0000950109-95-003821.txt : 19950920 0000950109-95-003821.hdr.sgml : 19950920 ACCESSION NUMBER: 0000950109-95-003821 CONFORMED SUBMISSION TYPE: 485APOS PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 19950919 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: VARIABLE ANNUITY ACCOUNT B OF AETNA LIFE INS & ANNUITY CO CENTRAL INDEX KEY: 0000103005 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485APOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-87932 FILM NUMBER: 95574615 FILING VALUES: FORM TYPE: 485APOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-02512 FILM NUMBER: 95574616 BUSINESS ADDRESS: STREET 1: 151 FARMINGTON AVE CITY: HARTFORD STATE: CT ZIP: 06156 BUSINESS PHONE: 2032734808 MAIL ADDRESS: STREET 1: AETNA LIFE & CASUALTY STREET 2: 151 FARMINGTON AVE CITY: HARTFORD STATE: CT ZIP: 06156 FORMER COMPANY: FORMER CONFORMED NAME: VARIABLE ANNUITY ACCOUNT B OF AETNA VARIABLE ANNUITY LIFE IN DATE OF NAME CHANGE: 19791108 485APOS 1 POST-EFFECTIVE #1 TO N-4 As filed with the Securities and Exchange Registration No. 33-87932 Commission on September 18, 1995 Registration No. 811-2512 -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-4 -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- Variable Annuity Account B of Aetna Life Insurance and Annuity Company (Exact Name of Registrant) Aetna Life Insurance and Annuity Company (Name of Depositor) 151 Farmington Avenue, RE4C, Hartford, Connecticut 06156 (Address of Depositor's Principal Executive Offices) (Zip Code) Depositor's Telephone Number, including Area Code: (860) 273-7834 Susan E. Bryant, Counsel Aetna Life Insurance and Annuity Company 151 Farmington Avenue, RE4C, Hartford, Connecticut 06156 (Name and Address of Agent for Service) -------------------------------------------------------------------------------- It is proposed that this filing will become effective (Check appropriate space): immediately upon filing pursuant to paragraph (b) of Rule 485 --- on _______________________ pursuant to paragraph (b) of Rule 485 --- X 60 days after filing pursuant to paragraph (a)(i) of Rule 485 --- on _______________________ pursuant to paragraph (a)(ii) of Rule 485 --- 75 days after filing pursuant to paragraph (a)(ii) of Rule 485 --- on _______________________ pursuant to (a)(ii) of Rule 485 --- If appropriate check the following space: This post-effective amendment designates a new effective date for a --- previously filed post-effective amendment. Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant has registered an indefinite number of securities under the Securities Act of 1933. Registrant filed a Rule 24f-2 Notice for the fiscal year ended December 31, 1994 on February 28, 1995. VARIABLE ANNUITY ACCOUNT B CROSS REFERENCE SHEET
Form N-4 -------- Item No. Part A (Prospectus) Location -------- ------------------- -------- 1 Cover Page..................................... Cover Page 2 Definitions.................................... Glossary of Special Terms 3 Synopsis or Highlights......................... Prospectus Summary; Fee Table 4 Condensed Financial Information................ Condensed Financial Information 5 General Description of Registrant, Depositor, The Company; Variable Annuity and Portfolio Companies........................ Account B; The Funds 6 Deductions and Expenses........................ Charges and Deductions 7 General Description of Variable Annuity Contracts...................................... Contract Rights; Miscellaneous 8 Annuity Period................................. Annuity Period 9 Death Benefit.................................. Death Benefit 10 Purchases and Contract Value................... Contract Purchase; Certificate Holder's Account Value 11 Redemptions.................................... Contract Rights - Withdrawals; Right to Cancel 12 Taxes.......................................... Tax Status 13 Legal Proceedings.............................. Miscellaneous - Legal Proceedings 14 Table of Contents of the Statement of Statement of Additional Additional Information......................... Information - Table of Contents Part B (Statement of Additional Information) -------------------------------------------- 15 Cover Page..................................... Cover page 16 Table of Contents.............................. Table of Contents 17 General Information and History................ General Information and History 18 Services....................................... General Information and History; Independent Auditors 19 Purchase of Securities Being Offered........... Offering and Purchase of Contracts 20 Underwriters................................... Offering and Purchase of Contracts 21 Calculation of Performance Data................ Performance Data - General; Performance Data - Average Annual Total Return Quotations 22 Annuity Payments............................... Annuity Payments 23 Financial Statements........................... Financial Statements
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. AETNA LIFE INSURANCE AND ANNUITY COMPANY Service Unit, RS1T 151 Farmington Avenue Hartford, Connecticut 06156 Telephone: 1-800-531-4547 VARIABLE ANNUITY ACCOUNT B Prospectus Dated: , 1995 MARATHON PLUS/GROWTH PLUS (NEW YORK) This Prospectus describes provisions of the New York group and individual variable annuity contracts issued by Aetna Life Insurance and Annuity Company (the "Company"). As of the date of this Prospectus, only interests in group contracts are offered for new sales. Two Contracts are described in this Prospectus: the nonqualified-flexible premium contract ("Nonqualified Flexible Premium Contract") and the Contract available for rollovers under Individual Retirement Annuities ("IRA Rollover Contract"). See "Contract Purchase" and "Contract Rights." The Contracts are offered through the Company as underwriter, and by registered broker-dealers selected by it. See "Contract Purchase -- Distribution." Purchase Payments received under the Contracts on behalf of persons participating under group Contracts or individual Contract owners (collectively, "Certificate Holders") will be allocated at the Certificate Holder's direction to variable funding options or to a credited interest option for accumulation of values for the Certificate Holder's Account. The variable options reflect the investment experience of Variable Annuity Account B (the "Separate Account") based on Purchase Payments directed to one or more of the following mutual funds as selected by the Certificate Holder. (See "Variable Annuity Account B" and "The Funds.") . Aetna Variable Fund . Fidelity Contrafund Portfolio . Aetna Income Shares . IMS -- Equity Growth and Income . Aetna Variable Encore Fund Fund . Aetna Investment Advisers Fund, Inc. . IMS -- Growth Stock Fund . Aetna Ascent Variable Portfolio . IMS -- Utility Fund . Aetna Crossroads Variable Portfolio . IMS -- Prime Money Fund . Aetna Legacy Variable Portfolio . IMS -- U.S. Government Bond Fund . Alger American Balanced Portfolio . IMS -- Corporate Bond Fund . Alger American Income and Growth . IMS -- International Stock Fund Portfolio . Janus Aspen Aggressive Growth . Alger American Growth Portfolio Portfolio . Alger American MidCap Growth . Janus Aspen Balanced Portfolio Portfolio . Janus Aspen Flexible Income . Alger American Leveraged AllCap Portfolio Portfolio . Janus Aspen Growth Portfolio . Alger American Small Cap Portfolio . Janus Aspen Short-Term Bond . Fidelity High Income Portfolio Portfolio . Fidelity Equity-Income Portfolio . Janus Aspen Worldwide Growth . Fidelity Growth Portfolio Portfolio . Fidelity Overseas Portfolio . Lexington Emerging Markets Fund . Fidelity Investment Grade Bond . Lexington Natural Resources Trust Portfolio . TCI International (a Twentieth . Fidelity Asset Manager Portfolio Century Fund) . Fidelity Index 500 Portfolio . TCI Growth (a Twentieth Century Fund) . TCI Balanced (a Twentieth Century Fund) The fixed interest option available during the Accumulation Period is the ALIAC Guaranteed Account ("AGA"). Except as specifically mentioned, this Prospectus describes only the variable options of the Contracts. Information about the AGA is found in the Appendix and in the AGA prospectus. This Prospectus provides information about the Separate Account that you should know before investing. Additional information about the Separate Account is contained in a Statement of Additional Information ("SAI") dated , 1995, filed with the Securities and Exchange Commission and incorporated herein by reference. The Table of Contents for the SAI is printed in this Prospectus. The SAI may be obtained without charge by indicating your request on your application, or by calling 1-800-531-4547. THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUSES FOR THE FUNDS AND THE ALIAC GUARANTEED ACCOUNT. ALL PROSPECTUSES SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE. THE SECURITIES OFFERED BY THIS PROSPECTUS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUSES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. NO PERSON IS AUTHORIZED BY THE COMPANY TO GIVE INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THE PROSPECTUSES, IN CONNECTION WITH THE OFFERS OF THE SECURITIES DESCRIBED IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. TABLE OF CONTENTS
Page GLOSSARY OF SPECIAL TERMS.................................................. 3 PROSPECTUS SUMMARY......................................................... 6 FEE TABLE.................................................................. 7 PERFORMANCE DATA........................................................... 13 THE COMPANY................................................................ 14 VARIABLE ANNUITY ACCOUNT B................................................. 14 THE FUNDS.................................................................. 14 Fund Investment Advisers.................................................. 19 Fund Additions and Limitations............................................ 20 Mixed and Shared Funding.................................................. 20 CONTRACT PURCHASE General................................................................... 20 Purchase.................................................................. 20 Purchase Payments......................................................... 21 Designations of Beneficiary and Annuitant................................. 21 Distribution.............................................................. 21 CERTIFICATE HOLDER'S ACCOUNT VALUES Accumulation Units........................................................ 22 Net Investment Factor..................................................... 23 CONTRACT RIGHTS Right to Cancel........................................................... 23 Rights Under the Contract and Account..................................... 23 Loans..................................................................... 23 Transfers Among Investment Options........................................ 24 Dollar Cost Averaging Program............................................. 24 Account Rebalancing Program .............................................. 24 Withdrawals............................................................... 25 CHARGES AND DEDUCTIONS General................................................................... 25 Maintenance Fee........................................................... 26 Mortality and Expense Risk Charges........................................ 26 Administrative Expense Charge............................................. 26 Transfer Fees............................................................. 26 Deferred Sales Charge..................................................... 26 Fund Expenses............................................................. 28
Page Premium Tax.............................................................. 28 Commissions and Distribution Expenses.................................... 28 ADDITIONAL WITHDRAWAL OPTIONS General.................................................................. 28 Estate Conservation Option............................................... 29 Systematic Withdrawal Option............................................. 29 ANNUITY PERIOD Annuity Period Elections................................................. 30 Annuity Options.......................................................... 31 DEATH BENEFIT General.................................................................. 32 Death Benefit Amount..................................................... 32 Death Benefit Options Available to Beneficiary Under a Nonqualified Flexible Premium Contract............................................... 33 Death Benefit Options Available to Beneficiary Under an IRA Rollover Contract................................................................ 35 TAX STATUS Introduction............................................................. 36 Taxation of the Company.................................................. 36 Tax Status of the Contract............................................... 37 Taxation of Annuities.................................................... 38 IRA Rollover Contract.................................................... 39 Withholding.............................................................. 40 Possible Changes in Taxation............................................. 40 Other Tax Consequences................................................... 40 MISCELLANEOUS Voting Rights............................................................ 40 Modification of the Contract............................................. 41 Inquiries................................................................ 41 Telephone Transfers...................................................... 41 Transfer of Ownership; Assignment........................................ 42 Legal Proceedings........................................................ 42 Legal Matters............................................................ 42 STATEMENT OF ADDITIONAL INFORMATION -- TABLE OF CONTENTS.................. 43 APPENDIX: ALIAC Guaranteed Account........................................ 44
2 GLOSSARY OF SPECIAL TERMS As used in this Prospectus, the following terms have the meanings shown: ACCUMULATION PERIOD: The period during which one or more Net Purchase Payments applied to a Certificate Holder's Account are invested to fund future annuity payments. ACCUMULATION UNIT: A measure of the net investment results for each variable investment option during the Accumulation Period. The Accumulation Units for the applicable Funds are used to calculate the portion of the Certificate Holder's Account attributable to the Separate Account during the Accumulation Period. ADJUSTED ACCOUNT VALUE: The Certificate Holder's Account Value plus or minus the Certificate Holder's aggregate ALIAC Guaranteed Account market value adjustment ("MVA"). AGA: ALIAC Guaranteed Account, a credited interest option offered as a funding option under the Contract. ANNUITANT: The natural person on whose life the Annuity benefit under a Contract is based. ANNUITY: A series of payments for life, for a definite period or for a combination of the two. ANNUITY DATE: The date on which Annuity payments commence. ANNUITY OPTIONS: Annuity payment methods available during the Annuity Period. ANNUITY PERIOD: The period of time during which Annuity payments are made. ANNUITY UNIT: A unit of measure used to calculate the dollar amount of each variable Annuity payment during the Annuity Period. Annuity Units are used to calculate the amount of each variable Annuity payment. BENEFICIARY: The person entitled to receive any death benefit with respect to a Certificate Holder's Account. CERTIFICATE: The document issued to a Certificate Holder for a Certificate Holder's Account established under a group Contract. CERTIFICATE HOLDER: A person or entity (i.e., a Trustee for a Trust) who purchases or acquires an interest under a group Contract or who purchases an individual Contract, sometimes referred to as "you." A Certificate Holder's spouse may have an interest in the same Certificate Holder's Account as a joint Certificate Holder. References to "Certificate Holders" in this Prospectus mean both of the Certificate Holders on Joint Accounts. CERTIFICATE HOLDER'S ACCOUNT: A record established for each Certificate Holder to maintain values under a Contract. CERTIFICATE HOLDER'S ACCOUNT VALUE: As of any Valuation Period, the dollar value of all amounts accumulated in a Certificate Holder's Account, including the value of the Accumulation Units, AGA and amounts deposited pursuant to the guaranteed death benefit. CODE: The Internal Revenue Code of 1986, as amended. COMPANY: Aetna Life Insurance and Annuity Company. 3 CONTRACTS: Group or individual variable deferred annuity contracts described in this prospectus, one of which is a nonqualified flexible premium contract and the other an Individual Retirement Annuity (IRA). DISTRIBUTOR(S): The registered broker-dealer(s) which have entered into selling agreements with the Company to offer and sell the Contracts. The Company may also serve as a Distributor. EFFECTIVE DATE: The date a Contract or Certificate is issued to a Certificate Holder. FUNDS: The open-end management investment companies available as variable funding options for the investment of assets of the Separate Account under the Contracts. GENERAL ACCOUNT: The account into which all Company assets not held in a separate account are deposited. The General Account is subject to all liabilities of the Company. GROUP CONTRACT HOLDER: The entity to which a group Contract is issued. HOME OFFICE: The principal executive offices of the Company located at 151 Farmington Avenue, Hartford, Connecticut 06156. INDIVIDUAL RETIREMENT ANNUITY (IRA) ROLLOVER CONTRACT: An individual or group variable deferred annuity contract established to accept Purchase Payments of rollover amounts previously accumulated under an Individual Retirement Account or Annuity or a plan qualified under Code Section 401 or 403. These Contracts are intended to qualify under Code Section 408(b). MARKET VALUE ADJUSTMENT (MVA): An amount deducted or added to amounts withdrawn early from the AGA to reflect changes in the market value of the investment since the date of deposit. See the Appendix and the prospectus for the AGA for a discussion of how the market value adjustment is actually calculated. NASD: National Association of Securities Dealers, Inc. 1940 ACT: The Investment Company Act of 1940, as amended. NET PURCHASE PAYMENT: The Purchase Payment less premium taxes, if applicable. NONQUALIFIED FLEXIBLE PREMIUM CONTRACT: An individual or group variable deferred annuity contract established to accept one or more Purchase Payments to supplement an individual's retirement income, or to provide an alternative investment option under an Individual Retirement Account qualified under Code Section 408(a). PURCHASE PAYMENT(S): The gross payment(s) made to a Certificate Holder's Account pursuant to the terms of a Contract. The Company reserves the right to refuse to accept any Purchase Payment at any time for any reason. REGISTERED REPRESENTATIVE: The individual who is registered with the NASD as an agent of a Distributor to offer and sell securities and who has the appropriate insurance licenses to sell variable annuity contracts. See "Distribution." SEC: Securities and Exchange Commission. SEPARATE ACCOUNT: Variable Annuity Account B, an account whose assets are segregated from other assets of the Company. The Separate Account holds shares of the Funds acquired as variable funding options under the Contracts. The Company holds title to the assets held in the Separate Account. 4 UNDERWRITER: The registered broker-dealer which contracts with other registered broker-dealers on behalf of the Separate Account to offer and sell the Contracts. The Company will serve as Underwriter for the Contracts. VALUATION PERIOD: The period of time for which a Fund determines its net asset value, usually from 4:15 p.m. Eastern time each day the New York Exchange is open for trading until 4:15 the next such business day. VALUATION RESERVE: A reserve established pursuant to the insurance laws of the State of Connecticut to measure voting rights during the Annuity Period. It also measures the value of a commutation right under the "Payments of a Stated Period of Time" nonlifetime Annuity option when elected on a variable basis. VARIABLE ANNUITY CONTRACT: An annuity contract providing for the accumulation of values, and for retirement payments, which vary in amount based on investment results. 5 PROSPECTUS SUMMARY CONTRACTS OFFERED Two types of variable deferred annuity Contracts are being offered. One is a Nonqualified Flexible Premium Contract and the other is an Individual Retirement Annuity (IRA) rollover contract. See "Contract Purchase -- General," "Contract Rights" and "Miscellaneous." PURCHASE Under the group Contract, individuals may be enrolled as Certificate Holders and the Company will maintain a Certificate Holder's Account for each Certificate Holder. Under an individual Contract, the owner will be an individual. (In either case, the individual is referred to as "Certificate Holder" or "you.") Under the Contracts, Certificate Holders have certain rights (see "Contract Rights"). As of the date of this Prospectus, only interests in group contracts are offered for new sales. WITHDRAWAL You may redeem all or a portion of your Account Value during the Accumulation Period by completing the Company's disbursement form and sending it to the Company. Amounts withdrawn may be subject to a deferred sales charge or maintenance fee. See "Charges and Deductions." The maximum deferred sales charge that could be assessed is 7% of each Net Purchase Payment. Amounts withdrawn from the AGA may be subject to a market value adjustment. (See the Appendix.) A 10% federal penalty tax may also be imposed on the taxable portion paid to you and certain amounts may be subject to tax withholding. See "Tax Status -- Taxation of Annuities." GUARANTEED DEATH BENEFIT These Contacts contain a guaranteed death benefit feature. Upon the death of the Certificate Holder or the Annuitant, under certain circumstances, the Certificate Holder's Account Value may be adjusted upward. See "Death Benefit." CONTRACT CHARGES Certain charges are associated with these Contracts, for example, mortality and expense risk charges, administrative expense charges, maintenance fees and transfer fees. The Funds are also subject to certain fees and expenses. See "Charges and Deductions" for a complete explanation of these charges. FREE LOOK PROVISION The Certificate Holder may cancel the Certificate Holder's Account no later than ten days after receiving the Contract or Certificate (whichever is applicable) by returning it to us or to the Distributor from whom it was purchased along with a written notice of cancellation. The Certificate Holder will receive the full amount of Purchase Payments made under the Contract upon cancellation under this provision. (See "Contract Rights -- Right to Cancel.") 6 FEE TABLE (Based on year ended December 31, 1994) THE PURPOSE OF THE FEE TABLE IS TO ASSIST CERTIFICATE HOLDERS IN UNDERSTANDING THE VARIOUS COSTS AND EXPENSES THAT WILL BE BORNE, DIRECTLY OR INDIRECTLY, UNDER THE CONTRACT. THE INFORMATION LISTED REFLECTS THE CHARGES DUE UNDER THE CONTRACT AS WELL AS THE FEES AND EXPENSES DEDUCTED FROM THE FUNDS. ADDITIONAL INFORMATION REGARDING THE CHARGES AND DEDUCTIONS ASSESSED UNDER THE CONTRACT CAN BE FOUND UNDER "CHARGES AND DEDUCTIONS" IN THIS PROSPECTUS. CHARGES AND EXPENSES SHOWN DO NOT TAKE INTO ACCOUNT PREMIUM TAXES THAT MAY BE APPLICABLE. FOR MORE INFORMATION REGARDING EXPENSES PAID OUT OF THE ASSETS OF A PARTICULAR FUND, SEE THE FUND'S PROSPECTUS. TRANSACTION EXPENSES -------------------- DEFERRED SALES CHARGE (as a percentage of each Net Purchase Payment deposited)(/1/)
LENGTH OF TIME SINCE NET PURCHASE PAYMENT MADE DEDUCTION ---------------------------------------------- --------- Less than 1 year 7% 1 or more but less than 2 years 6% 2 or more but less than 3 years 5% 3 or more but less than 4 years 4% 4 or more but less than 5 years 3% 5 or more but less than 6 years 2% 6 or more but less than 7 years 1% 7 or more than 7 years 0% Transfers(/2/) $ 0.00
ANNUAL EXPENSES --------------- Annual Maintenance Fee(/3/) $30.00
SEPARATE ACCOUNT ANNUAL EXPENSES Daily deductions are made from the Certificate Holder's Account Value held in the variable options. The deduction is the daily equivalent of the annual effective percentage shown in the following chart: During the Accumulation Period: Mortality and Expense Risk Fees 1.25% Administrative Expense Charge 0.15% ----- Total Separate Account Annual Expenses 1.40% ===== During the Annuity Period: Mortality and Expense Risk Fees 1.25% Administrative Expense Charge(/4/) 0.00% ----- Total Separate Account Annual Expenses 1.25% =====
(/1/)Referred to in the Contracts as a "surrender fee." See "Charges and Deductions -- Deferred Sales Charge" for instances in which this charge may be waived. (/2/)We currently do not impose a transfer fee; however, we reserve the right to impose a fee of $10 for each transfer in excess of 12 per year. See "Contract Rights -- Transfers Among Investment Options." (/3/)The maintenance fee is waived when the Certificate Holder's Account Value is $50,000 or more on the date the maintenance fee is due. See "Charges and Deductions -- Maintenance Fee." (/4/)The Company does not currently impose an administrative charge during the Annuity Period. We do, however, reserve the right to deduct a daily administrative expense charge during the Annuity Period of up to 0.25% per year from the portion of a Certificate Holder's Account Values held in the Separate Account. 7 MUTUAL FUND ANNUAL EXPENSES (As a percentage of average net assets, except where otherwise noted, based on figures for the year ended December 31, 1994.)
INVESTMENT OTHER ADVISORY FEES(/1/) EXPENSE(/2/) (AFTER EXPENSE (AFTER EXPENSE TOTAL FUND REIMBURSEMENT) REIMBURSEMENT) ANNUAL EXPENSES ------------------ -------------- --------------- Aetna Variable Fund 0.25% 0.05% 0.30% Aetna Income Shares 0.25% 0.08% 0.33% Aetna Variable Encore Fund 0.25% 0.07% 0.32% Aetna Investment Advisers Fund, Inc. 0.25% 0.07% 0.32% Aetna Ascent Variable Portfolio(/3/) 0.50% 0.20% 0.70% Aetna Crossroads Variable Portfolio(/3/) 0.50% 0.20% 0.70% Aetna Legacy Variable Portfolio(/3/) 0.50% 0.20% 0.70% Alger American Balanced Portfolio 0.75% 0.33% 1.08% Alger American Income and Growth Portfolio 0.63% 0.12% 0.75% Alger American MidCap Growth Portfolio 0.80% 0.17% 0.97% Alger American Leveraged AllCap Growth Portfolio(/3/)(/4/) 0.85% 0.94% 1.79% Alger American Small Cap Portfolio 0.85% 0.11% 0.96% Alger American Growth Portfolio 0.75% 0.11% 0.86% Fidelity High Income Portfolio 0.61% 0.10% 0.71% Fidelity Equity-Income Portfolio(/5/) 0.52% 0.06% 0.58% Fidelity Growth Portfolio(/5/) 0.62% 0.07% 0.69% Fidelity Overseas Portfolio 0.77% 0.15% 0.92% Fidelity Investment Grade Bond Portfolio 0.46% 0.21% 0.67% Fidelity Asset Manager Portfolio(/5/) 0.72% 0.08% 0.80% Fidelity Index 500 Portfolio(/6/) 0.00% 0.28% 0.28% Fidelity Contrafund Portfolio(/3/) 0.62% 0.27% 0.89% IMS Equity Growth and Income Fund(/7/) 0.00% 0.85% 0.85% IMS Utility Fund(/7/) 0.00% 0.85% 0.85% IMS Prime Money Fund(/7/) 0.00% 0.80% 0.80% IMS U.S. Government Bond Fund(/7/) 0.00% 0.80% 0.80% IMS Corporate Bond Fund(/7/) 0.00% 0.80% 0.80% IMS International Stock Fund(/8/) 0.52% 0.73% 1.25% IMS Growth Stock Fund(/9/) 0.00% 0.85% 0.85% Janus Aspen Aggressive Growth(/10/) 0.77% 0.28% 1.05% Janus Aspen Balanced Portfolio(/10/) 0.83% 0.74% 1.57% Janus Aspen Flexible Income Portfolio(/10/) 0.30% 0.70% 1.00% Janus Aspen Growth Portfolio(/10/) 0.66% 0.22% 0.88% Janus Aspen Short-Term Bond Portfolio(/10/) 0.00% 0.65% 0.65% Janus Aspen Worldwide Growth Portfolio(/10/) 0.69% 0.49% 1.18% Lexington Emerging Markets Fund(/11/) 0.85% 0.45% 1.30% Lexington Natural Resources Trust 1.00% 0.55% 1.55% TCI Growth(/12/) 1.00% 0.00% 1.00% TCI Balanced(/12/) 1.00% 0.00% 1.00% TCI International(/12/) 1.50% 0.00% 1.50%
8 ------- (/1/)Certain of the unaffiliated Fund managers or their affiliates reimburse the Company for administrative costs incurred in connection with administering the Funds as variable funding options. These reimbursements are generally based on a percentage of assets under management and may be paid out of the managers' advisory fees. These amounts are not charged to the Funds or Contract Holders, but are paid from other assets of the Fund Managers or their affiliates. (/2/)A mutual fund's "Other Expenses" include operating costs of the Fund. The deduction of the above expenses are reflected in the Fund's net asset value and are not deducted from the Contract Value. (/3/)These funds have only limited operating history; therefore the expenses are estimated for the current fiscal year. (/4/)This figure does not include 0.75% that is attributable to Interest Expense. (/5/)A portion of the brokerage commission the Fund paid was used to reduce its expenses. Without this reduction, total operating expenses would have been 0.60% for the Equity-Income Portfolio, 0.70% for the Growth Portfolio and 0.81% for the Asset Manager Portfolio. (/6/)The Fund's expenses were voluntarily reduced by the Fund's investment adviser. Absent reimbursement, investment advisory fees, other expenses and total expenses would have been 0.28%, 0.53% and 0.81%, respectively. (/7/)The Fund's Adviser has agreed to waive all or a portion of its advisory fee and reimburse certain expenses so that the total annual expenses for the Equity Growth and Income Fund and the Utility Fund would not exceed 0.85% of average net assets, and the total annual expenses for the Prime Money Fund, the U.S. Government Bond Fund and the Corporate Bond Fund would not exceed 0.80% of average net assets. Without this waiver and reimbursement, the maximum advisory fees and the maximum total annual expenses for the Funds, respectively, would have been 0.75% and 25.96% for the Equity Growth and Income Fund, 0.75% and 55.43% for the Utility Fund, 0.50% and 72.54% for the Prime Money Fund, 0.60% and 33.35% for the U.S. Government Bond Fund, and 0.60% and 10.42% for the Corporate Bond Fund. The Adviser can terminate this voluntary waiver or reimbursement of expenses at any time at its sole discretion. (/8/)The estimated management fee has been reduced to reflect the anticipated voluntary waiver of a portion of the management fee. The Fund's Adviser can terminate this voluntary waiver at any time at its sole discretion. The maximum management fee is 1.00%. The Total Fund Annual Expenses are estimated to be 1.73% absent the anticipated voluntary waiver of a portion of the management fee. Total Fund Annual Expenses are estimated based on average expenses expected to be incurred during the period ending December 31, 1995. During the course of this period, expenses may be more or less than the average amount shown. (/9/)The estimated management fee has been reduced to reflect the anticipated voluntary waiver of the management fee. The Fund's Adviser can terminate this voluntary waiver at any time at its sole discretion. The maximum management fee is 0.75%. The Total Fund Annual Expenses are estimated to be 5.81% absent the anticipated voluntary waiver of the management fee and the anticipated voluntary reimbursement of certain other operating expenses. Total Fund Annual Expenses are estimated based on average expenses expected to be incurred during the period ending December 31, 1995. During the course of this period, expenses may be more or less than the average amount shown. (/10/)The expense figures shown are net of certain expense waivers from Janus Capital Corporation. Without such waivers, the Investment Advisory Fees, Other Expenses and Total Mutual Fund Annual Expenses for the Portfolios for the fiscal year ended December 31, 1994 would have been; 1.00%, 0.28% and 1.28%, respectively, for Janus Aspen Aggressive Growth Portfolio: 1.00%, 0.74% and 1.74%, respectively, for Janus Aspen Balanced Portfolio; 0.65%, 0.70% and 1.35%, respectively, for Janus Aspen Flexible Income Portfolio; 1.00%, 0.22% and 1.22%, respectively, for Janus Aspen Growth Portfolio; 0.65%, 0.75% and 1.40%, respectively, for Janus Aspen Short- Term Bond Portfolio; and 1.00%, 0.49% and 1.49%, respectively, for Janus Aspen Worldwide Growth Portfolio. (/11/)The Fund's investment adviser has agreed to reimburse the Fund so that the total expenses of the Fund (excluding taxes, brokerage, and extraordinary expenses) will not exceed an annual rate of 1.30% of the Fund's average net assets. Without this agreement, it is estimated that the Fund's Investment Advisory Fee, Total Other Expenses and Total Mutual Fund Annual Expenses would have been 0.85%, 5.43% and 6.28%, respectively. (/12/)The Portfolio's investment adviser pays all expenses of the Portfolio except brokerage commissions, taxes, interest, fees and expenses of the non-interested directors (including counsel fees) and extraordinary expenses. 9 HYPOTHETICAL ILLUSTRATION (EXAMPLE) ----------------------------------- THIS EXAMPLE IS PURELY HYPOTHETICAL. IT SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR EXPECTED RETURN. ACTUAL EXPENSES AND/OR RETURN MAY BE MORE OR LESS THAN THOSE SHOWN BELOW. Assuming a 5% annual return on assets, you would have paid the following expenses on a $1,000 investment (/1/):
For a complete withdrawal at If no withdrawal is made, or if the end of the applicable time the Certificate Holder period: annuitizes: 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years ------ ------- ------- -------- ------ ------- ------- -------- Aetna Variable Fund $72 $ 91 $113 $207 $18 $ 55 $ 95 $207 Aetna Income Shares $72 $ 92 $115 $210 $18 $ 56 $ 97 $210 Aetna Variable Encore Fund $72 $ 92 $114 $209 $18 $ 56 $ 96 $209 Aetna Investment Advisers Fund, Inc. $72 $ 92 $114 $209 $18 $ 56 $ 96 $209 Aetna Ascent Variable Portfolio $76 $103 $134 $249 $22 $ 68 $116 $249 Aetna Crossroads Variable Portfolio $76 $103 $134 $249 $22 $ 68 $116 $249 Aetna Legacy Variable Portfolio $76 $103 $134 $249 $22 $ 68 $116 $249 Alger American Balanced Portfolio $80 $115 $153 $287 $26 $ 79 $135 $287 Alger American Income and Growth Portfolio $76 $105 $136 $254 $22 $ 69 $118 $254 Alger American MidCap Growth Portfolio $78 $111 $147 $276 $25 $ 76 $129 $276 Alger American Leveraged AllCap Portfolio $87 $136 $187 $355 $33 $100 $170 $355 Alger American Small Cap Portfolio $78 $111 $147 $275 $24 $ 75 $129 $275 Alger American Growth Portfolio $77 $108 $142 $265 $23 $ 72 $124 $265 Fidelity Equity-Income Portfolio $75 $100 $127 $237 $21 $ 64 $110 $237 Fidelity Growth Portfolio $76 $103 $133 $248 $22 $ 67 $115 $248 Fidelity Overseas Portfolio $78 $110 $145 $271 $24 $ 74 $127 $271 Fidelity Asset Manager Portfolio $77 $106 $139 $259 $23 $ 71 $121 $259 Fidelity High Income Portfolio $76 $104 $134 $250 $22 $ 68 $116 $250 Fidelity Investment Grade Bond Portfolio $75 $102 $132 $246 $22 $ 67 $114 $246 Fidelity Index 500 Portfolio $71 $ 90 $112 $205 $18 $ 55 $ 94 $205 Fidelity Contrafund Portfolio $78 $109 $143 $268 $24 $ 73 $125 $268 IMS Equity Growth and Income Fund $77 $108 $141 $264 $23 $ 72 $123 $264 IMS Utility Fund $77 $108 $141 $264 $23 $ 72 $123 $264 IMS Prime Money Fund $77 $106 $139 $259 $23 $ 71 $121 $259 IMS U.S. Government Bond Fund $77 $106 $139 $259 $23 $ 71 $121 $259 IMS Corporate Bond Fund $77 $106 $139 $259 $23 $ 71 $121 $259 IMS International Stock Fund $81 $120 $161 $304 $27 $ 84 $143 $304 IMS Growth Stock Fund $77 $108 $141 $264 $23 $ 72 $123 $264 Janus Aspen Aggressive Growth Portfolio $79 $114 $151 $284 $25 $ 78 $133 $284 Janus Aspen Balanced Portfolio $84 $129 $177 $334 $31 $ 94 $159 $334 Janus Aspen Flexible Income Portfolio $79 $112 $149 $279 $25 $ 77 $131 $279 Janus Aspen Growth Portfolio $78 $109 $143 $267 $24 $ 73 $125 $267 Janus Aspen Short-Term Bond Portfolio $75 $102 $131 $244 $21 $ 66 $113 $244 Janus Aspen Worldwide Growth Portfolio $81 $118 $158 $297 $27 $ 82 $140 $297 Lexington Emerging Markets Fund $82 $121 $164 $309 $28 $ 86 $146 $309 Lexington Natural Resources Trust $91 $150 $210 $397 $37 $114 $192 $397 TCI Growth $79 $112 $149 $279 $25 $ 77 $131 $279 TCI Balanced $79 $112 $149 $279 $25 $ 77 $131 $279 TCI International $84 $127 $173 $328 $30 $ 91 $156 $328
------- (/1/)The illustration reflects the $30.00 maintenance fee as an annual charge of 0.058% of assets. 10 CONDENSED FINANCIAL INFORMATION (SELECTED DATA FOR ACCUMULATION UNITS OUTSTANDING THROUGHOUT EACH PERIOD) THE CONDENSED FINANCIAL INFORMATION PRESENTED BELOW FOR THE YEAR OR PERIOD ENDED DECEMBER 31, 1994 IS DERIVED FROM THE FINANCIAL STATEMENTS OF THE SEPARATE ACCOUNT, WHICH FINANCIAL STATEMENTS HAVE BEEN AUDITED BY KPMG PEAT MARWICK LLP, INDEPENDENT AUDITORS. THE FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1994, AND THE INDEPENDENT AUDITORS' REPORT THEREON, ARE INCLUDED IN THE STATEMENT OF ADDITIONAL INFORMATION.
1994 --------- AETNA VARIABLE FUND Value at beginning of period $10.000 Value at end of period $10.737 Increase (decrease) in value of accumulation units(/1/) 7.37%(/2/) Number of accumulation units outstanding at end of period 3,178,712 AETNA INCOME SHARES Value at beginning of period $10.000 Value at end of period $10.324 Increase (decrease) in value of accumulation units(/1/) 3.24%(/3/) Number of accumulation units outstanding at end of period 983,357 AETNA VARIABLE ENCORE FUND Value at beginning of period $10.000 Value at end of period $10.489 Increase (decrease) in value of accumulation units(/1/) 4.89%(/2/) Number of accumulation units outstanding at end of period 3,407,448 AETNA INVESTMENT ADVISERS FUND, INC. Value at beginning of period $10.000 Value at end of period $10.828 Increase (decrease) in value of accumulation units(/1/) 8.28%(/4/) Number of accumulation units outstanding at end of period 911,281 FIDELITY EQUITY-INCOME PORTFOLIO Value at beginning of period $10.000 Value at end of period $10.002 Increase (decrease) in value of accumulation units(/1/) 0.02%(/5/) Number of accumulation units outstanding at end of period 17,013 FIDELITY GROWTH PORTFOLIO Value at beginning of period $10.000 Value at end of period $10.423 Increase (decrease) in value of accumulation units(/1/) 4.23%(/5/) Number of accumulation units outstanding at end of period 17,013 IMS EQUITY GROWTH AND INCOME FUND Value at beginning of period $10.000 Value at end of period $ 9.838 Increase (decrease) in value of accumulation units(/1/) (1.62)%(/6/) Number of accumulation units outstanding at end of period 188,708 IMS UTILITY FUND Value at beginning of period $10.000 Value at end of period $ 9.881 Increase (decrease) in value of accumulation units(/1/) (1.19)%(/6/) Number of accumulation units outstanding at end of period 41,191 IMS U.S. GOVERNMENT BOND FUND Value at beginning of period $10.000 Value at end of period $10.073 Increase (decrease) in value of accumulation units(/1/) 0.73%(/6/) Number of accumulation units outstanding at end of period 12,714
11
1994 ------- IMS CORPORATE BOND FUND Value at beginning of period $10.000 Value at end of period $ 9.814 Increase (decrease) in value of accumulation units(/1/) (1.86)%(/6/) Number of accumulation units outstanding at end of period 31,309 JANUS ASPEN GROWTH PORTFOLIO Value at beginning of period $10.000 Value at end of period $10.109 Increase (decrease) in value of accumulation units(/1/) 1.09%(/4/) Number of accumulation units outstanding at end of period 9,588 LEXINGTON EMERGING MARKETS FUND Value at beginning of period $10.000 Value at end of period $ 9.795 Increase (decrease) in value of accumulation units(/1/) (2.05)%(/4/) Number of accumulation units outstanding at end of period 1,500 LEXINGTON NATURAL RESOURCES TRUST Value at beginning of period $10.000 Value at end of period $ 9.056 Increase (decrease) in value of accumulation units(/1/) (9.44)%(/3/) Number of accumulation units outstanding at end of period 537 TCI GROWTH Value at beginning of period $10.000 Value at end of period $10.847 Increase (decrease) in value of accumulation units(/1/) 8.47%(/4/) Number of accumulation units outstanding at end of period 893,534 TCI BALANCED Value at beginning of period $10.000 Value at end of period $10.152 Increase (decrease) in value of accumulation units(/1/) 1.52%(/4/) Number of accumulation units outstanding at end of period 3,477 TCI INTERNATIONAL Value at beginning of period $10.000 Value at end of period $ 9.441 Increase (decrease) in value of accumulation units(/1/) (5.59)%(/4/) Number of accumulation units outstanding at end of period 3,745
(/1/)The above figures are calculated by subtracting the beginning Accumulation Unit value from the ending Accumulation Unit value during a calendar year, and dividing the result by the beginning Accumulation Unit value. These figures do not reflect the deferred sales charge or the fixed dollar annual maintenance fee, if any. Inclusion of these charges would reduce the investment results shown. (/2/)Reflects less than a full year of performance activity. Funds were first received in this option during October 1994. (/3/)Reflects less than a full year of performance activity. Funds were first received in this option during August 1994. (/4/)Reflects less than a full year of performance activity. Funds were first received in this option during July 1994. (/5/)Reflects less than a full year of performance activity. Funds were first received in this option during December 1994. (/6/)Reflects less than a full year of performance activity. Funds were first received in this option during September 1994. 12 PERFORMANCE DATA From time to time, the Company may advertise different types of historical performance for the variable funding options of the Separate Account available under the Contracts described in this Prospectus. The Company may advertise the "standardized average annual total returns" of the variable funding options, calculated in a manner prescribed by the SEC, as well as the "non- standardized return." Both methods are described below. Further information is contained in the SAI. "Standardized average annual total returns" are computed according to a formula in which a hypothetical investment of $1,000 is applied to the variable funding options under the Contract and then related to the ending redeemable values over the most recent one, five and ten-year periods (or since inception if less than 10 years). Standardized returns will reflect the deduction of all recurring charges during each period (e.g., mortality and expense risk charges, the annual maintenance fee, the administrative expense charge and any applicable deferred sales charge). "Non-standardized return" will be calculated in a similar manner, except that non-standardized figures will not reflect the deduction of any applicable deferred sales charge (which would decrease the level of performance shown if reflected in these calculations). The non-standardized figures may also include a three-year period. For Funds that were in existence prior to the date that the Fund became available under the Contract, the performance data will show the investment performance that such Fund would have achieved (reduced by the applicable charges) had it been available under the Contract for the period quoted. The Company may distribute sales literature that compares the percentage change in Accumulation Unit values for any of the Funds to established market indexes such as the Standard & Poor's 500 Stock Index and the Dow Jones Industrial Averages or to the change in values of other management investment companies that have investment objectives similar to the Fund being compared. The Company may publish in advertisements and reports to Certificate Holders 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 the Company's financial strength and/or claims-paying ability. We may also quote ranking services, such as Morningstar's Variable Annuity/Life Performance Report, and Lipper's Variable Insurance Products Performance Analysis Service (VIPPAS), which rank variable annuity or life subaccounts or their underlying funds by performance and/or investment objective. From time to time, we will quote articles from newspapers and magazines or other publications or reports including, but not limited to, The Wall Street Journal, Money magazine, USA Today and The VARDS Report. 13 THE COMPANY Aetna Life Insurance and Annuity Company (the "Company") is the issuer of the Contracts and the depositor of the Separate Account. The Company is engaged in the business of issuing variable annuity and variable and universal life insurance policies. The Company was organized in 1976 as a stock life insurance company under the insurance laws of the State of Connecticut. Through a merger, the Company succeeded to the business of Aetna Variable Annuity Life Insurance Company. The former Company had been doing business since 1954 as an Arkansas insurance company under the name Participating Annuity Life Insurance Company. The Company is registered as an investment adviser under the Investment Advisers Act of 1940 and, as such, serves as the investment adviser to the Aetna Funds. It is also registered as a broker-dealer under the Securities Exchange Act of 1934 and is a member of the National Association of Securities Dealers, Inc. The Company is a wholly owned subsidiary of Aetna Life and Casualty Company, a diversified financial services company. Organized under the laws of the State of Connecticut in 1967, Aetna Life and Casualty Company is publicly held, and to the best of its knowledge, no single person or entity beneficially owns as much as 10% of the outstanding shares of its capital stock. VARIABLE ANNUITY ACCOUNT B Variable Annuity Account B is a separate account established by the Company in 1976 under the insurance laws of the State of Connecticut. The Separate Account was formed for the purpose of segregating assets attributable to the variable portions of the Contracts from Company assets. The Separate Account is registered as a unit investment trust under Investment Company Act of 1940, and meets the definition of "separate account" under the federal securities laws. Although the Company holds title to the assets of the Separate Account, such assets are not chargeable with liabilities arising out of any other business the Company may conduct. Income, gains or losses of the Separate Account are credited to or charged against the assets of the Separate Account without regard to the other income, gains or losses of the Company. All obligations of the Company arising under the contracts are its general corporate obligations. THE FUNDS The Certificate Holder will designate some or all of the mutual funds described below as variable funding options under the Contract. Except where noted, all of the Funds are diversified as defined in the Investment Company Act of 1940. The availability of the Funds is subject to applicable regulatory authorization. . AETNA VARIABLE FUND (sometimes called the "Growth and Income Fund") seeks to maximize total return through investments in a diversified portfolio of common stocks and securities convertible into common stocks. . AETNA INCOME SHARES (sometimes called the "Bond Fund") seeks to maximize total return, consistent with reasonable risk, through investments in a diversified portfolio consisting primarily of debt securities. . AETNA VARIABLE ENCORE FUND (sometimes called the "Money Market Fund") 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. . AETNA INVESTMENT ADVISERS FUND, INC. (sometimes called the "Managed Fund") is a managed mutual fund which seeks to maximize investment return consistent with reasonable safety of principal by investing in one or more of the following asset classes: stocks, bonds and cash equivalents, based on the Company's judgment of which of those sectors or mix thereof offers the best investment prospects. 14 . AETNA GENERATION PORTFOLIOS INC. -- AETNA ASCENT VARIABLE PORTFOLIO seeks to provide capital appreciation by allocating its investments among equities and fixed income securities. Aetna Ascent Variable Portfolio is managed for investors who generally have an investment horizon exceeding 15 years, and who have a high level of risk tolerance. See the Fund's prospectus for a discussion of the risks involved. . AETNA GENERATION PORTFOLIOS, INC. -- AETNA CROSSROADS VARIABLE PORTFOLIO seeks to provide total return (i.e., income and capital appreciation, both realized and unrealized) by allocating its investments among equities and fixed income securities. Aetna Crossroads Variable Portfolio is managed for investors who generally have an investment horizon exceeding 10 years and who have a moderate level of risk tolerance. . AETNA GENERATION PORTFOLIOS, INC. -- AETNA LEGACY VARIABLE PORTFOLIO seeks to provide total return consistent with preservation of capital by allocating its investments among equities and fixed income securities. Aetna Legacy Variable Portfolio is managed for investors who generally have an investment horizon exceeding five years and who have a low level of risk tolerance. . ALGER AMERICAN FUND -- ALGER AMERICAN BALANCED PORTFOLIO seeks current income and long-term capital appreciation by investing in common stocks and fixed income securities, with emphasis on income-producing securities which appear to have some potential for capital appreciation. . ALGER AMERICAN FUND -- ALGER AMERICAN INCOME AND GROWTH PORTFOLIO seeks a high level of dividend income to the extent consistent with prudent investment management by investing primarily in dividend paying equity securities. Capital appreciation is a secondary objective of the Portfolio. . ALGER AMERICAN FUND -- ALGER AMERICAN GROWTH PORTFOLIO seeks long-term capital appreciation by investing in a diversified, actively managed portfolio of equity securities, primarily of companies with total market capitalization -- present market value per share multiplied by the total number of shares outstanding -- of $1 billion or greater. Income is a consideration in the selection of investments but is not an investment objective. . ALGER AMERICAN FUND -- ALGER AMERICAN MIDCAP GROWTH PORTFOLIO seeks long- term capital appreciation by investing in a diversified, actively managed portfolio of equity securities, primarily of companies with total market capitalization between $750 million and $3.5 billion. Income is a consideration in the selection of investments but is not an investment objective of the Portfolio. . ALGER AMERICAN FUND -- ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO seeks long-term capital appreciation by investing in a diversified, actively managed portfolio of equity securities. Income is a consideration in the selection of investments but is not an investment objective of the Portfolio. The Portfolio may engage in leveraging (up to 33 1/3% of its assets) and options and futures transactions, which are deemed to be speculative and which may cause the Portfolio's net asset value to fluctuate. . ALGER AMERICAN FUND -- ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO ("Alger American Small Cap Portfolio") seeks capital return through investment in the common stock of smaller companies offering the potential for significant price gain. It invests at least 85% of its net assets in equity securities and at least 65% of its net assets in equity securities of companies that, at the time of purchase, have "total market capitalization" -- present market value per share multiplied by the total number of shares outstanding -- of less than $1 billion. Investing in smaller companies may present risks not present in investments in larger companies. See the Fund's prospectus for a discussion of these risks. . FIDELITY INVESTMENTS' VARIABLE INSURANCE PRODUCTS FUND -- HIGH INCOME PORTFOLIO ("Fidelity High Income Portfolio") seeks to obtain a high level of current income by investing primarily in high-yielding, lower-rated, fixed income securities, while also considering growth of capital. Lower- rated corporate debt obligations are commonly known as "junk bonds" or "high yield, high risk bonds" and involve significant degree of risk (see the funds' prospectus for a discussion of the risk factors involved in investing in lower-rated corporate debt obligations). 15 . FIDELITY INVESTMENTS' VARIABLE INSURANCE PRODUCTS FUND -- EQUITY-INCOME PORTFOLIO ("Fidelity Equity-Income Portfolio") seeks reasonable income by investing primarily in income-producing equity securities. In choosing these securities, the Fund will also consider the potential for capital appreciation. . FIDELITY INVESTMENTS' VARIABLE INSURANCE PRODUCTS FUND -- GROWTH PORTFOLIO ("Fidelity Growth Portfolio") seeks to achieve capital appreciation by investing primarily in common stock, although the Fund is not limited to any one type of security. . FIDELITY INVESTMENTS' VARIABLE INSURANCE PRODUCTS FUND -- OVERSEAS PORTFOLIO ("Fidelity Overseas Portfolio") seeks long-term growth of capital primarily through investments in foreign securities (at least 65% from at least three countries outside of North America). Investing in foreign securities may involve a greater degree of risk than investing in domestic securities. See the Funds' prospectus for a discussion of the risks involved. . FIDELITY INVESTMENTS' VARIABLE INSURANCE PRODUCTS FUND II -- INVESTMENT GRADE BOND PORTFOLIO ("Fidelity Investment Grade Bond Portfolio") seeks as high a level of current income as is consistent with the preservation of capital by investing in a broad range of investment-grade fixed-income securities. . FIDELITY INVESTMENTS' VARIABLE INSURANCE PRODUCTS FUND II -- ASSET MANAGER PORTFOLIO ("Fidelity Asset Manager Portfolio") seeks high total return with reduced risk over the long-term by allocating its assets among stocks, bonds and short-term fixed-income instruments. . FIDELITY INVESTMENTS' VARIABLE INSURANCE PRODUCTS FUND II -- INDEX 500 PORTFOLIO ("Fidelity Index 500 Portfolio") seeks to provide investment results that correspond to the total return of common stocks publicly traded in the United States by duplicating the composition and total return of the Standard & Poor's 500 Composite Stock Price Index. . FIDELITY INVESTMENTS' VARIABLE INSURANCE PRODUCTS FUND II -- CONTRAFUND PORTFOLIO ("Fidelity Contrafund Portfolio") seeks maximum total return over the long term by investing its assets mainly in equity securities of companies that are undervalued or out-of-favor. . INSURANCE MANAGEMENT SERIES -- EQUITY GROWTH AND INCOME FUND ("IMS Equity Growth and Income Fund") seeks to achieve long-term growth of capital and to provide income. The IMS Equity Growth and Income Fund pursues its investment objectives by investing, under normal circumstances, at least 65% of its total assets in common stock of "blue-chip" companies. "Blue- chip" companies generally are top-quality, established growth companies which, in the opinion of the Adviser, meet certain criteria. . INSURANCE MANAGEMENT SERIES -- UTILITY FUND ("IMS Utility Fund") seeks to achieve high current income and moderate capital appreciation by investing primarily in a professionally managed and diversified portfolio of equity and debt securities of utility companies. Under normal market conditions, the IMS Utility Fund will invest at least 65% of its total assets in securities of utility companies. . INSURANCE MANAGEMENT SERIES -- PRIME MONEY FUND ("IMS Prime Money Fund") The investment objective of the Fund is to provide current income consistent with stability of principal and liquidity. The Fund pursues its investment objective by investing exclusively in a portfolio of money market instruments maturing in 397 days or less. The average maturity of the money market instruments in the Fund's portfolio, computed on a dollar-weighted basis, will be 90 days or less. A investment in this Fund is neither insured nor guaranteed by the U.S. government. . INSURANCE MANAGEMENT SERIES -- U.S. GOVERNMENT BOND FUND ("IMS U.S. Government Bond Fund") seeks to provide current income. The IMS U.S. Government Bond Fund pursues its investment objective by investing at least 65% of the value of its total assets in securities issued or guaranteed as to payment of principal and interest by the U.S. government or its agencies or instrumentalities. . INSURANCE MANAGEMENT SERIES -- CORPORATE BOND FUND ("IMS Corporate Bond Fund") seeks high current income by investing primarily in a diversified portfolio of professionally managed fixed income 16 securities. The fixed-income securities in which the Fund intends to invest are lower-rated corporate debt obligations. Lower-rated corporate debt obligations are commonly known as "junk bonds" or "high yield, high risk bonds" and involve significant degree of risk (see the funds' prospectus for a discussion of the risk factors involved in investing in lower-rated corporate debt obligations). Some of the fixed income securities may involve equity features. Capital growth will be considered, but only when consistent with the investment objective of high current income. . INSURANCE MANAGEMENT SERIES -- INTERNATIONAL STOCK FUND ("IMS International Stock Fund") The investment objective of the Fund is to seek a total return on its assets by investing at least 65% of its assets (and under normal market conditions, substantially all of its assets) in equity securities of issuers located in at least three different countries outside of the United States. Investing in non-U.S. securities carries substantial risks in addition to those associated with domestic investments. In an attempt to reduce some of these risks, the Fund diversifies its investments broadly among foreign countries, including both developed and developing countries. At least three countries will always be represented. Other risks may also be attributable to investments in developing countries due to less mature economies and less stable political systems. Investors should consult the Fund's prospectus for a discussion of these risks before investing. . INSURANCE MANAGEMENT SERIES -- GROWTH STOCK FUND ("IMS Growth Stock Fund") The investment objective of the Fund is capital appreciation. The Fund pursues its investment objective by investing at least 65% of its assets in equity securities of companies with prospects for above-average growth in earnings and dividends or companies where significant fundamental changes are taking place. Equity securities include common stocks, preferred stocks, and securities (including debt securities) that are convertible into common stocks. . JANUS ASPEN SERIES -- AGGRESSIVE GROWTH PORTFOLIO ("Janus Aspen Aggressive Growth Portfolio") is a nondiversified portfolio that seeks long-term growth of capital by emphasizing investments in common stock of companies with a market capitalization between $1 billion and $5 billion. . JANUS ASPEN SERIES -- BALANCED PORTFOLIO ("Janus Aspen Balanced Portfolio") seeks both long-term growth of capital and current income. The Portfolio is designed for investors who want to participate in the equity markets through a more moderate investment than a pure growth fund. Investments in income-producing securities are intended to result in a portfolio that provides a more consistent total return than may be attainable through investing solely in growth stocks. The Portfolio is not designed for investors who desire a consistent level of income. . JANUS ASPEN SERIES -- FLEXIBLE INCOME PORTFOLIO ("Janus Aspen Flexible Income Portfolio") seeks to maximize total return, consistent with preservation of capital from a combination of current income and capital appreciation. Janus Aspen Flexible Income Portfolio invests in all types of income-producing securities, and may have substantial holdings of debt securities rated below investment grade ("high yield, high risk securities") also commonly known as "junk bonds." High yield, high risk securities involve certain risks. See the Fund's prospectus for a discussion of these risks. . JANUS ASPEN SERIES -- GROWTH PORTFOLIO ("Janus Aspen Growth Portfolio") seeks long-term growth of capital by investing primarily in a diversified portfolio of common stocks of a large number of issuers of any size. The Portfolio generally emphasizes issuers with large market capitalizations. . JANUS ASPEN SERIES -- SHORT-TERM BOND PORTFOLIO ("Janus Aspen Short-Term Bond Portfolio") seeks as high a level of current income as is consistent with preservation of capital by investing primarily in short-and intermediate-term fixed income securities. The Portfolio will normally maintain a dollar-weighted average portfolio maturity of less than three years, but not to exceed five years depending upon its portfolio manager's opinion of prevailing market, financial and economic conditions. 17 . JANUS ASPEN SERIES -- WORLDWIDE GROWTH PORTFOLIO ("Janus Aspen Worldwide Growth Portfolio") seeks long-term growth of capital by investing primarily in common stocks of companies of foreign and domestic issuers of any size. The Portfolio normally invests in issuers from at least five different countries including the United States. International investments involve risks not present in U.S. Securities. . LEXINGTON EMERGING MARKETS FUND seeks long-term growth of capital primarily through investment in equity securities of companies domiciled in, or doing business in emerging countries and emerging markets. Investments in emerging markets involve risks not present in domestic markets. See the Fund's prospectus for information on risks inherent in this investment. . LEXINGTON NATURAL RESOURCES TRUST is a nondiversified portfolio that seeks long-term growth of capital through investment primarily in common stocks of companies which own or develop natural resources and other basic commodities or supply goods and services to such companies. Current income will not be a factor. Total return will consist primarily of capital appreciation. The Fund may invest up to 25% of its total assets in foreign securities. Foreign investing involves risks that differ from those involved in domestic investing. See the Fund's prospectus for a discussion of these risks. . TCI PORTFOLIOS, INC. -- TCI GROWTH (a Twentieth Century Fund) seeks capital growth by investing in common stocks (including securities convertible into common stocks) and other securities that meet certain fundamental and technical standards of selection and, in the opinion of the Fund's management, have better than average potential for appreciation. The Fund tries to stay fully invested in such securities, regardless of the movement of prices generally. The Fund may invest in foreign securities. Foreign investing involves risks that differ from those involved in domestic investing. See the Fund's prospectus for a discussion of these risks. . TCI PORTFOLIOS, INC. -- TCI BALANCED (a Twentieth Century Fund) seeks capital growth and current income. It seeks capital growth by investing in 60% common stocks (including securities convertible into common stocks) and other securities that meet certain fundamental and technical standards of selection and, in the opinion of the Fund's management, have better-than-average potential for appreciation. Management intends to maintain approximately 40% of the Fund's assets in fixed income securities. . TCI PORTFOLIOS, INC. -- TCI INTERNATIONAL (a Twentieth Century Fund) seeks capital growth by investing primarily in an internationally diversified portfolio of common stocks that are considered by management to have prospects for appreciation. The fund will invest primarily in securities of issuers located in countries with developed economies. Investing in foreign securities may involve a greater degree of risk than investing in domestic securities. See the Fund's prospectus for a discussion of the risks involved. There is no assurance that the Funds will achieve their investment objectives. Certificate Holders bear the full investment risk of investments in the Funds selected. Some of the Funds may use instruments known as derivatives as part of their investment strategies as described in their respective prospectus. The use of certain derivatives such as inverse floaters and principal only debt instruments may involve higher risk of volatility to a Fund. The use of leverage in connection with derivatives can also increase risk of losses. See the prospectus for the Funds for a discussion of the risks associated with an investment in those funds. More comprehensive information, including a discussion of potential risks, is found in the current prospectus for each Fund which is distributed with and must accompany this Prospectus. Certificate Holders should read the accompanying prospectuses carefully before investing. Additional prospectuses and the Statements of Additional Information for this Prospectus and each of the Funds can be obtained from the Company's Home Office at the address and telephone number listed on the cover of this Prospectus. 18 FUND INVESTMENT ADVISERS The following identifies the investment adviser and the subadviser, if any, for each Fund.
FUND INVESTMENT ADVISER ---- ------------------ Aetna Life Insurance and Aetna Variable Fund Annuity Company (ALIAC) Aetna Income Shares ALIAC Aetna Variable Encore Fund ALIAC Aetna Investment Advisers Fund, Inc. ALIAC Aetna Ascent Variable Portfolio ALIAC Aetna Crossroads Variable Portfolio ALIAC Aetna Legacy Variable Portfolio ALIAC Alger American Balanced Portfolio Fred Alger Management, Inc. Alger American Income and Growth Fred Alger Management, Inc. Portfolio Alger American MidCap Growth Portfolio Fred Alger Management, Inc. Alger American Leveraged AllCap Fred Alger Management, Inc. Portfolio Alger American Small Cap Portfolio Fred Alger Management, Inc. Alger American Growth Portfolio Fred Alger Management, Inc. Fidelity High Income Portfolio Fidelity Management & Research Company Fidelity Equity-Income Portfolio Fidelity Management & Research Company Fidelity Growth Portfolio Fidelity Management & Research Company Fidelity Overseas Portfolio Fidelity Management & Research Company Fidelity Investment Grade Bond Fidelity Management & Research Company Portfolio Fidelity Asset Manager Portfolio Fidelity Management & Research Company Fidelity Index 500 Portfolio Fidelity Management & Research Company Fidelity Contrafund Portfolio Fidelity Management & Research Company IMS Equity Growth and Income Fund Federated Advisers IMS Utility Fund Federated Advisers IMS Prime Money Fund Federated Advisers IMS International Stock Fund Federated Advisers IMS U.S. Government Bond Fund Federated Advisers IMS Corporate Bond Fund Federated Advisers IMS Growth Stock Fund Federated Advisers Janus Aggressive Growth Portfolio Janus Capital Corporation Janus Balanced Portfolio Janus Capital Corporation Janus Flexible Income Portfolio Janus Capital Corporation Janus Growth Portfolio Janus Capital Corporation Janus Short-Term Bond Portfolio Janus Capital Corporation Janus Worldwide Growth Portfolio Janus Capital Corporation Lexington Emerging Markets Fund Lexington Management Corporation Lexington Natural Resources Trust Lexington Management Corporation* TCI Growth Investors Research Corporation TCI Balanced Investors Research Corporation TCI International Investors Research Corporation
------- * Market Systems Research Advisors, Inc. serves as the subadviser for the Lexington Natural Resources Trust. 19 FUND ADDITIONS AND LIMITATIONS We may, from time to time, add additional mutual funds as eligible variable funding options under the Contracts. No more than 18 different choices of investment options may be made over the life of the individual Contract or the Certificate under a group Contract. See "Transfers Among Investment Options." The Company has reserved the right to limit which, and how many, funding options will be available during the annuity period. Funding options offered under the Contract may vary by Distributor. MIXED AND SHARED FUNDING Shares of the Funds are sold to us for funding variable annuities. The Funds may be sold to other companies for the same purpose. This is referred to as "shared funding." Shares of the Funds may also be used for funding variable life insurance policies through variable life separate accounts sponsored by us or by third parties. This is referred to as "mixed funding." It is conceivable that, in the future, it may be disadvantageous for variable annuity separate accounts and variable life separate accounts of the same or of an unaffiliated insurance company to invest in these Funds simultaneously, since the interests of the contract holders or policy owners or insurance companies may differ. Each Fund's Board of Trustees or Directors has agreed to monitor events in order to identify any material irreconcilable conflicts which may possibly arise and to determine what action, if any, should be taken in response thereto. If such a conflict were to occur, one of the separate accounts might withdraw its investment in a Fund. This might force that Fund to sell portfolio securities at disadvantageous prices. CONTRACT PURCHASE GENERAL Two types of variable deferred annuity contracts are being offered. One allows the purchaser to make one or more payments in any amounts (flexible premiums), subject to the minimums discussed below (the "Nonqualified Flexible Premium Contract"). The Nonqualified Flexible Premium Contract does not qualify for any special tax treatment under the Code other than the provisions applicable to all deferred annuities. See "Tax Status." The other Contract is intended to be established as an individual retirement annuity under Section 408(b) of the Code to accept rollover payments from qualifying retirement plans such as plans qualified under Section 401 or 403 of the Code or another Individual Retirement Annuity or Account under Section 408 of the Code. PURCHASE As of the effective date of this Prospectus, only interests in group Contracts are offered for new sales. A Certificate Holder establishes an account under a group contract by completing an enrollment form and any other required forms. The Distributor will deliver any application or enrollment form to the Company for review, acceptance or rejection. The Company must accept or reject an enrollment form within two business days of its receipt. If the enrollment form is incomplete, the Company may hold it and any accompanying Purchase Payment for five days. Purchase 20 Payments may be held for longer periods only with the consent of the Certificate Holder, pending acceptance of the enrollment form. If the enrollment form is accepted, a Certificate will be issued to the Certificate Holder. Any Purchase Payment accompanying the enrollment form, or received prior to acceptance of the enrollment form, will be invested as of the date of acceptance. If the enrollment form is rejected, the enrollment form and any Purchase Payments will be returned to the Certificate Holder. You may cancel the Contract or Certificate within 10 days of receiving it. See "Contract Rights -- Right to Cancel." PURCHASE PAYMENTS Each Purchase Payment accepted by us that is to be invested in the Funds, is deposited in the Separate Account as set forth under "Certificate Holder's Account Values." You may elect to have each Purchase Payment accumulate (a) on a variable basis by allocating your Purchase Payment to one or more of the Funds; (b) on a fixed basis under the AGA; or (c) in a combination of any of the available investment options. Purchase Payments must be allocated in terms of whole percentages. For subsequent Purchase Payments, if no allocation instructions are received with the Purchase Payment, the allocation will be the same as that indicated on the original enrollment form. See the Appendix for a discussion of subsequent Purchase Payments allocated to AGA. For the Nonqualified Flexible Premium Contract the minimum initial Purchase Payment is $5,000. Additional Purchase Payments to a Nonqualified Flexible Premium Contract must be at least $2,500. Subsequent payments may be sent to the Distributor or to the Company at the Home Office. The minimum Purchase Payment for the IRA Rollover Contract is $5,000. A Purchase Payment of more than $500,000 is allowed only with our consent. The maximum issue age for the Annuitant is 90. Additional Purchase Payments made to an existing Contract are subject to the terms and conditions published by us at the time of the payment. We reserve the right to limit the total dollar amount accepted from a Certificate Holder. We also reserve the right to reject any Purchase Payment to a prospective or existing Certificate Holder's Account without advance notice. Each Nonqualified Flexible Premium Contract must be aggregated with other annuity contracts and/or accounts under a Contract purchased by you from us (and our affiliates) in any calendar year on or after October 21, 1988 for purposes of determining the taxable portion of payments. (See "Tax Status -- Taxation of Annuities.") DESIGNATIONS OF BENEFICIARY AND ANNUITANT You must designate the Beneficiary and the Annuitant on the enrollment form. For an IRA Rollover Contract, you must be the Annuitant. For Flexible Premium Contracts, you may (but need not) select a different person as the Annuitant. See "Death Benefit--Death Benefit Amount" if you are not the Annuitant. DISTRIBUTION The Company will serve as Underwriter for the securities sold by this Prospectus. The Company is registered as a broker-dealer with the Securities and Exchange Commission and is a member of the National Association of 21 Securities Dealers, Inc. (NASD). As Underwriter, the Company will contract with one or more registered broker-dealers ("Distributors") to offer and sell the Contracts. The Company and one or more affiliates may also sell the Contracts directly. All registered representatives of the Distributors must also be licensed as insurance agents to sell variable annuity contracts. The Company may also contract with independent third party broker-dealers who will act as wholesalers by assisting the Company in finding broker-dealers interested in acting as Distributors for the Company. These wholesalers may also provide training, marketing and other sales related functions for the Company and the Distributors and may provide certain administrative services to the Company in connection with the Contracts. The Company may pay such wholesalers compensation based on Purchase Payments for the Contracts purchased through Distributors selected by the wholesaler. The Company may also designate third parties to provide services in connection with the Contracts such as reviewing applications for completeness and compliance with insurance requirements and providing the Distributors with approved marketing material, prospectuses or other supplies. These parties will also receive payments based on Purchase Payments for their services, to the extent such payments are allowed by applicable securities laws. All costs and expenses related to these services will be paid by the Company. Federated Securities Corp. ("FSC"), an affiliate of the adviser to the Funds in the Insurance Management Series, may enter into agreements with some of the Distributors to provide services to customers in connection with these Funds acquired through the Contracts. These services will include providing customers with information concerning the Funds, their investment objectives, policies and limitations; portfolio securities; performance, responding to customer inquiries and providing such other services as the parties may agree. Fees for these services may be based on the total number of assets in the Funds attributable to the Distributors' customers. CERTIFICATE HOLDER'S ACCOUNT VALUES ACCUMULATION UNITS A Purchase Payment that is directed to one or more of the Funds is deposited in the Separate Account and credited to the Certificate Holder's Account in the form of Accumulation Units for each Fund selected. The number of Accumulation Units credited is determined by dividing the applicable portion of the Purchase Payment by that Contract's Accumulation Unit value of the appropriate Fund. The Accumulation Unit value used is that next-computed following the date on which a Purchase Payment is received, unless the application has not been accepted. In that event, Purchase Payments will be credited at the Accumulation Unit value next determined after acceptance of the application. Shares of the Funds are purchased by the Separate Account at the net asset value next determined by the Fund following receipt of Purchase Payments by the Separate Account, which will be no later than the next business day following the crediting of the Accumulation Units attributable to the Funds. The value of Accumulation Units attributable to the Funds will be affected by the investment performance, expenses and charges of those Funds. Generally, if the net asset value of the fund increases, so does the Accumulation Unit value; however, performance of the Separate Account is reduced by charges and deductions under the Contract. Accumulation Units are valued separately for each Fund. Therefore, if you elect to have a Purchase Payment invested in a combination of Funds, you will have Accumulation Units credited from more than one source. The value of the Certificate Holder's Account as of the most recent Valuation Period is determined by adding the value of any Accumulation Units attributed to the Fund(s) you have selected to the value of any amounts invested in the AGA. 22 NET INVESTMENT FACTOR The value of an Accumulation Unit in any Valuation Period is calculated by multiplying the Fund's Accumulation Unit value for your Contract for the immediately preceding Valuation Period by the net investment factor of the appropriate investment option for the current period. The net investment factor is calculated separately for each Fund in which assets of the Separate Account are invested. It is determined by adding 1.0000000 to the net investment rate. The net investment rate equals (a) the net assets of the Fund held by the Separate Account at the end of a Valuation Period, minus (b) the net assets of the Fund held by the Separate Account at the beginning of a Valuation Period, plus or minus (c) taxes or provision for taxes, if any, attributable to the operation of the Separate Account, divided by (d) the value of the Fund's Accumulation and Annuity Units held by the Separate Account at the beginning of the Valuation Period, minus (e) a daily charge at the annual effective rate of 1.25% for mortality and expense risks, and a daily administrative expense charge at the annual effective rate of 0.15% during the Accumulation Period and up to 0.25% during the Annuity Period. The net investment rate may be more or less than 0%. CONTRACT RIGHTS RIGHT TO CANCEL The Certificate Holder may cancel the Certificate Holder's Account no later than ten days after receiving the Contract or Certificate by returning it to us or the Distributor from whom it was purchased along with a written notice of cancellation. We will send a refund not later than seven calendar days after we receive the Contract or Certificate and the written notice at our Home Office. We will refund the Purchase Payments made under the Contract as of the date the request is received. RIGHTS UNDER THE CONTRACT AND ACCOUNT The Group Contract Holder has title to the Contract. The Certificate Holder has all other rights to the Certificate Holder's Account under the Contract. However, under a Nonqualified Flexible Premium Contract, if the Certificate Holder and the Annuitant are not the same, and the Annuitant dies first, a different provision applies. In this case, the Certificate Holder's rights are automatically transferred to the Beneficiary. (See "Death Benefit.") Two individuals may have an interest in the same Certificate Holder's Account as Joint Certificate Holders. See "Contract Purchase." Joint Certificate Holders have equal rights under the Contract and with respect to their Certificate Holder's Account. On the death of a Joint Certificate Holder prior to the Annuity Date, the surviving Certificate Holder may retain all ownership rights under the Contract or elect to have the proceeds distributed. See "Death Benefits." All rights under the Contract must be exercised by both Joint Certificate Holders with the exception of transfers among investment options; at the Company's discretion, one Joint Certificate Holder can select additional investment options after the Certificate Holder's Account has been established. LOANS Loans are not allowed. 23 TRANSFERS AMONG INVESTMENT OPTIONS The Company currently allows unlimited transfers of accumulated amounts to available investment options during the Accumulation Period without charge; however, it reserves the right to charge up to $10 per transaction if more than 12 transfers are made in a calendar year. See "Charges and Deductions -- Transfer Charges." The Company reserves the right to establish a minimum transfer amount. Unless the transfer is made from the one-year guaranteed term in connection with the Dollar Cost Averaging Program transfers from the AGA will be subject to a market value adjustment, if applicable. (See "Dollar Cost Averaging Program" below, as well as the Appendix and the prospectus for the AGA.) Any transfer will be based on the Accumulation Unit value next determined after the Company receives a valid request at its Home Office. During the Annuity Period, transfers are not available. DOLLAR COST AVERAGING PROGRAM Dollar Cost Averaging ("DCA") is a system for investing a fixed amount of money at regular intervals over a period of time. It is based on the economic fact that buying a variably priced item with a constant sum of money at fixed intervals affords the buyer the opportunity to automatically buy more of that item when prices are low and less of it when prices are high, thus reducing the average cost per item. Dollar Cost Averaging does not ensure a profit nor guarantee against loss in a declining market. Certificate Holders should consider their financial ability to continue purchases through periods of low price levels. The Dollar Cost Averaging Program permits Certificate Holders to systematically transfer amounts from any of the variable funding options and the one-year Guaranteed Term of the AGA to any of the variable investment options. A market value adjustment will not be applied to dollar cost averaging transfers from the one-year Guaranteed Term. (See Appendix I for a discussion of the restrictions and features attributable to the Guaranteed Account.) You must have an Account Value of at least $5,000 to participate in the Dollar Cost Averaging Program. The minimum amount that may be transferred into a particular variable funding option is $50. DCA can be elected at any time during the Accumulation Period by completing the DCA section of the application or by completing a DCA Election Form available from the Company at its Home Office. All DCA transfers will be made on the 15th of each month (or the next Valuation Period, if applicable). Any transfer made under the DCA program will not be counted for purposes of any transfer limitations imposed under the Contract. A Certificate Holder may terminate the DCA program at any time. The Company reserves the right to modify or terminate the DCA program at any time. Dollar Cost Averaging is not available to individuals who have elected the Systematic Withdrawal Option or the Account Rebalancing Program (described below). ACCOUNT REBALANCING PROGRAM The Account Rebalancing Program allows Certificate Holders to have portions of their Certificate Holder's Account Value automatically reallocated annually to a specified percentage. Only Certificate Holder Account Values accumulating in the variable funding options can be rebalanced. Certificate Holders may participate in this program by completing the Account Rebalancing Section of the enrollment form, or by requesting the service in writing from the Company's Home Office. Reallocations under the Account Rebalancing Program will not be counted for purposes of any transfer limitations imposed under the Contract. Account Rebalancing is not available to Certificate Holders who have elected the Dollar Cost Averaging Program. Account Rebalancing does not ensure a profit nor guarantee against loss in a declining market. 24 WITHDRAWALS You may withdraw all or a portion of the Certificate Holder's Account Value during the Accumulation Period by properly completing a disbursement form provided by us and sending it to our Home Office. Withdrawal request forms are available from us and from the Distributors. The following types of withdrawals may be requested: . Full Withdrawal: The Adjusted Account Value minus any applicable deferred sales charge and maintenance fee due. . Partial Withdrawal (Percentage): The percentage of the Adjusted Account Value requested minus any applicable deferred sales charge. . Partial Withdrawal (Specific Dollar Amount): The dollar amount requested. The amount actually withdrawn from the Certificate Holder's Account may be greater or less than the dollar amount requested to allow for payment of any applicable deferred sales charge plus or minus any applicable MVA. We will pay all amounts based on the Certificate Holder's Account Value next computed after the request is received in the Home Office or at a later date, if specified. For any partial withdrawal, if you do not provide instructions to the contrary, amounts will be withdrawn on a pro rata basis from each of the funding options in which you have an interest. A deferred sales charge (surrender fee) may be deducted upon any full or partial withdrawal. See "Charges and Deductions -- Deferred Sales Charge." For treatment of amounts withdrawn from the AGA, see the Appendix. Tax or tax penalties may be due on the amounts withdrawn or tax withholding may apply. See "Tax Status --Taxation of Annuities." We reserve the right to close out, on 90 days' written notice, any Certificate or Individual Contract with a value of $2,500 or less immediately following a partial withdrawal. A deferred sales charge will not be deducted in this event. The Company does not intend to exercise this right in cases where the Account Value is reduced to $2,500 or less solely due to investment performance. IRA Rollover Contracts will not be closed out if adverse consequences would result to the Certificate Holder from the withdrawal. Our policy is to make payments for withdrawal requests in accordance with SEC requirements, but normally not later than seven calendar days after we receive a properly completed withdrawal form in our Home Office or within seven calendar days of the date the withdrawal form may specify. Payments may be delayed for: (a) any period in which the New York Stock Exchange ("Exchange") is closed (other than customary weekend and holiday closings) or in which trading on the Exchange is restricted; (b) any period in which an emergency exists where disposal of securities held by the Funds is not reasonably practicable or it is not reasonably practicable for the value of the assets of the Funds to be fairly determined; or (c) such other periods as the SEC may by order permit for the protection of Certificate Holders. The conditions under which restricted trading or an emergency exists will be determined by the rules and regulations of the SEC. The tax treatment of withdrawals from each Nonqualified Flexible Premium Contract may be affected if you own other annuity contracts or accounts issued by us (or our affiliates) that were purchased on or after October 21, 1988. (See "Tax Status -- Taxation of Annuities.") CHARGES AND DEDUCTIONS GENERAL This section describes the maximum charges that may be deducted under the Contract or Certificate for maintenance fees, administrative expenses, sales- related expenses and transfer fees. A description of mortality and expense risk charges and Fund expenses is also included. 25 MAINTENANCE FEE We charge an annual maintenance fee of $30 for each Certificate or Contract during the Accumulation Period. This fee is to reimburse us for some administrative expenses relating to the establishment and maintenance of the Certificate Holder's Account. We will deduct the fee from the Certificate Holder's Account Value on the anniversary of an individual Contract's or a Certificate's Effective Date (or, if this is not a day that the New York Stock Exchange is open, on the next such day). The fee is also deducted upon withdrawal of your entire Account Value. The fee is deducted proportionately from each funding option used by liquidating a portion of amounts held in those options. We will not deduct a maintenance fee (either annually or upon withdrawal) when the Certificate Holder's Account Value is $50,000 or more on the day the maintenance fee is due. MORTALITY AND EXPENSE RISK CHARGES We make a daily deduction from the Separate Account portion of the Certificate Holder's Account Value for mortality and expense risks (insurance charges). The deduction, equal to the annual effective rate of 1.25% per year, is made as part of the calculation of Accumulation Unit and Annuity Unit values. The mortality risk charge is to compensate us for the risks we assume (a) for the guaranteed death benefit and (b) when we promise to continue making payments for the lives of individual Annuitants according to Annuity rates specified in the Contract or Certificate. The expense risk charge is to compensate us for the risk that actual expenses for costs incurred under the Contract will exceed the maximum costs that can be charged under the Contract. We hope to profit from the daily deduction for mortality and expense risks. Any such profit, as well as any other profit realized by us, would be available for any proper corporate purpose, including, but not limited to, payment of sales and distribution expenses. During 1994, we received $8,918,042 for mortality and expense risks from contracts funded through the Separate Account. ADMINISTRATIVE EXPENSE CHARGE During the Accumulation Period, we deduct a daily charge of 0.15% per year from the Separate Account portion of the Certificate Holder's Account Value. This charge is to reimburse us for expenses we incur in administering the Contract; we do not intend to profit from this charge. The administrative expense charge is a percentage of the variable portion of your Account Value; therefore, there may be no relationship between the amount deducted and the amount of expenses attributable to the Certificate Holder's Account. An administrative expense charge is established upon election of a variable Annuity Option. This charge will not exceed 0.25% per year, deducted on a daily basis from any variable portion of the Annuity Option. Through April 30, 1996, this charge is guaranteed to be 0%. Once an Annuity Option is elected, and an administrative expense charge is established, we will not change the charge. TRANSFER FEES Unlimited transfers are allowed during the Accumulation Period. We allow 12 free transfers per calendar year. Thereafter, we reserve the right to charge $10 for each additional transfer. If we do assess the fee, it will be deducted from the Account Value. During the Annuity Period, transfers are not allowed. DEFERRED SALES CHARGE You may withdraw your Adjusted Account Value of the Certificate Holder's Account at any time during the Accumulation Period; however, a deferred sales charge (referred to in the Contract as a surrender fee) may be deducted so that we may recover some of our sales expenses. 26 The charge only applies to that portion of your Certificate Holder's Account Value that represents Net Purchase Payments (not to any associated changes in value), and decreases by 1% per year so that seven years after the date of the Purchase Payment, the charge associated with that payment is 0%. To satisfy a partial withdrawal, the deferred sales charge is calculated as if Purchase Payments are withdrawn in the same order they were paid to the Certificate Holder's Account (i.e., the oldest Purchase Payment will be exhausted, then the next oldest and so on). Partial withdrawals from the AGA will be treated as described in the Appendix and the prospectus for the AGA. Withdrawals are charged first against Purchase Payments then against increases in value. The deferred sales charge for each Purchase Payment is determined by multiplying the Purchase Payment withdrawn by the appropriate percentage, depending on the number of years completed since the Purchase Payment was made, as shown in the table below. The total charge will be the sum of the charges applicable for all of the Purchase Payments withdrawn.
