment for gains and
other items included in net income (2) (0.1) (0.1) 0.3
- ------------------------------------------------------------------------------------
Net unrealized (losses) gains on securities $ (2.8) $ 1.0 $ --
====================================================================================
</TABLE>
(1) Pretax unrealized holding gains (losses) arising during the period were
$(4.5) million, $1.3 million and $0.4 million for 1999, 1998 and 1997,
respectively.
(2) Pretax reclassification adjustments for gains and other items included in
net income were $(0.2) million, $(0.2) million and $0.4 million for 1999,
1998 and 1997, 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) 1999 1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Current taxes (benefits):
Federal $ (0.3) $ (1.7) $ 1.2
State -- 0.1 --
Net realized capital gains (losses) (0.4) (0.1) 0.1
- ------------------------------------------------------------------------------
(0.7) (1.7) 1.3
- ------------------------------------------------------------------------------
Deferred taxes (benefits):
Federal 3.1 2.3 (0.4)
Net realized capital gains (losses) 0.3 -- (0.1)
- ------------------------------------------------------------------------------
3.4 2.3 (0.5)
- ------------------------------------------------------------------------------
Total $ 2.7 $ 0.6 $ 0.8
==============================================================================
</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) 1999 1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Income before income taxes and cumulative
effect adjustment $ 8.1 $ 3.2 $ 2.5
Tax rate 35% 35% 35%
- ------------------------------------------------------------------------------
Application of the tax rate 2.8 1.1 0.9
Tax effect of:
Excludable dividends (0.1) (0.5) (0.1)
- ------------------------------------------------------------------------------
Income taxes $ 2.7 $ 0.6 $ 0.8
==============================================================================
</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) 1999 1998
- -------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Policyholders' funds left with the Company $ 12.4 $ 16.6
Unrealized gains allocable to experience-rated
contracts -- 1.3
Net unrealized capital losses 2.5 --
Investment losses 0.4 --
Guaranty fund assessments 0.1 0.1
Other 0.5 0.1
- -------------------------------------------------------------------------
Total gross assets 15.9 18.1
- -------------------------------------------------------------------------
Deferred tax liabilities:
Deferred policy acquisition costs 16.9 16.9
Unrealized losses allocable to experience-rated
contracts 1.6 --
Net unrealized capital gains -- 1.9
- -------------------------------------------------------------------------
Total gross liabilities 18.5 18.8
- -------------------------------------------------------------------------
Net deferred tax liability $ 2.6 $ 0.7
=========================================================================
</TABLE>
Net unrealized capital gains and losses are presented in shareholder's equity
net of deferred taxes.
Management believes that it is more likely than not that the Company will
realize the benefit of the deferred tax assets. The Company expects sufficient
taxable income in the future to realize the deferred tax assets because of the
Company's long-term history of having taxable income, which is projected to
continue.
The Internal Revenue Service (the "Service") has completed examinations of the
consolidated federal income tax returns of Aetna through 1994. 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 1995 through 1997.
8. Benefit Plans
The Company utilizes the employees of Aetna and its affiliates (primarily
ALIAC). The benefit plan charges allocated to the Company were $0.4 million and
$0.2 million at December 31, 1999 and 1998, respectively. In 1997 the charges
were immaterial.
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 $6.0
million and $10.5 million for the years ended December 31, 1999 and 1998,
respectively, (of which $2.0 million and $5.5 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, was 1.25% and 1.40% for 1999 and 1998 and 1.40% in 1997, 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 $13.5 million, $10.3 million and $5.6 million for the years ended December
31, 1999, 1998 and 1997, respectively.
The Company received no capital contributions in 1999. The Company received
capital contributions of $15.0 million in cash from ALIAC in 1998 and $20.0
million in 1997.
Aeltus, an affiliate of the Company, acts 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, 1999, 1998 and 1997 amounted to $0.1 million, $0.2
million and $0.1 million, respectively.
