-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TE8e+5Nb/LE/32t+7yrdSsV2bAedoQVEtUXT0PL1eh0mGzES5lqyQLvl4mBI7CEE +d9KmYs95lTKBTetMgEoEQ== 0000950146-99-000874.txt : 19990421 0000950146-99-000874.hdr.sgml : 19990421 ACCESSION NUMBER: 0000950146-99-000874 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 23 FILED AS OF DATE: 19990420 EFFECTIVENESS DATE: 19990420 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: 485BPOS SEC ACT: SEC FILE NUMBER: 333-09515 FILM NUMBER: 99597462 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 811-02512 FILM NUMBER: 99597463 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 485BPOS 1 FORM N-4 As filed with the Securities and Exchange Registration No. 333-09515 Commission on April 20, 1999 Registration No. 811-2512 - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-4 - -------------------------------------------------------------------------------- POST-EFFECTIVE AMENDMENT NO. 7 TO REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 and Amendment to REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 - -------------------------------------------------------------------------------- Variable Annuity Account B of Aetna Life Insurance and Annuity Company Aetna Life Insurance and Annuity Company 151 Farmington Avenue, RE4A, Hartford, Connecticut 06156 Depositor's Telephone Number, including Area Code: (860) 273-4686 Julie E. Rockmore, Counsel Aetna Life Insurance and Annuity Company 151 Farmington Avenue, RE4A, Hartford, Connecticut 06156 (Name and Address of Agent for Service) - -------------------------------------------------------------------------------- It is proposed that this filing will become effective: 60 days after filing pursuant to paragraph (a)(1) of Rule 485 -------- X on May 3, 1999 pursuant to paragraph (b) of Rule 485 -------- VARIABLE ANNUITY ACCOUNT B CROSS REFERENCE SHEET
FORM N-4 ITEM NO. PART A (PROSPECTUS) LOCATION - PROSPECTUS 1 Cover Page........................................... Cover Page 2 Definitions.......................................... Not Applicable 3 Synopsis............................................. Contract Overview; Fee Table 4 Condensed Financial Information...................... Condensed Financial Information; Appendix III - Condensed Financial Information 5 General Description of Registrant, Depositor, and Portfolio Companies.................................. Other Topics - The Company; Variable Annuity Account B; Appendix II - Description of Underlying Funds 6 Deductions and Expenses.............................. Fees 7 General Description of Variable Annuity Contracts.... Contract Overview; Other Topics 8 Annuity Period....................................... Income Payments 9 Death Benefit........................................ Death Benefit 10 Purchases and Contract Value......................... Purchase; Calculating Variable Income Payments 11 Redemptions.......................................... Right to Cancel 12 Taxes................................................ Taxation 13 Legal Proceedings.................................... Other Topics - Legal Matters and Proceedings 14 Table of Contents of the Statement of Additional Information.......................................... Statement of Additional Information - Table of Contents
FORM N-4 ITEM NO. PART B (STATEMENT OF ADDITIONAL INFORMATION) LOCATION - 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; Average Annual Total Return Quotations 22 Annuity Payments..................................... Income 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 Immediate Annuity Prospectus - May 3, 1999 - -------------------------------------------------------------------------------- The Funds Aetna Ascent VP Aetna Balanced VP, Inc. Aetna Income Shares d/b/a Aetna Bond VP Aetna Crossroads VP Aetna Growth VP Aetna Variable Fund d/b/a Aetna Growth and Income VP Aetna Index Plus Large Cap VP Aetna International VP Aetna Legacy VP Aetna Variable Encore Fund d/b/a Aetna Money Market VP Aetna Real Estate Securities VP Aetna Small Company VP AIM V.I. Capital Appreciation Fund AIM V.I. Growth Fund AIM V.I. Growth and Income Fund AIM V.I. Value Fund Fidelity Variable Insurance Products Fund (VIP) High Income Portfolio Janus Aspen Growth Portfolio Janus Aspen Worldwide Growth Portfolio Oppenheimer Aggressive Growth Fund/VA Oppenheimer Main Street Growth and Income Fund/VA Oppenheimer Strategic Bond Fund/VA Portfolio Partners MFS Emerging Equities Portfolio Portfolio Partners MFS Value Equity Portfolio Portfolio Partners Scudder International Growth Portfolio Portfolio Partners T. Rowe Price Growth Equity Portfolio The Contract. The contract described in this prospectus is a fixed or variable, group or individual, immediate annuity contract issued by Aetna Life Insurance and Annuity Company (the Company, we, us, our). It is available as a non qualified contract, or as a qualified contract for use with a traditional Individual Retirement Annuity (IRA) under section 408(b) of the Internal Revenue Code of 1986, as amended (Tax Code) or with retirement plans qualifying under Tax Code sections 401, 403(b) or 457. Contracts sold in New York are not available for 457 plans. Why Reading this Prospectus is Important. This prospectus contains facts about the contract and its investment options that you should know before investing. The information will help you determine if the contract is right for you. If you do invest in the contract, retain this document for future reference. Table of Contents . . . page 3 Contract Design. The contract is designed to: >Provide income payments for a specified period or for life >Offer a variety of variable investment options and a fixed dollar option to fund income payments >Provide the option to have a death benefit available for a designated beneficiary Getting Additional Information. You may obtain the May 3, 1999, Statement of Additional Information (SAI) about the separate account by indicating your request on your application or by calling us at 1-800-238-6273. You may also obtain an SAI for any of the funds by calling that number. This prospectus, the SAI and other information about the separate account are posted on the Securities Exchange Commission (SEC) web site, http://www.sec.gov and may also be obtained, free of charge, by contacting the SEC Public Reference Room at 202-942-8090. The SAI table of contents is listed on page 32 of this prospectus. The SAI is incorporated into this prospectus by reference. Additional Disclosure Information. Neither the SEC, nor any state securities commission, has approved or disapproved the securities offered through this prospectus or passed on the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense. This prospectus is valid only when accompanied by current prospectuses of the funds. We do not intend for this prospectus to be an offer to sell or a solicitation of an offer to buy these securities in any state that does not permit their sale. We have not authorized anyone to provide you with information that is different from that contained in this prospectus. Investment Options. When you purchase the contract, your purchase payment, less any premium tax, will be applied to the investment options you select. If you select variable investment options, you will receive variable income payments. If you select the fixed dollar option, you will receive fixed income payments. If you select one or more variable investment options and the fixed dollar option, a portion of your payment will vary and a portion will remain fixed. Certain options may be unavailable through your contract, your plan or in your state. Variable Income Payments. If you select variable income payments, the amount of your payments will vary based on the performance of the variable investment options that you select. These options are called subaccounts. The subaccounts Prospectus - May 3, 1999 (continued) - -------------------------------------------------------------------------------- are within Variable Annuity Account B (the separate account), a separate account of the Company. Each subaccount invests in one of the mutual funds (funds) listed on this page. Subaccount performance will vary depending on the performance of the underlying fund. You do not invest directly in or hold shares of the funds. The funds in which the subaccounts invest have various risks. For information about risks of investing in the funds see "Investment Options" in this prospectus and each fund prospectus. Read this prospectus in conjunction with the fund prospectuses, and retain the prospectuses for future reference. Fixed Income Payments. If you select fixed payments, your purchase payment, less any premium tax, will be applied to the fixed dollar option and your payment amount will not vary. Except as specifically mentioned, this prospectus describes only the variable investment options. However, we describe the fixed dollar option in Appendix I of this prospectus. TABLE OF CONTENTS Contract Overview ................................................. 4 Contract Design Who's Who Contract Rights The Contract and Retirement Plans Contract Facts Questions: Contacting the Company Sending Forms and Written Requests in Good Order Fee Table .......................................................... 6 Condensed Financial Information .................................... 11 Purchase ........................................................... 11 Right to Cancel .................................................... 12 Income Payments .................................................... 12 Calculating Variable Income Payments ............................... 15 Investment Options ................................................. 16 Fees ............................................................... 18 Death Benefit ...................................................... 21 Withdrawals ........................................................ 22 Taxation ........................................................... 23 Other Topics ....................................................... 29 The Company -- Variable Annuity Account B -- Performance Reporting -- Distribution -- Transfer of Ownership -- Payment Delay or Suspension - -- Voting Rights -- Contract Modification -- Legal Matters and Proceedings -- Financial Statements -- Year 2000 Readiness Contents of the Statement of Additional Information ................ 32 Appendix I Fixed Dollar Option ..................................... 33 Appendix II Description of Underlying Funds ........................ 36 Appendix III Condensed Financial Information ....................... 51
3 Contract Overview - -------------------------------------------------------------------------------- The term "contract" in this prospectus refers to individual contracts and to certificates issued under group contracts. - -------------------------------------------------------------------------------- Contract Design - -------------------------------------------------------------------------------- The contract is designed for individuals who would like regular income payments from an annuity contract. - -------------------------------------------------------------------------------- Who's Who - -------------------------------------------------------------------------------- Contract Holder (you): The person to whom we issue an individually owned contract or the participant under a group contract. Participant: The individual who participates in a group contract, generally in connection with a retirement plan. The Company (we, us): Aetna Life Insurance and Annuity Company. We issue the contract. - -------------------------------------------------------------------------------- Contract Rights - -------------------------------------------------------------------------------- Contract holders hold the rights under the contract. Generally, the contract holder is either an individual to whom we issue an individual contract or a participant under a group contract. For contracts issued in connection with 457 plans, the plan sponsor is the contract holder and holds the rights under the contract. Section 457 plan sponsors may allow their participants to exercise certain limited contract rights. For example, the section 457 plan sponsor has the right to make investment selections, but may permit their individual participants to exercise that right. - -------------------------------------------------------------------------------- The Contract and Retirement Plans - -------------------------------------------------------------------------------- We may offer this contract to employees or other individuals in connection with a retirement plan. Plan Type. We refer to a retirement plan by the Tax Code section under which it qualifies. For example: a "457 plan" is a plan that qualifies for tax treatment under Tax Code section 457. We are not a party to the plan, so the terms and the conditions of the contract and the plan may differ. - -------------------------------------------------------------------------------- Contract Facts - -------------------------------------------------------------------------------- Income Payment Options. You may select from a number of features for your payments including: duration, number of payees, payments to beneficiaries, guaranteed minimum payment amount, variable or fixed payments, and more. Some features require payment of additional fees. See "Income Payments." Free look/Right to Cancel. You may cancel the contract no later than ten days after receipt of the contract; some states allow more than ten days. Participants in 403(b) plans and some 401 plans may cancel their participation in the contract no later than ten days after they receive evidence of participation in the contract. See "Right to Cancel." Death Benefit. If any guaranteed income payments remain to be paid at the time of the death of the annuitant or both annuitants, if applicable, they may be paid to your beneficiary. See "Death Benefit." 4 Withdrawals. Some payment options allow you to withdraw a portion or all of any remaining guaranteed payments. An early withdrawal charge may apply. See "Withdrawals." Fees. Certain fees associated with the contract will reduce income payments. See "Fee Table" and "Fees." Taxation. The Tax Code has certain rules that apply to amounts distributed under the contract. Tax penalties may apply if rules are not followed. See "Taxation." - -------------------------------------------------------------------------------- Questions: Contacting the Company - -------------------------------------------------------------------------------- To answer your questions, contact your local representative or write or call our Home Office: Aetna Life Insurance and Annuity Company Attention: ARS Settlements 151 Farmington Avenue Hartford, CT 06156 1-800-238-6273 - -------------------------------------------------------------------------------- Sending Forms and Written Requests in Good Order - -------------------------------------------------------------------------------- If you are writing to change your beneficiary, request a withdrawal, or for any other purpose, contact your local representative or write or call us to learn what information is required for the request to be in "good order." We can only act upon requests that are received in good order. 5 In This Section: >Maximum Transaction Fees >Maximum Fees Deducted from the Subaccounts >Fees Deducted by the Funds >Hypothetical Examples of Fees You May Incur Over Time Also see "Fees" for: >Reduction or Elimination of Certain Fees >How, When and Why Fees are Deducted >Premium and Other Taxes Fee Table - -------------------------------------------------------------------------------- Following is an overview of fees associated with the contract that may affect the amount of variable income payments. For fees applicable to fixed income payments, see Appendix I. Any applicable premium taxes are not reflected below. See "Fees" for additional information. Maximum Transaction Fees Early Withdrawal Charge (As a percentage of the present value of remaining guaranteed payments withdrawn.(1)) Maximum Early Withdrawal Charge Schedule
Number of Years from Contract Effective Date* Early Withdrawal Charge ------------------------ ----------------------- Fewer than 1 7% 1 or more but fewer than 2 6% 2 or more but fewer than 3 5% 3 or more but fewer than 4 4% 4 or more but fewer than 5 3% 5 or more but fewer than 6 2% 6 or more but fewer than 7 1% 7 or more 0%
* For participants under a group contract, the early withdrawal charge will be calculated based upon the number of years from the certificate effective date. Maximum Fees Deducted from the Subaccounts (Daily deductions equal to the given percentage of values invested in the subaccounts, on an annual basis.) For Contracts Without the Guaranteed Minimum Income Feature: Mortality and Expense Risk Charge ...................... 1.25% Administrative Expense Charge .......................... 0.00%(2) ---- Total Separate Account Expenses ........................ 1.25% ==== For Contracts With the Guaranteed Minimum Income Feature: Mortality and Expense Risk Charge ...................... 1.25% Administrative Expense Charge .......................... 0.00%(2) Guaranteed Minimum Income Charge ....................... 1.00% ---- Total Separate Account Expenses ........................ 2.25% ====
(1) Although the maximum early withdrawal charge is 7% of the remaining guaranteed payments withdrawn, the total early withdrawal charge deducted will not exceed 8.5% of your purchase payment to the contract. See "Fees--Early Withdrawal Charge." (2) We currently do not impose an administrative expense charge. We reserve, however, the right to impose this charge for new contracts and to deduct a daily charge from the subaccounts equivalent to not more than 0.25% annually. 6 Fees Deducted by the Funds Using this Information. The following table shows the investment advisory fees and other expenses charged annually by each fund. Fund fees are one factor that impacts the value of a fund share. To learn about additional factors impacting a fund, refer to the fund prospectus. How Fees are Deducted. Fund fees are not deducted directly from your income payments. When a subaccount purchases shares of a fund, the fees are reflected in that purchase price, so income payments based on investments in that subaccount will be impacted indirectly by the fund fees. The following figures are a percentage of the average net assets of each fund, and are based on figures for the year ended December 31, 1998, unless otherwise noted.
Total Fund Net Fund Investment Annual Expenses Total Annual Expenses Advisory Other Without Waivers Waivers and After Waivers Fund Name Fees(1) Expenses or Reductions Reductions or Reductions --------- ---------- -------- --------------- ----------- --------------- Aetna Ascent VP(2)(3) 0.60% 0.15% 0.75% 0.00% 0.75% Aetna Balanced VP, Inc.(3) 0.50% 0.09% 0.59% -- 0.59% Aetna Bond VP(3) 0.40% 0.10% 0.50% -- 0.50% Aetna Crossroads VP(2)(3) 0.60% 0.15% 0.75% 0.00% 0.75% Aetna Growth VP(2)(3) 0.60% 0.15% 0.75% 0.00% 0.75% Aetna Growth and Income VP(3) 0.50% 0.08% 0.58% -- 0.58% Aetna Index Plus Large Cap VP(2)(3) 0.35% 0.10% 0.45% 0.00% 0.45% Aetna International VP(2)(3) 0.85% 1.22% 2.07% 0.92% 1.15% Aetna Legacy VP(2)(3) 0.60% 0.16% 0.76% 0.00% 0.76% Aetna Money Market VP(3) 0.25% 0.09% 0.34% -- 0.34% Aetna Real Estate Securities VP(2)(3) 0.75% 0.73% 1.48% 0.53% 0.95% Aetna Small Company VP(2)(3) 0.75% 0.14% 0.89% 0.00% 0.89% AIM V.I. Capital Appreciation Fund(4) 0.62% 0.05% 0.67% -- 0.67% AIM V.I. Growth Fund(4) 0.64% 0.08% 0.72% -- 0.72% AIM V.I. Growth and Income Fund(4) 0.61% 0.04% 0.65% -- 0.65% AIM V.I. Value Fund(4) 0.61% 0.05% 0.66% -- 0.66% Fidelity VIP High Income Portfolio(5) 0.58% 0.12% 0.70% 0.00% 0.70% Janus Aspen Growth Portfolio(6) 0.72% 0.03% 0.75% 0.07% 0.68% Janus Aspen Worldwide Growth Portfolio(6) 0.67% 0.07% 0.74% 0.02% 0.72% Oppenheimer Aggressive Growth Fund/VA(4) 0.69% 0.02% 0.71% -- 0.71% Oppenheimer Main Street Growth & Income Fund/VA(4) 0.74% 0.05% 0.79% -- 0.79% Oppenheimer Strategic Bond Fund/VA(4) 0.74% 0.06% 0.80% -- 0.80% Portfolio Partners MFS Emerging Equities Portfolio(7) 0.68% 0.13% 0.81% 0.00% 0.83% Portfolio Partners MFS Value Equity Portfolio(7) 0.65% 0.25% 0.90% -- 0.90% Portfolio Partners Scudder International Growth Portfolio(7) 0.80% 0.20% 1.00% -- 1.00% Portfolio Partners T. Rowe Price Growth Equity Portfolio(7) 0.60% 0.15% 0.75% -- 0.75%
continued > 7 (1) Certain of the fund advisers reimburse the company for administrative costs incurred in connection with administering the funds as variable funding options under the contract. These reimbursements are generally paid out of the management fees and are not charged to investors. For the AIM Funds, the reimbursements may be paid out of fund assets in an amount up to 0.25% annually. Any such reimbursements paid from the AIM Funds' assets are included in the "Other Expenses" column. (2) The investment adviser is contractually obligated through December 31, 1999 to waive all or a portion of its investment advisory fee and/or its administrative services fee and/or to reimburse a portion of other expenses in order to ensure that the portfolio's Total Fund Annual Expenses do not exceed the percentage reflected under Net Fund Annual Expenses After Waivers or Reductions. (3) Prior to May 1, 1998, the portfolio's investment adviser provided administrative services to the portfolio and assumed the portfolio's ordinary recurring direct costs under an administrative services agreement. After that date, the portfolio's investment adviser provided administrative services but no longer assumed all of the portfolio's ordinary recurring direct costs under an administrative services agreement. The administrative fee is 0.075% on the first $5 billion in assets and 0.050% on all assets over $5 billion. The "Other Expenses" shown are not based on actual figures for the year ended December 31, 1998, but reflect the fee payable under the new administrative services agreement and estimates the portfolio's ordinary recurring direct costs. (4) Fee waiver/expense reimbursement obligations do not apply to these portfolios. (5) A portion of the brokerage commissions that certain funds pay was used to reduce fund expenses. In addition, certain funds, or the investment adviser on behalf of certain funds, have entered into arrangements with their custodian whereby credits realized as a result of uninvested cash balances were used to reduce custodian expenses. These credits are included under Total Waivers and Reductions. (6) All expenses are stated both with and without contractual waivers and fee reductions by Janus Capital. Fee reductions for the Aggressive Growth, Balanced, Growth and Worldwide Growth Portfolios reduce the management fee to the level of the corresponding Janus retail fund. Other waivers, if applicable, are first applied against the management fee and then against Other Expenses. Janus Capital has agreed to continue the other waivers and fee reductions until at least the next annual renewal of the advisory agreement. (7) The investment adviser has agreed to reimburse the portfolios for expenses and/or waive its fees, so that, through at least April 30, 2000, the aggregate of each portfolio's expenses will not exceed the combined investment advisory fees and other expenses shown under the Net Fund Annual Expenses After Waivers or Reductions column above. For the Portfolio Partners MFS Emerging Equities Portfolio, the Total Fund Annual Expenses Without Waivers or Reductions for 1998 were less than the percentage reflected under the Net Fund Annual Expenses After Waivers or Reductions column. Nevertheless, the investment adviser will waive fees and/or reimburse expenses if that portfolio's Total Fund Annual Expenses Without Waivers or Reductions for 1999 exceed the percentage reflected under the Net Fund Annual Expenses After Waivers or Reductions column. 8 Hypothetical Examples--For Contracts Without the Guaranteed Minimum Income Feature Fees You May Incur Over Time. The following hypothetical examples show the fees that you would pay if you invested $1000 in a subaccount, assuming the subaccount earned a 5% annual return. For the purposes of these examples, we deducted total annual fund expenses, the maximum mortality and expense risk charge of 1.25% annually, and assume you have selected the "nonlifetime- guaranteed payments" payment option for a 15 year period, with a 3.5% assumed annual net return rate. The total annual fund expenses used are those shown in the column "Total Fund Annual Expenses Without Waivers or Reductions" in the Fund Expense Table. > These examples are purely hypothetical > They should not be considered a representation of past or future fees or expected returns > Actual expenses and/or returns may be more or less than those shown in these examples
EXAMPLE A EXAMPLE B ---------------------------------------- -------------------------------------- If you withdraw your remaining If you do not withdraw your remaining guaranteed payments at the end of the guaranteed payments, you would pay periods shown, you would pay the the following fees at the end of the following fees, including any applicable periods shown (no early withdrawal early withdrawal charge: charge is reflected): 1 Year 3 Years 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years ------ ------- ------- -------- ------ ------- ------- -------- Aetna Ascent VP $76 $ 88 $100 $140 $19 $55 $ 86 $140 Aetna Balanced VP, Inc. $75 $ 84 $ 93 $129 $18 $51 $ 79 $129 Aetna Bond VP $74 $ 81 $ 90 $124 $17 $48 $ 75 $124 Aetna Crossroads VP $76 $ 88 $100 $140 $19 $55 $ 86 $140 Aetna Growth VP $76 $ 88 $100 $140 $19 $55 $ 86 $140 Aetna Growth and Income VP $75 $ 84 $ 93 $129 $18 $50 $ 79 $129 Aetna Index Plus Large Cap VP $73 $ 80 $ 87 $120 $17 $47 $ 73 $120 Aetna International VP $88 $121 $151 $220 $32 $89 $138 $220 Aetna Legacy VP $76 $ 88 $100 $140 $20 $55 $ 86 $140 Aetna Money Market VP $72 $ 77 $ 83 $113 $15 $44 $ 69 $113 Aetna Real Estate Securities VP $83 $106 $128 $185 $26 $74 $115 $185 Aetna Small Company VP $77 $ 92 $105 $149 $21 $59 $ 91 $149 AIM V.I. Capital Appreciation Fund $75 $ 86 $ 96 $135 $19 $53 $ 82 $135 AIM V.I. Growth Fund $76 $ 87 $ 98 $138 $19 $54 $ 84 $138 AIM V.I. Growth and Income Fund $75 $ 85 $ 96 $133 $18 $52 $ 81 $133 AIM V.I. Value Fund $75 $ 86 $ 96 $134 $19 $52 $ 82 $134 Fidelity VIP High Income Portfolio $76 $ 87 $ 98 $137 $19 $54 $ 83 $137 Janus Aspen Growth Portfolio $76 $ 88 $100 $140 $19 $55 $ 86 $140 Janus Aspen Worldwide Growth Portfolio $76 $ 88 $ 99 $139 $19 $55 $ 85 $139 Oppenheimer Aggressive Growth Fund/VA $76 $ 87 $ 98 $137 $19 $54 $ 84 $137 Oppenheimer Main Street Growth & Income Fund/ VA $76 $ 89 $101 $142 $20 $56 $ 87 $142 Oppenheimer Strategic Bond Fund/VA $77 $ 89 $102 $143 $20 $56 $ 88 $143 Portfolio Partners MFS Emerging Equities Portfolio $77 $ 89 $102 $144 $20 $56 $ 88 $144 Portfolio Partners MFS Value Equity Portfolio $77 $ 92 $106 $149 $21 $59 $ 92 $149 Portfolio Partners Scudder International Growth Portfolio $78 $ 94 $110 $156 $22 $62 $ 96 $156 Portfolio Partners T. Rowe Price Growth Equity Portfolio $76 $ 88 $100 $140 $19 $55 $ 86 $140
continued > 9 Hypothetical Examples--For Contracts With the Guaranteed Minimum Income Feature Fees You May Incur Over Time. The following hypothetical examples show the fees that you would pay if you invested $1000 in a subaccount, assuming the subaccount earned a 5% annual return. For the purposes of these examples, we deducted total annual fund expenses, the maximum mortality and expense risk charge of 1.25% annually, the guaranteed minimum income charge of 1.00% annually, and assume you are a 65 year old male and have selected the "life income--guaranteed payments" payment option with payments guaranteed for 15 years, and a 3.5% assumed annual net return rate. The total annual fund expenses used are those shown in the column "Total Fund Annual Expenses Without Waivers or Reductions" in the Fund Expense Table. > These examples are purely hypothetical > They should not be considered a representation of past or future fees or expected returns > Actual expenses and/or returns may be more or less than those shown in these examples
EXAMPLE A EXAMPLE B --------------------------------------- -------------------------------------- If you withdraw your remaining If you do not withdraw your guaranteed payments at the end of remaining guaranteed payments you the periods shown, you would pay the would pay the following fees at the following fees, including any end of the periods shown (no early applicable early withdrawal charge: withdrawal charge is reflected): 1 Year 3 Years 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years ------ ------- ------- -------- ------ ------- ------- -------- Aetna Index Plus Large Cap VP Not Applicable. Withdrawals are $27 $77 $123 $220 not allowed if you elect the guaranteed minimum income feature.
10 Condensed Financial Information - -------------------------------------------------------------------------------- Understanding Condensed Financial Information. In Appendix III of this prospectus, we provide condensed financial information about the Variable Annuity Account B subaccounts available under the contract. This information shows the values of the subaccounts at the end of each year from the time purchase payments were first received in the subaccounts under the contracts described in this prospectus. Purchase - -------------------------------------------------------------------------------- Contracts Available for Purchase. The contract is designed for persons who would like to receive regular income payments from an annuity contract. It is available to be purchased as a non qualified contract or as a qualified contract for use with a traditional IRA under section 408(b) of the Tax Code or with retirement plans qualifying under Tax Code sections 401, 403(b) or 457. Contracts sold in New York are not available for 457 plans. Availability as a group contract is subject to state approval. We reserve the right to limit purchase of an individual contract to natural persons. ERISA Notification. We must be notified by the employer or plan trustee if the contract is offered in connection with a 403(b) or 401 plan that is subject to Title I of the Employee Retirement Income Security Act of 1974 (ERISA), as amended. How to Purchase. To purchase a contract, submit your purchase payment and the required application or enrollment forms to the Company. Purchase Payment Amount. To purchase a contract you must make one payment of at least $10,000. After your initial payment, no additional purchase payments may be made. We reserve the right to lower the minimum required payment, to establish a maximum payment amount and to reject any payment exceeding the maximum. Acceptance or Rejection. We must accept or reject an application or enrollment materials within two business days of receipt. If the forms are incomplete, we may hold any forms and accompanying payments for five business days pending completion. In all cases, we may hold payments for longer periods with the permission of the contract holder and if we deposit the payments in the Aetna Money Market VP subaccount until the forms are completed (or for a maximum of 105 days). If we reject your application or enrollment, we will return the forms and any payments. Age Requirements. The maximum issue age is between 85 and 90, depending upon the income payment option selected. We reserve the right to modify the maximum issue age. Allocation of Your Purchase Payment to the Investment Options. We will allocate your purchase payment, less any applicable premium taxes, among the investment options you select. You may select up to four of the available variable investment options at any one time. You may also select the fixed dollar option and allocate all or a portion of your payment to the general account. See "Investment Options." Allocations must be in whole percentages. Any purchase payment received before we accept the application or enrollment materials, will be invested as of the day we do accept them. 11 Terms to understand: Annuitant(s): The person(s) whose life or life expectancy(ies) determines the amount of continuation of lifetime income payments or whose death results in payment of death benefits. Beneficiary: The person(s) designated to receive death benefit proceeds payable under the contract. Right to Cancel - -------------------------------------------------------------------------------- When and How to Cancel. You may cancel the contract by returning it, or the document showing your participation under a group contract, to the Company along with written notice of your intent to cancel. In most states, you have ten days from receipt to exercise this "free look" right; some states allow you longer. For contracts issued in connection with 457 plans, the contract holder may follow these procedures on behalf of the participant. Refunds. On the day we receive the request for cancellation in good order, we will calculate your contract value. Your refund will equal that value and will reflect deduction of any income payments made. This amount may be more or less than your purchase payment. In certain states (or if you have purchased the contract as an IRA), we may be required to return your entire purchase payment. Income Payments - -------------------------------------------------------------------------------- Under the contract, we will make regular income payments to you or to a payee you designate in writing. Initiating Payments. To initiate income payments, you must make the following selections on your application or enrollment form: o Income payment start date o Payment frequency (i.e., monthly, quarterly, semi-annually or annually) o Payment option and any special features, such as a right to withdraw or the guaranteed minimum income feature o Variable and/or fixed payments o The subaccounts to allocate your purchase payment among (only if you select variable payments) o An assumed annual net return rate (only if you select variable payments) Your investment adviser can help you consider what selections may be appropriate for your financial goals. Generally, your selections may not be changed after the contract is issued. Some changes, such as transfers among subaccounts, may be allowed. What Affects Income Payment Amounts? Some of the factors that may affect your payment amounts include: your age, your gender, the amount of your purchase payment, the payment option selected, the number of guaranteed payments (if any), whether variable or fixed payments are selected, and, for variable payments, the assumed annual net return rate selected. Payment Due Dates: You will generally receive your first income payment on the last day of the selected payment period. For example, if you elect to receive one payment a year, we will make the payment on the day before the anniversary of the contract effective date. An alternative first payment date may be elected subject to our approval and in compliance with IRS regulations. Minimum Payments Amounts. For all payment options, the initial income payment must be at least $50 per month, or a total of $250 per year for payments of any other frequency. 12 Assumed Annual Net Return Rate. If you select variable payments, you will also select an assumed annual net return rate of either 5% or 3.5%. If you select a 5% rate, your first payment will be higher, but subsequent payments will increase only if the investment performance of the subaccounts you selected is greater than 5% annually, after fees are deducted. Payment amounts will decline if the investment performance is less than 5%, after deduction of fees. If you select a 3.5% rate, your first payment will be lower, but subsequent payments will increase more rapidly and decline more slowly depending on the investment performance of the subaccounts you selected. For more information about selecting an assumed annual net return rate, request a copy of the Statement of Additional Information by calling the Company. See "Contract Overview." Guaranteed Minimum Income Feature If you elect this feature, we guarantee that your variable payment will never be less than the guaranteed minimum payment amount shown in your contract. The guaranteed minimum payment amount equals 90% of your estimated initial payment. Estimated Initial Payment Amount. If you elect this feature, on the date we issue your contract we estimate the amount of your initial payment based on the value of the annuity units your payment purchases on that date. See "Calculating Variable Income Payments--Annuity Units." Your guaranteed minimum payment amount will equal 90% of this estimated amount. This feature requires that you select: o A lifetime payment option o 100% variable payments o Aetna Index Plus Large Cap VP as the only subaccount into which your purchase payment is allocated o 3.5% assumed annual net return rate In addition to other contract charges, a guaranteed minimum income charge will apply. See "Fees." There is no right to withdraw and no right to transfer if you select this option. Delay of Start Date. The contract is designed to be viewed as an immediate annuity contract under the Tax Code, however, you may elect to delay your payment start date for up to 12 months following purchase of the contract. See "Taxation" for rules applicable where death occurs before the annuity starting date under a non qualified annuity. Consult a tax advisor before electing a delay. Taxation. The Tax Code has rules regarding income payments. For example, for qualified contracts, guaranteed payments may not extend beyond (a) the estimated life expectancy of the annuitant or (b) the joint life expectancies of the annuitant and beneficiary. Payments must comply with the minimum distribution requirements of Tax Code section 401(a)(9). In some cases tax penalties will apply if rules are not followed. For tax rules that may apply to the contracts see "Taxation." 13 Payment Options The following chart explains the payment options and their accompanying death benefits and rights to withdraw. Also see "Death Benefit," "Withdrawals," and Appendix I for additional detail. We may offer additional payment options under the contract from time to time.
- --------------------------------------------------------------------------------------------------------------------- Lifetime Payment Options - --------------------------------------------------------------------------------------------------------------------- Length of Payments: For as long as the annuitant lives. It is possible that no payment will be made should the annuitant die prior to the first payment's due date. Life Income Death Benefit--None: All payments end upon the annuitant's death. Right to Withdraw: None. Length of Payments: For as long as the annuitant lives, with payments guaranteed for your choice of 5 through 30 years (or other periods we may make available at the time you select this option). Life Income-- Death Benefit--Payment to the Beneficiary: If the annuitant dies before we have made all the Guaranteed guaranteed payments, payments will continue to the beneficiary. Payments Right to Withdraw: At the time of purchase, you may elect the right to withdraw all or a portion of any remaining guaranteed payments (some restrictions apply, see "Withdrawals"). Length of Payments: For as long as either annuitant lives. It is possible that no payment will be made should both the annuitant and joint annuitant die before the first payment's due date. Continuing Payments: When you select this option you will also choose either: (a) Full or reduced payments to continue to the surviving annuitant after the first annuitant's death; or (b) 100% of the payment will continue to the annuitant on the joint annuitant's death, and a Life Income-- reduced payment will continue to the joint annuitant on the annuitant's death. Two Lives In either case, payments cease upon the death of the surviving annuitant. Any reduction in payment will result in a corresponding reduction to the amount of the guaranteed minimum income payment, if applicable. Death Benefit--None: All payments end upon the death of both annuitants. Right to Withdraw: None. Length of Payments: For as long as either annuitant lives, with payments guaranteed for your choice of 5 through 30 years (or other periods we may make available at the time you select this option.) Life Income-- Continuing Payments: 100% of the payment will continue to the surviving annuitant after the first Two Lives-- annuitant's death. Guaranteed Death Benefit--Payment to the Beneficiary: If both annuitants die before the guaranteed Payments payments have all been paid, payments will continue to the beneficiary. Right to Withdraw: At the time of purchase, you may elect the right to withdraw all or a portion of any remaining guaranteed payments (some restrictions apply, see "Withdrawals"). - --------------------------------------------------------------------------------------------------------------------- Nonlifetime Payment Option - --------------------------------------------------------------------------------------------------------------------- Length of Payments: Payments will continue for your choice of 5 through 30 years (or other periods we may make available at the time you select this option.) Death Benefit -- Payment to the Beneficiary: If the annuitant dies before we make all the guaranteed payments, payment will continue to the beneficiary. Nonlifetime-- Right to Withdraw: Guaranteed (a) If you are receiving variable income payments you may withdraw all or a portion of any Payments remaining guaranteed payments at any time. (b) If you are receiving fixed income payments at the time of purchase, you may elect the right to withdraw all or a portion of any remaining guaranteed payments (some restrictions apply, see "Withdrawals").
14 Calculating Variable Income Payments - -------------------------------------------------------------------------------- The amount of any variable income payment is determined by multiplying the number of annuity units that you hold by an annuity unit value (AUV) for each unit. Annuity Units. When you select variable income payments, your payment purchases annuity units of the Variable Annuity Account B subaccounts dedicated to the funds you select. The number of units purchased is based on your purchase payment amount and the value of each unit on the day the purchase payment is invested. Generally, the number of units will not vary over the life of the contract, but the value of each unit will vary daily based on the performance of the underlying fund and deduction of fees. Some events may reduce the number of units, including transfers among subaccounts, withdrawals, or death of an annuitant if reduction of payment to a surviving annuitant was selected. Annuity Unit Value (AUV). The value of each annuity unit in a subaccount is called the annuity unit value or AUV. As stated above, the value of annuity units varies daily in relation to the underlying fund's investment performance. The value also reflects daily deductions for fund fees and expenses, the mortality and expense risk charge, the administrative expense charge (if any) and the guaranteed minimum income charge (if applicable). We discuss these deductions in more detail in "Fees." Valuation. We determine the AUV every business day after the close of the New York Stock Exchange. At that time, we calculate the current AUV by multiplying the AUV last calculated by the net return factor of the subaccount, and by a factor to reflect the assumed annual net return rate. The net return factor measures the investment performance of the subaccount from one valuation to the next. The assumed annual net return rate will be either 3.5% or 5% as you selected. Current AUV = Prior AUV x Net Return Factor x Assumed Annual Net Return Rate Factor Net Return Factor. The net return factor for a subaccount between two consecutive valuations equals the sum of 1.000000 plus the net return rate. The net return rate is computed according to a formula that is equivalent to the following: >The net assets of the fund held by the subaccount as of the current valuation; minus >The net assets of the fund held by the subaccount at the preceding valuation; plus or minus >Taxes or provisions for taxes, if any, due to subaccount operations (with any federal income tax liability offset by foreign tax credits to the extent allowed); divided by >The total value of the subaccount's units at the preceding valuation; minus >A daily deduction for the mortality and expense risk charge, the administrative expense charge (if any) and the guaranteed minimum income charge (if applicable). See "Fees." The net return rate may be either positive or negative. 15 Investment Options - -------------------------------------------------------------------------------- When you purchase the contract, your purchase payment, less any premium tax, will be applied to the investment options you select. If you select variable investment options, you will receive variable income payments. If you select the fixed dollar option, you will receive fixed income payments. If you select one or more variable investment options and the fixed dollar option, a portion of your payment will vary and a portion will remain fixed. Variable Income Payments. If you select variable income payments, the amount of your payments will vary based on the performance of the variable investment options that you select. These options are called subaccounts. The subaccounts are within Variable Annuity Account B (the separate account), a separate account of the Company. Each subaccount invests in a specific mutual fund (fund). Subaccount performance will vary depending upon the investment performance of the underlying fund. You do not invest directly in or hold shares of the funds. >Fund Descriptions. For descriptions of the funds that the subaccounts invest in, see Appendix II and each fund prospectus. Fund prospectuses may be obtained, free of charge, from our Home Office at the address and phone number listed in "Contract Overview" or by contacting the SEC's web site or the SEC Public Reference Room. Fixed Income Payments. If you select fixed payments, your purchase payment, less any premium tax, will be applied to the fixed dollar option and your payment amount will not vary. Except where noted, this prospectus describes only the variable investment options. The fixed dollar option is described in Appendix I. Number of Options You May Select. You may select up to four subaccounts and/or the fixed dollar option at any one time. Selecting Investment Options o Choose options appropriate for you. Your investment adviser can help you evaluate which investment options may be appropriate for your financial goals. o Understand the risks associated with the options you choose. Some funds are considered riskier than others. Funds with additional risks are expected to have a value that rises and falls more rapidly and to a greater degree than other funds. For example, funds investing in foreign or international securities are subject to additional risks not associated with domestic investments, and their performance may vary accordingly. Also, funds using derivatives in their investment strategy may be subject to additional risks. o Be informed. Read the fund prospectuses and the fixed dollar option Appendix I in this prospectus. Additional Risks of Investing in the Funds (Mixed and Shared Funding). "Shared funding" occurs when shares of a fund, which our subaccounts buy for variable annuity contracts, are also bought by other insurance companies for their variable annuity contracts. "Mixed funding" occurs when shares of a fund, 16 which our subaccounts buy for variable annuity contracts, are bought for variable life insurance contracts issued by us or other insurance companies. >Shared--bought by more than one company >Mixed--bought for annuities and life insurance It is possible that a conflict of interest may arise due to mixed and shared funding, which could adversely impact the value of a fund. For example, if a conflict of interest occurred and one of the subaccounts withdrew its investment in a fund, the fund may be forced to sell its securities at disadvantageous prices, causing its share value to decrease. Each fund's board of directors or trustees will monitor events to identify any conflicts which may arise and to determine what action, if any, should be taken to address such conflicts. Investment Option Availability. Some funds may be unavailable through your contract or plan or in some states. At times, we may add, withdraw or substitute funds, subject to the conditions in your contract and in compliance with regulatory requirements. We may disallow investment in a fund if fund shares are unavailable to the separate account or if we judge that further investments in such shares should become inappropriate for the contract. In addition, we may substitute shares of another fund for shares already acquired. We reserve the right to do so without a proxy vote. Rejection of Investments by a Fund. Orders for the purchase of fund shares may be subject to acceptance or rejection by the fund. We reserve the right to reject, without prior notice, any allocation of your payments to a subaccount if the subaccount's investment in its corresponding fund is rejected or not accepted by the fund for any reason. Transfers Among Variable Investment Options. You may make transfers among the subaccounts after the contract is issued by calling or writing to our Home Office. The Company reserves the right to limit such transfers to twelve in any calendar year and to establish a minimum transfer amount. Transfers are not allowed into or out of the fixed dollar option. Limits on Frequent Transfers. The contracts are not designed to serve as vehicles for frequent trading in response to short-term fluctuations in the market. Such frequent trading can disrupt management of a fund and raise its expenses. This in turn can have an adverse effect on fund performance. Accordingly, organizations or individuals that use market-timing investment strategies and make frequent transfers should not purchase the contracts. We reserve the right to restrict, in our sole discretion and without prior notice, transfers initiated by a market-timing organization or individual or other party authorized to give transfer instructions on behalf of multiple contract holders. Such restrictions could include: (1) not accepting transfer instructions from an agent acting on behalf of more than one contract holder; and (2) not accepting preauthorized transfer forms from market timers or other entities acting on behalf of more than one contract holder at a time. We further reserve the right to impose, without prior notice, restrictions on any transfers that we determine, in our sole discretion, will disadvantage or potentially hurt the rights or interests of other contract holders. 17 Types of Fees There are four types of fees and deductions associated with the contract that may affect the amount of your variable income payments. For fees applicable to fixed payments see Appendix I. >Transaction Fee o Early Withdrawal Charge >Fees Deducted from the Subaccounts o Mortality and Expense Risk Charge o Administrative Expense Charge o Guaranteed Minimum Income Charge >Fees Deducted by the Funds >Premium and Other Taxes Fees - -------------------------------------------------------------------------------- The following repeats and adds to information provided under "Fee Table." Please review both sections for information on fees. Reduction or Elimination of Certain Fees When sales of the contract are made to individuals or a group of individuals in a manner that results in savings of sales expenses, we may reduce or eliminate the early withdrawal charge or mortality and expense risk charge. Our decision to reduce or eliminate either of these charges will be based on one or more of the following: >The size and type of group of individuals to whom the contract is offered >The type and frequency of administrative and sales services to be provided >Whether there is a prior or existing relationship with the Company such as being an employee of the Company or one of its affiliates; receiving distributions or making internal transfers from other contracts issued by the Company or an affiliate; or making transfers of amounts held under qualified plans sponsored by the Company or an affiliate. Any reduction or elimination of the early withdrawal charge or mortality and expense risk charge will not be unfairly discriminatory against any person. Transaction Fee Early Withdrawal Charge Withdrawals of all or a portion of the present value of remaining guaranteed payments may be subject to a charge. Not all contracts permit withdrawals. (See "Withdrawals.") Amount: The charge is a percentage of the present value of any remaining guaranteed payments that you withdraw. The percentage will be determined by the early withdrawal charge schedule applicable to your contract. Although the maximum early withdrawal charge is 7% of the remaining guaranteed payments withdrawn, the total early withdrawal charge will never be more than 8.5% of your purchase payment to the contract. 18 Early Withdrawal Charge Schedules Schedule A: Subject to state approval, Schedule A applies to contracts issued on or after May 3, 1999.
- -------------------------------------------------------- Schedule A - -------------------------------------------------------- Number of Years from Contract Effective Date* Early Withdrawal Charge Fewer than 1** 7% 1 or more but fewer than 2 6% 2 or more but fewer than 3 5% 3 or more but fewer than 4 4% 4 or more but fewer than 5 3% 5 or more but fewer than 6 2% 6 or more but fewer than 7 1% 7 or more 0%
Schedule B: Schedule B applies to contracts issued prior to May 3, 1999. It also applies to contracts issued on or after May 3, 1999 in states where Schedule A is not approved as of the contract effective date.