LENGTH OF TIME SINCE PURCHASE PAYMENT MADE DEDUCTION --------------------- --------- Less than 1 year 7% 1 or more but less than 2 years 6% 2 or more but less than 3 years 5% 3 or more but less than 4 years 4% 4 or more but less than 5 years 3% 5 or more but less than 6 years 2% 6 or more but less than 7 years 1% 7 or more than 7 years 0%
We will not deduct a deferred sales charge from any Purchase Payment withdrawn that is: (a) Applied to provide Annuity benefits; (b) Paid to a Beneficiary due to the Annuitant's death before Annuity payments start, up to a maximum of the Net Purchase Payment(s) in the Certificate Holder's Account on the Annuitant's date of death; (c) Withdrawn due to the election of the Systematic Withdrawal Option (SWO) or the Estate Conservation Option (ECO); (d) Paid due to the full withdrawal of the Certificate Holder's Account for which the value is $2,500 or less and no withdrawals have been made in the prior 12 months; (e) Paid at least 12 months after the date of the first Purchase Payment to the Certificate Holder's Account in an amount of 15% or less of the Certificate Holder's Account Value. This applies to the first partial or full withdrawal made each calendar year. The 15% amount will be calculated using the Certificate Holder's Account Value on the date the request is received in good order at the Home Office. If a withdrawal is made that exceeds 15%, the applicable deferred sales charge will be assessed on the amount over 15%. This provision may not be exercised if SWO is elected; or (f) Paid if we close out the Certificate Holder's Account. See "Contract Rights -- Withdrawals." In the instances cited in the above paragraphs, no deferred sales charge is deducted. However, the amount withdrawn may be subject to the 10% federal penalty tax. See "Tax Status -- Taxation of Annuities." An MVA may also apply to amounts withdrawn from the AGA. Based on our actuarial determination, we do not anticipate that the deferred sales charge will cover all sales and administrative expenses that we will incur in connection with the Contract. 27 FUND EXPENSES Each Fund has an investment adviser which charges a management or investment advisory fee for its services. These fees are based on each Fund's average net assets, and are deducted from the assets of each Fund and paid to the investment adviser. The Fee Table sets forth the management fee and expenses of each Fund. See "The Funds" for a list of the Funds' investment advisers. Most expenses incurred in the operations of each Fund are borne by that Fund. Fund advisers may reimburse the Funds they advise for some or all of these expenses. For further details on each Fund's expenses, you should read the accompanying prospectus for each Fund and the Fee Table in this Prospectus. PREMIUM TAX New York currently does not impose a premium tax on Purchase Payments. COMMISSIONS AND DISTRIBUTION EXPENSES We pay Distributors and their registered representatives who sell the Contracts commissions and service fees. In limited circumstances, we also pay certain of these professionals compensation, overrides or reimbursement for expenses associated with the distribution of the Contract. In total, the compensation amounts are considered equivalent to approximately 7.5% of the Purchase Payments credited to the Contract over the Contract's estimated life. See "Contract Purchase -- Distribution." We pay these commissions, fees and related distribution expenses out of any deferred sales charges assessed or out of our general assets, including investment income and any profit from investment advisory fees and mortality and expense risk charges. No additional deductions or charges are imposed for commissions and related expenses. See "Charges and Deductions -- Deferred Sales Charge." ADDITIONAL WITHDRAWAL OPTIONS GENERAL We offer two withdrawal options that are not considered Annuity options: the Estate Conservation Option ("ECO") and the Systematic Withdrawal Option ("SWO"). These options are available if the Certificate Holder's Account Value is at least $25,000 at the time of election and you are at least age 70 1/2 for ECO or 59 1/2 for SWO. ECO is available only for amounts in an IRA Contract, and not for amounts under a Nonqualified Flexible Premium Contract. Under SWO, you receive a series of partial withdrawals from your Account based on a payment method you select. it is designed for those who want a periodic income while retaining investment flexibility for amounts accumulating under the Contract. ECO offers the same investment flexibility as SWO, but is designed for those who want to receive only the minimum distribution that the Code requires each year. Under ECO, the Company calculates the minimum distribution amount required by law and pays you that amount once a year. Amounts withdrawn under the ECO or SWO will be deducted from the Account in the same manner as for any other withdrawals during the Accumulation Period except that no deferred sales charge or market value adjustment (if applicable) will be applied. See "Contract Rights -- Withdrawals" and "Charges and Deductions -- Deferred Sales Charges." Since ECO and SWO are not Annuity Options, the Certificate Holder's Account retains all the rights and obligations available during the Accumulation Period as described in this Prospectus, and is subject to all Accumulation Period Contract charges. We reserve the right to discontinue the availability of these withdrawal options and to change the terms for future elections. 28 Once elected, you or your spousal beneficiary may revoke the applicable option(s) at any time by submitting a written request to our Home Office. Any revocation will apply only to the amounts not yet paid. Once ECO or SWO is revoked, it may not be elected again. SWO is different from ECO in the following ways: (1) SWO payments are made for a fixed dollar amount, fixed time period or fixed percentage whereas ECO payments vary in dollar amount and can continue indefinitely during your lifetime, (2) generally, SWO payments will be higher than expected ECO payments; and (3) ECO is available only for amounts in an Individual Retirement Annuity Contract, whereas SWO is available under both Individual Retirement Annuity Contracts and nonqualified deferred annuity contracts. You should carefully assess your future income needs when considering the election of these withdrawal options. You should consult your tax adviser prior to electing one of these options due to the potential for adverse tax consequences. For a discussion of the consequences if you or your Beneficiary dies after SWO or ECO has been elected, see "Death Benefit." ESTATE CONSERVATION OPTION The first distribution may not be made before the calendar year in which the Certificate Holder attains age 70 1/2. ECO is available only for amounts in an Individual Retirement Annuity Contract. We will calculate and distribute an annual amount using the recalculation method contained in the Code's minimum distribution regulations. You specify the month during which you want to receive your distribution, and we will mail such distribution for receipt by the 15th of that month annually thereafter. The annual distribution is determined each year by dividing the Certificate Holder's Account Value by a life expectancy factor from tables designated by the Internal Revenue Service ("IRS"). The factor will be based on either your life expectancy or the joint life expectancy of you and your Beneficiary and will be redetermined for each calendar year's distribution. The Certificate Holder's Account Value to be used in this calculation is the Certificate Holder's Account Value on the December 31st of the year prior to the year in which the ECO payment is being made. This calculation will be changed, if necessary, to conform to changes in the Code or applicable regulations. SYSTEMATIC WITHDRAWAL OPTION SWO payments are available on a monthly, quarterly, semiannual or annual basis and are mailed for receipt by the 15th of the month. Under the Specified Percentage method, payments will be made until you reach age 70 1/2, or if elected by your spouse as a Beneficiary, until you would have reached age 70 1/2. You may not make any election that would result in a payment of less than $500. You may elect one of the following methods of distribution: (a) Specified Payment -- payments of a designated dollar amount. The dollar amount chosen cannot be greater than 10% of the Certificate Holder's Account Value. We may require a minimum payment amount. (b) Specified Period -- payments for a designated time period. The specified period must be at least 10 years but, for IRA Rollover Contracts, not greater than your life expectancy factor. (c) Specified Percentage -- payments of a designated percentage. The specified percentage chosen cannot be greater than 10% of the Certificate Holder's Account Value. The percentage elected may be changed every six months. 29 Each annual distribution is determined by multiplying the Certificate Holder's Account Value by the percentage chosen. The value used in this calculation is the value on the December 31st of the year prior to the year for which the payment is being made. For payments made more often than annually, the annual payment result (calculated above) is divided by the number of the payments due each year. Note: For an IRA Rollover Contract, the annual minimum SWO distribution, or maximum SWO time period, as you direct, will be determined by a life expectancy factor from tables designated by the IRS. Under both the Specified Payment and Specified Period payment methods, a higher amount will be paid in any year, if required under the Code's minimum distribution rules. For the initial distribution year, we will calculate the amount paid based on your single life expectancy determined from Table V of Section 1.72-9 of the Income Tax Regulations. For each year thereafter, we will use the life expectancy for the previous year reduced by one. ANNUITY PERIOD ANNUITY PERIOD ELECTIONS You must notify us in writing of the Annuity Date and Annuity Option you elect. Until a date and option are elected, the Certificate Holder's Account Value will continue in the Accumulation Period. Once an Annuity Option is elected, it cannot be changed. Payments may not begin earlier than one year after purchase, or later than the later of: (a) the first day of the month following the Annuitant's 85th birthday, or (b) the tenth anniversary of the last Purchase Payment. As required by the Code, distributions from an IRA Rollover Contract must begin no later than April 1 of the calendar year after the calendar year in which you attain age 70 1/2. At least 30 days before the Annuity Date, you must notify us in writing to elect or change (a) the date on which Annuity payments are to begin, (b) the Annuity option, (c) whether the payments are to be made monthly, quarterly, semiannually or annually, and (d) the investment option(s) to be used to provide Annuity payments. The Company has reserved the right to limit which, and how many, funding options will be available during the Annuity Period. Once Annuity Payments start, no further changes of Annuity Options may be made. In addition, no further changes may be made to the selection of variable funding options offered during the Annuity Period. If Annuity payments are elected on a variable basis, the first and subsequent Annuity payments will depend on an assumed net investment rate (3 1/2% annually, unless a 5% annual rate is elected). Use of the 3 1/2% assumed rate causes a lower first payment, but subsequent payments would increase more rapidly or decline more slowly as changes occur in the net investment rate. A 5% rate causes a higher first payment, but Annuity payments will increase thereafter only to the extent that the net investment rate exceeds 5% annually. Annuity payments would decline if the rate were below 5%. For purposes of Annuity payments, the Annuitant's adjusted age (and joint Annuitant's, if elected) will be used. The Annuitant's adjusted age is his or her age as of the birthday closest to the date of the first Annuity payment, reduced by one year for Annuity start dates occurring during the period from July 1, 1993 through December 31, 1999. The Annuitant's age (and joint Annuitant's, if applicable) will be reduced by two years for Annuity start dates occurring during the period from January 1, 2000 through December 31, 2009. The Annuitant's adjusted age (and joint Annuitant's, if applicable) will be reduced by one additional year for Annuity start dates in each succeeding decade. No election may be made that would result in a first Annuity payment of less than $50 or total yearly Annuity payments of less than $250 (less if required by state law). If the Account Value on the Annuity start date is insufficient to elect an option for the minimum amount specified, a lump-sum payment must be elected. We 30 reserve the right to increase the minimum first Annuity payment amount and the minimum annual Annuity payment amount based on increases reflected in the Consumer Price Index-Urban (CPI-U), since July 1, 1993. For IRA Rollover Contracts, in determining the amount of Annuity payments, we must satisfy the minimum distribution incidental death benefit rule described in IRS regulations. This rule assures that any death benefits payable are incidental to the primary purpose of the Contract, which is to provide you with retirement benefits. The amount to be distributed under this rule is determined based on your age and tables contained in the IRS regulations. When payments start, the age of the Annuitant plus the number of years for which payments are guaranteed must not exceed 95. ANNUITY OPTIONS LIFETIME: (a) Life Annuity -- an Annuity with payments guaranteed to the date of the Annuitant's death. This option may be elected with payments guaranteed for a minimum of 5, 10, 15 or 20 years. Because it provides a specified minimum number of Annuity payments, the election of a guaranteed payment period results in somewhat lower payment than if a Life Annuity with no specified number of guaranteed payments had been elected. (b) Life Income Based Upon the Lives of Two Payees -- An Annuity will be paid during the lives of the Annuitant and a second Annuitant. Payments will continue until both Annuitants have died. When this option is chosen, a choice must be made of: (i) 100% of the payment to continue after the first death; (ii) 66 2/3% of the payment to continue after the first death; (iii) 50% of the payment to continue after the first death; (iv) Payments for a minimum of 120 months, with 100% of the payment to continue after the first death; or (v) 100% of the payment to continue at the death of the second Annuitant and 50% of the payment to continue at the death of the Annuitant. Because (b)(iv) provides a specified minimum number of Annuity payments, the election of the guaranteed payment period results in somewhat lower payments. Payments under any lifetime Annuity option will be determined without regard to the sex of the Annuitant(s). Such Annuity payments will be based solely on the age of the Annuitant(s). If a lifetime option is elected without a guaranteed minimum payment period, it is possible that only one Annuity payment will be made if the Annuitant under (a), or the surviving Annuitant under (b), should die prior to the due date of the second Annuity payment. Once lifetime Annuity payments begin, you cannot elect to receive a lump-sum settlement or change elections. NONLIFETIME: (a) Payments for a Stated Period of Time -- an Annuity with payments to be made for five to 30 years, as selected. If this option is elected on a variable basis, you may request at any time during the payment 31 period that the present value of all or any portion of the remaining variable payments be paid in one sum. If elected on a fixed basis, you cannot elect to receive a lump-sum settlement. Any lump sum elected before three years of payments have been completed will be treated as a withdrawal during the Accumulation Period and any applicable deferred sales charge will be assessed. See "Charges and Deductions -- Deferred Sales Charge." Once an Annuity Option is elected on either a variable or fixed basis, you cannot change elections. (b) Payment of Interest -- This option may be used only by your Beneficiary when you die before electing an Annuity Option. All or a portion of the amount payable upon your death will be held in our general account. Interest payments will be made to your Beneficiary. Your Beneficiary may withdraw any amount held under this option or direct that any or all of the amount be applied to an Annuity Option. We make a daily deduction for mortality and expense risks from any amounts held on a variable basis. See "Charges and Deductions -- Mortality and Expense Risk Charges." Therefore, electing the nonlifetime option on a variable basis will result in a deduction being made even though we assume no mortality risk. In addition to the Annuity Options described, we may offer you and other payees optional methods of payment. DEATH BENEFIT GENERAL The following section provides information about determining the death benefit amount, should you or the Annuitant die during the Accumulation Period. Additional information is given for IRA Rollover Contracts and Nonqualified Flexible Premium Contracts regarding the rights available and who receives them in case of the death of you or the Annuitant. In many cases, the rights available will depend on whether the Beneficiary is your spouse. In many of the scenarios described below, a deadline is given for receiving distributions equal to the Certificate Holder's Account Value. According to the Code, the required amount must be distributed by the deadline given. If not, the IRS will deem the Beneficiary to be in "constructive receipt" of the amount, and the Beneficiary may be subject to a penalty tax in addition to any other income tax due on the amount. Upon the death of a Joint Certificate Holder prior to the Annuity Date, the surviving Certificate Holder, if any, will be the designated beneficiary. Any other beneficiary designation on record with the Company at the time of death will be treated as a contingent beneficiary, and payments will be made to such beneficiary only upon the death of the surviving Certificate Holder. Upon the death of an Annuitant who is not a Certificate Holder, the Death Benefit Amount will be paid to the beneficiary designated. Note: We will not allow Annuity payments to a Beneficiary to extend beyond the Beneficiary's life or any period certain greater than the Beneficiary's life expectancy. DEATH BENEFIT AMOUNT If the Annuitant (or for the Nonqualified Flexible Premium Contract, the Certificate Holder or the Annuitant) dies before Annuity payments start, the Beneficiary is entitled to a death benefit. The excess, if any, of the amount of the guaranteed death benefit over the Certificate Holder's Account Value is determined as of the date of death. Any excess amount will be deposited to the Certificate Holder's Account and allocated to the money market option available under the Contract as of the claim date. The Certificate Holder's Account Value on the claim date plus any excess amount deposited, becomes the Certificate Holder's Account Value. The claim date is the date when we receive valid proof of death and the Beneficiary's claim at our Home Office. 32 For Nonqualified Flexible Premium Contracts, the death benefit value is determined as described in items (a), (b), (c) and (d) below. For IRA Rollover Contracts, the death benefit value is determined as described in items (a), (b) and (d) below. (a) Death of Certificate Holder/Annuitant (for IRA Rollover Contracts) or death of Annuitant (for Nonqualified Flexible Premium Contracts) less than 85 years of age: The guaranteed death benefit value is the greatest of: (1) The Net Purchase Payment(s) made to the Certificate Holder's Account minus the sum of all amounts withdrawn, applied to an Annuity, or deducted from the Certificate Holder's Account; (2) The highest step-up value as of the date of death. A step-up value is determined on each anniversary of the Effective Date. Each step- up value is calculated as the Certificate Holder's Account Value on the Effective Date anniversary, increased by the amount of any Purchase Payment(s) made, and decreased by the amount of any partial withdrawals and/or amounts applied to an Annuity Option since the Effective Date anniversary; (3) The Certificate Holder's Account Value as of the date of death. The excess, if any, of the guaranteed death benefit value over the Certificate Holder's Account Value is determined as of the date of death. Any excess amount will be deposited and allocated to the money market option available under the Contract as of the claim date. The Certificate Holder's Account Value on the claim date plus any excess amount deposited becomes the Certificate Holder's Account Value. (b) Death of Certificate Holder/Annuitant (for IRA Rollover Contracts) or death of Annuitant (for Nonqualified Flexible Premium Contracts) age 85 or greater: The death benefit is the greatest of: (1) The Net Purchase Payments made to the Certificate Holder's Account minus the sum of all amounts withdrawn, applied to an Annuity, or deducted from the Certificate Holder's Account; (2) The highest step-up value as of the Participant's 85th birthday. The step-up value is calculated as described in (a)(2); (3) The Certificate Holder's Account Value as of the date of death. (c) Death of the Certificate Holder if the Certificate Holder is not the Annuitant (Nonqualified Flexible Premium Contracts only): The death benefit amount is the Certificate Holder's Adjusted Account Value on the Claim Date. A deferred sales charge may apply to any full or partial withdrawal. (See "Charges and Deductions--Deferred Sales Charge.") (d) Death of a Spousal Beneficiary: In the case of a spousal beneficiary who continued the Account in his or her own name, the death benefit shall be equal to the Certificate Holder's Account Value, less any applicable deferred sales charge on any Purchase Payment(s) made after we receive proof of death. For amounts held in the ALIAC Guaranteed Account: The death benefit, if paid within six months of the date of the Annuitant's death, is the greater of the Certificate Holder's Account Value or the aggregate market value adjusted (MVA) amount. If paid after the six-month period, the death benefit will be the aggregate Market Value Adjustment amount. The aggregate Market Value Adjustment amount may be more or less than the Certificate Holder's Account Value. DEATH BENEFIT OPTIONS AVAILABLE TO BENEFICIARY UNDER A NONQUALIFIED FLEXIBLE PREMIUM CONTRACT Under a Nonqualified Flexible Premium Contract, prior to any election, the Certificate Holder's Account Value will remain in the Certificate Holder's Account and the Certificate Holder's Account Value will continue to be affected 33 by the investment performance of the investment option(s) selected. The Beneficiary has the right to allocate or transfer any amount to any available investment options (subject to an MVA, as applicable). The Code requires that distributions begin within a certain time period as described below; failure to commence distribution within those time periods can result in tax penalties. The following options are available to the Beneficiary: (a) When you are the Annuitant and you die: (1) If the Beneficiary is your surviving spouse, the Beneficiary will become the successor Certificate Holder. The successor Certificate Holder may exercise all Certificate Holder rights under the Contract and continue in the Accumulation Period, or may elect (i), (ii), or (iii) below. Under the Code, distributions are not required until the successor Certificate Holder's death. The Beneficiary may: (i) Apply some or all of the Certificate Holder's Adjusted Account Value to any of the Annuity options. The Amount of payout will depend on the annuity option elected and the investment option(s) used to provide such payments. The proceeds are taxed in the same manner as annuity payments. See "Tax Status." (ii) Elect to have some or all of the Certificate Holder's Adjusted Account Value deposited in the Company's general account, earning the then-current interest rate which may be changed from time to time. The Beneficiary may elect to receive monthly, quarterly, semiannual or annual interest payments. The balance on deposit can be withdrawn at any time or applied to any Annuity option. The principal amount is guaranteed, but interest payments may vary; or (iii) Request, at any time, a lump-sum payment equal to all or a portion of the Certificate Holder's Adjusted Account Value. Under (ii) and (iii) above, payments are taxed as surrenders as they are received. (2) If the Beneficiary is not your surviving spouse, he or she may exercise all Contract or Certificate Holder rights and continue in the Accumulation Period or may elect option (i), (ii), or (iii) under (1) above. According to the Code, any portion of the Certificate Holder's Adjusted Account Value not applied to an Annuity option (other than the Nonlifetime Payment of Interest) within one year of your death, must be paid within five years after your death. (3) If no Beneficiary exists, a lump-sum payment equal to the Certificate Holder's Adjusted Account Value will be made to your estate. Note: If SWO has been elected, SWO payments to the Beneficiary may be continued, unless the Beneficiary elects otherwise. Any payments elected must be made at least as frequently as those made prior to your death. (b) When you are not the Annuitant and you die: (1) If the Beneficiary is your surviving spouse, he or she will become the successor Certificate Holder. The successor Certificate Holder may exercise all your rights under the Contract and continue in the Accumulation Period, or may elect (i), (ii), or (iii) below. Under the Code, distributions are not required until the successor Certificate Holder's death. The Beneficiary may elect to: (i) Apply some or all of the Certificate Holder's Adjusted Account Value to any of the Annuity options. The amount of payout will depend on the annuity option elected and the investment option(s) used to provide such payments. The proceeds are taxed in the same manner as annuity payments; 34 (ii) Elect to have some or all of the Surrender Value deposited in the Company's general account, earning the then-current interest rate which may be changed from time to time. The Beneficiary may elect to receive monthly, quarterly, semiannual or annual interest payments. The balance on deposit can be withdrawn at any time or applied to any Annuity option. The principal amount is guaranteed, but interest payments may vary; or (iii) Request, at any time, a lump-sum payment equal to all or a portion of the Surrender Value. Under (ii) and (iii) above, payments are taxed as surrenders as they are received. (2) If the Beneficiary is not your surviving spouse, he or she may elect option (i), (ii), or (iii) under (1) above. According to the Code, any portion of the Certificate Holder's Adjusted Account Value not applied to one of the Annuity options (other than the Nonlifetime Payment of Interest) within one year of your death and must be paid within five years after your death. This amount will be subject to a deferred sales charge, if applicable. (3) If no Beneficiary exists, a lump-sum payment equal to the Surrender Value will be made to your estate. Note: If SWO has been elected, the payments to the Beneficiary may be continued, unless the Beneficiary elects otherwise. Any payments elected must be made at least as frequently as those made prior to your death. (c) When you are not the Annuitant and the Annuitant dies: the Beneficiary must elect an Annuity option (see "Annuity Options") other than the Nonlifetime Payment of Interest within 60 days of the date of death. DEATH BENEFIT OPTIONS AVAILABLE TO BENEFICIARY UNDER AN IRA ROLLOVER CONTRACT Under an IRA Rollover Contract, prior to any election, the Certificate Holder's Account Value will be retained in the Certificate Holder's Account and the Account Value will continue to be affected by the investment performance of the investment option(s) selected. Under the Code, distributions must begin within a certain time period. If no elections are made, no distributions will be made. Failure to commence distributions within those time periods can result in tax penalties. The following options are available to the Beneficiary: (a) If the Beneficiary is your surviving spouse, he or she may exercise all rights under the Contract and continue in the Accumulation Period, or may elect (1), (2), or (3) below. Under the Code, distributions are not required until December 31st of the year in which you would have attained age 70 1/2. The Beneficiary may elect to: (1) Apply some or all of the Certificate Holder's Adjusted Account Value to the Annuity options. The amount of payout will depend on the annuity option elected and the investment option(s) used to provide such payments; (2) Elect to have some or all of the Certificate Holder's Adjusted Account Value deposited in the Company's general account, earning the then-current interest rate which may be changed from time to time. The Beneficiary may elect to receive monthly, quarterly, semiannual or annual interest payments. The balance on deposit can be withdrawn at any time, or applied to any Annuity option. The principal amount is guaranteed, but interest amounts may vary; or (3) Receive, at any time, a lump-sum payment equal to all or any portion of the Adjusted Account Value. 35 In general, regardless of the method of payment, payments received by your Beneficiaries after your death are taxed in the same manner as if you had received those payments. See "Tax Status." Note: If ECO is in effect when you die, your surviving spouse can elect to continue receiving ECO payments if a joint life expectancy was chosen. Otherwise, your surviving spouse must receive a lump-sum payment of the Certificate Holder's Adjusted Account Value. If SWO is in effect and you die before your required beginning date for minimum distributions the SWO payments will stop and your surviving spouse may elect (1), (2) or (3) above. If SWO is in effect and you die after your required beginning date for minimum distributions, your surviving spouse can elect to continue SWO payments. Otherwise, your spouse must elect to receive a lump sum payment equal to the Adjusted Account Value. (b) If the Beneficiary is other than your surviving spouse, and ECO is not in effect when you die, he or she may exercise all rights under the Certificate Holder's Account and continue in the Accumulation Period or may elect option (1), (2), or (3) under (a) above. Any portion of the Adjusted Account Value that is not applied to an Annuity Option (other than the Nonlifetime Payment of Interest) by December 31st of the year following the year of your death must be distributed by December 31st of the year containing the fifth anniversary of your date of death. Note: If ECO or SWO is in effect when you die, the Beneficiary must receive an automatic and immediate lump-sum payment of the Adjusted Account Value. (c) If no Beneficiary exists, a lump-sum payment equal to the Adjusted Account Value will be made to your estate. TAX STATUS INTRODUCTION The following discussion is a general discussion of federal income tax considerations relating to the Contract and is not intended as tax advice. This discussion is not intended to address the tax consequences resulting from all of the situations in which a person may be entitled to or may receive a distribution under the Contract. Any person concerned about these tax implications should consult a competent tax adviser before initiating any transaction. This discussion is based upon the Company's understanding of the present federal income tax laws as they are currently interpreted by the Internal Revenue Service ("IRS"). No representation is made as to the likelihood of the continuation of the present federal income tax laws or of the current interpretation by the IRS. Moreover, no attempt has been made to consider any applicable state or other tax laws. The Nonqualified Flexible Premium Contract is purchased on a non-tax qualified basis. The IRA Rollover Contract is purchased and used in connection with certain arrangements entitled to special income tax treatment under section 408 of the Code. The ultimate effect of federal income taxes on the amounts held under a Contract, on Annuity Payments, and on the economic benefit to the Contract Holder, the Annuitant, or the Beneficiary may depend on the tax status of the individual concerned. TAXATION OF THE COMPANY The Company is taxed as a life insurance company under the Code. Since the Separate Account is not an entity separate from the Company, and its operation forms a part of the Company, it will not be taxed separately as a 36 "regulated investment company" under Subchapter M of the Code or as any other Separate entity. Investment income and capital gains are automatically applied to increase reserves under the Contracts. Under existing federal income tax law, the Company believes that the Separate Account investment income and net capital gains will not be taxed to the extent that such income and gains are applied to increase the reserves under the Contracts. Accordingly, the Company does not anticipate that it will incur any federal income tax liability attributable to the Separate Account and, therefore, the Company does not intend to make provisions for any such taxes. However, if changes in the federal tax laws or interpretations thereof result in the Company being taxed on income or gains attributable to the Separate Account, then the Company may impose a charge against the Separate Account (with respect to some or all Contracts) in order to set aside provisions to pay such taxes. TAX STATUS OF THE CONTRACT DIVERSIFICATION: Section 817(h) of the Code requires that with respect to Nonqualified Flexible Premium Contracts, the investments of the Funds be "adequately diversified" in accordance with Treasury Regulations in order for the Contracts to qualify as annuity contracts under federal tax law. The Separate Account, through the Funds, intends to comply with the diversification requirements prescribed by the Treasury in Reg. Sec. 1.817-5, which affects how the Funds' assets may be invested. In certain circumstances, owners of variable annuity contracts may be considered the owners, for federal income tax purposes, of the assets of the separate accounts used to support their contracts. In these circumstances, income and gains from the separate account assets would be includible in the variable contract owner's gross income. The IRS has stated in published rulings that a variable contract owner will be considered the owner of separate account assets if the contract owner possesses incidents of investment control over the assets. The ownership rights under the contract are similar to, but different in certain respects from those described by the IRS in rulings in which it was determined that contract owners were not owners of separate account assets. For example, a Certificate Holder has additional flexibility in allocating premium payments and account values. In addition, the number of funds provided under the Contract is significantly greater than the number of funds offered in contracts on which rulings have been issued. These differences could result in a Certificate Holder being treated as the owner of a pro rata portion of the assets of the Separate Account. The Company reserves the right to modify the Contract as necessary to attempt to prevent a Certificate Holder from being considered the owner of a pro rata share of the assets of the Separate Account. REQUIRED DISTRIBUTION: In order to be treated as an annuity contract for federal income tax purposes, section 72(s) of the Code requires nonqualified contracts to provide that (a) if any Certificate Holder dies on or after the annuity date but prior to the time the entire interest in the Contract has been distributed, the remaining portion of such interest will be distributed at least as rapidly as under the method of distribution being used as of the date of such owner's death; and (b) if any Certificate Holder dies prior to the annuity date, the entire interest in the Contract will be distributed within five years after the date of such Certificate Holder's death. These requirements will be considered satisfied as to any portion of a Certificate Holder's interest which is payable to or for the benefit of a "designated beneficiary" and which is distributed over the life of such "designated beneficiary" or over a period not extending beyond the life expectancy of that beneficiary, provided that such distributions begin within one year of the Certificate Holder's death. The "designated beneficiary" refers to a natural person designated by the Certificate Holder as a Beneficiary and to whom ownership of the contract passes by reason of death. However, if the "designated beneficiary" is the surviving spouse of the deceased Certificate Holder, the contract may be continued with the surviving spouse as the new Certificate Holder. The Nonqualified Flexible Premium Contracts contain provisions which are intended to comply with the requirements of section 72(s) of the Code, although no regulations interpreting these requirements have yet been 37 issued. The Company intends to review such provisions and modify them if necessary to assure that they comply with the requirements of Code section 72(s) when clarified by regulation or otherwise. Other rules may apply to IRA Rollover Contracts. The following discussion is based on the assumption that the Contract qualifies as an annuity contract for federal income tax purposes. TAXATION OF ANNUITIES IN GENERAL: Section 72 of the Code governs taxation of annuities in general. The Company believes that a Certificate Holder who is a natural person generally is not taxed on increases in the Contract Value until distribution occurs by withdrawing all or part of such Account Value (e.g., withdrawals or Annuity payments under the Annuity Option elected). The assignment, pledge, or agreement to assign or pledge any portion of the Value generally will be treated as a distribution. The taxable portion of a distribution (in the form of a single sum payment or an annuity) is taxable as ordinary income. The following discussion generally applies to a Contract owned by a natural person. WITHDRAWALS: In the case of a withdrawal under an IRA Rollover Contract, including withdrawals under SWO or ECO, the amount taxable is generally based on the ratio of the "investment in the contract" to Contract Value. The "investment in the contract" generally equals the amount of any nondeductible Purchase Payments paid by or on behalf of any individual less any amount received previously which was excludable from gross income. For an IRA Rollover Contract, the "investment in the contract" can be zero. Special tax rules may be available for certain distributions from an IRA Rollover Contract. With respect to Nonqualified Flexible Premium Contracts, partial withdrawals, including withdrawals under SWO, are generally treated as taxable income to the extent that the Contract Value immediately before the withdrawal exceeds the "investment in the contract" at that time. The Contract Value immediately before a withdrawal may have to be increased by any positive market value adjustment (MVA) that results from such a withdrawal. There is, however, no definitive guidance on the proper tax treatment of MVAs in these circumstances, and a Contract Holder should contact a competent tax advisor with respect to the potential tax consequences of any MVA that arises as a result of a partial withdrawal. Full withdrawals of a Nonqualified Flexible Premium Contract are treated as taxable income to the extent that the amount received exceeds the "investment in the contract." ANNUITY PAYMENTS: Although the tax consequences may vary depending on the Annuity payment elected under the Contract, in general, only the portion of the Annuity payment that represents the amount by which the Contract Value exceeds the "investment in the contract" will be taxed; after the "investment in the contract" is recovered, the full amount of any additional Annuity payments is taxable. For Variable Annuity payments, the taxable portion is generally determined by an equation that establishes a specific dollar amount of each payment that is not taxed. The dollar amount is determined by dividing the "investment in the contract" by the total number of expected periodic payments. However, the entire distribution will be taxable once the recipient has recovered the dollar amount of his or her "investment in the contract." For Fixed Annuity payments, in general there is no tax on the portion of each payment which represents the same ratio that the "investment in the contract" bears to the total expected value of the Annuity payments for the term of the payments; however, the remainder of each Annuity payment is taxable. Once the "investment in the contract" has been fully recovered, the full amount of any additional Annuity payments is taxable. If Annuity payments cease as a result of an Annuitant's death before full recovery of the "investment in the contract," consult a competent tax advisor regarding deductibility of the unrecovered amount. 38 PENALTY TAX: In the case of a distribution pursuant to a Nonqualified Flexible Premium Contract, there may be imposed a federal income tax penalty equal to 10% of the amount treated as taxable income. In general, however, there is no penalty tax on distributions: (1) made on or after the date on which the taxpayer attains age 59 1/2; (2) made as a result of death or disability of a Certificate Holder; (3) received in substantially equal periodic payments as a life annuity or a joint and survivor annuity for the lives or life expectancies of the Certificate Holder and a "designated beneficiary." Other tax penalties may apply to certain distributions pursuant to an IRA Rollover Contract. TAXATION OF DEATH BENEFIT PROCEEDS: Amounts may be distributed from the Contract because of the death of a Certificate Holder or the Annuitant. Generally, such amounts are includible in the income of the recipient as follows: (1) if distributed in a lump sum, they are taxed in the same manner as a full surrender as described above, or (2) if distributed under an Annuity Option, they are taxed in the same manner as Annuity payments, as described above. TRANSFERS, ASSIGNMENTS, OR EXCHANGES OF THE CONTRACT: A transfer of ownership of a Contract, the designation of an Annuitant, Payee or other Beneficiary who is not also a Certificate Holder, the selection of certain Annuity Dates, or the exchange of a Contract may result in certain tax consequences that are not discussed herein. Assignments or transfers of ownership of an IRA Rollover Contract are not allowed except as permitted under Code Section 408(d)(6), coincident to a divorce. Anyone contemplating any such designation, transfer, assignment, selection, or exchange should contact a competent tax adviser with respect to the potential tax effects of such a transaction. MULTIPLE CONTRACTS: All deferred nonqualified annuity contracts that are issued by the Company (or its affiliates) to the same owner during any calendar year are treated as one annuity contract for purposes of determining the amount includible in gross income under section 72(e) of the Code. In addition, the Treasury Department has specific authority to issue regulations that prevent the avoidance of section 72(e) through the serial purchase of annuity contracts or otherwise. Congress has also indicated that the Treasury Department may have authority to treat the combination purchase of an immediate annuity contract and separate deferred annuity contracts as a single annuity contract under its general authority to prescribe rules as may be necessary to enforce the income tax laws. IRA ROLLOVER CONTRACT IN GENERAL: The qualified contract is designed for use as an Individual Retirement Annuity. The tax rules applicable to participants and beneficiaries in Individual Retirement Annuities are complex. Special favorable tax treatment may be available for certain types of contributions and distributions. Adverse tax consequences may result from contributions in excess of specified limits; distributions prior to age 59 1/2 (subject to certain exceptions); distributions that do not conform to specified commencement and minimum distribution rules; aggregate distributions in excess of a specified annual amount; and in other specified circumstances. INDIVIDUAL RETIREMENT ANNUITIES: Section 408 of the Code permits eligible individuals to contribute to an individual retirement program known as an Individual Retirement Annuity or Individual Retirement Account, each hereinafter referred to as an "IRA." Also, distributions from certain other types of qualified plans may be "rolled over" on a tax-deferred basis into an IRA. The sale of a contract for use with an IRA may be subject to special disclosure requirements of the Internal Revenue Service. Purchasers of a Contract for use with IRAs will be provided with supplemental information required by the Internal Revenue Service or other appropriate agency. Such purchasers will have the right to revoke their purchase within 7 days of the earlier of the establishment of the IRA or their purchase. A Qualified Contract issued in connection with an IRA will be amended as necessary 39 to conform to the requirements of the Code. Purchasers should seek competent advice as to the suitability of the Contract for use with IRAs. The Internal Revenue Service has not reviewed the Contract for qualification as an IRA, and has not addressed in a ruling of general applicability whether a death benefit provision such as the provision in the Contract comports with IRA qualification requirements. WITHHOLDING Pension and annuity distributions generally are subject to withholding for the recipient's federal income tax liability at rates that vary according to the type of distribution and the recipient's tax status. Recipients, however, generally are provided the opportunity to elect not to have tax withheld from distributions. POSSIBLE CHANGES IN TAXATION In past years, legislation has been proposed that would have adversely modified the federal taxation of certain annuities. For example, one such proposal would have changed the tax treatment of nonqualified annuities that did not have "substantial life contingencies" by taxing income as it is credited to the annuity. Although as of the date of this prospectus Congress is not actively considering any legislation regarding the taxation of annuities, there is always the possibility that the tax treatment of annuities could change by legislation or other means (such as IRS regulations, revenue rulings, judicial decisions, etc.). Moreover, it is also possible that any change could be retroactive (that is, effective prior to the date of the change). OTHER TAX CONSEQUENCES As noted, above, the foregoing discussion of the federal income tax consequences is not exhaustive and special rules are provided with respect to other tax situations not discussed in this Prospectus. Further, the federal income tax consequences discussed herein reflect the Company's understanding of the current law and the law may change. Federal estate and gift tax consequences of ownership or receipt of distributions under the Contract depend on the individual circumstances of each Certificate Holder or recipient of a distribution. A competent tax adviser should be consulted for further information. MISCELLANEOUS VOTING RIGHTS Each Certificate Holder may direct us in the voting of shares at shareholders' meetings of the appropriate Fund(s). The number of votes to which each Certificate Holder may give direction will be determined as of the record date. The number of votes each Certificate Holder is entitled to direct with respect to a particular Fund during the Accumulation Period equals the portion of the Certificate Holder's Account Value(s) attributable to that Fund, divided by the net asset value of one share of that Fund. During the Annuity Period, the number of votes is equal to the Certificate Holder's share of the Valuation Reserve for the portion of the Contract attributable to that Fund, divided by the net asset value of one share of that Fund. In determining the number of votes, fractional votes will be recognized. Where the value of the Contract or Valuation Reserve relates to more than one Fund, the calculation of votes will be performed separately for each Fund. Votes attributable to Certificate Holders who do not direct us will be cast by us in the same proportion as votes for which directions have been received. You will receive a notice of each meeting of shareholders, together with any proxy solicitation materials, and a statement of the number of votes attributable to your Contract. 40 MODIFICATION OF THE CONTRACT The Company may modify the Contract when it deems an amendment appropriate, subject to the limitations described below, by notifying the Contract Holder and Certificate Holder in writing 30 days before the effective date of the change. The following Contract provisions are considered material by the Company and cannot be changed without the approval of appropriate state or federal regulatory authorities: (a) transfers among investment options; (b) notification to the Contract Holder; (c) conditions governing payments of surrender values; (d) terms of Annuity Options; (e) death benefit payments; and (f) contract charges. In addition, changes to the items listed below will apply only to new Certificate Holders' Accounts established under a group Contract, or individual Contracts issued after the effective date of the change: (a) the Annuity Options; (b) the contractual promise that no deduction will be made from the Purchase Payment for sales or administrative expenses; (c) increasing the deferred sales charges; (d) increasing the mortality and expense risk charges; (e) increasing the administrative charge; (f) the right to make transfers; and (g) the Guaranteed Rate of the AGA. Modification of items (b) through (e) above specifically require authorization by the SEC to the extent that the proposed changes are not currently authorized by existing orders issued to us by the SEC. No modification may affect any Annuity beginning before the effective date of the change unless deemed necessary for the Contract to comply with the requirements of the Code or other laws and regulations affecting the Contract. INQUIRIES You may direct inquiries by writing directly to us at the address shown on the cover page of this Prospectus or by calling 1-800-531-4547. TELEPHONE TRANSFERS You automatically have the right to make transfers among Funds by telephone. The Company has enacted procedures to prevent abuses of transactions by telephone. The procedures include requiring the use of a personal identification number (PIN) to execute transactions. You are responsible for safeguarding your PIN, and for keeping your Contract information confidential. If the Company fails to follow its procedures it would be liable for any losses to your Contract resulting from the failure. To ensure authenticity, the Company records all calls on the 800 line. 41 TRANSFER OF OWNERSHIP; ASSIGNMENT Assignments or transfers of ownership of an IRA Rollover Contract are not allowed except as permitted under Code Section 408(d)(6), coincident to a divorce. We will accept assignments or transfers of ownership of a Nonqualified Flexible Premium Contract, with proper notification. The date of any such transfer will be the date we receive the notification at our Home Office. See "Tax Status -- Taxation of Annuities." If you are contemplating a transfer of ownership or assignment you should consult a tax adviser due to the potential for tax liability. LEGAL PROCEEDINGS We know of no material legal proceedings pending to which the Separate Account is a party or which would materially affect the Separate Account. LEGAL MATTERS The validity of the securities offered by this Prospectus has been passed upon by Susan E. Bryant, Esq., Counsel to the Company. 42 STATEMENT OF ADDITIONAL INFORMATION -- TABLE OF CONTENTS The following items are the contents of the Statement of Additional Information: General Information and History............................................. 2 Variable Annuity Account B.................................................. 2 Offering and Purchase of Contracts.......................................... 3 Performance Data............................................................ 3 General.................................................................... 3 Average Annual Total Return Quotations..................................... 4 Annuity Payments............................................................ 5 Dollar-Cost Averaging....................................................... 7 Sales Material.............................................................. 7 Independent Auditors........................................................ 7 Financial Statements of the Separate Account................................ S-1 Financial Statements of the Company......................................... F-1
43 APPENDIX ALIAC GUARANTEED ACCOUNT THE ALIAC GUARANTEED ACCOUNT ("AGA") IS A CREDITED INTEREST OPTION AVAILABLE DURING THE ACCUMULATION PERIOD UNDER THE CONTRACTS DESCRIBED IN THIS PROSPECTUS. SINCE MGA IS A FUNDING OPTION UNDER THE CONTRACT, YOU SHOULD READ THE ACCOMPANYING AGA PROSPECTUS CAREFULLY BEFORE INVESTING. THIS APPENDIX IS INTENDED AS A SUMMARY DESCRIPTION OF AGA AND IS NOT INTENDED AS A REPLACEMENT FOR THE ALIAC GUARANTEED ACCOUNT PROSPECTUS. GENERAL AGA is a credited interest option for which we guarantee a stipulated rate of interest for a stated period of time on amounts applied to AGA. For guaranteed terms of one year or less, a guaranteed rate is credited for the full term. For guaranteed rates of greater than one year, the initial guaranteed rate is credited from the date of deposit to the end of a specified period within the guaranteed term. The interest rate stipulated is an annual effective yield; that is, it reflects a full year's interest. Interest is credited daily at a rate that will provide the guaranteed annual effective yield over the period of one year. Guaranteed interest rates will never be less than an annual effective rate of 3%. During the deposit period, amounts may be applied to any of the available guaranteed terms. Purchase Payments received after the initial payment will be allocated in the same proportions as the last allocation, if no new allocation instructions are received with the Purchase Payment. For amounts allocated to the ALIAC Guaranteed Account, if the same guaranteed term(s) are not available, the next shortest term will be used. If no shorter guaranteed term is available, the next longer guaranteed term will be used. WITHDRAWALS Except for transfers from the one-year Guaranteed Term in connection with the Dollar Cost Averaging Program and withdrawals taken in connection with an Estate Conservation or Systematic Withdrawal distribution option, withdrawals or transfers from a guaranteed term before the guaranteed term matures may be subject to a market value adjustment ("MVA"). An MVA reflects the change in the value of the investment due to changes in interest rates since the date of deposit. When interest rates increase after the date of deposit, the value of the investment decreases, and the MVA is negative. Conversely, when interest rates decrease after the date of deposit, the value of the investment increases, and the MVA is positive. It is possible that a negative MVA could result in you receiving an amount that is less than the amount you allocated to AGA. For partial withdrawals during the Accumulation Period, amounts to be withdrawn from the AGA will be withdrawn on a pro rata basis from each group of deposits having the same length of time until the Maturity Date ("Guaranteed Term Group"). Within a Guaranteed Term Group, the amount will be withdrawn first from the oldest Deposit Period, then from the next oldest, and so on until the amount requested is satisfied. MATURITY OF A GUARANTEED TERM As a guaranteed term matures, assets accumulating under AGA may be (a) transferred to a new guaranteed term, (b) transferred to any other available investment options, or (c) withdrawn. Amounts withdrawn may be subject to a deferred sales charge. If no direction is received by the Company at its Home Office by the maturity date of a guaranteed term, the amount from the maturing guaranteed term will be transferred to the current deposit period for a similar length guaranteed term. If the same guaranteed term is no longer available the next shortest guaranteed term available in the current deposit period will be used. If no shorter guaranteed term is available, the next longer guaranteed term will be used. 44 If you do not provide instruction concerning the maturity value of a maturing guaranteed term, the maturity value transfer provision applies. This provision allows you to transfer without an MVA to available guaranteed terms of the current deposit period or to other available investment options, or surrender without an MVA (if applicable, a deferred sales charge is assessed on the surrendered amount). The provision is available only during the calendar month immediately following a guaranteed term maturity date and only applies to the first transaction regardless of the amount involved in the transaction. MORTALITY AND EXPENSE RISK CHARGES We make no deductions from the credited interest rate for mortality and expense risks; these risks are considered in determining the credited rate. TRANSFERS Amounts applied to a guaranteed term during a deposit period may not be transferred to any other funding option or to another guaranteed term during that deposit period or for 90 days after the close of that deposit period. This does not apply to (1) amounts transferred on the Maturity Date or under the maturity value transfer provision; (2) amounts transferred from the Guaranteed Account before the Maturity Date due to the election of an Annuity option; (3) amounts transferred from the one-year Guaranteed Term in connection with the Dollar Cost Averaging Program; and (4) amounts distributed under the Estate Conservation or Systematic Withdrawal distribution. Transfers after the 90-day period are permitted from guaranteed term(s) to other guaranteed term(s) available during a deposit period or to other available investment options. Except for transactions described in items (1), (3) and (4) above, amounts withdrawn or transferred from the Guaranteed Account prior to the maturity date will be subject to a Market Value Adjustment. However, only a positive aggregate Market Value Adjustment will be applied to transfers made due to annuitization under one of the lifetime Annuity Options described in (2) above. Transfers of AGA values on or within one calendar month of a term's maturity date are not counted as one of the 12 free transfers of accumulated values in the Certificate Holder's Account. The Certificate Holder may select a maximum of 18 different funding options over the lifetime of the Contract. Under the ALIAC Guaranteed Account, each guaranteed term is counted as one funding option. If a guaranteed term matures, and is renewed for the same term, it will not count as an additional funding option. DEATH BENEFIT Full and partial withdrawals and transfers made from the AGA within six months after the date of the Annuitant's death will be the greater of: (a) The aggregate MVA amount (i.e., the sum of all market value adjusted amounts calculated due to a withdrawal of amounts). This total may be greater or less than the Certificate Holder's Account Value of those amounts; or (b) The applicable portion of the Certificate Holder's Account Value attributable to AGA. After the six-month period, the surrender or transfer amount will be adjusted for the aggregate MVA amount, which may be greater or less than the Certificate Holder's Account Value of those amounts. Only a positive aggregate Market Value Adjustment will be applied to transfers made due to annuitization under one of the lifetime Annuity Options. ANNUITY PERIOD By notifying us at our Home Office at least 30 days before the Annuity Date, you may elect to have amounts which have been accumulating under AGA transferred to one or more of the funds available during the Annuity Period to provide variable Annuity payments. AGA cannot be used as an investment option during the Annuity Period. Transfers made due to the election of a lifetime Annuity Option will be subject to only a positive aggregate MVA. 45 -------------------------------------------------------------------------------- VARIABLE ANNUITY ACCOUNT B OF AETNA LIFE INSURANCE AND ANNUITY COMPANY -------------------------------------------------------------------------------- Statement of Additional Information dated September ___, 1995 This Statement of Additional Information is not a prospectus and should be read in conjunction with the current prospectus for Marathon Plus/Growth Plus (New York) dated September ______, 1995. A free prospectus is available upon request from the local Aetna Life Insurance and Annuity Company office or by writing to or calling: Aetna Life Insurance and Annuity Company Service Unit 151 Farmington Avenue Hartford, Connecticut 06156 1-800-531-4547 Read the prospectus before you invest. Terms used in this Statement of Additional Information shall have the same meaning as in the prospectus. TABLE OF CONTENTS
Page General Information and History................................... 2 Variable Annuity Account B........................................ 2 Offering and Purchase of Contracts................................ 3 Performance Data.................................................. 3 General......................................................... 3 Average Annual Total Return Quotations.......................... 4 Annuity Payments.................................................. 5 Dollar-Cost Averaging............................................. 7 Sales Material.................................................... 7 Independent Auditors.............................................. 7 Financial Statements of the Separate Account...................... S-1 Financial Statements of Aetna Life Insurance and Annuity Company.. F-1
GENERAL INFORMATION AND HISTORY Aetna Life Insurance and Annuity Company (the "Company") is a stock life insurance company which was organized in 1976 under the insurance laws of the State of Connecticut. The Company is a wholly owned subsidiary of Aetna Life Insurance and Casualty Company which, with its subsidiaries, constitutes one of the nation's largest diversified financial services organizations. The Company's Home Office is located at 151 Farmington Avenue, Hartford, Connecticut 06156. ALIAC, a registered broker-dealer under the Securities Exchange Act of 1934, serves as the principal underwriter for the Separate Account. ALIAC is also a registered investment adviser under the Investment Advisers Act of 1940, and provides investment advice to several of the registered management investment companies offered as variable investment options under the Contracts funded by the Separate Account (see "Variable Annuity Account B" below). Other than the mortality and expense risk charges and administrative expense charge described in the prospectus, all expenses incurred in the operations of the Separate Account are borne by the Company. See "Charges and Deductions" in the prospectus. The Company receives reimbursement for certain administrative costs from the Funds' investment adviser used as funding options under the Contract. These fees generally range from 0.10% to 0.25%. The assets of the Separate Account are held by the Company. The Separate Account has no custodian. However, the Funds in whose shares the assets of the Separate Account are invested each have custodians, as discussed in their respective prospectuses. VARIABLE ANNUITY ACCOUNT B Variable Annuity Account B (the "Separate Account") is a separate account established by the Company for the purpose of funding variable annuity contracts issued by the Company. The Separate Account is registered with the Securities and Exchange Commission as a unit investment trust under the Investment Company Act of 1940, as amended. The assets of the Separate Account will be invested exclusively in shares of the mutual funds described in the Prospectus. Purchase Payments made under the Contract may be allocated to one or more of the variable investment options. The Company may make additions to or deletions from available investment options as permitted by law. The 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 Contract are as follows: 2 Aetna Variable Fund Fidelity Index 500 Portfolio Aetna Income Shares IMS-Growth Stock Fund Aetna Variable Encore Fund IMS-Equity Growth and Income Fund Aetna Investment Advisers Fund, Inc. IMS-Utility Fund Aetna Ascent Variable Portfolio IMS-U.S. Government Bond Fund Aetna Crossroads Variable Portfolio IMS-Corporate Bond Fund Aetna Legacy Variable Portfolio IMS-International Stock Fund Alger American Balanced Portfolio IMS-Prime Money Fund Alger American Income and Growth Portfolio Janus Aspen Balanced Portfolio Alger American Growth Portfolio Janus Aspen Flexible Income Portfolio Alger American MidCap Growth Portfolio Janus Aspen Growth Portfolio Alger American Leveraged AllCap Portfolio Janus Aspen Short-Term Bond Portfolio Alger American Small Cap Portfolio Janus Aspen Worldwide Growth Portfolio Fidelity Contrafund Portfolio Janus Aspen Aggressive Growth Portfolio Fidelity Equity-Income Portfolio Lexington Natural Resources Trust Fidelity GrowthPortfolio Lexington Emerging Markets Fund Fidelity Overseas Portfolio TCI Growth Fidelity Asset Manager Portfolio TCI Balanced Fidelity High Income Portfolio TCI International Fidelity Investment Grade Bond Portfolio
Complete descriptions of each of the Funds, including their investment objectives, policies, risks and fees and expenses, are contained in the prospectuses and statements of additional information for each of the Funds. OFFERING AND PURCHASE OF CONTRACTS As principal underwriter, ALIAC offers the Contracts through life insurance agents licensed to sell variable annuities who are registered representatives of ALIAC or of other registered broker-dealers who have sales agreements with ALIAC. The offering of the Contracts is continuous. A description of the manner in which Contracts are purchased may be found in the prospectus under the sections titled "Contract Purchase" and "Certificate Holder's Account Values." PERFORMANCE DATA GENERAL From time to time, the Company may advertise different types of historical performance for the variable options of the Separate Account available under the Contracts issued by the Company which are described in the Prospectus. The Company may advertise the "standardized average annual total returns," calculated in a manner prescribed by the Securities and Exchange Commission (the "standardized return"), as well as the "non-standardized total return," both of which are described below. The standardized and non-standardized total return figures are computed according to a formula in which a hypothetical initial Purchase Payment of $1,000 is applied to the variable options under the Contract, and then related to the ending redeemable values over one, three, five and ten year periods (or fractional periods thereof). The standardized figures reflect the deduction of all recurring charges during 3 each period (e.g., mortality and expense risk charges, maintenance fees, administrative charges, and deferred sales charges). These charges will be deducted on a pro rata basis in the case of fractional periods. The maintenance fee is converted to a percentage of assets based on the average account size under these contracts and similar contracts funded by the Separate Account. The non-standardized figures will be calculated in a similar manner, except that non-standardized figures will not reflect the deduction of any applicable deferred sales charge (which would decrease the level of performance shown if reflected in these calculations). The non-standardized figures may also include a three year period. For variable options underlying the Separate Account that were in existence prior to the date the Fund became available under the Contract or the date on which the Separate Account commenced operations, the standardized and non- standardized total returns may include periods prior to the date on which such Fund became available under the Contract. These figures are calculated by adjusting the actual returns of the Fund to reflect the charges that would have been assessed under the Contract had that Fund been available under the Contract during that period. The total return quotations are based upon historical earnings and are not necessarily representative of future performance. Investment results of the Funds will fluctuate over time, and any presentation of the Funds' total return quotations for any prior period should not be considered as a representation of how the variable options will perform in any future period. Additionally, your Account Value upon redemption may be more or less than your original cost. AVERAGE ANNUAL TOTAL RETURN QUOTATIONS - Standardized and Non-Standardized The table shown below reflects the average annual standardized and non- standardized total return quotation figures for the periods ended December 31, 1994 for the variable options available under the Contract.