10. Commitments and Contingent Liabilities
Commitments
At December 31, 1999 and 1998 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.87131-00 AICA Ed. May 2000
<PAGE>
VARIABLE ANNUITY ACCOUNT I
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
(1) Included in Part A:
Condensed Financial Information
(2) Included in Part B:
Financial Statements of Variable Annuity Account I:
- Statement of Assets and Liabilities as of December 31, 1999
- Statement of Operations for the year ended December 31, 1999
- Statements of Changes in Net Assets for the years ended
December 31, 1999 and December 31, 1998
- Condensed Financial Information for the year ended
December 31, 1999
- Notes to Financial Statements
- Independent Auditors' Report
Financial Statements of Depositor:
- Independent Auditors' Report
- Statements of Income for the years ended December 31, 1999,
1998 and 1997
- Balance Sheets for the years ended December 31, 1999 and 1998
- Statements of Changes in Shareholder's Equity for the years
ended December 31, 1999, 1998 and 1997
- Statements of Cash Flows for the years ended December 31,
1999, 1998 and 1997
- 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)(3)
(4.2) Certificate (GTCC2-99(TORP)FL) to Variable Annuity Contract
G2-CDA-99(TORP)FL(3)
(5) Variable Annuity Contract Application(3)
(6.1) Certificate of Incorporation of Aetna Insurance Company of
America(3)
(6.2) By-laws of Aetna Insurance Company of America(3)
(7) Not Applicable
(8.1) Fund Participation Agreement between Aetna Insurance Company
of America and AIM dated November 1, 1999(3)
<PAGE>
(8.2) Service Agreement between Aetna Insurance Company of America
and AIM dated November 1, 1999(3)
(8.3) Fund Participation Agreement between Aetna Insurance Company of
America, Aetna Variable Fund, Aetna Variable Encore Fund, Aetna,
Income Shares, Aetna Balanced VP, Inc., Aetna GET Fund, on behalf
of each of its series, Aetna Generation Portfolios, Inc., on
behalf of each of its series, and Aetna Variable Portfolios,
Inc., on behalf of each of its series and Aeltus Investment
Management dated as of May 1, 1998(4)
(8.4) First Amendment dated as of May 1, 2000 to Fund Participation
Agreement between Aetna Insurance Company of America, Aetna
Variable Fund, Aetna Variable Encore Fund, Aetna, Income Shares,
Aetna Balanced VP, Inc., Aetna GET Fund, on behalf of each of its
series, Aetna Generation Portfolios, Inc., on behalf of each of
its series, and Aetna Variable Portfolios, Inc., on behalf of
each of its series and Aeltus Investment Management dated as of
May 1, 1998(4)
(8.5) Service Agreement between Aeltus Investment Management, Inc.
and Aetna Insurance Company of America dated May 1, 1998(4)
(8.6) Amendment No. 1 dated as of May 1, 2000 to Service Agreement
between Aeltus Investment Management, Inc. and Aetna
Insurance Company of America dated May 1, 1998(4)
(8.7) Fund Participation Agreement among Calvert Responsibly
Invested Balanced Portfolio, Calvert Asset Management
Company, Inc. and Aetna Insurance Company of America dated
December 1, 1997(5)
(8.8) Service Agreement between Calvert Asset Management Company,
Inc. and Aetna Insurance Company of America dated December 1,
1997(5)
(8.9) Form of Fund Participation Agreement dated May 1, 2000 between
Aetna Insurance Company of America and The Chapman Funds, Inc.
(8.10) Fund Participation Agreement among Aetna Insurance Company
of America, Variable Insurance Products Fund and Fidelity
Distributors Corporation dated October 20, 1995(6)
(8.11) First Amendment dated as of May 1, 1997 to Fund Participation
Agreement among Aetna Insurance Company of America, Variable
Insurance Products Fund and Fidelity Distributors Corporation
dated October 20, 1995(4)
(8.12) Fund Participation Agreement among Aetna Insurance Company
of America, Variable Insurance Products Fund II and Fidelity
Distributors Corporation dated October 20, 1995(6)
(8.13) First Amendment dated as of May 1, 1997 to Fund Participation
Agreement among Aetna Insurance Company of America, Variable
Insurance Products Fund II and Fidelity Distributors Corporation
dated October 20, 1995(4)
(8.14) Fund Participation Agreement among Janus Capital
Corporation, Aetna Insurance Company of America and Janus
Aspen Series dated December 8, 1997(7)
<PAGE>
(8.15) 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(7)
(8.16) Service Agreement between Janus Capital Corporation and
Aetna Insurance Company of America dated as of December 8,
1997(7)
(8.17) Fund Participation Agreement between Aetna Insurance Company
of America, Oppenheimer Variable Account Funds and
Oppenheimer Fund, Inc. dated April 1, 1997(8)
(8.18) Service Agreement between Aetna Insurance Company of America
and Oppenheimer Funds, Inc. dated April 1, 1997(8)
(8.19) Administrative Service Agreement between Aetna Insurance
Company of America and Agency, Inc.(6)
(9) Opinion and Consent of Counsel
(10) Consent of Independent Auditors
(11) Not applicable
(12) Not applicable
(13) Schedule for Computation of Performance Data(3)
(14.1) Powers of Attorney(9)
(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 Pre-Effective Amendment No. 1 to
Registration Statement on Form N-4 (File No. 333-87131), as filed on
December 15, 1999.