- --------------------------------------------------------- Schedule B - --------------------------------------------------------- Number of Years from Contract Effective Date* Early Withdrawal Charge Fewer than 1** 5% 1 or more, but fewer than 2 5% 2 or more, but fewer than 3 4% 3 or more, but fewer than 4 4% 4 or more, but fewer than 5 3% 5 or more, but fewer than 6 2% 6 or more, but fewer than 7 1% 7 or more 0%
* For participants under a group contract, the early withdrawal charge will be calculated based upon the number of years from the certificate effective date. ** Certain contracts do not allow withdrawals during the first contract year. When/How. At the time of withdrawal we deduct this charge from the amount withdrawn. Purpose. This is a deferred sales charge. It reimburses us for some of the sales and administrative expenses associated with the contract. Fees Deducted from the Subaccounts Mortality and Expense Risk Charge Maximum Amount: 1.25% annually of values invested in the subaccounts. When/How. We deduct this fee daily from the subaccounts corresponding to the funds you select. Purpose. This fee compensates us for the mortality and expense risks we assume under the contracts. >The mortality risks are those risks associated with our promise to make lifetime payments based on annuity rates specified in the contracts >The expense risk is the risk that the actual expenses we incur under the contracts will exceed the maximum costs that we can charge If the amount we deduct for this fee is not enough to cover our mortality costs and expenses under the contracts, we will bear the loss. We may use any excess to recover distribution costs relating to the contract and as a source of profit. We expect to make a profit from this fee. 19 Administrative Expense Charge Maximum Amount. We currently do not charge an administrative expense charge. We reserve, however, the right to charge up to 0.25% annually of values invested in the subaccounts. When/How. If imposed, we deduct this fee daily from the subaccounts corresponding to the funds you select. Purpose. This fee helps defray our administrative expenses. The fee is not intended to exceed the average expected cost of administering the contracts. We do not expect to make a profit from this fee. Guaranteed Minimum Income Charge This is assessed only if you select the guaranteed minimum income feature. Maximum Amount. 1.00% annually of values invested in the subaccounts. When/How. We deduct this fee daily from the subaccounts corresponding to the funds you select. Purpose. This includes compensating us for the additional mortality and expense risks we assume by guaranteeing minimum income payments. For additional information regarding those risks, see "Mortality and Expense Risk Charge--Purpose" in this section. Fees Deducted by the Funds Maximum Amount. Each fund's advisory fees and expenses are different. They are set forth in the "Fees Deducted by the Funds" table (see "Fee Table") and are described in more detail in each fund's prospectus. When/How. The fund fees are reflected in the daily value of fund shares. These values affect the daily value of the subaccounts. Purpose. These expenses help to pay the fund's investment adviser and operating expenses. Premium and Other Taxes Maximum Amount. 4% or less, depending on the jurisdiction. When/How. We reserve the right to deduct premium taxes from your purchase payment on the contract effective date. Under certain circumstances, we reserve the right not to deduct premium taxes where the purchase payment is provided through an internal transfer from an annuity or other contract issued by us (or one of our affiliates) under which we previously deducted a premium tax. 20 Death Benefit - -------------------------------------------------------------------------------- The following describes the death benefit applicable to variable income payments. These are also outlined under "Income Phase--Payment Options." For information on the death benefit applicable to the fixed dollar option, refer to Appendix I. See "Income Phase" for a definition of annuitant and beneficiary as used in this section. Payment of Death Benefit. Upon the death of the annuitant and any surviving joint annuitant, if applicable, a death benefit may be payable if your contract is issued under any of the following payment options: 1. Life Income -- Guaranteed Payments 2. Life Income -- Two Lives -- Guaranteed Payments 3. Nonlifetime -- Guaranteed Payments Any death benefit will be paid in the form specified in the contract and will be distributed at least as rapidly as under the method of distribution in effect upon the date of death. See "Taxation" for rules where you have elected to delay your payment start date under a non qualified annuity and you die before the annuity starting date. Under payment options 1 and 2 above, a lump-sum payment of the present value of any death benefit may be requested within six months following the date of death. A lump-sum payment may be requested at any time (even after the six month period) if you had elected the right to withdraw. Under payment option 3 above, a lump-sum payment of the present value of any death benefit may be requested at any time. If a lump-sum payment is requested, no early withdrawal charge is applied and payment will be sent within seven days following our receipt of request in good order. Calculation of Lump-Sum Payment of the Death Benefit. The value of the lump-sum payment of the death benefit will equal the present value of any remaining guaranteed payments, calculated using the assumed annual net return rate stated in your contract. We will calculate this value on the next valuation date following our receipt of proof of death acceptable to us and payment request in good order. Such value will reflect any payments made after date of death. Who Receives Death Benefit Proceeds? The beneficiary is the person entitled to receive any death benefit proceeds. We will pay any death benefit proceeds based on the last written beneficiary designation on file at our Home Office as of the date of death. Changes in Beneficiary Designations. The designated beneficiary may be changed at any time during the lifetime of the annuitant and the joint annuitant (if applicable). Such change must be submitted to the Company in writing, and except for contracts issued in New York, will become effective as of the date written notice of the change is received and recorded by the Company. For contracts issued in New York, the change will become effective as of the date the notice is signed. However, our obligation to pay death benefits will be fully discharged upon payment to the beneficiary named in the written notice of beneficiary designation that we last received as of the date of such payment. Some restrictions may apply to beneficiary changes under qualified contracts. 21 Withdrawals - -------------------------------------------------------------------------------- Withdrawals of Variable Payments You may make partial or full withdrawals of the present value of any remaining guaranteed variable income payments if you are receiving payments under either: >A lifetime payment option with guaranteed payments and you elected a right to make withdrawals. In this circumstance withdrawals are allowed once each year, beginning after the first contract year. (Subject to state approval.) >The nonlifetime payment option. Partial withdrawals are allowed only if each remaining guaranteed payment will be at least $50. If you select the guaranteed minimum income feature, you may not make any withdrawals. Withdrawals of Fixed Payments (For additional detail see Appendix I--Fixed Dollar Option) You may make partial or full withdrawals of the present value of any remaining fixed income payments if you are receiving payments under either: >A lifetime payment option with guaranteed payments and you elected a right to make withdrawals. In this circumstance withdrawals are allowed once each year, beginning after the first contract year. (Subject to state approval.) >The nonlifetime payment option and you elected a right to make withdrawals. In this circumstance withdrawals are allowed once each year, beginning after the first contract year. Partial withdrawals are allowed only if each remaining guaranteed payment will be at least $50. Amount Available for Withdrawal Variable Income Payments. For any withdrawal of remaining variable guaranteed income payments, the amount available for withdrawal is equal to the present value of any remaining guaranteed variable payments (less any applicable early withdrawal charge) calculated using the assumed annual net return rate stated in your contract. Withdrawal values are determined as of the valuation date following our receipt of your written request in good order at our Home Office. Fixed Income Payments. See Appendix I for details regarding withdrawals of fixed payments. Early Withdrawal Charge Withdrawals may be subject to an early withdrawal charge as described in "Fees--Early Withdrawal Charge." Reduction of Remaining Payments Any withdrawal will result in a proportionate reduction of any remaining guaranteed payments. Additionally, the withdrawal amount will be taken from the subaccounts proportionately, unless you designate otherwise. For lifetime options, any payments to be made beyond the guaranteed payment period will be unaffected by any withdrawals. 22 In This Section: >Introduction >Terms to Understand >The Contract >Withdrawals and Other Distributions >10% Penalty Tax >Withholding for Federal Income Tax Liability >Rules Specific to Certain Plans >Non Qualified Contracts >Diversification >Assignment of Right to Payments >Delay of Start Date >Taxation of the Company When consulting a tax advisor, be certain that he or she has expertise in the Tax Code sections applicable to your tax concerns. Taxation - -------------------------------------------------------------------------------- Introduction This section discusses our understanding of current federal income tax laws affecting the contract. You should keep the following in mind when reading it: >Your tax position (or the tax position of the beneficiary, as applicable) determines federal taxation of amounts held or paid out under the contract. >Tax laws change. It is possible that a change in the future could affect contracts issued in the past. >This section addresses federal income tax rules and does not discuss federal estate and gift tax implications, state and local taxes or any other tax provisions. >We do not make any guarantee about the tax treatment of the contract or a transaction involving the contract. Terms to Understand >Contract holder means the person to whom we issue an individually owned contract or the participant under a group contract. >The term "payment" in this section refers to income payments. We do not intend this information to be tax advice. For advice about the effect of federal income taxes or any other taxes on amounts held or paid out under the contract, consult a tax adviser. The Contract The contract is designed for use on a non-tax qualified basis as a non qualified contract, or as a qualified contract under certain retirement arrangements under Tax Code sections 401, 403(b), 408(b) or 457. The tax rules vary according to whether the contract is a non qualified contract or qualified contract. If used as a qualified contract under a retirement arrangement, you need to know the Tax Code section under which your arrangement qualifies. Contact your plan sponsor, local representative or the Company to learn which Tax Code section applies to your arrangement. Contract holders and participants are responsible for determining that contributions, distributions and other transactions satisfy applicable laws. Legal counsel and a tax advisor should be consulted regarding the suitability of the contract. If the contract is purchased in conjunction with a retirement plan, the plan is not a part of the contract and we are not bound by the plan's terms or conditions. Withdrawals and Other Distributions Certain tax rules apply to distributions from the contract. A distribution is any amount taken from the contract including payments, full or partial withdrawals of the value of remaining payments (if permitted under the contract), rollovers, exchanges and death benefit proceeds. We report the taxable portion of all distributions to the Internal Revenue Service (IRS). 23 Non Qualified Contracts. A full withdrawal of the present value of any remaining guaranteed payments under a non qualified contract is taxable to the extent that the amount received exceeds any remaining investment in the contract. If a partial withdrawal of the present value of any remaining payments is made and the continuing payments you receive are reduced because of the partial withdrawal, a part of the withdrawal may not be taxable. The part that is not taxable is equal to any remaining investment in the contract multiplied by a fraction. The numerator (top part of the fraction) is the reduction in each payment because of the partial withdrawal. The denominator (bottom part of the fraction) is the full amount of each payment originally provided. For income payments, a portion of each payment which represents the investment in the contract is not taxable. An exclusion ratio is calculated to determine the nontaxable portion. For fixed income 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 dollar amount of the expected payments as defined in Tax Code section 72(d). The entire annuity payment will be taxable once the recipient has recovered the investment in the contract. For variable income payments, an equation is used to establish 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. The entire payment will be taxable once the recipient has recovered the investment in the contract. 401 and 403(b) Plans. All distributions from these plans are taxed as received unless one of the following applies: >The distribution is an eligible rollover distribution and is rolled over to another plan of the same type or to a traditional individual retirement annuity/account (IRA) in accordance with the Tax Code. >You made after-tax contributions to the plan. In this case, depending on the type of distribution, the amount will be taxed according to the rules detailed in the Tax Code. A payment can be an eligible rollover distribution only if it is both of the following: >Made under a nonlifetime payment option with a period of less than ten years. >Only to the extent it is not attributable to after-tax contributions and/or is not a required minimum distribution under Tax Code section 401(a)(9). 408(b) Individual Retirement Annuity (IRA). All distributions from a traditional IRA are taxed as received unless one of the following applies: >The distribution is rolled over to another traditional IRA or, if the IRA contains only amounts previously rolled over from a 401(a), 401(k), or 403(b) plan, to another plan of the same type. >You made after-tax contributions to the plan. In this case, the distribution will be taxed according to rules detailed in the Tax Code. A payment can be rolled over only if it is one or more of the following: >Not attributable to after-tax contributions. 24 >Not a required minimum distribution under Tax Code section 401(a)(9). There are limitations on the number of rollovers that may be made in any one year period. You should consult a tax adviser prior to making a rollover. Death Benefit Proceeds. In general, payments received by your beneficiaries after your death are taxed in the same manner as if you had received those payments. 10% Penalty Tax Under certain circumstances, the Tax Code may impose a 10% penalty tax on the taxable portion of any distribution from a non qualified contract or from a contract used with a 401, 403(b) or 408(b) arrangement. The 10% penalty tax does not apply to a distribution from a 457 plan. An exception to the 10% penalty discussed below requires that the payment or distribution be part of a series of substantially equal periodic payments. If you select an increasing annuity or an early withdrawal of the value of remaining payments, the payment or distribution may be subject to the 10% penalty unless one of the other exceptions applies. You should consult with a tax advisor to determine how this will affect your tax liability. Non Qualified Contracts. There is an exception to the 10% penalty if payment is made under an immediate annuity contract. An immediate annuity is defined as a contract to which all of the following apply: >Is purchased with a single premium >Has an annuity starting date, as defined by the Tax Code, no later than one year from date of purchase >Provides for a series of substantially equal periodic payments to be made no less frequently than annually The IRS has ruled, however, that where an immediate annuity is received in exchange for a deferred annuity contract in a Tax Code section 1035 exchange, the immediate annuity does not qualify for this exception to the 10% penalty. One of the other exceptions to the penalty may apply. In addition to the immediate annuity exception, the 10% penalty tax does not apply to the taxable portion of payments made in one or more of the following circumstances: >On or after the taxpayer becomes age 591/2 >After the taxpayer has become totally and permanently disabled (as defined by the Tax Code) >On or after the death of the contract holder >As part of a series of substantially equal periodic payments (at least annually) over the life or life expectancy of the taxpayer or the joint lives or joint life expectancies of the taxpayer and beneficiary Modification of the series of payments prior to the later of age 591/2 or 5 years may result in an additional tax in the year of modification equal to the penalty which would have been imposed, plus interest, if the exception had not applied. 401 and 403(b) Plans. The 10% penalty tax applies to the taxable portion of a distribution from a 401 or a 403(b) plan, unless one or more of the following have occurred: 25 >You have attained age 59 1/2 >You have become totally and permanently disabled (as defined by the Tax Code) >You have died >You have separated from service with the plan sponsor at or after age 55 >The distribution is rolled over into another plan of the same type or to an IRA in accordance with the Tax Code >The distribution is made in substantially equal periodic payments (at least annually) over your life or life expectancy or the joint lives or joint life expectancies of you and your beneficiary. Also, if a 401 or 403(b) plan, you must have separated from service with the plan sponsor. In addition, the penalty tax does not apply for the amount of distribution equal to unreimbursed medical expenses you incur that qualify for a deduction under the Tax Code. IRA. In general, except for the exception relating to separation from service with the plan sponsor at or after age 55, the exceptions listed above for 401 and 403(b) plans also apply to distributions from an IRA. The penalty tax is also waived on a distribution made from an IRA to pay for health insurance premiums for certain unemployed individuals or used for qualified first-time home purchase or for higher education expenses. Withholding for Federal Income Tax Liability Any distributions under the contract are generally subject to withholding. Federal income tax liability rates vary according to the type of distribution and the recipient's tax status. Non Qualified Contracts. Generally, you or a beneficiary may elect not to have tax withheld from distributions. 401 and 403(b) Plans. Generally, you or a beneficiary may elect not to have tax withheld from certain distributions. However, if the distribution is an eligible rollover distribution (see "Taxation of Distributions" in this section) and the amount is not directly rolled over, the distribution is subject to mandatory 20% federal income tax withholding. IRA. Generally, you or a beneficiary may elect not to have tax withheld from distributions. Non-resident Aliens. If you or a beneficiary is a non-resident alien, then any withholding is governed by Tax Code section 1441 based on the individual's citizenship, the country of domicile and treaty status. Rules Specific to Certain Plans Code Section 403(b) Plans. Under Tax Code section 403(b), contributions made by public school systems or nonprofit healthcare organizations and other Tax Code section 501(c)(3) tax exempt organizations to purchase annuity contracts for their employees are generally excludable from the gross income of the employee. >Assignment or Transfer of Contracts. Adverse tax consequences to the plan and/or to you may result if your beneficial interest in the contract is assigned 26 or transferred to any person except to an alternate payee under a qualified domestic relations order in accordance with Tax Code section 414(p). >Restrictions on Distributions. Tax Code section 403(b)(11) restricts the distribution under 403(b) contracts of the following: o Salary reduction contributions made after December 31, 1988 o Earnings on those contributions o Earnings during such period on amounts held as of December 31, 1988 Distribution of those amounts may only occur upon your death, attainment of age 59 1/2, separation from service, disability, or financial hardship. Income attributable to salary reduction contributions and credited on or after January 1, 1989 may not be distributed in the case of hardship. Code Section 408(b) IRAs. Tax Code section 408(b) permits eligible individuals to contribute to a traditional Individual Retirement Annuity (IRA) on a pre-tax (deductible) basis. Employers may establish Simplified Employee Pension (SEP) plans and contribute to a traditional IRA owned by the employee. >Assignment or transfer of contracts. Adverse tax consequences may result if you assign or transfer your interest in the contract to persons other than your spouse incident to a divorce. >Rollovers and Transfers. Rollovers and direct transfers are permitted from a 401, 403(a) or a 403(b) arrangement to a traditional IRA. Non Qualified Contracts Non-Natural Holders of a Non Qualified Contract. If the contract holder is not a natural person, a non qualified contract generally is not treated as an annuity for income tax purposes and the income on the contract for the taxable year is currently taxable as ordinary income. This rule does not apply to an immediate annuity which is defined in the same way as for penalty tax purposes. (See "10% Penalty Tax--Non Qualified Contract" above.) Therefore, if you elect an increasing annuity or elect to receive an early withdrawal of all or a portion of the value of any remaining payments, you should consult with a tax advisor to determine how this will affect your tax liability. A non-natural person exempt from federal income taxes should consult with its tax adviser regarding treatment of income on the contract for purposes of the unrelated business income tax. Diversification Tax Code section 817(h) requires that in a non qualified contract 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. Assignment of Right to Payments A transfer of the right to payments under a non qualified contract or the exchange of a contract may result in tax consequences. Generally, if you direct payment to another party, the payments will be tax reported to you. Anyone contemplating any such assignment or exchange should contact a tax adviser regarding the potential tax effects of such a transaction. 27 Delay of Start Date If you have elected to delay your annuity starting date, as defined below, and you die before the annuity starting date, specific rules for payment of any death benefit apply. The annuity starting date is defined by the Tax Code to mean the first day of the period (month, quarter, half year, year depending on whether payments will be made monthly, quarterly, semi-annually or annually) which ends on the date of the first annuity payment. A delayed annuity starting date occurs any time a monthly payment begins later than one month, a quarterly payment begins later than three months or a semi-annual payment begins later than six months from date of purchase. For example, if you purchase the contract on June 1 with monthly payments to begin October 1, your annuity starting date is September 1, and would be considered a delayed annuity starting date. If you die before a delayed annuity starting date, the entire interest in the account must be paid within five years of the date of death, or payments may be made over the life or over a period not extending beyond the life expectancy of the beneficiary or payee, as applicable, provided such payments begin not later than one year after the date of death. This rule does not apply if the beneficiary or payee is your spouse. Taxation of the Company We are taxed as a life insurance company under the Tax Code. Variable Annuity Separate Account B is not a separate entity from us. Therefore, it is not taxed separately as a "regulated investment company," but is taxed as part of the Company. We automatically apply investment income and capital gains attributable to the separate account to increase reserves under the contracts. Because of this, under existing federal tax law we believe that any such income and gains will not be taxed to the extent that such income and gains are applied to increase reserves under the contracts. In addition, any foreign tax credits attributable to the separate account will be first used to reduce any income taxes imposed on the separate account before being used by the Company. In summary, we do not expect that we will incur any federal income tax liability attributable to the separate account and we do not intend to make any provision for such taxes. However, changes in federal tax laws and/or their interpretation may result in our being taxed on income or gains attributable to the separate account. In this case, we may impose a charge against the separate account (with respect to some or all of the contracts) to set aside provisions to pay such taxes. We may deduct this amount from the separate account, including from your account value invested in the subaccounts. 28 Other Topics - -------------------------------------------------------------------------------- The Company Aetna Life Insurance and Annuity Company (the Company, we, us) issues the contracts described in this prospectus and is responsible for providing each contract's insurance and annuity benefits. We are a stock life insurance company organized under the insurance laws of the State of Connecticut in 1976 and an indirect wholly-owned subsidiary of Aetna, Inc. Through a merger our operations include the business of Aetna Variable Annuity Life Insurance Company (formerly known as Participating Annuity Life Insurance Company, an Arkansas life insurance company organized in 1954). We are engaged in the business of issuing life insurance and annuities. Our principal executive offices are located at: 151 Farmington Avenue Hartford Connecticut 06156 Variable Annuity Account B We established Variable Annuity Account B (the separate account) in 1976 as a segregated asset account to fund our variable annuity contracts. The separate account is registered as a unit investment trust under the Investment Company Act of 1940. It also meets the definition of separate account under the federal securities laws. The separate account is divided into subaccounts. These subaccounts invest directly in shares of a pre-assigned fund. Although we hold title to the assets of the separate account, such assets are not chargeable with the liabilities of any other business that we conduct. Income, gains or losses of the separate account are credited to or charged against the assets of the separate account without regard to other income, gains or losses of the Company. All obligations arising under the contracts are obligations of the Company. Performance Reporting We may illustrate the hypothetical values of income payments made from each of the subaccounts over certain periods of time based on historical net asset values of the funds. These numbers will reflect the mortality and expense risk charge, the administrative expense charge (if any), any applicable guaranteed minimum income charge and the advisory fees and other expenses of the funds. We may also advertise different types of historical performance for the subaccounts including: >Standardized average annual total returns >Non-standardized average annual total returns We may also advertise certain ratings, rankings or other information related to the Company, the subaccounts or the funds. For further details regarding performance reporting and advertising, request a Statement of Additional Information at the number listed in "Contract Overview." Standardized Average Annual Total Returns. We calculate standardized average annual total returns according to a formula prescribed by the SEC. 29 This shows the percentage return applicable to $1,000 invested in the subaccount over the most recent one, five and ten-year periods. If the investment option was not available for the full period, we give a history from the date money was first received in that option under the separate account. We include all recurring charges during each period (e.g., mortality and expense risk charges, administrative expense charges (if any), any applicable guaranteed minimum income charges and any applicable early withdrawal charges). Non-Standardized Average Annual Total Returns. We calculate non-standardized average annual total returns in a similar manner as that stated above, except we do not include the deduction of any applicable early withdrawal charges. If we reflected these charges in the calculation, they would decrease the level of performance reflected by the calculation. Non-standardized returns may also include performance from the fund's inception date, if that date is earlier than the one we use for standardized returns. Distribution The Company acts as the Principal Underwriter for the securities sold by this prospectus, and as the distributor of the contracts. Compensation will be paid to broker-dealers who sell the contracts. Broker- dealers will be paid commissions up to an amount currently equal to 7.0% of payment to a contract or as a combination of a certain percentage amount of payments to a contract at time of sale and a trail commission as a percentage of assets. Under the latter arrangement, commission payments may exceed 7.0% of payments to the contract over the life of the contract. In limited circumstances, we also pay certain of these professionals compensation, overrides or reimbursement for expenses associated with the distribution of the contract. At times the Company may offer certain distributors an enhanced commission for a limited period of time. In addition, some sales personnel may receive various types of non-cash compensation such as special sales incentives, including trips and educational and/or business seminars. In addition, we may provide additional compensation to the Company's supervisory and other management personnel if the overall amount of investments in funds advised by the Company or its affiliates increases over time. We pay these commissions, fees and related distribution expenses out of any early withdrawal 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. The names of the broker-dealer and the registered representative responsible for your contract are set forth on your application. Commissions and sales related expenses are paid by the Company and are not deducted from your payment to the contract. To the extent that the early withdrawal charge is insufficient to cover the actual costs of distribution, the Company may use any of its corporate assets, including any profit from the mortality and expense risk charge, to make up any difference. Transfer of Ownership Ownership of the contract may be changed to the extent permitted by law. You should immediately notify the Company, in writing, of any change in 30 ownership. No such ownership change will be binding until such notification is received and recorded at our Home Office. We reserve the right to reject transfer or assignment to a non-natural person. Payment Delay or Suspension We reserve the right to suspend or postpone the date of any payment of benefits or values under the following circumstances: (a) when the New York Stock Exchange is closed (except customary holidays or weekends); (b) when trading on the New York Stock Exchange is restricted; (c) when an emergency exists as determined by the SEC so that disposal of the securities held in the subaccounts is not reasonably practicable or it is not reasonably practicable to determine the value of the subaccount's assets; (d) during any other periods the SEC permits for the protection of investors. The conditions under which restricted trading or an emergency exists shall be determined by the rules and regulations of the SEC. Voting Rights The Company is the legal owner of the shares of the funds. However, we believe that when a fund solicits proxies in conjunction with a vote of shareholders, we are required to obtain from you and other owners instructions as to how to vote those shares. When we receive those instructions, we will vote all of the shares we own in proportion to those instructions. This will also include any shares that the Company owns on its own behalf. Should we determine that we are no longer required to comply with the above, we will vote the shares in our own right. Contract Modification We reserve the right to modify the contract to meet the requirements of state or federal laws or regulations. We will notify you in writing of any changes. Legal Matters And Proceedings We know of no material legal proceedings pending to which the separate account or the Company is a party or which would materially affect the separate account. The validity of the securities offered by this prospectus has been passed upon by Counsel to the Company. Financial Statements The consolidated financial statements of the Company and the financial statements of the separate account have been included in the Statement of Additional Information (SAI). Request an SAI at the number listed in "Contract Overview." Year 2000 Readiness As a healthcare and financial services enterprise, Aetna Inc. (referred to collectively with its affiliates and subsidiaries as Aetna), is dependent on computer systems and applications to conduct its business. Aetna has developed and is currently executing a comprehensive risk-based plan designed to make its mission-critical information technology (IT) systems and embedded systems Year 2000 ready. The plan for IT systems covers five stages including (i) assessment, (ii) remediation, (iii) testing, (iv) implementation and (v) Year 2000 approval. At year end 1997, Aetna, including the Company, had 31 substantially completed the assessment stage. The remediation of mission- critical IT systems was completed by year end 1998. Testing of all mission- critical IT systems is underway with Year 2000 approval targeted for completion by mid-1999. The costs of these efforts will not affect the separate account. The Company, its affiliates and the mutual funds that serve as investment options for the separate account also have relationships with investment advisers, broker-dealers, transfer agents, custodians or other securities industry participants or other service providers that are not affiliated with Aetna. Aetna, including the Company, has initiated communication with its critical external relationships to determine the extent to which Aetna may be vulnerable to such parties' failure to resolve their own Year 2000 issues. Aetna and the Company have assessed and are prioritizing responses in an attempt to mitigate risks with respect to the failure of these parties to be Year 2000 ready. There can be no assurance that failure of third parties to complete adequate preparations in a timely manner, and any resulting systems interruptions or other consequences, would not have an adverse effect, directly or indirectly, on the separate account, including, without limitation, its operation or the valuation of its assets and units. Contents of the Statement of Additional Information - -------------------------------------------------------------------------------- The Statement of Additional Information (SAI) contains more specific information on the separate account and the contract, as well as the financial statements of the separate account and the Company. A list of the contents of the SAI is set forth below: General Information and History Variable Annuity Account B Offering and Purchase of Contract Performance Data Income Payments Sales Material and Advertising Independent Auditors Financial Statements of the Separate Account Financial Statements of Aetna Life Insurance and Annuity Company and Subsidiary Request an SAI by calling the Company at the number listed in "Contract Overview." 32 Appendix I Fixed Dollar Option - -------------------------------------------------------------------------------- The following summarizes material information concerning the fixed dollar option. You may choose to allocate all or a portion of your purchase payment to the fixed dollar option. If you choose the fixed dollar option, your income payments will generally remain fixed as specified in your contract over the term of the contract. Your fixed payment may vary due to factors including your selection of an increasing annuity or your use of a right to withdraw. In certain cases, you may elect a right to withdraw any remaining guaranteed payments, (see "Withdrawals" in this appendix). Amounts allocated to the fixed dollar option are held in the Company's general account that supports general insurance and annuity obligations. Interests in the fixed dollar option have not been registered with the SEC in reliance upon exemptions under the Securities Act of 1933, as amended. Disclosure in this prospectus regarding the fixed dollar option may, however, be subject to certain generally applicable provisions of the federal securities laws relating to the accuracy and completeness of such statements. Disclosure in this appendix regarding the fixed dollar option has not been reviewed by the SEC. Payment Options All of the payment options described under "Income Payments" in this prospectus are available for the fixed dollar option. If you allocate all of your purchase payment to the fixed dollar option, you may also elect one of the following features in connection with your fixed income payments: (a) A Cash Refund Feature. (Only available if you select 100% fixed payments.) With this feature, if the annuitant or both annuitants (as applicable) die, then the beneficiary will receive a lump-sum payment equal to the purchase payment allocated to the fixed dollar option less any premium tax and less the total amount of fixed income payments paid prior to such death. The cash refund feature may be elected only with a "life income" or "life income-two lives" payment option that has no reduction in payment to the survivor, see "Income Payments--Payment Options." You may not elect a right to withdraw or elect an increasing annuity with this feature. (b) An Increasing Annuity. (Only available if you select 100% fixed payments.) With this feature you may elect for your payments to increase by either one, two, or three percent, compounded annually. The higher your percentage, the lower your initial payment will be. This is available with any payment option, except for those with a reduction in payment to the survivor, see "Income Payments--Payment Options." You may not elect a right to withdraw or elect the cash refund feature with an increasing annuity. The feature is not available under contracts purchased in conjunction with Section 457 deferred compensation plans. Fixed Income Payment Amounts The amount of each payment depends on (1) the purchase payment that you allocate to the fixed dollar option, less any premium tax, and (2) the payment option and features chosen. Withdrawals Withdrawal Amount--Lifetime Payment Options. If you select a lifetime payment option with a right to withdraw, the withdrawal amount available from any fixed portion of remaining guaranteed payments is equal to the present value of the remaining fixed portion of guaranteed payments calculated using the contract rate adjusted by the change in the constant maturity ten year Treasury note rate from your contract effective date to the date we calculate the withdrawal amount. Any applicable early withdrawal charge will be deducted. Withdrawal Amount--Nonlifetime Payment Options. If you select a nonlifetime payment option with a right to withdraw, the withdrawal amount available from any fixed portion of remaining guaranteed payments is equal to the present value of the remaining fixed portion of guaranteed payments calculated using the adjusted contract rate. The calculation is presented below. Any applicable early withdrawal charge will be deducted. 33 The adjusted contract rate equals (Rate of Return) + WY - IY, where: Rate of Return is the fixed annuity present value interest rate shown in your contract WY is the withdrawal yield IY is the issue yield WY is determined as follows: (1) WY is the average of the yields, as published in the Wall Street Journal on the Friday before the date of the withdrawal, of the three (or more if the Company deems necessary) noncallable, noninflation adjusted Treasury Notes or Bonds maturing on or closest to the withdrawal duration date. (2) The withdrawal duration date is the date (month and year) obtained when the withdrawal duration is added to the date of the withdrawal. (3) Withdrawal duration equals 1 plus the number of whole years from the date of the withdrawal until the final guaranteed payment is due, divided by 2. Any resulting fraction will be rounded up to the next whole number. IY is determined as follows: (1) IY is the average of the yields, as published in the Wall Street Journal on the Friday before the contract effective date shown in your contract, of the three (or more if the Company deems necessary) noncallable, noninflation adjusted Treasury Notes or Bonds maturing on or closest to the issue duration date. (2) The issue duration date (month and year) is obtained when the issue duration is added to the contract effective date. (3) Issue duration equals 1 plus the number of whole years from issue until the final payment is due, divided by 2. Any resulting fraction will be rounded up to the next whole number. Early Withdrawal Charge Withdrawals may be subject to an early withdrawal charge. The charge is a percentage of the amount that you withdraw. The percentage will be determined by the early withdrawal charge schedule applicable to your contract: Schedule A: Subject to state approval, Schedule A applies to contracts issued on or after May 3, 1999.
- ------------------------------------------------------------------ Schedule A - ------------------------------------------------------------------ Number of Years from Contract Effective Date* Early Withdrawal Charge 1 or more, but fewer than 2 6% 2 or more, but fewer than 3 5% 3 or more, but fewer than 4 4% 4 or more, but fewer than 5 3% 5 or more, but fewer than 6 2% 6 or more, but fewer than 7 1% 7 or more 0%
Schedule B applies to contracts issued prior to May 3, 1999. It also applies to contracts issued on or after May 3, 1999 in states where Schedule A is not approved as of the contract effective date.
- ------------------------------------------------------------------ Schedule B - ------------------------------------------------------------------ Number of Years from Contract Effective Date* Early Withdrawal Charge 1 or more, but fewer than 2 5% 2 or more, but fewer than 3 4% 3 or more, but fewer than 4 4% 4 or more, but fewer than 5 3% 5 or more, but fewer than 6 2% 6 or more, but fewer than 7 1% 7 or more 0%
*For participants under a group contract, the early withdrawal charge will be calculated based upon the number of years from the certificate effective date. 34 The early withdrawal charge, in effect, is a deferred sales charge imposed to reimburse the Company for unrecovered acquisition and distribution costs. Reduction or Elimination of the Early Withdrawal Charge. We may reduce or eliminate the early withdrawal charge when sales of the contract are made to individuals or a group of individuals in such a manner that results in savings of sales expenses. The entitlement to such a reduction in the early withdrawal charge will be based on one or more of the following criteria: (a) The size and type of group of individuals to whom the contract is offered (b) The type and frequency of administrative and sales services to be provided (c) Whether there is a prior or existing relationship with the Company such as being an employee of the Company or one of its affiliate; receiving distributions or making internal transfers from other contracts issued by the Company or one of its affiliates; or making transfers of amounts held under qualified plans sponsored by the Company or an affiliate Any reduction or elimination of the early withdrawal charge will not be unfairly discriminatory against any person. Death Benefit If the annuitant or both annuitants, as applicable, die before all guaranteed payments are paid, payments will continue to the beneficiary in the manner stated in your contract. Payment of Death Benefit. Any death benefit will be paid in the form specified in the contract and will be distributed at least as rapidly as under the method of distribution in effect upon the date of death. See "Taxation" for rules that apply if you have elected to delay your payment start date under a non qualified annuity and you die before the annuity starting date. A lump-sum payment of any death benefit may be requested within six months following the date of death. If a lump-sum payment is requested, no early withdrawal charge is applied and payment will be sent within seven days following our receipt of request in good order. A lump-sum payment may be requested at anytime (even after the six month period) if you had elected the right to withdraw. If a cash refund feature was elected, the death benefit will be paid in one sum to the beneficiary. If the contract holder who is not the annuitant dies, income payments will continue to be paid to the payee in the form specified in the contract. If no payee survives the death of the contract holder, income payments will be made to the annuitant. Such payments will be paid at least as rapidly as under the method of distribution then in effect. Death Benefit Amount. If you elect a right to withdraw, the death benefit value will be determined as described under "Withdrawal Amount" in this appendix. No early withdrawal charge will apply. If the contract is issued with guaranteed payments and with no right to withdraw, the rate used to determine the value of the remaining guaranteed payments will be the fixed annuity present value interest rate shown in the contract. The value of the death benefit will be determined as of the next valuation following the Company's receipt at its Home Office of proof of death acceptable to us and a request for payment in good order. 35 Appendix II Description of Underlying Funds - -------------------------------------------------------------------------------- The investment results of the mutual funds (funds) are likely to differ significantly and there is no assurance that any of the funds will achieve their respective investment objectives. Shares of the funds will rise and fall in value and you could lose money by investing in the funds. Shares of the funds are not bank deposits and are not guaranteed, endorsed or insured by any financial institution, the Federal Deposit Insurance Corporation or any other government agency. Except as noted, all funds are diversified, as defined under the Investment Company Act of 1940. Aetna Balanced VP, Inc. Investment Objective Seeks to maximize investment return, consistent with reasonable safety of principal by investing in a diversified portfolio of one or more of the following asset classes: stocks, bonds, and cash equivalents, based on the investment adviser's judgment of which of those sectors or mix thereof offers the best investment prospects. Policies Under normal market conditions, allocates assets among the following asset classes: 1) equities such as common and preferred stocks; and 2) debt such as bonds, mortgage-related and other asset-backed securities, and U.S. Government securities. Typically maintains approximately 60% of total assets in equities and 40% of total assets in debt (including money market instruments), although those percentages may vary from time to time. Risks Principal risks are those generally attributable to stock and bond investing. The success of the fund's strategy depends on the investment adviser's skill in allocating fund assets between equities and debt and in choosing investments within those categories. Risks attributable to stock investing include sudden and unpredictable drops in the value of the market as a whole and periods of lackluster or negative performance. Stocks of smaller companies tend to be less liquid and more volatile than stocks of larger companies and can be particularly sensitive to expected changes in interest rates, borrowing costs and earnings. Fixed-income investments are subject to the risk that interest rates will rise, which generally causes bond prices to fall. Also, economic and market conditions may cause issuers to default or go bankrupt. Values of high-yield bonds are even more sensitive to economic and market conditions than other bonds. Prices of mortgage-related securities, in addition to being sensitive to changes in interest rates, also are sensitive to changes in the prepayment patterns on the underlying instruments. Investment Adviser: Aeltus Investment Management, Inc. Aetna Income Shares d/b/a Aetna Bond VP Investment Objective Seeks to maximize total return, consistent with reasonable risk, through investments in a diversified portfolio consisting primarily of debt securities. It is anticipated that capital appreciation and investment income will both be major factors in achieving total return. Policies Under normal market conditions, invests at least 65% of total assets in high-grade corporate bonds, mortgage-related and other asset-backed securities, and securities issued or guaranteed by the U.S. government, its agencies and instrumentalities. High-grade securities are rated at least A by Standard & Poor's Corporation (S&P) or Moody's Investors Service, Inc. (Moody's), or if unrated, considered by the investment adviser to be of comparable quality. May also invest up to 15% of total assets in high-yield bonds, and up to 25% of total assets in foreign debt securities. Risks Principal risks are those generally attributable to debt investing, including increases in interest rates and loss of principal. Generally, when interest rates rise, bond prices fall. Bonds with longer maturities tend to be more sensitive to changes in interest rates. For all bonds there is a risk that the issuer will default. High-yield bonds 36 generally are more susceptible to the risk of default than higher rated bonds. Prices of mortgage-related securities, in addition to being sensitive to changes in interest rates, also are sensitive to changes in the prepayment patterns on the underlying instruments. Foreign securities have additional risks. Some foreign securities tend to be less liquid and more volatile than their U.S. counterparts. In addition, accounting standards and market regulations tend to be less standardized. These risks are usually higher for securities of companies in emerging markets. Securities of foreign companies may be denominated in foreign currency. Exchange rate fluctuations may reduce or eliminate gains or create losses. Investment Adviser: Aeltus Investment Management, Inc. Aetna Variable Fund d/b/a Aetna Growth and Income VP Investment Objective Seeks to maximize total return through investments in a diversified portfolio of common stocks and securities convertible into common stock. It is anticipated that capital appreciation and investment income will both be major factors in achieving total return. Policies Under normal market conditions, invests at least 65% of total assets in common stocks that the investment adviser believes have significant potential for capital or income growth. Tends to emphasize stocks of larger companies. Also invests assets across other asset classes (including stocks of small and medium-sized companies, international stock, real estate securities and fixed income securities). Risks Principal risks are those generally attributable to stock investing. These risks include sudden and unpredictable drops in the value of the market as a whole and periods of lackluster or negative performance. The success of the fund's strategy also depends significantly on the investment adviser's skill in allocating assets and in choosing investments within each asset class. Growth-oriented stocks typically sell at relatively high valuations as compared to other types of stocks. If a growth stock does not exhibit the level of growth expected, its price may drop sharply. Historically, growth-oriented stocks have been more volatile than value-oriented stocks. Although the investment adviser emphasizes large cap stocks, the fund is more diversified across asset classes than most other funds with a similar investment objective. Therefore, it may not perform as well as those funds when large cap stocks are in favor. Investment Adviser: Aeltus Investment Management, Inc. Aetna Variable Encore Fund d/b/a Aetna Money Market VP Investment Objective Seeks to provide high current return, consistent with preservation of capital and liquidity, through investment in high-quality money market instruments. Policies Invests only in a diversified portfolio of high-quality fixed income securities denominated in U.S. dollars, with short remaining maturities. These securities include U.S. Government securities, such as U.S. Treasury bills and securities issued or sponsored by U.S. Government agencies. They also may include corporate debt securities, finance company commercial paper, asset-backed securities and certain obligations of U.S. and foreign banks, each of which must be highly rated by independent rating agencies or, if unrated, considered by the investment adviser to be of comparable quality. Maintains a dollar-weighted average portfolio maturity of 90 days or less. Risks It is possible to lose money by investing in the fund. There is no guarantee the fund will achieve its investment objective. Shares of the fund are not bank deposits and are not guaranteed, endorsed or insured by any financial institution, the FDIC or any other government agency. 37 A weak economy, strong equity markets and changes by the Federal Reserve in its monetary policies all could affect short-term interest rates and therefore the value and yield of the fund's shares. Investment Adviser: Aeltus Investment Management, Inc. Aetna Generation Portfolios, Inc.--Aetna Ascent VP Investment Objective Seeks to provide capital appreciation. Policies Designed for investors seeking capital appreciation who generally have an investment horizon exceeding 15 years and who have a high level of risk tolerance. Under normal market conditions, allocates assets among several classes of equities, fixed-income securities, and money market instruments. The investment adviser has instituted both a benchmark percentage allocation and a fund level range allocation for each asset class. Asset allocation may vary from the benchmark allocation (within the permissible range) based on the investment adviser's ongoing evaluation of the expected returns and risks of each asset class relative to other classes. May invest up to 15% of total assets in high-yield bonds. The benchmark portfolio is 80% equities and 20% fixed income under neutral market conditions. Risks The success of the fund's strategy depends significantly on the investment adviser's skill in choosing investments and in allocating assets among the different investment classes. Principal risks are those generally attributable to stock and bond investing. For stock investments, risks include sudden and unpredictable drops in the value of the market as a whole and periods of lackluster or negative performance. Stocks of smaller companies tend to be less liquid and more volatile. Risks associated with real estate securities include periodic declines in the value of real estate, generally, or in the rents and other income generated by real estate. For bonds, generally, when interest rates rise, bond prices fall. Economic and market conditions may cause issuers to default or go bankrupt. Values of high-yield bonds are even more sensitive to economic and market conditions than other bonds. Prices of mortgage-related securities, in addition to being sensitive to changes in interest rates, also are sensitive to changes in the prepayment patterns on the underlying instruments. Foreign securities have additional risks. Some foreign securities tend to be less liquid and more volatile than their U.S. counterparts. In addition, accounting standards and market regulations tend to be less standardized. These risks are usually higher for securities of companies in emerging markets. Securities of foreign companies may be denominated in foreign currency. Exchange rate fluctuations may reduce or eliminate gains or create losses. Investment Adviser: Aeltus Investment Management, Inc. Aetna Generation Portfolios, Inc.--Aetna Crossroads VP Investment Objective Seeks to provide total return (i.e., income and capital appreciation, both realized and unrealized). Policies Designed for investors seeking a balance between income and capital appreciation who generally have an investment horizon exceeding ten years and who have a moderate level of risk tolerance. Under normal market conditions, allocates assets among several classes of equities, fixed-income securities, and money market instruments. The investment adviser has instituted both a benchmark percentage allocation and a fund level range allocation for each asset class. Asset allocation may vary from the benchmark allocation (within the permissible range) based on the investment adviser's ongoing evaluation of the expected returns and risks of each asset class relative to other classes. May invest up to 15% of total assets in high-yield bonds. The benchmark portfolio is 60% equities and 40% fixed income under neutral market conditions. 38 Risks The success of the fund's strategy depends significantly on the investment adviser's skill in choosing investments and in allocating assets among the different investment classes. Principal risks are those generally attributable to stock and bond investing. For stock investments, risks include sudden and unpredictable drops in the value of the market as a whole and periods of lackluster or negative performance. Stocks of smaller companies tend to be less liquid and more volatile. Risks associated with real estate securities include periodic declines in the value of real estate, generally, or in the rents and other income generated by real estate. For bonds, generally, when interest rates rise, bond prices fall. Economic and market conditions may cause issuers to default or go bankrupt. Values of high-yield bonds are even more sensitive to economic and market conditions than other bonds. Prices of mortgage-related securities, in addition to being sensitive to changes in interest rates, also are sensitive to changes in the prepayment patterns on the underlying instruments. Foreign securities have additional risks. Some foreign securities tend to be less liquid and more volatile than their U.S. counterparts. In addition, accounting standards and market regulations tend to be less standardized. These risks are usually higher for securities of companies in emerging markets. Securities of foreign companies may be denominated in foreign currency. Exchange rate fluctuations may reduce or eliminate gains or create losses. Investment Adviser: Aeltus Investment Management, Inc. Aetna Generation Portfolios, Inc.