-------------------------------------------------------------------------------------- Fund STANDARDIZED NON-STANDARDIZED Inception Date ------------------------------------------------------------------------------------------------------------------------------ Installment Payment Contract 1 Year 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years ($30 annual maintenance fee) ------------------------------------------------------------------------------------------------------------------------------- Aetna Variable Fund (7.84)% 6.20% 12.51% (2.43)% 2.57% 6.47% 12.51% 04/30/75 ------------------------------------------------------------------------------------------------------------------------------- Aetna Income Shares (10.62)% 6.28% 8.61% (5.19)% 2.76% 6.55% 8.61% 06/01/78 ------------------------------------------------------------------------------------------------------------------------------- Aetna Variable Encore Fund (2.81)% 3.33% 4.96% 2.58% 2.14% 3.64% 4.96% 09/01/75 ------------------------------------------------------------------------------------------------------------------------------- * * Aetna Investment Advisers Fund, Inc. (7.23)% 5.99% 6.19% (1.82)% 3.69% 6.26% 6.42% 06/23/89 ------------------------------------------------------------------------------------------------------------------------------- * * Alger American Balanced Portfolio (11.09)% 2.90% 3.15% (5.66)% 2.63% 3.21% 3.43% 09/05/89 ------------------------------------------------------------------------------------------------------------------------------- * * Alger American Income and Growth (15.08)% 4.53% 4.91% (9.62)% 1.71% 4.82% 5.01% 11/14/88 Portfolio ------------------------------------------------------------------------------------------------------------------------------- * * Alger American Growth Portfolio (5.43)% 13.47% 15.00% (0.03)% 10.14% 13.67% 15.13% 01/08/89 ------------------------------------------------------------------------------------------------------------------------------- * * Alger American MidCap Growth Portfolio (8.40)% 15.95% N/A (2.98)% 18.74% N/A N/A 04/30/93 ------------------------------------------------------------------------------------------------------------------------------- * * Alger American Small Cap Portfolio (11.21)% 12.09% 17.68% (5.77)% 2.39% 12.30% 17.73% 09/20/88 -------------------------------------------------------------------------------------------------------------------------------
4
-------------------------------------------------------------------------------------- Fund STANDARDIZED NON-STANDARDIZED Inception Date ------------------------------------------------------------------------------------------------------------------------------ Installment Payment Contract 1 Year 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years ($30 annual maintenance fee) ------------------------------------------------------------------------------------------------------------------------------- * * Fidelity Asset Manager Portfolio (12.88)% 8.88% 8.39% (7.43)% 6.79% 9.12% 8.62% 09/06/89 ------------------------------------------------------------------------------------------------------------------------------- * * Fidelity Equity-Income Portfolio 0.14% 8.67% 9.39% 5.51% 12.32% 8.91% 9.39% 10/22/86 ------------------------------------------------------------------------------------------------------------------------------- * * Fidelity Growth Portfolio (6.87)% 9.03% 11.06% (1.46)% 7.68% 9.27% 11.06% 11/07/86 ------------------------------------------------------------------------------------------------------------------------------- * * Fidelity Overseas Portfolio (5.15)% 3.96% 5.51% 0.25% 6.09% 4.25% 5.51% 02/13/87 ------------------------------------------------------------------------------------------------------------------------------- * * Fidelity High Income Portfolio (8.49)% 12.15% 9.33% (3.07)% 11.76% 12.36% 9.33% 10/11/85 ------------------------------------------------------------------------------------------------------------------------------- * * Fidelity Investment Grade Bond Portfolio (10.59)% 5.24% 5.93% (5.16)% 2.91% 5.52% 6.03% 12/05/88 ------------------------------------------------------------------------------------------------------------------------------- * * Fidelity Index 500 Portfolio (5.83)% 3.93% N/A (0.43)% 5.71% N/A N/A 08/27/92 ------------------------------------------------------------------------------------------------------------------------------- * * IMS-Equity Growth and Income Fund (8.27)% N/A N/A (1.96)% N/A N/A N/A 02/10/94 ------------------------------------------------------------------------------------------------------------------------------- * * IMS Prime Money Fund (6.02)% N/A 0.28% N/A N/A N/A N/A ------------------------------------------------------------------------------------------------------------------------------- * * IMS-Utility Fund (11.45)% N/A N/A (5.11)% N/A N/A N/A 02/10/94 ------------------------------------------------------------------------------------------------------------------------------- * * IMS-U.S. Government Bond Fund (4.88)% N/A N/A 1.41% N/A N/A N/A 03/28/94 ------------------------------------------------------------------------------------------------------------------------------- * * IMS-Corporate Bond Fund (10.99)% N/A N/A (4.65)% N/A N/A N/A 03/01/94 ------------------------------------------------------------------------------------------------------------------------------- * * Janus Aspen Aggressive Growth Portfolio 9.62% 22.40% N/A 14.93% 26.14% N/A N/A 09/13/93 ------------------------------------------------------------------------------------------------------------------------------- * * Janus Aspen Balanced Portfolio (6.04)% 0.53% N/A (0.64)% 4.63% N/A N/A 09/13/93 ------------------------------------------------------------------------------------------------------------------------------- * * Janus Aspen Flexible Income Portfolio (7.57)% (5.67)% N/A (2.16)% (1.46)% N/A N/A 09/13/93 ------------------------------------------------------------------------------------------------------------------------------- * * Janus Aspen Growth Portfolio (4.00)% (0.68)% N/A 1.40% 3.44% N/A N/A 09/13/93 ------------------------------------------------------------------------------------------------------------------------------- * * Janus Aspen Short-Term Bond Portfolio (5.95)% (4.72)% N/A (0.55)% (0.53)% N/A N/A 09/13/93 ------------------------------------------------------------------------------------------------------------------------------- * * Janus Aspen Worldwide Growth Portfolio (5.34)% 10.15% N/A 0.06% 14.08% N/A N/A 09/13/93 ------------------------------------------------------------------------------------------------------------------------------- * * Lexington Emerging Markets Fund (7.73)% N/A N/A (1.42)% N/A N/A N/A 03/31/94 ------------------------------------------------------------------------------------------------------------------------------- * * Lexington Natural Resources Trust (12.20)% (4.55)% (1.71)% (6.76)% 1.09% (4.11)% (1.36)% 05/31/89 ------------------------------------------------------------------------------------------------------------------------------- * * TCI International (11.50)% N/A N/A (5.16)% N/A N/A N/A 05/31/94 ------------------------------------------------------------------------------------------------------------------------------- * * TCI Growth (8.10)% 6.91% 9.10% (2.69)% 1.12% 7.17% 9.10% 11/20/87 ------------------------------------------------------------------------------------------------------------------------------- * * TCI Balanced (6.15)% 4.56% N/A (0.74)% (0.85)% 5.40% N/A 05/31/94 -------------------------------------------------------------------------------------------------------------------------------
*Although results are not available for the full calendar indicated, the percentage shown is an average annual return since inception. ANNUITY PAYMENTS When Annuity payments are to begin, the value of the Contract or Account is determined using Accumulation Unit values as of the tenth Valuation Period before the first Annuity payment is due. Such 5 value (less any applicable premium tax) is applied to provide an Annuity in accordance with the Annuity and investment options elected. The Annuity option tables found in the Contract show, for each form of Annuity, the amount of the first Annuity payment for each $1,000 of value applied. Thereafter, variable Annuity payments fluctuate as the Annuity Unit value(s) fluctuates with the investment experience of the selected investment option(s). The first payment and subsequent payments also vary depending on the assumed net investment rate selected (3.5% or 5% per annum). Selection of a 5% rate causes a higher first payment, but Annuity payments will increase thereafter only to the extent that the net investment rate increases by more than 5% on an annual basis. Annuity payments would decline if the rate failed to increase by 5%. Use of the 3.5% assumed rate causes a lower first payment, but subsequent payments would increase more rapidly or decline more slowly as changes occur in the net investment rate. When the Annuity Period begins, the Annuitant is credited with a fixed number of Annuity Units (which does not change thereafter) in each of the designated investment options. This number is calculated by dividing (a) by (b) where (a) is the amount of the first Annuity payment based on a particular investment option and (b) is the then current Annuity Unit value for that investment option. As noted, Annuity Unit values fluctuate from one Valuation Period to the next; such fluctuations reflect changes in the net investment factor for the appropriate Fund(s) (with a ten Valuation Period lag which gives the Company time to process Annuity payments) and a mathematical adjustment which offsets the assumed net investment rate of 3.5% or 5% per annum. The operation of all these factors can be illustrated by the following hypothetical example. These procedures will be performed separately for the investment options selected during the Annuity Period. EXAMPLE: Assume that, at the date Annuity payments are to begin, there are 3,000 Accumulation Units credited under a particular Contract or Account and that the value of an Accumulation Unit for the tenth Valuation Period prior to retirement was $13.650000. This produces a total value of $40,950. Assume also that no premium tax is payable and that the Annuity table in the Contract provides, for the option elected, a first monthly variable Annuity payment of $6.68 per $1000 of value applied; the Annuitant's first monthly payment would thus be 40.950 multiplied by $6.68, or $273.55. Assume then that the value of an Annuity Unit for the Valuation Period in which the first payment was due was $13.400000. When this value is divided into the first monthly payment, the number of Annuity Units is determined to be 20.414. The value of this number of Annuity Units will be paid in each subsequent month. If the net investment factor with respect to the appropriate Fund is 1.0015000 as of the tenth Valuation Period preceding the due date of the second monthly payment, multiplying this factor by .9999058* (to neutralize the assumed net investment rate of 3.5% per annum built into the number of Annuity Units determined above) produces a result of 1.0014057. This is then multiplied by the Annuity Unit value for 6 the prior Valuation Period (assume such value to be $13.504376) to produce an Annuity Unit value of $13.523359 for the Valuation Period in which the second payment is due. 7 The second monthly payment is then determined by multiplying the number of Annuity Units by the current Annuity Unit value, or 20.414 times $13.523359, which produces a payment of $276.07. *If an assumed net investment rate of 5% is elected, the appropriate factor to neutralize such assumed rate would be .9998663. DOLLAR-COST AVERAGING The term "dollar-cost averaging" describes a system of investing a uniform sum of money at regular intervals over an extended period of time. It is based on the economic fact that buying a variably priced item with a constant sum of money at fixed intervals results in acquiring more of the item when prices are low and less of it when prices are high. In order to maximize the effectiveness of dollar-cost averaging, it is important that investors consider their financial ability to continue purchasing the securities through periods of high and low price levels. Investors should also note that no system can protect against reduced values in a declining market. SALES MATERIAL The Company may include hypothetical illustrations in its sales literature that explain the mathematical principles of dollar cost averaging, compounded interest, tax deferred accumulation, and the mechanics of variable annuity contracts. The Company may also discuss the difference between variable annuity contracts and other types of savings or investment products, including, but not limited to, personal savings accounts and Certificates of Deposit. INDEPENDENT AUDITORS KPMG Peat Marwick LLP, CityPlace II, Hartford, Connecticut 06103-4103, are the independent auditors for the Separate Account and for the Company. The services provided to the Separate Account include primarily the examination of the Separate Account's financial statements and the review of filings made with the SEC. 8 FINANCIAL STATEMENTS VARIABLE ANNUITY ACCOUNT B Index Independent Auditors Report Statement of Assets and Liabilities Statement of Operations Statements of Changes in Net Assets Notes to Financial Statements Condensed Financial Information S-1 INDEPENDENT AUDITORS' REPORT The Board of Directors of Aetna Life Insurance and Annuity Company and Contract Owners of Variable Annuity Account B: We have audited the accompanying statement of assets and liabilities of Aetna Life Insurance and Annuity Company Variable Annuity Account B (the "Account") as of December 31, 1994, the related statement of operations and condensed fi- nancial information for the year then ended and the statements of changes in net assets for each of the years in the two-year period then ended. These fi- nancial 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 au- dits. We conducted our audits in accordance with generally accepted auditing stan- dards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and condensed fi- nancial information are free of material misstatement. An audit also 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, 1994, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant esti- mates 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 posi- tion of Aetna Life Insurance and Annuity Company Variable Annuity Account B as of December 31, 1994, the results of its operations and condensed financial in- formation for the year then ended and the changes in its net assets for each of the years in the two-year period then ended in conformity with generally ac- cepted accounting principles. KPMG Peat Marwick llp Hartford, Connecticut January 31, 1995 Variable Annuity Account B STATEMENT OF ASSETS AND LIABILITIES -- December 31, 1994 ASSETS: Investments, at net asset value: (Note 1) Aetna Variable Fund; 17,826,130 shares at $26.23 per share (cost $507,156,445)................................................... $467,568,315 Aetna Income Shares; 5,871,114 shares at $11.72 per share (cost $74,117,645).................................................... 68,832,108 Aetna Variable Encore Fund; 7,078,396 shares at $12.55 per share (cost $89,821,997).............................................. 88,823,487 Aetna Investment Advisers Fund, Inc.; 7,752,415 shares at $12.23 per share (cost $93,379,859).............................................. 94,792,938 Aetna GET Fund, Series B; 1,226,848 shares at $9.92 per share (cost $12,353,186).............................................. 12,170,153 Alger American Fund--Alger American Small Capitalization Portfolio; 155,668 shares at $27.31 per share (cost $4,071,354). 4,251,298 Calvert Socially Responsible Series; 5,491 shares at $1.44 per share (cost $8,462)............................................. 7,912 Fidelity Investments Variable Insurance Products Fund--Equity- Income Portfolio; 11,086 shares at $15.35 per share (cost $170,056)....................................................... 170,167 Fidelity Investments Variable Insurance Products Fund--Growth Portfolio; 8,176 shares at $21.69 per share (cost $170,056)..... 177,333 Insurance Management Series--Corporate Bond Fund; 34,641 shares at $8.87 per share (cost $311,414)................................................. 307,263 Insurance Management Series--Equity Growth and Income Fund; 190,609 shares at $9.74 per share (cost $1,862,442)............. 1,856,527 Insurance Management Series--U.S. Government Bond Fund; 12,833 shares at $9.98 per share (cost $128,226)....................... 128,071 Insurance Management Series--Prime Money Fund; 521,201 shares at $1.00 per share (cost $521,214)................................................. 521,201 Insurance Management Series--Utility Fund; 43,813 shares at $9.29 per share (cost $408,580)................................................. 407,020 Janus Aspen Series--Aggressive Growth Portfolio; 99,782 shares at $13.62 per share (cost $1,346,463).............................. 1,359,035 Janus Aspen Series--Flexible Income Portfolio; 16,574 shares at $9.48 per share (cost $162,859)................................. 157,121 Janus Aspen Series--Growth Portfolio; 9,169 shares at $10.57 per share (cost $96,205)............................................ 96,920 Lexington Emerging Markets Fund, Inc.; 1,490 shares at $9.86 per share (cost $14,968)............................................ 14,692 Lexington Natural Resources Trust; 132,414 shares at $9.71 per share (cost $1,326,234)......................................... 1,285,738 Neuberger & Berman Advisers Management Trust--Growth Portfolio; 137,169 shares at $20.31 per share (cost $2,851,294)............ 2,785,910 Scudder Variable Life Investment Fund--International Portfolio; 816,372 shares at $10.69 per share (cost $8,944,895)............ 8,727,018 TCI Portfolios, Inc.--TCI Balanced; 5,922 shares at $5.96 per share (cost $35,156)............................................ 35,294 TCI Portfolios, Inc.--TCI Growth; 4,483,578 shares at $9.21 per share (cost $40,864,347)........................................ 41,293,756 TCI Portfolios, Inc.--TCI International; 7,444 shares at $4.75 per share (cost $37,331)........................................ 35,359 ------------ NET ASSETS........................................................ $795,804,636 ============
Variable Annuity Account B STATEMENT OF ASSETS AND LIABILITIES -- December 31, 1994 (continued) Net assets represented by:
ACCUMULATION UNIT UNITS VALUE ------------ ------------ Reserves for annuity contracts in accumulation period: AETNA VARIABLE FUND: Non-Qualified 1964................... 5,159.1 $114.828 $ 592,407 Non-Qualified I...................... 232,142.6 129.838 30,140,993 Non-Qualified II..................... 478,180.1 91.515 43,760,850 Non-Qualified III.................... 2,229,372.7 87.638 195,378,787 Non-Qualified V...................... 11,117,382.8 10.698 118,932,105 Non-Qualified VI..................... 52,441.8 9.993 524,057 Non-Qualified VII.................... 3,178,711.5 10.737 34,130,411 AETNA INCOME SHARES: Non-Qualified I...................... 16,981.4 39.514 671,004 Non-Qualified II..................... 151,836.3 41.302 6,271,196 Non-Qualified III.................... 699,850.8 39.919 27,937,427 Non-Qualified V...................... 1,988,960.0 10.457 20,799,277 Non-Qualified VI..................... 8,201.1 9.534 78,189 Non-Qualified VII.................... 983,356.7 10.324 10,152,119 AETNA VARIABLE ENCORE FUND: Non-Qualified I...................... 30,683.2 35.958 1,103,292 Non-Qualified II..................... 194,997.6 36.602 7,137,317 Non-Qualified III.................... 744,594.5 34.450 25,651,159 Non-Qualified V...................... 1,822,449.0 10.509 19,152,951 Non-Qualified VI..................... 3,730.2 10.237 38,185 Non-Qualified VII.................... 3,407,448.2 10.489 35,740,583 AETNA INVESTMENT ADVISERS FUND, INC.: Non-Qualified I...................... 70,446.9 14.299 1,007,320 Non-Qualified II..................... 679,528.1 14.252 9,684,634 Non-Qualified III.................... 2,044,887.2 14.218 29,074,206 Non-Qualified V...................... 3,541,702.6 10.971 38,856,019 Non-Qualified VII.................... 911,280.6 10.828 9,867,346 AETNA GET FUND, SERIES B: Non-Qualified V...................... 1,197,924.6 10.159 12,170,153 ALGER AMERICAN FUND--ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO: Non-Qualified V...................... 441,808.5 9.622 4,251,298 CALVERT SOCIALLY RESPONSIBLE SERIES: Non-Qualified V...................... 752.3 10.518 7,912 FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUND--EQUITY-INCOME PORTFOLIO: Non-Qualified VII.................... 17,012.8 10.002 170,167 FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUND--GROWTH PORTFOLIO: Non-Qualified VII.................... 17,012.8 10.423 177,333
Variable Annuity Account B STATEMENT OF ASSETS AND LIABILITIES -- December 31, 1994 (continued)
ACCUMULATION UNIT UNITS VALUE ------------ ------------ INSURANCE MANAGEMENT SERIES--CORPORATE BOND FUND: Non-Qualified VII...................... 31,308.6 $ 9.814 $ 307,263 INSURANCE MANAGEMENT SERIES--EQUITY GROWTH AND INCOME FUND: Non-Qualified VII...................... 188,707.5 9.838 1,856,527 INSURANCE MANAGEMENT SERIES--U.S. GOVERNMENT BOND FUND: Non-Qualified VII...................... 12,713.7 10.073 128,071 INSURANCE MANAGEMENT SERIES--PRIME MONEY FUND: Non-Qualified VII...................... 51,948.7 10.033 521,201 INSURANCE MANAGEMENT SERIES--UTILITY FUND: Non-Qualified VII...................... 41,190.7 9.881 407,020 JANUS ASPEN SERIES--AGGRESSIVE GROWTH PORTFOLIO: Non-Qualified V........................ 131,702.1 10.319 1,359,035 JANUS ASPEN SERIES--FLEXIBLE INCOME PORTFOLIO: Non-Qualified V........................ 15,892.7 9.886 157,121 JANUS ASPEN SERIES--GROWTH PORTFOLIO: Non-Qualified VII...................... 9,587.6 10.109 96,920 LEXINGTON EMERGING MARKETS FUND, INC.: Non-Qualified VII...................... 1,500.0 9.795 14,692 LEXINGTON NATURAL RESOURCES TRUST: Non-Qualified V........................ 141,075.6 9.079 1,280,873 Non-Qualified VII...................... 537.2 9.056 4,865 NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST--GROWTH PORTFOLIO: Non-Qualified V........................ 228,369.5 12.199 2,785,910 SCUDDER VARIABLE LIFE INVESTMENT FUND-- INTERNATIONAL PORTFOLIO: Non-Qualified V........................ 652,629.7 13.372 8,727,018 TCI PORTFOLIOS, INC.--TCI BALANCED: Non-Qualified VII...................... 3,476.6 10.152 35,294 TCI PORTFOLIOS, INC.--TCI GROWTH: Non-Qualified II....................... 568,153.8 10.213 5,802,835 Non-Qualified III...................... 1,340,758.1 10.123 13,573,082 Non-Qualified V........................ 1,123,365.7 10.883 12,225,789 Non-Qualified VII...................... 893,534.0 10.847 9,692,050 TCI PORTFOLIOS, INC.--TCI INTERNATIONAL: Non-Qualified VII...................... 3,745.4 9.441 35,359 Reserved for annuity contracts in payment period (Note 1)............... 53,335,014 ------------ $795,804,636 ============
See Notes to Financial Statements. Variable Annuity Account B STATEMENT OF OPERATIONS -- Year Ended December 31, 1994
INVESTMENT INCOME: Dividends: (Notes 1 and 3) Aetna Variable Fund............................................. $ 71,958,106 Aetna Income Shares............................................. 4,312,751 Aetna Variable Encore Fund...................................... 2,814,325 Aetna Investment Advisers Fund, Inc............................. 3,701,779 Aetna GET Fund, Series B........................................ 423,359 Alger American Fund--Alger American Small Capitalization Portfolio...................................................... 51,845 Calvert Socially Responsible Series............................. 246 Insurance Management Series--Corporate Bond Fund................ 3,827 Insurance Management Series--Equity Growth and Income Fund...... 4,162 Insurance Management Series--U.S. Government Bond Fund.......... 936 Insurance Management Series--Prime Money Fund................... 2,397 Insurance Management Series--Utility Fund....................... 1,778 Janus Aspen Series--Aggressive Growth Portfolio................. 9,728 Janus Aspen Series--Flexible Income Portfolio................... 4,789 Janus Aspen Series--Growth Portfolio............................ 274 Lexington Emerging Markets Fund, Inc. .......................... 315 Lexington Natural Resources Trust............................... 4,758 Neuberger & Berman Advisers Management Trust--Growth Portfolio.. 113,211 Scudder Variable Life Investment Fund--International Portfolio.. 20,721 TCI Portfolios, Inc.--TCI Balanced.............................. 405 TCI Portfolios, Inc.--TCI Growth................................ 3,234 ------------ Total investment income...................................... 83,432,946 Valuation period deductions (Note 2)............................. (8,918,042) ------------ Net investment income............................................ 74,514,904 ------------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain on sales of investments: (Notes 1 and 4) Proceeds from sales............................................. 213,403,512 Cost of investments sold........................................ 156,402,976 ------------ Net realized gain............................................ 57,000,536 Net unrealized gain (loss) on investments: Beginning of year............................................... 102,069,324 End of year..................................................... (44,356,052) ------------ Net unrealized loss.......................................... (146,425,376) ------------ Net realized and unrealized loss on investments.................. (89,424,840) ------------ Net decrease in net assets resulting from operations............. $(14,909,936) ============
See Notes to Financial Statements. Variable Annuity Account B STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, -------------------------- 1994 1993 ------------ ------------ FROM OPERATIONS: Net investment income.............................. $ 74,514,904 $ 34,484,591 Net realized and unrealized gain (loss) on invest- ments............................................. (89,424,840) 995,346 ------------ ------------ Net increase (decrease) in net assets resulting from operations.................................. (14,909,936) 35,479,937 ------------ ------------ FROM UNIT TRANSACTIONS: Variable annuity contract purchase payments........ 170,170,873 115,263,261 Sales and administrative charges deducted by the Company........................................... (8,045) (68,920) ------------ ------------ Net variable annuity contract purchase payments... 170,162,828 115,194,341 Transfers from the Company for mortality guarantee adjustments....................................... 537,027 522,820 Transfers from (to) the Company's fixed account op- tions............................................. (6,000,310) 12,354,531 Redemptions by contract holders.................... (32,737,461) (20,997,172) Annuity payments................................... (7,564,589) (5,704,047) Other.............................................. (127,555) 166,934 ------------ ------------ Net increase in net assets from unit transactions. 124,269,940 101,537,407 ------------ ------------ Change in net assets............................... 109,360,004 137,017,344 NET ASSETS: Beginning of year.................................. 686,444,632 549,427,288 ------------ ------------ End of year........................................ $795,804,636 $686,444,632 ============ ============
See Notes to Financial Statements. Variable Annuity Account B NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Variable Annuity Account B ("Account") is registered under the Investment Com- pany Act of 1940 as a unit investment trust. The Account is sold exclusively for use with annuity contracts that may be entitled to tax-deferred treatment under specific sections of the Internal Revenue Code of 1986, as amended. The accompanying financial statements of the Account have been prepared in ac- cordance with generally accepted accounting principles. 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, 1994: Aetna Variable Fund Insurance Management Series-- Aetna Income Shares Prime Money Fund Aetna Variable Encore Fund Insurance Management Series-- Aetna Investment Advisers Fund, Utility Fund Inc. Janus Aspen Series--Aggressive Aetna GET Fund, Series B Growth Portfolio Alger American Fund--Alger Janus Aspen Series--Flexible American Small Capitalization Income Portfolio Portfolio Janus Aspen Series--Growth Calvert Socially Responsible Portfolio Series Lexington Emerging Markets Fund, Fidelity Investments Variable Inc. Insurance Products Fund-- Lexington Natural Resources Trust Equity-Income Portfolio Neuberger & Berman Advisers Fidelity Investments Variable Management Trust--Growth Insurance Products Fund-- Portfolio Growth Portfolio Scudder Variable Life Investment Insurance Management Series-- Fund--International Portfolio Corporate Bond Fund TCI Portfolios, Inc.--TCI Insurance Management Series-- Balanced Equity Growth and Income Fund TCI Portfolios, Inc.--TCI Growth Insurance Management Series--U.S. TCI Portfolios, Inc.--TCI Government Bond Fund International B. OTHER Investment transactions are accounted for on a trade-date basis and divi- dend 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 Aetna Life Insurance and Annuity Company ("Company") which is taxed as a life insurance company under the Internal Revenue Code of 1986, as amended. D. ANNUITY RESERVES Annuity reserves held in the Separate Accounts are computed for currently payable contracts according to the Progressive Annuity, a49, 1971 Individ- ual Annuity Mortality, 1971 Group Annuity Mortality, 83a, and 1983 Group Annuity Mortality tables using various assumed interest rates not to exceed seven percent. 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 re- serves are required, the Company reimburses the Account. VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS (continued) 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 the Funds' undistributed net investment income and accumulated net realized gain (loss) on investments is included in net unrealized loss in the Statement of Operations. Dividends were received from the following Funds:
DATE OF DIVIDEND SOURCE FUND REINVESTMENT OF DIVIDENDS ---- ---------------- ------------ Aetna Variable Fund July 20, 1994 Net investment income and net December 30, 1994 realized gains ------------------------------------------------------------------------------- Aetna Income Shares July 20, 1994 December 30, 1994 Net investment income ------------------------------------------------------------------------------- Aetna Variable Encore Fund July 20, 1994 December 30, 1994 Net investment income ------------------------------------------------------------------------------- Aetna Investment Advisers July 20, 1994 Net investment income and net Fund, Inc. December 30, 1994 realized gains ------------------------------------------------------------------------------- Aetna Get Fund, Series B Net investment income and net December 30, 1994 realized gains ------------------------------------------------------------------------------- Alger American Fund--Alger American Small Capitalization Portfolio May 5, 1994 Net realized gains ------------------------------------------------------------------------------- Calvert Socially Responsible Series December 30, 1994 Net investment income ------------------------------------------------------------------------------- Insurance Management October 21, 1994 Series--Corporate Bond November 21, 1994 Fund December 21, 1994 Net investment income ------------------------------------------------------------------------------- Insurance Management Series--Equity Growth and Income Fund December 21, 1994 Net investment income ------------------------------------------------------------------------------- Insurance Management October 21, 1994 Series--U.S. Government November 21, 1994 Bond Fund December 21, 1994 Net investment income ------------------------------------------------------------------------------- Insurance Management November 30, 1994 Series--Prime Money Fund December 30, 1994 Net investment income ------------------------------------------------------------------------------- Insurance Management October 21, 1994 Series--Utility Fund November 21, 1994 December 21, 1994 Net investment income
VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS (continued) 3. DIVIDEND INCOME (continued)
DATE OF DIVIDEND SOURCE FUND REINVESTMENT OF DIVIDENDS ---- ---------------- ------------ Janus Aspen Series-- Aggressive Growth Portfolio December 29, 1994 Net investment income ------------------------------------------------------------------------------- Janus Aspen Series--Flexible Income Portfolio December 29, 1994 Net investment income ------------------------------------------------------------------------------- Janus Aspen Series--Growth Portfolio December 29, 1994 Net investment income ------------------------------------------------------------------------------- Lexington Emerging Markets Net investment income and net Fund, Inc. December 29, 1994 realized gains ------------------------------------------------------------------------------- Lexington Natural Resources Trust December 29, 1994 Net investment income ------------------------------------------------------------------------------- Neuberger & Berman Advisers Management Trust--Growth Net investment income and net Portfolio February 11, 1994 realized gains ------------------------------------------------------------------------------- Scudder Variable Life Investment Fund-- International Portfolio February 28, 1994 Net investment income ------------------------------------------------------------------------------- TCI Portfolios, Inc.--TCI September 24, 1994 Balanced December 16, 1994 Net investment income ------------------------------------------------------------------------------- TCI Portfolios, Inc.--TCI April 8, 1994 Net investment income Growth
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, 1994 aggregated $342,561,371 and $213,403,512, respectively. Variable Annuity Account B CONDENSED FINANCIAL INFORMATION CHANGE IN VALUE OF ACCUMULATION UNIT -- JANUARY 1, 1994 TO DECEMBER 31, 1994
INCREASE NET NET REALIZED (DECREASE) VALUE AT INVESTMENT AND UNREALIZED VALUE AT IN VALUE OF ANNUITY UNIT BEGINNING INCOME GAIN (LOSS) ON END OF ACCUMULATION VALUE AT END OF YEAR (LOSS) INVESTMENTS YEAR UNIT OF YEAR (A) --------- ---------- -------------- -------- ------------ ------------ AETNA VARIABLE FUND: Non-Qualified 1964............. $117.426 $ 3.539 $(6.137) $114.828 (2.21%) $ -- Non-Qualified I................ 132.696 2.261 (5.119) 129.838 (2.15%) 48.373 Non-Qualified II............... 93.586 3.122 (5.193) 91.515 (2.21%) 46.528 Non-Qualified III.............. 89.593 3.170 (5.125) 87.638 (2.18%) -- --------------------------------------------------------------------------------------------------------- AETNA INCOME SHARES: Non-Qualified I................ $ 41.562 $ 0.774 $(2.822) $ 39.514 (4.93%) $21.717 Non-Qualified II............... 43.469 0.870 (3.037) 41.302 (4.99%) 24.646 Non-Qualified III.............. 42.014 0.887 (2.982) 39.919 (4.99%) -- --------------------------------------------------------------------------------------------------------- AETNA VARIABLE ENCORE FUND: Non-Qualified I................ $ 34.957 $ 0.147 $ 0.854 $ 35.958 2.86% $ -- Non-Qualified II............... 35.605 0.244 0.753 36.602 2.80% -- Non-Qualified III.............. 33.511 0.270 0.669 34.450 2.80% -- --------------------------------------------------------------------------------------------------------- AETNA INVESTMENT ADVISERS FUND, INC.: Non-Qualified I................ $ 14.543 $ 0.347 $(0.591) $ 14.299 (1.68%) $11.326 Non-Qualified II............... 14.503 0.348 (0.599) 14.252 (1.73%) 11.296 Non-Qualified III.............. 14.462 0.348 (0.592) 14.218 (1.69%) -- --------------------------------------------------------------------------------------------------------- TCI PORTFOLIOS, INC--TCI GROWTH: Non-Qualified II............... $ 10.473 $(0.124) $(0.136) $ 10.213 (2.48%) $ -- Non-Qualified III.............. 10.373 (0.123) (0.127) 10.123 (2.41%) -- ---------------------------------------------------------------------------------------------------------
Condensed financial information for Aetna GET Fund, Series B, Alger American Fund--Alger American Small Capitalization Portfolio, Calvert Socially Responsible Series, Fidelity Investments Variable Insurance Products Fund-- Equity--Income Portfolio, Fidelity Investments Variable Insurance Products Fund--Growth Portfolio, Insurance Management Series--Corporate Bond Fund, Insurance Management Series--Equity Growth and Income Fund, Insurance Management Series--U.S. Government Bond Fund, Insurance Management Series-- Prime Money Fund, Insurance Management Series--Utility Fund, Janus Aspen Series--Aggressive Growth Portfolio, Janus Aspen Series--Flexible Income Portfolio, Janus Aspen Series--Growth Portfolio, Lexington Emerging Markets Fund, Inc., Lexington Natural Resources Trust, Neuberger & Berman Advisers Management Trust--Growth Portfolio, Scudder Variable Life Investment Fund-- International Portfolio, TCI Portfolios, Inc.--TCI Balanced, TCI Portfolios, Inc.--International has been omitted as it only pertains to those individuals in the Aetna Growth Plus and Marathon Plus programs. NON-QUALIFIED 1964 Individual contracts issued from December 1, 1964 to March 14, 1967. NON-QUALIFIED I Individual contracts issued in connection with deferred compensation plans from March 15, 1967 through April 30, 1975; other individual contracts issued from March 15, 1967 through October 31, 1975; and group contracts issued from March 15, 1967 to December 31, 1975. NON-QUALIFIED II Individual contracts issued in connection with deferred compensation plans since May 1, 1975; other individual contracts issued since November 1, 1975; and group contracts issued since January 1, 1976. NON-QUALIFIED III Group contracts issued in connection with deferred compensation plans for tax-exempt organizations (non-governmental only) since May 3, 1982. (a) The annuity unit is a statistical device used to calculate variable annuity payments. Each variable annuity payment is determined by multiplying the current annuity unit value by the number of annuity units credited to the annuitant at the commencement of the annuity period. At this time, only Aetna Variable Fund, Aetna Income Shares and Aetna Investment Advisers Fund, Inc. are available for variable annuity payments. CONSOLIDATED FINANCIAL STATEMENTS AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES INDEX
PAGE ---- Independent Auditors' Report.............................................. F-2 Consolidated Financial Statements: Consolidated Statements of Income for the Years Ended December 31, 1994, 1993 and 1992.......................................................... F-3 Consolidated Balance Sheets as of December 31, 1994 and 1993............ F-4 Consolidated Statements of Shareholder's Equity for the Years Ended December 31, 1994, 1993 and 1992....................................... F-5 Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, 1993 and 1992.................................................... F-6 Notes to Consolidated Financial Statements.............................. F-7
F-1 INDEPENDENT AUDITOR'S REPORT The Shareholder and Board of Directors Aetna Life Insurance and Annuity Company: We have audited the accompanying consolidated balance sheets of Aetna Life Insurance and Annuity Company and Subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of income, changes in shareholder's equity and cash flows for each of the years in the three-year period ended December 31, 1994. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Aetna Life Insurance and Annuity Company and Subsidiaries at December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1994, in conformity with generally accepted accounting principles. As discussed in Note 1 to the consolidated financial statements, in 1993 the Company changed its methods of accounting for certain investments in debt and equity securities and reinsurance contracts. In 1992, the Company changed its method of accounting for income taxes and postretirement benefits other than pensions. KPMG Peat Marwick LLP Hartford, Connecticut February 7, 1995 F-2 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY) CONSOLIDATED STATEMENTS OF INCOME (MILLIONS)
YEARS ENDED DECEMBER 31, -------------------------- 1994 1993 1992 -------- -------- -------- Revenue: Premiums......................................... $ 124.2 $ 82.1 $ 72.5 Charges assessed against policyholders........... 279.0 251.5 235.4 Net investment income............................ 917.2 911.9 848.1 Net realized capital gains....................... 1.5 9.5 13.4 Other income..................................... 10.3 9.5 6.7 -------- -------- -------- Total revenue.................................. 1,332.2 1,264.5 1,176.1 -------- -------- -------- Benefits and expenses: Current and future benefits...................... 852.4 806.4 761.6 Operating expenses............................... 227.2 201.3 213.5 Amortization of deferred policy acquisition costs........................................... 36.1 37.7 32.9 -------- -------- -------- Total benefits and expenses.................... 1,115.7 1,045.4 1,008.0 -------- -------- -------- Income before federal income taxes and cumulative effect adjustments................................ 216.5 219.1 168.1 Federal income taxes............................. 71.2 76.2 54.9 -------- -------- -------- Income before cumulative effect adjustments........ 145.3 142.9 113.2 Cumulative effect adjustments, net of tax: Change in accounting for income taxes............ -- -- 22.8 Change in accounting for postretirement benefits other than pensions............................. -- -- (13.2) -------- -------- -------- Net income......................................... $ 145.3 $ 142.9 $ 122.8 ======== ======== ========
See Notes to Consolidated Financial Statements. F-3 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY) CONSOLIDATED BALANCE SHEETS (MILLIONS)
DECEMBER 31, -------------------- ASSETS 1994 1993 ------ --------- --------- Investments: Debt securities, available for sale: (amortized cost: $10,577.8 and $9,783.9).................... $10,191.4 $10,531.0 Equity securities, available for sale: Non-redeemable preferred stock (cost: $43.3 and $38.3)...... 47.2 45.9 Investment in affiliated mutual funds (cost: $187.2 and $122.4).................................................... 181.9 126.7 Short-term investments....................................... 98.0 22.6 Mortgage loans............................................... 9.9 10.1 Policy loans................................................. 248.7 202.7 Limited partnership.......................................... 24.4 -- --------- --------- Total investments........................................ 10,801.5 10,939.0 Cash and cash equivalents...................................... 623.3 536.1 Accrued investment income...................................... 142.2 124.7 Premiums due and other receivables............................. 75.8 67.0 Deferred policy acquisition costs.............................. 1,172.0 1,061.0 Reinsurance loan to affiliate.................................. 690.3 711.0 Other assets................................................... 15.9 12.6 Separate Accounts assets....................................... 7,420.8 6,684.3 --------- --------- Total assets............................................. $20,941.8 $20,135.7 ========= ========= LIABILITIES AND SHAREHOLDER'S EQUITY ------------------------------------ Liabilities: Future policy benefits....................................... $ 2,968.1 $ 2,741.8 Unpaid claims and claim expenses............................. 23.8 27.2 Policyholders' funds left with the Company................... 8,901.6 9,003.9 --------- --------- Total insurance liabilities.............................. 11,893.5 11,698.7 Other liabilities............................................ 302.1 229.7 Federal income taxes: Current.................................................... 3.4 40.6 Deferred................................................... 233.5 161.5 Separate Accounts liabilities................................ 7,420.8 6,684.3 --------- --------- Total liabilities........................................ 19,853.3 18,889.0 --------- --------- Shareholder's equity: Common capital stock, par value $50 (100,000 shares autho- rized; 55,000 shares issued and outstanding)................ 2.8 2.8 Paid-in capital.............................................. 407.6 407.6 Net unrealized capital gains (losses)........................ (189.0) 114.5 Retained earnings............................................ 867.1 721.8 --------- --------- Total shareholder's equity............................... 1,088.5 1,246.7 --------- --------- Total liabilities and shareholder's equity............... $20,941.8 $20,135.7 ========= =========
See Notes to Consolidated Financial Statements. F-4 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY) CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY (MILLIONS)
YEARS ENDED DECEMBER 31, ------------------------- 1994 1993 1992 -------- -------- ------ Shareholder's equity, beginning of year.............. $1,246.7 $ 990.1 $867.4 Net change in unrealized capital gains (losses)...... (303.5) 113.7 (0.1) Net income........................................... 145.3 142.9 122.8 -------- -------- ------ Shareholder's equity, end of year.................... $1,088.5 $1,246.7 $990.1 ======== ======== ======
See Notes to Consolidated Financial Statements. F-5 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY) CONSOLIDATED STATEMENTS OF CASH FLOWS (MILLIONS)
YEARS ENDED DECEMBER 31, ------------------------------- 1994 1993 1992 --------- --------- --------- Cash Flows from Operating Activities: Net income.................................. $ 145.3 $ 142.9 $ 122.8 Cumulative effect adjustments............... -- -- (9.6) Increase in accrued investment income....... (17.5) (11.1) (8.7) (Increase) decrease in premiums due and other receivables.......................... 1.3 (5.6) (19.9) Increase in policy loans.................... (46.0) (36.4) (32.4) Increase in deferred policy acquisition costs...................................... (96.5) (60.5) (60.8) Decrease in reinsurance loan to affiliate... 27.8 31.8 37.8 Net increase in universal life account balances................................... 164.7 126.4 130.8 Increase in other insurance reserve liabilities................................ 65.7 86.1 20.5 Net increase in other liabilities and other assets..................................... 53.9 7.0 20.2 Decrease in federal income taxes............ (11.7) (3.7) (11.8) Net accretion of discount on bonds.......... (77.9) (88.1) (75.2) Net realized capital gains.................. (1.5) (9.5) (13.4) Other, net.................................. (1.0) 0.2 (0.2) --------- --------- --------- Net cash provided by operating activities. 206.6 179.5 100.1 --------- --------- --------- Cash Flows from Investing Activities: Proceeds from sales of: Debt securities available for sale........ 3,593.8 473.9 543.3 Equity securities......................... 93.1 89.6 50.6 Investment maturities and collections of: Debt securities available for sale........ 1,289.2 2,133.3 1,179.2 Short-term investments.................... 30.4 19.7 5.0 Cost of investment purchases in: Debt securities........................... (5,621.4) (3,669.2) (2,612.2) Equity securities......................... (162.5) (157.5) (63.0) Short-term investments.................... (106.1) (41.3) (5.0) Limited partnership....................... (25.0) -- -- --------- --------- --------- Net cash used for investing activities.. (908.5) (1,151.5) (902.1) --------- --------- --------- Cash Flows from Financing Activities: Deposits and interest credited for investment contracts....................... 1,737.8 2,117.8 1,619.6 Withdrawals of investment contracts......... (948.7) (1,000.3) (767.7) --------- --------- --------- Net cash provided by financing activities............................. 789.1 1,117.5 851.9 --------- --------- --------- Net increase in cash and cash equivalents..... 87.2 145.5 49.9 Cash and cash equivalents, beginning of year.. 536.1 390.6 340.7 --------- --------- --------- Cash and cash equivalents, end of year........ $ 623.3 $ 536.1 $ 390.6 ========= ========= ========= Supplemental cash flow information: Income taxes paid, net...................... $ 82.6 $ 79.9 $ 54.0 ========= ========= =========
See Notes to Consolidated Financial Statements. F-6 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1994, 1993, AND 1992 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The consolidated financial statements include Aetna Life Insurance and Annuity Company and its wholly owned subsidiaries, Aetna Insurance Company of America, Systematized Benefits Administrators, Inc., Aetna Private Capital, Inc. and Aetna Investment Services, Inc. (collectively, the "Company"). Aetna Life Insurance and Annuity Company is a wholly owned subsidiary of Aetna Life and Casualty Company ("Aetna"). The consolidated financial statements have been prepared in conformity with generally accepted accounting principles. Intercompany transactions have been eliminated. Certain reclassifications have been made to 1993 and 1992 financial information to conform to the 1994 presentation. The Company offers a wide range of life insurance products and annuity contracts with variable and fixed accumulation and payout options. The Company also provides investment advisory and other services to affiliated mutual funds. Accounting Changes Accounting for Certain Investments in Debt and Equity Securities On December 31, 1993, the Company adopted Financial Accounting Standard ("FAS") No. 115, Accounting for Certain Investments in Debt and Equity Securities, which requires the classification of debt securities into three categories: "held to maturity", which are carried at amortized cost; "available for sale", which are carried at fair value with changes in fair value recognized as a component of shareholder's equity; and "trading", which are carried at fair value with immediate recognition in income of changes in fair value. Initial adoption of this standard resulted in a net increase of $106.8 million, net of taxes of $57.5 million, to net unrealized gains in shareholder's equity. These amounts exclude gains and losses allocable to experience-rated (including universal life) contractholders. Adoption of FAS No. 115 did not have a material effect on deferred policy acquisition costs. Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts During 1993, the Company adopted FAS No. 113, Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts, retroactive to January 1, 1993. Reinsurance recoverables (previously reported as a reduction in insurance reserve liabilities) and reinsurance receivables and ceded unearned premiums are included in premiums due and other receivables. The adoption of FAS No. 113 did not have a material impact on the Company's 1993 Consolidated Financial Statements. Accounting for Income Taxes The Company adopted FAS No. 109, Accounting for Income Taxes, in 1992, retroactive to January 1, 1992. A cumulative effect benefit of $22.8 million related to the adoption of this standard is reflected in the 1992 Consolidated Statement of Income. F-7 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Postretirement Benefits Other Than Pensions FAS No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, required that employers accrue the cost and recognize the liability for providing non-pension benefits to retired employees and agents. Aetna and the Company implemented FAS No. 106 in 1992, retroactive to January 1, 1992 on the immediate recognition basis. The cumulative effect charge for all Aetna employees was reflected in Aetna's 1992 Statement of Income. A cumulative effect charge of $13.2 million, net of taxes of $7.1 million, related to the adoption of this standard for Company agents is reflected in the Company's 1992 Consolidated Statement of Income. Cash and Cash Equivalents Cash and cash equivalents include cash on hand, money market instruments and other debt issues with a maturity of ninety days or less when purchased. Investments Debt Securities At December 31, 1994 and 1993, all of the Company's debt securities are classified as available for sale and carried at fair value. These securities are written down (as realized losses) for other than temporary decline in value. Unrealized gains and losses related to these securities, after deducting amounts allocable to experience-rated contractholders and related taxes, are reflected in shareholder's equity. Fair values for debt securities are based on quoted market prices or dealer quotations. Where quoted market prices or dealer quotations are not available, fair values are measured utilizing quoted market prices for similar securities or by using discounted cash flow methods. Cost for mortgage-backed securities is adjusted for unamortized premiums and discounts, which are amortized using the interest method over the estimated remaining term of the securities, adjusted for anticipated prepayments. Purchases and sales of debt securities are recorded on the trade date. Equity Securities Equity securities are classified as available for sale and carried at fair value based on quoted market prices or dealer quotations. Equity securities are written down (as realized losses) for other than temporary declines in value. Unrealized gains and losses related to such securities are reflected in shareholder's equity. Purchases and sales are recorded on the trade date. The investment in affiliated mutual funds represents an investment in the Aetna Series Fund, Inc., a retail mutual fund which has been seeded by the Company, and is carried at fair value. Mortgage Loans and Policy Loans Mortgage loans and policy loans are carried at unpaid principal balances net of valuation reserves, which approximates fair value, and are generally secured. Purchases and sales of mortgage loans are recorded on the closing date. F-8 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Limited Partnership The Company's limited partnership investment is carried at the amount invested plus the Company's share of undistributed operating results and unrealized gains (losses), which approximates fair value. Short-Term Investments Short-term investments, consisting primarily of money market instruments and other debt issues purchased with an original maturity of over ninety days and less than one year, are considered available for sale and are carried at fair value, which approximates amortized cost. Deferred Policy Acquisition Costs Certain costs of acquiring insurance business have been deferred. These costs, all of which vary with and are primarily related to the production of new business, consist principally of commissions, certain expenses of underwriting and issuing contracts and certain agency expenses. For fixed ordinary life contracts, such costs are amortized over expected premium-paying periods. For universal life and certain annuity contracts, such costs are amortized in proportion to estimated gross profits and adjusted to reflect actual gross profits. These costs are amortized over twenty years for annuity pension contracts, and over the contract period for universal life contracts. Deferred policy acquisition costs are written off to the extent that it is determined that future policy premiums and investment income or gross profits would not be adequate to cover related losses and expenses. Insurance Reserve Liabilities The Company's liabilities include reserves related to fixed ordinary life, fixed universal life and fixed annuity contracts. Reserves for future policy benefits for fixed ordinary life contracts are computed on the basis of assumed investment yield, assumed mortality, withdrawals and expenses, including a margin for adverse deviation, which generally vary by plan, year of issue and policy duration. Reserve interest rates range from 2.25% to 10.50%. Assumed investment yield is based on the Company's experience. Mortality and withdrawal rate assumptions are based on relevant Aetna experience and are periodically reviewed against both industry standards and experience. Reserves for fixed universal life (included in Future Policy Benefits) and fixed deferred annuity contracts (included in Policyholders' Funds Left With the Company) are equal to the fund value. The fund value is equal to cumulative deposits less charges plus credited interest thereon, without reduction for possible future penalties assessed on premature withdrawal. For guaranteed interest options, the interest credited ranged from 4.00% to 5.85% in 1994 and 4.00% to 7.68% in 1993. For all other fixed options, the interest credited ranged from 5.00% to 7.50% in 1994 and 5.00% to 9.25% in 1993. Reserves for fixed annuity contracts in the annuity period and for future amounts due under settlement options are computed actuarially using the Progressive Annuity Table (modified), the Annuity Table for 1949, the 1971 Individual Annuity Mortality Table, the 1971 Group Annuity Mortality Table, the 1983 Individual Annuity Mortality Table and the 1983 Group Annuity Mortality Table, at assumed interest rates ranging from 3.5% to 9.5%. Reserves relating to contracts with life contingencies are included in Future Policy Benefits. For other contracts, the reserves are reflected in Policyholders' Funds Left With the Company. F-9 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Unpaid claims for all lines of insurance include benefits for reported losses and estimates of benefits for losses incurred but not reported. Premiums, Charges Assessed Against Policyholders, Benefits and Expenses Premiums are recorded as revenue when due for fixed ordinary life contracts. Charges assessed against policyholders' funds for cost of insurance, surrender charges, actuarial margin and other fees are recorded as revenue for universal life and certain annuity contracts. Policy benefits and expenses are recorded in relation to the associated premiums or gross profit so as to result in recognition of profits over the expected lives of the contracts. Separate Accounts Assets held under variable universal life, variable life and variable annuity contracts are segregated in Separate Accounts and are invested, as designated by the contractholder or participant under a contract, in shares of Aetna Variable Fund, Aetna Income Shares, Aetna Variable Encore Fund, Aetna Investment Advisers Fund, Inc., Aetna GET Fund, or The Aetna Series Fund Inc., which are managed by the Company or other selected mutual funds not managed by the Company. Separate Accounts assets and liabilities are carried at fair value except for those relating to a guaranteed interest option which is offered through a Separate Account. The assets of the Separate Account supporting the guaranteed interest option are carried at an amortized cost of $149.7 million for 1994 (fair value $146.3 million) and $31.2 million for 1993 (fair value $33.3 million), since the Company bears the investment risk where the contract is held to maturity. Reserves relating to the guaranteed interest option are maintained at fund value and reflect interest credited at rates ranging from 4.5% to 8.38% in 1994 and from 4% to 9.45% in 1993. Separate Accounts assets and liabilities are shown as separate captions in the Consolidated Balance Sheets. Deposits, investment income and net realized and unrealized capital gains (losses) of the Separate Accounts are not reflected in the Consolidated Statements of Income (with the exception of realized capital gains (losses) on the sale of assets supporting the guaranteed interest option). The Consolidated Statements of Cash Flows do not reflect investment activity of the Separate Accounts. Federal Income Taxes The Company is included in the consolidated federal income tax return of Aetna. The Company is taxed at regular corporate rates after adjusting income reported for financial statement purposes for certain items. Deferred income tax benefits result from changes during the year in cumulative temporary differences between the tax basis and book basis of assets and liabilities. F-10 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 2. INVESTMENTS Investments in debt securities available for sale as of December 31, 1994 were as follows:
GROSS GROSS AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE --------- ---------- ---------- --------- (millions) U.S. Treasury securities and obliga- tions of U.S government agencies and corporations........................ $ 1,396.1 $ 2.0 $ 84.2 $ 1,313.9 Obligations of states and political subdivisions........................ 37.9 1.2 -- 39.1 U.S. Corporate securities: Financial.......................... 2,216.9 3.8 109.4 2,111.3 Utilities.......................... 100.1 -- 7.9 92.2 Other.............................. 1,344.3 6.0 67.9 1,282.4 --------- ------ ------ --------- Total U.S. Corporate securities.. 3,661.3 9.8 185.2 3,485.9 Foreign securities: Government......................... 434.4 1.2 33.9 401.7 Financial.......................... 368.2 1.1 23.0 346.3 Utilities.......................... 204.4 2.5 9.5 197.4 Other.............................. 46.3 0.8 1.5 45.6 --------- ------ ------ --------- Total Foreign securities......... 1,053.3 5.6 67.9 991.0 Residential mortgage-backed securi- ties: Residential pass-throughs.......... 627.1 81.5 5.0 703.6 Residential CMOs................... 2,671.0 32.9 139.4 2,564.5 --------- ------ ------ --------- Total Residential mortgage-backed se- curities............................ 3,298.1 114.4 144.4 3,268.1 Commercial/Multifamily mortgage- backed securities................... 435.0 0.2 21.3 413.9 --------- ------ ------ --------- Total Mortgage-backed securities. 3,733.1 114.6 165.7 3,682.0 Other loan-backed securities......... 696.1 0.2 16.8 679.5 --------- ------ ------ --------- Total debt securities available for sale................................ $10,577.8 $133.4 $519.8 $10,191.4 ========= ====== ====== =========
F-11 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Investments in debt securities available for sale as of December 31, 1993 were as follows:
GROSS GROSS AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE --------- ---------- ---------- --------- (millions) U.S. Treasury securities and obliga- tions of U.S. government agencies and corporations.................... $ 827.2 $ 19.4 $ 6.6 $ 840.0 Obligations of states and political subdivisions........................ 0.5 -- -- 0.5 U.S. Corporate securities: Financial.......................... 983.3 49.2 0.7 1,031.8 Utilities.......................... 141.2 12.4 -- 153.6 Other.............................. 704.3 51.6 2.3 753.6 -------- ------ ----- --------- Total U.S. Corporate securi- ties.......................... 1,828.8 113.2 3.0 1,939.0 Foreign securities: Government......................... 289.1 31.7 0.5 320.3 Financial.......................... 365.8 18.5 0.9 383.4 Utilities.......................... 206.2 28.9 0.1 235.0 Other.............................. 30.4 1.3 0.8 30.9 -------- ------ ----- --------- Total Foreign securities....... 891.5 80.4 2.3 969.6 Residential mortgage-backed securi- ties: Residential pass-throughs.......... 1,125.0 218.1 1.7 1,341.4 Residential CMOs................... 4,868.7 318.1 1.1 5,185.7 -------- ------ ----- --------- Total Residential mortgage-backed se- curities............................ 5,993.7 536.2 2.8 6,527.1 Commercial/Multifamily mortgage- backed securities................... 193.0 13.4 0.8 205.6 -------- ------ ----- --------- Total Mortgage-backed securi- ties.......................... 6,186.7 549.6 3.6 6,732.7 Other loan-backed securities......... 49.2 0.2 0.2 49.2 -------- ------ ----- --------- Total debt securities available for sale................................ $9,783.9 $762.8 $15.7 $10,531.0 ======== ====== ===== =========
At December 31, 1994 and 1993, net unrealized appreciation (depreciation) of $(386.4) million and $747.1 million, respectively, on available for sale debt securities included $(308.6) million and $582.8 million, respectively, related to experience-rated contractholders, which were not included in shareholder's equity. F-12 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The amortized cost and fair value of debt securities for the year ended December 31, 1994 are shown below by contractual maturity. Actual maturities may differ from contractual maturities because securities may be restructured, called, or prepaid.
AMORTIZED FAIR COST VALUE --------- --------- (millions) Due to mature: One year or less................................... $ 103.9 $ 103.5 After one year through five years.................. 1,965.6 1,920.0 After five years through ten years................. 2,371.3 2,207.0 After ten years.................................... 1,707.8 1,599.4 Mortgage-backed securities......................... 3,733.1 3,682.0 Other loan-backed securities....................... 696.1 679.5 --------- --------- Total............................................ $10,577.8 $10,191.4 ========= =========
At December 31, 1994 and 1993, debt securities carried at $7.0 million and $7.3 million, respectively, were on deposit as required by regulatory authorities. The valuation reserve for mortgage loans was $3.1 million and $4.2 million at December 31, 1994 and 1993, respectively. The carrying value of non-income producing investments was $0.2 million and $34.3 million at December 31, 1994 and 1993, respectively. 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, 1994 are as follows:
AMORTIZED FAIR DEBT SECURITIES COST VALUE --------------- --------- ------ (millions) General Electric Capital Corporation.................... $264.9 $252.1 General Motors Corporation.............................. 167.8 161.7 Society National Bank................................... 152.8 143.7 Ford Motor Company...................................... 144.7 142.3 Associates Corporation of North America................. 132.9 131.1 First Deposit Master Trust 1994-1A...................... 114.9 112.1
The portfolio of debt securities at December 31, 1994 and 1993 included $318 million and $329 million, respectively, (3% of the debt securities for both years) of investments that are considered "below investment grade". "Below investment grade" securities are defined to be securities that carry a rating below BBB-/Baa3, by Standard & Poors/Moody's Investor Services, respectively. Of these below investment grade assets, $32 million and $39 million, at December 31, 1994 and 1993, respectively, were investments that were purchased at investment grade, but whose ratings have since been downgraded. Included in residential mortgage-back securities are collateralized mortgage obligations ("CMOs") with carrying values of $2.6 billion and $5.2 billion at December 31, 1994 and 1993, respectively. The $2.6 billion decline in CMOs from December 31, 1993 to December 31, 1994 was related primarily to sales F-13 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) and principal repayments. CMO sales of $1.6 billion resulted in net realized capital gains of $35 million of which $23 million was allocated to experience- rated contracts. The Company's CMO exposure was reduced as a result of changes in their risk and return characteristics and to better diversify the risk profile of the Company's assets. The principal risks inherent in holding CMOs are prepayment and extension risks related to dramatic decreases and increases in interest rates whereby the CMOs would be subject to repayments of principal earlier or later than originally anticipated. At December 31, 1994 and 1993, approximately 85% and 93%, respectively, of the Company's CMO holdings consisted of sequential and planned amortization class ("PAC") debt securities which are subject to less prepayment and extension risk than other CMO instruments. At December 31, 1994 and 1993, approximately 82% of the Company's CMO holdings were collateralized by residential mortgage loans, on which the timely payment of principal and interest was backed by specified government agencies (e.g., GNMA, FNMA, FHLMC). If due to declining interest rates, principal was to be repaid earlier than originally anticipated, the Company could be affected by a decrease in investment income due to the reinvestment of these funds at a lower interest rate. Such prepayments may result in a duration mismatch between assets and liabilities which could be corrected as cash from prepayments could be reinvested at an appropriate duration to adjust the mismatch. Conversely, if due to increasing interest rates, principal was to be repaid slower than originally anticipated, the Company could be affected by a decrease in cash flow which reduces the ability to reinvest expected principal repayments at higher interest rates. Such slower payments may result in a duration mismatch between assets and liabilities which could be corrected as available cash flow could be reinvested at an appropriate duration to adjust the mismatch. At December 31, 1994 and 1993, 4% and 3%, respectively, of the Company's CMO holdings consisted of interest-only strips (IOs) or principal-only strips (POs). IOs receive payments of interest and POs receive payments of principal on the underlying pool of mortgages. The risk inherent in holding POs is extension risk related to dramatic increases in interest rates whereby the future payments due on POs could be repaid much slower than originally anticipated. The extension risks inherent in holding POs, PACs and sequentials was mitigated by purchasing offsetting positions in IOs. During dramatic increases in interest rates, IOs would generate more future payments than originally anticipated. The risk inherent in holding IOs is prepayment risk related to dramatic decreases in interest rates whereby future IO cash flows could be much less than originally anticipated and in some cases could be less than the original cost of the IO. The risks inherent in IOs are mitigated by holding offsetting positions in PO's, PACs, and sequentials. During dramatic decreases in interest rates POs, PACs and sequentials would generate future cash flows much quicker than originally anticipated. In 1993, due to declining interest rates and prepayments on the underlying pool of mortgages, the amortized cost on IO's was written down by $85.4 million. IO writedowns of $4.7 million, net of $80.7 million allocated to experience-rated contracts, were reflected in 1993 net realized capital gains (losses). In 1994, due to increasing interest rates, unrealized gains on IO's increased from $0.5 million at December 31, 1993 to $17.8 million at December 31, 1994. Conversely, unrealized gains on POs decreased from $36.7 million at December 31, 1993 to $5.3 million at December 31, 1994. 1994 net realized gains (losses) included net gains of $10.0 million as a result of sales of IOs and POs (including amounts allocated to experience-rated contractholders). F-14 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The Company did not use derivative instruments (ie., futures, forward contracts, interest swaps, etc.) for hedging or any other purposes in 1994 or 1993. The Company does hold investments in certain debt and equity securities with derivative characteristics (ie., including the fact that their market value is at least partially determined by, among other things, levels of or changes in interest rates, prepayment rates, equity markets or credit ratings/spreads). The amortized cost and fair value of these securities, included in the $10.8 billion investment portfolio, as of December 31, 1994 was as follows:
AMORTIZED FAIR COST VALUE --------- -------- (millions) Collateralized mortgage obligations (including interest-only and principal-only strips)............ $2,671.0 $2,564.5 Treasury and agency strips: Principal.......................................... 20.7 21.6 Interest........................................... 104.2 90.2 Mandatorily convertible preferred stock.............. 12.1 11.6
Investments in available for sale equity securities were as follows:
GROSS GROSS UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE ------- ---------- ---------- ------- (millions) 1994 Equity Securities...................... $ 230.5 $ 6.5 $7.9 $ 229.1 ------- ----- ---- ------- 1993 Equity Securities...................... $ 160.7 $12.0 $0.1 $ 172.6 ------- ----- ---- -------
At December 31, 1994 and 1993, 91% of outstanding policy loans had fixed interest rates. The fixed interest rates for annuity policy loans ranged from 1% to 3% for individual annuity policies in both 1994 and 1993. The fixed interest rates for individual life policy loans ranged from 5% to 8% in 1994 and 6% to 8% in 1993. The remaining outstanding policy loans had variable interest rates averaging 8% in 1994 and 1993. Investment income from policy loans was $11.5 million, $10.8 million and $9.5 million in 1994, 1993 and 1992, respectively. Off-Balance Sheet Financial Instruments At December 31, 1993, the Company had $149.0 million in outstanding forward commitments to purchase mortgage-backed securities at a specified future date and at a specified price or yield. These instruments involve elements of market risk whereby future changes in market prices may make a financial instrument less valuable. However, the difference between the fair value at which the commitments can be settled, and the contractual value of these securities, was immaterial at December 31, 1993. There were no outstanding forward commitments at December 31, 1994. There were no material concentrations of off-balance sheet financial instruments at December 31, 1994 and 1993. F-15 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 3. CAPITAL GAINS AND LOSSES ON INVESTMENT OPERATIONS Realized capital gains or losses are the difference between proceeds received from investments sold or prepaid, and amortized cost. Net realized capital gains as reflected in the Consolidated Statements of Income are after deductions for net realized capital gains (losses) allocated to experience- rated contracts of $(29.1) million, $(54.8) million and $36.1 million for the years ended December 31, 1994, 1993, and 1992, respectively. Net realized capital gains (losses) allocated to experience-rated contracts are deferred and subsequently reflected in credited rates on an amortized basis. Net unamortized gains (losses), reflected as a component of Policyholders' Funds Left With the Company, were $(50.7) million and $(16.5) million at the end of December 31, 1994 and 1993, respectively. Changes to the mortgage loan valuation reserve and writedowns on debt securities are included in net realized capital gains (losses) and amounted to $1.1 million and $(98.5) million, of which $0.8 million and $(91.5) million were allocable to experience-rated contractholders, for the years ended December 31, 1994 and 1993, respectively. There were no changes to the valuation reserve or writedowns in 1992. The 1993 losses were primarily related to writedowns of interest-only mortgage-backed securities to their fair value. Net realized capital gains (losses) on investments, net of amounts allocated to experience-rated contracts, were as follows:
1994 1993 1992 ---- ---- ----- (millions) Debt securities............................................ $1.0 $9.6 $12.9 Equity securities.......................................... 0.2 .1 0.5 Mortgage loans............................................. 0.3 (0.2) -- ---- ---- ----- Pretax realized capital gains.............................. $1.5 $9.5 $13.4 ==== ==== ===== After-tax realized capital gains........................... $1.0 $6.2 $ 8.8 ==== ==== =====
Gross gains of $26.6 million, $33.3 million and $13.9 million and gross losses of $25.6 million, $23.7 million and $1.0 million were realized from the sales of investments in debt securities in 1994, 1993 and 1992, respectively. Changes in unrealized capital gains (losses), excluding changes in unrealized capital gains (losses) related to experience-rated contracts, for the years ended December 31, were as follows:
1994 1993 1992 ------- ------ ----- (millions) Debt securities...................................... $(242.1) $164.3 $ -- Equity securities.................................... (13.3) 10.6 (0.1) Limited partnership.................................. (1.8) -- -- ------- ------ ----- (257.2) 174.9 (0.1) Deferred federal income taxes (See Note 6)........... 46.3 61.2 -- ------- ------ ----- Net change in unrealized capital gains (losses)...... $(303.5) $113.7 $(0.1) ======= ====== =====
The net change in unrealized capital gains (losses) on debt securities in 1994 and 1993 resulted from the adoption of FAS No. 115. For the year ended December 31, 1992, debt securities were carried at F-16 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) amortized cost. The unrecorded net appreciation for debt securities carried at amortized cost (including amounts allocable to experience-rated contracts) amounted to $612.4 million at December 31, 1992. Net unrealized capital gains (losses) allocable to experience-rated contracts of $(308.6) million and $582.8 million at December 31, 1994 and 1993, respectively, are not included in shareholder's equity. These amounts are reflected on the Consolidated Balance Sheet in policyholders' funds left with the Company. Shareholder's equity included the following unrealized capital gains (losses), which are net of amounts allocable to experience-rated contractholders, at December 31:
1994 1993 1992 ------- ------ ------ (millions) Debt securities Gross unrealized capital gains.................... $ 27.4 $164.3 $ -- Gross unrealized capital losses................... (105.2) -- -- ------- ------ ------ (77.8) 164.3 -- Equity securities Gross unrealized capital gains.................... 6.5 12.0 2.0 Gross unrealized capital losses................... (7.9) (0.1) (0.7) ------- ------ ------ (1.4) 11.9 1.3 Limited Partnership Gross unrealized capital gains.................... -- -- -- Gross unrealized capital losses................... (1.8) -- -- ------- ------ ------ (1.8) -- -- Deferred federal income taxes (See Note 6).......... 108.0 61.7 0.5 ------- ------ ------ Net unrealized capital gains (losses)............... $(189.0) $114.5 $ 0.8 ======= ====== ======
4. NET INVESTMENT INCOME Sources of net investment income were as follows:
1994 1993 1992 ------ ------ ------ (millions) Debt securities.................................. $823.9 $828.0 $763.7 Preferred stock.................................. 3.9 2.3 2.8 Investment in affiliated mutual funds............ 5.2 2.9 3.2 Mortgage loans................................... 1.4 1.5 1.8 Policy loans..................................... 11.5 10.8 9.5 Reinsurance loan to affiliate.................... 51.5 53.3 56.7 Cash equivalents................................. 29.5 16.8 16.6 Other............................................ 6.7 7.7 6.4 ------ ------ ------ Gross investment income.......................... 933.6 923.3 860.7 Less investment expenses......................... (16.4) (11.4) (12.6) ------ ------ ------ Net investment income............................ $917.2 $911.9 $848.1 ====== ====== ======
F-17 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Net investment income includes amounts allocable to experience-rated contractholders of $677.1 million, $661.3 million and $604.0 million for the years ended December 31, 1994, 1993 and 1992, respectively. Interest credited to contractholders is included in Current and Future Benefits. 5. DIVIDEND RESTRICTIONS AND SHAREHOLDER'S EQUITY The amount of dividends that may be paid to the shareholder in 1995 without prior approval by the Insurance Commissioner of the State of Connecticut is $70.9 million. The Insurance Department of the State of Connecticut (the "Department") recognizes as net income and shareholder's equity those amounts determined in conformity with statutory accounting practices prescribed or permitted by the Department, which differ in certain respects from generally accepted accounting principles. Statutory net income was $70.9 million, $77.6 million and $62.5 million for the years ended December 31, 1994, 1993 and 1992, respectively. Statutory shareholder's equity was $615.0 million and $574.4 million as of December 31, 1994 and 1993, respectively. As of December 31, 1994, the Company does not utilize any statutory accounting practices which are not prescribed by insurance regulators that, individually or in the aggregate, materially affect statutory shareholder's equity. 6. FEDERAL INCOME TAXES The Company is included in the consolidated federal income tax return of Aetna. Aetna allocates to each member an amount approximating the tax it would have incurred were it not a member of the consolidated group, and credits the member for the use of its tax saving attributes in the consolidated return. As discussed in Note 1, the Company adopted FAS No. 109 as of January 1, 1992 resulting in a cumulative effect benefit of $22.8 million. In August 1993, the Omnibus Budget Reconciliation Act of 1993 (OBRA) was enacted which resulted in an increase in the federal corporate tax rate from 34% to 35% retroactive to January 1, 1993. The enactment of OBRA resulted in an increase in the deferred tax liability of $3.4 million at date of enactment, which is included in the 1993 deferred tax expense. Components of income tax expense (benefits) were as follows:
1994 1993 1992 ------ ------ ------ (millions) Current taxes (benefits): Income from operations............................. $ 78.7 $ 87.1 $ 68.0 Net realized capital gains......................... (33.2) 18.1 18.1 ------ ------ ------ 45.5 105.2 86.1 ------ ------ ------ Deferred taxes (benefits): Income from operations............................. (8.0) (14.2) (17.7) Net realized capital gains......................... 33.7 (14.8) (13.5) ------ ------ ------ 25.7 (29.0) (31.2) ------ ------ ------ Total............................................ $ 71.2 $ 76.2 $ 54.9 ====== ====== ======
F-18 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Income tax expense was different from the amount computed by applying the federal income tax rate to income before federal income taxes for the following reasons:
1994 1993 1992 ------ ------ ------ (millions) Income before federal income taxes................... $216.5 $219.1 $168.1 Tax rate............................................. 35% 35% 34% ------ ------ ------ Application of the tax rate.......................... 75.8 76.7 57.2 ------ ------ ------ Tax effect of: Excludable dividends............................... (8.6) (8.7) (6.4) Tax reserve adjustments............................ 2.9 4.7 5.1 Reinsurance transaction............................ 1.9 (0.2) (0.5) Tax rate change on deferred liabilities............ -- 3.7 -- Other, net......................................... (0.8) -- (0.5) ------ ------ ------ Income tax expense............................... $ 71.2 $ 76.2 $ 54.9 ====== ====== ======
The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities under FAS No. 109 at December 31, 1994 and 1993 are presented below:
1994 1993 ------ ------ (millions) Deferred tax assets: Insurance reserves........................................... $211.5 $195.4 Net unrealized capital losses................................ 136.3 -- Investment losses not currently deductible................... 15.5 31.2 Postretirement benefits other than pensions.................. 8.4 8.6 Impairment reserves.......................................... -- 7.9 Other........................................................ 28.3 19.3 ------ ------ Total gross assets......................................... 400.0 262.4 Less valuation allowance....................................... 136.3 -- ------ ------ Deferred tax assets net of valuation......................... 263.7 262.4 Deferred tax liabilities: Deferred policy acquisition costs............................ 385.2 355.2 Unrealized losses allocable to experience-rated contracts.... 108.0 -- Market discount.............................................. 3.6 5.4 Net unrealized capital gains................................. -- 61.7 Other........................................................ 0.4 1.6 ------ ------ Total gross liabilities.................................... 497.2 423.9 ------ ------ Net deferred tax liability................................. $233.5 $161.5 ====== ======
Net unrealized capital gains and losses are presented in shareholder's equity net of deferred taxes. At December 31, 1994, $81.0 million of net unrealized capital losses were reflected in shareholder's equity without deferred tax benefits. For federal income tax purposes, capital losses are deductible only against capital gains in the year of sale or during the carryback and carryforward periods (three and five years, respectively). Due to the expected full utilization of capital gains in the carryback period and F-19 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) the uncertainty of future capital gains, a valuation allowance of $28.3 million related to the net unrealized capital losses has been reflected in shareholder's equity. In addition, $308.6 million of net unrealized capital losses related to experience-rated contracts are not reflected in shareholder's equity since such losses, if realized, are allocable to contractholders. However, the potential loss of tax benefits on such losses is the risk of the Company and therefore would adversely affect the Company rather than the contractholder. Accordingly, an additional valuation allowance of $108.0 million has been reflected in shareholder's equity as of December 31, 1994. Any reversals of the valuation allowance are contingent upon the recognition of future capital gains in the Company's federal income tax return or a change in circumstances which causes the recognition of the benefits to become more likely than not. Non-recognition of the deferred tax benefits on net unrealized losses described above had no impact on net income for 1994, but has the potential to adversely affect future results if such losses are realized. The "Policyholders' Surplus Account," which arose under prior tax law, is generally that portion of a life insurance company's statutory income that has not been subject to taxation. As of December 31, 1983, no further additions could be made to the Policyholders' Surplus Account for tax return purposes under the Deficit Reduction Act of 1984. The balance in such account was approximately $17.2 million at December 31, 1994. This amount would be taxed only under certain conditions. No income taxes have been provided on this amount since management believes the conditions under which such taxes would become payable are remote. The Internal Revenue Service ("Service") has completed examinations of the consolidated federal income tax returns of Aetna through 1986. Discussions are being held with the Service with respect to proposed adjustments. However, management believes there are adequate defenses against, or sufficient reserves to provide for, such adjustments. The Service has commenced its examinations for the years 1987 through 1990. 7. BENEFIT PLANS Employee Pension Plans -- The Company, in conjunction with Aetna, has non- contributory defined benefit pension plans covering substantially all employees. The plans provide pension benefits based on years of service and average annual compensation (measured over sixty consecutive months of highest earnings in a 120 month period). Contributions are determined using the Entry Age Normal Cost Method and, for qualified plans subject to ERISA requirements, are limited to the amounts that are currently deductible for tax reporting purposes. The accumulated benefit obligation and plan assets are recorded by Aetna. The accumulated plan assets exceed accumulated plan benefits. There has been no funding to the plan for the years 1992 through 1994, and therefore, no expense has been recorded by the Company. Agent Pension Plans -- The Company, in conjunction with Aetna, has a non- qualified pension plan covering certain agents. The plan provides pension benefits based on annual commission earnings. The accumulated plan assets exceed accumulated plan benefits. There has been no funding to the plan for the years 1992 through 1994, and therefore, no expense has been recorded by the Company. Employee Postretirement Benefits -- In addition to providing pension benefits, Aetna also provides certain postretirement health care and life insurance benefits, subject to certain caps, for retired employees. Medical and dental benefits are offered to all full-time employees retiring at age 50 with at least 15 years of service or at age 65 with at least 10 years of service. Retirees are required to contribute to the plans based on their years of service with Aetna. F-20 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Aetna implemented FAS No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions in 1992 on the immediate recognition basis. The cumulative effect charge for all Aetna employees was reflected in Aetna's 1992 Statement of Income. Prior to the adoption of FAS No. 106, the cost of postretirement benefits was charged to operations as payments were made. The accumulated benefit obligation and plan assets are recorded by Aetna. Accumulated postretirement benefits exceed plan assets. The cost to the Company associated with the Aetna postretirement plans for 1994, 1993 and 1992 were $1.0 million, $0.8 million and $0.8 million, respectively. Agent Postretirement Benefits -- The Company, in conjunction with Aetna, also provides certain postemployment health care and life insurance benefits for certain agents. The impact of recognizing the liability for agent costs was a cumulative effect adjustment of $13.2 million (net of deferred taxes of $6.8 million) and is reported in the 1992 Consolidated Statement of Income. The cost to the Company associated to the agents' postretirement plans for 1994, 1993 and 1992 were $0.7 million, $0.6 million and $0.7 million, respectively. Incentive Savings Plan -- Substantially all employees are eligible to participate in a savings plan under which designated contributions, which may be invested in common stock of Aetna or certain other investments, are matched, up to 5% of compensation, by Aetna. Pretax charges to operations for the incentive savings plan were $3.3 million, $3.1 million and $2.8 million in 1994, 1993 and 1992, respectively. Stock Plans -- Aetna has a stock incentive plan that provides for stock options and deferred contingent common stock or cash awards to certain key employees. Aetna also has a stock option plan under which executive and middle management employees of Aetna may be granted options to purchase common stock of Aetna at the market price on the date of grant or, in connection with certain business combinations, may be granted options to purchase common stock on different terms. The cost to the Company associated to the Aetna stock plans for 1994 and 1993 was $2.3 million, $0.4 million, respectively. The cost for 1992 was immaterial. 8. RELATED PARTY TRANSACTIONS The Company is compensated by the Separate Accounts for bearing mortality and expense risks pertaining to variable life and annuity contracts. Under the insurance contracts, the Separate Accounts pay the Company a daily fee which, on an annual basis, ranges, depending on the product, from .70% to 1.80% of their average daily net assets. The Company also receives fees from the variable life and annuity mutual funds and The Aetna Series Fund for serving as investment adviser. Under the advisory agreements, the Funds pay the Company a daily fee which, on an annual basis, ranges, depending on the fund, from .25% to 1.00% of their average daily net assets. The advisory agreements also call for the variable funds to pay their own administrative expenses and for The Aetna Series Fund to pay certain administrative expenses. The Company also receives fees (expressed as a percentage of the average daily net assets) from The Aetna Series Fund for providing administration shareholder services and promoting sales. The amount of compensation and fees received from the Separate Accounts and Funds, included in Charges Assessed Against Policyholders, amounted to $104.6 million, $93.6 million and $80.5 million in 1994, 1993 and 1992, respectively. The Company may waive advisory fees at its discretion. F-21 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The Company may, from time to time, make reimbursements to a Fund for some or all of its operating expenses. Reimbursement arrangements may be terminated at any time without notice. Since 1981, all domestic individual non-participating life insurance of Aetna and its subsidiaries has been issued by the Company. Effective December 31, 1988, the Company entered into a reinsurance agreement with Aetna Life Insurance Company ("Aetna Life") in which substantially all of the non- participating individual life and annuity business written by Aetna Life prior to 1981 was assumed by the Company. A $108.0 million commission, paid by the Company to Aetna Life in 1988, was capitalized as deferred policy acquisition costs. The Company maintained insurance reserves of $690.3 million and $711.0 million as of December 31, 1994 and 1993, respectively, relating to the business assumed. In consideration for the assumption of this business, a loan was established relating to the assets held by Aetna Life which support the insurance reserves. The loan is being reduced in accordance with the decrease in the reserves. The fair value of this loan was $630.3 million and $685.8 million as of December 31, 1994 and 1993, respectively, and is based upon the fair value of the underlying assets. Premiums of $32.8 million, $33.3 million and $36.8 million and current and future benefits of $43.8 million, $55.4 million and $47.2 million were assumed in 1994, 1993 and 1992, respectively. Investment income of $51.5 million, $53.3 million and $56.7 million was generated from the reinsurance loan to affiliate in 1994, 1993 and 1992, respectively. Net income of approximately $25.1 million, $13.6 million and $21.7 million resulted from this agreement in 1994, 1993 and 1992, respectively. On December 16, 1988, the Company assumed $25.0 million of premium revenue from Aetna Life for the purchase and administration of a life contingent single premium variable payout annuity contract. In addition, the Company also is responsible for administering fixed annuity payments that are made to annuitants receiving variable payments. Reserves of $24.2 million and $27.8 million were maintained for this contract as of December 31, 1994 and 1993, respectively. Effective February 1, 1992, the Company increased its retention limit per individual life to $2.0 million and entered into a reinsurance agreement with Aetna Life to reinsure amounts in excess of this limit, up to a maximum of $8.0 million on any new individual life business, on a yearly renewable term basis. Premium amounts related to this agreement for 1994, 1993 and 1992 were immaterial. Effective December 31, 1992, the Company entered into an assumption reinsurance agreement with Aetna Life to reinsure a block of approximately 3,500 life contingent, period certain and deferred lump sum annuities (totaling $175.5 million in premium) issued by the Company to Aetna Casualty to fund its obligations under structured settlement agreements. The negotiated price recognized the sale of future profits and included consideration to ALIAC for the continued administration of the reinsured contracts on behalf of, and in the name of, Aetna Life. The Company received no capital contributions in 1994, 1993 or 1992. Premiums due and other receivables include $27.6 million and $9.8 million due from affiliates in 1994 and 1993, respectively. Other liabilities include $27.9 million and $26.1 million due to affiliates for 1994 and 1993, respectively. Substantially all of the administrative and support functions of the Company are provided by Aetna and its affiliates. The financial statements reflect allocated charges for these services based upon measures appropriate for the type and nature of service provided. F-22 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 9. REINSURANCE The Company utilizes indemnity reinsurance agreements to reduce its exposure to large losses in all aspects of its insurance business. Such reinsurance permits recovery of a portion of losses from reinsurers, although it does not discharge the primary liability of the Company as direct insurer of the risks reinsured. The Company evaluates the financial strength of potential reinsurers and continually monitors the financial condition of reinsurers. Only those reinsurance recoverables deemed probable of recovery are reflected as assets on the Company's Consolidated Balance Sheets. The following table includes premium amounts ceded/assumed to/from affiliated companies as discussed in Note 8 above.
CEDED TO ASSUMED DIRECT OTHER FROM OTHER NET AMOUNT COMPANIES COMPANIES AMOUNT ------ --------- ---------- ------ (millions) 1994 Premiums: Life Insurance............................ $ 25.8 $ 6.0 $32.8 $ 52.6 Accident and Health Insurance............. 10.8 9.3 -- 1.5 Annuities................................. 69.9 -- 0.2 70.1 ------ ----- ----- ------ Total earned premiums................... $106.5 $15.3 $33.0 $124.2 ====== ===== ===== ====== 1993 Premiums: Life Insurance............................ $ 20.9 $ 5.6 $33.3 $ 48.6 Accident and Health Insurance............. 14.4 12.9 -- 1.5 Annuities................................. 31.3 -- 0.7 32.0 ------ ----- ----- ------ Total earned premiums................... $ 66.6 $18.5 $34.0 $ 82.1 ====== ===== ===== ====== 1992 Premiums: Life Insurance............................ $ 20.8 $ 5.2 $36.8 $ 52.4 Accident and Health Insurance............. 15.1 13.7 -- 1.4 Annuities................................. 18.4 -- 0.3 18.7 ------ ----- ----- ------ Total earned premiums................... $ 54.3 $18.9 $37.1 $ 72.5 ====== ===== ===== ======
10. FINANCIAL INSTRUMENTS The carrying values and estimated fair values of the Company's financial instruments at December 31, 1994 and 1993 were as follows:
1994 1993 ------------------- ------------------- CARRYING FAIR CARRYING FAIR VALUE VALUE VALUE VALUE --------- --------- --------- --------- (millions) Assets: Cash and cash equivalents............. $ 623.3 $ 623.3 $ 536.1 $ 536.1 Short-term investments................ 98.0 98.0 22.6 22.6 Debt securities....................... 10,191.4 10,191.4 10,531.0 10,531.0 Equity securities..................... 229.1 229.1 172.6 172.6 Limited partnership................... 24.4 24.4 -- -- Mortgage loans........................ 9.9 9.9 10.1 10.1 Liabilities: Investment contract liabilities: With a fixed maturity............... 826.7 833.5 733.3 795.6 Without a fixed maturity............ 8,074.9 7,870.4 8,196.4 8,099.3
F-23 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Fair value estimates are made at a specific point in time, based on available market information and judgments about the financial instrument, such as estimates of timing and amount of expected future cash flows. Such estimates do not reflect any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular financial instrument, nor do they consider the tax impact of the realization of unrealized gains or losses. In 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 and liquidity risk, the fair values of all assets and liabilities should be taken into consideration, not only those above. The following valuation methods and assumptions were used by the Company in estimating the fair value of the above financial instruments: Short-term instruments: Fair values are based on quoted market prices or dealer quotations. Where quoted market prices are not available, the carrying amounts reported in the Consolidated Balance Sheets approximates fair value. Short-term instruments have a maturity date of one year or less and include cash and cash equivalents, and short-term investments. Debt and equity securities: Fair values are based on quoted market prices or dealer quotations. Where quoted market prices or dealer quotations are not available, fair value is estimated by using quoted market prices for similar securities or discounted cash flow methods. Mortgage loans: Fair value is estimated by discounting expected mortgage loan cash flows at market rates which reflect the rates at which similar loans would be made to similar borrowers. The rates reflect management's assessment of the credit quality and the remaining duration of the loans. The fair value estimate of mortgage loans of lower quality, including problem and restructured loans, is based on the estimated fair value of the underlying collateral. 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 on demand. 11. SEGMENT INFORMATION Effective December 31, 1994, the Company's operations, which previously were reported in total, will now be reported through two major business segments: Life Insurance and Financial Services. The Life Insurance segment markets most types of life insurance including universal life, interest-sensitive whole life, and term insurance. These products are offered primarily to individuals, small businesses, employer-sponsored groups and executives of Fortune 2000 companies. The Financial Services segment markets and services individual and group annuity contracts which offer a variety of funding and distribution options for personal and employer-sponsored retirement plans that qualify for tax deferral under sections 401(k) for corporations, 403(b) for hospitals and educational institutions, 408 for individual retirement accounts, and 457 for state and local governments and tax exempt healthcare organizations (the "deferred compensation market"), of the Internal Revenue Code. These contracts may be immediate or deferred. These products are offered primarily to individuals, pension plans, small businesses and employer-sponsored groups. F-24 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A WHOLLY OWNED SUBSIDIARY OF AETNA LIFE AND CASUALTY COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED) Summarized financial information for the Company's principal operations was as follows:
1994 1993 1992 --------- --------- --------- (millions) Revenue: Life insurance................................. $ 386.1 $ 371.7 $ 363.6 Financial services............................. 946.1 892.8 812.5 --------- --------- --------- Total revenue................................ $ 1,332.2 $ 1,264.5 $ 1,176.1 ========= ========= ========= Income from continuing operations before income taxes and cumulative effect adjustments: Life insurance................................. $ 96.8 $ 98.0 $ 74.6 Financial services............................. 119.7 121.1 93.5 --------- --------- --------- Total income from continuing operations be- fore income taxes and cumulative effect ad- justments................................... $ 216.5 $ 219.1 $ 168.1 Net income: Life insurance................................. $ 59.8 $ 56.1 $ 45.6 Financial services............................. 85.5 86.8 67.6 --------- --------- --------- Income before cumulative effect adjustments.. $ 145.3 $ 142.9 $ 113.2 --------- --------- --------- Cumulative effect adjustments................ -- -- 9.6 --------- --------- --------- Net income....................................... $ 145.3 $ 142.9 $ 122.8 ========= ========= ========= 1994 1993 1992 --------- --------- --------- (millions) Assets under management, at fair value: Life insurance................................. $ 2,175.2 $ 2,180.1 $ 1,973.1 Financial services............................. 17,791.9 16,600.5 13,644.3 --------- --------- --------- Total assets under management................ $19,967.1 $18,780.6 $15,617.4 ========= ========= =========
F-25 VARIABLE ANNUITY ACCOUNT B 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 B: - Independent Auditors' Report - Statement of Assets and Liabilities as of December 31, 1994 - Statement of Operations for the year ended December 31, 1994 - Statements of Changes in Net Assets for the years ended December 31, 1994 and 1993 - Notes to Financial Statements Financial Statements of the Depositor: - Independent Auditors' Report - Consolidated Balance Sheets as of December 31, 1994 and 1993 - Consolidated Statements of Income for the years ended December 31, 1994, 1993 and 1992 - Consolidated Statements of Changes in Shareholder's Equity for the years ended December 31, 1994, 1993 and 1992 - Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1993 and 1992 - Notes to Consolidated Financial Statements (b) Exhibits (1) Resolution of the Board of Directors of Aetna Life Insurance and Annuity Company establishing Variable Annuity Account B/1/ (2) Not applicable (3.1) Form of Selling Agreement/2/ (3.2) Alternative Form of Wholesaling Agreement and Related Selling Agreement/3/ (4.1) Form of Variable Annuity Contract (G-CDA-IC(IR/NY)) (4.2) Form of Variable Annuity Contract (G-CDA-IC(NQ/NY)) (4.3) Form of Variable Annuity Contract (GMCC-IC(IR/NY)) (4.4) Form of Variable Annuity Contract (GMCC-IC(NQ/NY)) (5.1) Form of Variable Annuity Contract Application (795.00.2NY)* (5.2) Form of Variable Annuity Contract Application (795.00.1NY)* (5.3) Form of Variable Annuity Contract Application (G00557-01CNY)* (6) Certificate of Incorporation and By-Laws of Depositor/4/ (7) Not applicable (8.1) Fund Participation Agreement between Aetna Life Insurance and Annuity Company, Alger American Fund and Fred Alger Management, Inc. dated September 1, 1993/3/ (8.2) Fund Participation Agreement by and among Aetna Life Insurance and Annuity Company, Insurance Management Series and Federated Advisors/5/ (8.3) Fund Participation Agreements between Aetna Life Insurance and Annuity Company and Fidelity Distributors Corporation dated February 1, 1994 (Variable Annuity Products Fund)/6/ (8.4) Fund Participation Agreement between Aetna Life Insurance and Annuity Company and Fidelity Distributors Corporation dated February 1, 1994 (Variable Annuity Products Fund II)/6/ (8.5) Fund Participation Agreement between Aetna Life Insurance and Annuity Company and Janus Aspen Series dated April 19, 1994, and amended June 15, 1994/7/ (8.6) Fund Participation Agreement between Aetna Life Insurance and Annuity Company and Lexington Management Corporation regarding Natural Resources Trust dated December 1, 1988 and amended February 11, 1991/8/ (8.7) Fund Participation Agreement between Aetna Life Insurance and Annuity Company, Lexington Emerging Markets Fund, Inc. and Lexington Management Corporation (its investment advisor) dated April 28, 1994/9/ (8.8) Fund Participation Agreement between Aetna Life Insurance and Annuity Company, Investors Research Corporation and TCI Portfolios, Inc. dated July 29, 1992 and amended December 22, 1992 and June 1, 1994/10/ (8.9) Form of Administrative Service Agreement between Aetna Life Insurance and Annuity Company and Agency, Inc./2/ (9) Opinion of Counsel/11/ (10.1) Consent of Independent Auditors (10.2) Consent of Counsel* (11) Not applicable (12) Not applicable (13) Computation of Performance Data (14) Financial Data Schedule (See Exhibit 27) (15.1) Powers of Attorney/12/ (15.2) Authorization for Signatures/13/ * To be filed by amendment 1. Incorporated by reference to Registration Statement on Form N-4 (File No. 2-52448) filed February 28, 1986. 2. Incorporated by reference to Post-Effective Amendment No. 15 to Registration Statement on Form N-4 (File No. 33-34370) filed on April 19, 1994. 3. Incorporated by reference to Pre-Effective Amendment No. 1 to Registration Statement on Form N-4 (File No. 33-75996) filed on April 21, 1994. 4. Incorporated by reference to Post-Effective Amendment No. 2 to Registration Statement on Form N-4 (File No. 2-52449) filed on February 28, 1994. 5. Incorporated by reference to Post-Effective Amendment No. 2 to Registration Statement on Form N-4 (File No. 33-79122) filed on September 15, 1994. 6. Incorporated by reference to Pre-Effective Amendment No. 1 to Registration Statement on Form N-4 (File No. 33-75978) filed on April 25, 1994. 7. Incorporated by reference to Post-Effective Amendment No. 2 to Registration Statement on Form N-4 (File No. 33-75960) filed on August 9, 1994. 8. Incorporated by reference to Post-Effective Amendment No. 4 to Registration Statement on Form N-4 (File No. 33-75978) filed on March 24, 1995. 9. Incorporated by reference to Post-Effective Amendment No. 1 to Registration Statement on Form N-4 (File No. 33-75978) filed on August 24, 1994. 10. Incorporated by reference to Registration Statement on Form N-4 (File No. 33-88720) filed on January 20, 1995. 11. Incorporated by reference to Registrant's 24f-2 Notice for the fiscal year ended December 31, 1994 filed on February 28, 1995. 12. The Power of Attorney for David E. Bushong, Acting Chief Financial Officer, is included in this filing. The Powers of Attorney for all other signatories of this Registration Statement are incorporated by reference to Post-Effective Amendment No. 3 to Registration Statement on Form N-4 (File No. 33-75996) filed on February 23, 1995. 13. Incorporated by reference to Post-Effective Amendment No. 1 to Registration Statement on Form N-4 (File No. 33-91846) electronically filed on August 15, 1995. Item 25. Directors and Officers of the Depositor -------- --------------------------------------- Name and Principal Business Address* Positions and Offices with Depositor ------------------ ------------------------------------ Daniel P. Kearney Director and President Gary G. Benanav Director Christopher J. Burns Director and Senior Vice President, Life Laura R. Estes Director and Senior Vice President, ALIAC Pensions Shaun P. Mathews Director and Senior Vice President, Strategic Markets and Products Scott A. Striegel Director and Senior Vice President, Annuity James C. Hamilton Director, Vice President and Treasurer Dominick J. Agostino Director, Senior Vice President and Chief Financial Officer David E. Bushong Acting Chief Financial Officer John Y. Kim Director and Senior Vice President, ALIAC Investments Robert E. Broatch Senior Vice President and Corporate Controller Zoe Baird Senior Vice President and General Counsel Fred J. Franklin Vice President and Chief Compliance Officer Susan E. Schechter Corporate Secretary and Counsel * 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 references to Exhibit 24(c) to Registration Statement on Form N-4 (File No. 33-88720) filed on January 20, 1995. Item 27. Number of Contract Owners -------- ------------------------- As of June 30, 1995, there were 73,790 contract owners of variable annuity contracts funded through Account B. Item 28. Indemnification -------- --------------- Reference is hereby made to Section 33-320a of the Connecticut General Statutes ("C.G.S.") regarding indemnification of directors and officers of Connecticut corporations. The statute provides in general that Connecticut corporations shall indemnify their officers, directors, employees, agents, and certain other defined individuals against judgments, fines, penalties, amounts paid in settlement and reasonable expenses actually incurred in connection with proceedings against the corporation. The corporation's obligation to provide such indemnification does not apply unless (1) the individual is successful on the merits in the defense of any such proceeding; or (2) a determination is made (by a majority of the board of directors not a party to the proceeding by written consent; by independent legal counsel selected by a majority of the directors not involved in the proceeding; or by a majority of the shareholders not involved in the proceeding) that the individual acted in good faith and in the best interests of the corporation; or (3) the court, upon application by the individual, determines in view of all the circumstances that such person is reasonably entitled to be indemnified. C.G.S. Section 33-320a provides an exclusive remedy: a Connecticut corporation cannot indemnify a director or officer to an extent either greater or less than that authorized by the statute, e.g., pursuant to its certificate of incorporation, bylaws, or any separate contractual arrangement. However, the statute does specifically authorize a corporation to procure indemnification insurance to provide greater indemnification rights. The premiums for such insurance may be shared with the insured individuals on an agreed basis. Consistent with the statute, Aetna Life and Casualty Company has procured insurance from Lloyd's of London and several major United States excess insurers for its directors and officers and the directors and officers of its subsidiaries, including the Depositor, which supplements the indemnification rights provided by C.G.S. Section 33-320a to the extent such coverage does not violate public policy. Item 29. Principal Underwriter -------- --------------------- (a) In addition to serving as the principal underwriter for the Registrant, Aetna Life Insurance and Annuity Company (ALIAC) also acts as the principal underwriter for Variable Life Account B and Variable Annuity Accounts C and G (separate accounts of ALIAC registered as unit investment trusts), and Separate Account I (a separate account of Aetna Insurance Company of America registered as a unit investment trust). Additionally, ALIAC is the investment adviser for Aetna Variable Fund, Aetna Income Shares, Aetna Variable Encore Fund, Aetna Investment Advisers Fund, Inc., Aetna GET Fund, Aetna Series Fund, Inc. and Aetna Generation Portfolios, Inc. ALIAC is also the depositor of Variable Life Account B and Variable Annuity Accounts C and G. (b) See Item 25 regarding the Depositor. (c) Compensation as of December 31, 1994:
(1) (2) (3) (4) (5) Name of Net Underwriting Compensation Principal Discounts and on Redemption Brokerage Underwriter Commissions or Annuitization Commissions Compensation* ----------- ----------- ---------------- ----------- ------------ Aetna Life $269,230 $9,036,662 Insurance and Annuity Company
* 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 Account B. Item 30. Location of Accounts and Records -------- -------------------------------- All records concerning contract owners of Variable Annuity Account B are located at the home office of the Depositor as follows: Aetna Life Insurance and Annuity Company 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) Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. SIGNATURES As required by the Securities Act of 1933, as amended, and the Investment Company Act of 1940, the Registrant, Variable Annuity Account B of Aetna Life Insurance and Annuity Company, has caused this Post-Effective Amendment No. 1 to its Registration Statement on Form N-4 (File No. 33-87932) to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Hartford, State of Connecticut, on the 18th day of September, 1995. VARIABLE ANNUITY ACCOUNT B OF AETNA LIFE INSURANCE AND ANNUITY COMPANY (Registrant) By: AETNA LIFE INSURANCE AND ANNUITY COMPANY (Depositor) By: Daniel P. Kearney* ----------------------------------------- Daniel P. Kearney President As required by the Securities Act of 1933, as amended, this Post-Effective Amendment No. 1 to the Registration Statement on Form N-4 (File No. 33-87932) has been signed by the following persons in the capacities and on the dates indicated. Signature Title Date --------- ----- ---- Daniel P. Kearney* Director and President ) --------------------------- ) Daniel P. Kearney (principal executive officer) ) ) Dominick J. Agostino* Director ) --------------------------- ) Dominick J. Agostino ) ) David E. Bushong* Acting Chief Financial Officer ) --------------------------- ) September David E. Bushong (principal accounting and financial ) 18, 1995 officer) ) ) James C. Hamilton* Director ) --------------------------- ) James C. Hamilton ) ) Gary G. Benanav* Director ) --------------------------- ) Gary G. Benanav ) ) Christopher J. Burns* Director ) --------------------------- ) Christopher J. Burns ) ) Laura R. Estes* Director ) --------------------------- ) Laura R. Estes ) ) John Y. Kim* Director ) --------------------------- ) John Y. Kim ) ) Shaun P. Mathews* Director ) --------------------------- ) Shaun P. Mathews ) ) Scott A. Striegel* Director ) --------------------------- ) Scott A. Striegel ) By: /s/ Julie E. Rockmore ----------------------------------------------- *Julie E. Rockmore Attorney-in-Fact VARIABLE ANNUITY ACCOUNT B EXHIBIT INDEX Exhibit No. Exhibit Page ----------- ------- ---- 99-B.1 Resolution of the Board of Directors of * Aetna Life Insurance and Annuity Company establishing Variable Annuity Account B 99-B.3.1 Form of Selling Agreement * 99-B.3.2 Alternative Form of Wholesaling Agreement * and Related Selling Agreement 99-B.4 Form of Variable Annuity Contracts -- 99-B.5 Form of Variable Annuity Contract ** Applications 99-B.6 Certificate of Incorporation and By-Laws of * Depositor 99-B.8.1 Fund Participation Agreement between Aetna * Life Insurance and Annuity Company, Alger American Fund and Fred Alger Management, Inc. dated September 1, 1993 99-B.8.2 Fund Participation Agreement by and among * Aetna Life Insurance and Annuity Company, Insurance Management Series and Federated Advisors 99-B.8.3 Fund Participation Agreements between Aetna * Life Insurance and Annuity Company and Fidelity Distributors Corporation dated February 1, 1994 (Variable Insurance Products Fund) 99-B.8.4 Fund Participation Agreement between Aetna * Life Insurance and Annuity Company and Fidelity Distributors Corporation dated February 1, 1994 (Variable Insurance Products Fund II) 99-B.8.5 Fund Participation Agreement between Aetna * Life Insurance and Annuity Company and Janus Aspen Series dated April 19, 1994, and amended June 15, 1994 99-B.8.6 Fund Participation Agreement between Aetna * Life Insurance and Annuity Company and Lexington Management Corporation regarding Natural Resources Trust dated December 1, 1988 and amended February 11, 1991 *Incorporated by reference **To be filed by amendment Exhibit No. Exhibit Page ----------- ------- ---- 99-B.8.7 Fund Participation Agreement between Aetna * Life Insurance and Annuity Company, Lexington Emerging Markets Fund, Inc. and Lexington Management Corporation (its investment advisor) dated April 28, 1994 99-B.8.8 Fund Participation Agreement between Aetna * Life Insurance and Annuity Company, Investors Research Corporation and TCI Portfolios, Inc. dated July 29, 1992 and amended December 22, 1992 and June 1, 1994 99-B.8.9 Form of Administrative Service Agreement * between Aetna Life Insurance and Annuity Company and Agency, Inc. 99-B.9 Opinion of Counsel * 99-B.10.1 Consent of Independent Auditors ------ 99-B.10.2 Consent of Counsel ------ 99-B.13 Computation of Performance Data ------ 99-B.15.1 Powers of Attorney ------ 99-B.15.2 Authorization for Signatures * 27 Financial Data Schedule ------ *Incorporated by reference **To be filed by amendment EX-99.B.4.A 2 CONTRACT A EXHIBIT 99.B.4a [LOGO OF AETNA APPEARS HERE] AETNA LIFE INSURANCE AND ANNUITY COMPANY Home Office: 151 Farmington Avenue Hartford, Connecticut 06156 (800) 525-4225 Aetna Life Insurance and Annuity Company, herein called Aetna, agrees to pay the benefits stated in the Contract. -------------------------------------------------------------------------------- CERTIFICATE OF To the Certificate Holder: GROUP ANNUITY COVERAGE Aetna certifies that coverage is in force for you under the stated Group Annuity Contract and Certificate numbers. All data shown here is taken from Aetna records and is based upon information furnished by you. This Certificate is a summary of the Group Annuity Contract provisions. It replaces any and all prior certificates, riders, or amendments issued to you under the stated Contract and Certificate numbers. This Certificate is for information only and is not a part of the Contract. THE VARIABLE FEATURES OF THE GROUP CONTRACT ARE DESCRIBED IN PARTS III AND IV. -------------------------------------------------------------------------------- RIGHT TO You may cancel this Certificate within 10 days of CANCEL receiving it by returning this Certificate along with a written notice to Aetna at the above address or to the agent from whom it was purchased. Within 7 days after it receives the notice of cancellation and this Certificate at its Home Office, Aetna will return the entire consideration paid plus any increase or minus any decrease in the current value of any funds allocated to the Separate Account. Dan Kearney Lucille M. Nickerson President Secretary -------------------------------------------------------------------------------- Contract Holder Group Annuity Contract No. SPECIMEN SPECIMEN -------------------------------------------------------------------------------- Your Name Certificate No. JOHN DOE SPECIMEN -------------------------------------------------------------------------------- Annuitant Name Type of Plan JOHN DOE JR. FLEXIBLE PREMIUM -------------------------------------------------------------------------------- ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT, WHEN BASED ON INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT. THIS CONTRACT CONTAINS A MARKET VALUE ADJUSTMENT FORMULA. APPLICATION OF A MARKET VALUE ADJUSTMENT MAY RESULT IN EITHER AN INCREASE OR DECREASE IN THE CURRENT VALUE. THE MARKET VALUE ADJUSTMENT FORMULA DOES NOT APPLY TO A GUARANTEED TERM AT THE TIME OF ITS MATURITY. 1 SPECIFICATIONS ------------------------------------------------------------------------------------------------------------------------------------ GUARANTEED There are guaranteed interest rates for amounts held in the AG Account (See Contract Schedule I). INTEREST RATE ------------------------------------------------------------------------------------------------------------------------------------ DEDUCTIONS FROM There will be deductions for mortality and expense risks and administrative fees (see Contract THE SEPARATE Schedule I and II). ACCOUNT ------------------------------------------------------------------------------------------------------------------------------------ DEDUCTION FROM Purchase Payment is subject to a deduction for premium taxes, if any (see 3.01). PURCHASE PAYMENT ------------------------------------------------------------------------------------------------------------------------------------ SURRENDER There will be a charge deducted upon surrender (see Contract Schedule I). FEE
2 CONTRACT SCHEDULE I ACCUMULATION PERIOD SEPARATE ACCOUNT -------------------------------------------------------------------------------- SEPARATE ACCOUNT: Variable Annuity Account B CHARGES TO SEPARATE A daily charge is deducted from any portion of the Current Value allocated to the Separate Account. ACCOUNT: The deduction is the daily equivalent of the annual effective percentage shown in the following chart. Administrative Charge 0.15% Mortality Risk Charge 0.35% Expense Risk Charge 0.90% ----- Total Separate Account Charges 1.40% SEPARATE ACCOUNT FUNDS: During the Accumulation Period the Funds available with this Contract are: Aetna Variable Fund Aetna Income Shares Aetna Variable Encore Fund Aetna Investment Advisers Fund, Inc. Aetna Ascent Variable Portfolio Aetna Crossroads Variable Portfolio Aetna Legacy Variable Portfolio The Alger American Fund - Alger American Balanced Portfolio The Alger American Fund - Alger American Income and Growth Portfolio The Alger American Fund - Alger American Growth Portfolio The Alger American Fund - Alger American Midcap Growth Portfolio The Alger American Fund - Alger American Leveraged Allcap Portfolio The Alger American Fund - Alger American Small Capitalization Portfolio Fidelity Investments Variable Insurance Products Fund - High Income Portfolio Fidelity Investments Variable Insurance Products Fund - Equity-Income Portfolio Fidelity Investments Variable Insurance Products Fund - Growth Portfolio Fidelity Investments Variable Insurance Products Fund - Overseas Portfolio Fidelity Investments Variable Insurance Products Fund II - Investment Grade Bond Portfolio Fidelity Investments Variable Insurance Products Fund II - Asset Manager Portfolio Fidelity Investments Variable Insurance Products Fund II - Index 500 Portfolio Fidelity Investments Variable Insurance Products Fund II - Contrafund Portfolio Insurance Management Series - Corporate Bond Fund
3 CONTRACT SCHEDULE I (CONT'D) ACCUMULATION PERIOD SEPARATE ACCOUNT (CONT'D) -------------------------------------------------------------------------------- SEPARATE ACCOUNT FUNDS Insurance Management Series - Equity Growth and Income Fund (CONT'D): Insurance Management Series - International Stock Fund Insurance Management Series - U.S. Government Bond Fund Insurance Management Series - Utility Fund Janus Aspen Series - Aggressive Growth Portfolio Janus Aspen Series - Balanced Portfolio Janus Aspen Series - Flexible Income Portfolio Janus Aspen Series - Growth Portfolio Janus Aspen Series - Short-Term Bond Portfolio Janus Aspen Series - Worldwide Growth Portfolio Lexington Emerging Markets Fund Lexington Natural Resources Trust TCI Portfolios, Inc. - TCI International TCI Portfolios, Inc. - TCI Growth TCI Portfolios, Inc. - TCI Balanced
ALIAC GUARANTEED ACCOUNT (AG ACCOUNT) -------------------------------------------------------------------------------- MINIMUM GUARANTEED 3.0%. INTEREST RATE (effective annual rate of return):
SEPARATE ACCOUNT AND AG ACCOUNT -------------------------------------------------------------------------------- MINIMUM INITIAL PURCHASE $5,000 PAYMENT: MAXIMUM INITIAL PURCHASE $500,000 PAYMENT WITHOUT HOME OFFICE APPROVAL: TRANSFERS: An unlimited number of Transfers may be made during the Accumulation Period. Aetna allows 12 free Transfers in any calendar year. Thereafter, Aetna reserves the right to charge $10 for each subsequent Transfer. MINIMUM TRANSFER $500 AMOUNT: MAINTENANCE FEE: The annual Maintenance Fee is $30. If the Current Value is $50,000 or more on the date the Maintenance Fee is to be deducted, the Maintenance Fee is $0.