4. Incorporated by reference to Pre-Effective Amendment No. 11 to
Registration Statement on Form N-4 (File No. 33-59749), as filed on
April 4, 2000.
5. 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.
6. 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.
7. Incorporated by reference to Registration Statement on Form N-4 (File
No. 333-87131), as filed on September 15, 1999.
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.
9. Incorporated by reference to Post-Effective Amendment No. 4 to
Registration Statement on Form S-2 (File No. 333-49581), as filed on
April 4, 2000.
<PAGE>
Item 25. Directors and Officers of the Depositor
Name and Principal
Business Address* Positions and Offices with Depositor
- ----------------- ------------------------------------
Thomas J. McInerney Director and President
Deborah Koltenuk Vice President, Corporate Controller, and
Assistant Treasurer
Shaun P. Mathews Director and Senior Vice President
Steven A. Haxton Director
David W. O'Leary Director
Catherine H. Smith Director
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
*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 24 of Post-Effective Amendment
No. 38 to the Registration Statement on Form N-1A (File No. 33-41694), as filed
on February 23, 2000.
Item 27. Number of Contract Owners
As of February 29, 2000, there were 15,293 individuals holding interests
in variable annuity contracts funded through Variable Annuity Account I.
Item 28. Indemnification
Florida Statutes chapter 607.0859 governs the indemnification of officers,
directors, employees and agents of a Florida corporation. Section 607.0859(1)
provides that a corporation may indemnify a person who is or was a party to a
proceeding by reason of the fact that the person is or was a director, officer,
employee or agent of the corporation (or in certain other defined circumstances)
against liability (defined as obligations to pay a judgment, settlement,
penalty, fine, including an excise tax assessed with respect to any employee
benefit plan, and expenses actually and reasonably incurred with respect to the
proceeding). Section 607.0859(2) provides that a corporation may indemnify a
person who was or is a party to any proceeding by or in the
<PAGE>
right of the corporation to procure a judgment in its favor by reason that the
person is or was connected to the corporation as noted in subsection (1) against
expenses and amounts paid in settlement not exceeding, in the judgment of the
board of directors, the estimated expense of litigating the proceeding to
conclusion, actually and reasonably incurred in connection with the defense or
settlement of such proceeding, including any appeal. Indemnification under both
subsection (1) and (2) is subject to a determination that the person seeking
indemnification has met the standard of conduct set forth in the applicable
subsection. However, pursuant to section 607.0859(3), to the extent that the
person seeking indemnification has been successful in defense of any proceeding,
claim or issue referred to in subsection (1) or (2), that person shall be
indemnified against expenses that he or she actually and reasonably incurred.
Expenses incurred by an officer or director in defending any such proceeding may
be paid in advance of the final disposition of the proceeding, provided that
such person undertakes to repay any such amount if he or she is ultimately found
not to be entitled to indemnification pursuant to section 607.0850. Expenses
incurred by other employees or agents may be advanced upon such terms and
conditions deemed appropriate by the board of directors.
Section 607.0850(4) provides that any indemnification under subsection (1) or
(2), unless made pursuant to a determination by a court, shall be made only as
authorized in the specific case upon a determination that that indemnification
is proper in the circumstances because the party has met the applicable standard
of conduct set forth in subsection (1) or (2). Such determination may be made
(a) by the disinterested directors, pursuant to section 607.0850(4)(a); (b) by a
committee duly designated by the board of directors, pursuant to section
607.0850(4)(b); (c) by independent legal counsel, pursuant to section
607.0850(4)(c); or (d) by the shareholders, pursuant to section 607.0850(4)(d).