--Aetna Legacy VP Investment Objective Seeks to provide total return consistent with preservation of capital. Policies Designed for investors primarily seeking total return consistent with capital preservation who generally have an investment horizon exceeding five years and who have a low level of risk tolerance. Under normal market conditions, allocates assets among several classes of equities, fixed-income securities, and money market instruments. The investment adviser has instituted both a benchmark percentage allocation and a fund level range allocation for each asset class. Asset allocation may vary from the benchmark allocation (within the permissible range) based on the investment adviser's ongoing evaluation of the expected returns and risks of each asset class relative to other classes. May invest up to 15% of total assets in high-yield bonds. The benchmark portfolio is 40% equities and 60% fixed income under neutral market conditions. Risks The success of the fund's strategy depends significantly on the investment adviser's skill in choosing investments and in allocating assets among the different investment classes. Principal risks are those generally attributable to stock and bond investing. For stock investments, risks include sudden and unpredictable drops in the value of the market as a whole and periods of lackluster or negative performance. Stocks of smaller companies tend to be less liquid and more volatile. Risks associated with real estate securities include periodic declines in the value of real estate, generally, or in the rents and other income generated by real estate. For bonds, generally, when interest rates rise, bond prices fall. Economic and market conditions may cause issuers to default or go bankrupt. Values of high-yield bonds are even more sensitive to economic and market conditions than other bonds. Prices of mortgage-related securities, in addition to being sensitive to changes in interest rates, also are sensitive to changes in the prepayment patterns on the underlying instruments. Foreign securities have additional risks. Some foreign securities tend to be less liquid and more volatile than their U.S. counterparts. In addition, accounting standards and market regulations tend to be less standardized. These risks are usually higher for securities of companies in emerging markets. Securities of foreign companies may be denominated in foreign currency. Exchange rate fluctuations may reduce or eliminate gains or create losses. Investment Adviser: Aeltus Investment Management, Inc. 39 Aetna Variable Portfolios, Inc.--Aetna Growth VP Investment Objective Seeks growth of capital through investment in a diversified portfolio of common stocks and securities convertible into common stocks believed to offer growth potential. Policies Under normal market conditions, invests at least 65% of total assets in common stocks. Tends to emphasize stocks of larger companies, although may invest in companies of any size. Focuses on companies that the investment adviser believes have strong, sustainable and improving earnings growth, and established market positions in a particular industry. Risks Principal risks are those generally attributable to stock investing. They include sudden and unpredictable drops in the value of the market as a whole and periods of lackluster or negative performance. Growth-oriented stocks typically sell at relatively high valuations as compared to other types of stocks. If a growth stock does not exhibit the consistent level of growth expected, its price may drop sharply. Historically, growth-oriented stocks have been more volatile than value-oriented stocks. Investment Adviser: Aeltus Investment Management, Inc. Aetna Variable Portfolios, Inc.--Aetna Index Plus Large Cap VP Investment Objective Seeks to outperform the total return performance of the Standard & Poor's 500 Composite Index (S&P 500), while maintaining a market level of risk. Policies Invests at least 80% of net assets in stocks included in the S&P 500 (other than Aetna Inc. common stock). The investment adviser attempts to achieve the objective by overweighting those stocks in the S&P 500 that the investment adviser believes will outperform the index, and underweighting (or avoiding altogether) those stocks that the investment adviser believes will underperform the index. In determining stock weightings, the portfolio manager uses quantitative computer models to evaluate various criteria, such as the financial strength of each company and its potential for strong, sustained earnings growth. Although the fund will not hold all the stocks in the S&P 500, the investment adviser expects that there will be a close correlation between the performance of the fund and that of the S&P 500 in both rising and falling markets. Risks Principal risks are those generally attributable to stock investing. These risks include sudden and unpredictable drops in the value of the market as a whole and periods of lackluster or negative performance. The success of the fund's strategy depends significantly on the investment adviser's skill in determining which securities to overweight, underweight or avoid altogether. Investment Adviser: Aeltus Investment Management, Inc. Aetna Variable Portfolios, Inc.--Aetna International VP Investment Objective Seeks long-term capital growth primarily though investment in a diversified portfolio of common stocks principally traded in countries outside of the United States. The fund will not target any given level of current income. Policies Under normal market conditions, invests at least 65% of total assets in securities principally traded in three or more countries outside of North America. These securities may include common stocks as well as securities 40 convertible into common stocks. Invests primarily in established foreign securities markets, although may invest in emerging markets as well. Employs currency hedging strategies to protect from adverse effects on the U.S. dollar. Risks Principal risks are those generally attributable to stock investing. These risks include sudden and unpredictable drops in the value of the market as a whole and periods of lackluster or negative performance. Stocks of foreign companies present additional risks for U.S. investors, including the following: stocks of foreign companies tend to be less liquid and more volatile than their U.S. counterparts; accounting standards and market regulations tend to be less standardized in certain foreign countries; and economic and political climates tend to be less stable. Stocks of foreign companies may be denominated in foreign currency. Exchange rate fluctuations may reduce or eliminate gains or create losses. A hedging strategy adds to the fund's expenses and may not perform as expected. Investment Adviser: Aeltus Investment Management, Inc. Aetna Variable Portfolios, Inc.--Aetna Real Estate Securities VP Investment Objective Seeks maximum total return primarily through investment in a diversified portfolio of equity securities issued by real estate companies, the majority of which are real estate investment trusts (REITs). Policies Under normal market conditions, invests at least 65% of total assets in stocks, convertible securities and preferred stocks of companies principally engaged in the real estate industry. These companies may invest in, among other things, shopping malls, healthcare facilities, office parks and apartment communities, or may provide real estate management and development services. Risks Concentrating in stocks of real estate-related companies presents certain risks that are more closely associated with investing in real estate directly than with investing in the stock market generally. Those risks include: periodic declines in the value of real estate, generally, or in the rents and other income generated by real estate; periodic over-building, which creates gluts in the market, as well as changes in laws (such as zoning laws) that impair the property rights of real estate owners; adverse developments in the real estate industry, which may have a greater impact on this fund than a fund that is more broadly diversified. Performance also may be adversely affected by sudden and unpredictable drops in the value of the market as a whole and periods of lackluster or negative stock market performance. Although the fund is subject to the risks generally attributable to stock investing, because the fund has concentrated its assets in one industry it may be subject to more abrupt swings in value than would a fund that does not concentrate its assets in one industry. Investment Adviser: Aeltus Investment Management, Inc. Aetna Variable Portfolios, Inc.--Aetna Small Company VP Investment Objective Seeks growth of capital primarily through investment in a diversified portfolio of common stocks and securities convertible into common stocks of companies with smaller market capitalizations. Policies Under normal market conditions, invests at least 65% of total assets in common stocks of small-capitalization companies, defined as: the 2,000 smallest of the 3,000 largest U.S. companies (as measured by market capitalization); all companies not included above that are included in the Standard & Poor's SmallCap 600 Index or the Russell 2000 Index; and companies with market capitalizations lower than any companies included in the first two categories. For purposes of the 65% policy, the largest company in this group in which the fund intends to invest currently has a market capitalization of approximately $1.5 billion. 41 Risks Principal risks are those generally attributable to stock investing. These risks include sudden and unpredictable drops in the value of the market as a whole and periods of lackluster or negative performance. Stocks of smaller companies carry higher risks than stocks of larger companies. This is because smaller companies may lack the management experience, financial resources, product diversification, and competitive strengths of larger companies. In many instances, the frequency and volume of trading in these stocks is substantially less than is typical of stocks of larger companies. As a result, the stocks of smaller companies may be subject to wider price fluctuations or may be less liquid. When selling a large quantity of a particular stock, the fund may have to sell at a discount from quoted prices or may have to make a series of small sales over an extended period of time due to the more limited trading volume of smaller company stocks. Stocks of smaller companies can be particularly sensitive to expected changes in interest rates, borrowing costs and earnings. Investment Adviser: Aeltus Investment Management, Inc. AIM V.I. Capital Appreciation Fund Investment Objective Seeks growth of capital through investment in common stocks, with emphasis on medium- and small-sized growth companies. Policies The portfolio managers focus on companies they believe are likely to benefit from new or innovative products, services or processes as well as those that have experienced above-average, long-term growth in earnings and have excellent prospects for future growth. The portfolio managers consider whether to sell a particular security when any of those factors materially changes. The fund may also invest up to 20% of its total assets in foreign securities. In anticipation of or in response to adverse market conditions or for cash management purposes, the fund may hold all or a portion of its assets in cash, money market instruments, bonds or other debt securities. As a result, the fund may not achieve its investment objective. Risks The prices of equity securities change in response to many factors, including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity. This is especially true with respect to common stocks of smaller companies, whose prices may go up and down more than common stocks of larger, more-established companies. Also, since common stocks of smaller companies may not be traded as often as common stocks of larger, more-established companies, it may be difficult or impossible for the fund to sell securities at a desirable price. Investment Adviser: A I M Advisors, Inc. AIM V.I. Growth Fund Investment Objective Seeks growth of capital primarily by investing in seasoned and better capitalized companies considered to have strong earnings momentum. Policies The portfolio managers focus on companies that have experienced above-average growth in earnings and have excellent prospects for future growth. The portfolio managers consider whether to sell a particular security when any of those factors materially changes. The fund may also invest up to 20% of its total assets in foreign securities. In anticipation of or in response to adverse market conditions or for cash management purposes, the fund may hold all or a portion of its assets in cash, money market instruments, bonds or other debt securities. As a result, the fund may not achieve its investment objective. 42 Risks The prices of equity securities change in response to many factors, including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity. Investment Adviser: A I M Advisors, Inc. AIM V.I. Growth and Income Fund Investment Objective Seeks growth of capital with a secondary objective of current income. Policies The fund seeks to meet these objectives by investing at least 65% of its net assets in income-producing securities, including dividend-paying common stocks and convertible securities. The portfolio managers purchase securities of established companies that have long-term above-average growth in earnings and dividends, and growth companies that they believe have the potential for above-average growth in earnings and dividends. The portfolio managers consider whether to sell a particular security when they believe the security no longer has that potential or the capacity to generate income. The fund may also invest up to 20% of its total assets in foreign securities. The fund may engage in active and frequent trading of portfolio securities to achieve its investment objectives. If the fund does trade in this way, it may incur increased transaction costs and brokerage commissions, both of which can lower the actual return on your investment. In anticipation of or in response to adverse market conditions or for cash management purposes, the fund may hold all or a portion of its assets in cash, money market instruments, bonds or other debt securities. As a result, the fund may not achieve its investment objective. Risks The prices of equity securities change in response to many factors, including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity. The values of the convertible securities in which the fund may invest also will be affected by market interest rates, the risk that the issuer may default on interest or principal payments and the value of the underlying common stock into which these securities may be converted. Specifically, since these types of convertible securities pay fixed interest and dividends, their values may fall if market interest rates rise and rise if market interest rates fall. Additionally, an issuer may have the right to buy back certain of the convertible securities at a time and at a price that is unfavorable to the fund. Investment Adviser: A I M Advisors, Inc. AIM V.I. Value Fund Investment Objective Seeks to achieve long-term growth of capital by investing primarily in equity securities judged by the fund's investment advisor to be undervalued relative to the investment advisor's appraisal of the current or projected earnings of the companies issuing the securities, or relative to current market values of assets owned by the companies issuing the securities or relative to the equity market generally. Income is a secondary objective. Policies The fund also may invest in preferred stocks and debt instruments that have prospects for growth of capital. The fund may also invest up to 25% of its total assets in foreign securities. The portfolio managers focus on undervalued equity securities of (1) out-of-favor cyclical growth companies; (2) established growth companies that are undervalued compared to historical relative valuation parameters; (3) companies where there is early but tangible evidence of improving prospects that are not yet reflected in the price of the company's equity securities; and (4) companies whose equity securities are selling at prices that do 43 not reflect the current market value of their assets and where there is reason to expect realization of this potential in the form of increased equity values. The portfolio managers consider whether to sell a particular security when they believe the company no longer fits into any of the above categories. In anticipation of or in response to adverse market conditions or for cash management purposes, the fund may hold all or a portion of its assets in cash, money market instruments, bonds or other debt securities. As a result, the fund may not achieve its investment objective. Risks The prices of equity securities change in response to many factors, including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity. If the seller of a repurchase agreement in which the fund invests defaults on its obligation or declares bankruptcy, the fund may experience delays in selling the securities underlying the repurchase agreement. As a result, the fund may incur losses arising from decline in the value of those securities, reduced levels of income and expenses of enforcing its rights. Investment Adviser: A I M Advisors, Inc. Fidelity Variable Insurance Products Fund--High Income Portfolio Investment Objective Seeks a high level of current income while also considering growth of capital. Policies Normally invests at least 65% of total assets in income-producing debt securities, preferred stocks and convertible securities, with an emphasis on lower-quality debt securities. May also invest in non-income producing securities, including defaulted securities and common stocks. Currently intends to limit common stocks to 10% of total assets. May invest in securities of both foreign and domestic issuers. In making investment decisions, the investment adviser relies on fundamental analysis of each issuer and its potential for success in light of its current financial condition, its industry position, and economic and market conditions. May use various techniques, such as buying and selling futures contracts, to increase or decrease exposure to changing security prices, interest rates or other factors that affect security values. Risks Debt securities have varying levels of sensitivity to changes in interest rates. In general, the price of a debt security can fall when interest rates rise. Securities with longer maturities and mortgage securities can be more sensitive to interest rate changes. The value of equity securities fluctuates in response to issuer, political, market and economic developments. In the short term, equity prices can fluctuate dramatically in response to these developments. Foreign investments, especially those in emerging markets, can be more volatile and potentially less liquid than U.S. investments due to increased risks of adverse issuer, political, regulatory, market or economic developments. Lower-quality debt securities (those of less than investment-grade quality) can be more volatile due to increased sensitivity to adverse issuer, political, regulatory, market or economic developments. Lower-quality debt securities involve greater risk of default or price changes due to changes in the credit quality of the issuer. Investment Adviser: Fidelity Management & Research Company Janus Aspen Series--Growth Portfolio Investment Objective Seeks long-term growth of capital in a manner consistent with the preservation of capital. Policies Generally invests primarily in common stocks of larger, more established companies selected for their growth potential, although it can invest in companies of any size. May at times hold substantial positions in cash or similar investments. 44 Risks Because the Portfolio may invest substantially all of its assets in common stocks, the main risk is that the value of the stocks it holds might decrease in response to the activities of an individual company or in response to general market and/or economic conditions. Performance may also be affected by risks specific to certain types of investments, such as foreign securities, derivative investments, non-investment grade debt securities (high-yield/ high-risk securities or "junk" bonds) or companies with relatively small market capitalizations. Smaller or newer companies may suffer more significant losses as well as realize more substantial growth than larger or more established issuers. Investments in such companies tend to be more volatile and somewhat more speculative. Issues associated with investing in foreign securities include currency risk, political and economic risk, regulatory risk, market risk and transaction costs. High-yield/high-risk securities are generally more dependent on the ability of the issuer to meet interest and principal payments (i.e., credit risk). They are more vulnerable to real or perceived economic changes, political changes or other adverse developments specific to the issuer. Investment Adviser: Janus Capital Corporation Janus Aspen Series--Worldwide Growth Portfolio Investment Objective Seeks long-term growth of capital in a manner consistent with the preservation of capital. Policies Invests primarily in common stocks of companies of any size throughout the world. Normally invests in issuers from at least five different countries, including the United States. May at times invest in fewer than five countries or even in a single country. May hold substantial positions in cash or similar investments. Risks Because the Portfolio may invest substantially all of its assets in common stocks, the main risk is that the value of the stocks it holds might decrease in response to the activities of an individual company or in response to general market and/or economic conditions. Performance may also be affected by risks specific to certain types of investments, such as foreign securities, derivative investments, non-investment grade debt securities (high-yield/ high-risk securities or "junk" bonds) or companies with relatively small market capitalizations. Smaller or newer companies may suffer more significant losses as well as realize more substantial growth than larger or more established issuers. Investments in such companies tend to be more volatile and somewhat more speculative. Issues associated with investing in foreign securities include currency risk, political and economic risk, regulatory risk, market risk and transaction costs. High-yield/high-risk securities are generally more dependent on the ability of the issuer to meet interest and principal payments (i.e., credit risk). They are more vulnerable to real or perceived economic changes, political changes or other adverse developments specific to the issuer. Investment Adviser: Janus Capital Corporation Oppenheimer Aggressive Growth Fund/VA Investment Objective Seeks to achieve long-term capital appreciation by investing in "growth-type" companies. Policies Invests mainly in equity securities, such as common stocks, preferred stocks and convertible securities, of issuers in the U.S. and foreign countries. The fund can invest in any country, including countries with developed or emerging markets, but currently emphasizes investments in developed markets. As a fundamental policy, the fund will normally invest in at least four countries (including the United States). The fund emphasizes investments in securities of "growth-type" companies. The fund may also invest in cyclical industries and in "special situations" that the fund's investment manager believes present opportunities for capital growth. "Special situations" are anticipated acquisitions, mergers or other unusual developments which, in the opinion of the manager, will increase the value of an issuer's securities, regardless of general business conditions or market movements. 45 Risks The fund's investments in stocks are subject to changes in their value from a number of factors. They include changes in general stock market movements, or the change in value of particular stocks because of an event affecting the issuer. The fund expects to have substantial amounts of its investments in foreign securities. Therefore, it will be subject to the risks that economic, political or other events can have on the values of securities of issuers in particular foreign countries. Changes in interest rates can also affect stock prices. Investing in securities with high growth potential, which are often newer companies having a market capitalization of $200 million or less, involves substantially greater risks of loss and price fluctuations than larger cap issuers. Small-cap stock investments also pose certain risks because their stocks may be less liquid than those of larger issuers. Investment Adviser: OppenheimerFunds, Inc. Oppenheimer Main Street Growth & Income Fund/VA Investment Objective Seeks a high total return (which includes growth in the value of its shares as well as current income) from equity and debt securities. Policies Invests in equity securities, such as common stocks, preferred stocks and convertible securities and in debt securities, of issuers in the U.S. and foreign countries. Although the fund can invest in securities of issues of all market capitalization ranges, it may focus from time to time on small to medium capitalization issuers (having a market capitalization of less than $5 billion). The fund can also use hedging instruments and certain derivative investments to try to manage investment risks. Risks The fund's investments in stocks and bonds are subject to changes in their value from a number of factors. They include changes in general stock and bond market movements, or the change in value of particular stocks or bonds because of an event affecting the issuer. High-yield, lower-grade bonds are subject to greater credit risks than investment-grade securities. The fund can have significant amounts of its assets invested in foreign securities. Therefore, it will be subject to the risks of economic, political or other events that can affect the values of securities of issuers in particular foreign countries. Changes in interest rates can also affect stock and bond prices. Investment Adviser: OppenheimerFunds, Inc. Oppenheimer Strategic Bond Fund/VA Investment Objective Seeks a high level of current income principally derived from interest on debt securities and seeks to enhance such income by writing covered call options on debt securities. Policies Invests mainly in debt securities of issuers in three market sectors: foreign governments and companies, U.S. government securities and lower-rated high-yield securities of U.S. companies. Under normal market conditions, the fund invests in each of those three market sectors. However, the fund is not obligated to do so, and the amount of its assets in each of the three sectors will vary over time. The fund can invest up to 100% of its assets in any one sector at any time, if the manager believes that in doing so the fund can achieve its objective without undue risk. The fund's foreign investments can include debt securities of issuers in developed markets as well as emerging markets, which have special risks. The fund can also use hedging instruments and certain derivative investments to try to enhance income or try to manage investment risks. Risks The fund's investments in debt securities are subject to changes in their value from a number of factors. They include changes in general bond market movements in the U.S. and abroad, or the change in value of particular 46 bonds because of an event affecting the issuer. The fund can focus significant amounts of its investments in foreign debt securities. Therefore, it will be subject to the risks that economic, political or other events can have on the values of securities of issuers in particular foreign countries. These risks are heightened in the case of emerging market debt securities. Changes in interest rates can also affect securities prices. Investment Adviser: OppenheimerFunds, Inc. Portfolio Partners MFS Emerging Equities Portfolio Investment Objective Seeks long-term growth of capital. Policies Invests, under normal market conditions, at least 80% of total assets in common stocks and related securities, such as preferred stock, convertible securities and depositary receipts of emerging growth companies. Emerging growth companies are companies believed to be either early in their life cycle but which have the potential to become major enterprises, or major enterprises whose rates of earnings growth are expected to accelerate. Investments may include securities traded in the over-the-counter markets. May also invest in foreign securities and may have exposure to foreign currencies through its investment in these securities, its direct holdings of foreign currencies or through its use of foreign currency exchange contracts for the purchase or sale of a fixed quantity of foreign currency at a future date. Risks Investment in the portfolio is subject to the following risks: >Market and Company Risk: The value of the securities in which the portfolio invests may decline due to changing economic, political or market conditions, or due to the financial condition of the company which issued the security. >Emerging Growth Risk: The portfolio's performance is particularly sensitive to changes in the value of emerging growth companies. Investments in emerging growth companies may be subject to more abrupt or erratic market movements and may involve greater risks than investments in other companies. >Over the Counter Risk: Equity securities that are traded over the counter may be more volatile than exchange listed securities, and the portfolio may experience difficulty in purchasing or selling these securities at a fair price. >Foreign Markets Risk: Investment in foreign securities involves risks related to political, social and economic developments abroad. These risks result from differences between the regulations to which U.S. and foreign issuers and markets are subject. >Currency Risk: The portfolio's exposure to foreign currencies may cause the value of the portfolio to decline if the U.S. dollar strengthens against these currencies or if foreign governments intervene in the currency markets. Investment Adviser: Aetna Life Insurance and Annuity Company; Subadviser: Massachusetts Financial Services Company Portfolio Partners MFS Value Equity Portfolio Investment Objectives Seeks capital appreciation. Policies Invests primarily (at least 65% of total assets) in common stocks and related securities, such as preferred stock, convertible securities and depositary receipts. Focuses on companies believed to have favorable growth prospects and attractive valuations based on current and expected earnings or cash flow. Investments may include securities traded in the over-the-counter markets. 47 May invest in foreign securities (including emerging market securities) and may have exposure to foreign currencies through its investment in these securities, its direct holdings of foreign currencies or through its use of foreign currency exchange contracts for the purchase or sale of a fixed quantity of a foreign currency at a future date. Also may invest in debt securities issued by both U.S. and foreign companies, including non-investment grade debt securities. Risks Investment in the portfolio is subject to the following risks: >Market and Company Risk: The value of the securities in which the portfolio invests may decline due to changing economic, political or market conditions, or due to the financial condition of the company which issued the security. In addition, securities of growth companies may be more volatile because such companies usually invest a high portion of their earnings in their businesses and may lack the dividends of value companies, which can cushion the security prices in a declining market. >Over the Counter Risk: Equity securities that are traded over the counter may be more volatile than exchange listed securities, and the portfolio may experience difficulty in purchasing or selling these securities at a fair price. >Foreign Markets Risk: The portfolio's investment in foreign securities involves additional risks relating to political, social and economic developments abroad. Other risks from these investments result from the differences between the regulations to which U.S. and foreign issuers and markets are subject. >Emerging Markets Risk: Emerging markets are generally defined as countries in the initial stages of their industrialization cycles with low per capita income. Investments in emerging markets securities involve all of the risks of investment in foreign securities, and also have additional risks. >Currency Risk: The portfolio's exposure to foreign currencies may cause the value of the portfolio to decline in the event that the U.S. dollar strengthens against these currencies, or in the event that foreign governments intervene in the currency markets. >Interest Rate Risk: The portfolio's investment in debt securities involves risks relating to interest rate movement. If interest rates go up, the value of debt securities held by the portfolio will decline. >Credit Risk: The portfolio's investment in non-investment grade debt securities involves credit risk because issuers of non-investment grade securities are more likely to have difficulty making timely payments of interest or principal. Investment Adviser: Aetna Life Insurance and Annuity Company; Subadviser: Massachusetts Financial Services Company Portfolio Partners Scudder International Growth Portfolio Investment Objective Seeks long-term growth of capital. Policies Invests primarily (at least 65% of total assets) in the equity securities of foreign companies believed to have high growth potential. Normally invests in securities of at least three different countries other than the U.S. Focuses on issuers located primarily in Europe, Latin America, and the emerging markets of the Pacific Basin and Japan, but also may invest in select issues from elsewhere outside the U.S. Will invest in securities in both developed and developing markets. Seeks to invest in those companies believed to be best able to capitalize on the growth and changes taking place within and between various regions of the world. Typically, these are companies with leading or rapidly developing business franchises, strong financial positions, and high quality management capable of defining and implementing strategies to take advantage of local, regional or global markets. Also may invest in debt securities issued by both U.S. and foreign companies, including non-investment grade debt securities. 48 Risks Investment in the portfolio is subject to the following risks: >Market and Company Risk: The value of the securities in which the portfolio invests may decline due to changing economic, political or market conditions, or due to the financial condition of the company which issued the security. In addition, securities of growth companies may be more volatile because such companies usually invest a high portion of their earnings in their businesses and may lack the dividends of value companies, which can cushion the security prices in a declining market. >Foreign Markets Risk: The portfolio's investment in foreign securities involves additional risks relating to political, social and economic developments abroad. Other risks from these investments result from the differences between the regulations to which U.S. and foreign issuers and markets are subject. >Currency Risk: The portfolio's exposure to foreign currencies may cause the value of the portfolio to decline in the event that the U.S. dollar strengthens against these currencies, or in the event that foreign governments intervene in the currency markets. >Emerging Growth Risk: The portfolio's performance is particularly sensitive to changes in the value of emerging growth companies. Investments in emerging growth companies may be subject to more abrupt or erratic market movements and may involve greater risks than investments in other companies. >Interest Rate Risk: The portfolio's investment in debt securities involves risks relating to interest rate movement. If interest rates go up, the value of debt securities held by the portfolio will decline. >Credit Risk: The portfolio's investment in non-investment grade debt securities involves credit risk because issuers of non-investment grade securities are more likely to have difficulty making timely payments of interest or principal. Investment Adviser: Aetna Life Insurance and Annuity Company; Subadviser: Scudder Kemper Investments, Inc. Portfolio Partners T. Rowe Price Growth Equity Portfolio Investment Objective Seeks long-term capital growth, and, secondarily, increasing dividend income. Policies Invests primarily (at least 65% of total assets) in the common stocks of a diversified group of growth companies. The subadviser seeks companies with a lucrative niche in the economy that it believes will give them the ability to sustain earnings momentum even during times of slow economic growth. The subadviser believes that when a company's earnings grow faster than both inflation and the overall economy, the market will eventually reward it with a higher stock price. May invest in foreign securities and may have exposure to foreign currencies through its investment in these securities, its direct holdings of foreign currencies or through its use of foreign currency exchange contracts for the purchase or sale of a fixed quantity of foreign currency at a future date. Risks Investment in the portfolio is subject to the following risks: >Market and Company Risk: The value of the securities in which the portfolio invests may decline due to changing economic, political or market conditions, or due to the financial condition of the company which issued the security. In addition, securities of growth companies may be more volatile because such companies usually invest a high portion of their earnings in their businesses and may lack the dividends of value companies, which can cushion the security prices in a declining market. >Foreign Markets Risk: The portfolio's investment in foreign securities involves additional risks relating to political, social and economic developments abroad. Other risks from these investments result from the differences between the regulations to which U.S. and foreign issuers and markets are subject. 49 >Currency Risk: The portfolio's exposure to foreign currencies may cause the value of the portfolio to decline in the event that the U.S. dollar strengthens against these currencies, or in the event that foreign governments intervene in the currency markets. Investment Adviser: Aetna Life Insurance and Annuity Company; Subadviser: T. Rowe Price Associates, Inc. 50 Appendix III Condensed Financial Information - -------------------------------------------------------------------------------- (Selected data for annuity and accumulation units outstanding throughout each period) ================================================================================ The condensed financial information presented below for each of the periods in the two-year period ended December 31, 1998 (as applicable), is derived from information included in the financial statements of the separate account, which have been audited by KPMG LLP, independent auditors. The financial statements and the independent auditors' report thereon for the year ended December 31, 1998 are included in the Statement of Additional Information. The annuity unit values shown below are derived from accumulation unit values and reflect the application of a factor corresponding to the assumed annual net return rates of 3.50% and 5.00% as noted. See "Calculating Variable Income Payments" for more information. Only those subaccounts with annuity units outstanding at the end of the period are listed below.
Assumed Annual Net Return Rate Assumed Annual Net Return Rate of 3.50% of 5.00% ------------------------------- ------------------------------ 1998 1997 1998 1997 ------- ------- ------- ------ AETNA BALANCED VP, INC. Value at beginning of period $15.488 $13.448(1) $14.800 $13.209(2) Value at end of period $17.280 $15.488 $16.276 $14.800 AETNA BOND VP Value at beginning of period $11.529 $11.087(1) $11.017 $10.990(3) Value at end of period $11.896 $11.529 $11.205 $11.017 AETNA CROSSROADS VP Value at beginning of period $10.242 $10.108(4) $10.223 $10.032(4) Value at end of period $10.350 $10.242 $10.182 $10.223 AETNA GROWTH VP Value at beginning of period $14.972(5) $13.015 $13.538(4) Value at end of period $17.245 $16.827 $13.015 AETNA GROWTH AND INCOME VP Value at beginning of period $18.426 $15.431(2) $17.607 $15.123(2) Value at end of period $20.128 $18.426 $18.959 $17.607 AETNA INDEX PLUS LARGE CAP VP Value at beginning of period $12.402 $11.263(3) $12.277 $10.848(6) Value at end of period $15.572 $12.402 $15.195 $12.277 AETNA INTERNATIONAL VP Value at beginning of period $10.413(7) Value at end of period $10.780 AETNA LEGACY VP Value at beginning of period $11.201 $10.372(8) $11.017 $10.264(2) Value at end of period $11.429 $11.201 $11.080 $11.017 AETNA MONEY MARKET VP Value at beginning of period $10.044(9) Value at end of period $10.073 AETNA REAL ESTATE SECURITIES VP Value at beginning of period $ 9.235(10) Value at end of period $ 8.295 AETNA SMALL COMPANY VP Value at beginning of period $13.444 $12.930(11) $13.308 $13.322(4) Value at end of period $12.968 $13.444 $12.654 $13.308 FIDELITY VIP HIGH INCOME PORTFOLIO Value at beginning of period $10.483(5) $10.060 $10.058(4) Value at end of period $ 9.201 $ 9.052 $10.060 JANUS ASPEN GROWTH PORTFOLIO Value at beginning of period $11.789 $10.481(1) $11.580 $10.433(1) Value at end of period $15.260 $11.789 $14.775 $11.580 JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO Value at beginning of period $12.007 $10.576(2) $11.794 $10.638(2) Value at end of period $14.769 $12.007 $14.300 $11.794 OPPENHEIMER STRATEGIC BOND FUND/VA Value at beginning of period $10.180(5) $10.152(12) Value at end of period $ 9.909 $ 9.749 PORTFOLIO PARTNERS MFS EMERGING EQUITIES PORTFOLIO Value at beginning of period $ 9.894 $10.050(13) $ 9.719 $ 9.885(13) Value at end of period $12.241 $ 9.894 $11.852 $ 9.719 PORTFOLIO PARTNERS MFS VALUE EQUITY PORTFOLIO Value at beginning of period $12.474 $12.335(13) $12.253 $12.132(13) Value at end of period $15.084 $12.474 $14.605 $12.253
51 Condensed Financial Information (continued) - --------------------------------------------------------------------------------
Assumed Annual Net Assumed Annual Net Return Return Rate Rate of 3.50% of 5.00% ----------------------- ------------------------ 1998 1997 1998 1997 ------- ------ ------ ----- PORTFOLIO PARTNERS SCUDDER INTERNATIONAL GROWTH PORTFOLIO Value at beginning of period $11.433(7) $11.992(14) Value at end of period $11.777 $11.587 PORTFOLIO PARTNERS T. ROWE PRICE GROWTH EQUITY PORTFOLIO Value at beginning of period $10.998(9) Value at end of period $11.582
- ----------------- (1) Funds were first received in this option during March 1997. (2) Funds were first received in this option during January 1997. (3) Funds were first received in this option during October 1997. (4) Funds were first received in this option during December 1997. (5) Funds were first received in this option during March 1998. (6) Funds were first received in this option during May 1997. (7) Funds were first received in this option during November 1998. (8) Funds were first received in this option during February 1997. (9) Funds were first received in this option during July 1998. (10) Funds were first received in this option during June 1998. (11) Funds were first received in this option during August 1997. (12) Funds were first received in this option during February 1998. (13) Funds were first received in this option during November 1997. (14) Funds were first received in this option during May 1998. 52 For Master Applications Only - -------------------------------------------------------------------------------- I hereby acknowledge receipt of an Account B Aetna Immediate Annuity prospectus dated May 3, 1999. ____ Please send an Account B Statement of Additional Information (Form No. SAI.09515-99) dated May 3, 1999. - -------------------------------------------------------------------------------- CONTRACT HOLDER'S SIGNATURE - -------------------------------------------------------------------------------- DATE PROS.09515-99 VARIABLE ANNUITY ACCOUNT B OF AETNA LIFE INSURANCE AND ANNUITY COMPANY Statement of Additional Information dated May 3, 1999 A Fixed and Variable Single Premium, Group or Individual, Immediate Annuity Contract This Statement of Additional Information is not a prospectus and should be read in conjunction with the current prospectus for Variable Annuity Account B (the separate account) dated May 3, 1999. 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 Attn: ARS Settlements 151 Farmington Avenue Hartford, Connecticut 06156 1-800-238-6273 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 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............................... 3 Income Payments...................................................... 7 Sales Material and Advertising....................................... 8 Independent Auditors................................................. 8 Financial Statements of the Separate Account......................... S-1 Financial Statements of Aetna Life Insurance and Annuity Company and Subsidiary....................................... F-1
GENERAL INFORMATION AND HISTORY Aetna Life Insurance and Annuity Company (the "Company," we, us, our) is a stock life insurance company which was organized under the insurance laws of the State of Connecticut in 1976. The Company is an indirect wholly owned subsidiary of Aetna Inc. Through a merger, it succeeded to the business of Aetna Variable Annuity Life Insurance Company (formerly Participating Annuity Life Insurance Company organized in 1954). As of December 31, 1998, the Company and its subsidiary life company had $43 billion invested through their products, including $29 billion in their separate accounts (of which the Company, or an affiliate oversees the management of $21 billion). The Company is ranked among the top 2% of all U.S. life insurance companies based on assets as of December 31, 1997. The Company is engaged in the business of issuing life insurance policies and annuity contracts. Our Home Office is located at 151 Farmington Avenue, Hartford, Connecticut 06156. In addition to serving as the principal underwriter and the depositor for the separate account, the Company is a registered investment adviser under the Investment Advisers Act of 1940, and a registered broker-dealer under the Securities Exchange Act of 1934. We provide 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 charge, the administrative expense charge and the guaranteed minimum income charge described in the prospectus, all expenses incurred in the operations of the separate account are borne by the Company. (See "Fees" in the prospectus.) We receive reimbursement for certain administrative costs from some advisers of the funds used as funding options under the contract. These fees generally range up to 0.425%. The assets of the separate account are held by the Company. The separate account has no custodian. However, the funds in whose shares the assets of the separate account are invested each have custodians, as discussed in their respective prospectuses. From this point forward, the term "contract(s)" refers only to those offered through the prospectus. VARIABLE ANNUITY ACCOUNT B Variable Annuity Account B is a separate account established by the Company for the purpose of funding variable annuity contracts issued by the Company. The separate account is registered with the Securities and Exchange Commission as a unit investment trust under the Investment Company Act of 1940, as amended. Payments to accounts under the contract may be allocated to one or more of the subaccounts. Each subaccount invests in the shares of only one of the funds listed below. We may make additions to, deletions from or substitutions of available investment options as permitted by law and subject to the conditions of the contract. The availability of the funds is subject to applicable regulatory authorization. Not all funds may be available in all jurisdictions or under all contracts. The funds currently available under the contract are as follows: Aetna Ascent VP Aetna Balanced VP, Inc. Aetna Income Shares d/b/a Aetna Bond VP Aetna Crossroads VP Aetna Growth VP Aetna Variable Fund d/b/a Aetna Growth and Income VP Aetna Index Plus Large Cap VP Aetna International VP Aetna Legacy VP Aetna Variable Encore Fund d/b/a Aetna Money Market VP Aetna Real Estate Securities VP Aetna Small Company VP AIM V.I. Capital Appreciation Fund AIM V.I. Growth Fund AIM V.I. Growth and Income Fund AIM V.I. Value Fund Fidelity Variable Insurance Products Fund (VIP) High Income Portfolio Janus Aspen Growth Portfolio Janus Aspen Worldwide Growth Portfolio Oppenheimer Aggressive Growth Fund/VA Oppenheimer Growth and Income Fund/VA Oppenheimer Strategic Bond Fund/VA Portfolio Partners MFS Emerging Equities Portfolio Portfolio Partners MFS Value Equity Portfolio Portfolio Partners Scudder International Growth Portfolio Portfolio Partners T. Rowe Price Growth Equity 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 The Company is both the depositor and the principal underwriter for the securities sold by the prospectus. We offer the contracts through life insurance agents licensed to sell variable annuities who are registered representatives of the Company or of other registered broker-dealers who have sales agreements with the Company. The offering of the contracts is continuous. A description of the manner in which contracts are purchased may be found in the prospectus under the sections titled "Purchase." PERFORMANCE DATA GENERAL From time to time, we may advertise different types of historical performance for the subaccounts of the separate account available under the contracts. We may advertise the "standardized average annual total returns," calculated in a manner prescribed by the Securities and Exchange Commission (the "standardized return"), as well as the "non-standardized returns," both of which are described below. The standardized and non-standardized total return figures are computed according to a formula in which a hypothetical initial payment of $1,000 is applied under a deferred annuity contract to the various subaccounts available under the contract, and then related to the ending redeemable values over one, five and ten year periods (or fractional periods thereof). The redeemable value is then divided by the initial investment and this quotient is taken to the Nth root (N represents the number of years in the period) and 1 is subtracted from the result which is then expressed as a percentage, carried to at least the nearest hundredth of a percent. The standardized figures use the actual returns of the fund since the date contributions were first received in the fund under the separate account, adjusted to reflect the deduction of the maximum recurring charges under the contracts during each period (e.g., 1.25% mortality and expense risk charges, 1.00% guaranteed minimum income charge, as applicable, and an early withdrawal charge of 7% grading down to 0% after seven years). These charges will be deducted on a pro rata basis in the case of fractional periods. The non-standardized figures will be calculated in a similar manner, except that they will not reflect the deduction of any applicable early withdrawal charge. The deduction of the early withdrawal charge would decrease the level of performance shown if reflected in these calculations. The non-standardized figures may also include monthly, quarterly, year-to-date and three year periods, and may include returns calculated from the fund's inception date and/or the date contributions were first received in the fund under the separate account. Investment results of the funds will fluctuate over time, and any presentation of the subaccounts' total return quotations for any prior period should not be considered as a representation of how the subaccounts will perform in any future period. 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, 1998 for the Subaccounts. The standardized returns assume the maximum charges under the contract as described under "General" above. The non-standardized returns assume the same charges but do not include the early withdrawal charges. Also reflected in both tables is the guaranteed minimum income charge as it applies to Aetna Index Plus Large Cap fund. As reflected in the tables, this charge only applies when the guaranteed minimum income feature is selected. For the subaccounts funded by the Portfolio Partners portfolios, two sets of performance returns are shown for each subaccount: one showing performance based solely on the performance of the Portfolio Partners portfolio from November 28, 1997, the date the Portfolio commenced operations; and one quotation based on (a) performance through November 26, 1997 of the fund it replaced under many contracts and; (b) after November 26, 1997, based on the performance of the Portfolio Partners portfolio. For those subaccounts where results are not available for the full calendar period indicated, performance for such partial periods is shown in the column labeled "Since Inception." For standardized performance, the "Since Inception" column shows average annual return since the date contributions were first received in the fund under the separate account. For non-standardized performance, the "Since Inception" column shows average annual total return since the fund's inception date.
- ------------------------------------------------------------------------------------------------------------------------------------ Date Contributions STANDARDIZED First Received Under the Separate Account - ------------------------------------------------------------------------------------------------------------------------------------ Since SUBACCOUNT 1 Year 5 Years 10 Years Inception* - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Ascent VP (3.18%) 13.03% 08/31/1995 - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Balanced VP, Inc. 8.55% 13.99% 11.69% 06/30/1989 - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Bond VP(1) 0.38% 4.89% 7.91% - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Crossroads VP (1.69%) 11.41% 08/31/1995 - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Growth VP 27.80% 30.19% 05/30/1997 - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Growth and Income VP(1) 6.28% 17.41% 15.00% - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Index Plus Large Cap VP 22.16% 28.01% 10/31/1996 - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Index Plus Large Cap VP(4) - ------------------------------------------------------------------------------------------------------------------------------------ Aetna International VP (10.53%) 05/05/1998 - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ Date Contributions STANDARDIZED First Received Under the Separate Account - ------------------------------------------------------------------------------------------------------------------------------------ Since SUBACCOUNT 1 Year 5 Years 10 Years Inception* - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Legacy VP (0.73%) 9.49% 08/31/1995 - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Money Market VP(1)(2) (2.11%) 3.55% 4.43% - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Real Estate Securities VP (18.27%) 05/06/1998 - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Small Company VP (6.16%) 8.13% 05/30/1997 - ------------------------------------------------------------------------------------------------------------------------------------ AIM V.I. Capital Appreciation Fund 20.23% 10/02/1998 - ------------------------------------------------------------------------------------------------------------------------------------ AIM V.I. Growth Fund 23.29% 10/02/1998 - ------------------------------------------------------------------------------------------------------------------------------------ AIM V.I. Growth and Income Fund 21.08% 10/02/1998 - ------------------------------------------------------------------------------------------------------------------------------------ AIM V.I. Value Fund 21.82% 10/02/1998 - ------------------------------------------------------------------------------------------------------------------------------------ Fidelity VIP High Income Portfolio (11.19%) 7.05% 06/30/1995 - ------------------------------------------------------------------------------------------------------------------------------------ Janus Aspen Growth Portfolio 25.93% 21.73% 07/29/1994 - ------------------------------------------------------------------------------------------------------------------------------------ Janus Aspen Worldwide Growth Portfolio 19.67% 25.73% 04/28/1995 - ------------------------------------------------------------------------------------------------------------------------------------ Oppenheimer Aggressive Growth Fund/VA 4.30% 8.92% 05/30/1997 - ------------------------------------------------------------------------------------------------------------------------------------ Oppenheimer Main Street Growth & Income Fund/VA (2.81%) 9.40% 05/30/1997 - ------------------------------------------------------------------------------------------------------------------------------------ Oppenheimer Strategic Bond Fund/VA (4.49%) 0.43% 05/30/1997 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio Partners MFS Emerging Equities Portfolio 20.36% 17.18% 11/28/1997 - ------------------------------------------------------------------------------------------------------------------------------------ Alger American Small Cap/Portfolio Partners MFS Emerging Equities(3) 20.36% 13.38% 13.13% 09/30/1993 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio Partners MFS Value Equity Portfolio 17.65% 17.61% 11/28/1997 - ------------------------------------------------------------------------------------------------------------------------------------ Neuberger Berman AMT Growth/Portfolio Partners MFS Value Equity(3) 17.65% 15.01% 13.68% 11/30/1992 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio Partners Scudder International Growth Portfolio 10.55% 10.89% 11/28/1997 - ------------------------------------------------------------------------------------------------------------------------------------ Scudder International Portfolio Class A/Portfolio Partners Scudder International Growth(3) 10.55% 8.60% 11.29% 08/31/1992 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio Partners T. Rowe Price Growth Equity Portfolio 18.45% 18.98% 11/28/1997 - ------------------------------------------------------------------------------------------------------------------------------------ Alger American Growth/Portfolio Partners T. Rowe Price Growth 18.45% 23.05% 02/28/1995 Equity(3) - ------------------------------------------------------------------------------------------------------------------------------------
Please refer to the discussion preceding the tables for an explanation of the charges included and methodology used in the standardized and non-standardized figures. These figures represent historical performance and should not be considered a projection of future performance. * Reflects performance from the date contributions were first received in the fund under the separate account. (1) These funds have been available through the separate account for more than ten years. (2) The current yield for the subaccount for the 7-day period ended December 31, 1998 (on an annualized basis) was 3.77%. Current yield more closely reflects current earnings than does total return. The current yield reflects the deduction of all charges under the contract that are deducted from the total return quotations shown above except the maximum 7% early withdrawal charge. (3) The fund first listed was replaced with the applicable Portfolio Partners Portfolio after the close of business on November 26, 1997. The performance shown is based on the performance of the replaced fund until November 26, 1997, and the performance of the applicable Portfolio Partners Portfolio after that date. The replaced fund may not have been available under all contracts. The "Date Contributions First Received Under the Separate Account" refers to the applicable date for the replaced fund. (4) This line represents standardized performance reflecting deduction of all applicable charges including the guaranteed minimum income charge. No returns are shown, however, because as of the date hereof no contributions were received in the fund under the guaranteed minimum income feature under the separate account.