4 CONTRACT SCHEDULE I (CONT'D) ACCUMULATION PERIOD SEPARATE ACCOUNT AND AG ACCOUNT (CONT'D) -------------------------------------------------------------------------------- SURRENDER FEE: For each surrender, the Surrender Fee will be determined as follows: Surrender Fee Length of Time from Deposit (as percentage of of Net Purchase Payment (Years) Net Purchase Payment) Less than 1 year 7% 1 or more but less than 2 years 6% 2 or more but less than 3 years 5% 3 or more but less than 4 years 4% 4 or more but less than 5 years 3% 5 or more but less than 6 years 2% 6 or more but less than 7 years 1% 7 years or more 0% SYSTEMATIC WITHDRAWAL The specified payment or specified percentage may not be greater than 10% of the Current Value at OPTION (SWO) time of election. PERCENTAGE: SWO MINIMUM INITIAL $25,000 CURRENT VALUE: SWO MINIMUM PAYMENT $500 AMOUNT: ESTATE CONSERVATION $25,000 OPTION (ECO) MINIMUM INITIAL CURRENT VALUE:
See 1. GENERAL DEFINITIONS for explanations. 5 CONTRACT SCHEDULE I ACCUMULATION PERIOD SEPARATE ACCOUNT -------------------------------------------------------------------------------- SEPARATE ACCOUNT: Variable Annuity Account B CHARGES TO SEPARATE A daily charge is deducted from any portion of the Current Value allocated to the Separate Account. ACCOUNT: The deduction is the daily equivalent of the annual effective percentage shown in the following chart. Administrative Charge 0.15% Mortality Risk Charge 0.35% Expense Risk Charge 0.90% ----- Total Separate Account Charges 1.40% SEPARATE ACCOUNT FUNDS: During the Accumulation Period the Funds available with this Contract are: Aetna Variable Fund Aetna Income Shares Aetna Variable Encore Fund Aetna Investment Advisers Fund, Inc. Aetna Ascent Variable Portfolio Aetna Crossroads Variable Portfolio Aetna Legacy Variable Portfolio Janus Aspen Series - Aggressive Growth Portfolio Janus Aspen Series - Flexible Income Portfolio Janus Aspen Series - Growth Portfolio Lexington Emerging Markets Fund Lexington Natural Resources Trust TCI Portfolios, Inc. - TCI International TCI Portfolios, Inc. - TCI Growth TCI Portfolios, Inc. - TCI Balanced
ALIAC GUARANTEED ACCOUNT (AG ACCOUNT) -------------------------------------------------------------------------------- MINIMUM GUARANTEED 3.0%. INTEREST RATE (effective annual rate of return):
6 CONTRACT SCHEDULE I (CONT'D) ACCUMULATION PERIOD SEPARATE ACCOUNT AND AG ACCOUNT -------------------------------------------------------------------------------- MINIMUM INITIAL PURCHASE $5,000 PAYMENT: MAXIMUM INITIAL PURCHASE $500,000 PAYMENT WITHOUT HOME OFFICE APPROVAL: TRANSFERS: An unlimited number of Transfers may be made during the Accumulation Period. Aetna allows 12 free Transfers in any calendar year. Thereafter, Aetna reserves the right to charge $10 for each subsequent Transfer. MINIMUM TRANSFER $500 AMOUNT: MAINTENANCE FEE: The annual Maintenance Fee is $30. If the Current Value is $50,000 or more on the date the Maintenance Fee is to be deducted, the Maintenance Fee is $0. SURRENDER FEE: For each surrender, the Surrender Fee will be determined as follows: Surrender Fee Length of Time from Deposit (as percentage of of Net Purchase Payment (Years) Net Purchase Payment) Less than 1 year 7% 1 or more but less than 2 years 6% 2 or more but less than 3 years 5% 3 or more but less than 4 years 4% 4 or more but less than 5 years 3% 5 or more but less than 6 years 2% 6 or more but less than 7 years 1% 7 years or more 0% SYSTEMATIC WITHDRAWAL The specified payment or specified percentage OPTION (SWO) may not be greater than 10% of the Current Value PERCENTAGE: at time of election. SWO MINIMUM INITIAL $25,000 CURRENT VALUE:
7 CONTRACT SCHEDULE I (CONT'D) ACCUMULATION PERIOD SEPARATE ACCOUNT AND AG ACCOUNT (CONT'D) -------------------------------------------------------------------------------- SWO MINIMUM PAYMENT $500 AMOUNT: ESTATE CONSERVATION $25,000 OPTION (ECO) MINIMUM INITIAL CURRENT VALUE:
See 1. GENERAL DEFINITIONS for explanations. 8 CONTRACT SCHEDULE I ACCUMULATION PERIOD SEPARATE ACCOUNT -------------------------------------------------------------------------------- SEPARATE ACCOUNT: Variable Annuity Account B CHARGES TO SEPARATE A daily charge is deducted from any portion of the Current Value allocated to the Separate Account. ACCOUNT: The deduction is the daily equivalent of the annual effective percentage shown in the following chart. Administrative Charge 0.15% Mortality Risk Charge 0.35% Expense Risk Charge 0.90% ----- Total Separate Account Charges 1.40% SEPARATE ACCOUNT FUNDS: During the Accumulation Period the Funds available with this Contract are: Insurance Management Series - Equity Growth and Income Fund Insurance Management Series - Utility Fund Insurance Management Series - Prime Money Fund Insurance Management Series - U.S. Government Bond Fund Insurance Management Series - Corporate Bond Fund Insurance Management Series - International Stock Fund
ALIAC GUARANTEED ACCOUNT (AG ACCOUNT) -------------------------------------------------------------------------------- MINIMUM GUARANTEED 3.0%. INTEREST RATE (effective annual rate of return):
9 CONTRACT SCHEDULE I (CONT'D) ACCUMULATION PERIOD SEPARATE ACCOUNT AND AG ACCOUNT -------------------------------------------------------------------------------- MINIMUM INITIAL PURCHASE $5,000 PAYMENT: MAXIMUM INITIAL PURCHASE $500,000 PAYMENT WITHOUT HOME OFFICE APPROVAL: TRANSFERS: An unlimited number of Transfers may be made during the Accumulation Period. Aetna allows 12 free Transfers in any calendar year. Thereafter, Aetna reserves the right to charge $10 for each subsequent Transfer. MINIMUM TRANSFER $500 AMOUNT: MAINTENANCE FEE: The annual Maintenance Fee is $30. If the Current Value is $50,000 or more on the date the Maintenance Fee is to be deducted, the Maintenance Fee is $0. SURRENDER FEE: For each surrender, the Surrender Fee will be determined as follows: Surrender Fee Length of Time from Deposit of Net (as percentage of Purchase Payment (Years) Net Purchase Payment) Less than 1 year 7% 1 or more but less than 2 years 6% 2 or more but less than 3 years 5% 3 or more but less than 4 years 4% 4 or more but less than 5 years 3% 5 or more but less than 6 years 2% 6 or more but less than 7 years 1% 7 years or more 0% SYSTEMATIC WITHDRAWAL The specified payment or specified percentage may not be greater than 10% of the Current Value at OPTION (SWO) time of election. PERCENTAGE: SWO MINIMUM INITIAL $25,000 CURRENT VALUE:
10 CONTRACT SCHEDULE I (CONT'D) ACCUMULATION PERIOD SEPARATE ACCOUNT AND AG ACCOUNT (CONT'D) -------------------------------------------------------------------------------- SWO MINIMUM PAYMENT $500 AMOUNT: ESTATE CONSERVATION $25,000 OPTION (ECO) MINIMUM INITIAL CURRENT VALUE: See 1. GENERAL DEFINITIONS for explanations.
11 CONTRACT SCHEDULE II ANNUITY PERIOD SEPARATE ACCOUNT -------------------------------------------------------------------------------- CHARGES TO SEPARATE A daily charge at an annual effective rate of 1.25% for Annuity mortality and expense risks. The ACCOUNT: administrative charge is established upon election of an Annuity option. This charge will not exceed 0.25%. WARIABLE ANNUITY ASSUMED If a Variable Annuity is chosen, an assumed annual net return rate of 5.0% may be elected. If 5.0% ANNUAL NET RETURN RATE: is not elected, Aetna will use an assumed annual net return rate of 3.5%. The assumed annual net return rate factor for 3.5% per year is 0.9999058. The assumed annual net return rate factor for 5.0% per year is 0.9998663. If the portion of a Variable Annuity payment for any Fund is not to decrease, the Annuity return factor under the Separate Account for that Fund must be: (a) 4.75% on an annual basis plus an annual return of up to 0.25% to offset the administrative charge set at the time Annuity payments commence if an assumed annual net return rate of 3.5% is chosen; or (b) 6.25% on an annual basis plus an annual return of up to 0.25% to offset the administrative charge set at the time Annuity payments commence, if an assumed annual net return rate of 5% is chosen.
FIXED ANNUITY -------------------------------------------------------------------------------- MINIMUM GUARANTEED 3.0% INTEREST RATE (effective annual rate of return):
See 1. GENERAL DEFINITIONS for explanations. 12 TABLE OF CONTENTS I. GENERAL DEFINITIONS ------------------------------------------------------------------
PAGE 1.01 Account....................................................................10 1.02 Accumulation Period........................................................10 1.03 Adjusted Current Value.....................................................10 1.04 ALIAC Guaranteed Account (AG Account)......................................10 1.05 Annuitant..................................................................10 1.06 Annuity....................................................................10 1.07 Beneficiary................................................................10 1.08 Certificate Holder.........................................................10 1.09 Code.......................................................................10 1.10 Contract...................................................................10 1.11 Contract Holder............................................................10 1.12 Current Value..............................................................11 1.13 Deposit Period.............................................................11 1.14 Dollar Cost Averaging......................................................11 1.15 Fixed Annuity..............................................................11 1.16 Fund(s)....................................................................11 1.17 General Account............................................................11 1.18 Guaranteed Rate -- AG Account..............................................11 1.19 Guaranteed Term............................................................11 1.20 Guaranteed Term(s) Groups..................................................12 1.21 Maintenance Fee............................................................12 1.22 Market Value Adjustment (MVA)..............................................12 1.23 Matured Term Value.........................................................12 1.24 Matured Term Value Transfer................................................12 1.25 Maturity Date..............................................................12 1.26 Net Purchase Payment(s)....................................................12 1.27 Nonunitized Separate Account...............................................12 1.28 Purchase Payment(s)........................................................12 1.29 Reinvestment...............................................................12 1.30 Separate Account...........................................................13 1.31 Surrender Value............................................................13 1.32 Transfers..................................................................13
13
PAGE 1.33 Valuation Period (Period)..................................................13 1.34 Variable Annuity...........................................................13 II. GENERAL PROVISIONS ------------------------------------------------------------------ 2.01 Change of Contract.........................................................13 2.02 Change of Fund(s)..........................................................14 2.03 Nonparticipating Contract..................................................14 2.04 Payments and Elections.....................................................15 2.05 State Laws.................................................................15 2.06 Control of Contract........................................................15 2.07 Designation of Beneficiary.................................................15 2.08 Misstatements and Adjustments..............................................16 2.09 Incontestability...........................................................16 2.10 Grace Period...............................................................16 III. PURCHASE PAYMENT, CURRENT VALUE, AND SURRENDER PROVISIONS ------------------------------------------------------------------ 3.01 Net Purchase Payment.......................................................16 3.02 Certificate Holder's Account...............................................16 3.03 Fund(s) Record Units -- Separate Account...................................17 3.04 Net Return Factor(s) -- Separate Account...................................17 3.05 Fund Record Unit Value -- Separate Account.................................17 3.06 Market Value Adjustment....................................................18 3.07 Transfer of Current Value from the Funds or ALIAC Guaranteed Account.......19 3.08 Notice to the Certificate Holder...........................................19 3.09 Loans......................................................................19 3.10 Systematic Withdrawal Option (SWO).........................................19 3.11 Death Benefit Amount.......................................................21 3.12 Death Benefit Options Available to Beneficiary.............................23 3.13 Liquidation of Surrender Value.............................................24 3.14 Surrender Fee..............................................................25 3.15 Payment of Surrender Value.................................................25
14 IV. ANNUITY PROVISIONS ------------------------------------------------------------------
PAGE 4.01 Choices to be Made.........................................................25 4.02 Terms of Annuity Options...................................................26 4.03 Death of Annuitant/Beneficiary.............................................27 4.04 Fund(s) Annuity Units -- Separate Account..................................28 4.05 Fund(s) Annuity Unit Value -- Separate Account.............................28 4.06 Annuity Net Return Factor(s) -- Separate Account...........................29 4.07 Annuity Options............................................................29
15 I. GENERAL DEFINITIONS -------------------------------------------------------------------------------- 1.01 ACCOUNT: A record established for each Certificate Holder to maintain the value of the Net Purchase Payment held on his/her behalf during the Accumulation Period. 1.02 ACCUMULATION PERIOD: The period during which the Net Purchase Payment(s) are applied to a Contract to provide future Annuity payment(s). 1.03 ADJUSTED CURRENT VALUE: The Current Value of a Contract plus or minus any aggregate ALIAC Guaranteed Account MVA, if applicable. (See 1.21) 1.04 ALIAC GUARANTEED An accumulation option where Aetna ACCOUNT guarantees stipulated rate(s) of interest for (AG ACCOUNT): specified periods of time. All assets of Aetna, including amounts in the Nonunitized Separate Account, are available to meet the guarantees under the AG Account. 1.05 ANNUITANT: The person whose life is measured for purposes of the Guaranteed Death Benefit and the duration of Annuity payments under this Contract. 1.06 ANNUITY: Payment of an income: (a) For the life of one or two persons; (b) For a stated period; or (c) For some combination of (a) and (b). 1.07 BENEFICIARY: The individual or estate entitled to receive any payment from the Contract upon the death of the Annuitant, or if the Certificate Holder is different from the Annuitant, upon the death of the Certificate Holder. If the Account is held by joint Certificate Holders, the survivor will be deemed the designated Beneficiary and any other Beneficiary on record will be treated as the contingent Beneficiary. 1.08 CERTIFICATE HOLDER: A person who purchases an interest in the Contract as evidenced by a certificate. Aetna reserves the right to limit ownership to natural persons. If more than one Certificate Holder owns an account, each Certificate Holder will be a joint Certificate Holder. Any joint Certificate Holder must be the spouse of the other joint Certificate Holder. Joint Certificate Holders have joint ownership rights and both must authorize exercising any ownership rights unless Aetna allows otherwise. If the account is owned by a nonnatural person, the death benefit will be paid at the death of the Annuitant. 1.09 CODE: The Internal Revenue Code of 1986, as it may be amended from time to time. 1.10 CONTRACT: This agreement between Aetna and the Contract Holder. 1.11 CONTRACT HOLDER: The entity to which a group Contract is issued. 16 1.12 CURRENT VALUE: As of the most recent Valuation Period, the Net Purchase Payment and any additional amount deposited pursuant to 3.12 plus any interest added to the portion allocated to the ALIAC Guaranteed Account; and plus or minus the investment experience of the portion allocated to the Funds since deposit; less all Maintenance Fees deducted, any amounts surrendered and any amounts applied to an Annuity. 1.13 DEPOSIT PERIOD: A calendar week, a calendar month, a calendar quarter, or any other period of time specified by Aetna during which the Net Purchase Payment(s), Transfers or Reinvestments are accepted into the ALIAC Guaranteed Account for one or more Guaranteed Terms. Aetna reserves the right to extend the Deposit Period. 1.14 DOLLAR COST AVERAGING: A program that permits the Certificate Holder to systematically transfer amounts from any of the Funds and the one-year AG Account Guaranteed Term to any of the Funds by completing the appropriate section of the enrollment form or a Dollar Cost Averaging election form. 1.15 FIXED ANNUITY: An Annuity with payments that do not vary in amount. 1.16 FUND(S): The open-end management investment companies (mutual funds) in which the Separate Account invests (see Contract Schedule I for the specific fund options). 1.17 GENERAL ACCOUNT: The account holding the assets of Aetna, other than those assets held in Aetna's separate accounts. 1.18 GUARANTEED RATE -- Aetna will declare the interest rate AG ACCOUNT: applicable to a specific Guaranteed Term at the start of the Deposit Period for that Guaranteed Term. The rate is guaranteed by Aetna for that Deposit Period and the ensuing Guaranteed Term. The Guaranteed Rate is an annual effective yield. That is, interest is credited daily at a rate that will produce the Guaranteed Rate over the period of a year. No Guaranteed Rate will ever be less than the Minimum Guaranteed Rate shown on Contract Schedule I. 1.19 GUARANTEED TERM: The period of time for which the AG Account Guaranteed Rate is guaranteed on the Net Purchase Payment, Transfers and Reinvestments made into a current Deposit Period for the AG Account. Such period begins on the day following the close of the Deposit Period and ends on the designated Maturity Date. Guaranteed Terms are offered at Aetna's discretion for various lengths of time ranging up to and including ten years. During a Deposit Period, Aetna may make available any number of Guaranteed Terms. The Contract Holder may allocate Net Purchase Payments and Transfers into any or all of the available Guaranteed Terms. 17 1.20 GUARANTEED TERM(S) All AG Account Guaranteed Term(s) with GROUPS: the same length of time from the close of the Deposit Period until the designated Maturity Date. 1.21 MAINTENANCE FEE: The Maintenance Fee (see Contract Schedule I) will be deducted during the Accumulation Period from the Current Value on each anniversary of the date the Contract is established and upon the surrender of the entire Contract. 1.22 MARKET VALUE ADJUSTMENT An adjustment that may apply to an amount (MVA): withdrawn or transferred from an AG Account Guaranteed Term prior to the end of that Guaranteed Term. The adjustment reflects the change in the value of the investment due to changes in interest rates since the date of deposit and is computed using the formula given in 3.06. The adjustment is expressed as a percentage of each dollar being withdrawn or transferred. 1.23 MATURED TERM VALUE: The amount payable on an AG Account Guaranteed Term's Maturity Date. 1.24 MATURED TERM VALUE During the calendar month following TRANSFER: an AG Account Maturity Date, the Certificate Holder may notify Aetna's Home Office in writing to Transfer or surrender all or part of the Matured Term Value, plus interest at the new Guaranteed Rate accrued thereon, from the AG Account without an MVA. This provision only applies to the first such written request received from the Certificate Holder during this period for any Matured Term Value. 1.25 MATURITY DATE: The last day of an AG Account Guaranteed Term. 1.26 NET PURCHASE PAYMENT: The Purchase Payment less premium taxes, as applicable. 1.27 NONUNITIZED SEPARATE A separate account set up by Aetna under ACCOUNT: Title 38, Section 38a-433, of the Connecticut General Statutes, that holds assets for AG Account Terms. There are no discrete units for this Account. The Certificate Holder does not participate in the investment gain or loss from the assets held in the Nonunitized Separate Account. Such gain or loss is borne entirely by Aetna. These assets may be chargeable with liabilities arising out of any other business of Aetna. 1.28 PURCHASE PAYMENT(S): Payment(s) accepted by Aetna at its Home Office. Aetna reserves the right to refuse to accept any Purchase Payment at any time for any reason. No advance notice will be given to the Contract Holder. Aetna reserves the right to refuse to accept any Purchase Payment at any time for any reason. No advance notice will be given to the Contract Holder or Certificate Holder. 1.29 REINVESTMENT: Aetna will mail a notice to the Contract Holder at least 18 calendar days and not more than 45 days before a Guaranteed Term's Maturity Date. 18 1.29 REINVESTMENT: This notice will contain the Terms available (CONT'D) during current Deposit (CONT'D) Periods with their Guaranteed Rate, and projected Matured Term Value. If no specific direction is given by the Certificate Holder prior to the Maturity Date, each Matured Term Value will be reinvested in the current Deposit Period for a Guaranteed Term of the same duration. If a Guaranteed Term of the same duration is unavailable, each Matured Term Value will automatically be reinvested in the current Deposit Period for the next shortest Guaranteed Term available. If no shorter Guaranteed Term is available, the next longer Guaranteed Term will be used. Aetna will mail a confirmation statement to the Certificate Holder the next business day after the Maturity Date. This notice will sate the Guaranteed Term and Guaranteed Rate which will apply to the reinvested Matured Term Value. 1.30 SEPARATE ACCOUNT: A separate account that buys and holds shares of the Fund(s). Income, gains or losses, realized or unrealized, are credited or charged to the Separate Account without regard to other income, gains or losses of Aetna. Aetna owns the assets held in the Separate Account and is not a trustee as to such amounts. This Separate Account generally is not guaranteed and is held at market value. The assets of the Separate Account, to the extent of reserves and other contract liabilities of the Account, shall not be cha rged with other Aetna liabilities. 1.31 SURRENDER VALUE: The amount payable by Aetna upon the surrender of any portion of an account. 1.32 TRANSFERS: The movement of invested amounts among the available Fund(s) and the AG Account under this Contract during the Accum ulation Period. 1.33 VALUATION PERIOD (PERIOD): The period of time for which a Fund determines its net asset value, usually from 4:15 p.m. Eastern time each day the New York Stock Exchange is open until 4:15 p.m. the next such day, or such other day that one or more of the Funds determines its net asset value. 1.34 VARIABLE ANNUITY: An Annuity with payments that vary with the net investment results of one or more Funds held under the Separate Account. II. GENERAL PROVISIONS -------------------------------------------------------------------------------- 2.01 CHANGE OF CONTRACT: Only an authorized officer of Aetna may change the terms of the contract. Aetna will notify the Contract Holder in writing at least 30 days before the effective date of any change. Any change will not affect the amount or terms of any Annuity which begins before the change. 19 2.01 CHANGE OF CONTRACT Aetna may make any change that affects the AG (CONT'D): Account Market Value Adjustment (3.06) with at least 30 days' advance written notice to the Contract Holder and the Certificate Holder. Any such change shall become effective for any new Term and will be applicable only if it is more favorable to the Contract Holder and/or the Certificate Holder. Any change that affects any of the following under this Contract will not apply to Accounts in existence before the effective date of the change: (a) Net Purchase Payment (3.01) (b) AG Account Guaranteed Rate (1.04) (c) Net Return Factor(s) -- Separate Account (3.04) (d) Current Value (1.12) (e) Surrender Value (1.31) (f) Fund(s) Annuity Unit Value -- Separate Account (4.05) (g) Annuity Options (4.07) (h) Fixed Annuity Guaranteed Interest Rates (4.01) (i) Transfers (1.32) This Contract may be changed as deemed necessary by Aetna to comply with federal or state law. Any such change is subject to the prior approval of the New York Insurance Department. 2.02 CHANGE OF FUND(S): Aetna, or the Separate Account, may: (a) Change the Fund(s) which may be invested in by the Separate Account; and (b) Replace the shares of any Fund(s) held in the Separate Account with shares of any other Fund(s). Changes must be: (a) Approved by a majority vote of the shares in the Separate Account with respect to the Fund(s) whose shares are to be replaced; or (b) Deemed necessary by Aetna under the Investment Company Act of 1940; or (c) Deemed necessary by Aetna to accomplish the purpose of the Separate Account. Such changes are subject to the approval of the Superintendent of the New York Insurance Department and Aetna will notify the Contract Holder of such change. 2.03 NONPARTICIPATING CONTRACT: The Contract Holder, Certificate Holders or Beneficiaries will not have a right to share in the earnings of Aetna. 20 2.04 PAYMENTS AND ELECTIONS: While the Certificate Holder is living, Aetna will pay the Certificate Holder any Annuity payments as and when due. After the Certificate Holder's death, or at the death of the first Certificate Holder if the Account is owned jointly, any Annuity payments required to be made will be paid in accordance with 4.03. Aetna will determine other payments and/or elections as of the end of the Valuation Period in which the request is received at its Home Office. Such payments will be made within 7 calendar days of receipt at its Home Office of a written claim for payment which is in good order, except as provided in 3.15. 2.05 STATE LAWS: The Contract and the Certificates comply with the laws of the state in which they are delivered. Any surrender, death, or Annuity payments are equal to or greater than the minimum required by such laws. Annuity tables for legal reserve valuation shall be as required by state law. Such tables may be different from Annuity tables used to determine Annuity payments. 2.06 CONTROL OF CONTRACT: This is a Contract between the Contract Holder and Aetna. The Contract Holder has title to the Contract. Contract Holder rights are limited to accepting and rejecting Contract modifications. The Certificate Holder has all other rights to amounts held in his or her Account. Each Certificate Holder shall own all amounts held in his or her Account. Each Certificate Holder may make any choices allowed by this Contract for his or her Account. Certificate Holder choices made under the contract must be in writing. If the Account is owned jointly, both joint Certificate Holders must authorize any Certificate Holder change in writing. Until receipt of such choices at Aetna's Home Office, Aetna may rely on any previous choices made. The Account may not be attached, alienated, or subject to the claims of creditors of the Certificate Holder except to the extent permitted by law. The Certificate Holder may assign or transfer his or her rights under the Contract. Aetna reserves the right not to accept assignment or transfer to a nonnatural person. Any assignment or transfer made must be submitted to Aetna's Home Office in writing and will not be effective until accepted by Aetna. 2.07 DESIGNATION OF Each Certificate Holder shall name his or her BENEFICIARY: Beneficiary. If the Account is owned jointly, both joint Certificate Holders must agree in writing to the Beneficiary designated. The Beneficiary may be changed at any time. Changes to a Beneficiary must be submitted to Aetna's Home Office in writing and will not be effective until accepted by Aetna. 21 2.08 MISSTATEMENTS AND If Aetna finds the age or sex of any ADJUSTMENTS: Annuitant to be misstated, the amount payable under the Contract shall be adjusted for the correct age or sex; the amount of any underpayment or overpayment, with interest at six per cent per year, shall be credited to, or changed against, the current or next succeeding payment or payments to be made by Aetna under the Contract. 2.09 INCONTESTABILITY: Aetna cannot cancel the Contract because of any error of fact on the application. Aetna cannot cancel an Account because of any error of fact on the enrollment form. 2.10 GRACE PERIOD: This Contract will remain in effect even if Purchase Payments are not continued. III. PURCHASE PAYMENT, CURRENT VALUE, AND SURRENDER PROVISIONS -------------------------------------------------------------------------------- 3.01 NET PURCHASE PAYMENT: This amount is the actual Purchase Payment less any premium tax. Aetna will generally deduct the premium tax when Annuity benefits are elected (see Part IV). If Aetna determines that under applicable state law, it must pay a premium tax when the Purchase Payment is received or at any other time, it will deduct the tax at that time. The Net Purchase Payment will be credited among: (a) The current Deposit Period(s) for Guaranteed Terms under the AG Account; and (b) The Fund(s) in which the Separate Account invests. For each Net Purchase Payment, the Certificate Holder shall tell Aetna the allocation percentage to be applied to the current Deposit Period for each of the available Guaranteed Terms in the AG Account and/or each Fund. If allocation instructions are not received along with any subsequent Net Purchase Payment, the allocation will be the same as that indicated on the original application. If the same Guaranteed Term is no longer available, the Net Purchase Payment will be allocated to the next shortest Guaranteed Term available in the current Deposit Period. If no shorter Guaranteed Term is available, the next longer Guaranteed Term will be used. The minimum acceptable additional Purchase Payment is shown on Contract Schedule I. The maximum acceptable Purchase Payment without Home Office approval is also provided on Contract Schedule I. 3.02 CERTIFICATE HOLDER'S Aetna will maintain an Account for each ACCOUNT: Certificate Holder. 22 3.03 FUND(S) RECORD UNITS -- The portion of the Net Purchase Payment(s) SEPARATE ACCOUNT: applied to each Fund under the Separate Account will determine the number of Fund record units for that Fund. This number is equal to the portion of the Net Purchase Payment(s) applied to each Fund divided by the Fund record unit value (see 3.05) for the Valuation Period in which the Purchase Payment is received in good order at Aetna's Home Office. 3.04 NET RETURN FACTOR(S) -- The net return factor(s) are used to compute SEPARATE ACCOUNT: all Separate Account record units for any Fund. The net return factor for each Fund is equal to 1.0000000 plus the net return rate. The net return rate is equal to: (a) The value of the shares of the Fund held by the Separate Account at the end of the Valuation Period; minus (b) The value of the shares of the Fund held by the Separate Account at the start of the Valuation Period; plus or minus (c) Taxes (or reserves for taxes) on the Separate Account (if any); divided by (d) The total value of the Fund record units and Fund Annuity units of the Separate Account at the start of the Valuation Period; minus (e) A daily Separate Account charge at an annual rate as shown on Contract Schedule I for mortality and expense risks, which may include profit; and a daily administrative charge. A net return rate may be more or less than 0%. The value of a share of the Fund is equal to the net assets of the Fund divided by the number of shares outstanding. 3.05 FUND RECORD UNIT A Fund record unit value is computed by VALUE -- SEPARATE ACCOUNT: multiplying the net return factors for the current Valuation Period by the Fund record unit value for the previous Period. The dollar value of Fund record units, Separate Account assets, and Variable Annuity payments may go up or down due to investment gain or loss. 3.06 MARKET VALUE Except as noted below, there will be an MVA Adjustment: for a withdrawal from the AG Account before the end of a Guaranteed Term when the withdrawal is due to: (a) A Transfer; except for Transfers from the one-year AG Account Guaranteed Term under the Dollar Cost Averaging program or, as specified in 1.24, AG Account Matured Term Value Transfer; (b) A full or partial surrender (including a 15% free withdrawal under 3.14), except for a partial withdrawal under the Systematic Withdrawal Option (see 3.10); or (c) An election of Annuity option 2 (see 4.07). 23 3.06 MARKET VALUE Full and partial surrenders and ADJUSTMENT Transfers made within six months (CONT'D): after the date of the Annuitant's death will be the greater of: (a) The aggregate MVA amount which is the sum of all market value adjusted amounts calculated due to a withdrawal of amounts. This total may be greater or less than the Current Value of those amounts; or (b) The applicable portion of the Current Value in the AG Account. After the six-month period, the surrender or transfer will be the aggregate MVA amount, which may be greater or less than the Current Value of those amounts. The greater of the aggregate MVA amount or the applicable portion of the Current Value applies to amounts withdrawn from the AG Account on account of an election of Annuity options 3 or 4 (see 4.07). Market value adjusted amounts will be equal to the amount withdrawn multiplied by the following ratio: x ----- 365 (1 + i) ---------------- x ----- 365 (1 + j) Where: i is the Deposit Period Yield j is the Current Yield x is the number of days remaining, (computed from Wednesday of the week of withdrawal) in the Guaranteed Term. The Deposit Period Yield will be determined as follows: (a) At the close of the last business day of each week of the Deposit Period, a yield will be computed as the average of the yields on that day of U.S. Treasury Notes which mature in the last three months of the Guaranteed Term. (b) The Deposit Period Yield is the average of those yields for the Deposit Period. If withdrawal is made before the close of the Deposit Period, it is the average of those yields on each week preceding withdrawal. The Current Yield is the average of the yields on the last business day of the week preceding withdrawal on the same U.S. Treasury Notes included in the Deposit Period Yield. 24 3.06 MARKET VALUE In the event that no U.S. Treasury Notes ADJUSTMENT which mature in the last three months of (CONT'D): the Guaranteed Term exist, Aetna reserves the right to use the U.S. Treasury Notes that mature in the following quarter. If. U.S. Treasury Notes are no longer available, a suitable replacement index, subject to approval of the Superintendent of the New York Insurance Department, would then be utilized. A detailed description of the MVA has been filed with the Superintendent of the New York Insurance Department. 3.07 TRANSFER OF CURRENT VALUE Before an Annuity option is elected, all FROM THE FUNDS OR or any portion of the Adjusted Current AG ACCOUNT: Value may be transferred from any Fund or Guaranteed Term of the AG Account: (a) To any other Fund; or (b) To any Guaranteed Term of the AG Account available in the current Deposit Period. Transfer requests can be submitted as a percentage or as a dollar amount. The minimum transfer amount is shown on Contract Schedule I. Within a Guaranteed Term Group, the amount to be surrendered or transferred will be withdrawn first from the oldest Deposit Period, then from the next oldest, and so on until the amount requested is satisfied. The Certificate Holder may make an unlimited number of Transfers during the Accumulation Period. The number of free Transfers allowed by Aetna is shown on Contract Schedule I. Additional Transfers may be subject to a Transfer fee as shown on Contract Schedule I. Amounts transferred from the AG Account under the Dollar Cost Averaging program, or amounts transferred as a Matured Term Value on or within the calendar month of the Term's Maturity Date, do not count against the annual Transfer limit. Amounts applied to Guaranteed Terms of the AG Account may not be transferred to the Funds or to another Guaranteed Term during the Deposit Period or for 90 days after the close of the Deposit Period except for: (1) a Matured Term Value(s) during the calendar month following the Term's Maturity Date and (2) amounts transferred from the one- year AG Account Guaranteed Term under the Dollar Cost Averaging program. Transfers from Guaranteed Terms of the AG Account are subject to the MVA provisions in 3.06. 3.08 NOTICE TO THE CONTRACT The Certificate Holder will receive HOLDER: quarterly statements from Aetna of: 25 (a) The value of any amounts held in: (1) The AG Account; and (2) The Fund(s) under the Separate Account. (b) The number of any Fund(s) record units; and (c) The Fund(s) record unit value. 3.08 NOTICE TO THE CONTRACT Such number or values will be as of a HOLDER specific date no more than 60 days (CONT'D): before the date of the notice. 3.09 LOANS: Loans are not available under this Contract. 3.10 SYSTEMATIC WITHDRAWAL The following distribution options OPTION (SWO) may be elected by the Certificate Holder during the Accumulation Period. A distribution option under which a portion of the Account's Current Value will automatically be surrendered and distributed each year. SWO payments will be calculated based on the Account's full Current Value. The distributed amount will be withdrawn pro rata from each investment option used under the Account. A Surrender Fee will not be deducted from any portion of the Current Value which is paid as a distribution under SWO. Certificate Holders should consult their tax advisers prior to requesting this distribution option. Aetna will not be responsible for any adverse tax consequences due to receiving SWO payments. (a) Amount of Distribution: The Certificate Holder may elect one of the three payment methods described below. (1) Specified Payment: Payment of a designated dollar amount. The annual amount may not be greater than the percentage of the Account's Current Value on the date of the SWO election as shown on Contract Schedule I. This annual dollar amount will remain constant. The minimum SWO payment amount is shown on Contract Schedule I. If SWO payments are made more frequently than annually, the designated annual amount is divided by the number of payments due each year; or (2) Specified Period: Payments made over a designated period of time of at least 10 years. The annual payment is calculated by dividing the Current Value as of December 31 of the year prior to the payment year by the number of payment years remaining; or (3) Specified Percentage: Payments of a designated percentage which cannot be greater than the percentage of the Current Value at the time of election as shown on Contract Schedule I. The percentage may be changed by written request. Aetna reserves the right to limit the number of times the percentage may be changed. The annual amount is calculated by multiplying the Current Value as of December 31 of the year prior to the payment year by the designated percentage. 26 Payments upon the Contract Holder's death will continue to the Beneficiary in the manner described in 3.11. 3.10 SYSTEMATIC WITHDRAWAL (b) Minimum Initial Current Value: OPTION (SWO) The Minimum Initial Current Value (CONT'D): required to begin SWO is shown on Contract Schedule I. If after election of this option the Current Value is insufficient to make a scheduled SWO payment, Aetna will distribute the entire balance. (c) Date of Distribution: The Contract Holder shall specify the first payment date. The earliest allowable first payment date is the date on which the Contract Holder attains age 59 1/2. The latest allowable SWO payment date is the month of the Contract Holder's 85th birthday. As elected by the Contract Holder, SWO payments will be made on a monthly, quarterly, semi-annual or annual basis. If SWO payments are made more frequently than annually, the designated annual amount is divided by the number of payments due each year. Subsequent payments will be made on the 15th of the appropriate months or on such other date as Aetna may designate or allow. (d) Election and Revocation: SWO may be elected by the Certificate Holder or a spouse beneficiary if elected after the Certificate Holders death by submitting a completed and signed election form to Aetna's Home Office. Once elected, this option may be revoked by the Certificate Holder or spousal Beneficiary, if elected after the Certificate Holder's death, by submitting a written request to Aetna at its Home Office. Any revocation will apply only to amounts not yet paid. SWO may be elected only once by the Certificate Holder or by the spouse Beneficiary. 3.11 DEATH BENEFIT AMOUNT: If the Certificate Holder or Annuitant dies before Annuity payments start, the Beneficiary is entitled to a death benefit under the Account. If the Account is owned jointly, the death benefit is paid at the death of the first joint Certificate Holder to die. The claim date is the date when proof of death and the Beneficiary's claim are received in good order at Aetna's Home Office. The amount of the death benefit is determined as follows: (a) Death of Annuitant less than 85 years of age: The guaranteed death benefit is the greatest of: (1) The sum of all Net Purchase Payment(s) made to the Account (as of the date of death) minus the sum of all amounts surrendered, applied to an Annuity, or deducted from the Account; 27 3.11 DEATH BENEFIT AMOUNT (2) The highest step-up value as (CONT'D) of the date of death. A step- up value is determined on each anniversary of the Effective Date. Each step-up value is calculated as the Account's Current Value on the Effective Date anniversary, increased by the amount of any Purchase Payment(s) made, and decreased by the sum of all amounts surrendered, deducted, and/or applied to an Annuity option since the Effective Date anniversary. (3) The Account's Current Value as of the date of death. The excess, if any, of the guaranteed death benefit value over the Account's Current Value is determined as of the date of death. Any excess amount will be deposited in the Account and allocated to Aetna Variable Encore Fund as of the claim date. The Current Value on the claim date plus any excess amount deposited becomes the Account's Current Value. (b) Death of Annuitant age 85 or greater: The death benefit is the greatest of: (1) The sum of all Net Purchase Payment(s) made to the account (as of the date of death) minus the sum of all amounts surrendered, applied to an Annuity, or deducted from the Account; (2) The highest step-up value prior to the Certificate Holder's 85th birthday. A step-up value is determined on each anniversary of the Effective Date. Each step-up value is calculated as the Account's Current Value on the Effective Date anniversary, increased by the amount of any Purchase Payment(s) made, and decreased by the sum of all amounts surrendered, deducted, and/or applied to an Annuity option since the Effective Date anniversary. (3) The Account's Current Value as of the date of death. The excess, if any, of the guaranteed death benefit value over the Account's Current Value is determined as of the date of death. Any excess amount will be deposited in the Account and allocated to the Aetna Variable Encore Fund as of the claim date. The Current Value on the claim date, plus any excess amount deposited, becomes the Account's Current Value. (c) Death of the Certificate Holder if the Certificate Holder is not the Annuitant: The death benefit amount is the Account's Adjusted Current Value on the Claim Date. A Surrender Fee may apply to any full or partial surrender (see 3.14 and Contract Schedule I). 28 3.11 DEATH BENEFIT AMOUNT (d) At the death of a surviving spouse (CONT'D) Beneficiary who continued the Account in his or her own name, the death benefit amount is equal to the Account's Current Value less any applicable Surrender Fee on the amount of any Purchase Payment(s) made since the death of the Certificate Holder. 3.12 DEATH BENEFIT OPTIONS Prior to any election, or until amounts AVAILABLE TO BENEFICIARY: must be otherwise distributed under this section, the Current Value of the account will be retained in the Account. The Beneficiary has the right under the Contract to allocate or reallocate any amount to any of the available investment options (subject to an MVA, as applicable). The following options are available to the Beneficiary: (a) When the Contract Holder is the Annuitant: If the Contract Holder/Annuitant dies, and: (1) If the Beneficiary is the Certificate Holder's surviving spouse, the surviving spouse may exercise all rights under the Contract and continue in the Accumulation Period, or may elect (i), (ii), or (iii) below. Under the Code, distributions from the Account are not required until the Spousal Beneficiary's death. The Spousal Beneficiary may elect to: (i) Apply some or all of the Adjusted Current Value of the Account to Annuity option 2, 3 or 4 (see 4.07); (ii) Apply some or all of the Adjusted Current Value to Annuity option 1 (see 4.07); or (iii) Receive, at any time, a lump sum payment equal to the Adjusted Current Value of the Account. (2) If the Beneficiary is other than the Certificate Holder's surviving spouse, then options (i), (ii), or (iii) under (1) above apply. Any portion of the Adjusted Current Value of the Account not applied to Annuity option 2, 3 or 4 within one year of the Certificate Holder's death, must be distributed within five years of the date of death. (3) If no Beneficiary exists, a lump sum payment equal to the Adjusted Current Value will be made to the Certificate Holder's estate. (b) When the Certificate Holder is not the Annuitant and the Certificate Holder dies, and: 29 3.12 DEATH BENEFIT OPTIONS (1) If the Beneficiary is the AVAILABLE TO BENEFICIARY Certificate Holder's surviving (CONT'D) spouse, the Beneficiary may exercise all rights under the Contract and continue in the Accumulation Period, or may elect (i), (ii), or (iii) below. Under the Code, distributions from the Account are not required under the spousal Beneficiary's death. The spousal Beneficiary may elect to: (i) Apply some or all of the Adjusted Current Value of the Account to Annuity option 2, 3 or 4 (see 4.07); (ii) Apply some or all of the Adjusted Current Value to Annuity option 1 (see 4.07); or (iii) Receive, at any time, a lump sum payment equal to the Adjusted Current Value of the Account. (2) If the Beneficiary is other than the Certificate Holder's surviving spouse, then options (i), (ii), or (iii) under (1) above apply. Any portion of the Adjusted Current Value not applied to Annuity option 2, 3 or 4 within one year of the Certificate Holder's death, must be distributed within five years of the date of death. (3) If no Beneficiary exists, a lump sum payment equal to the Surrender Value will be made to the Certificate Holder's estate. (c) When the Certificate Holder is not the Annuitant and the Annuitant dies: The Beneficiary must elect Annuity option 2, 3 or 4 within 60 days of the date of death or the gain, if any, will be includible in the Beneficiary's income in the tax year in which the Annuitant dies. 3.13 LIQUIDATION OF All or any portion of the Account's SURRENDER VALUE: Current Value may be surrendered at any time. Surrender requests can be submitted as a percentage of the Account's Adjusted Current Value or as a specific dollar amount. Net Purchase Payment amounts are withdrawn first, and then the excess value, if any. For any partial surrender, amounts are withdrawn on a pro rata basis from the Fund(s) and/or the Guaranteed Term(s) Groups of the AG Account in which the Current Value is invested. Within a Guaranteed Term Group, the amount to be surrendered or transferred will be withdrawn first from the oldest Deposit Period, then from the next oldest, and so on until the amount requested is satisfied. After deduction of the Maintenance Fee, if applicable, the surrendered amount shall be reduced by a Surrender Fee, if applicable. An MVA may apply to amounts surrendered from the AG Account. 30 3.14 SURRENDER FEE: The Surrender Fee only applies to the Net Purchase Payment(s) portion surrendered and varies according to the elapsed time since deposit (see Contract Schedule I). Net Purchase Payment amounts are withdrawn in the same order they were applied. No Surrender Fee is deducted from any portion of the Net Purchase Payment which is paid: (a) To a Beneficiary due to the Annuitant's death before Annuity payments start, up to a maximum of the aggregate Net Purchase Payment(s) minus the total of all partial surrenders, amounts applied to an Annuity and deductions made prior to the Annuitant's date of death; (b) As a premium for an Annuity option 2, 3 or 4 under this Contract (see 4.07); (c) As a distribution under the SWO provision (see 3.10); (d) At least 12 months after the date of the Purchase Payment to the Account, in an amount equal to or less than 15% of the Current Value. This applies to the first surrender request, partial or full, in a calendar year. The Current Value is calculated as of the date the surrender request is received in good order at Aetna's Home Office. This waiver is not available to the Contract Holder while SWO is in effect; or (e) For a full surrender of the Account where the Current Value of the Account is $2,500 or less and no surrenders have been taken from the Contract within the prior 12 months. 3.15 PAYMENT OF Under certain emergency conditions, SURRENDER VALUE: Aetna may defer payment: (a) For a period of up to 6 months (unless not allowed by state law); or (b) As provided by federal law under the Investment Company Act of 1940. IV. ANNUITY PROVISIONS -------------------------------------------------------------------------------- 4.01 CHOICES TO BE MADE: The Certificate Holder may tell Aetna to apply any portion of the Adjusted Current Value (minus any premium tax) for an Annuity under option 2, 3, or 4 (see 4.07). The first Annuity payment may not be earlier than one calendar year after the Purchase Payment nor later than the first day of the month following the Annuitant's 85th birthday. When an Annuity Option is chosen, Aetna must also be told if payments are to be made other than monthly and whether to pay: 31 4.01 CHOICES TO BE MADE: (a) A Fixed Annuity using the General (CONT'D) Account; (b) A Variable Annuity using any of the Fund(s) available under this Contract for Annuity purposes; or (c) A combination of (a) and (b). If a Fixed Annuity is chosen, the Annuity purchase rate for the option chosen reflects at least the Minimum Guaranteed Interest Rate (see Contract Schedule II), but may reflect a higher interest rate. If a Variable Annuity is chosen, the initial Annuity payment for the option chosen reflects the assumed annual return rate elected. (see Contract Schedule II). 4.02 TERMS OF ANNUITY (a) When payments start, the age of the OPTIONS: Annuitant plus the number of years for which payments are guaranteed must not exceed 95. (b) An Annuity option may not be elected if the first payment would be less than $50 or if the total payments in a year would be less than $250 (less if required by state law). Aetna reserves the right to increase the minimum first Annuity payment amount and the annual minimum annual Annuity payment amount based upon increases reflected in the Consumer Price Index-Urban, (CPI-U) since July 1, 1993. (c) If a Fixed Annuity under option 2, 3 or 4 is chosen and a larger payment would result from applying the Surrender Value or, if greater, 95% of what the surrender would be if there were no surrender fee, to a current Aetna single premium immediate Annuity, Aetna will make the larger payment. (d) For purposes of calculating the guaranteed first payment of a Variable Annuity or the payments for a Fixed Annuity, the Annuitant's and second Annuitant's adjusted age will be used. The Annuitant's and second Annuitant's adjusted age is his or her age as of the birthday closest to the Annuity commencement date reduced by one year for Annuity commencement dates occurring during the period of time from July 1, 1993 through December 31, 1999. The Annuitant's and second Annuitant's age will be reduced by two years for Annuity commencement dates occurring during the period of time from January 1, 2000 through December 31, 2009. The Annuitant's and second Annuitant's age will be reduced by one additional year for Annuity commencement dates occurring in each succeeding decade. The Annuity purchase rates for options 3 and 4 are based on mortality from 1983 Table a. 32 4.02 TERMS OF ANNUITY (e) Assumed Annual Net Return Rate is OPTIONS (CONT'D) the interest rate used to determine the amount of the first Annuity payment under a Variable Annuity as shown on Contract Schedule II. The Separate Account must earn this rate plus enough to cover the mortality and expense risk charges (which may include profit) and administrative charges if future Variable Annuity Payments are to remain level, (see Annuity return factor under Variable Annuity Assumed Annual Net Return Rate on Contract Schedule II). (f) Once elected, Annuity payments cannot be commuted to a lump sum except for Variable Annuity payments under option 2 (see 4.07). The life expectancy of the Annuitant and second Annuitant shall be irrevocable upon the election of an Annuity option. 4.03 DEATH OF ANNUITANT/ (a) Certificate Holder is Annuitant: BENEFICIARY: When the Certificate Holder is the Annuitant and the Annuitant dies under option 2 or 3, or both the Annuitant and the second Annuitant die under option 4(d), the present value of any remaining guaranteed payments will be paid in one sum to the Beneficiary, or upon election by the Beneficiary, any remaining payments will continue to the Beneficiary. If option 4 has been elected and the Certificate Holder dies, the remaining payments will continue to the successor payee. If no successor payee has been designated, the Beneficiary will be treated as the successor payee. If the Account has joint Certificate Holders, the surviving joint Certificate Holder will be deemed the successor payee. (b) Certificate Holder is Not Annuitant: When the Certificate Holder is not the Annuitant and the Certificate Holder dies, the remaining payments under options 2, 3 or 4 will continue to the successor payee. If no successor payee has been designated, the Beneficiary will be treated as the successor payee. If the Account has joint Certificate Holders, the surviving joint Certificate Holder will be deemed the successor payee. If the Annuitant dies under option 2 or 3, or if both the Annuitant and the second Annuitant die under option 4(d), the present value of any remaining guaranteed payments will be paid in one sum to the Beneficiary, or upon the election by the Beneficiary, any remaining payments will continue to the Beneficiary. If option 4 has been elected, and the Annuitant dies, the remaining payments will continue to the Certificate Holder. (c) No Beneficiary Named/Surviving: If there is no Beneficiary under option 2, 3 or 4, the present value of any remaining payments will be paid in one sum to the Certificate Holder, or if the Certificate Holder is not living, then to the Certificate Holder's estate. 33 4.03 DEATH OF ANNUITANT/ (d) If the Beneficiary designated under BENEFICIARY option 1 dies, the amount held plus (CONT'D) accrued interest will be paid in one sum to a successor Beneficiary, if any, named by the designated Beneficiary. If there is no successor Beneficiary, the lump sum will be paid to the designated Beneficiary's estate. (e) If the Beneficiary or the successor payee dies while receiving Annuity payments, the present value of any remaining guaranteed payments will be paid in one sum to the successor Beneficiary/payee, or upon election by the successor Beneficiary/payee, any remaining payments will continue to the successor Beneficiary/payee. If no successor Beneficiary/payee has been designated, the present value of any remaining guaranteed payments will be paid in one sum to the Beneficiary's/payee's estate. (f) The present value will be determined as of the Valuation Period in which proof of death acceptable to Aetna and a request for payment is received at Aetna's Home Office. The interest rate used to determine the first payment will be used to calculate the present value. 4.04 FUND(S) ANNUITY UNITS -- The number of each Fund's Annuity units SEPARATE ACCOUNT: is based on the amount of the first Variable Annuity payment which is equal to: (a) The portion of the Current Value applied to pay a Variable Annuity (minus any premium tax); divided by (b) 1,000; multiplied by (c) The payment rate for the option chosen. Such amount, or portion, of the variable payment will be divided by the appropriate Fund Annuity unit value (see 4.05) on the tenth Valuation Period before the due date of the first payment to determine the number of each Fund Annuity units. The number of each Fund Annuity units remains fixed. Each future payment is equal to the sum of the products of each Fund Annuity unit value multiplied by the appropriate number of Units. The Fund Annuity unit value on the tenth Valuation Period prior to the due date of the payment is used. 4.05 FUND(S) ANNUITY UNIT For any Valuation Period, a Fund Annuity VALUE -- SEPARATE unit value is equal to: ACCOUNT: (a) The value for the previous Period; multiplied by (b) The Annuity net return factor(s) (see 4.06 below) for the Period; multiplied by (c) A factor to reflect the assumed annual net return rate (see Contract Schedule II). The dollar value of a Fund Annuity unit value and Annuity payments may go up or down due to investment gain or loss. 34 4.06 ANNUITY NET RETURN The Annuity net return factor(s) are FACTOR(S) -- SEPARATE used to compute Annuity payments for any ACCOUNT: Fund. The Annuity net return factor(s) for each Fund is equal to 1.0000000 plus the net return rate. The net return rate is equal to: (a) The value of the shares of the Fund held by the Separate Account at the end of a Valuation Period; minus (b) The value of the shares of the Fund held by the Separate Account at the start of the Valuation Period; plus or minus (c) Taxes (or reserves for taxes) on the Separate Account (if any); divided by (d) The total value of the Fund record units and the Fund Annuity units of the Separate Account at the start of the Valuation Period; minus (e) A daily charge for Annuity mortality and expense risks, which may include profit, and a daily administrative charge (at the annual rate as shown on Contract Schedule II). A net return rate may be more or less than 0%. The value of a share of the Fund is equal to the net assets of the Fund divided by the number of shares outstanding. Payments shall not be changed due to changes in the mortality or expense results or administrative charges. 4.07 ANNUITY OPTIONS: Option 1 -- Payment of Interest on Sum Left with Aetna -- This option may be used only by the Beneficiary when the Certificate Holder dies before Aetna has started paying an Annuity. A portion or all of the sum paid upon death may be held under this option and will be held in the General Account of Aetna at interest (see 4.01). The Beneficiary may later tell Aetna to: (a) Pay a portion or all of the sum held by Aetna; or (b) Apply a portion or all of the sum held by Aetna to any Annuity option below. If a nonspouse Beneficiary elects that some or all of the Current Value is to be held under this option, the Beneficiary must tell Aetna to pay the full sum held under this option within 5 years of the date of death. Option 2 -- Payments for a Stated Period of Time -- An Annuity will be paid for the number of years chosen. The number of years must be at least 5 and not more than 30. If payments for this option are made under a Variable Annuity, the present value of any remaining payments may be withdrawn 35 4.07 ANNUITY OPTIONS: at any time. If a withdrawal is (CONT'D) requested within 3 years after the start of payments, it will be treated as a surrender and any applicable Surrender Fee will be applied (see 3.14). If a nonspouse Beneficiary elects this option at the death of the Contract Holder, the period selected may not extend beyond the Beneficiary's life expectancy. Option 3 -- Life Income -- An Annuity will be paid for the life of the Annuitant. If also chosen, Aetna will guarantee payments for 60, 120, 180, or 240 months. Option 4 -- Life Income Based upon the Lives of Two Annuitants -- An Annuity will be paid during the lives of the Annuitant and a second Annuitant. Payments will continue until both Annuitants have died. When this option is chosen, a choice must be made of: (a) 100% of the payment to continue after the first death; (b) 66 2/3% of the payment to continue after the first death; (c) 50% of the payment to continue after the first death; (d) Payments for a minimum of 120 months with 100% of the payment to continue after the first death; or (e) 100% of the payment to continue at the death of the second Annuitant and 50% of the payment to continue at the death of the Annuitant. Other Options -- Aetna may make other options available as allowed by the laws of the state in which this Contract and the Certificate is delivered. 36 OPTION 2 PAYMENTS FOR A STATED PERIOD OF TIME AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
--------------------------------------------------------------------------------------------------- GUARANTEED MONTHLY QUARTERLY SEMI-ANNUAL ANNUAL YEARS RATE PAYMENT PAYMENT PAYMENT PAYMENT --------------------------------------------------------------------------------------------------- 5 3.00% 17.91 53.59 106.78 211.99 6 3.00% 15.14 45.30 90.27 179.22 7 3.00% 13.16 39.39 78.49 155.83 8 3.00% 11.68 34.96 69.66 138.31 9 3.00% 10.53 31.52 62.81 124.69 10 3.00% 9.61 28.77 57.33 113.82 11 3.00% 8.86 26.52 52.85 104.93 12 3.00% 8.24 24.65 49.13 97.54 13 3.00% 7.71 23.08 45.98 91.29 14 3.00% 7.26 21.73 43.29 85.95 15 3.00% 6.87 20.56 40.96 81.33 16 3.00% 6.53 19.54 38.93 77.29 17 3.00% 6.23 18.64 37.14 73.74 18 3.00% 5.96 17.84 35.56 70.59 19 3.00% 5.73 17.13 34.14 67.78 20 3.00% 5.51 16.50 32.87 65.26 21 3.00% 5.32 15.92 31.72 62.98 22 3.00% 5.15 15.40 30.68 60.92 23 3.00% 4.99 14.92 29.74 59.04 24 3.00% 4.84 14.49 28.88 57.33 25 3.00% 4.71 14.09 28.08 55.76 26 3.00% 4.59 13.73 27.36 54.31 27 3.00% 4.47 13.39 26.68 52.97 28 3.00% 4.37 13.08 26.06 51.74 29 3.00% 4.27 12.79 25.49 50.60 30 3.00% 4.18 12.52 24.95 49.53 --------------------------------------------------------------------------------------------------
37 OPTION 3 LIFE INCOME AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0% PAYMENTS GUARANTEED FOR A STATED PERIOD OF MONTHS -------------------------------------------------
---------------------------------------------------------------------------------------------- ADJUSTED NONE 60 120 180 240 AGE OF ---------------------------------------------------------------------------- ANNUITANT MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE ---------------------------------------------------------------------------------------------- 50 $4.27 $3.90 $4.26 $3.90 $4.22 $3.89 $4.17 $3.86 $4.08 $3.82 51 4.34 3.97 4.33 3.96 4.30 3.95 4.23 3.92 4.14 3.88 52 4.43 4.03 4.41 4.03 4.37 4.01 4.30 3.98 4.20 3.93 53 4.51 4.10 4.50 4.10 4.45 4.08 4.37 4.04 4.26 3.99 54 4.60 4.18 4.59 4.17 4.54 4.15 4.45 4.11 4.32 4.04 55 4.70 4.25 4.68 4.25 4.62 4.22 4.53 4.18 4.39 4.11 56 4.80 4.34 4.78 4.33 4.72 4.30 4.61 4.25 4.45 4.17 57 4.91 4.42 4.89 4.41 4.82 4.38 4.69 4.32 4.51 4.23 58 5.03 4.52 5.00 4.51 4.92 4.47 4.78 4.40 4.58 4.30 59 5.15 4.61 5.12 4.60 5.03 4.56 4.87 4.48 4.65 4.37 60 5.28 4.72 5.25 4.70 5.14 4.66 4.96 4.57 4.71 4.44 61 5.43 4.83 5.39 4.81 5.27 4.76 5.06 4.66 4.78 4.51 62 5.58 4.95 5.53 4.93 5.39 4.87 5.16 4.75 4.84 4.58 63 5.74 5.08 5.69 5.05 5.53 4.99 5.26 4.85 4.90 4.65 64 5.91 5.21 5.85 5.18 5.66 5.10 5.36 4.95 4.96 4.72 65 6.10 5.36 6.03 5.32 5.81 5.22 5.46 5.05 5.02 4.79 66 6.30 5.51 6.21 5.47 5.93 5.36 5.56 5.16 5.08 4.86 67 6.51 5.67 6.41 5.63 6.12 5.50 5.66 5.26 5.13 4.93 68 6.73 5.85 6.62 5.80 6.28 5.65 5.77 5.37 5.18 5.00 69 6.97 6.04 6.84 5.98 6.44 5.80 5.86 5.49 5.23 5.06 70 7.23 6.25 7.07 6.18 6.61 5.97 5.96 5.60 5.27 5.12 71 7.51 6.47 7.32 6.39 6.79 6.14 6.05 5.71 5.31 5.18 72 7.80 6.71 7.58 6.62 6.96 6.32 6.14 5.83 5.34 5.23 73 8.12 6.98 7.85 6.86 7.14 6.50 6.23 5.94 5.37 5.28 74 8.46 7.26 8.14 7.12 7.32 6.69 6.31 6.04 5.40 5.32 75 8.82 7.57 8.45 7.40 7.50 6.89 6.38 6.14 5.42 5.35 ----------------------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. 38 OPTION 4 LIFE INCOME FOR TWO PAYEES AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES (ANNUITANT IS MALE AND SECOND ANNUITANT IS FEMALE) Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
----------------------------------------------------------------------------- ADJUSTED AGES ----------------------------- SECOND ANNUITANT ANNUITANT OPTION 4A OPTION 4B OPTION 4C OPTION 4D OPTION 4E ----------------------------------------------------------------------------- 55 50 $3.69 $4.05 $4.27 $3.69 $4.13 55 55 3.88 4.25 4.47 3.87 4.25 55 60 3.06 4.47 4.71 4.06 4.36 60 55 3.99 4.44 4.71 3.98 4.55 60 60 4.24 4.71 4.99 4.23 4.70 60 65 4.49 5.01 5.32 4.48 4.85 65 60 4.38 4.97 5.32 4.38 5.10 65 65 4.72 5.33 5.70 4.71 5.32 65 70 5.07 5.75 6.17 5.05 5.54 70 65 4.93 5.68 6.15 4.91 5.86 70 70 5.40 6.21 6.70 5.36 6.18 70 75 5.89 6.82 7.40 5.81 6.49 75 70 5.69 6.68 7.32 5.62 6.92 75 75 6.37 7.45 8.15 6.23 7.40 75 80 7.07 8.34 9.16 6.78 7.85 -----------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates assume the Annuitant is Male and the Second Annuitant is Female. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. 39 OPTION 4 LIFE INCOME FOR TWO PAYEES AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES (ANNUITANT IS FEMALE AND SECOND ANNUITANT IS MALE) Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
-------------------------------------------------------------------------------- ADJUSTED AGES ------------------------ SECOND ANNUITANT ANNUITANT OPTION 4A OPTION 4B OPTION 4C OPTION 4D OPTION 4E -------------------------------------------------------------------------------- 55 50 $3.75 $4.07 $4.26 $3.75 $3.98 55 55 3.88 4.25 4.47 3.87 4.06 55 60 3.99 4.44 4.71 3.98 4.12 60 55 4.06 4.47 4.71 4.06 4.37 60 60 4.24 4.71 4.99 4.23 4.47 60 65 4.38 4.97 5.32 4.38 4.54 65 60 4.49 5.01 5.32 4.48 4.89 65 65 4.72 5.33 5.70 4.71 5.02 65 70 4.93 5.68 6.15 4.91 5.14 70 65 5.07 5.75 6.17 5.05 5.60 70 70 5.40 6.21 6.70 5.36 5.79 70 75 5.69 6.68 7.32 5.62 5.96 75 70 5.89 6.83 7.40 5.81 6.63 75 75 6.37 7.45 8.15 6.23 6.92 75 80 6.78 8.11 8.99 6.54 7.15 --------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates assume the Annuitant is Female and the Second Annuitant is Male. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. 40 OPTION 2 PAYMENTS FOR A STATED PERIOD OF TIME AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
-------------------------------------------------------------------------------------------------- YEARS GUARANTEED MONTHLY QUARTERLY SEMI-ANNUAL ANNUAL RATE PAYMENT PAYMENT PAYMENT PAYMENT -------------------------------------------------------------------------------------------------- 5 3.50% 18.12 54.19 107.92 213.99 6 3.50% 15.35 45.92 91.44 181.32 7 3.50% 13.38 40.01 79.69 158.01 8 3.50% 11.90 35.59 70.88 140.56 9 3.50% 10.75 32.16 64.05 127.00 10 3.50% 9.83 29.42 58.59 116.18 11 3.50% 9.09 27.18 54.13 107.34 12 3.50% 8.46 25.32 50.42 99.98 13 3.50% 7.94 23.75 47.29 93.78 14 3.50% 7.49 22.40 44.62 88.47 15 3.50% 7.10 21.24 42.31 83.89 16 3.50% 6.76 20.23 40.29 79.89 17 3.50% 6.47 19.34 38.51 76.37 18 3.50% 6.20 18.55 36.94 73.25 19 3.50% 5.97 17.85 35.54 70.47 20 3.50% 5.75 17.22 34.28 67.98 21 3.50% 5.56 16.65 33.15 65.74 22 3.50% 5.39 16.13 32.13 63.70 23 3.50% 5.24 15.66 31.19 61.85 24 3.50% 5.09 15.24 30.34 60.17 25 3.50% 4.96 14.85 29.56 58.62 26 3.50% 4.84 14.49 28.95 57.20 27 3.50% 4.73 14.15 28.19 55.90 28 3.50% 4.63 13.85 27.58 54.69 29 3.50% 4.53 13.57 27.02 53.57 30 3.50% 4.45 13.30 26.49 52.53 --------------------------------------------------------------------------------------------------
41 OPTION 2 PAYMENTS FOR A STATED PERIOD OF TIME AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
-------------------------------------------------------------------------------------------------- YEARS GUARANTEED MONTHLY QUARTERLY SEMI-ANNUAL ANNUAL RATE PAYMENT PAYMENT PAYMENT PAYMENT -------------------------------------------------------------------------------------------------- 5 5.00% 18.74 56.00 111.33 219.98 6 5.00% 15.99 47.77 94.96 187.64 7 5.00% 14.02 41.90 83.30 164.59 8 5.00% 12.56 37.52 74.58 147.35 9 5.00% 11.42 34.11 67.81 133.99 10 5.00% 10.51 31.40 62.42 123.34 11 5.00% 9.77 29.19 58.03 114.66 12 5.00% 9.16 27.36 54.38 107.45 13 5.00% 8.64 25.81 51.31 101.39 14 5.00% 8.20 24.50 48.69 96.21 15 5.00% 7.82 23.36 46.44 91.75 16 5.00% 7.49 22.37 44.47 87.88 17 5.00% 7.20 21.51 42.75 84.48 18 5.00% 6.94 20.74 41.23 81.47 19 5.00% 6.71 20.06 39.88 78.80 20 5.00% 6.51 19.46 38.68 76.42 21 5.00% 6.33 18.91 37.59 74.28 22 5.00% 6.17 18.42 36.62 72.35 23 5.00% 6.02 17.98 35.73 70.61 24 5.00% 5.88 17.57 34.93 69.02 25 5.00% 5.76 17.20 34.20 67.57 26 5.00% 5.65 16.87 33.53 66.25 27 5.00% 5.54 16.56 32.92 65.04 28 5.00% 5.45 16.28 32.35 63.93 29 5.00% 5.36 16.01 31.83 62.90 30 5.00% 5.28 15.77 31.35 61.95 --------------------------------------------------------------------------------------------------
42 OPTION 3 LIFE INCOME AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Variable Annuity with Assumed Net Return Rate of 3.5% PAYMENTS GUARANTEED FOR A STATED PERIOD OF MONTHS -------------------------------------------------
---------------------------------------------------------------------------------------------- ADJUSTED NONE 60 120 180 240 AGE OF ---------------------------------------------------------------------------- ANNUITANT MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE ---------------------------------------------------------------------------------------------- 50 $4.56 $4.20 $4.55 $4.19 $4.51 $4.18 $4.45 $4.15 $4.36 $4.11 51 4.64 4.26 4.62 4.25 4.58 4.24 4.51 4.21 4.42 4.16 52 4.72 4.32 4.70 4.32 4.66 4.30 4.58 4.26 4.48 4.21 53 4.80 4.39 4.79 4.38 4.74 4.36 4.65 4.32 4.53 4.27 54 4.89 4.46 4.87 4.46 4.82 4.43 4.73 4.39 4.59 4.32 55 4.99 4.54 4.97 4.53 4.91 4.50 4.80 4.46 4.65 4.38 56 5.09 4.62 5.07 4.61 5.00 4.58 4.88 4.53 4.72 4.44 57 5.20 4.71 5.17 4.70 5.10 4.66 4.96 4.60 4.78 4.50 58 5.32 4.80 5.29 4.79 5.20 4.75 5.05 4.68 4.84 4.57 59 5.44 4.90 5.41 4.88 5.31 4.84 5.14 4.76 4.91 4.63 60 5.57 5.00 5.53 4.99 5.42 4.93 5.23 4.84 4.97 4.70 61 5.71 5.11 5.67 5.09 5.54 5.03 5.32 4.93 5.03 4.77 62 5.86 5.23 5.81 5.21 5.66 5.14 5.42 5.02 5.09 4.84 63 6.02 5.36 5.97 5.33 5.79 5.25 5.51 5.11 5.16 4.91 64 6.20 5.49 6.13 5.46 5.93 5.37 5.61 5.21 5.21 4.98 65 6.38 5.64 6.31 5.60 6.07 5.49 5.71 5.31 5.27 5.05 66 6.58 5.79 6.49 5.75 6.22 5.63 5.81 5.41 5.32 5.12 67 6.79 5.95 6.69 5.91 6.38 5.76 5.91 5.52 5.38 5.18 68 7.02 6.13 6.89 6.08 6.53 5.91 6.01 5.63 5.42 5.25 69 7.26 6.32 7.11 6.26 6.70 6.06 6.11 5.74 5.47 5.31 70 7.52 6.53 7.35 6.45 6.86 6.23 6.20 5.85 5.51 5.37 71 7.80 6.75 7.59 6.66 7.03 6.39 6.29 5.96 5.54 5.42 72 8.09 6.99 7.85 6.89 7.21 6.57 6.38 6.07 5.57 5.47 73 8.41 7.26 8.12 7.13 7.38 6.75 6.46 6.17 5.60 5.51 74 8.75 7.54 8.41 7.39 7.55 6.94 6.53 6.28 5.63 5.55 75 9.12 7.85 8.71 7.66 7.73 7.13 6.61 6.38 5.65 5.59 ----------------------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. 43 OPTION 3 LIFE INCOME AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Variable Annuity with Assumed Net Return Rate of 5.0% PAYMENTS GUARANTEED FOR A STATED PERIOD OF MONTHS -------------------------------------------------
---------------------------------------------------------------------------------------------- ADJUSTED NONE 60 120 180 240 AGE OF ---------------------------------------------------------------------------- ANNUITANT MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE ---------------------------------------------------------------------------------------------- 50 $ 5.48 $5.12 $5.46 $5.11 $5.41 $5.09 $5.34 $5.06 $5.24 $5.01 51 5.55 5.17 5.53 5.17 5.48 5.14 5.40 5.11 5.29 5.05 52 5.63 5.23 5.61 5.23 5.55 5.20 5.46 5.16 5.34 5.10 53 5.71 5.30 5.69 5.29 5.62 5.26 5.53 5.22 5.40 5.15 54 5.80 5.37 5.77 5.36 5.70 5.33 5.60 5.27 5.45 5.20 55 5.89 5.44 5.86 5.43 5.79 5.39 5.67 5.34 5.51 5.25 56 5.99 5.52 5.96 5.51 5.87 5.47 5.74 5.40 5.56 5.31 57 6.10 5.60 6.06 5.59 5.97 5.54 5.82 5.47 5.62 5.37 58 6.21 5.69 6.17 5.67 6.06 5.62 5.90 5.54 5.68 5.42 59 6.33 5.79 6.29 5.77 6.17 5.71 5.98 5.61 5.74 5.48 60 6.46 5.89 6.41 5.87 6.28 5.80 6.06 5.69 5.79 5.55 61 6.60 6.00 6.55 6.07 6.39 5.90 6.15 5.77 5.85 5.61 62 6.75 6.11 6.69 6.08 6.51 6.00 6.24 5.86 5.91 5.67 63 6.91 6.23 6.84 6.20 6.64 6.10 6.33 5.95 5.96 5.73 64 7.09 6.37 7.00 6.33 6.77 6.22 6.42 6.04 6.02 5.80 65 7.27 6.51 7.18 6.46 6.91 6.34 6.52 6.13 6.07 5.86 66 7.47 6.66 7.36 6.61 7.05 6.46 6.61 6.23 6.12 5.92 67 7.68 6.82 7.55 6.76 7.20 6.60 6.70 6.33 6.16 5.99 68 7.91 7.00 7.76 6.93 7.35 6.74 6.80 6.43 6.21 6.04 69 8.15 7.19 7.98 7.11 7.51 6.89 6.89 6.54 6.25 6.10 70 8.41 7.39 8.21 7.30 7.67 7.04 6.97 6.64 6.28 6.15 71 8.69 7.62 8.45 7.51 7.83 7.21 7.06 6.74 6.32 6.20 72 8.99 7.86 8.70 7.73 8.00 7.38 7.14 6.85 6.35 6.25 73 9.31 8.12 8.97 7.97 8.16 7.55 7.21 6.95 6.37 6.29 74 9.65 8.41 9.26 8.23 8.33 7.73 7.29 7.04 6.39 6.33 75 10.02 8.72 9.55 8.50 8.50 7.92 7.35 7.14 6.41 6.36 ----------------------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. 44 OPTION 4 LIFE INCOME FOR TWO PAYEES AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES (ANNUITANT IS MALE AND SECOND ANNUITANT IS FEMALE) Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
-------------------------------------------------------------------------------- ADJUSTED AGES ----------------------- SECOND ANNUITANT ANNUITANT OPTION 4A OPTION 4B OPTION 4C OPTION 4D OPTION 4E -------------------------------------------------------------------------------- 55 50 $3.97 $4.35 $4.56 $3.97 $4.42 55 55 4.16 4.54 4.76 4.15 4.54 55 60 4.34 4.76 5.00 4.34 4.64 60 55 4.27 4.73 5.00 4.26 4.83 60 60 4.51 4.99 5.27 4.50 4.98 60 65 4.76 5.29 5.60 4.75 5.13 65 60 4.66 5.25 5.61 4.65 5.39 65 65 4.99 5.61 5.99 4.98 5.60 65 70 5.34 6.03 6.46 5.31 5.81 70 65 5.19 5.97 6.44 5.17 6.14 70 70 5.67 6.49 6.99 5.62 6.47 70 75 6.16 7.10 7.68 6.07 6.77 75 70 5.95 6.96 7.61 5.87 7.20 75 75 6.64 7.73 8.43 6.48 7.68 75 80 7.33 8.62 9.45 7.02 8.13 --------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates assume the Annuitant is Male and the Second Annuitant is Female. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. 45 OPTION 4 LIFE INCOME FOR TWO PAYEES AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES (ANNUITANT IS FEMALE AND SECOND ANNUITANT IS MALE) Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
------------------------------------------------------------------------------ ADJUSTED AGES ----------------------- SECOND ANNUITANT ANNUITANT OPTION 4A OPTION 4B OPTION 4C OPTION 4D OPTION 4E ------------------------------------------------------------------------------ 55 50 $4.03 $4.36 $4.55 $4.03 $4.41 55 55 4.16 4.54 4.76 4.15 4.54 55 60 4.27 4.73 5.00 4.26 4.83 60 55 4.34 4.76 5.00 4.34 4.64 60 60 4.51 4.99 5.27 4.50 4.98 60 65 4.66 5.25 5.61 4.65 5.39 65 60 4.76 5.29 5.60 4.75 5.13 65 65 4.99 5.61 5.99 4.98 5.60 65 70 5.19 5.97 6.44 5.17 6.14 70 65 5.34 6.03 6.46 5.31 5.81 70 70 5.67 6.49 6.99 5.62 6.47 70 75 5.95 6.96 7.61 5.87 7.20 75 70 6.16 7.10 7.68 6.07 6.77 75 75 6.64 7.73 8.43 6.48 7.68 75 80 7.04 8.39 9.29 6.79 8.70 ------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates assume the Annuitant is Female and the Second Annuitant is Male. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. 46 OPTION 4 LIFE INCOME FOR TWO PAYEES AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES (ANNUITANT IS MALE AND SECOND ANNUITANT IS FEMALE) Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
------------------------------------------------------------------------------ ADJUSTED AGES ----------------------- SECOND ANNUITANT ANNUITANT OPTION 4A OPTION 4B OPTION 4C OPTION 4D OPTION 4E ------------------------------------------------------------------------------ 55 50 $4.88 $5.26 $ 5.48 $4.88 $5.34 55 55 5.04 5.44 5.66 5.04 5.43 55 60 5.21 5.65 5.89 5.21 5.53 60 55 5.15 5.63 5.91 5.14 5.73 60 60 5.37 5.87 6.16 5.37 5.86 60 65 5.61 6.16 6.49 5.60 6.01 65 60 5.52 6.14 6.51 5.51 6.28 65 65 5.83 6.49 6.87 5.82 6.47 65 70 6.17 6.90 7.33 6.13 6.67 70 65 6.04 6.84 7.34 6.00 7.03 70 70 6.49 7.35 7.87 6.44 7.33 70 75 6.97 7.96 8.56 6.87 7.62 75 70 6.77 7.84 8.51 6.68 8.08 75 75 7.45 8.60 9.33 7.27 8.55 75 80 8.14 9.49 10.35 7.80 8.98 ------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates assume the Annuitant is Male and the Second Annuitant is Female. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. 47 OPTION 4 LIFE INCOME FOR TWO PAYEES AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES (ANNUITANT IS FEMALE AND SECOND ANNUITANT IS MALE) Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
------------------------------------------------------------------------------ ADJUSTED AGES ----------------------- SECOND ANNUITANT ANNUITANT OPTION 4A OPTION 4B OPTION 4C OPTION 4D OPTION 4E ------------------------------------------------------------------------------ 55 50 $4.93 $5.27 $ 5.46 $4.93 $5.19 55 55 5.04 5.44 5.66 5.04 5.43 55 60 5.15 5.63 5.91 5.14 5.73 60 55 5.21 5.65 5.89 5.21 5.53 60 60 5.37 5.87 6.16 5.37 5.86 60 65 5.52 6.14 6.51 5.51 6.28 65 60 5.61 6.16 6.49 5.60 6.01 65 65 5.83 6.49 6.87 5.82 6.47 65 70 6.04 6.84 7.34 6.00 7.03 70 65 6.17 6.90 7.33 6.13 6.67 70 70 6.49 7.35 7.87 6.44 7.33 70 75 6.77 7.84 8.51 6.68 8.08 75 70 6.97 7.96 8.56 6.87 7.62 75 75 7.45 8.60 9.33 7.27 8.55 75 80 7.86 9.28 10.20 7.57 9.59 ------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates assume the Annuitant is Female and the Second Annuitant is Male. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. 48 -------------------------------------------------------------------------------- [LOGO OF AETNA APPEARS HERE] AETNA LIFE INSURANCE AND ANNUITY COMPANY Home Office: 151 Farmington Avenue Hartford, Connecticut 06156 (800) 525-4225 CERTIFICATE OF GROUP ANNUITY COVERAGE -------------------------------------------------------------------------------- ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT, WHEN BASED ON INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT. THIS CONTRACT CONTAINS A MARKET VALUE ADJUSTMENT FORMULA. APPLICATION OF A MARKET VALUE ADJUSTMENT MAY RESULT IN EITHER AN INCREASE OR DECREASE IN THE CURRENT VALUE. THE MARKET VALUE ADJUSTMENT FORMULA DOES NOT APPLY TO A GUARANTEED TERM AT THE TIME OF ITS MATURITY. 49 EX-99.B.4.B 3 CONTRACT B EXHIBIT EX99.B.4(b) ___________________________________________________ [LOGO APPEARS HERE] AETNA LIFE INSURANCE AND ANNUITY COMPANY Home Office: 151 Farmington Avenue Hartford, Connecticut 06156 (800) 525-4225 Aetna Life Insurance and Annuity Company, herein called Aetna, agrees to pay the benefits stated in the Contract. ________________________________________________________________________________ CERTIFICATE OF To the Certificate Holder: GROUP ANNUITY COVERAGE Aetna certifies that coverage is in force for you under the stated Group Annuity Contract and Certificate numbers. All data shown here is taken from Aetna records and is based upon information furnished by you. This Certificate is a summary of the Group Annuity Contract provisions. It replaces any and all prior certificates, riders, or amendments issued to you under the stated Contract and Certificate numbers. This Certificate is for information only and is not a part of the Contract. THE VARIABLE FEATURES OF THE GROUP CONTRACT ARE DESCRIBED IN PARTS III AND IV. ________________________________________________________________________________ RIGHT TO You may cancel this Certificate within 10 days of CANCEL receiving it by returning this Certificate along with a written notice to Aetna at the above address or to the agent from whom it was purchased. Within 7 days after it receives the notice of cancellation and this Certificate at its Home Office, Aetna will return the entire consideration paid plus any increase or minus any decrease in the current value of any funds allocated to the Separate Account. Dan Kearney Lucille M. Nickerson President Secretary ________________________________________________________________________________ Contract Holder Group Annuity Contract No. SPECIMEN SPECIMEN ________________________________________________________________________________ Your Name Certificate No. JOHN DOE SPECIMEN ________________________________________________________________________________ Annuitant Name Type of Plan JOHN DOE JR. IRA ROLLOVER ________________________________________________________________________________ ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT, WHEN BASED ON INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT. THIS CONTRACT CONTAINS A MARKET VALUE ADJUSTMENT FORMULA. APPLICATION OF A MARKET VALUE ADJUSTMENT MAY RESULT IN EITHER AN INCREASE OR DECREASE IN THE CURRENT VALUE. THE MARKET VALUE ADJUSTMENT FORMULA DOES NOT APPLY TO A GUARANTEED TERM AT THE TIME OF ITS MATURITY. 1 SPECIFICATIONS ________________________________________________________________________________ GUARANTEED There are guaranteed interest rates for amounts INTEREST RATE held in the AG Account (see Contract Schedule I). ________________________________________________________________________________ DEDUCTIONS FROM There will be deductions for mortality and expense THE SEPARATE risks and administrative fees (see Contract ACCOUNT Schedule I and II). ________________________________________________________________________________ DEDUCTION FROM Purchase Payment is subject to a deduction for PURCHASE premium taxes, if any (see 3.01). PAYMENT(S) ________________________________________________________________________________ SURRENDER There will be a charge deducted upon surrender FEE (see Contract Schedule I). 2 CONTRACT SCHEDULE I ACCUMULATION PERIOD SEPARATE ACCOUNT ________________________________________________________________________________ SEPARATE ACCOUNT: Variable Annuity Account B CHARGES TO SEPARATE A daily charge is deducted from any portion of the ACCOUNT: Current Value allocated to the Separate Account. The deduction is the daily equivalent of the annual effective percentage shown in the following chart. Administrative Charge 0.15% Mortality Risk Charge 0.35% Expense Risk Charge 0.90% ----- Total Separate Account Charges 1.40% SEPARATE ACCOUNT FUNDS: During the Accumulation Period the Funds available with this Contract are: Aetna Variable Fund Aetna Income Shares Aetna Variable Encore Fund Aetna Investment Advisers Fund, Inc. Aetna Ascent Variable Portfolio Aetna Crossroads Variable Portfolio Aetna Legacy Variable Portfolio The Alger American Fund - Alger American Balanced Portfolio The Alger American Fund - Alger American Income and Growth Portfolio The Alger American Fund - Alger American Growth Portfolio The Alger American Fund - Alger American Midcap Growth Portfolio The Alger American Fund - Alger American Leveraged Allcap Portfolio The Alger American Fund - Alger American Small Capitalization Portfolio Fidelity Investments Variable Insurance Products Fund -High Income Portfolio Fidelity Investments Variable Insurance Products Fund -Equity-Income Portfolio Fidelity Investments Variable Insurance Products Fund -Growth Portfolio Fidelity Investments Variable Insurance Products Fund -Overseas Portfolio Fidelity Investments Variable Insurance Products Fund II -Investment Grade Bond Portfolio Fidelity Investments Variable Insurance Products Fund II -Asset Manager Portfolio Fidelity Investments Variable Insurance Products Fund II -Index 500 Portfolio Fidelity Investments Variable Insurance Products Fund II -Contrafund Portfolio 3 CONTRACT SCHEDULE I (CONT'D) ACCUMULATION PERIOD SEPARATE ACCOUNT (CONT'D) ________________________________________________________________________________ SEPARATE ACCOUNT FUNDS Insurance Management Series -Equity Growth and (CONT'D): Income Fund Insurance Management Series - International Stock Fund Insurance Management Series -Corporate Bond Fund Insurance Management Series -U.S. Government Bond Fund Insurance Management Series -Utility Fund Janus Aspen Series -Aggressive Growth Portfolio Janus Aspen Series - Balanced Portfolio Janus Aspen Series - Flexible Income Portfolio Janus Aspen Series - Growth Portfolio Janus Aspen Series - Short-Term Bond Portfolio Janus Aspen Series - Worldwide Growth Portfolio Lexington Emerging Markets Fund Lexington Natural Resources Trust TCI Portfolios, Inc. - TCI International TCI Portfolios, Inc. - TCI Growth TCI Portfolios, Inc. - TCI Balanced ALIAC GUARANTEED ACCOUNT (AG ACCOUNT) ________________________________________________________________________________ MINIMUM GUARANTEED 3.0%. INTEREST RATE (effective annual rate of return): SEPARATE ACCOUNT AND AG ACCOUNT ________________________________________________________________________________ MINIMUM INITIAL PURCHASE $5,000 PAYMENT: MAXIMUM INITIAL PURCHASE $500,000 PAYMENT WITHOUT HOME OFFICE APPROVAL: TRANSFERS: An unlimited number of Transfers may be made during the Accumulation Period. Aetna allows 12 free Transfers in any calendar year. Thereafter, Aetna reserves the right to charge $10 for each subsequent Transfer. MINIMUM TRANSFER $500 AMOUNT: MAINTENANCE FEE: The annual Maintenance Fee is $30. If the Current Value is $50,000 or more on the date the Maintenance Fee is to be deducted, the Maintenance Fee is $0. 4 CONTRACT SCHEDULE I (CONT'D) ACCUMULATION PERIOD
SEPARATE ACCOUNT AND AG ACCOUNT (CONT'D) ________________________________________________________________________________ SURRENDER FEE: For each surrender, the Surrender Fee will be determined as follows: Surrender Fee Length of Time from Deposit of Net (as percentage of Purchase Payment (Years) Net Purchase Payment) Less than 1 year 7% 1 or more but less than 2 years 6% 2 or more but less than 3 years 5% 3 or more but less than 4 years 4% 4 or more but less than 5 years 3% 5 or more but less than 6 years 2% 6 or more but less than 7 years 1% 7 years or more 0% SYSTEMATIC WITHDRAWAL The specified payment or specified percentage may OPTION (SWO) not be greater than 10% of the Current Value at PERCENTAGE: time of election. SWO MINIMUM INITIAL $25,000 CURRENT VALUE: SWO MINIMUM PAYMENT $500 AMOUNT: ESTATE CONSERVATION $25,000 OPTION (ECO) MINIMUM INITIAL CURRENT VALUE: See 1. GENERAL DEFINITIONS for explanations.