The reasonableness of expenses and authorization of indemnification shall be
made in the same manner, except as otherwise required by section 607.0850(5).
The indemnification and advancement of expenses provisions of section 607.0850
are not exclusive, and a corporation may make other or further provisions for
the indemnification or advancement of expenses of parties identified in section
607.0850(1), except as otherwise prohibited by section 607.0850(7).
Indemnification and advancement of expenses may also be ordered by a court of
competent jurisdiction, pursuant to section 607.0850(9). Section 607.0850(12)
specifically authorizes a corporation to procure indemnification insurance on
behalf of an individual who was a director, officer, employer or agent of the
corporation. Consistent with this 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 subsidiary,
including the Depositor.
Item 29. Principal Underwriters
(a) In addition to serving as the principal underwriter for the
Registrant, Aetna Life Insurance and Annuity Company (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
<PAGE>
underwriter and depositor for Variable Life Account B of ALIAC, Variable Life
Account C 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
Name and Principal
Business Address* Positions and Offices with Underwriter
- ----------------- --------------------------------------
Thomas J. McInerney Director and President
Shaun P. Mathews Director and Senior Vice President
Catherine H. Smith Director
Deborah Koltenuk Vice President, 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
* The principal business address of all directors and officers listed is 151
Farmington Avenue, Hartford, Connecticut 06156.
(c) Compensation as of December 31, 1999:
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Name of Net Underwriting Compensation
Principal Discounts and on Redemption Brokerage
Underwriter Commissions or Annuitization Commissions Compensation*
- ----------- ----------- ---------------- ----------- -------------
<S> <C> <C> <C> <C>
Aetna Life $1,207,122 $13,687,287
Insurance 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.
<PAGE>
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
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 complies
with the provisions of Paragraphs (1) through (4) of the SEC Staff's
No-Action Letter dated November 28, 1988 with respect to language
covering withdrawal restrictions applicable to plans established
pursuant to Section 403(b) of the Internal Revenue Code, See
American Counsel of Life Insurance; SEC No-Action Letter, [1988 WL
1235221 *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
<PAGE>
controlling precedent, submit to a court of appropriate jurisdiction
the question of whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(f) Aetna Insurance Company of America represents that the fees and
charges deducted under the contracts covered by this registration
statement, in the aggregate, are reasonable in relation to the
services rendered, the expenses expected to be incurred, and the
risks assumed by the insurance company.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act
of 1940, the Registrant, Variable Annuity Account I of Aetna Insurance Company
of America, certifies that it meets the requirements of Securities Act Rule
485(b) for effectiveness of this Post-Effective Amendment to its Registration
Statement on Form N-4 (File No. 333-87131) and has duly caused this
Post-Effective Amendment to be signed on its behalf in the City of Hartford, and
State of Connecticut, on the 13th day of April, 2000.
VARIABLE ANNUITY ACCOUNT I OF AETNA
INSURANCE COMPANY OF AMERICA
(Registrant)
By: AETNA INSURANCE COMPANY OF AMERICA
(Depositor)
By Thomas J. McInerney*
-------------------------------------
Thomas J. McInerney
President
As required by the Securities Act of 1933, this Post-Effective Amendment
No. 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, ) April
- ----------------------- and Assistant Treasurer ) 13, 2000
Deborah Koltenuk (principal accounting and financial officer) )
)
)
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
Exhibit No. Exhibit
- ----------- -------
99-B.8.9 Form of Fund Participation Agreement dated May 1, 2000
between Aetna Insurance Company of America and The
Chapman Funds, Inc.
-----------
99-B.9 Opinion and Consent of Counsel
-----------
99-B.10 Consent of Independent Auditors
-----------
Exhibit 99-B.8.9
FORM OF
FUND PARTICIPATION AGREEMENT
between
FUND and AICA
Aetna Insurance Company of America (the "Company"), the Chapman Funds,
Inc. (the "Fund") and The Chapman Co. (the "Distributor") hereby agree to an
arrangement whereby the series of the Fund listed on Schedule A attached hereto
shall be made available to serve as underlying investment media for Variable
Annuity Contracts ("Contracts") to be issued by the Company.