- ------------------------------------------------------------------------------------------------------------------------------------ Fund NON-STANDARDIZED Inception Date - ------------------------------------------------------------------------------------------------------------------------------------ Since SUBACCOUNT 1 Year 3 Years 5 Years 10 Years Inception** - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Ascent VP 3.00% 14.17% 15.10% 07/05/1995 - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Balanced VP, Inc. 15.47% 16.68% 14.45% 11.57% 04/03/1989 - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Bond VP(1) 6.79% 5.32% 5.31% 7.91% - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Crossroads VP 4.59% 12.52% 13.33% 07/05/1995 - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Growth VP 35.96% 33.61% 12/13/1996 - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ Fund NON-STANDARDIZED Inception Date - ------------------------------------------------------------------------------------------------------------------------------------ Since SUBACCOUNT 1 Year 3 Years 5 Years 10 Years Inception** - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Growth and Income VP(1) 13.06% 21.24% 17.88% 15.00% - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Index Plus Large Cap VP 29.96% 31.66% 09/16/1996 - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Index Plus Large Cap VP(4) 28.68% 30.35% 09/16/1996 - ------------------------------------------------------------------------------------------------------------------------------------ Aetna International VP 17.44% 20.03% 12/22/1997 - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Legacy VP 5.60% 10.42% 11.21% 07/05/1995 - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Money Market VP(1)(2) 4.14% 4.11% 3.97% 4.43% - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Real Estate Securities VP (13.94%) (10.43%) 12/15/1997 - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Small Company VP (0.16%) 15.69% 12/27/1996 - ------------------------------------------------------------------------------------------------------------------------------------ AIM V.I. Capital Appreciation Fund 17.82% 15.32% 15.78% 17.30% 05/05/1993 - ------------------------------------------------------------------------------------------------------------------------------------ AIM V.I. Growth Fund 32.47% 24.63% 19.94% 19.38% 05/05/1993 - ------------------------------------------------------------------------------------------------------------------------------------ AIM V.I. Growth and Income Fund 26.11% 22.87% 20.98% 05/02/1994 - ------------------------------------------------------------------------------------------------------------------------------------ AIM V.I. Value Fund 30.77% 21.97% 20.20% 20.39% 05/05/1993 - ------------------------------------------------------------------------------------------------------------------------------------ Fidelity VIP High Income Portfolio(1) (5.52%) 7.32% 7.44% 9.69% - ------------------------------------------------------------------------------------------------------------------------------------ Janus Aspen Growth Portfolio 33.96% 23.84% 19.90% 19.37% 09/13/1993 - ------------------------------------------------------------------------------------------------------------------------------------ Janus Aspen Worldwide Growth Portfolio 27.31% 25.08% 19.80% 22.48% 09/13/1993 - ------------------------------------------------------------------------------------------------------------------------------------ Oppenheimer Aggressive Growth Fund/VA(1) 10.96% 13.25% 11.65% 14.54% - ------------------------------------------------------------------------------------------------------------------------------------ Oppenheimer Main Street Growth & Income Fund/VA 3.39% 20.96% 25.42% 07/06/1995 - ------------------------------------------------------------------------------------------------------------------------------------ Oppenheimer Strategic Bond Fund/VA 1.61% 6.47% 5.49% 5.45% 05/03/1993 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio Partners MFS Emerging Equities Portfolio 28.05% 23.95% 11/28/1997 - ------------------------------------------------------------------------------------------------------------------------------------ Alger American Small Cap/Portfolio Partners MFS Emerging 28.05% 12.42% 13.84% 19.49% Equities(3) - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio Partners MFS Value Equity Portfolio 25.15% 24.41% 11/28/1997 - ------------------------------------------------------------------------------------------------------------------------------------ Neuberger Berman AMT Growth/Portfolio Partners MFS Value Equity(3) 25.15% 18.94% 15.48% 13.28% - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio Partners Scudder International Growth Portfolio 17.61% 17.32% 11/28/1997 - ------------------------------------------------------------------------------------------------------------------------------------ Scudder International Portfolio Class A/Portfolio Partners Scudder International Growth(3) 17.61% 12.78% 9.04% 10.62% - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio Partners T. Rowe Price Growth Equity Portfolio 26.01% 25.71% 11/28/1997 - ------------------------------------------------------------------------------------------------------------------------------------ Alger American Growth/Portfolio Partners T. Rowe Price Growth Equity(3) 26.01% 21.33% 19.23% 18.97% 01/09/1989 - ------------------------------------------------------------------------------------------------------------------------------------
Please refer to the discussion preceding the tables for an explanation of the charges included and methodology used in the standardized and non-standardized figures. These figures represent historical performance and should not be considered a projection of future performance. ** Reflects performance from the fund's inception date. (1) These funds have been in operation for more than ten years. (2) The current yield for the subaccount for the 7-day period ended December 31, 1998 (on an annualized basis) was 3.77%. Current yield more closely reflects current earnings than does total return. The current yield reflects the deduction of all charges under the contract that are deducted from the total return quotations shown above. As in the table above, the maximum 7% early withdrawal charge is not reflected. (3) The fund first listed was replaced with the applicable Portfolio Partners Portfolio after the close of business on November 26, 1997. The performance shown is based on the performance of the replaced fund until November 26, 1997, and the performance of the applicable Portfolio Partners Portfolio after that date. The replaced fund may not have been available under all contracts. The "Fund Inception Date" refers to the applicable date for the replaced fund. If no date is shown, the replaced fund has been in operation for more than ten years. (4) The non-standardized returns in this row reflect deduction of applicable charges including the guaranteed minimum income charge. The numbers are only applicable if the guaranteed minimum income feature was elected. INCOME PAYMENTS Your variable payments will fluctuate as the annuity unit value(s) fluctuates with the investment experience of the selected subaccount(s). The first payment and subsequent payments also vary depending on the assumed annual net return rate selected (3.5% or 5% per annum). Selection of a 5% rate causes a higher first payment, but payments will increase thereafter only to the extent that the net investment rate increases by more than 5% on an annual basis. Payments would decline if the rate failed to increase by 5%. Use of the 3.5% assumed rate causes a lower first payment, but subsequent payments would increase more rapidly or decline more slowly as changes occur in the net investment rate. A fixed number of annuity units is determined in each of the designated subaccounts on the contract effective date. The number of annuity units, which generally does not change thereafter, is calculated by dividing (a) by (b), where (a) is the amount of the income payment as if the payment was calculated as of the contract effective date, and (b) is the annuity unit value for that investment option on the contract effective date. The first payment will be calculated as of the tenth valuation before the payment due date which depends upon the payment frequency you have selected. As noted above, annuity unit values fluctuate from one valuation to the next (see "Calculating Variable Income Payments" in the prospectus); such fluctuations reflect changes in the net investment factor for the applicable subaccount(s) (with a ten valuation lag which gives the Company time to process payments) and a mathematical adjustment which offsets the assumed annual net return 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 each subaccount selected. EXAMPLE: Assume that you purchase a single premium immediate annuity contract with a $50,000 premium. The payment option that you select has a payment factor of $6.68 per $1,000 of value applied. Also assume that no premium tax is payable. If a payment was determined as of the contract effective date, that payment would be calculated by multiplying $6.68 per $1,000 by 50.000. This would produce an initial payment of $334.00. Assume that the value of the annuity unit on the contract effective date is 13.400000. The payment calculated as of the contract effective date is divided by the annuity unit value to determine the number of annuity units (that is, $334.00/13.400000 = 24.925 annuity units). The number of annuity units will generally remain constant over the term of your contract as determined by your annuity option. The value of each payment will be determined on the tenth valuation before the payment due date by multiplying the number of annuity units by that date's annuity unit value. Payments will subsequently fluctuate depending upon the net investment performance that occurs between payment valuation dates less a factor that represents the assumed annual net return rate. This offsets the assumed annual net return rate built into the number of annuity units determined above. Annuity unit values are calculated on a daily basis by multiplying the annuity unit value by the daily net return factor and by a factor to reflect the daily assumed annual net return rate. The factor for a 3.5% assumed annual net return rate is 0.9999058 and for 5.0%, 0.9998663. The new payment is calculated by multiplying the number of annuity units by the new annuity unit value. SALES MATERIAL AND ADVERTISING We may illustrate the hypothetical values of income payments made from each of the subaccounts over certain time periods based on the historical net asset values of the funds. We may also advertise returns based on other fee schedules that apply to a particular contract holder. These fee schedules may result in higher returns than those shown. We may also include hypothetical illustrations in our sales literature that explain the mathematical principles of compounded interest, tax deferred accumulation, and the mechanics of variable annuity contracts. We may also discuss the difference between variable annuity contracts and savings or investment products such as personal savings accounts and certificates of deposit. We may publish in advertisements and reports, the ratings and other information assigned to us by one or more independent rating organizations such as A.M. Best Company, Duff & Phelps, Standard & Poor's Corporation and Moody's Investors Service, Inc. The purpose of the ratings is to reflect our financial strength and/or claims-paying ability. We may also quote ranking services such as Morningstar's Variable Annuity/Life Performance Report and Lipper's Variable Insurance Products Performance Analysis Service (VIPPAS), which rank variable annuity or life subaccounts or their underlying funds by performance and/or investment objective. We may illustrate in advertisements the performance of the underlying funds, if accompanied by performance which also shows the performance of such funds reduced by applicable charges under the separate account. We may categorize funds in terms of the asset classes they represent and use such categories in marketing materials for the contracts. We may also show in advertisements the portfolio holdings of the underlying funds, updated at various intervals. From time to time, we will quote articles from newspapers and magazines or other publications or reports such as The Wall Street Journal, Money magazine, USA Today and The VARDS Report. We may provide in advertising, sales literature, periodic publications or other materials information on various topics of interest to current and prospective contract holders. These topics may include the relationship between sectors of the economy and the economy as a whole and its effect on various securities markets, investment strategies and techniques (such as value investing, market timing, asset allocation, constant ratio transfer and account rebalancing), the advantages and disadvantages of investing in tax-deferred and taxable investments, customer profiles and hypothetical purchase and investment scenarios, financial management and tax and retirement planning, and investment alternatives to certificates of deposit and other financial instruments, including comparison between the contracts and the characteristics of and market for such financial instruments. INDEPENDENT AUDITORS KPMG LLP, CityPlace II, Hartford, Connecticut 06103-4103, are the independent auditors for the separate account and for the Company. The services provided to the separate account include primarily the examination of the separate account's financial statements and the review of filings made with the SEC. FINANCIAL STATEMENTS VARIABLE ANNUITY ACCOUNT B Index Statement of Assets and Liabilities........................................ S-2 Statements of Operations and Changes in Net Assets......................... S-7 Condensed Financial Information............................................ S-8 Notes to Financial Statements.............................................. S-16 Independent Auditors' Report............................................... S-36
S-1 Variable Annuity Account B Statement of Assets and Liabilities - December 31, 1998 ASSETS: Investments, at net asset value: (Note 1)
Net Shares Cost Assets ------ ---- ------ Aetna Ascent VP: 1,775,905 $ 25,102,742 $ 24,898,190 Aetna Balanced VP: 12,391,167 181,255,533 194,913,051 Aetna Bond VP: 6,915,310 90,585,384 90,313,945 Aetna Crossroads VP: 2,222,763 29,151,210 29,607,202 Aetna Get Fund, Series B: 1,328,751 16,114,148 19,399,768 Aetna Get Fund, Series C: 641,495 6,843,405 9,276,019 Aetna Get Fund, Series D: 8,945,182 89,971,949 89,907,126 Aetna Growth and Income VP: 34,864,532 1,125,170,574 1,110,783,981 Aetna Growth VP: 2,192,686 25,612,305 29,667,044 Aetna High Yield VP: 25,485 269,013 230,386 Aetna Index Plus Large Cap VP: 4,950,434 77,533,729 87,078,142 Aetna Index Plus Mid Cap VP: 30,799 350,678 375,745 Aetna Index Plus Small Cap VP: 98,357 961,535 969,800 Aetna International VP: 132,091 1,535,380 1,530,933 Aetna Legacy VP: 2,841,936 34,924,355 35,154,748 Aetna Money Market VP: 11,204,743 148,567,676 150,002,380 Aetna Real Estate Securities VP: 115,069 1,060,043 981,537 Aetna Small Company VP: 1,445,875 17,304,318 18,492,740 Aetna Value Opportunity VP: 1,296,961 16,956,181 18,689,212 AIM V.I. Funds: Capital Appreciation Fund: 11,857 279,072 298,792 Growth and Income Fund: 9,329 203,793 221,558 Growth Fund: 11,970 284,519 296,860 Value Fund: 26,818 681,416 703,970 Alger American Funds: Balanced Portfolio: 476,550 4,602,622 6,185,618 Income & Growth Portfolio: 1,178,638 11,247,924 15,463,737 Leveraged AllCap Portfolio: 486,301 10,438,458 16,971,895 American Century Investments: Balanced Fund: 567,422 4,244,446 4,732,298 International Fund: 760,004 5,048,080 5,791,227 Calvert Social Balanced Portfolio: 916,276 1,943,153 1,958,082 Fidelity Investments Variable Insurance Products Fund: Equity-Income Portfolio: 6,927,959 153,249,176 176,108,721 Growth Portfolio: 3,087,069 104,576,368 138,516,768 High Income Portfolio: 4,321,896 54,257,145 49,831,459 Overseas Portfolio: 892,112 17,216,864 17,886,843 Fidelity Investments Variable Insurance Products Fund II: Asset Manager Portfolio: 1,124,160 18,781,312 20,414,738 Contrafund Portfolio: 6,668,348 127,772,939 162,974,413 Index 500 Portfolio: 1,003,440 116,197,819 141,735,838 Investment Grade Bond Portfolio: 439,478 5,217,593 5,695,641 Insurance Management Series: American Leaders Fund II: 6,201,568 97,218,342 134,450,002 Equity Income Fund II: 2,025,727 24,690,902 28,664,036 Growth Strategies Fund II: 1,532,692 22,205,952 27,450,515 High Income Bond Fund II: 4,568,474 47,172,964 49,887,731 International Equity Fund II: 1,138,497 13,701,931 17,521,464 Prime Money Fund II: 8,067,320 8,065,097 8,067,320
S-2 Variable Annuity Account B Statement of Assets and Liabilities - December 31, 1998 (continued):
Net Shares Cost Assets ------ ---- ------ U.S. Government Securities II: 1,439,895 $ 15,041,447 $ 16,054,824 Utility Fund II: 1,986,746 23,284,347 30,337,604 Janus Aspen Series: Aggressive Growth Portfolio: 2,079,332 49,261,924 57,368,774 Balanced Portfolio: 3,210,155 56,987,418 72,228,489 Flexible Income Portfolio: 1,710,899 20,378,246 20,633,439 Growth Portfolio: 2,958,516 57,362,313 69,643,462 Worldwide Growth Portfolio: 8,512,439 210,385,419 247,626,862 Lexington Emerging Markets Fund: 266,212 2,706,082 1,509,423 Lexington Natural Resources Trust Fund: 358,558 5,221,161 3,954,893 MFS Funds: Total Return Series: 2,104,731 34,302,993 38,137,728 Worldwide Government Series: 185,123 1,911,846 2,014,138 Oppenheimer Funds: Aggressive Growth Fund: 265,843 10,674,495 11,917,723 Global Securities Fund: 346,765 6,867,095 7,653,101 Growth & Income Fund: 1,718,418 35,629,032 35,193,209 Strategic Bond Fund: 2,558,320 13,050,936 13,098,600 Portfolio Partners, Inc. (PPI): PPI MFS Emerging Equities Portfolio: 2,382,266 112,648,846 132,072,829 PPI MFS Research Growth Portfolio: 7,421,331 77,594,206 88,610,687 PPI MFS Value Equity Portfolio: 738,878 24,196,477 27,966,529 PPI Scudder International Growth Portfolio: 1,049,896 16,732,753 17,596,256 PPI T. Rowe Price Growth Equity Portfolio: 2,148,768 93,956,758 118,848,377 -------------- -------------- NET ASSETS $3,606,761,839 $3,956,568,422 ============== ==============
Net assets represented by: Reserves for annuity contracts in accumulation and payment period: (Notes 1 and 5)
Aetna Ascent VP: Annuity contracts in accumulation ........... $ 24,898,190 Aetna Balanced VP: Annuity contracts in accumulation ........... 176,154,146 Annuity contracts in payment period ......... 18,758,905 Aetna Bond VP: Annuity contracts in accumulation ........... 85,100,187 Annuity contracts in payment period ......... 5,213,758 Aetna Crossroads VP: Annuity contracts in accumulation ........... 28,289,880 Annuity contracts in payment period ......... 1,317,322 Aetna Get Fund, Series B: Annuity contracts in accumulation ........... 19,399,768 Aetna Get Fund, Series C: Annuity contracts in accumulation ........... 9,276,019 Aetna Get Fund, Series D: Annuity contracts in accumulation ........... 89,907,126 Aetna Growth and Income VP: Annuity contracts in accumulation ........... 955,586,320 Annuity contracts in payment period ......... 155,197,661 Aetna Growth VP: Annuity contracts in accumulation ........... 28,467,187 Annuity contracts in payment period ......... 1,199,857
S-3 Variable Annuity Account B Statement of Assets and Liabilities - December 31, 1998 (continued):
Aetna High Yield VP: Annuity contracts in accumulation ........... $ 230,386 Aetna Index Plus Large Cap VP: Annuity contracts in accumulation ........... 85,248,495 Annuity contracts in payment period ......... 1,829,647 Aetna Index Plus Mid Cap VP: Annuity contracts in accumulation ........... 375,745 Aetna Index Plus Small Cap VP: Annuity contracts in accumulation ........... 969,800 Aetna International VP: Annuity contracts in accumulation ........... 1,528,847 Annuity contracts in payment period ......... 2,086 Aetna Legacy VP: Annuity contracts in accumulation ........... 32,331,905 Annuity contracts in payment period ......... 2,822,843 Aetna Money Market VP: Annuity contracts in accumulation ........... 149,772,871 Annuity contracts in payment period ......... 229,509 Aetna Real Estate Securities VP: Annuity contracts in accumulation ........... 965,259 Annuity contracts in payment period ......... 16,278 Aetna Small Company VP: Annuity contracts in accumulation ........... 18,295,242 Annuity contracts in payment period ......... 197,498 Aetna Value Opportunity VP: Annuity contracts in accumulation ........... 18,689,212 AIM V.I. Funds: Capital Appreciation Fund: Annuity contracts in accumulation ........... 298,792 Growth and Income Fund: Annuity contracts in accumulation ........... 221,558 Growth Fund: Annuity contracts in accumulation ........... 296,860 Value Fund: Annuity contracts in accumulation ........... 703,970 Alger American Funds: Balanced Portfolio: Annuity contracts in accumulation ........... 6,185,618 Income & Growth Portfolio: Annuity contracts in accumulation ........... 15,463,737 Leveraged AllCap Portfolio: Annuity contracts in accumulation ........... 16,971,895 American Century Investments: Balanced Fund: Annuity contracts in accumulation ........... 4,732,298 International Fund: Annuity contracts in accumulation ........... 5,791,227 Calvert Social Balanced Portfolio: Annuity contracts in accumulation ........... 1,958,082
S-4 Variable Annuity Account B Statement of Assets and Liabilities - December 31, 1998 (continued):
Fidelity Investments Variable Insurance Products Fund: Equity-Income Portfolio: Annuity contracts in accumulation .................... $ 176,108,721 Growth Portfolio: Annuity contracts in accumulation .................... 138,516,768 High Income Portfolio: Annuity contracts in accumulation .................... 49,328,098 Annuity contracts in payment period .................. 503,361 Overseas Portfolio: Annuity contracts in accumulation .................... 17,886,843 Fidelity Investments Variable Insurance Products Fund II: Asset Manager Portfolio: Annuity contracts in accumulation .................... 20,414,738 Contrafund Portfolio: Annuity contracts in accumulation .................... 162,974,413 Index 500 Portfolio: Annuity contracts in accumulation .................... 141,735,838 Investment Grade Bond Portfolio: Annuity contracts in accumulation .................... 5,695,641 Insurance Management Series: American Leaders Fund II: Annuity contracts in accumulation .................... 134,398,144 Annuity contracts in payment period .................. 51,858 Equity Income Fund II: Annuity contracts in accumulation .................... 28,656,460 Annuity contracts in payment period .................. 7,576 Growth Strategies Fund II: Annuity contracts in accumulation .................... 27,450,515 High Income Bond Fund II: Annuity contracts in accumulation .................... 49,887,731 International Equity Fund II: Annuity contracts in accumulation .................... 17,521,464 Prime Money Fund II: Annuity contracts in accumulation .................... 8,067,320 U.S. Government Securities II: Annuity contracts in accumulation .................... 16,054,824 Utility Fund II: Annuity contracts in accumulation .................... 30,329,937 Annuity contracts in payment period .................. 7,667 Janus Aspen Series: Aggressive Growth Portfolio: Annuity contracts in accumulation .................... 57,368,774 Balanced Portfolio: Annuity contracts in accumulation .................... 72,228,489 Flexible Income Portfolio: Annuity contracts in accumulation .................... 20,633,439 Growth Portfolio: Annuity contracts in accumulation .................... 68,058,273 Annuity contracts in payment period .................. 1,585,189 Worldwide Growth Portfolio: Annuity contracts in accumulation .................... 243,902,115 Annuity contracts in payment period .................. 3,724,747
S-5 Variable Annuity Account B Statement of Assets and Liabilities - December 31, 1998 (continued):
Lexington Emerging Markets Fund: Annuity contracts in accumulation ........... $ 1,509,423 Lexington Natural Resources Trust Fund: Annuity contracts in accumulation ........... 3,954,893 MFS Funds: Total Return Series: Annuity contracts in accumulation ........... 38,137,728 Worldwide Government Series: Annuity contracts in accumulation ........... 2,014,138 Oppenheimer Funds: Aggressive Growth Fund: Annuity contracts in accumulation ........... 11,917,723 Global Securities Fund: Annuity contracts in accumulation ........... 7,653,101 Growth & Income Fund: Annuity contracts in accumulation ........... 35,193,209 Strategic Bond Fund: Annuity contracts in accumulation ........... 12,897,019 Annuity contracts in payment period ......... 201,581 Portfolio Partners, Inc (PPI): PPI MFS Emerging Equities Portfolio: Annuity contracts in accumulation ........... 131,150,274 Annuity contracts in payment period ......... 922,555 PPI MFS Research Growth Portfolio: Annuity contracts in accumulation ........... 88,610,687 PPI MFS Value Equity Portfolio: Annuity contracts in accumulation ........... 27,062,849 Annuity contracts in payment period ......... 903,680 PPI Scudder International Growth Portfolio: Annuity contracts in accumulation ........... 17,577,310 Annuity contracts in payment period ......... 18,946 PPI T. Rowe Price Growth Equity Portfolio: Annuity contracts in accumulation ........... 118,791,854 Annuity contracts in payment period ......... 56,523 -------------- $3,956,568,422 ==============
See Notes to Financial Statements S-6 Variable Annuity Account B Statements of Operations and Changes in Net Assets
Year Ended December 31, 1998 1997 ---- ---- INVESTMENT INCOME: Income: (Notes 1, 3 and 5) Dividends ............................................................. $ 325,794,651 $ 278,833,116 Expenses: (Notes 2 and 5) Valuation period deductions ........................................... (42,285,760) (29,243,851) -------------- -------------- Net investment income .................................................. 283,508,891 249,589,265 -------------- -------------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS: Net realized gain on sales of investments: (Notes 1, 4 and 5) Proceeds from sales ................................................... 1,555,519,398 1,004,789,371 Cost of investments sold .............................................. 1,412,108,865 933,728,508 -------------- -------------- Net realized gain .................................................... 143,410,533 71,060,863 -------------- -------------- Net unrealized gain on investments: (Note 5) Beginning of year ..................................................... 255,524,506 122,191,053 End of year ........................................................... 349,806,583 255,524,506 -------------- -------------- Net change in unrealized gain ........................................ 94,282,077 133,333,453 -------------- -------------- Net realized and unrealized gain on investments ........................ 237,692,610 204,394,316 -------------- -------------- Net increase in net assets resulting from operations ................... 521,201,501 453,983,581 -------------- -------------- FROM UNIT TRANSACTIONS: Variable annuity contract purchase payments ............................ 489,286,251 571,501,505 Transfers from the Company for mortality guarantee adjustments ......... (906,373) 371,835 Transfers from the Company's fixed account options ..................... 212,914,994 144,526,667 Redemptions by contract holders ........................................ (167,845,102) (82,942,177) Annuity payments ....................................................... (22,421,712) (16,137,431) Other .................................................................. 1,896,006 2,327,153 -------------- -------------- Net increase in net assets from unit transactions (Note 5) ........... 512,924,064 619,647,552 -------------- -------------- Change in net assets ................................................... 1,034,125,565 1,073,631,133 NET ASSETS: Beginning of year ...................................................... 2,922,442,857 1,848,811,724 -------------- -------------- End of year ............................................................ $3,956,568,422 $2,922,442,857 ============== ==============
See Notes to Financial Statements S-7 Variable Annuity Account B Condensed Financial Information - Year Ended December 31, 1998
- -------------------------------------------------------------------------------------------------------------------------------- Value Per Unit Increase (Decrease) Units -------- in Value of Outstanding Reserves Beginning End of Accumulation at End at End of Year Year Unit of Year of Year - -------------------------------------------------------------------------------------------------------------------------------- Aetna Ascent VP: Non-Qualified V $ 15.392 $ 15.855 3.01% 274,115.2 $ 4,346,011 Non-Qualified V (0.75) 15.535 16.082 3.52% 104,608.3 1,682,346 Non-Qualified VII 15.333 15.769 2.84% 1,027,839.2 16,207,554 Non-Qualified VIII 14.947 14.012 (6.26%) (4) 160,746.0 2,252,334 Non-Qualified IX 15.364 15.786 2.75% 1,717.5 27,113 Non-Qualified X 15.422 15.942 3.37% 24,014.0 382,832 - -------------------------------------------------------------------------------------------------------------------------------- Aetna Balanced VP: Non-Qualified V 18.989 21.929 15.48% 2,929,719.6 64,245,891 Non-Qualified V (0.75) 19.166 22.244 16.06% 1,798,424.8 40,003,913 Non-Qualified VI 15.962 18.445 15.56% 43,363.3 799,818 Non-Qualified VII 18.653 21.507 15.30% 2,533,501.2 54,487,004 Non-Qualified VIII 14.392 15.212 5.70% (4) 363,744.6 5,533,430 Non-Qualified IX 18.954 21.834 15.19% 30,063.5 656,418 Non-Qualified X 19.016 22.015 15.77% 452,763.7 9,967,686 Non-Qualified XI 15.985 18.517 15.84% 6,799.7 125,910 Non-Qualified XIII 9.555 10.337 8.18% (10) 5,234.6 54,109 Non-Qualified XIV 9.276 10.323 11.29% (8) 17,680.9 182,516 Non-Qualified XV 9.581 10.316 7.67% (10) 9,446.8 97,451 Annuity contracts in payment period 18,758,905 - -------------------------------------------------------------------------------------------------------------------------------- Aetna Bond VP: Non-Qualified V 13.361 14.270 6.80% 1,129,588.7 16,119,085 Non-Qualified V (0.75) 13.486 14.475 7.33% 2,012,308.2 29,127,850 Non-Qualified VI 12.204 13.041 6.86% 51,406.2 670,396 Non-Qualified VII 13.128 13.998 6.63% 1,948,372.8 27,273,239 Non-Qualified VIII 11.367 11.910 4.78% (4) 387,994.7 4,620,903 Non-Qualified IX 13.337 14.208 6.53% 18,429.1 261,845 Non-Qualified X 13.373 14.304 6.96% 452,992.2 6,479,375 Non-Qualified XI 12.214 13.072 7.02% 1,301.4 17,012 Non-Qualified XIII 10.157 10.319 1.59% (9) 16,581.5 171,096 Non-Qualified XIV 10.119 10.305 1.84% (9) 30,948.7 318,914 Non-Qualified XV 10.188 10.298 1.08% (10) 3,930.2 40,472 Annuity contracts in payment period 5,213,758 - -------------------------------------------------------------------------------------------------------------------------------- Aetna Crossroads VP: Non-Qualified V 14.432 15.095 4.59% 218,648.6 3,300,593 Non-Qualified V (0.75) 14.566 15.312 5.12% 119,245.6 1,825,908 Non-Qualified VII 14.377 15.013 4.42% 1,316,579.2 19,766,357 Non-Qualified VIII 14.044 13.588 (3.25%) (4) 237,468.1 3,226,692 Non-Qualified IX 14.406 15.030 4.33% 457.5 6,876 Non-Qualified X 14.461 15.179 4.97% 10,768.7 163,454 Annuity contracts in payment period 1,317,322 - -------------------------------------------------------------------------------------------------------------------------------- Aetna Get Fund, Series B: Non-Qualified V 20.717 24.373 17.65% 737,172.7 17,966,894 Non-Qualified X 20.717 24.373 17.65% 58,790.1 1,432,874 - -------------------------------------------------------------------------------------------------------------------------------- Aetna Get Fund, Series C: Non-Qualified V 12.636 15.904 25.86% 92,330.0 1,468,418 Non-Qualified V (0.75) 12.718 16.087 26.49% 468,819.8 7,541,894 Non-Qualified IX 12.613 15.835 25.55% 9,144.7 144,810 Non-Qualified X 12.636 15.904 25.86% 7,601.7 120,897 - -------------------------------------------------------------------------------------------------------------------------------- Aetna Get Fund, Series D: Non-Qualified V 9.997 10.062 0.65% (9) 1,577,071.0 15,867,744 Non-Qualified V (0.75) 9.997 10.073 0.76% (9) 614,759.8 6,192,546 Non-Qualified VII 9.997 10.058 0.61% (9) 3,322,479.7 33,416,640 Non-Qualified VIII 9.998 10.067 0.69% (9) 1,277,188.8 12,857,641 Non-Qualified X 10.023 10.062 0.39% (10) 65,946.9 663,527 Non-Qualified XIII 10.004 10.072 0.68% (9) 931,827.7 9,385,656 Non-Qualified XIV 10.000 10.066 0.66% (9) 884,851.1 8,907,146 Non-Qualified XV 10.009 10.063 0.54% (9) 259,978.3 2,616,226 - --------------------------------------------------------------------------------------------------------------------------------
S-8 Variable Annuity Account B Condensed Financial Information - Year Ended December 31, 1998 (continued):
- -------------------------------------------------------------------------------------------------------------------------------- Value Per Unit Increase (Decrease) Units -------- in Value of Outstanding Reserves Beginning End of Accumulation at End at End of Year Year Unit of Year of Year - -------------------------------------------------------------------------------------------------------------------------------- Aetna Growth and Income VP: Non-Qualified 1964 $ 236.446 $ 267.347 13.07% 958.7 $ 256,298 Non-Qualified V 22.028 24.907 13.07% 9,491,618.9 236,409,291 Non-Qualified V (0.75) 22.233 25.265 13.64% 12,975,484.3 327,821,341 Non-Qualified VI 20.614 23.322 13.14% 1,842,162.9 42,963,821 Non-Qualified VII 22.004 24.839 12.88% 8,999,335.5 223,538,139 Non-Qualified VIII 16.554 16.604 0.30% (4) 1,327,156.5 22,036,585 Non-Qualified IX 21.988 24.800 12.79% 148,050.5 3,671,604 Non-Qualified X 22.060 25.005 13.35% 3,821,349.4 95,552,990 Non-Qualified XI 20.644 23.414 13.42% 46,205.4 1,081,861 Non-Qualified XIII 7.862 9.886 25.74% (9) 125,488.2 1,240,545 Non-Qualified XIV 7.672 9.872 28.68% (9) 55,706.9 549,962 Non-Qualified XV 8.961 9.866 10.10% (10) 47,019.7 463,883 Annuity contracts in payment period 155,197,661 - -------------------------------------------------------------------------------------------------------------------------------- Aetna Growth VP: Non-Qualified V 13.173 17.912 35.98% 140,521.9 2,516,985 Non-Qualified V (0.75) 13.239 18.067 36.47% (1) 428,697.2 7,745,376 Non-Qualified VII 13.158 17.862 35.75% 738,448.8 13,190,361 Non-Qualified VIII 15.809 17.909 13.28% (4) 266,761.0 4,777,514 Non-Qualified IX 15.727 17.834 13.40% (4) 2,088.8 37,253 Non-Qualified XIII 8.387 10.489 25.06% (9) 8,459.9 88,734 Non-Qualified XIV 8.359 10.475 25.31% (9) 8,297.4 86,912 Non-Qualified XV 8.899 10.468 17.63% (10) 2,297.8 24,052 Annuity contracts in payment period 1,199,857 - -------------------------------------------------------------------------------------------------------------------------------- Aetna High Yield VP: Non-Qualified V 9.954 9.212 (7.45%) (4) 604.9 5,573 Non-Qualified V (0.75) 9.941 9.244 (7.01%) (5) 24,320.0 224,813 - -------------------------------------------------------------------------------------------------------------------------------- Aetna Index Plus Large Cap VP: Non-Qualified V 14.444 18.772 29.96% 527,155.0 9,895,905 Non-Qualified V (0.75) 14.538 18.989 30.62% 1,060,363.0 20,135,153 Non-Qualified VII 14.414 18.704 29.76% 2,252,763.4 42,134,590 Non-Qualified VIII 16.421 18.449 12.35% (4) 609,863.4 11,251,627 Non-Qualified IX 14.418 18.691 29.64% 23,366.8 436,755 Non-Qualified XIII 8.469 10.716 26.53% (9) 31,054.3 332,779 Non-Qualified XIV 8.964 10.702 19.39% (8) 94,255.0 1,008,675 Non-Qualified XV 9.134 10.694 17.08% (9) 4,956.9 53,011 Annuity contracts in payment period 1,829,647 - -------------------------------------------------------------------------------------------------------------------------------- Aetna Index Plus Mid Cap VP: Non-Qualified V 10.107 10.891 7.76% (4) 17,010.7 185,258 Non-Qualified V (0.75) 9.950 10.928 9.83% (6) 16,206.7 177,112 Non-Qualified IX 8.579 10.872 26.73% (9) 1,230.2 13,375 - -------------------------------------------------------------------------------------------------------------------------------- Aetna Index Plus Small Cap VP: Non-Qualified V 9.996 8.815 (11.81%) (4) 55,563.7 489,810 Non-Qualified V (0.75) 9.407 8.846 (5.96%) (5) 53,459.5 472,892 Non-Qualified IX 7.685 8.800 14.51% (8) 806.6 7,098 - -------------------------------------------------------------------------------------------------------------------------------- Aetna International VP: Non-Qualified V 10.149 9.765 (3.78%) (4) 35,872.2 350,278 Non-Qualified V (0.75) 10.288 9.798 (4.76%) (5) 28,999.8 284,152 Non-Qualified VII 10.169 9.754 (4.08%) (5) 45,143.4 440,322 Non-Qualified VIII 10.100 9.764 (3.33%) (4) 41,046.6 400,784 Non-Qualified XIII 8.583 9.149 6.59% (10) 587.0 5,371 Non-Qualified XIV 8.497 9.137 7.53% (10) 4,529.2 41,383 Non-Qualified XV 8.663 9.131 5.40% (11) 718.1 6,557 Annuity contracts in payment period 2,086 - -------------------------------------------------------------------------------------------------------------------------------- Aetna Legacy VP: Non-Qualified V 13.317 14.064 5.61% 197,741.5 2,781,008 Non-Qualified V (0.75) 13.441 14.266 6.14% 120,311.5 1,716,341 Non-Qualified VII 13.267 13.989 5.44% 1,551,324.4 21,701,727 Non-Qualified VIII 13.073 13.037 (0.28%) (4) 467,027.3 6,088,503
S-9 Variable Annuity Account B Condensed Financial Information - Year Ended December 31, 1998 (continued):
- -------------------------------------------------------------------------------------------------------------------------------- Value Per Unit Increase (Decrease) Units -------- in Value of Outstanding Reserves Beginning End of Accumulation at End at End of Year Year Unit of Year of Year - -------------------------------------------------------------------------------------------------------------------------------- Aetna Legacy VP (continued): Non-Qualified IX $13.292 $14.003 5.35% 1,187.8 $ 16,633 Non-Qualified X 13.343 14.141 5.98% 1,958.3 27,693 Annuity contracts in payment period 2,822,843 - -------------------------------------------------------------------------------------------------------------------------------- Aetna Money Market VP: Non-Qualified V 11.930 12.425 4.15% 1,146,661.0 14,247,696 Non-Qualified V (0.75) 12.041 12.604 4.68% 2,102,275.4 26,496,757 Non-Qualified VI 11.642 12.132 4.21% 67,991.9 824,888 Non-Qualified VII 11.850 12.322 3.98% 6,973,165.3 85,923,420 Non-Qualified VIII 10.847 11.141 2.71% (4) 1,221,158.5 13,605,259 Non-Qualified IX 11.908 12.372 3.90% 32,766.7 405,379 Non-Qualified X 11.930 12.425 4.15% 505,775.1 6,284,447 Non-Qualified XI 11.642 12.132 4.21% 49.6 602 Non-Qualified XIII 10.122 10.199 0.76% (9) 103,625.5 1,056,910 Non-Qualified XIV 10.086 10.186 0.99% (8) 44,014.2 448,309 Non-Qualified XV 10.120 10.179 0.58% (10) 47,079.4 479,204 Annuity contracts in payment period 229,509 - -------------------------------------------------------------------------------------------------------------------------------- Aetna Real Estate Securities VP: Non-Qualified V 10.095 8.873 (12.11%) (4) 17,925.8 159,052 Non-Qualified V (0.75) 9.678 8.903 (8.01%) (5) 23,760.3 211,549 Non-Qualified VII 10.043 8.863 (11.75%) (4) 40,811.5 361,711 Non-Qualified VIII 10.033 8.872 (11.57%) (4) 13,789.3 122,343 Non-Qualified XIII 8.690 8.903 2.45% (10) 10,325.4 91,925 Non-Qualified XIV 8.833 8.891 0.66% (10) 2,081.8 18,509 Non-Qualified XV 8.648 8.885 2.74% (10) 19.2 170 Annuity contracts in payment period 16,278 - -------------------------------------------------------------------------------------------------------------------------------- Aetna Small Company VP: Non-Qualified V 13.654 13.633 (0.15%) 91,991.6 1,254,115 Non-Qualified V (0.75) 13.704 13.751 0.34% 90,091.7 1,238,889 Non-Qualified VII 13.638 13.595 (0.32%) 873,315.8 11,872,953 Non-Qualified VIII 15.596 13.631 (12.60%) (4) 272,561.7 3,715,319 Non-Qualified IX 13.320 13.574 1.91% (1) 797.4 10,824 Non-Qualified XIII 8.799 9.357 6.34% (10) 13,537.9 126,679 Non-Qualified XIV 7.219 9.345 29.45% (9) 7,786.6 72,764 Non-Qualified XV 8.739 9.338 6.85% (11) 396.1 3,699 Annuity contracts in payment period 197,498 - -------------------------------------------------------------------------------------------------------------------------------- Aetna Value Opportunity VP: Non-Qualified V 13.261 16.030 20.88% 60,870.3 975,730 Non-Qualified V (0.75) 12.632 16.169 28.00% (1) 91,721.6 1,483,031 Non-Qualified VII 13.246 15.985 20.68% 841,077.5 13,444,950 Non-Qualified VIII 15.274 16.028 4.94% (4) 173,741.4 2,784,641 Non-Qualified IX 14.467 15.960 10.32% (3) 53.9 860 - -------------------------------------------------------------------------------------------------------------------------------- AIM V.I. Funds: Capital Appreciation Fund: Non-Qualified XIII 7.522 10.245 36.20% (9) 10,912.8 111,802 Non-Qualified XIV 7.914 10.231 29.28% (9) 17,420.4 178,233 Non-Qualified XV 9.078 10.224 12.62% (10) 856.5 8,757 - -------------------------------------------------------------------------------------------------------------------------------- Growth and Income Fund: Non-Qualified XIII 7.948 10.663 34.16% (9) 3,665.9 39,090 Non-Qualified XIV 8.179 10.649 30.20% (9) 9,967.9 106,146 Non-Qualified XV 8.830 10.641 20.51% (9) 7,172.1 76,322 - -------------------------------------------------------------------------------------------------------------------------------- Growth Fund: Non-Qualified XIII 7.856 10.779 37.21% (9) 11,162.9 120,321 Non-Qualified XIV 8.120 10.764 32.56% (9) 14,904.3 160,430 Non-Qualified XV 9.702 10.757 10.87% (11) 1,497.6 16,109 - -------------------------------------------------------------------------------------------------------------------------------- Value Fund: Non-Qualified XIII 7.820 10.616 35.75% (9) 27,667.7 293,713 Non-Qualified XIV 8.093 10.601 30.99% (9) 29,485.9 312,592 Non-Qualified XV 9.664 10.594 9.62% (11) 9,218.7 97,665 - --------------------------------------------------------------------------------------------------------------------------------
S-10 Variable Annuity Account B Condensed Financial Information - Year Ended December 31, 1998 (continued):
- -------------------------------------------------------------------------------------------------------------------------------- Value Per Unit Increase (Decrease) Units -------- in Value of Outstanding Reserves Beginning End of Accumulation at End at End of Year Year Unit of Year of Year - -------------------------------------------------------------------------------------------------------------------------------- Alger American Funds: Balanced Portfolio: Non-Qualified VII $16.153 $20.946 29.67% 295,306.5 $ 6,185,618 - -------------------------------------------------------------------------------------------------------------------------------- Income & Growth Portfolio: Non-Qualified VII 16.902 22.064 30.54% 700,861.1 15,463,737 - -------------------------------------------------------------------------------------------------------------------------------- Leveraged AllCap Portfolio: Non-Qualified VII 15.988 24.881 55.62% 682,007.2 16,968,827 Non-Qualified VIII 13.551 18.206 34.35% (4) 168.5 3,068 - -------------------------------------------------------------------------------------------------------------------------------- American Century Investments: Balanced Fund: Non-Qualified VII 15.312 17.479 14.15% 270,740.7 4,732,298 - -------------------------------------------------------------------------------------------------------------------------------- International Fund: Non-Qualified VII 13.782 16.139 17.10% 358,674.4 5,788,553 Non-Qualified VIII 15.241 14.599 (4.21%) (4) 183.2 2,674 - -------------------------------------------------------------------------------------------------------------------------------- Calvert Social Balanced Portfolio: Non-Qualified V 17.779 20.415 14.83% 8,742.2 178,470 Non-Qualified V (0.75) 17.944 20.708 15.40% 35,543.7 736,032 Non-Qualified VII 9.976 11.437 14.65% 34,437.7 393,873 Non-Qualified VIII 10.882 11.456 5.27% (4) 56,713.4 649,707 - -------------------------------------------------------------------------------------------------------------------------------- Fidelity Investments Variable Insurance Products Fund: Equity-Income Portfolio: Non-Qualified V 15.784 17.400 10.24% 298,921.1 5,201,225 Non-Qualified V (0.75) 15.930 17.650 10.80% 630,681.6 11,131,403 Non-Qualified VII 18.963 20.872 10.07% 6,923,691.7 144,511,703 Non-Qualified VIII 15.151 14.942 (1.38%) (4) 919,970.0 13,746,143 Non-Qualified IX 15.755 17.325 9.97% 6,719.9 116,422 Non-Qualified X 15.784 17.400 10.24% 13,539.3 235,583 Non-Qualified XIII 8.459 9.911 17.17% (9) 48,259.6 478,287 Non-Qualified XIV 8.314 9.897 19.04% (9) 59,608.6 589,966 Non-Qualified XV 9.412 9.891 5.09% (11) 9,907.3 97,989 - -------------------------------------------------------------------------------------------------------------------------------- Growth Portfolio: Non-Qualified V 13.904 19.155 37.77% 324,557.7 6,216,774 Non-Qualified V (0.75) 14.034 19.430 38.45% 595,859.4 11,577,298 Non-Qualified VII 19.157 26.348 37.54% 4,154,249.8 109,456,984 Non-Qualified VIII 14.533 17.420 19.87% (4) 600,814.2 10,466,173 Non-Qualified IX 13.879 19.072 37.42% 17,622.0 336,085 Non-Qualified X 13.904 19.155 37.77% 24,195.4 463,454 - -------------------------------------------------------------------------------------------------------------------------------- High Income Portfolio: Non-Qualified VII 13.959 13.168 (5.67%) 3,196,920.6 42,096,053 Non-Qualified VIII 13.167 11.798 (10.40%) (4) 530,361.7 6,257,364 Non-Qualified XIII 8.626 8.949 3.74% (10) 40,909.1 366,076 Non-Qualified XIV 8.411 8.936 6.24% (10) 19,660.9 175,698 Non-Qualified XV 8.987 8.930 (0.63%) (11) 48,475.9 432,907 Annuity contracts in payment period 503,361 - -------------------------------------------------------------------------------------------------------------------------------- Overseas Portfolio: Non-Qualified V 12.381 13.786 11.35% 54,225.5 747,571 Non-Qualified V (0.75) 12.496 13.984 11.91% 141,714.4 1,981,774 Non-Qualified VII 13.682 15.210 11.17% 929,309.5 14,135,208 Non-Qualified VIII 13.796 12.879 (6.65%) (4) 77,430.9 997,217 Non-Qualified IX 12.358 13.727 11.08% 1,826.6 25,073 - -------------------------------------------------------------------------------------------------------------------------------- Fidelity Investments Variable Insurance Products Fund II: Asset Manager Portfolio: Non-Qualified VII 15.679 17.786 13.44% 1,019,122.4 18,126,177 Non-Qualified VIII 13.995 14.783 5.63% (4) 154,808.5 2,288,561 - -------------------------------------------------------------------------------------------------------------------------------- Contrafund Portfolio: Non-Qualified V 15.374 19.735 28.37% 488,102.2 9,632,520 Non-Qualified V (0.75) 15.517 20.018 29.01% 779,941.7 15,612,818 Non-Qualified VII 17.066 21.872 28.16% 5,718,965.7 125,086,950
S-11 Variable Annuity Account B Condensed Financial Information - Year Ended December 31, 1998 (continued):
- -------------------------------------------------------------------------------------------------------------------------------- Value Per Unit Increase (Decrease) Units -------- in Value of Outstanding Reserves Beginning End of Accumulation at End at End of Year Year Unit of Year of Year - -------------------------------------------------------------------------------------------------------------------------------- Contrafund Portfolio (continued): Non-Qualified VIII $15.503 $17.492 12.83% (4) 637,258.2 $ 11,146,870 Non-Qualified IX 15.346 19.649 28.04% 20,906.9 410,809 Non-Qualified X 15.374 19.735 28.37% 14,618.4 288,488 Non-Qualified XIII 8.083 10.535 30.34% (9) 42,196.2 444,543 Non-Qualified XIV 8.746 10.521 20.29% (8) 29,543.1 310,821 Non-Qualified XV 8.946 10.514 17.53% (10) 3,861.0 40,594 - -------------------------------------------------------------------------------------------------------------------------------- Index 500 Portfolio: Non-Qualified VII 17.961 22.727 26.54% 5,533,320.3 125,753,551 Non-Qualified VIII 17.227 18.925 9.86% (4) 844,489.5 15,982,287 - -------------------------------------------------------------------------------------------------------------------------------- Investment Grade Bond Portfolio: Non-Qualified VII 11.597 12.446 7.32% 457,640.6 5,695,641 - -------------------------------------------------------------------------------------------------------------------------------- Insurance Management Series: American Leaders Fund II: Non-Qualified VII 20.287 23.528 15.98% 5,705,447.4 134,238,634 Non-Qualified VIII 16.597 16.869 1.64% (5) 9,455.9 159,510 Annuity contracts in payment period 51,858 - -------------------------------------------------------------------------------------------------------------------------------- Equity Income Fund II: Non-Qualified VII 12.305 14.013 13.88% 2,043,618.6 28,656,460 Annuity contracts in payment period 7,576 - -------------------------------------------------------------------------------------------------------------------------------- Growth Strategies Fund II: Non-Qualified VII 15.777 18.269 15.80% 1,502,535.0 27,450,515 - -------------------------------------------------------------------------------------------------------------------------------- High Income Bond Fund II: Non-Qualified VII 14.724 14.910 1.26% 3,345,668.5 49,883,928 Non-Qualified VIII 12.832 12.629 (1.58%) (4) 301.1 3,803 - -------------------------------------------------------------------------------------------------------------------------------- International Equity Fund II: Non-Qualified VII 11.888 14.719 23.81% 1,190,289.9 17,519,674 Non-Qualified VIII 13.748 13.523 (1.64%) (7) 132.3 1,790 - -------------------------------------------------------------------------------------------------------------------------------- Prime Money Fund II: Non-Qualified VII 11.119 11.503 3.45% 701,312.8 8,067,320 - -------------------------------------------------------------------------------------------------------------------------------- U.S. Government Securities Fund II: Non-Qualified VII 11.883 12.614 6.15% 1,272,804.3 16,054,824 - -------------------------------------------------------------------------------------------------------------------------------- Utility Fund II: Non-Qualified VII 16.611 18.663 12.35% 1,625,061.9 30,328,887 Non-Qualified VIII 13.786 15.472 12.23% (7) 67.9 1,050 Annuity contracts in payment period 7,667 - -------------------------------------------------------------------------------------------------------------------------------- Janus Aspen Series: Aggressive Growth Portfolio: Non-Qualified V 15.410 20.433 32.60% 512,154.4 10,464,741 Non-Qualified V (0.75) 15.554 20.726 33.25% 459,709.5 9,528,051 Non-Qualified VII 15.418 20.410 32.38% 1,622,088.6 33,106,814 Non-Qualified VIII 12.108 14.162 16.96% (4) 216,957.5 3,072,646 Non-Qualified IX 15.382 20.345 32.26% 12,305.4 250,348 Non-Qualified X 15.410 20.433 32.60% 24,372.9 498,007 Non-Qualified XIII 7.183 11.042 53.72% (9) 18,317.8 202,268 Non-Qualified XIV 6.858 11.027 60.79% (9) 21,356.2 235,501 Non-Qualified XV 9.497 11.020 16.04% (11) 943.6 10,398 - -------------------------------------------------------------------------------------------------------------------------------- Balanced Portfolio: Non-Qualified V 14.990 19.880 32.62% 334,507.8 6,649,987 Non-Qualified V (0.75) 15.130 20.165 33.28% 241,070.0 4,861,245 Non-Qualified VII 16.692 22.101 32.40% 2,277,803.6 50,341,553 Non-Qualified VIII 15.156 17.569 15.92% (4) 480,187.2 8,436,522 Non-Qualified IX 14.963 19.794 32.29% 7,705.0 152,514 Non-Qualified X 14.990 19.880 32.62% 6,712.2 133,439 Non-Qualified XIII 9.175 10.945 19.29% (9) 114,602.5 1,254,291 Non-Qualified XIV 8.301 10.930 31.67% (9) 27,397.4 299,452 Non-Qualified XV 9.275 10.923 17.77% (8 9,108.3 99,486 - --------------------------------------------------------------------------------------------------------------------------------
S-12 Variable Annuity Account B Condensed Financial Information - Year Ended December 31, 1998 (continued):
- -------------------------------------------------------------------------------------------------------------------------------- Value Per Unit Increase (Decrease) Units -------- in Value of Outstanding Reserves Beginning End of Accumulation at End at End of Year Year Unit of Year of Year - -------------------------------------------------------------------------------------------------------------------------------- Flexible Income Portfolio: Non-Qualified V $14.393 $15.509 7.75% 85,516.5 $ 1,326,243 Non-Qualified V (0.75) 14.527 15.731 8.29% 199,466.7 3,137,882 Non-Qualified VII 14.320 15.405 7.58% 855,509.7 13,179,344 Non-Qualified VIII 12.363 12.873 4.13% (4) 221,988.1 2,857,737 Non-Qualified IX 14.367 15.442 7.48% 3,382.6 52,233 Non-Qualified X 14.630 15.509 6.01% (2) 5,158.4 80,000 - -------------------------------------------------------------------------------------------------------------------------------- Growth Portfolio: Non-Qualified V 15.414 20.651 33.98% 217,309.5 4,487,701 Non-Qualified V (0.75) 15.558 20.948 34.64% 244,106.5 5,113,454 Non-Qualified VII 18.340 24.532 33.76% 2,097,548.1 51,456,280 Non-Qualified VIII 15.094 17.461 15.68% (4) 281,233.5 4,910,658 Non-Qualified IX 15.386 20.562 33.64% 4,444.5 91,388 Non-Qualified X 15.414 20.651 33.98% 1,027.9 21,226 Non-Qualified XIII 7.907 10.938 38.33% (9) 138,459.2 1,514,405 Non-Qualified XIV 7.596 10.923 43.80% (9) 35,759.3 390,592 Non-Qualified XV 9.157 10.915 19.20% (10) 6,648.3 72,569 Annuity contracts in payment period 1,585,189 - -------------------------------------------------------------------------------------------------------------------------------- Worldwide Growth Portfolio: Non-Qualified V 16.745 21.320 27.32% 1,069,704.4 22,805,969 Non-Qualified V (0.75) 16.901 21.626 27.96% 1,346,456.7 29,118,282 Non-Qualified VII 18.910 24.039 27.12% 7,196,142.1 172,985,648 Non-Qualified VIII 16.509 17.358 5.14% (4) 941,812.3 16,347,812 Non-Qualified IX 16.714 21.228 27.01% 28,229.7 599,257 Non-Qualified X 16.745 21.320 27.32% 45,970.7 980,091 Non-Qualified XIII 7.245 9.576 32.17% (9) 63,712.4 610,124 Non-Qualified XIV 8.027 9.563 19.14% (8) 39,601.7 378,723 Non-Qualified XV 8.519 9.557 12.18% (10) 7,974.3 76,209 Annuity contracts in payment period 3,724,747 - -------------------------------------------------------------------------------------------------------------------------------- Lexington Emerging Markets Fund: Non-Qualified VII 8.572 6.068 (29.21%) 247,857.1 1,509,423 - -------------------------------------------------------------------------------------------------------------------------------- Lexington Natural Resources Trust Fund: Non-Qualified V 13.896 11.030 (20.62%) 89,735.0 989,787 Non-Qualified V (0.75) 14.025 11.189 (20.22%) 92,175.0 1,031,313 Non-Qualified VII 13.794 10.932 (20.75%) 174,370.9 1,906,192 Non-Qualified IX 13.870 10.982 (20.82%) 752.5 8,264 Non-Qualified X 13.896 11.030 (20.62%) 1,753.1 19,337 - -------------------------------------------------------------------------------------------------------------------------------- MFS Funds: Total Return Series: Non-Qualified VII 13.030 14.432 10.76% 2,203,926.5 31,807,542 Non-Qualified VIII 14.096 14.491 2.80% (4) 400,395.8 5,802,076 Non-Qualified XIII 9.712 10.171 4.73% (10) 11,625.0 118,235 Non-Qualified XIV 9.772 10.157 3.94% (10) 12,838.2 130,398 Non-Qualified XV 9.737 10.150 4.24% (10) 27,534.1 279,477 - -------------------------------------------------------------------------------------------------------------------------------- Worldwide Government Series: Non-Qualified VII 10.207 10.860 6.40% 156,298.4 1,697,332 Non-Qualified VIII 10.312 10.904 5.74% (4) 29,054.9 316,806 - -------------------------------------------------------------------------------------------------------------------------------- Oppenheimer Funds: Aggressive Growth Fund: Non-Qualified VII 12.204 13.520 10.78% 659,693.3 8,919,034 Non-Qualified VIII 14.076 13.556 (3.69%) (4) 211,732.4 2,870,164 Non-Qualified XIII 7.289 9.362 28.44% (9) 730.2 6,837 Non-Qualified XIV 6.300 9.350 48.41% (9) 12,608.6 117,886 Non-Qualified XV 8.309 9.343 12.44% (11) 406.9 3,802 - -------------------------------------------------------------------------------------------------------------------------------- Global Securities Fund: Non-Qualified V 10.027 10.018 (0.09%) (4) 3,998.3 40,057 Non-Qualified V (0.75) 10.004 10.053 0.49% (6) 9,360.1 94,099 Non-Qualified VII 11.539 12.982 12.51% 465,279.3 6,040,369 Non-Qualified VIII 13.007 13.016 0.07% (4) 113,574.5 1,478,339 Non-Qualified IX 9.378 10.001 6.64% (11) 23.7 237 - --------------------------------------------------------------------------------------------------------------------------------
S-13 Variable Annuity Account B Condensed Financial Information - Year Ended December 31, 1998 (continued):
- -------------------------------------------------------------------------------------------------------------------------------- Value Per Unit Increase (Decrease) Units -------- in Value of Outstanding Reserves Beginning End of Accumulation at End at End of Year Year Unit of Year of Year - -------------------------------------------------------------------------------------------------------------------------------- Growth & Income Fund: Non-Qualified VII $ 12.785 $ 13.199 3.24% 2,014,343.2 $26,587,287 Non-Qualified VIII 14.890 13.234 (11.12%) (4) 602,061.1 7,967,561 Non-Qualified XIII 6.913 9.080 31.35% (9) 27,241.3 247,342 Non-Qualified XIV 6.647 9.067 36.41% (9) 41,656.3 377,715 Non-Qualified XV 8.449 9.061 7.24% (10) 1,468.2 13,304 - -------------------------------------------------------------------------------------------------------------------------------- Strategic Bond Fund: Non-Qualified V 9.952 9.895 (0.57%) (4) 3,006.1 29,745 Non-Qualified V (0.75) 10.098 9.929 (1.67%) (6) 625.2 6,208 Non-Qualified VII 10.764 10.921 1.46% 890,900.1 9,729,448 Non-Qualified VIII 11.084 10.950 (1.21%) (4) 254,861.2 2,790,663 Non-Qualified IX 9.889 9.878 (0.11%) (11) 67.2 664 Non-Qualified XIII 9.550 9.823 2.86% (10) 21,480.1 211,003 Non-Qualified XIV 9.566 9.810 2.55% (9) 13,169.1 129,188 Non-Qualified XV 9.768 9.803 0.36% (11) 10.2 100 Annuity contracts in payment period 201,581 - -------------------------------------------------------------------------------------------------------------------------------- Portfolio Partners, Inc. (PPI): PPI MFS Emerging Equities Portfolio: Non-Qualified V 15.219 19.489 28.06% 695,812.6 13,560,945 Non-Qualified V (0.75) 15.361 19.769 28.70% 562,096.7 11,112,279 Non-Qualified VII 14.707 18.803 27.85% 5,270,772.3 99,108,417 Non-Qualified VIII 12.011 12.761 6.24% (4) 509,943.9 6,507,181 Non-Qualified IX 15.192 19.405 27.73% 13,060.2 253,436 Non-Qualified X 15.219 19.489 28.06% 11,330.3 220,821 Non-Qualified XIII 7.999 10.371 29.65% (9) 11,390.8 118,131 Non-Qualified XIV 6.702 10.357 54.54% (9) 13,509.1 139,910 Non-Qualified XV 8.599 10.350 20.36% (10) 12,479.0 129,154 Annuity contracts in payment period 922,555 - -------------------------------------------------------------------------------------------------------------------------------- PPI MFS Research Growth Portfolio: Non-Qualified V 12.744 15.481 21.48% 605,270.9 9,370,125 Non-Qualified V (0.75) 12.863 15.703 22.08% 428,785.0 6,733,360 Non-Qualified VI 10.761 13.080 21.55% 8,187.8 107,093 Non-Qualified VII 12.641 15.331 21.28% 4,136,850.6 63,421,168 Non-Qualified VIII 10.102 10.532 4.26% (4) 554,094.8 5,835,838 Non-Qualified IX 12.721 15.414 21.17% 21,363.0 329,290 Non-Qualified X 12.744 15.481 21.48% 148,963.1 2,306,080 Non-Qualified XI 11.698 13.080 11.81% (10) 2,353.6 30,784 Non-Qualified XIII 8.805 10.113 14.86% (10) 4,603.7 46,556 Non-Qualified XIV 9.089 10.099 11.11% (10) 36,362.5 367,223 Non-Qualified XV 8.886 10.092 13.57% (10) 6,259.4 63,170 - -------------------------------------------------------------------------------------------------------------------------------- PPI MFS Value Equity Portfolio: Non-Qualified V 21.343 26.713 25.16% 303,746.3 8,114,121 Non-Qualified V (0.75) 21.541 27.097 25.79% 167,064.5 4,526,964 Non-Qualified VII 10.152 12.686 24.96% 881,252.1 11,179,905 Non-Qualified VIII 12.147 12.708 4.62% (4) 214,289.8 2,723,123 Non-Qualified IX 21.304 26.598 24.85% 1,925.9 51,224 Non-Qualified X 21.343 26.713 25.16% 9,947.4 265,731 Non-Qualified XIII 9.507 10.193 7.22% (10) 10,086.1 102,811 Non-Qualified XIV 9.302 10.180 9.44% (10) 9,561.3 97,330 Non-Qualified XV 9.421 10.173 7.98% (11) 161.2 1,640 Annuity contracts in payment period 903,680 - -------------------------------------------------------------------------------------------------------------------------------- PPI Scudder International Growth Portfolio: Non-Qualified V 17.903 21.057 17.62% 360,392.4 7,588,700 Non-Qualified V (0.75) 18.070 21.359 18.20% 257,953.3 5,509,651 Non-Qualified VII 9.912 11.640 17.43% 199,291.3 2,319,696 Non-Qualified VIII 11.775 11.659 (0.99%) (4) 107,008.6 1,247,585 Non-Qualified IX 17.870 20.966 17.33% 5,411.2 113,451 Non-Qualified X 17.903 21.057 17.62% 5,244.9 110,442 Non-Qualified XIII 8.553 9.248 8.13% (10) 46,182.0 427,101 Non-Qualified XIV 8.395 9.236 10.02% (9) 25,859.7 238,833
S-14 Variable Annuity Account B Condensed Financial Information - Year Ended December 31, 1998 (continued):
- -------------------------------------------------------------------------------------------------------------------------------- Value Per Unit Increase (Decrease) Units -------- in Value of Outstanding Reserves Beginning End of Accumulation at End at End of Year Year Unit of Year of Year - --------------------------------------------------------------------------------------------------------------------------------- PPI Scudder International Growth Portfolio (continued): Non-Qualified XV $ 8.841 $ 9.229 4.39% (10) 2,367.5 $ 21,851 Annuity contracts in payment period 18,946 - --------------------------------------------------------------------------------------------------------------------------------- PPI T. Rowe Price Growth Equity Portfolio: Non-Qualified V 14.400 18.146 26.01% 287,914.4 5,224,616 Non-Qualified V (0.75) 14.534 18.407 26.65% 335,509.9 6,175,728 Non-Qualified VII 18.343 23.078 25.81% 4,440,082.5 102,469,170 Non-Qualified VIII 15.327 16.682 8.84% (4) 272,321.4 4,542,742 Non-Qualified IX 14.374 18.068 25.70% 16,259.0 293,769 Non-Qualified X 14.400 18.146 26.01% 4,729.8 85,829 Annuity contracts in payment period 56,523 - ---------------------------------------------------------------------------------------------------------------------------------
Non-Qualified 1964 Individual contracts issued from December 1, 1964 to March 14, 1967. Non-Qualified V Group Aetna Plus contracts issued in connection with Deferred Compensation Plans issued since August 28, 1992. Non-Qualified VI Certain existing contracts that were converted to ACES, an administrative system (previously valued under Non-Qualified I). Non-Qualified VII Certain individual and group contracts issued as non-qualified deferred annuity contracts or Individual Retirement Annuity contracts issued since May 4, 1994. Non-Qualified VIII Certain individual Retirement Annuity contracts issued since May 1, 1998. Non-Qualified IX Group Aetna Plus contracts issued in connection with Deferred Compensation Plans having contract modifications effective April 7, 1997. Non-Qualified X Group Aetna Plus contracts issued in connection with Deferred Compensation Plans having contract modifications effective May 29, 1997. Non-Qualified XI Certain contracts previously valued under Non-Qualified VI having contract modifications effective May 29, 1997. Non-Qualified XIII Certain individual Retirement Annuity contracts issued since October 1, 1998. Non-Qualified XIV Certain individual Retirement Annuity contracts issued since September 1, 1998. Non-Qualified XV Certain individual Retirement Annuity contracts issued since September 1, 1998.