5 CONTRACT SCHEDULE I ACCUMULATION PERIOD SEPARATE ACCOUNT ________________________________________________________________________________ SEPARATE ACCOUNT: Variable Annuity Account B CHARGES TO SEPARATE A daily charge is deducted from any portion of the ACCOUNT: Current Value allocated to the Separate Account. The deduction is the daily equivalent of the annual effective percentage shown in the following chart. Administrative Charge 0.15% Mortality Risk Charge 0.35% Expense Risk Charge 0.90% ----- Total Separate Account Charges 1.40% SEPARATE ACCOUNT FUNDS: During the Accumulation Period the Funds available with this Contract are: Aetna Variable Fund Aetna Income Shares Aetna Variable Encore Fund Aetna Investment Advisers Fund, Inc. Aetna Ascent Variable Portfolio Aetna Crossroads Variable Portfolio Aetna Legacy Variable Portfolio Janus Aspen Series - Aggressive Growth Portfolio Janus Aspen Series - Flexible Income Portfolio Janus Aspen Series - Growth Portfolio Lexington Emerging Markets Fund Lexington Natural Resources Trust TCI Portfolios, Inc. - TCI International TCI Portfolios, Inc. - TCI Growth TCI Portfolios, Inc. - TCI Balanced ALIAC GUARANTEED ACCOUNT (AG ACCOUNT) ________________________________________________________________________________ MINIMUM GUARANTEED 3.0%. INTEREST RATE (effective annual rate of return): 6 CONTRACT SCHEDULE I (CONT'D) ACCUMULATION PERIOD
SEPARATE ACCOUNT AND AG ACCOUNT ________________________________________________________________________________ MINIMUM INITIAL PURCHASE $5,000 PAYMENT: MAXIMUM INITIAL PURCHASE $500,000 PAYMENT WITHOUT HOME OFFICE APPROVAL: TRANSFERS: An unlimited number of Transfers may be made during the Accumulation Period. Aetna allows 12 free Transfers in any calendar year. Thereafter, Aetna reserves the right to charge $10 for each subsequent Transfer. MINIMUM TRANSFER $500 AMOUNT: MAINTENANCE FEE: The annual Maintenance Fee is $30. If the Current Value is $50,000 or more on the date the Maintenance Fee is to be deducted, the Maintenance Fee is $0. SURRENDER FEE: For each surrender, the Surrender Fee will be determined as follows: Surrender Fee Length of Time from Deposit of Net (as percentage of Purchase Payment (Years) Net Purchase Payment) Less than 1 year 7% 1 or more but less than 2 years 6% 2 or more but less than 3 years 5% 3 or more but less than 4 years 4% 4 or more but less than 5 years 3% 5 or more but less than 6 years 2% 6 or more but less than 7 years 1% 7 years or more 0% SYSTEMATIC WITHDRAWAL The specified payment or specified percentage may OPTION (SWO) not be greater than 10% of the Current Value at PERCENTAGE: time of election. SWO MINIMUM INITIAL $25,000 CURRENT VALUE:
7 CONTRACT SCHEDULE I (CONT'D) ACCUMULATION PERIOD SEPARATE ACCOUNT AND AG ACCOUNT (CONT'D) ________________________________________________________________________________ SWO MINIMUM PAYMENT $500 AMOUNT: ESTATE CONSERVATION $25,000 OPTION (ECO) MINIMUM INITIAL CURRENT VALUE: See 1. GENERAL DEFINITIONS for explanations. 8 CONTRACT SCHEDULE I ACCUMULATION PERIOD SEPARATE ACCOUNT ________________________________________________________________________________ SEPARATE ACCOUNT: Variable Annuity Account B CHARGES TO SEPARATE A daily charge is deducted from any portion of the ACCOUNT: Current Value allocated to the Separate Account. The deduction is the daily equivalent of the annual effective percentage shown in the following chart. Administrative Charge 0.15% Mortality Risk Charge 0.35% Expense Risk Charge 0.90% ----- Total Separate Account Charges 1.40% SEPARATE ACCOUNT FUNDS: During the Accumulation Period the Funds available with this Contract are: Insurance Management Series - Equity Growth and Income Fund Insurance Management Series - Utility Fund Insurance Management Series - Prime Money Fund Insurance Management Series - U.S. Government Bond Fund Insurance Management Series - Corporate Bond Fund Insurance Management Series - International Stock Fund ALIAC GUARANTEED ACCOUNT (AG ACCOUNT) ________________________________________________________________________________ MINIMUM GUARANTEED 3.0%. INTEREST RATE (effective annual rate of return): 9 CONTRACT SCHEDULE I (CONT'D) ACCUMULATION PERIOD
SEPARATE ACCOUNT AND AG ACCOUNT ________________________________________________________________________________ MINIMUM INITIAL PURCHASE $5,000 PAYMENT: MAXIMUM INITIAL PURCHASE $500,000 PAYMENT WITHOUT HOME OFFICE APPROVAL: TRANSFERS: An unlimited number of Transfers may be made during the Accumulation Period. Aetna allows 12 free Transfers in any calendar year. Thereafter, Aetna reserves the right to charge $10 for each subsequent Transfer. MINIMUM TRANSFER $500 AMOUNT: MAINTENANCE FEE: The annual Maintenance Fee is $30. If the Current Value is $50,000 or more on the date the Maintenance Fee is to be deducted, the Maintenance Fee is $0. SURRENDER FEE: For each surrender, the Surrender Fee will be determined as follows: Surrender Fee Length of Time from Deposit of Net (as percentage of Purchase Payment (Years) Net Purchase Payment) Less than 1 year 7% 1 or more but less than 2 years 6% 2 or more but less than 3 years 5% 3 or more but less than 4 years 4% 4 or more but less than 5 years 3% 5 or more but less than 6 years 2% 6 or more but less than 7 years 1% 7 years or more 0% SYSTEMATIC WITHDRAWAL The specified payment or specified percentage may OPTION (SWO) not be greater than 10% of the Current Value at PERCENTAGE: time of election. SWO MINIMUM INITIAL $25,000 CURRENT VALUE:
10 CONTRACT SCHEDULE I (CONT'D) ACCUMULATION PERIOD SEPARATE ACCOUNT AND AG ACCOUNT (CONT'D) ________________________________________________________________________________ SWO MINIMUM PAYMENT $500 AMOUNT: ESTATE CONSERVATION $25,000 OPTION (ECO) MINIMUM INITIAL CURRENT VALUE: See 1. GENERAL DEFINITIONS for explanations. 11 CONTRACT SCHEDULE II ANNUITY PERIOD SEPARATE ACCOUNT ________________________________________________________________________________ CHARGES TO SEPARATE A daily charge at an annual effective rate of 1.25% ACCOUNT: for Annuity mortality and expense risks. The administrative charge is established upon election of an Annuity option. This charge will not exceed 0.25%. VARIABLE ANNUITY ASSUMED If a Variable Annuity is chosen, an assumed annual ANNUAL NET RETURN RATE: net return rate of 5.0% may be elected. If 5.0% is not elected, Aetna will use an assumed annual net return rate of 3.5%. The assumed annual net return rate factor for 3.5% per year is 0.9999058. The assumed annual net return rate factor for 5.0% per year is 0.9998663. If the portion of a Variable Annuity payment for any Fund is not to decrease, the Annuity return factor under the Separate Account for that Fund must be: (a) 4.75% on an annual basis plus an annual return of up to 0.25% to offset the administrative charge set at the time Annuity payments commence if an assumed annual net return rate of 3.5% is chosen; or (b) 6.25% on an annual basis plus an annual return of up to 0.25% to offset the administrative charge set at the time Annuity payments commence, if an assumed annual net return rate of 5% is chosen. FIXED ANNUITY ________________________________________________________________________________ MINIMUM GUARANTEED 3.0% INTEREST RATE (effective annual rate of return): See 1. GENERAL DEFINITIONS for explanations. 12 TABLE OF CONTENTS I. GENERAL DEFINITIONS ________________________________________________________________________________
PAGE 1.01 Account................................................................10 1.02 Accumulation Period....................................................10 1.03 Adjusted Current Value.................................................10 1.04 ALIAC Guaranteed Account (AG Account)..................................10 1.05 Annuitant..............................................................10 1.06 Annuity................................................................10 1.07 Beneficiary............................................................10 1.08 Certificate Holder.....................................................10 1.09 Code...................................................................10 1.10 Contract...............................................................10 1.11 Contract Holder........................................................10 1.12 Current Value..........................................................10 1.13 Deposit Period.........................................................11 1.14 Dollar Cost Averaging..................................................11 1.15 Fixed Annuity..........................................................11 1.16 Fund(s)................................................................11 1.17 General Account........................................................11 1.18 Guaranteed Rate - AG Account...........................................11 1.19 Guaranteed Term........................................................11 1.20 Guaranteed Term(s) Groups..............................................11 1.21 Maintenance Fee........................................................11 1.22 Market Value Adjustment (MVA)..........................................12 1.23 Matured Term Value.....................................................12 1.24 Matured Term Value Transfer............................................12 1.25 Maturity Date..........................................................12 1.26 Net Purchase Payment...................................................12 1.27 Nonunitized Separate Account...........................................12 1.28 Purchase Payment.......................................................12 1.29 Reinvestment...........................................................13 1.30 Separate Account.......................................................13 1.31 Surrender Value........................................................13 1.32 Transfers..............................................................13
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PAGE 1.33 Valuation Period (Period)..............................................13 1.34 Variable Annuity.......................................................13 II. GENERAL PROVISIONS ________________________________________________________________________________ 2.01 Change of Contract.....................................................13 2.02 Change of Fund(s)......................................................14 2.03 Nonparticipating Contract..............................................14 2.04 Payments and Elections.................................................15 2.05 State Laws.............................................................15 2.06 Control of Contract....................................................15 2.07 Designation of Beneficiary.............................................15 2.08 Misstatements and Adjustments..........................................15 2.09 Incontestability.......................................................15 III. PURCHASE PAYMENT, CURRENT VALUE, AND SURRENDER PROVISIONS ________________________________________________________________________________ 3.01 Net Purchase Payment...................................................16 3.02 Certificate Holder's Account...........................................16 3.03 Fund(s) Record Units -- Separate Account...............................16 3.04 Net Return Factor(s) -- Separate Account...............................16 3.05 Fund Record Unit Value -- Separate Account.............................17 3.06 Market Value Adjustment................................................17 3.07 Transfer of Current Value from the Funds or AG Account.................18 3.08 Reports................................................................19 3.09 Notice to the Certificate Holder.......................................19 3.10 Loans..................................................................19 3.11 Distribution Options...................................................19 3.12 Death Benefit Amount...................................................23 3.13 Death Benefit Options Available to Beneficiary.........................24 3.14 Required Distribution to Certificate Holder/Beneficiary................25 3.15 Liquidation of Surrender Value.........................................26 3.16 Surrender Fee..........................................................26 3.17 Payment of Surrender Value.............................................27
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IV. ANNUITY PROVISIONS ________________________________________________________________________________ PAGE 4.01 Choices to be Made.....................................................27 4.02 Annuity Payments to Certificate Holder.................................27 4.03 Annuity Payments to Beneficiary........................................28 4.04 Terms of Annuity Options...............................................28 4.05 Death of Annuitant/Beneficiary.........................................29 4.06 Fund(s) Annuity Units -- Separate Account..............................30 4.07 Fund Annuity Unit Value -- Separate Account............................30 4.08 Annuity Net Return Factor(s) -- Separate Account.......................30 4.09 Annuity Options........................................................31
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I. GENERAL DEFINITIONS --------------------------------------------------------------------------------------------------------------------------------- 1.01 ACCOUNT: A record established for each Certificate Holder to maintain the value of the Net Purchase Payment held on his/her behalf during the Accumulation Period. 1.02 ACCUMULATION PERIOD: The period during which the Net Purchase Payment is applied to the Contract to provide future Annuity payment(s). 1.03 ADJUSTED CURRENT VALUE: The Current Value of a Contract plus or minus any aggregate AG Account MVA, if applicable. (See 1.21) 1.04 ALIAC GUARANTEED An accumulation option where Aetna guarantees stipulated ACCOUNT rate(s) of interest for specified periods of time. All assets of (AG ACCOUNT): Aetna, including amounts in the Nonunitized Separate Account, are available to meet the guarantees under the AG Account. 1.05 ANNUITANT: The person whose life is measured for purposes of the guaranteed death benefit and the duration of Annuity payments under this Contract. The Contract Holder and Annuitant must be the same person under this Contract. 1.06 ANNUITY: Payment of an income: (a) For the life of one or two persons; (b) For a stated period; or (c) For some combination of (a) and (b). 1.07 BENEFICIARY: The individual or estate entitled to receive any payment from the Contract upon the death of the Annuitant. 1.08 CERTIFICATE HOLDER: A person who purchases an interest in this Contract as evidenced by a certificate. 1.09 CODE: The Internal Revenue Code of 1986, as it may be amended from time to time. 1.10 CONTRACT: This agreement between Aetna and the Contract Holder to provide an annuity which qualifies as an Individual Retirement Annuity under Code Section 408(b) for the exclusive benefit of the Contract Holder or his or her Beneficiary(ies). 1.11 CONTRACT HOLDER: The entity to which a group Contract is issued. 1.12 CURRENT VALUE: As of the most recent Valuation Period, the Net Purchase Payment and any additional amount deposited pursuant to 3.12 plus any interest added to the portion allocated to the AG Account; and plus or minus the investment experience of the portion allocated to the Funds since deposit; less all Maintenance Fees deducted, any amounts surrendered and any amounts applied to an Annuity.
16 1.13 DEPOSIT PERIOD: A calendar week, a calendar month, a calendar quarter, or any other period of time specified by Aetna during which the Net Purchase Payment, Transfers or Reinvestments are accepted into the AG Account for one or more Guaranteed Terms. Aetna reserves the right to extend the Deposit Period. 1.14 DOLLAR COST AVERAGING: A program that permits the Certificate Holder to systematically transfer amounts from any of the Funds and the one-year AG Account Guaranteed Term to any of the Funds by completing the appropriate section of the enrollment form or a Dollar Cost Averaging election form. 1.15 FIXED ANNUITY: An Annuity with payments that do not vary in amount. 1.16 FUND(S): The open-end management investment companies (mutual funds) in which the Separate Account invests (see Contract Schedule I for the specific fund options). 1.17 GENERAL ACCOUNT: The account holding the assets of Aetna, other than those assets held in Aetna's separate accounts. 1.18 GUARANTEED RATE -- Aetna will declare the interest rate applicable to a specific AG ACCOUNT: Guaranteed Term at the start of the Deposit Period for that Guaranteed Term. The rate is guaranteed by Aetna for that Deposit Period and the ensuing Guaranteed Term. The Guaranteed Rate is an annual effective yield. That is, interest is credited daily at a rate that will produce the Guaranteed Rate over the period of a year. No Guaranteed Rate will ever be less than the Minimum Guaranteed Rate shown on Contract Schedule I. 1.19 GUARANTEED TERM: The period of time for which the AG Account Guaranteed Rate is guaranteed on the Net Purchase Payment, Transfers and Reinvestments made into a current Deposit Period for the AG Account. Such period begins on the day following the close of the Deposit Period and ends on the designated Maturity Date. Guaranteed Terms are offered at Aetna's discretion for various lengths of time ranging up to and including ten years. During a Deposit Period, Aetna may make available any number of Guaranteed Terms. The Contract Holder may allocate the Net Purchase Payment and Transfers into any or all of the available Guaranteed Terms. 1.20 GUARANTEED TERM(S) All AG Account Guaranteed Term(s) with the same length of GROUPS: time from the close of the Deposit Period until the designated Maturity Date. 1.21 MAINTENANCE FEE: The Maintenance Fee (see Contract Schedule I) will be deducted during the Accumulation Period from the Current Value on each anniversary of the date the Contract is established and upon the surrender of the entire Contract.
17 1.22 MARKET VALUE ADJUSTMENT An adjustment that may apply to an amount withdrawn or transferred from an AG Account (MVA): Guaranteed Term prior to the end of that Guaranteed Term. The adjustment reflects the change in the value of the investment due to changes in interest rates since the date of deposit and is computed using the formula given in 3.06. The adjustment is expressed as a percentage of each dollar being withdrawn. 1.23 MATURED TERM VALUE: The amount payable on an AG Account Guaranteed Term's Maturity Date. 1.24 MATURED TERM VALUE During the calendar month following an AG Account Maturity TRANSFER: Date, the Certificate Holder may notify Aetna's Home Office in writing to Transfer or surrender all or part of the Matured Term Value, plus interest at the new Guaranteed Rate accrued thereon, from the AG Account without an MVA. This provision only applies to the first such written request received from the Certificate Holder during this period for any Matured Term Value. 1.25 MATURITY DATE: The last day of an AG Account Guaranteed Term. 1.26 NET PURCHASE PAYMENT: The Purchase Payment less premium taxes, as applicable. 1.27 NONUNITIZED SEPARATE A separate account set up by Aetna under Title 38, Section ACCOUNT: 38a-433, of the Connecticut General Statutes, that holds assets for AG Account Terms. There are no discrete units for this Account. The Certificate Holder does not participate in the investment gain or loss from the assets held in the Nonunitized Separate Account. Such gain or loss is borne entirely by Aetna. These assets may be chargeable with liabilities arising out of any other business of Aetna. 1.28 PURCHASE PAYMENT: The cash payment accepted by Aetna at its Home Office which is a rollover amount under Code Section 402(c), 403(a)(4), 403(b)(8), or 408(d)(3). Aetna may require verification that a rollover amount qualifies as such under the Code. Payments to Simplified Employee Pension plans and annual deductible and nondeductible contributions to Individual Retirement Annuities are not accepted under this Contract. Aetna reserves the right to refuse to accept any Purchase Payment at any time for any reason. No advance notice will be given to the Contract Holder or Certificate Holder.
18 1.29 REINVESTMENT: Aetna will mail a notice to the Contract Holder at least 18 calendar days and not more than 45 days before a Guaranteed Term's Maturity Date. This notice will contain the Terms available during current Deposit Periods with their Guaranteed Rate, and projected Matured Term Value. If no specific direction is given by the Certificate Holder prior to the Maturity Date, each Matured Term Value will be reinvested in the current Deposit Period for a Guaranteed Term of the same duration. If a Guaranteed Term of the same duration is unavailable, each Matured Term Value will automatically be reinvested in the current Deposit Period for the next shortest Guaranteed Term available. If no shorter Guaranteed Term is available, the next longer Guaranteed Term will be used. Aetna will mail a confirmation statement to the Certificate Holder the next business day after the Maturity Date. This notice will sate the Guaranteed Term and Guaranteed Rate which will apply to the reinvested Matured Term Value. 1.30 SEPARATE ACCOUNT: A separate account that buys and holds shares of the Fund(s). Income, gains or losses, realized or unrealized, are credited or charged to the Separate Account without regard to other income, gains or losses of Aetna. Aetna owns the assets held in the Separate Account and is not a trustee as to such amounts. This Separate Account generally is not guaranteed and is held at market value. The assets of the Separate Account, to the extent of reserves and other contract liabilities of the Account, shall not be charged with other Aetna liabilities. 1.31 SURRENDER VALUE: The amount payable by Aetna upon the surrender of any portion of an Account. 1.32 TRANSFERS: The movement of invested amounts among the available Fund(s) and the AG Account under this Contract during the Accumulation Period. 1.33 VALUATION PERIOD (PERIOD):The period of time for which a Fund determines its net asset value, usually from 4:15 p.m. Eastern time each day the New York Stock Exchange is open until 4:15 p.m. the next such day, or such other day that one or more of the Funds determines its net asset value. 1.34 VARIABLE ANNUITY: An Annuity with payments that vary with the net investment results of one or more Funds held under the Separate Account. II. GENERAL PROVISIONS -------------------------------------------------------------------------------- 2.01 CHANGE OF CONTRACT: Only an authorized officer of Aetna may change the terms of this Contract. Aetna will notify the Contract Holder in writing at least 30 days before the effective date of any change. Any change will not affect the amount or terms of any Annuity which begins before the change.
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2.01 CHANGE OF CONTRACT Aetna may make any change that affects the AG Account (CONT'D): Market Value Adjustment (3.06) with at least 30 days advance written notice to the Contract Holder and the Certificate Holder. Any such change shall become effective for any new Term and will be applicable only if it is more favorable to the Contract Holder and/or the Certificate Holder. Any change that affects any of the following under this Contract will not apply to Accounts in existence before the effective date of the change: (a) Net Purchase Payment (1.26) (b) AG Account Guaranteed Rate (1.04) (c) Net Return Factor(s) -- Separate Account (3.04) (d) Current Value (1.12) (e) Surrender Value (1.31) (f) Fund(s) Annuity Unit Value -- Separate Account (4.07) (g) Annuity Options (4.09) (h) Fixed Annuity Guaranteed Interest Rates (4.01) (i) Transfers (1.32) The Contract may be changed as deemed necessary by Aetna to comply with federal or state law. Any such change is subject to the prior approval of the New York Insurance Department. 2.02 CHANGE OF FUND(S): Aetna, or the Separate Account, may: (a) Change the Fund(s) which may be invested in by the Separate Account; and (b) Replace the shares of any Fund(s) held in the Separate Account with shares of any other Fund(s). Changes must be: (a) Approved by a majority vote of the shares in the Separate Account with respect to the Fund(s) whose shares are to be replaced; or (b) Deemed necessary by Aetna under the Investment Company Act of 1940; or (c) Deemed necessary by Aetna to accomplish the purpose of the Separate Account. Such changes are subject to the approval of the Superintendent of the New York Insurance Department and Aetna will notify the Contract Holder of such change. 2.03 NONPARTICIPATING CONTRACT: The Contract Holder, Certificate Holders or Beneficiaries will not have a right to share in the earnings of Aetna.
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2.04 PAYMENTS AND ELECTIONS: While the Certificate Holder is living, Aetna will pay the Certificate Holder any Annuity payments as and when due. After the Certificate Holder's death, any Annuity payments required to be made will be paid in accordance with 4.05. Aetna will determine other payments and/or elections as of the end of the Valuation Period in which the request is received at its Home Office. Such payments will be made within 7 calendar days of receipt at its Home Office of a written claim for payment which is in good order, except as provided in 3.17. 2.05 STATE LAWS: The Contract and the Certificates comply with the laws of the state in which they are delivered. Any surrender, death, or Annuity payments are equal to or greater than the minimum required by such laws. Annuity tables for legal reserve valuation shall be as required by state law. Such tables may be different from Annuity tables used to determine Annuity payments. 2.06 CONTROL OF CONTRACT: This is a Contract between the Contract Holder and Aetna. The Contract Holder has title to the Contract. Contract Holder rights are limited to accepting and rejecting Contract modifications. Each Certificate Holder has a nonforfeitable right to all amounts held in his or her Account. Each Certificate Holder may make any choices allowed by this contract for his or her Account. Choices made under this Contract must be in writing. Until receipt of such choices at Aetna's Home Office, Aetna may rely on any previous choices made. The Contract is not subject to the claims of any creditors of the Contract Holder or the Certificate Holder except to the extent permitted by law. The Account may not be attached, alienated, or subject to the claims of creditors of the Certificate Holder except to the extent permitted by law. This Account is nontransferable by the Certificate Holder. The Certificate Holder may not assign, transfer, pledge or use as collateral his or her rights under the Contract. 2.07 DESIGNATION OF Each Certificate Holder shall name his or her Beneficiary. The BENEFICIARY: Beneficiary may be changed at any time. Changes to a Beneficiary must be submitted to Aetna's Home Office in writing and will not be effective until accepted by Aetna. 2.08 MISSTATEMENTS AND If Aetna finds the age or sex of any Annuitant to be misstated, ADJUSTMENTS: the amount payable under the Contract shall be adjusted for the correct age or sex; the amount of any underpayment or overpayment, with interest at six per cent per year, shall be credited to, or changed against, the current or next succeeding payment or payments to be made by Aetna under the Contract. 2.09 INCONTESTABILITY: Aetna cannot cancel the Contract because of any error of fact on the application. Aetna cannot cancel an account because of any error of fact on the enrollment form.
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III. PURCHASE PAYMENT, CURRENT VALUE, AND SURRENDER PROVISIONS ------------------------------------------------------------------------------------------------------------------------------------ 3.01 NET PURCHASE PAYMENT: This amount is the actual Purchase Payment less any premium tax. Aetna will generally deduct the premium tax when Annuity benefits are elected (see Part IV). If Aetna determines that under applicable state law, it must pay a premium tax when the Purchase Payment is received or at any other time, it will deduct the tax at that time. The Net Purchase Payment will be credited among: (a) The current Deposit Period(s) for Guaranteed Terms under the AG Account; and (b) The Fund(s) in which the Separate Account invests. The Certificate Holder shall tell Aetna the allocation percentage to be applied to the current Deposit Period for each of the available Guaranteed Terms in the AG Account and/or each Fund. 3.02 CERTIFICATE HOLDER'S Aetna will maintain an Account for each Certificate Holder. ACCOUNT: Aetna will declare from time to time the acceptability and the minimum amount for additional Purchase Payments. Each Account will be subject to the Terms and conditions of the Contract in effect at the time the first Purchase Payment for such account is applied to the Contract except for changes made to comply with federal or state law. 3.03 FUND(S) RECORD UNITS -- The portion of the Net Purchase Payment applied to each Fund SEPARATE ACCOUNT: under the Separate Account will determine the number of Fund record units for that Fund. This number is equal to the portion of the Net Purchase Payment applied to each Fund divided by the Fund record unit value (see 3.05) for the Valuation Period in which the Purchase Payment is received in good order at Aetna's Home Office. 3.04 NET RETURN FACTOR(S) -- The net return factor(s) are used to compute all Separate SEPARATE ACCOUNT: Account record units for any Fund. The net return factor for each Fund is equal to 1.0000000 plus the net return rate. The net return rate is equal to: (a) The value of the shares of the Fund held by the Separate Account at the end of the Valuation Period; minus (b) The value of the shares of the Fund held by the Separate Account at the start of the Valuation Period; plus or minus
22 3.04 NET RETURN FACTOR(S) -- (c) Taxes (or reserves for taxes) on the Separate Account (if SEPARATE ACCOUNT any); divided by (CONT'D): (d) The total value of the Fund(s) record units and Fund(s) Annuity units of the Separate Account at the start of the Valuation Period; minus (e) A daily Separate Account charge at an annual rate as shown on Contract Schedule I for mortality and expense risks, which may include profit; and a daily administrative charge. A net return rate may be more less than 0%. The value of a share of the Fund is equal to the net assets of the Fund divided by the number of shares outstanding. 3.05 FUND RECORD UNIT A Fund record unit value is computed by multiplying the net VALUE -- SEPARATE ACCOUNT:return factors for the current Valuation Period by the Fund record unit value for the previous Period. The dollar value of Fund record units, Separate Account assets, and Variable Annuity payments may go up or down due to investment gain or loss. 3.06 MARKET VALUE ADJUSTMENT: Except as noted below, there will be an MVA for a withdrawal from the AG Account before the end of a Guaranteed Term when the withdrawal is due to: (a) A Transfer; except for transfers from the one-year AG Account Guaranteed Term under the Dollar Cost Averaging program or, as specified in 1.24, AG Account Matured Term Value Transfer; (b) A full or partial surrender (including a 15% free withdrawal under 3.16), except for a partial withdrawal under the Systematic Withdrawal Option (see 3.11); or (c) An election of Annuity option 2 (see 4.09). Full and partial surrenders and Transfers made within six months after the date of the Annuitant's death will be the greater of: (a) The aggregate MVA amount which is the sum of all market value adjusted amounts calculated due to a withdrawal of amounts. This total may be greater or less than the Current Value of those amounts; or (b) The applicable portion of the Current Value in the AG Account. After the six-month period, the surrender or Transfer will be the aggregate MVA amount, which may be greater or less than the Current Value of those amounts. The greater of the aggregate MVA amount or the applicable portion of the Current Value applies to amounts withdrawn from the AG Account on account of an election of Annuity options 3 or 4 (see 4.09).
23 3.06 MARKET VALUE ADJUSTMENT Market value adjusted amounts will be equal to the amount (CONT'D): withdrawn multiplied by the following ratio: x --- 365 (1 + i) -------------------- x --- 365 (1 + j) Where: i is the Deposit Period Yield j is the Current Yield x is the number of days remaining, (computed from Wednesday of the week of withdrawal) in the Guaranteed Term. The Deposit Period Yield will be determined as follows: (a) At the close of the last business day of each week of the Deposit Period, a yield will be computed as the average of the yields on that day of U.S. Treasury Notes which mature in the last three months of the Guaranteed Term. (b) The Deposit Period Yield is the average of those yields for the Deposit Period. If withdrawal is made before the close of the Deposit Period, it is the average of those yields on each week preceding withdrawal. The Current Yield is the average of the yields on the last business day of the week preceding withdrawal on the same U.S. Treasury Notes included in the Deposit Period Yield. In the event that no U.S. Treasury Notes which mature in the last three months of the Guaranteed Term exist, Aetna reserves the right to use the U.S. Treasury Notes that mature in the following quarter. If. U.S. Treasury Notes are no longer available, a suitable replacement index, subject to approval of the Superintendent of the New York Insurance Department, would then be utilized. A detailed description of the MVA has been filed with the Superintendent of the New York Insurance Department. 3.07 TRANSFER OF CURRENT VALUE Before an Annuity option is elected, all or any portion of the FROM THE FUNDS OR Adjusted Current Value of the Contract may be transferred from AG ACCOUNT: any Fund or Guaranteed Term of the AG Account: (a) To any other Fund; or (b) To any Guaranteed Term of the AG Account available in the current Deposit Period.
24 3.07 TRANSFER OF CURRENT VALUE Transfer requests can be submitted as a percentage or as a dollar amount. The minimum FROM THE FUNDS OR transfer amount is shown on Contract Schedule I. Within a Guaranteed Term Group, the AG ACCOUNT (CONT'D): amount to be surrendered or transferred will be withdrawn first from the oldest Deposit Period, then from the next oldest, and so on until the amount requested is satisfied. The Certificate Holder may make an unlimited number of Transfers during the Accumulation period. The number of free Transfers allowed by Aetna is shown on Contract Schedule I. Additional Transfers may be subject to a Transfer fee as shown on Contract Schedule I. Amounts transferred from the AG Account under the Dollar Cost Averaging program, or amounts transferred as a Matured Term Value on or within the calendar month of the Term's Maturity Date, do not count against the annual Transfer limit. Amounts applied to Guaranteed Terms of the AG Account may not be transferred to the Funds or to another Guaranteed Term during the Deposit Period or for 90 days after the close of the Deposit Period except for (1) a Matured Term Value(s) during the calendar month following the Term's Maturity Date and (2) amounts transferred from the one-year AG Account Guaranteed Term under the Dollar Cost Averaging program. 3.08 REPORTS: Aetna, as issuer of the Contract, will make any reports required of it by federal or state law. Aetna will furnish annual calendar year reports concerning the status of the annuity. 3.09 NOTICE TO THE CONTRACT The Contract Holder will receive quarterly statements from Aetna of: HOLDER: (a) The value of any amounts held in: (1) The AG Account; and (2) The Fund(s) under the Separate Account. (b) The number of any Fund(s) record units; and (c) The Fund(s) record unit value. Such number or values will be as of a specific date no more than 60 days before the date of the notice. 3.10 LOANS: Loans are not available under the Contract. 3.11 DISTRIBUTION OPTIONS: The following distribution options may be elected by the Certificate Holder during the Accumulation Period. (A) ESTATE CONSERVATION OPTION (ECO) - A distribution option under which a portion of the Current Value will automatically be surrendered and distributed each year. ECO payments will be calculated based on the Account's full Current Value. The distributed amount will be withdrawn pro rata from each investment option used under the Account. A Surrender Fee will not be deducted from any portion of the Current Value which is paid as a distribution under ECO. Certificate Holders should consult their tax advisers prior to requesting this distribution option. Aetna will not be responsible for any adverse tax consequences due to receiving ECO payments.
25 3.11 DISTRIBUTION OPTIONS (1) Amount of Distribution: Each year that ECO is in effect, Aetna will calculate and (CONT'D) distribute an amount equal to the minimum required distribution under the Code. The annual distribution will be determined by dividing the Current Value as of December 31 of the year prior to the payment year, by a life expectancy factor. The Certificate Holder, or spouse Beneficiary if ECO is elected after the Certificate Holder's death, shall elect either single life expectancy or joint life expectancy. Life expectancy is computed by use of the expected return multiples in Tables V and VI of section 1.72-9 of the Income Tax Regulations. Joint life expectancy can only be elected based on the joint life expectancy of the Certificate Holder and his or her Beneficiary. If the Certificate Holder makes any changes in the Beneficiary designation under the Certificate, ECO distributions after the change will be recalculated as required by IRS regulations. Life expectancies shall be recalculated annually. If the joint life expectancy is elected with a non-spouse Beneficiary, the life expectancy of the non-spouse Beneficiary must not be recalculated. Instead, the life expectancy will be calculated using the attained age of the Beneficiary during the calendar year in which the Certificate Holder attains age 70 1/2, and payments for subsequent years shall be recalculated based on such life expectancy reduced by one for each calendar year which has elapsed since the calendar year life expectancy was first calculated. If joint life expectancy is elected with a spouse Beneficiary, at the death of either, the payments can continue and will be calculated based solely on the survivor's life expectancy. If joint life expectancy is elected with a non-spouse Beneficiary and the non- spouse Beneficiary dies first, payments will continue based on the joint life expectancy. If a single life expectancy is elected and the Certificate Holder dies, or if a joint life expectancy is elected and the survivor dies, the death benefits determined under Section 3.12 will be paid to the Beneficiary in a lump sum not later than December 31 following the year of death. (2) Minimum Initial Current Value: The ECO Minimum Initial Account Current Value is shown on Contract Schedule I. If after election of this option, the Current Value is
26 3.11 DISTRIBUTION OPTIONS insufficient to make a scheduled ECO payment, Aetna will distribute the (CONT'D): entire Account balance. (3) Date of Distribution: Distribution will be made annually on the 15th of any month or such other date as Aetna may designate or allow. The latest allowable payment date is the month of the Certificate Holder's 85th birthday. The Certificate Holder shall specify an initial distribution month, not earlier than the calendar year in which the Certificate Holder attains age 70 1/2, or such later time when distributions must commence as specified under the Code, whichever is appropriate. For a spouse Beneficiary, the earliest date is the date of the Certificate Holder's death. (4) Election and Revocation: ECO may be elected by the Certificate Holder by submitting a written request to Aetna at its Home Office. Once elected, this option may be revoked by the Certificate Holder, or spouse Beneficiary if elected after the Contract Holder's death, by submitting a written request to Aetna at its Home Office. Any revocation will apply only to amounts not yet paid. The Certificate Holder assumes responsibility for compliance with minimum distribution rules under the Code. ECO may be elected only once by the Certificate Holder or by a spouse Beneficiary. (B) SYSTEMATIC WITHDRAWAL OPTION (SWO): A distribution option under which a portion of the Account's Current Value will automatically be surrendered and distributed each year. SWO payments will be calculated based on the Account's full Current Value. The distributed amount will be withdrawn pro rata from each investment option used under the Account. A Surrender Fee will not be deducted from any portion of the Current Value which is paid as a distribution under SWO. Certificate Holders should consult their tax advisers prior to requesting this distribution option. Aetna will not be responsible for any adverse tax consequences due to receiving SWO payments. (1) Amount of Distribution: The Certificate Holder may elect one of the three payment methods described below. (i) Specified Payment: Payments of a designated dollar amount. The annual amount may not be greater than the percentage of the Account's Current Value at time of election as shown on Contract Schedule I. This annual dollar amount will remain constant. The minimum SWO payment amount is shown on Contract Schedule I; or
27 3.11 DISTRIBUTION OPTIONS (ii) Specified Period: Payments made over a period of time of at least 10 years. (CONT'D) The maximum specified period shall be determined under the Code minimum distribution rules. The annual amount is calculated by dividing the Current Value as of December 31 of the year prior to the payment year by the number of payment years remaining; or (iii) Specified Percentage: Payments of a designated percentage which cannot be greater than the percentage of the Current Value at the time of election as shown on Contract Schedule I. The percentage may be changed by written request. Aetna reserves the right to limit the number of times the percentage may be changed. The annual amount is calculated by multiplying the Current Value as of December 31 of the year prior to the payment year by the designated percentage. Payments will be made until the year the Certificate Holder attains age 70 1/2 or, if elected by the spouse Beneficiary, the year the Certificate Holder would have attained age 70 1/2. Under both the Specified Payment and Specified Period payment methods, a higher amount shall be paid in any year if required under the Code minimum distribution rules. For purposes of this determination, life expectancy for the initial distribution year shall be calculated based on single life expectancy Table V of section 1.72-9 of the Income Tax Regulations. With each subsequent year, the life expectancy will be the life expectancy for the previous year reduced by one. Payments upon the Certificate Holder's death will be made to the Beneficiary in the manner described in 3.13. (2) Minimum Initial Current Value: The Minimum Initial Current Value required to begin SWO is shown on Contract Schedule I. If after election of this option the Current Value is insufficient to make a scheduled SWO payment, Aetna will distribute the entire balance. (3) Date of Distribution: The Certificate Holder shall specify the initial distribution date. The earliest date for distribution is the first date on which the Certificate Holder attains age 59 1/2. The latest allowable SWO payment date is the month of the Certificate Holder's 85th birthday. As elected by the Certificate Holder, SWO payments will be made on a monthly, quarterly, semi-annual or annual basis. If SWO payments are made more frequently than annually, the designated annual amount is divided by the number of payments due each year.
28 3.11 DISTRIBUTION OPTIONS Subsequent distributions will be made on the 15th of any month or such other date (CONT'D): as Aetna may designate or allow. (4) Election and Revocation: SWO may be elected by the Certificate Holder or spouse Beneficiary if elected after the Certificate Holder's death by submitting a completed and signed election form to Aetna's Home Office. Once elected, this option may be revoked by the Certificate Holder, or spouse Beneficiary if elected after the Certificate Holder's death, by submitting a written request to Aetna at its Home Office. Any revocation will apply only to amounts not yet paid. SWO may be elected only once by the Certificate Holder or by the spouse Beneficiary. 3.12 DEATH BENEFIT AMOUNT: If the Certificate Holder/Annuitant dies before Annuity payments start, the Beneficiary is entitled to a death benefit under the Account. The claim date is the date when proof of death and the Beneficiary's claim are received in good order at Aetna's Home Office. The amount of the death benefit is determined as follows: (a) Death of Certificate Holder/Annuitant less than 85 years of age: The guaranteed death benefit is the greatest of: (1) The sum of all Net Purchase Payment(s) made to the Account (as of the date of death) minus the sum of all amounts surrendered, applied to an Annuity, or deducted from the Account; (2) The highest step-up value as of the date of death. A step-up value is determined on each anniversary of the Effective Date. Each step-up value is calculated as the Account's Current Value on the Effective Date anniversary, increased by the amount of any Purchase Payment(s) made, and decreased by the sum of all amounts surrendered, deducted, and/or applied to an Annuity option since the Effective Date anniversary. (3) The Account's Current Value as of the date of death. The excess, if any, of the guaranteed death benefit value over the Account's Current Value is determined as of the date of death. Any excess amount will be deposited to the Account and allocated to Aetna Variable Encore Fund as of the claim date. The Current Value on the claim date plus any excess amount deposited becomes the Account's Current Value. (b) Death of Certificate Holder/Annuitant age 85 or greater: The death benefit is the greatest of:
29 3.12 DEATH BENEFIT AMOUNT (1) The sum of all Net Purchase Payment(s) made to the account (as of the date of death) (CONT'D): minus the sum of all amounts surrendered, applied to an Annuity, or deducted from the Account; (2) The highest step-up value prior to the Certificate Holder's 85th birthday. A step-up value is determined on each anniversary of the Effective Date. Each step-up value is calculated as the Account's Current Value on the Effective Date anniversary, increased by the amount of any Purchase Payment(s) made, and decreased by the sum of all amounts surrendered, deducted, and/or applied to an Annuity option since the Effective Date anniversary. (3) The Certificate Holder's Account Value as of the date of death. The excess, if any, of the guaranteed death benefit value over the Account's Current Value is determined as of the date of death. Any excess amount will be deposited in the Account and allocated to the Aetna Variable Encore Fund as of the claim date. The Current Value on the claim date, plus any excess amount deposited, becomes the Account's Current Value. (c) At the death of a surviving spouse Beneficiary who continued the Account in his or her own name, the death benefit amount is equal to the Account's Current Value less any applicable Surrender Fee on the amount of any Purchase Payment(s) made since the death of the Certificate Holder. 3.13 DEATH BENEFIT OPTIONS Prior to any election, or until amounts must be otherwise distributed under this section, AVAILABLE TO BENEFICIARY: the Current Value of the Account will be retained in the Account. The Beneficiary has the right under the Contract to allocate or reallocate any amount to any of the available investment options (subject to an MVA, as applicable). The following options are available to the Beneficiary: (a) If the Beneficiary is the Certificate Holder's surviving spouse, the surviving spouse may exercise all rights under the Contract and continue in the Accumulation Period, or may elect (1), (2), or (3) below. Under the Code, distributions from the Account are not required until December 31st of the year in which the original Certificate Holder would have attained age 70 1/2. The Beneficiary may elect to: (1) Apply some or all of the Adjusted Current Value of the Account to Annuity option 2, 3 or 4 (see 4.09); (2) Apply some or all of the Adjusted Current Value to Annuity option 1 (see 4.09); or
30 3.13 DEATH BENEFIT OPTIONS (3) Receive, at any time, a lump sum payment AVAILABLE TO BENEFICIARY equal to the Adjusted Current Value of the Account. If ECO is in effect on the Certificate Holder's date of death, the surviving spouse can elect to continue receiving ECO payments if a joint life expectancy was chosen. Otherwise, the surviving spouse must receive a lump sum payment equal to the Adjusted Current Value of the Account. If SWO is in effect and the Certificate Holder dies before the required beginning date for minimum distributions (see 3.13), SWO payments will cease and the surviving spouse may claim the death benefit in accordance with the terms of this section. If SWO is in effect and the Certificate Holder dies after the required beginning date for minimum distributions, the surviving spouse can elect to continue to receive the SWO payments. Otherwise, the surviving spouse must elect to receive a lump sum payment equal to the Adjusted Current Value. (b) If the Beneficiary is other than the Certificate Holder's surviving spouse, then options (1), (2), or (3) under (a) above apply. Any portion of the Adjusted Current Value that is not applied to Annuity option 2, 3 or 4 by December 31st of the year following the year of the Certificate Holder's death must be distributed by December 31st of the year containing the fifth anniversary of the Certificate Holder's date of death. If ECO or SWO is in effect on the Certificate Holder's date of death, the Beneficiary must receive an automatic and immediate lump sum payment equal to the Adjusted Current Value. (c) If no Beneficiary exists, a lump sum payment equal to the Adjusted Current Value will be made to the Certificate Holder's estate. 3.14 REQUIRED DISTRIBUTION (a) Certificate Holder: The entire interest of the Certificate Holder will be distributed TO CONTRACT HOLDER/ or begin to be distributed no later than April 1 BENEFICIARY: following the calendar year in which the Certificate Holder attains age 70 1/2 (required beginning date), over (a) the life of the Contract Holder, or the lives of the Contract Holder and his or her designated Beneficiary, or (b) a period certain not extending beyond the life expectancy of the Contract Holder, or the joint and last survivor expectancy of the Contract Holder and his or her designated Beneficiary. Payments must be made in periodic payments at intervals no longer than one year. In addition, payments must be either nonincreasing or they may increase only as provided in Q&A F-3 of section 1.401(a)(9)-1 of the Proposed Income Tax Regulations.
31 3.14 REQUIRED DISTRIBUTION All distributions made hereunder shall be made in accordance with the requirements TO CONTRACT HOLDER/ of section 401(a)(9) of the Code, and the regulations thereunder, including BENEFICIARY (CONT'D): the minimum distribution incidental benefit requirement of section 1.401(a)(9)-2 of the Proposed Income Tax Regulations. Distribution may be an Annuity as set forth in Sections 4.01 through 4.04, payments under ECO or SWO as defined in Section 3.11 or a lump sum payment. (b) Beneficiary: If the Certificate Holder dies after distribution of his or her interest has begun, the remaining portion of such interest will continue to be distributed at least as rapidly as under the method of distribution being used prior to the Certificate Holder's death. Distributions are considered to have begun if distributions are made on account of the Certificate Holder's reaching his or her required beginning date or if prior to the required beginning date distributions irrevocably commence to the Certificate Holder over a period permitted and in an Annuity form acceptable under section 1.401(a)(9) of the Income Tax Regulations. 3.15 LIQUIDATION OF All or any portion of the Account's Current Value may be SURRENDER VALUE: surrendered at any time. Surrender requests can be submitted as a percentage of the Account Current Value or as a specific dollar amount. The Net Purchase Payment amount is withdrawn first, and then the excess value, if any. For any partial surrender amounts are withdrawn on a pro rata basis from the Fund(s) and/or the Guaranteed Term(s) Groups of the AG Account in which the Current Value is invested. Within a Guaranteed Term Group, the amount to be surrendered or transferred will be withdrawn first from the oldest Deposit Period, then from the next oldest, and so on until the amount requested is satisfied. After deduction of the Maintenance Fee, if applicable, the surrendered amounts shall be reduced by a Surrender Fee, if applicable. An MVA may apply to amounts surrendered from the AG Account. 3.16 SURRENDER FEE: The Surrender Fee only applies to the Net Purchase Payment portion surrendered and varies according to the elapsed time since deposit (see Contract Schedule I). No Surrender Fee is deducted from any portion of the Current Value which is paid: (a) To a Beneficiary due to the Certificate Holder's death before Annuity payments start;
32 3.16 SURRENDER FEE: (CONT'D) (b) As a premium for an Annuity option 2, 3 or 4 under this Contract (see 4.09); (c) As a distribution under the ECO or SWO provision (see 3.11); (d) At least 12 months after the date of the Purchase Payment to the Account, in an amount equal to or less than 15% of the Current Value. This applies to the first surrender request, partial or full, in a calendar year. The Current Value is calculated as of the date the surrender request is received in good order at Aetna's Home Office. This waiver is not available to the Contract Holder while SWO is in effect; or (e) For a full surrender of the Account where the Current Value of the Account is $2,500 or less and no surrenders have been taken from the Contract within the prior 12 months. 3.17 PAYMENT OF Under certain emergency conditions, Aetna may defer payment: SURRENDER VALUE: (a) For a period of up to 6 months (unless not allowed by state law); or (b) As provided by federal law under the Investment Company Act of 1940.
IV. ANNUITY PROVISIONS ------------------------------------------------------------------------------------------------------------------------------------ 4.01 CHOICES TO BE MADE: The Certificate Holder may tell Aetna to apply any portion of the Adjusted Current Value (minus any premium tax) for an Annuity under option 2, 3, or 4 (see 4.09). The first Annuity payment may not be earlier than one calendar year after the Purchase Payment nor later than the first day of the month following the Annuitant's 85th birthday. When an Annuity Option is chosen, Aetna must also be told if payments are to be made other than monthly and whether to pay: (a) A Fixed Annuity using the AG Account; (b) A Variable Annuity using any of the Fund(s) available under this Contract for Annuity purposes; or (c) A combination of (a) and (b). If a Fixed Annuity is chosen, the Annuity purchase rate for the option chosen reflects at least the Minimum Guaranteed Interest Rate (see Contract Schedule II), but may reflect a higher interest rate. If a Variable Annuity is chosen, the initial Annuity payment for the option chosen reflects the assumed annual return rate elected. (see Contract Schedule II).
33 4.02 ANNUITY PAYMENTS TO In no event may any payments to the Annuitant under an CONTRACT HOLDER: Annuity Option extend beyond: (a) The life of the Certificate Holder; (b) The lives of the Certificate Holder and Beneficiary; (c) Any certain period greater than the Certificate Holder's life expectancy according to regulations under Code Section 401(a)(9), determined as of the date payments are to begin; or (d) A period greater than the joint and last survivor life expectancies of the Certificate Holder and the Certificate Holder's Beneficiary according to regulations under Code Section 401(a)(9), determined as of the date payments are to begin. 4.03 ANNUITY PAYMENTS TO In no event may payments to the Beneficiary under an Annuity option extend beyond: BENEFICIARY: (a) The life of the Beneficiary; or (b) Any certain period greater than the Beneficiary's life expectancy as determined by regulations under Code Section 401(a)(9). 4.04 TERMS OF ANNUITY (a) When payments start, the age of the Annuitant plus the number of years for which payments OPTIONS: are guaranteed must not exceed 95. (b) An Annuity option may not be elected if the first payment would be less than $50 or if the total payments in a year would be less than $250 (less if required by state law). Aetna reserves the right to increase the minimum first Annuity payment amount and the annual minimum annual Annuity payment amount based upon increases reflected in the Consumer Price Index-Urban, (CPI-U) since July 1, 1993. (c) If a Fixed Annuity under option 2, 3 or 4 is chosen and a larger payment would result from applying the Surrender Value or, if greater, 95% of what the surrender would be if there were no surrender fee, to a current Aetna single premium immediate Annuity, Aetna will make the larger payment. (d) For purposes of calculating the guaranteed first payment of a Variable Annuity or the payments for a Fixed Annuity, the Annuitant's and second Annuitant's adjusted age will be used. The Annuitant's and second Annuitant's adjusted age is his or her age as of the birthday closest to the Annuity commencement date reduced by one year for Annuity commencement dates occurring during the period of time from July 1, 1993 through December 31, 1999. The Annuitant's and second Annuitant's age will be reduced by two years for Annuity commencement dates occurring during the period of time from January 1, 2000 through December 31, 2009. The Annuitant's and second Annuitant's age will be reduced by one
34 4.04 TERMS OF ANNUITY additional year for Annuity commencement dates occurring in each succeeding OPTIONS (CONT'D): decade. The Annuity purchase rates for options 3 and 4 are based on mortality from 1983 Table a. (e) Assumed Annual Net Return Rate is the interest rate used to determine the amount of the first Annuity payment under a Variable Annuity as shown on Contract Schedule II. The Separate Account must earn this rate plus enough to cover the mortality and expense risk charges (which may include profit) and administrative charges if future Variable Annuity Payments are to remain level, (see Annuity return factor under Variable Annuity Assumed Annual Net Return Rate on Contract Schedule II). (f) Once elected, Annuity payments cannot be commuted to a lump sum except for Variable Annuity payments under option 2 (see 4.09). The life expectancy of the Certificate Holder or Certificate Holder and second Annuitant shall be irrevocable upon the election of an Annuity option. 4.05 DEATH OF ANNUITANT/ (a) When an Annuitant dies under option 2 or 3, or both the Annuitant and the second BENEFICIARY: Annuitant die under option 4(d), the present value of any remaining guaranteed payments will be paid in one sum to the Beneficiary, or upon election by the Beneficiary, any remaining payments will continue to the Beneficiary. If option 4 has been elected and the Annuitant dies, the remaining payments will continue to the second Annuitant as successor payee. (b) If there is no Beneficiary under option 2, 3 or 4, the present value of any remaining payments will be paid in one sum to the Certificate Holder's estate. (c) If the Beneficiary designated under option 1 dies, the amount held plus accrued interest will be paid in one sum to a successor Beneficiary, if any, named by the designated Beneficiary. If there is no successor Beneficiary, the lump sum will be paid to the designated Beneficiary's estate. (d) If the Beneficiary dies while receiving Annuity payments, the present value of any remaining guaranteed payments will be paid in one sum to the successor Beneficiary, or upon election by the successor Beneficiary, any remaining payments will continue to the successor Beneficiary. If no successor Beneficiary has been designated, the present value of any remaining guaranteed payments will be paid in one sum to the Beneficiary's estate. (e) The present value will be determined as of the Valuation Period in which proof of death acceptable to Aetna and a request for payment is received at Aetna's Home Office. The
35 interest rate used to determine the first payment will be used to calculate the present value. 4.06 FUND(S) ANNUITY UNITS -- The number of each Fund's Annuity units is based on the amount of the first Variable Annuity SEPARATE ACCOUNT: payment which is equal to: (a) The portion of the Current Value applied to pay a Variable Annuity (minus any premium tax); divided by (b) 1,000; multiplied by (c) The payment rate for the option chosen. Such amount, or portion, of the variable payment will be divided by the appropriate Fund Annuity unit value (see 4.07) on the tenth Valuation Period before the due date of the first payment to determine the number of each Fund Annuity units. The number of each Fund Annuity units remains fixed. Each future payment is equal to the sum of the products of each Fund Annuity unit value multiplied by the appropriate number of units. The Fund Annuity unit value on the tenth Valuation Period prior to the due date of the payment is used. 4.07 FUND(S) ANNUITY UNIT For any Valuation Period, a Fund Annuity unit value is equal to: VALUE -- SEPARATE ACCOUNT: (a) The Value for the previous Period; multiplied by (b) The Annuity net return factor(s) (see 4.08 below) for the Period; multiplied by (c) A factor to reflect the assumed annual net return rate (see Contract Schedule II). The dollar value of a Fund Annuity unit value and Annuity payments may go up or down due to investment gain or loss. 4.08 ANNUITY NET RETURN The Annuity net return factor(s) are used to compute Annuity payments for any Fund. FACTOR(S) -- SEPARATE ACCOUNT: The Annuity net return factor(s) for each Fund is equal to 1.0000000 plus the net return rate. The net return rate is equal to: (a) The value of the shares of the Fund held by the Separate Account at the end of a Valuation Period; minus (b) The value of the shares of the Fund held by the Separate Account at the start of the Valuation Period; plus or minus (c) Taxes (or reserves for taxes) on the Separate Account (if any); divided by (d) The total value of the Fund record units and the Fund Annuity units of the Separate Account at the start of the Valuation Period; minus (e) A daily charge for Annuity mortality and expense risks, which may include profit, and a daily administrative charge (at the annual rate as shown on Contract Schedule II).
36 A net return rate may be more or less than 0%. The value of a share of the Fund is equal to the net assets of the Fund divided by the number of shares outstanding.
37 4.08 ANNUITY NET RETURN Payments shall not be changed due to changes in the mortality or expense results or FACTOR(S) -- SEPARATE administrative charges. ACCOUNT: (CONT'D) 4.09 ANNUITY OPTIONS: Option 1 -- Payment of Interest on Sum Left with Aetna -- This option may be used only by the Beneficiary when the Certificate Holder dies before Aetna has started paying an Annuity. A portion or all of the sum paid upon death may be held under this option and will be held in the General Account of Aetna at interest (see 3.13 and 4.01). The Beneficiary may later tell Aetna to: (a) Pay a portion or all of the sum held by Aetna; or (b) Apply a portion or all of the sum held by Aetna to any Annuity option below. If a nonspouse Beneficiary elects that some or all of the Current Value is to be held under this option, the Beneficiary must tell Aetna to pay the full sum held under this option by December 31st of the year containing the fifth anniversary of the Contract Holder's date of death. Option 2 -- Payments for a Stated Period of Time -- An Annuity will be paid for the number of years chosen. The number of years must be at least 5 and not more than 30. If payments for this option are made under a Variable Annuity, the present value of any remaining payments may be withdrawn at any time. If a withdrawal is requested within 3 years after the start of payments, it will be treated as a surrender and any applicable Surrender Fee will be applied (see 3.16). Option 3 -- Life Income -- An Annuity will be paid for the life of the Annuitant. If also chosen, Aetna will guarantee payments for 60, 120, 180, or 240 months. Option 4 -- Life Income Based upon the Lives of Two Annuitants -- An Annuity will be paid during the lives of the Annuitant and a second Annuitant. Payments will continue until both Annuitants have died. When this option is chosen, a choice must be made of: (a) 100% of the payment to continue after the first death; (b) 66 2/3% of the payment to continue after the first death; (c) 50% of the payment to continue after the first death; (d) Payments for a minimum of 120 months with 100% of the payment to continue after the first death; or (e) 100% of the payment to continue at the death of the second Annuitant and 50% of the payment to continue at the death of the Annuitant. Other Options -- Aetna may make other options available as allowed by the laws of the state in which this Contract and the Certificate is delivered.