1. Establishment of Accounts; Availability of Fund.
The Company represents that it has established Variable Annuity Accounts 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 the Company to an Account for investment in the
shares of one of more specified open-end management investment companies
available through that Account as underlying investment media. Selection
of a particular investment management company and changes therein from
time to time are made by the participant or Contract owner, as applicable
under a particular Contract.
2. Pricing Information; Orders; Settlement.
(a) The Fund will make Fund shares available to be purchased by the
Company, and will accept redemption orders from the Company, on
behalf of each Account at the net asset value applicable to each
order on those days on which the Fund calculates its net asset value
(a "Business Day"). Fund shares shall be purchased and redeemed in
such quantity and at such time determined by the Company to be
necessary to meet the requirements of those Contracts for which the
Fund(s) serve as underlying investment media, provided, however,
that the Board of Directors of the Fund (hereinafter the
"Directors") may upon reasonable notice to the Company, refuse to
sell shares of any series of the Fund to any person, or suspend or
terminate the offering of shares of any series if such action is
required by law or by regulatory authorities having jurisdiction or
is, in the sole discretion of the Directors, acting in good faith
and in the best interests of the shareholders of any series and is
acting in compliance with their fiduciary obligations under federal
and/or any applicable state laws.
<PAGE>
(b) The Fund will provide to the Company closing net asset value,
dividend and capital gain information at the close of trading each
day that the New York Stock Exchange (the "Exchange") is open (each
such day a "Business Day"). The Fund will use its best efforts to
provide such information by 6:30 p.m. Eastern Standard time and will
provide such information in no event later than 7:00p.m. Eastern
Standard time on such Business Day. The Company will send via
facsimile or electronic transmission to the Fund or its specified
agent orders to purchase and/or redeem Fund shares by 10:00 a.m.
Eastern Standard Time the following business day. Payment for net
purchases will be wired by the Company to an account designated by
the Fund to coincide with the order for shares of the Fund.
(c) The Fund hereby appoints the Company as its agent for the limited
purpose of accepting purchase and redemption orders for Fund shares
relating to the Contracts from Contract owners or participants.
Orders from Contract owners or participants received from any
distributor of the Contracts (including affiliates of the Company)
by the Company, acting as agent for the Fund, prior to the close of
the Exchange on any given business day will be executed by the Fund
at the net asset value determined as of the close of the Exchange on
such Business Day, provided that the Fund receives written (or
facsimile) notice of such order by 10 a.m. Eastern Standard Time on
the next following Business Day. Any orders received by the Company
acting as agent on such day but after the close of the Exchange will
be executed by the Fund at the net asset value determined as of the
close of the Exchange on the next business day following the day of
receipt of such order, provided that the Fund receives written (or
facsimile) notice of such order by 10 a.m. Eastern Standard Time
within two days following the day of receipt of such order.
(d) Payments for net redemptions of shares of the Fund will be wired by
the Fund to an account designated by the Company on the same
Business Day the Company places an order to redeem Fund Shares.
Payments for net purchases of the Fund will be wired by the Company
to an account designated by the Fund on the same Business Day the
Company places an order to purchase Fund shares. Payments shall be
in federal funds transmitted by wire.
(e) In lieu of applicable provisions set forth in paragraphs 2(a)
through 2(d) above, the parties may agree to provide pricing
information, execute orders and wire payments for purchases and
redemptions through National Securities Clearing Corporation's
Fund/SERV system in which case such activities will be governed by
the provisions set forth in an Exhibit to this Agreement.
(f) Each party has the right to rely on information or confirmations
provided by the other party (or by any affiliate of the other
party), and shall not be liable in the event that an error is a
result of any misinformation supplied by the other party
(g) The Fund and Distributor shall indemnify and hold the Company
harmless, from the effective date of this Agreement, against any
amount the Company is required to pay
2
<PAGE>
to Contract owners or participants due to: (i) an incorrect
calculation of a Fund's daily net asset value, dividend rate, or
capital gains distribution rate or (ii) incorrect or late reporting
of the daily net asset value, dividend rate, or capital gain
distribution rate of a Fund, upon written notification by the
Company, with supporting data, to Distributor. In addition, the Fund
or the Distributor shall be liable to the Company for systems and
out of pocket costs incurred by the Company in making a Contract
owners's or a participant's account whole, if such costs or expenses
are a result of the Fund's or the Distributor's failure to provide
timely or correct net asset values, dividend and capital gains or
financial information and if such information is not corrected by
4:00 p.m. Eastern Standard time 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 reconciliation with incorrect
information, the amount required to make a Contract owner's or a
participant's account whole shall be borne by the party providing
the incorrect information, regardless of when the error is
corrected.