Notes to Condensed Financial Information: (1) - Reflects less than a full year of performance activity. Funds were first received in this option during January 1998. (2) - Reflects less than a full year of performance activity. Funds were first received in this option during February 1998. (3) - Reflects less than a full year of performance activity. Funds were first received in this option during March 1998. (4) - Reflects less than a full year of performance activity. Funds were first received in this option during May 1998. (5) - Reflects less than a full year of performance activity. Funds were first received in this option during June 1998. (6) - Reflects less than a full year of performance activity. Funds were first received in this option during July 1998. (7) - Reflects less than a full year of performance activity. Funds were first received in this option during August 1998. (8) - Reflects less than a full year of performance activity. Funds were first received in this option during September 1998. (9) - Reflects less than a full year of performance activity. Funds were first received in this option during October 1998. (10) - Reflects less than a full year of performance activity. Funds were first received in this option during November 1998. (11) - Reflects less than a full year of performance activity. Funds were first received in this option during December 1998. See Notes to Financial Statements S-15 Variable Annuity Account B Notes to Financial Statements - December 31, 1998 1. Summary of Significant Accounting Policies Variable Annuity Account B (the "Account") is a separate account established by Aetna Life Insurance and Annuity Company (the "Company") registered under the Investment Company Act of 1940 as a unit investment trust. The Account is sold exclusively for use with variable annuity contracts that may be entitled to tax-deferred treatment under specific sections of the Internal Revenue Code of 1986, as amended. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect amounts reported therein. Although actual results could differ from these estimates, any such differences are expected to be immaterial to the net assets of the Account. a. Valuation of Investments Investments in the following Funds are stated at the closing net asset value per share as determined by each Fund on December 31, 1998:
Aetna Ascent VP Fidelity Investments Variable Insurance Aetna Balanced VP Products Fund II: Aetna Bond VP o Asset Manager Portfolio Aetna Crossroads VP o Contrafund Portfolio Aetna GET Fund, Series B o Index 500 Portfolio Aetna GET Fund, Series C o Investment Grade Bond Portfolio Aetna GET Fund, Series D Insurance Management Series: Aetna Growth and Income VP o American Leaders Fund II Aetna Growth VP o Equity Income Fund II Aetna High Yield VP o Growth Strategies Fund II Aetna Index Plus Large Cap VP o High Income Bond Fund II Aetna Index Plus Mid Cap VP o International Equity Fund II Aetna Index Plus Small Cap VP o Prime Money Fund II Aetna International VP o U.S. Government Securities Fund II Aetna Legacy VP o Utility Fund II Aetna Money Market VP Janus Aspen Series: Aetna Real Estate Securities VP o Aggressive Growth Portfolio Aetna Small Company VP o Balanced Portfolio Aetna Value Opportunity VP o Flexible Income Portfolio AIM V.I. Funds: o Growth Portfolio o Capital Appreciation Fund o Worldwide Growth Portfolio o Growth and Income Fund Lexington Emerging Markets Fund o Growth Fund Lexington Natural Resources Trust Fund o Value Fund MFS Funds: Alger American Funds: o Total Return Series o Balanced Portfolio o Worldwide Government Series o Income & Growth Portfolio Oppenheimer Funds: o Leveraged AllCap Portfolio o Aggressive Growth Fund American Century Investments: o Global Securities Fund o Balanced Fund o Growth & Income Fund o International Fund o Strategic Bond Fund Calvert Social Balanced Portfolio Portfolio Partners, Inc. (PPI): Fidelity Investments Variable Insurance o PPI MFS Emerging Equities Portfolio Products Fund: o PPI MFS Research Growth Portfolio o Equity-Income Portfolio o PPI MFS Value Equity Portfolio o Growth Portfolio o PPI Scudder International Growth Portfolio o High Income Portfolio o PPI T. Rowe Price Growth Equity Portfolio o Overseas Portfolio
S-16 Variable Annuity Account B Notes to Financial Statements - December 31, 1998 (continued): b. Other Investment transactions are accounted for on a trade date basis and dividend income is recorded on the ex-dividend date. The cost of investments sold is determined by specific identification. c. Federal Income Taxes The operations of the Account form a part of, and are taxed with, the total operations of the Company which is taxed as a life insurance company under the Internal Revenue Code of 1986, as amended. d. Annuity Reserves Annuity reserves held in the Separate Accounts are computed for currently payable contracts according to the Progressive Annuity, a49, 1971 Individual 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 reserves are required, the Company reimburses the Account. 2. Valuation Period Deductions Deductions by the Account for mortality and expense risk charges are made in accordance with the terms of the contracts and are paid to the Company. 3. Dividend Income On an annual basis, the Funds distribute substantially all of their taxable income and realized capital gains to their shareholders. Distributions to the Account are automatically reinvested in shares of the Funds. The Account's proportionate share of each Fund's undistributed net investment income (distributions in excess of net investment income) and accumulated net realized gain (loss) on investments is included in net unrealized gain (loss) in the Statements of Operations and Changes in Net Assets. 4. Purchases and Sales of Investments The cost of purchases and proceeds from sales of investments other than short-term investments for the years ended December 31, 1998 and December 31, 1997 aggregated $2,351,952,353 and $1,555,519,398; $1,874,026,188 and $1,004,789,371, respectively. S-17 Variable Annuity Account B Notes to Financial Statements - December 31, 1998 (continued): 5. Supplemental Information to Statements of Operations and Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------ Year Ended December 31, 1998 Valuation Proceeds Cost of Net Period from Investments Realized Dividends Deductions Sales Sold Gain (Loss) - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Ascent VP: (1) $1,192,999 ($314,522) $6,202,187 $5,330,213 $871,974 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Balanced VP: (2) 31,081,246 (2,098,681) 22,863,897 18,450,097 4,413,800 Annuity contracts in accumulation Annuity contracts in payment period - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Bond VP: (3) 5,276,463 (891,202) 45,551,245 43,538,269 2,012,976 Annuity contracts in accumulation Annuity contracts in payment period - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Crossroads VP: (4) 1,150,096 (357,408) 3,956,923 3,518,415 438,508 Annuity contracts in accumulation Annuity contracts in payment period - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Get Fund, Series B: 5,018,284 (317,102) 5,046,075 3,579,372 1,466,703 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Get Fund, Series C: 1,099,683 (125,657) 4,593,631 3,264,351 1,329,280 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Get Fund, Series D: 375,948 (91,506) 9,290 9,230 60 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Growth and Income VP: (5) 194,648,930 (11,627,716) 149,305,243 120,221,169 29,084,074 Annuity contracts in accumulation Annuity contracts in payment period - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Growth VP: (6) 57,222 (185,058) 12,683,460 13,031,327 (347,867) Annuity contracts in accumulation Annuity contracts in payment period - ------------------------------------------------------------------------------------------------------------------------------------ Aetna High Yield VP: (7) 22,406 (865) 33,710 33,668 42 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Index Plus Large Cap VP: (8) 3,829,668 (635,743) 17,517,599 14,396,635 3,120,964 Annuity contracts in accumulation Annuity contracts in payment period - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Index Plus Mid Cap VP: (9) 18,437 (1,287) 73,979 81,147 (7,168) Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Index Plus Small Cap VP: (10) 38,562 (2,372) 124,787 157,822 (33,035) Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Aetna International VP: (11) 78,439 (5,821) 5,370,639 5,420,699 (50,060) Annuity contracts in accumulation Annuity contracts in payment period - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Legacy VP: (12) 1,516,017 (403,303) 5,625,929 5,116,001 509,928 Annuity contracts in accumulation Annuity contracts in payment period - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Money Market VP: (13) 6,326,910 (1,717,493) 386,526,442 385,568,048 958,394 Annuity contracts in accumulation Annuity contracts in payment period - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Real Estate Securities VP: (14) 49,524 (4,403) 197,598 223,098 (25,500) Annuity contracts in accumulation Annuity contracts in payment period - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Small Company VP: (15) 162,321 (180,527) 17,373,472 19,128,504 (1,755,032) Annuity contracts in accumulation Annuity contracts in payment period - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Value Opportunity VP: (16) 205,253 (172,485) 6,514,348 6,609,710 (95,362) Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------
S-18
- ------------------------------------------------------------------------------------------------------------------------------------ Net Unrealized Net Gain (Loss) Net Increase (Decrease) Net Assets ----------- Change in In Net Assets ---------- Beginning End Unrealized from Unit Beginning End of Year of Year Gain (Loss) Transactions of Year of Year - ------------------------------------------------------------------------------------------------------------------------------------ $1,034,430 ($204,552) ($1,238,982) $3,942,985 $ 20,443,736 $ 24,898,190 - ------------------------------------------------------------------------------------------------------------------------------------ 21,131,758 13,657,518 (7,474,240) 6,148,805 150,761,384 176,154,146 12,080,737 18,758,905 - ------------------------------------------------------------------------------------------------------------------------------------ 781,718 (271,440) (1,053,158) 12,050,394 69,236,488 85,100,187 3,681,984 5,213,758 - ------------------------------------------------------------------------------------------------------------------------------------ 704,161 455,992 (248,169) 8,303,550 20,250,904 28,289,880 69,721 1,317,322 - ------------------------------------------------------------------------------------------------------------------------------------ 6,194,743 3,285,620 (2,909,123) (4,718,918) 20,859,924 19,399,768 - ------------------------------------------------------------------------------------------------------------------------------------ 2,144,550 2,432,614 288,064 (4,244,458) 10,929,107 9,276,019 - ------------------------------------------------------------------------------------------------------------------------------------ 0 (64,824) (64,824) 89,687,448 0 89,907,126 - ------------------------------------------------------------------------------------------------------------------------------------ 67,675,837 (14,386,593) (82,062,430) (42,142,027) 892,006,381 955,586,320 130,876,769 155,197,661 - ------------------------------------------------------------------------------------------------------------------------------------ (945,071) 4,054,739 4,999,810 21,924,027 3,210,344 28,467,187 8,566 1,199,857 - ------------------------------------------------------------------------------------------------------------------------------------ 0 (38,627) (38,627) 247,430 0 230,386 - ------------------------------------------------------------------------------------------------------------------------------------ 1,342,384 9,544,413 8,202,029 44,321,436 28,074,705 85,248,495 165,083 1,829,647 - ------------------------------------------------------------------------------------------------------------------------------------ 0 25,068 25,068 340,695 0 375,745 - ------------------------------------------------------------------------------------------------------------------------------------ 0 8,264 8,264 958,381 0 969,800 - ------------------------------------------------------------------------------------------------------------------------------------ 0 (4,447) (4,447) 1,512,822 0 1,528,847 0 2,086 - ------------------------------------------------------------------------------------------------------------------------------------ 556,022 230,393 (325,629) 13,863,127 18,710,015 32,331,905 1,284,593 2,822,843 - ------------------------------------------------------------------------------------------------------------------------------------ 1,429,868 1,434,703 4,835 19,490,597 124,939,137 149,772,871 0 229,509 - ------------------------------------------------------------------------------------------------------------------------------------ 0 (78,505) (78,505) 1,040,421 0 965,259 0 16,278 - ------------------------------------------------------------------------------------------------------------------------------------ (299,676) 1,188,423 1,488,099 12,670,750 6,059,783 18,295,242 47,346 197,498 - ------------------------------------------------------------------------------------------------------------------------------------ (545,082) 1,733,031 2,278,113 12,561,099 3,912,594 18,689,212 - ------------------------------------------------------------------------------------------------------------------------------------
S-19 Variable Annuity Account B Notes to Financial Statements - December 31, 1998 (continued): 5. Supplemental Information of Statements of Operations and Changes in Net Assets (continued):
- ------------------------------------------------------------------------------------------------------------------------------------ Year Ended December 31, 1998 Valuation Proceeds Cost of Net Period from Investments Realized Dividends Deductions Sales Sold Gain (Loss) - ------------------------------------------------------------------------------------------------------------------------------------ AIM V.I. Funds: Capital Appreciation Fund: $4,806 ($202) $14,985 $12,643 $2,342 Annuity contracts in accumulation - ----------------------------------------------------------------------------------------------------------------------------------- Growth and Income Fund: 2,713 (267) 23,669 19,935 3,734 Annuity contracts in accumulation - ----------------------------------------------------------------------------------------------------------------------------------- Growth Fund: 9,742 (211) 23,394 19,680 3,714 Annuity contracts in accumulation - ----------------------------------------------------------------------------------------------------------------------------------- Value Fund: 25,024 (535) 56,171 51,027 5,144 Annuity contracts in accumulation - ----------------------------------------------------------------------------------------------------------------------------------- Alger American Funds: Balanced Portfolio: 486,973 (82,216) 1,110,574 897,864 212,710 Annuity contracts in accumulation - ----------------------------------------------------------------------------------------------------------------------------------- Income & Growth Portfolio: 1,467,662 (206,029) 3,272,978 2,151,013 1,121,965 Annuity contracts in accumulation - ----------------------------------------------------------------------------------------------------------------------------------- Leveraged AllCap Portfolio: 631,832 (203,365) 4,222,156 3,043,959 1,178,197 Annuity contracts in accumulation - ----------------------------------------------------------------------------------------------------------------------------------- American Century Investments: Balanced Fund: 593,854 (65,789) 611,313 550,274 61,039 Annuity contracts in accumulation - ----------------------------------------------------------------------------------------------------------------------------------- International Fund: 390,912 (86,065) 1,137,750 894,619 243,131 Annuity contracts in accumulation - ----------------------------------------------------------------------------------------------------------------------------------- Calvert Social Balanced Portfolio: 142,097 (14,682) 869,863 750,607 119,256 Annuity contracts in accumulation - ----------------------------------------------------------------------------------------------------------------------------------- Fidelity Investments Variable Insurance Products Fund: Equity-Income Portfolio: 8,906,937 (2,144,267) 25,370,915 20,727,569 4,643,346 Annuity contracts in accumulation - ----------------------------------------------------------------------------------------------------------------------------------- Growth Portfolio: 11,278,163 (1,400,091) 22,592,809 17,208,859 5,383,950 Annuity contracts in accumulation - ----------------------------------------------------------------------------------------------------------------------------------- High Income Portfolio: 4,692,207 (673,883) 14,109,054 14,587,749 (478,695) Annuity contracts in accumulation Annuity contracts in payment period - ----------------------------------------------------------------------------------------------------------------------------------- Overseas Portfolio: 1,031,834 (210,954) 48,431,460 47,643,577 787,883 Annuity contracts in accumulation - ----------------------------------------------------------------------------------------------------------------------------------- Fidelity Investments Variable Insurance Products Fund II: Asset Manager Portfolio: 1,595,388 (233,627) 3,024,858 2,760,267 264,591 Annuity contracts in accumulation - ----------------------------------------------------------------------------------------------------------------------------------- Contrafund Portfolio: 6,614,609 (1,728,721) 42,738,053 30,874,729 11,863,324 Annuity contracts in accumulation - ----------------------------------------------------------------------------------------------------------------------------------- Index 500 Portfolio: 3,204,277 (1,496,826) 30,685,587 22,118,189 8,567,398 Annuity contracts in accumulation - ----------------------------------------------------------------------------------------------------------------------------------- Investment Grade Bond Portfolio: 342,576 (87,927) 1,725,694 1,635,019 90,675 Annuity contracts in accumulation - -----------------------------------------------------------------------------------------------------------------------------------
S-20
- ------------------------------------------------------------------------------------------------------------------------------------ Net Unrealized Net Gain (Loss) Net Increase (Decrease) Net Assets ----------- Change in in Net Assets ---------- Beginning End Unrealized from Unit Beginning End of Year of Year Gain (Loss) Transactions of Year of Year - ------------------------------------------------------------------------------------------------------------------------------------ $0 $19,720 $19,720 $272,126 $0 $298,792 - ------------------------------------------------------------------------------------------------------------------------------------ 0 17,765 17,765 197,613 0 221,558 - ------------------------------------------------------------------------------------------------------------------------------------ 0 12,342 12,342 271,273 0 296,860 - ------------------------------------------------------------------------------------------------------------------------------------ 0 22,553 22,553 651,784 0 703,970 - ------------------------------------------------------------------------------------------------------------------------------------ 691,602 1,582,996 891,394 (979,394) 5,656,151 6,185,618 - ------------------------------------------------------------------------------------------------------------------------------------ 2,709,055 4,215,812 1,506,757 (2,575,078) 14,148,460 15,463,737 - ------------------------------------------------------------------------------------------------------------------------------------ 1,540,243 6,533,437 4,993,194 (3,907,972) 14,280,009 16,971,895 - ------------------------------------------------------------------------------------------------------------------------------------ 462,379 487,853 25,474 (525,510) 4,643,230 4,732,298 - ------------------------------------------------------------------------------------------------------------------------------------ 361,821 743,148 381,327 (991,033) 5,852,955 5,791,227 - ------------------------------------------------------------------------------------------------------------------------------------ 59,286 14,930 (44,356) 784,430 971,337 1,958,082 - ------------------------------------------------------------------------------------------------------------------------------------ 19,807,673 22,859,546 3,051,873 22,941,092 138,709,740 176,108,721 - ------------------------------------------------------------------------------------------------------------------------------------ 14,584,513 33,940,400 19,355,887 23,497,310 80,401,549 138,516,768 - ------------------------------------------------------------------------------------------------------------------------------------ 2,722,687 (4,425,686) (7,148,373) 18,153,824 35,217,837 49,328,098 68,542 503,361 - ------------------------------------------------------------------------------------------------------------------------------------ 460,930 669,980 209,050 3,064,387 13,004,643 17,886,843 - ------------------------------------------------------------------------------------------------------------------------------------ 1,137,702 1,633,427 495,725 6,549,586 11,743,075 20,414,738 - ------------------------------------------------------------------------------------------------------------------------------------ 18,201,832 35,201,475 16,999,643 21,398,116 107,827,442 162,974,413 - ------------------------------------------------------------------------------------------------------------------------------------ 10,882,841 25,538,020 14,655,179 39,819,038 76,986,772 141,735,838 - ------------------------------------------------------------------------------------------------------------------------------------ 387,160 478,048 90,888 (1,318,753) 6,578,182 5,695,641 - ------------------------------------------------------------------------------------------------------------------------------------
S-21 Variable Annuity Account B Notes to Financial Statements - December 31, 1998 (continued): 5. Supplemental Information to Statements of Operations and Changes in Net Assets (continued):
- ------------------------------------------------------------------------------------------------------------------------------------ Year Ended December 31, 1998 Valuation Proceeds Cost of Net Period from Investments Realized Dividends Deductions Sales Sold Gain (Loss) - ------------------------------------------------------------------------------------------------------------------------------------ Insurance Management Series: American Leaders Fund II: $7,998,351 ($1,792,801) $11,978,535 $7,178,957 $4,799,578 Annuity contracts in accumulation Annuity contracts in payment period - ------------------------------------------------------------------------------------------------------------------------------------ Equity Income Fund II: 129,452 (351,981) 2,362,630 1,928,603 434,027 Annuity contracts in accumulation Annuity contracts in payment period - ------------------------------------------------------------------------------------------------------------------------------------ Growth Strategies Fund II: 1,440,579 (346,704) 2,791,762 2,071,376 720,386 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ High Income Bond Fund II: 1,568,969 (734,892) 9,316,278 8,463,432 852,846 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ International Equity Fund II: 19,289 (235,997) 1,956,908 1,482,907 474,001 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Prime Money Fund II: 373,803 (110,555) 7,641,997 7,641,997 0 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Government Securities Fund II: 228,386 (196,668) 3,851,945 3,576,274 275,671 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Utility Fund II: 1,743,305 (392,083) 2,677,845 1,942,231 735,614 Annuity contracts in accumulation Annuity contracts in payment period - ------------------------------------------------------------------------------------------------------------------------------------ Janus Aspen Series: Aggressive Growth Portfolio: 0 (548,576) 107,425,514 96,362,874 11,062,640 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Balanced Portfolio: 2,261,301 (641,284) 6,017,873 4,527,218 1,490,655 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Flexible Income Portfolio: 1,033,461 (191,305) 3,727,543 3,410,925 316,618 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Growth Portfolio: 3,293,173 (683,049) 26,018,237 18,985,226 7,033,011 Annuity contracts in accumulation Annuity contracts in payment period - ------------------------------------------------------------------------------------------------------------------------------------ Worldwide Growth Portfolio: 8,111,689 (2,748,458) 78,479,604 56,933,615 21,545,989 Annuity contracts in accumulation Annuity contracts in payment period - ------------------------------------------------------------------------------------------------------------------------------------ Lexington Emerging Markets Fund: 161,811 (28,458) 724,351 1,074,950 (350,599) Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Lexington Natural Resources Trust Fund: 340,539 (62,444) 2,112,416 2,109,389 3,027 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ MFS Funds: Total Return Series: 778,001 (405,501) 3,009,737 2,396,400 613,337 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Worldwide Government Series: 17,379 (22,917) 739,420 740,555 (1,135) Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Oppenheimer Funds: Aggressive Growth Fund: 152,035 (112,671) 86,439,393 86,664,887 (225,494) Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Global Securities Fund: 387,530 (69,872) 10,919,054 11,293,037 (373,983) Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Growth & Income Fund: 1,054,695 (356,726) 4,266,733 4,140,441 126,292 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------
S-22
- ------------------------------------------------------------------------------------------------------------------------------------ Net Unrealized Net Gain (Loss) Net Increase (Decrease) Net Assets ----------- Change in in Net Assets ---------- Beginning End Unrealized from Unit Beginning End of Year of Year Gain (Loss) Transactions of Year of Year - ------------------------------------------------------------------------------------------------------------------------------------ $30,111,589 $37,231,660 $7,120,071 ($524,859) $16,800,911 $134,398,144 48,751 51,858 - ------------------------------------------------------------------------------------------------------------------------------------ 911,406 3,973,133 3,061,727 5,452,240 19,938,571 28,656,460 0 7,576 - ------------------------------------------------------------------------------------------------------------------------------------ 3,558,451 5,244,563 1,686,112 1,241,036 22,709,106 27,450,515 - ------------------------------------------------------------------------------------------------------------------------------------ 3,763,082 2,714,767 (1,048,315) (3,963,730) 53,212,853 49,887,731 - ------------------------------------------------------------------------------------------------------------------------------------ 938,501 3,819,534 2,881,033 437,110 13,946,028 17,521,464 - ------------------------------------------------------------------------------------------------------------------------------------ 0 2,223 2,223 271,362 7,530,487 8,067,320 - ------------------------------------------------------------------------------------------------------------------------------------ 513,199 1,013,377 500,178 2,050,473 13,196,784 16,054,824 - ------------------------------------------------------------------------------------------------------------------------------------ 5,801,015 7,053,257 1,252,242 695,668 26,302,858 30,329,937 0 7,667 - ------------------------------------------------------------------------------------------------------------------------------------ 4,594,517 8,106,849 3,512,332 4,958,453 38,383,925 57,368,774 - ------------------------------------------------------------------------------------------------------------------------------------ 3,462,858 15,241,071 11,778,213 26,193,826 31,145,778 72,228,489 - ------------------------------------------------------------------------------------------------------------------------------------ 367,565 255,193 (112,372) 9,052,449 10,534,588 20,633,439 - ------------------------------------------------------------------------------------------------------------------------------------ 5,764,208 12,281,148 6,516,940 12,764,560 40,072,928 68,058,273 645,899 1,585,189 - ------------------------------------------------------------------------------------------------------------------------------------ 18,210,266 37,241,442 19,031,176 39,032,925 160,658,096 243,902,115 1,995,445 3,724,747 - ------------------------------------------------------------------------------------------------------------------------------------ (709,548) (1,196,659) (487,111) (619,636) 2,833,416 1,509,423 ----------------------------------------------------------------------------------------------------------------------------------- 177,872 (1,266,269) (1,444,141) (1,812,452) 6,930,364 3,954,893 - ------------------------------------------------------------------------------------------------------------------------------------ 1,975,149 3,834,735 1,859,586 16,318,427 18,973,878 38,137,728 - ------------------------------------------------------------------------------------------------------------------------------------ (5,937) 102,292 108,229 588,288 1,324,295 2,014,138 - ------------------------------------------------------------------------------------------------------------------------------------ 133,786 1,243,228 1,109,442 7,306,211 3,688,200 11,917,723 - ------------------------------------------------------------------------------------------------------------------------------------ (846) 786,005 786,851 4,241,638 2,680,937 7,653,101 - ------------------------------------------------------------------------------------------------------------------------------------ 465,927 (435,824) (901,751) 22,581,792 12,688,907 35,193,209 - ------------------------------------------------------------------------------------------------------------------------------------
S-23 Variable Annuity Account B Notes to Financial Statements - December 31, 1998 (continued): 5. Supplemental Information to Statements of Operations and Changes in Net Assets (continued):
- ------------------------------------------------------------------------------------------------------------------------------------ Year Ended December 31, 1998 Valuation Proceeds Cost of Net Period from Investments Realized Dividends Deductions Sales Sold Gain (Loss) - ------------------------------------------------------------------------------------------------------------------------------------ Strategic Bond Fund: $150,955 ($113,793) $1,981,154 $2,006,416 ($25,262) Annuity contracts in accumulation Annuity contracts in payment period - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio Partners, Inc. (PPI): PPI MFS Emerging Equities Portfolio: 321,152 (1,493,640) 87,290,554 78,385,480 8,905,074 Annuity contracts in accumulation Annuity contracts in payment period - ------------------------------------------------------------------------------------------------------------------------------------ PPI MFS Research Growth Portfolio: 18,247 (1,021,049) 37,548,653 34,203,994 3,344,659 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ PPI MFS Value Equity Portfolio: 34,159 (276,002) 13,051,497 11,621,475 1,430,022 Annuity contracts in accumulation Annuity contracts in payment period - ------------------------------------------------------------------------------------------------------------------------------------ PPI Scudder International Growth Portfolio: 29,626 (167,735) 136,940,032 134,230,073 2,709,959 Annuity contracts in accumulation Annuity contracts in payment period - ------------------------------------------------------------------------------------------------------------------------------------ PPI T. Rowe Price Growth Equity Portfolio: 576,750 (1,411,791) 16,657,996 15,110,779 1,547,217 Annuity contracts in accumulation Annuity contracts in payment period - ------------------------------------------------------------------------------------------------------------------------------------ Total Variable Annuity Account B $325,794,651 ($42,285,760) $1,555,519,398 $1,412,108,865 $143,410,533 ====================================================================================================================================
(1) - Effective May 1, 1998, Aetna Ascent Variable Portfolio's name changed to Aetna Ascent VP. (2) - Effective May 1, 1998, Aetna Investment Advisors Fund's name changed to Aetna Balanced VP. (3) - Effective May 1, 1998, Aetna Income Shares' name changed to Aetna Bond VP. (4) - Effective May 1, 1998, Aetna Crossroads Variable Portfolio's name changed to Aetna Crossroads VP. (5) - Effective May 1, 1998, Aetna Variable Fund's name changed to Aetna Growth and Income VP. (6) - Effective May 1, 1998, Aetna Variable Growth Portfolio's name changed to Aetna Growth VP. (7) - Effective May 1, 1998, Aetna High Yield Portfolio's name changed to Aetna High Yield VP. (8) - Effective May 1, 1998, Aetna Variable Index Plus Portfolio's name changed to Aetna Index Plus Large Cap VP. (9) - Effective May 1, 1998, Aetna Index Plus Mid Cap Portfolio's name changed to Aetna Index Plus Mid Cap VP. (10) -Effective May 1, 1998, Aetna Index Plus Small Cap Portfolio's name changed to Aetna Index Plus Small Cap VP. (11) -Effective May 1, 1998, Aetna International Portfolio's name changed to Aetna International VP. (12) -Effective May 1, 1998, Aetna Legacy Variable Portfolio's name changed to Aetna Legacy VP. (13) -Effective May 1, 1998, Aetna Variable Encore Fund's name changed to Aetna Money Market VP. (14) -Effective May 1, 1998, Aetna Real Estate Securities Portfolio's name changed to Aetna Real Estate Securities VP. (15) -Effective May 1, 1998, Aetna Variable Small Company Portfolio's name changed to Aetna Small Company VP. (16) -Effective May 1, 1998, Aetna Variable Capital Appreciation Portfolio's name changed to Aetna Value Opportunity VP. S-24
- ------------------------------------------------------------------------------------------------------------------------------------ Net Unrealized Net Gain (Loss) Net Increase (Decrease) Net Assets ----------- Change in in Net Assets ---------- Beginning End Unrealized from Unit Beginning End of Year of Year Gain (Loss) Transactions of Year of Year - ------------------------------------------------------------------------------------------------------------------------------------ ($21,173) $47,663 $68,836 $9,925,163 $3,092,701 $12,897,019 0 201,581 - ------------------------------------------------------------------------------------------------------------------------------------ (753,832) 19,423,983 20,177,815 8,869,734 94,796,247 131,150,274 496,447 922,555 - ------------------------------------------------------------------------------------------------------------------------------------ (1,162,926) 11,016,482 12,179,408 8,222,292 65,867,130 88,610,687 - ------------------------------------------------------------------------------------------------------------------------------------ 220,662 3,770,053 3,549,391 7,801,278 15,049,606 27,062,849 378,075 903,680 - ------------------------------------------------------------------------------------------------------------------------------------ 195,427 863,502 668,075 1,706,168 12,650,163 17,577,310 0 18,946 - ------------------------------------------------------------------------------------------------------------------------------------ 1,797,922 24,891,619 23,093,697 4,872,245 90,170,258 118,791,854 0 56,523 - ------------------------------------------------------------------------------------------------------------------------------------ $255,524,506 $349,806,583 $94,282,077 $512,924,064 $2,922,442,857 $3,956,568,422 ====================================================================================================================================
S-25 Variable Annuity Account B Notes to Financial Statements - December 31, 1998 (continued): 5. Supplemental Information to Statements of Operations and Changes in Net Assets (continued):
- ------------------------------------------------------------------------------------------------------------------------------------ Year Ended December 31, 1997 Valuation Proceeds Cost of Net Period from Investments Realized Dividends Deductions Sales Sold Gain (Loss) - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Variable Fund: $206,171,606 ($9,508,053) $64,103,032 $51,274,099 $12,828,933 Annuity contracts in accumulation Annuity contracts in payment period - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Income Shares: 4,333,850 (737,718) 12,717,950 11,951,670 766,280 Annuity contracts in accumulation Annuity contracts in payment period - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Variable Encore Fund: 4,149,350 (1,373,114) 187,177,845 187,281,193 (103,348) Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Investment Advisers Fund, Inc.: 20,983,218 (1,660,805) 12,262,658 9,696,803 2,565,855 Annuity contracts in accumulation Annuity contracts in payment period - ------------------------------------------------------------------------------------------------------------------------------------ Aetna GET Fund, Series B: 3,422,687 (286,592) 1,109,194 713,521 395,673 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Aetna GET Fund, Series C: 169,021 (119,214) 963,591 833,090 130,501 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Ascent Variable Portfolio: 1,293,085 (171,542) 2,422,808 2,093,544 329,264 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Crossroads Variable Portfolio: 1,366,067 (170,121) 1,119,794 921,119 198,675 Annuity contracts in accumulation Annuity contracts in payment period - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Legacy Variable Portfolio: 1,122,530 (176,596) 1,280,095 1,125,823 154,272 Annuity contracts in accumulation Annuity contracts in payment period - ------------------------------------------------------------------------------------------------------------------------------------ Aetna Variable Portfolio, Inc.: Capital Appreciation Portfolio: 621,617 (11,486) 125,792 110,176 15,616 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Growth Portfolio: 848,691 (9,678) 592,546 560,620 31,926 Annuity contracts in accumulation Annuity contracts in payment period - ------------------------------------------------------------------------------------------------------------------------------------ Index Plus Portfolio: 1,110,445 (154,416) 2,229,246 1,790,247 438,999 Annuity contracts in accumulation Annuity contracts in payment period - ------------------------------------------------------------------------------------------------------------------------------------ Small Company Portfolio: 366,132 (19,387) 261,692 230,152 31,540 Annuity contracts in accumulation Annuity contracts in payment period - ------------------------------------------------------------------------------------------------------------------------------------ Alger American Funds: Balanced Portfolio: 142,299 (73,798) 1,098,365 1,473,706 (375,341) Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------
S-26
- ------------------------------------------------------------------------------------------------------------------------------------ Net Unrealized Net Gain (Loss) Net Increase (Decrease) Net Assets ----------- Change in In Net Assets ----------- Beginning End Unrealized from Unit Beginning End of Year of Year Gain (Loss) Transactions of Year of Year - ------------------------------------------------------------------------------------------------------------------------------------ $59,979,314 $67,675,837 $7,696,523 $71,233,894 $644,728,031 $892,006,381 89,732,216 130,876,769 - ------------------------------------------------------------------------------------------------------------------------------------ 379,633 781,718 402,085 (1,964,060) 66,534,546 69,236,488 3,583,489 3,681,984 - ------------------------------------------------------------------------------------------------------------------------------------ (540,607) 1,429,868 1,970,475 13,513,776 106,781,998 124,939,137 - ------------------------------------------------------------------------------------------------------------------------------------ 15,114,435 21,131,758 6,017,323 7,591,834 119,402,212 150,761,384 7,942,484 12,080,737 - ------------------------------------------------------------------------------------------------------------------------------------ 4,487,610 6,194,743 1,707,133 (712,316) 16,333,339 20,859,924 - ------------------------------------------------------------------------------------------------------------------------------------ 144,834 2,144,550 1,999,716 (532,193) 9,281,276 10,929,107 - ------------------------------------------------------------------------------------------------------------------------------------ 276,453 1,034,430 757,977 12,596,284 5,638,668 20,443,736 - ------------------------------------------------------------------------------------------------------------------------------------ 151,493 704,161 552,668 13,077,636 5,295,700 20,250,904 0 69,721 - ------------------------------------------------------------------------------------------------------------------------------------ 46,576 556,022 509,446 12,197,969 6,186,987 18,710,015 0 1,284,593 - ------------------------------------------------------------------------------------------------------------------------------------ 0 (545,082) (545,082) 3,831,929 0 3,912,594 - ------------------------------------------------------------------------------------------------------------------------------------ 0 (945,071) (945,071) 3,293,042 0 3,210,344 0 8,566 - ------------------------------------------------------------------------------------------------------------------------------------ (4,046) 1,342,384 1,346,430 23,512,958 1,985,372 28,074,705 0 165,083 - ------------------------------------------------------------------------------------------------------------------------------------ 0 (299,676) (299,676) 6,028,520 0 6,059,783 0 47,346 - ------------------------------------------------------------------------------------------------------------------------------------ (461,380) 691,602 1,152,982 1,032,718 3,777,291 5,656,151 - ------------------------------------------------------------------------------------------------------------------------------------
S-27 Variable Annuity Account B Notes to Financial Statements - December 31, 1998 (continued): 5. Supplemental Information to Statements of Operations and Changes in Net Assets (continued):
- ------------------------------------------------------------------------------------------------------------------------------------ Year Ended December 31, 1997 Valuation Proceeds Cost of Net Period from Investments Realized Dividends Deductions Sales Sold Gain (Loss) - ----------------------------------------------------------------------------------------------------------------------------------- Alger American Funds (continued): Growth Portfolio: (1) $506,477 ($685,927) $ 78,591,434 $ 64,519,617 $ 14,071,817 Annuity contracts in accumulation - ----------------------------------------------------------------------------------------------------------------------------------- Income and Growth Portfolio: 401,543 (156,768) 2,602,037 3,401,714 (799,677) Annuity contracts in accumulation - ----------------------------------------------------------------------------------------------------------------------------------- Leveraged AllCap Portfolio: 0 (196,601) 7,570,244 6,461,486 1,108,758 Annuity contracts in accumulation - ----------------------------------------------------------------------------------------------------------------------------------- MidCap Growth Portfolio: (1) 350,028 (308,858) 49,795,194 45,404,313 4,390,881 Annuity contracts in accumulation - ----------------------------------------------------------------------------------------------------------------------------------- Small Capitalization Portfolio: (2) 2,260,717 (722,118) 118,175,863 114,437,088 3,738,775 Annuity contracts in accumulation - ----------------------------------------------------------------------------------------------------------------------------------- American Century Investments: Balanced Fund: 199,265 (58,943) 704,536 619,119 85,417 Annuity contracts in accumulation - ----------------------------------------------------------------------------------------------------------------------------------- Capital Appreciation Fund: (3) 725,963 (365,809) 47,909,593 51,060,683 (3,151,090) Annuity contracts in accumulation - ----------------------------------------------------------------------------------------------------------------------------------- International Fund: 176,899 (85,324) 4,226,767 3,417,937 808,830 Annuity contracts in accumulation - ----------------------------------------------------------------------------------------------------------------------------------- Calvert Social Balanced Portfolio: 67,562 (7,128) 212,241 199,799 12,442 Annuity contracts in accumulation - ----------------------------------------------------------------------------------------------------------------------------------- Fidelity Investments Variable Insurance Products Fund: Equity-Income Portfolio: 7,870,976 (1,400,361) 17,887,517 15,251,625 2,635,892 Annuity contracts in accumulation - ----------------------------------------------------------------------------------------------------------------------------------- Growth Portfolio: 2,159,319 (938,752) 10,659,015 9,711,716 947,299 Annuity contracts in accumulation - ----------------------------------------------------------------------------------------------------------------------------------- High Income Portfolio: 1,270,071 (337,944) 4,857,948 4,277,783 580,165 Annuity contracts in accumulation Annuity contracts in payment period - ----------------------------------------------------------------------------------------------------------------------------------- Overseas Portfolio: 863,493 (164,196) 5,725,552 5,116,905 608,647 Annuity contracts in accumulation - ----------------------------------------------------------------------------------------------------------------------------------- Fidelity Investments Variable Insurance Products Fund II: Asset Manager Portfolio: 761,827 (120,783) 1,009,159 904,890 104,269 Annuity contracts in accumulation - ----------------------------------------------------------------------------------------------------------------------------------- Contrafund Portfolio: 1,931,363 (1,125,088) 13,933,668 10,543,199 3,390,469 Annuity contracts in accumulation - ----------------------------------------------------------------------------------------------------------------------------------- Index 500 Portfolio: 1,159,193 (771,581) 17,678,295 13,392,232 4,286,063 Annuity contracts in accumulation - ----------------------------------------------------------------------------------------------------------------------------------- Investment Grade Bond Portfolio: 277,920 (79,205) 1,100,211 1,085,995 14,216 Annuity contracts in accumulation - -----------------------------------------------------------------------------------------------------------------------------------
S-28
- ------------------------------------------------------------------------------------------------------------------------------------ Net Unrealized Net Gain (Loss) Net Increase (Decrease) Net Assets ----------- Change in In Net Assets ---------- Beginning End Unrealized from Unit Beginning End of Year of Year Gain (Loss) Transactions of Year of Year - ------------------------------------------------------------------------------------------------------------------------------------ $2,349,936 $0 ($2,349,936) ($55,087,434) $43,545,003 $0 - ------------------------------------------------------------------------------------------------------------------------------------ (828,912) 2,709,055 3,537,967 4,693,808 6,471,587 14,148,460 - ------------------------------------------------------------------------------------------------------------------------------------ 220,810 1,540,243 1,319,433 628,691 11,419,728 14,280,009 - ------------------------------------------------------------------------------------------------------------------------------------ 682,424 0 (682,424) (23,592,354) 19,842,727 0 - ------------------------------------------------------------------------------------------------------------------------------------ (495,260) 0 495,260 (64,524,063) 58,751,429 0 - ------------------------------------------------------------------------------------------------------------------------------------ 145,325 462,379 317,054 1,109,081 2,991,356 4,643,230 - ------------------------------------------------------------------------------------------------------------------------------------ (1,588,390) 0 1,588,390 (43,166,616) 44,369,162 0 - ------------------------------------------------------------------------------------------------------------------------------------ 375,835 361,821 (14,014) 259,970 4,706,594 5,852,955 - ------------------------------------------------------------------------------------------------------------------------------------ (881) 59,286 60,167 241,657 596,637 971,337 - ------------------------------------------------------------------------------------------------------------------------------------ 5,773,475 19,807,673 14,034,198 43,088,538 72,480,497 138,709,740 - ------------------------------------------------------------------------------------------------------------------------------------ 3,258,300 14,584,513 11,326,213 8,978,986 57,928,484 80,401,549 - ------------------------------------------------------------------------------------------------------------------------------------ 814,429 2,722,687 1,908,258 17,156,365 14,709,464 35,217,837 0 68,542 - ------------------------------------------------------------------------------------------------------------------------------------ 743,689 460,930 (282,759) 2,276,187 9,703,271 13,004,643 - ------------------------------------------------------------------------------------------------------------------------------------ 484,182 1,137,702 653,520 4,412,778 5,931,464 11,743,075 - ------------------------------------------------------------------------------------------------------------------------------------ 6,210,754 18,201,832 11,991,078 35,101,002 56,538,618 107,827,442 - ------------------------------------------------------------------------------------------------------------------------------------ 2,241,040 10,882,841 8,641,801 36,290,926 27,380,370 76,986,772 - ------------------------------------------------------------------------------------------------------------------------------------ 175,829 387,160 211,331 1,392,243 4,761,677 6,578,182 - ------------------------------------------------------------------------------------------------------------------------------------
S-29 Variable Annuity Account B Notes to Financial Statements - December 31, 1998 (continued): 5. Supplemental Information to Statements of Operations and Changes in Net Assets (continued):
- ------------------------------------------------------------------------------------------------------------------------------------ Year Ended December 31, 1997 Valuation Proceeds Cost of Net Period from Investments Realized Dividends Deductions Sales Sold Gain (Loss) - ------------------------------------------------------------------------------------------------------------------------------------ Insurance Management Series: American Leaders Fund II: $2,033,587 ($1,272,645) $2,239,581 $1,354,167 $885,414 Annuity contracts in accumulation Annuity contracts in payment period - ------------------------------------------------------------------------------------------------------------------------------------ Equity Income Fund II: 52,763 (108,244) 188,614 167,057 21,557 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Growth Strategies Fund II: 63,162 (214,573) 650,403 461,919 188,484 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ High Income Bond Fund II: 2,232,254 (576,880) 5,856,816 5,388,542 468,274 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ International Equity Fund II: 8,680 (138,835) 787,960 678,156 109,804 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Prime Money Fund II: 365,689 (107,783) 7,931,948 7,931,971 (23) Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Government Securities Fund II: 366,225 (147,271) 3,825,499 3,747,648 77,851 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Utility Fund II: 838,523 (291,277) 1,512,321 1,157,193 355,128 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Janus Aspen Series: Aggressive Growth Portfolio: 0 (419,040) 19,586,639 19,136,007 450,632 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Balanced Portfolio: 786,909 (294,871) 2,053,281 1,687,149 366,132 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Flexible Income Portfolio: 528,359 (93,943) 1,111,581 1,079,357 32,224 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Growth Portfolio: 967,832 (429,682) 2,254,366 1,752,378 501,988 Annuity contracts in accumulation Annuity contracts in payment period - ------------------------------------------------------------------------------------------------------------------------------------ Short-Term Bond Portfolio: (4) 62,602 (36,643) 13,023,397 12,927,175 96,222 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Worldwide Growth Portfolio: 2,077,847 (1,645,928) 21,615,276 15,329,845 6,285,431 Annuity contracts in accumulation Annuity contracts in payment period - ------------------------------------------------------------------------------------------------------------------------------------ Lexington Emerging Markets Fund: 2,717 (53,043) 4,235,697 4,177,632 58,065 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Lexington Natural Resources Trust Fund: 209,099 (85,086) 3,246,699 2,653,024 593,675 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------
S-30