38 OPTION 2 PAYMENTS FOR A STATED PERIOD OF TIME AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
------------------------------------------------------------------------------------------------------ GUARANTEED MONTHLY QUARTERLY SEMI-ANNUAL ANNUAL YEARS RATE PAYMENT PAYMENT PAYMENT PAYMENT ------------------------------------------------------------------------------------------------------ 5 3.00% 17.91 53.59 106.78 211.99 6 3.00% 15.14 45.30 90.27 179.22 7 3.00% 13.16 39.39 78.49 155.83 8 3.00% 11.68 34.96 69.66 138.31 9 3.00% 10.53 31.52 62.81 124.69 10 3.00% 9.61 28.77 57.33 113.82 11 3.00% 8.86 26.52 52.85 104.93 12 3.00% 8.24 24.65 49.13 97.54 13 3.00% 7.71 23.08 45.98 91.29 14 3.00% 7.26 21.73 43.29 85.95 15 3.00% 6.87 20.56 40.96 81.33 16 3.00% 6.53 19.54 38.93 77.29 17 3.00% 6.23 18.64 37.14 73.74 18 3.00% 5.96 17.84 35.56 70.59 19 3.00% 5.73 17.13 34.14 67.78 20 3.00% 5.51 16.50 32.87 65.26 21 3.00% 5.32 15.92 31.72 62.98 22 3.00% 5.15 15.40 30.68 60.92 23 3.00% 4.99 14.92 29.74 59.04 24 3.00% 4.84 14.49 28.88 57.33 25 3.00% 4.71 14.09 28.08 55.76 26 3.00% 4.59 13.73 27.36 54.31 27 3.00% 4.47 13.39 26.68 52.97 28 3.00% 4.37 13.08 26.06 51.74 29 3.00% 4.27 12.79 25.49 50.60 30 3.00% 4.18 12.52 24.95 49.53 ------------------------------------------------------------------------------------------------------
39 OPTION 3 LIFE INCOME AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0% PAYMENTS GUARANTEED FOR A STATED PERIOD OF MONTHS -------------------------------------------------
----------------------------------------------------------------------------------------------- ADJUSTED NONE 60 120 180 240 AGE OF ------------------------------------------------------------------------------ ANNUITANT MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE ----------------------------------------------------------------------------------------------- 50 $4.27 $3.90 $4.26 $3.90 $4.22 $3.89 $4.17 $3.86 $4.08 $3.82 51 4.34 3.97 4.33 3.96 4.30 3.95 4.23 3.92 4.14 3.88 52 4.43 4.03 4.41 4.03 4.37 4.01 4.30 3.98 4.20 3.93 53 4.51 4.10 4.50 4.10 4.45 4.08 4.37 4.04 4.26 3.99 54 4.60 4.18 4.59 4.17 4.54 4.15 4.45 4.11 4.32 4.04 55 4.70 4.25 4.68 4.25 4.62 4.22 4.53 4.18 4.39 4.11 56 4.80 4.34 4.78 4.33 4.72 4.30 4.61 4.25 4.45 4.17 57 4.91 4.42 4.89 4.41 4.82 4.38 4.69 4.32 4.51 4.23 58 5.03 4.52 5.00 4.51 4.92 4.47 4.78 4.40 4.58 4.30 59 5.15 4.61 5.12 4.60 5.03 4.56 4.87 4.48 4.65 4.37 60 5.28 4.72 5.25 4.70 5.14 4.66 4.96 4.57 4.71 4.44 61 5.43 4.83 5.39 4.81 5.27 4.76 5.06 4.66 4.78 4.51 62 5.58 4.95 5.53 4.93 5.39 4.87 5.16 4.75 4.84 4.58 63 5.74 5.08 5.69 5.05 5.53 4.99 5.26 4.85 4.90 4.65 64 5.91 5.21 5.85 5.18 5.66 5.10 5.36 4.95 4.96 4.72 65 6.10 5.36 6.03 5.32 5.81 5.22 5.46 5.05 5.02 4.79 66 6.30 5.51 6.21 5.47 5.93 5.36 5.56 5.16 5.08 4.86 67 6.51 5.67 6.41 5.63 6.12 5.50 5.66 5.26 5.13 4.93 68 6.73 5.85 6.62 5.80 6.28 5.65 5.77 5.37 5.18 5.00 69 6.97 6.04 6.84 5.98 6.44 5.80 5.86 5.49 5.23 5.06 70 7.23 6.25 7.07 6.18 6.61 5.97 5.96 5.60 5.27 5.12 71 7.51 6.47 7.32 6.39 6.79 6.14 6.05 5.71 5.31 5.18 72 7.80 6.71 7.58 6.62 6.96 6.32 6.14 5.83 5.34 5.23 73 8.12 6.98 7.85 6.86 7.14 6.50 6.23 5.94 5.37 5.28 74 8.46 7.26 8.14 7.12 7.32 6.69 6.31 6.04 5.40 5.32 75 8.82 7.57 8.45 7.40 7.50 6.89 6.38 6.14 5.42 5.35 -----------------------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. 40 OPTION 4 LIFE INCOME FOR TWO PAYEES AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES (ANNUITANT IS MALE AND SECOND ANNUITANT IS FEMALE) Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
----------------------------------------------------------------------------------------- ADJUSTED AGES ----------------------------- SECOND ANNUITANT ANNUITANT OPTION 4A OPTION 4B OPTION 4C OPTION 4D OPTION 4E ----------------------------------------------------------------------------------------- 55 50 $3.69 $4.05 $4.27 $3.69 $4.13 55 55 3.88 4.25 4.47 3.87 4.25 55 60 3.06 4.47 4.71 4.06 4.36 60 55 3.99 4.44 4.71 3.98 4.55 60 60 4.24 4.71 4.99 4.23 4.70 60 65 4.49 5.01 5.32 4.48 4.85 65 60 4.38 4.97 5.32 4.38 5.10 65 65 4.72 5.33 5.70 4.71 5.32 65 70 5.07 5.75 6.17 5.05 5.54 70 65 4.93 5.68 6.15 4.91 5.86 70 70 5.40 6.21 6.70 5.36 6.18 70 75 5.89 6.82 7.40 5.81 6.49 75 70 5.69 6.68 7.32 5.62 6.92 75 75 6.37 7.45 8.15 6.23 7.40 75 80 7.07 8.34 9.16 6.78 7.85 -----------------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates assume the Annuitant is Male and the Second Annuitant is Female. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. 41 OPTION 4 LIFE INCOME FOR TWO PAYEES AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES (ANNUITANT IS FEMALE AND SECOND ANNUITANT IS MALE) Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
---------------------------------------------------------------------------------------- ADJUSTED AGES ----------------------------- SECOND ANNUITANT ANNUITANT OPTION 4A OPTION 4B OPTION 4C OPTION 4D OPTION 4E ---------------------------------------------------------------------------------------- 55 50 $3.75 $4.07 $4.26 $3.75 $3.98 55 55 3.88 4.25 4.47 3.87 4.06 55 60 3.99 4.44 4.71 3.98 4.12 60 55 4.06 4.47 4.71 4.06 4.37 60 60 4.24 4.71 4.99 4.23 4.47 60 65 4.38 4.97 5.32 4.38 4.54 65 60 4.49 5.01 5.32 4.48 4.89 65 65 4.72 5.33 5.70 4.71 5.02 65 70 4.93 5.68 6.15 4.91 5.14 70 65 5.07 5.75 6.17 5.05 5.60 70 70 5.40 6.21 6.70 5.36 5.79 70 75 5.69 6.68 7.32 5.62 5.96 75 70 5.89 6.83 7.40 5.81 6.63 75 75 6.37 7.45 8.15 6.23 6.92 75 80 6.78 8.11 8.99 6.54 7.15 ----------------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates assume the Annuitant is Female and the Second Annuitant is Male. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. 42 OPTION 2 PAYMENTS FOR A STATED PERIOD OF TIME AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
------------------------------------------------------------------------------------------------------ GUARANTEED MONTHLY QUARTERLY SEMI-ANNUAL ANNUAL YEARS RATE PAYMENT PAYMENT PAYMENT PAYMENT ------------------------------------------------------------------------------------------------------ 5 3.50% 18.12 54.19 107.92 213.99 6 3.50% 15.35 45.92 91.44 181.32 7 3.50% 13.38 40.01 79.69 158.01 8 3.50% 11.90 35.59 70.88 140.56 9 3.50% 10.75 32.16 64.05 127.00 10 3.50% 9.83 29.42 58.59 116.18 11 3.50% 9.09 27.18 54.13 107.34 12 3.50% 8.46 25.32 50.42 99.98 13 3.50% 7.94 23.75 47.29 93.78 14 3.50% 7.49 22.40 44.62 88.47 15 3.50% 7.10 21.24 42.31 83.89 16 3.50% 6.76 20.23 40.29 79.89 17 3.50% 6.47 19.34 38.51 76.37 18 3.50% 6.20 18.55 36.94 73.25 19 3.50% 5.97 17.85 35.54 70.47 20 3.50% 5.75 17.22 34.28 67.98 21 3.50% 5.56 16.65 33.15 65.74 22 3.50% 5.39 16.13 32.13 63.70 23 3.50% 5.24 15.66 31.19 61.85 24 3.50% 5.09 15.24 30.34 60.17 25 3.50% 4.96 14.85 29.56 58.62 26 3.50% 4.84 14.49 28.95 57.20 27 3.50% 4.73 14.15 28.19 55.90 28 3.50% 4.63 13.85 27.58 54.69 29 3.50% 4.53 13.57 27.02 53.57 30 3.50% 4.45 13.30 26.49 52.53 ------------------------------------------------------------------------------------------------------
43 OPTION 2 PAYMENTS FOR A STATED PERIOD OF TIME AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
------------------------------------------------------------------------------------------------------ GUARANTEED MONTHLY QUARTERLY SEMI-ANNUAL ANNUAL YEARS RATE PAYMENT PAYMENT PAYMENT PAYMENT ------------------------------------------------------------------------------------------------------ 5 5.00% 18.74 56.00 111.33 219.98 6 5.00% 15.99 47.77 94.96 187.64 7 5.00% 14.02 41.90 83.30 164.59 8 5.00% 12.56 37.52 74.58 147.35 9 5.00% 11.42 34.11 67.81 133.99 10 5.00% 10.51 31.40 62.42 123.34 11 5.00% 9.77 29.19 58.03 114.66 12 5.00% 9.16 27.36 54.38 107.45 13 5.00% 8.64 25.81 51.31 101.39 14 5.00% 8.20 24.50 48.69 96.21 15 5.00% 7.82 23.36 46.44 91.75 16 5.00% 7.49 22.37 44.47 87.88 17 5.00% 7.20 21.51 42.75 84.48 18 5.00% 6.94 20.74 41.23 81.47 19 5.00% 6.71 20.06 39.88 78.80 20 5.00% 6.51 19.46 38.68 76.42 21 5.00% 6.33 18.91 37.59 74.28 22 5.00% 6.17 18.42 36.62 72.35 23 5.00% 6.02 17.98 35.73 70.61 24 5.00% 5.88 17.57 34.93 69.02 25 5.00% 5.76 17.20 34.20 67.57 26 5.00% 5.65 16.87 33.53 66.25 27 5.00% 5.54 16.56 32.92 65.04 28 5.00% 5.45 16.28 32.35 63.93 29 5.00% 5.36 16.01 31.83 62.90 30 5.00% 5.28 15.77 31.35 61.95 ------------------------------------------------------------------------------------------------------
44 OPTION 3 LIFE INCOME AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Variable Annuity with Assumed Net Return Rate of 3.5% PAYMENTS GUARANTEED FOR A STATED PERIOD OF MONTHS -------------------------------------------------
----------------------------------------------------------------------------------------------- ADJUSTED NONE 60 120 180 240 AGE OF ------------------------------------------------------------------------------ ANNUITANT MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE ----------------------------------------------------------------------------------------------- 50 $4.56 $4.20 $4.55 $4.19 $4.51 $4.18 $4.45 $4.15 $4.36 $4.11 51 4.64 4.26 4.62 4.25 4.58 4.24 4.51 4.21 4.42 4.16 52 4.72 4.32 4.70 4.32 4.66 4.30 4.58 4.26 4.48 4.21 53 4.80 4.39 4.79 4.38 4.74 4.36 4.65 4.32 4.53 4.27 54 4.89 4.46 4.87 4.46 4.82 4.43 4.73 4.39 4.59 4.32 55 4.99 4.54 4.97 4.53 4.91 4.50 4.80 4.46 4.65 4.38 56 5.09 4.62 5.07 4.61 5.00 4.58 4.88 4.53 4.72 4.44 57 5.20 4.71 5.17 4.70 5.10 4.66 4.96 4.60 4.78 4.50 58 5.32 4.80 5.29 4.79 5.20 4.75 5.05 4.68 4.84 4.57 59 5.44 4.90 5.41 4.88 5.31 4.84 5.14 4.76 4.91 4.63 60 5.57 5.00 5.53 4.99 5.42 4.93 5.23 4.84 4.97 4.70 61 5.71 5.11 5.67 5.09 5.54 5.03 5.32 4.93 5.03 4.77 62 5.86 5.23 5.81 5.21 5.66 5.14 5.42 5.02 5.09 4.84 63 6.02 5.36 5.97 5.33 5.79 5.25 5.51 5.11 5.16 4.91 64 6.20 5.49 6.13 5.46 5.93 5.37 5.61 5.21 5.21 4.98 65 6.38 5.64 6.31 5.60 6.07 5.49 5.71 5.31 5.27 5.05 66 6.58 5.79 6.49 5.75 6.22 5.63 5.81 5.41 5.32 5.12 67 6.79 5.95 6.69 5.91 6.38 5.76 5.91 5.52 5.38 5.18 68 7.02 6.13 6.89 6.08 6.53 5.91 6.01 5.63 5.42 5.25 69 7.26 6.32 7.11 6.26 6.70 6.06 6.11 5.74 5.47 5.31 70 7.52 6.53 7.35 6.45 6.86 6.23 6.20 5.85 5.51 5.37 71 7.80 6.75 7.59 6.66 7.03 6.39 6.29 5.96 5.54 5.42 72 8.09 6.99 7.85 6.89 7.21 6.57 6.38 6.07 5.57 5.47 73 8.41 7.26 8.12 7.13 7.38 6.75 6.46 6.17 5.60 5.51 74 8.75 7.54 8.41 7.39 7.55 6.94 6.53 6.28 5.63 5.55 75 9.12 7.85 8.71 7.66 7.73 7.13 6.61 6.38 5.65 5.59 ---------------------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. 45 OPTION 3 LIFE INCOME AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Variable Annuity with Assumed Net Return Rate of 5.0% PAYMENTS GUARANTEED FOR A STATED PERIOD OF MONTHS -------------------------------------------------
----------------------------------------------------------------------------------------------- ADJUSTED NONE 60 120 180 240 AGE OF ------------------------------------------------------------------------------ ANNUITANT MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE ----------------------------------------------------------------------------------------------- 50 $ 5.48 $5.12 $5.46 $5.11 $5.41 $5.09 $5.34 $5.06 $5.24 $5.01 51 5.55 5.17 5.53 5.17 5.48 5.14 5.40 5.11 5.29 5.05 52 5.63 5.23 5.61 5.23 5.55 5.20 5.46 5.16 5.34 5.10 53 5.71 5.30 5.69 5.29 5.62 5.26 5.53 5.22 5.40 5.15 54 5.80 5.37 5.77 5.36 5.70 5.33 5.60 5.27 5.45 5.20 55 5.89 5.44 5.86 5.43 5.79 5.39 5.67 5.34 5.51 5.25 56 5.99 5.52 5.96 5.51 5.87 5.47 5.74 5.40 5.56 5.31 57 6.10 5.60 6.06 5.59 5.97 5.54 5.82 5.47 5.62 5.37 58 6.21 5.69 6.17 5.67 6.06 5.62 5.90 5.54 5.68 5.42 59 6.33 5.79 6.29 5.77 6.17 5.71 5.98 5.61 5.74 5.48 60 6.46 5.89 6.41 5.87 6.28 5.80 6.06 5.69 5.79 5.55 61 6.60 6.00 6.55 6.07 6.39 5.90 6.15 5.77 5.85 5.61 62 6.75 6.11 6.69 6.08 6.51 6.00 6.24 5.86 5.91 5.67 63 6.91 6.23 6.84 6.20 6.64 6.10 6.33 5.95 5.96 5.73 64 7.09 6.37 7.00 6.33 6.77 6.22 6.42 6.04 6.02 5.80 65 7.27 6.51 7.18 6.46 6.91 6.34 6.52 6.13 6.07 5.86 66 7.47 6.66 7.36 6.61 7.05 6.46 6.61 6.23 6.12 5.92 67 7.68 6.82 7.55 6.76 7.20 6.60 6.70 6.33 6.16 5.99 68 7.91 7.00 7.76 6.93 7.35 6.74 6.80 6.43 6.21 6.04 69 8.15 7.19 7.98 7.11 7.51 6.89 6.89 6.54 6.25 6.10 70 8.41 7.39 8.21 7.30 7.67 7.04 6.97 6.64 6.28 6.15 71 8.69 7.62 8.45 7.51 7.83 7.21 7.06 6.74 6.32 6.20 72 8.99 7.86 8.70 7.73 8.00 7.38 7.14 6.85 6.35 6.25 73 9.31 8.12 8.97 7.97 8.16 7.55 7.21 6.95 6.37 6.29 74 9.65 8.41 9.26 8.23 8.33 7.73 7.29 7.04 6.39 6.33 75 10.02 8.72 9.55 8.50 8.50 7.92 7.35 7.14 6.41 6.36 -----------------------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. 46 OPTION 4 LIFE INCOME FOR TWO PAYEES AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES (ANNUITANT IS MALE AND SECOND ANNUITANT IS FEMALE) Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
----------------------------------------------------------------------------------------- ADJUSTED AGES ------------------------ SECOND ANNUITANT ANNUITANT OPTION 4A OPTION 4B OPTION 4C OPTION 4D OPTION 4E ----------------------------------------------------------------------------------------- 55 50 $3.97 $4.35 $4.56 $3.97 $4.42 55 55 4.16 4.54 4.76 4.15 4.54 55 60 4.34 4.76 5.00 4.34 4.64 60 55 4.27 4.73 5.00 4.26 4.83 60 60 4.51 4.99 5.27 4.50 4.98 60 65 4.76 5.29 5.60 4.75 5.13 65 60 4.66 5.25 5.61 4.65 5.39 65 65 4.99 5.61 5.99 4.98 5.60 65 70 5.34 6.03 6.46 5.31 5.81 70 65 5.19 5.97 6.44 5.17 6.14 70 70 5.67 6.49 6.99 5.62 6.47 70 75 6.16 7.10 7.68 6.07 6.77 75 70 5.95 6.96 7.61 5.87 7.20 75 75 6.64 7.73 8.43 6.48 7.68 75 80 7.33 8.62 9.45 7.02 8.13 -----------------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates assume the Annuitant is Male and the Second Annuitant is Female. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. 47 OPTION 4 LIFE INCOME FOR TWO PAYEES AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES (ANNUITANT IS FEMALE AND SECOND ANNUITANT IS MALE) Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
---------------------------------------------------------------------------------------- ADJUSTED AGES ------------------------ SECOND ANNUITANT ANNUITANT OPTION 4A OPTION 4B OPTION 4C OPTION 4D OPTION 4E ---------------------------------------------------------------------------------------- 55 50 $4.03 $4.36 $4.55 $4.03 $4.41 55 55 4.16 4.54 4.76 4.15 4.54 55 60 4.27 4.73 5.00 4.26 4.83 60 55 4.34 4.76 5.00 4.34 4.64 60 60 4.51 4.99 5.27 4.50 4.98 60 65 4.66 5.25 5.61 4.65 5.39 65 60 4.76 5.29 5.60 4.75 5.13 65 65 4.99 5.61 5.99 4.98 5.60 65 70 5.19 5.97 6.44 5.17 6.14 70 65 5.34 6.03 6.46 5.31 5.81 70 70 5.67 6.49 6.99 5.62 6.47 70 75 5.95 6.96 7.61 5.87 7.20 75 70 6.16 7.10 7.68 6.07 6.77 75 75 6.64 7.73 8.43 6.48 7.68 75 80 7.04 8.39 9.29 6.79 8.70 ----------------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates assume the Annuitant is Female and the Second Annuitant is Male. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. 48 OPTION 4 LIFE INCOME FOR TWO PAYEES AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES (ANNUITANT IS MALE AND SECOND ANNUITANT IS FEMALE) Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
---------------------------------------------------------------------------------------- ADJUSTED AGES ------------------------ SECOND ANNUITANT ANNUITANT OPTION 4A OPTION 4B OPTION 4C OPTION 4D OPTION 4E ---------------------------------------------------------------------------------------- 55 50 $4.88 $5.26 $ 5.48 $4.88 $5.34 55 55 5.04 5.44 5.66 5.04 5.43 55 60 5.21 5.65 5.89 5.21 5.53 60 55 5.15 5.63 5.91 5.14 5.73 60 60 5.37 5.87 6.16 5.37 5.86 60 65 5.61 6.16 6.49 5.60 6.01 65 60 5.52 6.14 6.51 5.51 6.28 65 65 5.83 6.49 6.87 5.82 6.47 65 70 6.17 6.90 7.33 6.13 6.67 70 65 6.04 6.84 7.34 6.00 7.03 70 70 6.49 7.35 7.87 6.44 7.33 70 75 6.97 7.96 8.56 6.87 7.62 75 70 6.77 7.84 8.51 6.68 8.08 75 75 7.45 8.60 9.33 7.27 8.55 75 80 8.14 9.49 10.35 7.80 8.98 ----------------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates assume the Annuitant is Male and the Second Annuitant is Female. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. 49 OPTION 4 LIFE INCOME FOR TWO PAYEES AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES (ANNUITANT IS FEMALE AND SECOND ANNUITANT IS MALE) Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
---------------------------------------------------------------------------------------- ADJUSTED AGES ------------------------ SECOND ANNUITANT ANNUITANT OPTION 4A OPTION 4B OPTION 4C OPTION 4D OPTION 4E ---------------------------------------------------------------------------------------- 55 50 $4.93 $5.27 $5.46 $4.93 $5.19 55 55 5.04 5.44 5.66 5.04 5.43 55 60 5.15 5.63 5.91 5.14 5.73 60 55 5.21 5.65 5.89 5.21 5.53 60 60 5.37 5.87 6.16 5.37 5.86 60 65 5.52 6.14 6.51 5.51 6.28 65 60 5.61 6.16 6.49 5.60 6.01 65 65 5.83 6.49 6.87 5.82 6.47 65 70 6.04 6.84 7.34 6.00 7.03 70 65 6.17 6.90 7.33 6.13 6.67 70 70 6.49 7.35 7.87 6.44 7.33 70 75 6.77 7.84 8.51 6.68 8.08 75 70 6.97 7.96 8.56 6.87 7.62 75 75 7.45 8.60 9.33 7.27 8.55 75 80 7.86 9.28 10.20 7.57 9.59 ----------------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates assume the Annuitant is Female and the Second Annuitant is Male. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. 50 ----------------------------------------------------------------------- [LOGO OF AETNA APPEARS HERE] AETNA LIFE INSURANCE AND ANNUITY COMPANY Home Office: 151 Farmington Avenue Hartford, Connecticut 06156 (800) 525-4225 CERTIFICATE OF GROUP ANNUITY COVERAGE ----------------------------------------------------------------------- ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT, WHEN BASED ON INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT. THIS CONTRACT CONTAINS A MARKET VALUE ADJUSTMENT FORMULA. APPLICATION OF A MARKET VALUE ADJUSTMENT MAY RESULT IN EITHER AN INCREASE OR DECREASE IN THE CURRENT VALUE. THE MARKET VALUE ADJUSTMENT FORMULA DOES NOT APPLY TO A GUARANTEED TERM AT THE TIME OF ITS MATURITY. 51 EX-99.B.4.C 4 CONTRACT C Exhibit 99.B.4(C) ------------------------------------------------ [LOGO OF AETNA APPEARS HERE] AETNA LIFE INSURANCE AND ANNUITY COMPANY Home Office: 151 Farmington Avenue Hartford, Connecticut 06156 (800) 525-4225 Aetna Life Insurance and Annuity Company, herein called Aetna, agrees to pay the benefits stated in this Contract. SPECIFICATIONS -------------------------------------------------------------------------------- Plan MARATHON PLUS -------------------------------------------------------------------------------- Type of Plan INDIVIDUAL RETIREMENT ANNUITY ROLLOVER ACCOUNT -------------------------------------------------------------------------------- Contract Holder SPECIMEN -------------------------------------------------------------------------------- Annuitant SPECIMEN -------------------------------------------------------------------------------- Contract No. SPECIMEN -------------------------------------------------------------------------------- Effective Date MAY 1, 1995 -------------------------------------------------------------------------------- This Contract is Delivered in NEW YORK and is Subject to the Laws of that Jurisdiction THE VARIABLE FEATURES OF THE CONTRACT ARE DESCRIBED IN PARTS III AND IV. RIGHT TO CANCEL -------------------------------------------------------------------------------- The Contract Holder may cancel this Contract within 10 days of receiving it by returning this Contract along with a written notice to Aetna at the above address or to the agent from whom it was purchased. Within 7 days after it receives the notice of cancellation and this Contract at its Home Office, Aetna will return the entire consideration paid plus any increase or minus any decrease in the current value of any funds allocated to the Separate Account. This page, the following pages, and the application make up the entire Contract. Signed at the Home Office on the Effective Date. Dan Kearney Lucille M. Nickerson ----------------------- ------------------------ President Secretary Group Variable, Fixed, or Combination Annuity Contract Nonparticipating ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT, WHEN BASED ON INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT. THIS CONTRACT CONTAINS A MARKET VALUE ADJUSTMENT FORMULA. APPLICATION OF A MARKET VALUE ADJUSTMENT MAY RESULT IN EITHER AN INCREASE OR DECREASE IN THE CURRENT VALUE. THE MARKET VALUE ADJUSTMENT FORMULA DOES NOT APPLY TO A GUARANTEED TERM AT THE TIME OF ITS MATURITY. 1 SPECIFICATIONS ----------------------------------------------------------------------------------------------------------------------------------- GUARANTEED There is a guaranteed interest rate for Purchase Payment(s) held in the ALIAC Guaranteed Account (see Contract INTEREST RATE Schedule I). ----------------------------------------------------------------------------------------------------------------------------------- DEDUCTIONS FROM There will be deductions for mortality and expense risks and administrative fees (see Contract Schedule I and THE SEPARATE II). ACCOUNT ----------------------------------------------------------------------------------------------------------------------------------- DEDUCTION FROM Purchase Payment(s) are subject to a deduction for premium taxes, if any (see 3.01). PURCHASE PAYMENT(S) ----------------------------------------------------------------------------------------------------------------------------------- SURRENDER There will be a charge deducted upon surrender (see Contract Schedule I). FEE
This Contract is a legal contract and constitutes the entire legal relationship between Aetna and the Contract Holder. READ THIS CONTRACT CAREFULLY. This contract sets forth, in detail, all of the rights and obligations of both you and Aetna. IT IS THEREFORE IMPORTANT THAT YOU READ THIS CONTRACT CAREFULLY. 2 CONTRACT SCHEDULE I ACCUMULATION PERIOD SEPARATE ACCOUNT -------------------------------------------------------------------------------- SEPARATE ACCOUNT: Variable Annuity Account B CHARGES TO SEPARATE A daily charge is deducted from any portion of the Current Value allocated to the Separate Account. ACCOUNT: The deduction is the daily equivalent of the annual effective percentage shown in the following chart. Administrative Charge 0.15% Mortality Risk Charge 0.35% Expense Risk Charge 0.90% ----- Total Separate Account Charges 1.40% SEPARATE ACCOUNT FUNDS: During the Accumulation Period the Funds available with this Contract are: Aetna Variable Fund Aetna Income Shares Aetna Variable Encore Fund Aetna Investment Advisers Fund, Inc. Aetna Ascent Variable Portfolio Aetna Crossroads Variable Portfolio Aetna Legacy Variable Portfolio The Alger American Fund - Alger American Balanced Portfolio The Alger American Fund - Alger American Income and Growth Portfolio The Alger American Fund - Alger American Growth Portfolio The Alger American Fund - Alger American Midcap Growth Portfolio The Alger American Fund - Alger American Leveraged Allcap Portfolio The Alger American Fund - Alger American Small Capitalization Portfolio Fidelity Investments Variable Insurance Products Fund - High Income Portfolio Fidelity Investments Variable Insurance Products Fund - Equity-Income Portfolio Fidelity Investments Variable Insurance Products Fund - Growth Portfolio Fidelity Investments Variable Insurance Products Fund - Overseas Portfolio Fidelity Investments Variable Insurance Products Fund II - Investment Grade Bond Portfolio Fidelity Investments Variable Insurance Products Fund II - Asset Manager Portfolio Fidelity Investments Variable Insurance Products Fund II - Index 500 Portfolio Fidelity Investments Variable Insurance Products Fund II - Contrafund Portfolio
3 Insurance Management Series - Corporate Bond Fund
4 CONTRACT SCHEDULE I (CONT'D) ACCUMULATION PERIOD SEPARATE ACCOUNT (CONT'D) -------------------------------------------------------------------------------- SEPARATE ACCOUNT FUNDS Insurance Management Series - Equity Growth and Income Fund (CONT'D): Insurance Management Series - International Stock Fund Insurance Management Series - U.S. Government Bond Fund Insurance Management Series - Utility Fund Janus Aspen Series - Aggressive Growth Portfolio Janus Aspen Series - Balanced Portfolio Janus Aspen Series - Flexible Income Portfolio Janus Aspen Series - Growth Portfolio Janus Aspen Series - Short-Term Bond Portfolio Janus Aspen Series - Worldwide Growth Portfolio Lexington Emerging Markets Fund Lexington Natural Resources Trust TCI Portfolios, Inc. - TCI International TCI Portfolios, Inc. - TCI Growth TCI Portfolios, Inc. - TCI Balanced ALIAC GUARANTEED ACCOUNT (AG ACCOUNT) -------------------------------------------------------------------------------- MINIMUM GUARANTEED 3.0%. INTEREST RATE (effective annual rate of return): SEPARATE ACCOUNT AND AG ACCOUNT -------------------------------------------------------------------------------- MINIMUM INITIAL PURCHASE $5,000 PAYMENT: MAXIMUM INITIAL PURCHASE $500,000 PAYMENT WITHOUT HOME OFFICE APPROVAL: TRANSFERS: An unlimited number of Transfers may be made during the Accumulation Period. Aetna allows 12 free Transfers in any calendar year. Thereafter, Aetna reserves the right to charge $10 for each subsequent Transfer. MINIMUM TRANSFER $500 AMOUNT: MAINTENANCE FEE: The annual Maintenance Fee is $30. If the Current Value is $50,000 or more on the date the Maintenance Fee is to be deducted, the Maintenance Fee is $0.
5 CONTRACT SCHEDULE I (CONT'D) ACCUMULATION PERIOD SEPARATE ACCOUNT AND AG ACCOUNT (CONT'D) -------------------------------------------------------------------------------- SURRENDER FEE: For each surrender, the Surrender Fee will be determined as follows: Surrender Fee Length of Time from Deposit of Net (as percentage of Purchase Payment (Years) Net Purchase Payment) Less than 1 year 7% 1 or more but less than 2 years 6% 2 or more but less than 3 years 5% 3 or more but less than 4 years 4% 4 or more but less than 5 years 3% 5 or more but less than 6 years 2% 6 or more but less than 7 years 1% 7 years or more 0% SYSTEMATIC WITHDRAWAL The specified payment or specified percentage may not be greater than 10% of the Current Value at OPTION (SWO) time of election. PERCENTAGE: SWO MINIMUM INITIAL $25,000 CURRENT VALUE: SWO MINIMUM PAYMENT $500 AMOUNT: ESTATE CONSERVATION $25,000 OPTION (ECO) MINIMUM INITIAL CURRENT VALUE:
See 1. GENERAL DEFINITIONS for explanations. 6 CONTRACT SCHEDULE I ACCUMULATION PERIOD SEPARATE ACCOUNT -------------------------------------------------------------------------------- SEPARATE ACCOUNT: Variable Annuity Account B CHARGES TO SEPARATE A daily charge is deducted from any portion of the Current Value allocated to the Separate Account. ACCOUNT: The deduction is the daily equivalent of the annual effective percentage shown in the following chart. Administrative Charge 0.15% Mortality Risk Charge 0.35% Expense Risk Charge 0.90% ----- Total Separate Account Charges 1.40% SEPARATE ACCOUNT FUNDS: During the Accumulation Period the Funds available with this Contract are: Aetna Variable Fund Aetna Income Shares Aetna Variable Encore Fund Aetna Investment Advisers Fund, Inc. Aetna Ascent Variable Portfolio Aetna Crossroads Variable Portfolio Aetna Legacy Variable Portfolio Janus Aspen Series - Aggressive Growth Portfolio Janus Aspen Series - Flexible Income Portfolio Janus Aspen Series - Growth Portfolio Lexington Emerging Markets Fund Lexington Natural Resources Trust TCI Portfolios, Inc. - TCI International TCI Portfolios, Inc. - TCI Growth TCI Portfolios, Inc. - TCI Balanced
ALIAC GUARANTEED ACCOUNT (AG ACCOUNT) -------------------------------------------------------------------------------- MINIMUM GUARANTEED 3.0%. INTEREST RATE (effective annual rate of return):
7 CONTRACT SCHEDULE I (CONT'D) ACCUMULATION PERIOD SEPARATE ACCOUNT AND AG ACCOUNT -------------------------------------------------------------------------------- MINIMUM INITIAL PURCHASE $5,000 PAYMENT: MAXIMUM INITIAL PURCHASE $500,000 PAYMENT WITHOUT HOME OFFICE APPROVAL: TRANSFERS: An unlimited number of Transfers may be made during the Accumulation Period. Aetna allows 12 free Transfers in any calendar year. Thereafter, Aetna reserves the right to charge $10 for each subsequent Transfer. MINIMUM TRANSFER $500 AMOUNT: MAINTENANCE FEE: The annual Maintenance Fee is $30. If the Current Value is $50,000 or more on the date the Maintenance Fee is to be deducted, the Maintenance Fee is $0. SURRENDER FEE: For each surrender, the Surrender Fee will be determined as follows: Surrender Fee Length of Time from Deposit of Net (as percentage of Purchase Payment (Years) Net Purchase Payment) Less than 1 year 7% 1 or more but less than 2 years 6% 2 or more but less than 3 years 5% 3 or more but less than 4 years 4% 4 or more but less than 5 years 3% 5 or more but less than 6 years 2% 6 or more but less than 7 years 1% 7 years or more 0% SYSTEMATIC WITHDRAWAL The specified payment or specified percentage may not be greater than 10% of the Current Value at OPTION (SWO) time ofelection. PERCENTAGE: SWO MINIMUM INITIAL $25,000 CURRENT VALUE:
8 CONTRACT SCHEDULE I (CONT'D) ACCUMULATION PERIOD SEPARATE ACCOUNT AND AG ACCOUNT (CONT'D) -------------------------------------------------------------------------------- SWO MINIMUM PAYMENT $500 AMOUNT: ESTATE CONSERVATION $25,000 OPTION (ECO) MINIMUM INITIAL CURRENT VALUE: See 1. GENERAL DEFINITIONS for explanations.
9 CONTRACT SCHEDULE I ACCUMULATION PERIOD SEPARATE ACCOUNT -------------------------------------------------------------------------------- SEPARATE ACCOUNT: Variable Annuity Account B CHARGES TO SEPARATE A daily charge is deducted from any portion of the Current Value allocated to the Separate Account. ACCOUNT: The deduction is the daily equivalent of the annual effective percentage shown in the following chart. Administrative Charge 0.15% Mortality Risk Charge 0.35% Expense Risk Charge 0.90% ----- Total Separate Account Charges 1.40% SEPARATE ACCOUNT FUNDS: During the Accumulation Period the Funds available with this Contract are: Insurance Management Series - Equity Growth and Income Fund Insurance Management Series - Utility Fund Insurance Management Series - Prime Money Fund Insurance Management Series - U.S. Government Bond Fund Insurance Management Series - Corporate Bond Fund Insurance Management Series - International Stock Fund ALIAC GUARANTEED ACCOUNT (AG ACCOUNT) ------------------------------------------------------------------------------------------------------------------------------------ MINIMUM GUARANTEED 3.0%. INTEREST RATE (effective annual rate of return):
10 CONTRACT SCHEDULE I (CONT'D) ACCUMULATION PERIOD SEPARATE ACCOUNT AND AG ACCOUNT -------------------------------------------------------------------------------- MINIMUM INITIAL PURCHASE $5,000 PAYMENT: MAXIMUM INITIAL PURCHASE $500,000 PAYMENT WITHOUT HOME OFFICE APPROVAL: TRANSFERS: An unlimited number of Transfers may be made during the Accumulation Period. Aetna allows 12 free Transfers in any calendar year. Thereafter, Aetna reserves the right to charge $10 for each subsequent Transfer. MINIMUM TRANSFER $500 AMOUNT: MAINTENANCE FEE: The annual Maintenance Fee is $30. If the Current Value is $50,000 or more on the date the Maintenance Fee is to be deducted, the Maintenance Fee is $0. SURRENDER FEE: For each surrender, the Surrender Fee will be determined as follows: Surrender Fee Length of Time from Deposit of Net (as percentage of Purchase Payment (Years) Net Purchase Payment) Less than 1 year 7% 1 or more but less than 2 years 6% 2 or more but less than 3 years 5% 3 or more but less than 4 years 4% 4 or more but less than 5 years 3% 5 or more but less than 6 years 2% 6 or more but less than 7 years 1% 7 years or more 0% SYSTEMATIC WITHDRAWAL The specified payment or specified percentage may not be greater than 10% of the Current Value at OPTION (SWO) time of election. PERCENTAGE: SWO MINIMUM INITIAL $25,000 CURRENT VALUE:
11 CONTRACT SCHEDULE I (CONT'D) ACCUMULATION PERIOD SEPARATE ACCOUNT AND AG ACCOUNT (CONT'D) -------------------------------------------------------------------------------- SWO MINIMUM PAYMENT $500 AMOUNT: ESTATE CONSERVATION $25,000 OPTION (ECO) MINIMUM INITIAL CURRENT VALUE:
See 1. GENERAL DEFINITIONS for explanations. 12 CONTRACT SCHEDULE II ANNUITY PERIOD SEPARATE ACCOUNT -------------------------------------------------------------------------------- CHARGES TO SEPARATE A daily charge at an annual effective rate of 1.25% for Annuity mortality and expense risks. The ACCOUNT: administrative charge is established upon election of an Annuity option. This charge will not exceed 0.25%. VARIABLE ANNUITY ASSUMED If a Variable Annuity is chosen, an assumed annual net return rate of 5.0% may be elected. If 5.0% ANNUAL NET RETURN RATE: is not elected, Aetna will use an assumed annual net return rate of 3.5%. The assumed annual net return rate factor for 3.5% per year is 0.9999058. The assumed annual net return rate factor for 5.0% per year is 0.9998663. If the portion of a Variable Annuity payment for any Fund is not to decrease, the Annuity return factor under the Separate Account for that Fund must be: (a) 4.75% on an annual basis plus an annual return of up to 0.25% to offset the administrative charge set at the time Annuity payments commence if an assumed annual net return rate of 3.5% is chosen; or (b) 6.25% on an annual basis plus an annual return of up to 0.25% to offset the administrative charge set at the time Annuity payments commence, if an assumed annual net return rate of 5% is chosen.
FIXED ANNUITY -------------------------------------------------------------------------------- MINIMUM GUARANTEED 3.0% INTEREST RATE (effective annual rate of return):
See 1. GENERAL DEFINITIONS for explanations. 13 TABLE OF CONTENTS I. GENERAL DEFINITIONS ------------------------------------------------------------------------------
PAGE 1.01 Account.......................................................................10 1.02 Accumulation Period...........................................................10 1.03 Adjusted Current Value........................................................10 1.04 ALIAC Guaranteed Account (AG Account).........................................10 1.05 Annuitant.....................................................................10 1.06 Annuity.......................................................................10 1.07 Beneficiary...................................................................10 1.08 Certificate Holder............................................................10 1.09 Code..........................................................................10 1.10 Contract......................................................................10 1.11 Contract Holder...............................................................10 1.12 Current Value.................................................................10 1.13 Deposit Period................................................................11 1.14 Dollar Cost Averaging.........................................................11 1.15 Fixed Annuity.................................................................11 1.16 Fund(s).......................................................................11 1.17 General Account...............................................................11 1.18 Guaranteed Rate - AG Account..................................................11 1.19 Guaranteed Term...............................................................11 1.20 Guaranteed Term(s) Groups.....................................................11 1.21 Maintenance Fee...............................................................11 1.22 Market Value Adjustment (MVA).................................................12 1.23 Matured Term Value............................................................12 1.24 Matured Term Value Transfer...................................................12 1.25 Maturity Date.................................................................12 1.26 Net Purchase Payment..........................................................12 1.27 Nonunitized Separate Account..................................................12 1.28 Purchase Payment..............................................................12 1.29 Reinvestment..................................................................13 1.30 Separate Account..............................................................13 1.31 Surrender Value...............................................................13 1.32 Transfers.....................................................................13
14
PAGE 1.33 Valuation Period (Period).....................................................13 1.34 Variable Annuity..............................................................13
II. GENERAL PROVISIONS -------------------------------------------------------------------------------- 2.01 Change of Contract............................................................13 2.02 Change of Fund(s).............................................................14 2.03 Nonparticipating Contract.....................................................14 2.04 Payments and Elections........................................................15 2.05 State Laws....................................................................15 2.06 Control of Contract...........................................................15 2.07 Designation of Beneficiary....................................................15 2.08 Misstatements and Adjustments.................................................15 2.09 Incontestability..............................................................15 2.10 Individual Certificates.......................................................16
III. PURCHASE PAYMENT, CURRENT VALUE, AND SURRENDER PROVISIONS ------------------------------------------------------------------------------- 3.01 Net Purchase Payment..........................................................16 3.02 Certificate Holder's Account..................................................16 3.03 Fund(s) Record Units -- Separate Account......................................16 3.04 Net Return Factor(s) -- Separate Account......................................16 3.05 Fund Record Unit Value -- Separate Account....................................17 3.06 Market Value Adjustment.......................................................17 3.07 Transfer of Current Value from the Funds or AG Account........................18 3.08 Reports.......................................................................19 3.09 Notice to the Certificate Holder..............................................19 3.10 Loans.........................................................................19 3.11 Distribution Options..........................................................19 3.12 Death Benefit Amount..........................................................23 3.13 Death Benefit Options Available to Beneficiary................................24 3.14 Required Distribution to Certificate Holder/Beneficiary.......................25 3.15 Liquidation of Surrender Value................................................26 3.16 Surrender Fee.................................................................26 3.17 Payment of Surrender Value....................................................27
15 IV. ANNUITY PROVISIONS -------------------------------------------------------------------------------
PAGE 4.01 Choices to be Made............................................................27 4.02 Annuity Payments to Certificate Holder........................................27 4.03 Annuity Payments to Beneficiary...............................................28 4.04 Terms of Annuity Options......................................................28 4.05 Death of Annuitant/Beneficiary................................................29 4.06 Fund(s) Annuity Units -- Separate Account.....................................30 4.07 Fund Annuity Unit Value -- Separate Account...................................30 4.08 Annuity Net Return Factor(s) -- Separate Account..............................30 4.09 Annuity Options...............................................................31
16
I. GENERAL DEFINITIONS ---------------------------------------------------------------------------------------------------------------------- 1.01 ACCOUNT: A record established for each Certificate Holder to maintain the value of the Net Purchase Payment held on his/her behalf during the Accumulation Period. 1.02 ACCUMULATION PERIOD: The period during which the Net Purchase Payment is applied to the Contract to provide future Annuity payment(s). 1.03 ADJUSTED CURRENT VALUE: The Current Value of a Contract plus or minus any aggregate AG Account MVA, if applicable. (See 1.21) 1.04 ALIAC GUARANTEED An accumulation option where Aetna guarantees stipulated rate(s) of ACCOUNT interest for specified periods of time. All assets of Aetna, including (AG ACCOUNT): amounts in the Nonunitized Separate Account, are available to meet the guarantees under the AG Account. 1.05 ANNUITANT: The person whose life is measured for purposes of the guaranteed death benefit and the duration of Annuity payments under this Contract. The Contract Holder and Annuitant must be the same person under this Contract. 1.06 ANNUITY: Payment of an income: (a) For the life of one or two persons; (b) For a stated period; or (c) For some combination of (a) and (b). 1.07 BENEFICIARY: The individual or estate entitled to receive any payment from the Contract upon the death of the Annuitant. 1.08 CERTIFICATE HOLDER: A person who purchases an interest in this Contract as evidenced by a certificate. 1.09 CODE: The Internal Revenue Code of 1986, as it may be amended from time to time. 1.10 CONTRACT: This agreement between Aetna and the Contract Holder to provide an annuity which qualifies as an Individual Retirement Annuity under Code Section 408(b) for the exclusive benefit of the Contract Holder or his or her Beneficiary(ies). 1.11 CONTRACT HOLDER: The entity to which a group Contract is issued. 1.12 CURRENT VALUE: As of the most recent Valuation Period, the Net Purchase Payment and any additional amount deposited pursuant to 3.12 plus any interest added to the portion allocated to the AG Account; and plus or minus the investment experience of the portion allocated to the Funds since deposit; less all Maintenance Fees deducted, any amounts surrendered and any amounts applied to an Annuity.
17 1.13 DEPOSIT PERIOD: A calendar week, a calendar month, a calendar quarter, or any other period of time specified by Aetna during which the Net Purchase Payment, Transfers or Reinvestments are accepted into the AG Account for one or more Guaranteed Terms. Aetna reserves the right to extend the Deposit Period. 1.14 DOLLAR COST AVERAGING: A program that permits the Certificate Holder to systematically transfer amounts from any of the Funds and the one-year AG Account Guaranteed Term to any of the Funds by completing the appropriate section of the enrollment form or a Dollar Cost Averaging election form. 1.15 FIXED ANNUITY: An Annuity with payments that do not vary in amount. 1.16 FUND(S): The open-end management investment companies (mutual funds) in which the Separate Account invests (see Contract Schedule I for the specific fund options). 1.17 GENERAL ACCOUNT: The account holding the assets of Aetna, other than those assets held in Aetna's separate accounts. 1.18 GUARANTEED RATE -- Aetna will declare the interest rate applicable to a specific Guaranteed AG ACCOUNT: Term at the start of the Deposit Period for that Guaranteed Term. The rate is guaranteed by Aetna for that Deposit Period and the ensuing Guaranteed Term. The Guaranteed Rate is an annual effective yield. That is, interest is credited daily at a rate that will produce the Guaranteed Rate over the period of a year. No Guaranteed Rate will ever be less than the Minimum Guaranteed Rate shown on Contract Schedule I. 1.19 GUARANTEED TERM: The period of time for which the AG Account Guaranteed Rate is guaranteed on the Net Purchase Payment, Transfers and Reinvestments made into a current Deposit Period for the AG Account. Such period begins on the day following the close of the Deposit Period and ends on the designated Maturity Date. Guaranteed Terms are offered at Aetna's discretion for various lengths of time ranging up to and including ten years. During a Deposit Period, Aetna may make available any number of Guaranteed Terms. The Contract Holder may allocate the Net Purchase Payment and Transfers into any or all of the available Guaranteed Terms. 1.20 GUARANTEED TERM(S) All AG Account Guaranteed Term(s) with the same length of time from the GROUPS: close of the Deposit Period until the designated Maturity Date. 1.21 MAINTENANCE FEE: The Maintenance Fee (see Contract Schedule I) will be deducted during the Accumulation Period from the Current Value on each anniversary of the date the Contract is established and upon the surrender of the entire Contract.
18 1.22 MARKET VALUE ADJUSTMENT An adjustment that may apply to an amount withdrawn or transferred from an (MVA): AG Account Guaranteed Term prior to the end of that Guaranteed Term. The adjustment reflects the change in the value of the investment due to changes in interest rates since the date of deposit and is computed using the formula given in 3.06. The adjustment is expressed as a percentage of each dollar being withdrawn. 1.23 MATURED TERM VALUE: The amount payable on an AG Account Guaranteed Term's Maturity Date. 1.24 MATURED TERM VALUE During the calendar month following an AG Account Maturity Date, the TRANSFER: Certificate Holder may notify Aetna's Home Office in writing to Transfer or surrender all or part of the Matured Term Value, plus interest at the new Guaranteed Rate accrued thereon, from the AG Account without an MVA. This provision only applies to the first such written request received from the Certificate Holder during this period for any Matured Term Value. 1.25 MATURITY DATE: The last day of an AG Account Guaranteed Term. 1.26 NET PURCHASE PAYMENT: The Purchase Payment less premium taxes, as applicable. 1.27 NONUNITIZED SEPARATE A separate account set up by Aetna under Title 38, Section 38a-433, of the ACCOUNT: Connecticut General Statutes, that holds assets for AG Account Terms. There are no discrete units for this Account. The Certificate Holder does not participate in the investment gain or loss from the assets held in the Nonunitized Separate Account. Such gain or loss is borne entirely by Aetna. These assets may be chargeable with liabilities arising out of any other business of Aetna. 1.28 PURCHASE PAYMENT: The cash payment accepted by Aetna at its Home Office which is a rollover amount under Code Section 402(c), 403(a)(4), 403(b)(8), or 408(d)(3). Aetna may require verification that a rollover amount qualifies as such under the Code. Payments to Simplified Employee Pension plans and annual deductible and nondeductible contributions to Individual Retirement Annuities are not accepted under this Contract. Aetna reserves the right to refuse to accept any Purchase Payment at any time for any reason. No advance notice will be given to the Contract Holder or Certificate Holder.
19 1.29 REINVESTMENT: Aetna will mail a notice to the Contract Holder at least 18 calendar days and not more than 45 days before a Guaranteed Term's Maturity Date. This notice will contain the Terms available during current Deposit Periods with their Guaranteed Rate, and projected Matured Term Value. If no specific direction is given by the Certificate Holder prior to the Maturity Date, each Matured Term Value will be reinvested in the current Deposit Period for a Guaranteed Term of the same duration. If a Guaranteed Term of the same duration is unavailable, each Matured Term Value will automatically be reinvested in the current Deposit Period for the next shortest Guaranteed Term available. If no shorter Guaranteed Term is available, the next longer Guaranteed Term will be used. Aetna will mail a confirmation statement to the Certificate Holder the next business day after the Maturity Date. This notice will sate the Guaranteed Term and Guaranteed Rate which will apply to the reinvested Matured Term Value. 1.30 SEPARATE ACCOUNT: A separate account that buys and holds shares of the Fund(s). Income, gains or losses, realized or unrealized, are credited or charged to the Separate Account without regard to other income, gains or losses of Aetna. Aetna owns the assets held in the Separate Account and is not a trustee as to such amounts. This Separate Account generally is not guaranteed and is held at market value. The assets of the Separate Account, to the extent of reserves and other contract liabilities of the Account, shall not be charged with other Aetna liabilities. 1.31 SURRENDER VALUE: The amount payable by Aetna upon the surrender of any portion of an Account. 1.32 TRANSFERS: The movement of invested amounts among the available Fund(s) and the AG Account under this Contract during the Accumulation Period. 1.33 VALUATION PERIOD (PERIOD): The period of time for which a Fund determines its net asset value, usually from 4:15 p.m. Eastern time each day the New York Stock Exchange is open until 4:15 p.m. the next such day, or such other day that one or more of the Funds determines its net asset value. 1.34 VARIABLE ANNUITY: An Annuity with payments that vary with the net investment results of one or more Funds held under the Separate Account. II. GENERAL PROVISIONS ------------------------------------------------------------------------------------------------------------- 2.01 CHANGE OF CONTRACT: Only an authorized officer of Aetna may change the terms of this Contract. Aetna will notify the Contract Holder in writing at least 30 days before the effective date of any change. Any change will not affect the amount or terms of any Annuity which begins before the change.
20 2.01 CHANGE OF CONTRACT Aetna may make any change that affects the AG Account Market Value (CONT'D): Adjustment (3.06) with at least 30 days advance written notice to the Contract Holder and the Certificate Holder. Any such change shall become effective for any new Term and will be applicable only if it is more favorable to the Contract Holder and/or the Certificate Holder. Any change that affects any of the following under this Contract will not apply to Accounts in existence before the effective date of the change: (a) Net Purchase Payment (1.26) (b) AG Account Guaranteed Rate (1.04) (c) Net Return Factor(s) -- Separate Account (3.04) (d) Current Value (1.12) (e) Surrender Value (1.31) (f) Fund(s) Annuity Unit Value -- Separate Account (4.07 ) (g) Annuity Options (4.09) (h) Fixed Annuity Guaranteed Interest Rates (4.01) (i) Transfers (1.32) This Contract may be changed as deemed necessary by Aetna to comply with federal or state law. Any such change is subject to the prior approval of the New York Insurance Department. 2.02 CHANGE OF FUND(S): Aetna, or the Separate Account, may: (a) Change the Fund(s) which may be invested in by the Separate Account; and (b) Replace the shares of any Fund(s) held in the Separate Account with shares of any other Fund(s). Changes must be: (a) Approved by a majority vote of the shares in the Separate Account with respect to the Fund(s) whose shares are to be replaced; or (b) Deemed necessary by Aetna under the Investment Company Act of 1940; or (c) Deemed necessary by Aetna to accomplish the purpose of the Separate Account. Such changes are subject to the approval of the Superintendent of the New York Insurance Department and Aetna will notify the Contract Holder of such change. 2.03 NONPARTICIPATING CONTRACT: The Contract Holder, Certificate Holders or Beneficiaries will not have a right to share in the earnings of Aetna.
21 2.04 PAYMENTS AND ELECTIONS: While the Certificate Holder is living, Aetna will pay the Certificate Holder any Annuity payments as and when due. After the Certificate Holder's death, any Annuity payments required to be made will be paid in accordance with 4.05. Aetna will determine other payments and/or elections as of the end of the Valuation Period in which the request is received at its Home Office. Such payments will be made within 7 calendar days of receipt at its Home Office of a written claim for payment which is in good order, except as provided in 3.17. 2.05 STATE LAWS: The Contract and the Certificates comply with the laws of the state in which they are delivered. Any surrender, death, or Annuity payments are equal to or greater than the minimum required by such laws. Annuity tables for legal reserve valuation shall be as required by state law. Such tables may be different from Annuity tables used to determine Annuity payments. 2.06 CONTROL OF CONTRACT: This is a Contract between the Contract Holder and Aetna. The Contract Holder has title to the Contract. Contract Holder rights are limited to accepting and rejecting Contract modifications. Each Certificate Holder has a nonforfeitable right to all amounts held in his or her Account. Each Certificate Holder may make any choices allowed by this contract for his or her Account. Choices made under this Contract must be in writing. Until receipt of such choices at Aetna's Home Office, Aetna may rely on any previous choices made. The Contract is not subject to the claims of any creditors of the Contract Holder or the Certificate Holder except to the extent permitted by law. The Account may not be attached, alienated, or subject to the claims of creditors of the Certificate Holder except to the extent permitted by law. This Account is nontransferable by the Certificate Holder. The Certificate Holder may not assign, transfer, pledge or use as collateral his or her rights under the Contract. 2.07 DESIGNATION OF Each Certificate Holder shall name his or her Beneficiary. The Beneficiary BENEFICIARY: may be changed at any time. Changes to a Beneficiary must be submitted to Aetna's Home Office in writing and will not be effective until accepted by Aetna. 2.08 MISSTATEMENTS AND If Aetna finds the age or sex of any Annuitant to be misstated, the amount ADJUSTMENTS: payable under the Contract shall be adjusted for the correct age or sex; the amount of any underpayment or overpayment, with interest at six per cent per year, shall be credited to, or changed against, the current or next succeeding payment or payments to be made by Aetna under the Contract. 2.09 INCONTESTABILITY: Aetna cannot cancel the Contract because of any error of fact on the application. Aetna cannot cancel an account because of any error of fact on the enrollment form.
22 2.10 INDIVIDUAL CERTIFICATES: Aetna shall issue a certificate to each Certificate Holder. The certificate will summarize certain provisions of the contract. Certificates are for information only and are not a part of the Contract. III. PURCHASE PAYMENT, CURRENT VALUE, AND SURRENDER PROVISIONS ------------------------------------------------------------------------------------------------------------- 3.01 NET PURCHASE PAYMENT: This amount is the actual Purchase Payment less any premium tax. Aetna will generally deduct the premium tax when Annuity benefits are elected (see Part IV). If Aetna determines that under applicable state law, it must pay a premium tax when the Purchase Payment is received or at any other time, it will deduct the tax at that time. The Net Purchase Payment will be credited among: (a) The current Deposit Period(s) for Guaranteed Terms under the AG Account; and (b) The Fund(s) in which the Separate Account invests. The Certificate Holder shall tell Aetna the allocation percentage to be applied to the current Deposit Period for each of the available Guaranteed Terms in the AG Account and/or each Fund. 3.02 CERTIFICATE HOLDER'S Aetna will maintain an Account for each Certificate Holder. ACCOUNT: Aetna will declare from time to time the acceptability and the minimum amount for additional Purchase Payments. Each Account will be subject to the Terms and conditions of the Contract in effect at the time the first Purchase Payment for such account is applied to the Contract except for changes made to comply with federal or state law. 3.03 FUND(S) RECORD UNITS -- The portion of the Net Purchase Payment applied to each Fund under the SEPARATE ACCOUNT: Separate Account will determine the number of Fund record units for that Fund. This number is equal to the portion of the Net Purchase Payment applied to each Fund divided by the Fund record unit value (see 3.05) for the Valuation Period in which the Purchase Payment is received in good order at Aetna's Home Office. 3.04 NET RETURN FACTOR(S) -- The net return factor(s) are used to compute all Separate account record SEPARATE ACCOUNT: units for any Fund. The net return factor for each Fund is equal to 1.0000000 plus the net return rate. The net return rate is equal to: (a) The value of the shares of the Fund held by the Separate Account at the end of the Valuation Period; minus (b) The value of the shares of the Fund held by the Separate Account at the start of the Valuation Period; plus or minus
23 3.04 NET RETURN FACTOR(S) -- (c) Taxes (or reserves for taxes) on the Separate Account (if any); divided by SEPARATE ACCOUNT (d) The total value of the Fund(s) record units and Fund(s) Annuity units of the Separate (CONT'D): Account at the start of the Valuation Period; minus (e) A daily Separate Account charge at an annual rate as shown on Contract Schedule I for mortality and expense risks, which may include profit; and a daily administrative charge. A net return rate may be more or less than 0%. The value of a share of the Fund is equal to the net assets of the Fund divided by the number of shares outstanding. 3.05 FUND RECORD UNIT A Fund record unit value is computed by multiplying the net return factors for the current VALUE -- SEPARATE ACCOUNT: Valuation Period by the Fund record unit value for the previous Period. The dollar value of Fund record units, Separate Account assets, and Variable Annuity payments may go up or down due to investment gain or loss. 3.06 MARKET VALUE ADJUSTMENT: Except as noted below, there will be an MVA for a withdrawal from the AG Account before the end of a Guaranteed Term when the withdrawal is due to: (a) A Transfer; except for transfers from the one-year AG Account Guaranteed Term under the Dollar Cost Averaging program or, as specified in 1.24, AG Account Matured Term Value Transfer; (b) A full or partial surrender (including a 15% free withdrawal under 3.16), except for a partial withdrawal under the Systematic Withdrawal Option (see 3.11); or (c) An election of Annuity option 2 (see 4.09). Full and partial surrenders and Transfers made within six months after the date of the Annuitant's death will be the greater of: (a) The aggregate MVA amount which is the sum of all market value adjusted amounts calculated due to a withdrawal of amounts. This total may be greater or less than the Current Value of those amounts; or (b) The applicable portion of the Current Value in the AG Account. After the six-month period, the surrender or Transfer will be the aggregate MVA amount, which may be greater or less than the Current Value of those amounts. The greater of the aggregate MVA amount or the applicable portion of the Current Value applies to amounts withdrawn from the AG Account on account of an election of Annuity options 3 or 4 (see 4.09).
24 3.06 MARKET VALUE ADJUSTMENT Market value adjusted amounts will be equal to the amount withdrawn (CONT'D): multiplied by the following ratio: x --- 365 (1 + i) ----------- x --- 365 --- (1 + j) Where: i is the Deposit Period Yield j is the Current Yield x is the number of days remaining, (computed from Wednesday of the week of withdrawal) in the Guaranteed Term. The Deposit Period Yield will be determined as follows: (a) At the close of the last business day of each week of the Deposit Period, a yield will be computed as the average of the yields on that day of U.S. Treasury Notes which mature in the last three months of the Guaranteed Term. (b) The Deposit Period Yield is the average of those yields for the Deposit Period. If withdrawal is made before the close of the Deposit Period, it is the average of those yields on each week preceding withdrawal. The Current Yield is the average of the yields on the last business day of the week preceding withdrawal on the same U.S. Treasury Notes included in the Deposit Period Yield. In the event that no U.S. Treasury Notes which mature in the last three months of the Guaranteed Term exist, Aetna reserves the right to use the U.S. Treasury Notes that mature in the following quarter. If. U.S. Treasury Notes are no longer available, a suitable replacement index, subject to approval of the Superintendent of the New York Insurance Department, would then be utilized. A detailed description of the MVA has been filed with the Superintendent of the New York Insurance Department. 3.07 TRANSFER OF CURRENT VALUE Before an Annuity option is elected, all or any portion of the Adjusted FROM THE FUNDS OR Current Value of the Contract may be transferred from any Fund or AG ACCOUNT: Guaranteed Term of the AG Account: (a) To any other Fund; or (b) To any Guaranteed Term of the AG Account available in the current Deposit Period.
25 3.07 TRANSFER OF CURRENT VALUE Transfer requests can be submitted as a percentage or as a dollar amount. FROM THE FUNDS OR The minimum transfer amount is shown on Contract Schedule I. Within a AG ACCOUNT: Guaranteed Term Group, the amount to be surrendered or transferred will be (CONT'D): withdrawn first from the oldest Deposit Period, then from the next oldest, and so on until the amount requested is satisfied. The Certificate Holder may make an unlimited number of Transfers during the Accumulation Period. The number of free Transfers allowed by Aetna is shown on Contract Schedule I. Additional Transfers may be subject to a Transfer fee as shown on Contract Schedule I. Amounts transferred from the AG Account under the Dollar Cost Averaging program, or amounts transferred as a Matured Term Value on or within the calendar month of the Term's Maturity Date, do not count against the annual Transfer limit. Amounts applied to Guaranteed Terms of the AG Account may not be transferred to the Funds or to another Guaranteed Term during the Deposit Period or for 90 days after the close of the Deposit Period except for (1) a Matured Term Value(s) during the calendar month following the Term's Maturity Date and (2) amounts transferred from the one-year AG Account Guaranteed Term under the Dollar Cost Averaging program. 3.08 REPORTS: Aetna, as issuer of the Contract, will make any reports required of it by federal or state law. Aetna will furnish annual calendar year reports concerning the status of the annuity. 3.09 NOTICE TO THE CONTRACT The Contract Holder will receive quarterly statements from HOLDER: Aetna of: (a) The value of any amounts held in: (1) The AG Account; and (2) The Fund(s) under the Separate Account. (b) The number of any Fund(s) record units; and (c) The Fund(s) record unit value. Such number or values will be as of a specific date no more than 60 days before the date of the notice. 3.10 LOANS: Loans are not available under this Contract. 3.11 DISTRIBUTION OPTIONS: The following distribution options may be elected by the Certificate Holder during the Accumulation Period. (A) ESTATE CONSERVATION OPTION (ECO) - A distribution option under which a portion of the Current Value will automatically be surrendered and distributed each year. ECO payments will be calculated based on the Account's full Current Value. The distributed amount will be withdrawn pro rata from each investment option used under the Account. A Surrender Fee will not be deducted from any portion of the Current Value which is paid as a distribution under ECO. Certificate Holders should consult their tax advisers prior to requesting this distribution option. Aetna will not be responsible for any adverse tax consequences due to receiving ECO payments.
26 3.11 DISTRIBUTION OPTIONS (1) Amount of Distribution: Each year that ECO is in effect, Aetna (CONT'D): will calculate and distribute an amount equal to the minimum required distribution under the Code. The annual distribution will be determined by dividing the Current Value as of December 31 of the year prior to the payment year, by a life expectancy factor. The Certificate Holder, or spouse Beneficiary if ECO is elected after the Certificate Holder's death, shall elect either single life expectancy or joint life expectancy. Life expectancy is computed by use of the expected return multiples in Tables V and VI of section 1.72-9 of the Income Tax Regulations. Joint life expectancy can only be elected based on the joint life expectancy of the Certificate Holder and his or her Beneficiary. If the Certificate Holder makes any changes in the Beneficiary designation under the Certificate, ECO distributions after the change will be recalculated as required by IRS regulations. Life expectancies shall be recalculated annually. If the joint life expectancy is elected with a non-spouse Beneficiary, the life expectancy of the non-spouse Beneficiary must not be recalculated. Instead, the life expectancy will be calculated using the attained age of the Beneficiary during the calendar year in which the Certificate Holder attains age 70 1/2, and payments for subsequent years shall be recalculated based on such life expectancy reduced by one for each calendar year which has elapsed since the calendar year life expectancy was first calculated. If joint life expectancy is elected with a spouse Beneficiary, at the death of either, the payments can continue and will be calculated based solely on the survivor's life expectancy. If joint life expectancy is elected with a non-spouse Beneficiary and the non-spouse Beneficiary dies first, payments will continue based on the joint life expectancy. If a single life expectancy is elected and the Certificate Holder dies, or if a joint life expectancy is elected and the survivor dies, the death benefits determined under Section 3.12 will be paid to the Beneficiary in a lump sum not later than December 31 following the year of death. (2) Minimum Initial Current Value: The ECO Minimum Initial Account Current Value is shown on Contract Schedule I. If after election of this option, the Current Value is
27 insufficient to make a scheduled ECO payment, Aetna will distribute the entire Account balance.
28 3.11 DISTRIBUTION OPTIONS (3) Date of Distribution: Distribution will be made annually on the 15th of any month or (CONT'D) such other date as Aetna may designate or allow. The latest allowable payment date is the month of the Certificate Holder's 85th birthday. The Certificate Holder shall specify an initial distribution month, not earlier than the calendar year in which the Certificate Holder attains age 70 1/2, or such later time when distributions must commence as specified under the Code, whichever is appropriate. For a spouse Beneficiary, the earliest date is the date of the Certificate Holder's death. (4) Election and Revocation: ECO may be elected by the Certificate Holder by submitting a written request to Aetna at its Home Office. Once elected, this option may be revoked by the Certificate Holder, or spouse Beneficiary if elected after the Contract Holder's death, by submitting a written request to Aetna at its Home Office. Any revocation will apply only to amounts not yet paid. The Certificate Holder assumes responsibility for compliance with minimum distribution rules under the Code. ECO may be elected only once by the Certificate Holder or by a spouse Beneficiary. (B) SYSTEMATIC WITHDRAWAL OPTION (SWO): A distribution option under which a portion of the Account's Current Value will automatically be surrendered and distributed each year. SWO payments will be calculated based on the Account's full Current Value. The distributed amount will be withdrawn pro rata from each investment option used under the Account. A Surrender Fee will not be deducted from any portion of the Current Value which is paid as a distribution under SWO. Certificate Holders should consult their tax advisers prior to requesting this distribution option. Aetna will not be responsible for any adverse tax consequences due to receiving SWO payments. (1) Amount of Distribution: The Certificate Holder may elect one of the three payment methods described below. (i) Specified Payment: Payments of a designated dollar amount. The annual amount may not be greater than the percentage of the Account's Current Value at time of election as shown on Contract Schedule I. This annual dollar amount will remain constant. The minimum SWO payment amount is shown on Contract Schedule I; or
29 3.11 DISTRIBUTION OPTIONS (ii) Specified Period: Payments made over a period of time of at (CONT'D) least 10 years. The maximum specified period shall be determined under the Code minimum distribution rules. The annual amount is calculated by dividing the Current Value as of December 31 of the year prior to the payment year by the number of payment years remaining; or (iii) Specified Percentage: Payments of a designated percentage which cannot be greater than the percentage of the Current Value at the time of election as shown on Contract Schedule I. The percentage may be changed by written request. Aetna reserves the right to limit the number of times the percentage may be changed. The annual amount is calculated by multiplying the Current Value as of December 31 of the year prior to the payment year by the designated percentage. Payments will be made until the year the Certificate Holder attains age 70 1/2 or, if elected by the spouse Beneficiary, the year the Certificate Holder would have attained age 70 1/2. Under both the Specified Payment and Specified Period payment methods, a higher amount shall be paid in any year if required under the Code minimum distribution rules. For purposes of this determination, life expectancy for the initial distribution year shall be calculated based on single life expectancy Table V of section 1.72-9 of the Income Tax Regulations. With each subsequent year, the life expectancy will be the life expectancy for the previous year reduced by one. Payments upon the Certificate Holder's death will be made to the Beneficiary in the manner described in 3.13. (2) Minimum Initial Current Value: The Minimum Initial Current Value required to begin SWO is shown on Contract Schedule I. If after election of this option the Current Value is insufficient to make a schedule SWO payment, Aetna will distribute the entire balance. (3) Date of Distribution: The Certificate Holder shall specify the initial distribution date. The earliest date for distribution is the first date on which the Certificate Holder attains age 59 1/2. The latest allowable SWO payment date is the month of the Certificate Holder's 85th birthday. As elected by the Certificate Holder, SWO payments will be made on a monthly, quarterly, semi- annual or annual basis. If SWO payments are made more frequently than annually, the designated annual amount is divided by the number of payments due each year.
30 3.11 DISTRIBUTION OPTIONS Subsequent distributions will be made on the 15th of any month or (CONT'D): such other date as Aetna may designate or allow. (4) Election and Revocation: SWO may be elected by the Certificate Holder or spouse Beneficiary if elected after the Certificate Holder's death by submitting a completed and signed election form to Aetna's Home Office. Once elected, this option may be revoked by the Certificate Holder, or spouse Beneficiary if elected after the Certificate Holder's death, by submitting a written request to Aetna at its Home Office. Any revocation will apply only to amounts not yet paid. SWO may be elected only once by the Certificate Holder or by the spouse Beneficiary. 3.12 DEATH BENEFIT AMOUNT: If the Certificate Holder/Annuitant dies before Annuity payments start, the Beneficiary is entitled to a death benefit under the Account. The claim date is the date when proof of death and the Beneficiary's claim are received in good order at Aetna's Home Office. The amount of the death benefit is determined as follows: (a) Death of Certificate Holder/Annuitant less than 85 years of age: The guaranteed death benefit is the greatest of: (1) The sum of all Net Purchase Payment(s) made to the Account (as of the date of death) minus the sum of all amounts surrendered, applied to an Annuity, or deducted from the Account; (2) The highest step-up value as of the date of death. A step-up value is determined on each anniversary of the Effective Date. Each step-up value is calculated as the Account's Current Value on the Effective Date anniversary, increased by the amount of any Purchase Payment(s) made, and decreased by the sum of all amounts surrendered, deducted, and/or applied to an Annuity option since the Effective Date anniversary. (3) The Account's Current Value as of the date of death. The excess, if any, of the guaranteed death benefit value over the Account's Current Value is determined as of the date of death. Any excess amount will be deposited to the Account and allocated to Aetna Variable Encore Fund as of the claim date. The Current Value on the claim date plus any excess amount deposited becomes the Account's Current Value. (b) Death of Certificate Holder/Annuitant age 85 or greater: The death benefit is the greatest of:
31 3.12 DEATH BENEFIT AMOUNT (1) The sum of all Net Purchase Payment(s) made to the account (as of (CONT'D): the date of death) minus the sum of all amounts surrendered, applied to an Annuity, or deducted from the Account; (2) The highest step-up value prior to the Certificate Holder's 85th birthday. A step-up value is determined on each anniversary of the Effective Date. Each step-up value is calculated as the Account's Current Value on the Effective Date anniversary, increased by the amount of any Purchase Payment(s) made, and decreased by the sum of all amounts surrendered, deducted, and/or applied to an Annuity option since the Effective Date anniversary. (3) The Certificate Holder's Account Value as of the date of death. The excess, if any, of the guaranteed death benefit value over the Account's Current Value is determined as of the date of death. Any excess amount will be deposited in the Account and allocated to the Aetna Variable Encore Fund as of the claim date. The Current Value on the claim date, plus any excess amount deposited, becomes the Account's Current Value. (c) At the death of a surviving spouse Beneficiary who continued the Account in his or her own name, the death benefit amount is equal to the Account's Current Value less any applicable Surrender Fee on the amount of any Purchase Payment(s) made since the death of the Certificate Holder. 3.13 DEATH BENEFIT OPTIONS Prior to any election, or until amounts must be otherwise distributed under AVAILABLE TO BENEFICIARY: this section, the Current Value of the Account will be retained in the Account. The Beneficiary has the right under the Contract to allocate or reallocate any amount to any of the available investment options (subject to an MVA, as applicable). The following options are available to the Beneficiary: (a) If the Beneficiary is the Certificate Holder's surviving spouse, the surviving spouse may exercise all rights under the Contract and continue in the Accumulation Period, or may elect (1), (2), or (3) below. Under the Code, distributions from the Account are not required until December 31st of the year in which the original Certificate Holder would have attained age 70 1/2. The Beneficiary may elect to: (1) Apply some or all of the Adjusted Current Value of the Account to Annuity option 2, 3 or 4 (see 4.09); (2) Apply some or all of the Adjusted Current Value to Annuity option 1 (see 4.09); or
32 (3) Receive, at any time, a lump sum payment equal to the Adjusted Current Value of the Account.
33 3.13 DEATH BENEFIT OPTIONS If ECO is in effect on the Certificate Holder's date of death, the AVAILABLE TO BENEFICIARY surviving spouse can elect to continue receiving ECO payments if a (CONT'D): joint life expectancy was chosen. Otherwise, the surviving spouse must receive a lump sum payment equal to the Adjusted Current Value of the Account. If SWO is in effect and the Certificate Holder dies before the required beginning date for minimum distributions (see 3.13), SWO payments will cease and the surviving spouse may claim the death benefit in accordance with the terms of this section. If SWO is in effect and the Certificate Holder dies after the required beginning date for minimum distributions, the surviving spouse can elect to continue to receive the SWO payments. Otherwise, the surviving spouse must elect to receive a lump sum payment equal to the Adjusted Current Value. (b) If the Beneficiary is other than the Certificate Holder's surviving spouse, then options (1), (2), or (3) under (a) above apply. Any portion of the Adjusted Current Value that is not applied to Annuity option 2, 3 or 4 by December 31st of the year following the year of the Certificate Holder's death must be distributed by December 31st of the year containing the fifth anniversary of the Certificate Holder's date of death. If ECO or SWO is in effect on the Certificate Holder's date of death, the Beneficiary must receive an automatic and immediate lump sum payment equal to the Adjusted Current Value. (c) If no Beneficiary exists, a lump sum payment equal to the Adjusted Current Value will be made to the Certificate Holder's estate. 3.14 REQUIRED DISTRIBUTION (a) Certificate Holder: The entire interest of the Certificate Holder will TO CONTRACT HOLDER/ be distributed or begin to be distributed no later than April 1 BENEFICIARY: following the calendar year in which the Certificate Holder attains age 70 1/2 (required beginning date), over (a) the life of the Contract Holder, or the lives of the Contract Holder and his or her designated Beneficiary, or (b) a period certain not extending beyond the life expectancy of the Contract Holder, or the joint and last survivor expectancy of the Contract Holder and his or her designated Beneficiary. Payments must be made in periodic payments at intervals no longer than one year. In addition, payments must be either nonincreasing or they may increase only as provided in Q&A F-3 of section 1.401(a)(9)-1 of the Proposed Income Tax Regulations. All distributions made hereunder shall be made in accordance with the requirements of section 401(a)(9) of the Code, and the regulations thereunder, including the minimum distribution incidental benefit requirement of section 1.401(a)(9)-2 of the Proposed Income Tax Regulations.