(h) The Company agrees to purchase and redeem the shares of the series
of the Fund named in Schedule A offered by the then current
prospectus and statement of additional information of the Fund in
accordance with the provisions of such prospectus and statement of
additional information.
3. Fees.
In consideration of services provided by the Company under this Agreement,
the Fund or Distributor shall pay fees to the Company as set forth in
Schedule C.
4. Expenses.
(a) Except as otherwise provided in this Agreement, all expenses
incident to the performance by the Fund under this Agreement shall
be paid by the Fund, including the cost of registration of Fund
shares with the Securities and Exchange Commission (the "SEC") and
in states where required. The Fund and Distributor shall pay no fee
or other compensation to the Company under this Agreement, and the
Company shall pay no fee or other compensation to the Fund or
Distributor, except as provided herein and in Schedule C attached
hereto and made a part of this Agreement as may be amended from time
to time with the mutual consent of the parties hereto. All expenses
incident to performance by each party of its respective duties under
this Agreement shall be paid by that party, unless otherwise
specified in this Agreement.
(b) The Fund or the Distributor shall provide to the Company, at the
location designated by the Company, periodic fund reports to
shareholders and other materials that are required by law to be sent
to Contract owners or participants. In addition, the Fund or the
Distributor shall provide the Company with a sufficient quantity of
its prospectuses, statements of additional information and any
supplements to any of
3
<PAGE>
these materials, to be used in connection with the offerings and
transactions contemplated by this Agreement
(c) The Fund or Distributor shall provide the company with a sufficient
quantity of its proxy material that is required to be sent to
Contract owners or participants. The cost associated with proxy
preparation, group authorization letters, programming for tabulation
and necessary materials (including postage) will be paid by the Fund
or Distributor.
5. Representations.
(a) The Company agrees that it and its agents shall not, without the
written consent of the Fund or the Distributor, make representations
concerning the Fund, or its shares except those contained in the
then current prospectuses and in current printed sales literature
approved by the Fund or the Distributor.
(b) The Fund and Distributor represent and warrant that (i) they have
examined and tested their systems and made reasonable inquiry of
their business partners and other entities with whom they conduct
business with respect to Year 2000 problems and (ii) their ability
to perform their obligations under this Agreement will not be
materially interrupted or disrupted as a result of any business
interruptions or other business problems relating to specific dates
or days before, during and after the Year 2000. This representation
and warranty does not extend to any interruption or disruption
caused solely by any act or omission of the Company.
6. Termination.
This agreement shall terminate as to the sale and issuance of new
Contracts:
(a) at the option of either the Company, the Distributor or the Fund,
upon sixty days advance written notice to the other parties;
(b) at the option of the Company, upon one week advance written notice
to the Distributor and the Fund, if Fund shares are not available
for any reason to meet the requirement of Contracts as determined by
the Company. Reasonable advance notice of election to terminate
shall be furnished by Company;
(c) at the option of either the Company, the Distributor or the Fund,
immediately upon institution of formal proceedings against the
broker-dealer or broker-dealers marketing the Contracts, the
Account, the Company, the Fund or the Distributor by the National
Association of Securities Dealers, Inc. (the "NASD"), the SEC or any
other regulatory body;
(d) upon the determination of the Accounts to substitute for the Fund's
shares the shares of another investment company in accordance with
the terms of the applicable
4
<PAGE>
Contracts. The Company will give 60 days written notice to the Fund
and the Distributor of any decision to replace the Fund's shares;
(e) upon assignment of this Agreement, unless made with the written
consent of all other parties hereto;
(f) if Fund shares are not registered, issued or sold in conformance
with Federal law or such law precludes the use of Fund shares as an
underlying investment medium for Contracts issued or to be issued by
the Company. Prompt notice shall be given by the appropriate party
should such situation occur.