- ------------------------------------------------------------------------------------------------------------------------------------ Net Unrealized Net Gain (Loss) Net Increase (Decrease) Net Assets ----------- Change in In Net Assets ---------- Beginning End Unrealized from Unit Beginning End of Year of Year Gain (Loss) Transactions of Year of Year - ------------------------------------------------------------------------------------------------------------------------------------ $8,810,467 $30,111,589 $21,301,122 $ 32,775,129 $61,127,055 $116,800,911 0 48,751 - ------------------------------------------------------------------------------------------------------------------------------------ 0 911,406 911,406 19,061,089 0 19,938,571 - ------------------------------------------------------------------------------------------------------------------------------------ 733,393 3,558,451 2,825,058 12,664,797 7,182,178 22,709,106 - ------------------------------------------------------------------------------------------------------------------------------------ 1,022,582 3,763,082 2,740,500 21,197,568 27,151,137 53,212,853 - ------------------------------------------------------------------------------------------------------------------------------------ 307,602 938,501 630,899 7,399,890 5,935,590 13,946,028 - ------------------------------------------------------------------------------------------------------------------------------------ 0 0 0 (471,714) 7,744,318 7,530,487 - ------------------------------------------------------------------------------------------------------------------------------------ 73,398 513,199 439,801 4,803,969 7,656,209 13,196,784 - ------------------------------------------------------------------------------------------------------------------------------------ 1,730,892 5,801,015 4,070,123 4,555,867 16,774,494 26,302,858 - ------------------------------------------------------------------------------------------------------------------------------------ 534,823 4,594,517 4,059,694 2,750,579 31,542,060 38,383,925 - ------------------------------------------------------------------------------------------------------------------------------------ 373,883 3,462,858 3,088,975 15,424,389 11,774,244 31,145,778 - ------------------------------------------------------------------------------------------------------------------------------------ 73,395 367,565 294,170 4,626,561 5,147,217 10,534,588 - ------------------------------------------------------------------------------------------------------------------------------------ 1,093,423 5,764,208 4,670,785 14,123,750 20,884,154 40,072,928 0 645,899 - ------------------------------------------------------------------------------------------------------------------------------------ (27,376) 0 27,376 (2,070,168) 1,920,611 0 - ------------------------------------------------------------------------------------------------------------------------------------ 5,151,123 18,210,266 13,059,143 76,404,357 66,472,691 160,658,096 0 1,995,445 - ------------------------------------------------------------------------------------------------------------------------------------ (66,591) (709,548) (642,957) 952,674 2,515,960 2,833,416 - ------------------------------------------------------------------------------------------------------------------------------------ 538,139 177,872 (360,267) 1,821,159 4,751,784 6,930,364 - ------------------------------------------------------------------------------------------------------------------------------------
S-31 Variable Annuity Account B Notes to Financial Statements - December 31, 1998 (continued): 5. Supplemental Information to Statements of Operations and Changes in Net Assets (continued):
- ------------------------------------------------------------------------------------------------------------------------------------ Year Ended December 31, 1997 Valuation Proceeds Cost of Net Period from Investments Realized Dividends Deductions Sales Sold Gain (Loss) - ------------------------------------------------------------------------------------------------------------------------------------ MFS Funds: Emerging Growth Series: (2) $0 ($232,144) $37,594,997 $34,076,137 $3,518,860 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Research Series: (3) 0 (273,185) 37,686,630 34,109,865 3,576,765 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Total Return Series: 0 (154,993) 689,861 564,440 125,421 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Value Series: (5) 0 (19,996) 4,332,717 3,942,044 390,673 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Worldwide Government Series: 15,502 (12,983) 124,845 123,607 1,238 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Neuberger & Berman Advisers Management Trust - Growth Portfolio: (5) 741,183 (92,357) 17,383,777 16,347,694 1,036,083 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Oppenheimer Funds: Capital Appreciation Fund: 0 (13,374) 8,964,190 9,092,515 (128,325) Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Global Securities Fund: 0 (12,451) 850,938 802,777 48,161 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Growth & Income Fund: 37,178 (35,759) 188,084 164,087 23,997 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Strategic Bond Fund: 84,234 (10,842) 122,739 121,006 1,733 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio Partners, Inc. PPI: PPI MFS Emerging Equities Portfolio: 0 (120,211) 43,880,815 44,111,392 (230,577) Annuity contracts in accumulation Annuity contracts in payment period - ------------------------------------------------------------------------------------------------------------------------------------ PPI MFS Research Growth Portfolio: 0 (82,490) 37,923,531 37,983,794 (60,263) Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ PPI MFS Value Equity Portfolio: 0 (16,913) 4,632,658 4,633,034 (376) Annuity contracts in accumulation Annuity contracts in payment period - ------------------------------------------------------------------------------------------------------------------------------------ PPI Scudder International Growth Portfolio: 0 (12,760) 259,410 255,379 4,031 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ PPI T. Rowe Price Growth Portfolio: 0 (115,952) 33,484,569 33,491,822 (7,253) Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------ Scudder Variable Life Investment Fund - International Portfolio: (6) 275,557 (123,791) 16,445,650 14,417,831 2,027,819 Annuity contracts in accumulation - ------------------------------------------------------------------------------------------------------------------------------------
S-32
- ------------------------------------------------------------------------------------------------------------------------------------ Net Unrealized Net Gain (Loss) Net Increase (Decrease) Net Assets ----------- Change in In Net Assets ------------ Beginning End Unrealized from Unit Beginning End of Year of Year Gain (Loss) Transactions of Year of Year - ------------------------------------------------------------------------------------------------------------------------------------ ($85,796) $0 $85,796 ($12,370,520) $8,998,008 $0 - ------------------------------------------------------------------------------------------------------------------------------------ 204,764 0 (204,764) (9,875,328) 6,776,512 0 - ------------------------------------------------------------------------------------------------------------------------------------ 72,010 1,975,149 1,903,139 12,883,941 4,216,370 18,973,878 - ------------------------------------------------------------------------------------------------------------------------------------ 935 0 (935) (578,583) 208,841 0 - ------------------------------------------------------------------------------------------------------------------------------------ 9,304 (5,937) (15,241) 927,866 407,913 1,324,295 - ------------------------------------------------------------------------------------------------------------------------------------ (6,666) 0 6,666 (9,934,149) 8,242,574 0 - ------------------------------------------------------------------------------------------------------------------------------------ 0 133,786 133,786 3,696,113 0 3,688,200 - ------------------------------------------------------------------------------------------------------------------------------------ 0 (846) (846) 2,646,073 0 2,680,937 - ------------------------------------------------------------------------------------------------------------------------------------ 0 465,927 465,927 12,197,564 0 12,688,907 - ------------------------------------------------------------------------------------------------------------------------------------ 0 (21,173) (21,173) 3,038,749 0 3,092,701 - ------------------------------------------------------------------------------------------------------------------------------------ 0 (753,832) (753,832) 96,397,314 0 94,796,247 0 496,447 - ------------------------------------------------------------------------------------------------------------------------------------ 0 (1,162,926) (1,162,926) 67,172,809 0 65,867,130 - ------------------------------------------------------------------------------------------------------------------------------------ 0 220,662 220,662 15,224,308 0 15,049,606 0 378,075 - ------------------------------------------------------------------------------------------------------------------------------------ 0 195,427 195,427 12,463,465 0 12,650,163 - ------------------------------------------------------------------------------------------------------------------------------------ 0 1,797,922 1,797,922 88,495,541 0 90,170,258 - ------------------------------------------------------------------------------------------------------------------------------------ 1,510,449 0 (1,510,449) (12,719,263) 12,050,127 0 - ------------------------------------------------------------------------------------------------------------------------------------
S-33 Variable Annuity Account B Notes to Financial Statements - December 31, 1998 (continued): 5. Supplemental Information to Statements of Operations and Changes in Net Assets (continued):
- ------------------------------------------------------------------------------------------------------------------------------------ Year Ended December 31, 1997 Valuation Proceeds Cost of Net Period from Investments Realized Dividends Deductions Sales Sold Gain (Loss) - ------------------------------------------------------------------------------------------------------------------------------------ Total Variable Annuity Account B $278,833,116 ($29,243,851) $1,004,789,371 $933,728,508 $71,060,863 ====================================================================================================================================
(1) - Effective November 28, 1997, this funds assets were transferred to the PPI T. Rowe Price Growth Equity Portfolio. (2) - Effective November 28, 1997, this funds assets were transferred to the PPI MFS Emerging Equities Portfolio. (3) - Effective November 28, 1997, this funds assets were transferred to PPI MFS Research Growth Fund. (4) - Effective November 28, 1997, this funds assets were transferred to the Aetna Variable Encore Fund. (5) - Effective November 28, 1997, this funds assets were transferred to the PPI MFS Value Equity Portfolio. (6) - Effective November 28, 1997, this funds assets were transferred to the PPI Scudder International Growth Portfolio. S-34
- ------------------------------------------------------------------------------------------------------------------------------------ Net Unrealized Net Gain (Loss) Net Increase (Decrease) Net Assets ----------- Change in In Net Assets ---------- Beginning End Unrealized from Unit Beginning End of Year of Year Gain (Loss) Transactions of Year of Year - ------------------------------------------------------------------------------------------------------------------------------------ $122,191,053 $255,524,506 $133,333,453 $619,647,552 $1,848,811,724 $2,922,442,857 ===================================================================================================================================
S-35 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, 1998, and the related statements of operations and changes in net assets for each of the years in the two-year period then ended and condensed financial information for the year ended December 31, 1998. These financial statements and condensed financial information are the responsibility of the Account's management. Our responsibility is to express an opinion on these financial statements and condensed financial information based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and condensed financial information are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and condensed financial information. Our procedures included confirmation of securities owned as of December 31, 1998, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and condensed financial information referred to above present fairly, in all material respects, the financial position of Aetna Life Insurance and Annuity Company Variable Annuity Account B as of December 31, 1998, the results of its operations and changes in its net assets for each of the years in the two-year period then ended and condensed financial information for the year ended December 31, 1998, in conformity with generally accepted accounting principles. /s/ KPMG LLP Hartford, Connecticut February 26, 1999 S-36 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: - Statement of Assets and Liabilities as of December 31, 1998 - Statements of Operations and Changes in Net Assets for the years ended December 31, 1998 and 1997 - Condensed Financial Information for the year ended December 31, 1998 - Notes to Financial Statements - Independent Auditors' Report Financial Statements of the Depositor: - Independent Auditors' Report - Consolidated Statements of Income for the years ended December 31, 1998, 1997 and 1996 - Consolidated Balance Sheets as of December 31, 1998 and 1997 - Consolidated Statements of Changes in Shareholder's Equity for the years ended December 31, 1998, 1997 and 1996 - Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996 - 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) Broker-Dealer Agreement(2) (3.2) Alternative Form of Wholesaling Agreement and Related Selling Agreement(3) (4.1) Variable Annuity Contract (A050SP96)(4) (4.2) Variable Annuity Contract (A050SP99) (4.3) Endorsement SPIAE99 to Variable Annuity Contract A050SP99 (4.4) Endorsement SPIAEVW99 to Variable Annuity Contracts A050SP99 and SPIA(GR)99 (4.5) Endorsement SPIAEW99 to Variable Annuity Contracts A050SP99 and SPIA(GR)99 (4.6) Endorsement SPIAEVPG99 to Variable Annuity Contracts A050SP99 and SPIA(GR)99 (4.7) Endorsement E401SP96 to Variable Annuity Contracts A050SP99 and SPIA(GR)99 (4.8) Endorsement E403SP96 to Variable Annuity Contracts A050SP99 and SPIA(GR)99 (4.9) Endorsement SPIA457-99 to Variable Annuity Contracts A050SP99 and SPIA(GR)99 (4.10) Variable Annuity Contract (SPIA(GR)99) (4.11) Variable Annuity Contract Certificate (SPIA(GR)-99CERT) (4.12) Endorsement SPIAE(GR)99 to Variable Annuity Contract SPIA(GR)99 and Certificate SPIA(GR)-99CERT (4.13) Endorsement SPIAEVW(GR)99 to Variable Annuity Contract SPIA(GR)99 and Certificate SPIA(GR)-99CERT (4.14) Endorsement SPIAEW(GR)99 to Variable Annuity Contract SPIA(GR)99 and Certificate SPIA(GR)-99CERT (4.15) Endorsement SPIAEVPG(GR)99 to Variable Annuity Contract SPIA(GR)99 and Certificate SPIA(GR)-99CERT (4.16) Endorsement SPIAE401(GR)99 to Variable Annuity Contract SPIA(GR)99 and Certificate SPIA(GR)-99CERT (4.17) Endorsement SPIAE403(GR)99 to Variable Annuity Contract SPIA(GR)99 and Certificate SPIA(GR)-99CERT (4.18) Endorsement SPIAE457(GR)99 to Variable Annuity Contract SPIA(GR)99 and Certificate SPIA(GR)-99CERT (4.19) Endorsement SPIAEIRA(GR)99 to Variable Annuity Contract SPIA(GR)99 and Certificate SPIA(GR)-99CERT (5.1) Variable Annuity Contract Application (82941(2/99)) (5.2) Variable Annuity Contract Application for New York (82950(2/99)) (6.1) Certificate of Incorporation of Aetna Life Insurance and Annuity Company(5) (6.2) Amendment to Certificate of Incorporation of Aetna Life Insurance and Annuity Company(6) (6.3) By-Laws as amended September 17, 1997 of Aetna Life Insurance and Annuity Company(7) (7) Not applicable (8.1) Fund Participation Agreement between Aetna Life Insurance and Annuity Company and AIM dated June 30, 1998(8) (8.2) Service Agreement between Aetna Life Insurance and Annuity Company and AIM effective June 30, 1998(8) (8.3) Fund Participation Agreement by and among Aetna Life Insurance and Annuity Company and Aetna Variable Fund, Aetna Variable Encore Fund, Aetna Income Shares, Aetna Balanced VP, Inc., Aetna GET Fund on behalf of each of its series, Aetna Generation Portfolios, Inc. on behalf of each of its series, Aetna Variable Portfolios, Inc. on behalf of each of its series, and Aeltus Investment Management, Inc. dated as of May 1, 1998(2) (8.4) Amendment dated November 9, 1998 to Fund Participation Agreement by and among Aetna Life Insurance and Annuity Company and Aetna Variable Fund, Aetna Variable Encore Fund, Aetna Income Shares, Aetna Balanced VP, Inc., Aetna GET Fund on behalf of each of its series, Aetna Generation Portfolios, Inc. on behalf of each of its series, Aetna Variable Portfolios, Inc. on behalf of each of its series, and Aeltus Investment Management, Inc. dated as of May 1, 1998(9) (8.5) Service Agreement between Aeltus Investment Management, Inc. and Aetna Life Insurance and Annuity Company in connection with the sale of shares of Aetna Variable Fund, Aetna Variable Encore Fund, Aetna Income Shares, Aetna Balanced VP, Inc., Aetna GET Fund on behalf of each of its series, Aetna Generation Portfolios, Inc. on behalf of each of its series, and Aetna Variable Portfolios, Inc. on behalf of each of its series dated as of May 1, 1998(2) (8.6) Amendment dated November 4, 1998 to Service Agreement between Aeltus Investment Management, Inc. and Aetna Life Insurance and Annuity Company in connection with the sale of shares of Aetna Variable Fund, Aetna Variable Encore Fund, Aetna Income Shares, Aetna Balanced VP, Inc., Aetna GET Fund on behalf of each of its series, Aetna Generation Portfolios, Inc. on behalf of each of its series and Aetna Variable Portfolios, Inc. on behalf of each of its series dated as of May 1, 1998(9) (8.7) Fund Participation Agreement between Aetna Life Insurance and Annuity Company, Variable Insurance Products Fund and Fidelity Distributors Corporation dated February 1, 1994 and amended on December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996 and March 1, 1996(6) (8.8) Fifth Amendment dated as of May 1, 1997 to the Fund Participation Agreement between Aetna Life Insurance and Annuity Company, Variable Insurance Products Fund and Fidelity Distributors Corporation dated February 1, 1994 and amended on December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996 and March 1, 1996(10) (8.9) Sixth Amendment dated November 6, 1997 to the Fund Participation Agreement between Aetna Life Insurance and Annuity Company, Variable Insurance Products Fund and Fidelity Distributors Corporation dated February 1, 1994 and amended on December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996, March 1, 1996 and May 1, 1997(11) (8.10) Seventh Amendment dated as of May 1, 1998 to the Fund Participation Agreement between Aetna Life Insurance and Annuity Company, Variable Insurance Products Fund and Fidelity Distributors Corporation dated February 1, 1994 and amended on December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996, March 1, 1996, May 1, 1997 and November 6, 1997(2) (8.11) Service Agreement between Aetna Life Insurance and Annuity Company and Fidelity Investments Institutional Operations Company dated as of November 1, 1995(12) (8.12) Amendment dated January 1, 1997 to Service Agreement between Aetna Life Insurance and Annuity Company and Fidelity Investments Institutional Operations Company dated as of November 1, 1995(10) (8.13) Service Contract between Fidelity Distributors Corporation and Aetna Life Insurance and Annuity Company dated May 2, 1997(9) (8.14) Fund Participation Agreement among Janus Aspen Series and Aetna Life Insurance and Annuity Company and Janus Capital Corporation dated December 8, 1997(13) (8.15) Amendment dated October 12, 1998 to Fund Participation Agreement among Janus Aspen Series and Aetna Life Insurance and Annuity Company and Janus Capital Corporation dated December 8, 1997(9) (8.16) Service Agreement between Janus Capital Corporation and Aetna Life Insurance and Annuity Company dated December 8, 1997(13) (8.17) Fund Participation Agreement dated March 11, 1997 between Aetna Life Insurance and Annuity Company and Oppenheimer Variable Annuity Account Funds and Oppenheimer Funds, Inc.(14) (8.18) Service Agreement effective as of March 11, 1997 between Oppenheimer Funds, Inc. and Aetna Life Insurance and Annuity Company(14) (9) Opinion and Consent of Counsel (10) Consent of Independent Auditors (11) Not applicable (12) Not applicable (13) Schedule for Computation of Performance Data(15) (14) Not applicable (15.1) Powers of Attorney(16) (15.2) Authorization for Signatures(3) 1. Incorporated by reference to Post-Effective Amendment No. 6 to Registration Statement on Form N-4 (File No. 33-75986), as filed on April 22, 1996. 2. Incorporated by reference to Registration Statement on Form N-4 (File No. 333-56297), as filed on June 8, 1998. 3. Incorporated by reference to Post-Effective Amendment No. 5 to Registration Statement on Form N-4 (File No. 33-75986), as filed on April 12, 1996. 4. Incorporated by reference to Registration Statement on Form N-4 (File No. 333-09515), as filed on August 2, 1996. 5. Incorporated by reference to Post-Effective Amendment No. 1 to Registration Statement on Form S-1 (File No. 33-60477), as filed on April 15, 1996. 6. Incorporated by reference to Post-Effective Amendment No. 12 to Registration Statement on Form N-4 (File No. 33-75964), as filed on February 11, 1997. 7. Incorporated by reference to Post-Effective Amendment No. 12 to Registration Statement on Form N-4 (File No. 33-91846), as filed on October 30, 1997. 8. Incorporated by reference to Pre-Effective Amendment No. 1 to Registration Statement on Form N-4 (File No. 333-56297), as filed on August 4, 1998. 9. Incorporated by reference to Post-Effective Amendment No. 2 to Registration Statement on Form N-4 (File No. 333-56297), as filed on December 14, 1998. 10. Incorporated by reference to Post-Effective Amendment No. 30 to Registration Statement on Form N-4 (File No. 33-34370), as filed on September 29, 1997. 11. Incorporated by reference to Post-Effective Amendment No. 16 to Registration Statement on Form N-4 (File No. 33-75964), as filed on February 9, 1998. 12. Incorporated by reference to Post-Effective Amendment No. 3 to Registration Statement on Form N-4 (File No. 33-88720), as filed on June 28, 1996. 13. Incorporated by reference to Post-Effective Amendment No. 10 to Registration Statement on Form N-4 (File No. 33-75992), as filed on December 31, 1997. 14. Incorporated by reference to Post-Effective Amendment No. 27 to Registration Statement on Form N-4 (File No. 33-34370), as filed on April 16, 1997. 15. Incorporated by reference to Post-Effective Amendment No. 4 to Registration Statement on Form N-4 (File No. 333-09515), as filed on April 9, 1998. 16. Incorporated by reference to Post-Effective Amendment No. 5 to Registration Statement on Form N-4 (File No. 333-56297), as filed on February 25, 1999. Item 25. Directors and Officers of the Depositor
Name and Principal Business Address* Positions and Offices with Depositor - ----------------- ------------------------------------ Thomas J. McInerney Director and President Shaun P. Mathews Director and Senior Vice President Catherine H. Smith Director, Chief Financial Officer and Senior Vice President Deborah Koltenuk Vice President, Treasurer and Corporate Controller Therese M. Squillacote Vice President and Chief Compliance Officer Kirk P. Wickman Senior Vice President, General Counsel and Corporate Secretary
* The principal business address of all directors and officers listed is 151 Farmington Avenue, Hartford, Connecticut 06156. Item 26. Persons Controlled by or Under Common Control with the Depositor or Registrant Incorporated herein by reference to Item 24 to Post-Effective Amendment No. 14 to Registration Statement on Form N-1A (File No. 33-12723), as filed on March 10, 1999. Item 27. Number of Contract Owners As of February 28, 1999, there were 77,799 individuals holding interests in variable annuity contracts funded through Variable Annuity Account B. Item 28. Indemnification Section 21 of Public Act No. 97-246 of the Connecticut General Assembly (the "Act") provides that a corporation may provide indemnification of or advance expenses to a director, officer, employee or agent only as permitted by Sections 33-770 to 33-778, inclusive, of the Connecticut General Statutes, as amended by Sections 12 to 20, inclusive, of this Act. Reference is hereby made to Section 33-771(e) of the Connecticut General Statutes ("CGS") regarding indemnification of directors and Section 33-776(d) of CGS regarding indemnification of officers, employees and agents of Connecticut corporations. These statutes provide in general that Connecticut corporations incorporated prior to January 1, 1997 shall, except to the extent that their certificate of incorporation expressly provides otherwise, indemnify their directors, officers, employees and agents against "liability" (defined as the obligation to pay a judgment, settlement, penalty, fine, including an excise tax assessed with respect to an employee benefit plan, or reasonable expenses incurred with respect to a proceeding) when (1) a determination is made pursuant to Section 33-775 that the party seeking indemnification has met the standard of conduct set forth in Section 33-771 or (2) a court has determined that indemnification is appropriate pursuant to Section 33-774. Under Section 33-775, the determination of and the authorization for indemnification are made (a) by the disinterested directors, as defined in Section 33-770(3); (b) by special counsel; (c) by the shareholders; or (d) in the case of indemnification of an officer, agent or employee of the corporation, by the general counsel of the corporation or such other officer(s) as the board of directors may specify. Also, Section 33-772 provides that a corporation shall indemnify an individual who was wholly successful on the merits or otherwise against reasonable expenses incurred by him in connection with a proceeding to which he was a party because he was a director of the corporation. In the case of a proceeding by or in the right of the corporation or with respect to conduct for which the director, officer, agent or employee was adjudged liable on the basis that he received a financial benefit to which he was not entitled, indemnification is limited to reasonable expenses incurred in connection with the proceeding against the corporation to which the individual was named a party. The statute does specifically authorize a corporation to procure indemnification insurance on behalf of an individual who was a director, officer, employer or agent of the corporation. Consistent with the statute, Aetna Inc. has procured insurance from Lloyd's of London and several major United States excess insurers for its directors and officers and the directors and officers of its subsidiaries, including the Depositor. Item 29. Principal Underwriter (a) In addition to serving as the principal underwriter and depositor for the Registrant, Aetna Life Insurance and Annuity Company (Aetna) also acts as the principal underwriter, only, for Aetna Variable Encore Fund, Aetna Variable Fund, Aetna Generation Portfolios, Inc., Aetna Income Shares, Aetna Balanced VP, Inc. (formerly Aetna Investment Advisers Fund, Inc.), Aetna GET Fund, and Aetna Variable Portfolios, Inc. and as principal underwriter and investment adviser for Portfolio Partners, Inc. (all management investment companies registered under the Investment Company Act of 1940 (1940 Act)). Additionally, Aetna acts as the principal underwriter and depositor for Variable Life Account B of Aetna, Variable Annuity Account C of Aetna and Variable Annuity Account G of Aetna (separate accounts of Aetna registered as unit investment trusts under the 1940 Act). Aetna is also the principal underwriter for Variable Annuity Account I of Aetna Insurance Company of America (AICA) (a separate account of AICA registered as a unit investment trust under the 1940 Act). (b) See Item 25 regarding the Depositor. (c) Compensation as of December 31, 1998:
(1) (2) (3) (4) (5) Compensation on Name of Net Underwriting Redemption or Brokerage Principal Underwriter Discounts and Commissions Annuitization Commissions Compensation* - --------------------- ------------------------- ------------- ----------- ------------- Aetna Life Insurance $684,000 $42,930,000 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 Variable Annuity Account B. Item 30. Location of Accounts and Records All accounts, books and other documents required to be maintained by Section 31(a) of the 1940 Act and the rules under it relating to the securities described in and issued under this Registration Statement are located at the home office of the Depositor as follows: Aetna 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) The Company hereby represents that it is relying upon and will comply with the provisions of Paragraphs (1) through (4) of the SEC Staff's No-Action Letter dated November 28, 1988 with respect to language concerning withdrawal restrictions applicable to plans established pursuant to Section 403(b) of the Internal Revenue Code. See American Counsel of Life Insurance; SEC No-Action Letter, [1988 WL 235221, *13 (S.E.C.]. (e) Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (f) Aetna Life Insurance and Annuity Company represents that the fees and charges deducted under the contracts covered by this registration statement, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by the insurance company. SIGNATURES As required by the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant, Variable Annuity Account B of Aetna Life Insurance and Annuity Company certifies that it meets the requirements of Securities Act Rule 485(b) for effectiveness of this Post-Effective Amendment to its Registration Statement on Form N-4 (File No. 333-09515) has duly caused this Post-Effective Amendment to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Hartford, State of Connecticut, on the 20th day of April, 1999. VARIABLE ANNUITY ACCOUNT B OF AETNA LIFE INSURANCE AND ANNUITY COMPANY (Registrant) By: AETNA LIFE INSURANCE AND ANNUITY COMPANY (Depositor) By: Thomas J. McInerney* ----------------------------------- Thomas J. McInerney President As required by the Securities Act of 1933, this Post-Effective Amendment No. 7 to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date - --------- ----- ---- Thomas J. McInerney* Director and President ) - ------------------------------------- (principal executive officer) ) Thomas J. McInerney ) ) Catherine H. Smith* Director and Chief Financial Officer ) April - ------------------------------------- ) Catherine H. Smith ) 20, 1999 ) Shaun P. Mathews* Director ) - ------------------------------------- ) Shaun P. Mathews ) ) Deborah Koltenuk* Vice President, Treasurer and Corporate Controller ) - ------------------------------------- ) Deborah Koltenuk )
By: /s/ J. Neil McMurdie --------------------------------------------- J. Neil McMurdie *Attorney-in-Fact VARIABLE ANNUITY ACCOUNT B Exhibit Index
Exhibit No. Exhibit - ----------- ------- 99-B.4.2 Variable Annuity Contract (A050SP99) _________ 99-B.4.3 Endorsement SPIAE99 to Variable Annuity Contract A050SP99 _________ 99-B.4.4 Endorsement SPIAEVW99 to Variable Annuity Contracts A050SP99 and SPIA(GR)99 _________ 99-B.4.5 Endorsement SPIAEW99 to Variable Annuity Contracts A050SP99 and SPIA(GR)99 _________ 99-B.4.6 Endorsement SPIAEVPG99 to Variable Annuity Contracts A050SP99 and SPIA(GR)99 _________ 99-B.4.7 Endorsement E401SP96 to Variable Annuity Contracts A050SP99 and SPIA(GR)99 _________ 99-B.4.8 Endorsement E403SP96 to Variable Annuity Contracts A050SP99 and SPIA(GR)99 _________ 99-B.4.9 Endorsement SPIA457-99 to Variable Annuity Contracts A050SP99 and SPIA(GR)99 _________ 99-B.4.10 Variable Annuity Contract (SPIA(GR)99) _________ 99-B.4.11 Variable Annuity Contract Certificate (SPIA(GR)-99CERT) _________ 99-B.4.12 Endorsement SPIAE(GR)99 to Variable Annuity Contract SPIA(GR)99 and Certificate SPIA(GR)-99CERT _________ 99-B.4.13 Endorsement SPIAEVW(GR)99 to Variable Annuity Contract SPIA(GR)99 and Certificate SPIA(GR)-99CERT _________ 99-B.4.14 Endorsement SPIAEW(GR)99 to Variable Annuity Contract SPIA(GR)99 and Certificate SPIA(GR)-99CERT _________ 99-B.4.15 Endorsement SPIAEVPG(GR)99 to Variable Annuity Contract SPIA(GR)99 and Certificate SPIA(GR)-99CERT _________ 99-B.4.16 Endorsement SPIAE401(GR)99 to Variable Annuity Contract SPIA(GR)99 and Certificate SPIA(GR)-99CERT _________
Exhibit No. Exhibit - ----------- ------- 99-B.4.17 Endorsement SPIAE403(GR)99 to Variable Annuity Contract SPIA(GR)99 and Certificate SPIA(GR)-99CERT _________ 99-B.4.18 Endorsement SPIAE457(GR)99 to Variable Annuity Contract SPIA(GR)99 and Certificate SPIA(GR)-99CERT _________ 99-B.4.19 Endorsement SPIAEIRA(GR)99 to Variable Annuity Contract SPIA(GR)99 and Certificate SPIA(GR)-99CERT _________ 99-B.5.1 Variable Annuity Contract Application (82941(2/99)) _________ 99-B.5.2 Variable Annuity Contract Application for New York (82950(2/99)) _________ 99-B.9 Opinion and Consent of Counsel _________ 99-B.10 Consent of Independent Auditors _________
EX-99.B.4.2 2 ANNUITY CONTRACT Exhibit 99-B.4.2 ------------------------------------------------------------------- [Aetna Logo] Aetna Life Insurance and Annuity Company Home Office: 151 Farmington Avenue Hartford, Connecticut 06156 (800) 238-6273 A Stock Company Aetna Life Insurance and Annuity Company, herein called Aetna, agrees to pay the benefits stated in this contract. Individual Single Premium Immediate Fixed, Variable or Combination Annuity Contract (Nonparticipating) 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 AETNA RECEIVES THE NOTICE OF CANCELLATION AND THIS CONTRACT AT ITS HOME OFFICE, AETNA WILL RETURN THE ENTIRE CONSIDERATION PAID LESS ANY PAYMENTS MADE PLUS ANY INCREASE OR MINUS ANY DECREASE IN THE ACCOUNT VALUE OF ANY FUNDS ALLOCATED TO THE SEPARATE ACCOUNT. Signed at the Home Office on the Effective Date. /s/ Thomas J. McInerney /s/ Kirk P. Wickman - -------------------------------------------------------------------------------- President Secretary This contract sets forth, in detail, all of the rights and obligations of both the Contract Holder and Aetna. IT IS THEREFORE IMPORTANT THAT YOU READ THIS CONTRACT CAREFULLY. This contract and any attached documents constitute the entire legal relationship between Aetna and the Contract Holder. ALL PAYMENTS AND VALUES PROVIDED BY THE CONTRACT, WHEN BASED ON INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT. A050SP99 This page intentionally left blank. Page 2 Table of Contents Separate Account ............................................................. 6 Charges to Separate Account ................................................ 6 Variable Annuity Assumed Annual Net Return Rate ............................ 6 Transfers .................................................................... 6 I. DEFINITIONS ............................................................... 7 1.01 Annuitant/Joint Annuitant ......................................... 7 1.02 Annuity ........................................................... 7 1.03 Beneficiary(ies) .................................................. 7 1.04 Contract Holder ................................................... 7 1.05 Fixed Annuity ..................................................... 7 1.06 Fund(s) ........................................................... 7 1.07 Guaranteed Payment ................................................ 7 1.08 Life Annuity ...................................................... 7 1.09 Payee ............................................................. 7 1.10 Period Certain Annuity ............................................ 7 1.11 Separate Account .................................................. 8 1.12 Survivor .......................................................... 8 1.13 Valuation Date .................................................... 8 1.14 Valuation Period .................................................. 8 1.15 Variable Annuity ................................................. 8 II. GENERAL PROVISIONS ....................................................... 8 2.01 Premiums .......................................................... 8 2.02 Payments .......................................................... 8 2.03 Change of Contract ................................................ 8 2.04 Ownership ......................................................... 8 2.05 Misstatements and Adjustments ..................................... 9 2.06 Incontestability .................................................. 9 2.07 Beneficiary Designation ........................................... 9 2.08 Nonparticipating Contract ......................................... 9 2.09 State Laws ........................................................ 9 III. VARIABLE ANNUITY PROVISIONS ............................................. 9 3.01 Fund Annuity Units - Separate Account ............................. 9 3.02 Fund Annuity Unit Value ........................................... 9 3.03 Fund Annuity Net Return Factors ................................... 9 3.04 Transfer(s) .......................................................10 3.05 Notice to the Contract Holder .....................................10 3.06 Change of Fund(s) .................................................10 IV. BENEFIT PROVISIONS .......................................................11 4.01 Death Benefit Provision ............................................11
Page 3 This page intentionally left blank. Page 4 SPECIFICATIONS Contract Number: M2828 123123121 Contract Effective Date: March 15, 1999 Annuitant: John F. Smith Annuitant Issue Age: 53 Joint Annuitant: Mary A. Smith Joint Annuitant Issue Age: 53 First Payment Date: April 15, 1999 Payment Frequency: Monthly Single Premium: $15,000.00 Contract Holder: John F. Smith
SCHEDULE OF BENEFITS Joint and 100% Survivor Annuity with Guaranteed Payments: Annuity payments begin on the First Payment Date and will continue for the lives of the Annuitant and Joint Annuitant. At the death of either the Annuitant or Joint Annuitant, the payment amount will continue to be paid for the life of the survivor. If the survivor dies prior to the payment of all guaranteed payments, any remaining payments will be paid to the beneficiary. Payment Information: Payments will be made on a Fixed and Variable basis. Number of Guaranteed Payments: xx Fixed Payment from General Account: $xx.xx Fixed Annuity Present Value Interest Rate: 5.9% FUNDING ELECTIONS
Number of Fund's Percent Fund Name Annuity Units Per Payment: 75% Aetna Variable Fund 10.678 25% Aetna Growth and Income Fund 9.887
Variable Annuity Assumed Annual Net Return Rate: 3.5% Page 5 Contract Schedule Separate Account - -------------------------------------------------------------------------------- Charges to Separate Account A daily charge at an annual effective rate of [1.25%] for mortality and expense risk and profit (M & E) is deducted from any portion of the account value allocated to a Variable Annuity. A daily charge at an annual effective rate of up to [0.25%] for administration is deducted from any portion of the account value allocated to a Variable Annuity. Variable Annuity Assumed Annual Net Return Rate If a Variable Annuity is chosen, an assumed annual net return rate of [5.0%] may be elected. If [5.0%] is not elected, Aetna will use an assumed annual net return rate of [3.5%]. The daily net return rate factor for an assumed annual net return rate of [3.5%] per year is [0.9999058]. The daily net return rate factor for an assumed annual net return rate [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. Transfers - -------------------------------------------------------------------------------- Maximum Number of Allowable Fund Transfers: [Twelve per calendar Year] Page 6 I. DEFINITIONS - -------------------------------------------------------------------------------- 1.01 Annuitant/Joint Annuitant An individual named on the Specifications page of this contract (1) whose death terminates or adjusts the amount of life-contingent payments, and/or (2) whose death results in the payment of death benefits; a measured life. 1.02 Annuity Payment of a specified amount(s) or specified number of units made: a) On specified dates or intervals for the lifetime of one or more Annuitants with or without Guaranteed Payments; or b) On specified dates or intervals for a specified period of time. Annuity benefits payable under this contract are shown in the Schedule of Benefits on the Specifications page. 1.03 Beneficiary(ies) The person(s), named by the Contract Holder, entitled to receive death benefits, if any, under the terms of this contract. 1.04 Contract Holder The person to whom this contract is issued. Aetna reserves the right to limit ownership to natural persons. 1.05 Fixed Annuity An Annuity that is not a Variable Annuity. 1.06 Fund(s) The open-end registered management investment companies whose shares are purchased by the Separate Account to fund the benefits provided by the contract. 1.07 Guaranteed Payment A payment that is due whether or not the Annuitant, or Joint Annuitant, if applicable, is alive on the payment due date, as described in the Schedule of Benefits on the Specifications page. 1.08 Life Annuity An Annuity with payments that are based solely on whether or not the Annuitant, or Joint Annuitant, if applicable, is alive on the payment due date as described in the Schedule of Benefits on the Specifications page. 1.09 Payee A person that receives Annuity payments. The Contract Holder shall be the Payee unless the Contract Holder designates otherwise in writing. 1.10 Period Certain Annuity An Annuity with a specified number of Guaranteed Payments without a life contingency. Page 7 1.11 Separate Account An account, established by Aetna under Section 38a-433 of the Connecticut General Statutes, that buys and holds shares of the Fund(s) available under this contract. Income, gains or losses, realized or unrealized are credited or charged to the Separate Account without regard to other income, gains or losses of Aetna. Aetna owns the assets held in the Separate Account and is not a trustee of such amounts. Amounts in the Separate Account are not generally guaranteed and are held at market value. The assets of the Separate Account, to the extent of reserves and other contract liabilities of the Account, cannot be charged with other Aetna liabilities arising out of any other Aetna business. 1.12 Survivor With an Annuity based on the lives of an Annuitant and Joint Annuitant, the individual who is not the first to die. 1.13 Valuation Date The date and time on which a Fund Annuity Unit Value is calculated. Currently, this calculation will be determined at the close of business of the New York Stock Exchange on any normal business day, Monday through Friday, that the New York Stock Exchange is open. 1.14 Valuation Period The period of time between successive Valuation Dates. 1.15 Variable Annuity An Annuity with payments that vary with the net investment results of the Funds available under this contract. Aetna reserves the right to limit the Fund(s) available with the Variable Annuity Minimum Income Guarantee, if applicable. II. GENERAL PROVISIONS - -------------------------------------------------------------------------------- 2.01 Premium The amount of the premium applied to this contract will be the premium received minus a deduction for premium taxes, if any. 2.02 Payments Aetna will pay to the Payee a Fixed or Variable Annuity or a combination of the two as selected by the Contract Holder and as shown in the Schedule of Benefits on the Specifications page. Aetna discharges its obligation to pay when it makes payment by check or electronic funds transfer to the Payee's address or the bank that Aetna has on record as of 15 business days before the payment due date. We reserve the right to suspend any life-contingent payments to a Payee if acceptable proof of life of an Annuitant or Joint Annuitant is not furnished when requested. 2.03 Change of Contract Only an authorized officer of Aetna may change the terms of this contract. Aetna reserves the right to modify this contract to meet the requirements of applicable state and federal laws or regulations. Aetna will notify the Contract Holder in writing of any changes. 2.04 Ownership This is a contract between the Contract Holder and Aetna. The Contract Holder has title to the contract and, during the lifetime of the Annuitant, and, if applicable, Joint Annuitant, all rights to amounts held in the contract. Any choice allowed under this contract must be made by the Contract Holder in writing, unless Aetna allows otherwise. Until receipt of such choices in Aetna's home office, Aetna may rely on any previous choices made. Page 8 The contract is not subject to the claims of any creditors except to the extent permitted by law. Ownership of the contract may be changed to the extent permitted by law by notifying Aetna in writing in a form acceptable to Aetna. No such ownership change is binding until such notification is received and recorded by Aetna at its home office. 2.05 Misstatements and Adjustments If the age, sex, or any relevant fact concerning any Annuitant is found to be misstated, the correct facts will be used to adjust payments. 2.06 Incontestability Aetna will not contest this contract from its effective date. 2.07 Beneficiary Designation If the contract provides for any Guaranteed Payments following the death of the Annuitant, and the Joint Annuitant if applicable, the Contract Holder has the right to name a Beneficiary(ies). The Beneficiary designation may be changed by the Contract Holder during the lifetime of the Annuitant, and, if applicable, the Joint Annuitant, by sending written notice of the change in a form acceptable to Aetna to Aetna's home office. Such change will not be effective until received and recorded by Aetna. In all cases, Aetna will pay death benefits based on the last written Beneficiary designation it has on record on the date of the death. 2.08 Nonparticipating Contract The Contract Holder or Beneficiaries do not have a right to share in the earnings of Aetna. 2.09 State Laws This contract complies with the laws of the state in which it is delivered. Annuity payments under this contract are equal to or greater than the minimum required by such laws. III. VARIABLE ANNUITY PROVISIONS - -------------------------------------------------------------------------------- 3.01 Fund Annuity Units - Separate Account The initial number of a Fund's Annuity units is stated on the Specifications page. Each future payment is equal to the sum of the products of each Fund Annuity unit value multiplied by the appropriate number of units. The Fund Annuity unit value on the tenth Valuation Date prior to the due date of the payment is used. 3.02 Fund Annuity Unit Value For any Valuation Date, a Fund's Annuity unit value is equal to: a) The value for the preceding Valuation Date; multiplied by b) The Annuity net return factor(s) for the Valuation Period; multiplied by c) A factor to reflect the assumed annual net return rate. The factors for the assumed annual net return are shown on the Contract Schedule. 3.03 Fund Annuity Net Return Factors The Annuity net return factor(s) are used to compute all Separate Account Annuity unit values for any Fund. The Annuity net return factor for each Fund is equal to 1.0000000 plus the net return rate. Page 9 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 Annuity units of the Separate Account at the start of the Valuation Period; minus e) A Separate Account charge at an annual effective rate as shown on the Contract Schedule for Annuity mortality and expense risks and profit and a daily administrative charge which will not exceed the amount shown on the Contract Schedule on an annual basis. The daily administrative charge will be established on the Effective Date of this contract. 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. 3.04 Transfer(s) At the request of a Contract Holder, all or any portion of the account value may be transferred from any Fund to any other allowable Fund. Transfers will be processed as of the Valuation Date next following when a transfer request is received in good order at Aetna's home office. The maximum number of allowable transfers in a calendar year is shown on the Contract Schedule. Aetna reserves the right to increase the number of allowable transfers. Transfer requests must be expressed as a percentage of the allocation among the Funds of the amount upon which the Variable Annuity will be based. Aetna may establish a minimum transfer amount. 3.05 Notice to the Contract Holder Once a year, Aetna will notify the Contract Holder of: a) The number of Fund(s) Annuity units; and b) The value of Fund(s) Annuity units. Such numbers or values will be as of a date no more than 60 days before the date of the notice. 3.06 Change of Fund(s) The assets of the Separate Account are segregated by Fund. If the shares of any Fund are no longer available for investment by the Separate Account or if in Aetna's judgment further investment in such shares should become inappropriate in view of the purpose of the contract, Aetna may cease to make such Fund shares available for investment under the contract prospectively, or Aetna may substitute shares of another Fund for shares already acquired. Aetna may also, from time to time, add additional Funds. Any elimination, substitution or addition of Funds will be done in accordance with applicable state and federal securities laws. Aetna reserves the right to substitute shares of another Fund for shares already acquired without a proxy vote. Page 10 IV. BENEFIT PROVISIONS - -------------------------------------------------------------------------------- 4.01 Death Benefit Provision a) If the Annuitant dies, or under a joint Annuity option the Survivor dies, any remaining Guaranteed Payments will be paid to the Beneficiary in the form specified in the Schedule of Benefits on the Specifications page. Such payments will be paid at least as rapidly as under the method of distribution then in effect. Within six months of such death, the Beneficiary may elect to receive the withdrawal value of any remaining Guaranteed Payments less any early withdrawal charge. The rate used to determine the withdrawal value will be the Fixed Annuity Present Value Interest Rate shown on the Specifications page. No early withdrawal charge will apply to the withdrawal value in this situation. If this contract is issued as a Variable Period Certain Annuity, the Beneficiary may elect to receive the withdrawal value of any remaining Guaranteed Payments at any time. No early withdrawal charge will apply to the withdrawal value in this situation. b) If the Contract Holder who is not the Annuitant(s) dies, payments will be paid to the Payee in the form specified in the Schedule of Benefits on the Specifications page. If no Payee designated by the Contract Holder survives the death of the Contract Holder, payments will be made to the Annuitant. Such payments will be paid at least as rapidly as under the method of distribution then in effect. c) If the Contract Holder dies before the annuity starting date the entire interest in the contract must be distributed within five years of the date of death, or payments may be made over the life or over a period not extending beyond the life expectancy of the Beneficiary or payee, as applicable, provided such payments begin not later than one year after the date of death. The annuity starting date is generally defined by the Internal Revenue Code to mean the first day of the period (month, quarter, half-year, year depending on weather payments will be made monthly, quarterly, semi-annually or annually) which ends on the date of the first annuity payment. This provision will not apply if the Beneficiary or payee, as applicable, is the Contract Holder's spouse. Page 11 This page intentionally left blank. This page intentionally left blank. - -------------------------------------------------------------------------------- Aetna Life Insurance and Annuity Company Home Office: 151 Farmington Avenue Hartford, Connecticut 06156 (800) 238-6273 Individual Single Premium Immediate Fixed, Variable or Combination Annuity Contract Nonparticipating - -------------------------------------------------------------------------------- ALL PAYMENTS AND VALUES PROVIDED BY THE CONTRACT, WHEN BASED ON INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT. EX-99.B.4.3 3 ENDORSEMENT Exhibit 99-B.4.3 Aetna Life Insurance and Annuity Company ENDORSEMENT The Contract is hereby endorsed as follows: New sections entitled Withdrawal Frequency and Amounts and Early Withdrawal Charge Schedule are added to the Contract Schedule to include the following language Withdrawal Frequency and Amounts Fixed Period Certain Annuity Withdrawals: Under a Fixed Period Certain Annuity, withdrawals may be elected [once] a year. No withdrawals are allowed from a Fixed Period Certain Annuity in the first contract year. In subsequent contract years, full or partial withdrawals are allowed, provided that under a partial withdrawal the remaining Annuity payments would equal $50 or more. Early Withdrawal Charge Schedule
Early Withdrawal Charge Number of Years from Contract Effective Date (% of Withdrawal Value) --------------------------------------------------------------------------------------------- 1 or more, but fewer than 2 6% 2 or more, but fewer than 3 5% 3 or more, but fewer than 4 4% 4 or more, but fewer than 5 3% 5 or more, but fewer than 6 2% 6 or more, but fewer than 7 1% 7 or more 0%