34 3.14 REQUIRED DISTRIBUTION Distribution may be an Annuity as set forth in Sections 4.01 through TO CONTRACT HOLDER/ 4.04, payments under ECO or SWO as defined in Section 3.11 or a lump BENEFICIARY sum payment. (CONT'D): (b) Beneficiary: If the Certificate Holder dies after distribution of his or her interest has begun, the remaining portion of such interest will continue to be distributed at least as rapidly as under the method of distribution being used prior to the Certificate Holder's death. Distributions are considered to have begun if distributions are made on account of the Certificate Holder's reaching his or her required beginning date or if prior to the required beginning date distributions irrevocably commence to the Certificate Holder over a period permitted and in an Annuity form acceptable under section 1.401(a)(9) of the Income Tax Regulations. 3.15 LIQUIDATION OF All or any portion of the Account's Current Value may be surrendered SURRENDER VALUE: at any time. Surrender requests can be submitted as a percentage of the Account Current Value or as a specific dollar amount. The Net Purchase Payment amount is withdrawn first, and then the excess value, if any. For any partial surrender amounts are withdrawn on a pro rata basis from the Fund(s) and/or the Guaranteed Term(s) Groups of the AG Account in which the Current Value is invested. Within a Guaranteed Term Group, the amount to be surrendered or transferred will be withdrawn first from the oldest Deposit Period, then from the next oldest, and so on until the amount requested is satisfied. After deduction of the Maintenance Fee, if applicable, the surrendered amounts shall be reduced by a Surrender Fee, if applicable. An MVA may apply to amounts surrendered from the AG Account. 3.16 SURRENDER FEE: The Surrender Fee only applies to the Net Purchase Payment portion surrendered and varies according to the elapsed time since deposit (see Contract Schedule I). No Surrender Fee is deducted from any portion of the Current Value which is paid: (a) To a Beneficiary due to the Certificate Holder's death before Annuity payments start; (b) As a premium for an Annuity option 2, 3 or 4 under this Contract (see 4.09); (c) As a distribution under the ECO or SWO provision (see 3.11);
35 3.16 SURRENDER FEE: (CONT'D) (d) At least 12 months after the date of the Purchase Payment to the Account, in an amount equal to or less than 15% of the Current Value. This applies to the first surrender request, partial or full, in a calendar year. The Current Value is calculated as of the date the surrender request is received in good order at Aetna's Home Office. This waiver is not available to the Contract Holder while SWO is in effect; or (e) For a full surrender of the Account where the Current Value of the Account is $2,500 or less and no surrenders have been taken from the Contract within the prior 12 months. 3.17 PAYMENT OF Under certain emergency conditions, Aetna may defer payment: SURRENDER VALUE: (a) For a period of up to 6 months (unless not allowed by state law); or (b) As provided by federal law under the Investment Company Act of 1940. IV. ANNUITY PROVISIONS ------------------------------------------------------------------------------------------------------------- 4.01 CHOICES TO BE MADE: The Certificate Holder may tell Aetna to apply any portion of the Adjusted Current Value (minus any premium tax) for an Annuity under option 2, 3, or 4 (see 4.09). The first Annuity payment may not be earlier than one calendar year after the Purchase Payment nor later than the first day of the month following the Annuitant's 85th birthday. When an Annuity Option is chosen, Aetna must also be told if payments are to be made other than monthly and whether to pay: (a) A Fixed Annuity using the AG Account; (b) A Variable Annuity using any of the Fund(s) available under this Contract for Annuity purposes; or (c) A combination of (a) and (b). If a Fixed Annuity is chosen, the Annuity purchase rate for the option chosen reflects at least the Minimum Guaranteed Interest Rate (see Contract Schedule II), but may reflect a higher interest rate. If a Variable Annuity is chosen, the initial Annuity payment for the option chosen reflects the assumed annual return rate elected. (see Contract Schedule II). 4.02 ANNUITY PAYMENTS TO In no event may any payments to the Annuitant under an Annuity Option CONTRACT HOLDER: extend beyond: (a) The life of the Certificate Holder; (b) The lives of the Certificate Holder and Beneficiary;
36 (c) Any certain period greater than the Certificate Holder's life expectancy according to regulations under Code Section 401(a)(9), determined as of the date payments are to begin; or
37 4.02 ANNUITY PAYMENTS TO (d) A period greater than the joint and last expectancies of the CONTRACT HOLDER Certificate Holder and the Certificate Holder's Beneficiary (CONT'D): according to regulations under Code Section 401(a)(9), determined as of the date payments are to begin. 4.03 ANNUITY PAYMENTS TO In no event may payments to the Beneficiary under an Annuity option BENEFICIARY: extend beyond: (a) The life of the Beneficiary; or (b) Any certain period greater than the Beneficiary's life expectancy as determined by regulations under Code Section 401(a)(9). 4.04 TERMS OF ANNUITY (a) When payments start, the age of the Annuitant plus the number of OPTIONS: years for which payments are guaranteed must not exceed 95. (b) An Annuity option may not be elected if the first payment would be less than $50 or if the total payments in a year would be less than $250 (less if required by state law). Aetna reserves the right to increase the minimum first Annuity payment amount and the annual minimum annual Annuity payment amount based upon increases reflected in the Consumer Price Index-Urban, (CPI-U) since July 1, 1993. (c) If a Fixed Annuity under option 2, 3 or 4 is chosen and a larger payment would result from applying the Surrender Value or, if greater, 95% of what the surrender would be if there were no surrender fee, to a current Aetna single premium immediate Annuity, Aetna will make the larger payment. (d) For purposes of calculating the guaranteed first payment of a Variable Annuity or the payments for a Fixed Annuity, the Annuitant's and second Annuitant's adjusted age will be used. The Annuitant's and second Annuitant's adjusted age is his or her age as of the birthday closest to the Annuity commencement date reduced by one year for Annuity commencement dates occurring during the period of time from July 1, 1993 through December 31, 1999. The Annuitant's and second Annuitant's age will be reduced by two years for Annuity commencement dates occurring during the period of time from January 1, 2000 through December 31, 2009. The Annuitant's and second Annuitant's age will be reduced by one additional year for Annuity commencement dates occurring in each succeeding decade. The Annuity purchase rates for options 3 and 4 are based on mortality from 1983 Table a.
38 4.04 TERMS OF ANNUITY (e) Assumed Annual Net Return Rate is the interest rate used to OPTIONS (CONT'D): determine the amount of the first Annuity payment under a Variable Annuity as shown on Contract Schedule II. The Separate Account must earn this rate plus enough to cover the mortality and expense risk charges (which may include profit) and administrative charges if future Variable Annuity Payments are to remain level, (see Annuity return factor under Variable Annuity Assumed Annual Net Return Rate on Contract Schedule II). (f) Once elected, Annuity payments cannot be commuted to a lump sum except for Variable Annuity payments under option 2 (see 4.09). The life expectancy of the Certificate Holder or Certificate Holder and second Annuitant shall be irrevocable upon the election of an Annuity option. 4.05 DEATH OF ANNUITANT/ (a) When an Annuitant dies under option 2 or 3, or both the Annuitant BENEFICIARY: and the second Annuitant die under option 4(d), the present value of any remaining guaranteed payments will be paid in one sum to the Beneficiary, or upon election by the Beneficiary, any remaining payments will continue to the Beneficiary. If option 4 has been elected and the Annuitant dies, the remaining payments will continue to the second Annuitant as successor payee. (b) If there is no Beneficiary under option 2, 3 or 4, the present value of any remaining payments will be paid in one sum to the Certificate Holder's estate. (c) If the Beneficiary designated under option 1 dies, the amount held plus accrued interest will be paid in one sum to a successor Beneficiary, if any, named by the designated Beneficiary. If there is no successor Beneficiary, the lump sum will be paid to the designated Beneficiary's estate. (d) If the Beneficiary dies while receiving Annuity payments, the present value of any remaining guaranteed payments will be paid in one sum to the successor Beneficiary, or upon election by the successor Beneficiary, any remaining payments will continue to the successor Beneficiary. If no successor Beneficiary has been designated, the present value of any remaining guaranteed payments will be paid in one sum to the Beneficiary's estate. (e) The present value will be determined as of the Valuation Period in which proof of death acceptable to Aetna and a request for payment is received at Aetna's Home Office. The interest rate used to determine the first payment will be used to calculate the present value.
39 4.06 FUND(S) ANNUITY UNITS -- The number of each Fund's Annuity units is based on the amount of the SEPARATE ACCOUNT: first Variable Annuity payment which is equal to: (a) The portion of the Current Value applied to pay a Variable Annuity (minus any premium tax); divided by (b) 1,000; multiplied by (c) The payment rate for the option chosen. Such amount, or portion, of the variable payment will be divided by the appropriate Fund Annuity unit value (see 4.07) on the tenth Valuation Period before the due date of the first payment to determine the number of each Fund Annuity units. The number of each Fund Annuity units remains fixed. Each future payment is equal to the sum of the products of each Fund Annuity unit value multiplied by the appropriate number of units. The Fund Annuity unit value on the tenth Valuation Period prior to the due date of the payment is used. 4.07 FUND(S) ANNUITY UNIT For any Valuation Period, a Fund Annuity unit value is equal to: VALUE -- SEPARATE ACCOUNT: (a) The Value for the previous Period; multiplied by (b) The Annuity net return factor(s) (see 4.08 below) for the Period; multiplied by (c) A factor to reflect the assumed annual net return rate (see Contract Schedule II). The dollar value of a Fund Annuity unit value and Annuity payments may go up or down due to investment gain or loss. 4.08 ANNUITY NET RETURN The Annuity net return factor(s) are used to compute Annuity payments FACTOR(S) -- SEPARATE for any Fund. ACCOUNT: The Annuity net return factor(s) for each Fund is equal to 1.0000000 plus the net return rate. The net return rate is equal to: (a) The value of the shares of the Fund held by the Separate Account at the end of a Valuation Period; minus (b) The value of the shares of the Fund held by the Separate Account at the start of the Valuation Period; plus or minus (c) Taxes (or reserves for taxes) on the Separate Account (if any); divided by (d) The total value of the Fund record units and the Fund Annuity units of the Separate Account at the start of the Valuation Period; minus (e) A daily charge for Annuity mortality and expense risks, which may include profit, and a daily administrative charge (at the annual rate as shown on Contract Schedule II). A net return rate may be more or less than 0%.
40 The value of a share of the Fund is equal to the net assets of the Fund divided by the number of shares outstanding.
41 4.08 ANNUITY NET RETURN Payments shall not be changed due to changes in the mortality or expense FACTOR(S) -- SEPARATE results or administrative charges. ACCOUNT: (CONT'D) 4.09 ANNUITY OPTIONS: Option 1 -- Payment of Interest on Sum Left with Aetna -- This option may be used only by the Beneficiary when the Certificate Holder dies before Aetna has started paying an Annuity. A portion or all of the sum paid upon death may be held under this option and will be held in the General Account of Aetna at interest (see 3.13 and 4.01). The Beneficiary may later tell Aetna to: (a) Pay a portion or all of the sum held by Aetna; or (b) Apply a portion or all of the sum held by Aetna to any Annuity option below. If a nonspouse Beneficiary elects that some or all of the Current Value is to be held under this option, the Beneficiary must tell Aetna to pay the full sum held under this option by December 31st of the year containing the fifth anniversary of the Contract Holder's date of death. Option 2 -- Payments for a Stated Period of Time -- An Annuity will be paid for the number of years chosen. The number of years must be at least 5 and not more than 30. If payments for this option are made under a Variable Annuity, the present value of any remaining payments may be withdrawn at any time. If a withdrawal is requested within 3 years after the start of payments, it will be treated as a surrender and any applicable Surrender Fee will be applied (see 3.16). Option 3 -- Life Income -- An Annuity will be paid for the life of the Annuitant. If also chosen, Aetna will guarantee payments for 60, 120, 180, or 240 months. Option 4 -- Life Income Based upon the Lives of Two Annuitants -- An Annuity will be paid during the lives of the Annuitant and a second Annuitant. Payments will continue until both Annuitants have died. When this option is chosen, a choice must be made of: (a) 100% of the payment to continue after the first death; (b) 66 2/3% of the payment to continue after the first death; (c) 50% of the payment to continue after the first death; (d) Payments for a minimum of 120 months with 100% of the payment to continue after the first death; or (e) 100% of the payment to continue at the death of the second Annuitant and 50% of the payment to continue at the death of the Annuitant. Other Options -- Aetna may make other options available as allowed by the laws of the state in which this Contract and the Certificate is delivered.
42 OPTION 2 PAYMENTS FOR A STATED PERIOD OF TIME AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
----------------------------------------------------------------------------------------------- YEARS GUARANTEED MONTHLY QUARTERLY SEMI-ANNUAL ANNUAL RATE PAYMENT PAYMENT PAYMENT PAYMENT ----------------------------------------------------------------------------------------------- 5 3.00% 17.91 53.59 106.78 211.99 6 3.00% 15.14 45.30 90.27 179.22 7 3.00% 13.16 39.39 78.49 155.83 8 3.00% 11.68 34.96 69.66 138.31 9 3.00% 10.53 31.52 62.81 124.69 10 3.00% 9.61 28.77 57.33 113.82 11 3.00% 8.86 26.52 52.85 104.93 12 3.00% 8.24 24.65 49.13 97.54 13 3.00% 7.71 23.08 45.98 91.29 14 3.00% 7.26 21.73 43.29 85.95 15 3.00% 6.87 20.56 40.96 81.33 16 3.00% 6.53 19.54 38.93 77.29 17 3.00% 6.23 18.64 37.14 73.74 18 3.00% 5.96 17.84 35.56 70.59 19 3.00% 5.73 17.13 34.14 67.78 20 3.00% 5.51 16.50 32.87 65.26 21 3.00% 5.32 15.92 31.72 62.98 22 3.00% 5.15 15.40 30.68 60.92 23 3.00% 4.99 14.92 29.74 59.04 24 3.00% 4.84 14.49 28.88 57.33 25 3.00% 4.71 14.09 28.08 55.76 26 3.00% 4.59 13.73 27.36 54.31 27 3.00% 4.47 13.39 26.68 52.97 28 3.00% 4.37 13.08 26.06 51.74 29 3.00% 4.27 12.79 25.49 50.60 30 3.00% 4.18 12.52 24.95 49.53 -----------------------------------------------------------------------------------------------
43 OPTION 3 LIFE INCOME AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0% PAYMENTS GUARANTEED FOR A STATED PERIOD OF MONTHS -------------------------------------------------
---------------------------------------------------------------------------------------------- ADJUSTED AGE OF NONE 60 120 180 240 ----------------------------------------------------------------------------- ANNUITANT MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE ---------------------------------------------------------------------------------------------- 50 $4.27 $3.90 $4.26 $3.90 $4.22 $3.89 $4.17 $3.86 $4.08 $3.82 51 4.34 3.97 4.33 3.96 4.30 3.95 4.23 3.92 4.14 3.88 52 4.43 4.03 4.41 4.03 4.37 4.01 4.30 3.98 4.20 3.93 53 4.51 4.10 4.50 4.10 4.45 4.08 4.37 4.04 4.26 3.99 54 4.60 4.18 4.59 4.17 4.54 4.15 4.45 4.11 4.32 4.04 55 4.70 4.25 4.68 4.25 4.62 4.22 4.53 4.18 4.39 4.11 56 4.80 4.34 4.78 4.33 4.72 4.30 4.61 4.25 4.45 4.17 57 4.91 4.42 4.89 4.41 4.82 4.38 4.69 4.32 4.51 4.23 58 5.03 4.52 5.00 4.51 4.92 4.47 4.78 4.40 4.58 4.30 59 5.15 4.61 5.12 4.60 5.03 4.56 4.87 4.48 4.65 4.37 60 5.28 4.72 5.25 4.70 5.14 4.66 4.96 4.57 4.71 4.44 61 5.43 4.83 5.39 4.81 5.27 4.76 5.06 4.66 4.78 4.51 62 5.58 4.95 5.53 4.93 5.39 4.87 5.16 4.75 4.84 4.58 63 5.74 5.08 5.69 5.05 5.53 4.99 5.26 4.85 4.90 4.65 64 5.91 5.21 5.85 5.18 5.66 5.10 5.36 4.95 4.96 4.72 65 6.10 5.36 6.03 5.32 5.81 5.22 5.46 5.05 5.02 4.79 66 6.30 5.51 6.21 5.47 5.93 5.36 5.56 5.16 5.08 4.86 67 6.51 5.67 6.41 5.63 6.12 5.50 5.66 5.26 5.13 4.93 68 6.73 5.85 6.62 5.80 6.28 5.65 5.77 5.37 5.18 5.00 69 6.97 6.04 6.84 5.98 6.44 5.80 5.86 5.49 5.23 5.06 70 7.23 6.25 7.07 6.18 6.61 5.97 5.96 5.60 5.27 5.12 71 7.51 6.47 7.32 6.39 6.79 6.14 6.05 5.71 5.31 5.18 72 7.80 6.71 7.58 6.62 6.96 6.32 6.14 5.83 5.34 5.23 73 8.12 6.98 7.85 6.86 7.14 6.50 6.23 5.94 5.37 5.28 74 8.46 7.26 8.14 7.12 7.32 6.69 6.31 6.04 5.40 5.32 75 8.82 7.57 8.45 7.40 7.50 6.89 6.38 6.14 5.42 5.35 ----------------------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. 44 OPTION 4 LIFE INCOME FOR TWO PAYEES AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES (ANNUITANT IS MALE AND SECOND ANNUITANT IS FEMALE) Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
---------------------------------------------------------------------------------- ADJUSTED AGES --------------------------- SECOND ANNUITANT ANNUITANT OPTION 4A OPTION 4B OPTION 4C OPTION 4D OPTION 4E ---------------------------------------------------------------------------------- 55 50 $3.69 $4.05 $4.27 $3.69 $4.13 55 55 3.88 4.25 4.47 3.87 4.25 55 60 3.06 4.47 4.71 4.06 4.36 60 55 3.99 4.44 4.71 3.98 4.55 60 60 4.24 4.71 4.99 4.23 4.70 60 65 4.49 5.01 5.32 4.48 4.85 65 60 4.38 4.97 5.32 4.38 5.10 65 65 4.72 5.33 5.70 4.71 5.32 65 70 5.07 5.75 6.17 5.05 5.54 70 65 4.93 5.68 6.15 4.91 5.86 70 70 5.40 6.21 6.70 5.36 6.18 70 75 5.89 6.82 7.40 5.81 6.49 75 70 5.69 6.68 7.32 5.62 6.92 75 75 6.37 7.45 8.15 6.23 7.40 75 80 7.07 8.34 9.16 6.78 7.85 ------------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates assume the Annuitant is Male and the Second Annuitant is Female. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. 45 OPTION 4 LIFE INCOME FOR TWO PAYEES AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES (ANNUITANT IS FEMALE AND SECOND ANNUITANT IS MALE) Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
-------------------------------------------------------------------------------- ADJUSTED AGES ------------------------ SECOND ANNUITANT ANNUITANT OPTION 4A OPTION 4B OPTION 4C OPTION 4D OPTION 4E -------------------------------------------------------------------------------- 55 50 $3.75 $4.07 $4.26 $3.75 $3.98 55 55 3.88 4.25 4.47 3.87 4.06 55 60 3.99 4.44 4.71 3.98 4.12 60 55 4.06 4.47 4.71 4.06 4.37 60 60 4.24 4.71 4.99 4.23 4.47 60 65 4.38 4.97 5.32 4.38 4.54 65 60 4.49 5.01 5.32 4.48 4.89 65 65 4.72 5.33 5.70 4.71 5.02 65 70 4.93 5.68 6.15 4.91 5.14 70 65 5.07 5.75 6.17 5.05 5.60 70 70 5.40 6.21 6.70 5.36 5.79 70 75 5.69 6.68 7.32 5.62 5.96 75 70 5.89 6.83 7.40 5.81 6.63 75 75 6.37 7.45 8.15 6.23 6.92 75 80 6.78 8.11 8.99 6.54 7.15 --------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates assume the Annuitant is Female and the Second Annuitant is Male. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. 46 OPTION 2 PAYMENTS FOR A STATED PERIOD OF TIME AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
--------------------------------------------------------------------------------------------------- YEARS GUARANTEED MONTHLY QUARTERLY SEMI-ANNUAL ANNUAL RATE PAYMENT PAYMENT PAYMENT PAYMENT --------------------------------------------------------------------------------------------------- 5 3.50% 18.12 54.19 107.92 213.99 6 3.50% 15.35 45.92 91.44 181.32 7 3.50% 13.38 40.01 79.69 158.01 8 3.50% 11.90 35.59 70.88 140.56 9 3.50% 10.75 32.16 64.05 127.00 10 3.50% 9.83 29.42 58.59 116.18 11 3.50% 9.09 27.18 54.13 107.34 12 3.50% 8.46 25.32 50.42 99.98 13 3.50% 7.94 23.75 47.29 93.78 14 3.50% 7.49 22.40 44.62 88.47 15 3.50% 7.10 21.24 42.31 83.89 16 3.50% 6.76 20.23 40.29 79.89 17 3.50% 6.47 19.34 38.51 76.37 18 3.50% 6.20 18.55 36.94 73.25 19 3.50% 5.97 17.85 35.54 70.47 20 3.50% 5.75 17.22 34.28 67.98 21 3.50% 5.56 16.65 33.15 65.74 22 3.50% 5.39 16.13 32.13 63.70 23 3.50% 5.24 15.66 31.19 61.85 24 3.50% 5.09 15.24 30.34 60.17 25 3.50% 4.96 14.85 29.56 58.62 26 3.50% 4.84 14.49 28.95 57.20 27 3.50% 4.73 14.15 28.19 55.90 28 3.50% 4.63 13.85 27.58 54.69 29 3.50% 4.53 13.57 27.02 53.57 30 3.50% 4.45 13.30 26.49 52.53 --------------------------------------------------------------------------------------------------
47 OPTION 2 PAYMENTS FOR A STATED PERIOD OF TIME AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
--------------------------------------------------------------------------------------------------- YEARS GUARANTEED MONTHLY QUARTERLY SEMI-ANNUAL ANNUAL RATE PAYMENT PAYMENT PAYMENT PAYMENT --------------------------------------------------------------------------------------------------- 5 5.00% 18.74 56.00 111.33 219.98 6 5.00% 15.99 47.77 94.96 187.64 7 5.00% 14.02 41.90 83.30 164.59 8 5.00% 12.56 37.52 74.58 147.35 9 5.00% 11.42 34.11 67.81 133.99 10 5.00% 10.51 31.40 62.42 123.34 11 5.00% 9.77 29.19 58.03 114.66 12 5.00% 9.16 27.36 54.38 107.45 13 5.00% 8.64 25.81 51.31 101.39 14 5.00% 8.20 24.50 48.69 96.21 15 5.00% 7.82 23.36 46.44 91.75 16 5.00% 7.49 22.37 44.47 87.88 17 5.00% 7.20 21.51 42.75 84.48 18 5.00% 6.94 20.74 41.23 81.47 19 5.00% 6.71 20.06 39.88 78.80 20 5.00% 6.51 19.46 38.68 76.42 21 5.00% 6.33 18.91 37.59 74.28 22 5.00% 6.17 18.42 36.62 72.35 23 5.00% 6.02 17.98 35.73 70.61 24 5.00% 5.88 17.57 34.93 69.02 25 5.00% 5.76 17.20 34.20 67.57 26 5.00% 5.65 16.87 33.53 66.25 27 5.00% 5.54 16.56 32.92 65.04 28 5.00% 5.45 16.28 32.35 63.93 29 5.00% 5.36 16.01 31.83 62.90 30 5.00% 5.28 15.77 31.35 61.95 --------------------------------------------------------------------------------------------------
48 OPTION 3 LIFE INCOME AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Variable Annuity with Assumed Net Return Rate of 3.5% PAYMENTS GUARANTEED FOR A STATED PERIOD OF MONTHS -------------------------------------------------
---------------------------------------------------------------------------------------------- ADJUSTED NONE 60 120 180 240 AGE OF ---------------------------------------------------------------------------------- ANNUITANT MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE ---------------------------------------------------------------------------------------------- 50 $4.56 $4.20 $4.55 $4.19 $4.51 $4.18 $4.45 $4.15 $4.36 $4.11 51 4.64 4.26 4.62 4.25 4.58 4.24 4.51 4.21 4.42 4.16 52 4.72 4.32 4.70 4.32 4.66 4.30 4.58 4.26 4.48 4.21 53 4.80 4.39 4.79 4.38 4.74 4.36 4.65 4.32 4.53 4.27 54 4.89 4.46 4.87 4.46 4.82 4.43 4.73 4.39 4.59 4.32 55 4.99 4.54 4.97 4.53 4.91 4.50 4.80 4.46 4.65 4.38 56 5.09 4.62 5.07 4.61 5.00 4.58 4.88 4.53 4.72 4.44 57 5.20 4.71 5.17 4.70 5.10 4.66 4.96 4.60 4.78 4.50 58 5.32 4.80 5.29 4.79 5.20 4.75 5.05 4.68 4.84 4.57 59 5.44 4.90 5.41 4.88 5.31 4.84 5.14 4.76 4.91 4.63 60 5.57 5.00 5.53 4.99 5.42 4.93 5.23 4.84 4.97 4.70 61 5.71 5.11 5.67 5.09 5.54 5.03 5.32 4.93 5.03 4.77 62 5.86 5.23 5.81 5.21 5.66 5.14 5.42 5.02 5.09 4.84 63 6.02 5.36 5.97 5.33 5.79 5.25 5.51 5.11 5.16 4.91 64 6.20 5.49 6.13 5.46 5.93 5.37 5.61 5.21 5.21 4.98 65 6.38 5.64 6.31 5.60 6.07 5.49 5.71 5.31 5.27 5.05 66 6.58 5.79 6.49 5.75 6.22 5.63 5.81 5.41 5.32 5.12 67 6.79 5.95 6.69 5.91 6.38 5.76 5.91 5.52 5.38 5.18 68 7.02 6.13 6.89 6.08 6.53 5.91 6.01 5.63 5.42 5.25 69 7.26 6.32 7.11 6.26 6.70 6.06 6.11 5.74 5.47 5.31 70 7.52 6.53 7.35 6.45 6.86 6.23 6.20 5.85 5.51 5.37 71 7.80 6.75 7.59 6.66 7.03 6.39 6.29 5.96 5.54 5.42 72 8.09 6.99 7.85 6.89 7.21 6.57 6.38 6.07 5.57 5.47 73 8.41 7.26 8.12 7.13 7.38 6.75 6.46 6.17 5.60 5.51 74 8.75 7.54 8.41 7.39 7.55 6.94 6.53 6.28 5.63 5.55 75 9.12 7.85 8.71 7.66 7.73 7.13 6.61 6.38 5.65 5.59 --------------------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. 49 OPTION 3 LIFE INCOME AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Variable Annuity with Assumed Net Return Rate of 5.0% PAYMENTS GUARANTEED FOR A STATED PERIOD OF MONTHS -------------------------------------------------
----------------------------------------------------------------------------------------------- ADJUSTED NONE 60 120 180 240 AGE OF -------------------------------------------------------------------------------- ANNUITANT MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE ---------------------------------------------------------------------------------------------- 50 $ 5.48 $5.12 $5.46 $5.11 $5.41 $5.09 $5.34 $5.06 $5.24 $5.01 51 5.55 5.17 5.53 5.17 5.48 5.14 5.40 5.11 5.29 5.05 52 5.63 5.23 5.61 5.23 5.55 5.20 5.46 5.16 5.34 5.10 53 5.71 5.30 5.69 5.29 5.62 5.26 5.53 5.22 5.40 5.15 54 5.80 5.37 5.77 5.36 5.70 5.33 5.60 5.27 5.45 5.20 55 5.89 5.44 5.86 5.43 5.79 5.39 5.67 5.34 5.51 5.25 56 5.99 5.52 5.96 5.51 5.87 5.47 5.74 5.40 5.56 5.31 57 6.10 5.60 6.06 5.59 5.97 5.54 5.82 5.47 5.62 5.37 58 6.21 5.69 6.17 5.67 6.06 5.62 5.90 5.54 5.68 5.42 59 6.33 5.79 6.29 5.77 6.17 5.71 5.98 5.61 5.74 5.48 60 6.46 5.89 6.41 5.87 6.28 5.80 6.06 5.69 5.79 5.55 61 6.60 6.00 6.55 6.07 6.39 5.90 6.15 5.77 5.85 5.61 62 6.75 6.11 6.69 6.08 6.51 6.00 6.24 5.86 5.91 5.67 63 6.91 6.23 6.84 6.20 6.64 6.10 6.33 5.95 5.96 5.73 64 7.09 6.37 7.00 6.33 6.77 6.22 6.42 6.04 6.02 5.80 65 7.27 6.51 7.18 6.46 6.91 6.34 6.52 6.13 6.07 5.86 66 7.47 6.66 7.36 6.61 7.05 6.46 6.61 6.23 6.12 5.92 67 7.68 6.82 7.55 6.76 7.20 6.60 6.70 6.33 6.16 5.99 68 7.91 7.00 7.76 6.93 7.35 6.74 6.80 6.43 6.21 6.04 69 8.15 7.19 7.98 7.11 7.51 6.89 6.89 6.54 6.25 6.10 70 8.41 7.39 8.21 7.30 7.67 7.04 6.97 6.64 6.28 6.15 71 8.69 7.62 8.45 7.51 7.83 7.21 7.06 6.74 6.32 6.20 72 8.99 7.86 8.70 7.73 8.00 7.38 7.14 6.85 6.35 6.25 73 9.31 8.12 8.97 7.97 8.16 7.55 7.21 6.95 6.37 6.29 74 9.65 8.41 9.26 8.23 8.33 7.73 7.29 7.04 6.39 6.33 75 10.02 8.72 9.55 8.50 8.50 7.92 7.35 7.14 6.41 6.36 ----------------------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. 50 OPTION 4 LIFE INCOME FOR TWO PAYEES AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES (ANNUITANT IS MALE AND SECOND ANNUITANT IS FEMALE) Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
------------------------------------------------------------------------------- ADJUSTED AGES ----------------------- SECOND ANNUITANT ANNUITANT OPTION 4A OPTION 4B OPTION 4C OPTION 4D OPTION 4E ------------------------------------------------------------------------------- 55 50 $3.97 $4.35 $4.56 $3.97 $4.42 55 55 4.16 4.54 4.76 4.15 4.54 55 60 4.34 4.76 5.00 4.34 4.64 60 55 4.27 4.73 5.00 4.26 4.83 60 60 4.51 4.99 5.27 4.50 4.98 60 65 4.76 5.29 5.60 4.75 5.13 65 60 4.66 5.25 5.61 4.65 5.39 65 65 4.99 5.61 5.99 4.98 5.60 65 70 5.34 6.03 6.46 5.31 5.81 70 65 5.19 5.97 6.44 5.17 6.14 70 70 5.67 6.49 6.99 5.62 6.47 70 75 6.16 7.10 7.68 6.07 6.77 75 70 5.95 6.96 7.61 5.87 7.20 75 75 6.64 7.73 8.43 6.48 7.68 75 80 7.33 8.62 9.45 7.02 8.13 -------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates assume the Annuitant is Male and the Second Annuitant is Female. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. 51 OPTION 4 LIFE INCOME FOR TWO PAYEES AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES (ANNUITANT IS FEMALE AND SECOND ANNUITANT IS MALE) Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
------------------------------------------------------------------------------- ADJUSTED AGES ------------------------ SECOND ANNUITANT ANNUITANT OPTION 4A OPTION 4B OPTION 4C OPTION 4D OPTION 4E ------------------------------------------------------------------------------- 55 50 $4.03 $4.36 $4.55 $4.03 $4.41 55 55 4.16 4.54 4.76 4.15 4.54 55 60 4.27 4.73 5.00 4.26 4.83 60 55 4.34 4.76 5.00 4.34 4.64 60 60 4.51 4.99 5.27 4.50 4.98 60 65 4.66 5.25 5.61 4.65 5.39 65 60 4.76 5.29 5.60 4.75 5.13 65 65 4.99 5.61 5.99 4.98 5.60 65 70 5.19 5.97 6.44 5.17 6.14 70 65 5.34 6.03 6.46 5.31 5.81 70 70 5.67 6.49 6.99 5.62 6.47 70 75 5.95 6.96 7.61 5.87 7.20 75 70 6.16 7.10 7.68 6.07 6.77 75 75 6.64 7.73 8.43 6.48 7.68 75 80 7.04 8.39 9.29 6.79 8.70 -------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates assume the Annuitant is Female and the Second Annuitant is Male. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. 52 OPTION 4 LIFE INCOME FOR TWO PAYEES AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES (ANNUITANT IS MALE AND SECOND ANNUITANT IS FEMALE) Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
-------------------------------------------------------------------------------- ADJUSTED AGES ------------------------ SECOND ANNUITANT ANNUITANT OPTION 4A OPTION 4B OPTION 4C OPTION 4D OPTION 4E -------------------------------------------------------------------------------- 55 50 $4.88 $5.26 $5.48 $4.88 $5.34 55 55 5.04 5.44 5.66 5.04 5.43 55 60 5.21 5.65 5.89 5.21 5.53 60 55 5.15 5.63 5.91 5.14 5.73 60 60 5.37 5.87 6.16 5.37 5.86 60 65 5.61 6.16 6.49 5.60 6.01 65 60 5.52 6.14 6.51 5.51 6.28 65 65 5.83 6.49 6.87 5.82 6.47 65 70 6.17 6.90 7.33 6.13 6.67 70 65 6.04 6.84 7.34 6.00 7.03 70 70 6.49 7.35 7.87 6.44 7.33 70 75 6.97 7.96 8.56 6.87 7.62 75 70 6.77 7.84 8.51 6.68 8.08 75 75 7.45 8.60 9.33 7.27 8.55 75 80 8.14 9.49 10.35 7.80 8.98 --------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates assume the Annuitant is Male and the Second Annuitant is Female. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. 53 OPTION 4 LIFE INCOME FOR TWO PAYEES AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES (ANNUITANT IS FEMALE AND SECOND ANNUITANT IS MALE) Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
------------------------------------------------------------------------------------- ADJUSTED AGES ------------------------ SECOND ANNUITANT ANNUITANT OPTION 4A OPTION 4B OPTION 4C OPTION 4D OPTION 4E ------------------------------------------------------------------------------------- 55 50 $4.93 $5.27 $ 5.46 $4.93 $5.19 55 55 5.04 5.44 5.66 5.04 5.43 55 60 5.15 5.63 5.91 5.14 5.73 60 55 5.21 5.65 5.89 5.21 5.53 60 60 5.37 5.87 6.16 5.37 5.86 60 65 5.52 6.14 6.51 5.51 6.28 65 60 5.61 6.16 6.49 5.60 6.01 65 65 5.83 6.49 6.87 5.82 6.47 65 70 6.04 6.84 7.34 6.00 7.03 70 65 6.17 6.90 7.33 6.13 6.67 70 70 6.49 7.35 7.87 6.44 7.33 70 75 6.77 7.84 8.51 6.68 8.08 75 70 6.97 7.96 8.56 6.87 7.62 75 75 7.45 8.60 9.33 7.27 8.55 75 80 7.86 9.28 10.20 7.57 9.59 ------------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates assume the Annuitant is Female and the Second Annuitant is Male. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. 54 -------------------------------------------------------------------------------- [LOGO OF AETNA APPEARS HERE] AETNA LIFE INSURANCE AND ANNUITY COMPANY Home Office: 151 Farmington Avenue Hartford, Connecticut 06156 (800) 525-4225 Group Variable, Fixed, or Combination Annuity Contract Nonparticipating -------------------------------------------------------------------------------- ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT, WHEN BASED ON INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT. THIS CONTRACT CONTAINS A MARKET VALUE ADJUSTMENT FORMULA. APPLICATION OF A MARKET VALUE ADJUSTMENT MAY RESULT IN EITHER AN INCREASE OR DECREASE IN THE CURRENT VALUE. THE MARKET VALUE ADJUSTMENT FORMULA DOES NOT APPLY TO A GUARANTEED TERM AT THE TIME OF ITS MATURITY. 55 EX-99.B.4.D 5 CONTRACT D EXHIBIT 99B4(d) ---------------------------------------------------------- [LOGO OF AETNA AETNA LIFE INSURANCE AND ANNUITY COMPANY APPEARS HERE] Home Office: 151 Farmington Avenue Hartford, Connecticut 06156 (800) 525-4225 Aetna Life Insurance and Annuity Company, herein called Aetna, agrees to pay the benefits stated in this Contract. SPECIFICATIONS -------------------------------------------------------------------------------- Plan MARATHON PLUS -------------------------------------------------------------------------------- Type of Plan FLEXIBLE PREMIUM ACCOUNT -------------------------------------------------------------------------------- Contract Holder SPECIMEN -------------------------------------------------------------------------------- Annuitant SPECIMEN -------------------------------------------------------------------------------- Contract No. SPECIMEN -------------------------------------------------------------------------------- Effective Date MAY 1, 1995 -------------------------------------------------------------------------------- This Contract is Delivered in NEW YORK and is Subject to the Laws of that Jurisdiction THE VARIABLE FEATURES OF THE CONTRACT ARE DESCRIBED IN PARTS III AND IV. RIGHT TO CANCEL ------------------------------------------------------------------------------- The Contract Holder may cancel this Contract within 10 days of receiving it by returning this Contract along with a written notice to Aetna at the above address or to the agent from whom it was purchased. Within 7 days after it receives the notice of cancellation and this Contract at its Home Office, Aetna will return the entire consideration paid plus any increase or minus any decrease in the current value of any funds allocated to the Separate Account. This page, the following pages, and the application make up the entire Contract. Signed at the Home Office on the Effective Date. Dan Kearney Lucille M. Nickerson President Secretary Group Variable, Fixed, or Combination Annuity Contract Nonparticipating ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT, WHEN BASED ON INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT. THIS CONTRACT CONTAINS A MARKET VALUE ADJUSTMENT FORMULA. APPLICATION OF A MARKET VALUE ADJUSTMENT MAY RESULT IN EITHER AN INCREASE OR DECREASE IN THE CURRENT VALUE. THE MARKET VALUE ADJUSTMENT FORMULA DOES NOT APPLY TO A GUARANTEED TERM AT THE TIME OF ITS MATURITY. 1 SPECIFICATIONS ------------------------------------------------------------------------------- GUARANTEED There is a guaranteed interest rate for Purchase Payment(s) INTEREST RATE held in the ALIAC Guaranteed Account (see Contract Schedule I). ------------------------------------------------------------------------------- DEDUCTIONS FROM There will be deductions for mortality and expense risks THE SEPARATE and administrative fees (see Contract Schedule I and II). ACCOUNT ------------------------------------------------------------------------------- DEDUCTION FROM Purchase Payment(s) are subject to a deduction for premium PURCHASE taxes, if any (see 3.01). PAYMENT(S) ------------------------------------------------------------------------------- SURRENDER There will be a charge deducted upon surrender (see FEE Contract Schedule I). This Contract is a legal contract and constitutes the entire legal relationship between Aetna and the Contract Holder. READ THIS CONTRACT CAREFULLY. This contract sets forth, in detail, all of the rights and obligations of both you and Aetna. IT IS THEREFORE IMPORTANT THAT YOU READ THIS CONTRACT CAREFULLY. 2 CONTRACT SCHEDULE I ACCUMULATION PERIOD SEPARATE ACCOUNT ------------------------------------------------------------------------------- SEPARATE ACCOUNT: Variable Annuity Account B CHARGES TO SEPARATE A daily charge is deducted from any portion of the ACCOUNT: Current Value allocated to the Separate Account. The deduction is the daily equivalent of the annual effective percentage shown in the following chart. Administrative Charge 0.15% Mortality Risk Charge 0.35% Expense Risk Charge 0.90% ----- Total Separate Account Charges 1.40% SEPARATE ACCOUNT FUNDS: During the Accumulation Period the Funds available with this Contract are: Aetna Variable Fund Aetna Income Shares Aetna Variable Encore Fund Aetna Investment Advisers Fund, Inc. Aetna Ascent Variable Portfolio Aetna Crossroads Variable Portfolio Aetna Legacy Variable Portfolio The Alger American Fund - Alger American Balanced Portfolio The Alger American Fund - Alger American Income and Growth Portfolio The Alger American Fund - Alger American Growth Portfolio The Alger American Fund - Alger American Midcap Growth Portfolio The Alger American Fund - Alger American Leveraged Allcap Portfolio The Alger American Fund - Alger American Small Capitalization Portfolio Fidelity Investments Variable Insurance Products Fund - High Income Portfolio Fidelity Investments Variable Insurance Products Fund - Equity - Income Portfolio Fidelity Investments Variable Insurance Products Fund - Growth Portfolio Fidelity Investments Variable Insurance Products Fund - Overseas Portfolio Fidelity Investments Variable Insurance Products Fund II - Investment Grade Bond Portfolio Fidelity Investments Variable Insurance Products Fund II - Asset Manager Portfolio Fidelity Investments Variable Insurance Products Fund II - Index 500 Portfolio Fidelity Investments Variable Insurance Products Fund II - Contrafund Portfolio 3 CONTRACT SCHEDULE I (CONT'D) ACCUMULATION PERIOD SEPARATE ACCOUNT (CONT'D) ------------------------------------------------------------------------------- SEPARATE ACCOUNT FUNDS Insurance Management Series - Corporate Bond Fund (CONT'D): Insurance Management Series - Equity Growth and Income Fund Insurance Management Series - International Stock Fund Insurance Management Series - U.S. Government Bond Fund Insurance Management Series - Utility Fund Janus Aspen Series - Aggressive Growth Portfolio Janus Aspen Series - Balanced Portfolio Janus Aspen Series - Flexible Income Portfolio Janus Aspen Series - Growth Portfolio Janus Aspen Series - Short-Term Bond Portfolio Janus Aspen Series - Worldwide Growth Portfolio Lexington Emerging Markets Fund Lexington Natural Resources Trust TCI Portfolios, Inc. - TCI International TCI Portfolios, Inc. - TCI Growth TCI Portfolios, Inc. - TCI Balanced ALIAC GUARANTEED ACCOUNT (AG ACCOUNT) ------------------------------------------------------------------------------- MINIMUM GUARANTEED 3.0%. INTEREST RATE (effective annual rate of return): SEPARATE ACCOUNT AND AG ACCOUNT ------------------------------------------------------------------------------- MINIMUM INITIAL PURCHASE $5,000 PAYMENT: MAXIMUM INITIAL PURCHASE $500,000 PAYMENT WITHOUT HOME OFFICE APPROVAL: TRANSFERS: An unlimited number of Transfers may be made during the Accumulation Period. Aetna allows 12 free Transfers in any calendar year. Thereafter, Aetna reserves the right to charge $10 for each subsequent Transfer. MINIMUM TRANSFER $500 AMOUNT: MAINTENANCE FEE: The annual Maintenance Fee is $30. If the Current Value is $50,000 or more on the date the Maintenance Fee is to be deducted, the Maintenance Fee is $0. 4 CONTRACT SCHEDULE I (CONT'D) ACCUMULATION PERIOD SEPARATE ACCOUNT AND AG ACCOUNT (CONT'D) ------------------------------------------------------------------------------- SURRENDER FEE: For each surrender, the Surrender Fee will be determined as follows: Surrender Fee Length of Time from Deposit of Net (as percentage of Purchase Payment (Years) Net Purchase Payment) Less than 1 year 7% 1 or more but less than 2 years 6% 2 or more but less than 3 years 5% 3 or more but less than 4 years 4% 4 or more but less than 5 years 3% 5 or more but less than 6 years 2% 6 or more but less than 7 years 1% 7 years or more 0% SYSTEMATIC WITHDRAWAL The specified payment or specified percentage may OPTION (SWO) not be greater than 10% of the Current Value at PERCENTAGE: time of election. SWO MINIMUM INITIAL $25,000 CURRENT VALUE: SWO MINIMUM PAYMENT $500 AMOUNT: ESTATE CONSERVATION $25,000 OPTION (ECO) MINIMUM INITIAL CURRENT VALUE: See 1. GENERAL DEFINITIONS for explanations.
5 CONTRACT SCHEDULE I ACCUMULATION PERIOD SEPARATE ACCOUNT ------------------------------------------------------------------------------- SEPARATE ACCOUNT: Variable Annuity Account B CHARGES TO SEPARATE A daily charge is deducted from any portion of the ACCOUNT: Current Value allocated to the Separate Account. The deduction is the daily equivalent of the annual effective percentage shown in the following chart. Administrative Charge 0.15% Mortality Risk Charge 0.35% Expense Risk Charge 0.90% ----- Total Separate Account Charges 1.40% SEPARATE ACCOUNT FUNDS: During the Accumulation Period the Funds available with this Contract are: Aetna Variable Fund Aetna Income Shares Aetna Variable Encore Fund Aetna Investment Advisers Fund, Inc. Aetna Ascent Variable Portfolio Aetna Crossroads Variable Portfolio Aetna Legacy Variable Portfolio Janus Aspen Series - Aggressive Growth Portfolio Janus Aspen Series - Flexible Income Portfolio Janus Aspen Series - Growth Portfolio Lexington Emerging Markets Fund Lexington Natural Resources Trust TCI Portfolios, Inc. - TCI International TCI Portfolios, Inc. - TCI Growth TCI Portfolios, Inc. - TCI Balanced ALIAC GUARANTEED ACCOUNT (AG ACCOUNT) ------------------------------------------------------------------------------- MINIMUM GUARANTEED 3.0%. INTEREST RATE (effective annual rate of return):
6 CONTRACT SCHEDULE I (CONT'D) ACCUMULATION PERIOD SEPARATE ACCOUNT AND AG ACCOUNT ------------------------------------------------------------------------------- MINIMUM INITIAL PURCHASE $5,000 PAYMENT: MAXIMUM INITIAL PURCHASE $500,000 PAYMENT WITHOUT HOME OFFICE APPROVAL: TRANSFERS: An unlimited number of Transfers may be made during the Accumulation Period. Aetna allows 12 free Transfers in any calendar year. Thereafter, Aetna reserves the right to charge $10 for each subsequent Transfer. MINIMUM TRANSFER $500 AMOUNT: MAINTENANCE FEE: The annual Maintenance Fee is $30. If the Current Value is $50,000 or more on the date the Maintenance Fee is to be deducted, the Maintenance Fee is $0. SURRENDER FEE: For each surrender, the Surrender Fee will be determined as follows: Surrender Fee Length of Time from Deposit of Net (as percentage of Purchase Payment (Years) Net Purchase Payment) Less than 1 year 7% 1 or more but less than 2 years 6% 2 or more but less than 3 years 5% 3 or more but less than 4 years 4% 4 or more but less than 5 years 3% 5 or more but less than 6 years 2% 6 or more but less than 7 years 1% 7 years or more 0%
SYSTEMATIC WITHDRAWAL The specified payment or specified percentage may OPTION (SWO) not be greater than 10% of the Current Value at time PERCENTAGE: of election. SWO MINIMUM INITIAL $25,000 CURRENT VALUE: 7 CONTRACT SCHEDULE I (CONT'D) ACCUMULATION PERIOD SEPARATE ACCOUNT AND AG ACCOUNT (CONT'D) ------------------------------------------------------------------------------- SWO MINIMUM PAYMENT $500 AMOUNT: ESTATE CONSERVATION $25,000 OPTION (ECO) MINIMUM INITIAL CURRENT VALUE: See 1. GENERAL DEFINITIONS for explanations.
8 CONTRACT SCHEDULE I ACCUMULATION PERIOD SEPARATE ACCOUNT ------------------------------------------------------------------------------- SEPARATE ACCOUNT: Variable Annuity Account B CHARGES TO SEPARATE A daily charge is deducted from any portion of the ACCOUNT: Current Value allocated to the Separate Account. The deduction is the daily equivalent of the annual effective percentage shown in the following chart. Administrative Charge 0.15% Mortality Risk Charge 0.35% Expense Risk Charge 0.90% ----- Total Separate Account Charges 1.40% SEPARATE ACCOUNT FUNDS: During the Accumulation Period the Funds available with this Contract are: Insurance Management Series - Equity Growth and Income Fund Insurance Management Series - Utility Fund Insurance Management Series - Prime Money Fund Insurance Management Series - U.S. Government Bond Fund Insurance Management Series - Corporate Bond Fund Insurance Management Series - International Stock Fund ALIAC GUARANTEED ACCOUNT (AG ACCOUNT) ------------------------------------------------------------------------------- MINIMUM GUARANTEED 3.0%. INTEREST RATE (effective annual rate of return):
9 CONTRACT SCHEDULE I (CONT'D) ACCUMULATION PERIOD SEPARATE ACCOUNT AND AG ACCOUNT ------------------------------------------------------------------------------- MINIMUM INITIAL PURCHASE $5,000 PAYMENT: MAXIMUM INITIAL PURCHASE $500,000 PAYMENT WITHOUT HOME OFFICE APPROVAL: TRANSFERS: An unlimited number of Transfers may be made during the Accumulation Period. Aetna allows 12 free Transfers in any calendar year. Thereafter, Aetna reserves the right to charge $10 for each subsequent Transfer. MINIMUM TRANSFER $500 AMOUNT: MAINTENANCE FEE: The annual Maintenance Fee is $30. If the Current Value is $50,000 or more on the date the Maintenance Fee is to be deducted, the Maintenance Fee is $0. SURRENDER FEE: For each surrender, the Surrender Fee will be determined as follows: Surrender Fee Length of Time from Deposit of Net (as percentage of Purchase Payment (Years) Net Purchase Payment) Less than 1 year 7% 1 or more but less than 2 years 6% 2 or more but less than 3 years 5% 3 or more but less than 4 years 4% 4 or more but less than 5 years 3% 5 or more but less than 6 years 2% 6 or more but less than 7 years 1% 7 years or more 0% SYSTEMATIC WITHDRAWAL The specified payment or specified percentage may OPTION (SWO) not be greater than 10% of the Current Value at PERCENTAGE: time of election. SWO MINIMUM INITIAL $25,000 CURRENT VALUE:
10 CONTRACT SCHEDULE I (CONT'D) ACCUMULATION PERIOD SEPARATE ACCOUNT AND AG ACCOUNT (CONT'D) ------------------------------------------------------------------------------- SWO MINIMUM PAYMENT $500 AMOUNT: ESTATE CONSERVATION $25,000 OPTION (ECO) MINIMUM INITIAL CURRENT VALUE: See 1. GENERAL DEFINITIONS for explanations. 11 CONTRACT SCHEDULE II ANNUITY PERIOD SEPARATE ACCOUNT ------------------------------------------------------------------------------- CHARGES TO SEPARATE A daily charge at an annual effective rate of ACCOUNT: 1.25% for Annuity mortality and expense risks. The administrative charge is established upon election of an Annuity option. This charge will not exceed 0.25%. VARIABLE ANNUITY ASSUMED If a Variable Annuity is chosen, an assumed annual ANNUAL NET RETURN RATE: net return rate of 5.0% may be elected. If 5.0% is not elected, Aetna will use an assumed annual net return rate of 3.5% . The assumed annual net return rate factor for 3.5% per year is 0.9999058. The assumed annual net return rate factor for 5.0% per year is 0.9998663. If the portion of a Variable Annuity payment for any Fund is not to decrease, the Annuity return factor under the Separate Account for that Fund must be: (a) 4.75% on an annual basis plus an annual return of up to 0.25% to offset the administrative charge set at the time Annuity payments commence if an assumed annual net return rate of 3.5% is chosen; or (b) 6.25% on an annual basis plus an annual return of up to 0.25% to offset the administrative charge set at the time Annuity payments commence, if an assumed annual net return rate of 5% is chosen. FIXED ANNUITY ------------------------------------------------------------------------------- MINIMUM GUARANTEED 3.0% INTEREST RATE (effective annual rate of return): See 1. GENERAL DEFINITIONS for explanations.
12 TABLE OF CONTENTS
I. GENERAL DEFINITIONS ------------------------------------------------------------------------------- PAGE 1.01 Account....................................................................10 1.02 Accumulation Period........................................................10 1.03 Adjusted Current Value.....................................................10 1.04 ALIAC Guaranteed Account (AG Account)......................................10 1.05 Annuitant..................................................................10 1.06 Annuity....................................................................10 1.07 Beneficiary................................................................10 1.08 Certificate Holder.........................................................10 1.09 Code.......................................................................10 1.10 Contract...................................................................10 1.11 Contract Holder............................................................10 1.12 Current Value..............................................................11 1.13 Deposit Period.............................................................11 1.14 Dollar Cost Averaging......................................................11 1.15 Fixed Annuity..............................................................11 1.16 Fund(s)....................................................................11 1.17 General Account............................................................11 1.18 Guaranteed Rate - AG Account...............................................11 1.19 Guaranteed Term............................................................11 1.20 Guaranteed Term(s) Groups..................................................11 1.21 Maintenance Fee............................................................12 1.22 Market Value Adjustment (MVA)..............................................12 1.23 Matured Term Value.........................................................12 1.24 Matured Term Value Transfer................................................12 1.25 Maturity Date..............................................................12 1.26 Net Purchase Payment(s)....................................................12 1.27 Nonunitized Separate Account...............................................12 1.28 Purchase Payment(s)........................................................12 1.29 Reinvestment...............................................................12 1.30 Separate Account...........................................................13 1.31 Surrender Value............................................................13 1.32 Transfers..................................................................13
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PAGE 1.33 Valuation Period (Period)..................................................13 1.34 Variable Annuity...........................................................13 II. GENERAL PROVISIONS ------------------------------------------------------------------------------- 2.01 Change of Contract.........................................................13 2.02 Change of Fund(s)..........................................................14 2.03 Nonparticipating Contract..................................................14 2.04 Payments and Elections.....................................................14 2.05 State Laws.................................................................15 2.06 Control of Contract........................................................15 2.07 Designation of Beneficiary.................................................15 2.08 Misstatements and Adjustments..............................................15 2.09 Incontestability...........................................................15 2.10 Grace Period...............................................................15 2.11 Individual Certificate.....................................................15 III. PURCHASE PAYMENT, CURRENT VALUE, AND SURRENDER PROVISIONS ------------------------------------------------------------------------------- 3.01 Net Purchase Payment.......................................................16 3.02 Certificate Holder's Account...............................................16 3.03 Fund(s) Record Units -- Separate Account...................................16 3.04 Net Return Factor(s) -- Separate Account...................................16 3.05 Fund Record Unit Value -- Separate Account.................................17 3.06 Market Value Adjustment....................................................17 3.07 Transfer of Current Value from the Funds or ALIAC Guaranteed Account.......18 3.08 Notice to the Certificate Holder...........................................19 3.09 Loans......................................................................19 3.10 Systematic Withdrawal Option (SWO).........................................19 3.11 Death Benefit Amount.......................................................21 3.12 Death Benefit Options Available to Beneficiary.............................22 3.13 Liquidation of Surrender Value.............................................24 3.14 Surrender Fee..............................................................24 3.15 Payment of Surrender Value.................................................24
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IV. ANNUITY PROVISIONS ------------------------------------------------------------------------------- PAGE 4.01 Choices to be Made.........................................................25 4.02 Terms of Annuity Options...................................................26 4.03 Death of Annuitant/Beneficiary.............................................27 4.04 Fund(s) Annuity Units -- Separate Account..................................27 4.05 Fund Annuity Unit Value -- Separate Account................................28 4.06 Annuity Net Return Factor(s) -- Separate Account...........................28 4.07 Annuity Options............................................................28
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I. GENERAL DEFINITIONS ------------------------------------------------------------------------------- 1.01 ACCOUNT: A record established for each Certificate Holder to maintain the value of the Net Purchase Payment held on his/her behalf during the Accumulation Period. 1.02 ACCUMULATION PERIOD: The period during which the Net Purchase Payment is applied to the Contract to provide future Annuity payment(s). 1.03 ADJUSTED CURRENT VALUE: The Current Value of a Contract plus or minus any aggregate ALIAC Guaranteed Account MVA, if applicable. (See 1.21) 1.04 ALIAC GUARANTEED An accumulation option where Aetna guarantees stipulated ACCOUNT rate(s) of interest for specified periods of time. All assets of (AG ACCOUNT): Aetna, including amounts in the Nonunitized Separate Account, are available to meet the guarantees under the AG Account. 1.05 ANNUITANT: The person whose life is measured for purposes of the Guaranteed Death Benefit and the duration of Annuity payments under this Contract. 1.06 ANNUITY: Payment of an income: (a) For the life of one or two persons; (b) For a stated period; or (c) For some combination of (a) and (b). 1.07 BENEFICIARY: The individual or estate entitled to receive any payment from the Contract upon the death of the Annuitant, or if the Certificate Holder is different from the Annuitant, upon the death of the Certificate Holder. If the Account is held by joint Certificate Holders, the survivor will be deemed the designated Beneficiary and any other Beneficiary on record will be treated as the contingent Beneficiary. 1.08 CERTIFICATE HOLDER: A person who purchases an interest in this Contract as evidenced by a certificate. Aetna reserves the right to limit ownership to natural persons. If more than one Certificate Holder owns an account, each Certificate Holder will be a joint Certificate Holder. Any joint Certificate Holder must be the spouse of the other joint Certificate Holder. Joint Certificate Holders have joint ownership rights and both must authorize exercising any ownership rights unless Aetna allows otherwise. If the account is owned by a nonnatural person, the death benefit will be paid at the death of the Annuitant. 1.09 CODE: The Internal Revenue Code of 1986, as it may be amended from time to time. 1.10 CONTRACT: This agreement between Aetna and the Contract Holder. 1.11 CONTRACT HOLDER: The entity to which a group Contract is issued.
16 1.12 CURRENT VALUE: As of the most recent Valuation Period, the Net Purchase Payment and any additional amount deposited pursuant to 3.11 plus any interest added to the portion allocated to the ALIAC Guaranteed Account; and plus or minus the investment experience of the portion allocated to the Funds since deposit; less all Maintenance Fees deducted, any amounts surrendered and any amounts applied to an Annuity. 1.13 DEPOSIT PERIOD: A calendar week, a calendar month, a calendar quarter, or any other period of time specified by Aetna during which Net Purchase Payment(s), Transfers or Reinvestments are accepted into the ALIAC Guaranteed Account for one or more Guaranteed Terms. Aetna reserves the right to extend the Deposit Period. 1.14 DOLLAR COST AVERAGING: A program that permits the Certificate Holder to systematically transfer amounts from any of the Funds and the one-year AG Account Guaranteed Term to any of the Funds by completing the appropriate section of the enrollment form or a Dollar Cost Averaging election form. 1.15 FIXED ANNUITY: An Annuity with payments that do not vary in amount. 1.16 FUND(S): The open-end management investment companies (mutual funds) in which the Separate Account invests (see Contract Schedule I for specific fund options). 1.17 GENERAL ACCOUNT: The account holding the assets of Aetna, other than those assets held in Aetna's separate accounts. 1.18 GUARANTEED RATE -- Aetna will declare the interest rate applicable to a specific Guaranteed AG ACCOUNT: Term at the start of the Deposit Period for that Guaranteed Term. The rate is guaranteed by Aetna for that Deposit Period and the ensuing Guaranteed Term. The Guaranteed Rate is an annual effective yield. That is, interest is credited daily at a rate that will produce the Guaranteed Rate over the period of a year. No Guaranteed Rate will ever be less than the Minimum Guaranteed Rate shown on Contract Schedule I. 1.19 GUARANTEED TERM: The period of time for which the AG Account Guaranteed Rate is guaranteed on the Net Purchase Payments, Transfers and Reinvestments made into a current Deposit Period for the AG Account. Such period begins on the day following the close of the Deposit Period and ends on the designated Maturity Date. Guaranteed Terms are offered at Aetna's discretion for various lengths of time ranging up to and including ten years. During a Deposit Period, Aetna may make available any number of Guaranteed Terms. The Contract Holder may allocate the Net Purchase Payments and Transfers into any or all of the available Guaranteed Terms. 1.20 GUARANTEED TERM(S) All AG Account Guaranteed Term(s) with the same length of time from the GROUPS: close of the Deposit Period until the designated Maturity Date.
17 1.21 MAINTENANCE FEE: The Maintenance Fee (see Contract Schedule I) will be deducted during the Accumulation Period from the Current Value on each anniversary of the date the Contract is established and upon the surrender of the entire Contract. 1.22 MARKET VALUE ADJUSTMENT An adjustment that may apply to an amount withdrawn or transferred from an (MVA): AG Account Guaranteed Term prior to the end of that Guaranteed Term. The adjustment reflects the change in the value of the investment due to changes in interest rates since the date of deposit and is computed using the formula given in 3.06. The adjustment is expressed as a percentage of each dollar being withdrawn or transferred. 1.23 MATURED TERM VALUE: The amount payable on an AG Account Guaranteed Term's Maturity Date. 1.24 MATURED TERM VALUE: During the calendar month following an AG Account Maturity Date, the Certificate Holder may notify Aetna's Home Office in writing to Transfer or surrender all or part of the Matured Term Value, plus interest at the new Guaranteed Rate accrued thereon, from the AG Account without an MVA. This provision only applies to the first such written request received from the Certificate Holder during this period for any Matured Term Value. 1.25 MATURITY DATE: The last day of an AG Account Guaranteed Term. 1.26 NET PURCHASE PAYMENT: The Purchase Payment less premium taxes, if applicable. 1.27 NONUNITIZED SEPARATE A separate account set up by Aetna under Title 38, Section 38a-433, of the ACCOUNT: Connecticut General Statutes, that holds assets for AG Account Terms. There are no discrete units for this Account. The Certificate Holder does not participate in the investment gain or loss from the assets held in the Nonunitized Separate Account. Such gain or loss is borne entirely by Aetna. These assets may be chargeable with liabilities arising out of any other business of Aetna. 1.28 PURCHASE PAYMENT(S): Payment(s) accepted by Aetna at its Home Office. Aetna reserves the right to refuse to accept any Purchase Payment at any time for any reason. No advance notice will be given to the Contract Holder. Aetna reserves the right to refuse to accept any Purchase Payment at any time for any reason. No advance notice will be given to the Contract Holder or Certificate Holder. 1.29 REINVESTMENT: Aetna will mail a notice to the Contract Holder at least 18 calendar days and not more than 45 days before a Guaranteed Term's Maturity Date.
18 1.29 REINVESTMENT: This notice will contain the Terms available during current Deposit Periods (CON'T) with their Guaranteed Rate, and projected Matured Term Value. If no specific direction is given by the Certificate Holder prior to the Maturity Date, each Matured Term Value will be reinvested in the current Deposit Period for a Guaranteed Term of the same duration. If a Guaranteed Term of the same duration is unavailable, each Matured Term Value will automatically be reinvested in the current Deposit Period for the next shortest Guaranteed Term available. If no shorter Guaranteed Term is available, the next longer Guaranteed Term will be used. Aetna will mail a confirmation statement to the Certificate Holder the next business day after the Maturity Date. This notice will sate the Guaranteed Term and Guaranteed Rate which will apply to the reinvested Matured Term Value. 1.30 SEPARATE ACCOUNT: A separate account that buys and holds shares of the Fund(s). Income, gains or losses, realized or unrealized, are credited or charged to the Separate Account without regard to other income, gains or losses of Aetna. Aetna owns the assets held in the Separate Account and is not a trustee as to such amounts. This Separate Account generally is not guaranteed and is held at market value. The assets of the Separate Account, to the extent of reserves and other contract liabilities of the Account, shall not be charged with other Aetna liabilities. 1.31 SURRENDER VALUE: The amount payable by Aetna upon the surrender of any portion of an account. 1.32 TRANSFERS: The movement of invested amounts among the available Fund(s) and the AG Account under this Contract during the Accumulation Period. 1.33 VALUATION PERIOD (PERIOD): The period of time for which a Fund determines its net asset value, usually from 4:15 p.m. Eastern time each day the New York Stock Exchange is open until 4:15 p.m. the next such day, or such other day that one or more of the Funds determines its net asset value. 1.34 VARIABLE ANNUITY: An Annuity with payments that vary with the net investment results of one or more Funds held under the Separate Account.
II. GENERAL PROVISIONS ------------------------------------------------------------------------------- 2.01 CHANGE OF CONTRACT: Only an authorized officer of Aetna may change the terms of this Contract. Aetna will notify the Contract Holder in writing at least 30 days before the effective date of any change. Any change will not affect the amount or terms of any Annuity which begins before the change. Aetna may make any change that affects the AG Account Market Value Adjustment (3.06) with at least 30 days' advance written notice to the Contract Holder and the Certificate Holder. Any such change shall become effective for any new Term and will be
19 applicable only if it is more favorable to the Contract Holder and/or the Certificate Holder. 2.01 CHANGE OF CONTRACT: Any change that affects any of the following under this Contract will not (CON'T) apply to Accounts in existence before the effective date of the change: (a) Net Purchase Payment (3.01 ) (b) AG Account Guaranteed Rate (1.04) (c) Net Return Factor(s) -- Separate Account (3.04) (d) Current Value (1.12) (e) Surrender Value (1.31) (f) Fund(s) Annuity Unit Value -- Separate Account (4.05) (g) Annuity Options (4.07) (h) Fixed Annuity Guaranteed Interest Rates (4.01) (i) Transfers (1.32). This Contract may be changed as deemed necessary by Aetna to comply with federal or state law. Any such change is subject to the prior approval of the New York Insurance Department. 2.02 CHANGE OF FUND(S): Aetna, or the Separate Account, may: (a) Change the Fund(s) which may be invested in by the Separate Account; and (b) Replace the shares of any Fund(s) held in the Separate Account with shares of any other Fund(s). Changes must be: (a) Approved by a majority vote of the shares in the Separate Account with respect to the Fund(s) whose shares are to be replaced; or (b) Deemed necessary by Aetna under the Investment Company Act of 1940; or (c) Deemed necessary by Aetna to accomplish the purpose of the Separate Account. Such changes are subject to the approval of the Superintendent of the New York Insurance Department and Aetna will notify the Contract Holder of such change. 2.03 NONPARTICIPATING CONTRACT: The Contract Holder, Certificate Holder's or Beneficiaries will not have a right to share in the earnings of Aetna. 2.04 PAYMENTS AND ELECTIONS: While the Certificate Holder is living, Aetna will pay the Certificate Holder any Annuity payments as and when due. After the Certificate Holder's death, or at the death of the first Certificate Holder if the Account is owned jointly, any Annuity payments required to be made will be paid in accordance with 4.03. Aetna will determine other payments and/or elections as of the end of the Valuation Period in which the request is received at its Home
20 Office. Such payments will be made within 7 calendar days of receipt at its Home Office of a written claim for payment which is in good order, except as provided in 3.15. 2.05 STATE LAWS: The Contract and the Certificate's comply with the laws of the state in which they are delivered. Any surrender, death, or Annuity payments are equal to or greater than the minimum required by such laws. Annuity tables for legal reserve valuation shall be as required by state law. Such tables may be different from Annuity tables used to determine Annuity payments. 2.06 CONTROL OF CONTRACT: This is a Contract between the Contract Holder and Aetna. The Contract Holder has title to the Contract. Contract Holder rights are limited to accepting and rejecting Contract modifications. The Certificate Holder has all other rights to amounts held in his or her Account. Each Certificate Holder shall own all amounts held in his or her Account. Each Certificate Holder may make any choices allowed by this Contract for his or her Account. Certificate Holder choices made under this contract must be in writing. If the Account is owned jointly, both joint Certificate Holders must authorize any Certificate Holder change in writing. Until receipt of such choices at Aetna's Home Office, Aetna may rely on any previous choices made. The Account may not be attached, alienated, or subject to the claims of creditors of the Certificate Holder except to the extent permitted by law. The Certificate Holder may assign or transfer his or her rights under the Contract. Aetna reserves the right not to accept assignment or transfer to a nonnatural person. Any assignment or transfer made must be submitted to Aetna's Home Office in writing and will not be effective until accepted by Aetna. 2.07 DESIGNATION OF Each Certificate Holder shall name his or her Beneficiary. If the Account BENEFICIARY: is owned jointly, both joint Certificate Holders must agree in writing to the Beneficiary designated. The Beneficiary may be changed at any time. Changes to a Beneficiary must be submitted to Aetna's Home Office in writing and will not be effective until accepted by Aetna. 2.08 MISSTATEMENTS AND If Aetna finds the age or sex of any Annuitant to be misstated, the amount ADJUSTMENTS: payable under the Contract shall be adjusted for the correct age or sex; the amount of any underpayment or overpayment, with interest at six per cent per year, shall be credited to, or changed against, the current or next succeeding payment or payments to be made by Aetna under the Contract. 2.09 INCONTESTABILITY: Aetna cannot cancel the Contract because of any error of fact on the application. Aetna cannot cancel an Account because of any error of fact on the enrollment form. 2.10 GRACE PERIOD: This Contract will remain in effect even if Purchase Payments are not continued.
21 2.11 INDIVIDUAL CERTIFICATES: Aetna shall issue a certificate to each Certificate Holder. The certificate will summarize certain provisions of the contract. Certificates are for information only and are not a part of the Contract. III. PURCHASE PAYMENT, CURRENT VALUE, AND SURRENDER PROVISIONS ------------------------------------------------------------------------------- 3.01 NET PURCHASE PAYMENT: This amount is the actual Purchase Payment less any premium tax. Aetna will generally deduct the premium tax when Annuity benefits are elected (see Part IV). If Aetna determines that under applicable state law, it must pay a premium tax when the Purchase Payment is received or at any other time, it will deduct the tax at that time. The Net Purchase Payment will be credited among: (a) The current Deposit Period(s) for Guaranteed Terms under the AG Account; and (b) The Fund(s) in which the Separate Account invests. For each Net Purchase Payment, the Certificate Holder shall tell Aetna the allocation percentage to be applied to the current Deposit Period for each of the available Guaranteed Terms in the AG Account and/or each Fund. If allocation instructions are not received along with any subsequent Net Purchase Payment, the allocation will be the same as that indicated on the original application. If the same Guaranteed Term is no longer available, the Net Purchase Payment will be allocated to the next shortest Guaranteed Term available in the current Deposit Period. If no shorter Guaranteed Term is available, the next longer Guaranteed Term will be used. The minimum acceptable additional Purchase Payment is shown on Contract Schedule I. The maximum acceptable Purchase Payment without Home Office approval is also provided on Contract Schedule I. 3.02 CERTIFICATE HOLDER'S Aetna will maintain an Account for each Certificate Holder. ACCOUNT: 3.03 FUND(S) RECORD UNITS -- The portion of the Net Purchase Payment(s) applied to each Fund under the SEPARATE ACCOUNT: Separate Account will determine the number of Fund record units for that Fund. This number is equal to the portion of the Net Purchase Payment(s) applied to each Fund divided by the Fund record unit value (see 3.05) for the Valuation Period in which the Purchase Payment is received in good order at Aetna's Home Office. 3.04 NET RETURN FACTOR(S) -- The net return factor(s) are used to compute all Separate SEPARATE ACCOUNT: Account record units for any Fund. The net return factor for each Fund is equal to 1.0000000 plus the net return rate. The net return rate is equal to:
22 (a) The value of the shares of the Fund held by the Separate Account at the end of the Valuation Period; minus
23 3.04 NET RETURN FACTOR(S) -- (b) The value of the shares of the Fund held by the Separate Account at SEPARATE ACCOUNT the start of the Valuation Period; plus or minus (CON'T): (c) Taxes (or reserves for taxes) on the Separate Account (if any); divided by (d) The total value of the Fund record units and Fund Annuity units of the Separate Account at the start of the Valuation Period; minus (e) A daily Separate Account charge at an annual rate as shown on Contract Schedule I for mortality and expense risks, which may include profit; and a daily administrative charge. A net return rate may be more or less than 0%. The value of a share of the Fund is equal to the net assets of the Fund divided by the number of shares outstanding. 3.05 FUND RECORD UNIT A Fund record unit value is computed by multiplying the net return factors VALUE -- SEPARATE ACCOUNT: for the current Valuation Period by the Fund record unit value for the previous Period. The dollar value of Fund record units, Separate Account assets, and Variable Annuity payments may go up or down due to investment gain or loss. 3.06 MARKET VALUE Except as noted below, there will be an MVA for a withdrawal ADJUSTMENT: from the AG Account before the end of a Guaranteed Term when the withdrawal is due to: (a) A Transfer; except for Transfers from the one-year AG Account Guaranteed Term under the Dollar Cost Averaging program or, as specified in 1.24, AG Account Matured Term Value Transfer; (b) A full or partial surrender (including a 15% free withdrawal under 3.14), except for a partial withdrawal under the Systematic Withdrawal Option (see 3.10); or (c) An election of Annuity option 2 (see 4.07). Full and partial surrenders and Transfers made within six months after the date of the Annuitant's death will be the greater of: (a) The aggregate MVA amount which is the sum of all market value adjusted amounts calculated due to a withdrawal of amounts. This total may be greater or less than the Current Value of those amounts; or (b) The applicable portion of the Current Value in the AG Account. After the six-month period, the surrender or Transfer will be the aggregate MVA amount, which may be greater or less than the Current Value of those amounts. The greater of the aggregate MVA amount or the applicable portion of the Current Value applies to amounts withdrawn from the AG Account on account of an election of Annuity options 3 or 4 (see 4.07).
24 3.06 MARKET VALUE Market value adjusted amounts will be equal to the amount ADJUSTMENT (CON'T): withdrawn multiplied by the following ratio: x --- 365 (1 + i) ----------- x --- 365 --- (1 + j) Where: i is the Deposit Period Yield j is the Current Yield x is the number of days remaining, (computed from Wednesday of the week of withdrawal) in the Guaranteed Term. The Deposit Period Yield will be determined as follows: (a) At the close of the last business day of each week of the Deposit Period, a yield will be computed as the average of the yields on that day of U.S. Treasury Notes which mature in the last three months of the Guaranteed Term. (b) The Deposit Period Yield is the average of those yields for the Deposit Period. If withdrawal is made before the close of the Deposit Period, it is the average of those yields on each week preceding withdrawal. The Current Yield is the average of the yields on the last business day of the week preceding withdrawal on the same U.S. Treasury Notes included in the Deposit Period Yield. In the event that no U.S. Treasury Notes which mature in the last three months of the Guaranteed Term exist, Aetna reserves the right to use the U.S. Treasury Notes that mature in the following quarter. If. U.S. Treasury Notes are no longer available, a suitable replacement index, subject to approval of the Superintendent of the New York Insurance Department, would then be utilized. A detailed description of the MVA has been filed with the Superintendent of the New York Insurance Department. 3.07 TRANSFER OF CURRENT VALUE Before an Annuity option is elected, all or any portion of the Adjusted FROM THE FUNDS OR Current Value of the Contract may be transferred from any Fund or AG ACCOUNT: Guaranteed Term of the AG Account: (a) To any other Fund; or (b) To any Guaranteed Term of the AG Account available in the current Deposit Period.
25 3.07 TRANSFER OF CURRENT VALUE Transfer requests can be submitted as a percentage or as a dollar amount. FROM THE FUNDS OR The minimum transfer amount is shown on Contract Schedule I. Within a AG ACCOUNT (CON'T): Guaranteed Term Group, the amount to be surrendered or transferred will be withdrawn first from the oldest Deposit Period, then from the next oldest, and so on until the amount requested is satisfied. The Certificate Holder may make an unlimited number of Transfers during the Accumulation Period. The number of free Transfers allowed by Aetna is shown on Contract Schedule I. Additional Transfers may be subject to a Transfer fee as shown on Contract Schedule I. Amounts transferred from the AG Account under the Dollar Cost Averaging program, or amounts transferred as a Matured Term Value on or within one calendar month of the Term's Maturity Date, do not count against the annual Transfer limit. Amounts applied to Guaranteed Terms of the AG Account may not be transferred to the Funds or to another Guaranteed Term during the Deposit Period or for 90 days after the close of the Deposit Period except for (1) a Matured Term Value(s) during the calendar month following the Term's Maturity Date and (2) amounts transferred from the one-year AG Account Guaranteed Term under the Dollar Cost Averaging program. Transfers from Guaranteed Terms of the AG Account are subject to the MVA provisions in 3.06. 3.08 NOTICE TO THE The Contract Holder will receive quarterly statements from Aetna of: CONTRACT HOLDER: (a) The value of any amounts held in: (1) The AG Account; and (2) The Fund(s) under the Separate Account. (b) The number of any Fund(s) record units; and (c) The Fund(s) record unit value. Such number or values will be as of a specific date no more than 60 days before the date of the notice. 3.09 LOANS: Loans are not available under this Contract. 3.10 SYSTEMATIC WITHDRAWAL: The following distribution options may be elected by the Certificate Holder OPTION (SWO): during the Accumulation Period. A distribution option under which a portion of the Accounts' Current Value will automatically be surrendered and distributed each year. SWO payments will be calculated based on the Accounts' full Current Value. The distributed amount will be withdrawn pro rata from each investment option used under the Account. A Surrender Fee will not be deducted from any portion of the Current Value which is paid as a distribution under SWO. Certificate Holders should consult their tax advisers prior to requesting this distribution option. Aetna will not be responsible for any adverse tax consequences due to receiving SWO payments.
26 3.10 SYSTEMATIC WITHDRAWAL (a) Amount of Distribution: The Certificate Holder may OPTION (SWO) elect one of the three payment methods described below. (CON'T): (1) Specified Payment: Payments of a designated dollar amount. The annual amount may not be greater than the percentage of the Account's Current Value on the date of the SWO election as shown on Contract Schedule I. This annual dollar amount will remain constant. The minimum SWO payment amount is shown on Contract Schedule I. If SWO payments are made more frequently than annually, the designated annual amount is divided by the number of payments due each year; or (2) Specified Period: Payments made over a designated period of time of at least 10 years. The annual amount is calculated by dividing the Current Value as of December 31 of the year prior to the payment year by the number of payment years remaining; or (3) Specified Percentage: Payments of a designated percentage which cannot be greater than the percentage of the Current Value at the time of election as shown on Contract Schedule I. The percentage may be changed by written request. Aetna reserves the right to limit the number of times the percentage may be changed. The annual amount is calculated by multiplying the Current Value as of December 31 of the year prior to the payment year by the designated percentage. Payments upon the Contract Holder's death will continue to the Beneficiary in the manner described in 3.11. (b) Minimum Initial Current Value: The Minimum Initial Current Value required to begin SWO is shown on Contract Schedule I. If after election of this option the Current Value is insufficient to make a scheduled SWO payment, Aetna will distribute the entire balance. (c) Date of Distribution: The Contract Holder shall specify the first payment date. The earliest allowable first payment date is the date on which the Contract Holder attains age 59 1/2. The latest allowable SWO payment date is the month of the Contract Holder's 85th birthday. As elected by the Contract Holder, SWO payments will be made on a monthly, quarterly, semi-annual or annual basis. If SWO payments are made more frequently than annually, the designated annual amount is divided by the number of payments due each year. Subsequent payments will be made on the 15th of the appropriate months or on such other date as Aetna may designate or allow.