7. Continuation of Agreement.
Termination as the result of any cause listed in Section 6 shall not
affect the Fund's obligation to furnish its shares to Contracts then in
force for which its shares serve or may serve as the underlying medium
unless such further sale of Fund shares is prohibited by law or the SEC or
other regulatory body.
8. Advertising Materials; Filed Documents.
(a) Advertising and sales literature with respect to the Fund prepared
by the Company or its agents for use in marketing its Contracts will
be submitted to the Fund or its designee for review before such
material is submitted to any regulatory body for review, distributed
to the public, or used in connection with any Account or Contract..
No such material shall be used if the Fund or its designee
reasonably object to such use in writing, transmitted by facsimile
within five business days after receipt of such material.
(b) The Fund will provide additional copies of its financials as soon as
available to the Company and at least one complete copy of all
registration statements, prospectuses, statements of additional
information, annual and semi-annual reports, proxy statements and
all amendments or supplements to any of the above that relate to the
series of the Fund named in Schedule A promptly after the filing of
such document with the SEC or other regulatory authorities. At the
Distributor's request, the Company will provide to the Distributor
at least one complete copy of all registration statements,
prospectuses, statements of additional information, annual and
semi-annual reports, proxy statements, and all amendments or
supplements to any of the above that relate to the Account promptly
after the filing of such document with the SEC or other regulatory
authority.
(c) The Fund or the Distributor will provide via Excel spreadsheet
diskette format or in electronic transmission to the Company at
least quarterly portfolio information necessary to update Fund
profiles within seven business days following the end of each
quarter.
5
<PAGE>
9. Proxy Voting.
(a) The Company shall provide pass-through voting privileges on Fund
shares held by registered separate accounts to all Contract owners
and participants to the extent the SEC continues to interpret the
1940 Act as requiring such privileges. The Company shall provide
pass-through voting privileges on Fund shares held by unregistered
separate accounts to all Contract owners.
(b) The Company will distribute to Contract owners and participants, 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, the Company, with respect to each group Contract and in each
Account, shall vote Fund shares for which no instructions have been
received in the same proportion as shares for which such
instructions have been received. The Company and its agents shall
not oppose or interfere with the solicitation of proxies for Fund
shares held for such Contract owners and participants.
10. Indemnification.
(a) The Company agrees to indemnify and hold harmless the Fund and the
Distributor, and its directors, officers, employees, agents and each
person, if any, who controls the Fund or its Distributor within the
meaning of the Securities Act of 1933 (the "1933 Act") against any
losses, claims, damages or liabilities to which the Fund or any such
director, officer, employee, agent, or controlling person may become
subject, under the 1933 Act or otherwise, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration
Statement, prospectus or sales literature of the Company or arise
out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or arise
out of or as a result of conduct, statements or representations
(other than statements or representations contained in the
prospectuses or sales literature of the Fund) of the Company or its
agents, with respect to the sale and distribution of Contracts for
which Fund shares are the underlying investment. The Company will
reimburse any legal or other expenses reasonably incurred by the
Fund or any such director, officer, employee, agent, investment
Distributor, or controlling person in connection with investigating
or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such
case to the extent that any such loss, claim, damage or liability
arises out of or is based upon (i) an untrue statement or omission
or alleged omission made in such Registration Statement or
prospectus in conformity with written materials furnished to the
Company by the Fund specifically for use therein or (ii) the willful
misfeasance, bad faith, or gross negligence by the Fund or
Distributor in the performance of its duties or the Fund's or
Distributor's reckless disregard of obligations or duties under this
Agreement or to the
6
<PAGE>
Company, whichever is applicable. This indemnity agreement will be
in addition to any liability which Company may otherwise have.
(b) The Fund and the Distributor agree to indemnify and hold harmless
the Company and its directors, officers, employees, agents and each
person, if any, who controls the Company within the meaning of the
1933 Act against any losses, claims, damages or liabilities to which
the Company or any such director, officer, employee, agent or
controlling person may become subject, under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, prospectuses or sales
literature of the Fund or arise out of or are based upon the
omission or the alleged omission to state therein a material fact
required to be stated therein or material fact required to be stated
therein or necessary to make the statements therein not misleading.