If this contract is established as a rollover from another contract issued by Aetna or an affiliate, the early withdrawal charge will be determined according to the effective date of the account under such predecessor contract. New sections entitled Withdrawal/Partial Withdrawal and Withdrawal Value are added to "Benefit Provisions" to include the following language: 4.02 Withdrawal/Partial Withdrawal If this contract is issued as a Fixed Period Certain Annuity as described on the Specifications page, the Contract Holder may elect to receive the withdrawal value of all or a portion of the Guaranteed Payments. If a portion of the Guaranteed Payments under a Fixed Period Certain Annuity is withdrawn, the remaining Annuity payments will be reduced proportionally. Withdrawals are subject to an early withdrawal charge as shown on the Contract Schedule, unless an exception under this contract applies. 4.03 Withdrawal Value a) The withdrawal value is equal to the present value of the remaining Guaranteed Payments calculated using the assumed net return rate stated on the Contract Schedule. b) All withdrawal values will be determined as of the Valuation Date next following when a written request for withdrawal is received in good order by Aetna at its home office. c) Under a Fixed Period Certain Annuity, the withdrawal value is equal to the present value of the remaining Guaranteed Payments calculated using the adjusted contract rate. SPIAE99 The adjusted contract rate equals: (Rate of Return) + WY - IY where: Rate of Return is the Fixed Annuity Present Value Interest Rate shown on the Specifications page WY is the Withdrawal Yield IY is the Issue Yield WY is determined as follows: 1) WY is the average of the yields, as published in the Wall Street Journal on the Friday before the date of withdrawal, of the three, or more if Aetna deems necessary, noncallable noninflation adjusted Treasury Notes or Bonds maturing on or closest to the Withdrawal Duration Date. 2) "Withdrawal Duration Date" is the date (month and year) obtained when the withdrawal duration is added to the date of withdrawal. 3) "Withdrawal Duration" equals 1 plus the number of whole years from the date of withdrawal until the final Guaranteed Payment is due, divided by 2. Any resulting fraction will be rounded up to the next whole number. IY is determined as follows: 1) IY is the average of the yields as published in the Wall Street Journal on the Friday before the Contract Effective Date, of the three, or more if Aetna deems necessary, noncallable noninflation adjusted Treasury Notes or Bonds maturing on or closest to the Issue Duration Date. 2) "Issue Duration Date" (month and year) is obtained when Issue Duration is added to the Contract Effective Date. 3) "Issue Duration" equals 1 plus the number of whole years from issue until the final payment is due, divided by 2. Any resulting fraction will be rounded up to the next whole number. The section entitled Death Benefit Provision is amended by replacing item a) and adding item d) with the following language: a) If the Annuitant dies, or under a joint Annuity option the Survivor dies, any remaining Guaranteed Payments will be paid to the Beneficiary as specified in the Schedule of Benefits on the Specifications page. Such payments will be paid at least as rapidly as under the method of distribution then in effect. The Beneficiary may elect to receive the withdrawal value of any remaining Guaranteed Payments. No early withdrawal charge will apply to the withdrawal value in this situation. d) The withdrawal value under this death benefit provision will be determined as of the Valuation Date next following when proof of death acceptable to Aetna and a request for payment are received in good order at Aetna's home office. If this contract is issued as a Fixed Period Certain Annuity, the withdrawal value will be determined as described in the section entitled withdrawal value. Endorsed and made a part of this contract on the Contract Effective Date. /s/ Thomas J. McInerney ---------------------------------------- President Aetna Life Insurance and Annuity Company EX-99.B.4.4 4 ENDORSEMENT Exhibit 99-B.4.4 Aetna Life Insurance and Annuity Company ENDORSEMENT The Contract is hereby endorsed as follows: New sections entitled Withdrawal Frequency and Amounts and Early Withdrawal Charge Schedule are added to the Contract Schedule to include the following language Withdrawal Frequency and Amounts Variable Annuity Withdrawals: Under a Variable Period Certain Annuity, full or partial withdrawals are allowed, provided that under a partial withdrawal the remaining Annuity payments would equal $50 or more. Early Withdrawal Charge Schedule
Early Withdrawal Charge Number of Years from Contract Effective Date (% of Withdrawal Value) --------------------------------------------------------------------------------------------- Fewer than 1 7% 1 or more, but fewer than 2 6% 2 or more, but fewer than 3 5% 3 or more, but fewer than 4 4% 4 or more, but fewer than 5 3% 5 or more, but fewer than 6 2% 6 or more, but fewer than 7 1% 7 or more 0%
If this contract is established as a rollover from another contract issued by Aetna or an affiliate, the early withdrawal charge will be determined according to the effective date of the account under such predecessor contract. New sections entitled Withdrawal/Partial Withdrawal and Withdrawal Value are added to "Benefit Provisions" to include the following language: 4.02 Withdrawal/Partial Withdrawal If this contract is issued as a Variable Period Certain Annuity, the Contract Holder may elect to receive the withdrawal value of all or a portion of the Guaranteed Payments. If a portion of the Guaranteed Payments under a Variable Period Certain Annuity is withdrawn, the remaining Variable Annuity payments will be reduced pro-rata from all of the Funds or otherwise as the Contract Holder so designates. Withdrawals may be subject to a early withdrawal charge as shown on the Contract Schedule. 4.03 Withdrawal Value a) Under a Variable Period Certain Annuity, the withdrawal value is equal to the present value of the remaining Guaranteed Payments calculated using the assumed annual net return rate stated on the Contract Schedule. b) All withdrawal values will be determined as of the Valuation Date next following when a written request for withdrawal is received in good order by Aetna at its home office. Endorsed and made a part of this contract on the Contract Effective Date. /s/ Thomas J. McInerney ---------------------------------------- President Aetna Life Insurance and Annuity Company SPIA(GR)99 EX-99.B.4.5 5 ENDORSEMENT Exhibit 99-B.4.5 Aetna Life Insurance and Annuity Company ENDORSEMENT The Contract is hereby endorsed as follows: New sections entitled Withdrawal Frequency and Amounts and Early Withdrawal Charge Schedule are added to the Contract Schedule to include the following language: Withdrawal Frequency and Amounts Life with Guaranteed Period Annuity Withdrawals: Withdrawals may be elected within the Guaranteed Period once a year. No withdrawals are allowed from a Life with Guaranteed Period Annuity in the first contract year. In subsequent contract years within the Guaranteed Period, full or partial withdrawals are allowed, provided that under a partial withdrawal the remaining Annuity payments would equal $50 or more. At the end of the Guaranteed Period, payments as defined in section 2.02 will continue for the life of the Annuitant or Joint Annuitant if applicable. Early Withdrawal Charge Schedule
Early Withdrawal Charge Number of Years from Contract Effective Date (% of Withdrawal Value) --------------------------------------------------------------------------------------------- 1 or more, but fewer than 2 6% 2 or more, but fewer than 3 5% 3 or more, but fewer than 4 4% 4 or more, but fewer than 5 3% 5 or more, but fewer than 6 2% 6 or more, but fewer than 7 1% 7 or more 0%
If this contract is established as a rollover from another contract issued by Aetna or an affiliate, the early withdrawal charge will be determined according to the effective date of the account under such predecessor contract. New sections entitled Withdrawal/Partial Withdrawal and Withdrawal Value are added to "Benefit Provisions" to include the following language: 4.02 Withdrawal/Partial Withdrawal If this contract is issued as a Life with Guaranteed Period Annuity as described on the Specifications page, the Contract Holder may elect to receive the withdrawal value of all or a portion of the Guaranteed Payments in the amounts and frequency as stated on the Contract Schedule. If a portion of the Guaranteed Payments under a Life with Guaranteed Period Annuity is withdrawn, the remaining Annuity payments within the Guaranteed Period will be reduced proportionally. Withdrawals are subject to an early withdrawal charge as shown on the Contract Schedule, unless an exception under this contract applies. 4.03 Withdrawal Value The Withdrawal Value is equal to: a) For the variable portion the present value of the remaining Guaranteed Payments calculated using the assumed annual net return rate stated on the Specifications page effective as of the Valuation Date next following the receipt of the written request by Aetna at its home office. The resulting value will be reduced by any applicable early withdrawal charge. b) For the fixed portion the present value of the remaining Guaranteed Payments calculated using the adjusted contract rate, less any early withdrawal charge, if applicable. The adjusted contract rate equals the Fixed Annuity Present Value Interest Rate, as shown in the Specifications page, plus the increase or minus the decrease in the published 10 year on-the-run Treasury rate from the contract effective date to the withdrawal calculation date. The section entitled Death Benefit Provision is amended by replacing item a) and adding item d) with the following language: a) If the Annuitant dies, or under a joint Annuity option the Survivor dies, any remaining Guaranteed Payments will be paid to the Beneficiary as specified in the Schedule of Benefits on the Specifications page. Such payments will be paid at least as rapidly as under the method of distribution then in effect. The Beneficiary may elect to receive the withdrawal value of any remaining Guaranteed Payments. No early withdrawal charge will apply to the withdrawal value in this situation. d) The withdrawal value under this death benefit provision will be determined as of the Valuation Date next following when proof of death acceptable to Aetna and a request for payment are received in good order at Aetna's home office. Endorsed and made a part of this contract on the Contract Effective Date. /s/ Thomas J. McInerney ---------------------------------------- President Aetna Life Insurance and Annuity Company SPIAEW99 EX-99.B.4.6 6 ENDORSEMENT Exhibit 99-B.4.6 Aetna Life Insurance and Annuity Company ENDORSEMENT The Contract is hereby endorsed as follows: The Definitions section is amended by adding the following: 1.16 Variable Annuity Minimum Income Guarantee: Available only with Life Annuity options, the Variable Annuity Minimum Income Guarantee will ensure that the annuity payment will never be less than the Guaranteed Minimum Income Payment shown in the Schedule of Benefits on the Specifications page. If this contract is issued as a Joint and xx% Survivor or Contigent Annuity, at the death of either the annuitant or joint annuitant, the Guaranteed Minimum Income Payments for the survivor will be reduced by the percent stated in the annuity description on the Specifications page. The section Charges to Separate Account on the Contract Schedule is amended by adding the following: If the Variable Annuity Minimum Income Guarantee has been chosen, an additional daily charge at an annual effective rate of 1.00% will be deducted from any portion of the account value allocated to a Variable Annuity. The section Variable Annuity Assumed Annual Net Return Rate on the Contract Schedule is deleted and replaced with the following language. If the Variable Annuity Minimum Income Guarantee has been chosen, an assumed annual net return rate of 3.5% will apply. The daily net return rate factor for an assumed annual net return rate of 3.5% per year is 0.9999058. 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 [5.75%] 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 for an assumed annual net return rate of 3.5%. Should the Variable Annuity payment , as described in 3.01, fall below the Guaranteed Minimum Income Payment, Aetna will calculate and pay the difference between the Guaranteed Minimum Income Payment and the current Variable Annuity payment such that the total payment remitted for that payment date will not be less than the Guaranteed Minimum Income Payment. The section Transfers is deleted and replaced with the following: If the Variable Annuity Minimum Income Guarantee is in effect no transfers will be allowed. Endorsed and made a part of this contract on the Contract Effective Date. /s/ Thomas J. McInerney ---------------------------------------- President Aetna Life Insurance and Annuity Company SPIAEVPG99 EXAMPLE SPECIFICATIONS Contract Number: M2828 123123121 Contract Effective Date: February 14, 1999 Contract Holder: John F. Smith Single Premium: $10,000.00 Annuitant: John F. Smith Joint Annuitant: Mary F. Smith Annuitant Issue Age: 56 Joint Annuitant Issue Age: 55 First Payment Date: March 14, 1999 Payment Frequency: Monthly
SCHEDULE OF BENEFITS Joint and 66 2/3 Survivor Annuity: Annuity payments begin on the First Payment Date and will continue for the lives of the Annuitant and Joint Annuitant. At the death of either the Annuitant or Joint Annuitant, the payments will continue at 66 2/3% of the payment amount for the life of the survivor. Payments cease upon the death of the survivor. Payment Information: Payments will be made on a Fixed and Variable basis Fixed Payment from General Account: $ xx.xx Fixed Annuity Present Value Interest Rate: 5.9% FUNDING ELECTIONS
Number of Fund Percent Fund Name Annuity Units Per Payment: 100% Aetna Index Plus Large Cap VP .00689
Variable Annuity Assumed Annual Net Return Rate: 3.5% Guaranteed Minimum Income Payment: 90% of the Initial Variable Annuity Payment valued as of the Contract Effective Date. EX-99.B.4.7 7 ENDORSEMENT Exhibit 99-B.4.7 Aetna Life Insurance and Annuity Company ENDORSEMENT The contract is endorsed to permit the contract to be used to pay benefits under a pension or profit sharing plan qualified under Section 401(a) of the Internal Revenue Code ("Code") and, if applicable, the Employee Retirement Income Security Act (ERISA). The following provisions apply and, in the case of a conflict with any provision in the contract, this endorsement controls. Nontransferable. The contract is nontransferable in accordance with Code Section 401(g). The contract may not be sold, assigned, transferred or pledged as collateral for a loan or as security for the performance of an obligation or for any other purpose, except pursuant to a qualified domestic relations order as described in Code Section 414(p). This restriction shall not apply to the trustee of any trust described in Code Section 401(a), which is exempt from tax under Section 501(a). Contract Holder. The Contract Holder must be the employer sponsoring the plan or, if the plan has a trust, the trustee of such trust. The Contract Holder may assign ownership of the contract to the Participant in which case the Participant shall become the Contract Holder. Participant. The Participant is the participant under the Code Section 401(a) plan on whose behalf the contract is purchased. Beneficiary. If the Contract Holder is the employer or plan trustee, the Beneficiary is the Contract Holder. If the contract has been assigned to the Participant, the Participant shall name a Beneficiary. However, if the contract is subject to ERISA and the Participant is married, the Participant must name the spouse as Beneficiary of 50% of any remaining Guaranteed Payments. However, if the Participant has attained age 35, an alternate Beneficiary may be named for this portion of the contract provided the Participant furnishes to Aetna a waiver and spousal consent satisfying the requirements of Code Section 417. Any Beneficiary may be named for the balance without the consent of the spouse. Distributions. The Annuity payments will only be paid to the Contract Holder, or to the Participant at the direction of the Contract Holder. Death Benefit. At the death of the Annuitant, Aetna will pay any remaining Guaranteed Payments, as directed by the Contract Holder or, if the Participant is the Contract Holder, by the designated Beneficiary. If the contract is subject to ERISA, the Contract Holder who is not the Participant must certify in a form acceptable to Aetna that the distribution to a non-spouse plan beneficiary complies with the waiver and spousal consent requirements of Code Section 417. In the absence of such certification, payment will be made to the Contract Holder. Commutation/Partial Commutation. If the Contract is subject to ERISA and the Contract Holder has a right of commutation under this contract, to exercise such right the Contract Holder must certify in a form acceptable to Aetna that the distribution complies with the waiver and spousal consent requirements of Code Section 417. In the absence of such certification, Aetna will pay the commuted value to the Contract Holder provided the Contract Holder is the employer or plan trustee. Endorsed and made a part of the contract as of the Contract Effective Date. /s/ Thomas J. McInerney ---------------------------------------- President Aetna Life Insurance and Annuity Company E401SP96 EX-99.B.4.8 8 ENDORSEMENT Exhibit 99-B.4.8 Aetna Life Insurance and Annuity Company ENDORSEMENT The contract is endorsed in order to meet the requirements of Section 403(b) of the Internal Revenue Code ("Code") and, if applicable, the Employee Retirement Income Security Act (ERISA). The following provisions apply and, in the case of a conflict with any provision in the contract, this endorsement controls. Nontransferable. The contract is nontransferable in accordance with Code Section 401(g). The contract may not be sold, assigned, transferred or pledged as collateral for a loan or as security for the performance of an obligation or for any other purpose, except pursuant to a qualified domestic relations order as described in Code Section 414(p). Contract Holder. The Contract Holder must be a participant under a Code Section 403(b) Tax Deferred Annuity program. Annuitant. The Annuitant is the Contract Holder. Beneficiary. The Contract Holder shall name a Beneficiary. If the Contract is subject to ERISA and the Contract Holder is married, the spouse must be named as Beneficiary of 50% of any remaining Guaranteed Payments. However, if the Contract Holder has attained age 35, an alternate Beneficiary may be named for this portion of the Contract provided the Contract Holder furnishes to Aetna a waiver and spousal consent satisfying the requirements of ERISA Section 205. Any Beneficiary may be named for the balance without the consent of the spouse. Premium. The premium applied to the contract must be an amount rolled over from (1) another contract qualified under Code Section 403(b) or a custodial account qualified under Code Section 403(b)(7), or (2) from an Individual Retirement Account or Annuity qualified under Code Sections 408(a) or 408(b) that contains only amounts previously rolled over from a 403(b) Tax Deferred Annuity. Any amount rolled over from a Code Section 403(b) contract or custodial account must be eligible for distribution under the withdrawal instructions set forth in Code Section 403(b)(7) or 403(b)(11), as applicable. Distributions. The Annuity payments will only be paid to the Contract Holder, or to an alternate payee pursuant to a qualified domestic relations order as described in Code Section 414(p). Commutation/Partial Commutation. If the contract is subject to ERISA and if the Contract Holder has a right of commutation under this contract, to exercise such right the Contract Holder must furnish to Aetna a waiver and spousal consent satisfying the requirements of ERISA Section 205. Endorsed and made a part of the contract as of the Contract Effective Date. /s/ Thomas J. McInerney ---------------------------------------- President Aetna Life Insurance and Annuity Company E403SP96 EX-99.B.4.9 9 ENDORSEMENT Exhibit 99-B.4.9 Aetna Life Insurance and Annuity Company ENDORSEMENT This contract is endorsed to permit an employer to purchase the contract in conjunction with a nonqualified deferred compensation plan or a deferred compensation plan under Section 457 of the Internal Revenue Code ("Code"). The following provisions apply and, in the case of a conflict with any provision in the contract, this endorsement controls. Contract Holder. The Contract Holder must be the employer who sponsors the deferred compensation plan. Annuitant. The Annuitant is a participant or plan beneficiary under the deferred compensation plan. Beneficiary. The Beneficiary is the Contract Holder. Death Benefit. At the death of the Annuitant, Aetna will pay any remaining Guaranteed Payments as directed by the Contract Holder. Exclusive Benefit. This provision applies if this contract is issued in conjunction with a Code Section 457(b) deferred compensation plan to a government employer, as defined in Code Section 457(e)(1)(A). Any amounts withdrawn or paid from this contract are required to be utilized for the exclusive benefit of the participant and plan beneficiary in accordance with Code Section 457(g). This requirement shall be effective (i) immediately if the plan was not in existence on August 20, 1996 or (ii) if the plan was already for the exclusive benefit of participants and their beneficiaries in accordance with Code Section 457(g) and January 1, 1999. Endorsed and made a part of the contract as of the Contract Effective Date. /s/ Thomas J. McInerney ---------------------------------------- President Aetna Life Insurance and Annuity Company SPIA457-99 EX-99.B.4.10 10 ANNUITY CONTRACT Exhibit 99-B.4.10 [Aetna Logo] ------------------------------------------------------------------ Aetna Life Insurance and Annuity Company Home Office: 151 Farmington Avenue Hartford, Connecticut 06156 (800) 531-4547 You may call the toll free number shown above to request information about this Contract. Aetna Life Insurance and Annuity Company, a stock company, herein called Aetna, agrees to pay the benefits stated in this Contract. Group Single Premium Immediate Fixed, Variable or Combination Annuity Contract (Nonparticipating) 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 AETNA RECEIVES THE NOTICE OF CANCELLATION AND THIS CONTRACT AT ITS HOME OFFICE, AETNA WILL RETURN THE AMOUNT OF CERTIFICATE HOLDER PREMIUM RECEIVED PLUS ANY INCREASE OR MINUS ANY DECREASE IN THE ACCOUNT VALUE OF ANY FUNDS ALLOCATED TO THE SEPARATE ACCOUNT. Signed at the Home Office on the Effective Date. /s/ Thomas J. McInerney /s/ Kirk P. Wickman President Secretary The contract sets forth, in detail, all of the rights and obligations of both the Contract Holder and Aetna. IT IS THEREFORE IMPORTANT THAT YOU READ THIS CONTRACT CAREFULLY. The contract and any attached documents constitute the entire legal relationship between Aetna and the Contract Holder. Group Single Premium Immediate Fixed, Variable or Combination Annuity Contract (Nonparticipating) ALL PAYMENTS AND VALUES PROVIDED BY THE CONTRACT, WHEN BASED ON INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT This page intentionally left blank. SPIA(GR)99 Page 2
Table of Contents Separate Account ....................................................... 6 Charges to Separate Account ....................................... 6 Variable Annuity Assumed Annual Net Return Rate ................... 6 Transfers .............................................................. 6 I. DEFINITIONS ......................................................... 7 1.01 Account ..................................................... 7 1.02 Annuitant/Joint Annuitant ................................... 7 1.03 Annuity ..................................................... 7 1.04 Beneficiary(ies) ............................................ 7 1.05 Certificate Holder .......................................... 7 1.06 Contract .................................................... 7 1.07 Contract Holder ............................................. 7 1.08 Fixed Annuity ............................................... 7 1.09 Fund(s) ..................................................... 7 1.10 Guaranteed Payment .......................................... 7 1.11 Life Annuity ................................................ 7 1.12 Payee ....................................................... 8 1.13 Period Certain Annuity ...................................... 8 1.14 Separate Account ............................................ 8 1.15 Survivor .................................................... 8 1.16 Valuation Date .............................................. 8 1.17 Valuation Period ............................................ 8 1.18 Variable Annuity ........................................... 8 II. GENERAL PROVISIONS ................................................. 8 2.01 Premiums .................................................... 8 2.02 Payments .................................................... 8 2.03 Change of Contract .......................................... 9 2.04 Ownership ................................................... 9 2.05 Misstatements and Adjustments ............................... 9 2.06 Incontestability ............................................ 9 2.07 Beneficiary Designation ..................................... 2.08 Nonparticipating Contract ................................... 9 2.09 State Laws .................................................. 9 III. VARIABLE ANNUITY PROVISIONS ....................................... 9 3.01 Fund Annuity Units - Separate Account ....................... 9 3.02 Fund Annuity Unit Value ..................................... 10 3.03 Fund Annuity Net Return Factors ............................. 10 3.04 Transfer(s) ................................................. 10 3.05 Notice to the Contract Holder ............................... 10 3.06 Change of Fund(s) ........................................... 11 IV. BENEFIT PROVISIONS ................................................. 11 4.01 Death Benefit Provision ...................................... 11
SPIA(GR)99 Page 3 SPECIFICATIONS Contract Holder: ABC Corporation Group Contract No.: M2828 Contract Effective Date: February 14, 1999 Individual Account information can be found on the certificate Specifications page. SPIA(GR)99 Page 4 Contract Schedule Separate Account - -------------------------------------------------------------------------------- Charges to Separate Account A daily charge at an annual effective rate of 1.25% for mortality and expense risk and profit (M & E) is deducted from any portion of the Account value allocated to a Variable Annuity. A daily charge at an annual effective rate of up to 0.25% for administration is deducted from any portion of the Account value allocated to a Variable Annuity. Variable Annuity Assumed Annual Net Return Rate If a Variable Annuity is chosen, an assumed annual net return rate of 5.0% may be elected. If 5.0% is not elected, Aetna will use an assumed annual net return rate of 3.5%. The daily net return rate factor for an assumed annual net return rate of 3.5% per year is 0.9999058. The daily net return rate factor for an assumed annual net return rate 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. Transfers - -------------------------------------------------------------------------------- Maximum Number of Allowable Fund Transfers: Twelve per calendar year SPIA(GR)99 Page 5 I. DEFINITIONS - -------------------------------------------------------------------------------- 1.01 Account A record established for each Certificate Holder to maintain the value of the premium held on his/her behalf. 1.02 Annuitant/Joint Annuitant An individual named on the Specifications page of the contract (1) whose death terminates or adjusts the amount of life-contingent payments, and/or (2) whose death results in the payment of death benefits; a measured life. 1.03 Annuity Payment of a specified amount(s) or specified number of units made: a) On specified dates or intervals for the lifetime of one or more Annuitants with or without Guaranteed Payments; or b) On specified dates or intervals for a specified period of time. Annuity benefits payable under the contract are shown in the Schedule of Benefits on the Specifications page. 1.04 Beneficiary(ies) The individual or entity entitled to receive any death benefit due under the Account. 1.05 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. Joint Certificate Holders have joint ownership rights and both must authorize exercising any ownership rights unless Aetna allows otherwise. 1.06 Contract The agreement between Aetna and the Contract Holder. 1.07 Contract Holder The person to whom the contract is issued. 1.08 Fixed Annuity An Annuity with payments that do not vary with fund performance. 1.09 Fund(s) The open-end registered management investment companies whose shares are purchased by the Separate Account to fund the benefits provided by the contract. 1.10 Guaranteed Payment A payment that is due whether or not the Annuitant, or Joint Annuitant, if applicable, is alive on the payment due date, as described in the Schedule of Benefits on the Specifications page. 1.11 Life Annuity An Annuity with payments that are based solely on whether or not the Annuitant, or Joint Annuitant, if applicable, is alive on the payment due date as described in the Schedule of Benefits on the Specifications page. SPIA(GR)99 Page 6 1.12 Payee A person that receives Annuity payments. The Certificate Holder shall be the Payee unless the Certificate Holder designates otherwise in writing. 1.13 Period Certain Annuity An Annuity with a specified number of Guaranteed Payments without a life contingency. 1.14 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 of such amounts. Amounts in the Separate Account are not generally guaranteed and are held at market value. The assets of the Separate Account, to the extent of reserves and other contract liabilities of the Separate Account, cannot be charged with other Aetna liabilities arising out of any other Aetna business. 1.15 Survivor With an Annuity based on the lives of an Annuitant and Joint Annuitant, the individual who is not the first to die. 1.16 Valuation Date The date and time on which a Fund Annuity Unit Value is calculated. Currently, this calculation will be determined at the close of business of the New York Stock Exchange on any normal business day, Monday through Friday, that the New York Stock Exchange is open. 1.17 Valuation Period The period of time between successive Valuation Dates. 1.18 Variable Annuity An Annuity with payments that vary with the net investment results of the Funds available under the contract. Aetna reserves the right to limit the Fund(s) available with the Variable Annuity Payment Guarantee, if applicable. II. GENERAL PROVISIONS - -------------------------------------------------------------------------------- 2.01 Premium The amount of the premium applied to the contract will be the premium received minus a deduction for premium taxes, if any. 2.02 Payments Aetna will pay to the Payee a Fixed or Variable Annuity or a combination of the two as selected by the Certificate Holder and as shown in the Schedule of Benefits on the Specifications page. Aetna discharges its obligation to pay when it makes payment by check or electronic funds transfer to the Payee's address or the bank that Aetna has on record as of 15 business days before the payment due date. We reserve the right to suspend any life-contingent payments to a Payee if acceptable proof of life of an Annuitant or Joint Annuitant is not furnished when requested. SPIA(GR)99 Page 7 2.03 Change of Contract Only an authorized officer of Aetna may change the terms of the contract. Aetna will notify the Contract Holder in writing of any changes. Aetna reserves the right to modify the contract to meet the requirements of applicable state and federal laws or regulations. 2.04 Control of Contract The contract is between the Contract Holder and Aetna. The Contract Holder has title to the contract. Contract Holder rights are limited to accepting or rejecting contract modifications. The Certificate Holder has all other rights to amounts held in the contract. Any choice allowed under the contract must be made in writing by the Certificate Holder or both Certificate Holders, if jointly owned. Until receipt of such choices in Aetna's home office, Aetna may rely on any previous choices made. The contract is not subject to the claims of any creditors of the Contract Holder or Certificate Holder, except to the extent permitted by law. The Certificate Holder may assign or transfer his or her rights under the contract. Aetna reserves the right not to accept assignment or transfer to a nonnatural person. Any assignment or transfer made must be submitted to Aetna's home office in writing and will not be effective until accepted by Aetna. 2.05 Misstatements and Adjustments If the age, sex, or any relevant fact concerning any Annuitant is found to be misstated, the correct facts will be used to adjust payments. 2.06 Incontestability Aetna will not contest the contract from its effective date. 2.07 Beneficiary Designation If the contract provides for any Guaranteed Payments following the death of the Annuitant, and the Joint Annuitant if applicable, the Certificate Holder has the right to name a Beneficiary(ies). If the Account is owned jointly, both joint Certificate Holders must agree in writing to the Beneficiary designated. The Beneficiary designation may be changed by the Certificate Holder during the lifetime of the Annuitant, and, if applicable, the Joint Annuitant, by sending written notice of the change in a form acceptable to Aetna to Aetna's home office. Such change will not be effective until received and recorded by Aetna. In all cases, Aetna will pay death benefits based on the last written Beneficiary designation it has on record on the date of the death. 2.08 Nonparticipating Contract The Contract Holder, Certificate Holders, Payees or Beneficiaries will not have a right to share in the earnings of Aetna. 2.09 State Laws The contract and the certificates comply with the laws of the state in which it is delivered. Annuity payments are equal to or greater than the minimum required by such laws. III. VARIABLE ANNUITY PROVISIONS - -------------------------------------------------------------------------------- 3.01 Fund Annuity Units - Separate Account The initial number of a Fund's Annuity units is stated on the Specifications page. Each future payment is equal to the sum of the products of each Fund Annuity unit value multiplied by the appropriate number of units. The Fund Annuity unit value on the tenth Valuation Date prior to the due date of the payment is used. SPIA(GR)99 Page 8 3.02 Fund Annuity Unit Value For any Valuation Date, a Fund's Annuity unit value is equal to: a) The value for the preceding Valuation Date; multiplied by b) The Annuity net return factor(s) for the Valuation Period; multiplied by c) A factor to reflect the assumed annual net return rate. The factors for the assumed annual net return are shown on the Contract Schedule. 3.03 Fund Annuity Net Return Factors The Annuity net return factor(s) are used to compute all Separate Account Annuity unit values for any Fund. The Annuity net return factor for each Fund is equal to 1.0000000 plus the net return rate. The net return rate is equal to: a) The value of the shares of the Fund held by the Separate Account at the end of a Valuation Period; minus b) The value of the shares of the Fund held by the Separate Account at the start of the Valuation Period; plus or minus c) Taxes (or reserves for taxes) on the Separate Account (if any); divided by d) The total value of the Fund Annuity units of the Separate Account at the start of the Valuation Period; minus e) A Separate Account charge at an annual effective rate as shown on the Contract Schedule for Annuity mortality and expense risks and profit and a daily administrative charge which will not exceed the amount shown on the Contract Schedule on an annual basis. The daily administrative charge will be established on the Effective Date of the contract. 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. 3.04 Transfer(s) At the request of a Certificate Holder, all or any portion of the Account value may be transferred from any Fund to any other allowable Fund. Transfers will be processed as of the Valuation Date next following when a transfer request is received in good order at Aetna's home office. The maximum number of allowable transfers in a calendar year is shown on the Contract Schedule. Aetna reserves the right to increase the number of allowable transfers. Transfer requests must be expressed as a percentage of the allocation among the Funds of the amount upon which the Variable Annuity will be based. Aetna may establish a minimum transfer amount. 3.05 Notice to the Certificate Holder Once a year, Aetna will notify the Certificate Holder of: a) The number of Fund(s) Annuity units; and b) The value of Fund(s) Annuity units. Such numbers or values will be as of a date no more than 60 days before the date of the notice. SPIA(GR)99 Page 9 3.06 Change of Fund(s) The assets of the Separate Account are segregated by Fund. If the shares of any Fund are no longer available for investment by the Separate Account or if in Aetna's judgment further investment in such shares should become inappropriate in view of the purpose of the contract, Aetna may cease to make such Fund shares available for investment under the contract prospectively, or Aetna may substitute shares of another Fund for shares already acquired. Aetna may also, from time to time, add additional Funds. Any elimination, substitution or addition of Funds will be done in accordance with applicable state and federal securities laws. Aetna reserves the right to substitute shares of another Fund for shares already acquired without a proxy vote. IV. BENEFIT PROVISIONS - -------------------------------------------------------------------------------- 4.01 Death Benefit Provision a) If the Annuitant dies, or under a joint Annuity option the Survivor dies, any remaining Guaranteed Payments will be paid to the Beneficiary in the form specified in the Schedule of Benefits on the Specifications page. Such payments will be paid at least as rapidly as under the method of distribution then in effect. Within six months of such death, the Beneficiary may elect to receive the withdrawal value of any remaining Guaranteed Payments less any early withdrawal charge. The rate used to determine the withdrawal value will be the Fixed Annuity Present Value Interest Rate shown on the Specifications page. No early withdrawal charge will apply to the withdrawal value in this situation. If the contract is issued as a Variable Period Certain Annuity, the Beneficiary may elect to receive the withdrawal value of any remaining Guaranteed Payments at any time. No early withdrawal charge will apply to the withdrawal value in this situation. b) If the Certificate Holder who is not the Annuitant(s) dies, payments will be paid to the Payee in the form specified in the Schedule of Benefits on the Specifications page. If no Payee designated by the Contract Holder survives the death of the Certificate Holder, payments will be made to the Annuitant. Such payments will be paid at least as rapidly as under the method of distribution then in effect. c) If the Certificate Holder dies before the annuity starting date the entire interest in the contract must be distributed within five years of the date of death, or payments may be made over the life or over a period not extending beyond the life expectancy of the Beneficiary or Payee, as applicable, provided such payments begin not later than one year after the date of death. The annuity starting date is generally defined by the Internal Revenue Code to mean the first day of the period (month, quarter, half-year, year depending on whether payments will be made monthly, quarterly, semi-annually or annually) which ends on the date of the first annuity payment. This provision will not apply if the Beneficiary or Payee, as applicable, is the Certificate Holder's spouse. SPIA(GR)99 Page 10 This page intentionally left blank. SPIA(GR)99 - -------------------------------------------------------------------------------- Aetna Life Insurance and Annuity Company Home Office: 151 Farmington Avenue Hartford, Connecticut 06156 (800) 238-6273 Contract of Group Annuity Coverage - -------------------------------------------------------------------------------- Group Single Premium Immediate Fixed, Variable or Combination Annuity Contract (Nonparticipating) ALL PAYMENTS AND VALUES PROVIDED BY THE CONTRACT, WHEN BASED ON INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT SPIA(GR)99 EX-99.B.4.11 11 GROUP CONTRACT Exhibit 99-B.4.11 [Aetna Logo] --------------------------------------------------------------- Aetna Life Insurance and Annuity Company Home Office: 151 Farmington Avenue P.O. Box 30670 Hartford, Connecticut 06156-0670 (800) 531-4547 You may call the toll free number shown above to request information about this Certificate. Aetna Life Insurance and Annuity Company (Aetna), a stock company, 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 or endorsements issued to you under the stated Contract and Certificate numbers. This Certificate is for information only and is not a part of the Contract. The variable features of the Group Contract are described in part III - -------------------------------------------------------------------------------- Right to Cancel You may cancel your Account within 10 days by returning the certificate to the agent from whom it was purchased, or to Aetna at the address shown above. Within seven days of receiving this Certificate at its home office, Aetna will return the amount of premium received, plus any increase, or minus any decrease, on the amount, if any, of premium allocated to the Separate Account fund(s). Signed at the Home Office on the Effective Date. /s/ Thomas J. McInerney /s/ Kirk P. Wickman President Secretary
- ------------------------------------------------------------------------------------------------- Contract Holder Group Annuity Contract Holder No SPECIMEN SPECIMEN - ------------------------------------------------------------------------------------------------- Certificate Holder Certificate No. SPECIMEN SPECIMEN - ------------------------------------------------------------------------------------------------- Annuitant Name Type of Plan SPECIMEN SPECIMEN
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. SPIA(GR)99CERT This page intentionally left blank. SPIA(GR)99CERT Page 2
Table of Contents Separate Account ....................................................... 6 Charges to Separate Account ....................................... 6 Variable Annuity Assumed Annual Net Return Rate ................... 6 Transfers .............................................................. 6 I. DEFINITIONS ......................................................... 7 1.01 Account ..................................................... 7 1.02 Annuitant/Joint Annuitant ................................... 7 1.03 Annuity ..................................................... 7 1.04 Beneficiary(ies) ............................................ 7 1.05 Certificate Holder .......................................... 7 1.06 Contract .................................................... 7 1.07 Contract Holder ............................................. 7 1.08 Fixed Annuity ............................................... 7 1.09 Fund(s) ..................................................... 7 1.10 Guaranteed Payment .......................................... 7 1.11 Life Annuity ................................................ 7 1.12 Payee ....................................................... 8 1.13 Period Certain Annuity ...................................... 8 1.14 Separate Account ............................................ 8 1.15 Survivor .................................................... 8 1.16 Valuation Date .............................................. 8 1.17 Valuation Period ............................................ 8 1.18 Variable Annuity ........................................... 8 II. GENERAL PROVISIONS ................................................. 8 2.01 Premiums .................................................... 8 2.02 Payments .................................................... 8 2.03 Change of Contract .......................................... 9 2.04 Ownership ................................................... 9 2.05 Misstatements and Adjustments ............................... 9 2.06 Incontestability ............................................ 9 2.07 Beneficiary Designation ..................................... 9 2.08 Nonparticipating Contract ................................... 9 2.09 State Laws .................................................. 9 III. VARIABLE ANNUITY PROVISIONS ....................................... 9 3.01 Fund Annuity Units - Separate Account ....................... 9 3.02 Fund Annuity Unit Value ..................................... 10 3.03 Fund Annuity Net Return Factors ............................. 10 3.04 Transfer(s) ................................................. 10 3.05 Notice to the Contract Holder ............................... 10 3.06 Change of Fund(s) ........................................... 11 IV. BENEFIT PROVISIONS ................................................. 11 4.01 Death Benefit Provision ...................................... 11
SPIA(GR)99CERT Page 3
SPECIFICATIONS Group Certificate No.: [xxxx] Contract Holder: [xxxx] Certificate Number: [xxxx] Certificate Number: [xxxx] Contract Effective Date: [xxxx] Single Premium:: [xxxx] Annuitant: [xxxx] Annuitant Issue Age: [xxxx] Joint Annuitant: [xxxx] Joint Annuitant Issue Age: [xxxx] First Payment Date: [xxxx] Payment Frequency: [xxxx] Single Premium: [xxxx]
SCHEDULE OF BENEFITS Joint and 100% Survivor Annuity with Guaranteed Payments: Annuity payments begin on the First Payment Date and will continue for the lives of the Annuitant and Joint Annuitant. At the death of either the Annuitant or Joint Annuitant, the payment amount will continue to be paid for the life of the survivor. If the survivor dies prior to the payment of all guaranteed payments, any remaining payments will be paid to the beneficiary. Payment Information: Payments will be made on a Fixed basis. Number of Guaranteed Payments: [xxxx] Fixed Payment from General Account: [xxxx] Fixed Annuity Present Value Interest Rate: [xxxx]% FUNDING ELECTIONS
Number of Fund Percent Fund Name Annuity Units Per Payment: [xxxx] [xxxx] [xxxx]
Variable Annuity Assumed Annual Net Return Rate: [xxxx]% SPIA(GR)99CERT Page 4 Contract Schedule Separate Account - -------------------------------------------------------------------------------- Charges to Separate Account A daily charge at an annual effective rate of 1.25% for mortality and expense risk and profit (M & E) is deducted from any portion of the Account value allocated to a Variable Annuity. A daily charge at an annual effective rate of up to 0.25% for administration is deducted from any portion of the Account value allocated to a Variable Annuity. Variable Annuity Assumed Annual Net Return Rate If a Variable Annuity is chosen, an assumed annual net return rate of 5.0% may be elected. If 5.0% is not elected, Aetna will use an assumed annual net return rate of 3.5%. The daily net return rate factor for an assumed annual net return rate of 3.5% per year is 0.9999058. The daily net return rate factor for an assumed annual net return rate 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. Transfers - -------------------------------------------------------------------------------- Maximum Number of Allowable Fund Transfers: Twelve per calendar year SPIA(GR)99CERT Page 5 I. DEFINITIONS - -------------------------------------------------------------------------------- 1.01 Account A record established for each Certificate Holder to maintain the value of the premium held on his/her behalf. 1.02 Annuitant/Joint Annuitant An individual named on the Specifications page of the certificate (1) whose death terminates or adjusts the amount of life-contingent payments, and/or (2) whose death results in the payment of death benefits; a measured life. 1.03 Annuity Payment of a specified amount(s) or specified number of units made: a) On specified dates or intervals for the lifetime of one or more Annuitants with or without Guaranteed Payments; or b) On specified dates or intervals for a specified period of time. Annuity benefits payable under the Contract are shown in the Schedule of Benefits on the Specifications page. 1.04 Beneficiary(ies) The individual or entity entitled to receive any death benefit due under the Account. 1.05 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. Joint Certificate Holders have joint ownership rights and both must authorize exercising any ownership rights unless Aetna allows otherwise. 1.06 Contract The agreement between Aetna and the Contract Holder. 1.07 Contract Holder The entity to whom the Contract is issued. 1.08 Fixed Annuity An Annuity with payments that do not vary with fund performance. 1.09 Fund(s) The open-end registered management investment companies whose shares are purchased by the Separate Account to fund the benefits provided by the Contract. 1.10 Guaranteed Payment A payment that is due whether or not the Annuitant, or Joint Annuitant, if applicable, is alive on the payment due date, as described in the Schedule of Benefits on the Specifications page. 1.11 Life Annuity An Annuity with payments that are based solely on whether or not the Annuitant, or Joint Annuitant, if applicable, is alive on the payment due date as described in the Schedule of Benefits on the Specifications page. SPIA(GR)99CERT Page 6 1.12 Payee A person that receives Annuity payments. The Certificate Holder shall be the Payee unless the Certificate Holder designates otherwise in writing. 1.13 Period Certain Annuity An Annuity with a specified number of Guaranteed Payments without a life contingency. 1.14 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 of such amounts. Amounts in the Separate Account are not generally guaranteed and are held at market value. The assets of the Separate Account, to the extent of reserves and other Contract liabilities of the Separate Account, cannot be charged with other Aetna liabilities arising out of any other Aetna business. 1.15 Survivor With an Annuity based on the lives of an Annuitant and Joint Annuitant, the individual who is not the first to die. 1.16 Valuation Date The date and time on which a Fund Annuity Unit Value is calculated. Currently, this calculation will be determined at the close of business of the New York Stock Exchange on any normal business day, Monday through Friday, that the New York Stock Exchange is open. 1.17 Valuation Period The period of time between successive Valuation Dates. 1.18 Variable Annuity An Annuity with payments that vary with the net investment results of the Funds available under the Contract. Aetna reserves the right to limit the Fund(s) available with the Variable Annuity Payment Guarantee, if applicable. II. GENERAL PROVISIONS - -------------------------------------------------------------------------------- 2.01 Premium The amount of the premium applied to the Contract will be the premium received minus a deduction for premium taxes, if any. 2.02 Payments Aetna will pay to the Payee a Fixed or Variable Annuity or a combination of the two as selected by the Certificate Holder and as shown in the Schedule of Benefits on the Specifications page. Aetna discharges its obligation to pay when it makes payment by check or electronic funds transfer to the Payee's address or the bank that Aetna has on record as of 15 business days before the payment due date. We reserve the right to suspend any life-contingent payments to a Payee if acceptable proof of life of an Annuitant or Joint Annuitant is not furnished when requested. SPIA(GR)99CERT Page 7 2.03 Change of Contract Only an authorized officer of Aetna may change the terms of the Contract. Aetna will notify the Contract Holder in writing of any changes. Aetna reserves the right to modify the Contract to meet the requirements of applicable state and federal laws or regulations. 2.04 Control of Contract The Contract is between the Contract Holder and Aetna. The Contract Holder has title to the Contract. Contract Holder rights are limited to accepting or rejecting Contract modifications. The Certificate Holder has all other rights to amounts held in the Contract. Any choice allowed under the Contract must be made in writing by the Certificate Holder or both Certificate Holders, if jointly owned. Until receipt of such choices in Aetna's home office, Aetna may rely on any previous choices made. The Contract is not subject to the claims of any creditors of the Contract Holder or Certificate Holder, except to the extent permitted by law. The Certificate Holder may assign or transfer his or her rights under the Contract. Aetna reserves the right not to accept assignment or transfer to a nonnatural person. Any assignment or transfer made must be submitted to Aetna's home office in writing and will not be effective until accepted by Aetna. 2.05 Misstatements and Adjustments If the age, sex, or any relevant fact concerning any Annuitant is found to be misstated, the correct facts will be used to adjust payments. 2.06 Incontestability Aetna will not contest the Contract from its effective date. 2.07 Beneficiary Designation If the Contract provides for any Guaranteed Payments following the death of the Annuitant, and the Joint Annuitant if applicable, the Certificate Holder has the right to name a Beneficiary(ies). If the Account is owned jointly, both joint Certificate Holders must agree in writing to the Beneficiary designated. The Beneficiary designation may be changed by the Certificate Holder during the lifetime of the Annuitant, and, if applicable, the Joint Annuitant, by sending written notice of the change in a form acceptable to Aetna to Aetna's home office. Such change will not be effective until received and recorded by Aetna. In all cases, Aetna will pay death benefits based on the last written Beneficiary designation it has on record on the date of the death. 2.08 Nonparticipating Contract The Contract Holder, Certificate Holders, Payees or Beneficiaries will not have a right to share in the earnings of Aetna. 2.09 State Laws The Contract and the certificates comply with the laws of the state in which it is delivered. Annuity payments are equal to or greater than the minimum required by such laws. III. VARIABLE ANNUITY PROVISIONS - -------------------------------------------------------------------------------- 3.01 Fund Annuity Units - Separate Account The initial number of a Fund Annuity units is stated on the Specifications page. Each future payment is equal to the sum of the products of each Fund Annuity unit value multiplied by the appropriate number of units. The Fund Annuity unit value on the tenth Valuation Date prior to the due date of the payment is used. SPIA(GR)99CERT Page 8 3.02 Fund Annuity Unit Value For any Valuation Date, a Fund Annuity unit value is equal to: a) The value for the preceding Valuation Date; multiplied by b) The Annuity net return factor(s) for the Valuation Period; multiplied by c) A factor to reflect the assumed annual net return rate. The factors for the assumed annual net return are shown on the Contract Schedule. 3.03 Fund Annuity Net Return Factors The Annuity net return factor(s) are used to compute all Separate Account Annuity unit values for any Fund. The Annuity net return factor for each Fund is equal to 1.0000000 plus the net return rate. The net return rate is equal to: a) The value of the shares of the Fund held by the Separate Account at the end of a Valuation Period; minus b) The value of the shares of the Fund held by the Separate Account at the start of the Valuation Period; plus or minus c) Taxes (or reserves for taxes) on the Separate Account (if any); divided by d) The total value of the Fund Annuity units of the Separate Account at the start of the Valuation Period; minus e) A Separate Account charge at an annual effective rate as shown on the Contract Schedule for Annuity mortality and expense risks and profit and a daily administrative charge which will not exceed the amount shown on the Contract Schedule on an annual basis. The daily administrative charge will be established on the Effective Date of the Contract. 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. 3.04 Transfer(s) At the request of a Certificate Holder, all or any portion of the Account value may be transferred from any Fund to any other allowable Fund. Transfers will be processed as of the Valuation Date next following when a transfer request is received in good order at Aetna's home office. The maximum number of allowable transfers in a calendar year is shown on the Contract Schedule. Aetna reserves the right to increase the number of allowable transfers. Transfer requests must be expressed as a percentage of the allocation among the Funds of the amount upon which the Variable Annuity will be based. Aetna may establish a minimum transfer amount. 3.05 Notice to the Certificate Holder Once a year, Aetna will notify the Certificate Holder of: a) The number of Fund(s) Annuity units; and b) The value of Fund(s) Annuity units. Such numbers or values will be as of a date no more than 60 days before the date of the notice. SPIA(GR)99CERT Page 9 3.06 Change of Fund(s) The assets of the Separate Account are segregated by Fund. If the shares of any Fund are no longer available for investment by the Separate Account or if in Aetna's judgment further investment in such shares should become inappropriate in view of the purpose of the Contract, Aetna may cease to make such Fund shares available for investment under the Contract prospectively, or Aetna may substitute shares of another Fund for shares already acquired. Aetna may also, from time to time, add additional Funds. Any elimination, substitution or addition of Funds will be done in accordance with applicable state and federal securities laws. Aetna reserves the right to substitute shares of another Fund for shares already acquired without a proxy vote. IV. BENEFIT PROVISIONS - -------------------------------------------------------------------------------- 4.01 Death Benefit Provision a) If the Annuitant dies, or under a joint Annuity option the Survivor dies, any remaining Guaranteed Payments will be paid to the Beneficiary in the form specified in the Schedule of Benefits on the Specifications page. Such payments will be paid at least as rapidly as under the method of distribution then in effect. For the fixed portion of the Account: Within six months of such death, the Beneficiary may elect to receive the withdrawal value of any remaining Guaranteed Payments. The rate used to determine the withdrawal value will be the Fixed Annuity Present Value Interest Rate shown on the Specifications page. No early withdrawal charge will apply to the withdrawal value in this situation. For the variable portion of the Account: The Beneficiary may elect to receive the withdrawal value of any remaining Guaranteed Payments at any time. The rate used to determine the withdrawal value will be the Variable Annuity Assumed Annual Net Return Rate shown on the Specifications page. No early withdrawal charge will apply to the withdrawal value in this situation. b) If the Certificate Holder who is not the Annuitant(s) dies, payments will be paid to the Payee in the form specified in the Schedule of Benefits on the Specifications page. If no Payee designated by the Contract Holder survives the death of the Certificate Holder, payments will be made to the Annuitant. Such payments will be paid at least as rapidly as under the method of distribution then in effect. c) If the Certificate Holder dies before the annuity starting date the entire interest in the Contract must be distributed within five years of the date of death, or payments may be made over the life or over a period not extending beyond the life expectancy of the Beneficiary or Payee, as applicable, provided such payments begin not later than one year after the date of death. The annuity starting date is generally defined by the Internal Revenue Code to mean the first day of the period (month, quarter, half-year, year depending on whether payments will be made monthly, quarterly, semi-annually or annually) which ends on the date of the first annuity payment. This provision will not apply if the Beneficiary or Payee, as applicable, is the Certificate Holder's spouse. SPIA(GR)99CERT Page 10 This page intentionally left blank. SPIA(GR)99CERT - -------------------------------------------------------------------------------- Aetna Life Insurance and Annuity Company Home Office: 151 Farmington Avenue Hartford, Connecticut 06156 (800) 238-6273 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. SPIA(GR)99CERT EX-99.B.4.12 12 ENDORSEMENT Exhibit 99-B.4.12 Aetna Life Insurance and Annuity Company ENDORSEMENT The Contract and certificate are hereby endorsed as follows: New sections entitled "Withdrawal Frequency and Amounts" and "Early Withdrawal Charge Schedule" are added to the Contract Schedule to include the following language: Withdrawal Frequency and Amounts Fixed Period Certain Annuity Withdrawals: Under a Fixed Period Certain Annuity, withdrawals may be elected once a year. No withdrawals are allowed from a Fixed Period Certain Annuity in the first Contract year. In subsequent Contract years, full or partial withdrawals are allowed, provided that under a partial withdrawal the remaining Annuity payments would equal $50 or more. Early Withdrawal Charge Schedule