27 3.10 SYSTEMATIC WITHDRAWAL (d) Election and Revocation: SWO may be elected by the Certificate Holder OPTION (SWO) or a spouse beneficiary if elected after the Certificate Holder's (CON'T): death by submitting a completed and signed election form to Aetna's Home Office. Once elected, this option may be revoked by the Certificate Holder or spousal Beneficiary, if elected after the Certificate Holder's death, by submitting a written request to Aetna at its Home Office. Any revocation will apply only to amounts not yet paid. SWO may be elected only once by the Certificate Holder or by the spouse Beneficiary. 3.11 DEATH BENEFIT AMOUNT: If the Certificate Holder/Annuitant dies before Annuity payments start, the Beneficiary is entitled to a death benefit under the Account. If the Account is owned jointly, the death benefit is paid at the death of the first joint Certificate Holder to die. The claim date is the date when proof of death and the Beneficiary's claim are received in good order at Aetna's Home Office. The amount of the death benefit is determined as follows: (a) Death of Annuitant less than 85 years of age: The guaranteed death benefit is the greatest of: (1) The sum of all Net Purchase Payment(s) made to the Account (as of the date of death) minus the sum of all amounts surrendered, applied to an Annuity, or deducted from the Account; (2) The highest step-up value as of the date of death. A step-up value is determined on each anniversary of the Effective Date. Each step-up value is calculated as the Account's Current Value on the Effective Date anniversary, increased by the amount of any Purchase Payment(s) made, and decreased by the sum of all amounts surrendered, deducted, and/or applied to an Annuity option since the Effective Date anniversary. (3) The Account's Current Value as of the date of death. The excess, if any, of the guaranteed death benefit value over the Account's Current Value is determined as of the date of death. Any excess amount will be deposited to the Account and allocated to Aetna Variable Encore Fund as of the claim date. The Current Value on the claim date plus any excess amount deposited becomes the Account's Current Value. (b) Death of Annuitant age 85 or greater: The death benefit is the greatest of: (1) The sum of all Net Purchase Payment(s) made to the Account (as of the date of death) minus the sum of all amounts surrendered, applied to an Annuity, or deducted from the Account;
28 3.11 DEATH BENEFIT (2) The highest step-up value prior to the Certificate Holder's 85th AMOUNT (CON'T) birthday. A step-up value is determined on each anniversary of the Effective Date. Each step-up value is calculated as the Account's Current Value on the Effective Date anniversary, increased by the amount of any Purchase Payment(s) made, and decreased by the sum of all amounts surrendered, deducted, and/or applied to an Annuity option since the Effective Date anniversary. (3) The Account's Current Value as of the date of death. The excess, if any, of the guaranteed death benefit value over the Account's Current Value is determined as of the date of death. Any excess amount will be deposited in the Account and allocated to the Aetna Variable Encore Fund as of the claim date. The Current Value on the claim date, plus any excess amount deposited, becomes the Account's Current Value. (c) Death of the Certificate Holder if the Certificate Holder is not the Annuitant: The death benefit amount is the Account's Adjusted Current Value on the Claim Date. A Surrender Fee may apply to any full or partial surrender (see 3.14 and Contract Schedule I). (d) At the death of a surviving spouse Beneficiary who continued the Account in his or her own name, the death benefit amount is equal to the Account's Current Value less any applicable Surrender Fee on the amount of any Purchase Payment(s) made since the death of the Certificate Holder. 3.12 DEATH BENEFIT OPTIONS Prior to any election, or until amounts must be otherwise distributed AVAILABLE TO BENEFICIARY: under this section, the Current Value of the account will be retained in the Account. The Beneficiary has the right under the Contract to allocate or reallocate any amount to any of the available investment options (subject to an MVA, as applicable). The following options are available to the Beneficiary: (a) When the Contract Holder is the Annuitant: If the Contract Holder/Annuitant dies, and: (1) If the Beneficiary is the Certificate Holder's surviving spouse, the Beneficiary may exercise all rights under the Contract and continue in the Accumulation Period, or may elect (i), (ii), or (iii) below. Under the Code, distributions from the Account are not required until the Spousal Beneficiary's death. The Spousal Beneficiary may elect to: (i) Apply some or all of the Adjusted Current Value of the Account to Annuity option 2, 3 or 4 (see 4.07); (ii) Apply some or all of the Adjusted Current Value to Annuity option 1 (see 4.07); or
29 3.12 DEATH BENEFIT OPTIONS (iii) Receive, at any time, a lump sum payment equal to the AVAILABLE TO BENEFICIARY Adjusted Current Value of the Account. (CON'T): (2) If the Beneficiary is other than the Certificate Holder's surviving spouse, then options (i), (ii), or (iii) under (1) above apply. Any portion of the Adjusted Current Value of the Account not applied to Annuity option 2, 3 or 4 within on year of the Certificate Holder's death, must be distributed within five years of the date of death. (3) If no Beneficiary exists, a lump sum payment equal to the Adjusted Current Value will be made to the Certificate Holder's estate. (b) When the Certificate Holder is not the Annuitant and the Certificate Holder dies, and: (1) If the Beneficiary is the Certificate Holder's surviving spouse, the Beneficiary may exercise all rights under the Contract and continue in the Accumulation Period, or may elect (i), (ii), or (iii) below. Under the Code, distributions from the Account are not required until the spousal Beneficiary's death. The spousal Beneficiary may elect to: (i) Apply some or all of the Adjusted Current Value of the Account to Annuity option 2, 3 or 4 (see 4.07); (ii) Apply some or all of the Surrender Value to Annuity option 1 (see 4.07); or (iii) Receive, at any time, a lump sum payment equal to the Surrender Value. (2) If the Beneficiary is other than the Certificate Holder's surviving spouse, then options (i), (ii), or (iii) under (1) above apply. Any portion of the Adjusted Current Value not applied to Annuity option 2, 3 or 4 within one year of the Certificate Holder's death, must be distributed within five years of the date of death. (3) If no Beneficiary exists, a lump sum payment equal to the Surrender Value will be made to the Certificate Holder's estate. (c) When the Certificate Holder is not the Annuitant and the Annuitant dies: The Beneficiary must elect Annuity option 2, 3 or 4 within 60 days of the date of death or the gain, if any, will be includible in the Beneficiary's income in the tax year in which the Annuitant dies.
30 3.13 LIQUIDATION OF All or any portion of the Account's Current Value may be surrendered at any SURRENDER VALUE: time. Surrender requests can be submitted as a percentage of the Account's Adjusted Current Value or as a specific dollar amount. Net Purchase Payment amounts are withdrawn first, and then the excess value, if any. For any partial surrender amounts are withdrawn on a pro rata basis from the Fund(s) and/or the Guaranteed Term(s) Groups of the AG Account in which the Current Value is invested. Within a Guaranteed Term Group, the amount to be surrendered or transferred will be withdrawn first from the oldest Deposit Period, then from the next oldest, and so on until the amount requested is satisfied. After deduction of the Maintenance Fee, if applicable, the surrendered amounts shall be reduced by a Surrender Fee, if applicable. An MVA may apply to amounts surrendered from the AG Account. 3.14 SURRENDER FEE: The Surrender Fee only applies to the Net Purchase Payment(s) portion surrendered and varies according to the elapsed time since deposit (see Contract Schedule I). Net Purchase Payment amounts are withdrawn in the same order they were applied. No Surrender Fee is deducted from any portion of the Net Purchase Payment which is paid: (a) To a Beneficiary due to the Annuitant's death before Annuity payments start, up to a maximum of the aggregate Net Purchase Payment(s) minus the total of all partial surrenders, amounts applied to an Annuity and deductions made prior to the Annuitant's date of death; (b) As a premium for an Annuity option 2, 3 or 4 under this Contract (see 4.07); (c) As a distribution under the SWO provision (see 3.10); (d) At least 12 months after the date of the Purchase Payment to the Account, in an amount equal to or less than 15% of the Current Value. This applies to the first surrender request, partial or full, in a calendar year. The Current Value is calculated as of the date the surrender request is received in good order at Aetna's Home Office. This waiver is not available to the Contract Holder while SWO is in effect; or (e) For a full surrender where the Account's Current Value is $2,500 or less and no surrenders have been taken from the Contract within the prior 12 months. 3.15 PAYMENT OF Under certain emergency conditions, Aetna may defer payment: SURRENDER VALUE: (a) For a period of up to 6 months (unless not allowed by state law); or
31 (b) As provided by federal law under the Investment Company Act of 1940. IV. ANNUITY PROVISIONS ------------------------------------------------------------------------------- 4.01 CHOICES TO BE MADE: The Certificate Holder may tell Aetna to apply any portion of the Adjusted Current Value (minus any premium tax) for an Annuity under option 2, 3, or 4 (see 4.07). The first Annuity payment may not be earlier than one calendar year after the initial Purchase Payment nor later than the first day of the month following the Annuitant's 85th birthday. When an Annuity Option is chosen, Aetna must also be told if payments are to be made other than monthly and whether to pay: (a) A Fixed Annuity using the General Account; (b) A Variable Annuity using any of the Fund(s) available under this Contract for Annuity purposes; or (c) A combination of (a) and (b). If a Fixed Annuity is chosen, the Annuity purchase rate for the option chosen reflects at least the Minimum Guaranteed Interest Rate (see Contract Schedule II), but may reflect a higher interest rate. If a Variable Annuity is chosen, the initial Annuity payment for the option chosen reflects the assumed annual return rate elected. (see Contract Schedule II). 4.02 TERMS OF ANNUITY (a) When payments start, the age of the Annuitant plus the number of years OPTIONS: for which payments are guaranteed must not exceed 95. (b) An Annuity option may not be elected if the first payment would be less than $50 or if the total payments in a year would be less than $250 (less if required by state law). Aetna reserves the right to increase the minimum first Annuity payment amount and the annual minimum annual Annuity payment amount based upon increases reflected in the Consumer Price Index-Urban, (CPI-U) since July 1, 1993. (c) If a Fixed Annuity under option 2, 3 or 4 is chosen and a larger payment would result from applying the Surrender Value or, if greater, 95% of what the surrender would be if there were no surrender fee, to a current Aetna single premium immediate Annuity, Aetna will make the larger payment. (d) For purposes of calculating the guaranteed first payment of a Variable Annuity or the payments for a Fixed Annuity, the Annuitant's and second Annuitant's adjusted age will be used. The Annuitant's and second Annuitant's adjusted age is his or
32 her age as of the birthday closest to the Annuity commencement date reduced by one year for Annuity
33 4.02 TERMS OF ANNUITY commencement dates occurring during the period of time from July 1, OPTIONS (CON'T): 1993 through December 31, 1999. The Annuitant's and second Annuitant's age will be reduced by two years for Annuity commencement dates occurring during the period of time from January 1, 2000 through December 31, 2009. The Annuitant's and second Annuitant's age will be reduced by one additional year for Annuity commencement dates occurring in each succeeding decade. The Annuity purchase rates for options 3 and 4 are based on mortality from 1983 Table a. (e) Assumed Annual Net Return Rate is the interest rate used to determine the amount of the first Annuity payment under a Variable Annuity as shown on Contract Schedule II. The Separate Account must earn this rate plus enough to cover the mortality and expense risk charges (which may include profit) and administrative charges if future Variable Annuity Payments are to remain level, (see Annuity return factor under Variable Annuity Assumed Annual Net Return Rate on Contract Schedule II). (f) Once elected, Annuity payments cannot be commuted to a lump sum except for Variable Annuity payments under option 2 (see 4.07). The life expectancy of the Annuitant and second Annuitant shall be irrevocable upon the election of an Annuity option. 4.03 DEATH OF ANNUITANT/ (a) Certificate Holder is Annuitant: When the Certificate Holder is the BENEFICIARY: Annuitant and the Annuitant dies under option 2 or 3, or both the Annuitant and the second Annuitant die under option 4(d), the present value of any remaining guaranteed payments will be paid in one sum to the Beneficiary, or upon election by the Beneficiary, any remaining payments will continue to the Beneficiary. If option 4 has been elected and the Certificate Holder dies, the remaining payments will continue to the second payee. If no successor payee has been designated, the Beneficiary will be treated as the successor payee. If the Account has joint Certificate Holders, the surviving joint Certificate Holder will be deemed the successor payee. (b) Certificate Holder is Not Annuitant: When the Certificate Holder is not the Annuitant and the Certificate Holder dies, the remaining payments under options 2, 3 or 4 will continue to the successor payee. If no successor payee has been designated, the Beneficiary will be treated as the successor payee. If the Account has joint Certificate Holders, the surviving joint Certificate Holder will be deemed the successor payee.
34 4.03 DEATH OF ANNUITANT/ If the Annuitant dies under option 2 or 3, or if both the Annuitant BENEFICIARY (CON'T): and the second Annuitant die under option 4(d), the present value of any remaining guaranteed payments will be paid in one sum to the Beneficiary, or upon the election by the Beneficiary, any remaining payments will continue to the Beneficiary. If option 4 has been elected, and the Annuitant dies, the remaining payments will continue to the Certificate Holder. (c) No Beneficiary Named/Surviving: If there is no Beneficiary under option 2, 3 or 4, the present value of any remaining payments will be paid in one sum to the Certificate Holder, or if the Certificate Holder is not living, then to the Certificate Holder's estate. (d) If the Beneficiary designated under option 1 dies, the amount held plus accrued interest will be paid in one sum to a successor Beneficiary, if any, named by the designated Beneficiary. If there is no successor Beneficiary, the lump sum will be paid to the designated Beneficiary's estate. (e) If the Beneficiary or the successor payee dies while receiving Annuity payments, the present value of any remaining guaranteed payments will be paid in one sum to the successor Beneficiary/payee, or upon election by the successor Beneficiary/payee, any remaining payments will continue to the successor Beneficiary/payee. If no successor Beneficiary/payee has been designated, the present value of any remaining guaranteed payments will be paid in one sum to the Beneficiary's/payee's estate. (f) The present value will be determined as of the Valuation Period in which proof of death acceptable to Aetna and a request for payment is received at Aetna's Home Office. The interest rate used to determine the first payment will be used to calculate the present value. 4.04 FUND(S) ANNUITY UNITS -- The number of each Fund's Annuity units is based on the amount of the first SEPARATE ACCOUNT: Variable Annuity payment which is equal to: (a) The portion of the Current Value applied to pay a Variable Annuity (minus any premium tax); divided by (b) 1,000; multiplied by (c) The payment rate for the option chosen. Such amount, or portion, of the variable payment will be divided by the appropriate Fund Annuity unit value (see 4.05) on the tenth Valuation Period before the due date of the first payment to determine the number of each Fund Annuity units. The number of each Fund Annuity units remains fixed. Each future payment is equal to the sum of the products of each Fund Annuity unit value multiplied by the
35 appropriate number of Units. The Fund Annuity unit value on the tenth Valuation Period prior to the due date of the payment is used.
36 4.05 FUND(S) ANNUITY UNIT For any Valuation Period, a Fund Annuity unit value is equal to: VALUE -- SEPARATE ACCOUNT: (a) The Value for the previous Period; multiplied by (b) The Annuity net return factor(s) (see 4.06 below) for the Period; multiplied by (c) A factor to reflect the assumed annual net return rate (see Contract Schedule II). The dollar value of a Fund Annuity unit value and Annuity payments may go up or down due to investment gain or loss. 4.06 ANNUITY NET RETURN The Annuity net return factor(s) are used to compute Annuity payments for FACTOR(S) -- SEPARATE any Fund. ACCOUNT: The Annuity net return factor(s) for each Fund is equal to 1.0000000 plus the net return rate. The net return rate is equal to: (a) The value of the shares of the Fund held by the Separate Account at the end of a Valuation Period; minus (b) The value of the shares of the Fund held by the Separate Account at the start of the Valuation Period; plus or minus (c) Taxes (or reserves for taxes) on the Separate Account (if any); divided by (d) The total value of the Fund record units and the Fund Annuity units of the Separate Account at the start of the Valuation Period; minus (e) A daily charge for Annuity mortality and expense risks, which may include profit, and a daily administrative charge (at the annual rate as shown on Contract Schedule II). A net return rate may be more or less than 0%. The value of a share of the Fund is equal to the net assets of the Fund divided by the number of shares outstanding. Payments shall not be changed due to changes in the mortality or expense results or administrative charges. 4.07 ANNUITY OPTIONS: Option 1 -- Payment of Interest on Sum Left with Aetna -- This option may be used only by the Beneficiary when the Certificate Holder dies before Aetna has started paying an Annuity. A portion or all of the sum paid upon death may be held under this option and will be held in the General Account of Aetna at interest (see 4.01). The Beneficiary may later tell Aetna to: (a) Pay a portion or all of the sum held by Aetna; or (b) Apply a portion or all of the sum held by Aetna to any Annuity Option below.
37 4.07 ANNUITY OPTIONS If a nonspouse Beneficiary elects that some or all of the Current Value is (CON'T): to be held under this option, the Beneficiary must tell Aetna to pay the full sum held under this option within 5 years of the date of death. Option 2 -- Payments for a Stated Period of Time -- An Annuity will be paid for the number of years chosen. The number of years must be at least 5 and not more than 30. If payments for this option are made under a Variable Annuity, the present value of any remaining payments may be withdrawn at any time. If a withdrawal is requested within 3 years after the start of payments, it will be treated as a surrender and any applicable Surrender Fee will be applied (see 3.14). If a nonspouse Beneficiary elects this option at the death of the Contract Holder, the period selected may not extend beyond the Beneficiary's life expectancy. Option 3 -- Life Income -- An Annuity will be paid for the life of the Annuitant. If also chosen, Aetna will guarantee payments for 60, 120, 180, or 240 months. Option 4 -- Life Income Based upon the Lives of Two Annuitants -- An Annuity will be paid during the lives of the Annuitant and a second Annuitant. Payments will continue until both Annuitants have died. When this option is chosen, a choice must be made of: (a) 100% of the payment to continue after the first death; (b) 66 2/3% of the payment to continue after the first death; (c) 50% of the payment to continue after the first death; (d) Payments for a minimum of 120 months with 100% of the payment to continue after the first death; or (e) 100% of the payment to continue at the death of the second Annuitant and 50% of the payment to continue at the death of the Annuitant. Other Options -- Aetna may make other options available as allowed by the laws of the state in which this Contract and the Certificate is delivered.
38 OPTION 2 PAYMENTS FOR A STATED PERIOD OF TIME AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
--------------------------------------------------------------------------------- YEARS GUARANTEED MONTHLY QUARTERLY SEMI-ANNUAL ANNUAL RATE PAYMENT PAYMENT PAYMENT PAYMENT --------------------------------------------------------------------------------- 5 3.00% 17.91 53.59 106.78 211.99 6 3.00% 15.14 45.30 90.27 179.22 7 3.00% 13.16 39.39 78.49 155.83 8 3.00% 11.68 34.96 69.66 138.31 9 3.00% 10.53 31.52 62.81 124.69 10 3.00% 9.61 28.77 57.33 113.82 11 3.00% 8.86 26.52 52.85 104.93 12 3.00% 8.24 24.65 49.13 97.54 13 3.00% 7.71 23.08 45.98 91.29 14 3.00% 7.26 21.73 43.29 85.95 15 3.00% 6.87 20.56 40.96 81.33 16 3.00% 6.53 19.54 38.93 77.29 17 3.00% 6.23 18.64 37.14 73.74 18 3.00% 5.96 17.84 35.56 70.59 19 3.00% 5.73 17.13 34.14 67.78 20 3.00% 5.51 16.50 32.87 65.26 21 3.00% 5.32 15.92 31.72 62.98 22 3.00% 5.15 15.40 30.68 60.92 23 3.00% 4.99 14.92 29.74 59.04 24 3.00% 4.84 14.49 28.88 57.33 25 3.00% 4.71 14.09 28.08 55.76 26 3.00% 4.59 13.73 27.36 54.31 27 3.00% 4.47 13.39 26.68 52.97 28 3.00% 4.37 13.08 26.06 51.74 29 3.00% 4.27 12.79 25.49 50.60 30 3.00% 4.18 12.52 24.95 49.53 --------------------------------------------------------------------------------
39 OPTION 3 LIFE INCOME AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0% PAYMENTS GUARANTEED FOR A STATED PERIOD OF MONTHS -------------------------------------------------
--------------------------------------------------------------------------------------------- ADJUSTED NONE 60 120 180 240 AGE OF --------------------------------------------------------------------------- ANNUITANT MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE --------------------------------------------------------------------------------------------- 50 $4.27 $3.90 $4.26 $3.90 $4.22 $3.89 $4.17 $3.86 $4.08 $3.82 51 4.34 3.97 4.33 3.96 4.30 3.95 4.23 3.92 4.14 3.88 52 4.43 4.03 4.41 4.03 4.37 4.01 4.30 3.98 4.20 3.93 53 4.51 4.10 4.50 4.10 4.45 4.08 4.37 4.04 4.26 3.99 54 4.60 4.18 4.59 4.17 4.54 4.15 4.45 4.11 4.32 4.04 55 4.70 4.25 4.68 4.25 4.62 4.22 4.53 4.18 4.39 4.11 56 4.80 4.34 4.78 4.33 4.72 4.30 4.61 4.25 4.45 4.17 57 4.91 4.42 4.89 4.41 4.82 4.38 4.69 4.32 4.51 4.23 58 5.03 4.52 5.00 4.51 4.92 4.47 4.78 4.40 4.58 4.30 59 5.15 4.61 5.12 4.60 5.03 4.56 4.87 4.48 4.65 4.37 60 5.28 4.72 5.25 4.70 5.14 4.66 4.96 4.57 4.71 4.44 61 5.43 4.83 5.39 4.81 5.27 4.76 5.06 4.66 4.78 4.51 62 5.58 4.95 5.53 4.93 5.39 4.87 5.16 4.75 4.84 4.58 63 5.74 5.08 5.69 5.05 5.53 4.99 5.26 4.85 4.90 4.65 64 5.91 5.21 5.85 5.18 5.66 5.10 5.36 4.95 4.96 4.72 65 6.10 5.36 6.03 5.32 5.81 5.22 5.46 5.05 5.02 4.79 66 6.30 5.51 6.21 5.47 5.93 5.36 5.56 5.16 5.08 4.86 67 6.51 5.67 6.41 5.63 6.12 5.50 5.66 5.26 5.13 4.93 68 6.73 5.85 6.62 5.80 6.28 5.65 5.77 5.37 5.18 5.00 69 6.97 6.04 6.84 5.98 6.44 5.80 5.86 5.49 5.23 5.06 70 7.23 6.25 7.07 6.18 6.61 5.97 5.96 5.60 5.27 5.12 71 7.51 6.47 7.32 6.39 6.79 6.14 6.05 5.71 5.31 5.18 72 7.80 6.71 7.58 6.62 6.96 6.32 6.14 5.83 5.34 5.23 73 8.12 6.98 7.85 6.86 7.14 6.50 6.23 5.94 5.37 5.28 74 8.46 7.26 8.14 7.12 7.32 6.69 6.31 6.04 5.40 5.32 75 8.82 7.57 8.45 7.40 7.50 6.89 6.38 6.14 5.42 5.35 --------------------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. 40 OPTION 4 LIFE INCOME FOR TWO PAYEES AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES (ANNUITANT IS MALE AND SECOND ANNUITANT IS FEMALE) Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
----------------------------------------------------------------------------- ADJUSTED AGES --------------------- SECOND ANNUITANT ANNUITANT OPTION 4A OPTION 4B OPTION 4C OPTION 4D OPTION 4E ----------------------------------------------------------------------------- 55 50 $3.69 $4.05 $4.27 $3.69 $4.13 55 55 3.88 4.25 4.47 3.87 4.25 55 60 3.06 4.47 4.71 4.06 4.36 60 55 3.99 4.44 4.71 3.98 4.55 60 60 4.24 4.71 4.99 4.23 4.70 60 65 4.49 5.01 5.32 4.48 4.85 65 60 4.38 4.97 5.32 4.38 5.10 65 65 4.72 5.33 5.70 4.71 5.32 65 70 5.07 5.75 6.17 5.05 5.54 70 65 4.93 5.68 6.15 4.91 5.86 70 70 5.40 6.21 6.70 5.36 6.18 70 75 5.89 6.82 7.40 5.81 6.49 75 70 5.69 6.68 7.32 5.62 6.92 75 75 6.37 7.45 8.15 6.23 7.40 75 80 7.07 8.34 9.16 6.78 7.85 -----------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates assume the Annuitant is Male and the Second Annuitant is Female. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. 41 OPTION 4 LIFE INCOME FOR TWO PAYEES AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES (ANNUITANT IS FEMALE AND SECOND ANNUITANT IS MALE) Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
--------------------------------------------------------------------------- ADJUSTED AGES --------------------- SECOND ANNUITANT ANNUITANT OPTION 4A OPTION 4B OPTION 4C OPTION 4D OPTION 4E --------------------------------------------------------------------------- 55 50 $3.75 $4.07 $4.26 $3.75 $3.98 55 55 3.88 4.25 4.47 3.87 4.06 55 60 3.99 4.44 4.71 3.98 4.12 60 55 4.06 4.47 4.71 4.06 4.37 60 60 4.24 4.71 4.99 4.23 4.47 60 65 4.38 4.97 5.32 4.38 4.54 65 60 4.49 5.01 5.32 4.48 4.89 65 65 4.72 5.33 5.70 4.71 5.02 65 70 4.93 5.68 6.15 4.91 5.14 70 65 5.07 5.75 6.17 5.05 5.60 70 70 5.40 6.21 6.70 5.36 5.79 70 75 5.69 6.68 7.32 5.62 5.96 75 70 5.89 6.83 7.40 5.81 6.63 75 75 6.37 7.45 8.15 6.23 6.92 75 80 6.78 8.11 8.99 6.54 7.15 ---------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates assume the Annuitant is Female and the Second Annuitant is Male. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. 42 OPTION 2 PAYMENTS FOR A STATED PERIOD OF TIME AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
------------------------------------------------------------------ GUARANTEED MONTHLY QUARTERLY SEMI-ANNUAL ANNUAL YEARS RATE PAYMENT PAYMENT PAYMENT PAYMENT ------------------------------------------------------------------ 5 3.50% 18.12 54.19 107.92 213.99 6 3.50% 15.35 45.92 91.44 181.32 7 3.50% 13.38 40.01 79.69 158.01 8 3.50% 11.90 35.59 70.88 140.56 9 3.50% 10.75 32.16 64.05 127.00 10 3.50% 9.83 29.42 58.59 116.18 11 3.50% 9.09 27.18 54.13 107.34 12 3.50% 8.46 25.32 50.42 99.98 13 3.50% 7.94 23.75 47.29 93.78 14 3.50% 7.49 22.40 44.62 88.47 15 3.50% 7.10 21.24 42.31 83.89 16 3.50% 6.76 20.23 40.29 79.89 17 3.50% 6.47 19.34 38.51 76.37 18 3.50% 6.20 18.55 36.94 73.25 19 3.50% 5.97 17.85 35.54 70.47 20 3.50% 5.75 17.22 34.28 67.98 21 3.50% 5.56 16.65 33.15 65.74 22 3.50% 5.39 16.13 32.13 63.70 23 3.50% 5.24 15.66 31.19 61.85 24 3.50% 5.09 15.24 30.34 60.17 25 3.50% 4.96 14.85 29.56 58.62 26 3.50% 4.84 14.49 28.95 57.20 27 3.50% 4.73 14.15 28.19 55.90 28 3.50% 4.63 13.85 27.58 54.69 29 3.50% 4.53 13.57 27.02 53.57 30 3.50% 4.45 13.30 26.49 52.53 ------------------------------------------------------------------
43 OPTION 2 PAYMENTS FOR A STATED PERIOD OF TIME AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
---------------------------------------------------------------------- YEARS GUARANTEED MONTHLY QUARTERLY SEMI-ANNUAL ANNUAL RATE PAYMENT PAYMENT PAYMENT PAYMENT ---------------------------------------------------------------------- 5 5.00% 18.74 56.00 111.33 219.98 6 5.00% 15.99 47.77 94.96 187.64 7 5.00% 14.02 41.90 83.30 164.59 8 5.00% 12.56 37.52 74.58 147.35 9 5.00% 11.42 34.11 67.81 133.99 10 5.00% 10.51 31.40 62.42 123.34 11 5.00% 9.77 29.19 58.03 114.66 12 5.00% 9.16 27.36 54.38 107.45 13 5.00% 8.64 25.81 51.31 101.39 14 5.00% 8.20 24.50 48.69 96.21 15 5.00% 7.82 23.36 46.44 91.75 16 5.00% 7.49 22.37 44.47 87.88 17 5.00% 7.20 21.51 42.75 84.48 18 5.00% 6.94 20.74 41.23 81.47 19 5.00% 6.71 20.06 39.88 78.80 20 5.00% 6.51 19.46 38.68 76.42 21 5.00% 6.33 18.91 37.59 74.28 22 5.00% 6.17 18.42 36.62 72.35 23 5.00% 6.02 17.98 35.73 70.61 24 5.00% 5.88 17.57 34.93 69.02 25 5.00% 5.76 17.20 34.20 67.57 26 5.00% 5.65 16.87 33.53 66.25 27 5.00% 5.54 16.56 32.92 65.04 28 5.00% 5.45 16.28 32.35 63.93 29 5.00% 5.36 16.01 31.83 62.90 30 5.00% 5.28 15.77 31.35 61.95 ----------------------------------------------------------------------
44 OPTION 3 LIFE INCOME AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Variable Annuity with Assumed Net Return Rate of 3.5% PAYMENTS GUARANTEED FOR A STATED PERIOD OF MONTHS -------------------------------------------------
--------------------------------------------------------------------------------------------- ADJUSTED NONE 60 120 180 240 AGE OF --------------------------------------------------------------------------- ANNUITANT MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE --------------------------------------------------------------------------------------------- 50 $4.56 $4.20 $4.55 $4.19 $4.51 $4.18 $4.45 $4.15 $4.36 $4.11 51 4.64 4.26 4.62 4.25 4.58 4.24 4.51 4.21 4.42 4.16 52 4.72 4.32 4.70 4.32 4.66 4.30 4.58 4.26 4.48 4.21 53 4.80 4.39 4.79 4.38 4.74 4.36 4.65 4.32 4.53 4.27 54 4.89 4.46 4.87 4.46 4.82 4.43 4.73 4.39 4.59 4.32 55 4.99 4.54 4.97 4.53 4.91 4.50 4.80 4.46 4.65 4.38 56 5.09 4.62 5.07 4.61 5.00 4.58 4.88 4.53 4.72 4.44 57 5.20 4.71 5.17 4.70 5.10 4.66 4.96 4.60 4.78 4.50 58 5.32 4.80 5.29 4.79 5.20 4.75 5.05 4.68 4.84 4.57 59 5.44 4.90 5.41 4.88 5.31 4.84 5.14 4.76 4.91 4.63 60 5.57 5.00 5.53 4.99 5.42 4.93 5.23 4.84 4.97 4.70 61 5.71 5.11 5.67 5.09 5.54 5.03 5.32 4.93 5.03 4.77 62 5.86 5.23 5.81 5.21 5.66 5.14 5.42 5.02 5.09 4.84 63 6.02 5.36 5.97 5.33 5.79 5.25 5.51 5.11 5.16 4.91 64 6.20 5.49 6.13 5.46 5.93 5.37 5.61 5.21 5.21 4.98 65 6.38 5.64 6.31 5.60 6.07 5.49 5.71 5.31 5.27 5.05 66 6.58 5.79 6.49 5.75 6.22 5.63 5.81 5.41 5.32 5.12 67 6.79 5.95 6.69 5.91 6.38 5.76 5.91 5.52 5.38 5.18 68 7.02 6.13 6.89 6.08 6.53 5.91 6.01 5.63 5.42 5.25 69 7.26 6.32 7.11 6.26 6.70 6.06 6.11 5.74 5.47 5.31 70 7.52 6.53 7.35 6.45 6.86 6.23 6.20 5.85 5.51 5.37 71 7.80 6.75 7.59 6.66 7.03 6.39 6.29 5.96 5.54 5.42 72 8.09 6.99 7.85 6.89 7.21 6.57 6.38 6.07 5.57 5.47 73 8.41 7.26 8.12 7.13 7.38 6.75 6.46 6.17 5.60 5.51 74 8.75 7.54 8.41 7.39 7.55 6.94 6.53 6.28 5.63 5.55 75 9.12 7.85 8.71 7.66 7.73 7.13 6.61 6.38 5.65 5.59 --------------------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. 45 OPTION 3 LIFE INCOME AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Variable Annuity with Assumed Net Return Rate of 5.0% PAYMENTS GUARANTEED FOR A STATED PERIOD OF MONTHS -------------------------------------------------
--------------------------------------------------------------------------------------------- ADJUSTED NONE 60 120 180 240 AGE OF ---------------------------------------------------------------------------- ANNUITANT MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE --------------------------------------------------------------------------------------------- 50 $ 5.48 $5.12 $5.46 $5.11 $5.41 $5.09 $5.34 $5.06 $5.24 $5.01 51 5.55 5.17 5.53 5.17 5.48 5.14 5.40 5.11 5.29 5.05 52 5.63 5.23 5.61 5.23 5.55 5.20 5.46 5.16 5.34 5.10 53 5.71 5.30 5.69 5.29 5.62 5.26 5.53 5.22 5.40 5.15 54 5.80 5.37 5.77 5.36 5.70 5.33 5.60 5.27 5.45 5.20 55 5.89 5.44 5.86 5.43 5.79 5.39 5.67 5.34 5.51 5.25 56 5.99 5.52 5.96 5.51 5.87 5.47 5.74 5.40 5.56 5.31 57 6.10 5.60 6.06 5.59 5.97 5.54 5.82 5.47 5.62 5.37 58 6.21 5.69 6.17 5.67 6.06 5.62 5.90 5.54 5.68 5.42 59 6.33 5.79 6.29 5.77 6.17 5.71 5.98 5.61 5.74 5.48 60 6.46 5.89 6.41 5.87 6.28 5.80 6.06 5.69 5.79 5.55 61 6.60 6.00 6.55 6.07 6.39 5.90 6.15 5.77 5.85 5.61 62 6.75 6.11 6.69 6.08 6.51 6.00 6.24 5.86 5.91 5.67 63 6.91 6.23 6.84 6.20 6.64 6.10 6.33 5.95 5.96 5.73 64 7.09 6.37 7.00 6.33 6.77 6.22 6.42 6.04 6.02 5.80 65 7.27 6.51 7.18 6.46 6.91 6.34 6.52 6.13 6.07 5.86 66 7.47 6.66 7.36 6.61 7.05 6.46 6.61 6.23 6.12 5.92 67 7.68 6.82 7.55 6.76 7.20 6.60 6.70 6.33 6.16 5.99 68 7.91 7.00 7.76 6.93 7.35 6.74 6.80 6.43 6.21 6.04 69 8.15 7.19 7.98 7.11 7.51 6.89 6.89 6.54 6.25 6.10 70 8.41 7.39 8.21 7.30 7.67 7.04 6.97 6.64 6.28 6.15 71 8.69 7.62 8.45 7.51 7.83 7.21 7.06 6.74 6.32 6.20 72 8.99 7.86 8.70 7.73 8.00 7.38 7.14 6.85 6.35 6.25 73 9.31 8.12 8.97 7.97 8.16 7.55 7.21 6.95 6.37 6.29 74 9.65 8.41 9.26 8.23 8.33 7.73 7.29 7.04 6.39 6.33 75 10.02 8.72 9.55 8.50 8.50 7.92 7.35 7.14 6.41 6.36 ---------------------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. 46 OPTION 4 LIFE INCOME FOR TWO PAYEES AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES (ANNUITANT IS MALE AND SECOND ANNUITANT IS FEMALE) Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
---------------------------------------------------------------------------- ADJUSTED AGES ---------------------- SECOND ANNUITANT ANNUITANT OPTION 4A OPTION 4B OPTION 4C OPTION 4D OPTION 4E ---------------------------------------------------------------------------- 55 50 $3.97 $4.35 $4.56 $3.97 $4.42 55 55 4.16 4.54 4.76 4.15 4.54 55 60 4.34 4.76 5.00 4.34 4.64 60 55 4.27 4.73 5.00 4.26 4.83 60 60 4.51 4.99 5.27 4.50 4.98 60 65 4.76 5.29 5.60 4.75 5.13 65 60 4.66 5.25 5.61 4.65 5.39 65 65 4.99 5.61 5.99 4.98 5.60 65 70 5.34 6.03 6.46 5.31 5.81 70 65 5.19 5.97 6.44 5.17 6.14 70 70 5.67 6.49 6.99 5.62 6.47 70 75 6.16 7.10 7.68 6.07 6.77 75 70 5.95 6.96 7.61 5.87 7.20 75 75 6.64 7.73 8.43 6.48 7.68 75 80 7.33 8.62 9.45 7.02 8.13 ----------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates assume the Annuitant is Male and the Second Annuitant is Female. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. 47 OPTION 4 LIFE INCOME FOR TWO PAYEES AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES (ANNUITANT IS FEMALE AND SECOND ANNUITANT IS MALE) Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
---------------------------------------------------------------------------- ADJUSTED AGES ----------------------------- SECOND ANNUITANT ANNUITANT OPTION 4A OPTION 4B OPTION 4C OPTION 4D OPTION 4E ---------------------------------------------------------------------------- 55 50 $4.03 $4.36 $4.55 $4.03 $4.41 55 55 4.16 4.54 4.76 4.15 4.54 55 60 4.27 4.73 5.00 4.26 4.83 60 55 4.34 4.76 5.00 4.34 4.64 60 60 4.51 4.99 5.27 4.50 4.98 60 65 4.66 5.25 5.61 4.65 5.39 65 60 4.76 5.29 5.60 4.75 5.13 65 65 4.99 5.61 5.99 4.98 5.60 65 70 5.19 5.97 6.44 5.17 6.14 70 65 5.34 6.03 6.46 5.31 5.81 70 70 5.67 6.49 6.99 5.62 6.47 70 75 5.95 6.96 7.61 5.87 7.20 75 70 6.16 7.10 7.68 6.07 6.77 75 75 6.64 7.73 8.43 6.48 7.68 75 80 7.04 8.39 9.29 6.79 8.70 -----------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates assume the Annuitant is Female and the Second Annuitant is Male. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. 48 OPTION 4 LIFE INCOME FOR TWO PAYEES AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES (ANNUITANT IS MALE AND SECOND ANNUITANT IS FEMALE) Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
---------------------------------------------------------------------------- ADJUSTED AGES --------------------- SECOND ANNUITANT ANNUITANT OPTION 4A OPTION 4B OPTION 4C OPTION 4D OPTION 4E ---------------------------------------------------------------------------- 55 50 $4.88 $5.26 $ 5.48 $4.88 $5.34 55 55 5.04 5.44 5.66 5.04 5.43 55 60 5.21 5.65 5.89 5.21 5.53 60 55 5.15 5.63 5.91 5.14 5.73 60 60 5.37 5.87 6.16 5.37 5.86 60 65 5.61 6.16 6.49 5.60 6.01 65 60 5.52 6.14 6.51 5.51 6.28 65 65 5.83 6.49 6.87 5.82 6.47 65 70 6.17 6.90 7.33 6.13 6.67 70 65 6.04 6.84 7.34 6.00 7.03 70 70 6.49 7.35 7.87 6.44 7.33 70 75 6.97 7.96 8.56 6.87 7.62 75 70 6.77 7.84 8.51 6.68 8.08 75 75 7.45 8.60 9.33 7.27 8.55 75 80 8.14 9.49 10.35 7.80 8.98 -----------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates assume the Annuitant is Male and the Second Annuitant is Female. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. 49 OPTION 4 LIFE INCOME FOR TWO PAYEES AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES (ANNUITANT IS FEMALE AND SECOND ANNUITANT IS MALE) Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
------------------------------------------------------------------------------ ADJUSTED AGES ---------------------- SECOND ANNUITANT ANNUITANT OPTION 4A OPTION 4B OPTION 4C OPTION 4D OPTION 4E ------------------------------------------------------------------------------ 55 50 $4.93 $5.27 $ 5.46 $4.93 $5.19 55 55 5.04 5.44 5.66 5.04 5.43 55 60 5.15 5.63 5.91 5.14 5.73 60 55 5.21 5.65 5.89 5.21 5.53 60 60 5.37 5.87 6.16 5.37 5.86 60 65 5.52 6.14 6.51 5.51 6.28 65 60 5.61 6.16 6.49 5.60 6.01 65 65 5.83 6.49 6.87 5.82 6.47 65 70 6.04 6.84 7.34 6.00 7.03 70 65 6.17 6.90 7.33 6.13 6.67 70 70 6.49 7.35 7.87 6.44 7.33 70 75 6.77 7.84 8.51 6.68 8.08 75 70 6.97 7.96 8.56 6.87 7.62 75 75 7.45 8.60 9.33 7.27 8.55 75 80 7.86 9.28 10.20 7.57 9.59 -----------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates assume the Annuitant is Female and the Second Annuitant is Male. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. 50 --------------------------------------------------------------- [LOGO OF AETNA GOES HERE] AETNA LIFE INSURANCE AND ANNUITY COMPANY Home Office: 151 Farmington Avenue Hartford, Connecticut 06156 (800) 525-4225 Group Variable, Fixed, or Combination Annuity Contract Nonparticipating --------------------------------------------------------------- ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT, WHEN BASED ON INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT. THIS CONTRACT CONTAINS A MARKET VALUE ADJUSTMENT FORMULA. APPLICATION OF A MARKET VALUE ADJUSTMENT MAY RESULT IN EITHER AN INCREASE OR DECREASE IN THE CURRENT VALUE. THE MARKET VALUE ADJUSTMENT FORMULA DOES NOT APPLY TO A GUARANTEED TERM AT THE TIME OF ITS MATURITY. 51 EX-99.B.10.1 6 CONSENT OF AUDITORS EXHIBIT 99-B.10.1 Consent of Independent Auditors The Board of Directors of Aetna Life Insurance and Annuity Company and Contract Owners of Aetna Variable Annuity Account B: We consent to the use of our reports dated January 31, 1995 and February 7, 1995 included herein and to the references to our Firm under the captions "CONDENSED FINANCIAL INFORMATION" in the Prospectus and "INDEPENDENT AUDITORS" in the Statement of Additional Information. Our report dated February 7, 1995 refers to a change in 1993 in the Company's methods of accounting for certain investments in debt and equity securities and reinsurance contracts, and a change in 1992 in the Company's methods of accounting for income taxes and post retirement benefits other than pensions. /s/ KPMG Peat Marwick LLP ------------------------- KPMG Peat Marwick LLP Hartford, Connecticut September 18, 1995 EX-99.B.10.2 7 CONSENT OF COUNSEL [LOGO OF AETNA Aetna Life Insurance and Susan E. Bryant APPEARS HERE] Annuity Company Counsel 151 Farmington Avenue Law & Regulatory Affairs, RE4C Hartford, CT 06156 (203) 273-7834 Fax: (203) 273-8340 EXHIBIT 99-B.10.2 September 18, 1995 Securities and Exchange Commission 450 Fifth Street N.W. Washington, D.C. 20549 Dear Sir or Madam: As Counsel of Aetna Life Insurance and Annuity Company (the "Company"), I hereby consent to the use of my opinion dated February 27, 1995 (incorporated herein by reference to the 24f-2 Notice for the fiscal year ended December 31, 1994 filed on behalf of Variable Annuity Account B of Aetna Life Insurance and Annuity Company on February 28, 1995) as an exhibit to this Post-Effective Amendment No. 1 to Registration Statement on Form N-4 (File No. 33-87932) and to my being named under the caption "Legal Matters" therein. Sincerely, /s/ Susan E. Bryant Susan E. Bryant Counsel Aetna Life Insurance and Annuity Company EX-99.B.13 8 COMPUTATION OF PERFORMANCE DATA Exhibit 99.B.13
Aetna Variable Fund (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- VARMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 0.0% 976.32 -2.37% -2.43% 3 0.0% 1081.06 2.63% 2.57% 5 0.0% 1371.96 6.53% 6.47% 10 0.0% 3267.34 12.57% 12.51% Accumulation Unit Values ------------------------------------------------------------ VARMTH VARMTH.UV 12-99-84 3.286219 12-99-89 7.826182 12-99-91 9.932096 12-99-93 10.997616 12-99-94 10.737184
(Day = 99 means end-of-month.)
Aetna Income Shares (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- AISMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 0.0% 948.65 -5.14% -5.19% 3 0.0% 1086.99 2.82% 2.76% 5 0.0% 1377.16 6.61% 6.55% 10 0.0% 2296.69 8.67% 8.61% Accumulation Unit Values ------------------------------------------------------------ AISMTH AISMTH.UV 12-99-84 4.495147 12-99-89 7.496521 12-99-91 9.497741 12-99-93 10.882773 12-99-94 10.323944
(Day = 99 means end-of-month.)
Aetna Encore Fund (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- ENCMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 0.0% 1026.35 2.64% 2.58% 3 0.0% 1067.55 2.20% 2.14% 5 0.0% 1198.96 3.70% 3.64% 10 0.0% 1631.13 5.01% 4.96% Accumulation Unit Values ------------------------------------------------------------ ENCMTH ENCMTH.UV 12-99-84 6.430484 12-99-89 8.748390 12-99-91 9.825225 12-99-93 10.219646 12-99-94 10.488958
(Day = 99 means end-of-month.)
AIAF (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- AIAMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 0.0% 982.39 -1.76% -1.82% 3 0.0% 1116.79 3.75% 3.69% 5 0.0% 1358.32 6.32% 6.26% From 06-23-89 0.0% 1414.54 6.48% 6.42% Accumulation Unit Values ------------------------------------------------------------ AIAMTH AIAMTH.UV 06-23-89 7.664971 i 12-99-89 7.982223 12-99-91 9.708561 12-99-93 11.036731 12-99-94 10.842404 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Alger Balanced (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- ALGBLMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 0.0% 943.99 -5.60% -5.66% 3 0.0% 1082.96 2.69% 2.63% 5 0.0% 1174.68 3.27% 3.21% From 09-05-89 0.0% 1200.40 3.49% 3.43% Accumulation Unit Values ------------------------------------------------------------ ALGBLMTH ALGBLMTH.UV 09-05-89 8.268394 i 12-99-89 8.449437 12-99-91 9.165009 12-99-93 10.514274 12-99-94 9.925345 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Alger Income and Growth (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- ALGIGMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 0.0% 904.34 -9.57% -9.62% 3 0.0% 1053.94 1.77% 1.71% 5 0.0% 1269.11 4.88% 4.82% From 11-14-88 0.0% 1354.27 5.07% 5.01% Accumulation Unit Values ------------------------------------------------------------ ALGIGMTH ALGIGMTH.UV 11-14-88 5.967675 i 12-99-89 6.368130 12-99-91 7.668245 12-99-93 8.936722 12-99-94 8.081864 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Alger Growth (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- ALGGMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 0.0% 1000.26 0.03% -0.03% 3 0.0% 1338.36 10.20% 10.14% 5 0.0% 1902.23 13.72% 13.67% From 01-08-89 0.0% 2328.37 15.19% 15.13% Accumulation Unit Values ------------------------------------------------------------ ALGGMTH ALGGMTH.UV 01-08-89 4.173216 i 12-99-89 5.108121 12-99-91 7.260203 12-99-93 9.714274 12-99-94 9.716797 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Alger MidCap (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- ALGMCMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 0.0% 970.80 -2.92% -2.98% From 04-99-93 0.0% 1333.65 18.80% 18.74% From 04-99-93 0.0% 1333.65 18.80% 18.74% From 04-99-93 0.0% 1333.65 18.80% 18.74% Accumulation Unit Values ------------------------------------------------------------ ALGMCMTH ALGMCMTH.UV 04-99-93 7.356424 i 12-99-93 10.106022 12-99-94 9.810919 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Alger Small Cap (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- ALGSCMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 0.0% 942.85 -5.72% -5.77% 3 0.0% 1075.26 2.45% 2.39% 5 0.0% 1790.47 12.36% 12.30% From 09-20-88 0.0% 2795.49 17.79% 17.73% Accumulation Unit Values ------------------------------------------------------------ ALGSCMTH ALGSCMTH.UV 09-20-88 3.342177 i 12-99-89 5.218194 12-99-91 8.689096 12-99-93 9.909388 12-99-94 9.343028 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Fidelity Asset Manager (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- FIDAMMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 0.0% 926.24 -7.38% -7.43% 3 0.0% 1219.79 6.85% 6.79% 5 0.0% 1550.89 9.17% 9.12% From 09-06-89 0.0% 1556.49 8.68% 8.62% Accumulation Unit Values ------------------------------------------------------------ FIDAMMTH FIDAMMTH.UV 09-06-89 6.498087 i 12-99-89 6.521551 12-99-91 8.291758 12-99-93 10.919704 12-99-94 10.114227 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Fidelity Equity-Income (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- FIDEIMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 0.0% 1055.67 5.57% 5.51% 3 0.0% 1419.11 12.38% 12.32% 5 0.0% 1536.15 8.96% 8.91% From 10-22-86 0.0% 2094.88 9.45% 9.39% Accumulation Unit Values ------------------------------------------------------------ FIDEIMTH FIDEIMTH.UV 10-22-86 4.774624 i 12-99-89 6.511267 12-99-91 7.048258 12-99-93 9.474806 12-99-94 10.002271 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Fidelity Growth (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- FIDEGMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 0.0% 986.01 -1.40% -1.46% 3 0.0% 1250.50 7.74% 7.68% 5 0.0% 1561.62 9.32% 9.27% From 11-07-86 0.0% 2361.38 11.12% 11.06% Accumulation Unit Values ------------------------------------------------------------ FIDEGMTH FIDEGMTH.UV 11-07-86 4.414141 i 12-99-89 6.674788 12-99-91 8.335422 12-99-93 10.571333 12-99-94 10.423485 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Fidelity High Income (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- FIDHIMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 0.0% 969.86 -3.01% -3.07% 3 0.0% 1398.23 11.82% 11.76% 5 0.0% 1795.19 12.41% 12.36% From 10-11-85 0.0% 2287.75 9.39% 9.33% Accumulation Unit Values ------------------------------------------------------------ FIDHIMTH FIDHIMTH.UV 10-11-85 3.929683 i 12-99-89 5.007911 12-99-91 6.429659 12-99-93 9.269555 12-99-94 8.990133 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Fidelity Index 500 (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- FD500MTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 0.0% 996.26 -0.37% -0.43% From 08-27-92 0.0% 1140.41 5.76% 5.71% From 08-27-92 0.0% 1140.41 5.76% 5.71% From 08-27-92 0.0% 1140.41 5.76% 5.71% Accumulation Unit Values ------------------------------------------------------------ FD500MTH FD500MTH.UV 08-27-92 7.348010 i 12-99-93 8.411191 12-99-94 8.379747 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Fidelity Investment Grade Bond (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- FDIGMTHT Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 0.0% 948.96 -5.10% -5.16% 3 0.0% 1091.84 2.97% 2.91% 5 0.0% 1311.57 5.57% 5.52% From 12-05-88 0.0% 1431.83 6.09% 6.03% Accumulation Unit Values ------------------------------------------------------------ FDIGMTHT FDIGMTHT.UV 12-05-88 6.984075 i 12-99-89 7.624440 12-99-91 9.158839 12-99-93 10.537887 12-99-94 10.000000 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Fidelity Overseas (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- FIDOSMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 0.0% 1003.11 0.31% 0.25% 3 0.0% 1195.96 6.15% 6.09% 5 0.0% 1235.06 4.31% 4.25% From 02-13-87 0.0% 1532.57 5.57% 5.51% Accumulation Unit Values ------------------------------------------------------------ FIDOSMTH FIDOSMTH.UV 02-13-87 6.722974 i 12-99-89 8.342462 12-99-91 8.615182 12-99-93 10.271516 12-99-94 10.303449 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
IMS Corporate Bond (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- FEDCBMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ From 03-01-94 0.0% 954.05 -4.60% -4.65% From 03-01-94 0.0% 954.05 -4.60% -4.65% From 03-01-94 0.0% 954.05 -4.60% -4.65% From 03-01-94 0.0% 954.05 -4.60% -4.65% Accumulation Unit Values ------------------------------------------------------------ FEDCBMTH FEDCBMTH.UV 03-01-94 10.286665 i 12-99-94 9.814011 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
IMS Equity Growth & Income (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- FEDGIMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ From 02-10-94 0.0% 980.98 -1.90% -1.96% From 02-10-94 0.0% 980.98 -1.90% -1.96% From 02-10-94 0.0% 980.98 -1.90% -1.96% From 02-10-94 0.0% 980.98 -1.90% -1.96% Accumulation Unit Values ------------------------------------------------------------ FEDGIMTH FEDGIMTH.UV 02-10-94 10.028900 i 12-99-94 9.838122 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
IMS Prime Money (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- FEDPMMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ From 11-14-94 0.0% 1003.34 0.33% 0.28% From 11-14-94 0.0% 1003.34 0.33% 0.28% From 11-14-94 0.0% 1003.34 0.33% 0.28% From 11-14-94 0.0% 1003.34 0.33% 0.28% Accumulation Unit Values ------------------------------------------------------------ FEDPMMTH FEDPMMTH.UV 11-14-94 10.000000 i 12-99-94 10.033362 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
IMS U.S. Government Bond (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- FEDGBMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ From 03-28-94 0.0% 1014.72 1.47% 1.41% From 03-28-94 0.0% 1014.72 1.47% 1.41% From 03-28-94 0.0% 1014.72 1.47% 1.41% From 03-28-94 0.0% 1014.72 1.47% 1.41% Accumulation Unit Values ------------------------------------------------------------ FEDGBMTH FEDGBMTH.UV 03-28-94 9.927313 i 12-99-94 10.073476 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
IMS Utlity (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- FEDUMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ From 02-10-94 0.0% 949.46 -5.05% -5.11% From 02-10-94 0.0% 949.46 -5.05% -5.11% From 02-10-94 0.0% 949.46 -5.05% -5.11% From 02-10-94 0.0% 949.46 -5.05% -5.11% Accumulation Unit Values ------------------------------------------------------------ FEDUMTH FEDUMTH.UV 02-10-94 10.407302 i 12-99-94 9.881346 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Janus Aspen Aggressive Growth (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- JAGMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 0.0% 1149.91 14.99% 14.93% From 09-13-93 0.0% 1352.78 26.20% 26.14% From 09-13-93 0.0% 1352.78 26.20% 26.14% From 09-13-93 0.0% 1352.78 26.20% 26.14% Accumulation Unit Values ------------------------------------------------------------ JAGMTH JAGMTH.UV 09-13-93 7.668394 i 12-99-93 9.021260 12-99-94 10.373656 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Janus Aspen Balanced (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- JBALMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 0.0% 994.23 -0.58% -0.64% From 09-13-93 0.0% 1061.28 4.69% 4.63% From 09-13-93 0.0% 1061.28 4.69% 4.63% From 09-13-93 0.0% 1061.28 4.69% 4.63% Accumulation Unit Values ------------------------------------------------------------ JBALMTH JBALMTH.UV 09-13-93 9.267979 i 12-99-93 9.892989 12-99-94 9.835912 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Janus Aspen Flexible Income (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- JFIMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 0.0% 979.02 -2.10% -2.16% From 09-13-93 0.0% 981.79 -1.41% -1.46% From 09-13-93 0.0% 981.79 -1.41% -1.46% From 09-13-93 0.0% 981.79 -1.41% -1.46% Accumulation Unit Values ------------------------------------------------------------ JFIMTH JFIMTH.UV 09-13-93 10.066883 i 12-99-93 10.095320 12-99-94 9.883519 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Janus Aspen Growth (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- JGMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 0.0% 1014.54 1.45% 1.40% From 09-13-93 0.0% 1045.65 3.50% 3.44% From 09-13-93 0.0% 1045.65 3.50% 3.44% From 09-13-93 0.0% 1045.65 3.50% 3.44% Accumulation Unit Values ------------------------------------------------------------ JGMTH JGMTH.UV 09-13-93 9.667554 i 12-99-93 9.964019 12-99-94 10.108882 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Janus Aspen Short-Term Bond (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- JSTBMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 0.0% 995.13 -0.49% -0.55% From 09-13-93 0.0% 993.92 -0.47% -0.53% From 09-13-93 0.0% 993.92 -0.47% -0.53% From 09-13-93 0.0% 993.92 -0.47% -0.53% Accumulation Unit Values ------------------------------------------------------------ JSTBMTH JSTBMTH.UV 09-13-93 10.027677 i 12-99-93 10.015473 12-99-94 9.966712 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Janus Aspen Worldwide (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- JWWMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 0.0% 1001.15 0.12% 0.06% From 09-13-93 0.0% 1187.37 14.14% 14.08% From 09-13-93 0.0% 1187.37 14.14% 14.08% From 09-13-93 0.0% 1187.37 14.14% 14.08% Accumulation Unit Values ------------------------------------------------------------ JWWMTH JWWMTH.UV 09-13-93 8.275945 i 12-99-93 9.815304 12-99-94 9.826635 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Lexington Emerging Markets (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- LEXEMMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ From 03-99-94 0.0% 986.40 -1.36% -1.42% From 03-99-94 0.0% 986.40 -1.36% -1.42% From 03-99-94 0.0% 986.40 -1.36% -1.42% From 03-99-94 0.0% 986.40 -1.36% -1.42% Accumulation Unit Values ------------------------------------------------------------ LEXEMMTH LEXEMMTH.UV 03-99-94 9.929607 i 12-99-94 9.794605 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Lexington Natural Resources (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- LEXNMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 0.0% 932.99 -6.70% -6.76% 3 0.0% 1034.79 1.15% 1.09% 5 0.0% 813.03 -4.06% -4.11% From 05-31-89 0.0% 929.34 -1.30% -1.36% Accumulation Unit Values ------------------------------------------------------------ LEXNMTH LEXNMTH.UV 05-31-89 9.744811 i 12-99-89 11.138797 12-99-91 8.751727 12-99-93 9.706659 12-99-94 9.056214 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
TCI Balanced (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- TCIBMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 0.0% 993.17 -0.68% -0.74% 3 0.0% 976.43 -0.79% -0.85% From 05-00-91 0.0% 1215.20 5.46% 5.40% From 05-00-91 0.0% 1215.20 5.46% 5.40% Accumulation Unit Values ------------------------------------------------------------ TCIBMTH TCIBMTH.UV 05-00-91 8.354158 i 12-99-91 10.397068 12-99-93 10.221738 12-99-94 10.151972 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
TCI Growth (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- TCIGMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 0.0% 973.70 -2.63% -2.69% 3 0.0% 1035.64 1.17% 1.12% 5 0.0% 1417.76 7.23% 7.17% From 11-20-87 0.0% 1864.91 9.16% 9.10% Accumulation Unit Values ------------------------------------------------------------ TCIGMTH TCIGMTH.UV 11-20-87 5.816299 i 12-99-89 7.650708 12-99-91 10.473611 12-99-93 11.139901 12-99-94 10.846873 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
TCI International (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- TCIIMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ From 05-00-94 0.0% 948.96 -5.10% -5.16% From 05-00-94 0.0% 948.96 -5.10% -5.16% From 05-00-94 0.0% 948.96 -5.10% -5.16% From 05-00-94 0.0% 948.96 -5.10% -5.16% Accumulation Unit Values ------------------------------------------------------------ TCIIMTH TCIIMTH.UV 05-00-94 9.948573 i 12-99-94 9.440766 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Aetna Variable Fund (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- VARMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 6.0% 922.18 -7.78% -7.84% 3 4.0% 1045.38 1.49% 1.43% 5 2.0% 1354.70 6.26% 6.20% 10 0.0% 3267.34 12.57% 12.51% Accumulation Unit Values ------------------------------------------------------------ VARMTH VARMTH.UV 12-99-84 3.286219 12-99-89 7.826182 12-99-91 9.932096 12-99-93 10.997616 12-99-94 10.737184
(Day = 99 means end-of-month.)
Aetna Income Shares (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- AISMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 6.0% 894.34 -10.57% -10.62% 3 4.0% 1051.34 1.68% 1.62% 5 2.0% 1359.91 6.34% 6.28% 10 0.0% 2296.69 8.67% 8.61% Accumulation Unit Values ------------------------------------------------------------ AISMTH AISMTH.UV 12-99-84 4.495147 12-99-89 7.496521 12-99-91 9.497741 12-99-93 10.882773 12-99-94 10.323944
(Day = 99 means end-of-month.)
Aetna Encore Fund (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- ENCMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 6.0% 972.51 -2.75% -2.81% 3 4.0% 1031.82 1.05% 0.99% 5 2.0% 1181.36 3.39% 3.33% 10 0.0% 1631.13 5.01% 4.96% Accumulation Unit Values ------------------------------------------------------------ ENCMTH ENCMTH.UV 12-99-84 6.430484 12-99-89 8.748390 12-99-91 9.825225 12-99-93 10.219646 12-99-94 10.488958
(Day = 99 means end-of-month.)
AIAF (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- AIAMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 6.0% 928.28 -7.17% -7.23% 3 4.0% 1081.26 2.64% 2.58% 5 2.0% 1341.04 6.04% 5.99% From 06-23-89 2.0% 1397.37 6.25% 6.19% Accumulation Unit Values ------------------------------------------------------------ AIAMTH AIAMTH.UV 06-23-89 7.664971 i 12-99-89 7.982223 12-99-91 9.708561 12-99-93 11.036731 12-99-94 10.842404 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Alger Balanced (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- ALGBLMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 6.0% 889.65 -11.04% -11.09% 3 4.0% 1047.29 1.55% 1.49% 5 2.0% 1157.03 2.96% 2.90% From 09-05-89 2.0% 1182.80 3.21% 3.15% Accumulation Unit Values ------------------------------------------------------------ ALGBLMTH ALGBLMTH.UV 09-05-89 8.268394 i 12-99-89 8.449437 12-99-91 9.165009 12-99-93 10.514274 12-99-94 9.925345 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Alger Income and Growth (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- ALGIGMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 6.0% 849.77 -15.02% -15.08% 3 4.0% 1018.16 0.60% 0.54% 5 2.0% 1251.65 4.59% 4.53% From 11-14-88 1.0% 1345.62 4.96% 4.91% Accumulation Unit Values ------------------------------------------------------------ ALGIGMTH ALGIGMTH.UV 11-14-88 5.967675 i 12-99-89 6.368130 12-99-91 7.668245 12-99-93 8.936722 12-99-94 8.081864 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Alger Growth (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- ALGGMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 6.0% 946.26 -5.37% -5.43% 3 4.0% 1303.71 9.24% 9.19% 5 2.0% 1886.03 13.53% 13.47% From 01-08-89 2.0% 2313.03 15.06% 15.00% Accumulation Unit Values ------------------------------------------------------------ ALGGMTH ALGGMTH.UV 01-08-89 4.173216 i 12-99-89 5.108121 12-99-91 7.260203 12-99-93 9.714274 12-99-94 9.716797 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Alger MidCap (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- ALGMCMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 6.0% 916.62 -8.34% -8.40% From 04-99-93 6.0% 1281.65 16.01% 15.95% From 04-99-93 6.0% 1281.65 16.01% 15.95% From 04-99-93 6.0% 1281.65 16.01% 15.95% Accumulation Unit Values ------------------------------------------------------------ ALGMCMTH ALGMCMTH.UV 04-99-93 7.356424 i 12-99-93 10.106022 12-99-94 9.810919 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Alger Small Cap (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- ALGSCMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 6.0% 888.51 -11.15% -11.21% 3 4.0% 1039.56 1.30% 1.24% 5 2.0% 1774.05 12.15% 12.09% From 09-20-88 1.0% 2788.29 17.74% 17.68% Accumulation Unit Values ------------------------------------------------------------ ALGSCMTH ALGSCMTH.UV 09-20-88 3.342177 i 12-99-89 5.218194 12-99-91 8.689096 12-99-93 9.909388 12-99-94 9.343028 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Fidelity Asset Manager (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- FIDAMMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 6.0% 871.80 -12.82% -12.88% 3 4.0% 1184.67 5.81% 5.75% 5 2.0% 1533.99 8.93% 8.88% From 09-06-89 2.0% 1539.60 8.45% 8.39% Accumulation Unit Values ------------------------------------------------------------ FIDAMMTH FIDAMMTH.UV 09-06-89 6.498087 i 12-99-89 6.521551 12-99-91 8.291758 12-99-93 10.919704 12-99-94 10.114227 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Fidelity Equity-Income (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- FIDEIMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 6.0% 1002.00 0.20% 0.14% 3 4.0% 1384.79 11.46% 11.40% 5 2.0% 1519.22 8.72% 8.67% From 10-22-86 0.0% 2094.88 9.45% 9.39% Accumulation Unit Values ------------------------------------------------------------ FIDEIMTH FIDEIMTH.UV 10-22-86 4.774624 i 12-99-89 6.511267 12-99-91 7.048258 12-99-93 9.474806 12-99-94 10.002271 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Fidelity Growth (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- FIDEGMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 6.0% 931.93 -6.81% -6.87% 3 4.0% 1215.50 6.72% 6.66% 5 2.0% 1544.74 9.09% 9.03% From 11-07-86 0.0% 2361.38 11.12% 11.06% Accumulation Unit Values ------------------------------------------------------------ FIDEGMTH FIDEGMTH.UV 11-07-86 4.414141 i 12-99-89 6.674788 12-99-91 8.335422 12-99-93 10.571333 12-99-94 10.423485 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Fidelity High Income (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- FIDHIMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 6.0% 915.68 -8.43% -8.49% 3 4.0% 1363.82 10.90% 10.84% 5 2.0% 1778.78 12.21% 12.15% From 10-11-85 0.0% 2287.75 9.39% 9.33% Accumulation Unit Values ------------------------------------------------------------ FIDHIMTH FIDHIMTH.UV 10-11-85 3.929683 i 12-99-89 5.007911 12-99-91 6.429659 12-99-93 9.269555 12-99-94 8.990133 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Fidelity Index 500 (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- FD500MTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 6.0% 942.24 -5.78% -5.83% From 08-27-92 5.0% 1096.11 3.99% 3.93% From 08-27-92 5.0% 1096.11 3.99% 3.93% From 08-27-92 5.0% 1096.11 3.99% 3.93% Accumulation Unit Values ------------------------------------------------------------ FD500MTH FD500MTH.UV 08-27-92 7.348010 i 12-99-93 8.411191 12-99-94 8.379747 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Fidelity Investment Grade Bond (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- FDIGMTHT Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 6.0% 894.65 -10.54% -10.59% 3 4.0% 1056.21 1.84% 1.78% 5 2.0% 1294.19 5.29% 5.24% From 12-05-88 1.0% 1423.26 5.99% 5.93% Accumulation Unit Values ------------------------------------------------------------ FDIGMTHT FDIGMTHT.UV 12-05-88 6.984075 i 12-99-89 7.624440 12-99-91 9.158839 12-99-93 10.537887 12-99-94 10.000000 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Fidelity Overseas (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- FIDOSMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 6.0% 949.13 -5.09% -5.15% 3 4.0% 1160.74 5.09% 5.04% 5 2.0% 1217.53 4.01% 3.96% From 02-13-87 0.0% 1532.57 5.57% 5.51% Accumulation Unit Values ------------------------------------------------------------ FIDOSMTH FIDOSMTH.UV 02-13-87 6.722974 i 12-99-89 8.342462 12-99-91 8.615182 12-99-93 10.271516 12-99-94 10.303449 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
IMS Corporate Bond (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- FEDCBMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ From 03-01-94 7.0% 890.73 -10.93% -10.99% From 03-01-94 7.0% 890.73 -10.93% -10.99% From 03-01-94 7.0% 890.73 -10.93% -10.99% From 03-01-94 7.0% 890.73 -10.93% -10.99% Accumulation Unit Values ------------------------------------------------------------ FEDCBMTH FEDCBMTH.UV 03-01-94 10.286665 i 12-99-94 9.814011 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
IMS Equity Growth & Income (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- FEDGIMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ From 02-10-94 7.0% 917.85 -8.22% -8.27% From 02-10-94 7.0% 917.85 -8.22% -8.27% From 02-10-94 7.0% 917.85 -8.22% -8.27% From 02-10-94 7.0% 917.85 -8.22% -8.27% Accumulation Unit Values ------------------------------------------------------------ FEDGIMTH FEDGIMTH.UV 02-10-94 10.028900 i 12-99-94 9.838122 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
IMS Prime Money (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- FEDPMMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ From 11-14-94 7.0% 940.36 -5.96% -6.02% From 11-14-94 7.0% 940.36 -5.96% -6.02% From 11-14-94 7.0% 940.36 -5.96% -6.02% From 11-14-94 7.0% 940.36 -5.96% -6.02% Accumulation Unit Values ------------------------------------------------------------ FEDPMMTH FEDPMMTH.UV 11-14-94 10.000000 i 12-99-94 10.033362 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
IMS U.S. Government Bond (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- FEDGBMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ From 03-28-94 7.0% 951.82 -4.82% -4.88% From 03-28-94 7.0% 951.82 -4.82% -4.88% From 03-28-94 7.0% 951.82 -4.82% -4.88% From 03-28-94 7.0% 951.82 -4.82% -4.88% Accumulation Unit Values ------------------------------------------------------------ FEDGBMTH FEDGBMTH.UV 03-28-94 9.927313 i 12-99-94 10.073476 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
IMS Utlity (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- FEDUMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ From 02-10-94 7.0% 886.11 -11.39% -11.45% From 02-10-94 7.0% 886.11 -11.39% -11.45% From 02-10-94 7.0% 886.11 -11.39% -11.45% From 02-10-94 7.0% 886.11 -11.39% -11.45% Accumulation Unit Values ------------------------------------------------------------ FEDUMTH FEDUMTH.UV 02-10-94 10.407302 i 12-99-94 9.881346 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Janus Aspen Aggressive Growth (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- JAGMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 6.0% 1096.81 9.68% 9.62% From 09-13-93 6.0% 1300.90 22.45% 22.40% From 09-13-93 6.0% 1300.90 22.45% 22.40% From 09-13-93 6.0% 1300.90 22.45% 22.40% Accumulation Unit Values ------------------------------------------------------------ JAGMTH JAGMTH.UV 09-13-93 7.668394 i 12-99-93 9.021260 12-99-94 10.373656 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Janus Aspen Balanced (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- JBALMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 6.0% 940.20 -5.98% -6.04% From 09-13-93 6.0% 1007.65 0.59% 0.53% From 09-13-93 6.0% 1007.65 0.59% 0.53% From 09-13-93 6.0% 1007.65 0.59% 0.53% Accumulation Unit Values ------------------------------------------------------------ JBALMTH JBALMTH.UV 09-13-93 9.267979 i 12-99-93 9.892989 12-99-94 9.835912 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Janus Aspen Flexible Income (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- JFIMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 6.0% 924.89 -7.51% -7.57% From 09-13-93 6.0% 927.68 -5.62% -5.67% From 09-13-93 6.0% 927.68 -5.62% -5.67% From 09-13-93 6.0% 927.68 -5.62% -5.67% Accumulation Unit Values ------------------------------------------------------------ JFIMTH JFIMTH.UV 09-13-93 10.066883 i 12-99-93 10.095320 12-99-94 9.883519 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Janus Aspen Growth (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- JGMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 6.0% 960.63 -3.94% -4.00% From 09-13-93 6.0% 991.92 -0.62% -0.68% From 09-13-93 6.0% 991.92 -0.62% -0.68% From 09-13-93 6.0% 991.92 -0.62% -0.68% Accumulation Unit Values ------------------------------------------------------------ JGMTH JGMTH.UV 09-13-93 9.667554 i 12-99-93 9.964019 12-99-94 10.108882 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Janus Aspen Short-Term Bond (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- JSTBMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 6.0% 941.10 -5.89% -5.95% From 09-13-93 6.0% 939.88 -4.66% -4.72% From 09-13-93 6.0% 939.88 -4.66% -4.72% From 09-13-93 6.0% 939.88 -4.66% -4.72% Accumulation Unit Values ------------------------------------------------------------ JSTBMTH JSTBMTH.UV 09-13-93 10.027677 i 12-99-93 10.015473 12-99-94 9.966712 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Janus Aspen Worldwide (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- JWWMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 6.0% 947.16 -5.28% -5.34% From 09-13-93 6.0% 1134.49 10.20% 10.15% From 09-13-93 6.0% 1134.49 10.20% 10.15% From 09-13-93 6.0% 1134.49 10.20% 10.15% Accumulation Unit Values ------------------------------------------------------------ JWWMTH JWWMTH.UV 09-13-93 8.275945 i 12-99-93 9.815304 12-99-94 9.826635 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Lexington Emerging Markets (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- LEXEMMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ From 03-99-94 7.0% 923.30 -7.67% -7.73% From 03-99-94 7.0% 923.30 -7.67% -7.73% From 03-99-94 7.0% 923.30 -7.67% -7.73% From 03-99-94 7.0% 923.30 -7.67% -7.73% Accumulation Unit Values ------------------------------------------------------------ LEXEMMTH LEXEMMTH.UV 03-99-94 9.929607 i 12-99-94 9.794605 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
Lexington Natural Resources (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- LEXNMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 6.0% 878.59 -12.14% -12.20% 3 4.0% 998.93 -0.04% -0.09% 5 2.0% 794.66 -4.49% -4.55% From 05-31-89 2.0% 911.20 -1.65% -1.71% Accumulation Unit Values ------------------------------------------------------------ LEXNMTH LEXNMTH.UV 05-31-89 9.744811 i 12-99-89 11.138797 12-99-91 8.751727 12-99-93 9.706659 12-99-94 9.056214 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
TCI Balanced (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- TCIBMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 6.0% 939.13 -6.09% -6.15% 3 4.0% 940.34 -2.03% -2.09% From 05-00-91 4.0% 1180.06 4.62% 4.56% From 05-00-91 4.0% 1180.06 4.62% 4.56% Accumulation Unit Values ------------------------------------------------------------ TCIBMTH TCIBMTH.UV 05-00-91 8.354158 i 12-99-91 10.397068 12-99-93 10.221738 12-99-94 10.151972 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
TCI Growth (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- TCIGMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ 1 6.0% 919.54 -8.05% -8.10% 3 4.0% 999.78 -0.01% -0.07% 5 2.0% 1400.60 6.97% 6.91% From 11-20-87 0.0% 1864.91 9.16% 9.10% Accumulation Unit Values ------------------------------------------------------------ TCIGMTH TCIGMTH.UV 11-20-87 5.816299 i 12-99-89 7.650708 12-99-91 10.473611 12-99-93 11.139901 12-99-94 10.846873 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.)
TCI International (Marathon) MTHNY.WWO ------------------------------------------------------------------------------ Gross Deposit: 1000.00 Net Deposit: 1000.00 Redeemable Value ------------------------------------------------------------------------------------- TCIIMTH Nom. 30.00 M.F. (0.058%) # of Years --------------------------- Ending 12-94 DSC Value IRR MF IRR ------------ ---- --------- ------ ------ From 05-00-94 7.0% 885.60 -11.44% -11.50% From 05-00-94 7.0% 885.60 -11.44% -11.50% From 05-00-94 7.0% 885.60 -11.44% -11.50% From 05-00-94 7.0% 885.60 -11.44% -11.50% Accumulation Unit Values ------------------------------------------------------------ TCIIMTH TCIIMTH.UV 05-00-94 9.948573 i 12-99-94 9.440766 i
(Unit values marked 'i' are used for from-inception calculations.) (Day = 99 means end-of-month.) EX-99.B.15.1 9 POWERS OF ATTORNEY EXHIBIT 99-B.15.1 Power of Attorney I, David E. Bushong, Acting Chief Financial Officer of Aetna Life Insurance and Annuity Company, do hereby constitute and appoint Susan E. Bryant, Steven J. Lauwers, and Julie E. Rockmore and each of them individually, my true and lawful attorneys, with full power to them and each of them to sign for me, and in my name and in the capacity indicated below, any and all amendments to the Registration Statements listed below filed with the Securities and Exchange Commission by Aetna Life Insurance and Annuity Company under the Securities Act of 1933, as amended, and/or the Investment Company Act of 1940, including but not limited to pre-effective amendments and post-effective amendments to such filings: Registration Statements filed under the Securities Act of 1933, as amended: 2-52448 33-75966 33-75998 2-52449 33-75968 33-76000 33-2339 33-75970 33-76002 33-34370 33-75972 33-76004 33-34583 33-75974 33-76018 33-42555 33-75976 33-76024 33-60477 33-75978 33-76026 33-61897 33-75980 33-79118 33-62473 33-75982 33-79122 33-75248 33-75984 33-81216 33-75954 33-75986 33-87642 33-75956 33-75988 33-87932 33-75958 33-75990 33-88720 33-75960 33-75992 33-88722 33-75962 33-75994 33-88724 33-75964 33-75996 33-91846
Registration Statements filed under the Investment Company Act of 1940: 811-2512 811-2513 811-4536 811-5906 hereby ratifying and confirming on this 13th day of September, 1995 my signature as it may be signed by my said attorneys to any such registration statements, applications and any and all amendments thereto: /s/ David E. Bushong ----------------------------------------------- David E. Bushong Acting Chief Financial Officer (Principal Accounting and Financial Officer) EX-27 10 FINANCIAL DATA SCHEDULE
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VARIABLE ANNUITY ACCOUNT B AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 12-MOS DEC-31-1994 JAN-01-1994 DEC-31-1994 840,160,688 795,804,636 0 0 0 795,804,636 0 0 0 0 0 0 0 0 0 0 0 0 0 795,804,636 83,432,946 0 0 (8,918,042) 74,514,904 57,000,536 (146,425,376) (14,909,936) 0 0 0 0 0 0 0 109,360,004 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0