The Fund will reimburse any legal or other expenses reasonably
incurred by the Company or any such director, officer, employee,
agent, or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action;
provided, however, that the Fund will not be liable in any such case
to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or omission or alleged
omission made in such Registration Statement or prospectuses which
are in conformity with written materials furnished to the Fund by
the Company specifically for use therein.
(c) Promptly after receipt by an indemnified party hereunder of notice
of the commencement of action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying
party hereunder, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any
indemnified party otherwise than under this Section 10. 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 10 for
any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than
reasonable costs of investigation.
11. Miscellaneous.
(a) Amendment and Waiver. Neither this Agreement, nor any provision
hereof, may be amended, waived, discharged or terminated orally, but
only by an instrument in writing signed by all parties hereto.
7
<PAGE>
(b) Notices. All notices and other communications hereunder shall be
given or made in writing and shall be delivered personally, or sent
by telex, telecopier or registered or certified mail, postage
prepaid, return receipt requested, or recognized overnight courier
service to the party or parties to whom they are directed at the
following addresses, or at such other addresses as may be designated
by notice from such party to all other parties.
To the Company:
Aetna Insurance Company of America
151 Farmington Avenue
Hartford, Connecticut 06156
Attention: _______________, Counsel
To the Fund:
The Chapman Fund, Inc.
=======================
-----------------------
-----------------------
Attn:
------------------
To the Distributor:
The Chapman Co.
=======================
-----------------------
-----------------------
Attn:
------------------
Any notice, demand or other communication given in a manner prescribed in
this subsection (b) shall be deemed to have been delivered on receipt.
(c) Successors and Assigns. This agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
permitted successors and assigns.
(d) Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one
agreement, and any party hereto may execute this Agreement by
signing any such counterpart.
(e) Severability. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or
impaired thereby.
8
<PAGE>
(f) Entire Agreement. This Agreement constitutes the entire agreement
and understanding between the parties hereto and supersedes all
prior agreement and understandings relating to the subject matter
hereof.
(g) Governing Law. This Agreement shall be governed and interpreted in
accordance with the laws of the State of Connecticut.
(h) Non Exclusivity. It is understood by the parties that this Agreement
is not an exclusive arrangement in any respect.
(i) Confidentiality. The terms of this Agreement and the Schedules
thereto will be held confidential by each party except to the extent
that either party or its counsel may deem it necessary to disclose
such terms.
12. Limitation on Liability of Directors, etc.
This agreement has been executed on behalf of the Fund by the undersigned
officer of the Fund in his or her capacity as an officer of the Fund. The
obligations of this agreement shall be binding upon the assets and
property of the Fund only and shall not be binding on any Director,
officer or shareholder of the Fund individually.
IN WITNESS WHEREOF, the undersigned have executed this Agreement by their
duly authorized officers effective as of the ____ day of _________, _____.
AETNA INSURANCE COMPANY OF AMERICA
By:__________________________________
Name:________________________________
Title:_______________________________
THE CHAPMAN FUND, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
THE CHAPMAN CO.
By:__________________________________
Name:________________________________
Title:_______________________________
9
<PAGE>
Schedule A
(For any future separate accounts--See Section 1)
10
EX-99.B.9
Aetna Aetna Inc.
Financial Services 151 Farmington Avenue
Hartford, CT 06156-8975
Michael A. Pignatella
Counsel
AFS Law, TS31
April 13, 2000 (860) 273-0261
Fax: (860) 273-9407
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: Aetna Insurance Company of America and its Variable Annuity Account I
Post-Effective Amendment No. 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 have reviewed the N-4 Registration Statement
and Post-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/ Michael A. Pignatella
Michael A. Pignatella
EX. 99-B.10
Consent of Independent Auditors
The Board of Directors of Aetna Insurance Company of America and
Contract Owners of Variable Annuity Account I:
We consent to the use of our report dated March 22, 2000, relating to the
financial statements of Aetna Insurance Company of America and our report dated
February 11, 2000, relating to the financial statements of Variable Annuity
Account I, which are included in this Post-Effective Amendment No. 1 to
Registration Statement (File No. 333-87131) on Form N-4 and to the reference to
our firm under the heading "Independent Auditors" in the statement of additional
information.
/s/ KPMG LLP
KPMG LLP
Hartford, Connecticut
April 13, 2000