Early Withdrawal Charge Number of Years from Contract Effective Date (% of Withdrawal Value) ------------------------------------------------------------------------------------------------------ 1 or more, but fewer than 2 6% 2 or more, but fewer than 3 5% 3 or more, but fewer than 4 4% 4 or more, but fewer than 5 3% 5 or more, but fewer than 6 2% 6 or more, but fewer than 7 1% 7 or more 0%
If the Account is established as a rollover from another contract issued by Aetna or an affiliate, the early withdrawal charge will be determined according to the effective date of the account under such predecessor contract. New sections entitled "Withdrawal/Partial Withdrawal" and "Withdrawal Value" are added to "Benefit Provisions" to include the following language: 4.02 Withdrawal/Partial Withdrawal If the Contract is issued as a Fixed Period Certain Annuity as described on the Specifications page, the Certificate Holder may elect to receive the withdrawal value of all or a portion of the Guaranteed Payments. If a portion of the Guaranteed Payments under a Fixed Period Certain Annuity is withdrawn, the remaining Annuity payments will be reduced proportionally. Withdrawals are subject to an early withdrawal charge as shown on the Contract Schedule, unless an exception under the contract applies. 4.03 Withdrawal Value Under a Fixed Period Certain Annuity the withdrawal value is equal to the present value of the remaining Guaranteed Payments calculated using the adjusted contract rate The adjusted contract rate equals: (Rate of Return) + WY - IY where: Rate of Return is the Fixed Annuity Present Value Interest Rate shown on the Specifications page WY is the Withdrawal Yield IY is the Issue Yield SPIAE(GR)99 WY is determined as follows: 1) WY is the average of the yields, as published in the Wall Street Journal on the Friday before the date of withdrawal, of the three, or more if Aetna deems necessary, noncallable noninflation adjusted Treasury Notes or Bonds maturing on or closest to the Withdrawal Duration Date. 2) "Withdrawal Duration Date" is the date (month and year) obtained when the withdrawal duration is added to the date of withdrawal. 3) "Withdrawal Duration" equals 1 plus the number of whole years from the date of withdrawal until the final Guaranteed Payment is due, divided by 2. Any resulting fraction will be rounded up to the next whole number. IY is determined as follows: 1) IY is the average of the yields as published in the Wall Street Journal on the Friday before the Account Effective Date, of the three, or more if Aetna deems necessary, noncallable noninflation adjusted Treasury Notes or Bonds maturing on or closest to the Issue Duration Date. 2) "Issue Duration Date" (month and year) is obtained when Issue Duration is added to the Account Effective Date. 3) "Issue Duration" equals 1 plus the number of whole years from issue until the final payment is due, divided by 2. Any resulting fraction will be rounded up to the next whole number. All withdrawal values will be determined as of the Valuation Date next following when a written request for withdrawal is received in good order by Aetna at its home office. The section entitled Death Benefit Provision is amended by replacing item a) and adding item d) with the following language: a) If the Annuitant dies, or under a joint Annuity option the Survivor dies, any remaining Guaranteed Payments will be paid to the Beneficiary as specified in the Schedule of Benefits on the Specifications page. Such payments will be paid at least as rapidly as under the method of distribution then in effect. The Beneficiary may elect to receive the withdrawal value of any remaining Guaranteed Payments. No early withdrawal charge will apply to the withdrawal value in this situation. d) The withdrawal value under this death benefit provision will be determined as of the Valuation Date next following when proof of death acceptable to Aetna and a request for payment are received in good order at Aetna's home office. If the Account is issued as a Fixed Period Certain Annuity, the withdrawal value will be determined as described in the section entitled withdrawal value. Endorsed and made a part of the Contract on the Contract Effective Date and the certificate on the Account Effective Date. /s/ Thomas J. McInerney ---------------------------------------- President Aetna Life Insurance and Annuity Company SPIAE(GR)99 EX-99.B.4.13 13 ENDORSEMENT Exhibit 99-B.4.13 Aetna Life Insurance and Annuity Company ENDORSEMENT The Contract and certificate are hereby endorsed as follows: New sections entitled "Withdrawal Frequency and Amounts" and "Early Withdrawal Charge Schedule" are added to the Contract Schedule to include the following language: Withdrawal Frequency and Amounts Variable Annuity Withdrawals: Under a Variable Period Certain Annuity, full or partial withdrawals are allowed, provided that under a partial withdrawal the remaining Annuity payments would equal $50 or more. Early Withdrawal Charge Schedule
Early Withdrawal Charge Number of Years from Account Effective Date (% of Withdrawal Value) ----------------------------------------------------------------------------------------------------- Fewer than 1 7% 1 or more, but fewer than 2 6% 2 or more, but fewer than 3 5% 3 or more, but fewer than 4 4% 4 or more, but fewer than 5 3% 5 or more, but fewer than 6 2% 6 or more, but fewer than 7 1% 7 or more 0%
If the Account is established as a rollover from another contract issued by Aetna or an affiliate, the early withdrawal charge will be determined according to the effective date of the account under such predecessor contract. New sections entitled "Withdrawal/Partial Withdrawal" and "Withdrawal Value" are added to "Benefit Provisions" to include the following language: 4.02 Withdrawal/Partial Withdrawal For any portion of the Account value applied as a Variable Period Certain Annuity, the Certificate Holder may elect to receive the withdrawal value of all or a portion of the Guaranteed Payments. If a portion of the Guaranteed Payments under a Variable Period Certain Annuity is withdrawn, the remaining Variable Annuity payments will be reduced pro-rata from all of the Funds or otherwise as the Certificate Holder so designates. Withdrawals may be subject to an early withdrawal charge as shown on the Contract Schedule. SPIAEVW(GR)99 4.03 Withdrawal Value Under a Variable Period Certain Annuity, the withdrawal value is equal to the present value of the remaining Guaranteed Payments calculated using the Variable Annuity Assumed Annual Net Return Rate stated on the Specifications page. All withdrawal values will be determined as of the Valuation Date next following when a written request for withdrawal is received in good order by Aetna at its home office. Endorsed and made a part of the Contract on the Contract Effective Date and the certificate on the Account Effective Date. /s/ Thomas J. McInerney ---------------------------------------- President Aetna Life Insurance and Annuity Company SPIAEVW(GR)99 EX-99.B.4.14 14 ENDORSEMENT Exhibit 99-B.4.14 Aetna Life Insurance and Annuity Company ENDORSEMENT The Contract and certificate are hereby endorsed as follows: New sections entitled "Withdrawal Frequency and Amounts" and "Early Withdrawal Charge Schedule" are added to the Contract Schedule to include the following language: Withdrawal Frequency and Amounts Life with Guaranteed Period Annuity Withdrawals: Withdrawals may be elected within the Guaranteed Period once a year. No withdrawals are allowed from a Life with Guaranteed Period Annuity in the first Contract year. In subsequent Contract years within the Guaranteed Period, full or partial withdrawals are allowed, provided that under a partial withdrawal the remaining Annuity payments would equal $50 or more. At the end of the Guaranteed Period, payments as defined in section 2.02 will continue for the life of the Annuitant or Joint Annuitant if applicable. Early Withdrawal Charge Schedule
Early Withdrawal Charge Number of Years from Account Effective Date (% of Withdrawal Value) ------------------------------------------------------------------------------------------------------- 1 or more, but fewer than 2 6% 2 or more, but fewer than 3 5% 3 or more, but fewer than 4 4% 4 or more, but fewer than 5 3% 5 or more, but fewer than 6 2% 6 or more, but fewer than 7 1% 7 or more 0%
If the Account is established as a rollover from another contract issued by Aetna or an affiliate, the early withdrawal charge will be determined according to the effective date of the account under such predecessor contract. New sections entitled "Withdrawal/Partial Withdrawal" and "Withdrawal Value" are added to "Benefit Provisions" to include the following language: 4.02 Withdrawal/Partial Withdrawal If the Contract is issued as a Life with Guaranteed Period Annuity as described on the Specifications page, the Certificate Holder may elect to receive the withdrawal value of all or a portion of the Guaranteed Payments in the amounts and frequency as stated on the Contract Schedule. If a portion of the Guaranteed Payments under a Life with Guaranteed Period Annuity is withdrawn, the remaining Annuity payments within the Guaranteed Period will be reduced proportionally. Withdrawals are subject to an early withdrawal charge as shown on the Contract Schedule, unless an exception under the Contract applies. SPIAEW(GR)99 4.03 Withdrawal Value The withdrawal value is equal to: a) For the variable portion the present value of the remaining Guaranteed Payments calculated using the Variable Annuity Assumed Annual Net Return Rate stated on the Specifications page effective as of the Valuation Date next following the receipt of the written request by Aetna at its home office. The resulting value will be reduced by any applicable early withdrawal charge. b) For the fixed portion the present value of the remaining Guaranteed Payments calculated using the adjusted contract rate, less any early withdrawal charge, if applicable. The adjusted contract rate equals the Fixed Annuity Present Value Interest Rate, as shown in the Specifications page, plus the increase or minus the decrease in the published 10 year on-the-run Treasury rate from the Account Effective Date to the withdrawal calculation date. The section entitled "Death Benefit Provision" is amended by replacing item a) and adding item d) with the following language: a) If the Annuitant dies, or under a joint Annuity option the Survivor dies, any remaining Guaranteed Payments will be paid to the Beneficiary as specified in the Schedule of Benefits on the Specifications page. Such payments will be paid at least as rapidly as under the method of distribution then in effect. The Beneficiary may elect to receive the withdrawal value of any remaining Guaranteed Payments. No early withdrawal charge will apply to the withdrawal value in this situation. d) The withdrawal value under this death benefit provision will be determined as of the Valuation Date next following when proof of death acceptable to Aetna and a request for payment are received in good order at Aetna's home office. The withdrawal value will be determined as described in section 4.03 entitled Withdrawal Value. Endorsed and made a part of the Contract on the Contract Effective Date and the certificate on the Account Effective Date. /s/ Thomas J. McInerney ---------------------------------------- President Aetna Life Insurance and Annuity Company SPIAEW(GR)99 EX-99.B.4.15 15 ENDORSEMENT Exhibit 99-B.4.15 Aetna Life Insurance and Annuity Company ENDORSEMENT The Contract and certificate are hereby endorsed as follows: The Definitions section is amended by adding the following: 1.16 Variable Annuity Minimum Income Guarantee: Available only with Life Annuity options, the Variable Annuity Minimum Income Guarantee will ensure that the Annuity payment will never be less than the Guaranteed Minimum Income Payment shown in the Schedule of Benefits on the Specifications page. The section Charges to Separate Account on the Contract Schedule is amended by adding the following: If the Variable Annuity Minimum Income Guarantee has been chosen, an additional daily charge at an annual effective rate of 1.00% will be deducted from any portion of the Account value allocated to a Variable Annuity. The section Variable Annuity Assumed Annual Net Return Rate on the Contract Schedule is deleted and replaced with the following language. If the Variable Annuity Minimum Income Guarantee has been chosen, an assumed annual net return rate of 3.5% will apply. The daily net return rate factor for an assumed annual net return rate of 3.5% per year is 0.9999058. 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 5.75% 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 for an assumed annual net return rate of 3.5%. Should the Variable Annuity payment, as described in 3.01, fall below the Guaranteed Minimum Income Payment, Aetna will calculate and pay the difference between the Guaranteed Minimum Income Payment and the current Variable Annuity payment such that the total payment remitted for that payment date will not be less than the Guaranteed Minimum Income Payment. The section Transfers is deleted and replaced with the following: If the Variable Annuity Minimum Income Guarantee is in effect no transfers will be allowed. Endorsed and made a part of the Contract on the Contract Effective Date and the certificate on the Account Effective Date. /s/ Thomas J. McInerney ---------------------------------------- President Aetna Life Insurance and Annuity Company SPIAEVPG(GR)99 EX-99.B.4.16 16 ENDORSEMENT Exhibit 99-B.4.16 Aetna Life Insurance and Annuity Company ENDORSEMENT The Contract and certificate are endorsed to permit the Contract to be used to pay benefits under a pension or profit sharing plan qualified under Section 401(a) of the Internal Revenue Code ("Code") and, if applicable, the Employee Retirement Income Security Act (ERISA). The following provisions apply and, in the case of a conflict with any provision in the Contract, this endorsement controls. Nontransferable. The Contract is nontransferable in accordance with Code Section 401(g). The Contract may not be sold, assigned, transferred or pledged as collateral for a loan or as security for the performance of an obligation or for any other purpose, except pursuant to a qualified domestic relations order as described in Code Section 414(p). This restriction shall not apply to the trustee of any trust described in Code Section 401(a), which is exempt from tax under Section 501(a). Contract Holder. The Contract Holder must be the employer sponsoring the plan or, if the plan has a trust, the trustee of such trust. The Contract Holder may assign ownership of the Contract to the Participant in which case the Participant shall become the Contract Holder. Certificate Holder. The Certificate Holder is the participant under the Code Section 401(a) plan on whose behalf an Account is established. The Certificate Holder and the Annuitant must be the same person. Joint Certificate Holders are not permitted. Beneficiary. If the Contract Holder is the employer or plan trustee, the Beneficiary is the Contract Holder. If the Contract has been assigned to the participant, the participant shall name a Beneficiary Distributions. The Annuity payments will only be paid to the Contract Holder, or to the participant at the direction of the Contract Holder. Death Benefit. At the death of the Annuitant, Aetna will pay any remaining Guaranteed Payments, as directed by the Contract Holder or, if the participant is the Contract Holder, by the designated Beneficiary. Withdrawal/Partial Withdrawal. If the Contract is subject to ERISA and payment is made in the form of a qualified joint and survivor annuity, as defined in ERISA Section 205, and the Certificate Holder has a right of withdrawal under this Contract, to exercise such right the Certificate Holder must certify in a form acceptable to Aetna that the distribution complies with the waiver and spousal consent requirements of Code Section 417. In the absence of such certification, Aetna will pay the withdrawal value to the Contract Holder provided the Contract Holder is the employer or plan trustee. Endorsed and made a part of the Contract as of the Contract Effective Date and the certificate as of the Account Effective Date. /s/ Thomas J. McInerney ---------------------------------------- President Aetna Life Insurance and Annuity Company SPIAE401 EX-99.B.4.17 17 ENDORSEMENT Exhibit 99-B.4.17 Aetna Life Insurance and Annuity Company ENDORSEMENT The Contract and certificate are endorsed in order to meet the requirements of Section 403(b) of the Internal Revenue Code ("Code") and, if applicable, the Employee Retirement Income Security Act (ERISA). The following provisions apply and, in the case of a conflict with any provision in the Contract, this endorsement controls. Nontransferable. The Contract is nontransferable in accordance with Code Section 401(g). The Contract may not be sold, assigned, transferred or pledged as collateral for a loan or as security for the performance of an obligation or for any other purpose, except pursuant to a qualified domestic relations order as described in Code Section 414(p). Contract Holder. The Contract Holder must be the employer sponsoring a Code Section 403(b) Tax Deferred Annuity program. Certificate Holder. The Certificate Holder is the participant under the Code Section 403(b) Tax Deferred Annuity program on whose behalf an Account is established. The Certificate Holder and the Annuitant must be the same person. Joint Certificate Holders are not permitted. Premium. The premium applied to the Contract must be an amount rolled over from (1) another contract qualified under Code Section 403(b) or a custodial account qualified under Code Section 403(b)(7), or (2) an Individual Retirement Account or Annuity qualified under Code Section 408(a) or 408(b) that contains only amounts previously rolled over from a 403(b) Tax Deferred Annuity. Any amount rolled over from a Code Section 403(b) contract or custodial account must be eligible for distribution under the withdrawal instructions set forth in Code Section 403(b)(7) or 403(b)(11), as applicable. Distributions. The Annuity payments will only be paid to the Certificate Holder, or to an alternate payee pursuant to a qualified domestic relations order as described in Code Section 414(p). Withdrawal/Partial Withdrawal. If the Contract is subject to ERISA and payment is made in the form of a qualified joint and survivor annuity, as defined in ERISA Section 205, and if the Certificate Holder has a right of withdrawal under the Contract, to exercise such right the Certificate Holder must furnish to Aetna a waiver and spousal consent satisfying the requirements of ERISA Section 205. Endorsed and made a part of the Contract as of the Contract Effective Date and the certificate as of the Account Effective Date. /s/ Thomas J. McInerney ---------------------------------------- President Aetna Life Insurance and Annuity Company SPIAE403(GR)99 EX-99.B.4.18 18 ENDORSEMENT Exhibit 99-B.4.18 Aetna Life Insurance and Annuity Company ENDORSEMENT The Contract and certificate are endorsed to permit an employer to purchase the Contract in conjunction with a nonqualified deferred compensation plan or a deferred compensation plan under Section 457 of the Internal Revenue Code ("Code"). The following provisions apply and, in the case of a conflict with any provision in the Contract, this endorsement controls. Contract Holder. The Contract Holder must be the employer who sponsors the deferred compensation plan. The Contract Holder has all rights under the Contract. Certificate Holder. The Certificate Holder is a participant or plan beneficiary under the deferred compensation plan on whose behalf an Account is established. The Certificate Holder and the Annuitant must be the same person. Joint Certificate Holders are not permitted. The Certificate Holder has no rights under the Contract. Beneficiary. The Beneficiary is the Contract Holder. Death Benefit. At the death of the Annuitant, Aetna will pay any remaining Guaranteed Payments as directed by the Contract Holder. Exclusive Benefit. This provision applies if the Contract is issued in conjunction with a Code Section 457(b) deferred compensation plan to a government employer, as defined in Code Section 457(e)(1)(A). Any amounts withdrawn or paid from this Contract are required to be utilized for the exclusive benefit of the participant and plan beneficiary in accordance with Code Section 457(g). This requirement shall be effective (i) immediately if the plan was not in existence on August 20, 1996 or (ii) if the plan was already for the exclusive benefit of participants and their beneficiaries in accordance with Code Section 457(g) and January 1, 1999. Endorsed and made a part of the Contract as of the Contract Effective Date. /s/ Thomas J. McInerney ---------------------------------------- President Aetna Life Insurance and Annuity Company SPIAE457(GR)99 EX-99.B.4.19 19 ENDORSEMENT Exhibit 99-B.4.19 Aetna Life Insurance and Annuity Company ENDORSEMENT The Contract and certificate are endorsed to meet the qualification requirements for an Individual Retirement Annuity under Internal Revenue Code ("Code") Section 408(b). The following provisions apply and, in the case of a conflict with any provision in the Contract, this endorsement controls. Certificate Holder. The Certificate Holder and the Annuitant must be the same person. Joint Certificate Holders are not permitted. Nontransferable/Nonforfeitable. The Contract is nontransferable. The Certificate Holder may not sell, assign, transfer, pledge or use as collateral for a loan or as security for the performance of an obligation or for any other purpose, his or her interest in the Contract to any person other than the issuer of the Contract or to a spouse incident to a divorce under the provisions of Code Section 408(d)(6). The Certificate Holder's entire interest in the Contract is nonforfeitable. Exclusive Benefit. The Account is established for the exclusive benefit of the Certificate Holder or his or her Beneficiary(ies). Premium. The premium applied to the Account must be a rollover contribution as permitted under Code Section 402(c), 403(a)(4), 403(b)(8) or 408(d)(3). Distributions. The Annuity payments will be paid only to the Certificate Holder. Annuity payments must be made at intervals of no longer than one year and must be either nonincreasing or they may increase only as provided in Section 1.401(a)(9)-1 of the Proposed Income Tax Regulations. Annual Reports. Aetna will furnish annual calendar year reports concerning the status of the Account under the Contract. Right to Cancel. The Certificate Holder may cancel the Account within 10 days by returning the certificate to Aetna at the address above or to the person from whom it was purchased. Within seven days from the cancellation request, Aetna will return all the Certificate Holder's premium payments, less any Annuity payments made. Endorsed and made a part of the Contract as of the Contract Effective Date. /s/ Thomas J. McInerney ---------------------------------------- President Aetna Life Insurance and Annuity Company SPIAEIRA(GR)99 EX-99.B.5.1 20 ANNUITY APPLICATION [Aetna Logo] Individual Variable Single Premium Retirement Services* Aetna-Immediate Annuity Application - -------------------------------------------------------------------------------- |_| INTERNAL |_| EXTERNAL - -------------------------------------- Type of Contract |_| Nonqualified Annuity Regular |_| Nonqualified Annuity- 1035 Exchange* |_| 403(b) Rollover |_| 408(b) IRA Transfer/Rollover |_| Nonqualified or 457 Deferred Comp |_| 401(a) Qualified Plan * Please attach assignment form. Subject to ERISA (Must be completed if 401(a) Qualified Plan or 403(b) Rollover is indicated.) |_| ] Yes [_] No Aetna Life Insurance and Annuity Company 151 Farmington Avenue Hartford, CT 06156-0005 Phone: 1-800-238-6254 Fax: 1-860-273-8657 Contractholder Information (Contractholder will be payee unless otherwise requested; This information will be used for tax reporting; Changes to SS# or Date of Birth must be initialed.) - -------------------------------------------------------------------------------- Name (Last, First, Middle Initial) Social Security No. - -------------------------------------------------------------------------------- Address (No. & Street / PO Box) - -------------------------------------------------------------------------------- City/Town State Zip Code |_| M |_| F - -------------------------------------------------------------------------------- Telephone No.: Home Work Date of Birth (mm/dd/yy) - -------------------------------------------------------------------------------- Are you associated with a national Association of Securities Dealer Firm? [_] Yes [_] No (If yes, please specify) Annuitant (If different from Contractholder; If an IRA or 403(b), Annuitant and Contract-holder must be the same person.) - -------------------------------------------------------------------------------- Name (Last, First, Middle Initial) Social Security No. - -------------------------------------------------------------------------------- Address (No. & Street / PO Box) - -------------------------------------------------------------------------------- City/Town State Zip Code |_| M |_| F - -------------------------------------------------------------------------------- Telephone No.: Home Work Date of Birth (mm/dd/yy) Joint Annuitant (Joint lifetime option only) - -------------------------------------------------------------------------------- Name (Last, First, Middle Initial) Social Security No. |_| M |_| F - -------------------------------------------------------------------------------- Relationship Date of Birth (mm/dd/yy) Annuity Options (Complete the type of Annuity and select an Annuity Option; Include copy of birth certificate for Life or Joint Life Options; For an IRA, 401 or 403(b) contract, the Annuity Option election must comply with IRC 401(a)(9); If subject to ERISA a Joint Lifetime Option must be elected, unless spousal consent is provided.) |_| Fixed Only |_| Variable Only |_| Combination Variable/Fixed (Only one box may be checked) (Only one option may be elected)
Non-Lifetime-Option Joint Lifetime Options A. Period Certain of ______ (5-30 years) D. Joint & 100% Survivor E. Joint & 100% Survivor with Guarantee of ______ (5-30 years) Single Lifetime Options F. Joint & 66-2/3% Survivor B. Single Life Only G. Joint & 50% Survivor C. Single Life with Guarantee of ______ (5-30 years) H. Joint & 50% Contingent Survivor
Additional Features (Cash Refund & Increasing Annuity may only be elected if the Fixed Only option is indicated above.) [_] Cash Refund (Only available with Lifetime Options B and D above) [_] Increasing Annuity (Only available with Non-Lifetime Option A and Lifetime Options B, C, D or E) ______% 1, 2 or 3% Annual Increase (Complete desired percentage. Not Available to 457 contracts.) [_] Commutability of Fixed Non-Lifetime Option A. (Available with Fixed only or Combination Variable/Fixed) Investment Options and Fund Codes Assumed Annual Net Return Rate (3.5% will be assumed if no election is made.) [_] 3.5% [_] 5% Complete Investment Options if Variable Only or a Combination Variable/Fixed option is indicated above; Up to four variable options may be selected; Use whole percentages only.
Variable Options (select up to four) ______ % [031] Aetna Ascent VP ______ % [077] AIM V.I. Growth Fund ______ % [008] Aetna Balanced VP, Inc. ______ % [079] AIM V.I. Growth & Income Fund ______ % [004] Aetna Bond VP ______ % [078] AIM V.I. Value Fund ______ % [032] Aetna Crossroads VP ______ % [132] Fidelity VIP High Income Portfolio ______ % [001] Aetna Growth and Income VP ______ % [117] Janus Aspen Growth Portfolio ______ % [040] Aetna Growth VP ______ % [123] Janus Aspen Worldwide Growth Portfolio ______ % [035] Aetna Index Plus Large Cap VP ______ % [098] Oppenheimer Strategic Bond Fund ______ % [055] Aetna International VP ______ % [106] PPI MFS Emerging Equities Portfolio ______ % [033] Aetna Legacy VP ______ % [100] PPI MFS Value Equity Portfolio ______ % [003] Aetna Money Market VP ______ % [104] PPI Scudder International Growth Portfolio ______ % [051] Aetna Real Estate Securities VP ______ % [111] PPI T. Rowe Price Equity Portfolio ______ % [042] Aetna Small Company VP ______ % ALIAC Fixed Dollar ______ % [076] AIM V.I. Capital Appreciation Fund 100 % TOTAL
Page 1 of 2 -- Incomplete without all pages Replacement Information Will this contract change or replace any existing life insurance or annuity contracts? |_| Yes |_| No (If yes, provide carrier name and account number:) [_] Aetna [_] Other Carrier --------------------- Account No. --------------------------- For an Aetna Annuity replacement only, I have received annuity option proposals for both the original and new contracts and understand the differences: |_| Yes |_| No Internal Rollovers Reason for Disbursement from Accumulation Contract: [_] Age 591/2 [_] Separation from Service [_] Death [_] Other ----------------------------- - --------------------------------------- Anti-fraud (not applicable in VA.) Any person who knowingly and with intent to injure, defraud, or deceive any insurer files a statement of claim or an application containing any false, incomplete, or misleading information is guilty of a felony. Beneficiary(ies) Unless directed otherwise, we will pay any death benefit in equal shares to the primary beneficiary(ies) named or to all living members of a class (e.g., children). If no primary beneficiary is living, payment will be made in equal shares to the contingent beneficiary(ies). If more than two (2) beneficiaries, please attach a separate sheet.
Complete Legal Name Date of Birth Relationship Social Security No. % - -------------------------------------------------------------------------------------------------------------- [_] Primary - -------------------------------------------------------------------------------------------------------------- [_] Primary [_] Contingent - -------------------------------------------------------------------------------------------------------------- [_] Primary [_] Contingent - --------------------------------------------------------------------------------------------------------------
If subject to ERISA, a spouse must be the primary beneficiary for at least 50%, unless spousal consent is provided. Payment Information Payment Frequency (Check box for frequency of payment) [_] Monthly (default) [_] Quarterly [_] Semi-annually [_] Annually First Payment Date ----------------- [_] EFT (Electronic Funds Transfer) complete information for EFT below [_] Check (default) - -------------------------------------------------------------------------------- Bank Name and Address (No. & Street, City/Town, State, Zip Code) [_] Checking [_] Savings - -------------------------------------------------------------------------------- Bank Routing No. Bank Account No. Type of Account (Please attach voided check or deposit slip) IRS Form W-4P OMB NO. 1545-0415 Withholding Notice and Election (Complete for payments from a 401(a), 403(b), 408(b) or Nonqualified annuity contract. Please use a separate IRS Form W-4 for W-2 income paid from any Deferred Comp Plan.) Periodic payments from a settlement option are generally subject to Federal Income Tax withholding unless you elect not to have withholding apply. TDA and Pension: For stated period of less than 10 years, 20% may apply (you cannot elect out).See Special Tax Notice. Tax will be withheld only on the portion that is subject to Federal Income Tax. There will be no withholding on dollars that have already been taxed. Elect withholding or no withholding by checking the appropriate box below. To change or revoke your election, send a new IRS Form W-4P (available at IRS offices)to Aetna. This change will be effective no later than the January 1, May 1, July 1, or October 1 after it is received provided we receive it 30 days prior to that date. Otherwise, the change or revocation will be effective on the next scheduled date. Whether or not you have tax withheld, by January 31 of each year, you will receive a statement from Aetna showing the total taxable amount of your distribution and the total income tax withheld, if any. CAUTION: There are penalties for not paying enough tax during the year, either through withholding or estimated tax payments, or both. For more information see IRS Publication 505, Tax Withholding and Estimated Tax. COMPLETE THE FOLLOWING APPLICABLE LINES: [_] 1. I elect to have no income tax withheld from my annuity. (Do not complete lines 2 or 3.) [_] 2. I elect to have taxes withheld from each periodic annuity payment to be figured using the number of allowances and marital status shown: __________________ (allowances). (You may also designate an additional amount on line 3.) [ ] SINGLE [ ] MARRIED [ ] MARRIED, BUT WITHHOLD AT HIGHER SINGLE RATE [_] 3. I want the following additional amount withheld from each pension or annuity payment. Note: For periodic payments, you cannot enter an amount here without entering the number (including zero) of allowances on line 2: $________________ Your Acknowledgment Distribution Channel: Workplace: [_] Career [_] Independent [_] Other Financial Institution: [_] Broker/Dealer [_] Bank [_] Other Life: [_] Life Brokerage Manager [_] MGA [_] Other [_] AFSI Rep For Internal Rollovers only: o I authorize Aetna to transfer to this contract, the balance of my account(s) noted in the Replacement Information Section. For Rollovers for TDA and Pension Participants: o I, the payee, have received the Special Tax Notice and waive the 30 day notice requirement. o I certify that this information is correct and complete and, under penalty of perjury, the Social Security Number(s) shown on this form is/are correct. o I understand that when based on the investment experience of a Separate Account, all payments and contract values are variable and are not guaranteed as to fixed dollar amount, and I have received a current prospectus. o If I have elected EFT, I authorize Aetna to deposit my payments by EFT to my bank account. o If payments are directed to a bank account, I authorize and direct the bank to refund to Aetna and charge to my account the amount of any payments made to the bank for any due date after my death. o I understand the following individual(s)/organization(s) will receive compensation as the result of my purchase (completed by agent): / / - -------------------------------------------------------------------------------- [_] Please send me a Statement of Additional Information. [_] The Company (Aetna Life Insurance and Annuity Company)may hold my application and Purchase Payment if it cannot accept my application within five business days after receiving it at its home office.
- -------------------------------------------------------------------------------------------------------------------------------- Signature of Contractholder City, State where signed Date (mm/dd/yy) - -------------------------------------------------------------------------------------------------------------------------------- Signature of Payee Date (mm/dd/yy)
Registered Representative Do you have any reason to believe any existing life insurance and/or annuity contracts will be modified or replaced if this contract is issued? [_] Yes [_] No Please choose one of the following: [_] NT [_] T1 [_] T2
- -------------------------------------------------------------------------------------------------------------------------------- Broker/Dealer Firm (Print) Representative's Name (Print) Social Security No. - -------------------------------------------------------------------------------------------------------------------------------- Agency/ Agent Code State License No. - -------------------------------------------------------------------------------------------------------------------------------- Signature of Registered Representative Date (mm/dd/yy) Telephone No.
82941 (2/99) EX-99.B.5.2 21 ANNUITY APPLICATION (NY) [AETNA Logo] Individual Variable Single Premium Retirement Services* Aetna-Immediate Annuity Application (NY) |_| INTERNAL |_| EXTERNAL - ----------------------------------- Type of Contract |_| Nonqualified Annuity Regular |_| Nonqualified Annuity- 1035 Exchange* |_| 403(b) Rollover |_| 408(b) IRA Transfer/Rollover |_| 401(a) Qualified Plan * Please attach assignment form. Subject to ERISA (Must be completed if 401(a) Qualified Plan or 403(b) Rollover is indicated.) |_| Yes |_| No Aetna Life Insurance and Annuity Company 151 Farmington Avenue Hartford, CT 06156-0005 Phone: 1-800-238-6254 Fax: 1-860-273-8657 Contractholder Information ( Contractholder will be payee unless otherwise requested; This information will be used for tax reporting; Changes to SS# or Date of Birth must be initialed.) - -------------------------------------------------------------------------------- Name (Last, First, Middle Initial) Social Security No. - -------------------------------------------------------------------------------- Address (No. & Street / PO Box) - -------------------------------------------------------------------------------- City/Town State Zip Code |_| M |_| F - -------------------------------------------------------------------------------- Telephone No: Home Work Date of Birth (mm/dd/yy) Annuitant (If different from Contractholder; If an IRA or 403(b), Annuitant and Contract-holder must be the same person.) - -------------------------------------------------------------------------------- Name (Last, First, Middle Initial) Social Security No. - -------------------------------------------------------------------------------- Address (No. & Street / PO Box) - -------------------------------------------------------------------------------- City/Town State Zip Code |_| M |_| F - -------------------------------------------------------------------------------- Telephone No.: Home Work Date of Birth (mm/dd/yy) Joint Annuitant (Joint lifetime option only.) - -------------------------------------------------------------------------------- Name (Last, First, Middle Initial) Social Security No. |_| M |_| F - -------------------------------------------------------------------------------- Relationship Date of Birth (mm/dd/yy) Annuity Options (Complete the type of Annuity and select an Annuity Option; Include copy of birth certificate for Life or Joint Life Options; For an IRA, 401 or 403(b) contract, the Annuity Option election must comply with IRC 401(a)(9); If subject to ERISA a Joint Lifetime Option must be elected, unless spousal consent is provided.) |_| Fixed Only |_| Variable Only |_| Combination Variable/Fixed (Only one box may be checked.)
(Only one option may be elected) Non-Lifetime-Option Joint Lifetime Options A. Period Certain of ______ (5-30 years) D. Joint & 100% Survivor E. Joint & 100% Survivor with Guarantee of ______ (5-30 years) Single Lifetime Options F. Joint & 66-2/3% Survivor B. Single Life Only G. Joint & 50% Survivor C. Single Life with Guarantee of ______ (5-30 years) H. Joint & 50% Contingent Survivor
Additional Features (Cash Refund & Increasing Annuity may only be elected if the Fixed Only option is indicated above.) |_| Cash Refund (Only available with Lifetime Options B and D above) |_| Increasing Annuity (Only available with Non-Lifetime Option A and Lifetime Options B, C, D or E) _____% 1, 2 or 3% Annual Increase (Complete desired percentage) |_| Commutability of Fixed Non-Lifetime Option A. (Available with Fixed only or Combination Variable/Fixed) Investment Options and Fund Codes Assumed Annual Net Return Rate (3.5% will be assumed if no election is made.) |_| 3.5% |_| 5% Complete Investment Options if Variable Only or a Combination Variable/Fixed option is indicated above; Up to four variable options may be selected; Use whole percentages only.
Variable Options (select up to four) ______ % [031] Aetna Ascent VP ______ % [077] AIM V.I. Growth Fund ______ % [008] Aetna Balanced VP, Inc. ______ % [079] AIM V.I. Growth & Income Fund ______ % [004] Aetna Bond VP ______ % [078] AIM V.I. Value Fund ______ % [032] Aetna Crossroads VP ______ % [132] Fidelity VIP High Income Portfolio ______ % [001] Aetna Growth and Income VP ______ % [117] Janus Aspen Growth Portfolio ______ % [040] Aetna Growth VP ______ % [123] Janus Aspen Worldwide Growth Portfolio ______ % [035] Aetna Index Plus Large Cap VP ______ % [098] Oppenheimer Strategic Bond Fund ______ % [055] Aetna International VP ______ % [106] PPI MFS Emerging Equities Portfolio ______ % [033] Aetna Legacy VP ______ % [100] PPI MFS Value Equity Portfolio ______ % [003] Aetna Money Market VP ______ % [104] PPI Scudder International Growth Portfolio ______ % [051] Aetna Real Estate Securities VP ______ % [111] PPI T. Rowe Price Equity Portfolio ______ % [042] Aetna Small Company VP ______ % ALIAC Fixed Dollar ______ % [076] AIM V.I. Capital Appreciation Fund 100 % TOTAL
Page 1 of 2 -- Incomplete without all names Replacement Information Will this contract change or replace any existing life insurance or annuity contracts? |_| Yes |_| No (If yes, provide carrier name and account number:) |_| Aetna |_| Other Carrier ____________________ Account No. __________________ For an Aetna Annuity replacement only, I have received annuity option proposals for both the original and new contracts and understand the differences: |_| Yes |_| No Payment Information Payment Frequency (Check box for frequency of payment) |_| Monthly (default) |_| Quarterly |_| Semi-annually |_| Annually First Payment Date ___________________ Internal Rollovers Reason for Disbursement from Accumulation Contract: |_| Age 59-1/2 |_| Separation from Service |_| Death |_| Other ____________________________ ______________________________________ Beneficiary(ies) Unless directed otherwise, we will pay any death benefit in equal shares to the primary beneficiary(ies) named or to all living members of a class (e.g., children). If no primary beneficiary is living, payment will be made in equal shares to the contingent beneficiary(ies). If more than two (2) beneficiaries, please attach a separate sheet.
Complete Legal Name Date of Birth Relationship Social Security No. % - -------------------------------------------------------------------------------------------------------------- [_] Primary - -------------------------------------------------------------------------------------------------------------- [_] Primary [_] Contingent - -------------------------------------------------------------------------------------------------------------- [_] Primary [_] Contingent - --------------------------------------------------------------------------------------------------------------
If subject to ERISA, a spouse must be the primary beneficiary for at least 50%, unless spousal consent is provided. IRS Form W-4P OMB NO. 1545-0415 Withholding Notice and Election (Complete for payments from a 401(a), 403(b), 408(b) or Nonqualified annuity contract.) Periodic payments from a settlement option are generally subject to Federal Income Tax withholding unless you elect not to have withholding apply. TDA and Pension: For stated period of less than 10 years, 20% may apply (you cannot elect out).See Special Tax Notice. Tax will be withheld only on the portion that is subject to Federal Income Tax. There will be no withholding on dollars that have already been taxed. Elect withholding or no withholding by checking the appropriate box below. To change or revoke your election, send a new IRS Form W-4P (available at IRS offices)to Aetna. This change will be effective no later than the January 1, May 1, July 1, or October 1 after it is received provided we receive it 30 days prior to that date. Otherwise, the change or revocation will be effective on the next scheduled date. Whether or not you have tax withheld, by January 31 of each year, you will receive a statement from Aetna showing the total taxable amount of your distribution and the total income tax withheld, if any. CAUTION: There are penalties for not paying enough tax during the year, either through withholding or estimated tax payments, or both. For more information see IRS Publication 505, Tax Withholding and Estimated Tax. COMPLETE THE FOLLOWING APPLICABLE LINES: |_| 1. I elect to have no income tax withheld from my annuity. (Do not complete lines 2 or 3.) |_| 2. I elect to have taxes withheld from each periodic annuity payment to be figured using the number of allowances and marital status shown: __________________ (allowances). (You may also designate an additional amount on line 3.) |_| SINGLE |_| MARRIED |_| MARRIED, BUT WITHHOLD AT HIGHER SINGLE RATE |_| 3. I want the following additional amount withheld from each pension or annuity payment. Note: For periodic payments, you cannot enter an amount here without entering the number (including zero) of allowances on line 2: $__________ Your Acknowledgment Distribution Channel: Workplace: [_] Career [_] Independent [_] Other Financial Institution: [_] Broker/Dealer [_] Bank [_] Other Life: [_] Life Brokerage Manager [_] MGA [_] Other [_] AFSI Rep For Internal Rollovers only: o I authorize Aetna to transfer to this contract, the balance of my account(s) noted in the Replacement Information Section. For Rollovers for TDA and Pension Participants: o I, the payee, have received the Special Tax Notice and waive the 30 day notice requirement. o I certify that this information is correct and complete and, under penalty of perjury, the Social Security number(s) shown on this form is/are correct. o I understand that when based on the investment experience of a Separate Account, all payments and contract values are variable and are not guaranteed as to fixed dollar amount, and I have received a current prospectus. o I understand the following individual(s)/organization(s) will receive compensation as the result of my purchase (completed by agent): / / - -------------------------------------------------------------------------------- |_| Please send me a Statement of Additional Information. |_| The Company (Aetna Life Insurance and Annuity Company)may hold my application and Purchase Payment if it cannot accept my application within five business days after receiving it at its home office.
- -------------------------------------------------------------------------------------------------------------------------------- Signature of Contractholder City, State Where Signed Date (mm/dd/yy) - -------------------------------------------------------------------------------------------------------------------------------- Signature of Payee Date (mm/dd/yy)
Registered Representative Do you have any reason to believe any existing life insurance and/or annuity contracts will be modified or replaced if this contract is issued? |_| Yes |_| No Please choose one of the following: |_| NT |_| T1 |_| T2
- -------------------------------------------------------------------------------------------------------------------------------- Broker/Dealer Firm (Print) Representative's Name (Print) Social Security No. - -------------------------------------------------------------------------------------------------------------------------------- Agency/ Agent Code State License No. - -------------------------------------------------------------------------------------------------------------------------------- Signature of Registered Representative Date (mm/dd/yy) Telephone No. Page 2 of 2 -- Incomplete without all pages
82950 (2/99) EX-99.B.9 22 OPINION & CONSENT OF COUNSEL 151 Farmington Avenue Hartford, CT 06156 Julie E. Rockmore Counsel Law Division, RE4A April 20, 1999 Investments & Financial Services (860) 273-4686 Fax: (860) 273-8340 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, DC 20549 Re: Aetna Life Insurance and Annuity Company and its Variable Annuity Account B Post-Effective Amendment No. 7 to Registration Statement on Form N-4 Prospectus Title: Aetna Immediate Annuity File Nos.: 333-09515 and 811-2512 Dear Sir or Madam: The undersigned serves as counsel to Aetna Life Insurance and Annuity Company, a Connecticut life insurance company (the "Company"). It is my understanding that the Company, as depositor, has registered an indefinite amount of securities (the "Securities") under the Securities Act of 1933 (the "Securities Act") as provided in Rule 24f-2 under the Investment Company Act of 1940 (the "Investment Company Act"). In connection with this opinion, I or those for whom I have supervisory responsibility, have reviewed the N-4 Registration Statement, as amended to the date hereof, and this Post-Effective Amendment No. 7. I have also examined originals or copies, certified or otherwise identified to my satisfaction, of such documents, trust records and other instruments I have deemed necessary or appropriate for the purpose of rendering this opinion. For purposes of such examination, I have assumed the genuineness of all signatures on original documents and the conformity to the original of all copies. I am admitted to practice law in Connecticut and do not purport to be an expert on the laws of any other state. My opinion herein as to any other law is based upon a limited inquiry thereof which I have deemed appropriate under the circumstances. Based upon the foregoing, I am of the opinion that the Securities have been duly and validly authorized and, assuming the securities will be issued and sold in accordance with the provisions of the prospectus, will constitute legal and binding obligations of the Company. I consent to the filing of this opinion as an exhibit to the Registration Statement. Sincerely, /s/ Julie E. Rockmore Julie E. Rockmore EX-99.B.10 23 CONSENT OF INDEPENDENT AUDITORS Consent of Independent Auditors The Board of Directors of Aetna Life Insurance and Annuity Company and Contractholders of Variable Annuity Account B: We consent to the use of our reports dated February 3, 1999 and February 26, 1999 included in this Post-Effective Amendment No. 7 to Registration Statement (File No. 333-09515) on Form N-4 and to the references to our firm under the headings "Condensed Financial Information" in the prospectus and "Independent Auditors" in the statement of additional information. /s/ KMPG LLP KMPG LLP Hartford, Connecticut April 20, 1999 -----END PRIVACY-ENHANCED MESSAGE-----